Annual Report & Accounts
Strategic Report
1
This document is important and requires your
immediate attention. If you are in any doubt as to
the action you should take, you should contact an
appropriate independent advisor authorised under
the Finanical Services and Markets Act 2000 (as
amended) immediately. If you have sold or otherwise
transferred all of your shares in Shoe Zone plc you
should forward this document to the purchaser or
transferee, or to the stockbroker, bank or other agent
through whom the sale or transfer was affected for
transmission to the purchaser or transferee.
Contents
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
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3
10
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19
26
28
33
41
46
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48
49
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Financial Highlights
REVENUE
(2017: £157.8M)
£160.6m
FINAL DIVIDEND
(2017: 6.8P)
8.0p
STATUTORY PBT
(2017: £9.5M)
SPECIAL DIVIDEND
(2017: NIL)
£11.3m
8.0p
NET CASH
(2017: £11.8M)
£15.7m
TOTAL DIVIDEND
(2017: 10.2P)
19.5p
PRODUCT GROSS MARGIN
(2017: 63.2%)
TOTAL YIELD
(BASED ON SHARE PRICE 29/9/18)
62.9%
11.3%
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Chief Executive’s report
I am pleased to report that 2018 has been another
successful year for Shoe Zone. The strength of the core
business model, combined with the focus on growth
through the Big Box roll out and Digital channels, gives me
confidence that Shoe Zone will continue to deliver positive
results and returns for shareholders in the future.
The business delivered revenue growth of 1.8% at £160.6m (2017: £157.8m) and continues
to generate cash effectively with cashflow from operations up 7.2% to £15.0m (2017: £14.0m)
from a robust debt free balance sheet.
Statutory profit before tax has increased 18.4% from £9.5m to £11.3m, the highest annual
performance since flotation in 2014, reflecting strong performance throughout the business.
Diluted earnings per share increased 20.7% from 15.8p to 19.0p.
Dividends
The board remains committed to delivering positive dividend growth to shareholders. In recent
years, the strategy has been to pay out approximately 60% of post-tax earnings as a normal
dividend and any surplus cash above £11m as a special dividend.
For the year ended 29 September 2018, the board is proposing to pay out 60% of post-tax
earnings as a normal dividend. This results in a final dividend of 8p per share (2017: 6.8p),
giving a total dividend for the year of 11.5p (2017: 10.2p) per share.
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Chief Executive’s Report CONTINUED
In addition, I am pleased to confirm a special dividend of 8p per share, returning £4m of
surplus cash to shareholders.
The dividends will be paid to shareholders on the register on 1 March 2019, payable on 20
March 2019 if approved at the Annual General Meeting which will be held on 7 March 2019.
The shares will go ex-dividend on 28 February 2019.
Strategy
The Shoe Zone strategy has three key objectives
• Growth through Big Box
• Growth through Operational Excellence
• Growth through Digital
Growth through Big Box
The Big Box portfolio has expanded by 10 stores to a total of 19 stores operational at year
end (25 stores operational by 31 December 2018). Following the successful trial, the concept
now provides a clear path for growth through diversification into out of town retail and a
proposition attractive to a more affluent customer base. The pipeline of new store openings
is well developed and it is anticipated that this will further grow and accelerate during 2019,
with a target of 20 stores opening during the coming calendar year. Big Box stores are already
delivering a significant contribution to the Group’s revenue and profits with £7.1m of revenue
and £0.4m of profit contribution in the period, representing 4.4% of total revenue and over
2.3% of branch cash contribution during 2018.
The profitability and payback of the Big Box stores continue to be a focus for the business.
During 2018 we redesigned the in-store fixtures so that they can be used across the full Shoe
Zone estate. The new ‘Unity’ equipment has resulted in capital expenditure savings of over
£50k per Big Box.
During the year we also added new brands into the Big Box range. Wrangler and Crocs
have now joined Skechers and Clarks amongst others, to provide a premium offering that
complements the core own-brand Shoe Zone styles. In the Spring Summer range for 2019
we will also offer an own label premium range ‘Lilley and Skinner’ in Ladies shoes, which will
provide a higher gross margin.
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Chief Executive’s Report CONTINUED
Growth through Operational Excellence
Systems
During 2018 we successfully rolled out new till hardware and software upgrades which
improved the speed of transactions in store, reduced the need for paper forms and increased
digital integration in store. Customers wishing to join the email database are now able to enter
their own details using the new customer facing touch screens.
The software upgrades further enhance our already market leading systems, all of which are
programmed and managed by our in house IT department. During 2019 we will bring the
Group’s warehouse management system in house meaning that all operational systems will be
controlled within Shoe Zone.
Systems across the business are fully integrated so that we have a single view of stock across
retail, the warehouse and digital. We can also identify when we need to recall stock from stores
with low sales or a fragmented size range and consolidate and reallocate to better stores. On
average we recall 30,000 pairs per week.
During the past 12 months we have also further enhanced our stock and picking systems
to enable consolidation of digital and main warehouse stock therefore increasing picking
efficiency and supporting flexibility of tasks within the warehouse teams. Within our Distribution
Centre, we hold on average 1,000,000 pairs with throughput of 800,000 pairs per week. We
achieved a pick accuracy of 99.96% in 2018.
Product
We remain committed to offering our customers the best possible value and have maintained
key price points for our core value lines. We have increased the number of lines in “Multi-Buy”
deals (e.g. ‘2 for £20’), which alongside on-going range improvements has increased average
transaction value by 4.7% during the year to £12.98.
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Chief Executive’s Report CONTINUED
Direct sourcing continues to grow with footwear orders placed directly with overseas factories
increasing to 85.0% (2017: 84.7%) of total footwear orders. Working closely with our source
of manufacture has helped maintain high gross product margins as well as improving
communication and control across the supply chain. A demonstration of our commitment to
quality is shown by our complaints level of less than 1%, which is half of the industry average.
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 low levels
of markdown at 7.9% (2017: 7.6%).
Store Portfolio
We ended the year operating from 492 stores having opened 16 and closed 20 during the
period. 10 of the openings were the continued roll out of Big Box and the remaining six were
the new Unity Town Centre format.
The core estate continues to be invested in and refreshed. Total capital spend of £5.1m
included the 16 new openings, 23 full refits, continued rebranding of the estate and the roll out
of new tills. This capital outlay was partially offset by £1.5m in rent free during the first year of
opening.
The focus on managing property costs has resulted in rents at the lease renewal date falling by
23.1% in the 12 month period (2017: reduction of 24.5%) delivering £431k of annual savings.
We expect that this trend will continue as supply in the retail property market continues to
outstrip demand.
The business continues to benefit from a flexible portfolio with an average lease length of 2.1
years which gives us significant opportunity to respond to changes in shopping patterns in any
retail locations at short notice.
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Chief Executive’s Report CONTINUED
Growth through Digital
Digital continues to be a key area of focus and growth for the business. Our market leading
customer offer provides the choice of ordering on-line or in-store, and to have products
delivered free of charge, with no minimum spend limit, or to click and collect from a Shoe Zone
store. Returns can be made either free to store or our Distribution Centre.
Digital revenue has increased 19.9% year on year to £9.8m (2017: £8.2m) representing 6.1%
of revenue and now delivers over £2.6m (2017: £2.0m) profit contribution before Head Office
apportioned costs, representing 23.1% of total profit.
Shoezone.com has had another successful year and we continue to see the gradual shift
towards mobile devices. Mobile and tablet visits now represent 79.0% (2017: 78.9%) of all
website visits.
We continue to focus on engaged customers and emails sent have increased by 26.2%,
resulting in a sales increase of 18.8% on the prior year, now accounting for 7.8% of all site
revenue. The new in-store tills rolled out as part of the Operational Excellence strategy
allow customers to enter their own email addresses using the customer facing touch screen,
therefore reducing the time required to register new customers.
Overall conversion rates remained broadly static at 4.13% over the full year (2017: 4.18%). The
‘mobile first’ design and implementation continues to deliver strong results with an increase in
conversion to 3.68% (2017: 3.55%), however desktop conversion has fallen marginally.
In addition to growth in sales, we continue to manage the profitability of our Digital channel.
During 2018, we have introduced an integrated management structure under our new
Operations Director, aligning both Retail and Digital warehouse activities and consolidation of
stock into single pick locations.
Digital purchase returns continue to be low at less than 11% of online sales with 90% of these
returns being taken back to store rather than the Distribution Centre.
Social Responsibility
We are incredibly proud of all of our team’s effort in achieving these results and want to thank
them for their on-going commitment and hard work.
During 2018 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 £650,000 for our chosen charity in the last five years.
We recognise the impact of our activities on the environment and recycle as much of our waste
as possible. We are actively reducing the use of plastic within our stores and the delivery lorries
return used cardboard, plastics, fluorescent lighting tubes and obsolete equipment for reuse or
recycling.
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Chief Executive’s Report CONTINUED
In our refits we are now using LED lighting in order to reduce energy consumption and are also
working with the shoe manufacturers to reduce the use of single use plastics in packaging of
new products.
We are also transitioning our car fleet to hybrid cars wherever possible.
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 have continued to manage the store portfolio having opened six new Big Box stores and
refitted a further four Shoe Zone stores since year-end. In total, we are targeting to have 45 Big
Box stores open by December 2019 of which there are currently 12 with provisional opening
dates. A further 35 full refits are planned for the remainder of the year.
We expect the business to continue to have strong cash conversion and anticipate capital
expenditure will continue at current levels as we maintain the standard of the store portfolio.
Shoe Zone has made a solid start to the year and is trading ahead of previous market
expectations. We are making good progress against our strategic objectives and the Board
remains positive about the outlook for the remainder of the year.
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Financial Review
In the 52 weeks to 29 September 2018,
Profit before Tax increased from £9.5m
to £11.3m, an increase of 18.4%. This is
due to strong trading in all areas of the
business, supported by stability in the
exchange rate across the year. Earnings
per share increased by 20.7% to 19.0p
(2017: 15.8p).
Revenues increased by 1.8% to
£160.6m (2017: £157.8m). This reflects
solid trading throughout the portfolio
supported by digital growth and new
openings of Big Box stores.
Overall store numbers reduced by a net
four branches to 492 at the year end
(2017: net 14 branches closed leaving a
total of 496).
Digital growth has proved strong with
revenues increasing by 19.9% (2017:
34.5%), and this has now developed to
account for 6.1% of total sales (2017:
5.3%). Profit contribution from Digital
increased to £2.6m (2017: £2.0m) in the
year.
Product gross margin remained strong
at 62.9% (2017: 63.2%), reflecting a
continued focus in direct sourcing,
successful negotiations with suppliers
and management of write downs.
The slight fall year on year reflects an
increase in multi buy promotions for
example 2 for £20, and the impact of
lower branded margins.
Operating expenses decreased to
£19.1m (2017: £20.3m). Administration
expenses decreased by £1.4m primarily
due to the reduced impact of foreign
exchange differences and a reduction
in professional charges offset by
planned increases in digital operational
costs. Distribution Costs remained
broadly flat year on year with staff
cost increases being partially offset by
warehouse efficiencies.
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Financial Review CONTINUED
The effective rate of corporation tax for the year was 19.4% (2017: 19.8%).
During the year capital expenditure was £5.0m (2017: £5.1m). This included on-going
investment in the portfolio, opening 16 new stores, 23 refits, and the roll out of a new till
system across all stores.
The pension liability has fallen by £0.8m from £7.1m to £6.3m due mainly to an increase in the
yield performance of corporate bonds.
The derivative financial asset of £1.4m, compared to a £2.5m liability in prior year, represents
the mark to market valuation of the derivative hedges in place at the end of the financial year.
As outlined in the annual 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 £15.0m cash from operations, a year on year increase of £1.0m
resulting in a net cash position of £15.7m (2017: £11.8m) 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 8.0p (2017: 6.8p) per share, resulting in a total
dividend for the year of 11.5p (2017: 10.2p) per share. In addition, the closing cash position
of £15.7m gives surplus cash of £4.0m which will be returned to shareholders in the form of a
special dividend of 8p 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.
The dividends will be paid to shareholders on the register on 1 March 2019, payable on 20
March 2019 if approved at the Annual General Meeting to be held on 7 March 2019. The
shares will go ex-dividend on 28 February 2019.
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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
6.1%
2017: 5.3%
62.9%
2017: 63.2%
£15.7m
2017: £11.8m
Online sales as a
percentage of total
sales. Online sales
exclude orders placed
in store.
The online participation increased
by 80 basis points to 6.1% (2017:
5.3%). This performance reflects
the growth of the Shoezone
website sales and the offering on
eBay and Amazon.
Product Gross
Profit expressed
as a percentage of
revenue.
Product Gross Margin fell slightly
by 30 basis points to 62.9% (2017:
63.2%). This maintenance of a high
Gross Margin reflects the on-going
focus on direct sourcing which was
85% of purchases. The slight fall
year on year reflects an increase in
multi buy promotions for example
‘2 for £20’.
EARNINGS PER SHARE
GROWTH
RENTAL % OF TURNOVER
19.0p
2017: 15.8p
12.6%
2017: 12.7%
The movement in
Earnings per Share.
Store rent as a
percentage of
turnover
Earnings per Share increased to
19.0p (2017:15.8p), an increase of
20.7%.
The rental % of turnover has
reduced from 12.7% to 12.6%
reflecting the on-going focus on
rent negotiations.
Cash held by the
Group at the period
end.
We finished the year with a healthy
cash balance of £15.7m
(2017:£11.8m).
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Principal Risks and Uncertainties
We set out below the principal risks and uncertainties that the Directors consider could impact
the business. The list highlights the key risks but there may be other risks to which the business
is exposed. The list is not intended to be exhaustive.
Market and Competition
The value footwear retail market is highly competitive, particularly with respect to price,
product selection, quality and store location. The markets the Group operates in are, on a
comparative basis, free and open markets with low barriers to entry. The Group competes at
national and local levels with a diverse group of retailers of varying sizes and covering different
product categories and geographic markets. These competitors include local, national and
global retailers, including other specialist footwear retailers, supermarkets, online retailers
and local independent retailers. Some competitors may have greater market presence, name
recognition, financial resources and economies of scale or lower cost bases than the Group
and may be able to withstand, or respond more swiftly to, changes in market conditions, any
of which could give them a competitive advantage over the Group. In addition, like many
other retailers, because the Group does not have exclusive rights to many of the elements
that comprise its in-store experience and product offering, competitors may seek to copy
or improve on the Group’s business strategy, which could significantly harm the Group’s
competitive position.
The Board monitors competitor activities and discusses them on a weekly basis. The Group
has adopted a strategy which intends to differentiate itself from its closest competitors and
endeavours to price match on any cross over product lines. Maintaining price competitiveness
is a key focus of the business.
Identifying fashion and trends
The success of the Group’s business depends in part on its ability to innovate and to identify,
anticipate and respond to evolving trends in consumer preferences, 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.
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Principal Risks and
Uncertainties CONTINUED
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, currency exchange rates, interest and tax rates, may adversely affect the
disposable income of the Group’s customers, which could result in lower sales. In particular,
in times of economic uncertainty or recession or lack of consumer confidence, there may be a
decrease in discretionary purchases generally, which could have a material adverse effect on
the Group’s business, results of operations and financial condition. Global economic conditions
and uncertainties may also impact the Group’s manufacturers and suppliers in ways that could
adversely affect the Group’s business.
The Board considers very carefully the economic climate in planning its product ranges and
pricing structure. As the business is focussed on offering low prices it is more resilient to
reductions in consumer expenditure than other footwear retailers.
Strategic Report
Strategic Report
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15
Principal Risks and
Uncertainties CONTINUED
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 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 is 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.
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
Strategic Report
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Principal Risks and
Uncertainties
CONTINUED
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.
The business has developed and maintains a Business Continuity Plan for the unlikely scenario
of long term 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
Strategic Report
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Principal Risks and
Uncertainties CONTINUED
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, anti-spam 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.
Brexit
Shoe Zone continues to review the potential risks and opportunities that Brexit may pose or
offer in times of continued uncertainty. Within the Shoe Zone product range, less than 2.5%
of all stock is purchased from within the EU. The duty paid on non-EU purchases is in line with
WTO terms and therefore the risk of a no-deal Brexit forcing the UK to adopt these terms is
minimal.
Therefore there are two remaining risks around imports of finished products from the far east;
a period of instability of the Sterling Dollar exchange rate or an increase in the time taken for
imports to clear customs. Shoe Zone has already taken steps to mitigate these risks.
Hedging policy and processes have been reviewed and Shoe Zone are hedged at the required
levels for the full 2018/19 financial year.
Imports of finished goods from the Far East are landed in the UK, primarily at Felixstowe, which
focus on non-EU arrivals. Logistics are managed by a third party provider who have Authorised
Economic Operator (AEO) status to minimise delays for goods passing through customs and
the in-house Shipping Team are liaising very closely with the logistics providers own working
group to ensure we can address any issues as they arise.
The strategic report was approved by the Board.
On behalf of the Board
Nick Davis
Chief Executive Officer
Date: 8 January 2019
Jonathan Fearn
Chief Financial Officer
Date: 8 January 2019
Strategic Report
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Corporate Governance
Statement
Chairman’s Statement
It is with pleasure that I take the opportunity to outline the approach taken to Corporate
Governance within Shoe Zone plc.
The Board is committed to maintaining high standards of corporate governance and, with
effect from 1 September 2018, the Board has adopted the Quoted Companies Alliance’s (QCA)
Corporate Governance Code for small and mid-size quoted companies (the “Code”).
The Code was revised in April 2018 to meet the new requirements of AIM Rule 26 and sets out
ten broad principles of corporate governance, states what are considered to be appropriate
corporate governance arrangements for growing companies and requires companies to
provide an explanation about how they are meeting the principles through certain prescribed
disclosures.
The Chairman leads the Board and is responsible for its overall effectiveness in directing the
Company. He manages the Board agenda and ensures that all Directors receive accurate,
timely and clear information and effectively contribute their various talents and experience in
the development and implementation of the Company’s strategy. He ensures that the nature
and extent of the significant risks the Company is willing to embrace in the implementation
of its strategy are challenged and determined by the Board. The Chairman is responsible
for ensuring that the Board implements, maintains and communicates effective corporate
governance processes and for promoting a culture of openness and debate designed to foster
a positive governance culture throughout the Company.
The Board has considered how each principle is applied and provides below an explanation of
the approach taken in relation to each and how they support the Company’s medium to long-
term success.
The Board considers that it does not depart from any of the principles of the QCA Code and
there have been no corporate governance matters in the previous year.
Anthony Smith
Chairman
Date: 8 January 2019
Governance
Governance
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19
Corporate Governance
Statement
CONTINUED
THE TEN PRINCIPLES OF THE QCA CODE
Establish a strategy
and business model
which promote
long-term value for
shareholders.
GROWTH1
DELIVER
GROWTH2
DELIVER
Seek to understand
and meet shareholder
needs and
expectation.
• Shoe Zone is a value retailer of shoes and
associated products. Its strength is based
on three pillars;
• Growth through Big Box and Digital.
• Driving value through the Shoe Zone
retail estate by being the lowest cost
end to end operator in the market.
• Excellence in retail operations through
committed people serving excellent
value products to customers whom we
really care for.
• This business model has been developed
over many years and has proved successful
in both profit performance and cash
generation.
• The Chief Executive Officer and the Chief
Financial Officer are primarily responsible
for maintaining dialogue with shareholders,
supported by the Company’s broker and
financial PR advisers.
• The CEO and CFO hold both one-to-one
and group meetings with shareholders
and the investing community following the
announcement of the annual and interim
results. The Chairman also attends a
number of these group meetings.
• Following these meetings, the Company’s
brokers provide independent and
anonymised feedback to the Board on
shareholders’ views. The Company’s
financial PR advisers also provide
anonymised feedback to the Board on
views of analysts.
Governance
20
Corporate Governance
Statement
CONTINUED
• Shoe Zone takes its wider stakeholder
population into account within its decision
making processes.
• Examples of this are:
• The Shoe Zone supplier manual outlines
minimum working practices that we
expect from all our suppliers.
• The buying team, and in some instances
the CEO, visit every factory that supplies
us with manufactured product.
• We hold employee forums for the
Distribution Centre and in particular,
prior to changing shift patterns
and afterwards to understand the
implementation and any on-going issues
that may have been caused.
• Prior to the implementation of new
uniforms, we trialled them over a
number of stores and feedback was
sought from employees before the
final design and materials had been
approved.
• We are working with suppliers to eliminate
plastic materials from the supply chain
as far as possible. Most recently we have
replaced plastic ‘shoe shapers’ with
biodegradable cardboard ones.
• We collect all plastic and cardboard waste
from our stores. Where possible, we reuse
or recycle cardboard waste and recycle
plastic waste through a third party.
• Shoe Zone is committed to eliminating all
forms of slavery and the company website
outlines the actions we are taking to
ensure that we are supportive of the wider
movement.
• The key risks and the approach taken to
mitigate these is detailed in the Annual
Report and Accounts. The key risks
identified are listed in the Annual Report
elsewhere.
Governance
21
Take into account
wider stakeholder and
social responsibilities
and their implications
for long term success.
Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation.
GROWTH3
DELIVER
GROWTH4
DELIVER
Corporate Governance
Statement CONTINUED
• The board consists of four Executive Directors
and three Non-Executive Directors.
• The Executive Chairman is Anthony Smith,
who is also the major shareholder with 27.79%
shareholding.
• The Non-Executive Deputy Chairman is Jeremy
Sharman, who is a shareholder and is also chair of
the Audit Committee.
• The remaining Executive board members are
Nick Davis, CEO; Charles Smith, COO; Jonathan
Fearn, CFO. Charles Smith is the second largest
shareholder with 22.22%.
• The remaining Non-Executive Directors are
Charlie Caminada and Malcolm Collins. Charlie is
Chairman of the Remuneration Committee.
• Within the Executive Directors, Anthony Smith,
Nick Davis and Jonathan Fearn are all full time
Directors. Charles Smith is employed for three
days a week.
• The Non-Executive directors are selected for the
specific skills and expertise that they contribute
to the business. This ranges from experience of
investment banking, investor relations and shoe
market experience.
• Please refer to the Investor Relations section of
the website for further details of the Directors.
• The Executive Board consists of the two main
shareholders, Anthony and Charles Smith, Nick
Davis (CEO) and Jonathan Fearn (CFO).
• Within the organisation there is also an Executive
Committee and a wider management team that
has functional responsibility for the business.
• The board is constantly reviewing its own
performance and that of the Executive
Committee including its relevance and
constitution as the business develops and
grows. We look to identify those individuals who
excel in their role and develop them through
appointment to the Management Team and
measure their success as part of the group and
the wider group.
Governance
22
Maintain the
board as a well-
functioning,
balanced team led
by the chair.
Ensure that
between them the
directors have the
necessary up-to-
date experience,
skills and
capabilities.
MAINTAIN
A DYNAMIC
MANAGEMENT
FRAMEWORK5
FRAMEWORK6
MAINTAIN
A DYNAMIC
MANAGEMENT
Evaluate board
performance
based on clear and
relevant objectives,
seeking continuous
improvement.
MAINTAIN
A DYNAMIC
MANAGEMENT
FRAMEWORK7
Corporate Governance
Statement CONTINUED
Promote a
corporate culture
that is based on
ethical values and
behaviours.
MAINTAIN
A DYNAMIC
MANAGEMENT
FRAMEWORK8
Maintain
governance and
processes that
are fit for purpose
and support good
decision-making
by the board.
Communicate
how the company
is governed and
its performance
by maintaining
a dialogue with
shareholders and
other relevant
stakeholders.
MAINTAIN
A DYNAMIC
MANAGEMENT
FRAMEWORK9
TRUST10
BUILD
• The company seeks to promote an open culture
where all employees feel that they contribute
to the ongoing success of the business. We
recognise those employees that particularly
demonstrate these behaviours through both
performance based rewards, such as in-store
competitions, and non-performance based
rewards such as ‘Unsung Hero of the Month’.
• We also operate a non-contractual bonus scheme
that rewards all employees, with service greater
than one year, based on the overall company
profit performance.
• The board meets around six times per year.
Agendas and papers are issued in advance of
the meeting in order to allow each member to
prepare thoroughly. All Non-Executive Directors
are expected to attend these meetings.
• The Remuneration Committee and Audit
Committee meet at least twice per year and their
reports are contained in the Annual Report and
Accounts.
• Draft minutes are circulated for all meetings and
following feedback, approved by the various
boards at their next meeting.
• Non-Executive Directors are also called on
where their expertise or advice would benefit
the company, such as selection of a new audit
partner, product range reviews or the selection of
other advisors.
• Management meetings are also held periodically
with other key senior members of the company
who hold functional responsibility. Information
is disseminated through this group to the wider
business and updates and feedback sought on
key topics and areas.
• All shareholders are invited to make use of
the Group’s Annual General Meeting to raise
any questions regarding the management or
performance of the Company.
• Following the announcement of results
the company will also offer the chance for
shareholders to meet the Chairman, CEO and
CFO to discuss performance and future plans.
• From time to time we also offer the opportunity
for potential investors to visit a local store or
Head Office in Leicester.
• All voting results for the Annual General Meeting
on resolutions are available on the website and
the reports of Board Committees are set out in
the Annual Report and Accounts each year.
Governance
23
Corporate Governance
Statement CONTINUED
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.
The Board is committed to maintaining high standards of corporate governance and to being
transparent about its arrangements.
The key responsibilities of the Board are:
• the overall management of the Group;
• approval of corporate strategy;
• approval of income, expenditure and capital budgets;
• oversight of operations ensuring adequate systems of internal control and risk
management are in place;
• to review business performance against the objectives that it has set;
• to monitor the integrity of the financial statements and approve the annual and interim
reports;
• approval of the dividend policy;
• determining changes to the structure and composition of the Board;
• determining remuneration policy;
• approval of communications with shareholders and the market.
Details of each of the Directors is given in their biographies on pages 26 and 27.
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 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.
Governance
24
Corporate Governance
Statement
CONTINUED
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 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 28.
Governance
25
Board of Directors
ANTHONY SMITH
Chairman
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 Chairman in June 2016. Anthony is a
founder and Trustee of the Shoe Zone Trust.
NICK DAVIS
Chief Executive Officer
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 was appointed Chief Executive Officer in 2016.
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 a
group of BMW dealerships and is a Board member
and Trustee of three charities.
JONATHAN FEARN
Chief Financial Officer
Jonathan joined Shoe Zone as Chief Financial Officer in 2016 and
has subsequently gained responsibility for IT, Merchandising and
Shipping. Jonathan has extensive experience within Strategic and
Retail Finance, primarily within Celesio UK, including a period as
a Head of Region for Lloydspharmacy Retail and prior to that with
PowerGen UK. Jonathan holds a BSc (Hons) in Managerial and Ad-
ministrative Studies from Aston University and is CGMA qualified.
Governance
26
CHARLES SMITH
Chief Operating Officer
Charles started at Shoe Zone in 1998, joining the Board of Directors in 2001.
As Chief Operating Officer his main areas of responsibility are Retail and HR.
Charles is a founder and Trustee of the Shoe Zone Trust. Outside of Shoe Zone
he is a Trustee of three other charities.
JEREMY SHARMAN
Non-Executive Deputy Chairman
Jeremy Sharman has over 25 years of experience acting as a
Non-Executive Director on the boards of various companies,
primarily in the consumer and internet sectors. He was one
of the founding partners of HgCapital where he served from
1990 to 2005. He now acts as an independent investing
director. He has served as chairman or non-executive director
on the boards of Premier Marinas, Park Resorts, Hoseasons,
Villarenters.com, Travelsphere, Page and Moy and Belfast
International Airport amongst others. Jeremy took up the post
of Non-Executive Director at Shoe Zone in 2012. Jeremy holds
an MA in Mathematics from Oxford University. He is founder
and chairman of two charities and chairman of Witham Hall
and Dolphin Preparatory Schools.
CHARLIE CAMINADA
Non-Executive Director
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).
MALCOLM COLLINS
Non-Executive Director
Malcolm Collins 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 Womens Footwear Buyer.
Governance
27
Remuneration Report
This is the Company’s fifth Directors’ Remuneration Report
since it listed on AIM in May 2014.
The Remuneration 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
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
28
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
(1)
(2)
(3)
13,895,592
33,700
11,109,408
350
234,375
(4)
15,625
Nil
27.79%
0.07%
22.22%
0.0%
0.47%
0.03%
Nil
(1)
(2)
(3)
(4)
The registered holder of these shares is Slawston Investments Limited, an entity jointly owned by Anthony
and Catherine Smith
The registered holder of these shares is Louise Davis, the wife of Nick Davis
The registered holder of these shares is Sheepy Magna Investments Limited, an entity jointly owned by
Charles and Sian Smith
The registered holder of 12,000 of these shares is Fiona Sharman, the wife of Jeremy Sharman
Governance
29
Remuneration Report CONTINUED
Directors’ Remuneration
Directors’ remuneration information for those individuals who have served as a Director for the
year are presented below. The information presented in respect of these Directors is for the full
financial year.
Individual
Financial
year
Basic Salary
and fees
Profit Share
(Bonus)
LTIP paid
within year
Benefits
Pension
Contribution
Total
Executive Directors
Anthony Smith
Nick Davis
Charles Smith (1)
Jonathan Fearn (2)
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
Non–Executive Directors
Jeremy Sharman
Charlie Caminada
Malcolm Collins
Total
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
£
250,000
250,000
£
-
-
£
-
-
£
43,488
37,600
£
-
-
£
293,488
287,600
206,000
208,668
23,413
10,610
24,720
463,411
191,580
105,000
120,000
170,000
101,500
56,183
30,000
30,000
30,000
30,000
20,000
20,000
-
-
51,384
14,794
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,294
17,000
331,874
16,137
20,503
-
-
136,137
190,503
10,013
12,180
175,077
5,258
6,742
82,977
-
-
-
-
-
-
-
-
-
-
-
-
30,000
30,000
30,000
30,000
20,000
20,000
757,500
260,052
23,413
80,248
36,900
1,158,113
747,763
119,794
-
81,655
23,742
972,954
(1)
(2)
In 2017 Charles Smith now contracted for three days per week.
Appointed 7 March 2017.
Governance
30
Remuneration Report
CONTINUED
Long Term Incentive Plans
During 2018, the Remuneration Committee approved the introduction of a Long Term
Incentive Plan (LTIP) for selected Executive Directors. The financial value of the award is based
on the achievement of annual Profit before Tax targets which are then converted to a number
of shares based on a defined share price. The shares are then transferred to the individual over
the following three years.
For Nick Davis, achievement of target awards at 50% of salary up to a maximum of 100%; for
Jonathan Fearn, achievement of target will award at 37.5% up to a maximum of 75% of salary.
The volume of shares awarded are outlined below:
Individual
Year of vesting
2019
2020
2021
Total
Nick Davis
FY18
26,520
26,520
26,520
79,560
FY17
14,493
14,493
-
28,986
Total
41,013
41,013
26,520
108,546
Jonathan Fearn
FY18
9,788
9,788
9,788
29,364
FY17
-
-
-
-
Total
9,788
9,788
9,788
29,364
Governance
31
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
212,500
120,000
115,000
Each Executive Director’s employment will continue until terminated by either party by written
notice. The notice periods applicable are 12 months for Anthony Smith, 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.
For the 2019 year, the committee intends to continue the LTIP benefit to Nick Davis and
Jonathan Fearn, based on performance against agreed PBT targets.
The Company may elect to terminate the employment of each Executive Director by making a
payment in lieu of notice equal to their basic salary payable in monthly instalments.
Each of the Executive Directors has agreed to post-termination restrictions in order to protect
confidential information, trade secrets and business connections. These restrictions last for 9
months.
The Non-Executive Directors have entered into appointment letters. Under the terms of these
letters, the Non-Executive Directors are entitled to an annual fee as set out below:
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: 8 January 2019
Governance
32
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
The Directors present their Annual Report and audited
financial statements of the Company and the Group for
the 52 weeks ended 29 September 2018.
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 market of the
London stock exchange.
Share Capital
Details of the share capital of the company are shown in note 20 of the financial statements.
The company’s share capital consists of one class of ordinary shares. As at 29 September
2018 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 1 March 2018, 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 2019 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
Jeremy Sharman
Charlie Caminada
Malcolm Collins
Governance
33
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
Directors’ Interests
Information about the Directors’ interests in the shares of the Company can be found in the
Directors’ Remuneration Report.
Directors’ Indemnities
As permitted by the Articles of Association, the Directors have the benefit of an indemnity
provision as defined by s234 of the Companies Act 2006. The indemnity was in force
throughout the financial year and at the date of approval of the financial statements. The
Group maintains Directors’ and Officers’ liability insurance.
In accordance with the Articles of Association, all the Directors offer themselves for re-election
at the AGM, as they were appointed during the year.
Employees
The Group employed 3,489 (30 September 2017: 3,507) 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 fifth AGM will be held on Thursday, 7 March 2019 at 10.00 a.m. at the
Company’s registered office at Haramead Business Centre, Humberstone Road, Leicester,
Leicestershire LE1 2LH. The Notice of AGM appears on pages 97 to 101.
Set out below is an explanation of certain resolutions which will be proposed at the AGM.
Governance
34
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
Final Dividend (resolution 2)
The Directors are proposing a final dividend of 8.0p per ordinary share, amounting to a final
dividend of approximately £4m, which is subject to approval by the shareholders at the AGM.
Special Dividend (resolution 3)
The Directors are also proposing a special dividend of 8.0p per ordinary share. In light of
the continued strong performance, cash generation and the robustness of the Company’s
balance sheet, the Directors consider it appropriate to propose a cash return to shareholders
of, in aggregate, approximately £4m (in addition to the final dividend proposed in resolution
2), which is structured as a special dividend of 8.0p per ordinary share. The approval of this
resolution is not dependent on the approval of resolution 2, nor is the approval of resolution 2
dependent on the approval of this resolution.
Re-election of Directors (resolutions 4 to 10)
The UK Corporate Governance Code recommends that directors should be subject to annual
re-election by shareholders. In line with the Company’s intention to apply certain principles
of the UK Corporate Governance Code, each Director will stand for re-election at the AGM.
Biographical details of each Director appear on pages 26 and 27. 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 13)
The Company is prohibited under the Companies Act 2006 from making donations to EU
political parties or organisations or to independent election candidates in the EU of over
£5,000 a year without shareholder approval. The Companies Act 2006 uses very broad
definitions of political donations and expenditure which may extend to normal business
activities which might not be thought of as political expenditure in the more usual sense.
Activities which could be caught include representing the Company in the business community
or at special interest groups which the Company may wish to support. In addition, the
sponsorship of industry forums, the funding of seminars and other functions to which politicians
are invited may also be caught. The Company is therefore proposing this resolution to ensure
that it does not inadvertently breach the rules whilst carrying out its normal business activities.
During its last financial 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.
Governance
35
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
Authorities to allot shares (resolution 14)
By law, the Directors are not permitted to allot new shares (or to grant rights over shares)
unless authorised to do so by shareholders. Resolution 14 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 8 January 2019. 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 8 January 2019).
Disapplication of pre-emption rights (resolutions 15 and
16)
Resolutions 15 and 16 concern the disapplication 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 15 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 15 gives the Directors the necessary authority to either allot
shares or sell shares held in treasury for cash on a non pre-emptive basis up to an aggregate
nominal amount of £25,000 (being 2,500,000 shares). This is equivalent to 5% of the issued
share capital of the Company on 8 January 2019. This resolution also disapplies statutory pre-
emption rights to the extent necessary to facilitate rights issues.
Resolution 16 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 8 January 2019) 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-pre-emptive basis above 7.5%
of the total issued share capital of the Company over a rolling three-year period without
consulting shareholders first.
Governance
36
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
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 2020 or 31 March 2020, whichever is earlier.
Authorisation for the Company to purchase its own shares
(Resolution 17)
Resolution 17 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 17 is passed, the Company will be authorised
to purchase up to a maximum of 5,000,000 ordinary shares, representing approximately 10%
of the Company’s issued ordinary share capital as at 8 January 2019. Resolution 17 also sets
out the minimum and maximum price that the Company may pay for purchases of its ordinary
shares.
If Resolution 17 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 2020 or 31
March 2020, 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, with a view to using any such shares
held in treasury for future distributions under the Company’s existing employee incentive plans.
Online voting and form of proxy
Please note you will not receive a form of proxy for the March 2019 AGM in the post. This year
we have introduced an option to vote online which you can do at www.signalshares.com. To
register you will need your Investor Code, which can be found on your share certificate. You will
still be able to vote in person at the AGM and using a proxy. For shares held through CREST,
proxy appointments may be submitted via the CREST proxy voting system. Otherwise, you may
request a hard copy proxy form directly from our Registrars, Link Asset Services, 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 between 9.00 a.m. – 5.30 p.m.
Monday to Friday excluding public holidays in England and Wales.
Voting online or appointing a proxy will not preclude a shareholder from attending the AGM
and voting in person.
All online votes or proxy appointments should be submitted so as to be received no later than
10.00 a.m. on 5 March 2019.
Governance
37
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
Recommendation
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
PKF Cooper Parry have issued their independent report on these financial statements to the
shareholders of Shoe Zone plc. The report can be found on page 41 to 45.
The auditor, PKF Cooper Parry 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 Group’s bankers and relevant advisors on the suitability of these
currency contracts in respect of the timings and rate. The Group has no exposure to equity
securities. Limited credit risk exposure exists given the high level of cash transactions through
the store network. Where credit risk arises management have procedures in place to assess
the level of risk to be taken, with approval by the Directors for significant credit transactions.
Further information can be found in note 3 to the financial statements.
Environment
The vast majority of our stores in England, Wales and Scotland have a requirement to ensure
that all packaging and store waste is returned to our distribution centre to be recycled and re-
used.
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
Governance
38
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
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
2019. 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.
Events after the year-end
Between 29 September 2018 and the date of this report, there have been no material events.
The Strategic Report, the Directors’ Report and the Remuneration Report were approved by
the Board.
Directors’ responsibilities statement
The Directors are responsible for preparing the strategic report, the Director’s report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial
year. Under that law the Directors have elected to prepare the group financial statements
in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and the company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law). Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs of the group
and company and of the profit or loss of the group for that period. The Directors are also
required to prepare financial statements in accordance with the rules of the London Stock
Exchange for companies trading securities on the Alternative Investment Market.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply 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.
Governance
39
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the company’s transactions and disclose with reasonable accuracy at any time
the financial position of the company and enable them to ensure that the financial statements
comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements
are made available on a website. Financial statements are published on the company’s
website in accordance with legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the company’s website is the responsibility of the Directors.
The Directors’ responsibility also extends to the on-going integrity of the financial statements
contained therein.
Disclosure of information to auditor
Each Director in office at the date of approval of this report has confirmed that:
• So far as he is aware, there is no relevant audit information of which the Company’s
auditors are unaware; and
• He has taken all reasonable steps that he ought to have taken as a Director in order to
make himself aware of any relevant audit information and to establish that the Company’s
auditor are aware of that information.
Approved by the Board and signed on its behalf:
Nick Davis
Chief Executive Officer
Date: 8 January 2019
Governance
40
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC
Opinion
We have audited the financial statements of Shoe Zone plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the 52 weeks ended 29 September 2018 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 29 September 2018 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.
Basis for opinion
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 and parent company 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.
Governance
41
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC CONTINUED
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 ability 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.
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.
Carrying value and impairment of Property, Plant and
Equipment in relation to the store portfolio
Matter
The Group has a significant property, plant and equipment balance in relation to the portfolio
of stores it operates. The Group’s assessment of the carrying value of assets relating to each
store requires significant judgement, in particular regarding cash flows, growth rates and
discount rates.
Response
• We obtained information on performance by store in order to assess for indication of
impairment.
• We considered historical trading performance by comparing recent growth rates of both
revenue and operating profit by store.
• We assessed the appropriateness of the assumptions concerning growth rates and inputs
to the discount rates against latest market expectations.
Governance
42
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC CONTINUED
• We performed sensitivity analysis to determine whether an impairment would be required
if costs increase at a higher than forecast rate.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in determining the
nature, timing and extent of our audit procedures, in evaluating the effect of any identified
misstatements, and in forming our audit opinion.
The materiality for the group financial statements as a whole was set at £844,000. This has
been determined with reference to the benchmark of the group’s profit before tax which we
consider to be an appropriate measure for a group of companies such as these. Materiality
represents 7.5% of group profit before tax.
The materiality for the parent company financial statements as a whole was set at £13,350. This
has been determined with reference to the benchmark of the parent company’s loss before tax
which we consider to be an appropriate measure for a parent company such as this. Materiality
represents 7.5% of the parent company loss before tax.
An overview of the scope of our audit
We adopted a risk based audit approach. We gained a detailed understanding of the group’s
business, the environment it operates in and the risks it faces.
The key elements of our audit approach were as follows:
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. In performing our testing we
utilised performance materiality of £717,000, equating to 85% of materiality.
In order to address the matters described in the Key audit matters section we performed
focused audit procedures over these areas, including reference to external market data and
publicly available market information in relation to assumptions used.
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
Governance
43
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC CONTINUED
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 explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 39, 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.
Governance
44
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC CONTINUED
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.
Auditor’s responsibilities for the audit of the financial
statements
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. 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.
Use of our report
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 parent company and the parent company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Katharine Warrington (Senior Statutory Auditor)
For and on behalf of PKF Cooper Parry Group Limited
Chartered Accountants and Statutory Auditor
Sky View
Argosy Road
East Midlands Airport
Castle Donington
Derby
DE74 2SA
Date: 8 January 2019
Governance
45
CONSOLIDATED INCOME STATEMENT
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
Note
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
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
1, 4, 8
5
5
5
9
9
10
26
160,615
(130,086)
30,529
(13,070)
(6,048)
11,411
31
(187)
11,255
(1,738)
9,517
19.03p
157,777
(127,657)
30,120
(14,454)
(5,872)
9,794
15
(306)
9,503
(1,620)
7,883
15.77p
Financials
46
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE
INCOME FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
Note
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
Profit for the period
Items that will not be reclassified subsequently to
the income statement
Remeasurement gains on defined benefit pension
scheme
Movement in deferred tax on pension schemes
23
23
Items that will be reclassified subsequently to the
income statement
Fair value movements on cash flow hedges
Cash flow hedges recognised in inventories
Tax on cash flow hedges
Other comprehensive income for the period
Total comprehensive income for the period
attributable to equity holders of the parent
£’000
9,517
295
(50)
232
2,958
(548)
2,887
£’000
7,883
5,608
(1,217)
(934)
(1,233)
377
2,601
12,404
10,484
Financials
47
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 29 SEPTEMBER 2018
Note
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
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 liability
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
£’000
£’000
21,103
703
21,806
27,804
6,229
1,383
15,682
51,098
72,904
(25,016)
(689)
-
(550)
(26,255)
(1,649)
(290)
(6,296)
(8,235)
(34,490)
38,414
500
2,662
1,123
34,129
38,414
20,783
861
21,644
28,017
6,108
-
11,786
45,911
67,555
(23,576)
(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
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: 8 January 2019
Financials
48
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
Share
capital
Merger
reserve
Cash flow
hedge
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
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)
500
2,662
(1,520)
29,518
31,160
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,191
(548)
9,517
9,517
295
295
-
3,191
(51)
(599)
2,643
9,761
12,404
-
-
(5,150)
(5,150)
(5,150)
(5,150)
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
At 30 September 2017
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
At 29 September 2018
500
2,662
1,123
34,129
38,414
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
49
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
Note
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
Operating activities
Profit after taxation
Corporation tax
Finance income
Finance expense
Depreciation of property, plant and equipment
Fixed asset impairment and loss on disposal of property,
plant and equipment
Pension contributions paid
(Increase) / decrease in trade and other receivables
(Increase) / decrease in foreign exchange contract
Decrease in inventories
Increase / (decrease) in trade and other payables
Increase / (decrease) in provisions
Cash generated from operations
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Interest received
Net cash used in investing activities
Financing activities
Dividends paid during the year
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
11
24
9,517
1,738
(31)
187
3,097
430
(704)
14,234
(146)
(709)
182
531
859
717
14,951
(2,096)
12,855
(5,094)
1,254
31
(3,809)
(5,150)
(5,150)
3,896
11,786
15,682
7,883
1,620
(15)
306
2,962
188
(649)
12,295
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
Financials
50
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
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 08961190.
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 29 September
2018.
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 29 September 2018. The results for all
subsidiary companies are consolidated using the acquisition method of accounting.
Financials
51
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
1. ACCOUNTING POLICIES
CONTINUED
Where the company has control over an investee, it is classified as a subsidiary. The company
controls an investee if all three of the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the practical ability to direct
the relevant activities of the investee without holding the majority of the voting rights. In
determining whether de-facto control exists the company considers all relevant facts and
circumstances, including:
• The size of the company’s voting rights relative to both the size and dispersion of other
parties who hold voting rights.
• Substantive potential voting rights held by the company and by other parties.
• Other contractual arrangements.
• Historic patterns in voting attendance.
The consolidated financial statements present the results of the company and its subsidiaries
(‘the Group’) as if they formed a single entity. Intercompany transactions and balances between
group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using
the acquisition method. In the statement of financial position, the acquiree’s identifiable assets,
liabilities and contingent liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated statement of compre-
hensive 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:
Financials
52
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
1. ACCOUNTING POLICIES
CONTINUED
IFRS 16 ‘Leases’. This Standard is effective for the Group for the 52 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 Group for the 53 week financial period ending 5 October
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 53 week financial
period ending 5 October 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.
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
Fixtures and fittings
Motor vehicles
5-10 years on a straight line basis
5-10 years on a straight line basis
3-5 years on a straight line basis
Financials
53
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
1. ACCOUNTING POLICIES
CONTINUED
No depreciation is provided against freehold land. Depreciation is provided against freehold
shop properties writing off the original cost less estimated residual value over the useful
economic life of the property which is estimated to be 50 years.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have
been transferred to the Shoe Zone plc Group (a ‘finance lease’), the asset is treated as if it had
been purchased outright.
The amount initially recognised as an asset is the lower of the fair value of the leased property
and the present value of the minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease payments are analysed between
interest and capital. The interest element is charged to the consolidated income statement
over the period of the lease and is calculated so that it represents a constant proportion of the
lease liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are not transferred to
the Group (an ‘operating lease’), the total rentals payable under the lease are charged to the
consolidated income statement on a straight-line basis over the lease term. The aggregate
benefit of lease incentives is recognised as a reduction of the rental expense over the lease
term on a straight-line basis.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed for impairment when there is an
indication that assets might be impaired. When the carrying value of an asset exceeds its
recoverable amount, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the
impairment test is carried out on the asset’s cash generating unit (i.e. the smallest group of
assets in which the asset belongs for which there are separable identifiable cash flows).
Impairment charges are included in the consolidated income statement in cost of sales,
except to the extent they reverse previous gains recognised in the consolidated statement of
comprehensive income.
Inventories
Inventories are initially recognised at cost on a first in first out basis, and subsequently at the
lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present location and condition.
Financials
54
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
1. ACCOUNTING POLICIES
CONTINUED
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 include 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 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.
Financials
55
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
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 designation and documentation of the hedging
relationship and the Group’s risk management objective and strategy for undertaking the
hedge.
• For cash flow hedges, the hedged item in a forecast transaction is highly probable and
presents an exposure to variations in cash flows that could ultimately affect profit or loss.
• The cumulative change in the fair value of the hedging instrument is expected to be
between 80-125% of the cumulative change in the fair value or cash flows of the hedged
item attributable to the risk hedged (i.e. it is expected to be highly effective).
• The effectiveness of the hedge can be reliably measured.
• The hedge remains highly effective on each date tested. Effectiveness is tested quarterly.
The Group uses derivative financial instruments such as forward foreign exchange contracts
to hedge its risks associated with foreign currency fluctuations. Such derivative financial
instruments are initially measured at fair value and subsequently remeasured at fair value. The
fair value of forward foreign exchange contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles.
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to
the ineffective portion is recognised immediately in cost of sales in the income statement.
Amounts accumulated in equity are reclassified to inventories in the period when the purchase
occurs, matching the hedged transaction. The cash flows are expected to occur and impact on
profit and loss within 12 months from the year end.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss previously recognised in equity is retained
in equity and is recognised when the forecast transaction is ultimately recognised in cost of
sales in the income statement. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately transferred to the income
statement.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or
liability in the statement of financial position differs from its tax base.
Financials
56
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
1. ACCOUNTING POLICIES
CONTINUED
Recognition of deferred tax assets is restricted to those instances where it is probable that
taxable profit will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when the deferred
tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.
Deferred tax assets are offset when the Group has legally enforceable rights to set off current
tax assets against current tax liabilities and the deferred tax liabilities relate to taxes levied by
the same tax authority on either:
• the same taxable group company; or
• different company entities which intend to either settle current tax assets and liabilities on
a net basis, or to realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax assets and liabilities are expected to
be settled or recovered.
Provisions
Provision for dilapidations is made at the best estimate of the expenditure required to settle
the obligation at the reporting date, where material, discounted at the pre-tax rate reflecting
current market assessments of the time value of money and risks specific to the liability. A
dilapidation provision is only recognised on those properties which are likely to be exited.
Where such property is identified the full costs expected are recognised. This provision relates
to the liability of wear and tear incurred on the leasehold properties and does not include any
removal of shop refits as experience indicates that liabilities do not arise for removal of shop
refits.
Foreign exchange
Transactions entered into the Group entities in a currency other than the functional currency are
recorded at the average 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.
Financials
57
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
1. ACCOUNTING POLICIES
CONTINUED
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 curtailments are recognised
immediately in profit or loss.
Settlements of defined benefit schemes are recognised in the period in which the settlement
occurs.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends
to equity shareholders, this is when declared by the directors. In the case of final and special
dividends, this is when approved by the shareholders at the AGM.
Financials
58
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Shoe Zone plc Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical experience and
other factors, including expectations of future events that are believed to be reasonable
under the circumstances. In the future, actual experience may differ from these estimates and
assumptions. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
Accounting estimates and assumptions
Retirement benefits:
The Groups defined benefit schemes’ pension surplus/obligation, which is assessed each
period by actuaries, is based on key assumptions including discount rates, mortality rates,
inflation, future salary costs and pension costs. These assumptions, individually or collectively,
may be different to actual outcomes; refer to note 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, see note 12.
Judgements
Foreign currency hedge accounting
Group policy is to adopt hedge accounting for cash flows for the purchase of goods for resale.
Due to the degree of judgement in determining forecast cash flows there is a risk that the as-
sumptions made in the effectiveness testing are inappropriate.
Financials
59
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
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; and
Fair value hierarchy
All financial instruments measured at fair value must be classified into one of the levels below:
• Level 1: Quoted prices in active markets;
• Level 2: Level 1 quoted prices are not allowable, but fair value is based on observable
market data; and
• Level 3: Inputs that are not based on observable market data.
Financials
60
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
3. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
CONTINUED
A summary of the financial instruments held by category is provided below:
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
Financial assets
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
448
220
15,682
16,350
30
1,353
1,383
327
170
11,786
12,283
-
-
-
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
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
22,584
21,234
-
-
22,584
709
1,837
23,780
Financials
61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
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 29 September 2018 and 30
September 2017.
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 29 September 2018 the Group has trade
receivables of £448,000 (2017: £327,000).
Approximately 36% of the balance is with longstanding prepaid gift card providers 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 £170,000.
The Directors are unaware of any factors affecting the recoverability of outstanding balances at
29 September 2018 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 service
providers and the Board monitors its exposure to counterparty risk on an on-going basis.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the
Group will encounter difficulty in meeting its financial obligations as they fall due. The Group’s
policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when
they become due.
To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a
period of at least 30 days.
Trade payables are repayable within 3 months. The Group prepares and maintains detailed
cash flow forecasts to monitor cash requirements and manage liquidity risk.
Financials
62
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
3. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
CONTINUED
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of
financial liabilities:
Up to 3
months
Between
3 and 12
months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
At 29 September 2018
£’000
£’000
£’000
£’000
£’000
Trade and other payables
Total financial liabilities
22,584
22,584
-
-
-
-
-
-
-
-
Up to 3
months
Between
3 and 12
months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
At 30 September 2017
£’000
£’000
£’000
£’000
£’000
Trade and other payables
21,234
Derivative financial liability
824
Total
22,058
-
1,486
1,486
-
236
236
-
-
-
-
Financials
63
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
3. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
CONTINUED
Foreign exchange risk
The Group is predominantly exposed to foreign exchange risk on purchases from major suppliers based in the
Far East. Purchases are made on a central basis and the risk is mitigated through using forward foreign currency
exchange contracts.
The fair value of forward foreign exchange contacts has been determined based on discounted market forward
currency exchange rates at the balance sheet date.
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.
Income Statement
Equity
2018
£’000
659
(805)
2017
£’000
682
(834)
2018
£’000
4,046
(4,945)
2017
£’000
4,868
(5,949)
Sterling strengthens by 10%
Sterling weakens by 10%
Financials
64
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
3. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
CONTINUED
Year end exchange rates applied in the above analysis are US Dollar 1.31 (2017: 1.34). 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.
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 £38,414,000 (30
September 2017: £32,876,000).
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
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
160,615
157,777
Financials
65
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
5. EXPENSES BY NATURE
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
Administration expenses
Loss on Foreign Exchange
Other costs
6. AUDITOR’S REMUNERATION
The audit of the parent company
Audit of subsidiary financial statements pursuant to legislation
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
52,789
2,580
4,730
38,016
3,530
608
20,407
88
18,744
75
7,637
£’000
51,524
2,094
5,205
36,912
2,971
621
21,045
286
19,203
1,667
6,455
149,204
147,983
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
15
40
55
19
39
58
Financials
66
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
7. EMPLOYEE BENEFIT EXPENSES
Employee benefit expenses (including Directors) comprise:
Wages and salaries
Social security costs
Other pension costs
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
35,223
1,836
957
38,016
34,194
1,792
926
36,912
The average monthly number of employees during the period was as follows:
Sales and distribution
Directors
Administration
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
No.
3,350
7
151
3,508
No.
3,361
7
153
3,521
The average monthly number of full time equivalent employees during the period was 1,718 (2017: 1,751).
Shoe Zone plc does not employ any members of staff and has no staff costs during the period (2017: Nil).
Directors’ remuneration, included in staff costs:
Salaries and benefits
Pension contributions
Information regarding the highest paid Director is as follows:
Salary and benefits
Pension contribution
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
1,098
27
1,125
425
15
440
949
24
973
315
17
332
Financials
67
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 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
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
156,165
4,220
230
160,615
152,562
4,991
224
157,777
There are no customers with turnover in excess of 10% or more of total turnover.
Non-current assets by location:
United Kingdom
Republic of Ireland
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
21,091
12
21,103
20,499
284
20,783
The group has only one operating and reporting segment which reflects the group’s management and reporting
structure as viewed by the board of directors.
The deferred tax asset of £703,000 (2017: £861,000) is unallocated.
Financials
68
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
9. FINANCE INCOME AND EXPENSES
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
Finance income
Interest receivable
Total finance income
Finance expense
Net interest expense on defined benefit pension scheme
Total finance expense
31
31
(187)
(187)
15
15
(306)
(306)
Financials
69
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
10. INCOME TAX
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
Current tax expense
Current tax on profits for the period
Adjustment for under / (over) provision in prior periods
Total current tax expense
Deferred tax expense
Adjustment for (over) provision in prior periods
Origination and reversal of temporary differences (note 19)
Tax charge on profit on ordinary activities
1,995
183
2,178
(456)
16
1,738
1,949
(69)
1,880
(245)
(15)
1,620
The reason for the difference between the actual tax charge for the period and the standard rate of corporation
tax in the United Kingdom applied to profit for the period as follows:
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
9,517
1,738
11,255
2,138
(125)
(2)
(273)
1,738
£’000
7,883
1,620
9,503
1,853
269
(188)
(314)
1,620
Profit for the period
Income tax expense
Profit before income taxes
Expected tax charge based on corporation tax rate of 19%
(30 September 2017: 19.5%)
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:
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%. 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
70
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
11. DIVIDENDS
Dividends paid during the year at 10.3p (2017: 18.2p) per share
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
£’000
5,150
£’000
9,100
A final dividend of 8.0p (2017: 6.8p) per share is proposed for shareholders on the register on 1 March 2019
payable on 20 March 2019 following approval at the Annual General Meeting on 7 March 2019.
A special dividend of 8.0p (2017: Nil) per share is proposed for shareholders on the register on 1 March 2019
payable on 20 March 2019 following approval at the Annual General Meeting on 7 March 2019.
Financials
71
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 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
s
e
l
c
i
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 1 October 2016
10,153
16,757
Additions
Disposals
-
-
1,855
(882)
At 30 September 2017
10,153
17,730
Additions
Disposals
Impairments
Assets under construction
-
(1,384)
-
-
1,646
(522)
(315)
-
24
10
-
34
-
-
-
-
31,284
3,281
(2,021)
32,544
3,448
(1,111)
(337)
125
At 29 September 2018
8,769
18,539
34
34,669
Depreciation
At 1 October 2016
Charge for the period
Disposals
At 30 September 2017
Charge for the period
Disposals
Impairments
1,189
12,975
56
-
1,245
52
(231)
-
1,130
(840)
13,265
1,095
(494)
(134)
6
6
-
12
6
-
-
25,386
1,770
(1,875)
25,281
1,938
(1,043)
(84)
At 29 September 2018
1,066
13,732
18
26,092
Net book value
At 29 September 2018
At 30 September 2017
At 1 October 2016
7,703
8,908
8,964
4,807
4,465
3,782
16
22
18
8,577
7,263
5,898
-
125
-
125
-
-
-
(125)
-
-
-
-
-
-
-
-
-
125
-
58,218
5,271
(2,903)
60,586
5,094
(3,017)
(652)
-
62,011
39,556
2,962
(2,715)
39,803
3,091
(1,768)
(218)
40,908
21,103
20,783
18,662
Financials
72
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
13. INVENTORIES
29 September 2018
30 September 2017
Goods for resale
Shop fitting materials and other consumables
£’000
27,300
504
27,804
£’000
27,802
215
28,017
14. TRADE AND OTHER RECEIVABLES
29 September 2018
30 September 2017
Trade receivables
Prepayments
Other receivables
£’000
448
5,573
208
6,229
£’000
327
5,611
170
6,108
There are no impairment provisions or receivables past due in either year.
15. DERIVATIVE FINANCIAL INSTRUMENTS
At the balance sheet date, details of the forward foreign exchange contracts that the Group has committed to are
as follows:
Derivative financial assets / liabilities
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
29 September 2018
30 September 2017
£’000
£’000
30
1,353
1,383
(709)
(1,837)
(2,546)
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 29 September 2018 were
$58,300,000 (30 September 2017: $71,750,000). 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
73
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
16. TRADE AND OTHER PAYABLES
Current
Trade payables
Social security and other taxes
Other payables
Accruals
Non-current
Accruals
29 September 2018
30 September 2017
£’000
£’000
10,549
1,396
236
12,835
25,016
11,694
1,635
326
9,921
23,576
29 September 2018
30 September 2017
£’000
1,649
1,649
£’000
1,742
1,742
Financials
74
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
17. PROVISIONS
As at 30 September 2017
Additions
Amounts utilised
Amounts released
As at 29 September 2018
Customer Returns
Dilapidations
£’000
£’000
40
38
(40)
-
38
909
639
(246)
(361)
941
The provisions are aged as follows:
Current
Non-current
As at 29 September 2018
Customer Returns
Dilapidations
£’000
£’000
38
-
38
651
290
941
Total
£’000
949
677
(286)
(361)
979
Total
£’000
689
290
979
For all products, the Group has incurred an obligation to exchange the item if it is faulty due to a lack of quality
or give the client a refund if they are not satisfied. Revenue from the sale of the products is recognised once the
product is sold, however, a provision for customer returns based on previous experience is recognised at the same
time.
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the
end of the lease in accordance with the lease terms. The main uncertainty relates to estimating the cost that will
be incurred at the end of the lease.
18. CONTINGENT LIABILITIES
The Shoe Zone plc Group and subsidiary undertakings have given a duty deferment guarantee in favour of HM
Revenue and Customs amounting to £800,000 (30 September 2017: £800,000).
Financials
75
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
19. DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17% (30
September 2017: 17%).
The movement on the deferred tax account is as shown below:
29 September 2018
30 September 2017
At beginning of the period
Recognised in income statement:
Tax expense (note 10)
Recognised in other comprehensive income:
Actuarial gain 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
£’000
861
440
(50)
(548)
703
£’000
1,441
260
(1,217)
377
861
29 September 2018
30 September 2017
£’000
£’000
1,289
(1,426)
(230)
1,070
703
991
(1,656)
317
1,209
861
The Group has an unrecognised deferred tax asset £885,000 as at 29 September 2018 (30 September 2017:
£893,000).
There are estimated losses available to offset against future capital taxable profits amounting to approximately
£5,207,000 (30 September 2017: £5,250,000).
Financials
76
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
20. SHARE CAPITAL
Share capital issued and fully paid
50,000,000 ordinary shares of 1p each
29 September 2018
30 September 2017
£’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
29 September 2018
30 September 2017
29 September 2018
30 September 2017
£’000
£’000
£’000
£’000
Not later than one year
Later than one year
and not later than five
years
Later than five years
18,283
35,223
4,908
58,414
18,652
35,191
5,486
59,329
655
387
-
1,042
554
872
-
1,426
22. CAPITAL COMMITMENTS
29 September 2018
30 September 2017
Contracted for but not provided
£’000
205
£’000
238
Financials
77
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSION COSTS
Defined contribution scheme
The Group operates a defined contribution pension scheme namely Shoe Zone Worksave Pension Plan
contributions amounted to £957,000 (30 September 2017: £926,000).
Defined benefit scheme
The Group operates two other pension schemes in the UK: the Shoe Zone Pension Scheme and the Shoefayre
Limited Pension and Life Assurance Scheme. The Shoe Zone Pension Scheme provided benefits on a defined
benefit basis for service up to 30 September 2001. For service after that date, benefits are provided on a defined
contribution basis. The Shoefayre Limited Pension and Life Assurance Scheme provided benefits on a defined
benefit basis but was closed to future accrual on 30 June 2009. The scheme was acquired on the purchase of
Shoefayre Limited on 19 September 2007. The assets of all schemes are held in separate trustee administered
funds. The pension contributions to the Shoe Zone Pension Scheme defined contribution element was £2,000 (30
September 2017: £2,000).
The schemes are exposed to a number of risks, including:
• Investment risk: movement of discount rate used (high quality corporate bonds) against the return from plan
assets
• Interest rate risk: decreases/increases in the discount rate used (high quality corporate bonds) will increase/
decrease the defined benefit obligation
• Longevity risk: changes in the estimation of mortality rates of current and former employees.
Amounts recognised in the balance sheet at 29 September 2018
Fair value of assets
Present value of funded obligations
Impact of asset ceiling
Deficit
29 September 2018
30 September 2017
£’000
£’000
77,408
(81,423)
(2,281)
(6,296)
78,065
(83,573)
(1,600)
(7,108)
Financials
78
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSIONS
CONTINUED
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial losses arising from changes in:
Demographic assumptions
Financial assumptions
Total actuarial gain
Impact of asset ceiling
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive income
29 September 2018
30 September 2017
£’000
14
(379)
1,305
1,713
4,363
926
(645)
(50)
245
£’000
1,132
6,076
(1,600)
(1,217)
4,391
Financials
79
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 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 29 September 2018 for the purpose of calculating the pension deficit and
disclosures in the current period.
Post retirement mortality
Life expectancy
Male currently aged 45
Female currently aged 45
Male currently aged 65
Female currently aged 65
Financial assumptions
Deferred pension revaluation
Pension increases
Discount rate
Consumer Price Index
Retail Price Index
29 September 2018
30 September 2017
Years
Years
90
92
88
90
90
92
88
90
29 September 2018
30 September 2017
%
2.55
3.40
2.85
2.55
3.55
%
2.55
3.40
2.75
2.55
3.55
The weighted average duration of the defined benefit obligation for the Shoe Zone scheme at 29 September
2018 is 17 years (30 September 2017 : 17 years).
The weighted average duration of the defined benefit obligation for the Shoefayre scheme at 29 September 2018
is 19 years (30 September 2017 : 19 years).
Financials
80
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSIONS
CONTINUED
Defined benefit scheme - Shoe Zone Pension Scheme Assets
Assets
The major categories of assets as a perecentage of total assets are as follows:
Asset category
29 September 2018
30 September 2017
Equities
Property
Gilts/bonds
Cash
Diversified Growth Funds
Liability Driven Investment
21%
10%
18%
1%
40%
10%
100%
30%
10%
14%
1%
32%
13%
100%
The actual return on the Scheme’s assets net of expenses over the period to the review date was a gain of
£1,352,000 (30 September 2017: £2,292,000).
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
81
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSIONS
CONTINUED
Amounts recognised in the income statement over the period
Interest cost
Expected return on assets
Interest on asset restriction
Amounts recognised in the statement of financial position
Fair value of assets
Present value of funded obligations
Surplus
Impact of asset ceiling
Net defined benefit liability
29 September 2018
30 September 2017
£’000
£’000
(1,252)
1,297
(45)
-
(1,190)
1,122
-
(68)
29 September 2018
30 September 2017
£’000
£’000
47,372
(45,091)
2,281
(2,281)
-
48,286
(46,686)
1,600
(1,600)
-
Financials
82
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSIONS
CONTINUED
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial gains arising from changes in:
Demographic assumptions
Financial assumptions
Total actuarial gain
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
29 September 2018
30 September 2017
£’000
55
(164)
645
878
2,397
481
(645)
19
(90)
£’000
1,170
3,275
(1,600)
(618)
2,227
29 September 2018
30 September 2017
£’000
£’000
48,286
1,297
109
(2,366)
55
47,381
47,556
1,122
54
(1,616)
1,170
48,286
Financials
83
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSIONS
CONTINUED
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
The change in defined benefit obligation over the period was:
29 September 2018
30 September 2017
£’000
£’000
Defined benefit obligation at the beginning of the period
Interest cost
Benefits paid
Actuarial gain
Defined benefit obligation at the end of the period
46,686
1,252
(2,366)
(481)
45,091
50,387
1,190
(1,616)
(3,275)
46,686
Contributions of £111,000 are expected to be made during the year ended 5 October 2019 by Shoe Zone Retail
Limited.
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%
-2%
+4%
-4%
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
84
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSIONS
CONTINUED
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme
The company operates the Shoefayre Limited Pension and Life Assurance Scheme. The scheme provided benefits
on a defined benefit basis but was closed to future accrual on 30 June 2009.
The major categories of assets as a percentage of total assets are as follows:
Asset Category
29 September 2018
30 September 2017
Equities
Property
Gilts/bonds
Cash
Diversified Growth Funds
Liability Driven Investment
19%
13%
13%
0%
39%
16%
100%
18%
13%
13%
0%
39%
17%
100%
The actual return on the Scheme’s assets net of expenses over the period to the review date was a gain of
£771,000 (30 September 2017: £697,000). 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
29 September 2018
30 September 2017
£’000
£’000
Fair value of assets
Present value of funded obligations
Net liability
30,036
(36,332)
(6,296)
29,779
(36,887)
(7,108)
Financials
85
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 CONTINUED
23. PENSIONS
CONTINUED
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme (continued)
Amounts recognised in other comprehensive income
Loss on plan assets
Actuarial gains arising from changes in:
Demographic assumptions
Financial assumptions
Total actuarial loss
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive income
Amounts recognised in the income statement over the period
Interest cost
Expected return on assets
29 September 2018
30 September 2017
£’000
£’000
(41)
(38)
(215)
660
835
1,965
445
(68)
336
2,800
(599)
2,163
29 September 2018
30 September 2017
£’000
£’000
(999)
812
(187)
(973)
735
(238)
Financials
86
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 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 on assets
Fair value of assets at the end of the period
The change in defined benefit obligation over the period was:
29 September 2018
30 September 2017
£’000
£’000
29,779
812
595
(1,109)
(41)
30,036
32,148
735
595
(3,661)
(38)
29,779
29 September 2018
30 September 2017
£’000
£’000
Defined benefit obligation at the beginning of the period
Interest cost
Benefits paid
Actuarial gain on obligation
Defined benefit obligation at the end of the period
36,887
999
(1,109)
(445)
36,332
42,375
973
(3,661)
(2,800)
36,887
Contributions of £808,000 are expected to be made during the year ended 5 October 2019 by Shoe Zone Retail
Limited.
Financials
87
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 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%
+5%
-4%
+4%
-4%
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:
29 September 2018
30 September 2017
£’000
£’000
Cash at banks and in hand
Cash and cash equivalents
15,682
15,682
11,786
11,786
Financials
88
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 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
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
163
957
109
595
163
924
56
595
1,824
1,738
During the period, the key management personnel remuneration included within staff costs are as follows:
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
Short term employee benefits
Post-employment benefit
Employers national insurance
Key management personnel are considered to be the Directors of Shoe Zone plc.
£’000
1,121
27
120
1,268
£’000
949
24
114
1,087
Financials
89
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018 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
29 September 2018
52 weeks ended
30 September 2017
£’000
£’000
Numerator
Profit for the year and earnings used in basic and diluted EPS
9,517
7,883
52 weeks ended
29 September 2018
52 weeks ended
30 September 2017
No.
No.
Denominator
Weighted average number of shares used in basic and diluted
EPS
50,000,000
50,000,000
27. ULTIMATE CONTROLLING PARTY
The company is controlled by the Smith family albeit there is not a single controlling party.
Financials
90
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 29 SEPTEMBER 2018
Note
29 September 2018
30 September 2017
£’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
4
4
(1,311)
(1,307)
67,337
500
586
66,251
67,337
68,644
68,644
17
17
(1,146)
(1,129)
67,515
500
586
66,429
67,515
The company made a profit during the year of £4,972,000 (2017: £8,933,000).
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: 8 January 2019
Financials
91
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
At 1 October 2016
Profit for the period
Total comprehensive income for the period
Dividends paid during the year
Total contributions by and distributions to owners
At 30 September 2017
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
66,596
67,682
-
-
-
-
-
-
-
-
8,933
8,933
8,933
8,933
(9,100)
(9,100)
(9,100)
(9,100)
500
586
66,429
67,515
-
-
-
-
-
-
-
-
4,972
4,972
4,972
4,972
(5,150)
(5,150)
(5,150)
(5,150)
At 29 September 2018
500
586
66,251
67,337
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
92
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
1. ACCOUNTING POLICIES
Basis of preparation
The Company’s financial period is 52 weeks ended 29 September 2018. 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 £4,972,000 (30 September 2017: £8,933,000)
The financial statements have been prepared in accordance with Financial Reporting Standard
100 ‘Application of Financial Reporting Requirements’ and Financial Reporting Standard
101 “Reduced Disclosure Framework”. The principal accounting policies adopted in the
preparation of the financial statements are set out below. The policies have been consistently
applied to all the years presented, unless otherwise stated.
As permitted by FRS 101, the company has taken advantage of all the disclosure exemptions
available under that standard.
Accounting policies have been applied consistently throughout the period.
Investments
Investments held as fixed assets are stated at cost, less any provision for impairment.
Financials
93
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
2. FIXED ASSET INVESTMENTS
29 September 2018
30 September 2017
£’000
£’000
Cost
Impairment of investment in Castle Acres Development Limited
Total
70,586
(1,942)
68,644
70,586
(1,942)
68,644
The subsidiaries of the company, all of which are 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
100% owned by company
Shoe Zone Retail Limited
England & Wales Trading company
100% owned by company
Zone Property Limited
England & Wales Property holding company 100% owned by company
Zone Group Limited
England & Wales Non-trading company
100% owned by company
Shoe Zone (Ireland) Limited
England & Wales Non-trading company
Shoe Zone Pension Trustees Limited England & Wales Non-trading company
Shoe Fayre 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
The registered address of all of the above subsidiaries is Haramead Business Centre,
Humberstone Road, Leicester, LE1 2LH.
100% owned by Shoe
Zone Retail 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
100% owned by Zone
Group Limited
100% owned by Zone
Group Limited
Financials
94
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 29 SEPTEMBER 2018
CONTINUED
3. DEBTORS
29 September 2018
30 September 2017
Prepayments
£’000
4
£’000
17
4. CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
29 September 2018
30 September 2017
Amounts owing to group undertakings
Accruals
£’000
1,293
18
1,311
£’000
1,136
10
1,146
5. SHARE CAPITAL
29 September 2018
30 September 2017
Allotted, called up and fully paid:
50,000,000 ordinary shares of 1p each
6. RESERVES
At 30 September 2017
Profit for the financial period
Dividends paid during the year
At 29 September 2018
7. RELATED PARTY TRANSACTIONS
£’000
£’000
500
500
500
500
Merger reserve
Profit and loss account
£’000
£’000
586
-
-
586
66,429
4,972
(5,150)
66,251
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
95
Directors and Advisers
Solicitors
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London
EC2A 2EW
Corporate broker
Finncap
60 New Broad Street
London
EC2M 1JJ
Directors
A E P Smith
N J Davis
J C P Smith
J L Fearn
J W Sharman
C J Caminada
M J Collins
Secretary
J L Fearn
Registered office
Haramead Business Centre
Humberstone Road
Leicester
LE1 2LH
Auditor
PKF Cooper Parry Group
Limited
East Midlands Office
Sky View, Argosy Road
East Midlands Airport
Derby
DE74 2SA
Bankers
HSBC Bank plc
2-6 Gallowtree Gate
Leicester
LE1 1DA
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Kent
BR3 4TU
Shareholder Information
96
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 7 March 2019 at 10.00 a.m. to consider and, if
thought fit, pass the resolutions set out below. Resolutions
1 to 14 will be proposed as ordinary resolutions and
Resolutions 15 to 17 will be proposed as special
resolutions.
1.
2.
3.
To receive and adopt the Company’s annual accounts for the financial period ended 29
September 2018 and the associated reports of the Directors of the Company and the
auditors of the Company.
To declare a final dividend of 8.0p per ordinary share for the financial period ended 29
September 2018.
To declare a special dividend of 8.0p per ordinary share for the financial period ended 29
September 2018.
4.
To re-elect Anthony Smith as a Director.
5.
To re-elect Charles Smith as a Director.
6.
To re-elect Nick Davis as a Director.
7.
To re-elect Jonathan Fearn as a Director
8.
To re-elect Charlie Caminada as a Director.
9.
To re-elect Jeremy Sharman as a Director.
10. To re-elect Malcolm Collins as a Director
11. To re-appoint PKF Cooper Parry Group Ltd 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 2020.
12. To authorise the Directors of the Company to determine the remuneration of PKF
Cooper Parry Group Ltd as auditors of the Company.
13. That, in accordance with section 366 of the Companies Act 2006 (the ‘Act’), the
Shareholder Information
97
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
Company and its subsidiaries be and are hereby authorised, in aggregate, to:
a. make political donations to political parties and/or independent election candidates,
not exceeding £50,000.00 in total;
b. make political donations to political organisations other than political parties, not
exceeding £50,000.00 in total; and
c.
incur political expenditure, not exceeding £50,000.00 in total,
such authority to expire on the earlier of 31 March 2020 and the conclusion of the
Annual General Meeting of the Company to be held in 2020. 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.
14. 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
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.
ii.
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
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 2020 and the conclusion of the
Annual General Meeting of the Company to be held in 2020, 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.
Shareholder Information
98
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
15. That, subject to the passing of resolution 14 proposed at the annual general meeting of
the Company convened for 7 March 2019 (‘Resolution 14’) 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 Company 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 14 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 14, by way of a
rights issue only):
i.
ii.
to holders of Ordinary Shares in proportion (as nearly as may be practicable) to
their existing holdings; and
to holders of other equity securities as required by the rights of those securities
or as the Directors otherwise consider necessary or permitted by the rights of
those securities,
and so that the Directors may impose any limits or restrictions and make any
arrangements which they consider necessary or appropriate to deal with any treasury
shares, fractional entitlements, record dates, legal, regulatory or practical problems in,
or under the laws of, any territory or the requirements of any regulatory body or stock
exchange or any other matters.
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 2020 and the conclusion of the annual
general meeting of the Company to be held in 2020, 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.
16. That, subject to the passing of resolution 14 proposed at the annual general meeting
of the Company convened for 7 March 2019 (‘Resolution 14’) and in addition to any
authority granted pursuant to resolution 15 proposed at the annual general meeting
of the Company convened for 7 March 2019, 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 14 and/or by way of a sale of treasury
Shareholder Information
99
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
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 2020 and the conclusion of the annual
general meeting of the Company to be held in 2020, 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.
17. 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:
a.
b.
the aggregate nominal amount of such Ordinary Shares hereby authorised to be
acquired by the Company shall not exceed £50,000;
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 2020 and the conclusion of the annual general
meeting of the Company to be held in 2020, 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.
Shareholder Information
100
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
Form of Proxy
You will not receive a form of proxy for the 2019 Annual General Meeting in the post. Instead,
you will receive instructions to enable you to vote electronically and how to register to do so.
You will still be able to vote in person at the Annual General Meeting, and may request a hard
copy form of proxy directly from the registrars. Further details of these arrangements are set
out in the notes to this notice of Annual General Meeting.
By order of the Board
Jonathan Fearn
Company Secretary
Date: 8 January 2019
Registered Office
Haramead Business Centre
Humberstone Road
Leicester
Leicestershire
LE1 2LH
Shareholder Information
101
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. ONLINE VOTING
Members may vote online at www.signalshares.com. To register for this service, members will
need their Investor Code, which can be found on their share certificate. To be valid, an online
vote must be submitted no later than 48 hours before the time of the Annual General Meeting
or any adjournment of that meeting.
The submission of an online vote will not prevent a member from attending the Annual General
Meeting and voting in person.
3. 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. 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 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.
Shareholder Information
102
NOTES
CONTINUED
4. APPOINTMENT OF A PROXY USING A FORM OF PROXY
Members may request a hard copy proxy form directly from Registrar 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.
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.
5. APPOINTMENT OF A PROXY THROUGH CREST
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy
appointment service may do so by using the procedures described in the CREST Manual and
by logging on to the following website: www.euroclear.com/CREST. CREST personal members
or other CREST sponsored members, and those CREST members who have appointed (a)
voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who
will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the
appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated
in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the
information required for such instruction, as described in the CREST Manual. The message,
regardless of whether it constitutes the appointment of a proxy, or is an amendment to the
instruction given to a previously appointed proxy must, in order to be valid, be transmitted
so as to be received by the Registrar (ID RA10) no later than 48 hours before the time of the
Annual General Meeting or any adjournment of that meeting. For this purpose, the time of
receipt will be taken to be the time (as determined by the timestamp applied to the message
by the CREST Application Host) from which the Registrar is able to retrieve the message
by enquiry to CREST in the manner prescribed by CREST. After this time any change of
instructions to proxies appointed through 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
Shareholder Information
103
NOTES CONTINUED
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).
6. 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.
7. 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).
8. 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 5 March 2019 (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.
9. VOTING RIGHTS
As at 8 January 2019 the Company’s issued share capital consisted of 50,000,000 ordinary
shares of £0.01 each carrying one vote each. 75,000 shares are held by the Company
in treasury. Therefore, the total voting rights in the Company as at 8 January 2019 were
49,925,000 votes.
Shareholder Information
104
Shoe Zone plc
Annual Report & Accounts 2018
www.shoezone.com
email: investorrelations@shoezone.com
Shareholder Information
106