TIDMSHOE
RNS Number : 5453M
Shoe Zone PLC
09 January 2019
09 January 2019
Shoe Zone plc
Preliminary Results
Shoe Zone plc ("Shoe Zone", the "Company" or the "Group"), the
leading UK value footwear retailer, is pleased to announce its
Preliminary Results for the 52 weeks ended 29 September 2018.
Financial Highlights
-- Revenue up 1.8% to GBP160.6m (2017: GBP157.8m)
-- Product gross margin at 62.9% (2017: 63.2%)
-- Statutory Profit before tax increased 18.4% to GBP11.3m (2017: GBP9.5m)
-- Earnings per share up 20.7% to 19.0p (2017: 15.8p)
-- Strong cash conversion with cash balance of GBP15.7m (2017: GBP11.8m)
-- Proposed final dividend raised 17.6% to 8.0p per share (2017: 6.8p per share)
-- Special dividend of 8.0p (2017: Nil)
-- Total dividend increased 91.2% to 19.5p per share (2017: 10.2p per share)
Operational Highlights
-- 19 Big Box stores at period end contributing GBP7.1m sales
o 25 Big Box stores at publication date with further 20 targeted
in 2019
-- Developed and launched new store equipment in-house, saving c.GBP50k per refit
-- Successful roll out of new till system across retail estate
-- Rent on renewals fell on average by 23.1%, equivalent to a full year saving of GBP431k
-- Outstanding average lease length of 2.1 years
-- Digital revenue increased 19.9% to GBP9.8m (2017: GBP8.2m)
achieving profit contribution of GBP2.6m (2017: GBP2.0m)
Nick Davis, Chief Executive of Shoe Zone plc, said:
"I am pleased to report that 2018 has been another successful
year for Shoe Zone with the Group delivering a record Profit before
Tax since IPO driven from a strong performance throughout the
business while operating in a challenging consumer environment.
"This positive performance is testament to the strength of the
core business model and the effective focus on growing the Big Box
and Digital channels. As a result of the strong performance, the
Board is pleased to again return excess cash to shareholders by way
of special dividend.
"We continue to make good progress against our strategic
objectives and the Board remains positive about the outlook for the
Group. We are incredibly proud of all of our team's effort in
delivering this progress and would like to thank them for all of
their hard work."
There will be a presentation for analysts at the offices of FTI
Consulting, 200 Aldersgate, London, EC1A 4HD, at 9:30am on 09
January 2019.
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please call:
Shoe Zone plc Tel: +44 (0)116 222
Anthony Smith (Chairman) 3000
Nick Davis (CEO)
Jonathan Fearn (CFO)
FinnCap Limited (Nominated Adviser & Broker) Tel: +44 (0)20 7220
Matt Goode 0500
Carl Holmes
Hannah Boros
FTI Consulting (Financial PR) Tel: +44 (0)20 3727
Jonathon Brill 1000
Alex Beagley
Eleanor Purdon
Alice Newlyn
About Shoe Zone
Shoe Zone is the largest specialist value footwear retailer,
offering low price and high quality footwear for the whole
family.
The Group operates from a portfolio of around 500 stores and
employs approximately 3,500 employees across the UK and the
Republic of Ireland.
Shoe Zone's website, www.shoezone.com, combined with our
extensive store portfolio, gives customers the opportunity to shop
across multiple channels.
Shoe Zone sells approximately 20 million pairs of shoes per
annum with an average retail price per pair of shoes of around
GBP10. The Group maintains low retail prices due to high volumes
ordered, direct sourcing from factories and a low product line
count.
Chief Executive's report
I am pleased to report that 2018 has been another successful
year for Shoe Zone plc. The strength of the core business model,
combined with the focus on growth through the Big Box roll out and
Digital channels, gives me confidence that Shoe Zone will continue
to deliver positive results and returns for shareholders in the
future.
The business delivered revenue growth of 1.8% at GBP160.6m
(2017: GBP157.8m) and continues to generate cash effectively with
cashflow from operations up 7.2% to GBP15.0m (2017: GBP14.0m) from
a robust debt free balance sheet.
Statutory profit before tax has increased 18.4% from GBP9.5m to
GBP11.3m, the highest annual performance since flotation in 2014,
reflecting strong performance throughout the business. Diluted
earnings per share increased 20.7% from 15.8p to 19.0p.
Dividends
The board remains committed to delivering positive dividend
growth to shareholders. In recent years, the strategy has been to
pay out approximately 60% of post-tax earnings as a normal dividend
and any surplus cash above GBP11m as a special dividend.
For the year ended 29 September 2018, the board is proposing to
pay out 60% of post-tax earnings as a normal dividend. This results
in a final dividend of 8p per share (2017: 6.8p), giving a total
dividend for the year of 11.5p (2017: 10.2p) per share.
In addition, I am pleased to confirm a special dividend of 8p
per share, returning GBP4m of surplus cash to shareholders.
The dividends will be paid to shareholders on the register on 1
March 2019, payable on 20 March 2019 if approved at the Annual
General Meeting which will be held on 7 March 2019. The shares will
go ex-dividend on 28 February 2019.
Strategy
The Shoe Zone strategy has three key objectives
-- Growth through Big Box
-- Growth through Operational Excellence
-- Growth through Digital
Growth through Big Box
The Big Box portfolio has expanded by 10 stores to a total of 19
stores operational at year end (25 stores operational by 31
December 2018). Following the successful trial, the concept now
provides a clear path for growth through diversification into out
of town retail and a proposition attractive to a more affluent
customer base. The pipeline of new store openings is well developed
and it is anticipated that this will further grow and accelerate
during 2019, with a target of 20 stores opening during the coming
calendar year. Big Box stores are already delivering a significant
contribution to the Group's revenue and profits with GBP7.1m of
revenue and GBP0.4m of profit contribution in the period,
representing 4.4% of total revenue and over 2.3% of branch cash
contribution during 2018.
The profitability and payback of the Big Box stores continue to
be a focus for the business. During 2018 we redesigned the in-store
fixtures so that they can be used across the full Shoe Zone estate.
The new 'Unity' equipment has resulted in capital expenditure
savings of over GBP50k per Big Box.
During the year we also added new brands into the Big Box range.
Wrangler and Crocs have now joined Skechers and Clarks amongst
others, to provide a premium offering that complements the core
own-brand Shoe Zone styles. In the Spring Summer range for 2019 we
will also offer an own label premium range 'Lilley and Skinner' in
Ladies shoes, which will provide a higher gross margin.
Growth through Operational Excellence
Systems
During 2018 we successfully rolled out new till hardware and
software upgrades which improved the speed of transactions in
store, reduced the need for paper forms and increased digital
integration in store. Customers wishing to join the email database
are now able to enter their own details using the new customer
facing touch screens.
The software upgrades further enhance our already market leading
systems, all of which are programmed and managed by our in house IT
department. During 2019 we will bring the Group's warehouse
management system in house meaning that all operational systems
will be controlled within Shoe Zone.
Systems across the business are fully integrated so that we have
a single view of stock across retail, the warehouse and digital. We
can also identify when we need to recall stock from stores with low
sales or a fragmented size range and consolidate and reallocate to
better stores. On average we recall 30,000 pairs per week.
During the past 12 months we have also further enhanced our
stock and picking systems to enable consolidation of digital and
main warehouse stock therefore increasing picking efficiency and
supporting flexibility of tasks within the warehouse teams. Within
our Distribution Centre, we hold on average 1,000,000 pairs with
throughput of 800,000 pairs per week. We achieved a pick accuracy
of 99.96% in 2018.
Product
We remain committed to offering our customers the best possible
value and have maintained key price points for our core value
lines. We have increased the number of lines in "Multi-Buy" deals
(e.g. '2 for GBP20'), which alongside on-going range improvements
has increased average transaction value by 4.7% during the year to
GBP12.98.
Direct sourcing continues to grow with footwear orders placed
directly with overseas factories increasing to 85.0% (2017: 84.7%)
of total footwear orders. Working closely with our source of
manufacture has helped maintain high gross product margins as well
as improving communication and control across the supply chain. A
demonstration of our commitment to quality is shown by our
complaints level of less than 1%, which is half of the industry
average.
Our 'right price, first time' strategy which helps control the
amount of markdown value as a percentage of turnover, continues to
ensure we remain one of the industry leaders in low levels of
markdown at 7.9% (2017: 7.6%).
Store Portfolio
We ended the year operating from 492 stores having opened 16 and
closed 20 during the period. 10 of the openings were the continued
roll out of Big Box and the remaining six were the new Unity Town
Centre format.
The core estate continues to be invested in and refreshed. Total
capital spend of GBP5.1m included the 16 new openings, 23 full
refits, continued rebranding of the estate and the roll out of new
tills. This capital outlay was partially offset by GBP1.5m in rent
free during the first year of opening.
The focus on managing property costs has resulted in rents at
the lease renewal date falling by 23.1% in the 12 month period
(2017: reduction of 24.5%) delivering GBP431k of annual savings. We
expect that this trend will continue as supply in the retail
property market continues to outstrip demand.
The business continues to benefit from a flexible portfolio with
an average lease length of 2.1 years which gives us significant
opportunity to respond to changes in shopping patterns in any
retail locations at short notice.
Growth through Digital
Digital continues to be a key area of focus and growth for the
business. Our market leading customer offer provides the choice of
ordering on-line or in-store, and to have products delivered free
of charge, with no minimum spend limit, or to click and collect
from a Shoe Zone store. Returns can be made either free to store or
our Distribution Centre.
Digital revenue has increased 19.9% year on year to GBP9.8m,
(2017: GBP8.2m) representing 6.1% of revenue and now delivers over
GBP2.6m (2017: GBP2.0m) profit contribution before Head Office
apportioned costs, representing 23.1% of total profit.
Shoezone.com has had another successful year and we continue to
see the gradual shift towards mobile devices. Mobile and tablet
visits now represent 79.0% (2017: 78.9%) of all website visits.
We continue to focus on engaged customers and emails sent have
increased by 26.2%, resulting in a sales increase of 18.8% on the
prior year, now accounting for 7.8% of all site revenue. The new
in-store tills rolled out as part of the Operational Excellence
strategy allow customers to enter their own email addresses using
the customer facing touch screen, therefore reducing the time
required to register new customers.
Overall conversion rates remained broadly static at 4.13% over
the full year (2017: 4.18%). The 'mobile first' design and
implementation continues to deliver strong results with an increase
in conversion to 3.68% (2017: 3.55%), however desktop conversion
has fallen marginally.
In addition to growth in sales, we continue to manage the
profitability of our Digital channel. During 2018, we have
introduced an integrated management structure under our new
Operations Director, aligning both Retail and Digital warehouse
activities and consolidation of stock into single pick
locations.
Digital purchase returns continue to be low at less than 11% of
online sales with 90% of these returns being taken back to store
rather than the Distribution Centre.
Social Responsibility
We are incredibly proud of all of our team's effort in achieving
these results and want to thank them for their on-going commitment
and hard work.
During 2018 Shoe Zone plc donated over GBP100,000 to charitable
causes. We also continue to support BBC Children in Need and the
enthusiasm and commitment of our colleagues has resulted in us
collectively raising over GBP650,000 for our chosen charity in the
last five years.
We recognise the impact of our activities on the environment and
recycle as much of our waste as possible. We are actively reducing
the use of plastic within our stores and the delivery lorries
return used cardboard, plastics, fluorescent lighting tubes and
obsolete equipment for reuse or recycling.
In our refits we are now using LED lighting in order to reduce
energy consumption and are also working with the shoe manufacturers
to reduce the use of single use plastics in packaging of new
products.
We are also transitioning our car fleet to hybrid cars wherever
possible.
Current trading and Outlook
The outlook for consumer spending remains challenging with the
difficult economic conditions likely to continue. Despite this, we
are well positioned given our strong value retail proposition that
has proven to be robust in challenging market conditions.
We have continued to manage the store portfolio having opened
six new Big Box stores and refitted a further four Shoe Zone stores
since year-end. In total, we are targeting to have 45 Big Box
stores open by December 2019 of which there are currently 12 with
provisional opening dates. A further 35 full refits are planned for
the remainder of the year
We expect the business to continue to have strong cash
conversion and anticipate capital expenditure will continue at
current levels as we maintain the standard of the store
portfolio.
Shoe Zone has made a solid start to the year and is trading
ahead of previous market expectations. We are making good progress
against our strategic objectives and the Board remains positive
about the outlook for the remainder of the year.
Financial review
In the 52 weeks to 29 September 2018, Profit before Tax
increased from GBP9.5m to GBP11.3m, an increase of 18.4%. This is
due to strong trading in all areas of the business, supported by
stability in the exchange rate across the year. Earnings per share
increased by 20.7% to 19.0p (2017: 15.8p)
Revenues increased by 1.8% to GBP160.6m (2017: GBP157.8m). This
reflects solid trading throughout the portfolio supported by
digital growth and new openings of Big Box stores.
Overall store numbers reduced by a net four branches to 492 at
the year end (2017: net 14 branches closed leaving a total of
496).
Digital growth has proved strong with revenues increasing by
19.9% (2017: 34.5%), and this has now developed to account for 6.1%
of total sales (2017: 5.3%). Profit contribution from Digital
increased to GBP2.6m (2017: GBP2.0m) in the year.
Product gross margin remained strong at 62.9% (2017: 63.2%),
reflecting a continued focus in direct sourcing, successful
negotiations with suppliers and management of write downs. The
slight fall year on year reflects an increase in multi buy
promotions for example 2 for GBP20 and the impact of lower branded
margins.
Operating expenses decreased to GBP19.1m (2017: GBP20.3m).
Administration expenses decreased by GBP1.4m primarily due to the
reduced impact of foreign exchange differences and a reduction in
professional charges offset by planned increases in digital
operational costs. Distribution Costs remained broadly flat year on
year with staff cost increases being partially offset by warehouse
efficiencies.
The effective rate of corporation tax for the year was 19.4%
(2017: 19.8%).
During the year capital expenditure was GBP5.0m (2017: GBP5.1m).
This included on-going investment in the portfolio, opening 16 new
stores, 23 refits, and the roll out of a new till system across all
stores.
The pension liability has fallen by GBP0.8m from GBP7.1m to
GBP6.3m due mainly to an increase in the yield performance of
corporate bonds.
The derivative financial asset of GBP1.4m, compared to a GBP2.5m
liability in prior year, represents the mark to market valuation of
the derivative hedges in place at the end of the financial year. As
outlined in the annual report, Shoe Zone only hedges against future
dollar purchases of goods for resale, all hedges in place will be
effective upon their delivery date.
The Group uses derivative financial instruments, typically
forward exchange contracts, to hedge the risk of future foreign
currency fluctuations. The hedging policy enables the effective
portion of changes in the fair value of designated derivatives to
be recognised in other comprehensive income. Historically these
movements would have been recognised in the Income Statement.
Further information can be seen in accounting policies in note 1 of
the financial statements.
The Company generated GBP15.0m cash from operations, a year on
year increase of GBP1.0m resulting in a net cash position of
GBP15.7m (2017: GBP11.8m) at the year end, underpinning a strong
debt free balance sheet. The Group's current bank facilities
consist of an on demand overdraft facility of GBP5.0m with HSBC.
This facility has not been used within the year.
The Board is proposing a final dividend of 8.0p (2017: 6.8p) per
share, resulting in a total dividend for the year of 11.5p (2017:
10.2p) per share. In addition, the closing cash position of
GBP15.7m gives surplus cash of GBP4m which will be returned to
shareholders in the form of a special dividend of 8p per share. The
Board continues to believe the business can operate on an
opening/closing cash position of GBP11m and any excess above this
level will be paid out to shareholders unless there is a change in
business requirement.
The dividends will be paid to shareholders on the register on 1
March 2019, payable on 20 March 2019 if approved at the Annual
General Meeting to be held on 7 March 2019. The shares will go
ex-dividend on 28 February 2019.
Consolidated income statement for the 52 weeks ended 29
September 2018
Note
52 weeks 52 weeks
ended ended
29 September 30 September
2018 2017
GBP'000 GBP'000
Revenue 2 160,615 157,777
Cost of sales (130,086) (127,657)
--------------- ---------------
Gross profit 30,529 30,120
Administration expenses (13,070) (14,454)
Distribution costs (6,048) (5,872)
--------------- ---------------
Profit from operations 11,411 9,794
Finance income 31 15
Finance expense (187) (306)
--------------- ---------------
Profit before taxation 11,255 9,503
Taxation (1,738) (1,620)
--------------- ---------------
Profit attributable to equity holders of
the parent 9,517 7,883
=============== ===============
Earnings per share - basic and diluted 19.03p 15.77p
=============== ===============
Consolidated statement of total comprehensive income for the 52
weeks ended 29 September 2018
Note 52 weeks 52 weeks
ended ended
29 September 30 September
2018 2017
GBP'000 GBP'000
Profit for the period 9,517 7,883
Items that will not be reclassified subsequently
to the income statement
Remeasurement gains on defined benefit
pension scheme 295 5,608
Movement in deferred tax on pension schemes (50) (1,217)
Items that will be reclassified subsequently
to the income statement
Fair value movements on cash flow hedges 232 (934)
Cash flow hedges recognised in inventories 2,958 (1,233)
Tax on cash flow hedges (548) 377
Other comprehensive income for the period 2,887 2,601
--------------- ---------------
Total comprehensive income for the period
attributable
to equity holders of the parent 12,404 10,484
=============== ===============
Consolidated statement of financial position as at 29 September
2018
Note 52 weeks 52 weeks
ended ended
29 September 30 September
2018 2017
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 21,103 20,783
Deferred tax asset 703 861
Total non-current assets 21,806 21,644
--------------- ---------------
Current assets
Inventories 27,804 28,017
Trade and other receivables 6,229 6,108
Derivative financial assets 1,383 -
Cash and cash equivalents 15,682 11,786
Total current assets 51,098 45,911
--------------- ---------------
Total assets 72,904 67,555
--------------- ---------------
Current liabilities
Trade and other payables (25,016) (23,576)
Provisions (689) (829)
Derivative financial liability - (2,546)
Corporation tax liability (550) (474)
Total current liabilities (26,255) (27,425)
--------------- ---------------
Non-current liabilities
Trade and other payables (1,649) (1,742)
Provisions (290) (120)
Employee benefit liability (6,296) (7,108)
Total non-current liabilities (8,235) (8,970)
Total liabilities (34,490) (36,395)
--------------- ---------------
Net assets 38,414 31,160
=============== ===============
Equity attributable to equity holders
of the company
Called up share capital 5 500 500
Merger reserve 2,662 2,662
Cash flow hedge reserve 1,123 (1,520)
Retained earnings 34,129 29,518
--------------- ---------------
Total equity and reserves 38,414 31,160
=============== ===============
Consolidated statement of changes in equity for the 52 weeks
ended 29 September 2018
Share capital Merger Cash flow hedge Retained earnings Total
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2016 500 2,662 270 26,344 29,776
Profit for the period - - - 7,883 7,883
Defined benefit
pension movements - - - 5,608 5,608
Cash flow hedge
movements - - (2,167) - (2,167)
Deferred tax on other
comprehensive income - - 377 (1,217) (840)
Total comprehensive
income for the period - - (1,790) 12,274 10,484
--------------- ---------- ----------------------- ------------------- ---------
Dividends paid during
the year (note 3) - - - (9,100) (9,100)
--------------- ---------- ----------------------- ------------------- ---------
Total contributions by
and distributions to
owners - - - (9,100) (9,100)
--------------- ---------- ----------------------- ------------------- ---------
At 30 September 2017 500 2,662 (1,520) 29,518 31,160
Profit for the period - - - 9,517 9,517
Defined benefit
pension movements - - - 295 295
Cash flow hedge
movements - - 3,191 - 3,191
Deferred tax on other
comprehensive income - - (548) (51) (599)
--------------- ---------- ----------------------- ------------------- ---------
Total comprehensive
income for the period - - 2,643 9,761 12,404
--------------- ---------- ----------------------- ------------------- ---------
Dividends paid during
the year (note 3) - - - (5,150) (5,150)
--------------- ---------- ----------------------- ------------------- ---------
Total contributions by
and distributions to
owners - - - (5,150) (5,150)
--------------- ---------- ----------------------- ------------------- ---------
At 29 September 2018 500 2,662 1,123 34,129 38,414
--------------- ---------- ----------------------- ------------------- ---------
Share capital comprises nominal value of shares subscribed
for.
The merger reserve has arisen as a result of the application of
merger accounting to the group reorganisation of 26 March 2014.
The cash flow hedge reserve comprises of gains/losses arising on
the effective portion of hedging instruments and is carried at fair
value in a qualifying cash flow hedge.
Retained earnings are all other net gains and losses and
transactions with owners (e.g. dividends) not recognised
elsewhere.
Consolidated statement of cash flows for the 52 weeks ended 29
September 2018
Note 52 weeks 52 weeks
ended 29 September 2018 ended 30 September 2017
GBP'000 GBP'000
Operating activities
Profit after taxation 9,517 7,883
Corporation tax 1,738 1,620
Finance income (31) (15)
Finance expense 187 306
Depreciation of property, plant and equipment 3,097 2,962
Fixed asset impairment and loss on disposal of
property, plant and equipment 430 188
Pension contributions paid (704) (649)
14,234 12,295
(Increase) / decrease in trade and other
receivables (146) 1,084
(Increase) / decrease in foreign exchange contract (709) 321
Decrease in inventories 182 2,767
Increase / (decrease) in trade and other payables 531 (2,467)
Increase / (decrease) in provisions 859 (48)
717 1,657
Cash generated from operations 14,951 13,952
Income taxes paid (2,096) (2,990)
-------------------------- --------------------------
Net cash flows from operating activities 12,855 10,962
-------------------------- --------------------------
Investing activities
Purchase of property, plant and equipment (5,094) (5,137)
Sale of property, plant and equipment 1,254 -
Interest received 31 15
-------------------------- --------------------------
Net cash used in investing activities (3,809) (5,122)
-------------------------- --------------------------
Financing activities
Dividends paid during the year 3 (5,150) (9,100)
Net cash used in financing activities (5,150) (9,100)
-------------------------- --------------------------
Net increase in cash and cash equivalents 3,896 (3,260)
Cash and cash equivalents at beginning of period 11,786 15,046
-------------------------- --------------------------
Cash and cash equivalents at end of period 15,682 11,786
========================== ==========================
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
company registered number of the Company is 08961190.
The Company and its subsidiaries' (collectively the Group)
principal activity is a footwear retailer in the United Kingdom and
the Republic of Ireland.
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 29 September 2018.
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards and
Interpretations (collectively IFRSs) issued by the Internal
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 company's accounting policies.
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 29 September 2018. 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
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Changes in accounting policies
The Group has not early adopted the following new standards,
amendments or interpretations that have been issued but are not yet
effective. The Directors anticipate that the adoption of these
standards will not result in significant changes to the Group's
accounting policies. The Group has commenced its assessment of the
impact of these standards but is not yet in a position to state
whether these standards would have a material impact on its results
of operations and financial position.
Standards, amendments and interpretations which are not
effective or early adopted by the Group
Standards or amendments that are applicable but that are not
effective and have not been early adopted are as follows:
IFRS 16 'Leases'. This Standard is effective for the Group for
the 52 week financial period ending 3 October 2020 and will require
a significant change in the accounting and reporting of leases for
the Group. The standard will require lessees to recognise assets
and liabilities for all leases, with the exception of low value
leases or where the lease term is 12 months or less. The impact on
the Group is currently being assessed and it is not yet practicable
to quantify the effect of the standard on these consolidated
financial statements.
IFRS 9 'Financial Instruments' replaces IAS 39 'Financial
Instruments: Recognition and Measurement' and is effective for the
Group for the 53 week financial period ending 5 October 2019. The
main change for the Group is a simplification of hedge accounting
rules. As a result, the impact of the change on the Group is
minimal, and will result in no changes in disclosure.
IRFS 15 'Revenue from Contracts with Customers'. This is
effective for the 53 week financial period ending 5 October 2019,
and requires revenue generated from contracts with customers to
more accurately reflect the economic reality. This standard will
not have any impact on the Group's revenues, as all of the Group's
revenue relates to the sale of products made directly to customers
either in store or online, no contracts are in place for any
revenue generated.
The group has not early adopted any IFRSs or IFRS
interpretations.
There have been no changes to standards during the year that
affect the Group.
Revenue
Revenue is measured at the fair value of consideration received
or receivable net of discounts, returns and VAT. Revenue is
recognised when the company has transferred the significant risks
and rewards of ownership to the buyer at the point of sale in the
shop. At the point of sale a provision is made for the level of
expected returns based on previous experience.
Internet sales are recognised when the goods have been paid for,
despatched and received by the customer.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment so as to write off their carrying value over the expected
useful economic lives. It is provided at the following rates:
Leasehold improvements - 5-10 years on a straight line basis
Fixtures and fittings - 5-10 years on a straight line basis
Motor vehicles - 3-5 years on a straight line basis
No depreciation is provided against freehold land. Depreciation
is provided against freehold shop properties writing off the
original cost less estimated residual value over the useful
economic life of the property which is estimated to be 50
years.
Leased assets
Where substantially all of the risks and rewards incidental to
ownership of a leased asset have been transferred to the Shoe Zone
plc Group (a 'finance lease'), the asset is treated as if it had
been purchased outright.
The amount initially recognised as an asset is the lower of the
fair value of the leased property and the present value of the
minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease
payments are analysed between interest and capital. The interest
element is charged to the consolidated income statement over the
period of the lease and is calculated so that it represents a
constant proportion of the lease liability. The capital element
reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an 'operating lease'),
the total rentals payable under the lease are charged to the
consolidated income statement on a straight-line basis over the
lease term. The aggregate benefit of lease incentives is recognised
as a reduction of the rental expense over the lease term on a
straight-line basis.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed 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
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.
Loans and receivables
Cash and cash equivalents include cash in hand and deposits held
at call with banks.
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.
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
remeasured 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.
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 period. Foreign currency monetary assets
and liabilities are translated at the rates ruling at the reporting
date.
Foreign exchange differences are recognised in the profit and
loss account.
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 statement of comprehensive income 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 profit or loss,
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 period.
Gains or losses arising from changes to scheme benefits or
scheme curtailments are recognised immediately in profit or
loss.
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 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 Officer,
Chief Financial Officer and Chief Operating Officer.
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. 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 29 ended
September 30 September
2018 2017
GBP'000 GBP'000
External revenue by location of customers:
United Kingdom 156,165 152,562
Republic of Ireland 4,220 4,991
Other 230 224
------------ ---------------
160,615 157,777
============ ===============
There are no customers with turnover in excess of 10% or more of
total turnover.
52 weeks 52 weeks
ended 29 ended
September 30 September
2018 2017
GBP'000 GBP'000
Non-current assets by location:
United Kingdom 21,091 20,499
Republic of Ireland 12 284
21,103 20,783
============ ===============
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.
3 Dividends
52 weeks 52 weeks
ended ended
29 September 30 September
2018 2017
GBP'000 GBP'000
Dividends paid during the year at 10.3p (2017:
18.2p) per share 5,150 9,100
=============== ===============
A final dividend of 8.0p (2017: 6.8p) per share is proposed for
shareholders on the register on 1 March 2019 payable on 20 March
2019 following approval at the Annual General Meeting on 7 March
2019.
A special dividend of 8.0p (2017: Nil) per share is proposed for
shareholders on the register on 1 March 2019 payable on 20 March
2019 following approval at the Annual General Meeting on 7 March
2019.
4 Contingent liabilities
The Shoe Zone plc Group and subsidiary undertakings have given a
duty deferment guarantee in favour of HM Revenue and Customs
amounting to GBP800,000 (30 September 2017: GBP800,000).
5 Share Capital
29 30
September September
2018 2017
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 29 ended 30
September September
2018 2017
GBP'000 GBP'000
Numerator
Profit for the year and earnings used in basic
and diluted EPS 9,517 7,883
============ ============
29 30
September September
2018 2017
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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKFDPPBKDFDK
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January 09, 2019 02:00 ET (07:00 GMT)
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