MOTHERCARE PLC

Financial Analysis of Mothercare Plc.



Financial Analysis of Mothercare Plc.

Introduction

Mothercare Plc. operates in retail of motherhood and children's apparel lines, furniture's and fixtures, homely equipment, bedcovers, bed sheets, blankets and related beddings, nursing, showering, travelling, and children's toys via physical point of sales system and Internet. Mothercare Plc. is currently operating in Europe, Middle East, Africa, and the Far East regions. It's headquarter is located in Hertfordshire. There are about 4350 employees working in its United Kingdome region only (Marketline, 2012, pp. 3-4).

History

The Mothercare Plc. initiated its operations in 1961 in Surrey by opening the very first store; gradually in the next year company opened its mail order system for delivering its goods. Mothercare Plc. became a publically limited company in 1972. Later it accompanied and merged its business with Habitat Chain and established Habitat Mothercare in 1982. The Mothercare Plc initiated its franchise system in 1984 in order to develop its business operations globally. Gradually it merged with British Home Stores in 1986 and the name of Holding company became Mothercare Plc. in 2000 (www.mothercareplc.com, 2012, n.d.).

Business Overview

The company's main target audience is children and mothers. It mainly sells and manufactures products like clothes for mothers, children and babies. It offers complementary homely and travelling equipment. There are three brands operating under Mothercare Plc., which are Mothercare, Gurgle.com and the early learning Centre. It conducts its operations via physical point of sales system i.e. stores in UK, Internet or e-stores, and mail orders, and franchises along with joint venture businesses. It has prevalence in 106 locations of stores, 103 stores operating in town are inclusive of 688 internationally operated stores of Mothercare Plc. Early Learning centre limited, Mothercare UK limited and Mothercare Procurement Limited is the three subsidiaries of the aforementioned Company (Marketline, 2012, pp. 3-4).

The Financial Analysis of Company

The revenues of the company increased from GBP 793.6 million in 2011 to 812 million in first quarter of 2012, showing an increase of 2% from the last year. Despite the 2 percent increase in revenue, the profit before tax of the company was negative 102 million as compared to the last year's profit of 8.8 million before tax. The decline in profitability was due to the exceptional and underlying expense of 104 million reported in the company's income statement. The underlying items included 9.1 million under the restructuring costs in UK head office, loss on disposal of property of 22.6 million, goodwill impairment of 55 million on acquisitions of ELC. These were the major drivers of expense among other miscellaneous expenses. The loss in operations led to net loss of £91.8 million in 2012 as compare to net profit of £6.5 million in 2011 (ft.com/marketsdata, 2013, n.d.).

Source: markets.ft.com

Earnings per share of the company has understandably declined from the last year due to decline in profitability and is reported to be negative 1.05 from the last year EPS of 0.08. Dividend per share also declined due to negative before tax ...