TIDMMTC
RNS Number : 2915X
Mothercare PLC
23 November 2017
Mothercare plc FY17/18 Half Year Results
Continued transformation of the brand, converting into positive
UK like-for-likes set against a challenging consumer backdrop
Mothercare plc, the leading global retailer for parents and
young children, today announces half year results for the 28 week
period to 7th October 2017.
Highlights for H1 FY17/18
-- Group adjusted loss before tax GBP(0.7)m (H1 FY16/17: GBP5.9m profit)
-- UK transformation progressing
- UK like-for-like sales +2.5% with online sales +5.3% and
margins up 34bps
- 97 stores now in the modern 'club' format, representing 75% of
store estate
- Store closure programme continues: closed ten underperforming
stores; opened one new
- Adjusted UK EBITDA at GBP1.0m (H1 FY16/17 GBP(0.6)m); UK
adjusted loss before tax GBP(9.6)m (H1 FY16/17 GBP(8.8)m)
-- International performance remains challenging, primarily driven by the key Middle East market
- Constant currency sales (7.7)% (H1 FY16/17: (0.8)%)
- Transferring our learnings from the UK to International
- Launched new website in Pakistan and two new marketplaces:
India and United Arab Emirates; online presence now in 23 countries
across 30 websites and marketplaces
- Online sales growth +57% in constant currency
- 127 stores now refurbished in the modern 'club' format
-- Statutory Group loss before tax of GBP(16.8)m (H1 FY16/17
GBP(0.8)m net). DebtGBP(37.6)m in line with guidance
-- Ongoing restructuring costs and investment to support phase two of the transformation
28 weeks 28 weeks % change
to to
7 Oct 2017 8 Oct 2016 vs.
GBP million GBP million last
year
-------------------------------- ----------- ----------- --------
UK
UK like-for-like sales1 2.5% (0.7)% -
Total UK sales 229.0 231.2 (1.0)%
Adjusted UK loss2 (9.6) (8.8) (9)%
International
International like-for-like
sales1 (8.0)% (2.9)% -
International retail sales
in constant currency1 (7.7)% (0.8)% -
International retail sales
in actual currency (1.7)% 7.1% -
Total International sales 398.9 405.6 (1.7)%
Adjusted International profit2 14.9 20.8 (28)%
Group
Worldwide sales1 627.9 636.8 (1.4)%
Total group sales 339.5 347.7 (2.4)%
Group adjusted (loss)/profit
before tax2 (0.7) 5.9 (112)%
-------------------------------- ----------- ----------- --------
Adjusted items (16.1) (6.7) -
Group (loss)/profit before
tax after adjusted items (16.8) (0.8) -
Basic EPS (8.5)p 0.2p -
Basic adjusted EPS2 0.0p 3.4p -
Net (debt)/cash (37.6) (15.6) -
-------------------------------- ----------- ----------- --------
"
Mark Newton-Jones, Chief Executive of Mothercare plc, said:
"We are on track with our transformation plans for our business,
with like-for-like sales in the UK growing 2.5% and gross margins
up by 34 bps year on year, in the first half. Across the business,
we continue to invest and make progress, developing the Mothercare
brand into a digitally led, global specialist.
"In the UK, 97 stores are now in the modern 'club' format,
representing 75% of the total estate and, as planned, we have
closed a further ten stores and opened one new store as we work
towards our target of 80-100 stores. We are growing our digital
capability, with 42% of our trade now taken online. We have built
further strength in personal service, advice and expertise, whilst
sharpening our focus on our core markets of maternity, newborn,
baby and toddler up to pre-school. As reported in May, we are
reducing our cost base as we become an even leaner and simpler
business, and we have identified opportunities to go faster in this
respect.
"Our International markets remain challenging, primarily as a
result of weak trading in the Middle East that is dragging down our
overall performance overseas; there is no clear sight as to when
things will bottom out in that region. We are working with our
partners across the globe to help them improve trading by exporting
our digital experience and our modern 'club' format into their
territories. We have expanded our digital presence in a further
three countries: India, Pakistan and United Arab Emirates
"Towards the end of the reporting period, and in subsequent
weeks, we have seen a softening in the UK market with lower
footfall and spend which is consistent with recent industry
reports. Not-withstanding this uncertain consumer backdrop, the
Mothercare brand, whilst not immune, is in a stronger position with
a much-improved product and service offer and a more robust
business model.
"We remain firmly committed to our vision to be the leading
global retailer for parents and young children."
Investor and analyst enquiries
to:
mothercare plc
Mark Newton-Jones, Chief Executive
Officer 01923 206037
Richard Smothers, Chief Financial
Officer 01923 206037
Glyn Hughes, Chief Financial
Officer Designate 01923 206037
Helen Gunter, Director of Corporate
Communications 01923 206381
Media enquiries to: MHP Communications
Tim Rowntree/Simon Hockridge/Alistair
de Kare-Silver 020 3128 8742
mothercare@mhpc.com
Notes:
1. UK like-for-like sales are defined as sales from stores that
have been trading continuously from the same selling space for at
least a year and include online sales. UK online sales include both
website sales and sales taken on iPads in store. International
retail sales, including online sales, are the estimated retail
sales of overseas franchisees and joint ventures and associates to
their cus tomers. International like-for-like sales are the
estimated franchisee retail sales from stores that have been
trading continuously from the same selling space for at least a
year. International sales in constant currency exclude the impact
of movements in foreign
exchange on translation. Worldwide sales are total International
sales plus total UK sales. Total International sales are
International
retail sales plus International Wholesale sales. Total group
sales is a statutory number and is made up of total UK sales and
receipts from our International partners, which includes royalty
payments and the cost of goods dispatched to our franchise
partners.
2. The use of alternative performance measures (APM's) within
this announcement are intended to assist in providing additional
useful information on the ongoing trends, performance and position
of the Group and should be considered in addition to IFRS measures
(see Note 2 in financial review).
3. This announcement contains certain forward-looking statements
concerning the company. Although the Board believes its
expectations are based on reasonable assumptions, the matters to
which such statements refer may be influenced by factors that could
cause actual outcomes and results to be materially different. The
forward-looking statements speak only as at the date of this
document and the company does not undertake any obligation to
announce any revisions to such statements, except as required by
law or by any appropriate regulatory authority.
4. Mothercare plc will release their Q3 results for the 13 week
period to 6th January 2018, on 11th January 2018.
CHIEF EXECUTIVE'S REVIEW
Overview
In the first half, we have remained focused on delivering the
second phase of the transformation of our brand. We continue to
make good progress against each of the six strategic pillars, using
our learnings and consumer insight, to reshape our business to meet
the future needs of both our UK customers and our International
partners.
1. Becoming a digitally led business
o Online sales +5.3%
o Online 42% of UK retail sales (c40% H1 FY16/17)
o Mobile 82% of total online sales (80% H1 FY16/17)
o 42% of total online sales generated by iPads in stores (44% H1
FY16/17)
o 2.9m active customers on the database
2. Supported by a modern retail estate and great service
o 97 stores now in the modern 'club' format, representing 75% of
store estate
o Closed 10 underperforming stores; opened 1 new
o Expectant Parent Events attended by 32,000 new mums and dads
creating cGBP8m of revenue (+51% H1 FY16/17)
3. Offering style, quality and innovation in product
o 40% of Home and Travel is now exclusive (35% H1 FY16/17)
o 116 Home and Travel exclusive products launched
o 20% of Clothing and Footwear at 'best' end of the range
4. Stabilise and recapture gross margin
o Full price sales at 60% (65% H1 FY16/17) as customers shifted
towards promotions
o UK gross margin +34bps
o US$ cost inflation partly offset by negotiation and price
increases of 3-5% towards end of H1
5. Running a lean organisation while investing for the future
o Stock position reduced by GBP6m to GBP120m
o Investment in warehousing consolidation and merchandising
planning systems now complete
o Clear plans to accelerate business simplification and central
overhead savings
o Toys range reduced by 50% to focus on younger ages for
spring/summer 2018 season
6. Expanding further internationally
o Space down (3.0)% with 1,135 stores in 50 countries
o Opened 68 new stores (closed 83)
o 127 stores now in the modern 'club' format
o Launched new website in Pakistan and two marketplaces: United
Arab Emirates and India. Now trading in 23 countries across 30
websites and marketplaces
GROUP RESULTS
Global retail space across all of our markets was down (5.1)%
year on year with the UK declining by (9.2)% to c1.4m sq.ft and
International down (3.0)% at c2.9m sq.ft. We now have 143 stores in
the UK and internationally, our partners now operate from 1,135
stores in 50 countries.
28 weeks 28 weeks % change
to to
7 Oct 2017 8 Oct 2016 vs. last
year
GBPmillion GBPmillion
----------------------------------- ---------- ---------- -------------
Adjusted International
profit2 14.9 20.8 (28)%
Adjusted UK loss2 (9.6) (8.8) (9)%
Adjusted corporate expenses (4.3) (3.7) (16)%
Adjusted profit from operations2 1.0 8.3 (88)%
Adjusted net finance costs (1.9) (1.9) -
Share based payments credit/
(charge) 0.2 (0.5) -
Adjusted (loss)/profit
before tax2 (0.7) 5.9 (112)%
Adjusted costs (15.6) (10.7) -
Non-cash foreign currency
adjustments - 4.5 -
Amortisation of intangibles (0.5) (0.5) -
Reported (loss)/profit
before tax (16.8) (0.8) -
----------------------------------- ---------- ---------- -------------
Worldwide sales were down (1.4)% at GBP627.9m with total UK
sales down (1.0)% at GBP229.0m and total International sales down
(1.7)% at GBP398.9m. Group sales, which reflect our UK sales and
reported revenues or receipts from our International partners, were
down (2.4)% at GBP339.5m.
Adjusted Group loss before tax was GBP(0.7)m. UK adjusted losses
increased to GBP(9.6)m, while adjusted International profits were
down (28)% to GBP14.9m. Adjusted corporate expenses increased to
GBP(4.3)m, adjusted finance costs remained flat at GBP(1.9)m and
share based payments were a GBP0.2m credit as vesting assumptions
were updated.
After a charge of GBP(15.6)m for adjusted items, primarily
property and restructuring relating to our transformation programme
and a GBP(0.5)m charge for amortisation of intangibles, the
reported loss for the half year was GBP(16.8)m (H1 FY16/17
GBP(0.8)m).
Our balance sheet remains strong with net assets of GBP65.8m and
net debt of GBP(37.6)m, in line with expectations, compared with a
net debt of GBP(15.6)m last year, reflecting our investment
programme in the UK store estate, IT and infrastructure.
UK
We are making good progress with the second phase of the
transformation of our brand, reshaping our business to become more
relevant to our digitally enabled customer.
The growth in like-for-like sales of 2.5%, supported by online
growth of 5.3% and an improvement in gross margin of 34bps, was
more than offset by costs primarily associated with our
transformation, including warehouse transition costs, property and
depreciation. Productivity is expected to improve in the second
half. Adjusted EBITDA in the UK improved to GBP1.0m from (GBP0.6)m
in H1 FY16/17, although adjusted losses in the UK increased to
GBP(9.6)m from GBP(8.8)m due to higher depreciation costs as a
result of our programme of investment.
28 weeks 28 weeks % change
to to
7 Oct 2017 8 Oct 2016 vs. last
year
GBPmillion GBPmillion
----------------------------- ---------- ---------- ------------
UK like-for-like sales
growth 2.5% (0.7)% -
UK online sales 87.9 83.4 5.3%
UK retail sales (including
online) 210.6 214.6 (1.9)%
UK wholesale sales 18.4 16.6 10.8%
Total UK sales 229.0 231.2 (1.0)%
Adjusted EBITDA 1.0 (0.6) 267%
Adjusted loss (9.6) (8.8) (9)%
----------------------------- ---------- ---------- ------------
Becoming a digitally led business
We continue to achieve good growth in our online business as it
matures, with sales up 5.3%. Online now accounts for 42% of our
total UK retail sales (40% H1 FY16/17). The trend towards mobile
continues with mobile now 82% of total online sales (80% H1
FY16/17).
Using our learnings over the last three years and our rich
consumer insight from our database of 2.9m active customers, we are
growing our digital capability, focusing on developing a truly
personalised experience for our customers.
Supported by a modern retail estate
We are making progress with our store strategy, closing
underperforming stores, opening new sites and transitioning to two
thirds out of town and one third of stores in town. We now have 75%
of our store estate in the modern 'club' format (97 stores) and
closed ten underperforming stores in the period as part of our
planned closure programme. Our omnichannel customer strategy
continues to evolve, with 42% of our online sales now from iPads in
store.
We continue to develop our stores as community hubs, bringing
mums and dads together to connect with each other while obtaining
expert knowledge and advice on their parenting journey. Through our
Expectant Parent Events, new mums meet-ups and NCT partnership, we
are reaching out to many more new parents. Whilst these events are
creating a community, they are also commercial, with cGBP8m of
sales generated at our Expectant Parent Events, a growth of 51% on
the previous year.
Offering style, quality and innovation in product
We have maintained our price architecture, with an average of
20% of our clothing and footwear in the 'best' range (20% H1
FY16/17) and 40% 'best' in Home and Travel (20% H1 FY16/17). We
continue to work with our suppliers to introduce new brands and
exclusive ranges. This is particularly important as we combat
aggressive discounting in the market.
In Home and Travel, we have launched 116 new exclusive products
in the period, bringing the total to 178 (+5% H1 FY16/17). New
exclusives include the Silver Cross Pioneer Brompton and Silver
Cross Pursuit pushchairs and baby monitors by Motorola and
Angelcare. New brands introduced include Snuzkot, Merifor,
Shnuggle, Moba and Ewan the Sheep.
In total, we now have four out of ten products exclusive to us,
compared with one in 20, three years ago.
In Clothing and Footwear, our celebrity 'best' brands, My K,
Smile and Little Bird, continue to be customer favourites. The
modern monochrome collection, designed by Myleene Klass, is a big
hit while newborn and girls are top sellers in Julien Macdonald's
Smile collection. Little Bird, by Jools Oliver, is an enduring
favourite through the seasons and has developed something of a cult
following with its colourful, retro inspired range, with products
often selling out within days of being released. We extended Little
Bird into bedding and maternity in the summer and this
autumn/winter season saw the return of favourite Little Bird pieces
from the last five years, as voted for by our customers.
Meanwhile we are advancing with our plans to reshape our ranges
to focus on our core markets of maternity, newborn, baby and
toddler up to pre-school. From autumn/winter 2018 we will no longer
sell clothing ranges in the UK for older children.
In Toys, brands are now 20% of the mix, from 5% three years ago,
with exclusive products from Vtech, Infantino and SmarTrike. Our
own Mothercare and ELC products for the season include 'Little
Senses' our brand new innovative sensory range for babies six
months and up; Blossom Farm, wooden play sets and our Happyland
Christmas sets which include the top selling advent calendar.
We have already made decisions that will reduce our toy ranges
by c50% as part of our plans to focus on the baby and pre-school
markets. The space that will subsequently be released, will be
occupied by either Clothing and Footwear or Home and Travel
products.
Stabilize and recapture gross margin
UK gross margin rose in the first half by +34bps. Sales of full
price product, however, declined to 60% (65% H1 FY16/17) as we saw
customers buying more heavily into promotional items. The increase
in cost of goods from the devaluation of sterling against the
dollar, was partly negotiated away, but has resulted in price
increases for customers of 3-5%. These increases only began to flow
through towards the end of the first half.
Running a lean organisation while investing for the future
We continue to modernise our brand, investing in infrastructure
and shaping our business to meet
the needs of today's digitally enabled consumer. We have
consolidated our warehousing, so we can now fulfil products for
both stores and online from one campus, and we have upgraded our
planning and merchandising systems, to enable us to better manage
stock and help grow full price sales. Our transformation strategy
is progressing well and enables us, as previously reported, to
deliver significant central cost savings.
International
Trading in a number of our international territories continues
to be volatile. Total International sales fell by (1.7)% to
GBP393.2m in actual currency (H1 FY16/17 GBP399.9m) while constant
currency delivered a fall of (7.7%). Adjusted profits for our
International business were down (28)% to GBP14.9m
International accounts for 67% of worldwide space and 64% of
worldwide sales.
28 weeks 28 weeks % change
to to
7 Oct 8 Oct 2016 vs. last
2017 year
GBPmillion GBPmillion
------------------------------ ---------- ---------- -----------
International like-for-like
sales growth (8.0)% (2.9)% -
International retail sales:
constant currency (7.7)% (0.8)% -
International retail sales:
actual currency (1.7)% +7.1% -
International retail sales 393.2 399.9 (1.7)%
International wholesale
sales 5.7 5.7 0.0%
Total International sales 398.9 405.6 (1.7)%
Adjusted profit 14.9 20.8 (28)%
------------------------------ ---------- ---------- -----------
Adjusted profit is impacted by lower sales, with the benefit of
currency translation predominantly negated by our hedging strategy,
and the timing of shipments to partners. However, this timing will
unwind and will be fulfilled in the second half of the year, along
with the pass-through of higher US$ product inflation to our
partners, reversing out approximately 50% of the first half's year
on year decline in profit.
Expanding further internationally
We continue to work proactively with our partners to manage
their store portfolio and grow their digital presence. Space was
down (3.0)% in the period, opening 68 stores whilst closing 83. We
have refurbished 127 stores in the modern 'club' format.
Online continues to present a significant opportunity globally
and is growing steadily from very low penetration levels. We
launched a new website in Pakistan and two new marketplaces in
United Arab Emirates and India. We are now trading online in 23
markets across 30 websites and marketplaces.
Online sales have grown by 73% in moving currency and 57% in
constant currency.
International like-for-like sales were down (8.0)%, with the
Middle East continuing to be a drag, due to its scale, on overall
performance. Russia has been impacted by unseasonably cold weather
in the summer months and mild weather in autumn/winter.
Outlook
Towards the end of the reporting period, and in subsequent
weeks, we have seen a softening in the UK market with lower
footfall and spend which is consistent with recent industry
reports. Not- withstanding this uncertain consumer backdrop, the
Mothercare brand, whilst not immune, is in a stronger position with
a much-improved product and service offer and a more robust
business model.
International markets, in particular the Middle East, remain
challenging, but in spite of this, we continue to work with our
partners to improve their businesses, exporting our digital
experience and new store format around the globe.
We remain firmly committed to our vision to be the leading
global retailer for parents and young children.
FINANCIAL REVIEW
RESULTS SUMMARY
Group adjusted loss before tax was GBP(0.7) million, for the 28
weeks to 7 October 2017, (H1 FY2016/17: GBP5.9 million profit).
Adjusted (loss)/profit excludes adjusted costs and other adjusted
items which are analysed below. Adjusted costs include costs
relating to announced activity on property, development of
warehousing, a strategic review of overhead costs and a provision
for China JV receivables. After adjusted items, the Group recorded
a pre-tax loss of GBP(16.8) million (H1 FY2016/17: loss of GBP0.8
million).
Income statement
GBP million 28 weeks 28 weeks 52 weeks
to to to
7 October 8 October 25 March
2017 2016 2017
----------------------------------------- --------------------- -------------------- --------------------
Revenue 339.5 347.7 667.4
Adjusted profit from retail operations
before interest and share based
payments 1.0 8.3 23.8
Share based payments credit/(charge) 0.2 (0.5) (0.8)
Adjusted net finance costs (1.9) (1.9) (3.3)
----------------------------------------- --------------------- -------------------- --------------------
Adjusted (loss)/profit before tax (0.7) 5.9 19.7
Adjusted costs (15.6) (10.7) (15.7)
Non-cash foreign currency adjustments - 4.5 4.1
Amortisation of intangible assets (0.5) (0.5) (1.0)
----------------------------------------- --------------------- -------------------- --------------------
(Loss)/profit before tax (16.8) (0.8) 7.1
----------------------------------------- --------------------- -------------------- --------------------
Adjusted EPS - basic 0.0p 3.4p 9.7p
EPS - basic (8.5)p 0.2p 4.8p
----------------------------------------- --------------------- -------------------- --------------------
Adjusted profit from retail operations before share based
payments includes all of the Group's trading activities, but
excludes the share based payment credit to the income statement in
accordance with IFRS 2 (see next page).
Note: adjusted (loss)/profit and adjusted items were previously
defined as underlying (loss)/profit and exceptional costs and
non-underlying items (see Note 2).
Results by segment
The primary segments of Mothercare plc are the UK business and
the International business.
GBP million - Revenue 28 weeks to 28 weeks 52 weeks
7 October to to
2017 8 October 25 March
2016 2017
----------------------- ----------- -------------------- -------------------
UK 229.0 231.2 459.4
International 110.5 116.5 208.0
----------------------- ----------- -------------------- -------------------
Total 339.5 347.7 667.4
----------------------- ----------- -------------------- -------------------
GBP million - Adjusted (loss)/profit 28 weeks 28 weeks 52 weeks
to to to
7 October 8 October 25 March
2017 2016 2017
--------------------------------------- ---------- -------------------- -------------------
UK (9.6) (8.8) (4.4)
International 14.9 20.8 35.2
Corporate (4.3) (3.7) (7.0)
--------------------------------------- ---------- -------------------- -------------------
Adjusted profit from operations
before interest and share based
payments 1.0 8.3 23.8
Share based payments 0.2 (0.5) (0.8)
Net finance costs (1.9) (1.9) (3.3)
--------------------------------------- ---------- -------------------- -------------------
Adjusted (loss)/profit before
tax (0.7) 5.9 19.7
--------------------------------------- ---------- -------------------- -------------------
UK LFL have increased by 2.5%, with online sales up 5.3%.
However total sales were down on the last half year due to planned
store closures. Higher LFL sales and a small improvement of 34 bps
in margin were more than offset by higher costs and depreciation
which has meant adjusted losses in the UK increased to GBP(9.6)
million from GBP(8.8) million last half year.
International retail sales in constant currency were down (7.7)%
where the continuing challenging economic conditions are impacting
performance, primarily driven by continued weakness in the Middle
East. International sales decreased by (5.2)% on a reported basis
and (1.7)% on a total basis, benefitting from currency tailwinds as
sterling devalued, this tailwind having limited benefit to the
profit and loss as it was mostly hedged. International adjusted
profit was down GBP(5.9)million on last half year to GBP14.9
million.
Corporate expenses represent board and company secretarial costs
and other head office costs including audit, professional fees,
insurance and head office property costs.
Like-for-like sales, total International sales and worldwide
sales
UK 'Like-for-like sales' are defined as sales for stores that
have been trading continuously from the
same selling space for at least a year and include Direct in
Home and Direct in Store.
International retail sales are the estimated retail sales of
overseas franchisees and joint ventures and associates to their
customers (rather than Mothercare sales to franchisees as included
in the statutory or reported sales numbers). Total International
sales are International retail sales plus International wholesale
sales. Group worldwide sales are total International sales plus
total UK sales. Group worldwide sales and reported sales are
analysed as follows:
GBP million Reported Worldwide sales*
sales
------------ ---------------------- ------------ ------------- ---------------------------------
28 weeks 28 weeks % 52 28 28 weeks % 52 weeks
ended ended weeks weeks ended ended
7 October 8 October ended ended 8 25
2017 2016 25 7 October March
March October 2016 2017
2017 2017
---------------- ------------ ------------ -------- ------------ ------------- ------------ -------- ---------
UK retail
sales 210.6 214.6 (1.9)% 423.6 210.6 214.6 (1.9)% 423.6
UK wholesale
sales 18.4 16.6 10.8% 35.8 18.4 16.6 10.8% 35.8
---------------- ------------ ------------ -------- ------------ ------------- ------------ -------- ---------
Total UK sales 229.0 231.2 (1.0)% 459.4 229.0 231.2 (1.0)% 459.4
---------------- ------------ ------------ -------- ------------ ------------- ------------ -------- ---------
International
retail sales 104.8 110.8 (5.4)% 198.7 393.2 399.9 (1.7)% 753.2
International
wholesale
sales 5.7 5.7 - 9.3 5.7 5.7 - 9.3
---------------- ------------ ------------ -------- ------------ ------------- ------------ -------- ---------
Total
International
sales 110.5 116.5 (5.2)% 208.0 398.9 405.6 (1.7)% 762.5
---------------- ------------ ------------ -------- ------------ ------------- ------------ -------- ---------
Group sales /
Group
worldwide
sales 339.5 347.7 (2.4)% 667.4 627.9 636.8 (1.4)% 1,221.9
---------------- ------------ ------------ -------- ------------ ------------- ------------ -------- ---------
* Estimated
Analysis of worldwide sales movement
GBP million - Worldwide sales
------------------------------------- ------
Sales for 28 weeks ended 8 October
2016 636.8
Currency impact 26.3
------------------------------------- ------
Proforma sales for 28 weeks ended
8 October 2016 663.1
Increase in UK LFL 5.1
Decrease in UK space (9.1)
Decrease in international LFL (31.5)
Decrease in international space (1.5)
Increase in wholesale 1.8
------------------------------------- ------
Sales for 28 weeks ended 7 October
2017 627.9
------------------------------------- ------
Sales in the 28 weeks ended 7 October 2017 were lower by
GBP(8.9) million primarily as a result of decreased International
LFL, partially offset by a favourable currency impact of GBP26.3
million due to the devaluation of sterling.
Including the currency impact, international retail sales have
decreased by GBP(6.7) million driven by an decrease in space and
LFL, offset by favourable currency impact.
UK retail sales have fallen by GBP(4.0) million due a decrease
in UK space as a result of planned store closures, partially offset
by increased LFL.
Analysis of profit movement
GBP million - Adjusted profit before
tax
---------------------------------------- -----
Adjusted profit before tax for 28
weeks ended 8 October 2016 5.9
Currency impact 0.6
---------------------------------------- -----
Proforma adjusted profit before tax
for 28 weeks ended 8 October 2016 6.5
Decrease in International volumes (3.9)
UK space impact 1.5
UK sales and margin 1.5
Increase in depreciation (2.7)
Increase in costs (3.6)
---------------------------------------- -----
Adjusted loss before tax for 28 weeks
ended 7 October 2017 (0.7)
---------------------------------------- -----
On a proforma basis (i.e. excluding the currency impact)
adjusted profit before tax has fallen from
GBP6.5 million to a loss of GBP(0.7) million. This is driven by
lower international volumes and increased costs, some of which is
timing and depreciation.
Foreign exchange
The main exchange rates used to translate the consolidated
income statement and balance sheet are set out below:
28 weeks ended 28 weeks 52 weeks
7 October 2017 ended ended 25
8 October March 2017
2016
----------------- --------------------------------------- ---------------- ------------------------
Average:
Russian rouble 75.02 88.95 82.40
Saudi riyal 4.84 5.17 4.95
Emirati dirham 4.74 5.03 4.81
Kuwaiti dinar 0.39 0.42 0.40
----------------- --------------------------------------- ---------------- ------------------------
Closing:
Russian rouble 77.11 81.58 70.90
Saudi riyal 5.02 4.87 4.65
Emirati dirham 4.92 4.77 4.55
Kuwaiti dinar 0.40 0.39 0.38
----------------- --------------------------------------- ---------------- ------------------------
The principal currencies that impact our results are the Russian
rouble, Saudi riyal, Emirati dirham and Kuwaiti dinar. The net
effect of currency translation caused worldwide sales and adjusted
operating profit to increase by GBP26.3 million and GBP0.6 million
respectively compared with 2016 as shown overleaf:
Adjusted
Worldwide Sales Operating
GBP million profit
GBP million
------------------------- ----------------------------------------------- -----------------------
Net effect of currency
translation;
Russian rouble 12.7 0.2
Saudi riyal 3.9 0.2
Emirati Dirham 2.6 0.2
Kuwaiti dinar 1.2 0.1
Other currencies 5.9 (0.1)
------------------------- ----------------------------------------------- -----------------------
26.3 0.6
------------------------- ----------------------------------------------- -----------------------
The profit benefits are limited due to hedging of royalty
receipts.
In addition to the translation exposure, the Group is also
exposed to movements on certain of its transactions, principally
movements in the US dollar. Although they are largely hedged,
eventually the impact of GBP sterling depreciation flows through
the cost of goods and is passed on in price increases.
Share based payments
Adjusted profit before tax also includes a share based payments
credit of GBP0.2 million (H1 FY2016/17: GBP(0.5) million charge) in
relation to the Company's long-term incentive schemes. The credit
is due to a change in the estimated number of shares that will vest
and hence an accumulated true up.
Financing and taxation
Financing represents interest receivable on bank deposits,
interest payable on borrowings, the amortisation of costs relating
to bank facility fees and the net interest charge on the
liabilities/assets of the pension scheme (see note 5).
The tax credit for total loss comprises corporation taxes
incurred and a deferred tax charge. The total tax credit was GBP2.3
million (H1 FY2016/17: credit of GBP1.2 million) - (see note
6).
Adjusted items
Adjusted (loss)/profit before tax excludes the following
adjusted items (see note 4): Adjusted costs:
-- Costs relating to announced activity on property and retail restructuring programmes;
-- Costs relating to the planned development of warehouses in the UK;
-- Costs relating to a strategic review of overhead costs;
-- Costs relating to the joint venture trade receivable provision and associated legal costs;
-- Costs relating to refinancing in May 2017.
-- Costs relating to stock provisions associated with ranges to
be exited as part of the strategic review announced in May
2017.
Other adjusted items:
-- The revaluation of monetary assets and liabilities held in
foreign currencies and the revaluation of outstanding forward
contracts which have not yet been matched to the purchase of stock.
These revaluation adjustments are reported as adjusted items so
that the Group reports its adjusted performance consistently with
its cash flows, reflecting the hedging which is in place; and
-- Amortisation of intangible assets (excluding software).
Earnings per share and dividend
Basic adjusted earnings per share were nil pence compared to 3.4
pence in the 28 weeks to 8 October 2016.
28 weeks 28 weeks 52 weeks
ended 7 ended 8 October ended
October 2016 25
2017 March
2017
Million Million Million
-------------------------------------- -------------------- -------------------------------- -------------
Weighted average number of shares
in issue 169.8 170.8 170.5
Dilution- option schemes 7.5 4.2 7.9
-------------------------------------- -------------------- -------------------------------- -------------
Diluted weighted average number
of shares in issue 177.3 175.0 178.4
-------------------------------------- -------------------- -------------------------------- -------------
Number of shares at period end 170.9 170.9 170.9
-------------------------------------- -------------------- -------------------------------- -------------
GBP million GBP million GBP million
-------------------------------------- -------------------- -------------------------------- -------------
(Loss)/profit for basic and
diluted earnings per share (14.5) 0.4 8.2
Adjusted items (note 4) 16.1 6.7 12.6
Tax effect of above items (1.6) (1.3) (4.3)
-------------------------------------- -------------------- -------------------------------- -------------
Adjusted earnings 0.0 5.8 16.5
-------------------------------------- -------------------- -------------------------------- -------------
Pence Pence Pence
-------------------------------------- -------------------- -------------------------------- -------------
Basic earnings per share (8.5) 0.2 4.8
Basic adjusted earnings per
share 0.0 3.4 9.7
Diluted earnings per share (8.5) 0.2 4.6
Diluted adjusted earnings per
share 0.0 3.3 9.3
-------------------------------------- -------------------- -------------------------------- -------------
The Board has concluded that given the cash investment required
to deliver the current strategy the Company will not pay an interim
dividend for 2017/18. The total dividend for the period is nil
pence per share (2016/17: nil pence per share).
Pensions
The Mothercare defined benefit pension schemes were closed with
effect from 30 March 2013. Details of the income statement net
charge, total cash funding and net assets and liabilities are as
follows:
GBP million 28 weeks 28 weeks 52 weeks
ending 7 ending ending
October 8 October 25
2017 2016 March
2017
--------------------------------------- ----------------------------------------- --------------- -----------------
Income statement
Running costs (1.7) (1.6) (3.0)
Net (interest on liabilities)/return
on assets (1.1) (1.3) (2.6)
--------------------------------------- ----------------------------------------- --------------- -----------------
Net charge (2.8) (2.9) (5.6)
--------------------------------------- ----------------------------------------- --------------- -----------------
Cash funding
Regular contributions (2.6) (2.4) (2.4)
Deficit contributions (4.5) (3.6) (7.2)
--------------------------------------- ----------------------------------------- --------------- -----------------
Total cash funding (7.1) (6.0) (9.6)
--------------------------------------- ----------------------------------------- --------------- -----------------
Balance sheet
Fair value of schemes' assets 339.7 329.4 329.6
Present value of defined benefit
obligations (408.6) (435.9) (409.7)
--------------------------------------- ----------------------------------------- --------------- -----------------
Net liability (68.9) (106.5) (80.1)
--------------------------------------- ----------------------------------------- --------------- -----------------
In consultation with the independent actuaries to the schemes,
the key market rate assumptions used in the valuation and their
sensitivity to a 0.1% movement in the rate are shown below.
H1 H1 H1 FY2017/18 H1 FY2017/18
FY2017/18 FY2016/17 Sensitivity Impact on scheme
liabilities
GBP million
---------------- ---------------------------- -------------------------- ----------------------- -----------------
Discount rate 2.7% 2.6% +/- 0.1% -7.8/7.8
---------------- ---------------------------- -------------------------- ----------------------- -----------------
Inflation -
RPI 3.2% 3.2% +/- 0.1% 7.5/-7.5
---------------- ---------------------------- -------------------------- ----------------------- -----------------
Inflation -
CPI 2.1% 2.1% +/- 0.1% 2.7/-2.7
---------------- ---------------------------- -------------------------- ----------------------- -----------------
The tri-ennial valuation of the pension scheme has been
concluded (based on the FY17 balance sheet year end date) and this
will be reflected in the valuation as at 24 March 2018.
Cash flow
Adjusted free cash flow (as defined in Note 2) was an outflow of
GBP(13.7) million with adjusted cash generated from operations of
GBP0.1 million.
Capital expenditure of GBP(12.4) million reflected the continued
investment in store refurbishment and IT infrastructure but was
materially lower than in the 28 weeks ended 8 October 2016 as the
next stage of the transformation of the UK store estate was being
planned.
Working capital was an outflow of GBP(5.3) million, reflecting
higher stocks and receivables partially offset by higher payables
as stocks built for the seasonal peak.
Cash outflows in respect of adjusted costs of GBP8.9 million
include cash spent on restructuring costs and warehousing and store
closures costs.
Other movements include movements in provisions, amortisation of
lease incentives and lease incentives received.
28 weeks 28 weeks 52 weeks
ended 7 ended 8 ended 25
October 2017 October March 2017
2016
GBP million GBP million GBP million
---------------------------------------- ------------------- --------------- -----------------
Adjusted profit from operations
before interest and share based
payments 1.0 8.3 23.8
---------------------------------------- ------------------- --------------- -----------------
Depreciation and amortisation 12.3 9.6 18.2
Retirement benefit schemes (5.4) (4.4) (6.6)
Change in working capital (5.3) (6.8) (3.7)
Other movements (2.5) (5.9) (4.7)
---------------------------------------- ------------------- --------------- -----------------
Cash generated from operations 0.1 0.8 27.0
Capital expenditure (12.4) (25.1) (39.3)
Interest and tax paid (1.4) (1.0) (2.1)
---------------------------------------- ------------------- --------------- -----------------
Adjusted Free cashflow (13.7) (25.3) (14.4)
Adjusted costs (8.9) (2.1) (12.5)
---------------------------------------- ------------------- --------------- -----------------
Free cashflow (22.6) (27.4) (26.9)
---------------------------------------- ------------------- --------------- -----------------
Drawdown on facility 24.5 30.0 15.0
Payment of facility fee (0.6) - -
Purchase of own shares - - (1.2)
Exchange differences 0.9 (1.7) (1.3)
---------------------------------------- ------------------- --------------- -----------------
(Overdraft)/cash and cash equivalents
at beginning of period (0.9) 13.5 13.5
---------------------------------------- ------------------- --------------- -----------------
Cash and cash equivalents/
(overdraft) at end of period 1.3 14.4 (0.9)
---------------------------------------- ------------------- --------------- -----------------
Borrowings (including facility
fee) (38.9) (30.0) (15.0)
---------------------------------------- ------------------- --------------- -----------------
Statutory net debt at end of
period (37.6) (15.6) (15.9)
---------------------------------------- ------------------- --------------- -----------------
Balance sheet
The balance sheet includes identifiable intangible assets
arising on the acquisition of the Early Learning Centre of GBP4.7
million and goodwill of GBP26.8 million. These assets are allocated
to the International business.
7 October 8 October 25 March
2017 2016 2017
GBP million GBP million GBP million
----------------------------------- ----------- ---------------------- --------------------
Goodwill and other intangibles 61.8 54.8 63.4
Property, plant and equipment 70.1 77.0 80.4
Retirement benefit obligations
(net of tax) (57.2) (88.4) (66.4)
Net borrowings (37.6) (15.6) (15.9)
Derivative financial instruments (0.7) 21.7 8.0
Other net assets 29.4 12.8 11.9
----------------------------------- ----------- ---------------------- --------------------
Net assets 65.8 62.3 81.4
----------------------------------- ----------- ---------------------- --------------------
Share capital and premium 146.4 146.4 146.4
Reserves (80.6) (84.1) (65.0)
----------------------------------- ----------- ---------------------- --------------------
Total equity 65.8 62.3 81.4
----------------------------------- ----------- ---------------------- --------------------
Shareholders' funds amount to GBP65.8 million, an increase of
GBP3.5 million year on year driven predominantly by a decrease of
GBP31.2 million in the defined benefit obligation (net of deferred
tax) partly offset by the losses since H1 FY2016/17.
Going concern
The directors have reviewed the going concern principle
according to revised guidance provided by the FRC.
The Group's business activities and the factors likely to affect
its future development are set out in the principal risks and
uncertainties section. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are set out
in the financial review.
As at 7 October 2017 the Group had a net debt of GBP37.6 million
and had headroom on both cash and covenants on its facility.
On 5 May 2017, the Group refinanced with the support of its two
existing banks, HSBC and Barclays, amending its committed
facilities of GBP50 million to a GBP62.5 million revolving credit
facility and a GBP5 million uncommitted overdraft (at an interest
rate range of 2.0% to 3.0% above LIBOR) maturing in May 2020. The
amended revolving credit facility is made up of two tranches, a
GBP50.0 million maturing in May 2020 (with an option to extend for
an additional one year on two occasions subject to lenders'
approval) and an additional GBP12.5 million maturing in November
2018 (with an option to extend for an additional six months on two
occasions subject to lenders' approval). In addition, an accordion
facility with a variable limit that allows the Group to draw down
up to GBP75 million has been made available, subject to credit
committee approval.
The directors have reviewed the Group's latest forecasts and
projections, which have been sensitivity-tested for reasonably
possible adverse variations in performance. This indicates the
Group will operate within the terms of its borrowing facilities and
covenants for the foreseeable future. To the extent that future
trading is worse than a reasonably possible downside, which the
directors do not consider a likely scenario, then there are
mitigating actions available, which would enable the Group to
continue to operate within the terms of the borrowing facilities
and covenants for at least the next 12 months. Based on this, the
directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for at least the
next 12 months. Accordingly, the financial statements are therefore
prepared on the going concern basis.
Treasury policy and financial risk management
The Board approves treasury policies and senior management
directly controls day-to-day operations within these policies. The
major financial risk to which the Group is exposed relates to
movements in foreign exchange rates and interest rates. Where
appropriate, cost effective and practicable, the Group uses
financial instruments and derivatives to manage the risks.
No speculative use of derivatives, currency or other instruments
is permitted.
Foreign currency risk
All International sales to franchisees are invoiced in Pounds
sterling or US dollars.
International reported sales represent approximately 32.5% of
Group sales. Total International sales in the 28 week period
represent approximately 63.5% of Group worldwide sales. The Group
therefore has some currency exposure on these sales, but they are
used to offset or hedge in part the Group's US dollar denominated
product purchases. The Group policy is that all material exposures
are hedged by using forward currency contracts. To help mitigate
against the currency impact on royalty receipts, the Group has
hedged against its major market currency exposure.
Interest rate risk
The Group has drawn down GBP39.5 million on the Revolving Credit
Facility. The RCF attracts an interest rate of 2.5% above LIBOR, it
exposes the Group to cashflow interest rate risk. The interest
exposure is monitored by management but due to low interest rate
levels during the period the risk is believed to be minimal and no
interest rate hedging has been undertaken.
Credit risk
The Group's exposure to credit risk is inherent in its trade
receivables. The Group has no significant concentration of credit
risk, except with the China joint venture. The Group operates
effective credit control procedures in order to minimise exposure
to overdue debts. Before accepting any new credit customer, the
Group obtains a credit check from an external agency to assess the
credit quality of the potential customer and then sets credit
limits on a customer by customer basis.
Shareholders' funds
Shareholders' funds amount to GBP65.8 million, an increase of
GBP3.5 million in the 52 week period. This represents GBP0.39 per
share compared to GBP0.36 per share on 8 October 2016.
Post balance sheet events
Additional costs within adjusted items are expected in the
second half of FY2017/18 as subsequent to the balance sheet date it
was announced that there will be a wider head office restructure to
save overhead costs by GBP7-GBP10 million before any
re-investment.
Condensed income statement
For the 28 weeks ended 7 October 2017
28 weeks ended 28 weeks ended 52 weeks
7 October 2017 8 October 2016 ended
25 March
2017
(unaudited) (unaudited)
------------------------ --------- ------------------------------------------ ------------------------------------------ ---------------
Before Before
Note adjusted Adjusted adjusted Adjusted
items1 items Total items1 items Total Total
GBP 2 GBP GBP 2 GBP GBP
million GBP million million GBP million million
million million
------------------------ --------- ------------- ------------ ------------- ------------- ----------- -------------- ---------------
Revenue 339.5 - 339.5 347.7 - 347.7 667.4
Cost of sales (317.4) (1.5) (318.9) (320.1) (0.5) (320.6) (608.6)
------------------------ --------- ------------- ------------ ------------- ------------- ----------- -------------- ---------------
Gross profit/(loss) 22.1 (1.5) 20.6 27.6 (0.5) 27.1 58.8
Administrative
expenses (20.9) (2.7) (23.6) (19.8) (5.3) (25.1) (47.9)
------------------------ --------- ------------- ------------ ------------- ------------- ----------- -------------- ---------------
Profit/(loss)
from retail operations 1.2 (4.2) (3.0) 7.8 (5.8) 2.0 10.9
Other adjusted
costs 4 - (11.7) (11.7) - (0.9) (0.9) (0.5)
------------------------ --------- ------------- ------------ ------------- ------------- ----------- -------------- ---------------
Profit/(Loss)
from operations 1.2 (15.9) (14.7) 7.8 (6.7) 1.1 10.4
Net finance costs 5 (1.9) (0.2) (2.1) (1.9) - (1.9) (3.3)
------------------------ --------- ------------- ------------ ------------- ------------- ----------- -------------- ---------------
(Loss)/profit
before taxation (0.7) (16.1) (16.8) 5.9 (6.7) (0.8) 7.1
Taxation 6 0.7 1.6 2.3 (0.1) 1.3 1.2 1.1
------------------------ --------- ------------- ------------ ------------- ------------- ----------- -------------- ---------------
(Loss)/profit
for the period
attributable
to equity holders
of the parent 0.0 (14.5) (14.5) 5.8 (5.4) 0.4 8.2
Earnings per
share
Basic 8 0.0p (8.5)p 3.4p 0.2p 4.8p
Diluted 8 0.0p (8.5)p 3.3p 0.2p 4.6p
-------------- --------- ------ -------- ---- ----
All results relate to continuing operations.
(1) Before items described in note 2 below. This was previously
defined as underlying
(2) Adjusted items includes property costs, costs of developing
warehousing, stock provisions and restructuring costs and other
adjusted items of amortisation of intangible assets (excluding
software) and the impact of non-cash foreign currency adjustments
under IAS 39 and IAS 21 as set out in note 4 to the financial
statements. These items were previously defined as exceptional and
non-underlying items
Condensed statement of comprehensive income/(expense)
For the 28 weeks ended 7 October 2017
28 weeks 28 weeks 52 weeks
ended ended ended
7 October 8 October 25 March
2017 (unaudited) 2016 (unaudited) 2017
GBP million GBP million GBP million
---------------------------------------- --------------------- ----------------------- ---------------
(Loss)/profit for the period (14.5) 0.4 8.2
Items that will not be reclassified
subsequently to the income statement:
Actuarial gain/(loss) on defined
benefit pension schemes 6.9 (35.1) (9.7)
Income tax relating to items
not reclassified (1.1) 4.8 0.5
---------------------------------------- --------------------- ----------------------- ---------------
5.8 (30.3) (9.2)
---------------------------------------- --------------------- ----------------------- ---------------
Items that may be reclassified
subsequently to the income statement:
Exchange differences on translation
of foreign operations (0.6) (1.7) (1.8)
Cash flow hedges: (losses)/gains
arising in the period (4.1) 17.1 20.2
Deferred tax on cash flow hedges 1.2 (1.4) 1.1
---------------------------------------- --------------------- ----------------------- ---------------
(3.5) 14.0 19.5
---------------------------------------- --------------------- ----------------------- ---------------
Other comprehensive income/(expense)
for the
period 2.3 (16.3) 10.3
---------------------------------------- --------------------- ----------------------- ---------------
Total comprehensive (expense)/income
for the period wholly attributable
to equity holders of the parent (12.2) (15.9) 18.5
---------------------------------------- --------------------- ----------------------- ---------------
Condensed balance sheet
As at 7 October 2017
7 October 8 October 25 March
2017 (unaudited) 2016 (unaudited) 2017
Note GBP million GBP million GBP million
------------------------------------- ---- ----------------- ---------------------- -----------
Non-current assets
Goodwill 26.8 26.8 26.8
Intangible assets 35.0 28.0 36.6
Property, plant and
equipment 10 70.1 77.0 80.4
Long term receivable - - 0.8
Deferred tax asset 6 25.2 24.8 24.8
Derivative financial
instruments 13 0.9 2.2 0.2
------------------------------------- ---- ----------------- ---------------------- -----------
158.0 158.8 169.6
------------------------------------- ---- ----------------- ---------------------- -----------
Current assets
Inventories 119.6 125.8 102.0
Trade and other receivables 71.8 75.0 67.6
Cash and cash equivalents 11 1.3 14.4 -
Current tax asset 2.2 0.9 -
Derivative financial
instruments 13 2.3 20.4 8.6
------------------------------------- ---- ----------------- ---------------------- -----------
197.2 236.5 178.2
------------------------------------- ---- ----------------- ---------------------- -----------
Total assets 355.2 395.3 347.8
------------------------------------- ---- ----------------- ---------------------- -----------
Current liabilities
Trade and other payables (131.4) (147.5) (125.5)
Bank overdraft - - (0.9)
Current tax liabilities - - (0.2)
Derivative financial
instruments 13 (3.9) (0.9) (0.8)
Short term provisions (8.2) (9.0) (8.8)
------------------------------------- ---- ----------------- ---------------------- -----------
(143.5) (157.4) (136.2)
------------------------------------- ---- ----------------- ---------------------- -----------
Non-current liabilities
Trade and other payables (23.3) (21.3) (21.5)
Borrowings 11 (38.9) (30.0) (15.0)
Retirement benefit obligations 12 (68.9) (106.5) (80.1)
Long term provisions (14.8) (17.8) (13.6)
------------------------------------- ---- ----------------- ---------------------- -----------
(145.9) (175.6) (130.2)
------------------------------------- ---- ----------------- ---------------------- -----------
Total liabilities (289.4) (333.0) (266.4)
------------------------------------- ---- ----------------- ---------------------- -----------
Net assets 65.8 62.3 81.4
------------------------------------- ---- ----------------- ---------------------- -----------
Equity attributable to equity holders of the parent
Share capital 85.4 85.4 85.4
Share premium account 61.0 61.0 61.0
Own shares (1.1) (0.3) (1.5)
Translation reserve (1.9) (1.2) (1.3)
Hedging reserve (0.8) 14.3 5.2
Retained deficit (76.8) (96.9) (67.4)
------------------------------------- ---- ----------------- ---------------------- -----------
Total equity 65.8 62.3 81.4
------------------------------------- ---- ----------------- ---------------------- -----------
Condensed statement of changes in equity
For the 28 weeks ended 7 October 2017 (unaudited)
Share Share Own Translation Hedging Retained Total
capital premium shares reserve reserve deficit equity
account
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
Balance at 25
March
2017 85.4 61.0 (1.5) (1.3) 5.2 (67.4) 81.4
Other
comprehensive
(expense)/income
for
the period - - - (0.6) (2.9) 5.8 2.3
Loss for the
period - - - - - (14.5) (14.5)
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
Total
comprehensive
(expense)/income
for
the period - - - (0.6) (2.9) (8.7) (12.2)
Removal from
equity
to inventories
during
the period - - - - (3.1) - (3.1)
Credit to equity
for
equity-settled
share-
based payments - - - - - (0.2) (0.2)
Deferred tax on
share-based
payments - - - - - (0.1) (0.1)
Shares
transferred
to employees on
vesting - - 0.4 - - (0.4) -
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
Balance at 7
October
2017 (unaudited) 85.4 61.0 (1.1) (1.9) (0.8) (76.8) 65.8
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
For the 28 weeks ended 8 October 2016 (unaudited)
Share Share Own Translation Hedging Retained Total
capital premium shares reserve reserve deficit equity
account
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
Balance at 26
March
2016 85.4 61.0 (0.3) 0.5 9.7 (67.2) 89.1
Other
comprehensive
(expense)/income
for
the period - - - (1.7) 15.7 (30.3) (16.3)
Profit for the
period - - - - - 0.4 0.4
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
Total
comprehensive
(expense)/income
for
the period - - - (1.7) 15.7 (29.9) (15.9)
Removal from
equity
to inventories
during
the period - - - - (11.1) - (11.1)
Credit to equity
for
equity-settled
share-
based payments - - - - - 0.3 0.3
Deferred tax on
share-based
payments - - - - - (0.1) (0.1)
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
Balance at 8
October
2016 (unaudited) 85.4 61.0 (0.3) (1.2) 14.3 (96.9) 62.3
------------------- ------------ ------------- ------------- ---------------- ----------- ----------- ------------
For the 52 weeks ended 25 March 2017
Share Share Own Translation Hedging Retained Total
capital premium shares reserve reserve deficit equity
account
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
------------------- ------------ ------------- ------------- ---------------- ----------- ------------ ------------
Balance at 26
March
2016 85.4 61.0 (0.3) 0.5 9.7 (67.2) 89.1
Other
comprehensive
(expense)/income
for
the period - - - (1.8) 21.3 (9.2) 10.3
Profit for the
period - - - - - 8.2 8.2
------------------- ------------ ------------- ------------- ---------------- ----------- ------------ ------------
Total
comprehensive
(expense)/income
for
the period (1.8) 21.3 (1.0) 18.5
- - -
Removal from
equity
to inventories
during
the period - - - - (25.8) - (25.8)
Purchase of own
shares - - (1.2) - - - (1.2)
Credit to equity
for
equity-settled
share-
based payments - - - - - 0.8 0.8
------------------- ------------ ------------- ------------- ---------------- ----------- ------------ ------------
Balance at 25
March
2017 (audited) 85.4 61.0 (1.5) (1.3) 5.2 (67.4) 81.4
------------------- ------------ ------------- ------------- ---------------- ----------- ------------ ------------
Condensed cash flow statement
For the 28 weeks ended 7 October 2017
28 weeks 28 weeks 52 weeks
Note ended ended ended
7 October 8 October 25 March
2017 (unaudited) 2016 (unaudited) 2017
------------------------------------------- ------ -------------------- ----------------------- --------------
GBP million GBP million GBP million
------------------------------------------- ------ -------------------- ----------------------- --------------
Net cash flow from operating
activities 15 (7.6) (1.9) 15.3
------------------------------------------- ------ -------------------- ----------------------- --------------
Cash flows from investing
activities
------------------------------------------- ------ -------------------- ----------------------- --------------
Interest received - - 0.1
Purchase of property, plant
and equipment (11.5) (21.1) (28.2)
Purchase of intangibles
- software (2.8) (4.0) (14.4)
Net cash received on disposal
of joint venture - - 1.3
------------------------------------------- ------ -------------------- ----------------------- --------------
Net cash used in investing
activities (14.3) (25.1) (41.2)
------------------------------------------- ------ -------------------- ----------------------- --------------
Cash flows from financing
activities
Interest paid (0.7) (0.4) (1.0)
Drawdown on facility 24.5 30.0 15.0
Purchase of own shares - - (1.2)
Payment of facility fee (0.6) - -
------------------------------------------- ------ -------------------- ----------------------- --------------
Net cash raised in financing
activities 23.2 29.6 12.8
------------------------------------------- ------ -------------------- ----------------------- --------------
Net increase/(decrease) in cash
and cash equivalents 1.3 2.6 (13.1)
--------------------------------------------------- -------------------- ----------------------- --------------
(Overdraft)/cash and cash equivalents
at beginning of period (0.9) 13.5 13.5
Effect of foreign exchange
rate changes 0.9 (1.7) (1.3)
------------------------------------------- ------ -------------------- ----------------------- --------------
Net cash and cash equivalents/(overdraft)
at end of period 1.3 14.4 (0.9)
------------------------------------------- ------ -------------------- ----------------------- --------------
Notes
1 General information
The Group's business activities, together with factors likely to
affect its future development, performance and position are set out
in the Chief Executive's review and the financial review and
include a summary of the Group's financial position, its cash flows
and borrowing facilities and a discussion of why the directors
consider that the going concern basis is appropriate.
The results for the 28 weeks ended 7 October 2017 are unaudited
but have been reviewed by the Group's auditor, whose report forms
part of this document. The information for the 52 weeks ended 25
March 2017 included in this report does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. A
copy of the statutory accounts for that period has been delivered
to the Registrar of Companies. The auditor's report on those
accounts was not qualified or modified, did not draw attention to
any matters by way of emphasis and did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
2 Accounting Policies and Standards
The annual financial statements of Mothercare plc are prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. The condensed set of
financial statements included in this half yearly report has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the European Union.
Taxation
The taxation charge for the 28 week period is calculated by
applying the best estimate of the average annual effective tax rate
expected for the full year to the profit for the period and
recognising a tax credit only to the extent that the resulting tax
asset is more than likely not to reverse.
Profit from retail operations
Profit from retail operations represents the profit generated
from normal retail trading, prior to any gains or losses on
property transactions and impairment charges. It also includes the
volatility arising from non-cash foreign currency adjustments under
IAS 39 'Financial Instruments: Recognition and Measurement' and IAS
21 'The Effects of Changes in Foreign Exchange Rates'.
Non-cash foreign currency adjustments
Since January 2014 the Group has adopted hedge accounting on its
foreign currency contracts. The adjustment made by the Group
ensures that it reports its adjusted profit performance
consistently with cash flows, reflecting the economic hedging which
is in place. In addition, foreign currency monetary assets and
liabilities are revalued to the closing balance sheet rate under
IAS21 "The Effects of Changes in Foreign Exchange Rates".
Amortisation of intangible assets
The average estimated useful life of identifiable intangible
assets is 10 to 20 years for trade names and 5 to 10 years for
customer relationships. The amortisation of these intangible assets
is recorded in adjusted items.
Retirement benefits
In consultation with the independent actuaries to the schemes,
the valuation of the pension obligation has been updated to reflect
current market discount rates, current market values of investments
and actual investment returns, and also to consider whether there
have been any other events that would significantly affect the
pension liabilities. The impact of these changes in assumptions and
events has been estimated in arriving at the valuation of the
pension obligation.
Alternative performance measures (APMs)
In the reporting of financial information, the directors have
adopted various APMs of historical or future financial performance,
position or cash flows other than those defined or specified under
International Financial Reporting Standards (IFRS). These measures
are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including those in the
Group's industry. APMs should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS
measurements.
Notes (continued)
2 Accounting Policies and Standards (continued) Purpose
The directors believe that these APMs assist in providing
additional useful information on the ongoing trends, performance
and position of the Group. APMs are also used to enhance the
comparability of information between reporting periods and
geographical units (such as like-for-like sales), by adjusting for
non-recurring or uncontrollable factors which affect IFRS measures,
to aid the user in understanding the Group's performance.
Consequently, APMs are used by the directors and management for
performance analysis, planning, reporting and incentive setting
purposes and have remained consistent with prior year.
The key APMs that the Group has focused on this half year are as
follows:
-- Group worldwide sales: This is the headline measure of
revenue for the Group. Worldwide sales are total International
sales plus total UK sales. Total International sales are
International retail sales plus International Wholesale sales.
Total Group sales is a statutory number and is made up of total UK
sales and receipts from our International partners, which includes
royalty payments and the cost of goods dispatched to our franchise
partners.
-- Like-for-like sales (LFL): This is a widely used indicator of
a retailer's current trading performance. This is defined as sales
from stores that have been trading continuously from the same
selling space for at least a year and include online sales.
International retail sales are the estimated retail sales of
overseas franchisees and joint ventures and associates to their
customers. International like-for-like sales are the estimated
franchisee retail sales from stores that have been trading
continuously from the same selling space for at least a year.
-- Constant currency sales exclude the impact of movements in
foreign exchange on translation.
-- Adjusted (loss)/profit: This is the headline measure of the
Group's performance, and is based on (loss)/profit before adjusted
items; adjusted costs, amortisation of intangibles and impact of
non- cash foreign currency adjustments under IAS 39 and IAS 21.
Certain items due to their significance or one-off nature have been
classified as adjusted costs. The gains and losses on these
discrete items, such as profits/losses on the disposal/termination
of property interests, provision for onerous leases, inventory,
receivables, impairment charges, restructuring costs and other non-
operating items can have a material impact on the absolute amount
of and trend in the profit from operations and the result for the
period. Therefore any gains and losses on such items are analysed
as adjusted items on the face of the income statement.
-- Adjusted free cash flow: This is the headline measure of cash
flow for the Group. This is based on the adjusted performance
excluding the impact of adjusted items. The presentation of
adjusted free cash flow differs from the statutory cash flow.
-- Adjusted earnings per share: This is the earnings per share
using adjusted (loss)/profit after tax as the earnings.
Note: adjusted profit and adjusted items were previously defined
as underlying profit and exceptional and non-underlying items.
3 Segmental information
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reported to the Group's board in order to allocate
resources to the segments and assess their performance. The Group's
reporting segments under IFRS 8 are UK and International.
UK comprises the Group's UK store and wholesale operations,
catalogue and web sales. The International business comprises the
Group's franchise and wholesale revenues outside the UK. The
unallocated corporate expenses represent board and company
secretarial costs and other head office costs including audit,
professional fees, insurance and head office property costs.
3 Segmental information
28 weeks ended 7 October 2017
(unaudited)
Unallocated
UK International Corporate Consolidated
Expenses
GBP million GBP million GBP million GBP million
----------------------------------------------------------- ----------- --------------- ----------- --------------
Revenue
External sales 229.0 110.5 - 339.5
----------------------------------------------------------- ----------- ---------------
Result
Adjusted profit from retail operations before interest and
share based payments (9.6) 14.9 (4.3) 1.0
Share-based payments credit 0.2
Adjusted profit from retail operations 1.2
Non-cash foreign currency adjustments (adjusted item) -
Amortisation of intangible assets (adjusted item) (0.5)
Adjusted costs (excluding adjusted items in finance
costs) (15.4)
Loss from operations (14.7)
Finance costs (2.1)
Loss before taxation (16.8)
Taxation 2.3
Loss for the period (14.5)
28 weeks ended 8 October 2016
(unaudited)
Unallocated Corporate Expenses
UK International Consolidated
GBP million GBP million GBP million GBP million
---------------------------------------- --------------
Revenue
External sales 231.2 116.5 - 347.7
Result
Adjusted profit from retail operations
before interest and share based
payments (8.8) 20.8 (3.7) 8.3
Share-based payments (0.5)
Adjusted profit from retail
operations 7.8
Non-cash foreign currency adjustments
(adjusted item) 4.5
Amortisation of intangible assets
(adjusted item) (0.5)
Adjusted costs (10.7)
Profit from operations 1.1
Finance cost (1.9)
Loss before taxation (0.8)
Taxation 1.2
Profit for the period 0.4
52 weeks ended 25 March 2017
Unallocated Corporate Expenses
UK International Consolidated
GBP million GBP million GBP million GBP million
Revenue
External sales 459.4 208.0 - 667.4
Result
Adjusted profit from retail operations
before interest and share based
payments (4.4) 35.2 (7.0) 23.8
Share-based payments (0.8)
Adjusted profit from retail
operations 23.0
Non-cash foreign currency adjustments
(adjusted item) 4.1
Amortisation of intangible assets
(adjusted item) (1.0)
Adjusted costs (15.7)
---------------------------------------- --------------
Profit from operations 10.4
Finance costs (3.3)
Profit before taxation 7.1
Taxation 1.1
Profit for the period 8.2
4 Adjusted items
Due to their significance or one-off nature, certain items have
been classified as adjusted items as follows:
28 weeks ended 28 weeks ended 52 weeks ended
7 October 2017 (unaudited) 8 October 2016 (unaudited) 25 March 2017
GBP million GBP million GBP million
Adjusted costs:
Restructuring costs included in cost of sales (1.0) (4.5) (5.5)
Restructuring costs and property impairment included in
administrative expenses (1.3) (1.3) (5.7)
Property related costs in other adjusted costs (11.7) (0.9) (0.5)
Joint venture trade receivable provision in
administrative expenses (1.4) (4.0) (4.0)
Restructuring costs in finance costs (0.2) - -
Total adjusted costs: (15.6) (10.7) (15.7)
Other adjusted items:
Non-cash foreign currency adjustments under IAS39 and IAS21
included in cost of sales - 4.5 4.1
Amortisation of intangibles included in cost of sales (0.5) (0.5) (1.0)
Adjusted items before tax (16.1) (6.7) (12.6)
Restructuring costs included in cost of sales
During the 28 weeks ended 7 October 2017 a charge of GBP1.0
million was recognised for further incremental costs associated
with the planned development of UK warehousing that began in the
prior year.
In H1 FY2016/17, a charge of GBP4.5 million was recognised,
GBP3.6 million was related to costs associated to the international
restructure (in particular a GBP3.2m charge to increase the stock
provision to align international trading with UK) and GBP0.9
million was related to the planned development of warehouses in the
UK and consists of incremental labour and warehouse storage
costs.
Restructuring costs and property impairment included in
administration expenses
During the 28 weeks ended 7 October 2017 a charge of GBP1.3
million was recognised. The majority of this amount related to an
ongoing strategic review of the overhead cost base of the business,
the costs include consultancy fees, staff costs, a GBP0.4 million
increase in stock provisioning associated with ranges to be exited,
and redundancy costs. Additional adjusted costs are expected in the
second half of FY2017/18 as subsequent to the balance sheet date it
was announced that there will be a wider head office restructure to
save central costs by GBP7-GBP10 million before any re-
investment.
In H1 FY2016/17, a GBP1.3 million charge related to head office
redundancies.
Property related costs in other adjusted costs
During the 28 weeks ended 7 October 2017 a charge of GBP11.7
million was recognised. A GBP7.9 million charge related to store
closures costs and impairments following the store closure
programme announced during the period. A GBP3.2 million charge
related to accelerated depreciation for stores refurbished by
FY2017/18 and H1 FY2018/19. Additionally a charge of GBP0.6 million
for dilapidations on an expired warehouse lease.
In H1 FY2016/17, a charge of GBP0.9 million was recognised. A
GBP0.4 million charge related to accelerated
depreciation for stores refurbished by FY2016/17 and H1 FY2017/18. The remaining
GBP0.5 million charge related to asset write-downs for stores
refurbished or closed.
4 Adjusted items (continued)
Joint venture trade receivable provision in administration
expenses
During the 28 weeks ended 7 October 2017 the Group had made
considerable progress in converting the joint venture in China to a
franchise agreement. This transition has led to a GBP1.4 million
charge to adjusted costs consisting of; GBP0.9 million for a loan
write off, GBP0.3 million legal fees and a GBP0.2 million increase
in the trade receivable provision.
In HY17, the Group fully provided for all outstanding debt at
FY2015/16, GBP4.0 million. In H2 FY2016/17 a further GBP1.5 million
was provided (charged to adjusted profit).
Restructuring in finance costs
A renegotiation on new banking facilities was signed on 5 May
2017 and a charge of GBP0.2 million for the write off of the
previous unamortised facility charge was recognised in the 28 weeks
ended 7 October 2017.
5 Net finance costs
28 weeks ended 28 weeks ended 52 weeks ended
7 October 2017 (unaudited) 8 October 2016 (unaudited) 25 March 2017
GBP million GBP million GBP million
Interest on pension liabilities/return on
assets 1.1 1.3 2.6
Other net interest 1.0 0.6 0.7
Net finance costs 2.1 1.9 3.3
6 Taxation
28 weeks ended 28 weeks ended 52 weeks ended
7 October 2017 (unaudited) 8 October 2016 (unaudited) 25 March 2017
GBP million GBP million GBP million
Current tax - Overseas tax and UK
corporation tax (1.6) - 1.8
Deferred tax - UK tax charge for timing
differences (0.7) (1.2) (2.9)
Total tax credit (2.3) (1.2) (1.1)
The deferred tax credit arises on UK temporary differences.
The net deferred tax asset at 7 October 2017 is GBP25.2 million
(H1 FY2016/17: GBP24.8 million) including GBP11.7 million of
deferred tax assets in relation to retirement benefit obligations
(H1 FY2016/17: GBP18.1 million).
HMRC will be reviewing Mothercare's compliance with the National
Minimum Wage legislation in the second half of the year. Currently
the outcome of this is unknown and it is not possible to estimate
any potential cost.
7 Dividends
In April 2012 the Group announced that the dividend would not be
resumed until there was a marked improvement in the Group's
results. Accordingly, there will be no dividend for the first half
of the year.
8 Earnings per share
28 weeks ended 28 weeks ended 52 weeks ended
7 October 2017 (unaudited) 8 October 2016 (unaudited) 25 March 2017
million million million
-------------------
Weighted average number of shares in
issue for the purpose of basic
earnings per share 169.8 170.8 170.5
Dilution - option schemes 7.5 4.2 7.9
-------------------
Weighted average number of shares in
issue for the purpose of diluted
earnings per share 177.3 175.0 178.4
-------------------
GBP million GBP million GBP million
(Loss)/ profit for basic and diluted
earnings per share (14.5) 0.4 8.2
Adjusted items (Note 4) 16.1 6.7 12.6
Tax effect of above items (1.6) (1.3) (4.3)
Adjusted earnings 0.0 5.8 16.5
-------------------
Pence Pence Pence
Basic earnings per share (8.5) 0.2 4.8
Basic adjusted earnings per share 0.0 3.4 9.7
Diluted earnings per share (8.5) 0.2 4.6
Diluted adjusted earnings per share 0.0 3.3 9.3
9 Seasonality of the Early Learning Centre
Sales for the Early Learning Centre are more heavily weighted
towards the second half of the year, with approximately 38% of
annual sales forecast to occur in the third quarter (mid-October to
early January).
10 Property, plant and equipment
Capital additions of GBP6.4 million were made during the period
(H1 FY2016/17: GBP19.4 million). The decrease over H1 FY2016/17 is
primarily driven by the rest of the store refurbishment programme
being planned.
11 Bank loans and overdrafts
As at 7 October 2017, the Group had drawn down GBP39.5 million
of the Revolving Credit Facility. The RCF attracts an interest rate
of 2.5% above LIBOR. This is offset by GBP0.6 million facility fee
and GBP1.3 million of cash and cash equivalents resulting in net
debt of GBP(37.6) million.
12 Retirement benefit schemes
The Group updated its accounting for pensions under IAS 19 as at
7 October 2017. This involved rolling forward the assumptions from
the prior year end and updating for changes in market rates in the
first half. For the UK schemes, based on the actuarial assumptions
from the last full actuarial valuations carried out in March 2014,
a liability of GBP68.9 million (H1 FY2016/17: GBP106.5 million) has
been recognised. This represents a material decrease year on year,
primarily as a result of higher gilt and corporate bond yields and
increased asset values.
The tri-ennial valuation of the pension has been concluded
(based on the FY17 balance sheet year end date) and this will be
reflected in the valuation as at 24 March 2018.
13 Financial instruments' fair value disclosures
The Group held the following financial instruments at fair value
at 7 October 2017. The fair value of foreign currency forward
contracts is measured using quoted foreign exchange rates and yield
curves from quoted rates matching the maturities of the contracts,
and they therefore are categorised within level 2 of the fair value
hierarchy set out in IFRS 7.
Fair value measurements at Fair value Fair value measurements at
7 October 2017 (unaudited) measurements at 8 25 March 2017
October 2016
(unaudited)
GBP million GBP million GBP million
Non-current financial
assets:
Derivative financial
instruments:
Forward foreign currency
contracts 0.9 2.2 0.2
Current financial assets:
Derivative financial
instruments:
Forward foreign currency
contracts 2.3 20.4 8.6
Current financial
liabilities:
Derivative financial
instruments:
Forward foreign currency
contracts (3.9) (0.9) (0.8)
(0.7) 21.7 8.0
The derivative financial assets and liabilities whose fair
values include the use of level 2 inputs are obtained from the
banks or financial instruments with which the derivatives have been
transacted, subject to adjustment for own credit risk if
necessary.
The valuations incorporate the following inputs:
-- interest rates and yield curves at commonly quoted intervals; and
-- observable credit spreads.
The directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values.
14 Share-based payments
A charge is recognised for share-based payments based on the
fair value of the awards at the date of grant, the estimated number
of shares that will vest and the vesting period of each award. The
total net credit for share-based payments under IFRS 2 is GBP0.2
million (H1 FY2016/17: GBP0.5 million charge) of which GBP0.2
million (H1 FY2016/17: GBP0.3 million) will be equity settled. The
assumptions used to measure the fair values of the share-based
payments are in line with those previously published.
15 Notes to the cash flow statement
28 weeks ended 28 weeks ended 52 weeks ended
7 October 2017 (unaudited) 8 October 2016 (unaudited) 25 March 2017
GBP million GBP million GBP million
(Loss)/profit from retail operations (3.0) 2.0 10.9
Adjustments for:
Depreciation of property, plant and
equipment 8.4 7.0 14.2
Amortisation of intangible assets 4.4 3.1 5.0
Impairment of property, plant and equipment
and intangible assets (0.2) - 1.9
Losses on disposal of property, plant and
equipment and intangible assets (0.1) - -
Loss on non-cash foreign currency
adjustments - (4.5) (4.1)
Equity settled share-based payments (0.2) 0.5 0.8
Movement in provisions (5.3) (3.7) (7.5)
Cash payments for other adjusted items (0.1) - (0.2)
Amortisation of lease incentives (2.3) (3.0) (5.0)
Lease incentives received 1.9 0.9 2.0
Payments to retirement benefit schemes (7.1) (6.0) (9.6)
Charge to profit from operations in respect
of retirement benefit schemes 1.7 1.6 3.0
Operating cash flow before movement in
working capital (1.9) (2.1) 11.4
Increase in inventories (18.4) (22.9) (0.5)
(Increase)/decrease in receivables (7.0) 1.3 7.5
Increase/(decrease) in payables 20.4 22.4 (2.0)
Cash (used in)/generated from operations (6.9) (1.3) 16.4
Income taxes paid (0.7) (0.6) (1.1)
Net cash (outflow)/inflow from operating
activities (7.6) (1.9) 15.3
Analysis of net debt
25 March Foreign exchange 7 October
2017 Cash flow 2017
GBP million GBP million GBP million GBP million
Cash and cash equivalents - 0.4 0.9 1.3
Borrowings (15.0) (24.5) - (39.5)
Facility fee - 0.6 - 0.6
Bank overdrafts (0.9) 0.9 - -
Net debt (15.9) (22.6) 0.9 (37.6)
16 Related party transactions
Transactions between the Group and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
joint ventures and associates are disclosed below.
Trading transactions:
Joint ventures and associates Revenue from related Amounts owed by related parties (net of
parties provisions)
GBP million GBP million
28 weeks ended 7 October 2017 (unaudited) 3.8 7.2
28 weeks ended 8 October 2016 (unaudited) 6.4 4.0
52 weeks ended 25 March 2017 9.8 6.3
Income earned from related parties includes royalty income on
retail sales of related parties to
their customers, plus sales of goods to related parties made at
the Group's usual list price.
The net amounts owed by related parties relate to the China JV
(GBP6.8 million) and the Ukraine JV (GBP0.4 million).
A provision of GBP5.7 million and GBP0.8 million (H1 FY2016/17:
GBP4.5 million and GBP1.0 million) exists for doubtful debts in
respect of the amounts owed by China JV and Ukraine JV
respectively. In addition a loan balance with China of GBP0.9
million has been written off during the 28 weeks ended 7 October
2017.
The amounts outstanding are unsecured and will be settled in
cash.
17 Post balance sheet events
Additional costs within adjusted items are expected in the
second half of FY2017/18 as subsequent to the balance sheet date it
was announced that there will be a wider head office restructure to
save overhead costs by GBP7-GBP10 million before any
re-investment.
Risks and uncertainties
The Board continually assesses and monitors the key risks of the
business. The principal risks and
uncertainties which could impact the Company's long-term
performance are summarised below:
-- The anticipated turnaround of the Group's UK business may not
be achievable if it fails to implement effectively key aspects of
its new strategic plan such as IT, store and infrastructure
transformation.
-- The Group may be affected by challenging economic conditions
and political developments affecting the UK and International
markets in which it operates.
-- The Group's brands and reputation are key to its success both
in the UK and internationally; any damage to the Group's brands or
concerns relating to its products (including their quality or
safety) could have an adverse effect on the business.
-- The Group is dependent on a small number of franchise
partners that make up a significant proportion of its International
business, many of which are due for re-negotiation.
-- The Group's results of operations may be affected by both
transactional and translational foreign exchange risk.
-- The Group's future success depends on the performance of its key senior management and
the ability to attract and retain high quality and highly
skilled personnel.
-- The Group's business is dependent on its ability to source
products successfully from its suppliers, most of which are based
outside the UK. The Group relies on its manufacturers, suppliers
and distributors to comply with employment, environmental and other
laws.
-- The Group relies on its ability to improve existing products
and successfully develop and launch new innovative products.
-- The Group supplies and sources its products and operates in a
number of countries in which bribery and corruption pose
significant risks.
-- Any unauthorised access or disclosure of confidential
information stored or obtained by the Group, either by criminal
cyber-attack or a speculative loner, could have a negative effect
on its business.
-- The Group's exposure to credit risk is inherent in its trade
receivables. The Group has no significant concentration of credit
risk, except with the China joint venture. The Group operates
effective credit control procedures in order to minimise exposure
to overdue debts. Before accepting any new credit customer, the
Group obtains a credit check from an external agency to assess the
credit quality of the potential customer and then sets credit
limits on a customer by customer basis.
Certain statements in this report are forward looking. Although
the Group believes that the expectations reflected in these
statements are reasonable, we can give no assurance that these
expectations will prove to have been correct. As these statements
contain risks and uncertainties, actual results may differ from
those expressed or implied. We undertake no obligation to update
any forward looking statements whether as a result of new
information, future events or otherwise.
Responsibility statement
We confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared in accordance with IAS 34
"Interim Financial Reporting";
(b) The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first 28 weeks of the year and description of principal
risks and uncertainties for the remaining 24 weeks of the year);
and
(c) The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
By order of the Board
Mark Newton-Jones Richard Smothers
Chief Executive Chief Financial Officer
22 November 2017
Independent review report to Mothercare plc
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
28 weeks ended 7 October 2017 which comprises the condensed income
statement, the condensed balance sheet, the condensed statement of
changes in equity, the condensed statement of comprehensive income,
the condensed cash flow statement and related notes 1 to 17. We
have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 28 weeks ended 7
October 2017 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP Statutory Auditor London, UK
22 November 2017
Shareholder information
Financial calendar
2018
Preliminary announcement of results for the 52 weeks ending 24 March 2018 End May
Issue of report and accounts Mid-June
Annual General Meeting Mid-July
Announcement of interim results for the 28 weeks ended 6 October 2018 End November
Registered office and head office
Cherry Tree Road, Watford, Hertfordshire WD24 6SH Telephone
01923 241000
www.mothercareplc.com
Registered number 1950509
Group General Counsel and Company Secretary
Alice Darwell
Registrars
Administrative enquiries concerning shareholders in Mothercare
plc for such matters as the loss of a share certificate, dividend
payments or a change of address should be directed, in the first
instance, to the registrars:
Equiniti Limited
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone 0371 384 2013 (calls to this number are charged at 8p
per minute plus network extras)
Overseas +44 (0)121 415 7042
www.equiniti.com
Share dealing service
A postal share dealing service is available through the
Company's registrars for the purchase and sale of Mothercare plc
shares. Further details can be obtained from Equiniti on 0371 384
2030. Online and telephone services are also available through the
Company's registrars - www.shareview.co.uk and 03456 037 037. Lines
are open 08:30 to 17:30, Monday to Friday.
The Company's stockbrokers are:
J.P. Morgan Cazenove & Co Limited
25 Bank Street
Canary Wharf,
London E14 5JP
Telephone 020 7742 4000
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Telephone 020 7260 1000
ShareGift
Shareholders with a small number of shares, the value of which
makes it uneconomic to sell them, may wish to consider donating
them to charity through ShareGift, a registered charity
administered by The Orr Mackintosh Foundation. The share transfer
form needed to make a donation may be obtained from the Mothercare
plc registrars, Equiniti Limited.
Further information about ShareGift is available from
www.sharegift.org or by telephone on 020 7930 3737.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BTBBTMBMTTJR
(END) Dow Jones Newswires
November 23, 2017 02:00 ET (07:00 GMT)
Mothercare (LSE:MTC)
Historical Stock Chart
From Apr 2024 to May 2024
Mothercare (LSE:MTC)
Historical Stock Chart
From May 2023 to May 2024