New documents released by FTI Consulting confirm that collapsed apparel business Mosaic Brands had an accumulated loss of around $346 million over the last five financial years.
The latest revelation comes several months after the managing company – which owned 10 online and retail brands, including Noni B, Katies, Millers and Rivers – fell into voluntary administration, appointing FTI Consulting’s Vaughan Strawbridge, Kate Warwick, David McGrath, and Kathryn Evans as voluntary administrators.
Meanwhile, KPMG’s David Hardy, Gayle Dickerson, Ryan Eagle and Amanda Coneyworth were appointed as receivers and managers.
The comprehensive report was also shared via an ASX release, which noted that FY19 was the last year that Mosaic Brands generated sufficient profits to declare a dividend. But by FY25 year-to-date, the group’s accumulated losses on the balance sheet were around $346 million, with the group’s net asset position deteriorating from around $103 million in December 2019 to negative equity of around $170 million in October 2024 – a negative movement of around $272 million.
Alongside the profit slips, the group experienced a decline in revenue year-on-year, dropping from $713.58 million in FY20 to $424.83 million in FY24.
The drop in revenue was matched with a drop in expenses over the same period, falling from $450.22 million in FY20 to $248.27 million in FY24. The documents note that FY24 numbers are still in draft phase.
In FY25 year-to-date, sales hit just $107.51 million, which would have been impacted by the voluntary administration appointment, which commenced in late October 2024. Mosaic Brands’ net profit after tax (NPAT) in the current financial year is negative $34.47 million.
The report added that FY20 was the first financial year since 2016 when the group’s revenue declined, with Mosaic attributing the fall to the summer bushfires between 2019 and 2020 and the Covid-19 pandemic.
The year-to-date management accounts as at October 27, 2024, reported a loss after tax of around $34 million and a negative net asset position of around $170 million.
The report by FTI Consulting also indicated that the business may have breached the Corporations Act 2001 based on its investigation so far, noting particular areas include duty to prevent insolvent trading, failure to act in good faith and failure to keep good books and records.
"Further investigations are required to be undertaken and consideration of any defences the directors may have available," the report read.
The directors of Mosaic Brands have reportedly advised administrators that they have sought to rely on Safe Harbour protections since April 1, 2021, and prior to this relied upon temporary relief provided during Covid-19 which, it is claimed, provided temporary relief from personal liability for insolvent trading for debts incurred during this period.
The administrators noted that, in their view, it is not clear whether the Safe Harbour eligibility criteria were met at all times and further investigation is required.
"It is also relevant to note the directors of Mosaic Brands changed through the period December 2020 to 28 October 2024. Individual directors can only be liable for debts incurred while they were in office," the report read. "Accordingly, the potential liability of each director for insolvent trading can only be referred to the period for which they were a director of Mosaic Brands, and a debt was incurred.
"At this time, the administrators reported that it is unclear as to the capacity of the directors to meet a successful insolvent trading claim and would be subject of further investigation by a liquidator, if appointed. It should be noted the companies did not have any directors and officers insurance policies in place."
A second creditors' meeting is set for June 20, with the administrators’ opinion being the Mosaic Brands business should be placed into liquidation. All staff of Mosaic Brands at the time of its VA are expected to be paid in full, with first-ranking creditors set to gain 98 cents on the dollar. Second-ranking and unsecured creditors are expected to receive low to no return.
The gross amount of unsecured debts incurred by Mosaic Brands which remain outstanding total around $196 million.
The report also noted that the intellectual property of Katies, Millers, Noni B, Rockmans, and Rivers have since been sold to new owners.