REG - Shoe Zone PLC - Interim Results

Shoe ZoneAnnouncement

21/05/2019 07:05

RNS Number : 6072Z
Shoe Zone PLC
21 May 2019
 


21 May 2019
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 30 March 2019.
 
Financial Highlights
 
·      Revenue of £73.0m (2018 H1: £73.7m)
·      Strong product gross margins at 62.0% (2018 H1: 60.6%)
·      Statutory Profit before tax of £1.0m (2018 H1: £1.0m)
·      Net cash of £3.3m (2018 H1: £5.9m)
·      Statutory earnings per share of 1.65p (2018 H1: 1.70p)
·      Interim dividend maintained at 3.5p per share (2018 H1: 3.5p per share)
 
Operational Highlights
 
·      Rent on renewals fell on average by 18.5%, equivalent to a full year saving of £334k
·      Rent as a percentage of turnover remained static at 11.9% (2018 H1: 12.0%)
·      Operating from 26 Big Box locations at period end contributing £5.5m revenue in H1 and £0.4m of cash contribution
·      Will be operating from 33 Big Box stores at end of May, on track to meet targeted 45 by the end of 2019
·      Trials initiated for new Hybrid store format
·      Digital sales increased by 4.9% to £5.0m (2018 H1: £4.8m) achieving profit contribution of £1.5m (2018 H1: £1.2m)
 
Nick Davis, Chief Executive of Shoe Zone plc, said:
 
"The first half of our financial year has been positive for the Group, trading in line with management's expectations and achieving profitable revenue growth in our two key growth areas of Digital and Big Box.
 
Our ongoing strategic focus continues to be on the Big Box roll out with a target of 45 stores by the end of December 2019. This is progressing to plan and we will be operating from 33 Big Box stores by the end of May.
 
Additionally, our refreshed digital strategy has also generated profitable growth, laying the foundation for a positive outlook for the rest of the year. 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. Additionally, we have experienced lower administration costs due to careful control of property costs and beneficial reduction in foreign exchange.
 
Trading momentum has continued into the second half, in line with market expectations. With our growth strategy in place, we believe we are favourably insulated against many of the structural sector issues and the Board continues to look to the future with confidence."
 
There will be a presentation for analysts at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD, at 9:00am on 21 May 2019.
 
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 and Broker)
Matt Goode (Corporate Finance)
Carl Homes (Corporate Finance)
Hannah Boros (Corporate Finance)
Alice Lane (ECM)
 


Tel: +44 (0)20 7220 0500




FTI Consulting (Financial PR)
Jonathon Brill
Alex Beagley
Eleanor Purdon
Alice Newlyn
 


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 truly multi-channel shopping experience to its customers.
 
Financial Summary
In the six months to 30 March 2019, the Company generated revenues of £73.0m (2018 H1: £73.7m) and profit before tax of £1.0m (2018 H1: £1.0m). This performance reflects the focus on our strategy of growth through the roll out of the Big Box format stores, Operational Excellence and Digital.
 
Cash generation continues to be a focus and the Group had net cash of £3.3m (2018 H1: £5.9m) at 30 March 2019 with no bank debt. The adverse variance to last year is due to increased capital expenditure, the £4m special dividend paid in 2019 and £1.2m of freehold disposal proceeds during 2018.
 
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 (2018 H1: 3.5p per share). This will be paid on 14 August 2019 to shareholders on the register on 19 July 2019. The shares will go ex-dividend on 18 July 2019.
 
Growth through Big Box
 
The roll out of the Big Box format continues to deliver exciting growth opportunities for Shoe Zone. The number of operational stores has increased by seven to 26 at 30 March 2019 with a very strong pipeline through the remainder of 2019 and beyond. We are confident that we will achieve our target of 20 new openings during the current financial year. 
 
Big Box stores generated £5.5m revenue and £0.4m cash contribution in the 26 weeks representing 7.6% of total turnover and 3.5% of total cash contribution. This compares to 4.4% of total revenue and 2.3% of cash contribution for the full year 2017/18.
 
During the period we also continued the development of our own label premium brands, Lilley and Skinner and Comfy Steps. These will form part of the Spring Summer season with 23 lines and 19,000 pairs available in store and online. Initial performance of these lines at the commencement of the season has proved positive.
 
In addition to the Big Box formats we are also trialling a 'Hybrid' concept in more affluent demographic areas which encapsulates the look and feel of a Big Box store in a High Street or Shopping Centre environment. The stores sell all the Shoe Zone range and Big Box brands where the additional brand presence in the locality does not conflict with other retailers. This trial is still in its infancy but initial results are encouraging.
 
Growth through Digital
 
Digital revenue has grown by 4.9% to £5.0m (2018 H1: £4.8m) and profit contribution has grown by 19.9% to £1.5m (2018 H1: £1.2m), comparable revenue growth of 8.3%.
 
We continue to focus on the growth of our email database and during the 26 weeks achieved growth of over 250k new customers with 92% of new sign ups as a result of contact in store. The total number of active users in the database is now 501,000. The growth in our database, and a 42.3% rise in our targeted email promotions, has meant that we have been able to increase the impact of our email promotions to deliver a 13.8% increase in email revenue.
 
The range of products we sell exclusively online has grown by 185% since October 2018 and associated revenue delivered for the period has risen by 150% year on year. New product ranges such as Ruby Shoo and Rocket Dog have been successfully introduced and we anticipate that this broadening of the Digital offering will continue to accelerate with our Digital shoe buyer now on-board. 
 
Growth through Operational Excellence
 
Product
 
We remain committed to offering our customers the best value possible and have maintained key price points for our Core Value lines. We have increased the number of lines offering 'Multi-Buy' deals (e.g. '2 for £20') which alongside on-going range improvements has increased average transaction value by 4.82% during the year to £13.91.
 
We have continued to increase our direct sourcing and as a result, footwear orders placed directly with overseas factories increased to 87.6% (2018 FY: 87.1%) of total footwear orders. Working closely with manufacturers has helped grow gross product margins as well as improving communication and control across the supply chain. As a result, product gross margin performance improved by 1.4 percentage points in the period to 62.0% (2018 H1: 60.6%).
 
Property
 
We ended the period operating from 495 stores having opened nine, all of which were Big Box format, and closed six.
 
The core estate continues to be invested in and refreshed. Total capital spend of £3.2m included the nine Big Box openings, one relocation, 12 full refits and the continued rebranding of the remaining estate.
 
Rents on renewal fell by 18.5%, equivalent to a full year saving of £334k. Total rents remain tightly controlled at 11.9% of turnover and the average outstanding lease length on the portfolio has reduced to 2.0 years (2018 FY: 2.1 years).
 
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. The progress being made through the current growth strategy, including management of the cost base and particularly the property portfolio, coupled with the fundamental strengths of the business model provides the Board with confidence that Shoe Zone is insulated against many of the structural issues faced by other retailers.  The Board would like to thank all of Shoe Zone's teams and business partners for their hard work in the first half of the financial year.
 
Unaudited consolidated income statement




 


 


 


 


 


 


 


 




 


Note


 


26 weeks ended 30 March 2019


 


26 weeks ended 31 March 2018


 


52 weeks ended 29 September 2018




 


 


 


£'000


 


£'000


 


£'000




Revenue


2


 


72,995


 


73,672


 


160,615




Cost of sales


 


 


(63,453)


 


(63,634)


 


(130,086)




Gross profit


 


 


9,542


 


10,038


 


30,529




Administration expenses


 


 


(5,508)


 


(6,067)


 


(13,070)




Distribution costs


 


 


(2,987)


 


(2,928)


 


(6,048)




Profit from operations


 


 


1,047


 


1,043


 


11,411




Finance income


 


 


56


 


7


 


31




Finance expense


 


 


(87)


 


(95)


 


(187)




Profit before taxation


 


 


1,016


 


955


 


11,255




Taxation


4


 


(193)


 


(104)


 


(1,738)




Profit attributable to equity holders of the parent


5


 


823


 


851


 


9,517




 




Earnings per share - basic and diluted


5


 


1.65p


 


1.70p


 


19.03p




 
Unaudited consolidated statement of total comprehensive income




 


 


26 weeks

ended 30 March
2019


 


26 weeks

ended 31 March
2018


 


52 weeks

ended 29 September
2018




 


 


£'000


 


£'000


 


£'000




Profit for the period


 


823


 


851


 


9,517




Items that will not be reclassified subsequently to the income statement


 


 


 


 


 


 




Remeasurement gains and losses on defined benefit pension scheme


 


(611)


 


840


 


295




Movement in deferred tax on pension schemes


 


340


 


60


 


(50)




Cash flow hedges


 


 


 


 


 


 




Fair value movements in other comprehensive income


 


(4,082)


 


2,578


 


232




Cash flow hedges recognised in inventories


 


1,930


 


(2,333)


 


2,958




Tax on cash flow hedges


 


180


 


(327)


 


(548)




Other comprehensive (expense) / income for the period


 


(2,243)


 


818


 


2,887




Total comprehensive (expense) / income for the period
attributable to equity holders of the parent


 


(1,420)


 


1,669


 


12,404




 
Unaudited consolidated statement of financial position
 




 


 


 


 


 


 


 




 


Notes


26 weeks        ended 30

March

2019


 


26 weeks
ended 31
March
2018


 


52 weeks    ended 29 September

2018




 


 


£'000


 


£'000


 


£'000




Assets


 


 


 


 


 


 




Non-current assets


 


 


 


 


 


 




Property, plant and equipment


 


22,762


 


20,430


 


21,103




Deferred tax asset


 


736


 


932


 


703




Total non-current assets


 


23,498


 


21,362


 


21,806




Current assets


 


 


 


 


 


 




Inventories


 


27,576


 


25,171


 


27,804




Trade and other receivables


 


5,775


 


5,335


 


6,229




Derivative financial assets


3


1,500


 


-


 


1,383




Corporation tax asset


 


-


 


411


 


-




Cash and cash equivalents


 


3,311


 


5,900


 


15,682




Total current assets


 


38,162


 


36,817


 


51,098




Total assets


 


61,660


 


58,179


 


72,904




Current liabilities


 


 


 


 


 


 




Trade and other payables


 


(21,988)


 


(17,638)


 


(25,016)




Provisions for liabilities and charges


 


(268)


 


(715)


 


(689)




Derivative financial liability


3


-


 


(2,520)


 


-




Corporation tax liability


 


(118)


 


-


 


(550)




Total current liabilities


 


(22,374)


 


(20,873)


 


(26,255)




Non-current liabilities


 


 


 


 


 


 




Trade and other payables


 


(1,913)


 


(1,743)


 


(1,649)




Provisions for liabilities and charges


 


(420)


 


(123)


 


(290)




Employee benefit liability


 


(7,959)


 


(6,011)


 


(6,296)




Total non-current liabilities


 


(10,292)


 


(7,877)


 


(8,235)




Total liabilities


 


(32,666)


 


(28,750)


 


(34,490)




Net assets


 


28,994


 


29,429


 


38,414




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          


 


882


 


(1,601)


 


1,123




Retained earnings


 


24,950


 


27,868


 


34,129




Total equity and reserves


 


28,994


 


29,429


 


38,414




 
Unaudited consolidated statement of changes in equity




 


Share capital


 


Share premium


 


Cash flow hedge reserve


 


Retained earnings


 


Total




 


£'000


 


£'000


 


      £'000


 


£'000


 


£'000




 


 


 


 


 


 


 


 


 


 




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




At 30 September 2017


500


 


2,662


 


(1,520)


 


29,518


 


31,160




Profit for the period


-


 


-


 


-


 


9,517


 


9,517




Defined benefit pension movements


-


 


-


 


-


 


295


 


295




Cash flow hedge movements


-


 


-


 


3,191


 


-


 


3,191




Deferred tax on other comprehensive income


-


 


-


 


(548)


 


(51)


 


(599)




Total comprehensive income for the period


-


 


  -


 


2,643


 


9,761


 


12,404




Dividends paid during the period


             -


 


  -


 


  -


 


(5,150)


 


(5,150)




Total contributions by and distributions to owners


-


 


-


 


-


 


(5,150)


 


(5,150)




At 29 September 2018


500


 


2,662


 


1,123


 


34,129


 


38,414




Profit for the period


-


 


-


 


-


 


823


 


823




Defined benefit pension movements


-


 


-


 


-


 


(611)


 


(611)




Cash flow hedge movements


-


 


-


 


(421)


 


-


 


(421)




Deferred tax on other comprehensive income


-


 


-


 


180


 


(1,391)


 


(1,211)




Total comprehensive income for the period


-


 


-


 


(241)


 


(1,179)


 


(1,420)




Dividends paid during the period


-


 


-


 


-


 


(8,000)


 


(8,000)




Total contributions by and distributions to owners


-


 


-


 


-


 


(8,000)


 


(8,000)




At 30 March 2019


500


 


2,662


 


882


 


24,950


 


28,994




 
Unaudited consolidated statement of cash flows
 




 


 


26 weeks        ended 30

March

2019


 


26 weeks  ended 31
March
2018


 


52 weeks  ended 29

September

2018




 


 


£'000


 


£'000


 


£'000




Operating activities


 


 


 


 


 


 




Profit after taxation


 


823


 


851


 


9,517




Corporation tax


 


193


 


104


 


1,738




Finance income


 


(56)


 


(7)


 


(31)




Finance expense


 


87


 


95


 


187




Pension contributions paid


 


(415)


 


(351)


 


(704)




Depreciation of property, plant and equipment


 


1,473


 


1,456


 


3,097




Loss on disposal of property, plant and equipment


 


31


 


41


 


430




 


 


2,136


 


2,189


 


14,234




Decrease / (increase) in trade and other receivables


 


430


 


773


 


(146)




Increase in foreign exchange contract


 


-


 


-


 


(709)




(Increase) / decrease in inventories


 


(239)


 


2,727


 


182




(Decrease) / increase in trade and other payables


 


(3,073)


 


(5,968)


 


531




Increase in provisions


 


131


 


3


 


859




 


 


(2,751)


 


(2,465)


 


717




 


 


 


 


 


 


 




Cash generated from operations


 


(553)


 


(276)


 


14,951




Income taxes paid


 


(627)


 


(989)


 


(2,096)




Net cash flows from operating activities


 


(1,180)


 


(1,265)


 


12,855




Investing activities


 


 


 


 


 


 




Purchase of property, plant and equipment


 


(3,248)


 


(2,381)


 


(5,094)




Sale of property, plant and equipment


 


-  


 


1,153  


 


1,254




Interest received


 


56


 


7


 


31




Net cash used in investing activities


 


(3,192)


 


(1,221)


 


(3,809)




Financing activities


 


 


 


 


 


 




Dividends paid during the year


 


(8,000)


 


(3,400)


 


(5,150)




Net cash used in financing activities


 


(8,000)


 


(3,400)


 


(5,150)




Net decrease in cash and cash equivalents


 


(12,372)


 


(5,886)


 


3,896




Cash and cash equivalents at beginning of period


 


15,683


 


11,786


 


11,786




Cash and cash equivalents at end of period


 


3,311


 


5,900


 


15,682




 
Notes to the financial statements for the 26 weeks ended 30 March 2019
Basis of preparation
The consolidated interim financial statements of the Group for the 26 weeks ended 30 March 2019, 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 30 March 2019, 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 2018 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 29 September 2018.
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.




 


30
March
2019


 


31
March
2018


 


29
September
2018




 


£'000


 


£'000


 


£'000




External revenue by location of customers:


 


 


 


 


 




United Kingdom


71,257


 


71,532


 


156,165




Republic of Ireland


1,738


 


2,080


 


4,220




Other


-


 


60


 


230




 


72,995


 


73,672


 


160,615




There are no customers with turnover in excess of 10% of total turnover
Notes to the financial statements for the 26 weeks ended 30 March 2019 (continued)




 


30
March
2019


 


31
March
2018


 


29
September
2018


 




 


£'000


 


£'000


 


£'000


 




Non-current assets by location:


 


 


 


 


 


 




United Kingdom


22,744


 


20,416


 


21,091


 




Other


18


 


            14


 


12




 


22,762


 


     20,430


 


21,103



 
 
 
 
 
 
 
 
 
 
 



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




 


30

March

2019


 


31

March

2018


 


29

September

2018




 


£'000


 


£'000


 


£'000




Derivative financial assets


 


 


 


 


 




Derivatives not designated as hedging instruments   


437


 


(591)


 


30




Derivatives designated as hedging instruments          


1,063


 


(1,929)


 


1,353




 


1,500


 


(2,520)


 


1,383




 
3.    Taxation
The taxation charge for the 26 weeks ended 30 March 2019 is based on the estimated effective tax rate for the full year of 19% (2018:19%).
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.
 
4.    Earnings per share




 


30

March

2019


 


31

March

2018


 


29

September

2018




 


£'000


 


£'000


 


£'000




 


 


 


 


 


 




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


823


 


851


 


9,517




 


 


 


 


 


 




Earnings per share - basic and diluted


1.65p


 


1.70p


 


19.03p




 




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END
 
 
IR AMMATMBITBTL