"The figures are encouraging, but it's very early days and there'll be plenty of bumps along the road," warns Mark Newton-Jones, the new boss of Mothercare (MTC). Although UK like-for-like sales rose 1.5 per cent in the first half, and international revenue grew 5 per cent, he said a mountain of work lay ahead, and that investors should expect "extreme movements" over the next year.
Having just concluded a successful nine-for-10 rights issue - priced at 125p and raising £95m - Mothercare has cleared its debt, and will use the remaining £55m to invest in the business. That includes 50 to 70 store closures over the next couple of years, store refurbishments, a website overhaul and improvements to the quality and design of clothing. Store numbers will shrink, but space won't, as Mothercare focuses on out-of-town outlets. Two such outlets have been revamped into brighter and better configured shops, similar to department stores, with soft play areas and cafes. New brands are also being introduced, including Converse shoes, which are "selling like hotcakes".
Underlying pre-tax profit grew to £3.3m from £2m, as international profit remained flat at £25.3m and UK losses narrowed. The gross margin was level, ending five years of consecutive decline. Numis Securities expects adjusted pre-tax profit of £12.5m for the full year, giving EPS of 6.5p, up from £9.5m and 5.8p.
| MOTHERCARE (MTC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 187p | MARKET VALUE: | £316m | |
| TOUCH: | 186-188p | 12-MONTH HIGH: | 354p | LOW: 107p |
| DIVIDEND YIELD: | nil | PE RATIO: | nil | |
| NET ASSET VALUE: | 7.5p* | NET DEBT**: | £54.2m | |
| Half-year to 11 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 376 | -11.0 | -9.8 | nil |
| 2014 | 373 | 5.5 | 5.1 | nil |
| % change | -1 | - | - | - |
Ex-div: na Payment: na **Pre rights issue *Includes intangible assets of £42.9m, or 25p a share | ||||
