Mothercare Plc : Annual Financial Report

Mothercare PLC Annual Financial Report

 

To the London Stock Exchange

 

12 June 2014

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 29 March 2014; and

 

·        Notice of Annual General Meeting of the Company which is to be held at 3.00pm on Thursday 17 July 2014 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 29 March 2014. The Company's preliminary statement was announced on 22^nd May 2014 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 board takes overall responsibility for risk management with a particular focus on determining the nature and extent of significant risks it is willing to take in achieving its strategic objectives.  The Audit and Risk Committee takes responsibility for overseeing the effectiveness of sound risk management and internal control systems.

 

The Executive Committee is responsible for delivering the Company's strategy and managing operational risk, and the internal risk management process has been formalised through the Risk Committee which acts as a forum to monitor and manage risk processes and to assess and identify any emerging risks.

 

The Company must report its principal risks and uncertainties in its annual Strategic Report, in addition to providing some explanation of its internal risk management process.  The table below sets out the principal risks and uncertainties, and indicates the directional change of perceived net risk over the year.

 

Key:

^              increase in risk over the year

=             no change

 

 

Financial
	Risk	Impact	Mitigation	Change
	·     The group fails to meet its financial targets	·       Financial pressure and capital constraints ·       Adverse publicity and media coverage ·       Ultimately, could lead to a potential breach of covenants contained in bank facility agreements leading to Event of Default	·        Refined Transformation and Growth plan with Project Management Office scoped to track project contribution ·        Renegotiated bank facility to safeguard future financing needs ·        Alternative financing options to supplement bank facility	^
	·     LFL sales in the UK do not meet expectations  and forecasts	·       Weaker UK consumer confidence continues to impact profit and performance ·       Loss of supplier confidence ·       Loss of market share	·        Product range and pricing being adapted to meet customer demand ·        Reshaped UK business team ·        New price and value strategy supported by promotional activity ·        Improved 'Direct to Customer' channel including 'Collect in Store' ·        Restructuring of overseas Sourcing Offices buying processes and procedures to improve margin	^
	·     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	=
	·     Material changes in currency exchange rates	·       Reduction in profit from currency movements	·        Currency hedging now put in place to protect the group profit against unfavourable movement in exchange rates	^
	·     Accelerated store closure programme does not meet targets ·     Store closure programme diverts capital, impacts customer brand perception ·     Store closure programme leaves the business vulnerable to failure by sub-lease tenants	·       Ongoing cost to the Company if no closure ·       Greater than anticipated costs of closure ·       Reduces cash available to UK or International business ·       Potential for leases to revert back to the Company if failure by sub-lease tenants	·        Dedicated and experienced property team ·        Store portfolio strategy completed in 2013 and reviewed annually ·        Track record of meeting annual closure targets	^
	·     Uncertainty in the macro economic environment	·       International businesses may be impacted in affected regions ·       Increase in cost of goods impacts franchisee margin ·       Potential for increase in bad debts	·        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 website offerings	^
	·     Political risk and uncertainty in key franchise markets and joint venture markets ·     Over exposure in certain International territories	·       The group becomes vulnerable to key markets and franchise partners ·       Profitability of International business and franchisees affected ·       Increased fuel and commodity prices reduces profitability	·        Strong franchise operations work closely with International franchisees ·        Credit insurance in place and tested ·        Sustainable expansion plans finalised with franchisees	=
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 and erosion of brand loyalty ·       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	=
Manufacturing and product
	·     The group fails to meet its reputation for quality, safety and integrity	·       Damage to brand reputation and customer confidence ·       Failure to handle any safety issue with dexterity would attract unfavourable media comment and 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 on pre-despatch quality checks ·        The Company has signed the Bangladesh Safety Accord to help improve factory safety	=
	·     Increasing overseas sourcing activity leaves the group open to social responsibility and bribery issues	·       Damage to brand reputation, both in the UK and country of issue origin ·       Increasing environmental impact of importing large volumes of product causes damage to brand and reputation	·        Company Code of Conduct and Conflict of Interest - compliance certification ·        In-house responsible sourcing team working in Bangladesh, India and China ·        Revised Sourcing Office summary of 'Controls and Procedures' issued ·        The group is looking to increase sourcing from within the EU	=
	·     Failure to invest properly in product innovation	·       New products and innovation are a key driver of sales ·       Product offering looks tired and fails to attract customers	·        The group maintains an ongoing investment strategy in new products ·        Launch of new products and ranges delivered in FY2013/14 with further planned launches in FY2014/15 ·        Extended Baby K and Little Bird ranges	=
People and infrastructure
	·     Organisational change and headcount reductions lead to erosion of corporate knowledge ·     Key employees leave the business	·       The Transformation and Growth plan falls behind schedule ·       Employee experience and expertise is lost	·        Development and approval of key business objectives for all employees from top down with regular reviews to monitor employee performance ·        Regular feedback given to Executive Management through anonymous internal questionnaire ·        Increased level of internal communications	=
	·     Legacy IT systems fail to meet business requirements ·     Data Centre back up fails	·       Adverse impact on performance and ability to meet key targets ·       Increased risk of data loss through internal and external sources ·       Systems are vulnerable to criminal cyber attacks	·        Comprehensive IT review (ongoing) ·        Head Office computing platform upgraded to facilitate IT strategy ·        New till system implemented throughout the Mothercare estate ·        Microsoft Office 365 solution for all email being actively built ·        Data Centre being moved to an external specialist data centre	=
	·     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 ·        Benchmarking global rates is part of the International Supply Chain routine	=

 

 

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 strategic report includes 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 in the annual report and accounts and on the Company's website at mothercareplc.com.

 

Email:      [e-mail]

 

 

---

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Mothercare Plc via Globenewswire

HUG#1792495