Mothercare delays pension deficit payments after disruption of Russian operations
Mothercare said it would be posting a higher than expected profit on Monday.
In a pre-close trading update, the baby-clothes seller said it expected that EBITDA before adjusting items would be in the range of £11.5m to £12m for the year to 26 March.
The retailer’s share price fell by a dramatic seven per cent on Monmday afternoon, after the retailer detailed the disruption caused by war in Ukraine.
Mothercare departed the UK high street in January 2020, with the closure of 79 brick-and-mortar stores.
Reduced cash generation means the retailer will not fully pay the first instalment of its deficit repair contributions, expected this month. It would instead begin talks with its schemes’ trustees over when future payments can be expected.
“All contributions for the year to 31 March 2022 have been made in full and on time,” an update on the London Stock Exchange stated.
The total annual contribution due for the year to March 2023 was £9m, the company said.
Mothercare said it had suspended its franchise partner’s retail business in Russia, including 116 stores and an online operation, in March.
Some £88m in annual retail sales came from Russia with the territory directly contributing around £5.5m to adjusted EBITDA for the year.
However, the firm had the “resilience” to cope with the war’s impact, Mothercare’s boss said.
Mothercare chairman, Clive Whiley, added: “As expected last year was one of further progress for Mothercare, generating free cash flow from operations as a focused, asset light global franchising business. While we must now deal with the impacts of the suspension of our franchise partner’s operations in Russia, we retain the resilience to deal with this additional challenge satisfactorily.”
He added: “We continue to drive initiatives designed to maintain momentum in improving profitability particularly when we return to more normal pre-pandemic levels of business.
“The near halving of the pension deficit also offers the potential for material reductions in our recovery plan payments. This is a good backdrop against which to revisit our current financing arrangements and we are exploring all available alternative funding options to further improve our financial flexibility.”