Mothercare Plc : Annual Financial Report

15 juni 2016

 

Mothercare PLC Annual Financial Report

Risk description	Impact	Mitigation	Change on last year
The anticipated turnaround of the Group's UK business may not be achievable if it fails to implement effectively key aspects of its new strategic plan.	The Group is unable to compete with other key players in the UK, including multi-channel retailers as well as internet only businesses causing the Group's in store sales to decline and reduce profits.   This risk impacts the following strategic pillars: 01, 02, 03, 04, 05	Rigorous project governance managing the key spend areas of store refurbishment and IT systems with audit oversight.   Strategic plan to refurbish all ongoing stores, varying from light touch re-fits to full refurbishment, within the three-year plan - 47 stores refurbished during FY2015/16.   Maintaining a lean organisation through tight management of resources and controlling the Group's cost base.   Simplify customers' online journey and enhance the customer experience by way of improved photo and video presentation and customer reviews.   Improve the product delivery proposition, including enabling customers to better track their product orders and provide greater convenience and choice as to delivery and collection points with stores enabled to pick product for customers from store stock.	=
The Group may be affected by challenging economic conditions and political developments affecting the UK and International markets in which it operates.   The Group's results of operation may be affected by foreign exchange risk.	As the UK economy continues to strengthen, the economic and political uncertainty enveloping eastern/southern Europe, oil based economies, and those dependent on China could have a material adverse effect on the Group's business.   Hedging foreign exchange does not eliminate the Group's exchange or interest rate risks entirely and may not be fully effective.  Any significant losses on the Group's hedging positions could have a material adverse effect on the Group's business, results of operations or financial condition.   This risk impacts the following strategic pillars: 03, 04, 06	Improved products, presentation and service, including exclusivity in branded offerings.   Franchise partners have the ability to source product locally.   Improved customer service with investment in training of management and store teams to improve the quality and consistency.   Improved customer propositions targeting improved credit finance proposition in partnership with third party credit providers, personal shopping and online booking of specialist services and activities in store.   Group's hedging policy agreed by the Board.   The largest five franchisees have their trading currencies hedged.   Hedging undertaken by Treasury signed off by the Director of Finance, using six to nine month horizon for the five largest franchisees and 15 months for US Dollar exposure.   Limited exposure to Eurozone countries.	^
The Group is materially dependent on a small number of franchise partners that make up a significant proportion of its International business.	Any damage to, or loss of, the Group's relationship with Alshaya or any of its other key franchise partners could have a material adverse effect on the Group's business, results of operation or financial condition.   This risk impacts the following strategic pillars: 06	Strong personal and business relationships built up over a long time with key franchise partners.   Regular senior management visits to key franchise partners' markets, including the Executive Committee.   Credit insurance in place for the major franchisees.   Development plan agreed for franchise markets.	=
The Group's brands and reputation are key to its success both in the UK and internationally; any damage to the Group's brands or concerns relating to its products (including their quality or safety) could have a material adverse effect on the business.	Any perceived or actual concerns related to the Group's products, supply chain or its franchise partners and/or its wholesale customers may be widely disseminated online, on consumer blogs or other social media sites or via print or broadcast media.  Similarly, any litigation that the Group may face could subject it to increasing negative attention in the press.   This risk impacts the following strategic pillars: 03	Significant Group investment in product quality management resource.   High standards communicated throughout the supply chain with in-house responsible sourcing team working in Bangladesh, India and China.   Global code of conduct communicated and applied through the system using an e-learning tool for sign-off.   Focus on pre despatch quality checks.   Established product recall process managed by crisis management team.   The Company participates in the Bangladesh Safety Accord.   Group trade marks are fomally logged in country of operation.   IP awareness courses are run through teams and regular checks/searches are conducted.	=
The Group's business is materially dependent on its ability to source products successfully from its suppliers, most of whom are based outside the UK.  The Group relies on its manufacturers, suppliers and distributors to comply with employment, environmental and other laws.	If the Group is unable to secure ongoing support, or attractive commercial terms from its existing suppliers, or is unable to find replacement suppliers in the event of a particular source of supply no longer being available, this could have a material adverse effect on the Group's stock management, profitability and competitiveness and may result in a loss of market share.   This risk impacts the following strategic pillars: 03, 04	Company Code of Conduct and Conflict of Interest - compliance self-certification.   Corporate Responsibility Sourcing team in place.   Tone from the top delivered at International supplier meetings.   Adherence to EU timber laws.	=
The Group relies on its ability to improve existing products and successfully develop and launch new innovatory products.	Failure to bring new innovatory product to the market may have a material adverse effect on the Group's business, results of operation or financial condition.   This risk impacts the following strategic pillars: 03, 04	Shortening product lead times and restructure its 'Good, Better, Best' product architecture.   Introducing new phases.   Demonstrate good value products across all price points and supplement these with exclusive third-party products and new brands.   Enhance the customer experience in-store through newly refurbished stores with improved presentation and merchandising standards.	=
The Group's future success depends on the performance of its key senior management and the ability to attract and retain high quality and highly skilled personnel.	Any failure to attract and retain key personnel to meet the Group's operational needs may delay or curtail the achievement of major strategic objectives and could have a material adverse effect on the continuity of the Group's operations.   This risk impacts the following strategic pillars: 05	Shave save scheme open to all employees.   Performance related bonus scheme open to all employees.   Quarterly performance reviews against objectives.   People plan now in place.   Regular senior leadership team (SLT) meetings.	=
Any unauthorised access or disclosure of confidential information stored or obtained by the Group, either by criminal cyber-attack or a speculative loner, could have a material adverse effect on its business.	If any third party with whom the Group interacts violates applicable laws or the Group's data protection policies, whether intended or not, could result in legal claims or regulatory action, which may subject the Group to liability and litigation.   This risk impacts the following strategic pillars: 01	End to end encrypted Pin Entry Devices (PED) rolled out to the store estate.   No customer cardholder detail is kept on internal systems.   All sensitive and confidential information that falls within the Data Protection Act is overseen by the Risk Committee.   Constant review of cyber security framework.   Regular reporting of attacks.   Regular penetration tests conducted.	^
The Group supplies and sources its products and operates in a number of countries in which bribery and corruption pose significant threats.	The Group also deals with a significant amount of cash in its operations and is subject to various reporting and anti-money laundering regulations.  Any violation of money-laundering laws or regulations by the Group could have a material adverse effect on its business, reputation or results of operation.   This risk impacts the following strategic pillars: 03, 06	Company Code of Conduct and Conflict of Interest - compliance self-certification.   Awareness of the UK Modern Slavery Act 2015 being presented to all employees globally.   In-house responsible sourcing team working in Bangladesh, India and China who are fully trained in how to deal with attempts at bribery.	=

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