Interim Results
Next PLC
11 September 2001
Date: Embargoed until 07.00am, Tuesday 11
September 2001
Contacts: Simon Wolfson, Chief Executive
David Jones, Deputy Chairman
Next plc
Tel: 020 7796 4133 (11/09/01)
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/
NEXT PLC
RESULTS FOR THE HALF YEAR ENDED JULY 2001
* NEXT Retail turnover up 19%
* NEXT Directory turnover up 18%
* Operating profit before interest and tax up 17% to £90.3m
* Earnings per share up 22%
* Interim dividend increased 12.5% to 9p
Sir Brian Pitman, Chairman, said
'NEXT has had another successful half year. The combined turnover of NEXT
Retail and NEXT Directory increased by 19%, operating profit was up by 17% and
earnings per share rose by 22%. The annual post tax return on capital
increased to 34%.
The Board is pleased to announce an interim dividend of 9p per share, a 12.5%
increase on the previous year.
We expect further profitable growth in the second half of the year.'
Chairman's Statement
NEXT has had another successful half year. The combined turnover of NEXT
Retail and NEXT Directory increased by 19%, operating profit was up by 17% and
earnings per share rose by 22%. The annual post tax return on capital
increased to 34%.
The Board is pleased to announce an interim dividend of 9p per share, a 12.5%
increase on the previous year. The Balance Sheet remains very strong, with
net cash of £99m, and our investment in larger stores is delivering a
substantial return on capital.
We expect further profitable growth in the second half of the year.
Sir Brian Pitman
Chairman
Chief Executive's Review
In the six months to July 2001 the NEXT Group achieved operating profit before
interest and tax of £90.3m compared with £77.4m the previous year, an increase
of 17%. Last year we purchased for cancellation ten percent of our issued
share capital. These purchases contributed to the rise in earnings per share
this year, which increased by 22% to 20.3p.
Turnover and profit figures are set out in the table below.
Turnover Profit before Tax
Six months to July Six months to July
2001 2000 2001 2000
£m £m £m £m
NEXT Retail 559.5 470.1 58.9 46.1
NEXT Directory 162.7 138.1 21.8 17.6
_______ _______ _______ _______
The NEXT Brand 722.2 608.2 80.7 63.7
NEXT Franchise 8.2 6.9 1.6 1.2
Ventura 51.5 49.1 6.0 5.1
Other Activities 12.4 12.3 5.4 6.9
ESOP charge - - (3.4) (0.9)
Clydesdale (Discontinued) - 8.6 - 1.4
_________ _________ _________ _________
794.3 685.1 90.3 77.4 +17%
________ _______
Interest Income 2.7 3.3
_________ _________
Profit before Tax 93.0 80.7 +15%
________ _______
Post Tax Earnings per share 20.3p 16.7p +22%
The NEXT Brand
The NEXT Brand is focused at the top end of the mass market. 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 majority of our turnover comes from women's, men's and children's
clothing. 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 can add value. Our sales of products for the home
have shown exceptional growth over the last year as we improved and extended
our ranges into larger departments within new stores.
We intend to continue the development of the 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 19% and profits by 28%.
Like-for-like sales in the 257 stores that traded continuously for more than a
year were 10% up.
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 year this approach has yielded an exceptional increase in square
footage of 328,000 square feet. Much of this gain has been driven by the
opening of 13 sites previously traded by C&A. Whilst we have had much success
in our acquisition programme it should be stressed that NEXT has not altered
or compromised its strict financial criteria on capital invested, payback and
profitability.
July 2001 July 2000 Change
Store numbers 333 338 -5
Square footage 1,847,000 1,519,000 +328,000
Currently the portfolio of new space opened since July 2000 is exceeding its
sales target by 11% and is forecast to payback the capital invested in 12
months. We now have eight NEXT Retail stores trading more than 20,000 square
feet. These are located in Bluewater Park, Thurrock, Norwich, Middlesbrough,
Liverpool, Edinburgh, Sheffield Meadowhall and Bromley. Each of these stores
are trading ahead of our initial expectations.
NEXT Directory
NEXT Directory has made good progress in the first half with sales moving
ahead by 18% and profits up by 24%. We have continued to invest in the
recruitment of new customers, resulting in growth in our customer base of 5%
over the season. Over the last year we have increased our customer base by
13%.
July 2001 January 2001 July 2000
Active Customers 1,083,000 1,030,000 953,000
The breadth of offer in the Directory and mid season catalogue has increased.
This is reflected in the greater number of pages in each publication compared
with last year, as shown below.
Publication Spring/Summer Spring/Summer %
2001 2000 Increase
Main Directory
(January-July) 628 Pages 540 Pages +16%
Mid season catalogue
(May-July) 292 Pages 175 Pages +67%
The Internet accounted for 10% of Directory customer orders, compared with 7%
last year, and is currently running at 11%. The majority of Internet sales
come from existing customers who have a catalogue and use the Internet to
check stock availability and place orders. We have now developed our on-line
service to enable customers to check their personal account and make payments.
NEXT Franchise
Our overseas franchise operation had a satisfactory half year, with sales
increasing by 19% to £8.2m. At the end of July 2001 there were 41 franchise
stores compared with 33 the previous year.
Ventura
Profits increased by 19% to £6m on a 5% increase in sales. Ventura continues
with its strategy of growing its core call centre services and customer
account management activities, whilst reducing its investment in the less
profitable business of funded consumer credit.
New customer service business has been won from both existing and new clients.
Ventura has now added Freeserve, Thames Water and others to its list of blue
chip clients. We expect Ventura to make further progress in the second half
of the year.
Other Activities
Profits for the half year were £5.4m compared with £6.9m the previous year.
The main contributors were £4.5m from NEXT Asia, our product sourcing company
based in Hong Kong, and £1.4m from our Property Management company.
ESOP
NEXT operates employee share option schemes and has an Employee Share
Ownership Plan Trust, which purchased a further two million shares at a price
of 920p during the period. A provision of £3.4m has been taken in respect of
shares held by the Trust (last year £0.9m) and a similar charge is anticipated
in the second half. At the end of July the Trust held 8 million shares and
the company had 11.3 million employee share options outstanding. Over the
last five years the average charge in respect of shares purchased by the Trust
has been £4.3m per annum.
Balance Sheet
At the end of July we had net cash balances of £99m. The end of season Summer
Sale was successful and stock levels for Autumn are in line with our
requirements. The majority of our £34m 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 in the region of £75m and
will include additions to our product development and call centre facilities.
Dividend
The Directors are pleased to declare an interim dividend of 9p, an increase of
12.5% (last year 8p). This will be paid on 2 January 2002 to shareholders on
the register at 30 November 2001. The shares will trade ex-dividend from 28
November 2001.
Current Trading
In the first six weeks of the Autumn/Winter season, sales in NEXT Retail are
19% ahead of the same period last year. Like-for-like sales in the 267 stores
that have been trading continuously for at least one year are 8% ahead. Sales
in NEXT Directory are 20% ahead of last year.
Simon Wolfson
Chief Executive 11 September 2001
Unaudited Statement of Group Results
for the six months ended July 2001
Six months Six months Year
to July to July to Jan
2001 2000 2001
£m £m £m
Turnover
Continuing activities 794.3 676.5 1,571.0
Discontinued activities - 8.6 17.5
_________ _________ _________
794.3 685.1 1,588.5
_________ _________ _________
Operating Profit
Continuing activities 90.3 76.0 209.7
Discontinued activities - 1.4 2.8
_________ _________ _________
Total 90.3 77.4 212.5
Profit on disposal of business - - 12.1
Loss on disposal of fixed assets - - (10.8)
_________ _________ _________
Profit before interest 90.3 77.4 213.8
Net interest receivable 2.7 3.3 4.6
_________ _________ _________
Profit before taxation 93.0 80.7 218.4
Taxation (26.1) (23.4) (60.8)
_________ _________ _________
Profit after taxation 66.9 57.3 157.6
Dividends (29.7) (20.8) (73.7)
_________ _________ _________
Profit for the period
transferred to reserves 37.2 36.5 83.9
_________ _________ _________
Earnings per share p 20.3 16.7 46.8
Diluted earnings per share p 20.0 16.6 46.4
Dividend per share p 9.0 8.0 24.0
Shareholders' funds £m 536.8 453.2 499.7
The accounts for the year to January 2001 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 2001.
Registered in England 35161. Registered Office, Desford Road, Enderby,
Leicester LE9 5AT
Balance Sheet
July 2001 Jan 2001 July 2000
£m £m £m
Fixed assets
Tangible assets 297 288 281
Investments - - 3
Investment in own shares 44 39 45
_________ _________ _________
341 327 329
Net current assets
Property development stocks 9 9 9
Stocks 178 165 184
Debtors 249 269 305
Creditors (less than one year) (310) (336) (286)
Cash and deposits less borrowings 99 94 (64)
_________ _________ _________
Total assets less current liabilities 566 528 477
Creditors (more than one year) (20) (19) (17)
Provision for liabilities and charges (9) (9) (7)
_________ _________ _________
Net assets 537 500 453
_________ _________ _________
Cash Flow
for the six months ended July 2001
Six months Six months
to July 2001 to July 2000
£m £m
Profit before taxation 93 81
Depreciation and disposals 25 26
Capital expenditure (34) (20)
Stocks (13) (46)
Debtors 19 31
Creditors (1) (7)
Dividends (53) (46)
Taxation (23) (17)
Investment in own shares (8) 3
Purchase of own shares - (192)
_________ _________
Net cash inflow/(outflow) 5 (187)
_________ _________
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended July Unaudited Unaudited
Six months Six months Year
to July to July to Jan
2001 2000 2001
£m £m £m
Turnover
Continuing activities 794.3 676.5 1,571.0
Discontinued activities - 8.6 17.5
_________ _________ _________
794.3 685.1 1,588.5
_________ _________ _________
Operating Profit
Continuing activities 90.3 76.0 209.7
Discontinued activities - 1.4 2.8
_________ _________ _________
90.3 77.4 212.5
Profit on disposal of business - - 12.1
Loss on disposal of fixed assets - - (10.8)
_________ _________ _________
Profit before interest 90.3 77.4 213.8
Net interest receivable 2.7 3.3 4.6
_________ _________ _________
Profit on ordinary activities
before taxation 93.0 80.7 218.4
Taxation on profit on ordinary
activities (26.1) (23.4) (60.8)
_________ _________ _________
Profit on ordinary activites
after taxation 66.9 57.3 157.6
Dividends (29.7) (20.8) (73.7)
_________ _________ _________
Profit for the period
transferred to reserves 37.2 36.5 83.9
_________ _________ _________
Earnings per share 20.3p 16.7p 46.8p
Diluted earnings per share 20.0p 16.6p 46.4p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended July
Six months Six months Year
to July to July to Jan
2001 2000 2001
£m £m £m
Profit attributable to members
of parent company 66.9 57.3 157.6
Exchange difference on translation
of net assets
of subsidiary undertakings (0.1) 1.8 0.8
________ ________ ________
Total recognised gains and losses relating
to the period 66.8 59.1 158.4
________ ________ ________
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited
July 2001 July 2000 Jan 2001
£m £m £m
Fixed assets
Tangible assets 296.5 281.3 287.6
Investments 0.3 2.7 -
Investment in own shares 43.5 45.2 39.4
________ ________ ________
340.3 329.2 327.0
________ ________ ________
Current assets
Property development stocks 9.1 9.1 9.1
Stocks 178.2 183.5 164.9
Debtors 249.5 305.4 269.0
Cash at bank and in hand 127.2 60.9 104.2
________ ________ ________
564.0 558.9 547.2
________ ________ ________
Current liabilities
Creditors: amounts falling
due within one year 338.0 410.8 346.6
________ ________ ________
226.0 148.1 200.6
________ ________ ________
Total assets less current liabilities 566.3 477.3 527.6
Creditors: amounts falling due after more
than one year 20.1 16.9 18.5
Provision for liabilities and charges 9.4 7.2 9.4
_______ ________ ________
Net assets 536.8 453.2 499.7
________ _______ ________
Capital and reserves
Called up share capital 33.7 33.7 33.7
Share premium account 3.8 3.8 3.8
Revaluation reserve 15.3 15.9 15.5
Other reserves 4.1 4.1 4.1
Profit and loss account 479.9 395.7 442.6
________ _______ ________
Shareholders' funds 536.8 453.2 499.7
_______ _______ ________
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended July
Unaudited Unaudited
Six months Six months Year to
to July 2001 to July 2000 Jan 2001
£m £m £m
Net cash inflow from
operating activities 118.5 76.7 273.8
_______ _____ ______
Dividends from associates - - 1.4
________ ________ ________
Returns on investments and servicing of finance
Interest received 2.1 4.0 5.0
________ ________ ________
Taxation
UK corporation tax paid (21.7) (15.6) (59.7)
Overseas tax paid (1.1) (1.4) (3.0)
________ ________ ________
(22.8) (17.0) (62.7)
________ ________ ________
Capital expenditure and financial investment
Purchase of tangible fixed assets (34.1) (20.0) (61.6)
Proceeds from disposal of fixed assets 1.1 4.2 4.5
Purchase of own shares by ESOP (18.5) - -
Receipts on disposal of shares by ESOP 11.0 2.8 8.5
________ ________ ________
(40.5) (13.0) (48.6)
________ ________ ________
Acquisitions and disposals
Disposal of subsidiary and
associated undertakings - - 66.5
________ ________ ________
Equity dividends paid (52.8) (45.8) (72.0)
________ ________ ________
Changes in net funds
resulting from cash flows 4.5 4.9 163.4
Management of liquid resources 30.0 190.0 15.0
Financing
Issue of new shares - - 0.1
Company shares purchased for cancellation - (191.8) (191.8)
Repayments of capital element
of finance leases (0.1) (0.2) (0.4)
________ ________ ________
(0.1) (192.0) (192.1)
________ ________ ________
Increase/(decrease) in cash in the period 34.4 2.9 (13.7)
________ ________ ________
Reconciliation of net cash
flow to movement in net funds
Increase/(decrease) in cash
in the period 34.4 2.9 (13.7)
Cash realised from liquid resources (30.0) (190.0) (15.0)
Repayments of capital elements
of finance leases 0.1 0.2 0.4
________ ________ ________
Changes in net funds resulting
from cash flows 4.5 (186.9) (28.3)
Net funds at January 2001 94.3 122.6 122.6
________ ________ ________
Net funds/(borrowings) at July 2001 98.8 (64.3) 94.3
________ ________ ________
BASIS OF PREPARATION
The report was approved by the Board of Directors on 11 September 2001.
The accounts for the year to January 2001 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 2001.
Registered in England 35161. Registered Office, Desford Road, Enderby,
Leicester LE9 5AT.
EARNINGS PER SHARE
The calculation of earnings per share is based on £66.9m (2000: £57.3m) being
the profit for the six months after taxation and 329.2m ordinary shares of 10p
each (2000: 343.7m), 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 £66.9m (2000: £57.3m) being the profit
for the six months after taxation and 334.1m ordinary shares of 10p each
(2000: 345.2m) 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 4.9m shares
(2000: 1.5m shares).
RECONCILIATION OF SHAREHOLDERS' FUNDS
Six months Six months Year to
to July 2001 to July 2000 Jan 2001
£m £m £m
Total recognised
gains and losses 66.8 59.1 158.4
Dividends (29.7) (20.8) (73.7)
Purchase of own shares
for cancellation - (191.8) (191.8)
New share capital issued - - 0.1
________ ________ ________
Total movement during
the period 37.1 (153.5) (107.0)
Shareholders' funds
at January 2001 499.7 606.7 606.7
________ ________ ________
Shareholders' funds
at July 2001 536.8 453.2 499.7
________ ________ ________
CASH FLOW: RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
Six months Six months Year to
to July 2001 to July 2000 Jan 2001
£m £m £m
Operating profit
before interest and
non-operating
exceptional items 90.3 77.4 212.5
Depreciation 21.6 19.3 41.3
Loss on disposal of
fixed assets 2.4 6.5 5.4
Anticipated deficit
in ESOP 3.4 0.9 0.9
Income from interest
in associated undertakings (0.4) (0.4) (1.1)
Increase in stock (13.3) (46.1) (27.5)
Decrease in debtors 20.1 30.2 13.5
(Decrease)/increase
in creditors (5.4) (12.8) 25.5
(Decrease)/increase in
provision for liabilities
and charges (0.1) (0.1) 2.5
Exchange movement (0.1) 1.8 0.8
________ ________ ________
Net cash inflow from
operating activities 118.5 76.7 273.8
________ ________ ________
CASH FLOW: ANALYSIS OF NET FUNDS
January Cash July
2001 Flow 2001
£m £m £m
Cash in hand 14.2 42.9 57.1
Overnight deposits/
(borrowings) 5.0 (16.5) (11.5)
Overdrafts (9.8) 8.0 (1.8)
________ ________ ________
9.4 34.4 43.8
Short term deposits 85.0 (30.0) 55.0
Finance leases (0.1) 0.1 -
________ ________ ________
Total 94.3 4.5 98.8
________ ________ ________
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