REG - Shoe Zone PLC - Interim Results
21/05/2024 07:00
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RNS Number : 1763P Shoe Zone PLC 21 May 2024
Shoe Zone PLC
("Shoe Zone" or the "Company")
Interim results for the 26 weeks to 30 March 2024
Shoe Zone PLC is pleased to announce its interim results for the 26 weeks to
30 March 2024, (the "Period").
Financial highlights
• Revenue of £76.5m (2023 H1: £75.4m) +1.5%
o Store revenue £59.4m (2023 H1: £61.1m) -2.8%
o Digital revenue £17.1m (2023 H1: £14.3m) +19.6%
• Contribution of £12.2m (2023 H1: £11.1m)
o Store contribution of £8.5m
o Digital contribution of £3.7m
• Profit before tax of £2.6m (2023 H1: £1.5m)
• Adjusted profit before tax of £2.5m (2023 H1: £2.5m)*
• Earnings per share of 5.6p (2023 H1: 3.1p)
• Net cash of £4.1m (2023 H1: £12.9m)
• Proposed interim dividend of 2.5 pence per share (2023 H1: 2.5
pence)
Operational highlights
· 309 stores at Period end (2023 FY: 323) comprising:
o 162 New Format (2023 FY: 135)
o 147 Original (2023 FY: 188)
· 15 stores opened, 15 refits, 29 stores closed
· Capital expenditure of £5.3m (2023 H1: £5.3m)
· Annualised lease renewal savings of £0.2m, an average reduction of
28%
· Average lease length of 2.3 years (2023 FY: 2.1 years)
· Digital returns rate of 11.4% (2023 H1: 11.9%) - 12 months average
*Adjusted items 2024 H1 £0.1m forex gain. (2023 H1: Forex loss £1.3m, offset
by property gain £0.3m)
For further information please call:
Shoe Zone
PLC
Tel: +44 (0) 116 222 3001
Charles Smith (Chairman)
Terry Boot (Finance Director)
Zeus (Nominated Adviser and Broker)
Tel: +44 (0) 203 829 5000
David Foreman, James Hornigold, Ed Beddows (Investment Banking)
Dominic King (Corporate Broking)
Chairman's statement
Introduction
Shoe Zone delivered a robust performance in the Period against a continuing
backdrop of consumer uncertainty and macroeconomic volatility. Total revenues
increased by 1.5% having traded out of 27 fewer stores compared to 12 months
ago, with digital revenue increasing by 19.6%. The performance further
demonstrates the resilience of our business and the success of our ongoing
strategy.
Trading over all channels was positive with total revenues of £76.5m (2023
H1: £75.4m), store revenues were £59.4m (2023 H1: £61.1m - trading out of
fewer stores), digital revenues were £17.1m (2023 H1: £14.3m) with strong
performance across all online channels with additional growth from our online
exclusive range and range extensions.
Adjusted profit before tax was £2.5m (2023 H1: £2.5m*), which is in line
with management expectations for the Period.
We ended the Period trading out of 309 stores, which is a reduction of 27
compared to 12 months ago and 14 lower compared to last year end. In the first
half we closed 29 stores, opened 15 new format stores and refitted 15 Original
stores to our new format. In total we are now trading out of 147 Original
stores and 162 new format stores. We are actively working to relocate and
refit further stores in the second half of the year, together with a number of
stores currently in the pipeline, opening before Christmas.
Our average lease length is 2.3 years (2023 FY: 2.1 years), which is
increasing as we open new stores with 5 year leases but still gives 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 continue to accelerate our refit and relocation programme along with
further investment in our digital and head office infrastructure. All of these
are key to our strategy, and we expect to spend £10m+ on capital projects
this year and during each of the following two years.
We have continued to invest in our portfolio with more Original stores
converted to our new format. The results continue to be very positive, and we
will carry on looking for further opportunities to roll out the new format.
Our ultimate goal is a 300 new format stores in the medium term. We anticipate
trading from a similar retail square footage, albeit from a reduced number of
locations. Digital revenues grew by 19.6% as we continue to invest in new
product lines and additional brands as well as enhancing our platform with the
development of a mobile App and adding new payment options via wallet
payments, all of which will improve 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 11.4% (2023 H1: 11.9%) and the vast majority of these are
returned to store, hence why our physical store network is critical to our
future success.
Dividend
The Board proposes an interim dividend of 2.5p per share, which will become
payable on 14 August 2024 to those shareholders on the Company's register as
at the close of business on the record date of 12 July 2024. The ex-dividend
date will be 11 July 2024.
Outlook
Our original full year profit before tax forecast was £15.2m, which has been
revised down to £13.8m, a reduction of £1.4m. At the point at which the
original forecast was prepared the consensus was that the National Living Wage
would increase to £11.08, but when announced, the increase was to £11.44
which adds £0.4m of cost in our second half. The continuing disruption in the
Middle East has increased shipping times and container prices which adds a
minimum of £0.5m of cost and due to the large number of stores we have
closed, particularly in Scotland, we have provided for an additional £0.5m of
dilapidations.
Financial Review
Profit before tax was £2.6m, adjusted to £2.5m (2023 H1: £1.5m adjusted to
£2.5m). The adjustment this year reflects a foreign exchange gain £0.1m and
last year included foreign exchange losses of £1.3m, offset by profit on
freehold property sale of £0.3m. We benefitted in the Period from better
underlying margins as lower container prices were realised, offset by cost
increases due to National Living Wage, utilities and depreciation.
In the Period, total revenues were £76.5m (2023 H1: £75.4m). Store revenues
decreased by £1.7m as we traded out of 27 fewer stores than 12 months ago.
Digital sales increased by £2.8m to £17.1m (2023 H1: £14.3m). Digital gross
margins increased to 61.0% (2023 H1: 58.0%) due to lower container prices, and
contribution was £3.7m (2023 H1: £3.2m).
Gross profit in the Period was £14.7m (2023 H1: £13.6m), with a margin of
19.3% (2023 H1: 18.1%). The percentage increase was due to the underlying
product margin being higher at 62.7% (2023 H1: 60.1%), due to the impact of
lower container prices and a stronger sterling to dollar exchange rate.
Container prices have increased post Chinese new year due to the continuing
disruption in the Red Sea, and indications are that this will continue until
at least the end of the year, which is longer than we initially estimated.
Within cost of sales, we spent £1.1m less on stock purchases and £0.8m less
in rates due to less stores and refunds received. There were cost increases on
utilities of £0.6m due to energy price rises, depreciation of £0.9m due to
higher capital spend and higher lease depreciation of £0.5m, due to more 5
year leases and less temporary leases.
Administration expenses reduced by £0.2m to £8.9m (2023 H1: £9.1m). Last
year included a £1.3m foreign exchange loss, so if this was excluded, costs
have increased year on year by £1.1m due to higher sales related digital
costs £0.5m, higher wages £0.3m and lower lease disposal profits £0.3m.
Distribution costs increased by £0.1m to £2.8m (2023 H1: £2.7m) due to the
increase in the National Living Wage.
Stock at the Period end was £2.9m higher at £31.0m (2023 H1: £28.1m). This
reflects a higher branded mix, having added 50+ more branded Hybrid stores,
higher stock of Ladies sandals as we received a proportion of the range
earlier than last year and a higher stock of boots which will form part of the
Autumn/Winter 2024 range.
The Company ended the Period with a net cash balance of £4.1m (2023 FY:
£16.4m). However, we generated a strong operating cash flow of £13.4m
compared to £12.0m last year, and the 68% decrease in net cash is driven by
dividend payments of £6.9m, increased capex of £5.3m and higher stock levels
of £2.6m.
Capital expenditure in the Period was £5.3m (2023 H1: £5.3m) which is
continuing our long-term target of £10m+ per annum. Expenditure in the Period
included new stores, refits and relocations, which are partly funded by
Landlord rent free periods, IT expenditure and infrastructure works in head
office and distribution centre, which will be continued through the second
half of the year.
The Shoefayre Limited Pension and Life Assurance Scheme deficit increased to
£2.1m (2023 FY: £2.0m deficit). This was due to a fall in bond yields which
led to a lower assumed discount rate and therefore a higher value being placed
on the scheme's liabilities. The Shoe Zone Pension Scheme's surplus remained
at £0.5m (2023 FY: £0.5m surplus).
Earnings per share were 5.6p (2023 H1: 3.1p per share) reflecting a higher
profit before tax generated in the Period.
Unaudited consolidated income statement (52 weeks audited)
26 Wks end 26 Wks end 52 Wks end
30 Mar 2024 1 Apr 2023 30 Sep 2023
£'000 £'000 £'000
Revenue 76,475 75,391 165,657
Cost of sales (61,734) (61,752) (124,805)
Gross Profit 14,741 13,639 40,852
Administration expenses (8,863) (9,100) (18,791)
Distribution costs (2,787) (2,668) (5,311)
Profit from Operations 3,091 1,871 16,750
Finance income 0 0 0
Finance expense (480) (342) (568)
Profit before Tax 2,611 1,529 16,182
Taxation 0 0 (2,962)
Profit after Tax 2,611 1,529 13,220
Earnings per Share 5.6p 3.1p 27.8p
Unaudited consolidated statement of total comprehensive income (52 weeks
audited)
26 Wks end 26 Wks end 52 Wks end
30 Mar 2024 1 Apr 2023 30 Sep 2023
£'000 £'000 £'000
Profit/(Loss) for the period 2,611 1,528 13,220
Items that will not be reclassified subsequently to the
income statement
DB pension scheme (5) (1,973) (2,054)
Movement in deferred tax on pension schemes 0 (57) 513
Share buy back 0 (1,849) (7,125)
Cash flow hedges
Fair value movements in other comprehensive income (247) (776) (295)
Tax on cash flow hedges 0 0 54
Other comprehensive (expense)/Income for the period (252) (4,655) (8,907)
Total comprehensive (expense)/Income for the period (2,359) (3,127) 4,313
attributable to equity holders of the parent
Unaudited consolidated statement of financial position (52 weeks audited)
26 Wks end 26 Wks end 52 Wks end
30 Mar 2024 1 Apr 2023 30 Sep 2023
Assets £'000 £'000 £'000
Non-current Assets
Property, plant and equipment 21,444 15,859 19,178
Right of use assets 29,722 25,454 25,751
Deferred tax asset 573 902 529
Total Non-current Assets 51,739 42,215 45,458
Current Assets
Inventories 31,030 28,117 33,752
Trade and other receivables 2,835 3,007 3,219
Derivative financial assets 46 0 0
Cash and cash equivalents 4,093 12,870 16,354
Total Current Assets 38,004 43,994 53,383
Total Assets 89,743 86,029 98,841
Current Liabilities
Trade and other payables (16,690) (17,281) (24,353)
Lease liabilities (12,720) (13,562) (13,071)
Derivative financial liabilities 0 (603) 0
Provisions (1,283) (2,575) (1,026)
Corporation tax liability 0 (289) 0
Total Current Liabilities (30,693) (34,310) (38,450)
Non-current Liabilities
Lease liabilities (25,177) (21,349) (22,219)
Provisions (2,873) (1,508) (2,766)
Employee benefit liability (2,105) (1,973) (2,054)
Total Non-current Liabilities (30,155) (22,830) (27,039)
Total Liabilities (60,848) (59,140) (65,489)
Net Assets 28,895 27,069 33,352
Equity attributable to equity holders of the company
Called up share capital 463 485 463
Merger res/Cap red 2,699 2,677 2,699
Cash flow hedge reserve 225 (123) 412
Retained earnings 25,508 24,030 29,778
Total Equity and Reserves 28,895 27,069 33,352
Unaudited consolidated statement of changes in Equity (prior years audited)
Share Share Capital Cash flow Retained Total
Capital Premium Redemp. Hedge Earnings
Reserve Reserve
£'000 £'000 £'000 £'000 £'000 £'000
At October 2022 495 2,662 5 653 33,428 37,243
Profit for the period 0 0 0 0 1,528 1,528
Defined benefit pension movements 0 0 0 0 (1,973) (1,973)
Cash flow hedge movements 0 0 0 (776) 0 (776)
Share buy-back (10) 0 10 0 (1,849) (1,849)
Deferred tax on other comp. income 0 0 0 0 (57) (57)
Total comprehensive income for the period (10) 0 10 (776) (2,351) (3,127)
Dividends paid 0 0 0 0 (7,047) (7,047)
Contributions by and distrib. to owners 0 0 0 0 (7,047) (7,047)
As at April 2023 485 2,662 15 (123) 24,030 27,069
At October 2022 495 2,662 5 653 33,428 37,243
Profit for the period 0 0 0 0 13,220 13,220
Defined benefit pension movements 0 0 0 0 (2,054) (2,054)
Cash flow hedge movements 0 0 0 (295) 0 (295)
Share buy-back (32) 0 32 0 (7,125) (7,125)
Deferred tax on other comp. income 0 0 0 54 513 567
Total comprehensive income for the period (32) 0 32 (241) 4,554 4,313
Dividends paid 0 0 0 0 (8,204) (8,204)
Contributions by and distrib. to owners 0 0 0 0 (8,204) (8,204)
As at October 2023 463 2,662 37 412 29,778 33,352
At October 2023 463 2,662 37 412 29,778 33,352
Profit for the period 0 0 0 0 2,611 2,611
Defined benefit pension movements 0 0 0 0 (5) (5)
Cash flow hedge movements 0 0 0 (187) 0 (776)
Share buy-back 0 0 0 0 0 0
Deferred tax on other comp. income 0 0 0 0 0 0
Total comprehensive income for the period 0 0 0 (187) 2,606 2,419
Dividends paid 0 0 0 0 (6,886) (6,886)
Contributions by and distrib. to owners 0 0 0 0 (6,886) (6.886)
As at March 2024 463 2,662 37 225 25,498 28,885
Unaudited consolidated statement of cash flows (52 weeks audited)
26 Wks end 26 Wks end 52 Wks end
30 Mar 2024 1 Apr 2023 30 Sep 2023
£'000 £'000 £'000
Operating activities
Profit after tax 2,611 1,529 13,220
Corporation tax 0 0 2,962
Finance income 0 0 0
Finance expense 480 342 568
Depreciation of property, plant and machinery 2,757 1,737 3,929
Fixed asset impairment and loss on disposal of property, 187 (111) 369
plant and machinery
Right of use asset on profit, depreciation & impairment 9,763 6,977 17,484
15,798 10,474 38,532
Decrease/(increase) in trade and other receivables 384 3,064 2,852
Decrease/(increase) in foreign exchange contracts (179) (412) (265)
Decrease/(increase) in inventories 2,722 4,071 (1,564)
(Decrease)/increase in trade and other payables (5,728) (5,520) 1,552
Increase in provisions 364 313 22
(2,437) 1,516 2,567
Cash generated from operations 13,361 11,990 41,099
Net corporation tax paid (1,919) (1,738) (4,171)
Net cash flows from operating activities 11,442 10,252 36,928
Investing activities
Purchase of property, plant and machinery (5,210) (5,314) (11,372)
Proceeds from Sale of Freeholds 0 411 478
Net cash used in investing activities (5,210) (4,903) (10,894)
Share buy-back 0 (1,849) (7,125)
Capital element of lease repayments (11,724) (8,196) (18,954)
Interest 117 186 176
Dividends paid during year (6,886) (7,047) (8,204)
Net cash used in financing activities (18,493) (16,906) (34,107)
Net inc/(dec) in cash and cash equivalents (12,261) (11,557) (8,073)
Cash and cash equivalents at beginning of period 16,354 24,427 24,427
Cash and cash equivalents at end of period 4,093 12,870 16,354
Notes to the financial statements for the 26 weeks ended 30 March 2024
Basis for preparation
The consolidated interim financial statements of the company for the 26 weeks
ended 30 March 2024, 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 30 March 2024, 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 2023 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 30 Sept 2023.
Going Concern
At the balance sheet date, the company had a good cash balance and a strong
net asset position. 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.
26 Wks end 26 Wks end 52 Wks end
30 Mar 1 Apr 30 Sep
2024 2023 2023
External revenue by location of customers: £'000 £'000 £'000
United Kingdom 59,079 60,776 134,078
Digital 17,144 14,347 30,966
Other 252 268 613
76,475 75,391 165,657
3. Taxation
The taxation charge of zero for the 26 weeks ended 30 March 2024 is based on
the assumption that the capital allowances available on our estimated capital
spend will reduce the expected charge for the full year.
4. Earnings per share
26 Wks end 26 Wks end 52 Wks end
1 Apr 1 Apr 30 Sep
2024 2023 2023
£'000 £'000 £'000
Profit in the period and earnings used in basic
diluted earnings per share 2,611 1,529 13,220
5.6p 3.1p 27.8p
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