IC view on MTC27 May 2014 11:28
Mothercare (MTC) is still on the hunt for a new chief executive. Given the infant retailer's struggle to stem falling sales and persistent losses in the UK business, the appointment can't come soon enough.
Trading last year did match 'management expectations', but remember that guidance was slashed in January following a disastrous Christmas. Adjusted pre-tax profit of £9.5m was ahead of consensus forecasts, while worldwide network sales rose 0.5 per cent to £1.19bn.
That was driven entirely by the international business, which is in good health. With all four overseas regions performing strongly, total sales were up 6 per cent to £729m, despite "unprecedented levels of currency devaluation". Like-for-like sales rose 2.5 per cent, boosting profits 8 per cent to £45.3m.
The UK struggled - but at least trading improved. Like-for-like sales fell 1.9 per cent, compared with 3.6 per cent in the previous year and 6.2 per cent the year before that. And, after a "disappointing" third quarter, sales were flat in the final 12 weeks. Overall, retail sales dipped 8 per cent to £433m as Mothercare continued to axe unprofitable stores, while online sales grew 5 per cent to £134m. That left the UK business £21.5m in the red.
Numis Securities expects adjusted pre-tax profit of £12.5m for 2015, giving EPS of 10.8p.
MOTHERCARE (MTC)
ORD PRICE: 161p MARKET VALUE: £143m
TOUCH: 160-162p 12-MONTH HIGH: 495p LOW: 136p
DIVIDEND YIELD: nil PE RATIO: na
NET ASSET VALUE: 17p* NET DEBT: £46.5m
Year to 29 Mar Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2010 766 32.5 28.0 16.8
2011 794 8.8 7.6 18.3
2012 813 -103.0 -105.0 2**
2013 749 -23.9 -26.9 nil
2014 725 -26.3 -31.0 nil
% change -3 - - -
Ex-div: na
Payment: na
*Includes intangible assets of £44.2m, or 50p a share
**Interim dividend only
IC VIEW:
Mothercare's overseas business is supporting the UK division, which has a serious image problem. The group needs a new CEO - badly - to drag it back into the black. Until then, the shares, trading on 15 times forward earnings, remain a hold.
Last IC view: Hold, 291p, 8 Jan 2014
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