TIDMSHOE

RNS Number : 9084Y

Shoe Zone PLC

18 May 2021

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

INTERIM RESULTS

Shoe Zone PLC ("Shoe Zone", the "Company") is pleased to announce its interim results for the six months to 3 April 2021. (the "Period")

Financial Update

   --     Revenue of GBP40.4m (2020 H1: GBP68.9m) 

o Store revenue GBP22.8m (2020 H1: GBP63.3m)

o Digital revenue GBP17.6m (2020 H1: GBP5.5m)

o Digital contribution of GBP5.3m (2020 H1: GBP1.9m)

o Digital conversion rate 6.43% (2020 H1: 3.47%)

o Over 1.0 million engaged users in shoezone.com database

-- Statutory loss before tax GBP(2.6)m (2020 H1: GBP(2.5)m as a result of tight cost control and increase in digital.

   --     Statutory earnings per share (4.2)p (2020 H1: (4.1)p) 
   --     Net cash balance of GBP4.1m (2020 H1: GBP3.6m) 
   --     No interim dividend to be paid (2020 H1: no dividend) 

Business and COVID-19 Update

   --     All stores closed for a minimum of 16 weeks in the Period 
   --     Digital and Warehouse teams operated throughout the lockdowns 
   --     Supply chain disruption due to container shortages and Ever Given/Suez Canal issues 

-- Continual cash preservation action taken throughout the period resulting in net cash of GBP4.1m at the end of the Period

   --     Ongoing negotiations with Landlords and suppliers 

-- Majority of staff furloughed and we have used the Government business support schemes including grants, rates and VAT

   --     CLBILS loan of GBP15m in place and drawn down. GBP4.6m repaid 

-- Store numbers are 422 having reduced by 38 in the period. A full review of individual store viability will now continue

   --     Exit from the Republic of Ireland with all stores and shoezone.ie now closed 

For further information please call:

Shoe Zone PLC Tel: via 0116 222 3000

Anthony Smith (Chief Executive)

Terry Boot (Finance Director)

Finncap (Nominated Advisor and Broker) Tel: 020 7220 0500

Matt Goode (Corporate Finance)

Kate Bannatyne (Corporate Finance)

Alice Lane (ECM)

Chief Executive's statement

Introduction

The last 12 months have been like no other in the company's history. The COVID-19 pandemic has had a huge social and economic impact around the world and has led to huge consequences for all businesses, including our own, as we have had to adapt and change to meet the significant challenges in the last year and I thank our loyal and committed staff during this period. However, we have come through this challenging period and are now in position to continue our strategy going forward, with the assumption that no further lockdowns are required.

The company currently operates from a portfolio of around 422 stores (38 closed in the period with 3 stores refitted and 1 relocation to new formats). We operate a comprehensive digital proposition, enabling it to provide a multi-channel shopping experience to its customers.

Since the period end we have relocated a further 3 stores.

Strategy Update

The strategy outlined before the COVID-19 pandemic took hold, is still the general direction the Directors believe is the route to be taking going forward. The last 12 months has demonstrated the need to build on the significant successes within our Digital business. The investments we have made have put us in a strong position to enable our customers to buy throughout the lockdown, resulting in strong growth over this period. Digital growth will continue to be a big part of our future strategy along with our focus on Big Box and Hybrid expansion. These new stores will be at a lower pace due to cash constraints.

COVID-19 Update

We have had to adapt and reshape our business to react to extremely difficult trading conditions. We enter the second half of the financial year with the hope that we have seen the worst of the COVID-19 impact and look forward to the stores getting back to what we would call "normal" trading conditions, with no further lockdowns.

No stores were open in the first 2 weeks of the 2(nd) half. Trading started strongly but has settled down to a more mixed picture of good High Street and retail park sales but weaker shopping centre performance.

Financial Summary

In the six months to 3 April 2021, the company generated revenues of GBP40.4m (2020 H1: GBP68.9m) and a loss before tax of GBP(2.6)m (2020 H1 GBP(2.5)m).

The reduction in revenue over the prior year reflects the continued impact of COVID-19. During the six months we experienced significant disruption in the supply chain and a fall in consumer spending for a significant number of months in the period, particularly in Jan, Feb and March when all stores were closed. In the period we saw an increase in Digital sales to GBP17.6m compared to last year of GBP5.5m, however the store deficit was GBP40.5m compared to last year.

The gross profit for this year reflects the sales related margin reduction year on year due to clearing excess stock and the benefit of the Government COVID business support schemes. Admin and distribution costs are higher than last year primarily due to GBP3.1m additional expenditure relating to the increase in Digital sales and a GBP0.5m increase due to foreign exchange revaluation.

The company ended the period with a net cash balance of GBP4.1m (2020 GBP3.6m). The increase in cash balance has been achieved through the measures taken by the business over the last 12 months, which restricted cash out of the business but also took advantage of the Government furlough scheme, the business rates holiday, retail grants and the ability to delay VAT. We should state that, compared to last year, we are behind on rental payments as we continue to negotiate better terms with Landlords.

Dividend

We are continuing to focus on cash preservation as the business comes out of lockdown and therefore no interim dividend will be paid. Our dividend policy remains on hold as previously stated.

Unaudited consolidated income statement

 
                                             26 Wks end   26 Wks end   52 Wks end 
                                             3 Apr 2021   4 Apr 2020   3 Oct 2020 
                                                GBP'000      GBP'000      GBP'000 
 Revenue                                         40,435       68,944      122,568 
 Cost of Sales                                 (29,804)     (61,262)    (114,455) 
                                            -----------  -----------  ----------- 
 Gross Profit                                    10,631        7,682        8,113 
 Administration Expenses                        (7,906)      (6,273)     (13,928) 
 Distribution 
  Costs                                         (4,477)      (2,927)      (6,895) 
                                            -----------  -----------  ----------- 
 Loss from Operations                           (1,752)      (1,518)     (12,710) 
 Finance Income                                       0          (1)           10 
 Finance Expense                                  (860)      (1,009)      (1,901) 
                                            -----------  -----------  ----------- 
 Loss before Taxation                           (2,612)      (2,528)     (14,601) 
 Taxation                                           497          480        2,698 
 Loss attributable to equity holders 
  of the parent                                 (2,115)      (2,048)     (11,903) 
                                            ===========  ===========  =========== 
 
 Earnings per 
  Share                                          (4.2)p       (4.1)p      (23.8)p 
 

Unaudited consolidated statement of total comprehensive income

 
                                                           26 Wks    26 Wks     52 Wks 
                                                              end       end        end 
                                                            3 Apr     4 Apr      3 Oct 
                                                             2021      2020       2020 
                                                          GBP'000   GBP'000    GBP'000 
 Loss for the period                                      (2,115)   (2,048)   (11,903) 
                                                         --------  --------  --------- 
 Items that will not be reclassified subsequently 
  to the 
 income statement 
 DB pension scheme                                          2,769     (642)    (2,114) 
 Movement in deferred tax on 
  pension schemes                                           (526)        94        899 
 IFRS-16 Opening 
  balances                                                      0   (3,242)          0 
 Cash flow hedges 
 Fair value movements in other comprehensive 
  income                                                  (1,903)   (2,431)    (2,124) 
 Cash flow hedges recognised 
  in inventories                                                0     2,868          0 
 Tax on cash flow 
  hedges                                                      364      (74)        363 
                                                         --------  --------  --------- 
 Other comprehensive (expense)/Income 
  for the period                                              704   (3,427)    (2,976) 
 Total comprehensive (expense)/Income 
  for the period                                          (1,411)   (5,475)   (14,879) 
                                                         ========  ========  ========= 
 attributable to equity holders 
  of the parent 
 

Unaudited consolidated statement of financial position

 
                                               26 Wks end   26 Wks end   52 Wks end 
                                               3 Apr 2021   4 Apr 2020   3 Oct 2020 
                                                  GBP'000      GBP'000      GBP'000 
 Assets 
 Non-current 
  Assets 
 Property, plant and 
  equipment                                        14,733       22,669       16,967 
 Right of use 
  assets                                           36,464       53,456       42,387 
 deferred tax 
  asset                                             5,455        1,597        5,617 
                                              -----------  -----------  ----------- 
 Total Non-current 
  assets                                           56,652       77,722       64,971 
 Current Assets 
 Inventories                                       28,433       25,727       26,698 
 Trade and other receivables                        3,524        4,978        2,735 
 Derivative financial 
  assets                                                0        2,751            0 
 Cash and cash equivalents                         14,473        3,571       13,266 
                                              -----------  -----------  ----------- 
 Total Current 
  Assets                                           46,430       37,027       42,699 
 Total Assets                                     103,082      114,749      107,670 
 Current Liabilities 
 Trade and other payables                        (12,250)     (31,167)     (17,316) 
 Lease liabilities                               (15,629)            0     (19,914) 
 Derivative financial 
  liability                                       (2,620)            0        (105) 
 Bank loans                                       (4,800)            0      (1,944) 
 Provisions                                       (1,756)        (573)      (1,471) 
 Corporation tax liability                              0            0        (137) 
                                              -----------  -----------  ----------- 
 Total Current Liabilities                       (37,055)     (31,740)     (40,887) 
 Non-Current Liabilities 
 Trade and other payables                               0            0            0 
 Lease liabilities                               (40,042)     (46,521)     (37,475) 
 Bank loans                                       (5,600)            0      (5,056) 
 Provisions                                       (1,499)        (581)      (1,260) 
 Employee benefit 
  liability                                       (7,899)      (9,952)     (10,594) 
                                              -----------  -----------  ----------- 
 Total Non-Current 
  Liabilities                                    (55,040)     (57,054)     (54,385) 
 Total liabilities                               (92,095)     (88,794)     (95,272) 
 Net Assets                                        10,987       25,955       12,398 
                                              ===========  ===========  =========== 
 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                          (1,654)        2,008        (116) 
 Retained earnings                                  9,479       20,785        9,352 
 Total Equity and 
  Reserves                                         10,987       25,955       12,398 
                                              ===========  ===========  =========== 
 

Unaudited consolidated statement of changes in Equity

 
                                        Share     Share   Cash flow   Retained      Total 
                                      Capital   Premium       Hedge   Earnings 
                                                            Reserve 
                                      GBP'000   GBP'000     GBP'000    GBP'000    GBP'000 
 
 At October 2019                          500     2,662       1,645     26,623     31,430 
                                     --------  --------  ----------  ---------  --------- 
 Loss for the period                        0         0           0    (2,048)    (2,048) 
 Defined benefit pension movements          0         0           0      (642)      (642) 
 cash flow hedge movements                  0         0         437          0        437 
 Right of use asset movement                0         0           0    (3,242)    (3,242) 
 Deferred tax on other comp. 
  income                                    0         0        (74)         94         20 
                                     --------  --------  ----------  ---------  --------- 
 Total comprehensive income 
  for the period                            0         0         363    (5,838)    (5,475) 
 Dividends paid                             0         0           0          0          0 
                                     --------  --------  ----------  ---------  --------- 
 Contributions by and distribution 
  to owners                                 0         0           0          0          0 
 As at April 2020                         500     2,662       2,008     20,785     25,955 
                                     --------  --------  ----------  ---------  --------- 
 
 At October 2019                          500     2,662       1,645     26,623     31,430 
                                     --------  --------  ----------  ---------  --------- 
 Impact of transition to IFRS-16            0         0           0    (4,153)    (4,153) 
 Loss for the period                        0         0           0   (11,903)   (11,903) 
 Defined benefit pension movements          0         0           0    (2,114)    (2,114) 
 cash flow hedge movements                  0         0     (2,124)          0    (2,124) 
 Deferred tax on other comp. 
  income                                    0         0         363        899      1,262 
                                     --------  --------  ----------  ---------  --------- 
 Total comprehensive income 
  for the period                            0         0     (1,761)   (17,271)   (19,032) 
 Dividends paid                             0         0           0          0          0 
                                     --------  --------  ----------  ---------  --------- 
 Contributions by and distribution 
  to owners                                 0         0           0          0          0 
 As at October 2020                       500     2,662       (116)      9,352     12,398 
                                     --------  --------  ----------  ---------  --------- 
 
 At October 2020                          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 other 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 2021                         500     2,662     (1,655)      9,480     10,987 
                                     --------  --------  ----------  ---------  --------- 
 

Unaudited consolidated statement of cash flows

 
                                                26 Wks     26 Wks     52 Wks 
                                                   end        end        end 
                                                 3 Apr      4 Apr      3 Oct 
                                                  2021       2020       2020 
                                               GBP'000    GBP'000    GBP'000 
 Operating activities 
 Loss after tax                                (2,115)    (2,048)   (11,903) 
 Corporation tax                                 (497)      (480)    (2,698) 
 Finance income                                      0        (8)       (10) 
 Finance expense                                   860      1,018      1,901 
 Depn of property, plant and machinery           1,598      1,573      3,545 
 FA impairment and loss on disposal 
  of property,                                     840         66      4,642 
   plant and machinery 
 ROUA on disposal, depn and impairment           7,782      9,722     23,998 
 Pension contributions paid                          0      (417)    (1,466) 
                                              --------  ---------  --------- 
                                                 8,468      9,426     18,009 
 Decrease/(increase) in trade and 
  other receivables                              (789)      1,324      (810) 
 Decrease/(increase) in foreign 
  exchange contracts                               613          0        336 
 Decrease/(increase) in inventories            (1,735)      3,196      2,184 
 (Decrease)/increase in trade and 
  other payables                               (5,066)   (17,857)    (5,498) 
 Increase in provisions                            524        110      1,646 
                                              --------  ---------  --------- 
                                               (6,453)   (13,227)    (2,142) 
                                              --------  ---------  --------- 
 Cash generated from operations                  2,015    (3,801)     15,867 
 Net corporation tax paid                          360    (1,888)      (283) 
                                              --------  ---------  --------- 
 Net cash flows from operating activities        2,375    (5,689)     15,584 
                                              --------  ---------  --------- 
 Investing activities 
 Purchase of property, plant and 
  machinery                                      (204)    (2,165)    (2,809) 
 Interest received                                   0          8         10 
                                                        ---------  --------- 
 Net cash used in investing activities           (204)    (2,157)    (2,799) 
                                              --------  ---------  --------- 
 New secured loan repayable by instalments       5,000          0     10,000 
 Repayment of secured loan                     (1,600)          0    (3,000) 
 Capital element of lease repayments           (4,210)          0   (17,719) 
 Interest paid                                   (154)          0      (217) 
 Dividends paid during year                          0          0          0 
                                                        ---------  --------- 
 Net cash used in financing activities           (964)          0   (10,936) 
                                              --------  ---------  --------- 
 Net increase in cash and cash equivalents       1,207    (7,846)      1,849 
 Cash and cash equivalents at beginning 
  of period                                     13,266     11,417     11,417 
 Cash and cash equivalents at end 
  of period                                     14,473      3,571     13,266 
                                              ========  =========  ========= 
 

Notes to the financial statements for the 26 weeks ended 3 April 2021

Basis for preparation

The consolidated interim financial statements of the company for the 26 weeks ended 3 April 2021, 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 3 April 2021, 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 2020 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 3 Oct 2020.

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 due to the banking facilities available to it and the UK Government support available to businesses during this time.

The cash forecast prepared by the Directors show that the company will be able to operate within the facilities available to it and on that basis, the Directors have prepared these financial statements on a going concern basis.

Events after the period end

Subsequent to the period end, the COVID-19 lockdown ended with non-essential retailers able to open from April onwards. Assuming that this will be the last period of lockdown, the Directors believe that the company is strongly positioned to progress positively.

   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.

 
                                       3 Apr     4 Apr     3 Oct 
                                        2021      2020      2020 
 External revenue by location 
  of customers:                      GBP'000   GBP'000   GBP'000 
 
 United Kingdom                       21,934    61,871   100,098 
 Digital                              17,624     5,471    19,296 
 Republic of 
  Ireland                                675     1,602     2,678 
 Other                                   202         0       496 
                                      40,435    68,944   122,568 
                                    ========  ========  ======== 
 

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

 
                             3 Apr     4 Apr     3 Oct 
                              2021      2020      2020 
 Non-current assets 
  by location              GBP'000   GBP'000   GBP'000 
 
 United Kingdom             15,732    22,650    16,962 
 Republic of 
  Ireland                        0        19         5 
                            15,732    22,669    16,967 
                          ========  ========  ======== 
 

3. Derivative financial assets

At the balance sheet date, details of the forward contracts that the group has committed to are as follows:

 
                                            3 Apr     4 Apr     3 Oct 
                                             2021      2020      2020 
                                          GBP'000   GBP'000   GBP'000 
 Derivative financial 
 assets 
 Not designated as hedging 
  instruments                               (578)       332        34 
 Designated as hedging instruments        (2,042)     2,419     (139) 
                                          (2,620)     2,751     (105) 
                                         ========  ========  ======== 
 

4. Taxation

The taxation credit for the 26 weeks ended 3 April 2021 is based on an estimated effective tax rate for the full year of 19% (2020:19%)

5. Earnings per share

 
                                            3 Apr     4 Apr      3 Oct 
                                             2021      2020       2020 
                                          GBP'000   GBP'000    GBP'000 
 Profit in the period and earnings 
  used in basic 
  diluted earnings 
  per share                               (2,115)   (2,048)   (11,903) 
 
                                           (4.2)p   (4.10)p    (23.8)p 
                                         ========  ========  ========= 
 

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