CHAIRMAN'S STATEMENT
The NEXT Group has delivered profits exactly in line with the guidance we issued in January 2019 and we are maintaining our guidance for the year ahead.
As anticipated, the year to January 2019 was challenging for NEXT as we continued to experience a structural change in our business, with sales continuing to transfer from our stores to online. Despite this, Earnings Per Share for the Group increased by +4.5% to 435.3p. We are proposing a final ordinary dividend of 110p taking the total ordinary dividend for the year to 165p, an increase of +4.4% on last year.
Total1 Group sales were £4.2bn. Full price sales2 were up +3.1%. Online3 full price sales increased by +14.8% and Retail full price sales declined by -7.3%.
Cash flow remained strong and we returned £541m to shareholders through a combination of ordinary dividends (£216m) and share buybacks (£325m). During the year we purchased 6.3m shares at an average price of £51.65 and reduced our shares in issue by 4.3%.
We have continued to invest in the business, spending £129m on stores, warehousing and systems. Net debt increased to £1,096m from £1,002m driven by the sales growth in nextpay, our online credit business. Net debt of £1.1bn remains well within our bond and bank facilities of £1.5bn and broadly aligned to our Online debtor book.
We have had a number of changes to the Board during the year. Michael Law, Group Operations Director who had been with NEXT for 23 years, retired from the Board at the 2018 AGM in May. Richard Papp, who has been with NEXT for 25 years, succeeded Michael on the Board as Group Merchandise and Operations Director.
Caroline Goodall, non-executive director and Chairman of the Remuneration Committee, retired from the Board on 1 January 2019. Tristia Harrison joined our Board in September 2018 as a non-executive director. Tristia is Chief Executive Officer of TalkTalk Telecom Group plc.
The strength of the Group is built on the hard work and dedication of all NEXT's people. I would like to thank them all for their contribution, especially for the determination and commitment they have shown during this demanding year.
Even though the High Street looks set to remain challenging our Online business continues to increase its contribution to sales and profit of the Group. Our central guidance for the year ahead is for Earnings Per Share to grow by +3.6%. The Board continues to be focused on building shareholder value through the delivery of long term sustainable growth in Earnings Per Share. Our core strategy remains unchanged; focus on our customers, products and profitability, continuing to build on the capabilities of our brand and Online Platform and returning surplus cash to our shareholders.
Michael Roney
Chairman
|
TOTAL SALES |
Jan 2019 £m |
|
Jan 2018 £m |
|
|
Retail |
1,955.1 |
|
2,123.0 |
– 7.9% |
|
Online |
1,918.8 |
|
1,672.4 |
+14.7% |
|
Finance |
250.3 |
|
223.2 |
+12.1% |
|
Brand |
4,124.2 |
|
4,018.6 |
+2.6% |
|
Other6 |
96.7 |
|
98.9 |
|
|
Total Group sales |
4,220.9 |
|
4,117.5 |
+2.5% |
|
Statutory revenue |
4,167.4 |
|
4,090.77 |
|
|
PROFIT and EPS |
Jan 2019 £m |
|
Jan 20188 £m |
|
|
Retail |
212.3 |
|
268.7 |
– 21.0% |
|
Online |
352.6 |
|
309.8 |
+13.8% |
|
Finance (after funding costs) |
121.2 |
|
111.9 |
+8.4% |
|
Brand |
686.1 |
|
690.4 |
– 0.6% |
|
Other |
35.8 |
|
28.9 |
|
|
Recharge of interest to Finance |
40.1 |
|
40.6 |
|
|
Operating profit |
762.0 |
|
759.9 |
+0.3% |
|
Net external interest |
(39.1) |
|
(33.8) |
|
|
Profit before tax |
722.9 |
|
726.1 |
– 0.4% |
|
Taxation |
(132.5) |
|
(134.3) |
|
|
Profit after tax |
590.4 |
|
591.8 |
|
|
Earnings Per Share |
435.3p |
|
416.7p |
+4.5% |
|
Ordinary dividends per share |
165.0p |
|
158.0p |
+4.4% |
The World Moves On
The internet has been good for consumers. It has given access to an unprecedented choice of goods along with delivery networks that are faster, more efficient and cheaper than ever before. It is a fact of life for those of us who are established High Street retailers that one way or another, less clothing, homeware, electrical goods and food are going to be sold on the High Street and more sold online. For NEXT, we believe that this market represents a long-term threat to our Retail business but potentially, a much larger opportunity for the Group as a whole.
This type of change is not unprecedented. The emergence of supermarkets in the 1960's heralded a profound change in the way people shopped for food. Old structures of supply and distribution were replaced with new and better ones. People no longer had to go to several shops to buy their food and the choice and value on offer to consumers was dramatically improved.
The Changing Shape of NEXT
The online retail revolution is very similar and is likely to result in similar levels of threats and opportunities for those of us who make a living in retail. No one knows what the High Street will look like in ten years, but one thing is certain: the people walking down it will be wearing clothes. And hundreds of thousands of people will be employed in the design, manufacture, distribution, marketing and fulfilment of that product.
We cannot decide how our customers will shop; our job is to adapt and serve them in whatever way they most want. To this end NEXT has changed dramatically over the last fifteen years. The business has moved from stores to internet, from UK only to international, from mono-brand to multi-brand aggregator. The table tells that story in numbers. It gives the percentage of our sales by channel (note that we have used Directory to describe what is now our Online business as in 2003 more than half of our Directory sales came over the phone!), our Directory sales by brand, and our Directory sales by location.