KEY POINTS:
Shares in children's clothing retailer Pumpkin Patch surged yesterday on news the company was looking to buy back 5 per cent of its own stock.
Its shares pushed off the bottom of an all-time low of 80c yesterday - surging 13c or 16.25 per cent at one point - before ending the day at 91c, up 11c or 13.75 per cent. The on-market buyback, handled by First NZ Capital, would see the retailer reclaim up to 8.35 million ordinary shares - 4.99 per cent of its total share issue - over a period of a year beginning on Friday.
Chief executive Maurice Prendergast said the company was "pro-actively managing" its capital structure to provide a valuation benefit to its shareholders.
"The buyback reflects our belief in the true underlying value of the Pumpkin Patch brand and our confidence in the company's continued financial performance into the future."
Chief financial officer Matthew Washington said the buyback, a first for the company, had not been prompted by any takeover concerns over the share price's low.
"There's certainly nothing that's been a factor in any decision, and we're not aware of any pending action if there was any out there.
"This is more a reflection of our confidence in the value of the business and our ability to trade successfully going forward."
Forsyth Barr analyst Guy Hallwright said: "They're trying to send signals, I suppose, that at this kind of share price they view reinvesting in the shares as one of the best uses they can think of for their money - that's bearing in mind that we've got an environment where clearly the expansion programme offshore's been slowed down because of the global economic conditions."
Hallwright said it was not an unusual move, although not many had occurred recently.
"In this kind of climate, with a lot of companies trading well below where any reasonable estimates of their value are, it is the sort of thing that we could see more of.
"In general the New Zealand market's not highly geared, so companies may have cash resources that they can use to buy back capital.
"Certainly management is trying to send a positive signal to the market, and it seems to be being received."
Listed at $1.25 a share in June 2004, Pumpkin Patch climbed to $4.95 early last year before plummeting this year as consumers shut their wallets and retail stocks fell out of favour.
