REG - Shoe Zone PLC - Interim Results

Shoe ZoneAnnouncement

24/05/2018 07:05

RNS Number : 0873P
Shoe Zone PLC
24 May 2018
 


24 May 2018
Shoe Zone plc
 
Interim Results
 
Shoe Zone plc ("Shoe Zone", the "Company" or the "Group") the leading UK value footwear retailer, is pleased to announce its Interim Results for the six months to 31 March 2018.
 
Financial Highlights
 
·      Revenue growth of 1.1% to £73.7m (2017 H1: £72.9m)
·      Strong product margins at 60.6% (2017 H1: 62.8%)
·      Statutory Profit before tax of £1.0m (2017 H1: £0.3m)
·      Cash increased to £5.9m (2017 H1: 4.6m)
·      Statutory earnings per share of 1.70p (2017 H1: 0.50p)
·      Interim dividend raised to 3.5p per share (2017 H1: 3.4p per share)
 
Operational Highlights
 
·      Rent on renewals fell on average by 22%, equivalent to a full year saving of £100k
·      Rent as a % of turnover remained static at 12% (2017 H1: 12%)
·      Footwear orders placed directly with overseas factories increased to 87.1% (2017 H1: 84.7%)
·      Operating from 12 big box locations at period end contributing £3.1m sales in H1
·      Multi-channel sales increased by 21% to £4.9m (2017 H1: £4.0m) achieving contribution of £1.2m (2017 H1: £1.0m)
 
Nick Davis, Chief Executive of Shoe Zone plc, said:
 
"This has been a good first half for the Group, trading in line with management's expectations and achieving profitable revenue growth.
 
Our on-going strategic focus on the property portfolio has continued to benefit the Group, with careful management of leases and measured opening of core and Big Box stores, taking advantage of the favourable retail rental environment.
 
This good performance also reflects our close management of costs and ability to maintain appealing key price-points and multi-buy offers for our customers.
 
We are delighted that multi-channel revenue has continued to grow profitably, especially via mobile, which remains an ongoing area of development for the business.
 
Trading momentum has continued into the second half, in line with expectations for the full year. With our growth strategy in place, we believe we are favourably insulated against many of the structural sector issues and the Board remains confident of the outlook for Shoe Zone."
 
There will be a presentation for analysts at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD, at 9:30am on 24 May 2018.
 
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via regulatory news service this inside information is now considered to be in the public domain.
 
For further information, please call:
 




Shoe Zone plc
Nick Davis (CEO)
Jonathan Fearn (CFO)
 


Tel: via FTI Consulting




Finncap (Nominated Advisor)
Matt Goode
Carl Homes
Alice Lane
Hannah Boros
 


Tel: +44 (0)20 7220 0500




FTI Consulting (Financial PR)
Jonathon Brill
Alex Beagley
Eleanor Purdon
Charlotte Cobb


Tel: +44 (0)20 3727 1000




 
Chief Executive's Statement
Introduction
 
Shoe Zone is the leading UK value footwear retailer, offering low price and high quality footwear for the whole family. The Group operates from a portfolio of around 500 stores and employs approximately 3,500 employees across the UK and the Republic of Ireland. Shoe Zone's online offering, combined with its extensive store portfolio, enables it to provide a true multi-channel shopping experience to its customers. I will now provide an update on our core areas of progress in the first six months of our financial year.
 
Financial Summary
 
In the six months to 31 March 2018, the Company generated revenues of £73.7m (2017 H1: £72.9m) and profit before tax of £1.0m (2017 H1: £0.3m). This performance reflects the continued focus on driving profitable sales through our existing Shoe Zone core estate, developing our successful multi-channel offering and the roll out of the Big Box store format. 
 
Product gross margin performance remained strong at 60.6% (2017 H1: 62.8%). The slight fall compared to last year is due to higher write downs early in the year and sales mix in the second quarter.
 
Cash generation continues to be a focus throughout the year and as at 31 March 2018, Shoe Zone had net cash of £5.9m (2017 H1: £4.6m) with no bank debt. This is due to a strong trading performance and the opportunistic disposal of five freehold properties for £1.2m. 
 
Management continues to monitor all costs closely and these remain tightly controlled.
 
Dividend
 
The Board is declaring an interim dividend of 3.5 pence per share (2017 H1: 3.4p per share). This will be paid on 15 August 2018 to shareholders on the register on 20 July 2018. The shares will go ex-dividend on 19 July 2018.
 
Product
 
We remain committed to offering our customers the best value possible and have continued to maintain key price points for our Core Value lines alongside our focus on multi-buy deals (e.g. '2 for £8'). We have continued to increase our direct sourcing and as a result, footwear orders placed directly with overseas factories increased to 87.1% (2017 FY: 84.7%) of total footwear orders. Working closely with manufacturers has helped support gross product margins as well as improving communication and control across the supply chain.
 
Non-footwear ranges including handbags, school bags, lunch boxes, purses and accessories continue to grow with sales from non-footwear achieving £3.6m, a 12% increase on prior year.
 
Property
 
We continue to make progress with the Company's strategy to roll out the new Big Box concept in a managed expansion. During 2018 we have opened a further three Big Box stores in the first half, and are currently completing works on two more stores. We remain on track to deliver 10 stores by the end of the year. The availability of out of town retail space, at the right size and price, has increased in recent months and therefore the pipeline for future roll out remains strong.
 
Within the core Shoe Zone estate we have opened a further four stores and closed 10 stores resulting in total store numbers at the 31 March 2018 of 493. Having pursued a programme of closing loss-making stores since IPO in 2014, we have achieved our target of loss makers making up no more than 5% of the core estate. Of those that remain, the majority only make a marginal loss.
 
We have continued to enhance the store portfolio by completing 12 full refits and seven fascia updates in the first half. 
 
Rents on renewal fell by 22%, equivalent to a full year saving of £100k. Total rents remain tightly controlled at 12% of turnover and the average outstanding lease length on the portfolio has reduced to 2.2 years (2017 FY: 2.3 years).
 
During the period we completed the sale and leaseback of five freehold properties for net proceeds of £1.2m. Proceeds were in line with Net Book Value held and therefore did not impact on profit. There are 14 remaining freeholds within the estate with a Net Book Value of £7.8m.
 
Multi-channel
 
Multi-channel continues to show strong profitable growth, delivering a year on year sales increase of 21% and contribution of £1.2m (H1 2017: £1.0m).
 
The email database continues to be a strong source of income. Email revenue increased by 28.6% from an increase of only 6.3% increase in emails sent. Significant work is on-going to identify and focus on engaged customers, attempt to re-engage those that have not responded in some time to emails and then remove those customers who do not.
 
Mobile visits now account for 79% (2017 H1: 76%) of total visits and mobile revenue has grown to 69% (2017 H1: 66%). We continue to develop mobile technology as the primary focus of our digital strategy.
 
Current trading and outlook
 
Trading in the first half of the year was in line with management's expectations and this has continued into the second half. We believe that the current growth strategy including management of the cost base and particularly the property portfolio means that we are confident that Shoe Zone is insulated against many of the structural issues faced by other retailers. 
 
We continue to diversify our customer base through the roll out of Big Box stores, capturing a broader demographic through the sale of own label and branded shoe styles. New 'Unity' fixtures and fittings will be trialled in the second half which will update the look of the core Shoe Zone estate and reduce future Big Box fit out costs by delivering synergies between the equipment used in both store formats.
 
The Board would like to thank all of our Shoe Zone teams and business partners for all their hard work in the first half of the financial year.
 
Unaudited consolidated income statement




 


 


 


 


 


 


 


 




 


Note


 


26 weeks ended 31 March 2018


 


26 weeks ended 1 April
2017


 


52 weeks ended 30 September 2017




 


 


 


£'000


 


£'000


 


£'000




Revenue


2


 


73,672


 


72,862


 


157,777




Cost of sales


 


 


(63,634)


 


(62,532)


 


(127,657)




Gross profit


 


 


10,038


 


10,330


 


30,120




Administration expenses


 


 


(6,067)


 


(7,050)


 


(14,454)




Distribution costs


 


 


(2,928)


 


(2,827)


 


(5,872)




Profit from operations


 


 


1,043


 


453


 


9,794




Finance income


 


 


7


 


11


 


15




Finance expense


 


 


(95)


 


(155)


 


(306)




Profit before taxation


 


 


955


 


309


 


9,503




Taxation


4


 


(104)


 


(60)


 


(1,620)




Profit attributable to equity holders of the parent


5


 


851


 


249


 


7,883




 




Earnings per share - basic and diluted


5


 


1.70p


 


 0.50p


 


15.77p




 
 
Unaudited consolidated statement of total comprehensive income




 


 


26 weeks

ended 31 March
2018


 


26 weeks

ended 1 April
2017


 


52 weeks

ended 30 September
2017




 


 


£'000


 


£'000


 


£'000




Profit for the period


 


851


 


249


 


7,883




Items that will not be reclassified subsequently to the income statement


 


 


 


 


 


 




Remeasurement gains and losses on defined benefit pension scheme


 


840


 


5,064


 


5,608




Movement in deferred tax on pension schemes


 


60


 


(912)


 


(1,217)




Cash flow hedges


 


 


 


 


 


 




Fair value movements in other comprehensive income


 


2,578


 


1,001


 


(934)




Cash flow hedges recognised in inventories


 


(2,333)


 


(1,140)


 


(1,233)




Tax on cash flow hedges


 


(327)


 


(24)


 


377




Other comprehensive income for the period


 


818


 


3,989


 


2,601




Total comprehensive income for the period
attributable to equity holders of the parent


 


1,669


 


5,516


 


10,484




 
Unaudited consolidated statement of financial position
 




 


 


 


 


 


 


 




 


Notes


26 weeks        ended 31

March

2018


 


26 weeks  ended 1

April

2017


 


52 weeks    ended 30 September

2017




 


 


£'000


 


£'000


 


£'000




Assets


 


 


 


 


 


 




Non-current assets


 


 


 


 


 


 




Property, plant and equipment


 


20,430


 


18,667


 


20,783




Deferred tax asset


 


932


 


540


 


861




Total non-current assets


 


21,362


 


19,207


 


21,644




Current assets


 


 


 


 


 


 




Inventories


 


25,171


 


27,294


 


28,017




Trade and other receivables


 


5,335


 


5,638


 


6,108




Derivative financial assets


3


-


 


225


 


-




Corporation tax asset


 


411


 


273


 


-




Cash and cash equivalents


 


5,900


 


4,613


 


11,786




Total current assets


 


36,817


 


38,043


 


45,911




Total assets


 


58,179


 


57,250


 


67,555




Current liabilities


 


 


 


 


 


 




Trade and other payables


 


(17,638)


 


(18,928)


 


(23,576)




Provisions for liabilities and charges


 


(715)


 


(751)


 


(829)




Derivative financial liability


3


(2,520)


 


-


 


(2,546)




Corporation tax liability


 


-


 


-


 


(474)




Total current liabilities


 


(20,873)


 


(19,679)


 


(27,425)




Non-current liabilities


 


 


 


 


 


 




Trade and other payables


 


(1,743)


 


(3,002)


 


(1,742)




Provisions for liabilities and charges


 


(123)


 


(104)


 


(120)




Employee benefit liability


 


(6,011)


 


(7,851)


 


(7,108)




Total non-current liabilities


 


(7,877)


 


(10,957)


 


(8,970)




Total liabilities


 


(28,750)


 


(30,636)


 


(36,395)




Net assets


 


29,429


 


26,614


 


31,160




Equity attributable to equity holders of the company


 


 


 


 


 


 




Called up share capital


 


500


 


500


 


500




Share premium reserve


 


2,662


 


2,662


 


2,662




Cash flow hedge reserve          


 


(1,601)


 


107


 


(1,520)




Retained earnings


 


27,868


 


23,345


 


29,518




Total equity and reserves


 


29,429


 


26,614


 


31,160




 
Unaudited consolidated statement of changes in equity




 


Share capital


 


Share premium


 


Cash flow hedge reserve


 


Retained earnings


 


Total




 


£'000


 


£'000


 


£'000


 


£'000


 


£'000




 


 


 


 


 


 


 


 


 


 




At 1 October 2016


500


 


2,662


 


270


 


26,344


 


29,776




Profit for the period


-


 


-


 


-


 


249


 


249




Deferred tax on other comprehensive income


-


 


-


 


(163)


 


4,152


 


3,989




Total comprehensive income for the period


-


 


  -


 


(163)


 


4,401


 


4,238




Dividends paid during the period


             -


 


  -


 


                -


 


(7,400)


 


(7,400)




Total contributions by and distributions to owners


-


 


-


 


-


 


(7,400)


 


(7,400)




At 1 April 2017


500


 


2,662


 


107


 


23,345


 


26,614




At 1 October 2016


500


 


2,662


 


270


 


26,344


 


29,776




Profit for the period


-


 


-


 


-


 


7,883


 


7,883




Defined benefit pension movements


-


 


-


 


-


 


5,608


 


5,608




Cash flow hedge movements


-


 


-


 


(2,167)


 


-


 


(2,167)




Deferred tax on other comprehensive income


-


 


-


 


377


 


(1,217)


 


(840)




Total comprehensive income for the period


-


 


  -


 


(1,790)


 


12,274


 


10,484




Dividends paid during the period


             -


 


  -


 


                -


 


(9,100)


 


(9,100)




Total contributions by and distributions to owners


-


 


-


 


-


 


(9,100)


 


(9,100)




At 30 September 2017


500


 


2,662


 


(1,520)


 


29,518


 


31,160




Profit for the period


-


 


-


 


-


 


851


 


851




Defined benefit pension movements


-


 


-


 


-


 


840


 


840




Cash flow hedge movements


-


 


-


 


246


 


-


 


246




Deferred tax on other comprehensive income


-


 


-


 


(327)


 


59


 


(268)




Total comprehensive income for the period


-


 


-


 


(81)


 


1,750


 


1,669




Dividends paid during the period


-


 


-


 


-


 


(3,400)


 


(3,400)




Total contributions by and distributions to owners


-


 


-


 


-


 


(3,400)


 


(3,400)




At 31 March  2018


500


 


2,662


 


(1,601)


 


27,868


 


29,429




 
Unaudited consolidated statement of cash flows
 




 


 


26 weeks        ended 31
March
2018


 


26 weeks
  ended 1
April
2017


 


52 weeks
ended 30
September
2017




 


 


£'000


 


£'000


 


£'000




Operating activities


 


 


 


 


 


 




Profit after taxation


 


851


 


249


 


7,883




Corporation tax


 


104


 


60


 


1,620




Finance income


 


(7)


 


(11)


 


(15)




Finance expense


 


95


 


155


 


306




Pension contributions paid


 


(351)


 


 (298)


 


(649)




Depreciation of property, plant and equipment


 


1,456


 


1,535


 


2,962




Loss on disposal of property, plant and equipment


 


41


 


88


 


188




 


 


2,189


 


1,778


 


12,295




Decrease in trade and other receivables


 


773


 


1,553


 


1,084




Decrease in foreign exchange contract


 


-


 


-


 


321




Decrease in inventories


 


2,727


 


3,007


 


2,767




Decrease in trade and other payables


 


(5,968)


 


(5,773)


 


(2,467)




Increase / (decrease) in provisions


 


3


 


(142)


 


(48)




 


 


(2,465)


 


(1,355)


 


1,657




 


 


 


 


 


 


 




Cash generated from operations


 


(276)


 


423


 


13,952




Income taxes paid


 


(989)


 


(1,889)


 


(2,990)




Net cash flows from operating activities


 


(1,265)


 


(1,466)


 


10,962




Investing activities


 


 


 


 


 


 




Purchase of property, plant and equipment


 


(2,381)


 


(1,578)


 


(5,137)




Sale of property, plant and equipment


 


1,153  


 


-


 


-




Interest received


 


7


 


11


 


15




Net cash used in investing activities


 


(1,221)


 


(1,567)


 


(5,122)




Financing activities


 


 


 


 


 


 




Dividends paid during the year


 


(3,400)


 


(7,400)


 


(9,100)




Net cash used in financing activities


 


(3,400)


 


(7,400)


 


(9,100)




Net decrease in cash and cash equivalents


 


(5,886)


 


(10,433)


 


(3,260)




Cash and cash equivalents at beginning of period


 


11,786


 


15,046


 


15,046




Cash and cash equivalents at end of period


 


5,900


 


4,613


 


11,786




 
Notes to the financial statements for the 26 weeks ended 31 March 2018
Basis of preparation
The consolidated interim financial statements of the Group for the 26 weeks ended 31 March 2018, which are unaudited, have been prepared in accordance with the same accounting policies, presentation and methods of computation  followed in the condensed set of financial statements as applied in the group's latest annual audited financial statements. A copy of those accounts has been delivered to the Registrar of Companies.
The financial information for the 26 weeks ended 31 March 2018, 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 2017 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 historical cost convention, as modified by the revaluation of derivative financial instruments to fair 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 amounts of assets and liabilities at the date of the financial statements and the reported amounts 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 30 September 2017.
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 operating decision maker has been identified as the management team including the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. 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.




 


31
March
2018


 


1

April

2017


 


30
 September
 2017




 


£'000


 


£'000


 


£'000




External revenue by location of customers:


 


 


 


 


 




United Kingdom


71,532


 


70,404


 


152,562




Republic of Ireland


2,080


 


2,458


 


4,991




Other


60


 


-


 


224




 


73,672


 


72,862


 


157,777




There are no customers with turnover in excess of 10% of total turnover




 


31
March
2018


 


1

April

2017


 


30
 September
2017


 




 


£'000


 


£'000


 


£'000


 




Non-current assets by location:


 


 


 


 


 


 




United Kingdom


20,416


 


18,667


 


20,499


 




Other


14


 


-


 


           284




 


20,430


 


18,667


 


      20,783



 
 
 
 
 
 
 
 
 
 
 



 
3.    Derivative financial instruments
At the balance sheet date, details of the forward foreign exchange contracts that the group has committed to are as follows:




 


31

March

2018


 


1

April

2017


 


30

September

2017




 


£'000


 


£'000


 


£'000




Derivative financial assets


 


 


 


 


 




Derivatives not designated as hedging instruments  


(591)


 


95


 


(709)




Derivatives designated as hedging instruments         


(1,929)


 


130


 


(1,837)




 


(2,520)


 


225


 


(2,546)




 
4.    Taxation
The taxation charge for the 26 weeks ended 31 March 2018 is based on the estimated effective tax rate for the full year of 19% (2017:19.5%).
The standard rate of Corporation Tax in the UK reduced from 20% to 19% with effect from 1 April 2017. The standard rate will fall further to 17% with effect from 1 April 2020. These rates were enacted during the current year and deferred tax balances have been stated at a rate at which they are expected to reverse.
 
5.    Earnings per share




 


31

March

2018


 


1

April

2017


 


30

September

2017




 


£'000


 


£'000


 


£'000




 


 


 


 


 


 




Profit for the period and earnings used in basic and diluted earnings per share


851


 


249


 


7,883




 


 


 


 


 


 




Earnings per share - basic and diluted


1.70p


 


        0.50p


 


15.80p




 




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END
 
 
IR AJMATMBJTBIP