Mothercare shares slide as group enters refinancing negotiations

10th May 2024 09:18

(Sharecast News) - Retailer Mothercare shares nosedived in early trading as the group revealed it had entered refinancing negotiations as demand for its products continued to be subdued.

Global sales by Mothercare's franchise partners hit £281.0m in the year ended 30 March, down 13% year-on-year, while profits were only "marginally above" the £6.7m recorded last year. Net debt reached £14.7m.

Mothercare said its sales decline was principally due to partners "still clearing inventory due to suppressed demand during Covid-19", particularly hurting trading its largest market, the Middle East.

The London-listed group said it was now looking to renegotiate or refinance its debt facility, warning that its current loan, which has an interest rate of around 19.2%, would more than likely to lead to the firm wavering its covenant tests. Mothercare also said it was "well advanced" in looking at various financing alternatives to give it both "additional flexibility and reduced cash financing costs".

Mothercare also warned that global economic uncertainties had limited retail sales, something it expects to continue impacting trading into FY25.

Chairman 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 of 0910 BST, Mothercare shares had slumped 23.87% to 4.72p.

Reporting by Iain Gilbert at Sharecast.com