Mothercare update reveals more job losses than expected
The extra closures mainly come from its Childrens World unit, whose CVA didn't get approved by its creditors so this will now go into administration.
But while this is a tough development for an already under-pressure retail industry, for Mothercare it represents “good progress” with the company’s turnaround plan.
The mother-and-baby products retailer said Monday that it’s progressing with its financing and restructuring plans set out on May 17 and with a fully underwritten equity issue to raise £32.5 million from its existing shareholders.
It also has revised debt facilities of £67.5m provided by its existing lenders, although this is conditional on, among other things, the completion of that £32.5 million capital raising.
The company said that the challenge periods for its Mothercare and ELC (Early Learning Centre) CVAs expired last week with no challenges made so those CVAs and now effective.
And as far as Childrens World is concerned, while the unit will cease to exist, 13 of its 22 stores will be transferred to other Mothercare group companies to continue trading.
The Mothercare chain itself will be left with 77 stores with 19 of those benefiting from reduced rent bills.
But will this all be enough to keep the company in business? The film updated on current trading on Monday and said it “continues to follow the patterns seen in the second half of the last financial year, with challenging conditions in the UK and some stability visible in our international operations.”
So no big encouragement there, although it also said that efficiency and cost savings initiatives “have now identified cost savings totalling £19m together with £10m cash realisation arising out of the processes outlined above and other programmes.”
Interim executive Chairman Clive Whiley said: “When I joined the business just three months ago, Mothercare faced a bleak future. We have worked tirelessly as a team to get to where we are today and this fully underwritten equity issue marks the end of this initial phase, returning the group to financial stability.
“Alongside the fundraising, we have been very busy on numerous fronts to restructure the group for future profitability. Whilst the lack of full approval for the Childrens World CVA was disappointing, we have now found a solution which allows us to go further and faster with the right-sizing of our store portfolio. We have also identified significant areas for further efficiencies and cost savings, which will underpin our return to a sustainable future.”
Mark Newton-Jones, who is back in charge as CEO, added: “The last three months of hard work and progress have put in place the foundations to get Mothercare back to where it should be as a fit-for-purpose business with a stronger and more efficient structure both for our UK business and our international franchisees.
“We are now in a position to re-focus on our customers and improve the Mothercare brand both in the UK and across the globe. We have exciting plans ahead to revitalise the brand through enhancing our product ranges, improving our design and value, developing our digital and multi-channel proposition and investing in our people.”
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