Mothercare Plc : Half-year results <Origin Href="QuoteRef">MTC.L</Origin>
19/11/2015 07:00
Mothercare Plc
FY2015/16 Half Year Results
Further encouraging strategic progress: underlying profits more than doubled
Mothercare plc, the global retailer for parents and young children, today
announces half-year results for the 28-week period to 10 October 2015.
Highlights for H1 FY2015/16
* Underlying profit before tax up 112% at £7.0m
* Strong progress in the UK: margins up 76 bps, online sales growth of 22% and
like-for-like sales growth of 3.8% with UK losses halved
* International remains challenging with economic and currency headwinds, but
continue to grow space which was up 6.6%
* Continued progress against all six strategic pillars
Group performance
H1 FY2015/16 H1 FY2014/15
28 weeks to 28 weeks to % change
10 Oct 2015 11 Oct 2014 vs.
£million £million last year
UK
UK like-for-like sales 1 +3.8% +1.5% -
Total UK sales 236.6 235.6 +0.4%
Underlying UK loss 2 (6.1) (13.5) +54.8%
International
International like-for-like sales 1 (2.3)% +4.9% -
International retail sales in constant currency +1.8% +11.8%
International retail sales in actual currency (5.0)% +13.3%
Total International sales 376.7 397.5 (5.2)%
Underlying International profit 2 21.7 25.3 (14.2)%
Group
Worldwide sales 1 613.3 633.1 (3.1)%
Total group sales 349.9 372.7 (6.1)%
Group underlying profit before tax 2 7.0 3.3 +112.1%
Exceptional credit/charge & non-underlying items (1.2) 2.2 -
Group profit before tax after exceptional and non-underlying items 5.8 5.5 +5.4%
Underlying EPS 2 3.3p 3.0p +10.9%
Net cash/(debt) 27.2 (54.2) -
Mark Newton-Jones, Chief Executive of Mothercare plc, said:
"We are a year into our turnaround; making good progress against each of our
strategic pillars and as a result underlying profits for the first half have
more than doubled."
"Our work to return the UK business to profitability continues to pay off,
with growth in both gross margins and like-for-like sales. Improved product
architecture, better buying and a focus on full price retailing helped drive
the stronger margin growth. Our new store format is going down well with
customers, and these refurbished stores are delivering encouraging uplifts in
both sales and profit. The UK is annualising against our new trading approach
and is performing well; but there is still more work to do."
"We continue to lay the foundations for future growth in our International
business. Despite increased economic and currency headwinds in a number of our
markets, impacting both sales and profits, we and our franchise partners
remain confident in the business model and together continued to grow space.
We expect the challenging environment to continue into the second half."
"Overall, expectations for the full year outturn are unchanged. Our vision
remains clear: to be the leading global retailer for parents and young
children."
Investor & analyst enquiries to:
Mothercare plc
Mark Newton-Jones, Chief Executive Officer
Richard Smothers, Chief Financial Officer
Ramona Tipnis, Director of Investor
Relations
01923 206455
Media enquiries to:
Mothercare plc
Lorna Else, Interim Director of Corporate Communications
MHP Communications
John Olsen/Simon
Hockridge
020 3128 8100
Notes:
1 - UK like-for-like sales are defined as sales from stores that have been
trading continuously from the same space for at least a year and include
online sales.
International retail sales are the estimated total retail sales of overseas
franchise and joint venture partners to their customers. International
like-for-like sales are the estimated franchisee retail sales at constant
currency from stores that have been trading continuously from the same selling
space for at least a year and include online sales on a similar basis.
Total International sales are International retail sales plus International
Wholesale sales. Worldwide sales are total International sales plus total UK
sales. International stores refer to overseas franchise and joint venture
stores.
2 - Underlying profit before tax refers to PBT before exceptional and
non-underlying items. Underlying EPS is calculated on the basis of underlying
profit.
3 - 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.
4 - Mothercare plc will release its Q3 Trading Update for the 13 weeks to 9
January 2016 on Thursday 14 January 2016.
CHIEF EXECUTIVE'S REVIEW
Overview
We have, over the first half of the year, built on the progress we made last
year. Our UK business is benefitting from our strategic initiatives with much
stronger gross margins and like-for-like sales growth. In International we and
our franchise partners continue to grow space and invest for the future
despite economic and currency headwinds. We remain singularly focussed in our
goal of being the leading global retailer for parents and young children.
We have made good progress across each of our six strategic pillars and
overall the business is now on a firmer footing and we are positioning
ourselves well for the future.
1Become a digitally led businessOnline sales up 22%, accounting for 36% of UK
retail sales iPads now in all stores and driving in-store online sales growth
of 36%. In-store online ordering now represent 45% of all online salesMobile
now 80% of online traffic and 56% of online sales for customers ordering from
home2Supported by a modern retail estate and great serviceOver 20% of the UK
store estate to be refurbished in time for peak Christmas tradingRefurbishment
programme is rolling out a new, modern look and feel to our stores and
introducing new departments - maternity, cafés and play areasClosed 16
underperforming stores, refurbished eight and resited four stores in the
UK3Offering style, quality and innovation in productImproved style, quality,
innovation and design for all three product categories and added a further 48
brands thus helping to improve product and price architecture4Stabilise and
recapture gross marginMargins up by 76 bps driven by less discounting and now
also better buyingSignificantly lower levels of stock going into sale with 70%
of product sold at full price5Running a lean organisation while investing for
the futureContinued tight control of store costs and inventory6Expanding
further internationallySpace up 6.6% with 1,310 stores in 60 countries as a
net 37 new stores opened during H1 and opened our 100th store in both China
and Russia
Group results
Global retail space across all of our markets was up 1.3% year-on-year, with
UK reduced by (7.4)% to 1.6m sq.ft. and International up 6.6% at 3.0m sq.ft..
We now have 173 stores in the UK and in International we operate from 60
countries around the world with 1,310 stores.
H1 FY2015/16 H1 FY2014/15
28 weeks to 28 weeks to % change
10 Oct 15 10 Oct 14 vs. last year
£million £million
Underlying International profit 2 21.7 25.3 (14.2)%
Underlying UK loss 2 (6.1) (13.5) +54.8%
Corporate expenses (4.9) (4.3) (13.9)%
Underlying profit from operations 2 10.7 7.5 +42.7%
Underlying net finance costs (1.8) (3.6) -
Share based payments (1.9) (0.6) -
Underlying profit before tax 2 7.0 3.3 +112.1%
Exceptional items (1.5) (3.2) -
Non-cash foreign currency adjustments 0.8 5.9 -
Amortisation of intangibles (0.5) (0.5) -
Reported profit before tax 5.8 5.5 +5.4%
Worldwide sales were down (3.1)% at £613.3m with total UK sales up 0.4% and
total International sales down (5.2)%. Group sales, which reflect total UK
sales and reported revenues or receipts from our International partners, were
down (6.1)% at £349.9m.
Underlying Group profits before tax were up 112% at £7.0m. Our UK business
benefitted from our ongoing strategic initiatives and saw a significant
reduction in losses to £(6.1)m. Our International business was impacted by
ongoing volatility from economic and currency headwinds and profits were down
at £21.7m. Corporate expenses were £(4.9)m while finance costs were reduced
to £(1.8)m, but the cost for share based payments increased to £(1.9)m,
which is in line with the change in the share price.
After a charge of £(1.5)m for exceptional items, a credit of £0.8m for
non-cash foreign currency adjustments and a £(0.5)m charge for amortisation
of intangibles, the reported profit for the half year was £5.8m (H1
FY2014/15: £5.5m).
The balance sheet remains strong with a net cash balance of £27.2m compared
to net cash of £31.5m at the end of FY2014/15 and also reflecting our move
from net debt of £(54.2)m a year ago at H1 2014/15 following the rights
issue.
UK
We have made significant progress towards returning the UK to profitability.
The benefits of our strategic initiatives are beginning to come through with
strong growth in margins and like-for-like sales. As a result, we have more
than halved the operating loss to £(6.1)m for the first half of the year.
H1 FY2015/16 H1 FY2014/15
28 weeks to 28 weeks to % change
10 Oct 15 11 Oct 14 vs. last year
UK like-for-like sales growth +3.8% +1.5% -
UK online sales £78.1m £63.9m +22.1%
UK retail sales (including online) £219.1m £219.0m +0.0%
UK wholesale sales £17.5m £16.6m +5.4%
Total UK sales £236.6m £235.6m +0.4%
Underlying loss £(6.1)m £(13.5)m +54.8%
Become a digitally led business
Our digital strategy of improving our presentation and customer journey
online and introducing more iPads to stores, has helped to significantly
improve the level of online sales which were up 22% to £78m. Online sales now
account for 36% (H1 FY2014/15: 29%) of UK retail sales. Mobile is now the
predominant channel for our customers ordering from home and now makes up 80%
of online traffic and 56% of our online sales. Click-and-collect now accounts
for 34% of online orders and 24% of online sales.
We have increased the number of iPads in stores, with all sales-floor staff
in refurbished stores having an iPad. This has helped to drive online sales
through stores faster and these sales now account for 45% of all online sales.
Supported by a modern retail estate and great service
We have continued with modernising and realigning our store estate with a new
store format. We have introduced new departments - maternity, cafés and play
areas - while also improving fixtures, signage and navigation around stores.
We are seeing improved dwell times, a benefit to conversion rates and growth
in margins and sales.
Over the first half of the year we closed 16 underperforming stores (12
Mothercare and four ELC), refurbished eight stores and resited four stores.
Our store teams are working towards getting c20% of our store estate
refurbished in time for peak Christmas trading. We are taking a portfolio
approach to our store refurbishment programme and not cherry-picking stores
with the best returns first. Included in the first tranche is a range of
stores from c.3,000 sq.ft. to c18,000 sq.ft. to ensure we are achieving the
expected returns from a representative mix of our store estate. Gateshead and
Solihull were refurbished last year and Gateshead was our largest
refurbishment to date at over 32,000 sq.ft.. Whilst it is still early days,
these new format stores are delivering sales and profit uplifts which are in
line with our expectations.
We ended the period with 173 stores (163 Mothercare and 10 ELC) or 1.6m
sq.ft. of retail space. Our store portfolio is continuing to migrate to larger
stores with 96 out-of-town Mothercare stores and 67 Mothercare in town and 10
ELC in town stores, moving us closer to our blueprint of two thirds
out-of-town and one third in-town. These closures meant space was down (7.4)%
year-on-year which, coupled with positive like-for-like sales, resulted in
total UK sales growth of 0.4% to £237m. Store closures reduced losses by
£2.2m during the first half of the year.
Offering style, quality and innovation in product
Our teams have continued their work towards improving the customer offer and,
over the course of the first half of this year, we introduced a further 48
brands across our three product categories. This, along with the work we have
done with our own designed product, has nearly doubled our sales from product
at the 'Best' end of the ranges from c10% to c15%, whilst not compromising on
our 'Better' ranges.
In Clothing and footwear , we have continued to work with external brands to
sit alongside our own brand product which has once again been improved. In
Home and travel we continued to work with our suppliers to grow the number of
new branded products while also increasing the level of exclusive product and
offers for our customers. In ELC Toys our work has been focussed on peak
trading, which is just ahead of us. We have made further progress towards
increasing the number of brands with an educational tone, with some brands
starting to provide exclusive sales periods.
Stabilise and recapture margin
After five years of margin decline, we are now well on our way to
establishing ourselves as a full price retailer with another half year of
maintaining a balanced pricing policy across all product categories. The
results are clear, margins are up, like-for-like sales have returned to growth
and our near complete exit from underperforming stores means total UK sales
are also up by 0.4%.
Over the half year, we continued to improve the style and quality of our
product, manage stock levels more efficiently and work with our supplier base
to ensure we have the right product for our customers. These efforts are
continuing to have a positive impact on the business as a whole. Our customers
understand that we are no longer looking to drive sales through ongoing
discounts and promotions. Instead we are looking to drive sales by improving
our product, introducing exclusivity and improving our presentation in store
and online.
As a result of this improvement in product ranges and stock management, we
sold over 70% of product at full price. This allowed us to delay the start of
the end-of-season sale to the second quarter whilst also having a shorter,
sharper sale. The end result was a cleaner stock file and a further 76 bps
improvement in gross margins.
Running a lean organisation
We have continued to manage our cost base and inventory levels tightly by
working with our suppliers to ensure we are efficient with the level of stock
in the supply chain. Our store refurbishment programme is managed tightly to
ensure the efficient use of capital. Store refurbishments are carefully
planned to minimise disruption to customers and the impact on sales. This
continued focus on the cost base has allowed us to capitalise on gross margin
and like-for-like sales gains to more than halve the half year loss to £(6)m.
International
Many of our International markets were faced with ongoing economic and
currency headwinds. As a result we saw an increased level of volatility across
all four regions. Despite this uncertainty and the impact that it is having on
sales in both constant and actual currencies, we and our franchise partners
remain confident in the business model and together continue to grow space. We
are working together to ensure our trading approach is appropriate for current
market conditions. By strengthening our International business we will be well
positioned for when market conditions improve.
H1 FY2015/16 H1 FY2014/15
28 weeks to 28 weeks to % change
10 Oct 15 11 Oct 14 vs. last year
International like-for-like sales growth (2.3)% +4.9% -
International retail sales: constant currency +1.8% +11.8% -
International retail sales: actual currency (5.0)% +13.3% -
International retail sales £373.4m £393.2m (5.0)%
International wholesale sales £3.3m £4.3m (23.3)%
Total International sales £376.7m £397.5m (5.2)%
Underlying profit £21.7m £25.3m (14.2)%
Expanding further internationally
Space was up 6.6% year-on-year during the first half of the year, and we
added a net 37 stores and 118k sq.ft. of retail space to our International
store estate. Our ongoing strategy of managing space effectively saw the
closure of 32 stores or 70k sq.ft. and the opening of 69 stores or 188k sq.ft.
during the first half of the year. The trend for our International markets is
one of exiting smaller stores whilst moving to larger stores in locations that
attract higher footfall and therefore better sales densities in the
longer-term. We are also drawing upon our successes in the UK, which is
helping to strengthen and position our International business well for when
underlying trading conditions improve.
International like-for-like sales were down (2.3)% year-on-year with Europe
including Russia flat while the Middle East, Asia and Latin America were
weaker. International retail sales in constant currency were up 1.8%, with
three out of four regions delivering growth. However currency moves continued
to have an adverse effect, which meant International retail sales in actual
currencies were down (5.0)% year-on-year at £373m. Wholesale sales were down
at £3m and total International sales were down (5.2)% at £377m.
Underlying profit for our International business was down (14.2)% at £21.7m,
with adverse currency moves having a c£(1.0)m impact during the half year.
International profit margins remain healthy despite the increased level of
economic and currency volatility.
International now accounts for 66% of worldwide space and 61% of worldwide
sales.
Outlook
The UK is a year into our new trading approach and it is responding well.
There is still much to do and we might see some volatility as we anniversary
the implementation of various initiatives. In International we are continuing
to grow space and are drawing upon our experience in the UK and across all 60
International markets to navigate current headwinds, which we expect to
continue into H2.
We have made good progress against each of our strategic pillars and will
continue to develop these in the months ahead. With Christmas just five weeks
away, our thoughts now turn to peak trading, on which we will update in
January.
Overall, expectations for the full year outturn are unchanged. Our vision
remains clear - to be the leading global retailer for parents and young
children.
FINANCIAL REVIEW
RESULTS SUMMARY
Group underlying profit before tax was £7.0 million, for the 28 weeks to 10
October 2015, (H1 2014/15: £3.3 million profit). Underlying profit excludes
exceptional items and other non-underlying items which are analysed below.
Exceptional items include costs relating to previously announced activity on
property and retail restructuring programmes. After exceptional and
non-underlying items, the Group recorded a pre-tax profit of £5.8 million (H1
2014/15: profit of £5.5 million).
Income statement
£ million 28 weeks to 10 October 2015 28 weeks to 11 October 2014 52 weeks to 28 March 2015
Revenue 349.9 372.7 713.9
Underlying profit from operations before interest and share based payments 10.7 7.5 19.3
Share based payments (1.9) (0.6) (1.3)
Net finance costs (1.8) (3.6) (5.0)
Underlying profit before tax 7.0 3.3 13.0
Exceptional items (1.5) (3.2) (32.0)
Non-cash foreign currency adjustments 0.8 5.9 6.9
Amortisation of intangible assets (0.5) (0.5) (1.0)
Profit/(loss) before tax 5.8 5.5 (13.1)
Underlying EPS - basic 3.3p 3.0p 8.6p
EPS - basic 2.8p 5.1p (12.6p)
Profit from operations before share based payments includes all of the
Group's trading activities, but excludes the share based payment charge to the
income statement in accordance with IFRS 2 (see below).
Results by segment
The primary segments of Mothercare plc are the UK business and the
International business.
£ million - Revenue 28 weeks to 10 October 2015 28 weeks to 11 October 2014 52 weeks to 28 March 2015
UK 236.6 235.6 458.1
International 113.3 137.1 255.8
Total 349.9 372.7 713.9
£ million - Underlying profit/(loss) 28 weeks to 10 October 2015 28 weeks to 11 October 2014 52 weeks to 28 March 2015
UK (6.1) (13.5) (18.0)
International 21.7 25.3 45.9
Corporate (4.9) (4.3) (8.6)
Underlying profit from operations before share based payments 10.7 7.5 19.3
Share based payments (1.9) (0.6) (1.3)
Net finance costs (1.8) (3.6) (5.0)
Underlying profit before tax 7.0 3.3 13.0
Total UK sales increased by 0.4% with sales reductions from store closures
more than offset by a strong LFL performance at 3.8%, driven by full price
trading and supported by uplifts from newly refurbished stores and the
continued delivery of the online strategy. Profitability also benefited from
the removal of 16 loss-making stores during the period as this programme
continues to deliver significant cost savings UK losses have halved to £(6.1)
million.
International retail sales in constant currency were up 1.8% with three out
of four regions growing year-on-year. The anticipated and ongoing economic and
currency headwinds meant retail sales in actual currency were down (5.0%) at
£373.4m. Group sales, which reflect reported revenues or receipts from our
International partners along with total UK sales, were £22.8m lower as a
result of the timing of shipments and tighter stock management across some of
our International markets. This led to International profits being £(3.6)m
lower than last year.
Corporate expenses represent board and company secretarial costs and other
head office costs including audit, professional fees, insurance and head
office property.
Like-for-like sales, total International sales and worldwide sales
UK like-for-like sales are defined as sales for stores that have been trading
continuously for at least a year and include in store online sales and online
sales delivered direct to home.
International retail sales are the estimated retail sales of overseas
franchisees and joint ventures and associates to their customers (rather than
Mothercare sales to franchisees as included in the statutory or reported sales
numbers). Total International sales are International retail sales plus
International wholesale sales. Group worldwide sales are total International
sales plus total UK sales. Group network sales and reported sales are
analysed as follows:
£ million Reported sales Worldwide sales*
28 weeks to 10 October 2015 28 weeks to 11 October 2014 % 52 weeks to 28 March 2015 28 weeks to 10 October 2015 28 weeks to 11 October 2014 % 52 weeks to 28 March 2015
UK retail sales 219.1 219.0 0.1% 425.7 219.1 219.0 0.1% 425.7
UK wholesale sales 17.5 16.6 5.4% 32.4 17.5 16.6 5.4% 32.4
Total UK sales 236.6 235.6 0.4% 458.1 236.6 235.6 0.4% 458.1
International retail sales 110.0 132.8 (17.2%) 247.7 373.4 393.2 (5.0%) 737.3
International wholesale sales 3.3 4.3 (23.3%) 8.1 3.3 4.3 (23.3%) 8.1
Total International sales 113.3 137.1 (17.4%) 255.8 376.7 397.5 (5.2%) 745.4
Group sales 349.9 372.7 (6.1%) 713.9 613.3 633.1 (3.1%) 1,203.5
* estimated
Analysis of worldwide sales movement
£ million - Worldwide sales
Sales for 28 weeks ended 11 October 2014 633.1
Currency impact (26.4)
Proforma sales for 28 weeks ended 11 October 2014 606.7
Increase in UK LFL 8.5
Decrease in UK space (8.1)
Decrease in international LFL (8.0)
Increase in international space 14.2
Sales for 28 weeks ended 10 October 2015 613.3
Sales in the 28 weeks ended 10 October 2015 were lower by £(19.8)m primarily
as a result of an adverse currency impact of £(26.4)m.
Excluding the currency impact international sales have increased by £6.7m
driven by an increase in space, offset by reduced like for like sales.
UK like for like sales have grown strongly by £8.5m, but have been offset by
decrease in UK space as a result of store closures.
Analysis of profit movement
£ million - underlying profit before tax
Underlying profit for 28 weeks ended 11 October 2014 3.3
Currency impact (1.0)
Proforma underlying profit for 28 weeks ended 11 October 2014 2.3
Decrease in International volumes (2.7)
UK closures of loss making stores 2.2
UK sales and margin improvement 7.1
Increase in costs (1.9)
Underlying profit before tax for 28 weeks ended 10 October 2015 7.0
On a proforma basis (i.e. excluding the currency impact) underlying profit
has grown strongly from £2.3m to £7.0m. This is driven by UK sales and
margin improvement and the closure of UK loss making stores. This is partly
offset by lower international volumes and an increase in costs reflecting the
full year effect of investment in new resource to deliver the turnaround plan
hired in the year and an increase in share based payments.
Foreign exchange
The main exchange rates used to translate the consolidated income statement
and balance sheet are set out below:
28 weeks ended 10 October 2015 28 weeks ended 11 October 2014 52 weeks ended 28 March 2015
Average:
Russian rouble 89.38 59.86 70.57
Ukrainian hryvnia 33.32 20.39 22.50
Indonesian rupiah 20,720 19,580 19,484
Saudi riyal 5.77 6.27 6.03
Closing:
Russian rouble 94.67 63.85 88.67
Ukrainian hryvnia 33.48 20.81 34.77
Indonesian rupiah 20,787 19,568 19,499
Saudi riyal 5.75 5.99 5.61
The principal currencies that impact our results are the Russian rouble,
Ukrainian hryvnia, Indonesian rupiah and Saudi riyal. These currencies have
mostly weakened against sterling in the year. The net effect of currency
translation caused worldwide sales and underlying operating profit from
ongoing operations to decrease by £26.4m and £1.0m respectively compared
with 2015 as shown below:
The profit impacts are somewhat mitigated by our hedging strategy on royalty
receipts.
Worldwide Sales £ million Underlying Operating profit £ million
Russian rouble (25.4) (1.3)
Ukrainian hryvnia (2.0) (0.1)
Indonesian rupiah (0.7) (0.1)
Saudi riyal 4.1 0.1
Other Middle East countries 5.7 0.5
Other currencies (8.1) (0.1)
(26.4) (1.0)
In addition to the translation exposure, the Group is also exposed to
movements on certain of its transactions, principally movements in the US
dollar. These exposures are largely hedged and therefore do not significantly
impact underlying profit.
Share based payments
Underlying profit before tax also includes a share based payments charge of
£(1.9) million (H1 2014/15: £(0.6) million charge) in relation to the
company's long-term incentive schemes.
Financing and taxation
Financing represents interest receivable on bank deposits, interest payable
on borrowings, the amortisation of costs relating to bank facility fees and
the net interest charge on the liabilities/assets of the pension scheme (see
note 5).
The underlying tax charge comprises corporation taxes incurred and deferred
tax charge. The total tax charge was £(1.0) million (H1 2014/15: charge of
£(1.0) million) - see note 6.
Non-underlying items
Underlying profit before tax excludes the following non-underlying items (see
note 4):
Exceptional items:
* Costs relating to previously announced activity on property and retail
restructuring programmes.
Other non-underlying items:
* The revaluation of monetary assets and liabilities held in foreign
currencies and the revaluation of outstanding forward contracts which have not
yet been matched to the purchase of stock. These revaluation adjustments are
reported as non-underlying items so as the Group reports its underlying
performance consistently with its cash flows, reflecting the hedging which is
in place. (note: prior year credit included the fair value movement of
contracts taken out before hedge accounting was adopted in January 2014);
* Amortisation of intangible assets (excluding software).
Earnings per share and dividend
Basic underlying earnings per share were 3.3 pence compared to 3.0 pence in
the 28 weeks to 11 October 2014. The total number of shares has increased by
0.3 million since 28 March 2015 due to share option exercises.
28 weeks ended 10 October 215 28 weeks ended 11 October 2014 52 weeks ended 28 March 2015
Million million Million
Weighted average number of shares in issue 170.7 88.7 122.2
Dilution- option schemes (for underlying results only) 9.0 1.1 3.6
Diluted weighted average number of shares in issue 179.7 89.8 125.8
Number of shares at period end 170.8 88.8 170.5
£ Million £ million £ million
Profit /(loss) for basic and diluted earnings per share 4.8 4.5 (15.4)
Exceptional items and other non-underlying items (Note 4) 1.2 (2.2) 26.1
Tax effect of above items (0.3) 0.4 (0.2)
Underlying earnings 5.7 2.7 10.5
Pence
Basic profit / (loss) per share 2.8 5.1 (12.6)
Basic underlying earnings per share 3.3 3.0 8.6
Diluted profit / (loss) per share 2.7 5.0 (12.6)
Diluted underlying earnings per share 3.2 3.0 8.3
The Board has concluded that given the cash investment required to deliver
the new strategy the Company will not pay an interim dividend for 2015/16.
The total dividend for the period is nil pence per share (2013/14: nil pence
per share).
Pensions
The Mothercare defined benefit pension schemes were closed with effect from
30 March 2013. Details of the income statement net charge, total cash funding
and net assets and liabilities are as follows:
£ million 28 weeks to 10 October 2015 28 weeks to 11 October 2014 52 weeks to 28 March 2015
Income statement
Running costs (1.5) (0.6) (1.4)
Net (interest on liabilities)/return on assets (1.5) (1.1) (2.1)
Net charge (3.0) (1.7) (3.5)
Cash funding
Regular contributions (1.6) (0.5) (0.6)
Deficit contributions (5.4) (2.7) (5.8)
Total cash funding (7.0) (3.2) (6.4)
Balance sheet
Fair value of schemes' assets 288.4 259.8 283.4
Present value of defined benefit obligations (341.8) (323.3) (364.6)
Net liability (53.4) (63.5) (81.2)
The running costs of the Mothercare defined benefit pension schemes have
increased from £(0.6) million in the 28 weeks to 11 October 2014 to £(1.5)
million in the 28 weeks to 10 October 2015 due to an increased PPF levy in the
year.
In consultation with the independent actuaries to the schemes, the key market
rate assumptions used in the valuation and their sensitivity to a 0.1%
movement in the rate are shown below.
H1 15/16 H1 14/15 2015/16 Sensitivity 2015/16 Impact on scheme liabilities £ million
Discount rate 3.95% 4.0% +/- 0.1% -6.0 / +6.0
Inflation - RPI 3.05% 3.1% +/- 0.1% +5.4 / -4.1
Inflation - CPI 1.95% 2.0% +/- 0.1% +5.4 / -4.1
Cash flow
Underlying free cash flow was £1.6m with cash generated from operations of
£18.8m being broadly utilised by capital expenditure and financing / tax
charges.
Capital expenditure of £16.6 million reflected the investment in the year in
store refurbishment and IT infrastructure and was materially higher than in
the 28 weeks ended 11 October 2014 as the investment strategy was implemented.
28 weeks ended 10 October 2015 28 weeks ended 11 October 2014 52 weeks ended 28 March 2015
£ million £ million £ million
Underlying profit from operations before interest and share based payments 10.7 7.5 19.3
Depreciation and amortisation 8.9 8.9 16.7
Retirement benefit schemes (5.5) (2.6) (5.0)
Change in working capital 2.0 (0.3) (9.8)
Other movements 2.7 (0.7) (3.2)
Cash generated from operations 18.8 12.8 18.0
Capital expenditure (16.6) (4.4) (12.7)
Interest and tax paid (0.6) (4.8) (6.2)
Underlying Free cashflow 1.6 3.6 (0.9)
Exceptional (4.3) (10.6) (16.7)
Free cashflow (2.7) (7.0) (17.6)
Net bank loans (repaid)/raised Issue of ordinary share capital - 0.4 5.0 - (65.0) 95.3
Exchange differences (2.0) (0.9) 1.5
Cash and cash equivalents at beginning of period 31.5 17.3 17.3
Net cash and cash equivalents at end of period 27.2 14.4 31.5
Balance sheet
The balance sheet includes identifiable intangible assets arising on the
acquisition of the Early Learning Centre of £6.2 million and goodwill of
£26.8 million. These assets are allocated to the International business.
10 October 2015 11 October 2014 28 March 2015
£ million £ million £ million
Goodwill and other intangibles 46.5 42.9 45.9
Property, plant and equipment 56.0 55.3 56.4
Retirement benefit obligations (net of tax) (42.8) (50.8) (64.9)
Net cash / (borrowings) 27.2 (54.2) 31.5
Derivative financial instruments 2.9 3.9 9.3
Other net assets /(liabilities) 8.3 15.6 (0.5)
Net assets 98.1 12.7 77.7
Share capital and premium 146.4 50.7 146.0
Reserves (48.3) (38.0) (68.3)
Total equity 98.1 12.7 77.7
Shareholders' funds amount to £98.1 million, an increase of £20.4 million
in the year driven largely by a reduction of £22.1 million in the defined
benefit obligation (net of deferred tax).
Going concern
The directors have reviewed the going concern principle in the light of the
guidance provided by the FRC. The Group's objective with respect to managing
capital is to maintain a balance sheet structure that is both efficient in
terms of providing long-term returns to shareholders and safeguards the
Group's ability to continue as a going concern. As appropriate, the Group can
choose to adjust its capital structure by varying the amounts of dividends
paid to shareholders, returns of capital to shareholders, issuing new shares
or varying the level of capital expenditure.
The Group's latest forecasts and projections, which incorporate the strategic
initiatives outlined above, have been sensitivity tested for reasonably
possible adverse variations in trading performance and foreign currency
fluctuations. This indicates the Group will operate within the terms of its
borrowing facilities and covenants for the foreseeable future.
After considering the trading performance, future strategic plans and
shareholder funds, the directors have a reasonable expectation that the
company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the financial statements
are prepared on the going concern basis.
Capital additions
Total capital additions for the half year was £12.8 million (H1 2014/15:
£4.4 million), of which £3.1 million was for software intangibles and £9.7
million for tangible fixed assets. Landlord contributions of £3.5 million (H1
2014/15: £1.6 million) were received, partially offsetting the £12.8 million
outflow. Net capital expenditure after landlord contributions was £9.3
million (H1 2013/14: £2.8 million). The increase was primarily due to the
store refurbishment programme.
Treasury policy and financial risk management
The Board approves treasury policies and senior management directly controls
day-to-day operations within these policies. The major financial risk to which
the Group is exposed relates to movements in foreign exchange rates and
interest rates. Where appropriate, cost effective and practicable, the Group
uses financial instruments and derivatives to manage the risks.
No speculative use of derivatives, currency or other instruments is
permitted.
Foreign currency risk
All International sales to franchisees are invoiced in Pounds sterling or US
dollars.
International reported sales represent approximately 32 per cent of Group
sales. Total International sales in the 28 week period represent approximately
61 per cent of Group network sales. The Group therefore has some currency
exposure on these sales, but they are used to offset or hedge in part the
Group's US dollar denominated product purchases. The Group policy is that all
material exposures are hedged by using forward currency contracts. To help
mitigate against the currency impact on royalty receipts, the Group has hedged
against its major market currency exposure.
Interest rate risk
Subsequent to the rights issue and repayment of term loan in the year 52 week
period 28 March 2015, the Group is no longer currently exposed to any material
interest rate risk.
During the period to 28 March 2015 the Group negotiated a new revolving
credit facility, which as at 10 October 2015 has not had any amounts drawn
down on it. However, should the Group draw down on this facility in the
future, the Group would incur interest rate risk again.
Shareholders' funds
Shareholders' funds amount to £98.1 million, an increase of £20.4 million
in the 28 week period. This represents £0.57 per share compared to £0.46 per
share at the year end. The retained deficit in the condensed balance sheet is
£51.8 million.
Post balance sheet event
There have been no post balance sheet events.
Condensed income statement
For the 28 weeks ended 10 October 2015
28 weeks ended 10 October 2015 (unaudited ) 28 weeks ended 11 October 2014 (unaudited) 52 weeks ended 28 March 2015
Note Underlying 1 £ million Non-underlying 2 £ million Total £ million Underlying 1 £ million Non-underlying 2 £ million Total £ million Total £ million
Revenue 349.9 - 349.9 372.7 - 372.7 713.9
Cost of sales (318.1) - (318.1) (346.0) 4.3 (341.7) (656.3)
Gross profit 31.8 - 31.8 26.7 4.3 31.0 57.6
Administrative expenses (22.5) (2.3) (24.8) (19.6) (2.1) (21.7) (37.8)
Profit/(loss) from retail operations 9.3 (2.3) 7.0 7.1 2.2 9.3 19.8
Other exceptional items 4 - 1.1 1.1 - - - (26.2)
Share of results of joint ventures and associates (0.5) - (0.5) (0.2) - (0.2) (0.2)
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