Aurora Fashions on profit track

Aurora Fashions, the women’s fashion retailer that owns the Oasis and Karen Millen brands, said it was on a sound financial footing after cutting net debt by a fifth. According to the Financial Times, the group, which was established last year

from the remnants of its predecessor Mosaic, said it was ahead of a schedule agreed with its main lender, Kaupthing, the failed Icelandic bank that also holds more than 80 per cent of the equity, to pay off the debt.

Aurora was formed following what was in effect a debt-for-equity swap last March, when Kaupthing moved to take control of several brands owned by Mosaic.

Equity in Mosaic was buried under the mountain of debt and was in effect worthless. Kaupthing sought to use a pre-packaged administration process to shed unprofitable sites.

In its first 11 months of trading, Aurora generated an operating profit of £22.6m on retail sales of £661m, although the group incurred restructuring costs of £57.9m including payments to reimburse suppliers of Mosaic.

Aurora, which has almost 1,500 outlets in 45 countries, said that credit insurers had agreed in the spring to reinstate cover to its suppliers.

The company said it was on track to make a pre-tax profit for the year to the end of January 2011.

Net debt at Aurora, which is also behind the Coast and Warehouse chains, stood at £109m at the end of January, equivalent to 2.8 times last year’s earnings before interest, taxes, depreciation and amortisation.

Derek Lovelock, executive chairman, said that multiple was “significantly ahead” of the plan that the group had presented to its lenders. “I’m delighted that Aurora has emerged in such great shape,” he added. “Our business has been transformed.”

During the period, the company opened 83 of its own stores in overseas markets as well as 67 franchise outlets. International retail sales account for more than a third of the group’s total.

As part of moves to cut costs, Aurora closed two of its distribution centres and integrated the IT operations across its brands.

In June Aurora was awarded IT Team of the Year and the EPoS Initiative of the Year awards at the Retail Week Technology ceremony.

Source: FT
Image: Aurora Group