LONDON (Alliance News) - Mothercare PLC on Tuesday said it has sold the Early Learning Centre business, while it is on track with its transformation plan.
Mothercare shares were trading up 7.1% at 18 pence each Tuesday morning.
In May, the baby products retailer launched a refinancing and restructuring plan, including several store closures, in the face of challenging trading.
The company said its store closure programme, which will lower the number of stores to 80 from 137 by May, is "ahead of the original schedule", and will be completed by the end of March.
Furthermore, Mothercare is on track for cost savings of at least GBP19 million a year.
"Throughout the last nine months we have been progressively reducing net debt, and our aspiration remains to be bank debt free by the end of 2019," the retailer added.
To reach this objective and reduce its bank debt by GBP17.5 million over the next year, the retailer decided to sell the business and certain assets of toy firm Early Learning Centre Ltd to TEAL Brands Ltd for a cash sum and earn out fees of up to GBP13.5 million.
Of this amount, GBP6 million is to be received on completion of the disposal, with up to GBP5.5 million due within a few months and a further GBP2 million earn out fees over the next two years.
"We are retaining ownership of approximately GBP6 million of inventory relating to ELC that we intend to sell over the next few months," Mothercare added.
"Whilst Mothercare has a solid presence in the toy market through the ELC brand, the group does not have the necessary capital, resources or scale in this category to continue to invest and develop the own-brand ELC toys needed to maximise returns from this specialist brand."
Mothercare (MTC)