REG - Shoe Zone PLC - Interim Results

Shoe ZoneAnnouncement

18/05/2021 07:05

RNS Number : 9084Y
  
Shoe Zone PLC
  
18 May 2021
  
 

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
INTERIM RESULTS
 
Shoe Zone PLC ("Shoe Zone", the "Company") is pleased to announce its interim results for the six months to 3 April 2021. (the "Period")
Financial Update
•     Revenue of £40.4m (2020 H1: £68.9m)

o  Store revenue £22.8m (2020 H1: £63.3m)
o  Digital revenue £17.6m (2020 H1: £5.5m)
o  Digital contribution of £5.3m (2020 H1: £1.9m)
o  Digital conversion rate 6.43% (2020 H1: 3.47%)
o  Over 1.0 million engaged users in shoezone.com database

•     Statutory loss before tax £(2.6)m (2020 H1: £(2.5)m as a result of tight cost control and increase in digital.
•     Statutory earnings per share (4.2)p (2020 H1: (4.1)p)
•     Net cash balance of £4.1m (2020 H1: £3.6m)
•     No interim dividend to be paid (2020 H1: no dividend)
Business and COVID-19 Update
•     All stores closed for a minimum of 16 weeks in the Period
•     Digital and Warehouse teams operated throughout the lockdowns
•     Supply chain disruption due to container shortages and Ever Given/Suez Canal issues
•     Continual cash preservation action taken throughout the period resulting in net cash of £4.1m at the end of the Period
•     Ongoing negotiations with Landlords and suppliers
•     Majority of staff furloughed and we have used the Government business support schemes including grants, rates and VAT 
•     CLBILS loan of £15m in place and drawn down. £4.6m repaid
•     Store numbers are 422 having reduced by 38 in the period. A full review of individual store viability will now continue
•     Exit from the Republic of Ireland with all stores and shoezone.ie now closed
 
 
For further information please call:
 
Shoe Zone PLC                                                                                  Tel: via 0116 222 3000
Anthony Smith (Chief Executive)
Terry Boot (Finance Director)
Finncap (Nominated Advisor and Broker)                                            Tel: 020 7220 0500
Matt Goode (Corporate Finance)
Kate Bannatyne (Corporate Finance)
Alice Lane (ECM)
 
Chief Executive's statement
Introduction
The last 12 months have been like no other in the company's history. The COVID-19 pandemic has had a huge social and economic impact around the world and has led to huge consequences for all businesses, including our own, as we have had to adapt and change to meet the significant challenges in the last year and I thank our loyal and committed staff during this period. However, we have come through this challenging period and are now in position to continue our strategy going forward, with the assumption that no further lockdowns are required.
The company currently operates from a portfolio of around 422 stores (38 closed in the period with 3 stores refitted and 1 relocation to new formats). We operate a comprehensive digital proposition, enabling it to provide a multi-channel shopping experience to its customers.
Since the period end we have relocated a further 3 stores.
Strategy Update
The strategy outlined before the COVID-19 pandemic took hold, is still the general direction the Directors believe is the route to be taking going forward. The last 12 months has demonstrated the need to build on the significant successes within our Digital business. The investments we have made have put us in a strong position to enable our customers to buy throughout the lockdown, resulting in strong growth over this period. Digital growth will continue to be a big part of our future strategy along with our focus on Big Box and Hybrid expansion. These new stores will be at a lower pace due to cash constraints.
COVID-19 Update
We have had to adapt and reshape our business to react to extremely difficult trading conditions. We enter the second half of the financial year with the hope that we have seen the worst of the COVID-19 impact and look forward to the stores getting back to what we would call "normal" trading conditions, with no further lockdowns.  
No stores were open in the first 2 weeks of the 2nd half. Trading started strongly but has settled down to a more mixed picture of good High Street and retail park sales but weaker shopping centre performance.
Financial Summary
In the six months to 3 April 2021, the company generated revenues of £40.4m (2020 H1: £68.9m) and a loss before tax of £(2.6)m (2020 H1 £(2.5)m).
The reduction in revenue over the prior year reflects the continued impact of COVID-19. During the six months we experienced significant disruption in the supply chain and a fall in consumer spending for a significant number of months in the period, particularly in Jan, Feb and March when all stores were closed. In the period we saw an increase in Digital sales to £17.6m compared to last year of £5.5m, however the store deficit was £40.5m compared to last year.
The gross profit for this year reflects the sales related margin reduction year on year due to clearing excess stock and the benefit of the Government COVID business support schemes. Admin and distribution costs are higher than last year primarily due to £3.1m additional expenditure relating to the increase in Digital sales and a £0.5m increase due to foreign exchange revaluation.
The company ended the period with a net cash balance of £4.1m (2020 £3.6m). The increase in cash balance has been achieved through the measures taken by the business over the last 12 months, which restricted cash out of the business but also took advantage of the Government furlough scheme, the business rates holiday, retail grants and the ability to delay VAT. We should state that, compared to last year, we are behind on rental payments as we continue to negotiate better terms with Landlords.
Dividend
We are continuing to focus on cash preservation as the business comes out of lockdown and therefore no interim dividend will be paid. Our dividend policy remains on hold as previously stated.
 
 
Unaudited consolidated income statement 




 


 


 


 


 


 


26 Wks end


26 Wks end


52 Wks end




 


 


 


 


 


 


3 Apr 2021


4 Apr 2020


3 Oct 2020




 


 


 


 


 


 


£'000


£'000


£'000




Revenue


 


 


 


 


 


40,435


68,944


122,568




Cost of Sales


 


 


 


 


(29,804)


(61,262)


(114,455)




Gross Profit


 


 


 


 


10,631


7,682


8,113




Administration Expenses


 


 


 


(7,906)


(6,273)


(13,928)




Distribution Costs


 


 


 


 


(4,477)


(2,927)


(6,895)




Loss from Operations


 


 


 


(1,752)


(1,518)


(12,710)




Finance Income


 


 


 


 


0


(1)


10




Finance Expense


 


 


 


 


(860)


(1,009)


(1,901)




Loss before Taxation


 


 


 


(2,612)


(2,528)


(14,601)




Taxation


 


 


 


 


 


497


480


2,698




Loss attributable to equity holders of the parent


 


(2,115)


(2,048)


(11,903)




 


 


 


 


 


 


 


 


 




Earnings per Share


 


 


 


 


(4.2)p


(4.1)p


(23.8)p




 
 
Unaudited consolidated statement of total comprehensive income




 


 


 


 


 


 


26 Wks end


26 Wks end


52 Wks end




 


 


 


 


 


 


3 Apr 2021


4 Apr 2020


3 Oct 2020




 


 


 


 


 


 


£'000


£'000


£'000




Loss for the period


 


 


 


(2,115)


(2,048)


(11,903)




Items that will not be reclassified subsequently to the


 


 


 




income statement


 


 


 


 


 


 




DB pension scheme


 


 


 


2,769


(642)


(2,114)




Movement in deferred tax on pension schemes


 


(526)


94


899




IFRS-16 Opening balances


 


 


 


0


(3,242)


0




Cash flow hedges


 


 


 


 


 


 




Fair value movements in other comprehensive income


(1,903)


(2,431)


(2,124)




Cash flow hedges recognised in inventories


 


0


2,868


0




Tax on cash flow hedges


 


 


 


364


(74)


363




Other comprehensive (expense)/Income for the period


704


(3,427)


(2,976)




Total comprehensive (expense)/Income for the period


(1,411)


(5,475)


(14,879)




attributable to equity holders of the parent


 


 


 


 




 
 
Unaudited consolidated statement of financial position




 


 


 


 


 


 


26 Wks end


26 Wks end


52 Wks end




 


 


 


 


 


 


3 Apr 2021


4 Apr 2020


3 Oct 2020




 


 


 


 


 


 


£'000


£'000


£'000




Assets


 


 


 


 


 


 


 


 




Non-current Assets


 


 


 


 


 


 


 




Property, plant and equipment


 


 


 


14,733


22,669


16,967




Right of use assets


 


 


 


 


36,464


53,456


42,387




deferred tax asset


 


 


 


 


5,455


1,597


5,617




Total Non-current assets


 


 


 


56,652


77,722


64,971




Current Assets


 


 


 


 


 


 


 




Inventories


 


 


 


 


28,433


25,727


26,698




Trade and other receivables


 


 


 


3,524


4,978


2,735




Derivative financial assets


 


 


 


0


2,751


0




Cash and cash equivalents


 


 


 


14,473


3,571


13,266




Total Current Assets


 


 


 


 


46,430


37,027


42,699




Total Assets


 


 


 


 


103,082


114,749


107,670




Current Liabilities


 


 


 


 


 


 


 




Trade and other payables


 


 


 


(12,250)


(31,167)


(17,316)




Lease liabilities


 


 


 


 


(15,629)


0


(19,914)




Derivative financial liability


 


 


 


(2,620)


0


(105)




Bank loans


 


 


 


 


(4,800)


0


(1,944)




Provisions


 


 


 


 


(1,756)


(573)


(1,471)




Corporation tax liability


 


 


 


0


0


(137)




Total Current Liabilities


 


 


 


(37,055)


(31,740)


(40,887)




Non-Current Liabilities


 


 


 


 


 


 




Trade and other payables


 


 


 


0


0


0




Lease liabilities


 


 


 


 


(40,042)


(46,521)


(37,475)




Bank loans


 


 


 


 


(5,600)


0


(5,056)




Provisions


 


 


 


 


(1,499)


(581)


(1,260)




Employee benefit liability


 


 


 


(7,899)


(9,952)


(10,594)




Total Non-Current Liabilities


 


 


 


(55,040)


(57,054)


(54,385)




Total liabilities


 


 


 


 


(92,095)


(88,794)


(95,272)




Net Assets


 


 


 


 


10,987


25,955


12,398




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


 


 


 


(1,654)


2,008


(116)




Retained earnings


 


 


 


 


9,479


20,785


9,352




Total Equity and Reserves


 


 


 


10,987


25,955


12,398




 
 
Unaudited consolidated statement of changes in Equity




 


Share


Share


Cash flow


Retained


Total




 


Capital


Premium


Hedge


Earnings


 




 


 


 


Reserve


 


 




 


£'000


£'000


£'000


£'000


£'000




 


 


 


 


 


 




At October 2019


500


2,662


1,645


26,623


31,430




Loss for the period


0


0


0


(2,048)


(2,048)




Defined benefit pension movements


0


0


0


(642)


(642)




cash flow hedge movements


0


0


437


0


437




Right of use asset movement


0


0


0


(3,242)


(3,242)




Deferred tax on other comp. income


0


0


(74)


94


20




Total comprehensive income for the period


0


0


363


(5,838)


(5,475)




Dividends paid


0


0


0


0


0




Contributions by and distribution to owners


0


0


0


0


0




As at April 2020


500


2,662


2,008


20,785


25,955




 


 


 


 


 


 




At October 2019


500


2,662


1,645


26,623


31,430




Impact of transition to IFRS-16


0


0


0


(4,153)


(4,153)




Loss for the period


0


0


0


(11,903)


(11,903)




Defined benefit pension movements


0


0


0


(2,114)


(2,114)




cash flow hedge movements


0


0


(2,124)


0


(2,124)




Deferred tax on other comp. income


0


0


363


899


1,262




Total comprehensive income for the period


0


0


(1,761)


(17,271)


(19,032)




Dividends paid


0


0


0


0


0




Contributions by and distribution to owners


0


0


0


0


0




As at October 2020


500


2,662


(116)


9,352


12,398




 


 


 


 


 


 




At October 2020


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 other 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 2021


500


2,662


(1,655)


9,480


10,987




 
 
Unaudited consolidated statement of cash flows




 


 


26 Wks end


26 Wks end


52 Wks end




 


 


3 Apr 2021


4 Apr 2020


3 Oct 2020




 


 


£'000


£'000


£'000




Operating activities


 


 


 


 




Loss after tax


 


(2,115)


(2,048)


(11,903)




Corporation tax


 


(497)


(480)


(2,698)




Finance income


 


0


(8)


(10)




Finance expense


 


860


1,018


1,901




Depn of property, plant and machinery


 


1,598


1,573


3,545




FA impairment and loss on disposal of property,


 


840


66


4,642




   plant and machinery


 


 


 


 




ROUA on disposal, depn and impairment


 


7,782


9,722


23,998




Pension contributions paid


 


0


(417)


(1,466)




 


 


8,468


9,426


18,009




Decrease/(increase) in trade and other receivables


 


(789)


1,324


(810)




Decrease/(increase) in foreign exchange contracts


 


613


0


336




Decrease/(increase) in inventories


 


(1,735)


3,196


2,184




(Decrease)/increase in trade and other payables


 


(5,066)


(17,857)


(5,498)




Increase in provisions


 


524


110


1,646




 


 


(6,453)


(13,227)


(2,142)




Cash generated from operations


 


2,015


(3,801)


15,867




Net corporation tax paid


 


360


(1,888)


(283)




Net cash flows from operating activities


 


2,375


(5,689)


15,584




Investing activities


 


 


 


 




Purchase of property, plant and machinery


 


(204)


(2,165)


(2,809)




Interest received


 


0


8


10




Net cash used in investing activities


 


(204)


(2,157)


(2,799)




New secured loan repayable by instalments


 


5,000


0


10,000




Repayment of secured loan


 


(1,600)


0


(3,000)




Capital element of lease repayments


 


(4,210)


0


(17,719)




Interest paid


 


(154)


0


(217)




Dividends paid during year


 


0


0


0




Net cash used in financing activities


 


(964)


0


(10,936)




Net increase in cash and cash equivalents


 


1,207


(7,846)


1,849




Cash and cash equivalents at beginning of period


 


13,266


11,417


11,417




Cash and cash equivalents at end of period


 


14,473


3,571


13,266




 
 
Notes to the financial statements for the 26 weeks ended 3 April 2021
Basis for preparation
The consolidated interim financial statements of the company for the 26 weeks ended 3 April 2021, 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 3 April 2021, 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 2020 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 3 Oct 2020.
 
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 due to the banking facilities available to it and the UK Government support available to businesses during this time.
The cash forecast prepared by the Directors show that the company will be able to operate within the facilities available to it and on that basis, the Directors have prepared these financial statements on a going concern basis.


 
 
 
Events after the period end
Subsequent to the period end, the COVID-19 lockdown ended with non-essential retailers able to open from April onwards. Assuming that this will be the last period of lockdown, the Directors believe that the company is strongly positioned to progress positively.
 

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.               




 


 


 


 


 


3 Apr


4 Apr


3 Oct




 


 


 


 


 


2021


2020


2020




External revenue by location of customers:


£'000


£'000


£'000




 


 


 


 


 


 


 


 




United Kingdom


 


 


 


21,934


61,871


100,098




Digital


 


 


 


 


17,624


5,471


19,296




Republic of Ireland


 


 


 


675


1,602


2,678




Other


 


 


 


 


202


0


496




 


 


 


 


 


40,435


68,944


122,568




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




 


 


 


 


 


3 Apr


4 Apr


3 Oct




 


 


 


 


 


2021


2020


2020




Non-current assets by location


 


 


£'000


£'000


£'000




 


 


 


 


 


 


 


 




United Kingdom


 


 


 


15,732


22,650


16,962




Republic of Ireland


 


 


 


0


19


5




 


 


 


 


 


15,732


22,669


16,967




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




 


 


 


 


 


3 Apr


4 Apr


3 Oct




 


 


 


 


 


2021


2020


2020




 


 


 


 


 


£'000


£'000


£'000




Derivative financial assets


 


 


 


 


 




Not designated as hedging instruments


 


(578)


332


34




Designated as hedging instruments


 


(2,042)


2,419


(139)




 


 


 


 


 


(2,620)


2,751


(105)




 
4. Taxation
The taxation credit for the 26 weeks ended 3 April 2021 is based on an estimated effective tax rate for the full year of 19% (2020:19%)
 
 
5. Earnings per share




 


 


 


 


 


3 Apr


4 Apr


3 Oct




 


 


 


 


 


2021


2020


2020




 


 


 


 


 


£'000


£'000


£'000




Profit in the period and earnings used in basic


 


 


 




  diluted earnings per share


 


 


(2,115)


(2,048)


(11,903)




 


 


 


 


 


 


 


 




 


 


 


 


 


(4.2)p


(4.10)p


(23.8)p




 

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