Pumpkin Patch says earnings for the 2016 year will be "significantly' below that forecast for 2015. Photo / NZ Herald
Pumpkin Patch says earnings for the 2016 year will be "significantly' below that forecast for 2015. Photo / NZ Herald
Pumpkin Patch has postponed the release of its full year result this morning and has warned the market that after tax losses are likely to be bigger than expected.
The company also advised that it was in advanced discussions with its bank around scheduled extension of its banking facilities.
It shares have plunged nearly 25 per cent on the NZX this morning, valuing the former market darling at $18.4 million. Pumpkin Patch shares peaked at $4.95 in early 2007.
In a statement to the market this morning, the ailing retailer 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 is not giving any media interviews today.
In its statement, the company said, "when combined with additional impairment adjustments, including further adjustments in relation to under-performing stores, reported after tax losses for the year will now be above the modest level previously advised".
Pumpkin Patch was scheduled to post its full year report this morning however at the last minute the company released the update and postponed the result until September 30.
Shares opened at $0.145 and have fallen 66.28 per cent over the last 52 weeks.
Craigs Investment Partners analyst Mark Lister said the possibility of bankruptcy was very real.
He said Pumpkin Patch was already "in a pretty tight spot and their bankers were already probably keeping a pretty tight rein on them and so that obviously has just made things worse again."
"Basically their balance sheet is nowhere near as strong as it needs to be, they have too much debt for the way the business is going these days and they need to do something to rectify that. So how do you do that, you can raise equity, a lot of it will hinge on the approach the banks take but it's not good news."
"It's bad news all around. They're in a pretty tough spot and who knows how they'll get themselves out of this hole. 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."
Lister said postponing the release of the financial result was "a big move and they won't have done that lightly. They're obviously under increasing pressure."
It's bad news all around. They're in a pretty tough spot and who knows how they'll get themselves out of this hole. 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.
"They've probably said all they can and it's up to the market to judge just how bad it is. The worst case scenario is that they go bankrupt and completely collapse," said Lister. "Let's hope it doesn't get to that point but it is always a possibility when things are going from bad to worse and when you have balance sheet issues as well as these write-downs as well as the operational side of the business is in a really difficult spot and your whole management team has seen such changes so is that possible?
"Yes it is, but hopefully it doesn't get to that. They are in a very difficult corner to get themselves out of."
Lister said it had been "a huge fall from grace" for the company.
"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."
