Jim Armitage: Honesty may not be enough for ailing Mothercare
Mothercare’s mea culpa is a pretty extraordinary piece of City history. Rarely have we seen such plain-speaking honesty.
Under the title “what went wrong?”, the company dedicates a big section of its results to giving shareholders the explanation they deserve for last year’s catastrophic shares crash.
Directors, it admits, were fighting with each other and their shareholders when they should have been focused on cutting costs and reining in a stores investment plan.
The resulting cash crunch was worsened by City advisers who descended like flies on a dirty nappy.
Fees piled up to no less than £10 million for various funding wheezes. Had new management not stepped in, stopped the fees and mended relations between banks and shareholders, the whole thing would have gone under.
But for all today’s honesty and new management’s impressive discipline on costs and debt, can this business really survive in a digital world?
On today’s figures, perhaps not. Sales from shops fell 8.9% — no surprise there. But online sales, where better rivals enjoy breakneck growth, crashed 8%. Mothercare has been rescued for now, but only the bravest would buy the shares.
Take private
Charterhouse’s £668 million takeover of quoted events group Tarsus is significant. Every banker in town claims to have a private equity firm up their sleeve hunting for plcs to buy; now the deals are starting to happen.
Who could be next? Well, Charterhouse owned Merlin for years before its float. Given the Alton Towers owner now has a big dipper-sized For Sale sign over it, the firm’s willingness to spend is sure to set tongues wagging. Merlin stock gained another 4% today. Kerching...
