Sosandar Plc

Good morning, everybody, and thank you for joining us. So here with me today is Ali, co-CEO, and Steve, our CFO. So just to talk you through the agenda for today, we're going to kick off with our autumn trading highlights. Then Steve is going to do half one financials and some more financial detail on our autumn trading, followed by Ali and I looking at our operational progress, just a conclusion, and then over to you for questions. We've started the second half of the financial year really well with strong autumn trading in the months of October and November, which are our key trading months. This is both on our own site and through third parties, and we are on track for full year guidance. Revenue is up 16% year on year, and both October and November are PBT positive. Our decision to reduce price promotional activity has delivered the positive results we anticipated with margin rising to 59.8% from 56.4% last year. We've successfully launched with Freemans online and in store with Sainsbury's. We are number one or number two brand in all of Sainsbury's nine fashion concept stores. We've also executed our very first international third-party partnership with The Iconic, which went live last week, They're the biggest online player in our demographic in Australia, and the Bay in Canada will follow very soon in early 2024.

Good afternoon, everybody. We shared the news in October that we are moving towards becoming a multi-channel retailer, which will significantly increase our addressable market. In preparation for becoming a multi-channel retailer, we've reduced the amount of price promotional activity on our own website, which is a norm of the PurePlay model. This reduction in price promotional activity was trialled in quarter two with the results reflected in our H1 numbers. So the revenue for the first half, which ended in September, was 22.2 million, which is up 6% versus last year. Our gross margin was up by 100 basis points from 54.4% to 55.4%. This increase includes a higher proportion of revenue being delivered through our wholesale channel, which has a lower price point and a lower gross margin. Excluding the effect of this, the like-for-like margin was up 200 basis points versus last year. The gross margin in quarter two on our own site was up 570 basis points to 55.1%, which reflects the reduction in price promotional activity during that period. Our overheads increased by 21% or 2.3 million to 13.3 million. This increase includes third-party commissions, which accounts for over half of the overall increase. The balance includes the strengthening of the SUSANA team, which was invested in in the latter part of FY23, and also an increase in the activity-driven fulfilment costs. We are on track to meet full-year market guidance for FY24, which is a PBT of 0.1 million, which means that H2 will be PBT positive of 1.4 million. In terms of the balance sheet, our net assets increased to 17.2 million as at the end of September 2023, compared with 10.6 million the year before. Cash at the end of September was 7 million, which includes bringing stock in earlier for the autumn season compared with the previous year. Our cash balance at the end of November has increased to 7.3 million. Our inventory level has increased to 14.2 million although it is always important to note that September is a peak month for stock as a large proportion of the autumn range will be with us already or in transit at this point. The balance reduces from September as we sell through the autumn winter season. Receivables increased to 3.8 million compared with 2.3 million a year before, due to the increase in revenue from our third-party partners, including the relationship with our new partner, Sainsbury's. There has been no change to payment terms with any of our partners who continue to pay in full and on time. Non-current assets increased by 0.6 million to 2 million. Investment in the development and launch of the Susanda app and ongoing costs for our new ERP system results in our intangibles being 0.4 million. Moving on to cash flow in more detail. So our cash position was further strengthened in February with the equity raise, which has allowed us to invest further in growing our distribution in particular with third parties with the launch with Sainsbury's. The cash balance of 7 million at the end of September is enabling us to self-fund the rollout of the multi-channel strategy as we look to open our first physical stores from early in FY25. It's worth noting that September is typically both a high point for inventory and a lower point for cash. being the month before the peak trading months of the autumn-winter season. If we move on to post-period trading, which covers October and November, revenue is £10.2 million, which is 16% up on the same period last year. This growth is ahead of the 15% that is needed in H2 to deliver the full-year market guidance revenue of £46.8 million. and significantly ahead of the 6% growth that we reported in the first half of the year. November was a record month for Susanda and gross margin continued to increase, which reflects the continued reduction in price promotional activity on our own website. Gross margin for October and November is 59.8%, which is 430 basis points ahead of H1. In addition, we continue to trade exceptionally well with all of our third-party partners, which sees us being one of the top-selling brands, including with Next and Marks & Spencers. Both October and November have been PBT positive, and we are on track to deliver the full-year market guidance of 0.1 million positive. This would result in a substantial positive swing in H2 compared with H1. PVT target therefore for H2 is 1.4 million positive compared to the 1.3 million loss in H1. On this slide are the core KPIs for our own website for October and November compared with the previous year. In addition, I've compared to quarter two as this shows how the KPIs have developed since we reduced the amount of price promotional activity, which commenced in August. Traffic to our own site increased by 2%, which is a significant positive move since quarter two, where we saw traffic being 8% lower. This is represented on the graphs by the blue figures. This is significant given customers are not receiving the frequency or quantum of price promotional incentives to purchase. Conversion also improved with quarter two, being 19% down year on year compared to 22% down in Q2. Last year, our conversion rate was extraordinary. with that current level of conversion remaining really strong compared to market comparators at 3.4%. Average order value has increased 6% versus last year to £116, which is a similar level of growth compared with quarter two. The reduction in price promotions is all about improving profitability in the mid to longer term by improving gross margin and creating price alignment between online and physical stores. It is therefore really pleasing to deliver such a strong gross margin on our own site in October and November of 58.1%, which is up 400 basis points versus last year.

Key to our operational progress is the addressable market. So we thought we'd just take a moment to look what this is in the UK. The UK fashion industry contributes 62 billion annually to the GDP of the UK. It's a growing industry. It's the second biggest retail market in the UK after food and groceries, and one in every 25 jobs in the UK is in fashion. In addition to this, the UK is the third largest fashion market in the world after the US and China. And as an export market, British fashion brands are highly coveted worldwide. So the size of our addressable market is huge.