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In the wake of a challenging retail environment that has been further impacted by a systems glitch announced in June, Mosaic Brands (ASX: MOZ) has confirmed media reports that it has enacted safe harbour provisions of corporate law which allow the board to address financial distress on the company behind the scenes without the need to notify the market.
“The group wishes to confirm that its directors have and continue to take advice from advisors on their ongoing duties,” says the Mosaic board in an announcement to the ASX this morning.
“These fiduciary obligations are matters the board has always taken seriously and we confirm that the advice provided has extended, from time to time, to considering the applicability of and compliance with the safe harbour provisions as outlined in the Corporations Act 2001 for the directors.”
Safe harbour provisions allow company directors to explore restructuring options to shore up a company’s financial position and it is generally seen as cheaper and less disruptive for smaller companies than voluntary administration.
Mosaic confirms that Deloitte has been advising the company on previously announced refinancing considerations.
The company also confirms that its senior secured creditor “remains supportive”.
“As noted in earlier announcements, the group has suffered from operational issues in recent months that have adversely impacted trade,” says Mosaic.
“These are being worked through by the directors, management and its advisors, and the group anticipates a recovery in its trading performance through the course of H1 FY25 once these operational issues are resolved.”
Mosaic Brands operates about 700 stores for nine retail clothing brands, comprising Millers, Rockmans, Noni B, Rivers, Katies, Autograph, W. Lane, Crossroads and Beme, in Australia and New Zealand.
The company revealed in June that due to a challenging second half it was expecting to post a marginal operating loss for the FY24 full year.
Mosaic also revealed that the half year was hit by disruptions as it “migrated to a fully integrated logistical supply chain and distribution system with a newly appointed global partner”.
“The implementation disruptions experienced by Mosaic were greater than anticipated, delaying the delivery of inventory leading into the key Mother’s Day trading period,” the company said at the time.
“This, combined with softness in consumer spending, severely impacted revenue and earnings in the fourth quarter.”
After a pause in trading ahead of today’s announcement was lifted, Mosaic shares fell to a low of about 4.3 per cent, or 0.02c to 4.4c, by noon (AEST).
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