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MTC Mothercare Plc

6.35
-0.30 (-4.51%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Mothercare Plc LSE:MTC London Ordinary Share GB0009067447 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.30 -4.51% 6.35 6.30 6.40 6.60 6.30 6.60 183,506 16:35:29
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Department Stores 73.1M -100k -0.0002 -315.00 35.52M

Mothercare PLC Half-year Report (0006Q)

24/11/2016 7:01am

UK Regulatory


Mothercare (LSE:MTC)
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TIDMMTC

RNS Number : 0006Q

Mothercare PLC

24 November 2016

mothercare plc

FY16/17 Half Year Results

Continued progress on six pillar strategy in challenging UK conditions

Mothercare plc, the leading global retailer for parents and young children, today announces half year results for the 28 week period to 8th October 2016.

Highlights for H1 FY16/17

   --     Group underlying profit before tax at GBP5.9m (H1 FY15/16 GBP7m) 
   --     UK turnaround progressing strongly in spite of a difficult 6 month trading period 
   -      Sales and margin growth stalled as a result of unseasonable weather and warehouse changes 
   -      Further improvements to intake margin offset by higher markdown 
   -      Warehouse infrastructure and systems change; first phase completed 

- Digital sales now represent c40% of total UK sales with c80% from mobile and 1 million apps downloaded by our customers. Website successfully replatformed

- 32 refurbishments completed, 91 now in total, representing c60% of our store estate in the new modern format

-- Solid International performance, +7.7% in actual currency in spite of volatile trading across the globe

   -      3 new International web sites created, taking our online availability to 14 markets 
   -      Opened 84 new stores, (closed 55); 1.8% increase in space 
   --     Statutory loss before tax of GBP(0.8)m (H1 FY15/16 GBP5.8m profit). Debt GBP15.6m. 

Group performance

 
                                                                              28 weeks to   28 weeks to    % change 
                                                                               8 Oct 2016   10 Oct 2015         vs. 
                                                                              GBP million   GBP million   last year 
---------------------------------------------------------------------------  ------------  ------------  ---------- 
 UK 
 UK like-for-like sales(1)                                                         (0.7)%         +3.8%           - 
 Total UK sales                                                                     231.2         236.6      (2.3)% 
 Underlying UK loss(2)                                                              (8.8)         (6.1)     (44.3)% 
 International 
 International like-for-like sales(1)                                              (2.9)%        (2.3)%           - 
 International retail sales in constant currency                                   (0.8)%         +1.8% 
 International retail sales in actual currency                                       7.1%        (5.0)% 
 Total International sales                                                          405.6         376.7       +7.7% 
 Underlying International profit(2)                                                  20.8          21.7      (4.1)% 
 Group 
 Worldwide sales(1)                                                                 636.8         613.3       +3.8% 
 Total group sales                                                                  347.7         349.9      (0.6)% 
---------------------------------------------------------------------------  ------------  ------------  ---------- 
 Group underlying profit before tax(2)                                                5.9           7.0     (15.7)% 
---------------------------------------------------------------------------  ------------  ------------  ---------- 
 Exceptional charge & non-underlying items                                          (6.7)         (1.2)           - 
 Group (loss)/profit before tax after exceptional and non-underlying items          (0.8)           5.8           - 
 Underlying EPS(2)                                                                   3.4p          3.3p       +3.0% 
 Net (debt)/cash                                                                   (15.6)          27.2           - 
---------------------------------------------------------------------------  ------------  ------------  ---------- 
 

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

"We are now in the second year of the turnaround of mothercare, and we are continuing to make major changes in the business. We have refurbished c60% of our UK store estate, upgraded our distribution and online capabilities and completed the bulk of the unprofitable store closure programme. Lastly we have seen a step change in our digital credentials with c40% of our business now being generated through this channel.

"The last 6 months have been challenging and, not withstanding our progress with our strategic pillars, our sales and margin stalled in the period. There are two factors at play here - firstly the widely reported slowdown in sales across the high street due to unseasonal weather through the spring/summer season, resulting in higher markdown. Secondly, whilst our planned warehouse infrastructure change has been successfully completed, it did mean a reduced flow of product for 8 weeks in the summer and a one off increase in operational costs as the systems bedded in.

"Finally, we are making good progress with the reorganisation and focus within our International business. While sales are still volatile across the globe, many of our markets have now returned to growth. We are putting retail space down and exporting our learnings and good practice from the UK into International online, which has grown by +46% in local currency.

"While conditions in the first half have been challenging, the second half has started in line with our plans and the business is well prepared for the important peak season. We expect to make further progress in the second half which will partially compensate for the effect of the headwinds experienced in H1.

"We continue to see opportunities to further develop and improve our business both here in the UK and in our international markets. Our vision remains clear: to be the leading global retailer for parents and young children."

Investor and analyst enquiries to:

mothercare plc

   Mark Newton-Jones, Chief Executive Officer                                     01923 206455 
   Richard Smothers, Chief Financial Officer                                          01923 206455 
   Helen Gunter, Director of Corporate Communications                      01923 206381 

Media enquiries to:

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 7 January 2017 on Thursday 12 January 2017.

CHIEF EXECUTIVE'S REVIEW

Overview

In a challenging first half, we have remained focused on delivering an improved offer for both our UK customers and our International partners.

We continue to make good progress against each of the six strategic pillars and the business is positioned well to navigate the future UK and global economic uncertainties.

   1.    Becoming a digitally led business 

o Online sales +6.9%, accounting for c40% of UK retail sales (36% H1 FY15/16)

o Mobile now c80% of total online sales

o Launch of new responsive website improving conversion and check out

o Upgraded app driving improved performance and conversion with over 1 million downloaded

o Over 3m customers on UK database

   2.    Supported by a modern retail estate and great service 

o Closed 6 underperforming stores; opened 2 new

o 32 refurbishments completed, 91 now in total, representing c60% of store estate in the new modern format

o iPads in store driving c44% of online sales

   3.    Offering style, quality and innovation in product 

o 50 H&T exclusive products launched, bringing total to 134 exclusive products (+35% H1 FY15/16)

o 20% of product now at 'best' end range

   4.    Stablise and recapture gross margin 

o Underlying bought in margin, up year on year

o Full price sales at 65% (69% H1 FY15/16)

o Deeper discounts to clear seasonal stock

o UK gross margin down (59)bps

   5.    Running a lean organization while investing for the future 

o Development of our warehousing infrastructure; first phase completed

o Tight control of costs`

   6.    Expanding further internationally 

o Space + 1.8% with 1,339 stores in 56 countries

o Opened 84 new stores (closed 55); store portfolio actively managed

o Launched websites in three new markets; 14 markets now online

GROUP RESULTS

Global retail space across all of our markets was + 0.6% year on year with the UK declining by 1.7% to 1.5m sq.ft and International up 1.8% at 3.06m sq.ft. We now have 166 stores in the UK and in International we operate 1,339 stores in 56 countries

 
                                          28 weeks to   28 weeks to     % change 
                                           8 Oct 2016   10 Oct 2015   vs. last year 
                                           GBPmillion    GBPmillion 
---------------------------------------  ------------  ------------  -------------- 
 Underlying International profit(2)              20.8          21.7          (4.1)% 
 Underlying UK loss(2)                          (8.8)         (6.1)         (44.3)% 
 Corporate expenses                             (3.7)         (4.9)          +22.4% 
 Underlying profit from operations(2)             8.3          10.7         (22.4)% 
 Underlying net finance costs                   (1.9)         (1.8)               - 
 
 Share based payments                           (0.5)         (1.9)               - 
 Underlying profit before tax(2)                  5.9           7.0         (15.7)% 
 Exceptional items                             (10.7)         (1.5)               - 
 Non-cash foreign currency adjustments            4.5           0.8               - 
 Amortisation of intangibles                    (0.5)         (0.5)               - 
 Reported (loss)/profit before 
  tax                                           (0.8)           5.8               - 
---------------------------------------  ------------  ------------  -------------- 
 

Worldwide sales were +3.8% at GBP637 million with total UK sales down (2.3)% and total International sales +7.7%. Group sales, which reflect our UK sales and reported revenues or receipts from our International partners, were down (0.6%) at GBP348 million.

Underlying Group profit before tax was down (15.7)% at GBP5.9m. UK losses increased to a loss of GBP(8.8)m, while International profits were GBP20.8m. Other Group expenses improved with corporate costs of GBP(3.7)m, finance costs of GBP(1.9)m and share based payments of GBP(0.5)m.

After a charge of GBP(10.7)m for exceptional items (including property, warehousing costs, write down of International stock and provision for China JV receivables), a credit of GBP4.5m for non-cash foreign currency adjustments and a GBP(0.5)m charge for amortisation of intangibles, the reported loss for the half year was GBP(0.8)m (H1 FY15/16: GBP5.8m profit).

Our balance sheet remains strong with net assets of GBP62.3m, but with net debt of GBP(15.6)m compared with a cash balance of GBP27.2m last year, reflecting our investment programme in the UK store estate and infrastructure.

UK

We are confident with our investment programme in the UK but we have seen a softening in our UK performance in line with the rest of the market due to poor weather, impacting both sales and margin, as customers responded to heavier discounts. In addition, planned changes to our warehouse infrastructure had an adverse impact on sales as well as costs. It is still too early to determine whether consumer confidence has materially shifted post the EU referendum in June, but we remain committed to ensuring we have the appropriate offer for our customers.

 
                                       H1 FY2016/17   H1 FY2015/16 
                                        28 weeks to    28 weeks to        % change 
                                         8 Oct 2016    10 Oct 2015   vs. last year 
------------------------------------  -------------  -------------  -------------- 
 UK like-for-like sales growth               (0.7)%          +3.8%               - 
 UK online sales                           GBP83.4m       GBP78.1m           +6.9% 
 UK retail sales (including online)       GBP214.6m      GBP219.1m          (2.1)% 
 UK wholesale sales                        GBP16.6m       GBP17.5m          (5.0)% 
 Total UK sales                           GBP231.2m      GBP236.6m          (2.3)% 
 Underlying loss                          GBP(8.8)m      GBP(6.1)m         (44.3)% 
------------------------------------  -------------  -------------  -------------- 
 

Becoming a digitally led business

We continue to achieve good growth in our online business, which now accounts for c40% of our total UK retail sales (+36% H1 FY15/16). The trend towards mobile continues with mobile now c80% of total online sales. Click and Collect now accounts for c43% of online orders and c27% of online sales.

We launched our new responsive website during the half, improving speed, presentation, the customer journey and a smoother check out process. In the first full period since it went live, we have seen strong sales +20% LFL. The mothercare app has also been upgraded, leading to improvements in performance and conversion.

Supported by a modern retail estate

We continue to make progress with our store strategy, closing underperforming stores, opening new sites and transitioning to one third of stores in town and two thirds out of town. We closed 6 stores in the period as we come towards the end of our current closure strategy. We do, however, continue to review our store portfolio strategy, to ensure it remains relevant for customers. To date, c60% of the store estate (91 stores) are now in the new format. Our omnichannel customer strategy continues to progress well with 44% of our online sales now from iPads in store. In our refitted stores, every customer advisor has an iPad and one in two customer advisers in our other stores.

Further improvements continue to be made to support our omnichannel strategy including the start of a roll out of customer Wi-Fi pre-Christmas.

Offering style, quality and innovation in product

We have maintained our price architecture, with an average of 20% of all three product categories now in the 'best' tier and continued to focus on introducing new brands and exclusive ranges.

In Home and Travel, 20% of products now at 'best'; launched 50 new exclusive products, bringing the total to 134 exclusive products (+35% H1 FY15/16), including Chicco feeding range, Orla Kiely Gro bags and GB strollers.

In Toys, we continue to make further progress towards growing our brands which are now 18% of the mix and also increasing exclusivity. During the period, we introduced 10 new brands including the very popular pre-school TV licenses, Paw Patrol, Peppa Pig and Thomas the Tank Engine; and 20 exclusive products.

In Clothing and Footwear we have continued to focus on quality, choice and range with both external brands and our own brand product. We rebranded Baby K to My K to reflect a broader age group; grew our newborn and baby categories including the Heritage and Peter Rabbit ranges.

Stabilize and recapture gross margin

This has been a difficult period as poor weather resulted in lower sales, higher stocks and more discounting. This resulted in UK gross margin decline in the first half of (59)bps, although buying margin continued to progress. During the period, 65% of the product mix was sold at full price (69% H1 FY15/16).

Running a lean organization while investing for the future

We continue to make improvements in our cost base with improved efficiencies in stores.

We also initiated investment in our technology infrastructure which in the long term, will improve our ability to manage product and stock through the business both in the UK and Internationally.

We started the investment in our warehousing during the period, to build the optimal platform for an improved shopping experience for our customers, as well as improving efficiencies. This initial phase had an impact on sales as we managed the flow of stock through our supply chain and some one-off costs that are recorded as exceptionals.

International

Trading for many of our International partners continues to be volatile, although many of our markets did return to growth in the period.

We have some positive currency tailwinds albeit the impact to our profit is limited due to our hedging strategy.

Favourable currency movements meant International sales have grown by 7.1% in actual currencies at GBP399.9 million while constant currencies delivered a (0.8)% fall. Wholesale sales were +73.8% at GBP5.7m and total International sales were +7.7% at GBP406m.

Underlying profits for our International business were GBP20.8 million, with currency moves having a negligible impact during the half year.

In line with our new approach to trading with our International partners, we wrote down the value of stock in International. This, along with a provision for China JV receivables, was recorded as exceptional costs.

International accounts for 66% of worldwide space and 64% of worldwide sales.

 
                                  28 weeks to   28 weeks to        % change 
                                   8 Oct 2016   10 Oct 2015   vs. last year 
-------------------------------  ------------  ------------  -------------- 
 International like-for-like 
  sales growth                         (2.9)%        (2.3)%               - 
 International retail sales: 
  constant currency                    (0.8)%         +1.8%               - 
 International retail sales: 
  actual currency                       +7.1%        (5.0)%               - 
 
 International retail sales         GBP399.9m     GBP373.4m           +7.1% 
 International wholesale sales        GBP5.7m       GBP3.3m          +73.8% 
 Total International sales          GBP405.6m     GBP376.7m           +7.7% 
 Underlying profit                   GBP20.8m      GBP21.7m          (4.1)% 
-------------------------------  ------------  ------------  -------------- 
 

Expanding further internationally

Space was +1.8% year on year as we added net 29 stores. We continue to work proactively with our partners to develop their store portfolio and opened 84 new stores whilst closing 55. Our new store concept is now in 9 countries. Online continues to present a significant opportunity and although only representing c2% of International e-commerce sales, it grew by c46% (26% in constant currency), in the half. We launched websites in three new countries: Malaysia, Belarus and Turkey. We now have 14 markets internationally online.

International like-for-like sales were down (2.9)% with Europe, Russia, Middle East and Asia, all weaker. While markets are still volatile, many, including China, have now returned to growth.

Outlook

We are in the second year of our turnaround and continue to make good progress against each of the six strategic pillars. While conditions in the first half have been challenging, the second half has started in line with our plans and the business is well prepared for the important peak season. We expect to make further progress in the second half which will partially compensate for the effect of the headwinds experienced in H1.

FINANCIAL REVIEW

RESULTS SUMMARY

Group underlying profit before tax was GBP5.9 million, for the 28 weeks to 8 October 2016, (H1 FY2015/16: GBP7.0 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, development of warehousing, restructuring of international operations and a provision for China JV receivables. After exceptional and non-underlying items, the Group recorded a pre-tax loss of GBP(0.8) million (H1 FY2015/16: profit of GBP5.8 million).

Income statement

 
 GBP million                                   28 weeks   28 weeks    52 weeks 
                                                     to      to 10          to 
                                              8 October    October    26 March 
                                                   2016       2015        2016 
------------------------------------------  -----------  ---------  ---------- 
 
 Revenue                                          347.7      349.9       682.3 
 Underlying profit from operations before 
  interest and share based payments                 8.3       10.7        25.8 
 Share based payments                             (0.5)      (1.9)       (3.0) 
 Net finance costs                                (1.9)      (1.8)       (3.2) 
------------------------------------------  -----------  ---------  ---------- 
 Underlying profit before tax                       5.9        7.0        19.6 
 Exceptional items                               (10.7)      (1.5)      (10.2) 
 Non-cash foreign currency adjustments              4.5        0.8         1.2 
 Amortisation of intangible assets                (0.5)      (0.5)       (0.9) 
------------------------------------------  -----------  ---------  ---------- 
 (Loss)/profit before tax                         (0.8)        5.8         9.7 
------------------------------------------  -----------  ---------  ---------- 
 Underlying EPS - basic                            3.4p       3.3p        9.6p 
 EPS - basic                                       0.2p       2.8p        3.8p 
------------------------------------------  -----------  ---------  ---------- 
 

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 next page).

Results by segment

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

 
 GBP million - Revenue      28 weeks      28 weeks       52 weeks 
                                  to            to    to 26 March 
                           8 October    10 October           2016 
                                2016          2015 
-----------------------  -----------  ------------  ------------- 
 UK                            231.2         236.6      459.7 
 International                 116.5         113.3      222.6 
-----------------------  -----------  ------------  ------------- 
 Total                         347.7         349.9      682.3 
-----------------------  -----------  ------------  ------------- 
 
 
 GBP million - Underlying profit               28 weeks      28 weeks       52 weeks 
                                                     to            to    to 26 March 
                                              8 October    10 October           2016 
                                                   2016          2015 
------------------------------------------  -----------  ------------  ------------- 
 
 UK                                               (8.8)         (6.1)          (6.4) 
 International                                     20.8          21.7           40.3 
 Corporate                                        (3.7)         (4.9)          (8.1) 
------------------------------------------  -----------  ------------  ------------- 
 Underlying profit from operations before 
  share based payments                              8.3          10.7           25.8 
 Share based payments                             (0.5)         (1.9)          (3.0) 
 Net finance costs                                (1.9)         (1.8)          (3.2) 
------------------------------------------  -----------  ------------  ------------- 
 Underlying profit before tax                       5.9           7.0           19.6 
------------------------------------------  -----------  ------------  ------------- 
 

UK sales were significantly impacted by poorer weather over the summer resulting in higher stocks and then deeper discounts. We continued to see benefits from refitted stores and cost savings from closed stores. A planned change in our warehousing facilities had some impact on stockholding and missed sales along with a number of one-off exceptional costs. Losses in the UK increased to GBP(8.8) million from GBP(6.1) million last year.

International retail sales in constant currency were down (0.8)% with mixed performance across the regions. In particular, we saw China return to growth in the period but continued softening in the Middle East. Overall, International sales increased by 2.8% on a reported basis and 7.7% on a total basis, benefitting from currency tailwinds as sterling devalued, this tailwind having limited benefit to the profit and loss as it was mostly hedged. International profit was GBP20.8 million.

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 from the same selling space for at least a year and include Direct in Home and Direct in Store.

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 worldwide sales and reported sales are analysed as follows:

 
 GBP million                         Reported sales                                         Worldwide sales* 
                    ------------------------------------------------  -----------  --------------------------------- 
                       28 weeks      28 weeks          %    52 weeks     28 weeks      28 weeks        %    52 weeks 
                          ended         ended                  ended        ended         ended                ended 
                      8 October    10 October               26 March    8 October    10 October                   26 
                           2016          2015                   2016         2016          2015                March 
                                                                                                                2016 
------------------  -----------  ------------  ---------  ----------  -----------  ------------  -------  ---------- 
 UK retail sales          214.6         219.1     (2.1%)       426.1        214.6         219.1   (2.1%)       426.1 
 UK wholesale 
  sales                    16.6          17.5     (5.0%)        33.6         16.6          17.5   (5.0%)        33.6 
------------------  -----------  ------------  ---------  ----------  -----------  ------------  -------  ---------- 
 Total UK sales           231.2         236.6     (2.3%)       459.7        231.2         236.6   (2.3%)       459.7 
------------------  -----------  ------------  ---------  ----------  -----------  ------------  -------  ---------- 
 International 
  retail 
  sales                   110.8         110.0       0.7%       215.9        399.9         373.4     7.1%       683.0 
 International 
  wholesale 
  sales                     5.7           3.3      73.8%         6.7          5.7           3.3    73.8%         6.7 
------------------  -----------  ------------  ---------  ----------  -----------  ------------  -------  ---------- 
 Total 
  International 
  sales                   116.5         113.3       2.8%       222.6        405.6         376.7     7.7%       689.7 
------------------  -----------  ------------  ---------  ----------  -----------  ------------  -------  ---------- 
 Group sales / 
  Group 
  worldwide sales         347.7         349.9     (0.6%)       682.3        636.8         613.3     3.8%     1,149.4 
------------------  -----------  ------------  ---------  ----------  -----------  ------------  -------  ---------- 
 

* Estimated

Analysis of worldwide sales movement

 
 GBP million - Worldwide sales 
----------------------------------------------  ------- 
 Sales for 28 weeks ended 10 October 2015         613.3 
 Currency impact                                   29.8 
----------------------------------------------  ------- 
 Proforma sales for 28 weeks ended 10 October 
  2015                                            643.1 
 Decrease in UK LFL                               (1.4) 
 Decrease in UK space                             (4.2) 
 Decrease in international LFL                   (11.2) 
 Increase in international space                    7.9 
 Increase in wholesale                              2.6 
 Sales for 28 weeks ended 8 October 2016          636.8 
----------------------------------------------  ------- 
 

Sales in the 28 weeks ended 8 October 2016 were higher by GBP23.5 million primarily as a result of a favourable currency impact of GBP29.8 million due to the devaluation of sterling.

Including the currency impact, international sales have increased by GBP26.5 million driven by an increase in space, offset by reduced like for like sales mainly in Middle East/North Africa.

UK sales have fallen by GBP(5.6) million due to a fall in LFL sales, compounded by a decrease in UK space as a result of planned store closures.

Analysis of profit movement

 
 
 GBP million - Underlying profit before tax 
-------------------------------------------------  ------ 
 Underlying profit for 28 weeks ended 10 October 
  2015                                                7.0 
 Currency impact                                      0.1 
-------------------------------------------------  ------ 
 Proforma underlying profit for 28 weeks ended 
  10 October 2015                                     7.1 
 Decrease in International volumes                  (1.1) 
 UK space impact                                      1.1 
 UK sales and margin                                (1.2) 
 Increase in costs                                    0.0 
 Underlying profit before tax for 28 weeks ended 
  8 October 2016                                      5.9 
-------------------------------------------------  ------ 
 

On a proforma basis (i.e. excluding the currency impact) underlying profit has fallen from GBP7.1 million to GBP5.9 million. This is driven by lower international volumes and reduced UK sales and margin, partly offset by the benefits of UK store closures. UK sales and margin were predominantly adverse due to poor seasonal weather impacting sales and resulting in high markdowns to clear stock.

Foreign exchange

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

 
                       28 weeks ended   28 weeks ended   52 weeks ended 
                       8 October 2016       10 October    26 March 2016 
                                                  2015 
 
 Average: 
 Russian rouble                 88.95            89.38            95.40 
 Indonesian rupiah             18,186           20,720           20,418 
 Saudi riyal                     5.17             5.77             5.68 
 Emirati Dirham                  5.03             5.64             5.54 
 Closing: 
 Russian rouble                 81.58            94.67            98.09 
 Indonesian rupiah             16,889           20,787           18,959 
 Saudi riyal                     4.87             5.75             5.43 
 Emirati Dirham                  4.77             5.58             5.32 
-------------------  ----------------  ---------------  --------------- 
 

The principal currencies that impact our results are the Russian rouble, Indonesian rupiah and Saudi riyal. The net effect of currency translation caused worldwide sales and underlying operating profit from ongoing operations to increase by GBP29.8 million and GBP0.1 million respectively compared with 2016 as shown overleaf:

 
 
                                                        Underlying 
                                  Worldwide Sales        Operating 
                                      GBP million           profit 
                                                       GBP million 
-----------------------------  ------------------  --------------- 
 
 Saudi riyal                                  6.5                - 
 Emirati Dirham                               4.6                - 
 Indonesian rupiah                            1.9                - 
 Russian rouble                               0.6            (0.4) 
 Other Middle East countries                  4.2              0.1 
 Other currencies                            12.0              0.4 
-----------------------------  ------------------  --------------- 
                                             29.8              0.1 
-----------------------------  ------------------  --------------- 
 

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

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 GBP(0.5) million (H1 FY2015/16: GBP(1.9) 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 credit comprises corporation taxes incurred and a deferred tax charge. The total tax credit was GBP1.2 million (H1 FY2015/16: charge of GBP(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;

   --      Costs relating to the planned development of warehouses in the UK; 
   --      Costs relating to the International stock obsolescence charge; and 
   --      Costs relating to the joint venture trade receivable provision. 

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; and

   --      Amortisation of intangible assets (excluding software). 

Earnings per share and dividend

Basic underlying earnings per share were 3.4 pence compared to 3.3 pence in the 28 weeks to 10 October 2015.

 
                                                 28 weeks ended      28 weeks      52 weeks 
                                                      8 October         ended      ended 26 
                                                           2016    10 October    March 2016 
                                                                         2015 
                                                        Million       Million       Million 
------------------------------------------------  -------------  ------------  ------------ 
 
 Weighted average number of shares 
  in issue                                                170.8         170.7         170.6 
 Dilution- option schemes                                   4.2           9.0           6.0 
 Diluted weighted average number of 
  shares in issue                                         175.0         179.7         176.6 
 Number of shares at period end                           170.9         170.8         170.9 
 
 
                                                    GBP million   GBP million   GBP million 
------------------------------------------------  -------------  ------------  ------------ 
 Profit for basic and diluted earnings 
  per share                                                 0.4           4.8           6.4 
 Exceptional items and other non-underlying 
  items (note 4)                                            6.7           1.2           9.9 
 Tax effect of above items                                (1.3)         (0.3)           0.1 
 Underlying earnings                                        5.8           5.7          16.4 
------------------------------------------------  -------------  ------------  ------------ 
 
                                                          Pence         Pence         Pence 
------------------------------------------------  -------------  ------------  ------------ 
 Basic profit per share                                     0.2           2.8           3.8 
 Basic underlying earnings per share                        3.4           3.3           9.6 
 Diluted profit per share                                   0.2           2.7           3.6 
 Diluted underlying earnings per share                      3.3           3.2           9.3 
------------------------------------------------  -------------  ------------  ------------ 
 
 

The Board has concluded that given the cash investment required to deliver the current strategy the Company will not pay an interim dividend for 2016/17. The total dividend for the period is nil pence per share (2015/16: 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:

 
 GBP million                                  28 weeks        28 weeks   52 weeks ending 
                                              ending 8       ending 10          26 March 
                                          October 2016    October 2015              2016 
--------------------------------------  --------------  --------------  ---------------- 
 
 Income statement 
 Running costs                                   (1.6)           (1.5)             (2.7) 
 Net (interest on liabilities)/return 
  on assets                                      (1.3)           (1.5)             (2.7) 
--------------------------------------  --------------  --------------  ---------------- 
 Net charge                                      (2.9)           (3.0)             (5.4) 
--------------------------------------  --------------  --------------  ---------------- 
 Cash funding 
 Regular contributions                           (2.4)           (1.6)             (2.2) 
 Deficit contributions                           (3.6)           (5.4)             (8.9) 
--------------------------------------  --------------  --------------  ---------------- 
 Total cash funding                              (6.0)           (7.0)            (11.1) 
--------------------------------------  --------------  --------------  ---------------- 
 Balance sheet 
 Fair value of schemes' assets                   329.4           288.4             287.5 
 Present value of defined benefit 
  obligations                                  (435.9)         (341.8)           (361.9) 
--------------------------------------  --------------  --------------  ---------------- 
 Net liability                                 (106.5)          (53.4)            (74.4) 
--------------------------------------  --------------  --------------  ---------------- 
 

The running costs of the Mothercare defined benefit pension schemes have risen from GBP(1.5) million in the 28 weeks to 10 October 2015 to GBP(1.6) million in the 28 weeks to 8 October 2016 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           H1             H1        H1 FY2016/17 
               FY2016/17    FY2015/16      FY2016/17    Impact on scheme 
                                         Sensitivity         liabilities 
                                                             GBP million 
-----------  -----------  -----------  -------------  ------------------ 
 Discount 
  rate              2.6%        3.95%       +/- 0.1%         - 8.9/+ 8.9 
 Inflation 
  - RPI             3.2%        3.05%       +/- 0.1%         + 6.9/- 6.9 
-----------  -----------  -----------  -------------  ------------------ 
 Inflation 
  - CPI             2.1%        1.95%       +/- 0.1%         + 6.9/- 6.9 
-----------  -----------  -----------  -------------  ------------------ 
 

Cash flow

Underlying free cash flow was an outflow of GBP(25.3) million with cash generated from operations of GBP0.8 million.

Capital expenditure of GBP25.1 million reflected the continued investment in store refurbishment and IT infrastructure and was materially higher than in the 28 weeks ended 10 October 2015 as the investment strategy was implemented.

Working capital was an outflow of GBP(6.8) million, reflecting higher stocks partially offset by higher payables.

Other movements include movements in provisions, amortisation of lease incentives and lease incentives received.

 
                                               28 weeks      28 weeks      52 weeks 
                                                ended 8      ended 10      ended 26 
                                                October       October    March 2016 
                                                   2016          2015 
                                            GBP million   GBP million   GBP million 
----------------------------------------   ------------  ------------  ------------ 
 Underlying profit from operations 
  before interest and share based 
  payments                                          8.3          10.7          25.8 
-----------------------------------------  ------------  ------------  ------------ 
 Depreciation and amortisation                      9.6           8.9          17.5 
 Retirement benefit schemes                       (4.4)         (5.5)         (8.4) 
 Change in working capital                        (6.8)           2.0             - 
 Other movements                                  (5.9)           2.7           0.9 
-----------------------------------------  ------------  ------------  ------------ 
 Cash generated from operations                     0.8          18.8          35.8 
 Capital expenditure                             (25.1)        (16.6)        (39.2) 
 Interest and tax paid                            (1.0)         (0.6)         (2.2) 
-----------------------------------------  ------------  ------------  ------------ 
 Underlying Free cashflow                        (25.3)           1.6         (5.6) 
 Exceptional                                      (2.1)         (4.3)        (12.9) 
-----------------------------------------  ------------  ------------  ------------ 
 Free cashflow                                   (27.4)         (2.7)        (18.5) 
 Net bank loans                                    30.0             -             - 
 Issue of ordinary share capital                      -           0.4           0.4 
 Exchange differences                             (1.7)         (2.0)           0.1 
-----------------------------------------  ------------  ------------  ------------ 
 Cash and cash equivalents at beginning 
  of period                                        13.5          31.5          31.5 
 Net cash and cash equivalents 
  at end of period                                 14.4          27.2          13.5 
 Borrowings                                      (30.0)             -             - 
 Statutory net (debt)/cash at end 
  of period                                      (15.6)          27.2          13.5 
-----------------------------------------  ------------  ------------  ------------ 
 

Balance sheet

The balance sheet includes identifiable intangible assets arising on the acquisition of the Early Learning Centre of GBP5.2 million and goodwill of GBP26.8 million. These assets are allocated to the International business.

 
                                         8 October    10 October      26 March 
                                              2016          2015          2016 
                                       GBP million   GBP million   GBP million 
----------------------------------    ------------  ------------  ------------ 
 
 Goodwill and other intangibles               54.8          46.5          53.9 
 Property, plant and equipment                77.0          56.0          69.4 
 Retirement benefit obligations 
  (net of tax)                              (88.4)        (42.8)        (58.1) 
 Net (borrowings)/cash                      (15.6)          27.2          13.5 
 Derivative financial instruments             21.7           2.9          11.2 
 Other net assets/(liabilities)               12.8           8.3         (0.8) 
 Net assets                                   62.3          98.1          89.1 
------------------------------------  ------------  ------------  ------------ 
 
 Share capital and premium                   146.4         146.4         146.4 
 Reserves                                   (84.1)        (48.3)        (57.3) 
------------------------------------  ------------  ------------  ------------ 
 Total equity                                 62.3          98.1          89.1 
------------------------------------  ------------  ------------  ------------ 
 

Shareholders' funds amount to GBP62.3 million, a reduction of GBP35.8 million in the year driven predominantly by an increase of GBP45.6 million in the defined benefit obligation (net of deferred tax).

Going concern

The Directors have reviewed the going concern principle in the light of 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 business activities and the factors likely to affect its future development are set out in the principal risks and uncertainties of the annual report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are set out in the financial review. At the end of the 28 weeks ended 8 October 2016 the Group had a net debt of GBP15.6 million, representing GBP30 million of the revolving credit facility offset by GBP14.4 million of cash. This is within the Group's facilities, which are in place until May 2018 and with sufficient headroom against covenants.

The Directors have reviewed the Group's latest forecasts and projections, which have been sensitivity-tested for reasonably possible adverse variations in performance. This indicates the Group will operate within the terms of its borrowing facilities and covenants for the foreseeable future. To the extent that future trading is worse than a reasonably possible downside, which the Directors do not consider a likely scenario, then there are mitigating actions available which includes reducing some discretionary costs and non-essential capital expenditure and would enable the Group to continue to operate within the terms of the borrowing facilities and covenants for the foreseeable future. Based on this, 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 therefore prepared on the going concern basis.

Capital additions

Total capital additions for the 28 week period was GBP19.4 million (H1 FY2015/16: GBP12.8 million), of which GBP4.0 million was for software intangibles and GBP15.4 million for tangible fixed assets. Landlord contributions of GBP0.9 million (H1 FY2015/16: GBP3.5 million) were received, partially offsetting the GBP19.4 million outflow. Net capital expenditure after landlord contributions was GBP18.5 million (H1 FY2015/16: GBP9.3 million). The increase was primarily due to the store refurbishment and infrastructure investment programmes.

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 34% of Group sales. Total International sales in the 28 week period represent approximately 64% 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

The Group has drawn down GBP30.0 million on the Revolving Credit Facility. The RCF attracts an interest rate of 2.5% above LIBOR.

Shareholders' funds

Shareholders' funds amount to GBP62.3 million, a reduction of GBP35.8 million in the 52 week period. This represents GBP0.36 per share compared to GBP0.52 per share at the year end.

Post balance sheet events

There have been no post balance sheet events.

Condensed income statement

For the 28 weeks ended 8 October 2016

 
                                                   28 weeks ended 8 October                                 28 weeks ended    52 weeks 
                                                                       2016                                10 October 2015       ended 
                                                                (unaudited)                                    (unaudited)    26 March 
                                                                                                                                  2016 
                                            Non-underlying                                     Non-underlying 
                            Underlying(1)              (2)            Total    Underlying(1)              (2)        Total       Total 
                    Note      GBP million      GBP million      GBP million              GBP              GBP          GBP         GBP 
                                                                                     million          million      million     million 
----------------  ------  ---------------  ---------------  ---------------  ---------------  ---------------  -----------  ---------- 
 Revenue                            347.7                -            347.7            349.9                -        349.9       682.3 
 Cost of sales                    (320.1)            (0.5)          (320.6)          (318.1)                -      (318.1)     (622.1) 
----------------  ------  ---------------  ---------------  ---------------  ---------------  ---------------  -----------  ---------- 
 Gross 
  profit/(loss)                      27.6            (0.5)             27.1             31.8                -         31.8        60.2 
 Administrative 
  expenses                         (19.8)            (5.3)           (25.1)           (22.5)            (2.3)       (24.8)      (42.8) 
----------------  ------  ---------------  ---------------  ---------------  ---------------  ---------------  -----------  ---------- 
 Profit/(loss) 
  from 
  retail 
  operations                          7.8            (5.8)              2.0              9.3            (2.3)          7.0        17.4 
 Other 
  exceptional 
  items              4                  -            (0.9)            (0.9)                -              1.1          1.1       (3.4) 
 Share of 
  results of 
  joint ventures 
  and 
  associates                            -                -                -            (0.5)                -        (0.5)       (1.1) 
----------------  ------  ---------------  ---------------  ---------------  ---------------  ---------------  -----------  ---------- 
 Profit/(loss) 
  from 
  operations                          7.8            (6.7)              1.1              8.8            (1.2)          7.6        12.9 
 Net finance 
  costs              5              (1.9)                -            (1.9)            (1.8)                -        (1.8)       (3.2) 
----------------  ------  ---------------  ---------------  ---------------  ---------------  ---------------  -----------  ---------- 
 Profit/(loss) 
  before 
  taxation                            5.9            (6.7)            (0.8)              7.0            (1.2)          5.8         9.7 
 Taxation            6              (0.1)              1.3              1.2            (1.3)              0.3        (1.0)       (3.3) 
----------------  ------  ---------------  --------------- 
 Profit/(loss) for the 
  period attributable to 
  equity holders of the 
  parent                              5.8            (5.4)              0.4              5.7            (0.9)          4.8         6.4 
------------------------  ---------------  ---------------  ---------------  ---------------  ---------------  -----------  ---------- 
 
 Profit per 
 share 
 Basic               8               3.4p                              0.2p             3.3p                          2.8p        3.8p 
 Diluted             8               3.3p                              0.2p             3.2p                          2.7p        3.6p 
----------------  ------  ---------------  ---------------  ---------------  ---------------  ---------------  -----------  ---------- 
 
 

All results relate to continuing operations.

(1) Before items described in note 2 below.

(2) Includes exceptional property costs, costs of developing warehousing and restructuring international operations 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/(expense)

For the 28 weeks ended 8 October 2016

 
                                                             28 weeks        28 weeks      52 weeks 
                                                                ended           ended         ended 
                                                            8 October      10 October      26 March 
                                                                 2016            2015          2016 
                                                          (unaudited)     (unaudited) 
                                                          GBP million     GBP million   GBP million 
-------------------------------------------  ---------  -------------  --------------  ------------ 
 
 Profit for the period                                            0.4             4.8           6.4 
 
 Items that will not be reclassified 
  subsequently to the income statement: 
  Actuarial (loss)/gain on defined 
  benefit pension schemes                                      (35.1)            23.8           1.1 
 Income tax relating to items 
  not reclassified                                                4.8           (4.8)         (1.5) 
                                                               (30.3)            19.0         (0.4) 
-------------------------------------------  ---------  -------------  --------------  ------------ 
 Items that may be reclassified 
  subsequently to the income statement: 
 Exchange differences on translation 
  of foreign operations                                         (1.7)           (0.9)         (0.4) 
 Cash flow hedges: gains /(losses) 
  arising in the period                                          17.1           (8.9)           4.2 
 Deferred tax on cash flow hedges                               (1.4)             1.2         (0.3) 
                                                                 14.0           (8.6)           3.5 
-------------------------------------------  ---------  -------------  --------------  ------------ 
 
 Other comprehensive (expense)/income 
  for the period                                               (16.3)            10.4           3.1 
-------------------------------------------  ---------  -------------  --------------  ------------ 
 
 Total comprehensive (expense)/income 
  for the period wholly attributable 
  to equity holders of the parent                              (15.9)            15.2               9.5 
--------------------------------------------------      -------------  --------------  ---------------- 
 
 
 

Condensed balance sheet

As at 8 October 2016

 
                                                    8 October      10 October      26 March 
                                                         2016            2015          2016 
                                                  (unaudited)     (unaudited) 
                                          Note    GBP million     GBP million   GBP million 
---------------------------------------  -----  -------------  --------------  ------------ 
 Non-current assets 
     Goodwill                                            26.8            26.8          26.8 
     Intangible assets                                   28.0            19.7          27.1 
     Property, plant and equipment         10            77.0            56.0          69.4 
     Investments in joint ventures                          -             3.9             - 
     Deferred tax asset                    6             24.8            19.6          20.3 
    Derivative financial instruments       13             2.2               -           0.2 
                                                        158.8           126.0         143.8 
---------------------------------------  ----- 
 Current assets 
     Inventories                                        125.8           112.5         101.8 
     Trade and other receivables                         75.0            66.9          75.9 
     Cash and cash equivalents                           14.4            27.2          13.5 
     Current tax asset                                    0.9             0.7           0.3 
     Derivative financial instruments      13            20.4             2.9          12.1 
---------------------------------------  ----- 
                                                        236.5           210.2         203.6 
---------------------------------------  -----  -------------  --------------  ------------ 
 
 Total assets                                           395.3           336.2         347.4 
---------------------------------------  -----  -------------  --------------  ------------ 
 
 Current liabilities 
     Trade and other payables                         (147.5)         (124.2)       (130.1) 
    Derivative financial instruments       13           (0.9)               -         (1.1) 
     Short term provisions                              (9.0)          (26.3)        (14.6) 
                                                      (157.4)         (150.5)       (145.8) 
---------------------------------------  ----- 
 Non-current liabilities 
     Trade and other payables                          (21.3)          (21.8)        (22.1) 
     Borrowings                            11          (30.0)               -             - 
     Retirement benefit obligations        12         (106.5)          (53.4)        (74.4) 
     Long term provisions                              (17.8)          (12.4)        (16.0) 
---------------------------------------  ----- 
                                                      (175.6)          (87.6)       (112.5) 
---------------------------------------  -----  -------------  --------------  ------------ 
 
 Total liabilities                                    (333.0)         (238.1)       (258.3) 
---------------------------------------  -----  -------------  --------------  ------------ 
 
 Net assets                                              62.3            98.1          89.1 
---------------------------------------  -----  -------------  --------------  ------------ 
 
 Equity attributable to equity holders 
  of the parent 
     Share capital                                       85.4            85.4          85.4 
     Share premium account                               61.0            61.0          61.0 
     Own shares                                         (0.3)           (0.4)         (0.3) 
     Translation reserve                                (1.2)               -           0.5 
     Hedging reserve                                     14.3             3.9           9.7 
     Retained deficit                                  (96.9)          (51.8)        (67.2) 
---------------------------------------  ----- 
 Total equity                                            62.3            98.1          89.1 
---------------------------------------  -----  -------------  --------------  ------------ 
 
 
 

Condensed statement of changes in equity

For the 28 weeks ended 8 October 2016

 
                                            Share      Share        Own   Translation    Hedging   Retained      Total 
                                          capital    premium     shares       reserve    reserve    deficit     equity 
                                                     account 
                                              GBP        GBP        GBP           GBP        GBP        GBP        GBP 
                                          million    million    million       million    million    million    million 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 Balance at 26 March 2016                    85.4       61.0      (0.3)           0.5        9.7     (67.2)       89.1 
 Other comprehensive (expense)/income 
  for the period                                -          -          -         (1.7)       15.7     (30.3)     (16.3) 
 Profit for the period                          -          -          -             -          -        0.4        0.4 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 Total comprehensive (expense)/income 
  for the period                                -          -          -         (1.7)       15.7     (29.9)     (15.9) 
 Removal from equity to inventories 
  during the period                             -          -          -             -     (11.1)          -     (11.1) 
 Credit to equity for equity-settled 
  share-based payments                          -          -          -             -          -        0.3        0.3 
 Deferred tax on share-based 
  payments                                      -          -          -             -          -      (0.1)      (0.1) 
 Balance at 8 October 2016 
  (unaudited)                                85.4       61.0      (0.3)         (1.2)       14.3     (96.9)       62.3 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 

For the 28 weeks ended 10 October 2015

 
                                            Share      Share        Own   Translation    Hedging   Retained      Total 
                                          capital    premium     shares       reserve    reserve    deficit     equity 
                                                     account 
                                              GBP        GBP        GBP           GBP        GBP        GBP        GBP 
                                          million    million    million       million    million    million    million 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 Balance at 28 March 2015                    85.2       60.8      (0.4)           0.9        6.8     (75.6)       77.7 
 Other comprehensive (expense)/income 
  for the period                                -          -          -         (0.9)      (7.7)       19.0       10.4 
 Profit for the period                          -          -          -             -          -        4.8        4.8 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 Total comprehensive (expense)/income 
  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 52 weeks ended 26 March 2016

 
                                            Share      Share        Own   Translation    Hedging   Retained      Total 
                                          capital    premium     shares       reserve    reserve    deficit     equity 
                                                     account 
                                              GBP        GBP        GBP           GBP        GBP        GBP        GBP 
                                          million    million    million       million    million    million    million 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 Balance at 28 March 2015                    85.2       60.8      (0.4)           0.9        6.8     (75.6)       77.7 
 Other comprehensive (expense)/income 
  for the period                                -          -          -         (0.4)        3.9      (0.4)        3.1 
 Profit for the period                          -          -          -             -          -        6.4        6.4 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 Total comprehensive (expense)/income 
  for the period                                -          -          -         (0.4)        3.9        6.0        9.5 
 Removal from equity to inventories 
  during the period                             -          -          -             -      (1.0)          -      (1.0) 
 Issue of equity shares                       0.2        0.2        0.1             -          -          -        0.5 
 Credit to equity for equity-settled 
  share-based payments                          -          -          -             -          -        2.4        2.4 
 Balance at 26 March 2016 
  (audited)                                  85.4       61.0      (0.3)           0.5        9.7     (67.2)       89.1 
--------------------------------------  ---------  ---------  ---------  ------------  ---------  ---------  --------- 
 

Condensed cash flow statement

For the 28 weeks ended 8 October 2016

 
                                                              28 weeks       28 weeks      52 weeks 
                                                                 ended          ended         ended 
                                                   Note      8 October     10 October      26 March 
                                                                  2016           2015          2016 
                                                           (unaudited)    (unaudited) 
 
                                                           GBP million    GBP million   GBP million 
-----------------------------------------------  ------  -------------  -------------  ------------ 
 Net cash flow from operating activities           15            (1.9)           11.1          21.9 
-----------------------------------------------  ------  -------------  -------------  ------------ 
 Cash flows from investing activities 
    Interest received                                                -              -           0.2 
     Purchase of property, plant and equipment                  (21.1)         (13.5)        (27.8) 
     Purchase of intangibles - software                          (4.0)          (3.1)        (11.4) 
    Net cash received on disposal of joint                           -            2.8             - 
     venture 
 Net cash used in investing activities                          (25.1)         (13.8)        (39.0) 
-----------------------------------------------  ------  -------------  -------------  ------------ 
 Cash flows from financing activities 
    Interest paid                                                (0.4)              -         (1.4) 
    Bank loans raised                                             30.0              -             - 
    Issue of ordinary share capital                                  -            0.4           0.4 
 Net cash raised in financing activities                          29.6            0.4         (1.0) 
-----------------------------------------------  ------  -------------  -------------  ------------ 
 
 Net increase/(decrease) in cash and 
  cash equivalents                                                 2.6          (2.3)        (18.1) 
-----------------------------------------------  ------  -------------  -------------  ------------ 
 
 Cash and cash equivalents at beginning 
  of period                                                       13.5           31.5          31.5 
 Effect of foreign exchange rate changes                         (1.7)          (2.0)           0.1 
-----------------------------------------------  ------ 
 Net cash and cash equivalents at end 
  of period                                                       14.4           27.2          13.5 
-----------------------------------------------  ------  -------------  -------------  ------------ 
 
 

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 8 October 2016 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 26 March 2016 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 28 week period 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 

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reported to the Group's board in order to allocate resources to the segments and assess their performance. The Group's reporting segments under IFRS 8 are UK and International.

UK comprises the Group's UK store and wholesale operations, catalogue and web sales. The International business comprises the Group's franchise and wholesale revenues outside the UK. The unallocated corporate expenses represent board and company secretarial costs and other head office costs including audit, professional fees, insurance and head office property.

 
                                                                               28 weeks ended 8 October 2016 
                                                                                                 (unaudited) 
                                               ------------------------------------------------------------- 
                                                                                Unallocated 
                                                                                  Corporate 
                                                         UK     International      Expenses     Consolidated 
                                                GBP million       GBP million   GBP million      GBP million 
---------------------  ----------------------  ------------  ----------------  ------------  --------------- 
 Revenue 
 External sales                                       231.2             116.5             -            347.7 
---------------------------------------------  ------------  ----------------  ------------  --------------- 
 Result 
 Segment result (underlying)                          (8.8)              20.8         (3.7)              8.3 
---------------------------------------------  ------------  ----------------  ------------ 
 Share-based payments (underlying)                                                                     (0.5) 
 Non-cash foreign currency adjustments 
  (non-underlying)                                                                                       4.5 
 Amortisation of intangible assets 
  (non-underlying)                                                                                     (0.5) 
 Exceptional items                                                                                    (10.7) 
-----------------------------------------------------------  ----------------  ------------  --------------- 
 Profit from operations                                                                                  1.1 
 Finance cost                                                                                          (1.9) 
-----------------------------------------------------------  ----------------  ------------  --------------- 
 Loss before taxation                                                                                  (0.8) 
 Taxation                                                                                                1.2 
 Profit for the period                                                                                   0.4 
-----------------------------------------------------------  ----------------  ------------  --------------- 
 
 
 
                                                                              28 weeks ended 10 October 2015 
                                                                                                 (unaudited) 
                                               ------------------------------------------------------------- 
                                                                                Unallocated 
                                                                                  Corporate 
                                                         UK     International      Expenses     Consolidated 
                                                GBP million       GBP million   GBP million      GBP 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 
-----------------------------------------------------------  ----------------  ------------  --------------- 
 
 
 
                                                                           52 weeks ended 26 March 2016 
                                          ------------------------------------------------------------- 
                                                                           Unallocated 
                                                                             Corporate 
                                                    UK     International      Expenses     Consolidated 
                                           GBP million       GBP million   GBP million      GBP million 
---------------------------------------   ------------  ----------------  ------------  --------------- 
 Revenue 
 External sales                                  459.7             222.6             -            682.3 
----------------------------------------  ------------  ----------------  ------------  --------------- 
 Result 
 Segment result (underlying)                     (6.4)              40.3         (8.1)             25.8 
----------------------------------------  ------------  ----------------  ------------ 
 Share-based payments (underlying)                                                                (3.0) 
 Non-cash foreign currency adjustments 
  (non-underlying)                                                                                  1.2 
 Amortisation of intangible assets 
  (non-underlying)                                                                                (0.9) 
 Exceptional items                                                                               (10.2) 
----------------------------------------  ------------  ----------------  ------------  --------------- 
 Profit from operations                                                                            12.9 
 Finance costs (including GBP0.8m non-underlying)                                                 (3.2) 
------------------------------------------------------  ----------------  ------------  --------------- 
 Profit before taxation                                                                             9.7 
 Taxation                                                                                         (3.3) 
 Profit for the period                                                                              6.4 
------------------------------------------------------  ----------------  ------------  --------------- 
 

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        28 weeks   52 weeks ended 
                                                             ended           ended 
                                                         8 October      10 October    26 March 2016 
                                                              2016            2015 
                                                       (unaudited)     (unaudited) 
                                                       GBP million     GBP million      GBP million 
-------------------------  ------------------------  -------------  --------------  --------------- 
 Exceptional items: 
    Restructuring costs included in cost 
     of sales                                                (4.5)           (0.3)            (0.3) 
    Restructuring costs and property impairment 
     included in administrative expenses                     (1.3)           (0.2)            (6.5) 
    Property related costs in other exceptional 
     items                                                   (0.9)           (0.8)            (0.1) 
    Joint venture trade receivable provision 
     in administrative expenses                              (4.0)               -                - 
    Impairment of investment in and receivables 
     due from joint venture/associate in 
     other exceptional items                                     -               -            (3.3) 
    Loss on disposal of joint ventures                           -           (0.2)                - 
     in other exceptional items 
 Total exceptional items:                                   (10.7)           (1.5)           (10.2) 
 
 Other non-underlying items: 
    Non-cash foreign currency adjustments 
     under IAS39 and IAS21                                     4.5             0.8              1.2 
    Amortisation of intangibles                              (0.5)           (0.5)            (0.9) 
 Exceptional and non-underlying items 
  before tax                                                 (6.7)           (1.2)            (9.9) 
---------------------------------------------------  -------------  --------------  --------------- 
 

Restructuring costs included in cost of sales

During the 28 weeks ended 8 October 2016 a charge of GBP4.5 million was recognised. GBP3.6 million was related to costs associated to the international restructure. Towards the end of FY2015/16, the Group recognised that significant challenges exist within the current International business model requiring a wide range restructure. At H1 FY2016/17, GBP3.2 million of the restructure costs relate to a one-off increase in the stock provision to reflect the alignment of our international trading strategy with the UK, i.e. more full price sales, less discounting and tighter management of stocks. GBP0.9 million was related to the planned development of warehouses in the UK and consists of incremental labour and warehouse storage costs.

In H1 FY2015/16, a GBP0.3 million charge related to the store restructuring programme.

Restructuring costs and property impairment included in administration expenses

During the 28 weeks ended 8 October 2016 a charge of GBP1.3 million was recognised. The majority of this amount related to head office redundancies. No further costs are expected.

In H1 FY2015/16, a GBP0.2 million charge related to business restructuring in the central functions.

Property related costs in other exceptional items

During the 28 weeks ended 8 October 2016 a charge of GBP0.9 million was recognised. A GBP0.4 million charge related to accelerated depreciation for stores refurbished by FY2016/17 and H1 FY2017/18. The remaining GBP0.5 million charge related to asset write-downs for stores refurbished or closed.

In H1 FY2015/16, a GBP2.1 million charge was recognised in respect of asset write-downs for those stores refurbished by H1 FY2015/16 and accelerated depreciation for stores refurbished by FY2015/16. This is partly offset by a net benefit of GBP1.3 million recognised in relation to movements in store closure and related provisions.

Joint venture trade receivable provision in administration expenses

Due to the challenging economic conditions and performance over the past 12 months in China, the Group took a prudent approach and provided for all outstanding debt at FY2015/16, GBP4.0 million.

   5       Net finance costs 
 
                                                    28 weeks       28 weeks      52 weeks 
                                                       ended          ended         ended 
                                                   8 October     10 October      26 March 
                                                        2016           2015          2016 
                                                 (unaudited)    (unaudited) 
                                                 GBP million    GBP million   GBP million 
----------------------------------------  ---  -------------  -------------  ------------ 
 Interest on pension liabilities/return 
  on assets                                              1.3            1.5           2.7 
 Other net interest                                      0.6            0.3           0.5 
---------------------------------------------  -------------  -------------  ------------ 
 Net finance costs                                       1.9            1.8           3.2 
---------------------------------------------  -------------  -------------  ------------ 
 
   6       Taxation 
 
                                                           28 weeks       28 weeks      52 weeks 
                                                              ended          ended         ended 
                                                          8 October     10 October      26 March 
                                                               2016           2015          2016 
                                                        (unaudited)    (unaudited) 
                                                        GBP million    GBP million   GBP million 
-----------------------------------------------  ---  -------------  -------------  ------------ 
 Current tax - Overseas tax and UK corporation 
  tax                                                           0.0            0.3           1.8 
 Deferred tax - UK tax charge for timing 
  differences                                                 (1.2)       0.7                1.5 
---------------------------------------------------- 
 Total tax (credit)/charge                                    (1.2)            1.0           3.3 
---------------------------------------------------- 
 
 

The deferred tax charge arises on UK temporary differences.

The net deferred tax asset at 8 October 2016 is GBP24.8 million (H1 FY2015/16: GBP19.6 million) including GBP18.1 million of deferred tax assets in relation to retirement benefit obligations (H1 FY2015/16: GBP10.6 million).

In recent years the UK Government has steadily reduced the rate of UK corporation tax, with the latest rates substantively enacted by the balance sheet date being 20% with effect from 1 April 2015, 19% effective from 1 April 2017 and 17% effective from 1 April 2020. The closing deferred tax assets and liabilities have been calculated at 17%, on the basis that this is the rate at which those assets and liabilities are expected to unwind.

   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       28 weeks      52 weeks 
                                                           ended          ended         ended 
                                                       8 October     10 October      26 March 
                                                            2016           2015          2016 
                                                     (unaudited)    (unaudited) 
                                                         million        million       million 
--------------------------------------------  ---  -------------  -------------  ------------ 
 Weighted average number of shares in 
  issue for the purpose of basic earnings 
  per share                                                170.8          170.7         170.6 
 Dilution - option schemes                                   4.2            9.0           6.0 
------------------------------------------------- 
 Weighted average number of shares in 
  issue for the purpose of diluted earnings 
  per share                                                175.0          179.7         176.6 
------------------------------------------------- 
 
                                                     GBP million    GBP million   GBP million 
--------------------------------------------  ---  -------------  -------------  ------------ 
 Profit for basic and diluted earnings 
  per share                                                  0.4            4.8           6.4 
 Exceptional and other non-underlying 
  items                                                      6.7            1.2           9.9 
 Tax effect of above items                                 (1.3)          (0.3)           0.1 
------------------------------------------------- 
 Underlying earnings                                         5.8            5.7          16.4 
-------------------------------------------------  -------------  -------------  ------------ 
 
                                                           Pence          Pence         Pence 
--------------------------------------------  --- 
 Basic earnings per share                                    0.2            2.8           3.8 
 Basic underlying earnings per share                         3.4            3.3           9.6 
 Diluted earnings per share                                  0.2            2.7           3.6 
 Diluted underlying earnings per share                       3.3            3.2           9.3 
-------------------------------------------------  -------------  -------------  ------------ 
 
   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 46% of annual sales forecast to occur in the third quarter (mid-October to early January).

   10       Property, plant and equipment 

Capital additions of GBP19.4 million were made during the period (H1 FY2015/16: GBP12.8 million). The increase over H1 FY2015/16 is primarily driven by the store refurbishment programme.

   11     Bank loans and overdrafts 

As at 8 October 2016, the Group had drawn down GBP30.0 million of the Revolving Credit Facility. The RCF attracts an interest rate of 2.5% above LIBOR.

   12     Retirement benefit schemes 

The Group updated its accounting for pensions under IAS 19 as at 8 October 2016. 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 GBP106.5 million (H1 FY2015/16: GBP53.4 million) has been recognised. This represents a material increase since the year end, primarily as a result of lower gilt and corporate bond yields.

   13     Financial instruments' fair value disclosures 

The Group held the following financial instruments at fair value at 8 October 2016. 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       Fair value      Fair value 
                                         measurements     measurements    measurements 
                                         at 8 October    at 10 October     at 26 March 
                                                 2016             2015            2016 
                                          (unaudited)      (unaudited) 
                                          GBP million      GBP million     GBP million 
------------------------------------   --------------  ---------------  -------------- 
 Non-current financial assets: 
 Derivative financial instruments: 
 Forward foreign currency contracts               2.2                -             0.2 
 Current financial assets: 
 Derivative financial instruments: 
 Forward foreign currency contracts              20.4              2.9            12.1 
 Current financial liabilities: 
 Derivative financial instruments: 
 Forward foreign currency contracts             (0.9)                -           (1.1) 
------------------------------------- 
                                                 21.7              2.9            11.2 
 ------------------------------------  --------------  ---------------  -------------- 
 
 

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 GBP0.5 million (H1 FY2015/16: GBP1.9 million) of which GBP0.3 million (H1 FY2015/16: GBP1.4 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       28 weeks        52 weeks 
                                                          ended          ended           ended 
                                                      8 October     10 October        26 March 
                                                           2016           2015            2016 
                                                    (unaudited)    (unaudited) 
 
                                                    GBP million    GBP million     GBP million 
------------------------------------------------  -------------  -------------  -------------- 
 Profit from retail operations                              2.0            7.0            17.4 
 Adjustments for: 
     Depreciation of property, plant and 
      equipment                                             7.0            7.0            13.3 
    Amortisation of intangible assets                       3.1            2.5             5.1 
    Impairment of property, plant and equipment 
     and intangible assets                                    -            1.5             1.5 
    Losses on disposal of property, plant 
     and equipment and intangible assets                      -            1.4             4.2 
    (Profit)/loss on non-underlying non-cash 
     foreign currency adjustments                         (4.5)          (0.8)           (1.2) 
     Equity settled share-based payments                    0.5            1.9             3.0 
    Movement in provisions                                (3.7)          (4.5)          (13.9) 
     Cash payments for other exceptional 
      items                                                   -          (0.3)             2.8 
    Amortisation of lease incentives                      (3.0)          (2.2)           (4.1) 
    Lease incentives received                               0.9            3.5             5.3 
     Payments to retirement benefit schemes               (6.0)          (7.0)          (11.1) 
     Charge to profit from operations in 
      respect of retirement benefit schemes                 1.6            1.5             2.7 
------------------------------------------------  -------------  -------------  -------------- 
 Operating cash flow before movement 
  in working capital                                      (2.1)           11.5            25.0 
     Increase in inventories                             (22.9)         (23.3)          (12.9) 
     (Increase)/decrease in receivables                     1.3            1.9           (1.1) 
     Increase in payables                                  22.4           21.7            13.3 
------------------------------------------------  -------------  -------------  -------------- 
 Cash used in/(generated) from operations                 (1.3)           11.8            24.3 
------------------------------------------------  -------------  -------------  -------------- 
 Income taxes paid                                        (0.6)          (0.7)           (2.4) 
------------------------------------------------  -------------  -------------  -------------- 
 Net cash (outflow)/inflow from operating 
  activities                                              (1.9)           11.1            21.9 
------------------------------------------------  -------------  -------------  -------------- 
 
 
 

Analysis of net debt

 
 
                                  26 March                     Foreign     8 October 
                                      2016     Cash flow      exchange          2016 
                               GBP million   GBP million   GBP million   GBP million 
---------------------------   ------------  ------------  ------------  ------------ 
 Cash and cash equivalents            13.5           2.6         (1.7)          14.4 
----------------------------  ------------  ------------  ------------  ------------ 
 Borrowings                              -        (30.0)             -        (30.0) 
----------------------------  ------------  ------------  ------------  ------------ 
 Net (debt)/cash                      13.5        (27.4)         (1.7)        (15.6) 
----------------------------  ------------  ------------  ------------  ------------ 
 
   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         Revenue from        Amounts owed by related 
                                    related parties    parties (net of provisions) 
                                        GBP million                    GBP million 
--------------------------------  -----------------  ----------------------------- 
 
 28 weeks ended 8 October 2016 
  (unaudited)                                   6.4                            4.0 
 28 weeks ended 10 October 2015 
  (unaudited)                                   4.6                            2.2 
 52 weeks ended 26 March 2016                   8.9                            4.8 
--------------------------------  -----------------  ----------------------------- 
 

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 owed by related parties relate to the China JV (GBP8.1 million) and the Ukraine JV (GBP1.4 million).

A provision of GBP5.5 million (H1 FY2015/16: GBP1.0 million) has been made for doubtful debts in respect of the amounts owed by related parties.

The amounts outstanding are unsecured and will be settled in cash.

   17        Post balance sheet events 

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 such as IT, store and infrastructure transformation.

-- 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 an adverse effect on the business.

-- The Group is dependent on a small number of franchise partners that make up a significant proportion of its International business.

-- 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 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.

-- The Group relies on its ability to improve existing products and successfully develop and launch new innovative products.

-- 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 negative effect on its business.

-- The Group has exposure to the trading performance of its Joint Ventures in China and Ukraine, including share of profits and recoverability of debt.

Certain statements in this report are forward looking. Although the Group believes that the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to have been correct. As these statements contain risks and uncertainties, actual results may differ from those expressed or implied. 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:

(a) The condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(b) 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 remaining 24 weeks of the year); and

(c) 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 

23 November 2016

Independent review report to Mothercare plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 28 weeks ended 8 October 2016 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 half-yearly 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 half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly 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 half-yearly 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 half-yearly financial report for the 28 weeks ended 8 October 2016 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

23 November 2016

Shareholder information

Financial calendar

 
                                                          2017 
-------------------------------------------------------  ------------- 
 
 Preliminary announcement of results for the 52 weeks     End May 
  ending 25 March 2017 
 Issue of report and accounts                             Mid-June 
 Annual General Meeting                                   Mid-July 
 Announcement of interim results for the 28 weeks ended   End November 
  7 October 2017 
-------------------------------------------------------  ------------- 
 

Registered office and head office

Cherry Tree Road, Watford, Hertfordshire WD24 6SH

Telephone 01923 241000

www.mothercareplc.com

Registered number 1950509

Group General Counsel and Company Secretary

Daniel Talisman

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 0371 384 2013 (calls to this number are charged at 8p per minute plus network extras)

Overseas +44 (0)121 415 7042

www.equiniti.com

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 0371 384 2030. Online and telephone services are also available through the Company's registrars - www.shareview.co.uk and 03456 037 037. Lines are open 08:30 to 17:30, Monday to Friday.

The Company's stockbrokers are:

J.P. Morgan Cazenove & Co Limited

25 Bank Street

Canary Wharf,

London E14 5JP

Telephone 020 7742 4000

Numis Securities Limited

The London Stock Exchange Building

10 Paternoster Square

London EC4M 7LT

Telephone 020 7260 1000

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.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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