In the process of finalising its 2015 financial accounts Pumpkin Patch became aware of certain risks which are expected to result in an unanticipated increase in provisioning against the carrying value of working capital.
This effectively means the children’s clothes retailer will miss earnings guidance and post a bigger net loss, which has forced the children’s clothing retailer into talks with its lender, ANZ Bank New Zealand.
The Auckland-based company is in talks to extend the terms of its $75 million banking facility, of which the first $25 million tranche comes due on September 30 and the remaining $50 million expires on February 29 next year. Pumpkin Patch shares dropped 17 per cent to a record low 12 cents, valuing the former stock market darling at $20.3 million. The stock peaked at $4.95 in early 2007.
This provisioning will reduce normalised EBITDA to between $11.6 million and $11.8 million from approximately $14 million previously advised to the market.
When combined with additional impairment adjustments, including further adjustments in relation to under-performing stores, reported after tax losses for the year will now be above the modest level previously advised.
To properly consider and assess the risks identified, Pumpkin Patch advises that the full announcement of its financial results for the year ended July 31 will be deferred from today to September 30.
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. Today, Pumpkin Patch said it was “in advanced discussions with its bank regarding the scheduled extension of banking facilities and any impact the revised normalised ebitda expectation might have on applicable terms and conditions including 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 Humphries has been replaced by former Warehouse Group CEO Luke Bunt and Dave Foster was promoted to the position of CFO.
