Mothercare is planning to expand into several Asian markets as it secures £24m in additional financing.
The nursery specialist has entered a new joint venture with Reliance Brands UK covering its IP assets in India, Nepal, Sri Lanka, Bhutan and Bangladesh.
Reliance holds a 51% stake in the partnership, which it acquired for £16m and the deal replaces its previous 30-year franchise agreement with the retailer from six years ago.
Mothercare has also secured a refinancing deal with Gordon Brothers to replace its £19.5m loan with a new £8m arrangement.
It comes as the retailer reported 31% surge in pre-tax profits to £2.9m, up from £2.2m, in the 53 weeks to March.
Sales plunged 23% to £56.2m, which it attributed to a weaker performance from its franchise partners due to “the continuing challenges in our Middle Eastern markets”.
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The retailer’s chair Clive Whiley said: “Today’s agreement strengthen our operations in South Asia through an even closer working relationship with Reliance, our existing valued franchise partner, and underline the intrinsic value of the Mothercare brand strength, coterminously supporting a material reduction in our bank facilities and leverage.
“We have renewed confidence in the opportunity that this reinvigorated joint-venture now presents. We look forward to working even more closely with Reliance Brands as our joint venture partner and not just franchisee in the region, moving forward together.”
He added: “We have worked closely with Gordon Brothers for over five years now and value its ongoing support for Mothercare. The revised facility agreement and related arrangements reflect the strength of that ongoing relationship and trust alongside recognising the accretive nature of the joint-venture to our equity valuation.
“For Mothercare, the reduction in the required facility size, funded by the formation of the joint venture, and the resulting significantly reduced cash interest cost, greatly improves our flexibility for FY25 and beyond.”
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