Mothercare Plc appoints administrators to Mothercare UK Limited
LONDON: Mothercare plc has appointed Zelf Hussain, Toby Banfield, and David Baxendale of PricewaterhouseCoopers LLP as administrators to the Company's active trading subsidiary, Mothercare UK Limited and Mothercare Business Services Limited (MBS). It is emphasised that the Company and its other subsidiaries are not in administration, hence, the Group will be free to continue to trade in the normal course of business. As stated in May at the time of final results for the period ended 30 March 2019, this financial year's key strategic aim was to progress the next phase of transformation of the business. This comprised two key and related elements. First, to secure a financial structure for the whole of the Mothercare Group which maintains a sustainable business model with a capacity to secure future growth. Second, to evolve, adapt and optimise the structure, format and model for our UK retail operations. Since May 2018, company has undertaken a root and branch review of the Group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding UK Retail business. Through this process, it has become clear that the UK Retail operations of the Group, which today includes 79 stores, are not capable of returning to a level of structural profitability and returns that are sustainable for the Group as it currently stands and/or attractive enough for a third party partner to operate on an arm's length basis. Furthermore, the Company is unable to continue to satisfy the ongoing cash needs of Mothercare UK. Having taken insolvency and legal advice, the Directors of Mothercare UK and MBS decided that there was no reasonable alternative but to appoint administrators. The Administrators' primary responsibility will now be to establish the liabilities of Mothercare UK and MBS and to realise their assets in order to make a distribution to creditors. The Board of the Company is in close contact with the Administrators regarding the administration processes and is finalising agreements with various stakeholders to secure additional financing to underpin the next steps to preserve the Group's financial position and future as a solvent Group. For the avoidance of doubt, it is expected that Mothercare's shares will remain admitted to the Official List and to trading on the Main Market of the London Stock Exchange, as the Company has sufficient cash resources to meet its current operating requirements. The ongoing Group will drive a greater focus on strengthening its global brand, improving the product design, marketing and distribution of Mothercare products around the world to its franchisees. Clive Whiley, Chairman of Mothercare commented: "It is with deep regret and sadness that we have been unable to avoid the administration of Mothercare UK and Mothercare Business Services, and we fully understand the significant impact on those UK colleagues and business partners who are affected. However, the Board concluded that the administration processes serve the wider interests of ensuring a sustainable future for the Company, including the wider Group's global colleagues, its pension fund, lenders and other stakeholders. "The UK high street is facing a near existential problem with intensifying and compounding pressures across numerous fronts, most notably the high levels of rent and rates and the continuing shifts in consumer behaviour from high street to online. Mothercare UK is far from immune to these headwinds despite the strength of the Mothercare brand, its exclusive and quality product range and recognised customer service. Despite the changes implemented over the last 18 months contributing to a significant reduction in net debt over the same period, Mothercare UK continues to consume cash on an unsustainable basis. "The action announced today has been carefully thought through and without it, the existence of the wider Group would be threatened. We know it is right for the wider Group to ensure that Mothercare remains the leading global brand for parents and young children with a bright and solvent future within the international franchise business." The transfer to Mothercare Global Brands Limited (a wholly owned subsidiary of Mothercare plc) from the Administrators of: the Mothercare brand, its trademarks and associated intellectual property; the novation of the commercial agreements relating to international franchise operations; and the transfer of the Group's pension scheme deficit. A significantly strengthened financial position through the following new arrangements: o Placing of £3.2 million new equity raised today at 10 pence per share alongside an agreement in principle for the provision of an additional £5.5 million tranche of unsecured convertible loan notes o Existing £24 million bank debt facilities will be paid down by the administration process o Up to £50 million of further financial capacity potentially available to the Group from third parties including a standby underwritten equity issue and a new term loan facility, amongst other sources o Revised payment schedule agreed with pension scheme trustees, reducing contributions over the next 18 months Ongoing dialogue in the UK with potential partners to maintain a presence for customers both in store and online. Although no developments can be guaranteed, company expects to announce further details of these negotiations in due course.