Mothercare will launch a rights issue to raise around £100m to help it deliver on its new strategic plan.
The retailer said the rights issue, which will raise £95m net of expenses, is aimed at transforming the business into a digitally-led business with a modern shop estate. It currently operates 1,500 Mothercare and Early Learning Centre stores across 60 countries.
It said the rights issue will also enable the group to repay “a significant amount of its outstanding debt and therefore provide it with a stronger capital base to implement the new strategic plan”.
Mothercare believes the rights issue will enable it to accelerate the reshaping of the UK store portfolio through expansion of the existing store closure programme, to undertake a store refurbishment and relocation programme with the aim of generating increased sales through improved densities and to provide a modern store environment. It is expected that approximately £25m of the net proceeds of the rights issue will be applied to store closures and approximately £20m on the store refurbishment programme.
Around £10m will be invested in digital systems and infrastructure and around £40m of the net proceeds will go towards the full repayment of the group’s existing loan.
The rights issue will be priced at 125 pence per new ordinary share. It represented a 49.6% discount to the closing price of 248.25 pence per ordinary share on 22 September 2014.
Alan Parker, chairman of Mothercare, said: “This fund-raising is a pivotal step for Mothercare. It will position us for the next phase of our strategy, which is focused on returning the UK to profitability, reinforcing the strong growth potential in our international operations, and as a result, generate sustainable long-term value for Mothercare shareholders”.
Mark Newton-Jones, chief executive of Mothercare, added: “We have set out our strategic plans for the turnaround of Mothercare and ELC in the UK. By modernising and transforming the UK into a digitally-led business supported by a modern store estate we will underpin the growth of the group’s successful international business. Our ambition is for Mothercare to become the leading global retailer for parents and young children. The support of our shareholders will allow us to deliver on this ambition.”