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Pumpkin Patch accounts tagged

 

pumpkin patchPumpkin Patch’s 2014 annual accounts have been tagged by auditor PwC over the unprofitable children’s clothing retailer’s reliance on bank funding to continue trading.

The auditor’s report is included in the Auckland-based company’s annual report, which was filed to the stock exchange on Wednesday.

It shows the retailer renegotiated the terms of its banking arrangements with ANZ Bank, which the board viewed as “prudent to provide accommodation for potential adverse results arising from a challenging trading environment while an extended facility was negotiated”.

New covenants mean Pumpkin Patch has to remain within 20 per cent of forecast earnings before interest, tax, depreciation and amortisation on a rolling 12 month basis.

The retailer also told the bank it doesn’t intend paying a dividend in the 2015 financial year, and will have to get the lender’s permission if that position changes.

Still, the board, which has undergone a major overhaul, signed off on the accounts as a going concern, saying the retailer “can trade profitably and meet its bank covenants for a period of 12 months” based on assumed sales growth and a reduction of net debt.

Auditor PwC tagged the accounts, citing the company’s dependence on meeting obligations under the bank facility agreement.

“If the group is unable to comply with its bank covenants, renegotiate its facility or obtain alternative sources of funding, then this indicates the existence of a material uncertainty that may cast significant doubt about the company’s and group’s ability to continue as a going concern,” PwC said.

Pumpkin Patch’s new banking facility of $NZ75 million ($A69.82 million) was down from a previous $NZ100 million, and the retailer had drawn on $NZ66 million as at July 31, compared to $NZ52 million a year earlier.

The annual report confirms the result reported in September, when the company turned to a loss of $NZ10.2 million in the 12 months ended July 31 from a profit of $NZ5.1 million a year earlier.

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