Interim Results
September 18 2003 - 3:01AM
UK Regulatory
RNS Number:8903P
Next PLC
18 September 2003
Date: Embargoed until 07.00am, Thursday 18 September 2003
Contacts: Simon Wolfson, Chief Executive
David Keens, Group Finance Director
NEXT PLC
Tel: 020 7796 4133 (18/09/2003)
Tel: 08454 567777 (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 2003
* NEXT Retail turnover up 21%
* NEXT Directory turnover up 15%
* Group operating profit before interest and tax up 15% to #130m
* Earnings per share up 24%
* Interim dividend increased 10% to 11p
CHAIRMAN'S STATEMENT
I am pleased to report that NEXT has continued to make good progress in the six
months to July 2003.
For many years we have focused on developing the NEXT Brand in its core markets
of the UK and Eire, with special emphasis on delivering stylish products whilst
improving their value and quality. This has resulted in significant progress
over the last five years.
It is worth reflecting that in the last five years NEXT has increased its
turnover by 100% and its operating profit by 115%. We have further enhanced
earnings per share through buying back 27% of our issued share capital at an
average price of 744p. As a result EPS has grown by 129%. It is our firm
belief that in the long term it is these fundamentals that will drive financial
returns to shareholders. In the last five years our share price increase
together with dividends paid have outperformed the FTSE100 by 185%, and in the
last two years by 51%.
Our medium and longer term objectives are reviewed on a regular basis. Whilst
there will always be minor adjustments, we are confident that our strategy of
improving the product, expanding selling space in NEXT Retail and increasing the
customer base of NEXT Directory will continue to deliver healthy growth.
David Jones CBE
Chairman
NEXT PLC
CHIEF EXECUTIVE'S REVIEW
NEXT's financial objective is to deliver sustainable long term growth in
earnings per share. In the six months to July 2003 the NEXT Group increased its
EPS to 31.7p, an increase of 24% over the previous year. The operating profit
of the group increased by 15% to #130.4m. EPS rose faster than operating profit
as a result of recent share buybacks.
Turnover Profit before Tax
Six months to July Six months to July
2003 2002 2003 2002
#m #m #m #m
NEXT Retail 797.4 656.0 85.8 74.5
NEXT Directory 247.1 215.3 30.2 30.2
_________ _________ _________ _________
The NEXT Brand 1,044.5 871.3 116.0 104.7
NEXT Franchise 13.2 10.0 2.4 1.9
Ventura 52.9 49.7 5.9 5.0
Other activities 10.4 13.8 8.6 6.5
ESOP charge - - (2.5) (4.5)
_________ _________ _________ _________
1,121.0 944.8 130.4 113.6 +15%
_________ _________
Interest (expense)/income (7.2) 2.2
_________ _________
Profit before tax 123.2 115.8 + 6%
Taxation (37.5) (34.7)
_________ _________
Profit after tax 85.7 81.1 + 6%
_________ _________
Post tax earnings per share 31.7p 25.5p +24%
Interest has become an expense rather than income as a result of the cash
outflows associated with share buybacks, this has resulted in profit before tax
growth of 6%.
The financial half year for NEXT Retail and Directory ended on 2 August, whereas
in 2002 it ended on 27 July. As a result of this change our sales and profit
comparisons are distorted. This year the end-of-season Summer Sale was one week
earlier in the financial calendar. Although both halves consist of 26 weeks,
this year the first half had one week less of full price sales and one week more
of discounted sales than usual. The effect is to move approximately #6m of
pre-tax profit from the first to the second half.
THE NEXT BRAND
NEXT is committed to delivering stylish good quality products at affordable
prices. It is our firm belief that NEXT will only continue to prosper if it
passes on the benefits of improved buying to its customers. We have achieved
improvements in quality and reductions in price on many of our products. At the
same time we have continued to broaden the products we offer to our customers,
particularly in the Home department.
After a somewhat disappointing Autumn season last year we were able to make
significant improvements to the Spring and Summer ranges. Our ranges were
better balanced with greater choice for our contemporary customer. In addition
we corrected the fit issues we experienced in some of our Womenswear ranges.
One of the biggest challenges has been providing a reliable delivery service for
our Home products. This season we have introduced a new carrier and developed
new systems to manage this process. The transition has been successful but has
resulted in some double-running costs and the improved service will be more
expensive going forward.
NEXT RETAIL
NEXT Retail increased sales in the half year by 21% and profits by 15%.
Like-for-like sales for the comparable period in the 290 stores that have traded
continuously for at least one year were 1.8% ahead of last year. However 28
stores were planned to be affected by new openings and once these have been
removed, the underlying like-for-like sales were 3.8% ahead of last year.
NEXT continues to expand its portfolio of retail space in order to give its
customers improved ranges in a more comfortable environment. In the first half
we increased our selling space by 232,000 square feet. In the last six months
we have opened stores trading more than 20,000 square feet in Chester, Croydon,
Dudley Merryhill, Gateshead Team Valley and Nottingham. All five stores are
trading at or above their appraised sales targets.
In contrast to the last few years NEXT is beginning to increase the number of
stores it trades in addition to extending and relocating existing stores. The
majority of these new trading locations are in out-of-town retail parks where
the breadth of our offer gives us the required scale to trade successfully.
July January July Annual Change
2003 2003 2002
Store numbers 352 344 332 +20
Square footage 2,570,000 2,338,000 2,075,000 +495,000
Taken as a whole sales from new space are significantly exceeding our
expectations, beating target by 26%. The payback on net capital invested in
the new space is forecast to be less than 12 months.
The profitable expansion of selling space is our most important avenue of
growth. We remain confident that we can profitably increase space going forward
and will open at least 250,000 square feet in the second half of this financial
year.
NEXT DIRECTORY
NEXT Directory increased sales by 15% and profits were level with last year.
Profit growth in the first half was hindered primarily by the increased costs of
developing our Home business, including double-running costs associated with the
introduction of a new furniture delivery supplier.
We have taken action to improve the profitability of the Directory in the second
half. We have increased our gross margins on large Home products to compensate
for higher delivery costs. In addition we have increased our general delivery
charge from #2.95 to #3.50 which brings it more into line with market rates for
next day delivery. We have also reduced our marketing budget to cut out less
productive new customer recruitment.
Our general strategy for growing the Directory remains unchanged. We intend to
increase the number of customers using the Directory and offer greater diversity
of products through increasing page numbers.
In the first half our active customer base grew to 1,576,000 an increase of 17%
over last year. We printed 1,246 pages as against 1,040 pages in Spring/Summer
last year.
NEXT FRANCHISE
Our overseas franchise operation had a good half year, with sales increasing by
32% to #13.2m and contributing a profit of #2.4m. At the end of July 2003 there
were 70 franchise stores compared with 49 the previous year. All regions
increased sales. Our partner in Japan has opened 10 stand-alone Childrenswear
stores and the store in Iceland has started very well.
VENTURA
Ventura made a stronger than expected start to the year, winning new business
and renewing contracts with existing clients. Profit increased to #5.9m, this
includes #1.2m from the funded consumer credit business which will reduce as the
collect out of customer balances continues. Our focus remains on delivering a
high quality service whilst ensuring that costs are tightly controlled. Whilst
we remain cautious about prospects in this very competitive market we are
pleased with the significant progress Ventura has made.
OTHER ACTIVITIES
Profits from Other Activities for the half year were #8.6m compared with #6.5m
the previous year. The main contributors were #7.0m from NEXT Asia, our product
sourcing company based in Hong Kong, and #4.3m from our Property Management
division which included a final #2.2m development profit from a property which
we sold in a previous year. NEXT Near East, acquired in July 2002, contributed
#2.6m after goodwill amortisation of #1.6m. Central costs this year include an
additional #2.5m charge in respect of the group's pension scheme as weak stock
markets have reduced the value of the scheme's assets, a further additional
charge of a similar amount is expected in the second half.
EMPLOYEE SHARE OWNERSHIP PLAN (ESOP)
NEXT operates employee share option schemes and has an Employee Share Ownership
Plan Trust, which purchased a further 3 million shares at an average price of
959p during the period. A charge of #2.5m has been made in respect of shares
held by the Trust (last year #4.5m). At the end of July the Trust held 8.4
million shares and the company had 9.9 million employee share options
outstanding. The full year charge for the ESOP last year was #8.2m whereas we
expect the annual charge for the current year to be in the region of #5m.
BALANCE SHEET AND CASH FLOW
At the end of July we had net borrowings of #319m which included the #300m 10
year bond issued in June, the proceeds of which were used to replace shorter
term bank borrowings. The cash outflow of #130m included #111m on shares
purchased for cancellation and #18m on increasing the shares held in the
company's ESOP. Stock levels for Autumn are in line with our requirements.
Most of our #49m 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 #110m.
DIVIDEND
The directors are pleased to declare an interim dividend of 11p, an increase of
10% (last year 10p). This will be paid on 2 January 2004 to shareholders on the
register at 28 November 2003. The shares will trade ex-dividend from 26
November 2003.
SHARE BUYBACK
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. At our AGM in May 2003 shareholders renewed the authority to
purchase shares when the Board considers it appropriate. During the half year
we purchased and cancelled 4.5% of our shares in issue at an average price of
858p. We do not intend to buy back shares at the expense of investing in the
business. In addition we intend to maintain the company's investment grade
credit rating.
CURRENT TRADING
In the six weeks since 3 August sales in NEXT Retail are 17% ahead of last year.
Like-for-like sales in the 286 stores that have been trading continuously for
at least one year, and that have not benefited from capital expenditure of more
than 2% of their annual turnover, are 0.8% ahead of the previous year.
Included in the 286 stores are 23 stores that, as anticipated, have been
directly affected by new store openings and extensions. Underlying sales in the
263 stores which have not been affected by new space are 2.5% ahead of last
year.
Sales in NEXT Directory for the first six weeks are 10% ahead of last year.
Taken together sales for the NEXT Brand are 15% ahead of last year.
Simon Wolfson
Chief Executive
18 September 2003
NEXT PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited
Six months Six months Year to
to July 2003 to July 2002 Jan 2003
#m #m #m
Turnover 1,121.0 944.8 2,202.6
________ ________ ________
Operating profit 130.4 113.6 301.5
Net interest (payable)/receivable (7.2) 2.2 (0.3)
________ ________ ________
Profit on ordinary activities before taxation 123.2 115.8 301.2
Taxation on profit on ordinary activities (37.5) (34.7) (90.7)
________ ________ ________
Profit on ordinary activities after taxation 85.7 81.1 210.5
Dividends (27.5) (29.1) (86.0)
________ ________ ________
Profit for the period transferred to reserves 58.2 52.0 124.5
________ ________ ________
Earnings per share 31.7p 25.5p 68.7p
Diluted earnings per share 31.5p 25.3p 68.1p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months Six months Year to
to July 2003 to July 2002 Jan 2003
#m #m #m
Profit attributable to members of parent company 85.7 81.1 210.5
Exchange difference on translation of net assets of
subsidiary undertakings 1.8 (2.3) (4.6)
________ ________ ________
Total recognised gains and losses relating to the period 87.5 78.8 205.9
________ ________ ________
NEXT PLC
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited
July 2003 July 2002 Jan 2003
#m #m #m
Fixed assets
Goodwill 29.6 36.0 31.0
Tangible assets 339.4 309.8 323.1
Investments 0.5 0.2 0.5
Investment in own shares 62.5 54.1 47.0
________ ________ ________
432.0 400.1 401.6
________ ________ ________
Current assets
Property development stocks 9.5 9.1 9.1
Stocks 236.6 225.9 234.9
Debtors 340.1 279.1 318.1
Cash at bank and in hand 66.3 69.8 32.6
________ ________ _______
652.5 583.9 594.7
Current liabilities
Creditors: amounts falling due within one year 503.0 518.1 664.9
________ ________ ________
149.5 65.8 (70.2)
________ ________ ________
Total assets less current liabilities 581.5 465.9 331.4
Creditors: amounts falling due after more than one year 337.8 40.1 37.0
Provision for liabilities and charges 19.5 18.9 19.3
________ ________ ________
Net assets 224.2 406.9 275.1
________ ________ ________
Capital and reserves
Called up share capital 27.4 31.1 28.7
Share premium account 0.5 3.8 -
Capital redemption reserve 2.5 7.4 1.2
Revaluation reserve 14.7 15.1 14.8
Other reserves (1,448.9) (0.7) (1,448.9)
Profit and loss account 1,628.0 350.2 1,679.3
________ ________ ________
Shareholders' funds 224.2 406.9 275.1
________ ________ ________
NEXT PLC
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
Six months Six months Year to
to July 2003 to July 2002 Jan 2003
#m #m #m
Net cash inflow from operating activities 148.8 99.1 314.9
________ ________ ________
Returns on investments and servicing of finance
Interest (paid)/ received (2.1) 3.4 (1.1)
________ ________ ________
Taxation
UK corporation tax paid (42.0) (38.5) (90.8)
UK corporation tax overpayment received - 4.0 4.0
Overseas tax paid (1.2) (1.4) (3.4)
________ ________ ________
(43.2) (35.9) (90.2)
________ ________ ________
Capital expenditure and financial investment
Purchase of tangible fixed assets (48.8) (38.7) (86.3)
Proceeds from disposal of fixed assets 0.1 0.6 3.1
Purchase of own shares by ESOP (28.8) (29.6) (29.6)
Proceeds from disposal of shares by ESOP 10.9 8.9 12.3
________ ________ ________
(66.6) (58.8) (100.5)
________ ________ ________
Acquisitions and disposals
Disposal of subsidiary undertakings - - (1.2)
Acquisition of subsidiary undertakings - (21.6) (24.6)
________ ________ ________
- (21.6) (25.8)
________ ________ ________
Equity dividends paid (56.3) (58.7) (88.4)
________ ________ ________
Cash (outflow)/inflow before management of liquid resources and
financing (19.4) (72.5) 8.9
Management of liquid resources 1.8 290.1 152.8
Financing
Issue of new shares 0.5 - 0.1
Company shares purchased for cancellation (111.4) (189.7) (391.8)
Unsecured bank loans (150.0) - 210.0
Issue of corporate bonds 300.0 - -
________ ________ ________
39.1 (189.7) (181.7)
________ ________ ________
Increase/(decrease) in cash in the period 21.5 27.9 (20.0)
________ ________ ________
NEXT PLC
BASIS OF PREPARATION
The report was approved by the Board of Directors on 18 September 2003.
The accounts for the year to January 2003 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 2003.
Registered in England 4412362. Registered Office, Desford Road, Enderby,
Leicester LE19 4AT.
EARNINGS PER SHARE
The calculation of earnings per share is based on #85.7m (2002: #81.1m) being
the profit for the six months after taxation and 270.2m ordinary shares of 10p
each (2002: 317.5m), 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 #85.7m (2002: #81.1m) being the profit
for the six months after taxation and 272.2m ordinary shares of 10p each (2002:
321.0m) 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 2.0m shares (2002: 3.5m shares).
RECONCILIATION OF SHAREHOLDERS' FUNDS
Six months Six months Year to
to July 2003 to July 2002 Jan 2003
#m #m #m
Total recognised gains and losses 87.5 78.8 205.9
Dividends (27.5) (29.1) (86.0)
Purchase of own shares for cancellation (111.4) (189.7) (391.7)
Issue of new shares 0.5 - -
________ ________ ________
Total movement during the period (50.9) (140.0) (271.8)
Shareholders' funds at January 2003 275.1 546.9 546.9
________ ________ ________
Shareholders' funds at July 2003 224.2 406.9 275.1
________ ________ ________
CASH FLOW: RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
Six months Six months Year to
to July 2003 to July 2002 Jan 2003
#m #m #m
Operating profit before interest 130.4 113.6 301.5
Depreciation 30.9 26.9 59.1
Amortisation of goodwill 1.6 - 1.6
Loss on disposal of fixed assets 1.5 0.6 0.1
Anticipated deficit in ESOP 2.5 4.5 8.2
Income from interest in associated undertakings - - (0.4)
Increase in stock (2.2) (58.2) (62.8)
Increase in debtors (23.5) (1.5) (39.7)
Increase in creditors 6.1 15.6 52.1
Decrease in provision for liabilities and charges - (0.1) -
Exchange movement 1.5 (2.3) (4.8)
________ ________ ________
Net cash inflow from operating activities 148.8 99.1 314.9
________ ________ ________
CASH FLOW: RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/FUNDS
Six months Six months Year to
to July 2003 to July 2002 Jan 2003
#m #m #m
Increase/(decrease) in cash in the period 21.5 27.9 (20.0)
Cash realised from liquid resources (1.8) (290.1) (152.8)
Decrease/(increase) in cash from unsecured bank loans 150.0 - (210.0)
Increase in cash from corporate bonds (300.0) - -
________ ________ ________
Changes in net (debt)/funds resulting from cash flows (130.3) (262.2) (382.8)
Net (debt)/funds at January 2003 (188.8) 194.0 194.0
________ ________ ________
Net debt at July 2003 (319.1) (68.2) (188.8)
________ ________ ________
CASH FLOW: ANALYSIS OF NET DEBT
January Cash July
2003 flow 2003
#m #m #m
Cash in hand 25.3 28.3 53.6
Overnight (borrowings)/deposits (10.0) 17.2 7.2
Overdrafts (1.4) (24.0) (25.4)
________ ________ ________
13.9 21.5 35.4
Short term deposits 7.3 (1.8) 5.5
Unsecured bank loans (210.0) 150.0 (60.0)
Corporate bonds - (300.0) (300.0)
________ ________ ________
Total net debt (188.8) (130.3) (319.1)
________ ________ ________
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 but not limited to 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.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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