TIDMMTC
RNS Number : 4770F
Mothercare PLC
18 May 2017
Mothercare plc
FY2016/17 Full Year Results
The UK returns to underlying profit in the second half.
Sharpening our focus on digital and our core customer to drive
future growth.
Mothercare plc, the leading global retailer for parents and
young children, today announces full year results for the 52 week
period to 25(th) March 2017.
Highlights for FY16/17
-- 41% of UK sales now online, with database of over 3 million
customers (FY15 150K); margin up 54bps, and a return to underlying
profit in the second half
-- 70% store estate now in the newly refurbished club format
-- International total sales growth up 10.6% with progress in
many markets supported by currency tailwinds, but like-for-like
down (4.1)%, primarily due to the Middle East
-- Ten new websites opened, 21 countries now online
-- Group underlying profit before tax level on the year at
GBP19.7 million (FY16 GBP19.6 million) in spite of a difficult
summer period
-- Debt of GBP15.9 million driven by investment in store refurbishment, digital and warehousing
(FY16 net cash GBP13.5 million). New bank facilities agreed
Group performance
FY2016/17 FY2015/16
52 weeks to 52 weeks to % change
25 Mar 2017 26 Mar 2016 vs.
GBPmillion GBPmillion last year
-------------------------------------------------------------------- ------------ ------------ ----------
UK
UK like-for-like sales(1) +1.1% +3.6%
Total UK sales 459.4 459.7 (0.1)%
Underlying UK loss(2) (4.4) (6.4) 31%
International
International like-for-like sales(1) (4.1)% (4.5)%
International retail sales in constant currency (2.4)% (1.4)%
International retail sales in actual currency 10.3% (7.4)%
Total International sales 762.5 689.7 10.6%
Underlying International profit(2) 35.2 40.3 (13)%
Group
Worldwide sales(1) 1,221.9 1,149.4 6.3%
Total group sales 667.4 682.3 (2.2)%
-------------------------------------------------------------------- ------------ ------------ ----------
Group underlying profit before tax(2) 19.7 19.6 1%
-------------------------------------------------------------------- ------------ ------------ ----------
Exceptional (charge)/credit & non-underlying items (12.6) (9.9)
Group profit before tax after exceptional and non-underlying items 7.1 9.7
Underlying EPS(2) 9.7p 9.6p 0.9%
Net (debt)/cash (15.9) 13.5 -
-------------------------------------------------------------------- ------------ ------------ ----------
Mark Newton-Jones, Chief Executive of mothercare plc, said:
"We are now in the third year of our turnaround and I am pleased
to report that we have achieved much of what we set out to do from
our six pillar strategy introduced in 2014. Whilst we are proud of
what we've achieved to date, we believe we are only half way
through the transformation of the Mothercare brand."
"Following a difficult start to the year, the UK recovered in
the second half, returning to underlying profit for the first time
in six years. International markets showed signs of recovery with
strong growth in Russia and Indonesia, and a sales recovery in
China, albeit the country is yet to return to positive cash profit.
The Middle East continues to be economically challenging. We have
launched ten new websites globally, bringing our total to 21
countries now trading online."
"Through our work over the past 3 years and with an extensive
database of over 3m, we have developed a far deeper understanding
and insight into our customers and the importance of our brand to
them. This knowledge can now inform us as to how we shape our
business and our ranges, to become ever more relevant to our modern
digitally enabled customer."
"Our customers shop across both digital and store channels and
thus we will invest in both. Digital revenue is on a trajectory to
be over half of our turnover. We are clear in the role our stores
will play for the future, by offering specialist advice and service
and first class product presentation. Store numbers will reduce
over time as we focus on a regional presence in key conurbations
across the UK."
"We shall focus our product offer on maternity, newborn, baby
and toddler up to pre-school. We are a true specialist in these
categories and thus we will build our future ranges and our
services upon this basis."
"Over time, this simpler approach will lead to a leaner, more
agile business resulting in more stable and sustainable cash
flows."
"Our vision remains clear: to be the leading global retailer for
parents and young children."
Investor and analyst enquiries to:
mothercare plc
Mark Newton-Jones, Chief Executive Officer 01923 206455
Richard Smothers, Chief Financial Officer 01923 206455
Helen Gunter, Director of Corporate Communications 01923 206381
Media enquiries to:
MHP Communications
John Olsen/Simon Hockridge 020 3128 8100
Notes:
1 - UK like-for-like sales are defined as sales from stores that
have been trading continuously from the same space for at least a
year and include online sales.
International retail sales are the estimated total retail sales
of overseas franchise and joint venture partners to their
customers. International like-for-like sales are the estimated
franchisee retail sales at constant currency from stores that have
been trading continuously from the same selling space for at least
a year and include online sales on a similar basis.
Total International sales are International retail sales plus
International Wholesale sales. Worldwide sales are total
International sales plus total UK sales. International stores refer
to overseas franchise and joint venture stores.
2 - Underlying profit before tax refers to PBT before
exceptional and non-underlying items. Underlying EPS is calculated
on the basis of underlying profit.
3 - This announcement contains certain forward-looking
statements concerning the Group. Although the Board believes its
expectations are based on reasonable assumptions, the matters to
which such statements refer may be influenced by factors that could
cause actual outcomes and results to be materially different. The
forward-looking statements speak only as at the date of this
document and the Group does not undertake any obligation to
announce any revisions to such statements, except as required by
law or by any appropriate regulatory authority.
4 - Mothercare plc will release its Q1 Trading Update for the 15
weeks to 8th July on 20th July 2017.
Chief Executive's review
This year marks the third year of our turnaround and I am very
pleased to report that we have continued to make good progress,
despite some challenging conditions in this past year. The UK has
returned to underlying profit in the second half of the year for
the first time in six years. In the UK we have closed unprofitable
stores, transitioned the store portfolio to two thirds out of town
and one third in town, and 70% of our UK store estate is now
refurbished in the new club format. We now have an agile store
estate with an average lease length of five years.
The trend towards omnichannel shopping continues to rise as we
see our digitally enabled customers shopping seamlessly between
stores and online. Our database of over three million active
customers combined with over four million e-receipts, is giving us
great insight into their shopping and browsing behaviours. This
intelligence is equipping us to both shape our ranges and
personalise the shopping experience for our customers.
We continue to improve margin through better buying negotiation,
as well as a focus on product quality and exclusivity, all of which
will drive full price sales. At the end of the year, we had
returned to full price sales of 60% after a difficult summer
season.
The investment programme in the business has continued to
strengthen our capabilities in key areas. We have invested in
digital by re-platforming our website. In IT infrastructure, we
have upgraded our planning and merchandising systems to enable us
to better manage stock and help grow full price sales. We have
upgraded our warehouse capability so we can fulfil products for
both stores and online from one campus; in the longer term, this
will enable us to reduce overall stock levels.
In our International business, we have seen strong sales in
Indonesia and Russia, supported by currency tailwinds. India
continues to be a key opportunity for growth and we consolidated
our franchisee partners there during the year. In China sales
recovered toward the end of the year, however the business is yet
to return to positive cash profit. The Middle East continues to
face economic challenges, but we are still expanding there and are
well positioned to benefit when market conditions improve. We
continue to work closely with all our partners, exporting our
learnings and good practice from the UK.
More recently, we have made some changes to the Executive team
to support the next stage of our transformation. Executive
responsibility has been combined for both UK retail stores and
e-commerce, brand and marketing under the new post of Chief
Customer Officer, reflecting our omnichannel customer. We have also
created the role of Global Product Officer for an integrated
approach to our product, planning, sourcing and distribution for
all international markets. Matt Stringer will take on this role.
Kevin Rusling has been appointed as International Managing
Director, on our Executive board and will report to me. Kevin
brings a wealth of international retail experience and will drive
our franchise and joint venture businesses forward.
Finally we also welcome Kirsty Homer as HR Director, to manage
all aspects of the people side of our business in the UK and Asia.
Kirsty brings a renewed focus for our people and will drive the
adoption of our values, the engagement of our teams and oversee the
step change we wish to deliver in service and specialism.
I am extremely proud of the progress we have made in the last
three years, none of which would have been achieved without the
hard work and commitment of our colleagues, International partners
and suppliers around the world. They are all playing their part as
we continue to transform Mothercare into a modern, profitable and
global brand.
Become a digitally led business
-- Online sales up 7.8% and now account for 41% of UK retail sales (FY16: 37%)
-- Mobile c83% of online traffic
-- Launch of new responsive website improving conversion and with a faster check out
-- Upgraded app driving improved conversion with over 1 million downloads
-- Deep customer insight being built with over 3 million on the
database and 4.3million e-receipts
Supported by a modern retail estate and great service
-- Closed 21 underperforming stores; opened three new stores, including one re-site
-- Refurbished 40 stores; 70% of store estate in the new club format refurbishment.
-- Agile store estate with average lease length of five years
-- 40% of total online sales generated by iPads in store
-- Colleagues trained in specialist service
Offering style, quality and innovation in product
-- 34% of Home and Travel options in 'best' category
-- 20% of clothing now in the 'best' category
-- Launched 13 new brands in Home and Travel
-- 35% Home and Travel products are now exclusive
Stabilise and recapture gross margin
-- Underlying bought in margin up year on year
-- 60% full price sales mix in a tough environment (FY16: 65%, FY14: 57%)
-- Margin up 54 bps, third successive year of margin improvement
-- Negative margin impact of planned warehouse change offset by VAT recovery claim
Running a lean organisation while investing for the future
-- Development of a new warehouse infrastructure - both online and stores are now combined
-- Upgraded planning and merchandising systems to improve stock
management and grow full price sales
-- Tight control of costs has enabled further investment in marketing and digital
Expanding further internationally
-- International LFL (4.1)% primarily due to challenging economic conditions in the Middle East
-- Online sales up 64% in constant currency
-- Trading online in 21 countries and 26 online channels (FY16:
11 countries and 14 online channels)
-- Space +0.9% with 1,150 stores* in 55 countries
-- Opened 144 stores and closed 116 during the year, as part of
our rationalisation plan with our partners
Group results
We now trade from 1,302* stores in 55 countries across the
world. Global retail space was c4.4 million* sq.ft, despite
challenging market conditions in the Middle East and continued
planned store closures in the UK. In the UK space was down (5.9)%
and we ended the year with 152 stores and c1.5 million sq.ft of
retail space. International continued to grow space which was up
0.9% and we ended the year with 1,150 stores* and c3 million sq.ft*
of retail space.
52 weeks 52 weeks
to to % change
25 March 26 March vs. last
2017 2016 year
GBPmillion GBPmillion
----------------------------- ----------- ----------- ---------
Underlying International
profit(2) 35.2 40.3 (12.7)%
Underlying UK loss(2) (4.4) (6.4) 31.3%
Corporate expenses (7.0) (8.1) 13.6%
Underlying profit from
operations(2) 23.8 25.8 (7.8)%
Underlying net finance
costs (3.3) (3.2) -
Share based payments (0.8) (3.0) -
Underlying profit before
tax(2) 19.7 19.6 1%
Exceptional items (15.7) (10.2) -
Non-cash foreign currency
adjustments 4.1 1.2 -
Amortisation of intangibles (1.0) (0.9) -
Reported profit before
tax 7.1 9.7 -
----------------------------- ----------- ----------- ---------
Worldwide sales were up 6.3% at GBP1,222 million with total UK
sales down (0.1%) and UK like for like up 1.1%. Total International
sales up 10.6%. Group sales were down (2.2%) at GBP667 million due
to lower shipments to our partners.
Despite the decline in Group sales, underlying Group profit
before tax was up 1% to GBP19.7 million. The UK reduced losses by
31% to (GBP4.4 million), making an underlying profit in the second
half of GBP4.4m while International profits were down 13% to
GBP35.2 million. Other Group expenses were down 14% during the year
with corporate costs of (GBP7 million), finance costs of (GBP3.3
million) and share based payments of (GBP0.8 million).
Non-underlying costs were significantly higher at (GBP15.7
million) for exceptional items, including property related costs,
International stock provisions and provision for China JV
receivables as well as other restructuring costs; a credit of
GBP4.1 million for non-cash foreign currency adjustments and a
charge of (GBP1 million) for amortisation of intangible assets. As
a result, we ended the year with a reported profit before tax of
GBP7.1 million compared to GBP9.7 million in the previous year
(FY15: loss of (GBP13.1 million)).
Debt at the end of the year was (GBP15.9 million), (FY16:
GBP13.5m cash) in line with our plan as we invested GBP39.3 million
in our store refurbishment and infrastructure programme.
FOOTNOTE: *ELC inserts within a mothercare store have previously
been classified as separate stores, with their own square footage.
We have now aligned the classification policy with our UK business
ie. an ELC store located within or adjacent to a mothercare store,
sharing a common passage way or entrance, is classified as one
store. This reclassification means that 188 stores have been
removed from the Q4 reported numbers of 1,338 stores, resulting in
1,150 International stores and c three million sq ft of space.
UK
In the UK, we continued to make progress on our six strategic
pillars. However, the first half of the year was challenging and
sales and margin in the period stalled. There were two factors at
play here - firstly the widely reported slowdown in sales across
the high street due to unseasonable weather through the
spring/summer season, resulting in higher markdown. Secondly, our
planned warehouse infrastructure change meant there was a reduced
flow of product to our stores for eight weeks in the summer and a
one-off increase in operational costs as the new systems bedded
in.
We made good progress in the second half of the year with
performance in line with expectations which partially compensates
for the shortfall in the first half and also received an
outstanding VAT claim which offset the margin impact of our
warehouse changes. We finished the year with total UK sales
marginally down (0.1%) at GBP459 million and underlying UK losses
reduced by 31% to (GBP4.4 million). Underlying UK losses three
years ago were (GBP21.5million) in FY2013/14, prior to our
turnaround.
52 weeks 52 weeks
to to % change
25 March 26 March vs. last
2017 2016 year
GBPmillion GBPmillion
---------------------------- ----------- ----------- ---------
UK like-for-like sales
growth(1) 1.1% 3.6% -
UK online sales 171.9 159.4 7.8%
UK retail sales (including
online) 423.6 426.1 (0.6)%
UK wholesale sales 35.8 33.6 6.5%
Total UK sales 459.4 459.7 (0.1)%
Underlying loss(2) (4.4) (6.4) (31)%
---------------------------- ----------- ----------- ---------
Six Pillar Strategy
Become a digitally led business
Online sales were up 7.8% at cGBP172million with sales via iPads
in our stores now accounting for 40% of the mix. The trend towards
mobile continues, with our digitally enabled customers using their
mobiles to browse and purchase product, review content and engage
with us on our social channels. Mobile now accounts for 83% of
online traffic. Click and Collect orders are now 25% of online
sales; giving customers this flexibility to collect in store,
bringing the additional benefit of driving footfall. The
re-platforming of our website has provided customers with an
enhanced web experience, providing better navigation, clearer
product presentation and simplified check out process. This
functionality, combined with the customer insight from our database
of over 3 million, up from 150,000 three years ago, is enabling us
to now personalise the shopping experience with content that is
relevant to our customers' life stage and needs.
Supported by a modern retail estate and great service
We now have 90 stores refurbished in the new club format,
representing 70% of our total store estate. Customers have reacted
very positively to the investment and we are seeing improved
performance in most of these stores. We are developing our stores
to be more than just outlets to sell product but centres of
expertise, advice and support. They play a valuable role in
bringing together communities of mums and dads to meet, chat, seek
information and knowledge. We had over 50,000 customers attend our
Expectant Parent Events and hosted parent meet-ups and many parties
and get togethers in our coffee shops and play areas.
We have renegotiated the majority of leases in our portfolio and
now have an agile store estate. This now allows us the flexibility
to ensure we have the right footprint to support our customers'
evolving shopper behaviours. The average lease length is now five
years.
Whilst our strategy of closing underperforming stores reduced UK
space by (5.9)% we still grew UK like-for-like sales by 1.1% and
only dropped overall UK sales by (0.1)%.
Offering style, quality and innovation in product
Our continued focus in quality, exclusivity and value for money
has been well received by our customers this year.
In Clothing and Footwear, we have delivered our target of 20% of
our clothing range in the 'best' category, compared to just 11%
three years ago. We continue to innovate with new collections like
Heritage which takes our back catalogue of designs and
re-introduces them as a retro collection. Our celebrity
collaborations are also firm favourites: 'Smile' by Julian
Macdonald; Jools Oliver's 'Little Bird' collection which has now
been extended into maternity and nursery, bedding and accessories
and the newly relaunched 'My K' by Myleene Klass.
In Home and Travel we have continued to work with our suppliers
to increase our exclusive product and offers for our customers. We
now have 35% of Home and Travel product exclusive to Mothercare
from nothing three years ago. We have introduced 13 new brands this
year. Our 'better' and 'best' categories are now 81% of our Home
and Travel product offer with 34% 'best'. Design innovation remains
a key focus. Our latest in-house designed pushchair range 'Journey'
combines the best of cutting edge technology with modern design and
became an instant best seller.
In Toys, branded and licensed toys have continued to grow in
line with our strategy and are now 20% of our mix, compared to less
than 10% three years ago, with good growth from existing brands
like Vtech, Fisher Price and SmarTrike. Product newness and
innovation are of high importance with 1,440 newlines introduced
this year 20% more than the previous year.
In ELC the ever popular Happyland has seen investment in new
designs and tooling to launch ten new play sets. These include our
Christmas advent calendar which was a complete sell out. We have
also continued to develop and enhance our Learning range of
products designed to help teach early literacy and numerical
skills.
Stabilise and recapture margin
Despite the challenges in the first half of the year, we made
good progress in the second half, finishing the year with gross
margin up 54 bps and in line with our long-term guidance of
50-100bps. This is our third successive year of gross margin
improvement after several years of decline. Our percentage of full
price sales was 60% compared to 57% three years ago.
We have upgraded our planning and merchandise systems which will
enable us to better manage stock and should lead to a reduction in
markdown and further growth in full price sales.
Running a lean organisation
We have absorbed the underlying cost inflation of the national
living wage through productivity improvements, additionally, our
cost base has also reduced as store numbers have come down.
Our Watford head office has been refurbished to create a
flexible, multi-functional space for meetings with our suppliers
and colleagues. We have constructed a mock shop at the centre of
the office to enable us to lay out product as it would appear to
our customer. This working mock shop will enable us to present our
product ranges more professionally to our franchise partners for
their selection and importantly will help with the construction of
our global ranges.
International
In 2016 we undertook a review of our International business. An
output from this review is to strengthen the franchise model by
focusing our activity on where we believe there are the biggest
opportunities for growth. This will mean investing more time and
resource in our largest territories and over time consolidating or
exiting some of our small territories. In the last year we have
exited franchise agreements in Poland and Morocco for both the
Mothercare and ELC brands and in Venezuela for ELC only. The number
of stores closed across these three markets as a result was eight
and a total of c18,000 sq.ft.
In the year, we opened 144 new stores and closed 116, with 50
stores now in the new club format post refurbishment.
We are helping our partners to position our brand correctly
against local competition both through a product mix and pricing
architecture, and additionally helping them to better manage their
inventory levels through the buy and then the subsequent level of
markdown needed to clear the stock.
We see significant global opportunity in digital with our
International online sales growing by 64% in constant currency this
year. We ended the year trading online in 21 countries with 26
online channels (FY16: trading in 11 countries and 14 online
channels). Online penetration is now 3% of International sales and
climbing (FY16: 2%).In Russia and China, where we are more
established, online sales penetration is now over 10%.
We are still encouraged by many more exciting opportunities in
both existing and new markets around the world.
52 weeks 52 weeks
to to % change
25 March 26 March vs. last
2017 2016 year
----------------------------- --------- --------- ---------
International like-for-like
sales growth(1) (4.1)% (4.5)% -
International retail
sales: constant currency (2.4)% (1.4)% -
International retail
sales: actual currency 10.3% (7.4)% -
International retail
sales 753.2 683.0 10.3%
International wholesale
sales 9.3 6.7 38.8%
Total International
sales 762.5 689.7 10.6%
Underlying profit(2) 35.2 40.3 (13)%
----------------------------- --------- --------- ---------
Outlook
We have achieved much of what we set out to do from our original
six pillar strategy set in 2014. We have gained a deeper insight
into our customers' changing product needs and, importantly, how
their shopping behaviour is altering. Our online transactions now
represent 41% of our UK turnover and are growing extensively in our
global business.
The UK returned to profit in the second half of the year, this
was last achieved six years ago. Whilst we are proud of what we
have achieved to date, we believe we are only half way through the
transformation of the Mothercare brand.
With the clear progress and results being seen in the UK, we now
enter the second phase of our turnaround. Through the work we have
put in and the build of an extensive database, we approach this
next phase with a far deeper understanding of our customers and the
importance of our brand to them.
Our knowledge and insight can now inform us as to how we shape
the business and our ranges. As a result, we are becoming even more
focused in our core markets of maternity, newborn baby and toddler
up to pre-school. We are a true specialist in these categories and
will build our offer and our services upon this basis.
In the UK our store numbers will reduce to between 80 and 100 as
we focus on a regional presence in key conurbations. We are clear
that the role of our store network is to support our digitally led
approach by providing specialist face to face service and advice
along with first class product presentation. With the data we
continue to build, we are equipped to personalise our customer
shopping journey, from the baby's due date, all the way through to
their pre-school age. We will no longer sell ranges in the UK for
older children in either Clothing or Toys.
Over time, this simpler approach will lead to a leaner, more
agile business resulting in more stable and sustainable cash
flows.
None of us are certain how the UK consumer will respond in the
short term to the inflationary pressures that will inevitably flow
into their household expenditure. However, we do know that we are
moving the mothercare brand forward and becoming more relevant to
our modern customer. As such we are excited by the next phase of
the turnaround and remain confident of the Group's future
prospects.
Our vision remains clear: to be the leading global retailer for
parents and young children.
Mothercare plc
Preliminary Results
FINANCIAL REVIEW
RESULTS SUMMARY
Group underlying profit before tax increased by GBP0.1 million
to GBP19.7 million (2015/16: GBP19.6 million). Underlying profit
excludes exceptional items and other non-underlying items which are
analysed below. Exceptional items include costs relating to
activity on property, warehousing costs, restructuring costs and
provision for joint venture receivable. After exceptional and
non-underlying items, the Group recorded a pre-tax profit of GBP7.1
million (2015/16: GBP9.7 million).
Income statement
GBP million 52 weeks 52 weeks
ended ended
25 March 26 March
2017 2016
--------------------------------------- ----------- -----------
Revenue 667.4 682.3
Underlying profit from operations
before interest and share based
payments 23.8 25.8
Share based payments (0.8) (3.0)
Net finance costs (3.3) (3.2)
--------------------------------------- ----------- -----------
Underlying profit before tax 19.7 19.6
Exceptional items (15.7) (10.2)
Non-cash foreign currency adjustments 4.1 1.2
Amortisation of intangible assets (1.0) (0.9)
--------------------------------------- ----------- -----------
Profit before tax 7.1 9.7
--------------------------------------- ----------- -----------
Underlying EPS - basic (pence) 9.7 9.6
EPS - basic (pence) 4.8 3.8
--------------------------------------- ----------- -----------
Profit from operations before share based payments includes all
of the Group's trading activities, but excludes the share based
payment costs charged to the income statement in accordance with
IFRS 2 (see below).
Results by segment
The primary segments of Mothercare plc are the UK business and
the International business.
52 weeks 52 weeks
ended ended
25 March 26 March
2017 2016
----------------------- ----------- -----------
GBP million - Revenue
----------------------- ----------- -----------
UK 459.4 459.7
International 208.0 222.6
----------------------- ----------- -----------
Total 667.4 682.3
----------------------- ----------- -----------
52 weeks 52 weeks
to to
25 March 26 March
2017 2016
--------------------------------- ---------- ----------
GBP million - Underlying Profit
--------------------------------- ---------- ----------
UK (4.4) (6.4)
International 35.2 40.3
Corporate (7.0) (8.1)
--------------------------------- ---------- ----------
Profit from operations before
share based payments 23.8 25.8
Share based payments (0.8) (3.0)
Net finance costs (3.3) (3.2)
Underlying profit before tax 19.7 19.6
--------------------------------- ---------- ----------
UK LFL sales have increased by 1.1% with support from online
sales which were up 8.9% year on year. Total UK sales were stable
year on year, with underlying trading offsetting the impact of 21
planned store closures and 3 new store openings. The business
continued to sell more at full price, and this along with improved
buying margins and planned efficiencies improved profitability.
International retail sales decreased by 2.4% on a constant
currency basis and up 10.3% in actual currency, reflecting the
ongoing currency tailwinds. However the decrease in International
volumes along with lower royalties from China resulted in profits
being down on last year.
Corporate expenses represent board and company secretarial costs
and other head office costs including audit, professional fees,
insurance and head office property, and were lower year on
year.
Share based payments
Underlying profit before tax also includes a share based
payments charge of GBP0.8 million (2015/16: GBP3.0 million) in
relation to the Company's long-term incentive schemes. There are a
number of long-term share based incentive schemes including the
Long Term Incentive Plans, the Save As You Earn schemes and the
Company Share Option Plan. The decrease in the charge year on year
is due to a change in the estimated number of shares that will
vest. Full details can be found in Note 28 in the consolidated
financial statements.
The charges as calculated under IFRS 2 are calculations based on
a number of market based factors and estimates about the future
including estimates of Mothercare's future share price, future
profitability and TSR in relation to a comparator group of
retailers. As a result it is difficult to estimate or predict
reliably future charges.
Like-for-like sales, total International sales and worldwide
sales
UK 'Like-for-like sales' are defined as sales for stores that
have been trading continuously from the same selling space for at
least a year and include Direct in Home and Direct in Store.
International retail sales are the estimated retail sales of
overseas franchisees and joint ventures to their customers (rather
than Mothercare sales to franchisees as included in the statutory
or reported sales numbers). Total International sales are
International retail sales plus International wholesale sales.
Group worldwide sales are total International sales plus total UK
sales. Group worldwide sales and reported sales are analysed as
follows:
GBP million Reported sales Worldwide sales*
---------------------- ----------------------
52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended
25 March 26 March 25 March 26 March
2017 2016 2017 2016
------------------------- ---------- ---------- ---------- ----------
UK retail sales 423.6 426.1 423.6 426.1
UK wholesale sales 35.8 33.6 35.8 33.6
------------------------- ---------- ---------- ---------- ----------
Total UK sales 459.4 459.7 459.4 459.7
------------------------- ---------- ---------- ---------- ----------
International retail
sales 198.7 215.9 753.2 683.0
International wholesale
sales 9.3 6.7 9.3 6.7
------------------------- ---------- ---------- ---------- ----------
Total International
sales 208.0 222.6 762.5 689.7
------------------------- ---------- ---------- ---------- ----------
Group sales/Group
worldwide sales 667.4 682.3 1,221.9 1,149.4
------------------------- ---------- ---------- ---------- ----------
* Estimated
Analysis of worldwide sales movement
GBP million - Worldwide sales
----------------------------------- --------
Sales for 52 weeks ended 26 March
2016 1,149.4
Currency impact 88.8
----------------------------------- --------
Proforma sales for 52 weeks ended
26 March 2016 1,238.2
Decrease in International LFL (30.1)
Increase in International space 11.6
Increase in UK LFL 4.6
Decrease in UK space (6.0)
Increase in wholesale 3.6
Sales for 52 weeks ended 25 March
2017 1,221.9
----------------------------------- --------
Sales in the year ended 25 March 2017 were higher by GBP72.5
million primarily as a result of favourable currency impact of
GBP88.8 million due to the devaluation of sterling.
Including the currency impact, International sales have
increased by GBP72.8million driven by an increase in space offset
by reduced LFL sales.
UK sales have remained stable with an increase in LFL sales and
wholesale sales offset by a decrease in space.
Analysis of profit movement
GBP million - underlying profit
before tax
-------------------------------------- ------
Underlying profit for 52 weeks ended
26 March 2016 19.6
Currency impact 1.3
-------------------------------------- ------
Proforma underlying profit for 52
weeks ended 26 March 2016 20.9
Decrease in International volumes (4.2)
UK closures of loss making stores 0.7
UK sales and margin improvement 6.4
Lower China royalties (1.5)
Increase in costs (2.6)
Underlying profit before tax for
52 weeks ended 25 March 2017 19.7
-------------------------------------- ------
On a proforma basis (i.e. excluding the currency impact)
underlying profit has fallen from GBP20.9 million to GBP19.7
million. This is driven by a decrease in International volumes and
an increase in costs. This is partly offset by an improvement in UK
sales and margin.
Margin was supported by ongoing work to recover VAT and includes
benefits relating to the current and prior years. This is offset by
the margin impact during the summer from the planned upgrade of our
distribution centre, which reduced availability and led to an
increased level of markdown.
Foreign exchange
The main exchange rates used to translate the consolidated
income statement and balance sheet are set out below:
52 weeks 52 weeks
ended 25 ended 26
March 2017 March 2016
Average:
------------------- ------------ ------------
Euro 1.19 1.37
Chinese reniminbi 8.78 9.57
Kuwaiti dinar 0.40 0.46
Saudi riyal 4.95 5.68
Emirati Dirham 4.81 5.54
Russian rouble 82.40 95.40
Closing:
Euro 1.15 1.29
Chinese reniminbi 8.56 9.37
Kuwaiti dinar 0.38 0.44
Saudi riyal 4.65 5.43
Emirati Dirham 4.55 5.32
Russian rouble 70.90 98.09
------------------- ------------ ------------
The principal currencies that impact our results are Euro,
Chinese reniminbi, Kuwaiti dinar, Saudi riyal, Emirati Dirham and
Russian rouble. The net effect of currency translation caused
worldwide sales and underlying operating profit from ongoing
operations to increase by GBP88.8 million and GBP1.3 million
respectively compared with 2016 as shown below:
Underlying
Worldwide Operating
Sales profit
GBP million GBP million
------------------- -------------- ---------------
Euro 11.5 0.2
Chinese reniminbi 17.9 0.1
Saudi riyal 14.2 0.1
Emirati Dirham 11.2 0.1
Russian rouble 17.9 -
Kuwaiti dinar 5.4 0.1
Other currencies 10.7 0.7
------------------- -------------- ---------------
88.8 1.3
------------------- -------------- ---------------
The profit impacts are somewhat mitigated by our hedging
strategy on royalty receipts.
In addition to the translation exposure, the Group is also
exposed to movements on certain of its transactions, principally
movements in the US dollar. These exposures are largely hedged and
therefore did not significantly impact underlying profit in the
current year.
Net finance cost
Financing represents interest receivable on bank deposits, less
amounts capitalised for borrowing costs associated with the build
of qualifying assets, fees 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.
The net finance cost is in line with last year.
52 weeks 52 weeks
ended 25 ended 26
March 2017 March 2016
GBP million GBP million
------------------------------------ ------------ ------------
Net interest on liabilities/return
on assets on pension 2.6 2.7
Other net interest 0.7 0.5
Net finance costs 3.3 3.2
------------------------------------ ------------ ------------
Taxation
The underlying tax charge is comprised of current overseas taxes
and a prior year adjustment for overseas taxes and is offset by UK
deferred tax. The effective tax rate is 16.3% (2015/16: 16.4%). The
effective tax rate is lower than the standard tax rate of 20%
mainly due to the recognition of the deferred tax asset on the
brought forward tax losses and further losses becoming available
due to adoption of FRS 101 for statutory reporting. An underlying
tax charge of GBP3.2 million (2015/16: GBP3.2 million) has been
included for the period within a total tax credit of GBP1.1 million
(2015/16: charge of GBP3.3 million). The cash tax payments were
GBP1.1 million.
Non-underlying items
Underlying profit before tax excludes the following
non-underlying items (see Note 3):
Exceptional items (see Note 3):
-- Costs relating to previously announced activity on property
and retail restructuring programmes;
-- Costs relating to the planned development of warehouses in the UK;
-- Cost associated with head office redundancies and IT restructuring;
-- Store impairment and onerous lease charges;
-- Costs relating to the International stock obsolescence charge; and
-- Costs relating to the China joint venture trade receivable provision.
Exceptional items in 2015/16 included assets written off at net
book value with respect to the store restructuring and
refurbishment programme of GBP5.6 million, a credit for the release
of the store property provision in relation to the UK business of
GBP0.8 million, International bad debt costs of GBP1.9 million and
impairment of joint venture by GBP3.3 million.
Other non-underlying items:
-- The revaluation of monetary assets and liabilities held in
foreign currencies and the revaluation of outstanding forward
contracts which have not yet been matched to the purchase of stock.
These revaluation adjustments are reported as non-underlying items
so as the Group reports its underlying performance consistently
with its cash flows, reflecting the hedging which is in place;
and
-- Amortisation of intangible assets (excluding software).
Earnings per share and dividend
Basic earnings per share were 4.8 pence compared to 3.8 pence in
2015/16. Basic underlying earnings per share were 9.7 pence
compared to 9.6 pence last year.
52 weeks ended 52 weeks
25 March 2017 ended
26 March
2016
Million Million
-------------------------------- --------------- ------------
Weighted average number of
shares in issue 170.5 170.6
Dilution- option schemes
(for underlying results only) 7.9 6.0
Diluted weighted average
number of shares in issue 178.4 176.6
Number of shares at period
end 170.9 170.9
GBP Million GBP Million
-------------------------------- --------------- ------------
Profit for basic and diluted
earnings per share 8.2 6.4
Exceptional items and other
non-underlying items (Note
3) 12.6 9.9
Tax effect of above items (4.3) 0.1
Underlying earnings 16.5 16.4
-------------------------------- --------------- ------------
Basic earnings per share 4.8 3.8
Basic underlying earnings
per share 9.7 9.6
Diluted earnings per share 4.6 3.6
Diluted underlying earnings
per share 9.3 9.3
-------------------------------- --------------- ------------
The Board has concluded that given the cash investment required
to deliver the strategy the Company will not pay a final dividend
for 2016/17. The total dividend for the year is nil pence per share
(2015/16: nil pence per share).
Pensions
The Mothercare defined benefit pension schemes were closed with
effect from 30 March 2013. Details of the income statement net
charge, total cash funding and net assets and liabilities are as
follows:
GBP million 52 weeks 52 weeks 52 weeks
ending ending ending
24 March 25 March 26 March
2018 * 2017 2016
------------------------------------ ---------- ---------- --------------------
Income statement
Running costs (3.2) (3.0) (2.7)
Net interest on liabilities/return
on assets (2.9) (2.6) (2.7)
------------------------------------ ---------- ---------- --------------------
Net charge (6.1) (5.6) (5.4)
------------------------------------ ---------- ---------- --------------------
Cash funding
Regular contributions (2.6) (2.4) (2.2)
Deficit contributions (9.1) (7.2) (8.9)
------------------------------------ ---------- ---------- --------------------
Total cash funding (11.7) (9.6) (11.1)
------------------------------------ ---------- ---------- --------------------
Balance sheet
Fair value of schemes'
assets n/a 329.6 287.5
Present value of defined
benefit obligations n/a (409.7) (361.9)
------------------------------------ ---------- ---------- --------------------
Net liability n/a (80.1) (74.4)
------------------------------------ ---------- ---------- --------------------
* Estimate
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:
2016/17 2015/16 2016/17 2016/17
Sensitivity Sensitivity
GBP million
----------- -------- -------- ------------- -------------
Discount
rate 2.7% 3.6% +/- 0.1% -7.8/+7.8
Inflation
- RPI 3.2% 3.1% +/- 0.1% +7.5/-7.5
----------- -------- -------- ------------- -------------
Inflation
- CPI 2.1% 2.0% +/- 0.1% +2.7/-2.7
----------- -------- -------- ------------- -------------
Cash flow
Underlying free cash flow was an outflow of GBP14.4 million with
cash generated from operations of GBP27.0 million being used for
capital expenditure and taxation.
Capital expenditure of GBP39.3 million reflected the investment
in the year in store refurbishment and IT infrastructure.
Working capital was an outflow of GBP3.7 million, reflecting the
timing profile of payments for stock, and the mid-season sale
moving into the new financial year.
52 weeks 52 weeks
ended 25 ended
March 2017 26 March
2016
GBP million GBP million
-------------------------------- ------------ ------------
Underlying profit from
operations before interest
and share based payments 23.8 25.8
--------------------------------- ------------ ------------
Depreciation and amortisation 18.2 17.5
Retirement benefit schemes (6.6) (8.4)
Change in working capital (3.7) -
Other movements (4.7) (4.4)
--------------------------------- ------------ ------------
Cash generated from operations 27.0 30.5
Capital expenditure (39.3) (33.9)
Interest and tax paid (2.1) (2.2)
--------------------------------- ------------ ------------
Underlying Free cashflow (14.4) (5.6)
Exceptional (12.5) (12.9)
--------------------------------- ------------ ------------
Free cashflow (26.9) (18.5)
Issue of ordinary share
capital - 0.4
Drawdown on facility 15.0 -
Purchase of own shares (1.2) -
Exchange differences (1.3) 0.1
--------------------------------- ------------ ------------
Cash and cash equivalents
at beginning of period 13.5 31.5
(Overdraft)/cash and cash
equivalents at end of
period (0.9) 13.5
Borrowings (15.0) -
Statutory net (debt)/cash
at end of period (15.9) 13.5
--------------------------------- ------------ ------------
Balance sheet
The balance sheet includes identifiable intangible assets
arising on the acquisition of the Early Learning Centre of GBP4.9
million and goodwill of GBP26.8 million. These assets are allocated
to the International business.
25 March 26 March
2017 2016
GBP million GBP million
---------------------------------- ------------ ------------
Goodwill and other intangibles 63.4 53.9
Property, plant and equipment 80.4 69.4
Retirement benefit obligations
(net of tax) (66.4) (58.1)
Net (borrowings)/cash (15.9) 13.5
Derivative financial instruments 8.0 11.2
Other net assets/(liabilities) 11.9 (0.8)
Net assets 81.4 89.1
------------------------------------ ------------ ------------
Share capital and premium 146.4 146.4
Reserves (65.0) (57.3)
------------------------------------ ------------ ------------
Total equity 81.4 89.1
------------------------------------ ------------ ------------
Shareholders' funds amount to GBP81.4 million, a decrease of
GBP7.7 million in the year driven mainly by a fall in the defined
benefit obligation (net of tax) of GBP8.3 million. This represents
GBP0.48 per share compared to GBP0.52 per share at the previous
year end.
Going concern
The directors have reviewed the going concern principle
according to revised guidance provided by the FRC.
The Group's business activities and the factors likely to affect
its future development are set out in the principal risks and
uncertainties section. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are set out
in the financial review.
At the end of the year the Group was in a net debt position of
GBP15.9 million and had headroom on both cash and covenants on its
existing facility.
On 5 May 2017 the Group refinanced with the support of its two
existing banks, HSBC and Barclays, amending its committed
facilities of GBP50.0 million to a GBP62.5 million revolving credit
facility and a GBP5.0 million uncommitted overdraft (at an interest
rate range of 2.0% to 3.0% above LIBOR). The amended revolving
credit facility is made up of two tranches, a GBP50.0 million
maturing in May 2020 (with an option to extend for an additional
one year on two occasions subject to lenders' approval) and an
additional GBP12.5 million maturing in November 2018 (with an
option to extend for an additional six months on two occasions
subject to lenders' approval). In addition, an accordion facility
with a variable limit that allows the Group to draw down up to
GBP75.0 million has been made available, subject to lenders'
approval.
The directors have reviewed the Group's latest forecasts and
projections, which have been sensitivity-tested for reasonably
possible adverse variations in performance. This indicates the
Group will operate within the terms of its borrowing facilities and
covenants for the foreseeable future. To the extent that future
trading is worse than a reasonably possible downside, which the
directors do not consider a likely scenario, then there are
mitigating actions available, which would enable the Group to
continue to operate within the terms of the borrowing facilities
and covenants for the foreseeable future. Based on this, the
directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
for the foreseeable future. Accordingly, the financial statements
are therefore prepared on the going concern basis.
Viability Statement
In accordance with provision C.2.2 of the 2014 revision of the
Code, the directors have assessed the prospects and viability of
the Company and its ability to meet liabilities as they fall due
over the medium term. The directors concluded that a period of
three years is a suitable time period for their review for the
following reasons;
-- This period aligns with our business planning cycle and delivery of strategic goals
-- Performance is significantly impacted by both UK and
International economic conditions which are difficult to predict
beyond this period
The assessment was made by considering the principal risks
facing the Company, and stress testing the strategic plan to model
the impact of a combination of these risks occurring together to
drive severe and extreme pressure on the business over the three
year period to FY20. The review included detailed financial
projections covering profit, cash flows and banking facility
covenants. Two different scenarios were modelled.
The first scenario assumed a continuation of severe external
macro-economic and currency pressures across key International
markets over an 18 month period, alongside a marked downward turn
in consumer confidence in the UK market over the same timeframe,
with the impact equivalent to the worst UK performance over a five
year historic period. Modest recovery is assumed thereafter across
the Group. Projections under this scenario factored in short term
high single digit negative LFL growth in International, and
negative LFL and margins in the UK. The second scenario assumes a
less severe but sustained negative impact on both the UK and
International businesses, with smaller declines each year over the
entire period.
In both of the above scenarios, the profitability and liquidity
of the business would be significantly impacted. However, the
directors concluded that while management would need to take
significant mitigating actions such as an immediate and material
reduction in capital spend and costs, there would be sufficient
cash available for the business to remain liquid in both of the
above scenarios over the period reviewed.
Based on the results of this review, the directors confirm they
have a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due for
the next three years.
Treasury policy and financial risk management
The board approves treasury policies and senior management
directly controls day-to-day operations within these policies. The
major financial risk to which the Group is exposed relates to
movements in foreign exchange rates and interest rates. Where
appropriate, cost effective and practicable, the Group uses
financial instruments and derivatives to manage the risks.
No speculative use of derivatives, currency or other instruments
is permitted.
Foreign currency risk
All International sales to franchisees are invoiced in Pounds
sterling or US dollars.
International reported sales represent approximately 31% of
group sales. Total International worldwide sales in the 52 week
period represent approximately 62% of group worldwide sales. The
Group therefore has some currency exposure on these sales, but they
are used to offset or hedge in part the Group's US dollar
denominated product purchases. The Group policy is that all
material exposures are hedged by using forward currency contracts.
To help mitigate against the currency impact on royalty receipts,
the Group has hedged against its major market currency
exposure.
Interest rate risk
The principal interest rate risk of the Group arises in respect
of the drawdown of the revolving credit facility. This facility is
at a fixed rate plus LIBOR, it exposes the Group to cashflow
interest rate risk. The interest exposure is monitored by
management but due to low interest rate levels during the period
the risk is believed to be minimal and no interest rate hedging has
been undertaken.
Credit risk
The Group's exposure to credit risk inherent in its trade
receivables. The Group has no significant concentration of credit
risk, except with the China joint venture. The Group operates
effective credit control procedures in order to minimise exposure
to overdue debts and where possible also carries insurance against
the cost of bad debts. The insurance counterparties involved in
transactions are limited to high quality financial institutions.
Before accepting any new credit 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.
Events after the balance sheet date
On 5 May 2017 the Group refinanced with the support of its two
existing banks, HSBC and Barclays, amending its committed
facilities of GBP50.0 million to a GBP62.5 million revolving credit
facility and a GBP5.0 million uncommitted overdraft (at an interest
rate range of 2.0% to 3.0% above LIBOR). The amended revolving
credit facility is made up of two tranches, a GBP50.0 million
maturing in May 2020 (with an option to extend for an additional
one year on two occasions subject to lenders' approval) and an
additional GBP12.5 million maturing in November 2018 (with an
option to extend for an additional six months on two occasions
subject to lenders' approval). In addition, an accordion facility
with a variable limit that allows the Group to draw down up to
GBP75.0 million has been made available, subject to lenders'
approval.
Consolidated income statement
For the 52 weeks ended 25 March 2017
Note 52 weeks ended 52 weeks ended
25 March 2017 26 March 2016
----------------------------------------- ---------------------------------------------
Underlying(1) Non- Total Underlying(1) Non-underlying(2) Total
underlying
(2)
GBP million GBP GBP GBP GBP GBP
million million million million million
--------------------- ----- -------------- ------------ ----------- -------------- ------------------ ---------
Revenue 2 667.4 - 667.4 682.3 - 682.3
Cost of sales (606.2) (2.4) (608.6) (622.1) - (622.1)
--------------------- ----- -------------- ------------ ----------- -------------- ------------------ ---------
Gross profit 61.2 (2.4) 58.8 60.2 - 60.2
Administrative
expenses (38.2) (9.7) (47.9) (36.3) (6.5) (42.8)
Profit/(loss) from
retail operations 23.0 (12.1) 10.9 23.9 (6.5) 17.4
Other exceptional
items 3 - (0.5) (0.5) - (3.4) (3.4)
Share of results
of joint ventures - - - (1.1) - (1.1)
--------------------- ----- -------------- ------------ ----------- -------------- ------------------ ---------
Profit/(loss) from
operations 2 23.0 (12.6) 10.4 22.8 (9.9) 12.9
Net finance costs 4 (3.3) - (3.3) (3.2) - (3.2)
--------------------- ----- -------------- ------------ ----------- -------------- ------------------ ---------
Profit/(loss) before
taxation 19.7 (12.6) 7.1 19.6 (9.9) 9.7
Taxation 5 (3.2) 4.3 1.1 (3.2) (0.1) (3.3)
-------------- ------------ ----------- -------------- ------------------ ---------
Profit/(loss) for
the period
attributable
to equity holders
of the parent 16.5 (8.3) 8.2 16.4 (10.0) 6.4
--------------------- ----- -------------- ------------ ----------- -------------- ------------------ ---------
Earnings per share
Basic 7 9.7p 4.8p 9.6p 3.8p
Diluted 7 9.3p 4.6p 9.3p 3.6p
--------------------- ----- -------------- ------------ ----------- -------------- ------------------ ---------
All results relate to continuing operations.
(1) Before items described in footnote 2 below.
(2) Includes exceptional items (property costs, restructuring
costs, provision for receivables and impairment charges) and other
non-underlying items of amortisation of intangible assets
(excluding software) and the impact of non-cash foreign currency
adjustments under IAS 39 and IAS 21 as set out in Note 3.
Consolidated statement of comprehensive income
For the 52 weeks ended 25 March 2017
52 weeks 52 weeks
ended ended
25 March 26 March
2017 2016
GBP million GBP million
-------------------------------------- --- ------------ ------------
Profit for the period 8.2 6.4
Items that will not be reclassified
subsequently to the income
statement:
Remeasurement of net defined
benefit liability - actuarial
(loss)/gain on defined benefit
pension schemes (9.7) 1.1
Deferred tax relating to
items not reclassified 0.5 (1.5)
-------------------------------------- --- ------------ ------------
(9.2) (0.4)
-------------------------------------- --- ------------ ------------
Items that may be reclassified
subsequently to the income
statement:
Exchange differences on translation
of foreign operations (1.8) (0.4)
Cash flow hedges: gains arising
in the period 20.2 4.2
Deferred tax relating to
items reclassified 1.1 (0.3)
19.5 3.5
-------------------------------------- --- ------------ ------------
Other comprehensive income
for the period 10.3 3.1
-------------------------------------- --- ------------ ------------
Total comprehensive income
for the period wholly attributable
to equity holders of the
parent 18.5 9.5
------------------------------------------- ------------ ------------
Consolidated balance sheet
As at 25 March 2017
25 March 26 March
2017 2016
GBP million GBP million
---------------------------------- ----- ---- ------------ ------------
Non-current assets
Goodwill 26.8 26.8
Intangible assets 36.6 27.1
Property, plant and equipment 80.4 69.4
Investments in joint ventures - -
Long term receivable 0.8 -
Deferred tax asset 24.8 20.3
Derivative financial instruments 0.2 0.2
169.6 143.8
----- --------------------------------------- ------------ ------------
Current assets
Inventories 102.0 101.8
Trade and other receivables 67.6 75.9
Current tax asset - 0.3
Derivative financial instruments 8.6 12.1
Cash and cash equivalents - 13.5
178.2 203.6
Total assets 347.8 347.4
----------------------------------------------- ------------ ------------
Current liabilities
Trade and other payables (125.5) (130.1)
Bank overdraft (0.9) -
Current tax liabilities (0.2) -
Derivative financial instruments (0.8) (1.1)
Short-term provisions (8.8) (14.6)
(136.2) (145.8)
----- --------------------------------------- ------------ ------------
Non-current liabilities
Trade and other payables (21.5) (22.1)
Borrowings (15.0) -
Retirement benefit obligations (80.1) (74.4)
Long-term provisions (13.6) (16.0)
(130.2) (112.5)
Total liabilities (266.4) (258.3)
----------------------------------------------- ------------ ------------
Net assets 81.4 89.1
----------------------------------------------- ------------ ------------
Equity attributable to equity
holders of the parent
Share capital 85.4 85.4
Share premium account 61.0 61.0
Own shares (1.5) (0.3)
Translation reserve (1.3) 0.5
Hedging reserve 5.2 9.7
Retained deficit (67.4) (67.2)
----------------------------------------------- ------------ ------------
Total equity 81.4 89.1
----------------------------------------------- ------------ ------------
Consolidated statement of changes in equity
For the 52 weeks ended 25 March 2017
Equity attributable to equity
holders of the parent
----------------------------------------------------------------------
Share Share Own Translation Hedging Retained Total
capital premium shares reserve Reserve earnings equity
account
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
----------------------- --------- --------- --------- ------------ --------- ---------- ---------
Balance at 26
March 2016 85.4 61.0 (0.3) 0.5 9.7 (67.2) 89.1
Other comprehensive
expense for the
period - - - (1.8) 21.3 (9.2) 10.3
Profit for the
period - - - - - 8.2 8.2
----------------------- --------- --------- --------- ------------ --------- ---------- ---------
Total comprehensive
income/(expense)
for the period - - - (1.8) 21.3 (1.0) 18.5
Removal from equity
to inventories
during the period - - - - (25.8) - (25.8)
Purchase of own
shares - - (1.2) - - - (1.2)
Credit to equity
for equity-settled
share-based payments - - - - - 0.8 0.8
Balance at 25
March 2017 85.4 61.0 (1.5) (1.3) 5.2 (67.4) 81.4
----------------------- --------- --------- --------- ------------ --------- ---------- ---------
For the 52 weeks ended 26 March 2016
Equity attributable to equity
holders of the parent
----------------------------------------------------------------------
Share Share Own Translation Hedging Retained Total
capital premium shares reserve reserve earnings equity
account
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
----------------------- --------- --------- --------- ------------ --------- ---------- ---------
Balance at 28
March 2015 85.2 60.8 (0.4) 0.9 6.8 (75.6) 77.7
Other comprehensive
expense for the
period - - - (0.4) 3.9 (0.4) 3.1
Profit for the
period - - - - - 6.4 6.4
----------------------- --------- --------- --------- ------------ --------- ---------- ---------
Total comprehensive
income/(expense)
for the period - - - (0.4) 3.9 6.0 9.5
Removal from equity
to inventories
during the period - - - - (1.0) - (1.0)
Issue of equity
shares 0.2 0.2 0.1 - - - 0.5
Credit to equity
for equity-settled
share-based payments - - - - - 2.4 2.4
Balance at 26
March 2016 85.4 61.0 (0.3) 0.5 9.7 (67.2) 89.1
----------------------- --------- --------- --------- ------------ --------- ---------- ---------
Consolidated cash flow statement
For the 52 weeks ended 25 March 2017
52 weeks 52 weeks
ended ended
25 March 26 March
2017 2016
GBP million GBP million
-------------------------------- ------------ ------------
Net cash flow from operating
activities 15.3 21.9
--------------------------------- ------------ ------------
Cash flows from investing
activities
Interest received 0.1 0.2
Purchase of property,
plant and equipment (28.2) (27.8)
Purchase of intangibles
- software (14.4) (11.4)
Proceeds from sale of 1.3 -
property, plant and equipment
Net cash used in investing
activities (41.2) (39.0)
--------------------------------- ------------ ------------
Cash flows from financing
activities
Interest paid (1.0) (1.4)
Drawdown on facility 15.0 -
Purchase of own shares (1.2) -
Issue of ordinary share
capital - 0.4
Net cash used in financing
activities 12.8 (1.0)
Net decrease in cash and
cash equivalents (13.1) (18.1)
--------------------------------- ------------ ------------
Cash and cash equivalents
at beginning of period 13.5 31.5
Effect of foreign exchange
rate changes (1.3) 0.1
(Overdraft)/cash and cash
equivalents at end of
period (0.9) 13.5
--------------------------------- ------------ ------------
Notes
1. General information
a) The accounting policies followed are the same as those
published by the Group within the 2016 annual report.
b) Whilst the financial information included in this preliminary
announcement has been prepared in accordance with IFRS as endorsed
by the European Union, this announcement does not itself contain
sufficient information to comply with all the disclosure
requirements of IFRS.
c) The Company believes that underlying profit before tax and
underlying earnings provides additional useful information for
shareholders. The term underlying earnings is not a defined term
under IFRS and may not therefore be comparable with similarly
titled profit measurements reported by other companies. It is not
intended to be a substitute for IFRS measures of profit. As the
Company has chosen to present an alternative earnings per share
measure, a reconciliation of this alternative measure to the
statutory measure required by IFRS is given in Note 7.
d) The financial information set out in this announcement does
not constitute the Company's statutory accounts for the 52 week
period ended 25 March 2017 or the 52 week period ended 26 March
2016, but it is derived from those accounts. Statutory accounts for
2016 have been delivered to the Registrar of Companies and those
for 2017 will be delivered following the Company's annual general
meeting. The auditors have reported on those accounts; their
reports were unqualified, did not draw attention to any matters by
way of emphasis without qualifying their report and did not contain
statements under s498 (2) or (3) of the Companies Act 2006. The
2016 financial statements are available on the Company's website
(www.mothercareplc.com).
e)
2. 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 board in order to allocate
resources to the segments and assess their performance. The Group's
reporting segments under IFRS 8 are UK and International.
UK comprises the Group's UK store and wholesale operations,
catalogue and web sales. The International business comprises the
Group's franchise and wholesale revenues outside the UK. The
unallocated corporate expenses represent board and company
secretarial costs and other head office costs including audit,
professional fees, insurance and head office property.
52 weeks ended 25 March 2017
----------------------------------------------------------
Unallocated
corporate
UK International expenses Consolidated
GBP GBP million GBP million GBP million
million
----------------------------- --------- ---------------- ------------ ---------------
Revenue
External sales 459.4 208.0 - 667.4
------------------------------ --------- ---------------- ------------ ---------------
Result
Segment result (underlying) (4.4) 35.2 (7.0) 23.8
------------------------------ --------- ---------------- ------------
Share-based payments (0.8)
Non-cash foreign currency
adjustments (non-underlying) 4.1
Amortisation of intangible
assets (non-underlying) (1.0)
Exceptional items (Note
3) (15.7)
------------------------------ --------- ---------------- ------------ ---------------
Profit from operations 10.4
Net finance costs (underlying) (3.3)
----------------------------------------- ---------------- ------------ ---------------
Profit before taxation 7.1
Taxation 1.1
Profit for the period 8.2
----------------------------------------- ---------------- ------------ ---------------
52 weeks ended 26 March 2016
--------------------------------------------------------------
Unallocated
corporate
UK International expenses Consolidated
GBP GBP million GBP million GBP million
million
----------------------------- --------- ---------------- ------------ -------------------
Revenue
External sales 459.7 222.6 - 682.3
------------------------------ --------- ---------------- ------------ -------------------
Result
Segment result (underlying) (6.4) 40.3 (8.1) 25.8
------------------------------ --------- ---------------- ------------
Share-based payments (3.0)
Non-cash foreign currency
adjustments (non-underlying) 1.2
Amortisation of intangible
assets (non-underlying) (0.9)
Exceptional items (Note
3) (10.2)
------------------------------ --------- ---------------- ------------ -------------------
Profit from operations 12.9
Net finance costs (underlying) (3.2)
----------------------------------------- ---------------- ------------ -------------------
Profit before taxation 9.7
Taxation (3.3)
Profit for the period 6.4
----------------------------------------- ---------------- ------------ -------------------
3. Exceptional and other non-underlying items
Due to their significance or one-off nature, certain items have
been classified as exceptional or non-underlying as follows:
52 weeks 52 weeks
ended ended
25 March 26 March
2017 2016
GBP million GBP million
------------------------------------------- ------------ ------------
Exceptional items:
Restructuring costs in cost
of sales (5.5) (0.3)
Restructuring and property
impairment included in administrative
expenses (5.7) (6.5)
Joint venture trade receivable
provision included in administrative (4.0) -
expenses
Property related costs in
other exceptional items (0.5) (0.1)
Impairment of investment
in joint venture in other
exceptional items - (3.3)
Total exceptional items: (15.7) (10.2)
Other non-underlying items:
Non-cash foreign currency
adjustments under IAS 39
and IAS 21(1) 4.1 1.2
Amortisation of intangibles(1) (1.0) (0.9)
Exceptional and other non-underlying
items (12.6) (9.9)
-------------------------------------------- ------------ ------------
(1) Included in non-underlying cost of sales is a credit of
GBP3.1 million (2016: credit of GBP0.3 million).
Restructuring costs in cost of sales
During the 52 weeks ended 25 March 2017 a charge of GBP5.5
million was recognised. GBP3.4 million was related to the
international restructure, GBP1.1 million to warehouse development
costs and GBP1.0 million warehouse closure costs.
GBP3.4 million was related to costs associated to the
international restructure. Towards the end of 2016, the Group
recognised that significant challenges exist within the current
International business model requiring a wide range restructure.
GBP3.2 million of the restructure costs relate to a one-off
increase in the stock provision to reflect the alignment of our
international trading strategy with the UK, i.e. more full price
sales, less discounting and tighter management of stocks.
GBP1.1 million was related to the planned development of
warehouses in the UK and consists of incremental labour and
warehouse storage costs.
GBP1.0 million was related to the planned closure of the online
warehouse. The costs consist of unavoidable costs associated to the
closure. The online warehouse operation in the following year will
operate from our main distribution centre.
During the 52 weeks ended 26 March 2016 a charge of GBP0.3
million was recognised in relation to the store restructuring
programme.
Restructuring and property related costs included in
administrative expenses
During the 52 weeks ended 25 March 2017 a charge of GBP5.7
million was recognised. GBP3.6 million related to head office
restructure costs, GBP0.2m related to the write off of amounts owed
by a franchisee and GBP1.9 million store impairment.
The Group, recognised GBP3.6 million associated to head office
restructure. GBP2.1 million related to head office redundancies and
IT restructure, GBP1.5 million related to the Group strategy
review. The strategy review continues to evolve the strategic six
pillars, drive profitability and deliver effective and significant
changes. Such costs will continue into 2018.
GBP1.9 million charge was recognised where the carrying value of
property, plant and equipment is higher than net realisable value
(2016: GBP1.8 million credit). This is mainly driven by an overall
decline in store net present value.
During the 52 weeks ended 26 March 2016 a charge of GBP6.5
million was recognised mainly related to fixed assets written off
in relation to the store restructuring and refurbishment
programme.
Joint venture trade receivable provision in administration
expenses
Due to the challenging economic conditions and performance over
the past 12 months in China, the Group took a prudent approach and
provided for all outstanding debt at 26 March 2016, GBP4.0 million
(charged to exceptional items) plus a provision of GBP1.5 million
for overdue debt in the current year (charged to underlying
profit).
Included in gross trade receivables is GBP10.4 million (2016:
GBP4.0 million) for amounts owed from the joint venture in China,
in addition the Group has made a loan of GBP0.8 million during the
year. A provision of GBP5.5 million (2016: GBPnil) exists for debt
where there is uncertainty over the recoverability.
Property related costs
Provisions of GBP0.5 million (2016: GBP0.1 million) have been
made for onerous leases and losses on disposal/termination of
property interests.
Impairment of joint venture investment
During the 52 weeks ended 26 March 2016, the Group fully
impaired its investment in Mothercare-Goodbaby China Retail Limited
('China JV') due to uncertainties in respect of the future cash
flows. The impairment was recorded at the start of January 2016.
The charge in the period amounts to GBP3.3 million.
4. Net finance costs
52 weeks 52 weeks
ended 25 ended
March 2017 26 March
2016
GBP million GBP million
------------------------------------ ------------ ------------
Interest and bank fees on
bank loans and overdrafts 0.7 0.5
Net interest on liabilities/return
on assets on pension 2.6 2.7
Net finance costs 3.3 3.2
------------------------------------ ------------ ------------
Financing represents interest receivable on bank deposits, less
amounts capitalised for borrowing costs associated with the build
of qualifying assets, fees 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.
5. Taxation
The (credit)/charge for taxation on profit for the period
comprises:
52 weeks 52 weeks
ended 25 ended
March 2017 26 March
2016
GBP million GBP million
---------------------------------- ------------ ------------
Current tax:
Current year 1.6 1.8
Adjustment in respect of 0.2 -
prior periods
1.8 1.8
---------------------------------- ------------ ------------
Deferred tax:
Current year 0.5 0.6
Change in tax rate in respect
of prior periods 0.3 0.2
Adjustment in respect of
prior periods (3.7) 0.7
---------------------------------- ------------ ------------
(2.9) 1.5
(Credit)/charge for taxation
on profit for the period (1.1) 3.3
---------------------------------- ------------ ------------
UK corporation tax is calculated at 20% (2016: 20%) of the
estimated assessable profit for the period. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
Due to the adoption of FRS 101 for statutory accounting purposes
subsequent to the preparation of the consolidated group financial
statements for the 52 weeks ended 26 March 2016, further tax losses
have become available within the Group and a prior year adjustment
of GBP1.1 million to recognise a deferred tax asset in respect of
these losses has been recognised in the financial statements in the
current period. The corresponding credit to the income statement
has been recognised as a non-underlying credit given the one-off
nature of this transaction.
The (credit)/charge for the period can be reconciled to the
profit for the period before taxation per the consolidated income
statement as follows:
52 weeks 52 weeks
ended 25 ended
March 2017 26 March
2016
GBP million GBP million
------------------------------------- ------------ ------------
Profit for the period before
taxation 7.1 9.7
Profit for the period before
taxation multiplied by the
standard rate of corporation
tax in the UK of 20% (2016:
20 %) 1.4 1.9
Effects of:
(Income)/expenses not deductible
for tax purposes (0.3) 1.6
Rate change on deferred tax 0.3 0.2
Impact of difference in current (0.1) -
and deferred tax rates
Impact of overseas tax rates 1.1 1.5
Relief for losses brought
forward - (1.9)
Impact of double tax relief - (0.7)
Adjustment in respect of 0.2 -
prior periods - current tax
Adjustment in respect of
prior periods - deferred
tax (3.7) 0.7
------------------------------------- ------------ ------------
(Credit)/charge for taxation
on profit for the period (1.1) 3.3
------------------------------------- ------------ ------------
In addition to the amount credited to the income statement, a
deferred tax credit relating to retirement benefit obligations
amounting to GBP0.5 million (2016: GBP1.5 million charge) has been
taken directly to other comprehensive income.
6. Dividends
The directors are not recommending the payment of a final
dividend for the year (2016: GBPnil). No interim dividend was paid
during the year (2016: GBPnil).
7. Earnings per share
52 weeks 52 weeks
ended ended
25 March 26 March
2017 2016
Million million
----------------------------------------- ------------ ------------
Weighted average number of
shares in issue 170.5 170.6
Dilution - option schemes
(for underlying results only) 7.9 6.0
----------------------------------------- ------------ ------------
Diluted weighted average
number of shares in issue 178.4 176.6
----------------------------------------- ------------ ------------
Number of shares at period
end 170.9 170.9
----------------------------------------- ------------ ------------
GBP million GBP million
----------------------------------------- ------------ ------------
Profit for basic and diluted
earnings per share 8.2 6.4
Exceptional and other non-underlying
items (Note 3) 12.6 9.9
Tax effect of above items (4.3) 0.1
Underlying earnings 16.5 16.4
----------------------------------------- ------------ ------------
pence pence
----------------------------------------- ------------ ------------
Basic earnings per share 4.8 3.8
Basic underlying earnings
per share 9.7 9.6
Diluted earnings per share 4.6 3.6
Diluted underlying earnings
per share 9.3 9.3
----------------------------------------- ------------ ------------
8. Reconciliation of cash flow from operating activities
52 weeks 52 weeks
ended ended
25 March 26 March
2017 2016
GBP million GBP million
Profit from retail operations 10.9 17.4
Adjustments for:
Depreciation of property,
plant and equipment 14.2 13.3
Amortisation of intangible
assets 5.0 5.1
Impairment of property, plant
and equipment and intangible
assets 1.9 1.5
Losses on disposal of property,
plant and equipment and intangible
assets - 4.2
Profit on non-underlying
non-cash foreign currency
adjustments (4.1) (1.2)
Equity-settled share-based
payments 0.8 3.0
Movement in provisions (7.5) (13.9)
Cash payments for other exceptional
items (0.2) 2.8
Amortisation of lease incentives (5.0) (4.1)
Lease incentives received 2.0 5.3
Payments to retirement benefit
schemes (9.6) (11.1)
Charge to profit from operations
in respect of retirement
benefit schemes 3.0 2.7
Operating cash flow before
movement in working capital 11.4 25.0
(Increase)/decrease in inventories (0.5) (12.9)
Decrease/(increase) in receivables 7.5 (1.1)
(Decrease)/increase in payables (2.0) 13.3
Cash generated from operations 16.4 24.3
------------------------------------- ------------ ------------
Income taxes paid (1.1) (2.4)
------------------------------------- ------------ ------------
Net cash flow from operating
activities 15.3 21.9
------------------------------------- ------------ ------------
9. Events after the balance sheet date
On 5 May 2017 the Group refinanced with the support of its two
existing banks, HSBC and Barclays, amending its committed
facilities of GBP50.0 million to a GBP62.5 million revolving credit
facility and a GBP5.0 million uncommitted overdraft (at an interest
rate range of 2.0% to 3.0% above LIBOR). The amended revolving
credit facility is made up of two tranches, a GBP50.0 million
maturing in May 2020 (with an option to extend for an additional
one year on two occasions subject to lenders' approval) and an
additional GBP12.5 million maturing in November 2018 (with an
option to extend for an additional six months on two occasions
subject to lenders' approval). In addition, an accordion facility
with a variable limit that allows the Group to draw down up to
GBP75.0 million has been made available, subject to lenders'
approval.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KMGMKVNNGNZM
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