Pumpkin Patch posts $9.1M full-year loss on charges, secures bank facilities through 2017

Wednesday 30th September 2015

Pumpkin Patch, the unprofitable children's clothing retailer, posted a full-year loss that included bigger than expected provisions against under-performing stores and said it had concluded talks with its bank to extend its debt facilities through the end of 2017.

The loss was $9.1 million in the 12 months ended July 31, including pretax reorganisation costs of $6.4 million, compared to a loss of $11.5 million a year earlier, when one-time costs were $14.6 million, the Auckland based company said in a statement. Operating revenue fell 1 percent to $238.5 million.

The retailer warned last Friday that its loss would be greater than the "modest" level it had previously flagged to the market, because of "an unanticipated increase in provisioning against the carrying value of working capital" and impairments against under-performing stores. The weaker results forced Pumpkin Patch into talks with its lender, ANZ Bank New Zealand, to extend the term of its $75 million banking facility, of which the first $25 million tranche was to have come due on Sept. 30 .

Net bank debt fell about 40 percent to $39 million, while inventory fell to $41 million from a restated $64.3 million a year earlier.

"Trading conditions were challenging throughout the year across all channels with the sector experiencing high levels of promotional activity," the company said. Normalised earnings before interest, tax, depreciation and amortisation are expected to be "significantly lower" in 2016, because of the impact of "foreign currency headwinds and the flow on impact of the tough trading conditions in the wholesale and online channels."

Normalised ebitda dropped to $11.7 million in the 2015 financial year, from $17 million in 2014.

Sales in Australia, the company's biggest market at 64 percent of total revenue, rose 1.3 percent to $151.9 million in the latest year, but ebit fell to $16.2 million from $18.9 million, as discounting and a higher kiwi dollar to the Australian dollar shrank its ebit margin to 10.7 percent from 12.7 percent. It closed nine Australian stores during the year.

In New Zealand, sales fell 2.4 percent to $46.8 million, although on a same-store basis sales rose 0.5 percent. Subdued retail conditions and discounting led to a slight drop in ebit to $8.2 million from $8.4 million, while its ebit margin was unchanged at 17.6 percent.

For the rest of the world, sales fell 7.5 percent to $39.8 million, which the company said reflected the loss of key wholesale accounts. Ebit dropped to $1.9 million from $4.2 million.

Pumpkin Patch has failed to find a suitor with an acceptable proposal after hiring Goldman Sachs for a capital review in 2014. At the time it had warned the company was at risk of breaching banking covenants. The company lost its two most senior executives with the departure of chief executive Di Humphries and the resignation of chief financial officer Steve Mackay this year. Humphries will step down next month, and be replaced by former Warehouse Group CEO Luke Bunt, while Dave Foster was promoted to the position of CFO.

The company didn't declare a dividend. Its shares last traded at 10.5 cents, have touched a record low 8 cents this week, and have tumbled 74 percent in the past 12 months.

BusinessDesk.co.nz

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