Pumpkin Patch delays worse-than-expected result release

See also: Investors shun Pumpkin Patch in bad news day

Pumpkin Patch [NZX: PPL] has delayed releasing its annual results until next Wednesday, as worse-than-expected earnings means it needs more time to negotiate its tenuous relationship with its bank.

The floundering childrenswear retailer was due to release its financial results for the year to July 31, 2015 this morning but instead chief financial officer Dave Foster issued a statement saying this would be delayed until September 30.

While finalising its accounts, the company became "aware of certain risks which are expected to result in an unanticipated increase in provisioning against the carrying value of working capital,” he says.

Normalised earnings before interest, tax, depreciation and amortisation will now be between $11.6 million and $11.8 million, he says. This is down from the previous market guidance given in July of about $14 million.

Reported after-tax losses for the year will also be more than previously advised, after the company was hit with impairment adjustments caused by under-performing stores. It did not say what the losses will probably be.

The company suffered from high staff churn, store closures and asset write-downs during the year, with weak Australian growth.

Therefore, it needs more time to properly consider and assess its risks, the statement says.

Pumpkin Patch told the market it is in “advanced discussions” with ANZ Bank to extend the terms of its $75 million banking facility. The first $25 million tranche comes due on September 30 and the remaining $50 million expires at the end of February.

The bank is concerned about the impact the revised earnings might have on banking covenants and other conditions of its loan.

The retailer was tagged by its auditor last year over the prospect of breaching the terms of its banking covenants.

In June, Pumpkin Patch abandoned plans to refinance or find a buyer after interested parties did not make a high enough offer for the board.

The childrenswear company has been plagued with problems and profit downgrades in recent years, forced to discount stock to maintain sales to compete with cheaper online rivals and shut unprofitable stores.

It completed a strategic review of all areas of the business last year – with reorganisation costs of $14.6 million – and is trying to run a two-year transformation process to improve the company’s financial position in future.

But high executive team churn has made it hard for the business to gain traction. It recently named Luke Bunt as its new managing director, replacing Di Humphries who resigned in June after less than two years in charge.

Early this month it announced the appointment of Dave Foster as its chief financial officer to replace Steve Mackay, who quit after less than a year.

The stock is trading at just 14.5c, having fallen more than 66% in the past year.

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