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Boy this little puppy has had a hard time over the last few years. Share price has dropped from a high of nearly 5 bucks and profit has dropped about 30%. USA and UK is a bit of a prob and this part of the world is doing OK, so far.
After the loss by Pumpkin Patch reported yesterday and write downs in the US don't expect too much more over the next 6 months. Things are going to be bloody tough in the US and UK and they may have to close more stores. Long term its a winner...
Pumpkin Patch today announced that it was in the final stages of developing a new stand alone childrenswear brand to be launched in the Australasian market within the next 3 months.
The Company’s Chief Executive Officer Maurice Prendergast said “The new brand will focus on what is described as the playwear end of the market which accounts for over 70% of the $3billion a year Australasian childrenswear industry. It will allow us to participate in a very large part of the market that Pumpkin Patch does not currently cater for and creates long term growth opportunities for us”.
Prendergast added “The introduction of a dual brand aimed at a different segment of the market is a model that has been successfully followed by numerous international clothing companies. This move will allow us to leverage our existing infrastructure and retail expertise for the benefit of both brands”.
The Company says the new brand will be sold in stand alone stores separate from its current Pumpkin Patch stores. It plans to open an initial tranche of 6 to 8 stores by year end. The new brand stores are in addition to the 30 to 40 Pumpkin Patch stores the Company expects to open over the next 3 years in Australasia.
While the new brand will initially be launched in Australia and New Zealand the Company believes there are considerable long term growth opportunities for the new brand in existing global markets that Pumpkin Patch currently trades. Prendergast commented “We already have interest from a number of wholesale partners who see opportunities for the new brand in their home markets so we are encouraged about what we might be able to do internationally”.
Prendergast added “We have worked hard over the last 2 years to strengthen the Balance Sheet and reduce debt levels to position us to take advantage of growth opportunities such as the launch of this venture. While we do not expect any immediate impact on earnings or debt levels we believe this move will be a driver of earnings and cash flow growth going forward. “
Prendergast concluded by saying “The launch of this brand is yet another step towards us becoming a truly global childrenswear company. Currently Pumpkin Patch product is sold in over 550 locations in 22 markets around the world and we expect that this launch will further enhance our ability to grow. Add this to the substantial global growth opportunities that the Pumpkin Patch brand has and the future looks very bright”.
Pumpkin Patch Limited 26 April 2010
For further information please contact: Maurice Prendergast (Chief Executive Officer) or Matthew Washington (Chief Financial Officer) Pumpkin Patch Limited Phone +64 9 274 7088
Summary of substantial holding to which disclosure relates
Class of listed voting securities: Ordinary shares
Summary for: OnePath (NZ) Limited
For this disclosure,— (a) total number held in class: 11,743,100 (b) total in class: 167,636,408 (c) total percentage held in class: 7.005%
For last disclosure,— (a) total number held in class: 13,479,304 (b) total in class: 166,814,799 (c) total percentage held in class: 8.08%
Details of transactions and events giving rise to relevant event
Details of the transactions or other events requiring disclosure under the instructions to this form:
Total sales of 2,787,457 ordinary shares in Pumpkin Patch Limited for the consideration NZ$5,471,036.93, and total purchases 1,051,253 ordinary shares in Pumpkin Patch Limited for the consideration NZ$2,049,576.15 between 30th November 2009 and 29th November 2010 inclusive due to normal trading activity.
Details of relevant interests in substantial holding after relevant event
Details for: OnePath (NZ) Limited
Nature of relevant interest(s): OnePath (NZ) Limited acts as an investment manager for certain investment funds and as a result has a relevant interest in the units as it has: - a conditional power to exercise the right to vote attached to the units; and - a conditional power to acquire or dispose of the units. OnePath (NZ) Limited’s relevant interests stated above arise only from the powers of investment contained in its investment management contracts with The Bank of New Zealand Officers Provident Association, The Government Super Fund Authority, National Provident Fund, The Presyterian Church and Support Services, The Waikato Community Trust Incorporated and The New Zealand Defence Force, and as manager of the OnePath Wholesale Equity Selection Fund, OnePath Wholesale Australasian Share Fund and OnePath Wholesale New Zealand Share Fund.
For that relevant interest,— (a) number held in class: 11,743,100 (b) percentage held in class: 7.005% (c) current registered holder(s) of securities: New Zealand Central Securities Depository Limited (d) registered holder(s) of securities once transfers registered: Unknown
Nature of connection between substantial security holders: N/A Address(es) of substantial security holder(s): Level 27, ASB Bank Centre, 135 Albert Street, Auckland, 1010
Name of any other person believed to have given, or believed to be required to give, a disclosure under the Act in relation to the securities to which this disclosure relates: None
I, Simon Peake, declare that, to the best of my knowledge and belief, the information contained in this disclosure is correct and that I am duly authorised to make this disclosure by all persons for whom it is made.
Pumpkin Patch Limited has announced that Greg Muir has today informed the Board of Directors that he has decided not to seek re-election at the Annual Shareholders Meeting on 23 November 2010.
Greg Muir said “I am proud of Pumpkin Patch’s achievements during my time as Executive Chairman and Chairman of the Board. Over this period the Company has produced significant total market returns with turnover and earnings more than doubling. I have enjoyed contributing to this iconic New Zealand company and am particularly proud of its continued growth and development.”
Muir added “Despite the stellar performance of the Company, it would appear that my leadership of the Pumpkin Patch Board is drawing attention away from the business itself. Rather than allowing this to continue I have decided it would be in the best interests of the Company for me not to seek re-election.”
Greg joined Pumpkin Patch in 2004 as Executive Chairman to assist the Company in its listing on the New Zealand Stock Exchange and to lead the Wholesale Division through its early growth phase. In 2008 Greg stood down from his executive role but remained Chairman of the Board of Directors.
The Company’s Chief Executive Officer, Maurice Prendergast, said “I would like to thank Greg for the effort he has put in over the last 6 years especially for his work in developing the Wholesale Division and helping it become such an important part of Pumpkin Patch’s long term future. He has been an outstanding executive and Chairman and we wish him well”.
Pumpkin Patch Limited 19 November 2010
For further information please contact: Maurice Prendergast Chief Executive Officer Pumpkin Patch Limited Phone +64 9 274 7088
Trading update and half year 2011 earnings guidance
Pumpkin Patch Limited has today provided an update on trading conditions and guidance on first half earnings.
The challenging trading conditions experienced in the second half of the 2010 financial year carried across into the 2011 financial year especially in the key Australian and New Zealand markets. The lacklustre trading environment resulted in lower than expected sales across those markets which when coupled with the fixed nature of store overheads led to a deleveraging impact on earnings. Half year net profit after tax is expected to be between $7.5m and $8.5m.
Maurice Prendergast, Pumpkin Patch CEO, stated “It was always going to be extremely hard for us to repeat the very strong first half performance we had in 2010 with the challenging conditions we have faced in all markets since then. A slow start to the delivery of summer inventory severely impacted the first six weeks of the season. This in conjunction with cooler weather in Australia and snowstorms in the United Kingdom has made trading particularly difficult”
Prendergast added “In all markets many of our customers have chosen to retire debt in the wake of the global financial crisis. We are able to ride out this short term trading weakness due to a strong Balance Sheet and are continuing with our longer term strategies outlined at our Annual Shareholders Meeting. Our store expansion programme in Australia, Ireland, and the United Kingdom and the trial of our new concept Charlie & Me remain on track”
Prendergast concluded by saying “While many commentators are predicting improved retail conditions in 2011 we remain cautious especially in Australia where there are risks around interest rate increases and the impact of the recent floods.” In order to provide the market with some clarity around earnings the Company is currently forecasting full year earnings to be in the range of $16.0m to $18.0m.
The Company expects to release its first half result to the market in detail on 1 March 2011.
Pumpkin Patch Limited 27 January 2011 ---------------------------------------------------------------------------------------------------------- For further information please contact: Maurice Prendergast - Chief Executive Officer Pumpkin Patch Limited Phone +64 9 274 7088
Pumpkin Patch Limited has today announced a number of changes it is implementing across its global business including the closure of the United States retail operation, strategies for underperforming stores in the United Kingdom, and a realignment of New Zealand based support functions.
Pumpkin Patch’s Chief Executive Officer, Maurice Prendergast, commented “The decisions we are announcing today are necessary to ensure we are operating in a way that better matches the current retail environments we face across our markets. In the medium term financial results will be considerably enhanced and in the long term we will be better positioned to execute our longer term growth strategies”.
United States retail The Company has made the decision to shut the remaining 20 retail stores in the United States and in the medium term focus on wholesale and web based growth opportunities in that market.
In 2009 the Company renegotiated all of its United States leases down to levels that reflected market rents at that time. These leases expire over the next two to three months.
Discussions have been held with landlords to extend leases. However while lease extensions were available the proposed lease terms would make the United States retail operation unsustainable especially given the poor state of the retail environment in that market.
As a result the Company is implementing a managed store closure program that will see the 20 stores cease trading on a staggered basis over the coming six months utilising short term lease roll-overs where required. This will allow sales opportunities and inventory sell through to be maximised across the store network during the closure process.
The EBIT losses from the United States retail segment in the 2011 financial year, before reorganisation costs, are forecasted to be between NZD2.4m and NZD2.9m. The full positive financial impact of the changes on total group earnings will be seen in the second half of the 2012 financial year by which time all United States stores will be closed.
United Kingdom While many of the 41 United Kingdom stores are trading at levels considered acceptable given the tough retail environment, the Company is developing strategies to enhance the overall trading result focusing on 17 underperforming stores which generate the majority of the EBIT loss from that market.
Twelve of these stores have leases expiring within the next 15 months and the Company will be taking the opportunity to negotiate with landlords appropriate rent reductions or other reorganisation options that would significantly improve earnings results from those stores. Similar discussions will be held with the landlords of the other 5 underperforming stores whose leases expire after the 2012 financial year. Should acceptable solutions not be found stores will be closed.
As a result the Company is recognising a non-cash impairment charge of around NZD2m in the 2011 financial year to take the carrying value of 8 of the 17 stores to nil. The carrying value of the other 9 stores was fully impaired as part of the reorganisation plan implemented in 2009 and therefore no additional impairment charge is required for those stores.
The United Kingdom and the recently opened Ireland stores remain an important part of the Company’s long term growth strategies. The plans being developed for the United Kingdom will enhance overall short term earnings performances and provide a stronger and more sustainable platform on which to implement future growth strategies.
Head Office functions As a result of the changes in the United States and the United Kingdom the Company is reviewing its Head Office operation to ensure it better matches the reorganised store network and is more appropriate given the challenging retail conditions being experienced globally.
Although the review and consultation processes have only recently commenced it is likely that there will be a reduction in the number of employees at the Auckland based Head Office. Any changes that result from the review will be implemented in the current financial year.
Trading Update Trading conditions across all markets remain challenging and volatile with no indication that this situation will materially improve in the near term.
Along with other apparel retailers the Company has experienced abnormally high price increases from suppliers, in particular the cost of cotton. While raw material prices have stabilised of late, ongoing increases in labour and other manufacturing costs will mean the Company will continue to investigate new suppliers and countries from which to source product.
In addition the Company has encountered a warmer than normal start to the winter season and a continuation of the high New Zealand dollar which has impacted the value of international sales.
Continued challenging retail conditions coupled with the above factors have impacted trading results in the second half of the year. The Company expects 2011 net profit after tax, before reorganisation costs, to be between $12m and $14m. This includes the trading results of all stores, whether continuing and discontinuing in the coming financial year.
The Company estimates the overall EBIT impact of implementing the above changes to be between $9m and $11m including employee, lease, and inventory related costs, other miscellaneous administrative and advisory costs, and the non-cash impairment charge on 8 United Kingdom stores outlined above. An EBIT charge of between $9m and $11m will be recognised in the current financial year.
Between $4m and $5m of the above costs will be cash in nature, with the bulk of the cash costs falling in the 2012 financial year as the changes are implemented.
Based on current trading and the scheduled timing of inventory shipments bank debt at July, after cash reorganisation costs, is expected to be between $66m and $72m. The Company currently meets all banking facility obligations and is expecting to do so at July and throughout the reorganisation process.
Impact of the changes on 2012 and 2013 earnings As the changes will be implemented across the 2012 financial year the full earnings benefit will not be seen until the 2013 financial year.
The changes announced today are expected to have a positive group EBIT impact in 2012 of between $7m and $9m, and between $10m and $12m in 2013. The Company confirms that all its Australasian stores are trading profitably and that it anticipates further expansion for both the Pumpkin Patch and Charlie & Me brands in those markets in 2012 and 2013.
In addition the Company expects lower working capital requirements, primarily inventory, and as a result lower bank debt.
Prendergast added “The changes being announced today will enhance future earnings and cash flow results for the Company. The removal of the losses from the United States and the United Kingdom, and the lower overhead structure will drive much improved financial results going forward”
Prendergast concluded by saying “We have always prided ourselves of the closeness of our teams that operate across the business. While the decisions we have made today are necessary we cannot overlook the fact that a large number of our team members will be impacted, with many being long serving employees who have contributed to the success of Pumpkin Patch over the years. We will of course be doing everything we can to help them and the rest of the team during this time. We would like to thank all of the team for their continued support and enthusiasm for the brand”
On behalf of the Board of Directors
Maurice Prendergast Chief Executive Officer Pumpkin Patch Limited 15 June 2011
__________________________________________________________ For further information please contact: Maurice Prendergast (Chief Executive Officer), or Matthew Washington (Chief Financial Officer) Pumpkin Patch Limited Phone +64 9 274 7088
Pumpkin Patch has today announced the findings of the review of its United Kingdom retail operation.
Following an extensive review of the United Kingdom retail operation by Pumpkin Patch management and external United Kingdom based advisors the directors have decided to appoint administrators to the United Kingdom subsidiary company.
The stand alone United Kingdom registered subsidiary company operates 36 Pumpkin Patch retail stores across the United Kingdom.
The decision announced today does not materially impact any other group company including the New Zealand parent company, the Irish subsidiary company that operates the Pumpkin Patch retail stores in Ireland, or the group companies that operate the 185 retail stores across Australasia, the 20 international wholesale markets, and the online businesses operating in 5 international markets.
In announcing the move Neil Cowie, Pumpkin Patch Group’s CEO, said “The return on investment from the UK retail operation has not been acceptable and the current trading losses being generated only accentuate this. The economic environment in the United Kingdom and in wider Europe is extremely difficult and we believe it is going to get worse before it gets better. Therefore we expect the UK operation would continue to make losses for some time to come. While the decision is a hard one it is a decision we had to make as it just doesn’t make sense for us or our shareholders to continue to maintain the existing operation up there”.
Cowie added “As part of the administration process we are effectively handing over the day to day control of the UK subsidiary to the administrators. As such we cannot pre-empt what actions the administrators may take in the coming days and weeks. However we anticipate that if they cannot find any alternative options some or all of the UK stores will be closed.”
Cowie continued “We are confident that there is a place in the UK market for our brands. This is supported by our fast growing UK online operation and the fact that 750,000 customers shopped at our UK stores over the last 18 months. In fact the review highlighted a number of interesting opportunities for Pumpkin Patch and Charlie & Me in the UK and we will be exploring these over the coming months. In the meantime we will be ramping up our existing UK online activities to continue supplying Pumpkin Patch product to our loyal and supportive UK customers”.
Full recognition of all reorganisation costs will be made in the current first half financial period. This will include the costs of impairing United Kingdom net assets, expensing mark to market losses on foreign exchange contracts held on behalf of the United Kingdom subsidiary company, and other estimated reorganisation costs such as lease and employee commitments. Cash costs are expected to be between NZD3m and NZD5m and non-cash costs are expected to be between NZD25m and NZD27m. The before tax impact on total group shareholders funds will be between NZD11m and NZD13m as a number of items being provided for, such as the mark to market losses on foreign exchange contracts, are already included in shareholders funds.
The elimination of the losses from the United Kingdom retail operation will improve total group operating earnings and cash flows from the second half of the 2012 financial year and into the future.
Cowie also provided an update on some of the other priority areas announced last year. “Our major focus has been on Australasian retail sales across the Christmas period which tracked well above last year but margins were slightly impacted as increased promotional activity was needed to get the customers shopping; a theme that has been seen across much of the year. However this allowed us to clear a lot of inventory and we go into the new season happy with the level of inventory we have”.
Cowie continued “We are still seeing very strong growth across all of our online markets and the early indications are that wholesale customers will be increasing orders in FY13. Our Wholesale Team is currently in discussions on two new wholesale opportunities which we hope to be able to confirm within the next two months”.
The Company still expects year end bank debt will be between $40m and $50m.
Cowie finished by saying “We of course must remember that our valued team members in the UK are being impacted by the decision announced today. Pumpkin Patch is a close knit team and decisions like this are always difficult. We will be doing everything we can to support the UK team members through what is obviously a difficult time for them”.
Pumpkin Patch Limited 19th January 2012 -------------------------------------------------------------- For further information please contact: Neil Cowie (Chief Executive Officer) or Matthew Washington (Chief Financial Officer) Pumpkin Patch Limited Phone +64 9 274 7088
Pumpkin Patch has announced that due to solid trading performances over the last three months its net profit before non-recurring reorganisation costs for the financial year ended 31 July 2012 is expected to be above market expectations at around $10.1m.
Both bank debt and inventory will be lower than market expectations and lower than last year. Bank debt will be around $55m (vs. $61m last year) and inventory will be around $62m (vs. $84m last year).
The Company has also confirmed that its online sales for the year have exceeded $30m, an increase of around 50% on last year with strong growth for both Pumpkin Patch and Charlie & Me brands across all online markets.
The above numbers are preliminary results and are subject to external audit review.
The Company is expecting to release its audited result for the financial year ended 31 July 2012 on 27 September.
Net profit (loss) after tax: 4,700, (29,983), 115.7%
Net bank debt: 65,735, 66,745 Inventory: 70,404, 63,430 Shareholders' Funds: 44,372, 26,615
Pumpkin Patch Limited today reported its un-audited results for the 6 months ended 31 January 2013.
Neil Cowie, Chief Executive Officer, said "While the overall reported result is a major improvement on last year and supports the changes we made to the business in 2012, it also reflects the challenges we faced in the first half. However despite those challenges we delivered improved operating earnings and higher margins in our all important Australia and New Zealand markets which was a great achievement."
Cowie highlighted the continued strong performance from the Online business unit as a highlight for the first half period. "Global online sales year to date exceeded $19m, up around 28% on last year, and again global online earnings exceeded the EBIT generated by all of our New Zealand retail stores combined. Our online sales in Australia are the equivalent of around 15% of our Australian retail sales which is significantly ahead of the average retailer. This reflects the advanced nature of our online operation and the longer term earnings generating capability it offers us".
Cowie continued "The development of our multi-channel and customer experience strategies has continued with considerable pace. The customer reaction to our new 'click and collect' (buy online and deliver to store) model continues to exceed our expectations and we are working on a number of other initiatives in this space. We are well on the way to becoming a true multi-channel business, and we need to be as it is the customer who will ultimately decide when, how, and where they want to interact with us. This makes the multi-channel initiatives a key part of our long term growth strategies."
Cowie provided an update on the International business unit. "International sales were up 6% on last year. We are seeing increased orders from our more established franchise partners and the markets we entered in the last few years, albeit the high New Zealand dollar continues to impact the value of those sales. In the last six months we started selling product in Mexico and Brunei and completed the first deliveries of Charlie and Me product to 26 franchise stores across the Middle East. Since January we have delivered product to our latest market, Venezuela, and are currently in talks with potential partners in new markets in the Middle East, Asia, Central America, and South America. We remain very confident that the international strategies being implemented will deliver significant earnings growth in the future".
Commenting on Australasian retail results Cowie said "Trading conditions across Australia and New Zealand have been pretty subdued. Adding to this, we experienced the late delivery of summer inventory at the start of the season. This meant the level and mix of inventory was not ideal and sales opportunities were lost. Even though trading conditions across the rest of the period more closely tracked last year and we had a reasonable Christmas, we couldn't recoup the sales and earnings lost at the start of the season."
Cowie added "The late delivery of inventory was very disappointing and made it hard for us to build momentum across the half. We have made a number of significant changes at Head Office and are currently implementing product design and procurement initiatives which will drive earnings and working capital benefits into FY14 and beyond."
"2012 was a year of major change for us with the closure of the loss making United States and United Kingdom retail operations. The theme of change has carried across into 2013. We are now in the latter part of the change process and are on track to deliver positive growth and shareholder value into the future".
Cowie continued "To ensure we had appropriate inventory levels for the start of the current winter season and to avoid the impact of the early Chinese New Year we brought forward the timing of inventory deliveries for the second half trading period. As a result inventory holdings at January were around $7m higher than the same time last year."
Cowie added "Despite the higher inventory net bank debt was $1m less than last year. We are expecting the initiatives currently being rolled out to have a gradual but materially positive impact on bank debt in FY14 and beyond. We are conscious of the need to strike a balance between the long term reduction in bank debt and the distribution of gains to shareholders, and as such we will be reviewing the dividend policy at year end".
Cowie concluded by saying "While the result should have been better than it was, we are pleased with our progress in making the changes necessary for us to successfully implement strategies that will generate long term value for our shareholders. We are committed to the change process and to the strategic direction in which we are taking the business".
Pumpkin Patch Limited 18 March 2013 --------------------------------------------------------------------------- For further information please contact: Neil Cowie (Chief Executive Officer) or Matthew Washington (Chief Financial Officer) Pumpkin Patch Limited Phone +64 9 274 7088
The full Chief Executive Officer's commentary that formed part of today's announcement to the NZX is attached.
Pumpkin Patch Limited Un-audited result for the 6 months ended 31 January 2013
Notes: o All references to dollars are NZ Dollars unless otherwise stated o During 2012 the Company adopted a new segment reporting methodology that more accurately reflects the multi-channel and geographic nature of its operations. Comparative 1H12 segment results referred to in this document have been restated to reflect this change.
Overview Pumpkin Patch Limited has today announced its un-audited result for the 6 months ended 31 January 2013.
Total Group earnings after tax were $4.7m, a significant improvement from the $30.0m loss reported in the same period last year. Excluding reorganisation costs and trading losses from discontinued operations underlying net earnings for the period were $6.5m (1H12: $7.2m).
Total revenue from the continuing business operations was $153.1m, down 5.0% on last year.
Online sales continued to grow strongly with sales reaching $19.3m for the period, up 28% on last year. Earnings from the global online operation again well exceeded the earnings from all New Zealand retail stores combined.
The International business unit generated strong underlying sales growth from existing and new markets in local currency terms. However the high exchange rates continued to impact the value of sales in New Zealand dollar terms.
While retail trading conditions across all markets were challenging for much of the period, additional challenges were created by the late delivery of inventory in the early part of the summer season which led to inventory volume and mix being less than ideal. As a result sales opportunities were lost.
Trading conditions across the rest of the period more closely tracked expectations, including the Christmas trading period, however the sales lost at the start of the season could not be recouped and first half earnings were impacted.
The Company has made a number of significant changes across functional areas and is currently implementing a series of initiatives focused on product design and procurement processes which will generate earnings, working capital, and bank debt benefits in FY14 and beyond.
Despite the lower group sales result total earnings from operating units (excluding Central Support costs) were in line with last year with the Australian and New Zealand operations generating both earnings and margin % growth. An improving average import exchange rate and a focus on store level overheads have helped improve overall segment margins.
As part of the ongoing change process being undertaken across the business, reorganisation costs of $2.6m were recognised in 1H13 (1H12: $36.1m).
Overview of 1H13 Financial Result
Australia Subdued trading conditions in Australia combined with the inventory disruptions at the start of the summer season created a number of challenges across the period and sales were impacted. Total sales for the six month period were $102.8m, down 5.7%.
Despite the challenges faced segment EBIT increased 1.3% to $16.0m and EBIT margins increased to 15.6% (1H12: 14.5%). This was the result of improved underlying gross margins, improved average import exchange rates, and the continued focus on reducing store related overheads.
The Company continues to open new stores where strict investment criteria are met. During 1H13 five new stores were opened with a major portion of the capital expenditure being funded through landlord contributions. The Company has also taken steps to address stores not meeting performance benchmarks and where appropriate lease arrangements could not be made with landlords. During 1H13 two stores were closed. Store numbers now total 132.
New Zealand New Zealand was also impacted by soft retail conditions and inventory disruptions in the early part of the summer season. Sales totalled $28.0m, down 9.7%.
Total segment EBIT for the period was up 0.5% to $4.8m, with EBIT margins increasing to 17.2% (1H12: 15.4%). Like Australia this was the result of improved underlying gross margins, improved average import exchange rates, and the continued focus on reducing store related overheads.
The Company continues to open stores where appropriate opportunities arise and close stores not meeting performance benchmarks. During 1H13 three new stores were opened and one store was closed. Store numbers now total 53.
International Total sales for the period were $22.3m, up 5.8%. Increased orders from most existing markets and sales to new international markets resulted in higher sales in foreign currency terms. However the continued high New Zealand dollar exchange rate impacted the translation of international sales.
Segment EBIT was down 12.6% to $2.4m. The higher export exchange rates and the costs of establishing new wholesale markets impacted earnings in the period.
The International segment currently consists of 364 partner locations across 19 markets, 3 retail stores in Ireland and Company operated websites selling product in 6 international markets.
During 1H13 the Company commenced sales of Pumpkin Patch product to Mexico and Brunei, and shipped the first Charlie & Me product to 26 franchise stores in the Middle East.
Since January the Company has started shipping product to its latest market, Venezuela, and is currently in talks with potential partners in new markets across the Middle East, Asia, Central America, and South America. Any new relationships formed in the current year will not lead to noticeable sales and earnings until FY15.
Central Support Functions Total Central Support costs excluding head office reorganisation costs were $11.7m (1H12: $10.8m) driven by increased foreign exchange revaluation losses which offset the impact of general overheads savings.
Other Financial Information Reorganisation Costs Reorganisation costs of $2.6m were recognised in 1H13 (1H12: $36.1m), of which $1.9m were non-cash in nature.
An impairment and onerous lease charge of $1.9m was made in relation to four Australian stores which are underperforming and have upcoming lease renewals. Should appropriate arrangements not be negotiated with landlords the stores will be closed.
During 1H13 the Company incurred an additional $0.3m in landlord, employee, and professional services costs associated with the closure of the United Kingdom and United States retail business units. Any costs incurred in future periods will be immaterial.
Costs of $0.4m relating to changes made to Head Office functions were also recognised in the period.
Cash Flows and Balance Sheet Net bank debt at January was $65.7m (1H12: $66.7m). Based on current trading conditions, continued control over overheads and capital expenditure, and the working capital improvements expected to come from initiatives currently being implemented, the Company expects net bank debt to significantly reduce from current levels in FY14 and into FY15.
To avoid a repeat of the inventory delivery disruptions that occurred at the start of 1H13 and to adjust for the early Chinese New Year, the timing of new season inventory deliveries from suppliers was brought forward into January. As a result inventory levels at January were higher at $70.4m (1H12: $63.4m). The product design, procurement and supply chain initiatives currently underway will lead to lower average inventory holdings across FY14 and FY15.
Gross capital expenditure, before landlord contributions, was $5.2m (1H12: $3.6m) reflecting the increase in new stores opened this year. The international and online growth strategies are not expected to lead to any material capital expenditure requirements in the foreseeable future.
Shareholders' funds were $44.4m, 67% higher than the same time last year.
Dividend While an interim FY13 dividend will not be paid, the initiatives currently being implemented across the business are expected to deliver a gradual but material improvement in net bank debt in coming periods. The Company is conscious of the need to strike a balance between the long term reduction in bank debt and the distribution of gains to shareholders, and as such will be reviewing the dividend policy at year end.
Key focus areas/ outlook for the reminder of FY13
Current trading conditions and costs of doing business o Trading conditions across Australia and New Zealand are expected to remain at current levels in the near term. o Higher average FX import rates will assist margins but the full impact will not be seen while market conditions remain challenging and promotional activity remains historically high. o Higher export FX rates will continue to impact International earnings. o Will continue to focus on working with landlords to generate lower rental costs at lease renewal time. Stores will be closed if appropriate lease terms cannot be negotiated. o Focus to remain on reducing overheads and ensuring cost structures are contained as the business grows into the future.
Multi-channel and customer experience strategies o Multi-channel and customer experience strategies remain a very important long term strategic focus area. o The customer decides when, how, and where they buy so these initiatives are crucial to the future success of the business. o Technology is being used to create a true multi-channel customer shopping experience. o 'Click & Collect' (order online, pickup in store) is still in the early stages but continues to exceed expectations. o 'E-counter' (online orders in store, delivery to home) is currently being trialed. o A number of other initiatives are in the pipeline. o Patch General Store is still in the development phase. Product range continues to be expanded. o Social networking initiatives being increasingly used to interact with our customer community.
Enhancing product design, procurement, and supply chain processes o Implementing a number of initiatives relating to product design, procurement, and supply chain processes. o Focus on ensuring product designs and core brand values are aligned with both current and future customer needs and market growth strategies. o Earnings and working capital benefits will flow from these changes in FY14 and beyond.
Online o Online sales continue to grow rapidly (approx 28% YTD). o Developing online business concepts for international franchise partners. o Online will remain a low cost and flexible way to enter new markets. o No significant capital investment is required in the medium term.
International partners o Local currency sales are expected to grow in existing and new markets but the high New Zealand dollar will continue to impact earnings. o Bed in the new relationships (Mexico, Venezuela, Brunei) and assist in the development of the 26 Charlie & Me stores across the Middle East. o Exploring a number of opportunities for both Pumpkin Patch and Charlie & Me brands across the Middle East, Asia, Central America, and South America.
Charlie & Me o Online uptake continues to exceed expectations, confirming it will be a strong online brand. o Continue to assess retail store operating performances vs. the strategic plan. Store trials to date have confirmed the long term store location requirements. o Product now available in 26 franchise locations in the Middle East. o Currently exploring international franchise opportunities with new and existing partners. o The brand will be a major part of the long term international growth strategies.
Balance Sheet o Current initiatives will lead to improved earnings and lower working capital and net bank debt in FY14 and beyond. o Will continue with a disciplined approach to capital expenditure.
Summary Although the first half period was challenging and the result reflects that, the Company continues to make good progress in reorganising the business to ensure it is well positioned to successfully execute its long term growth strategies in both Australasian and international markets and deliver benefits for shareholders in years to come.
Neil Cowie Chief Executive Officer
Jane Freeman Chairperso
Pumpkin Patch Limited 18 March 2013
PPL - 1H13 Result Presentation.pdf
PPL - 1H13 Appendix 1 (plus segment note).pdf
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