TIDMMTC
RNS Number : 4285H
Mothercare PLC
24 November 2022
Mothercare plc
Interim results announcement
Driving the Mothercare brand globally
Mothercare plc ("Mothercare" "the Company" or "the Group"), the
leading specialist global brand for parents and young children,
today announces unaudited half year results for the 26-week period
to 24 September 2022 ("H1 FY23"). The comparative period was a
26-week period to 25 September 2021 ("H1 FY22").
Key Highlights
-- International retail sales by franchise partners of GBP162.1
million (2021: GBP184.3 million, excluding Russia GBP140.8
million), an increase of 15% over last year, excluding sales from
Russia.
-- Adjusted EBITDA of GBP3.2 million (H1 FY22: GBP5.6 million)
reflecting the loss of contribution from Russia for the whole of
the current period, which was around GBP2.9 million for the
equivalent period last year.
-- Group adjusted profit before taxation from operations of
GBP2.9 million (H1 FY22: GBP5.2 million).
-- Total Group profit before taxation of GBP0.8 million (H1 FY22: GBP4.0 million).
-- Successfully completed the refinancing of the business, without further equity dilution.
-- New Chief Executive Officer appointed and joining in January.
-- Net debt reduced to GBP11.6 million (GBP13.3 million at 25 September 2021).
-- Pension scheme deficit materially reduced to GBP42 million at
30 September 2022 (GBP124.6 million deficit at 31 March 2020).
Our Group
26 weeks 28 weeks
26 weeks to to to
24 Sep 2022 25 Sep 2021 10 Oct 2020
Turnover GBPm 38.5 41.7 44.4
Adjusted EBITDA (2) GBPm 3.2 5.6 (0.1)
Adjusted profit from operations (2) GBPm 2.9 5.2 (1.3)
Adjusted profit before taxation (2) GBPm 1.7 3.6 (4.4)
Profit for the period GBPm 0.4 3.6 (13.2)
Adjusted basic earnings per share (2) 0.2p 0.9p (1.2)p
Basic earnings per share 0.1p 1.0p (3.5)p
------------------------------------------------ ------------ ------------ -----------
Our Franchise partners
26 weeks 28 weeks
26 weeks to to to
24 Sep 2022 25 Sep 2021 10 Oct 2020
Worldwide retail sales (1) GBPm 162.1 184.3 189.2
Online retail sales GBPm 13.1 17.6 27.1
Total number of stores 562 740 793
Space (k) sq. ft. 1,345 1,967 2,180
--------------------------------- ------------ ------------ -----------
Clive Whiley, Chairman of Mothercare plc, commented:
"Our results demonstrate the strong foundations and resilience
we have created in the business over recent years. Furthermore, we
have generated both profit and cash despite the impact of Covid-19
and the war in Ukraine.
Our immediate priority now remains to support our franchise
partners as we together navigate out of this suppressed demand
period, recover from supply chain disruptions and rebuild their
store footfall whilst growing their digital sales. This inevitably
means that a return to pre pandemic levels of trading is taking
time, however this will ultimately benefit both our own business
and our franchise partners' businesses in the longer term.
Today I am delighted to announce the impending arrival of Dan Le
Vesconte as our new Chief Executive Officer, with extensive
experience in the retail direct-to-consumer, wholesale and
licensing sector he will be a great asset to the executive team.
Whilst we remain mindful of the current global economic uncertainty
we are now wholly focused upon restoring critical mass and driving
the Mothercare brand globally over the next five years."
Investor and analyst enquiries
to:
Mothercare plc Email : investorrelations@mothercare.com
Clive Whiley, Chairman
Andrew Cook, Chief Financial
Officer
Numis Securities Limited Tel : 020 7260 1000
(Nominated Advisor & Joint
Corporate Broker)
Luke Bordewich
Henry Slater
finnCap (Joint Corporate Tel : 020 7220 0500
Broker)
Christopher Raggett
Media enquiries to:
MHP Email : mothercare@mhpc.com
Simon Hockridge Tel : 07709 496 125
Tim Rowntree
Notes
1 - Worldwide retail sales are total International and UK retail
franchise partner sales to end customers (which are estimated and
unaudited) .
2 - Adjusted figures are stated before the impact of the
adjusting items set out in note 4.
3 - Net debt is defined as total borrowings, cash at bank and
IFRS 16 lease liabilities.
4 - This announcement contains certain forward-looking
statements concerning the Group. 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 Group does not undertake any obligation to
announce any revisions to such statements, except as required by
law or by any appropriate regulatory authority.
5 - The information contained within this announcement is deemed
by the Company to constitute inside information for the purposes of
the Market Abuse Regulation (EU) No 596/2014. Upon the publication
of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public
domain.
6 - The person responsible for the release of this announcement
is Lynne Medini, Group Company Secretary at Mothercare plc,
Westside 1, London Road, Hemel Hempstead, HP3 9TD.
7 - M othercare plc's Legal Entity Identifier (" LEI") number is
213800ZL6RPV9Z9GFO74.
Chairman's statement
Overview
The transformation of the business in recent years to focus upon
our core international franchise and brand management competencies
as an asset light global franchising business, has proved
invaluable. We were once again forced to contend with unavoidable
adverse events this half, in particular with the termination of our
operations in Russia. It is therefore testimony to the resilience
of the business that, notwithstanding the ongoing challenges from
the pandemic and the current global economic uncertainty on our
franchise partners, we still succeeded in generating free cash flow
from operations and an adjusted EBITDA of GBP3.2 million for the
six months to 24 September 2022. We continue to make the necessary
adjustments to our supply chain, operations and administrative
costs demanded to address the consequent diseconomies of reduced
scale. At the half-year end we successfully refinanced the
business, without further equity dilution, which further enhances
our financial flexibility.
Trading Update
Although at the half-year end our franchise partners' global
stores were all open following the pandemic, retail sales of GBP162
million for the period were heavily impacted by the pausing of
operations we announced on 9 March 2022 and the subsequent
termination of the right to operate Mothercare branded stores in
Russia on 27 June 2022. Excluding the impact of the lost Russian
retail sales, worldwide retail sales grew at 15% in the 26 weeks to
24 September 2022. Online retail sales for the period reduced to 8%
of total retail sales (H1 FY22: 9.5%) in part reflecting the loss
of the higher Russian online activity but still well ahead of the
pre pandemic level of 4.9%.
Against this back-drop our franchisees in Asian markets
performed particularly well, with India and Malaysia ahead of pre
pandemic levels of sales, recovering strongly from Covid-19
impacted periods. The UK franchise with Boots increased sales
performance by 10% year on year over the same period. However,
performance in our Middle Eastern region, specifically the Kingdom
of Saudi Arabia and the United Arab Emirates remained much more
challenging. Saudi Arabia has undergone significant changes over
the last few years including sales tax, Saudisation of the
workforce and the introduction of many new leisure activities which
didn't previously exist all competing for consumers' money. This
continues to change the shape of our retail offering in the country
although we remain confident of the longer term market
opportunity.
Overall we have seen strong contributions from our innovation
pipeline and core new-born and baby essentials categories where we
have made improvements to design, quality and fit. We are currently
evolving these same improvements into further ranges across our
product age spectrum. In addition, we have recently launched our
new toy range MPlay, now worth 5% of our order book, which is
designed to develop early stage hand and eye co-ordination and
mobility skills and is the first of several developments in our
Home and Travel product category.
Given the pressures on families around the world as a result of
inflation and as a direct response to the input cost challenges we
face, we continue to evolve our product to ensure we can offer
value for money. To this end we have increased our offer on packs
and outfit sets both providing better value.
Growth Opportunities
As we strive to be the leading global brand for parents and
young children the Mothercare brand is in an almost unparalleled
position. It is a highly trusted British heritage brand, which is
globally recognised and connects with new-born babies and children
across multiple product categories. The Board is conscious that, at
present, the Company's singular route to market is via our
franchisees and thus we have barely scratched the surface in
exploring the multiple possibilities available to us to grow the
future global presence of the brand:
-- We are driving initiatives to maintain momentum in improving
profitability. Underwritten by the establishment of a cost base
that is appropriate for our business with the necessary skills and
experience to deliver further growth as we return to more normal
pre-pandemic levels of business.
-- Mothercare is still not represented in eight of the top ten
markets in the world, when ranked by wealth and birth rate. We are
exploring options to enter new territories through several channels
or a combination thereof via e-commerce (either DTC or
marketplaces) or with partners that would hold the online rights
for a territory and provide the website and full supply chain
capability in these markets. We have opportunities to wholesale the
Mothercare product into third party retailers, both large retailers
or independents and we can licence the brand either by specific
product in a country (e.g. baby bottles and teats) or the whole
offer if it is more economical to manufacture our Mothercare
designs locally.
We will fully leverage this intrinsic value through connections
with other businesses and the development of the product range and
licensing beyond our historic limits. There is a window of
opportunity for us, via step-change growth, to bring synergies and
enhanced profitability into our business, as the core strengths of
the Group across supply, franchisee partnerships and international
reach continue to demonstrate momentum.
Update on Initiatives
Supply chain model
Our efforts to develop our supply chain to reduce cost,
complexity and deliver goods to our franchise partners in the
quickest way led to a marked improvement in on-time availability,
with over 85% of our product being delivered direct from our
country of manufacturing to our retail partners' markets.
Enterprise Resource Planning ('ERP') System
Our new ERP system includes a leading product lifecycle
management system integrated with a supply chain and finance system
with portal-based access for both our franchise partners and
manufacturing partners to both input and access information. This
is due to go live early in the next financial year, with the full
benefit of the cost savings in the financial year ending March
2024. We are confident that the final system will deliver at least
the expected benefits and cost savings.
Brand Review
We have substantially completed our in-depth review of our brand
positioning and customer perceptions across all of our major
markets. We understand evolving customer needs in each territory
even better as we seek both to elevate our product and to reinforce
categories where we have natural defensive strengths. This improved
insight will inform the future brand and product strategy to be
driven by the new Chief Executive Officer.
Cost Reductions
The continual review and challenge to costs held administrative
expenses flat at prior year levels, inflationary pressures
notwithstanding, whilst still ensuring we operate to the standards
of a world class business.
Pension Schemes
The last full actuarial valuation of the schemes was at 31 March
2020 and showed a deficit of GBP124.6 million, resulting from total
assets of GBP383.7 and total liabilities of GBP508.3 million. Based
on a desktop review of this valuation provided to the pension
scheme trustees, at 30 September 2022 the deficit had reduced by
67% to GBP42 million.
The revised recovery plan agreed with the Trustees in September
includes total contributions (Deficit Repair Contributions plus
costs) in the financial years to: March 2023 GBP1 million; March
2024 GBP4 million; March 2025 GBP7 million; March 2026 GBP8
million; March 2027 & beyond GBP9 million aggregating to fully
fund a GBP78 million deficit by March 2033.
However, the recent turmoil in financial markets following the
mini budget alongside the complexity of Liability Driven Investment
hedging strategies means that this calculation is far from
straightforward. We look forward to improved clarity at the next
full actuarial valuation, at March 2023. At which time, if the
recent reduction in the deficit remains, the subsequent annual
payments could be further reduced.
Management & Board changes
Our successful transition to be an international brand owner and
operator, has led to a need to reinforce the product, brand,
E-commerce and distribution skills within the executive team.
Accordingly I am delighted that we have appointed Daniel Le
Vesconte as the Group's new Chief Executive Officer today. Dan
brings a wealth of international brand experience in direct to
consumer, franchise, wholesale and licensing, having held senior
leadership roles for several globally recognised brands including
Abercrombie and Fitch, Hollister and Gilly Hicks (A&F Corp), Dr
Martens (Dr Martens PLC), the Wolverine Worldwide group of brands
and Vans and Reef (VF Corp).
Dan joins us in January and will work closely with our global
stakeholders to spearhead the growth of the iconic Mothercare brand
into the next generation, complementing our existing executive team
to accelerate step-change growth.
Outlook
The strong platform for growth we have created would not have
been possible with out the ongoing commitment and support of all
stakeholders, including our Mothercare colleagues, our franchise
partners, our manufacturing partners, our pension scheme trustees
and our shareholders.
Whilst trading conditions will likely remain challenging across
our markets, including consumer sentiment and inflation, the
far-reaching and ongoing improvements to our product offer,
increased focus on value and the demographics of births and
children around the world will provide a degree of insulation in
these uncertain times. O ur medium-term guidance for the steady
state operation, in more normal circumstances, of our continuing
franchise operations remains that they are capable of exceeding
GBP10 million operating profit.
We have once again demonstrated our fortitude to deal with major
challenges effectively and remain profitable and cash generative.
The results from our recent focus on product design have encouraged
us to concentrate our efforts upon accelerating our exposure to new
products and markets , restoring critical mass and optimising the
Mothercare brand globally over the next five years.
Clive Whiley
Chairman
Condensed consolidated income statement
For the 26 weeks ended 24 September 2022
26 weeks ended 24 26 weeks ended 25 52 weeks
September 2022 September 2021 ended
(Unaudited ) (Unaudited) 26 March
2022
Restated * (Audited)
Before Adjusted Total Before Adjusted Total Total
adjusted items(1) adjusted items
Note items items (1)
GBP GBP GBP GBP GBP million GBP
million million million million GBP million
million
---------------- ------ --------- --------- ---------------- --------- --------- ----------------- -----------
Revenue 38.5 - 38.5 41.7 - 41.7 82.5
Cost of sales (27.5) - (27.5) (28.2) - (28.2) (54.9)
---------------- ------ --------- --------- ---------------- --------- --------- ----------------- -----------
Gross profit 11.0 - 11.0 13.5 - 13.5 27.6
Administrative
expenses (8.1) - (8.1) (8.3) 0.4 (7.9) (14.1)
Impairment
losses
on receivables - - - - - - (0.5)
---------------- ------
Profit from
operations 2.9 - 2.9 5.2 0.4 5.6 13.0
Net finance
costs 5 (1.2) (0.9) (2.1) (1.6) - (1.6) (1.9)
---------------- ------ --------- --------- ---------------- --------- --------- ----------------- -----------
Profit before
taxation 1.7 (0.9) 0.8 3.6 0.4 4.0 11.1
Taxation 6 (0.4) - (0.4) (0.4) - (0.4) 1.0
---------------- ------ --------- --------- ---------------- --------- --------- ----------------- -----------
Profit for the
period 1.3 (0.9) 0.4 3.2 0.4 3.6 12.1
---------------- ------ --------- --------- ---------------- --------- --------- ----------------- -----------
Profit for the period
attributable to equity
holders of the parent 1.3 (0.9) 0.4 3.2 0.4 3.6 12.1
------------------------ --------- --------- ---------------- --------- --------- ----------------- -----------
Earnings per
share
0.2 0.5
Basic 7 p 0.1 p 0.6 p p 1.6p
0.2 0.6
Diluted 7 p 0.1 p 0.6 p p 1.6p
---------------- ------ --------- --------- -------------------- --------- --------- ----------------- ---------------
(1) Adjusted items included: restructuring costs included in
finance costs, and property related income and other restructuring
costs included in administrative expenses. Adjusted items are
one-off or significant in nature and or /value. Excluding these
items from the profit metrics provides readers with helpful
additional information on the performance of the business across
the periods because it is consistent with how business performance
is reviewed by the Board and Operating Board.
* The comparative results for the period to 25 September 2021
have been restated to incorporate the impact of a
misclassification. An amount of GBP2.3 million in operating
expenses has been reclassified to cost of sales, the change has
resulted in a decrease in gross profit of GBP2.3 to GBP13.5 million
compared to the amount previously reported of GBP15.8 million.
Condensed consolidated statement of comprehensive income
For the 26 weeks ended 24 September 2022
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
----------------------------------------------- --- --------------- -------------- ------------
Profit for the period 0.4 3.6 12.1
Items that will not be reclassified
subsequently to the income statement:
Actuarial (loss)/gain on defined
benefit pension schemes (1.1) 1.9 35.0
Income tax relating to items not
reclassified 0.2 - (3.1)
(0.9) 1.9 31.9
----------------------------------------------- --- --------------- -------------- ------------
Items that may be reclassified subsequently
to the income statement:
Exchange differences on translation 0.1 - -
of foreign operations
0.1 - -
----------------------------------------------- --- --------------- -------------- ------------
Other comprehensive (expense)/income
for the period (0.8) 1.9 31.9
----------------------------------------------- --- --------------- -------------- ------------
Total comprehensive (expense)/income
for the period wholly attributable
to equity holders of the parent (0.4) 5.5 44.0
---------------------------------------------- ---- --------------- -------------- ------------
Condensed consolidated balance sheet
As at 24 September 2022
24 September 25 September 26 March
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
Note GBP million GBP million GBP million
--------------------------------------- ----- ------------------- ------------- ------------
Non-current assets
Intangible assets 8 4.5 1.2 3.6
Property, plant and equipment 8 0.2 0.4 0.3
Right-of-use assets 0.7 1.1 0.9
Retirement benefit obligations 11.8 - 12.4
17.2 2.7 17.2
--------------------------------------- -----
Current assets
Inventories 0.6 4.5 2.1
Trade and other receivables 6.9 11.5 8.1
Derivative financial instruments 11 0.2 - 0.2
Current tax asset 0.3 - -
Cash and cash equivalents 8.7 6.9 9.2
16.7 25.5 19.6
--------------------------------------- ----- ------------------- ------------- ------------
Total assets 33.9 28.2 36.8
--------------------------------------- ----- ------------------- ------------- ------------
Current liabilities
Trade and other payables (10.7) (18.2) (12.1)
Lease liabilities (0.5) (0.3) (0.3)
Derivative financial instruments 11 - (1.5) -
Provisions (0.9) (2.3) (1.7)
(12.1) (22.3) (14.1)
--------------------------------------- -----
Non-current liabilities
Borrowings 9 (19.3) (19.0) (19.1)
Lease liabilities (0.5) (0.9) (0.8)
Retirement benefit obligations 10 - (22.0) -
Provisions (0.6) (1.2) (0.9)
Deferred tax liability (0.2) - (0.4)
(20.6) (43.1) (21.2)
--------------------------------------- ----- ------------------- ------------- ------------
Total liabilities (32.7) (65.4) (35.3)
--------------------------------------- ----- ------------------- ------------- ------------
Net assets/(liabilities) 1.2 (37.2) 1.5
--------------------------------------- ----- ------------------- ------------- ------------
Equity attributable to equity holders
of the parent
Share capital 89.3 89.3 89.3
Share premium account 108.8 108.8 108.8
Own shares (1.0) (1.0) (1.0)
Translation reserve (3.6) (3.5) (3.7)
Retained deficit (192.3) (230.8) (191.9)
--------------------------------------- ----- ------------
Total equity 1.2 (37.2) 1.5
--------------------------------------- ----- ------------------- ------------- ------------
Condensed consolidated statement of changes in equity
For the 26 weeks ended 24 September 2022 (unaudited)
Share Share Own Translation Retained Total
capital premium shares reserve deficit equity
account
GBP million GBP GBP GBP GBP million GBP
million million million million
--------------------------------- ------------ --------- --------- ------------ ------------ -----------
Balance as at 26 March
2022 as previously reported 89.3 108.8 (1.0) (3.7) (191.9) 1.5
Profit for the period - - - - 0.4 0.4
Other comprehensive income
for the period - - - 0.1 (0.9) (0.8)
--------------------------------- ------------ --------- --------- ------------ ------------ -----------
Total comprehensive income
for the period - - - 0.1 (0.5) (0.4)
Adjustments to equity
for equity-settled share-based
payments - - - - 0.1 0.1
Balance at 24 September
2022 89.3 108.8 (1.0) (3.6) (192.3) 1.2
--------------------------------- ------------ --------- --------- ------------ ------------ -----------
For the 26 weeks ended 25 September 2021 (unaudited)
Share Share Own Translation Retained Total
capital premium shares reserve deficit equity
account
GBP million GBP GBP GBP million GBP million GBP
million million million
--------------------------------- ------------ --------- --------- ------------ ------------ ---------
Balance as at 26 March
2022 as previously reported 89.3 108.8 (1.0) (3.7) (236.4) (43.0)
Profit for the period - - - - 3.6 3.6
Other comprehensive income
for the period - - - - 1.9 1.9
Total comprehensive income
for the period - - - - 5.5 5.5
Adjustments to equity
for equity-settled share-based
payments - - - - 0.3 0.3
Balance at 25 September
2021 89.3 108.8 (1.0) (3.7) (230.6) (37.2)
--------------------------------- ------------ --------- --------- ------------ ------------ ---------
For the 52 weeks ended 26 March 2022 (audited)
Share Share Own Translation Retained Total
capital premium shares reserve deficit equity
account
GBP million GBP GBP GBP million GBP million GBP
million million million
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Balance at 27 March 2021 89.3 108.8 (1.0) (3.7) (236.4) (43.0)
Items that will not be
reclassified subsequently
to the
income statement - - - - 31.9 31.9
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Other comprehensive income - - - - 31.9 31.9
Profit for the period - - - - 12.1 12.1
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Total comprehensive income - - - - 44.0 44.0
Adjustment to equity for
equity-settled share-based
payments - - - - 0.5 0.5
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Balance at 26 March 2022 89.3 108.8 (1.0) (3.7) (191.9) 1.5
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Condensed consolidated cash flow statement
For the 26 weeks ended 24 September 2022
26 weeks 26 weeks 52 weeks
ended ended ended
Note 24 September 25 September 26 March
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
------------------------------------------- ------ --------------- -------------- ------------
Net cash flow from operating activities 13 2.1 2.1 8.1
Cash flows from investing activities
Purchase of property, plant and
equipment 0.0 (0.1) (0.1)
Purchase of intangibles - software (0.7) (0.5) (2.8)
Cash used in investing activities (0.7) (0.6) (2.9)
------------------------------------------- ------ --------------- -------------- ------------
Cash flows from financing activities
Interest paid (1.9) (1.3) (2.5)
Repayments of obligations under
leases (0.1) (0.2) (0.5)
Net cash outflow from financing
activities (2.0) (1.5) (3.0)
--------------- -------------- ------------
Net (decrease)/increase in cash
and cash equivalents (0.6) - 2.2
------------------------------------------- ------ --------------- -------------- ------------
Cash and cash equivalents at beginning
of period 9.2 6.9 6.9
Effect of foreign exchange rate
changes 0.1 - 0.1
------------------------------------------- ------
Cash and cash equivalents at end
of period 8.7 6.9 9.2
------------------------------------------- ------ --------------- -------------- ------------
Notes to the condensed consolidated financial statements
1 General information
The review of the Group's business activities, together with
factors likely to affect its future development, performance and
position are set out in the Financial Highlights and Chairman's
Statement.
The results for the 26 weeks ended 24 September 2022 are
unaudited.
These unaudited condensed consolidated interim financial
statements for the current period and prior financial periods do
not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for the 2022
financial year has been filed with the Registrar of Companies. The
2022 financial statements are available on the Group's website (
www.mothercareplc.com ). The auditor has reported on these: their
report was unqualified.
2 Accounting Policies and Standards
Basis of preparation
These unaudited condensed consolidated interim financial
statements have been prepared in accordance with the Disclosure and
Transparency Rules of the UK Financial Conduct Authority, and with
IAS 34 'Interim Financial Reporting'. Unless otherwise stated, the
accounting policies applied, and the judgements, estimates and
assumptions made in applying these policies, are consistent with
those described in the Annual Report and Financial Statements 2022.
The financial period represents the 26 weeks ended 24 September
2022. The comparative periods are the 26 weeks ended 25 September
2021 and the 52 weeks ended 26 March 2022.
Going concern
When considering the going concern assumption, the Directors of
the Group have reviewed a number of factors, including the Group's
trading results and its continued access to sufficient borrowing
facilities against the Group's latest forecasts and projections,
comprising:
-- A Base Case forecast which excludes any income from Russia; and
-- A Sensitised forecast, which applies sensitivities against
the Base Case for reasonably possible adverse variations in
performance, reflecting the ongoing volatility in our key
markets.
In making the assessment on going concern the Directors have
assumed that it is able to mitigate the material uncertainty in
relation to levels of recovery in retail sales post COVID-19
coupled with the heightened global economic uncertainty. The impact
of these issues on the future prospects of the Company is not fully
quantifiable at the reporting date, as the complexity and scale of
these issues at a global level is outside of what any business
could accurately reflect in a financial forecast.
However, we have attempted to capture the impact on both our
supply chain and key franchise partners based on what is currently
known. We have modelled a substantial reduction in global retail
sales as a result of subdued, consumer confidence or disposable
income, throughout the remainder of FY23 with recovery in FY24.
The Sensitised scenario assumes the following additional key
assumption:
-- A delayed recovery that assumes that retail sales remain
subdued throughout the majority of the forecast period as a result
of consumer confidence returning more slowly post COVID-19, coupled
with the potential impact on customers disposable income due to the
current heightened global economic uncertainty.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
Going concern (continued)
The Board's confidence in the Group's Base Case forecast, which
indicates the Group will operate within the terms of its revised
borrowing facilities which now includes more appropriate covenants
following the cessation of the Russian operation and the Group's
proven cash management capability, supports our preparation of the
financial statements on a going concern basis.
However, if trading conditions were to deteriorate beyond the
level of risks applied in the Sensitised forecast, or the Group was
unable to mitigate the material uncertainties assumed in the Base
Case Forecast and the Group was not able to execute further cost or
cash management programmes, the Group would at certain points of
the working capital cycle have insufficient cash. If this scenario
were to crystallise the Group would need to renegotiate with its
lender in order to secure waivers to potential covenant breaches
and consequential cash remedies or secure additional funding.
Therefore, we have concluded that, in this situation, there is a
material uncertainty that casts significant doubt that the Group
will be able to operate as a going concern without such waivers or
new financing facilities.
Adoption of new IFRSs
The same accounting policies, presentation and methods of
computation are followed in this half yearly report as applied in
the Group's last audited financial statements for the 52 weeks
ended 26 March 2022.
Standard issued but not yet effective
There are no standards issued but not yet effective that have
been identified as expected to have a material impact on the
disclosures or the amounts reported in these financial
statements.
Foreign currency adjustments
Foreign currency monetary assets and liabilities are revalued to
the closing balance sheet rate under IAS21 "The Effects of Changes
in Foreign Exchange Rates".
Taxation
The taxation charge for the 26 week period is calculated by
applying the best estimate of the average annual effective tax rate
expected for the full year to the profit/loss for the period after
adjusting for any significant one-off items, and a tax credit is
recognised only to the extent that the resulting tax asset is more
than likely not to reverse.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognised in full in the period in which they
occur. They are recognised outside of the income statement and
presented in other comprehensive income.
Past service cost is recognised immediately to the extent that
the benefits are already vested.
The retirement benefit obligation recognised in the balance
sheet represents the present value of the defined benefit
obligation less the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost,
plus the present value of available refunds.
The Group has an unconditional right to a refund of surplus
under the rules.
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 for 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 measures.
Purpose
The Directors believe that these APMs assist in providing
additional useful information on the performance and position of
the Group because they are consistent with how business performance
is reported to the Board and Operating Board.
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.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
The key APMs that the Group has focused on during the period are
as follows:
Group worldwide retail sales
Group worldwide sales are total International and UK retail
sales from our franchise partners. Total Group revenue is a
statutory number and is made up of total receipts from our
franchise partners, which includes royalty payments and the cost of
goods dispatched to franchise partners.
Profit/(loss) before adjusted items
The Group's policy is to exclude items that are considered to be
significant in both nature and/or quantum and where treatment as an
adjusted item provides stakeholders with additional useful
information to assess the year-on-year trading performance of
the Group.
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 executive decision makers
(comprising the executive directors and operating board) in order
to allocate resources to the segments and assess their performance.
Under IFRS 8, the Group has not identified that its continuing
operations represent more than one operating segment.
The results of franchise partners are not reported separately,
nor are resources allocated on a franchise partner by franchise
partner basis, and therefore have not been identified to constitute
separate operating segments.
Notes to the condensed consolidated financial statements
4 Adjusted items
Due to their significance or one-off nature, certain items have
been classified as adjusted items as follows:
26 weeks 26 weeks ended 52 weeks
ended ended
24 September 25 September 26 March
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
---------------------------------------------
GBP million GBP million GBP million
--------------------------------------------- --------------- --------------- ------------
Adjusted costs/(income):
Restructuring costs included in finance
costs 0.9 - 1.2
Property related (income)/costs included
in administrative expenses - (0.5) 0.5
Other restructuring costs included in
administrative expenses - 0.1 1.4
Adjusted items before tax 0.9 (0.4) 3.1
--------------------------------------------- --------------- --------------- ------------
Restructuring costs included in finance costs - GBP0.9 million
(H1 FY22: GBP nil)
The current year costs relate to legal and professional fees
incurred in renegotiating the loan in the current year of GBP0.5
million and a GBP0.4 million loss arising from the modification of
the existing loan.
Property related (income)/costs included in administrative
expenses - GBPNil (H1 FY22: GBP0.5 million income)
In the comparative period, there was a GBP0.5 million release of
provisions in relation to onerous lease costs prior to the
administration of Mothercare UK Limited. The release of provision
represented amounts settled by the Group during the period.
Other restructuring costs included in administrative expenses -
GBPNil (H1 FY22: GBP0.1 million costs)
In the comparative period GBP0.1 million of severance pay
related costs were incurred as a result of Group restructuring of
operations.
5 Net finance costs
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
------------------------------------------- --- --------------- -------------- ------------
Interest (income)/expense on pension
liabilities (0.2) 0.2 0.5
Interest expense on lease liabilities 0.1 0.1 0.1
Fair value movement on embedded derivatives
and warrants - - (1.2)
Other net interest 1.3 1.3 2.5
------------------------------------------------ --------------- -------------- ------------
Net finance costs 1.2 1.6 1.9
------------------------------------------------ --------------- -------------- ------------
Notes to the condensed consolidated financial statements
6 Taxation
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
------------------------------------------ --- --------------- -------------- ------------
Current tax - Overseas tax and UK
corporation tax 0.4 0.4 1.7
Deferred tax - UK tax charge for temporary
differences - - (2.7)
----------------------------------------------- --------------- -------------- ------------
Total tax charge 0.4 0.4 (1.0)
----------------------------------------------- --------------- -------------- ------------
No deferred tax asset has been recognised in the financial
statements at the balance sheet date (H1 FY22: GBPnil million).
7 Earnings per share
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022 (Audited)
(Unaudited) (Unaudited)
million million million
-------------------------------------------- --- --------------- -------------- -----------------
Weighted average number of shares in
issue for the purpose of basic earnings
per share 563.8 562.9 563.8
Dilutive potential ordinary shares 1.8 28.7 10.1
-------------------------------------------------
Weighted average number of shares in
issue for the purpose of diluted earnings
per share 565.6 591.6 573.9
-------------------------------------------------
GBP million GBP million GBP million
-------------------------------------------- --- --------------- -------------- -----------------
Profit for basic and diluted earnings
per share 0.4 3.6 12.1
Adjusted items 0.9 (0.4) (3.1)
Tax effect of adjusted items - - -
Adjusted earnings 1.3 3.2 (9.0)
------------------------------------------------- --------------- -------------- -----------------
GBP million GBP million GBP million
-------------------------------------------- --- --------------- -------------- -----------------
Pence Pence Pence
-------------------------------------------- ---
Basic earnings per share 0.1 0.6 1.6
Basic adjusted earnings per share 0.2 0.6 2.1
Diluted earnings per share 0.1 0.6 1.6
Diluted adjusted earnings per share 0.2 0.5 2.1
------------------------------------------------- --------------- -------------- -----------------
The total dividend for the period is nil pence per share (H1
FY22: nil pence per share).
Notes to the condensed consolidated financial statements
8 Tangible fixed assets and Software assets
There were no additions to Right-of-use assets in the
period.
Capital additions of GBP1.0 million were made during the period
(H1 FY22: GBP0.3 million). These comprised tangible fixed assets of
GBP0.0 million (H1 FY22: GBPnil million) and software assets of
GBP1.0 million (H1 FY22: GBP0.3 million).
9 Borrowings
The Group had outstanding borrowings at 24 September 2022 of
GBP19.3 million (26 March 2022: GBP19.1 million) .
The credit facility of GBP19.3 million (26 March 2022: GBP19 .1
million) is secured on the shares of specified obligor subsidiaries
and the assets of the group not already pledged. The Group also
holds a financial asset of GBP0.2 million (26 March 2022: GBP0. 2
million) reflecting the expected proceeds from the wind-down of the
UK operations by the administrators of Mothercare UK Ltd and
Mothercare Business Services Limited.
10 Retirement benefit schemes
The Group has calculated the value of its pension liability
under IAS 19 as at 24 September 2022. The FY22 year end assumptions
have been rolled forward and updated for changes in market rates
over the current interim period.
For the two schemes, based on the actuarial assumptions from the
last full actuarial valuations carried out as of March 2020 and
using the rolled forward assumptions referred to above, a net asset
of GBP11.8 million (H1 FY22: GBP22.0 million liability) has been
recognised. The swing to a surplus position was mainly due to the
assumptions used to place a value on the scheme liabilities. The
discount rate and long term inflation expectations increased over
the period.
11 Financial instruments: fair value disclosures
The Group held the following financial instruments at fair value
at 24 September 2022.
Fair value Fair value Fair value
measurements measurements measurements
at 24 September at 25 September at 26
2022 2021 March
(Unaudited) (Unaudited)) 2022
(Audited)
GBP million GBP million GBP million
----------------------------------------- ----------------- ----------------- ----------------
Non-current financial liabilities:
Derivative financial instruments:
Embedded derivative arising on warrants - (1.2) -
Financial guarantees - (0.3) -
Current financial assets:
Derivative financial instruments:
Financial asset 0.2 2.6 0.2
0.2 1.1 0.2
----------------------------------------- ----------------- ----------------- ----------------
In prior year, the Group had warrants which provides the
opportunity to purchase shares at an exercise price of 12 pence per
share and a financial guarantee over a leasehold premises
previously traded as Mothercare UK Ltd (in administration). The
option to purchase at the exercise price was fair valued and
treated as an embedded derivative. The fair value of embedded
derivatives arising on the warrant was measured using the
Black-Scholes model, based on quoted prices and fell under level 2
of IFRS 7's fair value hierarchy.
Notes to the condensed consolidated financial statements
11 Financial instruments: fair value disclosures (continued)
The Group's financial asset (Level 3 within the IFRS 7
hierarchy) represents a right, arising under the sales purchase
agreement with the administrators of MUK, to receive the proceeds
of the wind-up of the UK retail store estate and website operations
as repayment for the Group's secured borrowings. It has been
estimated by the administrators that the Group will receive GBP0.2
million (H1 FY22: GBP2.6 million). Many of the outflows which would
impact the valuation of this financial asset are finalised, with
the final repayment being dependent on the amounts to be received
back by the merchant acquirer and final settlement of VAT.
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.
12 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 charge for share-based payments under IFRS 2 is GBP0.1
million (H1 FY22: GBP0.3 million).
13 Notes to the cash flow statement
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
-------------------------------------------------- --------------- -------------- ------------
Profit from operations 2.9 5.6 13.0
Adjustments for:
Depreciation of property, plant and
equipment and right of use assets 0.3 0.3 0.6
Amortisation of intangible assets 0.1 0.1 0.3
Loss/(gain) on non-cash foreign currency
adjustments 1.4 0.1 (0.1)
Share-based payments 0.1 0.3 0.5
Movement in provisions (1.1) (2.6) (3.4)
Net gain on financial derivative instruments - - (0.6)
Payments to retirement benefit schemes (1.3) (2.9) (5.2)
Charge in respect of retirement benefit
schemes 1.0 1.1 1.7
-------------------------------------------------- --------------- --------------
Operating cash flow before movement
in working capital 3.4 2.0 6.8
Decrease in inventories 1.1 1.4 3.8
Decrease in receivables 0.2 6.0 11.7
Decrease in payables (1.9) (6.8) (12.9)
Cash generated from operations 2.8 2.6 9.4
-------------------------------------------------- --------------- -------------- ------------
Income taxes paid (0.7) (0.5) (1.3)
-------------------------------------------------- --------------- -------------- ------------
Net cash flow from operating activities 2.1 2.1 8.1
Analysis of net debt
26 March Non-cash 24 September
2022 Cash Foreign movements 2022
flow exchange
GBP million GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------ ------------ ------------ ---------------
Cash and cash equivalents 9.2 (0.6) 0.1 - 8.7
IFRS 16 lease liabilities (1.1) 0.1 - - (1.0)
Term loan (19.1) - - (0.2) (19.3)
Net debt (11.0) (0.5) 0.1 (0.2) (11.6)
--------------------------- ------------ ------------ ------------ ------------ ---------------
Notes to the condensed consolidated financial statements
14 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:
There was no revenue earned from related parties in the current
or prior period.
A provision of GBP1.8 million (H1 FY22: GBP1.8 million) exists
for doubtful debts in respect of the amounts owed by the related
party.
Additional Disclosures
Embedded enterprise risk management framework
We have implemented an embedded enterprise risk management (ERM)
framework which applies to every part of our business operations.
The primary focus of ERM is to manage the principal and emerging
risks to the business and to support management in risk-based
decision making. The Board monitors ERM by assessing the
effectiveness of internal controls and effectiveness of risk
management. Clear risk tolerance levels across strategic,
operational and reputational risks are set by the Board enabling
consistent and risk aware decision making.
Principal risks and uncertainties
Our Principal Risks are those that can materially impact our
performance, opportunities or reputation. Our Executive, Audit and
Risk Committee, and Operating Board, undertake an assessment of our
Principal risks at least annually in relation to achieving our
strategy and our future performance. Mothercare has a policy of
continuously identifying and reviewing Principal Risks. Workshops
are held with department leaders to identify, assess and evaluate
Principal Risks, and with the Operating Board to discuss, evaluate,
mitigate and own Principal and operational risks. The following
risks have been agreed:
-- Liquidity
-- Dependence on a small number of partners
-- Covid-19
-- Challenging global economic and political conditions
-- ERP system
-- Regulatory and legal
-- Brand, reputation and relationships
-- Personnel and talent
Directors' Responsibility statement
The Directors are responsible for preparing the Interim Results
for the 26-week period ended 24 September 2022 in accordance with
applicable law, regulations and accounting standards. The Directors
confirm that to the best of their knowledge the condensed
consolidated interim financial statements have been prepared in
accordance with IAS 34: 'Interim Financial Reporting', and that the
interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of the important events that have occurred
during the first 26 weeks of the financial year and their impact on
the condensed consolidated interim financial statements, and a
description of the principal risks and uncertainties for the
remaining 26 weeks of the financial year; and
-- material related party transactions in the first 26 weeks of
the year and any material changes in the related party transactions
described in the last annual report.
The Directors of Mothercare plc are listed on page 38 of the
Mothercare plc Annual Report and Financial Statements 2022. A list
of directors is maintained on the Mothercare plc website at:
www.mothercareplc.com. With the exception of today's announcement,
there have been no changes since the publication of the Annual
Report.
By order of the Board
Clive Whiley Andrew Cook
Chairman Chief Financial Officer
24 November 2022
Shareholder information
Financial calendar
2023
------------------------------------------------------------- ----------
Preliminary announcement of results for the 52 weeks ending July
25 March 2023
Issue of report and accounts July
Annual General Meeting September
Announcement of interim results for the 26 weeks ending 23 November
September 2023
Registered office and head office
Westside 1, London Road, Hemel Hempstead, Hertfordshire HP3
9TD
www.mothercareplc.com
Registered number 1950509
Group Company Secretary
Lynne Medini
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
Overseas +44 (0)121 415 7042
www.shareview.co.uk
Postal share dealing service
A postal share dealing service is available through the
Company's registrars for the purchase and sale of Mothercare plc
shares from the www.shareview.co.uk website or on the shareholder
helpline Telephone 0371 384 2013, Overseas +44(0)121 415 7042.
Further details can be obtained from Equiniti on 0371 384 2013
(calls to this number are charged at the standard landline rate per
minute plus network extras. Lines are open 8.30 am to 5.30pm,
Monday to Friday).
The Company's stockbrokers are:
Numis Securities Limited
45 Gresham Street
London EC2V 7BF
Telephone 020 7260 1000
finnCap Limited
One Bartholomew Close
London EC1A 7BL
Telephone 020 7220 0500
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.
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END
IR BKQBDKBDKPDB
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Mothercare (AQSE:MTC.GB)
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