Pumpkin Patch accounts tagged over reliance on banker

Photo / Chris Gorman

Pumpkin Patch's auditors, international accounting firm PwC, said the NZX-listed childrens wear retailer may have difficulty continuing as a going concern if it was unable to comply with its banking covenants with ANZ Bank.

PwC, in the company's annual report released today, said: "Without qualifying our opinion, we draw attention to Note 17 and Note 24 in the financial statements which indicates the going concern assumption is dependent on the ability of the group to continue meeting its obligations under its 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.

Note 17 said a revised facility agreement had been structured "to align against key strategic review priorities initiated by the Group". Total facilities available under the Revised Facility Agreement amount to $75 million, down from $100 million a year earlier.

In Note 24, the directors said they had considered the group's ability to remain in compliance with its bank covenants, which are agreements to keep financial ratios within pre-set limits.

"If the group is unable to continue meeting its obligations under its bank facility agreement, is unable to renegotiate that facility or obtain alternative sources of funding, then this indicates the existence of a material uncertainty that may cast doubt about the company's and group's ability to continue as a going concern," the directors said. They said the group continued to "pro-actively" manage its relationship with the bank.

Pumpkin Patch turned in a loss of $10.2 million for the year to July 31 from a profit of $5.1 million a year earlier.

A new management team has been put in place since chief executive Di Humphries took over in August last year, including new chief financial officer Steve Mackay.

When the company reported its annual result in September, Humphries said a comprehensive two-year transformation process was under way to improve the Company's financial position. "One key aspect of this process is to ensure Pumpkin Patch continues to adapt to the extremely dynamic international marketplace in which it operates," she said then.