Mosaic Back in Black as Horror Turns to Wonder

Mosaic Brand’s annus horribilis has turned into annus mirabilis as accounting black, not red, becomes the order of the day with stores open, revenue ticking over, profits on board and more to come in 2022.

The new tune for the company and its many retail brands was one investors loved yesterday, sending the shares up more than 25% to 75.5 cents.

They closed a little lower than that at 68 cents, up more than 18% on the day.

Still that’s a long way from the $1.19 of January but the market is now more confident that the company and its retail chains have a future.

A year ago Mosaic Brands, the owner of retail brands like Katies, Millers, Noni B and Rivers was feeling the pain of the pandemic and lockdowns which choked off retailing activity across the country and pushing the company to the brink.

But before Covid hit it was hit hard by the terrible bushfires along the East Coast from September 2019 through January 2020 which gradually saw dozens of its 1,000 strong stores closed for varying periods of time.

That plus the impact of Covid and the lockdowns saw the company so close to tipping over the edge that its auditors questioned whether it remained a going concern in the June 30 yearly accounts.

But with the help of its banks, JobKeeper, staff and management agreeing to help with wage freezes or cuts and the curtailment of the virus and the gradual ending of lockdowns, Mosaic has slowly climbed back.

Yesterday it confirmed the recovery seen in the February interim results was continuing to the point has quelled those auditor concerns about the business’ ability to continue as a going concern after restructuring its financing.

The company told the ASX that it had renewed its $25 million working capital facility with the ANZ, noting the “accounting related material uncertainty commentary” flagged in its full-year accounts last August had been resolved.

Mosaic has a customer base that skews old and a broad, 1,000-plus store network that exposed it to the nationwide lockdowns, and then the state and city lockdowns as 2020 and then 2021 went on.

CEO Scott Evans said “After the toughest 18 months imaginable including the bushfires and COVID-19 pandemic, we are confident that Mosaic Brands has come through stronger and better with a very clear path to returning to our year-on-year track record of profitability and growth.”

He said that the continued vaccine rollout for those over the age of 50 had helped the business’ sales recover across the second half of the financial year.

Year-to-date gross margin is at negative 0.5 per cent, an improvement on the 5.6 per cent fall reported earlier this year.

The company now expects its EBITDA to be around $48 million for the June 30 year, a result largely reliant on the around $50 million in JobKeeper payments claimed by the retailer. That will rise to an estimated $50 million in 2022 with the completion of the EziBuy deal.

“Whilst some in the retail sector benefited from the COVID-19 stimulus, Mosaic Brands faced a unique set of challenges due to our more COVID sensitive customer which we are proud to say we have successfully navigated,” Mr Evans said.

“We have reshaped our cost base, our inventory holding and remained focused on margin rather than chasing sales at any cost. We believe that as a national retailer who made those difficult changes early, Mosaic Brands has never been in a stronger position to take on the future.”

The retailer has also negotiated an extension on exercising the option to buy the remaining 50% of NZ-based online retailer EziBuy, and now expects to complete the deal by the end of September.

“Aligned with the vaccine roll-out, since Easter every week sees more and more of our customers heading back into store. Encouragingly even with the gradual return to normalised shopping behaviour our online sales continue to perform well and grow.

“Following the exercise of the EziBuy option total Group online sales will deliver approx. 30% of annual revenue,’ Mr Scott told the ASX.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →