Contents
Strategic Report
Governance
Corporate governance statement
Board of Directors
Remuneration report
Directors’ report
Independent auditor’s report to the members of Shoe Zone plc
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
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14
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42
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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.
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1
Chief Executive’s report
In my second year back as Chief Executive, it is
disappointing I am reporting on a year impacted by
COVID-19. Despite this, there are positives such as the
continued growth of digital and the commitment and
focus of our loyal employees. The financial pressure
caused by COVID-19 has meant we now have debt on the
balance sheet for the first time in over 15 years.
The business model of digital, big box, hybrid and town centre stores remains the same
although the percentage contributions of each area are changing fast due to lockdown
restrictions, some of which will be a permanent shift.
In 2020, the business delivered revenue of £122.6m (2019: £162.0m). Underlying loss before
tax was £14.6m (2019: profit before tax £6.7m). During the year freehold property values
were reviewed to reflect the deteriorating retail property environment, resulting in a non-cash
adjustment of £2.3m. Loss per share is therefore -23.65p (2019: Earnings per share 11.43p).
Digital
Digital continues to be a key growth area especially during lockdown
periods when it was our only source of income. Our relatively new
autonomous digital department has been very effective at coping
with unexpectedly huge growth in sales and volumes.
Digital revenue was £19.3m (2019: £10.6m) with growth of 82% and
a profit contribution of £4.6m (2019: £3.0m). The slower increase
in contribution was due to heavy discounting in Lockdown 1 using
a “Buy One Get One Free” promotion to generate cash and rectify
overstocks. Discounting and resultant lower margins continue to be
an ongoing issue due to COVID-19. We also had to slow down our
digital exclusive lines due to lack of availability from suppliers. Gross
margin during April 2020 was 28.7% (2019: 65.4%), and in May was
52.4% (2019: 64.7%). Gross margin took 5 months to recover in the
financial year, and hence digital margin for the period as a whole was
51.7% (2019: 60.3%).
By the close of the year we grew the email database to 1.45m
engaged members (2019: 1.1m). The conversion rate grew to 4.47%
(2019: 3.48%) however this has been artificially inflated because of
stores not being open, although we are focused on taking advantage
of the increase in engaged database members going forward.
Returns continue to be extremely low at 8.4% (2019: 11%). The
returns’ rate has been lower than expected during lockdown due to
the mix of product sold. We expect this to return to c.10% as trading
patterns stabilise.
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Chief Executive’s Report CONTINUED
Big Box & Hybrid
The big box stores have increased by 9 to a total of 51 stores. Revenue was £17.1m (2019:
£15.6m) with a contribution loss of £0.2m (2019: £1.5m profit). This loss is entirely attributable
to the COVID-19 lockdown impact.
The hybrid stores have increased by 2 to a total of 6. These have performed well and will
be our strategy for town centre renewal over the next five years, which we anticipate will
contribute the majority of our town centre profitability.
Product
We revived the ‘Lilley & Skinner’ brand in Spring/Summer with premium sandals and Autumn/
Winter with boots. These are sourced direct from factories and deliver strong margins.
Osaga, Red Level, Stone Creek, Urban Territory were former Brantano brands acquired during
the year to develop for our big box and hybrid ranges. These brands will enhance our “made
to order” product ranges.
Clarks gave us notice to end our relationship due to their ongoing difficulties. This brand was
performing poorly for us, so will not be missed.
Property
We ended the period operating from 460 stores, having opened 10 (9 big box; 1 hybrid) and
closed 50. We completed 8 refits. Total capital expenditure of £2.8m (2019: £7.3m).
Rents at lease renewal have fallen by 30.9% (2019: 23.1%) saving £777k (2019: £631k). We
expect this trend will continue as property supply continues to outstrip demand.
Our average lease length is 2 years, giving us opportunity to respond to changes in any retail
location at short notice.
Dividend
The effect of COVID-19, has meant the business has taken on debt of £12m after being debt
free for over 15 years. Our defined benefit pension schemes remain at deficit of £10.6m and
will need greater support. Until the business is debt free, has tackled the pension deficit,
repaired the balance sheet and restored capital expenditure, the business will not be in a
position to make dividend payments. We anticipate this will not be before 2025.
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Chief Executive’s Report CONTINUED
Outlook
All of our stores are closed and we remain unable to forecast accurately due to current
uncertainties. Our experienced management team continues to make the right decisions as
new issues arise. However, we look forward to our customers returning to our stores on or after
12th April 2021 (England only), combined with our Digital platforms continuing to perform well.
Property
We have opened 1 hybrid store and completed 3 conversions (2 hybrid; 1 big box). When all
our stores reopen we will have 427 stores (52 big box; 9 hybrid; 367 town centre). We have
closed 33 stores which is faster than previously forecast, mainly due to COVID-19 and certain
towns becoming unviable due to the closures of complementary retailers.
We expect closures and openings to be at a similar level to 2020 (50 closures and 10
relocations). This is expected to continue for the next 2-3 years, and will have a negative cash
impact due to the closure costs of redundancies and dilapidations.
Capital expenditure
The rollout of big box stores has been suspended for the foreseeable future due to the
financial pressure caused by COVID-19.
The hybrid stores have performed well and we now plan to relocate 10 stores to this format
in 2021. These are largely funded by rent free periods from landlords, payback within 12
months and have a high success rate because the relocation of existing stores. Most of these
relocations are essential to protect store contributions in decent towns where our current lease
has expired.
Non-store capital expenditure is suspended unless it is business critical e.g. Payments software
update to comply with GDPR.
Product
The November 2020 and current lockdowns are having a material impact on sales and margins.
This will leave us with a Winter stock overhang of c. £7m at cost, that we are unable to deal
with until Autumn 2021, as it is currently locked away in non-trading stores. We have sufficient
warehouse stocks to fulfil digital orders on the majority of high-volume styles.
Freight rates post-Christmas have significantly increased to c. £6,500 per container (2019:
£1,900). We can’t forecast how long this will last but it is significant as we import on average
100 containers per month.
Owing to Force Majeure stock cancellations during Lockdowns 1–3, we now have an excess of
dollar hedges. We will keep the excess dollars for future use unless the business requires it for
sterling payments.
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Chief Executive’s Report CONTINUED
Conclusion
We have received government assistance via furlough payments, grants and rates relief.
We have also had cash flow assistance via VAT deferral, rent deferrals from landlords (some
discounts/COVID-19 clause reductions in rent), cancellations of stock with suppliers and other
cost savings.
We do not expect profits will return to pre COVID-19 levels for the foreseeable future.
Lockdown in November and January to mid-April so far in this financial year makes a return to
profit extremely unlikely until the financial period ending on 2nd October 2022 at the earliest.
I would like to thank all those who gave us assistance in 2020 and have continued to help us in
2021. We are working very well as a management team in finding innovative ways to secure a
future for our extremely dedicated “Shoe Zoners”.
Director’s statement of compliance with the duty to
promote the success of the group (Section 172(1)
statement)
The Director has acted in the way he considers, in good faith, promotes the success of
the group for the benefit of its members as a whole, and in doing so have given regard to
(amongst other matters):
External relationships
The vast majority of the Company’s products are manufactured overseas in China and to a
lesser extent in India and Europe. As a result, the Group is subject to the risks associated with
international trade, particularly those 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 Company’s policy for the payment of suppliers is to agree payment terms in advance and
to abide by such terms.
The Company continually develops strategies to further improve its strong relationship with its
suppliers.
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Chief Executive’s Report CONTINUED
Our people
Our long-term success depends on looking after the best interests of our employees,
customers, shareholders and suppliers.
All employees are able to contribute to the ongoing success of the business through regular
contact between management and employees. We promote equal opportunities and do not
tolerate discrimination of any kind. We operate a non-contractual profit share scheme that
rewards all employees, with service greater than one year, based on the overall company
profit performance. Details on the number of people employed can be found in note 7 of the
financial statements.
I am delighted that Terry Boot will be joining us on 8th March 2021 as our new Finance
Director. The Board meets regularly and communicates with our people on a regular basis to
ensure they all understand our strategic objectives both short and long-term.
I am incredibly proud of the effort of our employees in extremely difficult circumstances and
want to thank them for their ongoing commitment and hard work and the considerable efforts
needed in the months ahead.
Charity
We donated over £165,000 to charitable causes. These donations are mainly targeted at
children in poverty/difficult circumstances locally, nationally and internationally and delivered
via The Shoe Zone Trust.
Environment
We recognise the impact of our activities on the environment. We relentlessly review our
consumption of single use plastics and have eliminated them in all own label products.
We recycle all cardboard and plastic waste from our stores and head office. We use sea
transportation to reduce emissions. We are currently trialling our first Compressed Natural Gas
delivery lorry.
Political donations
During its last financial period the Group made no political donations and incurred no political
expenditure. The Group does not intend to make any such donations or incur any such
expenditure this year.
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Financial Review
In the 52 weeks to 3 October 2020, revenues fell by 24.4%
to £122.6m (2019: £162.0m) following the loss of trade
from our retail stores due to COVID-19. We ended the
year with 460 stores, a net reduction of 40 stores on 2019.
The Loss before Tax was £14.6m (2019: Profit before Tax £6.7m). This significant reduction in
Profit before Tax was due to COVID-19 reversed in part by furlough support monies and rate
free periods during lock-down. We continue to focus on cost reductions in rent, rates and
central costs.
Digital growth has been strong with revenues of £19.3m (2019: £10.6m). Profit contribution
from Digital increased by 15.3% to £4.6m (2019: £3.0m) in the year. We continue to grow and
invest in our digital presence and recognise the growth potential this provides.
During the year, the company has adopted IFRS 16. This has had a significant impact on both
our income statement account and statement of financial position. Details of the impact can be
found in note 1.
During the year, with the back drop of COVID-19 and increased pressure on retail space we
undertook a review of the value of our freehold properties. This resulted in a one off non-cash
adjustment to profits of £2.3m
Product Gross Margin decreased to 61.4% (2018: 62.7%) due to digital promotional activity
during lock-down and a buy one get one free promotion when stores reopened.
Administration expenses increased by £1.8m to £13.9m (2019: £12.1m) in part due to
COVID-19 with redundancy costs rising by £1.2m. Distribution costs rose by £0.7m to £6.9M
(2019: £6.2m) with the higher costs of digital post and packing.
The effective rate of corporation tax for the year was 18.5% (2019: 19.4%) creating £2.7m of
taxable losses to be offset against future profits.
Earnings per Share are therefore a (23.81p) (2019: 11.43p).
Capital expenditure fell to £2.8m (2019: £7.3m) as we conserved cash during lockdown. The
expenditure in the early part of the financial year was for expansion of our Big Box portfolio,
re-fits and IT development projects.
For the first time in over 15 years the Group has taken on debt to mitigate the loss of trade
during COVID-19. The business has a loan with National Westminster Bank supported by the
COVID-19 Large Business Interruption Loan Scheme. At the year-end the draw down was
£7.0m which we extended to £12.0m in October to cover the cash flow pressure through
further lockdowns.
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Financial Review CONTINUED
The pension liability has increased by £0.9m (2019: £3.4m) from £9.7m to £10.6m. During the
year, deficit reduction contributions of £1.4m were made between the two schemes.
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.
Derivative financial assets of £(0.1m), compared to £2.7m in the prior year, represents the
market to market valuation of the derivative hedges in place at the end of the financial year.
Due to stock cancellations during the pandemic Shoe Zone is over hedged against future dollar
purchases, this will be reflected in larger variations in exchange differences in future periods.
The Company generated £15.9m cash from operations, a year on year increase of £1.7m
resulting in a net cash position of £6.3m (2019: £11.4m) at the year end. The reported cash
position (£13.3m) includes the £7.0m CLBILS loan. The Group’s current bank facilities also
include an on demand overdraft facility of £3.0m, which has not been used during the year.
With the growing pension scheme liability, loan facility and ongoing pressure from COVID-19
and lockdowns the Board is not proposing a final dividend this year and given these pressures
on our business will be unlikely to pay a dividend until 2025 at the earliest.
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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 %
15.7%
2019: 6.5%
Online sales as a percentage of total sales. Online sales
exclude orders placed in store.
The online participation increased by 920 basis points to 15.7% (2019: 6.5%). This
performance reflects the growth of the Shoe Zone website sales, the offering on
eBay and Amazon, and reflects the lockdown periods restricting store sales.
PRODUCT GROSS MARGIN %
61.4%
2019: 62.7%
Product Gross Profit expressed as a percentage of
revenue.
Product Gross Margin remained stable at 61.4% (2019: 62.7%). This decrease
reflects the increased promotional activity both in store and on digital platforms
as a result of Covid restrictions.
CASH BALANCE
£6.3m
2019: £11.4m
Cash held by the Group at the period end.
We finished the year with a net cash balance of £6.3m (2019: £11.4m).
EARNINGS PER SHARE
(23.81p)
2019: 11.43p
The percentage movement in Earnings per Share.
Earnings per Share decreased to (23.81p) (2019: 11.43p).
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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 footwear 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 best sellers on a weekly basis
and evaluates the performance of new lines.
Economic factors
Poor economic conditions in the UK, the Republic of Ireland and globally, as well as economic
factors such as unemployment levels, consumer debt levels, lack of available credit, energy
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Principal Risks and
Uncertainties CONTINUED
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.
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 and Europe. 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.
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Principal Risks and
Uncertainties CONTINUED
The Board has sufficient internal processes to ensure that it receives feedback from stores
and customers on the design and quality of its products. The business’ reputation is carefully
managed through internal procedures by the Board.
Loss of key operating site
The Group has a single distribution centre and its head office located at premises in Leicester
and therefore the Group is currently entirely dependent on the continued efficient operation
of the Leicester premises. Any disruption to the operation of the Leicester premises may
therefore have an adverse effect upon the Group’s financial condition, operations and business
prospects. The premises may suffer prolonged power or equipment failures, failures in its IT
systems or networks or damage from fire, flood, or other disasters or unforeseen events which
may not be covered by, or may be in excess of, its insurance coverage. Damage resulting
from any of these events may take considerable time to repair. A prolonged period before
rectification could have an adverse effect upon the Group’s financial condition, operations and
business prospects.
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
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 are in use and its
appropriateness regularly reviewed.
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Principal Risks and
Uncertainties CONTINUED
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 the post Brexit
environment presents. Within the Shoe Zone product range, less than 2.5% of all stock is
purchased from within the EU, this limits any potential risks.
The import of finished product from the Far East represents the main areas of risk, initial
disruption at ports has now been resolved and deliveries have only been marginally impacted.
No major instability of the Sterling/Dollar exchange rate has been seen and Shoe Zone is now
fully hedged for the forthcoming financial year.
We continue to monitor both of these risk factors.
COVID-19
The COVID-19 pandemic has presented all retailers with challenges and Shoe Zone has not
been immune to this.
During the pandemic, Shoe Zone has taken a CLBILS loan (see note 18) and has made use of
the government job retention scheme and rating relief.
Shoe Zone remains in a satisfactory cash position despite the current trading environment.
With the prospect of high street stores reopening following the initial success of the
government vaccine programme, we look forward to increased demand returning to our high
street stores.
Going concern
Please see page 23 in Director’s report regarding going concern.
The strategic report was approved by the Board.
On behalf of the Board
Anthony Smith
Chief Executive
Date: 5 March 2021
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13
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. The code states what are considered to be
appropriate corporate governance arrangements for companies. It provides 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.
Charles Smith
Chairman
Date: 5 March 2021
Governance
14
Corporate Governance
Statement CONTINUED
THE TEN PRINCIPLES OF THE QCA CODE
CATEGORY: DELIVER GROWTH
1
CATEGORY: DELIVER GROWTH
2
PRINCIPLE: ESTABLISH A STRATEGY AND
BUSINESS MODEL WHICH PROMOTES LONG-
TERM VALUE FOR SHAREHOLDERS.
PRINCIPLE: SEEK TO UNDERSTAND AND MEET
SHAREHOLDER NEEDS AND EXPECTATIONS.
• Shoe Zone is a footwear retailer. Its strategy is
based on three pillars:
• Digital growth
• Town Centre renewal
• Big Box expansion
• This business model has been developed
over many years and has proved successful in
both profit performance and cash generation.
Growth strategies have been limited
through the year due to lockdowns and cash
preservation strategies.
• The Chief Executive and the Finance Director
are primarily responsible for maintaining
dialogue with shareholders, supported by the
Company’s broker.
• The Chief Executive and Finance Director 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.
Governance
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15
Corporate Governance
Statement CONTINUED
CATEGORY: DELIVER GROWTH
3
CATEGORY: DELIVER GROWTH
4
PRINCIPLE: TAKE INTO ACCOUNT WIDER
STAKEHOLDER AND SOCIAL RESPONSIBILITIES
AND THEIR IMPLICATIONS FOR LONG TERM
SUCCESS.
PRINCIPLE: EMBED EFFECTIVE RISK
MANAGEMENT, CONSIDERING BOTH
OPPORTUNITIES AND THREATS, THROUGHOUT
THE ORGANISATION.
• 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.
• 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
Chairman and Chief Executive, 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 ongoing issues that it may have been
caused.
• 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.
Governance
Governance
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16
Corporate Governance
Statement CONTINUED
5
CATEGORY: MAINTAIN A DYNAMIC
MANAGEMENT FRAMEWORK
6
CATEGORY: MAINTAIN A DYNAMIC
MANAGEMENT FRAMEWORK
PRINCIPLE: MAINTAIN THE BOARD AS A WELL-
FUNCTIONING, BALANCED TEAM LED BY THE
CHAIR.
PRINCIPLE: ENSURE THAT BETWEEN THEM
THE DIRECTORS HAVE THE NECESSARY UP-TO-
DATE EXPERIENCE, SKILLS AND CAPABILITIES.
• The Board consists of three Executive Directors
and two Non-executive Directors.
• Please refer to the Investor Relations section of
the website for further details of the Directors.
• The Executive Chairman is Charles Smith,
who is also a major shareholder with 22.43%
shareholding.
• The Senior non-executive director is Victoria
Norrish, who is the Chair of the Audit
Committee.
• The remaining Executive board members are
Anthony Smith, Chief Executive and Terry
Boot, Finance Director. Anthony Smith is the
largest shareholder with 28.05%.
• The remaining Non-executive Director is
Malcolm Collins. He is Chairman of the
Remuneration Committee.
• Within the Executive Directors, Anthony
Smith is a full time Director. Charles Smith is
employed for four 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 accounting, footwear retail and
supply chain expertise.
Governance
Governance
17
17
Corporate Governance
Statement CONTINUED
7
CATEGORY: MAINTAIN A DYNAMIC
MANAGEMENT FRAMEWORK
8
CATEGORY: MAINTAIN A DYNAMIC
MANAGEMENT FRAMEWORK
PRINCIPLE: EVALUATE BOARD PERFORMANCE
BASED ON CLEAR AND RELEVANT
OBJECTIVES, SEEKING CONTINUOUS
IMPROVEMENT.
PRINCIPLE: PROMOTE A CORPORATE CULTURE
THAT IS BASED ON ETHICAL VALUES AND
BEHAVIOURS.
• The Company seeks to promote an open
culture where all employees feel that they
contribute to the ongoing success of the
business.
• We operate a non-contractual profit share
scheme that rewards all employees, with
service greater than one year, based on the
overall company profit performance.
• The Executive Board consists of Anthony
Smith, Charles Smith and Terry Boot.
• Within the organisation there is also a wider
Management Team that has functional
responsibility for the business.
• The Board is constantly reviewing its own
performance and that of the Management
Team 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
Governance
18
18
Corporate Governance
Statement CONTINUED
9
10
CATEGORY: BUILD TRUST
CATEGORY: MAINTAIN A DYNAMIC
MANAGEMENT FRAMEWORK
PRINCIPLE: MAINTAIN GOVERNANCE AND
PROCESSES THAT ARE FIT FOR PURPOSE AND
SUPPORT GOOD DECISION-MAKING BY THE
BOARD.
PRINCIPLE: COMMUNICATE HOW THE
COMPANY IS GOVERNED AND ITS
PERFORMANCE BY MAINTAINING A DIALOGUE
WITH SHAREHOLDERS AND OTHER RELEVANT
STAKEHOLDERS.
• 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, Chief
Executive and Finance Director to discuss
performance and future plans.
• 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.
• 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 pension negotiations,
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.
Governance
19
Corporate Governance
Statement CONTINUED
The Board
The Board comprises three Executive Directors (including the Chairman) and two 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; and
• approval of communications with shareholders and the market.
Details of each of the Directors are given in their biographies on pages 14.
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 QCA 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
20
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 all 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 Victoria Norrish. 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 15.
Governance
21
Board of Directors
Chairman
CHARLES SMITH
Charles joined Shoe Zone in 1998, becoming Chief Operating Officer in 2001. He was
appointed Chairman in January 2020. Charles is a founder and Trustee of the
Shoe Zone Trust.
Chief Executive
ANTHONY SMITH
Anthony joined Shoe Zone in 1993 as Marketing Manager before becoming Chief Executive
in 1997. Anthony was appointed Chairman in June 2016. He was re-appointed as Chief
Executive in August 2019. Anthony is a founder and Trustee of the Shoe Zone Trust.
Finance Director
TERRY BOOT
Terry joined Shoe Zone in March 2021 as Finance Director. He was most recently Finance
Director and then CEO at The Company of Master Jewellers having prior to that been in the
footwear industry for 26 years. From 1998 to 2016, he was the Finance Director at Brantano.
Company Secretary
CATHERINE BOWEN
Catherine joined Shoe Zone in September 2018 as General Counsel and was appointed
Company Secretary in September 2019. Catherine qualified as a solicitor in 2001 and has
extensive legal experience in the retail sector, and is a specialist in landlord and tenant
matters. Catherine also taught, part time, on the Law Degree at University of Leicester for
eight years, while continuing to practice.
Non-executive Director
MALCOLM COLLINS
Malcolm joined as a Non-Executive Director in June 2016. Malcolm was most recently Group
Buying and Design Director for footwear and accessories at New Look, overseeing the
Group’s £550m footwear division. Prior to Malcolm’s 16 years at New Look, he worked for 23
years at Clarks Shoes including 13 years as Women’s Footwear Buyer.
Non-executive Director
VICTORIA NORRISH
Victoria joined as a Non-Executive Director in August 2020. Victoria joined Blue Light Card
Limited in January 2021 as Chief Financial Officer. She was previously at TheWorks.co.uk plc
from 2008 to 2020 as Supply Chain Director (January 2019 to December 2020), Strategic
Development Director (July 2018 to January 2019) and Finance Director (November 2008 to
July 2018). She commenced her accountancy career as an auditor with KPMG and
Godkin & Co.
Governance
22
Remuneration Report
This is the Company’s sixth Directors’ Remuneration
Report since it listed on AIM in May 2014.
The Remuneration Committee consists of the Non-executive Directors. Malcolm Collins is the
Chairman and Victoria Norrish also serves on the Committee.
Anthony Smith and Charles Smith may attend the Committee meetings by invitation.
Duties
The main duties of the Remuneration Committee are set out in its Terms of Reference adopted
25 April 2014 and include:
• responsibility for agreeing, with the Board, the framework or broad policy for the
remuneration of all Executive Directors of the Company, including pension rights,
compensation payments bonuses, incentive payments, share options and benefits in kind;
• obtain reliable, up-to-date information about remuneration in other companies of
comparable scale and complexity and market practice generally;
• 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; and
• agree the policy for authorising claims for expenses from the Directors.
Governance
Governance
23
23
Remuneration Report
CONTINUED
Directors and Directors’ interests
The Directors listed below all served through 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
Charles Smith
Non-executive Directors
Victoria Norrish
Malcolm Collins
Number of
ordinary
shares
Percentage
of issued
share capital
14,025,837
(1)
11,213,538
(2)
Nil
Nil
28.05%
22.43%
Nil
Nil
(1)
(2)
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 Sheepy Magna Investments Limited, an entity jointly owned by
Charles and Sian Smith
Governance
Governance
24
24
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
Charles Smith
Nick Davis
Jonathan Fearn*
Peter Foot*
Non–executive Directors
Malcolm Collins
Victoria Norrish
Jeremy Sharman*
Charlie Caminada*
Total
FY20
350,000
FY19
250,000
FY20
224,000
FY19
120,000
FY20
FY19
-
194,792
FY20
101,896
FY19
115,000
FY20
FY19
30,403
-
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
19,334
20,000
2,828
-
27,000
30,000
16,613
30,000
FY20
772,074
FY19
759,792
* Resigned before date of signing
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43,464
53,342
23,329
19,412
-
11,661
9,477
11,426
2,153
-
-
-
-
-
-
-
-
-
- 393,464
-
303,342
- 247,329
-
-
139,412
-
23,375
229,828
12,228 123,601
13,800
140,226
-
-
-
-
-
-
-
-
-
-
32,256
-
19,334
20,000
2,828
-
27,000
30,000
16,613
30,000
78,423
95,841
12,228 862,725
37,175
892,808
Governance
Governance
25
25
Remuneration Report CONTINUED
Long Term Incentive Plan (LTIP)
All shares owed to Jonathan Fearn for previous years’ performance were vested in November
2019. In addition, the Company have awarded Jonathan a net amount of 10,000 shares in
compensation for the termination of the Shoe Zone LTIP scheme. These shares were also
vested in November 2019.
The LTIP scheme has now been discontinued.
Directors’ Service contracts and employment letters
The Executive Directors have entered into service agreements with the Company with effect
from 1 May 2017 or in the case of Peter Foot his date of commencement. Salaries for the up-
coming year are set out below:
Anthony Smith
Charles Smith (1)
Peter Foot (resigned 19 February 2021)
Terry Boot (started 8 March 2021)
(1) Now contracted for 4 days per week.
£
350,000
224,000
125,000
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 and Charles Smith
and 6 months for Terry Boot. Other fixed elements of the Executive Directors’ remuneration
comprise a company car provision, life assurance and private medical insurance. Terry Boot is
entitled to a Pension Contribution of 12% basic salary.
The Company may elect to terminate the employment of each Executive Director by making a
payment in lieu of notice equal to their basic salary payable in monthly instalments.
Each of the Executive Directors has agreed to post-termination restrictions in order to protect
confidential information, trade secrets and business connections. These restrictions last for 9
months.
Governance
26
Remuneration Report
CONTINUED
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:
Malcolm Collins
Victoria Norrish
Jeremy Sharman*
Charlie Caminada*
* Resigned before date of signing
£
20,000
30,000
30,000
30,000
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
Malcolm Collins
Chairman of the Remuneration Committee
Date: 5 March 2021
Governance
27
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020
The Directors present their Annual Report and audited
financial statements of the Company and the Group for
the 52 weeks ended 3 October 2020.
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 stores 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 22 of the financial statements.
The Company’s share capital consists of one class of ordinary shares. As at 3 October 2020
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 5th March 2020, 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 2021 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 are listed on the Directors and Advisors page.
Directors’ Interests
Information about the Directors’ interests in the shares of the Company can be found in the
Directors’ Remuneration Report.
Governance
28
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
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 3,428 (05 October 2019: 3,519) 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.
All employees are able to contribute to the ongoing success of the business through regular
contact between management and employees. We promote equal opportunities and do not
tolerate discrimination of any kind.
Annual general meeting
The Company’s seventh AGM will be held on Wednesday, 31 March 2021 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 107 to 110.
In light of the current guidance issued by the UK Government restricting social gatherings,
which would prohibit shareholders from attending the Annual General Meeting if it remains
in place at the date of the Annual General Meeting, and the general uncertainty on what
additional and/or alternative measures may be put in place should the current guidance be
amended, the Board regretfully requests that shareholders do not attend the Annual General
Meeting in person (irrespective of whether the restrictions on social gatherings remain in place
at the date of the Annual General Meeting). The Annual General Meeting will be convened
with the minimum quorum of shareholders required in order to conduct the business of the
Annual General Meeting and this will be facilitated by the Company’s management.
Governance
29
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
With this in mind, shareholders are strongly encouraged to exercise their vote by appointing
the Chairman of the Annual General Meeting as their only proxy and providing voting
instructions in advance of the Annual General Meeting, in accordance with the instructions
explained in the Notes attached to this Notice of Annual General Meeting. In the interests of
health and safety, shareholders and any appointed proxies or corporate representatives (other
than the Chairman of the Annual General Meeting or another member of the Company’s
management attending the Annual General Meeting to facilitate a quorum) will not be
admitted to the Annual General Meeting.
The Company will continue to closely monitor the developing impact of COVID-19 and the
latest guidance from the UK Government. If the guidance changes significantly such that the
arrangements regarding attendance at the Annual General Meeting can change, the Company
will notify shareholders of any such changes via Regulatory Information Service.
Set out below is an explanation of certain resolutions which will be proposed at the AGM.
Appointment of Directors (resolutions 2 to 6)
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 election or re-election (as
appropriate) at the AGM. Biographical details of each Director appear on page 22. 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 9)
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
30
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
Authority to allot shares (resolution 10)
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 10 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 2 March 2021. 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 2 March 2021).
Disapplication of pre-emption rights (resolutions 11 and
12)
Resolutions 11 and 12 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 11 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 11 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 2 March 2021. This resolution also disapplies statutory pre-emption
rights to the extent necessary to facilitate rights issues.
Resolution 12 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 2 March 2021) 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.
Governance
31
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
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.
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 2022 or 31 March 2022, whichever is earlier.
Authorisation for the Company to purchase its own shares
(Resolution 13)
Resolution 13 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 a manner as the Directors may determine from time to time, subject to the
limitations set out in the resolution. If Resolution 13 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 2 March 2021. Resolution 13 also sets out the
minimum and maximum price that the Company may pay for purchases of its ordinary shares.
If Resolution 13 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 2022 or 31
March 2022, 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 to employees.
Form of proxy
Please note you will not receive a form of proxy for the March 2021 AGM in the post. You
may 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. 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 0371
664 0391 if calling from the United Kingdom, or +44(0)371 664 0391 if calling from outside the
United Kingdom.
Calls are charged at the standard geographical rate and will vary by provider. 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.
Governance
32
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
In normal circumstances voting online or appointing a proxy will not preclude a shareholder
from attending the AGM and voting in person. However please note the restrictions on
attendance at the AGM this year in light of the ongoing COVID-19 guidance. As a result,
shareholders are encouraged to appoint a proxy.
All online votes or proxy appointments should be submitted so as to be received no later than
10.00 a.m. on 29 March 2021.
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
Cooper Parry Group Limited have issued their independent report on these financial
statements to the shareholders of Shoe Zone plc. The report can be found on pages 37 to 41.
The auditor, Cooper Parry Group Limited 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.
Governance
33
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
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.
Streamlined Energy and Carbon Reporting (SECR)
Energy consumption breakdown (kWh):
Electricity
Natural gas
Transport fuel
Other fuels
Totals
Greenhouse gas emissions (tCO2e):
From combustion of fuel
Natural gas
Transport fuel for company vehicles
Transport fuel for rental vehicles
Other fuels
Subtotal
From Purchased Electricity, Steam, Heat & Cooling
From Other Activities inc. Process & Fugitive
Subtotal
Total gross emissions
Renewable electricity
Carbon offsets
Domestic carbon units
Total net emissions
Intensity ratios
Annual MWh per £m Turnover
Annual tCO2e per £m Turnover
13,642,297
2,300,880
428,475
-
16,371,652
423.06
57.34
48.29
-
528.69
3,180.57
23.53
3,204.10
3,732.79
-
-
-
3,732.79
133.58
30.46
Governance
34
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
Going Concern
The Directors consider that the business is a going concern and that it is appropriate to
prepare the financial statements on a going concern basis. In reaching this conclusion, the
Directors have assessed the Group’s current performance and position and factors that may
affect the Group’s future prospects.
The Group’s financial position is satisfactory despite the current trading environment. It also has
in place a £3.0m overdraft facility. During the pandemic the company took a COVID-19 Large
Business Interruption Loan Scheme (CLBILS) loan of £7.0m, this requires the Group to comply
with certain financial covenants, these have been met during the year and since year end. 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.
With the prospect of high street stores reopening following the initial success of the
Government vaccine programme, we look forward to increased demand returning to our high
street stores combined with maintaining the growth levels of our digital presence.
Digital performance growth combined with the satisfactory cash position gives the Directors a
reasonable basis on which to satisfy themselves that the business is a going concern.
Events after the year-end
Between 3 October 2020 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.
Governance
35
DIRECTORS’ REPORT
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
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; and
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure that the financial statements
comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements
are made available on a website. Financial statements are published on the company’s
website in accordance with legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the company’s website is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing 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 they are aware, there is no relevant audit information of which the Company’s
auditors are unaware; and
• They have taken all reasonable steps that he ought to have taken as a Director in order to
make himself aware of any relevant audit information and to establish that the Company’s
auditor are aware of that information.
Approved by the Board and signed on its behalf:
Anthony Smith
Chief Executive
Date: 5 March 2021
Governance
36
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 03 October 2020 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 03 October 2020 and of the group’s loss 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
37
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.
• We performed sensitivity analysis to determine whether an impairment would be required
if costs increase at a higher than forecast rate.
Governance
38
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC CONTINUED
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 £300,000. This has
been determined with reference to the benchmark of the group’s loss before tax which we
consider to be an appropriate measure for a group of companies such as these. Materiality
represents 3% of group loss before tax.
The materiality for the parent company financial statements as a whole was set at £15,000. 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 £442,000, 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
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
Governance
39
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC CONTINUED
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 35, the
Directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the group’s
and the parent company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the group or the parent company or to cease operations, or
have no realistic alternative but to do so.
Governance
40
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SHOE ZONE PLC CONTINUED
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 parent 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 parent 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 Cooper Parry Group Limited
Chartered Accountants and Statutory Auditor
Sky View
Argosy Road
East Midlands Airport
Castle Donington
Derby
DE74 2SA
Date: 12 January 2021
Governance
41
CONSOLIDATED INCOME STATEMENT FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
Note
4, 8
5
5
5
9
9
10
28
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
(Loss)/Profit from operations
Finance income
Finance expense
(Loss)/Profit before taxation
Taxation
(Loss)/Profit attributable to equity
holders of the parent
(Loss)/Profit Earnings per Share –
basic and diluted
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
122,568
(114,455)
8,113
(13,928)
(6,895)
(12,710)
10
(1,901)
(14,601)
2,698
(11,903)
(23.81p)
£’000
162,047
(136,965)
25,082
(12,081)
(6,154)
6,847
44
(192)
6,699
(985)
5,714
11.43p
Financials
42
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE
INCOME FOR THE 52 WEEKS ENDED 3 OCTOBER 2020
Note
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
(Loss)/profit for the period
Items that will not be reclassified subsequently to
the income statement
Remeasurement losses on defined benefit pension
scheme
Movement in deferred tax on pension schemes
25
21
Items that will be reclassified subsequently to the
income statement
£’000
(11,903)
(2,114)
899
£’000
5,714
(4,177)
707
Fair value movements on cash flow hedges
(2,124)
648
Cash flow hedges recognised in inventories
Tax on cash flow hedges
Other comprehensive income / (expense) for the
period
Total comprehensive income for the period
attributable to equity holders of the parent
363
(2,973)
(14,879)
(126)
(2,948)
2,766
Financials
43
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 3 OCTOBER 2020
Note
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
Assets
Non-current assets
Property, plant and equipment
Right of use assets
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
Lease liabilities
Derivative financial liability
Bank Loan
Provisions
Corporation tax liability
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Bank Loan
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
13
21
14
15
16
26
17
13
16
18
19
17
13
18
19
25
22
£’000
16,967
42,387
5,617
64,971
26,698
2,735
-
13,266
42,699
107,670
(17,316)
(19,914)
(105)
(1,944)
(1,471)
(137)
(40,887)
-
(37,475)
(5,056)
(1,260)
(10,594)
(54,385)
(95,272)
12,398
500
2,662
(116)
9,352
12,398
£’000
22,143
-
1,677
23,820
28,511
6,078
2,726
11,417
48,732
72,552
(27,429)
-
-
-
(715)
(440)
(28,584)
(2,432)
-
-
(370)
(9,736)
(12,538)
(41,122)
31,430
500
2,662
1,645
26,623
31,430
The financial statements were approved and authorised for issue by the Board of Directors and
were signed on its behalf by:
Anthony Smith, Chief Executive, Date: 5 March 2021
Financials
44
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 3 OCTOBER 2020
Share
capital
Merger
reserve
Cash flow
hedge
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
500
2,662
1,123
34,129
38,414
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
648
(126)
5,714
5,714
(4,177)
(4,177)
-
707
648
581
522
2,244
2,766
-
-
(9,750)
(9,750)
(9,750)
(9,750)
At 29 September 2018
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 5 October 2019
500
2,662
1,645
26,623
31,430
Impact on transition to IFRS 16 (note 13)
-
-
-
(4,153)
(4,153)
At 6 October 2019
Loss 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
500
2,662
1,645
22,470
27,277
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(11,903)
(11,903)
(2,114)
(2,114)
(2,124)
-
(2,124)
363
899
1,262
(1,761)
(13,118)
(14,879)
-
-
-
-
-
-
At 3 October 2020
500
2,662
(116)
9,352
12,398
Share capital comprises the nominal value of shares subscribed for.
The merger reserve has arisen as a result of the application of merger accounting to the group
reorganisation on 26 March 2014.
The cash flow hedge reserve comprises of gains/losses arising on the effective portion of
hedging instruments and is carried at fair value in a qualifying cash flow hedge.
Retained earnings are all other net gains and losses and transactions with owners (e.g.
dividends) not recognised elsewhere.
Financials
45
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
Note
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
Operating activities
(Loss)/Profit after tax
Corporation tax
Finance income
Finance expense
Depreciation of property, plant and equipment
12
Fixed asset impairment and loss on disposal of property,
plant and equipment
Right of use asset profit on disposal, depreciation and
impairment
Pension contributions paid
Decrease / (increase) in trade and other receivables
Decrease / (increase) in foreign exchange contract
Decrease / (increase) in inventories
(Decrease) / Increase in trade and other payables
Increase in provisions
Cash generated from operations
Net corporation tax paid
Net cash flows from operating activities
Investing activities
Purchase of property, plant and equipment
Interest received
Net cash used in investing activities
New secured loan repayable by instalments
Repayments of secured loan
Capital element of lease repayments
Interest paid
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
1
2
3
4
4
5
6
7
8
12
18
18
11
26
£’000
(11,903)
(2,698)
(10)
1,901
3,545
4,642
23,998
(1,466)
18,009
(810)
336
2,184
(5,498)
1,646
(2,142)
15,867
(283)
15,584
(2,809)
10
(2,799)
10,000
(3,000)
(17,719)
(217)
-
(10,936)
1,849
11,417
13,266
£’000
5,714
985
(44)
192
3,258
3,034
-
(890)
12,249
157
30
(1,451)
3,150
83
1,969
14,218
(1,488)
12,730
(7,290)
44
(7,246)
-
-
(9,750)
(9,750)
(4,266)
15,683
11,417
Financials
46
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
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 3 October
2020.
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 3 October 2020. The results for all subsidiary
companies are consolidated using the acquisition method of accounting.
Where the company has control over an investee, it is classified as a subsidiary. The company
Financials
47
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES
CONTINUED
controls an investee if all three of the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the practical ability to direct
the relevant activities of the investee without holding the majority of the voting rights. In
determining whether de-facto control exists the company considers all relevant facts and
circumstances, including:
• The size of the company’s voting rights relative to both the size and dispersion of other
parties who hold voting rights.
• Substantive potential voting rights held by the company and by other parties.
• Other contractual arrangements.
• Historic patterns in voting attendance.
The consolidated financial statements present the results of the company and its subsidiaries
(‘the Group’) as if they formed a single entity. Intercompany transactions and balances between
group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using
the acquisition method. In the statement of financial position, the acquiree’s identifiable
assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the consolidated statement
of comprehensive income from the date on which control is obtained. They are deconsolidated
from the date on which control ceases.
Going Concern
The Directors consider that the business is a going concern and that it is appropriate to
prepare the financial statements on a going concern basis. In reaching this conclusion, the
Directors have assessed the Group’s current performance and position and factors that may
affect the Group’s future prospects.
The Group’s financial position is strong with healthy positive cash balances. It also has in place
a £3.0m overdraft facility. During the pandemic the company took a CLBILS loan of £7.0m, this
requires the group to comply with certain financial covenants, these have been met during the
year and since year end. 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.
With the prospect of high street stores reopening following the initial success of the
government vaccine programme, we look forward to increased demand returning to our high
street stores combined with maintaining the growth levels of our digital presence.
Financials
48
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS 16 Leases
IFRS 16 Leases is effective for the Group from 6 October 2019 and replaces existing
lease guidance under IAS 17 Leases. IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of all leases.
Leases in which the Group is a lessee
A majority of the Groups trading stores are leased. The Group also has a number of non-
property leases relating to vehicles and other equipment.
Under IFRS 16 on commencement of a lease the Group recognises on the Balance Sheet a
right of use asset and a lease liability representing its obligation to make payments under the
lease.
The right of use asset is established as the cost value of the initial measurement of the lease
liability adjusted for any lease payments made at or before commencement and any lease
incentives received or premiums paid. The Group depreciates the right of use assets on a
straight line basis from the lease commencement date to the earlier of the end of the useful
life of the right of use asset or the end of the lease term. The Group assesses the right of use
asset for impairment on a periodic basis. The Group has not factored the dilapidation provision
into the right of use asset as the provision relates to general ‘wear and tear’ as opposed to
structural changes.
The lease liability is initially measured as the present value of the remaining lease payments,
discounted using the interest rate based on the Groups incremental borrowing rate.
Subsequent to initial measurement, the liability will be reduced for lease payments made and
increased by interest charged on the net liability value. The carrying value of the lease liability
is periodically remeasured to reflect any modification event such as any change to in-substance
fixed payments or change in the lease term. When the lease liability is remeasured the
corresponding adjustment is reflected in the right of use asset or profit and loss account if the
right of use asset is already reduced to zero.
The Group has elected to account for short term leases and leases of low-value assets using
the practical expedient method. Instead of recognising a right of use asset and a lease liability,
the payments for these are treated as an expense on a straight line basis over the term of
the lease. The total value of leases/agreements where the company has used the practical
expedient are disclosed in note 13.
Leases in which the Group is a lessor
Lessor accounting remains the same as that applied under IAS 17 and applied to previous
accounting periods. At inception the lease is assessed as being an operating or finance lease.
This assessment is based on an evaluation as to whether the lease transfers substantially all
the risks and rewards to the underlying asset. If this is the case then the lease is identified as a
finance lease. If not the lease is recognised as an operating lease.
The Group has a very small number of leases where it is intermediate lessor.
Financials
49
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS 16 transition note
The Group has adopted IFRS 16 Leases on 6 October 2019 using the modified retrospective
approach. The cumulative effect of adopting IFRS 16 has been recognised as an adjustment
to the opening balance sheet as at 6 October 2019, with no restatement of comparable
information and a £4.2m adjustment (debit) to retained earnings.
Under the modified retrospective approach the opening right of use asset can be measured in
one of two ways:
(a) As if the Group had applied IFRS 16 since the commencement date using its
incremental borrowing rate at the date of initial application; or
(b) Measured at an amount equal to the lease liability at the date of initial application.
The right of use assets for property leases were measured on a retrospective basis as if the new
rules had always been applied. Other right-of-use assets were measured at the amount equal
to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating
to the lease recognised in the balance sheet as at 6 October 2019.
The Group applies the practical expedient, not to reassess whether a contract is or contains a
lease at the date of application. This means the Group applies IFRS 16 to all contracts entered
into before 6 October 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.
The Group has elected to use the exemptions proposed by the standard on lease contracts
for which the lease term ends within 12 months as of the date of initial application, except
for leases which are expected to be renewed or replaced by a lease with a term greater than
12 months. These leases are accounted for as short-term leases and the lease payments
associated with them are recognised as an expense.
Financials
50
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS 16 transition note (continued)
The impact on the income statement for the 52 weeks ended 3 October 2020 is as follows:
52 weeks ended
3 October 2020
(excluding IFRS 16
adjustments)
IFRS 16 adjustment
53 weeks ended
5 October 2019
(including IFRS 16
adjustments)
Revenue
Cost of sales
Gross profit
Administration expenses
Distribution costs
Profit from operations
Finance income
Finance expense
Loss before tax
Taxation
Loss after tax
£’000
122,568
(109,870)
12,698
(15,278)
(6,910)
(9,490)
10
(217)
(9,697)
2,698
(6,999)
£’000
-
(4,585)
(4,585)
1,350
15
(3,220)
-
(1,684)
(4,904)
-
(4,904)
£’000
122,568
(114,455)
8,113
(13,928)
(6,895)
(12,710)
10
(1,901)
(14,601)
2,698
(11,903)
Financials
51
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS16 transition note (continued)
Note
53 weeks ended
3 October 2019
53 weeks ended
5 October 2019
53 weeks ended
5 October 2019
(excluding IFRS 16
adjustments)
IFRS 16 adjustment
(including IFRS 16
adjustments)
£’000
£’000
£’000
Assets
Non-current assets
Property, plant and equipment
Right of use assets
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Corporation tax asset
Total current assets
Total assets
12
13
21
14
15
16
26
22,143
-
1,677
23,820
28,511
6,078
2,726
11,417
-
48,732
72,552
-
61,662
-
61,662
-
(4,153)
-
-
-
(4,153)
57,509
22,143
61,662
1,677
85,482
28,511
1,925
2,726
11,417
-
44,579
130,061
Financials
52
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS16 transition note (continued)
Note
53 weeks ended
5 October 2019
53 weeks ended
5 October 2019
53 weeks ended
5 October 2019
(excluding IFRS 16
adjustments)
IFRS 16 adjustment
(including IFRS 16
adjustments)
£’000
£’000
£’000
Current liabilities
Trade and other payables
Lease liabilities
Derivative financial asset/liability
Bank Loan
Provisions
Corporation tax liability
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Bank Loan
Provisions
Employee benefit liability
Total non-current liabilities
Total liabilities
Net assets
17
13
16
18
19
17
13
18
19
25
Equity attributable to equity
holders of the company
Called up share capital
22
Merger reserve
Cash flow hedge reserve
Retained earnings
Total equity and reserves
(27,429)
715
-
-
(715)
(440)
(28,584)
(2,432)
-
-
(370)
(9,736)
(12,538)
(41,121)
31,431
500
2,662
1,645
26,623
31,430
4,595
(19,914)
-
-
-
-
(17,296)
2,432
(46,798)
-
-
-
(44,366)
(61,662)
(4,153)
-
-
-
(4,153)
(4,153)
(22,834)
(21,891)
-
-
(715)
(440)
(45,880)
-
(46,798)
-
(370)
(9,736)
(56,904)
(102,784)
27,277
500
2,662
1,645
22,470
27,277
Financials
53
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS 16 transition note (continued)
Under previous lease accounting standards (IAS 17), lease costs were recognised on a straight-
line basis over the term of the lease and the Group would have recognised these costs within
operating expenses this would have been recognised in the 52 week period ended 3 October
2020 if IAS 17 had still been applied. Under IFRS 16 these costs have been removed and
replaced with depreciation of the right of use assets and no rent costs in the profit and loss
account, which has resulted in an additional charge of £3.2m for the year ended 3 October
2020.
The impact on net financing expense in the 52 week period ended 3 October 2020 was £1.7m.
The net impact of applying IFRS 16 to the profit for the period in the 52 week period ended
3 October 2020 was a reduction of £4.9m after tax. This difference to profit for the period
represents a timing difference in the recognition of costs under IFRS 16 compared to IAS 17.
IAS 17 recognises costs on a straight-line basis, whereas under IFRS 16 finance charges are
recognised in relation to the value of the lease liability and costs will therefore reduce as the
liability reduces.
The Group has adopted IFRS 16 Leases retrospectively from 6 October 2019, but has not
restated comparatives for the 2019 reporting period, as permitted under the specific transition
provisions in the standard. The reclassifications and the adjustments arising from the new
leasing rules are therefore recognised in the opening balance sheet on 6 October 2019.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had
previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of 5 October 2019. The weighted average
lessee’s incremental borrowing rate applied to the lease liabilities on 5 October 2019 was
2.94% and was 1.82% at 3 October 2020. If the discount rate was changed by 0.13% this would
result in an increase of liabilities in excess of £300,000.
The presentation of cash flows arising from leases where the Group is a lessor has also
changed. Up to 5 October 2019, cash flows relating to such leases were treated as part of
operating cash flow. On transition to IFRS 16, the cash flows relating to capital repayments are
required to be presented as financing cash flows.
For leases previously classified as finance leases, the entity recognised the carrying amount
of the lease asset and lease liability immediately before transition as the carrying amount of
the right of use asset and the lease liability at the date of initial application. The measurement
principles of IFRS 16 are only applied after that date.
Financials
Financials
54
54
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS 16 transition note (continued)
(i) Practical expedients applied on transition
In applying IFRS 16 for the first time, the group has used the following practical expedients
permitted by the standard:
• applying a single discount rate to a portfolio of leases with reasonably similar
characteristics
• relying on previous assessments on whether leases are onerous as an alternative to
performing an impairment review – there were no onerous contracts as at 6 October 2019
• accounting for operating leases with a remaining lease term of less than 12 months as at 6
October 2019 as short-term leases
• excluding initial direct costs for the measurement of the right of use asset at the date of
initial application, and
• using hindsight in determining the lease term where the contract contains options to
extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the
date of initial application. Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 and Interpretation 4 determining
whether an arrangement contains a Lease.
Financials
Financials
55
55
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
IFRS 16 transition note (continued)
(ii) Measurement of lease liabilities
The following is a reconciliation of total operating lease commitments at 5 October 2019 (as
disclosed in the financial statements to 5 October 2019) to the lease liabilities recognised at 6
October 2019.
Total operating lease commitments disclosed at 5 October 2019
Recognition exemptions
Leases of low value assets
Leases with remaining lease term of less than 12 months
Contracts reassessed as lease contracts (prior year operating
lease commitment errors)
Adjustments as a result of a different treatment of extension and termination options
Variable lease payments not recognised
Other adjustments relating to commitment disclosures
Operating lease liabilities before discounting
Discounted using incremental borrowing rate
Finance lease obligations
Total lease liabilities recognised under IFRS 16 at 6 October 2019
(iii) Other non-current assets
Sublease assets have been recognised in respect of finance leases under IFRS 16 for a
number of the properties which are subleased to third parties. The finance lease is assessed
by reference to the right of use asset under the head lease rather than the underlying asset. A
number of subleases continue to be accounted for as operating leases which has resulted in no
change to their accounting treatment under IFRS 16.
51,070
£’000
(14)
(95)
6,637
12,313
-
(165)
69,746
(1,113)
56
68,689
Financials
Financials
56
56
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
(iv) Lease liabilities
A lease liability is recognised under IFRS 16, representing the Group’s contractual obligation
to minimum lease payments during the lease term. The lease liability is initially measured at
the present value of the remaining lease payments, discounted using the rates based on the
Group’s incremental borrowing rate. The weighted average discount rate used to discount the
lease liability as at 5 October 2019 was 2.94 %. The element of the liability payable in the next
12 months is shown within current liabilities, with the balance shown in non-current liabilities.
(v) Amendment to IFRS 16 for COVID-19 related rent concessions
On 28 May 2020, the IASB issued COVID-19 related Rent Concessions - Amendment to IFRS
16 Leases (the amendment). The Board amended the standard to provide optional relief to
lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions
arising as a direct consequence of the COVID-19 pandemic. The amendments do not apply to
lessors.
As a practical expedient, a lessee may elect not to assess whether a COVID-19 related lease
concession from a lessor is a lease modification. A lessee that makes this election accounts for
any qualifying change in lease payments resulting from the COVID-19related rent concession
the same way it would account for the change under IFRS 16 if the change were not a lease
modification. A lessee may elect to apply the practical expedient consistently to contracts with
similar characteristics and in similar circumstances.
The Group received rent free periods or discounts on some property leases during the year. In
addition, some rental payments were deferred. Such amendments have been accounted for as
if the lease is unchanged and a separate lease liability recognised where payments have been
deferred.
The practical expedient applies only to rent concessions occurring as a direct consequence of
the COVID-19 pandemic and only if all of the conditions described in IFRS 16 paragraph 46B
are met. This amendment was effective for financial periods beginning on or after 1 June 2020,
however, this amendment has been adopted early by the Group as permitted.
The Group received discounts and free rental periods amounting to £0.2m which have been
recognised as a credit in the income statement.
The Group has not factored the dilapidation provision into the right of use as the provision
relates to general ‘wear and tear’ as opposed to structural charges. Under IFRS 16 cash
payments for the lease liability are recognised within financing activities. In the prior period
operating lease payments under IAS 17 are recognised in operating activities. This has no net
impact on the cash flow.
Financials
Financials
57
57
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
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.
Exceptional Items
Exceptional items are transactions that fall within the ordinary activities of the Company but are
presented separately due to their size or incidence.
The Directors reviewed the treatment of non-underlying items, it was not considered
appropriate to show any non-underlying items for the current year or prior year.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as purchase
price, cost includes directly attributable costs.
Depreciation is provided on all items of property, plant and equipment so as to write off their
carrying value over the expected useful economic lives. It is provided at the following rates:
Freehold and long leasehold
50 years on a straight line basis
Short leasehold and leasehold improvements
5-10 years on a straight line basis
Fixtures and fittings
Motor vehicles
5-10 years on a straight line basis
3-5 years on a straight line basis
No depreciation is provided against freehold land. Depreciation is provided against freehold
shop properties writing off the original cost less estimated residual value over the useful
economic life of the property which is estimated to be 50 years.
Financials
Financials
58
58
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
1. ACCOUNTING POLICIES CONTINUED
Assets under construction
Whilst held under assets under construction, no depreciation is charged on the assets. Once
the project is completed, the asset will be transferred to the correct fixed asset category.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed in conjunction with an independent
third party for impairment when there is an indication that assets might be impaired. When
the carrying value of an asset exceeds its recoverable amount, the asset is written down
accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the
impairment test is carried out on the asset’s cash generating unit (i.e. the smallest group of
assets in which the asset belongs for which there are separable identifiable cash flows).
Impairment charges are included in the consolidated income statement in cost of sales,
except to the extent they reverse previous gains recognised in the consolidated statement of
comprehensive income.
Inventories
Inventories are initially recognised at cost on a first in first out basis, and subsequently at the
lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present location and condition.
Financial assets
The Group classified its financial assets into the categories, discussed below, due to the
purpose for which the asset was acquired. The Group has not classified any of its financial
assets as held to maturity.
The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items.
Cash and cash equivalents include cash in hand and deposits held at call with banks.
Financials
Financials
59
59
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
Loans and receivables
Loans and receivable assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally through the provision
of goods to customers (e.g. trade receivables), but also incorporate other types of contractual
monetary asset. They are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at amortised cost using
the effective interest rate method, less provision for impairment.
The Group’s loans and receivables comprise trade and other receivables and cash and cash
equivalents included within the consolidated statement of financial position.
Impairment provisions are recognised when there is objective evidence (such as significant
financial difficulties on the part of the counterparty or default or significant delay in payment)
that the Group will be unable to collect all of the amounts due under the terms receivable,
the amount of such a provision being the difference between the net carrying amount and the
present value of the future expected cash flows associated with the impaired receivable. For
trade receivables, which are reported net, such provisions are recorded in a separate allowance
account with the loss being recognised within administrative expenses in the consolidated
income statement. On confirmation that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated provision.
Financial liabilities
The Group classified its financial liabilities as other financial liabilities which include the
following:
• Trade payables and other short-term monetary liabilities, which are initially recognised at
fair value and subsequently carried at amortised cost using the effective interest method.
• Bank loan – external loan which is valued at its amortised cost and incurs interest.
• Finance costs are charged to the profit and loss account over the term of the debt using
the effective interest method so that the amount charged is at a constant rate on the
carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the
associated capital instrument.
Derivative financial instruments and hedging activities
Hedge accounting is applied to financial assets and financial liabilities only where all of the
following criteria are met:
At the inception of the hedge there is formal designation and documentation of the hedging
relationship and the Group’s risk management objective and strategy for undertaking the
Financials
60
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
hedge.
• For cash flow hedges, the hedged item in a forecast transaction is highly probable and
presents an exposure to variations in cash flows that could ultimately affect profit or loss.
• The cumulative change in the fair value of the hedging instrument is expected to be
between 80-125% of the cumulative change in the fair value or cash flows of the hedged
item attributable to the risk hedged (i.e. it is expected to be highly effective).
• The effectiveness of the hedge can be reliably measured.
• The hedge remains highly effective on each date tested. Effectiveness is tested quarterly.
The Group uses derivative financial instruments such as forward foreign exchange contracts
to hedge its risks associated with foreign currency fluctuations. Such derivative financial
instruments are initially measured at fair value and subsequently remeasured at fair value. The
fair value of forward foreign exchange contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles.
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to
the ineffective portion is recognised immediately in cost of sales in the income statement.
Amounts accumulated in equity are reclassified to inventories in the period when the purchase
occurs, matching the hedged transaction. The cash flows are expected to occur and impact on
profit and loss within 12 months from the year end.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss previously recognised in equity is retained
in equity and is recognised when the forecast transaction is ultimately recognised in cost of
sales in the income statement. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately transferred to the income
statement.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or
liability in the statement of financial position differs from its tax base.
Recognition of deferred tax assets is restricted to those instances where it is probable that
taxable profit will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when the deferred
Financials
61
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.
Deferred tax assets are offset when the Group has legally enforceable rights to set off current
tax assets against current tax liabilities and the deferred tax liabilities relate to taxes levied by
the same tax authority on either:
• the same taxable group company; or
• different company entities which intend to either settle current tax assets and liabilities on
a net basis, or to realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax assets and liabilities are expected to
be settled or recovered.
Provisions
Provision for dilapidations is made at the best estimate of the expenditure required to settle
the obligation at the reporting date, where material, discounted at the pre-tax rate reflecting
current market assessments of the time value of money and risks specific to the liability. A
dilapidation provision is only recognised on those properties which are likely to be exited.
Where such property is identified the full costs expected are recognised. This provision relates
to the liability of ‘wear and tear’ incurred on the leasehold properties and does not include
any removal of shop refits as experience indicates that liabilities do not arise for removal of
shop refits. Dilapidations are not included in IFRS 16 as they relate to ‘wear and tear’ and not
structural alterations to the buildings.
Foreign exchange
Transactions entered into the Group entities in a currency other than the functional currency are
recorded at the average monthly rate prevailing during the period. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the reporting date.
Foreign exchange differences are recognised in the profit and loss account.
Retirement benefits – defined contribution and benefit
schemes
The Group operates both defined benefit and defined contribution funded pension schemes.
The schemes are administered by trustees and are independent of the Group.
Contributions to defined contribution schemes are charged to the consolidated statement of
comprehensive income in the year to which they relate.
Defined benefit scheme surpluses and deficits are measured at:
Financials
62
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
• the fair value of plan assets at the reporting date; less
• plan liabilities calculated using the projected unit credit method discounted to its present
value using yields available on high quality corporate bonds that have maturity dates
approximating to the terms of the liabilities; plus
• unrecognised past service costs; less
• the effect of minimum funding requirements agreed with scheme trustees.
Re-measurements of the net defined obligation are recognised directly within equity. These
include actuarial gains and losses, return on plan assets (interest exclusive) and any asset
ceilings (interest exclusive).
Service costs are recognised in the income statement, and include current and past service
costs as well as gains and losses on curtailments.
Net interest expense (income) is recognised in the income statement, and is calculated by
applying the discount rate used to measure the defined benefit obligation (asset) at the
beginning of the annual period to the balance of the net defined benefit obligation (asset),
considering the effects of contributions and benefit payments during the 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
Financials
63
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
dividends, this is when approved by the shareholders at the AGM.
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Shoe Zone plc Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical experience and
other factors, including expectations of future events that are believed to be reasonable
under the circumstances. In the future, actual experience may differ from these estimates and
assumptions. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
Accounting estimates and assumptions
Retirement benefits:
The Groups’ defined benefit schemes’ pension surplus/obligation, which is assessed each
period by actuaries, is based on key assumptions including discount rates, mortality rates,
inflation, future salary costs and pension costs. These assumptions, individually or collectively,
may be different to actual outcomes; refer to note 25 for further details.
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 de-
termined 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 port-
folio 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 £17,000.
A decrease of one percentage point in the growth rate after year three would have resulted in
an increase to the impairment charge of £7,000.
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.
Discount rate - The weighted average lessee’s incremental borrowing rate applied to the lease
liabilities on 5 October 2019 was 2.94% and was 1.82% at 3 October 2020. If the discount rate
was changed by 0.13% this would result in an increase of liabilities in excess of £300,000.
Financials
64
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
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; and
• foreign exchange risk.
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; and
• trade and other payables.
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 available, but fair value is based on observable
market data; and
• Level 3: Inputs that are not based on observable market data.
Financials
65
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
3. FINANCIAL INSTRUMENTS – RISK MANAGEMENT CONTINUED
A summary of the financial instruments held by category is provided below:
Financial assets
Financial assets at amortised cost
Trade receivables
Other receivables
Cash and cash equivalents
Total receivables and cash
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Total financial assets
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
582
690
13,266
14,538
34
(139)
14,433
396
421
11,417
12,234
744
1,982
14,960
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
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
17,316
24,119
-
-
-
-
Total financial liabilities
17,316
24,119
Financials
Financials
66
66
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
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 3 October 2020 and 5 October
2019.
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 3 October 2020 the Group has trade
receivables of £582,000 (2019: £396,000).
£378,000 of the balance is monies due from on-line sales with a further £103,000 in respect
of longstanding prepaid gift card providers. The remainder is balances owing from sub-let
properties and charges due from a number of suppliers.
The Directors are unaware of any factors affecting the recoverability of outstanding balances at
3 October 2020 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. The Company has an overdraft facility of £3m and has taken
advantage of a CLBILS loan (see note 18) to maintain cash balances through the COVID-19
pandemic.
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
Financials
67
67
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
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 3 October 2020
£’000
£’000
£’000
£’000
£’000
Trade and other payables
Total financial liabilities
17,316
17,316
-
-
-
-
-
-
-
-
Up to 3
months
Between
3 and 12
months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
At 5 October 2019
£’000
£’000
£’000
£’000
£’000
Trade and other payables
Total
24,119
24,119
-
-
-
-
-
-
-
-
Financials
Financials
68
68
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
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
2020
£’000
379
(463)
2019
£’000
692
(845)
2020
£’000
5,033
(6,151)
2019
£’000
4,412
(5,393)
Sterling strengthens by 10%
Sterling weakens by 10%
Financials
Financials
69
69
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
3. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
CONTINUED
Year-end exchange rates applied in the above analysis are US Dollar 1.29 (2019: 1.23).
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
£12,351,000 (5 October 2019: £31,430,000).
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 commen-
surately 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
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
122,568
162,047
Financials
Financials
70
70
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
5. EXPENSES BY NATURE
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
Inventories recognised as an expense
Carriage charges on purchases
Duty charges on purchases
Employee benefit expenses
Depreciation and impairment charge of property, plant and
equipment
Depreciation held on finance lease
Depreciation of right of use assets
Operating lease expense
Land and buildings
Other
Loss on disposal of property, plant and equipment
Profit on disposal of Right of Use Asset
Administration expenses
Gain on Foreign Exchange
Other costs
6. AUDITOR’S REMUNERATION
The audit of the parent company
Audit of subsidiary financial statements pursuant to legislation
Other services
£’000
41,858
1,800
3,940
33,054
7,695
16
24,112
1,303
82
526
(113)
12,378
(30)
8,657
135,278
£’000
52,198
2,687
5,743
39,488
6,199
2
-
21,364
626
92
-
19,619
(385)
7,567
155,200
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
10
55
-
65
10
48
5
63
Financials
Financials
71
71
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
7. EMPLOYEE BENEFIT EXPENSES
Employee benefit expenses (including Directors) comprise:
Wages and salaries
Social security costs
Other pension costs
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
30,534
1,614
906
33,054
36,363
2,061
1,064
39,488
Wages and salaries in 2020 incudes the benefit of furlough income £5,039,000.
The average monthly number of employees during the period was as follows:
Sales and distribution
Directors
Administration
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
No.
3,275
6
147
3,428
No.
3,351
7
161
3,519
The average monthly number of full time equivalent employees during the period was 1,698
(2019: 1,737).
Shoe Zone plc does not employ any members of staff and has no staff costs during the period
(2019: Nil).
Directors’ remuneration, included in staff costs:
Salaries and benefits
Pension contributions
Information regarding the highest paid Director is as follows:
Salary and benefits
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
851
12
863
393
393
856
37
893
303
303
Financials
Financials
72
72
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
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 and Finance Director.
The Board considers that each store is an operating segment but there is only one reporting
segment as the stores qualify for aggregation, as defined under IFRS 8.The Directors now
consider digital to be its own operating segment. Management reviews the performance of
the Group by reference to total results against budget. The total profit measures are operating
profit and profit for the year, both disclosed on the face of the consolidated income statement.
No differences exist between the basis of preparation of the performance measures used by
management and the figures in the Group financial statements.
Revenue
United Kingdom stores
Digital
Republic of Ireland stores
Other
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
100,098
19,296
2,678
496
122,568
146,928
10,592
3,838
689
162,047
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
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
59,349
5
59,354
22,124
19
22,143
Digital fixed and current assets have not been disclosed due to the immaterial value. The
contribution is £4m (2019: £3.0m)
The Group has only one operating and reporting segment which reflects the Group’s
management and reporting structure as viewed by the board of directors.
The deferred tax asset of £5,617,000 (2019: £1,677,000) is unallocated.
Financials
Financials
73
73
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
9. FINANCE INCOME AND EXPENSES
Finance income
Interest receivable
Total finance income
Finance expense
Interest expense on lease liability
Net interest expense on defined benefit pension scheme
Loan interest
Other finance expense
Total finance expense
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
10
10
(1,684)
(163)
(50)
(4)
(1,901)
44
44
-
(172)
-
(20)
(192)
Financials
Financials
74
74
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
10. INCOME TAX
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
Current tax expense
Current tax on (loss)/profits for the period
Adjustment for (over) / under provision in prior periods
Total current tax (credit)/expense
Deferred tax expense
Adjustment for (over) provision in prior periods
Origination and reversal of temporary differences (note 21)
(Credit)/Tax charge on (loss)/profit on ordinary activities
-
(20)
(20)
(994)
(1,684)
(2,698)
1,442
(64)
1,378
(348)
(45)
985
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 is as follows:
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
(Loss)/Profit for the period
Income tax expense
(Loss)/Profit before income taxes
Expected tax charge based on corporation tax rate of 19%
(05 October 2019: 19%)
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:
There were no factors that may affect future tax charges.
£’000
(11,903)
(2,698)
(14,601)
(2,774)
956
134
(1,014)
(2,698)
£’000
5,714
985
6,699
1,273
119
6
(413)
985
Financials
Financials
75
75
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
11. DIVIDENDS
Dividends paid during the year at Nil (2019: 19.5p) per share
53 weeks ended
5 October 2019
53 weeks ended
5 October 2019
£’000
Nil
£’000
9,750
No final dividend is proposed for shareholders on the register (2019: 8.0p) per share.
Financials
Financials
76
76
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
12. PROPERTY,
PLANT AND
EQUIPMENT
l
d
n
a
d
o
h
e
e
r
F
l
d
o
h
e
s
a
e
l
g
n
o
l
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 29 September 2018
8,769
18,539
Additions
Disposals
Impairments
Assets under construction
318
-
(2,838)
-
2,570
(324)
(105)
-
34
80
-
-
-
34,669
4,004
(1,203)
-
-
-
360
-
-
-
62,011
7,332
(1,527)
(2,943)
-
At 5 October 2019
6,249
20,680
114
37,470
360
64,873
Additions
Disposals
Impairments
Assets under construction
-
-
-
-
590
(1,485)
-
125
-
-
-
-
2,219
(1,943)
-
235
-
-
-
(360)
At 3 October 2020
6,249
19,910
114
37,981
Depreciation
At 29 September 2018
1,066
13,732
Charge for the period
Disposals
Impairments
At 5 October 2019
Charge for the period
Disposals
Impairments
At 3 October 2020
Net book value
At 3 October 2020
At 5 October 2019
At 30 September 2018
57
-
-
1,123
54
-
2,447
3,624
2,625
5,126
7,703
1,098
(318)
-
14,512
1,043
(1,335)
717
14,937
4,973
6,168
4,807
18
7
-
-
25
22
-
-
26,092
2,096
(1,118)
-
27,070
2,426
(1,819)
1,002
47
28,679
67
89
16
9,302
10,400
8,577
-
-
-
-
-
-
-
-
-
-
-
360
-
2,809
(3,428)
-
-
64,254
40,908
3,258
(1,436)
-
42,730
3,545
(3,154)
4,166
47,287
16,967
22,143
21,103
Financials
77
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
13. LEASES
The majority of the Company’s trading stores are leased under operating leases. The Group
also has a number of non-property operating leases relating to vehicles and an item of
equipment in the Distribution Centre.
Information about leases for which the Company is a lessee is presented below:
Cost
Balance at 5 October 2019
Additions
Disposals
At 3 October 2020
Depreciation
Balance at 5 October 2019
Charge for the period
Disposals
Impairment
At 3 October 2020
Net book value
At 3 October 2020
At 5 October 2019
Property
Motor vehicles and
equipment
£’000
£’000
60,528
5,435
(1,159)
64,804
-
18,456
(292)
5,135
23,299
41,505
60,528
1,134
271
(2)
1,403
-
521
-
-
521
882
1,134
Total
£’000
61,662
5,706
(1,161)
66,207
-
18,977
(292)
5,135
23,820
42,387
61,662
Financials
78
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
13. LEASES
CONTINUED
The Group costs for those leases for which the practical expedient was applied described in
Accounting Policies: IFRS 16 Leases, amounted to £292,000 in the 52 weeks ended 3 October
2020.
The table below sets out the maturity analysis of future lease payments:
Maturity analysis – contracted undiscounted cash flows
3 October 2020
5 October 2019
Less than one year
Between one and five years
More than five years
Total undiscounted lease liabilities
Carrying value of lease liabilities included in balance sheet
Current
Non-current
£’000
£’000
16,660
32,454
6,986
56,100
57,389
19,914
37,475
30,887
31,119
6,549
68,555
-
-
-
Operating Leases
The Group has a number of stores on short-term rental and a small number of outlets where a
subsection are sublet to third parties at a contracted rate. The Group has classified these leases
as operating leases because they do not transfer substantially all the risks and rewards of the
right of use asset.
In line with IAS36 the carrying value of the right of use-asset is assessed for impairment and
booked where necessary. See note 23.
Financials
79
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
14. INVENTORIES
3 October 2020
5 October 2019
Goods for resale
Shop fitting materials and other consumables
£’000
26,295
403
26,698
£’000
27,838
673
28,511
15. TRADE AND OTHER RECEIVABLES
3 October 2020
5 October 2019
Trade receivables
Prepayments
Other receivables
£’000
582
1,463
690
2,735
£’000
396
5,261
421
6,078
There are no impairment provisions or receivables past due in either year.
16. DERIVATIVE FINANCIAL INSTRUMENTS
At the balance sheet date, details of the forward foreign exchange contracts that the Group has committed
to are as follows:
3 October 2020
5 October 2019
Derivative financial assets/liability
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
£’000
34
(139)
(105)
£’000
744
1,982
2,726
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 3
October 2020 were $71,250,000 (5 October 2019: $59,700,000). 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 is market rates
of financial instruments at the balance sheet date.
Financials
Financials
80
80
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
17. TRADE AND OTHER PAYABLES
Current
Trade payables
Social security and other taxes
Other payables and finance lease liability
Accruals
Non-current
Accruals
3 October 2020
5 October 2019
£’000
£’000
6,401
440
426
10,049
17,316
12,335
2,097
708
12,289
27,429
3 October 2020
5 October 2019
£’000
-
-
£’000
2,432
2,432
Non-current accruals for prior year relate to rental liabilities, these are now included in IFRS 16
(note 13).
Financials
Financials
81
81
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
18. LOANS
Amounts falling due within one year
Bank Loans
Amounts falling due within 1-2 years
Bank loans
Amounts falling due within 2-5 years
Bank loans
3 October 2020
5 October 2019
£’000
£’000
1,944
2,333
2,723
7,000
-
-
-
-
The bank loan is provided by National Westminster Bank plc under their COVID-19 Large
Business Interruption Scheme. The loan is repayable over 36 monthly payments of £194,000.
It is subject to an interest rate of 1.22% over base increasing to 1.72% over base rate in May
2021.
After the year-end the Group extended the loan by a further £5 million. National Westminster
Bank plc holds a fixed and floating charge over the Group’s property and assets.
Financials
82
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
19. PROVISIONS
As at 5 October 2019
Additions
Amounts utilised
Amounts released
As at 3 October 2020
The provisions are aged as follows:
Current
Non-current
As at 3 October 2020
Customer Returns
Dilapidations
£’000
41
28
(41)
-
28
£’000
1,044
1,797
(138)
-
2,703
Customer Returns
Dilapidations
£’000
28
-
28
£’000
1,443
1,260
2,703
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.
20. CONTINGENT LIABILITIES
Shoe Zone plc and its subsidiary undertakings have given a duty deferment guarantee in favour
of HM Revenue and Customs amounting to £800,000 (5 October 2019: £800,000).
Total
£’000
1,085
1,825
(179)
-
2,731
Total
£’000
1,471
1,260
2,731
Financials
83
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
21. DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the liability method using a tax
rate of 19% (5 October 2019: 17%).
The movement on the deferred tax account is as shown below:
At beginning of the period
Recognised in income statement:
Tax expense (note 10)
Recognised in other comprehensive income:
Actuarial gain / loss on defined benefit pension schemes
Cashflow hedge
At end of the period
3 October 2020
5 October 2019
£’000
1,677
2,678
899
363
5,617
£’000
703
393
707
(126)
1,677
The deferred tax has arisen due to the following:
3 October 2020
5 October 2019
Accelerated capital allowances
Ineligible buildings
Short term timing differences
Loss for the financial year
IFRS 16 transitional adjustment
Defined benefit pension scheme
£’000
1,361
(540)
26
2,126
631
2,013
5,617
The Group has an unrecognised deferred tax asset £989,000 as at 3 October 2020 (5 October
2019: £885,000).
There are estimated losses available to offset against future capital taxable profits amounting
to approximately £11.0m (5 October 2019: Nil).
£’000
1,279
(920)
(337)
-
-
1,655
1,677
Financials
84
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
22. SHARE CAPITAL
Share capital issued and fully paid
50,000,000 ordinary shares of 1p each
3 October 2020
5 October 2019
£’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.
23. 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:
Expense relating to short-term leases
Expense relating to variable lease payments
The majority of leases are now included within IFRS 16 (note 13).
Property
Property
3 October 2020
5 October 2019
£’000
£’000
292
29
321
-
-
-
Financials
85
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
23. LEASES CONTINUED
Finance leases
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.
Not later than one year
Later than one year and not later than five years
Later than five years
Motor Vehicle
Motor Vehicle
3 October 2020
5 October 2019
£’000
£’000
16
48
-
64
11
45
-
56
Finance leases are secured on the assets to which they relate to. The net book value of assets
held under finance lease is £62,000 (2019: £78,000).
24. CAPITAL COMMITMENTS
Contracted for but not provided
3 October 2020
5 October 2019
£’000
Nil
£’000
28
Financials
86
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. PENSION COSTS
Defined contribution scheme
The Group operates a defined contribution pension scheme namely Shoe Zone Worksave
Pension Plan contributions amounted to £906,000 (05 October 2019: £1,064,000).
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. There have been no contributions to the scheme this year, last year
was also nil.
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 3 October 2020
Fair value of assets
Present value of funded obligations
Impact of asset ceiling
Deficit
3 October 2020
5 October 2019
£’000
£’000
87,850
(94,724)
(3,720)
(10,594)
86,683
(92,232)
(4,187)
(9,736)
Financials
87
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. PENSIONS
CONTINUED
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial gains arising from changes in:
Demographic assumptions
Financial assumptions
Experience losses
Total actuarial gain
Impact of asset ceiling
Deferred tax on employee benefit scheme
Total amount recognised in other comprehensive income
3 October 2020
5 October 2019
£’000
1,360
277
(4,293)
-
(4,016)
542
899
(1,215)
£’000
9,311
(206)
(14,005)
2,561
(11,650)
(1,838)
707
(3,470)
Financials
Financials
88
88
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. PENSIONS
CONTINUED
The following figures are based on a full actuarial valuation performed in April 2016 and March
2016 for the Shoe Zone and Shoefayre schemes respectively which was carried out by a quali-
fied independent actuary. This actuarial valuation has been updated to 5 October 2019 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
3 October 2020
5 October 2019
Years
Years
88.7
90.4
86.9
88.9
88.5
90.2
86.7
88.6
3 October 2020
5 October 2019
%
2.40
3.10
1.40
2.40
3.20
%
2.55
3.40
1.80
2.55
3.55
The weighted average duration of the defined benefit obligation for the Shoe Zone scheme at
3 October 2020 is 14 years (5 October 2019: 17 years).
The weighted average duration of the defined benefit obligation for the Shoefayre scheme at 3
October 2020 is 16 years (5 October 2019: 19 years).
Financials
Financials
89
89
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. PENSIONS CONTINUED
Defined benefit scheme - Shoe Zone Pension Scheme Assets
Assets
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 major categories of assets as a percentage of total assets are as follows:
Asset category
3 October 2020
5 October 2019
Equities
Property
Gilts/bonds
Cash
Diversified Growth Funds
Liability Driven Investment
17%
0%
17%
11%
33%
22%
100%
16%
9%
16%
0%
35%
24%
100%
The actual return on the Scheme’s assets net of expenses over the period to the review date
was a gain of £2,288,000 (5 October 2019: £7,253,000).
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
Financials
90
90
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
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
3 October 2020
5 October 2019
£’000
£’000
(859)
934
(75)
-
(1,284)
1,352
(68)
-
3 October 2020
5 October 2019
£’000
£’000
53,264
(49,544)
3,720
(3,720)
-
52,822
(48,635)
4,187
(4,187)
-
Financials
Financials
91
91
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. PENSIONS
CONTINUED
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
Amounts recognised in other comprehensive income
Return on plan assets
Actuarial (loss) / gains arising from changes in:
Demographic assumptions
Financial assumptions
Total actuarial (loss) / 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:
3 October 2020
5 October 2019
£’000
£’000
1,354
171
(2,066)
(1,895)
542
198
199
5,901
1,378
(7,206)
(5,828)
(1,838)
19
(1,746)
3 October 2020
5 October 2019
£’000
£’000
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
52,822
934
46
(1,892)
1,354
53,264
47,381
1,352
102
(1,914)
5,901
52,822
Financials
Financials
92
92
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. PENSIONS
CONTINUED
Defined benefit scheme - Shoe Zone Pension Scheme (continued)
The change in defined benefit obligation over the period was:
3 October 2020
5 October 2019
£’000
£’000
Defined benefit obligation at the beginning of the period
Interest cost
Benefits paid
Actuarial loss
Defined benefit obligation at the end of the period
48,635
859
(1,892)
1,942
49,544
45,091
1,284
(1,914)
4,174
48,635
During 2020 contributions of £46,000 were made.
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
-7.0%
8.0%
2.0%
-1.0%
4.0%
-4.0%
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
Financials
93
93
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. 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
3 October 2020
5 October 2019
Equities
Property
Gilts/bonds
Cash
Diversified Growth Funds
Liability Driven Investment
21%
0%
9%
4%
44%
22%
100%
19%
11%
9%
0%
38%
23%
100%
The actual return on the Scheme’s assets net of expenses over the period to the review
date was a gain of £616,000 (5 October 2019: £4,277,000). The assets do not include any
investments in shares of the company.
The expected return on assets is a weighted average of the assumed long-term returns
available on high quality corporate bonds in line with the method used to value the liabilities.
Equity and property returns are developed based on the selection of an appropriate risk
premium above the risk free rate which is measured in accordance with the yield on the
government bonds. Bond returns are selected by reference to the yields on the government
and corporate debt, as appropriate to the scheme holdings of these instruments. The expected
returns on the Target Return Funds are equal to the fund’s targets.
Amounts recognised in the statement of financial position
Fair value of assets
Present value of funded obligations
Net liability
3 October 2020
5 October 2019
£’000
£’000
34,586
(45,180)
(10,594)
33,861
(43,597)
(9,736)
Financials
Financials
94
94
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. PENSIONS
CONTINUED
Defined benefit scheme - Shoefayre Limited Pension and Life Assurance Scheme (continued)
Amounts recognised in other comprehensive income
Gain / (loss) on plan assets
Actuarial (loss) / gains arising from changes in:
Demographic assumptions
Financial assumptions
Total actuarial (loss) / gain
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
3 October 2020
5 October 2019
£’000
£’000
6
106
(2,227)
(2,121)
701
(1,414)
3,410
(1,584)
(6,799)
(8,383)
688
(4,285)
3 October 2020
5 October 2019
£’000
£’000
(773)
610
(163)
(1,039)
867
(172)
Financials
Financials
95
95
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. 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 gain / (loss) on assets
Fair value of assets at the end of the period
The change in defined benefit obligation over the period was:
Defined benefit obligation at the beginning of the period
Interest cost
Benefits paid
Actuarial loss on obligation
Defined benefit obligation at the end of the period
During 2020 contributions of £1,420,000 were made.
3 October 2020
5 October 2019
£’000
£’000
33,861
610
1,420
(1,311)
6
34,586
30,036
867
779
(1,231)
3,410
33,861
3 October 2020
5 October 2019
£’000
£’000
43,597
773
(1,311)
2,121
45,180
36,332
1,039
(1,231)
7,457
43,597
Financials
Financials
96
96
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
25. 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
-8.0%
10.0%
5.0%
-4.0%
4.0%
-4.0%
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.
26. CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purpose of the statement of cash flow comprise:
3 October 2020
5 October 2019
£’000
£’000
Cash at banks and in hand
Cash and cash equivalents
13,266
13,266
11,417
11,417
Financials
Financials
97
97
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
27. 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
3 October 2020
53 weeks ended
5 October 2019
£’000
147
872
46
1,350
2,415
£’000
163
1,064
111
779
2,117
During the period, the key management personnel remuneration included within staff costs are
as follows:
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
Short term employee benefits
Post-employment benefit
Employers national insurance
£’000
851
12
111
974
Key management personnel are considered to be the Directors of Shoe Zone plc.
£’000
856
37
168
1,061
Financials
Financials
98
98
NOTES TO THE FINANCIAL STATEMENTS FOR THE
52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
28. EARNINGS PER SHARE
Earnings per share is calculated by dividing profit for the year by the weighted average number
of shares outstanding during the year.
Numerator
Loss)/Profit for the year and (Loss)/earnings used in basic and
diluted EPS
As the company recorded a loss this year the EPS is nil.
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
£’000
£’000
-
5,714
52 weeks ended
3 October 2020
53 weeks ended
5 October 2019
No.
No.
Denominator
Weighted average number of shares used in basic and diluted
EPS
50,000,000
50,000,000
29. ANALYSIS OF NET DEBT
6 October
2019
Cashflows
Loan advance
Loan
repayment
3 October
2020
Cash at bank and in hand
11,417
1,849
Bank loan
-
(10,000)
11,417
1,849
(10,000)
-
3,000
3,000
13,266
(7,000)
6,266
30. ULTIMATE CONTROLLING PARTY
The company is controlled by the Smith family albeit there is not a single controlling party.
Financials
Financials
99
99
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 3 OCTOBER 2020
Note
3 October 2020
5 October 2019
£’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
12
12
(1,695)
(1,683)
66,961
500
586
65,875
66,961
The company made a loss during the year of £177,000 (2019: profit of £9,551,000).
The financial statements were approved and authorised for issue by the Board of Directors and
were signed on its behalf by:
Anthony Smith
Chief Executive
Date: 5 March 2021
68,644
68,644
65
65
(1,571)
(1,506)
67,138
500
586
66,052
67,138
Financials
Financials
100
100
COMPANY STATEMENT OF CHANGES IN EQUITY FOR
THE 52 WEEKS ENDED 3 OCTOBER 2020
At 29 September 2018
Profit for the period
Total comprehensive income for the period
Dividends paid during the year
Total contributions by and distributions to owners
At 5 October 2019
Loss 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
66,251
67,337
-
-
-
-
-
-
-
-
9,551
9,551
9,551
9,551
(9,750)
(9,750)
(9,750)
(9,750)
500
586
66,052
67,138
-
-
-
-
-
-
-
-
(177)
(177)
-
-
(177)
(177)
-
-
At 3 October 2020
500
586
65,875
66,961
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
Financials
101
101
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR
THE 52 WEEKS ENDED 3 OCTOBER 2020
1. ACCOUNTING POLICIES
Basis of preparation
The Company’s financial period is 52 weeks ended 3 October 2020. 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 loss dealt with in
the accounts of the Company was £177,000 (5 October 2019: profit of £9,551,000).
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.
The directors review the forecast and budgets of the subsidiaries held and review any
necessary impairments.
Financials
Financials
102
102
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR
THE 52 WEEKS ENDED 3 OCTOBER 2020
CONTINUED
2. FIXED ASSET INVESTMENTS
3 October 2020
5 October 2019
£’000
£’000
Cost
Impairment of investment in Castle Acres Development Limited
Total
70,586
(1,942)
68,644
70,586
(1,942)
68,644
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 Non-trading 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
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
The registered address of all of the above subsidiaries is Haramead Business Centre,
Humberstone Road, Leicester, LE1 2LH.
Financials
Financials
103
103
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR
THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
3. DEBTORS
Prepayments
Other debtors
4. CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR
Amounts owing to group undertakings
Accruals
5. SHARE CAPITAL
Allotted, called up and fully paid:
50,000,000 ordinary shares of 1p each
3 October 2020
5 October 2019
£’000
£’000
4
8
12
10
55
65
3 October 2020
5 October 2019
£’000
1,660
35
1,695
£’000
1,549
22
1,571
3 October 2020
5 October 2019
£’000
£’000
500
500
500
500
Financials
Financials
104
104
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR
THE 52 WEEKS ENDED 3 OCTOBER 2020 CONTINUED
6. RESERVES
At 5 October 2019
Loss for the financial period
Dividends paid during the year
At 3 October 2020
Merger reserve
Profit and loss account
£’000
£’000
586
-
-
586
66,052
(177)
-
65,875
7. RELATED PARTY TRANSACTIONS
Transactions between the Company and its 100% owned subsidiaries, which are related parties
of the Company, are not disclosed in this note due to the advantage being taken of the
exemption provided by FRS 101 ‘Reduced Disclosure Framework’. There have been no other
related party transactions during the year.
Financials
105
Directors and Advisers
Directors
Registered office
Registrar
A E P Smith
J C P Smith
M J Collins
V J Norrish
(appointed 28 August 2020)
P J L Foot
(appointed 23 July 2020,
resigned 19 February 2021)
J L Fearn
(resigned 31 July 2020)
J W Sharman
(resigned 26 August 2020)
C J Caminada
(resigned 24 March 2020)
Secretary
C A Bowen
Haramead Business Centre
Humberstone Road
Leicester
LE1 2LH
Auditor
Cooper Parry Group Limited
East Midlands Office
Sky View, Argosy Road
East Midlands Airport
Derby
DE74 2SA
Link Group
10th Floor
Central Square
29 Wellington Road
Leeds
LS1DL
Solicitors
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London
EC2A 2EW
Bankers
NatWest
1 Granby Street
Leicester
LE1 9GT
Corporate broker
Finncap
60 New Broad Street
London
EC2M 1JJ
Shareholder Information
106
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 Wednesday 31 March 2021 at 10.00 a.m. to
consider and, if thought fit, pass the resolutions set out
below. Resolutions 1 to 10 will be proposed as ordinary
resolutions and Resolutions 11 to 13 will be proposed as
special resolutions.
1.
To receive and adopt the Company’s annual accounts for the financial period ended
3 October 2020 and the associated reports of the Directors of the Company and the
auditors of the Company.
2.
To re-elect Charles Smith as a Director.
3.
To re-elect Anthony Smith as a Director.
4.
To elect Terry Boot as a Director.
5.
To re-elect Malcolm Collins as a Director.
6.
To elect Victoria Norrish as a Director.
7.
8.
9.
To re-appoint Cooper Parry Group Limited 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 2022.
To authorise the Directors of the Company to determine the remuneration of Cooper
Parry Group Limited as auditors of the Company.
That, in accordance with section 366 of the Companies Act 2006 (the ‘Act’), the
Company and its subsidiaries be and are hereby authorised, in aggregate, to:
(a) make political donations to political parties and/or independent election candidates,
not exceeding £50,000 in total;
(b) make political donations to political organisations other than political parties, not
exceeding £50,000 in total; and
(c)
incur political expenditure, not exceeding £50,000 in total,
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NOTICE OF ANNUAL GENERAL MEETING CONTINUED
such authority to expire on the earlier of 31 March 2022 and the conclusion of the annual
general meeting of the Company to be held in 2022. 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.
10. 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; and
(b) up to an aggregate nominal amount of £333,332 (such amount to be reduced by
any shares allotted, or rights to subscribe for or to convert any security into shares
granted, under paragraph (a) of this resolution) in connection with an offer by way of
a rights issue:
(i)
to holders of ordinary shares of £0.01 each in the capital of the Company in
proportion (as nearly as may be practicable) to their existing holdings; and
(ii)
to holders of other equity securities as required by the rights of those securities
or as the Directors otherwise consider necessary or permitted by the rights of
those securities,
and so that the Directors may impose any limits or restrictions and make any
arrangements which they consider necessary or appropriate to deal with treasury shares,
fractional entitlements or securities represented by depositary receipts, record dates,
legal, regulatory or practical problems in, or under the laws of, any territory or the
requirements of any regulatory body or stock exchange or any other matter, provided
that this authority shall expire on the earlier of 31 March 2022 and the conclusion of the
annual general meeting of the Company to be held in 2022, 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.
11. That, subject to the passing of Resolution 10 proposed at the annual general meeting of
the Company convened for 31 March 2021 (‘Resolution 10’) and in substitution for any
existing authority but without prejudice to the exercise of any such authority prior to the
date of the passing of this resolution, the Directors of the Company be and are hereby
generally empowered pursuant to sections 570 and 573 of the Companies Act 2006 (the
‘Act’) to allot equity securities (within the meaning of section 560(1) of the Act) (including
the grant of rights to subscribe for, or to convert any securities into, ordinary shares of
£0.01 each in the capital of the Company (‘Ordinary Shares’)) for cash pursuant to the
authorities conferred by Resolution 10 and/or by way of a sale of treasury shares (within
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NOTICE OF ANNUAL GENERAL MEETING CONTINUED
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 10, by way of a
rights issue only):
(i)
to holders of Ordinary Shares in proportion (as nearly as may be practicable) to
their existing holdings; and
(ii)
to holders of other equity securities as required by the rights of those securities
or as the Directors otherwise consider necessary or permitted by the rights of
those securities,
and so that the Directors may impose any limits or restrictions and make any
arrangements which they consider necessary or appropriate to deal with any treasury
shares, fractional entitlements, record dates, legal, regulatory or practical problems in,
or under the laws of, any territory or the requirements of any regulatory body or stock
exchange or any other matters (including such problems arising by virtue of equity
securities being represented by depositary receipts); and
(b) the allotment of equity securities and the sale of treasury shares (other than under
paragraph (a) of this resolution) up to an aggregate nominal amount of £25,000,
and shall expire on the earlier of 31 March 2022 and the conclusion of the annual
general meeting of the Company to be held in 2022, 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.
12. That, subject to the passing of Resolution 10 proposed at the annual general meeting
of the Company convened for 31 March 2021 (‘Resolution 10’) and in addition to any
authority granted pursuant to Resolution 11 proposed at the annual general meeting
of the Company convened for 31 March 2021, 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 10 and/or by way of a sale of treasury
shares within the meaning of section 560(3) of the Act, as if section 561(1) of the Act did
not apply to any such allotment or sale, provided that this power shall be:
(a)
limited to the allotment of equity securities and the sale of treasury shares for cash
up to an aggregate nominal amount of £25,000; and
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NOTICE OF ANNUAL GENERAL MEETING CONTINUED
(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 2022 and the conclusion of the annual
general meeting of the Company to be held in 2022, 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.
13. 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)
the aggregate number of such Ordinary Shares hereby authorised to be acquired by
the Company shall not exceed 5,000,000;
(b) 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 2022 and the conclusion of the annual general
meeting of the Company to be held in 2022, save that the Company may before such
expiry make an offer or enter into an agreement which would or might require such
purchases of Ordinary Shares to be carried out after such expiry and the Directors may
carry out such purchases in pursuance of such an offer or agreement as if the power
conferred hereby had not expired.
By order of the Board
Catherine Bowen
Company Secretary
Date: 5 March 2021
Registered Office: Haramead Business Centre, Humberstone Road, Leicester, Leicestershire,
LE1 2LH
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NOTES
1. ATTENDING THE ANNUAL GENERAL MEETING IN PERSON
Although in normal circumstances members are encouraged to attend the Annual General
Meeting in person, in light of the current UK Government guidance restricting gatherings,
members are requested not to attend the Annual General Meeting in person and those
arriving at the venue will not be permitted access to the Annual General Meeting. If these
arrangements change, members will be notified by the Company via Regulatory Information
Service.
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. However, in light of the restrictions on attendance at the Annual
General Meeting outlined above, we strongly encourage all shareholders to exercise their vote
by appointing the Chairman of the Annual General Meeting as their proxy and providing voting
instructions in advance of the Annual General Meeting.
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 Link Group, 10th Floor, Central Square, 29 Wellington
Street, Leeds LS1 4DL or by telephone on 0371 664 0391 if calling from the United Kingdom,
or +44(0)371 664 0391 if calling from outside the United Kingdom. Calls are charged at the
standard geographical rate and will vary by provider. 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.
(London time) Monday to Friday excluding public holidays in England and Wales.
However, please note the restrictions on attendance at the Annual General Meeting outlined
above and the impact this will have on multiple proxy appointments. 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.
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NOTES
CONTINUED
In usual circumstances, the appointment of a proxy will not prevent a member from attending
the Annual General Meeting and voting in person if he or she wishes. However, as highlighted
above, in light of the continuing guidelines restricting social gatherings as a result of
COVID-19, members are requested not to attend the Annual General Meeting and restrictions
on entry will be in place.
4. APPOINTMENT OF A PROXY USING A FORM OF PROXY
Members may request a hard copy proxy form directly from Registrar on 0371 664 0330. (Calls
are charged at the standard geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines open between 09:00 –
17:30 (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.
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NOTES CONTINUED
It is the responsibility of the CREST member concerned to take (or, if the CREST member
is a CREST personal member, or sponsored member, or has appointed (a) voting service
provider(s), to procure that their CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST members and, where applicable, their
CREST sponsors or voting system providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended).
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). Please, however, note the restrictions on attendance at the Annual General Meeting
in light of the ongoing COVID-19 restrictions. In light of these restrictions, corporate members
are encouraged to appoint the Chairman of the Annual General Meeting as their proxy and to
provide voting instructions in advance of the Annual General Meeting.
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 29 March 2021 (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.
Please, however, note the restrictions on attendance at the Annual General Meeting in light of
the ongoing COVID-19 restrictions.
9. VOTING RIGHTS
As at 2 March 2021 the Company’s issued share capital consisted of 50,000,000 ordinary shares
of £0.01 each carrying one vote each 12,878 shares are held by the Company in treasury.
Therefore, the total voting rights in the Company as at 2 March 2021 were 49,987,122 votes.
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