TIDMMTC
RNS Number : 5320U
Mothercare PLC
24 November 2023
Mothercare plc
Interim results announcement
Driving the Mothercare brand globally
Mothercare plc ("Mothercare" "the Company" or "the Group"), the
highly trusted British heritage international brand and franchise
operator, that connects with the parents of newborn babies and
children across multiple product categories throughout their early
life as parents, today announces unaudited half year results for
the 26-week period to 23 September 2023 ("H1 FY24"). The
comparative period was a 26-week period to 24 September 2022 ("H1
FY23").
Key Highlights
-- International retail sales by franchise partners of GBP137.2
million (2022: GBP162.1 million), a decrease of 15% on last year
(13% down at constant currency). This reflects difficult trading
conditions in the Middle East which is down 20% on last year, with
continuing operations excluding the Middle East down 6% on last
year at constant currency.
-- Adjusted EBITDA of GBP3.6 million (H1 FY23: GBP3.2 million)
increased by 12%, reflecting tighter control of costs.
-- Group adjusted profit before taxation from operations
increased 17% to GBP3.4 million (H1 FY23: GBP2.9 million).
-- Total Group profit before taxation of GBP2.0 million (H1 FY23: GBP0.8 million).
-- Net debt increased to GBP15.8 million (GBP11.6 million at 24 September 2022).
-- We continue to explore options to further mitigate the
pension scheme current deficit of GBP35 million (at 31 March 2023)
notwithstanding the reduction from GBP124.5 million since March
2020.
Our Group
26 weeks 26 weeks 26 weeks 28 weeks
to to to to
23 Sep 24 Sep 25 Sep 10 Oct
2023 2022 2021 2020
Turnover GBPm 29.0 38.5 41.7 44.4
Adjusted EBITDA (2) GBPm 3.6 3.2 5.6 (0.1)
Adjusted profit from operations (2) GBPm 3.4 2.9 5.2 (1.3)
Adjusted profit before taxation (2) GBPm 1.8 1.7 3.6 (4.4)
Profit for the period GBPm 1.7 0.4 3.6 (13.2)
Adjusted basic earnings per share (2) 0.2p 0.2p 0.9p (1.2)p
Basic earnings per share 0.3p 0.1p 1.0p (3.5)p
------------------------------------------------ --------- --------- -------- --------
Our Franchise partners
26 weeks 26 weeks 26 weeks 28 weeks
to to to to
23 Sep 24 Sep 25 Sep 10 Oct
2023 2022 2021 2020
Worldwide retail sales (1) GBPm 137.2 162.1 184.3 189.2
Online retail sales GBPm 13.7 13.1 17.6 27.1
Total number of stores 500 562 740 793
Space (k) sq. ft. 1,201 1,345 1,967 2,180
--------------------------------- --------- --------- -------- --------
Clive Whiley, Chairman of Mothercare plc, commented:
"These results are testament to our continued drive to preserve
the strength of the Mothercare brand in a fast changing retail and
macroeconomic trading environment. Against significant headwinds in
the Middle East, one of our core markets, we are pleased that our
business model and disciplined approach to cost has resulted in an
increase in profitability for the first half."
Investor and analyst enquiries to:
Mothercare plc Email: investorrelations@mothercare.com
Clive Whiley, Chairman
Andrew Cook, Chief Financial Officer
Deutsche Numis Tel: 020 7260 1000
(NOMAD & Joint Corporate Broker)
Luke Bordewich
Henry Slater
Cavendish Capital Markets Limited Tel: 0 20 7220 0500
(Joint Corporate Broker)
Carl Holmes
Media enquiries to:
MHP Email: mothercare@mhpc.com
Rachel Farrington Tel: 020 3128 8613
Tim Rowntree
Notes
1 - Worldwide retail sales are total 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
Trading Update
As noted in our last trading update, our franchise partners'
international retail sales were impacted by the continuing global
economic uncertainty, alongside the need for them to clear old
inventory, decreasing by 15% to GBP137 million for the 26 weeks to
23 September 2023. Online retail sales for the period increased to
10% of total retail sales (H1 FY23: 8%).
Performance in our Middle Eastern region, especially the Kingdom
of Saudi Arabia, remains challenging having undergone significant
changes in recent years. Fiscal and legislative changes and the
introduction of many new leisure activities competing for
consumers' money is changing consumer behaviour. The shape of our
partner's retail offering in the country is evolving and we remain
confident of the longer-term market opportunity.
It is therefore reassuring to report that our continued focus
upon the necessary adjustments to our supply chain, operations and
administrative costs meant that we generated free cash flow from
operations and increased adjusted EBITDA by 12% to GBP3.6 million
for the six months to 23 September 2023.
We are acutely aware of the ongoing pressure exerted on our
franchise partners' profitability and the consequent need for them
to reduce costs and the levels of investment they can make in their
businesses. This will likely lead to further reductions in our
store footprint in some regions. We are working closely with our
key partners to assist them with their recovery, ultimately
benefitting both our own business and our franchise partners'
businesses when we eventually return to pre pandemic levels of
trading. We do not currently expect our combined efforts to offset
full this impact on the Group results for the financial year to
March 2024 and beyond.
Financing
The Group had net debt of GBP15.8 million on 23 September 2023
(September 2022: GBP11.6 million). This comprised total cash of
GBP4.2 million (September 2022: GBP8.7 million), against lease
liabilities of GBP0.4 million and GBP19.6 million of the Group's
existing loan facility with GB Europe Management Services Limited
("GBB") which remains fully drawn.
We continue to enjoy a strong relationship with GBB and the
Group has received various necessary waivers and adjustments to
covenants in relation to the loan facility from GBB in the past. As
noted in our previous trading update the interest cost on this loan
(currently 19.2%) and the extended time to return to pre-pandemic
retail sales levels means that we will continue to need such
waivers and covenant adjustments to the loan facility to avoid or
remedy breaches of its terms. Accordingly, we are continuing our
refinancing discussions with GBB to vary this debt facility
alongside exploring various financing alternatives. For the
avoidance of doubt, the Group does not require additional liquidity
in our current forecasts. We continue to pursue other options that
would also provide additional liquidity to accelerate business
development.
Growth Opportunities
We have established momentum in improving profitability,
underpinned by a cost base that is now appropriate for the reduced
scale of our business. At the same time we are preserving the
skills and experience necessary to deliver further growth as we
return to more normal pre-pandemic levels of business.
Accordingly, we can now redouble our efforts to capitalise upon
the possibilities to grow the future global presence of the brand.
This includes entering new territories through multiple 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. This also opens a window of opportunity for us, via
step-change growth, to bring synergies and enhanced profitability
into our business, as we exploit the core strengths of the Group
across supply, franchisee partnerships and international reach.
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 further improvement in on-time availability,
with over 85% of our product being delivered direct from our
country of manufacturing to our retail partners' markets. We also
continue to develop our product option framework as we seek to
curtail the impact of input cost inflation.
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 now due to go live at the beginning of the next financial year,
with the full benefit of the cost savings in the financial year
ending March 2025. We are confident that the final system will
deliver at least the expected benefits and cost savings.
Pension Schemes
The last full actuarial valuation of the schemes was at 31 March
2023 and showed a deficit of GBP35 million, resulting from total
assets of GBP198 million and total liabilities of GBP233 million.
The revised recovery plan agreed with the Trustees includes total
contributions (Deficit Repair Contributions plus costs) in the
financial years to: March 2024 GBP2.4 million; March 2025 GBP2.0
million; March 2026 & 2027 GBP3.0 million; March 2028 &
2029 GBP4.0 million; March 2030 & 2031 GBP5.0 million; March
2032 GBP6.0 million and March 2033 GBP0.5 million aggregating to
fully fund the GBP35 million deficit by July 2032.
We continue to explore options to mitigate the pension scheme
deficit (GBP35 million deficit at 31 March 2023).
Outlook
Our prime goal in recent years has been to protect the
underlying Mothercare brand intellectual property value, for the
benefit of all stakeholders and avoiding unnecessary equity
dilution. We are continuing with our efforts to refinance the Group
and remain in discussions with key stakeholders and financing
partners to ensure that the Group has adequate and appropriate
financing for the future. O ur medium-term guidance for the steady
state operation, in more normal circumstances, is unchanged and we
believe our continuing franchise operations remain capable of
delivering approximately GBP10 million operating profit.
In the interim we remain focused on restoring critical mass and
monetising the Mothercare global brand IP to further free up
cashflow, in addition to the significant reduction in pension
contributions, to invest in the long-term corporate development of
the Group.
This 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 to whom
we are grateful.
Clive Whiley
Chairman
Condensed consolidated income statement
For the 26 weeks ended 23 September 2023
26 weeks ended 23 26 weeks ended 52 weeks
September 2023 24 September 2022 ended
(Unaudited ) (Unaudited) 25 March
2023
(Audited)
Before Adjusted Total Before Adjusted Total Total
adjusted items(1) adjusted items
Note items items (1)
GBP GBP GBP GBP GBP GBP
million million million million GBP million million
million
------------------- ------ --------- --------- ---------------- --------- ----------- ------------- -----------
Revenue 29.0 - 29.0 38.5 - 38.5 73.1
Cost of sales (19.0) - (19.0) (27.5) - (27.5) (52.2)
------------------- ------ --------- --------- ---------------- --------- ----------- ------------- -----------
Gross profit 10.0 - 10.0 11.0 - 11.0 20.9
Administrative
expenses (6.6) 0.2 (6.4) (8.1) - (8.1) (15.7)
Impairment losses
on receivables - - - - - - 0.8
------------------- ------
Profit from
operations 3.4 0.2 3.6 2.9 - 2.9 6.0
Net finance costs 5 (1.6) - (1.6) (1.2) (0.9) (2.1) (3.8)
------------------- ------ --------- --------- ---------------- --------- ----------- ------------- -----------
Profit before
taxation 1.8 0.2 2.0 1.7 (0.9) 0.8 2.2
Taxation 6 (0.3) - (0.3) (0.4) - (0.4) (2.3)
------------------- ------ --------- --------- ---------------- --------- ----------- ------------- -----------
Profit for the
period 1.5 0.2 1.7 1.3 (0.9) 0.4 (0.1)
------------------- ------ --------- --------- ---------------- --------- ----------- ------------- -----------
Profit for the period
attributable to equity
holders of the parent 1.5 0.2 1.7 1.3 (0.9) 0.4 (0.1)
--------------------------- --------- --------- ---------------- --------- ----------- ------------- -----------
Earnings per share
0.3 0.1
Basic 7 p 0.3 p 0.2 p p (0.0)p
0.3 0.1
Diluted 7 p 0.3 p 0.2 p p (0.0)p
------------------- ------ --------- --------- -------------------- ------------- ------- ------------- -----------
(1) Adjusted items included: restructuring costs included in
finance costs and administrative expenses, 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.
Condensed consolidated statement of comprehensive income
For the 26 weeks ended 23 September 2023
26 weeks 26 weeks 52 weeks
ended ended ended
23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
------------------------------------------------ --- --------------- -------------- ------------
Profit/(loss) for the period 1.7 0.4 (0.1)
Items that will not be reclassified
subsequently to the income statement:
Actuarial loss on defined benefit
pension schemes (16.3) (1.1) (4.5)
Deferred tax relating to items not
reclassified 3.1 0.2 1.1
(13.2) (0.9) (3.4)
------------------------------------------------ --- --------------- -------------- ------------
Items that may be reclassified subsequently
to the income statement:
Exchange differences on translation
of foreign operations (0.1) 0.1 -
(0.1) 0.1 -
------------------------------------------------ --- --------------- -------------- ------------
Other comprehensive expense for
the period (13.3) (0.8) (3.4)
------------------------------------------------ --- --------------- -------------- ------------
Total comprehensive expense for
the period wholly attributable to
equity holders of the parent (11.6) (0.4) (3.5)
------------------------------------------------ --- --------------- -------------- ------------
Condensed consolidated balance sheet
As at 23 September 2023
23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
Note GBP million GBP million GBP million
--------------------------------------- ----- ------------------- ------------------- ------------
Non-current assets
Intangible assets 8 6.8 4.5 5.8
Property, plant and equipment 8 0.2 0.2 0.2
Right-of-use assets 0.2 0.7 0.3
Deferred tax assets 2.7 - -
Retirement benefit obligations 10 - 11.8 8.4
9.9 17.2 14.7
--------------------------------------- -----
Current assets
Inventories 0.7 0.6 0.9
Trade and other receivables 5.1 6.9 7.2
Derivative financial instruments 11 0.5 0.2 0.5
Current tax asset 0.5 0.3 0.2
Cash and cash equivalents 4.2 8.7 7.1
11.0 16.7 15.9
--------------------------------------- ----- ------------------- ------------------- ------------
Total assets 20.9 33.9 30.6
--------------------------------------- ----- ------------------- ------------------- ------------
Current liabilities
Trade and other payables (7.5) (10.7) (10.8)
Lease liabilities (0.4) (0.5) (0.3)
Provisions (0.7) (0.9) (0.9)
(8.6) (12.1) (12.0)
--------------------------------------- -----
Non-current liabilities
Borrowings 9 (19.6) (19.3) (19.5)
Lease liabilities - (0.5) (0.2)
Provisions - (0.6) (0.3)
Retirement benefit obligations 10 (6.0) - -
Deferred tax liabilities - (0.2) (0.4)
(25.6) (20.6) (20.4)
--------------------------------------- ----- ------------------- ------------------- ------------
Total liabilities (34.2) (32.7) (32.4)
--------------------------------------- ----- ------------------- ------------------- ------------
Net (liabilities)/assets (13.3) 1.2 (1.8)
--------------------------------------- ----- ------------------- ------------------- ------------
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 (0.2) (1.0) (0.2)
Translation reserve (3.8) (3.6) (3.7)
Retained deficit (207.4) (192.3) (196.0)
--------------------------------------- ----- ------------
Total equity (13.3) 1.2 (1.8)
--------------------------------------- ----- ------------------- ------------------- ------------
Condensed consolidated statement of changes in equity
For the 26 weeks ended 23 September 2023 (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 25 March
2023 as previously reported 89.3 108.8 (0.2) (3.7) (196.0) (1.8)
Profit for the period - - - - 1.7 1.7
Other comprehensive income
for the period - - - (0.1) (13.2) (13.3)
--------------------------------- ------------ --------- --------- ------------ ------------ -----------
Total comprehensive income
for the period - - - (0.1) (11.5) (11.6)
Adjustments to equity
for equity-settled share-based
payments - - - - 0.1 0.1
Balance at 23 September
2023 89.3 108.8 (0.2) (3.8) (207.4) (13.3)
--------------------------------- ------------ --------- --------- ------------ ------------ -----------
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 million GBP million GBP
million million million
--------------------------------- ------------ --------- --------- ------------ ------------ ---------
Balance as at 25 March
2023 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 52 weeks ended 25 March 2023 (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 26 March 2022 89.3 108.8 (1.0) (3.7) (191.9) 1.5
Items that will not be
reclassified subsequently
to the
income statement - - - - (3.4) (3.4)
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Other comprehensive income - - - - (3.4) (3.4)
Profit for the period - - - - (0.1) (0.1)
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Total comprehensive income - - - - (3.5) (3.5)
Shares transferred to
executive
on vesting - - 0.8 - (0.8) -
Adjustment to equity for
equity-settled share-based
payments - - - - 0.2 0.2
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Balance at 25 March 2023 89.3 108.8 (0.2) (3.7) (196.0) (1.8)
----------------------------- ------------ --------- --------- ------------ ------------ ---------
Condensed consolidated cash flow statement
For the 26 weeks ended 23 September 2023
26 weeks 26 weeks 52 weeks
ended ended ended
Note 23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited (Audited)
)
GBP million GBP million GBP million
---------------------------------------- ------ --------------- -------------- ------------
Net cash flow from operating
activities 13 (0.3) 2.1 4.3
Cash flows from investing activities
Purchase of property, plant and
equipment (0.1) 0.0 (0.1)
Purchase of intangibles - software (0.6) (0.7) (2.2)
Cash used in investing activities (0.7) (0.7) (2.3)
---------------------------------------- ------ --------------- -------------- ------------
Cash flows from financing activities
Interest paid (1.7) (1.9) (2.8)
Repayments of obligations under
leases (0.2) (0.1) (0.3)
Facility fee paid - - (0.9)
Net cash outflow from financing
activities (1.9) (2.0) (4.0)
--------------- -------------- ------------
Net (decrease)/increase in cash
and cash equivalents (2.9) (0.6) (2.0)
---------------------------------------- ------ --------------- -------------- ------------
Cash and cash equivalents at beginning
of period 7.1 9.2 9.2
Effect of foreign exchange rate
changes - 0.1 (0.1)
---------------------------------------- ------
Cash and cash equivalents at
end of period 4.2 8.7 7.1
---------------------------------------- ------ --------------- -------------- ------------
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 23 September 2023 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 2023
financial year has been filed with the Registrar of Companies. The
2023 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 2023.
The financial period represents the 26 weeks ended 23 September
2023. The comparative periods are the 26 weeks ended 24 September
2022 and the 52 weeks ended 25 March 2023.
Going concern
With recent increases in interest rates, the interest rate on
this loan is currently approximately 19.2%, which coupled with the
extended time to return to pre-pandemic retail sales levels,
particularly in our Middle Eastern markets, means the Board's
current forecasts for continuing operations show the Group may
require waivers to future periods' covenant tests. Our current
lender remains supportive, whilst we complete our financing
activities to repay all or part of the facility.
The consolidated financial information has been prepared on a
going concern basis. 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; 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 the Group is able to mitigate the material uncertainty
surrounding the Group's ability to successfully complete its
financing activities to repay all or part of the existing facility
and that our current lenders would continue to support us in the
event we required waivers to future period's covenant test, whilst
doing so.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
Going concern (continued)
The Sensitised scenario assumes the following additional key
assumption:
-- A significant reduction in global retail sales, which may
result from subdued, consumer confidence or disposable income or
through store closures or weaker trading in our markets, throughout
the remainder of FY24 and FY25.
The Board's confidence in the Group's Base Case forecast, which
indicates that the Group will operate with sufficient cash
balances, provided appropriate covenant waivers on our current
facility were agreed, if required prior to the completion of our
funding activities, 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 risk applied in the Sensitised forecast, or the Group was
unable to execute further cost or cash management programmes, the
Group would at certain points of the working capital cycle require
covenant waivers based on its current facilities agreement. 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 have completed the
current negotiations to amend the covenants or secure additional
funding. Therefore, we have concluded that, in this situation,
there is a material uncertainty in relation to the continued
support of our existing lender, if required, that casts significant
doubt that the Group will be able to operate as a going concern
without potential waivers or revised/ new financing facilities.
Adoption of new IFRSs
The Group early adopted Amendments to IAS1 - Non-current
liabilities with covenants. The adoption had no impact on the
recently issued annual financial statements. Covenants which the
Group must comply with only after the reporting date did not affect
the classification of non-current liabilities at the period end.
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 25 March 2023.
Standards 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 sales
Group worldwide sales are total 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 52 weeks
ended ended ended
23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
---------------------------------------------
GBP million GBP million GBP million
--------------------------------------------- --------------- -------------- ------------
Adjusted costs/(income):
Restructuring costs/(income) included
in finance costs - 0.9 1.0
Property related (income)/costs included
in administrative expenses - - 0.2
Restructuring costs/(income) included
in administrative expenses 0.2 - 0.0
Adjusted items before tax 0.2 0.9 1.2
--------------------------------------------- --------------- -------------- ------------
Restructuring costs included in finance costs - GBPNil (H1 FY23:
0.9 million)
In the comparative period, GBP0.5 million of legal and
professional fees were incurred in renegotiating the Group's loan
and a GBP0.4m loss arising from the modification of the loan.
Restructuring costs included in administrative expenses - GBP0.2
million (H1 FY23: GBPNil)
The current year income relates to GBP0.4 million credits
arising in relation to the profit on disposal of Mothercare UK
Limited business which went into administration, this was offset by
GBP0.2m of severance payments made.
5 Net finance costs
26 weeks 26 weeks 52 weeks
ended ended ended
23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
------------------------------------------- --- --------------- -------------- ------------
Interest expense on lease liabilities 0.1 0.1 0.1
Other net interest 1.8 1.3 4.1
------------------------------------------------ --------------- -------------- ------------
Interest payable 1.9 1.4 4.2
------------------------------------------------ --------------- -------------- ------------
Net interest income on liabilities/return
on assets on pension (0.3) (0.2) (0.4)
------------------------------------------------ --------------- -------------- ------------
Net finance costs 1.6 1.2 3.8
------------------------------------------------ --------------- -------------- ------------
Notes to the condensed consolidated financial statements
6 Taxation
26 weeks 26 weeks 52 weeks
ended ended ended
23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
------------------------------------------ --- --------------- -------------- ------------
Current tax - Overseas tax and UK
corporation tax 0.3 0.4 1.1
Deferred tax - UK tax charge for temporary
differences - - 1.2
----------------------------------------------- --------------- -------------- ------------
Total tax charge 0.3 0.4 2.3
----------------------------------------------- --------------- -------------- ------------
In addition to the amount charged to the income statement,
deferred tax credits relating to retirement benefit obligations
amounting to GBP3.1 million has been charged directly to other
comprehensive income (H1 FY23: GBP0.2 million).
7 Earnings per share
26 weeks 26 weeks 52 weeks
ended ended ended
23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
million million million
-------------------------------------------- --- --------------- -------------- ------------
Weighted average number of shares in
issue for the purpose of basic earnings
per share 563.8 563.8 563.8
Dilutive potential ordinary shares 6.9 1.8 -
-------------------------------------------------
Weighted average number of shares in
issue for the purpose of diluted earnings
per share 570.7 565.6 563.8
-------------------------------------------------
GBP million GBP million GBP million
-------------------------------------------- --- --------------- -------------- ------------
Profit for basic and diluted earnings
per share 1.6 0.4 (0.1)
Adjusted items 0.2 0.9 1.2
Tax effect of adjusted items - - -
Adjusted earnings 1.4 1.3 1.1
------------------------------------------------- --------------- -------------- ------------
GBP million GBP million GBP million
-------------------------------------------- --- --------------- -------------- ------------
Pence Pence Pence
-------------------------------------------- ---
Basic earnings per share 0.3 0.1 (0.0)
Basic adjusted earnings per share 0.3 0.2 0.2
Diluted earnings per share 0.3 0.1 (0.0)
Diluted adjusted earnings per share 0.3 0.2 0.2
------------------------------------------------- --------------- -------------- ------------
The total dividend for the period is nil pence per share (H1
FY23: 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 GBP1.1 million were made during the period
(H1 FY23: GBP1.0 million). These comprised tangible fixed assets of
GBP0.1 million (H1 FY23: GBP0.0 million) and software assets of
GBP1.0 million (H1 FY23: GBP1.0 million).
9 Borrowings
The carrying value of the Group's outstanding borrowings at 23
September 2023 was GBP19.6 million (25 March 2023: GBP19.5 million)
. The Group is required to achieve certain royalty targets under
its covenants and, due to the extended time to return to
pre-pandemic retail sales levels, will have difficulty achieving
its targets. Accordingly, refinancing discussions are ongoing with
the lender to vary the debt facility.
The credit facility of GBP19.6 million (25 March 2023: GBP19 .5
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 GBP0.5 million (25 March 2023: GBP0. 5
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 23 September 2023. The FY23 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
actuarial valuations carried out as of March 2023 and using the
rolled forward assumptions referred to above, a net liability of
GBP6.0 million (H1 FY23: GBP11.8 million asset) has been
recognised. The swing to a liability position was mainly due to
returns on the assets being lower than expected at the start of the
year resulting in an asset experience loss.
11 Financial instruments: fair value disclosures
The Group held the following financial instruments at fair value
at 23 September 2023.
Fair value Fair value Fair value
measurements measurements measurements
at 23 September at 24 September at 25
2023 2022 March
(Unaudited) (Unaudited) 2023
(Audited)
GBP million GBP million GBP million
----------------------------------- ----------------- ----------------- --------------
Current financial assets:
Derivative financial instruments:
Financial asset 0.5 0.2 0.5
0.5 0.2 0.5
-------------------------------------- ----------------- ----------------- --------------
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 GBP0.5
million (H1 FY23: GBP0.2 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 FY23: GBP0.1 million).
13 Notes to the cash flow statement
26 weeks 26 weeks 52 weeks
ended ended ended
23 September 24 September 25 March
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
GBP million GBP million GBP million
-------------------------------------------------- --------------- -------------- ------------
Profit from operations 3.6 2.9 6.0
Adjustments for:
Depreciation of property, plant and
equipment and right of use assets 0.1 0.3 0.4
Amortisation of intangible assets 0.1 0.1 0.1
(Loss)/gain on non-cash foreign currency
adjustments (0.1) 1.4 0.1
Share-based payments 0.1 0.1 0.2
Movement in provisions (0.5) (1.1) (1.4)
Net gain on financial derivative instruments - - (0.3)
Payments to retirement benefit schemes (2.4) (1.3) (2.2)
Charge in respect of retirement benefit
schemes 0.7 1.0 2.1
-------------------------------------------------- --------------- --------------
Operating cash flow before movement
in working capital 1.6 3.4 5.0
Decrease in inventories 0.7 1.1 1.1
Decrease in receivables 1.5 0.2 0.9
Decrease in payables (3.7) (1.9) (1.4)
Cash generated from operations 0.1 2.8 5.6
-------------------------------------------------- --------------- -------------- ------------
Income taxes paid (0.4) (0.7) (1.3)
-------------------------------------------------- --------------- -------------- ------------
Net cash flow from operating activities (0.3) 2.1 4.3
Analysis of net debt
25 March Non-cash 23 September
2023 Cash Foreign movements 2023
flow exchange
GBP million GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------ ------------ ------------ ---------------
Cash and cash equivalents 7.1 (2.9) - - 4.2
IFRS 16 lease liabilities (0.5) 0.1 - - (0.4)
Term loan (19.5) - - (0.1) (19.6)
Net debt (12.9) (2.8) - (0.1) (15.8)
--------------------------- ------------ ------------ ------------ ------------ ---------------
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.
Risk management framework
A risk management framework is in place which is appropriate for
the size and complexity of the business with consideration to its
AIM listing, future partner and system developments and Brand
promotion and evolution.
MGB maintains its risk management function in line with the
Quoted Companies Alliance Corporate Governance Code (QCA Code)
complying with AIM Rule 26. The Audit & Risk Committee provides
oversight, as to the overall suitability and effectiveness of the
risk management approach and is accountable and supported by the
Board. The Operating Board formally reviews, discusses and
documents the Principal Risks to the business at least annually.
The Risk Committee, which is chaired by the CFO, sits quarterly to
understand existing and developing issues, and MGB Senior Managers
contribute to and update Operational Risk registers, as a minimum
also quarterly. All colleagues recognise their responsibility to
proactively identify and manage risk and opportunity in their daily
activities and planning.
Principal risks and uncertainties
Reviewed, discussed and agreed by the Operating Board annually,
MGB Principal Risks are designed to promote strategic success and
improve future performance, the impact of operational risks on
these determines the focus for senior management and their teams.
The following risks have been agreed:
-- Liquidity
-- Dependency on a small number of partners
-- Pension scheme funding
-- 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 23 September 2023 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 56 of the
Mothercare plc Annual Report and Financial Statements 2023. 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 2023
Shareholder information
Financial calendar
2024
--------------------------------------------------------- ----------
Preliminary announcement of results for the 53 weeks September
ending 30 March 2024
Issue of report and accounts September
Annual General Meeting September
Announcement of interim results for the 26 weeks ending November
28 September 2024
--------------------------------------------------------- ----------
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
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END
IR EAFFDALSDFAA
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November 24, 2023 02:00 ET (07:00 GMT)
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