REG - Shoe Zone PLC - Interim Results
16/05/2023 07:00
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RNS Number : 4765Z Shoe Zone PLC 16 May 2023
Shoe Zone PLC
("Shoe Zone" or the "Company")
Interim results for the 26 weeks to 1 April 2023
Shoe Zone PLC is pleased to announce its interim results for the 26 weeks to 1
April 2023, (the "Period").
Financial highlights
• Revenue of £75.4m (2022 H1: £69.9m) +7.9%
o Store revenue £61.1m (2022 H1: £57.2m) +6.8%
o Digital revenue £14.3m (2022 H1: £12.7m) +12.7%
• Contribution of £11.1m (2022 H1: £11.6m)
o Store contribution of £7.9m
o Digital contribution of £3.2m
• Profit before tax of £1.5m (2022 H1: £3.1m)
• Adjusted profit before tax of £2.5m (2022 H1: £3.1m)*
• Earnings per share of 3.1p (2022 H1: 5.7p)
• Net cash of £12.9m (2022 H1: £13.9m) at Period end
• Proposed interim dividend of 2.5 pence per share (2022 H1: 2.5
pence)
Operational highlights
· 336 stores at Period end (2022 FY: 360) comprising:
o 44 Big Box (2022 FY: 45)
o 66 Hybrid (2022 FY: 44)
o 226 Original (2022 FY: 271)
· 17 stores opened, 6 refits, 41 closed
· Capital expenditure of £5.3m (2022 H1: £2.3m)
· Annualised lease renewal savings of £0.4m, an average reduction of
27%
· Average lease length of 2.1 years (2022 FY: 1.8 years)
· Digital returns rate of 11.9% (2022 H1: 11.8%) - 12 months average
*Adjusted items 2023 H1 £1.3m forex loss offset by £0.3m profit on sale of
freehold. (2022 H1: Forex loss £0.3m, property gain £0.3m)
For further information please call:
Shoe Zone PLC
Tel: +44 (0) 116
222 3001
Anthony Smith (Chief Executive)
Terry Boot (Finance Director)
Zeus (Nominated Adviser and
Broker)
Tel: +44 (0) 203 829 5000
David Foreman, James Hornigold, Ed Beddows (Investment Banking)
Dominic King (Corporate Broking)
Chief Executive's statement
Introduction
Shoe Zone delivered a robust and positive performance in the Period against a
backdrop of consumer uncertainty and macroeconomic volatility. Total revenues
increased by 7.9% having traded out of 52 fewer stores compared to 12 months
ago and digital revenue within this increased by 12.7%. The performance
further demonstrates the resilience of our business and the success of our
ongoing strategy.
Trading over all channels was positive with total revenues of £75.4m (2022
H1: £69.9m), store revenues were £61.1m (2022 H1: £57.2m), Digital revenues
were £14.3m (2022 H1: £12.7m) with strong performance across all online
channels with additional growth from our online exclusive range and range
extensions.
Adjusted profit before tax was £2.5m (2022 H1: £3.1m), which is slightly
above management expectations for the Period. The reduction on the comparable
period last year is due to inflationary cost increases, mainly National Living
Wage increases.
We ended the Period trading out of 336 stores, which is a reduction of 52
compared to 12 months ago and 24 from last year end. In the first half we
closed 39 'Original' stores, opened 16 Hybrids, refitted 6 'Original' stores
to our Hybrid format, closed 2 Big Box stores and opened 1 new Big Box. In
total we are now trading out of 226 'Original' stores, 66 Hybrids and 44 Big
Box. We are actively working to relocate and refit further stores in the
second half of the year, together with a number of stores currently in the
pipeline, opening before Christmas.
Our average lease length is 2.1 years (2022 FY: 1.8 years), giving us the
opportunity and flexibility to respond to changes in any retail location at
short notice. Property supply continues to outstrip demand and we continue to
take advantage of this and significantly improve our property portfolio over
the medium term.
Strategy Update
We have accelerated our refit and relocation programme along with further
investment in our digital and head office infrastructure. All of these are key
to our strategy, and we expect to spend approx. 3-4% of revenue annually on
capital projects.
We have continued to invest in our portfolio with more 'Original' Shoe Zone
stores converted to Hybrid formats. The results continue to be very positive,
and we continue to look for further opportunities to roll these formats out as
planned. Our ultimate goal is a doubling of Big Box locations to approximately
100 and an increase in Hybrid stores to 200 in the medium term. We anticipate
trading from a similar retail square footage, albeit from a reduced number of
locations. Digital revenues grew by 12.7% as we continue to invest in new
product lines and additional brands as well as enhancing our platform with the
introduction of a new return's portal, the development of a mobile App and
adding new payment options, all of which will improve customer experience.
Part of the success of our digital operation is our very efficient returns
process which is complemented by our extensive network of stores. We have a
returns rate of 11.9%% and the vast majority of these are returned to store,
hence why our physical store network is critical to our future success.
Dividend
The Board proposes an interim dividend of 2.5p per share, which will become
payable on 16 August 2023 to those shareholders on the Company's register as
at the close of business on the record date 14 July 2023. The ex-dividend date
will be 13 July 2023.
Financial Review
Profit before tax was £1.5m, adjusted to £2.5m (2022 H1: £3.1m (reported
and adjusted)). The adjustments include foreign exchanges losses and profit on
one freehold property sale. The £0.6m reduction year on year reflects
inflationary increases, mainly National Living Wage, and a lower margin
achieved percentage due to higher container prices and a weak sterling to
dollar.
In the Period total revenues were £75.4m (2022 H1: £69.9m). Store revenues
increased by £3.9m even though we ended the Period trading out of 52 fewer
stores than 12 months ago. Digital sales increased by £1.6m to £14.3m (2022
H1: £12.7m). Digital gross margins reduced to 58.0% (2022 H1: 58.5%) due to
higher container prices and contribution was £3.2m (2022 H1: £2.7m).
One freehold property went to auction, resulting in a profit on sale of
£0.3m. A further property will be auctioned in the second half which will
conclude our freehold sales.
Gross profit in the Period was £13.6m, the same as the comparable period last
year (2022 H1: £13.6m), with gross profit margin at 18.1% (2022 H1: 19.5%).
The percentage reduction was due to the underlying product margin being lower
this Period (2023 H1: 60.1%, 2022 H1: 60.8%), due to the impact of higher
container prices, particularly in Q1 and a weak sterling to dollar exchange
rate. Subsequent to this, container prices have dropped to below pre pandemic
levels, the benefit of which will start to flow through in the second half of
this year. Depreciation charge increased due to higher capital spend.
Administration expenses increased by £1.6m to £9.1m (2022 H1: £7.5m) due to
£1.0m additional foreign exchange losses this year, a higher head office
depreciation charge and an additional cost of living bonus paid to all staff
in February.
Distribution costs increased by £0.2m to £2.6m (2022 H1: £2.4m) due to the
impact of the National Living Wage increase and inflationary cost increases on
transport expenses.
Our energy prices are fixed until September 2023. All our electricity
consumption is from 100% renewable sources, we have started to monitor energy
consumption and have a programme to insulate ceilings and to install more
energy efficient lighting in a number of stores. During the Period, we have
added electric and more hybrid vehicles to our fleet and have changed all of
our warehouse lighting to more energy efficient LED.
Stock at the Period end was £3.0m lower at £28.1m (2022 H1: £31.1m). This
reflects our positive trading over the last 12 months, a more normalised
intake pattern and the selling through of prior seasons boot product that we
previously reported as an over stock.
The Company ended the Period with a net cash balance of £12.9m (2022 H1:
£13.9m). The reduction is due to £8.2m of dividends paid in the last 12
months, £2.9m of shares bought back and additional capital spend, offset by
the positive trade in the Period and lower stock levels.
The share buy-back programme continues and as at the Period end, we had
re-purchased 1.8m shares at a total cost of £3.5m (average priced paid of
£1.93). We have cancelled 1.5m shares with 0.3m held in treasury to date.
(with 1.0m shares cancelled in the Period).
Capital expenditure in the Period was £5.3m (2022 H1: £2.3m) which is
returning to our long-term target of approx. 3-4% of revenue. Expenditure in
the Period included new stores, refits and relocations, which are partly
funded by Landlord rent free periods, IT expenditure and infrastructure works
in head office and distribution centre, which will be continued through the
second half of the year.
The Shoefayre Limited Pension and Life Assurance Scheme moved into a deficit
of £2.0m (2022 FY: £1.8m surplus). This was due to a fall in bond yields
which led to a lower assumed discount rate and therefore a higher value being
placed on the scheme's liabilities. The Shoe Zone Pension Schemes' surplus
reduced to £1.3m (2022 FY: £7.1m surplus) The main reason for this was due
to the purchase of the buy-in contract with Rothesay. Specifically, the value
of the scheme's uninsured liabilities as at 2 March 2023 was lower than the
actual premium paid to secure members' benefits with Rothesay.
Earnings per share were 3.1p (2022 H1: 5.7p per share).
Full year results in line with market expectations.
Unaudited consolidated income statement (52 weeks audited)
26 Wks end 26 Wks end 52 Wks end
1 Apr 2023 2 Apr 2022 1 Oct 2022
£'000 £'000 £'000
Revenue 75,391 69,864 156,164
Cost of sales (61,752) (56,247) (119,764)
Gross Profit 13,639 13,617 36,400
Administration expenses (9,100) (7,508) (16,620)
Distribution costs (2,668) (2,448) (5,104)
Profit from Operations 1,871 3,661 14,676
Finance income 0 0 0
Finance expense (342) (599) (1,113)
Profit before Tax 1,529 3,062 13,563
Taxation 0 (197) (2,718)
Profit after Tax 1,529 2,865 10,845
Earnings per Share 3.1p 5.7p 21.7p
Unaudited consolidated statement of total comprehensive income (52 weeks
audited)
26 Wks end 26 Wks end 52 Wks end
1 Apr 2023 2 Apr 2022 1 Oct 2022
£'000 £'000 £'000
Profit/(Loss) for the period 1,528 2,865 10,845
Items that will not be reclassified subsequently to the
income statement
DB pension scheme (1,973) 3,110 5,798
Movement in deferred tax on pension schemes (57) (560) (1,505)
Share buy back (1,849) 0 (966)
Cash flow hedges
Fair value movements in other comprehensive income (776) 682 1,129
Tax on cash flow hedges 0 (109) (226)
Other comprehensive (expense)/Income for the period (4,655) 3,123 4,230
Total comprehensive (expense)/Income for the period (3,127) 5,988 15,075
attributable to equity holders of the parent
Unaudited consolidated statement of financial position (52 weeks audited)
26 Wks end 26 Wks end 52 Wks end
1 Apr 2023 2 Apr 2022 1 Oct 2022
Assets £'000 £'000 £'000
Non-current Assets
Property, plant and equipment 15,859 13,555 12,582
Right of use assets 25,454 28,526 25.581
Deferred tax asset 902 2,490 720
Total Non-current Assets 42,215 44,571 38,883
Current Assets
Inventories 28,117 31,096 32,188
Trade and other receivables 3,007 3,450 6,071
Derivative financial assets 0 456 0
Cash and cash equivalents 12,870 13,872 24,427
Total Current Assets 43,994 48,874 62,686
Total Assets 86,029 93,445 101,569
Current Liabilities
Trade and other payables (17,281) (19,484) (22,801)
Lease liabilities (13,562) (14,016) (14,870)
Derivative financial liabilities (603) 0 0
Provisions (2,575) (1,727) (1,108)
Corporation tax liability (289) (317) (1,910)
Total Current Liabilities (34,310) (35,544) (40,689)
Non-current Liabilities
Lease liabilities (21,349) (23,554) (20,975)
Provisions (1,508) (2,084) (2,662)
Employee benefit liability (1,973) (2,857) 0
Total Non-current Liabilities (24,830) (28,495) (23,637)
Total Liabilities (59,140) (64,039) (64,326)
Net Assets 27,069 29,406 37,243
Equity attributable to equity holders of the company
Called up share capital 485 500 495
Merger res/Cap red 2,677 2,662 2,667
Cash flow hedge reserve (123) 323 653
Retained earnings 24,030 25,921 33,428
Total Equity and Reserves 27,069 29,406 37,243
Unaudited consolidated statement of changes in Equity (prior years audited)
Share Share Capital Cash flow Retained Total
Capital Premium Redemp. Hedge Earnings
Reserve Reserve
£'000 £'000 £'000 £'000 £'000 £'000
At October 2021 500 2,662 0 (250) 20,506 23,418
Profit for the period 0 0 0 0 2,865 2,865
Defined benefit pension movements 0 0 0 0 3,110 3,110
cash flow hedge movements 0 0 0 682 0 682
Deferred tax on other comp. income 0 0 0 (109) (560) (669)
Total comprehensive income for the period 0 0 0 573 5,415 5,988
Dividends paid 0 0 0 0 0 0
Contributions by and distrib. to owners 0 0 0 0 0 0
As at April 2022 500 2,662 0 323 25,921 29,406
At October 2021 500 2,662 0 (250) 20,506 23,418
Impact of transition to IFRS-16 0 0 0 0 10,845 10,845
Profit for the period 0 0 0 0 5,798 5,798
cash flow hedge movements 0 0 0 1,129 0 1,129
Share buy-back (5) 0 5 0 (966) (966)
Deferred tax on other comp. income 0 0 0 (226) (1,505) (1,731)
Total comprehensive income for the period (5) 0 5 903 14,172 15,075
Dividends paid 0 0 0 0 (1,250) (1,250)
Contributions by and distrib. to owners 0 0 0 0 (1,250) (1,250)
As at October 2022 495 2,662 5 653 33,428 37,243
At October 2022 495 2,662 5 653 33,428 37,243
Profit for the period 0 0 0 0 1,528 1,528
Defined benefit pension movements 0 0 0 0 (1,973) (1,973)
cash flow hedge movements 0 0 0 (776) 0 (776)
Share buy-back (10) 0 10 0 (1,849) (1,849)
Deferred tax on other comp. income 0 0 0 0 (57) (57)
Total comprehensive income for the period (10) 0 10 (776) (2,351) (3,127)
Dividends paid 0 0 0 0 (7,047) (7,047)
Contributions by and distrib. to owners 0 0 0 0 0 0
As at April 2023 485 2,662 15 (123) 24,030 27,069
Unaudited consolidated statement of cash flows (52 weeks audited)
26 Wks end 26 Wks end 52 Wks end
1 Apr 2023 2 Apr 2022 1 Oct 2022
£'000 £'000 £'000
Operating activities
Profit after tax 1,529 2,865 10,845
Corporation tax 0 197 2,718
Finance income 0 0 0
Finance expense 342 599 1,113
Depreciation of property, plant and machinery 1,737 1,514 4,118
Fixed asset impairment and loss on disposal of property, (111) 1,457 (1,075)
plant and machinery
Right of use asset on profit, depreciation & impairment 6,977 7,217 13,016
Pension contributions paid 0 0 0
10,474 13,849 30,735
Decrease/(increase) in trade and other receivables 3,064 2,007 627
Decrease/(increase) in foreign exchange contracts (412) (357) (527)
Decrease/(increase) in inventories 4,071 (5,965) (7,057)
(Decrease)/increase in trade and other payables (5,520) 3,154 6,361
Increase in provisions 313 386 345
1,516 (775) (251)
Cash generated from operations 11,990 13,074 30,484
Net corporation tax paid (1,738) (653) (1,214)
Net cash flows from operating activities 10,252 12,421 29,270
Investing activities
Purchase of property, plant and machinery (5,314) (2,299) (5,225)
Proceeds from Sale of Freeholds 411 0 3,590
Net cash used in investing activities (4,903) (2,299) (1,635)
Share buy-back (1,849) 0 (966)
Repayment of CLBILS loan 0 (4,400) (4,400)
Capital element of lease repayments (8,196) (10,790) (15,584)
Interest 186 (75) (23)
Dividends paid during year (7,047) 0 (1,250)
Net cash used in financing activities (16,906) (15,265) (22,223)
Net inc/(dec) in cash and cash equivalents (11,557) (5,143) 5,412
Cash and cash equivalents at beginning of period 24,427 19,015 19,015
Cash and cash equivalents at end of period 12,870 13,872 24,427
Notes to the financial statements for the 26 weeks ended 1 April 2023
Basis for preparation
The consolidated interim financial statements of the company for the 26 weeks
ended 1 April 2023, which are unaudited, have been prepared in accordance with
the same accounting policies, presentations and methods of computation
followed in the condensed set of financial statements as applied in the
group's latest audited financial statements. A copy of those accounts has been
delivered to the Registrar of Companies.
The financial information for the 26 weeks ended 1 April 2023, contained in
this interim report, does not constitute the full statutory accounts for that
period. The independent Auditors' report on the Annual Report and Financial
Statements for 2022 was unqualified, did not draw attention to any matters by
way of emphasis. And did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006.
The consolidated interim financial statements have neither been audited nor
reviewed pursuant to guidance issued by the Auditing Practices Board.
The condensed consolidated interim financial statements have been prepared on
a going concern basis and under the historic cost convention, as modified by
the revaluation of derivative financial instruments to far value.
The condensed consolidated interim financial statements are presented in
sterling and have been rounded to the nearest thousand (£'000).
The preparation of financial information in conformity with IFRS requires
management to make estimates and assumptions that affect the reported amount
of assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting period. Although
these estimates are based on management's best knowledge of the amount, event
or actions, actual events ultimately may differ from those estimates.
1. Accounting policies
In preparing these interim financial statements, the significant judgements
made by management in applying the group's accounting policies and the key
sources of estimation uncertainty were the same as those applied to the
consolidated financial statements reported in the latest annual audited
financial statements for the 52 weeks ended 1 Oct 2022.
Going Concern
At the balance sheet date the company had a good cash balance and a strong net
asset position. At the time of reviewing these accounts, the Directors have
considered the effect of COVID-19 on the ongoing position, and consider that
this does indicate that the company will continue to trade for a period of at
least 12 months from the date of publishing these accounts. Based on the cash
forecasts prepared by the Directors, these financial statements have been
prepared on a going concern basis.
2. Segmental Information
The group complies with IFRS 8 'Operating Segments' which determines and
presents operating segments based on information provided to the chief
operating decision maker. The chief decision maker has been identified as the
management team including the Chief Executive and Finance Director. The Board
considers that each store is an operating segment but there is only one
reporting segment as the stores qualify for aggregation, as defined under IFRS
8.
26 Wks end 26 Wks end 52 Wks end
1 Apr 2 Apr 1 Oct
2023 2022 2022
External revenue by location of customers: £'000 £'000 £'000
United Kingdom 60,776 56,855 128,664
Digital 14,347 12,726 26,967
Other 268 283 533
75,391 69,864 156,164
3. Taxation
The taxation charge of zero for the 26 weeks ended 1 April 2023 is based on
the assumption that the capital allowances available on our estimated capital
spend will reduce the expected charge for the full year.
4. Earnings per share
26 Wks end 26 Wks end 52 Wks end
1 Apr 2 Apr 1 Oct
2023 2022 2022
£'000 £'000 £'000
Profit in the period and earnings used in basic
diluted earnings per share 1,529 2,865 10,845
3.1p 5.7p 21.7p
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