Mothercare Plc : Half-year results

Mothercare Plc

FY2015/16 Half Year Results

Further encouraging strategic progress: underlying profits more than doubled

Mothercare plc, the global retailer for parents and young children, today announces half-year results for the 28-week period to 10 October 2015.

Highlights for H1 FY2015/16

• Underlying profit before tax up 112% at £7.0m
• Strong progress in the UK: margins up 76 bps, online sales growth of 22% and like-for-like sales growth of 3.8% with UK losses halved
• International remains challenging with economic and currency headwinds, but continue to grow space which was up 6.6%
• Continued progress against all six strategic pillars

Group performance

	H1 FY2015/16	H1 FY2014/15
	28 weeks to	28 weeks to	% change
	10 Oct 2015	11 Oct 2014	vs.
	£million	£million	last year
UK
UK like-for-like sales1	+3.8%	+1.5%	-
Total UK sales	236.6	235.6	+0.4%
Underlying UK loss2	(6.1)	(13.5)	+54.8%
International
International like-for-like sales1	(2.3)%	+4.9%	-
International retail sales in constant currency	+1.8%	+11.8%
International retail sales in actual currency	(5.0)%	+13.3%
Total International sales	376.7	397.5	(5.2)%
Underlying International profit2	21.7	25.3	(14.2)%
Group
Worldwide sales1	613.3	633.1	(3.1)%
Total group sales	349.9	372.7	(6.1)%
Group underlying profit before tax2	7.0	3.3	+112.1%
Exceptional credit/charge & non-underlying items	(1.2)	2.2	-
Group profit before tax after exceptional and non-underlying items	5.8	5.5	+5.4%
Underlying EPS2	3.3p	3.0p	+10.9%
Net cash/(debt)	27.2	(54.2)	-

Mark Newton-Jones, Chief Executive of Mothercare plc, said:

"We are a year into our turnaround; making good progress against each of our strategic pillars and as a result underlying profits for the first half have more than doubled."

"Our work to return the UK business to profitability continues to pay off, with growth in both gross margins and like-for-like sales. Improved product architecture, better buying and a focus on full price retailing helped drive the stronger margin growth. Our new store format is going down well with customers, and these refurbished stores are delivering encouraging uplifts in both sales and profit. The UK is annualising against our new trading approach and is performing well; but there is still more work to do."

"We continue to lay the foundations for future growth in our International business. Despite increased economic and currency headwinds in a number of our markets, impacting both sales and profits, we and our franchise partners remain confident in the business model and together continued to grow space. We expect the challenging environment to continue into the second half."

"Overall, expectations for the full year outturn are unchanged. Our vision remains clear: to be the leading global retailer for parents and young children."

Investor & analyst enquiries to:

Mothercare plc

Mark Newton-Jones, Chief Executive Officer

Richard Smothers, Chief Financial Officer

Ramona Tipnis, Director of Investor Relations                                    01923 206455

Media enquiries to:

Mothercare plc

Lorna Else, Interim Director of Corporate Communications

MHP Communications

John Olsen/Simon Hockridge                                                 020 3128 8100

Notes:

1 - UK like-for-like sales are defined as sales from stores that have been trading continuously from the same space for at least a year and include online sales.

International retail sales are the estimated total retail sales of overseas franchise and joint venture partners to their customers. International like-for-like sales are the estimated franchisee retail sales at constant currency from stores that have been trading continuously from the same selling space for at least a year and include online sales on a similar basis.

Total International sales are International retail sales plus International Wholesale sales. Worldwide sales are total International sales plus total UK sales. International stores refer to overseas franchise and joint venture stores.

2 - Underlying profit before tax refers to PBT before exceptional and non-underlying items. Underlying EPS is calculated on the basis of underlying profit.

3 - This announcement contains certain forward-looking statements concerning the Group. Although the Board believes its expectations are based on reasonable assumptions, the matters to which such statements refer may be influenced by factors that could cause actual outcomes and results to be materially different. The forward-looking statements speak only as at the date of this document and the Group does not undertake any obligation to announce any revisions to such statements, except as required by law or by any appropriate regulatory authority.

4 - Mothercare plc will release its Q3 Trading Update for the 13 weeks to 9 January 2016 on Thursday 14 January 2016.

 CHIEF EXECUTIVE'S REVIEW

Overview

We have, over the first half of the year, built on the progress we made last year. Our UK business is benefitting from our strategic initiatives with much stronger gross margins and like-for-like sales growth. In International we and our franchise partners continue to grow space and invest for the future despite economic and currency headwinds. We remain singularly focussed in our goal of being the leading global retailer for parents and young children.

We have made good progress across each of our six strategic pillars and overall the business is now on a firmer footing and we are positioning ourselves well for the future.

1. Become a digitally led business
   • Online sales up 22%, accounting for 36% of UK retail sales
   • iPads now in all stores and driving in-store online sales growth of 36%. In-store online ordering now represent 45% of all online sales
   • Mobile now 80% of online traffic and 56% of online sales for customers ordering from home
2. Supported by a modern retail estate and great service
   • Over 20% of the UK store estate to be refurbished in time for peak Christmas trading
   • Refurbishment programme is rolling out a new, modern look and feel to our stores and introducing new departments - maternity, cafés and play areas
   • Closed 16 underperforming stores,  refurbished eight and resited four stores in the UK
3. Offering style, quality and innovation in product
   • Improved style, quality, innovation and design for all three product categories and added a further 48 brands thus helping to improve product and price architecture
4. Stabilise and recapture gross margin
   • Margins up by 76 bps driven by less discounting and now also better buying
   • Significantly lower levels of stock going into sale with 70% of product sold at full price
5. Running a lean organisation while investing for the future
   • Continued tight control of store costs and inventory
6. Expanding further internationally
   • Space up 6.6% with 1,310 stores in 60 countries as a net 37 new stores opened during H1 and opened our 100^th store in both China and Russia

Group results

Global retail space across all of our markets was up 1.3% year-on-year, with UK reduced by (7.4)% to 1.6m sq.ft. and International up 6.6% at 3.0m sq.ft.. We now have 173 stores in the UK and in International we operate from 60 countries around the world with 1,310 stores.

	H1 FY2015/16	H1 FY2014/15
	28 weeks to	28 weeks to	% change
	10 Oct 15	10 Oct 14	vs. last year
	£million	£million
Underlying International profit2	21.7	25.3	(14.2)%
Underlying UK loss2	(6.1)	(13.5)	+54.8%
Corporate expenses	(4.9)	(4.3)	(13.9)%
Underlying profit from operations2	10.7	7.5	+42.7%
Underlying net finance costs	(1.8)	(3.6)	-
Share based payments	(1.9)	(0.6)	-
Underlying profit before tax2	7.0	3.3	+112.1%
Exceptional items	(1.5)	(3.2)	-
Non-cash foreign currency adjustments	0.8	5.9	-
Amortisation of intangibles	(0.5)	(0.5)	-
Reported profit before tax	5.8	5.5	+5.4%

Worldwide sales were down (3.1)% at £613.3m with total UK sales up 0.4% and total International sales down (5.2)%. Group sales, which reflect total UK sales and reported revenues or receipts from our International partners, were down (6.1)% at £349.9m.

Underlying Group profits before tax were up 112% at £7.0m. Our UK business benefitted from our ongoing strategic initiatives and saw a significant reduction in losses to £(6.1)m. Our International business was impacted by ongoing volatility from economic and currency headwinds and profits were down at £21.7m. Corporate expenses were £(4.9)m while finance costs were reduced to £(1.8)m, but the cost for share based payments increased to £(1.9)m, which is in line with the change in the share price.

After a charge of £(1.5)m for exceptional items, a credit of £0.8m for non-cash foreign currency adjustments and a £(0.5)m charge for amortisation of intangibles, the reported profit for the half year was £5.8m (H1 FY2014/15: £5.5m).

The balance sheet remains strong with a net cash balance of £27.2m compared to net cash of £31.5m at the end of FY2014/15 and also reflecting our move from net debt of £(54.2)m a year ago at H1 2014/15 following the rights issue.

UK

We have made significant progress towards returning the UK to profitability. The benefits of our strategic initiatives are beginning to come through with strong growth in margins and like-for-like sales. As a result, we have more than halved the operating loss to £(6.1)m for the first half of the year.

	H1 FY2015/16	H1 FY2014/15
	28 weeks to	28 weeks to	% change
	10 Oct 15	11 Oct 14	vs. last year
UK like-for-like sales growth	+3.8%	+1.5%	-
UK online sales	£78.1m	£63.9m	+22.1%
UK retail sales (including online)	£219.1m	£219.0m	+0.0%
UK wholesale sales	£17.5m	£16.6m	+5.4%
Total UK sales	£236.6m	£235.6m	+0.4%
Underlying loss	£(6.1)m	£(13.5)m	+54.8%

Become a digitally led business

Our digital strategy of improving our presentation and customer journey online and introducing more iPads to stores, has helped to significantly improve the level of online sales which were up 22% to £78m. Online sales now account for 36% (H1 FY2014/15: 29%) of UK retail sales. Mobile is now the predominant channel for our customers ordering from home and now makes up 80% of online traffic and 56% of our online sales. Click-and-collect now accounts for 34% of online orders and 24% of online sales.

We have increased the number of iPads in stores, with all sales-floor staff in refurbished stores having an iPad. This has helped to drive online sales through stores faster and these sales now account for 45% of all online sales.

Supported by a modern retail estate and great service

We have continued with modernising and realigning our store estate with a new store format. We have introduced new departments - maternity, cafés and play areas - while also improving fixtures, signage and navigation around stores. We are seeing improved dwell times, a benefit to conversion rates and growth in margins and sales.

Over the first half of the year we closed 16 underperforming stores (12 Mothercare and four ELC), refurbished eight stores and resited four stores. Our store teams are working towards getting c20% of our store estate refurbished in time for peak Christmas trading. We are taking a portfolio approach to our store refurbishment programme and not cherry-picking stores with the best returns first. Included in the first tranche is a range of stores from c.3,000 sq.ft. to c18,000 sq.ft. to ensure we are achieving the expected returns from a representative mix of our store estate. Gateshead and Solihull were refurbished last year and Gateshead was our largest refurbishment to date at over 32,000 sq.ft.. Whilst it is still early days, these new format stores are delivering sales and profit uplifts which are in line with our expectations.

We ended the period with 173 stores (163 Mothercare and 10 ELC) or 1.6m sq.ft. of retail space. Our store portfolio is continuing to migrate to larger stores with 96 out-of-town Mothercare stores and 67 Mothercare in town and 10 ELC in town stores, moving us closer to our blueprint of two thirds out-of-town and one third in-town. These closures meant space was down (7.4)% year-on-year which, coupled with positive like-for-like sales, resulted in total UK sales growth of 0.4% to £237m. Store closures reduced losses by £2.2m during the first half of the year.

Offering style, quality and innovation in product

Our teams have continued their work towards improving the customer offer and, over the course of the first half of this year, we introduced a further 48 brands across our three product categories. This, along with the work we have done with our own designed product, has nearly doubled our sales from product at the 'Best' end of the ranges from c10% to c15%, whilst not compromising on our 'Better' ranges.

In Clothing and footwear, we have continued to work with external brands to sit alongside our own brand product which has once again been improved. In Home and travel we continued to work with our suppliers to grow the number of new branded products while also increasing the level of exclusive product and offers for our customers. In ELC Toys our work has been focussed on peak trading, which is just ahead of us. We have made further progress towards increasing the number of brands with an educational tone, with some brands starting to provide exclusive sales periods.

Stabilise and recapture margin

After five years of margin decline, we are now well on our way to establishing ourselves as a full price retailer with another half year of maintaining a balanced pricing policy across all product categories. The results are clear, margins are up, like-for-like sales have returned to growth and our near complete exit from underperforming stores means total UK sales are also up by 0.4%.

Over the half year, we continued to improve the style and quality of our product, manage stock levels more efficiently and work with our supplier base to ensure we have the right product for our customers. These efforts are continuing to have a positive impact on the business as a whole. Our customers understand that we are no longer looking to drive sales through ongoing discounts and promotions. Instead we are looking to drive sales by improving our product, introducing exclusivity and improving our presentation in store and online.

As a result of this improvement in product ranges and stock management, we sold over 70% of product at full price. This allowed us to delay the start of the end-of-season sale to the second quarter whilst also having a shorter, sharper sale. The end result was a cleaner stock file and a further 76 bps improvement in gross margins.

Running a lean organisation

We have continued to manage our cost base and inventory levels tightly by working with our suppliers to ensure we are efficient with the level of stock in the supply chain. Our store refurbishment programme is managed tightly to ensure the efficient use of capital. Store refurbishments are carefully planned to minimise disruption to customers and the impact on sales. This continued focus on the cost base has allowed us to capitalise on gross margin and like-for-like sales gains to more than halve the half year loss to £(6)m.

International

Many of our International markets were faced with ongoing economic and currency headwinds. As a result we saw an increased level of volatility across all four regions. Despite this uncertainty and the impact that it is having on sales in both constant and actual currencies, we and our franchise partners remain confident in the business model and together continue to grow space. We are working together to ensure our trading approach is appropriate for current market conditions. By strengthening our International business we will be well positioned for when market conditions improve.

	H1 FY2015/16	H1 FY2014/15
	28 weeks to	28 weeks to	% change
	10 Oct 15	11 Oct 14	vs. last year
International like-for-like sales growth	(2.3)%	+4.9%	-
International retail sales: constant currency	+1.8%	+11.8%	-
International retail sales: actual currency	(5.0)%	+13.3%	-
International retail sales	£373.4m	£393.2m	(5.0)%
International wholesale sales	£3.3m	£4.3m	(23.3)%
Total International sales	£376.7m	£397.5m	(5.2)%
Underlying profit	£21.7m	£25.3m	(14.2)%

Expanding further internationally

Space was up 6.6% year-on-year during the first half of the year, and we added a net 37 stores and 118k sq.ft. of retail space to our International store estate. Our ongoing strategy of managing space effectively saw the closure of 32 stores or 70k sq.ft. and the opening of 69 stores or 188k sq.ft. during the first half of the year. The trend for our International markets is one of exiting smaller stores whilst moving to larger stores in locations that attract higher footfall and therefore better sales densities in the longer-term. We are also drawing upon our successes in the UK, which is helping to strengthen and position our International business well for when underlying trading conditions improve.

International like-for-like sales were down (2.3)% year-on-year with Europe including Russia flat while the Middle East, Asia and Latin America were weaker. International retail sales in constant currency were up 1.8%, with three out of four regions delivering growth. However currency moves continued to have an adverse effect, which meant International retail sales in actual currencies were down (5.0)% year-on-year at £373m. Wholesale sales were down at £3m and total International sales were down (5.2)% at £377m.

Underlying profit for our International business was down (14.2)% at £21.7m, with adverse currency moves having a c£(1.0)m impact during the half year. International profit margins remain healthy despite the increased level of economic and currency volatility.

International now accounts for 66% of worldwide space and 61% of worldwide sales.

Outlook

The UK is a year into our new trading approach and it is responding well. There is still much to do and we might see some volatility as we anniversary the implementation of various initiatives. In International we are continuing to grow space and are drawing upon our experience in the UK and across all 60 International markets to navigate current headwinds, which we expect to continue into H2.

We have made good progress against each of our strategic pillars and will continue to develop these in the months ahead. With Christmas just five weeks away, our thoughts now turn to peak trading, on which we will update in January.

Overall, expectations for the full year outturn are unchanged. Our vision remains clear - to be the leading global retailer for parents and young children.

FINANCIAL REVIEW

RESULTS SUMMARY

Group underlying profit before tax was £7.0 million, for the 28 weeks to 10 October 2015, (H1 2014/15: £3.3 million profit). Underlying profit excludes exceptional items and other non-underlying items which are analysed below. Exceptional items include costs relating to previously announced activity on property and retail restructuring programmes.  After exceptional and non-underlying items, the Group recorded a pre-tax profit of £5.8 million (H1 2014/15: profit of £5.5 million).

Income statement

£ million	28 weeks to 10 October 2015	28 weeks to 11 October 2014	52 weeks to 28 March 2015
Revenue	349.9	372.7	713.9
Underlying profit from operations before interest and share based payments	10.7	7.5	19.3
Share based payments	(1.9)	(0.6)	(1.3)
Net finance costs	(1.8)	(3.6)	(5.0)
Underlying profit before tax	7.0	3.3	13.0
Exceptional items	(1.5)	(3.2)	(32.0)
Non-cash foreign currency adjustments	0.8	5.9	6.9
Amortisation of intangible assets	(0.5)	(0.5)	(1.0)
Profit/(loss) before tax	5.8	5.5	(13.1)
Underlying EPS - basic	3.3p	3.0p	8.6p
EPS - basic	2.8p	5.1p	(12.6p)

Profit from operations before share based payments includes all of the Group's trading activities, but excludes the share based payment charge to the income statement in accordance with IFRS 2 (see below).

Results by segment

The primary segments of Mothercare plc are the UK business and the International business.

£ million - Revenue	28 weeks to 10 October 2015	28 weeks to 11 October 2014	52 weeks to 28 March 2015
UK	236.6	235.6	458.1
International	113.3	137.1	255.8
Total	349.9	372.7	713.9

£ million - Underlying profit/(loss)	28 weeks to 10 October 2015	28 weeks to 11 October 2014	52 weeks to 28 March 2015
UK	(6.1)	(13.5)	(18.0)
International	21.7	25.3	45.9
Corporate	(4.9)	(4.3)	(8.6)
Underlying profit from operations before share based payments	10.7	7.5	19.3
Share based payments	(1.9)	(0.6)	(1.3)
Net finance costs	(1.8)	(3.6)	(5.0)
Underlying profit before tax	7.0	3.3	13.0

Total UK sales increased by 0.4% with sales reductions from store closures more than offset by a strong LFL performance at 3.8%, driven by full price trading and supported by uplifts from newly refurbished stores and the continued delivery of the online strategy. Profitability also benefited from the removal of 16 loss-making stores during the period as this programme continues to deliver significant cost savings UK losses have halved to £(6.1) million.

International retail sales in constant currency were up 1.8% with three out of four regions growing year-on-year. The anticipated and ongoing economic and currency headwinds meant retail sales in actual currency were down (5.0%) at £373.4m. Group sales, which reflect reported revenues or receipts from our International partners along with total UK sales, were £22.8m lower as a result of the timing of shipments and tighter stock management across some of our International markets. This led to International profits being £(3.6)m lower than last year.

Corporate expenses represent board and company secretarial costs and other head office costs including audit, professional fees, insurance and head office property.

Like-for-like sales, total International sales and worldwide sales

UK like-for-like sales are defined as sales for stores that have been trading continuously for at least a year and include in store online sales and online sales delivered direct to home.

International retail sales are the estimated retail sales of overseas franchisees and joint ventures and associates to their customers (rather than Mothercare sales to franchisees as included in the statutory or reported sales numbers). Total International sales are International retail sales plus International wholesale sales. Group worldwide sales are total International sales plus total UK sales.  Group network sales and reported sales are analysed as follows:

£ million	Reported sales						Worldwide sales*
	28 weeks to 10 October 2015	28 weeks to 11 October 2014	%	52 weeks to 28 March 2015		28 weeks to 10 October 2015	28 weeks to 11 October 2014	%	52 weeks to 28 March 2015
UK retail sales	219.1	219.0	0.1%	425.7		219.1	219.0	0.1%	425.7
UK wholesale sales	17.5	16.6	5.4%	32.4		17.5	16.6	5.4%	32.4
Total UK sales	236.6	235.6	0.4%	458.1		236.6	235.6	0.4%	458.1
International retail sales	110.0	132.8	(17.2%)	247.7		373.4	393.2	(5.0%)	737.3
International wholesale sales	3.3	4.3	(23.3%)	8.1		3.3	4.3	(23.3%)	8.1
Total International sales	113.3	137.1	(17.4%)	255.8		376.7	397.5	(5.2%)	745.4
Group sales	349.9	372.7	(6.1%)	713.9		613.3	633.1	(3.1%)	1,203.5

* estimated

Analysis of worldwide sales movement

£ million - Worldwide sales
Sales for 28 weeks ended 11 October 2014	633.1
Currency impact	(26.4)
Proforma sales for 28 weeks ended 11 October 2014	606.7
Increase in UK LFL	8.5
Decrease in UK space	(8.1)
Decrease in international LFL	(8.0)
Increase in international space	14.2
Sales for 28 weeks ended 10 October 2015	613.3

Sales in the 28 weeks ended 10 October 2015 were lower by £(19.8)m primarily as a result of an adverse currency impact of £(26.4)m. 

Excluding the currency impact international sales have increased by £6.7m driven by an increase in space, offset by reduced like for like sales.

UK like for like sales have grown strongly by £8.5m, but have been offset by decrease in UK space as a result of store closures.

Analysis of profit movement

£ million - underlying profit before tax
Underlying profit for 28 weeks ended 11 October 2014	3.3
Currency impact	(1.0)
Proforma underlying profit for 28 weeks ended 11 October 2014	2.3
Decrease in International volumes	(2.7)
UK closures of loss making stores	2.2
UK sales and margin improvement	7.1
Increase in costs	(1.9)
Underlying profit before tax for 28 weeks ended 10 October 2015	7.0

On a proforma basis (i.e. excluding the currency impact) underlying profit has grown strongly from £2.3m to £7.0m. This is driven by UK sales and margin improvement and the closure of UK loss making stores. This is partly offset by lower international volumes and an increase in costs reflecting the full year effect of investment in new resource to deliver the turnaround plan hired in the year and an increase in share based payments.

Foreign exchange

The main exchange rates used to translate the consolidated income statement and balance sheet are set out below:

	28 weeks ended 10 October 2015	28 weeks ended 11 October 2014	52 weeks ended 28 March 2015
Average:
Russian rouble	89.38	59.86	70.57
Ukrainian hryvnia	33.32	20.39	22.50
Indonesian rupiah	20,720	19,580	19,484
Saudi riyal	5.77	6.27	6.03
Closing:
Russian rouble	94.67	63.85	88.67
Ukrainian hryvnia	33.48	20.81	34.77
Indonesian rupiah	20,787	19,568	19,499
Saudi riyal	5.75	5.99	5.61

The principal currencies that impact our results are the Russian rouble, Ukrainian hryvnia, Indonesian rupiah and Saudi riyal. These currencies have mostly weakened against sterling in the year. The net effect of currency translation caused worldwide sales and underlying operating profit from ongoing operations to decrease by £26.4m and £1.0m respectively compared with 2015 as shown below:

The profit impacts are somewhat mitigated by our hedging strategy on royalty receipts.

	Worldwide Sales £ million	Underlying   Operating profit   £ million
Russian rouble	(25.4)	(1.3)
Ukrainian hryvnia	(2.0)	(0.1)
Indonesian rupiah	(0.7)	(0.1)
Saudi riyal	4.1	0.1
Other Middle East countries	5.7	0.5
Other currencies	(8.1)	(0.1)
	(26.4)	(1.0)

In addition to the translation exposure, the Group is also exposed to movements on certain of its transactions, principally movements in the US dollar. These exposures are largely hedged and therefore do not significantly impact underlying profit.

Share based payments 

Underlying profit before tax also includes a share based payments charge of £(1.9) million (H1 2014/15: £(0.6) million charge) in relation to the company's long-term incentive schemes.

Financing and taxation

Financing represents interest receivable on bank deposits, interest payable on borrowings, the amortisation of costs relating to bank facility fees and the net interest charge on the liabilities/assets of the pension scheme (see note 5).

The underlying tax charge comprises corporation taxes incurred and deferred tax charge. The total tax charge was £(1.0) million (H1 2014/15: charge of £(1.0) million) - see note 6.

Non-underlying items

Underlying profit before tax excludes the following non-underlying items (see note 4):

Exceptional items:

• Costs relating to previously announced activity on property and retail restructuring programmes.

Other non-underlying items:

• The revaluation of monetary assets and liabilities held in foreign currencies and the revaluation of outstanding forward contracts which have not yet been matched to the purchase of stock.  These revaluation adjustments are reported as non-underlying items so as the Group reports its underlying performance consistently with its cash flows, reflecting the hedging which is in place.  (note: prior year credit included the fair value movement of contracts taken out before hedge accounting was adopted in January 2014);
• Amortisation of intangible assets (excluding software).

Earnings per share and dividend

Basic underlying earnings per share were 3.3 pence compared to 3.0 pence in the 28 weeks to 11 October 2014.  The total number of shares has increased by 0.3 million since 28 March 2015 due to share option exercises.

	28 weeks ended 10 October 215	28 weeks ended 11 October 2014		52 weeks ended 28 March 2015
	Million	million		Million
Weighted average number of shares in issue	170.7	88.7		122.2
Dilution- option schemes (for underlying results only)	9.0	1.1		3.6
Diluted weighted average number of shares in issue	179.7	89.8		125.8
Number of shares at period end	170.8	88.8		170.5
	£ Million	£ million		£ million
Profit /(loss) for basic and diluted earnings per share	4.8	4.5		(15.4)
Exceptional items and other non-underlying items (Note 4)	1.2	(2.2)		26.1
Tax effect of above items	(0.3)	0.4		(0.2)
Underlying earnings	5.7	2.7		10.5
				Pence
Basic profit / (loss) per share	2.8	5.1		(12.6)
Basic underlying earnings per share	3.3	3.0		8.6
Diluted profit / (loss) per share	2.7	5.0		(12.6)
Diluted underlying earnings per share	3.2		3.0		8.3

The Board has concluded that given the cash investment required to deliver the new strategy the Company will not pay an interim dividend for 2015/16.  The total dividend for the period is nil pence per share (2013/14: nil pence per share).

Pensions

The Mothercare defined benefit pension schemes were closed with effect from 30 March 2013. Details of the income statement net charge, total cash funding and net assets and liabilities are as follows:

£ million	28 weeks to 10 October 2015	28 weeks to 11 October 2014	52 weeks to 28 March 2015
Income statement
Running costs	(1.5)	(0.6)	(1.4)
Net (interest on liabilities)/return on assets	(1.5)	(1.1)	(2.1)
Net charge	(3.0)	(1.7)	(3.5)
Cash funding
Regular contributions	(1.6)	(0.5)	(0.6)
Deficit contributions	(5.4)	(2.7)	(5.8)
Total cash funding	(7.0)	(3.2)	(6.4)
Balance sheet
Fair value of schemes' assets	288.4	259.8	283.4
Present value of defined benefit obligations	(341.8)	(323.3)	(364.6)
Net liability	(53.4)	(63.5)	(81.2)

The running costs of the Mothercare defined benefit pension schemes have increased from £(0.6) million in the 28 weeks to 11 October 2014 to £(1.5) million in the 28 weeks to 10 October 2015 due to an increased PPF levy in the year.

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.

	H1 15/16	H1 14/15	2015/16 Sensitivity	2015/16 Impact on scheme liabilities £ million
Discount rate	3.95%	4.0%	+/- 0.1%	-6.0 / +6.0
Inflation - RPI	3.05%	3.1%	+/- 0.1%	+5.4 / -4.1
Inflation - CPI	1.95%	2.0%	+/- 0.1%	+5.4 / -4.1

Cash flow

Underlying free cash flow was £1.6m with cash generated from operations of £18.8m being broadly utilised by capital expenditure and financing / tax charges.

Capital expenditure of £16.6 million reflected the investment in the year in store refurbishment and IT infrastructure and was materially higher than in the 28 weeks ended 11 October 2014 as the investment strategy was implemented.

		28 weeks ended 10 October 2015	28 weeks ended 11 October 2014	52 weeks ended 28 March 2015
		£ million	£ million	£ million
Underlying profit from operations before interest and share based payments		10.7	7.5	19.3
Depreciation and amortisation		8.9	8.9	16.7
Retirement benefit schemes		(5.5)	(2.6)	(5.0)
Change in working capital		2.0	(0.3)	(9.8)
Other movements		2.7	(0.7)	(3.2)
Cash generated from operations		18.8	12.8	18.0
Capital expenditure		(16.6)	(4.4)	(12.7)
Interest and tax paid		(0.6)	(4.8)	(6.2)
Underlying Free cashflow		1.6	3.6	(0.9)
Exceptional		(4.3)	(10.6)	(16.7)
Free cashflow		(2.7)	(7.0)	(17.6)
Net bank loans (repaid)/raised Issue of ordinary share capital		- 0.4	5.0 -	(65.0) 95.3
Exchange differences		(2.0)	(0.9)	1.5
Cash and cash equivalents at beginning of period		31.5	17.3	17.3
Net cash and cash equivalents at end of period		27.2	14.4	31.5

Balance sheet

The balance sheet includes identifiable intangible assets arising on the acquisition of the Early Learning Centre of £6.2 million and goodwill of £26.8 million. These assets are allocated to the International business.

			10 October 2015	11 October 2014	28 March 2015
			£ million	£ million	£ million
Goodwill and other intangibles			46.5	42.9	45.9
Property, plant and equipment			56.0	55.3	56.4
Retirement benefit obligations (net of tax)			(42.8)	(50.8)	(64.9)
Net cash / (borrowings)			27.2	(54.2)	31.5
Derivative financial instruments			2.9	3.9	9.3
Other net assets /(liabilities)			8.3	15.6	(0.5)
Net assets			98.1	12.7	77.7
Share capital and premium			146.4	50.7	146.0
Reserves			(48.3)	(38.0)	(68.3)
Total equity			98.1	12.7	77.7

Shareholders' funds amount to £98.1 million, an increase of £20.4 million in the year driven largely by a reduction of £22.1 million in the defined benefit obligation (net of deferred tax).

Going concern

The directors have reviewed the going concern principle in the light of the guidance provided by the FRC. The Group's objective with respect to managing capital is to maintain a balance sheet structure that is both efficient in terms of providing long-term returns to shareholders and safeguards the Group's ability to continue as a going concern. As appropriate, the Group can choose to adjust its capital structure by varying the amounts of dividends paid to shareholders, returns of capital to shareholders, issuing new shares or varying the level of capital expenditure. 

The Group's latest forecasts and projections, which incorporate the strategic initiatives outlined above, have been sensitivity tested for reasonably possible adverse variations in trading performance and foreign currency fluctuations. This indicates the Group will operate within the terms of its borrowing facilities and covenants for the foreseeable future.

After considering the trading performance, future strategic plans and shareholder funds, the directors have a reasonable expectation that the company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements are prepared on the going concern basis.

Capital additions

Total capital additions for the half year was £12.8 million (H1 2014/15: £4.4 million), of which £3.1 million was for software intangibles and £9.7 million for tangible fixed assets. Landlord contributions of £3.5 million (H1 2014/15: £1.6 million) were received, partially offsetting the £12.8 million outflow. Net capital expenditure after landlord contributions was £9.3 million (H1 2013/14: £2.8 million).  The increase was primarily due to the store refurbishment programme.

Treasury policy and financial risk management

The Board approves treasury policies and senior management directly controls day-to-day operations within these policies. The major financial risk to which the Group is exposed relates to movements in foreign exchange rates and interest rates. Where appropriate, cost effective and practicable, the Group uses financial instruments and derivatives to manage the risks.

No speculative use of derivatives, currency or other instruments is permitted.

Foreign currency risk

All International sales to franchisees are invoiced in Pounds sterling or US dollars.

International reported sales represent approximately 32 per cent of Group sales. Total International sales in the 28 week period represent approximately 61 per cent of Group network sales. The Group therefore has some currency exposure on these sales, but they are used to offset or hedge in part the Group's US dollar denominated product purchases. The Group policy is that all material exposures are hedged by using forward currency contracts. To help mitigate against the currency impact on royalty receipts, the Group has hedged against its major market currency exposure.

Interest rate risk

Subsequent to the rights issue and repayment of term loan in the year 52 week period 28 March 2015, the Group is no longer currently exposed to any material interest rate risk.

During the period to 28 March 2015 the Group negotiated a new revolving credit facility, which as at 10 October 2015 has not had any amounts drawn down on it.  However, should the Group draw down on this facility in the future, the Group would incur interest rate risk again.

Shareholders' funds

Shareholders' funds amount to £98.1 million, an increase of £20.4 million in the 28 week period. This represents £0.57 per share compared to £0.46 per share at the year end. The retained deficit in the condensed balance sheet is £51.8 million.

Post balance sheet event

There have been no post balance sheet events.

Condensed income statement

 

For the 28 weeks ended 10 October 2015

 

		28 weeks ended 10 October 2015 (unaudited)			28 weeks ended 11 October 2014 (unaudited)			52 weeks ended 28 March 2015
	Note	Underlying1 £ million	Non-underlying 2 £ million	Total £ million	Underlying1 £ million	Non-underlying 2 £ million	Total £ million	Total £ million
Revenue		349.9	-	349.9	372.7	-	372.7	713.9
Cost of sales		(318.1)	-	(318.1)	(346.0)	4.3	(341.7)	(656.3)
Gross profit		31.8	-	31.8	26.7	4.3	31.0	57.6
Administrative expenses		(22.5)	(2.3)	(24.8)	(19.6)	(2.1)	(21.7)	(37.8)
Profit/(loss) from retail operations		9.3	(2.3)	7.0	7.1	2.2	9.3	19.8
Other exceptional items	4	-	1.1	1.1	-	-	-	(26.2)
Share of results of joint ventures and associates		(0.5)	-	(0.5)	(0.2)	-	(0.2)	(0.2)
Profit/(loss) from operations		8.8	(1.2)	7.6	6.9	2.2	9.1	(6.6)
Net finance costs	5	(1.8)	-	(1.8)	(3.6)	-	(3.6)	(6.5)
Profit/(loss) before taxation		7.0	(1.2)	5.8	3.3	2.2	5.5	(13.1)
Taxation	6	(1.3)	0.3	(1.0)	(0.6)	(0.4)	(1.0)	(2.3)
Profit/(loss) for the period attributable to equity holders of the parent		5.7	(0.9)	4.8	2.7	1.8	4.5	(15.4)
Profit/(loss) per share
Basic	8	3.3p		2.8p	3.0p		5.1p	(12.6p)
Diluted	8	3.2p		2.7p	3.0p		5.0p	(12.6p)

All results relate to continuing operations.

(1)  Before items described in note 2 below.

(2) Includes exceptional property costs, restructuring costs and impairment charges and other non-underlying items of amortisation of intangible assets (excluding software) and the impact of non-cash foreign currency adjustments under IAS 39 and IAS 21 as set out in Note 4 to the financial statements.

Condensed statement of comprehensive income

 

For the 28 weeks ended 10 October 2015

				28 weeks ended 10 October 2015 (unaudited)	28 weeks ended 11 October 2014 (unaudited)	52 weeks ended 28 March 2015
				£ million	£ million	£ million
Profit/(loss) for the period				4.8	4.5	(15.4)
Items that will not be reclassified subsequently to the income statement: Actuarial gain/(loss) on defined benefit pension schemes				23.8	(15.3)	(34.4)
Income tax relating to items not reclassified				(4.8)	3.1	7.0
				19.0	(12.2)	(27.4)
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations				(0.9)	0.6	1.6
Cash flow hedges: (losses) /gains arising in the period				(8.9)	4.0	13.3
Deferred tax on cash flow hedges				1.2	-	(1.7)
				(8.6)	4.6	13.2
Other comprehensive income / (expense) for the period				10.4	(7.6)	(14.2)
Total comprehensive income / (expense) for the period wholly attributable to equity holders of the parent				15.2	(3.1)	(29.6)

Condensed balance sheet

                                                                                   

As at 10 October 2015

			10 October 2015 (unaudited)	11 October 2014 (unaudited)		28 March 2015
	Note		£ million	£ million		£ million
Non-current assets
Goodwill			26.8	26.8		26.8
Intangible assets			19.7	16.1		19.1
Property, plant and equipment	10		56.0	55.3		56.4
Investments in joint ventures			3.9	7.4		7.3
Deferred tax asset	6		19.6	21.0		23.6
			126.0	126.6		133.2
Current assets
Inventories			112.5	114.0		87.7
Trade and other receivables			66.9	70.4		69.4
Cash and cash equivalents			27.2	14.4		31.5
Current tax asset			0.7	1.2		-
Derivative financial instruments	13		2.9	3.9		9.3
			210.2	203.9		197.9
Total assets			336.2	330.5		331.1
Current liabilities
Trade and other payables			(124.2)	(135.6)		(107.0)
Current tax liabilities			-	-		(0.3)
Borrowings	11		-	(41.6)		-
Short term provisions			(26.3)	(12.8)		(26.5)
			(150.5)	(190.0)		(133.8)
Non-current liabilities
Trade and other payables			(21.8)	(23.6)		(20.4)
Borrowings	11		-	(27.0)		-
Retirement benefit obligations	12		(53.4)	(63.5)		(81.2)
Long term provisions			(12.4)	(13.7)		(18.0)
			(87.6)	(127.8)		(119.6)
Total liabilities			(238.1)	(317.8)		(253.4)
Net assets			98.1	12.7		77.7
Equity attributable to equity holders of the parent
Share capital			85.4	44.4			85.2
Share premium account			61.0	6.3			60.8
Own shares			(0.4)	(0.4)			(0.4)
Translation reserve			-	3.5			0.9
Hedging reserve			3.9	-			6.8
Retained deficit			(51.8)	(41.1)			(75.6)
Total equity			98.1	12.7			77.7

Condensed statement of changes in equity

 

For the 28 weeks ended 10 October 2015

	Share capital	Share premium account	Own shares	Translation reserve	Hedging reserve	Retained deficit	Total equity
	£ million	£ million	£ million	£ million	£ million	£ million	£ million
Balance at 29 March 2015	85.2	60.8	(0.4)	0.9	6.8	(75.6)	77.7
Other comprehensive income for the period	-	-	-	(0.9)	(7.7)	19.0	10.4
Profit for the period	-	-	-	-	-	4.8	4.8
Total comprehensive expense for the period	-	-	-	(0.9)	(7.7)	23.8	15.2
Removal from equity to inventories during the period	-	-	-	-	3.2	-	3.2
Transfer between reserves	-	-	-	-	1.6	(1.6)	-
Credit to equity for equity-settled share-based payments	-	-	-	-	-	1.4	1.4
Deferred tax on share-based payments	-	-	-	-	-	0.2	0.2
Issue of equity shares	0.2	0.2	-	-	-	-	0.4
Balance at 10 October 2015 (unaudited)	85.4	61.0	(0.4)	-	3.9	(51.8)	98.1

For the 28 weeks ended 11 October 2014

	Share capital	Share premium account	Other reserve	Own shares	Translation and hedging reserve	Retained deficit	Total equity
	£ million	£ million	£ million	£ million	£ million	£ million	£ million
Balance at 30 March 2014	44.4	6.3	-	(0.4)	(1.1)	(34.0)	15.2
Other comprehensive expense for the period	-	-	-	-	4.6	(12.2)	(7.6)
Profit for the period	-	-	-	-	-	4.5	4.5
Total comprehensive expense for the period	-	-	-	-	4.6	(7.7)	(3.1)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	0.6	0.6
Shares transferred to employees on vesting	-	-	-	-	-	-	-
Balance at 11 October 2014 (unaudited)	44.4	6.3	-	(0.4)	3.5	(41.1)	12.7

 

For the 52 weeks ended 28 March 2015

	Share capital	Share premium account	Own shares	Translation reserve	Hedging reserve	Retained deficit	Total equity
	£ million	£ million	£ million	£ million	£ million	£ million	£ million
Balance at 30 March 2014	44.4	6.3	(0.4)	(0.7)	(0.4)	(34.0)	15.2
Other comprehensive income for the period	-	-	-	1.6	11.6	(27.4)	(14.2)
Loss for the period	-	-	-	-	-	(15.4)	(15.4)
Total comprehensive expense for the period	-	-	-	1.6	11.6	(42.8)	(29.6)
Removal from equity to inventories during the period	-	-	-	-	(4.4)	-	(4.4)
Issue of equity shares	40.8	54.5	-	-	-	-	95.3
Credit to equity for equity-settled share-based payments	-	-	-	-	-	1.2	1.2
Balance at 28 March 2015 (audited)	85.2	60.8	(0.4)	0.9	6.8	(75.6)	77.7

Condensed cash flow statement

 

For the 28 weeks ended 10 October 2015

	Note	28 weeks ended 10 October 2015 (unaudited)	28 weeks ended 11 October 2014 (unaudited)	52 weeks ended 28 March 2015
		£ million	£ million	£ million
Net cash flow from operating activities	15	11.1	0.2	(1.1)
Cash flows from investing activities
Purchase of property, plant and equipment		(13.5)	(3.1)	(6.5)
Purchase of intangibles - software		(3.1)	(1.3)	(6.2)
Net cash received on disposal of joint venture		2.8	-	-
Net cash used in investing activities		(13.8)	(4.4)	(12.7)
Cash flows from financing activities
Interest paid		-	(2.2)	(2.7)
Facility fees paid		-	(0.6)	(1.1)
Net bank loans raised		-	5.0	(65.0)
Issue of ordinary share capital		0.4	-	95.3
Net cash raised in financing activities		0.4	2.2	26.5
Net (decrease)/increase in cash and cash equivalents		(2.3)	(2.0)	12.7
Cash and cash equivalents at beginning of period		31.5	17.3	17.3
Effect of foreign exchange rate changes		(2.0)	(0.9)	1.5
Net cash and cash equivalents at end of period		27.2	14.4	31.5

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 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.

The results for the 28 weeks ended 10 October 2015 are unaudited but have been reviewed by the Group's auditor, whose report forms part of this document. The information for the 52 weeks ended 28 March 2015 included in this report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified or modified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

2. Accounting Policies and Standards

The annual financial statements of Mothercare plc are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed set of financial statements included in this half yearly report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. 

Taxation

The taxation charge for the half-year is calculated by applying the best estimate of the average annual effective tax rate expected for the full year to the profit for the period and recognise a tax credit only to the extent that the resulting tax asset is more than likely not to reverse.

Profit from retail operations

Profit from retail operations represents the profit generated from normal retail trading, prior to any gains or losses on property transactions and impairment charges. It also includes the volatility arising from non-cash foreign currency adjustments under IAS 39 'Financial Instruments: Recognition and Measurement' and IAS 21 'The Effects of Changes in Foreign Exchange Rates'.

Underlying earnings

The Company believes that underlying profit before tax and underlying earnings provides additional useful information for shareholders. The term underlying earnings is not a defined term under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. It is not intended to be a substitute for, or superior to, IFRS measures of profit. A reconciliation of this alternative measure to the statutory measure required by IFRS is disclosed in note 3. The adjustments made to reported results are as follows:

Exceptional items: Due to their significance or one-off nature, certain items have been classified as exceptional. The gains and losses on these discrete items, such as property costs, impairment charges, restructuring costs and other non-operating items can have a material impact on the absolute amount of and trend in the profit from operations and the results for the period. Therefore any gains and losses on such items are analysed as non-underlying on the face of the income statement. Further details of the exceptional items are provided in note 4.

Non-cash foreign currency adjustments

Since January 2014 the Group has adopted hedge accounting on its foreign currency contracts. The adjustment made by the Group ensures that it reports its underlying performance consistently with cash flows, reflecting the economic hedging which is in place.  In addition, foreign currency monetary assets and liabilities are revalued to the closing balance sheet rate under IAS21 "The Effects of Changes in Foreign Exchange Rates".

Amortisation of intangible assets

The average estimated useful life of identifiable intangible assets is 10 to 20 years for trade names and 5 to 10 years for customer relationships. The amortisation of these intangible assets does not reflect the underlying performance of the business.

Retirement benefits

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 to consider whether there have been 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.

 3          Segmental information

Information reported to the Group's Chief Executive for the purpose of resource allocation and assessment of segment performance is focused on two operating segments: UK and International. UK comprises the Group's UK store and wholesale operations, catalogue and internet sales. The International business comprises the Group's franchise and wholesale operations, joint ventures and associates outside of the UK.

Segmental information about the UK and International businesses is presented below.

			28 weeks ended 10 October 2015 (unaudited)
			UK	International	Unallocated Corporate Expenses	Consolidated
			£ million	£ million	£ million	£ million
Revenue
External sales			236.6	113.3	-	349.9
Result
Segment result (underlying)			(6.1)	21.7	(4.9)	10.7
Share-based payments (underlying)						(1.9)
Non-cash foreign currency adjustments (non-underlying)						0.8
Amortisation of intangible assets (non-underlying)						(0.5)
Exceptional items						(1.5)
Profit from operations						7.6
Finance cost						(1.8)
Profit before taxation						5.8
Taxation						(1.0)
Profit for the period						4.8

3          Segmental information (continued)

			28 weeks ended 11 October 2014 (unaudited)
			UK	International	Unallocated Corporate Expenses	Consolidated
			£ million	£ million	£ million	£ million
Revenue
External sales			235.6	137.1	-	372.7
Result
Segment result (underlying)			(13.5)	25.3	(4.3)	7.5
Share-based payments (underlying)						(0.6)
Non-cash foreign currency adjustments (non-underlying)						5.9
Amortisation of intangible assets (non-underlying)						(0.5)
Exceptional items						(3.2)
Loss from operations						(9.1)
Finance cost						(3.6)
Profit before taxation						5.5
Taxation						(1.0)
Profit for the period						4.5

		52 weeks ended 29 March 2015
		UK	International	Unallocated Corporate Expenses	Consolidated
		£ million	£ million	£ million	£ million
Revenue
External sales		458.1	255.8	-	713.9
Result
Segment result (underlying)		(18.0)	45.9	(8.6)	19.3
Share-based payments (underlying)					(1.3)
Non-cash foreign currency adjustments (non-underlying)					6.9
Amortisation of intangible assets (non-underlying)					(1.0)
Exceptional items					(30.5)
Loss from operations					(6.6)
Finance costs (including £0.8m non-underlying)					(6.5)
Loss before taxation					(13.1)
Taxation					(2.3)
Loss for the period					(15.4)

Corporate expenses not allocated to UK or International represent board and company secretarial costs and other head office costs including audit, professional fees, insurance and head office property.

4. Exceptional and non-underlying items

Due to their significance or one-off nature, certain items have been classified as exceptional or non-underlying as follows:

		28 weeks ended 10 October 2015 (unaudited)	28 weeks ended 11 October 2014 (unaudited)	52 weeks ended 28 March 2015
		£ million	£ million	£ million
Exceptional items:
Restructuring costs included in cost of sales		(0.3)	(1.1)	(3.4)
Restructuring costs included in administrative expenses		(0.2)	(2.1)	(5.7)
Store property, plant and equipment impairment included in administrative expenses		-	-	4.8
Property related costs in other exceptional items		(0.8)	-	(25.9)
Impairment of investment in and receivables due from joint venture/associate in other exceptional items		-	-	(0.3)
Loss on disposal of joint ventures in other exceptional items		(0.2)	-	-
Restructuring costs in finance costs		-	-	(1.5)
Total exceptional items:		(1.5)	(3.2)	(32.0)
Other non-underlying items:
Non-cash foreign currency adjustments under IAS39 and IAS211		0.8	5.9	6.9
Amortisation of intangibles1		(0.5)	(0.5)	(1.0)
Exceptional and non-underlying items before tax		(1.2)	2.2	(26.1)

¹Included in non-underlying cost of sales is a credit of £0.3m (H1 2014/15: charge of £(5.4)m)

Restructuring costs included in cost of sales

During the 28 weeks ended 10 October 2015 a charge of £(0.3) million was recognised in relation to incremental employee costs incurred as part of the store restructuring programme commenced in the prior year.

Restructuring costs included in administration expenses

The charge of £(0.2m) million relates to business restructuring in the central functions.

Property related costs in exceptional items

A charge of £(2.1) million was recognised in respect of asset write-downs for those stores refurbished in the first half of the year and accelerated depreciation for those stores committed to be refurbished as at the half year end.  This is partly offset by a net benefit of £1.3 million recognised in relation to movements in store closure and related provisions

Loss on disposal of joint ventures

A loss on disposal for £(0.2)m of the India joint venture disposed of on 8 May 2015 was recognised in the period.

5. Net finance costs

		28 weeks ended 10 October 2015 (unaudited)	28 weeks ended 11 October 2014 (unaudited)	52 weeks ended 28 March 2015
		£ million	£ million	£ million
Interest on pension liabilities/return on assets		1.5	1.1	4.4
Other net interest		0.3	2.5	2.1
Net finance costs		1.8	3.6	6.5

6. Taxation

		28 weeks ended 10 October 2015 (unaudited)	28 weeks ended 11 October 2014 (unaudited)	52 weeks ended 28 March 2015
		£ million	£ million	£ million
Current tax - Overseas tax and UK corporation tax		0.3	0.4	2.2
Deferred tax - UK tax charge for timing differences		0.7	0.6	0.1
Total tax charge		1.0	1.0	2.3

The deferred tax charge arises on UK temporary differences.

The net deferred tax asset at 10 October 2015 is £19.6 million (H1 2014/15: £21.0 million) including £10.6 million of deferred tax assets in relation to retirement benefit obligations (H1 2014/15: £12.7 million).

The Chancellor of the Exchequer has announced a reduction in the rate of corporation tax to 19% from 1 April 2017 and 18% from 1 April 2020.  The Finance Bill was not substantially enacted at the half year date, therefore the one off impact of re-measuring UK deferred tax assets and liabilities for the rate changes is not recognised at 10 October 2015.

7. Dividends

In April 2012 the Group announced that the dividend would not be resumed until there was a marked improvement in the Group's results. Accordingly, there will be no dividend for the first half of the year.

8. Earnings per share

		28 weeks ended 10 October 2015 (unaudited)	28 weeks ended 11 October 2014 (unaudited)	52 weeks ended 28 March 2015
		million	million	million
Weighted average number of shares in issue for the purpose of basic earnings per share		170.7	88.7	122.2
Dilution - option schemes		9.0	1.1	3.6
Weighted average number of shares in issue for the purpose of diluted earnings per share		179.7	89.8	125.8
		£ million	£ million	£ million
Profit/(loss) for basic and diluted earnings per share		4.8	4.5	(15.4)
Exceptional and other non-underlying items		1.2	(2.2)	26.1
Tax effect of above items		(0.3)	0.4	(0.2)
Underlying earnings		5.7	2.7	10.5
		Pence	Pence	Pence
Basic earnings/(loss) per share		2.8	5.1	(12.6)
Basic underlying earnings per share		3.3	3.0	8.6
Diluted earnings/(loss) per share		2.7	5.0	(12.6)
Diluted underlying earnings per share		3.2	3.0	8.3

9. Seasonality of the Early Learning Centre

Sales for the Early Learning Centre are more heavily weighted towards the second half of the year, with approximately 37% of annual sales forecast to occur in the third quarter (mid-October to early January).

1. Property, plant and equipment (excluding software intangibles)

Capital additions of £12.8 million were made during the period (H1 2014/15: £2.6 million).  The increase over H1 2014/15 is primarily driven by the store refurbishment programme.

1. Bank loans and overdrafts

As at 10 October 2015, the Group had not drawn down on any of its Revolving Credit Facility.

1. Retirement benefit schemes

The Group updated its accounting for pensions under IAS 19 as at 10 October 2015. This involved rolling forward the assumptions from the prior year end and updating for changes in market rates in the first half. For the UK schemes, based on the actuarial assumptions from the last full actuarial valuations carried out in March 2014, a liability of £53.4 million (H1 2014/15: £63.5 million) has been recognised.  This represents a 34% reduction since the year end position.

1. Financial instruments' fair value disclosures

The Group held the following financial instruments at fair value at 10 October 2015. The fair value of foreign currency forward contracts is measured using quoted foreign exchange rates and yield curves from quoted rates matching the maturities of the contracts, and they therefore are categorised within level 2 of the fair value hierarchy set out in IFRS 7.

		Fair value measurements at  10 October 2015 (unaudited)	Fair value measurements at  11 October 2014 (unaudited)	Fair value measurements at  28 March 2015
		£ million	£ million	£ million
Financial assets:
Derivative financial instruments:
Forward foreign currency contracts		2.9	3.9	9.3
		2.9	3.9	9.3

The derivative financial assets and liabilities whose fair values include the use of level 2 inputs are obtained from the banks or financial instruments with which the derivatives have been transacted, subject to adjustment for own credit risk if necessary.

The valuations incorporate the following inputs:

• interest rates and yield curves at commonly quoted intervals; and
• observable credit spreads.

The directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values.

14        Share-based payments

An expense is recognised for share-based payments based on the fair value of the awards at the date of grant, the estimated number of shares that will vest and the vesting period of each award. The total net charge for share-based payments under IFRS 2 is £1.9 million (28 weeks ended 11 October 2014: £0.6 million) of which £1.9 million (28 weeks ended 11 October 2014: £0.6 million) will be equity settled. The assumptions used to measure the fair values of the share-based payments are in line with those previously published.

15        Notes to the cash flow statement

	28 weeks ended 10 October 2015 (unaudited)	28 weeks ended 11 October 2014 (unaudited)	52 weeks ended 28 March 2015
	£ million	£ million	£ million
Profit from retail operations	7.0	9.3	19.8
Adjustments for:
Depreciation of property, plant and equipment	7.0	6.9	13.1
Impairment of tangible fixed assets	1.5	-	-
Amortisation of intangible assets	2.5	2.5	4.6
Impairment of intangible assets	-	-	(4.8)
Losses on disposal of property, plant and equipment and intangible assets	1.4	0.2	0.2
(Profit)/loss on non-underlying non-cash foreign currency adjustments	(0.8)	(5.9)	(6.9)
Equity settled share-based payments	1.9	0.6	1.3
Movement in provisions	(4.5)	(7.7)	(10.6)
Cash payments for other exceptional items	(0.3)	-	0.1
Amortisation of lease incentives	(2.2)	(2.6)	(4.8)
Lease incentives received	3.5	1.6	1.6
Payments to retirement benefit schemes	(7.0)	(3.3)	(6.4)
Charge to profit from operations in respect of retirement benefit schemes	1.5	0.6	1.4
Operating cash flow before movement in working capital	11.5	2.2	8.6
(Increase)/ decrease in inventories	(23.3)	(19.8)	7.7
Decrease/ (increase) in receivables	1.9	(10.4)	(9.6)
Increase/(decrease) in payables	21.7	30.2	(5.4)
Cash generated from operations	11.8	2.2	1.3
Income taxes paid	(0.7)	(2.0)	(2.4)
Net cash inflow/(outflow) from operating activities	11.1	0.2	(1.1)

16        Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint ventures and associates are disclosed below.

Trading transactions:

Joint ventures and associates	Income from related parties	Amounts owed by related parties (net of provisions)
	£ million	£ million
28 weeks ended 10 October 2015 (unaudited)	4.6	2.2
28 weeks ended 11 October 2014 (unaudited)	6.7	5.4
52 weeks ended 28 March 2015	14.7	3.9

Income earned from related parties includes royalty income on retail sales of related parties to their customers, plus sales of goods to related parties made at the Group's usual list price.

The amounts outstanding are unsecured and will be settled in cash

17        Post balance sheet event

There have been no post balance sheet events.

Risks and uncertainties

The Board continually assesses and monitors the key risks of the business. The principal risks and uncertainties which could impact the Company's long-term performance are summarised below:

• 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 may be affected by challenging economic conditions and political developments affecting the UK and international markets in which it operates.
• 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.
• The Group is materially dependent on a small number of franchise partners that make up a significant proportion of its international income.
• The Group's results of operations may be affected by both transactional and translational foreign exchange risk.
• 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.
• 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 manufacturers, suppliers and distributors to comply with employment, environmental and other laws.
• Any unauthorised access or disclosure of confidential information stored or obtained by the Group could have a material adverse effect on its business.
• The Group relies on its ability to improve existing products and successfully develop and launch new innovating product.
• The Group supplies and sources its products and operates in a number of countries in which bribery and corruption pose significant risks.
• Any unauthorised access or disclosure of confidential information stored or obtained by the Group, either by criminal cyber-attack or a speculative loner, could have a material effect on its business.

Certain statements in this report are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by forward looking statements. We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.

Responsibility statement

We confirm that to the best of our knowledge:

1. The condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";
    
2. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 28 weeks of the year and description of principal risks and uncertainties for the 24 weeks of the year); and
    
3. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Mark Newton Jones                                Richard Smothers

Chief Executive                                      Chief Financial Officer

18 November 2015

Independent review report to Mothercare plc

We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the 28 weeks ended 10 October 2015 which comprises the condensed income statement, the condensed balance sheet, the condensed statement of changes in equity, the condensed statement of comprehensive income, the condensed cash flow statement and related notes 1 to 17. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 28 weeks ended 10 October 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

18 November 2015

Shareholder information

Financial calendar

	2016
Preliminary announcement of results for the 52 weeks ending 27 March 2016	end May
Issue of report and accounts	mid June
Annual General Meeting	mid July
Announcement of interim results for the 28 weeks ended 9 October 2016	mid November

Registered office and head office

Cherry Tree Road, Watford, Hertfordshire WD24 6SH

Telephone [phone]

www.mothercareplc.com

Registered number 1950509

Group general counsel and company secretary

Nick Folland

Registrars

Administrative enquiries concerning shareholders in Mothercare plc for such matters as the loss of a share certificate, dividend payments or a change of address should be directed, in the first instance, to the registrars:

Equiniti Limited

Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA

Telephone [phone] (calls to this number are charged at 8p per minute plus network extras)

Overseas [phone]

www.equiniti.com

Postal share dealing service

A postal share dealing service is available through the Company's registrars for the purchase and sale of Mothercare plc shares. Further details can be obtained from Equiniti on 0871 384 2248 (calls to this number are charged at 8p per minute plus network extras). Lines are open 08:30 to 17:30, Monday to Friday.

The Company's stockbrokers are:

JPMorgan Cazenove & Co Limited

25 Bank Street

Canary Wharf,

London E14 5JP

Telephone [phone]

Numis Securities Limited

The London Stock Exchange Building

10 Paternoster Square

London EC4M 7LT

Telephone [phone]

ShareGift

Shareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating them to charity through ShareGift, a registered charity administered by The Orr Mackintosh Foundation. The share transfer form needed to make a donation may be obtained from the Mothercare plc registrars, Equiniti Limited.

Further information about ShareGift is available from www.sharegift.org or by telephone on

020 7930 3737.

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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#1967861