Shoe Zone PLC (LON:SHOE) is to distribute an extra £4mln to shareholders in the form of a special dividend after a better-than-expected second half of trading.
The value footwear retailer expects to report revenue of £161.0mln (2017: £157.8mln) and a pre-tax profit in excess of £11.0mln – above what the City had pencilled in.
READ: Shoe Zone’s profits set to come out unscathed from difficult year
Shoe Zone said the growth has been driven by a “strong performance across the business” and improved margins in its spring/ summer ranges. It also benefitted from the closure of loss-making stores.
All that has left it with a net cash balance of £15.7mln (2017: £11.8mln), and management plans on giving a quarter of that back to shareholders next March.
“The group has performed well through the year with a particularly strong performance in the second half,” said chief executive Nick Davis.
“Our strategy of growth through Big Box expansion and online channels allied with excellence in the operations of the core Shoe Zone estate provides us with a clear path for the future.
“I am particularly pleased that the continued strong cash conversion has enabled the board to outline its intention to propose its third special dividend.”
Davis added that the new financial year has started well.
Good surprise given sector troubles
“Today’s strong FY18 pre-close trading update represents a positive profit surprise. We therefore increase our FY18 PBT forecast by +9% to £11mln,” said finnCap analyst Peter Smedley.
“The roll out of Big Box and strong progress in online sales underpin the medium-term growth profile, backed by SHOE’s strong balance sheet.
“SHOE’s operational and financial performance in FY18 is even more noteworthy given the raft of profit warnings reported elsewhere in the UK clothing/footwear sector over the past two months.
“It is difficult for any retailer to stand apart from the turbulence affecting the sector at present, but the combination of SHOE’s strong performance, low valuation and appealing dividend yield (6.9% on the ordinary) make it look a particularly attractive investment, in our view.”
Shares jumped 12.5% to 185p on Monday.
-- Updates for share price and analyst comment --