Mothercare has successfully secured crucial refinancing and a strategic joint venture.
- The company established new debt facilities amounting to £8m with Gordon Brothers.
- A joint venture in South Asia with Reliance Brands has been initiated, worth £16m.
- Reliance Brands will hold a majority 51% stake in the new joint venture for South Asia.
- These strategic moves aim to alleviate Mothercare’s financial burden and bolster future growth.
Mothercare has announced a significant development in its financial strategy by securing new debt facilities totalling £8m through Gordon Brothers. This refinancing effort is a crucial step in stabilising the company’s financial foundation and reflects a well-managed relationship with Gordon Brothers, which has been supportive for over five years.
In parallel with the refinancing, Mothercare has entered a joint venture with Reliance Brands for their operations across South Asia, including significant markets such as India, Nepal, Sri Lanka, Bhutan, and Bangladesh. The joint venture, valued at £16m, represents a strategic alignment with Reliance Brands holding a 51% stake, thereby dominating the partnership, while Mothercare holds the remaining 49%. This move supersedes the prior franchise arrangement confined to India and is expected to spur substantial revenue growth.
Under the new joint venture, Mothercare anticipates rejuvenating its business operations and surpassing previous revenue benchmarks. Notably, in FY24, Mothercare’s revenue contribution from India alone was around £0.9m to adjusted EBITDA. The restructured collaboration promises enhanced economic efficiency through reduced financial liabilities and improved cash flow, aided by earnings from sourcing fees and equity stakes.
The combined financial manoeuvres of an £8m refinancing and a £16m capital influx from Reliance Brands are set to de-leverage Mothercare, reducing its dependency on costly former debt arrangements. Previously, the company bore a term loan of £19.5m at an annual interest of 13%, now replaced with an £8m facility at 4.8% per annum, substantially lowering financial obligations.
The strategic partnership and refinancing come amid challenges such as a temporary suspension of Mothercare’s shares in the Alternative Investment Market due to delays in audit results. However, with these solid financial underpinnings, Mothercare is poised to proceed with renewed confidence and investment potential.
Mothercare’s revised financial framework and strategic joint venture establish a pathway for sustainable growth and financial stability.
