(Reuters) – Mothercare saved more money than expected last year from the store closures on which it has pinned its recovery hopes, helping it cut net debt by 84% to 6.9 million pounds.

FILE PHOTO: People walk past a Mothercare store in Altricham, Britain, May 16, 2018. REUTERS/Andrew Yates

This fuelled expectations that the British owner of the Little Bird, Baby K and Blooming Marvellous brands will meet its target of being debt-free this year and drove its shares 20% higher to 24.3 pence on Friday.

The company also reported a loss before tax from continuing operations of 66.6 million pounds, compared with 94 million pounds a year earlier.

“The key message from today’s FY19 results is solid transformational progress and delivery on the market’s financial expectations,” finnCap analysts said in a note.

Mothercare, which floated in 1972 and has been a mainstay of British shopping streets, said it had closed a third of its British stores over the past year, realising more than 25 million pounds in cost savings.

It had originally hoped to save 19 million pounds as a result of reductions in rent, store costs, and other overheads.

“We have achieved a huge amount this year, refinancing, restructuring and reorganising Mothercare to ensure a sustainable future … The majority of that work is now done,” Chief Executive Mark Newton-Jones said.

Mothercare, which faces intense competition from a new generation of web-based players, said it has increased online marketing spend in Britain through paid search and e-mail.

Online sales currently contribute to 45% of its annual sales in Britain and represent 5% of its global turnover, with a digital presence in 22 nations.

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Mothercare said it would look to gain an online presence in four more countries this year.

“The next phase of our strategic transformation plan is to develop Mothercare as a global brand, maximising the opportunities we see across many international markets,” Newton-Jones said.

Like-for-like sales in Britain, where it has been losing money for more than a decade, were down nearly 9%, while annual worldwide sales slipped 8% to 1.07 billion pounds.

Reporting by Shashwat Awasthi in Bengaluru; editing by Patrick Graham and Alexander Smith



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