TIDMSHOE
RNS Number : 6882L
Shoe Zone PLC
17 May 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")
Interim results for the 26 week period to 2 April 2022
Shoe Zone PLC is pleased to announce its interim results for the
26 weeks to 2 April 2022, (the "Period").
Financial highlights
-- Revenue of GBP69.9m (2021 H1 : GBP40.4m) +73%
o Store revenue GBP58.1m
o Digital revenue GBP11.8m
-- Contribution of GBP11.6m (2021 H1: GBP4.5m) +158%
o Store contribution of GBP8.9m
o Digital contribution of GBP2.7m
-- Profit before tax GBP3.1m (2021 H1: GBP(2.6)m loss)
-- Earnings per share 5.7p (2021 H1: (4.2)p loss per share )
-- Net cash balance of GBP13.9m (2021 H1: GBP4.1m) at period end
-- Interim Dividend of 2.5pps (2021 H1: GBPNil)
Operational highlights
-- Stores traded for the full 26 weeks (2021: 10 weeks)
-- 388 stores at Period end comprising:
o 45 Big Box (2021 YE: 45)
o 35 Hybrid (2021 YE: 22)
o 308 Original (2021 YE: 343)
-- 8 new Hybrid stores opened and 30 poor performing stores closed
-- Capital expenditure of GBP2.3 m (2021 H1: GBP0.2m)
-- Annualised lease renewal savings of GBP0.4m, an average reduction of 37%
-- Average lease length of 1.8 years (2021: 1.9 years)
-- Digital returns rate of 10.9%
For further information please call:
Shoe Zone PLC Tel: +44 (0) 116 222 3000
Anthony Smith (Chief Executive)
Terry Boot (Finance Director)
Zeus (Nominated Adviser and Broker) Tel: +44(0) 203 829 5000
Daniel Harris, James Hornigold (Investment Banking)
Dominic King (Corporate Broking)
Chief Executive's statement
Introduction
We are able to report continuous trade for a full 26 week
period. The last full year saw the business return quickly to
profitability and became debt free again. Trading in the Period has
continued to be positive as we build on the strategy announced in
October last year ("the Strategy") and we believe we are in a
strong position. The rapid recovery of our business is due mainly
to the continued support of our loyal and committed staff.
Profit before tax stood at GBP3.1m for the Period (2021 H1:
GBP(2.6)m loss) with an earnings per share of 5.7p (2021 H1: (4.2)p
loss per share).
Stores traded for 26 weeks delivering revenues of GBP58.1m (2021
H1: GBP22.8m / 10 weeks trading). Digital revenues were GBP11.8m
(2021 H1: GBP17.6m) in the Period, a reduction to a more normalised
position due to the store closures and lockdowns last year, but is
still a 114.5% increase on a 2 year basis (2020 H1 GBP5.5m).
We ended the Period trading out of 388 stores, having closed 30
'Original' format stores, which is in line with the strategy
announced last October, and opened 8 stores in our new Hybrid
format. We have 308 'Original', 45 'Big Box' and 35 'Hybrid' stores
and we are actively working to relocate and/or refit further stores
in the 2(nd) half of the year, with at least 20 stores currently in
solicitors' hands.
Our average lease length is 1.8 years (2021: 1.9 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 continue to take advantage of this and
significantly improve our property portfolio over the medium
term.
Strategy Update
We are accelerating store relocations, refits and infrastructure
changes at our head office, and further investment in digital. All
of these areas are key to progressing our strategy and we will
commit to spending at least 3% of turnover annually on capital
projects.
We have continued to invest in our digital infrastructure and
our portfolio with more 'Original' Shoe Zone stores converted to
either a Big Box or Hybrid format. The results are very positive
and we continue to look for relocation opportunities to roll these
formats out as planned. Our ultimate goal is a doubling of Big Box
locations to approximately 100 and an increase in Hybrid stores to
200 in the medium term. We anticipate trading from a similar sales
square footage, albeit from a reduced number of locations. Digital
growth fell back as expected as we re-opened all stores, and is now
back to the normalised level expected but it is still 114.5% higher
on a 2 year basis. We continue to increase drop ship partners,
exclusive products and brands and we have introduced 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 complemented by our extensive
network of stores. We have a returns rate of 10.9% and the vast
majority of these are returned to store, hence why our physical
store network is critical to our future success.
Dividend
At the last year 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. We have now fully paid off the outstanding
loan balance and the Company is therefore now eligible to
recommence dividend payments in respect of the new financial
Period. The Board therefore proposes an interim dividend of 2.5p
per share. The interim dividend will become payable on 17 August
2022 to those shareholders on the Company's register as at the
close of business on the record date 15 July 2022. The ex-dividend
date is 14 July 2022. The Company will otherwise continue to review
management of its cash resources which may include special dividend
and/or buyback programme, details of which will be announced in due
course.
Financial Review
In the Period total revenues were GBP69.9m (2021 H1: GBP40.4m)
with a profit before tax of GBP3.1m (2021 H1: GBP(2.6)m loss). The
increase in revenue reflects trading in the stores for the whole of
the Period with less disruption to trade, with store revenues
increasing by GBP35.3m and store contribution increasing to GBP8.9m
(2021 H1: GBP(0.8)m loss). Digital sales reduced to GBP11.8m (2021
H1: GBP17.6m) as the level normalised but has more than doubled on
a 2 year basis. Digital gross margins increased to 58.5% (2021 H1:
57.6%) due to reduced markdowns, partially offset by a higher mix
of lower margin branded and online exclusive product. Digital
contribution was GBP2.7m (2021 H1: GBP5.3m).
Five freeholds and one long leasehold went to auction in
December, resulting in a profit on sale of GBP0.3m. A further 4
stores were auctioned in April with a final auction to take place
in May.
Gross profit for the Period stood at GBP13.6m, which is GBP5.9m
higher than last year (2021 H1: GBP7.7m) mainly due to the 16 weeks
additional store sales. The gross profit margin achieved for the
Period is 19.5% (2021 H1: 19.2%).
Product gross margins reduced to 60.8% (2021 H1: 61.5%) due to
higher average container prices, an increase in the higher mix of
branded product and offset by a reduction in markdown activity.
Administration expenses reduced by GBP0.4m to GBP7.5m (2021 H1:
GBP7.9m) due to a sales related reduction in digital expenses, a
reduction in redundancy payments, a reduced charge relating to
foreign exchange movements, partly offset by an increase in
contributions to the Shoe Zone Trust.
Distribution expenses increased by GBP0.8m to GBP2.4m (2021 H1:
GBP1.6m) due to higher warehouse wages compared to last year where
a large number of staff were put on furlough due to lockdown.
Our energy prices are fixed until September 2023 therefore we
are not exposed to the market price increases currently being
experienced and we have a number of initiatives in place to achieve
our carbon neutral goal. All of our electricity consumption is from
100% renewable sources, we have started to monitor energy
consumption and we have a programme to insulate ceilings and to
install more energy efficient lighting in a number of stores. This
year we will add electric vehicles to our fleet.
Stock at cost is higher for the Period by GBP2.7m at GBP31.1m
(2021 H1: GBP28.4m) due to a portion of the Autumn Winter ("AW")
2021 boots and wellington intake being delayed. This will now be
included in our AW2022 range as this stock is classed as continuity
product. We have also brought forward some of our Spring Summer
("SS") 2022 intake to ensure early delivery.
The Company ended the Period with a cash and equivalent balance
of GBP13.9m (2021 H1: GBP14.5m) and a net cash balance of GBP13.9m
(2021 H1: GBP4.1m). The increase in net cash is due mainly to the
additional revenue generated for the full Period and profitability
for the Period. We remain prudent and plan to conserve cash as a
precaution against the risks of inflation and current global
events.
Capital expenditure for the Period was GBP2.3m (2021 H1:
GBP0.2m) which is returning to our long term target of 3-4% of
turnover. The capital expenditure for the Period includes new
stores, refits and relocations, IT expenditure and infrastructure
works in the head office and distribution centre, and we will look
to accelerate spend in the 2(nd) half of the year and into the next
financial year.
We operate two closed defined benefit pension schemes. The
deficit for the Shoefayre Limited Pension and Life Assurance Scheme
reduced by GBP3.0m to GBP2.9m (2021 YE: GBP5.9m) and for the Shoe
Zone Pension Scheme the surplus increased by GBP1.0m to GBP6.9m
(2021 YE: GBP5.9m) 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, offset by lower than expected
investment returns and a rise in future inflationary
expectations.
Earnings per share are 5.7p (2021 H1: (4.2)p loss per
share).
Unaudited consolidated income statement
26 Wks 26 Wks 52 Wks
end end end
2 Apr 3 Apr 2 Oct
2022 2021 2021
GBP'000 GBP'000 GBP'000
Revenue 69,864 40,435 119,142
Cost of sales (56,247) (32,688) (86,667)
---------- ---------- ----------
Gross Profit 13,617 7,747 32,475
Administration
expenses (7,508) (7,906) (16,962)
Distribution costs (2,448) (1,593) (4,499)
---------- ---------- ----------
Profit from Operations 3,661 (1,752) 11,014
Finance income 0 0 0
Finance expense (599) (860) (1,558)
---------- ---------- ----------
Profit before
Tax 3,062 (2.612) 9,456
Taxation (197) 497 (2442)
Profit after Tax 2,865 (2,115) 7,014
========== ========== ==========
Earnings per Share 5.7p (4.2)p 14.0p
Unaudited consolidated statement of total comprehensive
income
26 Wks 26 Wks 52 Wks
end end end
2 Apr 3 Apr 2 Oct
2022 2021 2021
GBP'000 GBP'000 GBP'000
Profit/(Loss)
for the period 2,865 (2,115) 7,014
--------- --------- ---------
Items that will not be reclassified
subsequently to the
income statement
DB pension scheme 3,110 2,769 3,379
Movement in deferred tax on
pension schemes (560) (526) 761
IFRS-16 Opening
balances 0 0 0
Cash flow hedges
Fair value movements in other comprehensive
income 682 (1,903) (190)
Cash flow hedges recognised
in inventories 0 0 0
Tax on cash flow
hedges (109) 364 56
--------- --------- ---------
Other comprehensive (expense)/Income
for the period 3,123 704 4,006
Total comprehensive (expense)/Income
for the period 5,988 (1,411) 11,020
========= ========= =========
attributable to equity holders
of the parent
Unaudited consolidated statement of financial position
26 Wks 26 Wks 52 Wks
end end end
2 Apr 3 Apr 2 Oct
2022 2021 2021
Assets GBP'000 GBP'000 GBP'000
Non-current
Assets
Property, plant and
equipment 13,555 14,733 14,227
Right of use
assets 28,526 36,464 30,884
Deferred tax
asset 2,490 5,455 3,220
---------- ---------- ----------
Total Non-current
Assets 44,571 56,652 48,331
Current Assets
Inventories 31,096 28,433 25,131
Trade and other receivables 3,450 3,524 5,457
Derivative financial
assets 456 0 0
Cash and cash equivalents 13,872 14,473 19,015
---------- ---------- ----------
Total Current
Assets 48,874 46,430 49,603
Total Assets 93,445 103,082 97,934
Current Liabilities
Trade and other payables (19,484) (12,250) (16,440)
Lease liabilities (14,016) (15,629) (17,035)
Derivative financial
liabilities 0 (2,620) (591)
Bank loans 0 (4,800) (4,400)
Provisions (1,727) (1,756) (1,698)
Corporation tax liability (317) 0 (773)
---------- ---------- ----------
Total Current Liabilities (35,544) (37,055) (40,937)
Non-current Liabilities
Lease liabilities (23,554) (40,042) (25,942)
Bank loans 0 (5,600) 0
Provisions (2,084) (1,499) (1,728)
Employee benefit liability (2,857) (7,899) (5,909)
---------- ---------- ----------
Total Non-current
Liabilities (28,495) (55,040) (33,579)
Total Liabilities (64,039) (91,095) (74,516)
Net Assets 29,406 10,987 23,418
========== ========== ==========
Equity attributable to equity
holders of the company
Called up share capital 500 500 500
Merger reserve 2,662 2,662 2,662
Cash flow hedge reserve 323 (1,654) (250)
Retained earnings 25,921 9,479 20,506
---------- ---------- ----------
Total Equity and
Reserves 29,406 10,987 23,418
========== ========== ==========
Unaudited consolidated statement of changes in Equity
CF
Share Share hedge Retained Total
Capital Premium Reserve Earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at October
2021 500 2,662 (116) 9,352 12,398
--------- --------- --------- ---------- ---------
Loss for the
period 0 0 0 (2,115) (2,115)
Defined benefit pension movements 0 0 0 2,769 2,769
Cash flow hedge movements 0 0 (1,903) 0 (1,903)
Deferred tax on comp.
income 0 0 364 (526) (162)
--------- --------- --------- ---------- ---------
Total comprehensive income
for the period 0 0 (1,539) 128 (1,411)
Dividends paid 0 0 0 0 0
--------- --------- --------- ---------- ---------
Contributions by and distribution
to owners 0 0 0 0 0
--------- --------- --------- ---------- ---------
As at April
2022 500 2,662 (1,655) 9,480 10,987
========= ========= ========= ========== =========
As at October
2021 500 2,662 (116) 9,352 12,398
--------- --------- --------- ---------- ---------
Profit for the
period 0 0 0 7,014 7,014
Defined benefit pension movements 0 0 0 3,379 3,379
Cash flow hedge movements 0 0 (190) 0 (190)
Deferred tax on comp.
income 0 0 56 761 817
--------- --------- --------- ---------- ---------
Total comprehensive income
for the period 0 0 (134) 11,154 11,020
Dividends paid 0 0 0 0 0
--------- --------- --------- ---------- ---------
Contributions by and distribution
to owners 0 0 0 0 0
As at October
2021 500 2,662 (250) 20,506 23,418
========= ========= ========= ========== =========
As at October
2021 500 2,662 (250) 20,506 23,418
--------- --------- --------- ---------- ---------
Profit for the
period 0 0 0 2,865 2,865
Defined benefit pension movements 0 0 0 3,110 3,110
Cash flow hedge movements 0 0 682 0 682
Deferred tax on comp.
income 0 0 (109) (560) (669)
--------- --------- --------- ---------- ---------
Total comprehensive income
for the period 0 0 573 5,415 5,988
Dividends paid 0 0 0 0 0
--------- --------- --------- ---------- ---------
Contributions by and distribution
to owners 0 0 0 0 0
As at April
2022 500 2,662 323 25,921 29,406
========= ========= ========= ========== =========
Unaudited consolidated statement of cash flows
26 Wks 26 Wks 52 Wks
end end end
2 Apr 3 Apr 2 Oct
2022 2021 2021
GBP'000 GBP'000 GBP'000
Operating activities
Profit/(Loss) after tax 2,865 (2,115) 7,014
Corporation tax 197 (497) 2,442
Finance income 0 0 0
Finance expense 599 860 1,558
Depreciation of property, plant
and machinery 1,514 1,598 3,144
Fixed asset impairment and loss
on disposal of property, 1,457 840 1,001
plant and machinery
Right of use asset on profit, depreciation
& impairment 7,217 7,782 15,860
Pension contributions paid 0 0 (1,500)
---------- ---------- ----------
13,849 8,468 29,519
Decrease/(increase) in trade and
other receivables 2,007 (789) (2,722)
Decrease/(increase) in foreign
exchange contracts (357) 613 486
Decrease/(increase) in inventories (5,965) (1,735) 1,567
(Decrease)/increase in trade and
other payables 3,154 ((5,066) (816)
Increase in provisions 386 524 694
---------- ---------- ----------
(775) (6,453) (791)
---------- ---------- ----------
Cash generated from operations 13,074 2,015 28,728
Net corporation tax paid (653) 360 1,353
---------- ---------- ----------
Net cash flows from operating
activities 12,421 2,375 30,081
---------- ---------- ----------
Investing activities
Purchase of property, plant and
machinery (2,299) (204) (1,405)
Interest received 0 0 0
---------- ----------
Net cash used in investing activities (2,299) (204) (1,405)
---------- ---------- ----------
New secured loan repayable by instalments 0 5,000 0
Repayment of secured loan (4,400) (1,600) (2,600)
Capital element of lease repayments (10,790) (4,210) (20,037)
Interest paid (75) (154) (290)
Dividends paid during year 0 0 0
---------- ----------
Net cash used in financing activities (15,265) (964) (22,927)
---------- ---------- ----------
Net increase in cash and cash equivalents (5,143) 1,207 5,749
Cash and cash equivalents at beginning
of period 19,015 13,266 13,266
Cash and cash equivalents at end
of period 13,872 14,473 19,015
========== ========== ==========
Notes to the financial statements for the 26 weeks ended 2 April
2022
Basis for preparation
The consolidated interim financial statements of the company for
the 26 weeks ended 2 April 2022, which are unaudited, have been
prepared in accordance with the same accounting policies,
presentations and methods of computation followed in the condensed
set of financial statements as applied in the group's latest
audited financial statements. A copy of those accounts has been
delivered to the Registrar of Companies.
The financial information for the 26 weeks ended 2 April 2022,
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 2021 was
unqualified, did not draw attention to any matters by way of
emphasis. And did not contain a statement under 498(2) or 498(3) of
the Companies Act 2006.
The consolidated interim financial statements have neither been
audited nor reviewed pursuant to guidance issued by the Auditing
Practices Board.
The condensed consolidated interim financial statements have
been prepared on a going concern basis and under the historic cost
convention, as modified by the revaluation of derivative financial
instruments to far value.
The condensed consolidated interim financial statements are
presented in sterling and have been rounded to the nearest thousand
(GBP'000).
The preparation of financial information in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities at the date of the
financial statements and the reported amount of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual events ultimately may differ from those
estimates.
1. Accounting policies
In preparing these interim financial statements, the significant
judgements made by management in applying the group's accounting
policies and the key sources of estimation uncertainty were the
same as those applied to the consolidated financial statements
reported in the latest annual audited financial statements for the
52 weeks ended 2 Oct 2021.
Going Concern
At the balance sheet date the company had a good cash balance
and a strong net asset position. At the time of reviewing these
accounts, the Directors have considered the effect of COVID-19 on
the ongoing position, and consider that this does indicate that the
company will continue to trade for a period of at least 12 months
from the date of publishing these accounts. Based on the cash
forecasts prepared by the Directors, these financial statements
have been prepared on a going concern basis.
2. Segmental Information
The group complies with IFRS 8 'Operating Segments' which
determines and presents operating segments based on information
provided to the chief operating decision maker. The chief decision
maker has been identified as the management team including the
Chief Executive and Finance Director. The Board considers that each
store is an operating segment but there is only one reporting
segment as the stores qualify for aggregation, as defined under
IFRS 8.
2 Apr 3 Apr 2 Oct
2022 2021 2021
External revenue by location
of customers: GBP'000 GBP'000 GBP'000
United Kingdom 57,751 21,934 87,420
Digital 11,830 17,624 30,499
Republic of
Ireland 0 675 674
Other 283 202 549
69,864 40,435 119,142
========= ========= =========
3. Derivative financial assets
2 Apr 3 Apr 2 Oct
2022 2021 2021
GBP'000 GBP'000 GBP'000
Derivative financial
assets
Not designated as hedging
instruments 58 (578) (261)
Designated as hedging instruments 399 (2,042) (330)
457 (2,620) (591)
========= ========= =========
4. Taxation
The taxation credit for the 26 weeks ended 2 April 2022 is based
on an estimated effective tax rate for the full year of 19% (2021
H1:19%)
5. Earnings per share
2 Apr 3 Apr 2 Oct
2022 2021 2021
GBP'000 GBP'000 GBP'000
Profit in the period and earnings
used in basic
diluted earnings
per share 2,865 (2,115) 7,014
5.7p (4.2)p 14.03p
========= ========= =========
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