REG - Shoe Zone PLC - Final Results
10/01/2023 07:00
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RNS Number : 1609M Shoe Zone PLC 10 January 2023
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the company's obligations under Article 17 of
MAR. Upon the publication of this announcement via regulatory news service
this inside information is now considered to be in the public domain.
Shoe Zone plc
("Shoe Zone" or the "Company")
Final Results for the 52-week period to 1 October 2022
Shoe Zone is pleased to announce its audited results for the 52 weeks to 1
October 2022, (the "Period").
Financials
• Revenue of £156.2m (2021: £119.1m)
o Store revenue £129.8m (2021: £88.6m)
o Digital revenue £26.4m (2021: £30.5m)
• Profit before tax £13.6m (2021: £9.5m), adjusted £11.2m (1)
(2021: £9.5m)
• Interim dividend £1.25m, 2(nd) interim dividend £1.47m (2021:
Nil)
• Proposed final dividend of 3.3 pence per share (2021: Nil)
• Proposed special dividend of 8.2 pence per share (2021: Nil)
• Earnings per share 21.7p (2021: 14.0p)
• Net cash balance of £24.4m (2021: £14.6m)
• Commenced share buy-back programme, buying back 955,813 shares for
£1.7m cash
Operational
· Stores traded for 52 weeks (2021: 36 weeks)
· 360 stores at Period end (2021: 410) comprising:
o 45 Big Box (2021: 51)
o 44 Hybrid (2021: 16)
o 271 Original (2021: 343)
· Net closure of 50 stores
· Annualised lease renewal savings of £0.6m, an average reduction of
30%
· Average lease length of 1.8 years (2021: 1.9 years)
· Digital returns rate of 11.3% (2021: 8.4%)
(1) Adjusted to exclude the profit on sale of freehold properties and foreign
exchange revaluation
For further information please call:
Shoe Zone PLC Tel: +44 (0) 116 222 3000
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 had a very positive year due to trading for the full 52 weeks,
strong trading over our key back to school period and due to the incredible
hard work from our teams. These increases are primarily due to the increased
revenue and resultant gross profit generated in a normalised trading period
post pandemic.
Profit before tax was at £13.6m for the Period (2021: £9.5m) and £11.2m
(2021: £9.5m) on an adjusted basis, with an earnings per share of 21.74p
(2021: 14.03p)
Stores delivered revenues of £129.8m (2021: £88.6m). Digital continued to be
a key part of the business generating revenues of £26.4m (2021: £30.5m) in
the Period, a reduction of 13.5% which was in line with management
expectations post pandemic. We continue to invest in our digital
infrastructure with the addition of two automated bagging machines which have
significantly improved throughput and productivity. We have redesigned our
check-out page and introduced two buy now pay later providers (Klarna and
PayPal).
We ended the Period trading out of 360 stores, having closed 63 stores, opened
13 new stores and converted a further 11 existing stores to our new formats.
As we refit existing stores to our new formats, the branded mix will continue
to form a higher proportion of our overall sales.
Our average lease length is now 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 expect to take advantage
of this environment and significantly improve our property portfolio over the
medium term.
Total capital expenditure was £5.2m (2021: £1.4m) of which £3.1m was for
our refit and relocation programme.
We achieved rent reductions on 48 store renewals of £0.6m (2021: £1.8m) on
an annualised basis, an average reduction of 30%.
Strategy Update
We continue to accelerate our store refit and relocation programme and to
drive our digital strategy on the back of these solid set of results. The hard
work completed to reduce costs, streamline operations and accelerate
investment, positions us well for the year ahead.
Capital expenditure
We will spend a minimum of 3% of sales per annum to cover 50 store projects
and Head Office infrastructure changes including IT projects and new vehicles.
Property
We continue to transform our property portfolio with relocations/new stores
being partially funded by landlords through rent free periods of typically 12
months.
We ended the year with 45 Big Box, 44 Hybrid and 271 Original stores. This
year we expect to relocate or open a further 35 stores and continue to close a
number of older stores, and we will refit a minimum of 15 stores to our new
formats.
Digital
We continue to invest in our Digital Shoehub platform and in the next 12
months we will implement a new returns portal, introduce Google pay, Apple pay
and Clearpay.
Part of the success of our digital operation is our efficient returns process
which is complimented by our extensive network of stores. We have a returns
rate of c. 11% with the vast majority of these being returned to store and our
physical store network is critical to our continued success. We have seen over
the last two years a reduction in store numbers as we have exited unprofitable
locations. We will continue to rollout our successful 'Big Box' and 'Hybrid'
formats by targeting key towns for conversion or relocation. Our ultimate goal
is a doubling of Big Box locations to approximately 100 and an increase in
Hybrid stores from 44 to approximately 150. Overall, we anticipate trading
from a similar sales square footage, albeit from a reduced number of
locations.
Product
We expect markdown levels and product margin levels to be maintained. Supplier
payments remain up to date as they did at the year-end. Our buying and
shipping teams are doing an exceptional job of managing the direct from
factory supply chain, which is still very volatile, and we are confident we
are performing better than the market average.
Dividend
The outstanding CLBILS loan was paid off in January 2022 and enabled us to
restart dividends. An interim of 2.5 pence per share was paid in August 2022
and a second interim of 3.0 pence per share was paid in December 2022. It is
proposed that a final dividend of 3.3 pence per share be paid in March 2023 on
the basis of a 40% pay-out ratio. The Board will also propose an additional
special dividend of 8.2 pence per share (paid in March 2023), bringing the
total to 17.0 pence per share.
Financial Review
In the 52 weeks to 1 October 2022, total revenues were £156.2m (2021:
£119.1m) having traded for the full 52 weeks (FY 2021: 36 weeks). We ended
the year with 360 stores (2021: 410) having closed 63 and opened 13.
Profit before tax was £13.6m (2021: £9.5m), adjusted by profit on sale of
freeholds (£1.4m) and foreign exchange gains on revaluation (£1.0m),
therefore an adjusted profit before tax of £11.2m (2021: £9.5m). The
year-on-year increase is primarily due to the 52 weeks of continuous trade
compared to 36 weeks in the FY 2021 and strong second half trading which
included our key back to school period. We continue to actively control our
cost base in all areas of the business and have reduced our rent bill through
proactive discussions with landlords with further savings on renewals.
Digital revenues stood at £26.4m (2021: £30.5m) a reduction of 13.6%. The
reduction reflects a return to a normalised level of revenue post pandemic and
is in line with management expectations, but is significantly ahead of
pre-pandemic levels. Profit contribution from Digital was £7.0m (2021:
£8.5m) in the year.
Product margins were broadly in line with last year at 61.2% (2021: 61.5%).
This is due to contrasting impacts of increasing container prices and a higher
mix of lower margin branded product, and improved stock management due to less
supply chain volatility.
Statutory gross profit increased to £36.4m (2021: £32.5m) due to the
normalised trading period post pandemic. Cost of sales increased by £31.1m
due to higher stock purchases of £22.8m, COVID related retail grants not
received totalling £6.9m, store wages increase post furlough of £8.0m,
offset by a reduction in rents of £1.9m and a reduction in Right of Use
Assets depreciation of £2.3m.
Administration expenses reduced by £0.3m to £16.6m (2021: £16.9m) due to
the profit on sale of 14 freehold properties £1.4m, a foreign exchange gain
of £1.0m, offset by an increase in the contribution to the Shoe Zone Trust
£0.5m, higher repairs and dilapidation equating to £0.6m, higher salaries
post furlough of £0.5m and other asset write offs and impairment costs of
£0.5m.
Distribution costs increased by £0.6m to £5.1m (2021: £4.5m), due to higher
warehouse and distribution wages post furlough of £0.4m, and distribution
fuel costs of £0.2m.
The corporation tax charge for the Period was £2.7m (2021: £2.4m).
Earnings per share are 21.74p (2021: 14.03p).
Stock levels increased by £7.1m to £32.2m (2021: £25.1m), due to the
earlier timing of deliveries of Winter 2022 product and an increase in the
proportion of higher value branded product and in this financial year a
portion of the AW 2022 product was delivered earlier to ensure supply.
Capital expenditure increased to £5.2m (2021: £1.4m) as we restarted our
programme of store relocations and refits to expand our Hybrid formats. We
also invested £1.0m in our central distribution centre to further improve our
Digital efficiency. This total is the gross value expended and is partially
offset by £1.0m of rent free cash received via landlords when we relocate
stores.
At the Period end net cash was £24.4m (2021: £14.6m). During the Period we
paid off the remaining £4.4m CLBILS loan to take us once again to a debt free
position. The increase in cash is due to the higher level of profitability
from trading activities and the additional £3.6m from the sale of 14 freehold
properties, offset by the additional capital expenditure. The Group's current
bank facilities also include an on-demand overdraft facility of £3.0m, which
has not been used during the Period. We have £7.0m cash on notice deposit
(£5.0m at 3 months notice, £2.0m at 12 months notice).
The pension liability in the schemes reduced by £7.7m to a surplus of £1.8m
(2021: deficit £5.9m). We show a zero position on the balance sheet due to
the effect of an asset ceiling. The reduction is due to an increase in bond
yields which reduces the value placed on the scheme's liabilities and positive
assumption moves in mortality rates. This is partially offset by lower than
expected investment returns and a rise in future inflation expectations.
An interim dividend of 2.5 pence per share (paid on 17 August 2022) and a
second interim of 3.0 pence per share (paid on 21 December 2022) were approved
by the Board. It is proposed that a final dividend of 3.3 pence per share will
be paid on 22 March 2023 based on a 40% pay-out ratio. The Board is also
proposing an additional special dividend of 8.2 pence per share (paid on 22
March 2023), giving a total dividend of 17.0 pence per share.
The Company started a share buy-back programme in August 2022 and as at the
Period end had purchased 955,813 shares (of which 500,000 had been cancelled
with the balance held in treasury) at an average price of £1.79 equating to a
spend of £1.7m. The buy-back programme will continue for the foreseeable
future.
The Group uses derivative financial instruments, typically forward exchange
contracts, to hedge the risk of future foreign currency fluctuations. The
hedging policy enables the effective portion of changes in the fair value of
designated derivatives to be recognised in other comprehensive income.
Historically these movements would have been recognised in the Income
Statement.
Consolidated income statement for the 52 weeks ended 1 October 2022
52 weeks 52 weeks
ended 1 ended 2
October October
2022 2021
£'000 £'000
Revenue 156,164 119,142
Cost of sales (119,764) (86,667)
Gross profit 36,400 32,475
Administration expenses (16,620) (16,962)
Distribution costs (5,104) (4,499)
Profit from operations 14,676 11,014
Finance income - -
Finance expense (1,113) (1,558)
Profit before taxation 13,563 9,456
Taxation (2,718) (2,442)
Profit attributable to equity holders of the parent 10,845 7,014
Profit Earnings per Share - basic and diluted 21.74p 14.03p
Consolidated statement of total comprehensive income for the 52 weeks ended 1 October 2022
52 weeks 52 weeks
ended 1 ended 2
October October
2022 2021
£'000 £'000
Profit/(Loss) for the year 10,845 7,014
Items that will not be reclassified subsequently to the income statement
Remeasurement gains on defined benefit pension scheme 5,798 3,379
Movement in deferred tax on pension schemes (1,506) 761
Share buy back (966) -
Items that will be reclassified subsequently to the income statement
Fair value movements on cash flow hedges 1,129 (190)
Tax on cash flow hedges (226) 56
Other comprehensive income for the year 4,229 4,006
Total comprehensive income for the year attributable 15,074 11,020
to equity holders of the parent
Consolidated statement of financial position as at 1 October 2022
Registered Number 08961190 52 weeks 52 weeks
ended Ended
1 October 2 October
2022 2021
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 12,582 14,227
Right-of-use assets 25,581 30,884
Deferred tax asset 720 3,220
Total non-current assets 38,883 48,331
Current assets
Inventories 32,188 25,131
Trade and other receivables 6,071 5,457
Cash and cash equivalents 24,427 19,015
Total current assets 62,686 49,603
Total assets 101,569 97,934
Current liabilities
Trade and other payables (22,801) (16,440)
Lease liabilities (14,870) (17,035)
Derivative financial liability - (591)
Bank loan - (4,400)
Provisions (1,108) (1,698)
Corporation tax liability (1,910) (773)
Total current liabilities (40,689) (40,937)
Non-current liabilities
Lease liabilities (20,975) (25,942)
Provisions (2,662) (1,728)
Employee benefit liability - (5,909)
Total non-current liabilities (23,637) (33,579)
Total liabilities (64,326) (74,516)
Net assets 37,243 23,418
Equity attributable to equity holders of the company
Called up share capital 495 500
Merger reserve 2,662 2,662
Capital Redemption Reserve 5 -
Cash flow hedge reserve 653 (250)
Retained earnings 33,428 20,506
Total equity and reserves 37,243 23,418
Consolidated statement of changes in equity for the 52 weeks ended 1 October 2022
Share capital Capital Redemption reserve Merger Cash flow hedge reserve Retained earnings Total
reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 4 October 2020 500 2,662 (116) 9,352 12,398
Profit for the year - - - - 7,014 7,014
Defined benefit pension movements - - - - 3,379 3,379
Cash flow hedge movements - - - (190) - (190)
Deferred tax on other comprehensive income - - - 56 761 817
Total comprehensive income for the year - - - (134) 11,154 11,020
Dividends paid during the year (note 11) - - - - - -
Total contributions by and distributions to owners - - - - - -
At 2 October 2021 500 - 2,662 (250) 20,506 23,418
Impact on transition to IFRS 16 (note 13) - - - - - -
At 3 October 2021 500 - 2,662 (250) 20,506 23,418
Profit for the year - - - - 10,845 10,845
Defined benefit pension movements - - - - 5,798 5,798
Capital Redemption reserve - - - - - -
Cash flow hedge movements - - 1,129 - 1,129
Share Buy Back (5) 5 - - (966) (966)
Deferred tax on other comprehensive income - - - (226) (1,505) (1,731)
Total comprehensive income for the year (5) 5 - 903 14,172 15,075
Dividends paid during the year (note 11) - - - - (1,250) (1,250)
Total contributions by and distributions to owners - - - - - -
At 1 October 2022 495 5 2,662 653 33,230 37,243
Share capital comprises the nominal value of shares subscribed for. The
capital redemption reserve represents share purchased by the company back from
shareholders.
The merger reserve has arisen as a result of the application of merger
accounting to the group reorganisation on 26 March 2014.
The cash flow hedge reserve comprises of gains/losses arising on the effective
portion of hedging instruments and is carried at fair value in a qualifying
cash flow hedge.
Retained earnings are all other net gains and losses and transactions with
owners (e.g. dividends) not recognised elsewhere.
Consolidated statement of cash flows for the 52 weeks ended 1 October 2022
52 weeks 52 weeks
ended
ended
1 October 2 October
2022 2021
£'000 £'000
Operating activities
Profit after tax 10,845 7,014
Corporation tax charge 2,718 2,442
Finance income - -
Finance expense 1,113 1,558
Depreciation of property, plant and equipment 4,118 3,144
Fixed asset impairment and loss on disposal of property, plant and equipment (1,075) 1,001
and right of use asset
Right-of-use asset depreciation and impairment 13,016 15,860
Pension contributions paid - (1,500)
30,735 29,519
Increase in trade and other receivables 627 (2,722)
Decrease in foreign exchange contract (527) 486
Increase in inventories (7,057) 1,567
Increase in trade and other payables 6,361 (816)
Increase in provisions 345 694
(251) (791)
Cash generated from operations 30,484 28,728
Net corporation tax paid (1,214) 1,353
Net cash flows from operating activities 29,270 30,081
Investing activities
Purchase of property, plant and equipment (5,225) (1,405)
Proceeds from sale of PPE 3,590 -
Net cash used in investing activities (1,635) (1,405)
Share buy-back (966) -
Repayments of secured loan (4,400) (2,600)
Capital element of lease repayments (15,584) (20,037)
Interest paid (21) (290)
Dividends paid during the year (1,250) -
Net cash used in financing activities (22,221) (22,927)
Net increase in cash and cash equivalents 5,412 5,749
Cash and cash equivalents at beginning of year 19,015 13,266
Cash and cash equivalents at end of year 24,427 19,015
Notes to the financial statements for the 52 weeks ended 1 October 2022
1 Accounting policies
General information
Shoe Zone plc (the 'Company') is a public company incorporated and domiciled
in England and Wales. The registered office is at Haramead Business Centre,
Humberstone Road, Leicester, LE1 2LH. The registered number of the Company is
08961190.
The Company and its subsidiaries' (collectively the Group) principal activity
is footwear retailing.
Basis of preparation
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied for
the 52 weeks ended 1 October 2022.
These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards and Interpretations (collectively
IFRSs) issued by the International Accounting Standards Board (IASB) as
adopted by the European Union ('adopted IFRSs') and those parts of the
Companies Act 2006 that are applicable to companies that prepare financial
statements in accordance with IFRS.
The consolidated financial statements have been prepared on a going concern
basis and under the historical cost convention, as modified for the
revaluation of certain financial assets and financial liabilities at fair
value.
The preparation of financial statements in compliance with adopted IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in applying the Group's accounting policies.
The areas where significant judgements and estimates have been made in
preparing the financial statements and their effect are disclosed in note 2.
The consolidated financial statements are presented in Sterling, which is also
the Group's functional currency.
Amounts are rounded to the nearest thousand, unless otherwise stated.
Basis of consolidation
The consolidated financial statements incorporating the financial statements
of Shoe Zone plc and its subsidiary undertakings are all made up to 1 October
2022. The results for all subsidiary companies are consolidated using the
acquisition method of accounting.
Where the Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the Company has the practical
ability to direct the relevant activities of the investee without holding the
majority of the voting rights. In determining whether de-facto control exists
the company considers all relevant facts and circumstances, including:
· The size of the Company's voting rights relative to both the size
and dispersion of other parties who hold voting rights.
· Substantive potential voting rights held by the company and by
other parties.
· Other contractual arrangements.
· Historic patterns in voting attendance.
The consolidated financial statements present the results of the Company and
its subsidiaries ('the Group') as if they formed a single entity. Intercompany
transactions and balances between group companies are therefore eliminated in
full.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
income statement from the date on which control is obtained. They are
deconsolidated from the date on which control ceases.
Going Concern
The Directors consider that the business is a going concern and that it is
appropriate to prepare the financial statements on a going concern basis. In
reaching this conclusion, the Directors have assessed the Group's current
performance and position and factors that may affect the Group's future
prospects.
The Group's financial position is strong with healthy positive cash balances.
It also has in place a £3.0m overdraft facility. During the pandemic the
Group, in the prior year, took a CLBILS loan of £12.0m, this requires the
Group to comply with certain financial covenants, these have been met during
the year and since year end. The Directors have reviewed forecasts and
projections and consider that the Group has adequate banking facilities and
cash resources to meet its operational and capital commitments.
Assets under construction
Whilst held under assets under construction, no depreciation is charged on the
assets. Once the project is completed, the asset will be transferred to the
correct fixed asset category.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed in conjunction with
an independent third party for impairment when there is an indication that
assets might be impaired. When the carrying value of an asset exceeds its
recoverable amount, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual
asset, the impairment test is carried out on the asset's cash generating unit
(i.e. the smallest group of assets in which the asset belongs for which there
are separable identifiable cash flows).
Impairment charges are included in the consolidated income statement in cost
of sales, except to the extent they reverse previous gains recognised in the
consolidated statement of total comprehensive income.
Inventories
Inventories are initially recognised at cost on a first in first out basis,
and subsequently at the lower of cost and net realisable value. Cost comprises
all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition.
Financial assets
The Group classified its financial assets into the categories, discussed
below, due to the purpose for which the asset was acquired. The Group has not
classified any of its financial assets as held to maturity.
The Group documents at the inception of the transaction the relationship
between hedging instruments and hedged items, as well as its risk management
objectives and strategy for undertaking various hedging transactions. The
Group also documents its assessment, both at hedge inception and on an ongoing
basis, of whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged
items.
Cash and cash equivalents include cash in hand and deposits held at call with
banks.
Loans and receivables
Loans and receivable assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise
principally through the provision of goods to customers (e.g. trade
receivables), but also incorporate other types of contractual monetary asset.
They are initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue, and are subsequently
carried at amortised cost using the effective interest rate method, less
provision for impairment.
The Group's loans and receivables comprise trade and other receivables and
cash and cash equivalents included within the consolidated statement of
financial position.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default
or significant delay in payment) that the Group will be unable to collect all
of the amounts due under the terms receivable, the amount of such a provision
being the difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired receivable. For
trade receivables, which are reported net, such provisions are recorded in a
separate allowance account with the loss being recognised within
administrative expenses in the consolidated income statement. On confirmation
that the trade receivable will not be collectable, the gross carrying value of
the asset is written off against the associated provision.
Financial liabilities
The Group classified its financial liabilities as other financial liabilities
which include the following:
· Trade payables and other short-term monetary liabilities, which
are initially recognised at fair value and subsequently carried at amortised
cost using the effective interest method.
· Bank loan - external loan which is valued at its amortised cost
and incurs interest.
· Finance costs are charged to the income statement over the term
of the debt using the effective interest method so that the amount charged is
at a constant rate on the carrying amount. Issue costs are initially
recognised as a reduction in the proceeds of the associated capital
instrument.
Derivative financial instruments and hedging activities
Hedge accounting is applied to financial assets and financial liabilities only
where all of the following criteria are met:
At the inception of the hedge there is formal designation and documentation of
the hedging relationship and the Group's risk management objective and
strategy for undertaking the hedge.
· For cash flow hedges, the hedged item in a forecast transaction
is highly probable and presents an exposure to variations in cash flows that
could ultimately affect profit or loss.
· The cumulative change in the fair value of the hedging instrument
is expected to be between 80-125% of the cumulative change in the fair value
or cash flows of the hedged item attributable to the risk hedged (i.e. it is
expected to be highly effective).
· The effectiveness of the hedge can be reliably measured.
· The hedge remains highly effective on each date tested.
Effectiveness is tested quarterly.
The Group uses derivative financial instruments such as forward foreign
exchange contracts to hedge its risks associated with foreign currency
fluctuations. Such derivative financial instruments are initially measured at
fair value and subsequently remeasured at fair value. The fair value of
forward foreign exchange contracts is calculated by reference to current
forward exchange rates for contracts with similar maturity profiles.
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion is
recognised immediately in cost of sales in the income statement.
Amounts accumulated in equity are reclassified to inventories in the period
when the purchase occurs, matching the hedged transaction. The cash flows are
expected to occur and impact on profit and loss within 12 months from the year
end.
When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss previously
recognised in equity is retained in equity and is recognised when the forecast
transaction is ultimately recognised in cost of sales in the income
statement. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately transferred
to the income statement.
Deferred
taxation
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the statement of financial position differs from
its tax base.
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the balance sheet date and are
expected to apply when the deferred tax liabilities or assets are settled or
recovered. Deferred tax balances are not discounted.
Deferred tax assets are offset when the Group has legally enforceable rights
to set off current tax assets against current tax liabilities and the deferred
tax liabilities relate to taxes levied by the same tax authority on either:
· the same taxable group company; or
· different company entities which intend to either settle current
tax assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets and liabilities are expected to be settled or
recovered.
Provisions
Provision for dilapidations is made at the best estimate of the expenditure
required to settle the obligation at the reporting date, where material,
discounted at the pre-tax rate reflecting current market assessments of the
time value of money and risks specific to the liability. A dilapidation
provision is only recognised on those properties which are likely to be
exited. Where such property is identified the full costs expected are
recognised. This provision relates to the liability of 'wear and tear'
incurred on the leasehold properties and does not include any removal of shop
refits as experience indicates that liabilities do not arise for removal of
shop refits. Dilapidations are not included in IFRS 16 as they relate to 'wear
and tear' and not structural alterations to the buildings.
Foreign exchange
Transactions entered into the Group entities in a currency other than the
functional currency are recorded at the average monthly rate prevailing during
the year. Foreign currency monetary assets and liabilities are translated at
the rates ruling at the reporting date.
Foreign exchange differences are recognised in the income statement.
Retirement benefits - defined contribution and benefit schemes
The Group operates both defined benefit and defined contribution funded
pension schemes. The schemes are administered by trustees and are independent
of the Group.
Contributions to defined contribution schemes are charged to the consolidated
income statement in the year to which they relate.
Defined benefit scheme surpluses and deficits are measured at:
· the fair value of plan assets at the reporting date; less
· plan liabilities calculated using the projected unit credit
method discounted to its present value using yields available on high quality
corporate bonds that have maturity dates approximating to the terms of the
liabilities; plus
· unrecognised past service costs; less
· the effect of minimum funding requirements agreed with scheme
trustees.
Re-measurements of the net defined obligation are recognised directly within
equity. These include actuarial gains and losses, return on plan assets
(interest exclusive) and any asset ceilings (interest exclusive).
Service costs are recognised in the income statement, and include current and
past service costs as well as gains and losses on curtailments.
Net interest expense (income) is recognised in the income statement, and is
calculated by applying the discount rate used to measure the defined benefit
obligation (asset) at the beginning of the annual period to the balance of the
net defined benefit obligation (asset), considering the effects of
contributions and benefit payments during the year.
Gains or losses arising from changes to scheme benefits or scheme curtailments
are recognised immediately in the income statement.
Settlements of defined benefit schemes are recognised in the period in which
the settlement occurs.
A net pension asset may only be recognized when the group has an unconditional
right to a refund or to reductions in future contributions. As a result, no
asset has been recognised at year end.
Dividends
Dividends are recognised when they become legally payable. In the case of
interim dividends to equity shareholders, this is when declared by the
directors. In the case of final and special dividends, this is when approved
by the shareholders at the AGM.
Critical accounting estimates and judgements
The Shoe Zone plc Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
Accounting estimates and assumptions
Retirement benefits:
The Groups' defined benefit schemes' pension surplus/obligation, which is
assessed each period by actuaries, is based on key assumptions including
discount rates, mortality rates, inflation, future salary costs and pension
costs. These assumptions, individually or collectively, may be different to
actual outcomes; refer to note 25 for further details. A net pension asset may
only be recognized when the group has an unconditional right to a refund or to
reductions in future contributions. As a result, no asset has been recognised
at year end.
Estimated impairment of store assets:
The Group tests whether store assets have suffered any impairment in
accordance with the accounting policies stated in note 1. The recoverable
amount of cash-generating units is determined on a value-in-use calculation.
The method requires an estimate of future cash flows and the selection of a
suitable discount rate in order to calculate the net present value of cash
flows. The Group has performed a sensitivity analysis on the impairment tests
for its store portfolio using various reasonably possible scenarios. An
increase of three percentage points in the post-tax discount rate would have
resulted in no increase to the impairment charge. A decrease of one
percentage point in the growth rate after year three would have resulted in no
increase to the impairment charge.
Estimated useful life of property, plant and equipment:
At the date of capitalising property, plant and equipment, the Group estimates
the useful life of the asset based on management's judgement and experience.
Due to the significance of capital investment to the Group, variances between
actual and estimated useful economic lives could impact results both
positively and negatively, see note 12.
Judgements
Foreign currency hedge accounting:
Group policy is to adopt hedge accounting for cash flows for the purchase of
goods for resale. Due to the degree of judgement in determining forecast cash
flows there is a risk that the assumptions made in the effectiveness testing
are inappropriate.
Discount rate - The weighted average lessee's incremental borrowing rate
applied to the lease liabilities on 1 October 2022 was 1.82% and was 1.82% a.
If the discount rate was changed by 1% this would result in an increase of
liabilities in excess of £300,000.
52 weeks 52 weeks
ended 1 ended 2
October October
2022 2021
£'000 £'000
Revenue
United Kingdom stores 128,664 87,420
Digital 26,967 30,499
Republic of Ireland stores - 674
Other 533 549
156,164 119,142
There are no customers with turnover in excess of 10% of total turnover.
52 weeks 52 weeks
ended 1 ended 2
October October
2022 2021
£'000 £'000
Non-current assets excluding deferred tax asset by location:
United Kingdom 38,163 45,111
Republic of Ireland - -
38,163 45,111
Digital non-current and current assets have not been disclosed due to the
immaterial value. The contribution is £7.0m (2021: £8.5m)
The Group has only one operating and reporting segment which reflects the
Group's management and reporting structure as viewed by the board of
directors.
The deferred tax asset of £720,000 (2021: £3,220,000) is unallocated.
Dividends
52 weeks 52 weeks
ended 1 ended 2
October October
2022 2021
£'000 £'000
Dividends paid during the Period at 2.5p (2021: Nil) per share 1,250 Nil
Post Period, a second interim dividend of 3.0p per share was paid to all
shareholders on the register at 4 November 2022 and a final dividend of 3.3p
per share will be paid in March 2023 (2021: Nil)
Contingent liabilities
Shoe Zone plc and its subsidiary undertakings have given a duty deferment guarantee in favour of HM Revenue and Customs amounting to £800,000 (2 October 2021: £800,000).
Share capital
1 2
October October
2022 2021
£'000 £'000
Share capital issued and fully paid
49,500,000 ordinary shares of 1p each 495 500
495 500
Ordinary shares carry the right to one vote per share at general meetings of
the company and the rights to share in any distribution of profits or returns
of capital and to share in any residual assets available for distribution in
the event of a winding up.
Earnings per share
Earnings per share is calculated by dividing profit for the year by the weighted average number of shares outstanding during the year.
52 weeks 52 weeks
ended 1 October 2022 ended 2 October 2021
£'000 £'000
Numerator
Profit for the year and earnings used in basic and diluted EPS 21.74p 14.03p
1 2
October October
2022 2021
Denominator
Weighted average number of shares used in basic and diluted EPS 49,500,000 50,000,000
Ultimate controlling party
The company is controlled by the Smith family albeit there is not a single
controlling party.
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