Mothercare is seeking to raise about £100m by launching a rights issue as part of an ambition to make the company a “digitally led” business.

Mothercare is seeking to raise £100m to transform itself into a digitally led business

The money will be used to invest in a more modern store estate, improve IT systems and create a more efficient operational infrastructure.  

Money raised from the rights issue will also be used to repay a “significant amount” of its outstanding debt and provide it with a stronger capital base to carry out its strategic plan.

Mothercare chief executive Mark Newton-Jones said: “We have set out our strategic plans for the turnaround of Mothercare and Early Learning Centre 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.”

Mothercare claims the rights issue is necessary following “underinvestment” in the business in prior years and added that money will be used to accelerate its store closure programme and refurbish and relocate other stores.

It is expected £25m will be applied to store closures and £20m will be invested in the store refurbishment programme.

An additional £10m will be invested in digital systems and infrastructure to improve the links between its physical and online presence.

About £40m of proceeds will be spent on the full repayment of the group’s existing term loan.

Mothercare chairman Alan Parker said: “This fundraising 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 [and] reinforcing the strong growth potential in our international operations.”

Mothercare to raise £100m from rights issue to invest in digital transformation