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(Alliance News) - Embattled baby products retailer Mothercare PLC on Monday said it intends to appoint administrators for its domestic UK retail business, as part of a major restructuring programme.
"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," the parent company explained.
Mothercare shares in London were trading 22% lower at 8.84 pence each in early trade on Monday, valuing the company at GBP30.6 million. Year-to-date shares have lost 41% in value.
The company intends to file court notices to appoint administrators for its subsidiaries Mothercare UK Ltd and Mothercare Business Services Ltd, which provides certain services to Mothercare UK.
"These notices of intent to appoint administrators in respect of Mothercare UK and MBS are a necessary step in the restructuring and refinancing of the group. Plans are well advanced and being finalised for execution imminently," Mothercare said.
The retailer, however, emphasised that other business units remain unaffected by the move and that the company along with Mothercare UK and Mothercare Business Services continue to trade as normal.
Following the restructuring, the company plans to focus on its global brand franchise business which generates over GBP500 million in revenue per year from over 1,000 international stores in over 40 territories. In the year ended March 31, the international business generated a profit of GBP28.3 million whereas the UK retail operations posted a GBP36.3 million loss.
Mothercare joins the long-list of retailers who have embarked on a major restructuring programme and have filed for administration as Brexit economic uncertainty and cut throat competition hurts consumer spending. Major retailer who have filed for administration include Debenhams, Bonmarche, Thomas Cook and Karen Millen.
By Tapan Panchal; tapanpanchal@alliancenews.com
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