Interim Results
Next PLC
12 September 2002
Date: Embargoed until 07.00am, Thursday 12th September 2002
Contacts: Simon Wolfson, Chief Executive
David Keens, Group Finance Director
NEXT PLC
Tel: 020 7796 4133 (12/09/2002)
Tel: 0116 286 6411 (thereafter)
Alistair Mackinnon-Musson
Philip Dennis
Hudson Sandler
Tel: 020 7796 4133
Email: next@hspr.co.uk
Photographs available: http://www.next.co.uk/press/ (or Hudson Sandler, as above)
NEXT PLC
RESULTS FOR THE HALF YEAR ENDED JULY 2002
* NEXT Retail turnover up 17%
* NEXT Directory turnover up 32%
* Operating profit before interest and tax up 26% to £113.6m
* Earnings per share up 26%
* Interim dividend increased 11% to 10p
David Jones CBE, Chairman, said:
'NEXT continues to increase its sales both on the high street and direct to
home, with NEXT Brand turnover moving forward by more than 20% against last
year. Earnings per share increased by 26%. This has been achieved through
focusing on giving our customers better products in bigger shops and larger
catalogues.'
NEXT PLC
CHAIRMAN'S STATEMENT
NEXT continues to increase its sales both on the high street and direct to home,
with NEXT Brand turnover moving forward by more than 20% against last year.
Earnings per share increased by 26%. This has been achieved through focusing on
giving our customers better products in bigger shops and larger catalogues.
As a group we remain focused on developing the NEXT Brand in its core markets of
the UK and Eire. We believe that this focus is central to our success, and in
line with this belief we have returned £435m of surplus cash to shareholders
through share buybacks over the last three years. This has enhanced earnings
per share by 10% and we will continue with this policy.
The Board has decided that NEXT should have the flexibility to accelerate future
returns of cash to shareholders and to facilitate this we intend to effect a
capital reconstruction by way of a scheme of arrangement. The scheme in itself
will have no material effect on our stated profits. However, it will create
additional distributable reserves from which share repurchases can be made when
it is earnings enhancing and in the interests of shareholders generally.
Further details of the scheme, which will be subject to shareholder consent and
Court approval, will be sent to shareholders in due course.
David Jones CBE
Chairman
Chief Executive's Review and
Tables of Figures follow.
NEXT PLC
CHIEF EXECUTIVE'S REVIEW
In the six months to July 2002 the NEXT Group achieved operating profit before
interest and tax of £113.6m compared with £90.3m the previous year, an increase
of 26%. During the period we purchased for cancellation 6% of our issued share
capital at a cost of £190m.
Turnover and profit figures are set out in the table below.
Turnover Profit before Tax
Six months to July Six months to July
2002 2001 2002 2001
£m £m £m £m
NEXT Retail 656.0 559.5 74.5 58.9
NEXT Directory 215.3 162.7 30.2 21.8
_________ _________ _________ _________
The NEXT Brand 871.3 722.2 104.7 80.7
NEXT Franchise 10.0 8.2 1.9 1.6
Ventura 49.7 51.5 5.0 6.0
Other Activities 13.8 12.4 6.5 5.4
ESOP Charge - - (4.5) (3.4)
_________ _________ _________ _________
944.8 794.3 113.6 90.3 +26%
_________ _________
Interest Income 2.2 2.7
_________ _________
Profit before Tax 115.8 93.0 +24%
Taxation (34.7) (26.1)
_________ _________
Profit after Tax 81.1 66.9 +21%
_________ _________
Post Tax Earnings per share 25.5p 20.3p +26%
Interest income was lower due to the cash outflow associated with the share
buybacks and the tax charge increased, resulting in post tax profits growth of
21%. However, share buybacks brought earnings per share growth back up to 26%.
THE NEXT BRAND
NEXT remains committed to delivering stylish, good quality products to our
customers at affordable prices. We believe that we have good growth potential
in a part of the market which itself will also grow in the long term.
The women's, men's and children's ranges have achieved solid growth. Sales of
products for the home continue to show exceptional growth as we improve and
extend our ranges into larger departments within new stores. We believe that
these core areas will continue to provide most of our growth in the coming
years. However, we will continue to explore new product areas where we believe
our design skills and sales infrastructure can add value.
We intend to carry on the development of the NEXT Brand in our core markets of
the UK and Eire, where we are best able to understand and meet the needs of our
customers.
NEXT RETAIL
NEXT Retail increased sales in the half year by 17% and profits by 27%.
Like-for-like sales in the 255 stores that traded continuously for more than a
year were 7% up. Sale stock was higher than last year but the effect on
profitability was more than offset by the economies of scale obtained from sales
rising faster than costs.
We now have stores in the majority of towns and cities that can profitably
sustain a NEXT store. Our space growth has therefore been mainly focused on
relocating and extending stores in locations where we already have a trading
presence. Larger stores give us the opportunity to broaden our product offer
and improve the display of our ranges.
Over the last six months we have increased our trading space by 94,000 square
feet and expect to add at least another 250,000 square feet by January 2003.
Whilst we continue to have much success in our space acquisition programme it
should be stressed that NEXT has not altered or compromised its strict financial
criteria of profitability and payback on capital invested.
July 2002 January 2002 July 2001 Annual Change
Store numbers 332 331 333 -1
Square footage 2,075,000 1,981,000 1,847,000 +228,000
We continue to test the boundaries of the size of store NEXT can successfully
trade. We now have 11 stores of more than 20,000 square feet and stores in
Cardiff and Liverpool that are trading successfully from more than 40,000 square
feet.
NEXT DIRECTORY
NEXT Directory made significant progress in the first half with sales moving
ahead by 32% and profits up by 39%. We have continued to invest in the
recruitment of new customers, resulting in our customer base increasing by 12%
over the season and 25% over the last year.
July 2002 January 2002 July 2001
Active customers 1,351,000 1,201,000 1,083,000
The breadth of product offer in the Directory and mid season catalogue continues
to increase. This is possible due to the greater number of pages in each
publication compared with last year, as shown below.
Publication Spring/Summer Spring/Summer % Increase
2002 2001
Main Directory (January-July) 685 pages 645 pages +6%
Mid season catalogue (May-July) 355 pages 295 pages +20%
Our Autumn/Winter catalogue for 2002 has 749 pages as against 693 last year.
The Internet accounted for 14% of Directory customer orders, compared with 10%
last year, we believe it could stabilise at around this level.
NEXT FRANCHISE
Our overseas franchise operation had a good half year, with sales increasing by
21% to £10.0m. At the end of July 2002 there were 49 franchise stores compared
with 41 the previous year.
VENTURA
Profits reduced by 18% to £5m on a 4% reduction in sales. Ventura is exposed to
the challenges in the telecoms sector and its sales and margins have been under
severe pressure as a result. We expect this to continue for the next two years.
Ventura has set itself three key objectives through which it intends to position
the business as a high quality / low cost provider of call centre services.
• Reduce central overheads in order to improve the prices we are able to
offer clients.
• Operational excellence that guarantees that we can give clients a better
service than they could provide for themselves.
• Broaden the number of clients to provide the business with greater
stability.
OTHER ACTIVITIES
Profits for the half year were £6.5m compared with £5.4m the previous year. The
main contributors were £7.7m from NEXT Asia, our product sourcing company based
in Hong Kong, and £2.0m from our property management company. In the first
half last year central costs included a £2.3m credit in respect of the group's
pension scheme surplus, no credit has been taken this year as weak stock markets
have reduced the value of the scheme's assets.
EMPLOYEE SHARE OWNERSHIP PLAN (ESOP)
NEXT operates employee share option schemes and has an Employee Share Ownership
Plan Trust, which purchased a further 2.7 million shares at a price of £10.76
during the period. A provision of £4.5m has been taken in respect of shares held
by the Trust (last year £3.4m). At the end of July the Trust held 8.1 million
shares and the company had 10.3 million employee share options outstanding. The
full year charge for the ESOP last year was £8m and we expect a similar annual
charge for the current year.
BALANCE SHEET
At the end of July we had net borrowings of £68m. The cash outflow of £262m
included £190m on shares purchased for cancellation, £21m on increasing the
shares held in the company's ESOP and £22m in establishing a product sourcing
business covering Turkey, Romania and Sri Lanka, which we have named NEXT Near
East.
The end of season Summer Sale was successful and stock levels for Autumn are in
line with our requirements. The majority of our £39m capital expenditure
related to Retail stores and this will continue to be the case in Autumn/Winter.
We anticipate that capital expenditure for the whole year will be
approximately £90m.
DIVIDEND
The Directors are pleased to declare an interim dividend of 10p, an increase of
11.1% (last year 9p). This will be paid on 2 January 2003 to shareholders on
the register at 8 November 2002. The shares will trade ex-dividend from 6
November 2002. This interim dividend will not be affected by the proposed
capital reconstruction described below.
SHARE BUYBACK AND CAPITAL RECONSTRUCTION
Record of enhancing returns through share buybacks
Over the last five years NEXT has grown turnover by 98% and has generated £629m
of free cash flow (i.e. cash flow after working capital and capital expenditure
but before dividends and share buybacks).
This cash flow has enabled the company to buy back and cancel 63.6 million
shares whilst continuing to increase its dividend every year. We have purchased
17% of the shares that were in issue as at January 2000, returning £435m to
shareholders. The total enhancement to earnings per share as a result of these
buybacks has been 10%.
NEXT intends to continue with its strategy of buying back shares in the market
as and when it is earnings enhancing and in the interests of shareholders
generally. We have purchased 6% of our shares through on market purchases since
our AGM in May 2002 and have authority to purchase a further 4%. However, in
view of NEXT's strong cash flow the Board wish to have the flexibility to
accelerate future returns of cash to shareholders.
Capital reconstruction by way of a scheme of arrangement
In order to obtain this flexibility NEXT requires additional distributable
reserves. To achieve this NEXT intends to create a new listed holding company
by means of a scheme of arrangement under section 425 of the Companies Act.
Under the scheme, shareholders will receive one share in the new holding company
in exchange for each existing share in NEXT, which will then become a subsidiary
of the new holding company. The new company will subsequently be renamed NEXT
plc. We envisage that the scheme will become effective before the end of this
year.
Immediately following the scheme, the new holding company will implement a
capital reduction in order to increase its distributable reserves. The scheme,
of itself, will not have any material effect on the company's stated profits.
It is proposed that the new company will have shareholder authority to buy back
up to 15% of its issued share capital. The new company will buy back its shares
in the market when it is earnings enhancing and in the interests of shareholders
generally.
Summary
• NEXT may continue to buy back up to 4% of issued share capital until the
scheme is approved.
• Scheme of arrangement to create additional distributable reserves.
• The reconstruction itself (before any share buybacks) will have no
material effect on the company's stated profits.
• The new company will have authority to buy back up to 15% of its issued
share capital.
CURRENT TRADING
In the six weeks since 28 July sales in NEXT Retail are 14.7% ahead of last
year. Like-for-like sales in the 276 stores that have been trading continuously
for at least one year are up 5.7%.
This year our stock for the Sale was higher than last year, which accounted for
the increase in sales in the first two weeks of August. We have set out below
the growth in full price sales and total sales for each of the last six weeks.
Week ended Full price growth Total sales growth
3 August -23% 31%
10 August -2% 13%
17 August 8% 8%
24 August 12% 12%
31 August 15% 15%
7 September 1% 1%
Total 4.9% 14.7%
Sales in NEXT Directory for the first six weeks are 26.7% ahead of last year.
Taken together sales for the NEXT Brand are 17.4% ahead of last year.
Simon Wolfson
Chief Executive 12 September 2002
NEXT PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited
Six months Six months Year to
to July 2002 to July 2001 Jan 2002
£m £m £m
Turnover 944.8 794.3 1,871.7
________ ________ ________
Operating profit 113.6 90.3 258.6
Net interest receivable 2.2 2.7 7.2
________ ________ ________
Profit on ordinary activities before taxation 115.8 93.0 265.8
Taxation on profit on ordinary activities (34.7) (26.1) (76.0)
________
_______ _______
Profit on ordinary activities after taxation 81.1 66.9 189.8
Dividends (29.1) (29.7) (89.0)
________
_______ _______
Profit for the period transferred to reserves 52.0 37.2 100.8
________ ________ ________
Earnings per share 25.5p 20.3p 58.1p
Diluted earnings per share 25.3p 20.0p 57.3p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months Six months Year to
to July 2002 to July 2001 Jan 2002
£m £m £m
Profit attributable to members of parent company 81.1 66.9 189.8
Exchange difference on translation of net assets of
subsidiary undertakings (2.3) (0.1) 0.2
________ ________ ________
Total recognised gains and losses relating to the
period 78.8 66.8 190.0
________ ________ ________
NEXT PLC
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited
July 2002 July 2001 Jan 2002
£m £m £m
Fixed assets
Tangible assets 309.8 296.5 296.5
Goodwill 36.0 - -
Investments 0.2 0.3 0.2
Investment in own shares 54.1 43.5 37.9
________ ________ ________
400.1 340.3 334.6
________ ________ ________
Current assets
Property development stocks 9.1 9.1 9.1
Stocks 225.9 178.2 165.6
Debtors 279.1 249.5 278.6
Cash at bank and in hand 69.8 127.2 201.4
_______ _______ ________
583.9 564.0 654.7
Current liabilities
Creditors: amounts falling due within one year 518.1 338.0 403.2
________ ________ ________
65.8 226.0 251.5
________ ________ ________
Total assets less current liabilities 465.9 566.3 586.1
Creditors: amounts falling due after more than one year 40.1 20.1 20.4
Provision for liabilities and charges 18.9 9.4 18.8
________ ________ ________
Net assets 406.9 536.8 546.9
________ ________ ________
Capital and reserves
Called up share capital 31.1 33.7 33.1
Share premium account 3.8 3.8 3.8
Revaluation reserve 15.1 15.3 15.2
Other reserves 6.7 4.1 4.7
Profit and loss account 350.2 479.9 490.1
________ ________ ________
Shareholders' funds 406.9 536.8 546.9
________ ________ ________
NEXT PLC
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
Six months Six months Year to
to July 2002 to July 2001 Jan 2002
£m £m £m
Net cash inflow from operating activities 99.1 118.5 363.8
________ ________ ________
Dividends from associates - - 1.4
________ ________ ________
Returns on investments and servicing of finance
Interest received 3.4 2.1 6.3
________ ________ ________
Taxation
UK corporation tax paid (38.5) (21.7) (71.4)
UK corporation tax overpayment received 4.0 - 14.8
Overseas tax paid (1.4) (1.1) (3.2)
________ ________ ________
(35.9) (22.8) (59.8)
________ ________ ________
Capital expenditure and financial investment
Purchase of tangible fixed assets (38.7) (34.1) (72.8)
Proceeds from disposal of fixed assets 0.6 1.1 3.0
Purchase of own shares by ESOP (29.6) (18.5) (25.4)
Receipts on disposal of shares by ESOP 8.9 11.0 18.9
________ ________ ________
(58.8) (40.5) (76.3)
________ ________ ________
Acquisitions and disposals
Acquisition of subsidiary undertakings (21.6) - -
________ ________ ________
Equity dividends paid (58.7) (52.8) (81.9)
________ ________ ________
Changes in net funds resulting from cash flows (72.5) 4.5 153.5
Management of liquid resources 290.1 30.0 (75.1)
Financing
Company shares purchased for cancellation (189.7) - (53.8)
Repayments of capital element of finance leases - (0.1) (0.1)
________ ________ ________
(189.7) (0.1) (53.9)
________ ________ ________
Increase in cash in the period 27.9 34.4 24.5
________ ________ ________
Reconciliation of net cash flow to movement in net funds
Increase in cash in the period 27.9 34.4 24.5
Cash (realised from)/deposited in liquid resources (290.1) (30.0) 75.1
Repayments of capital elements of finance leases - 0.1 0.1
________ ________ ________
Changes in net funds resulting from cash flows (262.2) 4.5 99.7
Net funds at January 2002 194.0 94.3 94.3
________ ________ ________
Net (borrowings)/funds at July 2002 (68.2) 98.8 194.0
________ ________ ________
NEXT PLC
BASIS OF PREPARATION
The report was approved by the Board of Directors on 12 September 2002.
The accounts for the year to January 2002 are not full accounts within the
meaning of Section 240 of the Companies Act 1985. Full accounts for that period
incorporating an unqualified audit report have been delivered to the Registrar
of Companies.
Accounting policies adopted are consistent with those set out in the accounts
for the year ended January 2002.
Registered in England 35161. Registered Office, Desford Road, Enderby,
Leicester LE19 4AT.
EARNINGS PER SHARE
The calculation of earnings per share is based on £81.1m (2001: £66.9m) being
the profit for the six months after taxation and 317.5m ordinary shares of 10p
each (2001: 329.2m), being the weighted average number of shares ranking for
dividend less the weighted average number of shares held by the ESOP during the
year.
Diluted earnings per share is based on £81.1m (2001: £66.9m) being the profit
for the six months after taxation and 321.0m ordinary shares of 10p each (2001:
334.1m) being the weighted average number of shares used for the calculation of
earnings per share above increased by the dilutive effect of potential ordinary
shares from employee share option schemes of 3.5m shares (2001: 4.9m shares).
RECONCILIATION OF SHAREHOLDERS' FUNDS
Six months Six months Year to
to July 2002 to July 2001 Jan 2002
£m £m £m
Total recognised gains and losses 78.8 66.8 190.0
Dividends (29.1) (29.7) (89.0)
Purchase of own shares for cancellation (189.7) - (53.8)
________ ________ ________
Total movement during the period (140.0) 37.1 47.2
Shareholders' funds at January 2002 546.9 499.7 499.7
________ ________ ________
Shareholders' funds at July 2002 406.9 536.8 546.9
________ ________ ________
NEXT PLC
CASH FLOW: RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
Six months Six months Year to
to July 2002 to July 2001 Jan 2002
£m £m £m
Operating profit before interest 113.6 90.3 258.6
Depreciation 26.9 21.6 54.4
Loss on disposal of fixed assets 0.6 2.4 6.5
Anticipated deficit in ESOP 4.5 3.4 8.0
Income from interest in associated undertakings - (0.4) (1.3)
Increase in stock (58.2) (13.3) (0.7)
(Increase)/decrease in debtors (1.5) 20.1 (9.2)
Increase/(decrease) in creditors 15.6 (5.4) 46.7
(Decrease)/increase in provision for liabilities and charges (0.1) (0.1) 0.6
Exchange movement (2.3) (0.1) 0.2
________ ________ ________
Net cash inflow from operating activities 99.1 118.5 363.8
________ ________ ________
CASH FLOW: ANALYSIS OF NET FUNDS/(BORROWINGS)
January Cash July
2002 flow 2002
£m £m £m
Cash in hand 41.3 28.5 69.8
Overnight borrowings (2.5) (2.5) (5.0)
Overdrafts (4.9) 1.9 (3.0)
________ ________ ________
33.9 27.9 61.8
Short term deposits/(borrowings) 160.1 (290.1) (130.0)
________ ________ ________
Total net funds/(borrowings) 194.0 (262.2) (68.2)
________ ________ ________
This interim statement, the full text of the stock exchange announcement and the
interim results presentation can be found on the company's website at
www.next.co.uk
Statements made in this announcement that look forward in time or that express
management's beliefs, expectations or estimates regarding future occurrences and
prospects are 'forward-looking statements' within the meaning of the United
States federal securities laws. 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 various risks and uncertainties,
including failure by NEXT to predict accurately customer fashion preferences;
decline in the demand for merchandise offered by NEXT; competitive influences;
changes in levels 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.
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 20th May 2024
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