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Mothercare taps shareholders

Mothercare has announced a nine-for-ten rights issue to raise £100m to fund a major turnaround plan
September 24, 2014

Struggling baby and toddler retailer Mothercare (MTC) is to tap shareholders for £100m of fresh funds through a rights issues. The group plans a nine-for-ten issue, priced at 125p a share - which represents a chunky near-50 per cent discount to the share price just prior to news of the fund-raising.

IC TIP: Accept at 248p

New chief executive Mark Newton-Jones is pushing through a turnaround plan at the loss-making retailer and he reckons the "support of our shareholders" - through the provision of the extra funds - will allow the group to deliver on that strategy. Specifically - and while £40m of the funds raised will be used to repay debt - £45m will also be used to fund 75 store closures, 15 store openings and much-needed store refurbishments over the next three years. A further £10m will be invested in digital systems and infrastructure to modernise the group’s antiquated IT platform and offer customers a seamless multi-channel experience, which it has hitherto lacked. The strategic plan also includes expanding the successful overseas business, restoring profit margins and improving customer service.