Mothercare will switch its listing to the AIM

Mothercare will switch its listing to the AIM

UK mother and baby goods retailer Mothercare expects to make a small EBITDA loss for the full year as it prepares to delist from the main market amid a move to the AIM.

In a statement this morning (25 January), Mothercare said net worldwide retail sales for the three quarters to 2 January were GBP258m (US$352.9m), which was GBP155m down on the same period for last year.

For the current financial year, the group currently expects net worldwide retail sales of at least GBP320m and invoiced shipments of GBP80m, although it noted shipments may be impacted by the current challenges in the movement of containers from Asia caused by Covid-19, which could delay some into the following financial year. 

"Whilst further restrictions could inevitably be introduced, we can see an improved picture over the balance of the financial year. In aggregate, we estimate these impacts will have reduced Mothercare-related revenues by a third in the current financial year as a whole," it said.

Group revenue is expected to return to more normal levels in the short to medium term.

Accordingly, due to reduced revenues following the impact of Covid-19 and the one-off costs associated with the restructuring and assuming no further material restrictions on franchise partners' operations, the group continues to expect to make a small EBITDA loss for the full-year.

Meanwhile, Mothercare, which first listed on the London Stock Exchange in 1972, said with the completion of its transformation plan the board recognises that, commensurate with the group now being a smallcap company, it should apply to cancel the listing on the Official List of its ordinary shares and to trading on the main market alongside applying to the London Stock Exchange for admission to trading on AIM, which would also have tax benefits for some investors.

"AIM will offer greater flexibility with regard to corporate transactions, enabling the company to agree and execute certain transactions more quickly and cost-effectively than a company on the Official List," it said.

Cancellation of the listing on the main market is expected to take place about 12 March. 

"This final phase of the refinancing and restructuring of Mothercare will be marked by our successful admission onto AIM in the next few weeks. This period of hard work, effort and forbearance by our staff and stakeholders has paid off, and Mothercare can look forward to a brighter and stable future once more," said chairman Clive Whiley.

"We are not immune to the impact of the pandemic on our franchise partners' operations around the world but we emerge in better shape than we went into it. Our resilient performance over the last nine months bears out the robustness of the Mothercare business today. Upon completion of the arrangements that we are asking shareholders to approve at the forthcoming General Meeting, Mothercare will face the future as a conservatively financed, cash generative and profitable business for the first time in many years."

Shore Capital analyst Clive Black notes: "The journey has been long and hard for Mothercare and, frankly, it is an achievement that it has survived everything that has been thrown at it because this was a business with chronic pre-existing business health conditions. There are clearly challenges ahead as the pandemic, in particular, does not disappear as Mothercare's new financial year commences in April.

"However, it feels like the vast majority of the heavy lifting has been done, the group has a more sustainable platform in which to trade and compete, including its partnership with Boots in the UK, which may at least mean more demonstrable upside progress can be chronicled in future as opposed to restructuring and firefighting."

Mothercare said in November it has secured a GBP19.5m loan in order to repay its debts on the back of its half-year results in which it booked a loss resulting from lower sales and higher costs.