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Shoe Zone reports 40.0% Net Income decline in 2019 and 2.8 pp EBITDA Margin decline from 9.0% to 6.2%

08 Jan 2020 • About Shoe Zone ($SHOE) • By InTwits

Shoe Zone reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:
  • Shoe Zone has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's a lot of higher than industry average of 9.5%.
  • CAPEX is quite volatile: £7m in FY2019, £5m in FY2018, £5m in FY2017, £3m in FY2016, £2m in FY2015
  • The company has highly profitable business model: ROIC is 19.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Shoe Zone's Revenue increased slightly on 0.89%. Revenue decline was slowing down on average by 1.5 pp per annum in FY2015-FY2019. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.9 pp from 8.2% to 10.1% in FY2019.

Gross Margin decreased on 3.5 pp from 19.0% to 15.5% in FY2019. During FY2015-FY2019 Gross Margin topped in FY2017 at 19.1% and was declining since that time. SG&A as a % of Revenue decreased slightly on 0.65 pp from 11.9% to 11.3% in FY2019. During the last 5 years SG&A as a % of Revenue topped in FY2017 at 12.9% and was declining since that time.

Net Income margin decreased on 2.4 pp from 5.9% to 3.5% in FY2019. The efficient tax rate was 14.7% in FY2019.

Investments (CAPEX, working capital and M&A)

Shoe Zone's CAPEX/Revenue was 4.5% in FY2019. Shoe Zone's CAPEX/Revenue increased on 2.5 pp from 2.0% in FY2016 to 4.5% in FY2019. For the last three years the average CAPEX/Revenue was 3.6%. Shoe Zone invested a large share of EBITDA (72.1%) to CAPEX. CAPEX as a % of Revenue grew at 0.79 pp per annum in the last 5 years.

Inventories as a % of Revenue showed almost no change at 17.6% in FY2019.

Return on investment

The company operates at good ROIC (19.6%) and ROE (16.4%). ROIC dropped on 12.1 pp from 31.7% to 19.6% in FY2019. ROE dropped on 11.0 pp from 27.4% to 16.4% in FY2019. During FY2015-FY2019 ROIC topped in FY2018 at 31.7%. During the last 5 years ROE topped in FY2018 at 27.4%.

Leverage (Debt)

The company has no debt. Cash dropped on 27.2%.

Valuation and dividends

The company's trades at EV/EBITDA 7.4x and P/E 15.1x.

The company paid 175.0% of Net Income as dividends in FY2019.

Management team

Insider ownership is 50.7%. Insider ownership didn't change in 2019.

Financial and operational results

FY ended 30 Nov -0001

Shoe Zone ($SHOE) key annual financial indicators

mln. £201520162017201820192019/2018
Gross Profit27.327.830.130.525.1-17.8%
Interest expence0.2
Net Income8.
Balance Sheet
Short Term Debt0.
Long Term Debt0.
Cash flow
Revenue growth-3.5%-4.2%-1.3%1.8%0.9%
EBITDA growth-12.7%-3.3%-5.8%13.7%-30.3%

Gross Margin16.4%17.4%19.1%19.0%15.5%-3.5%
EBITDA Margin8.4%8.5%8.1%9.0%6.2%-2.8%
EBIT Margin7.1%4.2%-2.9%
SG&A, % of revenue6.6%10.9%12.9%11.9%11.3%-0.7%
Net Income Margin4.9%5.3%5.0%5.9%3.5%-2.4%
CAPEX, % of revenue1.1%2.0%3.3%3.2%4.5%1.3%

Net Debt/EBITDA-1.0x-1.1x-0.9x-1.1x-1.1x-0.0x
Insider ownership50.7%50.7%0.0%
Revenue/Employee, th. £46

Peers in General Retailers

Below you can find Shoe Zone benchmarking vs. other companies in General Retailers industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Development Securities(Investments) ($36JS)156.8%18.9%-48.8%40.1%
Corus Finance ($BD84)-99.5%13,313.3%10.4%12.9%
Bld Property Hldgs ($09GE)39.3%6.1%-0.2%8.5%
Sanctuary Housing ($BB21)5.3%7.2%0.3%5.5%
Housing Finance Corp ($68HB)9.1%10.9%8.2%3.0%
Median (14 companies)1.0%1.5%2.1%3.0%

Top companies by Gross margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Sanctuary Housing ($BB21)97.6%97.1%97.4%98.1%
Glh Hotels Ltd ($97KI)57.6%57.8%60.1%59.0%
Lewis(John)Partnership ($BD32)33.8%33.9%33.8%33.0%
Lewis(John) ($BC32)33.8%33.9%33.8%33.0%
Ashpol ($BC24)0.0%0.0%
Median (8 companies)33.8%32.7%31.9%16.5%

Top companies by EBITDA margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
T.H.F.C.(Indexed 2) ($90IL)97.9%97.1%96.2%96.4%
Housing Finance Corp ($68HB)97.9%97.1%96.2%96.4%
T.H.F.C.(Indexed) ($96JS)97.9%97.1%96.2%96.4%
T.H.F.C.(Social Housing Finance) ($96JP)97.9%97.1%96.2%96.4%
Bld Property Hldgs ($09GE)215.1%165.3%36.3%87.6%
Median (13 companies)44.3%39.7%29.2%52.7%

Top companies by CAPEX/Revenue, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Bld Property Hldgs ($09GE)59.2%84.6%53.0%55.6%
Sanctuary Housing ($BB21)60.0%31.0%33.3%42.3%
Mid Kent Water ($48HO)37.7%41.2%38.1%41.7%
Glh Hotels Ltd ($97KI)13.1%4.9%4.6%9.0%
Corus Finance ($BD84)9.6%6.6%5.7%
Median (13 companies)3.8%3.3%3.0%2.2%

Top companies by ROIC, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Corus Finance ($BD84)-19.6%2.1%8.4%10.7%
Lewis(John) ($BC32)18.6%19.8%22.0%8.2%
Lewis(John)Partnership ($BD32)18.6%19.8%22.0%8.2%
Glh Hotels Ltd ($97KI)4.9%5.7%5.6%7.5%
Development Securities(Investments) ($36JS)7.4%5.1%0.2%6.1%
Median (43 companies)3.2%3.9%2.6%1.0%

Top companies by Net Debt / EBITDA

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
T.H.F.C.(Indexed 2) ($90IL)20.3x22.6x24.3x28.0x
T.H.F.C.(Indexed) ($96JS)20.3x22.6x24.3x28.0x
T.H.F.C.(Social Housing Finance) ($96JP)20.3x22.6x24.3x28.0x
Housing Finance Corp ($68HB)20.3x22.6x24.3x28.0x
West Bromwich B.S. ($WBS)2.3x4.9x10.5x12.7x
Median (13 companies)3.1x4.0x4.6x8.6x