Mosaic Fashions Hf. Annual Report and Accounts M O S a I C F a S H I O N S H F
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07 08 09 Annual Report and Accounts and Report Annual osaic Fashions hf. osaic Fashions M 05 06 Mosaic Fashions hf. Annual Report and Accounts 2005-06 00 01 02 03 04 . eet ashions hf aul Str United Kingdom EC2A 4PN 69-77 P London Mosaic F contents Overview 1 Chairman’s statement 4 CEO’s statement 6 Oasis 8 Karen Millen 10 Coast 12 Whistles 14 Future growth 16 Finance Director’s report 20 Board of directors 22 Corporate responsibility 23 Corporate governance 24 Financial statements 26 Designed and produced by Loewy Group +44 (0)20 7798 2000 our vision Our vision is to develop a portfolio of differentiated, upmarket womenswear brands through a combination of organic growth and strategic acquisitions, utilising our extensive knowledge and experience in this sector of the market. We will also optimise the economies of scale and greater efficiencies deriving from our common infrastructure, as well as leverage shared skills across the group. We aim to realise the potential of the business through carefully considered international expansion and brand extensions, and invest in our people to create a culture of innovation and mutual growth. The strength and depth of our management team and the success that we have already achieved is a testament to our ability to take Mosaic Fashions’ brands to the top of the sector. Our goal is to deliver high quality, design-led products for our customers, rewarding partnerships for both our staff and suppliers, and solid returns for our investors. EBITDA Sales Trading profit For the year ended January 28, 2006 £m Mosaic Group 2005-06 1 7 the story so far 6 Whistles founded by husband and wife Richard and Lucille Lewin 8 1 Karen Millen and Kevin Stanford commence trading 9 1 Oasis stores founded by Michael and Maurice Bennet 9 5 Oasis stores listed on the London Stock Exchange 9 6 Coast founded as a fashion clubwear brand 9 8 Oasis acquires Coast 9 9 Derek Lovelock, appointed as CEO 0 0 Richard Glanville and Meg Lustman appointed as CFO and Business Development Director 0 1 Oasis Stores taken private through a management buyout 0 3 Management buyout supported by Baugur Group and investor group led by Kaupthing 0 4 Karen Millen and Whistles acquired. Company name changed to Mosaic Fashions 0 Mosaic Fashions hf listed 5 on ICEX Oasis 9 our global presence Oasis is an aspirational fashion brand, Mosaic has a clearly defined strategy for 0 targeting fashion-aware 18–30 year old entry into new markets according to the independent women, offering a range of size of the market and its degree of 4 : individual clothing and accessories. similarity with the UK. s i Currently trading from over 800 s outlets, each brand has demonstrated its potential to develop successfully a internationally. O Future international growth will mainly 9 Karen Millen be driven by the two largest brands, Karen Millen brings “designer-wear” to the Karen Millen and Oasis. Growth will 2 high street with a bold range of fashion and derive from developing opportunities 1 accessories targeting the 18–40 year old with our existing partners and through : body-conscious woman. exploring opportunities in new markets as they arise. n e l l i M n e r a K 8 Coast Coast is a premium brand providing 9 contemporary occasionwear for 1 stylish women. : t s a o C 2 Whistles Whistles appeals to women of all ages 7 who are confident at mixing and exploring : colour, textures and accessories. s e l t s i h W : e d Stores worldwide i USA 3 Lithuania 3 Australia 2 Belgium 1 Malta 1 China 70 w Cyprus 7 Middle East 40 Indonesia 3 d Denmark 7 Monaco 1 Russia 4 l Eire 44 Norway 12 Singapore 3 France 3 Spain 2 Taiwan 4 r Germany 24 Sweden 9 o Greece 6 Switzerland 1 Holland 1 Turkey 1 Iceland 6 United Kingdom 550 w s e r o t S Mosaic Group 2005-06 3 chairman’s statement As this is the first Annual Report and The company also made striking Accounts of Mosaic Fashions hf since progress in its efforts to become a global its public and private offering of shares retailer, utilising its joint venture in China in the company and their listing on the to open thirty six new Oasis outlets in ICEX in June 2005, it is particularly that burgeoning market, including its first gratifying to report financial results in Beijing, and expanding the number wholly consistent with the demanding of Karen Millen stores in leading forecasts given at that time. European cities and more recently in the United States. The purpose of the refinancing was to reduce the level and cost of the Board and management team company’s borrowing following the There were a number of organisational acquisition of Karen Millen and Whistles, changes over the course of the year, and to facilitate the raising of new driven by the need to integrate the equity as required. This was accomplished Karen Millen and Whistles businesses, successfully through the issue of shares to accommodate an increasing number to institutional and individual investors, of branches worldwide, and to create a and the issue of a £52 million bond. platform for the addition of further specialist brands should appropriate Financial results for 2005 candidates become available. All of which, In a challenging UK retail market, the though time consuming and potentially company’s sales grew to £410 million, disruptive, were implemented successfully. a 15 % increase over the pro forma numbers for 2004-05 published in the The boards of the group were reorganised company’s prospectus. Trading profit at the time of the listing on the ICEX to was up 17% to £47.1 million and the create a holdings board for Mosaic Fashions company’s EBITDA of £59.2 million hf, which meets monthly in London. It is represented 14% of net sales. Profits proposed to add at least one further after tax for the year, excluding non- independent director to the board so as to recurring costs, were £12.6 million, reflect more closely the recommendations resulting in earnings per share of 0.49p of the ICEX on corporate governance. or 0.83p, excluding non-recurring costs. Outlook Strategy implementation Though the UK retail climate remains The company made great progress challenging in respect of both sales in 2005 in positioning, developing growth and cost management, the and growing its portfolio of retail company is confident of achieving a womenswear brands both within and further year of low double digit earnings outside the UK and the management growth through the introduction of team, at all levels in the company, can strong and differentiated ranges, a justifiably be proud of everything that vigorous branch opening programme, was achieved in that regard. the tight control of operating costs and further overseas expansion. Oasis, the largest of the four, experienced double digit growth, the first half of the year being particularly robust, and added a further thirty branches and The company made great department store concessions to its estate. Coast continued the outstanding progress in 2005 in performance of recent years, consolidating Stewart Binnie positioning, developing its position as the high street’s principal Chairman occasionwear brand and opening a and growing its portfolio further twenty one outlets. of retail womenswear Karen Millen and Whistles, acquired in 2004, were successfully integrated into brands both within and the business, moving on to the group central systems platform and joining outside the UK. Coast in a new purpose-built distribution centre towards the end of the year. The company’s new lingerie brand, Odille, was “ well received by UK department store groups and its US customers. ” 4 Mosaic Group 2005-06 quality CEO’s statement I am pleased to report a strong year for Mosaic despite a difficult trading environment in the UK. Sales in the UK increased by 15% on the previous year with 67 new outlets opening. Our international business experienced even stronger growth with sales increasing by 41% on 2004-05 following the opening of a further 82 outlets in both existing and new markets. Our successful listing on the ICEX in June has given us the balance sheet to continue to support this growth and deliver value to our shareholders. Within our overall performance, we had a good first quarter followed by a very strong second quarter. This was driven by the broad appeal of the ‘boho’ fashion trend which each of the brands interpreted in its own way. Whistles in particular had a very strong ‘boho’ offer which saw them achieve sales of +17% to the first half in the previous year. Performance in the second half was tougher with a particularly difficult third quarter. The fashion trends in the autumn moved away from ‘boho’ to a much cleaner, sleeker silhouette of shorts, pencil skirts and stripes. Brands that anticipated these looks such as Oasis had a good season, whereas brands such as Whistles that were strongly associated with the ‘boho’ look, struggled to compete. A challenging third quarter was followed by a reasonable Christmas for the Group with Coast performing very strongly, as their occasionwear dresses were perfectly on trend for the season. The varied performance of the brands through the year highlighted the benefits of having a portfolio. With separate creative teams for each business, all of the collections are developed individually. This helps to mitigate the risk inherent in running a fashion business. As a result, if one business misinterprets the demand for a certain look, the same mistake will usually be avoided by the other brands, permitting the Group to absorb the underperformance of any single business.