The Mosaic Brands Ltd (ASX: MOZ) share price is sinking today after the company released its earnings report for the first half of the 2021 financial year (1H21).
After gradually lifting 1.02% to 99 cents a share through the morning, the Mosaic Brands share price took a sudden plunge at midday, dropping 8.6% to 90 cents at the time of writing.
Mosaic Brands (formerly known as Noni B) is the ASX retail company behind famous Aussie retailing brands like Noni B, Rivers, Beme, Millers and Autograph. The company has close to 1,400 stores around the country.
The company has had a rough trot over the past few years, falling from a high of around $3.70 a share back in late 2018 to less than a dollar today. Even so, Mosaic shares are up around 326% from the lows we saw back in March 2020.
What's driving the Mosaic Brands share price today?
Mosaic announced a bit of a mixed bag today. The company reported that revenues came in at $299.1 million, down 29% from $414.1 million for the prior corresponding period (1H20). That was despite Mosaic's online sales surging 27% year on year, rising from $41.1 million to $52.3 million. That represents a 17% share of overall revenues, rising from 10% in 1H20. Group margins also improved by 3% to 61%.
Despite that heavy drop in revenues, Mosaic reported an increase in earnings before interest, tax, depreciation and amortisation (EBITDA) of 38%, going from $32.7 million in 1H20 to $45.1 million in 1H21. However (as the company noted), this growth in EBITDA was massively assisted by JobKeeper payments from the federal government over the period. Mosaic said 'normalised EBITDA', which assumes no COVID-19 lockdowns and no JobKeeper, would have been $17.32 million.
The company also reports that its net cash position has increased by 1,109% to $65.3 million from the $5.4 million of the prior corresponding period.
Mosaic will not be paying a dividend for the half, in order to "preserve cash". The company has not paid a dividend since 2019.
Outlook for 2021 and beyond
Mosaic Brands CEO Scott Evans had this to say on the results:
The result was driven by a number of initiatives to reset the group for a post-COVID economy, including a continued focus on margin growth…
Whilst JobKeeper was an invaluable element in managing through the last 10 months, having now ended, Mosaic has transitioned through its toughest ever trading period, strengthened its balance sheet and returned to its track-record of profitability.
Given the unique demographic of our customers, we did not see, nor expect, a short term stimulus sugar hit to sales. However, conversely we are now planning for a longer-term sustainable lift in sales due to post-vaccine tailwinds as many of those same customers emerge from hibernation.
