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Entertainment Rights cuts jobs as Woolies collapse hits trading

Entertainment Rights, the children's television group which owns the rights to Rupert Bear and Postman Pat, is to cut a third of its workforce as part of a rescue plan that also includes an emergency loan to see it through Christmas.

The group, which also makes DVDs and games, revealed yesterday it faced significant losses following the collapse of Woolworths, one of the largest customers of its UK entertainment business.

Entertainment Rights also said Deborah Dugan, the head of its US arm, would take over as chief executive following the decision of Nick Phillips last week to step down after just nine months in charge.

Ms Dugan, a former EMI executive who served as president of Disney Publishing Worldwide before joining Entertainment last year, said: "I'm coming into the company when it's not in the best position – it needs a lot of careful management attention, and the first thing is securing financial stability."

She announced the group was to axe 50 of its 150-strong workforce by the end of the year as part of its plan to save £5m. "We are highly focused on cutting costs," Ms Dugan added.

Shares in Entertainment Rights leapt by a quarter yesterday after the company announced that it had secured a £13m short-term loan from HBOS, its main lending bank.

The move was made to "cover potential cash flow shortfalls" until the end of February and it remains in discussions with the bank over longer-term funding arrangements. Edward Knighton, chief financial officer, called the loan a "substantial vote of confidence". There had been fears the group had breached its banking coven-ants last week, and one insider admitted that securing the loan had been "touch and go".

Nevertheless, the company faces a difficult few weeks, warning that Christmas sales "will be lower than expected" and that shipment of goods would be later than anticipated. Entertainment Rights said that when Woolworths and its distribution business Entertainment UK had gone into administration, it owed the company £800,000. "The directors are actively seeking clarification as to the recoverability of this sum and the effect of the potential loss to the company," it said.

Entertainment Rights is currently exploring its options with other retailers, including supermarkets, who could replace the Woolworths business which would otherwise be lost.

Yesterday also marked the departure of a second senior manager in a week. Jane Smith, the company's chief creative and commercial director, left "to pursue other opportunities" after nine years at the group.

Ms Smith, who will not be replaced in the short term, is credited with reinventing Postman Pat.