7:59 cut – Sosander (SOS)

Sosander (SOS) – H1 Update

I am currently working through the numbers in detail and will update this article once I have completed them, but initial indications are that this has been another disappointing period for Sosander. Even taking September’s revenue growth (when tube advertising was in full swing), current revenue guidance looks difficult to meet given the results so far.

Despite the overall positive tone, I take the late decision to further increase advertising costs as a warning that profits will miss in order to meet the revenue target.

[Edit: Last year the company provided us with Q3 (calendar Q4) figures. Combined with public retail sales data, this allows an estimate to be made of how far ahead October 2019 was from October 2020.

Assuming that the statement was prepared on Friday on the expectation that October would exceed £1m during Saturday, the monthly total is likely to be around £1.15m, which I estimate to be 150% ahead (2.5x) of last year. Continuing the same rate of growth they would hit £9.3m for the full year. This is clearly within reach of the £9.5m consensus forecast, however continuing increasing advertising spend (and therefore growth rates) in the quiet months of February, March and April is against my understanding of their strategy.

October trading is clearly going to be very good and likely to be further aided by the first cold weather of the year overnight, but November and December trading will be absolutely critical.

Edit2: My initial thought that they were warning on profits but confirming revenue has been confirmed – operating profit forecasts have been reportedly cut from £-2.3m to £-3.8m, although since that have chosen to use a broker that is not available on Research Tree I am not in a position to confirm.

Judging by the share price reaction and the other commentary today it appears that most of their shareholders value top-line growth above all else, and that management have taken on board that the Apr-Jun slowdown was not acceptable. They may be right, but this isn’t really my game and I’ve decided to sell out.


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