Emerging as a sustainable, capital light, international franchise brand
Mothercare plc, the leading specialist global brand for parents and young children, today announces full year results for the 52 week period to 28 March 2020. Comparatives are based on the 53 week period to 30 March 2019.
· Successfully implemented new operating model:
o Transitioned the business to refocus on brand management and the design, development and sourcing of product to support international franchise partners.
Now serving 791 stores across 40 countries.
· International franchise arrangements secured:
o Heads of terms reached with Boots UK Limited (“Boots”) in late 2019 as UK franchise partner, with the Mothercare brand becoming available in Boots stores and online from Autumn 2020.
o Twenty-year franchise agreement with the Alshaya Group, our most significant franchise partner, providing surety over Mothercare’s largest commercial contract.
· New financial structure secured to maintain a stable and sustainable business:
o Administration of Mothercare UK completed, including transfer of brand rights and intellectual property into the Group.
o Eliminated approximately £30 million of operating losses through the closure of the UK Retail division.
Post period developments
· Continued discussions with both international franchise and manufacturing partners to further improve commercial relationships, with a positive impact on working capital.
· Completed contractual arrangements for the appointment of Boots as exclusive franchise partner to cover both the UK and Republic of Ireland for an initial period of ten years.
· Ongoing productive discussions to secure refinancing of the Group’s senior debt facility.
· In the first twenty-eight weeks of FY21, the Group’s Franchise Partners, all of whom were severely affected by COVID-19 lockdowns, had recorded total retail sales of £145.8m, representing a 39% decline year on year on a continuing operations basis.
· We currently estimate that 95% of our partners’ global retail locations are now open, from a low point of 27% in April 2020.
· There has been a strong recovery in the Middle East following the re-opening of stores after lockdown, with the exception of UAE which has been affected by the reduction in tourism.
· Recovery in Russia has been slow due to government restrictions delaying the full re-opening of the store estate. While all stores are now open, the market has not fully recovered with current performance driven down by lower footfall.
· Trade continues to be challenging in the key markets of India and Indonesia due to the continuing impact of COVID-19 on footfall and consumer confidence.
· Overall, the impact of store closures during the peak of lockdown measures was only partially offset by countries which were able to continue to trade via online platforms.
Financial highlights (on a continuing operations basis9, unless otherwise stated)
*Continuing operations represent the Global operation of the business, with the UK operational segment categorised as a discontinued operation. Continuing operations reflect accounting guidelines and therefore include some expenditure which ceased following the administration process, and as such does not necessarily reflect the result achieved by the standalone international business.
· Loss from continuing operations for the 52 weeks to 28 March 2020 of £7.2 million (2019: £21.1 million loss).
· Total profit for the year achieved of £14.4 million (2019: £97.0 million loss) included a gain on the loss of control of the Group’s main trading subsidiary Mothercare UK Limited, and a shared service entity, Mothercare Business Services Limited of £46.2 million. The comparative 53 weeks ended 30 March 2019 included a loss on the disposal of the Early Learning Centre trade and assets of £30.5 million.
· Net debt3 at £13.7 million (2019: £6.9 million).
· Challenging second half of the year, due to supply chain constraints during the administration process, followed by the widespread impact of COVID-19 requiring our partners to close a significant proportion of their retail store estates.
Clive Whiley, Chairman of Mothercare, commented:
“We have diligently managed our way through to mitigate the impact of the COVID-19 pandemic during this period of global crisis, and we emerge in better shape than we went into it. We continue to reduce costs and improve our efficiency. We are excited to launch our new UK and Ireland franchise with Boots, restoring the Mothercare brand to its home territory. We have entered into a new 20 year franchise agreement with Alshaya, our largest partner. We have successfully rolled out our innovative, working capital light arrangements with our manufacturing and franchise partners. We are now singularly focused upon building Mothercare as a global brand, both in our existing territories and beyond. We are confident with these foundations now in place Mothercare can move forward as a profitable and cash generative international franchise business, generating revenues through an asset-light model in some 40 international territories.
“This would not have been possible without the support of all of our stakeholders whom, on behalf of the Board, I would like to thank for enabling us to get to this point. As a result, from today, Mothercare can look forward to a brighter and stable future once more.”