Interim Results: Replacement

CORRECTION: INTERIM RESULTS

The following amendment has been made to the "Interim Results" announcement released on 27/11/2019 at 7:05am under RNS No 7654U.

·   The original RNS stated the Total Balance at 30 September 2019, in the Unaudited Consolidated Statement of Changes in Equity table, was £8,29753,000. This has now been corrected to £8,297,000.

All other details remain unchanged. The full amended announcement is set out below.

Sosandar plc

Interim Results  

Building on initial successes with significant sales momentum

Sosandar PLC (AIM: SOS), the online women's fashion brand, is pleased to announce its unaudited results for the six months ended 30 September 2019.

Financial Highlights

Operational Highlights

Current Trading

KPIs

Ali Hall and Julie Lavington, Joint CEOs, commented:

"We are delighted to be reporting on a period of significant progress for Sosandar. The investments that were made in the latter part of the second quarter have resulted in exceptional Autumn trading. Post period end, October was particularly notable, as we hit a special milestone - the first month where net revenues exceeded £1 million, a performance which November is on course to exceed.

It is becoming increasingly clear that once customers engage with Sosandar's product range and unique design aesthetics they remain loyal to, and highly engaged with the brand. We have seen continued database growth post period, with our number of subscribers in September up 26% month on month and new subscribers tracking over 300% up versus the same period last year.

Our vision is to be a global one-stop online destination for our customers, and with a widened product range, strong balance sheet, and a broadened, aggressive, and increasingly effective marketing strategy, we are confident that FY20 will be an important next step in that journey.

An analyst meeting will be held at 11:00am today at Octagon Point, St Paul's, 5 Cheapside, London, EC2V 6AA. To attend please contact Alma PR.

A video overview of the Company's results is available here: http://bit.ly/SOS_H119

Enquiries

About Sosandar PLC

Sosandar is an online womenswear brand, specifically targeted at a generation of women who have graduated from throwaway fashion and are looking for quality, affordable clothing with a premium, trend-led aesthetic. This is a section of the market that is currently being underserved.

Sosandar was launched in September 2016. The Sosandar business model is built around using trend-led, exclusive designs produced in-house and then manufactured using a variety of global suppliers. Sosandar caters for a growing market of fashion-conscious women, while utilising an outsourced logistics provider that can support its planned growth over the coming years.

Co-CEO's Operating review

We are very pleased with the Company's performance over the period, particularly the momentum which began to build in Q2 following the increased investment made into marketing, product and team, and which has continued to accelerate into current trading.  

Total revenues for the period increased 53% to £2.82 million, reflecting the strategy implemented over the year so far, where our sales and marketing spend was deliberately held back in Q1 and began to accelerate over Q2, delivering revenues for the quarter up 84%. This momentum has been built upon further into H2, with record periods of trading in September and October, both of which were up over 100% versus the prior year. October was the first month we saw net revenues (post returns) surpass £1 million, a performance which November is on course to exceed.

In July we were delighted to successfully raise £7 million (gross) through a significantly oversubscribed placing, with both new and existing shareholders showing their support for the business and our growth plans.

The proceeds from the placing have now begun to be deployed and as hoped, we have been able to accelerate our growth through strengthening our design capability, widening our product range and trialling additional marketing channels. These activities have resulted in increased customer acquisition alongside continued growth from our ever-expanding base of loyal existing customers.

We have continued to achieve high levels of growth across a broad range of KPIs, demonstrating the strength of our underlying business and proposition. We are excited to now be entering the next stage of our growth story, building the business in reach and maturity in order to effectively capitalise on the huge amount of demand for our unique design aesthetic that exists in the market.

Customer acquisition driving brand recognition and awareness

As at 30 September 2019, our customer database stood at 148,884, an increase of 76% on the same time last year. Growing brand awareness and the use of additional marketing channels have been key in driving this growth. These have been trialled in conjunction with our direct mail brochures, social media strategy and other existing channels, which continue to be highly successful.

September saw us begin to use TV advertising and start to trial the use of out-of-home digital media for the first time. This has included testing in different TV regions, channels and programmes with re-investment into those showing the best engagement versus cost ratio, and a test with digital panels across escalators at key London train and Tube stations. These new marketing initiatives are significantly increasing brand recognition and awareness. September, the first month TV went live, saw a record number of email subscriber sign-ups with a 224% increase on August and the equivalent to approximately six months' performance in the prior year. This momentum has continued with post period end sign ups 309% up on the same period last year. TV advertising is a key medium for retailers, and can create significant sales uplift, particularly for smaller brands. It is however, a capital-intensive medium, and we are delighted that we now have the necessary scale, network and talent available to pursue this medium. As communicated at the time of our half year trading statement, the strong results achieved through our trials have driven the strategic decision to accelerate the growth of the business by investing further in TV advertising. This increased expenditure is expected to significantly enhance future growth through accelerated customer database growth and increasing frequency of purchase from a loyal and highly engaged following. As with any new marketing initiative, as we mature into the use of the channel we expect our efficiency to increase, and ROI to grow.

The Sosandar brochures continue to prove that the use of high-quality lifestyle content is particularly valuable in driving high-converting customers to the website. Social media followings have grown to 75,854 on Facebook and 33,300 on Instagram, as at 30 September 2019. Facebook and increasingly Instagram continue to be our "ever-on shop window" with growing engagement on both channels. The swipe to shop functionality on Instagram also enhances brand engagement and capitalises on the growing number of influencers and celebrities posting about Sosandar. A host of celebrities are spotted wearing Sosandar on a daily basis, with these celebrities also regularly featured in national media from ITV, to Hello and the Daily Mail online. Household names such as Mel B and Amanda Holden have worn our products alongside Katherine Tyldesly who recently appeared on Strictly Come Dancing and Kate Garraway who is currently appearing on ITV's biggest show I'm A Celebrity Get Me Out Of Here.

As more customers learn of Sosandar, we are continually learning more about our customers; building our understanding of exactly what they are looking for from a one-stop fashion destination. This increases our ability to personalise our content and continually improve the relevance of our marketing.

Expanded product range and design capabilities

An important next step in our journey to become a one-stop shop for fashion forward women is the strengthening of our design capability and the widening of our product range, which accelerated significantly over the period.

The investment that has been made into the product team across all areas, including design, buying, merchandising and garment technology, has resulted in the product range, as measured by number of intake styles, more than doubling year-on-year. This widening of the range has come through the additions of more choice within product types, and new categories such as denim, knitwear, footwear and accessories. We now have over 1000 SKUs an increase of 113% against the prior year, which will help drive performance from Autumn Winter 2019 onwards. Best-selling product lines include dresses for all occasions, leather jackets, faux fur coats and denim dresses.

Average order value and gross margin have both shown a marginal decrease in the period, linked to the broadening product range. Average order value was impacted as average unit price shifted slightly as we sold proportionately more denim and jersey but units per basket has increased 5% year on year. As the cold weather drives sales of higher price point items such as leather and outerwear, and we start to see the benefit of repeating on successful new product lines we are confident we will see average order improvement in the Autumn Winter period.

In recent months our supplier base has been expanded substantially to support the broadening product range. The increasing range has also contributed to third party platform interest. Sosandar is now trading with Silk Fred, which has allowed us to successfully increase brand awareness with a broad range of customer demographics, and opportunities are presenting themselves to work with other interested parties.

Continuous development and learning

As we grow, extend our track record, and bring in more talent we are continually deepening our expertise in the market and gaining more access to data. This is vitally important as we maintain our focus on balancing strong growth with increasing efficiency.

The Group's marketing strategy, for example, centres around content, underpinned by algorithm-based data science. This approach makes use of detailed customer targeting, tracks return on investment and analyses purchasing habits to ensure spend is impactful. As the business becomes more mature and our customers continue to repeat order more frequently we have a larger pool of historic data to utilise.

Our test and repeat strategy continues to work well as we focus on fast stock turn with new product launching constantly, helping to minimise stock risk and allowing us to capitalise on best-selling items in real time. The increasing data in the business that comes from this test and repeat model helps feed the design process and has contributed to an increasing number of styles that become core best sellers and the strong improvement we have seen in returns over the period. As we grow, our levels of stock will increase, however our stock is carefully controlled and linked directly to marketing investment to ensure a continued fast and efficient stock turn.

Brand awareness continues to grow and in May Drapers, the fashion industry bible, recognised the brand, awarding Sosandar the prestigious accolade of Best New Online Business and Digital Team of the Year. This industry recognition is not only a great testament to the quality of our products and team, it also helps with attracting new talent and partners to Sosandar. Most recently, we are very proud to have been shortlisted for the Emerging Retailer award by Retail Week.

Outlook

We are extremely excited about the future prospects for Sosandar as momentum has continued strongly into the second half of the financial year, with record periods of trading in September and October. October was the first month we saw net revenues (post returns) surpass £1 million, a performance which November is on course to exceed and we are on track to meet management's expectations for the full year.

We are focused on continuing to grow our customer database as we invest further in TV advertising and expect our upfront investment in the team and product range to drive further progress in the second half.

Our vision is to be a global one-stop online destination for our customers, and with a widened product range offering, strong balance sheet, and a broadened, aggressive, and increasingly effective marketing strategy, we are confident that FY20 will be an important next step in that journey.

Financial review

KPIs and financial performance

Revenues in the period were up 53% from the same period last year, reaching £2.82m. The continued expansion of the business has been underpinned by growth across a number of KPIs, up-front investments into the product development early in the period and latterly into new and existing marketing channels, especially TV.

This product development investment included expansion of the product team to increase expertise and create a more robust structure to support growth in both core and new product areas. This has increased the number of new products available, enhancing choice for customers to support sales in the Autumn Winter period and beyond. Investment in this team also means the business is better placed to leverage the increasing data in the business to understand customer needs, as evidenced by the decrease in product returns and strong growth in new product areas. With a stronger team in place the business is well placed to continue to further improve customer choice.

The expanding product range has changed product sales mix, with proportionately more denim and jersey being sold in the period. As a result, average order value marginally decreased, however the product sales mix helped improve returns and units per basket improved. Average order has increased going into Autumn Winter with strong full price sales and colder weather driving sales of items with higher price points, such as leather and outerwear. Margin has also increased as the business benefits from repeat orders on the new product areas introduced in H1.

Sales at the start of H2 have benefited from the increased product choice combined and increased investment at the end of the period into customer acquisition, which included TV for the first time to complement existing marketing channels. This helped both customer acquisition but also brand engagement, as evidenced by the customer database growth both at the end of the period and the start of H2. Not all these customers convert immediately but with a bigger pool of engaged prospects there should be efficiency improvements going forward as these prospects convert, learnings are established, and the channel matures. The customers acquired are increasingly loyal and this ability to recruit and retain customers helped increase the active customer base by 70%.

As planned, the cost base increased during the period to support future growth, resulting in administrative expenses increasing 44% to £4.29m which includes increased expenditure on customer acquisition later in the period and investment in product development at the start of the period which delivered enhanced choice from Autumn Winter onwards. However, costs as a percentage of revenue decreased year on year (152% in H1 FY20 compared to 162% in H1 FY19) and return on this investment can be seen in current trading with the start of H2 FY20 showing revenue growth of over 100%. With a stronger infrastructure now in place, and the ongoing benefit of repeat revenue from the growing customer base, further efficiencies should be delivered whilst also delivering continued revenue growth. As a result of the increased administrative expenses, as expected, operating losses increased 41% to £2.78m (H1 FY19: £1.97m).

Financial position and cashflow

Following the successful placing in July 2019 the business goes into H2 with a strong cash position of £6.9m (H1 FY19: £2.6m). The placing has helped fund product expansion and enabled investment into stock to support the sales growth experienced post period end, as well as allowing for increased marketing spend.

Trade and other receivables have remained flat, with trade and other payables increasing 22% since FY 20, whilst still remaining at a manageable level of £1.2m.

This stock has been delivered from a much more diversified and specialist supply base, many of which have come on board during the period. High profile retail failures have created some restrictions in the credit market and as a result impacted availability of extended credit terms with these new suppliers. These new suppliers will however help deliver better product with improved margin and improved supply chain timescales. Furthermore, as we build these relationships so should our ability to obtain extended credit terms.

Capex remains limited in the business and so the cash available will be used to support working capital required for future growth.

KPIs

unaudited Consolidated statement of income and other comprehensive income

For the 6 MONTHS ended 30 september 2019