Underlying profits tumble at Burberry despite Brexit boost

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Burberry has reported a 5% dip in annual pre-tax profits despite a boost to revenues from the weak pound in the wake of the Brexit vote.

In the a year ago Burberry has benefited from the drop in the value of the pound following the vote to leave the European Union, boosting operating profits by almost £130m.

Burberry said it's on track toward a goal of cutting costs by £100 million a year by 2019.

On revenue of £2.8bn in the year to 31 March, which had already been announced, the beige-checked fashion house delivered adjusted profits of £462m, which were up 10% at the reported level and down 21% at the underlying level.

Underlying profits dropped by 21%, which Burberry blamed on restructuring costs, lower wholesale income (down 14%), particularly in the United States and the Beauty arm, and a 48% reduction in licensing income. In mainland China, sales growth accelerated in the latest quarter, rising to double-digit percentages from single digits earlier in the year, Burberry said.

Burberry said the currency boost seen in the past year would reverse this year, with current rates suggesting an adverse impact of about 30 million pounds.

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Its digital shake-up has included the soft-launch of a retail app in the UK.

Incoming Burberry CEO Marco Gobbetti will face pressure to secure a larger share of that growth for Burberry when he starts the job in July.

"2017 was a year of transition for Burberry in a fast changing luxury market", said CEO Christopher Bailey. He will take over in July while Bailey moves to the new position of president and chief creative officer; both Bailey and Gobbetti will report to chairman Sir John Peace.

"I am excited to work closely with him in this next chapter".

Burberry shares were marked 2.5% higher at closed at 1,683 pence each in London, the biggest jump since April 7, extending their year-to-date gain past 11%.

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