TIDMMTC
RNS Number : 2957N
Mothercare PLC
22 September 2023
Mothercare plc
Full Year Results 2023
Further progress made on the journey towards becoming an
asset-light, global franchising business
Mothercare plc ("Mothercare", "the Company" or "the Group"), the
highly trusted British heritage brand, that connects with the
parents of newborn babies and children across multiple product
categories throughout their early life as parents,, today announces
full year results for the 52 week period to 25 March 2023.
Comparatives are based on the 52 week period to 26 March 2022.
Key Highlights
-- 9% increase in net worldwide retail sales by franchise
partners in continuing markets of GBP322.7 million (2022: GBP297.1
million excluding Russia, GBP385.3 million including Russia).
-- Adjusted EBITDA of GBP6.7 million (2022: GBP12.0 million), ahead of analysts' expectations.
-- Net borrowings of GBP12.4 million (2022: GBP9.9 million) at the year end.
-- Pension scheme deficit materially reduced to GBP35.0 million (March 2020: GBP124.6 million).
-- Pension contributions reduced by GBP38.8 million to GBP34.9 million.
Current Trading & Outlook
-- In the first twenty five weeks of FY24, the Group's Franchise
Partners recorded total retail sales of GBP132.5 million (FY23:
GBP156.8 million), with the decline largely resulting from the
continuing challenges in our Middle Eastern markets
-- We expect to complete a refinancing shortly and remain in
discussions with a number of key stakeholders and financing
partners, to ensure that the Group has adequate and appropriate
financing for the future.
-- Our medium-term guidance for the steady state operation, in
more normal circumstances, of our continuing franchise operations
remains that they are capable of exceeding GBP10 million operating
profit and that opportunities exist to grow our global footprint
further.
-- We are now focused on both restoring critical mass and
monetising the Mothercare global brand IP.
Financial Highlights
-- Loss for the 52 weeks to 25 March 2023 of GBP0.1 million (2022: GBP12.1 million profit).
-- Net debt(3) at GBP12.9 million (2022: GBP11.0 million).
Our Group
2023 2022
52 weeks to 52 weeks to % change
25 Mar 2023 26 Mar 2022 vs.
GBPmillion GBPmillion last year
----------------------------------------- ------------ ------------ ----------
Turnover 73.1 82.5 (11)%
Adjusted EBITDA 6.7 12.0 (44)%
Adjusted operating profit 6.2 11.1 (44)%
Group adjusted profit after taxation(2) 1.1 9.0 (88)%
Statutory (loss)/profit (0.1) 12.1 -
Our Franchise partners
2023 2022
52 weeks to 52 weeks to % change
25 Mar 2023 26 Mar 2022 vs.
GBPmillion GBPmillion last year
-------------------------------- ------------ ------------ ----------
Worldwide retail sales(1) GBPm 322.7 385.3 (16)%
Online retail sales GBPm 29.3 40.9 (28)%
Total number of stores 506 680 (26)%
Space (k) sq. ft. 1,223 1,828 (33)%
-------------------------------- ------------ ------------ ----------
Clive Whiley, Chairman of Mothercare, commented:
"I am pleased with the progress Mothercare has made during the
year as we continue our transformation towards an asset-light,
global franchising business. Our priority over the last 12 months
has been the continued execution of our Transformation Plan and
cementing Mothercare's future as a sustainable business model, for
the benefit of all our stakeholders.
I would like to thank our colleagues across the business,
alongside our pension trustees and all other stakeholders, for
their continuing support. Without this, we would not be in the
profitable, cash generative position we are today.
We have a compelling market opportunity. Mothercare remains in
an unparalleled position of being a highly trusted British heritage
brand, with a significant opportunity to leverage this brand equity
and grow our global presence beyond our existing franchise network.
There is still work to do, but we are excited about the future
prospects for Mothercare as we leave behind the turmoil of recent
years."
Investor and analyst enquiries
to:
Mothercare plc Email:
Clive Whiley, Chairman investorrelations@mothercare.com
Andrew Cook, Chief Financial
Officer
Numis Securities Limited (NOMAD Tel: 020 7260 1000
& Joint Corporate Broker)
Luke Bordewich
Henry Slater
Cavendish Capital Markets Tel: 020 7220 0500
Limited (Joint Corporate Broker)
Carl Holmes
Media enquiries to: Email: mothercare@mhpgroup.com
MHP Tel: 020 3128 8613
Rachel Farrington
Tim Rowntree
Notes
The Directors believe that alternative performance measures
("APMs") assist in providing additional useful information on the
performance and position of the Group and across the period because
it is consistent with how business performance is reported to the
Board and Operating Board.
APMs are also used to enhance the comparability of information
between reporting periods and geographical units (such as
like-for-like sales), by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid the user
in understanding the Groups performance. Consequently, APMs are
used by the Directors and management for performance analysis,
planning, reporting and incentive setting purposes. The key APMs
that the Group has focused on in the period are as set out in the
Glossary.
1 - Worldwide retail sales are total international retail
franchise partner sales to end customers (which are estimated and
unaudited).
2 - Adjusted loss before taxation is stated before the impact of
the adjusting items set out in note 4.
3 - Net Debt is defined as total borrowings including
shareholder loans, cash at bank and IFRS 16 lease liabilities.
4 - this announcement contains certain forward-looking
statements concerning the Group. Although the Board believes its
expectations are based on reasonable assumptions, the matters to
which such statements refer may be influenced by factors that could
cause actual outcomes and results to be materially different. The
forward-looking statements speak only as at the date of this
document and the Group does not undertake any obligation to
announce any revisions to such statements, expect as required by
law or by any appropriate regulatory authority.
5 - The information contained within this announcement is deemed
by the Company to constitute inside information for the purposes of
the Market Abuse Regulation (EU) No 596/2014. Upon the publication
of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public
domain.
6 - the person responsible for the release of this announcement
is Lynne Medini, Group Company Secretary at Mothercare plc,
Westside 1, London Road, Hemel Hempstead, HP3 9TD.
7 - Mothercare plc's Legal Entity Identifier ("LEI") number is
213800ZL6RPV9Z9GFO74
Chairman's Statement
Introduction and the next year
Throughout the challenges of recent years our prime goal has
been to protect the underlying Mothercare brand intellectual
property ("IP"), in a solvent business structure, for the benefit
of all stakeholders. We have also sought to avoid unnecessary
equity dilution at all costs.
Accordingly, we are determined to:
o continue to reduce the combined business and pension schemes
financing requirement , whilst putting in place adequate working
capital facilities and eliminating the current unsustainable cash
financing charges;
o sponsor growth in our Partners retail sales and store
footprint;
o explore new territories and additional routes to market;
and
o establish a platform for step-change growth.
All of these objectives will help to improve the profitability
and covenant of the underlying business for actuarial pension and
stock market rating purposes alike.
Hence, we believe that the enormous effort applied over the last
five years has finally provided line-of-sight to rebalancing the
Mothercare brand IP value in a way that also promotes growth in our
royalty income.
The last five years
On my appointment as Chairman in April 2018, the combined
immediate refinancing requirement & pension schemes actuarial
deficit was GBP256 million for a business that reported a loss
before tax of GBP72.8 million on net worldwide retail sales of over
GBP600 million in the year ended March 2018.
The Transformation Plan launched immediately thereafter secured
a flexible financial structure which maintained a sustainable
business model with a capacity to sponsor future growth: ultimately
leading to the transition of the business to focus upon our core
international franchise and brand management competencies, as an
asset light global franchising business.
Extraneous circumstances surrounding the pandemic and the
Ukraine conflict, introduced:
-- Covid-19 led to an unprecedented demand shock (with a low
point in April 2020 of only 27% of our Franchise Partners' global
retail locations being open) with management focusing upon the
well-being of staff alongside successfully protecting corporate
liquidity to preserve the businesses of our manufacturing &
franchise partners; and
-- the suspension of the Russian retail business, in March 2022,
and the eventual withdrawal of the right to operate Mothercare
branded stores in Russia at the end of June 2022 drove numerous
economic, logistical & business disruptions into the Group.
Unfortunately, the dis-economies of scale associated with the
above, alongside not always maintaining product development in
unison with all our partners expectations, contributed to a halving
of our franchise partners store footprint over the last five
years.
The Year under review
On the same basis as the loss above was reported, for the
financial year to 25 March 2023 we are reporting a profit before
tax of GBP2.3 million on net worldwide retail sales by franchise
partners of GBP322 million with a comparative financing requirement
including pension deficit of GBP55 million, some 80% lower than the
inherited position. We have also generated free cash flow from
operations. Further financial highlights have been:
-- an adjusted EBITDA of GBP6.7 million (2022: GBP12.0 million).
For the prior year our Russian territory directly contributed some
GBP5.5 million to our adjusted EBITDA, which coupled with some
margin benefit due to shipping delays in last year's results, means
there is a year on year improvement in the underlying profitability
of the business once these elements are excluded;
-- net worldwide retail sales by franchise partners were
GBP322.7 million (2022: GBP385.3 million). For the prior year our
Russian territory contributed GBP88 million hence total retail
sales were 9% higher than the levels for the previous financial
year with the Russian retail sales excluded. Excluding our Middle
East markets as well as Russia, the increase was 17% and our Middle
East markets (43% of our total retail sales) reduced by 1% (at
actual exchange rates);
We remain mindful that the pandemic also had a significant
impact on our franchise partners' profitability, inevitably
resulting in a need for them to clear old inventory, reduce costs
and the levels of investment they have been able to make in their
businesses. This is likely to mean that the return to pre pandemic
levels of trading will take longer and we are working with our
partners to assist that recovery, ultimately benefitting both our
own business and our franchise partners in the longer term.
We continue to make ongoing improvements in product and service
but these will not offset completely the above factors which will
continue to impact the Group results for the financial year to
March 2024 and beyond.
Financing
At the year-end the Group had net borrowings of GBP12.4 million
(March 2022: GBP9.9 million). This comprised total cash of GBP7.1
million (March 2022: GBP9.2 million), reflecting ongoing tight
control of cash, against the GBP19.5 million (GBP19.1 million) of
the Group's existing loan facility with GB Europe Management
Services Limited ("GBB") which remained fully drawn across the
year. This unavoidable increase in net debt, set against the
challenging backdrop of significant increases in interest rates,
further demonstrates our progress as a focused, asset light, global
franchising business with no directly operated stores and greatly
reduced direct costs.
Since completing the GBP19.5 million secured four-year loan
facility with GBB, in September 2022, the interest rate on this
loan has increased to the current level of 19.2%, which coupled
with the extended time to return to pre-pandemic retail sales
levels, particularly in our Middle Eastern markets, means that we
will require waivers to future periods' covenant tests.
We have therefore commenced refinancing discussions with GBB to
vary, renegotiate or refinance this debt facility alongside
continuing to explore various financing alternatives. For the
avoidance of doubt, the Group does not require additional liquidity
in our current forecasts although this would be preferable to
accommodate business development and unanticipated challenges..
The first stage of this process was agreeing revised Deficit
Repair Contributions ("DRC's") with the Mothercare Pension Scheme
Trustees ("Trustees") of our defined benefit schemes' ("Schemes")
to reduce the annual cash cost to the Company.
Pension Schemes and revised pension contribution plans
We retain a good working relationship with the Trustees and I am
pleased to report that, following the most recent valuation of the
Schemes in March 2023, we have reached formal agreement with the
Trustees for a further reduction in DRCs. The revised recovery plan
now sets out aggregate contributions of GBP34.9 million in the
financial years March 2024 to March 2033. This represents a GBP38.8
million reduction in the aggregate cash payments that were to have
been made to the pension schemes in that period under our previous
repayment commitments.
The last full actuarial valuation of the schemes was at 31 March
2023 and showed a deficit of GBP35 million, resulting from total
assets of GBP198 million and total liabilities of GBP233
million.
The revised recovery plan agreed with the Trustees includes
total contributions (DRCs plus costs) in the financial years to
March 2024 GBP2.4 million; March 2025 GBP2.0 million; March 2026
& 2027 GBP3.0 million; March 2028 & 2029 GBP4.0 million;
March 2030 & 2031 GBP5.0 million and March 2032 GBP6 million
and March 2033 GBP0.5 million aggregating to fully fund the GBP35
million deficit by March 2033.
Opportunities for growth
As we pursue our goal to be the world's most trusted and
desirable brand for parents of babies and young children, the facts
surrounding our market remain compelling:
-- Mothercare remains in an almost unparalleled position of
being a highly trusted British heritage brand, that connects with
the parents of newborn babies and children across multiple product
categories throughout their early life as parents;
-- we estimate that there are some 30 million babies born every
year in the world, into markets addressable by the Mothercare
brand, yet only 700,000 in aggregate in the UK. Mothercare is still
not represented in eight of the top ten markets in the world, when
ranked by wealth and birth rate; and
-- we have yet to capitalize on the multiple opportunities
available to us in wholesale, licensing or online marketplaces to
grow the global presence of the Mothercare brand beyond our
existing franchise network.
This year we intend to leverage the full bandwidth of this
intrinsic value through connections with other businesses, the
development of our branded product ranges and licensing beyond our
historic boundaries.
Cost Reduction Programme and Enterprise Resource Planning
("ERP") system
Our continual review and challenge to costs, whilst still
ensuring we operate to the standards of a world class business,
should lead to a further net reduction in administrative expenses
once the ERP system is fully implemented later this financial
year.
Although our new ERP system has faced delays, I would like to
thank the internal team responsible for advancing this project,
within tight budgetary controls, for their efforts in bringing a
project of this size and complexity close to a conclusion.
Supply chain model
The loss of revenue and volume orders from the Russian retail
business represented the single biggest impact on the Group during
the period under review and required the necessary adjustments to
our supply chain, operations and administrative costs to address
the consequent diseconomies of scale and maintain our service to
our franchise partners.
We continue to evolve our supply chain to reduce cost,
complexity and deliver goods to our franchise partners in the
quickest way possible. We also closed our remaining UK distribution
centre in April 2022 and continue to develop our product option
framework as we seek to curtail the impact of input cost
inflation.
Management & Board changes
We have a PLC Board that we believe is appropriate for a company
of our size, nature and circumstances. Our Non-Executive Directors
have relevant skills, continue to directly contribute to the
ongoing change process, are regularly appraised and are encouraged
to interface with the Operating Board.
During the year we also supplemented the Operating Board via the
appointment of a Brand Director and, following our successful
transition to becoming an international brand owner and operator,
saw the departure of Kevin Rusling, our Chief Operating Officer,
who had been instrumental in managing that transition over the
previous five years.
Finally, we appointed a new Chief Executive Officer during the
year but unfortunately this failed to have the immediate impact
upon our core business we expected and the appointment was
terminated. We are therefore renewing our search and in the interim
the day-to-day management of the Group is being run by the Chief
Financial Officer and the Operating Board with oversight from me as
Non- Executive Chairman.
Dividend Policy
The Company has not paid a dividend since February 2012. The
Directors understand the importance of optimising value for
shareholders and it is the Directors' intention to return to paying
a dividend when it is financially prudent for the Group to do so
but recognising the restrictions within the Company's agreements
with its lenders and the Pension Trustees.
Summary and Outlook
As highlighted at the beginning of my statement, it has been
five years of hard work and transformative change for the Group
and, on behalf of the Board I would like to thank our colleagues
across the business, alongside our pension trustees and all other
stakeholders for their unstinting support throughout those
difficult times. Without that support, alongside the resilience we
have built into the business throughout this journey, we could not
have dealt with the major challenges we have faced and Mothercare
would not be in the profitable, cash generative position we are
today.
We expect to complete a refinancing shortly and remain in
discussions with a number of key stakeholders and financing
partners, to ensure that the Group has adequate and appropriate
financing for the future. Furthermore, our medium-term guidance is
unchanged for the steady state operation, in more normal
circumstances, and we believe our continuing franchise operations
remain capable of delivering approximately GBP10 million operating
profit.
In short, we are now focused on both restoring critical mass and
monetising the Mothercare global brand IP. This is an exciting
prospect for our partners, our colleagues and all our stakeholders
alike as we finally leave behind the turmoil of recent years.
Mothercare plc
Preliminary Results
FINANCIAL AND OPERATIONAL REVIEW
Our total retail sales and adjusted EBITDA from our continuing
markets have grown year on year. Demonstrating the strength in our
asset light, reduced risk, international
operating model.
The significant reduction in our pension contributions is the
first step in ensuring our longer term financing arrangements are
adequate and appropriate for the future needs of the Group.
International retail sales by our franchise partners of GBP322.7
million (2022: GBP385.3 million) includes no contribution for the
Russia market, which contributed GBP88.2 million to the FY22 retail
sales and was suspended at the end of our previous financial year.
Excluding the Russian retail sales from FY22, our total retail
sales from our continuing markets in FY23 increased by 9%.
The profit from operations in the year was GBP6.0 million (2022:
GBP13.0 million) reflecting a number of significant changes. To
better understand the underlying results, the Group uses a
non-statutory reporting measure of adjusted profit, to show results
before any one-off significant non-trading items. This involves
removing the adjusted items which relate to restructuring and
reorganisation costs and are non- recurring (GBP0.2 million added
back in year ended 2023 and GBP1.9 million subtracted in 2022),
together with depreciation and amortisation of GBP0.5 million
(2022: GBP0.9 million), resulting in an adjusted EBITDA profit for
the year of GBP6.7 million (2022: GBP12.0 million).
For the year to March 2022 our Russian territory directly
contributed some GBP5.5 million to our adjusted EBITDA, which
coupled with some margin benefit due to shipping delays in last
year's results, means there is a year on year improvement in
underlying profitability of the business, when these elements are
excluded. The Group recorded a loss for the 52 weeks to 25 March
2023 of GBP0.1 million (2022: profit of GBP12.1 million). The
adjusted profit for the year was GBP1.1 million (2022: GBP9.0
million). The adjusted items are detailed in note 6.
Retail space at the end of the year was 1.2 million sq. ft. from
506 stores (2022: 1.8 million sq. ft. from 680 stores, excluding
Russia these figures were 1.4 million sq. ft. from 564 stores)
PENSION SCHEME CONTRIBUTIONS
There are two defined benefit schemes, both of which are now
closed to new members, the Staff Scheme and the Executive Scheme.
Following the full actuarial triennial valuation at 31 March 2023,
the deficit on the Staff Scheme was GBP35.0 million, resulting from
assets of GBP198 million and liabilities of GBP233.0 million, the
Executive Scheme was in surplus, with assets of GBPXX million and
liabilities of GBPXX million. The schemes are independent and so
the surplus on the Executive Scheme cannot be used to set off the
deficit on the Staff Scheme. The deficit to be funded at 31 March
2023 of GBP35 million is a significant reduction from the deficit
of GBP124.6 million at 31 March 2020: the Staff Scheme deficit of
GBP101.7 million, from assets of GBP278.0 million and liabilities
of GBP379.7 million and the Executive Scheme deficit of GBP22.9
million, from assets of GBP105.7 and liabilities of GBP128.6
million.
The following annual contributions, which include the deficit
reduction contributions for the Staff Scheme and the costs for both
schemes, have now been agreed with the trustees, for the years
ending in March as follows: 2024 - GBP2.4 million; 2025 - GBP2.0
million; 2026 and 2027 - GBP3.0 million; 2028 and 2029 - GBP4.0
million; 2030 and 2031 GBP5.0 million; 2032 - GBP6.0 million and
2033 GBP2.0 million, a total of GBP36.4 million. These
contributions represent a cash saving of GBP37.3 million when
compared to the previous contributions we were committed to pay.
The previously agreed annual contributions to the pension schemes,
for the years ending in March, were as follows: 2024 - GBP4.0
million; 2025 - GBP7.0 million; 2026 -
GBP8.0 million; 2027 to 2032 - GBP9.0 million and 2033 - GBP0.7
million, a total of GBP73.7 million.
These deficits are on an actuarial technical provisions basis,
which is used to determine the contributions required and produces
different figures from those included in the balance sheet, which
are required to be from applying IAS 19 and resulted in the GBP8.4
million asset on the balance sheet in relation to the pension
schemes.
FINANCING
At the year-end Mothercare had total cash of GBP7.1 million
(March 2022: GBP9.2 million), reflecting ongoing tight control of
cash, against the GBP19.5 million (March 2022: GBP19.1 million) of
the Group's existing loan facility, which remained fully drawn
across the year.
With recent increases in interest rates, the interest rate on
this loan is currently approximately 19.2%, which coupled with the
extended time to return to pre-pandemic retail sales levels,
particularly in our Middle Eastern markets, means the Board's
current forecasts for continuing operations show the Group may
require waivers to future periods' covenant tests.
We have therefore commenced refinancing discussions with our
lender to vary, renegotiate or refinance this debt facility,
additionally we are looking at various financing alternatives
(including equity and equity linked structures) to give us both
additional flexibility and reduced cash financing costs. For the
avoidance of doubt the Group does not require (and is not seeking
through this refinancing) additional liquidity.
The first stage of this process was the agreement of the
significantly reduced pension contributions as detailed above. We
therefore expect to complete the refinancing in the near future, to
ensure the Group has adequate and appropriate financing for the
future.
OPERATING MODEL
The Group continues to work towards its goal of becoming an
asset light business. We continue to use our tripartite agreement
('TPA') process, whereby the franchise partners commit to paying
the manufacturing partners for the product when due and in return
the manufacturing partners were generally willing to re- extend
credit terms that had sometimes been lost because of the UK retail
administration. The TPA process has resulted in a substantial
reduction in our working capital requirement and has been an
instrumental element of our successful navigation through the
impact of COVID-19.
We have subsequently further improved the TPA model whereby the
franchise partner is invoiced directly by the manufacturing
partner. This allows the manufacturing partners the opportunity to
obtain credit insurance in relation to the franchise partners debt,
which due to MGB's limited trading history was sometimes difficult
to obtain for invoices raised to MGB. Additionally, this model
removes the Group's exposure to the debt and working capital
requirement for these products. Where this is the case, under IFRS
15 the Group is the agent in the transaction - previously the Group
was the principal. Hence for these products the creditors and stock
will not be recognised by the Group and whilst the associated
revenue and cost of sales will also be excluded there will be no
material impact on the absolute margin earned. The responsibility
for design, quality control and choice of manufacturing partner for
these products, are unchanged and remains with the Group.
For the latest orders for the spring/summer 2024 season, we
expect some 70% (FY22 50%) of the products by value, to be invoiced
directly to franchise partners by our manufacturing partners. We
continue to work with our larger franchise partners to move them to
this basis. For some of the smaller franchise partners we are
obtaining bank guarantees or letters of credit to reduce our debt
exposure.
We are also moving more product direct from manufacturing
partners to franchise partners. For spring/summer 2024, we expect
90% (FY22 80%), by value, to be shipped in this way. The remaining
10% are smaller orders that cannot be viably shipped direct and
they are consolidated on our in our warehouse in China.
These new ways of working are being accepted by both our
franchise and manufacturing partners as they are beneficial for
all. Our franchise partners have the potential of reduced
distribution recharges, shorter delivery times and improved surety
and availability of product. In turn, manufacturing partners have
greater security of payment through credit insurance or simply
dealing directly with some of our well capitalised franchise
partners.
ENTERPRISE RESOURCE PLANNING ("ERP") SYSTEM
Despite experiencing further delays, full testing of our new ERP
is underway and the initial feedback is positive though there will
inevitably be some elements that need amending. The full system is
expected to be live this financial year, with the product lifecycle
management system having gone live last May. The contract for the
creation of the ERP is on a fixed cost basis so will not increase,
however the costs of our own implementation team, which are both
internal and external continue to be capitalised. Once fully live
the annual IT cost savings resulting from the ERP are still
expected to be approximately GBP1 million. In addition to our own
savings there should be savings for both out franchise partners in
dealing with our business, through bespoke portals and quicker and
easier information flows with increased integrity and accuracy.
BALANCE SHEET
The balance sheet moved from a net asset position of GBP1.5
million in prior year to a net liability position of GBP1.8 million
at the end of the current year. A decrease in current assets of
GBP3.7 million was offset by a GBP2.2 million decrease in current
liabilities. Intangible assets increased by GBP2.2 million largely
due to acquisitions made for the Group's Enterprise Resource
Planning system. The decrease in the defined benefit pension scheme
asset of GBP4.0 million, is the main contributor to the overall
reduction in net assets of GBP3.3 million. The decrease in the
scheme assets due to lower than expected returns was offset by the
movement in the scheme liabilities, leading to the defined benefit
pension loss for the year of GBP4.5 million.
Net current assets
Current assets decreased by GBP3.7 million to GBP15.9 million
(2022: GBP19.6 million), driven by lower inventories of GBP1.2m,
trade and other receivables of GBP0.9 million and cash and cash
equivalents of GBP2.1 million, partially offset by a GBP0.5 million
increase in financial and tax assets.
Current liabilities decreased by GBP2.1 million to GBP12.0
million (2022: GBP14.1 million) reflecting a GBP0.8 million
decrease in provisions and a GBP1.3 million decrease in trade and
other payables.
Net current assets decreased to GBP3.9 million in the current
year from GBP5.5 million in prior year. The GBP1.6 million decrease
reflecting the reduction in trading activity around the year end
compared to the prior year.
The Group's working capital position is closely monitored, and
forecasts demonstrate the Group is able to meet its debts as they
fall due.
26 March 2023 27 March
GBP million 2022
GBP million
================================================= ============= ============
Intangible fixed assets 5.8 3.6
Property, plant and equipment 0.2 1.2
Retirement benefit obligations asset/(liability) 8.4 12.4
Net borrowings (excluding IFRS 16
lease liabilities) (12.4) (9.9)
Derivative financial instruments 0.5 0.2
Other net liabilities (4.3) (6.0)
================================================= ============= ============
Net assets / (liabilities) (1.8) 1.5
================================================= ============= ============
Share capital and premium 198.1 198.1
Reserves (199.9) (241.1)
================================================= ============= ============
Total equity (1.8) (43.0)
================================================= ============= ============
Pensions
The Mothercare defined benefit pension schemes were closed with
effect from 30 March 2013.
The defined benefit scheme surplus decreased by GBP4.0 million
to an asset position of GBP8.4 million (2022: 12.4 million). The
liabilities reduced from GBP383.4m at the end of last year to
GBP269.9 million at the end of the current year, the liabilities
were valued using a discount rate based on corporate bond yields
with an increase in yields placing a lower value on the
liabilities. In addition, the schemes' benefit payments are linked
to inflation, over the year changes in the financial market
conditions resulted in the discount rate increasing by 190 basis
points and long term inflation expectations decreasing by 50 basis
points. The assets have reduced from GBP395.8 million to GBP278.3
million due to lower than expected returns over the year. In
combination these movements resulted in a gain on liabilities of
GBP116.4 million and a loss on assets of GBP116.9 million since the
prior year end, which coupled with an experience adjustment of
GBP4.0 million resulting from the high levels of inflation observed
since the prior year-end and an allowance for the difference
between the actual and expected inflation seen since the 31 March
2020 actuarial valuation, the net loss for the year was GBP4.5
million.
The Group's deficit payments are calculated using the full
triennial actuarial valuation as the basis rather than the
accounting deficit / surplus. The value of the deficit under the
full actuarial valuation at 31 March 2023 was GBP35.0 million (31
March 2020 GBP124.6 million).
Details of the income statement net charge, total cash funding
and net assets and liabilities in respect of the defined benefit
pension schemes are as follows:
52 weeks 52 weeks 52 weeks
GBP million ending ended ended
30 March 25 March 26 March
2024* 2023 2022
===================================== ========= ========= =========
Income statement
Running costs (2.1) (2.1) (1.7)
Net income/ (expense) for return
on assets / interest on liabilities 0.5 0.4 (0.5)
===================================== ========= ========= =========
Net charge (1.6) (1.7) (2.2)
===================================== ========= ========= =========
Cash funding
Regular contributions (1.0) (1.0) (1.0)
Deficit contributions (1.4) (1.2) (4.3)
===================================== ========= ========= =========
Total cash funding (2.4) (2.2) (5.3)
===================================== ========= ========= =========
Balance sheet**
Fair value of schemes' assets n/a 278.3 395.8
Present value of defined benefit
obligations n/a (269.9) (383.4)
===================================== ========= ========= =========
Net (liability)/surplus n/a 8.4 12.4
===================================== ========= ========= =========
* Forecast
** The forecast fair value of schemes' assets and present value
of defined benefit obligations is dependent upon the movement in
external market factors, which have not been forecast by the Group
for 2023 and therefore have not been disclosed.
In consultation with the independent actuaries to the schemes,
the key market rate assumptions used in the valuation and their
sensitivity to a 0.1% movement in the rate are shown below:
2023
2023 Sensitivity
2023 2022 Sensitivity GBP million
================ ====== ====== ============= ============
Discount rate 4.7% 2.8% +/- 0.1% -3.7 /+3.8
================ ====== ====== ============= ============
Inflation - RPI 3.0% 3.5% +/- 0.1% +2.2 /-2.5
================ ====== ====== ============= ============
Inflation - CPI 2.3% 2.9% +/- 0.1% +1.2 /-1.3
================ ====== ====== ============= ============
The Group has a deferred tax liability of GBP0.4 million (2022:
GBP0.4 million). Deferred tax assets arising from short term timing
differences and losses of GBP2.8 million were offset by liabilities
arising from accelerated tax depreciation and tax on the actuarial
loss arising from the valuation of the defined benefit scheme of
GBP3.2 million. The position remains consistent with prior
year.
Net debt
Net debt excluding lease liabilities increased by GBP2.5 million
during the year to GBP12.4 million (2022: GBP9.9 million), due to a
net cash outflow of GBP1.9 million and a non-cash increase of
GBP0.7 million as well as a GBP0.1 million decrease resulting from
currency translation. Net debt including lease liabilities was
GBP12.9 million (2022: 11.0 million). The group refinanced its
facility during the year, extending the term to November 2025.
The Group regularly reviews its financing arrangements and
remains confident of its ability to access additional financing
successfully when needed. The Group's amended and extended
committed facility will mature in 2025, this together with its cash
and cash equivalents are considered adequate to meet its projected
cash requirements.
Leases
Right-of-use assets of GBP0.3 million (2022: GBP0.9 million) and
lease liabilities of GBP0.5 million (2022: GBP1.1 million)
represented the Group's head office leases. During the year, the
Group terminated the lease on the ground floor at the head office
as the additional space became surplus to its requirements, this
together with the amortisation of right-of-use assets and rental
payments accounts for the decrease year on year. There were no
significant penalties resulting from the termination.
Working capital
Working capital was GBP3.9 million at year compared with GBP5.5
million in prior year, a decrease of GBP1.6 million. The Group
successfully moved certain franchise partners to direct shipments
during the year, thereby reducing the stock levels to GBP0.9
million at year end (2022: GBP2.1 million). Trade receivables
increased to GBP3.7 million at year end (2022: GBP3.4 million)
mainly due to timing differences in shipments around the respective
year ends.
Trade payables decreased to GBP4.0 million (2022: GBP4.7
million) due to similar reasons.
INCOME STATEMENT
52 weeks to 52 weeks
26 March 2023 to
GBPmillion 27 March
2022
GBPmillion
============================================= ============== ===========
Revenue 73.1 82.5
Adjusted EBITDA (EBITDA before exceptionals) 6.7 12.0
Depreciation and amortisation (note
7) (0.5) (0.9)
============================================= ============== ===========
Adjusted result before interest and
taxation 6.2 11.1
Adjusted net finance costs (2.8) (3.1)
============================================= ============== ===========
Adjusted result before taxation 3.4 8.0
Adjusted costs (1.2) 3.1
============================================= ============== ===========
Loss before taxation 2.2 11.1
Taxation (2.3) 1.0
============================================= ============== ===========
Total profit/(loss) (0.1) 12.1
============================================= ============== ===========
EPS - basic (0.0)p 1.6p
============================================= ============== ===========
Adjusted EPS - basic 0.2p 2.1p
============================================= ============== ===========
Foreign exchange
The main exchange rates used to translate International retail
sales are set out below:
52 weeks ended 52 weeks
25 March 2023 ended
26 March
2022
================== ============== =========
Average:
Euro 1.2 1.2
Qatari riyal 4.4 5.0
Chinese renminbi 8.3 8.8
Kuwaiti dinar 0.4 0.4
Singapore dollar 1.7 1.8
Saudi riyal 4.5 5.1
Emirati dirham 4.4 5.0
Indonesian rupiah 18,160 19,644
Indian rupee 96.7 101.8
================== ============== =========
Closing:
Euro 1.1 1.2
Qatari riyal 4.4 4.8
Chinese renminbi 8.4 8.4
Kuwaiti dinar 0.4 0.4
Saudi riyal 4.5 4.9
Singapore dollar 1.6 1.8
Emirati dirham 4.5 4.8
Indonesian rupiah 18,730 18,924
Indian rupee 100.5 100.1
================== ============== =========
The principal currencies that impact the translation of
International sales are shown below. The net effect of currency
translation caused worldwide retail sales and adjusted profit to
increase by GBP23.2 million (2022: GBP16.4 million decrease) and
GBP1.4 million (2022: GBP0.9 million loss) respectively as shown
below:
Adjusted
Worldwide sales Profit/(loss)
GBP million GBP million
================== ================= ==============
Euro 0.0 0.0
Chinese Renminbi 0.5 0.0
Kuwaiti dinar 3.2 0.2
Qatari riyal 1.9 0.1
Saudi riyal 6.2 0.4
Emirati dirham 4.3 0.3
Indonesian rupiah 1.5 0.1
Singapore dollar 1.6 0.1
Indian rupee 1.0 0.1
================== ================= ==============
23.2 1.4
================== ================= ==============
Net finance costs
Financing costs include interest receivable on bank deposits,
less interest payable on borrowing facilities, the amortisation of
costs relating to bank facility fees and the net interest charge on
the liabilities/assets of the pension scheme.
Net finance expense for the year was GBP3.8 million, an increase
of GBP1.9 million. The prior year net charge included a gain of
GBP1.2 million relating to options which expired unexercised in
March 2022. Interest on the term loan was GBP2.9 million in the
current year (2022: GBP2.5 million) the movement driven by the
increase in base rates. Debt servicing payments of GBP4.0 million
(2022: GBP3.0 million) are comprised of net interest payments of
GBP2.8 million, lease payments of GBP0.3 million and facility costs
of GBP0.9 million.
The net interest income/cost on the defined benefit asset and
liability was an income of GBP0.4 million in the current year, a
swing from the cost of GBP0.5 million in 2022.
Discontinued operations
There were no discontinued operations presented for the current
financial 52 week period ended 25 March 2023. The total statutory
loss after tax for the Group is GBP0.1 million (2022: GBP12.1
million profit).
Taxation
The tax charge comprises corporation taxes incurred and a
deferred tax charge. The total tax charge from operations was
GBP2.3 million (2022: GBP1.0 million credit) - (see note 9).
Earnings per share
Basic adjusted earnings per share were 0.20 pence (2022: 1.6
pence). Statutory earnings per share were (0.0) pence (2022: 2.1
pence).
CASHFLOW
Reported net cash generated from operations decreased by GBP3.8
million to GBP4.3 million (2022: 8.1 million). Payables decreased
by GBP1.4 million, due to the slightly reduced operations and
timing, this was offset by a GBP1.1 million decrease in inventories
and GBP0.9 million decrease in receivables.
Cash outflow from investing activities of GBP2.3 million (2022:
GBP2.9 million), was mainly driven by our
investment in our new Enterprise Resource Planning system of
GBP2.2 million.
Cash outflow from financing activities was GBP4.0 million (2022:
GBP3.0 million).
Going concern
As stated in the strategic report, the Group's business
activities and the factors likely to affect its future development
are set out in the principal risks and uncertainties section of the
Group financial statements. The financial position of the Group,
its cash flows, liquidity position and borrowing facilities are set
out in the financial review.
With recent increases in interest rates, the interest rate on
this loan is currently approximately 19.2%, which coupled with the
extended time to return to pre-pandemic retail sales levels,
particularly in our Middle Eastern markets, means the Board's
current forecasts for continuing operations show the Group may
require waivers to future periods' covenant tests. Our current
lender remains supportive, whilst we complete our financing
activities to repay all or part of the facility.
The consolidated financial information has been prepared on a
going concern basis. When considering the going concern assumption,
the Directors of the Group have reviewed a number of factors,
including the Group's trading results and its continued access to
sufficient borrowing facilities against the Group's latest
forecasts and projections, comprising:
-- A Base Case forecast; and
-- A Sensitised forecast, which applies sensitivities against
the Base Case for reasonably possible adverse variations in
performance, reflecting the ongoing volatility in our key
markets.
In making the assessment on going concern the Directors have
assumed that the Group is able to mitigate the material uncertainty
surrounding the Group's ability to successfully complete its
financing activities to repay all or part of the existing facility
and that our current lenders would continue to support us in the
event we required waivers to future period's covenant test, whilst
doing so.
The Sensitised scenario assumes the following additional key
assumption:
-- A significant reduction in global retail sales, which may
result from subdued, consumer confidence or disposable income or
through store closures or weaker trading in our markets, throughout
the remainder of FY24 and FY25.
The Board's confidence in the Group's Base Case forecast, which
indicates that the Group will operate with sufficient cash
balances, provided appropriate covenant waivers on our current
facility were agreed, if required prior to the completion of our
funding activities, and the Group's proven cash management
capability, supports our preparation of the financial statements on
a going concern basis.
However, if trading conditions were to deteriorate beyond the
level of risk applied in the Sensitised forecast, or the Group was
unable to execute further cost or cash management programmes, the
Group would at certain points of the working capital cycle require
covenant waivers based on its current facilities agreement. If this
scenario were to crystallise the Group would need to renegotiate
with its lender in order to secure waivers to potential covenant
breaches and consequential cash remedies or have completed the
current negotiations to amend the covenants or secure additional
funding. Therefore, we have concluded that, in this situation,
there is a material uncertainty in relation to the continued
support of our existing lender, if required, that casts significant
doubt that the Group will be able to operate as a going concern
without potential waivers or revised/ new financing facilities.
Treasury policy and financial risk management
The Board approves treasury policies, and senior management
directly control day-to-day operations within these policies. The
major financial risk to which the Group is exposed relates to
movements in foreign exchange rates and interest rates. Where
appropriate, cost effective and practicable, the Group uses
financial instruments and derivatives to manage the risks, however
the main strategy is to effect natural hedges wherever
possible.
No speculative use of derivatives, currency or other instruments
is permitted.
Foreign currency risk
The group operates internationally and is exposed to foreign
exchange rage, primarily the US dollar. Foreign exchange risk
arises from future commercial transactions and recognized assets
and liabilities dominated in a currency that is not the functional
currency of the group which is the pound. All International sales
to franchisees are invoiced in pounds sterling or US dollars. The
Group therefore has some currency exposure on these sales, but they
are used to offset or hedge in part, the Group's US dollar
denominated product purchases. Under the tripartite agreements,
there has been an increased level of currency matching between
purchases and sales, improving the Group's ability to hedge
naturally.
Interest rate risk
The principal interest rate risk of the Group arises in respect
of the drawdown of the GBP19.5 million term loan which expose the
group to cash flow interest rate risk. Interest is charged at 13%
per annum plus SONIA, with SONIA not less than 1%, plus a 1% per
annum compounded payment to be made when the
loan is repaid, these expose the Group to future cash flow risk.
The interest exposure is monitored by management efforts are being
made to find cheaper sources of finance to mitigate the increasing
base rates.
In the comparative period, interest was charged at a fixed rate
of 12% plus SONIA.
Credit risk
Credit risk arises from cash and cash equivalents and credit
exposures to customers including outstanding receivables.
The Group has no significant concentrations of credit risk.
Credit risk is managed on a group basis. For banks and financial
institutions, only independently rated parties with a minimum,
rating of 'A' are accepted.
The Group operates effective credit control procedures in order
to minimise exposure to overdue debts. Before accepting any new
trade customer, the Group obtains a credit check from an external
agency to assess the credit quality of the potential customer and
then sets credit limits on a customer- by-customer basis. The group
applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses trade
receivables have been grouped based on shared credit risk
characteristics and the days past due. Trade receivables are
written off where there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery
include the failure of a debtor to engage in a repayment plan with
the group.
Shareholders' funds
Shareholders' funds amount to a deficit of GBP1.8 million an
adverse movement of GBP3.3 million from prior year. This was mainly
due to the impact of the net actuarial loss of GBP3.4 million at
year end.
Directors' responsibility statement
The 2023 Annual Report and Accounts which will be issued in
September 2023, contains a responsibility statement which sets out
that as at the date of approval of the Annual Report on 21
September 2023, in the case of each director in office at the date
the directors' report is approved:
-- so far as the director is aware, there is no relevant
information of which the group's and parent Company's auditors are
unaware: and
-- they have taken all the steps that they ought to have taken
as a director in order to make themselves aware of any relevant
audit information and to establish that the group's and parent
Company's auditors are aware of that information.
Consolidated income statement
For the 52 weeks ended 26 March 2023
52 weeks ended 25 March 2023 52 weeks ended 26
March 2022
------------------------------------------------------------------------ ---------------------------------------
Before Before Adjusted
Note adjusted Adjusted adjusted items
items items(1) Total items (1)
GBP GBP GBP GBP GBP Total
million million million million million GBP million
-------------------------- -------- ---------- ---------- ---------- ---------- ----------- --------------
Revenue 3 73.1 - 73.1 82.5 - 82.5
Cost of sales (52.2) - (52.2) (54.9) - (54.9)
-------------------------- -------- ---------- ---------- ---------- ---------- ----------- --------------
Gross profit 20.9 - 20.9 27.6 - 27.6
Administrative expenses (15.5) (0.2) (15.7) (16.0) 1.9 (14.1)
Impairment losses
on receivables 0.8 - 0.8 (0.5) - (0.5)
-------------------------- -------- ---------- ---------- ---------- ---------- ----------- --------------
Profit/(loss) from
operations 3 6.2 (0.2) 6.0 11.1 1.9 13.0
Finance costs (2.8) (1.0) (3.8) (3.1) 1.2 (1.9)
Profit /(loss) before
taxation 3.4 (1.2) 2.2 8.0 3.1 11.1
-------------------------- -------- ---------- ---------- ---------- ---------- ----------- --------------
Taxation 5 (2.3) - (2.3) 1.0 - 1.0
-------------------------- -------- ---------- ---------- ---------- ---------- ----------- --------------
Profit/(loss) for
the period 1.1 (1.2) (0.1) 9.0 3.1 12.1
Profit/(loss) for
the period attributable
to equity holders
of
the parent 1.1 (1.2) (0.1) 9.0 3.1 12.1
-------------------------- -------- ---------- ---------- ---------- ---------- ----------- --------------
Profit/(loss) per
share
Basic 7 (0.0)p 2.1p
Diluted 7 (0.0)p 2.1p
-------------------------- -------- ---------- ---------- ---------- ---------- ----------- --------------
(1) Includes adjusted costs (property costs, restructuring and
reorganisation costs) and movement on warrant options. Adjusted
items are considered to be one-off or significant in nature and /or
value. Excluding these items from profit metrics provides readers
with helpful additional information on the performance of the
business across the periods because it is consistent with how the
business performance is reviewed by the Board.
Consolidated statement of comprehensive income
For the 52 weeks ended 26 March 2023
52 weeks ended 52 weeks ended
26 March 27 March
2023 2022
GBP million GBP million
================================================= ============== =====================
Profit / (loss) for the period (0.1) 12.1
Items that will not be reclassified subsequently
to the income statement:
Remeasurement of net defined benefit liability:
Actuarial gain / (loss) on defined benefit
pension schemes (4.5) 35.0
Deferred tax relating to items not reclassified 1.1 (3.1)
================================================= ============== =====================
(3.4) 31.9
================================================= ============== =====================
Items that may be reclassified subsequently
to the income statement:
Exchange differences on translation of - -
foreign operations
Deferred tax relating to items reclassified - -
================================================= ============== =====================
- -
================================================= ============== =====================
Other comprehensive income / (expense)
for the period (3.4) 31.9
================================================= ============== =====================
Total comprehensive income / (expense)
for the period wholly
attributable to equity holders of the
parent (3.5) 44.0
================================================= ============== =====================
Consolidated balance sheet
As at 25 March 2023
25 March 26 March
2023 2022
GBP million GBP million
======================================== ============ ============
Non-current assets
Intangible assets 5.8 3.6
Property, plant and equipment 0.2 0.3
Right-of-use leasehold assets 0.3 0.9
Retirement benefit obligations 8.4 12.4
========================================= ============ ============
14.7 17.2
======================================== ============ ============
Current assets
Inventories 0.9 2.1
Trade and other receivables 7.2 8.1
Derivative financial instruments 0.5 0.2
0.2 -
Cash and cash equivalents 7.1 9.2
========================================= ============ ============
15.9 19.6
======================================== ============ ============
Total assets 30.6 36.8
========================================= ============ ============
Current liabilities
Trade and other payables (10.8) (12.1)
Lease liabilities (0.3) (0.3)
Provisions (0.9) (1.7)
========================================= ============ ============
(12.0) (14.1)
======================================== ============ ============
Non-current liabilities
Borrowings (19.5) (19.1)
Lease liabilities (0.2) (0.8)
Provisions (0.3) (0.9)
Deferred tax liability (0.4) (0.4)
========================================= ============ ============
(20.4) (21.2)
======================================== ============ ============
Total liabilities (32.4) (35.3)
========================================= ============ ============
Net assets/(liabilities) (1.8) 1.5
========================================= ============ ============
Equity attributable to equity holders
of the parent
Share capital 89.3 89.3
Share premium account 108.8 108.8
Own shares (0.2) (1.0)
Translation reserve (3.7) (3.7)
Retained loss (196.0) (236.4)
========================================= ============ ============
Total equity (1.8) (43.0)
========================================= ============ ============
Consolidated statement of changes in equity
For the 52 weeks ended 26 March 2023
Share
Share premium Translation Retained Total
capital account Own shares reserve earnings equity
GBP million GBP million GBP million GBP million GBP million GBP million
================== ============= ============ ============== ============= =============== ==================
Balance at 26 March
2022 89.3 108.8 (1.0) (3.7) (191.9) 1.5
Items that will not
be reclassified
subsequently to
the
income statement - - - - (3.4) (3.4)
=================== ============= ============ ============== ============= =============== ==================
Other comprehensive
income - - - - (3.4) (3.4)
Profit for the
period - - - - (0.1) (0.1)
=================== ============= ============ ============== ============= =============== ==================
Total comprehensive
income - - - - (3.5) (3.5)
Shares transferred
to executive
on vesting - - 0.8 - (0.8)
Adjustment to
equity for
equity-settled
share-based
payments - - - - 0.2 0.2
=================== ============= ============ ============== ============= =============== ==================
Balance at 25 March
2023 89.3 108.8 (0.2) (3.7) (196.0) (1.8)
=================== ============= ============ ============== ============= =============== ==================
Share Total
Share premium Translation Retained Equity
capital account Own shares reserve Earnings GBP
GBP million GBP million GBP million GBP million GBP million million
================= =============== ============ =============== ============= =============== ================
Balance at 27
March 2021 89.3 108.8 (1.0) (3.7) (236.4) (43.0)
Items that will
not be
reclassified
subsequently to
the
income statement - - - - 31.9 31.9
================== =============== ============ =============== ============= =============== ================
Other
comprehensive
income - - - - 31.9 31.9
Profit for the
period - - - - 12.1 12.1
================== =============== ============ =============== ============= =============== ================
Total
comprehensive
income - - - - 44.0 44.0
Adjustment to
equity for
equity-settled
share-based
payments - - - - 0.5 0.5
Balance at 26
March 2022 89.3 108.8 (1.0) (3.7) (191.9) 1.5
================== =============== ============ =============== ============= =============== ================
Consolidated cash flow statement
For the 52 weeks ended 25 March 2023
52 weeks 52 weeks
ended ended
Note 25 March 26 March
2023 2022
GBP million GBP million
=========================================== ====== ============ ============
Net cash flow from operating activities 10 4.3 8.1
Cash flows from investing activities
Purchase of property, plant and equipment (0.1) (0.1)
Purchase of intangibles - software (2.2) (2.8)
=========================================== ====== ============ ============
Cash used in investing activities (2.3) (2.9)
=========================================== ====== ============ ============
Cash flows from financing activities
Interest paid (2.8) (2.5)
Lease interest paid (0.1) (0.1)
Repayments of leases (0.2) (0.4)
Drawdown of loan facility (0.9) -
=========================================== ====== ============ ============
Net cash outflow / (inflow) from financing
activities (4.0) (3.0)
=========================================== ====== ============ ============
Net increase in cash and cash equivalents (2.0) 2.2
=========================================== ====== ============ ============
Cash and cash equivalents at beginning
of period 9.2 6.9
Effect of foreign exchange rate changes (0.1) 0.1
=========================================== ====== ============ ============
Cash and cash equivalents at end of
period 7.1 9.2
=========================================== ====== ============ ============
Notes
1. General information
The Group's business activities, together with factors likely to
affect its future development, performance and position are set out
in the Chairman's statement, the Chief Executive's review and the
Financial review and include a summary of the Group's financial
position, its cash flows and borrowing facilities and a discussion
of why the Directors consider that the going concern basis is
appropriate.
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006, this announcement does not itself contain
sufficient information to comply with all the disclosure
requirements of IFRS.
The financial information set out in this announcement does not
constitute the Group's statutory accounts for the 52 week period
ended 25 March 2023 or the 52 week period ended 26 March 2022, but
it is derived from those accounts. Statutory accounts for 2022 have
been delivered to the Registrar of Companies and those for 2023
will be delivered in September 2023. The auditor has reported on
the 2023 accounts: their report includes a material uncertainty
over going concern. The 2022 financial statements are available on
the Group's website (www.mothercareplc.com).
2. Accounting Policies and Standards
Going concern
As stated in the strategic report, the Group's business
activities and the factors likely to affect its future development
are set out in the principal risks and uncertainties section of the
Group
financial statements. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are set out
in the financial review.
With recent increases in interest rates, the interest rate on
this loan is currently approximately 19.2%, which coupled with the
extended time to return to pre-pandemic retail sales levels,
particularly in our Middle Eastern markets, means the Board's
current forecasts for continuing operations show the Group may
require waivers to future periods' covenant tests. Our current
lender remains supportive, whilst we complete our financing
activities to repay all or part of the facility.
The consolidated financial information has been prepared on a
going concern basis. When considering the going concern assumption,
the Directors of the Group have reviewed a number of factors,
including the Group's trading results and its continued access to
sufficient borrowing facilities against the Group's latest
forecasts and projections, comprising:
-- A Base Case forecast; and
-- A Sensitised forecast, which applies sensitivities against
the Base Case for reasonably possible adverse variations in
performance, reflecting the ongoing volatility in our key
markets..
In making the assessment on going concern the Directors have
assumed that the Group is able to mitigate the material uncertainty
surrounding the Group's ability to successfully complete its
financing activities to repay all or part of the existing facility
and that our current lenders would continue to support us in the
event we required waivers to future period's covenant test, whilst
doing so.
The Sensitised scenario assumes the following additional key
assumption:
-- A significant reduction in global retail sales, which may
result from subdued, consumer confidence or disposable income or
through store closures or weaker trading in our markets, throughout
the remainder of FY24 and FY25.
The Board's confidence in the Group's Base Case forecast, which
indicates that the Group will operate with sufficient cash
balances, provided appropriate covenant waivers on our current
facility were agreed, if required prior to the completion of our
funding activities, and the Group's proven cash management
capability, supports our preparation of the financial statements on
a going concern basis.
However, if trading conditions were to deteriorate beyond the
level of risk applied in the Sensitised forecast, or the Group was
unable to execute further cost or cash management programmes, the
Group would at certain points of the working capital cycle require
covenant waivers based on its current facilities agreement. If this
scenario were to crystallise, the Group would need to renegotiate
with its lender in order to secure waivers to potential covenant
breaches and consequential cash remedies or have completed the
current negotiations to amend the covenants or secure additional
funding. Therefore, we have concluded that, in this situation,
there is a material uncertainty in relation to the continued
support of our existing lender, if required, that casts significant
doubt that the Group will be able to operate as a going concern
without potential waivers or revised/ new financing facilities.
New standards, amendments, IFRIC interpretations and new
relevant disclosure requirements
The following standards and interpretations apply for the first
time to financial reporting periods commencing on or after 1
January 2022. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these financial
statements.
-- Annual Improvements to IFRS 2018-2020, effective 1 January 2022;
-- Onerous Contracts-Cost of Fulfilling a Contract (Amendments
to IAS 37), effective 1 January 2022;
-- Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16), effective 1 January 2022;
-- Reference to the Conceptual Framework (Amendments to IFRS 3), effective 1 January 2022.
Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognised in full in the period in which they
occur. They are recognised outside of the income statement and
presented in other comprehensive income.
Past service cost is recognised immediately to the extent that
the benefits are already vested.
The retirement benefit obligation recognised in the balance
sheet represents the present value of the defined benefit
obligation less the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost,
plus the present value of available refunds.
The Group has an unconditional right to a refund of surplus
under the rules.
In consultation with the independent actuaries to the schemes,
the valuation of the pension obligation has been updated to
reflect: current market discount rates; current market values of
investments and actual investment returns; and also for any other
events that would significantly affect the pension liabilities. The
impact of these changes in assumptions and events has been
estimated in arriving at the valuation of the pension
obligation.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors have
adopted various APMs of historical or future financial performance,
position or cash flows other than those defined or specified under
International Financial Reporting Standards (IFRS). A full
definition is shown in the glossary at the end of this
document.
These measures are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those in
the Group's industry.
APMs should be considered in addition to, and are not intended
to be a substitute for, or superior to, IFRS measures.
Purpose
The Directors believe that these APMs assist in providing
additional useful information on the performance and position of
the Group because they are consistent with how business performance
is reported to the Board and Operating Board.
APMs are also used to enhance the comparability of information
between reporting periods and geographical units (such as
like-for-like sales), by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid the user
in understanding the Group's performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive setting
purposes and have remained consistent with prior year except where
expressly stated.
The key APMs that the Group has focused on during the period are
as follows:
Group worldwide sales:
Group worldwide sales are total International retail sales.
Total Group revenue is a statutory number and is made up of
receipts from International franchise partners, which includes
royalty payments and the cost of goods dispatched to international
franchise partners.
Constant currency sales:
The Group reports some financial measures on both a reported and
constant currency basis. Sales in constant currency exclude the
impact of movements in foreign exchange translation. The constant
currency basis retranslates the previous year revenues at the
average actual periodic exchange rates used in the current
financial year. This measure is presented as a means of eliminating
the effects of exchange rate fluctuations on the year on year
reported results.
Profit/(loss) before adjusted items:
The Group's policy is to exclude items that are considered to be
signi cant in both nature and/or quantum and where treatment as an
adjusted item provides stakeholders with additional useful
information to assess the year-on-year trading performance of the
Group. On this basis, the following items were included within
adjusted items for the 52-week period ended 25 March 2023:
-- costs associated with restructuring and redundancies;
-- movement on embedded derivatives in the shareholder warrants;
-- dilapidations costs related to the groups head office building;
-- movement on the expected outcome related to the
administration of Mothercare UK Limited (in administration).
3. Segmental information
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reported to the Group's executive decision makers
(comprising the executive directors and operating board) in order
to allocate resources to the segments and assess their performance.
Under IFRS 8, the Group has not identified that its operations
represent more than one operating segment.
The results of franchise partners are not reported separately,
nor are resources allocated on a franchise partner by franchise
partner basis, and therefore have not been identified to constitute
separate operating segments.
Revenues are attributed to countries on the basis of the
customer's location. The largest customer represents approximately
30% (2022: 24%) of Group sales.
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
GBP million GBP million
==================================== ============= =============
Sale of goods to franchise partners 55.2 59.9
Royalties income 17.9 22.6
==================================== ============= =============
Total revenue 73.1 82.5
==================================== ============= =============
4. Adjusted items
The total adjusted items reported for the 52-week period ended
25 March 2023 is a net loss of GBP1.2 million (2022: GBP3.1 million
gain). The adjustments made to reported profit before tax to arrive
at adjusted profit are:
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
GBP million GBP million
==================================================== ============= ==============
Adjusted costs from continuing operations:
Property related (costs) / income included in
administrative expenses (0.2) 0.5
Restructuring and reorganisation (costs) / income
included in administrative expenses (0.0) 1.4
Restructuring (costs) / income included in nance
costs (1.0) 1.2
==================================================== ============= ==============
Adjusted items before tax (1.2) 3.1
==================================================== ============= ==============
Property related (costs) / income included in administrative
expenses - GBP (0.2) million (2022: GBP0.5 million)
The current year charge represents a true up of the
dilapidations provision for the Group's head office.
The prior year income relates to credits arising from the
settlement of a lease liability relating to a claim on a previous
UK retail store.
Restructuring and reorganisation (costs) / income included in
administrative expenses - GBP(0.0) million (2022: GBP1.4
million)
The current year charge relates to:
-- GBP(0.3) million redundancy payments made to certain staff
during the year, this was offset by;
-- GBP0.3 million true-up of the financial asset arising on the
revolving capital facility, which was valued at the end of
financial year 2022 based on the information available at the time,
whilst assuming the worst-case outcome.
The prior year income included:
-- GBP1.6 million credits arising in relation to the profit on
disposal of Mothercare UK Limited business which went into
administration. Of this GBP0.8 million relates to the true-up of
the financial asset arising on the revolving capital facility,
which was valued at the end of financial year 2022 based on the
information available at the time, whilst assuming the worst-case
outcome. The remaining GBP0.8 million relates to recovery of
holding and handling costs incurred in liquidating stock owned by
Mothercare UK Limited, these costs were expensed in previous years
as there was no certainty of recovery of these.
-- GBP(0.2) million provision to settle a legal claim received against a subsidiary.
Restructuring (costs) / income included in finance costs -
GBP(1.0) million (2022: GBP1.2 million)
The current year charge includes:
-- GBP(0.5) million transaction costs arising from the
refinancing that are not directly attributable to the
renegotiation.
-- GBP(0.4) million modification loss due to the group
renegotiating its existing loan facility. The principal amount
remained the same under the revised agreement with the term
extended by a year.
-- GBP(0.1) million cost incurred on finance brokers.
The prior year income relates to 15.0 million 12 pence warrants
which expired without the shareholders exercising the warrants.
Net finance costs
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
GBP million GBP million
=========================================== ============= =============
Other interest payable and nance charges 4.1 2.5
Net interest expense on liabilities/return
on assets on pension - 0.5
Interest on lease liabilities 0.1 0.1
Fair value movement on warrants - (1.2)
------------------------------------------- ------------- -------------
Interest payable 4.2 1.9
Net interest income on liabilities/return
on assets on pension (0.4) -
=========================================== ============= =============
Net finance costs/(income) 3.8 1.9
------------------------------------------- ------------- -------------
5. Taxation
The charge/(credit) for taxation on profit for the period
comprises:
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
GBP million GBP million
====================================== ========================= ==============
Current tax:
Foreign taxation 1.1 1.7
1.1 1.7
====================================== ========================= ==============
Deferred tax:
====================================== ========================= ==============
Origination and reversal of temporary
differences 1.2 (2.7)
-------------------------------------- ------------------------- --------------
Charge/(credit) for taxation on pro
t for the period 2.3 (1.0)
====================================== ========================= ==============
UK corporation tax is calculated at 19% (2022: 19%) of the
estimated assessable profit for the period. The increase in the
corporation tax rate from 19% to 25% was substantively enacted by
the balance sheet date and will be effective from 1 April 2023. As
a result, the relevant deferred tax balances have been remeasured.
Deferred tax balances are expected to unwind after 1 April 2023.
The impact of the change in tax rate has been recognised in tax
expense in profit or loss, except to the extent that it relates to
items previously recognised outside profit or loss.
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
The charge/ (credit) for the period can be reconciled to the
profit for the period before taxation per the consolidated income
statement as follows:
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
GBP million GBP million
================================================== ============ ============
Pro t for the period before taxation 11.1 (21.4)
Pro t for the period before taxation multiplied
by the standard rate of corporation tax in the
UK of 19% (2022: 19%) 2.1 (4.1)
Effects of:
Expenses not deductible for tax purposes 0.4 1.2
Income not taxable (0.1) (1.0)
Impact of overseas tax rates - 0.4
Foreign tax credits 0.7 0.2
Deferred tax recognized in other comprehensive
income - (3.1)
Remeasurement of deferred tax for changes in
tax rates 0.2 0.1
Deferred tax not recognised/written off 0.7 (0.9)
Charge/(credit) for taxation on pro t for the
period 2.3 (1.0)
================================================== ============ ============
6. Dividends
There was no final dividend for the period (2022: GBPnil) and no
interim dividend was paid during the period (2022: GBPnil).
7. Earnings per share
52 weeks 52 weeks
ended ended
25 March 26 March
2023 2022
million million
=================================== =========== ===========
Weighted average number of shares
in issue 563.8 563.8
Dilutive potential ordinary
shares - 10.1
=================================== =========== ===========
Diluted weighted average number
of shares 563.8 573.9
=================================== =========== ===========
Number of shares at period end 563.8 563.8
=================================== =========== ===========
GBP million GBP million
=================================== =========== ===========
(Loss)/profit for basic and
diluted earnings per share (0.1) 12.1
Adjusted items (note 4) 1.2 (3.1)
Tax effect of above items - -
=================================== =========== ===========
Adjusted pro t 1.1 9.0
=================================== =========== ===========
Pence Pence
=================================== =========== ===========
Basic (losses) / earnings per
share (0.0) 2.1
Basic adjusted earnings / (losses)
per share 0.2 1.6
Diluted (losses) / earnings
per share (0.0) 2.1
Diluted adjusted earnings per
share 0.2 1.6
=================================== =========== ===========
25 March 26 March
Analysis of shares by class 2023 2022
million million
=================================== =========== ===========
Ordinary shares at period end
date 563.8 563.8
Antidilutive/dilutive SAYE options 1.6 3.7
Antidilutive/dilutive LTIP options 6.9 11.3
Total 572.3 578.8
=================================== =========== ===========
Where there is a loss per share, the calculation has been based
on the weighted average number of shares in issue, as the loss
renders all potentially dilutive shares anti-dilutive.
8. Share Capital and Share Premium
On 12 March 2021, the Group's shares were transferred from the
London Stock Exchange's Main Market to instead be listed on AIM.
Following this, on 17 March 2021, the shareholder loans -
previously held within borrowings with the option to convert
classified as a financial liability - converted to equity. The
agreements entitled the shareholders to 189,644,132 ordinary 1
pence shares, giving rise to GBP1.9 million of share capital,
GBP17.1 million of share premium and GBP9.5 million of
distributable profits.
9. Notes to the cash flow statement
52 weeks ended 52 weeks
25 March ended 26
2023 March
GBP million 2022
GBP million
============================================== ======================= ============
Profit from operations 13.0 (2.4)
Adjustments for:
Depreciation of property, plant and equipment 0.1 0.3
Amortisation of right-of-use assets 0.3 0.3
Amortisation of intangible assets 0.1 0.3
Gain / (loss) on adjusted foreign currency
movements 0.1 (0.1)
Equity-settled share-based payments 0.2 0.5
Movement in provisions (1.4) (3.4)
Net gain on nancial derivative instruments (0.3) (0.6)
Payments to retirement bene t schemes (2.2) (5.2)
Charge to pro t from operations in respect
of retirement bene t schemes 2.1 1.7
Operating cash inflow / (outflow) before
movement in working capital 5.0 6.8
Decrease in inventories 1.1 3.8
Decrease in receivables 0.9 11.7
Decrease in payables (1.4) (12.9)
============================================== ======================= ============
Net cash inflow / (outflow) from operating
activities 5.6 9.4
Income taxes paid (1.3) (1.3)
============================================== ======================= ============
Net cash inflow / (outflow) from operating
activities 4.3 8.1
============================================== ======================= ============
Analysis of net debt
26 March Foreign Other non-cash 25 March
2022 Cash flow exchange movements(1) 2023
GBP million GBP million GBP million GBP million GBP million
========================== ============= ============= ============= ============== =============
Term loan (19.1) 0.3 - (0.7) (19.5)
Cash at bank 9.2 (2.2) 0.1 - 7.1
IFRS 16 lease liabilities (1.1) (0.3) - 0.9 (0.5)
=========================== ============= ============= ============= ============== =============
Net debt (11.0) (2.2) 0.1 0.2 (12.9)
=========================== ============= ============= ============= ============== =============
(1) Non-cash movements comprise
-- Term loan - unwinding of GBP0.7 million of the facility fee
charged on the term loan and loan modification costs.
-- Non-cash movements on IFRS 16 lease liabilities represents
the of interest accrued on lease liabilities and modification of
the lease agreement during the period.
The Group had outstanding borrowings at 25 March 2023 of GBP19.5
million (2022: GBP19.1 million).
In November 2020, the Group drew down on a four-year term loan
of GBP19.5 million (GBP19.1 million net of prepaid facility fees)
with Gordon Brothers. The loan is secured on the assets and shares
of specific Group subsidiaries. The interest rate payable is 13%
per annum plus SONIA, with SONIA not less than 1%, plus a 1% per
annum compounded payment to be made when the loan is repaid.
The Group also holds a financial asset of GBP0.5 million (2022:
GBP0.2 million) reflecting the expected proceeds from the wind-down
of the UK operations by the administrators of Mothercare UK
Limited. The total expected repayment due is GBP0.5 million (2022:
GBP0.2 million).
10. Events after the balance sheet date
Defined benefit scheme contributions
In the first half of FY24 a full triennial actuarial valuation
was performed and the Trustees of the schemes agreed a further
reduction in contributions after the balance sheet date. Details of
these are provided in the financial review.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR DXGDCIDDDGXB
(END) Dow Jones Newswires
September 22, 2023 02:00 ET (06:00 GMT)
Mothercare (LSE:MTC)
Historical Stock Chart
From Nov 2024 to Dec 2024
Mothercare (LSE:MTC)
Historical Stock Chart
From Dec 2023 to Dec 2024
