HALFYR: PPL: PPL HY10 Up 50% $14.3m

2 Mar 2010 10:20 am

PPL 02/03/2010 HALFYR

REL: 1020 HRS Pumpkin Patch Limited

HALFYR: PPL: PPL HY10 Up 50% $14.3m

Pumpkin Patch Limited Unaudited result for the 6 months ended 31 January 2010

Note: all references to dollars are NZ Dollars unless otherwise stated

Highlights - Net profit after tax up 50% to $14.3m - Trading conditions improving across all markets - Earnings growth across all retail markets - Development of a number of new Wholesale markets - Net bank debt down 70% to $9.6m. - Interim dividend increased 50% to 4.50 cents per share - The Company is well positioned to take advantage of the improving market conditions and growth opportunities across markets

Overview Pumpkin Patch Limited has today announced its unaudited result for the 6 months ended 31 January 2010. On revenue of $194m Pumpkin Patch has increased half year earnings to $14.3m, a 50% lift on the same period last year.

A number of major initiatives over the last 18 months have strengthened the Company's Balance Sheet with bank debt now less than $10m and inventory reduced 34% from a year ago.

While conditions in all of Pumpkin Patch's retail markets have improved management is still cautious of the retail spending outlook for the remainder of the financial year.

The Company is well positioned to take advantage of growth opportunities being developed in Australasia, the United Kingdom, and a number of Wholesale markets.

Individual Market Commentary

Australia Retail Trading conditions improved steadily across the period. Total AUD sales (excluding temporary clearance stores open in 1H09 but now closed) were up 3% and up 6% in NZD terms due to more favourable exchange rates.

The Company continued to focus on growing market share and reinforcing the brand's position in the market. While promotional activity remained higher than normal overall segment EBIT was up 2% to $19.9m. Excluding the temporary clearance stores in 1H09 EBIT was up 4%.

Similar trading conditions are anticipated for the remainder of the year.

During the period 3 new stores were opened (1H09: 3) taking total stores to 114. Negotiations continue on the first tranche of the 30-40 stores expected to be opened over the next three years. Four stores will be opened by the end of the financial year including the first of the new smaller format stores.

New Zealand Retail Although the New Zealand retail environment remained subdued for much of the period sales were up 1% (excluding temporary clearance stores).

Improved margins led to a 1% increase in total segment EBIT to $6.2m. Excluding the temporary clearance stores in 1H09 EBIT was up 4%.

The Company expects trading conditions to slowly improve across the second half of the year with a fuller recovery not occurring until 2011.

At January 50 stores were open across New Zealand. Two stores are expected to open before the end of the financial year.

Wholesale and Direct As indicated earlier in the year Wholesale partners lowered orders in response to softer retail environments in their home markets. As a result of this and the continued strength of the NZD against most export currencies total sales were down 14% to $24.0m.

Lower sales led to EBIT being down 13% to $6.8m however EBIT margins were at levels slightly higher than 1H09.

Early indications are that these markets are slowly returning to more normal buying patterns.

The Company now has wholesale partnerships in 20 international markets with China, Lebanon, Malta, and Thailand being the latest added.

United Kingdom Retail While general United Kingdom retail sales conditions remained volatile store level sales growth was generated across the period with the exception of January when the stores were impacted by severe snow storms. Total sales were up 3% in GBP terms however the higher exchange rate led to a 12% reduction in NZD sales.

Trading conditions are expected to improve steadily across the remainder of the year and into 2011.

The EBIT loss for the period was $0.2m, an 81% improvement on last year (1H09: $1.1m loss). The Company is benefiting from improving margins and supply chain processes.

The softer leasing environment is allowing the Company to negotiate better lease terms when existing leases are renewed. This environment is also creating a number of new store opportunities which are currently being assessed.

During the period 3 new stores were opened (1H09: 1) taking the total number of stores to 39. At least one new store will open before the end of the financial year.

United States Retail Retail conditions remained very volatile however some small signs of improvement were seen in the latter part of the period. Total sales from the 20 stores trading during the period were at similar levels as 1H09.

The segment EBIT loss from the 20 continuing stores was $0.8m, 80% better than last year (1H09: $3.8m loss). As part of the reorganisation plan implemented in 2009 store leases were renegotiated downwards to levels that better reflect the current market and full impairment was made of all store fixed assets.

Conditions are expected to remain soft but improve slowly through into 2011. The changes made to the store network in 2009 and the slowly improving environment will lead to a much improved result for the year.

The Company expects all legal requirements relating to the 2009 reorganisation to be completed in May 2010. Based on current estimates the costs recognised in 2009 are expected to be sufficient to complete all aspects of the reorganisation.

Other Financial Information

Unallocated Overheads Unallocated overheads were $9.7m (1H09: $8.5m). The increase reflects lower gains made this year on the mark to market revaluation of foreign exchange contracts. Overhead costs of operating Head Office functions remained similar to last year.

Cash Flows and Balance Sheet The Company has continued to strengthen its balance sheet in 2010 and remains very well positioned to take advantage of growth opportunities that are arising across markets.

The 70% reduction in bank debt over the last 12 months highlights the cash generating capabilities of the Company. Net bank debt was $9.6m at January. Based on current trading conditions and expected working capital and capital expenditure requirements net bank debt is expected to be around $15m at year end. The bulk of the bank debt facilities are in place until December 2011.

Capital expenditure cash flows totalled $3.9m (1H09: $8.2m).

Inventory is expected to remain around current levels based on an average store holding basis.

Dividend The Directors have approved a 50% increase in the interim dividend to 4.50 cents per share (2009 interim: 3.00cps). The dividend will be paid on 22nd April 2010, have a record date of 8th April 2010, and will be fully imputed for New Zealand shareholders and fully franked for Australian shareholders. Non-resident shareholders will receive a supplementary dividend.

Summary Although there remains some way to go before the markets fully recover the Company has placed itself in a position to benefit from improving trading conditions and the result announced today reflects this.

Pumpkin Patch is becoming a truly global childrenswear brand exporting New Zealand based intellectual property to the world. The Pumpkin Patch brand is now sold in 22 markets around the world with New Zealand making up only 16% of total Group turnover. The Company continues to focus on the numerous growth opportunities that international markets offer and is confident of being able to develop many of these in the next 2 to 3 years.

As a consequence of this diversification Pumpkin Patch is less reliant on any one market and has weathered the economic downturn well. Management remain confident this strategy will deliver long term rewards to shareholders.

On behalf of the Board of Directors we again thank the Pumpkin Patch team for their continued hard work and their ongoing dedication to the global success of the brand.

Maurice Prendergast - Chief Executive Officer Greg Muir - Chairman Pumpkin Patch Limited 2nd March 2010

This report has been prepared in a manner which complies with New Zealand International Financial Reporting Standards (NZIFRS) and gives a true and fair view of the matters to which the report relates and is based on un-audited financial statements. It should be read in conjunction with Appendix 1 and Appendix 7 issued to the New Zealand Stock Exchange on 2nd March 2010.

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE (Under NZIFRS)

Current Half Year NZ$'000; Up/ Down %; Previous Corresponding Half Year NZ$'000

TOTAL OPERATING REVENUE FROM CONTINUING ACTIVITIES: $193,988; Down 4.1%; $202,191

PROFIT AFTER TAX FROM CONTINUING ACTIVITIES ITEMS: $14,256; Up 19.9%; $11,892

LOSS FROM DISCONTINUED OPERATIONS AFTER TAX: Nil; ($2,390)

OPERATING SURPLUS AFTER TAX ATTRIBUTABLE TO MEMBERS OF LISTED ISSUER: $14,256; Up 50.0% $9,502

Final Dividend: 4.50 cps (2009: 3.00cps) Record Date: 8th April 2010 Payment Date: 22nd April 2010

Tax credits on final dividend: Fully imputed for New Zealand residents; fully franked for Australian residents; Supplementary dividend payable to non-residents. End CA:00191963 For:PPL Type:HALFYR Time:2010-03-02:10:20:14

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