Mothercare profits fall by 52% after Early Learning Centre acquisition

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The Independent Online

The childcare retailer Mothercare upped its green credentials with the introduction of an environmentally friendly nappy yesterday as it posted a 52 per cent drop in pre-tax profits after its acquisition of the Early Learning Centre chain.

The profits slide to £6.1m was largely due to the cost of integrating the two companies and first-half losses from ELC, which makes most money between October and December in the run-up to Christmas.

Mothercare's underlying pre-tax profits rose 10.7 per cent to £13.4m on the back of a 24 per cent increase in sales to £328.5m in the six months to 21 October.

The ELC brand of educational toys has been introduced within larger Mothercare stores and there are plans to roll out the brand worldwide.

Mothercare operates from 472 stores in 46 countries. It is expanding its footprint around the globe and opened stores in Armenia, Belarus, Egypt, Kazakhstan, New Zealand and the Philippines during the first half. In July, Mothercare signed a joint venture with China's largest manufact-urer of childcare products. The company plans to open stores in Shanghai and Beijing by spring of next year. It also entered India for the first time last year.

The chief executive, Ben Gordon, said it was important for Mothercare to be in markets which were experiencing such phenomenal growth. "This has been a transformational first half for the group and for Mothercare in particular," he said, adding: "We have become a truly global parenting brand."

Along with most other retailers, Mothercare remains cautious about consumer spending before Christmas due to credit jitters and fears of an economic slowdown. However, Mr Gordon said he believed the group was "well-placed as we enter the second half".

He added that the company's "smart nappy", which has gone on sale in stores, was "groundbreaking" and "exactly the kind of thing Mothercare should be doing".

The nappy comprises a reusable nappy outer, reusable washable nappy pads and disposable nappy pads. Some 3 billion nappies are thrown away in the UK every year, and 90 per cent end up in landfill sites.

Mothercare has recently launched, a social networking site for parents, or a "Facebook for mums", as Mr Gordon calls it. The site already has 120,000 registered users and is a forum for swapping information about parenting, he said.

Shares in Mothercare, which have outperformed the UK general retailers' index by almost 22 per cent this year, rose 5p to 369.75p yesterday. Keith Bowman, an analyst at Hargreaves Lansdown, said: "Adjusting for the recent acquisition of the Early Learning business, these are a solid set of results founded on management's push towards diversification."