Friday 24 May 2019 9:40 am

Mothercare’s annual loss jumps to £87m, delayed annual results reveal

Mothercare’s annual loss grew to £87.3m in the last financial year it said today in a delayed set of annual results.

The struggling retailer was due to report its results yesterday, but pushed back its report to today because of the “complexity” of its finances, sending shares down 5.2 per cent.

Sales fell 7.9 per cent to £1.07bn from £1.16bn the previous year.


Read more: Mothercare shares fall as it delays results due to their 'complexity'

Total loss before tax grew 19.9 per cent to £87.3m from £72.8m the previous year.

Net debt fell 84.4 per cent to £6.9m.

Despite the stark numbers, the market reacted well to Mothercare's update on its turnaround plan and its positive outlook for the current financial year, with shares up 11 per cent to 22.8p.

Peter Smedley, an analyst at Finncap, said: "The key message from today’s results is solid transformational progress and delivery on the market’s financial expectations.

"This is a complex set of results, reflective of major restructuring e.g. CVA, fundraise, disposal programme, significant cost cutting and new vision/strategy/operating model. Mothercare is now moving towards the next step of its transformation plan to develop Mothercare as a global brand."

AJ Bell investment director Russ Mould said:“The company is not out of the woods yet but may be starting to spot a path through the undergrowth after it reduced its cost base beyond initial guidance.


“Closing stores, selling and leasing back its head office, offloading the Early Learning Centre; all these actions might seem elementary responses to what the company described in its own words as ‘acute financial distress’ but they still deserve credit for getting them done.

“Achieving debt free status in 2019 will be a considerable milestone in taking Mothercare out of the naughty corner.

Mothercare embarked on a restructuring programme last year to try and turn around its struggling business.

The retailer said it had completed its UK store closure programme following a company voluntary arrangement with its creditors, shrinking its estate to 79 stores from 134 the previous year, representing a 30 per cent reduction in space.

In the last year it announced the sale of the Early Learning Centre to toyshop chain The Entertainer for £11.5m and the sale and leaseback of its Watford head office for £14.5m as it moved to shrink its debt pile.

Read more: Mothercare sells Early Learning Centre to The Entertainer

Chief executive Mark Newton-Jones said: “Whilst this major restructuring activity has resulted in significant headline losses for the year, the business is now on a sounder financial footing.

“The next phase of our strategic transformation plan is to develop Mothercare as a global brand, maximising the opportunities we see across many international markets. At the same time our primary focus in the UK will be the development of our online proposition, the introduction of enhanced credit options and more exclusivity in product, coupled with a reinforcement of our specialist and service credentials.

“In the early stages of this financial year, we are seeing some improving UK trends as we continue to rebuild to be the specialist retailer for parents and young children."

Emily Salter, retail analyst at Globaldata, said Mothercare's restructuring efforts had given it "a chance at a future".

"Mothercare must now focus on maximising footfall and sales from its remaining store estate, perhaps hosting instore events to emphasise its credentials as a specialist in the market and focus on what Amazon can’t do. Its online proposition must also be improved, which the retailer states as its primary focus for the UK, so it can compete with online and multichannel players in the future," she said.

 

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