Mothercare reports first-half loss as revenues drop

(Sharecast News) - Early-years brand Mothercare swung into the red in the first half after a sharp decline in revenues, but hopes that its new £30m joint venture in South Asia and recent refinancing will support growth going forward. The company, which primarily operates a franchise partnership model, said in October that it has entered into a new partnership with India's Reliance Brands, covering markets in India, Nepal, Sri Lanka, Bhutan and Bangladesh.

It also announced revised financing arrangements, reducing secured debt facilities by 60% to £8m and the annualised cash interest cost by over 75%.

"We have immediately utilised this new India joint venture and refinancing as a springboard for a de-leveraged Mothercare to explore the full bandwidth of growth opportunities through connections with other businesses, the development of our branded product ranges and licensing within and beyond our existing perimeters," said chairman Clive Whiley.

Mothercare, which in its heyday had more than 150 domestic stores, no longer has directly owned shops in the UK but sells through Boots as its exclusive UK franchise partner, while distributing its products through partners in 31 international markets.

Turnover totalled just £21m in the six months to 28 September, down from £29m the year before, with total global retail sales from franchise partners falling to £121.2m from £137.2m.

The company said that was mainly due to continuing uncertainty in the Middle East, its largest single market, and the ongoing need for franchise partners to clear old inventory. Meanwhile the total number of stores it had a presence in fell to 440 from 500 the year before.

As a result, Mothercase recorded a loss before tax of £1.8m for the first half, down from a profit of £1.7m a year earlier.

The stock was down 3.6% at 4p in early deals on Monday, taking the year-to-date loss to 42.5%.