Good morning, and welcome to the Sosandar half-year results webinar. Today, we are joined by Joint Chief Executive Officers Julie Lavington and Ali Hall, and CFO Steve Dilks. Questions are encouraged throughout this webinar and can be submitted via the Q&A box situated on the panel on the right-hand side of your screen. I will now hand over to Julie to begin the presentation.
Good morning, everyone, and welcome to our interim results for the six months ended 30th of September 2026. Ali and I are going to start the presentation with highlights from the half year before Steve runs through the financial results in more detail. Ali and I will talk more about our product, marketing, and the channels that we sell through. Let's start off first of all with the investment highlights. Our strategy and focus remain unchanged, and we are well-positioned for further growth. In the U.K. alone, the clothing market is worth GBP 60 billion annually. It's the second-biggest retail market in the U.K. after groceries, with 11 pence in every pound spent on retail is spent on clothes. The clothing market has grown every single year as far back as data goes, apart from in COVID, and even then, it bounced back very quickly.
At Sosandar, we target 35 to 65-year-old women who've got more money to spend than younger women, yet they often feel overlooked by a fashion industry that tends to have an obsession with younger customers. We've built a loyal following of women in this demographic because we really understand them. Well over 1 million women will have woken up this morning with at least one Sosandar item in their wardrobe, and we've only just scratched the surface. Our unique product range is all designed in-house by women for women, and we reach them through multiple successful channels. One of our core strengths is combining creativity with data analytics, and this very much sits at the heart of everything we do. We have a model that's scalable and capital-light.
Now let's look at the highlights of the first half of the financial year. We're really pleased to be reporting that our revenue has grown by 11% to GBP 20.8 million. This is especially pleasing considering the backdrop of a very tough economic climate, with the ongoing and well-publicized cost of living concerns across the U.K. Our revenue was actually up by 17% to the end of August. Prolonged summer weather through September delayed sales of autumn product across all of our sales channels. Importantly, sales have grown substantially through October. Gross margin for the first half has increased even further to 65.1% from 62.2% last year. This means our margin has increased more than 10 percentage points over the last three years. Profitability has made a significant improvement again year- on- year.
Our cash position is strong, even after GBP 0.9 million in buybacks in the period, and we have zero debt.
We are in a really good position for the business to continue scaling profitably. Our fixed cost base will not fundamentally increase, which means that extra revenue will fall to the bottom line. We continue to focus on increasing revenue across the business at high margin, which will mean a continued increase in profitability. We are also very much focused on continuing to maintain a healthy cash balance. Overall, we have had a good start to the second half, albeit autumn selling was delayed versus what we would normally expect due to the unusually high temperatures we experienced in September. But we have now seen a significant uptick in sales in October, with a jump of 30% in revenue versus trading in September. Now I will hand over to Steve, who is going to talk through the half-year results in more detail.
Good morning, everybody, and I am pleased to share the financial results for the first half of our financial year. Our revenue for the six-month period is up 11% to GBP 20.8 million. This includes a really strong spring and summer season to the end of August, followed by a delay in the start to our autumn season due to the prolonged summer weather through September, and I will provide much more detail on that on the next slide. Our channel mix continued to be equally split between our own channels, which incorporates our own website and our retail stores, compared with our third-party partnerships. All channels performed well through the spring-summer season, with third parties particularly strong following the rebound of M&S following their cyber incident last year.
Our gross margin has strengthened substantially, increasing by nearly 3 percentage points to 65.1%, and the adjusted loss before tax improved by GBP 0.4 million to a loss of GBP 0.7 million for the first half. This improvement reflects the growth in revenue, growth in gross margin, and the continuation of costs being both well-controlled and well-deployed. Profitability for the first half is in line with our expectations, and it reflects the usual phasing that is skewed towards the second half, which is always stronger, reflecting both higher revenue and the economies of scale that therefore come, and ultimately, higher profitability. Our cash balance at the end of September remains healthy at GBP 7.1 million. In terms of KPIs for our own website for the first half, the number of active customers grew by 6% to 203,000, and our conversion rate remained a really solid level of 2.6%.
Average order value fell very slightly to GBP 105, which reflects a slightly different product mix within the period and a lower proportion of autumn sales through September. Average order frequency inched up to 1.96 times per annum, as did the percentage of orders being generated from our repeating customers, which increased to 78%. Overall, we are very pleased with the results for the first half, and we are well-placed to deliver market expectations for the full year. I will now move on to provide more depth on our results, starting with our revenue. As I say, our performance for the first half reflected a strong spring/summer season, despite the challenging macroeconomic and consumer backdrop that we are experiencing.
The sales growth we reported for Q1 continued into quarter two, with revenue for the first five months to the end of August being 17% up year-on-year, which included being up 6% on our own channels and 32% up on third parties. The month of September was impacted by prolonged summer weather, which delayed sales of autumn product across all of our sales channels. Overall, for the first half, our own website was flat, but 5% ahead of last year, excluding the month of September. Like-for-like revenue through our five retail stores was up 10%, and during the period, we assigned the lease of our highest loss-making store, located in Bath, to another retailer. Third-party revenue grew by 24% for the half and was 32% up if we exclude the month of September.
Trading through all of our partners has been strong, and that includes through M&S, where revenue is back to expected levels following the cyber incident that they suffered last year. As the weather has turned more autumnal, we have seen sales strengthen week on week through the month of October, with trading now very much in line with our expectations. Moving on to gross margin, which increased by 290 basis points to 65.1% for the first half. This growth reflected the sales channel mix for the half, as well as much stronger intake margins due to lower cost prices for our product being agreed. The strength of sterling against the dollar has helped this also. Inclusive of this further increase in the current year, our gross margin has now improved by 10 percentage points in just the last three years.
The primary reasons being the reduction in price promotions on our own website and cost price improvements throughout the period. Post-period, the gross margin has been equally strong, with October being 68% compared with 67.2% in the same month last year. We would expect to report equally positive intake margins for the second half based on the cost prices that we have secured for autumn, as well as the weighted average forward contract rates that we have agreed between sterling and dollar. To summarize the improvement in our profitability, which improved by GBP 0.4 million, or 37%, to an adjusted loss before tax of GBP 0.7 million. It is really important to note that our profit is heavily weighted towards the second half, where revenue is traditionally stronger and the economies of scale greater.
Our improvement has been driven by both the growth in revenue and margin. The substantial increase in our margin is the single largest reason for the step-up in PBT in the period. We continued to invest in marketing throughout the period, which also included in September, despite the prolonged summer weather. The return on investment remains strong on this investment, albeit less so than last year. It is this investment that is allowing us to grow the active customers number during the period, which will then deliver ongoing revenue growth as we go into the second half. On our own website, we maintained our full price strategy throughout the period, including in September, where we chose not to offer price promotional deals to stimulate demand despite the hot weather. Stores improved in terms of both revenue and profitability, contributing an additional GBP 0.2 million to profit in the period.
Like-for-like revenue has been strong, being up 10% year-on-year. Additionally, we assigned the lease in Bath to another retailer. It is important to note, Bath was our worst performing store from a profitability perspective. Therefore, this has contributed positively in the period and will do so again in the second half. Overheads overall have continued to be both well-controlled and well-deployed.
Fixed overheads in the period decreased by GBP 0.2 million, and that reflects efficiencies that we have gained, which has more than offset inflationary rises that we have in the business. Overall, we are pleased with our first half performance, and we are in really good shape as we move into the second half of the year. In terms of cash, we have maintained a healthy balance of GBP 7.1 million, which is inclusive of a further GBP 0.9 million being returned to shareholders as part of our buyback program.
Including a further 700,000 shares that were bought back post-period, there are now 33.4 million shares being held in treasury at the end of October, which represents roughly 13% of the total shares in issue. Whilst the balance at the end of September was slightly lower than we would have expected, reflective of the revenue in September, we see this as purely timing rather than anything more material. The natural working capital cycle is the same as in previous years, with the cash balance post-period being an annual low point of GBP 6.4 million, which more reflects the timing of the heavy payments that we make for stock ahead of the autumn and winter season. From now on, cash will build as we sell that stock and turn it into cash.
To summarize from a financial perspective, despite the challenges from a macro perspective, we are well-placed. We are really pleased with our performance. We have a strong cash balance, and we are on track to meet our full-year expectations. On that note, I will pass back to Ali.
We are now going to move on to talk about product marketing and the channels that we sell through in a little more detail. At the heart of our business is understanding that the key to success in fashion is constant innovation of product and exciting our customer. The reason Sosandar is successful is that we consistently produce a brilliant product range year- after- year, season- after- season, that appeals to a wide audience. We are mid-priced, great quality, and on trend. We have a unique aesthetic, which is sexy and chic. We are strong in all product categories for all occasions, but our main skill is understanding our customers and being able to translate trends into outfits that she wants to buy again and again.
Innovation in marketing also sits at the center of everything we do in order to continually excite and interest our customers. Our marketing never stands still. In the last six months alone, we have shot in new, exciting locations, we have trialed different formats of brochures, introduced new designs for emails, and we continuously innovate how we communicate with our customers on social media. We have a strong celebrity following who continue to wear Sosandar time and time again. We are always working to maximize customer satisfaction. We have a market-leading Trustpilot score of 4.7 stars. We are really proud that our customer service team is based in our office, and they have exceptional knowledge of our brand and our product range. The Trustpilot summary states that consumers find our customer service to be exceptionally helpful and efficient.
Now looking at each of our three channels in turn, starting with sosandar.com, our own website. This is our single biggest revenue channel, and it drives nearly half of our annual revenue. It also operates at the highest net margin. It is the engine of brand building and of customer ownership. We have a cost of acquisition for new customers that comfortably pays back on first order, and we have a very high level of repeat purchase, with a repeat customer shopping on average four times a year.
Our third-party partnerships are also crucial to our growth. They have gone from zero five years ago to 51% of our group revenue, with Next, M&S, John Lewis, and Freemans being our four main ones. They have given us access to millions of shoppers from within our target demographic. We have reached a very broad audience very quickly. It is not just them that are important to us, we are also important to them. Brands like Sosandar are central to their own growth strategies, and we remain one of their top-selling brands, so we are all working together for the same aim. We benefit from the fact that they have huge audiences, which means we build the business with them at no incremental acquisition cost, which is now also translating into international sales with Next.
Moving on to stores, we are really pleased to see a 10% increase in revenue like-for-like across our store estate. Like other multichannel retailers, we are definitely seeing the benefit of our omnichannel presence across the brand as a whole in the areas where the stores are located. We have increased brand visibility and loyalty as they are driving increased sales to the website from those specific areas. We now have five stores after we assigned the lease for Bath to another retailer. Of the five stores, four are now close to break-even, and they are all trading up year-on-year. It is important to remember that all our stores have only been open between 18 months and two years. For now, our focus remains on bringing the store estate to profitability before we then make any decisions about further store openings.
To summarize, we have had a good first half. The macro environment has been really tough, but we continue to stand out from the crowd with revenue up 11%. Gross margin is up again to 65.1%. Profitability has made a significant improvement again year-on-year, and our cash position is strong. In terms of outlook, we are cautious about the macro environment. However, through our innovation and understanding of our customer, we have demonstrated we can continue to deliver against our goals. Therefore, we are well-placed to deliver good results for our second half. We have already seen a strong uptick in sales in October and are on track to deliver full-year expectations. Thank you, everyone. We will now hand over for questions.
Thank you. We have had a number of questions pre-submitted and submitted live. Just as a reminder, if you would like to ask a question, please type them into the Q&A box situated on the right-hand side of your screen. Our first question is, are the likes of Mint Velvet and Phase Eight losing customers to Sosandar, or are you attracting a different type of shopper?
I think the reality is that to be a brand that succeeds, you take market share from everyone, as the reality of how women shop is they do not shop with one brand. They will have their favorite brands that they are loyal to, but they will shop in a multitude of retailers. So really, we are taking share from a bit of everywhere.
Thank you. Our next question is, you have a strong cash balance and you have been buying back shares. Would you rather keep doing that or put more money into growing the business?
Our capital allocation policy, it continues to be broadly similar, insofar as we will continue to use cash in both buybacks, in order where there is possibilities for that to be the case, but we will always be cognizant that we will first use cash to drive the business in the right way. Julie talked on the slide about marketing, about return on investment, and about first order being profitable. That would not always be the case if we spent even more on marketing activity, because there are diminished returns. It is about using the right amount for the right activity. So I think to expect in second half that we will continue to use our cash in the right way, deployed to drive the business, but where there is surplus and where we see the need, we will participate further in buyback activity.
Thank you, Steve. Next we have, the shops have been losing money and you have already closed Bath. At what point do you decide whether the whole shop strategy is worth pursuing?
The shop strategy is worth pursuing because it is working. As Julie explained earlier, we are seeing a halo effect from the stores, where on the website, in the places where we have stores, we are seeing increased sales. It is also a brand-building exercise, so we see the strategy working. Also, four of our five stores are getting very close to cash break-even. So, it is a strategy that is working, and the one store that was not doing as well as the others, we got rid of quickly, and now we are just focusing on making the others get to profitability.
Thank you, Ali. Next we have, now that M&S is back to normal, should we expect a decent uplift in sales through that channel this year?
Yes and yes is the simple answer to that. Yes, M&S are growing in a very healthy way year-on-year, as they would be, because obviously sales were very suppressed last year. The important thing for us is that we're getting back to kind of year minus two. We're back at the sales levels that we would have expected to have been at last year, is the positive news. And there is lots of room to continue growing with M&S, so we're very pleased.
Thank you, Julie. Our next question is, we have seen M&S and ASOS, amongst others, being impacted by cyber hacks. What precautions do you have in place to combat something like this occurring?
Lots, lots of things. I think predominantly in our case, we choose partners for hosting of our website, for partners that manage payment processing and data. We choose partners that have got top-tier security protocols in place, and that's really important to us. We then simulate attacks through a third-party partner of ours that is trying to access data, be it on our own systems or by partners, and that's a regular process that we've had in place for many years. That's not as a result of what's happened recently. That's been something that we've done for many years.
We also have a lot of training of our people, because a lot of issues stem from weakness within one person, and that might be responding to an email or clicking a link. We train our staff regularly on the risks to try at all costs, really, to be as covered as possible. If the worst were to have happened on Sosandar, we also have full and comprehensive insurance, but that is only really required if something were to happen. Preventative measures are much more important, but it is also important to recognize that if something were to happen, we have got support around us that would get us back online, would lock down the problem, and will get us moving again. It is also probably worth talking about Sosandar's infrastructure more generally. Everything that we operate on is in the cloud.
That doesn't make you immune, but we don't have old server-type activities where things are stored within a server room, for example. Being in the cloud in itself helps you to be more protected. It doesn't make you immune, though. I think we do everything and all possible that make us as safe as we can be, but we also accept that there continues to be risks, which is why we remain vigilant to those things.
Thank you, Steve. Operating costs have gone up 13%, which is actually faster than sales. When do we start seeing the benefits of the investment you have already made?
I guess it is worth just talking about why costs have gone up in the period. There are three things that are at play here, really. One is the largest growth in revenue was third parties, predominantly our concession partners, and they attract a direct variable cost, which is their commission that is retained by the partner. If revenue with concessions goes up, so does their commission. We also have revenue growth generally, which has a cost to serve of logistics provision, both picking, packing, returns handling, and shipping the goods to the consumer or the partner. That has also risen. On the third element of why the costs went up in the period, marketing, which was a conscious choice to continue to invest in the right way through the period, including in September. September is important here because September is an autumn/winter period.
Spending money on a brochure, as we did in September, both benefits September as a month, but it also invests in the customer ahead of the autumn season. We will start to see more benefit from that investment that was incurred in September in October onwards. More traditionally, costs, particularly marketing, as well as our photography costs that prepare product imagery for our autumn seasons, is incurred at the back end of the first half. We have an unnatural balance, really, in the first half, whereby we are incurring heavily some costs that are for the following season. We have less of that happen at the end of the financial year, ready for spring. The second part of the question is, when do we start to see the economies of scale? Second half is the first answer to that.
But I think it is important that we continue to invest in order to get exponential growth on revenue, which is what we have done through the first half.
Thank you. Next we have, "You have now exited Bath. Are the remaining shops all performing broadly as expected, or are there still one or two that you are concerned about?
Of the five that are remaining, four are getting very close to profitability. There is one that is still a little trickier in terms of not performing quite as well as the others. We are not making any decisions as yet. We will continue, obviously, to monitor them closely, and we will make a decision as and when the time is right.
Thank you, Julie. Next we have, "You mentioned international sales with Next. Is this still at an early stage?
We are doing well with Next. I think if people have seen the Next results this morning, they obviously have talked about how well international sales are doing. Yes, we do sell very well. Part of our revenue from Next is from international markets, and it is a great growth area for them, and obviously, we are seeing the benefit of that.
Thank you. Our next question is, "You have made a real effort to move customers towards full price shopping. How confident are you that you can continue growing without having to rely more heavily on promotions?
I think we have demonstrated already that since that change two and a half, three years ago, that we have sustained growth throughout that period whilst also growing our margin. It is important to also recognize that we sell the vast majority now at full price, but tactical promotions still do exist. What has changed, really, is that when we do those tactical promotions, they work even better than they ever did because the response rate to them is greater, particularly probably at the moment with the cost of living and the macroeconomics. I think in answer to the question, could we still grow? Absolutely, because we have demonstrated that that is the case.
I think more importantly, the economics now of our business model, with a margin average in the mid-60s or maybe even a touch higher, much more of the GBP extra on revenue will drop to the bottom line than it did previously. I think that's a critical thing, that we can grow exponentially much greater in profit than the revenue would grow because of the cut-through to profit.
Thank you. How important are partners such as Next and M&S to your long-term growth?
I think they're very important. It's half of our revenue. We see all our channels as important. Our own website is about half on its own, and then you've got several partners, of which the four biggest ones are Next, Marks & Spencer, John Lewis, and Freemans, and they form the other half of our revenue. I think they're absolutely fundamental to the future of our business. We have very successful partnerships with everybody. It's a symbiotic relationship as well because for these big retailers, third-party brands are fundamental to their own growth strategies. We play a very important role in their own businesses, which is why it works so well, basically, because both brands and the larger retailers are doing well from the collaborations that we have.
Thank you. Our next question is, "Can you give shareholders an idea of how much profits the business could make if the shops simply broke even?
We are now in the most important trading period for our business, which is our Q3 period from October through December. I think that answer is always going to be predicated on how this season goes. I think if we exclude one of the five, because that's the one that's got the greatest drag, already, if you incorporate the incremental benefit that we get on our website from those stores, they're almost close to break-even overall. When we talk about losing money or breaking even, we predominantly only ever talk about what goes through the till of the store. We do not talk about the stores in the context of how they have allowed the business to grow and build more customers overall, wherever they then go on to shop.
What is pleasing this year is that we are getting much closer to that break-even point, inclusive of the incremental benefit that they deliver to the wider business. That is probably the critical point. Bath leaving was important. The one of the five that is maybe touch and go is something that we will look at in due course. I think they are no longer creating the significance of impact to our overall profitability that they were even a year ago. I think that is the most important message really, that we are now on the cusp, but we do need to trade the important season, which we are now in.
Thank you. We are now moving on to our final question. If you have any further questions, please email the team who will respond to any questions that were not covered today. Our last question is, with more stock going into the autumn and winter season, are you confident you will not end up having to discount heavily after Christmas?
Yes, we are confident. Last year, we utilized our stock very well. We actually exited last year with slightly less stock than maybe optimal levels on certain sizes within certain product ranges. This year, we have invested slightly more in stock in order to replenish that position. Despite having a later or a delayed start to the autumn season, that should not be seen as a worry about what happens at the end of the season. We feel like we are well-stocked, not too much, not too little, in order to deliver the revenue expectation for the year. In any case, it is quite normal to carry stock forward from one season to the next, or one year to the next. That is quite normal. We would just supplement any carryover into the following year anyway. It is not like you have to sell it now.
We're not having to therefore do distress discounting in order to clear stock. It doesn't work like that in our business. We do have end-of-season sales, but we're also comfortable to carry forward parts of our range into the next year.
Thank you, Steve. That's all the questions that we'll be covering today, so I'll hand back over to the management team for any closing remarks.
Just to say, thanks all very much for dialing in today, and we look forward to updating you again next year.