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Shoe Zone PLC   -  SHOE   

Interim Results

Released 07:00 21-May-2019

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

 


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