I am pleased with the Group’s performance in what continues
to be a challenging retail environment. We are still well
positioned in the market given our strong value retail
proposition and continue to manage our store portfolio successfully
through our on-going store rationalisation and refit programme.
We continue to make good progress against our strategic objectives
and have made a solid start to the year with trading in line
with expectations. The Board remains positive about the
outlook for the Group for the remainder of the year. - Nick Davis
C.E.O.
Strategic Report
Financial Highlights
Chief Executive’s 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
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Shareholder Information
Directors and Advisers
Notice of Annual General Meeting
1
2
3
8
10
11
16
18
20
25
31
36
37
38
39
40
41
79
80
81
84
85
Financial Highlights
2016: £159.8m
REVENUE
£157.8m
PROFIT BEFORE TAX
£9.5m
2016: £10.3m
2016: £15.0m
NET CASH
£11.8m
EARNINGS PER SHARE
15.8p
2016: 16.9p
2016: 6.8p
2016: 10.1p
FINAL DIVIDEND
6.8p
TOTAL DIVIDEND
10.2p
PRODUCT GROSS MARGIN
63.2%
2016: 62.0%
E-COMMERCE GROWTH
34.5%
2016: 16.9%
Strategic Report
2
Chief Executive’s Report
2017 was a historic year for Shoe Zone as the Group celebrated its
centenary as a shoe retailer. Over its 100 years in retailing, the business
has evolved into the leading specialist value footwear retailer in the UK.
The strength of the business model combined with the retail expertise
of our colleagues has meant that despite the current challenging
economic environment, Shoe Zone continues to deliver positive results.
We have continued to make good progress on our
strategy of developing the Big Box concept which
extends our customer base, product range and price
points. Within the core estate we have maintained
our focus on value, robust cost control and effective
property portfolio management.
The business delivered revenue of £157.8m (2016:
£159.8m) and continues to generate cash effectively
from a robust balance sheet position.
Profit before tax has fallen by 7.3% from £10.3m to
£9.5m, primarily due to the adverse impact of foreign
exchange on imported goods into the UK,
with earnings per share falling from 16.9p to 15.8p.
Dividends
The board remains committed to delivering positive
dividend growth to shareholders. In recent years, the
strategy has been to pay out around 60% of post-tax
earnings as a normal dividend and any surplus cash
above £11m as a special dividend.
For the year ended 30 September 2017, the board is
proposing to pay out 65% of post-tax earnings as a
normal dividend. The £0.8m surplus cash over and
above the £11m that is required for the business to
operate effectively will be reinvested in the business.
This results in a final dividend of 6.8p per share (2016:
6.8p), giving a total dividend for the year of 10.2p
(2016: 10.1p) per share.
Strategic Report
3
Chief Executive’s Report
CONTINUED
The dividends will be paid to shareholders on the
register on 23 February 2018, payable on 14 March
2018 if approved at the Annual General Meeting to be
held on 1 March 2018. The shares will go ex-dividend
on 22 February 2018.
Product
We remain committed to offering our customers the
best possible value and have maintained flat key
price points for our Core Value Lines despite facing
difficult currency headwinds as a result of the weaker
pound. Along with our low prices we have increased
the value proposition by extending the number of
lines in “Multi-Buy” deals (e.g. ‘2 for £20’). This, along
with range enhancements has improved average
transaction value by 3.3% during the year to £9.60. We
have continued to increase our direct sourcing and as
a result, footwear orders placed directly with overseas
factories increased to 84.7% (2016: 72.2%) of total
footwear orders. Working closely with our source
of manufacture has helped maintain gross product
margins as well as improving communication and
control across the supply chain.
Non-footwear ranges including handbags, school
bags, lunch boxes, purses and accessories continue
to grow with sales from non-footwear up 14.5% on the
previous year, now delivering revenue of £8m.
Our ‘right price, first time’ strategy which helps control
the amount of markdown value as a percentage of
turnover, continues to ensure we remain one of the
industry leaders in having a low level of markdown on
products. This year was no exception in achieving a
level of 7.6% (2016: 7.1%), albeit being slightly higher
than prior year due to the impact of the first season
end of branded stock in Big Box stores.
Store Portfolio
We closed the year operating from 496 stores having
opened 21 and closed 35 during the period. Within
the 21 store openings, six were the continued roll out
of the Big Box format and the remaining 15 were of the
latest Shoe Zone brand.
The core estate continues to be invested in and
refreshed. We completed 29 refits during the year, at a
total capital expenditure of £5.0m and continued with
the roll out of the new brand fascia having converted
20% of all stores to the new fascia and branding. This
will continue in the coming year with a target of 31
refits and 10 new standard openings.
Our strategy continues to be one of driving profitability
from our larger Grade 1 stores and closing smaller
Grade 3 stores. The profile of stores as at 30
September was as follows:
Big Box
9 stores
2%
Grade 3
97 stores
20%
Grade 2
106 stores
21%
Grade 1
284 stores
57%
Strategic Report
4
The focus on managing rent costs has resulted in rents
at the lease renewal date falling by 24.5% in the 12
month period (2016: reduction of 17%). We expect that
rent reductions will continue to be achieved and has
been complemented with a reduction in rates payable
following the Government’s review of business rates.
The business continues to benefit from a flexible
portfolio with an average lease length of only 2.3 years
and as a result, our lease structure gives us significant
opportunity to respond to changes in shopping
patterns in any retail location.
Loss making stores now make up only 6% of the
store portfolio compared to 11% three years ago. We
believe that the target of 5% of loss making stores
within the portfolio will be achieved in the next 18
months.
Following a successful trial of the Big Box concept
during the year we believe that the enhanced
proposition is one that complements the existing
Shoe Zone business and can be a profitable avenue
of business growth over the coming years. In addition
to the growth of Big Box store numbers, we have
continued to refine the in-store offering.
We believe that the
enhanced proposition of the
Big Box concept is one that
complements the existing
Shoe Zone business and
can be a profitable avenue
of business growth over the
coming years.
Chief Executive’s Report
CONTINUED
New brands such as Clarks have been successfully
integrated and existing ranges are refined each
season as we develop our understanding of customer
demand and behaviours. We are targeting 10 new Big
Box stores in 2018 and beyond into the medium term.
In 2018 we are therefore targeting a total of 20 new
openings; 10 Big Box and 10 standard stores.
E-commerce
E-commerce continues to be a key area of focus and
growth for the business. Revenue has increased to
£8.3m, (2016: £6.2m) an annual increase of 34% in the
year and now delivers over £2m contribution before
Head Office apportioned costs.
This continued growth is driven from both a focus on
UK sales through our own website and online market
places and the continued expansion into international
markets. In addition to the European market, during
2017 we launched into the USA through Amazon.com.
Revenue continues to grow in all international markets,
albeit this remains a relatively small proportion of total
multi-channel sales.
shoezone.com has had another successful year with
a significant shift to selling through mobile devices.
Mobile and tablet visits now represent 78.9% (2016:
74.9%) of all website visits.
Our email database continues to be a strong source
of revenue and conversion. During 2017 we
concentrated on increased conversion of active users
and re-engagement of those who respond less often.
This dual pronged approach has led to database
growth of 25% and email campaign sales increased by
37% on the prior year, now accounting for 13% of site
revenue.
Overall conversion rates remained broadly static at
4.2% over the full year (2016: 4.3%). The increase
in traffic resulting from the Group’s Search Engine
Optimisation (SEO) strategy has meant a slight dilution
in conversion rate, however this will be the key multi-
channel focus for 2018. The ‘mobile first’ design and
implementation continues to deliver strong results
with conversion of 3.55% (2016: 3.39%), however
desktop conversion has fallen marginally. The chart
below shows the conversion rates (the percentage
of people visiting our website that place an order) for
customers shopping using different devices:
Desktop Tablet Mobile
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
5.7%
5.9%
5.3%
4.4%
4.4%
3.6%
3.4%
3.6%
2.6%
2017
2016
2015
Strategic Report
6
Chief Executive’s Report
CONTINUED
Employees and Charity
some time we expect to broadly maintain our gross
margin percentages to their current levels.
We are incredibly proud of all of our team’s effort that
has gone in to achieve these results and want to thank
them for their ongoing commitment and hard work.
During 2017 Shoe Zone plc donated over £100,000 to
charitable causes. We also continue to support BBC
Children in Need and the enthusiasm and commitment
of our colleagues has resulted in us collectively raising
over £600,000 for our chosen charity in the last five
years.
Current trading and Outlook
The outlook for consumer spending remains
challenging with the difficult economic conditions
likely to continue. Despite this, we are well positioned
given our strong value retail proposition that has
proven to be robust in challenging market conditions.
We are exposed to fluctuations in the value of sterling
but have put significant work into managing the risk
through foreign currency hedging and re-sourcing.
While we anticipate this pressure may be here for
We have continued to manage the store portfolio
having opened seven new stores, including three
Big Box stores since the year end and refitted a
further nine. There are currently five new stores with
provisional opening dates and a further 22 full refits
planned for the remainder of the year.
We expect the business will continue to convert cash
effectively but anticipate a small increase in capital
expenditure to support store openings, refits, new till
systems and head office improvements.
Shoe Zone has made a solid start to the year and
trading is in line with expectations. We are making
good progress against our strategic objectives and
the board remains positive about the outlook for the
Group for the remainder of the year.
Nick Davis
Chief Executive Officer
Date: 9 January 2018
Strategic Report
7
Financial Review
In the 52 weeks to 30 September 2017, Profit before
Tax decreased from £10.3m to £9.5m, a reduction of
7.3%. This was primarily due to the impact of foreign
exchange resulting from the weaker pound on the
cost of imports from the Far East. Earnings per share
decreased 7.0% to 15.8p (2016: 16.9p)
Revenues of £157.8m (2016: £159.8m) declined by
1.2% due to the continued planned closure of loss
making stores, with the majority of the loss in revenue
in the first half of the year.
Loss making stores now make up only 6% of the Shoe
Zone portfolio, having been 11% three years ago.
Overall store numbers reduced by a net 14 branches
to 496 at the year-end (2016: 25 branches closed
leaving a total of 510).
Multichannel growth has proved strong with revenues
(excluding store orders) increasing by 34.5% (2016:
11.4%), and have now developed to 5.3% of total
sales (2016: 3.9%). Contribution from multichannel
increased to £2.0m in the year.
Product gross margin strengthened to 63.2%
(2016: 62.0%) reflecting further increases in direct
sourcing, successful negotiations with suppliers and
management of write downs.
Operating expenses increased to £20.4m (2016:
£17.4m). Administration expenses increased by
£2.8m primarily due to the impact of foreign exchange
differences, planned increases in multi-channel
operational costs and store closure costs. However,
these were offset by continuing efficiencies in
Distribution Costs, which remained broadly flat year on
year.
Strategic Report
8
Financial Review CONTINUED
The effective rate of corporation tax for the year was
19.8% (2016: 21.8%).
During the year the Group opened 21 new stores and
completed 29 refits, spending £5.0m (2016: £3.4m) on
capital expenditure.
The dividends will be paid to shareholders on the
register on 23 February 2018, payable on 14 March
2018 if approved at the Annual General Meeting to be
held on 1 March 2018. The shares will go ex-dividend
on 22 February 2018.
The pension liability has fallen by £6.0m from £13.1m
to £7.1m due to an increase in the discount rate
assumption from 2.40% to 2.75%. This assumption is
based on the yield performance of corporate bonds.
Jonathan Fearn
Chief Financial Officer
Date: 9 January 2018
The derivative financial liability of £2.5m represents
the mark to market valuation of the derivative hedges
in place at the end of the financial year. As outlined
in the report, Shoe Zone only hedges against future
dollar purchases of goods for resale, all hedges in
place will be effective upon their delivery date.
The Group uses derivative financial instruments,
typically forward exchange contracts, to hedge the risk
of future foreign currency fluctuations. The hedging
policy enables the effective portion of changes in the
fair value of designated derivatives to be recognised
in other comprehensive income. Historically these
movements would have been recognised in the
Income Statement. Further information can be
seen in accounting policies in note 1 of the financial
statements.
The Company generated £13.3m cash from
operations, a year on year decrease of £0.6m resulting
in a net cash position of £11.8m (2016: £15.0m) at
the year end, underpinning a strong debt free balance
sheet. The Group’s current bank facilities consist of an
on demand overdraft facility of £5.0m with HSBC. This
facility has not been used within the year.
The Board is proposing a final dividend of 6.8p (2016:
6.8p) per share, resulting in a total dividend for the year
of 10.2p (2016: 10.1p) per share. The Board continues
to believe the business can operate on an opening/
closing cash position of £11m and any excess above
this level will be paid out to shareholders unless there
is a change in business requirement.
Strategic Report
9
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 Gross Margin %
Cash Balance
Online Sales as a percentage of
total sales. Online sales exclude
orders placed in store.
The online participation increased
by 140 basis points to 5.3% (2016:
3.9%). This performance reflects
the growth of the Shoezone website
sales and the offering on Ebay and
Amazon.
5.3%
3.9%
3.3%
Product Gross Profit expressed as a
percentage of revenue.
Cash held by the Group at the
period end.
The Product Gross Margin
increased by 90 basis points to
63.2% (2016: 62.0%) reflecting the
continued success of increasing
our direct sourcing.
63.2%
62.0%
61.5%
We finished the year with a healthy
cash balance of £11.8m (2016:
£15.0m).
15.0m
14.2m
11.8m
2015
2016
2017
2015
2016
2017
2015
2016
2017
Earnings per Share Growth
Rental % of Turnover
The percentage movement in
Earnings per Share.
Store rent as a percentage of
turnover.
Earnings per Share reduced slightly
this year. EPS for the year is 15.8p
(2016:16.9p), a fall of 6.5%.
The rental % of turnover has
reduced from 12.9% to 12.7%
reflecting the ongoing focus on rent
negotiations.
16.9p
16.2p
15.8p
13.0%
12.9%
12.7%
2015
2016
2017
2015
2016
2017
Strategic Report
10
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, which could
give them a competitive advantage over the Group.
Strategic Report
11
Principal Risks and Uncertainties CONTINUED
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 UK Government is currently in the process of
negotiating the terms of the UK exit from the European
Union. The impact of this on the business is unclear,
however in the short term the uncertainty continues
to have an impact on the equity and the currency
markets. Shoe Zone operates a hedging policy for US
dollar purchases which protects the business from
this exposure in the short term. It is unclear what the
longer term impacts of Brexit will be on the UK and
international economies.
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.
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
Strategic Report
12
Principal Risks
and Uncertainties
CONTINUED
and to a lesser extent 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 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.
Principal Risks and Uncertainties CONTINUED
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.
During the past year the Business Continuity Plan has
been refreshed and key employees briefed on their
responsibilities in the case of the unlikely scenario of
disruption to the Leicester premises. The business
retains appropriate insurance to mitigate the risk of
such a loss.
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
business’s dependency on any third parties. Reputable
third party antivirus, anitspam 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.
On behalf of the Board
Nick Davis
Chief Executive Officer
Date: 9 January 2018
Jonathan Fearn
Chief Financial Officer
Date: 9 January 2018
Strategic Report
14
Corporate
Statement
Governance
Principles of Corporate
Governance
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 four Executive Directors
(including the Chairman) and three Non-Executive
Directors. The Board composition meets the
recommendations of the QCA guidelines.
•
•
•
•
•
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;
determining remuneration policy;
approval of communications with shareholders
and the market.
The Board is committed to maintaining high standards
of corporate governance and to being transparent
about its arrangements.
Details of each of the Directors is given in their
biographies on pages 18 and 19.
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;
Appointments to the Board and
re-election
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
Governance
16
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 Jeremy Sharman.
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.
Details of the duties of the Remuneration Committee
are set out in the Remuneration report on page 20.
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 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
Governance
17
Board of Directors
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 was appointed Executive Chairman in June 2016.
Anthony is a founder and Trustee of the Shoe Zone Trust.
Nick joined Shoe Zone in 2003 as Management Accountant
from PKF where he had been a Senior Business Advisor in
Audit and Assurance. Nick became Financial Controller of Shoe
Zone in 2005 and then joined the Board as Finance Director in
2006. As Chief Financial Officer in 2014 he successfully joint
led the company’s IPO process and in 2016 was appointed as
Chief Executive Officer. He is FCA qualified and holds a BSC in
Economics from Loughborough University. Outside of Shoe Zone
Nick serves as a Non-Executive Director for DC Management
Services Limited, a group of BMW dealerships. He is also a Board
member and Trustee of three charities.
Charles joined Shoe Zone in 1998, joining the Board in 2001. As
Chief Operating Officer his main areas of responsibility are Retail
and HR. He holds a Business Studies degree from Leicester De
Montfort University and is a Founder and Trustee of the Shoe
Zone Trust. He is also a Board member and Trustee of three other
charities.
Anthony Smith
Executive Chairman
Nick Davis
Chief Executive Officer
Charles Smith
Chief Operating Officer
Jonathan joined Shoe Zone as Chief Financial Officer in 2016 and
has subsequently gained responsibility for the Distribution Centre
and Transport Operations. Jonathan has extensive experience
within Strategic and Retail Finance, primarily within Celesio UK,
including a period as Head of Region for Lloydspharmacy Retail
and prior to that with PowerGen UK. Jonathan holds a BSc (Hons)
in Managerial and Administrative Studies from Aston University
and is CGMA qualified.
Jonathan Fearn
Chief Financial Officer
Governance
18
Jeremy 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 Preparatory Schools.
Charlie has over 21 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
has served as a Specialist Advisor & Member of the Development
Board to the Centre of Social Justice and a Specialist Advisor to
the UK Trade & Investment (UKTI).
Jeremy Sharman
Non-Executive Deputy
Chairman
Charlie Caminada
Non-Executive Director
Malcolm joined the Board as a Non-Executive Director in
June 2016. Malcolm has extensive experience in retail, most
recently as Group Buying and Design Director for footwear and
accessories at New Look. Malcolm oversaw the group’s £550m
footwear division which he and his team grew from a zero base
to market leaders, representing 30% of group turnover. Prior
to Malcolm’s 16 years at New Look, he spent 23 years at the
international retailer, wholesaler and manufacturer, Clarks Shoes.
Malcolm worked in a number of roles during his career at Clarks,
including 13 years as Women’s Footwear Buyer.
Malcolm Collins
Non-Executive Director
Governance
19
Remuneration Report
This is the Company’s fourth Directors’ Remuneration Report since it
listed on AIM in May 2014.
The Committee consists of two Non-Executive
Directors. Charlie Caminada is the Chairman and
Jeremy Sharman also serves on the Committee.
Anthony Smith, Nick Davis, Charles Smith and
Jonathan Fearn may attend the Committee meetings
by invitation.
Duties
The main duties of the Remuneration Committee are
set out in its Terms of Reference adopted on 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;
•
•
•
•
•
•
•
be exclusively responsible for selecting any
remuneration consultants who advise the
Committee;
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
Governance
20
Remuneration Report
CONTINUED
Directors and Directors’ interests
The Directors listed below all served throughout the year. Their interests in the issued share capital of the
Company as at the date of this report were as follows:
Executive Directors
Anthony Smith
Nick Davis
Charles Smith
Jonathan Fearn
Non-Executive Directors
Jeremy Sharman
Charlie Caminada
Malcolm Collins
Number of
ordinary
shares
Percentage
of issued
share capital
13,895,592 (1)
22,700 (2)
11,109,408 (3)
Nil
234,375
15,625
Nil
27.79%
0.05%
22.22%
-
0.47%
0.03%
-
(1)
(2)
(3)
The registered holder of these shares is Slawston Limited, an entity jointly owned by Anthony Smith and his wife.
The registered holder of these shares is the wife of Nick Davis.
The registered holder of these shares is Sheepy Magna Limited, an entity jointly owned by Charles Smith and his wife.
Governance
21
Remuneration Report
CONTINUED
Directors’ Remuneration
Directors’ remuneration information for those individuals who have served as a Director for the year are present-
ed below. The information presented in respect of these Directors is for the full financial year.
Individual
Financial
year
Basic
Salary and
fees
£
Executive Directors
Anthony Smith
FY17
250,000
FY16
250,000
Profit Share
(Bonus)
Benefits
Pension
Contribution
Total
£
-
-
£
37,600
36,338
£
-
-
£
287,600
286,338
Nick Davis
FY17
191,580
105,000
18,294
17,000
331,874
FY16
162,657
72,000
10,304
19,000
263,961
Charles Smith
FY17
170,000
FY16
200,000
-
-
20,503
29,158
-
-
190,503
229,158
Jonathan Fearn*
Non–Executive Directors
Ian Filby
Jeremy Sharman
Charlie Caminada
Malcolm Collins
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
FY17
FY16
56,183
14,794
5,258
6,742
82,977
-
-
41,666
30,000
30,000
30,000
30,000
20,000
5,493
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41,666
30,000
30,000
30,000
30,000
20,000
5,493
Total
FY17
747,763
119,794
81,655
23,742
972,954
FY16
719,816
72,000
75,800
19,000
886,616
*
Appointed 7 March 2017.
Governance
22
Remuneration Report
CONTINUED
Long Term Incentive Plans
During the year 2017 the board awarded Nick Davis a
Long Term Incentive which rewards performance for
achievement of Profit before Tax against an agreed
target. The incentive is structured on a sliding scale
such that achievement of target will reward at 50%
of salary up to a maximum reward of 100% of salary.
The shares will vest over three years following the
completion of the year end audit and publishing of the
annual accounts.
In order to facilitate the implementation of the LTIP
scheme, a special resolution will be passed at the
Annual General Meeting, on 1 March 2018, to allow the
purchase of shares with Treasury. Therefore, the first
year of the LTIP reward, £23,413, will be paid in cash
and subsequent awards of 14,493 shares will be made
in 2019 and 2020.
Remuneration Report
CONTINUED
Directors’ Service contracts and employment letters
The Executive Directors have entered into service agreements with the Company with effect from 1 May 2017.
Salaries for the current year are set out below:
Anthony Smith
Nick Davis
Charles Smith*
Jonathan Fearn
£
250,000
206,000
120,000
101,500
*
Charles Smith is now contracted for 3 days a week.
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, Charles Smith, and Nick Davis and 6 months for
Jonathan Fearn. Other fixed elements of the Executive
Directors’ remuneration comprise a company
car provision, life assurance and private medical
insurance. Nick Davis and Jonathan Fearn are 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.
For the 2018 year, the committee intends to award
the same LTIP benefit to Nick Davis, based on
performance against agreed PBT targets.
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:
Jeremy Sharman
Charlie Caminada
Malcolm Collins
£
30,000
30,000
20,000
The appointments are terminable by either party with three months’ 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
Charlie Caminada
Chairman of the Remuneration Committee
Date: 9 January 2018
Governance
24
Directors’ Report
for the 52 weeks ended 30 September 2017
The Directors present their Annual Report and audited financial
statements of the Company and the Group for the 52 weeks ended 30
September 2017.
The disclosure requirements of the Companies Act
2006 have been met by the contents of this Directors’
Report, apart from the likely future developments in
the business and existence of branches which are
included within the Strategic Report which should
therefore be read in conjunction with one another.
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 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 30 September 2017 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 2 March 2017, 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 2018 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
Nick Davis
Charles Smith
Jonathan Fearn (Appointed 7 March 2017)
Jeremy Sharman
Charlie Caminada
Malcolm Collins
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.
Governance
25
Directors’ Report
for the 52 weeks ended 30 September 2017 CONTINUED
Employees
The Group employed 3,507 (1 October 2016: 3,561)
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.
Annual general meeting
The Company’s fourth AGM will be held on Thursday,
1 March 2018 at 9:30am at the Company’s registered
office at Haramead Business Centre, Humberstone
Road, Leicester, Leicestershire LE1 2LH. The Notice of
AGM appears on pages 85 to 91.
Set out below is an explanation of certain resolutions
which will be proposed at the AGM.
Final dividend (resolution 2)
The Directors are proposing a final dividend of 6.8p
per ordinary share, amounting to a total dividend of
approximately £3.4m, which is subject to approval by
the shareholders at the AGM.
Re-election of Directors (resolutions 3
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 continued
intention to apply certain principles of the UK
Corporate Governance Code, each Director will stand
for election or re-election (as the case maybe) at the
AGM. Biographical details of each Director appear
on pages 18 and 19. 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.
Governance
26
Directors’ Report
for the 52 weeks ended 30 September 2017 CONTINUED
During its last financial period 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 (resolution
13)
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 10 January 2018.
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 10 January 2018).
Disapplication of pre-emption rights
(resolutions 14 and 15)
Resolutions 14 and 15 concern 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-preemptive basis up
to an aggregate nominal amount of £25,000 (being
2,500,000 shares). This is equivalent to 5% of the
issued share capital of the Company on 10 January
2018. This resolution also disapplies statutory pre-
emption rights to the extent necessary to facilitate
rights issues.
Resolution 15 is being proposed as a separate
resolution to authorise the Directors to allot a further
5% of issued ordinary share capital of the Company
otherwise than in connection with a pre-emptive
offer for the purposes of financing a transaction (or
refinancing within six months of the transaction) which
the Directors determine to be an acquisition or other
capital investment contemplated by the Pre-emption
Group’s Statement of Principles (the ‘Pre-emption
Group Principles’).
These disapplication authorities are in line with
the authority sought at last year’s AGM and with
institutional shareholder guidance, in particular the
Pre-emption Group Principles. The Pre-emption Group
Principles were updated in March 2015 and provide
the Company with greater flexibility to undertake non-
pre-emptive issuances in connection with acquisitions
and specified capital investments by allowing the
Company to allot shares with a nominal value of up to
£25,000 (representing 5% of the issued share capital
of the Company as at 9 January 2018) for cash where
that allotment is in connection with an acquisition or
specified capital investment (as described in the Pre-
emption Group 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.
The Board does not intend to allot shares for cash on
a non-preemptive basis above 7.5% of the total issued
share capital of the Company over a rolling three-year
period without consulting shareholders first.
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 2019 or 31
March 2019, whichever is earlier.
Governance
27
Directors’ Report
for the 52 weeks ended 30 September 2017 CONTINUED
Authorisation for the Company to
purchase its own shares
(resolution 16)
All proxy appointments should be submitted so as to
be received no later than 11am on 27 February 2018.
Recommendation
Resolution 16 seeks authority for the Company to
make market purchases (within the meaning of section
693(4) of the Companies Act 2006) of the Company’s
ordinary shares on such terms and in such manner
as the Directors may determine from time to time,
subject to the limitations set out in the resolution.
If Resolution 16 is passed, the Company will be
authorised to purchase up to a maximum of 5,000,000
ordinary shares, representing 10% of the Company’s
issued ordinary share capital as at 10 January
2018. Resolution 16 also sets out the minimum
and maximum price that the Company may pay for
purchases of its ordinary shares.
If Resolution 16 is passed, the authority for the
Company to purchase its ordinary shares will remain
effective until the conclusion of the next AGM of
the Company to be held in 2019 or 31 March 2019,
whichever is earlier.
The Directors will only exercise this buy-back authority,
after careful consideration, when it is in the best
interests of the shareholders generally. Any purchases
would be financed out of distributable profits and
shares purchased would either be cancelled (and the
number of shares in issue reduced accordingly) or
held as treasury shares and may be used for future
distributions under the Company’s existing employee
incentive plans.
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.
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 auditor
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 31 to 35.
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 from the
Governance
28
Directors’ Report
for the 52 weeks ended 30 September 2017 CONTINUED
Group’s bankers 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.
Events after the year-end
Between 30 September 2017 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.
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.
Going Concern
The Directors consider that the business is a going
concern and that it is appropriate to prepare the
financial statements on a going concern basis. In
reaching this conclusion, the Directors have assessed
the Group’s current performance and position and
factors that may affect the Group’s future prospects.
The Group’s financial position is strong with healthy
positive cash balances at the year end and no debt.
It also has in place a £5.0m Revolving Credit Facility
(‘RCF’), which matures in April 2018. The RCF requires
the Group to comply with certain financial covenants;
these have been met during the year, and since
the year-end. The RCF has not been utilised since
inception. The Directors have reviewed forecasts and
projections and consider that the Group has adequate
banking facilities and cash resources to meet its
operational and capital commitments. The Directors
therefore have a reasonable basis on which to satisfy
themselves that the business is a going concern.
Governance
29
Directors’ Report
for the 52 weeks ended 30 September 2017 CONTINUED
In preparing these financial statements, the Directors
are required to:
Disclosure of information to auditor
•
•
•
•
select suitable accounting policies and then
apply them consistently;
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;
prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the company will continue in
business.
Each Director in office at the date of approval of this
report has confirmed that:
•
•
So far as they are aware, there is no relevant audit
information of which the Company’s auditor are
unaware; and
They have 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.
Approved by the Board and signed on its behalf:
Nick Davis
Chief Executive Officer
Date: 9 January 2018
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 ongoing integrity of
the financial statements contained therein.
Governance
30
Independent Auditor’s Report to the members of
Shoe Zone plc
Opinion
Basis for opinion
We have audited the financial statements of Shoe
Zone plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the 52 weeks ended 30 September
2017 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 company statement of financial position,
the company statement of changes in equity and the
related notes to the financial statements, including a
summary of significant accounting policies.
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 the preparation of the parent
company financial statements is applicable law and
United Kingdom Accounting Standards, including
Financial Reporting Standard 101 Reduced Disclosure
Framework (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
•
•
•
•
the financial statements give a true and fair view
of the state of the Group’s and of the parent
company’s affairs as at 30 September 2017 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 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.
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the Auditor’s
responsibilities for the audit of the financial statements
section of our report. We are independent of the
group in accordance with the ethical requirements that
are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going
concern
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial
statements any identified material uncertainties
that may cast significant doubt about the group’s
or the parent company’s ability to continue to
adopt the going concern basis of accounting for
a period of at least twelve months from the date
when the financial statements are authorised for
issue.
Governance
31
Independent Auditor’s Report to the members of
Shoe Zone plc CONTINUED
Key audit matters
Key audit matters are those matters that, in our
professional judgment, were of most significance in
our audit of the financial statements of the current
period and include the most significant assessed risks
of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the
engagement team. These matters were addressed in
the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Area of focus
How our audit approach addressed the area of
focus
Impairment of Fixed Assets
As set out in the accounting policies in note 1 to the
financial statements the carrying value of fixed assets
is reviewed by management for impairment.
Management considers each store to be a cash-
generating unit (“CGU”) and has performed a
discounted cash flow assessment at CGU level to
ensure that the carrying value of the stores assets are
supported by its expected future cash flows.
We have challenged management on the inputs and
growth assumptions in their impairment assessment
calculation. We compared them to historical results
and forecasts prepared for the assessment of going
concern for consistency and reasonableness of
application.
We tested the allocation of central overheads to
each CGU for consistency with the prior year and
reasonableness of application.
We focused on this area because of the significant
carrying value of store assets and the judgement
used by management in their impairment assessment
including assumptions over future growth rates, the
allocation of central overheads and discount rate.
We reviewed the discount rate by assessing the cost
of capital for the Group and comparable organisations,
taking into account risk premium as an appropriate
measure of the discount rate applied.
Governance
32
Independent Auditor’s Report to the members of
Shoe Zone plc CONTINUED
Our application of materiality
We apply the concept of materiality both in planning
and performing our audit, and in evaluating the effect
of misstatements. We consider materiality to be
the magnitude by which misstatements, including
omissions, could influence the economic decisions
of reasonable users that are taken on the basis of
the financial statements. Importantly, misstatements
below these levels will not necessarily be evaluated
as immaterial as we also take account of the nature
of identified misstatements, and the particular
circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
Group materiality
Basis of materiality
Rationale for benchmark applied
£475,000
5% of Group profit before tax
We consider profit before income tax to be the most
significant determinant of the Group’s financial
performance used by shareholders.
We report to the Audit and Risk Committee any corrected and uncorrected identified misstatements exceeding
£14,000 in addition to other identified misstatements that warrant reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit scope focused on the Group’s
principal trading subsidiary, Shoe Zone Retail Limited
which was subject to a full scope audit. Together with
the parent company and its group consolidation, which
was also subject to a full scope audit, these entities
represent the principal business units of the Group and
account for 100% of the Group’s revenue, 100% of the
Group’s profit before tax and 100% of the Group’s total
assets.
was audited to a lower level of materiality. Audits
of the components were performed at a materiality
level calculated by reference to a proportion of group
materiality appropriate to the relative scale of the
business concerned.
The remaining components of the Group were
considered non-significant and these components
were principally subject to analytical review
procedures.
Whilst materiality for the financial statements as a
whole was £475,000, each component of the Group
Governance
33
Independent Auditor’s Report to the members of
Shoe Zone plc CONTINUED
Other information
The directors are responsible for the other information.
The other information comprises the information
included in the annual report, other than the financial
statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the
other information and, except to the extent otherwise
explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the
other information is materially inconsistent with the
financial statements or our knowledge obtained
in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required
to determine whether there is a material misstatement
in the financial statements or a material misstatement
of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are
required to report that fact. We have nothing to report
in this regard.
Opinions on other matters
prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the
course of the audit:
•
•
the information given in the strategic report and
the directors’ report for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
the strategic report and the directors’ report have
been prepared in accordance with applicable
legal requirements.
Matters on which we are required
to report by exception
In the light of the knowledge and understanding of the
group and the parent company and its environment
obtained in the course of the audit, we have not
identified material misstatements in the strategic
report or the directors’ report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept,
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 ex-
planations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 29, the directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a
true and fair view, and for such internal control as
the directors determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the group’s and the
parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related
to going concern and using the going concern basis
of accounting unless the directors either intend to
liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Governance
34
Independent Auditor’s Report to the members of
Shoe Zone plc CONTINUED
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Auditor’s responsibilities for the
audit of the financial statements
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.
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists.
Richard Wilson (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Nottingham
Date: 9 January 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Governance
35
Consolidated Income Statement
for the 52 weeks ended 30 September 2017
Note
52 weeks
ended
30 September
2017
52 weeks
ended
1 October
2016
£’000
£’000
1, 4, 8
157,777
159,834
5
5
5
9
9
10
26
(127,657)
(132,022)
30,120
27,812
(14,454)
(11,657)
(5,872)
9,794
15
(306)
9,503
(1,620)
7,883
(5,769)
10,386
56
(190)
10,252
(1,801)
8,451
15.77p
16.90p
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
Profit from operations
Finance income
Finance expense
Profit before taxation
Taxation
Profit attributable to equity holders of the parent
Earnings per share – basic and diluted
Financials
36
Consolidated Statement of Total Comprehensive
Income for the 52 weeks ended 30 September 2017
Note
52 weeks
ended
30 September
2017
52 weeks
ended
1 October
2016
£’000
£’000
Profit for the period
7,883
8,451
Items that will not be reclassified subsequently to the
income statement
Remeasurement gains / losses on defined benefit
pension scheme
Movement in deferred tax on pension schemes
23
23
5,608
(8,190)
(1,217)
1,474
Effect of change in deferred tax rate on opening liability
-
(362)
Items that will be reclassified subsequently to the
income statement
Fair value movements on cash flow hedges
(934)
1,683
Cash flow hedges recognised in inventories
(1,233)
(1,667)
Tax on cash flow hedges
Effect of change in deferred tax rate on opening liability
377
-
(3)
6
Other comprehensive expense for the period
2,601
(7,059)
Total comprehensive income for the period
attributable to equity holders of the parent
10,484
1,392
Financials
37
Consolidated Statement of Financial Position
as at 30 September 2017
Note
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
Assets
Non-current assets
Property, plant and equipment
Deferred tax asset
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
Derivative financial assets
Corporation tax liability
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Employee benefit 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
12
19
13
14
15
24
16
17
15
16
17
23
20
20,783
861
21,644
28,017
6,108
-
11,786
45,911
67,555
18,661
1,441
20,102
30,075
7,204
651
15,046
52,976
73,078
(23,576)
(25,348)
(829)
(2,546)
(474)
(27,425)
(1,742)
(120)
(7,108)
(8,970)
(36,395)
31,160
500
2,662
(1,520)
29,518
31,160
(922)
-
(1,583)
(27,853)
(2,316)
(75)
(13,058)
(15,449)
(43,302)
29,776
500
2,662
270
26,344
29,776
The financial statements were approved and authorised for issue by the Board of Directors and were signed on
its behalf by:
Jonathan Fearn
Chief Financial Officer
Date: 9 January 2018
Financials
38
Consolidated Statement of Changes in Equity
for the 52 weeks ended 30 September 2017
At 3 October 2015
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 1 October 2016
Profit for the period
Defined benefit pension movements
Cash flow hedge movements
Deferred tax on other comprehensive income
Total comprehensive income for the period
Dividends paid during the year (note 11)
Total contributions by and distributions to owners
Share
capital
Merger
reserve
Cash flow
hedge
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
500
2,662
251
32,871
36,284
-
-
-
-
-
-
-
-
-
-
-
19
19
-
-
8,451
8,451
(7,078)
(7,059)
1,373
1,392
(7,900)
(7,900)
(7,900)
(7,900)
500
2,662
270
26,344
29,776
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,883
7,883
5,608
5,608
(2,167)
-
(2,167)
377
(1,217)
(840)
(1,790)
12,274
10,484
-
-
(9,100)
(9,100)
(9,100)
(9,100)
At 30 September 2017
500
2,662
(1,520)
29,518
31,160
Share capital comprises nominal value of shares subscribed for.
The merger reserve has arisen as a result of the application of merger accounting to the group reorganisation of
26 March 2014.
The cash flow hedge reserve comprises of gains/losses arising on the effective portion of hedging instruments
and is carried at fair value in a qualifying cash flow hedge.
Retained earnings are all other net gains and losses and transactions with owners (e.g. dividends) not recognised
elsewhere.
Financials
39
Consolidated Statement of Cash Flows
for the 52 weeks ended 30 September 2017
Note
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
Operating activities
Profit after taxation
Corporation tax
Finance income
Finance expense
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Pension contributions paid
Decrease in trade and other receivables
Decrease in foreign exchange contract
(Increase)/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
Interest received
Net cash used in investing activities
Financing activities
Dividends paid during the year
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
11
24
Financials
40
7,883
1,620
(15)
306
2,962
188
(649)
8,451
1,801
(56)
190
3,153
309
(472)
12,295
13,376
1,084
321
2,767
(2,467)
(48)
1,657
13,952
(2,990)
10,962
(5,137)
15
(5,122)
(9,100)
(9,100)
(3,260)
15,046
11,786
861
239
(1,224)
821
(168)
529
13,905
(2,041)
11,864
(3,195)
56
(3,139)
(7,900)
(7,900)
825
14,221
15,046
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017
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 30 September 2017.
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.
The consolidated financial statements are presented in
Sterling, which is also the Group’s functional currency.
Amounts are rounded to the nearest thousand, unless
otherwise stated.
Basis of consolidation
The consolidated financial statements incorporating
the financial statements of Shoe Zone plc and
its subsidiary undertakings are all made up to 30
September 2017. 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.
Financials
41
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
1. Accounting policies
CONTINUED
The consolidated financial statements present the
results of the company and its subsidiaries (‘the
Group’) as if they formed a single entity. Intercompany
transactions and balances between group companies
are therefore eliminated in full.
The consolidated financial statements incorporate the
results of business combinations using the acquisition
method. In the statement of financial position, the
acquiree’s identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values
at the acquisition date. The results of acquired
operations are included in the consolidated statement
of comprehensive income from the date on which
control is obtained. They are deconsolidated from the
date on which control ceases.
Changes in accounting policies
The Group has not early adopted the following new
standards, amendments or interpretations that have
been issued but are not yet effective. The Directors
anticipate that the adoption of these standards will not
result in significant changes to the Group’s accounting
policies. The Group has commenced its assessment
of the impact of these standards but is not yet in a
position to state whether these standards would have
a material impact on its results of operations and
financial position.
Standards, amendments and
interpretations which are not
effective or early adopted by the
Group
Standards or amendments that are applicable but that
are not effective and have not been early adopted are
as follows:
IFRS 16 ‘Leases’. This amendment is effective for the
53 week financial period ending 3 October 2020 and
will require a significant change in the accounting and
reporting of leases for the Group. The standard will
require lessees to recognise assets and liabilities for
all leases, with the exception of low value leases or
where the lease term is 12 months or less. The impact
on the Group is currently being assessed and it is not
yet practicable to quantify the effect of the standard
on these consolidated financial statements.
IFRS 9 ‘Financial Instruments’ replaces IAS 39
‘Financial Instruments: Recognition and Measurement’
and is effective for the 52 week financial period ending
28 September 2019. The main change for the Group is
a simplification of hedge accounting rules. As a result,
the impact of the change on the Group is minimal, and
will result in no changes in disclosure.
IRFS 15 ‘Revenue from Contracts with Customers’.
This is effective for the 52 week financial period
ending 28 September 2019, and requires revenue
generated from contracts with customers to more
accurately reflect the economic reality. This standard
will not have any impact on the Group’s revenues, as all
of the Group’s revenue relates to the sale of products
made directly to customers either in store or online, no
contracts are in place for any revenue generated.
The group has not early adopted any IFRSs or IFRS
interpretations.
There have been no changes to standards during the
year that affect the Group.
Financials
42
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
1. Accounting policies
CONTINUED
Leased assets
Revenue
Revenue is measured at the fair value of consideration
received or receivable net of discounts, returns
and VAT. Revenue is recognised when the company
has transferred the significant risks and rewards of
ownership to the buyer at the point of sale in the shop.
At the point of sale a provision is made for the level of
expected returns based on previous experience.
Internet sales are recognised when the goods have
been paid for, despatched and received by the
customer.
Property, plant and equipment
Items of property, plant and equipment are initially
recognised at cost. As well as purchase price, cost
includes directly attributable costs.
Depreciation is provided on all items of property, plant
and equipment so as to write off their carrying value
over the expected useful economic lives. It is provided
at the following rates:
•
•
•
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.
Where substantially all of the risks and rewards
incidental to ownership of a leased asset have been
transferred to the Shoe Zone plc Group (a ‘finance
lease’), the asset is treated as if it had been purchased
outright.
The amount initially recognised as an asset is the
lower of the fair value of the leased property and
the present value of the minimum lease payments
payable over the term of the lease. The corresponding
lease commitment is shown as a liability. Lease
payments are analysed between interest and capital.
The interest element is charged to the consolidated
income statement over the period of the lease and is
calculated so that it represents a constant proportion
of the lease liability. The capital element reduces the
balance owed to the lessor.
Where substantially all of the risks and rewards
incidental to ownership are not transferred to the
Group (an ‘operating lease’), the total rentals payable
under the lease are charged to the consolidated
income statement on a straight-line basis over the
lease term. The aggregate benefit of lease incentives
is recognised as a reduction of the rental expense over
the lease term on a straight-line basis.
Impairment of non-financial assets
The carrying values of non-financial assets are
reviewed for impairment when there is an indication
that assets might be impaired. When the carrying value
of an asset exceeds its recoverable amount, the asset
is written down accordingly.
Where it is not possible to estimate the recoverable
amount of an individual asset, the impairment test is
carried out on the asset’s cash generating unit (i.e. the
smallest group of assets in which the asset belongs
for which there are separable identifiable cash flows).
Impairment charges are included in the consolidated
income statement in cost of sales, except to the
extent they reverse previous gains recognised in the
consolidated statement of comprehensive income.
Financials
43
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
other types of contractual monetary asset. They are
initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or
issue, and are subsequently carried at amortised cost
using the effective interest rate method, less provision
for impairment.
The Group’s loans and receivables comprise trade
and other receivables and cash and cash equivalents
included within the consolidated statement of financial
position.
Impairment provisions are recognised when there
is objective evidence (such as significant financial
difficulties on the part of the counterparty or default
or significant delay in payment) that the Group will
be unable to collect all of the amounts due under the
terms receivable, the amount of such a provision being
the difference between the net carrying amount and
the present value of the future expected cash flows
associated with the impaired receivable. For trade
receivables, which are reported net, such provisions
are recorded in a separate allowance account with
the loss being recognised within administrative
expenses in the consolidated income statement.
On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is
written off against the associated provision.
Financial liabilities
The Group classified its financial liabilities as other
financial liabilities which include the following:
•
trade payables and other short-term monetary
liabilities, which are initially recognised at fair
value and subsequently carried at amortised cost
using the effective interest method.
1.
Accounting policies
CONTINUED
Inventories
Inventories are initially recognised at cost on a first in
first out basis, and subsequently at the lower of cost
and net realisable value. Cost comprises all costs
of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present
location and condition.
Financial assets
The Group classified its financial assets into the
categories, discussed below, due to the purpose for
which the asset was acquired. The Group has not
classified any of its financial assets as held to maturity.
The Group documents at the inception of the
transaction the relationship between hedging
instruments and hedged items, as well as its risk
management objectives and strategy for undertaking
various hedging transactions. The Group also
documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives
that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash
flows of hedged items.
Loans and receivables
Cash and cash equivalents includes cash in hand and
deposits held at call with banks.
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
Financials
44
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
1.
Accounting policies
CONTINUED
Derivative financial instruments
and hedging activities
Hedge accounting is applied to financial assets and
financial liabilities only where all of the following
criteria are met:
At the inception of the hedge there is formal designa-
tion and documentation of the hedging relationship
and the Group’s risk management objective and strat-
egy for undertaking the hedge.
•
•
•
•
For cash flow hedges, the hedged item in a
forecast transaction is highly probable and
presents an exposure to variations in cash flows
that could ultimately affect profit or loss.
The cumulative change in the fair value of the
hedging instrument is expected to be between
80-125% of the cumulative change in the
fair value or cash flows of the hedged item
attributable to the risk hedged (i.e. it is expected
to be highly effective).
The effectiveness of the hedge can be reliably
measured.
The hedge remains highly effective on each date
tested. Effectiveness is tested quarterly.
The Group uses derivative financial instruments such
as forward foreign exchange contracts to hedge its
risks associated with foreign currency fluctuations.
Such derivative financial instruments are initially
measured at fair value and subsequently remeasured
at fair value. The fair value of forward foreign exchange
contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity
profiles.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges is recognised in other comprehensive
income. The gain or loss relating to the ineffective
portion is recognised immediately in cost of sales in
the income statement.
Amounts accumulated in equity are reclassified to
inventories in the period when the purchase occurs,
matching the hedged transaction. The cash flows are
expected to occur and impact on profit and loss within
12 months from the year end.
When a hedging instrument expires or is sold, or
when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss previously
recognised in equity is retained in equity and is
recognised when the forecast transaction is ultimately
recognised in cost of sales in the income statement.
When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the income
statement.
Deferred taxation
Deferred tax assets and liabilities are recognised
where the carrying amount of an asset or liability in the
statement of financial position differs from its tax base.
Recognition of deferred tax assets is restricted to
those instances where it is probable that taxable profit
will be available against which the difference can be
utilised.
The amount of the asset or liability is determined using
tax rates that have been enacted or substantively
enacted by the balance sheet date and are expected
to apply when the deferred tax liabilities or assets are
settled or recovered. Deferred tax balances are not
discounted.
Financials
45
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
1.
Accounting policies
CONTINUED
Deferred tax assets are offset when the Group
has legally enforceable rights to set off current tax
assets against current tax liabilities and the deferred
tax liabilities relate to taxes levied by the same tax
authority on either:
•
•
the same taxable group company; or
different company entities which intend to either
settle current tax assets and liabilities on a net
basis, or to realise the assets and settle the
liabilities simultaneously, in each future period
in which significant amounts of deferred tax
assets and liabilities are expected to be settled or
recovered.
Provisions
Provision for dilapidations is made at the best estimate
of the expenditure required to settle the obligation at
the reporting date, where material, discounted at the
pre-tax rate reflecting current market assessments
of the time value of money and risks specific to the
liability. A dilapidation provision is only recognised on
those properties which are likely to be exited. Where
such property is identified the full costs expected are
recognised. This provision relates to the liability of
wear and tear incurred on the leasehold properties
and does not include any removal of shop refits as
experience indicates that liabilities do not arise for
removal of shop refits.
Foreign exchange
Transactions entered into the Group entities in a
currency other than the functional currency are
recorded at the average monthly rate prevailing
during the period. Foreign currency monetary assets
and liabilities are translated at the rates ruling at the
reporting date.
Foreign exchange differences are recognised in the
profit and loss account.
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.
Financials
46
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
1.
Accounting policies
CONTINUED
flows there is a risk that the assumptions made in the
effectiveness testing are inappropriate.
Settlements of defined benefit schemes are
recognised in the period in which the settlement
occurs.
Retirement benefits
Dividends
Dividends are recognised when they become legally
payable. In the case of interim dividends to equity
shareholders, this is when declared by the directors.
In the case of final dividends, this is when approved by
the shareholders at the AGM.
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.
Accounting estimates and
assumptions
Foreign currency hedge
accounting
Group policy is to adopt hedge accounting for cash
flows for the purchase of goods for resale. Due to the
degree of judgement in determining forecast cash
The Groups defined benefit schemes’ pension surplus/
obligation, which is assessed each period by actuaries,
is based on key assumptions including discount
rates, mortality rates, inflation, future salary costs and
pension costs. These assumptions, individually or
collectively, may be different to actual outcomes; refer
to note 23 for further details.
Estimated impairment of store
assets
The Group tests whether store assets have suffered
any impairment in accordance with the accounting
policies stated in note 1. The recoverable amount of
cash-generating units is determined on a value-in-use
calculation. The method requires an estimate of future
cash flows and the selection of a suitable discount
rate in order to calculate the net present value of cash
flows. The Group has performed a sensitivity analysis
on the impairment tests for its store portfolio using
various reasonably possible scenarios. An increase of
three percentage points in the post-tax discount rate
would have resulted in an increase to the impairment
charge of £33,000. A decrease of one percentage
point in the growth rate after year three would have
resulted in an increase to the impairment charge of
£41,000.
Estimated useful life of property,
plant and equipment
At the date of capitalising property, plant and
equipment, the Group estimates the useful life
of the asset based on management’s judgement
and experience. Due to the significance of capital
investment to the Group, variances between actual
and estimated useful economic lives could impact
results both positively and negatively.
Financials
47
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
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.
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
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;
forward foreign exchange contracts;
trade and other payables.
Financials
48
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
3.
Financial instruments – risk management
CONTINUED
A summary of the financial instruments held by category is provided below:
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
327
170
11,786
12,283
-
-
-
333
195
15,046
15,574
321
330
651
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
21,234
22,816
709
1,837
-
-
23,780
22,816
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 assets
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Financial liabilities at fair value through other comprehensive
income
Financial liabilities at fair value through profit and loss
Financial liabilities at fair value through other comprehensive
income
Total financial liabilities
Financials
49
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
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.
3.
Financial instruments – risk
management
CONTINUED
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 30
September 2017 and 1 October 2016.
Trade and other receivables are measured at
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 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 30
September 2017 the Group has trade receivables of
£327,000 (1 October 2016: £333,000).
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 £110,000.
The Directors are unaware of any factors affecting
the recoverability of outstanding balances at 30
September 2017 and previously and consequently
no provisions have been made for bad and doubtful
debts.
All cash balances and derivative financial instruments
are held with reputable banks and the Board monitors
its exposure to counterparty risk on an ongoing basis.
Financials
50
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
3.
Financial instruments – risk management CONTINUED
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of
financial liabilities:
At 30 September 2017
Trade and other payables
Derivative financial liability
Up to 3
months
£’000
21,234
824
Total financial liabilities
22,058
Between
3 and 12
months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
£’000
£’000
£’000
£’000
-
1486
1486
-
236
236
-
-
-
-
-
-
At 1 October 2016
Trade and other payables
Total
Up to 3
months
£’000
22,816
22,816
Between
3 and 12
months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
£’000
£’000
£’000
£’000
-
-
-
-
-
-
-
-
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.
Financials
51
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
3.
Financial instruments – risk management CONTINUED
Foreign Currency: Sensitivity
Analysis
A sensitivity rate of 10% represents the directors’
assessment of a reasonably possible change, based
on historic volatility.
The analysis assumes that exchange rate fluctuations
on currency derivatives that form part of an effective
cash flow hedge relationship affect the fair value
reserve in equity and the fair value of the hedging
derivatives. For foreign exchange derivatives which
have ceased to have a hedging relationship, these
movements in exchange rates impact the income
statement.
Positive figures represent an increase in profit or
equity.
Sterling strengthens by 10%
Sterling weakens by 10%
Income Statement
Equity
2017
£’000
682
(834)
2016
£’000
2017
£’000
2016
£’000
660
4,868
1,539
(806)
(5,949)
(1,880)
Year end exchange rates applied in the above analysis are US Dollar 1.34 (2016: 1.29). Strengthening and
weakening of Sterling may not produce symmetrical results depending on the proportion and nature of foreign
exchange derivatives which cease to qualify for hedge accounting.
Financials
52
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
3.
Financial instruments – risk management
CONTINUED
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 and retained earnings totalling £32,876,000 (1
October 2016: £29,776,000).
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
cash resources whenever possible.
4.
Revenue
Revenue arises from:
Sales of goods
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
157,777
159,834
Financials
53
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
5.
Expenses by nature
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
51,524
2,094
5,205
36,912
2,971
621
21,045
286
16,825
1,245
1,133
-
1,667
6,455
£’000
54,756
1,726
4,762
36,206
3,153
631
21,722
309
17,337
1,251
1,015
239
460
5,881
147,983
149,448
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
19
39
58
19
39
58
Inventories recognised as an expense
Carriage charges on purchases
Duty charges on purchases
Employee benefit expenses
Depreciation 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
Loss on Foreign Exchange
Other costs
6.
Auditor’s remuneration
The audit of the parent company
Other services
Financials
54
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
7.
Employee benefit expenses
Employee benefit expenses (including Directors) comprise:
Wages and salaries
Social security costs
Other pension costs
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
34,616
1,799
926
37,341
33,670
1,740
875
36,285
The average monthly number of employees during the period was as follows:
Sales and distribution
Directors
Administration
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
No.
3,361
7
153
3,521
No.
3,495
6
155
3,656
The average monthly number of full time equivalent employees during the period was 1,751 (2016: 1,794).
Shoe Zone plc does not employ any members of staff and has no staff costs during the period (2016: Nil).
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
949
24
973
315
17
332
868
19
887
286
-
286
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
Financials
55
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 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 Chairman, Chief
Executive Officer, Chief Financial Officer and Chief
Operating Officer.
The Board considers that each store is an operating
segment but there is only one reporting segment as
the stores qualify for aggregation, as defined under
IFRS 8. Management reviews the performance of the
Group by reference to total results against budget.
The total profit measures are operating profit and
profit for the year, both disclosed on the face of the
consolidated income statement. No differences exist
between the basis of preparation of the performance
measures used by management and the figures in the
Group financial statements.
External revenue by location of customers:
United Kingdom
Republic of Ireland
Other
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
152,562
4,991
224
154,463
5,371
-
157,777
159,834
There are no customers with turnover in excess of 10% or more of total turnover.
Non-current assets by location:
United Kingdom
Other
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
20,499
284
20,783
18,661
-
18,661
Financials
56
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
9.
Finance income and expenses
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
Finance income
Interest receivable
Total finance income
Finance expense
Other interest payable
Net interest expense on defined benefit pension scheme
Total finance expense
15
15
-
(306)
(306)
56
56
-
(190)
(190)
Financials
57
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
10.
Income Tax
Current tax expense
Current tax on profits for the period
Adjustment for (over)/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
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
1,949
(69)
1,880
(260)
1,620
2,238
12
2,250
(449)
1,801
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:
Profit for the period
Income tax expense
Profit before income taxes
Expected tax charge based on corporation tax rate of 19.5%
(1 October 2016: 20%)
Expenses not deductible for tax purposes
Effective change of rate
Adjustments to tax charge in respect of previous period
Total tax expense
Factors that may affect future tax charges:
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000.
7,883
1,620
9,503
1,853
269
(188)
(314)
1,620
8,451
1,801
10,252
2,050
29
(359)
81
1,801
The standard rate of Corporation Tax in the UK reduced from 20% to 19% with effect from 1 April 2017.
Accordingly the Company’s profits for this accounting period are taxed at an effective rate of 19.5%. The
standard rate will fall further to 17% with effect from 1 April 2020. These rates were enacted during the current
year and deferred tax balances have been stated at a rate at which they are expected to reverse.
Financials
58
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
11.
Dividends
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
Dividends paid during the year: final 14.8p, interim 3.4p
(2016: final 12.5p interim 3.3p) per share
9,100
7,900
A final dividend of 6.8p (2016: 6.8p) per share is proposed for shareholders on the register on 23 February 2018
payable on 14 March 2018 following approval at the Annual General Meeting on 1 March 2018.
Financials
59
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
12.
Property, plant and equipment
l
d
o
h
e
e
r
F
s
e
i
t
r
e
p
o
r
p
l
d
o
h
e
s
a
e
l
d
n
a
s
t
n
e
m
e
v
o
r
p
m
i
l
d
o
h
e
s
a
e
l
t
r
o
h
S
i
l
s
e
c
h
e
v
r
o
t
o
M
s
g
n
i
t
t
fi
d
n
a
s
e
r
u
t
x
F
i
l
a
t
o
T
r
e
d
n
u
s
t
e
s
s
A
n
o
i
t
c
u
r
t
s
n
o
c
£’000
£’000
£’000
£’000
£’000
£’000
Cost
At 3 October 2015
10,153
16,975
Additions
Disposals
-
-
At 1 October 2016
10,153
Additions
Disposals
-
-
913
(1,132)
16,756
1,856
(882)
At 30 September 2017
10,153
17,730
Depreciation
At 3 October 2015
Charge for the period
Disposals
At 1 October 2016
Charge for the period
Disposals
1,133
12,690
56
-
1,284
(999)
1,189
12,975
56
-
1,130
(840)
At 30 September 2017
1,245
13,265
Net book value
At 30 September 2017
At 1 October 2016
At 3 October 2015
8,908
8,964
9,020
4,465
3,781
4,285
5
19
-
24
10
-
34
5
1
-
6
6
-
12
22
18
-
30,548
2,504
(1,768)
31,284
3,281
(2,021)
32,544
25,165
1,813
(1,592)
25,386
1,770
(1,875)
25,281
7,263
5,898
5,383
-
-
-
-
125
-
125
-
-
-
-
-
-
-
57,681
3,436
(2,900)
58,217
5,272
(2,903)
60,586
38,993
3,154
(2,591)
39,556
2,962
(2,715)
39,803
125
-
-
20,783
18,661
18,688
Financials
60
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
13.
Inventories
30 September 2017
1 October 2016
Goods for resale
Shop fitting materials and other consumables
£’000
£’000
27,802
215
28,017
29,900
175
30,075
14.
Trade and other receivables
30 September 2017
1 October 2016
Trade receivables
Prepayments
Other receivables
15.
Derivative financial instruments
£’000
£’000
327
5,611
170
6,108
333
6,676
195
7,204
At the balance sheet date, details of the forward foreign exchange contracts that the Group has committed to
are as follows:
30 September 2017
1 October 2016
Derivative financial assets / liabilities
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
£’000
£’000
(709)
(1,837)
(2,546)
321
330
651
The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the
consolidated statement of financial position.
The notional principal amounts of outstanding forward foreign exchange contracts at 30 September 2017
were $71,750,000 (1 October 2016: $22,000,000). 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.
Financials
61
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
16.
Trade and other payables
30 September 2017
1 October 2016
Current
Trade payables
Social security and other taxes
Other payables
Accruals
Non-current
Accruals
£’000
£’000
11,694
1,635
326
9,921
23,576
12,845
1,488
580
10,435
25,348
30 September 2017
1 October 2016
£’000
£’000
1,742
1,742
2,316
2,316
Financials
62
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
17.
Provisions
Customer Returns
Dilapidations
Total
£’000
£’000
£’000
43
40
(43)
-
40
954
376
(238)
(183)
909
997
416
(281)
(183)
949
Customer Returns
Dilapidations
Total
£’000
£’000
£’000
40
-
40
789
120
909
829
120
949
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.
As at 1 October 2016
Additions
Amounts utilised
Amounts released
As at 30 September 2017
The provisions are aged as follows:
Current
Non-current
As at 30 September 2017
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.
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 £800,000 (1 October 2016: £800,000).
Financials
63
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
19.
Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17%
(1 October 2016: 18%).
The movement on the deferred tax account is as shown below:
At beginning of the period
Recognised in income statement:
Tax expense (note 10)
Recognised in other comprehensive income:
Actuarial (gain) / loss on defined benefit pension schemes
Cashflow hedge
At end of the period
The deferred tax has arisen due to the following:
Accelerated capital allowances
Ineligible buildings
Short term timing differences
Defined benefit pension scheme
30 September 2017
1 October 2016
£’000
£’000
1,441
260
(1,217)
377
861
(124)
449
1,113
3
1,441
30 September 2017
1 October 2016
£’000
£’000
991
(1,656)
317
1,209
861
954
(1,803)
(60)
2,350
1,441
The Group has an unrecognised deferred tax asset £893,000 as at 30 September 2017 (1 October 2016:
£1,050,000).
There are estimated losses available to offset against future capital taxable profits amounting to approximately
£5,250,000 (1 October 2016: £5,250,000).
Financials
64
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
20.
Share Capital
30 September 2017
1 October 2016
Share capital issued and fully paid
50,000,000 ordinary shares of 1p each
£’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.
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
30 September
2017
1 October
2016
30 September
2017
1 October
2016
£’000
£’000
£’000
£’000
18,652
35,191
5,486
59,329
20,040
42,359
7,071
69,470
554
872
-
471
821
-
1,426
1,292
Not later than one year
Later than one year and not later than five years
Later than five years
22.
Capital Commitments
30 September 2017
1 October 2016
Contracted for but not provided
238
416
£’000
£’000
Financials
65
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
23.
Pension costs
Defined contribution scheme
The Group operates a defined contribution pension
scheme namely Shoe Zone Worksave Pension Plan
contributions amounted to £926,000 (1 October 2016:
£932,000).
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 £2,000 (1 October
2016: £2,000).
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
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.
Amounts recognised in the balance sheet at 30 September 2017
30 September 2017
1 October 2016
Fair value of assets
Present value of funded obligations
Impact of asset ceiling
Deficit
£’000
£’000
78,065
(83,573)
(1,600)
(7,108)
79,704
(92,762)
-
(13,058)
Financials
66
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
23.
Pensions
CONTINUED
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial losses arising from changes in:
Experience Loss
Demographic assumptions
Financial assumptions
Total actuarial gain / (loss)
Impact of asset ceiling
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive expense
30 September 2017
1 October 2016
£’000
£’000
1,133
7,297
-
1,713
4,362
3,969
547
(20,003)
6,075
(1,600)
(1,217)
4,391
(15,487)
-
1,474
(6,716)
Financials
67
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
23.
Pensions
CONTINUED
The following figures are based on a full actuarial valuation performed in April 2017 and March 2017 for the
Shoe Zone and Shoefayre schemes respectively which was carried out by a qualified independent actuary. This
actuarial valuation has been updated to 30 September 2017 for the purpose of calculating the pension surplus
and disclosures in the current period.
Post retirement mortality
30 September 2017
1 October 2016
Life expectancy
Years
Years
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
90
92
88
90
90
92
88
90
30 September 2017
1 October 2016
%
2.55
3.40
2.75
2.55
3.55
%
2.35
3.20
2.40
2.35
3.35
The weighted average duration of the defined benefit obligation for the Shoe Zone scheme at 30 September
2017 is 17 years (1 October 2016 – 16.5 years).
The weighted average duration of the defined benefit obligation for the Shoefayre scheme at 30 September
2017 is 19 years (1 October 2016 – 18.5 years).
Financials
68
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
23.
Pensions
CONTINUED
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
Diversified Growth Funds
Liability Driven Investment
30 September 2017
1 October 2016
30%
10%
14%
1%
32%
13%
29%
9%
20%
1%
33%
8%
100%
100%
The actual return on the Scheme’s assets net of
expenses over the period to the review date was a gain
of £2,292,000 (1 October 2016: £6,872,000).
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.
Financials
69
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
23.
Pensions
CONTINUED
Amounts recognised in the income statement over the period
Interest cost
Expected return on assets
Amounts recognised in the statement of financial position
Fair value of assets
Present value of funded obligations
Surplus / (deficit)
Impact of asset ceiling
Net defined benefit liability
30 September 2017
1 October 2016
£’000
£’000
(1,190)
1,122
(68)
(1,658)
1,609
(49)
30 September 2017
1 October 2016
£’000
£’000
48,286
(46,686)
1,600
(1,600)
-
47,556
(50,387)
(2,831)
-
(2,831)
Financials
70
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
23.
Pensions
CONTINUED
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
Amounts recognised in other comprehensive income
30 September 2017
1 October 2016
£’000
1,170
£’000
5,263
-
878
2,397
3,044
440
(10,260)
3,275
(1,600)
(618)
2,227
(6,776)
-
272
(1,241)
30 September 2017
1 October 2016
£’000
£’000
47,556
1,122
54
(1,616)
1,170
48,286
42,899
1,609
-
(2,215)
5,263
47,556
Return on plan assets
Actuarial losses arising from changes in:
Experience losses
Demographic assumptions
Financial assumptions
Total actuarial loss
Changes in effect of asset ceiling
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive expense
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
Company contributions
Benefits paid
Actuarial gain
Fair value of assets at the end of the period
Financials
71
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 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 (gain)/loss
Defined benefit obligation at the end of the period
30 September 2017
1 October 2016
£’000
£’000
50,387
1,190
(1,616)
(3,275)
46,686
44,168
1,658
(2,215)
6,776
50,387
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
-7%
+8%
+2%
-1%
+3%
-3%
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.
Financials
72
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 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 ben-
efits 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
30 September 2017
1 October 2016
Equities
Property
Gilts/bonds
Cash
Diversified Growth Funds
Liability Driven Investment
18%
13%
13%
0%
39%
17%
17%
11%
30%
1%
33%
8%
100%
100%
The actual return on the Scheme’s assets net of
expenses over the period to the review date was a
gain of £697,000 (1 October 2016: £3,164,000). 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
30 September 2017
1 October 2016
£’000
£’000
29,779
(36,887)
(7,108)
32,148
(42,375)
(10,227)
Fair value of assets
Present value of funded obligations
Net liability
Financials
73
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
23.
Pensions
CONTINUED
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme (continued)
Amounts recognised in other comprehensive income
Loss / (gain) on plan assets
Actuarial losses / (gains) arising from changes in:
Experience
Demographic assumptions
Financial assumptions
Total actuarial gain / (loss)
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive expense
Amounts recognised in the income statement over the period
Interest cost
Expected return on assets
30 September 2017
1 October 2016
-
835
1,965
£’000
(38)
2,800
(599)
2,163
925
107
(9,743)
£’000
2,034
(8,711)
1,202
(5,475)
30 September 2017
1 October 2016
£’000
£’000
(973)
735
(238)
(1,271)
1,130
(141)
Financials
74
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 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:
Fair value of assets at the beginning of the period
Expected return on assets
Employer contributions
Benefits paid
Actuarial (loss)/gain on assets
Fair value of assets at the end of the period
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 on obligation
Defined benefit obligation at the end of the period
30 September 2017
1 October 2016
£’000
£’000
32,148
735
595
(3,661)
(38)
29,779
29,737
1,130
472
(1,225)
2,034
32,148
30 September 2017
1 October 2016
£’000
£’000
42,375
973
(3,661)
(2,800)
36,887
33,618
1,271
(1,225)
8,711
42,375
Contributions of £595,000 are expected to be made during the year ended 29 September 2018 by Shoe Zone
Retail Limited.
Financials
75
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 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
-8%
+10%
+4%
-4%
+3%
-3%
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
Cash and cash equivalents
30 September 2017
1 October 2016
£’000
£’000
11,786
11,786
15,046
15,046
Financials
76
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 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 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
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
163
924
56
595
163
930
2
472
1,738
1,567
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
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
949
24
114
1,087
868
19
105
992
Key management personnel are considered to be the Directors of Shoe Zone plc.
Financials
77
Notes to the Financial Statements
for the 52 weeks ended 30 September 2017 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.
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
Numerator
Profit for the year and earnings used in basic and diluted EPS
7,883
8,451
52 weeks ended
30 September 2017
52 weeks ended
1 October 2016
£’000
£’000
Denominator
Weighted average number of shares used in basic and diluted EPS
50,000,000
50,000,000
26.
Ultimate controlling party
The company is controlled by the Smith family albeit there is not a single controlling party.
Financials
78
Company Statement of Financial Position
as at 30 September 2017
Note
30 September
2017
1 October
2016
£’000
£’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
17
17
(1,146)
(1,129)
67,515
500
586
66,429
67,515
68,644
68,644
17
17
(979)
(962)
67,682
500
586
66,596
67,682
The company made a profit during the year of £8,933,000 (2016: £8,042,000).
The financial statements were approved and authorised for issue by the Board of Directors and were signed on
its behalf by:
Jonathan Fearn
Chief Financial Officer
Date: 9 January 2018
Registered Number 08961190
Financials
79
Company Statement of Changes in Equity
for the 52 weeks ended 30 September 2017
At 3 October 2015
Profit for the period
Total comprehensive income for the period
Dividends paid during the year (note 6)
Total contributions by and distributions to owners
At 1 October 2016
Profit for the period
Total comprehensive income for the period
Dividends paid during the year (note 6)
Total contributions by and distributions to owners
Share
capital
Merger
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
500
586
66,454
67,540
-
-
-
-
-
-
-
-
500
586
-
-
-
-
-
-
-
-
8,042
8,042
(7,900)
(7,900)
66,596
8,933
8,933
(9,100)
(9,100)
66,429
8,042
8,042
(7,900)
(7,900)
67,682
8,933
8,933
(9,100)
(9,100)
67,515
At 30 September 2017
500
586
Share capital comprises nominal value of shares subscribed for.
The merger reserve has arisen as a result of the application of merger accounting to the group reorganisation of
26 March 2014.
Retained earnings are all other net gains and losses and transactions with owners (e.g. dividends) not recognised
elsewhere.
Financials
80
Notes to the Company Financial Statements
for the 52 weeks ended 30 September 2017
1.
Accounting policies
Basis of preparation
Investments
Investments held as fixed assets are stated at cost,
less any provision for impairment.
The Company’s financial period is 30 September 2017.
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 £8,933,000 (1 October 2016: £8,042,000)
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.
Financials
81
Notes to the Company Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
2.
Fixed Asset Investments
Cost
Impairment of investment in Castle Acres Development Limited
Total
30 September 2017
1 October 2016
£’000
£’000
70,586
(1,942)
68,644
70,586
(1,942)
68,644
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 Non-trading company
Shoe Zone Retail Limited
England & Wales Trading company
Zone Property Limited
England & Wales Property holding company
Zone Group Limited
England & Wales Non-trading company
Shoe Zone (Ireland) Limited
England & Wales Non-trading company
Shoe Zone Pension Trustees Limited
England & Wales Non-trading company
Stead & Simpson Limited
England & Wales Non-trading company
Zone Footwear Limited
England & Wales Non-trading company
Zone Retail
England & Wales Non-trading company
Walkright Limited
England & Wales Non-trading company
100% owned by
company
100% owned by
company
100% owned by
company
100% owned by
company
100% owned by Shoe
Zone Retail Limited
100% owned
by Castle Acres
Development Limited
100% owned by Zone
Group Limited
100% owned by Zone
Group Limited
100% owned by Zone
Group Limited
100% owned by Zone
Group Limited
The registered address of all of the above subsidiaries is Haramead Business Centre, Humberstone Road,
Leicester, LE1 2LH.
Financials
82
Notes to the Company Financial Statements
for the 52 weeks ended 30 September 2017 CONTINUED
3.
Debtors
Prepayments
30 September 2017
1 October 2016
£’000
17
£’000
17
4.
Creditors: amounts falling due within one year
Amounts owing to group undertakings
Accruals
5.
Share capital
Allotted, called up and fully paid:
50,000,000 ordinary shares of 1p each
30 September 2017
1 October 2016
£’000
1,136
10
1,146
£’000
973
6
979
30 September 2017
1 October 2016
£’000
£’000
500
500
500
500
6.
Reserves
Merger reserve
Profit and loss account
At 1 October 2016
Profit for the financial period
Dividends paid during the year
At 30 September 2017
7.
Related party transactions
£’000
586
-
-
586
£’000
66,596
8,933
(9,100)
66,429
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.
Financials
83
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Kent
BR3 4TU
Solicitors
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London
EC2A 2EW
Corporate broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Directors and Advisers
Directors
A E P Smith
N J Davis
J C P Smith
J L Fearn (appointed 7 Mar 2017)
J W Sharman
C J Caminada
M J Collins
Secretary
L S Hennell
Registered office
Haramead Business Centre
Humberstone Road
Leicester
LE1 2LH
Auditor
BDO LLP
Regent House
Clinton Avenue
Nottingham
NG5 1AZ
Bankers
HSBC Bank plc
2-6 Gallowtree Gate
Leicester
LE1 1DA
Shareholder Information
84
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 Thursday, 1 March 2018 at 9:30am to consider and, if thought fit,
pass the resolutions set out below. Resolutions 1 to 13 will be proposed
as ordinary resolutions and Resolutions 14 to 16 will be proposed as
special resolutions.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
To receive and adopt the Company’s annual
accounts for the financial period ended 30
September 2017 and the associated reports of
the Directors of the Company and the auditors
of the Company.
To declare a final dividend of 6.8p per ordinary
share for the financial period ended 30
September 2017.
11.
12.
To re-elect Charles Smith as a Director.
To re-elect Anthony Smith as a Director.
To re-elect Nick Davis as a Director.
To elect Jonathan Fearn as a Director.
To re-elect Charlie Caminada as a Director.
To re-elect Jeremy Sharman as a Director.
To re-elect Malcolm Collins as a Director.
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 2019.
To authorise the Directors of the Company to
determine the remuneration of BDO LLP as
auditors of the Company.
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.
c.
make political donations to political
organisations other than political parties,
not exceeding £50,000.00 in total; and
incur political expenditure, not exceeding
£50,000.00 in total,
such authority to expire on the earlier of 31
March 2019 and the conclusion of the annual
general meeting of the Company to be held in
2019. 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.
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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:
a.
up to an aggregate nominal amount of
£166,666.00; and
14.
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,
provided that this authority shall expire on the
earlier of 31 March 2019 and the conclusion of
the annual general meeting of the Company to
be held in 2019, 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.
That, subject to the passing of resolution 13
proposed at the annual general meeting of
the Company convened for 1 March 2018
(‘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
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Notice of Annual General Meeting CONTINUED
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
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 matters; 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 £25,000.00,
and shall expire on the earlier of 31 March
2019 and the conclusion of the annual general
meeting of the Company to be held in 2019,
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.
That, subject to the passing of resolution 13
proposed at the annual general meeting of
the Company convened for 1 March 2018
(‘Resolution 13’) and in addition to any authority
granted pursuant to resolution 14 proposed at
the annual general meeting of the Company
convened for 1 March 2018, 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
15.
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:
a.
limited to the allotment of equity securities
and the sale of treasury shares for cash
up to an aggregate nominal amount of
£25,000.00; and
b.
used only for the purposes of financing
(or refinancing, if the authority is to be
used within six months after the original
transaction) a transaction which the
Directors of the Company determine to be
an acquisition or other capital investment
of a kind contemplated by the Statement
of Principles on Disapplying Pre-Emption
Rights most recently published by the Pre-
Emption Group prior to the passing of this
resolution,
and shall expire on the earlier of 31 March
2019 and the conclusion of the annual general
meeting of the Company to be held in 2019,
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.
That, the Company be and is hereby generally
authorised pursuant to section 701 of the
Companies Act 2006 (the ‘Act’) to make market
purchases (within the meaning of section 693(4)
of the Act) of ordinary shares of £0.01 each in
the capital of the Company (‘Ordinary Shares’)
on such terms and in such manner as the
Directors of the Company may from time to time
determine, provided that:
16.
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a.
b.
the aggregate nominal amount of such
Ordinary Shares hereby authorised to be
acquired by the Company shall not exceed
£50,000.00;
the price that may be paid by the Company
for any of its Ordinary Shares shall not be
less than £0.01, being the nominal value
of each Ordinary Share, and shall not be
greater than the higher of, exclusive of
expenses:
i.
an amount equal to 105% of the
average trading price of the Ordinary
Shares as derived from the middle
market quotations for an Ordinary
Share on the London Stock Exchange
Daily Official List for the five trading
days immediately preceding the date
on which a share is contracted to be
purchased; and
ii.
the higher of the price of the last
independent trade and the highest
current independent bid on the trading
venue where the purchase is carried
out,
and unless previously revoked, renewed, extended or
varied, the authority hereby conferred shall expire on
the earlier of 31 March 2019 and the conclusion of the
annual general meeting of the Company to be held in
2019, save that the Company may before such expiry
make an offer or enter into an agreement which would
or might require such purchases of Ordinary Shares
to be carried out after such expiry and the Directors
may carry out such purchases in pursuance of such an
offer or agreement as if the power conferred hereby
had not expired.
By order of the Board
Lee S Hennell
Company Secretary
Date: 9 January 2018
Registered Office
Haramead Business Centre
Humberstone Road
Leicester
Leicestershire
LE1 2LH
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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,
Link Asset Services (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.
If you are outside the United Kingdom, please call +44
371 664 0300. 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.
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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 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).
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 27
February 2018 (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.
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8.
Voting rights
As at 10 January 2018 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 10 January 2018 were
50,000,000 votes.
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