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Pumpkin Patch in talks with bank after cutting guidance

Pumpkin Patch in talks with bank after cutting guidance, delaying results

By Jonathan Underhill

Sept. 25 (BusinessDesk) - Pumpkin Patch delayed the release of its 2015 results and said provisioning means it 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 Sept. 30 and the remaining $50 million expires on Feb. 29 next year. Pumpkin Patch shares dropped 17 percent 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.

The company said "an unanticipated increase in provisioning against the carrying value of working capital" meant normalised earnings before interest, tax and depreciation in the year ended July 31 was between $11.6 million and $11.8 million, below the forecast $14 million it gave on June 5.

"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," it said. It gave no detail of the net loss, other than to say it would no longer be "modest".

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 Humphries has been replaced by former Warehouse Group CEO Luke Bunt and Dave Foster was promoted to the position of CFO.


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