Annual Report &
Accounts 2022
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Contents
Overview
2
3
About us
Financial highlights
Strategic Report
Business model
Chairman’s statement
4
8 Growth
12
15 Chief Operating Officer’s report and business review
22 KPIs
26 Section 172 statement
27
Financial review
32 Risk Management in MGB
35 Non-financial information
36 Environmental, Social and Governance ‘ESG’
Governance
38 Board of Directors
39 Operating Board
40 Corporate governance report
44 Directors’ remuneration report
56 Directors’ report
Financial statements
58 Directors’ responsibilities statement
59
Independent auditor’s report
64 Consolidated income statement
Consolidated statement
65
of comprehensive income
66 Consolidated balance sheet
67
Consolidated statement of changes
in equity
68 Consolidated cash flow statement
69 Notes to the consolidated financial statements
Company financial statements
108 Company balance sheet
109 Company statement of changes in equity
110
115 Shareholder information
Notes to the company financial statements
Highlights
Highlights
• International retail sales by franchise partners of £385.3 million
(2021: £358.6 million)
• Adjusted EBITDA of £12.0 million (2021: £2.2 million), ahead of market expectations,
reflecting the Group’s focus on core international franchise and brand management
competencies, as an asset light global franchising business
• Net borrowings of £9.9 million (2021: £12.1 million) at the year end
• Pension scheme deficit materially reduced to £60 million as at 30 June 2022 (March
2020: £124.6 million) and agreed reduction in payments with Trustees to significantly
reduce annual cash cost going forward
• Post period end refinancing of the business, improving our financial flexibility
notwithstanding the loss of revenue from Russia
• The significant improvement in profitability evidences the full year impact of the
establishment of a cost base that is appropriate for our business but still has
the necessary skills and experience to deliver further growth, as the impact of
Covid-19 diminishes
Our History
1961
Founded by
Selim Zilka and
Sir James Goldsmith,
opening the first store
in Kingston.
2011
Alshaya opens their
200th Store
– Morocco Mall
1968
Begins selling
children’s clothes
up to the age of 5.
1972
Mothercare
becomes a
public company.
1983
The first international
franchise store
opens in Kuwait.
2000
Mothercare Plc is
formed as a sole
business after
previous mergers
with Habitat and BHS
and Mothercare.com
is launched.
1990s
Expands further
globally into Russia
and Europe.
1987
Stores open in
Malaysia, Hong
Kong and Singapore.
2019
Mothercare
Experience store
launched in
Singapore
– Harbour Front.
2020
Mothercare Global
Brand is formed and
partnership with
Boots UK
is launched.
2021
Mothercare
celebrates its
60th anniversary
2022
Our redefined
products with
improved design and
fabrications launches
to customers
Mothercare plc annual report and accounts 2022
1
Overview2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continued
About us
About us
A truly global brand with our
products trusted by millions of
parents around the world every day.
Mothercare plc is the owner of Mothercare Global Brand
(MGB), a globally franchised brand for parents and young
children. MGB designs, sources and supplies products across
clothing and many other essential categories including baby
nursery, feedtime, bathtime and playtime providing for the
needs of parents and young children across the world.
The Mothercare brand is presented in stores and online
through a network of global franchise partners who operate
approximately 700 dedicated Mothercare stores in some
36 countries around the world. There are also more than an
additional 400 stores in which the Mothercare brand is sold.
As previously reported we have been upgrading our clothing ranges
and are now offering great choice at a variety of price points,
improved design, quality and value. We believe this approach will
result in clearer differentiation from our international competitors’
offerings. The first full season that this upgraded product range was
available for our customers, was spring/summer 2022, which launched
in January this year. The initial feedback has been very positive but we
are aware that many of our territories still face challenges including
ongoing Covid-19 restrictions and the need to clear old inventory
from previous seasons as a result of supressed demand. We also
appreciate that it may take a number of seasons for consumer
confidence to return and thus sales to fully reflect the enhanced
ranges.
We are a truly global company
that caters for many different
markets and cultures.
1
2
3
7
8
6
9
16
17
15
14
4
11
13
26
5
25
12
22
23
27
20
24
21
10
18
19
36
35
28
29
30
33
34
32
31
Stores
Ireland
Lithuania
Estonia
Latvia
Belarus
11
1 UK
1
2
1
3 Gibraltar
5
4 Malta
10
5 Cyprus
7
6
4
7
5
8
12
9
116
10 Russia
5
11 Kazakhstan
5
12 Azerbaijan
1
13 Georgia
27
14 Greece
1
15 Albania
6
16 Romania
2
17 Serbia
139
India
18
6
19 Sri Lanka
20 UAE
43
21 Saudi Arabia 58
30
22 Kuwait
7
23 Bahrain
4
24 Oman
5
25 Egypt
3
26 Jordan
15
27 Qatar
11
28 Thailand
14
29 Vietnam
21
30 Malaysia
11
31 Singapore
51
32
Indonesia
3
33 Brunei
17
34 Philippines
6
35 Hong Kong
17
36 China
2
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Mothercare plc annual report and accounts 2022
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2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continued
Financial
highlights
Financial highlights
Our Group - £m
Turnover
Adjusted EBITDA
Adjusted operating profit
Adjusted profit / (loss)
Statutory profit / (loss)
Our franchise partners
Worldwide retail sales £m
Online retail sales £m
Total number of stores
Space (k) sq. ft.
2022
82.5
12.0
11.1
9.0
12.1
2022
385.3
40.9
680
1,828
2021
85.8
2.2
0.2
(8.6)
(21.5)
2021
358.6
44.4
734
1,970
Mothercare plc annual report and accounts 2022
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Chairman’s
statement
Chairman’s statement
The year under review was bookended by the
Covid-19 pandemic and the Ukraine conflict.
Indeed, even after two years, continuing
headwinds from the former prevented 14% of our
partners’ global stores trading at the year end, with
some restrictions still remaining in place today.
The latter caused the complete suspension of our
franchise partners’ retail business in Russia (116
stores and online) on the 9 March 2022.
In this context I am delighted to report that the prior year transition
of the business to focus upon our core international franchise
and brand management competencies, as an asset light global
franchising business, succeeded in generating free cash flow from
operations and an adjusted EBITDA of £12 million for the financial
year to 26 March 2022, a result ahead of market expectations.
Furthermore, we have now completed the refinancing of the
business, which is detailed further below and in the Financial
Review, without resorting to additional financing requirements or
further equity dilution.
The Pandemic and new ways of working with our Partners
Worldwide franchisee retail sales of £385 million, 7% higher than
last year, remain significantly impacted by Covid-19 at around
25% down on the total retail sales for similar territories in the year
before the pandemic. Online retail sales represented 11% of our
total retail sales, slightly down on the 12% for last year, reflecting
lower levels of Covid-19 restrictions on store openings, yet still well
ahead of the levels achieved in the period prior to the pandemic.
As detailed in the Chief Operating Officer’s report, most of the
new ways of working with our manufacturing and franchise
partners, introduced since the pandemic, are now embedded
in the business. However, we are mindful that the pandemic
has also had a significant impact on our franchise partners’
profitability, inevitably resulting in a need for them to reduce costs
and the levels of investment they have been able to make in their
businesses. This is likely to mean that the return to pre pandemic
levels of trading will take longer and we are working with our
partners to assist that recovery, ultimately benefitting both our own
business and our franchise partners in the longer term.
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2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continued Chairman’s statement
continued
Update on Russian business
Given the numerous economic, logistical, reputational and
business disruptions experienced since the suspension of
the Russian retail business, we withdrew the right to operate
Mothercare branded stores in Russia on 27 June 2022. This followed
the pausing of operations we announced on 9 March 2022
In the period under review £88 million of our franchisee retail sales
came from Russia and the territory directly contributed some £5.5
million to adjusted EBITDA for the year. This represents the single
biggest impact on the business for the new financial year and
will potentially lead to timing differences as we adjust our cost
base. We have already substantially implemented the necessary
adjustments to our supply chain, operations and administrative
costs to address the consequent diseconomies of scale and
maintain our service to our franchise partners.
New Financing Arrangements
At the year-end the Group had net borrowings of £9.9 million
(March 2021 £12.1 million). This comprised total cash of £9.2 million
(March 2021: £6.9 million), reflecting ongoing tight control of cash,
against the £19.5 million (£19.1 million net of the unamortised facility
fee) of the Group’s loan facility with GB Europe Management
Services Limited (“GBB”) which remained fully drawn across the
year. This modest reduction in net debt, set against the challenging
backdrop of the pandemic, demonstrates our progress as a
focused, asset light, global franchising business with no directly
operated stores and greatly reduced direct costs.
In addition, the warrants issued to certain of the Group’s
shareholders in relation to the 2021 amendments to the CULS
arrangements, expired unexercised on 17 March 2022, reducing
potential equity holders’ dilution and anticipated cash receipts by
£1.8 million.
When we completed the £19.5 million secured four-year loan facility
with GBB, in November 2020, the Group contained the Russia retail
business and the covenants were therefore set against the then
business plan and Group structure. As a result of the termination
of our Russian operation, following the commencement of the
Ukraine conflict, these covenants were no longer appropriate and
we therefore commenced refinancing discussions with GBB to
amend the terms to reflect the change.
I am therefore pleased to report that on 13 September we
agreed revised terms for our debt financing arrangements
with GBB, alongside agreeing reduced Deficit Reduction
Contributions (“DRC’s”) with the Mothercare Pension Scheme
Trustees of our defined benefit schemes’ (“Trustees”). This greatly
reduces the annual cash cost to the Company and together
these arrangements significantly improve our financial flexibility,
notwithstanding the loss of revenue from Russia. We explored
other potential debt providers as part of the refinancing process.
Revised £19.5m GBB term facility
Mothercare has agreed revised terms to extend the £19.5 million
GBB term loan facility by one year to November 2025. The term
loan bears an interest rate of 1300 basis points (“bps”) over SONIA
plus 100 bps PIK accrued monthly that rolls up into the principal.
The facility is secured on the assets of the Company and contains
covenants usual for facilities of this type (see the Financial Review).
In addition, the Pension Trustee second ranking secured charge
has been increased from £15 million to £25 million.
I would like to thank GBB, on behalf of all stakeholders, for their
support over the last three years as the Group’s sole lender.
Revised pension contribution plans
Since my appointment in 2018 we have fostered an excellent,
mutually beneficial working relationship with the Trustees without
whose support all stakeholders could have been materially
disadvantaged.
In order to support the new debt financing arrangements, we
have reached formal agreement with the Trustees for a further
reduction in DRCs. The revised recovery plan now sets out
aggregate contributions of £29 million in the financial years March
2023 to March 2027. This represents a £30 million reduction in the
aggregate cash payments that were to have been made to the
pension schemes in that period under the previous arrangement.
The revised recovery plan agreed with the Trustees includes total
contributions (DRCs plus costs) in the financial years to March 2023
£1 million; March 2024 £4 million; March 2025 £7 million; March 2026
£8 million; March 2027 & beyond £9 million aggregating to fully fund
a £78 million deficit by March 2033. We are also well advanced
in exploring the possibility of further reducing the quantum or
uncertainty of subsequent recovery plan contributions through
alternative means.
Mothercare plc annual report and accounts 2022
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Chairman’s statement
continued
Pension Schemes
The last full actuarial valuation of the schemes was at 31 March
2020 and showed a deficit of £124.6 million, resulting from total
assets of £383.7 million and total liabilities of £508.3 million. Based on
desktop projections of this valuation provided to the Trustees, as at
30 June 2022 the deficit had reduced to £60 million with total assets
at £330 million and total liabilities of £390 million.
Opportunities for growth
As we strive to be the leading global brand for parents and young
children Mothercare is in an almost unparalleled position in being
a highly trusted British heritage brand, that connects with newborn
babies and children across multiple product categories, at the
beginning of their life as consumers. Furthermore, at present the
Brand’s singular route to market is via franchisees.
Yet Mothercare is still not represented in eight of the top ten
markets in the world, when ranked by wealth and birth rate, and
we have barely scratched the surface in exploring the multiple
opportunities available to us in wholesale, licensing or online
marketplaces to grow the global presence of the brand.
This year we intend to leverage the full bandwidth of this intrinsic
value through connections with other businesses and the
development of the product range and licensing beyond our
historic limits.
Cost Reduction Programme
The results show a further net reduction in administrative expenses
of 25% compared to last year demonstrating our continual review
and challenge to costs, whilst still ensuring we operate to the
standards of a world class business.
Supply chain model
We continue to evolve our supply chain to reduce cost, complexity
and deliver goods to our franchise partners in the quickest way
possible. For Autumn/Winter 2022 we expect to deliver 80% of our
total shipments direct from the country of manufacturing to our
retail partners’ markets. Furthermore we closed our remaining UK
distribution centre in April 2022 and are also developing a new
product option framework as we seek to curtail the impact of input
cost inflation on each of our product categories.
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Mothercare plc annual report and accounts 2022
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continued
Enterprise Resource Planning (”ERP”) system
Dividend Policy
Although our new ERP system is progressing, with the product
lifecycle management system going live in the first quarter of the
current financial year, the remainder of the system has faced the
almost inevitable delays associated with a project of this size and
complexity. Hence, as this is currently due to go live around the
end of this financial year, we will not reap the full cost savings until
the financial year ending March 2024 although the contract for
the creation of the ERP is on a fixed basis so costs will not increase
commensurate with the delay.
Management & Board changes
We have a PLC Board that we believe is appropriate for a
company of our size, nature and circumstances. Our Non-Executive
Directors have deeply embedded and relevant skills, continue to
directly contribute to the ongoing change process, are regularly
appraised and are encouraged to interface with the Operating
Board.
During the year we also supplemented the Operating Board via
the appointment of a Director of Merchandising and, following our
successful transition to becoming an international brand owner
and operator, are reinforcing the brand and E-commerce skills
within the executive team. This will also facilitate an increasing
focus upon step-change growth.
Finally, having satisfactorily dealt with the additional challenges
created by the Ukraine conflict, we expect to appoint a new Chief
Executive Officer during the current year. A further announcement
will be made when appropriate and in the interim the day-to-day
management of the Group is being run by the Chief Operating
Officer and Chief Financial Officer with oversight from me as
Chairman and my fellow Non-Executive Directors.
The Company has not paid a dividend since February 2012. The
Directors understand the importance of optimising value for
shareholders and it is the Directors’ intention to return to paying a
dividend as soon as this is possible, noting the restriction within the
Company’s agreements with its lenders and the Pension Trustees
and once the Directors believe it is financially prudent for the
Group to do so.
Summary and Outlook
First and foremost, on behalf of the Board I would like to thank
our colleagues across the business, alongside our manufacturing,
franchise and financing partners and shareholders for their
unwavering support throughout the last four years. Without this
support Mothercare would not have been able to surmount the
considerable challenges we have overcome together and be in
the position we are today.
This represents an inflection point for Mothercare, with the
combined benefits of more normalised circumstances and the
updated financing arrangements greatly enhancing our financial
flexibility.
The permanent closure of the Russian business is fully reflected in
our forecasts, which will reduce our new financial year results by £6
million as previously guided, and we have substantially completed
the necessary adjustments to our cost base given the coterminous
diseconomies of scale. Our medium-term guidance for the steady
state operation, in more normal circumstances, of our continuing
franchise operations remains that they are capable of exceeding
£10 million operating profit.
As demonstrated at a number of points over the last four years,
we have the resilience to deal with major challenges satisfactorily.
Whilst mindful of the inflationary global economic environment,
we are now focused on restoring critical mass and optimising
the Mothercare brand globally over the next five years. This is
an exciting prospect for our partners, our colleagues and all our
stakeholders alike as we leave behind the turmoil of recent years.
Mothercare plc annual report and accounts 2022
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Growth
Growth
Mothercare is a truly global brand with our products used by millions of parents around the world every
day in over 36 countries.
Our strategy seeks to rejuvenate sustainable growth across the three key drivers.
GROWTH DRIVERS
ORGANIC
GROWTH
GROWTH BEYOND
EXISTING TERRITORIES
STEP CHANGE
GROWTH
Product and Category
Extension into existing markets
Entering new geographies
and new channels
Capturing new market
opportunities
PROGRESS IN 2021/22
− Home and Travel roadmap created
bringing over 300 new products to
our partners by Autumn 22
− Creation of MPlay our child
development toy range bringing
educational and development toys
back into the Mothercare brand
− Growth of baby category to
encourage early brand adoption
and increase customer lifetime value
and loyalty
− Grown key product across toddler
increasing the proportion of “sets
and packs” providing higher sales
values and enhanced customer
perceived value
− Delivered a substantial increase
in e-commerce and social assets
for our franchise partners as they
continue to lean into sales channels
of the future
− Developed a Market Attractiveness
model to identify future territories
for entry
− Launched our direct supply model
where we now move c83% of clothing
and c80% of all of our products direct
from country of origin to retail
8
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Mothercare plc annual report and accounts 2022
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2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continued Looking Ahead
–
–
–
–
Continue to innovate and bring further Home, Travel and Toy
products to market focusing on core higher value categories
such as furniture
Substantiate local production in India and Indonesia to unlock
competitive advantage
Investing further into the brand with new store design
incorporating digital
Accelerated trials into business model changes that will not only
bring benefit to existing markets but could provide the potential
to enter new markets in different ways
–
Capitalise on the shift to online
–
Finalise our licensing agreement to enable exciting geographic
and category expansion
Organic Growth
Our in-depth customer research programme engaged our end customers in our key global markets, this provided us with a broad picture of
what they want from us and what matters most to them. The resulting innovation pipeline has already brought products to market but many
more are to follow, especially across Home, Travel and Toys.
During the course of the year we developed and launched our MPlay range of children’s development toys together with an increased
range in feeding, sleep and baby entertainment all designed to increase the presence of the Mothercare brand in these key categories.
As outlined in the Chief Operating Officer’s report, with the new merchandising structure and more detailed reporting from partners we have
made changes to the range architecture by increasing the number of multi-pack sets across key categories. This included new, higher value,
3 and 4 packs as well as an extended range of footwear and accessories. The growth of sets should not only drive higher sales per square
foot in retail but will further underline a strong value message. In baby this will also encourage gift purchasing.
As we further extend our data gathering and analysis from our franchise partners combined with insights we will continue to develop a
customer-led category growth plan enabling our partners to increase sales and margins. The chart below shows the growth in our current
markets over the next 5 years demonstrating the room within our existing business to grow our offer and revenues.
Approximately 30% of our franchise partners’ retail sales are generated from products that they have sourced themselves and are not
branded as Mothercare. These products are usually where there isn’t a Mothercare equivalent and are mostly in the categories of home
and travel products. Our approval is required to sell all such products. Part of our product strategy is to review these locally sourced
products to identify opportunities for us to design and deliver similar products and thus extend our range. Not only will this increase
the sales of Mothercare branded products, which generally make higher margins for our franchise partners, but also allow them more
defense against becoming a showroom for third party brands, all of which can be purchased online from a competitor.
Whilst our online retail sales more than doubled in share of total sales during the pandemic, it still represents only 11% of our total retail
sales. Whilst market by market the percentage share is variable, over time this will inevitably grow and potentially offers our franchise
partners an opportunity to grow their businesses with lower capital investment over the longer term. Our increased investment in digital
marketing assets coupled with the awareness of the need to evolve as a digital retailer and consequential investment of our partners
provides significant headroom for them to grow their businesses.
Key MGB markets FY22 retails and forecast growth in market size
India
Hong Kong
Other MENA
ROW
Indonesia
Malaysia
Singapore
Qatar
Kuwait
UAE
Saudi Arabia
140%
120%
100%
80%
60%
40%
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20%
Cyprus
0%
0.0
UK
Greece
10.0
20.0
30.0
40.0
50.0
60.0
MGB retails FY22 (£m)
Mothercare plc annual report and accounts 2022
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HEAD_0 1st line continued
Growth
continued
Growth beyond existing territories
The chart below shows our existing markets and those we
have identified as potential opportunities when reviewing
expenditure of childrens wear in households with disposable
income that’s inline with the Mothercare Proposition.
Our asset light, IP heavy operating model enables us to
consider various market entry modes including online only,
concession and wholesale through shop-in-shops together with
the traditional franchise model.
2022 Addressable Markets
100%
MGB current markets
Potential markets
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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D
Step Change Growth
The Mothercare brand is in an almost unparalleled position
of being a highly trusted British heritage global brand, that
connects with newborn babies and children across multiple
product categories, at the beginning of their life as consumers.
We are seeking to leverage the full bandwidth of this intrinsic
value through connections with other businesses and the
development of the product range and licensing beyond
our historic limits. Our product development strategy will
provide potential in both existing and new markets, alongside
expanded distribution into markets where a full Mothercare
offering isn’t currently available.
There are also numerous natural product synergies into
associated non-clothing and home categories like health and
beauty or outdoor children’s activities that provide increased
sales opportunities for the brand. We are actively reviewing
these category opportunities and all routes to market based
upon the stable, capital light, international model we now have
established.
Moreover, we are aware that there are many opportunities, not
least as a result of the pandemic, that we could explore to bring
synergistic benefits or open up new territories and channels for
our existing products.
10
Mothercare plc annual report and accounts 2022
2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line
Mothercare plc annual report and accounts 2022
11
Strategic Report2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line
Our Business
Model
Our Business Model
Mothercare is a leading global parenting brand with operations
in 36 countries through global franchise partnerships. The brand
has a strong heritage and trusted reputation.
WHAT WE DO
1
2
3
CUSTOMER INSIGHT
We track customer sales and
use this alongside insight
from our partners/ loyalty
programme
PRODUCT FRAMEWORK
Our product function use
these insights to create the
best range framework and
identify new opportunities
DESIGN
Our in-house design team
creates our product offering,
ensuring globally compelling
products are created
8
BRAND MANAGEMENT
We have a dedicated
commercial management
team who work in close
partnership with our
franchisee’s to develop the
business
7
SALES
Our partners use many
channels to make our
brand available to
customers (MGB receives
royalty on their sales or in
some cases on the sale of
stock)
12
Mothercare plc annual report and accounts 2022
6
BRAND & MARKETING
We develop full online and
instore marketing for our
partners to use across social,
e-commerce and stores
4
MANUFACTURING
Our buying and technical
team identify manufacturing
partners to bring our products
to life, ensuring we are both
technically and ethically
compliant
5
DISTRIBUTION
Our supply chain team work
with a global network of
logistic companies to deliver
products to our retail markets,
most of our products move
direct to country of sale with
just c20% moving via a single
warehouse
2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continued PARTNERSHIPS
VALUE WE CREATE
Colleagues
Our talented team of people
whose skills are essential to the
brand’s success.
Manufacturing Partners
Over 60 trusted partners who
have the expertise to bring our
products to life.
Support Partners
Our key relationship partners
who play a role in our business.
Franchise Partners
Our 19 partners who deliver
the brand to end customers
every day.
Customers
We aim to be the most trusted
provider of quality products
and expertise to parents on
their parenting journey.
Business partners
We aim to create value for all
our partners, supporting their
profitable growth.
Colleagues
We aim to balance fair reward,
development in the role and
wellbeing for our colleagues by
offering them the tools needed
to take responsibility for their
future while supporting them
through each stage of their
career with us.
Shareholder
We aim to deliver sustainable
profit and growth.
Mothercare plc annual report and accounts 2022
13
Strategic Report2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line
Our Business Model
continued
Globally
Recognised
Brand &
Product
Offering
Established
Franchise
Model
Attractive
Financial
Model
Online, Marketing and Store Assets
Exclusive Partnership
• Full photographic and copy assets
• Full multichannel agreement for
for online.
use of the brand.
• Wire frame and social media
guidelines
• Stop Motion video, YouTube and
social media content.
• Window designs.
• Seasonal and brand photography
and video content.
• Content for key global and local
events, e.g. Ramadan, Diwali.
Market Relevant Design
• End consumer focused product
development.
• from pre birth to child driving
strong consumer lifetime value.
• technically compliant & certified.
• high level of product newness
engaging return purchasing &
brand loyalty.
• strongly co-ordinated cross
category offer encouraging higher
basket spend.
• unique cross category ranging for
hard and soft goods.
• Pull model, allowing partners to
select and maximise product
based upon local trading needs.
• Selected use of third party brands
to compliment the Mothercare
offer.
Attractive Financial Model
• Our financial model that is now
applied to the majority of our
franchise partners involves us
only placing orders for products
that match the orders from our
franchise partners and are covered
by the three-way contractual
agreement that they will pay for
them.
• We therefore do not
hold stock that is not covered by
a sales order and are generally
not exposed to the related
working capital requirement and
risk.
• The product is generally shipped
direct from our manufacturing
partners to our franchise partners,
largely removing the need for us
to use warehouses.
• We earn the majority of our gross
profit from the royalties we charge
as a percentage of our franchise
partners’ net retail sales.
Brand
• Mothercare has been designing and developing
products for babies, young children and parents
for over 60 years.
• Our long-standing manufacturing and franchise
partners’ businesses often started with the
Mothercare brand and we therefore benefit
from a deep understanding of the brand.
14
Mothercare plc annual report and accounts 2022
MGB• Brand,• Design,• Source & distribute products to PartnersMODELIn return for developing products and Mothercare IP our partners make payments to MGB including royalties on salesFRANCHISE PARTNERS36 Countries19 Partners2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line Chief Operating
Officer’s and
business review
Chief Operating Officer’s report and
business review
“ We have emerged
stronger from the terrible
pandemic by working more
closely with our franchise,
manufacturing and supply
chain partners and we
see exciting potential for
geographic expansion and
innovation in new channels
building on the brands
strong heritage.”
Clothing
Worldwide Retail Sales £340m
Our Largest Categories:
Newborn,
Baby Essentials,
Nightwear
i
i
S
S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
R
R
e
e
p
p
o
o
r
r
t
t
Kevin Rusling,
Chief Operating
Officer
Home, Travel and Toys
Worldwide Retail Sales £45m
Our Largest Categories:
Bedding,
Pushchairs,
Bathtime
and Toys
Mothercare plc annual report and accounts 2022
15
Strategic Report2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continued
Our Geographical Footprint
Overview
Our principal route to market is via our global
franchise network of Mothercare stores, shop-
in-shop formats and an ever increasing online
presence through 20 dedicated websites and
over 30 marketplaces. We trade from many
of the world’s best shopping malls and continue
to invest in both our store and online presentation
and content.
Middle East 37% of annual global sales 165 stores
The Middle East is Mothercare’s largest region and is made up
of four key geographies of Saudi Arabia, UAE, Qatar and Kuwait
together with Egypt, Jordan, Bahrain and Oman.
The largest of these markets is the Kingdom of Saudi Arabia and
accounts for 10% of our annual global sales. The country has
undergone significant changes over the last few years including
sales tax, Saudisation of the workforce and the introduction
of many new leisure activities which didn’t previously exist all
competing for consumers’ money. This continues to change the
shape of our retail offering in the Kingdom, and noticeably whilst
the store count has decreased the success of the app and online
trading (+400% over the last 3 years) continues to show the
opportunity in the market.
Our partner Alshaya is a leading operator within the region and
opened the first Mothercare store outside of the UK and continues
to be a great ambassador for the brand.
India 5% of annual global sales 139 stores
India is Mothercare’s fifth largest region, with revenues significantly
impacted by closures due to COVID-19 in the financial year but
subsequently rebounding strongly.
Our planned channel mix has developed significantly over the
last two years, historically 85% stores, 11% wholesale and 4% online
has moved to 63% stores, 15% wholesale and 22% online including
the launch of Mothercare.in and also expansion onto the reliance
owned Jio marketplace.
We have a strong heritage and brand recognition in India. Our
brand is highly trusted, and this has enabled us to expand the
product range into FMCG products like nappies, soaps and
personal care lines, all of which are available in supermarkets and
local corner shops across the country. We intend to further develop
this opportunity in and outside India.
16
Mothercare plc annual report and accounts 2022
Europe
41%
Middle East
37%
Asia
22%
The market backdrop is highly favourable and we are currently
working with our partner, Reliance, to unlock further opportunities
to grow the brand in the country.
2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line Malaysia, Singapore and Hong Kong 8% of annual global
sales 38 stores
Our 2nd largest region suffered a challenging year with
Malaysia, Singapore and Hong Kong impacted by COVID-19
regulations affecting the trading opportunity within the region.
These restrictions ranged from mall restrictions through to
Malaysia being closed for 16 weeks of the year. All three
markets have, however, had an incredible bounce back once
open and ready to trade.
There is strong growth planned for Malaysia with expectations
to achieve sales higher than pandemic levels driven through
the new space which incorporates an all new experiential store
format to drive customer experience and be a real point of
difference to the competition.
There is also a real focus on digital. The launch of a new
platform is planned for Autumn 22 with the key objective of
a much better customer journey across all digital channels
through improved delivery proposition, product offer,
promotional plan and digital expertise in the team to drive the
strategy.
Indonesia 5% of annual global sales 51 stores
Pre COVID-19, Indonesia was our fastest growing market and
struggled last year not only with closures and disruptions due to
COVID-19 but with major changes in regulations impacting the
importation of product.
Despite these challenges we are fully focused on restoring growth
in the region and our partner Kanmo has continued to invest in
6 new stores and the online proposition. The plan for the current
year would see the market back to pre pandemic levels (FY19)
driven by strong LFL growth, ecommerce and further new stores.
Greece 6% of annual global sales 27 stores
The performance of Greece during the year was one of
the strongest and has seen continual growth since 2019 and
throughout the pandemic driven by two key factors, firstly the
performance of e-commerce, which was launched as a response
to the pandemic and now commands a 16% share of business this
year. Secondly, our partner is longstanding within the market and
this depth of knowledge of their customer base has enabled them
to respond to the customer’s needs as they have changed.
UK 7% of annual global sales 12 shop-in-shops and over 400
locations in total
Club programmes which we believe will lead to continued
growth into the current year and beyond.
We launched our UK franchise with Boots UK in October 2020 mid-
pandemic and with the important role Boots played in healthcare
over this period and natural challenges that occur at the start of a
new relationship we had operational difficulties to overcome.
Sales throughout the year have seen steady growth and as both
parties returned to more normal trading environments, we were
able to focus on the launch of the Spring 22 season. We would
expect that our second year of operations will deliver a c20%
increase in retail sales.
Towards the end of the year we started to see significant
investment in the brand with both visual merchandising support
for key stores and a relaunch to their website. This investment
continues and included a fashion show supporting The Baby
Show NEC, utilising the Boots Advantage Card and Parenting
Mothercare plc annual report and accounts 2022
17
Strategic Report2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line
Our Product
Mapping what matters
We have engaged with our end customers through our global
research programmes to get the broadest picture of what they
want from us and this tells us what matters most to them. Those
insights helped us adapt our ranges and provided a more robust
view for our innovation pipeline.
Innovation
Our innovation pipeline of new products is stronger. In key
product categories we have designed, developed and brought
to market ranges with specific child development stages at the
heart of the product and with a particular focus around 0-5 years
where our customers have told us they need more support:
• Playtime – the launch of our MPlay children’s toy range
developing hand eye co-ordination and mobility as well as
high levels of play and engagement
• Feedtime – highchairs which speak to the classic as well as
contemporary customer
• Newborn Clothing – expansion of our daywear collections
to give customers greater choice and encourage repeat
purchasing
Features and Benefits
Our in-house design team, working closely with the buying and
technical teams create our product ranges with the customer’s
needs in mind right from the drawing board.
All age groups see this same focus – our baby sleepsuits have not
only a unique construction inside the foot area to protect tiny toes
but always have built in turnover scratch mittens for tiny hands and
our T-shirts have fabric that covers irritating back neck seams to
ensure real comfort for any young child.
Our refreshed ranges
We focus our development on providing clearly perceived value
and choice for our markets.
Value can be seen in understated design with great quality in our
everyday good products where simplicity is key ; added value
for customers who want a little extra in their garment design and
print in our better ranges and for those who seek more fabric and
garment interest – we provide added extras into our best offer.
Choice underpins our design and fabrication from simple to
detailed across a stretch of price points ensuring our ranges have
broad appeal.
Good
18
Mothercare plc annual report and accounts 2022
2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line Better
Best
Mothercare plc annual report and accounts 2022
Mothercare plc annual report and accounts 2022
Mothercare plc annual report and accounts 2022
19
19
19
Strategic Report2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line
Our Brand
We are evolving our already
strong brand
Alongside our investment in product, we continue
to evolve our brand, building upon its global
strength and our brand IP. Mothercare has a
strong DNA that resonates with parents across the
globe through our heritage of trusted and quality
products offering great value throughout the
parenting journey.
Through a programme of customer insight & research in core
markets across the globe we continue to cement and confirm our
brand evolution, ensuring our key qualities remain at the centre
of all we do whilst continuing to build upon them with a more
reflective view of our diverse global consumer base and the ever
changing way that they engage with the brand.
We’re working on our ‘store of the future’ – maximizing our
consumer research to develop a multi-channel concept that both
entices and excites our customer with a real focus on the future.
Our focus on video & social led storytelling has seen great
engagement this year and has given us a clear foundation on
which to build upon further.
In the e-commerce space we have evolved apparel on-model
shooting & 360 video content for our partners, bringing the
products to life.
Campaigns rich in narrative will be a cornerstone of our brand.
Connecting with our customers in the most natural and engaging
of ways. Ensuring they know that we understand the parenting
adventure and we are with them through it all.
20
Mothercare plc annual report and accounts 2022
2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line Our Performance
The last year was another turbulent year and
although the disruption from Covid-19 has started
to ease in some parts of the world, many countries
experienced uncertainty and volatility and this
continues today in certain production and retail
markets together with the continued challenges of
global supply chains.
Most recently we have seen a steep rise in input cost inflation impacting each of our product categories and are now using the
increased data to develop a new option framework reducing the number of products to maintain volume and limit price increases. We
continue to evolve our supply chain model to maximise the number of products we can move direct from country of manufacture to
retail without the need for warehousing. As a result, we have closed our UK warehouse and now just c20% of product moves through our
remaining Asia warehouse.
Throughout the year the teams worked on developing our new PLM and ERP solution so we can simplify the business and enable our
teams to focus more on the needs of our partners and customers.
Towards the end of the financial year, we announced the suspension of trade in Russia, our largest single country. Since the end of the
year under review operations have been closed there for the foreseeable future.
Mothercare emerged stronger from this terrible pandemic by working more closely with our franchise, manufacturing and supply
chain partners and we see exciting potential for geographic expansion and innovation in new channels building on the brand’s strong
heritage and trust that our global end consumer research highlighted in every market we surveyed. We are fully committed to stepping
up the growth of both our existing and new businesses over the next few years.
Mothercare plc annual report and accounts 2022
21
Strategic Report2nd line continuedHEAD_0 2nd lineHEAD_0 1st line continuedHEAD_0 1st line
KPIs
KPIs
KPIs
Worldwide Sales*
Total retail sales £m
Online retail sales £m
Stores as a % of total sales
Online as a % of total sales
Worldwide Stores*
Number of stores
Space (k) sq. ft.
International Growth*
Year on year sales in constant currency
Global Franchises
Countries with a Mothercare presence
Product Mix*
Clothing & Footwear
Home & Travel
Toys
2022
385.3
40.9
89.4%
10.6%
680
1,828
12.6%
36
88.4%
10.1%
1.5%
2021
358.6
44.4
87.6%
12.4%
734
1,970
2020
542.1
31.3
94.2%
5.8%
841
2,345
(30.5)%
(10.5) %
38
86.8%
11.2%
2.0%
40
78.2%
19.8%
1.9%
2019
604.3
26.8
95.6%
4.4%
1,010
2,643
(2.4) %
50
65.7%
31.1%
3.3%
* Numbers presented relate to stores held by, and sales to end consumers by the Group’s franchise partners with the exception of product mix which is based on MGB’s sales to
franchise partners. See accounting policies for definitions.
22
Mothercare plc annual report and accounts 2022
Risk Management in MGB
Risk Management in MGB
Overview and Objectives
As a global franchisor, operating across 36 territories and engaging with multiple manufacturers, supply chain sources and franchise
partners, Mothercare Global Brand (MGB) is exposed to multiple risks across the markets within which it operates. With this in mind a risk
management framework is in place which is appropriate for the size and complexity of the business following the Company’s admission
to AIM in March 2021, and the development and embedding of the current operating model.
MGB maintains its risk management function in line with the Quoted Companies Alliance Corporate Governance Code (QCA Code)
complying with AIM Rule 26. The Audit & Risk Committee provides oversight, as to the overall suitability and effectiveness of the risk
management approach and is accountable and supported by the Board. The Operating Board formally reviews, discusses and
documents the Principal Risks to the business at least annually. The Risk Committee sits quarterly to understand existing and developing
issues, and, MGB Senior Managers contribute to, and update, Operational Risk registers, as a minimum also quarterly. All colleagues
recognise their responsibility to proactively identify and manage risk and opportunity in their daily activities and planning.
MGB Risk Management structure FY22
Plc Board (Board)
Audit & Risk Committee
Operating Board
Risk Committee
Mothercare Global Brand (MGB)
The objectives in MGB’s risk management are to:
• Support each business function with the right ‘tone from the top’ with Principal risks and Tolerance approved at Operating Board level
• Ensure a consistent approach to the support of a responsible and risk-aware culture, within each department of the business and at
every level
• Assist in the continuing transformation of MGB by ensuring measured, calculated risk taking is supported to achieve business objectives
• Provide regular monitoring and reporting of risks in order to identify suitable mitigation through controls, actions or contingencies
Principles and Process
The principles adopted by MGB allow for the nature of balancing the driving of growth, within a complex and recently challenging, and
continually changing, global retail environment, while providing sound opportunity for investors. The risk management framework is
adopted throughout MGB to protect and enhance business value with an approach that is impactful and resilient, the end result being
considered and strategic decision-making. The primary principles are designed to promote the protection and improvement of working
capital, and the design and supply of sustainable, safe and desirable product for MGB franchise partners, they are:
• Business decisions being made with risk in mind, with Principal Risks reviewed annually
• Risk tolerance dictated by MGB strategy, with annual Operating Board review
• Best practice adopted to ensure legal compliance, through company-wide policies and training
• Risk aware culture is promoted, with quarterly departmental operational risk register reviews
Operational Risk Registers are maintained to inform the business of those areas having the biggest impact on the Principal Risks and
the threat they pose to MGB achieving its strategic objectives. Eleven of the business departments contribute quarterly with updates on
progress, developing threats and risks that have been reduced or removed. They are Brand, Buying, Commercial, Design, Finance, Legal,
IT, Merchandising, Technical, People and Supply Chain.
MGB Risk Management FY22
The ongoing risk that COVID-19 poses to all global businesses has shaped much of the risk management activities over the last two years.
MGB has grown increasingly resilient to these challenges with sound Supply Chain developments over this time to reduce the impact the
pandemic may have on operations. A series of planned projects have significantly reduced MGB liabilities including direct shipments to
franchise partners and new enhanced manufacturer agreements combined with the successful dynamic risk management of shipments
during a freight forwarders cyber-attack. Development of the product base, brand protection initiatives and financial controls have all
been discussed, monitored and reviewed through the risk management process and continue to be the focus to deliver an efficient,
profitable and expanding franchise proposition.
Mothercare plc annual report and accounts 2022
23
Strategic Report
Risk Management in MGB
Overview and Objectives
Principal Risks and uncertainties
Reviewed, discussed and agreed by the Operating Board annually, MGB Principal risks are designed to promote strategic success and
improve future performance, the impact of Operational risks on these determines the focus for senior management and their teams.
Potential Impact
Key Mitigations and Control
Change on LY
Principal Risk
Liquidity
Failure to control cash management
and working capital may result in
breaches to banking covenants,
failed commitments to our pension
schemes and inability to meet our
strategic intentions
Dependency on a small number of
partners
There may be an over reliance on
a few key franchise partners whose
success directly dictates the success
of MGB in the absence of further
franchise partner development.
Additionally with these key franchise
partners and some manufacturing
partners, MGB is exposed to
movements in foreign currency
exchange rates.
The ongoing disruption to global
trade may impact partner sales and
result in margin and revenue squeeze.
Disruption to global supply chain may
also put pressure on stock availability
and further hamper trade in our
global markets.
Any damage to, or loss of, the Group’s
relationship with key partners or
significant movements in related
exchange rates, could have a material
impact on the franchise model success,
operational capability or financial
stability.
COVID-19
There may be further sporadic
interruption on revenues as a result
of limitations on store opening,
customers’ shopping habits and
our ability to source and distribute
product in a timely manner
The impacts of COVID–19 on global
economies, could impact both our
franchise partners and manufacturing
partners ability to operate successfully,
therefore impacting on our revenue
and order books
Global economic and political
conditions
MGB may be negatively affected
by challenging economic conditions
and political developments affecting
the international markets in which it
operates.
Economic and political uncertainty,
as exemplified by the Russia market,
and potential supply interruption from
China could have a material adverse
effect on the Group’s business.
ERP System
MGB legacy IT systems are being
replaced by a world class ERP system
however this presents a risk of design
failure and implementation delay
leading to the loss of our ability to
operate
IT infrastructure disruption could result
in the inability to support our Global
partners to trade effectively. Any failure
or attack relating to our warehousing
systems or finance systems, especially
would impact operational efficiency
24
Mothercare plc annual report and accounts 2022
Strong cash management governance
in place, including a weekly Cash
Committee.
Tri–partite and manufacturer
agreements are in place with
franchisees and suppliers, significantly
improving working capital.
Credit management improvements
made to manage timely incoming
payments.
Ongoing identification and sufficiently
risk-spread review of new business
channels, partnerships and territories
to grow our global business and
reduce this reliance.
Collaboration and support with all
partners continues with the aim of
enabling growth.
Revised contracts provide increased
transparency, competitive pricing and
royalty rates.
The majority of the exchange rate
risk is limited to the royalties we earn
based on a percentage of the local
currency retail sales.
Our numerous franchise territories
coupled with the spread of our
manufacturing base reduces the
impact of restrictions imposed by an
individual country or region.
Management team will continue
with the rigour and agility they have
demonstrated in reaction to the
pandemic to date.
Introduction of a new Manufacturing
Partner Agreement reduces MGB
liabilities in relation to a pandemic.
MGB works closely with individual
franchise partners to optimise benefits
and mitigate risks to be gained from
changing conditions.
Expansion of the manufacturing base
through FY22 has spread the supply
risk and a risk-based review of new
potential markets is ongoing. Franchise
partners have the ability to source
product locally.
An ERP Steering Committee has been
established including representatives
from all departments and to ensure
that the system is appropriately
scoped and planned.
IT-specific Disaster Recovery Plan is
in place, in addition to departmental
continuity plans.
Extensions in place to support existing
core systems.
Continual monitoring of our IT
landscape against risk factors.
Risk Management in MGB
Overview and Objectives
Principal Risk
Potential Impact
Key Mitigations and Control
Change on LY
Regulatory and Legal
A failure to comply with increasing
regulatory requirements or
introduction of new regulations
impacting MGB or any of our partners
could result in brand damage, fines
or impact our ability to operate
profitably.
MGB is reliant on manufacturers,
suppliers and distributors to comply
with employment, environmental and
other laws. Regulatory compliance
requires monitoring and reporting
to avoid damage to the Mothercare
brand. Changes to regulations or
onerous import restrictions and
taxes could also significantly impact
profitability of some partners.
Brand, Reputation and Relationships
The Mothercare brand is a key asset
that is both strong and desirable.
Should this be negatively impacted
through neglected relationships, or
unsupported, poor execution, the
business model may not be successful
in the longer term.
Our brand could be impacted
by product failures, ineffective
management of product incidents,
public scandals, relating to any
partners, inappropriate behaviour,
data breaches or third-party IP
abuse, all of which may result in a
deterioration of brand confidence.
Personnel and talent
Failure to attract, retain, motivate
and progress our top talent, in an
exceptionally competitive job market,
could lead to high attrition rates and
an inability to ‘attract and retain’ to
meet our strategic intentions
Potential for talent to leave the Group
during brand evolution and COVID19
may impact on our ability to deliver on
our global strategic intentions.
Reduced efficiency and effectiveness
of operations due to employee
distraction.
Executive burn out due to extensive
business change program and
challenging trading conditions.
Decreased
Increased
Stable
Mandatory Compliance training is
available on a dedicated training
platform covering ABC, AML, GDPR,
H&S, COO, Competition Law and
Whistleblowing, with additional
training in Fraud identification
available to those in higher risk areas.
Conflict of Interest self–certification is
also required.
MGB has continued to develop its
sourcing strategy to allow for greater
flexibility in moving suppliers in
response to supply interruptions and
regulation changes.
New Manufacturing Partner
Agreements are in place for every
trade supplier reducing MGB liabilities
and promoting MGB governance
expectations at point of engagement.
All Mothercare branded suppliers
are required to comply with our
Responsible Sourcing Handbook –
Compliance Standards.
Responsible sourcing audits are
completed annually.
Group trademarks are formally
logged in country of operation with a
proactive enforcement of IP rights.
Clear and timely external
communications issued in relation to
MGB stance on Russia franchise stores.
Clear Employer Value Proposition
(EVP) in place to market MGB as an
attractive and competitive employer,
in order to retain talent and provide
colleague development and wellbeing
at the centre.
Executive review of an improved
reward and benefit structure.
Leadership team and line
management providing regular insight,
both face to face and via Teams,
about the business, its future direction,
opportunities and development for
colleagues.
NEW
Mothercare plc annual report and accounts 2022
25
Strategic Report
Section 172
statement
Section 172 statement
The Companies (Miscellaneous Reporting) Regulations 2018 require directors to explain how they considered their general duties
under Section 172(1) of the Companies Act 2006 to act in a manner they would consider would be most likely to promote the success of
the company for the long-term benefit of its shareholders as a whole whilst having regard, among other things, to the interests of all
stakeholders including employees, business relationships with suppliers, customers and others.
Mothercare’s stakeholders include its shareholders, employees, franchise partners, manufacturing partners, the trustees of the pension
scheme and its lenders. Key board decisions throughout the year considered the key stakeholder groups and regular methods of
engagement with those groups.
During the year the board was cognisant of its s172 duties and specific examples are set out below.
Significant event/decision
Key s172 stakeholders affected
Actions and impact
Franchise partner and its stakeholders Operation of Mothercare brand suspended on 9 March 2022
Suspension of operations of
Mothercare brand in Russia
Financing – commenced refinancing
discussions to reduce the cash
financing cost
Lenders
leading to complete cessation of the Mothercare brand in Russia.
The Russian franchise business represented around 20-25% of
Mothercare’s worldwide retail sales and was previously expected
to contribute around £0.5 million per month to group profit.
Refinancing discussions ongoing at the year end and the Group
remains in compliance with the terms and covenants of the
existing loan facility. Since the year end, revised terms to the
existing loan have been agreed and forecasts show that the
Group will operate within the terms of the facilities agreement for
the foreseeable future.
Pension schemes
Shareholders
Pension trustees, active and deferred
pensioners, lenders, shareholders
Commenced discussions with the pension trustees to agree a
revised schedule of contributions.
Regular dialogue has been maintained throughout the year with the Company’s major shareholders whom represent c80% of the share
register.
Employees
Working from home remained the case for much of the year and hybrid working has become the norm. MGB continued to hold weekly
virtual coffee mornings for all employees to join with two-way communication encouraged providing opportunities to ask questions either
anonymously or in person. There was an emphasis on wellbeing with access to support for an array of matters.
A discretionary bonus was paid to all eligible Mothercare Global Brand Limited colleagues who were employed as at the year end, with
the bonus payment prorated to acknowledge their respective efforts in building the Mothercare Global Brand business since the end of
calendar year 2019.
Annual bonus for the executive director for FY22, was achieved, and is to be paid in tranches. For FY22 there was no increase to base
salary for the executive director.
Lenders
The board kept the financial needs and available resources of the group under close review and entered its second year of its
arrangement with GB Europe Management Services Limited. The Company keeps its lender fully appraised of its financial status and
maintains regular dialogue.
Pension trustees
Regular dialogue took place with the trustees of the defined benefit pension schemes with continual discussions on the value of the deficit
and scope for mitigating risk to all stakeholders.
Franchise and manufacturing partners
We maintain regular dialogue with our franchise and manufacturing partners, and the year under review saw a particular focus on
clothing. We continued to hold virtual selling events and online quarterly business reviews and were fortunate to be able to meet with
some of the partners following the relaxation of travel restrictions.
26
Mothercare plc annual report and accounts 2022
Financial review
Financial review
“The significant improvement in
profitability evidences the full year
impact of the establishment of a
cost base that is appropriate for our
business but still has the necessary
skills and experience to deliver
further growth, as the impact of
COVID-19 diminishes. Coupled with
the refinement and improvement of
our operating model, we continue
to demonstrate we are a profitable
and cash generative international
business, with reduced risk, lower
overheads and an asset-light
model.”
We have previously highlighted the changes and restructuring that took place across the Group in recent years and the results of these
activities are now becoming evident in our improved financial performance. These results are still heavily impacted by COVID-19 and
going forwards we expect the growth from sales returning to pre-pandemic levels to significantly mitigate the loss of contribution from our
Russia operations.
International retail sales by our franchise partners of £385.3 million (2021: £358.6 million) showed a 7% increase year on year. Whilst the retail
sales have increased year on year, they are still significantly impacted by COVID-19 and remain below the levels we would otherwise
expect. Retail sales are around 25% down on the total retail sales for similar territories in the period before the pandemic.
The profit from operations in the year was £13.0 million (2021: loss of £2.4 million) reflecting a number of significant changes. To better
understand the underlying results, the Group uses a non-statutory reporting measure of adjusted profit, to show results before any one-off
significant non-trading items. This involves removing the adjusted items which relate to restructuring and reorganisation costs and are
non-recurring (£1.9 million subtracted in year ended 2022 and £2.6 million added back in 2021), together with depreciation and amortisation
of £0.9 million (2021: £2.0 million), resulting in an adjusted EBITDA profit for the year of £12.0 million (2021: £2.2 million).
The improvement in adjusted EBITDA of £9.8 million is made up of an increase of £5.1 million of gross profit and a reduction of £4.7 million
of net costs. Gross profit increased over the previous financial year by £5.1 million, approximately £3.0 million as a result of the previously
highlighted delays in shipping at the end of our financial year FY21. This moved margin of around £1.5 million into this financial year FY22,
with the remainder largely being an increase in royalties from the higher level of retail sales. The net year on year cost reductions of
£4.7 million, were made up of: £2.5 million of lower staff costs as we progress to a team that has the appropriate skills and experience for
the current business; pension scheme running costs reduced by £1.7 million to £1.7 million; IT costs reduced by £0.6 million; impairment of
receivables lower by £0.5 million; other net cost savings of £0.4 million, partially offset by the absence of around £1.0 million of the £2.0 million
other income, from the warehouse that was rented last year before assignment, which related to costs included within depreciation.
The Group recorded a profit for the 52 weeks to 26 March 2022 of £12.1 million (2021: loss of £21.5 million). The adjusted profit for the year was
£9.0 million (2021: loss of £8.6 million). The adjusted items are detailed in note 6.
Our Russian territory, which ceased contributing to the Group’s retail sales and revenue on the 9 March 2022, generated £88.2 million (23%)
of total retail sales for the financial year to March 2022 and £77.3 million (22%) of the previous year’s total retail sales. Russia contributed
around £5.5 million (2021: £5.0 million) to adjusted EBITDA for the year. The Group will not be affected by any further write offs in relation to
items such as stock or debt, as a result of the Russian termination.
Retail space at the end of the year was 1.8 million sq. ft. from 680 stores (2021: 2.0 million sq. ft. from 734 stores).
Mothercare plc annual report and accounts 2022
27
Strategic Report
Financial review
continued
REVISION TO LOAN TERMS
As a result of the termination of our Russian operation in March 2022, the Group was unable to continue to meet its covenant obligations
under the loan agreement with our lender Gordon Brothers. We have therefore agreed the following amendments to the loan:
• Loan to remain at £19.5 million and not amortising.
• Term extended from 26 November 2024 to 26 November 2025.
• Interest rate of 13% per annum plus SONIA, with SONIA not less than 1%, payable in cash, plus a 1% per annum payment-in-kind
coupon that accrues monthly into the principal (which becomes due when the loan is repaid). Previously the interest rate was 12% per
annum plus SONIA with a floor of 1%.
• Covenants revised to reflect the current results and forecasts of the Group and previous defaults waived.
• The facility remains secured over the assets of the Group as a whole and early repayment charges if it is repaid prior to term have
been reset.
Whilst there is some uncertainty particularly around the time and levels of recovery in retail sales post COVID-19, coupled with the
heightened global economic uncertainty, in the short term and the resultant impact on the Group’s profitability and cash generation our
forecasts show that we are able to comply with our revised commitments to our lender and the pension schemes for the foreseeable
future. As at the balance sheet date the Group had net borrowings of £9.9m, being cash of £9.2 million against the term, loan of £19.1 million,
which is a drawdown of £19.5m net of the unamortised facility fee, reflecting the continuing tight control of cash.
PENSION SCHEME CONTRIBUTIONS
Coupled with the revised terms for the term loan we also revised the schedule of contributions to our pension schemes’ deficits. The value
of the deficit under the full actuarial valuation at 31 March 2020 was £124.6 million; the Group’s deficit payments were previously calculated
using this as the basis. The previously agreed annual contributions to the pension schemes, for the years ending in March, were as follows:
2023 – £9.0million; 2024 – £10.5 million; 2025 – £12.0 million; 2026 to 2029 – £15 million; 2030 – £5.7 million.
As at 31 March 2022 the deficit had reduced to £78 million and the following revised annual contributions have now been agreed with the
trustees, for the years ending in March as follows: 2023 - £1 million; 2024 - £4 million; 2025 - £7 million; 2026 - £8 million; 2027 to 2032 - £9 million:
2033 - £0.7 million. Mainly due to increasing interest rates the deficit had reduced still further to £60m by the end of June 2022. These deficits
are on an actuarial technical provisions basis, which is used to determine the contributions required and produces different figures from
those included in the balance sheet, which are required to be from applying IAS 19.
OPERATING MODEL
The Group continues to work towards its goal of becoming an asset light business. We continue to use our tripartite agreement
(‘TPA’) process, whereby the franchise partners commit to paying the manufacturing partners for the product when due and in return
the manufacturing partners were generally willing to re-extend credit terms that had sometimes been lost because of the UK retail
administration. The TPA process has resulted in a substantial reduction in our working capital requirement and has been an instrumental
element of our successful navigation through the impact of COVID-19.
We have subsequently further improved the TPA model whereby the franchise partner is invoiced directly by the manufacturing partner.
This allows the manufacturing partners the opportunity to obtain credit insurance in relation to the franchise partners debt, which due to
MGB’s limited trading history was sometimes difficult to obtain for invoices raised to MGB. Additionally, this model removes the Group’s
exposure to the debt and working capital requirement for these products. Where this is the case, under IFRS 15 the Group is the agent in
the transaction – previously the Group was the principal. Hence for these products the creditors and stock will not be recognised by the
Group and whilst the associated revenue and cost of sales will also be excluded there will be no material impact on the absolute margin
earned. The responsibility for design, quality control and choice of manufacturing partner for these products, are unchanged and remains
with the Group.
For the spring/summer 2023 season, currently in production, we expect some 50% of the products by value, to be invoiced directly to
franchise partners by our manufacturing partners. This figure now excludes Russia that was invoiced direct. We continue to work with our
larger franchise partners to move them to this basis. For some of the smaller franchise partners we are obtaining bank guarantees or
letters of credit to reduce our debt exposure.
We are also moving more product direct from manufacturing partners to franchise partners. For spring/summer 2023, we expect 80%, by
value, to be shipped in this way. As we now move the majority of our products in this way, post year end, we have been able to exit from
our UK warehouse service provider and now only have a warehouse in China for consolidation of smaller orders that cannot be viably
shipped direct.
These new ways of working are being accepted by both our franchise and manufacturing partners as they are beneficial for all. Our
franchise partners have the potential of reduced distribution recharges, shorter delivery times and improved surety and availability of
28
Mothercare plc annual report and accounts 2022
product. In turn, manufacturing partners have greater security of payment through credit insurance or simply dealing directly with some of
our well capitalised franchise partners.
ENTERPRISE RESOURCE PLANNING (“ERP”) SYSTEM
Unfortunately, as is often the case when delivering a complicated integrated system, the ERP project has faced significant delays, which
have only come to light during the development of the system. Despite the delay in the finance and operations elements, the product
lifecycle management (“PLM”) went live in May 2022 and is proving to be a significant improvement over our legacy systems. When the full
system is complete both manufacturers and franchisees will be able to link to the PLM through bespoke portals to place, manage and
progress orders. The full ERP system is currently expected to go live around the end of this financial year and the provider is on a fixed
price contract, so this cost will not significantly increase due to the delay. We have also managed to realise some of the IT costs savings
early as highlighted above and there are further annual IT costs savings of approximately £1 million once the full ERP is live.
BALANCE SHEET
The balance sheet strengthened in the current year, closing the year at a net asset of £1.5 million compared with a net liability of £43.0
million for the prior year. The balance sheet benefited from a swing in the defined benefit pension scheme to an asset position of £12.4
million at year end (2021: £25.6 million liability). The move in the defined benefit scheme from a liability to an asset position was driven
mainly by an increase in the discount rate placing a lower value on the liabilities. The increase in the discount rate reflects the increase in
corporate bond yields during the period.
Net current assets
Current assets of £19.6 million (2021: £32.8 million) decreased by £13.2 million, principally due to lower inventory and trade receivable
balances which were partially offset by an increase in cash.
Current liabilities of £14.1 million (2021: £31.2 million) decreased by £17.1 million, principally as a result of decreases in trade and other payables
and provisions. In part due to those franchise partners now being invoiced directly by manufacturing partners so we do not record the
stock, payable and resultant receivable on these transactions.
Net current assets increased to £5.5 million in the current year, up from £1.6 million in the prior year, driven by the improvement in operating
performance year on year and lower payables year on year.
The Group’s working capital position is closely monitored and forecasts demonstrate the Group is able to meet its debts as they fall due.
Intangible fixed assets
Property, plant and equipment
Retirement benefit obligations asset/(liability)
Net borrowings (excluding IFRS 16 lease liabilities)
Derivative financial instruments
Other net liabilities
Net assets / (liabilities)
Share capital and premium
Reserves
Total equity
Pensions
26 March 2022
£ million
27 March 2021
£ million
3.6
1.2
12.4
(9.9)
0.2
(6.0)
1.5
198.1
(196.6)
1.5
1.1
1.7
(25.6)
(12.1)
0.8
(8.9)
(43.0)
198.1
(241.1)
(43.0)
The Mothercare defined benefit pension schemes were closed with effect from 30 March 2013.
The defined benefit scheme had a temporary surplus at the end of the year of £12.4 million (2021: £25.6 million deficit). The swing of
£38 million to a surplus position was mainly due to the assumptions used to place a value on the scheme liabilities. The liabilities are
valued using a discount rate that is based on corporate bond yields with an increase in yields placing a lower value on the liabilities.
Over the year, changes in the financial market conditions resulted in the discount rate increasing by 85 basis points and long-term inflation
expectations increasing by 35 basis points. The combination of these resulted in a reduction in the liabilities by £36 million with the increase
in inflation partially offsetting the increase in the discount rate. An allowance was also made for the potential impact of the COVID-19
pandemic on future improvements which resulted in a fall in life expectancies, reducing liabilities by £6 million. The returns on the scheme
assets were however lower than expected resulting in an asset experience loss of £7 million and the company contributions over the year
exceeded the income statement charge by £3 million.
The Group’s deficit payments are calculated using the full triennial actuarial valuation as the basis rather than the accounting deficit /
surplus. The value of the deficit under the full actuarial valuation at 31 March 2020 was £124.6 million.
Mothercare plc annual report and accounts 2022
29
Strategic Report
Financial review
continued
Details of the income statement net charge, total cash funding and net assets and liabilities in respect of the defined benefit pension
schemes are as follows:
£ million
Income statement
Running costs
Net (expense) / income for interest on liabilities / return on assets
Net charge
Cash funding
Regular contributions
Deficit contributions
Total cash funding
Balance sheet**
Fair value of schemes’ assets
Present value of defined benefit obligations
Net (liability)/surplus
* Forecast
52 weeks ending
26 March 2023*
52 weeks ended
26 March 2022
52 weeks ended
27 March 2021
(1.7)
0.4
(1.3)
(1.0)
–
(1.0)
n/a
n/a
n/a
(1.7)
(0.5)
(2.2)
(1.0)
(4.3)
(5.3)
395.8
(383.4)
12.4
(3.4)
0.2
(3.2)
(1.3)
(3.2)
(4.5)
403.4
(429.0)
(25.6)
** The forecast fair value of schemes’ assets and present value of defined benefit obligations is dependent upon the movement in external market factors, which have not been
forecast by the Group for 2023 and therefore have not been disclosed.
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:
Discount rate
Inflation – RPI
Inflation – CPI
2022
2.8%
3.5%
2.9%
2021
2.0%
3.1%
2.4%
2021
Sensitivity
+/– 0.1%
+/– 0.1%
+/– 0.1%
2021
Sensitivity
£ million
–6.3 /+6.4
+5.1 /–5.6
+1.9 /–1.9
The Group has a deferred tax liability of £0.4 million (2021: £nil). In 2021, no deferred tax asset was recognised as there was not considered
to be enough certainty over the recoverability. In the comparative period, the deferred tax liability arose as a temporary difference due to
the surplus on the pension scheme.
Net debt
The Group’s borrowings (including lease liabilities) of £20.2 million (2021: £20.4) has remained fairly consistent year on year. Net debt and
financial liabilities (Note 27) stood at £11.0 million at year end (2021: 14.7 million). The decrease resulting from warrant options of £1.2 million
which expired during the year.
The Group regularly reviews its financing arrangements and remains confident of its ability to access additional financing successfully
when needed. The Group’s amended and extended committed facility will mature in 2025, this together with its cash and cash equivalents
are considered adequate to meet its projected cash requirements.
Leases
Right-of-Use assets of £0.9 million (2021: £1.2 million) and lease liabilities of £1.1 million (2020: £1.4 million) represented the Group’s head office
leases.
Working capital
The Group only purchases stock directly needed to fulfil franchise partner orders and is gradually moving all franchise partners to direct
shipments thereby reducing our stock holdings at year end. Stock held in our UK distribution centres also reduced significantly prior to the
closure of the facility in early FY23. The year end stock decreased by £3.8m from £5.9 million in 2021 to £2.1 million at the year end. £1.7 million
of the decrease relates to stock in transit with £2.1 million being a reduction in the stocks held at our distribution centres.
Trade receivables fell by £8.2 million to £3.4million (2021: £11.6 million) driven by strong credit control measures and the direct invoicing
referred to above. Trade creditors decreased to £4.7 million (2021: £11.8 million) due to similar reasons.
30
Mothercare plc annual report and accounts 2022
INCOME STATEMENT
Revenue
Adjusted EBITDA (EBITDA before exceptionals)
Depreciation and amortisation (note 7)
Adjusted result before interest and taxation
Adjusted net finance costs
Adjusted result before taxation
Adjusted costs
Loss before taxation
Taxation
Total profit/(loss)
EPS – basic
Adjusted EPS – basic
Foreign exchange
The main exchange rates used to translate International retail sales are set out below:
Average:
Euro
Russian rouble
Chinese renminbi
Kuwaiti dinar
Saudi riyal
Emirati dirham
Indonesian rupiah
Indian rupee
Closing:
Euro
Russian rouble
Chinese renminbi
Kuwaiti dinar
Saudi riyal
Emirati dirham
Indonesian rupiah
Indian rupee
52 weeks to
26 March 2022
£million
52 weeks to
27 March 2021
£million
82.5
12.0
(0.9)
11.1
(3.1)
8.0
3.1
11.1
1.0
12.1
1.6p
2.1p
85.8
2.2
(2.0)
0.2
(8.7)
(8.5)
(12.9)
(21.4)
(0.1)
(21.5)
(5.7) p
(2.3) p
52 weeks ended
26 March 2022
52 weeks ended
27 March 2021
1.2
106.1
8.8
0.4
5.1
5.0
19,644
101.8
1.2
144.6
8.4
0.4
4.9
4.8
18,924
100.1
1.1
96.9
8.8
0.4
4.9
4.8
18,954
96.9
1.1
102.9
9.0
0.4
5.2
5.1
19,965
100.5
Mothercare plc annual report and accounts 2022
31
Strategic Report
Financial review
continued
The principal currencies that impact the translation of International sales are shown below. The net effect of currency translation caused
worldwide sales and adjusted loss to decrease by £16.4 million (2021: £26.1 million) and £0.9 million (2021: £1.4 million) respectively as shown
below:
Euro
Russian rouble
Chinese Renminbi
Kuwaiti dinar
Saudi riyal
Emirati dirham
Indonesian rupiah
Indian rupee
Other currencies
Net finance costs
Worldwide sales
£ million
Adjusted
Profit/(loss)
£ million
–
(4.5)
–
(0.8)
(2.4)
(1.3)
(0.5)
(0.5)
(6.4)
(16.4)
–
(0.3)
–
(0.1)
(0.2)
(0.1)
–
–
(0.2)
(0.9)
Financing costs include interest receivable on bank deposits, less interest payable on borrowing facilities, the amortisation of costs relating
to bank facility fees and the net interest charge on the liabilities/assets of the pension scheme.
Finance costs decreased by £17.1 million year on year explained by the conversion of shareholder loans to equity in the prior year. Interest
on borrowings was £2.5 million in the current year (2021: £6.2 million) The prior year cost included convertible shareholders loans which were
converted into equity in March 2021. Fair value movements on shareholder loan embedded derivatives of £9.1million in prior year was
nil in the current year due to the loan being converted into equity in March 2021. Fair value costs on warrants issued to shareholders of
£1.2 million in prior year was a gain of £1.2million in the current year as the options expired unexercised in March 2022.
The net interest income/costs on the defined benefit asset and liability was a cost of £0.5 million in the current year, a swing from the
income of £0.2 million in 2021.
Discontinued operations
There were no discontinued operations presented for the current financial 52 week period ended 26 March 2022.
The total statutory profit after tax for the Group is £12.1 million (2021: £21.5 million loss).
Taxation
The tax credit comprises corporation taxes incurred and a deferred tax credit. The total tax credit from operations was £1.0 million
(2021: £0.1 million charge) – (see note 9).
Earnings per share
Basic adjusted earnings per share were 2.1 pence (2021: 2.3 pence losses). Statutory earnings per share were 1.6 pence (2021: 5.7 pence
losses).
CASHFLOW
Statutory net cash flow from operating activities was an inflow of £8.1 million compared with an outflow of £2.6 million in the prior year;
this was driven by the increase in operating profit and prudent management of working capital. Working capital benefited from a large
decrease in receivables relative to 2021 partially offset by the decrease in payables.
Cash outflow from investing activities of £2.9 million (2021: £0.4 million), was mainly driven by our investment in our new Enterprise Resource
Plan system which is planned to be put into operation in FY24.
Cash outflow from financing activities was £3.0 million (2021: £3.8 million net inflow). The inflow in the prior year was driven by the cash
receipt of £7.3 million on the Group’s new four-year term loan.
Going concern
As stated in the strategic report, the Group’s business activities and the factors likely to affect its future development are set out in the
principal risks and uncertainties section of the Group financial statements. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are set out in the financial review.
32
Mothercare plc annual report and accounts 2022
The consolidated financial information has been prepared on a going concern basis. When considering the going concern assumption,
the Directors of the Group have reviewed a number of factors, including the Group’s trading results and its continued access to sufficient
borrowing facilities against the Group’s latest forecasts and projections, comprising:
• A Base Case forecast which excludes any income from Russia; and
• A Sensitised forecast, which applies sensitivities against the Base Case for reasonably possible adverse variations in performance,
reflecting the ongoing volatility in our key markets.
In making the assessment on going concern the Directors have assumed that it is able to mitigate the material uncertainty in relation to
levels of recovery in retail sales post COVID-19 coupled with the heightened global economic uncertainty. The impact of these issues on
the future prospects of the Group is not fully quantifiable at the reporting date, as the complexity and scale of these issues at a global
level is outside of what any business could accurately reflect in a financial forecast. However, we have attempted to capture the impact
on both our supply chain and key franchise partners based on what is currently known. We have modelled a substantial reduction in
global retail sales as a result of subdued, consumer confidence or disposable income, throughout the remainder of FY23 with recovery in
FY24.
The Sensitised scenario assumes the following additional key assumption:
• A delayed recovery that assumes that retail sales remain subdued throughout the majority of the forecast period as a result of
consumer confidence returning more slowly post COVID-19, coupled with the potential impact on customers’ disposable income due to
the current heightened global economic uncertainty.
The Board’s confidence in the Group’s Base Case forecast, which indicates the Group will operate within the terms of its revised borrowing
facilities which now includes more appropriate covenants following the cessation of the Russian operation and the Group’s proven cash
management capability, supports our preparation of the financial statements on a going concern basis.
However, if trading conditions were to deteriorate beyond the level of risks applied in the Sensitised forecast, or the Group was unable
to mitigate the material uncertainties assumed in the Base Case Forecast and the Group were not able to execute further cost or
cash management programmes, the Group would at certain points of the working capital cycle have insufficient cash. If this scenario
were to crystallise the Group would need to renegotiate with its lender in order to secure waivers to potential covenant breaches and
consequential cash remedies or secure additional funding. Therefore, we have concluded that, in this situation, there is a material
uncertainty that casts significant doubt that the Group will be able to operate as a going concern without such waivers or new financing
facilities.
Treasury policy and financial risk management
The Board approves treasury policies, and senior management directly control 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, however the main strategy is to effect
natural hedges wherever possible.
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. 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. Under the tripartite
agreements, there has been an increased level of currency matching between purchases and sales, improving the Group’s ability to
hedge naturally.
Interest rate risk
The principal interest rate risk of the Group arises in respect of the drawdown of the £19.5 million term loan. These borrowings were at a
fixed rate of 12% plus SONIA in the current year, from FY23 to FY25 interest would be charged at 13% per annum plus SONIA, with SONIA
not less than 1%, plus a 1% per annum compounded payment to be made when the loan is repaid, these expose the Group to future
cash flow risk. The interest exposure is monitored by management but due to low interest rate levels during the period the risk is believed
to be minimal and no interest rate hedging has been undertaken.
In the comparative period, the Group was exposed to interest rate risk from the Revolving Credit Facility (‘RCF’) and shareholder loans.
Credit risk
The Group has exposure to credit risk inherent in its trade receivables.
Mothercare plc annual report and accounts 2022
33
Strategic Report
Financial review
continued
The Group has no significant concentrations of credit risk.
The Group operates effective credit control procedures in order to minimise exposure to overdue debts. Before accepting any new trade
customer, the Group obtains a credit check from an external agency to assess the credit quality of the potential customer and then sets
credit limits on a customer by customer basis. IFRS 9 ‘Financial Instruments’ has been applied such that receivables balances are held net
of a provision calculated using a risk matrix, taking micro and macro-economic factors into consideration as detailed in note 3.
Shareholders’ funds
Shareholders’ funds amount to a surplus of £1.5 million, an improvement from the deficit of £43.0 million achieved in the comparative
period. This was principally driven by temporary net actuarial gains of £31.9 million on the Group’s defined benefit pension scheme and
profits for the year of £12.1 million.
The directors’ statement in respect of section 172 of the Companies Act 2006 can be found within the Governance section on page 26.
This strategic report was approved by the Board on 13 September 2022 and signed on its behalf by:
Andrew Cook
Chief Financial Officer
34
Mothercare plc annual report and accounts 2022
Non-financial information
Sections 414CA of the Companies Act 2006 requires a non-financial information statement to be included in the strategic report. The
following table summarises the non-financial information provided in this annual report and cross refers to where it can be found if not
included in full in the table.
Section 414CB non-financial matters
Impacts
Further details
Environmental matters
Social matters
Employees
Respect for human rights
Anti-corruption and anti-bribery
Responsible sourcing and climate change
(see ESG section)
Weekly ‘all hands’ coffee mornings have
continued to be held throughout the pandemic
albeit virtually. Well-being and mental health
have been a particular focus with access to
confidential professional support provided.
Modern Slavery encompasses the offences of
slavery, servitude, forced or compulsory labour
and human trafficking and is a grave violation
of human rights. As employers and providers
of goods and services, Mothercare seeks to
ensure that such offences do not take place in
our operations or our supply chain. We respect
internationally recognised human rights, as
outlined in the United Nations Guiding Principles
on Business and Human Rights (UNGPs) and work
with partners to understand and enhance the role
we can play in this.
The Bribery Act 2010, which came into force on 1
July 2011, consolidated previous legislation and
introduced, amongst other things, a corporate
offence of “failure to prevent bribery”. This is an
offence in the UK wherever the offence takes
place. Failure to comply with the act could
expose the group to unlimited fines and other
consequences.
The group’s Modern Slavery Statement
is set out in full on the Company’s
website at www.mothercareplc.com/
corporate-citizenship
The group has a zero-tolerance
approach to bribery and corruption
and its position has been explained
to its franchise and manufacturing
partners. Employees undertake annual
anti-bribery and corruption training.
Mothercare plc annual report and accounts 2022
35
Strategic Report
Environmental, Social and
Governance (ESG)
The ‘E’ in ESG
Responsible sourcing is a key element of MGB’s responsible
business programme. MGB is committed to respecting
internationally recognised human rights and partnering with
suppliers that:
• Provide decent, safe and fair working conditions for their
employees;
• Treat employees with dignity and respect;
MGB’s Responsible Sourcing Handbook provides detail for
manufacturing partners in the following areas:
• Child Labour policy
• Sub-contracting and sub-supplier policy
• Home worker policy
• Migrant worker policy
• Reduce the environmental impact of their operations; and
• Freedom of movement policy for workers living in hostels
• Demonstrate a strong commitment to business ethics.
MGB’s Responsible Sourcing Code of Practice sets out
the standards we require at the factories operated by our
manufacturing partners who we have a direct agreement with to
produce Mothercare products. MGB’s Code of Practice is based
on:
• Packaging policy
• Timber sourcing policy
• Animal welfare policy
• Cotton sourcing policy
• The UN Guiding Principles on Business and Human Rights which
outline the corporate responsibility to respect human rights,
avoid infringing on the human rights of others and address
relevant adverse human rights impacts;
• The Ethical Trading Initiative (ETI) Base Code which is founded
on the conventions of the International Labour Organisation
(ILO) and is an internationally recognised code of labour
practice;
• The UK Bribery Act 2010 which states that bribery and corruption
on an individual and company basis is a criminal offence; and
• The UK Modern Slavery Act 2015 which requires eligible
businesses (including Mothercare) to report against the
measures taken to eradicate slavery and human trafficking in
their operations and supply chains.
It is our manufacturing partners’ responsibility to ensure these
standards at their factories and within their own supply chains.
Implementation of this Code must be sensitive to the rights and
livelihoods of the workers it is aiming to protect.
In addition to the standards noted above, manufacturing partners
must comply with all relevant local and national laws. Where
any conflict between those laws and MGB’s standards exist,
the manufacturing partner must adhere to the standard which
provides the worker with the greatest protection. There may also
be country-specific requirements which MGB will discuss directly
with the local manufacturing partner.
MGB requires that manufacturing partners must implement
management systems and training for all employees (staff, workers
and supervisors) to ensure compliance with this Code and all
relevant national laws.
MGB monitors compliance with this Code via third party factory
audits. It also carries out training with manufacturing partners and
works with other organisations such as the Ethical Trading Initiative,
other retailers, consultants and non-governmental organisations.
MGB is building on sourcing sustainable materials for its products.
We currently offer organic cotton within our clothing ranges and
will be widening the number of products made from responsibly
sourced yarns and components.
Mothercare is committed to reducing the environmental impact
of its products in production, transportation, use and end of life .
Our aim is to develop packaging which fulfils its essential function
of preserving the product during transportation, distribution,
storage sale, providing information and in use while minimising the
environmental impact.
Climate change
Mothercare Greenhouse Gas Emissions 2021/22
2021
Performance
2022
Performance
Total CO2e emissions (tonnes)
CO2e emissions
(per £m Group revenue)
Total Energy Consumption (m kWh)
393
4.7
1.85
28
0.3
0.12
Methodology: Emissions fall within the activities for which we have
operational control. There are no material exclusions from this
data. We have used the GHG Protocol Corporate Accounting
and Reporting Standard as the method to quantify and report
greenhouse gas emissions. They have been reported in line
with the UK Government’s ‘Environmental Reporting Guidelines:
including streamlined energy and carbon reporting guidance’
(dated March 2019). We have applied emission factors from the UK
Government’s annually updated Conversion Factors tables and
overseas factors from the International Energy Agency’s annually
updated factors for China and India.
In 2022 our overall CO2e emissions reduced, in absolute terms, by
93% versus 2021, as a direct consequence of completing our move
to a smaller head office in FY21, and fully relinquishing control of
operations at distribution centres. No energy efficiency actions
were implemented in the year reported, however, now we have
completed our office relocations, FY22 emissions represents our
new baseline from which to track future emissions reduction activity.
36
Mothercare plc annual report and accounts 2022
The ‘S’ in Social
Building a culture of wellbeing at work.
The business supports an holistic approach to wellbeing including
physical, mental, financial and social and recognises that it can
often be challenging to balance work and home commitments. To
that end, we provide educational resources for our people on how
they can support themselves and others using both internal and
external resources to help foster mental wellbeing in the workplace
and ensuring parity between physical and mental health.
Being cognisant that many of MGB’s colleagues work on a hybrid
basis, a number of resources have been made available utilising
online platforms. Informative lunch and learn sessions hosted by
third parties including Retail Trust and the defined contribution
pension provider, were undertaken during the year and are
planned on an ongoing basis. We continue to host weekly coffee
mornings via an online portal so that all colleagues can join no
matter where they are located.
As well as hybrid working arrangements, MGB offers a number of
policies including flexible working, career breaks, paid time off for
volunteering.
MGB participates in the Cycle to Work scheme
The ‘G’ in Governance
Mothercare adopted the QCA Code on its move to AIM and more
information can be found in the Corporate Governance report at
page 40.
Mothercare plc annual report and accounts 2022
37
Strategic Report
Directors’
biographies
Board of directors
Directors’ biographies
Board of directors
Committee Memberships key:
A — Audit and Risk Committee
R — Remuneration Committee
N — Nomination Committee
F — Full board member
1. Clive Whiley N F
—
Position: Chairman
Appointment: April 2018.
Skills, competencies, experience: Clive Whiley has
thirty-five years’ experience in regulated strategic
management positions since becoming a Member of
the London Stock Exchange. He has extensive main
board executive director experience across a broad
range of financial services, engineering, manufacturing,
distribution, leisure, retail and mining businesses:
encompassing the UK, Europe, North America,
Australasia, the Middle East and the People’s Republic
of China.
2. Andrew Cook F
—
Position: Chief Financial Officer
Appointment: January 2020
Skills, competencies, experience: Andrew served as
Corporate Development Director of Mothercare from
April 2019 until his appointment as CFO in 2020. Andrew
is a highly-experienced, results-oriented finance
executive having successfully transformed business
profitability across a number of sectors, including retail.
He was most recently Chief Financial Officer for Stanley
Gibbons Group plc. Prior to that role, he held senior
director roles within Medina Dairy Group, Kelly Services,
The Body Shop and Virgin Group.
Other Directorships: Mr Whiley is Chairman of
China Venture Capital Management Limited, First
China Venture Capital Limited, Y-LEE Limited, Senior
Independent Director of Griffin Mining Limited and
Sportech PLC. Formerly Chairman of Dignity plc and a
Non-Executive Director of Grand Harbour Marina plc.
Other Directorships: None
3. Gillian Kent R A N F
—
Position: Non-executive director and
Remuneration Committee Chair
Appointment: March 2017
Skills, competencies, experience: Gillian
has had a broad executive career including
being Chief Executive of real estate portal
Propertyfinder until its acquisition by Zoopla,
and 15 years with Microsoft including three
years as Managing Director of MSN UK.
Gillian also held positions of Director of
Strategy and Business Development and
Director of Marketing MSN UK. Formerly a
non-executive director at Pendragon Plc,
Dignity plc, Coull Limited, Skadoosh Limited
and Portswigger Limited.
Other Directorships: Gillian holds non-
executive director roles at National Accident
Helpline Group Plc, Ascential Plc, SIG plc
and at two private companies, No Agent
Technologies Limited and Theo Topco
Limited.
4. Mark Newton-Jones F
—
Position: Non-Executive Director
Appointment: July 2014
Skills, competencies, experience: Mark was re-
appointed as Chief Executive Officer of the Company
in May 2018. Mark initially joined the Company in July
2014 acting as Chief Executive Officer of the Company
until April 2018. Mark has 30 years’ experience with and
developing some of the industry’s leading retail brands
in both stores and online. Formerly, Mark has held
directorships with companies within the Shop Direct
Group where he was Chief Executive Officer. Mark was
also a non-executive director of Boohoo plc from 2013
to 2016.
Other Directorships: Mark is Chairman of Graduate
Fashion Week and a board member of the INGKA
Holding B.V. (Supervisory Board of the IKEA Group).
Mark is also currently a director of Pockit Limited and
a member of Concentric Team Technology I Founder
Partner LLP.
5. Brian Small A R N F
—
Position: Non-executive director and Audit and Risk
Committee Chair
Appointment: December 2019
Skills, competencies, experience: Brian is an
experienced FTSE 250 CFO with broad general
management experience in retail, wholesale and
consumer-branded manufacturing. Most recently,
Brian was the CFO for JD Sports before retiring from
corporate life to focus on non-executive roles.
Other Directorships: Non-executive director of
Boohoo.com, Pendragon Plc and a Trustee Director for
the Retail Trust Charity.
6. Lynne Medini
—
Position: Group Company Secretary
Appointment: May 2018
Skills, competencies, experience: Lynne is
an experienced Chartered Governance
Professional with a career spanning 30
years at Mothercare. Fellow, The Chartered
Governance Institute.
38
Mothercare plc annual report and accounts 2022
HEAD_0 1st line continued2nd line continued Operating Board
Operating Board
Andrew Cook — Chief Financial Officer. See opposite page for biography.
7. Kevin Rusling
—
Position: Chief Operating Officer
Appointment: April 2017
Skills, competencies, experience: Formerly international
director of Monsoon Accessorize; prior to that Kevin ran
the international division of Walmart’s George at Asda
business for five years and was previously international
manager at Marks and Spencer for 12 years.
Other Directorships: Trustee of Sue Ryder, the palliative,
neurological and bereavement support charity.
8. Karen Tyler
—
Position: Chief Product Officer
Appointment: September 2020
Skills, competencies, experience: Karen Tyler has over
35 years’ retail and online experience sourcing and
developing product. She has extensive knowledge of
the children’s and nursery sector across many global
markets. She has previously led teams for Next, Boots,
Matalan as well as holding directorships at Boden and
Mamas and Papas.
9. Harriet Poppleton
—
Position: Commercial Director
Appointment: January 2021
Skills, competencies, experience: Formerly International
and Business Development director of Monsoon
Accessorize. Harriet has over 15 years of extensive
International retailing experience in various leadership
roles in USA, Middle East and the UK. Having
spearheaded a global change programme Harriet
is used to managing the complexities of multi-channel
global partnerships and business models whilst
delivering a global brand with consistency..
10. Jo Nicholls
—
Position: Director of Merchandising
Appointment: November 2021
Skills, competencies, experience: Formerly Senior
Director of Merchandising of George Clothing. Jo
has over 30 years of merchandising with both retail
and online experience and has extensive knowledge
of the clothing sector. She has implemented large
scale change programmes in planning, merchandise
processes and the introduction of new systems.
Mothercare plc annual report and accounts 2022
39
HEAD_0 1st line continued2nd line continuedGovernance
Corporate
governance report
Corporate governance report
The Board believes that establishing and maintaining high
standards of corporate governance are critical to the successful
delivery of the Group’s strategy and to safeguard the interests of
its shareholders, franchise partners, manufacturing partners, staff
and other stakeholders. It considers that The Quoted Companies
Alliance Corporate Governance Code (the QCA Code) is
appropriate for its size and complexity. We set out how we have
complied with the QCA Code at page 41.
The directors as at the date of this report and as at the year end
along with their biographical details and committee memberships
are shown on the preceding pages. Their attendance at meetings
for the year ended 26 March 2022 is set out in the table below.
The table sets out for each director both the number of meetings
attended and the maximum number of meetings that could
have been attended. Only the attendance of members of the
committees is shown in the table although other directors have
also attended at the invitation of the respective committee chair.
The ad hoc board meetings which approved the interim results
and full year report and accounts were constituted by the Board
from those members available at that time, having considered the
views of the whole Board beforehand.
Maximum no of meetings
Director
Clive Whiley
Andrew Cook
Gillian Kent
Mark Newton-Jones
Brian Small
Board
Audit and Risk
Nomination
Remuneration
Committee
5 additional
including
sub‑committee
10 formal
10/10
10/10
10/10
10/10
10/10
5/5
5/5
1/1
0/1
1/1
4 formal
1 formal
4 formal
1/1
1/1
1/1
4/4
4/4
4/4
4/4
Directors’ conflict of interest
The Board has maintained procedures whereby potential conflicts
of interest are reviewed regularly. These procedures have been
designed so that the Board may be reasonably assured that any
potential situation where a director may have a direct or indirect
interest which may conflict or may possibly conflict with the interests
of the Company are identified and, where appropriate, dealt with
in accordance with the Companies Act 2006 and the Company’s
Articles of Association. The Board has not had to deal with any
conflict during the period.
Board evaluation
An internal board evaluation was undertaken during FY21. This
involved each director completing a questionnaire. The outcome of
each was then collated into an anonymised summary followed by
open discussion on the results led by the Chairman. Unsurprisingly,
given the continued focus on survival throughout the pandemic,
a requirement was noted for an improvement in the timeliness
and content of routine board papers alongside a need for
future strategic direction in order to continue to grow the brand
worldwide.
During the year under review improvements were made to
both the content and timeliness of routine board papers. A
further evaluation will be undertaken once the in-coming CEO is
onboarded.
The search for a CEO was reignited during the year. An
announcement will be made when the recruitment process is
concluded.
In the interim, the day-to-day management of the Group continues
to be run by the Chief Operating Officer and Chief Financial Officer
with oversight from the non-executive Chairman. Furthermore,
the group has reinforced the executive team with the addition of
relevant skills and expertise, including the promotion of Harriet
Poppleton to Commercial Director and the appointment of a
Merchandise Director to the Operating Board.
The Chairman meets with the non-executive directors without
management present at least annually.
40
Mothercare plc annual report and accounts 2022
HEAD_0 1st line continuedHEAD_0 2nd line2nd line continued
Principle
1
QCA Corporate Governance Code:
10 principles and related disclosures
DELIVER GROWTH
Establish a strategy and business model which promote
long-term value for shareholders
2
3
4
5
6
7
8
9
Seek to understand and meet shareholder needs and
expectations
Take into account wider stakeholder and social
responsibilities and their implications for long-term success
Embed effective risk management, considering both
opportunities and threats, throughout the organisation
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
Maintain the board as a well-functioning, balanced team
led by the chair
Ensure that between them the directors have the
necessary up-to-date experience, skills and capabilities
Evaluate board performance based on clear and
relevant objectives, seeking continuous improvement
Promote a corporate culture that is based on ethical
values and behaviours
Maintain governance structures and processes that are
fit for purpose and support good decision-making by the
board
Mothercare plc application
The group’s business model is set out on page 12. The
group’s revenue principally derives from royalties payable
on global franchise partners’ retail sales, operating
through approximately 700 dedicated Mothercare stores
in some 36 countries around the world. In addition there
are over 400 stores in which the Mothercare brand is sold.
Since 2020 we have been working with MGB’s franchise
partners on an asset-light model in which manufacturing
partners invoice and are paid directly by franchise
partners for products. Moving forward this new operating
model, together with changes in associated cost structures,
would result in a reduction in future overheads and
supports improving cash generation for the business.
The Company maintains a very close dialogue with its
major investors, communicating directly with them several
times a year.
The Company maintains an investor relations inbox that
all shareholders are invited to use and, specifically to
ask questions that they might ordinarily ask at general
meetings of the company.
See section 172 statement on page 26
The main stakeholders in the business include its people,
franchise partners, manufacturing partners, lenders and
pension trustees. Regular dialogue is maintained with them
all.
See our Principal risks and uncertainties on pages 24 to 25
See our governance statement on pages 40 to 43
See our governance statement on pages 40to 43
See our governance statement on pages 40 to 43
The Company believes that establishing and maintaining
high standards of corporate governance are critical to
the successful delivery of the Group’s strategy and to
safeguard the interests of its stakeholders. The Group is
committed to respecting internationally recognised human
rights and partnering with suppliers that: provide decent,
safe and fair working conditions for their employees
with dignity and respect; reduce the environmental
impact of their operations; and demonstrate a strong
commitment to business ethics. MGB will continue to
evolve and strengthen the Group as it develops its global
relationships.
A key element of the Board’s responsibility is monitoring
and reviewing the effectiveness of the Company’s system
of internal control, and the non-executive directors
challenge and scrutinise its effectiveness and integrity.
The roles and responsibilities of the Directors, eg where
they sit on and / or chair a specific committee are set out
at page 42. The terms of reference and matters reserved
for the board are available on the Company’s website,
www.mothercareplc.com
Mothercare plc annual report and accounts 2022
41
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineGovernance
10
BUILD TRUST
Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders
and other relevant stakeholders
Reports of the work of the Board and its committees are
set out in the Annual Report 2022:
Board: corporate governance page 40 and Directors’
report page 56
Audit and Risk Committee: page 43
Nomination Committee – page 43
Remuneration Committee – page 44
Shareholder notices of meetings and voting at general
meetings is available on the regulatory information
service at www.mothercareplc.com. There have been no
significant votes cast against since 2018
Copies of previous annual reports are available on the
same URL
Governance and Committees
The Board is assisted by three main committees that meet and report on a regular basis. At the year end the members of the committees
were as set out below. A record of the meetings held during the year of the Board and its principal committees and the attendance by
each director is set out on page 40.
Committee members
A
Audit and Risk Committee
Brian Small (Chair)
Gillian Kent
R
Remuneration Committee
Gillian Kent (Chair)
Brian Small
N
Nomination Committee
Clive Whiley (Chair)
Gillian Kent
Brian Small
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Mothercare plc annual report and accounts 2022
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Audit and Risk Committee
Non audit services
The Committee comprises Brian Small as Chair and Gillian Kent.
Brian is a chartered accountant with recent and relevant financial
experience.
The Committee meets regularly during the year with attendance
noted at page 40 of the Governance report.
The Company’s chairman, CFO and external audit partner are
invited to attend along with other board directors and executives
from time to time.
A policy in respect of non-audit work by the audit firm is in effect.
The general principle is that the audit firm should not be requested
to carry out non-audit services on any activity of the Company
where they may in the future be required to give an audit opinion.
Furthermore the appointment of the audit firm for any non-audit
work must be approved by the Committee (or by the Chair of the
Committee in the case of minor matters), and will be approved
only if it is regarded as being in the best interests of the Company
and the Committee will not approve (and the Company will not
pay) any non-audit fees to the auditors on a contingent basis.
The Committee’s remit is to review the scope and issues arising
from the audit and matters relating to financial control and risk. It
assists the Board in its review of corporate governance and in the
presentation of the Company’s financial results through its review
of the interim and full year accounts before approval by the Board,
focusing in particular on compliance with accounting principles,
changes in accounting practice and major areas of judgment.
During its scheduled meetings the Committee considered the
unaudited interim statement, a review of the risk management
policy, risk register and risk committee terms of reference.
In addition to the scheduled meetings, the Committee met to
consider the tender of the external audit services culminating in
the appointment of Jeffreys Henry Audit Ltd who filled a casual
vacancy and whose appointment the Board is recommending an
‘in favour’ vote at the forthcoming AGM.
Nomination Committee
The Committee comprises Clive Whiley as Chair and Brian Small
and Gillian Kent. The terms of reference are available on the
Company’s website, mothercareplc.com.
As a matter of process, the Committee makes recommendations
to the Board on candidates to fill board vacancies which are
then considered by the Board in conjunction with any advice or
recommendation from the Remuneration Committee.
During the year, the search for a CEO was reignited and the
business continued to be run by the CFO and COO.
Remuneration Committee – see page 44
Mothercare plc annual report and accounts 2022
43
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineGovernance
Directors’
remuneration
report
Statement from the Chair
Directors’ remuneration report
STATEMENT FROM THE REMUNERATION COMMITTEE CHAIR
Dear Shareholder,
On behalf of my colleagues on the Remuneration Committee and the Board, I am pleased to present the Directors’ Remuneration Report
for FY2022.
The report contains the following parts:
• This annual statement.
• The Annual Report on Remuneration, which provides details of the amounts earned in respect of FY2022.
• The future Directors’ Remuneration Policy, intended to take effect from the close of the 2022 AGM.
As an AIM company, Mothercare is no longer subject to the remuneration reporting regulations of UK Main Market companies, and
therefore provides these remuneration disclosures on a voluntary basis. The Directors’ Remuneration Report is subject to an advisory vote
at the 2022 AGM. The Committee believes the advisory vote provides a greater degree of accountability and provides our shareholders
with a ‘say on executive pay’.
New 2023 Remuneration Policy
Our current Directors’ Remuneration Policy was approved by shareholders at a general meeting held on Friday 29 March 2019 and is now
more than three years old. The Committee has taken the opportunity to review the executive remuneration framework to ensure that it is
supportive of the Company’s long-term growth ambitions and is competitively positioned to attract, retain and incentivise the talent and
experience we require. In undertaking the review, the Committee kept in mind the following reward principles:
• Remuneration arrangements should be simple and transparent to executives and shareholders.
• The incentive framework should provide opportunity for executives to be well rewarded for exceptional performance, whilst ensuring
that the incentive framework does not encourage executives and senior management to operate outside of the Company’s risk
appetite.
• A significant element of the total remuneration package should be delivered through the long-term incentive plan, to support long-term
stewardship and encourage long-term share ownership amongst the executives and senior management.
The Committee also considered shareholder expectations and market practice for AIM companies.
Following consultation with major shareholders, the following key changes have been agreed by the Committee.
Incentive framework
Mothercare currently operates an annual bonus and performance-based LTIP as its incentive model for executives; the Committee
considers that this approach supports the delivery of the Company’s growth strategy and the creation of shareholder value. The
Committee therefore considers it appropriate to continue with a broadly similar approach.
Mothercare has transformed its business over the last couple of years and has remained resilient, despite the impact of Covid-19 and
the war in Ukraine. This is testament to the leadership and commitment of the executive and senior management team, as well as the
contribution from the wider workforce. The growth potential of the Company remains strong, reflecting the robust foundations created for
the business over recent years. We remain focused on accelerating growth in both existing and new markets. To achieve these growth
ambitions, and deliver the operational performance that creates the desired returns, the business will need to continue to retain and
incentivise the existing leadership team and attract new talent. We are currently actively searching for a CEO candidate.
In this context, and taking into account the reward principles set out above, the following changes are proposed to the performance-
based LTIP:
• Increase the normal maximum opportunity from 100% of salary to up to 150% of salary with effect from FY2023. This increases the
weighting of the overall incentive opportunity towards long-term value creation. It also ensures that the Committee has sufficient
flexibility to provide a market competitive remuneration package required to recruit a CEO of the required calibre.
• The maximum number of shares that may be granted in respect of FY2023, FY2024 and FY2025 will be calculated based on the share
price at the time of grant of the FY2023 awards. Granting awards based on a fixed number of shares further aligns executive and
senior management participants with shareholders and the Company’s growth ambitions, rewarding share price appreciation whilst
depreciation is penalised.
• A cap of 200% of the FY2023 award face value at grant and a collar of 50% of the FY2023 award face value at grant will be introduced
to mitigate against exceptional movements in the share price having a disproportionate impact on the overall incentive opportunity.
No further changes are proposed to the incentive framework.
44
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Post-employment shareholding guidelines
Mothercare operates within-employment and post-employment shareholding guidelines for the Executive Directors; post-employment
shareholding guidelines were adopted in 2019 as a result of changes to the UK Corporate Governance Code.
The Committee strongly believes that within-employment shareholding guidelines align Executive Directors with shareholders and the
guidelines will therefore continue to apply. Executive Directors are expected to build up and maintain a shareholding equal to 200% of
salary.
However, noting that the Company has now adopted the QCA Code, formal post-employment shareholding guidelines for the Executive
Directors will not apply under the new Policy, which is much more reflective of AIM market practice. Executive Directors will however be
expected to sell shares in an orderly manner post-employment.
The full 2023 Remuneration Policy is found on page 50.
Review of the 2022 financial year
FY2022 proved to be another challenging year for Mothercare with our markets still being significantly impacted by Covid-19 and the war
in Ukraine leading to the suspension and subsequent closure of our franchise partner’s retail business in Russia.
While our markets are still not yet back to a steady state, the team at Mothercare navigated through these challenges and franchisee
retail sales in FY2022 increased by 7% over FY2021 and EBITDA before adjusting items was ahead of market expectations at £12m.
Remuneration decisions in respect to FY2022
Salary/fees
No salary increase was awarded to the CFO in line with the wider workforce. The Chairman’s fee remained unchanged while the NED
fees were re-instated to their prior 2018 levels of £50,000 p.a. on 1 July 2021.
Annual bonus outcomes
The Committee approved a bonus payable at 100% of maximum to the CFO, as a result of the Group exceeding the maximum adjusted
EBITDA target of £11m (50% of bonus) and the CFO delivering exceptional performance in achieving his strategic financial (20% of bonus)
and non-financial targets (30% of bonus) set at the beginning of the year. See page 47 for further details.
Long term incentives
On 29 March 2019 Andrew Cook, the CFO, was granted a performance-based LTIP over 709,601 shares which was subject to three year
relative TSR performance targets and 30 pence absolute TSR underpin. The award was granted in respect of his previous role of Business
Development Director. The award lapsed in full as the TSR performance targets and underpin were not achieved.
On 29 March 2019 Clive Whiley was granted a restricted share award over 774,110 shares in respect of his previous role of Executive
Chairman. The award vested on 29 March 2022 and the underlying shares are subject to a two-year holding period.
Implementation of remuneration policy for FY2023
Salary/Fees
The CFO waived an inflationary salary increase and therefore there has been no change in his salary for FY23.
There was no change in NED fees and the Chairman’s fee was reduced from £130,000 p.a. to £120,000 on 1 April 2022 in line with planned
changes to manage board costs.
Annual bonus plan
The CFO will be granted a maximum bonus opportunity equal to 100% of salary in line with the Remuneration Policy. The bonus will be
subject to profit performance and financial and non-financial strategic objectives. Details of the performance metrics and targets and
performance against such targets will be disclosed in next year’s Directors’ Remuneration Report.
Long term incentives
It is proposed that the CFO will be granted a performance-based LTIP with a maximum opportunity equal to 125% of salary. The award
will be subject to absolute TSR performance (50% of award) and EBITDA performance (50% of award) measured over a three-year period.
Any shares that vest will be subject to a two-year post-vesting holding period. Details of the performance targets will be disclosed in next
year’s Directors’ Remuneration Report.
Mothercare plc annual report and accounts 2022
45
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Directors’ remuneration report
continued
Conclusion
We are committed to a responsible and transparent approach in respect of executive pay. We continue to welcome any feedback from
shareholders and hope to receive your support at the 2022 AGM.
Gillian Kent
Chair of the Remuneration Committee
13 September 2022
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HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continued Annual report on
Remuneration
Annual report on Remuneration
Single total figure of remuneration (audited)
The table below shows the single total figure remuneration for Directors in FY2022 with comparative figures for FY2021.
Director
Executive
Andrew Cook
Mark Newton-Jones2
Non Executive
Clive Whiley
Gillian Kent1
Mark Newton-Jones2
Brian Small1
Salary and fees
2021
2022
£000
£000
259
0
130
55.5
48
55.5
259
155
130
47.5
27
47.5
2022
£000
10.5
—
—
—
—
Benefits
2021
£000
Pension
2021
£000
2022
£000
Annual bonus
2021
£000
2022
£000
Long Term
Incentives
2021
£000
2022
£000
12
4
—
—
—
—
15
—
—
—
—
—
15
20
—
—
—
—
259
—
—
—
—
—
129.5
0
—
—
—
—
0
0
913
—
—
0
0
0
—
—
2022
£000
543.5
—
221
55.5
48
55.5
Total
2021
£000
415.5
179
130
47.5
27
47.5
The NED fees were reinstated to their previous level of £50,000 p.a. with effect from 1 July 2021. The additional fees for chairing the Audit and Risk Committee and Remuneration
1
Committee remained the same.
2 Mark Newton-Jones comparative figure for 2021 was in relation to his appointment as an executive director to 23 July 2020 and a NED with effect from 24 July 2020.
3 Represents the value of the restricted share award at vesting which was granted to Clive Whiley in respect of his previous role of Executive Chairman. See page 48 for further
details.
Executive Director base salary (auditable)
Base salary and fees
Andrew Cook
Non-executive director fees (auditable)
Chairman
Non-executive director
Chair of audit and risk committee
Chair of remuneration committee
2022
£000
259
2022
£000
130
501
7.5
7.5
2021
£000
259
2021
£000
130
40
7.5
7.5
% increase
0
% increase
0
25
0
0
1
With effect from 1 July 2021 and to reinstate the fees to the 2018 levels when the non-executive directors voluntarily took a reduction in fees given the financial crisis the Group
faced at the time.
Annual bonus plan (audited)
The CFO was granted an annual bonus with a maximum opportunity equal to 100% of salary. The table below sets out the bonus earned
by the CFO and how this reflects performance against targets.
Adjusted EBITDA
Proportion of bonus
determined by
measure Performance targets Actual performance
£12m in adjusted
EBITDA
50%
Target of £11m
required for
maximum
vesting
Amount earned (%
salary)
50%
Financially based strategic measures
Non-financial strategic measures
Total
20%
30%
100%
See table below
20%
30%
100%
Mothercare plc annual report and accounts 2022
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Annual report on Remuneration
continued
Measure
Strategic Financial Objectives
Strategic Non-Financial Objectives
Detail
20%
1. Maintain lender relationship to allow a
focus upon refinancing the debt facility in
FY23 onwards.
2. Maintain the financing profile to encourage
2021 warrant conversion.
3. Maintain 2021 YOY reduction in the
Company’s working capital position
30%
1. Complete the finalisation of the key
franchise and manufacturing partner
financing agreements, on most favourable
commercial terms practicable.
2. Maintain appropriate pension stakeholder
support (through Trustees, tPR, PPF).
3. Oversee project management of ERP
through to going live in 2022
Assessment
1. Achieved
2. Financing Profile maintained although
warrants conversion did not complete as
share price had fallen below the warrant
price.
3. Achieved
1. Successful finalisation of agreements with
partners.
2. Achieved with regular, constructive dialogue
maintained to keep stakeholders informed.
3. Secured a fixed price contract for the ERP with
the first part PLM live and close management
with implementation partners.
The Committee considered the bonus outcome to be appropriate taking into account underlying financial performance during FY2022,
the significant contributions of the CFO and the factors set out in the Chair’s statement on page 44.
Any bonus payable in excess of 75% is ordinarily deferred into shares which vest after three years. However, for the FY2022 bonus, the
Committee has applied discretion to pay the full value of the award in cash given Mothercare’s recent share price volatility and its current
share price being depressed. The award will be paid in tranches during FY2023.
Long term incentive plans (audited)
On 29 March 2019 Andrew Cook, the CFO was granted a performance-based LTIP over 709,601 shares which was subject to three year
relative TSR performance targets and 30 pence absolute share price underpin. The award was granted in respect of his previous role of
Business Development Director. The award lapsed in full as the TSR performance targets and share price underpin were not achieved.
On 29 March 2019 Clive Whiley was granted a restricted share award over 774,110 shares in respect of his role of Executive Chairman. The
award vested on 29 March 2022 and the underlying shares are subject to a two-year holding period.
Number of shares vesting
774,110
There was no LTIP awarded to the CFO during FY2022.
Payments to past Directors and payments for Loss of Office
There were no payments to past directors nor any payments for loss of office.
Value of shares at
vesting (based on the
mid-market closing
share price on the
vesting date)
Vesting date
29 March 2022
£91,345
Holding period
Two years
following vesting
48
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The interests of the Directors and their connected persons in the Company’s ordinary shares as at 27 March 2021 and 26 March 2022 are
set out below. As at September 2022, the Company has not advised of any changes to the interests of the Directors and their connected
persons.
Director
Executive Directors
Andrew Cook
Non-Executive Directors
Clive Whiley
Gillian Kent
Brian Small
Mark Newton-Jones
Shareholding
requirement
(% salary)
Current shareholding
(% salary)1
Shares held
at 26 March 2022
at 27 March 2021
200%
n/a
n/a
n/a
n/a
47%
n/a
n/a
n/a
n/a
862,375
862,375
1,225,890
—
—
2,796,710
1,225,890
—
—
2,796,710
1 Current shareholding as a % of salary was calculated by reference to the average mid-market quoted share price over the 30 days to the balance sheet date (14.09 pence).
Share interests
Director
Clive Whiley1
Andrew Cook2
Mark Newton-Jones2,3
Award
Chairman’s
restricted
share
award
SAYE
LTIP2019
LTIP 2020
LTIP 2019
Date of
award
Number of
awards at
27.03.21
Awards
granted
Awards
vested
Awards
lapsed
Number of
awards at
26.03.22
Exercise
price
Date at
which
award vests
29.03.2019
23.12.2020
29.03.2019
28.09.2020
29.03.2019
774,110
180,000
709,601
2,590,000
752,486
—
—
—
—
—
—
—
—
—
—
—
774,110
—
180,000
709,601
—
— 2,590,000
752,486
—
Nil
29.03.2022
10p 01.03.2024
29.03.2022
Nil
28.09.2023
Nil
29.03.2022
Nil
1
The Chairman’s restricted share award vested in full on 29 March 2022.
2 LTIP 2019 lapsed in full on 29 March 2022 as the TSR performance targets and underpin were not achieved.
3 Mark Newton-Jones served as an executive director up to 23 July 2020.
Advisers
During the year, the Committee received independent advice from PwC and Deloitte. Both are founder members of the Remuneration
Consultants Group and voluntarily operate under its code of conduct in dealings with the Committee.
Statement of voting at General Meeting
The FY2021 Directors’ Remuneration Report was approved at the Annual General Meeting held on 9 September 2021. The table below sets
out the voting outcome.
Resolution
To approve the Directors’ remuneration
report (2021)
Votes For
% of Votes For
Votes Against
% of Votes Against
Votes Withheld*
260,708,127
99.93
187,854
0.07
10,076
*A vote withheld is not a vote in law and is not counted in the calculation of votes ‘for’ and ‘against’ each resolution
Mothercare plc annual report and accounts 2022
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Annual report on Remuneration
continued
Executive Directors’ Policy Table
The table below summarises each element of the Policy for the executive directors, explaining how each element operates and how each
part links to the corporate strategy.
Base salary
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Pension
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Benefits
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Provides the basis on which to recruit and retain executive directors of appropriate calibre.
Salaries are normally reviewed annually by the Committee taking into account a number
of factors, including (but not limited to):
• an executive director’s experience, expertise and/or performance;
• competitive salary levels;
• pay and conditions elsewhere in the Group; and
• affordability and general market conditions.
Any annual salary increases will typically be in line with any salary increases awarded to
the workforce. Increases beyond those granted to the workforce may be awarded at the
Committee’s discretion, such as (but not limited to):
•
where an executive director has been promoted or has had a change in scope or
responsibility;
• where an executive director’s salary set at initial appointment was below the expected
level;
• where there has been a change in market practice; or
• where there has been a change in the size and/or complexity of the business.
Individual and Company performance is taken into account when determining whether
any salary increases are appropriate.
To provide an appropriate level of retirement benefit to executive directors.
The executive directors are eligible to participate in the Company’s defined contribution
registered pension scheme. In appropriate circumstances, such as where contributions
exceed the annual or lifetime allowance, the Company may instead pay a cash
supplement, or a combination of a cash supplement and pension contributions.
Executive directors receive a pension contribution in line with pension contributions
available to the majority of the workforce (currently 6% of salary).
None
To offer competitive and cost-effective benefits to complement the salary in line with those commonly offered by other
similar companies.
Benefits offered include private medical insurance family cover, a car or cash allowance,
life assurance and permanent health insurance.
Relocation and related benefits may be offered where an executive director is required to
relocate in line with Company policy. Relocation and related benefits may be subject to
repayment either in full or part if an executive resigns within two years of relocating.
The aim is to provide market competitive benefits and their value may vary from year to
year depending on the cost to the Company from third party providers.
None
50
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continued Annual Bonus
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
LTIP
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
SAYE Plan
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
To incentivise and reward performance against targets that are linked to the Company’s strategy.
Awards are based on performance (typically measured over a financial year) against key
financial and non-financial strategic targets.
Any bonus earned up to 75% of salary is payable in cash with the remainder deferred into
shares for three years.
Dividend equivalents may accrue on deferred shares. Such amounts will normally be paid
in shares.
Malus and clawback provisions set out below will apply.
The maximum bonus opportunity for executive directors is 100% of salary.
Performance measures and their weighting are determined annually by the Committee
reflecting the Company’s strategy.
At least 70% of the bonus is assessed against key financial measures and the balance may
be based on non-financial strategic measures.
The Committee may exercise its discretion to amend the level of any bonus award if it
considers that the level of payment is inconsistent with the underlying performance of the
Company or the experience of stakeholders over the performance period.
To incentivise and reward profitable growth and the delivery of sustainable long-term shareholder returns.
Award of performance shares (usually in the form of nil-cost options), which vest after three
years subject to performance measures and continued employment. Vested awards will
be subject to a two-year holding period.
Dividend equivalents may accrue on shares that vest. Such amounts will normally be paid
in shares.
Malus and clawback provisions set out below will apply.
For executive directors in office at the date of the approval of this Directors’ Remuneration
Report, the maximum award:
•
•
in respect of FY23 will be up to 150% of salary (the “FY23 Award”), converted into a
number of shares by reference to the market value of a share at the time of grant (the
“FY23 Price”);
in respect of future financial years, will be up to 150% of salary, converted into a number
of shares by reference to the FY23 Price. Provided that the grant in respect of any future
year may not exceed 200% of the FY23 Award or be less than 50% of the FY23 Award,
when calculated by reference to the market value of a share at the time the relevant
award is granted.
For any executive director appointed after the date of the approval of this Directors’
Remuneration Report, the maximum award in respect of any financial year will be up to
300% of salary, calculated by reference to the market value of a share at the time the
relevant award is granted.
Performance measures and their weighting are determined annually by the Committee
reflecting the Company’s strategy.
The Committee may exercise its discretion to amend the vesting outcome if it considers
that the vesting level is inconsistent with the underlying performance of the Company or
the experience of stakeholders over the performance period.
To promote share ownership and provide alignment with shareholders’ interests.
All employees including executive directors are eligible to participate in the HMRC
tax-qualifying Save as you Earn (SAYE) plan (and/or such other HMRC tax-qualifying all-
employee share plans as the Company may adopt in the future).
All eligible employees can save up to the HMRC limits applying over a three year savings
period.
None
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Directors Remuneration Policy (“Policy”)
Directors Remuneration Policy (“Policy”)
Share ownership policy
Purpose and link to strategy
Operation
To further align the long term interests of executive directors with those of shareholders.
Executive directors are expected to build up and maintain a shareholding in the Company
equivalent in value to 200% of salary.
100% of vested LTIP awards (after sale of shares to cover tax liabilities) must be retained
until the guideline is met.
Executive directors are not subject to formal post-employment shareholding guidelines.
However, executive directors will be expected to sell shares in an orderly manner post-
employment.
Incentive plan discretions
The Committee will operate the annual bonus plan and LTIP in accordance with their respective rules and the above Policy table. The
Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and administration of
these plans. These include (but are not limited to) the following:
• The ability to adjust or set different performance measures or targets if events occur (such as a change in strategy, a material
acquisition and/or divestment or a change in market conditions) which cause the Committee to determine that the performance
measures and/or targets are no longer appropriate and the amendment is required so that they achieve their original purpose and
are not materially less difficult to satisfy;
• The ability to adjust share awards if events occur (such as rights issues, corporate restructuring, a change of control or special
dividends).
Any use of discretion would, where relevant, be explained in the Directors’ Remuneration Report and may, as appropriate, be the subject
of consultation with the Company’s major shareholders.
Malus and clawback
Malus and clawback provisions apply to the annual bonus, deferred bonus awards and LTIP as follows:
Annual bonus
Deferred bonus awards
Malus
To such time as payment is made
To such time as the award vests
LTIP
To such time as the award vests
The events in which malus and clawback may apply are as follows:
• material misstatement of financial statements;
Clawback
Up to three years following payment
No clawback provisions apply (as malus
provisions apply for three years from the
date of award)
To the end of the holding period
• action or conduct of the executive director amounts to a material failure in risk management, employee misbehaviour, fraud or gross
misconduct;
• an error in the calculation of the number of shares subject to an award or calculation of performance outcomes;
• the executive director has wholly or partly caused the corporate failure of the Company; or
• the executive director has wholly or partly caused reputational damage to the Company or censure of the Company by a regulatory
authority.
Existing arrangements
The Committee reserves the right to settle the vesting of existing arrangements, which includes LTIP awards granted to the CFO on 28
September 2020.
52
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Chairman and Non-Executive Directors’ Policy
Fees and benefits
Purpose and link to strategy
Operation
Maximum opportunity
To attract and retain non-executive directors of appropriate calibre and experience.
Fees are normally reviewed annually.
The Chairman’s fee is determined by the Committee (without the Chairman present). The
non-executive directors’ fees are determined by a sub-committee of the Board comprising
the Chairman and the executive directors.
Fees may include a basic fee and additional fees for further responsibilities (e.g. chairing
Board committees or holding the office of Senior Independent Director).
The Chairman and non-executive directors cannot participate in any of the Company’s
incentive plans and are not eligible to join the Company’s pension scheme. The Chairman
and non-executive directors may be eligible to receive benefits such as travel costs,
secretarial support or other benefits that may be appropriate.
Any fee increases will typically be in line with any salary increases awarded to the wider
workforce. Increases beyond those granted to the workforce may be awarded at the
Committee’s discretion, such as (but not limited to):
•
where there has been an increase in the Chairman’s or non-executive director’s time
commitment to the role;
• where there has been a change in market practice; or
•
where there has been a change in the size and/or complexity of the business.
Overall fees paid to non-executive directors will remain within the limits set by the
Company’s Articles of Association.
Recruitment policy
The policy aims to facilitate the appointment of executive directors with the necessary background, skills and experience to ensure the
continuing success of the Company.
The Committee will typically seek to align the remuneration package with the above Policy table. The Committee may include other
elements of pay where the Committee believes there is a need to do so in the best interests of the Company and shareholders.
The Committee may make payments or awards in respect of hiring an executive director to “buyout” arrangements forfeited on leaving a
previous employer. In doing so the Committee will take account of relevant factors including any performance measures attached to the
forfeited arrangements and the time over which they would have vested. The Committee will generally seek to structure buyout awards or
payments on a like-for-like basis to the remuneration arrangements forfeited.
Fees payable to a newly appointed Chairman or non-executive director will be in line with the fee policy in place at the time of
appointment.
Service contracts
The CFO’s service contract is on a rolling basis and may be terminated by the Company or the CFO upon six months’ notice. The notice
period for any new executive director will not exceed 12 months by either party.
Non-executive directors’ letters of appointment are ordinarily for an initial three-year term followed by annual re-election at the
Company’s AGM and are subject to a one-month notice period by the Company or non-executive director.
Mothercare plc annual report and accounts 2022
53
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Directors Remuneration Policy (“Policy”)
continued
All the directors will offer themselves for election or re-election at the forthcoming Annual General Meeting.
Executive Director
Andrew Cook
Chairman
Clive Whiley1
Non-executive directors
Gillian Kent
Mark Newton-Jones2
Brian Small
Date of initial
appointment
Notice period
January 2020
6 months
April 2018
1 month
March 2017
July 2014
December 2019
1 month
1 month
1 month
1
2
Clive Whiley served as Executive Chairman between April 2018 and March 2020 and was appointed as non-executive Chairman in March 2020.
Mark Newton-Jones served as Chief Executive between July 2014 and January 2020, as an executive director between January 2020 and July 2021 and was appointed as a non-
executive director in July 2021.
Payments for loss of office
The principles on which the determination of payments for loss of office will be approached are set out below.
Payment in lieu of notice
Annual bonus and deferred bonus
awards
LTIP
Policy
The Company has discretion to make a payment in lieu of notice. Such a payment would include
salary and benefits for the unexpired period of notice. Any such payments will be subject to
mitigation.
The extent to which any annual bonus will be paid or unvested deferred bonus award will vest
will be determined in accordance with the rules of the STIP.
Executive directors must normally be in employment on the payment date to receive an
annual bonus. However, if an executive director leaves due to death, ill-health, injury, disability,
redundancy, retirement, the sale of their employer or any other reason at the discretion of the
Committee, they will be considered for a bonus payment.
The level of payment will be determined by the Committee taking into account the extent to
which performance targets are satisfied and, unless the Committee determines otherwise, the
proportion of the performance period that had elapsed on the date that the executive director
ceases employment. The Committee retains discretion to accelerate payment in exceptional
circumstances (e.g. death).
Other than summary dismissal, unvested deferred bonus awards will continue and vest at the
normal vesting date. The Committee retains discretion to accelerate vesting in exceptional
circumstances (e.g. death).
The extent to which any unvested award will vest will be determined in accordance with the
rules of the LTIP.
Unvested awards will normally lapse on cessation of employment. However, if an executive
director leaves due to death, ill-health, injury, disability, redundancy, retirement, the sale of their
employer or any other reason at the discretion of the Committee, awards will continue and vest
at the normal vesting date. The Committee retains discretion to accelerate vesting (and release)
in exceptional circumstances (e.g. death).
The level of vesting will be determined by the Committee taking into account the extent to
which performance targets are satisfied and, unless the Committee determines otherwise,
the proportion of the vesting period that had elapsed on the date that the executive director
ceases employment.
If an executive director leaves for any reason (other than summary dismissal) after an award
has vested but before it has been released (i.e. during a ‘holding period’), their vested award
will continue and be released at the normal release date. The Committee retain discretion to
accelerate the release of a vested award in exceptional circumstances (e.g. death).
54
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Other payments
Annual bonus awards will be determined taking into account performance at the time of the
event and, unless the Committee determines otherwise, the proportion of the performance
period that had elapsed.
Deferred bonus awards will vest in full at the time of the event, unless the Committee determines
otherwise.
Unvested LTIP awards will normally vest (and be released) at the time of the event. The level of
vesting will be determined taking into account performance at the time of the event and, unless
the Committee determines otherwise, the proportion of the vesting period that had elapsed.
In appropriate circumstances, payments may also be made in respect of accrued holiday,
outplacement and legal fees.
Awards under the SAYE may vest and, where relevant, be exercised in the event of employment
or a change of control in accordance with the rules of the SAYE Plan.
The Committee reserves the right to make additional exit payments where such payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim
arising in connection with the termination of an executive director’s employment.
There is no entitlement to any compensation in the event of non-executive directors’ fixed-term agreements not being renewed or the
agreement terminating earlier.
Consideration of employment conditions elsewhere in the Company
The Policy for the executive directors is designed with regard to the policy for employees across the Group as a whole.
Mothercare operates in a number of different territories and has employees who carry out diverse roles across a number of countries. All
employees, including senior managers, are paid by reference to the local market rate and base salary levels are reviewed regularly.
When considering salary increases for executive directors, the Company will be sensitive to pay and employment conditions across
the wider workforce. The Committee is kept updated through the year on general employment conditions, budgets for any basic
salary increase, the level of bonus pools and pay-outs, and participation in share plans. Therefore the Committee is aware of how total
remuneration of the executive directors compares to the total remuneration of the general population of employees and the Committee
will continue to monitor the progress of retail pay versus that of senior management.
Common approaches to remuneration policy which apply across the Group include:
• a consistent approach to ‘pay for performance’ is applied throughout the Group, with annual bonus schemes being offered to all
employees;
• offering pension and life assurance benefits for all employees, ensuring that salary increases for each category of employee are
considered taking into account the overall rate of increase across the Group, as well as Company and individual performance; and
• encouraging broad-based share ownership through the use of all-employee share plans.
Consideration of shareholders views
The Committee engages pro-actively with the Company’s major shareholders. For example, when any material changes are made to the
Policy, the Committee Chair will consult with major shareholders in advance. The Committee has consulted with the major shareholders in
respect of this Policy.
APPROVAL
This report was approved by the board of directors on 13 September 2022 and signed on its behalf by Gillian Kent, Chair of the
Remuneration Committee.
Mothercare plc annual report and accounts 2022
55
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Directors’ report
Directors’ report
The directors present their report on the affairs of the group,
together with the financial statements and auditors’ report for the
52-week period ended 26 March 2022. The corporate governance
statement set out on pages 40 to 43 forms part of this report. The
Chairman’s statement on page 4 gives further information on the
work of the Board during the period.
Capital structure
As at 31 August 2022, the Company’s issued ordinary share capital
was 563,836,626 ordinary shares of 1p each all carrying voting rights.
The details of the Company’s issued share capital as at 26 March
2022 are set out in note 24 to the financial statements. No shares
were held in Treasury.
The principal activity of the Group is undertaken by its subsidiary
and owner of the Mothercare intellectual property, Mothercare
Global Brand (MGB). MGB specialises in designing and sourcing
Mothercare products and licensing and franchising the brand.
The group’s headquarters is in the UK and it operates in some
36 countries through its network of franchise partners.
An overview of future developments can be found in ‘Growth’ on
page 8.
Details of the share plans operated by the Group are set out at
note 29 to the financial statements.
Substantial shareholdings
As at 31 August 2022, the Company had been advised by, or was
aware of, the following interests above 3% in the Company’s
ordinary share capital:
Directors
With regard to the appointment and replacement of directors, the
Company is governed by its Articles of Association, the Companies
Act 2006 and related legislation and best corporate governance
practice. The Articles may be amended by special resolution of the
shareholders. The business of the Company is managed by the
Board which may exercise all the powers of the Company subject
to the provision of the Articles of Association, the Companies Act
and any ordinary resolution of the Company.
The following directors served during the 52-week period ended
26 March 2022:
Name
Clive Whiley
Andrew Cook
Gillian Kent
Appointment
Non-executive chairman and chair of the
nomination committee
Executive director
Non-executive director and chair of the
remuneration committee
Mark Newton-Jones Non-executive director
Brian Small
Non-executive director and chair of the
audit and risk committee
The directors will all retire and offer themselves for re-election at the
forthcoming AGM.
The directors have had regard to the need to foster the Company’s
business relationship with suppliers, customers and others, and the
effect of that regard, including the principal decisions taken by the
Company during FY2022 are as set out in more detail in the section
172 statement on page 25.
Dividend
The directors are not recommending the payment of a final
dividend for the year and no interim dividend was paid during
the year (2021: nil). Dividend policy is set out on page 7 of the
Chairman’s statement.
Richard Griffiths and controlled undertakings
Lombard Odier Asset Management (Europe)
Limited
M&G Plc
D C Thomson & Company Limited
% of issued
share capital
33.22
26.09
12.08
9.39
Treasury policy and financial risk management
Treasury policy, financial risk management and foreign currency,
interest rate and credit risk are set out on page 33 of the financial
review.
Charitable giving
During the financial year the group donated approximately 100
old computers and monitors to a charity that helps to relieve
poverty by offering a free complete recycling of computers and
electrical equipment that is reused, recycled or resold back into the
community. Money made from this activity is donated back into the
local community to fund future projects, events and fundraising, all
to help relieve poverty.
A sample sale was held supported by a local branch of Home
Start.
Donations totalling £10,351 in the year under review were made to
Bliss.
Mothercare has decided to support charitable causes in a
different way and no longer requires its own charitable foundation
to do so. To that end the trustees agreed that the registered charity
company be put into members’ voluntary liquidation following
the distribution of remaining funds. This took place during the year
under review.
Energy and Carbon
The ESG section at page 36 within the Strategic Report contains
the group’s SECR reporting on energy consumption and carbon
emissions.
Political donations
It is the Company’s policy not to make political donations and
none were made during the year.
56
Mothercare plc annual report and accounts 2022
HEAD_0 1st line continuedHEAD_0 2nd line2nd line continued
Auditors
Each of the persons who was a director of the Company at the
date of approval of this annual report confirms that:
• so far as the director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
• the director has taken all the steps that he/she ought to have
taken as a director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information.
this confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.
Auditor
There was a change of auditor during the year with Jeffreys Henry
Audit Ltd filling a casual vacancy. A resolution to appoint them will
be proposed at the forthcoming annual general meeting.
Annual general meeting (AGM)
The AGM will be held on 13 October 2022.
By order of the board
Lynne Medini
Group Company Secretary
13 September 2022
Mothercare plc annual report and accounts 2022
57
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineGovernance
Directors’
responsibilities
statement
Directors’ responsibilities statement
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared
the Group Financial Statements in accordance with UK-adopted International Accounting Standards and with the requirements of
the Companies Act 2006 as applicable to companies reporting under those standards and Parent Company Financial Statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework” and applicable law). Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company
for that period.
In preparing the Group and parent company financial statements the Directors are required to:
• select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then
apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance with the specific requirements in IFRSs (and in respect of the parent company financial
statements, FRS 101) is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the
Group and Company financial position and financial performance;
• in respect of the Group financial statements, state whether UK-adopted International Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial statements;
• in respect of the parent company financial statements, state whether International Accounting Standards in conformity with the
requirements of the Companies Act 2006 / applicable UK Accounting Standards, including FRS 101, have been followed, subject to any
material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is appropriate to presume that the Company and/or the Group
will not continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006 and Article 4 of IAS Regulation. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for preparing the annual report in accordance with applicable law and regulations. Having taken advice
from the Audit and Risk Committee, the directors consider the annual report and the financial statements, taken as a whole, provides the
information necessary to assess the Company’s performance, business model and strategy and is fair, balanced and understandable.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• that the consolidated financial statements, prepared in accordance with UK-adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit or loss of
the group; and
• the parent company financial statements which have been prepared in accordance with United Kingdom Accounting Standards
comprising FRS 101 ‘Reduced Disclosure Framework’ and applicable law, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the parent company: and
• the Strategic Report and Directors’ Report include a fair review of the development and performance of the business and the position
of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks
and uncertainties that they face.
This responsibility statement was approved by the board of directors on 13 September 2022 and is signed on its behalf by:
Clive Whiley
Chairman
Andrew Cook
Chief Financial Officer
58
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continued
Independent
auditor’s report
to the members of
Mothercare plc
Independent auditor’s report
to the members of Mothercare plc
Opinion
We have audited the consolidated financial statements of Mothercare PLC and its subsidiaries (the “Group”), for the year ended 26
March 2022, which comprise the consolidated statement of comprehensive income, the consolidated and company statements of
financial position, the consolidated and company statements of changes in equity, the consolidated statement of cash flows and
notes to the financial statements, including a summary of significant accounting policies and the financial reporting framework that
has been applied in the preparation of the company and group financial statements and applicable law
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 26 March
2022 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with UK adopted International Accounting Standards
• the parent company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting
Practice and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2 in the financial statements, which indicates the ongoing impact of Covid-19, current economic conditions, and
entity’s exposure to the current European conflict, which may affect the future prospects and trading activities of the group.
The Group forecasts include additional funding requirements upon which the Group is dependent. The directors are satisfied that these
funding requirements will be met. The cause of this is largely to do with the ongoing impact of Covid-19 within the main operational
regions, entity’s exposure to the current European conflict and current economic conditions. These events or conditions, along with other
matters as set out in note 2 indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as
a going concern. Our opinion is not modified in respect of this matter.
The existence of a material uncertainty related to going concern is one of the most significant risks of material misstatement due to the
uncertainty of the future impact of Covid-19 outbreak on the entity’s trading activities and its exposure to the current European conflict. This
requires significant judgment when developing future plans in respect of the cash flow forecast and in determining the compliance with
loan covenants.
Management performed an assessment in relation to group’s ability to continue as a going concern and the assessment comprises
a base case scenario that includes a reasonable worst-case scenario and a reverse stress test. The overall assessment includes key
assumptions considered by management that required significant judgment in relation to the estimation of future revenue generated by
franchisees.
We assessed the significant judgements made by the management in relation to the reverse stress test to ensure that these are
adequately considered and in line with current events and trading performance.
We performed the following audit procedures to assess the management’s judgements, key assumptions and entity’s ability to continue
as a going concern:
• Liaising with management and discussing their going concern assessment, including their view and perspective associated with firm’s
ability to continue as a going concern
• Reviewing and assessing the reliability of the forecast to ensure its accuracy and performing arithmetical checks
• Reviewing the past forecast with the actual results to determine if prior year’s estimates were adequately considered and whether
management’s historical approach in terms of the key assumptions was appropriate
• Reviewing the forecast in line with the potential impact of Covid-19 and entity’s exposure to the current European conflict that affected its
trading activities
Mothercare plc annual report and accounts 2022
59
HEAD_0 1st line continued2nd line continuedFinancialsReport on the audit of the financial statements
Independent
auditor’s report
to the members of
Mothercare plc
Independent auditor’s report
to the members of Mothercare plc continued
• Assessing the worst-case scenario and reverse stress test considered by management in line with the key assumptions involved and
other relevant events to determine the potential impact that these may have in respect of the current covenants related to the external
borrowing facilities
• Assessing the covenants attached to the external borrowing facilities and challenging management approach and assessment of a
breach of covenants during the subsequent period
• Reviewing the subsequent trading activities and performance in line with the covenants attached to the external borrowing facilities
• Assessing the relevant disclosure within the annual report in line with the management’s assessment and other related aspects
considered
In line with our assessment and audit procedures performed, the group was not able to initialise any cash management programmes to
support the working capital cycles, giving rise to material uncertainty related to going concern.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our
audit.
As there is a material uncertainty for the going concern assumption, this key audit matter has not been included within this key audit
matters section. This is in accordance with the guidance set out within ISA (UK) 705.
Key audit matter
How our audit addressed the key audit matter
Defined benefit pension scheme
As part of our assessment, we identified the defined benefit
pension scheme as one of the most significant risks where
a material misstatement could exist. It was reported that
the Group operates two schemes that relate to staff and
executive members.
The valuation of scheme is comprehensive and requires
a high degree of judgment based on the actuarial
assumptions over the prevailing future outlook at the point
of valuation. Therefore, we considered that there are risks
associated with the judgements related to key assumptions
used in the valuation reporting of defined benefit scheme.
The defined benefit scheme is assessed under International
Accounting Standards (IAS) 19 ‘Employee Benefits’. Last
year, the defined benefit scheme stated a net deficit of
£25.6m. At the end of period ended 26 March 2022, the
defined benefit scheme outlines a net surplus of £12.4m.
Revenue recognition
In line with ISA (UK) 240, there is a presumed fraud risk
associated with revenue recognition.
The recognition of revenue from contracts with customers
requires a significant judgment from management.
Therefore, this aspect may give rise to manipulation risk
and inadequate approach in respect of the accounting
treatment and disclosure of revenue in accordance to IFRS
15, Revenue from Contracts with Customers.
We liaised with management to assess the current schemes disclosed in the year
and reviewed if an appropriate approach in line with IAS19 ‘Employee Benefits’
had been taken and the related criteria required to ensure all the relevant
aspects are met and disclosed;
We obtained and reviewed the actuarial reports that were prepared by a
management’s specialist to ensure that these are compliant with IAS 19 and
related criteria;
We have used our own independent specialist to assess and provide an opinion
in respect of the key assumptions and models that have been considered by the
actuary in order to determine the present value of the defined benefit surplus
reported at the end of the reporting period;
We have enquired from management, where required, to document and obtain
further insight in terms of the key assumptions disclosed by the actuary;
We have reviewed the actuary reports in line with the figures, details and
information disclosed in financial statements to ensure that there are no
discrepancies.
We have liaised with management and discussed the approach in respect of
the revenue recognition for all income streams, including any related aspects
associated with control procedures;
We have assessed the managements’ approach in respect of the application of
accounting policy in accordance with the criteria stipulated by IFRS 15, Revenue
from Contracts with Customers;
We have obtained external confirmations from Company’s partners in respect of
both revenue streams, royalty and product sales;
We have reviewed the external confirmations provided from Company’s partners
in line with the contractual agreements and any related aspects such as retail
sales or royalty rates; where required, we performed recalculation when assessing
the royalty revenue by franchise partner to adequate recognition and disclosure.
60
Mothercare plc annual report and accounts 2022
HEAD_0 1st line continued2nd line continued Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds fmateriality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures
on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£596,000 (£546,000)
£399,400 (£355,000)
Group financial statements
Company financial statements
How we determined it
5% of net profit
Rationale for benchmark applied We believe that profit before tax is a primary
measure used by shareholders in assessing the
performance of the Group whilst gross asset
values and revenue are a representation of the
size of the Group. All are generally accepted
auditing benchmarks.
1% of gross assets capped to 95% of group’s
materiality
We believe that the gross assets is an
appropriate measure used by shareholders in
assessing the performance of the Company
and is a generally accepted auditing
benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range
of materiality allocated across components was between £58,000 and £427,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £19,600 as well as
misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgments, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk
of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in
which they operate.
The Group financial statements are a consolidation of 2 reporting units, comprising the Group’s operating businesses and holding
companies
We performed audits of the complete financial information of Mothercare Plc and Mothercare Global Brand Limited reporting units, which
were individually financially significant and accounted for 100% of the Group’s revenue and 100% of the Group’s absolute profit before
tax (i.e., the sum of the numerical values without regard to whether they were profits or losses for the relevant reporting units). We also
performed specified audit procedures over account balances and transaction classes that we regarded as material to the Group.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
Mothercare plc annual report and accounts 2022
61
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
Independent auditor’s report
to the members of Mothercare plc continued
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 58, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
The extent to which the audit was considered capable of detecting irregularities including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of
irregularities, including fraud.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, was as follows:
• the senior statutory auditor ensured the engagement team collectively had the appropriate competence, capabilities and skills to
identify or recognise non-compliance with applicable laws and regulations;
• we identified the laws and regulations applicable to the company through discussions with directors and other management, and from
our commercial knowledge and experience of the digital marketing and advertising sector.
• we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements
or the operations of the company, including Companies Act 2006, taxation legislation, data protection, anti-bribery, employment,
environmental, health and safety legislation and anti-money laundering regulations.
• we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and
inspecting legal correspondence; and
• identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-
compliance throughout the audit.
• We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of
how fraud might occur, by:
• making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected
and alleged fraud;
• considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
62
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continued To address the risk of fraud through management bias and override of controls, we:
• performed analytical procedures to identify any unusual or unexpected relationships;
• tested journal entries to identify unusual transactions;
• assessed whether judgements and assumptions made in determining the accounting estimates set out in Note 3 of the Group financial
statements were indicative of potential bias;
• investigated the rationale behind significant or unusual transactions
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were
not limited to:
• agreeing financial statement disclosures to underlying supporting documentation;
• reading the minutes of meetings of those charged with governance;
• enquiring of management as to actual and potential litigation and claims;
• reviewing correspondence with HMRC and the company’s legal advisor
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial
transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures
required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of
regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate
concealment or collusion.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our audit. Our audit opinion is consistent with the additional report to
the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditor’s 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 and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Sanjay Parmar
Senior Statutory Auditor
For and on behalf of:
Jeffreys Henry Audit Ltd (Statutory Auditors)
Finsgate
5-7 Cranwood Street
London EC1V 9EE
13 September 2022
Mothercare plc annual report and accounts 2022
63
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
Consolidated
income statement
For the 52 weeks
ended 26 March
2022
Consolidated income statement
For the 52 weeks ended 26 March 2022
Revenue
Cost of sales
Gross profit
Administrative expenses
Other income
Impairment losses on receivables
Profit/(loss) from operations
Finance costs
Finance income
Profit /(loss) before taxation
Taxation
Profit/(loss) for the period
Profit/(loss) for the period
attributable to equity holders of
the parent
Profit/(loss) per share
Basic
Diluted
52 weeks ended 26 March 2022
52 weeks ended 27 March 2021
Before
adjusted
items
£ million
Note
Adjusted
items1
£ million
Total
£ million
Before
adjusted
items
£ million
Adjusted
items1
£ million
Total
£ million
4
6
18
7
8
8
9
11
11
82.5
(54.9)
27.6
(16.0)
–
(0.5)
11.1
(3.1)
–
8.0
1.0
9.0
9.0
–
–
–
1.9
–
–
1.9
1.2
–
3.1
–
3.1
3.1
82.5
(54.9)
27.6
(14.1)
–
(0.5)
13.0
(1.9)
–
11.1
1.0
12.1
12.1
1.6 p
1.6p
85.8
(63.3)
22.5
(23.3)
2.0
(1.0)
0.2
(8.9)
0.2
(8.5)
(0.1)
(8.6)
–
–
–
(2.6)
–
–
(2.6)
(10.3)
–
(12.9)
–
(12.9)
85.8
(63.3)
22.5
(25.9)
2.0
(1.0)
(2.4)
(19.2)
0.2
(21.4)
(0.1)
(21.5)
(8.6)
(12.9)
(21.5)
(5.7) p
(5.7) p
1
Includes adjusted costs (property costs, restructuring costs and impairment charges) and movement on warrant options. Adjusted items are considered to be one-off or
significant in nature and /or value. Excluding these items from profit metrics provides readers with helpful additional information on the performance of the business across the
periods because it is consistent with how the business performance is reviewed by the Board.
64
Mothercare plc annual report and accounts 2022
HEAD_0 1st line continued2nd line continued Consolidated statement of
comprehensive income
For the 52 weeks
ended 26 March 2022
Consolidated statement of comprehensive income
For the 52 weeks ended 26 March 2022
Profit / (loss) for the period
Items that will not be reclassified subsequently to the income statement:
Remeasurement of net defined benefit liability:
Actuarial gain / (loss) on defined benefit pension schemes
Deferred tax relating to items not reclassified
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations
Deferred tax relating to items reclassified
Other comprehensive income / (expense) for the period
Total comprehensive income / (expense) for the period wholly
attributable to equity holders of the parent
Note
30
16
26
16
52 weeks
ended
26 March
2022
£ million
12.1
35.0
(3.1)
31.9
–
–
–
31.9
44.0
52 weeks
ended
27 March
2021
£ million
(21.5)
(56.7)
10.2
(46.5)
–
–
–
(46.5)
(68.0)
Mothercare plc annual report and accounts 2022
65
Financials
Consolidated
balance sheet
As at 26 March
2022
Consolidated balance sheet
As at 26 March 2022
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use leasehold assets
Retirement benefit obligations
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Lease liabilities
Provisions
Non-current liabilities
Borrowings
Lease liabilities
Retirement benefit obligations
Provisions
Deferred tax liability
Total liabilities
Net assets/(liabilities)
Equity attributable to equity holders of the parent
Share capital
Share premium account
Own shares
Translation reserve
Retained loss
Total equity
Note
26 March
2022
£ million
27 March
2021
£ million
13
14
15
30
17
18
21
19
22
21
15
23
20
15
30
23
16
24
25
26
3.6
0.3
0.9
12.4
17.2
2.1
8.1
0.2
9.2
19.6
36.8
(12.1)
–
(0.3)
(1.7)
(14.1)
(19.1)
(0.8)
–
(0.9)
(0.4)
(21.2)
(35.3)
1.5
89.3
108.8
(1.0)
(3.7)
(191.9)
1.5
1.1
0.5
1.2
–
2.8
5.9
17.4
2.6
6.9
32.8
35.6
(24.9)
(1.8)
(0.3)
(4.2)
(31.2)
(19.0)
(1.1)
(25.6)
(1.7)
–
(47.4)
(78.6)
(43.0)
89.3
108.8
(1.0)
(3.7)
(236.4)
(43.0)
Approved by the board and authorised for issue on 13 September 2022 and signed on its behalf by:
Andrew Cook
Chief Financial Officer
Company Registration Number: 1950509
66
Mothercare plc annual report and accounts 2022
HEAD_0 1st line continued2nd line continued
Consolidated statement of
changes in equity
For the 52 weeks
ended 26 March 2022
Consolidated statement of changes in equity
For the 52 weeks ended 26 March 2022
Balance at 27 March 2021
Items that will not be reclassified subsequently to the
income statement
Other comprehensive income
Profit for the period
Total comprehensive income
Adjustment to equity for equity-settled share-based
payments
Balance at 26 March 2022
For the 52 weeks ended 27 March 2021
Balance at 28 March 2020 as previously reported
Prior year adjustment – income statement
Prior year adjustment – other comprehensive income
Balance at 28 March 2020 as restated
Items that will not be reclassified subsequently to the
income statement
Other comprehensive expense
Loss for the period
Total comprehensive (expense) /income
Conversion of shareholder loans
Adjustment to equity for equity-settled share-based
payments
Balance at 27 March 2021
Share
capital
£ million
89.3
Share
premium
account
£ million
108.8
Note
Own
shares
£ million
Translation
reserve
£ million
Retained
earnings
£ million
Total
equity
£ million
(1.0)
(3.7)
(236.4)
(43.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31.9
31.9
12.1
44.0
29
–
89.3
–
108.8
–
(1.0)
–
(3.7)
0.5
(191.9)
31.9
31.9
12.1
44.0
0.5
1.5
Share
capital
£ million
Note
Share
premium
account
£ million
Own
shares
£ million
Translation
reserve
£ million
Retained
Earnings
£ million
Total
Equity
£ million
87.4
–
–
87.4
–
–
–
–
1.9
–
89.3
91.7
–
–
91.7
–
–
–
–
17.1
(1.0)
–
–
(1.0)
–
–
–
–
–
(3.7)
–
–
(3.7)
–
–
–
–
–
(172.1)
(1.3)
(5.0)
(178.4)
(46.5)
(46.5)
(21.5)
(68.0)
9.5
–
108.8
–
(1.0)
–
(3.7)
0.5
(236.4)
2.3
(1.3)
(5.0)
(4.0)
(46.5)
(46.5)
(21.5)
(68.0)
28.5
0.5
(43.0)
24,25
29
Mothercare plc annual report and accounts 2022
67
Financials
Consolidated cash
flow statement
For the 52 weeks
ended 26 March
2022
Consolidated cash flow statement
For the 52 weeks ended 26 March 2022
Net cash inflow / (outflow) from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangibles – software
Cash used in investing activities
Cash flows from financing activities
Interest paid
Lease interest paid
Repayments of leases
Drawdown of loan facility
Net cash inflow / (outflow) from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of period
52 weeks ended
26 March
2022
£ million
52 weeks ended
27 March
2021
£ million
8.1
(0.1)
(2.8)
(2.9)
(2.5)
(0.1)
(0.4)
–
(3.0)
2.2
6.9
0.1
9.2
(2.6)
(0.2)
(0.2)
(0.4)
(1.4)
(0.6)
(1.5)
7.3
3.8
0.8
6.1
–
6.9
Note
27
27
68
Mothercare plc annual report and accounts 2022
HEAD_0 1st line continued2nd line continued Notes to the
consolidated
financial
statements
Notes to the consolidated financial statements
1 General information
• Extension of the temporary exemption from applying IFRS 9
Mothercare plc is a company incorporated in Great Britain under
the Companies Act 2006. The address of the registered office is
given in the shareholder information on page 115. The nature of the
Group’s operations and its principal activities are set out in note 5
and in the business review on page 15.
These financial statements are presented in UK pounds sterling
because that is the currency of the primary economic environment
in which the Group operates. Foreign operations are included in
accordance with the policies set out in note 2.
2 Significant accounting policies
Basis of presentation
The Group’s accounting period covers the 52 weeks ended
26 March 2022. The comparative period covered the 52 weeks
ended 27 March 2021.
Basis of accounting
The consolidated financial statements of Mothercare Plc as of
26 March 2022 and for the year then ended (the ”consolidated
financial statements”) were prepared in accordance with
UK‑adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006 (the “Companies
Act”).
On 31 December 2020, IFRS as adopted by the European
Union at that date was brought into UK law and became
UK‑adopted International Accounting Standards, with future
changes being subject to endorsement by the UK Endorsement
Board. Mothercare Plc transitioned to UK‑adopted International
Accounting Standards in its consolidated financial statements on
28 March 2021. This change constitutes a change in accounting
framework. However, there is no impact on recognition,
measurement or disclosure in the period reported as a result of
the change in framework. The consolidated financial statements
of Mothercare Plc have been prepared in accordance with
UK‑adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to those
companies reporting under those standards.
Adoption of new and revised standards
The same accounting policies, presentation and methods of
computation are followed in this yearly report as applied in the
Group’s last audited financial statements for the 52 weeks ended
27 March 2021.
New standards not affecting the reported results nor the financial
position
In the current year, the Group has applied a number of
amendments to IFRS Standards and Interpretations issued by the
International Accounting Standards Board (IASB) that are effective
for the current annual report period. Their adoption has not had
any material impact on the disclosures or on the amounts reported
in these financial statements.
New standards in issue but not yet effective
At the date of authorisation of these financial statements, the
following standards and interpretations, which have not been
applied in these financial statements, were in issue and endorsed
by the UKEB, but not yet effective:
• Amendment to IFRS 16, ‘Leases’ – COVID‑19 related rent
concessions
• IFRS 17, ‘Insurance Contracts’ – replacing IFRS 4
• Property, Plant and Equipment: Proceeds before intended use ‑
amendments to IAS 16
• Reference to the Conceptual framework – amendments to IFRS 3
• Onerous contracts: Cost of fulfilling a contract – amendments to
IAS 37
At the date of authorisation of these financial statements, the
following standards and interpretations, which have not been
applied in these financial statements, were in issue but not yet
endorsed by the UKEB, and not yet effective:
• Annual Improvements to IFRS 2018‑2020
• Classification of liabilities and current or non‑current –
amendments to IAS 1
• Disclosure of Accounting policies – amendments to IAS 1 and
IFRS Practice Statement 2
• Definition of Accounting Estimates – amendments to IAS 8
• Deferred Tax related to Assets and Liabilities arising from a Single
Transaction – Amendments to IAS 12
These standards which have been issued but are not yet effective
are not expected to have a material impact on the disclosures or
the amounts reported in these financial statements.
Going concern
As stated in the strategic report, the Group’s business activities
and the factors likely to affect its future development are set out in
the principal risks and uncertainties section of the Group financial
statements. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are set out in the financial
review.
The consolidated financial information has been prepared on
a going concern basis. When considering the going concern
assumption, the Directors of the Group have reviewed a number
of factors, including the Group’s trading results and its continued
access to sufficient borrowing facilities against the Group’s latest
forecasts and projections, comprising:
• A Base Case forecast which excludes any income from Russia;
and
• A Sensitised forecast, which applies sensitivities against the Base
Case for reasonably possible adverse variations in performance,
reflecting the ongoing volatility in our key markets.
In making the assessment on going concern the Directors have
assumed that it is able to mitigate the material uncertainty in
relation to levels of recovery in retail sales post COVID‑19 coupled
with the heightened global economic uncertainty. The impact
of these issues on the future prospects of the Group is not fully
quantifiable at the reporting date, as the complexity and scale
of these issues at a global level is outside of what any business
could accurately reflect in a financial forecast. However, we have
attempted to capture the impact on both our supply chain and
key franchise partners based on what is currently known. We have
Mothercare plc annual report and accounts 2022
69
HEAD_0 1st line continued2nd line continuedHEAD_0 2nd lineFinancials
2 Significant accounting policies (continued)
modelled a substantial reduction in global retail sales as a result of
subdued, consumer confidence or disposable income, throughout
the remainder of FY23 with recovery in FY24.
The Sensitised scenario assumes the following additional key
assumption:
• A delayed recovery that assumes that retail sales remain
subdued throughout the majority of the forecast period as
a result of consumer confidence returning more slowly post
COVID‑19, coupled with the potential impact on customers
disposable income due to the current heightened global
economic uncertainty.
The Board’s confidence in the Group’s Base Case forecast,
which indicates the Group will operate within the terms of its
revised borrowing facilities which now includes more appropriate
covenants following the cessation of the Russian operation and
the Group’s proven cash management capability, supports our
preparation of the financial statements on a going concern basis.
However, if trading conditions were to deteriorate beyond the level
of risks applied in the Sensitised forecast, or the Group was unable
to mitigate the material uncertainties assumed in the Base Case
Forecast and the Group were not able to execute further cost
or cash management programmes, the Group would at certain
points of the working capital cycle have insufficient cash. If this
scenario were to crystallise the Group would need to renegotiate
with its lender in order to secure waivers to potential covenant
breaches and consequential cash remedies or secure additional
funding. Therefore, we have concluded that, in this situation, there is
a material uncertainty that casts significant doubt that the Group
will be able to operate as a going concern without such waivers or
new financing facilities.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the
Company (its subsidiaries) made up to 26 March 2022. Control is
achieved when the Company:
• has the power over the investee;
• is exposed, or has the right, to variable returns from its
involvement with the investee; and
• has the ability to use its powers to affect its returns.
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
The accounting policies of subsidiaries are in line with those used
by the Group.
All intra‑group transactions, balances, income and expenses are
eliminated on consolidation.
Revenue recognition
Revenue is recognised only when (or as) the Group satisfies a
performance obligation by transferring control of the promised
goods or services to a customer. The transfer of control can
occur over time or at a point in time. Revenue is measured at the
transaction price the Group expects to be entitled to in a contract
70
Mothercare plc annual report and accounts 2022
with a customer and excludes amounts collected on behalf of third
parties discounts, value‑added taxes (VAT) and other sales‑related
taxes.
Revenue recognition has been considered in accordance with
IFRS 15 and two separate performance obligations have been
identified in relation to income received from franchise partners:
The first performance obligation identified relates to the sale of
goods to international franchise partners. Turnover from such sales
is recognised at the point in time at which the control of goods is
transferred, which is on dispatch. There are two potential points in
time depending on the method of shipping. In the first instance,
control passes to the franchise partner once the goods are loaded
on their shipping vessel. In the second instance, control passes to
the franchise partner at the point their freight carrier collects the
goods from one of our distribution centres.
The second performance obligation is in relation to royalty revenue
from licences provided to franchise partner to trade under the
Mothercare brand name, which is recognised on a sales usage
basis when the corresponding retail sales are recognised by the
franchise partner, in accordance with the substance of the relevant
licensing agreement.
Since mid‑way through the prior financial year, the Group has also
recognised revenue with certain customers on an agency basis.
The most significant consideration under IFRS 15 in determining
this treatment is that control of the stock passes directly from the
manufacturer to the franchise partner, therefore the Group never
takes control of the stock during the logistics cycle. Agency revenue,
being solely the margin element of the sale, is recognised at the
point that control of the goods passes to the franchise partner.
Given the Group’s business model, management are required
to apply their judgment as to whether the Group is contracting
in the capacity of an agent or a principal. The key determining
factor considered by management in making such a judgment
is whether control of the stock passes to the Group (before
transferring to the franchise partner).
Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that
asset’s net carrying amount.
Accrued income
Accrued income relates to revenues the Group is entitled to,
where amounts have not yet been invoiced, and is treated as a
receivable yet to be invoiced, dependent only on the passage of
time. In these instances Group has an unconditional right to the
revenue.
Adjusted earnings
The Group considers that adjusted profit before tax provides
additional useful information for shareholders. The term adjusted
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 IFRS
measures of profit.
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 2 Significant accounting policies (continued)
As the Group has chosen to present an alternative earnings per
share measure, a reconciliation of this alternative measure to the
statutory measure required by IFRS is given in note 11.
To meet the needs of shareholders and other external users of the
financial statements the presentation of the income statement has
been formatted to show more clearly, through the use of columns,
our adjusted business performance which provides more useful
information on underlying trends.
The adjustments made to reported results are as follows:
Adjusted items
Due to their significance or one‑off nature, and where treatment
as an adjusted item provides stakeholders with additional useful
information to assess the year‑on‑year trading performance of the
Group, certain items have been classified as adjusted.
The gains and losses on these items, such as provision for onerous
leases, impairment charges, and restructuring costs can have a
material impact on the trend in the profit from operations and the
result for the period. Adjusting for these items is consistent with how
business performance is measured internally by the Board and
Operating Board.
On this basis the following items are analysed as adjusted items on
the face of the income statement:
• costs associated with restructuring and redundancies;
• movement on embedded derivatives in the shareholder
warrants;
• historic claims received against a subsidiary of Mothercare UK
Limited (in administration);
• movement on the expected outcome related to the
administration of Mothercare UK Limited (in administration).
Further details of the adjusted items are provided in note 6.
Leasing
All leases are accounted for by recognising a right‑of‑use asset
and a lease liability unless they are for leases of low value assets,
or for a duration of twelve months or less.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent
in the lease unless (as it typically the case) this is not readily
determinable, in which case the Group’s incremental borrowing
rate on commencement of the lease is used. Variable lease
payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element
will remain unchanged throughout the lease term. Other variable
lease payments are expensed in the period to which they relate.
Right‑of‑use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for: lease payments made at or before commencement
of the lease; initial direct costs incurred; and the amount of
any dilapidations provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset.
Subsequent to initial measurement, lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right‑
of‑use assets are amortised on a straight‑line basis over the
remaining term of the lease or over the remaining economic life of
the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease, it
adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted
at the same discount rate that applied on lease commencement.
The carrying value of lease liabilities is similarly revised when the
variable element of future lease payments dependent on a rate or
index is revised. An equivalent adjustment is made to the carrying
value of the right‑of‑use asset, with the revised carrying amount
being amortised over the revised remaining lease term.
Foreign currencies
The individual financial statements of each Group company are
presented in the currency of the primary economic environment
in which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial position
of each Group company are expressed in pounds sterling, which
is the functional currency of the Company, and the presentational
currency for the consolidated financial statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the functional currency are
recorded at the rates of exchange prevailing on the dates of
the transactions. At each balance sheet date, monetary assets
and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date.
Non‑monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non‑
monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items,
and on the retranslation of monetary items, are included in the
income statement.
In these consolidated financial statements, the assets and liabilities
of the Group’s foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense
items are translated at the average exchange rates for the period;
unless exchange rates fluctuate significantly during that period,
in which case the exchange rates at the date of transactions are
used. Exchange differences arising, if any, are classified within other
comprehensive income, accumulated in equity in the Group’s
translation reserve. Such translation differences are recognised
as income or as expenses in the period in which the operation is
disposed of.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
Mothercare plc annual report and accounts 2022
71
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
2 Significant accounting policies (continued)
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognised in full in the period in which they
occur. They are recognised outside of the income statement and
presented in other comprehensive income.
Past service cost is recognised at the earlier of the following: when
the plan amendment or curtailment occurs; or when the entity
recognises related restructuring costs or termination benefits.
The retirement benefit obligation recognised in the balance sheet
represents the present value of the defined benefit obligation
less the fair value of scheme assets. Any asset resulting from this
calculation is limited to past service cost, plus the present value of
available refunds.
The Group has an unconditional right to a refund of surplus under
the rules.
In consultation with the independent actuaries to the schemes, the
valuation of the retirement benefit obligations has been updated
to reflect current market discount rates, and also considering
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 retirement benefit obligations.
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the asset
is realised based on the tax rates that have been enacted
or substantively enacted at the reporting date. Deferred
tax is charged or credited in the income statement, except
when it relates to items charged or credited directly to other
comprehensive income, in which case the deferred tax is also dealt
with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated
depreciation and any recognised impairment losses.
Depreciation is charged so as to write off the cost or valuation of
assets, other than land and assets in the course of construction,
over their estimated useful lives, using the straight‑line method, on
the following bases:
Taxation
Leasehold improvements –
lease term
The tax expense represents the sum of the tax currently payable
and deferred tax.
Fixtures, fittings and equipment – 3 to 10 years
The tax currently payable is based on taxable profit for the
financial year. Taxable profit differs from net profit as reported
in the income statement because it excludes items of income or
expense that are taxable or deductible in other financial years
and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that
have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used
in the computation of taxable profit, and is accounted for using the
balance sheet liability method.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and interests
in joint ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from initial
recognition of goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting
profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
72
Mothercare plc annual report and accounts 2022
The gain or loss arising on the disposal or retirement of an asset
is determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in the income
statement. Management re‑assess the useful lives and residual
values of property, plant and equipment on an annual basis.
Intangible assets – software
Where computer software is not an integral part of a related item
of computer hardware, the software is classified as an intangible
asset. The capitalised costs of software for internal use include
external direct costs of materials and services consumed in
developing or obtaining the software and payroll and payroll‑
related costs for employees who are directly associated with
and who devote substantial time to the project. Capitalisation of
these costs ceases no later than the point at which the software
is substantially complete and ready for its intended internal use.
These costs are amortised on a straight‑line basis over their
expected useful lives, which is normally five years.
Assets under the course of construction
Whilst internal development of intangible software assets is taking
place, assets are reported in the category of assets under the
course of construction. Once an asset is ready for use, either
in stages or in entirety, the asset is transferred to the reported
category of intangible assets – software and depreciation
commences.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 2 Significant accounting policies (continued)
Trade receivables
the impairment loss (if any). Intangible assets under the course
of construction are tested for impairment annually irrespective
of whether there are any indicators of impairment. Where the
asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the
cash generating unit to which the asset belongs. An intangible
asset with an indefinite useful life is tested for impairment at least
annually and whenever there is an indication that an asset may be
impaired.
The recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre‑tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash‑generating unit) is
estimated to be less than its carrying amount, the carrying amount
of the asset (or cash‑generating unit) is reduced to its recoverable
amount. An impairment loss is recognised as an expense in the
income statement immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash generating unit) is increased to
the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss
been recognised for the asset (or cash‑generating unit) in prior
years. A reversal of an impairment loss is recognised as income
immediately.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition.
Cost is calculated using the weighted average cost formula.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Financial guarantees
Where the Company has entered into financial guarantee
contracts, such as over a lease, these are initially measured at fair
value, and later revalued to the higher of: expected credit losses,
and the amount initially recognised less any cumulative income/
amortisation.
Trade receivables are initially measured at the transaction price,
and subsequently measured at amortised cost less provision or
impairment. The Group recognises a loss allowance for expected
credit losses on trade receivables, which is updated at each
financial reporting date to reflect changes in credit risk since initial
recognition.
Expected credit losses are estimated using a provision matrix
based on the Group’s historical credit loss experience, adjusted
for factors that are specific to the debtors, general economic
conditions, and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including time
value of money where appropriate.
Financial asset
The Group holds a financial asset of £0.2 million (2021: £2.6 million )
reflecting the amount which the administrators of MUK and MBS
are expected to pay towards settlement of the Group’s secured
debt. This amount represents the realisation of cash from the
wind‑up of the UK business through the administration process. The
asset has been fair valued based on the administrators’ worst‑
case estimate of the amount that the Group will receive.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, and other short‑term highly liquid investments that are
readily convertible to a known amount of cash and are subject to
an insignificant risk of change in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according
to the substance of the contractual arrangements entered into. An
equity instrument is any contract that evidences a residual interest
in the assets of the Group after deducting all of its liabilities.
Bank borrowings
Interest‑bearing bank loans and overdrafts are initially measured
at fair value, net of direct issue costs. Finance charges, including
premiums payable on settlement or redemption and direct issue
costs, are accounted for on an accruals basis to the income
statement using the effective rate interest method and are added
to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
Finance costs directly attributable to the acquisition or construction
of qualifying assets are capitalised. Qualifying assets are those
that necessarily take a substantial period of time to prepare for
their intended use.
Lease guarantees
Trade payables
Amounts which have fallen due are treated as financial guarantee
contracts under IFRS 9: Financial instruments. Amounts which are a
potential future liability are accounted for under IAS 37: Provisions.
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
Financial instruments
Financial assets and liabilities are recognised on the Group’s
balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Equity instruments
Equity instruments issued by the Company are recorded as the
proceeds are received, net of direct issue costs.
Derivative financial instruments
The Group’s financial risk management policy prohibits the use
of derivative financial instruments for speculative or trading
Mothercare plc annual report and accounts 2022
73
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
2 Significant accounting policies (continued)
purposes and the Group does not therefore hold or issue any such
instruments for such purposes.
an expense based on its estimate of the 20% discount related to
shares expected to vest on a straight‑line basis over the vesting
period.
Embedded derivatives
Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of the host contracts,
and the host contracts are not measured at fair value through
profit or loss.
Warrants
Where warrants are not issued for a fixed number of shares at a
fixed amount, they are recognised as a liability at fair value on
the date of issue. Subsequently, fair value is recalculated, with
movements recognised in the income statement, at each reporting
date.
Provisions
Provisions, including liabilities of uncertain timing or amount such
as leasehold dilapidations, warranty claims and disputes, and
onerous leases, are recognised when the Group has a present
obligation as a result of a past event, and it is probable that
the Group will be required to settle that obligation. Provisions
are measured at the directors’ best estimate of the expenditure
required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
Onerous contracts
Present obligations arising out of onerous contracts are recognised
and measured as provisions. An onerous contract is considered to
exist where the Group has a contract under which the unavoidable
costs of meeting the obligations under the contract exceed the
economic benefits expected to be received under it.
Share-based payments
The Group has applied the requirements of IFRS 2 ‘Share‑based
Payments’.
The Group issues equity‑settled share‑based payments to certain
employees. Equity‑settled share‑based payments are measured
at fair value at the date of grant, and expensed on a straight‑line
basis over the vesting period. The estimates are updated at each
balance sheet date for the Group’s expectation of shares that will
eventually vest and adjusted for the effect of non‑market based
vesting conditions.
Fair value is measured by use of the valuation technique
considered to be most appropriate for each class of award,
including Black‑Scholes calculations and Monte Carlo simulations.
The expected life used in the formula is adjusted, based on
management’s best estimate, for the effects of non‑transferability,
exercise restrictions and behavioural considerations.
For cash‑settled share‑based payments, a liability equal to the
portion of the goods or services received is recognised at the
current fair value determined at each balance sheet date, with any
changes in fair value recognised in the profit or loss for the year.
The Group also provides employees with the ability to purchase
the Group’s ordinary shares at 80% of the current market value
within an approved Save As You Earn scheme. The Group records
74
Mothercare plc annual report and accounts 2022
Government Grants
The Group received government grants in prior year under the
Coronavirus 19 Job Retention Scheme (CJRS) and in accordance
with IAS 20 Accounting for Government Grants, has accounted for
this income using the Income Approach. Under this method the
income is recognised on a systematic basis in the profit and loss
account over the same period that the Group recognised the
related payroll costs that the grant is intended to compensate. This
specific grant income has been deducted in reporting the related
payroll expense.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors have
adopted various APMs of historical or future financial performance,
position or cash flows other than those defined or specified under
International Financial Reporting Standards (IFRS).
These measures are not defined by IFRS and therefore may not be
directly comparable with other companies’ APMs, including those
in the Group’s industry.
APMs should be considered in addition to, and are not intended to
be a substitute for, or superior to, IFRS measurements.
Purpose
The Directors believe that these APMs assist in providing additional
useful information on the performance and position of the Group
because they are consistent with how business performance is
reported to the Board and Operating Board.
APMs are also used to enhance the comparability of information
between reporting periods and geographical units by adjusting
for non‑recurring or uncontrollable factors which affect IFRS
measures, to aid the user in understanding the Group’s
performance.
Consequently, APMs are used by the Directors and management
for performance analysis, planning, reporting and incentive setting
purposes and have remained consistent with prior year.
The key APMs that the Group has focused on during the period
are as follows:
Group worldwide sales:
Group worldwide sales are total International retail sales. Total
Group revenue is a statutory number and is made up of receipts
from International franchise partners, which includes royalty
payments and the cost of goods dispatched to international
franchise partners.
Constant currency sales:
The Group reports some financial measures on both a reported
and constant currency basis. Sales in constant currency exclude
the impact of movements in foreign exchange translation. The
constant currency basis retranslates the previous year revenues at
the average actual periodic exchange rates used in the current
financial year. This measure is presented as a means of eliminating
the effects of exchange rate fluctuations on the year on year
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 2 Significant accounting policies (continued)
reported results. Further details are disclosed within the Financial
Review on pages 27 to 34.
Profit/(loss) before adjusted items:
The Group’s policy is to exclude items that are considered to be
significant in both nature and/or quantum and where treatment
as an adjusted item provides stakeholders with additional useful
information to assess the year‑on‑year trading performance of
the Group. On this basis, the following items were included within
adjusted items for the 52‑week period ended 26 March 2022:
• costs associated with restructuring and redundancies ;
classification of adjusted items requires significant management
judgment by considering the nature and intentions of a transaction.
Note 6 provides further details on current period adjusted items
and their adherence to Group policy.
Determination of Expected credit losses (ECL) on trade and other
receivables
Judgment is required in determining the rate of expected default
applicable for receivables. A risk matrix includes judgments for
the rates used by age and risk level of a receivable. There is also
inherent judgment in selecting the appropriate risk level for each
customer.
• movement on embedded derivatives in the shareholder
3b Key sources of estimation uncertainty
warrants;
• historic claims received against a subsidiary of Mothercare UK
Limited (in administration);
• movement on the expected outcome related to the
administration of Mothercare UK Limited (in administration).
A reconciliation of adjusted earnings is shown in note 6.
3 Critical accounting judgements and key sources of estimation
uncertainty
In the process of applying the Group’s accounting policies, which
are described in note 2, management has made judgements
that have an effect on the application of policies and reported
amounts.
3a Critical accounting judgements
Critical judgements represent key decisions made by
management in the application of the Group’s accounting policies.
Where a significant risk of materially different outcomes exists due
to management assumptions or sources of estimation uncertainty,
this will represent a critical accounting estimate. Estimates and
judgements are continually evaluated and are based on
historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
The estimates and judgements which have a significant risk of
causing a material adjustment to the carrying amount of assets
and liabilities are discussed below.
Adjusted items
The directors believe that the adjusted profit and earnings
per share measures provide additional useful information for
shareholders on the performance of the business.
These measures are consistent with how business performance is
measured internally by the Board and Operating Board.
The adjusted profit before tax measure is not a recognised
profit measure under IFRS and may not be directly comparable
with adjusted profit measures used by other companies. The
In applying the Group’s accounting policies described above,
the directors have identified that the following areas are the key
estimates that have a significant risk of resulting in a material
adjustment to the carrying value of assets and liabilities in the next
financial year.
Expected credit losses (ECL) on trade and other receivables
The provision for the allowance for expected credit losses (refer
to note 18) is calculated using a combination of internally and
externally sourced information, including future default levels
(derived from historical defaults overlaid by macro‑economic
assumptions), future cash collection levels (derived from past
trends), credit ratings and other credit data.
Once a customer has defaulted on a receivable amount, there
is limited sensitivity associated with credit risk however, prior to
default, the greatest sensitivity relates to the ability of customers to
afford their payments. Deterioration in the ability of customers to
afford their payments will cause an increase in the probability of
default.
If the ECL rates on trade receivables had been 5% higher at 26
March 2022, the loss allowance on trade receivables would have
been £0.5 million higher (2021: £0.5 million higher).
Allowances against the carrying value of inventory
The Group reviews the market value of, and demand for, its
inventories on a periodic basis to ensure that recorded inventory
is stated at the lower of cost and net realisable value. In assessing
the ultimate realisation of inventories, the Group is required to
make judgements as to future demand requirements and to
compare these with current inventory levels. Factors that could
impact estimated demand and selling prices are timing and
success of product ranges (see note 17).
A 20% change in the volume of inventories requiring clearance
through the franchise network or any alternative mediums would
impact the net realisable value by £0.2 million (2021: £0.8 million).
A 5% change in the level of markdown applied to the selling
price would impact the value of inventories by £0.1 million (2021:
£0.2 million).
Mothercare plc annual report and accounts 2022
75
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
3 Critical accounting judgements and key sources of estimation
uncertainty (continued)
3a Critical accounting judgements (continued)
Retirement benefits
Retirement benefits are accounted for under IAS 19 ‘Employee
Benefits’. For defined benefit plans, obligations are measured at
discounted present value whilst plan assets are recorded at fair
value.
As a result of changing market and economic conditions, the
expenses and liabilities actually arising under the plans in the
future may differ materially from the estimates made on the basis
of these actuarial assumptions. The plan assets are partially
comprised of equity and fixed‑income instruments. Therefore,
declining returns on equity markets and markets for fixed‑income
instruments could necessitate additional contributions to the plans
in order to cover future pension obligations. Also, higher or lower
withdrawal rates or longer or shorter life expectancy of participants
may have an impact on the amount of pension income or
expense recorded in the future.
The interest rate used to discount post‑employment benefit
obligations to present value is derived from the yields of senior,
high‑quality corporate bonds at the balance sheet date;
selection of an appropriate rate is judgemental. These generally
include AA‑rated securities. The discount rate is based on the
yield of a portfolio of bonds whose weighted residual maturities
approximately correspond to the duration necessary to cover the
entire benefit obligation.
Pension and other post‑retirement benefits are inherently long‑term
and future experience may differ from the actuarial assumptions
used to determine the net charge for ‘pension and other post‑
retirement charges’. Note 30 to the consolidated financial
statements describes the principal discount rate, inflation and
pension retirement benefit obligation assumptions that have been
used to determine the pension and post‑retirement charges in
accordance with IAS 19. The calculation of any charge relating to
retirement benefits is clearly dependent on the assumptions used,
which reflects the exercise of judgment. The assumptions adopted
are based on prior experience, market conditions and the advice
of plan actuaries.
At 26 March 2022, the Group’s pension surplus was £12.4 million (2021:
£25.6 million deficit). Further details of the accounting policy on
retirement benefits are provided in note 2.
Sensitivities to changes in assumptions in respect of discount rates,
inflation and life expectancy are included in note 30.
Deferred taxation
The Directors have to consider the recoverability of the deferred tax
assets based on forecast profits. They are regarded as recoverable
to the extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be sufficient taxable
profits from which the future reversal of the underlying timing
differences can be deducted.
Impairment of assets
The Group reviews the carrying value of assets on a periodic
basis, and whenever events or changes in circumstances indicate
that the related carrying amounts may not be recoverable.
Such circumstances or events could include: a pattern of losses
involving the asset; a decline in the market value for the asset; and
an adverse change in the business or market in which the asset
is involved. Determining whether an impairment has occurred
typically requires various estimates and assumptions, including
determining which cash flows are directly related to the potentially
impaired asset, the useful life over which cash flows will occur, their
amount and the asset’s residual value, if any, and the impact of
Brexit or COVID‑19, if any. Estimates of future cash flows and the
selection of appropriate discount rates relating to particular assets
or groups of assets involve the exercise of a significant amount of
judgment.
Cash flow projections are based on the Group’s five year internal
forecasts, the results of which are reviewed by the Board. Estimates
of selling prices and direct costs are based on past experience,
expectations of future changes in the market and historic trends.
Estimation of useful lives of property, plant and equipment,
right‑of‑use assets and intangible assets
Property, plant and equipment and intangible assets are
depreciated on a straight line basis over their useful economic
lives. This requires the estimation of how long these assets will be
in use by the business before they are either disposed of, and if
necessary, required to be replaced. The appropriateness of assets’
useful economic lives and any changes could affect prospective
depreciation rates and asset carrying values are reviewed at
least annually. Right‑of‑Use investment property assets have
been depreciated over the lease length, which was considered
appropriate having taken into account the expected net present
value of cashflows generated over the lease term. Estimation
will be required over the estimated useful economic life of the
ERP system; currently this is an asset under construction and not
being depreciated but as appropriate the Group will carry out an
assessment of how long it is expected to endure.
76
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 4. Revenue
Sale of goods to franchise partners
Royalties income
Total revenue
5. Segmental information
52 weeks
ended
26 March
2022
£ million
59.9
22.6
82.5
52 weeks
ended
27 March
2021
£ million
68.1
17.7
85.8
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 executive decision makers (comprising the executive directors and operating board) in order to allocate
resources to the segments and assess their performance. Under IFRS 8, the Group has not identified that its operations represent more
than one operating segment.
The results of franchise partners are not reported separately, nor are resources allocated on a franchise partner by franchise partner
basis, and therefore have not been identified to constitute separate operating segments.
Revenues are attributed to countries on the basis of the customer’s location. The largest International customer represents approximately
24% (2021: 23%) of Group sales.
Turnover by destination
Europe
Middle East
Asia
Total revenue
52 weeks
ended
26 March
2022
£ million
42.0
14.4
26.1
82.5
52 weeks
ended
27 March
2021
£ million
46.2
20.1
19.5
85.8
Mothercare plc annual report and accounts 2022
77
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
6. Adjusted items
The total adjusted items reported for the 52‑week period ended 26 March 2022 is a net gain of £3.1 million (2021: £12.9 million cost). The
adjustments made to reported profit before tax to arrive at adjusted profit are:
Adjusted items:
Property related income / (costs) included in administrative expenses
Restructuring and reorganisation income / (costs) included in administrative expenses
Restructuring income / (costs) included in finance costs
Adjusted items before tax *
* Tax on adjusted items was at 19% (2021: 19%).
52 weeks
ended
26 March
2022
£ million
0.5
1.4
1.2
3.1
52 weeks
ended
27 March
2021
£ million
(0.5)
(2.1)
(10.3)
(12.9)
Property related income / (costs) included in administrative expenses – £0.5 million (2021: £(0.5) million)
The current year income relates to credits arising from the settlement of a lease liability relating to a claim on a previous UK retail store.
The prior year charge included:
• £(0.3) million in relation to the Group’s warehouse facility, which became vacant as a result of the cessation of the UK operations, which
comprises £(0.2) million of dilapidations cost and £(0.1) million of loss on disposal, as the warehouse was assigned to a new tenant in
March 2021 and the IFRS 16 asset and liability were disposed of.
• £(0.2) million in relation to settlement of a lease which reverted to Mothercare when the tenant went into administration.
Restructuring and reorganisation income / (costs) included in administrative expenses – £1.4 million (2021: £(2.1) million)
The current year income includes:
• £1.6 million credits arising in relation to the profit on disposal of Mothercare UK Limited business which went into administration. Of this
£0.8 million relates to the true‑up of the financial asset arising on the revolving capital facility, which was valued at the end of financial
year 2021 based on the information available at the time, whilst assuming the worst‑case outcome. The remaining £0.8 million relates to
recovery of holding and handling costs incurred in liquidating stock owned by Mothercare UK Limited, these costs were expensed in
previous years as there was no certainty of recovery of these.
• £(0.2) million provision to settle a legal claim received against a subsidiary.
The prior year charge included:
• £(1.3) million of legal and professional costs for the Group and also the pension funds in relation to the refinancing which took place and
resulted in the raise of a loan for £19.5 million and the settlement of the revolving capital facility previously held by the Group.
• £(1.3) million of restructuring costs, comprising of legal and professional fees incurred in the transition of the Group from the FTSE to AIM
stock exchange, and severance pay for roles no longer required as a result of the reduction in size of the Group.
• £1.4 million of credits arising in relation to the profit on disposal of Mothercare UK Limited business, which went into administration. Of this,
£0.8 million relates to the true‑up of the financial asset arising on the revolving capital facility, which was valued at the end of financial
year 2020 based on the information available at the time, whilst assuming the worst‑case outcome; and the remaining £0.6 million were
amounts arising on tax adjustments.
• £(0.7) million of costs incurred on the relocation of the Group’s head office.
• £(0.2) million of costs incurred on the implementation of a new ERP system for the Group; these are the amounts which were determined
not to meet the conditions for capitalisation as they were part of the research stage of the project.
Restructuring income/(costs) included in finance costs – £1.2 million (2021: £(10.3) million)
The £1.2 million income relates to 15.0 million 12 pence warrants issued in prior year. The warrant options issued to the shareholders expired
in March 2022 without the shareholders exercising the warrants. The prior year charge related to increases in the fair value of embedded
derivatives relating to shareholder loans due to the uncertainty in the UK market. The shareholder loans converted to equity in March 2021
and were fair valued immediately prior to their transfer to share capital and share premium.
78
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 6. Adjusted items (continued)
Cashflows arising on adjusted items
Property related costs
Restructuring and reorganisation costs in
administrative expenses
Restructuring costs in financing costs
Total
7. Profit/(loss) from operations
Cash flows from operating activities
Cash flows from investing activities
52 weeks
ended
26 March
2022
£ million
–
1.6
–
1.6
52 weeks
ended
27 March
2021
£ million
(0.7)
(2.3)
–
(3.0)
Profit/(loss) from operations (except where specifically stated) has been arrived at after crediting/(charging):
Net total foreign exchange loss
Cost of inventories recognised as an expense
Wright‑up (write‑down) of inventories to net realisable value
Depreciation of property, plant and equipment
Amortisation of right‑of‑use assets
Amortisation of intangible assets – software
Gain on disposal of property, plant and equipment
Rental income from investment properties
Rental expense of properties (see note 28)
Loss allowance on trade receivables (see note 18)
Warehouse, freight and duty costs
IT contracts and maintenance
Staff costs (including directors*):
Wages and salaries (including cash bonuses, excluding share‑based payment charges)
Social security costs
Pension costs (including administrative expenses and PPF levy of defined benefit scheme)
Share‑based payments charge (see note 29)
* Directors include executive and non‑executive directors.
52 weeks
ended
26 March
2022
£ million
–
–
–
–
52 weeks
ended
26 March
2022
£ million
(0.5)
(50.4)
3.2
(0.3)
(0.3)
(0.3)
–
–
(0.6)
(0.5)
(2.8)
(4.0)
(8.1)
(0.9)
(2.2)
(0.6)
52 weeks
ended
27 March
2021
£ million
–
–
–
–
52 weeks
ended
27 March
2021
£ million
(1.4)
(57.0)
(0.3)
(0.3)
(1.5)
(0.2)
0.1
2.0
(2.1)
(1.0)
(3.7)
(4.7)
(10.1)
(1.1)
(3.9)
(0.5)
Mothercare plc annual report and accounts 2022
79
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
7. Profit/(loss) from operations (continued)
An analysis of the average monthly number of full and part‑time employees throughout the Group, including directors*, is as follows:
Number of employees comprising:
UK stores
Head Office
Overseas
* Directors include executive and non‑executive directors.
52 weeks
ended
26 March
2022
Number
–
157
7
164
52 weeks
ended
27 March
2021
Number
247
179
10
436
Details of Directors’ emoluments, share options and beneficial interests are provided within the remuneration report on pages 44 to 55.
The analysis of auditor’s remuneration is as follows:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor for other services to the Group:
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Total non‑audit fees
The policy for the approval of non‑audit fees is set out on page 47, in the corporate governance report.
8. Net finance costs
Interest and bank fees on bank loans and overdrafts
Other interest payable
Net interest expense on liabilities/return on assets on pension
Interest on lease liabilities
Fair value movement on embedded derivatives
Fair value movement on warrants
Interest payable
Net interest income on liabilities/return on assets on pension
Net finance costs/(income)
52 weeks
ended
26 March
2022
£ million
0.0
0.1
0.1
–
52 weeks
ended
26 March
2022
£ million
–
2.5
0.5
0.1
–
(1.2)
1.9
–
1.9
52 weeks
ended
27 March
2021
£ million
0.1
0.2
0.3
0.2
52 weeks
ended
27 March
2021
£ million
1.8
6.2
–
0.9
9.1
1.2
19.2
(0.2)
19.0
80
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued
9. Taxation
The (credit)/charge for taxation on profit/(loss) for the period comprises:
Current tax:
Current year
Adjustment in respect of prior periods
Deferred tax: (see note 16)
Origination and reversal of temporary differences
Adjustment in respect of prior periods
(Credit)/charge for taxation on profit/(loss) for the period
52 weeks
ended
26 March
2022
£ million
1.7
–
1.7
(2.7)
–
(1.0)
52 weeks
ended
27 March
2021
£ million
0.9
(0.6)
0.3
–
(0.2)
0.1
UK corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the period. The increase in the corporation tax
rate from 19% to 25% was substantively enacted by the balance sheet date and will be effective from 1 April 2023. As a result, the relevant
deferred tax balances have been remeasured. Deferred tax balances are expected to unwind after 1 April 2023. The impact of the change
in tax rate has been recognised in tax expense in profit or loss, except to the extent that it relates to items previously recognised outside
profit or loss.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The (credit)/charge for the period can be reconciled to the profit/(loss) for the period before taxation per the consolidated income
statement as follows:
Profit/(loss) for the period before taxation
Profit/(loss) for the period before taxation multiplied by the standard rate of corporation tax
in the UK of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes
Impact of difference in current and deferred tax rates
Income not taxable
Impact of overseas tax rates
Impact of overseas taxes expensed
Deferred tax recognized in other comprehensive income
Adjustment in respect of prior periods – current tax
Adjustment in respect of prior periods – deferred tax
Deferred tax not recognised/written off
(Credit)/charge for taxation on profit/(loss) for the period
52 weeks
ended
26 March
2022
£ million
52 weeks
ended
27 March
2021
£ million
11.1
2.1
1.2
0.1
(1.0)
0.6
–
(3.1)
–
–
(0.9)
(1.0)
(21.4)
(4.1)
0.1
–
0.9
(0.7)
–
(0.6)
(0.2)
4.7
0.1
In addition to the amount charged to the income statement, deferred tax relating to retirement benefit obligations amounting to
£3.1 million has been charged directly to other comprehensive income (2021: (£10.2) million).
10. Dividends
There was no final dividend for the period (2021: £nil) and no interim dividend was paid during the period (2021: £nil).
Mothercare plc annual report and accounts 2022
81
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
11. Earnings / (losses) per share
Weighted average number of shares in issue
Dilutive potential ordinary shares
Diluted weighted average number of shares
Number of shares at period end
Profit/(loss) for basic and diluted earnings per share
Adjusted items (note 6)
Tax effect of above items
Adjusted profit / (loss)
Basic earnings / (losses) per share
Basic adjusted earnings / (losses) per share
Diluted earnings / (losses) per share
Diluted adjusted earnings / (losses) per share
Analysis of shares by class
Ordinary shares at period end date
SAYE options
Value creation plan
LTIP options
Warrants
Total
52 weeks
ended
26 March
2022
million
563.8
10.1
573.9
563.8
52 weeks
ended
27 March
2021
million
379.0
–
379.0
563.8
£ million
£ million
12.1
(3.1)
–
9.0
(21.5)
12.9
–
(8.6)
Pence
Pence
1.6
2.1
1.6
2.1
26 March
2022
million
563.8
3.7
–
11.3
–
578.8
(5.7)
(2.3)
(5.7)
(2.3)
27 March
2021
million
563.8
2.6
0.4
10.7
15.0
592.5
Where there is a loss per share, the calculation has been based on the weighted average number of shares in issue, as the loss renders
all potentially dilutive shares anti‑dilutive.
82
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 12. Subsidiaries and joint ventures
Details of all the Group’s investments in subsidiaries and joint ventures, all of which are wholly owned (except where stated) and included
in the consolidation, at the end of the reporting period is as follows:
Investment in subsidiaries
Country
% owned
Nature of Business
Direct/
indirect
UK(1)
UK(1)
UK(1)
UK(1)
UK(1)
Hong Kong(2)
UK(1)
UK(1)
Jersey(3)
UK(1)
Chelsea Stores Holdings Limited
Chelsea Stores (EBT Trustees) Limited
Chelsea Stores Holdings 2 Limited
Early Learning Centre Limited
Mothercare Toys 3 Limited
Mothercare Group Sourcing Limited
Mothercare Toys 2 Limited
TCR Properties Limited
Mothercare (Jersey) Limited
Mothercare Finance Limited
Mothercare Sourcing Division (Bangladesh) Private Limited Bangladesh(4)
Mothercare Finance Overseas Limited
Mothercare Group Limited (The)
Mothercare Services Limited
Mothercare (Holdings) Limited
Gurgle Limited
Mothercare International (Hong Kong) Limited
Mothercare Sourcing India Private Limited
Mothercare Inc
Princess Products Limited
Mothercare Procurement Limited
Mothercare Sourcing Limited
Mothercare Trademarks AG
Clothing Retailers Limited
Retail Clothing Limited
Strobe (2) Investments Limited
Strobe Investments Limited
Mothercare Commercial (Shanghai) Co Limited
Mothercare Global Brand Limited
Mothercare Europe Global Brand Limited
Mothercare Finance (2) Limited
Cayman Islands(5)
UK(1)
UK(1)
UK(1)
UK(1)
Hong Kong(2)
India(6)
USA(7)
UK(1)
Hong Kong(2)
UK(1)
Switzerland(8)
UK(1)
UK(1)
Jersey(3)
Jersey(3)
China(9)
UK(1)
ROI(10)
UK(1)
Investment in joint ventures
Wadicare Limited*
*As the joint venture is loss‑making, no share of profits has been recognised.
Registered office address;
(1) Westside 1, London Road, Hemel Hempstead, HP3 9TD
(2) 26th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong
(3) Sanne Secretaries Limited, IFC5, St Helier, JE1 1ST, Jersey
(4) 62/1 Purana Paltan, Level 4, Motijheel C/A, Dhaka 1000, Bangladesh
(5) Maples & Calder, PO Box 309, Grand Cayman, Cayman Islands
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Direct
Holding Company
Indirect
Dormant
Indirect
Holding Company
Indirect
Non Trading
Indirect
Property Company
Indirect
Non Trading
Indirect
Dormant
Direct
Dormant
Direct
Non Trading
Direct
Holding Company
Indirect
Dormant
Dormant
Direct
Investment Holding Company Direct
Indirect
Non Trading
Indirect
Holding Company
Non Trading
Indirect
Investment Holding Company Indirect
Indirect
Trading
Indirect
Non Trading
Direct
Dormant
Direct
Non ‑Trading
Direct
Dormant
Direct
Dormant
Indirect
Non Trading/Dormant
Indirect
Dormant
Direct
Non Trading
Direct
Non Trading
Indirect
Non Trading
Direct
Trading
Indirect
Dormant
Indirect
Trading
Place of
incorporation
Cyprus
Proportion of
ownership
interest
%
30
Proportion
of voting
power held
%
30
(6) Number 100, N.A Elixir, 2nd Floor, 4th B Cross, 5th Block Industrial Layout, Koramangala, Bangalore, 560095, India
(7) 1209 Orange Street, Wilmington, Delaware, 1980, USA
(8) Haldenstrasse 5, 6340 Baar, Switzerland
(9) Unit 7 and 8, 18 Floor, No 3 Building, No 1193 ChangNing Road, ChangNing District, Shanghai, China
(10) The Greenway, Block C, 1120114 St Stephen’s Green, Dublin 2, Ireland
Mothercare plc annual report and accounts 2022
83
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
13. Intangible assets
Cost
As at 28 March 2020
Additions
As at 27 March 2021
Additions
As at 26 March 2022
Amortisation and impairment
As at 28 March 2020
Amortisation
As at 27 March 2021
Amortisation
As at 26 March 2022
Net book value
As at 28 March 2020
As at 27 March 2021
As at 26 March 2022
Software
£ million
Software
under
development
£ million
Intangible assets
Total
Intangibles
£ million
1.4
0.1
1.5
–
1.5
0.8
0.2
1.0
0.3
1.3
0.6
0.5
0.2
–
0.6
0.6
2.8
3.4
–
–
–
–
–
–
0.6
3.4
1.4
0.7
2.1
2.8
4.9
0.8
0.2
1.0
0.3
1.3
0.6
1.1
3.6
The Group does not hold any intangible assets with a restricted title.
Software
Software is amortised on a straight line basis over its expected useful life which is usually five years. At each balance sheet date, the
Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss (if any). Intangible assets including software under the course of construction are tested for impairment annually
irrespective of whether there are any indicators of impairment. Where the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. As at year end, there
are no intangible assets remaining with an indefinite useful life.
The recoverable amount is deemed to be the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash‑generating unit (“CGU”) is estimated to be less than its carrying amount, the carrying
amount of the asset or CGU is reduced to that recoverable amount. An impairment loss is recognised as an expense in administrative
expenses immediately.
The relevant CGUs have been identified as the whole Group for any other software as these are used across the entire business. The key
assumptions for the value in use calculations are those regarding the discount rate. Management has used a pre‑tax discount rate of 13%.
Cashflow projection has been based on management’s most recent budget, which is for an eighteen month period with a projection
taking this out five years. Management have based the budgets on historic performance, adjusted for changes due to COVID‑19 and
the evolving business model. Various scenario analyses were run and there was sufficient headroom; the headroom was not particularly
sensitive to any budgetary assumptions used.
Sensitivity analysis has been undertaken, which reduces the net present value of future cash flows. There is no indication that the carrying
value of software would require further impairment over and above the £nil million (2021: £nil million) already booked.
Software additions include £nil (2021: £0.1 million) of internally generated intangible assets.
At 26 March 2022, the Group had entered into contractual commitments for the acquisition of software amounting to £nil million
(2021: £0.1 million).
84
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued
14. Property, plant and equipment
Cost
As at 28 March 2020
Additions
As at 27 March 2021
Additions
As at 26 March 2022
Accumulated depreciation and impairment
As at 28 March 2020
Charge for period
As at 27 March 2021
Charge for period
As at 26 March 2022
Net book value
As at 28 March 2020
As at 27 March 2021
As at 26 March 2022
Fixtures,
fittings,
equipment
£ million
2.4
0.1
2.5
0.1
2.6
1.7
0.3
2.0
0.3
2.3
0.7
0.5
0.3
An impairment review of Group level intangibles and fixed assets was completed and based on the value in use of the Group level cash
flows, no further impairment charge has been made.
Mothercare plc annual report and accounts 2022
85
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
15. Leases
Right-of-use Assets
At 28 March 2020
Additions
Disposals
Amortisation
Balance at 27 March 2021
Additions
Amortisation
Balance at 26 March 2022
Investment property
Land and buildings
£ million
Property, Plant and
Equipment
Land and buildings
£ million
Property, Plant and
Equipment
IT equipment
£ million
7.8
–
(6.6)
(1.2)
–
–
–
–
1.5
–
(0.3)
1.2
(0.3)
0.9
0.1
–
(0.1)
–
–
–
–
Total
£ million
7.9
1.5
(6.7)
(1.5)
1.2
(0.3)
0.9
An impairment review of investment property was completed and based on the net present value of the expected cashflows, an
impairment charge of £nil million (2021: £nil million) has been made. The net present value is equivalent to the fair value.
Lease liabilities
At 28 March 2020
Additions
Disposals
Interest expense
Lease payments
Balance at 27 March 2021
Additions
Interest expense
Lease payments
Balance at 26 March 2022
Land and buildings
£ million
IT equipment
£ million
Total
£ million
(8.3)
(1.5)
7.2
(0.9)
2.1
(1.4)
–
(0.1)
0.4
(1.1)
(0.1)
–
0.1
–
–
–
–
–
–
–
(8.4)
(1.5)
7.3
(0.9)
2.1
(1.4)
–
(0.1)
0.4
(1.1)
86
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 16. Deferred tax assets and liabilities
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon in the current and prior
reporting period:
At 28 March 2020
(Charge) /credit to income
Credit/(charge) to other
comprehensive income
At 27 March 2021
(Charge) /credit to income
Credit/(charge) to other
comprehensive income
At 26 March 2022
Accelerated
tax
depreciation
£ million
0.1
(0.1)
–
–
(0.2)
–
(0.2)
Short–term
timing
differences
£ million
(0.3)
0.3
–
–
1.3
–
1.3
Retirement
benefit
obligations
restated
£ million
(10.2)
–
10.2
–
–
(3.1)
(3.1)
Losses
£ million
Other
£ million
–
–
–
–
–
–
–
–
–
–
–
1.6
–
1.6
Total
£ million
(10.4)
0.2
10.2
–
2.7
(3.1)
(0.4)
Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to do so. The following is the
analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
26 March
2022
£ million
2.9
(3.3)
(0.4)
27 March
2021
£ million
–
–
–
At 26 March 2022, the Group has unused capital losses of £229.3 million (2021: £439.4 million) available for offset against future capital gains.
No asset has been recognised in respect of the capital losses as it is not considered probable that there will be future taxable capital
gains. The capital losses may be carried forward indefinitely.
The Group has taken a prudent approach given the uncertainty around future profitability of the relevant statutory entities and as at the
balance sheet date deferred tax assets of £Nil (2021: £0.1 million) on accelerated depreciation, and £2.4 million (2021: £0.1 million) on short‑
term timing differences have not been recognised. The Group also has unrelieved tax losses of £43.9 million (2021: £67.9 million) available for
offset against future profits at the balance sheet date. No deferred tax asset has been recognised for such losses.
In arriving at the decision not to recognise a deferred tax asset, management has critically assessed all available information, including
future business profit projections and in certain cases, analysis of historical operating results. These forecasts are consistent with those
prepared and used internally for business planning and impairment testing purposes. Following this evaluation, it was determined there
would be insufficient taxable income generated to realise the benefit of the remaining deferred tax assets in the near future.
At the reporting date, deferred tax liabilities of £0.1 million (2021: £0.1 million) relating to withholding taxes have not been provided for in
respect of the aggregate amount of unremitted earnings of £2.6 million (2021: £33.5 million) in respect of subsidiaries. No liability has been
recognised because the Group, being in a position to control the timing of the distribution of intra group dividends, has no intention
to distribute intra group dividends in the foreseeable future that would trigger withholding tax. There are no unremitted earnings in
connection with interests in joint ventures.
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87
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
17. Inventories
Gross value
Allowance against carrying value of inventories
Finished goods and goods for resale
Finished goods and goods for resale comprises the following:
Finished goods and goods for resale – at a distribution centre
Finished goods and goods for resale – in transit
Finished goods and goods for resale
26 March
2022
£ million
3.1
(1.0)
2.1
26 March
2022
£ million
1.9
0.2
2.1
27 March
2021
£ million
10.1
(4.2)
5.9
27 March
2021
£ million
3.4
2.5
5.9
The cost of inventories recognised as an expense during the year was £50.4 million (2021: £57 million). The amount of write down of
inventories to net realisable value recognised within net income in the period is a credit of (£3.2) million (2021: £0.3 million charge for total
operations). All inventories (2021: All) are expected to be recovered within the year.
18. Trade and other receivables
Trade receivables gross
Expected credit losses (ECL) under IFRS 9
Trade receivables net
Prepayments
Accrued income
Other receivables
VAT
Trade and other receivables due within one year
26 March
2022
£ million
27 March
2021
£ million
9.9
(6.5)
3.4
1.8
1.6
0.8
0.5
8.1
18.9
(7.3)
11.6
2.1
1.9
1.0
0.8
17.4
The following table details the risk profile of trade receivables based on the Group’s provision matrix, which determines the expected
credit loss by reference to age of the debt as well as micro and macroeconomic factors.
Trade receivables – days past due
Expected credit loss rate
(ECL)
Estimated total gross carrying
amount at default
Lifetime ECL
At 26 March 2022
Trade receivables – days past due
Expected credit loss rate (ECL)
Estimated total gross carrying
amount at default
Lifetime ECL
At 27 March 2021
Not past due
£ million
< 30 days
£ million
31–60 days
£ million
61–90 days
£ million
91–120 days
£ million
>120 days
£ million
Total
£ million
42%
3.4
(1.4)
2.0
35%
0.7
(0.2)
0.5
49%
0.5
(0.2)
0.3
0%
0.0
0.0
0.0
71%
0.0
0.0
0.0
89%
5.3
(4.7)
0.6
66%
9.9
(6.5)
3.4
Not past due
£ million
< 30 days
£ million
31–60 days
£ million
61–90 days
£ million
91–120 days
£ million
20%
24%
>120 days
£ million
92%
Total
£ million
39%
11%
7.6
(0.9)
6.7
15%
3.0
(0.5)
2.5
9%
1.6
(0.2)
1.4
0.2
–
0.2
0.4
(0.1)
0.3
6.1
(5.6)
0.5
18.9
(7.3)
11.6
88
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 18. Trade and other receivables (continued)
The following tables explain how significant changes in the gross carrying amount of the trade receivables contributed to the loss
allowance.
The following summarises the movement in the allowance for doubtful debts:
Balance at start of period
Amounts written off during the period as uncollectable
Amounts recovered in the period
Charged in the period
Balance at end of period
52 weeks ended
26 March
2022
£ million
52 weeks ended
27 March
2021
£ million
(7.3)
1.4
–
(0.6)
(6.5)
(8.5)
2.0
0.1
(0.9)
(7.3)
The Group’s exposure to credit risk inherent in its trade receivables is discussed in note 21. The Group has no significant concentration of
credit risk, except as disclosed above. The Group operates effective credit control procedures in order to minimise exposure to overdue
debts. Before accepting any new trade customer, the Group obtains a credit check from an external agency to assess the credit quality of
the potential customer and then sets credit limits on a customer by customer basis.
Debtor balances which are not provided for are either on payment plans and abide or pay to terms with the exception of timing due to
unforeseen circumstances.
Provisions for doubtful trade receivables are established based upon the difference between the receivable value and the estimated
net collectible amount. The Group establishes its provision for doubtful trade receivables based on its historical loss experiences and an
analysis of the counterparty’s current financial position.
The average credit period taken on sales of goods is disclosed in note 21. No interest is charged on trade receivables, however, the right
to charge interest on outstanding balances is retained.
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
19. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short‑term bank deposits with an original maturity of three months or
less. The carrying amount of these assets approximates their fair value.
20. Borrowings
The Group had outstanding borrowings at 26 March 2022 of £19.1 million (2021: £19.0 million).
In November 2020, the Group drew down on a four‑year term loan of £19.5 million (£19.1 million net of prepaid facility fees) with Gordon
Brothers. The loan is secured on the assets and shares of specific Group subsidiaries. Interest amounts payable on this facility are not
materially sensitive to changes in LIBOR; the interest rate payable is 13% plus SONIA.
The Group also holds a financial asset of £0.2 million (2021: £2.6 million) reflecting the expected proceeds from the wind‑down of the UK
operations by the administrators of Mothercare UK Limited. The total expected repayment due is £0.2 million (2021: £2.6 million).
The Group held shareholder loans which converted to equity in March 2021, and therefore there are no outstanding amounts at the
current financial period end.
Mothercare plc annual report and accounts 2022
89
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
20. Borrowings (continued)
Borrowing facilities
Borrowings:
Secured borrowings at amortised cost:
Term loan
Prepaid facility fee
Total Borrowings
Amount due for settlement after one year
21. Financial risk management
26 March
2022
£ million
27 March
2021
£ million
19.5
(0.4)
19.1
19.5
19.5
(0.5)
19.0
19.5
A. The classes and categories of the Group’s financial instruments are categorised as follows:
Financial Instruments: Categories
Financial assets
Customer and other receivables at amortised cost*
Cash and short‑term deposits
Financial assets
Total
Financial liabilities
Derivatives not designated as hedging instruments
Trade and other payables at amortised cost**
Lease liabilities
Interest bearing loans and borrowings:
Term loan
Total
Fair value level
26 March
2022
£ million
27 March
2021
£ million
3
2
5.0
9.2
0.2
14.4
–
9.7
1.1
19.5
30.3
13.5
6.9
2.6
23.0
1.8
21.8
1.4
19.5
44.5
*
Prepayments of £1.8 million (2021: £2.1 million), the VAT receivable of £0.5 million (2021: £0.8 million) and other debtors of £0.8 million (2021: £1 million) do not meet the definition of a
financial instrument.
** Other creditors (including payroll creditors and deferred income) of £2.4 million (2021: £3.1 million) do not meet the definition of a financial instrument.
The Group’s finance team performs valuations of financial items for financial reporting purposes, in consultation with third party valuation
specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with the overall
objective of maximising the use of market‑based information. The finance team reports directly to the Chief Financial Officer and to the
Audit and Risk Committee, with whom valuation processes and fair value changes are discussed.
Fair value hierarchy levels 1‑3 are based on the degree to which the fair value is observable and are defined as:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted process included within Level 1 that are observable for
the asset or liability, either directly (i.e. Prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
Derivatives and the financial asset are valued at fair value. All other financial assets/liabilities are valued at amortised cost.
90
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued
21. Financial risk management (continued)
The following valuation techniques are used for instruments categorised in Levels 2:
Derivatives not designated as hedging instruments (Level 2)
Warrants – £nil (2021: £1.2 million)
There were no outstanding warrants at the end of the year. The warrants issued in March 2021 were not traded on an active market,
however the inputs used in the valuation were all observable inputs: volatility was calculated using the Group’s share price trends; the risk
free rate was based on government data; and the share price used was the stock exchange listing price as at the reporting date. The
valuation of these inputs was predominantly sensitive to the share price, which is not judgmental. A change in the risk free rate and/or
volatility percentage would have no notable effect on the valuation. The exercise price was 12 pence.
Financial guarantees – £nil (2021: £0.6 million)
In prior year the group held a financial guarantee over a leasehold property previously traded by Mothercare UK Ltd (in administration)
which was not traded on an active market, however the inputs used in the valuation were all observable inputs – only amounts which had
already fallen due by the year end date was recognised as a financial guarantee.
Financial assets (Level 3) – the financial asset represents a right, arising under the sales purchase agreement with the administrators of
MUK, to receive the proceeds of the wind‑up of the UK retail store estate and website operations as repayment for the Group’s secured
borrowings. All amounts the Group is required to pay have now been settled, and the financil asset valuation has been calculated by
using the worst case scenario, i.e. that the Group will receive a further £0.2 million. Many of the outflows which would impact the valuation
of this financial asset have now been finalised, with the final repayment being dependent on the amounts to be received back by the
merchant acquirer and final settlement of VAT. In the comparative period, the financial asset was estimated by the worst case outcome
expected at that time, which was a settlement of £2.6 million.
B. Terms, conditions and risk management policies
The Board approves treasury policies and senior management directly controls day‑to‑day operations within these policies. The major
financial risks to which the Group is exposed relate to movements in foreign exchange rates and interest rates. Where appropriate, cost
effective and practicable, the Group uses financial instruments and derivatives to manage these risks. No speculative use of derivatives,
currency or other instruments is permitted. The Group’s financial risk management policy is described in note 21.
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the
returns to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of equity
attributable to equity holders of the parent comprising issued capital, reserves and retained earnings as disclosed in the statement of
changes in equity.
C. Foreign currency risk management
The Group incurs foreign currency risk on purchases whenever they are denominated in a currency other than the functional currency. This
risk is managed through the natural offset of sales and purchases denominated in foreign currency.
The Group historically used forward foreign currency contracts to reduce its cash flow exposure to exchange rate movements, primarily
on the US dollar. In doing so, hedge accounting was applied; contracts were considered effective cash flow hedges and accounted for
by recognising the gain/loss on the hedge through reserves. There were no contracts outstanding at the year end date or prior year end.
The Group has more recently relied on its foreign currency denominated revenues to provide a natural hedge against its foreign currency
denominated stock purchases.
The Group incurs foreign currency risk on royalty income as local sales are translated into Sterling amounts on which royalties are
calculated. To help mitigate against further currency impacts, the Group previously entered into hedging contracts. The Group has more
recently relied on the balance created by foreign currency denominated stock purchases.
Foreign exchange rate risk
Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes
in foreign exchange rates. The Group uses UK pounds sterling as its reporting currency. As a result, the Group is exposed to foreign
exchange rate risk on financial assets and liabilities that are denominated in a currency other than UK sterling, primarily in US dollars and
Hong Kong dollars.
Consequently, it enters into various contracts that reflect the changes in the value of foreign exchange rates to preserve the value of
assets, commitments and anticipated transactions. The Group previously used forward contracts and options, primarily in US dollars, but
has not entered into any contracts since the latest ones it held expired in May 2019.
Mothercare plc annual report and accounts 2022
91
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
21. Financial risk management (continued)
Derivatives embedded in non‑derivative host contracts have been recognised separately as derivative financial instruments when
their risks and characteristics are not closely related to those of the host contract and the host contract is not stated at its fair value with
changes in its fair value recognised in the income statement.
Of total continuing sales, 22% (2021: 25%) were invoiced in foreign currency. The Group purchases product in foreign currencies, representing
approximately 98% (2021: 98%) of purchases.
The Group did not hold any foreign currency forward exchange contracts at 26 March 2022; nor were they committed to any such
contracts (2021: none).
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as
follows:
US dollar
Euro
Indian rupee
Chinese renminbi
Bangladeshi taka
Liabilities – Trade payables
Assets – Trade receivables
Assets – Cash
26 March
2022
£ million
27 March
2021
£ million
26 March
2022
£ million
27 March
2021
£ million
26 March
2022
£ million
27 March
2021
£ million
(1.7)
–
(0.4)
–
–
(2.1)
(7.3)
(0.1)
(0.4)
–
–
(7.8)
0.7
–
0.3
–
–
1.0
3.5
0.5
0.6
–
–
4.6
0.9
0.1
0.9
–
0.1
2.0
1.0
–
0.8
–
0.1
1.9
Liabilities included in the table above are categorised as trade payables (2021: all trade payables).
Assets included in the table above are categorised as Trade debtors of £1.0 million (2021: £4.6 million) and cash of £2.0 million (2021:
£1.9 million)
Currency sensitivity analysis
The Group’s foreign currency financial assets and liabilities are denominated mainly in US dollars. The following table details the impact
of a 10% increase in the value of pounds sterling against the US dollar. A negative number indicates a net decrease in the carrying value
of assets and liabilities and a corresponding loss in adjusted items or in other comprehensive income where pounds sterling strengthens
against the US dollar.
US dollar impact
D. Credit risk
Reflected in profit and loss
Reflected in equity
26 March
2022
£ million
0.0
27 March
2021
£ million
0.3
26 March
2022
£ million
–
27 March
2021
£ million
–
Credit risk is the risk that a counterparty may default on their obligation to the Group in relation to lending, hedging, settlement and
other financial activities. The Group’s credit risk is primarily attributable to its trade receivables. The Group has a credit policy in place
and the exposure to counterparty credit risk is monitored. The Group mitigates its exposure to counterparty credit risk through minimum
counterparty credit guidelines, diversification of counterparties, working within agreed counterparty limits and bank guarantees where
appropriate.
The carrying amount of the financial assets represents the maximum credit exposure of the Group. The carrying amount is presented
net of impairment losses recognised. The maximum exposure to credit risk comprises trade receivables as shown in note 18, and cash
and derivative financial assets. Debtor balances which are not provided for are either on payment plans and abide or pay to terms with
exception of timing due to unforeseen circumstances.
The average credit period on International gross trade receivables based on International revenue was 33 days (2021: 49 days).
92
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21. Financial risk management (continued)
E. Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk
management framework for the management of the Group’s short‑, medium‑ and long‑term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities
by continuously monitoring forecast and actual cash flows, and matching the maturity profiles of financial assets and liabilities and
monitoring covenant compliance and headroom.
The table below shows the maturity analysis of the undiscounted remaining contractual cash flows of the Group’s financial liabilities,
including cash flows in respect of derivatives:
Financial liabilities
Borrowings
Trade and other payables
Lease liabilities
At 26 March 2022
Financial liabilities
Borrowings
Trade and other payables
Derivatives
Lease liabilities
At 27 March 2021
Less than 1 year
£ million
1 to 2 years
£ million
2–5 years
£ million
Over 5 years
£ million
–
9.7
0.3
10.0
–
–
0.8
0.8
19.5
–
–
19.5
–
–
–
–
Less than 1 year
£ million
1–2 years
£ million
2–5 years
£ million
Over 5 years
£ million
–
21.8
1.8
0.3
23.9
–
–
–
0.4
0.4
19.5
–
–
0.7
20.2
–
–
–
–
–
Total
£ million
19.5
9.7
1.1
30.3
Total
£ million
19.5
21.8
1.8
1.4
43.5
Stock payments due to suppliers are matched with franchise partner payments and as a result the unwind of trade payables from the
balance sheet is equal and opposite to trade receivable cash receipts from franchise partners. From summer 2020, the Group has been
sourcing and selling stock to franchise partners through a tripartite contracting mechanism. Under the tripartite agreements, each party
commits to produce, deliver and pay for stock to agreed timelines, this method of contracting greatly reduces the working capital burden
for the Group as all payments to suppliers are offset by cash receipts from franchise partners which are made in advance of the payment
to supplier.
There are some exceptions to this way of working where franchise partners do still receive invoices from the Group, which are settled on
agreed terms. These exceptions are incorporated into cash forecasts and the business has the headroom to deal with these. Away from
stock the overhead recovery and royalties are charged on terms which vary by franchise partner which provide cash flow to cover the
overhead costs.
F. Interest rate risk
The principal interest rate risk of the Group arises in respect of the drawdown of the term loan. This facility is at a fixed rate plus SONIA,
it exposes the Group to cashflow interest rate risk. The interest exposure is monitored by management but due to low interest rate levels
during the period the risk is believed to be minimal and no interest rate hedging has been undertaken.
G. Market risk
The Group is exposed to market risk, primarily related to foreign exchange and interest rates. The Group’s objective is to reduce, where it
deems appropriate to do so, fluctuations in earnings and cash flows associated with changes in interest rates, foreign currency rates and
of the currency exposure of certain net investments in foreign subsidiaries. It is the Group’s policy to use derivative financial instruments,
where possible, to manage exposures of fluctuations on exchange rates. The Group only sells existing assets or enters into transactions
and future transactions (in the case of anticipatory hedges) that it confidently expects it will have in the future, based on past experience.
The Group expects that any loss in value for these instruments generally would be offset by increases in the value of the underlying
transactions.
Capital management policies and procedures
The Group’s capital management objectives are:
• To ensure the Group’s ability to continue as a going concern;
• To provide an adequate return to shareholders by pricing products and services in a way that reflects the level of risk involved in
providing those goods and services.
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93
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21. Financial risk management (continued)
G. Market risk (continued)
The Group monitors capital on the basis of the carrying amount of equity, any secured borrowing facilities and any subordinated /
un‑secured loans, less cash and cash equivalents as presented in the statement of financial position.
Management assess the Group’s capital requirements in order to maintain an efficient overall financing structure while avoiding excess
leverage. This takes into account the subordination levels of the Group’s various classes of debt. The Group manages the capital structure
and makes adjustments to it in light of changes in economic conditions and the risk characteristics of underlying assets. In order to
maintain or adjust the capital structure, the Group may raise new loan financing or issue new shares to reduce debt.
22. Trade and other payables
Current liabilities
Trade payables
Payroll and other taxes including social security
Accruals
Deferred income
26 March
2022
£ million
27 March
2021
£ million
4.7
1.6
5.0
0.8
12.1
11.8
1.8
10.0
1.3
24.9
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases is 48 days (2021: 56 days). The Group has financial risk management policies in place to ensure that all
payables are paid within the credit timeframe.
Deferred income is a contract liability; it relates to amounts received from franchise partners before the stock has passed into their control.
The performance criteria which must be met is for the Group to provide the franchise partners control of the stock. Of the £0.8 million
deferred income balance (2021: £1.3 million), all (2021: all) of it will be included in revenue within one year.
The directors consider that the carrying amount of trade payables approximates to their fair value. Included within accruals is an amount
of £0.1 (2021: £1.0 million) in relation to contractual liabilities arising as part of the administration of Mothercare UK Limited. These represent
management’s best estimate of the amounts that are due to third parties.
26 March
2022
£ million
27 March
2021
£ million
0.8
0.9
1.7
0.1
0.8
0.9
0.9
1.7
2.6
2.3
1.9
4.2
0.2
1.5
1.7
2.5
3.4
5.9
23. Provisions
Current liabilities
Property provisions
Other provisions
Short-term provisions
Non-current liabilities
Property provisions
Other provisions
Long-term provisions
Property provisions
Other provisions
Total provisions
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23. Provisions (continued)
The movement on total provisions is as follows:
Balance at 27 March 2021
Utilised in period
Charged in period
Transferred from accruals
Transferred to financial instruments
Balance at 26 March 2022
Property
provisions
£ million
Other
provisions
£ million
Total
provisions
£ million
2.5
(2.4)
0.8
–
–
0.9
3.4
(1.9)
0.2
–
–
1.7
5.9
(4.3)
1.0
–
–
2.6
Property provisions charged in the current year represent £0.8 million property rates liability relating to the Group’s former Daventry
warehouse. In the prior year property provisions comprised £1.1 million of obligations in relation to the lease at the Group’s Daventry
warehouse site, which was assigned to a third party in March 2021.
Other provisions include provisions for uninsured losses and contractual agreements requiring future cash outflows. The timing of these
provisions is uncertain and estimation has been used to consider what amounts will fall due in less than one year.
24. Share capital
Issued and fully paid
Ordinary shares of 1 pence each
Balance at beginning of period
Conversion to equity of shareholder loans
Issue of shares in the period
Balance at the end of period
Deferred shares of 49 pence each
Balance at beginning of period
Balance at end of period
Total share capital at end of period
52 weeks
ended
26 March
2022
Number of
shares
563,836,626
–
–
563,836,626
170,871,885
170,871,885
52 weeks
ended
27 March
2021
Number of
shares
374,192,494
189,644,132
–
563,836,626
170,871,885
170,871,885
52 weeks
ended
26 March
2022
£ million
52 weeks
ended
27 March
2021
£ million
5.6
–
5.6
83.7
83.7
89.3
3.7
1.9
–
5.6
83.7
83.7
89.3
On 12 March 2021, the Group’s shares were transferred from the London Stock Exchange to instead be listed on AIM. Following this, on
17 March 2021, the shareholder loans – previously held within borrowings with the option to convert classified as a financial liability –
converted to equity. The agreements entitled the shareholders to 189,644,132 ordinary 1 pence shares, giving rise to £1.9 million of share
capital, £17.1 million of share premium and £9.5 million of distributable profits.
The deferred shares do not carry any voting rights.
Further details of employee and executive share schemes are given in note 30.
The own shares reserve of £1.0 million (2021: £1.0 million) represents the cost of shares in Mothercare plc purchased in the market and held
by the Mothercare Employee Trusts to satisfy options under the Group’s share option schemes (see note 30). The total shareholding is
925,342 (2021: 925,342) with a market value at 26 March 2022 of £0.1 million (2021: £0.1 million).
25. Share premium
Balance at beginning of period
Premium arising on conversion of shareholder loans to equity
Balance at end of period
See note 25 above for further details.
52 weeks
ended
26 March
2022
£ million
108.8
–
108.8
52 weeks
ended
27 March
2021
£ million
91.7
17.1
108.8
Mothercare plc annual report and accounts 2022
95
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26. Translation reserves
Translation reserve
Balance at beginning of period
Balance at end of period
27. Reconciliation of cash flow from operating activities
Profit / (loss) from operations
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of right‑of‑use assets
Amortisation of intangible assets
Profit on sale of property, plant and equipment
(Loss) / gain on adjusted foreign currency movements
Equity‑settled share‑based payments
Movement in provisions
Net gain on financial derivative instruments
Payments to retirement benefit schemes
Charge to profit from operations in respect of retirement benefit schemes
Operating cash inflow / (outflow) before movement in working capital
Decrease in inventories
Decrease in receivables
Decrease in payables
Net cash inflow / (outflow) from operating activities
Income taxes paid
Net cash inflow / (outflow) from operating activities
Changes in liabilities arising from financing activities
52 weeks
ended
26 March
2022
£ million
(3.7)
(3.7)
52 weeks
ended
26 March
2022
£ million
13.0
0.3
0.3
0.3
–
(0.1)
0.5
(3.4)
(0.6)
(5.2)
1.7
6.8
3.8
11.7
(12.9)
9.4
(1.3)
8.1
52 weeks
ended
27 March
2021
£ million
(3.7)
(3.7)
52 weeks
ended
27 March
2021
£ million
(2.4)
0.3
1.5
0.2
(0.1)
0.1
0.5
0.4
(0.8)
(4.5)
3.4
(1.4)
3.8
0.9
(5.1)
(1.8)
(0.8)
(2.6)
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non‑cash changes.
Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s
consolidated cash flow statement as cash flows from financing activities.
96
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Analysis of net debt and financial liabilities
Term loan
Cash at bank
IFRS 16 lease liabilities
Net debt
Warrants
Net debt and financial liabilities
1. Non‑cash movements comprise
Note
20
19/20
27 March
2021
£ million
Cash flow
£ million
Foreign
exchange
£ million
Other
non–cash
movements1
£ million
(19.0)
6.9
(1.4)
(13.5)
(1.2)
(14.7)
2.2
0.4
2.6
–
2.6
–
0.1
–
0.1
–
0.1
(0.1)
–
(0.1)
(0.2)
1.2
1.0
26 March
2022
£ million
(19.1)
9.2
(1.1)
(11.0)
–
(11.0)
• Term loan ‑ unwinding of £0.1 million of the facility fee charged on the term loan.
• Non‑cash movements on IFRS 16 lease liabilities represents the of interest accrued on lease liabilities.
• Non‑cash movements on the warrants represents the expiration of the warrant options issued to shareholders which were not exercised at year end.
28. Lease liabilities
At the balance sheet date, the maturity analysis of the Group’s undiscounted cashflows on IFRS 16 leases were as follows:
Not later than one year
After one year but not more than five years
After five years
Total undiscounted cashflows
Land and Buildings
26 March
2022
£ million
Other
26 March
2022
£ million
Land and Buildings
27 March
2021
£ million
Other
27 March
2021
£ million
0.4
0.9
–
1.3
–
–
–
–
0.5
1.2
–
1.7
–
–
–
–
The Group’s weighted average incremental borrowing rate for all leases is 11% (2021: 11%); as a practical expedient, a lessee may apply a
single discount rate to a portfolio of leases with reasonably similar characteristics; leases have been grouped according to location, type
and lease length. The practical expedient has been employed such that leases where the contractual term ends within twelve months of
the date of initial application have been accounted for as short‑term leases. The Group has elected to rely on its assessment on whether
a lease is onerous under IAS37: Provisions, Contingent Assets, and Contingent Liabilities immediately before the date of initial application,
and included an adjustment to the right‑of‑use asset at transition date, i.e. the beginning of the comparative period, in accordance with
this.
The weighted average incremental borrowing rate for leases is 11% (2021: 11%).
Operating lease commitments consisted of total future minimum lease payments of £nil (2021: £0.1 million) for leases which were not
accounted for under IFRS 16 ‘Leases’.
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97
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29. Share-based payments
An expense is recognised for share‑based payments based on the fair value of the awards (at the date of grant for those awards due to
be equity settled and at year end for those due to be cash settled), the estimated number of shares that will vest and the vesting period
of each award. The decrease in the charge year on year is due to a change in the estimated number of shares that will vest.
Share‑based payments comprise a charge of £0.6 million (2021: £0.5 million (2021: £0.9 million ) including national insurance. At 26 March 2022
there is a balance sheet liability of £0.4 million related to the expected national insurance charge when share‑based payment schemes
vest (2021: £0.4 million), which has been recognised in accruals in note 23.
These charges relate to the following schemes:
A. Save As You Earn Schemes
B. Long Term Incentive Plans – LTIP 2019
C. Long term Incentive Plans – LTIP 2020
D. Long Term Incentive Plans – LTIP 2021
Details of the share schemes that the Group operates are provided in the directors’ remuneration report on pages 44 to 55.
For each scheme, expected volatility was determined with reference to the 90‑day volatility of the Company share price over the
previous three years. The expected life used in each model has been adjusted, based on management’s best estimate, for the effects
of non‑transferability, exercise restrictions and behavioural considerations. The dates of exercise are not disclosed, as it is not deemed
practicable to do so.
A. Save As You Earn Schemes
The employee Save As You Earn schemes are open to all eligible employees and provide for a purchase price equal to the average
daily mid‑market price on the three days prior to the offer date, less 20%.
The share options can be applied for during a two week period in the year of invitation and savings are placed in an employee Save As
You Earn bank account on trust for a three‑year period.
The number of shares outstanding under the Save As You Earn Schemes is as follows:
Balance at beginning of period
Granted during period
Forfeited during period
Exercised during period
Cancelled in the period
Expired during period
Balance at end of period
Weighted
average
exercise
price
13p
12p
19p
–
14p
23p
14p
52 weeks
ended
26 March
2022
Number of
shares
2,614,618
1,335,598
(36,000)
–
(144,000)
(116,306)
3,653,910
52 weeks
ended
27 March
2021
Number of
shares
2,078,084
1,551,240
(91,075)
–
(261,968)
(661,663)
2,614,618
The shares outstanding at 26 March 2022 had a weighted average remaining contractual life of 2.2 years and held a weighted average
exercise price of 14p.
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The fair value of Save As You Earn share options is calculated based on a Black‑Scholes model with the following assumptions:
Grant date
Number of options granted
Share price at grant date
Exercise price
Expected volatility
Risk free rate
Expected dividend yield
Time to expiry
Fair value of option
December
2021
1,335,598
19.5p
15.4p
75%
0.63%
Nil
3 years
11p
December
2020
1,551,240
13p
10p
87%
0.03%
Nil
3 years
8.2p
The resulting fair value is expensed over the service period of three years on the assumption that 10% of the December 2021 options / 10%
of December 2020 options will lapse over the service period as employees leave the Group.
B. Long Term Incentive Plans – LTIP 2019
In March 2019 the Group granted awards under the Mothercare plc 2019 Long term Incentive Plan. These consisted of an award of
Conditional shares, which carry no performance conditions other than continued service, and a nil cost option award for which vesting
is subject to a relative total shareholder return (TSR) performance condition against a bespoke comparator group as well as fulfilment of
share price underpin. These options were valued using a Monte‑Carlo simulation model, the key assumptions and inputs are below
Grant date
Number of shares awarded
Share price at date of grant
Exercise price
Expected volatility
Risk‑free rate
Expected dividend yield
Fair value of shares granted
Average time to expiry
March
2019
Nil cost
options
7,608,053
22.5p
Nil
58.3%
0.63%
Nil
13.1p
3.0 years
March
2019
Conditional
shares
774,110
22.5p
Nil
58.3%
0.63%
Nil
22.5p
3.0 years
C. Long Term Incentive Plans – LTIP 2020
In September 2020, the Group granted further awards under the Mothercare plc 2019 Long term Incentive Plan. The performance
conditions relate to Group earnings before interest, tax, depreciation and amortisation, and relative total shareholder return weighted
equally 50:50. No consideration is payable for the grant of these awards. There were two types of awards granted, and a different
valuation model has been used for each. The EBITDA awards were valued using a Black‑Scholes model, the key assumptions and inputs
are below. The TSR awards were valued using a Monte‑Carlo simulation model, the key inputs and assumptions are below.
Grant date
Number of shares awarded
Share price at date of grant
Exercise price
Expected volatility
Risk‑free rate
Expected dividend yield
Fair value of shares granted
Average time to expiry
September
2020
EBITDA awards
3,095,000
10.3p
Nil
66.4%
(0.1) %
Nil
10.3p
3.0 years
September
2020
TSR awards
3,095,000
10.3p
Nil
66.4%
(0.1) %
Nil
5.0p
3.0 years
Mothercare plc annual report and accounts 2022
99
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29. Share-based payments (continued)
D. Long Term Incentive Plans – LTIP 2021
In September 2021, the Group granted further awards under the Mothercare plc 2019 Long term Incentive Plan. The performance
conditions relate to Group earnings before interest, tax, depreciation and amortisation, and absolute total shareholder return weighted
equally 50:50. No consideration is payable for the grant of these awards. There were two types of awards granted, and a different
valuation model has been used for each. The EBITDA awards were valued using a Black‑Scholes model, the key assumptions and inputs
are below. The TSR awards were valued using a Monte‑Carlo simulation model, the key inputs and assumptions are below.
Grant date
Number of shares awarded
Share price at date of grant
Exercise price
Expected volatility
Risk‑free rate
Expected dividend yield
Fair value of shares granted
Average time to expiry
30. Retirement benefit schemes
Defined contribution schemes
September
2021
EBITDA awards
694,350
10.9p
Nil
43.9%
0.56%
Nil
10.9p
3.0 years
September
2021
TSR awards
694,350
17.2p
Nil
79%
0.18%
Nil
12p
3.0 years
The Group operates defined contribution retirement benefit schemes for all qualifying employees.
The cost charged to the income statement of £0.4 million (2021: £0.5 million ) represents contributions due and paid to these schemes by the
Group at rates specified in the rules of the plan.
Defined benefit schemes
The Group previously operated two defined benefit pension schemes for employees of Mothercare UK Limited; these were both closed
to future accrual with effect from 28 March 2013.
The pension schemes’ assets are held in a separate trustee administered fund to meet long‑term pension liabilities to past and present
employees. The trustees of the fund are required to act in the best interest of the fund’s beneficiaries.
For the protection of members’ interests, the Group has appointed three trustees, who are independent of the Group. To maintain this
independence, the trustees and not the Group are responsible for their own successors.
The most recent full actuarial valuation was carried out as of 31 March 2020 and was updated for the purpose of these disclosures with the
advice of professionally qualified actuaries. The present value of the defined benefit obligation, the related current service cost and the
past service cost were measured using the projected unit method.
The value of the deficit under the full actuarial valuation at 31 March 2020 was £124.6 million; the Group’s deficit payments are calculated
using this as the basis.
The schemes expose the Company to actuarial risks such as longevity risk, interest rate risk and market (investment) risk.
100
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Below is an outline of the risks, what they are and how the Group mitigates those risks.
Risk
Description
Mitigation
Volatile asset returns
The Defined Benefit Obligation (DBO) is calculated
using a discount rate set with reference to AA
corporate bond yields; asset returns that differ from
the discount rate will create an element of volatility in
the solvency ratio.
The Staff Scheme has a 24% strategic allocation to a
diversified growth fund. The Executive Scheme had a
14% strategic allocation to a diversified growth fund at
the start of the year, but this was reduced to nil at the
end of the year (implementation took place post year
end in April / May).
Although these growth assets are expected to
outperform corporate bonds in the long term, they
can lead to volatility and mismatching risk in the short
term. The allocation to growth assets is monitored to
ensure it remains appropriate give the UK Pension
Schemes’ long‑term objectives.
Changes in
bond yields
A decrease in corporate bond yields will increase
the present value placed on the DBO for accounting
purposes, although this will be partially offset by an
increase in the value of the UK Pension Fund’s bond
holdings.
Over the year, the Company and Trustee strategic
allocation to growth assets, bond and bond‑like
assets has changed.
Staff Scheme – in August 2021, the remaining cash held
at Insight from the equity de‑risking in December 2019
was invested in the secured finance and LDI portfolios
with Insight.
Executive Scheme – in January 2022, a 10% strategic
allocation to buy and maintain credit was introduced.
Post year end, in April/May 2022, the Scheme was
further de-risked by removing the diversified growth
fund allocation (10%). The proceeds were used
to increase the buy and maintain credit strategic
allocation to 20%.
As at the end of the year, the Staff Scheme had a
strategic allocation to bond and bond‑like assets of
76% (up from 68% last year) and the Executive Scheme
had a strategic allocation to bond and bond‑like
assets of 100% (up from 86% last year)
The target interest rate and inflation hedge ratios
within the leveraged LDI portfolio were increased from
last year. For the Staff Scheme, the targets are 65%.
For the Executive Scheme, the target interest rate and
inflation hedge ratios are 73% and 77% respectively
(on the self-sufficiency basis, gilts + 0.4% p.a.). This is
designed to reduce funding level volatility by investing
in assets which more closely match the characteristics
of the liabilities.
The Staff and Executive Schemes have a proportion
of their strategic allocation (39% and 29% respectively)
in liability‑driven investments, which provide a hedge
against falling bond yields (falling yields which
increase the DBO will also increase the value of the
bond assets). Note that there are some differences
in the credit quality of bonds held by the UK Pension
Fund and the bonds analysed to decide the DBO
discount rate, such that there remains some risk should
yields on different quality bond/ swap assets diverge.
Inflation risk
A significant proportion of the DBO is indexed in line
with price inflation (specifically inflation in the UK Retail
Price Index and Consumer Price Index)and higher
inflation will lead to higher liabilities (although, in most
cases, this is capped at an annual increase of 5%).
The UK Pension Fund holds some inflation-linked
assets which provide a hedge against higher‑than‑
expected inflation increases on the DBO.
Life expectancy
The majority of the UK Pension Fund’s obligations
are to provide benefits for the life of the member, so
increases in life expectancy will result in an increase in
the liabilities.
Other Risks: There are a number of other risks of running the UK Pension Fund including operational risks (such as paying out the wrong
benefits) and legislative risks (such as the government increasing the burden on pension through new legislation).
Mothercare plc annual report and accounts 2022
101
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
30. Retirement benefit schemes (continued)
Asset‑liability matching strategy
The Trustees of the Schemes, on behalf of the Company, ensure that the Schemes’ assets are invested in accordance with the policies and
objectives set out in the Schemes’ Statement of Investment Principles.
The Schemes investment strategies aim to match the Schemes’ assets to a portion of the interest rate and inflation sensitivity of the
retirement obligations by investing in unleveraged and leveraged fixed and index‑linked UK government bonds, as part of a liability
driven investment portfolio. The Schemes also invest in other bond and bond‑like investments (multi‑asset credit and secured finance)
in order to broadly match benefit payments as they fall due, whilst aiming to generate an excess return over that expected from
government bonds. The Trustees, on behalf of the Company, reviews how the expected yield on the investments are matching the
expected cash outflows arising from the retirement obligations, and the degree to which the interest rate and inflation sensitivity of the
retirement obligations is matched.
In addition, the Trustees believe that, over the long term, excess returns over that expected from government bonds will be generated
through investing in equities and other return enhancing asset classes, as well as through the use of active management where
appropriate.
Over the year, the Company and Trustee strategic allocation to growth assets, bond and bond‑like assets has changed.
As at the end of the year, the Staff Scheme had a strategic allocation to bond and bond‑like assets of 76% (up from 68% last year) and the
Executive Scheme had a strategic allocation to bond and bond‑like assets of 100% (up from 86% last year).
The target interest rate and inflation hedge ratios within the leveraged liability driven investment portfolio were increased from last year.
For the Staff Scheme, the targets are 65% and for the Executive Scheme, the target interest rate and inflation hedge ratios are 73% and
77% respectively.
The IAS 19 valuation conducted for the period ended 26 March 2022 disclosed a net defined pension surplus of £12.4 million (2021: deficit of
£25.6 million).
Right to recognise a surplus position on the balance sheet
The Group is considered to have an unconditional right to a surplus under the scheme on scheme wind‑up, under Paragraph 11(c) of IFRIC
14. Under the scheme rules, the ability for the Trustees to apply remaining assets on a wind up, after all benefit entitlements have been
secured in full, to increase the benefits of the Schemes’ members prior to them being distributed to the Schemes’ employers is subject to
employer consent. Such consent can be properly withheld by the employer under current trust law and in that scenario, the Trustees have
to pay any balance remaining to employers in such shares as the Trustees after consultation with the Actuary shall decide. This is subject
to the requirements of section 76 of the Pensions Act 1995 having been met. The surplus can therefore be returned to the employers on
a winding up as long as the usual requirements in section 76 of the Pensions Act 1995 relating to the provision of pension increases have
been met (those requirements apply to all UK registered DB schemes).
The major assumptions used in the updated actuarial valuations were:
Discount rate
Inflation rate – RPI
Inflation rate – CPI
Future pension increases
Male life expectancy at age 65
Male life expectancy at age 65 (currently aged 45)
Female life expectancy at age 65
Female life expectancy at age 65 (currently aged 45)
26 March
2022
2.8%
3.45%
2.85%
3.1%
21.2 years
22.5 years
24.0 years
25.4 years
27 March
2021
2.0%
3.1%
2.4%
3.1%
21.6 years
22.9 years
24.2 years
25.7 years
Following the closure of the Scheme to future benefit accrual, a salary increase assumption is not required.
The mortality assumptions used are the SAPS tables published by the CMI allowing for future improvements in line with the CMI 2018
projections with a long term annual rate of improvement of 1.25 per cent. and a core smoothing factor of 7. Weighted averages across
both schemes are shown above.
102
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued 30. Retirement benefit schemes (continued)
The Company’s basis for setting the discount rate was amended to a ‘single agency’ yield curve approach in previous years. Under this
approach the yield curve is based on a AA ‘universe’ including bonds that receive at least one AA rating from the main ratings agencies
(i.e. a ‘single agency’ approach) and a bootstrapping method to extrapolate the curve at the longer end. Logarithmic regression has
been used to find the best fitting yield curve for the spot yields calculated from the bond data.
The effects of movements in the principal assumptions used to measure the scheme liabilities for every change in the relevant assumption
are set out below:
Assumption
Discount rate
Rate of RPI inflation
Rate of CPI inflation
Life expectancy (age 65)
Discount rate
Rate of RPI inflation
Change in
assumption
+/– 0.1%
+/– 0.1%
+/– 0.1%
+ 1 year
+/– 0.5%
+/– 0.5%
Impact on
scheme
liabilities
£ million
–6.3 /+6.4
+5.1 /–5.6
+1.9 /–1.9
+ 15.6
–29.8 /+33.7
+24.0 /– 24.4
The above sensitivities are applied to adjust the defined benefit obligation at the end of the reporting period. Whilst the analysis does
not take account of the full distribution of cash flows expected under the scheme, it does provide an approximation to the sensitivity of the
assumptions shown.
Amounts expensed in the income statement in respect of the defined benefit schemes are as follows:
Running costs
Net interest on liabilities/return on assets
52 weeks
ended
26 March
2022
£ million
1.7
0.5
2.2
52 weeks
ended
27 March
2021
£ million
3.4
(0.2)
3.2
Running costs are included in administrative expenses, and net interest on liabilities/return on assets is included in finance costs.
The amount recognised in other comprehensive income for the period ended 26 March 2022 is an income of £35.0 million (2021: £56.8 million
loss).
The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit retirement schemes is as
follows:
Present value of defined benefit obligations
Fair value of schemes’ assets
Asset/(Liability) recognised in balance sheet
26 March
2022
£ million
(383.4)
395.8
12.4
27 March
2021
£ million
(429.0)
403.4
(25.6)
Mothercare plc annual report and accounts 2022
103
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
30. Retirement benefit schemes (continued)
Movements in the present value of defined benefit obligations were as follows:
At beginning of period
Interest expense
Actuarial gains / (losses) arising from changes in demographic assumptions
Actuarial gains/(losses) arising from changes in financial assumptions
Experience gains on liabilities
Benefits paid
At end of period
Movements in the fair value of schemes’ assets were as follows:
At beginning of period
Interest income
Scheme administration expenses
(Losses) / gains on scheme assets excluding interest income
Company contributions
Benefits paid
At end of period
The major categories of scheme assets are as follows:
Corporate bonds
Index‑linked government bonds
Government bonds
Diversified growth funds
Cash and cash equivalents
26 March
2022
£ million
Quoted
market
price in
active
market
180.8
29.3
89.0
91.8
4.9
395.8
26 March
2022
£ million
No quoted
market
price in
active
market
–
–
–
–
–
–
52 weeks
ended
26 March
2022
£ million
(429.0)
(8.3)
5.6
36.2
–
12.1
(383.4)
52 weeks
ended
26 March
2022
£ million
403.4
7.8
(1.7)
(6.8)
5.2
(12.1)
395.8
27 March
2021
£ million
Quoted
market
price in
active
market
151.4
90.8
34.6
93.1
33.5
403.4
52 weeks
ended
27 March
2021
£ million
(371.4)
(7.3)
(5.1)
(78.4)
19.1
14.1
(429.0)
52 weeks
ended
27 March
2021
£ million
401.2
7.5
(3.4)
7.7
4.5
(14.1)
403.4
27 March
2021
£ million
No quoted
market
price in
active
market
–
–
–
–
–
–
The percentage split of the scheme assets between sterling and non‑sterling are as follows as at 26 March 2022:
Overseas equities
Corporate bonds
Secured Finance
Liability driven investments
Diversified growth funds
Cash and cash equivalents
Sterling
Non–sterling
100%
100%
100%
100%
66%
100%
–
–
–
–
34%
–
The schemes’ assets do not include any of the Group’s own financial instruments nor any property occupied by, or other assets used by,
the Group.
104
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued
30. Retirement benefit schemes (continued)
The Company is committed to paying into each scheme for future years, these amounts are outlined on the below Schedule of
Contributions:
Exec Scheme year ending March
2023
2024
2025
Amount
£1.0 million
£1.2 million
£1.4 million
Staff Scheme year ending March
Amount
2023
2024
2025
£8.0 million
£9.3 million
£10.6 million
The schemes are funded by the Company. Funding of the schemes is based on a separate actuarial valuation for funding purposes for
which the assumptions may differ from the assumptions above. Funding requirements are formally set out in the Statement of Funding
Principles, Schedule of Contributions and Recovery Plan agreed between the trustees and the Company.
The weighted average duration of the defined benefit obligation at 26 March 2022 is approximately 20 years (2021: 20 years).
The defined benefit obligation at 26 March 2022 can be approximately attributed to the scheme members as follows:
• Active members: 0% (2021: 0%)
• Deferred members: 65% (2021: 61%)
• Pensioner members: 35% (2021: 39%)
All benefits are vested at 26 March 2022 (unchanged from 27 March 2021).
31. Contingent liability
In previous years, it was reported that the Group had a contingent liability in relation to orders that were initially placed with suppliers for
the Spring/Summer 2020 and Autumn/Winter 2020 seasons but that were cancelled pre year end by management. Whilst resolution has
been reached with many of these suppliers there is still the possibility that due to the administration process or the impact of COVID‑19
there may be a claim from a supplier in relation to these issues.
The value of any potential cost to the Group is not possible to determine with any accuracy however management’s best estimate of
future outflows in relation to the above is considered to be less than £1.4 million in value (2021: £1.0 million), with the probability being low but
not remote.
As part of the administration of Mothercare UK Limited, the group signed an agreement with the administrators to purchase certain
assets and liabilities. There are certain pending claims for which the group may have to contribute via a top‑up mechanism agreed with
the administrators. The best estimate of the outflow is considered to be less than £1.9 million. As investigations are still ongoing it is not
possible to identify a timeline within which it might be resolved.
32. 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 are disclosed below.
Trading transactions
During the year, Group companies entered into the following transactions with related parties who are not members of the Group:
52 weeks ended 26 March 2022
Joint ventures
52 weeks ended 27 March 2021
Joint ventures
Sales of
goods
£ million
–
Sales of
goods
£ million
0.1
Purchases of
goods
£ million
–
Purchases
of
goods
£ million
–
Amounts
owed by
related
parties
£ million
1.8
Amounts
owed by
related
parties
£ million
1.8
Amounts
owed to
related
parties
£ million
–
Amounts
owed to
related
parties
£ million
–
Sales of goods to related parties were made at the Group’s usual cost prices.
Mothercare plc annual report and accounts 2022
105
HEAD_0 1st line continuedHEAD_0 1st line2nd line continuedHEAD_0 2nd lineFinancials
32. Related party transactions (continued)
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received at the year end. The
amounts shown above have been shown gross and a provision of £1.8 million (2021: £1.8 million) has been made for doubtful debts. During
the year, no debt owed from related parties was impaired (2021: £0.3 million).
Remuneration of key management personnel
The remuneration of the operating board (including directors and other key decision makers), who are the key management personnel
of the Group, is set out below in aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures’. Further information
about the remuneration of individual directors is provided in the audited part of the remuneration report on pages 44 to 55.
Short-term employee benefits
Compensation for loss of office
Mothercare Pension scheme
52 weeks
ended
26 March
2022
£ million
2.5
–
2.5
52 weeks
ended
27 March
2021
£ million
2.1
0.5
2.6
Details of other transactions and balances held with the two pension schemes are set out in note 31.
Other transactions with key management personnel
There were no other transactions with key management personnel.
Other transactions with related parties
There were no other transactions with shareholders in the current year. In the prior comparative period, one of the shareholders who
owns a significant stake in the business was involved in the following transactions: shareholder loans of £7.8 million in funds for which the
shareholder had an interest were converted to equity. In March 2021, 8.6 million 12 pence warrants were issued to these funds.
This shareholder is considered a related party through their ability to exercise significant influence as defined by IAS 28.
33. Events after the balance sheet date
Refinancing of borrowing
In the first half of FY23 the group renegotiated its existing loan facility. The total amount available under the facility remained the same.
The interest rate increased to 13% per annum plus SONIA, with SONIA not less than 1%, plus a 1% per annum compounded payment to
be made when the loan is repaid. Previously the interest rate was 12% per annum plus SONIA with a floor of 1%. The repayment date has
been extended from FY25 to FY26.
Cessation of Mothercare Business in Russia
Following the pausing of operations in Russia that we announced on 9 March 2022, on 27 June 2022 Mothercare terminated its license
and supply agreements with its franchise partner in Russia given the numerous economic, logistical and business disruptions and
the associated uncertainty and the detrimental impact on the Mothercare brand if operations resumed. With effect from that date
the franchise partner has no right to operate any Mothercare branded stores in Russia. The impact of the termination on the future
performance of the group has been outlined in the Chairman’s review on page 5.
Defined benefit scheme contributions
In order to support the new debt financing arrangements, the Trustees of the schemes agreed a further reduction in contributions after the
balance sheet date. Details of these are provided in the financial review on page 29.
106
Mothercare plc annual report and accounts 2022
HEAD_0 1st lineHEAD_0 1st line continuedHEAD_0 2nd line2nd line continuedNotes to the consolidated financial statements continued Company financial statements
Contents
108 Company balance sheet
109 Company statement of changes in equity
110 Notes to the Company financial statements
115 Shareholder information
Mothercare plc annual report and accounts 2022
107
Financials
Company balance sheet
As at 26 March 2022
Fixed assets
Investments in subsidiary undertakings
Current assets
Debtors – amounts falling due within one year
Cash and cash equivalents
Creditors – amounts falling due within one year
Derivative financial instruments
Provisions
Net current liabilities
Net liabilities
Equity
Called up share capital
Share premium
Own shares
Profit and loss account
Total Equity
For the 52 weeks ended 26 March 2022
Note
26 March
2022
£ million
27 March
2021
£ million
3
4
5
6
7
8
8
8
1.3
1.3
0.1
0.6
0.7
(171.9)
–
(0.2)
(171.4)
(170.1)
89.3
108.8
(1.0)
(367.2)
(170.1)
0.8
0.8
0.1
1.7
1.8
(170.6)
(1.8)
(0.7)
(171.3)
(170.5)
89.3
108.8
(1.0)
(367.6)
(170.5)
The Company has taken advantage of the disclosure exemption permitted by s408 of the Companies Act 2006 and has not presented a
profit and loss account. The Company reported a profit for the financial period ended 26 March 2022 of £0.4 million (2021: loss of £19.1 million).
Approved by the board on 13 September 2022 and signed on its behalf by:
Andrew Cook
Chief Financial Officer
Company Registration Number: 1950509
108
Mothercare plc annual report and accounts 2022
Company statement of changes in equity
For the 52 weeks ended 26 March 2022
Balance at 27 March 2021
Profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Balance at 26 March 2022
Balance at 28 March 2020 as previously reported
Prior year adjustments
Balance at 28 March 2020 as restated
Loss for the period
Other comprehensive income for the period
Total comprehensive income for the period
Issue of shares
Balance at 27 March 2021
Note
7
7
7
Share
capital
£ million
Share
premium
account
£ million
Own
share
reserve
£ million
89.3
–
–
–
89.3
87.4
–
87.4
–
–
–
1.9
89.3
108.8
–
–
–
108.8
91.7
–
91.7
–
–
–
17.1
108.8
(1.0)
–
–
–
(1.0)
(1.0)
–
(1.0)
–
–
–
–
(1.0)
Profit
and loss
account
£ million
(367.6)
0.4
–
0.4
(367.2)
(356.7)
(1.3)
(358.0)
(19.1)
–
(19.1)
9.5
(367.6)
Total
£ million
(170.5)
0.4
–
0.4
(170.1)
(178.6)
(1.3)
(179.9)
(19.1)
–
(19.1)
28.5
(170.5)
Mothercare plc annual report and accounts 2022
109
Financials
Notes to the company financial statements
As at 26 March 2022
General information
Mothercare plc is a public company limited by shares incorporated in Great Britain under the Companies Act 2006. The address of the
registered office is given in the shareholder information on page 115. Mothercare plc acts as a holding company for a group of companies
operating as a specialist franchisor of products for parents and young children under the Mothercare brand.
1. Significant accounting policies
The Company’s accounting period covers the 52 weeks ended 26 March 2022. The comparative period covered the 52 weeks ended
27 March 2021.
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the
definition of a qualifying entity under FRS100 ’Application of Financial Reporting Requirements’ issued by the Financial Reporting Council
(FRC). Accordingly these financial statements have been prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’ as issued
by the FRC.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemption available under the standard in relation to
share-based payments presentation of comparative information in respect of certain assets, capital management, certain revenue
requirements of IFRS 15, the presentation of a cash flow statement, standards not yet effective and certain related party transactions.
Where required, equivalent disclosures are given in the consolidated financial statements.
Going concern
The financial statements have been prepared on the historical cost basis and on the going concern basis, as described in the going
concern statement in the Financial Review on page 32.
The Directors have reviewed the Group’s latest forecasts and projections, which have been sensitivity-tested for reasonably possible
adverse variations in performance, reflecting the uncertainties around the impact of COVID-19.
The Board’s confidence in the Group’s Base Case forecast, which indicates the Group will operate within the terms of the revised
borrowing facilities which now includes more appropriate covenants following the cessation of the Russian operation and the Group’s
proven cash management capability supports our preparation of the financial statements on a going concern basis.
However, if trading conditions were to deteriorate beyond the level of risks applied in the sensitised forecast, or the Group was unable
to mitigate the material uncertainties assumed in the Base Case Forecast and the Group were not able to execute further cost or
cash management programmes, the Group would at certain points of the working capital cycle have insufficient cash. If this scenario
were to crystallise the Group would need to renegotiate with its lender in order to secure waivers to potential covenant breaches and
consequential cash remedies or secure additional funding. Therefore, we have concluded that, in this situation, there is a material
uncertainty that casts significant doubt that the Group will be able to operate as a going concern without such waivers or new financing
facilities.
Warrants
Where warrants are not issued for a fixed number of shares at a fixed amount, they are recognised as a liability at fair value on the
date of issue. Subsequently, fair value is recalculated, with movements recognised in the income statement, at each reporting date.
The Company is exempt from preparing financial instrument disclosures under FRS 101; these are included in note 22 of the Group
consolidated financial statements.
Interest rate risk
For information on the Company’s approach to interest rate risk, please see page 93 of the Group consolidated financial statements.
Liquidity risk
For information on the Company’s approach to liquidity risk, please see page 93 of the Group consolidated financial statements.
Credit risk
The Company has exposure to credit risk inherent in its receivables due from its subsidiary undertakings.
110
Mothercare plc annual report and accounts 2022
1. Significant accounting policies (continued)
Critical accounting judgements
The preparation of the Company financial statements requires management to make judgements, estimates and assumptions in
applying the Company’s accounting policies to determine the reported amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing
basis, with revisions to accounting estimates applied prospectively.
Critical judgements represent key decisions made by management in the application of the Group accounting policies. Where a
significant risk of materially different outcomes exists due to management assumptions or sources of estimation uncertainty, this will
represent a critical accounting estimate. Estimates and judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates.
The estimates and judgements which have a significant risk of causing a material adjustment to the carrying amount of assets and
liabilities are discussed below.
Impairment of assets
The Group reviews the carrying value of assets on a periodic basis, and whenever events or changes in circumstances indicate that the
related carrying amounts may not be recoverable. Such circumstances or events could include: a pattern of losses involving the asset;
a decline in the market value for the asset; and an adverse change in the business or market in which the asset is involved. Determining
whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are
directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual
value, if any.. Estimates of future cash flows and the selection of appropriate discount rates relating to particular assets or groups of assets
involve the exercise of a significant amount of judgment.
Key sources of estimation uncertainty
Allowances against the carrying value of investments in subsidiaries
The financial statements have been prepared on the historical cost basis except for the re measurement of certain financial instruments
to fair value. The principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial statements
except as noted below.
Investments in subsidiaries and associates are stated at cost less, where appropriate, provisions for impairment. The recoverable amounts
of individual investments in subsidiaries are determined from value in use calculations with a discounted cash flow model being used
to calculate this amount. The key assumptions for the value in use calculation are those regarding the discount rate and growth rates.
Management has used a pre-tax discount rate of 13.0% (2021: 13.0%) which reflects the time value of money and risks related to the cash
generating units. There have been no impairment charges during the current financial period (2021: £nil).
Cash flow projections are based on the Group’s five year internal forecasts, the results of which are reviewed by the Board. Estimates
of selling prices and direct costs are based on past experience, expectations of future changes in the market and historic trends. The
forecasts are extrapolated beyond four years based on long-term average growth rate of 0%.
2. Profit and loss account
As permitted by Section 408 of the Companies Act 2006, no separate profit and loss account is presented for the Company. The
Company’s profit for the 52 weeks ended 26 March 2022 was £0.4 million (2021: loss of £17.6 million). The auditor’s remuneration for audit and
other services is disclosed in note 7 to the consolidated financial statements.
Mothercare plc annual report and accounts 2022
111
Financials
Notes to the company financial statements
continued
3. Investments in subsidiary undertakings
Investments in the Company’s balance sheet consist of its investments in subsidiary undertakings. The Company’s subsidiaries, all of which
are wholly owned, are included in note 12 of the Group financial statements.
The Company’s investment in its subsidiary undertakings is as follows:
Investment in subsidiaries - net book value
Cost
At 27 March 2021
Disposal
Share-based payments to employees of subsidiaries
At 26 March 2022
Impairment
At 27 March 2021
Charged during the period
At 26 March 2022
Net book value
26 March
2022
£ million
1.3
27 March
2021
£ million
0.8
£ million
454.5
–
0.5
455
(453.7)
–
(453.7)
1.3
The recoverable amounts of individual investments in the Mothercare subsidiaries are determined from value in use calculations with
a discounted cash flow model being used to calculate this amount. The key assumptions for the value in use calculation are those
regarding the discount rate and growth rates. Management has used a pre-tax discount rate of 13.0% (2021: 13.0%) which reflects the time
value of money and risks related to the cash generating units. The cash flow projections are based on the financial budgets and forecasts
approved by the Board covering a five year period. No growth rate has been applied.
4. Debtors
Other debtors
5. Creditors
Creditors: amounts due within one year
Amounts due to subsidiary undertakings
Trade payables
Accruals and other creditors
Derivative financial instruments
26 March
2022
£ million
0.1
26 March
2022
£ million
169.9
–
2.0
–
171.9
27 March
2021
£ million
0.1
27 March
2021
£ million
167.8
0.3
2.5
1.8
172.4
Amounts due to subsidiary undertakings are repayable on demand. No interest is payable on the outstanding balances.
112
Mothercare plc annual report and accounts 2022
6. Provisions
Current liabilities
Property provisions
Other provisions
Short-term provisions
The movement on total provisions is as follows:
Balance at 27 March 2021
Released during the year
Charged to the income statement
Balance at 26 March 2022
26 March
2022
£ million
–
0.2
0.2
27 March
2021
£ million
0.7
–
0.7
Property
provisions
£ million
0.7
(0.7)
0.2
0.2
Other provisions of £(0.2) million relates to received against a subsidiary of Mothercare UK Limited which went into administration. In prior
year property provisions of £0.7 million related to a UK store lease which had been guaranteed by Mothercare plc.
7. Called up share capital
For details of the Company’s share capital and movements, please see note 25 to the consolidated financial statements.
Further details of employee and executive share schemes are provided in note 30 to the consolidated financial statements.
8. Reserves
Balance at 27 March 2021
Profit for the financial year
Balance at 26 March 2022
Share
premium
£ million
108.8
–
108.8
Own
shares
£ million
(1.0)
–
(1.0)
Profit
and loss
account
restated
£ million
(367.6)
0.4
(367.2)
The own shares reserve of £1.0 million (2021: £1.0 million) represents the cost of shares in Mothercare plc purchased in the market and held
by the Mothercare Employee Trusts to satisfy options under the Group’s share option schemes (see note 30). The total shareholding is
925,342 (2021: 925,342) with a market value at 27 March 2022 of £0.1 million (2021: £0.1 million).
The Company has no distributable reserves and has made no distribution during this or the prior year.
9. Events after the balance sheet date
Details on events after the balance sheet date are shown in note 35 to the consolidated financial statements.
Shareholder information (unaudited)
Shareholder analysis
A summary of holdings as at 26 March 2022 is as follows:
Banks, insurance companies and pension funds
Nominee companies
Other corporate holders
Individuals
Mothercare ordinary shares
Number of
shares
Number of
shareholders
1
480,373,063
78,689,942
4,773,620
563,836,626
1
149
160
18,382
18,692
Mothercare plc annual report and accounts 2022
113
Financials
Notes to the company financial statements
continued
10. Events after the balance sheet date (continued)
As can be seen from the above analysis, many shares are registered in the name of a nominee company as the legal owner. The
underlying holder of shares through a nominee account is the beneficial owner of these shares, being entitled to the capital value and the
income arising from them. An analysis of these nominee holdings shows that the largest underlying holders are pension funds, with unit
trusts and insurance companies the other major types of shareholder.
Share price data
Share price at 26 March 2022 (27 March 2021)
Market capitalisation
Share price movement during the year:
High
Low
2022
12.00p
£67.7m
19.95p
10.05p
2021
16.20p
£85.9m
17.90p
3.89p
All share prices are quoted at the mid-market closing price. For capital gains tax purposes:
• the market value on 31 March 1982 of one ordinary share in British Home Stores PLC is 155p and of one ordinary share in Habitat
Mothercare PLC is 133p; and
• the market value of each Mothercare plc 50p ordinary share immediately following the reduction of capital and consolidation on
17 August 2000 for the purpose of allocating base cost between such shares and the shares disposed of as a result of the reduction is
135p.
Rights issue and TERP
On 23 September 2014 the Company announced a proposed rights issue of 9 for 10 ordinary shares at 125p per new ordinary share. The
theoretical ex-rights price (‘TERP’) between 24 September and 9 October 2014 (being the last day the ordinary shares were traded cum
rights) was 178p.
Immediately before the rights issue, the issued share capital was 88,824,771. 79,942,294 new ordinary shares were issued on 27 October 2014.
The total issued share capital immediately following the rights issue was 168,767,065.
Placing and open offer
On 9 July 2018 the Company announced a proposed subdivision of shares (into 1p ordinary shares and 49p deferred shares) and a
placing and open offer of 170,871,885 ordinary 1p shares on a 1 for 1 basis at 19p per ordinary share. Immediately before the placing and
open offer, the issued share capital was 170,871,885. 170,871,885 new ordinary shares were issued on 27 July 2018. The total issued share capital
immediately following the placing and open offer was 341,743,770.
Placing
On 5 November 2019 the Company announced that 32,359,450 new ordinary 1p shares (the “Placing Shares”) had been placed by Numis
Securities Limited at a price of 10 pence per Placing Share with existing institutional investors. The Placing Shares were admitted to the
premium listing segment of the Official List on 7 November 2019. The issued share capital prior to the Placing was 341,833,044 and, following
the issue, the total number of issued shares with voting rights was 374,192,494.
Conversion shares
On 17 March 2021 189,644,132 conversion shares of 1p each were issued at 10 pence per ordinary share. The total voting rights following the
admission of the conversion shares was 563,836,626.
114
Mothercare plc annual report and accounts 2022
Shareholder information
Registrars and transfer office
Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Financial calendar
Annual General Meeting
Announcement of interim results
Preliminary announcement of results for the 52 weeks ending 25 March 2023
Issue of report and accounts
Annual General Meeting
Registered office and head office
Westside 1, London Road, Hemel Hempstead, Hertfordshire HP3 9TD www.mothercareplc.com
Registered number 1950509
Group company secretary
Lynne Medini
Registrars
2022
13 October
November
2023
July
July
September
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, Overseas +44(0)121 415 7042 www.shareview.co.uk
Postal share dealing service
A postal share dealing service is available through the Company’s registrars for the purchase and sale of Mothercare plc shares from the
www.shareview.co.uk website or on the shareholder helpline Telephone 0371 384 2013, Overseas +44(0)121 415 7042.
Further details can be obtained from Equiniti on 0371 384 2013 (calls to this number are charged at the standard landline rate per minute
plus network extras. Lines are open 8.30 am to 5.30pm, Monday to Friday).
Stockbrokers
The Company’s stockbrokers are:
finnCap Ltd, One Bartholomew Close, London, EC1A 7BL
Telephone 020 7220 0500
Numis Securities Limited, 45 Gresham Street, London, EC2V 7BF
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.
Mothercare plc annual report and accounts 2022
115
Financials
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Mothercare plc
Westside 1
London Road
Hemel Hempstead
HP3 9TD
www.mothercareplc.com
Registered in England number 1950509
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