TIDMSHOE

RNS Number : 9967X

Shoe Zone PLC

11 January 2022

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

("Shoe Zone" or the "Company")

Final Results for the 52 week period to 2 October 2021

Shoe Zone PLC is pleased to announce its audited results for the 52 weeks to 2 October 2021, (the "Period").

Financial highlights

   --     Revenue of GBP119.1m (2020 : GBP122.6m) 

o Store revenue GBP88.6m (2020: GBP103.3m)

o Digital revenue GBP30.5m (2020: GBP19.3m)

o Digital contribution of GBP8.5m (2020: GBP4.6m)

   --     Profit before tax GBP9.5m (2020: GBP(14.6)m loss) 
   --     Earnings per share 14.0p (2020: (23.8)p loss per share) 
   --     Net cash balance of GBP14.6m (2020: GBP6.3m) at period end 
   --     Dividend of GBPNil (2020: GBPNil) 

Operational highlights

   --    Stores traded for 36 weeks (2020: 41 weeks) 
   --    410 stores at Period end comprising: 

o 343 Original (2020: 403)

o 51 Big Box (2020: 51)

o 16 Hybrid (2020: 6)

   --    Net closure of 50 unprofitable locations 
   --    10 existing store conversions 
   --    Annualised lease renewal savings of GBP1.8m, an average reduction of 53% 
   --    Average lease length of 1.9 years (2020: 2 years) 
   --    Digital returns rate of 8.4% 

Post Period end, as at 10 January 2022:

   --    GBP4.4m outstanding CLBILS loan now fully paid off 
   --    Company is debt free 

-- Eligible to reinstate modest dividend payments, with an intention to return to the dividend list during the current period

For further information please call:

Shoe Zone PLC Tel: +44 (0) 116 222 3000

Anthony Smith (Chief Executive)

Terry Boot (Finance Director)

Zeus Capital (Nominated Advisor and Broker) Tel: +44(0) 203 829 5000

Daniel Harris, James Hornigold (Corporate Finance)

Dominic King (Corporate Broking)

Chief Executive's statement

Introduction

Shoe Zone had a very successful year due to the incredible hard work of our teams, by reducing costs, reducing non-essential capital expenditure, continuing to accelerate investment in our digital business alongside improving and streamlining operations.

Profit before tax was at GBP9.5m for the Period (2020: GBP14.6m loss) with an earnings per share of 14.0p (2020: (23.8)p loss per share)

Stores traded for 36 weeks delivering revenues of GBP88.6mm (2020: GBP103.0m / 41 weeks trading). Digital continuing to be a key growth area generating revenues of GBP30.5m (2020: GBP19.3m) in the period, an increase of 58%. Our decision to invest in infrastructure and people pre-pandemic enabled us to take advantage of the change in buying habits and to cope with the increase in volumes through our digital shoehub(R) platform.

We ended the Period trading out of 410 stores, having closed a net 50 unprofitable locations, and converted a further 10 existing stores to our new formats. We have 343 'Original', 51 'Big Box' and 16 'Hybrid' stores and we are actively working to relocate and/or refit further stores.

Big Box stores offer 650 styles per season (350 branded), Hybrid stores offer 475 styles per season (175 branded), and Original stores offer 300 core styles per season. As we refit existing stores to our new formats, the branded mix will continue to form a higher proportion of our overall sales.

Our average lease length is now less than two years, giving us the opportunity and flexibility to respond to changes in any retail location at short notice. Property supply continues to outstrip demand and we therefore expect to take advantage of this environment and significantly improve our property portfolio over the medium term.

Strategy Update

The decision to invest in our digital infrastructure and operations has led to significant growth in online sales over the last 12 months, giving us the going to continue investing in our people and our shoehub(R) platform. We aim to increase drop ship partners, market places, exclusive products, brands and plan to introduce additional payment and delivery options to enhance customer experience.

Part of the success of our digital operation is our very efficient returns process which is complimented by our extensive network of stores. We have a returns rate of c. 9% and the vast majority of these are returned to store and our physical store network is critical to our future success even. We have seen over the last 18 months a reduction in store numbers as we have exited unprofitable locations. We will continue to rollout our successful 'Big Box' and 'Hybrid' formats by targeting key towns for conversion or relocation. Our ultimate goal is a doubling of Big Box locations to approximately 100 and an increase in Hybrid stores from 16 to approximately 150. Overall, we anticipate trading from a similar sales square footage, albeit from a reduced number of locations.

As part of the changes we have implemented during the pandemic, planned capital expenditure was reduced to conserve cash. However, we have already restarted store relocations, refits, infrastructure changes at our head office and further investment in digital. All of these areas are key to our strategy going forward and we will commit to spend c.3% of turnover annually on capital projects as we did pre-pandemic.

Dividend

At the Period end we had an outstanding CLBILS loan balance of GBP4.4m, and under the terms of the agreement the business was restricted from making any dividend payments whilst there was a balance outstanding. Post Period end, we have fully paid off the outstanding balance of the CLBILS loan and the Company is therefore now eligible to recommence dividend payments in the new financial period.

Financial Review

In the 52 weeks to 2 October 2021 total revenues were at GBP119.1m (2020: GBP122.6m) with a profit before tax of GBP9.5m (2020: GBP14.6m loss). The stores traded for 36 weeks compared to 41 in the previous year and we ended the year trading out of a net 50 fewer stores as we continued to close non-profit making locations.

Digital continues to be a key growth area and traded strongly throughout the year generating revenues of GBP30.5m (2020: GBP19.3m) an increase of 58% due to increased revenues from our online exclusive range, Amazon and drop ship partners. Digital gross margins increased to 57.8% (2020: 51.7%) due to a greater proportion of full priced sales and less markdowns. Digital contribution was GBP8.5m (2020: GBP4.5m) an increase of 89%.

The statutory gross profit for the year increased by GBP27.2m to GBP32.5m (2020: GBP5.2m) due to reductions in inventory purchases of GBP2.0m, branch wages of GBP4.8m, branch rates GBP3.8m, fixed asset depreciation of GBP4.2m, asset impairments of GBP4.9m, rent/right-of-use-asset depreciation of GBP4.0m and received retail grants of GBP6.1m, offset by an increase in digital related postage of GBP2.0m.

Product gross margins increased to 61.5% (2020: 61.4%) due to less digital promotional activity during lockdown and therefore a higher proportion of full price sales.

Admin expenses increased by GBP3.0m to GBP16.9m (2020: GBP13.9m) due to an increase in digital sales related expenses and further store closure provisioning of GBP1.2m.

Distribution expenses increased by GBP0.5m to GBP4.5m (2020: GBP4.0m).

The Company ended the Period with a cash and equivalent balance of GBP19.0m (2020: GBP13.3m) and a net cash balance of GBP14.6m (2020 GBP6.3m). The increase in cash has been achieved through the measures taken by the business over the last 12 months, which restricted capital expenditure and significantly reduced all areas of cost. As at the Period end we were up to date on all creditor and rental payments.

Our CLBILS loan outstanding amount was GBP4.4m at the end of the Period but, post Period end, as at 10 January 2022, we are delighted to announce all that outstanding amounts due have been paid off and we are once again debt free.

Capital expenditure for the year was GBP1.4m (2020: GBP2.8m) which is again considerably lower than our target of 3% of turnover each year, as a result of the cash preservation measures we introduced at the start of the pandemic. This level will increase back to our normal operational level of 3% of turnover in the next financial year and will cover infrastructure changes at our distribution centre, IT projects and continued spend on refitting and relocating stores as we upgrade our store portfolio.

We operate 2 defined benefit pension schemes. The deficit for the Shoefayre Limited Pension and Life Assurance Scheme reduced by GBP4.7m to GBP5.9m (2020: GBP10.6m) and for the Shoe Zone Pension Scheme (closed Sept 2001) the surplus increased by GBP2.2m to GBP5.9m (2020: GBP3.7m) The reduction in deficit and increase in surplus is due to an increase in bond yields which reduces the value placed on the scheme's liabilities, improved investment performance.

Working capital increased by GBP2.1m to GBP14.2m (2020: GBP12.1m) due to lower trade creditors and a forex related margin call of GBP1.2m which has now been settled post Period end.

Earnings per share are 14.0p (2020: (23.8)p loss per share).

Consolidated income statement for the 52 weeks ended 2 October 2021

 
                                                  52 weeks     52 weeks 
                                                   ended 2      ended 3 
                                                   October      October 
                                                      2021         2020 
                                                   GBP'000      GBP'000 
 
  Revenue                                          119,142      122,568 
  Cost of sales                                   (86,667)    (117,332) 
                                                ----------  ----------- 
  Gross profit                                      32,475        5,236 
                       Administration expenses    (16,962)     (13,928) 
  Distribution costs                               (4,499)      (4,018) 
                                                ----------  ----------- 
  (Loss)/Profit from 
   operations                                       11,014     (12,710) 
  Finance income                                         -           10 
  Finance expense                                  (1,558)      (1,901) 
                                                ----------  ----------- 
  (Loss)/Profit before 
   taxation                                          9,456     (14,601) 
  Taxation                                         (2,442)        2,698 
                                                ----------  ----------- 
  (Loss)/Profit attributable 
   to equity holders 
   of the parent                                     7,014     (11,903) 
                                                ==========  =========== 
 
  (Loss)/Profit Earnings 
   per Share - basic 
   and diluted                                      14.03p     (23.81p) 
                                                ==========  =========== 
 
 
 

Consolidated statement of total comprehensive income for the 52 weeks ended 2 October 2021

 
                                                              52 weeks    52 weeks 
                                                                 ended       ended 
                                                                     2           3 
                                                               October     October 
                                                                  2021        2020 
                                                               GBP'000     GBP'000 
  (Loss)/profit for the period                                   7,014    (11,903) 
  Items that will not be reclassified subsequently 
   to the income statement 
  Re-measurement losses on defined benefit 
   pension scheme                                                3,379     (2,114) 
  Movement in deferred tax on pension schemes                      761         899 
  Items that will be reclassified subsequently 
   to the income statement 
  Fair value movements on cash flow hedges                       (190)     (2,124) 
  Tax on cash flow hedges                                           56         363 
  Other comprehensive income / (expense) 
   for the period                                                4,006     (2,976) 
                                                       ---------------  ---------- 
  Total comprehensive income for the period 
   attributable 
   to equity holders of the parent                              11,020    (14,879) 
                                                       ===============  ========== 
 
 
 

Consolidated statement of financial position as at 2 October 2021

 
                                               52 weeks      52 weeks 
                                                  ended         ended 
                                              2 October     3 October 
                                                   2021          2020 
                                                GBP'000       GBP'000 
 
  Assets 
  Non-Current assets 
  Property, plant and equipment                  14,227        16,967 
  Right of use assets                            30,884        42,387 
  Deferred tax asset                              3,220         5,617 
  Total non-current assets                       48,331        64,971 
                                           ------------  ------------ 
  Current assets 
  Inventories                                    25,131        26,698 
  Trade and other receivables                     5,457         2,735 
  Derivative financial assets                         -             - 
  Cash and cash equivalents                      19,015        13,266 
  Total current assets                           49,603        42,699 
                                           ------------  ------------ 
  Total assets                                   97,934       107,670 
                                           ------------  ------------ 
  Current liabilities 
  Trade and other payables                     (16,440)      (17,316) 
  Lease liabilities                            (17,035)      (19,914) 
  Derivative financial liability                  (591)         (105) 
  Bank Loan                                     (4,400)       (1,944) 
  Provisions                                    (1,698)       (1,471) 
  Corporation tax liability                       (773)         (137) 
  Total current liabilities                    (40,937)      (40,887) 
                                           ------------  ------------ 
  Non-current liabilities 
  Trade and other payables                            -             - 
  Lease liabilities                            (25,942)      (37,475) 
  Bank Loan                                           -       (5,056) 
  Provisions                                    (1,728)       (1,260) 
  Employee benefit liability                    (5,909)      (10,594) 
  Total non-current liabilities                (33,579)      (54,385) 
  Total liabilities                            (74,516)      (95,272) 
                                           ------------  ------------ 
  Net assets                                     23,418        12,398 
                                           ============  ============ 
  Equity attributable to equity holders 
   of the company 
  Called up share capital                           500           500 
  Merger reserve                                  2,662         2,662 
  Cash flow hedge reserve                         (250)         (116) 
  Retained earnings                              20,506         9,352 
                                           ------------  ------------ 
  Total equity and reserves                      23,418        12,398 
                                           ============  ============ 
 

Consolidated statement of changes in equity for the 52 weeks ended 2 October 2021

 
                           Share capital      Merger          Cash flow hedge    Retained earnings       Total 
                                             reserve                  reserve 
                                 GBP'000     GBP'000                  GBP'000              GBP'000     GBP'000 
  At 6 October 2019                  500       2,662                    1,645               22,470      27,277 
  Loss for the period                  -           -                        -             (11,903)    (11,903) 
  Defined benefit 
   pension movements                   -           -                        -              (2,114)     (2,114) 
  Cash flow hedge 
   movements                           -           -                  (2,124)                    -     (2,124) 
  Deferred tax on other 
   comprehensive income                -           -                      363                  899       1,262 
  Total comprehensive 
   income for the 
   period                              -           -                  (1,761)             (13,118)    (14,879) 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
  Dividends paid during                -           -                        -                    -           - 
  the year (note 11) 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
  Total contributions                  -           -                        -                    -           - 
  by and distributions 
  to owners 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
  At 3 October 2020                  500       2,662                    (116)                9,352      12,398 
  Impact on transition                 -           -                        -                    -           - 
  to IFRS 16 (note 13) 
  At 4 October 2020                  500       2,662                    (116)                9,352      12,398 
  Profit for the period                -           -                        -                7,014       7,014 
  Defined benefit 
   pension movements                   -           -                        -                3,379       3,379 
  Cash flow hedge 
   movements                           -           -                    (190)                    -       (190) 
  Deferred tax on other 
   comprehensive income                -           -                       56                  761         817 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
  Total comprehensive 
   income for the 
   period                              -           -                    (134)               11,154      11,020 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
  Dividends paid during                -           -                        -                    -           - 
  the year (note 11) 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
  Total contributions                  -           -                        -                    -           - 
  by and distributions 
  to owners 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
  At 2 October 2021                  500       2,662                    (250)               20,506      23,418 
                         ---------------  ----------  -----------------------  -------------------  ---------- 
 

Consolidated statement of cash flows for the 52 weeks ended 2 October 2021

 
                                                                                    52 weeks    52 weeks 
                                                                                     ended 2     ended 3 
                                                                                     October     October 
                                                                                        2021        2020 
                                                                                     GBP'000     GBP'000 
  Operating activities 
  (Loss)/Profit after tax                                                              7,014    (11,903) 
  Corporation tax                                                                      2,442     (2,698) 
  Finance income                                                                           -        (10) 
  Finance expense                                                                      1,558       1,901 
  Depreciation of property, plant and equipment                                        3,144       3,545 
  Fixed asset impairment and loss on disposal of property, plant and equipment         1,001       4,642 
  Right of use asset profit on disposal, depreciation and impairment                  15,860      23,998 
  Pension contributions paid                                                         (1,500)     (1,466) 
                                                                                      29,519      18,009 
  Decrease / (increase) in trade and other receivables                               (2,722)       (810) 
  Decrease / (increase) in foreign exchange contract                                     486         336 
  Decrease / (increase) in inventories                                                 1,567       2,184 
  (Decrease) / Increase in trade and other payables                                    (816)     (5,498) 
  Increase in provisions                                                                 694       1,646 
                                                                                       (791)     (2,142) 
  Cash generated from operations                                                      28,728      15,867 
  Net corporation tax paid                                                             1,353       (283) 
                                                                                  ----------  ---------- 
  Net cash flows from operating activities                                            30,081      15,584 
                                                                                  ----------  ---------- 
  Investing activities 
  Purchase of property, plant and equipment                                          (1,405)     (2,809) 
  Interest received                                                                        -          10 
                                                                                  ----------  ---------- 
  Net cash used in investing activities                                              (1,405)     (2,799) 
                                                                                  ----------  ---------- 
  New secured loan repayable by instalments                                                -      10,000 
  Repayments of secured loan                                                         (2,600)     (3,000) 
  Capital element of lease repayments                                               (20,037)    (17,719) 
  Interest paid                                                                        (290)       (217) 
  Dividends paid during the year                                                           -           - 
  Net cash used in financing activities                                             (22,927)    (10,936) 
                                                                                  ----------  ---------- 
  Net increase in cash and cash equivalents                                            5,749       1,849 
  Cash and cash equivalents at beginning of period                                    13,266      11,417 
                                                                                  ----------  ---------- 
  Cash and cash equivalents at end of period                                          19,015      13,266 
                                                                                  ==========  ========== 
 
   1.   Accounting policies 

General information

Shoe Zone plc (the 'Company') is a public company incorporated and domiciled in England and Wales. The registered office is at Haramead Business Centre, Humberstone Road, Leicester, LE1 2LH. The registered number of the Company is 08961190.

The Company and its subsidiaries' (collectively the Group) principal activity is footwear retailing.

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied for the 52 weeks ended 2 October 2021.

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ('adopted IFRSs') and those parts of the Companies Act 2006 that are applicable to companies that prepare financial statements in accordance with IFRS.

The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified for the revaluation of certain financial assets and financial liabilities at fair value.

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Group's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

The consolidated financial statements are presented in Sterling, which is also the Group's functional currency.

Amounts are rounded to the nearest thousand, unless otherwise stated.

Basis of consolidation

The consolidated financial statements incorporating the financial statements of Shoe Zone plc and its subsidiary undertakings are all made up to 2 October 2021. The results for all subsidiary companies are consolidated using the acquisition method of accounting.

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

-- The size of the Company's voting rights relative to both the size and dispersion of other parties who hold voting rights.

   --      Substantive potential voting rights held by the company and by other parties. 
   --      Other contractual arrangements. 
   --      Historic patterns in voting attendance. 

The consolidated financial statements present the results of the Company and its subsidiaries ('the Group') as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Going Concern

The Directors consider that the business is a going concern and that it is appropriate to prepare the financial statements on a going concern basis. In reaching this conclusion, the Directors have assessed the Group's current performance and position and factors that may affect the Group's future prospects.

The Group's financial position is strong with healthy positive cash balances. It also has in place a GBP3.0m overdraft facility. During the pandemic the Group, in the prior year, took a CLBILS loan of GBP12.0m, this requires the Group to comply with certain financial covenants, these have been met during the year and since year end. The Directors have reviewed forecasts and projections and consider that the Group has adequate banking facilities and cash resources to meet its operational and capital commitments.

Assets under construction

Whilst held under assets under construction, no depreciation is charged on the assets. Once the project is completed, the asset will be transferred to the correct fixed asset category.

Impairment of non-financial assets

The carrying values of non-financial assets are reviewed in conjunction with an independent third party for impairment when there is an indication that assets might be impaired. When the carrying value of an asset exceeds its recoverable amount, the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash generating unit (i.e. the smallest group of assets in which the asset belongs for which there are separable identifiable cash flows).

Impairment charges are included in the consolidated income statement in cost of sales, except to the extent they reverse previous gains recognised in the consolidated statement of total comprehensive income.

Inventories

Inventories are initially recognised at cost on a first in first out basis, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Financial assets

The Group classified its financial assets into the categories, discussed below, due to the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Cash and cash equivalents include cash in hand and deposits held at call with banks.

Loans and receivables

Loans and receivable assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents included within the consolidated statement of financial position.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the consolidated income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Financial liabilities

The Group classified its financial liabilities as other financial liabilities which include the following:

-- Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

   --      Bank loan - external loan which is valued at its amortised cost and incurs interest. 

-- Finance costs are charged to the income statement over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

Derivative financial instruments and hedging activities

Hedge accounting is applied to financial assets and financial liabilities only where all of the following criteria are met:

At the inception of the hedge there is formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge.

-- For cash flow hedges, the hedged item in a forecast transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss.

-- The cumulative change in the fair value of the hedging instrument is expected to be between 80-125% of the cumulative change in the fair value or cash flows of the hedged item attributable to the risk hedged (i.e. it is expected to be highly effective).

   --      The effectiveness of the hedge can be reliably measured. 
   --      The hedge remains highly effective on each date tested.  Effectiveness is tested quarterly. 

The Group uses derivative financial instruments such as forward foreign exchange contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are initially measured at fair value and subsequently re-measured at fair value. The fair value of forward foreign exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in cost of sales in the income statement.

Amounts accumulated in equity are reclassified to inventories in the period when the purchase occurs, matching the hedged transaction. The cash flows are expected to occur and impact on profit and loss within 12 months from the year end.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in equity is retained in equity and is recognised when the forecast transaction is ultimately recognised in cost of sales in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

Deferred tax assets are offset when the Group has legally enforceable rights to set off current tax assets against current tax liabilities and the deferred tax liabilities relate to taxes levied by the same tax authority on either:

   --      the same taxable group company; or 

-- different company entities which intend to either settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled or recovered.

Provisions

Provision for dilapidations is made at the best estimate of the expenditure required to settle the obligation at the reporting date, where material, discounted at the pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability. A dilapidation provision is only recognised on those properties which are likely to be exited. Where such property is identified the full costs expected are recognised. This provision relates to the liability of 'wear and tear' incurred on the leasehold properties and does not include any removal of shop refits as experience indicates that liabilities do not arise for removal of shop refits. Dilapidations are not included in IFRS 16 as they relate to 'wear and tear' and not structural alterations to the buildings.

Foreign exchange

Transactions entered into the Group entities in a currency other than the functional currency are recorded at the average monthly rate prevailing during the year. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date.

Foreign exchange differences are recognised in the income statement.

Retirement benefits - defined contribution and benefit schemes

The Group operates both defined benefit and defined contribution funded pension schemes. The schemes are administered by trustees and are independent of the Group.

Contributions to defined contribution schemes are charged to the consolidated income statement in the year to which they relate.

Defined benefit scheme surpluses and deficits are measured at:

   --      the fair value of plan assets at the reporting date; less 

-- plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus

   --      unrecognised past service costs; less 
   --      the effect of minimum funding requirements agreed with scheme trustees. 

Re-measurements of the net defined obligation are recognised directly within equity. These include actuarial gains and losses, return on plan assets (interest exclusive) and any asset ceilings (interest exclusive).

Service costs are recognised in the income statement, and include current and past service costs as well as gains and losses on curtailments.

Net interest expense (income) is recognised in the income statement, and is calculated by applying the discount rate used to measure the defined benefit obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of contributions and benefit payments during the year.

Gains or losses arising from changes to scheme benefits or scheme curtailments are recognised immediately in the income statement.

Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the directors. In the case of final and special dividends, this is when approved by the shareholders at the AGM.

   2.   Segmental information 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the management team including the Chairman, 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.The Directors now consider Digital to be its own operating segment. Management reviews the performance of the Group by reference to total results against budget. The total profit measures are operating profit and profit for the year, both disclosed on the face of the consolidated income statement. No differences exist between the basis of preparation of the performance measures used by management and the figures in the Group financial statements.

 
                                 52 weeks      52 weeks 
                                  ended 2         ended 
                                  October     3 October 
                                     2021          2020 
                                  GBP'000       GBP'000 
  Revenue 
  United Kingdom stores            87,420       100,098 
  Digital                          30,499        19,296 
  Republic of Ireland stores          674         2,678 
  Other                               549           496 
                               ----------  ------------ 
                                  119,142       122,568 
                               ==========  ============ 
 

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

 
                                      52 weeks      52 weeks 
                                       ended 2         ended 
                                       October     3 October 
                                          2021          2020 
                                       GBP'000       GBP'000 
  Non-current assets by location: 
  United Kingdom                        45,111        59,349 
  Republic of Ireland                        -             5 
 
                                        45,111        59,354 
                                    ==========  ============ 
 

Digital fixed and current assets have not been disclosed due to the immaterial value. The contribution is GBP8.5m (2020: GBP4.6m)

The Group has only one operating and reporting segment which reflects the Group's management and reporting structure as viewed by the board of directors.

The deferred tax asset of GBP3,220,000 (2020: GBP5,617,000) is unallocated.

3. Dividends

 
                                                   52 weeks         52 weeks 
                                                     ended             ended 
                                                   2 October       3 October 
                                                     2021               2020 
                                                     GBP'000         GBP'000 
  Dividends paid during the year at Nil (2020:           Nil             Nil 
   Nil) per share 
                                                ============    ============ 
 

No final dividend is proposed for shareholders on the register (2020: nil) per share. .

   4.   Contingent liabilities 

Shoe Zone plc and its subsidiary undertakings have given a duty deferment guarantee in favour of HM Revenue and Customs amounting to GBP800,000 (3 October 2020: GBP800,000).

5. Share capital

 
                                                   2           3 
                                             October     October 
                                                2021        2020 
                                             GBP'000     GBP'000 
  Share capital issued and fully paid 
  50,000,000 ordinary shares of 1p each          500         500 
                                                 500         500 
                                          ==========  ========== 
 

Ordinary shares carry the right to one vote per share at general meetings of the company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up.

   6.   Earnings per share 

Earnings per share is calculated by dividing profit for the year by the weighted average number of shares outstanding during the year.

 
                                           52 weeks     52 weeks 
                                              ended        ended 
                                                  2            3 
                                            October      October 
                                               2021         2020 
 
                                            GBP'000      GBP'000 
  Numerator 
  Profit / (loss) for the year and 
   (Loss)/earnings used in basic and 
   diluted EPS                               14.03p     (23.81)p 
                                        ===========  =========== 
 

As the Group recorded a loss last year the EPS is nil.

 
                                                 2 October     3 October 
                                                      2021          2020 
  Denominator 
  Weighted average number of shares used in 
   basic and diluted EPS                        50,000,000    50,000,000 
                                              ============  ============ 
 
   7.   Ultimate controlling party 

The company is controlled by the Smith family albeit there is not a single controlling party.

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END

FR DGGDBCXBDGDG

(END) Dow Jones Newswires

January 11, 2022 02:00 ET (07:00 GMT)

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