Pumpkin Patch seeks proposals after approaches to buy firm   20 Mar 2015

Pumpkin Patch seeks proposals after approaches to buy, refinance company; shares gain

By Tina Morrison

March 20 (BusinessDesk) - Pumpkin Patch, the children's clothing retailer whose shares have lost two-thirds of their value the past year, is seeking formal proposals after receiving approaches to buy or refinance the company. The shares rose 14 percent.

The Auckland-based retailer, which today posted an improvement in first-half earnings, said "certain third parties have proactively indicated their interest in Pumpkin Patch" since the company announced a capital review at its annual meeting in November. It has a market capitalisation of $35.5 million

"The board believes it is in the company's interests to seek formal proposals in respect of either an acquisition of the company or in respect of recapitalisation," chairman Peter Schuyt and chief executive Di Humphries said in a statement. Investment bank Goldman Sachs is advising the company and a sub-committee of the board of independent directors will evaluate proposals, they said.

Pumpkin Patch, which signalled in November that it was at risk of breaching banking covenants, said today that the company's underlying business performance is improving as its cost base falls and sales increase. First-half profit increased to $749,000 from $106,000 in the year earlier period as sales rose 2.2 percent to $121.9 million, the company said. It expects full-year earnings before interest, tax, depreciation, amortisation and transformation costs to be similar to last year at $14 million.

The latest earnings, for the six months ended Jan. 31, included after-tax reorganisation costs of $743,000 after the company embarked on a strategic review in a bid to lift its performance, focusing on its store footprint, stock levels, and an IT system upgrade. A reorganisation of its stores, mostly in Australia, will see it shuttering nine outlets in the second half of this year, it said.

A rise in the New Zealand dollar against the Australian dollar had imposed a $7.6 million negative impediment on the business compared with the same period a year earlier, the company said.

The retailer isn't paying a first-half dividend as it focuses on reducing bank debt. It reduced net bank debt to $52.7 million at Jan. 31, from $64.9 million at July 31.

Shares in Pumpkin Patch jumped 3 cents to 24 cents. The stock was rated an average 'hold' according to analyst recommendations compiled by Reuters.

(BusinessDesk)

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