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RNS
Shoe Zone PLC  -  SHOE   

Interim Results

Released 07:00 24-May-2018

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

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Interim Results - RNS