Ailing retailer could face receivership, says analyst

Pumpkin Patch shares hit a record low after it postponed the release of its full-year result and warned losses would be bigger than expected, with analysts warning receivership was a possibility.

Shares in the ailing retailer plunged as much as 37 per cent yesterday after the company advised it was in advanced discussions with its bank around extending its $75 million banking facilities.

The former market darling hit a peak in early 2007 with shares reaching $4.95, valuing the company at around $825 million. The company's share price closed down 4.5c yesterday at 10c, giving it a market capitalisation of $16.9 million.

Pumpkin Patch was scheduled to post its full-year report yesterday morning, however the company released an update and postponed the result until September 30.

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The company said it had "become aware of issues" that meant it would likely have to increase the amount of cash set aside for emergency costs, resulting in a reduction in earnings before interest, tax, depreciation and amortisation from $14 million down to between $11.6 million and $11.8 million for the year.

The company said its after-tax losses were likely to be higher than previously thought.

Craigs Investment Partners analyst Mark Lister said the possibility of bankruptcy was very real.

"The worst-case scenario is that they go into receivership and completely collapse," Lister said.

"Is it possible? Yes it is, but hopefully it doesn't get to that," he said.

"They are in a very difficult corner to get themselves out of."

Lister said Pumpkin Patch's bankers were likely to have been keeping a tight rein on the business anyway with the update yesterday making things worse.

He said it had been "a huge fall from grace" for the company.

"It's bad news all around," Lister said. "Plan A was to put themselves up for sale but that never really eventuated and as a standalone business, things look pretty challenging for them.

"You would hope there is still some value in the brand but I don't envy them trying to get themselves out of this situation."

Briscoe Group managing director Rod Duke was rumoured to have been eyeing up the business earlier in the year, before changing tack and making a bid for outdoor retailer Kathmandu.

Duke was previously on the board of Pumpkin Patch and still owns just under 10 per cent of the company.

Lister said postponing the release of the financial result was a big move that wouldn't have been done lightly, adding that they were obviously under increasing pressure.

"They're just over-indebted - they've got far too much debt for the size and the earnings that the business is generating these days," Lister said.

"So they need to find a way to rectify that and to reduce the debt and increase their equity, or get their banks to allow them even more flexibility than they've already been afforded. I'd imagine the bankers are starting to get a little jittery about doing that."

The company has seen high turnover from its management team in the past year, with chief executive Di Humphries announcing she was stepping down in June, as well as several of its board also stepping down.

Shares have fallen 76.7 per cent over the past year.