Seraphine says reliance on ecommerce puts it at a disadvantage as a smaller listed company as it prepared to quit stockmarket for a valuation of £15.3m – a tenth of its value at flotation

Screenshot of Seraphine.com

Screenshot of Seraphine.com

Seraphine is set to change hands, subject to shareholder approval, in a move that would take it private and value it at £15.3m. The move, says Seraphine, would give it the time and space to focus on profitable growth – free of the demands that being listed on the stockmarket entails. 

Mayfair Equity Partners has launched a 30p per share bid for the multichannel retailer that is supported by the board. The company, which is already a major shareholder in the business with 42% of voting rights, says it will take the business private if the deal wins the backing of shareholders. Its share price rose by 195.92% from 9.8p to 29p to 29p by lunchtime today. 

The context

The move comes 18 months after the pureplay maternity and nursing clothing brand floated on the London Stock Exchange, in July 2021, at a price of 295p per share and a market capitalisation of £150.2m. At the time, Seraphine Group chief executive David Williams said the move would see it “building on our existing strong fundamentals, reaching more customers worldwide and continuing to deliver innovative designs that support the journey of motherhood.”

Today Seraphine says its operating environment, already challenging as a result of Covid-19 supply chain issues, has “deteriorated markedly” since the Russian invasion of Ukraine. The subsequent cost-of-living crisis and energy price increases has a “damaging effect on consumer activity across all of Seraphine’s largest markets”. Its independent directors also believe that its dependance on ecommerce means Seraphine has been “disproportionately challenged” as a smaller listed business – with knock-on effects on its share price. The retailer trades online and through 11 shops, of which four are in the UK. By going private, it believes that it will be able to focus on profitable growth free of the costs and pressures of being listed. 

Sharon Flood, chair of Seraphine, says in today’s announcement: “Seraphine has faced an extraordinary convergence of challenges since listing in 2021 including the global supply chain crisis, the cost of living crisis and substantial inflation in online marketing costs.

“Whilst the whole retail sector has been affected by these issues, Seraphine, a relatively smaller company new to the London Stock Exchange with a large reliance on ecommerce, has, we believe, been disproportionately challenged.

“Despite the huge efforts of our people and management, who have managed to improve gross product margin, achieve higher basket sizes and expand into several new markets, the business continues to operate in a very uncertain and challenging market. Whilst we are cautiously confident in our ability to restore profitable growth in the future, additional capital now would enable us to make investments to accelerate our growth strategy. Seeking this capital on-market would likely be highly dilutive, and the restoration of value would take time.

“The Seraphine board, therefore, believes that this transaction would remove the substantial costs associated with being listed and afford management the time and space to give their full attention to a return to profitable growth. The Seraphine board also welcomes the further capital which has been committed by Mayfair, to accelerate growth and reinforce the company’s balance sheet, as well as Mayfair’s stated support of the management team and employees.”

Looking ahead

Bertie Aykroyd, partner of Mayfair Equity Partners (MEP), says: “As a major shareholder in the company, Mayfair remains supportive of management and their strategy. However, Mayfair believes that the company’s share price is negatively impacting Seraphine’s ability to deliver on its strategy and attract and retain talent. We believe that it would be beneficial for Seraphine, its employees, and its other stakeholders to continue its growth and development as a private company. This would allow Seraphine to operate without the material level of costs of maintaining a public listing, supporting the company during this period of macro-instability. As part of this transaction, we are also providing additional capital that will strengthen Seraphine’s balance sheet and support our intention to safeguard the business.

“Anticipating that current pressures on the company and market are to persist for the near-term, our objective is also to provide liquidity to certain shareholders to realise their investment for cash at a significant premium to the current market value.”

Seraphine is ranked Top350 in RXUK Top500 research

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