TIDMSHOE
RNS Number : 1609M
Shoe Zone PLC
10 January 2023
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of MAR. Upon the
publication of this announcement via regulatory news service this
inside information is now considered to be in the public
domain.
Shoe Zone plc
("Shoe Zone" or the "Company")
Final Results for the 52-week period to 1 October 2022
Shoe Zone is pleased to announce its audited results for the 52
weeks to 1 October 2022, (the "Period").
Financials
-- Revenue of GBP156.2m (2021: GBP119.1m)
o Store revenue GBP129.8m (2021: GBP88.6m)
o Digital revenue GBP26.4m (2021: GBP30.5m)
-- Profit before tax GBP13.6m (2021: GBP9.5m), adjusted GBP11.2m (1) (2021: GBP9.5m)
-- Interim dividend GBP1.25m, 2(nd) interim dividend GBP1.47m (2021: Nil)
-- Proposed final dividend of 3.3 pence per share (2021: Nil)
-- Proposed special dividend of 8.2 pence per share (2021: Nil)
-- Earnings per share 21.7p (2021: 14.0p)
-- Net cash balance of GBP24.4m (2021: GBP14.6m)
-- Commenced share buy-back programme, buying back 955,813 shares for GBP1.7m cash
Operational
-- Stores traded for 52 weeks (2021: 36 weeks)
-- 360 stores at Period end (2021: 410) comprising:
o 45 Big Box (2021: 51)
o 44 Hybrid (2021: 16)
o 271 Original (2021: 343)
-- Net closure of 50 stores
-- Annualised lease renewal savings of GBP0.6m, an average reduction of 30%
-- Average lease length of 1.8 years (2021: 1.9 years)
-- Digital returns rate of 11.3% (2021: 8.4%)
(1) Adjusted to exclude the profit on sale of freehold
properties and foreign exchange revaluation
For further information please call:
Shoe Zone PLC Tel: +44 (0) 116
222 3000
Anthony Smith (Chief Executive)
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)
Chief Executive's statement
Introduction
Shoe Zone had a very positive year due to trading for the full
52 weeks, strong trading over our key back to school period and due
to the incredible hard work from our teams. These increases are
primarily due to the increased revenue and resultant gross profit
generated in a normalised trading period post pandemic.
Profit before tax was at GBP13.6m for the Period (2021: GBP9.5m)
and GBP11.2m (2021: GBP9.5m) on an adjusted basis, with an earnings
per share of 21.74p (2021: 14.03p)
Stores delivered revenues of GBP129.8m (2021: GBP88.6m). Digital
continued to be a key part of the business generating revenues of
GBP26.4m (2021: GBP30.5m) in the Period, a reduction of 13.5% which
was in line with management expectations post pandemic. We continue
to invest in our digital infrastructure with the addition of two
automated bagging machines which have significantly improved
throughput and productivity. We have redesigned our check-out page
and introduced two buy now pay later providers (Klarna and
PayPal).
We ended the Period trading out of 360 stores, having closed 63
stores, opened 13 new stores and converted a further 11 existing
stores to our new formats. As we refit existing stores to our new
formats, the branded mix will continue to form a higher proportion
of our overall sales.
Our average lease length is now 1.8 years, giving us the
opportunity and flexibility to respond to changes in any retail
location at short notice. Property supply continues to outstrip
demand and we expect to take advantage of this environment and
significantly improve our property portfolio over the medium
term.
Total capital expenditure was GBP5.2m (2021: GBP1.4m) of which
GBP3.1m was for our refit and relocation programme.
We achieved rent reductions on 48 store renewals of GBP0.6m
(2021: GBP1.8m) on an annualised basis, an average reduction of
30%.
Strategy Update
We continue to accelerate our store refit and relocation
programme and to drive our digital strategy on the back of these
solid set of results. The hard work completed to reduce costs,
streamline operations and accelerate investment, positions us well
for the year ahead.
Capital expenditure
We will spend a minimum of 3% of sales per annum to cover 50
store projects and Head Office infrastructure changes including IT
projects and new vehicles.
Property
We continue to transform our property portfolio with
relocations/new stores being partially funded by landlords through
rent free periods of typically 12 months.
We ended the year with 45 Big Box, 44 Hybrid and 271 Original
stores. This year we expect to relocate or open a further 35 stores
and continue to close a number of older stores, and we will refit a
minimum of 15 stores to our new formats.
Digital
We continue to invest in our Digital Shoehub platform and in the
next 12 months we will implement a new returns portal, introduce
Google pay, Apple pay and Clearpay.
Part of the success of our digital operation is our efficient
returns process which is complimented by our extensive network of
stores. We have a returns rate of c. 11% with the vast majority of
these being returned to store and our physical store network is
critical to our continued success. We have seen over the last two
years a reduction in store numbers as we have exited unprofitable
locations. We will continue to rollout our successful 'Big Box' and
'Hybrid' formats by targeting key towns for conversion or
relocation. Our ultimate goal is a doubling of Big Box locations to
approximately 100 and an increase in Hybrid stores from 44 to
approximately 150. Overall, we anticipate trading from a similar
sales square footage, albeit from a reduced number of
locations.
Product
We expect markdown levels and product margin levels to be
maintained. Supplier payments remain up to date as they did at the
year-end. Our buying and shipping teams are doing an exceptional
job of managing the direct from factory supply chain, which is
still very volatile, and we are confident we are performing better
than the market average.
Dividend
The outstanding CLBILS loan was paid off in January 2022 and
enabled us to restart dividends. An interim of 2.5 pence per share
was paid in August 2022 and a second interim of 3.0 pence per share
was paid in December 2022. It is proposed that a final dividend of
3.3 pence per share be paid in March 2023 on the basis of a 40%
pay-out ratio. The Board will also propose an additional special
dividend of 8.2 pence per share (paid in March 2023), bringing the
total to 17.0 pence per share.
Financial Review
In the 52 weeks to 1 October 2022, total revenues were GBP156.2m
(2021: GBP119.1m) having traded for the full 52 weeks (FY 2021: 36
weeks). We ended the year with 360 stores (2021: 410) having closed
63 and opened 13.
Profit before tax was GBP13.6m (2021: GBP9.5m), adjusted by
profit on sale of freeholds (GBP1.4m) and foreign exchange gains on
revaluation (GBP1.0m), therefore an adjusted profit before tax of
GBP11.2m (2021: GBP9.5m). The year-on-year increase is primarily
due to the 52 weeks of continuous trade compared to 36 weeks in the
FY 2021 and strong second half trading which included our key back
to school period. We continue to actively control our cost base in
all areas of the business and have reduced our rent bill through
proactive discussions with landlords with further savings on
renewals.
Digital revenues stood at GBP26.4m (2021: GBP30.5m) a reduction
of 13.6%. The reduction reflects a return to a normalised level of
revenue post pandemic and is in line with management expectations,
but is significantly ahead of pre-pandemic levels. Profit
contribution from Digital was GBP7.0m (2021: GBP8.5m) in the
year.
Product margins were broadly in line with last year at 61.2%
(2021: 61.5%). This is due to contrasting impacts of increasing
container prices and a higher mix of lower margin branded product,
and improved stock management due to less supply chain
volatility.
Statutory gross profit increased to GBP36.4m (2021: GBP32.5m)
due to the normalised trading period post pandemic. Cost of sales
increased by GBP31.1m due to higher stock purchases of GBP22.8m,
COVID related retail grants not received totalling GBP6.9m, store
wages increase post furlough of GBP8.0m, offset by a reduction in
rents of GBP1.9m and a reduction in Right of Use Assets
depreciation of GBP2.3m.
Administration expenses reduced by GBP0.3m to GBP16.6m (2021:
GBP16.9m) due to the profit on sale of 14 freehold properties
GBP1.4m, a foreign exchange gain of GBP1.0m, offset by an increase
in the contribution to the Shoe Zone Trust GBP0.5m, higher repairs
and dilapidation equating to GBP0.6m, higher salaries post furlough
of GBP0.5m and other asset write offs and impairment costs of
GBP0.5m.
Distribution costs increased by GBP0.6m to GBP5.1m (2021:
GBP4.5m), due to higher warehouse and distribution wages post
furlough of GBP0.4m, and distribution fuel costs of GBP0.2m.
The corporation tax charge for the Period was GBP2.7m (2021:
GBP2.4m).
Earnings per share are 21.74p (2021: 14.03p).
Stock levels increased by GBP7.1m to GBP32.2m (2021: GBP25.1m),
due to the earlier timing of deliveries of Winter 2022 product and
an increase in the proportion of higher value branded product and
in this financial year a portion of the AW 2022 product was
delivered earlier to ensure supply.
Capital expenditure increased to GBP5.2m (2021: GBP1.4m) as we
restarted our programme of store relocations and refits to expand
our Hybrid formats. We also invested GBP1.0m in our central
distribution centre to further improve our Digital efficiency. This
total is the gross value expended and is partially offset by
GBP1.0m of rent free cash received via landlords when we relocate
stores.
At the Period end net cash was GBP24.4m (2021: GBP14.6m). During
the Period we paid off the remaining GBP4.4m CLBILS loan to take us
once again to a debt free position. The increase in cash is due to
the higher level of profitability from trading activities and the
additional GBP3.6m from the sale of 14 freehold properties, offset
by the additional capital expenditure. The Group's current bank
facilities also include an on-demand overdraft facility of GBP3.0m,
which has not been used during the Period. We have GBP7.0m cash on
notice deposit (GBP5.0m at 3 months notice, GBP2.0m at 12 months
notice).
The pension liability in the schemes reduced by GBP7.7m to a
surplus of GBP1.8m (2021: deficit GBP5.9m). We show a zero position
on the balance sheet due to the effect of an asset ceiling. The
reduction is due to an increase in bond yields which reduces the
value placed on the scheme's liabilities and positive assumption
moves in mortality rates. This is partially offset by lower than
expected investment returns and a rise in future inflation
expectations.
An interim dividend of 2.5 pence per share (paid on 17 August
2022) and a second interim of 3.0 pence per share (paid on 21
December 2022) were approved by the Board. It is proposed that a
final dividend of 3.3 pence per share will be paid on 22 March 2023
based on a 40% pay-out ratio. The Board is also proposing an
additional special dividend of 8.2 pence per share (paid on 22
March 2023), giving a total dividend of 17.0 pence per share.
The Company started a share buy-back programme in August 2022
and as at the Period end had purchased 955,813 shares (of which
500,000 had been cancelled with the balance held in treasury) at an
average price of GBP1.79 equating to a spend of GBP1.7m. The
buy-back programme will continue for the foreseeable future.
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.
Consolidated income statement for the 52 weeks ended 1 October
2022
52 weeks 52 weeks
ended ended
1 2
October October
2022 2021
GBP'000 GBP'000
Revenue 156,164 119,142
Cost of sales (119,764) (86,667)
----------- ----------
Gross profit 36,400 32,475
Administration expenses (16,620) (16,962)
Distribution costs (5,104) (4,499)
----------- ----------
Profit from operations 14,676 11,014
Finance income - -
Finance expense (1,113) (1,558)
----------- ----------
Profit before taxation 13,563 9,456
Taxation (2,718) (2,442)
----------- ----------
Profit attributable to equity holders
of the parent 10,845 7,014
=========== ==========
Profit Earnings per Share - basic and
diluted 21.74p 14.03p
=========== ==========
Consolidated statement of total comprehensive income for the 52
weeks ended 1 October 2022
52 weeks 52 weeks
ended ended 2
1 October
October 2021
2022
GBP'000 GBP'000
Profit/(Loss) for the year 10,845 7,014
Items that will not be reclassified
subsequently to the income statement
Remeasurement gains on defined benefit
pension scheme 5,798 3,379
Movement in deferred tax on pension schemes (1,506) 761
Share buy back (966) -
Items that will be reclassified subsequently
to the income statement
Fair value movements on cash flow hedges 1,129 (190)
Tax on cash flow hedges (226) 56
Other comprehensive income for the year 4,229 4,006
--------------- ----------
Total comprehensive income for the year
attributable
to equity holders of the parent 15,074 11,020
=============== ==========
Consolidated statement of financial position as at 1 October
2022
Registered Number 08961190 52 weeks 52 weeks
ended Ended
1 October 2 October
2022 2021
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 12,582 14,227
Right-of-use assets 25,581 30,884
Deferred tax asset 720 3,220
Total non-current assets 38,883 48,331
------------ ------------
Current assets
Inventories 32,188 25,131
Trade and other receivables 6,071 5,457
Cash and cash equivalents 24,427 19,015
Total current assets 62,686 49,603
------------ ------------
Total assets 101,569 97,934
------------ ------------
Current liabilities
Trade and other payables (22,801) (16,440)
Lease liabilities (14,870) (17,035)
Derivative financial liability - (591)
Bank loan - (4,400)
Provisions (1,108) (1,698)
Corporation tax liability (1,910) (773)
Total current liabilities (40,689) (40,937)
------------ ------------
Non-current liabilities
Lease liabilities (20,975) (25,942)
Provisions (2,662) (1,728)
Employee benefit liability - (5,909)
Total non-current liabilities (23,637) (33,579)
Total liabilities (64,326) (74,516)
------------ ------------
Net assets 37,243 23,418
============ ============
Equity attributable to equity holders
of the company
Called up share capital 495 500
Merger reserve 2,662 2,662
Capital Redemption Reserve 5 -
Cash flow hedge reserve 653 (250)
Retained earnings 33,428 20,506
------------ ------------
Total equity and reserves 37,243 23,418
============ ============
Consolidated statement of changes in equity for the 52 weeks
ended 1 October 2022
Share Capital Merger Cash Retained earnings Total
capital Redemption flow
reserve hedge
reserve
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 4 October 2020 500 2,662 (116) 9,352 12,398
Profit for the year - - - - 7,014 7,014
Defined benefit pension
movements - - - - 3,379 3,379
Cash flow hedge movements - - - (190) - (190)
Deferred tax on other
comprehensive income - - - 56 761 817
Total comprehensive
income for the year - - - (134) 11,154 11,020
---------- ------------- --------- ---------- ------------------- ---------
Dividends paid during - - - - - -
the year (note 11)
---------- ------------- --------- ---------- ------------------- ---------
Total contributions - - - - - -
by and distributions
to owners
---------- ------------- --------- ---------- ------------------- ---------
At 2 October 2021 500 - 2,662 (250) 20,506 23,418
Impact on transition - - - - - -
to IFRS 16 (note 13)
At 3 October 2021 500 - 2,662 (250) 20,506 23,418
Profit for the year - - - - 10,845 10,845
Defined benefit pension
movements - - - - 5,798 5,798
Capital Redemption - - - - - -
reserve
Cash flow hedge movements - - 1,129 - 1,129
Share Buy Back (5) 5 - - (966) (966)
Deferred tax on other
comprehensive income - - - (226) (1,505) (1,731)
---------- ------------- --------- ---------- ------------------- ---------
Total comprehensive
income for the year (5) 5 - 903 14,172 15,075
---------- ------------- --------- ---------- ------------------- ---------
Dividends paid during
the year (note 11) - - - - (1,250) (1,250)
---------- ------------- --------- ---------- ------------------- ---------
Total contributions - - - - - -
by and distributions
to owners
---------- ------------- --------- ---------- ------------------- ---------
At 1 October 2022 495 5 2,662 653 33,230 37,243
---------- ------------- --------- ---------- ------------------- ---------
Share capital comprises the nominal value of shares subscribed
for. The capital redemption reserve represents share purchased by
the company back from shareholders.
The merger reserve has arisen as a result of the application of
merger accounting to the group reorganisation on 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 1
October 2022
52 weeks 52 weeks
ended ended
1 October 2 October
2022 2021
GBP'000 GBP'000
Operating activities
Profit after tax 10,845 7,014
Corporation tax charge 2,718 2,442
Finance income - -
Finance expense 1,113 1,558
Depreciation of property, plant and equipment 4,118 3,144
Fixed asset impairment and loss on disposal of property, plant and equipment and
right of
use asset (1,075) 1,001
Right-of-use asset depreciation and impairment 13,016 15,860
Pension contributions paid - (1,500)
30,735 29,519
Increase in trade and other receivables 627 (2,722)
Decrease in foreign exchange contract (527) 486
Increase in inventories (7,057) 1,567
Increase in trade and other payables 6,361 (816)
Increase in provisions 345 694
(251) (791)
Cash generated from operations 30,484 28,728
Net corporation tax paid (1,214) 1,353
------------ ------------
Net cash flows from operating activities 29,270 30,081
------------ ------------
Investing activities
Purchase of property, plant and equipment (5,225) (1,405)
Proceeds from sale of PPE 3,590 -
------------ ------------
Net cash used in investing activities (1,635) (1,405)
------------ ------------
Share buy-back (966) -
Repayments of secured loan (4,400) (2,600)
Capital element of lease repayments (15,584) (20,037)
Interest paid (21) (290)
Dividends paid during the year (1,250) -
Net cash used in financing activities (22,221) (22,927)
------------ ------------
Net increase in cash and cash equivalents 5,412 5,749
Cash and cash equivalents at beginning of year 19,015 13,266
------------ ------------
Cash and cash equivalents at end of year 24,427 19,015
============ ============
Notes to the financial statements for the 52 weeks ended 1
October 2022
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
registered number of the Company is 08961190.
The Company and its subsidiaries' (collectively the Group)
principal activity is footwear retailing.
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 1 October 2022.
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards and
Interpretations (collectively IFRSs) issued by the International
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 Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note
2.
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 1 October 2022. 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
income statement from the date on which control is obtained. They
are deconsolidated from the date on which control ceases.
Going Concern
The Directors consider that the business is a going concern and
that it is appropriate to prepare the financial statements on a
going concern basis. In reaching this conclusion, the Directors
have assessed the Group's current performance and position and
factors that may affect the Group's future prospects.
The Group's financial position is strong with healthy positive
cash balances. It also has in place a GBP3.0m overdraft facility.
During the pandemic the Group, in the prior year, took a CLBILS
loan of GBP12.0m, this requires the Group to comply with certain
financial covenants, these have been met during the year and since
year end. The Directors have reviewed forecasts and projections and
consider that the Group has adequate banking facilities and cash
resources to meet its operational and capital commitments.
Assets under construction
Whilst held under assets under construction, no depreciation is
charged on the assets. Once the project is completed, the asset
will be transferred to the correct fixed asset category.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed in
conjunction with an independent third party 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 total
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.
Cash and cash equivalents include cash in hand and deposits held
at call with banks.
Loans and receivables
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.
-- Bank loan - external loan which is valued at its amortised cost and incurs interest.
-- Finance costs are charged to the income statement over the
term of the debt using the effective interest method so that the
amount charged is at a constant rate on the carrying amount. Issue
costs are initially recognised as a reduction in the proceeds of
the associated capital instrument.
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. Dilapidations are not included in IFRS
16 as they relate to 'wear and tear' and not structural alterations
to the buildings.
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 year. Foreign currency monetary assets
and liabilities are translated at the rates ruling at the reporting
date.
Foreign exchange differences are recognised in the income
statement.
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 income statement 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 the income
statement, 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 year.
Gains or losses arising from changes to scheme benefits or
scheme curtailments are recognised immediately in the income
statement.
Settlements of defined benefit schemes are recognised in the
period in which the settlement occurs.
A net pension asset may only be recognized when the group has an
unconditional right to a refund or to reductions in future
contributions. As a result, no asset has been recognised at year
end.
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 and special
dividends, this is when approved by the shareholders at the
AGM.
Critical accounting estimates and judgements
The Shoe Zone plc Group makes certain estimates and assumptions
regarding the future. Estimates and judgements are continually
evaluated based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The
estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Accounting estimates and assumptions
Retirement benefits:
The Groups' defined benefit schemes' pension surplus/obligation,
which is assessed each period by actuaries, is based on key
assumptions including discount rates, mortality rates, inflation,
future salary costs and pension costs. These assumptions,
individually or collectively, may be different to actual outcomes;
refer to note 25 for further details. A net pension asset may only
be recognized when the group has an unconditional right to a refund
or to reductions in future contributions. As a result, no asset has
been recognised at year end.
Estimated impairment of store assets:
The Group tests whether store assets have suffered any
impairment in accordance with the accounting policies stated in
note 1. The recoverable amount of cash-generating units is
determined on a value-in-use calculation. The method requires an
estimate of future cash flows and the selection of a suitable
discount rate in order to calculate the net present value of cash
flows. The Group has performed a sensitivity analysis on the
impairment tests for its store portfolio using various reasonably
possible scenarios. An increase of three percentage points in the
post-tax discount rate would have resulted in no increase to the
impairment charge. A decrease of one percentage point in the growth
rate after year three would have resulted in no increase to the
impairment charge.
Estimated useful life of property, plant and equipment:
At the date of capitalising property, plant and equipment, the
Group estimates the useful life of the asset based on management's
judgement and experience. Due to the significance of capital
investment to the Group, variances between actual and estimated
useful economic lives could impact results both positively and
negatively, see note 12.
Judgements
Foreign currency hedge accounting:
Group policy is to adopt hedge accounting for cash flows for the
purchase of goods for resale. Due to the degree of judgement in
determining forecast cash flows there is a risk that the
assumptions made in the effectiveness testing are
inappropriate.
Discount rate - The weighted average lessee's incremental
borrowing rate applied to the lease liabilities on 1 October 2022
was 1.82% and was 1.82% a. If the discount rate was changed by 1%
this would result in an increase of liabilities in excess of
GBP300,000.
52 weeks 52 weeks
ended 1 ended 2
October October
2022 2021
GBP'000 GBP'000
Revenue
United Kingdom stores 128,664 87,420
Digital 26,967 30,499
Republic of Ireland stores - 674
Other 533 549
---------- ----------
156,164 119,142
========== ==========
There are no customers with turnover in excess of 10% of total
turnover.
52 weeks 52 weeks
ended 1 ended 2
October October
2022 2021
GBP'000 GBP'000
Non-current assets excluding deferred tax
asset by location:
United Kingdom 38,163 45,111
Republic of Ireland - -
38,163 45,111
========== ==========
Digital non-current and current assets have not been disclosed
due to the immaterial value. The contribution is GBP7.0m (2021:
GBP8.5m)
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.
The deferred tax asset of GBP720,000 (2021: GBP3,220,000) is
unallocated.
Dividends
52 weeks 52 weeks
ended ended 2
1 October
October 2021
2022
GBP'000 GBP'000
Dividends paid during the Period at 2.5p (2021: 1,250 Nil
Nil) per share
========== ==========
Post Period, a second interim dividend of 3.0p per share was
paid to all shareholders on the register at 4 November 2022 and a
final dividend of 3.3p per share will be paid in March 2023 (2021:
Nil)
Contingent liabilities
Shoe Zone plc and its subsidiary undertakings have given a duty
deferment guarantee in favour of HM Revenue and Customs amounting
to GBP800,000 (2 October 2021: GBP800,000).
Share capital
1 2
October October
2022 2021
GBP'000 GBP'000
Share capital issued and fully paid
49,500,000 ordinary shares of 1p each 495 500
495 500
========== ==========
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.
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 ended
1 October 2 October
2022 2021
GBP'000 GBP'000
Numerator
Profit for the year and earnings
used in basic and diluted EPS 21.74p 14.03p
============ ============
1 2
October October
2022 2021
Denominator
Weighted average number of shares used in
basic and diluted EPS 49,500,000 50,000,000
============ ============
Ultimate controlling party
The company is controlled by the Smith family albeit there is
not a single controlling party.
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END
FR FZGGMLLKGFZM
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January 10, 2023 02:00 ET (07:00 GMT)
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