Pumpkin Patch: 'third parties' sniffing about

Photo / Chris Gorman

Pumpkin Patch says "certain third parties" have expressed an interest in the children's clothing retailer and its board is seeking formal proposals around either an acquisition or re-capitalisation.

The Auckland-based company has today reported a 10.7 per cent rise in half-year profit before reorganisation costs to $1.5 million.

Revenue rose to $121 million from $119.3 million in the same period a year earlier.

The retailer's shares, which have shed about 50 per cent over the past 12 months, jumped more than 26 per cent to 26.5c in early trading.

At its annual meeting last year Pumpkin Patch told shareholders it was undertaking a capital review and had hired investment bank Goldman Sachs as an adviser.

"Since that time certain third parties have proactively indicated their interest in Pumpkin Patch," the company said today. "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."

Pumpkin Patch said its board had established a sub-committee of independent directors to evaluate proposals.

"Further announcements to the market will be made if any proposal received represents a realistic option for the company."

There was market speculation earlier this year that Briscoe Group managing director Rod Duke - who has a 10 per cent stake in Pumpkin Patch and a seat on its board - might try to take control of the kids' clothing seller.

Duke would not confirm or deny the rumours.

Pumpkin Patch chairman Peter Schuyt declined to comment on whether Duke was one of the interested parties.

The third parties - which he declined to name - were showing a serious interest in the retailer, he said.

Schuyt said Pumpkin Patch would benefit from additional capital and expertise that could come with a new ownership structure.

"We've got parties who are interested who we believe could potentially add a lot of value to the business," he said.

Pumpkin Patch warned at the annual meeting that bank covenants could be breached if Christmas trading fell below expectations.

Schuyt said today that Christmas trading had been positive and the company was comfortable with its forecasts for the remainder of the financial year.

"We'd be obligated to advise the market if there was any forecast breach [in bank covenants] and obviously we haven't done that," he said. "The business risk is still there, but bank debt's down, operating cashflows are good and the relationship with the bank has been and continues to be good."

See a Pumpkin Patch supplied video on today's financial results here:

Chief executive Di Humphries said the competitive environment remained intense, but the retailer had achieved "solid" same store sales growth of 5.7 per cent in Australia and 1.8 per cent in New Zealand.

"In addition, traffic on our websites increased by 10.3 per cent," Humphries said. "The frequency of customer purchases across both our retail and online channels also increased significantly."

However, trading conditions in Pumpkin Patch's international business had been difficult, leading to a sales decline of 1.2 per cent, she said.

The company said its "transformation programme" was gaining momentum and progress was being made on "right-sizing" the business, with nine Australian stores scheduled for closure in the second-half of the financial year.

The company said full-year normalised earnings before interest, tax, depreciation and amortisation (ebitda) would be similar to last year's $14 million.

Read the latest Pumpkin Patch financial results here: