LONDON (ShareCast) - (Sharecast News) - Shares in Mothercare kicked upwards on Wednesday after the stricken retailer announced a series of restructuring measures.
The mother and child specialist first announced on Monday that it was calling in the administrators before appointing PWC after the market closed on Tuesday. It also announced a restructuring and refinancing package, however, which has been tentatively welcomed by the market.

The main focus is a phrased closure of all 79 UK stores, putting around 2,700 jobs at risk. In the year to March 2019, the Mothercare brand generated profits of £28.3m internationally but the UK retail operations lost £36.3m. Mothercare has more than 1,000 overseas franchised operations.

Chairman Clive Whiley said: "The UK high street is facing a near existential problem with intensifying and compounding pressures across numerous fronts, most notably the high levels of rent and rates and the continuing shifts in consumer behaviour from high street to online."

Also announced were plans to transfer the Mothercare brand and trademarks, along with associated intellectual property, to the Mothercare Global Brands business.

The group also intends to raise £3.2m by issuing 32.3m new shares at 10p per share and has an agreement in principle for an additional £5.5m tranche of unsecured convertible loan notes. Its existing bank debt facilities will be repaid from the administration process.

Whiley said the administration process had been "carefully thought through" and warned that without it, "the existence of the wider group would be threatened".

He continued: "We know it is right for the wider group to ensure Mothercare remains the leading global brand for parents and young children, with a bright and solvent future within the international franchise business."

Clive Black, analyst at Shore Capital, which has a 'hold' recommendation on the stock, said: "This is a potentially transformational moment in the recovery story for Mothercare.

"The sad but necessary closure of the UK stores will eliminate around £30m of operating losses [and] the company expects to be bank debt free by the year end. The statement suggests that the international franchise operations could be making operating profits of £10m-£15m pa and returning to growth and cash generation in 2021 and beyond.

"The changes announced this week look like the last pieces of the jigsaw being put together to returning the business to being profitable, and a bright future.2

Independent retail analysts Nick Bubb said: "Mothercare [has] announced a restructuring and refinancing package confirming that the remaining international business will be profitable and debt-free, free of the UK losses, and that is has found three big shareholder - M&G, Lombard Odier and the ex-stockbroker Richard Griffiths - to stump up more equity to back the vision; these brave souls even subscribed to a placing at 10p to raise £3.2m and have indicated they will back a bigger £35m equity rise if the company needs the money."

At 1230 GMT, shares in Mothercare were 36% higher at 12.88p. The stock fell heavily on Monday when it first announced. plans to appoint administrators.

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