REG - Mothercare PLC - Full Year Results 2023
22/09/2023 07:00
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RNS Number : 2957N Mothercare PLC 22 September 2023
Mothercare plc
Full Year Results 2023
Further progress made on the journey towards becoming an asset-light, global
franchising business
Mothercare plc ("Mothercare", "the Company" or "the Group"), the highly
trusted British heritage brand, that connects with the parents of newborn
babies and children across multiple product categories throughout their early
life as parents,, today announces full year results for the 52 week period to
25 March 2023. Comparatives are based on the 52 week period to 26 March
2022.
Key Highlights
• 9% increase in net worldwide retail sales by franchise partners in
continuing markets of £322.7 million (2022: £297.1 million excluding Russia,
£385.3 million including Russia).
• Adjusted EBITDA of £6.7 million (2022: £12.0 million), ahead of
analysts' expectations.
• Net borrowings of £12.4 million (2022: £9.9 million) at the year
end.
• Pension scheme deficit materially reduced to £35.0 million (March
2020: £124.6 million).
• Pension contributions reduced by £38.8 million to £34.9 million.
Current Trading & Outlook
· In the first twenty five weeks of FY24, the Group's Franchise
Partners recorded total retail sales of £132.5 million (FY23: £156.8
million), with the decline largely resulting from the continuing challenges in
our Middle Eastern markets
· We expect to complete a refinancing shortly and remain in discussions
with a number of key stakeholders and financing partners, to ensure that the
Group has adequate and appropriate financing for the future.
· Our medium-term guidance for the steady state operation, in more
normal circumstances, of our continuing franchise operations remains that they
are capable of exceeding £10 million operating profit and that opportunities
exist to grow our global footprint further.
· We are now focused on both restoring critical mass and monetising the
Mothercare global brand IP.
Financial Highlights
· Loss for the 52 weeks to 25 March 2023 of £0.1 million (2022:
£12.1 million profit).
· Net debt(3) at £12.9 million (2022: £11.0 million).
Our Group
2023 2022
52 weeks to 52 weeks to % change
25 Mar 2023 26 Mar 2022 vs.
£million £million last year
Turnover 73.1 82.5 (11)%
Adjusted EBITDA 6.7 12.0 (44)%
Adjusted operating profit 6.2 11.1 (44)%
Group adjusted profit after taxation(2) 1.1 9.0 (88)%
Statutory (loss)/profit (0.1) 12.1 -
Our Franchise partners
2023 2022
52 weeks to 52 weeks to % change
25 Mar 2023 26 Mar 2022 vs.
£million £million last year
Worldwide retail sales(1) £m 322.7 385.3 (16)%
Online retail sales £m 29.3 40.9 (28)%
Total number of stores 506 680 (26)%
Space (k) sq. ft. 1,223 1,828 (33)%
Clive Whiley, Chairman of Mothercare, commented:
"I am pleased with the progress Mothercare has made during the year as we
continue our transformation towards an asset-light, global franchising
business. Our priority over the last 12 months has been the continued
execution of our Transformation Plan and cementing Mothercare's future as a
sustainable business model, for the benefit of all our stakeholders.
I would like to thank our colleagues across the business, alongside our
pension trustees and all other stakeholders, for their continuing support.
Without this, we would not be in the profitable, cash generative position we
are today.
We have a compelling market opportunity. Mothercare remains in an unparalleled
position of being a highly trusted British heritage brand, with a significant
opportunity to leverage this brand equity and grow our global presence beyond
our existing franchise network. There is still work to do, but we are excited
about the future prospects for Mothercare as we leave behind the turmoil of
recent years."
Investor and analyst enquiries to:
Mothercare plc Email:
Clive Whiley, Chairman investorrelations@mothercare.com
Andrew Cook, Chief Financial Officer
Numis Securities Limited (NOMAD & Joint Corporate Broker) Tel: 020 7260 1000
Luke Bordewich
Henry Slater
Cavendish Capital Markets Limited (Joint Corporate Broker) Tel: 020 7220 0500
Carl Holmes
Media enquiries to: Email: mothercare@mhpgroup.com (mailto:mothercare@mhpgroup.com)
MHP Tel:020 3128 8613
Rachel Farrington
Tim Rowntree
Notes
The Directors believe that alternative performance measures ("APMs") assist in
providing additional useful information on the performance and position of the
Group and across the period because it is 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 Groups performance.
Consequently, APMs are used by the Directors and management for performance
analysis, planning, reporting and incentive setting purposes. The key APMs
that the Group has focused on in the period are as set out in the Glossary.
1 - Worldwide retail sales are total international retail franchise partner
sales to end customers (which are estimated and unaudited).
2 - Adjusted loss before taxation is stated before the impact of the adjusting
items set out in note 4.
3 - Net Debt is defined as total borrowings including shareholder loans, 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, expect 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 - Mothercare plc's Legal Entity Identifier ("LEI") number is
213800ZL6RPV9Z9GFO74
Chairman's Statement
Introduction and the next year
Throughout the challenges of recent years our prime goal has been to protect
the underlying Mothercare brand intellectual property ("IP"), in a solvent
business structure, for the benefit of all stakeholders. We have also sought
to avoid unnecessary equity dilution at all costs.
Accordingly, we are determined to:
o continue to reduce the combined business and pension schemes financing
requirement , whilst putting in place adequate working capital facilities and
eliminating the current unsustainable cash financing charges;
o sponsor growth in our Partners retail sales and store footprint;
o explore new territories and additional routes to market; and
o establish a platform for step-change growth.
All of these objectives will help to improve the profitability and covenant of
the underlying business for actuarial pension and stock market rating purposes
alike.
Hence, we believe that the enormous effort applied over the last five years
has finally provided line-of-sight to rebalancing the Mothercare brand IP
value in a way that also promotes growth in our royalty income.
The last five years
On my appointment as Chairman in April 2018, the combined immediate
refinancing requirement & pension schemes actuarial deficit was £256
million for a business that reported a loss before tax of £72.8 million on
net worldwide retail sales of over £600 million in the year ended March 2018.
The Transformation Plan launched immediately thereafter secured a flexible
financial structure which maintained a sustainable business model with a
capacity to sponsor future growth: ultimately leading to the transition of the
business to focus upon our core international franchise and brand management
competencies, as an asset light global franchising business.
Extraneous circumstances surrounding the pandemic and the Ukraine conflict,
introduced:
· Covid-19 led to an unprecedented demand shock (with a low point in
April 2020 of only 27% of our Franchise Partners' global retail locations
being open) with management focusing upon the well-being of staff alongside
successfully protecting corporate liquidity to preserve the businesses of our
manufacturing & franchise partners; and
· the suspension of the Russian retail business, in March 2022, and the
eventual withdrawal of the right to operate Mothercare branded stores in
Russia at the end of June 2022 drove numerous economic, logistical &
business disruptions into the Group.
Unfortunately, the dis-economies of scale associated with the above, alongside
not always maintaining product development in unison with all our partners
expectations, contributed to a halving of our franchise partners store
footprint over the last five years.
The Year under review
On the same basis as the loss above was reported, for the financial year to 25
March 2023 we are reporting a profit before tax of £2.3 million on net
worldwide retail sales by franchise partners of £322 million with a
comparative financing requirement including pension deficit of £55 million,
some 80% lower than the inherited position. We have also generated free cash
flow from operations. Further financial highlights have been:
· an adjusted EBITDA of £6.7 million (2022: £12.0 million). For the
prior year our Russian territory directly contributed some £5.5 million to
our adjusted EBITDA, which coupled with some margin benefit due to shipping
delays in last year's results, means there is a year on year improvement in
the underlying profitability of the business once these elements are
excluded;
· net worldwide retail sales by franchise partners were £322.7 million
(2022: £385.3 million). For the prior year our Russian territory contributed
£88 million hence total retail sales were 9% higher than the levels for the
previous financial year with the Russian retail sales excluded. Excluding our
Middle East markets as well as Russia, the increase was 17% and our Middle
East markets (43% of our total retail sales) reduced by 1% (at actual exchange
rates);
We remain mindful that the pandemic also had a significant impact on our
franchise partners' profitability, inevitably resulting in a need for them to
clear old inventory, reduce costs and the levels of investment they have been
able to make in their businesses. This is likely to mean that the return to
pre pandemic levels of trading will take longer and we are working with our
partners to assist that recovery, ultimately benefitting both our own business
and our franchise partners in the longer term.
We continue to make ongoing improvements in product and service but these will
not offset completely the above factors which will continue to impact the
Group results for the financial year to March 2024 and beyond.
Financing
At the year-end the Group had net borrowings of £12.4 million (March 2022:
£9.9 million). This comprised total cash of £7.1 million (March 2022: £9.2
million), reflecting ongoing tight control of cash, against the £19.5 million
(£19.1 million) of the Group's existing loan facility with GB Europe
Management Services Limited ("GBB") which remained fully drawn across the
year. This unavoidable increase in net debt, set against the challenging
backdrop of significant increases in interest rates, further demonstrates our
progress as a focused, asset light, global franchising business with no
directly operated stores and greatly reduced direct costs.
Since completing the £19.5 million secured four-year loan facility with GBB,
in September 2022, the interest rate on this loan has increased to the current
level of 19.2%, which coupled with the extended time to return to pre-pandemic
retail sales levels, particularly in our Middle Eastern markets, means that we
will require waivers to future periods' covenant tests.
We have therefore commenced refinancing discussions with GBB to vary,
renegotiate or refinance this debt facility alongside continuing to explore
various financing alternatives. For the avoidance of doubt, the Group does not
require additional liquidity in our current forecasts although this would be
preferable to accommodate business development and unanticipated challenges..
The first stage of this process was agreeing revised Deficit Repair
Contributions ("DRC's") with the Mothercare Pension Scheme Trustees
("Trustees") of our defined benefit schemes' ("Schemes") to reduce the annual
cash cost to the Company.
Pension Schemes and revised pension contribution plans
We retain a good working relationship with the Trustees and I am pleased to
report that, following the most recent valuation of the Schemes in March 2023,
we have reached formal agreement with the Trustees for a further reduction in
DRCs. The revised recovery plan now sets out aggregate contributions of
£34.9 million in the financial years March 2024 to March 2033. This
represents a £38.8 million reduction in the aggregate cash payments that were
to have been made to the pension schemes in that period under our previous
repayment commitments.
The last full actuarial valuation of the schemes was at 31 March 2023 and
showed a deficit of £35 million, resulting from total assets of £198 million
and total liabilities of £233 million.
The revised recovery plan agreed with the Trustees includes total
contributions (DRCs plus costs) in the financial years to March 2024 £2.4
million; March 2025 £2.0 million; March 2026 & 2027 £3.0 million; March
2028 & 2029 £4.0 million; March 2030 & 2031 £5.0 million and March
2032 £6 million and March 2033 £0.5 million aggregating to fully fund the
£35 million deficit by March 2033.
Opportunities for growth
As we pursue our goal to be the world's most trusted and desirable brand for
parents of babies and young children, the facts surrounding our market remain
compelling:
· Mothercare remains in an almost unparalleled position of being a
highly trusted British heritage brand, that connects with the parents of
newborn babies and children across multiple product categories throughout
their early life as parents;
· we estimate that there are some 30 million babies born every year in
the world, into markets addressable by the Mothercare brand, yet only 700,000
in aggregate in the UK. Mothercare is still not represented in eight of the
top ten markets in the world, when ranked by wealth and birth rate; and
· we have yet to capitalize on the multiple opportunities available to
us in wholesale, licensing or online marketplaces to grow the global presence
of the Mothercare brand beyond our existing franchise network.
This year we intend to leverage the full bandwidth of this intrinsic value
through connections with other businesses, the development of our branded
product ranges and licensing beyond our historic boundaries.
Cost Reduction Programme and Enterprise Resource Planning ("ERP") system
Our continual review and challenge to costs, whilst still ensuring we operate
to the standards of a world class business, should lead to a further net
reduction in administrative expenses once the ERP system is fully implemented
later this financial year.
Although our new ERP system has faced delays, I would like to thank the
internal team responsible for advancing this project, within tight budgetary
controls, for their efforts in bringing a project of this size and complexity
close to a conclusion.
Supply chain model
The loss of revenue and volume orders from the Russian retail business
represented the single biggest impact on the Group during the period under
review and required the necessary adjustments to our supply chain, operations
and administrative costs to address the consequent diseconomies of scale and
maintain our service to our franchise partners.
We continue to evolve our supply chain to reduce cost, complexity and deliver
goods to our franchise partners in the quickest way possible. We also closed
our remaining UK distribution centre in April 2022 and continue to develop our
product option framework as we seek to curtail the impact of input cost
inflation.
Management & Board changes
We have a PLC Board that we believe is appropriate for a company of our size,
nature and circumstances. Our Non-Executive Directors have relevant skills,
continue to directly contribute to the ongoing change process, are regularly
appraised and are encouraged to interface with the Operating Board.
During the year we also supplemented the Operating Board via the appointment
of a Brand Director and, following our successful transition to becoming an
international brand owner and operator, saw the departure of Kevin Rusling,
our Chief Operating Officer, who had been instrumental in managing that
transition over the previous five years.
Finally, we appointed a new Chief Executive Officer during the year but
unfortunately this failed to have the immediate impact upon our core business
we expected and the appointment was terminated. We are therefore renewing our
search and in the interim the day-to-day management of the Group is being run
by the Chief Financial Officer and the Operating Board with oversight from me
as Non- Executive Chairman.
Dividend Policy
The Company has not paid a dividend since February 2012. The Directors
understand the importance of optimising value for shareholders and it is the
Directors' intention to return to paying a dividend when it is financially
prudent for the Group to do so but recognising the restrictions within the
Company's agreements with its lenders and the Pension Trustees.
Summary and Outlook
As highlighted at the beginning of my statement, it has been five years of
hard work and transformative change for the Group and, on behalf of the Board
I would like to thank our colleagues across the business, alongside our
pension trustees and all other stakeholders for their unstinting support
throughout those difficult times. Without that support, alongside the
resilience we have built into the business throughout this journey, we could
not have dealt with the major challenges we have faced and Mothercare would
not be in the profitable, cash generative position we are today.
We expect to complete a refinancing shortly and remain in discussions with a
number of key stakeholders and financing partners, to ensure that the Group
has adequate and appropriate financing for the future. Furthermore, our
medium-term guidance is unchanged for the steady state operation, in more
normal circumstances, and we believe our continuing franchise operations
remain capable of delivering approximately £10 million operating profit.
In short, we are now focused on both restoring critical mass and monetising
the Mothercare global brand IP. This is an exciting prospect for our partners,
our colleagues and all our stakeholders alike as we finally leave behind the
turmoil of recent years.
Mothercare plc
Preliminary Results
FINANCIAL AND OPERATIONAL REVIEW
Our total retail sales and adjusted EBITDA from our continuing markets have
grown year on year. Demonstrating the strength in our asset light, reduced
risk, international
operating model.
The significant reduction in our pension contributions is the first step in
ensuring our longer term financing arrangements are adequate and appropriate
for the future needs of the Group.
International retail sales by our franchise partners of £322.7 million (2022:
£385.3 million) includes no contribution for the Russia market, which
contributed £88.2 million to the FY22 retail sales and was suspended at the
end of our previous financial year. Excluding the Russian retail sales from
FY22, our total retail sales from our continuing markets in FY23 increased by
9%.
The profit from operations in the year was £6.0 million (2022: £13.0
million) reflecting a number of significant changes. To better understand the
underlying results, the Group uses a non-statutory reporting measure of
adjusted profit, to show results before any one-off significant non-trading
items. This involves removing the adjusted items which relate to restructuring
and reorganisation costs and are non- recurring (£0.2 million added back in
year ended 2023 and £1.9 million subtracted in 2022), together with
depreciation and amortisation of £0.5 million (2022: £0.9 million),
resulting in an adjusted EBITDA profit for the year of £6.7 million (2022:
£12.0 million).
For the year to March 2022 our Russian territory directly contributed some
£5.5 million to our adjusted EBITDA, which coupled with some margin benefit
due to shipping delays in last year's results, means there is a year on year
improvement in underlying profitability of the business, when these elements
are excluded. The Group recorded a loss for the 52 weeks to 25 March 2023 of
£0.1 million (2022: profit of £12.1 million). The adjusted profit for the
year was £1.1 million (2022: £9.0 million). The adjusted items are detailed
in note 6.
Retail space at the end of the year was 1.2 million sq. ft. from 506 stores
(2022: 1.8 million sq. ft. from 680 stores, excluding Russia these figures
were 1.4 million sq. ft. from 564 stores)
PENSION SCHEME CONTRIBUTIONS
There are two defined benefit schemes, both of which are now closed to new
members, the Staff Scheme and the Executive Scheme. Following the full
actuarial triennial valuation at 31 March 2023, the deficit on the Staff
Scheme was £35.0 million, resulting from assets of £198 million and
liabilities of £233.0 million, the Executive Scheme was in surplus, with
assets of £XX million and liabilities of £XX million. The schemes are
independent and so the surplus on the Executive Scheme cannot be used to set
off the deficit on the Staff Scheme. The deficit to be funded at 31 March 2023
of £35 million is a significant reduction from the deficit of £124.6 million
at 31 March 2020: the Staff Scheme deficit of £101.7 million, from assets of
£278.0 million and liabilities of £379.7 million and the Executive Scheme
deficit of £22.9 million, from assets of £105.7 and liabilities of £128.6
million.
The following annual contributions, which include the deficit reduction
contributions for the Staff Scheme and the costs for both schemes, have now
been agreed with the trustees, for the years ending in March as follows: 2024
- £2.4 million; 2025 - £2.0 million; 2026 and 2027 - £3.0 million; 2028 and
2029 - £4.0 million; 2030 and 2031 £5.0 million; 2032 - £6.0 million and
2033 £2.0 million, a total of £36.4 million. These contributions represent a
cash saving of £37.3 million when compared to the previous contributions we
were committed to pay. The previously agreed annual contributions to the
pension schemes, for the years ending in March, were as follows: 2024 - £4.0
million; 2025 - £7.0 million; 2026 -
£8.0 million; 2027 to 2032 - £9.0 million and 2033 - £0.7 million, a total
of £73.7 million.
These deficits are on an actuarial technical provisions basis, which is used
to determine the contributions required and produces different figures from
those included in the balance sheet, which are required to be from applying
IAS 19 and resulted in the £8.4 million asset on the balance sheet in
relation to the pension schemes.
FINANCING
At the year-end Mothercare had total cash of £7.1 million (March 2022: £9.2
million), reflecting ongoing tight control of cash, against the £19.5 million
(March 2022: £19.1 million) of the Group's existing loan facility, which
remained fully drawn across the year.
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.
We have therefore commenced refinancing discussions with our lender to vary,
renegotiate or refinance this debt facility, additionally we are looking at
various financing alternatives (including equity and equity linked structures)
to give us both additional flexibility and reduced cash financing costs. For
the avoidance of doubt the Group does not require (and is not seeking through
this refinancing) additional liquidity.
The first stage of this process was the agreement of the significantly reduced
pension contributions as detailed above. We therefore expect to complete the
refinancing in the near future, to ensure the Group has adequate and
appropriate financing for the future.
OPERATING MODEL
The Group continues to work towards its goal of becoming an asset light
business. We continue to use our tripartite agreement ('TPA') process, whereby
the franchise partners commit to paying the manufacturing partners for the
product when due and in return the manufacturing partners were generally
willing to re- extend credit terms that had sometimes been lost because of the
UK retail administration. The TPA process has resulted in a substantial
reduction in our working capital requirement and has been an instrumental
element of our successful navigation through the impact of COVID-19.
We have subsequently further improved the TPA model whereby the franchise
partner is invoiced directly by the manufacturing partner. This allows the
manufacturing partners the opportunity to obtain credit insurance in relation
to the franchise partners debt, which due to MGB's limited trading history was
sometimes difficult to obtain for invoices raised to MGB. Additionally, this
model removes the Group's exposure to the debt and working capital requirement
for these products. Where this is the case, under IFRS 15 the Group is the
agent in the transaction - previously the Group was the principal. Hence for
these products the creditors and stock will not be recognised by the Group and
whilst the associated revenue and cost of sales will also be excluded there
will be no material impact on the absolute margin earned. The responsibility
for design, quality control and choice of manufacturing partner for these
products, are unchanged and remains with the Group.
For the latest orders for the spring/summer 2024 season, we expect some 70%
(FY22 50%) of the products by value, to be invoiced directly to franchise
partners by our manufacturing partners. We continue to work with our larger
franchise partners to move them to this basis. For some of the smaller
franchise partners we are obtaining bank guarantees or letters of credit to
reduce our debt exposure.
We are also moving more product direct from manufacturing partners to
franchise partners. For spring/summer 2024, we expect 90% (FY22 80%), by
value, to be shipped in this way. The remaining 10% are smaller orders that
cannot be viably shipped direct and they are consolidated on our in our
warehouse in China.
These new ways of working are being accepted by both our franchise and
manufacturing partners as they are beneficial for all. Our franchise partners
have the potential of reduced distribution recharges, shorter delivery times
and improved surety and availability of product. In turn, manufacturing
partners have greater security of payment through credit insurance or simply
dealing directly with some of our well capitalised franchise partners.
ENTERPRISE RESOURCE PLANNING ("ERP") SYSTEM
Despite experiencing further delays, full testing of our new ERP is underway
and the initial feedback is positive though there will inevitably be some
elements that need amending. The full system is expected to be live this
financial year, with the product lifecycle management system having gone live
last May. The contract for the creation of the ERP is on a fixed cost basis so
will not increase, however the costs of our own implementation team, which are
both internal and external continue to be capitalised. Once fully live the
annual IT cost savings resulting from the ERP are still expected to be
approximately £1 million. In addition to our own savings there should be
savings for both out franchise partners in dealing with our business, through
bespoke portals and quicker and easier information flows with increased
integrity and accuracy.
BALANCE SHEET
The balance sheet moved from a net asset position of £1.5 million in prior
year to a net liability position of £1.8 million at the end of the current
year. A decrease in current assets of £3.7 million was offset by a £2.2
million decrease in current liabilities. Intangible assets increased by £2.2
million largely due to acquisitions made for the Group's Enterprise Resource
Planning system. The decrease in the defined benefit pension scheme asset of
£4.0 million, is the main contributor to the overall reduction in net assets
of £3.3 million. The decrease in the scheme assets due to lower than expected
returns was offset by the movement in the scheme liabilities, leading to the
defined benefit pension loss for the year of £4.5 million.
Net current assets
Current assets decreased by £3.7 million to £15.9 million (2022: £19.6
million), driven by lower inventories of £1.2m, trade and other receivables
of £0.9 million and cash and cash equivalents of £2.1 million, partially
offset by a £0.5 million increase in financial and tax assets.
Current liabilities decreased by £2.1 million to £12.0 million (2022: £14.1
million) reflecting a £0.8 million decrease in provisions and a £1.3 million
decrease in trade and other payables.
Net current assets decreased to £3.9 million in the current year from £5.5
million in prior year. The £1.6 million decrease reflecting the reduction in
trading activity around the year end compared to the prior year.
The Group's working capital position is closely monitored, and forecasts
demonstrate the Group is able to meet its debts as they fall due.
26 March 2023 27 March 2022
£ million £ million
Intangible fixed assets 5.8 3.6
Property, plant and equipment 0.2 1.2
Retirement benefit obligations asset/(liability) 8.4 12.4
Net borrowings (excluding IFRS 16 lease liabilities) (12.4) (9.9)
Derivative financial instruments 0.5 0.2
Other net liabilities (4.3) (6.0)
Net assets / (liabilities) (1.8) 1.5
Share capital and premium 198.1 198.1
Reserves (199.9) (241.1)
Total equity (1.8) (43.0)
Pensions
The Mothercare defined benefit pension schemes were closed with effect from 30
March 2013.
The defined benefit scheme surplus decreased by £4.0 million to an asset
position of £8.4 million (2022: 12.4 million). The liabilities reduced from
£383.4m at the end of last year to £269.9 million at the end of the current
year, the liabilities were valued using a discount rate based on corporate
bond yields with an increase in yields placing a lower value on the
liabilities. In addition, the schemes' benefit payments are linked to
inflation, over the year changes in the financial market conditions resulted
in the discount rate increasing by 190 basis points and long term inflation
expectations decreasing by 50 basis points. The assets have reduced from
£395.8 million to £278.3 million due to lower than expected returns over the
year. In combination these movements resulted in a gain on liabilities of
£116.4 million and a loss on assets of £116.9 million since the prior year
end, which coupled with an experience adjustment of £4.0 million resulting
from the high levels of inflation observed since the prior year-end and an
allowance for the difference between the actual and expected inflation seen
since the 31 March 2020 actuarial valuation, the net loss for the year was
£4.5 million.
The Group's deficit payments are calculated using the full triennial actuarial
valuation as the basis rather than the accounting deficit / surplus. The value
of the deficit under the full actuarial valuation at 31 March 2023 was £35.0
million (31 March 2020 £124.6 million).
Details of the income statement net charge, total cash funding and net assets
and liabilities in respect of the defined benefit pension schemes are as
follows:
52 weeks ending 52 weeks ended 52 weeks ended
£ million 30 March 2024* 25 March 2023 26 March 2022
Income statement
Running costs (2.1) (2.1) (1.7)
Net income/ (expense) for return on assets / interest on liabilities 0.5 0.4 (0.5)
Net charge (1.6) (1.7) (2.2)
Cash funding
Regular contributions (1.0) (1.0) (1.0)
Deficit contributions (1.4) (1.2) (4.3)
Total cash funding (2.4) (2.2) (5.3)
Balance sheet**
Fair value of schemes' assets n/a 278.3 395.8
Present value of defined benefit obligations n/a (269.9) (383.4)
Net (liability)/surplus n/a 8.4 12.4
* Forecast
** The forecast fair value of schemes' assets and present value of defined
benefit obligations is dependent upon the movement in external market factors,
which have not been forecast by the Group for 2023 and therefore have not been
disclosed.
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:
2023
2023 Sensitivity
2023 2022 Sensitivity £ million
Discount rate 4.7% 2.8% +/- 0.1% -3.7 /+3.8
Inflation - RPI 3.0% 3.5% +/- 0.1% +2.2 /-2.5
Inflation - CPI 2.3% 2.9% +/- 0.1% +1.2 /-1.3
The Group has a deferred tax liability of £0.4 million (2022: £0.4 million).
Deferred tax assets arising from short term timing differences and losses of
£2.8 million were offset by liabilities arising from accelerated tax
depreciation and tax on the actuarial loss arising from the valuation of the
defined benefit scheme of £3.2 million. The position remains consistent with
prior year.
Net debt
Net debt excluding lease liabilities increased by £2.5 million during the
year to £12.4 million (2022: £9.9 million), due to a net cash outflow of
£1.9 million and a non-cash increase of £0.7 million as well as a £0.1
million decrease resulting from currency translation. Net debt including lease
liabilities was £12.9 million (2022: 11.0 million). The group refinanced its
facility during the year, extending the term to November 2025.
The Group regularly reviews its financing arrangements and remains confident
of its ability to access additional financing successfully when needed. The
Group's amended and extended committed facility will mature in 2025, this
together with its cash and cash equivalents are considered adequate to meet
its projected cash requirements.
Leases
Right-of-use assets of £0.3 million (2022: £0.9 million) and lease
liabilities of £0.5 million (2022: £1.1 million) represented the Group's
head office leases. During the year, the Group terminated the lease on the
ground floor at the head office as the additional space became surplus to its
requirements, this together with the amortisation of right-of-use assets and
rental payments accounts for the decrease year on year. There were no
significant penalties resulting from the termination.
Working capital
Working capital was £3.9 million at year compared with £5.5 million in prior
year, a decrease of £1.6 million. The Group successfully moved certain
franchise partners to direct shipments during the year, thereby reducing the
stock levels to £0.9 million at year end (2022: £2.1 million). Trade
receivables increased to £3.7 million at year end (2022: £3.4 million)
mainly due to timing differences in shipments around the respective year ends.
Trade payables decreased to £4.0 million (2022: £4.7 million) due to similar
reasons.
INCOME STATEMENT
52 weeks to 52 weeks to
26 March 2023 27 March 2022
£million £million
Revenue 73.1 82.5
Adjusted EBITDA (EBITDA before exceptionals) 6.7 12.0
Depreciation and amortisation (note 7) (0.5) (0.9)
Adjusted result before interest and taxation 6.2 11.1
Adjusted net finance costs (2.8) (3.1)
Adjusted result before taxation 3.4 8.0
Adjusted costs (1.2) 3.1
Loss before taxation 2.2 11.1
Taxation (2.3) 1.0
Total profit/(loss) (0.1) 12.1
EPS - basic (0.0)p 1.6p
Adjusted EPS - basic 0.2p 2.1p
Foreign exchange
The main exchange rates used to translate International retail sales are set
out below:
52 weeks ended 52 weeks ended
25 March 2023 26 March 2022
Average:
Euro 1.2 1.2
Qatari riyal 4.4 5.0
Chinese renminbi 8.3 8.8
Kuwaiti dinar 0.4 0.4
Singapore dollar 1.7 1.8
Saudi riyal 4.5 5.1
Emirati dirham 4.4 5.0
Indonesian rupiah 18,160 19,644
Indian rupee 96.7 101.8
Closing:
Euro 1.1 1.2
Qatari riyal 4.4 4.8
Chinese renminbi 8.4 8.4
Kuwaiti dinar 0.4 0.4
Saudi riyal 4.5 4.9
Singapore dollar 1.6 1.8
Emirati dirham 4.5 4.8
Indonesian rupiah 18,730 18,924
Indian rupee 100.5 100.1
The principal currencies that impact the translation of International sales
are shown below. The net effect of currency translation caused worldwide
retail sales and adjusted profit to increase by £23.2 million (2022: £16.4
million decrease) and £1.4 million (2022: £0.9 million loss) respectively as
shown below:
Adjusted
Worldwide sales Profit/(loss)
£ million £ million
Euro 0.0 0.0
Chinese Renminbi 0.5 0.0
Kuwaiti dinar 3.2 0.2
Qatari riyal 1.9 0.1
Saudi riyal 6.2 0.4
Emirati dirham 4.3 0.3
Indonesian rupiah 1.5 0.1
Singapore dollar 1.6 0.1
Indian rupee 1.0 0.1
23.2 1.4
Net finance costs
Financing costs include interest receivable on bank deposits, less interest
payable on borrowing facilities, the amortisation of costs relating to bank
facility fees and the net interest charge on the liabilities/assets of the
pension scheme.
Net finance expense for the year was £3.8 million, an increase of £1.9
million. The prior year net charge included a gain of £1.2 million relating
to options which expired unexercised in March 2022. Interest on the term loan
was £2.9 million in the current year (2022: £2.5 million) the movement
driven by the increase in base rates. Debt servicing payments of £4.0 million
(2022: £3.0 million) are comprised of net interest payments of £2.8 million,
lease payments of £0.3 million and facility costs of £0.9 million.
The net interest income/cost on the defined benefit asset and liability was an
income of £0.4 million in the current year, a swing from the cost of £0.5
million in 2022.
Discontinued operations
There were no discontinued operations presented for the current financial 52
week period ended 25 March 2023. The total statutory loss after tax for the
Group is £0.1 million (2022: £12.1 million profit).
Taxation
The tax charge comprises corporation taxes incurred and a deferred tax charge.
The total tax charge from operations was £2.3 million (2022: £1.0 million
credit) - (see note 9).
Earnings per share
Basic adjusted earnings per share were 0.20 pence (2022: 1.6 pence). Statutory
earnings per share were (0.0) pence (2022: 2.1 pence).
CASHFLOW
Reported net cash generated from operations decreased by £3.8 million to
£4.3 million (2022: 8.1 million). Payables decreased by £1.4 million, due to
the slightly reduced operations and timing, this was offset by a £1.1 million
decrease in inventories and £0.9 million decrease in receivables.
Cash outflow from investing activities of £2.3 million (2022: £2.9 million),
was mainly driven by our
investment in our new Enterprise Resource Planning system of £2.2 million.
Cash outflow from financing activities was £4.0 million (2022: £3.0
million).
Going concern
As stated in the strategic report, the Group's business activities and the
factors likely to affect its future development are set out in the principal
risks and uncertainties section of the Group financial statements. The
financial position of the Group, its cash flows, liquidity position and
borrowing facilities are set out in the financial review.
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.
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.
Treasury policy and financial risk management
The Board approves treasury policies, and senior management directly control
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, however the
main strategy is to effect natural hedges wherever possible.
No speculative use of derivatives, currency or other instruments is permitted.
Foreign currency risk
The group operates internationally and is exposed to foreign exchange rage,
primarily the US dollar. Foreign exchange risk arises from future commercial
transactions and recognized assets and liabilities dominated in a currency
that is not the functional currency of the group which is the pound. All
International sales to franchisees are invoiced in pounds sterling or US
dollars. 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. Under the tripartite agreements, there has been an
increased level of currency matching between purchases and sales, improving
the Group's ability to hedge naturally.
Interest rate risk
The principal interest rate risk of the Group arises in respect of the
drawdown of the £19.5 million term loan which expose the group to cash flow
interest rate risk. Interest is charged at 13% per annum plus SONIA, with
SONIA not less than 1%, plus a 1% per annum compounded payment to be made when
the
loan is repaid, these expose the Group to future cash flow risk. The interest
exposure is monitored by management efforts are being made to find cheaper
sources of finance to mitigate the increasing base rates.
In the comparative period, interest was charged at a fixed rate of 12% plus
SONIA.
Credit risk
Credit risk arises from cash and cash equivalents and credit exposures to
customers including outstanding receivables.
The Group has no significant concentrations of credit risk.
Credit risk is managed on a group basis. For banks and financial institutions,
only independently rated parties with a minimum, rating of 'A' are accepted.
The Group operates effective credit control procedures in order to minimise
exposure to overdue debts. Before accepting any new trade customer, the Group
obtains a credit check from an external agency to assess the credit quality of
the potential customer and then sets credit limits on a customer- by-customer
basis. The group applies the IFRS 9 simplified approach to measuring expected
credit losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses trade receivables have been
grouped based on shared credit risk characteristics and the days past due.
Trade receivables are written off where there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery
include the failure of a debtor to engage in a repayment plan with the group.
Shareholders' funds
Shareholders' funds amount to a deficit of £1.8 million an adverse movement
of £3.3 million from prior year. This was mainly due to the impact of the net
actuarial loss of £3.4 million at year end.
Directors' responsibility statement
The 2023 Annual Report and Accounts which will be issued in September 2023,
contains a responsibility statement which sets out that as at the date of
approval of the Annual Report on 21 September 2023, in the case of each
director in office at the date the directors' report is approved:
· so far as the director is aware, there is no relevant information of which the group's and parent Company's auditors are unaware: and
· they have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit information
and to establish that the group's and parent Company's auditors are aware of
that information.
Consolidated income statement
For the 52 weeks ended 26 March 2023
52 weeks ended 25 March 2023 52 weeks ended 26 March 2022
Before adjusted Adjusted Before adjusted
items items(1) Total items Adjusted items(1) Total
Note £ million £ million £ million £ million £ million £ million
Revenue 3 73.1 - 73.1 82.5 - 82.5
Cost of sales (52.2) - (52.2) (54.9) - (54.9)
Gross profit 20.9 - 20.9 27.6 - 27.6
Administrative expenses (15.5) (0.2) (15.7) (16.0) 1.9 (14.1)
Impairment losses on receivables 0.8 - 0.8 (0.5) - (0.5)
Profit/(loss) from operations 3 6.2 (0.2) 6.0 11.1 1.9 13.0
Finance costs (2.8) (1.0) (3.8) (3.1) 1.2 (1.9)
Profit /(loss) before taxation 3.4 (1.2) 2.2 8.0 3.1 11.1
Taxation 5 (2.3) - (2.3) 1.0 - 1.0
Profit/(loss) for the period 1.1 (1.2) (0.1) 9.0 3.1 12.1
Profit/(loss) for the period attributable to equity holders of 1.1 (1.2) (0.1)
the parent 9.0 3.1 12.1
Profit/(loss) per share
Basic 7 (0.0)p 2.1p
Diluted 7 (0.0)p 2.1p
(1) Includes adjusted costs (property costs, restructuring and
reorganisation costs) and movement on warrant options. Adjusted items are
considered to be one-off or significant in nature and /or value. Excluding
these items from profit metrics provides readers with helpful additional
information on the performance of the business across the periods because it
is consistent with how the business performance is reviewed by the Board.
Consolidated statement of comprehensive income
For the 52 weeks ended 26 March 2023
52 weeks ended 52 weeks ended 27 March
26 March 2022
2023 £ million
£ million
Profit / (loss) for the period (0.1) 12.1
Items that will not be reclassified subsequently to the income statement:
Remeasurement of net defined benefit liability:
Actuarial gain / (loss) on defined benefit pension schemes (4.5) 35.0
Deferred tax relating to items not reclassified 1.1 (3.1)
(3.4) 31.9
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations - -
Deferred tax relating to items reclassified - -
- -
Other comprehensive income / (expense) for the period (3.4) 31.9
Total comprehensive income / (expense) for the period wholly
attributable to equity holders of the parent (3.5) 44.0
Consolidated balance sheet
As at 25 March 2023
25 March 26 March
2023 2022
£ million £ million
Non-current assets
Intangible assets 5.8 3.6
Property, plant and equipment 0.2 0.3
Right-of-use leasehold assets 0.3 0.9
Retirement benefit obligations 8.4 12.4
14.7 17.2
Current assets
Inventories 0.9 2.1
Trade and other receivables 7.2 8.1
Derivative financial instruments 0.5 0.2
0.2 -
Cash and cash equivalents 7.1 9.2
15.9 19.6
Total assets 30.6 36.8
Current liabilities
Trade and other payables (10.8) (12.1)
Lease liabilities (0.3) (0.3)
Provisions (0.9) (1.7)
(12.0) (14.1)
Non-current liabilities
Borrowings (19.5) (19.1)
Lease liabilities (0.2) (0.8)
Provisions (0.3) (0.9)
Deferred tax liability (0.4) (0.4)
(20.4) (21.2)
Total liabilities (32.4) (35.3)
Net assets/(liabilities) (1.8) 1.5
Equity attributable to equity holders of the parent
Share capital 89.3 89.3
Share premium account 108.8 108.8
Own shares (0.2) (1.0)
Translation reserve (3.7) (3.7)
Retained loss (196.0) (236.4)
Total equity (1.8) (43.0)
Consolidated statement of changes in equity
For the 52 weeks ended 26 March 2023
Share premium account
Share capital £ million Own shares Translation Retained earnings Total equity
£ million £ million reserve £ 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)
Share premium account
Share capital £ million Own shares Translation Retained Earnings Total Equity
£ million £ million reserve £ 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
Consolidated cash flow statement
For the 52 weeks ended 25 March 2023
52 weeks ended 52 weeks ended
25 March 26 March
Note 2023 2022
£ million £ million
Net cash flow from operating activities 10 4.3 8.1
Cash flows from investing activities
Purchase of property, plant and equipment (0.1) (0.1)
Purchase of intangibles - software (2.2) (2.8)
Cash used in investing activities (2.3) (2.9)
Cash flows from financing activities
Interest paid (2.8) (2.5)
Lease interest paid (0.1) (0.1)
Repayments of leases (0.2) (0.4)
Drawdown of loan facility (0.9) -
Net cash outflow / (inflow) from financing activities (4.0) (3.0)
Net increase in cash and cash equivalents (2.0) 2.2
Cash and cash equivalents at beginning of period 9.2 6.9
Effect of foreign exchange rate changes (0.1) 0.1
Cash and cash equivalents at end of period 7.1 9.2
Notes
1. General information
The Group's business activities, together with factors likely to affect its
future development, performance and position are set out in the Chairman's
statement, the Chief Executive's review and the Financial review and include a
summary of the Group's financial position, its cash flows and borrowing
facilities and a discussion of why the Directors consider that the going
concern basis is appropriate.
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, this announcement
does not itself contain sufficient information to comply with all the
disclosure requirements of IFRS.
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the 52 week period ended 25 March 2023 or the
52 week period ended 26 March 2022, but it is derived from those accounts.
Statutory accounts for 2022 have been delivered to the Registrar of Companies
and those for 2023 will be delivered in September 2023. The auditor has
reported on the 2023 accounts: their report includes a material uncertainty
over going concern. The 2022 financial statements are available on the Group's
website (www.mothercareplc.com).
2. Accounting Policies and Standards
Going concern
As stated in the strategic report, the Group's business activities and the
factors likely to affect its future development are set out in the principal
risks and uncertainties section of the Group
financial statements. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are set out in the financial
review.
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.
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.
New standards, amendments, IFRIC interpretations and new relevant disclosure
requirements
The following standards and interpretations apply for the first time to
financial reporting periods commencing on or after 1 January 2022. Their
adoption has not had any material impact on the disclosures or on the amounts
reported in these financial statements.
· Annual Improvements to IFRS 2018-2020, effective 1 January 2022;
· Onerous Contracts-Cost of Fulfilling a Contract (Amendments to IAS
37), effective 1 January 2022;
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16), effective 1 January 2022;
· Reference to the Conceptual Framework (Amendments to IFRS 3),
effective 1 January 2022.
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). A full definition is shown in the glossary at the end of
this document.
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 except where expressly stated.
The key APMs that the Group has focused on during the period are as follows:
Group worldwide sales:
Group worldwide sales are total International retail sales. Total Group
revenue is a statutory number and is made up of receipts from International
franchise partners, which includes royalty payments and the cost of goods
dispatched to international franchise partners.
Constant currency sales:
The Group reports some financial measures on both a reported and constant
currency basis. Sales in constant currency exclude the impact of movements in
foreign exchange translation. The constant currency basis retranslates the
previous year revenues at the average actual periodic exchange rates used in
the current financial year. This measure is presented as a means of
eliminating the effects of exchange rate fluctuations on the year on year
reported results.
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. On this basis, the following items were
included within adjusted items for the 52-week period ended 25 March 2023:
• costs associated with restructuring and redundancies;
• movement on embedded derivatives in the shareholder warrants;
• dilapidations costs related to the groups head office
building;
• movement on the expected outcome related to the administration
of Mothercare UK Limited (in administration).
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
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.
Revenues are attributed to countries on the basis of the customer's location.
The largest customer represents approximately 30% (2022: 24%) of Group sales.
52 weeks 52 weeks ended
ended 26 March
25 March 2022
2023 £ million
£ million
Sale of goods to franchise partners 55.2 59.9
Royalties income 17.9 22.6
Total revenue 73.1 82.5
4. Adjusted items
The total adjusted items reported for the 52-week period ended 25 March 2023
is a net loss of £1.2 million (2022: £3.1 million gain). The adjustments
made to reported profit before tax to arrive at adjusted profit are:
52 weeks ended 52 weeks ended
25 March 26 March
2023 2022
£ million £ million
Adjusted costs from continuing operations:
Property related (costs) / income included in administrative expenses (0.2) 0.5
Restructuring and reorganisation (costs) / income included in administrative (0.0) 1.4
expenses
Restructuring (costs) / income included in finance costs (1.0) 1.2
Adjusted items before tax (1.2) 3.1
Property related (costs) / income included in administrative expenses - £
(0.2) million (2022: £0.5 million)
The current year charge represents a true up of the dilapidations provision
for the Group's head office.
The prior year income relates to credits arising from the settlement of a
lease liability relating to a claim on a previous UK retail store.
Restructuring and reorganisation (costs) / income included in administrative
expenses - £(0.0) million (2022: £1.4 million)
The current year charge relates to:
· £(0.3) million redundancy payments made to certain staff during the
year, this was offset by;
· £0.3 million true-up of the financial asset arising on the revolving
capital facility, which was valued at the end of financial year 2022 based on
the information available at the time, whilst assuming the worst-case outcome.
The prior year income included:
· £1.6 million credits arising in relation to the profit on disposal
of Mothercare UK Limited business which went into administration. Of this
£0.8 million relates to the true-up of the financial asset arising on the
revolving capital facility, which was valued at the end of financial year 2022
based on the information available at the time, whilst assuming the worst-case
outcome. The remaining £0.8 million relates to recovery of holding and
handling costs incurred in liquidating stock owned by Mothercare UK Limited,
these costs were expensed in previous years as there was no certainty of
recovery of these.
· £(0.2) million provision to settle a legal claim received against a
subsidiary.
Restructuring (costs) / income included in finance costs - £(1.0) million
(2022: £1.2 million)
The current year charge includes:
· £(0.5) million transaction costs arising from the refinancing that
are not directly attributable to the renegotiation.
· £(0.4) million modification loss due to the group renegotiating its
existing loan facility. The principal amount remained the same under the
revised agreement with the term extended by a year.
· £(0.1) million cost incurred on finance brokers.
The prior year income relates to 15.0 million 12 pence warrants which expired
without the shareholders exercising the warrants.
Net finance costs
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
£ million £ million
Other interest payable and finance charges 4.1 2.5
Net interest expense on liabilities/return on assets on pension - 0.5
Interest on lease liabilities 0.1 0.1
Fair value movement on warrants - (1.2)
Interest payable 4.2 1.9
Net interest income on liabilities/return on assets on pension (0.4) -
Net finance costs/(income) 3.8 1.9
5. Taxation
The charge/(credit) for taxation on profit for the period comprises:
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
£ million £ million
Current tax:
Foreign taxation 1.1 1.7
1.1 1.7
Deferred tax:
Origination and reversal of temporary differences 1.2 (2.7)
Charge/(credit) for taxation on profit for the period 2.3 (1.0)
UK corporation tax is calculated at 19% (2022: 19%) of the estimated
assessable profit for the period. The increase in the corporation tax rate
from 19% to 25% was substantively enacted by the balance sheet date and will
be effective from 1 April 2023. As a result, the relevant deferred tax
balances have been remeasured. Deferred tax balances are expected to unwind
after 1 April 2023. The impact of the change in tax rate has been recognised
in tax expense in profit or loss, except to the extent that it relates to
items previously recognised outside profit or loss.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The charge/ (credit) for the period can be reconciled to the profit for the
period before taxation per the consolidated income statement as follows:
52 weeks ended 52 weeks
25 March ended
2023 26 March
£ million 2022
£ million
Profit for the period before taxation 11.1 (21.4)
Profit for the period before taxation multiplied by the standard rate of
corporation tax in the UK of 19% (2022: 19%)
2.1 (4.1)
Effects of:
Expenses not deductible for tax purposes 0.4 1.2
Income not taxable (0.1) (1.0)
Impact of overseas tax rates - 0.4
Foreign tax credits 0.7 0.2
Deferred tax recognized in other comprehensive income - (3.1)
Remeasurement of deferred tax for changes in tax rates 0.2 0.1
Deferred tax not recognised/written off 0.7 (0.9)
Charge/(credit) for taxation on profit for the period 2.3 (1.0)
6. Dividends
There was no final dividend for the period (2022: £nil) and no interim
dividend was paid during the period (2022: £nil).
7. Earnings per share
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
million million
Weighted average number of shares in issue 563.8 563.8
Dilutive potential ordinary shares - 10.1
Diluted weighted average number of shares 563.8 573.9
Number of shares at period end 563.8 563.8
£ million £ million
(Loss)/profit for basic and diluted earnings per share (0.1) 12.1
Adjusted items (note 4) 1.2 (3.1)
Tax effect of above items - -
Adjusted profit 1.1 9.0
Pence Pence
Basic (losses) / earnings per share (0.0) 2.1
Basic adjusted earnings / (losses) per share 0.2 1.6
Diluted (losses) / earnings per share (0.0) 2.1
Diluted adjusted earnings per share 0.2 1.6
25 March 26 March
Analysis of shares by class 2023 2022
million million
Ordinary shares at period end date 563.8 563.8
Antidilutive/dilutive SAYE options 1.6 3.7
Antidilutive/dilutive LTIP options 6.9 11.3
Total 572.3 578.8
Where there is a loss per share, the calculation has been based on the
weighted average number of shares in issue, as the loss renders all
potentially dilutive shares anti-dilutive.
8. Share Capital and Share Premium
On 12 March 2021, the Group's shares were transferred from the London Stock
Exchange's Main Market to instead be listed on AIM. Following this, on 17
March 2021, the shareholder loans - previously held within borrowings with the
option to convert classified as a financial liability - converted to equity.
The agreements entitled the shareholders to 189,644,132 ordinary 1 pence
shares, giving rise to £1.9 million of share capital, £17.1 million of share
premium and £9.5 million of distributable profits.
9. Notes to the cash flow statement
52 weeks ended 52 weeks ended 26 March
25 March 2022
2023 £ million
£ million
Profit from operations 13.0 (2.4)
Adjustments for:
Depreciation of property, plant and equipment 0.1 0.3
Amortisation of right-of-use assets 0.3 0.3
Amortisation of intangible assets 0.1 0.3
Gain / (loss) on adjusted foreign currency movements 0.1 (0.1)
Equity-settled share-based payments 0.2 0.5
Movement in provisions (1.4) (3.4)
Net gain on financial derivative instruments (0.3) (0.6)
Payments to retirement benefit schemes (2.2) (5.2)
Charge to profit from operations in respect of retirement benefit schemes 2.1 1.7
Operating cash inflow / (outflow) before movement in working capital 5.0 6.8
Decrease in inventories 1.1 3.8
Decrease in receivables 0.9 11.7
Decrease in payables (1.4) (12.9)
Net cash inflow / (outflow) from operating activities 5.6 9.4
Income taxes paid (1.3) (1.3)
Net cash inflow / (outflow) from operating activities 4.3 8.1
Analysis of net debt
Other non-cash movements(1)
26 March Cash flow Foreign exchange £ million 25 March
2022 £ million £ million 2023
£ million £ million
Term loan (19.1) 0.3 - (0.7) (19.5)
Cash at bank 9.2 (2.2) 0.1 - 7.1
IFRS 16 lease liabilities (1.1) (0.3) - 0.9 (0.5)
Net debt (11.0) (2.2) 0.1 0.2 (12.9)
(1 ) Non-cash movements comprise
• Term loan - unwinding of £0.7 million of the facility fee charged
on the term loan and loan modification costs.
• Non-cash movements on IFRS 16 lease liabilities represents the of
interest accrued on lease liabilities and modification of the lease agreement
during the period.
The Group had outstanding borrowings at 25 March 2023 of £19.5 million (2022:
£19.1 million).
In November 2020, the Group drew down on a four-year term loan of £19.5
million (£19.1 million net of prepaid facility fees) with Gordon Brothers.
The loan is secured on the assets and shares of specific Group subsidiaries.
The interest rate payable is 13% per annum plus SONIA, with SONIA not less
than 1%, plus a 1% per annum compounded payment to be made when the loan is
repaid.
The Group also holds a financial asset of £0.5 million (2022: £0.2 million)
reflecting the expected proceeds from the wind-down of the UK operations by
the administrators of Mothercare UK Limited. The total expected repayment due
is £0.5 million (2022: £0.2 million).
10. Events after the balance sheet date
Defined benefit scheme contributions
In the first half of FY24 a full triennial actuarial valuation was performed
and the Trustees of the schemes agreed a further reduction in contributions
after the balance sheet date. Details of these are provided in the financial
review.
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