Sosandar Plc
Annual Report
For the year ended
31 March 2020
Company Registration Number: 05379931
Contents
Company Overview
Chairman’s Statement
Strategic Report
Corporate Governance
Board of Directors
Directors’ Report
Consolidated and Company Financial Statements
Independent Auditors’ Report
Consolidated Statement of Income and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Company Statement of Financial Position
Company Statement of Cash Flows
Company Statement of Changes in Equity
Notes to the Consolidated and Company Financial Statements
Company Information
Page
2
4
16
19
26
31
32
33
34
35
36
37
38
61
Sosandar plc
P a g e | 1
Annual Report 2020
CHAIRMAN’S STATEMENT
For the year ended 31 March 2020
Notwithstanding the unprecedented impact of the COVID pandemic at the end of the period, the
year to 31 March 2020 was another period of strong growth for Sosandar, with the Group again
increasing in sophistication as we made good progress towards our vision of becoming a global one-
stop online destination for fashion forward women.
We diversified our supplier base, entered the world of TV advertising and were delighted to win
several prestigious industry awards. We also began forging relationships with retail stalwarts such as
Next and John Lewis, reaching commercial agreements with both post-period end. Just four years on
from its foundation, the business has truly transformed into an emerging brand leader in our market
demographic.
COVID-19
We were forced to change course in the last few weeks of the end of the financial year as the impact
of the COVID-19 pandemic began to take hold. Since that time our focus has necessarily shifted to
the ongoing management of a business facing unprecedented external challenges.
I have seen first-hand the lengths our team has gone to over this time in order to maintain not only a
fully functional business, but one that has continued to perform well, growing sales whilst under
extremely testing circumstances. I applaud them for their hard work and innovation.
The challenges we have faced and overcome demonstrate the strength of our model and offering.
We were able to move rapidly to change stock in response to demand, our online capabilities lent us
an advantage throughout lockdown, and our strong relationship with our loyal customer base has
been invaluable as we kept the Sosandar community spirit high, our product offering fresh, and
increased repeat sales.
Strengthened financial position
We were pleased to complete two placings in the period, raising £7 million in July 2019 and £5
million in February 2020. The funds have been used to accelerate the growth of the business to great
effect, securing a record performance for the Group this year, a 103% increase in revenue and 129%
increase in customer base. The Board would like to take this opportunity to again extend its thanks
to the support shown from new and existing shareholders.
Our people
I would like to take this opportunity to thank Ali, Julie and our incredible executive team. They have
shown great skill in leadership and once again demonstrated their passion for the business over the
past year, as well as through the challenging environment since. Similarly, my fellow board members
are due our appreciation for their calm, clear and committed input, particularly in recent months
when we have all been navigating uncharted territory.
My particular thanks go to James Bowling, our Head of Finance, who has been with the business
since our early days and will be leaving us to pursue other opportunities in September. He has been
incredibly important in building the company up to where it stands today. We also welcome the
Sosandar plc
P a g e | 2
Annual Report 2020
CHAIRMAN’S STATEMENT
For the year ended 31 March 2020
appointment of Stephen Dilks, who will be stepping into the Finance Director role. He has extensive
experience in our sector and we look forward to benefitting from his knowledge going forward.
We must acknowledge that it has not been an easy time for our team, but I want to take this
opportunity to thank them for their dedication, hard work and ongoing enthusiasm for our business
and customers.
Outlook
The future remains uncertain, and we are ready to react to changes in the external environment. We
have proven, through the pandemic, that we are a genuinely agile, responsive business. We have
shown the level of control the Group has over its growth trajectory and with broad signals giving us
confidence it is now time to begin cautiously pressing down the accelerator pedal once more.
Our long-term focus has not wavered and continues to be on the development of our product,
infrastructure and service, alongside most importantly, further building our customer base.
There remains a huge opportunity ahead of us and numerous potential opportunities for future
expansion. Our ambition is for Sosandar to be a long-term, sustainable success and, notwithstanding
the challenging environment, we are well-placed to continue building the business throughout the
next year towards this goal.
______________
Bill Murray
Date: 17 August 2020
Sosandar plc
P a g e | 3
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
AT A GLANCE
Sosandar provide a one-stop online shop for style conscious women who have graduated from price
led alternatives. We offer this underserved audience fashion forward, affordable, quality clothing to
make them feel sexy, feminine and chic. The business sells entirely own label exclusive product
designed in-house.
Investment case
A unique proposition
Product exclusively designed in-house to suit a wide-ranging yet underserved demographic.
Exclusively designed trend-led, quality, affordable clothing with a premium aesthetic targeting a
demographic graduating from fast fashion brands and frustrated with high street alternatives.
Experienced and driven management team
Highly experienced management team with combined experience of 35 years in fashion and
previous success taking a business from concept to market leader.
Huge and growing market opportunity
Online fashion forecast to be worth £29bn by 2022 with Sosandar’s core demographic spending
£3.7bn a year on fashion.
Growing, loyal customer base
Active customers up 111% in the last year with a 2% increase in order frequency. Growing social
engagement and huge amounts of positive customer feedback.
Strong and scalable infrastructure in place
Mobile-first website built on leading Magento platform and logistics run through Clipper provide
capacity for large-scale growth.
Numerous potential opportunities for future expansion
Building an engaged customer base in attractive demographic allows opportunities for new product
categories along with geographical expansion and cross selling into complementary markets.
Sosandar plc
P a g e | 4
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
MARKET AND OPPORTUNITY
Fashion e-commerce represents a large and growing opportunity to build a multimillion-pound
business in an area of the market that is currently underserved by existing retailers.
BUSINESS MODEL
Our business is driven by creative flair skilfully combined with a data centric approach in order to
understand and respond to our customers’ needs. We excite and inspire our customers with
affordable, trend-led clothes for every occasion showcased with stunning lifestyle photography,
beautiful e-commerce imagery and video for every product. Our customer sits at the heart of
everything we do and we are committed to serving her every fashion need. We also provide fashion
and lifestyle magazine style content with styling tips, fashion ideas and trend advice.
Design
Our exclusive designs created entirely in-house offer exceptional quality at affordable prices. New
products are launched every month to deliver constant newness and to keep the brand at the
forefront of fashion trends.
Data
Data underpins everything we do: it leads our thinking on product and customer engagement, giving
a deep insight into our customers' decision-making and buying preferences, driving product
efficiency and enabling personalised marketing to ensure we continue to exceed customer
expectations.
Engagement
We use stunning product imagery and inspirational content to engage with our customers and build
brand awareness through both our own e-commerce site and a variety of channels, including social
media, PR and direct mail.
Sosandar plc
P a g e | 5
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
CO-CEO’S STATEMENT
The year to 31 March 2020 reflects a period of trading largely unaffected by the disruption and
uncertainty caused by COVID-19. The strong progress made both operationally and financially shows
there is a clear demand for the Company's unique offering in the market.
Since the outbreak of COVID-19, despite the challenges faced, as an online-only business the Company
has been able to react quickly and deliver continued revenue growth in the first quarter of the new
financial year and into current trading.
Vision and ambition
Our vision is to be a global one-stop online destination for a new generation of fashion forward
women who have graduated from fast fashion brands. We aim to build Sosandar into the go to
fashion destination for all occasions combining exceptional product with a first-class customer
experience.
Our strategy
Sosandar is focused on creating fashion-forward products for a generation of women overlooked by
existing fashion brands, and this offers a significant untapped opportunity - a demographic that spends
£3.7bn per year on fashion.
Our typical customer has a high disposable income and is very fashion conscious. She is looking for
quality, affordable clothing with a premium, trend-led aesthetic for all areas of her life.
Our strategy is to expand Sosandar's customer base and build our brand awareness through
developing exceptional products, providing a seamless customer experience and continuing to expand
our highly successful online and offline marketing activity. This is underpinned by combining our
creativity with gathering and analysing data on shopping habits, trends and customer preferences to
drive product development and effectively target new customers.
Overview
We are delighted to report revenue for the year of £9m up 103% year on year. Our customer base
continues to be very engaged with the brand demonstrating the ongoing strength of our products
across the entire range, with repeat orders up 144% and active customer base up 111%. Supported by
our marketing strategy, the period saw continued growth in customer numbers with new customers
up 67% and orders up 108%. Returns remained flat at 50%.
This strong growth in new customers was driven by the Group's strategic decision to invest and focus
marketing spend throughout Q2 and Q3. TV advertising naturally has a slower conversion rate in
comparison to social media and brochures, which resulted in the Group's conversion rate decreasing
by 25bps. Average order value for the period was down 6%, reflecting better than expected winter
weather and the impact this had on product mix.
Gross margin decreased 700bps to 48.5% driven by the discounting used during the initial period of
lock-down and stock provision, alongside the planned first order discounting following the period of
intense customer acquisition in Q2 and Q3.
Sosandar plc
P a g e | 6
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
Key operational developments
Throughout the period we continued to make good progress in building on our base from which
Sosandar can grow, looking towards achieving our vision of becoming a global one-stop online
destination for fashion forward women.
Following the oversubscribed placing of £7 million (gross) in July we were able to accelerate our
growth through strengthening our design capability, widening our product range and trialling
additional marketing channels. These activities directly resulted in increased customer acquisition
alongside continued growth from our ever-expanding base of loyal existing customers. This
investment quickly saw a return as we delivered record periods of trading in September, October and
November, with October and November delivering net revenues of over £1 million per month.
September also saw us begin to use TV advertising and start to trial the use of out-of-home digital
media for the first time. This 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 marketing initiatives significantly
increased brand recognition and awareness and will provide the basis of our learning and data as we
begin to reinvest in customer acquisition.
This period of customer acquisition also created significant growth in our customer database which
increased by 129% enabling communication with a much larger database in a cost effective way
through email and social channels. This proved especially important during the COVID lockdown as we
were able to significantly reduce marketing spend and trade off the customer database and prospects
acquired, especially in the second half of the year.
We were conscious that in order to become a one-stop shop for fashion forward women we needed
to further strengthen our design capability and widen our product range. Throughout the year, we
made investments across all areas, including design, buying, merchandising and garment technology
which resulted in our product range 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. In order to support the broadening product range we also
expanded our supplier base substantially.
As a result of our increased product range and as testament to the quality of our product, third party
interest to stock our clothes has increased. We have been trading on SilkFred for 19 months, which
has allowed us to successfully increase brand awareness with a broad range of customer
demographics. More recently we are delighted to also have reached agreements with household
names John Lewis and Next with capsule collections being released on their websites in Q2 FY2021.
This will further expand Sosandar’s brand awareness to their significant customer bases as well as
offering an additional channel to generate sales.
Response to COVID-19 and Q1 performance
The COVID-19 pandemic has had a profound impact on the trading environment in which we operate.
Our focus throughout this time has been and continues to be on ensuring the health and safety of our
colleagues whilst also ensuring that Sosandar remains well placed to deliver on its long-term growth
Sosandar plc
P a g e | 7
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
ambitions. In order to achieve this the Board took a number of actions to manage short term costs.
These included:
• A substantial reduction in its planned marketing spend in the short to medium term, in order
to focus on repeat orders from the Group's existing customer base, rather than new customer
acquisition.
• Stock levels being carefully managed with new stock being procured in line with demand.
Sosandar's flexible supply base enabled the Group to adapt production plans very quickly to
changes in consumer demand with continued use of the test and repeat strategy and minimal
initial order quantities helping to reduce stock risk.
• Warehousing and fulfilment costs successfully flexed to the changing demand needs as the
Company continues to benefit from the expertise of Clipper Logistics.
• All discretionary expenditure frozen.
• Approximately 60% of the workforce furloughed initially with the majority of the team of 33
no longer furloughed, with some part time.
• Reductions made to PLC Board remuneration.
Despite the drastically different trading environment and our decision to reduce marketing spend we
performed resiliently throughout April, May and June with total revenue in Q1 increasing 54% year on
year. This demonstrates the strength of our business model and continued demand for our products
from our highly engaged customer base.
Demonstrating our ability to convert prospects that have been established over time we saw a 24%
increase in new customers over the quarter, and robust growth in return customers, demonstrating
the longer-term impact of our acquisition marketing strategy in previous periods, and the benefits of
holding a larger database.
Pleasingly in June we recorded results very close to breakeven through a combination of growth in
sales, significantly decreased marketing spend and a strong margin from full price sales.
Outlook
The resilient performance throughout Q1 has continued into Q2 with revenue in July up 57%. The
lockdown period has proven how important our customer database, and their loyalty, is to
performance. Therefore, as lockdown restrictions ease we will begin cautiously increasing marketing
spend to continue this customer base growth. We will also continue to invest in new products whilst
maintaining the agility of decision making that has been vital in recent times to react to such sudden
changes in market conditions.
Notwithstanding the continued uncertainty in economic outlook we believe there is a significant
market share opportunity within our demographic, especially with the lockdown period escalating
growth in online retail. Combined with our growing and loyal customer base, an in-depth knowledge
of our customers’ changing needs, and our ability to quickly adapt to whatever is thrown at us we
remain confident in what the future holds for Sosandar.
Sosandar plc
P a g e | 8
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
FINANCIAL REVIEW
KPI’s
Revenue
Gross Profit
Gross Margin
Operating Loss
Adjusted Operating Loss1
EBITDA
Adjusted EBITDA1
Year ended 31 March 2020
£'000
£9,027
£4,381
48.5%
£(7,814)
£(7,439)
£(7,663)
£(7,288)
Year ended 31 March 2019
£'000
£4,440
£2,465
55.5%
£(3,546)
£(3,470)
£(3,485)
£(3,409)
Change
+103%
+78%
-700bps
-120%
-114%
-119%
-114%
1adjusted to reflect exceptional non-cash, accounting adjustment for share-based payment in 2020
The comparatives have not been adjusted for the impact of the adoption of IFRS 16 as at 1 April 2019
Year ended 31 March 2020
Year ended 31 March 2019
Change
Sessions
Conversion rate
Number of orders
AOV
Active customers
Repeat order rate
8,032,355
2.67%
214,487
£97.14
131,095
1.69
3,518,756
2.92%
102,967
£103.19
62,214
1.66
+128%
-25bps
+108%
-6%
+111%
+2%
During the financial year we have invested into all areas of the business, building on the momentum
of previous years and making sure infrastructure is in place to achieve continued future growth and
fully exploit the market opportunity that exists.
One area of investment was marketing, expanding on the successful mediums established in prior
years and trialling new areas, especially TV. This investment successfully delivered 128% increase in
web visits, 108% increase in orders and 103% increase in revenue. TV also proved especially
successful in building our customer database which increased 129% providing a stronger base on
which to build in future years, driving efficiencies as the proportion of orders from repeat orders
increases.
The increased investment in TV changed the dynamic of the traffic to the website. Existing channels
such as social and direct mail have a high level of direct response with intention to purchase. TV has
different characteristics driving high levels of traffic but with lower intention to purchase with
customers exploring the website for the first time and signing up for newsletters rather than making
a purchase immediately. As a result of the growth in TV investment and change in marketing mix,
conversion decreased slightly but brand awareness and website traffic has greatly increased.
The other area of investment was in people to expand product offering and enhance choice for the
growing customer base. This included expansion of the design team which helped the business to
test and expand into areas such as denim and loungewear, and increase the number of new styles by
88%. Increased choice helped to recruit and retain customers with active customer base up 111%
and order frequency up 2%.
Sosandar plc
P a g e | 9
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
To help support the enhanced product choice, investment has also been made into the sourcing and
merchandising teams to expand the supplier network by 119% across seven new countries. This
provided access to new fabric types and helped diversify risk whilst also providing price competition
within the supply chain.
As a result of this investment operating expenses increased by 99%, but decreased as a percentage
of revenue, with the costs of growth offset by underlying efficiencies and economies of scale. The
importance of a diversified supply base and increased customer database were underlined during
the COVID pandemic. The expansion of supply chain allowed for consistent delivery of product and
quick shift to more casual ranges. The larger database allowed conversion of prospects and orders
from repeat customers acquired pre year end.
Expanding into new areas meant there was a shift in product mix which combined with a milder
winter period than the previous year meant that proportionately higher sales of lower price product
impacted average unit values and ultimately average order value (AOV) which decreased 6% on the
year. AOV was also impacted by a significant increase in customer acquisition with new customers
up 67% on prior year and many of these new customers utilising first order discounts.
This growth in new customers also impacted margin as did establishing new relationships with
suppliers and small order quantities on the new product areas. Discounting and provisions as a result
of COVID at the end of the year contributed to margin reductions year on year but after the initial
impact of the pandemic margins have returned to prior year levels.
The success of the business meant that vesting conditions were activated during the year creating an
exceptional, non-cash, share based payment charge of £375k (2019: £76k) impacting the loss
position for the year.
Going into the new financial year the Company had a cash balance of £5.3m and healthy stock levels
which have helped Sosandar trade through the changing market conditions resulting from the global
pandemic. The foundations that have been built over recent years have put the Company in a strong
position going forward and helped achieve significant cost efficiencies in the first quarter reflecting
the agility of the business model. Whilst investment will start to increase in a controlled and prudent
manner, the Company will continue to benefit from the more established customer database and
infrastructure which has been developed throughout the year.
Sosandar plc
P a g e | 10
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
Risk Factors
There are a number of risks and uncertainties associated with the business. The Board believes the
following are the principle risks along with the mitigating actions being applied.
Strategic and Market Risks
Risk Factor
Market
competition
Impact
• As the business
continues to grow,
competitors may try
and target the same
demographic using a
similar proposition.
Fashion risk
Customer
demands and
e-commerce
advancements
Negative
online reviews
• As trends change there
is a risk that design does
not keep up with
customer requirements
for the latest fashion.
• As the e-commerce
market grows across all
sectors and industries,
consumers have
increased expectations
and increasing demands
around ease of
purchasing and returns.
• Negative comments on
social platforms could
influence purchasing
decisions for new
visitors.
Mitigating Actions
• Competitor activity is regularly reviewed to
ensure Sosandar’s brand proposition
continues to be viewed as a leader of the
trend-led, affordable market within its target
demographic.
• Sosandar puts the customer at the heart of
all decisions, focusing on up-to-date trends,
design principles important to its
demographic and a seamless purchase
experience to attract new customers.
• This is combined with a relentless pursuit of
service excellence to make sure customers
have the best possible experience to build
loyalty and further purchases.
• As a first mover, Sosandar has begun
building up a repeat customer base loyal to
the brand.
• The business operates on monthly drops
with tight design lead times that allow the
design team to track the latest catwalk and
commercial fashion trends. These are then
fed into the product development to ensure
that customers have access to the latest
trends at affordable prices.
• Regular meetings are held with developers
of new technology and services that
enhance customer experience to ensure that
the business stays up-to-date with the latest
e-commerce trends. This is not limited to the
fashion industry with review and adoption of
best practice principles from all areas of e-
commerce.
• A dedicated customer service team is able to
monitor any reviews or comments in order
to contact customers to resolve any issues.
Any unwarranted malicious content is
removed and the user reported to the
relevant social platform.
Sosandar plc
P a g e | 11
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
Operational Risks
Risk Factor
Supplier risk
Impact
Mitigating Actions
• The business relies on
• Purchases are spread over a number of
its outsourced
manufacturing supplier
base to provide the final
product. Loss of
suppliers through
insolvency, disaster or
ceasing of working
relationship could
impact short term
supply.
• Non-compliance with
labour or
environmental
requirements could
interrupt supply chain
and cause reputational
damage.
• Product supplied could
be of insufficient quality
for sale.
• GDPR could impact
ability to work with data
providers who help
identify prospective
customers for
marketing purposes.
• Data breaches could
impact reputation and
business continuity.
• Customers may wear
the products then use
the returns policy to
gain refund with the
product not suitable for
re-sale.
• Slow moving stock
could increase
warehousing or impact
margin if discounted.
Data and
GDPR
Mis-use of
returns policy
by customers
Slow moving
stock
Brexit risk
• The UK’s decision to
leave the EU could
impact costs.
suppliers to avoid over dependency on any
single supplier and as the business is
growing and increasing order quantities the
potential supplier base is widening.
• All design is done in-house with detailed
specification packs provided for each
product which helps on-board new suppliers
quickly.
• All suppliers are asked to confirm that they
adopt all relevant Ethical Trade Initiative
(ETI) base code principles.
• Each product goes through an extensive
sampling process and final quality control
process to ensure it is suitable for sale.
• We work with industry leading data
providers with extensive compliant
databases to ensure sufficient sources of
target information for marketing purposes.
• Dedicated cyber insurance policies are in
place which include specialist resource and
plans to minimise the impact of any cyber
attacks.
• Each product is quality controlled upon
return to the warehouse to check for wear
or damage and make sure that a refund
should be processed. The quality control
process includes equipment that ensures the
product is in the same condition as when
first received and that it is suitable for sale.
• Stock turn is reviewed regularly at product
level by senior management. Focused
marketing techniques are applied to
stimulate demand and maximise conversion.
• The outlet section of the website exists for
fragmented stock lines and any out of
season stock should we decide to reduce the
price if the above are unsuccessful.
Less than 10% of imports come from EU
countries and the company continues to
•
Sosandar plc
P a g e | 12
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
COVID 19 Risk
Financial Risks
Risk Factor
Foreign
exchange rate
risk
Working
capital risk
• Changes to
import/export rules
could impact delivery of
goods to customers and
delay delivery of stock
ordered from the EU.
• Severe loss of revenue
• Closure of the
•
warehouses
Loss of or absence of
employees due to
illness
•
Loss of supply chain
• Transport disruption
expand its supplier base to de-risk any
impact Brexit may have.
• Sales are currently UK only, any expansion
into overseas market would be done with an
understanding of any rules implemented as
part of the Brexit process.
• Diversified supply chain with no overreliance
on one single country
• Detailed live insight on customer demand
allows immediate insight into any changes in
demand allowing resource to be flexed
accordingly.
Limited fixed/committed expenditure with a
highly flexible cost base.
•
• Flexible supply chain to adapt to any change
in product type demand.
• Test and repeat model on stock to maximise
on fast selling product lines whilst
minimising risk on slower lines.
• Government financial support
• Safe working practices rigorously imposed
• Employees working from home wherever
possible
Impact
Mitigating Actions
• The business buys some
product in foreign
currency. Adverse
currency rate
movements could
impact margins.
• As the company invests
in product and
customer acquisition
there is a risk that funds
will be required to fund
continued growth.
• A detailed forward-looking purchase plan to
identify any potential currency exposure and
appropriate hedging techniques are used to
avoid any margin erosion caused by FX
movements.
• The business has detailed forward-looking
forecasts and in-depth analysis of both
product and marketing channel
performance. This analysis is used to
maximise efficiency of spend and return on
investment, balancing the growth
requirements against the funds available to
the business. Activities are adjusted
accordingly to manage cash flows whilst
maintaining communication with any
potential funders should any further growth
capital be required.
Sosandar plc
P a g e | 13
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
Section 172 Statement
Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of
stakeholders in their decision making. They must make decision in good faith that they believe will
most likely promote the success of the Company for the benefit of its shareholders. In making these
decisions the Directors must consider, amongst other things:
Likely long term impact of their decisions
Interests of employees and the need to act fairly between members of the Company
•
•
• The reputation of the Company with customers and suppliers
• The community and environment in which the Company operates
Key Stakeholders
Employees
Shareholders
Suppliers
Customers
How we engage
As a small team of under 40 people operating out of the same office there is
regular engagement on a daily basis with more formal updates via
presentations around key events
As an AIM listed business, we have a dedicated investor website with all key
information and RNS updates. We also conduct regular presentations with
investors and at retail investor events around the time of trading updates.
This year we also did a video presentation which was made available online
We have personal relationships across all our supply chain and update each
other through regular meetings and phone calls
Our customers are at the heart of everything we do. We use email and
social platforms to update them about new products and regularly review
any feedback we received to understand how we can improve their
experience
Significant events/decisions 2020
Event/Decision
Investment into
the team
Key
Stakeholders
Shareholders,
employees,
customers
TV trial and
subsequent
investment
Shareholders,
customers
Actions & Impact
• Expansion of team to create new products and
enhance choice for customers. Up front investment
required impacting cost base
• Executive made suggestions presented to the Board
for approval
• Updates given to shareholders through results and
RNS updates
• Significant growth achieved in product range
helping to recruit and retain customers
• Trial of TV for the first time to test its effectiveness
to generate new customers
• Trial was successful so subsequent investment was
made which increased cost base and required
additional funding
• Updates and presentations given to shareholders in
•
order to complete fundraising process
Investment was successful in generating significant
customer growth helping build the database and
Sosandar plc
P a g e | 14
Annual Report 2020
STRATEGIC REPORT
For the year ended 31 March 2020
Fundraise
processes
Shareholders,
employees,
suppliers
COVID 19
Impact
All stakeholders
ability to generate future revenue and shareholder
benefit
• Changes in the supplier credit market as a result of
high profile, high street retail failures impacted
working capital. This combined with TV investment
meant the business sought further funding
• Shareholder communications took place in
accordance with regulatory requirements and
presentations were given to explain details of
requirements.
• Funds have helped the business continue its growth
and provide strong foundation for the future.
• COVID 19 and the subsequent UK lockdown created
unprecedented market conditions
• The business switched from growth strategy to cash
preservation with reduction in all discretionary
spend
• Employees and suppliers were consulted around
safe working practices with office staff working
from home and additional measures taken at our
third-party warehouse
Increased frequency of updates to shareholders to
provide up to date information on performance
•
• Communication with customers to update on
service changes and actions taken both on the
website and through email
_________________
Julie Lavington
Director
Date: 17 August 2020
Sosandar plc
P a g e | 15
Annual Report 2020
BOARD OF DIRECTORS
Biographical details of the Directors
Bill Murray - Non-Executive Chairman
Bill Murray has extensive experience in the media industry, having spent 22 years until 2008 with
one of the largest independent media companies, Haymarket Media Group. Since the late 1990s he
has focused on the digital arena. He served as managing director of digital strategy at Haymarket
where he developed online business across the Haymarket Group and led a number of successful
launches and acquisitions.
Over the last 12 years, Bill has worked across a portfolio of digital, media and other commercial
organisations, providing strategic and commercial direction on both a non-executive and
consultancy basis.
He has been chairman of The Hollins Murray Group since 2009, a north west-based commercial
property group that now has a portfolio valued at more than £100 million. He chairs the board of
10ACT Ltd, trading as Trackback, a software company that provides lead follow-up and customer
experience improvement services to the automotive industry worldwide. Bill is also a director of
Jayess Assets Limited. Bill was founding chairman of the UK Association of Online Publishers from
2002, a position he held for four years and was chairman, then President of his beloved Camberley
RFC between 2006 and 2014.
Bill has worked with the founders of Sosandar since early 2014, has assisted them with fundraising
and numerous aspects of bringing the business to life and has chaired the Sosandar Board since its
inception at the start of 2016.
Alison Hall – Co CEO and Founder
Former fashion magazine editor, Alison Hall, is co-founder and joint CEO of Sosandar.
Prior to founding Sosandar in 2015, Alison was editor of Look magazine. After its launch in 2007,
Alison helped it grow to become a leading fashion magazine title. Alison has been a highly influential
fashion editor, and has twice been awarded the Editor of the Year (Women's Magazines (weekly or
fortnightly)) accolade by the British Society of Magazine Editors. During her tenure at Look, Alison
designed successful clothing ranges for several of the UK's top retailers.
Alison started out her career as a newspaper journalist, before holding editor positions on magazine
brands such as Slimming, Bliss and More. She successfully implemented major relaunches of various
titles, creating growing businesses, reinvigorating the brands and increasing circulations. Alison has
also been a fashion contributor to both local and national radio and TV shows.
Julie Lavington – Co CEO and Founder
Former fashion magazine publishing director, Julie Lavington, is co-founder and joint CEO of
Sosandar.
In 2007, Julie launched Look magazine, a leading UK women's fashion publication. During her tenure,
Julie steered Look to have a multi-platform presence with a wide social media reach. She diversified
into producing successful Look branded clothing ranges with leading UK fashion retailers. Julie was
awarded the prestigious Publisher of the Year Award in 2010 by the Professional Publishers
Sosandar plc
P a g e | 16
Annual Report 2020
BOARD OF DIRECTORS
Association. From August 2014, Julie was also publishing director of UK InStyle magazine a global
fashion brand published in 17 countries worldwide.
Prior to her role at Look and InStyle, Julie was publishing director of the TV portfolio at H. Bauer
from 2001 to 2006, where she took TV Choice from fledgling brand to market leader. She has also
held publishing roles on numerous women's brands, including Marie Claire, after starting her career
in advertising sales following a modern languages degree at Durham University.
Mark Collingbourne – Finance Director
Mark is a qualified accountant with significant experience in financial management, particularly in the
area of publicly quoted companies. He has dealt with all aspects of Plc development from bringing
small companies to flotation to supervising the on-going accountancy and ensuring the good
governance of international businesses.
During his ten-year tenure with ViaLogy Plc (now Yourgene Health Plc), Mark was a key member of
the team that arranged its transformation from a private US organisation to an AIM company, via a
merger with Original Investments Plc. He also played a major part in arranging the financial details of
ViaLogy's restructuring.
Previously, after periods with ITV Network Centre and Mechanical Copyright Protection Society
Limited, Mark was appointed Finance Director of Curtis Brown Group Limited, one of the UK's leading
literary agencies, in 1996, where he managed the financial implications of the management buyout in
2001.
Mark is currently chief finance officer of Optibiotix Health Plc and also holds board positions on a
number of small private companies.
Adam Reynolds – Non-Executive Director
Adam began his career in the City in 1980 with stockbrokers Rowe Rudd. He later joined Public
Relations business Basham & Coyle heading their Investor Relations Division. In 2000, he established
his own PR/IR and Corporate Finance firm, which listed on AIM in November 2000 and was then sold
in 2004.
Adam was approached in 2005 to become non-executive chairman of International Brand Licensing
Plc. In 2009, Adam brought David Evans and Julian Baines - the two leading diabetes specialists in the
UK - into the company and the business changed direction. Today it is known as EKF Diagnostics Plc.
Adam is a non-executive director and a shareholder.
In 2012, Adam was introduced to Autoclenz Plc through an institutional fund manager. In November
2012, Adam launched a successful agreed bid with the management for the business to be taken
private. Adam is a director and shareholder of this business.
Sosandar plc
P a g e | 17
Annual Report 2020
BOARD OF DIRECTORS
Nick Mustoe - Non Executive Director
Nick started his career in 1981 working in London advertising agency Foote Cone and Belding
followed by nine years at Lowe Howard Spink. In that time Nick worked across many clients including
Tesco, Heineken, Whitbread, Vauxhall, Wicks, Weetabix, Bauer Publishing and Hanson Group
Companies.
Nick started his own agency, Mustoes Merriman Levy, in 1993, which he ran as an independent
agency for 15 years, with a brief period under the ownership of Japanese multi-national Hakuhodo.
During this time the agency managed clients including Kia Cars, Lloyds Pharmacy, Doctor Marten,
Bauer Publishing, Coca Cola and Unilever.
In 2008, Mustoes Merriman Levy merged with a leading PR agency Geronimo to form Kindred, the
first fully integrated PR and advertising agency. Nick subsequently led an MBO of Kindred in 2010
and continues to lead the company as the chief executive.
Nick is chairman of Kempton Park Racecourse, Big Sofa Technologies Group Plc, ABC Connection
Limited and Starlight Children's Foundation and a non-executive director of Yourgene Health Plc.
Andrew Booth - Non-Executive Director
Andrew is a 20-year digital marketing veteran working with hypergrowth companies, starting with
gettyimages in 1999 developing his career throughout the rise from AIM to Nasdaq, to NYSE
becoming Vice President of Marketing.
Following the sale of gettyimages in 2008 for $2.4BN to Hellman and Friedman, Andrew joined Time
Out as group marketing director leading the migration of digital with the customers and growth of
the worldwide brand. Thereafter becoming chief marketing officer for the Hut Group spanning all
brands, all customer facing activity globally, in 2014 Andrew joined Lateooms.com, part of TUI Plc as
chief marketing officer / chief revenue officer remaining on until its sale.
Andrew remains within the plural environment focused on brands that are utilising technology to
significantly grow the customer relationship.
Sosandar plc
P a g e | 18
Annual Report 2020
GROUP DIRECTORS’ REPORT
The Directors present their report and the consolidated financial statements for the year ended 31
March 2020.
Results and dividends
The Group loss after tax for the year ended 31 March 2020 amounts to £7.81m (2019: £3.55m). The
Directors are not recommending payment of a final dividend for the year (2019: £nil).
Directors
The Directors who served on the Board during the year and to the date of this report are as follows:
Adam Reynolds
Alison Hall
Julie Lavington
Bill Murray
Nicolas Mustoe
Mark Collingbourne
Andrew Booth
Substantial shareholdings
As at 10 August 2020 the following held 3% or more of the share capital of the Company:
Rank
1
2
3
4
5
6
7
8
9
Shareholder
Bny (OCS) Nominees Limited
Octopus AIM VCT PLC
Aurora Moninees Limited
HSBC Global Custody UK (Nominees) Limited
Luna Nominees Limited
Hargreave Landsdown Nominees) Limited
Octopus AIM VCT 2PLC
The Bank of New York (Nominees) Limited
Hargreave Landsdown Nominees) Limited
Based on 192,269,122 ordinary shares on 31 March 2020.
No of shares at
10 August 2020
12,480,000
12,073,021
11,190,591
11,150,000
9,438,300
8,110,907
8,048,672
7,500,000
6,337,361
% Issued
Capital
6.49%
6.28%
5.82%
5.80%
4.91%
4.22%
4.19%
3.90%
3.30%
As at 31 March 2020 the following held 3% or more of the share capital of the Company:
Rank
1
2
3
4
5
6
7
8
9
10
Shareholder
Bny (OCS) Nominees Limited
Octopus AIM VCT PLC
Aurora Moninees Limited
Luna Nominees Limited
Octopus AIM VCT 2PLC
HSBC Global Custody UK (Nominees) Limited
The Bank of New York (Nominees) Limited
Hargreave Landsdown Nominees) Limited
Hargreave Landsdown Nominees) Limited
Barclays Direct Investing Nominees Limited
Based on 192,269,122 ordinary shares on 31 March 2020.
No of shares at
31 March 2020
12,480,000
12,073,021
11,190,591
9,215,300
8,048,672
7,582,837
7,500,000
7,100,165
6,214,491
5,895,595
% Issued
Capital
6.49%
6.28%
5.82%
4.79%
4.19%
3.94%
3.90%
3.69%
3.23%
3.07%
Sosandar plc
P a g e | 19
Annual Report 2020
GROUP DIRECTORS’ REPORT
Corporate governance
The Directors recognise the importance of sound corporate governance and, following Admission,
have undertaken to take account of the requirements of the QCA Guidelines to the extent that they
consider it appropriate, having regard to the Company's size, board structure, stage of development
and resources.
The QCA Guidelines recommend that the Board of Directors should include a balance of Executive and
Non-Executive Directors, such that no individual or small company of individuals can dominate the
board's decision taking.
The Company holds regular Board meetings and the Directors will be responsible for formulating,
reviewing and approving the Company's strategy, budget and major items of capital expenditure. The
Directors have, established an Audit Committee, a Nomination Committee, a Disclosure Committee
and a Remuneration Committee with formally delegated rules and responsibilities.
Remuneration Committee
The Remuneration Committee, which comprises Nick Mustoe (chairman), Adam Reynolds and Bill
Murray, met twice each year. The Committee is responsible for the review and recommendation of
the scale and structure of remuneration for senior management, including any bonus arrangements
or the award of share options with due regard to the interests of the Shareholders and the
performance of the Company.
Audit Committee
The Audit Committee, comprises Bill Murray (chairman), Adam Reynolds and Nick Mustoe, mee twice
a year. The committee is responsible for making recommendations to the Board on the appointment
of auditors and the audit fee and for ensuring that the financial performance of the Company is
properly monitored and reported. In addition, the Audit Committee received and reviewed reports
from management and the auditors relating to the interim report, the Annual Report and Accounts
and the internal control systems of the Company.
Nomination Committee
The Nomination Committee, comprises Adam Reynolds (chairman), Bill Murray and Nick Mustoe,
meet at such times and frequency as necessary. The Nomination Committee monitor the size and
composition of the Board and the other Board Committees and are responsible for identifying suitable
candidates for Board membership.
Disclosure Committee
The Disclosure Committee, which comprises Nick Mustoe (chairman), Bill Murray and Adam Reynolds,
meet at such times as shall be necessary or appropriate to discharge its obligations and comply with
applicable law and regulation. The Committee is responsible for overseeing the Company's compliance
with its obligations under the Market Abuse Regulation and the AIM Rules for Companies in relation
to the disclosure of inside information and price sensitive information.
Introduction
The Board of Sosandar Plc seeks to follow best practice in corporate governance as appropriate for a
company of our size, nature and stage of development. As a public company listed on AIM, we are
cognisant of the trust placed in the Board by institutional and retail investors, employees and other
stakeholders. We recognise the importance of an effectively operating corporate governance
framework.
Sosandar plc
P a g e | 20
Annual Report 2020
GROUP DIRECTORS’ REPORT
The Board has adopted the principles of the 2018 Quoted Companies Alliance Corporate Governance
Code - (the QCA Code) to support the Company's governance framework. The Directors acknowledge
the importance of the ten principles set out in the QCA Code and this statement briefly sets out how
we currently comply with the provisions of the QCA Code. The Board considers that it does not depart
from any of the principles of the QCA code.
Principle
How we comply with the QCA Code in this area
1. Establish a strategy and business model which promote long-term value for shareholders
Sosandar intends to build long-term shareholder value by targeting an underserved market of women
looking for trend-led, affordable, quality clothing with a premium aesthetic. We design and
manufacture clothing and footwear for all occasions with fashion forward styles designed to flatter.
Our strategy is to build a loyal customer base, focusing on customer growth and retention, by taking
advantage of the increasing convergence of e-commerce and media.
2. Seek to understand and meet shareholder needs and expectations
The Company recognises the importance of engaging with its shareholders and reports formally to
them when its full-year and half-year results are published.
The Board also seeks to engage with shareholders to understand their needs and expectations,
primarily through meetings with the Executive Directors, both individually as required (this mainly
applies to institutional investors and/or those with significant shareholdings) and at Annual General
Meetings, at which all shareholders are welcome.
The Joint CEOs and Executive Directors regularly present at private investment events during the year.
Investors may contact the Company directly through the investor enquiries email address noted on
the Company's website sosandar@almapr.co.uk. Investors may also receive Investor Email Alerts from
the Company by signing up at http://www.sosandar-ir.com/content/investors/alert.asp
3. Take into account wider stakeholder and social responsibilities and their implications for long-term
success
We recognise that we are responsible not only to our shareholders and employees, but to a wider
group of stakeholders (including, inter alia, our customers and suppliers) and the communities in
which we operate.
Sosandar Plc is committed to the highest standards of corporate social responsibility in its activities,
as outlined in more detail in the annual report and accounts.
Suppliers
We outsource manufacturing to 16 subcontractors around the world including India, China, Turkey
and Spain. All suppliers are asked to confirm they adhere to the ethical trade guidelines. The breadth
of strong supplier relationships mitigates the risk of over reliance on a small number of specific
contacts. The output from suppliers is regularly reviewed to ensure continued success.
Sosandar plc
P a g e | 21
Annual Report 2020
GROUP DIRECTORS’ REPORT
Customers
We provide frequent new product ranges to ensure constant newness for our customers. Our in-house
designers react quickly to changing customer demand to ensure the Company is on the cutting edge
of fashion, while tailoring garments to fit customers.
4. Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Board has identified what we believe to be a sensible approach to risk management for a company
of our size.
We outline the Company's approach to risk management and the principal risks we face, along with
what we do to mitigate those risks, in detail on pages 11 to 13 of our Annual Report and Accounts.
The Company receives regular feedback from its external auditors on the state of its risk management
and internal controls.
This area is subject to regular review as our business and the risks we face evolve.
5. Maintain the board as a well-functioning, balanced team led by the chair
The Board includes a balance of Executive and Non-Executive Directors, with four Non-Executive
Directors compared to three Executive Directors.
The Board's activities are supported by Nomination, Audit and Remuneration Committees.
All the Directors have appropriate skills and experience for the roles they perform at the Company,
including as members of Board Committees.
Directors are subject to re-election at least every three years in accordance with the Articles of
Association.
The Company is satisfied that the current Board is sufficiently resourced to discharge its governance
obligations on behalf of all stakeholders and will consider the requirement for additional Non-
Executive Directors as the Company fulfils its growth objectives.
6. Ensure that between them the Directors have the necessary up-to-date experience, skills and
capabilities
The Board currently comprises three Executive and four Non-Executive Directors with an appropriate
balance of sector, financial and public market skills and experience.
More details of the skills and experience of the Directors are provided in the Annual Report and
Accounts as well as the website.
The experience and knowledge of each of the Directors gives them the ability to constructively
challenge the strategy and to scrutinise performance.
The Board has access to external advisors where necessary.
Sosandar plc
P a g e | 22
Annual Report 2020
GROUP DIRECTORS’ REPORT
The Board and Committees receive training as appropriate. In particular, the members of the Audit
Committee receive technical updates from the Company's external auditors to keep them abreast of
the latest accounting, auditing, tax and reporting developments.
The Directors also receive regular briefings and updates from the Company's NOMAD in respect of
continued compliance with, inter alia, the AIM Rules and the Market Abuse Regulation.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous
improvement
Evaluation of the performance of the Company's Board has historically been implemented in an
informal manner.
The Nomination Committee formally reviews and considers the performance of each Director at or
around the time of publication of the Company's Annual Report.
The review looks at Director performance during the year, which includes but is not limited to:
financial targets; adherence to Company policies, effectiveness of management as well as attendance
and contribution at Company meetings.
On an ongoing basis, Board members maintain a watching brief to identify relevant internal and
external candidates who may be suitable additions to or backup for current Board members.
8. Promote a corporate culture that is based on ethical values and behaviours
The Board believes that the promotion of a corporate culture based on sound ethical values and
behaviours is essential to maximise shareholder value.
The Company carefully assesses each of the companies it works with to ensure the requisite standards
and values are in place. All new suppliers must confirm in writing that they adhere to the Ethical
Trading Initiative base code www.ethicaltrade.org/eti-base-code.
The Company's policies set out its zero tolerance approach towards any form of modern slavery,
discrimination or unethical behaviour relating to bribery, corruption or business conduct.
9. Maintain governance structures and processes that are fit for purpose and support good decision-
making by the board
The roles and responsibilities of specific Directors and Board Committees are available on our website.
The Board meets formally at least six times per year.
Each Committee has terms of reference outlining the specific responsibilities delegated to it.
The terms of reference of each Committee can be found on in the corporate governance section of
the Company website.
The appropriateness of the Board's structures and processes are reviewed through the ongoing
evaluation process by the Nomination Committee, which will evolve in parallel with the Company's
objectives, strategy and business model as the Company develops.
Sosandar plc
P a g e | 23
Annual Report 2020
GROUP DIRECTORS’ REPORT
10. Communicate how the company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The Company communicates progress throughout the year through Regulatory News Service
announcements and in more detail in its interim financial statements and Annual Report and
Accounts. All historical Annual Reports and other governance related material, including notices of all
general meetings, since the Company's formation, are available on the Company's website.
Results of shareholder votes are made public on the Company's website after the meetings concerned.
Directors’ remuneration
The Directors are entitled to receive relevant fees, as detailed in the Directors remuneration in note
6.
Directors and their interests
The Directors of the Company held the following beneficial interests in the shares and share options
of Sosandar Plc at 31 March 2020 and 31 March 2019:
31 March 2019 and 31 March 2020
Alison Hall
Julie Lavington
Nicholas Mustoe
Adam Reynolds
Mark Collingbourne
Bill Murray
Ordinary
shares of
0.01p each
5,309,343
5,309,343
4,872,871
1,960,802
928,919
345,107
Ordinary
shares of
0.01p each
8,400,000
8,400,000
400,000
800,000
400,000
400,000
Share Options
Option
exercise
Price £
0.151
0.151
0.151
0.151
0.151
0.151
Expiry
03/11/2027
03/11/2027
03/11/2027
03/11/2027
03/11/2027
03/11/2027
Going concern
After making appropriate enquires, the Directors consider that the Group and Company has adequate
resources to continue in operational existence for the foreseeable future. As part of their enquiries
the Directors have reviewed cash forecasts for the Group and Company’s operations for the 12 months
from the date of approval of the financial statements. The Group and Company has adequate cash to
cover its corporate overheads and management costs over this year but management continues to
monitor these costs and manage cashflows. Refer to note 2 for further information.
Events after the reporting period
Further information on events after the reporting period is set out in note 23.
Principal risks and uncertainties
The principal risks and uncertainties of the business are discussed in the Strategic Report and in note
22.
Overseas branches
The Company has no overseas branches.
Sosandar plc
P a g e | 24
Annual Report 2020
GROUP DIRECTORS’ REPORT
Directors' responsibilities
The Directors are responsible for preparing the Group Directors' Report and financial statements in
accordance with applicable law and International Financial Reporting Standards.
Company law requires the Directors to prepare financial statements for each financial period. Under
that law the Directors have elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted for use in the European Union that give a true
and fair view of the state of the affairs of the Group and the Company and of the profit or loss of the
Group for that period.
In preparing these financial statements the Directors are required to:
•
select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and prudent;
•
state whether the Group and Company financial statements have been prepared in
accordance with IFRS as adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate
to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Group and Company and to enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website.
Auditors
The Board are recommending Jeffreys Henry LLP for re-appointment as auditors of the Group and
Company. Jeffreys Henry LLP have expressed their willingness to accept this appointment and a
resolution re appointing them will be submitted to the forthcoming Annual General Meeting.
Disclosure of information to the auditors
At the date of approving this report, each Director confirms that, so far as that he is aware, there is no
relevant audit information of which the Group and Company’s auditors are unaware and she/he has
taken all the steps that he ought to have taken as a Director in order to make her/himself aware of
any relevant audit information and to establish that the Group and Company’s auditors are aware of
that information.
For and on behalf of the Board:
_____________________
Julie Lavington
Director
Date:17 August 2020
Sosandar plc
P a g e | 25
Annual Report 2020
INDEPENDENT AUDITORS’ REPORT
Independent auditor’s report to the members of Sosandar Plc for the year ended 31 March 2020
Opinion
We have audited the financial statements of Sosandar Plc (the ‘parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 March 2020 which comprise the consolidated statement of income and other
comprehensive income, the consolidated and parent Company statements of financial position, the consolidated
and parent Company statements of cash flows, the consolidated and parent Company statements of changes in
equity and notes to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the Group financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial
reporting framework that has been applied in the preparation of the parent Company financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, as
applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the parent
Company’s affairs as at 31 March 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
the parent Company financial statements have been properly prepared in accordance with IFRS’s as
adopted by the European Union as applied in accordance with the provisions of the Companies Act
2006; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the Company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.
Our audit approach
Overview
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
Sosandar plc
P a g e | 26
Annual Report 2020
INDEPENDENT AUDITORS’ REPORT
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of
all risks identified by our audit.
•
Inventory provisioning.
• Going concern assumption.
• Carrying value of investments and recoverability of intercompany loans to its subsidiary.
These are explained in more detail below.
Audit scope
• We conducted audits of the complete financial information of Sosandar Plc and Thread 35 Ltd.
• We performed specified procedures over certain account balances and transaction classes at other
•
Group companies.
Taken together, the Group companies over which we performed our audit procedures accounted for
100% of the absolute profit before tax (i.e. the sum of the numerical values without regard to whether
they were profits or losses for the relevant reporting units) and 100% of revenue.
Key audit matters
Key audit matter
Inventory provisioning
The Group held £3,809,830 of inventory as at 31
March 2020 (2019: £1,036,714) net of provisions
totalling £394,979 (2019: £591,022).
The provisioning policy is driven by margin rather
than age of stock. The key assumptions driving the
inventory provision are the net realisable value
expected to be achieved on sale, and the saleability
of older stock lines.
Going concern assumption
The Group is dependent upon its ability to generate
sufficient cash flows to meet continued operational
costs and hence continue trading.
loss-making status
Although the current
is as
expected due its relative newness, given the scale of
cash outflows, the Group needs to be generating
sufficient revenues to sustain its position.
The key assumptions that impact the conclusions are
the levels of future revenue, and the ability to control
the operating costs.
There are therefore inherent risks that the forecasts
may overstate future revenue or understate future
costs, and that the Group will not be able to operate
within its cash resources and continue to operate as
a going concern.
How our audit addressed the key audit matter
We understood the methodology used to calculate
the inventory provision and determined it was
consistent with that applied in the prior year.
We reconciled the inventory values used in the
provision to the general ledger.
We reviewed the calculations for arithmetical
accuracy and compared NRV
inputs to prices
available on the website.
We recomputed the level of provision having regard
to the Group’s provisioning methodology and
performed some sensitivity analysis to assess
whether there was risk of material misstatement of
the provision.
Evaluated the suitability of management’s model for
the forecast.
The forecast includes a number of assumptions
related to future cash flows and associated risks. Our
audit work has focused on evaluating and challenging
the reasonableness of these assumptions and their
impact on the forecast period.
Specifically, we obtained, challenged and assessed
management’s
and
performed procedures including:
forecast
concern
going
•
•
inputs
Verifying the consistency of key
relating to future sales and costs to other
financial and operational
information
obtained during the audit;
Assessed the reasonableness of expenses
and costs established;
• We reviewed
the
latest management
•
accounts to gauge the financial position.
Performed a retrospective review of prior
budgets to determine historical levels of
accuracy.
Sosandar plc
P a g e | 27
Annual Report 2020
INDEPENDENT AUDITORS’ REPORT
The
amount of
totalling £16,950,351
Carrying value of investments and recoverability of
inter-company loans to its subsidiary
The Company has amounts due from the subsidiary
Thread 35 Ltd
(2019:
£7,093,954), and an investment of £6,281,618 (2019:
the
carrying
£6,281,618).
intercompany balance between the parent and the
subsidiary represents 60% of the parent Company’s
total assets.
The recoverability of this balance is reliant on the
continued growth and profitability of the subsidiary.
The Directors consider these
fully
recoverable.
Management have provided cash flow forecasts and
performed
impairment reviews relating to the
investments and loans.
Management’s assessment of
recoverable
amount of investments and inter-company balances
requires estimation and
with
judgement around assumptions used, including the
cash
from continuing
operations. Changes to assumptions could lead to
in the estimated recoverable
material changes
amount, impacting the value of investment in the
subsidiary and possible impairment of the inter-
company balance.
flows to be generated
the subsidiary
loans are
the
Management performed stress tests reflecting
scenarios determined by mutual agreement.
We have reviewed the carrying value of the
investments and loans to the subsidiary. The review
considered the current position of the subsidiary, the
future outlook and
forecasts prepared by
management.
We have assessed the cash flow forecasts and
impairment reviews provided. The methodology and
assumptions used by management have been
evaluated, and deemed reasonable.
We have considered the Company’s assessments,
and the results of audit work conducted on the
subsidiary
indicators of
impairment.
We have assessed
the appropriateness and
applicability of the discount rate applied to the
current business performance;
We have confirmed that any adverse change in key
increase the
assumptions would not materially
impairment loss;
for any unrecognised
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Overall materiality
How we determined it
Rationale for
benchmark applied
Group financial statements
£366,000 (2019: £177,000)
5% of net loss before tax
We believe that loss before tax is a
by
primary measure
shareholders
the
performance of the Group.
used
in assessing
Company financial statements
£36,000 (2019: £162,000)
10% adjusted profit before tax
(2019: 1% of gross assets)
As the nature of the Company is
that of a holding company, gross
asset values are a representation
of its size of the Company; and is a
auditing
accepted
generally
benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components was between £36,000 and £348,000.
Sosandar plc
P a g e | 28
Annual Report 2020
INDEPENDENT AUDITORS’ REPORT
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during
our audit above £18,300 (Group audit) (2019: £8,850) and £1,800 (Company audit) (2019: £8,100) as well as
misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the Directors made subjective judgements, for example
in respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence of bias by the Directors that represented a
risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the structure of the Group and the Company, the
accounting processes and controls, and the industry in which they operate.
The Group financial statements are a consolidation of two reporting units, comprising the Group’s operating
businesses and holding companies.
We performed audits of the complete financial information of Sosandar Plc and Thread 35 Ltd reporting units,
which were individually financially significant and accounted for 100% of the Group’s revenue and 100% of the
Group’s absolute loss before tax (i.e. the sum of the numerical values without regard to whether they were
profits or losses for the relevant reporting units). We also performed specified audit procedures over account
balances and transaction classes that we regarded as material to the Group at two reporting units.
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the Annual Report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and parent Company and its environment obtained
in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’
Report.
Sosandar plc
P a g e | 29
Annual Report 2020
INDEPENDENT AUDITORS’ REPORT
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent Company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent Company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement set out on page 25, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the
parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Other matters which we are required to address
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent
Company and we remain independent of the Group and the parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
Use of this report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed
Sanjay Parmar (Senior Statutory Auditor)
For and on behalf of Jeffreys Henry LLP (Statutory Auditors)
Finsgate
5-7 Cranwood Street
London EC1V 9EE
17 August 2020
Sosandar plc
P a g e | 30
Annual Report 2020
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2020
Revenue from contracts with customers
Operational costs
Gross profit
Administrative expenses
Share based payment
Depreciation and amortisation
Operating loss
Finance income
Finance costs
Loss on ordinary activities before taxation
Tax on loss on ordinary activities
Loss for the year
Other Comprehensive income
Total Comprehensive loss for the year
Attributable to:
Equity holders of the parent
Group loss for the year
Total comprehensive loss for the year
Year ended
31 March
2020
Year ended
31 March
2019
Notes
£’000
£’000
4
5
20
7
9,027
(4,646)
4,381
(11,662)
(375)
(151)
(7,807)
3
(10)
(7,814)
-
(7,814)
4,440
(1,975)
2,465
(5,874)
(76)
(61)
(3,546)
-
-
(3,546)
-
(3,546)
-
-
(7,814)
(3,546)
(7,814)
(3,546)
(7,814)
(3,546)
(7,814)
(3,546)
Loss per share:
Loss per share – basic and diluted, attributable to ordinary
equity holders of the parent (pence)
Loss per share - basic and diluted, from continuing
operations (pence)
8
8
(5.14)
(3.19)
(5.14)
(3.19)
The notes on pages 38 to 60 form part of these financial statements.
Sosandar plc
P a g e | 31
Annual Report 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Capital redemption reserve
Other reserves
Reverse acquisition reserve
Retained earnings
Equity attributable to owners of the parent
Total equity
Liabilities
Lease liability
Non-current liabilities
Trade and other payables
Lease liability
Total current liabilities
Total liabilities
Total equity and liabilities
As at 31
March
2020
£’000
As at 31
March
2019
£’000
Notes
9
10
11
14
15
16
16
16
17
16
18
20
19
20
198
282
480
3,810
1,001
5,333
10,144
10,624
163
147
310
1,037
366
3,645
5,048
5,358
192
41,592
4,648
482
(19,596)
(19,414)
7,904
116
30,703
4,648
107
(19,596)
(11,600)
4,378
7,904
4,378
49
49
2,594
77
2,671
2,720
10,624
-
-
980
-
980
980
5,358
The financial statements were approved and authorised for issue by the Board of Directors on
17August 2020 and were signed on its behalf by:
_____________________
Julie Lavington
Director
Company Number: 05379931
The notes on pages 38 to 60 form part of these financial statements.
Sosandar plc
P a g e | 32
Annual Report 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020
Cash flows from operating activities
Group loss for the year
Share-based payments
Depreciation and amortisation
Net finance costs
Working capital adjustments:
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Net cash flow from operating activities
Notes
17
9 & 10
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
(7,814)
375
151
7
(2,773)
(635)
1,614
(9,075)
(3,546)
76
61
-
(506)
112
59
(3,744)
Cash flow from investing activities
Addition of property, plant and equipment, and intangibles
Bank interest received
9 & 10
(129)
3
(143)
-
Net cash flow from investing activities
(126)
(143)
Cash flow from financing activities
Net proceeds from issue of equity instruments
Payment of lease liabilities
Net cash flow from financing activities
16
10,965
(76)
10,889
2,916
-
2,916
Net change in cash and cash equivalents
1,688
(971)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
15
15
3,645
5,333
4,616
3,645
The notes on pages 38 to 60 form part of these financial statements.
Sosandar plc
P a g e | 33
Annual Report 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Sosandar Plc
Balance at 1 April 2018
Loss for the year
Share-based payments
Lapsed options
Issue of share capital
Costs on issue of share capital
Balance at 31 March 2019
Loss for the year
Shares-based payments
Issue of share capital
Costs on issue of share capital
Balance at 31 March 2020
Share
capital
£’000
Share
premium
£’000
Notes
Reverse
acquisition
reserve
£’000
Capital
redemption
reserve
£’000
107
-
-
-
9
-
116
-
-
76
-
192
27,796
(19,596)
-
-
-
2,991
(84)
30,703
-
-
11,924
(1,035)
41,592
-
-
-
-
-
(19,596)
-
-
-
-
(19,596)
4,648
-
-
-
-
-
4,648
-
-
-
-
4,648
18
16
16
17
16
16
Retained
earnings
£’000
(8,055)
(3,546)
-
1
-
-
(11,600)
(7,814)
-
-
-
(19,414)
Share-based
payment
reserve
£’000
32
-
76
(1)
-
-
107
-
375
-
-
482
Total
£’000
4,932
(3,546)
76
-
3,000
(84)
4,378
(7,814)
375
12,000
(1,035)
7,904
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of share issue expenses.
Share based payments reserve relate to the charge for share-based payments in accordance with International Financial Reporting Standard 2.
Retained earnings represent the cumulative loss of the Group attributable to equity shareholders.
Reverse acquisition reserve relates to the effect on equity of the reverse acquisition of Thread 35 Limited.
Capital redemption reserve represents the aggregate nominal value of all the deferred shares repurchased and cancelled by the Company. The reserve is non-distributable.
The notes on pages 38 to 60 form part of these financial statements.
Sosandar plc
P a g e | 34
Annual Report 2020
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
Assets
Non-current assets
Investments
Loans to subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Other reserves
Capital reserves
Retained earnings – prior years
Retained earnings – current year
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
12
13
14
15
16
16
16 & 17
18
18
19
As at 31
March
2020
£’000
As at 31
March
2019
£’000
6,282
16,950
23,232
6,282
7,094
13,376
132
4,819
4,951
28,183
8
3,134
3,142
16,518
192
41,592
482
4,648
(19,091)
95
27,918
116
30,703
107
4,648
(19,206)
115
16,483
265
265
265
28,183
35
35
35
16,518
The financial statements were approved and authorised for issue by the Board of Directors on 17
August 2020 and were signed on its behalf by:
_____________________
Julie Lavington
Director
Company Number: 05379931
The notes on pages 38 to 60 form part of these financial statements.
Sosandar plc
P a g e | 35
Annual Report 2020
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020
Cash flows from operating activities
Profit for the year
Impairment of investments and loans to subsidiaries
Interest charged on intercompany loan
Share-based payments
Working capital adjustments:
Change in trade and other receivables
Change in trade and other payables
Net cash flow from operating activities
Cash flow from investing activities
Loans to subsidiary undertakings
Net proceeds for sale of subsidiaries
Net cash flow from investing activities
Cash flow from financing activities
Net proceeds from issue of equity instruments
Net cash flow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
Notes
95
-
(652)
375
(124)
230
(76)
114
-
(293)
76
146
(222)
(179)
(9,204)
-
(9,204)
(3,966)
51
(3,915)
10,965
10,965
1,685
3,134
4,819
2,916
2,916
(1,178)
4,312
3,134
12
13
17
14
19
16
15
15
The notes on pages 38 to 60 form part of these financial statements.
Sosandar plc
P a g e | 36
Annual Report 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Balance at 1 April 2018
Profit for the year
Issue of share capital
Costs on issue of share capital
Shares based payments
Lapsed options
Balance at 31 March 2019
Profit for the year
Issue of share capital
Costs on issue of share capital
Shares based payments
Balance at 31 March 2020
Notes
16
16
17
16
16
17
Share
capital
£’000
107
-
9
-
-
-
116
-
76
-
-
192
Share
premium
£’000
27,796
-
2,991
(84)
-
-
30,703
-
11,924
(1,035)
-
41,592
Share-based
payment
reserve
£’000
32
-
-
-
76
(1)
107
-
-
-
375
482
Capital
redemption
reserve
£’000
4,648
-
-
-
-
-
4,648
-
-
-
-
4,648
Retained
earnings
£’000
(19,206)
114
-
-
-
1
(19,091)
95
-
-
-
(18,996)
Total equity
£’000
13,377
114
3,000
(84)
76
-
16,483
95
12,000
(1,035)
375
27,918
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of share issue expenses.
Share-based payments reserve relate to the charge for share-based payments in accordance with International Financial Reporting Standard 2.
Retained earnings represent the cumulative loss of the Company attributable to the equity shareholders.
Capital redemption reserve represents the aggregate nominal value of all the deferred shares repurchased and cancelled by the Company. The reserve is non-distributable.
The notes on pages 38 to 60 form part of these financial statements.
Sosandar plc
P a g e | 37
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information
Sosandar Plc (formerly Orogen Plc) (the ‘Company’) is a public limited company by shares incorporated
in England and Wales. Details of the registered office, the officers and advisers to the Company are
presented on the Company Information page at the end of this report. The Company is listed on the
AIM market of the London Stock Exchange (ticker: SOS).
The principal activity of the company in the year under review was that of a clothing manufacturer
and distributer via internet and mail order.
2 Significant accounting policies
Basis of preparation
The consolidated financial statements consolidate those of the Company and its subsidiaries (together
the ‘Group’ or ‘Sosandar’). The consolidated financial statements of the Group and the individual
financial statements of the Company are prepared in accordance with applicable UK law and
International Financial Reporting Standards (‘IFRS’) as adopted by the European Union and as applied
in accordance with the provisions of the Companies Act 2006. The Directors consider that the financial
information presented in these Financial Statements represents fairly the financial position,
operations and cash flows for the year, in conformity with IFRS.
Going Concern
The Group’s business activities, together with the factors likely to affect its future development,
performance and position, are set out in Chairman’s Statement on page 2. The financial position of
the Group, its cash flows, liquidity position and borrowing facilities are described in the financial
statements and associated notes. In addition, note 22 to the financial statements includes the Group’s
objectives, policies and processes for managing its capital; its financial risk management objectives;
details of its financial instruments; and its exposures to credit risk and liquidity risk.
The outbreak of Covid-19 created significant disruption and uncertainty however the business was
able to adapt its strategy and reduce marketing and operation costs but still deliver continued revenue
growth.
In order to assess the going concern of the Group, the Directors have prepared cash flow and profit
and loss forecasts for companies within the Group. These cash flow and profit and loss forecasts show
the Group expect an increase in revenue based on the assumptions set out in note 12 of the financial
statements. This will have sufficient headroom over available banking facilities. Management continue
to monitor costs and manage cashflows against these forecasts.
The directors have reviewed the Group’s bank balances, profitability in the four-year plans, the annual
budgets and forecasts, including assumptions concerning revenue growth, marketing spend, returns
and repeat customers and expenditure commitments and their impact on cash flow. For further details
also refer to note 12.
Based on their assessment of prospects and viability, the directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due
for the foreseeable future.
Should the underlying assumptions of the working capital model prove invalid or shareholder support
was withdrawn and the Group be unable to continue as a going concern it may be required to realise
its assets and discharge its liabilities other than in the normal course of business and at amounts
different to those stated in the financial statements. The financial statements do not include any
Sosandar plc
P a g e | 38
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Going Concern (continued)
adjustments relating to the recoverability and classifications of recorded asset amounts or liabilities
that may be necessary should the Group and Company be unable to continue as a going concern.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. Accordingly, they continue
to adopt the going concern basis in preparing the financial statements.
Consolidation
The consolidated financial statements include the financial statements of the Company and its
subsidiaries and associated undertakings. Thread 35 Limited has a reporting date of 31 March.
Subsidiaries are all entities over which Sosandar Plc has the power to govern the financial and
operating policies generally accompanying a shareholding of more than one half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Company. They are de-consolidated
from the date that control ceases.
In November 2017, Sosandar Plc (‘Company’) acquired the entire issued share capital of Thread 35 Ltd
(‘legal subsidiary’) for a consideration of £6,281,618, satisfied by the issue of shares of £1,603,422 and
cash of £4,678,196. As the legal subsidiary is reversed into the Company (the legal parent), which
originally was a publicly listed cash shell company, this transaction cannot be considered a business
combination, as the Company, the accounting acquire, does not meet the definition of a business
under IFRS 3 ‘Business Combinations’. However, the accounting for such capital transaction should
be treated as a share- based payment transaction and therefore accounted for under IFRS 2 ‘Share-
based payment’. Any difference in the fair value of the shares deemed to have been issued by the
Thread 35 Ltd (accounting acquirer) and the fair value of Sosandar Plc’s (the accounting acquiree)
identifiable net assets represents a service received by the accounting acquirer.
Although the consolidated financial information has been issued in the name of Sosandar Plc, the legal
parent, it represents in substance continuation of the financial information of the legal subsidiary.
The assets and liabilities of the legal subsidiary are recognised and measured in the Group financial
statements at the pre-combination carrying amounts and not restated at fair value.
The retained earnings and other reserves balances recognised in the Group financial statements
reflect the retained earnings and other reserves balances of the legal subsidiary immediately before
the business combination and the results of the period from 1 April 2017 to the date of the business
combination are those of the legal subsidiary only.
The equity structure (share capital and share premium) appearing in the Group financial statements
reflects the equity structure of Sosandar Plc, the legal parent. This includes the shares issued in order
to effect the business combination.
Sosandar plc
P a g e | 39
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Functional and presentation currency
Items included in the financial statements of the Group are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). The financial
statements are presented in Pounds Sterling (£), which is the Group’s presentation currency and the
Company’s functional currency.
Foreign currency transactions are translated into the functional currency using exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the income statement.
The results and financial position of all Group entities (none of which has the currency of a hyper-
inflationary economy) that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• monetary assets and liabilities for each statement of financial position presented are
•
translated at the closing rate at the date of that statement of financial position;
income and expenses for each income statement are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the
rate on the dates of the transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign
operations, and of borrowings and other currency instruments designated as hedges of such
investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or
sold, exchange differences that were recorded in equity are recognised in the income statement as
part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate.
Changes in accounting policies and disclosures
This year, the IFRS 16 standard on leases came into effect, which had a material effect on the Group.
The Group had to change accounting policies as a result of adopting IFRS 16. The Group elected to
adopt the new rules retrospectively but not adjust prior periods (see note 20).
The following new standards, amendments to standards and interpretations have been issued, but
are not effective for the financial period beginning 1 April 2019 and have not been early adopted.
The Directors anticipate that the adoption of these standard and the interpretations in future
periods will have no material impact, unless disclosed below, on the financial statements of the
Company.
The new standards include:
IFRS 3
IFRS 17
IAS 1
IAS 8
Business Combinations1
Insurance Contracts2
Presentation of Financial Statements1
Accounting Policies, Changes in Accounting Estimates and Errors1
Sosandar plc
P a g e | 40
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Changes in accounting policies and disclosures (continued)
Improvements to IFRSs Annual Improvements 2015-2017 Cycle1: Amendments to 2 IFRSs and 2 IASs
Revised conceptual framework for Financial reporting
1 Effective for annual periods beginning on or after 1 January 2020
2 Effective for annual periods beginning on or after 1 January 2021
The directors anticipate that the adoption of these standards and interpretations in future periods
will have no material effect on the financial statements of the group.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of Financial Statements in conformity with IFRS requires management to make
estimates and judgements that affect the reported amounts of assets and liabilities as well as the
disclosure of contingent assets and liabilities at the year end and the reported amounts of revenues
and expenses during the reporting period. Estimates and judgements are continually evaluated and
are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Inventories
Inventories are valued at the lower of cost and net realisable value, on a weighted average cost basis.
Net realisable value is the estimated selling price in the ordinary course of the business less applicable
variable selling expenses. Cost of purchase comprises the purchase price including import duties and
other taxes, transport and handling costs and other attributable costs, less trade discounts.
A provision is made to write down any slow-moving or obsolete inventory to net realisable value. The
provision is £395k at 31 March 2020 (2019: £91k). A difference of 1%pt in the provision as a
percentage of gross inventory would give rise to a difference of +/- £42k in gross profit.
Contract liabilities - refund accruals
Accruals for sales returns are estimated on the basis of historical returns and are recorded so as to
allocate them to the same period in which the original revenue is recorded. These accruals are
reviewed regularly and updated to reflect management’s latest best estimates, although actual
returns could vary from these estimates. The accrual for refunds totalled £79k (2019 net refund
accrual: £126k) and a right to returned goods asset recognised of £40k (2019: £nil). A performance
obligation is deemed for returns and refunds. A 14 days return policy is noted for a full refund. A
difference of 1%pt in the sales returns rate have an impact +/- £177k the refund provision, and +/-
£98k on the right to returned goods asset.
Calculation of share-based payment charges
The charge related to equity-settled transactions with employees is measured by reference to the fair
value of the equity instruments at the date they are granted, using an appropriate valuation model
selected according to the terms and conditions of the grant. Judgement is applied in determining the
most appropriate valuation model and in determining the inputs to the model. Judgements are also
applied in relation to estimations of the number of options which are expected to vest, by reference
to historic leaver rates and expected outcomes under relevant performance conditions. Please see
note 17.
Sosandar plc
P a g e | 41
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Critical accounting judgements and key sources of estimation uncertainty (continued)
Depreciation of property, plant and equipment and amortisation of other intangible assets
Depreciation and amortisation are provided to write down assets to their residual values over their
estimated useful lives. The determination of these residual values and estimated lives, and any change
to the residual values or estimated lives, requires the exercise of management judgement. Please see
notes 9 and 10.
Principal accounting policies
The principal accounting policies are summarised below. They have been consistently applied
throughout the year covered by the financial statements.
Revenue recognition
Revenue is recognised in according with the requirements of IFRS 15 'Revenue from Contracts with
Customers'. The Company recognises revenue to depict the transfer of promised goods and services
to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. This core principle is delivered in a five-step model
framework:
1. Identify the contract(s) with the customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognise revenue when (or as) the entity satisfy a performance obligation.
Revenue is recognised when control of the products have been transferred to the customer. Control
is considered to have transferred once products have been received by the customer unless shipping
terms dictate any different. Revenues exclude intra-group sales and value added taxes and represent
net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is
measured by reference to the fair value of consideration received or receivable by the Group for
goods supplied.
The practical expedient allowed under IFRS 15 para 122 has been taken.
No breakdown of revenue can be made in tabular form as all sales are UK and online, with similar
risk profiles.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is
measured as the aggregate of the consideration transferred, measured at acquisition date fair value
and the amount of any non-controlling interest in the acquiree. In the consolidated financial
statements, acquisition costs incurred are expensed and included in general and administrative
expenses.
Intangible assets
Identifiable development expenditure is capitalised to the extent that the technical, commercial and
financial feasibility can be demonstrated. Costs are capitalised where the expenditure will bring future
economic benefit to the company.
Amortisation is recognised so as to write off the cost or valuation of assets less their residual values
over their useful economic lives.
Sosandar plc
P a g e | 42
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at historical cost less subsequent accumulated depreciation
and accumulated impairment losses, if any. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the company and the cost of the item can be measured reliably. All other repairs and maintenance
are charged to profit or loss during the financial period in which they are incurred.
Depreciation on property, plant and equipment is calculated using the straight-line method to write
off their cost over their estimated useful lives at the following annual rates:
Plant and Machinery
Computer Equipment
Fixture and Fittings
Office Equipment
Leasehold Improvements
15% Straight line
33.33% Straight line
15% Reducing balance
25% Reducing balance
20% Straight line
Equity
Equity instruments issued by the Company are recorded at the value of the proceeds received, net of
direct issue costs, allocated between share capital and share premium.
Impairment of non-financial assets
At each statement of financial position date, the Company reviews the carrying amounts of its
investments to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is
tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount
of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount,
in which case the reversal of the impairment loss is treated as a revaluation increase.
Sosandar plc
P a g e | 43
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Taxation
Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax. The tax
currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported
in the same income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The
Group and Company’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the statement of financial position date.
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and
is accounted for using the statement of financial position liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax is reviewed at each statement of financial position date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is
settled or the asset realised. Deferred tax is charged or credited to the income statement, except
when it relates to items charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Group and Company intends to settle its current tax assets and liabilities
on a net basis.
Share-based compensation
The fair value of the employee and suppliers’ services received in exchange for the grant of the options
is recognised as an expense. The total amount to be expensed over the vesting year is determined by
reference to the fair value of the options granted, excluding the impact of any non-market vesting
conditions (for example, profitability and sales growth targets). Non-market vesting conditions are
included in assumptions about the number of options that are expected to vest. At each statement of
financial position date, the entity revises its estimates of the number of options that are expected to
vest. It recognises the impact of the revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity. The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and share premium when the options
are exercised.
Sosandar plc
P a g e | 44
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Share-based compensation (continued)
The fair value of share-based payments recognised in the income statement is measured by use of
the Black Scholes model, which takes into account conditions attached to the vesting and exercise of
the equity instruments. The expected life used in the model is adjusted; based on management’s best
estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The share price volatility percentage factor used in the calculation is based on management’s best
estimate of future share price behaviour and is selected based on past experience, future expectations
and benchmarked against peer companies in the industry.
Investments
Investments in subsidiary companies are stated at cost less any provision for impairment.
Investments are accounted for at cost unless there is evidence of a permanent diminution in value, in
which case they are written down to their estimated realisable value. Any such provision, together
with any realised gains and losses, is included in the statement of comprehensive income.
Impairment of investments
The impairment of the carrying value of the investment in subsidiaries is calculated using forward-
looking assumptions of profit growth rates, discount rates and timeframe which require management
judgement and estimates that cannot be certain.
Provisions
Provisions are recognised when the Group and Company has a present obligation as a result of a past
event, and it is probable that the Group and Company will be required to settle that obligation.
Provisions are measured at the Directors’ best estimate of the expenditure required to settle the
obligation at the statement of financial position date and are discounted to present value where the
effect is material.
Financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and
other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at
fair value through profit or loss, any directly attributable transactions costs, except as described
below. Subsequent to initial recognition non-derivative financial instruments are measured as
described below.
A financial instrument is recognised when the Group becomes a party to the contractual provisions of
the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows
from the financial assets expire or if the Group transfers the financial assets to another party without
retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of
financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase
or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the
contract expire or are discharged or cancelled.
Fair values
The carrying amounts of the financial assets and liabilities such as cash and cash equivalents,
receivables and payables of the Group and Company at the statement of financial position date
approximated their fair values, due to the relatively short-term nature of these financial instruments.
Sosandar plc
P a g e | 45
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Financial instruments (continued)
Trade payables and other non-derivative financial liabilities
Trade payables and other creditors are non-interest bearing and are measured at cost.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term
highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank
overdrafts are shown within borrowings in current liabilities on the statement of financial position.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at their
cost when the contractual right to receive cash or other financial assets from another entity is
established.
A provision for doubtful debts is made when there is objective evidence that the Group will not be
able to collect all amounts due according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation
and default or delinquency in payments are considered indicators that a trade and other receivables
are impaired.
Financial assets and liabilities
The Group classifies its financial assets at inception into three measurement categories; 'amortised
cost', 'fair value through other comprehensive income' ('FVOCI') and 'fair value through profit and
loss' ('FVTPL'). The Group classifies its financial liabilities, other than financial guarantees and loan
commitments, as measured at amortised cost. Management determines the classification of its
investments at initial recognition. A financial asset or financial liability is measured initially at fair
value. At inception transaction cost that are directly attributable to its acquisition or issue, for an
item not at fair value through profit or loss, is added to the fair value of the financial asset and
deducted from the fair value of the financial liability.
Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial asset
or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative
amortisation using the effective interest method of any difference between the initial amount
recognised and maturity amount, minus any reduction for impairment.
Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction on the measurement date. The fair
value of assets and liabilities in active markets are based on current bid and offer prices respectively.
If the market is not active the group establishes fair value by using appropriate valuation techniques.
These include the use of recent arm’s length transactions, reference to other instruments that are
substantially the same for which market observable prices exist, net present value and discounted
cash flow analysis.
Sosandar plc
P a g e | 46
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Financial assets and liabilities (continued)
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or where the group has transferred substantially all of the risks and rewards of
ownership. In transaction in which the group neither retains nor transfers substantially all the risks
and rewards of ownership of a financial asset and it retains control over the asset, the group
continues to recognise the asset to the extent of its continuing involvement, determined by the
extent to which it is exposed to changes in the value of the transferred asset. There have not been
any instances where assets have only been partly derecognised. The group derecognises a financial
liability when its contractual obligation are discharge, cancelled or expire.
Impairment losses from contracts with customers
The Group assesses at each financial position date whether there is objective evidence that a
financial asset or group of financial assets is impaired. If there is objective experience (such as
significant financial difficulty of obligor, breach of contract, or it becomes probable that debtor will
enter bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of the estimated future cash
flows (excluding future expected credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate (that is, the effective interest rate computed at initial
recognition).The carrying amount of the asset is reduced through use of an allowance account. The
amount of loss is recognised in the Statement of Comprehensive Income.
Leases
The group leases a single office unit and various pieces of equipment. The rental lease was for a 5
year term expiring 15th October 2021. Lease terms are negotiated on an individual basis and contain
a wide range of different terms and conditions. The lease agreements do not impose any covenants,
but leased assets may not be used as security for borrowing purposes.
Until the 2019 financial year, leases of property, plant and equipment were classified as either
finance or operating leases. Payments made under operating leases (net of any incentives received
from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.
From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the
date at which the leased asset is available for use by the group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and
the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments:
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be
determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would
have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Sosandar plc
P a g e | 47
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
Leases (continued)
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability
•
• any lease payments made at or before the commencement date less any lease incentives
received
• any initial direct costs, and
•
restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12
months or less. Low-value assets comprise IT-equipment and small items of office furniture.
3 Segmental information
In the opinion of the Directors, the Group has one class of business, being that of a clothing
manufacturer and distributer via internet and mail order. The Group’s primary reporting format is
determined by the geographical segment according to the location of its establishments. There is
currently only one geographic reporting segment, which is the UK. All costs are derived from the
single segment.
4 Operating loss
Operating loss is stated after charging/(crediting):
Operating lease rentals
Auditors’ remuneration
Audit fee – group and company
Non audit fees
Legal and other fees
Foreign currency (gain)/loss
Share based payment
5 Finance income
Bank interest received
6 Employees
Aggregate Directors’ emoluments including consulting fees
Wages and salaries
Social security costs
Pension costs
Share-based payments
Total
2020
£’000
2019
£’000
48
28
5
146
32
375
55
30
13
54
3
76
2020
£’000
3
2019
£’000
-
2020
£’000
471
1,318
173
39
375
2,376
2019
£’000
461
906
128
29
76
1,600
Sosandar plc
P a g e | 48
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Employees (continued)
Directors
Staff
Total
Directors’ remuneration
2020
2019
6
34
40
6
21
27
Details of emoluments received by Directors of the Company for the year ended 31 March 2020 are
as follows:
2020
Base
Salary
2020
Share-based
payment
2020
Total
2019
Base Salary
£
145,800
145,800
30,000
30,000
60,000
30,000
30,000
471,600
£
154,432
154,432
7,354
7,354
14,708
7,354
-
345,634
£
300,232
300,232
37,354
37,354
74,708
37,354
30,000
817,232
£
144,418
144,418
30,000
30,000
60,000
30,000
22,500
461,336
2019
Share-
based
payment
£
31,443
31,443
1,497
1,497
2,995
1,497
-
70,372
2019
Total
£
175,861
175,861
31,497
31,497
62,995
31,497
22,550
531,708
Alison Hall
Julie Lavington
Nicholas Mustoe
Bill Murray
Adam Reynolds
Mark Collingbourne
Andrew Booth
Total
7 Income tax benefit / (expense)
No corporation tax charge arises in the year ended 31 March 2020 and the year ended 31 March 2019.
A reconciliation of the expected tax benefit computed by applying the tax rate applicable in the
primary jurisdiction, the UK, to the loss before tax to the actual tax credit is as follows:
Loss on ordinary activities before taxation
Tax at the UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible for tax purposes
Losses unutilised
Accelerated depreciation
Recognition of previously unrecognised losses
Group relieved
Tax on loss on ordinary activities
Group
Company
2020
£’000
(7,814)
(1,485)
2019
£’000
(3,546)
(674)
82
1,502
(16)
(83)
-
-
16
658
-
-
-
-
2020
£’000
95
18
2
-
-
(20)
-
-
2019
£’000
114
21
5
-
-
-
(26)
-
The Group has estimated tax losses of £18,500,000 (2019: £10,400,000) to carry forward against
future taxable profits. The deferred tax asset on these tax losses at 19% amounts to approximately
£3,520,000 (2019: £1,976,000) and has not been recognised due to the uncertainty of the recovery.
Due to the fundamental change in the Company’s business following the exit of the mineral
exploration industry, tax losses carried forward may not be fully available for use against the future
profits of the Group.
Sosandar plc
P a g e | 49
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 Loss per share
Basic loss per share is calculated by dividing the loss attributable to equity shareholders by the
weighted average number of ordinary shares in issue during the year:
Loss after tax attributable to equity holders of the parent (£’000)
Weighted average number of ordinary shares in issue
Fully diluted average number of ordinary shares in issue
Basic and diluted loss per share (pence) – continuing operations
2020
(7,814)
151,961,672
151,961,672
(5.14)
2019
(3,546)
111,104,042
111,104,042
(3.19)
Basic and diluted loss per share (pence)
(5.14)
(3.19)
Where a loss is incurred the effect of outstanding share options and warrants is considered anti-
dilutive and is ignored for the purpose of the loss per share calculation. The share options outstanding
as at 31 March 2020 totalled 20,400,000 (2019: 20,400,000) and are potentially dilutive.
9 Intangible assets – Group
Cost
At 1 April 2018
Additions
At 31 March 2019
Amortisation
At 1 April 2018
Charge for the year
At 31 March 2019
Carrying value 31 March 2019
Cost
At 1 April 2019
Additions
At 31 March 2020
Amortisation
At 1 April 2019
Charge for the year
At 31 March 2020
Carrying value 31 March 2020
Website
£’000
Total
£’000
60
113
173
4
6
10
163
173
45
218
10
10
20
198
60
113
173
4
6
10
163
173
45
218
10
10
20
198
Sosandar plc
P a g e | 50
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10 Property, plant and equipment – Group
Computer
Equipment
£’000
Fixtures and
fittings equipment
£’000
Right of
Use
Total
Asset
£’000 £’000
Cost
At 1 April 2018
Additions
At 31 March 2019
Accumulated depreciation
At 1 April 2018
Charge for year
At 31 March 2019
Carrying value 31 March 2019
Cost
At 1 April 2019
Recognition of right-of-use-asset on
initial application of IFRS 16
Adjusted balance at 1 April 2019
Additions
At 31 March 2020
Accumulated depreciation
At 1 April 2019
Charge for year
At 31 March 2020
Carrying value 31 March 2020
11 Inventories – Group
Stock
25
24
49
8
10
18
31
49
-
49
37
86
18
15
33
53
226
6
232
71
45
116
116
232
-
232
47
279
116
51
167
112
-
-
-
-
-
-
-
-
192
192
-
192
-
75
75
117
251
30
281
79
55
134
147
281
192
473
84
557
134
141
275
282
2020
£’000
3,810
2019
£’000
1,037
The cost of inventories charged in the year as an expense equated to £4,646k (2019 £1,975k).
12 Non-current assets
Investments in subsidiaries and associates:
Cost at 1 April
Disposals during the year
Cost at 31 March
Impairment at 1 April
Disposals during the year
Impairment at 31 March
Carrying value as at 31 March
Group
Company
2020
£’000
-
-
-
-
-
-
-
2019
£’000
-
-
-
-
-
-
-
2020
£’000
6,282
-
6,282
-
-
-
6,282
2019
£’000
15,618
(9,336)
6,282
9,336
(9,336)
-
6,282
Sosandar plc
P a g e | 51
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12 Non-current assets (continued)
Investments in subsidiaries and associates:
Break down of carrying value of investment:
Thread 35
Total non-current assets
Group
Company
2020
£’000
-
-
2019
£’000
-
-
2020
£’000
6,282
6,282
2019
£’000
6,282
6,282
Investments are tested for impairment at the balance sheet date. The recoverable amount of the
investment in Thread 35 Ltd at 31 March 2020 was assessed on the basis of value in use. As this
exceeded carrying value no impairment loss was recognised.
The key assumptions in the calculation to access value in use are the future revenues and the ability
to generate future cash flows. The most recent financial results and forecast approved by
management were for the next 9 years and included terminal value. The projected results were
discounted at a rate which is a prudent evaluation of the pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the cash-generating unit.
The key assumptions used for the value in use calculation in 2020 were as follows:
Discount rate
Returns assumption
Compound annual revenue growth rate
%
8.5
43
24
The Directors have made significant estimates on future revenues and EBITDA growth in future years
based on the budgeted investment and expansion of our clothing and footwear ranges, increased
stocking levels and continued investment in marketing channels to acquire new customers.
The Directors have performed a sensitivity analysis to assess the impact of downside risk of the key
assumptions underpinning the projected results of the Group. The projections and associated
headroom used for the Group is sensitive to the EBITDA growth assumptions that have been applied.
The subsidiaries of Sosandar Plc are as follows:
Subsidiary companies
Incorporation
Holding
Type of share held
%
Holding1
2020
%
Holding1
2019
Thread 35
UK
Direct
Ordinary shares
100
100
Sosandar plc
P a g e | 52
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13 Loans to subsidiaries
Loan to subsidiary
Group
Company
2020
£’000
-
2019
£’000
-
2020
£’000
16,950
2019
£’000
7,094
The loan represents advancements to Thread 35 Limited and includes £687k (2019: £293k) of
interest charged in the year at a rate of 6%. The loan is secured and fixed and floating charges. The
floating charges covers all the property or undertaking of the company.
14 Trade and other receivables
VAT recoverable
Other receivables and prepayments
Right to returned goods
Trade and other receivables
Group
Company
2020
£’000
359
602
40
1,001
2019
£’000
25
341
-
366
2020
£’000
67
65
-
132
2019
£’000
8
-
-
8
The Directors consider that the carrying amount of trade and other receivables approximates their
fair value.
15 Cash and cash equivalents
Cash at bank
Cash and cash equivalents
16 Share capital and reserves
Group
Company
2020
£’000
5,333
5,333
2019
£’000
3,645
3,645
2020
£’000
4,819
4,819
2019
£’000
3,134
3,134
Details of ordinary shares issued are in the table below:
Date
At 31 Mar 2019
31 July 2019
2 Feb 2020
At 31 Mar 2020
Details
Share Issue
Share Issue
Ordinary shares (£0.01)
Number of shares
116,189,658
46,666,700
29,411,764
192,268,122
Issue price
£
0.001
0.001
0.001
0.001
Total
share
capital
£’000
116
47
29
192
Total share
premium
£’000
30,703
6,581
4,308
41,592
Sosandar plc
P a g e | 53
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16 Share capital and reserves (continued)
Group
Share
capital
£’000
Share
premium
£’000
Reverse
acquisition
reserve
£’000
Capital
redemption
reserve
£’000
Retained
earnings
£’000
Share-
based
payment
reserve
£’000
116
30,703
(19,596)
4,648
(11,600)
107
-
-
76
-
-
-
11,924
(1,035)
-
-
-
-
-
-
-
-
(7,814)
-
-
-
-
375
-
-
Total
£’000
4,378
(7,814)
375
12,000
(1,035)
192
41,592
(19,596)
4,648
(19,414)
482
7,904
Balance at 31 March
2019
Loss for the year
Share-based
payments
Issue of share capital
Costs on issue of
share capital
Balance at 31 March
2020
Reserves
The following describes the nature and purpose of each reserve within equity:
Share premium
Amount subscribed for share capital in excess of nominal value.
Share-based payment reserve
Cumulative fair value of share options and warrants granted and recognised as an
expense in the Income Statement.
Capital redemption reserve
Capital redemption reserve arises from the 100% acquisition of Thread 35 Limited
in November 2017 whereby the excess of the fair value of the issued ordinary
share capital issued over the nominal value of these shares is transferred to this
reserve in accordance with section 612 of the Companies Act 2006.
Reverse acquisition reserve
Effect on equity of the reverse acquisition of Thread 35 Limited
Retained earnings
Retained earnings represents all other net gains and losses and transactions with
shareholders (example dividends) not recognised elsewhere.
Sosandar plc
P a g e | 54
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17 Share based payments
Share option plans
The Group has a share ownership compensation scheme for Directors and senior employees of the
Group. On 2nd November 2017 share options over ordinary shares of 15.1p were issued with a further
issue over ordinary shares of 29.1p issued on 25th February 2019.
The options are settled in equity once exercised. If the options remain unexercised for a period after
ten years from the date of grant, the options expire.
Details of the number of share options and the weighted average exercise price (“WAEP”)
outstanding during the period are as follows:
31 March 2020
31 March 2019
Outstanding at 31 March
Number
(‘000)
20,400
Exercisable at 31 March
6,898
WAEP
£
0.155
0.157
Number
(‘000)
20,400
6,604
WAEP
£
0.155
0.151
The options outstanding at 31 March 2020 had a weighted average exercise price of ££0.157 and a
weighted average remaining contractual life of 7.63 years.
The fair values of options granted were calculated using the Black Scholes pricing model. The Group
used historical data to estimate expected period to exercise, within the valuation model. Expected
volatilities of options outstanding granted prior to the Company’s admission to AIM were based on
implied volatilities of a sample of listed companies based in similar sectors. The risk-free rate for the
expected period to exercise of the option was based on the UK gilt yield curve at the time of the
grant.
The Group recognised a charge of £375k (2019: £76k) related to equity-settled share-based payment
transactions during the year.
The assumptions used in the valuation of the options at the grant date are as follows:
Exercise price
Share price at date of grant
Risk-free rate
Volatility
Expected Life
Fair Value
Share Options
2019
29.1p
29.1p
0.25%
25%
10 years
0.07
Share options
2018
15.1p
15.1p
0.25%
25%
10 Years
0.05
Sosandar plc
P a g e | 55
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18 Retained earnings
Opening balance
(Loss)/profit for the year
Transfer from share-based payment reserve
Closing balance
Group
Company
2020
£’000
(11,600)
(7,814)
-
(19,414)
2019
£’000
(8,055)
(3,546)
1
(11,600)
2020
£’000
(19,091)
95
-
(18,996)
2019
£’000
(19,206)
114
1
(19,091)
In accordance with the provisions of the Companies Act 2006, the Company has not presented a
statement of profit or loss and other comprehensive income. The Company's profit for the year was
£95k (2019: £114k).
19 Trade and other payables
Trade payables
Accruals and deferred income
Other payables
Contract liabilities
Trade and other payables
20 Leases
Group
Company
2020
£’000
1,836
420
259
79
2,594
2019
£’000
579
102
173
126
980
2020
£’000
37
228
-
-
265
2019
£’000
-
35
-
-
35
Right of use assets and lease liability
This note explains the impact of the adoption of IFRS 16 Leases on the group’s financial statements
and discloses the new accounting policies that have been applied from 1 April 2019 can be found in
note 1.
The group has adopted IFRS 16 retrospectively from 1 April 2019, but has not restated comparatives
for the year ended 31 March 2019, as permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 April 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had
previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities
were measured at the present value of the remaining lease payments, discounted using the lessee’s
incremental borrowing rate as of 1 April 2019. The weighted average lessee’s incremental borrowing
rate applied to the lease liabilities on 1 April 2019 was 6%.
For leases previously classified as finance leases the entity recognised the carrying amount of the
lease asset and lease liability immediately before transition as the carrying amount of the right of
use asset and the lease liability at the date of initial application. The measurement principles of IFRS
16 are only applied after that date.
Sosandar plc
P a g e | 56
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 Leases (continued)
Operating lease commitments disclosed as at 31 March 2019
Discounted using incremental borrowing rate at date of initial application
Finance cost
Lease payments
Lease liability recognised in statement of financial position
Of which:
Current lease liabilities
Non-current lease liabilities
31 March
2020
£’000
203
6%
10
(76)
126
77
49
126
Right-of use assets were measured at the amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments relating to that lease recognised in the balance
sheet as at 31 March 2019. There were no onerous lease contracts that would have required an
adjustment to the right-of-use assets at the date of initial application. The recognised right-of-use
assets relate to Land and Property in relation to the lease at the group’s main trading address, 40
Water Lane, Wilmslow, Cheshire, SK9 5AP. An asset of £192k has been recognised in relation to this
lease
The change in accounting policy affected the following items in the balance sheet on 1 April 2019:
•
•
•
Fixed Assets, Land and Buildings – Increased by £192k
Accruals and deferred income – Decreased by £32k
Lease liabilities – Increased by £192k
There was no impact on retained earnings on 1 April 2019
Practical expedients applied
In applying IFRS 16 for the first time, the group has used the following practical expedients
permitted by the standard:
•
•
•
•
•
the use of a single discount rate to a portfolio of leases with reasonably similar
characteristics
reliance on previous assessments on whether leases are onerous
the accounting for operating leases with a remaining lease term of less than 12 months as at
1 April 2019 as short-term leases
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date
of initial application, and
the use of hindsight in determining the lease term where the contract contains options to
extend or terminate the lease.
The group has also elected not to reassess whether a contract is, or contains a lease at the date of
initial application. Instead, for contracts entered into before the transition date the group relied on
its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a
Lease.
Cashflow
-
-
depreciation of ROU asset to be added back to calculate cash from operating activities
lease payments then included as a cash outflow from financing activities
Sosandar plc
P a g e | 57
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21 Related party transactions
During the year to 31 March 2020 the Group was charged £60,000 (2019: £60,000) for services
provided by Reyco Limited, a company controlled by A Reynolds. There was no amount outstanding
at the balance sheet date.
During the year to 31 March 2020 the Group was charged £30,000 (2019: £30,000) for services
provided by Morrison Kingsley Consultants Limited, a company controlled by M Collingbourne. There
was an amount of £666 outstanding at the balance sheet date (2019: £nil).
During the year to 31 March 2020 the Group was charged £30,000 (2019: £30,000) for services
provided by Bill Murray and Associates, a company controlled by B Murray. There was no amount
outstanding at the balance sheet date.
During the year to 31 March 2020 the Group was charged £30,000 (2019: £30,000) for services
provided by N Mustoe. There was an amount of £500 outstanding at the balance sheet date (2019:
£nil).
During the year to 31 March 2020 the Group was charged £30,000 (2018: £22,500) for services
provided by Skale Limited, a company controlled by A Booth. There was an amount of £2,400
outstanding at the balance sheet date (2019: £nil).
At the balance sheet date, Julie Lavington owed Thread 35 Ltd £nil (2019: £1,200) for personal tax
invoices paid for by Thread 35 Ltd.
At the balance sheet date, Alison Hall owed Thread 35 Ltd £nil (2019: £1,200) for personal tax
invoices paid for by Thread 35 Ltd.
During the year to 31 March 2020, a management fee of £184,446 (2019: £190,808) was received
from Thread 35 Limited.
During the year to 31 March 2020, interest of £651,951 (2019: £292,938) was charged to Thread 35
Limited relating to the intercompany loan.
The Company’s intercompany loan receivable balance at the year-end was £16,950,351 from Thread
35 Limited (2019: £7,093,954).
22 Financial instruments – risk management
In common with all other businesses, the Group is exposed to risks that arise from its use of financial
instruments. This note describes the Group’s objectives, policies and processes for managing those
risks and the methods used to measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its
objectives, policies and processes for managing those risks or the methods used to measure them
from previous periods unless otherwise stated in this note.
Sosandar plc
P a g e | 58
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 Financial instruments – risk management (continued)
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives
and policies and, whilst retaining responsibility for them it has delegated the authority for designing
and operating processes that ensure the effective implementation of the objectives and policies to
the Group’s finance function. The Board receives regular updates from the management team
through which it reviews the effectiveness of the processes put in place and the appropriateness of
the objectives and policies it sets. The overall objective of the Board is to set policies that seek to
reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. The
Company’s operations expose it to some financial risks arising from its use of financial instruments,
the most significant ones being cash flow interest rate risk, foreign exchange risk, liquidity risk and
capital risk. Further details regarding these policies are set out below:
Cash flow interest rate risk
The Group is exposed to cash flow interest rate risk from its deposits of cash and cash equivalents with
banks. The cash balances maintained by the Group are proactively managed in order to ensure that
attractive rates of interest are received for the available funds but without affecting the working
capital flexibility the Group requires. The Group is not at present exposed to cash flow interest rate
risk on borrowings as it has no debt. No subsidiary company of the Group is permitted to enter into
any borrowing facility or lease agreement without the prior consent of the Company.
Foreign exchange risk
Foreign exchange risk may arise because the Group purchases stock in currencies other than the
functional currency.
The Group monitors the requirement for foreign currency on a monthly basis. The Group will forward
purchase the currency to fix the cost of goods for stock. Once the cost of goods has been fixed a final
selling price can be derived.
The Group considers this policy minimises any unnecessary foreign exchange exposure.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital; it is the risk that the Group will
encounter difficulty in meeting its financial obligations as they fall due. The principal obligations of the
Group arise in respect of committed expenditure in respect of its stock purchases and design. The
Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its obligations
when they become due. To achieve this aim, it seeks to maintain readily available cash balances (or
agreed facilities) to meet expected requirements and to raise new equity finance if required for future
development or expansion.
The Board receives cash flow projections on a monthly basis as well as information on cash balances.
The Board will not commit to material expenditure in respect of its ongoing commitments prior to
being satisfied that sufficient funding is available to the Group to finance the planned programmes.
For cash and cash equivalents, the Company only uses recognised banks with medium to high credit
ratings.
Sosandar plc
P a g e | 59
Annual Report 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 Financial instruments – risk management (continued)
The maturity of borrowings and other financial liabilities (representing undiscounted contractual cash-
flows) is as follows:
Trade and other payables
Lease liabilities
Total
Within 1 year
£’000
2,174
77
2,251
1-2 years
£’000
-
49
49
Financial assets
At the reporting date, the Group held the following financial assets, all of which were classified as
financial assets at amortised cost:
Cash and cash equivalents
Trade & other receivables
Right to returned goods
31 March 31 March
2019
£’000
3,645
366
-
4,011
2020
£’000
5,333
961
40
6,334
Financial liabilities
At the reporting dates, the Group held the following financial liabilities, all of which were classified
as other financial liabilities at amortised cost:
Trade payables
Accruals & deferred income
Other payables
Contract liabilities
Lease liabilities
31 March 31 March
2019
£’000
579
102
173
126
-
980
2020
£’000
1,836
420
259
79
126
2,720
Capital risk
The Group’s objectives when managing capital are to safeguard the ability to continue as a going
concern in order to provide returns for shareholders and benefits to other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.
23 Post balance sheet events
The Company and Group had no post balance sheet events.
24 Contingent liabilities
The Company and Group has no contingent liabilities.
25 Ultimate controlling party
There is no ultimate controlling party of the Company.
Sosandar plc
P a g e | 60
Annual Report 2020
Registered office
COMPANY INFORMATION
40 Water Lane,
Wilmslow, Cheshire,
England SK9 5AP
Registered number
05379931, England and Wales
Directors
Secretary
Auditors
Nominated advisor
Broker
Registrars
Solicitors
Public Relations
Bill Murray – Non-Executive Chairman
Adam Reynolds – Non-Executive Director
Mark Collingbourne – Finance Director
Alison Hall – Joint CEO
Julie Lavington – Joint CEO
Nicholas Mustoe – Non-Executive Director
Andrew Booth – Non-Executive Director
Mark Collingbourne
Jeffreys Henry LLP
Finsgate
5-7 Cranwood Street
London EC1V 9EE
Shore Capital and Corporate Limited
57 St James’s St
London SW1A 1LD
Shore Capital and Corporate Limited
57 St James’s St
London SW1A 1LD
Share Registrars Limited
The Courtyard
17 West St
Farnham
GU9 7DR
BPE Solicitors LLP
St. James’ House
St. James’ Square
Cheltenham GL50 3PR
Alma PR
71-73 Carter Lane
London WC2B 4HN
Sosandar plc
P a g e | 61
Annual Report 2020