TIDMNXT
RNS Number : 8845J
Next PLC
15 September 2016
Date: Embargoed until 07.00hrs, Thursday 15 September
2016
Contacts: Lord Wolfson, Chief Executive
Amanda James, Group Finance Director (analyst
calls)
NEXT PLC Tel: 0333 777 8888
Alistair Mackinnon-Musson Email: next@rowbellpr.com
Rowbell PR Tel: 020 7717 5239
Photographs: http://press.next.co.uk/media/company-images/campaignimages.aspx
----------------- -------------------------------------------------------------------
Next plc
Results for the
Half Year Ending
July 2016
CHIEF EXECUTIVE'S REVIEW
OVERVIEW
In March we predicted a challenging year and this has been
reflected in our first half results. Although total NEXT Brand
sales were +3.0% ahead of last year, full price sales were down
-0.3% on a comparable week basis(1) . Directory has performed
significantly better than Retail mainly as a result of improved
stock availability, enhanced website functionality and continued
growth from LABEL and overseas.
Profit before tax was down -1.5%. Underlying Earnings per Share
(EPS) were up +0.8%, boosted by the effect of share buybacks.
We are declaring an ordinary interim dividend of 53p per share,
which is in line with last year.
(1) Last year was a 53-week year, which meant that this year
started one week later than last year.
SALES excluding VAT July July
2016 2015
GBPm GBPm
NEXT Retail 1,083.6 1,083.0 +0.1%
NEXT Directory 821.2 767.0 +7.1%
======== ========
NEXT BRAND 1,904.8 1,850.0 +3.0%
Other 52.3 57.4
======== ========
Total NEXT Group sales 1,957.1 1,907.4 +2.6%
Statutory Revenue 1,939.7 1,890.5
======================== ======== ======== ======
PROFIT and EPS July July
2016 2015
GBPm GBPm
NEXT Retail 133.9 161.0 -16.8%
NEXT Directory 204.2 184.1 +10.9%
======= =======
NEXT BRAND 338.1 345.1 -2.0%
Other 22.4 16.9
======= =======
Operating profit 360.5 362.0 -0.4%
Net interest (18.4) (14.9)
======= =======
Profit before tax 342.1 347.1 -1.5%
Taxation (68.6) (70.1)
======= =======
Profit after tax 273.5 277.0
======= =======
EPS 188.6p 187.1p +0.8%
Ordinary interim dividend
per share 53.0p 53.0p 0.0%
=========================== ======= ======= =======
NEXT RETAIL
Retail Sales and Profit Analysis
GBPm July 2016 July 2015
=================== ========== ========== =======
Retail total
sales 1,083.6 1,083.0 +0.1%
Retail operating
profit 133.9 161.0 -16.8%
Retail net margin 12.4% 14.9%
Total Retail sales were up +0.1%, with net new space
contributing +2.8% to growth. Full price sales were down -3.2%.
Last year was a 53-week year, and as a result the first half of
this year started one week later than last year. On a comparable
week basis total Retail sales were down -0.7% and full price sales
were down -4.0%.
The table below sets out significant Retail margin movements by
major heads of costs.
Net operating margin on total sales last
year 14.9%
============================================================= ======
Bought-in Bought-in gross margin improved
gross margin due to reduced freight costs. +0.1%
Margin has declined as markdown
sales have grown by more than
full price sales, driven by
a much larger end-of-season
Sale. Total Brand stock for
Sale in the season was up +27%.
Retail took a greater proportion
of the increase than Directory,
so stock for Sale in Retail
was up +37%. In comparison,
stock for Sale in Directory
Markdown was up +14%. -1.8%
Increased rates of pay would
have reduced margin by -0.6%,
but were mitigated by productivity
Store payroll initiatives. -0.2%
Negative like for like sales
increased fixed costs as a percentage
of sales. Underlying rental
Store occupancy inflation was less than 1%. -0.8%
Costs increased due to the annual
cost of living award and occupancy
Warehouse costs of our new automated furniture
and distribution warehouse. -0.3%
Central overheads reduced, mainly
Central overheads due to lower management incentives. +0.5%
=================== ======================================== ======
Net operating margin on total sales this
year 12.4%
We expect Retail net margins for the full year to be around
15%.
Retail Space Expansion
We are now planning to increase net trading space by 350,000
square feet this year, taking our portfolio to 8.0m square feet.
This is more than we forecast in March. We now expect to deliver
stores that were planned to open early in 2017/18 towards the end
of the current year. Store numbers will remain broadly the same,
with the increase from new stores being offset by the closure of
smaller, less profitable stores.
The table below sets out the forecast change in store numbers
and space for the full year.
Store numbers Sq. Ft. ('000)
======================= ============== ===============
January 2016 540 7,650
New stores, including
17 re-sites +27 +610
Closures, including
20 re-sites -28 -320
Extensions (10) - +60
============== ===============
January 2017 (e) 539 8,000 +4.5%
Profitability of the portfolio of stores opened or extended in
the last 12 months is forecast to be 22% of VAT inclusive sales and
payback on the net capital invested is expected to be 22 months.
Both figures meet Company investment hurdles of 15% store
profitability and 24 months capital payback.
Looking ahead, our pipeline of new projects remains healthy and
we estimate that we will add between 250,000 and 300,000 square
feet per annum of net trading space during 2017 and 2018. This
estimate is only a rough guide at this stage and much will depend
on the property deals we are able to achieve and required planning
permissions.
NEXT: Edinburgh Straiton image: Click or paste the following
link into your web browser to view the PDF document. Refer to page
5 for the relevant image.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Retail Store Profitability and Average Lease Lengths
At a time when retail sales are moving backwards, it may seem
counterintuitive to be adding new space. Our view is that, in a
difficult trading environment, taking new space is one of the few
ways to mitigate losses from negative like for like sales. However,
for space acquisition to be effective in these circumstances it
must fulfil the following three criteria:
-- New space must be highly profitable (at least 15% but preferably >20%)
-- It pays back on capital invested within 2 years
-- The length of the lease taken is not onerous (generally 10 years or less)
These criteria mean that even if there is a significant decline
in like for like sales, new stores are likely to deliver healthy
returns on capital and remain profitable for the life of their
lease. Our store portfolio remains extremely profitable and the
average(2) remaining lease term is not onerous (7.3 years). The
table below sets out the percentage of our turnover within stores
of different levels of profitability.
(2) Average weighted by rental value
Mainline Percentage
store profitability of turnover
====================== =============
>20% 76%
>15% 93%
>10% 97%
>5% 99%
>0% 99.5%
====================== =============
NEXT DIRECTORY
NEXT Directory Sales Performance
Total Directory sales grew by +7.1%, with full price sales
growth of +5.5%. As with Retail, these figures are distorted by
last year's 53(rd) week. On a comparable week basis, total
Directory sales were up +5.4% and full price sales were up +4.9%.
The table below shows the year on year growth in full price sales
for each element of the business on a comparable week basis. Full
price sales in the UK grew by +2.5%. Much of the UK growth was
driven by LABEL, with the core UK NEXT full price business growing
by +0.1%. Our overseas business grew by +20.7%.
Full price
Full price GBPm % Var
sales growth
================ ======= ===========
UK NEXT +1 +0.1%
UK LABEL +14 +17.2%
======= ===========
Total UK +15 +2.5%
Overseas +19 +20.7%
======= ===========
Total +34 +4.9%
======= ===========
Directory Customer Base
Average active customers increased by +5% to 4.7 million, driven
by the growth of UK 'cash' customers (those who do not use the
Directory credit account when ordering) and customers overseas. The
table below sets out the growth in our customer base.
Average active July July
customers 2016 2015
====================== ====== ====== =====
UK credit account(3) 2.50m 2.61m -4%
UK cash 1.35m 1.14m +19%
====== ====== =====
Total UK 3.85m 3.75m +3%
Overseas 0.85m 0.71m +19%
====== ====== =====
Total 4.70m 4.46m +5%
(3) Prior year active customers have been reduced by 0.05m to
exclude inactive accounts that were included in error last
year.
Directory credit business
As anticipated our credit customer base continued to decline,
albeit that the rate of decline appears to have stabilised at
around -4%. The decline in customer numbers is not as a result of
more customers closing their accounts. Our retention rate (the
percentage of our existing customer base continuing to use their
accounts) remains stable at around 83%, however in recent years it
has become increasingly difficult to recruit new credit
customers.
The average sales and balances of those customers who become
inactive are much lower than those who continue to use their
accounts. This explains why although credit customers are down -4%,
sales to credit customers were level on last year.
The table below sets out the trend in our credit customer base
over the last four years.
Six months to July July July July
2013 2014 2015 2016
========================== ======== ======== ======== ========
Average active credit
accounts 2.81m 2.74m 2.61m 2.50m
% Change in credit
customers base +5% -3% -5% -4%
========================== ======== ======== ======== ========
Directory online credit GBP161 GBP179 GBP192 GBP199
sales (VAT ex.) per
average active credit
account
========================== ======== ======== ======== ========
Average balance per GBP228 GBP263 GBP305 GBP403
customer
========================== ======== ======== ======== ========
Directory online credit GBP452m GBP489m GBP501m GBP498m
sales (VAT ex.)
Retail sales paid using GBP102m GBP115m GBP119m GBP106m
Directory account
Total interest income GBP74m GBP84m GBP89m GBP105m
========================== ======== ======== ======== ========
Total credit income GBP628m GBP688m GBP709m GBP709m
(VAT ex.)
========================== ======== ======== ======== ========
Increase in total credit
income +8% +9% +3% +0%
========================== ======== ======== ======== ========
Directory Profit Analysis
Total NEXT Directory sales grew by +7.1%, profit grew by
+10.9%.
GBPm July 2016 July 2015
===================== ========== ========== =======
Directory total
sales 821.2 767.0 +7.1%
Directory operating
profit 204.2 184.1 +10.9%
========== ========== =======
Directory net
margin 24.9% 24.0%
The table below sets out significant Directory margin movements
by major heads of costs.
Net operating margin on total sales last
year 24.0%
============================================================= ======
Bought-in Bought-in gross margin improved
gross margin due to reduced freight costs. +0.1%
Margin declined by -0.9% as
a result of a 14% increase
in stock for the Directory
Sale.
In addition, last year was
53 weeks which meant this year
started one week later than
last year. This resulted in
an extra week of Directory
markdown sales in the first
half (the Directory Sale lasts
longer than the Retail Sale).
The effect of this timing difference
was to erode margin by -0.7%;
this will reverse out in the
Higher markdown second half. -1.6%
Increased interest from higher
average balances increased
margin by +3.4%; this has been
partially offset by a reduction
Interest income in APR. +1.2%
Operating efficiencies (+0.9%)
and the benefits from our International
hubs (+0.2%) have been moderately
offset by the annual cost of
living award and occupancy
Warehouse costs of our new automated
& distribution furniture warehouse (-0.2%). +0.9%
Marketing, Reduction in print costs (+0.6%)
photography to some extent have been offset
& catalogue by increased online marketing
production costs (-0.3%). +0.3%
Net operating margin on total sales this
year 24.9%
We expect Directory net margins for the full year to be around
25%.
Directory Overseas
Directory overseas continues to trade well with full price sales
in the first half up +21%. Stripping out the effect of the Pound's
appreciation, full price sales in local currencies were up
+27%.
Sales and profit history
The table below sets out the last four years' sales, profits and
net margins for Directory overseas, along with an estimate for the
current year. This year our overseas margin has improved, mainly as
a result of efficiencies within our parcel networks and
distribution hubs. We expect profitability for the full year to be
around 18% of sales.
Jan Jan Jan Jan Jan
GBPm 2013 2014 2015 2016 2017
(e)
=============== ====== ====== ====== ====== ======
Sales 54 101 163 197 232
Net profit 10 18 30 31 42
====== ====== ====== ====== ======
Profitability 19% 18% 18% 16% 18%
Distribution hubs
Last year we opened three new distribution hubs in Russia,
Germany and China. The hubs in Germany and Russia are both working
well. Within the next six months we will begin to service our
Polish business from the German hub. Learning to operate in China
has been more challenging than we originally anticipated and we
have recently relocated our hub out of a Free Trade Zone at minimal
cost. Our new operation in mainland China is now working well.
LABEL
For the full year we expect LABEL total sales to be up +12% with
full price sales up +14%. Net margin is expected to improve to 16%
largely as a result of a reduced markdown. In the first half of
this year we have added 9 new major brands and will add a further 6
in the second half.
The table below sets out the last two years' sales, profit and
margins for our LABEL business, along with our estimate for the
current year.
Jan Jan Jan
2015 2016 2017
GBPm (e)
================== ====== ====== ======
Total Sales VAT
ex.(4) 145 180 202
Profit 20 22 32
====== ====== ======
Profitability(4) 14% 12% 16%
(4) Excludes interest income on LABEL items purchased on the
NEXT Directory account
Lipsy & Co
Our subsidiary, Lipsy, has begun to work with other third-party
young fashion brands to create a second branded offer. This is
aimed at younger female customers and does not compete with our
existing LABEL brands. The business is called 'Lipsy & Co' and,
although still small, it has proved a successful addition to the
Group. Sales of Lipsy & Co are included in the numbers reported
for LABEL above.
THE CHANGING FACE OF NEXT DIRECTORY
In our year end report, issued in March 2016, we outlined the
steps we were taking to update and improve the performance of NEXT
Directory. This section reports on the progress we have made.
Improving Performance
The areas we targeted for improvement were as follows:
-- Stock availability
-- Mobile site and Apps
-- Online marketing
-- Personalisation of the website
-- Distribution of catalogues
-- Delivery services
Of the above areas, the only projects that we believe have had a
meaningful impact on sales performance in the first half were
improving stock availability, the launch of our new mobile site and
the roll-out of online marketing campaigns. Most of the other
improvements are dependent on systems developments due for delivery
and roll-out over the next twelve months.
The measures we have taken are beginning to have some positive
effect and the performance of NEXT Directory has significantly
improved relative to our Retail stores. The graph below shows the
full price sales performance of Directory relative to Retail over
the last three and a half years. For example, in Spring and Summer
2016, Directory sales grew by +5% and Retail sales reduced by -4%,
so the difference of +9% is shown on the graph. As can be seen,
last season's Directory performance was significantly better than
Retail.
Difference between Directory and Retail Full Price Sales Growth
chart: Click or paste the following link into your web browser to
view the PDF document. Refer to page 10 for the relevant chart.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Stock Availability
We achieved a significant improvement in our service levels in
the first half of the year, with items available for immediate
dispatch rising from 66% to 71%. However, this improvement was
mainly achieved through simply buying more stock and so contributed
to the significant increase in markdown that we experienced at the
end of the season.
For the second half of the year, we have planned and delivered
stock using a new stock control system. As a result, we believe
that we can deliver similar availability improvements in the second
half, but without generating additional markdown.
Stock availability chart: Click or paste the following link into
your web browser to view the PDF document. Refer to page 11 for the
relevant chart.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Mobile Site and Apps
m.next.co.uk
In the first half we rolled out our mobile website
(m.next.co.uk) to all handheld devices. We have continued to see an
improvement in the number of customers ordering as a percentage of
customers visiting the site. This conversion rate has risen by
+16%, from 4.9% to 5.7%.
Currently the functionality of our mobile site is more limited
than our full website, focussing on search, select and ordering.
Over the course of the next twelve months, we plan to deliver a
catalogue browsing mode (page view), enhanced account management,
order tracking and improved payment functionality. We will also
enable the purchase of sofas, furniture and flowers through the
mobile site. In the first half of next year, once we have converged
our overseas and UK websites onto one platform, we will be able to
launch a mobile site for our overseas customers.
Apps
We have significantly upgraded our iPhone and iPad apps. These
are both delivering excellent conversion rates (circa 10%),
although Apps still only account for 7% of Directory turnover.
During the second half of this year we plan to launch an App for
Android phones and tablets.
iPad and iPhone App image: Click or paste the following link
into your web browser to view the PDF document. Refer to page 12
for the relevant image.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Multiple devices
Over the course of the next six months we aim to make the
process of shopping across different devices more convenient by
enabling customers to view their shopping basket across a number of
different devices.
Online Marketing
Customer recruitment
During the first half of the year we significantly increased our
online marketing spend.
In the UK, online marketing has increased recruitment by 67,000
customers. This growth has been profitable, with an IRR (internal
rate of return) of 53%. UK campaigns meet our target IRR of 30% and
demonstrate the opportunity to expand online marketing in the UK.
The table below summarises the growth in UK customer recruitment,
together with the additional spend and incremental IRR. These
numbers need to be treated with some caution as the IRR makes
assumptions about customers' future spending and attrition, which
can only be confirmed with the passage of time.
UK
=============================== =======
Additional customers recruited 67,000
Additional recruitment GBP3.1m
& promotion spend
Cost per additional customer GBP47
Internal Rate of Return
(IRR) 53%
=======
We have also invested an additional GBP1m in online marketing
overseas. However, the returns achieved have been below our
investment hurdle rate. We will continue to look for more effective
ways of investing in overseas online marketing.
We anticipate that we will invest an additional GBP8m in online
marketing for the full year, most of which will be spent in the
UK.
Better targeting of advertising
We have recently installed software that will allow us to use
customer information in third-party advertising (such as product
preferences and purchasing history). We will be deploying the first
phase of this technology in the second half. We believe that this
change will allow us to improve the performance and reach of our
advertising going forward.
Personalised emails
We have had some success with limited personalisation of
customer emails but believe we still have much to learn and do in
order to maximise the power of well-targeted customer emails.
Personalisation of the Website
The personalisation of our website represents the biggest
challenge in our programme of improvement. This endeavour requires
us to develop three new capabilities:
-- A comprehensive customer database which allows us to link
customer profile information with transactional and browsing
history
-- New display software to allow individual users to get
different views of our website depending on their profile
-- An understanding of which personalisation techniques are most
likely to increase sales through targeting product and promotions
to the most relevant customers
During the first half we have developed the first phase of a new
customer marketing database and deployed third-party display
software, which will allow us to tailor individual customer views.
We have also conducted several encouraging personalisation
trials.
Over the next six months we will undertake a number of website
personalisation programmes, including home page product
preferences. However, we recognise that it will take at least
another six months to gain a clear understanding of which
personalisation techniques work best for the business. So we do not
expect personalisation to have much impact on sales during the
current financial year, though it represents a potentially
significant opportunity for 2017 and beyond.
Distribution of catalogues
Whilst the majority of our existing customers value our four
hardback catalogues, many of our newer customers opt out of
receiving a hardback publication. This change means that we were
missing the chance to use printed material to promote our new
ranges to a growing segment of our customer base.
Over the course of the last six months we have rationalised and
expanded the planned distribution of printed material. The most
important change has been the introduction of a smaller softback
version of our main publications for customers who do not want
hardback books. During the first half of the year we successfully
trialled this concept which will be rolled out in the second half.
The graph below sets out the changes to the distribution of
catalogues over the last five seasons and the distribution we are
planning for the current season. As can be seen, we have now
arrested the decline in printed materials.
Book Volumes 2014-2016 chart: Click or paste the following link
into your web browser to view the PDF document. Refer to page 14
for the relevant chart.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Net costs of online marketing and publication programme
Throughout the year we expect the reduction in hardback books,
after accounting for the increased cost of new softback
publications, to result in a net saving of GBP3m. This saving,
which is essentially a marketing cost, partially offsets the
planned GBP8m increase in online marketing spend.
Delivery services
As set out in our year end report, we plan to launch delivery
and collection from 5,000 parcel shops in October. Towards the end
of the year we will also begin giving our customers a two-hour
delivery window during which they can expect their goods. This
message will be sent by text at the beginning of the day.
Note on Systems Development
The speed at which we are able to deliver new systems remains
critical to the pace of business development within the NEXT
Directory. The convergence of our UK and overseas websites has been
a necessary step in the development of our overseas business and
will enable us to deliver far more efficient development in the
future. However, the scale and complexity of this project has
hampered our ability to deliver new systems over the last 12
months. This project will be complete by the end of the year so we
expect to be able to accelerate Directory systems development as we
go into 2017.
UPDATE ON CURRENCY AND 2017 PRICES
In our August trading statement we issued guidance for our
costing rates for 2017, in light of the recent devaluation of the
Pound. Our currency rates for the current year were not affected by
this year's devaluation because we had already covered most of our
requirements in the forward markets. As a result, Sterling's recent
devaluation will not affect us until Spring 2017.
The left-hand side of the table below shows the value of the
Pound against our achieved Dollar costing rates from 2015 to 2017.
Rates for 2017 are still an estimate as we have yet to purchase all
our currency requirements for next year. 64% of our purchases are
denominated in Dollars, the balance is priced in Euros, Pounds or
other local currencies. Even in those territories where goods are
priced in Dollars, the fall in the Pound will not fully translate
into higher Sterling prices. This is because ultimately, the Dollar
is only an intermediate currency. The value of the Pound against a
weighted basket of local currencies in our supplier territories
shows a smaller devaluation, as set out in the right-hand bar
chart.
Weighted basket currency chart: Click or paste the following
link into your web browser to view the PDF document. Refer to page
16 for the relevant chart.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
As can be seen from the chart, all other things being equal we
would expect cost prices to rise by 5% in 2017. However, in 2016 we
experienced a similar devaluation without any material impact on
Sterling cost prices. This was because:
-- We have developed new sources of supply (such as Burma and Cambodia)
-- Developing territories (such as Bangladesh) have broadened their capabilities
-- There is increased competition and improving efficiency in
mature territories (such as China and India)
-- Lower commodity prices
We believe that the first three factors will continue to
influence prices going into 2017 so we expect cost prices on like
for like garments to rise by 5% at the most. It is worth pointing
out that this calculation is not straightforward because, in a
world where fashion is changing so quickly, there will be very few
garments which are directly comparable to those we are selling this
year.
Likely effect on retail selling prices and turnover
The last time we had to increase prices (which was in 2010 when
cotton prices soared) we estimated that price elasticity was around
1.1. If that remains the case today, a retail selling price
increase of 5% would result in a fall in unit sales of -5.5% and a
fall in like for like sales value of between -0.5% to -1.0%. In the
scheme of things, we think that this drag on sales is manageable
and less damaging than taking a significant hit to margin.
OTHER TRADING BUSINESSES
NEXT Sourcing
NEXT Sourcing (NS) is our internal sourcing agent, which
procures around 40% of NEXT branded product. NS sales are down 10%
in local currency, mainly as a result of competition from other
third-party suppliers, in particular those who operate closer to
home and have a better ability to respond faster to new trends. The
impact of this was partially mitigated by changes in exchange
rates.
Looking forward, NS will focus on improving its product
development capabilities and operations in Turkey, which, of its
territories, is best placed to respond to emerging trends.
The table below sets out the performance of the business in
Sterling and in Dollars.
July July July July
2016 2015 2016 2015
GBPm GBPm USDm USDm
================== ====== ====== ============= ================
Sales (mainly
inter-company) 299.8 304.2 -1% 419.7 465.4 -10%
Operating profit 21.8 22.9 -5% 30.5 35.0 -13%
Operating margin 7.3% 7.5% 7.3% 7.5%
====== ====== ============= ================
Exchange rate 1.40 1.53
For the full year we expect NS to make around USD 65m profit, a
decline of 15% in local currency. Profit in Sterling is likely to
be slightly lower than last year's GBP50m.
Lipsy
Earlier this year Lipsy made the decision to curtail their UK
wholesale business which is less profitable than (and competes
with) its other sales channels. Lipsy's sales are broken down by
distribution channel in the table below. Sales through NEXT stores
and Directory are reported in those divisions and are set out in
the table below.
July 2016 July 2015
GBPm GBPm
==================================== ========== ==========
Franchise and wholesale 8.3 10.3
Lipsy Retail 1.7 1.9
Lipsy online (lipsy.co.uk) 4.1 2.7
========== ==========
Total Lipsy Sales 14.1 14.9
Lipsy Sales through NEXT Retail
(reported in NEXT Retail) 7.1 5.9
Lipsy sales through NEXT Directory
(reported in NEXT Directory) 19.9 13.1
Total Sales 41.1 33.9 +21%
========== ==========
A growing proportion of Lipsy's sales (around 33%) come from
selling third-party, young fashion brands, mainly on a commission
basis. These amounted to GBP13.9m in the first half of the year
compared with GBP6.1m for the same period last year.
Lipsy's first half profit was GBP2.8m, up from GBP1.8m last
year. We are anticipating full year profits of GBP6.6m compared
with GBP5.3m last year.
International Retail and Franchise Stores
Our franchise partners operate 179 stores in 37 countries.
Franchise sales in the year have reduced by -12%. This decline is
due to a combination of weak trading conditions in some important
territories and increased competition from our own overseas offer
online. Our 13 wholly owned stores in Europe have broadly broken
even. Revenue and profit are set out below.
July July
2016 2015
GBPm GBPm
================== ====== ======
Franchise income 26.6 30.9
Own store sales 5.5 5.4
====== ======
Total revenue 32.1 36.3 -12%
====== ======
Operating profit 4.2 4.7 -11%
Central Costs and Non-Trading Activities
The table below summarises central costs and other non-trading
activities.
GBPm July 2016 July 2015
============================= ========== ==========
Central costs and share
options (9.9) (13.3)
Property management 3.0 6.6
Unrealised foreign exchange - (6.3)
Associates 0.6 0.5
========== ==========
Total (6.3) (12.5)
========== ==========
The reduction in central costs and share options reflects lower
incentive costs this year. We anticipate a similar charge in the
second half. Last year's property management profit included GBP5m
from the development of a retail store. For the full year we are
budgeting for property management profit of GBP5m.
We are not budgeting for any unrealised exchange gains or losses
this year.
Interest and Taxation
The interest charge was GBP18.4m, up from last year's GBP14.9m
and reflecting higher debt levels this year. We are forecasting a
charge of GBP39m for the full year compared with GBP31m last
year.
Our expected tax rate of 20% for the current year is
commensurate with headline UK corporation tax rates. For 2017/18 we
expect this to fall below 20% following the UK Government's
decision to reduce the rate further.
CAPITAL EXPITURE, NET DEBT AND SHAREHOLDER DISTRIBUTIONS
Capital expenditure
In the current year we expect capital expenditure to be GBP162m.
The increase on last year of GBP11m is as a result of increased
investment in profitable new space and warehouse expenditure which
has been partly offset by a reduction in Head Office and Systems
expenditure.
Our capital expenditure forecast for the full year is shown by
category in the table below with the equivalent figures for the
last two years.
Jan 2015 Jan 2016 Jan 2017
GBPm (e)
=========================== ========= ========= =========
Retail space expansion 74 86 103
Retail cosmetic refits 6 15 10
========= ========= =========
Total capex on stores 80 101 113
Warehouse 12 22 30
Systems & Head Office
infrastructure 18 28 19
========= ========= =========
Total capital expenditure 110 151 162
New retail space remains our biggest investment at GBP103m. In
the year to January 2017, warehouse capex is forecast at GBP30m.
This includes GBP18m of expenditure on a new automated furniture
warehouse, compared to GBP12m last year. This new warehouse will be
operational towards the end of this year.
Systems capital expenditure is reducing to GBP7m due to a prior
year investment renewing our retail till systems. Expenditure on
Head Office infrastructure is reducing to GBP12m as we near the end
of upgrading our central facilities. This year's expenditure
includes a new on-site photographic and video studio, interim
accommodation for new starters and an upgrade to site security.
Balance Sheet, Net Debt and Financing
Cash flow in the first half
Underlying surplus cash generated from operations in the first
half was GBP233m. This is after deducting interest and capital
expenditure, but before financing GBP65m of additional investment
in Directory debt. We paid a special dividend of GBP88m and spent
GBP176m on share buybacks. Overall, net cash outflow for the first
half was GBP96m and net debt increased from GBP850m at the
beginning of the year to GBP946m at the end of July.
Cash flow for the full year
Assuming a further GBP30m of share buybacks this year, we now
expect net debt at January 2017 to finish broadly in line with net
debt at the start of the year, as set out in the table below.
GBPm Net Cash
debt flow
(e)
========================================== ======= ========
Net debt January 2016 850
Surplus cash from operations (after
tax, capital expenditure and ordinary
dividends but before funding additional
Directory debt) +350(e)
Special dividends / buybacks -294(e)
Financing for additional Directory
debt -65(e)
======= ========
Net debt January 2017 859(e)
Our forecast year end net debt of GBP859m is around GBP120m
higher than our forecast at the beginning of the year. The decision
to increase our leverage was made in the light of:
-- The successful issue a new bond at historically low rates.
-- The GBP300m increase in the Directory debtor book we have
experienced over the last two years.
-- The Directory debtor book, a financial asset now valued at
GBP953m, more than covers the value of our net debt.
The Group maintains its objective of investment grade status. At
GBP859m, the Group's net debt is very comfortably within the limit
of investment grade status which we estimate to be around
GBP1.5bn.
Bonds and Bank Facilities
Our debt (which peaks at GBP1.1bn) is securely financed through
a combination of bonds and committed bank facilities.
In May of this year we issued a new GBP300m 12-year bond in
anticipation of redeeming our GBP213m bond in October 2016. Once
the October bond is repaid, our financing will consist of GBP875m
of bonds and GBP525m of committed bank facilities, as set out in
the table below.
GBPm GBPm
======================= ===== ======
2021 Bond 325
2026 Bond 250
2028 Bond 300
===== ======
Total bond financing 875
Bank facility 2020 285
Bank facility 2021 240
===== ======
Total bank facilities 525
===== ======
Total financing 1,400
===== ======
Pension Scheme
On the IFRS accounting basis, our defined benefit scheme has
swung from a GBP46m surplus at January 2016 to a GBP35m deficit at
the end of July 2016. This is primarily due to lower interest
rates. A full actuarial valuation will be performed later this year
which, depending on market conditions, could show a deficit for
funding purposes in the order of GBP150m. If this were to be the
case, we anticipate that it may require additional Company
contributions of around GBP30m per year for 5 years.
Interim Dividend
We are declaring an ordinary interim dividend of 53p per share,
in line with last year, to be paid on 3 January 2017. Shares will
trade ex-dividend from 8 December 2016 and the record date will be
9 December 2016.
OUTLOOK
Recent Trade - a July 'bounce'?
There has been some talk of a general retail bounce in July and
whilst NEXT did enjoy very strong sales in July, this was driven by
a much larger end-of-season Sale. NEXT's stock for the
end-of-season Sale was up 30% on last year which increased both
footfall and sales.
As can be seen from the graph below, full price sales in July
remained subdued, so we do not believe that July trading
represented any change in underlying consumer spending patterns.
Trading since July, which to some extent may have been affected by
the Sale, has remained challenging and volatile. We are maintaining
our full year sales guidance but expect to have a clearer picture
of trading conditions at the beginning of November when we announce
our third quarter sales.
Total and Full Price Sales Growth: May, June and July 2016
chart: Click or paste the following link into your web browser to
view the PDF document. Refer to page 23 for the relevant chart.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Wider economic trends
Growth in GDP, Earnings and CPI remain subdued with little
change in underlying numbers over the last few months. General
inflation (CPI) is forecast to increase in the year ahead as the
effects of the Pound's devaluation filter through to the real
economy, so there is a risk of a squeeze on real earnings if wage
growth remains at its current level. Total earnings continued to
grow at around 4% throughout 2015 driven by growth in total
employment, although this has slowed to 2% in the first quarter of
this year.
Average Earnings, GDP and CPI chart: Click or paste the
following link into your web browser to view the PDF document.
Refer to page 23 for the relevant chart.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Trends in consumer spending
The graph below shows growth in consumer spending, total retail
sales and sales of clothing and footwear over the last 18 months.
As can be clearly seen from the graph, total consumer spending
(which includes items such as hotels, travel, restaurants, etc.)
has grown broadly in line with total earnings growth in 2015, at
just below 4%.
Growth in Consumer, Retail and Clothing & Footwear Sales
chart: Click or paste the following link into your web browser to
view the PDF document. Refer to page 24 for the relevant chart.
http://www.rns-pdf.londonstockexchange.com/rns/8845J_1-2016-9-14.pdf
Up until October/November 2015, total retail sales were growing
broadly in line with consumer spending, with clothing and footwear
doing significantly better. Towards the end of last year, and
coinciding with an unusually warm winter and cold spring, growth in
sales of clothing and footwear fell dramatically below the general
level of retail spending. This graph demonstrates the shift towards
more experiential spending that we highlighted in our March results
announcement.
We reiterate our guidance that the third quarter is likely to be
our toughest, as it was our best performing quarter last year.
There is a possibility that the trend away from spending on
clothing and footwear might not be as marked later in the year, as
the comparative numbers soften in November. This improvement is
very likely if we have a cold winter.
Outlook for Sales and Profit
We maintain our sales and profit guidance for the full year
issued with our trading statement at the beginning of August. For
the full year, we expect NEXT Brand full price sales growth to be
between -2.5% and +2.5%. Our wider than normal sales range reflects
the continued uncertainty and increasing volatility of consumer
demand.
Our sales and profit guidance range for the year is reiterated
in the table below.
Guidance Estimates Lower Upper
Full Year to January 2017 end end
(52 v 52 week basis) of guidance of guidance
============================= ============= =============
Total full price NEXT Brand
sales growth v LY -2.5% +2.5%
Group profit before tax GBP775m GBP845m
Group profit before tax
v LY -5.6% +2.9%
Earnings per share v LY -2.5% +6.3%
============= =============
Third Quarter Trading Update
Our next trading statement will cover the thirteen weeks to 29
October and is scheduled for Wednesday 2 November 2016.
SUMMARY
As expected, it has been a challenging year so far, with
economic and cyclical factors working against us, and it looks set
to remain that way until mid-October at the earliest. We remain
clear about where we need to focus our energies and continue to
work on the priorities we set out at the beginning of the year:
-- Continue our efforts to improve our buying processes, pushing
the boundaries of what we can achieve in terms of design and
quality
-- Upgrade the UK Directory business, developing new ways of
recruiting customers, stimulating sales from existing customers,
presenting our website, personalising our offer and improving our
delivery service
-- Continue to develop Directory's two growth businesses - LABEL and Overseas
-- Develop and profitably expand our UK retail store network
-- Control costs through innovation
These objectives all relate to improving how our customers
perceive NEXT. We believe that if we stick to our priorities then,
however difficult the current year may prove to be, the Company
will emerge well placed to grow when trading conditions become more
benign.
Lord Wolfson of Aspley Guise
Chief Executive
15 September 2016
UNAUDITED CONSOLIDATED
INCOME STATEMENT
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
GBPm GBPm
Revenue 1,939.7 1,890.5
Cost of sales (1,307.5) (1,246.0)
(____________) (____________)
Gross profit 632.2 644.5
Distribution costs (169.0) (166.7)
Administrative expenses (103.3) (110.0)
Unrealised foreign exchange losses - (6.3)
(____________) (____________)
Trading profit 359.9 361.5
Share of results of associates 0.6 0.5
(____________) (____________)
Operating profit 360.5 362.0
Finance income 0.1 0.5
Finance costs (18.5) (15.4)
(____________) (____________)
Profit before taxation 342.1 347.1
Taxation (68.6) (70.1)
(____________) (____________)
Profit for the period attributable
to equity holders of the parent company 273.5 277.0
(____________) (____________)
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
GBPm GBPm
Earnings per share (Note 4)
Basic 188.6p 187.1p
Diluted 187.1p 183.7p
Ordinary interim dividend per share
(Note 5) 53.0p 53.0p
UNAUDITED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
GBPm GBPm
Profit for the period 273.5 277.0
Other comprehensive income and expenses:
Items that will not be reclassified
to profit or loss
Actuarial (losses)/gains on defined
benefit pension scheme (77.8) 3.6
Tax relating to items which will not
be reclassified 15.6 (0.8)
(____________) (____________)
Sub-total items that will not be reclassified (62.2) 2.8
(____________) (____________)
Items that may be reclassified to
profit or loss
Exchange differences on translation
of foreign operations 0.8 2.0
Foreign currency cash flow hedges:
- fair value movements 49.3 (27.9)
- reclassified to the income statement (16.6) (20.3)
- recognised in inventories (22.1) (8.2)
Tax relating to items which may be
reclassified (2.1) 11.3
(____________) (____________)
Sub-total items that may be reclassified 9.3 (43.1)
(____________) (____________)
Other comprehensive expense for the
period (52.9) (40.3)
(____________) (____________)
Total comprehensive income for the
period 220.6 236.7
(____________) (____________)
UNAUDITED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
GBPm GBPm
Opening total equity 311.8 321.9
Total comprehensive income for the
period 220.6 236.7
Share buybacks & commitments (Note
6) (175.9) 101.1
ESOT share purchases & commitments (28.1) (73.2)
Shares issued by ESOT 13.3 34.2
Share option charge 6.3 6.7
Tax recognised directly in equity (12.1) 4.0
Equity dividends (Note 5) (150.3) (325.9)
(____________) (____________)
Closing total equity 185.6 305.5
(____________) (____________)
UNAUDITED CONSOLIDATED BALANCE SHEET
Notes 30 July 25 July 30 Jan
2016 2015 2016
GBPm GBPm GBPm
ASSETS AND LIABILITIES
Non-current assets
Property, plant & equipment 555.1 527.6 536.4
Intangible assets 43.5 43.9 43.7
Interests in associates
& other investments 2.1 2.1 2.1
Defined benefit pension
surplus - 37.3 46.0
Other financial assets 7 92.5 54.2 57.0
Deferred tax assets 5.3 20.7 2.7
(____________) (____________) (____________)
698.5 685.8 687.9
Current assets
Inventories 490.9 450.8 486.5
Assets under construction 3.2 - -
Customer and other
receivables 1,077.2 925.8 1,050.5
Other financial assets 7 53.6 8.8 38.9
Cash and short term
deposits 144.9 242.4 66.3
(____________) (____________) (____________)
1,769.8 1,627.8 1,642.2
(____________) (____________) (____________)
Total assets 2,468.3 2,313.6 2,330.1
(____________) (____________) (____________)
Current liabilities
Bank loans and overdrafts (3.7) (4.1) (128.6)
Corporate bonds 8 (213.0) - (213.8)
Trade payables and
other liabilities (631.6) (659.4) (673.5)
Dividends payable 5 (150.3) (237.0) (88.3)
Other financial liabilities 7 (4.8) (13.0) (1.3)
Current tax liabilities (64.7) (56.8) (65.1)
(____________) (____________) (____________)
(1,068.1) (970.3) (1,170.6)
Non-current liabilities
Corporate bonds 8 (934.0) (818.7) (615.0)
Defined benefit pension (35.0) - -
deficit
Provisions (7.1) (7.9) (7.3)
Other financial liabilities 7 (20.2) (8.1) (13.9)
Other liabilities 9 (218.3) (203.1) (211.5)
(____________) (____________) (____________)
(1,214.6) (1,037.8) (847.7)
(____________) (____________) (____________)
Total liabilities (2,282.7) (2,008.1) (2,018.3)
(____________) (____________) (____________)
NET ASSETS 185.6 305.5 311.8
(____________) (____________) (____________)
EQUITY
Share capital 14.7 15.3 15.1
Share premium account 0.9 0.9 0.9
Capital redemption
reserve 15.2 14.6 14.8
ESOT reserve (216.5) (211.5) (208.7)
Fair value reserve 37.9 (2.1) 29.4
Foreign currency translation
reserve (3.9) 0.3 (4.8)
Other reserves (1,443.8) (1,443.8) (1,443.8)
Retained earnings 1,781.1 1,931.9 1,908.9
(____________) (____________) (____________)
Shareholders' equity 185.6 305.6 311.8
Non-controlling interest - (0.1) -
(____________) (____________) (____________)
TOTAL EQUITY 185.6 305.5 311.8
(____________) (____________) (____________)
UNAUDITED CONSOLIDATED
CASH FLOW STATEMENT
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
GBPm GBPm
Cash flows from operating activities
Operating profit 360.5 362.0
Depreciation, impairment & disposal
of property, plant & equipment 57.9 56.3
Amortisation of intangible assets 0.2 0.1
Share option charge 6.3 6.7
Exchange movement 0.8 8.2
Increase in inventories and assets
under construction (7.6) (21.3)
Increase in customer and other receivables (24.7) (85.0)
Decrease in trade and other payables (59.0) (16.1)
Net pension contributions less income
statement charge 3.2 4.2
(____________) (____________)
Cash generated from operations 337.6 315.1
Corporation taxes paid (71.1) (69.9)
(____________) (____________)
Net cash from operating activities 266.5 245.2
(____________) (____________)
Cash flows from investing activities
Additions to property, plant & equipment (77.0) (80.9)
Movement in capital accruals 1.7 6.6
(____________) (____________)
Payments to acquire property, plant
& equipment (75.3) (74.3)
Proceeds from sale of property,
plant & equipment 0.6 0.2
Deferred consideration received - 3.0
(____________) (____________)
Net cash from investing activities (74.7) (71.1)
(____________) (____________)
Cash flows from financing activities
Repurchase of own shares (Note 6) (175.9) -
Purchase of shares by ESOT (28.1) (73.2)
Disposal of shares by ESOT 12.9 33.4
Issue of corporate bonds (Note 8) 297.3 -
Repayment of unsecured bank loans (115.0) -
Interest paid (7.0) (6.1)
Interest received 0.1 0.5
Payment of finance lease liabilities - (0.1)
Dividends paid (Note 5) (88.3) (162.8)
(____________) (____________)
Net cash from financing activities (104.0) (208.3)
(____________) (____________)
Net increase/(decrease) in cash
and cash equivalents 87.8 (34.2)
Opening cash and cash equivalents 52.7 272.7
Effect of exchange rate fluctuations
on cash held 0.7 (0.2)
(____________) (____________)
Closing cash and cash equivalents
(Note 10) 141.2 238.3
(____________) (____________)
NOTES TO THE UNAUDITED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The Group's interim results for the 26 weeks to 30 July 2016
(prior year 26 weeks to 25 July 2015) were approved by the Board of
Directors on 15 September 2016 and have been prepared in accordance
with IAS 34 Interim Financial Reporting.
The accounting policies adopted in the preparation of the
interim financial statements are the same as those set out in the
Group's annual financial statements for the year ended 30 January
2016. The financial statements have been prepared on the historical
cost basis except for certain financial instruments, pension assets
and liabilities and share-based payment liabilities which are
measured at fair value. Where applicable, disclosures required by
paragraph 16A of IAS 34 are given either in these interim financial
statements or in the accompanying Chief Executive's Review.
The interim financial statements have not been audited or
reviewed by auditors pursuant to the Auditing Practices Board
guidance on 'Review of Interim Financial Information' and do not
include all of the information required for full annual financial
statements.
The financial information contained in this report is condensed
and does not constitute statutory accounts of the Company within
the meaning of Section 434(3) of the Companies Act 2006. Statutory
accounts for the year to January 2016 have been delivered to the
Registrar of Companies. The audit report for those accounts was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under 498(2) or (3) of the
Companies Act 2006.
Going concern
The Directors report that, having reviewed current performance
and forecasts, they have a reasonable expectation that the Group
has adequate resources to continue its operations for the
foreseeable future. For this reason, they have continued to adopt
the going concern basis in preparing the financial statements.
2. Risks & uncertainties
The Board has considered the principal risks and uncertainties
for the remaining half of the financial year and determined that
the risks presented in the 2016 Annual Report, described as
follows, also remain relevant to the rest of the financial year:
Business strategy development & implementation; Management
team; Product design & selection; Key suppliers & supply
chain management; Warehousing & distribution; Customer
experience; Retail store network; Information security, business
continuity & cyber risk; Financial, treasury, liquidity &
credit risks. These are detailed on pages 27 to 30 of the 2016
Annual Report, a copy of which is available on the Company's
website at www.nextplc.co.uk.
In our Trading Statement which was published on 3 August 2016,
we commented on the impact of the EU Referendum. Our expectations
for the full year remain unchanged and are set out in the Chief
Executive's Review.
3. Segmental analysis
The Group's operating segments under IFRS 8 have been determined
based on the management accounts reviewed by the Board. The
performance of operating segments is assessed on profits before
interest and tax, excluding equity-settled share option charges
recognised under IFRS 2 Share-Based Payment and unrealised foreign
exchange gains or losses on derivatives which do not qualify for
hedge accounting. The activities, products and services of the
operating segments are detailed on page 24 of the 2016 Annual
Report. The Property Management segment holds properties and
property leases which are sub-let to other segments and external
parties.
Where third party branded goods are sold on a commission basis,
only the commission receivable is included in statutory revenue.
Total Sales represents the amount payable by the customer,
excluding VAT.
Segment sales and revenue
26 weeks to 30 Total Commission External Internal Total
July 2016 sales sales Revenue Revenue Segment
excluding adjustment GBPm GBPm Revenue
VAT GBPm GBPm
GBPm
NEXT Retail 1,083.6 (2.2) 1,081.4 2.6 1,084.0
NEXT Directory 821.2 (14.3) 806.9 - 806.9
NEXT International
Retail 32.1 - 32.1 - 32.1
NEXT Sourcing 2.5 - 2.5 297.3 299.8
(____________) (____________) (____________) (____________) (____________)
1,939.4 (16.5) 1,922.9 299.9 2,222.8
Lipsy 14.1 (0.9) 13.2 15.9 29.1
Property Management 3.6 - 3.6 103.0 106.6
(____________) (____________) (____________) (____________) (____________)
Total segment
sales/revenues 1,957.1 (17.4) 1,939.7 418.8 2,358.5
Eliminations - - - (418.8) (418.8)
(____________) (____________) (____________) (____________) (____________)
Total 1,957.1 (17.4) 1,939.7 - 1,939.7
(____________) (____________) (____________) (____________) (____________)
26 weeks to 25 Total Commission External Internal Total
July 2015 sales sales Revenue Revenue Segment
excluding adjustment GBPm GBPm Revenue
VAT GBPm GBPm
GBPm
NEXT Retail 1,083.0 (2.8) 1,080.2 2.8 1,083.0
NEXT Directory 767.0 (13.7) 753.3 - 753.3
NEXT International
Retail 36.3 - 36.3 - 36.3
NEXT Sourcing 3.2 - 3.2 301.0 304.2
(____________) (____________) (____________) (____________) (____________)
1,889.5 (16.5) 1,873.0 303.8 2,176.8
Lipsy 14.9 (0.4) 14.5 11.2 25.7
Property Management 3.0 - 3.0 96.4 99.4
(____________) (____________) (____________) (____________) (____________)
Total segment
sales/revenues 1,907.4 (16.9) 1,890.5 411.4 2,301.9
Eliminations - - - (411.4) (411.4)
(____________) (____________) (____________) (____________) (____________)
Total 1,907.4 (16.9) 1,890.5 - 1,890.5
(____________) (____________) (____________) (____________) (____________)
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
GBPm GBPm
Segment profit
NEXT Retail 133.9 161.0
NEXT Directory 204.2 184.1
NEXT International Retail 4.2 4.7
NEXT Sourcing 21.8 22.9
(____________) (____________)
364.1 372.7
Lipsy 2.8 1.8
Property Management 3.0 6.6
(____________) (____________)
Total segment profit 369.9 381.1
Central costs and other (3.7) (6.6)
Share option charge (6.3) (6.7)
Unrealised foreign exchange
losses - (6.3)
(____________) (____________)
Trading profit 359.9 361.5
Share of results of associates 0.6 0.5
Finance income 0.1 0.5
Finance costs (18.5) (15.4)
(____________) (____________)
Profit before tax 342.1 347.1
(____________) (____________)
4. Earnings per share
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
Basic earnings per share 188.6p 187.1p
-------------------------------- --------- ---------
Diluted earnings per share 187.1p 183.7p
-------------------------------- --------- ---------
Basic earnings per share is based on the profit for the period
attributable to the equity holders of the Parent Company and the
weighted average number of shares ranking for dividend less the
weighted average number of shares held by the ESOT during the
period.
Diluted earnings per share is based on the weighted average
number of shares used for the calculation of basic earnings per
share as increased by the dilutive effect of potential ordinary
shares. Dilutive shares arise from employee share option schemes
where the exercise price is less than the average market price of
the Company's ordinary shares during the period. Their dilutive
effect is calculated on the basis of the equivalent number of
nil-cost options. Where the option price is above the average
market price, the option is not dilutive and is excluded from the
diluted EPS calculation. In the current period, there were 2.3m
such options which were excluded from the diluted EPS calculation
(2015: Nil).
The table below shows the key variables used in the earnings per
share calculations:
26 weeks 26 weeks
to to
30 July 25 July
2016 2015
GBPm GBPm
Profit after tax attributable
to equity holders of the Parent
Company 273.5 277.0
Weighted average number of shares
(millions):
Weighted average shares in issue 149.3 152.9
Weighted average shares held by
ESOT (4.3) (4.8)
(_______________) (_______________)
Weighted average shares for basic
EPS 145.0 148.1
Weighted average dilutive potential
shares 1.2 2.7
(_______________) (_______________)
Weighted average shares for diluted
EPS 146.2 150.8
(_______________) (_______________)
5. Dividends
It is intended that this year's ordinary interim dividend of 53p
per share will be paid to shareholders on 3 January 2017. NEXT plc
shares will trade ex-dividend from 8 December 2016 and the record
date will be 9 December 2016. Dividends paid or declared during the
period were as follows:
26 weeks to 30 July 2016
Paid Pence Cash Statement July
per flow of changes 2016
share statement in equity balance
GBPm GBPm sheet
GBPm
1 Feb
Special interim dividend 2016 60p 88.3 - -
Ordinary final dividend 1 Aug
for year to Jan 2016 2016 105p - 150.3 150.3
(___________) (___________) (___________)
88.3 150.3 150.3
(___________) (___________) (___________)
26 weeks to 25 July 2015
Paid Pence Cash Statement July
per flow of changes 2015
share statement in equity balance
GBPm GBPm sheet
GBPm
2 Feb
Special interim dividend 2015 50p 73.9 - -
1 May
Special interim dividend 2015 60p 88.9 88.9 -
3 Aug
Special interim dividend 2015 60p - 88.9 88.9
Ordinary final dividend 3 Aug
for year to Jan 2015 2015 100p - 148.1 148.1
(___________) (___________) (___________)
162.8 325.9 237.0
(___________) (___________) (___________)
6. Share buybacks
In the period to 30 July 2016, NEXT plc purchased 3,359,879 of
its own 10p ordinary shares for cancellation at a total cost of
GBP175.9m. There were no share buybacks in the corresponding period
of the previous year.
7. Other financial assets and liabilities
Other financial assets and other financial liabilities include
the fair value of derivative contracts which the Group uses to
manage its foreign currency and interest rate risks. All
derivatives are categorised as Level 2 under the requirements of
IFRS 13, as they are valued using techniques based significantly on
observed market data.
8. Corporate bonds
In May 2016, NEXT plc issued a new GBP300m 12-year bond. The
amount received of GBP297.3m shown in the cash flow statement is
net of discount and issue costs. The table below shows the nominal
and balance sheet values of the Group's outstanding corporate
bonds.
Nominal value Balance sheet
value
30 25 30 30 25 30
July July Jan July July Jan
2016 2015 2016 2016 2015 2016
GBPm GBPm GBPm GBPm GBPm GBPm
Corporate bond 5.875%
repayable Oct 2016 212.6 212.6 212.6 213.0 214.6 213.8
Corporate bond 5.375%
repayable Oct 2021 325.0 325.0 325.0 331.6 333.7 332.7
Corporate bond 4.375%
repayable Oct 2026 250.0 250.0 250.0 302.4 270.4 282.3
Corporate bond 3.625%
repayable May 2028 300.0 - - 300.0 - -
(_________) (_________) (_________) (_________) (_________) (_________)
1,087.6 787.6 787.6 1,147.0 818.7 828.8
(_________) (_________) (_________) (_________) (_________) (_________)
Classified as:
Current liabilities 213.0 - 213.8
Non-current liabilities 934.0 818.7 615.0
(_________) (_________) (_________)
1,147.0 818.7 828.8
(_________) (_________) (_________)
As explained in the January 2016 Annual Report, the Group uses
interest rate derivatives to manage part of the interest rate risk
associated with its corporate bonds, whereby the carrying value of
the relevant bonds is adjusted for changes in fair value
attributable to the hedged risk. At July 2016, the fair value of
the Group's corporate bonds was GBP1,200.6m (July 2015: GBP870.3m,
January 2016: GBP879.3m). The fair values are market values at the
balance sheet date (IFRS 13 Level 1).
9. Other non-current liabilities
Other non-current liabilities relate primarily to the long term
element of property lease incentives received which will be
credited to the income statement more than one year from the
balance sheet date.
10. Analysis of net debt
30 Jan Cash Other 30 July
2016 flow non-cash 2016
GBPm GBPm changes GBPm
GBPm
Cash and short term
deposits 66.3 144.9
Overdrafts and short
term borrowings (13.6) (3.7)
(___________) (___________) (___________) (___________)
Cash and cash equivalents 52.7 87.8 0.7 141.2
Unsecured bank loans (115.0) 115.0 - -
Corporate bonds (828.8) (297.3) (20.9) (1,147.0)
Fair value hedges of
corporate bonds 41.2 - 18.2 59.4
(___________) (___________) (___________) (___________)
Total net debt (849.9) (94.5) (2.0) (946.4)
(___________) (___________) (___________) (___________)
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) The condensed set of financial statements has
been prepared in accordance with IAS 34;
b) The interim management report includes a fair
review of the information required by DTR 4.2.7R
(indication of important events during the
first six months and description of principal
risks and uncertainties for the remaining six
months of the year); and
c) The interim management report includes a fair
review of the information required by DTR 4.2.8R
(disclosure of related party transactions and
changes therein).
By order of the Board
Lord Wolfson of Aspley Amanda James
Guise Group Finance Director
Chief Executive
15 September 2016
This statement, the full text of the Stock Exchange announcement
and the results presentation can be found on the Company's website
at www.nextplc.co.uk.
Certain statements which appear in a number of places throughout
this Interim Management Report may constitute "forward looking
statements" which are all matters that are not historical facts,
including anticipated financial and operational performance,
business prospects and similar matters. These forward looking
statements are identifiable by words such as "aim", "anticipate",
"believe", "budget", "estimate", "expect", "forecast", "intend",
"plan", "project" and similar expressions. These forward looking
statements reflect NEXT's current expectations concerning future
events and actual results may differ materially from current
expectations or historical results. Any such forward looking
statements are subject to risks and uncertainties, including but
not limited to those matters highlighted in Note 2 of these interim
financial statements; failure by NEXT to accurately predict
customer fashion preferences; decline in the demand for merchandise
offered by NEXT; competitive influences; changes in level of store
traffic or consumer spending habits; effectiveness of NEXT's brand
awareness and marketing programmes; general economic conditions or
a downturn in the retail industry; the inability of NEXT to
successfully implement relocation or expansion of existing stores;
lack of sufficient consumer interest in NEXT Directory; acts of war
or terrorism worldwide; work stoppages, slowdowns or strikes; and
changes in financial and equity markets. These forward looking
statements do not amount to any representation that they will be
achieved as they involve risks and uncertainties and relate to
events and depend upon circumstances which may or may not occur in
the future and there can be no guarantee of future performance.
Undue reliance should not be placed on forward looking statements
which speak only as of the date of this document. NEXT does not
undertake any obligation to publicly update or revise forward
looking statements, whether as a result of new information, future
events or otherwise, except to the extent legally required.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LIMTTMBBBTTF
(END) Dow Jones Newswires
September 15, 2016 02:01 ET (06:01 GMT)
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