Mothercare Plc : Annual Financial Report

Mothercare PLC Annual Financial Report

To the London Stock Exchange

15 June 2012

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 31 March 2012;

 

§         Form of Proxy; and

 

§         Notice of Annual General Meeting of the Company which is to be held at 10.00 on Thursday 19 July 2012 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 Financial Services Authority's National Storage Mechanism located at http://hemscott.com/nsm.do.

 

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 31 March 2012. The Company's preliminary statement was announced on 24^th May 2012 and is available to view at the Company's website: mothercareplc.com/financial-reports.

 

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

 

Principal Risks and Uncertainties

 

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

 

In order to manage risk effectively, the executive committee (see page 31) has overall responsibility for ensuring that a rolling programme of structured risk assessments of those areas having a significant effect on the future of the business is carried out.  The programme ensures, so far as practicably possible, that the appropriate risk management processes are identified, controls established, residual risks evaluated and that the necessary action and risk avoidance measures taken or monitoring undertaken.  Elements of the programme are reviewed by the internal audit function during the year. 

 

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

 

	Risk	Impact	Mitigation
Financial	·     The group fails to meet the financial targets set out in the 'Transformation and Growth' plan	·       Potential breach of covenants contained in the bank facility agreements leading to event of default	·        Detailed monthly monitoring of financial performance against plan targets ·        Alternative financing options to supplement bank facility ·        Restructured head office and UK store teams
	·     LFL sales in the UK do not meet expectations under 'Transformation and Growth' plan	·       Poor business performance may mean that financial targets are not met ·       Loss of supplier confidence ·       Loss of market share	·        Reshaped UK business team ·        New price and value strategy supported by promotional activity ·        New website launched
	·     Unforeseen additional cash funding to support international joint venture operations and associates	·       Diverts cash away from the UK business ·       May delay UK business turnaround	·        Joint ventures and associates submit business plans and management reports monthly to the Company ·        Attendance at board meetings
	·     UK store rationalisation programme is difficult to achieve in current market conditions	·       Greater than anticipated costs of closure ·       Reduces cash available to UK business	·        2011/12 targets met which provides a record of past performance ·        Dedicated and experienced property team
	·     Uncertainty in the macro economic environment - particularly the Eurozone economies ·     Fluctuations and uncertainty in exchange rates	·       Continued weak UK consumer confidence may delay business turnaround ·       Underperforming International business in affected regions ·       Increase in cost of goods impacts margin ·       Potential for increase in bad debts	·        Product range and pricing being adapted to meet customer demand ·        Strong franchise partners; close working relationship with franchisees ensures early awareness of any financial issues ·        Credit insurance ·        Limited exposure to Eurozone economies
Operational	·     The UK business fails to deliver on brand standards, or react to changes in consumer demand or existing or new competitor activity	·       Loss of market share ·       Loss of sales leading to a shortfall in profits	·        Improvements being made at store level through better store operations, staff training and store standards ·        New website launched in the UK ·        New customer satisfaction programme launched ·        Structured pricing policy and strategy ·        Product range and pricing being adapted to meet customer demand
	·     International expansion leads to over-exposure in certain territories	·       The group becomes vulnerable to key markets	·        Strong franchise operations work closely with international franchisees ·        Credit insurance against key franchisee recoverables
Manufacturing and product	·     The group fails to meet its reputation for quality, safety and integrity	·       Damage to brand reputation and customer confidence would impact sales	·        Significant group investment in product quality management resource ·        High standards communicated throughout supply chain ·        In-house responsible sourcing team working in Bangladesh, India and China ·        Global code of conduct communicated and applied to head office/suppliers/franchisees
	·     Failure to invest properly in product innovation	·       New products and innovation are a key driver of sales	·        The group maintains an ongoing investment strategy in new products ·        Launches of new products and ranges planned for FY13
People and infrastructure	·     Organisational change and headcount reductions lead to erosion of corporate knowledge	·       The 'Transformation and Growth' plan falls behind schedule	·        Development and approval of key business objectives for all employees from top down with quarterly reviews to monitor employee performance
	·     Legacy IT systems fail to meet business requirements	·       Adverse impact on performance and ability to meet key targets	·        Comprehensive IT review planned
	·     Failure or increase in costs of the group's logistics or global distribution network	·       The UK business or international franchisees do not meet customer demand, leading to loss in sales ·       Erosion of margin	·        Regular review and audit of distribution network ·        Strengthened and dedicated expert distribution team

 

Directors' responsibility statement

We confirm that to the best of our knowledge:

 

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

 

§         The management report, which is incorporated into the directors' 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.

 

 

The directors of Mothercare plc are listed on page 30 and on the Company's website at mothercareplc.com.

 

Enquiries: Tim Ashby, Group General Counsel and Company Secretary [phone]

Email:      [e-mail]

 

 

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Source: Mothercare Plc via Thomson Reuters ONE

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