Share Name Share Symbol Market Type Share ISIN Share Description
Shoe Zone Plc LSE:SHOE London Ordinary Share GB00BLTVCF91 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.50p +0.26% 193.50p 192.00p 195.00p 193.50p 193.00p 193.00p 17,288 16:21:44
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Retailers 160.6 11.3 19.0 10.2 97

Shoe Zone PLC Interim Results

21/05/2019 7:00am

UK Regulatory (RNS & others)


Shoe Zone (LSE:SHOE)
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6 Months : From Feb 2019 to Aug 2019

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TIDMSHOE

RNS Number : 6072Z

Shoe Zone PLC

21 May 2019

21 May 2019

Shoe Zone plc

Interim Results

Shoe Zone plc ("Shoe Zone", the "Company" or the "Group") the leading UK value footwear retailer, is pleased to announce its Interim Results for the six months to 30 March 2019.

Financial Highlights

   --      Revenue of GBP73.0m (2018 H1: GBP73.7m) 
   --      Strong product gross margins at 62.0% (2018 H1: 60.6%) 
   --      Statutory Profit before tax of GBP1.0m (2018 H1: GBP1.0m) 
   --      Net cash of GBP3.3m (2018 H1: GBP5.9m) 
   --      Statutory earnings per share of 1.65p (2018 H1: 1.70p) 
   --      Interim dividend maintained at 3.5p per share (2018 H1: 3.5p per share) 

Operational Highlights

   --      Rent on renewals fell on average by 18.5%, equivalent to a full year saving of GBP334k 
   --      Rent as a percentage of turnover remained static at 11.9% (2018 H1: 12.0%) 

-- Operating from 26 Big Box locations at period end contributing GBP5.5m revenue in H1 and GBP0.4m of cash contribution

-- Will be operating from 33 Big Box stores at end of May, on track to meet targeted 45 by the end of 2019

   --      Trials initiated for new Hybrid store format 

-- Digital sales increased by 4.9% to GBP5.0m (2018 H1: GBP4.8m) achieving profit contribution of GBP1.5m (2018 H1: GBP1.2m)

Nick Davis, Chief Executive of Shoe Zone plc, said:

"The first half of our financial year has been positive for the Group, trading in line with management's expectations and achieving profitable revenue growth in our two key growth areas of Digital and Big Box.

Our ongoing strategic focus continues to be on the Big Box roll out with a target of 45 stores by the end of December 2019. This is progressing to plan and we will be operating from 33 Big Box stores by the end of May.

Additionally, our refreshed digital strategy has also generated profitable growth, laying the foundation for a positive outlook for the rest of the year. This good performance also reflects our close management of costs and ability to maintain appealing key price-points and multi-buy offers for our customers. Additionally, we have experienced lower administration costs due to careful control of property costs and beneficial reduction in foreign exchange.

Trading momentum has continued into the second half, in line with market expectations. With our growth strategy in place, we believe we are favourably insulated against many of the structural sector issues and the Board continues to look to the future with confidence."

There will be a presentation for analysts at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD, at 9:00am on 21 May 2019.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via regulatory news service this inside information is now considered to be in the public domain.

For further information, please call:

 
 Shoe Zone plc                            Tel: via FTI Consulting 
  Nick Davis (CEO) 
  Jonathan Fearn (CFO) 
 Finncap (Nominated Advisor and Broker)   Tel: +44 (0)20 7220 
  Matt Goode (Corporate Finance)           0500 
  Carl Homes (Corporate Finance) 
  Hannah Boros (Corporate Finance) 
  Alice Lane (ECM) 
 FTI Consulting (Financial PR)            Tel: +44 (0)20 3727 
  Jonathon Brill                           1000 
  Alex Beagley 
  Eleanor Purdon 
  Alice Newlyn 
 

Chief Executive's Statement

Introduction

Shoe Zone is the leading UK 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 online offering, combined with its extensive store portfolio, enables it to provide a truly multi-channel shopping experience to its customers.

Financial Summary

In the six months to 30 March 2019, the Company generated revenues of GBP73.0m (2018 H1: GBP73.7m) and profit before tax of GBP1.0m (2018 H1: GBP1.0m). This performance reflects the focus on our strategy of growth through the roll out of the Big Box format stores, Operational Excellence and Digital.

Cash generation continues to be a focus and the Group had net cash of GBP3.3m (2018 H1: GBP5.9m) at 30 March 2019 with no bank debt. The adverse variance to last year is due to increased capital expenditure, the GBP4m special dividend paid in 2019 and GBP1.2m of freehold disposal proceeds during 2018.

Management continues to monitor all costs closely and these remain tightly controlled.

Dividend

The Board is declaring an interim dividend of 3.5 pence per share (2018 H1: 3.5p per share). This will be paid on 14 August 2019 to shareholders on the register on 19 July 2019. The shares will go ex-dividend on 18 July 2019.

Growth through Big Box

The roll out of the Big Box format continues to deliver exciting growth opportunities for Shoe Zone. The number of operational stores has increased by seven to 26 at 30 March 2019 with a very strong pipeline through the remainder of 2019 and beyond. We are confident that we will achieve our target of 20 new openings during the current financial year.

Big Box stores generated GBP5.5m revenue and GBP0.4m cash contribution in the 26 weeks representing 7.6% of total turnover and 3.5% of total cash contribution. This compares to 4.4% of total revenue and 2.3% of cash contribution for the full year 2017/18.

During the period we also continued the development of our own label premium brands, Lilley and Skinner and Comfy Steps. These will form part of the Spring Summer season with 23 lines and 19,000 pairs available in store and online. Initial performance of these lines at the commencement of the season has proved positive.

In addition to the Big Box formats we are also trialling a 'Hybrid' concept in more affluent demographic areas which encapsulates the look and feel of a Big Box store in a High Street or Shopping Centre environment. The stores sell all the Shoe Zone range and Big Box brands where the additional brand presence in the locality does not conflict with other retailers. This trial is still in its infancy but initial results are encouraging.

Growth through Digital

Digital revenue has grown by 4.9% to GBP5.0m (2018 H1: GBP4.8m) and profit contribution has grown by 19.9% to GBP1.5m (2018 H1: GBP1.2m), comparable revenue growth of 8.3%.

We continue to focus on the growth of our email database and during the 26 weeks achieved growth of over 250k new customers with 92% of new sign ups as a result of contact in store. The total number of active users in the database is now 501,000. The growth in our database, and a 42.3% rise in our targeted email promotions, has meant that we have been able to increase the impact of our email promotions to deliver a 13.8% increase in email revenue.

The range of products we sell exclusively online has grown by 185% since October 2018 and associated revenue delivered for the period has risen by 150% year on year. New product ranges such as Ruby Shoo and Rocket Dog have been successfully introduced and we anticipate that this broadening of the Digital offering will continue to accelerate with our Digital shoe buyer now on-board.

Growth through Operational Excellence

Product

We remain committed to offering our customers the best value possible and have maintained key price points for our Core Value lines. We have increased the number of lines offering 'Multi-Buy' deals (e.g. '2 for GBP20') which alongside on-going range improvements has increased average transaction value by 4.82% during the year to GBP13.91.

We have continued to increase our direct sourcing and as a result, footwear orders placed directly with overseas factories increased to 87.6% (2018 FY: 87.1%) of total footwear orders. Working closely with manufacturers has helped grow gross product margins as well as improving communication and control across the supply chain. As a result, product gross margin performance improved by 1.4 percentage points in the period to 62.0% (2018 H1: 60.6%).

Property

We ended the period operating from 495 stores having opened nine, all of which were Big Box format, and closed six.

The core estate continues to be invested in and refreshed. Total capital spend of GBP3.2m included the nine Big Box openings, one relocation, 12 full refits and the continued rebranding of the remaining estate.

Rents on renewal fell by 18.5%, equivalent to a full year saving of GBP334k. Total rents remain tightly controlled at 11.9% of turnover and the average outstanding lease length on the portfolio has reduced to 2.0 years (2018 FY: 2.1 years).

Current trading and outlook

Trading in the first half of the year was in line with management's expectations and this has continued into the second half. The progress being made through the current growth strategy, including management of the cost base and particularly the property portfolio, coupled with the fundamental strengths of the business model provides the Board with confidence that Shoe Zone is insulated against many of the structural issues faced by other retailers. The Board would like to thank all of Shoe Zone's teams and business partners for their hard work in the first half of the financial year.

Unaudited consolidated income statement

 
 
                                            Note     26 weeks     26 weeks    52 weeks 
                                                     ended 30     ended 31    ended 29 
                                                   March 2019   March 2018   September 
                                                                                  2018 
                                                      GBP'000      GBP'000     GBP'000 
    Revenue                                  2         72,995       73,672     160,615 
    Cost of sales                                    (63,453)     (63,634)   (130,086) 
                                                  -----------  -----------  ---------- 
    Gross profit                                        9,542       10,038      30,529 
    Administration expenses                           (5,508)      (6,067)    (13,070) 
    Distribution costs                                (2,987)      (2,928)     (6,048) 
                                                  ----------- 
    Profit from operations                              1,047        1,043      11,411 
    Finance income                                         56            7          31 
    Finance expense                                      (87)         (95)       (187) 
                                                  -----------  -----------  ---------- 
    Profit before taxation                              1,016          955      11,255 
    Taxation                                 4          (193)        (104)     (1,738) 
                                                  -----------  -----------  ---------- 
    Profit attributable to equity holders 
     of the parent                           5            823          851       9,517 
                                                  ===========  ===========  ========== 
 
 
    Earnings per share - basic and 
     diluted                         51.65p  1.70p  19.03p 
                                      =====  =====  ====== 
 

Unaudited consolidated statement of total comprehensive income

 
                                                               26 weeks         26 weeks                52 weeks 
                                                         ended 30 March   ended 31 March      ended 29 September 
                                                                   2019             2018                    2018 
                                                                GBP'000          GBP'000                 GBP'000 
Profit for the period                                               823              851                   9,517 
                                                        ---------------  ---------------  ---------------------- 
Items that will not be reclassified subsequently to 
the income statement 
Remeasurement gains and losses on defined benefit 
 pension scheme                                                   (611)              840                     295 
Movement in deferred tax on pension schemes                         340               60                    (50) 
Cash flow hedges 
Fair value movements in other comprehensive income              (4,082)            2,578                     232 
Cash flow hedges recognised in inventories                        1,930          (2,333)                   2,958 
Tax on cash flow hedges                                             180            (327)                   (548) 
                                                        --------------- 
Other comprehensive (expense) / income for the period           (2,243)              818                   2,887 
                                                        ---------------  ---------------  ---------------------- 
Total comprehensive (expense) / income for the period 
 attributable to equity holders of the parent                   (1,420)            1,669                  12,404 
                                                        ===============  ===============  ====================== 
 

Unaudited consolidated statement of financial position

 
 
                                                  Notes  26 weeks ended 30   26 weeks  52 weeks ended 29 September 
                                                                     March   ended 31                         2018 
                                                                      2019      March 
                                                                                 2018 
                                                                   GBP'000    GBP'000                      GBP'000 
Assets 
Non-current assets 
Property, plant and equipment                                       22,762     20,430                       21,103 
Deferred tax asset                                                     736        932                          703 
                                                         -----------------  ---------  --------------------------- 
Total non-current assets                                            23,498     21,362                       21,806 
                                                         -----------------  ---------  --------------------------- 
Current assets 
Inventories                                                         27,576     25,171                       27,804 
Trade and other receivables                                          5,775      5,335                        6,229 
Derivative financial assets                         3                1,500          -                        1,383 
Corporation tax asset                                                    -        411                            - 
Cash and cash equivalents                                            3,311      5,900                       15,682 
                                                         -----------------  ---------  --------------------------- 
Total current assets                                                38,162     36,817                       51,098 
                                                         -----------------  ---------  --------------------------- 
Total assets                                                        61,660     58,179                       72,904 
                                                         -----------------  ---------  --------------------------- 
Current liabilities 
Trade and other payables                                          (21,988)   (17,638)                     (25,016) 
Provisions for liabilities and charges                               (268)      (715)                        (689) 
Derivative financial liability                      3                    -    (2,520)                            - 
Corporation tax liability                                            (118)          -                        (550) 
Total current liabilities                                         (22,374)   (20,873)                     (26,255) 
                                                         -----------------  ---------  --------------------------- 
Non-current liabilities 
Trade and other payables                                           (1,913)    (1,743)                      (1,649) 
Provisions for liabilities and charges                               (420)      (123)                        (290) 
Employee benefit liability                                         (7,959)    (6,011)                      (6,296) 
Total non-current liabilities                                     (10,292)    (7,877)                      (8,235) 
Total liabilities                                                 (32,666)   (28,750)                     (34,490) 
                                                         -----------------  ---------  --------------------------- 
Net assets                                                          28,994     29,429                       38,414 
                                                         =================  =========  =========================== 
Equity attributable to equity holders of the 
company 
Called up share capital                                                500        500                          500 
Share premium reserve                                                2,662      2,662                        2,662 
Cash flow hedge reserve                                                882    (1,601)                        1,123 
Retained earnings                                                   24,950     27,868                       34,129 
                                                         -----------------  ---------  --------------------------- 
Total equity and reserves                                           28,994     29,429                       38,414 
                                                         =================  =========  =========================== 
 

Unaudited consolidated statement of changes in equity

 
                                              Share     Share          Cash   Retained    Total 
                                            capital   premium          flow   earnings 
                                                                      hedge 
                                                                    reserve 
                                            GBP'000   GBP'000       GBP'000    GBP'000  GBP'000 
 
At 30 September 2017                            500     2,662       (1,520)     29,518   31,160 
Profit for the period                             -         -             -        851      851 
Defined benefit pension movements                 -         -             -        840      840 
Cash flow hedge movements                         -         -           246          -      246 
Deferred tax on other comprehensive 
 income                                           -         -         (327)         59    (268) 
                                      -------------  --------  ------------  ---------  ------- 
Total comprehensive income 
 for the period                                   -         -          (81)      1,750    1,669 
                                      -------------  --------  ------------  ---------  ------- 
Dividends paid during the 
 period                                           -         -             -    (3,400)  (3,400) 
                                      -------------  --------  ------------  ---------  ------- 
Total contributions by and 
 distributions to owners                          -         -             -    (3,400)  (3,400) 
                                      -------------  --------  ------------  ---------  ------- 
At 31 March 2018                                500     2,662       (1,601)     27,868   29,429 
                                      -------------  --------  ------------  ---------  ------- 
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 
 period                                           -         -             -    (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 
                                      -------------  --------  ------------  ---------  ------- 
Profit for the period                             -         -             -        823      823 
Defined benefit pension movements                 -         -             -      (611)    (611) 
Cash flow hedge movements                         -         -         (421)          -    (421) 
Deferred tax on other comprehensive 
 income                                           -         -           180    (1,391)  (1,211) 
                                      -------------  --------  ------------  ---------  ------- 
Total comprehensive income 
 for the period                                   -         -         (241)    (1,179)  (1,420) 
                                      -------------  --------  ------------  ---------  ------- 
Dividends paid during the 
 period                                           -         -             -    (8,000)  (8,000) 
                                      -------------  --------  ------------  ---------  ------- 
Total contributions by and 
 distributions to owners                          -         -             -    (8,000)  (8,000) 
                                      -------------  --------  ------------  ---------  ------- 
At 30 March 2019                                500     2,662           882     24,950   28,994 
                                      =============  ========  ============  =========  ======= 
 

Unaudited consolidated statement of cash flows

 
                                                        26 weeks ended 30  26 weeks ended 31  52 weeks ended 29 
                                                                    March              March          September 
                                                                     2019               2018               2018 
                                                                  GBP'000            GBP'000            GBP'000 
Operating activities 
Profit after taxation                                                 823                851              9,517 
Corporation tax                                                       193                104              1,738 
Finance income                                                       (56)                (7)               (31) 
Finance expense                                                        87                 95                187 
Pension contributions paid                                          (415)              (351)              (704) 
Depreciation of property, plant and equipment                       1,473              1,456              3,097 
Loss on disposal of property, plant and equipment                      31                 41                430 
                                                        -----------------  -----------------  ----------------- 
                                                                    2,136              2,189             14,234 
Decrease / (increase) in trade and other receivables                  430                773              (146) 
Increase in foreign exchange contract                                   -                  -              (709) 
(Increase) / decrease in inventories                                (239)              2,727                182 
(Decrease) / increase in trade and other payables                 (3,073)            (5,968)                531 
Increase in provisions                                                131                  3                859 
                                                        -----------------  -----------------  ----------------- 
                                                                  (2,751)            (2,465)                717 
                                                        -----------------  -----------------  ----------------- 
 
Cash generated from operations                                      (553)              (276)             14,951 
Income taxes paid                                                   (627)              (989)            (2,096) 
                                                        -----------------  -----------------  ----------------- 
Net cash flows from operating activities                          (1,180)            (1,265)             12,855 
                                                        -----------------  -----------------  ----------------- 
Investing activities 
Purchase of property, plant and equipment                         (3,248)            (2,381)            (5,094) 
Sale of property, plant and equipment                                   -              1,153              1,254 
Interest received                                                      56                  7                 31 
                                                        -----------------  -----------------  ----------------- 
Net cash used in investing activities                             (3,192)            (1,221)            (3,809) 
                                                        -----------------  -----------------  ----------------- 
Financing activities 
Dividends paid during the year                                    (8,000)            (3,400)            (5,150) 
Net cash used in financing activities                             (8,000)            (3,400)            (5,150) 
                                                        -----------------  -----------------  ----------------- 
Net decrease in cash and cash equivalents                        (12,372)            (5,886)              3,896 
Cash and cash equivalents at beginning of period                   15,683             11,786             11,786 
                                                        -----------------  -----------------  ----------------- 
Cash and cash equivalents at end of period                          3,311              5,900             15,682 
                                                        =================  =================  ================= 
 

Notes to the financial statements for the 26 weeks ended 30 March 2019

Basis of preparation

The consolidated interim financial statements of the Group for the 26 weeks ended 30 March 2019, which are unaudited, have been prepared in accordance with the same accounting policies, presentation and methods of computation followed in the condensed set of financial statements as applied in the group's latest annual 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 2019, 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 2018 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 historical cost convention, as modified by the revaluation of derivative financial instruments to fair 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 amounts of assets and liabilities at the date of the financial statements and the reported amounts 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 29 September 2018.

   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 operating decision maker has been identified as the management team including the Chief Executive Officer, Chief Operating Officer and Chief Financial 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.

 
                                                  30       31          29 
                                               March    March   September 
                                                2019     2018        2018 
                                             GBP'000  GBP'000     GBP'000 
External revenue by location of customers: 
United Kingdom                                71,257   71,532     156,165 
Republic of Ireland                            1,738    2,080       4,220 
Other                                              -       60         230 
                                             -------  -------  ---------- 
                                              72,995   73,672     160,615 
                                             =======  =======  ========== 
 

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

Notes to the financial statements for the 26 weeks ended 30 March 2019 (continued)

 
                                       30        31           29 
                                    March     March    September 
                                     2019      2018         2018 
                                  GBP'000   GBP'000      GBP'000 
Non-current assets by location: 
United Kingdom                     22,744    20,416       21,091 
Other                                  18      14               12 
                                  -------   -------   ------------ 
                                   22,762    20,430         21,103 
                                  =======   =======   ============ 
 
 
   2.    Derivative financial instruments 

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

 
                                             30       31          29 
                                          March    March   September 
                                           2019     2018        2018 
                                        GBP'000  GBP'000     GBP'000 
Derivative financial assets 
Derivatives not designated as hedging 
 instruments                                437    (591)          30 
Derivatives designated as hedging 
 instruments                              1,063  (1,929)       1,353 
                                        -------  -------  ---------- 
                                          1,500  (2,520)       1,383 
                                        =======  =======  ========== 
 
   3.    Taxation 

The taxation charge for the 26 weeks ended 30 March 2019 is based on the estimated effective tax rate for the full year of 19% (2018:19%).

The standard rate of Corporation Tax in the UK reduced from 20% to 19% with effect from 1 April 2017. The standard rate will fall further to 17% with effect from 1 April 2020. These rates were enacted during the current year and deferred tax balances have been stated at a rate at which they are expected to reverse.

   4.    Earnings per share 
 
                                              30       31          29 
                                           March    March   September 
                                            2019     2018        2018 
                                         GBP'000  GBP'000     GBP'000 
 
Profit for the period and earnings 
 used in basic and diluted earnings 
 per share                                   823      851       9,517 
 
Earnings per share - basic and diluted     1.65p    1.70p      19.03p 
                                         =======  =======  ========== 
 

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

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