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Video: Pumpkin Patch CEO, Di Humphries and Chairman, Peter Schuyt give their commentary on the result.

PUMPKIN PATCH LIMITED
HALF YEAR RESULT AND MARKET UPDATE

Specialty childrenswear company, Pumpkin Patch (NZX:PPL), today released its unaudited result for the six months ended 31 January 2015 and provided an update on the Company’s transformation programme, the Board’s review of capital initiatives and an outlook for the financial year.

Half Year Result

Total revenue for the six months to 31 January 2015 from continuing operations was $121.9 million compared to $119.3 million for the comparable period last year, up 2.2%. Excluding reorganisation costs, net profit after tax for the six months was $1.5 million compared to $1.3 million last year, up 10.7%. After reorganisation costs, net profit after tax was $0.7 million for the half compared to $0.1 million last year.

Commenting on the result, Chief Executive Di Humphries said “The competitive environment remains intense but the Company achieved solid same store sales growth of 5.7% in Australia and 1.8% in New Zealand. In addition, traffic on our websites increased by 10.3%. The frequency of customer purchases across both our retail and online channels also increased significantly. These are all positive signs. Partially offsetting this however, trading conditions in our international business have been more difficult leading to a modest decline in sales of 1.2%.”

“We have strengthened our connection and interaction with our customers both in New Zealand and Australia, and as a consequence of this and refinement of our product range our customers are re-engaging in a very positive and sustainable way” Ms Humphries said.

Ms. Humphries explained further that “It takes time to change customer behaviour and perceptions but in the last six months a number of our marketing initiatives have been more targeted and personalised thereby becoming more relevant to the customer. While it is still early days in terms of the implementation of our new customer contact strategy, results to date demonstrate the business is heading in the right direction”.

“Management of working capital has also been an area of intense focus resulting in improved inventory mix, solid progress towards improved stock turn and stronger cash flows” Ms Humphries said.

Cash flow from operating activities was $14.8 million in the half, well ahead of last year.

Chairman, Mr Peter Schuyt said “There are clear signs that underlying business performance is improving. Given competitive intensity in the trading environment and currency headwinds being encountered at the present time, the overall first half result is a satisfactory one”.

Transformation Programme

The company reported that the transformation programme was continuing to gain momentum. Progress was being made in ‘right-sizing’ the retail network, predominantly in Australia, with 9 stores announced for closure in the second half of FY15.

Key transformation projects also include redesign of the supply chain where good progress is being made in reducing design and product costs and improving inventory management resulting in reduced lead times to market.

Implementation of an integrated customer contact strategy leveraging the company’s highly developed customer database, development of on-line functionality and other key projects are also progressing well.

Mr Schuyt commented “the delivery of the transformation programme is paramount to establishing a more profitable and agile business model for Pumpkin Patch. Collectively, the Board believe the programme has identified the right initiatives to improve the future of the business and progress to date in respect of transformation has been positive. The Board has also established a Sub-committee to over-see the transformation program and KPMG have been engaged to provide support and quality assurance on transformation projects”.

Capital Initiatives

At the last Annual Meeting the company advised the market that it was undertaking a capital review. Since that time certain third parties have proactively indicated their interest in Pumpkin Patch.

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.

Goldman Sachs has been engaged to advise the Company. The Board has established a Sub-committee of independent Directors to evaluate proposals.

Further announcements to the market will be made if any proposal received represents a realistic option for the Company.

Outlook for FY15

Market conditions are expected to remain challenging, currency headwinds are likely to intensify in the short term at least and therefore the financial risks communicated at the last Annual Meeting remain.

Whilst the Company is benefiting from the transformation programme it is the Directors expectation that, subject to any significant change in trading conditions, the overall trading result for the financial year to 31 July 2015 will be similar to last year with normalised EBITDA (before transformation costs) in the order of $14.0 million.

ENDS

Pumpkin Patch Limited
Unaudited results for the 6 Months Ended 31 January 2015
Headline Financial Numbers

(1) Operating revenue for HY14 has been restated to ensure consistency with HY15
(2) This is a non-GAAP measure. A reconciliation to NZX Appendix 1 is attached

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