SOS Sosandar Plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1 General information

 

Sosandar Plc (the 'Company') is a public company limited 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 Group in the year under review was that of a clothing manufacturer and distributer via internet and mail order.

 

The principal activity of the company is that of a holding company.

 

2 Significant accounting policies

 

Basis of preparation

The consolidated financial statements consolidate those of the Company and its subsidiary (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 UK adopted international accounting standards (IFRSs) 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.

 

Prior period adjustments and FRC review

In February 2024, the Group received a letter from the Corporate Reporting Review Department of the Financial Reporting Council (FRC) advising that they had selected the FY23 Annual Report and Accounts for review. As a result of the review, it came to light that there was a presentational error in the Statement of Cashflows for the company. Loans made to subsidiaries of £3,423k in 2023 and £4,681k in 2022 were omitted from the cash flow statement when they should have been included as an investing cash outflow with a corresponding adjustment to operating cash flows relating to the subsequent impairment. This has been adjusted in the company cash flow statement. The error had no impact on the company statement of financial position.

 

The review conducted by the FRC was a limited scope review performed solely on the Group's Annual Report and Accounts for FY23 and does not provide any assurance that the annual report and accounts are correct in all material respects. The FRC's role is not to verify the information provided to it but to consider the compliance with reporting requirements. As such the FRC accepts no liability for reliance on their review by any stakeholder of the company, including but not limited to investors and shareholders.

 

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 pages 2-3. The financial position of the Group, its cash flows and liquidity position are described in the financial statements and associated notes. In addition, note 21 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.

 

In order to assess the going concern of the Group, the directors have reviewed the Group's bank balances, cash flows, 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. These cash flow and profit and loss forecasts show the Group expect an increase in revenue based on the assumptions set out in note 11 of the financial statements. This will have sufficient headroom over available banking facilities. Management continue to monitor costs and manage cashflows against these forecasts. 

 

At 31 March 2024, the Group had a cash balance of £8.3m and is therefore in a strong position, with sufficient working capital to take advantage of opportunities in FY25. This substantiates the view that the Group is a going concern.

 

The directors continue to monitor the Group's going concern basis against the backdrop of significant external events. During the financial year, rising inflation and increased interest rates led to a 'cost of living crisis' in the UK. Whilst at a macro level, these changes are expected to impact consumer spending, the Group has not experienced a material downturn in activity with gross margin remaining stable. Therefore, despite these events, 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, 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 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 subsidiary undertakings; all subsidiaries have a reporting date of 31 March.

 

Subsidiaries are all entities which fall within the definition of control under IFRS 10; an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

 

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 acquiree, 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 affect the business combination.

 

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.

 

Changes in accounting policies and disclosures

The accounting policies adopted are consistent throughout the financial period. Standards and amendments to UK adopted international accounting standards (IFRSs) effective as of 1 April 2023 have been applied by the Group.

Adoption of new and revised standards

During the financial year, the Group has adopted the following new IFRSs (including amendments thereto) and IFRIC interpretations, that became effective for the first time.

Standard	Effective date, annual period beginning on or after
IFRS 17 Insurance Contracts	1 January 2023
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information	1 January 2024
IFRS S2 Climate-related Disclosures	1 January 2024

 

Their adoption has not had any material impact on the disclosures or amounts reported in the financial statements.

Standards issued but not yet effective:

At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group and which have not been applied in these financial statements, were in issue but were not yet effective.

Standard	Effective date, annual period beginning on or after
Amendment to IFRS 16 - Leases on sale and leaseback	1 January 2024
Amendment to IAS 1 - Non-current liabilities with covenants	1 January 2024

 

The Directors have assessed the full impact of these accounting changes on the Company. To the extent that they may be applicable, the Directors have concluded that none of these pronouncements will cause material adjustments to the Group's Financial Statements. They may result in consequential changes to the accounting policies and other note disclosures. The new standards will not be early adopted by the Group and will be incorporated in the preparation of the Group Financial Statements from the effective dates noted above.

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.

The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and not presented an income statement nor a statement of comprehensive income for the Company alone.

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.

 

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.

 

Revenue recognition

Revenue is recognised at the point where legal title in the goods passes from the Group to the customer. This includes the price paid for the goods as well as any delivery charge where applicable. Typically, legal title is passed when the goods are despatched from the warehouse and as the invoice is created. It is impractical to recognise on delivery, and the difference due to this timing is immaterial. The point of recognition and the point of return is the same for both direct and third-party sales.

Revenue is reported after making deduction for actual and anticipated returns, relevant vouchers and sales taxes.   

Revenue is generated both on Sosandar's own website, and through third party partners.

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. Intangible assets have finite useful lives.

 

Amortisation is recognised within administrative expenses in the Statement of Comprehensive Income so as to write off the cost of assets less their residual values over their useful economic lives.

 

The following annual rates are used:

 

Website                                                                               20% Straight line

Trademark                                                                          20 % Straight line

Software                                                                             33% Straight line

 

Assets Under Construction will be depreciated when the assets are in use.

 

 

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 and reducing balance methods to write off their cost over their estimated useful lives at the following annual rates:

 

Plant and Machinery                                                      15% Straight line              
Computer Equipment                                                    33.33% Straight line        
Fixture and Fittings                                                         15% Reducing balance  
Office Equipment                                                            25% Reducing balance  
Leasehold Improvements                                            20% Straight line

Right of Use Asset                                                       20% Straight line

 

Equity

Equity instruments issued by the Group are recorded at the value of the proceeds received, net of direct issue costs, allocated between share capital and share premium.

 

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.

 

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.

 

The Group contributes to a defined contribution scheme for employees. The costs of these contributions are charged to the statement of comprehensive income on an accruals basis as they become payable under the scheme rules.

 

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. Note 11 contains the assumptions made by management.

 

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.

 

Trade payables and other non-derivative financial liabilities  

Trade payables and other creditors are non-interest bearing and are measured at amortised 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 transaction price and subsequently measured at their cost when the contractual right to receive cash or other financial assets from another entity is established.

 

Trade receivables are considered past due when they have passed their contracted due date. Trade receivables are assessed for impairment based upon the expected credit losses model. The Group applies the IFRS 9 Simplified Approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure, expected credit losses on a collective basis are grouped based on similar credit risk and aging.

Financial assets and liabilities

The Group classifies its financial assets at inception as measured at amortised cost. 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 costs that are directly attributable to its acquisition or issue, for an item not at fair value through profit or loss, are 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.

 

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 a 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 financial liability when its contractual obligations are discharged, 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, in line with IFRS 9. All financial instruments are initially measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs. Any measurement of expected credit losses under IFRS 9 reflects an unbiased and probability-weighted amount that is determined by evaluating the range of possible outcomes as well as incorporating the time value of money.

 

Impairment losses from contracts with customers

The Group considers reasonable and supportable information about past events, current conditions and reasonable and supportable forecasts of future economic conditions when measuring expected credit losses. The amount of loss is recognised in the Statement of Comprehensive Income.

 

Leases

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.

 

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 less than £5k.

 

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. The key areas identified by the Group are as follows:

 

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 £1,365k (2023: £2,617k) and a right to returned goods asset recognised of £555k (2023: £1,113k). A performance obligation is deemed for returns and refunds. A 14 day return policy is noted for a full refund through Sosandar.com and up to 30 days on third party retailer websites.

 

Critical accounting judgements and key sources of estimation uncertainty

Contract liabilities - refund accruals

 Whilst not a key source of estimation uncertainty, the directors believe it is relevant to disclose the impact of changes to the estimate. A difference of 1%pt in the sales returns rate have an impact of +/- £124k (2023: +/- £134k) on the refund provision, and +/- £53k (2023: +/- £60k) on the right to returned goods asset.

 

A provision is made to write down any slow-moving or obsolete inventory to net realisable value. The provision is £541k at 31 March 2024 (2023: £384k). Whilst not a key source of estimation uncertainty, the directors believe it is relevant to disclose the impact of changes to the estimate. A difference of 1%pt in the provision as a percentage of gross inventory would give rise to a difference of +/- £109k in gross profit (2021: +/- £124k).

 

Investments

In order to assess the impairment of the investment in the subsidiary, the Directors use a value in use calculation.

The key assumptions used for the value in use calculation for the year ended 31 March 2024 were as follows:

							2024	2023
							%	%
Discount rate							6.4	11
Compound annual revenue growth rate							10	20

 

The Directors assessment of the estimates on future revenues and EBITDA growth in future years is a key source of estimation uncertainty. The estimations are 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.

 

Impairment of non-financial assets

At each statement of financial position date, the Group 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 Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

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. 

 

Impairment of non-financial assets

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than it's 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.

 

Share-based compensation

The Group has issued equity-settled share-based payments to employees. 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 other reserves within 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.

 

The fair value of share-based payments recognised in the income statement taking 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.

 

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.

 

3 Revenue

 

The directors have considered the requirement of IFRS 15 with regards to disaggregation of revenue and do not consider this to be required as the group only has one operating segment which is retail sales.

 

The income recognition for delivery receipts, commissions on partner-fulfilled sales and wholesale revenue are in line with that of retail sales and linked to dispatch/delivery to customers.

 

Due to the nature of its activities, the group is not reliant on any individual major customers.

 

During the year, the Group expanded into international markets. The major geographical market remains the UK.

 

 

	Year ended	Year ended
	31-Mar	31-Mar
	2024	2023
	£'000	£'000
UK	46,177	42,451
Rest of World	100	-
Total	46,277	42,451

 

 

 

4 Operating loss

	31 March 2024		31 March 2023
	£'000		£'000
Operating loss is stated after charging/(crediting):
Operating lease rentals	121		86
Auditors' remuneration:
Audit fee - group and company	64		54
Legal and other fees	242		155
Foreign currency loss	13		190
Share based payment	262		311

 

5 Finance cost

	31 March 2024		31 March 2023
	£'000		£'000
Interest on the lease	36		40
Total	36		40

 

6 Employees

	31 March		31 March
	2024		2023
	£'000		£'000
Aggregate Directors' emoluments including consulting fees	819		752
Wages and salaries	3,621		2,571
Social security costs	433		353
Pension costs	221		148
Share-based payments	262		311
Total	5,356		4,135

 

	31 March		31 March
	2024		2023
	£'000		£'000
Directors	8		8
Staff	89		70
Total	97		78

 

Directors' remuneration

 

Details of emoluments received by Directors of the Group for the year ended 31 March 2024 are shown in the table below.

 

Details of the share options held by each Director can be found in the Group Directors' Report on page 28. The key management personnel are deemed to be the directors.

The share-based payment charge related to directors was £240k (2023: £279k).

	2024	2024	2024	2024	2023
	Base Salary	Pension	Other Benefits	Total	Total
	£	£	£	£	£
Alison Hall	235,000	28,200	9,361	272,561	222,567
Julie Lavington	235,000	28,200	7,902	271,102	222,921
Steve Dilks	171,000	13,680	7,651	192,331	151,778
Bill Murray *	-	-	-	-	38,019
Nicholas Mustoe **	45,000	-	-	45,000	30,692
Adam Reynolds	30,000	-	-	30,000	30,000
Mark Collingbourne ***	-	-	-	-	25,000
Andrew Booth	30,000	-	-	30,000	30,000
Jonathan Wragg ****	28,654	-	-	28,654	29,230
Lesley Watt *****	30,000	-	-	30,000	17,500
Total	804,654	70,080	24,914	899,648	797,707

 

* Passed away 4 February 2023

** Became Interim Chair 15 March 2023

*** Resigned 1 September 2022

**** Appointed 14 April 2022/ Resigned 15 December 2023

***** Appointed 1 September 2022

 

7 Income tax
a) Analysis of charge in the period

	31 March	31 March
	2024	2023
	£'000	£'000
Deferred tax
Origination and reversal of timing differences	91	(284)
Total deferred tax charge/(credit)	91	(284)
b) Factors affecting the tax charge for the period
	31 March	31 March
	2024	2023
	£'000	£'000
Loss on ordinary activities before taxation	(332)	1,597
Tax at the UK corporation tax rate of 25% (2023: 19%)	(83)	303
Expenses not deductible for tax purposes	66	60
Fixed asset differences	(13)	(15)
Remeasurement of deferred tax for changes in tax rates	(4)	(63)
Movement in deferred tax not recognised	125	(569)
Tax on loss on ordinary activities	91	(284)

On 1 April 2023 the rate of corporation tax increased to 25%. The deferred tax asset recognised in the accounts has been calculated using the current year tax rate of 25% (2023: 19%). The unrecognised deferred tax asset amounts to £3,425,906 (2023: £3,444,393) and has been recognised at the tax rate of 25%.

The deferred tax asset has been recognised due to the expectation that it will be reversed in future years.

8 Earnings/(loss) per share

Basic earnings/(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:

 

	31 March		31 March
	2024		2023
Profit / (Loss) after tax attributable to equity holders of the parent (£'000)	(423)		1,881
Weighted average number of ordinary shares in issue	248,226,513		224,738,344
Fully diluted average number of ordinary shares in issue	248,226,513		252,499,241
Basic earnings/(loss) per share (pence)	(0.17)		0.84
Diluted earnings/(loss) per share (pence)	(0.17)		0.74

 

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 prior year calculations of basic earnings per share is based on the weighted average number of ordinary shares and the diluted earnings per share calculation includes the effect of outstanding share options.

 

9 Intangible Assets

		Website		Trademark		Software		Assets under Construction		Total
		£'000		£'000		£'000		£'000		£'000
Cost
At 1 April 2022		228		2		-		-		230
Additions		-		-		-		-		-
At 31 March 2023		228		2		-		-		230
Amortisation
At 1 April 2022		228		1		-		-		229
Charge for the year		-		1		-		-		1
At 31 March 2023		228		2		-		-		230
Carrying value 31 March 2023		-		-		-		-		-
Cost
At 1 April 2023		228		2		-		-		230
Additions		-		8		191		259		458
Transfers				-				52		52
Disposals		-		-		(50)		(30)		(80)
At 31 March 2024		228		10		141		281		660
Amortisation
At 1 April 2023		228		2		-		-		230
Charge for the year		-		-		39		-		39
Disposals		-		-		-		-		-
At 31 March 2024		228		2		39		-		269
Carrying value 31 March 2024		-		8		102		281		391

 

Assets under construction are costs relating to the ERP implementation project and thus were transferred into intangible assets from property, plant and equipment. Refer to note 10.

10 Property, plant and equipment - Group

	Computer Equipment	Fixtures and fittings equipment	Right of use asset	Assets under Construction	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 April 2022	123	312	556	-	991
Additions	68	280	380	52	780
At 31 March 2023	191	592	936	52	1,771
Accumulated depreciation
At 1 April 2022	85	256	204	-	545
Charge for year	34	53	148	-	235
At 31 March 2023	119	309	352	-	780
Carrying value 31 March 2023	72	283	584	52	991
Cost
At 1 April 2023	191	592	936	52	1,771
Additions	50	31	166	-	247
Transfers	-	-	-	(52)	(52)
At 31 March 2024	241	623	1,102	-	1,966
Accumulated depreciation
At 1 April 2023	119	309	352	-	780
Charge for year	45	61	171	-	277
At 31 March 2024	164	370	523	-	1,057
Carrying value 31 March 2024	77	253	579	-	909

 

Assets under construction are costs relating to the ERP implementation project and thus were transferred into intangible assets from property, plant and equipment. Refer to note 9.

 

11 Non-current assets

Investments in subsidiaries:

	Company
	2024	2023
	£'000	£'000
Cost at 1 April	7,432	7,127
Additions during the year	262	305
Cost at 31 March	7,694	7,432
Impairment at 1 April	-	-
Disposals during the year	-	-
Impairment at 31 March	-	-
Carrying value as at 31 March	7,694	7,432

 

The additions during the year are in respect of the share-based payment expense which was issued in the Parent Company on behalf of its subsidiary, Thread 35 Limited and therefore represents a capital contribution during the year. More information can be found in note 17. 

Investments are tested for impairment at the balance sheet date, where indicators of impairment exist. Indicators were identified including the reduction in profit in the subsidiary and the write off of the intercompany loan balance with the subsidiary. The recoverable amount of the investment in Thread 35 Ltd as at 31 March 2024 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 5 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 for the year ended 31 March 2024 are disclosed in note 2, Critical accounting judgements and key sources of estimation uncertainty on page 59.

The subsidiaries of Sosandar Plc are as follows:

Subsidiary companies	Incorporation	Holding	Type of share held	% Holding 2024	% Holding 2023
	UK
Thread 35 Ltd		Direct	Ordinary shares	100	100
Sosandar (Europe) Limited	Ireland	Direct	Ordinary shares	100	-

 

The registered office of Thread 35 Limited is 40 Water Lane, Wilmslow, SK9 5AP and the registered office of Sosandar (Europe) Limited is 5^th Floor, 40 Mespil Road, Budlin 4, Ireland, D04 C2N4.

 

There were no other investments held by the Group.

 

12 Inventories - Group

	31 March		31 March
	2024		2023
	£'000		£'000
Stock - finished goods	10,365		11,251
Right to returned stock	555		1,110
Total	10,920		12,361

 

The cost of inventories charged in the year as an expense equated to £19,627k (2023: £18,416k). Right to returned stock relates to the cost of products sold in the financial year but expected to be returned after the financial period.

 

13 Loans to subsidiaries

 

	Group		Company
	2024	2023	2024	2023
	£'000	£'000	£'000	£'000
Loan to subsidiary	-	-	-	-

 

The loan made to Thread 35 Ltd by Sosandar Plc of £26,671k (2023: £26,470k) was fully impaired at the year end. The loan was not formalised during FY24. It does not bear interest and is repayable on demand. Post year end, the loan agreements between Sosandar PLC and Thread 35 Ltd and Sosandar (Europe) Limited were formalised.

 

14 Trade and other receivables

	Group		Company
	2024	2023	2024	2023
	£'000	£'000	£'000	£'000
Trade receivables	2,160	1,973	-	-
VAT recoverable	8	23	8	23
Other receivables	100	86	-	-
Prepayments	500	648	-	-
Trade and other receivables	2,768	2,730	8	23

 

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

 

Trade receivables are considered past due when they have passed their contracted due date. Trade receivables are assessed for impairment based upon the expected credit losses model. The Group applies the IFRS 9 Simplified Approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure, expected credit losses on a collective basis are grouped based on similar credit risk and aging. The Group does not have any non-current receivables.

At 31 March 2024 there were 3 customers who owed in excess of 80% of the total trade debtor balance.  These customers were operating within their credit terms and the directors do not foresee an increased credit risk associated with these customers. None of the trade receivables have been subject to a significant increase in credit risks since initial recognition and as such no impairment provision has been recognised on trade receivables.

 

Expected credit losses have been recognised in the parent company on the loan to the subsidiary.

 

 

31/03/2024	Note	External credit rating	Internal credit rating	12 month or lifetime ECL	Gross carrying amount	Loss allowance	Net carrying amount
					£'000	£'000	£'000
Loans to subsidiaries	13	N/A	Doubtful	Lifetime	26,671	(26,671)	-

 

15 Cash and cash equivalents

	Group		Company
	2024	2023	2024	2023
	£'000	£'000	£'000	£'000
Cash at bank	8,313	10,576	4,534	5,119

 

16 Share capital and reserves

Details of ordinary shares issued are in the table below:

 

 

Ordinary Shares (£0.01)
	Number of shares issued and fully paid	Issue Price £	Total Share Capital £'000	Total Share Premium £'000
At 31 Mar 2023	248,226,513	0.001	248	52,619
At 31 Mar 2024	248,226,513	0.001	248	52,619

 

17 Share based payments

 

Share option plans

The Group has a share ownership compensation scheme for Directors and senior employees of the Group. On 2^nd November 2017 share options over ordinary shares of 15.1p were issued with a further issue over ordinary shares of 29.1p issued on 25^th February 2019. On 21 June 2021 the Group announced the establishment of a new Long Term Incentive Plan in which it granted new nil cost options totalling 21,431,942 ordinary shares of 0.1 pence each to its executive directors and members of the senior management team. Some of the existing options granted, totalling 13,888,742 ordinary shares, were modified as part of these arrangements. There was no incremental fair value because of this modification.

 

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 2024		31 March 2023
	Number ('000)	WAEP £	Number ('000)	WAEP £
Outstanding at 31 March 2023	27,761	0.035	27,761	0.035
Modifications in the year	0	0.000	-	-
	0	0.000	-	-
Issuances in the year	135	0.000	-	-
Cancellations in the year	(135)	0.000	0	0
Outstanding at 31 March 2024	27,761	0.035	27,761	0.035
Exercisable at 31 March 2024	18,118	0.054	18,118	0.054

 

The options outstanding at 31 March 2024 had a weighted average exercise price of £0.035 and a weighted average remaining contractual life of 6.59 years.

The fair values of options granted prior to 2021 were calculated using the Black Scholes pricing model. The fair values of the options granted in June 2021 and May 2023 were calculated using the Monte Carlo 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 £262k (2023: £311k) related to equity-settled share-based payment transactions during the year. Of this, the charge recognised in the subsidiary, Thread 35 Ltd, was £262k (2023: £305k).

 

The assumptions used in the valuation of the options at the grant date are as follows. There were no new share issues in the year.

 

	Share options FY24	Share options FY22	Share options FY19	Share options FY18
Exercise price	0.0p	0.0p	29.2p	15.1p
Share price at date of grant	27.00p	23.75p	29.2p	15.1p
Risk-free rate	0.25%	0.25%	0.25%	0.25%
Volatility	70%	42%	25%	25%
Expected Life	3 years	5 years	10 years	10 years
Fair Value	0.20	0.13	0.07	0.05

 

For options exercisable at year end, the exercise price ranged from 0.0p to 29.2p.

 

18 Trade and other payables

	Group		Company
	2024	2023	2024	2023
	£'000	£'000	£'000	£'000
Trade payables	2,111	3,694	-	20
Accruals	692	549	61	36
Other payables	323	384	-	-
VAT payable	535	1,077	-	-
Contract liabilities	1,365	2,617	-	-
Deferred income	50	34
Trade and other payables	5,076	8,355	61	56

 

19 Leases

 

The Group have property lease contracts which are used in its day-to-day operations.

 

	31 March	31 March
	2024		2023
	£'000		£'000
Lease liability brought forward	630		327
Additions	166		380
Finance cost	36		40
Lease payments	(210)		(117)
Lease liability recognised in statement of financial position	622		630
	31 March		31 March
	2024		2023
	£'000		£'000
Of which
Current lease liabilities	194		148
Non-current lease liabilities	428		482
Lease liability recognised in statement of financial position	622		630

                               

On 1 April 2022, the Group entered into a second property lease in Wilmslow, England in order to expand its office space. Both property leases have a term of five years with a break clause after three years.

 

20 Related party transactions

 

The intercompany loan balance between the Company and its subsidiary, Thread 35 Ltd, increased by £201k during the year (2023: £3,423k).

 

21 Financial instruments - risk management

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. The Group's activities expose it to a range of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.

 

These methods include sensitivity analysis in the case of foreign exchange and other price risks, and ageing analysis for credit risk. 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.

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 Group'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:

 

Credit risk

 

The Group faces low credit risk as own site customers pay for their orders in full on order of the goods. There are credit terms with third party concession and wholesale customers.

 

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment. A provision for impairment of trade receivables is recognised on trade receivables if the Group deem there to be expected credit losses. The amount of expected credit losses is calculated using the simplified approach under IFRS 9 and is updated at each reporting date to reflect changes in credit risk since initial recognition of the financial asset.

 

Losses arising from impairment are recognised in the statement of comprehensive income in administrative expenses. The Group will write off, either partially or in full, the gross carrying amount of a financial asset when there is no realistic prospect of recovery. This is usually the case when it is determined that the debtor does not have the assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write off. However, the Group may still choose to pursue enforcement in order to recover the amounts due.

 

The types of customers that the Group trades with have strong credit ratings and a robust payment history with the Group with no aged balances and as such the Group have not identified any expected credit losses from trade receivables during the period. The Group does not deem credit risk a material risk to the business.

 

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 whether there is a requirement for foreign currency on a monthly basis. 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 Group only uses recognised banks with medium to high credit ratings.

 

The maturity of borrowings and other financial liabilities (representing undiscounted contractual cash-flows) is as follows:

 

 

	Group		Company
	Within 1 year	1-2 years	Within 1 year	1-2 years
As at 31 March 2024	£'000	£'000	£'000	£'000
Trade and other payables	18          5,076	-	61	-
Lease liabilities	19             194	428	-	-
Total	5,270	428	61	-
	Group		Company
	Within 1 year	1-2 years	Within 1 year	1-2 years
As at 31 March 2023	£'000	£'000	£'000	£'000
Trade and other payables	18          8,073	-	56	-
Lease liabilities	19               148	485	-	-
Total	8,221	485	56	-

 

Financial assets

At the reporting date, the Group held the following financial assets, all of which were classified as financial assets at amortised cost:

	Amortised cost		Amortised cost
	Group		Company
	31 March	31 March	31 March	31 March
	2024	2023	2024	2023
	£'000	£'000	£'000	£'000
Cash and cash equivalents	8,313	10,576	4,534	5,122
Trade & other receivables*	2,270	2,081	8	23
Total	10,583	12,657	4,542	5,145

*excluding prepayments

 

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:

	Amortised cost		Amortised cost
	Group		Company
	31 March	31 March	31 March	31 March
	2024	2023	2024	2023
	£'000	£'000	£'000	£'000
Trade payables	2,111	3,694	-	20
Accruals	692	549	61	36
Other payables*	323	384	-	-
Contract liabilities	1,365	2,617	-	-
Lease liabilities	622	633	-	-
Trade and other payables	5,113	7,877	61	56

*excluding VAT

 

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.

 

22 Net cash

 

The below table shows the Group's cash position less lease liabilities.

 

	At 1 April 2023	Cash flow	Additions	Accrued interest charges	At 31 March 2024
	£'000	£'000	£'000	£'000	£'000
Cash and cash equivalents	10,576	(2,263)	-	-	8,313
Lease liabilities	(630)	210	(166)	(36)	(622)
Net cash (excluding lease liabilities)	9,946	(2,053)	(166)	(36)	7,691

 

23 Post balance sheet events

 

Post year end, the loan agreements between the parent, Sosandar PLC, and the subsidiaries, Thread 35 Ltd and Sosandar (Europe) Limited were formalised. The loans bear interest of 6% and are repayable on demand. Management considers this a non-adjusting event.

 

24 Contingent liabilities

 

The Company and Group has no contingent liabilities.

 

25 Ultimate controlling party

There is no ultimate controlling party of the Company.