Detailed Financial Analysis of Mothercare Plc: Performance (2009-2017)

This report provides a financial analysis of Mothercare Plc. from 2009 to 2017, using ratio analysis to assess profitability, efficiency, shareholder returns, liquidity, and gearing. The analysis identifies the volatile performance of the company, particularly noting inconsistencies in 2012-2013 due to rising sales expenses and increased debt. Key factors influencing Mothercare's performance include cost of goods sold, debt levels, and industry trends. The report also explores the company's funding strategies, investor reactions to performance changes, and potential future issues such as declining revenue and liquidity concerns. Ultimately, the analysis concludes that Mothercare's financial performance has been volatile and has not consistently created wealth for shareholders.

Running head: FINANCIAL ANNALYSIS
Mothercare Plc.
Name of the Student:
Student ID:
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1MOTHERCARE PLC.
Executive Summary
The aim of the assignment is to conduct a financial analysis on the Mothercare Plc. Company
and the same was evaluated with the help of ratio analysis for the company. The ratio
analysis for the company was evaluated in the field of profitability, efficiency ratios,
shareholders return ratio, liquidity ratio and the gearing ratio of the company. The evaluation
of the company was done on the basis of the ratio analysis derived for the company and the
financial performance of the company from the trend period of 2009-2017.

2MOTHERCARE PLC.
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Performance of Company......................................................................................................3
Identifying the Flux Year...................................................................................................4
Key Factors for change in the Performance of Mothercare Plc.........................................4
Road to Recovery...................................................................................................................5
Industry wide Performance................................................................................................5
Changes in Mothercare Company......................................................................................6
Investor Reaction...............................................................................................................6
Future Problems.....................................................................................................................7
Future Issues.......................................................................................................................7
Conclusion..................................................................................................................................7
Reference....................................................................................................................................8

3MOTHERCARE PLC.
Introduction
Mothercare Plc. Company operating in the general retail industry specializing in retail
products which are directly attributed to babies and children up to the age of eight. The
company currently has a wide range of products which its offers. The changing market and
industry trend thereby application of digital marketing has enabled the online shopping sites
and platforms to be more attractable source for shopping and other necessary purchases. The
demand for the consumers in terms of product portfolio from the company is high where by
the company is having some issues with falling offline sales and customer experience from
the same. The financial analysis of the company was evaluated thereby assessing the
performance of the company in the trend period. The application of various strategies by the
management of the company which can help overcome the operational issues were taken into
account (Vogel 2014).
Discussion
Performance of Company
The performance of the company has been volatile in the trend period analysed for the
company. The trend period taken into analysis for the company for the company was from the
year 2009-2017 (Edwards 2014). The financial performance of the company could be well
assessed with the help of the profitability ratio and return on shareholders’ equity for
Mothercare Plc. The profitability ratio shows the amount of return generated by the company
for the equity shareholders. The sales revenue of the company has shown a downward trend
for the company in the trend period and the operation profit margin for the company at the
same time has been falling for the company (Omar et al. 2014). The Cost of goods sold was
the ley account identified in the financial statement which has increased at a considerable rate
for the company reflecting the reducing the operating margin or the gross profit margin of the

4MOTHERCARE PLC.
company. The rise in the sales expenses of the company could be directly attributed to the
rising operational expenses, raw materials cost and other directs cost of the company. The
efficiency of the company was however compared to be stable than other aspects of the
company. The liquidity position of the company has been stable in the trend-period but the
company is not having adequate liquidity as compared to the industry trend which may in
turn affect the operations of the company (Ibn-Homaid and Tijani 2015).
Identifying the Flux Year
The performance of the company has been volatile throughout the trend period, but as
analysed the financial performance of the company has been most inconsistent in the year
2012-13. The year observed falling revenue for the company and substantial increase in the
sales expenses of the company which directly affected the profitability condition of the
company. The company was having a high business risk in the trend period and the debt of
the company at the same time has increased in the year 2012-13 that directly increased the
financial risk associated with the company (Zeff van der, Wel and Camfferman 2016).
Key Factors for change in the Performance of Mothercare Plc.
The financial performance and position of the company is dependent on various
factors and the changes in these factors will affect the operations of the company. The key
factors that made a significant influence in the worsening and volatile financial statement was
the rising cost of goods sold or the sales expenses of the company, the increase in the debt of
the company. The industry trend in which the company is operating has shown a downward
trend in terms of profitability or return on equity but the performance of the company when
assessed with the other competitors has been very volatile which shows that the management
of the company might not be adapting proper strategies for maintaining a sustainable
performance of the company (Edwards 2014). The revenue for the company might have
fallen due to inconsistent marketing plan or low variety of product portfolio the company has

5MOTHERCARE PLC.
in contrast to its key competitors like Debenhams Plc. and M&S whose performance
relatively was much more stable and consistent than Mothercare Plc. The key issues for the
company could also be attributed when the debt exposure for the company has consistently
increased for the company which directly impacted the financial statement of the company
thereby creating a pressure on the profitability of the company.
Road to Recovery
Industry wide Performance
The change in the industry wide performance for the Mothercare Plc. Company has
been done due to the falling industry revenue and the profitability revenue in which the
company operates. Companies in the retail industry have been experiencing high competition
along with varied consumers taste and preference about the goods and services offered by
them. In order to compete well and remain sustainable in the business companies need to

6MOTHERCARE PLC.
come out with various strategies and level of products and services for the consumers so that
they can move along with the changing taste and preference of the consumers. The
performance of the companies could also be directly attributed to the economy in which the
company operates and the current business stage in which the company operates. Thus, on a
macro approach there are various factors which can influence the operations of the company
(Liang et al. 2016).
Changes in Mothercare Company
Mothercare Company in the due course of its business has made relevant changes
with respect to the increase in the operating activities of the companies. Financing plays an
important role and the same should be sourced after assessing the implications of the same on
the financial statement of the company. As assessed the company has increased the level of
debt in the initial years of the trend period which significantly boosted the gearing ratio for
the company in the year 2012-13 (Brigham 2016). The increase in the debt of the company
was the key reason for degrading or worsening of the financial position of the company.
Financial risk and operational risk at the same can time distort the performance and
sustainability of the company in the long run. However, the company in the later stage of the
trend period then comparatively opted for equity financing as a possible source for financing
of the company (Flammer 2015).
Investor Reaction
The profitability of the company plays an important role and the same shows the
amount of wealth created by the company from the operations of the company. Mothercare
company profitability and investor reaction was assessed in the trend analysis and the same
has been volatile and shown a downward trend which would create a negative impact on the
investors of the company. The return on equity ratio depicts the financial position of the
company where the company’s ability or creating wealth for the company has consistently

7MOTHERCARE PLC.
degraded over the trend period analysed. The return on equity for the company was around
15.28% in the year 2009 and which gradually fall down to around -33.14% in the year 2015
and then to 9.63% in the year 2017. The risk associated with the company in the form of
investment definitely increased with the increase in the volatility of financial position (Jordan
2014).
Future Problems
Future Issues
The key problem that were found while analysing the financials of the company was
the falling revenue of the company and the rising cost of goods sold for the company. The
company should have a core focus firstly on managing the operational profit for the company
as the sustainability in the same is the key factors for the growth and development of the
company in the long run. The debt exposure associated with the company can also be key
issue associated with the company which is significantly impacting the financial position of
the company. The liquidity position of the company was not compatible as per the industry
standards which can significantly affect the operations of the company (Gitman, Juchau and
Flanagan 2015).
Conclusion
The financial position of the company as assessed for the Mothercare Plc. has been
volatile in the trend analysis and the same was assessed with the help of the financial
statement of the company. The future issue associated with the company was assessed and
the key performance of the company was taken into account. On an overall basis the financial
performance of the company has been volatile and has not created wealth for the shareholders
of the company.

8MOTHERCARE PLC.
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