REG - Mothercare PLC - Interim results announcement
02/12/2024 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20241202:nRSB2770Oa&default-theme=true
RNS Number : 2770O Mothercare PLC 02 December 2024
Mothercare plc
Interim results announcement
Mothercare plc ("Mothercare" "the Company" or "the Group"), the highly trusted
British heritage international brand and franchise operator, that connects
with the parents of newborn babies and children across multiple product
categories, today announces unaudited half year results for the 26-week period
to 28 September 2024 ("H1 FY25"). The comparative period was a 26-week period
to 23 September 2023 ("H1 FY24").
Key Highlights
· Worldwide retail sales by franchise partners of £121.2 million
(2023: £137.2 million), a decrease of 12% on last year (9% down at constant
currency), with the decline largely resulting from the unchanged conditions in
our Middle Eastern markets.
· Adjusted EBITDA of £1.7 million (H1 FY24: £3.6 million) decreased
by 53%.
· Group adjusted profit from operations decreased by 68% to £1.1
million (H1 FY24: £3.4 million).
· Group adjusted loss before taxation of £1.4 million (H1 FY24: £1.8
million profit).
· Net debt increased to £17.1 million (£15.8 million at 23 September
2023).
· Following the Joint venture deal and refinancing announced on 17
October 2024, the term loan of £19.9 million included in the above net debt
figure, was reduced to £8.0 million.
Our Group
26 weeks to 26 weeks to 26 weeks to 26 weeks to
28 Sep 2024 23 Sep 2023 24 Sep 2022 25 Sep 2021
Turnover £m 21.0 29.0 38.5 41.7
Adjusted EBITDA(2 ) £m 1.7 3.6 3.2 5.6
Adjusted profit from operations (2 ) £m 1.1 3.4 2.9 5.2
Adjusted (loss)/profit before taxation(2 ) £m (1.4) 1.8 1.7 3.6
(Loss)/profit for the period £m (1.8) 1.7 0.4 3.6
Adjusted basic (loss)/earnings per share(2 ) (0.3)p 0.2p 0.2p 0.9p
Basic (loss)/ earnings per share (0.3)p 0.3p 0.1p 1.0p
Our Franchise partners
26 weeks to 26 weeks to 26 weeks to 26 weeks to
28 Sep 2024 23 Sep 2023 24 Sep 2022 25 Sep 2021
Worldwide retail sales(1) £m 121.2 137.2 162.1 184.3
Online retail sales £m 12.2 13.7 13.1 17.6
Total number of stores 440 500 562 740
Space (k) sq. ft. 1,100 1,201 1,345 1,967
Clive Whiley, Chairman of Mothercare plc, commented:
"Since the half-year end we announced both a new £30 million joint venture
for the South Asian region, with Reliance Brands Holding UK Limited
("Reliance") and subsequent revised financing arrangements, reducing secured
debt facilities by 60% to £8 million and our annualised cash interest cost by
over 75%.
We have immediately utilised this new India joint venture and refinancing as a
springboard for a de-leveraged Mothercare to explore the full bandwidth of
growth opportunities through connections with other businesses, the
development of our branded product ranges and licensing within and beyond our
existing perimeters.
Our results continue to reflect the impact of the continuing uncertainty on
our franchise partners' operations in the Middle East. We are now focused upon
restoring critical mass alongside delivering our remaining core objectives.
This is an exciting prospect for all our partners, colleagues and stakeholders
as we can finally leave behind the turmoil of recent years that Mothercare has
successfully come through."
Investor and analyst enquiries to:
Mothercare plc
Email: investorrelations@mothercare.com
(mailto:investorrelations@mothercare.com)
Clive Whiley, Chairman
Andrew Cook, Chief Financial
Officer
Deutsche Numis
Tel: 020
7260 1000
(NOMAD & Joint Corporate Broker)
Luke Bordewich
Cavendish Capital Markets Limited
Tel: 020 7220 0500
(Joint Corporate
Broker)
Carl Holmes
Media enquiries to:
MHP
Email: mothercare@mhpc.com
Rachel Farrington
Tel: 07801 894577
Tim Rowntree
Notes
1 - Worldwide retail sales are total international retail franchise partner
sales to end customers (which are estimated and unaudited).
2 - Adjusted profit after taxation is stated before the impact of the
adjusting items set out in note 4.
3 - Net debt is defined as total borrowings, cash at bank and IFRS 16 lease
liabilities.
4 - This announcement contains certain forward-looking statements concerning
the Group. Although the Board believes its expectations are based on
reasonable assumptions, the matters to which such statements refer may be
influenced by factors that could cause actual outcomes and results to be
materially different. The forward-looking statements speak only as at the date
of this document and the Group does not undertake any obligation to announce
any revisions to such statements, except as required by law or by any
appropriate regulatory authority.
5 - The information contained within this announcement is deemed by the
Company to constitute inside information for the purposes of the Market Abuse
Regulation (EU) No 596/2014. Upon the publication of this announcement via a
Regulatory Information Service, this inside information is now considered to
be in the public domain.
6 - The person responsible for the release of this announcement is Lynne
Medini, Group Company Secretary at Mothercare plc, Westside 1, London Road,
Hemel Hempstead, HP3 9TD.
7 - Mothercare plc's Legal Entity Identifier ("LEI") number is
213800ZL6RPV9Z9GFO74.
Chairman's statement
Core Objectives
As detailed in our Full Year 2024 results statement, our principal focus since
my appointment has been to protect the underlying Mothercare brand
intellectual property value for the benefit of all stakeholders.
The new joint venture for the South Asian region and coterminous refinancing,
detailed below, will further reduce the combined business and pension schemes
financing requirement and introduces significantly reduced cash financing
charges.
In addition, this establishes a platform for step-change growth as we strive
to sponsor growth in our franchise partners' retail sales and store footprint
alongside exploring new territories and additional routes to market.
Trading Update
As also noted in the Full Year 2024 results statement, our worldwide retail
sales by franchise partners of £121.2 million (2024: £137.2 million) were
again impacted by a combination of the continuing uncertainty in the Middle
East and the ongoing need for franchise partners to clear old inventory.
Online retail sales for the period remained at 10% of total retail sales (H1
FY24: 10%). The year-on-year decline in retail sales of 12% reduces to 9% at
constant currency exchange rates.
Performance in our Middle Eastern region, especially in our largest single
market, remains challenging where the shape of our partner's retail offering
in the country continues to adapt to address evolving consumer behaviour,
pursuant to ongoing fiscal and legislative changes.
Adjusted EBITDA for the period decreased to £1.7 million (2024: £3.6
million) leading to an adjusted loss before taxation of £1.4 million (2024:
£1.8 million adjusted profit before taxation) principally due to high net
financing costs in the period, which have since been significantly reduced for
future periods.
Joint Venture and Refinancing
On 17 October we announced a joint venture with an entry valuation of c£30
million for the South Asian region with Reliance Brands Ltd ("Reliance"), a
wholly owned subsidiary of Reliance Industries Ltd, a Fortune 500 company and
the largest private sector corporation in India.
The Company received gross consideration of £16 million on completion of
these new arrangements and secured reduced debt facilities of £8 million with
GB Europe Management Services Ltd ("Gordon Brothers"), in one step:
• demonstrating the inherent value of the Mothercare brand,
• creating an invigorated partnership in the South Asian region with
Reliance, one of the world's largest, leading and respected business groups
which will bring symbiotic and synergistic benefits; and
• de-leveraging the business to finally move forward and invest
appropriately in the Company's future development.
New South Asian Joint Venture Arrangements
Mothercare and Reliance created a new joint venture covering Mothercare's
franchise operations in India, Nepal, Sri Lanka, Bhutan and Bangladesh,
replacing the previous franchise arrangement with Reliance covering India
alone.
Under the terms of these arrangements, Reliance paid £16 million to acquire a
51% interest in a new joint venture company, JVCO 2024 Ltd ("JVCo"). We retain
a residual 49% shareholding in JVCo and granted JVCo perpetual rights for the
use of the Mothercare brand and related intellectual property in India, Nepal,
Sri Lanka, Bhutan and Bangladesh.
For the financial year ended 30 March 2024, our retail sales in India under
the previous franchise arrangements amounted to approximately £24 million and
contributed approximately £0.9 million to adjusted EBITDA. Whilst we will
receive revenues at lower rates than previously, we expect the reinvigorated
business to grow strongly and surpass previous revenue levels over the next
few years. We also expect to benefit from both sourcing fees (supplying the
joint venture with product) together with the value creation accruing to our
residual 49% equity stake in JVCo.
New Financing Arrangements with Gordon Brothers
We applied part of the proceeds received from Reliance towards a refinancing
of the Company's existing debt facilities with Gordon Brothers, replacing the
previous £19.5m term loan (which attracted interest at a rate of 13% per
annum, plus SONIA, plus PIK interest of 1% per annum) with:
• an £8m two year term loan facility, attracting interest at a rate
of 4.8% per annum, plus SONIA (with a floor of 5.2%), plus PIK interest of 1%
per annum, rising to 2% per annum through the term of the loan; and
• granted Gordon Brothers warrants to subscribe up to 43.4m new
ordinary shares at a subscription price of 8.5p per share (the "Warrants"),
exercisable for five years from the date of issue, representing approximately
7% of the Company's issued share capital (following exercise in full of the
Warrants).
Financial impact
We estimate that the restructuring of our operations in South Asia and the
associated sale of this 51% stake in JVCo, will result in a taxable gain
arising of approximately £29 million and - after the use of certain
preexisting tax losses - a cash tax cost of approximately £3 million.
Pension Schemes
We continue to operate in accordance with the revised recovery plan, agreed
with the Trustees last year, which includes total contributions (Deficit
Repair Contributions plus costs) in the financial years to 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 £6.0 million and
March 2033 £0.5 million aggregating to fully fund the deficit by March 2033.
We also continue to explore other options to mitigate the pension scheme
deficit.
Growth Opportunities
We intend to utilise the new South Asian region joint venture and coterminous
refinancing as a catalyst to redouble our efforts to capitalise upon the
possibilities to grow the future global presence of the Mothercare brand:
through connections with other businesses, the development of our branded
product ranges and licensing within and beyond our existing perimeters .
Management & Board changes
On the creation of the new South Asian joint venture and coterminous
refinancing, Mark Newton Jones indicated his intention to stand down from the
Board at the AGM held last month. I would like to thank Mark, both personally
and on behalf of the Board for his efforts since my appointment and we wish
him well with his future endeavours.
The day-to-day management of the Group continues to be run by the Chief
Financial Officer and the Operating Board, with oversight from me as Chairman.
We also anticipate the search for a new Chief Executive Officer to be
fulfilled as a natural consequence of the multiple strategic discussions
currently in train.
Outlook
Our core objectives over recent years were designed to protect and rebalance
the Mothercare brand IP value in a way that also promotes growth in our
royalty income: ultimately improving profitability and the covenant of the
underlying business, with benefits for both the actuarial pension deficit
and stock market rating purposes alike.
At a stroke the new South Asian joint venture underlines the inherent strength
of the business's brand, coterminously supporting a material de-leveraging of
the balance sheet and allows us to wholly focus upon restoring critical mass.
Indeed, we approach 2025 and beyond with a renewed and growing sense of
confidence given the multiple opportunities ahead, notwithstanding our ongoing
cautious shorter-term outlook, due to the continuing challenges facing our
Middle East operations.
None of this would have been possible without the continuing support from our
Mothercare colleagues, manufacturing & franchise partners, pension scheme
trustees and financial stakeholders alike, to whom we remain grateful.
Clive Whiley
Chairman
Condensed consolidated income statement
For the 26 weeks ended 28 September 2024
26 weeks ended 28 September 2024 26 weeks ended 23 September 2023 53 weeks ended
(Unaudited) (Unaudited) 30 March 2024
(Audited)
Before adjusted items Adjusted items(1) Total Before adjusted items Adjusted items (1) Total Total
£ million £ million
Note £ million £ million
£ million £ million £ million
Revenue 21.0 - 21.0 29.0 - 29.0 56.2
Cost of sales (13.0) - (13.0) (19.0) - (19.0) (36.6)
Gross profit 8.0 - 8.0 10.0 - 10.0 19.6
Administrative expenses (6.9) (0.4) (7.3) (6.6) 0.2 (6.4) (13.3)
Impairment losses on receivables - - - - - - 0.4
Profit from operations 1.1 (0.4) 0.7 3.4 0.2 3.6 6.7
Net finance costs 5 (2.5) - (2.5) (1.6) - (1.6) (3.8)
(Loss)/profit before taxation (1.4) (0.4) (1.8) 1.8 0.2 2.0 2.9
Taxation 6 (0.0) - (0.0) (0.3) - (0.3) 0.4
(Loss)/profit for the period (1.4) (0.4) (1.8) 1.5 0.2 1.7 3.3
(Loss)/profit for the period attributable to equity holders of the parent
(1.4) (0.4) (1.8) 1.5 0.2 1.7 3.3
Earnings per share
Basic 7 (0.3)p (0.3)p 0.3p 0.3p 0.6p
Diluted 7 (0.3 p (0.3)p 0.3p 0. p 0.6p
(1) Includes adjusted costs ( restructuring and reorganisation
costs). Adjusted items are one-off or significant in nature and or /value.
Excluding these items from the profit metrics provides readers with helpful
additional information on the performance of the business across the periods
because it is consistent with how business performance is reviewed by the
Board and Operating Board.
Condensed consolidated statement of comprehensive income
For the 26 weeks ended 28 September 2024
26 weeks ended 26 weeks ended 53 weeks ended
28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
(Loss)/profit for the period (1.8) 1.7 3.3
Items that will not be reclassified subsequently to the income statement:
Actuarial gain/(loss) on defined benefit pension schemes
3.8 (16.3) (33.8)
Deferred tax relating to items not reclassified (1.0) 3.1 2.0
2.8 (13.2) (31.8)
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations - (0.1) -
Other comprehensive income/(expense) for the period 2.8 (13.3) (31.8)
Total comprehensive income/(expense) for the period wholly attributable to
equity holders of the parent
1.0 (11.6) (28.5)
Condensed consolidated balance sheet
As at 28 September 2024
28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
Note £ million £ million £ million
Non-current assets
Intangible assets 8 8.4 6.8 7.9
Property, plant and equipment 8 0.2 0.2 0.2
Right-of-use assets - 0.2 0.1
Deferred tax assets 3.5 2.7 3.4
12.1 9.9 11.6
Current assets
Inventories 0.7 0.7 0.6
Trade and other receivables 6.1 5.1 4.3
Derivative financial instruments 11 0.5 0.5 0.7
Current tax asset - 0.5 0.2
Cash and cash equivalents 2.8 4.2 5.0
10.1 11.0 10.8
Total assets 20.2 20.9 22.4
Current liabilities
Trade and other payables (9.5) (7.5) (8.1)
Lease liabilities - (0.4) (0.2)
Provisions (0.1) (0.7) (0.3)
Current tax liabilities (0.1) - -
Borrowings 9 (19.9) - (19.7)
(29.6) (8.6) (28.3)
Non-current liabilities
Borrowings 9 - (19.6) -
Lease liabilities - - -
Retirement benefit obligations 10 (20.6) (6.0) (24.2)
Deferred tax liabilities (1.0) - -
(21.6) (25.6) (24.2)
Total liabilities (51.2) (34.2) (52.5)
Net liabilities (29.0) (13.3) (30.1)
Equity attributable to equity holders of the parent
Share capital 89.3 89.3 89.3
Share premium account 108.8 108.8 108.8
Own shares (0.2) (0.2) (0.2)
Translation reserve (3.7) (3.8) (3.7)
Retained deficit (223.2) (207.4) (224.3)
Total equity (29.0) (13.3) (30.1)
Condensed consolidated statement of changes in equity
For the 26 weeks ended 28 September 2024 (unaudited)
Share capital Share premium account Own shares Translation reserve Retained Total equity
deficit
£ million £ million £ million £ million £ million £ million
Balance as at 30 March 2024 89.3 108.8 (0.2) (3.7) (224.3) (30.1)
Loss for the period - - - - (1.8) (1.8)
Other comprehensive income for the period - - - - 2.8 2.8
Total comprehensive income for the period 1.0 1.0
- - - -
Adjustments to equity for equity-settled share-based payments - 0.1 0.1
- - -
Balance at 28 September 2024 89.3 108.8 (0.2) (3.7) (223.2) (29.0)
For the 26 weeks ended 23 September 2023 (unaudited)
Share capital Share premium account Own Translation reserve Retained Total equity
shares deficit
£ million £ million £ million £ million £ million £ million
Balance as at 25 March 2023 89.3 108.8 (0.2) (3.7) (196.0) (1.8)
Profit for the period - - - - 1.7 1.7
Other comprehensive expense for the period - - - (0.1) (13.2) (13.3)
Total comprehensive expense for the period (0.1) (11.5) (11.6)
- - -
Adjustments to equity for equity-settled share-based payments - 0.1 0.1
- - -
Balance at 23 September 2023 89.3 108.8 (0.2) (3.8) (207.4) (13.3)
For the 53 weeks ended 30 March 2024 (audited)
Share capital Share premium account Own Translation reserve Retained Total equity
shares deficit
£ million £ million £ million £ million £ million £ million
Balance at 25 March 2023 89.3 108.8 (0.2) (3.7) (196.0) (1.8)
Items that will not be reclassified subsequently to the
income statement - - - - (31.8) (31.8)
Other comprehensive expense - - - - (31.8) (31.8)
Profit for the period - - - - 3.3 3.3
Total comprehensive expense - - - - (28.5) (28.5)
Adjustment to equity for equity-settled share-based payments
- - - - 0.2 0.2
Balance at 30 March 2024 89.3 108.8 (0.2) (3.7) (224.3) (30.1)
Condensed consolidated cash flow statement
For the 26 weeks ended 28 September 2024
26 weeks ended 26 weeks ended 53 weeks ended
Note 28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Net cash flow from operating activities 13 0.0 (0.3) 4.8
Cash flows from investing activities
Purchase of property, plant and equipment - (0.1) (0.1)
Purchase of intangibles - software (0.8) (0.6) (2.2)
Cash used in investing activities (0.8) (0.7) (2.3)
Cash flows from financing activities
Proceeds from post administration distribution 0.2 - -
Interest paid (1.5) (1.7) (4.2)
Repayments of obligations under leases (0.2) (0.2) (0.3)
Net cash outflow from financing activities (1.5) (1.9) (4.5)
Net decrease in cash and cash equivalents (2.3) (2.9) (2.0)
Cash and cash equivalents at beginning of period 5.0 7.1 7.1
Effect of foreign exchange rate changes 0.1 - (0.1)
Cash and cash equivalents at end of period 2.8 4.2 5.0
Notes to the condensed consolidated financial statements
1 General information
The review of the Group's business activities, together with factors likely to
affect its future development, performance and position are set out in the
Financial Highlights and Chairman's Statement.
The results for the 26 weeks ended 28 September 2024 are unaudited.
These unaudited condensed consolidated interim financial statements for the
current period and prior financial periods do not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. A copy of the
statutory accounts for the 2024 financial year has been filed with the
Registrar of Companies. The 2024 financial statements are available on the
Group's website (www.mothercareplc.com
(https://protect.checkpoint.com/v2/___http:/www.mothercareplc.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo0OWU3YzhiYjVlMzc0NmUwNGU2NmZmYzM2NDY0NzMyMzo2OmUyNzA6YWZmNjYwMjc0OWJmZGFkZWNmZDFkNTZhMjUyYjkwY2NiZDU2NjIxNmM1ZjE2NjI3Mjg0ZmE3MjQ0YjdlM2IwNzpwOkY6Tg)
). The auditor has reported on these: their report was unqualified.
2 Accounting Policies and Standards
Basis of preparation
These unaudited condensed consolidated interim financial statements have been
prepared in accordance with the Disclosure and Transparency Rules of the UK
Financial Conduct Authority, and with IAS 34 'Interim Financial Reporting'.
Unless otherwise stated, the accounting policies applied, and the judgements,
estimates and assumptions made in applying these policies, are consistent with
those described in the Annual Report and Financial Statements 2024. The
financial period represents the 26 weeks ended 28 September 2024. The
comparative periods are the 26 weeks ended 23 September 2023 and the 53 weeks
ended 30 March 2024.
Going concern
Since the balance sheet date the IP rights for the Mothercare brand for India,
Bhutan, Bangladesh, Sri Lanka and Nepal were transferred to JVCO 2024 Ltd,
which was a wholly owned subsidiary of the Group, at a value of £33.3
million. On 17 October, in return for a 51% equity interest in JVCO 2024,
together with some royalty concessions, the Group received a gross
consideration of £16.0 million, from Reliance, our current franchise partner
in India.
From these proceeds Mothercare repaid £11.5 million of its existing loan
facility, reducing the principal liability to £8 million and at the same time
revised the terms of facility including reducing the interest charged from13%
per annum plus SONIA plus an additional 1% per annum payment-in-kind coupon to
4.8% per annum plus SONIA (with SONIA at a floor of 5.2%) plus a 1% per annum
payment-in-kind coupon for the first 12 months, rising to 1.5% per annum for
the 13 to 18 months and then 2% per annum thereafter percentage and revising
the financial covenants.
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, the recent reduction in debt and interest charges 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
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
Going concern (continued)
The Sensitised scenario assumes the following additional key assumption:
• A significant reduction in global retail sales, which may result from
subdued, consumer confidence or disposable income or through store closures or
weaker trading in our markets, throughout the remainder of FY25 and FY26.
The Board's confidence in the Group's Base Case forecast, which indicates that
the Group will operate with sufficient cash balances and within the financial
covenants of the loan facility, following the recent reduction and revision of
this facility and the Group's proven cash management capability, supports our
preparation of the financial statements on a going concern basis.
However, as described in the Chairman's statement, worldwide retails continue
to be impacted by a combination of the continuing uncertainty in the Middle
East and the ongoing need for franchise partners to clear old inventory. If
trading conditions were to deteriorate beyond the level of risk applied in the
sensitised forecast owing to ongoing geopolitical tensions, other global
downturn in trade or low consumer demand, the Group may need to renegotiate
with its lender in order to secure waivers to potential covenant breaches or
have access to additional funding to continue its trading activities. Whilst
the directors believe that the post year end deal with Reliance, as described
above, has now put the Group in a stronger position, it is acknowledged that,
in view of the above, there remains a material uncertainty which may cast
significant doubt about the Group's ability to continue as a going concern.
The financial statements do not include any adjustments that would result if
the Group was unable to continue as a going concern.
Adoption of new IFRSs
A number of new or amended standards became applicable for the current
reporting period. The Group did not have to change its accounting policies or
make retrospective adjustments as a result of adopting these standards.
Standards issued but not yet effective
In August 2023, the IASB amended IAS 21 to help entities to determine whether
a currency is exchangeable into another currency, and which spot exchange rate
to use when it is not. These new requirements will apply for annual reporting
periods beginning on or after 1 January 2025. The Group does not expect these
amendments to have a material impact on its operations or financial
statements.
Foreign currency adjustments
Foreign currency monetary assets and liabilities are revalued to the closing
balance sheet rate under IAS21 "The Effects of Changes in Foreign Exchange
Rates".
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
Taxation
The taxation charge for the 26 week period is calculated by applying the best
estimate of the average annual effective tax rate expected for the full year
to the profit/loss for the period after adjusting for any significant one-off
items, and a tax credit is recognised only to the extent that the resulting
tax asset is more than likely not to reverse.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due.
For defined benefit schemes, the cost of providing benefits is determined
using the Projected Unit Credit Method, with actuarial valuations being
carried out at each balance sheet date. Actuarial gains and losses are
recognised in full in the period in which they occur. They are recognised
outside of the income statement and presented in other comprehensive income.
Past service cost is recognised immediately to the extent that the benefits
are already vested.
The retirement benefit obligation recognised in the balance sheet represents
the present value of the defined benefit obligation less the fair value of
scheme assets. Any asset resulting from this calculation is limited to past
service cost, plus the present value of available refunds.
The Group has an unconditional right to a refund of surplus under the rules.
In consultation with the independent actuaries to the schemes, the valuation
of the pension obligation has been updated to reflect: current market discount
rates; current market values of investments and actual investment returns; and
also for any other events that would significantly affect the pension
liabilities. The impact of these changes in assumptions and events has been
estimated in arriving at the valuation of the pension obligation.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors have adopted various
APMs of historical or future financial performance, position or cash flows
other than those defined or specified under International Financial Reporting
Standards (IFRS).
These measures are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including those in the Group's
industry.
APMs should be considered in addition to, and are not intended to be a
substitute for, or superior to, IFRS measures.
Purpose
The Directors believe that these APMs assist in providing additional useful
information on the performance and position of the Group because they are
consistent with how business performance is reported to the Board and
Operating Board.
APMs are also used to enhance the comparability of information between
reporting periods and geographical units (such as like-for-like sales), by
adjusting for non-recurring or uncontrollable factors which affect IFRS
measures, to aid the user in understanding the Group's performance.
Consequently, APMs are used by the Directors and management for performance
analysis, planning, reporting and incentive setting purposes and have remained
consistent with prior year.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
The key APMs that the Group has focused on during the period are as follows:
Group worldwide sales
Group worldwide sales are total international retail sales from our franchise
partners. Total Group revenue is a statutory number and is made up of total
receipts from our franchise partners, which includes royalty payments, and the
cost of goods dispatched to international franchise partners.
Profit/(loss) before adjusted items
The Group's policy is to exclude items that are considered to be significant
in both nature and/or quantum and where treatment as an adjusted item provides
stakeholders with additional useful
information to assess the year-on-year trading performance of the Group.
3 Segmental information
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reported to the
Group's executive decision makers (comprising the executive directors and
operating board) in order to allocate resources to the segments and assess
their performance. Under IFRS 8, the Group has not identified that its
continuing operations represent more than one operating segment.
The results of franchise partners are not reported separately, nor are
resources allocated on a franchise partner by franchise partner basis, and
therefore have not been identified to constitute separate operating segments.
Notes to the condensed consolidated financial statements
4 Adjusted items
Due to their significance or one-off nature, certain items have been
classified as adjusted items as follows:
26 weeks ended 26 weeks ended 53 weeks ended
28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Adjusted (costs)/income:
Restructuring (costs)/income included in finance costs - - (0.4)
Restructuring (costs)/income included in administrative expenses (0.4) 0.2 0.2
Adjusted items before tax (0.4) 0.2 (0.2)
Restructuring (costs)/income included in administrative expenses - (£0.4)
million (H1 FY24: £0.2 million income)
The current year costs relates to:
• £0.2 million redundancy payments made to certain staff during the
period.
• £0.1 million costs relating to decommissioning of old IT systems.
• £0.1 million costs arising from technical challenges relating to the
new IT system.
The prior year income relates to £0.4 million credits arising in relation to
the profit on disposal of Mothercare UK Limited business which went into
administration, this was offset by £0.2m of severance payments made.
5 Net finance costs
26 weeks ended 26 weeks ended 53 weeks ended
28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Interest expense on lease liabilities - 0.1 0.1
Other net interest 1.9 1.8 4.1
Interest payable 1.9 1.9 4.2
Net interest expense/(income) on liabilities/return on assets on pension 0.6 (0.3) (0.4)
Net finance costs 2.5 1.6 3.8
Notes to the condensed consolidated financial statements
6 Taxation
26 weeks ended 26 weeks ended 53 weeks ended
28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Current tax - Overseas tax and UK corporation tax 0.0 0.3 1.5
Deferred tax - UK tax charge for temporary differences - - (1.9)
Total tax charge/(credit) 0.0 0.3 (0.4)
In addition to the amount charged to the income statement, deferred tax charge
relating to retirement benefit obligations amounting to £1.0 million has been
charged directly to other comprehensive income (H1 FY24: £3.1 million
credit).
7 (Loss)/earnings per share
26 weeks ended 26 weeks ended 53 weeks ended
28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
million million million
Weighted average number of shares in issue for the purpose of basic earnings
per share
563.8 563.8 563.8
Dilutive potential ordinary shares - 6.9 7.7
Weighted average number of shares in issue for the purpose of diluted earnings
per share
563.8 570.7 571.5
£ million £ million £ million
(Loss)/profit for basic and diluted earnings per share (1.8) 1.7 3.3
Adjusted items (0.4) 0.2 (0.2)
Tax effect of adjusted items - - -
Adjusted (loss)/earnings (1.4) 1.5 3.5
£ million £ million £ million
Pence Pence Pence
Basic (loss)/earnings per share (0.3) 0.3 0.6
Basic adjusted (loss)/ earnings per share (0.3) 0.3 0.6
Diluted (loss)/earnings per share (0.3) 0.3 0.6
Diluted adjusted (loss)/earnings per share (0.3) 0.3 0.6
The total dividend for the period is nil pence per share (H1 FY24: nil pence
per share).
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
Notes to the condensed consolidated financial statements
8 Tangible fixed assets and Software assets
There were no additions to Right-of-use assets in the period.
Capital additions of £0.8 million were made during the period (H1 FY24: £1.1
million). These comprised tangible fixed assets of £Nil (H1 FY24: £0.1
million) and software assets of £0.8 million (H1 FY24: £1.0 million).
9 Borrowings
The carrying value of the Group's outstanding borrowings at 23 September 2023
was £19.9 million (30 March 2024: £19.7 million). The Group is
required to achieve certain royalty targets under its covenants. At 28
September 2024 the loan was repayable on demand due to breaches in certain
loan covenants. The loan has been refinanced after the period end, refer to
note 15 for further details.
The credit facility of £19.9 million (30 March 2024: £19.7 million) is
secured on the shares of specified obligor subsidiaries and the assets of the
Group not already pledged. The Group also holds a financial asset of
£0.5 million (30 March 2024: £0.7 million) reflecting the expected
proceeds from the wind-down of the UK operations by the administrators of
Mothercare UK Ltd and Mothercare Business Services Limited.
10 Retirement benefit schemes
The Group has calculated the value of its pension liability under IAS 19 as at
28 September 2024. The FY24 year end assumptions have been rolled forward and
updated for changes in market rates over the current interim period.
For the two schemes, based on the actuarial assumptions from the actuarial
valuations carried out as of March 2024 and using the rolled forward
assumptions referred to above, a net obligation of £20.6 million (H1 FY24:
£6.0 million) has been recognised. The increase in the liability position was
mainly due to returns on the assets being lower than expected resulting in an
asset experience loss.
11 Financial instruments: fair value disclosures
The Group held the following financial instruments at fair value at 28
September 2024.
Fair value measurements at 28 September 2024 Fair value measurements at 23 September 2023 Fair value measurements at 30 March 2024
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Current financial assets:
Derivative financial instruments:
Financial asset 0.5 0.5 0.7
0.5 0.5 0.7
Notes to the condensed consolidated financial statements
11 Financial instruments: fair value disclosures (continued)
The Group's financial asset (Level 3 within the IFRS 7 hierarchy) represents a
right, arising under the sales purchase agreement with the administrators of
MUK, to receive the proceeds of the wind-up of the UK retail store estate and
website operations as repayment for the Group's secured borrowings. It has
been estimated by the administrators that the Group will receive £0.5 million
(H1 FY24: £0.5 million). Many of the outflows which would impact the
valuation of this financial asset are finalised, with the final repayment
being dependent on the amounts to be received back by the merchant acquirer
and final settlement of VAT.
The Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
are approximately equal to their fair values.
12 Share-based payments
A charge is recognised for share-based payments based on the fair value of the
awards at the date of grant, the estimated number of shares that will vest and
the vesting period of each award. The total net charge for share-based
payments under IFRS 2 is £0.1 million (H1 FY24: £0.1 million).
13 Notes to the cash flow statement
26 weeks ended 26 weeks ended 53 weeks ended
28 September 2024 23 September 2023 30 March 2024
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
(Loss)/profit from operations 0.7 3.6 6.7
Adjustments for:
Depreciation of property, plant and equipment and right of use assets 0.1 0.1 0.1
Amortisation of intangible assets 0.5 0.1 0.3
(Loss)/gain on non-cash foreign currency adjustments (0.1) (0.1) 0.2
Share-based payments 0.1 0.1 0.2
Movement in provisions (0.2) (0.5) (0.8)
Net gain on financial derivative instruments - - (0.2)
Payments to retirement benefit schemes (1.1) (2.4) (2.4)
Charge in respect of retirement benefit schemes 0.7 0.7 1.7
Operating cash flow before movement in working capital 0.7 1.6 5.8
Decrease in inventories 0.3 0.7 0.3
(Increase)/decrease in receivables (1.9) 1.5 2.4
(Increase)/decrease in payables 1.0 (3.7) (2.5)
Cash generated from operations 0.1 0.1 6.0
Income taxes paid (0.1) (0.4) (1.2)
Net cash flow from operating - (0.3) 4.8
activities
Analysis of net debt
Foreign exchange
30 March Non-cash movements 28 September
2024 Cash flow 2024
£ million £ million £ million £ million £ million
Cash and cash equivalents 5.0 (2.3) - 0.1 2.8
IFRS 16 lease liabilities (0.2) 0.2 - - -
Term loan (19.7) - - (0.2) (19.9)
Net debt (14.9) (2.1) - (0.1) (17.1)
Notes to the condensed consolidated financial statements
14 Related party transactions
Transactions between the Group and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. There was no revenue earned from related parties in the current or prior
year.
15 Events after the balance sheet date
The IP rights for the Mothercare brand for India, Bhutan, Bangladesh, Sri
Lanka and Nepal were transferred to JVCO 2024 Ltd, which was a wholly owned
subsidiary of the Group, at a value of £33.3 million. On 17 October, in
return for a 51% equity interest in JVCO 2024, together with some royalty
concessions, the Group received a gross consideration of £16.0 million, from
Reliance, our current franchise partner in India.
From these proceeds Mothercare repaid £11.5 million of its existing loan
facility, reducing the principal liability to £8 million and at the same time
revised the terms of facility including reducing the annual interest
percentage and revising the financial covenants. As part of the revision of
the loan facility, our lender, Gordon Brothers were granted new warrants to
subscribe up to 43.4m new ordinary shares of Mothercare at a subscription
price of 8.5p per share (the "Warrants"). These Warrants, which are
exercisable for 5 years from the date of issue, contain certain anti-dilution
rights which will operate so as to secure for Gordon Brothers the right to
subscribe for an aggregate equity interest representing approximately 7% of
the Company's issued share capital (following exercise in full of the
Warrants).
Additional Disclosures
Risk management framework
A risk management framework is in place which is appropriate for the size and
complexity of the business with consideration to its AIM listing, future
partner and system developments and Brand promotion and evolution.
MGB maintains its risk management function in line with the Quoted Companies
Alliance Corporate Governance Code (QCA Code) complying with AIM Rule 26. The
Audit & Risk Committee provides oversight, as to the overall suitability
and effectiveness of the risk management approach and is accountable and
supported by the Board. The Operating Board formally reviews, discusses and
documents the Principal Risks to the business at least annually. The Risk
Committee, which is chaired by the CFO, sits quarterly to understand existing
and developing issues, and MGB Senior Managers contribute to and update
Operational Risk registers, as a minimum also quarterly. All colleagues
recognise their responsibility to proactively identify and manage risk and
opportunity in their daily activities and planning.
Principal risks and uncertainties
Reviewed, discussed and agreed by the Operating Board annually, MGB Principal
Risks are designed to promote strategic success and improve future
performance, the impact of operational risks on these determines the focus for
senior management and their teams. The following risks have been agreed:
· Liquidity
· Dependency on a small number of partners
· Pension scheme funding
· Global economic and political conditions
· ERP system
· Regulatory and legal
· Brand, reputation and relationships
· Personnel and talent
Directors' Responsibility statement
The Directors are responsible for preparing the Interim Results for the
26-week period ended 28 September 2024 in accordance with applicable law,
regulations and accounting standards. The Directors confirm that to the best
of their knowledge the condensed consolidated interim financial statements
have been prepared in accordance with IAS 34: 'Interim Financial Reporting',
and that the interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
· an indication of the important events that have occurred during the
first 26 weeks of the financial year and their impact on the condensed
consolidated interim financial statements, and a description of the principal
risks and uncertainties for the remaining 26 weeks of the financial year; and
· material related party transactions in the first 26 weeks of the
year and any material changes in the related party transactions described in
the last annual report.
The Directors of Mothercare plc are listed on page 50 of the Mothercare plc
Annual Report and Financial Statements 2024. A list of directors is maintained
on the Mothercare plc website at: www.mothercareplc.com. With the exception of
today's announcement, there have been no changes since the publication of the
Annual Report.
By order of the Board
Clive Whiley
Andrew Cook
Chairman
Chief Financial Officer
2 December 2024
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR QKDBKDBDDQBKRecent news on Mothercare
See all newsREG - Mothercare PLC - Interim results announcement
AnnouncementREG - AIM Mothercare PLC - Restoration - Mothercare plc
AnnouncementREG - Mothercare PLC - Full Year Results 2024
AnnouncementREG - AIM Mothercare PLC - Suspension - Mothercare PLC
AnnouncementREG - Mothercare PLC - Interim Results
Announcement