Will Mosaic Brands survive?

This is THE ultimate question when it comes to this company

Perhaps the lowest quality retailer on the ASX

Anyway, the company is in suspension right beause they have not lodged their 4E and audited results. But they did release a Business Update the other day and the company is 'rationalising' the operations of their business by winding down the underperfoming brands and focusing on the core brands

They have named this realignment - 'Focus on Core'

"Focus on Core brand rationalisation Mosaic CEO Erica Berchtold said the Group would rationalise its brand portfolio as part of driving simplification across the business and focusing resources. “Mosaic will wind down five brands which have become marginal and non-core, allowing us to focus on five core growth brands,” said Ms Berchtold. “Each of those core brands will have a clearly differentiated market proposition, target customer, price point and product range. As part of the Focus on Core plan, Mosaic will exit the Rockmans, Autograph, Crossroads, W.Lane and BeMe brands, including all stores and websites.

The Group will now capitalise on and invest in its Millers, Noni B, Rivers and Katies brands, along with a standalone online Mosaic marketplace."

If the company survives perhaps there is some value here. That is a BIG if

Mosaic Brands (MOZ) is an extremely low quality retail discretionary company that looks cheap based off sales/revenue but has horrendous operating margins. For instance, revenues around $700-800m the last few years but barely profitable.

The ASX required the company to start issuing 4Cs a year ago.

MOZ also released a negative trading update 8th June that pushed the share price down 56% to a market cap around $20m

Onto the June quarter Appendix 4C:

Cash receipts $205m

OCF $57m

Acquisition $11m

Lease Liabilities $17.8m

Cash doubled to $42m (good cash flow even after acquisition)

Debt $37.3m (so net cash by almost $5m)

Fairly bullish in the commentary with some mention of improving trading conditions, increasing onlince prescence and focus on cost control

BUT the June quarter tends to be a good quarter for the company and it would not surprise to see a woeful September quarter.

The market has been concerned about the viability of the company moving forward. Otherwise, there might be some good value if management can increase those margins and not signifcantly hurt sales.

**Below is cash receipts history over past five quarters. Topsy-turvy ride for the company and reveals the seasonality ... although sales may/probably were affected by lockdowns last year**