17th May 2018 13:50
LONDON (Alliance News) - Shares in Mothercare PLC surged Thursday as the baby products retailer swung to a loss in its recent financial year after it earlier announced a GBP113.5 million funding plan and restructuring of its UK store portfolio alongside bringing back former Chief Executive Officer Mark Newton-Jones.
Shares in the company were trading 23% higher at 26.28 pence each Thursday afternoon.
For its year ended March 24, Mothercare reported a pretax loss of GBP72.8 million, sinking from a profit of GBP7.1 million the year before, stemming from a total one-off charge of GBP67.1 million, consisting of store closures, property impairments, restructuring and onerous leases.
On an adjusted basis, pretax profit dropped to GBP2.3 million from GBP19.7 million, on top of revenue that declined to GBP654.5 million from GBP667.4 million the prior year, reflecting a retail sector hit by headwinds leading to subdued consumer spending due to rising inflation, household income squeezes and slowing wage growth.
The struggling store chain earlier Thursday said the refinancing and restructuring of the UK store portfolio through company voluntary arrangements of certain subsidiaries will allow the business to return to a more stable footing and accelerate the transformation towards a viable and sustainable future.
A company voluntary arrangements allows a company with debt problems to repay its debts over an agreed period of time.
Under the store estate restructuring plan, the company plans to close 50 stores and seek rent reductions on a further 21 stores. It expects to have a total store portfolio of 78 by 2020, down from the current 137 stores.
The store estate restructuring is expected to result in a GBP10 million cash inflow and cost savings of GBP5 million.
Mothercare plans to raise GBP28 million via issue of new equity in July via placing and open offer. Proceeds will be used for general corporate purposes.
The company also has secured maturity extension to its committed debt facilities of GBP67.5 million and GBP8 million in new loans from some large shareholders. It also has signed a GBP10 million new debtor backed facility with one of the company's trade partners.
"?The recent financial performance of the business, impacted in particular by a large number of legacy loss making stores within the UK estate, has resulted in an unsustainable situation for the Mothercare brand, meaning the group was in clear need of an appropriate resolution. These comprehensive measures provide a renewed and stable financial structure for the business and will drive a step change in Mothercare's transformation," Interim Executive Chairman Clive Whiley said.
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