Rents to be reduced
Mothercare to close stores as CEO returns
Troubled childrenswear chain Mothercare is to close 50 stores across the UK, reducing its outlets by more than a third.
Mark Newton-Jones has agreed to return as chief executive alongside David Wood becoming group managing director.
The company will raise £113.5 million through a company voluntary arrangement which will also enable it to reduce rents.
It said the measures will allow Mothercare to return to a more stable footing, accelerate the transformation of the group and drive it towards a viable and sustainable future.
An equity capital raising of £28m is expected to be launched in July by way of a placing and open offer underwritten by Numis Securities.
A company voluntary arrangement is a formal statutory procedure which enables a company to agree with its unsecured creditors a composition in satisfaction of its debts or an arrangement of its affairs which can determine how its debts should be paid and in what proportions.
Interim Executive Chairman, said: “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. The potential for the Mothercare brand in the UK, benefitting from a restructured store estate, and internationally remains significant.”
The CVA proposals and supporting management actions, once completed, are expected to result in:
- A resized store estate with 50 stores to be exited, and material rent reductions on a further 21 stores
- A stabilised financial performance through cost savings and/or eliminated losses
- At least £10m cash inflow from store closures and working capital initiatives
- Further cost savings of at least £5m as the business is right sized
- Total store portfolio of 78 stores by FY20 (73 in FY22) from 137 stores today