Pumpkin Patch seeks flexibility from banks

Pumpkin Patch has maintained its earnings guidance for the year ended July 31 and said it had seen a "pleasing second half performance," though it's still considering further restructuring and is looking for more "flexibility" from its lenders.

Normalised earnings before interest, tax, depreciation and amortisation were between $2.8 and $3.4 million in the year, a range the retailer initially gave with its first-half results announcement in May and affirmed in June. Pumpkin Patch reported normalised ebitda of $11.7 million in the 2015 financial year and $17 million in 2014.

"Consistent with the company's strategic plan, the company is continuing to assess whether further restructuring provisions are required in respect of any underperforming assets," Pumpkin Patch said in a statement.

"As part of the annual review of its banking facilities, the company is in discussions with its bank on the suitability of the facilities' terms and conditions. Those discussions will occur in the context of the current operating environment and capital expenditure requirements associated with the company's strategic plan. Some additional flexibility is being sought. The review is anticipated to be completed in mid-September."

The retailer said it had second-half online sales growth of 44.1% in Australasia, and same-store growth of 4.2% in Australia and 5.4% in New Zealand, compared with the same time in 2015, which "contrasts significantly with the challenges experienced in the first half."

Pumpkin Patch's sales fell 16% to $102.8 million in the first half from a year earlier, with online sales down 13%. It posted a $6.8 million loss in the first half, compared to a $700,000 profit a year earlier.

In his address to shareholders last November, managing director Luke Bunt said 2016 earnings would be "significantly below" 2015's. Mr Bunt told investors the stores needed more investment, the clothes needed to become more "fashion forward" and the website needed to move away from being simply a clearance vehicle. He also warned that legacy costs of historical property exposures were putting the retailer at a disadvantage.

Today, the retailer said it had "significantly improved its inventory age profile and new season inventory is now at levels more appropriate to support all sales channels going forward." It had $49 million in inventory as of July 31.

The shares last traded at 7.5c, and have dropped 37.5% this year. Pumpkin Patch was a member of the S&P/NZX 50 Index until October 2013, when it was replaced by petrol station chain Z Energy.

(BusinessDesk)