Mothercare insists it is still cash generative amid investor concerns

By

Barbara Santamaria

Published
Mar 2, 2018

Mothercare moved to reassure investors on Friday after seeing its shares plummet this week following the collapse of British retailers Toys R Us and Maplin.

The company’s CEO Mark Newton-Jones said in a statement that Mothercare is still performing in line with expectations and remains a cash generative business.

Shares in the nursery retailer fell by 9% on Wednesday and 12.4% on Thursday, wiping £6 million off the company. The share price fell again more than 10% during Friday.

Mothercare remained relatively upbeat as it announced that net debt at year-end is now expected to be slightly better than the £50 million previously guided, but the current challenging conditions in the retail market will see the company talk with its financing partners about its “financing needs for FY19 and beyond”.

The company predicted its borrowings will increase towards the limit of its total committed and non-committed facilities “at various points from the start of the new financial year, and will therefore require waivers of certain financial covenants".

“The retail sector continues to face a number of pressures that are clearly having a profound impact on the sector as a whole,” said Newton-Jones in the statement. “Against this backdrop we are performing in line with our expectations and remain a cash generative business, but we also need to push ahead with our transformation strategy to meet our customers' needs and continue adapting to evolving shopping habits around the world.”

This transformation strategy will also force the company to explore new sources of financing to support and “maintain the momentum”.

“We are working together with all our stakeholders, including colleagues, franchisees, financiers, suppliers and pensions trustees on this next phase of our transformation and their part in delivering these plans. The support already being shown gives us confidence that, despite the challenges, there remains a clear way forward for Mothercare to realise its ambition to be the leading global retailer for parents and young children,” commented the CEO.

Mothercare confirmed its plans to reduce its UK store estate and shift its focus towards increasing digital capabilities as over 40% of sales are now being taken through digital channels.

Adjusted group profit for the year is expected to be at the lower end of the previously guided range of £1-5m.