REG - Mothercare PLC - Interim Results
24/11/2023 07:00
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RNS Number : 5320U Mothercare PLC 24 November 2023
Mothercare plc
Interim results announcement
Driving the Mothercare brand globally
Mothercare plc ("Mothercare" "the Company" or "the Group"), the highly trusted
British heritage international brand and franchise operator, that connects
with the parents of newborn babies and children across multiple product
categories throughout their early life as parents, today announces unaudited
half year results for the 26-week period to 23 September 2023 ("H1 FY24"). The
comparative period was a 26-week period to 24 September 2022 ("H1 FY23").
Key Highlights
· International retail sales by franchise partners of £137.2 million
(2022: £162.1 million), a decrease of 15% on last year (13% down at constant
currency). This reflects difficult trading conditions in the Middle East which
is down 20% on last year, with continuing operations excluding the Middle East
down 6% on last year at constant currency.
· Adjusted EBITDA of £3.6 million (H1 FY23: £3.2 million) increased
by 12%, reflecting tighter control of costs.
· Group adjusted profit before taxation from operations increased 17%
to £3.4 million (H1 FY23: £2.9 million).
· Total Group profit before taxation of £2.0 million (H1 FY23: £0.8
million).
· Net debt increased to £15.8 million (£11.6 million at 24 September
2022).
· We continue to explore options to further mitigate the pension scheme
current deficit of £35 million (at 31 March 2023) notwithstanding the
reduction from £124.5 million since March 2020.
Our Group
26 weeks to 26 weeks to 26 weeks to 28 weeks to
23 Sep 2023 24 Sep 2022 25 Sep 2021 10 Oct 2020
Turnover £m 29.0 38.5 41.7 44.4
Adjusted EBITDA(2 ) £m 3.6 3.2 5.6 (0.1)
Adjusted profit from operations (2 ) £m 3.4 2.9 5.2 (1.3)
Adjusted profit before taxation(2 ) £m 1.8 1.7 3.6 (4.4)
Profit for the period £m 1.7 0.4 3.6 (13.2)
Adjusted basic earnings per share(2 ) 0.2p 0.2p 0.9p (1.2)p
Basic earnings per share 0.3p 0.1p 1.0p (3.5)p
Our Franchise partners
26 weeks to 26 weeks to 26 weeks to 28 weeks to
23 Sep 2023 24 Sep 2022 25 Sep 2021 10 Oct 2020
Worldwide retail sales(1) £m 137.2 162.1 184.3 189.2
Online retail sales £m 13.7 13.1 17.6 27.1
Total number of stores 500 562 740 793
Space (k) sq. ft. 1,201 1,345 1,967 2,180
Clive Whiley, Chairman of Mothercare plc, commented:
"These results are testament to our continued drive to preserve the strength
of the Mothercare brand in a fast changing retail and macroeconomic trading
environment. Against significant headwinds in the Middle East, one of our core
markets, we are pleased that our business model and disciplined approach to
cost has resulted in an increase in profitability for the first half."
Investor and analyst enquiries to:
Mothercare plc
Email: investorrelations@mothercare.com
Clive Whiley, Chairman
Andrew Cook, Chief Financial
Officer
Deutsche Numis
Tel: 020
7260 1000
(NOMAD & Joint Corporate Broker)
Luke Bordewich
Henry Slater
Cavendish Capital Markets Limited
Tel: 020 7220 0500
(Joint Corporate
Broker)
Carl Holmes
Media enquiries to:
MHP
Email: mothercare@mhpc.com
Rachel Farrington
Tel: 020
3128 8613
Tim Rowntree
Notes
1 - Worldwide retail sales are total franchise partner sales to end customers
(which are estimated and unaudited).
2 - Adjusted figures are stated before the impact of the adjusting items set
out in note 4.
3 - Net debt is defined as total borrowings, cash at bank and IFRS 16 lease
liabilities.
4 - This announcement contains certain forward-looking statements concerning
the Group. Although the Board believes its expectations are based on
reasonable assumptions, the matters to which such statements refer may be
influenced by factors that could cause actual outcomes and results to be
materially different. The forward-looking statements speak only as at the date
of this document and the Group does not undertake any obligation to announce
any revisions to such statements, except as required by law or by any
appropriate regulatory authority.
5 - The information contained within this announcement is deemed by the
Company to constitute inside information for the purposes of the Market Abuse
Regulation (EU) No 596/2014. Upon the publication of this announcement via a
Regulatory Information Service, this inside information is now considered to
be in the public domain.
6 - The person responsible for the release of this announcement is Lynne
Medini, Group Company Secretary at Mothercare plc, Westside 1, London Road,
Hemel Hempstead, HP3 9TD.
7 - Mothercare plc's Legal Entity Identifier ("LEI") number is
213800ZL6RPV9Z9GFO74.
Chairman's statement
Trading Update
As noted in our last trading update, our franchise partners' international
retail sales were impacted by the continuing global economic uncertainty,
alongside the need for them to clear old inventory, decreasing by 15% to £137
million for the 26 weeks to 23 September 2023. Online retail sales for the
period increased to 10% of total retail sales (H1 FY23: 8%).
Performance in our Middle Eastern region, especially the Kingdom of Saudi
Arabia, remains challenging having undergone significant changes in recent
years. Fiscal and legislative changes and the introduction of many new
leisure activities competing for consumers' money is changing consumer
behaviour. The shape of our partner's retail offering in the country is
evolving and we remain confident of the longer-term market opportunity.
It is therefore reassuring to report that our continued focus upon the
necessary adjustments to our supply chain, operations and administrative costs
meant that we generated free cash flow from operations and increased adjusted
EBITDA by 12% to £3.6 million for the six months to 23 September 2023.
We are acutely aware of the ongoing pressure exerted on our franchise
partners' profitability and the consequent need for them to reduce costs and
the levels of investment they can make in their businesses. This will likely
lead to further reductions in our store footprint in some regions. We are
working closely with our key partners to assist them with their recovery,
ultimately benefitting both our own business and our franchise partners'
businesses when we eventually return to pre pandemic levels of trading. We
do not currently expect our combined efforts to offset full this impact on the
Group results for the financial year to March 2024 and beyond.
Financing
The Group had net debt of £15.8 million on 23 September 2023 (September 2022:
£11.6 million). This comprised total cash of £4.2 million (September 2022:
£8.7 million), against lease liabilities of £0.4 million and £19.6 million
of the Group's existing loan facility with GB Europe Management Services
Limited ("GBB") which remains fully drawn.
We continue to enjoy a strong relationship with GBB and the Group has received
various necessary waivers and adjustments to covenants in relation to the loan
facility from GBB in the past. As noted in our previous trading update the
interest cost on this loan (currently 19.2%) and the extended time to return
to pre-pandemic retail sales levels means that we will continue to need such
waivers and covenant adjustments to the loan facility to avoid or remedy
breaches of its terms. Accordingly, we are continuing our refinancing
discussions with GBB to vary this debt facility alongside exploring various
financing alternatives. For the avoidance of doubt, the Group does not require
additional liquidity in our current forecasts. We continue to pursue other
options that would also provide additional liquidity to accelerate business
development.
Growth Opportunities
We have established momentum in improving profitability, underpinned by a cost
base that is now appropriate for the reduced scale of our business. At the
same time we are preserving the skills and experience necessary to deliver
further growth as we return to more normal pre-pandemic levels of business.
Accordingly, we can now redouble our efforts to capitalise upon the
possibilities to grow the future global presence of the brand. This includes
entering new territories through multiple channels or a combination thereof
via e-commerce (either DTC or marketplaces) or with partners that would hold
the online rights for a territory and provide the website and full supply
chain capability in these markets. This also opens a window of opportunity
for us, via step-change growth, to bring synergies and enhanced profitability
into our business, as we exploit the core strengths of the Group across
supply, franchisee partnerships and international reach.
Update on Initiatives
Supply chain model
Our efforts to develop our supply chain to reduce cost, complexity and deliver
goods to our franchise partners in the quickest way led to a further
improvement in on-time availability, with over 85% of our product being
delivered direct from our country of manufacturing to our retail partners'
markets. We also continue to develop our product option framework as we seek
to curtail the impact of input cost inflation.
Enterprise Resource Planning ('ERP') System
Our new ERP system includes a leading product lifecycle management system
integrated with a supply chain and finance system with portal-based access for
both our franchise partners and manufacturing partners to both input and
access information. This is now due to go live at the beginning of the next
financial year, with the full benefit of the cost savings in the financial
year ending March 2025. We are confident that the final system will deliver at
least the expected benefits and cost savings.
Pension Schemes
The last full actuarial valuation of the schemes was at 31 March 2023 and
showed a deficit of £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 (Deficit Repair Contributions 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; March 2032 £6.0 million and
March 2033 £0.5 million aggregating to fully fund the £35 million deficit by
July 2032.
We continue to explore options to mitigate the pension scheme deficit (£35
million deficit at 31 March 2023).
Outlook
Our prime goal in recent years has been to protect the underlying Mothercare
brand intellectual property value, for the benefit of all stakeholders and
avoiding unnecessary equity dilution. We are continuing with our efforts to
refinance the Group and remain in discussions with key stakeholders and
financing partners to ensure that the Group has adequate and appropriate
financing for the future. Our medium-term guidance for the steady state
operation, in more normal circumstances, is unchanged and we believe our
continuing franchise operations remain capable of delivering approximately
£10 million operating profit.
In the interim we remain focused on restoring critical mass and monetising the
Mothercare global brand IP to further free up cashflow, in addition to the
significant reduction in pension contributions, to invest in the long-term
corporate development of the Group.
This would not have been possible without the ongoing commitment and support
of all stakeholders, including our Mothercare colleagues, our franchise
partners, our manufacturing partners, our pension scheme trustees and our
shareholders to whom we are grateful.
Clive Whiley
Chairman
Condensed consolidated income statement
For the 26 weeks ended 23 September 2023
26 weeks ended 23 September 2023 26 weeks ended 24 September 2022 52 weeks ended
(Unaudited) (Unaudited) 25 March 2023
(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 29.0 - 29.0 38.5 - 38.5 73.1
Cost of sales (19.0) - (19.0) (27.5) - (27.5) (52.2)
Gross profit 10.0 - 10.0 11.0 - 11.0 20.9
Administrative expenses (6.6) 0.2 (6.4) (8.1) - (8.1) (15.7)
Impairment losses on receivables - - - - - - 0.8
Profit from operations 3.4 0.2 3.6 2.9 - 2.9 6.0
Net finance costs 5 (1.6) - (1.6) (1.2) (0.9) (2.1) (3.8)
Profit before taxation 1.8 0.2 2.0 1.7 (0.9) 0.8 2.2
Taxation 6 (0.3) - (0.3) (0.4) - (0.4) (2.3)
Profit for the period 1.5 0.2 1.7 1.3 (0.9) 0.4 (0.1)
Profit for the period attributable to equity holders of the parent
1.5 0.2 1.7 1.3 (0.9) 0.4 (0.1)
Earnings per share
Basic 7 0.3 p 0.3 p 0.2 p 0.1 p (0.0)p
Diluted 7 0.3 p 0.3 p 0.2 p 0.1 p (0.0)p
(1) Adjusted items included: restructuring costs included in finance
costs and administrative expenses, and property related income and other
restructuring costs included in administrative expenses. Adjusted items are
one-off or significant in nature and or /value. Excluding these items from the
profit metrics provides readers with helpful additional information on the
performance of the business across the periods because it is consistent with
how business performance is reviewed by the Board and Operating Board.
Condensed consolidated statement of comprehensive income
For the 26 weeks ended 23 September 2023
26 weeks ended 26 weeks ended 52 weeks ended
23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Profit/(loss) for the period 1.7 0.4 (0.1)
Items that will not be reclassified subsequently to the income statement:
Actuarial loss on defined benefit pension schemes
(16.3) (1.1) (4.5)
Deferred tax relating to items not reclassified 3.1 0.2 1.1
(13.2) (0.9) (3.4)
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations (0.1) 0.1 -
(0.1) 0.1 -
Other comprehensive expense for the period (13.3) (0.8) (3.4)
Total comprehensive expense for the period wholly attributable to equity
holders of the parent
(11.6) (0.4) (3.5)
Condensed consolidated balance sheet
As at 23 September 2023
23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
Note £ million £ million £ million
Non-current assets
Intangible assets 8 6.8 4.5 5.8
Property, plant and equipment 8 0.2 0.2 0.2
Right-of-use assets 0.2 0.7 0.3
Deferred tax assets 2.7 - -
Retirement benefit obligations 10 - 11.8 8.4
9.9 17.2 14.7
Current assets
Inventories 0.7 0.6 0.9
Trade and other receivables 5.1 6.9 7.2
Derivative financial instruments 11 0.5 0.2 0.5
Current tax asset 0.5 0.3 0.2
Cash and cash equivalents 4.2 8.7 7.1
11.0 16.7 15.9
Total assets 20.9 33.9 30.6
Current liabilities
Trade and other payables (7.5) (10.7) (10.8)
Lease liabilities (0.4) (0.5) (0.3)
Provisions (0.7) (0.9) (0.9)
(8.6) (12.1) (12.0)
Non-current liabilities
Borrowings 9 (19.6) (19.3) (19.5)
Lease liabilities - (0.5) (0.2)
Provisions - (0.6) (0.3)
Retirement benefit obligations 10 (6.0) - -
Deferred tax liabilities - (0.2) (0.4)
(25.6) (20.6) (20.4)
Total liabilities (34.2) (32.7) (32.4)
Net (liabilities)/assets (13.3) 1.2 (1.8)
Equity attributable to equity holders of the parent
Share capital 89.3 89.3 89.3
Share premium account 108.8 108.8 108.8
Own shares (0.2) (1.0) (0.2)
Translation reserve (3.8) (3.6) (3.7)
Retained deficit (207.4) (192.3) (196.0)
Total equity (13.3) 1.2 (1.8)
Condensed consolidated statement of changes in equity
For the 26 weeks ended 23 September 2023 (unaudited)
Share capital Share premium account Own shares Translation reserve Retained Total equity
deficit
£ million £ million £ million £ million £ million £ million
Balance as at 25 March 2023 as previously reported 89.3 108.8 (0.2) (3.7) (196.0) (1.8)
Profit for the period - - - - 1.7 1.7
Other comprehensive income for the period - - - (0.1) (13.2) (13.3)
Total comprehensive income for the period (0.1) (11.5) (11.6)
- - -
Adjustments to equity for equity-settled share-based payments - 0.1 0.1
- - -
Balance at 23 September 2023 89.3 108.8 (0.2) (3.8) (207.4) (13.3)
For the 26 weeks ended 24 September 2022 (unaudited)
Share capital Share premium account Own shares Translation reserve Retained Total equity
deficit
£ million £ million £ million £ million £ million £ million
Balance as at 25 March 2023 as previously reported 89.3 108.8 (1.0) (3.7) (191.9) 1.5
Profit for the period - - - - 0.4 0.4
Other comprehensive income for the period - - - 0.1 (0.9) (0.8)
Total comprehensive income for the period 0.1 (0.5) (0.4)
- - -
Adjustments to equity for equity-settled share-based payments - 0.1 0.1
- - -
Balance at 24 September 2022 89.3 108.8 (1.0) (3.6) (192.3) 1.2
For the 52 weeks ended 25 March 2023 (audited)
Share capital Share premium account Own shares Translation reserve Retained Total equity
deficit
£ million £ million £ million £ million £ million £ million
Balance at 26 March 2022 89.3 108.8 (1.0) (3.7) (191.9) 1.5
Items that will not be reclassified subsequently to the
income statement
- - - - (3.4) (3.4)
Other comprehensive income - - - - (3.4) (3.4)
Profit for the period - - - - (0.1) (0.1)
Total comprehensive income - - - - (3.5) (3.5)
Shares transferred to executive
on vesting - - 0.8 - (0.8) -
Adjustment to equity for equity-settled share-based payments
- - - - 0.2 0.2
Balance at 25 March 2023 89.3 108.8 (0.2) (3.7) (196.0) (1.8)
Condensed consolidated cash flow statement
For the 26 weeks ended 23 September 2023
26 weeks ended 26 weeks ended 52 weeks ended
Note 23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Net cash flow from operating activities 13 (0.3) 2.1 4.3
Cash flows from investing activities
Purchase of property, plant and equipment (0.1) 0.0 (0.1)
Purchase of intangibles - software (0.6) (0.7) (2.2)
Cash used in investing activities (0.7) (0.7) (2.3)
Cash flows from financing activities
Interest paid (1.7) (1.9) (2.8)
Repayments of obligations under leases (0.2) (0.1) (0.3)
Facility fee paid - - (0.9)
Net cash outflow from financing activities (1.9) (2.0) (4.0)
Net (decrease)/increase in cash and cash equivalents (2.9) (0.6) (2.0)
Cash and cash equivalents at beginning of period 7.1 9.2 9.2
Effect of foreign exchange rate changes - 0.1 (0.1)
Cash and cash equivalents at end of period 4.2 8.7 7.1
Notes to the condensed consolidated financial statements
1 General information
The review of the Group's business activities, together with factors likely to
affect its future development, performance and position are set out in the
Financial Highlights and Chairman's Statement.
The results for the 26 weeks ended 23 September 2023 are unaudited.
These unaudited condensed consolidated interim financial statements for the
current period and prior financial periods do not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. A copy of the
statutory accounts for the 2023 financial year has been filed with the
Registrar of Companies. The 2023 financial statements are available on the
Group's website (www.mothercareplc.com (http://www.mothercareplc.com) ). The
auditor has reported on these: their report was unqualified.
2 Accounting Policies and Standards
Basis of preparation
These unaudited condensed consolidated interim financial statements have been
prepared in accordance with the Disclosure and Transparency Rules of the UK
Financial Conduct Authority, and with IAS 34 'Interim Financial Reporting'.
Unless otherwise stated, the accounting policies applied, and the judgements,
estimates and assumptions made in applying these policies, are consistent with
those described in the Annual Report and Financial Statements 2023. The
financial period represents the 26 weeks ended 23 September 2023. The
comparative periods are the 26 weeks ended 24 September 2022 and the 52 weeks
ended 25 March 2023.
Going concern
With recent increases in interest rates, the interest rate on this loan is
currently approximately 19.2%, which coupled with the extended time to return
to pre-pandemic retail sales levels, particularly in our Middle Eastern
markets, means the Board's current forecasts for continuing operations show
the Group may require waivers to future periods' covenant tests. Our current
lender remains supportive, whilst we complete our financing activities to
repay all or part of the facility.
The consolidated financial information has been prepared on a going concern
basis. When considering the going concern assumption, the Directors of the
Group have reviewed a number of factors, including the Group's trading results
and its continued access to sufficient borrowing facilities against the
Group's latest forecasts and projections, comprising:
• A Base Case forecast; and
• A Sensitised forecast, which applies sensitivities against the
Base Case for reasonably possible adverse variations in performance,
reflecting the ongoing volatility in our key markets.
In making the assessment on going concern the Directors have assumed that the
Group is able to mitigate the material uncertainty surrounding the Group's
ability to successfully complete its financing activities to repay all or part
of the existing facility and that our current lenders would continue to
support us in the event we required waivers to future period's covenant test,
whilst doing so.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
Going concern (continued)
The Sensitised scenario assumes the following additional key assumption:
• A significant reduction in global retail sales, which may
result from subdued, consumer confidence or disposable income or through store
closures or weaker trading in our markets, throughout the remainder of FY24
and FY25.
The Board's confidence in the Group's Base Case forecast, which indicates that
the Group will operate with sufficient cash balances, provided appropriate
covenant waivers on our current facility were agreed, if required prior to the
completion of our funding activities, and the Group's proven cash management
capability, supports our preparation of the financial statements on a going
concern basis.
However, if trading conditions were to deteriorate beyond the level of risk
applied in the Sensitised forecast, or the Group was unable to execute further
cost or cash management programmes, the Group would at certain points of the
working capital cycle require covenant waivers based on its current facilities
agreement. If this scenario were to crystallise, the Group would need to
renegotiate with its lender in order to secure waivers to potential covenant
breaches and consequential cash remedies or have completed the current
negotiations to amend the covenants or secure additional funding. Therefore,
we have concluded that, in this situation, there is a material uncertainty in
relation to the continued support of our existing lender, if required, that
casts significant doubt that the Group will be able to operate as a going
concern without potential waivers or revised/ new financing facilities.
Adoption of new IFRSs
The Group early adopted Amendments to IAS1 - Non-current liabilities with
covenants. The adoption had no impact on the recently issued annual financial
statements. Covenants which the Group must comply with only after the
reporting date did not affect the classification of non-current liabilities at
the period end. The same accounting policies, presentation and methods of
computation are followed in this half yearly report as applied in the Group's
last audited financial statements for the 52 weeks ended 25 March 2023.
Standards issued but not yet effective
There are no standards issued but not yet effective that have been identified
as expected to have a material impact on the disclosures or the amounts
reported in these financial statements.
Foreign currency adjustments
Foreign currency monetary assets and liabilities are revalued to the closing
balance sheet rate under IAS21 "The Effects of Changes in Foreign Exchange
Rates".
Taxation
The taxation charge for the 26 week period is calculated by applying the best
estimate of the average annual effective tax rate expected for the full year
to the profit/loss for the period after adjusting for any significant one-off
items, and a tax credit is recognised only to the extent that the resulting
tax asset is more than likely not to reverse.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due.
For defined benefit schemes, the cost of providing benefits is determined
using the Projected Unit Credit Method, with actuarial valuations being
carried out at each balance sheet date. Actuarial gains and losses are
recognised in full in the period in which they occur. They are recognised
outside of the income statement and presented in other comprehensive income.
Past service cost is recognised immediately to the extent that the benefits
are already vested.
The retirement benefit obligation recognised in the balance sheet represents
the present value of the defined benefit obligation less the fair value of
scheme assets. Any asset resulting from this calculation is limited to past
service cost, plus the present value of available refunds.
The Group has an unconditional right to a refund of surplus under the rules.
In consultation with the independent actuaries to the schemes, the valuation
of the pension obligation has been updated to reflect: current market discount
rates; current market values of investments and actual investment returns; and
also for any other events that would significantly affect the pension
liabilities. The impact of these changes in assumptions and events has been
estimated in arriving at the valuation of the pension obligation.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors have adopted various
APMs of historical or future financial performance, position or cash flows
other than those defined or specified under International Financial Reporting
Standards (IFRS).
These measures are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including those in the Group's
industry.
APMs should be considered in addition to, and are not intended to be a
substitute for, or superior to, IFRS measures.
Purpose
The Directors believe that these APMs assist in providing additional useful
information on the performance and position of the Group because they are
consistent with how business performance is reported to the Board and
Operating Board.
APMs are also used to enhance the comparability of information between
reporting periods and geographical units (such as like-for-like sales), by
adjusting for non-recurring or uncontrollable factors which affect IFRS
measures, to aid the user in understanding the Group's performance.
Consequently, APMs are used by the Directors and management for performance
analysis, planning, reporting and incentive setting purposes and have remained
consistent with prior year.
Notes to the condensed consolidated financial statements
2 Accounting Policies and Standards (continued)
The key APMs that the Group has focused on during the period are as follows:
Group worldwide sales
Group worldwide sales are total retail sales from our franchise partners.
Total Group revenue is a statutory number and is made up of total receipts
from our franchise partners, which includes royalty payments and the cost of
goods dispatched to franchise partners.
Profit/(loss) before adjusted items
The Group's policy is to exclude items that are considered to be significant
in both nature and/or quantum and where treatment as an adjusted item provides
stakeholders with additional useful
information to assess the year-on-year trading performance of the Group.
3 Segmental information
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reported to the
Group's executive decision makers (comprising the executive directors and
operating board) in order to allocate resources to the segments and assess
their performance. Under IFRS 8, the Group has not identified that its
continuing operations represent more than one operating segment.
The results of franchise partners are not reported separately, nor are
resources allocated on a franchise partner by franchise partner basis, and
therefore have not been identified to constitute separate operating segments.
Notes to the condensed consolidated financial statements
4 Adjusted items
Due to their significance or one-off nature, certain items have been
classified as adjusted items as follows:
26 weeks ended 26 weeks ended 52 weeks ended
23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Adjusted costs/(income):
Restructuring costs/(income) included in finance costs - 0.9 1.0
Property related (income)/costs included in administrative expenses - - 0.2
Restructuring costs/(income) included in administrative expenses 0.2 - 0.0
Adjusted items before tax 0.2 0.9 1.2
Restructuring costs included in finance costs - £Nil (H1 FY23: 0.9 million)
In the comparative period, £0.5 million of legal and professional fees were
incurred in renegotiating the Group's loan and a £0.4m loss arising from the
modification of the loan.
Restructuring costs included in administrative expenses - £0.2 million (H1
FY23: £Nil)
The current 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 52 weeks ended
23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Interest expense on lease liabilities 0.1 0.1 0.1
Other net interest 1.8 1.3 4.1
Interest payable 1.9 1.4 4.2
Net interest income on liabilities/return on assets on pension (0.3) (0.2) (0.4)
Net finance costs 1.6 1.2 3.8
Notes to the condensed consolidated financial statements
6 Taxation
26 weeks ended 26 weeks ended 52 weeks ended
23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Current tax - Overseas tax and UK corporation tax 0.3 0.4 1.1
Deferred tax - UK tax charge for temporary differences - - 1.2
Total tax charge 0.3 0.4 2.3
In addition to the amount charged to the income statement, deferred tax
credits relating to retirement benefit obligations amounting to £3.1 million
has been charged directly to other comprehensive income (H1 FY23: £0.2
million).
7 Earnings per share
26 weeks ended 26 weeks ended 52 weeks ended
23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
million million million
Weighted average number of shares in issue for the purpose of basic earnings
per share
563.8 563.8 563.8
Dilutive potential ordinary shares 6.9 1.8 -
Weighted average number of shares in issue for the purpose of diluted earnings
per share
570.7 565.6 563.8
£ million £ million £ million
Profit for basic and diluted earnings per share 1.6 0.4 (0.1)
Adjusted items 0.2 0.9 1.2
Tax effect of adjusted items - - -
Adjusted earnings 1.4 1.3 1.1
£ million £ million £ million
Pence Pence Pence
Basic earnings per share 0.3 0.1 (0.0)
Basic adjusted earnings per share 0.3 0.2 0.2
Diluted earnings per share 0.3 0.1 (0.0)
Diluted adjusted earnings per share 0.3 0.2 0.2
The total dividend for the period is nil pence per share (H1 FY23: nil pence
per share).
Notes to the condensed consolidated financial statements
8 Tangible fixed assets and Software assets
There were no additions to Right-of-use assets in the period.
Capital additions of £1.1 million were made during the period (H1 FY23: £1.0
million). These comprised tangible fixed assets of £0.1 million (H1 FY23:
£0.0 million) and software assets of £1.0 million (H1 FY23: £1.0 million).
9 Borrowings
The carrying value of the Group's outstanding borrowings at 23 September 2023
was £19.6 million (25 March 2023: £19.5 million). The Group is
required to achieve certain royalty targets under its covenants and, due to
the extended time to return to pre-pandemic retail sales levels, will have
difficulty achieving its targets. Accordingly, refinancing discussions are
ongoing with the lender to vary the debt facility.
The credit facility of £19.6 million (25 March 2023: £19.5 million) is
secured on the shares of specified obligor subsidiaries and the assets of the
Group not already pledged. The Group also holds a financial asset of
£0.5 million (25 March 2023: £0.5 million) reflecting the expected
proceeds from the wind-down of the UK operations by the administrators of
Mothercare UK Ltd and Mothercare Business Services Limited.
10 Retirement benefit schemes
The Group has calculated the value of its pension liability under IAS 19 as at
23 September 2023. The FY23 year end assumptions have been rolled forward and
updated for changes in market rates over the current interim period.
For the two schemes, based on the actuarial assumptions from the actuarial
valuations carried out as of March 2023 and using the rolled forward
assumptions referred to above, a net liability of £6.0 million (H1 FY23:
£11.8 million asset) has been recognised. The swing to a liability position
was mainly due to returns on the assets being lower than expected at the start
of the year resulting in an asset experience loss.
11 Financial instruments: fair value disclosures
The Group held the following financial instruments at fair value at 23
September 2023.
Fair value measurements at 23 September 2023 Fair value measurements at 24 September 2022 Fair value measurements at 25 March 2023
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Current financial assets:
Derivative financial instruments:
Financial asset 0.5 0.2 0.5
0.5 0.2 0.5
Notes to the condensed consolidated financial statements
11 Financial instruments: fair value disclosures (continued)
The Group's financial asset (Level 3 within the IFRS 7 hierarchy) represents a
right, arising under the sales purchase agreement with the administrators of
MUK, to receive the proceeds of the wind-up of the UK retail store estate and
website operations as repayment for the Group's secured borrowings. It has
been estimated by the administrators that the Group will receive £0.5 million
(H1 FY23: £0.2 million). Many of the outflows which would impact the
valuation of this financial asset are finalised, with the final repayment
being dependent on the amounts to be received back by the merchant acquirer
and final settlement of VAT.
The Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
are approximately equal to their fair values.
12 Share-based payments
A charge is recognised for share-based payments based on the fair value of the
awards at the date of grant, the estimated number of shares that will vest and
the vesting period of each award. The total net charge for share-based
payments under IFRS 2 is £0.1 million (H1 FY23: £0.1 million).
13 Notes to the cash flow statement
26 weeks ended 26 weeks ended 52 weeks ended
23 September 2023 24 September 2022 25 March 2023
(Unaudited) (Unaudited) (Audited)
£ million £ million £ million
Profit from operations 3.6 2.9 6.0
Adjustments for:
Depreciation of property, plant and equipment and right of use assets 0.1 0.3 0.4
Amortisation of intangible assets 0.1 0.1 0.1
(Loss)/gain on non-cash foreign currency adjustments (0.1) 1.4 0.1
Share-based payments 0.1 0.1 0.2
Movement in provisions (0.5) (1.1) (1.4)
Net gain on financial derivative instruments - - (0.3)
Payments to retirement benefit schemes (2.4) (1.3) (2.2)
Charge in respect of retirement benefit schemes 0.7 1.0 2.1
Operating cash flow before movement in working capital 1.6 3.4 5.0
Decrease in inventories 0.7 1.1 1.1
Decrease in receivables 1.5 0.2 0.9
Decrease in payables (3.7) (1.9) (1.4)
Cash generated from operations 0.1 2.8 5.6
Income taxes paid (0.4) (0.7) (1.3)
Net cash flow from operating (0.3) 2.1 4.3
activities
Analysis of net debt
Foreign exchange
25 March Non-cash movements 23 September
2023 Cash flow 2023
£ million £ million £ million £ million £ million
Cash and cash equivalents 7.1 (2.9) - - 4.2
IFRS 16 lease liabilities (0.5) 0.1 - - (0.4)
Term loan (19.5) - - (0.1) (19.6)
Net debt (12.9) (2.8) - (0.1) (15.8)
Notes to the condensed consolidated financial statements
14 Related party transactions
Transactions between the Group and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the Group and its joint ventures and associates are
disclosed below.
Trading transactions:
There was no revenue earned from related parties in the current or prior
period.
Risk management framework
A risk management framework is in place which is appropriate for the size and
complexity of the business with consideration to its AIM listing, future
partner and system developments and Brand promotion and evolution.
MGB maintains its risk management function in line with the Quoted Companies
Alliance Corporate Governance Code (QCA Code) complying with AIM Rule 26. The
Audit & Risk Committee provides oversight, as to the overall suitability
and effectiveness of the risk management approach and is accountable and
supported by the Board. The Operating Board formally reviews, discusses and
documents the Principal Risks to the business at least annually. The Risk
Committee, which is chaired by the CFO, sits quarterly to understand existing
and developing issues, and MGB Senior Managers contribute to and update
Operational Risk registers, as a minimum also quarterly. All colleagues
recognise their responsibility to proactively identify and manage risk and
opportunity in their daily activities and planning.
Principal risks and uncertainties
Reviewed, discussed and agreed by the Operating Board annually, MGB Principal
Risks are designed to promote strategic success and improve future
performance, the impact of operational risks on these determines the focus for
senior management and their teams. The following risks have been agreed:
· Liquidity
· Dependency on a small number of partners
· Pension scheme funding
· Global economic and political conditions
· ERP system
· Regulatory and legal
· Brand, reputation and relationships
· Personnel and talent
Directors' Responsibility statement
The Directors are responsible for preparing the Interim Results for the
26-week period ended 23 September 2023 in accordance with applicable law,
regulations and accounting standards. The Directors confirm that to the best
of their knowledge the condensed consolidated interim financial statements
have been prepared in accordance with IAS 34: 'Interim Financial Reporting',
and that the interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
· an indication of the important events that have occurred during the
first 26 weeks of the financial year and their impact on the condensed
consolidated interim financial statements, and a description of the principal
risks and uncertainties for the remaining 26 weeks of the financial year; and
· material related party transactions in the first 26 weeks of the
year and any material changes in the related party transactions described in
the last annual report.
The Directors of Mothercare plc are listed on page 56 of the Mothercare plc
Annual Report and Financial Statements 2023. A list of directors is maintained
on the Mothercare plc website at: www.mothercareplc.com. With the exception of
today's announcement, there have been no changes since the publication of the
Annual Report.
By order of the Board
Clive Whiley
Andrew Cook
Chairman
Chief Financial Officer
24 November 2023
Shareholder information
Financial calendar
2024
Preliminary announcement of results for the 53 weeks ending 30 March 2024 September
Issue of report and accounts September
Annual General Meeting September
Announcement of interim results for the 26 weeks ending 28 September 2024 November
Registered office and head office
Westside 1, London Road, Hemel Hempstead, Hertfordshire HP3 9TD
www.mothercareplc.com
Registered number 1950509
Group Company Secretary
Lynne Medini
Registrars
Administrative enquiries concerning shareholders in Mothercare plc for such
matters as the loss of a share certificate, dividend payments or a change of
address should be directed, in the first instance, to the registrars:
Equiniti Limited
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone 0371 384 2013
Overseas +44 (0)121 415 7042
www.shareview.co.uk
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