Prelim inary Results May 2 0 , 2 0 0 9 Ben Gordon Chief Executive - - PDF document

Prelim inary Results

May 2 0 , 2 0 0 9

Ben Gordon

Chief Executive

Mothercare group growth strategy

TW O BRANDS FOUR LEVERS FOR GROW TH I nternational I ntegration synergies Property portfolio Multi-channel

Neil Harrington

Finance Director

Introduction

• Group sales + 6.9% to £723.6m
• Group ‘network’ sales (inc. franchisee sales)

+ 16.4% to £983.0m

• Group profit before tax £42.2m
• Positive year end cash £24.8m
• Dividend + 20.8% to 14.5 pence

Income statement – statutory basis

4 .5 1.1 (35.2) 3 8 .6 0.1 3 8 .5 676.8 0 7 / 0 8 £ m 9.7

Other non-underlying items

4 2 .2

Profit before tax

(4.6)

Exceptional items

3 7 .1

Underlying profit before tax

(0.1)

Financing

3 7 .2

Underlying profit from operations

723.6

Revenue

0 8 / 0 9 £ m

Financial highlights – proforma basis

• Group sales + 2.8% to £723.6m
• UK LFL sales + 1.4% ; International LFL sales + 6.0%
• Total Direct sales + 25.5% to £107.3m
• UK gross margin -40 basis points
• Group underlying profit before tax + 12.4% to

£37.1m

Income statement – proforma basis

(2.0) (2.1) Amortisation of intangibles 28.5p 32.1p Underlying EPS – basic (36.1) (4.6) Exceptional items 2.5 11.8 Non-cash IAS 39 adjustment ( 2 .6 ) 4 2 .2 Profit before tax 3 3 .0 3 7 .1 Underlying profit before tax (1.4) (0.1) Financing 3 4 .4 3 7 .2 Profit from retail operations 703.6 723.6 Revenue 0 7 / 0 8 £ m 0 8 / 0 9 £ m

Strong growth in International – proforma basis

+ 12.5% 874.1 983.0 ‘Network’ sales + 1 2 .4 % 3 3 .0 3 7 .1 Total (1.4) (0.1) Financing

• 7.4%

(9.5) (8.8) Corporate + 47.9% 9.4 13.9 International

• 7.0%

34.5 32.1 UK 0 7 / 0 8 £ m 0 8 / 0 9 £ m Underlying profit + 40.9% 286.8 404.2 International retail sales

• 1.4%

587.3 578.8 UK 0 7 / 0 8 £ m 0 8 / 0 9 £ m Revenue

£4.1m growth in group underlying profit – proforma basis

£4.5m £1.3m £1.3m £0.7m £1.1m £2.6m

IFRS 2 Pensions (total) Corporate costs UK profit Interest International profit

£m 33.0 37.1

UK profit up £1.3 million – proforma basis

£m 1.3

£10.4m £4.4m £2.5m £8.0m £3.5m £2.3m £2.2m

Closed store costs LFL sales UK central costs Gross margin Store payroll Direct costs Closed store sales

15 consecutive quarters of UK LFL growth

2.1% 1.8% 0.8% 0.4% 1.6% 3.4% 3.4% 2.9% 1.0% 0.5% 1.1% 3.7%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Mothercare only Group

International

• International profit up 47.9% to £13.9m
• 115 new franchise stores; total 609 stores in

50 countries

• International franchisee retail sales up 40.9%

(+ 6.0% LFL)

• Natural currency hedge: US$ revenues pay Far

East suppliers

Franchisee retail sales – proforma basis

+ 21.9% £360.0m £438.6m Franchisee retail sales at constant currency £ 9 .4 m 12.0% £ 2 8 6 .8 m 0 7 / 0 8 + 47.9% + 40.9% £ 1 3 .9 m 6.0% £ 4 0 4 .2 m 0 8 / 0 9 Underlying PBT Franchisee like-for-like sales Franchisee retail sales

Integration of Early Learning Centre

• Integration substantially complete
• 84 ELC inserts
• Relocated ELC distribution centre
• Total benefits ahead of plan – 2008/ 09

estimate £10.0m

Property restructure – almost complete

1 4 5 1 5 2 7 1 0 3 Total stores im pacted 1 0 0 5 5 9 6 3 1 8 Total 19

• 2

16 9 Agreed 10

• 4

9 2 In negotiation 3 Downsizes 71 55 38 7 Completed % ELC inserts In town closures Out of town

• penings

9 0 % com pleted or agreed

Property restructure - effects

• LFL + 1.4% ; total UK sales down 1.4% driven

by planned space reduction

• £10.4m reduction in UK store occupancy costs
• 26.3% increase in Direct in Store sales to

£45.1m

• At least £5.0m of PBT from 2009/ 10

(including £2.4m delivered in 2008/ 09)

• Almost 50% of remaining leases expire in the

next three years

Defined benefit pension schemes

N/ A ( 5 .0 ) (2.0) (3.0) 4 .2 1.2 3.0 0 9 / 1 0 Estim ate £ m 2 .0 ( 2 5 .4 ) Net ( liability) / asset Balance Sheet ( 3 .7 ) ( 4 .7 ) Total cash funding (1.5) (2.6) Deficit contributions (2.2) (2.1) Regular contributions Cash Funding 0 .1 0 .9 Net charge (3.7) (1.6) Return on assets/ interest on liabilities 3.8 2.5 Service cost Income Statement 0 7 / 0 8 Actual £ m 0 8 / 0 9 Actual £ m

Changes to pension schemes

• Triennial valuation of defined benefit schemes

complete

• Schemes closed to new members
• Cap of 2.5% on revaluation of pension benefits
• Members contributions increased by up to 3.0%
• Annual company contributions increased by

approximately £1.0m p.a.

• One-off company contribution of £3.0m in

2009/ 10

• Above actions eliminate deficit over 10 years

Group balance sheet

2.0 (3.8) 198.0 (25.4) (1.8) 198.6 – Pensions – Tax – Net assets 27.7 33.1 – Working capital 96.6 93.1 – Fixed assets (23.7) 3.7 – Other 104.2 104.5 – Intangibles (27.7) (33.4) Non current liabilities 22.7 24.8 – Cash Net current assets Non current assets 0 7 / 0 8 £ m 0 8 / 0 9 £ m

Group cash flow

24.8 22.7

£m

£7.7m £10.9m £13.4m £22.8m £0.9m £54.6m £5.2m

Operating cash flow Financing Tax Working capital Dividends Integration/Property Capex Lease incentives

£6.6m

24.8 22.7

Group capex

5.7 0.5 0.7 5.7 0.3 9.3 (1) 16.2 (1) 2.3 6.7 15.0 Stores Systems Distribution Other Total capex

£m

2008/09 2009/10 (estimate)

(1) Net of landlords’ contributions of £6.6m in 2008/09

Guidance for 2009/ 10

• Difficult consumer environment; planning cautiously
• International and Direct continue strong growth
• 100 overseas franchise stores
• Up to £10.0m working capital outflow (International,

Direct)

• UK gross margin under pressure due to weakness of
• Sterling. Partly offset by currency gains in International
• Controllable costs reducing; pension costs increasing
• Total property strategy benefits £5.0m (including

£2.4m in 08/ 09)

• Debt free - well placed for an uncertain 2009/ 10

Ben Gordon

Chief Executive

Two world class brands

Innovation in clothing

Exclusive rights deal

Marble Arch, London

High play value toys

Summer range

• Teams in China,

Hong Kong, India

• Driving efficiencies,

margins, savings

• Great success with
• wn brand products

Direct sourcing

Mothercare group growth strategy

I ntegration Synergies Property Portfolio Multi-channel I nternational

• Brands travel
• Franchise m odel
• I nfrastructure
• Parenting centres
• Landmark stores
• High street
• Widest choice
• Int’l websites
• Gurgle.com
• ELC inserts
• Cost synergies
• Completion

Mothercare (29)

GI BRALTAR EIRE CZECH REPUBLI C CYPRUS BELGI UM RUSSIA ROMANI A POLAND MALTA GREECE UKRAI NE TURKEY SPAI N SLOVENI A SLOVAKI A TAIWAN SI NGAPORE MALAYSI A HONG KONG BRUNEI OMAN LEBANON KUWAIT BAHRAI N THAILAND NI GERIA UNITED ARAB EMI RATES SAUDI ARABIA QATAR

Mothercare International – 2004/ 05

Mothercare & ELC (51)

BELGI UM BELARUS AZERBAIJAN ARMENIA ALBANI A LATVI A KAZAKHSTAN GREECE GI BRALTAR GERMANY ROMANI A POLAND MALTA MACEDONIA LITHUANI A TURKEY SPAI N SLOVAKI A SERBIA RUSSI A INDONESIA HONG KONG CHI NA BRUNEI UKRAI NE THAILAND TAIWAN SI NGAPORE PHI LI PPI NES MALAYSI A LEBANON KUWAIT JORDAN EGYPT BAHRAI N NI GERIA UNITED ARAB EMI RATES SAUDI ARABIA QATAR OMAN PAKI STAN AUSTRALI A NEW ZEALAND INDIA UZBEKISTAN ESTONIA EIRE CZECH REPUBLI C CYPRUS BULGARIA

Mothercare group International – 2008/ 09

Russia growth story

Moscow, Russia

Middle East – Dubai Mall

Middle East – Dubai Mall

India opportunity

Ahmedabad Freeway Mall Bangalore Icon Mantri Chennai Kuppu Arcade Delhi Citywalk Saket Great India Place MGF Saket Rojouri Gardens Hyderabad Begumpet City Centre GVK Jaipur Triton Mall Suncity Kolkotta SouthCity Mumbai Bandra Juhu Inorbit Mall Nirmal Lifestyle Oberoi Mall Pune Transocean Vashi Inorbit Pune Castle Maine Mumbai Juhu Inorbit Mall

China growth

Shanghai, China

ELC – now in 29 countries

United Arab Emirates

• 12 Mothercare

franchisees in 29 countries

• Stores up from 92 to 164
• Plans for 50 more stores

in 6 countries

Mothercare group growth strategy

I nternational Property portfolio Multi-channel I ntegration synergies

ELC inserts Cost synergies Com pletion

• Brands travel
• Franchise model
• Infrastructure
• Parenting centres
• Landmark stores
• High street
• Widest choice
• Int’l websites
• Gurgle.com

ELC inserts in OOT Stores

Stoke

Synergies

• ELC inserts
• ELC warehouse move to Daventry
• ELC & MTC field management teams combined
• Integration of ELC head office into Watford HQ
• Delivery of £10.0m synergies
• Under
• way

Mothercare group growth strategy

I nternational I ntegration synergies Multi-channel Property portfolio

• Parenting centres
• Landm ark stores
• High Street

ELC inserts Cost synergies Completion

• Brands travel
• Franchise model
• Infrastructure
• Widest choice
• Int’l websites
• Gurgle.com

Mothercare property strategy

PARENTI NG CENTRE

Out of Tow n - 7 9 Over 8 k sq ft

LANDMARK

Major City Centre - 1 3 c5 -9 k sq ft

HI GH STREET

High Street – 3 1 3 c3 -5 k sq ft

Parenting centres - OOT

Aintree

Landmark stores – major cities

Birmingham

• Larger in town stores
• High traffic locations
• Major city centres and

shopping malls

• Bigger and better fit
• 10 new Landmark stores

Mothercare and ELC high street

Mothercare group growth strategy

I nternational I ntegration synergies Property portfolio Multi-channel W idest choice

I nt’l w ebsites Gurgle.com

• Brands travel
• Franchise model
• Infrastructure

ELC inserts Cost synergies Completion

• Next phase
• Parenting centres
• Landmark stores
• High street

Widest choice – Home and Travel

Wider clothing range online

• 2/ 3 of clothing range online
• 100% of clothing online in a year
• More Home and Travel than in store

ELC website

International web rollout

• Trial sites pre Christmas
• Transactional early 2010
• Local languages
• Mothercare to manage look and functionality
• Countries to run trading and fulfilment

Gurgle.com

Summary and Outlook

Q&A

Appendix: Key store data as of March 2009

I nternational Stores 6 0 9 572 494 462 328 Total 6 7 66 56 50 16 Other 83 186 237 288 2,023 76 335 411 October 2 0 0 8 * 8 5 1 9 6 2 6 1 2 8 8 2 ,0 0 7 7 9 3 2 6 4 0 5 March 2 0 0 9 * 163 154 103 Middle East 77 75 58 Far East 198 183 151 Europe 284 275 231 Sales per sq. ft. * * 2,070 2,114 1,792 Selling area (000s sq. ft.) 77 77 73 Out of town 348 361 152 High street 425 438 225 Total stores Total UK Stores March 2 0 0 8 * October 2 0 0 7 * March 2 0 0 7

* Including ELC * * Full year UK sales compared to year end UK store square footage