TIDMSHOE
RNS Number : 8441T
Shoe Zone PLC
11 January 2017
11 January 2017
Shoe Zone plc
Preliminary Results
Shoe Zone plc ("Shoe Zone", the "Company" or the "Group"), a
leading UK specialist value footwear retailer, is pleased to
announce its Final Results for the 52 weeks ended 1 October
2016.
Financial Highlights
-- Revenue reduced by 4.2% to GBP159.8m (2015: GBP166.8m)
reflecting the planned closure of loss making stores and difficult
trading conditions in H1 2016
-- Product gross margin strengthened to 62.0% (2015: 61.5%)
-- Profit before tax increased by 1.1% to GBP10.3m (2015: GBP10.1m)
-- Earnings per share increased 4.3% to 16.9p (2015: 16.2p)
-- Strong cash conversion with cash balance of GBP15.0m (2015: GBP14.2m)
-- Board proposing two dividends to be paid:
o Final dividend of 6.8p per share
o Special dividend of 8.0p per share
Operational Highlights
-- Product:
o Average transaction value improved by 5% during the year
o Footwear orders placed directly with overseas factories
increased to 72.2% (2015: 62.1%)
o Non-footwear ranges continued to grow, up 26% on 2015
-- Store portfolio:
o 17 new stores opened (including 10 relocations) and 41 refits
completed
o Encouraging performance from 'Big Box' trial; two store
openings during the period, one post period end
-- E-commerce:
o Overall multichannel revenue increased by 11%
o Operations moved to a dedicated online distribution zone,
improving efficiency
o Post year end, trading on Amazon marketplaces in France,
Germany, Spain and Italy
-- Appointed new Brands Manager to support development of branded ranges
Nick Davis, Chief Executive of Shoe Zone plc, said:
"I am pleased with the Group's performance in what was a
challenging retail environment. The Group's new branding is
resonating well with our customer base and we will continue to
update the estate through our store rationalisation and refit
programme. Our Big Box trial, which started in August 2016, is
delivering encouraging results while attracting a broader customer
demographic and we plan to open a further six new stores across the
UK in 2017.
"We continue to make good progress on our strategic objectives
and have traded in line with expectations for the first quarter of
the year. The Board remains positive for the outlook of the Group
and looks forward to updating shareholders on the progress of our
Big Box trial."
There will be a meeting for analysts at 9:30am on 11 January
2017 at the offices of FTI Consulting, 200 Aldersgate, London, EC1A
4HD.
For further information please call:
Shoe Zone plc Tel: +44 (0) 116
Anthony Smith (Chairman) 222 3000
Nick Davis (CEO)
Charles Smith (COO)
Jonathan Fearn (FD)
Numis Securities Limited Tel: +44 (0) 20
(Nominated Adviser & 7260 1000
Broker)
Oliver Cardigan
Mark Lander
FTI Consulting (Financial Tel: +44 (0) 20
PR) 3727 1000
Jonathon Brill
Alex Beagley
Eleanor Purdon
Chief Executive's report
The 2016 financial year was a positive year for Shoe Zone given
the challenging retail environment we faced. We have continued to
make good progress on our core strategy while maintaining our
robust cost control and effective property portfolio
management.
The business delivered revenue of GBP159.8m (2016: GBP166.8m)
and continues to generate cash effectively from a sound financial
position and a debt free balance sheet. Profit before tax increased
by 1.1% to GBP10.3m (2015: GBP10.1m) while earnings per share
increased 4.3% to 16.9p (2015: 16.2p).
Dividends
Following another successful year of cash generation, the
business closed with GBP15.0m of cash. As a result, the Board is
proposing two dividends to be paid: a final dividend of 6.8p per
share (2015: 6.5p), resulting in a total dividend for the year of
10.1p (2015: 9.7p) per share, and a special dividend of 8.0p per
share (2015: 6.0p). The total distribution for the year of 18.1p
(2015: 15.7p) represents an increase of 15.3% over the previous
year.
The aim of the special dividend is to distribute any surplus
cash back to shareholders. We continue to believe the business can
operate on an opening/closing cash position of GBP11m and any
excess above this level will be paid out to shareholders unless
there is a change in business requirement.
The dividends will be paid to shareholders on the register on 24
February 2017, payable on 15 March 2017 if approved at the Annual
General Meeting to be held on 2 March 2017. The shares will be
ex-dividend on 23 February 2017.
Product
We remain committed to offering our customers the best value
possible and have maintained key price points for our Core Value
Lines despite difficult currency headwinds. Along with our low
prices we have increased the value proposition by extending the
number of lines in multi-buy deals (e.g. '2 for GBP8'). This, along
with range enhancements has improved average transaction value by
5% during the year. We have continued to increase our direct
sourcing and as a result, footwear orders placed directly with
overseas factories increased to 72.2% (2015; 62.1%) of total
footwear orders. Working closely with our source of manufacture has
helped maintain gross product margins as well as improving
communication and control across the supply chain.
Non-footwear ranges including handbags, school bags, lunch
boxes, purses and accessories continue to grow with sales from
non-footwear up 26% on the previous year.
Our 'right price, first time' strategy which helps control the
amount of markdown value as a percentage of turnover, continues to
ensure we are industry leaders in driving low markdown. This year
was no exception in achieving a level of 7.1%. (2015: 6.3%).
In July 2016 we appointed a new Brands Manager to develop a
range of brands to complement the existing Shoe Zone range both
online and in our new 'Big Box' stores.
Stores
We closed the year operating from 510 stores with 17 new store
openings (including 10 relocations). We completed 41 refits during
the year, at a total capital expenditure of GBP3.4m. We will
continue to optimise our store portfolio and close loss making
stores to drive profitability. We believe that approximately 500
stores is the right number for our standard Shoe Zone offering.
We continue to drive profitability by opening larger Grade 1
stores and closing smaller Grade 3 stores which is demonstrated in
the following table.
Stores Stores Stores
at at at
1 October 3 October 4 October
2016 2015 2014
Big Box 2 - -
Grade 1
(large) 284 231 203
Grade 2
(medium) 110 168 178
Grade 3
(small) 114 136 164
------------ ------------ ------------
TOTAL 510 535 545
Our trend of falling rents continues (albeit at a slower pace)
with rents at the lease renewal date in the 12 months falling by
17% (2015: 27.2%). We expect that rent reductions will continue to
be realised and will be complemented with a reduction in rates
payable following the government's review of business rates.
The business continues to benefit from a flexible portfolio with
an average lease length of only 2.6 years. Our lease structure
gives us significant opportunity to respond to changes in shopping
habits in any retail location.
As part of our ongoing investment in updating our store
portfolio we have developed new store branding with a more
contemporary feel. The new modern logo will be rolled out with
future store refits and has already been adopted in all instore and
web marketing.
Project 'Big Box'
We have had a very encouraging start to the launch of our new
trial Project 'Big Box'. During August and September we opened two
stores, Launceston (Cornwall) and Durham, followed by Kirkstall
Bridge (Leeds) post the period end in October. These stores on
average are twice the size of a Grade 1 store and benefit from an
enhanced branded product range, driving a higher average
transaction value in a enhanced shopping environment. The three
trial stores are all located out of town and therefore this concept
creates significant opportunity for Shoe Zone in this space with
all future openings being out of town location or in larger high
street units. This new growth opportunity is a key strategic
development for the business, broadening the reach of the Shoe Zone
brand and enabling us to improve our market share.
E-commerce
In the summer of 2016, the Group's e-commerce operations were
moved to a dedicated online distribution zone in the Leicester
distribution centre. This segregated area now holds the majority of
online stock with close links to online administration and customer
services. This development has improved the customer focus creating
a cleaner environment with stronger quality control, more accurate
stock availability with faster processing times. It has also
improved efficiency in the main distribution centre that can now
focus on servicing the store network.
shoezone.com has had another successful year with a significant
shift to selling through mobile devices. Mobile and tablet visits
now represent 74.9% (2015: 66%) of all website visits.
Customer acquisition is a key strategic objective for our online
team and our database has grown by 12% during the year even after a
refining process was undertaken to concentrate on active users. We
have capitalised on this by sending 12m more emails with greater
relevance. Email campaign sales increased by 36% on the prior year
and now account for 12% of site revenue.
Our conversion rates continue to increase across all devices and
we achieved 4.29% over the full year (2015: 4.06%). Instilling a
'mobile first' design and implementation ethos has grown mobile
conversion to 3.39% (2015: 2.88%). Conversion rates on mobile
phones are always likely to be lower than desktops, but we believe
we can continue to narrow the gap.
Our e-commerce strategy has always been based on driving
profitability while not focusing on turnover growth. On this basis
we have restricted the sale of lower price product on our Amazon
and Ebay platforms that struggled to absorb postage and commission
costs. This has slowed revenue growth across these channels but
resulted in improved cash margin achieved. Overall multichannel
revenue is up 11% on the prior year.
Employees and Charity
As previously announced, during 2016 Ian Filby stepped down as
Non-Executive Chairman to enable Anthony Smith, the former CEO, to
move to the role of Executive Chairman. Anthony has led Shoe Zone
for 20 years through a series of acquisitions and the Company's IPO
in 2014. Anthony will continue to have a hands-on role in the
Company and will have particular responsibility for the property
portfolio and strategy. Following Anthony's appointment, Nick Davis
was appointed CEO. Nick has been with the business for 13 years and
was the natural successor to drive the Company's growth plans.
Jeremy Sharman became Non-Executive Deputy Chairman. Jeremy had
been a Non-Executive Director since the IPO and will chair the
Audit committee and sit on the Remuneration committee. Jonathan
Fearn was appointed as Finance Director. Jonathan has extensive
experience in strategic and commercial finance having worked for
Celesio Group (UK) (formally LloydsPharmacy) since 2002.
We are incredibly proud of all of our team's effort that has
gone in to achieve these results and want to thank them for their
ongoing commitment and hard work. We are very thankful for all of
the creativity and enthusiasm that has resulted in us collectively
raising approximately GBP150,000 for our chosen charity BBC
Children in Need.
Current trading and Outlook
The outlook for consumer spending looks challenging with the
current difficult economic conditions likely to continue. Despite
this, we are well positioned given our strong value proposition
that has proven to be robust in challenging market conditions. We
are exposed to fluctuations in the value of sterling but have put
significant work into managing the risk through foreign currency
hedging and re-sourcing. While we anticipate this pressure may be
here for some time we expect to broadly maintain our gross margin
percentages.
We have continued to manage the store portfolio having opened
six new stores since the year end and refitted four. Early signs
are that the changes we have made to store rebranding has been
favourably received with customers. There are currently five new
stores with provisional opening dates and a further 39 full refits
planned for the remainder of the year.
We plan to open a further six Big Box stores in 2017 at various
locations across the UK. These stores will be a mix of out of town
and high street locations but will all operate with the new
contemporary format, offering a good brand mix, extended product
range and broad customer appeal. If the trial continues to be a
success through 2017 we will look to accelerate the opening
programme of these stores into 2018 and beyond.
We expect the business will continue to convert cash effectively
but anticipate a small increase in both capital expenditure and
contribution to defined benefit pension schemes. We anticipate
spending an additional GBP1.0m more in 2017 on store opening,
refits and head office improvements. We are currently contributing
GBP600k to one of our pension schemes and are in discussions around
the ongoing funding with the trustees of our two schemes.
Our multichannel offering has had some exciting developments
since the year end and we are now trading on Amazon marketplaces in
France, Germany, Spain and Italy. We plan to continue to grow into
new international online marketplaces throughout 2017. Following a
Google algorithm change in September we have experienced a step up
in organic search on shoezone.com that is also very encouraging.
Further online growth in 2017 will come from investment in
'Personalisation', implementing new technology to enable us to
enhance our conversion rate optimisation, giving our customer a
more personal shopping experience.
Shoe Zone has made a solid start to the year and trading is in
line with expectations. We are making good progress against our
strategic objectives and the board remains positive about the
outlook for the Group for the remainder of the year.
Financial review
In the 52 weeks to 1 October 2016, Group profit before tax
('PBT') increased to GBP10.3m (2015: GBP10.1 m), an increase of
1.1% on last year. PBT margin also increased to 6.4% (2015:
6.1%).
Revenues of GBP159.8m (2015: GBP166.8m) declined by 4.2% due to
the planned closure of loss making stores and as a result of
difficult trading conditions in the first half. Store numbers
reduced by a net 25 branches to 510 at the year end (2015: 10
branches closed leaving a total of 535).
Multi-channel revenues (excluding store orders) have continued
to grow achieving 11.4% during the year (2015: 39.4%), and have
developed to 3.9% of total sales (2015: 3.3%).
Product gross margin strengthened to 62.0% (2015: 61.5%)
reflecting further increases in direct sourcing and management of
write downs.
Operating expenses increased to GBP17.4m (2015: GBP17.0m).
Administration expenses, which increased by GBP0.7m largely due to
the impact of unhedged foreign exchange differences were, offset by
continuing efficiencies in distribution costs.
The effective rate of corporation tax for the year was 21.8% on
PBT (2015: 24.4%).
Earnings per share increased 4.3% to 16.9p (2015: 16.2p).
During the year we opened 17 new stores and completed 41 refits,
spending GBP3.4m on capital expenditure.
The Group supports two defined benefit schemes. The accounting
valuation as at 1 October 2016 indicates a deterioration of GBP7.9m
within the year (before deferred tax). This reflects an increase in
the fair value of assets by GBP7.1m offset by an increase in the
present value of the funded obligations of GBP15.0m which is due to
significant falls in corporate bond yields over the year resulting
in a higher value being placed on the liabilities of the scheme.
The actuarial valuations for the schemes are currently in progress
and the company is in discussions with the trustees on the options
for the future funding of these schemes.
The Company continues to utilise a formal financial derivative
hedging policy. The Group uses derivative financial instruments,
typically forward exchange contracts, to hedge the risk of future
foreign currency fluctuations. The hedging policy enables the
effective portion of changes in the fair value of designated
derivatives to be recognised in other comprehensive income.
Historically these movements would have been recognised in the
income statement. Further information can be seen in accounting
policies note 1 of the financial statements. The Group closed the
year with a derivative financial asset of GBP0.7m; all of which has
been involved in a formally designated hedge.
The business has a debt free financial structure and generated
GBP13.9m cash from operations, a year on year increase of GBP2.3m
resulting in a net cash position of GBP15.0m (2015: GBP14.2m) at
the year end, underpinning a strong balance sheet. The Group's
current bank facilities consist of an on demand overdraft facility
of GBP5.0m with HSBC. This facility has not been used within the
year.
The Board is proposing two dividends to be paid; a final
dividend of 6.8p (2015: 6.5p) per share and a special dividend of
8.0p (2015: 6.0p) per share. The special dividend is being proposed
as the business has GBP4.1m of excess cash, GBP11m is currently
deemed to be the maximum cash the business requires to operate
effectively. The dividends will be paid to shareholders on the
register on 24 February 2017, payable on 16 March 2017 if approved
at the Annual General Meeting to be held on 2 March 2017.
Consolidated income statement for the 52 weeks ended 1 October
2016
Note
52 weeks 52 weeks
ended ended
1 October 3 October
2016 2015
GBP'000 GBP'000
1,
Revenue 2 159,834 166,819
Cost of sales (132,022) (139,503)
------------ ------------
Gross profit 27,812 27,316
Administration expenses (11,657) (10,939)
Distribution costs (5,769) (6,095)
------------ ------------
Profit from operations 10,386 10,282
Finance income 56 44
Finance expense (190) (186)
------------ ------------
Profit before taxation 10,252 10,140
Taxation (1,801) (2,039)
------------ ------------
Profit attributable to equity
holders of the parent 8,451 8,101
============ ============
Earnings per share - basic and
diluted 6 16.90p 16.20p
============ ============
Consolidated statement of total comprehensive income for the 52
weeks ended 1 October 2016
52 weeks 52 weeks
ended ended
1 3
October October
Note 2016 2015
GBP'000 GBP'000
Profit for the period 8,451 8,101
Items that will not be reclassified subsequently
to the income statement
Remeasurement losses on defined benefit pension
scheme (8,190) (499)
Movement in deferred tax on pension schemes 1,474 100
Effect of change in deferred tax rate on opening
liability (362) -
Items that will be reclassified subsequently
to the income statement
Fair value movements on cash flow hedges 1,683 314
Cash flow hedges recognised in inventories (1,667) -
Tax on cash flow hedges (3) (63)
Effect of change in deferred tax rate on opening
liability 6 -
---------- ----------
Other comprehensive expense for the period (7,059) (148)
---------- ----------
Total comprehensive income for the period attributable
to equity holders of the parent 1,392 7,953
========== ==========
Consolidated statement of financial position as at 1 October
2016
Note 52 weeks 52 weeks
ended ended
1 October 3
2016 October
2015
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 18,661 18,688
Deferred tax asset 1,441 -
Total non-current assets 20,102 18,688
------------ ----------
Current assets
Inventories 30,075 29,172
Trade and other receivables 7,204 8,148
Derivative financial assets 651 553
Cash and cash equivalents 15,046 14,221
Total current assets 52,976 52,094
------------ ----------
Total assets 73,078 70,782
------------ ----------
Current liabilities
Trade and other payables (25,348) (23,649)
Provisions (922) (802)
Corporation tax liability (1,583) (1,373)
Total current liabilities (27,853) (25,824)
------------ ----------
Non-current liabilities
Trade and other payables (2,316) (3,037)
Provisions (75) (363)
Employee benefit liability (13,058) (5,150)
Deferred tax liability - (124)
------------ ----------
Total non-current liabilities (15,449) (8,674)
Total liabilities (43,302) (34,498)
------------ ----------
Net assets 29,776 36,284
============ ==========
Equity attributable to equity
holders of the company
Called up share capital 5 500 500
Merger reserve 2,662 2,662
Cash flow hedge reserve 270 251
Retained earnings 26,344 32,871
------------ ----------
Total equity and reserves 29,776 36,284
============ ==========
Consolidated statement of changes in equity for the 52 weeks
ended 1 October 2016
Cash flow hedge
Share capital Merger reserve Retained earnings Total
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 4 October 2014 500 2,662 - 28,569 31,731
Profit for the period - - - 8,101 8,101
Other comprehensive
expense - - 251 (399) (148)
Total comprehensive
income for the
period - - 251 7,702 7,953
---------------- ---------- ---------------------- -------------------- ---------
Dividends paid during
the year (note 3) - - - (3,400) (3,400)
---------------- ---------- ---------------------- -------------------- ---------
Total contributions
by and distributions
to owners - - - (3,400) (3,400)
At 3 October 2015 500 2,662 251 32,871 36,284
Profit for the period - - - 8,451 8,451
Other comprehensive
income - - 19 (7,078) (7,059)
---------------- ---------- ---------------------- -------------------- ---------
Total comprehensive
income for the
period - - 19 1,373 1,392
---------------- ---------- ---------------------- -------------------- ---------
Dividends paid during
the year (note 3) - - - (7,900) (7,900)
---------------- ---------- ---------------------- -------------------- ---------
Total contributions
by and distributions
to owners - - - (7,900) (7,900)
---------------- ---------- ---------------------- -------------------- ---------
At 1 October 2016 500 2,662 270 26,344 29,776
---------------- ---------- ---------------------- -------------------- ---------
Share capital comprises nominal value of shares subscribed
for.
The merger reserve has arisen as a result of the application of
merger accounting to the group reorganisation of 26 March 2014.
The cash flow hedge reserve comprises of gains/losses arising on
the effective portion of hedging instruments and is carried at fair
value in a qualifying cash flow hedge.
Retained earnings are all other net gains and losses and
transactions with owners (e.g. dividends) not recognised
elsewhere.
Consolidated statement of cash flows for the 52 weeks ended 1
October 2016
Note 52 weeks 52 weeks
ended 1 October 2016 ended 3 October 2015
GBP'000 GBP'000
Operating activities
Profit after taxation 8,451 8,101
Corporation tax 1,801 2,039
Finance income (56) (44)
Finance expense 190 186
Depreciation of property, plant and equipment 3,153 3,713
Impairment of property, plant and equipment - 459
Loss on disposal of property, plant and equipment 309 46
Pension contributions paid (472) (300)
13,376 14,200
Decrease in trade and other receivables 861 303
Decrease in foreign exchange contract 239 501
(Increase)/Decrease in inventories (1,224) 9
Increase/(Decrease) in trade and other payables 821 (3,148)
Decrease in provisions (168) (264)
529 (2,599)
Cash generated from operations 13,905 11,601
Income taxes paid (2,041) (1,538)
----------------------- -----------------------
Net cash flows from operating activities 11,864 10,063
----------------------- -----------------------
Investing activities
Purchase of property, plant and equipment (3,195) (1,879)
Sale of property, plant and equipment - 280
Interest received 56 44
----------------------- -----------------------
Net cash used in investing activities (3,139) (1,555)
----------------------- -----------------------
Financing activities
Dividends paid during the year 3 (7,900) (3,400)
Interest paid - (1)
Net cash used in financing activities (7,900) (3,401)
----------------------- -----------------------
Net increase in cash and cash equivalents 825 5,107
Cash and cash equivalents at beginning of period 14,221 9,114
----------------------- -----------------------
Cash and cash equivalents at end of period 15,046 14,221
======================= =======================
1 Accounting policies
General information
Shoe Zone plc (the 'Company') is a public company incorporated
and domiciled in England and Wales. The registered office is at
Haramead Business Centre, Humberstone Road, Leicester, LE1 2LH. The
company registered number of the Company is 8961190.
The Company and its subsidiaries' (collectively the Group)
principal activity is a footwear retailer in the United Kingdom and
the Republic of Ireland.
Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied for the 52 weeks ended 1 October 2016.
The announcement of results for the Group for the 52 weeks ended
1 October 2016 was authorised for issue in accordance with a
resolution of the directors on 10 January 2017.
The Group financial statements for the 52 weeks ended 1 October
2016 included in this report do not constitute the Group's
statutory accounts for the 52 weeks ended 1 October 2016, or the 52
weeks ended 3 October 2015 but is derived from those accounts. The
auditor has reported on these accounts; their report was
unqualified, did not draw any matters by way of emphasis without
qualifying their report and did not contain statements under s498
(2) or (3) Companies Act 2006 or equivalent preceding legislation.
The statutory accounts for the 52 weeks ended 3 October 2015 have
been filed with the Registrar of Companies.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with IFRSs.
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 2016. The results for all
subsidiary companies are consolidated using the acquisition method
of accounting.
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the
practical ability to direct the relevant activities of the investee
without holding the majority of the voting rights. In determining
whether de-facto control exists the company considers all relevant
facts and circumstances, including:
-- The size of the company's voting rights relative to both the
size and dispersion of other parties who hold voting rights
-- Substantive potential voting rights held by the company and by other parties
-- Other contractual arrangements
-- Historic patterns in voting attendance.
The consolidated financial statements present the results of the
company and its subsidiaries ('the Group') as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Changes in accounting policies
The Group has not early adopted the following new standards,
amendments or interpretations that have been issued but are not yet
effective. The Directors anticipate that the adoption of these
standards will not result in significant changes to the Group's
accounting policies. The Group has commenced its assessment of the
impact of these standards but is not yet in a position to state
whether these standards would have a material impact on its results
of operations and financial position.
There were no significant standards or interpretations effective
for the first time for periods beginning on or after 4 October
2015. None of the amendments to Standards that are effective from
that date had a significant effect on the Group's financial
statements.
-- Annual Improvements to IFRSs 2012-2014 Cycle
-- IFRS 15 Revenue from Contracts with Customers
-- IFRS 9 Financial Instruments
-- IFRS 16 Leases
Revenue
Revenue is measured at the fair value of consideration received
or receivable net of discounts, returns and VAT. Revenue from the
sale of footwear is recognised when the company has transferred the
significant risks and rewards of ownership to the buyer at the
point of sale in the shop. At the point of sale a provision is made
for the level of expected returns based on previous experience.
Internet sales are recognised when the goods have been paid for,
despatched and received by the customer.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment so as to write off their carrying value over the expected
useful economic lives. It is provided at the following rates:
Leasehold - 5-10 years on a straight line basis
improvements
Fixtures and - 5-10 years on a straight line basis
fittings
Motor vehicles - 3-5 years on a straight line basis
No depreciation is provided against freehold land. Depreciation
is provided against freehold shop properties writing off the
original cost less estimated residual value over the useful
economic life of the property which is estimated to be 50
years.
Leased assets
Where substantially all of the risks and rewards incidental to
ownership of a leased asset have been transferred to the Shoe Zone
plc Group (a 'finance lease'), the asset is treated as if it had
been purchased outright.
The amount initially recognised as an asset is the lower of the
fair value of the leased property and the present value of the
minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease
payments are analysed between interest and capital. The interest
element is charged to the consolidated income statement over the
period of the lease and is calculated so that it represents a
constant proportion of the lease liability. The capital element
reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an 'operating lease'),
the total rentals payable under the lease are charged to the
consolidated income statement on a straight-line basis over the
lease term. The aggregate benefit of lease incentives is recognised
as a reduction of the rental expense over the lease term on a
straight-line basis.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed for
impairment when there is an indication that assets might be
impaired. When the carrying value of an asset exceeds its
recoverable amount, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
asset's cash generating unit (i.e. the smallest group of assets in
which the asset belongs for which there are separable identifiable
cash flows).
Impairment charges are included in the consolidated income
statement in cost of sales, except to the extent they reverse
previous gains recognised in the consolidated statement of
comprehensive income.
Inventories
Inventories are initially recognised at cost on a first in first
out basis, and subsequently at the lower of cost and net realisable
value. Cost comprises all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their
present location and condition.
Financial assets
The Group classified its financial assets into the categories,
discussed below, due to the purpose for which the asset was
acquired. The Group has not classified any of its financial assets
as held to maturity.
Derivative financial instruments and hedging activities
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.
The Group documents at the inception of the transaction the
relationship between hedging instruments and hedged items, as well
as its risk management objectives and strategy for undertaking
various hedging transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows
of hedged items.
Loans and receivables
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:
-- bank loans which are initially recognised at fair value net
of any transaction costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently
measured at amortised cost ensuring the interest element of the
borrowing is expensed over the repayment period at a constant rate;
and
-- trade payables, other borrowings and other short-term
monetary liabilities, which are initially recognised at fair value
and subsequently carried at amortised cost using the effective
interest method.
Deferred taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the statement of
financial position differs from its tax base.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
balance sheet date and are expected to apply when the deferred tax
liabilities or assets are settled or recovered. Deferred tax
balances are not discounted.
Deferred tax assets are offset when the Group has legally
enforceable rights to set off current tax assets against current
tax liabilities and the deferred tax liabilities relate to taxes
levied by the same tax authority on either:
-- the same taxable group company; or
-- different company entities which intend to either settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Provisions
Provision for dilapidations is made at the best estimate of the
expenditure required to settle the obligation at the reporting
date, where material, discounted at the pre-tax rate reflecting
current market assessments of the time value of money and risks
specific to the liability. A dilapidation provision is only
recognised on those properties which are likely to be exited. Where
such property is identified the full costs expected are recognised.
This provision relates to the liability of wear and tear incurred
on the leasehold properties and does not include any removal of
shop refits as experience indicates that liabilities do not arise
for removal of shop refits.
Foreign exchange
Transactions entered into the Group entities in a currency other
than the functional currency are recorded at the average rate
prevailing during the period. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting
date.
Retirement benefits - defined contribution and benefit
schemes
The Group operates both defined benefit and defined contribution
funded pension schemes. The schemes are administered by trustees
and are independent of the Group.
Contributions to defined contribution schemes are charged to the
consolidated statement of comprehensive income in the year to which
they relate.
Defined benefit scheme surpluses and deficits are measured
at:
-- the fair value of plan assets at the reporting date; less
-- plan liabilities calculated using the projected unit credit
method discounted to its present value using yields available on
high quality corporate bonds that have maturity dates approximating
to the terms of the liabilities; plus
-- unrecognised past service costs; less
-- the effect of minimum funding requirements agreed with scheme trustees.
Re-measurements of the net defined obligation are recognised
directly within equity. These include actuarial gains and losses,
return on plan assets (interest exclusive), and any asset ceilings
(interest exclusive).
Service costs are recognised in the income statement, and
include current and past service costs as well as gains and losses
on curtailments.
Net interest expense (income) is recognised in profit or loss,
and is calculated by applying the discount rate used to measure the
defined benefit obligation (asset) at the beginning of the annual
period to the balance of the net defined benefit obligation
(asset), considering the effects of contributions and benefit
payments during the period.
Gains or losses arising from changes to scheme benefits or
scheme curtailment are recognised immediately in profit or
loss.
Settlements of defined benefit schemes are recognised in the
period in which the settlement occurs.
2 Segmental information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
management team including the Chairman, Chief Executive Officer and
Chief Operating Officer.
The Board considers that each store is an operating segment but
there is only one reporting segment as the stores qualify for
aggregation, as defined under IFRS 8. Management reviews the
performance of the Group by reference to total results against
budget. The total profit measures are operating profit and profit
for the year, both disclosed on the face of the consolidated income
statement. No differences exist between the basis of preparation of
the performance measures used by management and the figures in the
Group financial statements.
52 weeks 52 weeks
ended ended
1 October 3 October
2016 2015
GBP'000 GBP'000
External revenue by location of customers:
United Kingdom 154,463 161,761
Republic of Ireland 5,371 5,058
------------ ------------
159,834 166,819
============ ============
There are no customers with turnover in excess of 10% or more of
total turnover.
52 weeks 52 weeks
ended ended
1 October 3 October
2016 2015
GBP'000 GBP'000
Non-current assets by location:
United Kingdom 18,661 18,688
============ ============
Non-current assets held in the Republic of Ireland are not
disclosed on the grounds of materiality.
3 Dividends
52 weeks 52 weeks
ended 1 ended
October 3 October
2016 2015
GBP'000 GBP'000
Dividends paid during the year at 15.8p (2015: 6.8p)
per share 7,900 3,400
========== ============
A final dividend of 6.8p (2015: 6.5p) per share is proposed for
shareholders on the register on 24 February 2017 payable on 17
March 2017 following approval at the Annual General Meeting on 2
March 2017.
A special dividend of 8.0p (2015: 6.0p) per share is proposed
for shareholders on the register on 24 February 2017 payable on 17
March 2017 following approval at the Annual General Meeting on 2
March 2017.
4 Contingent liabilities
The Shoe Zone plc Group and subsidiary undertakings have given a
duty deferment guarantee in favour of HM Revenue and Customs
amounting to GBP800,000 (3 October 2015: GBP800,000).
5 Share Capital
1 October 3 October
2016 2015
GBP'000 GBP'000
Share capital issued and fully
paid
50,000,000 ordinary shares of 1p
each 500 500
500 500
=========== ===========
Ordinary shares carry the right to one vote per share at general
meetings of the company and the rights to share in any distribution
of profits or returns of capital and to share in any residual
assets available for distribution in the event of a winding up.
6 Earnings per share
Earnings per share is calculated by dividing profit for the year
by the weighted average number of shares outstanding during the
year.
52 weeks 52 weeks
ended ended
1 October 3 October
2016 2015
GBP'000 GBP'000
Numerator
Profit for the year and earnings
used in basic and diluted EPS 8,451 8,101
============ ============
1 October 3 October
2016 2015
Denominator
Weighted average number of shares
used in basic and diluted EPS 50,000,000 50,000,000
============ ============
7 Ultimate controlling party
The company is controlled by the Smith family albeit there is
not a single controlling party.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKKDDFBKDNDD
(END) Dow Jones Newswires
January 11, 2017 02:00 ET (07:00 GMT)
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