Mothercare Plc : Annual Financial Report and No...

Mothercare PLC Annual Financial Report

To the London Stock Exchange

13 June 2013

Mothercare plc ("the Company")

ANNUAL REPORT AND FINANCIAL STATEMENTS AND NOTICE OF ANNUAL GENERAL MEETING

In accordance with the requirements of Rule 6.3.5 of the Disclosure and Transparency Rules ("DTR") of the UK Financial Services Authority, the Company has today published the following documents on its website, www.mothercareplc.com:

• The Annual Report and Accounts for the year ended 30 March 2013; and 

• Notice of Annual General Meeting of the Company which is to be held at 3.00pm on Thursday 18 July 2013 at the Company's office at Cherry Tree Road, Watford, Hertfordshire, WD24 6SH. 

In accordance with LR 9.6.1R and LR 9.6.3R copies of these documents will shortly be available for inspection via the National Storage Mechanism located at www.morningstar.co.uk/uk/nsm.

We also attach to this announcement, a description of the principal risk factors and a responsibility statement as required by DTR 4.1.12 and as set out in the Annual Financial Report for the year ended 30 March 2013. The Company's preliminary statement was announced on 23^rd May 2013 and is available to view at the Company's website: mothercareplc.com/financial-reports.

Please note that page and note references below refer to the corresponding pages and/or notes in the annual report and accounts.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Company may include some of those set out below.  These risks and uncertainties reflect and focus on some of the group's challenges in delivering the Transformation and Growth plan, particularly in the context of the wider economic uncertainties at a macro level.  It should be borne in mind that that this not an exhaustive list and that there may be other risks that have not been considered or risks that the board considers now are insignificant or immaterial in nature, but that may arise and/or have a larger effect than originally expected.  Against this background, the system of internal control is designed to manage rather than eliminate risks, to reduce the impact on the group and to ensure that adequate mitigation is in place.

In order to manage risk effectively, the executive committee (see page 39) has overall responsibility for ensuring that a rolling programme of structured risk assessments of those areas having a significant effect on the future of the business is carried out.  This programme ensures, so far as practicably possible, that the appropriate risk management processes are identified, controls established, residual risks evaluated and that the necessary monitoring action and risk avoidance measures taken.  Elements of the programme are reviewed by the internal audit function during the course of each financial year.  The process outlined above has been in effect during the period and up to the date of the approval of the accounts by the board.

The process outlined above has been in effect during the period and up to the date of the approval of the accounts by the board.

	Risk	Impact	Mitigation
Financial	The group fails to meet the financial targets set out in the Transformation and Growth plan	Potential breach of covenants contained in the bank facility agreements leading to Event of Default	Detailed monthly monitoring of financial performance against plan targets  Alternative financing options to supplement bank facility  Restructured head office and UK stores teams
	LFL sales in the UK do not meet expectations under Transformation and Growth plan	Poor business performance may mean that financial targets are not met  Loss of supplier confidence  Loss of market share	Reshaped UK business team  New price and value strategy supported by promotional activity and loyalty programme  Direct to customer channels. Including 'click and collect'
	Unforeseen additional cash funding to support international joint venture operations	Diverts cash away from the UK business  May delay UK business turnaround	Joint ventures submit business plans and management reports monthly to the Company  Attendance at joint venture company board meetings
	UK store rationalisation programme becomes difficult to achieve in current market conditions	Greater than anticipated costs of closure  Reduces cash available to UK business	2012/13 targets met which demonstrates a record of past performance over two years  Dedicated and experienced property team
	Uncertainty in the macro economic environment - particularly the Eurozone economies  Fluctuations and uncertainty in exchange rates	Weak UK consumer confidence continues may delay business turnaround  Underperforming International business in affected regions  Increase in cost of goods impacts margin  Potential for increase in bad debts	Product range and pricing being adapted to meet customer demand  Strong franchise partners; close working relationship with franchisees ensures early awareness of any financial issues  Credit insurance in place and tested  Limited exposure to Eurozone economies  Roll out franchisee online offerings
Operational	The UK business fails to deliver on brand standards, or react to changes in consumer demand or existing or new competitor activity	Loss of market share  Loss of sales leading to a shortfall in profits	Improvements being made at store level through better store operations, staff training and store standards  Customer satisfaction programme launched and embedded  Structured pricing policy and strategy  Product range and pricing being adapted to meet customer demand
	International expansion leads to overexposure in certain territories	The group becomes vulnerable in key markets	Strong franchise operations work closely with international franchisees  Credit insurance against key franchisee recoverables in place and tested
	Major supply chain or logistics disruption resulting from geo-political events	Product supply is halted or severely impacted	The group sources products from a number of different regions
Manufacturing and product	The group fails to meet its reputation for quality, safety and integrity  The group fails to ensure that its supplier base operates to the appropriate standards of safety	Damage to brand reputation and customer confidence would impact sales	Significant group investment in product quality management resource  High standards communicated throughout supply chain  In-house responsible sourcing team working in Bangladesh, India and China  Global Code of Conduct communicated and applied through the system  Focus shifted to pre-despatch quality checks
	Failure to invest properly in product innovation	Lack of new product and innovation would directly impact sales	The group maintains an ongoing investment strategy in new products  Launch of new products and ranges delivered in FY2012/13 with further planned launches in FY2013/14
People and infrastructure	Organisational change and headcount reductions lead to erosion of corporate knowledge	The Transformation and Growth plan falls behind schedule	In-depth organisational review to ensure any change is managed efficiently and with minimum disruption to business  Development and approval of key business objectives for all employees from top down with quarterly reviews to monitor employee performance
	Legacy IT systems fail to meet business requirements	Adverse impact on performance and ability to meet key targets	Comprehensive IT review defined
	Failure or increase in costs of the group's logistics or global distribution network	The UK business or international franchisees do not meet customer demand, leading to loss in sales  Erosion of margin	Regular review and audit of distribution network  Strengthened and dedicated expert distribution team

Directors' responsibility statement

We confirm that to the best of our knowledge:

• The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings, included in the consolidation taken as a whole; and 

• The Chairman's Statement, Chief Executive's Statement, Business Review, Financial Review and the Directors' Report include a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and 

• The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and gives shareholders the information needed to assess the group's performance, business model and strategy. 

The directors of Mothercare plc are listed on page 38 and on the Company's website at mothercareplc.com.

Email:        [e-mail]

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Source: Mothercare Plc via Thomson Reuters ONE

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