Interim Results

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 £69.9m (2021 H1 : £40.4m) +73%

o  Store revenue £58.1m

o  Digital revenue £11.8m

• Contribution of £11.6m (2021 H1: £4.5m) +158%

o  Store contribution of £8.9m

o  Digital contribution of £2.7m

• Profit before tax £3.1m (2021 H1: £(2.6)m loss)

• Earnings per share 5.7p (2021 H1: (4.2)p loss per share )

• Net cash balance of £13.9m (2021 H1: £4.1m) at period end

• Interim Dividend of 2.5pps (2021 H1: £Nil)

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 £2.3 m (2021 H1: £0.2m)

· Annualised lease renewal savings of £0.4m, 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: [phone]

Anthony Smith (Chief Executive)

Terry Boot (Finance Director)

Zeus (Nominated Adviser and Broker)    Tel: [phone]

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 £3.1m for the Period (2021 H1: £(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 £58.1m (2021 H1: £22.8m / 10 weeks trading). Digital revenues were £11.8m (2021 H1: £17.6m) 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 £5.5m).

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 £4.4m, 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 £69.9m (2021 H1: £40.4m) with a profit before tax of £3.1m (2021 H1: £(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 £35.3m and store contribution increasing to £8.9m (2021 H1: £(0.8)m loss). Digital sales reduced to £11.8m (2021 H1: £17.6m) 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 £2.7m (2021 H1: £5.3m).

Five freeholds and one long leasehold went to auction in December, resulting in a profit on sale of £0.3m. A further 4 stores were auctioned in April with a final auction to take place in May.

Gross profit for the Period stood at £13.6m, which is £5.9m higher than last year (2021 H1: £7.7m) 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 £0.4m to £7.5m (2021 H1: £7.9m) 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 £0.8m to £2.4m (2021 H1: £1.6m) 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 £2.7m at £31.1m (2021 H1: £28.4m) 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 £13.9m (2021 H1: £14.5m) and a net cash balance of £13.9m (2021 H1: £4.1m). 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 £2.3m (2021 H1: £0.2m) 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 £3.0m to £2.9m (2021 YE: £5.9m) and for the Shoe Zone Pension Scheme the surplus increased by £1.0m to £6.9m (2021 YE: £5.9m) 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 end	26 Wks end	52 Wks end
					2 Apr 2022	3 Apr 2021	2 Oct 2021
					£'000	£'000	£'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 end	26 Wks end	52 Wks end
						2 Apr 2022	3 Apr 2021	2 Oct 2021
						£'000	£'000	£'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 end	26 Wks end	52 Wks end
					2 Apr 2022	3 Apr 2021	2 Oct 2021
Assets					£'000	£'000	£'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

					Share	Share	CF hedge	Retained	Total
					Capital	Premium	Reserve	Earnings
					£'000	£'000	£'000	£'000	£'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 end	26 Wks end	52 Wks end
		2 Apr 2022	3 Apr 2021	2 Oct 2021
		£'000	£'000	£'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 (£'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:					£'000	£'000	£'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
					£'000	£'000	£'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
					£'000	£'000	£'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

 

END

 

 

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