SHOE ZONE PLC — Interim / Quarterly Report 2021

May 18, 2021

National Storage Mechanism | Additional information

RNS Number : 9084Y

Shoe Zone PLC

18 May 2021

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

INTERIM RESULTS

Shoe Zone PLC ("Shoe Zone", the "Company") is pleased to announce its interim results for the six months to 3 April 2021. (the "Period")

Financial Update

•     Revenue of £40.4m (2020 H1: £68.9m)

o  Store revenue £22.8m (2020 H1: £63.3m)

o  Digital revenue £17.6m (2020 H1: £5.5m)

o  Digital contribution of £5.3m (2020 H1: £1.9m)

o  Digital conversion rate 6.43% (2020 H1: 3.47%)

o  Over 1.0 million engaged users in shoezone.com database

•     Statutory loss before tax £(2.6)m (2020 H1: £(2.5)m as a result of tight cost control and increase in digital.

•     Statutory earnings per share (4.2)p (2020 H1: (4.1)p)

•     Net cash balance of £4.1m (2020 H1: £3.6m)

•     No interim dividend to be paid (2020 H1: no dividend)

Business and COVID-19 Update

•     All stores closed for a minimum of 16 weeks in the Period

•     Digital and Warehouse teams operated throughout the lockdowns

•     Supply chain disruption due to container shortages and Ever Given/Suez Canal issues

•     Continual cash preservation action taken throughout the period resulting in net cash of £4.1m at the end of the Period

•     Ongoing negotiations with Landlords and suppliers

•     Majority of staff furloughed and we have used the Government business support schemes including grants, rates and VAT

•     CLBILS loan of £15m in place and drawn down. £4.6m repaid

•     Store numbers are 422 having reduced by 38 in the period. A full review of individual store viability will now continue

•     Exit from the Republic of Ireland with all stores and shoezone.ie now closed

For further information please call:

Shoe Zone PLC                                                                                  Tel: via 0116 222 3000

Anthony Smith (Chief Executive)

Terry Boot (Finance Director)

Finncap (Nominated Advisor and Broker)                                            Tel: 020 7220 0500

Matt Goode (Corporate Finance)

Kate Bannatyne (Corporate Finance)

Alice Lane (ECM)

Chief Executive's statement

Introduction

The last 12 months have been like no other in the company's history. The COVID-19 pandemic has had a huge social and economic impact around the world and has led to huge consequences for all businesses, including our own, as we have had to adapt and change to meet the significant challenges in the last year and I thank our loyal and committed staff during this period. However, we have come through this challenging period and are now in position to continue our strategy going forward, with the assumption that no further lockdowns are required.

The company currently operates from a portfolio of around 422 stores (38 closed in the period with 3 stores refitted and 1 relocation to new formats). We operate a comprehensive digital proposition, enabling it to provide a multi-channel shopping experience to its customers.

Since the period end we have relocated a further 3 stores.

Strategy Update

The strategy outlined before the COVID-19 pandemic took hold, is still the general direction the Directors believe is the route to be taking going forward. The last 12 months has demonstrated the need to build on the significant successes within our Digital business. The investments we have made have put us in a strong position to enable our customers to buy throughout the lockdown, resulting in strong growth over this period. Digital growth will continue to be a big part of our future strategy along with our focus on Big Box and Hybrid expansion. These new stores will be at a lower pace due to cash constraints.

COVID-19 Update

We have had to adapt and reshape our business to react to extremely difficult trading conditions. We enter the second half of the financial year with the hope that we have seen the worst of the COVID-19 impact and look forward to the stores getting back to what we would call "normal" trading conditions, with no further lockdowns. 

No stores were open in the first 2 weeks of the 2nd half. Trading started strongly but has settled down to a more mixed picture of good High Street and retail park sales but weaker shopping centre performance.

Financial Summary

In the six months to 3 April 2021, the company generated revenues of £40.4m (2020 H1: £68.9m) and a loss before tax of £(2.6)m (2020 H1 £(2.5)m).

The reduction in revenue over the prior year reflects the continued impact of COVID-19. During the six months we experienced significant disruption in the supply chain and a fall in consumer spending for a significant number of months in the period, particularly in Jan, Feb and March when all stores were closed. In the period we saw an increase in Digital sales to £17.6m compared to last year of £5.5m, however the store deficit was £40.5m compared to last year.

The gross profit for this year reflects the sales related margin reduction year on year due to clearing excess stock and the benefit of the Government COVID business support schemes. Admin and distribution costs are higher than last year primarily due to £3.1m additional expenditure relating to the increase in Digital sales and a £0.5m increase due to foreign exchange revaluation.

The company ended the period with a net cash balance of £4.1m (2020 £3.6m). The increase in cash balance has been achieved through the measures taken by the business over the last 12 months, which restricted cash out of the business but also took advantage of the Government furlough scheme, the business rates holiday, retail grants and the ability to delay VAT. We should state that, compared to last year, we are behind on rental payments as we continue to negotiate better terms with Landlords.

Dividend

We are continuing to focus on cash preservation as the business comes out of lockdown and therefore no interim dividend will be paid. Our dividend policy remains on hold as previously stated.

Unaudited consolidated income statement

						26 Wks end	26 Wks end	52 Wks end
						3 Apr 2021	4 Apr 2020	3 Oct 2020
						£'000	£'000	£'000
Revenue						40,435	68,944	122,568
Cost of Sales						(29,804)	(61,262)	(114,455)
Gross Profit						10,631	7,682	8,113
Administration Expenses						(7,906)	(6,273)	(13,928)
Distribution Costs						(4,477)	(2,927)	(6,895)
Loss from Operations						(1,752)	(1,518)	(12,710)
Finance Income						0	(1)	10
Finance Expense						(860)	(1,009)	(1,901)
Loss before Taxation						(2,612)	(2,528)	(14,601)
Taxation						497	480	2,698
Loss attributable to equity holders of the parent						(2,115)	(2,048)	(11,903)
Earnings per Share						(4.2)p	(4.1)p	(23.8)p

Unaudited consolidated statement of total comprehensive income

						26 Wks end	26 Wks end	52 Wks end
						3 Apr 2021	4 Apr 2020	3 Oct 2020
						£'000	£'000	£'000
Loss for the period						(2,115)	(2,048)	(11,903)
Items that will not be reclassified subsequently to the
income statement
DB pension scheme						2,769	(642)	(2,114)
Movement in deferred tax on pension schemes						(526)	94	899
IFRS-16 Opening balances						0	(3,242)	0
Cash flow hedges
Fair value movements in other comprehensive income						(1,903)	(2,431)	(2,124)
Cash flow hedges recognised in inventories						0	2,868	0
Tax on cash flow hedges						364	(74)	363
Other comprehensive (expense)/Income for the period						704	(3,427)	(2,976)
Total comprehensive (expense)/Income for the period						(1,411)	(5,475)	(14,879)
attributable to equity holders of the parent

Unaudited consolidated statement of financial position

						26 Wks end	26 Wks end	52 Wks end
						3 Apr 2021	4 Apr 2020	3 Oct 2020
						£'000	£'000	£'000
Assets
Non-current Assets
Property, plant and equipment						14,733	22,669	16,967
Right of use assets						36,464	53,456	42,387
deferred tax asset						5,455	1,597	5,617
Total Non-current assets						56,652	77,722	64,971
Current Assets
Inventories						28,433	25,727	26,698
Trade and other receivables						3,524	4,978	2,735
Derivative financial assets						0	2,751	0
Cash and cash equivalents						14,473	3,571	13,266
Total Current Assets						46,430	37,027	42,699
Total Assets						103,082	114,749	107,670
Current Liabilities
Trade and other payables						(12,250)	(31,167)	(17,316)
Lease liabilities						(15,629)	0	(19,914)
Derivative financial liability						(2,620)	0	(105)
Bank loans						(4,800)	0	(1,944)
Provisions						(1,756)	(573)	(1,471)
Corporation tax liability						0	0	(137)
Total Current Liabilities						(37,055)	(31,740)	(40,887)
Non-Current Liabilities
Trade and other payables						0	0	0
Lease liabilities						(40,042)	(46,521)	(37,475)
Bank loans						(5,600)	0	(5,056)
Provisions						(1,499)	(581)	(1,260)
Employee benefit liability						(7,899)	(9,952)	(10,594)
Total Non-Current Liabilities						(55,040)	(57,054)	(54,385)
Total liabilities						(92,095)	(88,794)	(95,272)
Net Assets						10,987	25,955	12,398
Equity attributable to equity holders of the company
Called up share capital						500	500	500
Merger reserve						2,662	2,662	2,662
Cash flow hedge reserve						(1,654)	2,008	(116)
Retained earnings						9,479	20,785	9,352
Total Equity and Reserves						10,987	25,955	12,398

Unaudited consolidated statement of changes in Equity

	Share	Share	Cash flow	Retained	Total
	Capital	Premium	Hedge	Earnings
			Reserve
	£'000	£'000	£'000	£'000	£'000
At October 2019	500	2,662	1,645	26,623	31,430
Loss for the period	0	0	0	(2,048)	(2,048)
Defined benefit pension movements	0	0	0	(642)	(642)
cash flow hedge movements	0	0	437	0	437
Right of use asset movement	0	0	0	(3,242)	(3,242)
Deferred tax on other comp. income	0	0	(74)	94	20
Total comprehensive income for the period	0	0	363	(5,838)	(5,475)
Dividends paid	0	0	0	0	0
Contributions by and distribution to owners	0	0	0	0	0
As at April 2020	500	2,662	2,008	20,785	25,955
At October 2019	500	2,662	1,645	26,623	31,430
Impact of transition to IFRS-16	0	0	0	(4,153)	(4,153)
Loss for the period	0	0	0	(11,903)	(11,903)
Defined benefit pension movements	0	0	0	(2,114)	(2,114)
cash flow hedge movements	0	0	(2,124)	0	(2,124)
Deferred tax on other comp. income	0	0	363	899	1,262
Total comprehensive income for the period	0	0	(1,761)	(17,271)	(19,032)
Dividends paid	0	0	0	0	0
Contributions by and distribution to owners	0	0	0	0	0
As at October 2020	500	2,662	(116)	9,352	12,398
At October 2020	500	2,662	(116)	9,352	12,398
Loss for the period	0	0	0	(2,115)	(2,115)
Defined benefit pension movements	0	0	0	2,769	2,769
cash flow hedge movements	0	0	(1,903)	0	(1,903)
Deferred tax on other comp. income	0	0	364	(526)	(162)
Total comprehensive income for the period	0	0	(1,539)	128	(1,411)
Dividends paid	0	0	0	0	0
Contributions by and distribution to owners	0	0	0	0	0
As at April 2021	500	2,662	(1,655)	9,480	10,987

Unaudited consolidated statement of cash flows

		26 Wks end	26 Wks end	52 Wks end
		3 Apr 2021	4 Apr 2020	3 Oct 2020
		£'000	£'000	£'000
Operating activities
Loss after tax		(2,115)	(2,048)	(11,903)
Corporation tax		(497)	(480)	(2,698)
Finance income		0	(8)	(10)
Finance expense		860	1,018	1,901
Depn of property, plant and machinery		1,598	1,573	3,545
FA impairment and loss on disposal of property,		840	66	4,642
plant and machinery
ROUA on disposal, depn and impairment		7,782	9,722	23,998
Pension contributions paid		0	(417)	(1,466)
		8,468	9,426	18,009
Decrease/(increase) in trade and other receivables		(789)	1,324	(810)
Decrease/(increase) in foreign exchange contracts		613	0	336
Decrease/(increase) in inventories		(1,735)	3,196	2,184
(Decrease)/increase in trade and other payables		(5,066)	(17,857)	(5,498)
Increase in provisions		524	110	1,646
		(6,453)	(13,227)	(2,142)
Cash generated from operations		2,015	(3,801)	15,867
Net corporation tax paid		360	(1,888)	(283)
Net cash flows from operating activities		2,375	(5,689)	15,584
Investing activities
Purchase of property, plant and machinery		(204)	(2,165)	(2,809)
Interest received		0	8	10
Net cash used in investing activities		(204)	(2,157)	(2,799)
New secured loan repayable by instalments		5,000	0	10,000
Repayment of secured loan		(1,600)	0	(3,000)
Capital element of lease repayments		(4,210)	0	(17,719)
Interest paid		(154)	0	(217)
Dividends paid during year		0	0	0
Net cash used in financing activities		(964)	0	(10,936)
Net increase in cash and cash equivalents		1,207	(7,846)	1,849
Cash and cash equivalents at beginning of period		13,266	11,417	11,417
Cash and cash equivalents at end of period		14,473	3,571	13,266

Notes to the financial statements for the 26 weeks ended 3 April 2021

Basis for preparation

The consolidated interim financial statements of the company for the 26 weeks ended 3 April 2021, which are unaudited, have been prepared in accordance with the same accounting policies, presentations and methods of computation followed in the condensed set of financial statements as applied in the group's latest audited financial statements. A copy of those accounts has been delivered to the Registrar of Companies.

The financial information for the 26 weeks ended 3 April 2021, 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 2020 was unqualified, did not draw attention to any matters by way of emphasis. And did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The consolidated interim financial statements have neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board.

The condensed consolidated interim financial statements have been prepared on a going concern basis and under the historic cost convention, as modified by the revaluation of derivative financial instruments to far value.

The condensed consolidated interim financial statements are presented in sterling and have been rounded to the nearest thousand (£'000).

The preparation of financial information in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual events ultimately may differ from those estimates.

1.   Accounting policies

In preparing these interim financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements reported in the latest annual audited financial statements for the 52 weeks ended 3 Oct 2020.

Going Concern

At the balance sheet date the company had a good cash balance and a strong net asset position. At the time of reviewing these accounts, the Directors have considered the effect of COVID-19 on the ongoing position, and consider that this does indicate that the company will continue to trade for a period of at least 12 months from the date of publishing these accounts due to the banking facilities available to it and the UK Government support available to businesses during this time.

The cash forecast prepared by the Directors show that the company will be able to operate within the facilities available to it and on that basis, the Directors have prepared these financial statements on a going concern basis.

Events after the period end

Subsequent to the period end, the COVID-19 lockdown ended with non-essential retailers able to open from April onwards. Assuming that this will be the last period of lockdown, the Directors believe that the company is strongly positioned to progress positively.

2.   Segmental Information

The group complies with IFRS 8 'Operating Segments' which determines and presents operating segments based on information provided to the chief operating decision maker. The chief decision maker has been identified as the management team including the Chief Executive and Finance Director. The Board considers that each store is an operating segment but there is only one reporting segment as the stores qualify for aggregation, as defined under IFRS 8.              

					3 Apr	4 Apr	3 Oct
					2021	2020	2020
External revenue by location of customers:					£'000	£'000	£'000
United Kingdom					21,934	61,871	100,098
Digital					17,624	5,471	19,296
Republic of Ireland					675	1,602	2,678
Other					202	0	496
					40,435	68,944	122,568

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

					3 Apr	4 Apr	3 Oct
					2021	2020	2020
Non-current assets by location					£'000	£'000	£'000
United Kingdom					15,732	22,650	16,962
Republic of Ireland					0	19	5
					15,732	22,669	16,967

3. Derivative financial assets

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

					3 Apr	4 Apr	3 Oct
					2021	2020	2020
					£'000	£'000	£'000
Derivative financial assets
Not designated as hedging instruments					(578)	332	34
Designated as hedging instruments					(2,042)	2,419	(139)
					(2,620)	2,751	(105)

4. Taxation

The taxation credit for the 26 weeks ended 3 April 2021 is based on an estimated effective tax rate for the full year of 19% (2020:19%)

5. Earnings per share

					3 Apr	4 Apr	3 Oct
					2021	2020	2020
					£'000	£'000	£'000
Profit in the period and earnings used in basic
diluted earnings per share					(2,115)	(2,048)	(11,903)
					(4.2)p	(4.10)p	(23.8)p

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