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Share Name Share Symbol Market Type Share ISIN Share Description
Mothercare Plc LSE:MTC London Ordinary Share GB0009067447 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.13 -1.5% 8.54 8.50 8.60 9.00 8.06 8.22 606,661 16:35:20
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Retailers 513.8 -66.6 -33.1 - 32

Mothercare PLC Mothercare Plc: Transformation Plan Update

30/03/2020 7:00am

UK Regulatory (RNS & others)


 
TIDMMTC 
 
 
   Mothercare plc: Transformation Plan Update 
 
   Mothercare plc ("Mothercare", "the Company" or "the Group") today 
provides the following update on its Transformation Plan announced on 5 
November 2019 and further to the update released on 23 January 2020. 
 
   In those announcements, we set out our plans for the Group to become a 
profitable international franchise operation, generating revenues 
through an asset-light model, operating in over 40 international 
territories. We continue to make significant progress with those plans 
and have substantially completed our transition to refocus the Group on 
our core competencies of brand management and the design, development 
and sourcing of product to grow the Mothercare business with our global 
franchise partners. 
 
   Covid-19 
 
   As with all businesses, the impact of Covid-19 and the associated 
actions from governments and corporations around the globe has been 
having direct consequences for the Group, in particular given the 
disruption to both our franchise partners' and suppliers' businesses and 
operations. 
 
   In the UK, whilst many of our key UK head office staff are working 
productively from home, a number of our retail personnel are unable to 
do so. Accordingly, whilst UK Government support for furloughed workers 
has been enacted for around 430 of our Boots Mini-Club retail colleagues, 
this will still result in incremental operating costs for the Group. We 
welcome the measures announced by Her Majesty's Government, including 
tax reliefs and other forms of financial aid, which we will seek to 
utilise as and when they become readily accessible. 
 
   Franchise Partners 
 
   As retailers, our global franchise partners are facing the considerable 
challenges that the Covid-19 pandemic and national government responses 
present to their businesses in their respective territories. This is 
likely to lead to a material impact on Mothercare's short-term revenues. 
We will not be immune to the effect of widespread store closures and 
restrictions on local population freedom of movement in those 
territories. 
 
   However, the experience we gained as a result of the controlled supply 
shock that was exerted upon the business at the time of the 
administration of Mothercare UK and related store closures last November, 
is proving invaluable. We are in close dialogue with our franchise 
partners and our manufacturing partners, as we seek to manage and 
mitigate the overall impact on both our and their businesses. 
 
   UK franchise arrangements 
 
   On 13 December 2019, we announced that Mothercare Global Brand had 
entered into binding heads of terms for Boots UK ("Boots") to become the 
exclusive franchisee of the Mothercare brand for the UK. Boots is the 
UK's largest pharmacy-led health and beauty retailer and is part of the 
Retail Pharmacy International Division of Walgreens Boots Alliance, 
Inc., the first global pharmacy-led, health and wellbeing enterprise. 
 
   Although we remain on track with the process of finalising the detailed 
contractual arrangements with Boots, which are expected to last for an 
initial period of five years, there have inevitably been some delays as 
a result of the operational priorities forced upon both businesses by 
Covid-19. We currently anticipate that contractual arrangements will be 
finalised in late spring and that a wider Mothercare product offer will 
be available online and in Boots stores from late summer 2020. 
 
   Recapitalisation of the Business 
 
   On 5 November 2019, in addition to raising GBP8.7m from our existing 
investors and securing a temporary revised payment schedule with our 
pension scheme trustees, we set out a number of funding options, 
totaling GBP50m, which were available to the Group. 
 
   Since then there has been a substantial reduction in bank debt, with an 
initial distribution of GBP10m from the administrators of Mothercare UK 
Limited to the Group's secured debt holders now having been made. The 
total secured debt, which (at the time of the administration) included 
the Group's GBP24m revolving credit facility, other guarantees and 
likely crystallisation of letters of credit has (as of 27 March 2020) 
reduced to some GBP18.5m owed to the Company's current lenders and these 
liabilities are secured over the Group as a whole. We understand that 
there remains a further amount to come from the administrators of 
Mothercare UK Limited which is expected to reduce this secured debt 
further.  This remains in line with our guidance set out in January 
2020. 
 
   Throughout, we have striven to recalibrate our new operating model to be 
as capital-light as possible and we remain determined to complete the 
recapitalisation of the Group with the minimum possible further dilution 
for shareholders. We remain in discussions with a number of debt 
providers as set out on 23 January 2020 regarding entering into new debt 
facilities, in relation to which we continue to: 
 
   -- have access to our GBP10m trade partner facility; 
 
   -- work with the remaining interested parties, including Gordon Brothers, 
in progressing a GBP20m secured term loan; and 
 
   -- explore the various UK Government schemes to support business in 
these extraordinary times. 
 
   We have not extended the standby equity facility of up to GBP20m made 
available to us by Numis Securities, which has therefore now lapsed. In 
this context, the Board has determined for the time being that it will 
be in the better interests of stakeholders to pursue additional debt 
facilities for its reduced finance requirements rather than pursuing an 
equity solution at this time. The Board continues to keep the financial 
needs and available resources of the Group under close review through 
this unprecedented period and will take all necessary steps to preserve 
and/or enhance the Group's liquidity. 
 
   In line with FCA guidance, we are currently reviewing the timetable for 
publication of our audited annual financial report and a further 
announcement will be made in due course. 
 
   Clive Whiley, Chairman of Mothercare, commented: 
 
   "In the current circumstances, we have activated our contingency plans 
to deal with the challenges that we and others are facing in the current 
global crisis, focusing on the well-being of our colleagues alongside 
our ongoing business and corporate liquidity. We continue to enjoy the 
support of our key stakeholders and financing partners and we are very 
grateful to them at this unprecedented time. 
 
   We believe that the intrinsic value of our brand, the close contact 
fostered with our key stakeholders over the last two years and our 
seamless, deep understanding of the Group's new trading cash flow 
dynamics, honed over the last six months, will prove to be extremely 
valuable. 
 
   At this time we believe that our efforts should be focused on helping to 
preserve the businesses of our franchise and manufacturing partners 
through even more collaborative ways of working, to ensure both the 
short term liquidity of our business together with our return to longer 
term profitability. We are already seeing the benefits of this approach 
being brought to bear. 
 
   Finally, I would like to thank our colleagues, franchise partners, 
manufacturing partners, lenders and all stakeholders for their continued 
support in these most extraordinary of times." 
 
   Ends 
 
   For further information: 
 
   Mothercare plc 
 
   Glyn Hughes, Interim Chief Executive Officer                       01923 
206004 / investorrelations@mothercare.com 
 
   Andrew Cook, Chief Financial Officer 
 
 
 
   Numis Securities Ltd (Financial Adviser) 
 
   Luke Bordewich 
020 7260 1000 
 
   Henry Slater 
 
   MHP Communications 
 
   Simon Hockridge, Tim Rowntree, Alistair de Kare-Silver       07709 496 
125 
 
   mothercare@mhpc.com 
 
 
 
 
 
 

(END) Dow Jones Newswires

March 30, 2020 02:00 ET (06:00 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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