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Toy wholesaler Funtastic Ltd will pay down more debt after offloading its Manchester business unit to Network Clothing Company for up to $2.4 million.
Funtastic said Network Clothing, a clothing manufacturer, will pay around $1.4 million for the unit's net assets and up to another $1 million for goodwill consideration if certain conditions are completed by December 31, 2009.
Funtastic's chairman Graeme Yeomans said the sale comes at the final stages of a review of the company's non-core assets.
'The Manchester business was assessed as not fitting with the long-term strategic direction of Funtastic,' he said in a statement.
The sale is the latest in a series of sales of business units deemed to be non-core, after Funtastic's unprofitable Footwear and Planet Fun (New Zealand) and Apparel units were sold in June.
Total proceeds of $20 million from the sales of Footwear and Planet Fun (New Zealand) will also be applied to the group's debt, Funtastic said in June.
Funtastic is indebted to National Australia Bank (NAB), and on June 29 secured approval from its shareholders for the acquisition of Hong Kong-based NSR (HK) Ltd and a $22 million capital raising enabling an extension of its banking facilities to June 2011.
Company secretary David Berry said Funtastic's current net debt owing to NAB is $90 million.
The rights issue will push full year 2009 net debt to December 31 'substantially below' the $67.1 million held at the end of 2008, the company said at the time.
Funtastic issued a revenue and profit warning on June 26, telling the market it expects 2009 first half revenue to slump by 15 per cent on the previous corresponding period and a first half earnings before interest, tax and amortisation (EBITA) loss of around $10 million.
Its full year EBITA result is forecast to be 'materially lower' than previously advised.
Restructuring charges, loss-making non-core businesses, and a significantly lower profit contribution from its Judius unit prompted by the failure of ABC Learning Centres were to blame, the company said.
Funtastic's 2008 EBITA was $30.4 million and it reported an annual net loss of $50.8 million, down from a net profit of $5.2 million in 2007.
