Mosaic Brands (ASX:MOZ) share price rockets 21% on business update

The Mosaic Brands Ltd share price is one of the best performers on the ASX today after releasing a positive business update. Here's the details.

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The Mosaic Brands Ltd (ASX: MOZ) share price is picking up steam in mid-morning trade. This comes after the company provided investors with an update on its business performance.

At the time of writing, the fashion retailer's shares are rocketing 21.74% to 70 cents.

Let's take a closer look at what the company announced.

What's driving the Mosaic share price higher?

Investors are driving Mosaic shares higher after digesting the company's upbeat trading update and outlook.

In a statement to the ASX, Mosaic advised it has successfully completed a series of strategic initiatives to support growth. Previously, the COVID-19 pandemic impacted the company and created unique challenges which saw a severe decline in instore customer numbers.

However, Mosaic turned its attention to improving its internal metrics to offset the damage done. The group reshaped its cost base, inventory holding, and focused on margin rather than chasing sales. As a result, the company is seeing a gradual return to profitability and growth.

Recently, Mosaic renewed its $25 million working capital facility with Australia and New Zealand Banking Group Ltd (ASX: ANZ). However, the credit facility is expected to be reduced to $15 million in January 2022.

In addition, the company also secured a credit approved term sheet for a further $10 million with majority shareholder, Alceon.

FY21 outlook

Following the positive post Easter and Mother's Day trading period, Mosaic anticipates a continued rebound in customers. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is projected to be around $48 million. This is provided that there are no significant changes in the current operating environment such as government mandated lockdowns.

Looking further ahead, the group is forecasting an improved EBITDA for FY22 due to its more efficient business model. In the next financial year (FY22), underlying EBITDA is assumed to be roughly $50 million.

EziBuy acquisition update

Mosaic noted that it has renegotiated the terms to extend the Option expiry date until 30 September 2021. This is 3 months longer than the original date, with the company also postponing the payment terms until 31 December 2021.

Should the deal go through, Mosaic's digital revenue is estimated to be over $200 million, or 30% of its total income. EziBuy is forecasted to deliver a normalised EBITDA of about NZ$2.5 million in FY21, rising to NZ$5 million in FY22. This is before processes are fully integrated with Mosaic operations.

What did the CEO say?

Mosaic CEO Scott Evans touched on the company's progress, saying:

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.

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

Despite today's gain, the Mosaic share price is down more than 20% for the past 12 months.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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