10th May 2024 14:10
(Alliance News) - Mothercare PLC on Friday said it was pursuing refinancing options with its senior lender, following a tough financial year in which franchise partner sales were dragged down by weak trading in the Middle East.
Mothercare is a Watford-based company specialising in clothes, prams and other children's essentials. Shares in the company were down 24% at 4.72 pence each in London on Friday afternoon.
In a trading update for the 53 weeks to March 30, Mothercare said that retail sales by its franchise partners fell 13% to GBP281 million from GBP323 million a year prior.
Mothercare added that adjusted earnings before interest, tax, depreciation and amortisation for the year were "marginally" above the GBP6.7 million delivered in financial 2023.
The company said that the Middle Eastern markets, representing around 41% of total retail sales, continued to be challenging over the year.
"In addition to the global economic uncertainties which are impacting our retail sales, in many of our territories our partners are still clearing inventory due to the suppressed demand during Covid-19," Mothercare said.
UK and Indonesian operations increased retail sales annually, the company noted, with Indonesia growing to become Mothercare's second-largest market behind Saudi Arabia.
Mothercare expects the factors impacting its top line to persist into next year's results, though the company is maintaining its medium-term guidance.
"We continue to believe our continuing franchise operations remain capable of exceeding GBP10 million operating profit and maintain our focus on accelerating our growth in both existing and new markets," the company said.
Chair Clive Whiley said: "Given the exogenous factors influencing some of the company's operating markets, our immediate priority remains to support our franchise partners, ultimately for the benefit of our own business, however we have also redoubled our efforts to restore critical mass and are focused upon monetising the Mothercare global brand IP. This remains an exciting prospect for our partners, our colleagues and all stakeholders."
As at March 30, Mothercare had GBP5.0 million in total cash, down from GBP7.1 million in March 2023.
The company also has GBP19.7 million in its existing loan facility, which remained fully drawn across the year.
As a result of interest rates remaining at an elevated level, the 19.2% rate on its loan facility, and its failure to return to pre-pandemic sales levels, Mothercare said it has commenced refinancing discussions with its senior lender regarding a renegotiation of its existing facility.
The company is also considering various other financing options, including equity and equity-linked structures, which would provide "both additional flexibility and reduced cash financing costs".
By Hugh Cameron, Alliance News reporter
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