Deutsche Bank has lowered its price target for Mothercare PLC (LSE:MTC) from 12p to 6.5p, but has maintained a 'buy' rating on the stock, following the company’s latest financial results and a key refinancing deal.
Mothercare reported a 13% drop in retail sales, driven by challenging conditions in its key Middle Eastern markets, which account for 41% of its business. However, the UK and Indonesia saw growth.
Mothercare also revealed a joint venture with Reliance Brands, which acquired a 51% stake in the Mothercare brand across India and neighbouring countries for £16 million.
This values the joint venture at £31 million, higher than Mothercare’s current market capitalisation of £20 million, signalling potential growth ahead.
Despite a 23% fall in revenue to £56.2 million, the company managed to increase adjusted profits by 3%, with an EBITDA of £6.9 million, reflecting improved profitability.
The refinancing and partnership are expected to ease the company’s debt load and position it for future growth.
In early afternoon trading the stock was down 6% at 4.7p.