This morning Mothercare has done more or less what everyone expected it to do and yet also managed to surprise.
As widely leaked, the company has admitted it is insolvent in its current form and has thrown itself at the mercy of its landlords.
The CVA proposal is that 50 of the 137 remaining UK stores will shut, putting 800 jobs at risk. Mothercare is asking for rent reductions at 21 others.
If landlords accept to take the hit, the company says it has secured £113 million in funding (it’s tapping long-suffering shareholders for yet more money and HSBC and Barclays have agreed to extend credit) as part of yet another turnaround plan.
The surprise that’s caused a stir is that Mothercare has invited the CEO it fired last month to return. I say return, in truth he never left as he was seeing out his notice period.
Newton-Jones has lead Mothercare for the last four years. The company’s view now is that the strategy he was pursuing was “right” but the execution was “too slow”.
The surprise that hasn’t turned heads but may yet is that the company was due to file its preliminary results for last year at 07:00 this morning. They haven’t been published.
Deloitte is Mothercare’s auditor and, apparently, it has yet to sign-off the company as a going concern. We are told they will do so by lunchtime.
What’s curious is that KPMG drew up the CVA proposal on behalf of Mothercare. Surely the details were shared with Deloitte in advance of this morning, so why the delay?
Could it be that Deloitte is hesitating about vouching for the financial viability of Mothercare even if the CVA is approved? Does Deloitte have an issue with some of the assumptions that are being made about future cash-flows or the cost of funding?
As the independent auditor, Deloitte’s credibility is on the line. If the company falls flat on its face a few months down the line then people will ask questions about the questions Deloitte asked.
Deloitte has the right to “withhold opinion” on the company as a going concern but to do so would look terrible in the current climate.
I imagine the conversations that are taking place behind closed doors at the moment are rather interesting.