Mothercare Plc : Notice of AGM

 

Mothercare PLC Annual Financial Report

 

To the London Stock Exchange

 

16 June 2015

 

 Mothercare plc ("the Company")

 

 ANNUAL REPORT AND FINANCIAL STATEMENTS AND NOTICE OF ANNUAL GENERAL MEETING

 

In accordance with the requirements of Rule 6.3.5R 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 28 March 2015; and

Notice of Annual General Meeting of the Company which is to be held at 3.00pm on Thursday 23 July 2015 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 28 March 2015. The Company's preliminary statement was announced on 21 May 2015 and is available to view at the Company's website: mothercareplc.com/financial-reports.

 

 

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 has set out its clear strategic objectives against which it measures performance and the risks associated with these objectives are considered under four headings:

 

Financial

Operational

Manufacturing and product

People and infrastructure

 

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.  The risks in this table are broadly consistent with the risks outlined in the prospectus issued in September 2014 in connection with the rights issue.

 

Key:

^              increase in risk over the year

=             no change

N             new risk

 

 

Financial
	Risk	Impact	Mitigation	Change
	The retail markets in which the Group and its franchise partners operates are highly competitive, with few barriers to entry	If the Group, its franchise partners or its wholesale customers are unable to compete successfully in the UK or overseas markets, this may have a material effect on the Group's business, results of operation or financial condition	The Group has encouraged its franchise partners to establish a multi-channel approach to their respective markets   Introduction of value ranges and exclusive branded products   Keeping the product offering relevant for our target market and core customers   UK store refurbishment programme will provide a roadmap for franchise partners	=
	The anticipated turnaround of the Group's UK business may not be achievable if it fails to implement effectively key aspects of its new strategic plan	The Group is unable to compete with other key players in the UK, including multi-channel retailers as well as internet only businesses causing the Group's in-store sales to decline and reduce profits	Rigorous project governance managing the key spend areas of store refurbishment and IT systems with audit oversight   Strategic plan to refurbish all ongoing stores, varying from light touch re-fits to full refurbishment, within the three-year plan   Low inflation and fuel prices driving customer spending power   Maintaining a lean organisation through tight management of resources and controlling the Group's cost base   Simplify customers' online journey and enhance the customer experience by way of improved photo and video presentation and customer reviews   Improve the product delivery proposition, including enabling customers to better track their product orders and provide greater convenience and choice as to delivery and collection points	=
	The Group relies on forecasts of like-for-like sales in both of its UK and International businesses; any shortfall in like-for-like sales, particularly in the UK, could impact the Group's results materially	If the directors make plans or decisions based on certain like-for-like sales assumptions that prove to be inaccurate, this could have a material adverse effect on the Group's business, results of operations or financial condition	Ensuring cost prices and supplier terms are beneficial to the Group by building on its established supplier relationships   Improvements in stock management and reduced inventory to decrease markdown activity   Improving customer service to encourage customers to spend more in stores	=
	The Group may be affected by challenging economic conditions and political developments affecting the UK and International markets in which it operates	As the UK economy continues to strengthen, the economic and political uncertainty enveloping eastern and southern Europe, in particular Russia where Mothercare has a substantial presence, Ukraine and Greece, could have a material adverse effect on the Group's business	Focus on the political and fiscal situation that is unfolding in Russia and Greece   Improved products, presentation and service, including exclusivity in branded offerings   Improved customer service with investment in training of management and store teams to improve the quality and consistency   Improved customer propositions targeting improved credit finance proposition in partnership with third party credit providers, personal shopping and online booking of specialist services and activities in store	^
	The Group's results of operation may be affected by foreign exchange risk	Hedging foreign exchange does not eliminate the Group's exchange or interest rate risks entirely and may not be fully effective.  Any significant losses on the Group's hedging positions could have a material adverse effect on the Group's business, results of operations or financial condition	Group's hedging policy agreed by the Board   The largest five franchisees have their trading currencies hedged   Hedging undertaken by Treasury signed off by Director of Finance, using six to nine month horizon for the five largest franchisees and 15 months for US dollar exposure   Limited exposure to Eurozone countries	^
Operational
	The Group's revenue is dependent on footfall; the shift in consumer purchasing habits towards online and mobile channels will challenge the traditional business model and affect sales from the Group's UK store portfolio and the profitability of each store	The Group's revenue may be adversely affected if its retail destinations decrease in popularity with its core customer base	Relocate from non-profit making stores to areas of the UK where demographics are more favourable to the target market   Shift the bricks and mortar emphasis away from failing high streets to town centres, shopping centres and within department stores where consumer traffic is increasing   Fitting of modern fixtures to enable increased product density and better and more consistent product presentation across stores   Bringing all stores up to a good level of finish in terms of general decoration, branding, lighting, signage and facilities including toilets, feeding and customer changing facilities   Improvement in online service and website	=
	The Group is materially dependent on a small number of franchise partners that make up a significant proportion of its International business	Any damage to, or loss of, the Group's relationship with Alshaya or any of its other key franchise partners could have a material adverse effect on the Group's business, results of operation or financial condition	Strong personal and business relationships built up over a long time with key franchise partners   Regular senior management visits to key franchise partners' markets   Credit insurance in place for the major franchisees   Development plan agreed for franchise markets	N
	The Group may not be successful in reshaping the UK store footprint and building and further developing its existing online retail platform in the UK	Failure to reshape the UK store footprint in line with the strategic plan could have a material adverse effect on the Group's ability to turnaround its UK business and, in turn, restore its profitability	£25 million earmarked for store closures and initially £20 million for refurbish stores to drive sales densities   Highly competent operators with major store re-fit programme skills employed to manage the project   Initial list of stores earmarked for refurbishment during Q1 & Q2 of FY2016 complete   Planning for future warehousing capacity to underpin multi-channel retailing is in place   Investment in digital screens and video walls, iPads, customer Wi-Fi and click and collect enhancements into all stores   Significant investment in IT systems and infrastructure to support multi-channel retailing	N
	The Group's trademarks are central to the value of the Mothercare and ELC brands.  The Group may not be able to protect these trademarks in its International markets meaning that these rights may be challenged or invalidated in the future	If the Group is unable to defend successfully against allegations of infringement, it may face sanctions which could result in negative publicity, significant expense and may have a material adverse effect on the Group's financial condition and results of operation	Group's trademarks are lodged in all new countries where International is expanding   Intellectual property awareness courses are run for buying & merchandising   Search facilities available through Company Secretariat   Guidance documents on maintenance of intellectual property issues	N
	The Group intends to make significant change to the UK business over a short period of time	If the Group is unable to manage change effectively, there could be delays or inefficiencies arising	The Executive Committee has created a property steering committee and IT steering committee to oversee change   The Group has invested in a property management team	N
Manufacturing and product
	The Group is (and the product it sells are) subject to extensive UK, EU and International legislation and regulation	Failure to comply with applicable laws, regulations and/or judicial and/or regulatory authority determinations may result in civil or criminal sanctions, including fines, injunctions, product recalls, asset seizures, revocation of licences and regulatory authorisations and adversely affect customers' perception of the Group and its brand image, any of which could adversely affect the Group's business, results of operations or financial condition	The Group uses Bureau Veritas as specialists for regulatory requirements by country   In-house technologists manage the process and have exited poorly performing suppliers	=
	The Group's brands and reputation are key to its success both in the UK and internationally; any damage to the Group's brands or concerns relating to its products (including their quality or safety) could have a material adverse effect on the business	Any perceived or actual concerns related to the Group's products, supply chain or its franchise partners and/or its wholesale customers may be widely disseminated online, on consumer blogs or other social media sites or via print or broadcast media.  Similarly, any litigation that the Group may face could subject it to increasing negative attention in the press	Significant group investment in product quality management resource   High standards communicated throughout supply chain with 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   Established product recall process managed by crisis management team   The Company participates in the Bangladesh Safety Accord	=
	The Group's business is materially dependent on its ability to source products successfully from its suppliers, most of which are based outside the UK.  The Group relies on its manufactures, suppliers and distributors to comply with employment, environmental and other laws	If the Group is unable to secure ongoing support or attractive commercial terms from its existing suppliers, or is unable to find replacement suppliers in the event of a particular source of supply no longer being available, this could have a material adverse effect on the Group's stock management, profitability and competitiveness and may result in a loss of market share	Company Code of Conduct and Conflict of Interest - compliance self-certification   New  corporate responsibility manager up-skilling the Group's in-house responsible sourcing team working in Bangladesh, India and China   Franchise partners can and do source product from their local market   The Group may increase sourcing volumes from within the EU and use emerging markets such as Vietnam and Cambodia as alternative sourcing countries	=
	The Group relies on its ability to improve existing products and successfully develop and launch new  innovatory products	Failure to bring new innovatory product to the market may have a material adverse effect on the Group's business, results of operation or financial condition	The Group is seeking to shorten product lead times and restructure its "Good, Better, Best" product architecture   Demonstrate good value products across all price points and supplement these with exclusive third-party products and new brands   Enhance the customer experience in-store through newly refurbished stores with improved presentation and merchandising standards	=
People and infrastructure
	The Group's future success depends on the performance of its key senior management and the ability to attract and retain high quality and highly skilled personnel	Any failure to attract and retain key personnel to meet the Group's operational needs may delay or curtail the achievement of major strategic objectives and could have a material adverse effect on the continuity of the Group's  operations	Share option bonus scheme open to all employees   Share Save scheme open to all employees   Performance related bonus scheme open to all employees   Regular performance reviews against objectives	=
	Any unauthorised access or disclosure of confidential information store or obtained by the Group, either by criminal cyber-attack or a speculative loner, could have a material adverse effect on its business	If any third party with whom the Group interacts violates applicable laws or the Group's data protection policies, whether intended or not, this could result in legal claims or regulatory action which may subject the Group to liability and litigation	The rollout of an end-to-end encrypted Pin Entry Device (PED) to the store estate will significantly increase the Group's compliance to PCI DSS   No customer cardholder detail is kept on internal systems   All sensitive and confidential information that falls within the Data Protection Act is overseen by the risk committee	=
	The Group supplies and sources its products in a number of countries in which bribery and corruption pose significant risks	The Group also deals with a significant amount of cash in its operations and is subject to various reporting and anti-money laundering regulations.  Any violation of money-laundering laws or regulations by the Group could have a material adverse effect on its business, reputation or results of operations	Company Code of Conduct and Conflict of Interest - compliance self-certification   In-house responsible sourcing team working in Bangladesh, India and China	=

 

 

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]

 

 

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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

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