annual report - Pumpkin Patch investor relations
annual report - Pumpkin Patch investor relations
annual report - Pumpkin Patch investor relations
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<strong>annual</strong> <strong>report</strong><br />
2010
20<br />
years<br />
young<br />
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TABLE OF CONTENTS<br />
PERFORMANCE HIGHLIGHTS 06<br />
FINANCIAL HIGHLIGHTS 07<br />
CHAIRMANÕS LETTER 08<br />
CHIEF EXECUTIVE OFFICERÕS REPORT 13<br />
DIRECTORS 18<br />
CORPORATE GOVERNANCE 22<br />
GENERAL DISCLOSURES 28<br />
GROUP FINANCIAL STATEMENTS 37<br />
AUDITORSÕ REPORT 98<br />
SHAREHOLDER INFORMATION 100<br />
CORPORATE DIRECTORY 102<br />
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MAJOR ACHIEVEMENTS IN 2010<br />
- Net profit after tax up 76% to $25.5m<br />
FINANCIAL HIGHLIGHTS<br />
- Total dividend for the year up 27% to<br />
9.50 cents per share<br />
- Improved EBIT (earnings before interest and<br />
tax) margins across all retail markets<br />
- Launch of our new brand Charlie & Me<br />
- Entered 4 new wholesale markets, taking<br />
total wholesale markets to 20<br />
- The Company is well positioned to take<br />
advantage of growth opportunities across<br />
all of our markets<br />
2010<br />
2009<br />
Change<br />
NZ $000 NZ $000<br />
Trading Results<br />
Group operating revenue 381,994 428,609 (10.9%)<br />
Earnings before interest & tax 40,117 26,736 50.0%<br />
Net profit after tax<br />
25,502 14,522 75.6%<br />
(before non-recurring items)<br />
Financial Position at Year End<br />
Total equity 80,867 88,678<br />
Total assets 178,589 188,189<br />
Capital expenditure 13,379 11,796<br />
Number of Stores<br />
Australia 119 111<br />
New Zealand 49 51<br />
United Kingdom 39 36<br />
United States 20 20<br />
Total 227 218<br />
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CHAIRMANÕS LETTER<br />
DEAR SHAREHOLDERS<br />
The 2010 financial year proved to be challenging with continued uncertainty in<br />
global economic markets creating difficult general retail environments for all of our<br />
trading entities. Despite these challenging conditions the Company generated a very<br />
significant improvement in earnings and continued to grow the <strong>Pumpkin</strong> <strong>Patch</strong> brand<br />
in its 22 markets. The result reflects the strength of the <strong>Pumpkin</strong> <strong>Patch</strong> brand and the<br />
quality of the teams we have around the world.<br />
The various initiatives we have undertaken over the last two years, particularly the<br />
rationalisation of our US business, prepared us well for the current conditions. We<br />
have paid particular attention to balance sheet management over this last year,<br />
both debt and inventory levels are prudently low and we are well positioned to take<br />
advantage of growth opportunities that are available to us as a gradual recovery<br />
in trading conditions is looking to be possible over the next couple of years.<br />
The Annual Shareholders Meeting is to be held in Auckland at the Ellerslie<br />
Convention Centre on Tuesday 23 November 2010 at 1pm. The meeting will be<br />
a good opportunity for all shareholders to meet our new Independent Director<br />
Brent Impey, hear about the opportunities the Company is exploring and to receive<br />
an update on how we are trading in the current financial year.<br />
On behalf of the shareholders and the Board of Directors I would like to thank<br />
Maurice and his dedicated team for delivering such an outstanding result in very<br />
tough conditions and for continuing to develop opportunities to position <strong>Pumpkin</strong><br />
<strong>Patch</strong> for growth in the future.<br />
One item of particular note in the past year has been the launch of our new<br />
brand Charlie & Me. This new brand will allow the Company to target the very<br />
large Ôeveryday wearÕ segment of the market which makes up over 75% of global<br />
childrenswear sales. Charlie & Me affords us the opportunity to leverage the<br />
infrastructure and capabilities we already have across the business and enter a<br />
part of the market that the <strong>Pumpkin</strong> <strong>Patch</strong> brand does not directly target. Given that<br />
the first store has only recently opened we cannot yet comment on performance.<br />
However it is important to note that demonstrating success in this segment will have<br />
very positive implications for <strong>Pumpkin</strong> <strong>Patch</strong> and its growth aspirations. Charlie & Me<br />
has significant potential in our existing markets and perhaps even more so in markets<br />
where we are not yet represented.<br />
GREG MUIR - CHAIRMAN<br />
GREG MUIR<br />
Although it is easy to get distracted by the current economic environment the Board<br />
continues to take a long term view and develop and execute strategies that look to<br />
the future. In the coming year we expect to open at least 22 new stores, we will<br />
develop the Charlie & Me brand, and we will enter a number of new wholesale<br />
markets; all of which is an investment in the future of the Company that will generate<br />
long term benefits for shareholders.<br />
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SALES COMPOSITION<br />
Wholesale/ Direct<br />
14%<br />
Retail United States<br />
5%<br />
Retail Australia<br />
52%<br />
Retail<br />
United Kingdom<br />
14%<br />
Retail New Zealand<br />
15%<br />
STORE NUMBERS<br />
250<br />
249<br />
225<br />
228<br />
218<br />
227<br />
200<br />
200<br />
175<br />
167<br />
150<br />
136<br />
125<br />
114<br />
100<br />
75<br />
50<br />
25<br />
0<br />
84<br />
71<br />
56<br />
40<br />
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fcast 2011<br />
New Zealand Australia United Kingdom United States Ireland<br />
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CHIEF EXECUTIVE OFFICERÕS REPORT<br />
During the 2010 year we faced subdued market conditions across most of our<br />
global markets. While total group revenue was down 11% we delivered a 76%<br />
increase in full year earnings to $25.5m and improved EBIT margins across all 4<br />
of our retail markets. This was the result of inventory, margin, and cost management<br />
initiatives implemented during the year and the restructuring initiatives undertaken<br />
over the last two years.<br />
We continue to have a very strong Balance Sheet and are well positioned to take<br />
advantage of the significant growth opportunities the <strong>Pumpkin</strong> <strong>Patch</strong> brand and the<br />
new Charlie & Me brand have in Australasia and other international markets.<br />
While we expect general conditions in all markets to remain challenging in the short<br />
term the strength of the <strong>Pumpkin</strong> <strong>Patch</strong> brand will ensure we benefit when trading<br />
conditions improve.<br />
AUSTRALIA RETAIL<br />
2010 2009<br />
Turnover AU $Õ000 157,056 166,398 (5.6%)<br />
Turnover NZ $Õ000 198,276 203,426 (2.5%)<br />
EBIT NZ $Õ000 38,705 38,469 0.6%<br />
19.5% 18.9%<br />
Stores<br />
<strong>Pumpkin</strong> <strong>Patch</strong> 103 99<br />
Outlet 16 12<br />
119 111<br />
While we experienced a general improvement in sales in the first half of the year a<br />
softening of the general retail environment in the second half of the year offset much<br />
of that improvement. Total sales for the year were down 2.5% in NZD terms.<br />
MAURICE PRENDERGAST<br />
We continued to focus on the management of margins and overheads, the results of<br />
which can be seen in the 0.6% improvement in EBIT as a percentage of sales and<br />
the increase in total EBIT to $38.7m.<br />
During the year we opened 8 new stores (2009: 5) taking total stores to 119 at year<br />
end. We expect to open 8 new <strong>Pumpkin</strong> <strong>Patch</strong> stores in Australia in the 2011 year<br />
and see continued new store growth opportunities in coming years.<br />
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NEW ZEALAND RETAIL<br />
2010 2009<br />
Turnover NZ $Õ000 58,908 64,357 (8.5%)<br />
EBIT (1) NZ $Õ000 11,310 11,125 1.7%<br />
19.2% 17.3%<br />
Stores<br />
<strong>Pumpkin</strong> <strong>Patch</strong> 34 33<br />
Outlet 12 12<br />
Urban Angel 3 6<br />
49 51<br />
(1) Operating EBIT before non-recurring costs.<br />
The New Zealand retail environment remained subdued for much of the year<br />
with total sales down 8.5% or 6.3% when excluding temporary clearance stores<br />
operating in 2009 but not in 2010.<br />
Total EBIT was up 1.7% to $11.3m and EBIT as a percentage of sales was up a strong<br />
1.8% reflecting the focus on margin and inventory management across the year.<br />
At year end we had 49 stores open across New Zealand. Two new <strong>Pumpkin</strong> <strong>Patch</strong><br />
stores are expected to open in the 2011 year.<br />
WHOLESALE AND DIRECT<br />
2010 2009<br />
Turnover NZ $Õ000 53,217 62,540 (14.9%)<br />
EBIT NZ $Õ000 13,708 16,583 (17.3%)<br />
25.8% 26.5%<br />
With soft retail environments in their home markets our wholesale partners lowered their<br />
product orders in 2010. As a result of this and the continued strength of the NZD against<br />
most export currencies total sales were down 14.9% to $53.2m.<br />
The lower sales result led to EBIT being down 17.3% to $13.7m however EBIT margins<br />
remained at levels similar to 2009.<br />
During the year we established new wholesale partnerships in China, Lebanon, Malta,<br />
and Thailand taking the total number of wholesale markets to 20. We are in the process<br />
of finalising a number of <strong>relations</strong>hips in new markets for the 2011 year.<br />
The continued softness in global retail markets mean wholesale partners are only slowly<br />
returning to more normal buying patterns. The full impact of this and the impact of the<br />
new markets we are adding will not be seen until the 2012 financial year.<br />
UNITED KINGDOM RETAIL<br />
2010 2009<br />
Turnover GB £Õ000 23,636 22,520 5.0%<br />
Turnover NZ $Õ000 52,455 59,200 (11.4%)<br />
EBIT (1) NZ $Õ000 (885) (4,962) 82.2%<br />
Stores<br />
<strong>Pumpkin</strong> <strong>Patch</strong> 35 33<br />
Outlet 4 3<br />
39 36<br />
(1) Operating EBIT before non-recurring costs.<br />
While general retail conditions in the United Kingdom remained volatile throughout the<br />
year total sales in GBP terms were up 5.0%. However in NZD terms sales were down<br />
11.4% due to the significantly higher exchange rates experienced across the year.<br />
The EBIT loss for the year was $0.9m, a significant improvement on $5.0m loss<br />
last year. Improved margins and a focus on reducing overheads particularly at<br />
underperforming stores have all benefited the United Kingdom this year.<br />
Trading conditions are expected to remain soft in the short term but steadily improve<br />
later in the year and into 2012.<br />
During the year we opened 3 new stores (2009: 1) taking the total number of stores<br />
to 39. We expect to open 3 new stores in 2011.<br />
UNITED STATES RETAIL<br />
2010 2009<br />
Turnover US $Õ000 13,586 13,585 0.0%<br />
Turnover NZ $Õ000 19,138 22,825 (16.1%)<br />
EBIT (2) NZ $Õ000 (2,685) (9,289) 71.1%<br />
Stores<br />
<strong>Pumpkin</strong> <strong>Patch</strong> 20 20<br />
(2) EBIT excluding discontinued stores and before non-recurring costs.<br />
While retail conditions remained soft across the year trading patterns became more<br />
stable as the year progressed. Total USD sales from the 20 stores trading during the<br />
year were at similar levels as 2009. Sales in NZD terms were impacted by higher<br />
exchange rates and ended the year down 16%.<br />
The segment EBIT loss was $2.7m, a 71.1% improvement on last year (2009: $9.3m<br />
loss). Improved margins and the benefits of the 2009 reorganisation plan, mainly lower<br />
rental and depreciation charges, contributed to the much improved result.<br />
Conditions are expected to remain soft until the United States economy as a whole<br />
shows significant improvement.<br />
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NEW BUSINESS<br />
CHARLIE & ME<br />
During the year we announced the launch of Charlie & Me, our new stand alone<br />
brand targeting the Ôeveryday wearÕ segment of the market which makes up over<br />
75% of total global childrenswear sales. The new brand will allow us to leverage<br />
off our existing infrastructure and capabilities to expand into a very large segment<br />
of the market that our <strong>Pumpkin</strong> <strong>Patch</strong> brand does not directly cater for.<br />
While the initial focus of Charlie & Me will primarily be on Australia the brand<br />
creates substantial global growth opportunities.<br />
We opened the first Charlie & Me store in August 2010 and plan to open at least<br />
another 6 stores in 2011.<br />
IRELAND<br />
SUMMARY<br />
Although retail conditions were subdued in 2010 the 76% improvement in earnings<br />
shows we have responded well to the environment we faced and reflects the strength<br />
of the <strong>Pumpkin</strong> <strong>Patch</strong> brand.<br />
The initiatives undertaken over the last 24 months have ensured we are well<br />
positioned to take advantage of growth opportunities in all our markets and<br />
to reap the benefits when general trading conditions improve.<br />
The launch of the Charlie & Me brand and the ongoing development of new<br />
wholesale markets are expected to open up a new phase of long term growth<br />
and will deliver long term rewards to our shareholders.<br />
On behalf of the Board of Directors we again thank the very dedicated <strong>Pumpkin</strong><br />
<strong>Patch</strong> team based around the world for the hard work they put in everyday to<br />
make the Company the success that it is.<br />
Over the last three months we have opened our first two company operated <strong>Pumpkin</strong><br />
<strong>Patch</strong> stores in Ireland. While the retail environment remains challenging in Ireland<br />
the soft leasing conditions creates an opportunity for us to enter the market with<br />
relatively low risk.<br />
CASH FLOWS AND BALANCE SHEET<br />
We continue to maintain a very strong balance sheet which will allow us to take<br />
advantage of growth opportunities that exist across all markets. Net bank debt at<br />
year end was $26.1m. Based on current trading conditions and expected working<br />
capital and capital expenditure requirements net bank debt is expected to be<br />
between $30.0m and $35.0m at July 2011. The bulk of the bank debt facilities<br />
are in place until December 2011.<br />
MAURICE PRENDERGAST - CEO<br />
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JANE FREEMAN<br />
Independent Non-Executive Director, BCom<br />
Chair of the Remuneration and Nomination Committee<br />
and member of the Audit and Risk Committee<br />
DIRECTORS<br />
Jane has held senior marketing and management positions at TelecomÕs<br />
e-solutions, BankDirect, Clear Communications and ASB Bank Limited. Jane is<br />
currently a Director of Air New Zealand Limited and Delegats Group Limited.<br />
GREG MUIR<br />
Chairman, BA, MBA<br />
Greg was appointed Chairman in 2004. He is currently Managing Director<br />
of Tru-Test Ltd. Prior to joining Tru-Test he was Executive Chairman of <strong>Pumpkin</strong><br />
<strong>Patch</strong> from 2004 to 2008, Chief Executive of The Warehouse Group and held<br />
senior roles at TNT and Lion Nathan. Greg is currently Chairman of Tourism<br />
New Zealand, Pioneer Capital and the Blues Super 14 Franchise and a<br />
Director of the Auckland Rugby Union.<br />
BRENT IMPEY<br />
Independent Non-Executive Director<br />
Brent was most recently the CEO of MediaWorks NZ Limited and prior to<br />
this role he held a number of legal, corporate advisory, consultancy and<br />
media related roles. Brent is also a Director of Hutchwilco NZ Limited, Devon<br />
Funds Management, Fred Hollows Australia, and has been Chairman of Fred<br />
Hollows Foundation (NZ).<br />
MAURICE PRENDERGAST<br />
Chief Executive Officer<br />
Maurice has been Chief Executive Officer of <strong>Pumpkin</strong> <strong>Patch</strong> since 1993.<br />
Maurice has held executive positions in accounting, distribution and property<br />
development in both New Zealand and Australian companies. Maurice is<br />
currently a Director of Comvita Limited.<br />
DAVID JACKSON<br />
Independent Non-Executive Director, MCom (Hons), FCA<br />
Chair of the Audit and Risk Committee and member of the<br />
Remuneration and Nomination Committee<br />
David is currently a Director of Nuplex Industries Limited, Fonterra Co Operative<br />
Group Limited and Chairman of The New Zealand Refining Company Limited.<br />
David formerly was a Senior Audit Partner and Chairman of Ernst & Young.<br />
CHRISSY CONYNGHAM<br />
Group General Manager<br />
Design Director<br />
Chrissy joined <strong>Pumpkin</strong> <strong>Patch</strong> as Design Director in 1993. Chrissy leads<br />
the design team and is responsible for bringing together comprehensive<br />
ranges and product sourcing. Chrissy has over 20 years of experience<br />
in the fashion industry.<br />
SALLY SYNNOTT<br />
Non-Executive Director<br />
Member of the Audit and Risk Committee and the<br />
Remuneration and Nomination Committee<br />
Sally founded <strong>Pumpkin</strong> <strong>Patch</strong> in 1990 and held an executive role within the<br />
Company until 1993. Since then Sally has undertaken specialist assignments<br />
for the Company and has been a non-executive Director.<br />
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CORPORATE GOVERNANCE<br />
The Board of Directors have the overall responsibility for ensuring that the Company<br />
and Group is properly managed to enhance and protect shareholdersÕ interests. The<br />
Directors take this responsibility seriously and to this end, the Board has in place<br />
what it believes to be appropriate Group corporate governance policies<br />
and practices.<br />
The Board has undertaken to regularly review the corporate governance policies<br />
to ensure the CompanyÕs responsibilities and obligations are met.<br />
COMMITTEES<br />
The Board has an Audit and Risk Committee and a Remuneration and Nomination<br />
Committee. The objectives, composition and responsibilities of each committee are<br />
set out in its charter. These charters are available on the CompanyÕs corporate and<br />
<strong>investor</strong> <strong>relations</strong> website www.pumpkinpatch.biz<br />
AUDIT AND RISK COMMITTEE<br />
The Committee provides assistance to the Board in fulfilling their oversight<br />
responsibility to shareholders, potential shareholders, the investment community,<br />
and others relating to:-<br />
- the CompanyÕs financial statements and the financial <strong>report</strong>ing process;<br />
- the systems of internal accounting and financial controls;<br />
- the internal audit function;<br />
- the <strong>annual</strong> independent audit of the CompanyÕs financial statements; and<br />
- the legal compliance and ethics programmes as established by management<br />
and the Board.<br />
The Committee comprises a minimum of three non-executive Directors, the majority<br />
of which must be independent directors. The current members of the Committee are<br />
David Jackson (Chair), Jane Freeman, and Sally Synnott.<br />
REMUNERATION AND NOMINATION COMMITTEE<br />
The Committee provides assistance to the Board to ensure that the Company adopts<br />
remuneration policies that:-<br />
- attract, retain and motivate high calibre executives and directors so as to encourage<br />
enhanced performance by the Company<br />
- motivate directors and management to pursue the long-term growth and success of<br />
the Company within an appropriate control framework, and<br />
- demonstrate a clear <strong>relations</strong>hip between key executive performance and<br />
remuneration.<br />
The committee comprises a minimum of three non-executive Directors, the majority<br />
of which must be independent directors. The current members of the Committee are<br />
Jane Freeman (Chair), David Jackson, and Sally Synnott.<br />
BOARD AND COMMITTEE MEETINGS HELD DURING THE YEAR<br />
Board Meetings<br />
(1) Brent Impey was appointed by the Board on 2 July 2010<br />
Audit and Risk<br />
Committee<br />
Remuneration<br />
and Nomination<br />
Committee<br />
Chrissy Conyngham 10 - -<br />
Jane Freeman 11 2 2<br />
Brent Impey (1) - - -<br />
David Jackson 10 2 2<br />
Greg Muir 10 - -<br />
Maurice Prendergast 10 - -<br />
Sally Synnott 10 2 2<br />
Total Meetings Held 11 2 2<br />
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INDEPENDENT DIRECTORS<br />
The Company considers that three of the current seven Directors are independent<br />
directors, namely Jane Freeman, David Jackson and Brent Impey. The remaining<br />
four directors are deemed not to be independent due to disqualifying <strong>relations</strong>hips<br />
as defined in NZX Listing Rules; Chrissy Conyngham and Maurice Prendergast due<br />
to being executives in the Company, Greg Muir due to having held an executive<br />
position in the Company within the last three years, and Sally Synnott due to having<br />
a beneficial interest in securities held by a substantial security holder.<br />
The Company notes that it has a minimum of two independent Directors as required<br />
by the NZX Listing Rules.<br />
Having reviewed the composition of the Board, the Company considers the Directors<br />
hold an appropriate mix of skills, expertise, and independence.<br />
SHARE TRADING BY DIRECTORS AND OFFICERS<br />
The Company has formal procedures Directors and Officers are required to follow<br />
when trading in <strong>Pumpkin</strong> <strong>Patch</strong> Limited shares. Directors and selected senior officers<br />
must notify and obtain the consent of the Remuneration and Nominations Committee<br />
prior to trading. Other officers and other selected employees deemed to be<br />
restricted persons must notify and obtain the consent of the Company Secretary<br />
prior to trading. Restricted persons cannot trade shares during two blackout periods.<br />
The first blackout period commences 1 January and ends the day after the Company<br />
publically releases its Half Year financial result. The second blackout period<br />
commences 1 July and ends the day after the Company publically releases<br />
its Full Year financial result.<br />
A copy of this policy is available on the CompanyÕs website www.pumpkinpatch.biz<br />
CODE OF ETHICS<br />
The Company has a formal Code of Conduct and Ethics Policy. This policy provides<br />
guidance to all Directors, managers, employees and contractors of <strong>Pumpkin</strong> <strong>Patch</strong><br />
Limited and it subsidiaries on how it expects them to conduct themselves when<br />
undertaking business on behalf of the <strong>Pumpkin</strong> <strong>Patch</strong> Group.<br />
A copy of this policy is available on the CompanyÕs website www.pumpkinpatch.biz<br />
SHAREHOLDER RELATIONS<br />
The Company has a formal Shareholder Relations policy. The purpose of this Policy<br />
is to promote effective communication with shareholders and to encourage active<br />
participation at General Meetings.<br />
A copy of this policy is available on the CompanyÕs website www.pumpkinpatch.biz<br />
CONTINUOUS DISCLOSURE POLICY<br />
The Board has adopted a Market Disclosure Policy to provide a framework to assist<br />
the Company to meet its obligations under the NZX continuous disclosure rules. A<br />
copy of this policy is available on the CompanyÕs website www.pumpkinpatch.biz<br />
In the period 1 August 2009 to 31 July 2010 the Company made the following<br />
disclosures to the market:-<br />
- 23 September 2009: release of the audited result for the full year ended 31 July 2009<br />
- 2 March 2010: release of the unaudited result for the half year ended 31 January 2010<br />
- 26 April 2010: <strong>Pumpkin</strong> <strong>Patch</strong> to launch a new childrenswear brand<br />
- 2 July 2010: appointment of Independent Director, Brent Impey<br />
The Company believes it has met its obligations under the NZX continuous disclosure rules.<br />
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EXTERNAL AUDITOR INDEPENDENCE<br />
To ensure the independence of the CompanyÕs external auditor is maintained the Board<br />
has agreed the external auditor should not provide any services not permitted under<br />
IFAC (International Federation of Accountants) auditor independence regulations. The<br />
Audit and Risk Committee review services provided by the external auditor to ensure<br />
the company complies with this policy.<br />
RISK MANAGEMENT<br />
The Company recognises that in order to achieve its business plans and strategic<br />
goals, there must be a thorough understanding across the Group of the risks that<br />
may affect the ability of the Group to achieve those plans and goals. Throughout all<br />
of its business operations the Group has in place processes and systems which are<br />
designed to identify, assess, monitor and manage risk.<br />
- The Board satisfies itself that adequate external insurance cover is in place<br />
appropriate for the GroupÕs size and risk profile;<br />
- The Board satisfies itself that adequate Health, Safety and Environmental Protection<br />
Policies and hazard assessments are in place and monitors performance;<br />
- The CEO and Chief Financial Officer also provide a declaration that the financial<br />
statements of the Group present a true and fair view, in all material respects of the<br />
GroupÕs financial position and operating results. The CEO and Chief Financial Officer<br />
are able to make this declaration having regard to the GroupÕs sound system of risk<br />
management and control.<br />
The Board considers that the corporate governance principles followed by the Group<br />
do not materially differ from the NZX Corporate Governance Best Practice Code.<br />
The Board has ultimate responsibility for internal control and compliance across<br />
the Group.<br />
Accordingly, the Board manages risk in the following ways:-<br />
- The Board of Directors has oversight of risk management initiatives, policies and<br />
practices and is assisted in this regard by the Audit & Risk Committee in identifying<br />
risks which may have a material impact on the GroupÕs business;<br />
- The Chief Executive Officer (CEO) and Senior Executives of the Group are<br />
responsible for designing and implementing risk management and internal control<br />
systems which identify material risks that the Group faces as well as managing risk<br />
across the Group, and are required to <strong>report</strong> to the Board through the CEO. This<br />
includes the identification, assessment, reduction, management and monitoring of<br />
risk, as well as identifying any material changes to the GroupÕs risk profile. These<br />
are required to be <strong>report</strong>ed to the Board at regular intervals;<br />
- There is regular assessment by the Board of strategic risks affecting the GroupÕs<br />
operations and the establishment of controls to reduce their impact. This includes<br />
maintaining all relevant registrations and approvals in relation to business operations.<br />
On a regular basis the Board also reviews the GroupÕs internal controls and risk<br />
management practices to ensure that they are adequate and reflect the GroupÕs<br />
risk profile;<br />
- Risk assessments are conducted for all major work initiatives, where new projects<br />
are undertaken;<br />
- There is periodic verification of risk controls at various levels across the GroupÕs<br />
operations;<br />
- The Group has established a range of policies and procedures aimed at assisting<br />
in the management of risk across the GroupÕs operations;<br />
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GENERAL DISCLOSURES<br />
DIRECTORSÕ REMUNERATION<br />
Remuneration of the Directors of the company and other benefits received, or due<br />
and receivable during the year was as follows:<br />
$000 $000<br />
Non Executive Directors 2010 2009<br />
Jane Freeman (1) 85 85<br />
Brent Impey 6 -<br />
David Jackson (1) 85 85<br />
Greg Muir (2) 130 283<br />
Sally Synnott 75 75<br />
(1) Includes fees of $10,000 for, in the case of Jane Freeman, holding the position<br />
of Chair of the Remuneration and Nominations Committee, and for David Jackson,<br />
holding the position of Chair of the Audit and Risk Committee.<br />
(2) During 2009 Greg Muir ceased his executive position with the Company<br />
and retained the role of Chairman. Total remuneration for 2009 of $283,001<br />
consisted of executive role related remuneration ($207,168) for part of the year<br />
and ChairmanÕs fees ($75,833) for part of the year. Remuneration for 2010<br />
consists only of ChairmanÕs fees.<br />
2010 2009 2008 2007 2006<br />
Executive Directors $000 $000 $000 $000 $000<br />
Net Profit after tax (1) 25,502 14,522 17,079 23,542 26,490<br />
Maurice Prendergast<br />
Base Salary 526 526 526 492 457<br />
Cash Based Incentive 280 - 61 225 248<br />
Total 806 526 587 717 705<br />
Chrissy Conyngham<br />
Base Salary 472 451 437 389 340<br />
Cash Based Incentive 414 - 45 168 177<br />
Total 886 451 482 557 517<br />
(1) Before non-recurring items<br />
Base salary is the total cost of salary and packaged benefits, which may include<br />
the provision of a motor vehicle and other benefits received in their capacity as<br />
employees. Executive Directors do not receive Directors fees.<br />
In addition to the above remuneration, Executive Directors were each issued<br />
partly paid shares under Partly Paid Share Schemes, the value of which were<br />
independently assessed using a binominal option pricing model at the time of<br />
granting. The number of partly paid shares issued and their independently<br />
assessed fair values were:<br />
- Maurice Prendergast 250,000 shares valued at $80,000 (2009: 125,000<br />
shares valued at $41,250);<br />
- Chrissy Conyngham 250,000 shares valued at $80,000 (2009: 250,000<br />
shares valued at $82,500)<br />
Refer to note 19 in the Financial Statements for full details of the partly paid<br />
share scheme.<br />
DIRECTORS SHAREHOLDINGS<br />
31 July 2010 31 July 2009<br />
Chrissy Conyngham<br />
Beneficially or directly owned 813,510 813,510<br />
Options to acquire ordinary shares (1) 475,000 755,000<br />
Partly paid shares (2) 500,000 250,000<br />
Jane Freeman<br />
Beneficially or directly owned - -<br />
Brent Impey<br />
Beneficially or directly owned 4,000 -<br />
David Jackson<br />
Beneficially or directly owned 50,000 50,000<br />
Greg Muir<br />
Beneficially owned 1,461,900 1,661,900<br />
Options to acquire ordinary shares (1) 235,000 375,000<br />
Maurice Prendergast<br />
Beneficially or jointly owned 10,820,000 10,830,400<br />
Options to acquire ordinary shares (1) 235,000 260,000<br />
Partly paid shares (2) 375,000 125,000<br />
Not beneficially owned (3) 761,627 945,268<br />
Sally Synnott<br />
Beneficially or directly owned 9,506,800 10,006,800<br />
Not beneficially owned (3) 761,627 945,268<br />
20<br />
years<br />
young<br />
29
(1) The Executive Directors and Chairman hold options under the 2006 and 2007<br />
Employee Share Option Plans (refer note 19 of the Financial Statements). The<br />
2006 options have an exercise period of between 9 June 2009 and 9 June<br />
2011. The 2007 options have an exercise period of between 9 June 2010<br />
and 9 June 2012. Greg Muir was issued options under these schemes while<br />
he held an executive position with the Company. Non executive Directors<br />
were not eligible to participate in the option schemes.<br />
(2) Executive Directors have been issued partly paid shares during the year (refer<br />
note 19 of the Financial Statements). The 2008 partly paid shares can be<br />
converted to ordinary shares between 23 June 2011 and 23 June 2013.<br />
The 2009 partly paid shares can be converted to ordinary shares between<br />
23 June 2012 and 23 June 2014. Non executive Directors were not eligible<br />
to participate in the Partly Paid Share Schemes.<br />
(3) Maurice Prendergast and Sally Synnott are Directors and shareholders of<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Nominees Limited which acts as Trustee for various employee<br />
share ownership plans.<br />
SHARE DEALINGS BY DIRECTORS<br />
DISCLOSURE OF INTERESTS BY DIRECTORS<br />
The Directors named below have made a general disclosure of interest to the<br />
Board and entered the interest in the CompanyÕs interest register.<br />
Chrissy Conyngham<br />
Beneficial and direct shareholder in:<br />
Jane Freeman<br />
Director of:<br />
Brent Impey<br />
Director of:<br />
Beneficial shareholder in:<br />
David Jackson<br />
Beneficial shareholder in:<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited<br />
Air New Zealand Limited<br />
Jane Freeman Consulting Limited<br />
Man Cave Consulting Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited<br />
The Board has received disclosures from the Directors named below of changes in<br />
relevant interests in the Company during the period 1 August 2009 and 31 July 2010.<br />
Particulars of such disclosures are:-<br />
- Sally Synnott disposed of a total of 500,000 shares in three on market transactions<br />
between 13 and 15 October 2009;<br />
- On 6 November 2009, Partly Paid Shares were issued to Maurice Prendergast<br />
(250,000) and Chrissy Conyngham (250,000);<br />
- Greg Muir disposed of 200,000 shares on 17 December 2009;<br />
- On 9 June 2010 the 2005 options held by Greg Muir (140,000), Maurice<br />
Prendergast (150,000) and Chrissy Conyngham (280,000) expired; and<br />
- Maurice Prendergast disposed of 10,400 jointly held shares on 29 June 2010.<br />
Greg Muir<br />
Director of:<br />
Beneficial shareholder in:<br />
Maurice Prendergast<br />
Director of:<br />
Beneficial and joint shareholder in:<br />
Sally Synnott<br />
Director of:<br />
Beneficial and direct shareholder in:<br />
Ronaki Investments Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited<br />
Espies Shopfitters Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited and<br />
Espies Shopfitters Limited<br />
Matangi Holdings Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited and<br />
The Dickens Street Partnership<br />
20<br />
years<br />
young<br />
31
SUBSIDIARY COMPANY DIRECTOR DISCLOSURES<br />
In relation to <strong>Pumpkin</strong> <strong>Patch</strong> LimitedÕs subsidiary companies, the Companies Act<br />
1993 requires <strong>Pumpkin</strong> <strong>Patch</strong> Limited to disclose, during the year to 31 July 2010,<br />
particulars of entries in the Interests Register, the total remuneration and value of<br />
other benefits paid to subsidiary directors, the number of employees who received<br />
more than $100,000 and donations made by the subsidiaries and amounts paid<br />
to auditors.<br />
No wholly owned subsidiary has directors who are not employees of the <strong>Pumpkin</strong><br />
<strong>Patch</strong> group. No employee appointed as a Director of a subsidiary receives any<br />
remuneration or other benefits in his/her role as a director. The number of such<br />
employees that receive more than $100,000 as a result of employee remuneration<br />
(and other benefits) is included in the remuneration table on the following page.<br />
Audit fees are paid on behalf of the Group as disclosed in the financial statements,<br />
as are any donations made.<br />
During the financial year, there were no entries in any <strong>Pumpkin</strong> <strong>Patch</strong> Limited subsidiary<br />
company Interest Register pursuant to section 140 of the Companies Act 1993.<br />
Subsidiary Company Country of Registration Directors<br />
Torquay Enterprises Limited New Zealand Chrissy Conyngham,<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Originals Limited New Zealand Neil Cowie,<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited United Kingdom Maurice Prendergast<br />
<strong>Patch</strong> Kids Limited New Zealand & Matthew Washington<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Direct Limited New Zealand<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Asia Limited New Zealand<br />
Urban Angel Girls Limited New Zealand<br />
<strong>Pumpkin</strong> <strong>Patch</strong> LLC United States Chrissy Conyngham,<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Wholesale LLC United States Greg Muir,<br />
Maurice Prendergast<br />
& Matthew Washington<br />
<strong>Pumpkin</strong> <strong>Patch</strong> (Australia) Pty Limited Australia Chrissy Conyngham,<br />
The Catalogue Studio Pty Limited Australia Neil Cowie,<br />
Maurice Prendergast,<br />
Matthew Washington<br />
& Trish Watt<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Ireland Limited Ireland Neil Cowie,<br />
Pamela March,<br />
Maurice Prendergast<br />
& Matthew Washington<br />
REMUNERATION OF EMPLOYEES<br />
The number of employees (not including Directors) whose remuneration exceeded $100,000 is disclosed in<br />
the following table. Remuneration may include salary, performance based short term incentive payments, the<br />
value of performance based long term incentive benefits, provision of a motor vehicle, and other miscellaneous<br />
employment related benefits.<br />
During 2010 payments were made to employees under performance based short term incentive schemes,<br />
(2009: nil)<br />
$000 2010 2009<br />
100 - 110 10 10<br />
110 - 120 7 2<br />
120 - 130 7 7<br />
130 - 140 8 11<br />
140 - 150 3 8<br />
150 - 160 4 3<br />
160 - 170 1 2<br />
170 - 180 - 1<br />
180 - 190 1 2<br />
190 - 200 2 2<br />
200 - 210 3 -<br />
210 - 220 1 2<br />
230 - 240 1 4<br />
260 - 270 2 -<br />
280 - 290 2 -<br />
310 - 320 1 1<br />
320 - 330 1 -<br />
330 - 340 - 1<br />
340 - 350 1 -<br />
360 - 370 - 2<br />
400 – 410 1 -<br />
440 - 450 1 -<br />
450 - 460 - 1<br />
490 - 500 1 -<br />
580 - 590 1 -<br />
600 - 610 1 -<br />
Australian, United Kingdom, and United States remuneration has been converted into New Zealand<br />
dollars at $0.8035, $0.4659, and $0.7270 respectively.<br />
20<br />
years<br />
young<br />
33
20<br />
years<br />
young<br />
35
PUMPKIN PATCH LIMITED & SUBSIDIARIES<br />
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2010<br />
20<br />
years<br />
young<br />
37
PUMPKIN PATCH LIMITED & SUBSIDIARIES FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JULY 2010<br />
INCOME STATEMENTS For the year ended 31 July 2010<br />
Consolidated - Year ended Parent - Year ended<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
Notes $Õ000 $Õ000 $Õ000 $Õ000<br />
Sales revenue 381,994 412,348 - -<br />
Cost of goods sold (147,556) (175,231) - -<br />
Gross profit 234,438 237,117 - -<br />
Other operating income 204 197 73,167 41,090<br />
Expenses 3<br />
Selling expenses (167,138) (177,954) - -<br />
Finance expenses (2,356) (4,835) (5,337) 423<br />
Administrative and general expenses (27,388) (27,142) (46,926) (40,762)<br />
Profit from continuing operations before<br />
non-recurring items and income tax 37,760 27,383 20,904 751<br />
Non-recurring items 4 - (16,787) - (20,307)<br />
Profit/(loss) from continuing operations<br />
before income tax 37,760 10,596 20,904 (19,556)<br />
Income tax expense 6 (12,258) (8,834) 914 (1,504)<br />
Net profit from continuing operations 25,502 1,762 21,818 (21,060)<br />
(Loss) from discontinued operations (net of tax) 4 - (28,501) - -<br />
Profit /(loss) for the year 25,502 (26,739) 21,818 (21,060)<br />
STATEMENTS OF COMPREHENSIVE INCOME For the year ended 31 July 2010<br />
Consolidated - Year ended Parent - Year ended<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
Notes $Õ000 $Õ000 $Õ000 $Õ000<br />
Profit/(loss) for the year 25,502 (26,739) 21,818 (21,060)<br />
Other comprehensive income<br />
Exchange differences on translation<br />
of foreign operations (6,132) 5,044 - -<br />
Net movement on cash flow hedges (3,944) 6,715 - -<br />
Mark to market gains /(losses) on foreign<br />
currency portfolio restructure (17,103) 26,182 - -<br />
Income tax relating to components<br />
of other comprehensive income 8,055 (9,948) - -<br />
(19,124) 27,993 - -<br />
Total comprehensive income for the year,<br />
net of tax 6,378 1,254 21,818 (21,060)<br />
Total comprehensive income for the year<br />
is attributable to:<br />
Equity holders of <strong>Pumpkin</strong> <strong>Patch</strong> Limited 6,378 1,254 21,818 (21,060)<br />
6,378 1,254 21,818 (21,060)<br />
The above statements of comprehensive income should be read in conjunction with the accompanying notes.<br />
Earnings per share for profit attributable<br />
to shareholders: Cents Cents<br />
Basic earnings per share 22 15.3 (16.0)<br />
Diluted earnings per share 22 15.2 (16.0)<br />
Attributable to continuing operations:<br />
Basic earnings per share 22 15.3 1.1<br />
Diluted earnings per share 22 15.2 1.1<br />
Attributable to discontinuing operations:<br />
Basic earnings per share 22 - (17.1)<br />
Diluted earnings per share 22 - (17.1)<br />
The above income statements should be read in conjunction with the accompanying notes.<br />
Maurice Prendergast<br />
David Jackson<br />
22 September 2010 22 September 2010<br />
20<br />
years<br />
young<br />
39
PUMPKIN PATCH LIMITED & SUBSIDIARIES BALANCE SHEETS AS AT 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2010<br />
BALANCE SHEETS As at 31 July 2010<br />
Consolidated at Parent at<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
Notes $Õ000 $Õ000 $Õ000 $Õ000<br />
ASSETS<br />
Current assets<br />
Cash and cash equivalents 7 6,945 12,563 31 38<br />
Trade and other receivables 8 20,727 19,559 166,836 128,633<br />
Derivative financial instruments 10 4,930 4,123 - -<br />
Inventories 9 71,355 80,210 - -<br />
Current tax receivables 1,381 - 4,328 8,391<br />
Total current assets 105,338 116,455 171,195 137,062<br />
Non-current assets<br />
Property, plant and equipment 11 53,096 52,299 12,026 12,593<br />
Intangible assets 12 8,435 7,266 7,869 6,653<br />
Other financial assets 14 - - 58,189 58,189<br />
Trade and other receivables 4 4 4 4<br />
Derivative financial instruments 10 2,555 2,662 - -<br />
Deferred tax assets 13 9,161 9,502 - -<br />
Total non-current assets 73,251 71,733 78,088 77,439<br />
Total assets 178,589 188,188 249,283 214,501<br />
LIABILITIES<br />
Current liabilities<br />
Trade and other payables 15 31,653 34,055 212,970 185,531<br />
Interest bearing liabilities 16 25,000 10,000 28 319<br />
Current tax liabilities - 1,826 - -<br />
Derivative financial instruments 10 15,696 10,409 - -<br />
Deferred landlord contributions 2,058 2,326 - -<br />
Total current liabilities 74,407 58,616 212,998 185,850<br />
Non-current liabilities<br />
Interest bearing liabilities 16 8,000 21,000 - -<br />
Deferred landlord contributions 5,461 6,581 - -<br />
Derivative financial instruments 10 9,854 13,313 - -<br />
Deferred tax liabilities 13 - - 804 379<br />
Total non-current liabilities 23,315 40,894 804 379<br />
Total liabilities 97,722 99,510 213,802 186,229<br />
Net assets 80,867 88,678 35,481 28,272<br />
EQUITY<br />
Share capital 18 58,398 57,978 58,431 58,431<br />
Reserves 20 (1,544) 17,149 5,830 5,399<br />
Retained earnings / (deficit) 20 24,013 13,551 (28,780) (35,558)<br />
Total equity 80,867 88,678 35,481 28,272<br />
The above statements of financial position should be read in conjunction with the accompanying notes.<br />
STATEMENTS OF CHANGES IN EQUITY For the year ended 31 July 2010<br />
Attributable to equity holders of the Company<br />
Share<br />
capital Reserves<br />
Treasury<br />
stock<br />
Retained<br />
earnings<br />
Total<br />
equity<br />
Consolidated Notes $Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
Balance at 01 August 2008 58,802 (12,420) (790) 51,138 96,730<br />
Comprehensive income<br />
Profit/(loss) - - - (26,739) (26,739)<br />
Other comprehensive income - 27,993 - - 27,993<br />
Total comprehensive income - 27,993 - (26,739) 1,254<br />
Movement in treasury stock - - 337 - 337<br />
Movement in share based<br />
payments reserve 20 - 1,576 - - 1,576<br />
Shares issued 18 752 - - - 752<br />
Shares repurchased 18 (1,123) - - - (1,123)<br />
Dividends paid 21 - - - (10,848) (10,848)<br />
Balance at 31 July 2009 58,431 17,149 (453) 13,551 88,678<br />
Balance at 01 August 2009 58,431 17,149 (453) 13,551 88,678<br />
Comprehensive income<br />
Profit/(loss) - - - 25,502 25,502<br />
Other comprehensive income - (19,124) - - (19,124)<br />
Total comprehensive income - (19,124) - 25,502 6,378<br />
Movement in treasury stock 18 - - 420 - 420<br />
Movement in share based<br />
payments reserve 20 - 431 - - 431<br />
Dividends paid 21 - - - (15,040) (15,040)<br />
Balance at 31 July 2010 58,431 (1,544) (33) 24,013 80,867<br />
The above statements of changes in equity should be read in conjunction with the accompanying notes.<br />
20<br />
years<br />
young<br />
41
PUMPKIN PATCH LIMITED & SUBSIDIARIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2010<br />
STATEMENTS OF CHANGES IN EQUITY continued<br />
Attributable to equity holders of the Company<br />
Share<br />
capital<br />
Reserves<br />
Retained<br />
earnings/<br />
(deficit)<br />
Total<br />
equity<br />
Parent Notes $Õ000 $Õ000 $Õ000 $Õ000<br />
Balance at 01 August 2008 58,802 3,823 (3,650) 58,975<br />
Comprehensive income<br />
Profit/(loss) - - (21,060) (21,060)<br />
Other comprehensive income - - - -<br />
Total comprehensive income - - (21,060) (21,060)<br />
Movement in share based payments reserve 20 - 1,576 - 1,576<br />
Shares issued 18 752 - - 752<br />
Shares repurchased 18 (1,123) - - (1,123)<br />
Dividends paid 21 - - (10,848) (10,848)<br />
Balance at 31 July 2009 58,431 5,399 (35,558) 28,272<br />
Balance at 01 August 2009 58,431 5,399 (35,558) 28,272<br />
Comprehensive income<br />
Profit/(loss) - - 21,818 21,818<br />
Other comprehensive income - - - -<br />
Total comprehensive income - - 21,818 21,818<br />
Movement in share based payments reserve 20 - 431 - 431<br />
Dividends paid 21 - - (15,040) (15,040)<br />
Balance at 31 July 2010 58,431 5,830 (28,780) 35,481<br />
The above statements of changes in equity should be read in conjunction with the accompanying notes.<br />
STATEMENTS OF CASH FLOWS For the year ended 31 July 2010<br />
Consolidated - Year ended Parent - Year ended<br />
31 July 31 July 31 July 31 July<br />
2010 2009 2010 2009<br />
Notes $Õ000 $Õ000 $Õ000 $Õ000<br />
Cash flows from operating activities<br />
Cash was provided from:<br />
Receipts from customers 380,765 429,535 9,583 41,364<br />
Sales tax received 763 - - 1<br />
Dividends received 3 4 1 25,161 -<br />
Interest received 3 192 309 7,402 871<br />
Cash was applied to:<br />
Payments to suppliers and employees (343,395) (352,765) (14,679) (16,409)<br />
Interest paid 3 (2,549) (5,144) (12,739) (448)<br />
Sales tax paid - (691) (14) (165)<br />
Income taxes paid (14,979) (10,668) 5,402 (9,413)<br />
Net cash operating inflows/(outflows) 24 20,801 60,577 20,116 15,801<br />
Cash flows from investing activities<br />
Cash applied to:<br />
Purchase of property, plant and equipment (9,593) (8,152) (1,168) (1,598)<br />
Purchase of intangibles (3,786) (3,644) (3,624) (3,475)<br />
Net investing cash inflows/(outflows) (13,379) (11,796) (4,792) (5,073)<br />
Cash flows from financing activities<br />
Cash was provided from:<br />
Proceeds from issue of share capital 18 - 752 - 752<br />
Repayment of borrowings - (66,000) (291) -<br />
Proceeds of borrowings 2,000 - - 319<br />
Cash was applied to:<br />
Payments for shares bought back 18 - (1,123) - (1,123)<br />
Proceeds from restructure of foreign<br />
currency portfolio 20 - 25,339 - -<br />
Dividends paid 21 (15,040) (10,848) (15,040) (10,848)<br />
Net financing cash (outflows)/inflows (13,040) (51,880) (15,331) (10,900)<br />
Net (decrease)/ increase in cash and<br />
cash equivalents (5,618) (3,099) (7) (172)<br />
Cash and cash equivalents at the<br />
beginning of the financial year 12,563 15,662 38 210<br />
Cash and cash equivalents at end of year 7 6,945 12,563 31 38<br />
The above statements of cash flows should be read in conjunction with the accompanying notes.<br />
20<br />
years<br />
young<br />
43
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
1 GENERAL INFORMATION<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited (Ò CompanyÓ or Ò ParentÓ ) together with its subsidiaries (the Ò GroupÓ )<br />
is a leading designer, marketer, retailer and wholesaler of childrenÕs clothing.<br />
The Company is a limited liability company incorporated and domiciled in New Zealand.<br />
The address of its registered office is 439 East Tamaki Road, East Tamaki, Auckland,<br />
New Zealand.<br />
These financial statements were authorised for issue on 22 September 2010 by the<br />
Board of Directors who have the power to amend after issue.<br />
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<br />
The principal accounting policies adopted in the preparation of the financial statements<br />
are set out below. These policies have been consistently applied to all the years presented,<br />
unless otherwise stated.<br />
(A) BASIS OF PREPARATION<br />
The financial statements have been prepared in accordance with New Zealand Generally<br />
Accepted Accounting Practice (NZ GAAP). They comply with New Zealand Equivalents to<br />
International Financial Reporting Standards (NZ IFRS), and other applicable New Zealand<br />
Financial Reporting Standards, as appropriate for profit-oriented entities. The financial<br />
statements comply with International Financial Reporting Standards (IFRS).<br />
The principal accounting policies adopted in the preparation of the financial statements<br />
are set out below. The policies have been consistently applied to all the periods presented,<br />
unless otherwise stated.<br />
The <strong>report</strong>ing currency used in the preparation of these consolidated financial statements<br />
is New Zealand dollars, rounded where necessary to the nearest thousand dollars.<br />
To ensure consistency with the current year, comparative figures have been restated<br />
where appropriate.<br />
Entities <strong>report</strong>ing<br />
The financial statements for the Ò GroupÓ are the consolidated financial statements<br />
comprising the economic entity <strong>Pumpkin</strong> <strong>Patch</strong> Limited and its subsidiaries. The<br />
financial statements of the Parent are for the company as a seperate legal entity.<br />
Statutory base<br />
The Company is listed on the New Zealand Exchange (NZX). It is registered under the<br />
Companies Act 1993 and is an issuer in terms of the Securities Act 1978. The financial<br />
statements have been prepared in accordance with the requirements of the Financial<br />
Reporting Act 1993 and the Companies Act 1993.<br />
Historical cost convention<br />
These financial statements have been prepared under the historical cost convention,<br />
as modified by the revaluation of financial assets and liabilities, including derivative<br />
instruments.<br />
Changes in accounting policies<br />
The group has adopted the following new and amended NZ IFRSs as of 1 August 2009:<br />
- NZ IFRS 7 Financial instruments: Disclosures (amendment) - effective 1 January 2009.<br />
The amendment requires enhanced disclosures about fair value measurement and liquidity<br />
risk. In particular, the amendment requires disclosure of fair value measurements by level<br />
of a fair value measurement hierarchy. As the change in accounting policy only results in<br />
additional disclosures, there is no impact on earnings per share.<br />
- IAS 1 (revised), ÔPresentation of financial statementsÕ. The revised standard prohibits the<br />
presentation of items of income and expenses (that is Ônon-owner changes in equityÕ)<br />
in the statement of changes in equity, requiring Ônon-owner changes in equityÕ to be<br />
presented separately from owner changes in equity. All Ônon-owner changes in equityÕ<br />
are required to be shown in a performance statement.<br />
Entities can choose whether to present one performance statement (the statement<br />
of comprehensive income) or two statements (the income statement and statement<br />
of comprehensive income).<br />
The group has elected to present two statements: an income statement and a statement<br />
of comprehensive income.<br />
Critical accounting estimates<br />
The Group makes estimates and assumptions concerning the future. The resulting accounting<br />
estimates will, by definition, seldom equal the related actual results. The estimates and<br />
assumptions that have a significant risk of causing a material adjustment to the carrying<br />
amounts of assets and liabilities within the next financial year are addressed below:<br />
(i) Impairment of Property, Plant and Equipment<br />
The Group undertakes to <strong>annual</strong>ly review its assets for indicators that their value is<br />
impaired. Testing for impairment involves judgements and estimates in relation to the<br />
recoverability of asset values. As disclosed in note 4, in 2009 the Group performed<br />
impairment testing of its United Kingdom and United States retail stores as well as all<br />
Urban Angel stores, this resulted in an impairment charge being recognised in the 2009<br />
income statement. Following a review of the 2010 operations no indicators of impairment<br />
were identified and as such, no impairment charge was deemed necessary in 2010.<br />
(ii) Inventory<br />
As disclosed in note 2(M), inventories are recorded at the lower of cost and net realisable<br />
value. Assessing the net realisable value of inventory involves making estimates and<br />
judgements in relation to future selling prices.<br />
20<br />
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young<br />
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PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued<br />
(iii) Income Tax<br />
The Group has recognised deferred tax as disclosed in note 13. In recognising this asset,<br />
management have assumed that there will be no significant changes in the tax laws within<br />
the jurisdictions in which the Group operates.<br />
(B) PRINCIPLES OF CONSOLIDATION<br />
(i) Subsidiaries<br />
Subsidiaries are all entities (including special purpose entities) over which the group<br />
has the power to govern the financial and operating policies generally accompanying<br />
a shareholding of more than one half of the voting rights. The existence and effect of<br />
potential voting rights that are currently exercisable or convertible are considered when<br />
assessing whether the group controls another entity. Subsidiaries are fully consolidated<br />
from the date on which control is transferred to the group. They are de-consolidated<br />
from the date that control ceases.<br />
Inter-company transactions, balances and unrealised gains on transactions between group<br />
companies are eliminated. Unrealised losses are also eliminated. Accounting policies of<br />
subsidiaries have been changed where necessary to ensure consistency with the policies<br />
adopted by the group.<br />
(C) SEGMENT REPORTING<br />
An operating segment is a component of an entity that engages in business activities<br />
which earns revenue and incurs expenses and where the chief decision maker reviews<br />
the operating results on a regular basis and makes decisions on resource allocation.<br />
The Group is organised into five operating segments, depicting the four geographical<br />
regions the GroupÕs retail chain operates in and the wholesale/direct line of business.<br />
(D) FOREIGN CURRENCY TRANSLATION<br />
(i) Functional and presentation currency<br />
Items included in the financial statements of each of the GroupÕs entities are measured<br />
using the currency of the primary economic environment in which the entity operates<br />
(Ôthe functional currencyÕ). The consolidated and parent financial statements are presented<br />
in New Zealand dollars, which is the GroupÕs presentation currency.<br />
(iii) Foreign operations<br />
The results and balance sheets of foreign operations that have a functional currency<br />
different from the presentation currency are translated into the presentation currency<br />
as follows:<br />
- assets and liabilities for each balance sheet presented are translated at the closing<br />
rate at the date of that balance sheet;<br />
- income and expenses for each income statement are translated at average exchange<br />
rates (unless this is not a reasonable approximation of the cumulative effect of the rates<br />
prevailing on the transaction dates, in which case income and expenses are translated<br />
at the dates of the transactions); and<br />
- all resulting exchange differences are recognised as a separate component of equity.<br />
(E) REVENUE RECOGNITION<br />
Revenue comprises the fair value for the sale of goods and services, net of sales tax and<br />
discounts and after eliminating sales within the Group. Revenue is recognised as follows:<br />
(i) Sales of goods - retail<br />
Sales of goods are recognised when a Group entity sells a product to the customer.<br />
Retail sales are usually in cash or by credit card.<br />
(ii) Sales of goods - wholesale<br />
Wholesale sales are recognised in accordance with the terms of sales when the title has<br />
transferred and the benefits of ownership and risk pass to the customer. This is dependent<br />
on customer specific terms of trade.<br />
(iii) Interest income<br />
Interest income is recognised using the effective interest method.<br />
(iv) Dividend income<br />
Dividend income is recognised when the right to receive payment is established.<br />
(F) COST OF GOODS SOLD<br />
Cost of goods sold represent expenses associated with the design, purchase and<br />
all other costs incurred in getting the inventory to the point of sale.<br />
(ii) Transactions and balances<br />
Foreign currency transactions are translated into the functional currency using the exchange<br />
rates prevailing at the dates of the transactions. Foreign exchange gains and losses<br />
resulting from the settlement of such transactions and from the translation at year-end<br />
exchange rates of monetary assets and liabilities denominated in foreign currencies are<br />
recognised in the income statement, except when deferred in equity as qualifying cash<br />
flow hedges and qualifying net investment hedges.<br />
20<br />
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young<br />
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PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued<br />
(G) INCOME TAX<br />
The income tax expense or revenue for the period is the total of the current periodÕs taxable<br />
income based on the income tax rate for each jurisdiction plus/minus any prior yearsÕ<br />
under/over provisions, plus/minus movements in the deferred tax balance except where<br />
the movement in deferred tax is attributable to a movement in reserves.<br />
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates<br />
expected to apply when the assets are recovered or liabilities are settled, based on those<br />
tax rates which are enacted or substantively enacted for each jurisdiction. No deferred tax<br />
asset or liability is recognised in relation to these temporary differences if they arose in a<br />
transaction, other than a business combination, that at the time of the transaction did not<br />
affect either accounting profit or loss or taxable profit or loss.<br />
Deferred tax assets are recognised for deductible temporary differences and unused tax<br />
losses only to the extent that is probable that future taxable amounts will be available to<br />
utilise those temporary differences and losses.<br />
The income tax expense or revenue attributable to amounts recognised directly in equity<br />
are also recognised directly in equity.<br />
(H) GOODS AND SERVICES TAX (GST)<br />
The Income Statement has been prepared so that all components are stated exclusive of<br />
GST. All items in the balance sheet are stated net of GST, with the exception of receivables<br />
and payables, which include GST invoiced.<br />
(I) LEASES AND DEFERRED LANDLORD CONTRIBUTIONS<br />
Leases in which a significant portion of the risks and rewards of ownership are retained by<br />
the lessor are classified as operating leases. Payments made under operating leases are<br />
charged to the Income Statement on a straight-line basis over the period of the lease.<br />
Where a landlord makes a contribution to the initial setup cost of a store, the contribution<br />
is captialised. The contribution is amortised on a straight line basis over the life of the lease<br />
offsetting the lease payments made.<br />
(J) IMPAIRMENT OF NON FINANCIAL ASSETS<br />
Assets that have an indefinite useful life are not subject to amortisation and are tested<br />
<strong>annual</strong>ly for impairment. Assets that are subject to amortisation are reviewed for impairment<br />
whenever events or changes in circumstances indicate that the carrying amount may not<br />
be recoverable. An impairment loss is recognised for the amount by which the assetÕs<br />
carrying amount exceeds its recoverable amount. The recoverable amount is the higher<br />
of an assetÕs fair value less costs to sell and value in use. For the purposes of assessing<br />
impairment, assets are grouped at the lowest levels for which there are separately<br />
identifiable cash flows.<br />
(K) CASH AND CASH EQUIVALENTS<br />
Cash and cash equivalents includes cash on hand, deposits held at call with financial<br />
institutions, other short-term, highly liquid investments with original maturities of three months<br />
or less that are readily convertible to known amounts of cash. Bank overdrafts are shown<br />
within interest bearing liabilities in current liabilities on the balance sheet.<br />
(L) TRADE RECEIVABLES<br />
Trade receivables are recognised initially at fair value and subsequently at amortised<br />
cost less provision for doubtful debts.<br />
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known<br />
to be uncollectible are written off. A provision for doubtful receivables is established when<br />
there is objective evidence that the Group will not be able to collect all amounts due<br />
according to the original terms of receivables. The amount of the provision is the difference<br />
between the assetÕs carrying amount and the present value of estimated future cash flows.<br />
The amount of the provision is recognised in the Income Statement.<br />
Significant financial difficulties of the debtor, probability that the debtor will enter<br />
bankruptcy or financial reorganisation, and default or delinquency in payments are<br />
considered indicators that the trade receivable is impaired.<br />
(M) INVENTORIES<br />
Work in progress and finished goods are stated at the lower of cost and net realisable<br />
value. Costs are assigned to individual items of inventory on the basis of weighted average<br />
costs, and includes expenditure incurred in acquiring the assets and bringing them to their<br />
existing location and condition. Net realisable value is the estimated selling price in the<br />
ordinary course of business.<br />
(N) DERIVATIVES<br />
Derivatives are initially recognised at fair value on the date a derivative contract is entered<br />
into and are subsequently remeasured to their fair value. The method of recognising the<br />
resulting gain or loss depends on whether the derivative is designated as a hedging<br />
instrument, and if so, the nature of the item being hedged. The Group designates certain<br />
derivatives as either; (a) hedges of the fair value of recognised assets or liabilities or a firm<br />
commitment (fair value hedge); or (b) hedges of highly probable forecast transactions (cash<br />
flow hedges).<br />
The Group documents at the inception of the transaction the <strong>relations</strong>hip between hedging<br />
instruments and hedged items, as well as its risk management objective and strategy for<br />
undertaking various hedge transactions. The Group also documents its assessment, both<br />
at hedge inception and on an ongoing basis, of whether the derivatives that are used<br />
in hedging transactions have been and will continue to be highly effective in offsetting<br />
changes in fair values or cash flows of hedged items.<br />
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PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued<br />
(i) Fair value hedge<br />
Changes in the fair value of derivatives that are designated and qualify as fair value<br />
hedges are recorded in the Income Statement, together with any changes in the fair<br />
value of the hedged asset or liability that are attributable to the hedged risk.<br />
(ii) Cash flow hedge<br />
The effective portion of changes in the fair value of derivatives that are designated and<br />
qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or<br />
loss relating to the ineffective portion is recognised immediately in the income statement.<br />
Amounts accumulated in equity are recycled in the Income Statement in the periods<br />
when the hedged item will affect profit or loss (for instance when the forecast sale that is<br />
hedged takes place). However, when the forecast transaction that is hedged results in the<br />
recognition of a non-financial asset (for example, inventory) or a non-financial liability, the<br />
gains and losses previously deferred in equity are transferred from equity and included in<br />
the measurement of the initial cost or carrying amount of the asset or liability.<br />
When a hedging instrument expires, is sold or terminated, or when a hedge no longer<br />
meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at<br />
that time remains in equity and is recognised when the forecast transaction is ultimately<br />
recognised in the Income Statement. When a forecast transaction is no longer expected<br />
to occur, the cumulative gain or loss that was <strong>report</strong>ed in equity is immediately transferred<br />
to the Income Statement.<br />
(iii )Derivatives that do not qualify for hedge accounting<br />
Certain derivative instruments do not qualify for hedge accounting. Changes in the<br />
fair value of any derivative instrument that does not qualify for hedge accounting are<br />
recognised immediately in the Income Statement.<br />
(O) FINANCIAL ASSETS<br />
The Group classifies its financial assets in the following categories: Ò financial assets at<br />
fair value through profit or lossÓ and Ò loans and receivablesÓ. The classification depends<br />
on the purpose for which the financial assets were acquired. Management determines<br />
the classification of its investments at initial recognition.<br />
(i) Financial assets at fair value through profit or loss<br />
This category has two sub-categories: Ò financial assets held for tradingÓ , and those<br />
designated at Ò fair value through profit or loss on initial recognitionÓ . A financial asset is<br />
classified in this category if acquired principally for the purpose of selling in the short term.<br />
Derivatives are also categorised as held for trading unless they are designated as hedges.<br />
Assets in this category are classified as current assets if they are either held for trading or<br />
are expected to be realised within 12 months of the balance sheet date.<br />
(ii) Loans and receivables<br />
Ò Loans and receivablesÓ are non derivative financial assets with fixed or determinable<br />
payments that are not quoted in an active market. They are included in current assets,<br />
except for those with maturities greater than 12 months after the balance sheet date which<br />
are classified as non-current assets. Loans and receivables are included in receivables in<br />
the balance sheet (note 8).<br />
Financial assets carried at fair value through profit or loss are initially recognised at fair<br />
value, and transactions costs are expensed in the Income Statement. Loans and receivables<br />
are initially recognised at fair value plus transaction costs, and are subsequently carried at<br />
amortised cost using the effective interest method. Financial assets are recognised on trade<br />
dates, being the date on which the Group commits to purchase or sell the asset. Financial<br />
assets are derecognised when the rights to receive cash flows from the financial asset have<br />
expired or have been transferred and the Group has transferred substantially all risk and<br />
rewards of ownership.<br />
(P) FAIR VALUE ESTIMATION<br />
The fair value of financial assets and financial liabilities must be estimated for recognition<br />
and measurement or for disclosure purposes. The carrying value of cash and cash<br />
equivalents, trade receivables, trade payables, and short term liabilities is equivalent<br />
to their fair value due to their short term nature.<br />
The fair value of forward exchange contracts is determined using forward exchange market<br />
rates at the balance date. The Group assesses at each balance sheet date whether there<br />
is objective evidence that a financial asset or a group of financial assets is impaired.<br />
Gains or losses arising from changes in the fair value of the financial assets category<br />
are presented in the Income Statement in the period in which they arise.<br />
(Q) PROPERTY, PLANT AND EQUIPMENT<br />
All property, plant and equipment is stated at historical cost less depreciation and<br />
impairment. Historical cost includes expenditure that is directly attributable to the acquisition<br />
of the items.<br />
Subsequent costs are included in the assetÕs carrying amount or recognised as a separate<br />
asset, as appropriate, only when it is probable that future economic benefits associated<br />
with the item will flow to the Group and the cost of the item can be measured reliably.<br />
All repairs and maintenance are charged to the Income Statement during the financial<br />
period in which they are incurred.<br />
Land is not depreciated. Depreciation on other assets is calculated using the straight line<br />
method to allocate their costs, net of their residual values, over their estimated useful lives,<br />
as follows:<br />
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PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued<br />
- Shop fit out ........................................................................................5-10 years<br />
- Office equipment (including furniture and fittings (F&F)) .................................5-10 years<br />
- Computer equipment (including point of sale equipment (POS)) ......................3-5 years<br />
- Plant and machinery ............................................................................3-7 years<br />
- Vehicles ............................................................................................4-5 years<br />
- Leasehold improvements .......................................................................6-7 years<br />
The assetsÕ residual values and useful lives are reviewed, and adjusted if appropriate,<br />
at each balance sheet date.<br />
An assetÕs carrying amount is written down immediately to its recoverable amount<br />
if the assetÕs carrying amount is greater than its estimated recoverable amount.<br />
Gains and losses on disposals are determined by comparing proceeds with carrying<br />
amount. These are included in the Income Statement.<br />
(R) INTANGIBLE ASSETS<br />
(i) Trademarks<br />
Trademarks have a finite useful life and are carried at cost less accumulated amortisation<br />
and impairment losses. Amortisation is calculated using the straight line method to allocate<br />
the cost of trademarks and licences over their estimated useful lives, which varies from three<br />
to five years.<br />
(ii) Software costs<br />
Acquired computer software licences are capitalised on the basis of the costs incurred<br />
to acquire and bring to use the specific software. These costs are amortised over their<br />
estimated useful lives (three to five years).<br />
Costs associated with developing or maintaining computer software programmes are<br />
recognised as an expense as incurred. Costs that are directly associated with the production<br />
of identifiable and unique software products controlled by the Group, and that will probably<br />
generate economic benefits exceeding costs beyond one year, are recognised as intangible<br />
assets. Direct costs include the software development employee costs.<br />
Computer software development costs recognised as assets are amortised over their<br />
estimated useful lives (not exceeding five years).<br />
(S) TRADE AND OTHER PAYABLES<br />
Trade and other payables are initially recognised at fair value and subsequently<br />
at amortised costs.<br />
These amounts represent liabilities for goods and services provided to the Group prior<br />
to the end of financial year which are unpaid. The amounts are unsecured and are<br />
usually paid within 30 days of recognition.<br />
(T) BORROWINGS<br />
Borrowings are initially recognised at fair value, net of transaction costs incurred.<br />
Borrowings are subsequently measured at amortised cost. Any difference between<br />
the proceeds (net of transaction costs) and the redemption amount is recognised in the<br />
Income Statement over the period of the borrowings using the effective interest method.<br />
Borrowings are classified as current liabilities unless the Group has an unconditional right<br />
to defer settlement of the liability for at least 12 months after the balance sheet date.<br />
The classification of borrowings reflects the underlying bank facility agreement.<br />
(U) PROVISIONS<br />
Provisions are recognised when the Group has a present legal or constructive obligation as<br />
a result of past events, it is more likely than not that an outflow of resources will be required<br />
to settle the obligation, and the amount has been reliably estimated. Provisions are not<br />
recognised for future operating losses.<br />
(V) EMPLOYEE BENEFITS<br />
(i) Wages and salaries, <strong>annual</strong> leave and sick leave<br />
Liabilities for wages and salaries, including non-monetary benefits, <strong>annual</strong> leave and<br />
accumulating sick leave expected to be settled within 12 months of the <strong>report</strong>ing date<br />
are recognised in the provision for employee benefits in respect of employeesÕ services<br />
up to the <strong>report</strong>ing date and are measured at the amounts expected to be paid when the<br />
liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the<br />
leave is taken and measured at the rates paid or payable.<br />
(ii) Long service leave<br />
The liability for long service leave is recognised in the provision for employee benefits<br />
and measured as the present value of expected future payments to be made in respect<br />
of services provided by employees up to the <strong>report</strong>ing date. Consideration is given to<br />
experience of employee departures and periods of service.<br />
(iii) Employee share based payments<br />
The Group operates an equity-settled, share-based compensation plan. The fair value of<br />
the instruments granted is recognised as an employee expense in the Income Statement<br />
with a corresponding increase in the share based payments reserve. The total amount<br />
to be expensed over the vesting period is determined by reference to the fair value of<br />
the instruments granted, excluding the impact of any non-market vesting conditions (for<br />
example, profitability and sales growth targets). Non-market vesting conditions are included<br />
in assumptions about the number of instruments that are expected to become exercisable.<br />
At each balance sheet date, the entity revises its estimates of the number of instruments<br />
that are expected to become exercisable. It recognises the impact of the revision of<br />
original estimates, if any, in the Income Statement, and a corresponding adjustment<br />
to equity over the remaining vesting period.<br />
20<br />
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PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued<br />
When instruments are exercised the amount in the share based payment reserve relating to those<br />
options, together with the exercise price paid by the employee, is transferred to share capital.<br />
(W) SHARE CAPITAL<br />
Ordinary shares are classified as capital.<br />
Incremental costs directly attributable to the issue of new shares or instruments are shown<br />
in equity as a deduction, net of tax, from the proceeds.<br />
Where any Group company purchases or controls the CompanyÕs equity share capital<br />
(treasury stock), the consideration paid, including any directly attributable incremental<br />
costs (net of income taxes), is deducted from equity attributable to the GroupÕs equity<br />
holders until the shares are cancelled or reissued. Where such shares are subsequently<br />
reissued, any consideration received (net of any directly attributable incremental transaction<br />
costs and the related income tax effects) is included in equity attributable to the GroupÕs<br />
equity holders.<br />
(X) DIVIDENDS<br />
Provision is made for the amount of any dividend declared on or before the end of the<br />
financial year but not distributed at balance date.<br />
(Y) EARNINGS PER SHARE<br />
Basic earnings per share is calculated by dividing the profit attributable to equity holders of<br />
the company, by the weighted average number of ordinary shares on issue during the year.<br />
Diluted earnings per share is calculated by dividing the profit by the weighted average<br />
number of ordinary shares on issue during the year adjusted to include the potential dilutive<br />
effect as a result of the issue of share options.<br />
(Z) STATEMENT OF CASH FLOWS<br />
The following are definitions of the terms used in the Statement of Cash Flows:<br />
i) Cash comprises cash and bank balances.<br />
ii) Investing activities are those activities relating to the acquisition, holding and disposal<br />
of Property, Plant and Equipment, Intangible assets and Investments.<br />
iii) Financing activities are those activities which result in changes in the size and<br />
composition of the capital structure of the Group. This includes both equity and<br />
debt not falling within the definition of cash. Dividends paid are included in<br />
financing activities.<br />
(AA) STANDARDS, AMENDMENTS AND INTERPRETATIONS TO EXISTING STANDARDS<br />
THAT ARE NOT YET EFFECTIVE<br />
Below is a list of new standards, amendments and interpretations to existing standards<br />
which have been published that are mandatory for the GroupÕs accounting periods<br />
beginning on or after 1 August 2010 or later periods but which the Group has not early<br />
adopted. The standards listed are expected to effect the Group but are not expected to<br />
have a material impact on the GroupÕs financial statements.<br />
NZ IFRS 9 Financial Instruments<br />
(Mandatory for <strong>annual</strong> periods commencing on or after 1 January 2013). It is the<br />
intention of the IASB to replace IAS 39 with IFRS 9. The first phase of the implementation<br />
of IFRS 9 relates to the classification and measurement of financial assets.<br />
NZ IFRS 9 specifies how an entity should classify and measure financial assets, including<br />
some hybrid contracts. Management have not yet ascertained the impact which the<br />
implementation of this standard will have on the Group financial statements nor assessed<br />
when it will be adopted.<br />
NZ IAS 1 Presentation of Financial Statements (amendments)<br />
(Effective for <strong>annual</strong> periods beginning on or after 1 January 2010) The amendment<br />
to NZ IAS 1 stipulates that the terms of a liability that could result, at anytime, in its<br />
settlement by the issuance of equity instruments at the option of the counter party do not<br />
affect its classification.<br />
NZ IAS 7 Statement of Cash Flows (amendments)<br />
(Mandatory for <strong>annual</strong> periods commencing on or after 1 January 2010). The amendment<br />
to NZ IAS 7 explicitly states that only expenditure that results in a recognised asset can<br />
be classified as cash flow from investing activities.<br />
NZ IAS 17 Leases (amendments)<br />
(Mandatory for <strong>annual</strong> periods commencing on or after 1 January 2010). The amendment<br />
to NZ IAS 17 removes the specific guidance on classifying land as<br />
a lease.<br />
NZ IAS 24 Related Party Disclosures (revised)<br />
(effective from 1 July 2010). This standard supersedes NZ IAS 24 (issued in 2004). This<br />
revised NZ IAS 24 simplifies the definition of a related party, clarifying<br />
its intended meaning and eliminating inconsistencies from the previous definition.<br />
iv) Operating activities include all transactions and other events that are not investing<br />
or financing activities.<br />
20<br />
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PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
3 INCOME AND EXPENSES<br />
Consolidated - Year ended Parent - Year ended<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Profit before income tax from continuing<br />
activities includes the following specific<br />
expenses:<br />
Interest received (192) (309) (7,402) (871)<br />
Dividends received (4) (1) (25,161) (1)<br />
Rental and operating lease expenses 61,159 63,851 2,777 2,952<br />
Impairment of store assets - 16,787 - -<br />
Management fees - - (47,839) (40,894)<br />
Write down of investment in subsidiary - - - 20,307<br />
Net (gains) / losses on financial assets or<br />
liabilities designated as fair value through<br />
profit and loss (36) (1,255) - -<br />
Interest expense 2,549 5,144 12,739 448<br />
Bad debts written off 94 111 54 -<br />
DirectorÕs fees 381 321 381 321<br />
Donations 110 97 - -<br />
Employee benefit expenses<br />
Salaries & wages 77,561 78,707 20,556 22,057<br />
Share based payments 432 1,691 415 -<br />
77,993 80,398 20,971 22,057<br />
Depreciation<br />
Leasehold improvements 41 61 - -<br />
Computer equipment and point of sale<br />
equipment 820 781 536 387<br />
Shop fitouts 5,160 9,820 - -<br />
Plant and machinery 375 168 357 141<br />
Office equipment and furniture and fittings 2,397 2,531 842 1,103<br />
8,793 13,361 1,735 1,631<br />
Amortisation<br />
Trademarks 209 196 - -<br />
Software 2,408 1,500 2,408 1,475<br />
2,617 1,696 2,408 1,475<br />
Audit fees<br />
Statutory audit 235 216 165 138<br />
235 216 165 138<br />
4 NON-RECURRING EXPENSES<br />
(A) REORGANISATION OF UNITED STATES OPERATIONS<br />
On 29 June 2009 the Company announced a reorganisation in the United States of its<br />
35 retail stores operated by a wholly owned United States registered subsidiary company,<br />
<strong>Pumpkin</strong> <strong>Patch</strong> LLC.<br />
Under the reorganisation plan <strong>Pumpkin</strong> <strong>Patch</strong> LLC made the decision to close 15 stores<br />
in July 2009. All 15 stores were closed in July and August 2009 and <strong>Pumpkin</strong> <strong>Patch</strong> LLC<br />
renegotiated the leases on the remaining 20 stores which continue to trade uninterrupted<br />
and under normal course of business.<br />
The reorganisation was conducted utilising Chapter 11 of the United States Bankruptcy<br />
Code which provides certain legal protections while businesses implement reorganisations<br />
of the nature undertaken by <strong>Pumpkin</strong> <strong>Patch</strong> LLC. A hearing was held on 27 May 2010<br />
in the United States Bankruptcy Court in Delaware, during which the reorganisation plan<br />
was approved. The plan was effected on 16 August 2010 at which point notice was given<br />
to all outstanding creditors, resulting in <strong>Pumpkin</strong> <strong>Patch</strong> LLC exiting from Chapter 11<br />
on that date.<br />
An accrual for costs totalling $39,900,000 was reflected in the Group financial statements<br />
in the 2009 financial year. This accrual consisted of costs relating to the writing off<br />
and impairment of all fixed assets at the United States stores, inventory revaluation,<br />
employee entitlements, legal and professional costs, and other costs directly related to the<br />
reorganisation. No further costs relating to the restructuring of <strong>Pumpkin</strong> <strong>Patch</strong> LLC were<br />
incurred in the 2010 financial year nor are expected to be incurred in future periods.<br />
Financial information relating to the discontinued operation for the 2009 financial year is<br />
set out in section (C) below. Further information is set out in note 5 - segment information.<br />
(B) IMPAIRMENT OF URBAN ANGEL AND UNITED KINGDOM STORES<br />
In July 2009, management reviewed the performance of all stores. As a result of this<br />
review, management identified that the assets of a number of the CompanyÕs stores in<br />
the United Kingdom, as well all its stand-alone Urban Angel stores in New Zealand were<br />
impaired, based upon below par performance during the 2009 financial year with no sign<br />
of any improvement in the short to medium term. Accordingly, an impairment charge was<br />
recorded in the 2009 financial statements totalling $6,540,000, of which $6,377,000<br />
related to the United Kingdom stores and $163,000 related to the stand-alone Urban<br />
Angel stores. Refer to point (D) below.<br />
A review of store performance during the 2010 financial year did not identify any<br />
indicators of impairment, thus no impairment charge has been recorded in the current year.<br />
20<br />
years<br />
young<br />
57
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
4 NON-RECURRING EXPENSES continued<br />
(C) SUMMARY OF DISCONTINUED ACTIVITIES<br />
Consolidated - Year ended Parent - Year ended<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Revenue - US discontinued stores - 16,261 - -<br />
Operating Expenses - US discontinued stores - (21,751) - -<br />
(Loss) from US discontinued operating activities - (5,490) - -<br />
Impairment of assets of discontinued stores - (12,098) - -<br />
Inventory write down - (15,019) - -<br />
Other expenses - (2,546) - -<br />
Income tax credit - 6,652 - -<br />
(Loss) from discontinued operations - (28,501) - -<br />
Loss before income tax includes the following<br />
specific expenses:<br />
Rental and operating lease expenses - (4,119) - -<br />
Salaries and wages - (4,087) - -<br />
Impairment of store assets - (12,098) - -<br />
Depreciation - Computer and point of sale<br />
equipment - (50) - -<br />
Depreciation - Shop fitouts - (1,395) - -<br />
Depreciation - Office equipment and furniture<br />
& fittings - (337) - -<br />
Cash flow from discontinued activities:<br />
Cash flow from operating activities - (4,202) - -<br />
Net increase/(decrease) in cash generated<br />
by discontinued activities - (4,202) - -<br />
5 SEGMENT INFORMATION<br />
Management has determined the operating segments based on the <strong>report</strong>s reviewed by the<br />
Board of Directors that are used to make strategic decisions.<br />
The Board considers the business from both a geographic and distribution perspective.<br />
Geographically, the Board considers the performance of retail operations in New Zealand,<br />
Australia, the UK and the US, while the performance of the Wholesale and Direct business<br />
is assessed as a whole.<br />
The following is an analysis of the GroupÕs revenue and results by operating segment.<br />
Revenue <strong>report</strong>ed below represents revenue generated from external customers. There were<br />
no inter-segment sales in the year (2009:nil).<br />
The accounting policies of the <strong>report</strong>able segments are the same as the GroupÕs accounting<br />
policies described in note 2.<br />
Segment profit represents the profit earned by each segment without allocation of central<br />
administration costs, finance costs and income tax expense.<br />
(D) SUMMARY OF NON-RECURRING EXPENSES<br />
Impairment of continuing stores - United States - (10,247) - -<br />
Impairment of continuing stores - United Kingdom - (6,377) - -<br />
Impairment of continuing stores - Urban Angel - (163) - -<br />
Impairment of investment in subsidiary - - - (20,307)<br />
Total Impairment - (16,787) - (20,307)<br />
20<br />
years<br />
young<br />
59
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
5 SEGMENT INFORMATION continued<br />
Australia<br />
Retail<br />
New<br />
Zealand<br />
Retail<br />
United<br />
Kingdom<br />
Retail<br />
United<br />
States Wholesale<br />
Retail & Direct<br />
Head<br />
Office<br />
Group<br />
2010 $Õ000 $Õ000 $Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
Total revenue 198,276 58,908 52,455 19,138 53,217 204 382,198<br />
Total segment result before<br />
non-recurring expenses 38,705 11,310 (885) (2,685) 13,708 (22,393) 37,760<br />
Non-recurring expenses (note 4) - - - - - - -<br />
Total segment result before<br />
income tax 38,705 11,310 (885) (2,685) 13,708 (22,393) 37,760<br />
Income tax - - - - - (12,258) (12,258)<br />
Profit for the year 38,705 11,310 (885) (2,685) 13,708 (34,651) 25,502<br />
Segment total assets 57,986 19,567 26,199 6,030 21,449 47,358 178,589<br />
Segment non-current assets 23,664 5,546 8,787 270 - 34,984 73,251<br />
Acquisitions of property, plant and<br />
equipment, intangibles and other<br />
non-current segment assets 6,757 1,311 1,368 - 70 5,512 15,018<br />
Depreciation and amortisation<br />
expense 4,229 1,045 1,482 - 47 4,607 11,410<br />
Interest expense - - - - - 2,549 2,549<br />
2009<br />
Total revenue 203,426 64,357 59,200 22,825 62,540 197 412,545<br />
Total segment result before<br />
non-recurring expenses 38,469 11,125 (4,962) (9,289) 16,583 (24,543) 27,383<br />
Non-recurring expenses (note 4) - (163) (6,377) (10,247) - - (16,787)<br />
Total segment result before<br />
income tax 38,469 10,962 (11,339) (19,536) 16,583 (24,543) 10,596<br />
Income tax (note 6) - - - - - (8,834) (8,834)<br />
(Loss) from discontinuing operations<br />
net of tax (note 4) - - - - - - (28,501)<br />
(Loss) for the year - - - - - - (26,739)<br />
Segment total assets 57,348 18,504 31,921 9,412 18,373 52,631 188,189<br />
Segment non-current assets 23,144 6,248 9,988 - 73 32,280 71,733<br />
Acquisitions of property, plant and<br />
equipment, intangibles and other<br />
non-current segment assets 3,686 719 1,708 583 73 4,961 11,730<br />
Depreciation and amortisation<br />
expense 4,833 1,312 3,262 2,323 32 3,295 15,057<br />
Interest expense - - - - - 5,144 5,144<br />
The GroupÕs liabilities are not analysed on a segmental basis and therefore have not been <strong>report</strong>ed.<br />
6 INCOME TAX EXPENSE/(CREDIT)<br />
Consolidated - Year ended Parent - Year ended<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
(A) INCOME TAX EXPENSE/(CREDIT<br />
Current tax expense/(credit) 5,403 17,858 (1,405) 363<br />
Prior period adjustment 210 31 93 1,025<br />
Deferred tax (note 13) 6,371 629 240 116<br />
Tax impact on equity - (9,835) - -<br />
Foreign tax credits not utilised 21 151 - -<br />
Effect of change in tax rate 3 - (92) -<br />
Adjustment for removal of building depreciation 250 - 250 -<br />
12,258 8,834 (914) 1,504<br />
(B) NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE<br />
Profit before income tax expense 37,760 10,596 20,904 (19,556)<br />
Tax at other jurisdictions tax rate of 30%<br />
(2009 - 30%) 11,328 3,179 6,273 (5,867)<br />
Adjustments to taxation for:<br />
Non-assessable income - (1,143) (7,438) (38)<br />
Non-deductible expenses 446 1,628 - 6,384<br />
Non-deductible impairment charge - 4,988 - -<br />
Prior period adjustment 210 31 93 1,025<br />
Foreign tax credits not utilised 21 151 - -<br />
Effect of change in tax rate from 30% to 28% 3 - (92) -<br />
Adjustment for removal of building<br />
depreciation 250 - 250 -<br />
Income tax expense/(credit) 12,258 8,834 (914) 1,504<br />
During the year, as a result of the change in the NZ corporate tax rate from 30% to 28% which was<br />
enacted on 27 May 2010 and which will be effective from 1 June 2011, the relevant deferred tax<br />
balances have been remeasured. Deferred tax expected to reverse in the year to 31 May 2012 or<br />
later has been measured using the effective rate that will apply for that period, being 28%.<br />
(C) UNRECOGNISED TAX LOSSES<br />
The Group has estimated tax losses to carry forward from:<br />
- <strong>Pumpkin</strong> <strong>Patch</strong> Limited (UK) of GBP 146,000 (NZD 314,000) (2009: GBP 1,002,000; NZD<br />
2,532,000) which can be carried forward indefinitely to be offset against future profits; and<br />
- <strong>Pumpkin</strong> <strong>Patch</strong> LLC USD 16,302,000 (NZD 22,424,000) (2009: USD 15,426,000; NZD<br />
23,617,000) which expire between 2026 and 2030.<br />
The Group operates in a number of tax jurisdictions where the tax rates range from<br />
28% - 34% (2009: 28% - 34%).<br />
20<br />
years<br />
young<br />
61
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
7 CASH AND CASH EQUIVALENTS<br />
Consolidated at Parent at<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Cash at bank - NZD balances 6,718 12,357 10 3<br />
Cash on hand 227 206 21 35<br />
6,945 12,563 31 38<br />
The carrying amount for cash and cash equivalents equals the fair value.<br />
8 TRADE AND OTHER RECEIVABLES<br />
Consolidated at Parent at<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Trade receivables 10,590 12,052 2 2<br />
Amounts owed from subsidiaries - - 165,450 126,780<br />
Prepayments 8,111 6,306 1,023 1,005<br />
Sales tax receivable 40 - - -<br />
Employee share scheme receivable 203 215 203 215<br />
Other receivables 1,783 986 158 631<br />
20,727 19,559 166,836 128,633<br />
The carrying amounts of the GroupÕs and Parent entityÕs trade and other receivables are<br />
denominated in the following currencies:<br />
NZD 4,413 3,182 138,211 99,183<br />
USD 9,617 10,781 24,788 23,377<br />
AUD 1,616 1,500 - -<br />
GBP 5,081 4,096 3,837 6,073<br />
20,727 19,559 166,836 128,633<br />
As at 31 July 2010, trade receivables of $48,000 (2009: $149,000) were between 90<br />
and 120 days past due but not considered doubtful. These relate to a number of accounts<br />
for which there is no recent history of default. All other balances are considered current.<br />
The maximum exposure to credit risk at the <strong>report</strong>ing date is the fair value of receivables<br />
mentioned above. The Group does not hold any collateral as security. No trade receivables<br />
are considered impaired at 31 July 2010 (2009: $nil) and no provision for doubtful debts has<br />
been made (2009: $nil).<br />
Carrying amounts of trade receivables are equivalent to their fair value.<br />
9 INVENTORIES<br />
Consolidated at Parent at<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Work in progress 174 705 - -<br />
Finished Goods - at cost 71,181 79,505 - -<br />
71,355 80,210 - -<br />
Inventory provisions of $390,000 (2009: $224,000) have been provided for at year end<br />
for stock obsolescence.<br />
10 DERIVATIVE FINANCIAL INSTRUMENTS<br />
31 July 2010 31 July 2009<br />
Assets Liabilities Assets Liabilities<br />
Consolidated at $Õ000 $Õ000 $Õ000 $Õ000<br />
Current<br />
Foreign currency forward exchange contracts 4,930 (15,696) 4,069 (10,022)<br />
Foreign currency option contracts - - 54 -<br />
Interest rate swaps - - - (387)<br />
Non current<br />
Foreign currency forward exchange contracts 2,555 (9,854) 2,662 (13,313)<br />
7,485 (25,550) 6,785 (23,722)<br />
The above table shows the GroupÕs financial derivative holdings at year end. The Parent<br />
does not enter into any financial derivatives.<br />
The Group hedge accounts for all foreign exchange forward contractÕs, and all fair value<br />
movements in these contracts are recorded in a cash flow hedge reserve.<br />
At 31 July 2009 the Group had also entered into one foreign exchange option and<br />
one interest rate swap, for which the Group does not hedge account and all fair value<br />
movements in these financial derivatives are recorded in the Income Statement. The Group<br />
held no foreign exchange options or interest rate swaps at 31 July 2010.<br />
Refer to note 2(N) for information on the calculation of fair values.<br />
Credit risk<br />
The GroupÕs exposure to credit risk from derivative financial instruments is limited because<br />
it does not expect non-performance of the obligation contained therein due to the credit<br />
rating of the financial institutions concerned.<br />
20<br />
years<br />
young<br />
63
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
11 PROPERTY, PLANT AND EQUIPMENT<br />
Leasehold<br />
improvements<br />
Shop fitout<br />
Computer<br />
equipment and<br />
POS<br />
Consolidated $Õ000 $Õ000 $Õ000<br />
Year ended 31 July 2010<br />
Opening net book amount 155 34,059 4,833<br />
Exchange differences (7) (1,167) (27)<br />
Additions - 5,297 1,340<br />
Disposals - - -<br />
Depreciation charge (41) (5,160) (820)<br />
Closing net book amount 107 33,029 5,326<br />
Office equipment<br />
and F&F<br />
Plant and<br />
machinery<br />
Land<br />
Total<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
7,709 2,195 3,348 52,299<br />
(142) - - (1,343)<br />
4,594 - - 11,231<br />
- (298) - (298)<br />
(2,397) (375) - (8,793)<br />
9,764 1,522 3,348 53,096<br />
At 31 July 2010<br />
Cost 1,406 112,286 8,851<br />
Accumulated depreciation (1,299) (79,257) (3,525)<br />
Net book amount 107 33,029 5,326<br />
23,615 6,338 3,348 155,844<br />
(13,851) (4,816) - (102,748 )<br />
9,764 1,522 3,348 53,096<br />
At 01 August 2008<br />
Cost 1,799 119,631 13,342<br />
Accumulated depreciation (1,481) (53,405) (7,783)<br />
Net book amount 318 66,226 5,559<br />
19,624 7,019 3,144 164,559<br />
(8,165) (4,315) - (75,149)<br />
11,459 2,704 3,144 89,410<br />
Year ended 31 July 2009<br />
Opening net book amount 318 66,226 5,559<br />
Exchange differences (104) (190) (34)<br />
Additions 6 4,655 523<br />
Disposals (4) - (66)<br />
Impairment charge recognised in profit & loss - (25,417) (319)<br />
Depreciation charge (61) (11,215) (830)<br />
Closing net book amount 155 34,059 4,833<br />
11,459 2,704 3,144 89,410<br />
(50) - - (378)<br />
3,482 (340) 204 8,530<br />
(1,165) - - (1,235)<br />
(3,148) (1) - (28,885)<br />
(2,869) (168) - (15,143)<br />
7,709 2,195 3,348 52,299<br />
At 31 July 2009<br />
Cost 1,555 115,191 13,575<br />
Accumulated depreciation (1,400) (81,132) (8,742)<br />
Net book amount 155 34,059 4,833<br />
20,863 6,673 3,348 161,205<br />
(13,154) (4,478) - (108,906)<br />
7,709 2,195 3,348 52,299<br />
20<br />
years<br />
young<br />
65
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
11 PROPERTY, PLANT AND EQUIPMENT continued<br />
Computer<br />
equipment<br />
and POS<br />
Office<br />
equipment<br />
and F&F<br />
Plant and<br />
machinery<br />
Parent $Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
Year ended 31 July 2010<br />
Opening net book amount 4,030 3,299 1,916 3,348 12,593<br />
Additions 1,109 365 - - 1,474<br />
Disposals - - (306) - (306)<br />
Depreciation charge (536) (842) (357) - (1,735)<br />
Closing net book amount 4,603 2,822 1,253 3,348 12,026<br />
At 31 July 2010<br />
Cost 8,851 6,401 5,585 3,348 24,185<br />
Accumulated depreciation (4,248) (3,579) (4,332) - (12,159)<br />
Net book amount 4,603 2,822 1,253 3,348 12,026<br />
At 01 August 2008<br />
Cost 7,388 4,995 6,228 3,144 21,755<br />
Accumulated depreciation (3,324) (1,634) (3,834) - (8,792)<br />
Net book amount 4,064 3,361 2,394 3,144 12,963<br />
Year ended 31 July 2009<br />
Opening net book amount 4,064 3,361 2,394 3,144 12,963<br />
Additions 353 1,041 - 204 1,598<br />
Disposals - - (337) - (337)<br />
Depreciation charge (387) (1,103) (141) - (1,631)<br />
Closing net book amount 4,030 3,299 1,916 3,348 12,593<br />
At 31 July 2009<br />
Cost 7,742 6,036 5,891 3,348 23,017<br />
Accumulated depreciation (3,712) (2,737) (3,975) - (10,424)<br />
Net book amount 4,030 3,299 1,916 3,348 12,593<br />
Land<br />
Total<br />
12 INTANGIBLE ASSETS<br />
Trademarks Software Total<br />
Consolidated $Õ000 $Õ000 $Õ000<br />
Year ended 31 July 2010<br />
Opening net book amount 610 6,656 7,266<br />
Exchange differences - (1) (1)<br />
Additions 163 3,624 3,787<br />
Disposals - - -<br />
Amortisation charge (209) (2,408) (2,617)<br />
Closing net book amount 564 7,871 8,435<br />
At 31 July 2010<br />
Cost 1,544 15,735 17,279<br />
Accumulated amortisation (980) (7,864) (8,844)<br />
Net book amount 564 7,871 8,435<br />
At 01 August 2008<br />
Cost 1,230 8,637 9,867<br />
Accumulated amortisation (573) (3,972) (4,545)<br />
Net book amount 657 4,665 5,322<br />
Year ended 31 July 2009<br />
Opening net book amount 657 4,665 5,322<br />
Exchange differences - 7 7<br />
Additions 149 3,488 3,637<br />
Disposals - (4) (4)<br />
Amortisation charge (196) (1,500) (1,696)<br />
Closing net book amount 610 6,656 7,266<br />
At 31 July 2009<br />
Cost 1,381 12,117 13,498<br />
Accumulated amortisation (771) (5,461) (6,232)<br />
Net book amount 610 6,656 7,266<br />
20<br />
years<br />
young<br />
67
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
12 INTANGIBLE ASSETS continued<br />
Software<br />
Total<br />
Parent $Õ000 $Õ000<br />
Year ended 31 July 2010<br />
Opening net book amount 6,653 6,653<br />
Additions 3,624 3,624<br />
Amortisation charge (2,408) (2,408)<br />
Closing net book amount 7,869 7,869<br />
At 31 July 2010<br />
Cost 15,597 15,597<br />
Accumulated amortisation (7,728) (7,728)<br />
Net book amount 7,869 7,869<br />
At 01 August 2008<br />
Cost 8,498 8,498<br />
Accumulated amortisation (3,845) (3,845)<br />
Net book amount 4,653 4,653<br />
Year ended 31 July 2009<br />
Opening net book amount 4,653 4,653<br />
Additions 3,475 3,475<br />
Amortisation charge (1,475) (1,475)<br />
Closing net book amount 6,653 6,653<br />
At 31 July 2009<br />
Cost 11,974 11,974<br />
Accumulated amortisation (5,321) (5,321)<br />
Net book amount 6,653 6,653<br />
13 DEFERRED TAX ASSETS/ (LIABILITIES)<br />
Consolidated at Parent at<br />
31 July<br />
2010<br />
31 July<br />
2009<br />
31 July<br />
2010<br />
31 July<br />
2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
The balance comprises temporary differences<br />
attributable to:<br />
Amounts recognised in the income statement:<br />
Employee benefits 1,610 1,449 621 630<br />
Non-deductible provisions 3,041 3,524 306 60<br />
Property, plant and equipment (1,354) (416) (1,742) (988)<br />
Trade and other receivables (86) - (81) -<br />
Derivatives 5,419 5,081 - -<br />
Other Items 534 (136) - (81)<br />
Impact of tax rate change (3) - 92 -<br />
Total deferred asset/(liability) 9,161 9,502 (804) (379)<br />
Movements:<br />
Opening balance at 1 August 9,502 8,430 (379) (199)<br />
Credited (charged) to the income statement<br />
relating to continuing operations (note 6) (6,371) (629) (240) (116)<br />
Credited (charged) to the income statement<br />
relating to discontinued operations - 2,628 - -<br />
Credited (charged) to equity 5,319 - - -<br />
Prior year adjustment 964 (927) (27) (64)<br />
Impact of tax rate change (3) - 92 -<br />
Adjustment for removal of building depreciation (250) - (250) -<br />
Closing balance at 31 July 9,161 9,502 (804) (379)<br />
Deferred income tax assets are recognised for provisions, financial derivatives and fixed<br />
assets to the extent that the realisation of the related tax benefit through future taxable<br />
profit is deemed to be probable.<br />
The majority of the deferred income tax balances are expected to be settled in the next<br />
12 months.<br />
20<br />
years<br />
young<br />
69
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
14 INVESTMENTS IN SUBSIDIARIES<br />
The consolidated financial statements incorporate the assets, liabilities and results of the<br />
following significant subsidiaries in accordance with the accounting policy described in<br />
note 2(B):<br />
Name of entity Principal Activity Country of<br />
incorporation<br />
Torquay Enterprise Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Originals Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> (Australia) Pty Limited<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Limited<br />
Investment<br />
company<br />
Clothing retailer<br />
and wholesaler<br />
Holding/admin<br />
company<br />
Clothing retailer<br />
and wholesaler<br />
Equity<br />
holding<br />
2010 2009<br />
% %<br />
New Zealand 100 100<br />
New Zealand 100 100<br />
Australia 100 100<br />
United Kingdom 100 100<br />
<strong>Pumpkin</strong> <strong>Patch</strong> LLC * Clothing retailer United States 100 100<br />
15 TRADE AND OTHER PAYABLES<br />
Consolidated at Parent at<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Trade payables 12,972 7,471 549 984<br />
Amounts due to subsidiaries - - 207,221 179,867<br />
Sundry accruals 12,206 19,202 2,293 1,402<br />
Sales tax payable - 898 519 856<br />
Employee benefits 6,475 6,484 2,388 2,422<br />
31,653 34,055 212,970 185,531<br />
The carrying amounts of the GroupÕs and Parent entityÕs trade and other payables are<br />
denominated in the following currencies:<br />
NZD 10,769 4,576 212,896 185,531<br />
USD 9,800 10,538 - -<br />
AUD 7,942 14,778 74 -<br />
GBP 3,142 4,163 - -<br />
31,653 34,055 212,970 185,531<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Wholesale LLC<br />
Clothing<br />
wholesaler<br />
United States 100 100<br />
The fair value of trade and other payables approximates their carrying value.<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Direct Limited Clothing retailer New Zealand 100 100<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Ireland Limited # Clothing retailer Ireland 100 -<br />
* During the 2009 financial year the investment in <strong>Pumpkin</strong> <strong>Patch</strong> LLC was fully impaired.<br />
Refer to note 4 for further details.<br />
# <strong>Pumpkin</strong> <strong>Patch</strong> Ireland was incorporated as a subsidiary of <strong>Pumpkin</strong> <strong>Patch</strong> Limited in<br />
June 2010, however, it had not commenced trading as at 31 July 2010.<br />
All subsidiary entities have a balance date of 31 July and are audited by<br />
PricewaterhouseCoopers.<br />
Parent at<br />
31 July 2010 31 July 2009<br />
$Õ000 $Õ000<br />
Investment in subsidiaries 58,189 58,189<br />
20<br />
years<br />
young<br />
71
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
16 INTEREST BEARING LIABILITIES<br />
Consolidated at Parent at<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Current interest bearing liabilities<br />
Bank overdrafts - - 28 319<br />
Bank loans 25,000 10,000 - -<br />
Total current interest bearing<br />
liabilities 25,000 10,000 28 319<br />
Non-current interest bearing<br />
liabilities<br />
Bank loans 8,000 21,000 - -<br />
Total non current interest bearing<br />
liabilities 8,000 21,000 - -<br />
Total interest bearing borrowings 33,000 31,000 28 319<br />
17 IMPUTATION CREDIT ACCOUNT<br />
Through shareholding in parent company<br />
31 July 2010 31 July 2009<br />
$Õ000 $Õ000<br />
Imputation credit account 4,161 5,178<br />
Movements:<br />
Balance at beginning of year 5,178 409<br />
Tax payments, net of refunds 4,959 9,417<br />
Credits attached to dividend distributions (5,976) (4,648)<br />
4,161 5,178<br />
The Parent is part of an imputation credit group, therefore the above note details the<br />
imputation credits available to the Group and ultimately to the shareholders of the<br />
parent company.<br />
The bank loans are provided under the terms of an ANZ National Bank Limited Revolving<br />
Advances Facility Agreement dated 24 June 2009. The bank facilities outlined in this<br />
agreement expire in December 2011.<br />
The Company draws down on its bank facility as required via short-term loans which are<br />
required to be disclosed under current liabilities for external financial <strong>report</strong>ing purposes.<br />
These borrowings have been aged in accordance with the repayment terms of the<br />
facilities. At year end the weighted average interest rate is 4.60% (2009: 4.04%).<br />
As at 31 July 2010, the Group had $49,000,000 of unused lines of credit<br />
(2009: $67,000,000).<br />
The fair value of interest bearing liabilities approximates their carrying value.<br />
SECURITY<br />
The Company has guaranteed, together with subsidiary companies, the indebtedness<br />
of <strong>Pumpkin</strong> <strong>Patch</strong> Limited and subsidiaries at 31 July 2010, together with, in all cases,<br />
interest thereon under a cross guarantee deed dated 18 April 1996 and a guarantee and<br />
indemnity dated 11 July 2005. At 31 July 2010 the total indebtedness guaranteed by the<br />
deed amounted to $32,950,000 (2009: $28,165,000).<br />
Included in this are other guarantees held by the ANZ National Bank Limited of:<br />
- Rent guarantees to certain landlords amount to $2,112,000 (2009: $2,863,000);<br />
- Guarantees provided to the UK Customs Department, amounting to $1,614,000 (2009:<br />
$1,062,000); &<br />
- A guarantee of $75,000 (2009: $75,000) to the NZX.<br />
20<br />
years<br />
young<br />
73
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
18 SHARE CAPITAL<br />
Consolidated Parent<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Opening balance of issued and<br />
paid up capital 58,431 58,802 58,431 58,802<br />
Issues of ordinary shares during the year - - - -<br />
Exercise of options - 752 - 752<br />
Shares held as Treasury stock (33) (453) - -<br />
Shares bought back on market<br />
and cancelled - (1,123) - (1,123)<br />
58,398 57,978 58,431 58,431<br />
31 July 2010 31 July 2009<br />
Shares Shares<br />
Opening balance of ordinary<br />
shares issued 166,814,799 167,350,000<br />
Issues of ordinary shares during the year<br />
Exercise of options - 508,000<br />
Shares bought back on market<br />
and cancelled - (1,043,201)<br />
Closing balance of ordinary<br />
shares issued 166,814,799 166,814,799<br />
(A) ORDINARY SHARES<br />
As at 31 July 2010 there were 166,814,799 ordinary shares on issue<br />
(2009: 166,814,799). All ordinary shares are fully paid and rank equally with one<br />
vote attaching to each share.<br />
(B) TREASURY STOCK<br />
As at 31 July 2010 there were 34,142 shares (2009: 482,309) which have been issued<br />
under the DF7 (Income Tax Act 1994) Scheme but at balance date, have not been<br />
allocated to employees. The shares are held in trust by <strong>Pumpkin</strong> <strong>Patch</strong> Nominees Limited.<br />
The terms of the Trust Deed between the Company and the Trustee gives the Company<br />
the right to appoint trustees and to benefit from any surplus funds held by the Trust.<br />
Therefore the Company has consolidated the DF7 Scheme as an in substance subsidiary<br />
and as such has recognised unallocated DF7 Scheme shares as Treasury Stock. The value<br />
of the balance of Treasury Stock as at 31 July 2010 is $32,000 (2009: $453,000).<br />
(C) EMPLOYEE SHARE SCHEME<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Nominees Limited acts as a Trustee for the CompanyÕs employee share<br />
purchase plans. The Company advanced the Trustee an interest free loan to enable it to<br />
purchase the shares issued to it for the plans. The Company has agreed that the Trustee is,<br />
in turn, entitled to novate a portion of that loan to individual employees to assist them to<br />
purchase shares under the plans.<br />
At regular intervals the Trustee offers shares to those permanent employees of the Company<br />
with in excess of six months continuous service. The shares are offered at a discount to<br />
market price. Employees purchasing shares are provided financial assistance on an interest<br />
free basis, repayable in regular instalments. Dividends paid on allocated shares during the<br />
qualifying period are paid to employees.<br />
New Zealand Plan<br />
Shares are offered to employees in accordance with section DF7 of the New Zealand<br />
Income Tax Act 1994 to a maximum consideration of $2,340 per employee in any three<br />
year period. The qualifying period between grant and vesting dates is a minimum of three<br />
years. If an employee leaves the Company before the three year qualifying period ends<br />
the shares are repurchased by the Trustee at the lesser of the market price or the price at<br />
which the shares were offered.<br />
Australian Plan<br />
In September 2005 the Group introduced a share purchase plan for Australian employees.<br />
The Australian plan mirrors the New Zealand plan to the extent that it has been possible<br />
to comply with Australian legislation requirements. The main differences between the two<br />
plans are:<br />
- the maximum consideration is set at AU $780 per employee in any 12 month period<br />
- an employee who leaves the Company before the 12 month period ends is entitled to<br />
retain the shares after repaying the loan.<br />
United Kingdom Plan<br />
In September 2005 the Group introduced a share purchase plan for United Kingdom<br />
employees. The United Kingdom plan mirrors the New Zealand plan to the extent that<br />
it has been possible to comply with United Kingdom legislation requirements. The main<br />
differences between the two plans are:<br />
- the scheme is managed by an independent United Kingdom registered trustee company<br />
- shares are purchased by the trustee company at the end of the 12 month vesting period,<br />
at the lower of the market share price at either the beginning or the end of the 12 month<br />
vesting period<br />
- no loan is provided to employees to help purchase shares<br />
- an employee who leaves the Company before a three year vesting period ends is<br />
entitled to retain any shares that have been bought on their behalf by the trustee<br />
company.<br />
20<br />
years<br />
young<br />
75
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
18 SHARE CAPITAL continued<br />
(D) SHARE BUY-BACK<br />
The company did not repurchase any of its own ordinary shares during the 2010 financial year.<br />
During the 2009 financial year the company purchased and cancelled 1,043,201<br />
ordinary shares on market in December 2008. The shares were acquired at an average<br />
price of $1.08 per share, with prices ranging from $0.96 to $1.08. The total cost of<br />
$1,123,000 was deducted from shareholder equity.<br />
Average<br />
Date<br />
Shares<br />
repurchased<br />
purchase<br />
price<br />
2 December 2008 1,000,000 1.08<br />
19 December 2008 43,201 0.96<br />
(E) PARTLY PAID SHARES<br />
As at 31 July 2010 there were 2,335,000 (2009: 1,100,000) partly paid shares on issue.<br />
Partly paid redeemable shares are offered to selected senior executives at market value,<br />
who are initially required to pay 1 cent per share to participate in the scheme. Partly paid<br />
shares are held by a Trust for the benefit of the employees until they are fully paid. The<br />
trustee will exercise voting rights, and vote as directed by the Board, whilst the shares are<br />
held by the Trust. Employees are entitled to participate in any dividend pro rata to the<br />
extent the share is paid up. Legal title of the shares is not transferred to the participating<br />
employees until the shares are fully paid. Employees can request shares to be transferred<br />
by the holder three years after the date of issue, and lapse after five years if not exercised,<br />
as long as the market price of the ordinary shares is equal or greater than the benchmark<br />
performance target specified by the Board.<br />
19 SHARE BASED PAYMENTS<br />
(A) EMPLOYEE OPTION PLAN<br />
The Company operates a share Option Plan for selected senior employees, including<br />
Executive Directors, under the following terms.<br />
Options may be exercised in part or in full by the holder three years after the date of issue,<br />
and lapse after five years if not exercised, as long as the market price of the ordinary<br />
shares is equal or greater than the benchmark price. Each option entitles the holder to<br />
one ordinary share in the capital of the Company. The exercise price is determined by the<br />
Board but is based on the volume weighted average selling price of the CompanyÕs shares<br />
traded on the NZX during the 10 working days prior to issue date. Payment must be made<br />
in full for all options exercised on the dates they are exercised.<br />
During the financial year the Company issued 956,000 (2009: 1,025,000) options, of<br />
which none (2009: nil) were issued to Executive Directors. The fair value of the total options<br />
issued is estimated at $490,000 (2009:$287,000) under the binomial option-pricing<br />
valuation model using the following assumptions:<br />
Risk free interest rate - 5.6% (2009:5.6%)<br />
Expected dividend yield - 4.9% (2009: 4.5%)<br />
Expected share volatility - 30% to 40% (2009: 25% to 35%)<br />
The expected price volatility is derived by analysing the historical volatility over a recent<br />
historical period similar to the term of the option.<br />
The estimated fair value for each tranche of options issued is amortised over the vesting<br />
period of three years, from the grant date. The Company has recognised a compensatory<br />
expense in the income statement of $146,000 (2009: $1,579,000)<br />
which represents this amortisation.<br />
Set out below are summaries of options granted under the plan:<br />
Grant<br />
Date<br />
Expiry<br />
date<br />
Exercise<br />
price<br />
Balance at<br />
start of the<br />
year<br />
Granted<br />
during the<br />
year<br />
Exercised<br />
during the<br />
year<br />
Expired/<br />
Lapsed<br />
during the<br />
year<br />
Balance at Exercisable<br />
end of the at end of the<br />
year year<br />
000 000 000 000 000 $000<br />
June<br />
2005<br />
9 June<br />
2010 2.75 1,958 - - (1,958) - -<br />
June<br />
2006<br />
9 June<br />
2011 4.14 1,859 - - (91) 1,768 7,320<br />
June<br />
2007<br />
9 June<br />
2012 3.33 2,308 - - (535) 1,773 5,904<br />
June<br />
2008<br />
9 June<br />
2013 1.59 971 - - (134) 837 -<br />
June<br />
2009<br />
9 June<br />
2014 1.30 - 956 - (30) 926 -<br />
Total 7,096 956 - (2,748) 5,304 13,224<br />
Weighted average exercise price 3.14 1.30 - 2.84 2.97 -<br />
20<br />
years<br />
young<br />
77
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
19 SHARE BASED PAYMENTS continued<br />
(B) PARTLY PAID SHARE SCHEME<br />
The Company operates a Partly Paid Share Scheme for selected senior employees,<br />
including Executive Directors, under the following terms.<br />
Partly paid redeemable shares are offered to selected senior executives at market value,<br />
who are initially required to pay 1 cent per share to participate in the scheme. Partly paid<br />
shares are held by a Trust for the benefit of the employees until they are fully paid. The<br />
trustee will exercise voting rights, and vote as directed by the Board, whilst the shares are<br />
held by the Trust. Employees are entitled to participate in any dividend pro rata to the<br />
extent the share is paid up. Legal title of the shares is not transferred to the participating<br />
employees until the shares are fully paid. Employees can request shares to be transferred<br />
by the holder three years after the date of issue, and lapse after five years if not exercised,<br />
as long as the market price of the ordinary shares is equal or greater than the benchmark<br />
performance target specified by the Board.<br />
During the financial year the Company issued 1,235,000 (2009: 1,100,000) partly<br />
paid redeemable shares, of which 500,000 (2009: 375,000) were issued to Executive<br />
Directors. The total fair value of the Partly paid shares issued is estimated at $395,000<br />
(2009: $363,000) under the binomial option-pricing valuation model using the following<br />
assumptions:<br />
Risk free interest rate -5.3% (2009: 6.4%)<br />
Expected dividend yield - 4.9% (2009: 4.5%)<br />
Expected share volatility - 30% to 40% (2009: 30% to 40%)<br />
The expected price volatility is derived by analysing the historical volatility over a recent<br />
historical period similar to the term of the scheme.<br />
The estimated fair value for each tranche of the partly paid shares issued is amortised<br />
over the vesting period of three years from the grant date. The Company has recognised<br />
a compensatory expense in the Income Statement of $286,000 (2009: $112,000) which<br />
represents this amortisation.<br />
Set out below are summaries of partly paid redeemable shares granted under the plan:<br />
Grant<br />
Date<br />
June<br />
2008<br />
June<br />
2009<br />
Expiry<br />
date<br />
Exercise<br />
price<br />
Balance at<br />
start of the<br />
year<br />
Expired/<br />
Lapsed<br />
during the<br />
year<br />
Granted<br />
during the<br />
Exercised<br />
during the<br />
Balance at Exercisable<br />
end of the at end of the<br />
year year<br />
year year<br />
000s 000s 000s 000s 000s $000<br />
23 June<br />
2013 1.59 1,100 - - - 1,100 -<br />
23 June<br />
2014 1.30 - 1,235 - - 1,235 -<br />
Total 1,100 1,235 - - 2,335 -<br />
Weighted average exercise price 1.59 1.30 - - 1.44 -<br />
20 RESERVES AND RETAINED EARNINGS<br />
Consolidated Parent<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
(A) RESERVES<br />
Hedging reserve - cash flow hedges (12,642) (11,622) - -<br />
Share based payments reserve 5,830 5,399 5,830 5,399<br />
Foreign currency translation reserve (1,088) 5,044 - -<br />
Foreign currency portfolio restructure reserve 6,356 18,328 - -<br />
(1,544) 17,149 5,830 5,399<br />
Hedging reserve - cash flow hedges<br />
Balance 1 August (11,622) (16,243) - -<br />
Revaluation - gross (7,469) (2,170) - -<br />
Deferred tax 2,922 (2,094) - -<br />
Transfer to net profit - gross (4,653) 3,488 - -<br />
Transfer to inventory - gross 8,180 5,397 - -<br />
Balance 31 July (12,642) (11,622) - -<br />
Share based payments reserve<br />
Balance 1 August 5,399 3,823 5,399 3,823<br />
Option expense 431 1,691 416 1,290<br />
Transfer from Group company - - 15 401<br />
Transfer to share capital (options exercised) - (115) - (115)<br />
Balance 31 July 5,830 5,399 5,830 5,399<br />
Foreign currency translation reserve<br />
Balance 1 August 5,044 - - -<br />
Translation differences arising during the year (6,132) 5,044 - -<br />
Balance 31 July (1,088) 5,044 - -<br />
Foreign currency portfolio restructure reserve<br />
Balance 1 August 18,328 -<br />
Mark to market gains realised - 25,339<br />
Recognised in Income Statement (net of tax) (11,972) (7,011)<br />
Balance 31 July 6,356 18,328<br />
(i) Hedging reserve - cash flow hedges<br />
The hedging reserve is used to record gains or losses on a hedging instrument in a cash<br />
flow hedge that are recognised directly in equity, as described in note 2(N). Amounts are<br />
recognised in the Income Statement when the associated hedged transaction affects the<br />
Income Statement.<br />
20<br />
years<br />
young<br />
79
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
20 RESERVES & RETAINED EARNINGS continued<br />
(ii) Share based payments reserve<br />
The share based payments reserve is used to recognise the fair value of instruments issued<br />
but not exercised.<br />
(iii) Foreign currency translation reserve<br />
Exchange differences arising on translation of the foreign controlled entity are taken to the<br />
foreign currency translation reserve, as described in note 2(D). The reserve is recognised in<br />
the Income Statement when the net investment is disposed of.<br />
21 DIVIDENDS<br />
Interim dividend for the period ended<br />
31 January 2010<br />
Final dividend for the period ended<br />
31 July 2009<br />
Consolidated and Parent - Year ended<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
Cents per<br />
share<br />
Cents per<br />
share $Õ000 $Õ000<br />
4.50 - 7,537 -<br />
4.50 - 7,503 -<br />
(iv) Foreign currency portfolio restructure reserve<br />
The foreign currency portfolio restructure reserve is used to record the mark-to-market gains<br />
realised from the realignment of the GroupÕs foreign currency forward cover during the<br />
2009 financial year. Amounts are recognised in the Income Statement in the period in<br />
which the original foreign currency contract was due to mature.<br />
Interim dividend for the period ended<br />
31 January 2009<br />
Final dividend for the period ended<br />
31 July 2008<br />
- 3.00 - 4,980<br />
- 3.50 - 5,868<br />
Total dividends provided for or paid 9.00 6.50 15,040 10,848<br />
(B) RETAINED EARNINGS/ (DEFICIT)<br />
Consolidated at Parent at<br />
31 July 2010 31 July 2009 31 July 2010 31 July 2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
All dividends paid were fully imputed. Supplementary dividends of $460,000 (2009:<br />
$354,000) were paid to shareholders not tax resident in New Zealand for which the<br />
Group received a foreign <strong>investor</strong> tax credit entitlement.<br />
Balance 1 August 13,551 51,138 (35,558) (3,650)<br />
Net profit/(loss) for the year 25,502 (26,739) 21,818 (21,060)<br />
Dividends (15,040) (10,848) (15,040) (10,848)<br />
Balance 31 July 24,013 13,551 (28,780) (35,558)<br />
20<br />
years<br />
young<br />
81
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
22 EARNINGS PER SHARE<br />
Consolidated -Year ended<br />
31 July 2010 31 July 2009<br />
(A) BASIC EARNINGS PER SHARE<br />
(i) Group<br />
Profit/(loss) attributable to the ordinary equity holders of the company<br />
($Õ000) 25,502 (26,739)<br />
Weighted average number of ordinary shares on issue (thousands) 166,815 167,082<br />
Basic earnings per share (cents) 15.3 (16.0)<br />
(ii) Continuing operations<br />
Profit/(loss) from continuing operations attributable to the ordinary<br />
equity holders of the company ($Õ000) 25,502 1,762<br />
Weighted average number of ordinary shares on issue (thousands) 166,815 167,082<br />
Basic earnings per share (cents) 15.3 1.1<br />
(iii) Discontinuing operations<br />
Profit/(loss) from discontinuing operations attributable to the ordinary<br />
equity holders of the company ($Õ000) - (28,501)<br />
Weighted average number of ordinary shares on issue (thousands) 166,815 167,082<br />
Basic earnings per share (cents) - (17.1)<br />
(B) DILUTED EARNINGS PER SHARE<br />
(i) Group<br />
Profit/(loss) attributable to the ordinary equity holders of the company<br />
($Õ000) 25,502 (26,739)<br />
Weighted average number of ordinary shares on issue adjusted for<br />
share options issued but not exercised (thousands) 167,719 167,082<br />
Diluted earnings per share (cents) 15.2 (16.0)<br />
(ii) Continuing operations<br />
Profit/(loss) from continuing operations attributable to the ordinary<br />
equity holders of the company ($Õ000) 25,502 1,762<br />
Weighted average number of ordinary shares on issue adjusted for<br />
share options issued but not exercised (thousands) 167,719 167,082<br />
Diluted earnings per share (cents) 15.2 1.1<br />
(iii) Discontinuing operations<br />
Profit/(loss) from discontinuing operations attributable to the ordinary<br />
equity holders of the company ($Õ000) - (28,501)<br />
Weighted average number of ordinary shares on issue adjusted for<br />
share options issued but not exercised (thousands) 167,719 167,082<br />
Diluted earnings per share (cents) - (17.1)<br />
Basic earnings per share is calculated by dividing the profit by the weighted average<br />
number of ordinary shares on issue during the year.<br />
Diluted earnings per shares is calculated by dividing the profit by the weighted average<br />
number of ordinary shares on issue during the year adjusted to assume conversion of<br />
dilutive potential of ordinary shares as a result of the issue of share options. Where the<br />
market price is lower that the exercise price of the option, there is no effect on diluted<br />
earnings per share.<br />
23 RELATED PARTY TRANSACTIONS<br />
(A) SUBSIDIARIES<br />
Interests in subsidiaries are set out in note 14.<br />
During the year the Company advanced and repaid loans to its subsidiaries by way of<br />
internal current accounts. In presenting the financial statements of the Group, the effect of<br />
transactions and balances between fellow subsidiaries and those with the parent have<br />
been eliminated. All transactions with related parties were in the normal course of business<br />
and provided on commercial terms.<br />
Material transactions between the Company and its subsidiaries were:<br />
Management fees charged by the Company to the subsidiaries during the financial year<br />
were $47,839,000 (2009: $40,894,000).<br />
Interest charges of $7,402,000 (2009: nil). Inter-group loans are repayable on demand<br />
and attract an interest rate equivalent to that of the LIBOR rate plus 3.25% (2009: nil).<br />
Dividends of $25,161,000 were received by the Company from Torquay Enterprises<br />
Limited during the financial year (2009: $Nil)<br />
The Company incurs logistics and group administration and management costs. These<br />
costs are recharged to subsidiaries in the form of management fees. Subsidiary companies<br />
account for these costs based on the functional nature of the expenses.<br />
Refer also to note 16 for the related party guarantees.<br />
(B) OTHER TRANSACTIONS WITH KEY MANAGEMENT OR ENTITIES RELATED TO THEM<br />
In addition the Group undertook transactions with Directors and their related interests as<br />
detailed below:<br />
The Group paid rent of $67,000 (2009: $59,000) to The Dickens Street Partnership which<br />
is 66% owned by the Opito Family Trust, a shareholder in <strong>Pumpkin</strong> <strong>Patch</strong> Limited. The Opito<br />
Family Trust is associated with Sally Synnott, a Director in <strong>Pumpkin</strong> <strong>Patch</strong> Limited. The<br />
balance owed to The Dickens Street Partnership at 31 July 2010 was nil (2009: nil).<br />
The Group has made purchases of shop fixtures and fittings from Espies Shopfitters during<br />
the year of $2,769,000 (2009: $2,091,000). Espies Shopfitters is 59.6% (2009: 49.5%)<br />
beneficially owned by Kezza Family Trust a shareholder of <strong>Pumpkin</strong> <strong>Patch</strong> Limited. Kezza<br />
Family Trust is associated with Maurice Prendergast, a Director in <strong>Pumpkin</strong> <strong>Patch</strong> Limited.<br />
The balance owed to Espies Shopfitters at 31 July 2010 was $67,000 (2009: $180,000).<br />
20<br />
years<br />
young<br />
83
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
23 RELATED PARTY TRANSACTIONS continued<br />
(C) KEY MANAGEMENT AND DIRECTOR COMPENSATION<br />
Key management personnel compensation for the years ended 31 July 2010 and 31 July<br />
2009 is set out below. The key management personnel comprise certain members of<br />
the executive team (including both executive and non-executive directors) who have the<br />
greatest authority for the strategic direction and management of the company.<br />
The amount paid by the Group and the Parent were consistent for both 2010 and 2009.<br />
Directors<br />
fees<br />
Salaries and<br />
other short<br />
term employee<br />
benefits<br />
Cash<br />
based<br />
incentive<br />
issued<br />
Fair Value<br />
of share<br />
instruments<br />
issued<br />
Total<br />
$Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
2010 381 1,789 1,010 248 3,428<br />
2009 321 1,842 - 214 2,377<br />
During the 2009 financial year, no cash based incentive payments were made.<br />
(D) BALANCES OUTSTANDING BETWEEN THE COMPANY AND ITS SUBSIDIARIES<br />
Parent at<br />
31 July 2010 31 July 2009<br />
$Õ000 $Õ000<br />
Amounts due from subsidiaries 165,450 126,780<br />
Amounts due to subsidiaries (207,221) (179,867)<br />
(41,771) (53,087)<br />
24 RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET<br />
CASH INFLOW FROM OPERATING ACTIVITIES<br />
Consolidated - Year ended Parent - Year ended<br />
31 July<br />
2010<br />
31 July<br />
2009<br />
31 July<br />
2010<br />
31 July<br />
2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Profit/(loss) after tax for the year 25,502 (26,739) 21,818 (21,060)<br />
Add (deduct) non-cash items:<br />
Depreciation 8,793 15,143 1,735 1,631<br />
Amortisation of intangibles 2,617 1,696 2,408 1,475<br />
Share based payments expense 431 1,576 431 1,290<br />
Revaluation of derivative financial<br />
instruments 108 (1,255) - -<br />
Fit out contributions amortised (2,205) (3,159) - (100)<br />
(Increase)/decrease in deferred taxation 342 8,895 425 (7,269)<br />
Writedown of investment in subsidiary<br />
company - - - 20,307<br />
Impairment of continuing stores - 16,787 - -<br />
Non-cash items discontinuing operations - 17,345 - -<br />
Foreign currency portfolio restructure<br />
reserve amortisation (11,972) - - -<br />
Add/(less) movements in working<br />
capital items:<br />
(Increase)/decrease in receivables and<br />
prepayments (2,548) 894 (34,140) 275<br />
(Increase)/decrease in inventories 2,722 25,804 - -<br />
Increase/(decrease) in payables and<br />
provisions (2,989) 3,590 27,439 1,580<br />
(Increase)/decrease in related party<br />
balances - - - 17,672<br />
Net cash inflow from operating activities 20,801 60,577 20,116 15,801<br />
20<br />
years<br />
young<br />
85
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
25 FINANCIAL RISK MANAGEMENT<br />
The GroupÕs activities expose it to a variety of financial risks: market risk (including currency<br />
risk and interest rate risk), credit risk and liquidity risk. The GroupÕs overall risk management<br />
programme focuses on the unpredictability of financial markets and seeks to minimise<br />
potential adverse effects on the financial performance of the Group. The Group uses<br />
derivative financial instruments such as foreign exchange contracts and options and interest<br />
rate swaps to manage certain risk exposures. Derivatives are exclusively used for economic<br />
hedging purposes (ie not as trading or other speculative instruments), however not all<br />
derivative financial instruments qualify for hedge accounting.<br />
Risk management is carried out based on policies approved by the Board of Directors. The<br />
Group treasury policy provides written principles for overall risk management, as well as<br />
policies covering specific areas, such as foreign exchange risk. The Parent is not directly<br />
exposed to any significant financial risk.<br />
(iii) Summarised sensitivity analysis<br />
The following table summarises the sensitivity of the GroupÕs financial assets and financial<br />
liabilities to interest rate risk and foreign exchange risk.<br />
A sensitivity of 10% for foreign exchange risk has been selected. Despite the recent volatility<br />
in the currency markets over the past 12 months, an overall sensitivity of 10% is considered<br />
to be reasonable based upon the exchange rate volatility observed on a historic basis for<br />
the preceding five year period and market expectation for potential future movements.<br />
A sensitivity of 1% has been selected for interest rate risk. The 1% sensitivity is based on<br />
reasonably possible changes over a financial year, using the observed range of historical<br />
data for the preceding five year period.<br />
Amounts are shown net of income tax. All variables other than applicable interest rates and<br />
exchange rates are held constant.<br />
(A) MARKET RISK<br />
(i) Foreign exchange risk<br />
The Group operates internationally and is exposed to foreign exchange risk arising from<br />
various currency exposures, primarily with respect to the United States dollar, the British<br />
pound and Australian dollar.<br />
The purpose of the GroupÕs foreign currency risk management activities is to protect the<br />
Group from exchange rate volatility with respect to the New Zealand dollar net cash<br />
movements resulting from the sale of products in foreign currencies to foreign customers and<br />
the purchase of products and raw materials in foreign currencies from foreign suppliers.<br />
The Group enters into foreign currency option contracts and forward foreign currency<br />
contracts within policy parameters to manage risk associated with anticipated sales or<br />
costs denominated principally in United States dollars, British pounds and the Australian<br />
dollar. The terms of the foreign currency option contracts and the forward foreign currency<br />
contracts do not exceed three years. These anticipated sales or costs qualify as highly<br />
probable forecasts for hedge accounting purposes.<br />
Refer to note 10 which shows the forward foreign exchange contracts and options held<br />
by the Group as derivative financial instruments at balance date. A sensitivity analysis of<br />
foreign exchange rate risk on the GroupÕs financial assets and liabilities is provided in the<br />
table below.<br />
(ii) Cash flow and fair value interest rate risk<br />
The GroupÕs main interest rate risk arises from floating rate borrowings drawn down under<br />
bank debt facilities. When deemed appropriate, the Group manages floating interest rate<br />
risk by using floating to fixed interest rate swaps. Interest rate swaps have the economic<br />
effect of converting borrowings from floating to fixed rates.<br />
Refer to note 10 for notional principal amounts and valuations of interest rate swaps<br />
outstanding at balance date. A sensitivity analysis of interest rate risk on the GroupÕs<br />
financial assets and liabilities is provided in the table below. Refer to Note 16 for further<br />
details of the GroupÕs borrowings.<br />
20<br />
years<br />
young<br />
87
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
25 FINANCIAL RISK MANAGEMENT continued<br />
Interest rate risk<br />
Foreign exchange risk<br />
-1% +1% -10% +10%<br />
Carrying<br />
amount Profit Equity Profit Equity Profit Equity Profit Equity<br />
Consolidated sensitivity analysis $Õ000 $Õ000 $Õ000 $Õ000 $Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
31 July 2010<br />
Financial assets<br />
Cash and cash equivalents 6,945 (9) - 9 - 725 - (654) -<br />
Trade receivables 10,590 - - - - 1,219 - (896) -<br />
Sales tax receivable 40 - - - - (41) - 33 -<br />
Employee share scheme<br />
receivable 203 - - - - - - - -<br />
Other receivables 1,783 - - - - 49 - (40) -<br />
Derivative financial instruments 7,485 - - - - - (29,507) - 24,186<br />
Financial liabilities<br />
Trade payables 12,972 - - - - (1,209) - 989 -<br />
Employee benefits 6,475 - - - - (369) - 302 -<br />
Interest bearing liabilities 33,000 330 - (330) - - - - -<br />
Derivative financial instruments 25,550 - - - - - 20,334 - (16,500)<br />
321 - (321) - 374 (9,173) (266) 7,686<br />
31 July 2009<br />
Financial assets<br />
Cash and cash equivalents 12,563 (37) - 37 - 992 - (811) -<br />
Trade receivables 12,052 - - - - 1,331 - (1,089) -<br />
Employee share scheme<br />
receivable 215 - - - - - - - -<br />
Other receivables 986 - - - - 25 - (21) -<br />
Derivative financial instruments 6,785 - - - - 211 (3,889) (48) 3,169<br />
Financial liabilities<br />
Trade payables 7,471 - - - - (545) - 446 -<br />
Sales tax payable 898 - - - - (183) - 149 -<br />
Employee benefits 6,484 - - - - (374) - 306 -<br />
Interest bearing liabilities 31,000 310 - (310) - - - - -<br />
Derivative financial instruments 23,722 (75) - 73 - - (598) - 613<br />
198 - (200) - 1,457 (4,487) (1,068) 3,782<br />
Foreign exchange risk<br />
-10% +10%<br />
Carrying<br />
amount Profit Equity Profit Equity<br />
Parent sensitivity analysis $Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
31 July 2010<br />
Financial assets<br />
Cash and cash equivalents 31 1 - (1) -<br />
Trade Receivables 2 - - - -<br />
Amounts owed from subsidiaries 165,450 3,181 - (2,602) -<br />
Employee share scheme receivable 203 - - - -<br />
Other receivables 158 - - - -<br />
Financial liabilities<br />
Trade payables 549 - - - -<br />
Amounts owed to subsidiaries 207,221 - - - -<br />
Sales tax payable 519 - - - -<br />
Employee benefits 2,388 - - - -<br />
Interest bearing liabilities 28 - - - -<br />
3,182 - (2,603) -<br />
31 July 2009<br />
Financial assets<br />
Cash and cash equivalents 38 - - - -<br />
Trade Receivables 2 - - - -<br />
Amounts owed from subsidiaries 126,780 3,272 - (2,677) -<br />
Employee share scheme receivable 215 - - - -<br />
Other receivables 631 - - - -<br />
Financial liabilities<br />
Trade payables 984 - - - -<br />
Amounts owed to subsidiaries 179,867 - - - -<br />
Sales tax payable 856 - - - -<br />
Employee benefits 2,422 - - - -<br />
Interest bearing liabilities 319 - - - -<br />
3,272 - (2,677) -<br />
The Parent is not sensitive to any interest rate risk, nor is it sensitive to foreign exchange risk<br />
on amounts owed to its subsidiaries.<br />
20<br />
years<br />
young<br />
89
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
25 FINANCIAL RISK MANAGEMENT continued<br />
(B) CREDIT RISK<br />
Credit risk is managed on a Group basis and refers to the risk of a counterparty failing to<br />
discharge an obligation. In the normal course of business, the Group incurs credit risk from<br />
trade receivables and transactions with financial institutions. The Group places its cash,<br />
short-term deposits and derivative financial instruments with only high credit quality financial<br />
institutions. Sales to retail customers are required to be settled in cash or using major credit<br />
cards, mitigating credit risk. Trade receivables arising from wholesale arrangements are<br />
individually reviewed regularly for impairment as part of normal operating procedures<br />
and provided for where appropriate. Overdue amounts that have not been provided for<br />
relate to customers that have no recent history of default. Less than 9.2% (2009: 10.4%) of<br />
<strong>report</strong>ed sales give rise to trade receivables. The top five wholesale customers account for<br />
54% (2009: 84%) of the trade receivables balance. Refer also to note 8 for further details.<br />
(C) LIQUIDITY RISK<br />
Prudent liquidity risk management implies maintaining sufficient cash and the availability<br />
of funding through an adequate amount of committed credit facilities. Due to the dynamic<br />
nature of the underlying businesses, Management aims at maintaining flexibility in funding<br />
by keeping committed credit lines available.<br />
Management monitors rolling forecasts of the GroupÕs liquidity reserve on the basis of<br />
expected cash flow. Bank facilities are provided under the terms of an ANZ National Bank<br />
Limited Revolving Advances Facility Agreement dated 24 June 2009. The bank facilities<br />
outlined in this agreement expire in December 2011. The Company draws down on its<br />
bank facility as required via short-term loans which are required to be disclosed under<br />
current liabilities for external financial <strong>report</strong>ing purposes. For details of available facilities,<br />
refer note 16 for further details.<br />
The table below analyses the GroupÕs financial liabilities into relevant maturity groupings<br />
based on the remaining period at the <strong>report</strong>ing date to the contractual maturity date. The<br />
amounts disclosed in the table are the contractual undiscounted cash flows.<br />
Less than<br />
1 year<br />
Between 1<br />
& 2 years<br />
Between 2<br />
& 5 years Total<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Consolidated maturity analysis<br />
31 July 2010<br />
Trade payables 12,932 - - 12,932<br />
Employee benefits 6,475 - - 6,475<br />
Interest bearing liabilities 26,507 8,413 - 34,920<br />
Derivative financial instruments 15,696 9,854 - 25,550<br />
Guarantees issued 3,801 - - 3,801<br />
65,411 18,267 - 83,678<br />
31 July 2009<br />
Trade payables 7,471 - - 7,471<br />
Sales tax payable 898 - - 898<br />
Employee benefits 6,484 - - 6,484<br />
Interest bearing liabilities 10,178 - 21,000 31,178<br />
Derivative financial instruments 10,409 13,313 - 23,722<br />
Guarantees issued 4,000 - - 4,000<br />
39,440 13,313 21,000 73,753<br />
Parent maturity analysis<br />
31 July 2010<br />
Trade payables 549 - - 549<br />
Amounts due to subsidiaries 207,221 - - 207,221<br />
Sales tax payable 519 - - 519<br />
Employee benefits 2,388 - - 2,388<br />
Interest bearing liabilities 28 - - 28<br />
Guarantees issued 3,801 - - 3,801<br />
214,506 - - 214,506<br />
31 July 2009<br />
Trade payables 984 - - 984<br />
Amounts due to subsidiaries 179,867 - - 179,867<br />
Sales tax payable 856 - - 856<br />
Employee benefits 2,422 - - 2,422<br />
Interest bearing liabilities 319 - - 319<br />
Guarantees issued 4,000 - - 4,000<br />
188,448 - - 188,448<br />
20<br />
years<br />
young<br />
91
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
25 FINANCIAL RISK MANAGEMENT continued<br />
The Group enters into forward exchange contracts to manage the risks associated with<br />
foreign currency denominated sales and also manage the purchase of foreign currency<br />
denominated products.<br />
The table below analyses the GroupÕs derivative financial instruments that will be settled on<br />
a gross or net basis into relevant maturity groupings based on the remaining period at the<br />
balance sheet to the contractual maturity date. The amounts disclosed in the table are the<br />
contractual undiscounted cash flows. They are expected to occur and affect profit or loss<br />
at various dates between balance date and the following five years.<br />
Less than<br />
1 year<br />
Between 1<br />
& 2 years<br />
Between 2<br />
& 5 years<br />
Over<br />
5 years<br />
Consolidated $Õ000 $Õ000 $Õ000 $Õ000<br />
At 31 July 2010<br />
Forward foreign exchange contracts -<br />
cash flow hedges<br />
inflow 137,567 88,329 63,426 -<br />
outflow (108,732) (71,041) (30,061) -<br />
At 31 July 2009<br />
Forward foreign exchange contracts -<br />
cash flow hedges<br />
inflow 86,805 75,157 43,828 -<br />
outflow (66,782) (66,683) (41,238) -<br />
Net settled derivatives -<br />
interest rate swaps<br />
net outflow (476) - - -<br />
(D) FAIR VALUE ESTIMATION<br />
Effective for <strong>annual</strong> periods beginning on or after 1 January 2009, the group adopted the<br />
amendment to NZ IFRS 7 for financial instruments that are measured in the balance sheet<br />
at fair value, this requires disclosure of fair value measurements by level of the following fair<br />
value measurement hierarchy:<br />
Level 1<br />
Quoted prices (unadjusted) in active markets for identical assets or liabilities.<br />
Level 2<br />
Inputs other than quoted prices included within level 1 that are observable for the asset or<br />
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).<br />
Level 3<br />
Inputs for the asset or liability that are not based on observable market data (that is,<br />
unobservable inputs) (level 3).<br />
The following table presents the groupÕs assets and liabilities that are measured at fair<br />
value. The parent company did not have any assets or liabilities measured at fair value<br />
(2009: nil)<br />
Level 1 Level 2 Level 3 Total balance<br />
Consolidated $Õ000 $Õ000 $Õ000 $Õ000<br />
At 31 July 2010<br />
Assets<br />
Derivatives used for hedging - 7,485 - 7,485<br />
- 7,485 - 7,485<br />
Liabilities<br />
Derivatives used for hedging - 25,550 - 25,550<br />
- 25,550 - 25,550<br />
At 31 July 2009<br />
Assets<br />
Derivatives used for hedging - 6,785 - 6,785<br />
- 6,785 - 6,785<br />
Liabilities<br />
Derivatives used for hedging - 23,722 - 23,722<br />
- 23,722 - 23,722<br />
Level 2<br />
The fair value of financial instruments that are not traded in an active market (for example,<br />
over-the-counter derivatives) is determined by using valuation techniques. These valuation<br />
techniques maximise the use of observable market data where it is available and rely as<br />
little as possible on entity specific estimates. If all significant inputs required to fair value an<br />
instrument are observable, the instrument is included in level 2.<br />
20<br />
years<br />
young<br />
93
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
25 FINANCIAL RISK MANAGEMENT continued<br />
(E) FINANCIAL INSTRUMENTS BY CATEGORY<br />
Fair value Derivatives Measured at<br />
Loans and<br />
receivables<br />
through<br />
profit or loss<br />
used for<br />
hedging<br />
amortised<br />
cost Total<br />
Consolidated $Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
At 31 July 2010<br />
Cash and cash equivalents 6,945 - - - 6,945<br />
Trade receivables 10,590 - - - 10,590<br />
Employee share scheme receivable 203 - - - 203<br />
Other receivables 1,783 - - - 1,783<br />
Derivative financial instrument assets - - 7,485 - 7,485<br />
Trade payables - - - (12,972) (12,972)<br />
Employee benefits - - - (6,475) (6,475)<br />
Interest bearing liabilities - - - (33,000) (33,000)<br />
Derivative financial instrument liabilities - - (25,550) - (25,550)<br />
19,521 - (18,065) (52,447) (50,991)<br />
At 31 July 2009<br />
Cash and cash equivalents 12,563 - - - 12,563<br />
Trade receivables 12,052 - - - 12,052<br />
Employee share scheme receivable 215 - - - 215<br />
Other receivables 986 - - - 986<br />
Derivative financial instrument assets - 55 6,730 - 6,785<br />
Trade payables - - - (7,471) (7,471)<br />
Sales tax payable - - - (898) (898)<br />
Employee benefits - - - (6,484) (6,484)<br />
Interest bearing liabilities - - - (31,000) (31,000)<br />
Derivative financial instrument liabilities - (387) (23,335) - (23,722)<br />
25,816 (332) (16,605) (45,853) (36,974)<br />
The accounting policies for financial instruments have been applied to the line items above.<br />
Loans and<br />
receivables<br />
Fair value<br />
through<br />
profit or loss<br />
Derivatives Measured at<br />
used for<br />
hedging<br />
amortised<br />
cost Total<br />
Parent $Õ000 $Õ000 $Õ000 $Õ000 $Õ000<br />
At 31 July 2010<br />
Cash and cash equivalents 31 - - - 31<br />
Trade receivables 2 - - - 2<br />
Amounts owed from subsidiaries 165,450 - - - 165,450<br />
Employee share scheme receivable 203 - - - 203<br />
Other receivables 158 - - - 158<br />
Trade payables - - - (549) (549)<br />
Amounts due to subsidiaries - - - (207,221) (207,221)<br />
Sales tax payable - - - (519) (519)<br />
Employee benefits - - - (2,388) (2,388)<br />
Interest bearing liabilities - - - (28) (28)<br />
165,844 - - (210,705) (44,861)<br />
At 31 July 2009<br />
Cash and cash equivalents 38 - - - 38<br />
Trade receivables 2 - - - 2<br />
Amounts owed from subsidiaries 126,780 - - - 126,780<br />
Employee share scheme receivable 215 - - - 215<br />
Other receivables 631 - - - 631<br />
Trade payables - - - (984) (984)<br />
Amounts due to subsidiaries - - - (179,867) (179,867)<br />
Sales tax payable - - - (856) (856)<br />
Employee benefits - - - (2,422) (2,422)<br />
Interest bearing liabilities - - - (319) (319)<br />
127,666 - - (184,448) (56,782)<br />
The accounting policies for financial instruments have been applied to the line items above.<br />
20<br />
years<br />
young<br />
95
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
PUMPKIN PATCH LIMITED & SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS 31 JULY 2010<br />
25 FINANCIAL RISK MANAGEMENT continued<br />
(F) CAPITAL RISK MANAGEMENT<br />
The main objective of capital risk management is to ensure the Group operates as a going<br />
concern, meets debts as they fall due, maintains the best possible capital structure, and<br />
reduces the cost of capital. Group capital is regarded as equity as shown in the balance<br />
sheet. This quantifies capital as reference to the balance sheet. To maintain or alter the<br />
capital structure the Board has the ability to review the size of the dividends paid to<br />
shareholders, return capital or issue new shares, reduce or increase debt or sell assets.<br />
There are a number of external bank covenants in place relating to debt facilities. These<br />
covenants are calculated monthly and <strong>report</strong>ed to the bank quarterly. The principal<br />
convenants relating to capital management are the earnings before interest and taxation<br />
(EBIT) fixed cover charge ratio and the cashflow gearing ratio. There have been no<br />
breaches of these covenants for the current or prior period.<br />
27 CONTINGENCIES<br />
As at 31 July 2010 the parent entity and Group had no contingent liabilities or assets<br />
(2009:$Nil).<br />
28 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE<br />
- On 16 August 2010, the approved reorganisation plan for <strong>Pumpkin</strong> <strong>Patch</strong> LLC was<br />
effected resulting in notice being given to all outstanding creditors. <strong>Pumpkin</strong> <strong>Patch</strong> LLC<br />
exited from Chapter 11 status on this date.<br />
- On 21 September 2010 the Directors resolved to provide for a final dividend to be paid<br />
in respect of the year ended 31 July 2010. The dividend will be paid at a rate of 5.0<br />
cents per share (2009: 4.50 cents per share) on issue as at 7 October 2010, with full<br />
imputation credits attached.<br />
26 COMMITMENTS<br />
The Group has commitments for future capital expenditure at 31 July 2010 of $2.8 million<br />
(2009: $0.5 million).<br />
The Group leases various retail outlets under non-cancellable operating lease agreements.<br />
The leases reflect normal commercial arrangements with varying terms, escalation clauses<br />
and renewal rights.<br />
Consolidated at Parent at<br />
31 July<br />
2010<br />
31 July<br />
2009<br />
31 July<br />
2010<br />
31 July<br />
2009<br />
$Õ000 $Õ000 $Õ000 $Õ000<br />
Commitments for minimum lease payments in relation to non-cancellable operating leases<br />
are payable as follows:<br />
Within one year 49,961 57,397 2,775 2,795<br />
Later than one year but not later<br />
than five years 110,526 117,347 10,843 11,293<br />
Later than five years 36,532 40,959 17,415 20,794<br />
197,019 215,703 31,033 34,882<br />
20<br />
years<br />
young<br />
97
PricewaterhouseCoopers<br />
188 Quay Street<br />
Private Bag 92162<br />
Auckland, New Zealand<br />
Telephone +64 9 355 8000<br />
Facsimile +64 9 355 8001<br />
www.pwc.com/nz<br />
AuditorsÕ Report<br />
To the shareholders of <strong>Pumpkin</strong> <strong>Patch</strong> Limited<br />
We have audited the financial statements on pages 38 to 97. The financial statements provide information about<br />
the past financial performance and cash flows of the Company and Group for the year ended 31 July 2010 and<br />
their financial position as at that date. This information is stated in accordance with the accounting policies set<br />
out on pages 44 to 55.<br />
This <strong>report</strong> is made solely to the CompanyÕs shareholders, as a body, in accordance with Section 205 (1) of the<br />
Companies Act 1993. Our audit has been undertaken so that we might state to the CompanyÕs shareholders<br />
those matters we are required to state to them in an auditorsÕ <strong>report</strong> and for no other purpose. To the fullest extent<br />
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the CompanyÕs<br />
shareholders, as a body, for our audit work, for this <strong>report</strong> or for the opinion we have formed.<br />
DirectorsÕ Responsibilities<br />
The CompanyÕs Directors are responsible for the preparation and presentation of the financial statements which<br />
give a true and fair view of the financial position of the Company and Group as at 31 July 2010 and their financial<br />
performance and cash flows for the year ended on that date.<br />
We have no <strong>relations</strong>hip with or interests in the Company or any of its subsidiaries other than in our capacity as<br />
auditors.<br />
Unqualified Opinion<br />
We have obtained all the information and explanations we have required.<br />
In our opinion:<br />
(a) proper accounting records have been kept by the Company as far as appears from our examination of those<br />
records; and<br />
(b) the financial statements on pages 38 to 97:<br />
(i) comply with generally accepted accounting practice in New Zealand;<br />
(ii) comply with International Financial Reporting Standards; and<br />
(iii) give a true and fair view of the financial position of the Company and Group as at 31 July 2010 and<br />
their financial performance and cash flows for the year ended on that date.<br />
Our audit was completed on 22 September 2010 and our unqualified opinion is expressed as at that date.<br />
AuditorsÕ Responsibilities<br />
We are responsible for expressing an independent opinion on the financial statements presented by the Directors<br />
and <strong>report</strong>ing our opinion to you.<br />
Basis of Opinion<br />
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial<br />
statements. It also includes assessing:<br />
Chartered Accountants<br />
Auckland<br />
(a) the significant estimates and judgements made by the Directors in the preparation of the financial statements;<br />
and<br />
(b) whether the accounting policies are appropriate to the circumstances of the Company and Group, consistently<br />
applied and adequately disclosed.<br />
We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We<br />
planned and performed our audit so as to obtain all the information and explanations which we considered<br />
necessary to provide us with sufficient evidence to give reasonable assurance that the financial statements are<br />
free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the<br />
overall adequacy of the presentation of information in the financial statements.<br />
99
SHAREHOLDER INFORMATION<br />
FOR THE YEAR ENDED 31 JULY 2010<br />
size of holdings number of holders % number of shares %<br />
1 - 1,000 1,891 30.08 1,213,374 0.73<br />
1001 - 5,000 2,862 45.53 8,038,676 4.82<br />
5,001 - 10,000 890 14.16 6,813,753 4.08<br />
10,001 - 100,000 590 9.39 14,934,914 8.95<br />
Over 100,000 53 0.84 135,934,082 81.43<br />
6,286 100.00 166,934,799 100.00<br />
The details set out above were as at 31 August 2010.<br />
PRINCIPAL SHAREHOLDERS<br />
The names and holdings of the twenty largest registered shareholders as at<br />
31 August 2010 were:<br />
Ordinary Shares %<br />
New Zealand Central Securities Depository Limited 38,945,342 23.22<br />
Nigel P Smith and Wynyard Wood Trustee Services Limited 20,000,000 11.98<br />
JBWERE (NZ) Nominees Limited (45230 a/c) 16,791,181 10.06<br />
JBWERE (NZ) Nominees Limited (31098 a/c) 15,700,000 9.40<br />
Maurice J Prendergast, Kerry D Prendergast and Stuart G Callender 10,620,000 6.36<br />
SUBSTANTIAL SECURITY HOLDERS<br />
Pursuant to Section 26 of the Securities Markets Act 1988, the following<br />
substantial security holders at 31 August 2010 were as follows:<br />
Ordinary Shares<br />
Setar A Motani (notice dated 16 June 2006) 20,000,000<br />
Janet Heather Cameron (notice dated 29 April 2010) 16,086,181<br />
Rodney Adrian Duke and Alaister John Wall<br />
(notice dated 11 June 2008)<br />
15,700,000<br />
ING NZ Limited (notice dated 30 November 2009) 13,479,304<br />
Maurice J Prendergast and Kerry D Prendergast<br />
(notice dated 29 June 2010)<br />
Fisher Funds Management Limited<br />
(notice dated 10 June 2008)<br />
Mark J Synnott and Sally R Synnott<br />
(notice dated 19 October 2010)<br />
10,620,000<br />
10,073,400<br />
9,506,800<br />
Mark J Synnott, Sally R Synnott and The Gale Trustee Company Limited 9,500,000 5.69<br />
JBWERE (NZ) Nominees Limited (43331 a/c) 6,000,000 3.59<br />
Gregory J Muir, Debra J Muir and Geoffrey A Lawrie 1,461,900 0.88<br />
FNZ Custodians Limited 1,342,304 0.80<br />
Bruce M Walkley, Deborah F Walkley, Nigel P Smith 1,200,000 0.72<br />
<strong>Pumpkin</strong> <strong>Patch</strong> Nominees Limited 857,217 0.51<br />
Christine Conyngham 813,510 0.49<br />
Investment Custodial Services Limited 781,142 0.47<br />
Custodial Services Limited (3 a/c) 759,469 0.45<br />
Joanna Hickman, John A Callaghan, Kevin J Hickman and John W Ryder 720,000 0.43<br />
Brendon Thomas, Katrina Thomas, and John Turrall 635,000 0.38<br />
NZPT Custodians (Grosvenor) Limited 536,575 0.32<br />
Adrastea Limited 511,168 0.31<br />
Kay Gillard 510,289 0.31<br />
JBWERE (NZ) Nominees Limited (31100 a/c) 500,000 0.30<br />
20<br />
years<br />
young<br />
101
CORPORATE DIRECTORY<br />
Registered Office<br />
439 East Tamaki Road<br />
Auckland<br />
New Zealand<br />
Contact Details<br />
Private Bag 94 310<br />
Pakuranga<br />
Auckland<br />
New Zealand<br />
Phone: +64 9 274 7088<br />
Facsimile: +64 9 274 1122<br />
Website: www.pumpkinpatch.co.nz<br />
Investor Relations<br />
E-mail: <strong>investor</strong>@pumpkinpatch.co.nz<br />
Website: www.pumpkinpatch.biz<br />
EXECUTIVE TEAM<br />
Maurice Prendergast ..................................... Chief Executive Officer<br />
Chris Cardwell .................................... General Manager – Property<br />
Chrissy Conyngham ........... Group General Manager/Design Director<br />
Neil Cowie ...............................................Chief Operating Officer<br />
Dominique De Give .......................... General Manager – Wholesale<br />
Brian De Gregory ................... General Manager – Human Resources<br />
Glenys Hoffman...............................General Manager – Operations<br />
Bronny Jacobsen ........................... General Manager – Merchandise<br />
Kate Tattersfield................................. General Manager – Marketing<br />
Zarina Thesing ................ General Manager – Information Technology<br />
Bruce Walkley ........................................ General Manager – Direct<br />
Matthew Washington .......Chief Financial Officer/Company Secretary<br />
Share Registrar<br />
Link Market Services Limited<br />
PO Box 384<br />
Ashburton<br />
New Zealand<br />
Phone: +64 3 308 8887<br />
Facsimile: +64 3 308 1311<br />
Solicitors<br />
Simpson Grierson<br />
Private Bag 92 518<br />
Shortland Street<br />
Auckland<br />
New Zealand<br />
Auditors<br />
PricewaterhouseCoopers<br />
Private Bag 92 162<br />
Auckland<br />
New Zealand<br />
20<br />
years<br />
young<br />
103