REG - Shoe Zone PLC - Interim Results
17/05/2022 07:00
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RNS Number : 6882L Shoe Zone PLC 17 May 2022
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")
Interim results for the 26 week period to 2 April 2022
Shoe Zone PLC is pleased to announce its interim results for the 26 weeks to 2
April 2022, (the "Period").
Financial highlights
• Revenue of £69.9m (2021 H1 : £40.4m) +73%
o Store revenue £58.1m
o Digital revenue £11.8m
• Contribution of £11.6m (2021 H1: £4.5m) +158%
o Store contribution of £8.9m
o Digital contribution of £2.7m
• Profit before tax £3.1m (2021 H1: £(2.6)m loss)
• Earnings per share 5.7p (2021 H1: (4.2)p loss per share)
• Net cash balance of £13.9m (2021 H1: £4.1m) at period end
• Interim Dividend of 2.5pps (2021 H1: £Nil)
Operational highlights
· Stores traded for the full 26 weeks (2021: 10 weeks)
· 388 stores at Period end comprising:
o 45 Big Box (2021 YE: 45)
o 35 Hybrid (2021 YE: 22)
o 308 Original (2021 YE: 343)
· 8 new Hybrid stores opened and 30 poor performing stores closed
· Capital expenditure of £2.3 m (2021 H1: £0.2m)
· Annualised lease renewal savings of £0.4m, an average reduction of
37%
· Average lease length of 1.8 years (2021: 1.9 years)
· Digital returns rate of 10.9%
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
Daniel Harris, James Hornigold (Investment Banking)
Dominic King (Corporate Broking)
Chief Executive's statement
Introduction
We are able to report continuous trade for a full 26 week period. The last
full year saw the business return quickly to profitability and became debt
free again. Trading in the Period has continued to be positive as we build on
the strategy announced in October last year ("the Strategy") and we believe we
are in a strong position. The rapid recovery of our business is due mainly to
the continued support of our loyal and committed staff.
Profit before tax stood at £3.1m for the Period (2021 H1: £(2.6)m loss) with
an earnings per share of 5.7p (2021 H1: (4.2)p loss per share).
Stores traded for 26 weeks delivering revenues of £58.1m (2021 H1: £22.8m /
10 weeks trading). Digital revenues were £11.8m (2021 H1: £17.6m) in the
Period, a reduction to a more normalised position due to the store closures
and lockdowns last year, but is still a 114.5% increase on a 2 year basis
(2020 H1 £5.5m).
We ended the Period trading out of 388 stores, having closed 30 'Original'
format stores, which is in line with the strategy announced last October, and
opened 8 stores in our new Hybrid format. We have 308 'Original', 45 'Big Box'
and 35 'Hybrid' stores and we are actively working to relocate and/or refit
further stores in the 2(nd) half of the year, with at least 20 stores
currently in solicitors' hands.
Our average lease length is 1.8 years (2021: 1.9 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 are accelerating store relocations, refits and infrastructure changes at
our head office, and further investment in digital. All of these areas are key
to progressing our strategy and we will commit to spending at least 3% of
turnover annually on capital projects.
We have continued to invest in our digital infrastructure and our portfolio
with more 'Original' Shoe Zone stores converted to either a Big Box or Hybrid
format. The results are very positive and we continue to look for relocation
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 sales
square footage, albeit from a reduced number of locations. Digital growth fell
back as expected as we re-opened all stores, and is now back to the normalised
level expected but it is still 114.5% higher on a 2 year basis. We continue to
increase drop ship partners, exclusive products and brands and we have
introduced additional payment and delivery options to enhance 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 10.9% and the vast majority of these are returned to store,
hence why our physical store network is critical to our future success.
Dividend
At the last year end we had an outstanding CLBILS loan balance of £4.4m, and
under the terms of the agreement the business was restricted from making any
dividend payments whilst there was a balance outstanding. We have now fully
paid off the outstanding loan balance and the Company is therefore now
eligible to recommence dividend payments in respect of the new financial
Period. The Board therefore proposes an interim dividend of 2.5p per share.
The interim dividend will become payable on 17 August 2022 to those
shareholders on the Company's register as at the close of business on the
record date 15 July 2022. The ex-dividend date is 14 July 2022. The Company
will otherwise continue to review management of its cash resources which may
include special dividend and/or buyback programme, details of which will be
announced in due course.
Financial Review
In the Period total revenues were £69.9m (2021 H1: £40.4m) with a profit
before tax of £3.1m (2021 H1: £(2.6)m loss). The increase in revenue
reflects trading in the stores for the whole of the Period with less
disruption to trade, with store revenues increasing by £35.3m and store
contribution increasing to £8.9m (2021 H1: £(0.8)m loss). Digital sales
reduced to £11.8m (2021 H1: £17.6m) as the level normalised but has more
than doubled on a 2 year basis. Digital gross margins increased to 58.5% (2021
H1: 57.6%) due to reduced markdowns, partially offset by a higher mix of lower
margin branded and online exclusive product. Digital contribution was £2.7m
(2021 H1: £5.3m).
Five freeholds and one long leasehold went to auction in December, resulting
in a profit on sale of £0.3m. A further 4 stores were auctioned in April with
a final auction to take place in May.
Gross profit for the Period stood at £13.6m, which is £5.9m higher than last
year (2021 H1: £7.7m) mainly due to the 16 weeks additional store sales. The
gross profit margin achieved for the Period is 19.5% (2021 H1: 19.2%).
Product gross margins reduced to 60.8% (2021 H1: 61.5%) due to higher average
container prices, an increase in the higher mix of branded product and offset
by a reduction in markdown activity.
Administration expenses reduced by £0.4m to £7.5m (2021 H1: £7.9m) due to a
sales related reduction in digital expenses, a reduction in redundancy
payments, a reduced charge relating to foreign exchange movements, partly
offset by an increase in contributions to the Shoe Zone Trust.
Distribution expenses increased by £0.8m to £2.4m (2021 H1: £1.6m) due to
higher warehouse wages compared to last year where a large number of staff
were put on furlough due to lockdown.
Our energy prices are fixed until September 2023 therefore we are not exposed
to the market price increases currently being experienced and we have a number
of initiatives in place to achieve our carbon neutral goal. All of our
electricity consumption is from 100% renewable sources, we have started to
monitor energy consumption and we have a programme to insulate ceilings and to
install more energy efficient lighting in a number of stores. This year we
will add electric vehicles to our fleet.
Stock at cost is higher for the Period by £2.7m at £31.1m (2021 H1: £28.4m)
due to a portion of the Autumn Winter ("AW") 2021 boots and wellington intake
being delayed. This will now be included in our AW2022 range as this stock is
classed as continuity product. We have also brought forward some of our Spring
Summer ("SS") 2022 intake to ensure early delivery.
The Company ended the Period with a cash and equivalent balance of £13.9m
(2021 H1: £14.5m) and a net cash balance of £13.9m (2021 H1: £4.1m). The
increase in net cash is due mainly to the additional revenue generated for the
full Period and profitability for the Period. We remain prudent and plan to
conserve cash as a precaution against the risks of inflation and current
global events.
Capital expenditure for the Period was £2.3m (2021 H1: £0.2m) which is
returning to our long term target of 3-4% of turnover. The capital expenditure
for the Period includes new stores, refits and relocations, IT expenditure and
infrastructure works in the head office and distribution centre, and we will
look to accelerate spend in the 2(nd) half of the year and into the next
financial year.
We operate two closed defined benefit pension schemes. The deficit for the
Shoefayre Limited Pension and Life Assurance Scheme reduced by £3.0m to
£2.9m (2021 YE: £5.9m) and for the Shoe Zone Pension Scheme the surplus
increased by £1.0m to £6.9m (2021 YE: £5.9m) The reduction in deficit and
increase in surplus is due to an increase in bond yields which reduces the
value placed on the scheme's liabilities, offset by lower than expected
investment returns and a rise in future inflationary expectations.
Earnings per share are 5.7p (2021 H1: (4.2)p loss per share).
Unaudited consolidated income statement
26 Wks end 26 Wks end 52 Wks end
2 Apr 2022 3 Apr 2021 2 Oct 2021
£'000 £'000 £'000
Revenue 69,864 40,435 119,142
Cost of sales (56,247) (32,688) (86,667)
Gross Profit 13,617 7,747 32,475
Administration expenses (7,508) (7,906) (16,962)
Distribution costs (2,448) (1,593) (4,499)
Profit from Operations 3,661 (1,752) 11,014
Finance income 0 0 0
Finance expense (599) (860) (1,558)
Profit before Tax 3,062 (2.612) 9,456
Taxation (197) 497 (2442)
Profit after Tax 2,865 (2,115) 7,014
Earnings per Share 5.7p (4.2)p 14.0p
Unaudited consolidated statement of total comprehensive income
26 Wks end 26 Wks end 52 Wks end
2 Apr 2022 3 Apr 2021 2 Oct 2021
£'000 £'000 £'000
Profit/(Loss) for the period 2,865 (2,115) 7,014
Items that will not be reclassified subsequently to the
income statement
DB pension scheme 3,110 2,769 3,379
Movement in deferred tax on pension schemes (560) (526) 761
IFRS-16 Opening balances 0 0 0
Cash flow hedges
Fair value movements in other comprehensive income 682 (1,903) (190)
Cash flow hedges recognised in inventories 0 0 0
Tax on cash flow hedges (109) 364 56
Other comprehensive (expense)/Income for the period 3,123 704 4,006
Total comprehensive (expense)/Income for the period 5,988 (1,411) 11,020
attributable to equity holders of the parent
Unaudited consolidated statement of financial position
26 Wks end 26 Wks end 52 Wks end
2 Apr 2022 3 Apr 2021 2 Oct 2021
Assets £'000 £'000 £'000
Non-current Assets
Property, plant and equipment 13,555 14,733 14,227
Right of use assets 28,526 36,464 30,884
Deferred tax asset 2,490 5,455 3,220
Total Non-current Assets 44,571 56,652 48,331
Current Assets
Inventories 31,096 28,433 25,131
Trade and other receivables 3,450 3,524 5,457
Derivative financial assets 456 0 0
Cash and cash equivalents 13,872 14,473 19,015
Total Current Assets 48,874 46,430 49,603
Total Assets 93,445 103,082 97,934
Current Liabilities
Trade and other payables (19,484) (12,250) (16,440)
Lease liabilities (14,016) (15,629) (17,035)
Derivative financial liabilities 0 (2,620) (591)
Bank loans 0 (4,800) (4,400)
Provisions (1,727) (1,756) (1,698)
Corporation tax liability (317) 0 (773)
Total Current Liabilities (35,544) (37,055) (40,937)
Non-current Liabilities
Lease liabilities (23,554) (40,042) (25,942)
Bank loans 0 (5,600) 0
Provisions (2,084) (1,499) (1,728)
Employee benefit liability (2,857) (7,899) (5,909)
Total Non-current Liabilities (28,495) (55,040) (33,579)
Total Liabilities (64,039) (91,095) (74,516)
Net Assets 29,406 10,987 23,418
Equity attributable to equity holders of the company
Called up share capital 500 500 500
Merger reserve 2,662 2,662 2,662
Cash flow hedge reserve 323 (1,654) (250)
Retained earnings 25,921 9,479 20,506
Total Equity and Reserves 29,406 10,987 23,418
Unaudited consolidated statement of changes in Equity
Share Share CF hedge Retained Total
Capital Premium Reserve Earnings
£'000 £'000 £'000 £'000 £'000
As at October 2021 500 2,662 (116) 9,352 12,398
Loss for the period 0 0 0 (2,115) (2,115)
Defined benefit pension movements 0 0 0 2,769 2,769
Cash flow hedge movements 0 0 (1,903) 0 (1,903)
Deferred tax on comp. income 0 0 364 (526) (162)
Total comprehensive income for the period 0 0 (1,539) 128 (1,411)
Dividends paid 0 0 0 0 0
Contributions by and distribution to owners 0 0 0 0 0
As at April 2022 500 2,662 (1,655) 9,480 10,987
As at October 2021 500 2,662 (116) 9,352 12,398
Profit for the period 0 0 0 7,014 7,014
Defined benefit pension movements 0 0 0 3,379 3,379
Cash flow hedge movements 0 0 (190) 0 (190)
Deferred tax on comp. income 0 0 56 761 817
Total comprehensive income for the period 0 0 (134) 11,154 11,020
Dividends paid 0 0 0 0 0
Contributions by and distribution to owners 0 0 0 0 0
As at October 2021 500 2,662 (250) 20,506 23,418
As at October 2021 500 2,662 (250) 20,506 23,418
Profit for the period 0 0 0 2,865 2,865
Defined benefit pension movements 0 0 0 3,110 3,110
Cash flow hedge movements 0 0 682 0 682
Deferred tax on comp. income 0 0 (109) (560) (669)
Total comprehensive income for the period 0 0 573 5,415 5,988
Dividends paid 0 0 0 0 0
Contributions by and distribution to owners 0 0 0 0 0
As at April 2022 500 2,662 323 25,921 29,406
Unaudited consolidated statement of cash flows
26 Wks end 26 Wks end 52 Wks end
2 Apr 2022 3 Apr 2021 2 Oct 2021
£'000 £'000 £'000
Operating activities
Profit/(Loss) after tax 2,865 (2,115) 7,014
Corporation tax 197 (497) 2,442
Finance income 0 0 0
Finance expense 599 860 1,558
Depreciation of property, plant and machinery 1,514 1,598 3,144
Fixed asset impairment and loss on disposal of property, 1,457 840 1,001
plant and machinery
Right of use asset on profit, depreciation & impairment 7,217 7,782 15,860
Pension contributions paid 0 0 (1,500)
13,849 8,468 29,519
Decrease/(increase) in trade and other receivables 2,007 (789) (2,722)
Decrease/(increase) in foreign exchange contracts (357) 613 486
Decrease/(increase) in inventories (5,965) (1,735) 1,567
(Decrease)/increase in trade and other payables 3,154 ((5,066) (816)
Increase in provisions 386 524 694
(775) (6,453) (791)
Cash generated from operations 13,074 2,015 28,728
Net corporation tax paid (653) 360 1,353
Net cash flows from operating activities 12,421 2,375 30,081
Investing activities
Purchase of property, plant and machinery (2,299) (204) (1,405)
Interest received 0 0 0
Net cash used in investing activities (2,299) (204) (1,405)
New secured loan repayable by instalments 0 5,000 0
Repayment of secured loan (4,400) (1,600) (2,600)
Capital element of lease repayments (10,790) (4,210) (20,037)
Interest paid (75) (154) (290)
Dividends paid during year 0 0 0
Net cash used in financing activities (15,265) (964) (22,927)
Net increase in cash and cash equivalents (5,143) 1,207 5,749
Cash and cash equivalents at beginning of period 19,015 13,266 13,266
Cash and cash equivalents at end of period 13,872 14,473 19,015
Notes to the financial statements for the 26 weeks ended 2 April 2022
Basis for preparation
The consolidated interim financial statements of the company for the 26 weeks
ended 2 April 2022, 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 2 April 2022, 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 2021 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 2 Oct 2021.
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.
2 Apr 3 Apr 2 Oct
2022 2021 2021
External revenue by location of customers: £'000 £'000 £'000
United Kingdom 57,751 21,934 87,420
Digital 11,830 17,624 30,499
Republic of Ireland 0 675 674
Other 283 202 549
69,864 40,435 119,142
3. Derivative financial assets
2 Apr 3 Apr 2 Oct
2022 2021 2021
£'000 £'000 £'000
Derivative financial assets
Not designated as hedging instruments 58 (578) (261)
Designated as hedging instruments 399 (2,042) (330)
457 (2,620) (591)
4. Taxation
The taxation credit for the 26 weeks ended 2 April 2022 is based on an
estimated effective tax rate for the full year of 19% (2021 H1:19%)
5. Earnings per share
2 Apr 3 Apr 2 Oct
2022 2021 2021
£'000 £'000 £'000
Profit in the period and earnings used in basic
diluted earnings per share 2,865 (2,115) 7,014
5.7p (4.2)p 14.03p
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