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More retail misery: Mothercare in talks with financing partners, warns profits at lower-end of guidance

Published: 02:15 03 Mar 2018 AEDT

Mothercare store
Mothercare said it expects adjusted group pre-tax profit to be at the lower end of the previously guided range of £1mln-£5mln

Mothercare plc (LON:MTC) saw its shares plunge 15% on Friday as the global retailer for parents and young children became the latest high street name to say it is in talks with its financing partners and warned that full-year pre-tax profits will be at the lower-end of guidance.

Noting recent movements in its share price and media speculation, the FTSE Small Cap firm said: “Reflecting the more challenging trading environment and our seasonal cash flows, we are working with our financing partners with respect to our financing needs for FY19 and beyond.”

READ: Carpetright says in talks with banks to shore up balance sheet as it issues a third profit warning

The retailer added: “We are also exploring additional sources of financing to support and maintain the momentum of our transformation programme. All of these discussions are ongoing.”

The group since its statement of 8 January 2018, trading and financial performance has remained broadly in line with the board's expectations and it expects adjusted group pre-tax profit to be at the lower end of the previously guided range of £1mln-£5mln. 

Mothercare added that, given successful management actions on cash generation, it now expects net debt at year-end to be slightly better than the £50mln previously guided but forecast its borrowings to increase towards the limit of the group’s total committed and non-committed facilities at various points from the start of the new financial year

It said this will, therefore, require waivers of certain financial covenants, hence the talks with its financing partners.

Need to push ahead with transformation strategy

Mark Newton-Jones, Mothercare’s chief executive officer, said: "The retail sector continues to face a number of pressures that are clearly having a profound impact on the sector as a whole. 

“Against this backdrop we are performing in line with our expectations and remain a cash generative business, but we also need to push ahead with our transformation strategy to meet our customers' needs and continue adapting to evolving shopping habits around the world.” 

He added: “We are working together with all our stakeholders, including colleagues, franchisees, financiers, suppliers and pensions trustees on this next phase of our transformation and their part in delivering these plans. 

The support already being shown gives us confidence that, despite the challenges, there remains a clear way forward for Mothercare to realise its ambition to be the leading global retailer for parents and young children."

In late afternoon trading, Morthercare shares were down 15.,5% to 21p.

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