Annual Report & Accounts
Shoe Zone is the leading
UK Specialist Value Footwear Retailer
“In June 2015, we were excited to launch a new concept store with the
aim of attracting a wider audience. The store in Meadowhall, one of the
biggest shopping centres in the UK, has been a huge success.”
Anthony Smith, CEO.
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Shoe Zone store in Meadowhall following the launch of a new shopfit concept 6 June 2015
Contents
Strategic Report
Highlights
Directors and Advisers
Chief Executive Officer Report
Financial Review
Key Performance Indicators
Principal Risks and Uncertainties
Governance
Corporate Governance Statement
Board of Directors
Remuneration Report
Directors’ Report
Independent Auditor’s Report
Financial Statements
Consolidated Income Statement
Consolidated Statement of
Total Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Company Statement of Financial Position
Notes to the Company Financial Statements
Shareholder Information
Notice of Annual General Meeting
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Financial Highlights
Revenue
£166.8m
(2014: £172.9m)¹
Profit before tax
£10.1m
(2014: £10.5m)
Net cash
£14.2m
(2014: £9.1m)
Product
gross margin
61.5%
(2014: 61.3%)
Earnings
per share
16.2p
(2014: 16.1p)
Interim dividend
3.2p
Final dividend
Total dividend
Special dividend
6.5p
9.7p
6.0p
¹ Reduction due to planned closure of unprofitable stores
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Shoe Zone plc Annual Report and Accounts 2015 Directors and Advisers
Directors
I A Filby
A E P Smith
N J Davis
J C P Smith
C J Caminada
J W Sharman
Secretary
N J Davis
Registered office
Haramead Business Centre
Humberstone Road
Leicester
LE1 2LH
Auditor
BDO LLP
Pannell House
159 Charles Street
Leicester
LE1 1LD
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Registrar
Capita Asset Services Limited
The Registry
34 Beckenham Road
Kent
BR3 4TU
Solicitors
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London
EC2A 2EW
Corporate brokers
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Chief Executive’s report
Introduction
I am delighted to deliver my Chief Executive’s report on
another satisfying year for Shoe Zone. Whilst it was a
difficult year for the footwear industry, I believe we have
achieved a solid performance. Our key strengths have
been cost control, managing our property portfolio and
delivering strong profit margins through increased direct
sourcing and better inventory control, leading to an
improved cash position.
The financial position of the business remains very
sound, with our debt-free balance sheet providing a solid
foundation for the future. These results are in line with
expectations that were reset during the year, with profit
before tax decreasing by 3.4% to £10.1m (2014: £10.5m),
while earnings per share increased to 16.2p
(2014: 16.1p).
Dividends
As a result of our performance in the year and strong cash
position, the Board is proposing two dividends to be paid
being a final dividend of 6.5 pence per share, resulting
in a total dividend for the year of 9.7p per share and a
special dividend of 6.0 pence per share.
The board is proposing a special dividend in order to
distribute surplus cash generated from our strong cash
conversion. We believe that £11m is currently the
maximum level of cash that the business requires to
operate effectively and so excess above this level will be
paid to shareholders by way of a special dividend when
appropriate. Therefore, the special dividend of £3m,
being 6.0 pence per share is being proposed.
The dividends will be paid to shareholders on the
register on 26 February 2016, payable on 16 March 2016
if approved at the Annual General Meeting to be held
on 4 March 2016. The shares will be ex-dividend on 25
February 2016.
4
Product range development
We continue to make good progress in the development
of our product ranges. Following a slow start to the
financial year we made some adjustment to our future
ranges to ensure greater diversity of product and also
to give us future confidence about average price and
average transaction value. These stabilised in the second
half and have reverted to historic levels post the year end.
We appointed a new merchandise director in April 2015
with a focus on improving stock management and cash
generation. The full impact of this appointment will be
realised in 2016 and beyond.
We are very pleased with the progress of our
non-footwear ranges, which were gradually introduced
from the Spring/Summer 2013 season. In 2015,
non-footwear sales growth was up 33% with annual
sales of £5.5m. We have tailored the ranges to enhance
performance in 2016 and this strategy is already showing
good signs of further growth. We have also extended the
full non-footwear range to our Grade 3 stores which has
had a great start.
Shoe Zone plc Annual Report and Accounts 2015 Chief Executive’s report (continued)
Store portfolio management
improvements in 2014 (6.44%) we continued this well
controlled trend and reduced this to 6.25% in 2015.
We ended the year operating from 535 stores with 12 new
store openings (including seven relocations). We also
completed 40 store refits during the year, at a total capital
expenditure of £1.9m. We continue to rationalise our store
portfolio and will close further temporary/loss making
stores in 2016, reducing total sales but helping to improve
profitability.
Our rents at lease renewal in the 12 months fell by 27.2%.
We still see opportunities to reduce rents and relocate to
better sites and therefore continue to open larger, more
profitable Grade 1 stores while closing smaller Grade 3
stores (see table). Our average lease length is now 2.7
years and provides us with the flexibility to best manage
the portfolio, with secondary locations continuing to show
limited signs of rental recovery outside the M25.
Movement in Grade changes during the year were in line
with management forecasts. In addition, we have been
trialling new equipment during the year to increase store
densities without the need for refitting. This has been
extremely successful and will rapidly increase the number
of Grade 1 stores from February 2016 as shown in the
following table.
Estimate
1 February
2016
Stores at
3 October
2015
Stores at
4 October
2014
Grade 1 (large)
287
231 203
Grade 2 (medium)
123
168 178
Grade 3 (small)
115
136
164
TOTAL
525
535
545
Operational improvements
Product orders placed directly with overseas factories
increased in 2015 to 62.1% (2014: 53.1%). The margin
gains from this approach are partially being reinvested to
ensure we can provide our customers with the best value
product, with the remainder improving margin achieved for
the year.
We continue to implement our “right price, first time”
strategy, which helps control the amount of markdown
value as a percentage of turnover. Following big
We launched our updated store proposition at our new
Meadowhall store in Sheffield in June. This new format
has been a great success and this concept is now being
rolled out to new stores and refits.
E-commerce
shoezone.com continues to evolve and grow with an
upgraded fully responsive site launched in 2015. Our
database has grown by 47% which has helped e-mail
campaign sales increase by 65% on the prior year. Mobile
and tablet visits represented 66% (2014: 56%) of all visits
with conversion rates increasing on all devices, including
desktop. I am pleased that our overall e-commerce growth
was significantly ahead of e-commerce market
expectations (13.9% Mintel 2015).
Our 200 web exclusive products now account for 13.4%
(2014: 8.1%) of shoezone.com sales. This has even
greater potential as we buy greater volumes of these
styles.
In addition to our own website, which represents over
60% of all e-commerce sales, we also sell via Amazon
and eBay.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Chief Executive’s report (continued)
New sales opportunities
our new merchandise director will continue to improve our
stock and cash position.
Capital expenditure for the full year will be increased
to c.£3m from the original £2m expectation to allow
increased investment in stores, warehouse and IT. This
includes refitting an additional 10 stores; significant
investment in the Distribution Centre to allow for the
increasing volume of e-commerce sales; and a roll out of
new point of sale terminals which will be completed by
2018.
We have continued to make progress on the property
portfolio having opened six new stores, with a further four
stores having been refitted to our new concept so far this
year. There are currently four new stores with provisional
opening dates and a further 41 refits planned for 2016.
By February 2016, there will be an additional 56 Grade 1
stores converted through the introduction of new layouts
and equipment. There will also be 33 enhanced Grade
1 stores that will have their style count increased from
400 to 450. The extra styles will predominantly be higher
priced and consist of more fashionable footwear.
In August 2016, a trial “Project Big Box” will be launched
in three stores. This will be twice the size of an average
Grade 1 Shoe Zone store. The stores will benefit
significantly from an extended product range, higher
priced footwear and an enhanced environment. This will
allow Shoe Zone to benefit from the out of town market as
well as creating a strong new avenue for growth.
Our successful e-commerce offering continues to grow
successfully. E-commerce exclusive styles are being
increased to 275 per season from the current 200, to
satisfy the increasing demand for higher priced products.
The falling oil price is already having a positive impact
on the cost of logistics and should also impact the price
of raw materials thereby improving gross margins for the
remainder of the year.
Anthony Smith
Chief Executive Officer
12 January 2016
We started selling to over 30 additional countries,
including Germany, Italy, Spain and France, in the year
via Amazon and eBay. We will continue to increase the
number of countries in which our products are offered and
we are also working on further developments during 2016
that will improve the delivery options for our international
customers via shoezone.com.
Our promotional links with other value retailers are very
encouraging. During our ‘Back to School’ campaign, we
generated over £900,000 in a seven week period through
such promotions, representing a 10% increase on the
previous year.
Employees and Charity
We are immensely proud of the significant effort our
fantastic staff have put in to achieve these results and
want to thank them for their continued hard work, loyalty
and commitment. We are also extremely thankful for
their diligence throughout the year in raising £200,000
for our chosen charity BBC Children in Need. Our 2016
fundraising efforts will result in us raising an amazing
£500,000 over the last three years for this charity.
Current trading and Outlook
Shoe Zone’s trading in the first quarter of the year has
been challenging, amid the well documented high street
trading conditions for clothing and footwear retailers.
Despite this we have continued to make progress
against our strategic objectives. Our stock position is well
controlled and we have achieved strong gross margins
choosing not to discount stock before Christmas as is
usual for our business. We anticipate the full year effect of
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Shoe Zone plc Annual Report and Accounts 2015 Financial review
In the 52 weeks to 3 October 2015, revenues declined
3.5% to £166.8 million (2014: £172.9 million), firstly due to
the planned closure of loss making stores and secondly
as a result of difficult trading conditions in the first half.
Despite volumes increasing, revenue slowed during the
first half of the year and this was largely attributable to a
reduction in achieved average price caused by a warmer
season than was anticipated.
During the year there were no costs that required
classification as ‘exceptional’ (2014: £0.9m relating to the
May 2014 IPO).
The effective rate of corporation tax for the year was
20.1% (2014: 21.6%).
Earnings per share were 16.2 pence (2014: 16.1 pence).
Group profit before tax (“PBT”) reduced by 3.4% to £10.1
million (2014: £10.5 million). PBT margin was maintained
at 6.1%.
During the year we have opened 12 new stores and
completed 40 refits, spending £1.9 million on capital
expenditure.
Store numbers reduced by a net 10 branches to 535 at
the year-end (2014: 25 branches closed leaving a total of
545).
Online revenues (excluding store orders) have grown by
44.7% (2014: 20.6%) during the year and online sales
represented 3.3% of total sales (2014: 2.3%).
Product gross margin strengthened to 61.5% (2014:
61.3%) reflecting further increases in direct sourcing and
a reduction in stock mark down.
Operating expenses reduced to £17.0 million (2014: £17.1
million). In the current year the directors have carried
out a detailed review of the allocation of distribution
costs and administrative expenses to ensure a more
accurate allocation of these costs given the growth of
our online offering. Accordingly the comparative charge
for distribution costs have increased by £0.75 million
and administrative expenses have reduced by the same
amount. There is no impact on the results or net assets
from this restatement.
The Group supports two defined benefit schemes that
deteriorated by £0.4 million during the year.
During 2015 the Board adopted a cash flow hedging
policy relating to committed stock purchases from
overseas with the overall objective of protecting the
product gross margin. The Group uses derivative
financial instruments (usually forward exchange purchase
contracts) to hedge the risk of future foreign currency
fluctuations relating to the stock import schedules.
Further information can be seen in accounting policies
note 1 of the financial statements.
The business has a debt free financial structure and
generated £11.6 million from operations, resulting in a
net cash position of £14.2 million (2014: 9.1 million) at
the year end, underpinning a strong balance sheet. The
Group’s current bank facilities include a Rolling Credit
Facility for £5.0 million and an on demand overdraft facility
for £1.0 million, both with HSBC. Neither facility has been
used during the year.
Nick Davis
Chief Financial Officer
12 January 2016
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Key Performance Indicators
The Group uses the following Key Performance Indicators (KPIs) to
measure the performance and position of the business and its progress
against strategic objectives.
Online Participation % Product
Cash Balance
Gross Margin %
Online Sales as a percentage of total
sales. Online sales exclude orders
placed in store.
The online participation increased by
100 basis points to 3.3% (2014: 2.3%).
This performance reflects the growth
of our offering on Ebay and Amazon.
Product Gross Profit expressed as a
percentage of revenue.
Cash held by the Group at the period
end.
The Product Gross Margin increased
by 20 basis points to 61.5% (2014:
61.3%) reflecting the continued
success of increasing our direct
sourcing.
We finished the year with a healthy
cash balance of £14.2m (2014:
£9.1m).
3.3%
61.3%
61.5%
14.2m
2.3%
59.4%
1.5%
9.1m
6.6m
2013 2014 2015
2013 2014 2015
2013 2014 2015
Earnings per
Share Growth
Rental % of Turnover
The percentage movement in Earnings
per share.
Store rent as a percentage of turnover.
Earnings per Share made a small
improvement this year despite the fall
in turnover. EPS for the year is 16.2p
(2014: 16.1p).
The rental % of turnover has reduced
from 13.9% to 13.0% reflecting the
increase in larger format Grade
1 stores and successful rent
negotiations.
16.1p
16.2p
14.2%
13.9%
13.0%
6.9p
2013 2014 2015
2013 2014 2015
8
Shoe Zone plc Annual Report and Accounts 2015 Principal risks and uncertainties
We set out below the principal risks and uncertainties that
the Directors consider could impact the business. The list
highlights the key risks but there may be other risks to
which the business is exposed. The list is not intended to
be exhaustive.
Market and competition
The value footwear retail market is highly competitive,
particularly with respect to price, product selection, quality
and store location. The markets the Group operates in
are, on a comparative basis, free and open markets with
low barriers to entry. The Group competes at national and
local levels with a diverse group of retailers of varying
sizes and covering different product categories and
geographic markets. These competitors include local,
national and global retailers, including other specialist
footwear retailers, supermarkets, online retailers and
local independent retailers. Some competitors may have
greater market presence, name recognition, financial
resources and economies of scale or lower cost bases
than the Group and may be able to withstand, or respond
more swiftly to, changes in market conditions, any of
which could give them a competitive advantage over the
Group. In addition, like many other retailers, because
the Group does not have exclusive rights to many of
the elements that comprise its in-store experience and
product offering, competitors may seek to copy or improve
on the Group’s business strategy, which could significantly
harm the Group’s competitive position.
The Board monitors competitor activities and discusses
them on a weekly basis. The Group has adopted a
strategy which intends to differentiate itself from its closest
competitors and endeavours to price match on any cross
over product lines. Maintaining price competitiveness is a
key focus of the business.
Identifying fashion and trends
The success of the Group’s business depends in part
on its ability to innovate and to identify, anticipate and
respond to evolving trends in consumer preferences
and demographics and fashion trends, and to translate
these trends into appropriate, saleable products. The
Group seeks to change and refresh its product offering
seasonally in order to drive customer traffic through its
stores and online offering but demand for, and market
acceptance of, these new products is uncertain.
Trends and demands are continually reviewed by
knowledgeable and experienced employees who have a
high level of market awareness. The Board monitors on a
weekly basis best sellers and evaluates the performance
of new lines.
Economic factors
Poor economic conditions in the UK, the Republic of
Ireland and globally, as well as economic factors such
as unemployment levels, consumer debt levels, lack of
available credit, energy costs, inflation, interest and tax
rates, may adversely affect the disposable income of the
Group’s customers, which could result in lower sales. In
particular, in times of economic uncertainty or recession
or lack of consumer confidence, there may be a decrease
in discretionary purchases generally, which could have a
material adverse effect on the Group’s business, results
of operations and financial condition. Global economic
conditions and uncertainties may also impact the Group’s
manufacturers and suppliers in ways that could adversely
affect the Group’s business.
The Board considers very carefully the economic climate
in planning its product ranges and pricing structure. As
the business is focussed on offering low prices it is more
resilient to reductions in consumer expenditure than other
footwear retailers.
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Reliance on overseas suppliers
Like many retailers, the Group is dependent on being able
to source suitable products from manufacturers and other
suppliers at a sufficiently low cost and in a timely manner.
Although the Group enjoys good relationships with a wide
range of manufacturers and other suppliers and is not
overly reliant on any one supplier, there is still potential
for the Group to be exposed to adverse operational
and financial risks should there be a deterioration in
relationships with a number of its key suppliers or if the
Group is unable to identify and develop relationships with
suitable suppliers who can satisfy its standards for price,
quality, safety and its quantity and delivery requirements.
The vast majority of the Group’s retail products are
manufactured overseas by suppliers located in China,
India, Turkey, Italy and Portugal. As a result, the Group
is also subject to the risks associated with international
trade, particularly those risks which are common in the
importation of goods from developing countries, including
the imposition of taxes or other charges on imports,
compliance with and changes to import restrictions and
regulations, and exposure to different legal standards and
the burden of complying with a variety of foreign laws and
changing foreign government policies.
The Board are always seeking out new sources of supply
with a clear strategy of diversification. Members of the
Management Team frequently visit overseas suppliers
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Principal risks and uncertainties (continued)
to ensure that existing factories are being regularly
monitored and new factories are being sourced that meet
our price, quality and safety standards.
Reputational risk
The Group’s sales are dependent in part on the strength
and reputation of the brands it offers, including own label
brands, and are dependent on consumers’ perceptions of
the Group and its products.
The vast majority of the Group’s profits are derived
through sales of its own label brands. Maintaining broad
market acceptance of its own label brands depends on
many factors, including value, quality and consumer
perception. The Group may not in the future achieve or
maintain its expected sales of its own label brands, which
could have a material adverse effect on the Group’s
business, results of operations and financial position.
The Board has sufficient internal processes to ensure
that it receives feedback from stores and customers on
the design and quality of its products. The business’
reputation is carefully managed through internal
procedures by the Board.
Loss of key operating site
The Group has a single distribution centre and its head
office located at premises in Leicester and therefore the
Group is currently entirely dependent on the continued
efficient operation of the Leicester Premises. Any
disruption to the operation of the Leicester Premises
may therefore have an adverse effect upon the Group’s
financial condition, operations and business prospects.
The premises may suffer prolonged power or equipment
failures, failures in its IT systems or networks or damage
from fire, flood, or other disasters or unforeseen events
which may not be covered by, or may be in excess of, its
insurance coverage. Damage resulting from any of these
events may take considerable time to repair. A prolonged
period before rectification could have an adverse effect
upon the Group’s financial condition, operations and
business prospects.
Data security and IT reliability
The Group relies to a significant degree on the
uninterrupted operation of its computer and
communications systems and infrastructure, as well as the
equivalent systems and infrastructure of third parties, for
the efficient running of its business, including with respect
to inventory, merchandising, finance, human resources,
distribution and logistics and store operations.
The Group must comply with restrictions on the use of
customer data and ensure that confidential information
(such as credit or debit card numbers) is transmitted in a
secure manner over public networks.
Despite controls to ensure the confidentiality and integrity
of customer data, the Group may breach restrictions or
may be subject to attack from computer programmes
that attempt to penetrate the network security and
misappropriate confidential information. Any such breach
or compromise of security could adversely impact the
Group’s reputation with customers and consumers, lead to
litigation or fines, and as a result, have a material adverse
effect on its business, results of operations and financial
position.
The business has appropriate disaster recovery and
business interruption plans. The IT systems have been
developed significantly in-house reducing the businesses
dependency on any third parties. Reputable third party
antivirus, antispam and web filtering software is in use
and its appropriateness regularly reviewed.
Reliance on key personnel
The Group depends on a relatively small senior
management team and the loss of a material number of
such individuals or the inability to attract appropriate
personnel in a timely manner could impact upon the
Group’s future performance.
The Group’s Remuneration Policy is designed to attract,
retain and motivate management. Succession plans are in
place for key roles.
The strategic report was approved by the Board.
The business has appropriate insurance and business
continuity plans to mitigate the risk of such a loss.
On behalf of the Board
A E P Smith
Chief Executive Officer
12 January 2016
N J Davis
Chief Financial Officer
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Shoe Zone plc Annual Report and Accounts 2015 Corporate governance statement
Principles of Corporate
Governance
Appointments to the Board
and re-election
The Directors acknowledge the importance of the
principles set out in the UK Corporate Governance Code
(the ‘UK Code’). The UK Code is not compulsory for AIM
quoted companies; therefore this report does not describe
compliance with or departures from the UK Code.
However, the Directors intend to apply certain principles of
the UK Code where the Board considers it appropriate for
the size and nature of the Company. The Group supports
the Quoted Companies Alliance Corporate Governance
Code for Small and Mid-Size Quoted Companies 2013
which are widely recognised as the benchmark for
corporate governance of smaller quoted companies and
are therefore most appropriate for the Company.
The Board
The Board comprises three Executive Directors and three
Non-Executive Directors (including the Chairman). The
Board composition meets the recommendations of the
QCA guidelines.
The Board is committed to maintaining high standards of
corporate governance and to being transparent about its
arrangements.
The key responsibilities of the Board are:
the overall management of the Group;
●
● approval of corporate strategy;
● approval of income, expenditure and capital budgets;
● oversight of operations ensuring adequate systems of
internal control and risk management are in place;
to review business performance against the
objectives that it has set;
to monitor the integrity of the financial statements and
approve the annual and interim reports;
●
●
● approval of the dividend policy;
● determining changes to the structure and composition
of the Board;
The Company is governed by its Articles of Association
(‘Articles’). Under the Articles the Board has the power
to appoint a Director during the year but any person so
appointed must stand for election at the next Annual
General Meeting (‘AGM’). The Articles require that each
Director retires and seeks re-election by the members
every three years. The UK Code recommends that
directors should be subject to annual re-election by
members and, in line with the Company’s intention to
apply certain principles of the UK Code, each Director will
stand for re-election at each of the Company’s AGMs.
Board committees
The Board has established a Remuneration Committee
and an Audit Committee. Due to the nature and size of the
Group, the Directors have decided that issues concerning
the nomination of Directors will be dealt with by the Board
rather than a nomination committee.
Membership of the two Board Committees is comprised of
the two independent Non-executive Directors. Each Board
Committee has approved Terms of Reference setting
out their responsibilities. The Terms of Reference were
approved by the Board during the year. All of the Board
Committees are authorised to obtain, at the Company’s
expense, professional advice on any matter within the
Terms of Reference and to have access to sufficient
resources to carry out their duties.
The Audit Committee is chaired by Ian Filby. The
committee meets as necessary to monitor the Group’s
risk management and internal control systems and is also
concerned with any major accounting and audit related
issues. Executive Directors and senior management are
responsible for managing the risk framework and internal
control systems and must report on their effectiveness to
the Audit Committee.
● determining remuneration policy;
● approval of communications with shareholders and
Details of the duties of the Remuneration Committee are
set out in the Remuneration report on page 14.
the market.
Details of each of the Directors is given in their
biographies on pages 12 and 13.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Board of Directors
Ian Filby
Chairman
Anthony Smith
Chief Executive Officer
Nick Davis
Chief Financial Officer
Anthony joined Shoe Zone in 1993
as Marketing Manager and held
various roles within Marketing and
Retail divisions before becoming Chief
Executive Officer in 1997. Since his
appointment as Chief Executive Officer,
Shoe Zone has carried out three major
acquisitions and traded successfully
through two recessions. Anthony is
a founder and Trustee of the Shoe
Zone Trust. Anthony is a Trustee of
Uppingham School and Chairman of the
Uppingham School Foundation.
Nick joined Shoe Zone in 2003 as
Management Accountant from PKF
where he had been a Senior Business
Advisor in Audit and Assurance since
1999. Nick became Financial Controller
of Shoe Zone in 2005 and joined the
Board as Finance Director in 2006. As
Chief Financial Officer he is responsible
for all financial operations including
Accounting, Financial Planning,
Treasury, Tax and Financial Strategy.
He is FCA qualified and holds a BSC
in Economics from Loughborough
University. Outside of Shoe Zone Nick
also serves as a Board member and
Trustee of three charities.
Ian has over 30 years’ experience
in retail and is currently the Chief
Executive Officer of DFS Furniture
Company Ltd, a post he has held
since 2010. Prior to this he spent 28
years at The Boots Company plc and
Alliance Boots in various positions
including Executive Director (Retail
Brand Development division), Executive
Trading Director (Boots division),
Executive Director (Beauty & Lifestyle
division), Commercial Director (Lifestyle
division) and Sales and Marketing
Director (Fads/Homestyle division)
amongst others. In 2009 Ian set up IFF
Life & Business Solutions and has acted
as Interim Chief Executive Officer of
Groupe Aeroplan Europe (Nectar) and
a consultant to Alliance Boots Group
and Oliver Wyman. Ian holds an MA in
Chemistry from Cambridge University.
He has recently been appointed as
a member of the BRC (British Retail
Consortium) Board and Chair of the
BRC Policy Board.
12
Shoe Zone plc Annual Report and Accounts 2015 Board of Directors (continued)
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Charles Smith
Chief Operating Officer
Charlie Caminada
Non-Executive Director
Jeremy Sharman
Non-Executive Director
Charles joined Shoe Zone in 1998 and
joined the Board as Retail Director in
2001. Over the past 15 years, Charles
has worked closely with his brother,
Anthony, and other members of the
management team to ensure integration
of acquired businesses with Shoe
Zone’s existing business and the Shoe
Zone culture. As Chief Operating Officer
his main areas of responsibility are
Retail, HR and E-Commerce. Charles
holds a Business Studies degree from
Leicester DeMontfort University. Charles
is a founder and Trustee of Shoe Zone
Trust. Outside of Shoe Zone he is a
Board member and Trustee of three
charities.
Charlie has over 20 years’ executive
board experience of brand building
for entertainment, media and retail
organisations, including 16 years’
experience on the boards of London
Stock Exchange traded companies and
12 years’ experience as a COO. Charlie
spent seven years as Chief Operating
Officer at Ludorum plc between 2005
and 2012, heading the company’s listing
on AIM in 2006. Prior to that he was a
founding member and Chief Operating
Officer at HIT Entertainment plc for 15
years. Charlie is currently Non-Executive
Director at Hornby plc, Specialist Advisor
& Member of the Development Board
to the Centre of Social Justice and a
Specialist Advisor to the UK Trade &
Investment (UKTI). He is a Governor of
Heathfield School, Ascot.
Jeremy Sharman has over 25 years of
experience acting as a Non-Executive
Director on the boards of various
companies, primarily in the consumer
and internet sectors. He was one of
the founding partners of HgCapital
where he served from 1990 to 2005.
He now acts as an independent
investing Director. He has served as
chairman or non-Executive Director
on the boards of Premier Marinas,
Park Resorts, Hoseasons, Villarenters.
com, Travelsphere, Page and Moy and
Belfast International Airport amongst
others. Jeremy took up the post
of Non-Executive Director at Shoe
Zone in 2012. Jeremy holds an MA in
Mathematics from Oxford University. He
is founder and chairman of two charities
and chairman of Witham Hall and
Dolphin Preparatory Schools.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Shoe Zone plc Annual Report and Accounts 2015
Remuneration report
This is the Company’s second Directors’ Remuneration
Report since it listed on AIM in May 2014.
● be exclusively responsible for selecting any
remuneration consultants who advise the Committee;
The Committee consists of two Non-executive Directors.
Charlie Caminada is the Chairman and Ian Filby also
serves on the Committee.
Anthony Smith, Nick Davis and Charles Smith may attend
the Committee meetings by invitation.
Duties
The main duties of the Remuneration Committee are set
out in its Terms of Reference adopted 25 April 2014 and
include:
●
responsibility for agreeing with the Board, the
framework or broad policy for the remuneration of
all Executive Directors of the Company, including
pension rights, compensation payments bonuses,
incentive payments, share options and benefits in
kind;
● obtain reliable, up-to-date information about
remuneration in other companies of comparable scale
and complexity and market practice generally;
● approve the design and determine targets for any
performance-related pay schemes operated by the
Company and approve the total annual payments
made under such schemes;
● monitor the level and structure of remuneration
for senior management and note annually the
remuneration trends across the Group;
●
review the design and implementation of all share
incentive plans for approval by the Board and
shareholders. For such plans, determine each year
whether awards will be made, and if so, the overall
amount of such awards;
● ensure the contractual terms on termination, and
any payments made, are fair to the individual and
the Company, and in accordance with any legal and
regulatory requirements;
● oversee any major change in employee benefit
structures throughout the Group;
● agree the policy for authorising claims for expenses
from the Directors
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Shoe Zone plc Annual Report and Accounts 2015 Remuneration report (continued)
Directors and Directors’ interests
The Directors listed below all served throughout the year, or were appointed on the dates indicated below. Their interests in
the issued share capital of the Company as at the date of this report were as follows:
Executive Directors
Anthony Smith
Charles Smith
Nick Davis
Non-Executive Directors
Ian Filby
Charlie Caminada
Jeremy Sharman
Number of
ordinary shares
Percentage of
issued share capital
13,895,592 (1)
11,109,408 (2)
15,700 (3)
Nil
15,625
234,375
27.79%
22.22%
0.03%
-
0.03%
0.47%
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(1)
(2)
(3)
The registered holder of these shares is Slawston Limited, an entity 100% owned by Anthony Smith
The registered holder of these shares is Sheepy Magna Limited, an entity 100% owned by Charles Smith
The registered holder of these shares is the wife of Nick Davis
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Remuneration report (continued)
Directors’ Remuneration
Directors’ remuneration information for those individuals who have served as a Director for the year are presented below.
The information presented in respect of these Directors is for the full financial year.
Individual
Financial
year
Basic Salary
and fees
£
Profit Share
(Bonus)
£
Benefits
£
Pension
Contribution
£
Total
£
Executive Directors
Anthony Smith
FY15
250,000
FY14
225,000
Charles Smith
FY15
200,000
FY14
188,000
-
-
-
-
35,373
30,968
21,354
17,188
-
-
-
-
285,373
255,968
221,354
205,188
Nick Davis
FY15
143,594
79,269
10,444
17,931
251,238
FY14
136,500
86,620
11,565
16,380
251,065
Non-Executive Directors
Ian Filby
FY15
60,000
FY14
25,000
Charlie Caminada
FY15
30,000
FY14
12,500
Jeremy Sharman
FY15
30,000
FY14
23,100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
25,000
30,000
12,500
30,000
23,100
FY15
713,594
79,269
67,171
17,931
877,965
FY14
610,100
86,620
59,721
16,380
772,821
The Company currently does not operate any share option or share award schemes to its employees.
16
Shoe Zone plc Annual Report and Accounts 2015 Remuneration report (continued)
Directors’ Service contracts and employment letters
The Executive Directors have entered into service agreements with the Company at the following annual salaries with effect
from 1 May 2014. Salaries for the current year are set out below:
Anthony Smith
Charles Smith
Nick Davis
£
250,000
200,000
150,000
Each Executive Director’s employment will continue until terminated by either party by written notice. The notice periods
applicable are 12 months for Anthony Smith and Charles Smith, 6 months for Nick Davis. Other fixed elements of the
Executive Directors’ remuneration comprise a company car provision, life assurance and private medical insurance. Nick
Davis is entitled to a Pension Contribution of 12% of basic salary.
The Company may elect to terminate the employment of each Executive Director by making a payment in lieu of notice
equal to their basic salary payable in monthly instalments.
Each of the Executive Directors has agreed to post-termination restrictions in order to protect confidential information, trade
secrets and business connections. These restrictions last for 9 months.
The Non-Executive Directors have entered into appointment letters. Under the terms of these letters, the Non-Executive
Directors are entitled to an annual fee as set out below:
Ian Filby
Charlie Caminada
Jeremy Sharman
£
60,000
30,000
30,000
The appointments are terminable by either party with one month’s written notice. The Company may pay the
Non-Executive Directors in lieu of their notice period.
The remuneration report was approved by the Board.
On behalf of the Board
C J Caminada
Chairman of the Remuneration Committee
12 January 2016
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Directors’ report for the 52 weeks ended 3 October 2015
Directors’ Interests
Information about the Directors’ interests in the shares of
the Company can be found in the Directors’ Remuneration
Report.
Directors’ Indemnities
As permitted by the Articles of Association, the Directors
have the benefit of an indemnity provision as defined
by s234 of the Companies Act 2006. The indemnity was
in force throughout the financial year and at the date of
approval of the financial statements. The Group maintains
Directors’ and Officers’ liability insurance.
In accordance with the Articles of Association, all the
Directors offer themselves for re-election at the AGM, as
they were appointed during the year
Employees
The Group employed 3,721 (4 October 2014: 3,970)
employees at the year end.
The Group’s policy is to actively involve its employees
in the business to ensure that matters of concern to
them, including the Group’s aims and objectives and the
financial and economic factors which impact them are
communicated in an open and regular manner.
The Directors are committed to delivering the highest
standards of health and safety for employees, customers
and others that might be affected by the Group’s activities.
The Group is committed to employing the right people,
training them well and promoting from within wherever
possible. Well trained and motivated employees are
key to delivering good service to our customers and are
fundamental to the long-term success of the business.
The Group operates an equal opportunities policy that
aims to treat individuals fairly and not to discriminate on
the basis of sex, race, ethnic origin, disability or any other
basis. Applications for employment are fully considered
on their merits, and employees are given appropriate
training and equal opportunities for career development
and promotion.
The Directors present their Annual Report and audited
financial statements of the Company and the Group for
the 52 weeks ended 3 October 2015.
The disclosure requirements of the Companies Act 2006
have been met by the contents of this Directors’ Report,
along with the Strategic Report, and the Directors’
Remuneration Report which should therefore be read in
conjunction with this report.
The Company
Shoe Zone plc (the ‘Company’) is a company incorporated
and domiciled in the UK, with the registered company
number 08961190. The company is listed on the AIM
market of the London stock exchange.
Share Capital
Details of the share capital of the company are shown in
note 20 of the financial statements. The company’s share
capital consists of one class of ordinary shares. As at the
3 October 2015 there were 50,000,000 ordinary shares of
£0.01 each. The authorised share capital of the Company
is unlimited.
At the AGM held on 27 February 2015, the board was
granted authority to allot shares in the company of
up to approximately a third of the Company’s issued
share capital. The board was also granted authority to
allot further shares having an aggregate nominal value
of £166,666 in connection with a pre-emptive rights
issue (representing approximately a further third of the
Company’s issued share capital). At the 2016 AGM,
shareholders will be asked to renew this authority for a
further year.
Directors
The Directors who held office during the year and up to
the date of signing the financial statements were:
Anthony Smith
Charles Smith
Nick Davis
Ian Filby
Charlie Caminada
Jeremy Sharman
18
Shoe Zone plc Annual Report and Accounts 2015 Directors’ report for the 52 weeks ended
3 October 2015 (continued)
Annual general meeting
The Company’s second AGM will be held on Friday, 4
March 2016 at 11am at the Company’s registered office
at Haramead Business Centre, Humberstone Road,
Leicester, Leicestershire LE1 2LH. The Notice of AGM
appears on pages 68 to 71.
Set out below is an explanation of certain of the
resolutions which will be proposed at the AGM.
Dividends (resolutions 2 and 3)
Final dividend
The Directors are proposing a final dividend of 6.5p
per ordinary share, amounting to a total dividend of
approximately £3.25m, which is subject to approval by the
shareholders at the AGM. In line with the requirements of
IAS 10 – ‘Events after the reporting period’, this dividend
has not been recognised as a liability in the financial
statements.
Special dividend
The Directors are also proposing a special dividend of
6.0p per ordinary share. In light of the continued strong
performance, cash generation and the robustness of
the Company’s balance sheet, the Directors consider it
appropriate to propose a cash return to shareholders of,
in aggregate, approximately £3m (in addition to the final
dividend proposed in resolution 2), which is structured
as a special dividend of 6.0p per ordinary share. The
approval of this resolution is not dependent on the
approval of resolution 2, nor is the approval of resolution 2
dependent on the approval of this resolution.
Re-election of Directors (resolutions 4 to 9)
The UK Corporate Governance Code recommends
that directors should be subject to annual re-election
by shareholders. In line with the Company’s intention to
apply certain principles of the UK Corporate Governance
Code, each Director will stand for re-election at the AGM.
Biographical details of each Director appear on pages 12
and 13. The Board believes that each Director continues
to demonstrate his commitment to his role and that,
collectively; the Directors’ skills complement each other
and enhance the overall operation of the Board.
Political donations (resolution 12)
The Company is prohibited under the Companies Act
2006 from making donations to EU political parties or
organisations or to independent election candidates in the
EU of over £5,000 a year without shareholder approval.
The Companies Act 2006 uses very broad definitions of
political donations and expenditure which may extend to
normal business activities which might not be thought of
as political expenditure in the more usual sense. Activities
which could be caught include representing the Company
in the business community or at special interest groups
which the Company may wish to support. In addition, the
sponsorship of industry forums, the funding of seminars
and other functions to which politicians are invited may
also be caught. The Company is therefore proposing this
resolution to ensure that it does not inadvertently breach
the rules whilst carrying out its normal business activities.
During its last financial year the Company made no
political donations and incurred no political expenditure.
The Company does not intend to make any such
donations or incur any such expenditure this year.
Authorities to allot shares (resolutions 13 and 14)
By law, the Directors are not permitted to allot new shares
(or to grant rights over shares) unless authorised to do
so by shareholders. Resolution 13 seeks shareholder
authority to allow the Directors to allot shares having
an aggregate nominal value of £166,666 representing
approximately a third of the Company’s issued share
capital on 12 January 2016. In addition, shareholder
authority is sought to allot further shares having an
aggregate nominal value of £166,666 in connection with
a pre-emptive rights issue (representing approximately a
further third of the Company’s issued share capital on 12
January 2016).
Resolution 14 concerns the dis-application of pre-emption
rights. Under the Companies Act 2006, all shareholders
are entitled to participate on a pre-emptive basis in all
issues of shares for cash, unless shareholders have
authorised the Directors otherwise. Paragraph (a) of
resolution 14 gives the Directors authority to make
arrangements dealing with certain legal, regulatory and
practical matters in connection with a pre-emptive issue
of shares. Paragraph (b) of resolution 14 gives the
Directors the necessary authority to either allot shares
or sell shares held in treasury for cash on a non pre-
emptive basis up to an aggregate nominal amount of
£50,000 (being 5,000,000 shares). This is the equivalent
to approximately 10% of the issued share capital of
the Company on 12 January 2016. The authority to
issue up to 10% of the Company’s issued share capital
follows guidance from the Pre-Emption Group’s revised
Statement of Principles, published on 12 March 2015
(the ‘PEG Principles’). The PEG Principles provide the
Company with greater flexibility to undertake non-pre-
emptive issuances in connection with acquisitions and
specified capital investments. The Board confirms that
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Directors’ report for the 52 weeks ended
3 October 2015 (continued)
it will only allot shares with a nominal value of £25,000
(representing 5% of the issued share capital of the
Company as at 12 January 2016) for cash pursuant
to this authority where that allotment is in connection
with an acquisition or specified capital investment (as
described in the PEG Principles) which is announced at
the same time as the allotment, or which has taken place
in the preceding six-month period and is disclosed in the
announcement of that allotment. In addition, the Board
does not intend to allot shares for cash on a non-pre-
emptive basis above 7.5% of the total issued share capital
of the Company over a rolling three-year period without
consulting shareholders first. This complies with the PEG
Principles. This resolution also disapplies statutory
pre-emption rights to the extent necessary to facilitate
rights issues.
The Directors consider that it is appropriate for these
authorities to be granted to preserve maximum flexibility
for the future. However, the Directors currently have no
plans to exercise these powers. The authorities sought
will apply until the conclusion of the next AGM of the
Company to be held in 2017 or 31 March 2017, whichever
is earlier.
Form of Proxy
Shareholders will find enclosed a Form of Proxy for
use at the AGM. For shares held through CREST,
proxy appointments may be submitted via the CREST
proxy voting system. Votes should be lodged as soon
as possible in accordance with the instructions in the
Notice of AGM and on the Form of Proxy, whether or not
shareholders intend to be present at the AGM. Appointing
a proxy will not preclude a shareholder from attending the
AGM and voting in person.
All proxy appointments should be submitted so as to be
received no later than 11am on 2 March 2016.
The auditor, BDO LLP, have indicated their willingness to
continue in office and a resolution that they be
re-appointed will be proposed at the AGM.
Financial risk management
The Group’s operations expose it to a variety of financial
risks that include the effects of liquidity risk, foreign
currency risk and interest rate risk. The Group has in
place a risk management programme that seeks to limit
the adverse effects on the financial performance of the
Group by monitoring the management of net cash, and
the related finance income and costs. As the Group
has both interest bearing assets and interest bearing
liabilities, management maintain a close monitoring of
the respective balances to ensure any interest rate risk is
managed.
The Group does not make significant use of derivative
financial instruments but does use forward currency
contracts when management consider this to be
appropriate. External expert advice is sought on the
suitability of these currency contracts in respect of the
timings and rate. The Group has no exposure to equity
securities. Limited credit risk exposure exists given the
high level of cash transactions through the store network.
Where credit risk arises management have procedures in
place to assess the level of risk to be taken, with approval
by the Directors for significant credit transactions. Further
information can be found in note 3 to the financial
statements.
Environment
The vast majority of our stores in England, Wales and
Scotland have a requirement to ensure that all packaging
and store waste is returned to our distribution centre to be
recycled and re-used.
Recommendation
Going Concern
The Board considers that the resolutions to be proposed
at the AGM are in the best interests of the Company and
are most likely to promote the success of the Company
for the benefit of its members as a whole. The Directors
recommend that shareholders vote in favour of each
resolution, as the Directors intend to do in respect of their
own shareholdings.
External auditors
BDO LLP have issued their independent report on these
financial statements to the shareholders of Shoe Zone plc.
The report can be found on page 22.
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 at the year end and no debt. It also
has in place a £5.0m Revolving Credit Facility (‘RCF’),
which matures in May 2016. The RCF requires the Group
to comply with certain financial covenants; these have
been met during the year, and since the year-end. The
20
Shoe Zone plc Annual Report and Accounts 2015 Directors’ report for the 52 weeks ended
3 October 2015 (continued)
RCF has not been utilised since inception. The Directors
have reviewed forecasts and projections and consider
that the Group has adequate banking facilities to meet
its operational and capital commitments. The Directors
therefore have a reasonable basis on which to satisfy
themselves that the business is a going concern.
Events after the year-end
Between 3 October 2015 and the date of this report, there
have been no material events.
The Strategic Report, the Directors’ Report and the
Remuneration Report were approved by the Board.
Directors’ responsibilities
statement
The Directors are responsible for preparing the strategic
report, the Director’s report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the group financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union and the company financial statements
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law
the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view
of the state of affairs of the group and company and of the
profit or loss of the group for that period. The Directors
are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange
for companies trading securities on the Alternative
Investment Market.
In preparing these financial statements, the Directors are
required to:
● select suitable accounting policies and then apply
● prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable
accuracy at any time the financial position of the company
and enable them to ensure that the financial statements
comply with the requirements of the Companies Act
2006. They are also responsible for safeguarding the
assets of the company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Website publication
The Directors are responsible for ensuring the annual
report and the financial statements are made available
on a website. Financial statements are published on
the company’s website in accordance with legislation
in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance
and integrity of the company’s website is the responsibility
of the Directors. The Directors’ responsibility also extends
to the on-going integrity of the financial statements
contained therein.
Disclosure of information to
auditor
Each Director in office at the date of approval of this report
has confirmed that:
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● So far as he is aware, there is no relevant audit
information of which the Company’s auditor are
unaware; and
● He has taken all reasonable steps that he ought to
have taken as a Director in order to make himself
aware of any relevant audit information and to
establish that the Company’s auditor are aware of that
information.
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them consistently;
Approved by the Board and signed on its behalf:
● make judgements and accounting estimates that are
reasonable and prudent;
● state whether they have been prepared in accordance
with IFRSs as adopted by the European Union,
subject to any material departures disclosed and
explained in the financial statements;
A E P Smith
Chief Executive Officer
12 January 2016
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Independent auditor’s report to the members of
Shoe Zone plc
We have audited the financial statements of Shoe
Zone plc for the 52 weeks ended 3 October 2015
which comprise the consolidated income statement,
the consolidated statement of total comprehensive
income, the consolidated statement of financial position,
the consolidated statement of changes in equity, the
consolidated statement of cash flows, the related notes
and the company statement of financial position. The
financial reporting framework that has been applied
in the preparation of the Group financial statements is
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
The financial reporting framework that has been applied in
preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting
Practice) including FRS “101” ‘Reduced Disclosure
Framework’.
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of
Directors and auditor
As explained more fully in the statement of Directors’
responsibilities, the Directors are responsible for
the preparation of the financial statements and for
being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Financial
Reporting Council’s (FRC’s) Ethical Standards for
Auditors.
Scope of the audit of the financial
statements
A description of the scope of an audit of financial
statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
●
●
●
●
the financial statements give a true and fair view of
the state of the Group’s and the parent company’s
affairs as at 3 October 2015 and of the Group’s profit
for the 52 weeks then ended;
the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company’s financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Opinion on other matters
prescribed by the Companies Act
2006
In our opinion the information given in the Strategic report
and Directors’ report for the financial period for which the
financial statements are prepared is consistent with the
financial statements.
Matters on which we are required
to report by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
● adequate accounting records have not been kept by
the parent company, or returns adequate for our audit
have not been received from branches not visited by
us; or
the parent company financial statements are not in
agreement with the accounting records and returns;
or
●
● certain disclosures of Directors’ remuneration
specified by law are not made; or
● we have not received all the information and
explanations we require for our audit.
Richard Wilson (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Leicester
12 January 2016
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
22
Shoe Zone plc Annual Report and Accounts 2015 Consolidated income statement for the
52 weeks ended 3 October 2015
Note
1, 4, 8
5
5
5
5,6
9
9
10
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
Profit from operations
Analysed as:
Operating profit before exceptional items
Exceptional items in administration expenses
Finance income
Finance expense
Profit before taxation
Taxation
Profit attributable to
equity holders of the parent
Earnings per share - basic and diluted
26
52 weeks
ended 3
October 2015
Restated
52 weeks
ended 4
October 2014
£’000
166,819
(139,503)
27,316
(10,939)
(6,095)
10,282
10,282
-
44
(186)
10,140
(2,039)
8,101
16.20p
£’000
172,861
(144,303)
28,558
(12,000)
(5,989)
10,569
11,505
(936)
33
(103)
10,499
(2,459)
8,040
16.08p
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Consolidated statement of total comprehensive income
for the 52 weeks ended 3 October 2015
Note
52 weeks
ended 3
October 2015
52 weeks
ended 4
October 2014
Profit for the period
Items that will not be reclassified subsequently to the income statement
23
23
Remeasurement losses on defined benefit pension scheme
Movement in deferred tax on pension schemes
Cash flow hedges
Fair value movements in other comprehensive income
Tax on cash flow hedges
Other comprehensive expense for the period
Total comprehensive income for the period attributable to
equity holders of the parent
£’000
8,101
(499)
100
314
(63)
(148)
7,953
£’000
8,040
(2,371)
474
-
-
(1,897)
6,143
24
Shoe Zone plc Annual Report and Accounts 2015 Consolidated statement of financial position
as at 3 October 2015
Assets
Non-current assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Corporation tax liability
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Employee benefit liability
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the company
Called up share capital
Merger reserve
Cash flow hedge reserve
Retained earnings
Total equity and reserves
Note
52 weeks
ended 3
October 2015
52 weeks
ended 4
October 2014
£’000
£’000
12
13
14
15
24
16
17
16
17
23
19
20
18,688
18,688
29,172
8,148
553
14,221
52,094
70,782
(23,649)
(802)
(1,373)
(25,824)
(3,037)
(363)
(5,150)
(124)
(8,674)
(34,498)
36,284
500
2,662
251
32,871
36,284
21,233
21,233
29,181
8,377
741
9,114
47,413
68,646
(25,920)
(959)
(518)
(27,397)
(3,766)
(470)
(4,766)
(516)
(9,518)
(36,915)
31,731
500
2,662
-
28,569
31,731
The financial statements were approved and authorised for issue by the Board of Directors.
A E P Smith
Chief Executive Officer
12 January 2016
Registered Number 08961190
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Consolidated statement of changes in equity
for the 52 weeks ended 3 October 2015
Share
Capital
Merger
reserve
Cash flow
hedge
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
500
2,662
-
-
-
-
-
-
-
-
-
-
-
-
500
2,662
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
251
251
-
-
29,886
33,048
8,040
8,040
(1,897)
(1,897)
6,143
6,143
(2,458)
(2,458)
(5,002)
(5,002)
(7,460)
(7,460)
28,569
31,731
8,101
(399)
7,702
8,101
(148)
7,953
(3,400)
(3,400)
(3,400)
(3,400)
At 5 October 2013
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Distribution prior to group reorganisation
Dividends paid prior to group reorganisation
Total contributions by and distributions to
owners
At 4 October 2014
Profit for the period
Other comprehensive expense
Total comprehensive income for the period
Dividends paid during the year (note 11)
Total contributions by and distributions to
owners
At 3 October 2015
500
2,662
251
32,871
36,284
Share capital comprises nominal value of shares subscribed for.
The merger reserve is the nominal value of shares that have been repurchased.
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.
26
Shoe Zone plc Annual Report and Accounts 2015 Consolidated statement of cash flows
for the 52 weeks ended 3 October 2015
Operating activities
Profit after taxation
Corporation tax
Finance income
Finance expense
Pension contributions paid
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Loss on disposal of property, plant and equipment
Decrease in trade and other receivables
Decrease/(increase) in foreign exchange contract
Decrease in inventories
(Decrease)/increase in trade and other payables
Decrease in provisions
Cash generated from operations
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Interest received
Net cash used in investing activities
Financing activities
Distribution prior to group reorganisation
Dividends paid prior to group reorganisation
Dividends paid during the year
Interest paid
Repayment of loans
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Note
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
8,101
2,039
(44)
186
(300)
3,713
459
46
14,200
303
501
9
(3,148)
(264)
(2,599)
11,601
(1,538)
10,063
(1,879)
280
44
(1,555)
-
-
(3,400)
(1)
-
(3,401)
5,107
9,114
14,221
£’000
8,040
2,459
(33)
103
(425)
4,527
-
108
14,779
329
(1,269)
778
1,084
(200)
722
15,501
(2,512)
12,989
(2,008)
703
33
(1,272)
(2,458)
(5,002)
-
(27)
(1,668)
(9,155)
2,562
6,552
9,114
11
11
24
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27
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015
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 3 October 2015.
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and
Interpretations (collectively IFRSs) issued by the Internal Accounting Standards Board (IASB) as adopted by the European Union
(‘adopted IFRSs’) and those parts of the Companies Act 2006 that are applicable to companies that prepare financial statements
in accordance with IFRS.
The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as
modified for the revaluation of certain financial assets and financial liabilities at fair value.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise judgement in applying the company’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.
Basis of consolidation
The consolidated financial statements incorporating the financial statements of Shoe Zone plc and its subsidiary undertakings
are all made up to 3 October 2015. 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.
28
Shoe Zone plc Annual Report and Accounts 2015
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
1. Accounting policies (continued)
Basis of consolidation (continued)
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.
● Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)
● Recoverable amounts disclosures for non-financial assets (Amendments to IAS 36)
● Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)
● Defined Benefit Plans: Employee Contributions: Amendments to IAS 19
● Annual Improvements to IFRSs 2010-2012 Cycle
● Annual Improvements to IFRSs 2011-2013 Cycle
● Annual Improvements to IFRSs 2012–2014 Cycle
IFRS 15 Revenue from Contracts with Customers
●
IFRS 9 Financial Instruments
●
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Capital reorganisation and the merger reserve
In the prior year, on 26 March 2014 the Company was formed to become the new holding company for the Group. This was
put into effect through a share-for-share exchange.
The accounting treatment for group reorganisations is scoped out of IFRS 3. Accordingly, as required under IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors the Group has referred to current UK GAAP to assist
its judgement in identifying a suitable accounting policy. The introduction of the new holding company was accounted
for as a capital reorganisation using the merger accounting principles prescribed under current UK GAAP. Therefore
the consolidated financial statements of Shoe Zone plc are presented as if Shoe Zone plc has always been the holding
company for the Group and the share capital treated as if issued in the earliest year presented.
The use of merger accounting principles has resulted in a balance on Group capital and reserves which has been classified
as a merger reserve and included in the Group’s shareholders’ funds. The consolidated financial statements include the
results of the Company and all its subsidiary undertakings made up to the same accounting date.
As part of the reorganisation distributions were made to Humberzone Group Limited (formerly known as Shoe Zone Group
Limited) prior to the reorganisation itself taking place.
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.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
1. Accounting policies (continued)
Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide clearer
understanding of the underlying financial performance of the Group. They are material items of income or expense that
have been shown separately due to the significance of their nature or amount.
Investments
Investments held as fixed assets are stated at cost, less any provision for impairment.
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 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.
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.
30
Shoe Zone plc Annual Report and Accounts 2015
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
1. Accounting policies (continued)
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, 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 cost of sales in the income statement in the periods when the hedged
item affects profit or loss, matching when the hedged transaction occurs.
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.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
1. Accounting policies (continued)
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 and liabilities are offset when the Group has legally enforceable or substantially current tax assets and
liabilities and the deferred tax assets and 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.
32
Shoe Zone plc Annual Report and Accounts 2015
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
1. Accounting policies (continued)
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.
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33
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
2. Critical accounting estimates and judgements
The Shoe Zone plc Group makes certain estimates and assumptions regarding the future. Estimates and judgements are
continually evaluated based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and
assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
Judgements and accounting estimates and assumptions
Property, plant and equipment
Property, plant and equipment is depreciated over the useful lives of the assets. Useful lives are based on the
management’s estimates of the period that the assets will generate revenue, which are reviewed annually for continued
appropriateness. The carrying values are tested for impairment when there is an indication that the value of the assets
might be impaired. When carrying out impairment tests these would be based upon future cash flow forecasts and these
forecasts would be based upon management judgement. Future events could cause the assumptions to change, therefore
this could have an adverse effect on the future results of the Shoe Zone plc Group.
Defined benefit pension assumptions
The costs, assets and liabilities of the defined benefit schemes operated by the Shoe Zone plc Group are determined using
methods relying on actuarial estimates and assumptions. Details of the key assumptions are detailed in note 23. The Shoe
Zone plc Group takes advice from independent actuaries relating to the appropriateness of the assumptions. Changes
in the assumptions used may have a significant effect on the consolidated statement of comprehensive income and the
statement of financial position.
Dilapidation provisions
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of
the lease in accordance with the lease terms. The main assumption is in relation to the expected costs of rectification of
the wear and tear incurred. The Shoe Zone plc Group has a team managing the property portfolio and uses historical
experience when making a provision.
3. Financial instruments – risk management
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. The
overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility. The Group reports in Pound Sterling. All funding requirements and financial risks
are managed based on policies and procedures adopted by the Board of Directors. The Group does use forward currency
contracts to mitigate foreign exchange risk. The Group does not issue or use financial instruments of a speculative nature.
The Group is exposed to the following financial risks
● credit risk;
●
●
●
liquidity risk;
foreign exchange risk; and
interest rate risk.
34
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
3. Financial instruments – risk management (continued)
The Group is exposed to risks that arise from its use of financial instruments. The principal financial instruments used by the
Group, from which financial instrument risk arises, are as follows:
●
trade and other receivables;
● cash and cash equivalents;
●
●
● bank overdrafts.
forward foreign exchange contracts;
trade and other payables; and
Fair value hierarchy
All financial instruments measured at fair value must be classified into one of the levels below:
Level 1: Quoted prices in active markets;
Level 2: Level 1 quoted prices are not allowable, but fair value is based on observable market data; and
Level 3: Inputs that are not based on observable market data.
A summary of the financial instruments held by category is provided below:
Financial assets at amortised cost
Trade receivables
Other receivables
Cash and cash equivalents
Total receivables
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Total financial assests
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
313
178
14,221
14,712
239
314
553
381
119
9,114
9,614
741
-
-
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35
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
3. Financial instruments – risk management (continued)
Financial liabilities
Trade and other payables
Total financial liabilities at amortised cost
52 weeks ended 3
October 2015
52 weeks ended 4
October 2014
£’000
20,851
20,851
£’000
23,811
23,811
To the extent financial instruments are not carried at fair value in the consolidated statement of financial position, book value
approximates to fair value at 3 October 2015 and 4 October 2014.
Trade and other receivables are measured at book value and amortised cost. Book values and expected cash flows are
reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant
period.
Cash and cash equivalents are held in Pound Sterling and placed on deposit in UK banks.
Trade and other payables are measured at book value and amortised cost.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counter-party to a financial instrument fails to meet its
contractual obligations. At 3 October 2015 the Group has trade receivables of £313,000 (4 October 2014: £381,000).
Approximately 20% of the balance is with longstanding suppliers and will be recovered against orders placed for the
upcoming season. The remainder is spread over a number of smaller suppliers with the largest balance below £100,000.
The Directors are unaware of any factors affecting the recoverability of outstanding balances at 3 October 2015 and
previously and consequently no provisions have been made for bad and doubtful debts.
All cash balances are held with reputable banks and the Board monitors its exposure to counterparty risk on an ongoing
basis.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due.
To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 30 days.
Trade payables are repayable within 3 months. The Group prepares and maintains detailed cash flow forecasts to monitor
cash requirements and manage liquidity risk.
36
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
3. Financial instruments – risk management (continued)
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial
liabilities:
Up to 3
months
Between
3 and 12
months
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
£’000
£’000
£’000
£’000
£’000
At 3 October 2015
Trade and other payables
Total
20,851
20,851
-
-
-
-
-
-
-
-
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Up to 3
months
Between
3 and 12
months
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
£’000
£’000
£’000
£’000
£’000
At 4 October 2014
Trade and other payables
Total
23,811
23,811
-
-
-
-
-
-
-
-
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37
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
3. Financial instruments – risk management (continued)
Foreign exchange risk
The Group is predominantly exposed to foreign exchange risk on purchases from major suppliers based in the Far East.
Purchases are made on a central basis and the risk is mitigated through using forward foreign currency exchange contracts.
These contracts will be executed within twelve months from the year end.
The fair value of forward foreign exchange contacts has been determined based on discounted market forward currency
exchange rates at the balance sheet date.
Interest rate risk
The Group is exposed to interest rate risk which is managed centrally. The Group reviews the exposure periodically and will
manage its interest rate risk by reviewing appropriate facilities.
Capital management
In order to maintain or adjust the capital structure, the Group may adjust the value of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
The Group’s capital is made up of share capital, merger reserve, cash and retained earnings totalling £36,284,000
(4 October 2014: £31,731,000).
The Group’s objectives when maintaining capital are:
●
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
●
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders’ equity as set out in the consolidated statement of changes in
equity. All working capital requirements are planned to be financed from existing resources wherever possible.
4. Revenue
Revenue arises from:
Sales of goods
38
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
166,819
172,861
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
5. Expenses by nature
Changes in inventories of finished goods
Finished goods
Duty and carriage charges on purchases
Employee benefit expenses
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Operating lease expense:
- Other
- Land and buildings
Loss on disposal of property, plant and equipment
Branch running costs
Transportation expenses
Advertising expenses
Financial instruments movement
IPO Costs
Other costs
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
(157)
58,241
2,099
36,285
3,713
459
682
23,493
51
17,866
1,287
1,029
502
-
10,987
701
61,303
1,639
37,642
4,527
-
725
25,153
108
18,207
1,386
1,297
(1,269)
936
9,937
156,537
162,292
In the current year the directors have carried out a detailed review of the allocation of distribution costs and
administrative expenses to arrive at a more accurate allocation of these costs given the growth of our online offering.
Accordingly the comparative charge for distribution costs have increased by £0.75 million and administrative expenses
have reduced by the same amount. There is no impact on the results or net assets from this restatement.
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39
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
6. Auditor’s remuneration
The audit of the parent company
The audit of the company’s subsidiaries
IPO Costs
7. Employee benefit expenses
Employee benefit expenses (including Directors) comprise:
Wages and salaries
Social security costs
Other pension costs
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
5
53
-
58
4
51
150
205
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
33,670
1,740
875
36,285
£’000
35,017
1,846
779
37,642
The average monthly number of employees during the period was as follows:
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
No.
3,701
6
154
3,861
No.
3,950
6
155
4,111
Sales and distribution
Directors
Administration
40
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
7. Employee benefit expenses (continued)
Directors’ remuneration, included in staff costs:
Salaries and benefits
Pension contributions
Information regarding the highest paid Director is as follows:
Salary and benefits
Pension contribution
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
860
18
878
285
-
285
757
16
773
256
-
256
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41
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
8. 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 Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer.
The Board considers that each store is an operating segment but there is only one reporting segment as the stores qualify
for aggregation, as defined under IFRS 8. 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.
External revenue by location of customers:
United Kingdom
Republic of Ireland
52 weeks ended
3 October 2015
£’000
52 weeks ended
4 October 2014
£’000
161,761
5,058
166,819
167,146
5,715
172,861
There are no customers with turnover in excess of 10% or more of total turnover.
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
Non-current assets by location:
United Kingdom
18,688
21,233
Non-current assets held in the Republic of Ireland are not disclosed on the grounds of materiality.
42
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
9. Finance income and expenses
Finance income
Interest receivable
Total finance income
Finance expense
Other loans
Other interest payable
Net interest expense on defined benefit pension scheme
Total finance expense
10. Income Tax
Current tax expense
Current tax on profits for the period
Adjustment for under provision in prior periods
Total current tax expense
Deferred tax expense
Origination and reversal of temporary differences (note 19)
Tax charge on profit on ordinary activities
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
44
44
-
(1)
(185)
(186)
33
33
(27)
-
(76)
(103)
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
2,477
(83)
2,394
(355)
2,039
1,845
(33)
1,812
647
2,459
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43
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
10. Income Tax (continued)
The reason for the difference between the actual tax charge for the period and the standard rate of corporation tax in the
United Kingdom applied to profit for the period as follows:
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
Profit for the period
Income tax expense
Profit before income taxes
Expected tax charge based on corporation tax rate of 20.5%
(4 October 2014: 22%)
Expenses not deductible for tax purposes
Effective change of rate
Unrecognised deferred tax movement
Adjustments to tax charge in respect of previous period
Total tax expense
Factors that may affect future tax charges:
£’000
8,101
2,039
10,140
2,079
57
8
-
(105)
2,039
£’000
8,040
2,459
10,499
2,310
197
(50)
(107)
109
2,459
In addition to the changes in rates of corporation tax disclosed above, further changes to the UK Corporation tax rates were
substantively enacted as part of the Finance Bill 2015-16 on 26 October 2015. These include a reduction to the main rate to
19% from 1 April 2017 and to 18% from 1 April 2020. Deferred tax has been calculated at 20% being the rate applying from
October 2015.
11. Dividends
Dividends paid prior to group reorganisation
Dividends paid during the year
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
-
3,400
£’000
5,002
-
A final dividend of 6.5 pence per share (£3,250,000) is proposed for shareholders on the register on 26 February 2016
payable on 16 March 2016 following approval at the Annual General Meeting on 4 March 2016.
A special dividend of 6 pence per share (£3,000,000) is proposed for shareholders on the register on 26 February 2016
payable on 16 March 2016 following approval at the Annual General Meeting on 4 March 2016.
44
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
12. Property, plant and equipment
Freehold
properties
Short leasehold
and leasehold
improvements
Motor
vehicles
Fixtures
and fittings
£’000
£’000
£’000
£’000
Total
£’000
Cost
At 5 October 2013
11,423
16,971
Additions
Disposals
At 4 October 2014
Additions
Disposals
At 3 October 2015
Depreciation
At 5 October 2013
Charge for the period
Disposals
At 4 October 2014
Charge for the period
Impairment
Disposals
At 3 October 2015
Net book value
At 3 October 2015
At 4 October 2014
At 4 October 2013
-
(756)
10,667
-
(514)
10,153
948
58
-
691
(751)
16,911
577
(513)
16,975
10,482
1,850
(750)
1,006
11,582
57
290
(220)
1,133
9,020
9,661
10,475
1,522
84
(498)
12,690
4,285
5,329
6,489
5
-
-
5
-
-
5
5
-
-
5
-
-
-
5
-
-
-
29,391
57,790
1,244
(608)
30,027
1,377
(856)
30,548
1,935
(2,115)
57,610
1,954
(1,883)
57,681
21,719
33,154
2,619
(554)
23,784
2,134
85
(838)
25,165
5,383
6,243
7,672
4,527
(1,304)
36,377
3,713
459
(1,556)
38,993
18,688
21,233
24,636
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45
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
13. Inventories
Goods for resale
Shop fitting materials and other consumables
14. Trade and other receivables
Trade receivables
Prepayments
Other receivables
3 October 2015
4 October 2014
£’000
28,991
181
29,172
£’000
29,073
108
29,181
3 October 2015
4 October 2014
£’000
313
7,657
178
8,148
£’000
381
7,877
119
8,377
15. Derivative financial instruments
At the balance sheet date, details of the forward foreign exchange contracts that the Group has committed to are
as follows:
Derivative financial assets
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
3 October 2015
4 October 2014
£’000
£’000
239
314
553
741
-
741
The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets/liabilities in the
consolidated statement of financial position.
The notional principal amounts of outstanding forward foreign exchange contracts at 3 October 2015 were $22,500,000 (4
October 2014: $51,000,000). The fair value of the forward foreign exchange contracts are within the level 2 of the fair value
hierarchy and have been valued on the basis of observable market data. The key input into the valuation are market rates of
financial instruments at the balance sheet date.
46
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
16. Trade and other payables
Current
Trade payables
Social security and other taxes
Other payables
Accruals
Non-current
Other payables
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3 October 2015
4 October 2014
£’000
11,950
1,727
115
9,857
23,649
£’000
14,351
1,049
123
10,397
25,920
3 October 2015
4 October 2014
£’000
3,037
3,037
£’000
3,766
3,766
i
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47
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
17. Provisions
As at 4 October 2014
Additions
Amounts utilised
Amounts released
As at 3 October 2015
The provisions are aged as follows:
Customer
Returns
Dilapidations
£’000
372
48
(372)
-
48
£’000
1,057
588
(162)
(366)
1,117
Customer
Returns
Dilapidations
£’000
£’000
Total
£’000
1,429
636
(534)
(366)
1,165
Total
£’000
802
363
Current
Non-current
As at 3 October 2015
48
-
48
754
363
1,117
1,165
For all products, the Group has incurred an obligation to exchange the item if it is faulty due to a lack of quality or give
the client a refund if they are not satisfied. Revenue from the sale of the products is recognised once the product is sold,
however, a provision for customer returns based on previous experience is recognised at the same time.
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the
lease in accordance with the lease terms. The main uncertainty relates to estimating the cost that will be incurred at the end
of the lease.
18. 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 £1,600,000 (4 October 2014: £1,600,000).
48
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
19. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (4 October
2014: 20%).
The movement on the deferred tax account is as shown below:
3 October 2015
4 October 2014
At beginning of the period
Recognised in income statement:
Tax expense (note 10)
Recognised in other comprehensive income:
Actuarial loss on defined benefit pension schemes
Foreign exchange contract
At end of the period
£’000
(516)
355
100
(63)
(124)
£’000
(343)
(647)
474
-
(516)
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The deferred tax has arisen due to the following:
3 October 2015
4 October 2014
Accelerated capital allowances
Ineligible buildings
Short term timing differences
Defined benefit pension scheme
£’000
1,204
(2,247)
(111)
1,030
(124)
£’000
1,254
(2,575)
(148)
953
(516)
The Group has an unrecognised deferred tax asset of £1,005,000 at 3 October 2015 (4 October 2014: £994,000).
There are estimated losses available to offset against future capital taxable profits amounting to approximately £5,025,000
(4 October 2014: £4,970,000).
20. Share capital
Share capital issued and fully paid
50,000,000 ordinary shares of 1p each
3 October 2015
4 October 2014
£’000
£’000
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.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
21. Leases
Operating leases – lessee
The Shoe Zone plc Group has entered into commercial leases on land and buildings. These leases have an
average life of between five and ten years. There are no restrictions placed on the Shoe Zone plc Group by entering
into these leases. The total future minimum lease payments under non-cancellable operating leases for land and
buildings and other items of plant and machinery are as follows:
Land and
buildings
Land and
buildings
Other
Other
3 October
2015
4 October
2014
3 October
2015
4 October
2014
£’000
£’000
£’000
£’000
Not later than one year
Later than one year and not later
than five years
Later than five years
21,292
22,853
47,173
10,492
57,920
11,234
526
827
-
562
811
4
78,957
92,007
1,353
1,377
22. Capital commitments
Contracted for but not provided
3 October 2015
4 October 2014
£’000
422
£’000
57
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Shoe Zone plc Annual Report and Accounts 2015
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pension costs
Defined contribution scheme
The Group operates a defined contribution pension scheme namely Shoe Zone Worksave Pension Plan contributions
amounted to £875,000 (4 October 2014: £779,000).
Defined benefit scheme
The Group operates two other pension schemes in the UK: the Shoe Zone Pension Scheme and the Shoefayre Limited
Pension and Life Assurance Scheme. The Shoe Zone Pension Scheme provided benefits on a defined benefit basis for
service up to 30 September 2001. For service after that date, benefits are provided on a defined contribution basis. The
Shoefayre Limited Pension and Life Assurance Scheme provided benefits on a defined benefit basis but was closed to
future accrual on 30 June 2009. The scheme was acquired on the purchase of Shoefayre Limited on 19 September 2007.
The assets of all schemes are held in separate trustee administered funds. The pension contributions to the Shoe Zone
Pension Scheme defined contribution element was £3,000 (4 October 2014: £3,000).
The schemes are exposed to a number of risks, including:
●
Investment risk: movement of discount rate used (high quality corporate bonds) against the return from plan assets
●
Interest rate risk: decreases/increases in the discount rate used (high quality corporate bonds) will increase/decrease
the defined benefit obligation
● Longevity risk: changes in the estimation of mortality rates of current and former employees.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Amounts recognised in the balance sheet at 3 October 2015
Fair value of assets
Present value of funded obligations
Deficit
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial loss arising from changes in:
Financial assumptions
Effect of limiting net defined benefit asset
Total actuarial loss
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive income
3 October 2015
4 October 2014
£’000
72,636
(77,786)
(5,150)
£’000
71,306
(76,072)
(4,766)
3 October 2015
4 October 2014
£’000
715
(1,214)
-
(1,214)
100
(399)
£’000
2,592
(5,854)
891
(4,963)
474
(1,897)
The figures below are based on a full actuarial valuation performed in April 2013 and March 2013 for the Shoe Zone and
Shoefayre schemes respectively which was carried out by a qualified independent actuary. This actuarial valuation has
been updated to 3 October 2015 for the purpose of calculating the pension surplus and disclosures in the current period.
52
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Post retirement mortality
Life expectancy
Male currently aged 45
Female currently aged 45
Male currently aged 65
Female currently aged 65
Financial assumptions
Deferred pension revaluation
Pension increases
Discount rate
Consumer Price Index
Retail Price Index
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3 October 2015
4 October 2014
Years
Years
90
92
88
90
90
92
88
90
3 October 2015
4 October 2014
%
2.30
3.30
3.85
2.30
3.30
%
2.40
3.40
4.00
2.40
3.50
The weighted average duration of the defined benefit obligation for the Shoe Zone scheme at 3 October 2015 is
16.5 years (4 October 2014 – 16.5 years).
The weighted average duration of the defined benefit obligation for the Shoefayre scheme at 3 October 2015 is
18.5 years (4 October 2014 – 18.5 years).
Defined benefit scheme - Shoe Zone Pension Scheme
Assets
The major categories of assets as a percentage of total assets are as follows:
Asset Category
Equities
Property
Gilts/bonds
Cash
Target Return Funds
3 October 2015
4 October 2014
27%
10%
39%
1%
23%
100%
27%
9%
40%
-
24%
100%
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
The actual return on the Scheme’s assets net of expenses over the period to the review date was a gain of £2,001,000
(4 October 2014: £3,349,000).
The assets do not include any investments in shares of the company.
The expected return on assets is a weighted average of the assumed long-term returns available on high quality corporate
bonds in line with the method used to value the liabilities. Equity and property returns are developed based on the selection
of an appropriate risk premium above the risk free rate which is measured in accordance with the yield on the government
bonds. Bond returns are selected by reference to the yields on the government and corporate debt, as appropriate to the
scheme holdings of these instruments. The expected returns on the Target Return Funds are equal to the fund’s targets.
Amounts recognised in the income statement over the period
3 October 2015
4 October 2014
£’000
(1,698)
1,666
£’000
(1,771)
1,811
(32)
40
3 October 2015
4 October 2014
£’000
£’000
42,899
(44,168)
(1,269)
42,423
(43,217)
(794)
Interest cost
Expected return on assets
Amounts recognised in the statement of financial position
Fair value of assets
Present value of funded obligations
Deficit
54
Shoe Zone plc Annual Report and Accounts 2015
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial loss arising from changes in:
Financial assumptions
Effect of limiting net defined benefit asset
Total actuarial loss
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive income
Reconciliation of assets and defined benefit obligation
The change in assets over the period was:
Fair value of assets at the beginning of the period
Expected return on assets
Benefits paid
Actuarial gain
Fair value of assets at the end of the period
3 October 2015
4 October 2014
£’000
335
(778)
-
(778)
89
(354)
£’000
1,538
(3,263)
891
(2,372)
167
(667)
3 October 2015
4 October 2014
£’000
42,423
1,666
(1,525)
335
42,899
£’000
40,513
1,811
(1,439)
1,538
42,423
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
The change in defined benefit obligation over the period was:
Defined benefit obligation at the beginning of the period
Interest cost
Benefits paid
Actuarial loss
Defined benefit obligation at the end of the period
3 October 2015
4 October 2014
£’000
43,217
1,698
(1,525)
778
44,168
£’000
39,622
1,771
(1,439)
3,263
43,217
Shoe Zone Retail Limited expects to make no contributions to the scheme during the following period.
Sensitivity of the value placed on the liabilities:
Adjustments to assumptions
Approximate effect on
liabilities
Discount rate
Plus 0.50%
Minus 0.50%
Inflation
Plus 0.50%
Minus 0.50%
Life Expectancy
Plus 1.0 years
Minus 1.0 years
-8%
+9%
+2%
-2%
+2%
-2%
Note that the above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all
other assumptions remain the same.
56
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme
The company operates the Shoefayre Limited Pension and Life Assurance Scheme. The scheme provided benefits on a
defined benefit basis but was closed to future accrual on 30 June 2009.
The major categories of assets as a percentage of total assets are as follows:
Asset Category
Equities
Property
Gilts/bonds
Cash
Target Return Funds
3 October 2015
4 October 2014
13%
12%
47%
1%
27%
100%
16%
11%
46%
-
27%
100%
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The actual return on the Scheme’s assets net of expenses over the period to the review date was a gain of £1,522,000
(4 October 2014: £2,280,000). The assets do not include any investments in shares of the company.
The expected return on assets is a weighted average of the assumed long-term returns available on high quality corporate
bonds in line with the method used to value the liabilities. Equity and property returns are developed based on the selection
of an appropriate risk premium above the risk free rate which is measured in accordance with the yield on the government
bonds. Bond returns are selected by reference to the yields on the government and corporate debt, as appropriate to the
scheme holdings of these instruments. The expected returns on the Target Return Funds are equal to the fund’s targets.
Amounts recognised in the statement of financial position
Fair value of assets
Present value of funded obligations
Net liability
3 October 2015
4 October 2014
£’000
29,737
(33,618)
(3,881)
£’000
28,883
(32,855)
(3,972)
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme (continued)
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial loss arising from changes in:
Financial assumptions
Total actuarial loss
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive income
3 October 2015
4 October 2014
£’000
380
(436)
(436)
11
(45)
£’000
1,054
(2,591)
(2,591)
307
(1,230)
Amounts recognised in the income statement over the period
3 October 2015
4 October 2014
£’000
(1,295)
1,142
(153)
£’000
(1,342)
1,226
(116)
Interest cost
Expected return on assets
58
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme (continued)
Reconciliation of assets and defined benefit obligation
The change in assets over the period was:
3 October 2015
4 October 2014
Fair value of assets at the beginning of the period
Expected return on assets
Employer contributions
Benefits paid
Actuarial gain on assets
Fair value of assets at the end of the period
The change in defined benefit obligation over the period was:
£’000
28,883
1,142
300
(968)
380
29,737
£’000
27,296
1,226
425
(1,118)
1,054
28,883
3 October 2015
£’000
4 October 2014
Defined benefit obligation at the beginning of the period
Interest cost
Benefits paid
Actuarial loss on obligation
Defined benefit obligation at the end of the period
32,855
1,295
(968)
436
33,618
£’000
30,040
1,342
(1,118)
2,591
32,855
Contributions of £300,000 are expected to be made during the year ended 1 October 2016 by Shoe Zone Retail Limited.
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
23. Pensions (continued)
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme (continued)
Sensitivity of the value placed on the liabilities:
Adjustments to assumptions
Approximate effect on
liabilities
Discount rate
Plus 0.50%
Minus 0.50%
Inflation
Plus 0.50%
Minus 0.50%
Life Expectancy
Plus 1.0 years
Minus 1.0 years
-9%
+10%
+6%
-4%
+2%
-2%
Note that the above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all
other assumptions remain the same.
24. Cash and cash equivalents
Cash and cash equivalents for the purpose of the statement of cash flow comprise:
Cash at banks and in hand
3 October 2015
4 October 2014
£’000
14,221
£’000
9,114
Cash and cash equivalents
14,221
9,114
60
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
25. Related party transactions
Balances and transactions between the company and its subsidiaries, which are related parties of the company, have been
eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related
parties are disclosed below.
During the period, the Group entities entered into the following trading transactions with key management personnel:
Interest paid
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
-
£’000
27
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During the period, the Group entities entered into the following trading transactions with Group pension schemes:
Rent paid to Zone Executive Pension Scheme
Contributions to the:
Shoe Zone Worksave Pension Plan
Shoe Zone Pension Scheme
Shoefayre Limited Pension and Life Assurance Scheme
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
163
872
3
300
1,338
£’000
152
776
3
425
1,356
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Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
25. Related party transactions (continued)
During the period, the key management personnel remuneration included within staff costs are as follows:
Short term employee benefits
Post-employment benefit
Employers national insurance
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
£’000
860
18
104
982
757
16
83
856
Key management personnel are considered to be the Directors of Shoe Zone plc.
62
Shoe Zone plc Annual Report and Accounts 2015 Notes to the financial statements for the 52 weeks
ended 3 October 2015 (continued)
26. 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.
Numerator
Profit for the year and earnings used in basic and diluted EPS
52 weeks ended
3 October 2015
52 weeks ended
4 October 2014
£’000
8,101
£’000
8,040
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Denominator
Weighted average number of shares used in basic and diluted EPS
50,000,000
50,000,000
3 October 2015
4 October 2014
27. Ultimate controlling party
The company is controlled by the Smith family albeit there is not a single controlling party.
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63
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Company statement of financial position as at 3 October
2015
Note
3 October
2015
£’000
4 October
2014
£’000
Fixed assets
Investments
Current assets
Debtors
Creditors: amounts falling due within one year
Net current liabilities
Net assets
Capital and reserves
Called up share capital
Merger reserve
Profit and loss account
Total shareholders’ funds
2
3
4
5
6
6
68,644
68,644
14
14
(1,118)
(1,104)
67,540
500
586
66,454
67,540
70,586
70,586
7
7
(986)
(979)
69,607
500
586
68,521
69,607
The financial statements were approved and authorised for issue by the Board of Directors.
A E P Smith
Chief Executive Officer
12 January 2016
64
Registered Number 08961190
Shoe Zone plc Annual Report and Accounts 2015
Notes to the company financial statements for the 52 weeks
ended 3 October 2015 (continued)
1. Accounting policies
Basis of preparation
The Company’s financial period is 3 October 2015. The financial statements are prepared on the going concern basis,
under the historical cost convention and in accordance with the Companies Act 2006 and applicable accounting standards
in the United Kingdom.
The Company has taken advantage of the exemption contained in Section 408(4) of the Companies Act 2006 from
presenting its own profit and loss accounts. The profit dealt with in the accounts of the Company was £1,333,000
(4 October 2014: loss of £979,000)
The financial statements have been prepared in accordance with Financial Reporting Standard 100 ‘Application of Financial
Reporting Requirements’ and Financial Reporting Standard 101 “Reduced Disclosure Framework”. The principal accounting
policies adopted in the preparation of the financial statements are set out below. The policies have been consistently
applied to all the years presented, unless otherwise stated.
As permitted by FRS 101, the company has taken advantage of all the disclosure exemptions available under that standard.
Accounting policies have been applied consistently throughout the period.
Investments
Investments held as fixed assets are stated at cost, less any provision for impairment.
Share-based payments
Share-based payments are measured at fair value at the date of grant.
The charge relating to grants to employees of the Company is recognised on a straight-line basis as an expense in the profit
and loss account, spread over the vesting period, based on the Company’s estimate of the shares that will eventually vest
and adjusted for the effect of nonmarket-based vesting conditions.
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65
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notes to the company financial statements for the 52 weeks
ended 3 October 2015 (continued)
2. Fixed Asset Investments
Cost
Impairment of investment in Castle Acres Development Limited
Total
3 October
2015
4 October
2014
£’000
70,586
(1,942)
68,644
£’000
70,586
-
70,586
The subsidiaries of the company, all of which have been included in the consolidated financial statements, are as
follows:
Name of investment
Place of
incorporation
Principal activity
Ownership
Castle Acres Development Limited
England & Wales
Property holding company
100% owned by company
Shoe Zone Retail Limited
England & Wales
Trading company
100% owned by company
Zone Property Limited
England & Wales
Property holding company
100% owned by company
Zone Group Limited
England & Wales
Non-trading company
100% owned by company
Shoe Zone (Ireland) Limited
England & Wales
Non-trading company
100% owned by Shoe Zone
Retail Limited
Shoe Zone Pension Trustees Limited
England & Wales
Non-trading company
100% owned by Castle Acres
Development Limited
Stead & Simpson Limited
England & Wales
Non-trading company
100% owned by Zone Group
Limited
Zone Footwear Limited
England & Wales
Non-trading company
100% owned by Zone Group
Limited
Zone Retail
England & Wales
Non-trading company
100% owned by Zone Group
Limited
Walkright Limited
England & Wales
Non-trading company
100% owned by Zone Group
Limited
66
Shoe Zone plc Annual Report and Accounts 2015 Notes to the company financial statements for the 52 weeks
ended 3 October 2015 (continued)
3. Debtors
Prepayments
3 October 2015
4 October 2014
£’000
14
£’000
7
4. Creditors: amounts falling due within one year
Amounts owing to group undertakings
Accruals
5. Share capital
Allotted, called up and fully paid:
50,000,0000 ordinary shares of 1p each
6. Reserves
At 4 October 2014
Profit for the financial period
Dividends paid during the year
At 3 October 2015
3 October 2015
4 October 2014
£’000
1,104
14
1,118
£’000
982
4
986
3 October 2015
4 October 2014
£’000
500
500
£’000
500
500
Merger reserve
Profit and loss
account
£’000
586
-
-
586
£’000
68,521
1,333
(3,400)
66,454
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7. Related party transactions
Transactions between the Company and its 100% owned subsidiaries, which are related parties of the Company, are
not disclosed in this note due to the advantage being taken of the exemption provided by FRS 101 ‘Reduced Disclosure
Framework’. There have been no other related party transactions during the year.
67
Shoe Zone plc Annual Report and Accounts 2015shoezone.com
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting
of Shoe Zone plc (the ‘Company’) will be held at
its registered office at Haramead Business Centre,
Humberstone Road, Leicester, Leicestershire LE1 2LH on
Friday, 4 March 2016 at 11am to consider and, if thought
fit, pass the resolutions set out below. Resolutions 1 to 13
will be proposed as ordinary resolutions and Resolution
14 will be proposed as a special resolution.
1. To receive and adopt the Company’s annual accounts
for the financial period ended 3 October 2015 and the
associated reports of the Directors of the Company and
the auditors of the Company.
2. To declare a final dividend of 6.5 pence per ordinary
share for the financial period ended 3 October 2015.
3. To declare a special dividend of 6.0p per ordinary
share.
4. To re-elect Ian Filby as a Director.
(c) incur political expenditure, not exceeding £50,000.00
in total,
such authority to expire on the earlier of 31 March 2017
and the conclusion of the annual general meeting of the
Company to be held in 2017. For the purposes of this
resolution the terms ‘political donation’, ‘political parties’,
‘independent election candidates’, ‘political organisation’
and ‘political expenditure’ have the meanings given by
sections 363 to 365 of the Act.
13. That, in substitution for any existing authority but
without prejudice to the exercise of any such authority
prior to the date of the passing of this resolution, the
Directors of the Company be and are hereby generally
and unconditionally authorised pursuant to and in
accordance with section 551 of the Companies Act 2006
(the ‘Act’) to exercise all the powers of the Company
to allot shares in the Company and to grant rights to
subscribe for, or to convert any security into, shares in the
Company:
5. To re-elect Anthony Smith as a Director.
(a) up to an aggregate nominal amount of £166,666.00;
6. To re-elect Charles Smith as a Director.
7. To re-elect Nick Davis as a Director.
8. To re-elect Charlie Caminada as a Director.
9. To re-elect Jeremy Sharman as a Director.
10. To re-appoint BDO LLP as auditors of the Company
to hold office from the conclusion of the annual general
meeting until the conclusion of the annual general meeting
of the Company to be held in 2017.
11. To authorise the Directors of the Company to
determine the remuneration of BDO LLP as auditors of the
Company.
12. That, in accordance with section 366 of the
Companies Act 2006 (the ‘Act’), the Company and its
subsidiaries be and are hereby authorised, in aggregate,
to:
(a) make political donations to political parties and/
or independent election candidates, not exceeding
£50,000.00 in total;
(b) make political donations to political organisations
other than political parties, not exceeding £50,000.00
in total; and
and
(b) up to an aggregate nominal amount of £333,332.00
(such amount to be reduced by any shares allotted,
or rights to subscribe for or to convert any security
into shares granted, under paragraph (a) of this
resolution) in connection with an offer by way of a
rights issue:
(i) to holders of ordinary shares of £0.01 each in the
capital of the Company in proportion (as nearly as
may be practicable) to their existing holdings; and
(ii) to holders of other equity securities as required
by the rights of those securities or as the Directors
otherwise consider necessary or permitted by the
rights of those securities,
and so that the Directors may impose any limits
or restrictions and make any arrangements which
they consider necessary or appropriate to deal with
treasury shares, fractional entitlements or securities
represented by depositary receipts, record dates,
legal, regulatory or practical problems in, or under
the laws of, any territory or the requirements of any
regulatory body or stock exchange or any other
matter,
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Shoe Zone plc Annual Report and Accounts 2015
Notice of Annual General Meeting (continued)
of equity securities being represented by depositary
receipts); and
(b) the allotment of equity securities and the sale of
treasury shares (other than under paragraph (a) of
this resolution) up to an aggregate nominal amount of
£50,000.00,
and shall expire on the earlier of 31 March 2017 and
the conclusion of the annual general meeting of the
Company to be held in 2017, save that the Company
may before such expiry make an offer or enter into an
agreement which would or might require equity securities
to be allotted after such expiry and the Directors may
allot equity securities in pursuance of such an offer or
agreement as if the power conferred hereby had not
expired.
By order of the Board
Nick Davis
Company Secretary
Date: 12 January 2016
Registered Office
Haramead Business Centre
Humberstone Road
Leicester
Leicestershire
LE1 2LH
provided that this authority shall expire on the earlier of
31 March 2017 and the conclusion of the annual general
meeting of the Company to be held in 2017, save that
the Company may before such expiry make an offer or
enter into an agreement which would or might require
shares to be allotted, or rights to subscribe for or to
convert securities into shares to be granted, after such
expiry and the Directors may allot shares or grant such
rights in pursuance of such an offer or agreement as if the
authority conferred hereby had not expired.
14. That, subject to the passing of resolution 13 proposed
at the annual general meeting of the Company convened
for 4 March 2016 (‘Resolution 13’) and in substitution for
any existing authority but without prejudice to the exercise
of any such authority prior to the date of the passing of
this resolution, the Directors of the Company be and are
hereby generally empowered pursuant to sections 570
and 573 of the Companies Act 2006 (the ‘Act’) to allot
equity securities (within the meaning of section 560(1) of
the Act) (including the grant of rights to subscribe for, or
to convert any securities into, ordinary shares of £0.01
each in the capital of the Company (‘Ordinary Shares’) for
cash pursuant to the authorities conferred by Resolution
13 and/or by way of a sale of treasury shares (within the
meaning of section 560(3) of the Act), as if section 561(1)
of the Act did not apply to any such allotment or sale,
provided that this power shall be limited to:
(a) the allotment of equity securities and the sale of
treasury shares for cash in connection with an offer
of, or invitation to apply for, equity securities (but in
the case of the authority granted under paragraph (b)
of Resolution 13, by way of a rights issue only):
(i) to holders of Ordinary Shares in proportion (as
nearly as may be practicable) to their existing
holdings; and
(ii) to holders of other equity securities as required
by the rights of those securities or as the Directors
otherwise consider necessary or permitted by the
rights of those securities,
and so that the Directors may impose any limits
or restrictions and make any arrangements which
they consider necessary or appropriate to deal with
any treasury shares, fractional entitlements, record
dates, legal, regulatory or practical problems in, or
under the laws of, any territory or the requirements of
any regulatory body or stock exchange or any other
matter (including any such problems arising by virtue
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Notice of Annual General Meeting (continued)
Notes
1. Attending the Annual General Meeting in person
If you wish to attend the Annual General Meeting in
person, you should arrive at the venue for the Annual
General Meeting in good time to allow your attendance
to be registered. It is advisable to have some form of
identification with you as you may be asked to provide
evidence of your identity to the Company’s registrar,
Capita Asset Services Limited (the ‘Registrar’), prior to
being admitted to the Annual General Meeting.
2. Appointment of proxies
Members are entitled to appoint one or more proxies
to exercise all or any of their rights to attend, speak
and vote at the Annual General Meeting. A proxy need
not be a member of the Company but must attend the
Annual General Meeting to represent a member. To be
validly appointed, a proxy must be appointed using the
procedures set out in these notes and in the notes to
the accompanying Form of Proxy. If members wish their
proxy to speak on their behalf at the meeting, members
will need to appoint their own choice of proxy (not the
Chairman of the Annual General Meeting) and give their
instructions directly to them.
Members can only appoint more than one proxy where
each proxy is appointed to exercise rights attached to
different shares. Members cannot appoint more than
one proxy to exercise the rights attached to the same
share(s). If a member wishes to appoint more than one
proxy, they should contact the Registrar at The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4TU or by
telephone on 0871 664 0300. Calls cost 12p per minute
plus your phone company’s access charge. Calls outside
the United Kingdom will be charged at the applicable
international rate. Lines are open 9.00 a.m. to 5.30 p.m.
(London time) Monday to Friday excluding public holidays
in England and Wales. A member may instruct their proxy
to abstain from voting on any resolution to be considered
at the Annual General Meeting by marking the ‘Vote
Withheld’ option when appointing their proxy. It should be
noted that a vote withheld is not a vote in law and will not
be counted in the calculation of the proportion of votes
‘For’ or ‘Against’ the resolution.
The appointment of a proxy will not prevent a member
from attending the Annual General Meeting and voting in
person if they wish.
3. Appointment of a proxy using a Form of Proxy
A Form of Proxy for use in connection with the Annual
General Meeting is enclosed. To be valid, a Form of
Proxy or other instrument appointing a proxy, together
with any power of attorney or other authority under which
it is signed or a certified copy thereof, must be received
by post or (during normal business hours only) by hand
by the Registrar at The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU no later than 48 hours
before the time of the Annual General Meeting or any
adjournment of that meeting.
If you do not have a Form of Proxy and believe that you
should have one, or you require additional Forms of
Proxy, please contact the Registrar.
4. Appointment of a proxy through CREST
CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment
service may do so by using the procedures described in
the CREST Manual and by logging on to the following
website: www.euroclear.com/CREST. CREST personal
members or other CREST sponsored members, and
those CREST members who have appointed (a) voting
service provider(s), should refer to their CREST sponsor
or voting service provider(s) who will be able to take the
appropriate action on their behalf.
In order for a proxy appointment or instruction made
using the CREST service to be valid, the appropriate
CREST message (a ‘CREST Proxy Instruction’) must be
properly authenticated in accordance with Euroclear UK
& Ireland Limited’s specifications and must contain the
information required for such instruction, as described
in the CREST Manual. The message, regardless of
whether it constitutes the appointment of a proxy, or is
an amendment to the instruction given to a previously
appointed proxy must, in order to be valid, be transmitted
so as to be received by the Registrar (ID RA10) no later
than 48 hours before the time of the Annual General
Meeting or any adjournment of that meeting. For this
purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message
by the CREST Application Host) from which the Registrar
is able to retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time any
change of instructions to proxies appointed through
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Notes (continued)
7. Entitlement to attend and vote
To be entitled to attend and vote at the Annual General
Meeting (and for the purpose of determining the votes
they may cast), members must be registered in the
Company’s register of members at 6.00 p.m. on 2 March
2016 (or, if the Annual General Meeting is adjourned, at
6.00 p.m. on the day two days (excluding non-working
days) prior to the adjourned meeting). Changes to the
register of members after the relevant deadline will be
disregarded in determining the rights of any person to
attend and vote at the Annual General Meeting.
8. Voting rights
As at 12 January 2016 the Company’s issued share
capital consisted of 50,000,000 ordinary shares of £0.01
each carrying one vote each. No shares are held by the
Company in treasury. Therefore, the total voting rights in
the Company as at 12 January 2016 were 50,000,000
votes.
4. Appointment of a proxy through CREST
(continued)
CREST should be communicated to the appointee
through other means.
CREST members and, where applicable, their CREST
sponsors or voting service provider(s) should note that
Euroclear UK & Ireland Limited does not make available
special procedures in CREST for any particular message.
Normal system timings and limitations will, therefore,
apply in relation to the input of CREST Proxy Instructions.
It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed (a)
voting service provider(s), to procure that their CREST
sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system
providers are referred, in particular, to those sections of
the CREST Manual concerning practical limitations of the
CREST system and timings.
The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001
(as amended).
5. Appointment of a proxy by joint holders
In the case of joint holders, where more than one of the
joint holders purports to appoint one or more proxies, only
the purported appointment submitted by the most senior
holder will be accepted. Seniority shall be determined by
the order in which the names of the joint holders stand in
the Company’s register of members in respect of the joint
holding.
6. Corporate representatives
Any corporation which is a member can appoint one
or more corporate representatives. Members can only
appoint more than one corporate representative where
each corporate representative is appointed to exercise
rights attached to different shares. Members cannot
appoint more than one corporate representative to
exercise the rights attached to the same share(s).
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