TIDMSHOE
RNS Number : 0122Z
Shoe Zone PLC
09 January 2024
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 30 September 2023
Shoe Zone is pleased to announce its audited results for the 52
weeks to 30 September 2023, (the "Period").
Financials
-- Revenue of GBP165.7m (2022: GBP156.2m)
o Store revenue GBP134.8m (2022: GBP129.8m)
o Digital revenue GBP30.9m (2022: GBP26.4m)
-- Profit before tax GBP16.2m (2022: GBP13.6m), adjusted GBP16.5m(1) (2022: GBP11.2m)
-- Interim dividend GBP1.2m, (2022: GBP1.25m and GBP1.6m)
-- Proposed final dividend of 8.9 pence per share, total 11.4 pence per share (2022: 8.8 pps)
-- Proposed special dividend 6.0 pence per share, total 17.4 pence per share (2022: 17.0 pps)
-- Earnings per share 27.79p (2022: 21.74p)
-- Net cash balance of GBP16.4m (2022: GBP24.4m)
-- Share buy-back programme, total 3.8m shares for GBP8.1m since launch, GBP2.14 per share
Operational
-- 323 stores at Period end (2022: 360) comprising:
o 42 Big Box (2022: 45)
o 93 Hybrid (2022: 44)
o 188 Original (2022: 271)
-- 72 closures, 35 opened, 37 fewer stores
-- Annualised lease renewal savings of GBP0.7m, an average reduction of 31%
-- Average lease length of 2.2 years (2022: 1.8 years)
-- Digital returns rate of 11.8% (2022: 11.3%)
(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 3001
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, with strong and consistent
results throughout the key trading periods, particularly in the
second half, with strong peak summer and Back to School
trading.
Profit before tax increased by 19.1% to GBP16.2m for the Period
(2022: GBP13.6m) and adjusted profit before tax increased by 47.3%
to GBP16.5m (2022: GBP11.2m), with an earnings per share of 27.79p
(2022: 21.74p).
Store revenue increased by 3.9% to GBP134.8m (2022: GBP129.8m),
trading out of 37 fewer stores, with strong performance from our
relocated and refitted stores. Digital revenues increased by 17.0%
to GBP30.9m (2022: GBP26.4m) in the Period, driven by an increase
in conversion and strong Amazon sales. We continue to invest in our
digital infrastructure and the addition of two automated bagging
machines last year significantly improved throughput and
productivity.
We ended the Period trading out of 323 stores, having closed 72
stores, opened 35 new stores and refitted a further 15 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 2.2 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 GBP11.4m (2022: GBP5.2m), the
majority of which was for our refit and relocation programme, which
is partly offset by GBP1.8m of rent-free periods given by
Landlords.
We achieved rent reductions on 53 store renewals of GBP0.7m
(2022: GBP0.6m) on an annualised basis, an average reduction of
31%.
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 3-4% 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 42 Big Box, 93 Hybrid and 188 Original
stores. This year we expect to relocate or open a further 25 stores
and continue to close a number of older stores, and we will refit a
minimum of 25 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 a mobile App.
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. 11.8% 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 few
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 93 to
approximately 200. Overall, we anticipate trading from a similar
sales square footage, albeit from a reduced number of locations,
and by the end of 2026 we will not have any "Original" Shoe Zone
stores trading.
Product
We expect product margin levels to increase in the next
financial year as we are forecasting a full 12 months of lower
container prices compared to 6 months realised last year. Our
buying and shipping teams are doing an exceptional job of managing
the direct from factory supply chain, which is still volatile, and
we are confident we are performing better than the market
average.
Dividend
An interim of 2.5 pence per share was paid in August 2023. It is
proposed that a final dividend of 8.9 pence per share be paid in
March 2024 on the basis of a 40% pay-out ratio, totalling 11.4
pence per share (2022: 40% payout 8.8 pence per share). The Board
will also propose an additional special dividend of 6.0 pence per
share (to be paid in March 2024), bringing the total to 17.4 pence
per share (2022: 17.0 pence per share).
Financial Review
During the Period, total revenue was GBP165.7m (2022: GBP156.2m)
an increase of 6.1%. We ended the year with 323 stores (2022: 360)
having closed 72 and opened 35.
Profit before tax was GBP16.2m (2022: GBP13.6m), adjusted by
profit on sale of freeholds (-GBP0.3m) and foreign exchange gains
on revaluation (+GBP0.6m), therefore an adjusted profit before tax
of GBP16.5m (2022: GBP11.2m). The year-on-year increase is
primarily due to strong second half trading, including our key back
to school period, strong peak summer sales and the benefit of lower
container prices that started to be realised mid-year. We continue
to actively reduce 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 revenue was GBP30.9m (2022: GBP26.4m) an increase of
17.0%, which was ahead of management expectations and now ahead of
the peak during the pandemic. Profit contribution from Digital was
GBP8.6m (2022: GBP7.0m) in the Period.
Product margins increased to 62.3% (2022: 61.2%), due to the
reduction in container prices, a more favourable Sterling to Dollar
exchange rate, less supply chain volatility, continued improvement
in stock management, partly offset by a higher mix of lower margin
branded product.
Statutory gross profit increased by GBP4.5m to GBP40.9m, 24.7%
of revenue (2022: GBP36.4m, 23.3%). The year-on-year cash increase
reflects revenue growth and the percentage increase is as a result
of the higher underlying product margins. Cost of sales increased
by GBP5.0m, due to sales related cost increases, higher business
rates, higher store depreciation and National Living Wage
inflation.
Administration expenses increased by GBP2.2m to GBP18.8m (2022:
GBP16.6m) due to digital sales related courier costs GBP0.9m,
additional cost of living and profit share bonuses GBP0.6m,
depreciation GBP0.5m and Head Office repairs GBP0.2m.
Distribution costs increased by GBP0.2m to GBP5.3m (2022:
GBP5.1m), due to higher warehouse and distribution wages due to the
National Living Wage increase.
The corporation tax charge through the P&L is GBP3.0m (2022:
tax charge of GBP2.7m).
Earnings per share is 27.79p (2022: 21.74p).
Stock levels increased by GBP1.5m to GBP33.7m (2022: GBP32.2m),
due to the earlier delivery of Autumn/Winter 2023 product and an
increase in the proportion of higher value branded product we have
in stock compared to last year.
Capital expenditure increased to GBP11.4m (2022: GBP5.2m) as we
accelerated our programme of store relocations and refits to expand
our Hybrid formats. We also invested GBP1.3m in our central
distribution centre to further improve our Digital efficiency and a
further GBP0.9m on our vehicle fleet. This total is the gross
expenditure and is partially offset by GBP1.8m of rent-free cash
received via landlords when we opened new stores.
At the year-end, net cash was GBP16.4m (2022: GBP24.4m). The
decrease was due to dividends paid GBP8.2m, further share buy-backs
in the year of GBP7.1m and the increased level of capital
expenditure, offset by the cash generated from profitable
operations. We had GBP5.0m cash on deposit at the year end, which
matured in December 2023 and our current account is swept daily to
attract interest.
The Shoe Zone pension scheme is in a surplus of GBP0.5m (2022:
surplus of GBP7.1m). The reduction is due to the purchase of the
buy-in contract with Rothesay on 2 March 2023. Specifically, the
value placed on the Shoe Zone Scheme's uninsured liabilities on the
IAS19 assumptions was lower than the actual premiums paid to
Rothesay to secure member benefits. The Shoefayre scheme is now in
deficit of GBP2.1m (2022: surplus of GBP1.8m). This is firstly due
to the scheme's assets delivering a lower-than-expected investment
return, driven by a reduction in the hedging level of the scheme's
Liability Driven Investment (LDI) holdings and secondly, the
allowance for inflation has increased the value placed on the
scheme's liabilities.
An interim dividend of 2.5 pence per share was paid on 14 August
2023. It is proposed that a final dividend of 8.9 pence per share
will be paid in March 2024 based on a 40% pay-out ratio (total of
11.4 pence per share, 2022: 8.8 pence per share). The Board has
proposed an additional special dividend of 6.0 pence per share,
payable in March 2024, giving a total dividend of 17.4 pence per
share (2022: 17.0 pence per share).
The Company continued the share buy-back programme that was
started in August 2022 and as at 30 September 2023 had purchased
3,773,170 shares in total (of which 3,750,000 have been cancelled
with the balance held in treasury) at an average price of GBP2.14
equating to a total spend of GBP8.1m since the beginning of the
share buy-back programme. 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 30
September 2023
52 weeks 52 weeks
ended 30 ended 1
September October
2023 2022
GBP'000 GBP'000
Revenue 165,657 156,164
Cost of sales (124,805) (119,764)
------------ -----------
Gross profit 40,852 36,400
Administration expenses (18,791) (16,620)
Distribution costs (5,311) (5,104)
------------ -----------
Profit from operations 16,750 14,676
Finance income - -
Finance expense (568) (1,113)
------------ -----------
Profit before taxation 16,182 13,563
Taxation (2,962) (2,718)
------------ -----------
Profit attributable
to equity holders
of the parent 13,220 10,845
------------ -----------
Earnings per Share
- basic and diluted 27.79p 21.74p
------------ -----------
Consolidated statement of total comprehensive income for the 52
weeks ended 30 September 2023
52 weeks 52 weeks
ended 30 ended 1
September October
2023 2022
GBP'000 GBP'000
Profit for the year 13,220 10,845
Items that will not be reclassified subsequently
to the income statement
Remeasurement (loss)/gains on defined benefit
pension scheme (2,054) 5,798
Movement in deferred tax on pension schemes 513 (1,505)
Share buy back (7,125) (966)
Items that will be reclassified subsequently
to the income statement
Fair value movements on cash flow hedges (295) 1,129
Tax on cash flow hedges 54 (226)
------------ ----------
Other comprehensive (expense)/income for
the year (8,907) 4,230
------------ ----------
Total comprehensive income for the year
attributable
to equity holders of the parent 4,313 15,075
------------ ----------
Consolidated statement of financial position as at 30 September
2023
As at As at
30 September 1 October
2023 2022
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 19,178 12,582
Right-of-use assets 25,751 25,581
Deferred tax asset 529 720
--------------- ------------
Total non-current assets 45,458 38,883
--------------- ------------
Current assets
Inventories 33,752 32,188
Trade and other receivables 3,219 6,071
Cash and cash equivalents 16,354 24,427
Corporation tax asset 58 -
--------------- ------------
Total current assets 53,383 62,686
--------------- ------------
Total assets 98,841 101,569
--------------- ------------
Current liabilities
Trade and other payables (24,353) (22,801)
Lease liabilities (13,071) (14,870)
Derivative financial liability - -
Deferred Tax liability - -
Provisions (783) (1,108)
Corporation tax liability - (1,910)
--------------- ------------
Total current liabilities (38,207) (40,689)
--------------- ------------
Non-current liabilities
Lease liabilities (22,219) (20,975)
Provisions (3,009) (2,662)
Employee benefit liability (2,054) -
--------------- ------------
Total non-current liabilities (27,282) (23,637)
--------------- ------------
Total liabilities (65,489) (64,326)
--------------- ------------
Net assets 33,352 37,243
--------------- ------------
Equity attributable to equity holders
of the Company
Called up share capital 463 495
Merger reserve 2,662 2,662
Capital Redemption Reserve 37 5
Cash flow hedge reserve 412 653
Retained earnings 29,778 33,428
--------------- ------------
Total equity and reserves 33,352 37,243
--------------- ------------
Consolidated statement of changes in equity for the 52 weeks
ended 30 September 2023
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 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
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 - - - 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 33,428 37,243
---------- ------------- --------- ---------- ------------------- ---------
At 2 October 2022
Profit for the year - - - - 13,220 13,220
Defined benefit pension
movements - - - - (2,054) (2,054)
Capital Redemption - - - - - -
reserve
Cash flow hedge movements - - - (295) - (295)
Share Buy Back (32) 32 - - (7,125) (7,125)
Deferred tax on other
comprehensive income - - - 54 513 567
---------- ------------- --------- ---------- ------------------- ---------
Total comprehensive
income for the year (32) 32 - (241) 4,554 4,313
---------- ------------- --------- ---------- ------------------- ---------
Dividends paid during
the year (note 11) - - - - (8,204) (8,204)
---------- ------------- --------- ---------- ------------------- ---------
Total contributions - - - - - -
by and distributions
to owners
---------- ------------- --------- ---------- ------------------- ---------
At 30 September
2023 463 37 2,662 412 29,778 33,352
---------- ------------- --------- ---------- ------------------- ---------
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 30
September 2023
52 weeks 52 weeks ended 1 October
ended 30 September 2022
2023
GBP'000 GBP'000
Operating activities
Profit after tax 13,220 10,845
Corporation tax charge 2,962 2,718
Finance income - -
Finance expense 568 1,113
Depreciation of property, plant and equipment 3,929 4,118
Fixed asset impairment and loss on disposal of property,
plant and equipment and right of
use asset 369 (1,075)
Right-of-use asset depreciation and impairment 17,484 13,016
Pension contributions paid - -
--------------------- --------------------------
38,532 30,735
Decrease in trade and other receivables 2,852 627
Decrease in foreign exchange contract (295) (527)
Increase in inventories (1,564) (7,057)
Increase in trade and other payables 1,552 6,361
Increase in provisions 22 345
--------------------- --------------------------
2,567 (251)
Cash generated from operations 41,099 30,484
Net corporation tax paid (4,171) (1,214)
--------------------- --------------------------
Net cash flows from operating activities 36,928 29,270
--------------------- --------------------------
Investing activities
Purchase of property, plant and equipment (11,372) (5,225)
Proceeds from sale of PPE 478 3,590
--------------------- --------------------------
Net cash used in investing activities (10,894) (1,635)
--------------------- --------------------------
Share buy-back (7,125) (966)
Repayments of secured loan - (4,400)
Capital element of lease repayments (18,954) (15,584)
Interest received 176 (23)
Dividends paid during the year (8,204) (1,250)
--------------------- --------------------------
Net cash used in financing activities (34,107) (22,223)
--------------------- --------------------------
Net increase in cash and cash equivalents (8,073) 5,412
Cash and cash equivalents at beginning of year 24,427 19,015
--------------------- --------------------------
Cash and cash equivalents at end of year 16,354 24,427
--------------------- --------------------------
Notes to the financial statements for the 52 weeks ended 30
September 2023
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 30 September 2023
(2022: 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 UK adopted
international accounting standards ('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 30 September 2023. 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. 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.
Refitted and relocated store results and our positive digital
performance, combined with the satisfactory cash position gives the
Directors a reasonable basis on which to satisfy themselves that
the business is a going concern. The Group has prepared forecasts
and budgets which shows the Group has sufficient cash to meet its
day-to-day liabilities as they fall due. On that basis, the
directors have prepared the financial statements on a going concern
basis.
Revenue
Revenue is measured at the fair value of consideration received
or receivable net of discounts, returns and VAT. Revenue is
recognised when the company has transferred the significant risks
and rewards of ownership to the buyer at the point of sale in the
shop. At the point of sale, a provision is made for the level of
expected returns based on previous experience.
Internet sales are recognised when the goods have been paid for,
despatched and received by the customer.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment so as to write off their carrying value over the expected
useful economic lives. It is provided at the following rates:
Freehold and long leasehold properties - 50 years on a straight
line basis
Short leasehold and leasehold improvements - 5-10 years on a straight line basis
Fixtures and fittings - 5-10 years on a straight line basis
Motor vehicles - 3-5 years on a straight line basis
No depreciation is provided against freehold land. Depreciation
is provided against freehold shop properties writing off the
original cost less estimated residual value over the useful
economic life of the property which is estimated to be 50
years.
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
statement of financial position 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 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 30 September
2023 was 1.82%. If the discount rate was changed by 1% this would
result in an increase of assets in excess of GBP300,000.
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 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. The Directors now consider
Digital to be its own operating segment. 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 30 ended 1
September October
2023 2022
GBP'000 GBP'000
Revenue
United Kingdom stores 134,078 128,664
Digital 30,966 26,967
Other 613 533
------------ ----------
165,657 156,164
============ ==========
There are no customers with turnover in excess of 10% of total
turnover.
52 weeks 52 weeks
ended 30 ended 1
September October
2023 2022
GBP'000 GBP'000
Non-current assets excluding deferred tax asset
by location:
United Kingdom 44,929 38,163
44,929 38,163
============ ==========
Digital non-current and current assets have not been disclosed
due to the immaterial value. The contribution is GBP8.6m (2022:
GBP7.0m)
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.
Dividends
52 weeks 52 weeks
ended 30 ended 1
September October
2023 2022
GBP'000 GBP'000
Dividends paid during the year 8,204 1,250
============ ==========
Share capital
52 weeks 52 weeks
ended 30 ended 1
September October
2023 2022
GBP'000 GBP'000
Share capital issued and fully paid
46,250,000 (2022:49,500,000) ordinary shares
of 1p each 463 495
463 495
============ ==========
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
30 September 1 October
2023 2022
GBP'000 GBP'000
Numerator
Profit for the year and earnings
used in basic and diluted EPS 27.79p 21.74p
30 September 1
2023 October
2022
Denominator
Weighted average number of shares used in
basic and diluted EPS 46,250,000 49,500,000
============== ============
Ultimate controlling party
The company is controlled by the Smith family albeit there is
not a single controlling party.
This announcement does not constitute full statutory
accounts.
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END
FR BIGDBUBGDGSI
(END) Dow Jones Newswires
January 09, 2024 02:00 ET (07:00 GMT)
Grafico Azioni Shoe Zone (LSE:SHOE)
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