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Pumpkin Patch hangs out sale sign

pumpkin patchChildren’s clothing retailer Pumpkin Patch, 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 Auckland-based retailer, which on Friday posted an improvement in first-half earnings, says third parties have proactively indicated an interest in Pumpkin Patch since the company announced a capital review at its annual meeting in November.

It has a market capitalisation of $NZ35.5 million ($A34.38 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.

Pumpkin Patch, which signalled in November that it was at risk of breaching banking covenants, said the company’s underlying business performance is improving as its cost base falls and sales increase.

First-half profit increased to $NZ749,000 from $NZ106,000 in the year earlier period as sales rose 2.2 per cent to $NZ121.9 million.

It expects full-year earnings before interest, tax, depreciation, amortisation and transformation costs to be similar to last year at $NZ14m.

The latest earnings, for the six months ended January 31, included after-tax re-organisation costs of $NZ743,000 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 re-organisation of its stores, mostly in Australia, will see it closing 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 $NZ7.6 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 $NZ52.7m in January from $NZ64.9m at July 31.

Shares in Pumpkin Patch jumped NZ3 cents to NZ24 cents.


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