Pumpkin Patch thrown lifeline

Luke Bunt confirmed the company had closed nine stores in Australia and would be looking in the coming year to focus on improving stores that were underperforming. Photo / Chris Gorman

Director confident he can get children’s wear retailer back on track after bank extends facilities until 2017.

Children's clothing retailer Pumpkin Patch has been given a lifeline from its bank, which has agreed to extend facilities for the company until 2017, and managing director Luke Bunt is confident he can get the one-time market darling back on track.

"The company is in very good heart, and we're making good progress in building the capability that's going to be necessary to take the business forward," Bunt said.

The retailer posted a full-year loss of $9.1 million yesterday - an improvement on the $11.5 million loss reported a year earlier but significantly higher than Pumpkin Patch's previous market guidance for a "modest loss". It blamed the result on impairments for poor-performing stores and working capital risks.

The company was supposed to report its result last week, but on Friday morning deferred the result until yesterday because of "certain risks", which were expected to increase provisioning against the carrying value of working capital.

The surprise announcement, which also flagged discussions with the firm's bank over its loan facilities, sparked a heavy sell-off in the firm's shares, which dropped by more than 37 per cent in the one day. According to Bunt, the firm had become aware of the issue several hours before it was planning to post its result.

"We were about to conclude all our commercial arrangements with the bank when this issue emerged unexpectedly and the rest unfolded," Bunt said. "It was a commercial risk associated with working capital that was significant enough for us to warrant the action, but it was purely a trading related issue."

The company said discussions with ANZ had been concluded with facilities in place until the end of 2017.

"The financial position of the company has improved significantly over the last year in particular and we have formed a very strong working relationship with the bank," Bunt said.

"Over the last 12 months, we have made significant progress in reducing inventory and reducing debt at the same time by over $20 million," he said. "We're down from over $60 million last year to around $40 million this year and that, in our view, is material and has created the platform for us to move forward."

Normalised earnings before interest, tax, depreciation and amortisation fell to $11.7 million from $17 million a year earlier, and the company said it was expecting FY16 ebitda to be significantly lower than 2015.

Bunt confirmed the company had closed nine stores in Australia and would be looking in the coming year to focus on improving stores that were underperforming.

Chairman Peter Schuyt said he stood by the decision earlier in the year not to sell the company.

"When we got down to the wire on this and looked at the options available, it certainly was not in the best interests of either the shareholders, company or staff for [sale of the company] to be pursued further," Schuyt said. "We're absolutely sure that making that decision was in the best interests of everybody."

The company did not declare a dividend. Shares closed 19 per cent higher yesterday at 12.5c.