Final Results - Year Ended 29 January 2000

Next PLC 23 March 2000 Contacts: David Jones, Chief Executive Next plc Tel: 0171 601 1000 (23/03/00)) Tel: 0116 286 6411 (thereafter) Alistair Mackinnon-Musson Philip Dennis Square Mile Communications Tel: 0171 601 1000 NEXT PLC Preliminary Statement Year Ended January 2000 CHAIRMAN'S STATEMENT The year to January 2000 was another period of good growth for NEXT, with record profits and earnings per share. The trading profit before tax of £195.6m was 20% higher than the previous year. Shareholders' funds increased by £63m to £606m and we continued to earn a post-tax return of 24% on the enlarged capital. This strong performance enables the Board to recommend a final dividend of 14p, making a total of 21p for the year, which is an increase of 10%. Over the last five years, dividends have increased by 133% compared with a 91% increase in trading profits. Our strategy is to continue to build our market share in the UK and Eire by expanding our store space and by moving into new related product areas. We believe this presents the best opportunity for profitable growth. During the year, we completed the £100m warehouse development programme, which will provide sufficient capacity to service our anticipated growth. At the end of January we had net cash balances of £123m, an increase of £62m for the year. Your Board believes that NEXT will continue to generate a strong cash flow and that shareholder value can be enhanced by returning surplus capital to shareholders. As part of our ongoing strategy we, therefore, intend to buy back up to 10% of our own shares at a cost of up to £200m. Purchases will be made in the market as and when the price payable will result in an increase in earnings per share and is in the best interests of shareholders generally. I would like to thank everyone at NEXT for all their efforts during 1999. Our success is the result of a great team of people at all levels, pulling together, determined to provide outstanding value for money to customers. I would also like to thank all our suppliers who continue to support us so well. The current year has started well and we expect further progress in the year ahead. Sir Brian Pitman CHIEF EXECUTIVE'S REVIEW In the year to January 2000 NEXT achieved a trading profit before tax of £195.6m compared to £163.5m last year, an increase of 20%. In addition, there were exceptional items which resulted in a charge of £0.9m this year compared to a credit of £3.4m last year, making the total profit before tax £194.7m. This is a new record profit for NEXT. The turnover and trading profit from each of our divisions was as follows: Turnover Profit Excluding VAT Before Tax 2000 1999 2000 1999 £m £m £m £m NEXT Retail 985.4 821.6 128.8 102.6 NEXT Directory 274.7 269.4 30.5 25.5 NEXT Overseas (Continuing) 14.2 16.2 2.5 2.5 NEXT Overseas (Discontinued) - 3.1 - (1.9) Ventura 108.9 91.9 9.0 10.7 Clydesdale 14.4 14.7 2.5 3.1 Other Activities 27.8 22.2 14.4 12.0 ________ ________ ________ ________ 1,425.4 1,239.1 187.7 154.5 ________ ________ Interest Income 7.9 9.0 ________ ________ Trading Profit before Tax 195.6 163.5 Net Exceptional Items (0.9) 3.4 ________ ________ Total Profit before Tax 194.7 166.9 Taxation (54.5) (43.0) ________ ________ Total Profit after Tax 140.2 123.9 ________ ________ THE NEXT BRAND The NEXT Brand is targeted at the top end of the mass market. Its well established strengths are individual STYLE, good QUALITY and VALUE for money. NEXT designs its own products and sells them under its own label by two methods of shopping: High Street Stores and Home Shopping. The majority of our stores offer Womenswear, Menswear and Childrenswear, whilst the Home product range is offered in 78 of the larger stores. All four product ranges are included in the NEXT Directory catalogues. NEXT Retail Sales in NEXT Retail increased by 20% compared with the previous year. The sales increase in the first half was 24%, a good recovery from the poor Spring/Summer 1998 season. The sales increase in the second half was 17%. This was an excellent performance from both new and existing stores. During the year we continued our policy of relocating to larger stores where the existing space was too small and new space became available which satisfied our investment criteria. We require a minimum net branch profit of 15% before central overhead and cash payback of the capital investment in a maximum of 24 months. We closed 5 stores in order to resite in the following locations: Chelmsford, Durham, Newry, Staines and Telford We also opened 14 new stores in the following locations: Bluewater Park (2), Bridgend, Castleford, Chester, Dundee, Glasgow (2), Greenford, Kendal, Kirkcaldy, Milton Keynes, Moorgate and Peterborough The resites and the new openings are performing in line with our expectations. We extended 8 of our existing stores and closed 4 stores. At the end of January 2000 we had 337 stores with a selling space of 1,465,000 square feet compared with 1,350,000 square feet the previous year, an increase of 8.5%. NEXT Directory Sales in NEXT Directory were 2% ahead of the previous year. In last years accounts we stated our belief that the home shopping market would be difficult during 1999 due to increased customer recruitment activity from existing and new home shopping retailers. During the year we concentrated our efforts on protecting bottom line profits rather than 'chasing' unprofitable sales. This policy proved to be successful, whilst the number of active customers at the end of January increased by 4% to 924,000, the trading profit increased by 19%. NEXT OVERSEAS Our franchise operations in Europe, the Middle East and Japan produced a satisfactory result, with profits in line with the previous year. At the end of January we had 34 franchise stores compared with 36 the previous year. VENTURA We have carried out a strategic review of the Ventura business. We decided that providing credit to other retailers was not a core activity and have invited offers for the Clydesdale business. We are currently in discussion with a number of interested parties and will advise of the outcome in due course. Whilst sales in Ventura were £108.9m, an increase of 18%, trading profits were £9.0m compared with £10.7m the previous year. This reflects lower profits from funded credit and the costs of refocusing the business. We have also charged, as an exceptional item, £6m in respect of software assets and restructuring costs. Construction of the second new call centre has been completed and it is now available for occupation. OTHER ACTIVITIES The profit of £14.4m includes: £7.3m from NEXT Asia, our product sourcing company in the Far East. £4.4m from NEXT Estates, our property management division. Other Activities also includes Callscan, our telecoms software subsidiary, and Choice, an associated company which operates a chain of 10 discount stores. BALANCE SHEET NEXT has a strong Balance Sheet. Capital expenditure during the year was £67m and this included £16m on the Warehouse Development programme. The new warehouses are now complete and fully operational, therefore, capital expenditure in the year ahead will be less than £60m. At the end of January 2000 we had net cash balances of £123m, an increase of £62m from January 1999. DIVIDEND The directors are pleased to recommend a final net dividend of 14p against 12.6p last year, bringing the total for the year to 21p compared with 19.1p last year, an increase of 10%. The dividend is covered 1.8 times by earnings per share of 38.4p. THE YEAR AHEAD The NEXT Brand In the year ahead NEXT will continue to concentrate on the development of its major asset - the NEXT Brand - in the United Kingdom and Eire. We believe that our Brand, which has a market share of around 4%, has good, profitable growth prospects in the home market for some years to come. The main thrust of the growth will be in NEXT Retail. We will continue to increase our selling space, but only where opportunities with good profit potential are available. In the year 2000 we anticipate a net increase in selling space of 100,000 square feet, the majority of which has already been contracted. In the NEXT Directory we are anticipating a return to growth. The early signs from the Spring/Summer recruitment campaign are encouraging. We now have a new 24 hour delivery service which is operational in 90% of the United Kingdom. The introduction of a mid season hard backed mini Directory, replacing three smaller brochures, helps the Directory to maintain its uniqueness in the home shopping market. Next is well placed to take advantage of the growing use of the Internet as a means of communicating with, and selling to, customers. We already have an efficient website and management system, which provides the customer with on line stock availability information as well as delivery times. This has been operating successfully since August 1999 and it is anticipated that at least £12m of Directory sales will come via the Internet in the year ahead. Ventura Ventura is now in the process of streamlining and repositioning itself in a fast moving and growing market. We have already moved a long way towards our goal of being one of the UK's most effective providers of call centre services. The core services are account set-up, account management, billing, collections, telemarketing, customer loyalty and retention. Ventura is therefore in prime position to serve the growing number of companies supplying products and services via the Internet. We expect Ventura to resume profitable growth in the year ahead. CURRENT TRADING In the first seven weeks since the start of the new financial year NEXT Retail sales are 11% ahead of 1999. Like for like sales in the 284 stores which have been trading for at least one year are 3% ahead. NEXT Directory sales for the first seven weeks are 6% ahead of 1999. Taken together, sales for the NEXT Brand are 9.5% ahead of last year. We will make a further statement on current trading at our Annual General Meeting on 17 May 2000. David Jones 23 March 2000 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the financial year ended 29 January Before Exceptional 2000 1999 Exceptional Items Total Items (Unaudited) £m £m £m £m Turnover 1,425.4 - 1,425.4 1,239.1 _______ _______ ________ _______ Operating profit 187.7 (7.4) 180.3 157.9 Profit on disposal of business - 2.4 2.4 - - Profit on disposal of fixed assets - 4.1 4.1 - _______ _______ ________ _______ Profit before interest 187.7 (0.9) 186.8 157.9 Net interest receivable 7.9 - 7.9 9.0 _______ _______ ________ _______ Profit on ordinary activities before taxation 195.6 (0.9) 194.7 166.9 ________ _______ Taxation on profit on ordinary activities (54.5) (43.0) ________ _______ Profit on ordinary activities after taxation 140.2 123.9 Dividends (76.4) (69.1) ________ _______ Profit for the year transferred to reserves 63.8 54.8 ======== ======= Earnings per share 38.4p 33.9p Adjusted earnings per share 38.6p 32.9p (excluding exceptional items) Diluted earnings per share 37.9p 33.6p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the financial year ended 29 January 2000 1999 £m £m Profit attributable to members of the parent company 140.2 123.9 Unrealised deficit from impairment of freehold property valuation - (1.6) Exchange difference on translation of net assets of subsidiary undertakings 0.1 (0.1) ________ _______ Total recognised gains and losses relating to the year 140.3 122.2 ======== ======= CONSOLIDATED BALANCE SHEET As at 29 January 2000 1999 £m £m (Unaudited) Fixed assets Tangible assets 288.6 275.6 Investments 2.4 2.2 Investment in own shares 48.8 36.6 ________ _______ 339.8 314.4 ________ _______ Current assets Property development stocks 9.1 9.3 Stocks 137.5 141.8 Debtors - Amounts falling due within one year 270.7 261.0 - Amounts falling due after more than one year 65.3 62.8 Cash at bank and in hand 124.7 63.8 ________ _______ 607.3 538.7 Current liabilities Creditors: amounts falling due within one year 318.4 293.2 ________ _______ Net current assets 288.9 245.5 ________ _______ Total assets less current liabilities 628.7 559.9 Creditors: amounts falling due after more than one year 15.0 9.9 Provision for liabilities and charges 7.0 7.2 ________ _______ Net assets 606.7 542.8 ======== ======= Capital and reserves Called up share capital 37.4 37.4 Share premium account 3.7 3.7 Revaluation reserve 16.4 19.7 Other reserves 0.4 0.4 Profit and loss account 548.8 481.6 ________ _______ Shareholders' funds 606.7 542.8 ======== ======= CONSOLIDATED CASH FLOW STATEMENT For the financial year ended 29 January 2000 1999 £m £m Net cash inflow from operating activities 260.8 174.1 ________ _______ Dividends from associates 1.0 1.5 ________ _______ Returns on investments and servicing of finance Interest received 7.7 9.5 ________ _______ Taxation UK corporation tax paid (61.9) (52.3) Overseas tax paid (1.4) (1.7) ________ _______ (63.3) (54.0) ________ _______ Capital expenditure and financial investment Purchase of tangible fixed assets (67.3) (118.9) Proceeds from disposal of fixed assets 11.1 4.9 Purchase of own shares by ESOP (22.9) (35.1) Receipts on disposal of shares by ESOP 6.4 2.9 ________ _______ (72.7) (146.2) ________ _______ Acquisitions and disposals Proceeds from disposal of subsidiary undertaking 0.9 - Disposal of investment in associated undertaking 0.1 - ________ _______ 1.0 - Equity dividends paid (71.5) (67.6) ________ _______ Changes in net funds resulting from cash flows 63.0 (82.7) Management of liquid resources (56.7) 78.7 Financing New finance leases - 1.5 Repayments of capital element of finance leases (0.5) (0.6) ________ _______ (0.5) 0.9 ======== ======= Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash in the year 5.8 (3.1) Cash deposited/(realised from reduction) in liquid resources 56.7 (78.7) New finance leases - (1.5) Repayments of capital elements of finance leases 0.5 0.6 ________ _______ Changes in net funds resulting from cash flows 63.0 (82.7) Net funds at January 1999 59.6 142.3 ________ _______ Net funds at January 2000 122.6 59.6 ======== ======= BASIS OF PREPARATION The report was approved by the Board of Directors on 23 March 2000. Accounting policies adopted are consistent with those set out in the accounts for the year ended January 1999. The financial information for the year ended 29 January 2000 is unaudited and does not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 30 January 1999 has been extracted from the full accounts for that year which have been delivered to the Registrar of Companies and on which the auditors have issued an unqualified audit report. SEGMENTAL INFORMATION By business sector: Turnover Operating profit 2000 1999 2000 1999 £m £m £m £m Next Retail 985.4 821.6 128.8 102.6 Next Directory 274.7 269.4 33.4 33.6 Next Overseas 14.2 19.3 2.5 0.6 Ventura 123.3 106.6 5.5 13.8 Other activities 27.8 22.2 14.4 12.0 ESOP - - (4.3) (4.7) ______ ______ ______ ______ 1,425.4 1,239.1 180.3 157.9 ======= ======= ======= ======= By geographical destination: United Kingdom 1,379.9 1,195.2 169.4 152.1 Rest of Europe 29.6 23.1 0.6 - North America - 2.8 0.4 (0.8) Middle East 8.0 12.3 1.3 1.9 Asia 3.1 2.2 7.9 4.4 Australasia 4.8 3.5 0.7 0.3 ______ ______ ______ ______ 1,425.4 1,239.1 180.3 157.9 ======= ======= ======= ======= HALF YEAR ANALYSIS For the financial year ended 29 January Turnover First Second 2000 First Second 1999 half half half half £m £m £m £m £m £m NEXT Retail 423.0 562.4 985.4 341.1 480.5 821.6 NEXT Directory 127.8 146.9 274.7 126.1 143.3 269.4 NEXT Overseas (Continuing) 6.8 7.4 14.2 8.2 8.0 16.2 NEXT Overseas (Discontinued) - - - 2.8 0.3 3.1 Ventura 55.0 53.9 108.9 41.5 50.4 91.9 Clydesdale 7.5 6.9 14.4 7.3 7.4 14.7 Other Activities 12.5 15.3 27.8 9.2 13.0 22.2 ----- ----- ----- ----- ----- ----- 632.6 792.8 1,425.4 536.2 702.9 1,239.1 ===== ===== ===== ===== ===== ===== Profit before tax NEXT Retail 39.4 89.4 128.8 25.0 77.6 102.6 NEXT Directory 12.4 18.1 30.5 10.1 15.4 25.5 NEXT Overseas (Continuing) 1.3 1.2 2.5 1.0 1.5 2.5 NEXT Overseas (Discontinued) - - - (1.3) (0.6) (1.9) Ventura 4.4 4.6 9.0 4.0 6.7 10.7 Clydesdale 1.3 1.2 2.5 1.4 1.7 3.1 Other Activities 5.7 8.7 14.4 4.4 7.6 12.0 ----- ----- ----- ----- ----- ----- 64.5 123.2 187.7 44.6 109.9 154.5 Interest income 3.9 4.0 7.9 5.6 3.4 9.0 ----- ----- ----- ----- ----- ----- Trading Profit before Tax 68.4 127.2 195.6 50.2 113.3 163.5 ===== ===== ===== ===== Exceptional Items: Anticipated deficit in (4.3) (4.7) ESOP Ventura fixed asset impairment (6.0) - and restructuring costs NEXT Directory VAT 2.9 8.1 recovery Profit on disposal of 2.4 - business Disposal of freehold 4.1 - property _____ _____ Total Profit before Tax 194.7 166.9 _____ _____ EARNINGS PER SHARE The calculation of earnings per share is based on £140.2m (1999: £123.9m) being the profit for the year after taxation and 365.1m ordinary shares of 10p each (1999: 366.0m), being the weighted average number of shares ranking for dividend less the weighted average number of shares held by the ESOP during the year. An adjusted earnings per share has been shown excluding the effect of operating and non-operating exceptional items in order to reflect the underlying business performance as follows: 2000 1999 £m £m Earnings 140.2 123.9 Anticipated deficit in ESOP 4.3 4.7 Fixed asset impairment and restructuring costs 6.0 - VAT recovery (2.9) (8.1) Profit on disposal of business (2.4) - Disposal of freehold property (4.1) - _______ _______ Adjusted earnings excluding exceptional items 141.1 120.5 ======= ======= 2000 1999 pence pence Earnings per share 38.4 33.9 Exceptional items 0.2 (1.0) _______ _______ Adjusted earnings per share excluding exceptional items 38.6 32.9 ======= ======= The calculation of diluted earnings per share is based on £140.2m (1999: £123.9m) being the profit for the year after taxation and 369.5m ordinary shares of 10p each (1999: 369.1m) 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 4.4m shares (1999: 3.1m shares). RECONCILIATION OF SHAREHOLDERS' FUNDS 2000 1999 £m £m Total recognised gains and losses 140.3 122.2 Dividends (76.4) (69.1) New share capital issued - 0.1 _______ _______ Total movement during the year 63.9 53.2 Shareholders' funds at January 1999 542.8 489.6 _______ _______ Shareholders' funds at January 2000 606.7 542.8 ======= ======= CASH FLOW: RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW 2000 1999 £m £m Operating profit before interest and non-operating exceptional items 180.3 157.9 Depreciation 36.1 25.9 Impairment of fixed assets 5.2 - Loss/(profit) on disposal of fixed assets 5.9 1.0 Anticipated deficit in ESOP 4.3 4.7 Income from interest in associated undertakings (2.0) (2.3) Decrease/(increase) in stock 4.5 (19.3) Increase in debtors (10.7) (27.2) Increase in creditors 37.3 33.0 (Decrease)/increase in provision for liabilities and charges (0.2) 0.4 Exchange movement 0.1 - _______ _______ Net cash inflow from operating activities 260.8 174.1 ======= ======= CASH FLOW: ANALYSIS OF NET FUNDS January Cash January 1999 Flow 2000 £m £m £m Cash in hand 20.5 (0.9) 19.6 Overnight deposits - 5.1 5.1 Overdrafts (3.2) 1.6 (1.6) _______ _______ _______ 17.3 5.8 23.1 Short term deposits 43.3 56.7 100.0 Finance leases (1.0) 0.5 (0.5) _______ _______ _______ Total 59.6 63.0 122.6 _______ _______ _______ AGM/DIVIDEND/ANNUAL REPORT AND ACCOUNTS It is intended that the recommended dividend will be paid on 4 July 2000 to Shareholders registered on 5 June 2000. The Annual General Meeting will be held at Institute of Directors, 116 Pall Mall, London SW1 on Wednesday 17 May 2000. The Annual Report and Accounts will be sent to shareholders by 18 April 2000 and copies will be available from the Company's registered office: Desford Road, Enderby, Leicester LE9 5AT.

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