Coronavirus Update

NEXT PLC- Results for the Year Ending January 2021

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In last year's Full Year Results, published just as the UK went into lockdown, we stated that our sector was facing a crisis unprecedented in living memory.  We also stated that our strong balance sheet and profit margins would allow us to weather the storm.

Both statements have proved true.  A year on, NEXT has delivered profit before tax of £342m (2019/20: £729m, both pre-IFRS 16) in line with the central guidance issued in our January 2021 Trading Statement.  Despite most of our stores being closed for a significant portion of 2020/21, Total1 Group sales decreased by less than 17% to £3.6bn (2019/20: £4.4bn).

In April 2020, we stated our intention to suspend all capital returns to shareholders for the duration of the financial year and until the situation stabilises.  Given the continuing uncertainty around when our stores will reopen, no final dividend is proposed for 2020/21 and our share buyback programme remains suspended.  We remain committed to returning capital to shareholders in the long term and will review our position later in the year when we have better visibility of our trade once our stores reopen. 

Our cash resources have been carefully managed with a number of actions taken to conserve cash during the year.  As a result, net debt reduced to £610m (2019/20: £1.1bn).

We expect the shift in consumer behaviour towards Online sales to continue for some time and one of our priorities during the year has been to continue the development of our Online platform.  We accelerated part of our planned capital expenditure in the Online business, spending £121m on warehousing and systems.

During the year, the Board appointed Tom Hall as a non-executive director to replace Francis Salway, who has served on our Board for over nine years and will step down at the 20 May 2021 AGM.  On behalf of the other directors, I would like to thank Francis for his very significant contribution to the Board and to the Remuneration Committee during his time with NEXT.  I have particularly valued his hard work as Chairman of our Remuneration Committee.  We will miss Francis' unflappable and persistent good sense. Tom will take over the role of Chair of the Remuneration Committee and Jonathan Bewes will take over the role of Senior Independent Director on Francis' retirement at the 2021 AGM.

I believe that in difficult times there is a clearer separation between the stronger corporate performers and the weaker ones.  This result is due to the formation of a good management team and the establishment of robust processes during less volatile periods.  Our continued investment over many years in our people and our systems has shown resilient results in the past year.

The strength of the Group is built on the hard work and dedication of all NEXT's people and this year has highlighted their resilience and ability to work together in times of crisis.  I would like to thank them for their outstanding work during an extremely demanding year.


Michael Roney






Performance in the Year Ending January 2021

? Full price sales2 down -15% on last year.

? Profit before tax of £342m3 and in line with guidance given in January. 

? Year end net debt4 reduced by £502m to £610m.


Updated Central Guidance for the Full Year Ending January 2022

? Total Brand full price sales guidance remains unchanged and flat against 2019/20 (a two-year comparison).

?   The anticipated end of the third lockdown in April5 is two weeks later than we had allowed for in our previous guidance.  However, the profit lost from those additional two weeks has been offset by the benefit of the extension of business rates relief announced in March.

?In the first eight weeks of the year, Online sales have been stronger than expected and are up more than +60% on two years ago.  This overachievement plus the expected transfer of sales from Retail during the additional two weeks of lockdown, are expected to add £30m of profit.  As a result, we are raising our central profit guidance by £30m from £670m to £700m.



Brand full price sales in the year were down -15% on last year and total sales8 (including markdown sales) were down -17%.  This year was a 53-week year and the extra week added +1% to sales. 

Profit before tax was £342m (pre-IFRS 16) and we reduced our net debt by £502m to £610m.  The 53rd week added £12m to profit.

In the rest of this document, unless otherwise stated, we will compare sales and profit in the 53 weeks to January 2021 with 52 weeks in the prior year.  We would usually provide figures and variances to the prior year on a 52-week basis but, given the level of disruption in the year, we do not believe this would be helpful.

On a statutory basis, total sales were down -17%.  Profit before tax was also £342m and net debt (including leases) reduced by £567m to £1,796m.

8 Total sales are VAT exclusive sales including the full value of commission based sales (refer to Note 2 of the financial statements).


Total sales reduced by -£736m, with almost all of this reduction being in the first half of the year.  In the second half, the sales lost in Retail (-£368m) were almost entirely offset by sales gained Online (+£364m).

Sales by Division


Jan 2021

Jan 2020

Var £m

Var %


1st half

var £m

2nd half

var £m







- 142






- 48%


- 530

- 368





- 7%


- 6

- 12





- 16%


- 678

- 16





- 44%


- 24

- 18

Total Group sales




- 17%


- 702

- 34

Sales Phasing Throughout the Year

The chart below shows full price sales by month by sales channel.  Retail sales are shown in green, Online product sales are shown in blue and Finance interest income in grey.  The dotted black line shows the total full price sales for last year.  The months that were most impacted by lockdowns, resulting in the closure of the majority of our stores, are highlighted in pink. 

At the beginning of the pandemic in March 2020, we temporarily closed our warehouse operation for two weeks to make it COVID safe.  On reopening in April, picking capacity was gradually increased and was back to more normal levels during May.

Full Price Sales by Month chart:  Click or paste the following link into your web browser to view the PDF document. Refer to page 17 for the relevant chart.

Comment on Brand Markdown Sales

Our stock levels were well controlled during the year.  Despite the sudden drop in sales following the first lockdown, our surplus stock in the year was down -17% on the prior year. 

Markdown sales in the year were down -30% (down -41% in the first half and down -20% in the second half).  Markdown sales declined more than full price sales because:

We were unable to fully service the mid-season Sale event in late March due to the closure of our stores and the temporary closure of our warehouse.

We reduced the availability of Clearance stock Online when warehouse picking capacity was limited and full price orders were prioritised. 

Surplus stock and markdown sales £m

Jan 2021

Jan 2020

Var %

Surplus stock at original selling value (VAT Inc)



- 17%





Markdown sales (VAT ex.)



- 30%

Clearance sales (VAT ex.)



- 32%

Total markdown sales (VAT ex.)



- 30%


Profit Summary (Excluding IFRS16 Leases)

PROFIT £m and Earnings Per Share

Jan 2021

Jan 2020

Var £m

Var %










- 226%

Finance (after charging interest)




- 23%





- 47%

Sourcing and Other9










Group recharge of interest from Finance business





Operating profit




- 50%

Net external interest





Profit before tax




- 53%





- 62%

Profit after tax




- 51%

Earnings Per Share




- 51%


9 Other includes Franchise, Lipsy and other Group costs (page 49).

Statutory Sales and Profit

Profit before tax of £342m shown in the table above is stated on a pre-IFRS 16 (Leases) basis.  The financial information presented in pages 2 to 59 is also pre-IFRS 16, and aligns with the accounts we use to monitor and assess the performance of the business.  They are not statutory measures unless stated as such.  Last year (unusually) profit before tax, on a post IFRS 16 basis, was the same as on a pre-IFRS 16 basis at £342m.  The statutory numbers are summarised below and a reconciliation to the pre-IFRS 16 is provided in the Appendix on page 60 .



Jan 2021

Jan 2020

Var £m

Var %





- 17%

Profit before tax




- 54%

Profit after tax




- 53%

Earnings Per Share (Basic)





Non-recurring Costs, Savings and Profits

Within the reported profit before tax of £342m, there are a number of significant, non-recurring items.  These are summarised in the table below and in total, reduced profit by -£16m.  The key lines are briefly explained in the text below the table.

It should be noted that all the non-recurring profit items detailed below are cash generative in the year, while almost all the non-recurring loss items are provisions that do not impact on cash flow in the current year.

Full year profit impact (pre-IFRS 16)


Business rates reduction


Property profit from the sale and leaseback of properties


Profit from 53rd week


Subtotal: Benefits to profit


Property provisions for store impairment and onerous leases

- 100

Stock and fabric provisions

- 34

Bad debt provisions

- 20

Subtotal: Costs to profit

- 154

Total profit impact from non-recurring items

- 16

Property Profit

In the first half of the year, we completed the sale and leaseback of a warehouse complex and our head office. These transactions resulted in a cash inflow on sale of £154m and a net profit of £44m10.

10 Under IFRS 16 the difference between the cash proceeds and the asset sold (£44m) is not recognised as a gain in the year.  Instead, the gain is £8m with the difference amortised over the remaining lease term. The cash benefit and P&L impact over the lease term is the same.  See page 60.

Property Provisions for Store Impairment and Onerous Leases

We anticipate that Retail sales will not fully recover to pre-COVID levels and, as a result, we have increased our property provisions by £100m.  This is the combination of an £18m write down of store assets and an £82m provision for future cash losses arising from onerous leases.  Further details on our future sales assumptions are given on page 49 .  Whilst we have estimated future losses to the best of our abilities, it is possible that Retail sales may not be as good as we anticipate in 2021/22.  If that is the case, we may need to take further provisions in the year ahead. 

Stock and Fabric - Provisions and Write-Offs

In the year, we made additional stock provisions and write-offs of £34m, for the following reasons:

? We have taken a provision for Spring/Summer 2020 stock that was hibernated until 2021.

? We made additional provisions against Clearance stock carried over into this year.  Note that this provision is overand above the usual 70% write-down we make on stock after our Sale events.

? We have written off 30% of the value of the Fabric we purchased from suppliers which had been bought by them to fulfil orders that we subsequently cancelled. 

Total stock and fabric provisions have increased in the year from 9% of cost to 16%. 

Bad Debt Provisions

We are maintaining the £20m provision made in the first half of this year for potential future bad debt write-offs that might arise as a result of any adverse economic impact of the pandemic on consumer finances.  To date, we have not seen any deterioration in overall payment rates, but there is a risk that this will change when the Government furlough and other schemes come to an end. 


The Corporation Tax charge of £51m includes the following two adjustments:

1.  A significant element of the property profit of £44m from the sale of the warehouse complex does not incur a tax charge.  This is due to HMRC's indexation allowance and, to a lesser degree, historical capital losses.

2.  The release of historical international tax provisions and prior year true ups with HMRC.

Corporation Tax Effective Rate walk forward


Profit before tax £m


Tax charge £m

- 51

Effective tax rate


Benefit from £44m property profit


Historical provision release and true ups with HMRC


UK headline tax rate


In the year ahead we expect our effective tax rate to be around 17.5%.  This is lower than the UK headline rate of 19% due to the following tax benefits, primarily driven by the 3 March 2020 Budget announcement:

1.  The Corporation Tax rate increase to 25% with effect from 2023 will require the revaluation of our net deferred tax asset.  The increase in the asset position provides a one-off accounting tax rate benefit of 1%.

2.  The super deduction for capital expenditure on qualifying plant and machinery results in a tax rate benefit of 0.5%.


The table below explains how the £736m of sales lost during the pandemic translated into a profit reduction of -£387m.  It shows the year-on-year change in sales and major cost categories.

Profit impact January 2021 versus January 2020


Lost Retail sales

 - 897

Gained Online sales


Lost Finance interest and other Group sales

 - 61

Total lost sales

 - 736

Reduction in

cost of stock

The cost of stock reduced due to the reduction in buy  budgets and stock cancellations.  This was offset by non-recurring stock provisions of -£34m.



Reduced wages


Wage costs reduced, mainly in our Retail business when stores were closed.



Reduced store

occupancy costs


Includes business rates reduction of £82m plus savings in rent and other store occupancy costs such as maintenance and utilities (see page 44 ).





marketing costs


£15m saved from printing fewer catalogues, £6m saved on photography and £9m saved from the temporary suspension of marketing campaigns during the first lockdown.




Increased costs of

Online operations


Higher logistics costs due to higher Online sales. We also incurred cost increases relating to overseas freight surcharges and PPE.

 - 55



Property provisions and property profit


Property provisions of -£100m compared to -£10m in the previous year, creating a net increase in property provisions of -£90m.  This net increase in provisions was offset by £44m of property profit. 

 - 46



Year-on-year change in profit

 - 387



In the year to January 2021 we generated £521m of surplus cash before distributions, which compares with £498m in the previous year.  Net debt reduced to £610m. 

Cash inflows in the year were significantly enhanced by two items that compensated for the fall in profits:

The net reduction of £206m in customer receivables.

? The sale and leaseback of our Head Office and a warehouse complex which generated a cash inflow of £110m.



Jan 2021

Jan 2020

Profit before tax




Depreciation and property provisions




Capital expenditure

See page 25



Proceeds from sale and leaseback (net of profit gain)




Customer receivables

See page 38



Working capital and other




Tax paid




Cash flow before shareholder distributions




Ordinary dividends

See page 23



Share buybacks

See page 23



Movement in net debt





HMRC have changed the timing of quarterly Corporation Tax (CT) payments so that UK businesses pay tax in the same year that the taxable profit is earned.  Previously, half of the tax payment (two quarters) was deferred until the following year.  This change has resulted in a one-off catch up with six tax quarters being paid this year, compared with four payments last year.  In the year we paid £113m of CT, of which £60m related to the prior year and £53m related to the current year.



Jan 2021

Jan 2020

Tax paid relating to prior years




Tax paid relating to current year's profit




Total tax paid in period





In April last year we advised our shareholders that we would suspend all shareholder distributions until we had a better understanding of how the pandemic would impact the finances of the Group.  Prior to that announcement, in early February 2020, we had bought back 279,639 shares for £19m. 

The finances of the business have been very resilient and the Group's balance sheet is stronger now than at the start of the pandemic.  However, there is still much uncertainty in the Retail sector and the wider UK economy.  Rather than proposing a dividend at this time, the directors consider it sensible to wait and see how the business performs once the current lockdown comes to an end and COVID restrictions are lifted.  In the long term we remain committed to paying dividends and returning surplus cash to our shareholders.


Based on our central scenario, we expect to generate £175m of surplus cash after interest, tax, capital expenditure and investments, but before any distributions to shareholders.  This surplus cash includes two significant items:

An increase of £160m in customer receivables.  This increase is based on the assumption that payment rates move back to levels closer to those experienced before the pandemic.

£33m relates to the investment we have made in Reiss (see page 54 ).



Jan 2022 (e)

Profit before tax






Capital expenditure

See page 25


Acquisition (25% of Reiss)

See page 54


Customer receivables

See page 42


Working capital and other



Cash flow before shareholder distributions and bond repayment



Based on our central profit scenario of £700m, we expect to pay Corporation Tax of £113m.  This is made up of two elements:  (1) Corporation Tax of £133m, which is 19% of profit before tax and (2) a £20m reduction for the capital investment related super-deduction announced by the Chancellor in the March Budget. 

Tax Super-Deduction: Estimated Benefit

The tax super-deduction will allow an in-year tax deduction of 130% on qualifying capital expenditure in the tax years 2021/22 and 2022/23.  Based on our forecast for qualifying expenditure, we anticipate incremental cash tax savings of c.£40m over the next three years as set out in the table below:


Jan 22 (e)

Jan 23 (e)

Jan 24 (e)


Tax benefit





Tax rate change: Longer term

In the March 2021 Budget, the Chancellor also announced that the UK Corporation Tax Rate would increase from 19% to 25% from April 2023.  This increase will more than offset the short term benefits of the super-deduction described above.  Based on £700m of profit before tax, an increase in the UK headline rate of 6% equates to an additional £42m in cash tax payments. 


Our year end net debt at January 2021 was £610m, a reduction of £502m in the year.  This is comfortably within our existing bond and bank facilities of £1,575m, with headroom of £965m at the year end. 

Our existing facilities include a £325m bond which matures in October 2021.  It is our intention to repay this bond without issuing a new bond to replace it, effectively reducing the gearing of the Group.  Our total bond and bank facilities as at January 2022 would therefore reduce to £1,250m. 

Outlook for Net Debt, Bond and Bank Facilities in the Year to January 2023

Based on our central guidance for the year ahead, we expect to generate £175m of surplus cash before distribution to shareholders (see page 23 ).  This would further reduce the Group's net debt to £435m.  Even in the event that the Company decides it is appropriate to restart dividends later this year (see page 23 ), we estimate that the Group would still have more than £500m of headroom the following year, when net debt peaks in September 2022. 

The bar chart below sets out our bond and bank facilities, following the repayment of our £325m bond in October 2021. 

Financing, Net Debt and Headroom Forecast:  Click or paste the following link into your web browser to view the PDF document. Refer to page 24 for the relevant chart.

The Group manages the financing of its debt and liquidity to ensure it maintains its longstanding investment grade credit rating. 



We have invested £163m in capital expenditure in the year to January 2021, an increase of £24m on the prior year.  Capex by category is shown below, along with our forecast for the year ahead. 


Jan 2022 (e)

Jan 2021

Jan 2020









Retail space expansion




Retail cosmetic/maintenance capex




Head Office infrastructure




Total capital expenditure





Warehousing was our biggest expenditure at £100m.  This was part of a long-term investment programme to increase capacity.  In the year ahead we expect warehouse investment to increase to £117m, as we incur costs relating to the fit-out of our new boxed warehouse (Elmsall 3).  Planning permission for the new warehouse was granted in September 2020 and we anticipate that the warehouse will be operational in the second half of 2023/24.  This first phase will provide a further +60% increase in boxed unit throughput, compared to current levels.  Elmsall 3 will be highly automated and our aim is that the labour cost of Online boxed picking will be 45% lower in Elmsall 3 than in the year to January 2020.


We invested £21m of capital in systems this year.  This comprised £4m for hardware and infrastructure and £17m for software, which included the modernisation and development of three core Online systems: our website platform, warehouse systems and product systems.

As we explained in our Half Year Results, until recently almost all our systems costs were expensed as revenue costs.  This has changed in recent years as the nature of our systems development has changed to include:

Long-term software infrastructure projects to update and replace existing legacy systems

Total Platform third-party websites that will deliver benefits over the life of the Total Platform contracts 

In the year ahead we expect to increase capital expenditure on systems to £38m (£9m hardware and £29m software development). 

Retail Stores

Capital spent on Retail space expansion, at £29m, was £5m higher than last year.  This is primarily the result of delivering four large store re-sites, due to open in Spring 2021 (£18m) and four NEXT Beauty Halls (£8m).  Investment in new space is expected to reduce to £13m in the year ahead, due to fewer new store openings.

Cosmetic and maintenance spend was £6m lower than last year as non-essential work was suspended during lockdown.  In the year ahead, we expect this to increase to £14m, which would be a return to more normal levels.


Forecast capital expenditure to the year ending January 2025 is set out below.  The warehouse expenditure which totals £447m over five years covers an extensive expansion programme to increase Online capacity.  This expenditure will increase our Online warehousing capacity by around 80% from where it was during the year ended January 2020. 

Capital Expenditure Outlook by Category Jan 2021 - Jan 2025(e) chart:  Click or paste the following link into your web browser to view the PDF document. Refer to page 26 for the relevant chart.

Changes in Capex Outlook Since September 2020 Update

During the last six months, our five-year plan for capex spend has increased by around £90m.  This is largely due to the acceleration of warehouse and systems spend (£65m).  This spend is where we have identified opportunities to increase Online productivity and throughput from our existing estate.  In addition, the final costings for our third boxed warehouse, Elmsall 3, is £25m more than we originally estimated.  The table below shows the increase by category of spend. 

Capex category




Increased productivity and throughput



  - Acceleration of investment in Home warehouse capacity



  - Automation and storage



Systems   - Accelerated modernisation of systems platforms



Elmsall 3 overspend



Total change in capex five-year outlook