MARKET MINNOWS: Holly Willoughby favourite Sosandar is a buy

As a general rule of thumb, fledgling start-ups try to rustle up funds from angel investors and venture capitalists or turn to crowdfunding to grow.

But not so Sosandar, an online purveyor of women’s frocks favoured by TV presenters such as Holly Willoughby and Lorraine Kelly. The retailer floated on London’s junior market, AIM, in November, only 14 months after its official launch.

It started life as Thread35, a fashion brand set up by the joint chief executives of the company, Julie Lavington and Ali Hall, who used to publish and co-edit women’s magazine Look. It then listed as Sosandar through a reverse takeover of Orogen, a gold-digging company turned cash shell, which bought Thread.

Sosandar raised £5.3 million from investors — the placing was oversubscribed before its IPO. Some in the City said at the time it punched above its weight and came to market far too soon, inviting unnecessary scrutiny and racking up extra costs.

“It has definitely been the right thing to do,” retorts Lavington.

In its last update, the retailer said it made a pre-tax loss of about £6 million in the year to the end of March. However, revenue rocketed 378% to £1.4 million and its gross margin was up from 11.6% to almost 50%. It also revealed that revenues for the last quarter were up 73%.

Revenues for next year could come in at £9 million, and gross profits could reach £4.5 million. Management has also managed to halve marketing costs on luring shoppers onto Sosandar’s website. Sosandar’s shoppers, who have grown up with websites like Boohoo or Asos and can now afford to spend more on clothes, are prepared to part with cash.

The day-to-day costs of running the business are relatively low. (It still has only 22 staff.) Sosandar does not have warehouses — logistics are handled by Clipper — and the IT and manufacturing are outsourced as well. This will let them scale fast.

Paul Scott, an independent investor, has been building up a stake. “They are storming ahead of forecasts. It’s similar to what Asos achieved in the early days, which tells you they’re onto something — they’ve found a niche, they seem to know exactly what their customer wants and it’s starting to take off,” he says.

The stock today traded at 28.4p, up 9p since it listed, and analysts think it could edge up to at least 50p this year. Get in there while it’s cheap.