REG - Shoe Zone PLC - Interim Results

Shoe ZoneAnnouncement

23/06/2020 07:01

RNS Number : 7147Q
  
Shoe Zone PLC
  
23 June 2020
  
 

23 June 2020
Shoe Zone plc 
 
Interim Results
 
Shoe Zone plc ("Shoe Zone", the "Company" or the "Group") is pleased to announce its Interim Results for the six months to 4 April 2020.
 
Financial Update
 

·       Revenue of £68.9m (2019 H1: £73.0m) 
·       Year to February revenue growth of 2.6%
·       Statutory profit before tax of £(2.5)m (2019 H1: £1.0m)
·       Net cash of £3.6m (2019 H1: £3.3m) inclusive of the immediate measures taken to maintain cash balances at the end of March.
·       Statutory earnings per share of (4.1)p (2019 H1: 1.65p)
·       No interim dividend to be paid (2019 H1: 3.5p per share)
·       Operating from 47 Big Box locations at period end contributing £9.4m (2019: £5.5m) revenue in H1
·       Digital sales increased by 31.9% to £6.5m (2019 H1: £5.0m) achieving profit contribution of £1.9m (2019 H1: £1.5m)
·       Over 1.4 million engaged users on Shoezone.com database


 

 
COVID-19 Update
 

·       All retail stores closed on 24 March 2020.
·       416 stores in England, Northern Ireland and ROI re-opened by 15 June 2020 in line with the government guidelines.
·       Wales will open on 28 June and Scotland will start to open on 29 June.
·       Digital team and the Distribution Centre continued to operate throughout
·       Immediate action was taken to reduce cash outflows including negotiations with landlords and suppliers, cancellation of final dividend, furloughing the majority of employees and utilising government tax deferment schemes.
·       CBILS loan of £15m secured of which £10m has been drawn down to date.
·       Additional financial impacts post the balance sheet date not included in the Interim Results are £0.9m write down of Freehold Asset values and £0.3m redundancy costs incurred as a result of a Head Office rationalisation programme.  The total impact of these is £1.2m.
·       A review of the viability of all stores continues post exit from lockdown.

 
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
Anthony Smith (Chief Executive)
Jonathan Fearn (Chief Financial Officer)
 


Tel: via 0116 222 3000
 




Finncap (Nominated Advisor and Broker)
Matt Goode (Corporate Finance)
Hannah Boros (Corporate Finance)
Alice Lane (ECM)


Tel: +44 (0)20 7220 0500




 


 




 
Chief Executive's Statement
 
Introduction
 
The Group operates from a portfolio of around 470 stores and a comprehensive digital proposition enabling it to provide a truly multi-channel shopping experience to its customers. 
 
Financial Summary
In the six months to 4 April 2020, the Group generated revenues of £68.9m (2019 H1: £73.0m) and Profit before Tax of £(2.7)m (2019 H1: £1.0m) on a pre-IFRS 16 basis.  The implementation of IFRS16 during the period has increased Statutory Profit before Tax by £0.2m resulting in Statutory Profit before Tax of £(2.5)m.  A reconciliation of the Income statement is shown below:
 




 


 


Pre-IFRS16


 


Impact of IFRS16


 


Statutory Profit




 


 


£'000


 


£'000


 


£'000




Revenue


 


68,944


 


-


 


68,944




Cost of sales


 


(61,554)


 


292


 


(61,262)




Gross profit


 


7,390


 


292


 


7,682




Administration & Distribution Costs


 


(9,999)


 


799


 


(9,200)




Profit from operations


 


(2,609)


 


1,091


 


(1,518)




Financing costs


 


(77)


 


(933)


 


(1,010)




Profit before taxation


 


(2,686)


 


158


 


(2,528)




Taxation


 


510


 


(30)


 


480




Profit attributable to equity holders of the parent


 


(2,176)


 


128


 


(2,048)




 
 
The reduction in revenue and profit performance over prior year reflects the early impact of COVID-19.  During the period we experienced both disruption in the supply chain and a fall in consumer spending in March resulting in the subsequent closure of retail stores from the 24th March 2020.  Prior to this, the five months to February showed a year on year increase in revenue of 2.6%.  
 
The group ended the period with net cash balance of £3.6m (2019: £3.3m).  This increase in cash balance has only been achieved through the emergency measures put in place during March to restrict cash outflows.  These include cancelation of the 2019 final dividend (£4m), management of payments to suppliers and engagement with landlords to delay and renegotiate monthly and quarterly rents.  Capital expenditure for the period was £2.2m compared to £3.2m prior year.  Management continues to monitor all costs closely and these remain tightly controlled.
 
Dividend
 
Cash conservation continues to be the focus for the business as we emerge from lockdown and therefore no interim dividend will be paid (2019 H1: 3.5p per share).  On 29 April 2020, the Group announced the cancellation of its previous dividend policy.
 
 
 
Strategy Update
 
At the beginning of 2020 we announced an updated strategy to focus on Big Box expansion; Digital growth and Town Centre renewal.  We also announced a renewed focus on streamlining business processes and reducing Head Office costs.  
The company has made good progress in all of these areas in H1 2020:

·       We ended the period with 47 Big Box stores, (2019: 26 stores) an increase in store numbers of 81%. The Big Box portfolio generated £9.4m (2019: £5.5m) of total turnover for the first six months. One store was converted from High Street to Hybrid format in the period.
·       Digital has returned to strong growth showing revenue growth of 31.9% to £6.5m (2019: £5.0m).  Contribution has grown by 17.7% to £1.7m (2019 H1: £1.5m).  Email collections and active database growth continues to be a key lever in digital performance.  As at the period end, the database had 1,444,000 active users (2019: 501,000), an increase of 188%.


·       Overall store numbers were 490 (2019: 495) at period end.


·       Immediate action has been taken to review and streamline the Head Office functions and the new rationalised structure is now in place.

COVID-19 Update and Outlook
 
Following closure of all our stores on 24 March 2020, we continued to sell via our website, www.shoezone.com and via other online partners.  Digital performance has delivered high sales growth since lock down increasing from around 6.5% of total company sales to 17% of previously forecasted sales for the lockdown period.  This has been driven by a very aggressive Buy One Get One Free (BOGOF) promotion on all stock to generate cash as quickly as possible.  Although this has been now been amended to BOGOF on selected lines only it continues to have a significant impact on ongoing digital gross margin levels. 
 
We opened all England, Northern Ireland and the Republic of Ireland stores by the 15 June and the Welsh and Scottish stores will open as soon as government guidance allows.  We have implemented all published COVID-19 guidelines in stores and head office to ensure the safety of our colleagues and customers.  This includes Perspex screens being retrofitted to tills, distance markings on the floor and limits on the number of customers dependent on store size.  
 
COVID-19 will continue to have an unprecedented impact on the UK economy and the retail industry.  Whilst the group has taken all possible steps to ensure that the business will survive through the crisis and continue into the future, the impact is likely to continue to be felt for several years. 
 
As a result of this and following an extensive review of the store portfolio Shoe Zone has closed an additional 20 stores during lockdown and will only open 470 when permitted.  The Group has also taken immediate action to reduce costs at Head Office and pause all areas of discretionary spend.  Negotiations with landlords have also been accelerated and supplier orders reduced, cancelled or deferred as far as possible. 
 
The Head Office rationalisation programme has meant an additional £0.3m has been incurred in redundancy payments after the balance sheet date.  We have also undertaken a review of freehold values held resulting in a write down of £0.9m, giving an additional COVID-19 impact, not included in the first half results of £1.2m.  
 
 
Cash remains the key focus for the business and as stated on the 29 April 2020, the immediate focus will be on rebuilding cash balances to a higher level than previously carried and repaying the debt taken on as part of the CBILS scheme whilst fulfilling other statutory obligations.  The Board remain confident that the Group's current level of funding will be sufficient to secure the future of the business, assuming that sales return to a high proportion of previous sales during the next year.
 
The Board would like to thank all of the Shoe Zone team and its business partners for their hard work and support in the first half of the financial year and during the current COVID-19 period.
 
 
 
Unaudited consolidated income statement




 


 


 


 


 


 


 


 




 


Note


 


26 weeks ended 4 April
2020


 


26 weeks ended 30 March
2019


 


53 weeks

ended 5 October
2019




 


 


 


IFRS16


 


IAS17


 


IAS17




 


 


 


£'000


 


£'000


 


£'000




Revenue


2


 


68,944


 


72,995


 


162,047




Cost of sales


 


 


(61,262)


 


(63,453)


 


(136,965)




Gross profit


 


 


7,682


 


9,542


 


25,082




Administration expenses


 


 


(6,273)


 


(5,508)


 


(12,081)




Distribution costs


 


 


(2,927)


 


(2,987)


 


(6,154)




Profit from operations


 


 


(1,518)


 


1,047


 


6,847




Finance income


 


 


(1)


 


56


 


44




Finance expense


 


 


(1,009)


 


(87)


 


(192)




Profit before taxation


 


 


(2,528)


 


1,016


 


6,699




Taxation


4


 


480


 


(193)


 


(985)




Profit attributable to equity holders of the parent


5


 


(2,048)


 


823


 


5,714




 




Earnings per share - basic and diluted


5


 


(4.1)p


 


         1.65p


 


11.43p




 
 
Unaudited consolidated statement of total comprehensive income




 


 


26 weeks ended 4 April
2020


 


26 weeks ended 30 March
2019


 


53 weeks

ended 5 October
2019   




 


 


 


 


 


 


 




 


 


£'000


 


£'000


 


£'000




Profit for the period


 


(2,048)


 


823


 


5,714




Items that will not be reclassified subsequently to the income statement


 


 


 


 


 


 




Remeasurement gains and losses on defined benefit pension scheme


 


(642)


 


(611)


 


(4,177)




Movement in deferred tax on pension schemes


 


94


 


340


 


707




IFRS 16 Opening balances


 


(3,242)


 


-


 


-




Cash flow hedges


 


 


 


 


 


 




Fair value movements in other comprehensive income


 


(2,431)


 


(4,082)


 


(826)




Cash flow hedges recognised in inventories


 


2,868


 


1,930


 


1,474




Tax on cash flow hedges


 


(74)


 


180


 


(126)




Other comprehensive (expense) / income for the period


 


(3,427)


 


(2,243)


 


(2,948)




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


 


(5,475)


 


(1,420)


 


2,766




  
Unaudited consolidated statement of financial position
 




 


 


 


 


 


 


 




 


Notes


26 weeks
ended 04

April

2020


 


26 weeks
ended 30

March

2019


 


53 weeks

ended
5 October
2019   




 


 


£'000


 


£'000


 


£'000




Assets


 


 


 


 


 


 




Non-current assets


 


 


 


 


 


 




Property, plant and equipment


 


22,669


 


22,762


 


22,143




Right of use assets


 


53,456


 


-


 


-




Deferred tax asset


 


1,597


 


736


 


1,677




Total non-current assets


 


77,722


 


23,498


 


23,820




Current assets


 


 


 


 


 


 




Inventories


 


25,727


 


27,576


 


28,511




Trade and other receivables


 


4,978


 


5,775


 


6,078




Derivative financial assets


3


2,751


 


1,500


 


2,726




Corporation tax asset


 


-


 


-


 


-




Cash and cash equivalents


 


3,571


 


3,311


 


11,417




Total current assets


 


37,027


 


38,162


 


48,732




Total assets


 


114,749


 


61,660


 


72,552




Current liabilities


 


 


 


 


 


 




Trade and other payables


 


(31,167)


 


(21,988)


 


(27,429)




Provisions for liabilities and charges


 


(573)


 


(268)


 


(715)




Derivative financial liability


3


-


 


-


 


-




Corporation tax liability


 


-


 


(118)


 


(440)




Total current liabilities


 


(31,740)


 


(22,374)


 


(28,584)




Non-current liabilities


 


 


 


 


 


 




Trade and other payables


 


(46,521)


 


(1,913)


 


(2,432)




Provisions for liabilities and charges


 


(581)


 


(420)


 


(370)




Employee benefit liability


 


(9,952)


 


(7,959)


 


(9,736)




Total non-current liabilities


 


(57,054)


 


(10,292)


 


(12,538)




Total liabilities


 


(88,794)


 


(32,666)


 


(41,122)




Net assets


 


25,955


 


28,994


 


31,430




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           


 


2,008


 


882


 


1,645




Retained earnings


 


20,785


 


24,950


 


26,623




Total equity and reserves


 


25,955


 


28,994


 


31,430




 
 
 
Unaudited consolidated statement of changes in equity




 


Share capital


 


Share premium


 


Cash flow hedge reserve


 


Retained earnings


 


Total




 


£'000


 


£'000


 


   £'000


 


£'000


 


£'000




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




At 29 September 2018


500


 


2,662


 


1,123


 


34,129


 


38,414




Profit for the period


-


 


-


 


-


 


5,714


 


5,714




Defined benefit pension movements


-


 


-


 


-


 


(4,177)


 


(4,177)




Cash flow hedge movements


-


 


-


 


648


 


-


 


648




Deferred tax on other comprehensive income


-


 


-


 


(126)


 


707


 


581




Total comprehensive income for the period


-


 


                -


 


522


 


2,244


 


2,766




Dividends paid during the period 


           -


 


                -


 


                -


 


(9,750)


 


(9,750)




Total contributions by and distributions to owners


-


 


-


 


-


 


(9,750)


 


(9,750)




At 5 October 2019


500


 


2,662


 


1,645


 


26,623


 


31,430




Profit for the period


-


 


-


 


-


 


(2,048)


 


(2,048)




Defined benefit pension movements


-


 


-


 


-


 


(642)


 


(642)




Cash flow hedge movements


-


 


-


 


437


 


-


 


437




Right of use assets opening movement


-


 


-


 


-


 


(3,242)


 


(3,242)




Deferred tax on other comprehensive income


-


 


-


 


(74)


 


94


 


20




Total comprehensive income for the period


-


 


-


 


363


 


(5,838)


 


(5,475)




Dividends paid during the period


-


 


-


 


-


 


-


 


-




Total contributions by and distributions to owners


-


 


-


 


-


 


-


 


-




At 4 April 2020


500


 


2,662


 


2,008


 


20,785


 


25,955




 
Unaudited consolidated statement of cash flows
 




 


 


26 weeks
ended 4

April

2020


 


26 weeks
ended 30

March

2019


 


53 weeks
ended 5

October

2019




 


 


£'000


 


£'000


 


£'000




Operating activities


 


 


 


 


 


 




Profit after taxation


 


(2,048)


 


823


 


5,714




Corporation tax


 


(480)


 


193


 


985




Finance income


 


(8)


 


(56)


 


(44)




Finance expense


 


1,018


 


87


 


192




Depreciation of property, plant and equipment


 


1,573


 


1,473


 


3,258




Fixed asset impairment and loss on disposal of property, plant and equipment


 


66


 


31


 


3,034




Amortisation of right of use assets


 


9,722


 


-


 


-




Pension contributions paid


 


(417)


 


(415)


 


(890)




 


 


9,426


 


2,136


 


12,249




Decrease / (increase) in trade and other receivables


 


1,324


 


430


 


157




Increase in foreign exchange contract


 


-


 


-


 


30




(Increase) / decrease in inventories


 


3,196


 


(239)


 


(1,451)




(Decrease) / increase in trade and other payables


 


(17,857)


 


(3,011)


 


3,150




Increase in provisions


 


110


 


131


 


83




 


 


(13,227)


 


(2,689)


 


1,969




Cash generated from operations


 


(3,802)


 


(553)


 


14,218




Income taxes paid


 


(1,888)


 


(627)


 


(1,488)




Net cash flows from operating activities


 


(5,689)


 


(1,180)


 


12,730




Investing activities


 


 


 


 


 


 




Purchase of property, plant and equipment


 


(2,165)


 


(3,248)


 


(7,290)




Sale of property, plant and equipment


 


-   


 


-   


 


-




Interest received


 


8


 


56


 


44




Net cash used in investing activities


 


(2,157)


 


(3,192)


 


(7,246)




Financing activities


 


 


 


 


 


 




Dividends paid during the year


 


0


 


(8,000)


 


(9,750)




Net cash used in financing activities


 


0


 


(8,000)


 


(9,750)




Net decrease in cash and cash equivalents


 


(7,846)


 


(12,372)


 


(4,266)




Cash and cash equivalents at beginning of period


 


11,417


 


15,683


 


15,683




Cash and cash equivalents at end of period


 


3,571


 


3,311


 


11,417




 
 
 
Notes to the financial statements for the 26 weeks ended 4 April 2020
Basis of preparation
The consolidated interim financial statements of the Group for the 26 weeks ended 4 April 2020, 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 4 April 2020, 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 2019 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 53 weeks ended 5 October 2019.
Going Concern
At the balance sheet date the company had a good cash balance and a strong net current asset position. At the time of signing these accounts, the directors have considered the effect of the Coronavirus on the going concern 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 difficult time.
The financial forecasts prepared by the Directors show that the company will be able to operate within the facilities available to it.
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 Coronavirus pandemic has resulted in a long period of lockdown and closure of non-essential retail.  At this stage the directors continue to assess the impact this may have on the company and although there is a high level of uncertainty about the extent and the timeframe of the virus on the global economy, they believe the company is strongly positioned to handle any downturn that may occur in the retail sector.
To date, the directors have undertaken a review of Freehold values held on the balance sheet resulting in a reduction of carrying value from £4.7m to £3.8m.  This write down of £0.9m will be included in the full year results.
 
The head office rationalisation programme has resulted in redundancy payments of £0.3m paid post balance sheet.  Again these will be included in the full year results.  A review of the viability of all stores continues post exit from lockdown.
 

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 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.




 


04

April

2020


 


30

March

2019


 


05
October
2019




 


£'000


 


£'000


 


£'000




External revenue by location of customers:


 


 


 


 


 




United Kingdom


67,342


 


71,257


 


158,209




Republic of Ireland


1,602


 


1,738


 


3,517




Other


-


 


-


 


321




 


68,944


 


72,995


 


162,047




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




 


04

April

2020


 


30

March

2019


 


05

October

2019


 




 


£'000


 


£'000


 


£'000


 




Non-current assets by location:


 


 


 


 


 




United Kingdom


22,650


 


 22,744


 


      22,124




Other


19


 


18


 


19


 




 


22,669


 


22,762


 


22,143


 




 
 
 
Notes to the financial statements for the 26 weeks ended 4 April 2020 (continued)
 

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:




 


04

April

2020


 


30

March

2019


 


05

October

2019




 


£'000


 


£'000


 


£'000




Derivative financial assets


 


 


 


 


 




Derivatives not designated as hedging instruments    


332


 


437


 


744




Derivatives designated as hedging instruments           


2,419


 


1,063


 


1,982




 


2,751


 


1,500


 


2,726




 

4.   Taxation 

The taxation charge for the 26 weeks ended 04 April 2020 is based on the estimated effective tax rate for the full year of 19% (2019:19%). 
 

5.   Earnings per share 





 


04

April

2020


 


30

March

2019


 


05

October

2019




 


£'000


 


£'000


 


£'000




 


 


 


 


 


 




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


(2,048)


 


823


 


5,714




 


 


 


 


 


 




Earnings per share - basic and diluted


(4.1)p


 


1.65p


 


11.43p




 


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  END
 
 
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