Final Results

RNS Number : 1530J

Next PLC

25 March 2010

 



Date:	Embargoed until 07.00hrs, Thursday 25 March 2010
Contacts:	Simon Wolfson, Chief Executive
	David Keens, Group Finance Director
	NEXT PLC
	Tel:  [phone]
	Alistair Mackinnon-Musson
	Nathan Field
	Hudson Sandler
	Tel:      [phone]
	Email:  [e-mail]
Photographs:	Photographs available at:  http://www.next.co.uk/press/corporate.asp

Next plc

RESULTS FOR THE YEAR ENDED JANUARY 2010

·           Group revenues increased to £3,406m

·           Group profit before tax up 18% to £505m

·           Earnings per share up 21% to 188.5p

·           Total dividend increased 20% to 66p, covered 2.8 times

·           Cash inflow of £331m, before share buybacks

·           Net debt reduced to £400m, committed debt facilities of £800m

Chairman's Statement

The year to January 2010 was an exceptional year for Next, with growth in earnings per share of 21% to a new record for the Group of 188.5p.

It was an extraordinary year.  At the beginning of the year we faced an unstable economy, falling sales and Sterling weakness against both the US Dollar and the Euro, our main purchasing currencies.  In the event the consumer economy has been relatively stable.  The efforts of our buying teams and the support of our suppliers have helped us hold prices and increase revenues.  In addition, the strengths which I outlined in my statement last year, particularly the strength of our management team, have enabled us to contain costs, improve our products and continue to invest in our business.

Our cash generation remained robust, allowing us to increase our proposed full year dividend by 20% to 66p, buy back £120 million of our shares and reduce net debt by over £200 million to £400 million.  This leaves the Group in a very strong financial position.

We will continue to expand our store portfolio, particularly our new Home stores which have proved to be a great success this year.  We have revamped our UK website and are now trading online in 35 countries outside of the UK.  However, our main strategy of investing in the Next brand and improving and extending our product ranges will remain our focus for the foreseeable future.

Nick Brookes, having joined the Board in 2003, is stepping down at the AGM in May and I would like to thank him for his contribution over the last seven years.   We will be appointing a new non-executive director after the AGM and a further announcement will be made in due course.

Much of what we have achieved this year is due to the commitment and hard work of all our employees.  These results are a testimony to their success.  I would like to thank them all for the contribution they have made.

We remain confident that our operating model and financial strength position us well to make further progress in uncertain times.

John Barton

Chairman

Chief Executive's Review

OVERVIEW

Next's financial objective is clear and consistent, it is to deliver sustainable long term growth in earnings per share.  For the year ending January 2010 EPS increased by 21%, with profit before tax increasing by 18% to £505m.  Cash flow has been strong and is likely to remain so.  We propose to pay a final dividend of 47p which will take the growth in our annual dividend to 20%.

During the year we have made good progress in improving and developing our product ranges, expanding our store portfolio, refitting our stores, developing our online business and controlling costs.  We believe the Next Brand has emerged from recession in better shape than it entered, and is well placed to make progress in what we anticipate will be another challenging year.

A Year of Profit Upgrades

During the course of last year we raised our profit guidance several times.  At the beginning of the year, at the height of the financial crisis, we felt that we would be unlikely to maintain group profit at the previous year's level.  There are four reasons for the significant improvement in our performance, one is external and three are internal.

 

External Factor - Economy

The recession did not impact consumer spending by as much as most people expected.  Employment only decreased by 1.8% (circa 500,000) despite unemployment rising by circa 900,000.  The modest drop in employment combined with increased state benefit payments and lower interest rates meant that overall UK disposable income actually increased in 2009, with consumption remaining broadly flat.

 

Internal Factors

We believe there has been a marked improvement in our ranges; in particular we have been much faster to adopt new trends.

We were able to recover more of the decline in the value of Sterling from our supply base than expected.  Therefore, bought in gross margins did not decrease nearly as much as anticipated.  We had underestimated the extent to which new sources of supply would be able to improve cost prices and the extent to which our existing manufacturers' dollar cost base would decrease.

We also exceeded our targets for cost savings across the Group.

Long Term View

Next delivered full price like for like sales growth after four years of negative like for likes and we believe this is a reflection of the work done to revitalise the Brand over the last three years.  It is, however, worth reflecting that even during the period of negative like for likes we continued to deliver growth in sales and profit.  This growth has come from new Retail space and the Directory business.  In fact since 2005 our earnings per share have grown by 57%.

		Revenue excluding VAT			Profit & Earnings per share
	2010		2009	2010		2009
	£m		£m	£m		£m
Next Retail	2,274.2		2,197.9	324.0		288.8
Next Directory	873.2		816.4	183.6		157.6
Next International	64.2		68.6	1.2		9.0
Next Sourcing	3.5		5.9	35.7		32.0
	__________		__________	__________		__________
The Next Brand	3,215.1		3,088.8	544.5		487.4	+11.7%
Ventura	145.6		161.9	6.0		5.1
Other activities	45.8		20.8	(12.0)		(2.0)
Share option charge	-		-	(9.4)		(8.9)
Unrealised exchange gain/(loss)	-		-	0.7		(3.3)
	__________		__________	__________		__________
Revenue & operating profit	3,406.5		3,271.5	529.8		478.3	+10.8%
	_________		__________
Net interest expense				(24.5)		(49.5)
				__________		__________
Profit before tax				505.3		428.8	+17.8%
Taxation				(141.3)		(126.5)
				__________		__________
Profit after tax				364.0		302.3	+20.4%
				__________		__________
Basic earnings per share Dividends per share				188.5p 66.0p		156.0p 55.0p	+20.8% +20.0%

Product Development

We have improved the fashion content of our ranges, in particular we have continued to increase the speed at which we incorporate new trends and the depth in which we buy them.  This process has been more about reducing the time from concept to order, than reducing supplier lead times.  We still have further to go in developing quick response suppliers, both in Europe and by air-freight from the Far East. 

In the year ahead we will focus on getting the latest looks into the Directory.  We will reduce the lead time of catalogue production and make better use of the internet to allow customers to purchase online late additions to the Retail range.

Next Home continues to be the biggest opportunity for us to gain market share and we have made good progress in developing a stand alone offer.  Next Home now has critical mass as a destination for home products.  We are also looking at other smaller product opportunities, for example, we have developed our own NX sports brand to sit alongside established sportswear brands in the Directory and in selected Next stores.

NEXT RETAIL

Retail Sales

Retail sales finished the full year +3.5% ahead of last year, however, this includes a 53^rd week of sales and the 52 week comparison would have been +2.0%. 

Full price like for like sales for the 52 week period were 0.5% ahead of last year.  Many retailers choose to include their direct sales within their like for like sales figure, the equivalent figure for Next would have been +1.7%.

As a result of effective stock control 16% less stock went into the end of season Sales.  A reconciliation of full price like for like sales and total sales is set out in the table below:

52 week full price LFL             +0.5%

Net sales from new space      +3.2%

52 weeks full price sales     +3.7%

Additional week                       +1.5%

Markdowns                              - 1.7%

Total 53 week sales              +3.5%

 

New Space and Refits

We increased trading space by 257,000 square feet in the year, increasing our portfolio to 517 stores.  The payback on net capital invested in new space is forecast to be 13 months.  The net store contribution is forecast to be 21%.  These forecasts are comfortably ahead of our financial hurdles of 24 months payback and 15% contribution.  We opened 9 Home stand alone stores, taking our total out of town Home stores to 18. These stores are making a contribution of 19% and will pay back the capital invested in 14 months.

We expect to open a total of 340,000 square feet in the year ahead.  Included in this number is 150,000 square feet in 12 new Home stand alone stores.

During the year we opened 5 trial Sports Departments in existing Next stores.  These departments incorporate non-Next branded sportswear such as Adidas and Puma alongside our own NX Sport brand.  This trial has been successful and we plan to open a further 17 Sports Departments in the first half of this year, with more to follow in the second half. 

We continue to invest in improving our stores.  During the year we spent £26m refitting and £7m extending our stores, this year we intend to spend a further £18m on cosmetic refits, £6m on new sports and shoe departments and £17m on extensions.  Three years ago we started a programme to reinvigorate the look and feel of our stores, the vast majority of which are now in keeping with our brand.  We expect that a capital investment of £20m per annum will be required to maintain the image of our stores.

 

Retail Profit

Retail profit increased by +12.2% and net margin increased by +1.1%. 

The weakness of Sterling was an enormous challenge to margins.  The average rate at which we acquired US Dollars declined by 35 cents and if we had paid the same dollar prices for our merchandise our bought in gross margin would have been reduced by -5%. 

However, we were able to contain the drop in bought in gross margin to just -0.4%.  Lower cost prices were achieved by moving to new sources of supply and negotiating better terms with existing suppliers, many of whom were able to pass on the benefits of lower dollar input costs.  Lower VAT, significant freight savings and reduced fabric wastage also mitigated the currency weakness.  The first table below sets out the detail of the change in achieved gross margin.  The second table shows the walk forward from last year's operating margin to this year's result.  The figures show the change as a percentage of sales for each of our major heads of cost:

Currency rate		- 5.0%
Lower dollar prices from suppliers		+3.7%
VAT reduction		+0.5%
Lower freight and fabric charges		+0.4%
Total change to bought in gross margin		- 0.4%
Net operating margin last year		13.1%
Reduction in bought in gross margin	- 0.4%
Reduction in markdown	+1.4%
Increase in achieved gross margin			+1.0%
Change in store payroll			0.0%
Reduction in branch occupancy costs			+0.3%
Reduction in warehousing & distribution costs			+0.5%
Increase in other central overheads			- 0.7%
Net operating margin this year			14.2%

Reduced markdown improved margin by +1.4%. We marked down 16% less stock in our mainline stores (at original retail selling value) and improved the sell through in our clearance stores.  This reduction was partly as a result of improved stock control but also as a result of us significantly beating our initial sales budgets.  We do not anticipate there will be the same opportunity to save further markdown in the year ahead.

Store wages were flat as a percentage of sales, despite a 1% annual pay award, increased premiums for working on Boxing Day and higher staff bonus payments.  This was achieved as a result of improvements to the way we schedule the hours worked in our stores.  In the year ahead we again expect savings in worked hours to offset wage increases.

Occupancy costs decreased as a percentage of sales and improved margin by +0.3%, this was largely the result of lower energy costs.  In those stores that had a review, rent increased on a compound annual basis by 3.8%.  This increase was partially offset as a result of disputed rents being settled at lower levels than originally reserved.

Warehousing and distribution cost savings improved margin by 0.5%.  The largest cost reduction was due to lower charges for processing Sale stock with the balance achieved through numerous other efficiency projects.

Central overheads eroded margin by -0.7%. This was mainly due to increased staff incentives and a charge for sponsoring the 2012 Olympic Games.

NEXT DIRECTORY

Directory Sales

Directory sales finished the year up +7.0% (+5.0% on a 52 week basis). Growth was achieved through a 3.6% increase in the average number of active customers and a small 0.2% increase in pages.  The internet continues to be very important to the development of the Directory and now accounts for 70% of our orders.

 

Directory Profit

Directory profit was up +16.4% on last year.  The margin movement is detailed below; the figures show the change as a percentage of sales for each of our major heads of cost:

Net operating margin last year                                             19.3%
Reduction in bought in gross margin        Reduction in markdown	- 0.4% +0.9%
Increase in achieved gross margin		+0.5%
Improvement in bad debt		+0.7%
Service charge income		- 0.3%
Decrease in warehouse and distribution costs		+1.0%
Decrease in marketing and book creation		+0.7%
Increase in other central overheads		- 0.9%
Net operating margin this year		21.0%

The bought in gross margin decreased by -0.4%, in line with Retail and for the same reasons.  Directory generated 13% less markdown stock which increased margin by +0.9%.  Achieved gross margin increased by +0.5%. 

Bad debt improved against a very difficult period last year.  Service charge income did not grow as fast as sales and as a result margin was eroded by -0.3%.

Warehousing and distribution costs improved margin by 1.0%.  Delivery charge revenue was up by £3.5m as customers placed smaller orders more often.  The balance of the improvement came from numerous small cost saving initiatives.

We achieved efficiencies in book distribution and customer recruitment which gave a margin improvement of +0.7%.  An increase in central overheads eroded margin by -0.9%, mainly due to increased staff incentives and Olympic sponsorship.

INTERNATIONAL

 

Change in Direction

We have changed our approach to International trading and this change is reflected in these results, which include a number of one off charges. We are moving our focus away from wholly owned international stores to direct sales over the internet. 

The internet allows us to serve a customer base which is dispersed over a large area without the need to take on fixed assets and stock holdings in numerous locations.  Whilst in any one town or city there may not be enough Next customers to justify the investment in a store, there are enough customers in a whole country to justify the investment required for us to trade online. 

We are now serving customers in 35 overseas countries through our international website NextDirect.com.  Stock is held, picked and packed in our UK warehouses.  We are using a number of different third parties to deliver from our warehouses to overseas customers.   We charge €5 to deliver to mainland Europe within seven working days.  We are now able to deliver to the USA in two business days and charge US$10 per order.

To date our focus has been on establishing reliable overseas operations and we have not as yet spent significant time or money on marketing.  In the year ahead we will test and develop marketing methods overseas, with trials having just started in the USA.  We anticipate that over the next twelve months our International website turnover will be circa £7m, generating a profit of £1.4m.

We have 14 owned stores in Central Europe, 5 in Northern Europe and 4 in China.  We do not anticipate any new stores in Northern Europe and will keep the existing sites under review.  We have taken a provision against certain store assets, incurring a one off charge of £3.3m.  We will continue to trade our Central European stores, and expect to expand slowly in the region.  However we have taken a full impairment charge of £1.6m against the goodwill acquired with the Czech operations two years ago.

 

International Sales and Profits

Many of the overseas markets in which we trade have been affected by the world wide recession.  International sales have been difficult with sales in our franchise stores being down -7% on a like for like basis.  The Czech Republic was particularly difficult and sales in our directly owned Central European stores were down -14%.  Reported International profits were down from £9m to £1.2m, however, underlying profits were £6.1m prior to one off charges of £4.9m.

The table below sets out the trading profits of our International retail business and NextDirect.com, the latter is reported within Directory.  Also shown is our forecast for the year ahead.

	Trading Profit £m 2010	One Off Charges £m 2010	Total Profit £m 2010	Budget Profit £m  2011 (e)
International	6.1	(4.9)	1.2	6.0
NextDirect.com	0.8	(1.3)	(0.5)	1.4
Total	6.9	(6.2)	0.7	7.4

NEXT SOURCING (NSL)

NSL recorded an increase in profit to £35.7m, this included £5m improvement from translating its US Dollar profits into Sterling and £2m from an over provision of profit share in previous years.  Dollar operating profits actually reduced as NSL had to contend with lower dollar garment prices and therefore lower commission income, along with stronger competition for Next's business from third party suppliers.

NSL faces a challenging year with continued competition from external suppliers and general pressure on supplier margins.  As a result of these pressures we expect NSL to report profits in the region of £30m for the current year.

VENTURA

The year finished well and Ventura achieved a profit of £6m against £5m last year.  Second half sales were steady, with new business offsetting the activities which are no longer performed.  Further business has been won with new clients, which will start contributing in the current year.  Our wholly owned call centre in India has achieved significant wins with non-UK clients and we expect it to be operating at almost full capacity by the end of this year. 

We believe that turnover is now stable and that both sales and profits will increase in the year ahead.

OTHER ACTIVITIES

The Other Activities charge of £12m includes £6m for share based incentive schemes, compared to a £1m credit last year.  Volatility in the Next share price over the past two years has resulted in significant changes to the provisions required.  As expected, the £10m unrealised foreign exchange loss booked in the first half reversed in the second half, resulting in a net gain of £1m.

Also included here is our young female fashion brand, Lipsy.  We have now owned this wholesale, retail and internet business for a full year and are pleased with progress to date.  Lipsy made an operating profit before amortisation of £1m on sales of £28m.  In the current year we expect to open 11 new stores and anticipate profits of circa £3m before amortisation of £1m.

INTEREST AND TAX

The interest charge for the year halved to £25m, due to both lower borrowings and lower interest rates.  We expect a similar charge for the current year on debt which we estimate will average £500m after taking into account share buybacks completed to date.  Our average cost of debt is 5%, based on £505m of fixed rate bonds and interest rate swaps.

Our tax rate this year at 28% was slightly lower than anticipated and last year, the main factor was deferred tax adjustments on share option schemes.  We expect our tax rate for the year ahead will be no higher than this year.

BALANCE SHEET AND CASH FLOW

In the year the group generated £331m of cash flow before share buybacks but after interest, tax and dividend payments.

Capital expenditure for the year amounted to £99m and we are planning for £121m in the current year, broadly in line with underlying depreciation.  Stock levels were well controlled throughout the year and finished £10m down in value.  Directory debtor balances rose by £23m to £484m.  We have retained robust provisions against potential defaults and are more comfortable with the consumer debt environment than we were a year ago.

Net debt at the year end was down £229m to £400m.  This is comfortably financed by £505m of bonds maturing in 2013 and 2016.  In addition to this we have £295m of bank facilities committed until 2013.

We believe that Next is likely to continue to generate cash flow well in excess of that which is required to fund growth in the business.  We currently estimate we will generate around £175m of cash in the current year, after paying tax and dividends but before share buybacks.

SHARE BUYBACKS

We have continued our longstanding strategy of using surplus cash to buy back Next shares.  During the year we acquired 5.9m shares (3% of those in issue at the start of the year) at a cost of £120m.  Since the year end we have purchased a further 3.6m shares at a cost of £70m.

It is our intention to maintain an investment grade credit rating and we will not allow buybacks to constrain investment in the core business.  Given these principles and subject to market conditions we intend to continue buying back shares in the current year.  In this event, we expect net debt at January 2011 will be between £400m and £500m, broadly in line with our outstanding bonds.

The opportunity to use cash generated to buy back shares is important to our strategy.  In the context of a consumer environment that may remain subdued for some time, buybacks from free cash flow can turn modest underlying business growth into healthy EPS growth without adding any operational risk.  If, for example, we generate £200m of cash and use it to buy back shares at £20, then EPS would be enhanced by 5% on a full year basis.

DIVIDENDS

We have proposed raising our final dividend to 47p, taking the total dividend for the year to 66p.  This is an increase of 20% and is in line with growth in EPS.  Dividend cover remains a healthy 2.8 times compared to the sector average of 2.4 times.  Given our expectation for further strong cash flow and the current level of cover, we expect to raise dividends in the year ahead by at least 10%.

OUTLOOK FOR 2010/11

Outlook for the Economy

The outlook for the year ahead is hard to predict.  The consumer has come through the recession in relatively good shape.  Employment is down by less than 2%, mortgages remain low and the savings ratio is back to sustainable levels.  There are some slight worries; interest rate reductions annualise in April and we are beginning to see some modest inflationary pressure from the recent spike in commodity prices.  

The main concern is the size of the Government deficit.  In whichever way a future Government balances its books, the results will be uncomfortable for the consumer.  The best outcome will be if the Government is able to reduce the deficit through productivity gains, although this will not be without impact on consumer spending, as inevitably it will result in the loss of some public sector jobs. 

A worse scenario for the consumer would be a rise in taxation; direct taxes will reduce consumer spending, indirect taxes are likely to be inflationary.  So the outlook for the economy (and therefore for retail sales) remains dependent on policy decisions and their timing and, as yet, we have little certainty as to either.

Outlook for Sales, Costs and Profits

In the current environment, and for the reasons outlined above, it is difficult to make robust predictions about sales.  At this stage we are budgeting the first half as follows:

Sales (VAT ex)	First Half Range
Like for like	- 2.5% to +0.5%
Total Retail including new space	+0.5% to +3.5%
Directory	+1.0% to +4.0%

The biggest challenge this year will be to absorb the increase in VAT without raising prices to customers.  For the Spring Summer season we have succeeded in sourcing lower prices, which broadly offset the effect of increased VAT, so our prices will not be affected.  We have yet to source a significant quantity of stock for the Autumn, but increased commodity prices (particularly cotton) may lead to modest inflation in our Autumn Winter cost prices.  There are no significant threats to other costs in the year ahead, which are generally very well controlled. 

We are reluctant to give full year profit guidance at this early stage.  However, we think it is useful to outline how we expect profits to perform in a scenario where total sales are broadly level with last year.  In the event that this year's total 52 week Brand sales can match last year's 53 weeks (i.e. full year Retail like for likes down around -2%), then we believe we can further improve the Group's net operating margins by around 1%.  It is important to stress that this is not a forecast but does give an indication of the level of cost management within the business.

SUMMARY

Next has had an excellent year and has made good progress in revitalising the Next Brand.  Whilst we remain very cautious about the general economic outlook for the year ahead, we believe that we can grow operating profits with very modest increases in sales and continue to further enhance EPS with share buybacks from free cash flow.  We are well placed to face the challenges of the coming year.

Simon Wolfson

Chief Executive

25 March 2010

UNAUDITED CONSOLIDATED INCOME STATEMENT

		Year to January             2010             £m	Year  to January             2009             £m
Revenue		3,406.5	3,271.5
Cost of sales		(2,409.6)	(2,363.0)
		_________	_________
Trading profit		996.9	908.5
Distribution costs		(232.1)	(234.4)
Administration expenses		(236.6)	(192.9)
Other gains/(losses)		0.7	(3.8)
		_________	_________
Trading profit		528.9	477.4
Share of results of associates		0.9	0.9
		_________	_________
Operating profit		529.8	478.3
Finance income		0.8	1.3
Finance costs		(25.3)	(50.8)
		_________	_________
Profit before taxation		505.3	428.8
Taxation		(141.3)	(126.5)
		_________	_________
Profit for the year		364.0	302.3
		_________	_________
Profit for the year attributable to:
Equity holders of the parent company		364.1	302.4
Minority interest		(0.1)	(0.1)
		_________	_________
Profit for the year		364.0	302.3
		_________	_________
Basic earnings per share      p		188.5	156.0
Diluted earnings per share   p		177.4	155.7
Dividend per share                p		66.0	55.0

UNAUDITED CONSOLIDATED

STATEMENT OF COMPREHENSIVE INCOME

		Year to January 2010 £m	Year to January 2009 £m
Profit for the year		364.0	302.3
Other comprehensive income and expenses
Exchange differences on translation of foreign operations		(5.0)	7.0
(Losses)/gains on cash flow hedges		(61.4)	114.9
Actuarial losses on defined benefit pension schemes		(12.6)	(36.2)
Tax relating to components of other comprehensive income		19.0	1.1
		_________	_________
		(60.0)	86.8
Reclassification adjustments
Transferred to income statement on cash flow hedges		(8.3)	(30.7)
Transferred to the carrying amount of hedged items on cash flow hedges		5.2	(25.9)
		_________	_________
Other comprehensive (expense)/income for the year		(63.1)	30.2
		_________	_________
Total comprehensive income for the year		300.9	332.5
		_________	_________
Attributable to:
Equity holders of the parent company		301.0	332.7
Minority interest		(0.1)	(0.2)
		_________	_________
Total comprehensive income for the year		300.9	332.5
		_________	_________

 

UNAUDITED CONSOLIDATED STATEMENT OF

CHANGES IN TOTAL EQUITY

		Year to January 2010 £m	Year to January 2009 £m
Opening total equity as previously reported			(79.1)
Change in accounting policy (Note 1)			(16.1)
			________
Opening total equity (restated)		140.5	(95.2)
Total comprehensive income Equity holders of the parent company  Minority interest		301.0 (0.1)	332.7 (0.2)
Shares purchased for cancellation		(190.5)	-
Shares purchased by ESOT		(59.3)	-
Shares issued by ESOT		33.7	3.9
Share option charge		9.4	8.9
Tax recognised directly in equity		7.2	(3.1)
Equity dividends paid		(108.5)	(106.5)
		________	________
Closing total equity		133.4	140.5
		________	________

UNAUDITED CONSOLIDATED BALANCE SHEET

			January 2010 £m	January 2009 £m Restated		January 2008 £m Restated
ASSETS AND LIABILITIES
Non-current assets
Property, plant & equipment			577.2	612.8		610.6
Intangible assets			47.4	55.4		36.2
Interests in associates			4.0	3.5		2.9
Other investments			1.0	1.0		1.0
Other financial assets			22.7	14.1		0.5
			________	_________		_________
			652.3	686.8	651.2
Current assets
Inventories			309.0	318.7	319.1
Trade and other receivables			616.6	622.7	575.9
Other financial assets			8.6	84.4	12.6
Cash and short term deposits			107.0	47.8	56.0
			________	_________		_________
			1,041.2	1,073.6		963.6
			________	_________		_________
Total assets			1,693.5	1,760.4		1,614.8
			________	_________		_________
Current liabilities
Bank overdrafts			(4.7)	(46.3)		(37.7)
Unsecured bank loans			-	(75.0)		(205.0)
Trade and other payables			(550.3)	(490.5)		(473.3)
Other financial liabilities			(93.6)	(15.8)		(55.0)
Current tax liabilities			(109.5)	(85.9)		(92.4)
			________	_________		_________
			(758.1)	(713.5)		(863.4)
Non-current liabilities
Corporate bonds			(520.9)	(567.8)		(539.7)
Net retirement benefit obligation			(49.5)	(69.1)		(45.8)
Provisions			(13.4)	(13.1)		(9.4)
Deferred tax liabilities			(3.7)	(28.0)		(16.4)
Other financial liabilities			(4.4)	(2.4)		(12.3)
Other liabilities			(210.1)	(226.0)		(223.0)
			________	_________		_________
			(802.0)	(906.4)		(846.6)
			________	_________		_________
Total liabilities			(1,560.1)	(1,619.9)		(1,710.0)
			________	_________		_________
Net assets / (liabilities)			133.4	140.5		(95.2)
			________	_________		_________
EQUITY
Share capital			19.1	19.7		20.1
Share premium account			0.7	0.7		0.7
Capital redemption reserve			10.8	10.2		9.8
ESOT reserve			(78.2)	(48.7)		(54.8)
Fair value reserve			5.1	69.6		11.3
Foreign currency translation reserve			4.7	9.7		2.6
Other reserves			(1,443.8)	(1,443.8)		(1,443.8)
Retained earnings			1,615.2	1,523.2		1,358.8
			________	_________		_________
Shareholders' equity			133.6	140.6		(95.3)
Minority interest			(0.2)	(0.1)		0.1
			________	_________		_________
Total equity			133.4	140.5		(95.2)
			________	_________		_________

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

	Year to             January 2010             £m			Year to January 2009 £m
Cash flows from operating activities
Operating profit			529.8	478.3
Depreciation and amortisation			123.1	116.8
Impairment			6.4	-
Loss on disposal of property, plant & equipment			5.5	6.2
Share option charge			9.4	8.9
Share of undistributed profit of associates			(0.5)	(0.6)
Exchange movement			(1.6)	3.9
Decrease in inventories			9.7	1.0
Decrease/(increase) in trade and other receivables			6.0	(42.9)
Increase in trade and other payables			31.1	16.0
Pension contributions less income statement charge			(32.2)	(12.9)
			________	________
Cash generated from operations			686.7	574.7
Corporation taxes paid			(115.2)	(125.9)
			________	________
Net cash from operating activities			571.5	448.8
			________	________
Cash flows from investing activities
Proceeds from sale of property, plant & equipment			0.4	0.3
Acquisition of property, plant & equipment			(98.6)	(120.6)
Outflow on acquisition of subsidiaries			-	(14.1)
			________	________
Net cash from investing activities			(98.2)	(134.4)
			________	________
Cash flows from financing activities
Repurchase of own shares			(101.8)	(55.2)
Purchase of shares by ESOT			(39.2)	-
Proceeds from disposal of shares by ESOT			33.7	3.9
Repayment of unsecured bank loans			(75.0)	(130.0)
Repurchase of corporate bonds     Interest paid			(46.6) (32.1)	- (50.1)
Interest received			0.9	1.4
Payment of finance lease liabilities			(0.4)	(0.5)
Dividends paid			(108.5)	(106.5)
			________	________
Net cash from financing activities			(369.0)	(337.0)
			________	________
Net increase/(decrease) in cash and cash equivalents			104.3	(22.6)
Opening cash and cash equivalents			1.5	18.3
Effect of exchange rate fluctuations on cash held			(3.5)	5.8
			________	________
Closing cash and cash equivalents (Note 4)			102.3	1.5
			________	________

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1.      Basis of preparation

The results for the financial year are for the 53 weeks to 30 January 2010 (last year 52 weeks to 24 January 2009) with the exception of Next Sourcing, Ventura and certain other activities which relate to the calendar year to 31 January.

Other than as described below, the condensed consolidated financial statements for the year ended 30 January 2010 have been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union and the accounting policies set out in the Next plc Annual Report and Accounts for the year ended 24 January 2009.

The condensed financial statements are unaudited and do not constitute statutory accounts of the Company within the meaning of Section 434(3) of the Companies Act 2006.  Statutory accounts for the years to January 2008 and January 2009, incorporating unqualified audit reports, have been delivered to the Registrar of Companies.  Neither of these reports included statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

Changes to accounting standards

Change in accounting policy

An amendment to IAS 38 Intangible Assets requires that all advertising and marketing costs, including production costs of the Next Directory are recognised in the income statement when the goods or services have been received.  Prior to this amendment, such costs were charged to the income statement during the season in which the related marketing activity took place.

This change in accounting policy has been applied retrospectively, decreasing net assets by £16.1m at each comparative balance sheet date.  As the effect on earnings was not material in each period, reported profits for prior periods have not been restated.  Restated balance sheets from the beginning of the comparative period (January 2008) have been presented in accordance with IAS 1 (revised) Presentation of Financial Statements.

Other changes adopted in the current year

IAS 1 (revised) Presentation of Financial Statements

This is a presentational change only, affecting the titles and positioning of items within the financial statements, including the format of the primary statements which are now the Income Statement, Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and Cash Flow Statement.  There is no impact on reported profits or total equity.

IFRS 2 Share based Payment - Vesting Conditions and Cancellations (Amendment)

The amendment clarifies treatment of vesting conditions and cancellations of share based payments.  This has not affected the Group's accounting treatment and there has therefore been no impact on reported profits or total equity.

IFRS 7 Financial Instruments: Disclosures (Amendment)

Additional disclosures relating to a hierarchy for measurement of fair values of financial instruments are now required; there is no impact on reported profits or total equity.

IFRS 8 Operating Segments (Amendment)

This change means that reporting of the Group's segment assets is no longer required.

Other changes in accounting standards: future years

The Group has not adopted early IFRS 3 (Revised) Business Combinations, which will affect the accounting for any acquisitions made during the Group's financial year ending January 2011.  Acquisitions made prior to that date will not be affected.

2.      Segmental analysis

The Group's operating segments under IFRS 8 have been determined based on the management accounts reviewed by the Board of Directors. The Board assesses the performance of the operating segments based on profits before interest and tax, excluding share option charges recognised under IFRS 2 and unrealised foreign exchange gains or losses on derivative instruments.

	External revenue		Internal revenue		Total revenue
Year to January	2010 £m	2009 £m	2010 £m	2009 £m	2010 £m	2009 £m
Next Retail	2,274.2	2,197.9	5.2	4.0	2,279.4	2,201.9
Next Directory Next International Next Sourcing	873.2 64.2 3.5	816.4 68.6 5.9	- - 529.9	- - 594.8	873.2 64.2 533.4	816.4 68.6 600.7
	________	________	_________	________	________	________
Next Brand	3,215.1	3,088.8	535.1	598.8	3,750.2	3,687.6
Ventura	145.6	161.9	4.3	4.3	149.9	166.2
Property Management	6.3	6.7	181.9	174.2	188.2	180.9
	________	________	_________	________	________	________
Total segment revenues	3,367.0	3,257.4	721.3	777.3	4,088.3	4,034.7
Other	39.5	14.1	2.8	0.4	42.3	14.5
Eliminations	-	-	(724.1)	(777.7)	(724.1)	(777.7)
	________	________	_________	________	________	________
	3,406.5	3,271.5	-	-	3,406.5	3,271.5
	________	_________	_________	________	________	________

			Segment profit
Year to January			2010 £m	2009 £m
Next Retail			324.0	288.8
Next Directory Next International Next Sourcing			183.6 1.2 35.7	157.6 9.0 32.0
			_________	_________
Next Brand			544.5	487.4
Ventura			6.0	5.1
Property Management			0.3	0.8
			_________	_________
Total segment profit			550.8	493.3
Other activities (including central costs)			(13.2)	(3.7)
Share option charge			(9.4)	(8.9)
Unrealised foreign exchange gain/(loss)			0.7	(3.3)
			_________	_________
Trading profit			528.9	477.4
Share of results of associates			0.9	0.9
Finance income			0.8	1.3
Finance costs			(25.3)	(50.8)
			_________	_________
Profit before tax			505.3	428.8
			_________	_________

3.      Earnings per share

The calculation of basic earnings per share is based on £364.1m (2009: £302.4m) being the profit for the year attributable to equity holders of the parent company and 193.1m ordinary shares of 10p each (2009: 193.8m), being the weighted average number of shares in issue less the weighted average number of shares held by the ESOT during the year.

The calculation of diluted earnings per share is based on £364.1m (2009: £302.4m) being the profit for the year attributable to equity holders of the parent company and 205.2m ordinary shares of 10p each (2009: 194.0m), being the weighted average number of shares used for the calculation of basic earnings per share above increased by the dilutive effect of potential ordinary shares from employee share option schemes of 12.1m shares (2009: 0.2m).  The total number of share options outstanding at 30 January 2010 was 13.1m (2009: 12.9m), the increase in dilutive shares is a consequence of the higher average share price during the year ended 30 January 2010 compared to the previous year.

4.      Analysis of net debt

	January	Cash	Other non-cash	January
	2009	flow	changes	2010
	£m	£m	£m	£m
Cash and short term deposits	47.8			107.0
Overdrafts	(46.3)			(4.7)
	_______			________
Cash and cash equivalents	1.5	104.3	(3.5)	102.3
Unsecured bank loans	(75.0)	75.0	-	-
Corporate bonds	(567.8)	46.6	0.3	(520.9)
Fair value hedges of corporate bonds	14.1	-	5.4	19.5
Finance leases	(1.4)	0.4	-	(1.0)
	________	________	________	________
Total net debt	(628.6)	226.3	2.2	(400.1)
	________	________	________	________

5.      Share buybacks

During the year ended 30 January 2010, the Company purchased for cancellation 5,928,082 of its own ordinary shares of 10p each in the open market at a total cost of £120.1m.  In the prior year, the Company purchased 3,900,000 of its own ordinary shares of 10p each under off-market contingent purchase contracts at a cost of £53.6m.

At 30 January 2010, the Company was party to an irrevocable closed season buyback agreement for the purchase of its own ordinary shares of 10p each and at 22 March 2010 had purchased 3,635,706 shares under this arrangement at a total cost of £70.5m.

It is intended that the recommended final dividend will be paid on 1 July 2010 to shareholders registered on 28 May 2010.  The Annual General Meeting will be held at the Leicester Marriott Hotel, Smith Way, Grove Park, Leicester, LE19 1SW on Tuesday 18 May 2010.  The Annual Report and Accounts will be sent to shareholders by 15 April 2010 and copies will be available from the Company's registered office:  Desford Road, Enderby, Leicester, LE19 4AT and on the Company's website at www.nextplc.co.uk.

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 announcement 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 various risks and uncertainties, including but not limited to those matters highlighted in the Chief Executive's Review; failure by Next to predict accurately 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 do not undertake any obligation to update publicly or revise forward looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

 

END

 

 

FR USUARRVAOUUR