Annual Report • Mar 29, 2023
Annual Report
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Date: Embargoed until 07.00hrs, Wednesday 29 March 2023 Contacts: Lord Wolfson, Chief Executive Amanda James, Group Finance Director (analyst calls) NEXT PLC Tel: 0333 777 8888 Alistair Mackinnon-Musson Email: [email protected] Rowbell PR Tel: 020 7717 5239 Photographs: http://www.nextplc.co.uk/media/image-gallery/campaign-images
It has been a good year for NEXT. We have embraced the various challenges and seized the opportunies that have arisen.
A detailed analysis of our performance in 2022/23 and our outlook for the year ahead are covered in the following pages. Looking back on the year, among the highlights are:
We will be welcoming Jeremy Stakol to the Board in April as Group Investments, Acquisions and Third Party Brands Director. Jeremy has been the managing director at Lipsy since 2004 and in more recent years has successfully led many of the new investment transacons and related Total Plaorm opportunies.
We have prepared (and budgeted) for a difficult year. We are very clear on our priories. If we connue to improve our product ranges, relentlessly manage our costs and upgrade our customer service, whilst also developing new business opportunies; we can lay the foundaons for an exceponally strong business and sll deliver healthy profits, cash flow and dividends.
Our performance, as ever, is a result of the hard work and dedicaon of the NEXT team. I would like to thank my colleagues across the Group for all of their effort, talent and dedicaon.
Michael Roney Chairman 29 March 2023
The report is broken down into the following secons:
| PART ONE - HEADLINES AND SUMMARY OF FINANCIAL PERFORMANCE ________ | 5 |
|---|---|
| ________________ PART TWO - BIG PICTURE |
6 |
| THE LONG VIEW ____________________ | 6 |
| WHAT'S REALLY GOING ON HERE _________________ | 8 |
| NEW AVENUES OF GROWTH _________________ 10 | |
| TOTAL PLATFORM | 11 |
| INVESTMENTS AND ACQUISITIONS | 13 |
| NEXT BRAND OVERSEAS - WHOLESALE, FRANCHISE & LICENSING | 14 |
| ORGANISATION, MANAGEMENT AND CULTURE __________ | 15 |
| ACTIONS FOR THE YEAR AHEAD __________________ | 17 |
| IN CONCLUSION ____________________ | 18 |
| PART THREE - GROUP FINANCIAL PERFORMANCE IN 2022/23 AND GUIDANCE FOR 2023/24 _____ | 19 |
| GROUP SALES AND PROFIT SUMMARY ________________ | 20 |
| TOTAL GROUP SALES BY DIVISION | 20 |
| SUMMARY OF GROUP PROFIT BY DIVISION | 21 |
| GUIDANCE FOR THE YEAR AHEAD ________________ | 23 |
| _______________ 26 PART FOUR - RETAIL, ONLINE AND FINANCE |
|
| NEXT RETAIL ___________________ 26 | |
| SUMMARY OF RETAIL SALES AND PROFIT | 26 |
| GUIDANCE FOR RETAIL SALES AND PROFIT FOR THE YEAR AHEAD | 28 |
| LEASE RENEWALS AND COMMITMENTS | 29 |
| RETAIL SPACE | 31 |
| NEXT ONLINE __________________ 32 | |
| SUMMARY OF ONLINE SALES, PROFIT AND MARGIN | 32 |
| FULL PRICE SALES BY DIVISION | 33 |
| CUSTOMER ANALYSIS | 34 |
| ONLINE PROFIT AND NET MARGIN | 35 |
| FOCUS ON LABEL | 37 |
| FOCUS ON OVERSEAS | 41 |
| NEXT FINANCE ________________ 43 | |
| FINANCE PROFIT & LOSS SUMMARY | 43 |
| OUTLOOK FOR THE FULL YEAR TO JANUARY 2024 | 46 |
| PART FIVE - TOTAL PLATFORM AND OTHER BUSINESS ACTIVITIES _______ 48 | |
| TOTAL PLATFORM & INVESTMENTS ______________ | 48 |
| OTHER BUSINESS ACTIVITIES ________________ | 50 |
| INTEREST, TAX, PENSIONS AND ESG ______________ 52 | |
| PART SIX - CASH FLOW, DIVIDENDS & NET DEBT __________ 54 | |
| CASH FLOW | 54 |
| CAPITAL EXPENDITURE | 55 |
| INVESTMENTS IN THIRD-PARTY BRANDS | 57 |
| DIVIDENDS AND SHAREHOLDER RETURNS ___________ 58 | |
| NET DEBT, BOND AND BANK FACILITIES _______________ | 59 |
| _____________ 60 APPENDIX 1 - PRIOR PERIOD RESTATEMENTS |
|
| __________ 63 APPENDIX 2 - RECONCILIATION TO STATUTORY RESULTS |
| 1 Year | 3 Year | ||||
|---|---|---|---|---|---|
| £m | Jan 2023 | Jan 2022 | var % | Jan 2020 | var % |
| Total Trading Sales 1 | 5,146.1 | 4,746.5 | +8.4% | 4,267.2 | +20.6% |
| NEXT Profit before tax 2 | 870.4 | 823.1 | +5.7% | 748.5 | +16.3% |
| Profit aer tax | 711.7 | 677.5 | +5.0% | 610.2 | +16.6% |
| Basic Earnings Per Share 3 | 573.4p | 530.8p | +8.0% | 472.4p | +21.4% |
A detailed analysis of our guidance for the year ahead is given on page 23.
1Total Trading sales are VAT exclusive sales (including the full value of commission based sales) in Retail, Online plus NEXT Finance interest income. They exclude sales through Total Plaorm and Joules, in which we acquired a 74% equity stake during November 2022. Trading sales are not statutory sales (refer to Note 2 of the financial statements). Statutory sales were up +8.8% versus 2021/22 and up +18.0% versus 2019/20.
2NEXT profit before tax, profit aer tax and EPS reflect the profit aributable to the shareholders of NEXT plc. They exclude the effect of the Joules minority interests. Statutory profit before tax, including minority interests, is £869.3m, see Appendix 2 for detail.
3All references to EPS in the CEO report are 'Basic' EPS unless otherwise stated.
4Full price sales are total Trading sales, less items sold in Sale events and Clearance.
NEXT plc's core measure of success is the sustainable growth in Earnings Per Share. In the last twenty years, the Company has delivered a compound annual growth rate (CAGR) of 14.1% in pre-tax EPS (assuming the reinvestment of dividends 5), a very respectable return by the standards of most public companies.
But in business you are only as good as your next set of results. Looking at our EPS guidance for the year ahead, in the context of the last eight years, is sobering. If our guidance is correct, EPS will have delivered a CAGR of 5.4%; more than enough to keep pace with inflaon (CPI), which was 3.5% over the period, and good in the circumstances, but unexcing in absolute terms. And ulmately, investors are most interested in absolute returns.
The big queson is whether the Company's modest growth over the last eight years is indicave of its prospects going forward; or can it return to higher levels of growth more in keeping with its longer term performance? As it stands today the Group has far more ideas and opportunies for long term growth than it has had for some me. And while the year ahead looks very challenging, we are not facing the kind of long term structural obstacles that we have overcome in the past eight years.
5Assumes that all ordinary and special dividends were used to purchase NEXT shares, on the date that the dividends were paid.
Over the last eight years, the Company has endured three considerable shocks: the structural shi in shopping habits from Retail to Online; the pandemic; and now the cost of living squeeze.
Of these three challenges, the least dramac has had the most profound effect: the structural change in our industry resulted in a precipitous decline in Retail turnover, offset by rapid growth Online. The central difficulty was that Retail costs, such as rent and rates, in the short term remained fixed. Retail rents and other costs are beginning to adjust to the new reality (see page 30), but the transion has been uncomfortable.
Conversely, the costs associated with Online growth, such as delivery and warehousing, have risen in line with sales and have required significant capital investment. The effect has been that we have had to undertake the painful process of cung costs in our Retail operaons, whilst racing to keep up with growth Online.
NEXT's steady growth in these circumstances represents a considerable accomplishment. But, in a year when profits look set to decline, it would be right for us to queson the Group's prospects for longer term growth. The following paragraphs explain our thinking about the direcon of the Group over the next few years and then sets out our immediate priories for the year ahead.
Our diagnosis, set out in the following pages, is that NEXT plc can return to higher levels of growth once the cost of living crisis has passed. Our reasoning runs as follows:
NEXT has around 7m Online customers 6in the UK, close to 25% of the UK's 28m 7households. Our 466 stores give us a presence in almost all major UK and Ireland trading locaons. Our product ranges stretch from women's clothing through to upholstery. So the opportunies to expand our customer base, trading space and product offer are less numerous than they were.
But we are far from running out of ideas. Our product teams connue to push the boundaries of their offers, in terms of design content, price architecture and product categories. Our e-commerce and markeng teams can sll do much more to recruit and retain new customers, and drive growth in website traffic, online conversion and sales per customer.
The NEXT brand accounts for less than 10% in most of its key markets (see chart below). So, while our market share renders exceponal growth unlikely, we are a long way from reaching saturaon.
Our highest priority remains the connued development of the NEXT brand; it is our most valuable asset and cornerstone of the Group. In past reports we have wrien at length about the measures we take to improve our product ranges, customer service, websites, markeng and stores. So we have not elaborated on them here. Shareholders should not confuse lack of detail with loss of focus. We have concentrated on new business opportunies here, not because they are most important but because, to the outside world, they are the least understood.
6NEXT Online customers in the UK at the end of January 2023 were 6,993k, (2,870k credit and 4,123k cash).
7ONS, 2021 Census.
8Chart sources: Women's, Men's and Children's total UK Sales taken from Kantar, 52 weeks to 5 February 2023. Home UK sales taken from Globalreach, Q4 2022.
The fact that our core business is well established has an advantage: over the last thirty years it has built up valuable trading assets and skills - soware, infrastructure, stores and people - that can be used to build new growth businesses. Those assets are as follows:
9Customer numbers at the end of January 2023.
There are four main areas of opportunity outside our heartland business. These are:
Before we move on to discuss these opportunies in detail, there is an important aspect of our thinking that needs clarificaon.
It is all too easy for companies to lose sight of the fact that assets that deliver modest growth and healthy cash flow are very valuable assets. T oo many 'mature' companies have been sacrificed at the altar of 'growth': it is a well-trodden path that has liered corporate history with the carcasses of ruined companies - from GEC/Marconi to Northern Rock. Growth can always be bought, and ambious sales targets achieved, through taking on higher and higher risks for lower and lower returns.
We are very clear: if we cannot find good quality investments, then there is no shame (and much wisdom) in handing surplus cash back to our shareholders.
Total Plaorm is operaonal and working well across our four clients (Reiss, GAP, Victoria's Secret and Laura Ashley). For a more detailed analysis of Total Plaorm sales, profits and margins, please see page 48).
There are five big advantages clients get from switching their operaons to Total Plaorm. These are:
| Delivery services and website funconality |
Total Plaorm deploys the infrastructure NEXT has built over more than 30 years. This includes a next-day delivery on orders before 11pm, fully integrated e-commerce and in-store stock systems, rapid customer refunds, internaonal websites, returns through stores (including NEXT stores), unique item idenficaon and much more. |
|---|---|
| In terms of the website, clients can benefit from all of NEXT's online funconality: AI driven search engine, intelligent recommendaons, personalised search results, saved bags, credit facilies and more. |
|
| Fricon free, capex free growth |
Clients do not need to worry about upgrading their web capacies, warehouse space and distribuon networks. They can deliver exceponal levels of growth without operaonal fricon and step changes in their capital expenditure. |
| Variable cost base |
Total Plaorm is charged as a percentage of the client's turnover, leaving clients with few, if any, fixed operaonal costs. So in the event of a downturn, clients are not burdened with fixed costs they do not need. |
| Beer presence on LABEL |
Because our clients' stock is consolidated in NEXT's central warehouses, all their stock is available to sell to NEXT customers on LABEL. This has delivered significant sales growth on LABEL to all our exisng clients. |
| Focus | Total Plaorm allows clients to focus on the aspects of their business where they make the most difference: designing and buying great products and developing their brand identy. |
Focus for the year ahead will be:
Currently, our ability to take on new clients is constrained by three factors: warehousing capacity, systems mescales and the people and experse required to onboard new clients. This year we aim to eliminate all three bolenecks as detailed below.
Our new large boxed warehouse, Elmsall 3 (see page 55), will be operaonal towards the end of 2023. This new warehouse will remove the physical constraints to onboarding new fashion clients.
The constraint for Total Plaorm going into 2024 will be the speed at which we can develop new website 'plaorms' for new clients. Towards the end of 2022, we began simplifying the process for creang new Total Plaorm websites; this process is explained below.
Historically, we created separate copies of our website for each new client, which is costly and me-consuming. It also meant that whenever we upgraded our own website, we had to duplicate and test new code across each client's code base. As the number of clients grows, this process of maintaining funconal parity would have become exponenally more difficult.
Going forward we are taking a different approach. Each new client's website will operate different 'templates' of a single code base. In other words, each client's website will have a different 'view' of the same funconality, operang on the same code but with a different look and feel. This is similar to how we can individually configure our desktops to look unique while using the same operang system. This new approach will enable us to be more efficient in onboarding new clients, it will also ensure that clients are always kept up-to-date with improvements to website funconality.
The table below demonstrates our progress in reducing mescales and costs. It shows development man-hours (indexed to 100 for the Reiss website) along with the elapsed development me.
| Website development | Man-hours index 10 | Start and end date | Time elapsed 11 |
|---|---|---|---|
| Reiss | 100 | May 2021 - April 2022 | 11 months |
| JoJo Maman Bébé | 36 | Sept 2022 - May 2023 | 8 months |
| MADE.com | 24 | Mar 2023 - July 2023 | 4 months |
| New client | 15 | Mar 2024 - June 2024 | 3 months |
Alongside improving our technology, we will also reinforce the teams who scope, onboard and manage new clients. This will ensure that the workload does not restrict our growth.
10Development me for JoJo Maman Bébé and MADE include an esmate of the me required to develop an App to make them directly comparable with Reiss.
11The development me is just coding me and does not include specificaon me or post implementaon support.
In 2021 we acquired a 25% stake in Reiss; it was our second acquision of any material size in 30 years. Since then, we have made nine other investments, including a further 26% in Reiss, JoJo Maman Bébé, Sealskinz, Joules, MADE.com, Swoon, Aubin, along with a stake in the UK franchises for Victoria's Secret and GAP. Last year these investments delivered £16.8m profit to the Group.
When we first appraised Total Plaorm, it appeared to us that the value created for clients was likely to exceed the relavely modest profit generated for NEXT as a service provider. So it seemed sensible to invest in our future clients. In fact, so far, the Group has made more profit from these equity investments than from the service itself.
In a world where many retail businesses are regularly bought and sold by private equity owners, Total Plaorm gives NEXT a means of adding value to an investment unavailable to purely financial buyers.
70% of the cash invested in other retailers was done so with other partners. Working alongside seasoned private equity professionals brings us important negoaon and valuaon skills, and serves to spread our investments across a wider pool of retailers. In other investments, partnerships have been with the overseas owners of brands in which we operate the UK franchise (Victoria's Secret and GAP).
There are four criteria we look to achieve when invesng. These are:
| Great brands | We will focus on brands that bring something unique to the market with a clear market posion - customers, staff and suppliers understand what they stand for. |
|---|---|
| The potenal to add value |
Total Plaorm must be able to add value to the investment. We have declined opportunies to invest in good businesses because we felt we could not add enough value to their operaons. |
| Great management |
We do not intend to run the businesses in which we invest. They must be able to operate and thrive independently, so we are looking for businesses that either have great management (like Reiss) or where we are confident that we can find the right people (like MADE.com). |
| Right price | We are not the sort of business that makes 'strategic' investments, we only invest in businesses if we think they can deliver healthy returns on shareholders' funds. |
There will be excepons to these rules. With the proviso that we never (consciously) overpay, we may compromise some of these criteria if the others align. For example, we invested in Swoon which is a great business, brilliantly led with a reasonable price tag; but, in the short term, there are no plans to put them on Total Plaorm.
In many overseas markets we have successful direct-to-consumer online businesses. We also have some very producve partnerships with local aggregators (such as Zalando). However, it is apparent that our direct-to-consumer model is not effecve in some very sizable markets.
The pie charts below give a sense of the opportunies we might be missing overseas. The le hand chart shows total consumer spending 12on all consumer goods by major region. The chart on the right shows the percentage of our Online overseas sales NEXT takes by region (both charts exclude the UK). The over-performance of regions closer to the UK, points to potenal opportunies further afield. Europe and the Middle East, which account for 26% of the world's consumer spending, account for 87% of our online sales overseas.
It is unsurprising that our direct-to-consumer business struggles in the Americas and Asia. Inventory is sent to customers, using air freight, from our UK warehouses. A business that imports goods to the UK from the Far East and then ships them back by air, customer by customer, with all the logiscal and customs overheads involved, is unlikely to be compeve.
There are many factors that may be hindering the success of our direct-to-consumer online business in some regions. These consist of (1) elevated tariffs and bureaucrac obstacles, (2) prolonged delivery mes, (3) the dominance of local compeon, (4) local product regulaons, (5) limited brand recognion, and, naturally, (6) the possibility that our product range may not align with the preferences of the local market.
Among these challenges, only the last is insurmountable - if our products do not appeal to the local market, then no amount of effort will make our business a success. The remaining issues are soluble. So we are currently exploring alternave business models to address these and other obstacles, including:
We will be trialling all of these approaches, in a number of territories, over the coming years and strengthening the teams required to make that happen.
12World Bank data: Households and NPISHs Final Consumpon Expenditure (current US\$) 2021. Data excludes the UK.
As the Company takes on new challenges, we need to re-organise to ensure that we maximise the opportunies available to the Group. As importantly, we need to ensure that new business opportunies do not end up taking too much me from those whose main task is developing our heartland NEXT product, services and operaons.
Earlier this year we created a new division of the Group to focus on Investments, Acquisions and Third-Party Brands. The Investments Division has been placed under the leadership of a newly promoted main Board Director, Jeremy Stakol (see RNS, 8 February 2023). The new division will aim to maximise the following business opportunies:
Of course, all of these opportunies already involve many other departments across the business. And it is important to stress that, while Jeremy and his team will aim to advance these areas, they will not control them. In our internal communicaons, I have been very careful not to use the word 'co-ordinate' or 'control' when describing Jeremy's role. This change should not prevent others from taking iniaves in these areas. For example, many of our product divisions will connue to develop their own licence arrangements alongside any iniaves the Investments team may take.
So, while this new division will serve to accelerate opportunies, it will not act as a brake on the iniaves others are taking in these areas. Indeed, many of the transacons the Investments division idenfies may well be passed on to others in the Group to execute.
People oen talk about culture in terms of the qualies they aspire to. Of course, NEXT aspires to be many things, but aspiraons are not enough: for NEXT culture is about what we expect from one another. The following paragraphs give a flavour of some of the behaviours we expect from each other:
Of course, many of us (including me), on occasions deviate from these ideals, parcularly when we get frustrated, but our aspiraons are very clear.
We want to be an organisaon that thinks and collaborates at every level, where everyone feels they are making a difference. So many of our important decisions are, in the scheme of things, small. Choosing the colour of a dress, opmising a warehouse operaon, tweaking the funconality of a web page - each decision, on its own, will make lile difference. But the sum total of a myriad of such decisions, made well, are what makes the difference between great success and abject failure.
And even if I think about the big ideas that have transformed the business such as our first internet business, the beginnings of our LABEL business, our first overseas website and our first licence agreement: almost all those ideas started life as small iniaves, few of which emanated from the Board Room. They began because people experimented, took decisions and pushed boundaries. It is the Board's job to foster and direct this spirit of enterprise, and ensure that, where ideas do succeed, we push them as hard as possible and as far as they will go.
13We do, of course, take minutes at meengs where there is a regulatory, legal or corporate governance requirement.
This year, the opportunity for growth is naturally limited by market condions, so we will focus on improving the basics of our business whilst taking the opportunity to strengthen the foundaons of the business for future years. There are four main tasks:
As ever, our focus remains firmly fixed on the connued improvement of our product ranges . The opportunity to stretch the brand: increasing the breadth of our offer to customers.
The re-opening of overseas travel - to visit our suppliers and find other sources of inspiraon appears to have energised our ranges, with many areas pushing into more diverse designs, new fabricaons, price points and categories. We know that, in our customers' eyes, we are only as good as our latest ranges. So our product teams connue to push themselves and their suppliers to exceed customer expectaons.
Since the beginning of the pandemic our online service levels (in terms of the speed and accuracy of delivery) have suffered. First it was the pandemic itself that interfered with our operaons. More recently our acute lack of warehouse space, combined with a naonal shortage of warehousing and distribuon personnel at peak mes, has served to hamper operaons. The delivery of new warehousing capacity (see page 55) along with new automaon and technology, provides the opportunity to materially improve the accuracy of our picking, packing and delivery operaons: geng more items to more customers on me. The aim is to restore and surpass our pre-pandemic reliability.
In addion, we have invested in new contact centre technology with a view to materially improving our ability to handle enquiries and complaints. So when things do not go to plan, we can remedy the situaon quickly and more efficiently.
In a year where sales are not expected to grow, and inflaon is driving up costs, we have turned our minds to where we can save money within the organisaon. The main heads of cost saving are detailed below:
Lay the foundaons for our growth businesses . Pung in place the technology, warehousing, distribuon networks, organisaon and people required.
The year ahead looks like it will be challenging: the combinaon of inflaon in our cost base and top line sales which are likely to edge backwards is uncomfortable. But the Company is well prepared. If we achieve our guidance, a moderate sales decline will result in a pre-tax profit of £795m, strong cash flow and underlying net margins of around 15%.
Looking through next year to the longer term our prospects feel more posive than they have done for some me. The burdens of the structural change to our industry appear to have eased, our Retail business is a much smaller percentage of the Group than it was eight years ago, and its rent and rates bill is slowly adjusng to reflect current levels of retail demand. This year, the Group will focus on improving its product ranges, online service levels and cost controls. As importantly, the Group is also laying the foundaons for new avenues of growth to complement and leverage our heartland business.
These three notes are consistent with the changes made in our Half Year report issued in September 2022 and are repeated here for clarity.
Please note that none of these changes affect the reported overall margins or total profits for the Group in any year.
Here, and throughout this report, comparisons with last year are dominated by the impact of the pandemic, most of which have been explained in previous reports. So, we have devoted very lile me to explaining the one year variances in our main trading divisions (Online and Retail). Instead, we have focused on the three year variances which give important insights into the changing economics of the Group. Part Four gives a detailed insight into sales and costs by division.
In the past we have split the profit we generate from selling Lipsy goods through the NEXT website. Half the profit was reported in our Online division. The other half was reported in the Lipsy division which was within Other Group Acvies, along with Property and Sourcing. However, because all of Lipsy's sales were reported in the Online division, this served to understate the margin of the Online business. Three years ago, Lipsy's 'share' of Online profit was immaterial at only £6.8m; today the number would be £27.5m.
To correct this issue, we are now reporng all of Lipsy's Online sales and profits through the Online division. We have adjusted the relevant numbers from last year and three years ago, so that comparisons are on a like-for-like basis. We have corrected a similar reporng anomaly for the Finance division, whereby half the Finance profit on Lipsy sales was reported in Lipsy.
A detailed account of this change is given in Appendix 1.
Last year, the profit on Total Plaorm was reported across two business areas: (1) profit on sales was reported within the Online division and (2) equity returns were reported within Sourcing, Property and Other.
The business has grown significantly in the last 12 months and we believe it would aid understanding of performance to present the sales and profits in its own division. We have represented last year's numbers to reflect this change. The effect of this change is very small and details are provided in Appendix 1.
Full price sales (excluding Total Plaorm sales) were up +6.9% versus 2021/22 and up +20.5% versus 2019/20. Total Trading Sales (including markdown sales) were up +8.4% versus 2021/22 and up +20.6% versus 2019/20.
NEXT Profit before tax was £870m, which was up +5.7% versus 2021/22 and up +16.3% versus 2019/20.
| TOTAL SALES (VAT EX.) £m | Jan 2023 | Jan 2022 | 1 Year var % |
Jan 2020 | 3 Year var % |
|---|---|---|---|---|---|
| Online | 3,006.6 | 3,064.7 | - 2% | 2,146.6 | +40% |
| Retail | 1,865.1 | 1,432.4 | +30% | 1,851.9 | +1% |
| Finance | 274.4 | 249.4 | +10% | 268.7 | +2% |
| Total Trading Sales | 5,146.1 | 4,746.5 | +8.4% | 4,267.2 | +20.6% |
| Total Plaorm | 144.4 | 39.1 | +269% | 0.0 | - |
| Franchise, Sourcing, Property & Other | 124.0 | 76.2 | +63% | 94.6 | +31% |
| Total Group sales | 5,414.5 | 4,861.8 | +11.4% | 4,361.8 | +24.1% |
| Total Group statutory sales | 5,034.0 | 4,625.9 | +8.8% | 4,266.2 | +18.0% |
A full reconciliaon of Group sales to Group statutory sales is provided in Appendix 2 on page 63. The difference between Group sales and Group statutory sales is primarily due to the accounng treatment of items sold on commission through Online LABEL UK. Specifically, the gross transacon value (GTV) of these items is not included in Group statutory sales, whereas it is included in Group sales. Instead, the commission earned on the GTV (which is around 37%) is recognised as revenue in Group statutory sales.
14Online sales for January 2022 have been restated to move £39m of Total Plaorm sales into its own division.
The table below summarises the movement in profits for the major divisions within the Group versus last year and three years ago.
| Total Trading Sales (given for reference) | +8.4% | +20.6% | |||
|---|---|---|---|---|---|
| PROFIT £m and EPS | Jan 2023 | Jan 2022 | 1 Year var % |
Jan 2020 | 3 Year var % |
| Online | 467.3 | 604.4 | - 23% | 417.3 | +12% |
| Retail | 240.5 | 107.0 | +125% | 234.0 | +3% |
| Finance (aer charging interest) | 170.5 | 149.5 | +14% | 152.9 | +12% |
| Profit from Trading | 878.3 | 860.9 | +2.0% | 804.2 | +9.2% |
| Total Plaorm (inc. equity) 16 | 16.3 | 6.9 | +135% | 0.0 | - |
| Property, Sourcing, FX and Other | 13.5 | 6.7 | +101% | 13.4 | +1% |
| Recharge of interest from Finance | 34.4 | 30.9 | +11% | 36.3 | - 5% |
| Operang profit | 942.5 | 905.4 | +4.1% | 853.9 | +10.4% |
| Lease interest | (47.3) | (50.4) | - 6% | (61.8) | - 23% |
| Operang profit aer lease interest | 895.2 | 855.0 | +4.7% | 792.1 | +13.0% |
| Underlying operang margin | 16.5% | 17.6% | 18.2% | ||
| Net external interest 17 | (24.8) | (31.9) | - 22% | (43.6) | - 43% |
| NEXT Profit before tax 18 | 870.4 | 823.1 | +5.7% | 748.5 | +16.3% |
| Taxaon | (158.7) | (145.6) | +9% | (138.3) | +15% |
| Profit aer tax | 711.7 | 677.5 | +5.0% | 610.2 | +16.6% |
| Earnings Per Share | 573.4p | 530.8p | +8.0% | 472.4p | +21.4% |
Under the IFRS 16 accounng standard, some of our rental costs are accounted for as lease interest. To show the full cost of our leases in our analysis of margins, we have added a line in the table above to show underlying operang profits aer deducng lease interest . As shown, lease interest has fallen significantly in recent years, reflecng the renegoaon of many of our store leases as they have come up for renewal.
15Profit by division in January 2020 and 2022 includes the effect of IFRS 16 and restatements for the presentaon of profit from Lipsy and Total Plaorm. See Appendix 1 on page 60 for more detail on Lipsy and Total Plaorm changes.
16Total Plaorm (TP) profit of £16.3m includes (1) profit from providing TP services and (2) profit from our equity investments in TP clients. In addion, the external interest line includes £5.5m of preference share interest from our investment in Reiss and interest from loans made to other TP investments, giving total Group profit for TP of £21.8m. See page 48 for more detail.
17January 2023 external interest includes £4.8m of preference share income from Reiss and £0.7m from loans to TP investments.
18NEXT profit before tax, taxaon and profit aer tax reflect the profit aributable to the shareholders of NEXT plc. It excludes the effect of the Joules minority interests. See Appendix 2 for detail.
Over the last three years, underlying Group operang margins (including lease interest) have fallen by -1.63% from 18.16% to 16.53%.
The overall achieved margin of the Group will be determined by the mix of the various business streams within the Group. The total operang margin is not important as long as each business stream makes a margin commensurate with the risks and investment involved. The margins of our main business streams are set out in the table below.
| Margins 19 of our Trading businesses | Jan 2023 | Jan 2020 | 3 year change |
|
|---|---|---|---|---|
| Retail (including lease interest) | see page 28 | 11.0% | 9.5% | +1.5% |
| Online NEXT UK (including lease interest) | see page 36 | 19.9% | 22.0% | - 2.1% |
| Online LABEL UK (including lease interest) | see page 40 | 12.9% | 15.4% | - 2.5% |
| Online Overseas (including lease interest) | see page 42 | 8.6% | 16.5% | - 7.9% |
| Total Online (including lease interest) | see page 35 | 15.2% | 19.2% | - 4.0% |
| NEXT Finance & Other | see page 43 | 57.6% | 55.6% | +2.0% |
| Total operang margin | 16.53% | 18.16% | - 1.63% |
The main drivers of margin reducon and improvement over the last three years are set out in the table below.
| Factors reducing operang margins | Factors improving operang margins |
|---|---|
| versus three years ago | versus three years ago |
| Online inflaonary pressures, mainly in our logiscs operaon (-1.4%) An increase in spending on Technology (-1.0%) |
Lower Retail occupancy costs (+0.7%), due to: 1. the renegoaon of store leases 2. the closure of unprofitable stores, and 3. lower depreciaon (see page 28). |
19Retail and Online margins include lease interest costs, which are reported within the interest line of the P&L.
We are maintaining the guidance previously set out in our January Trading Statement; with full price sales expected to decline by -1.5% and profit before tax to be £795m .
In January's Trading Statement we set out guidance for the expected increase in our selling prices for the year ahead. We now believe price rises in the second half will be materially lower than we inially feared. Two factors have served to reduce pressure on pricing, these are:
The majority of these benefits will be felt in the second half of the year and we have revised our guidance for price inflaon in like-for-like garments accordingly. New guidance is set out in the table below, along with the guidance we gave in January.
| Like-for-like price inflaon guidance for 2023/24 | Latest Guidance | January Guidance |
|---|---|---|
| Spring & Summer | +7% | +8% |
| Autumn & Winter | +3% | +6% |
We are expecng performance in the first half of the year to be weaker than in the second half. This is because, in the first half last year, unusually warm summer weather coincided with the release of pent-up demand for summer events aer the pandemic (weddings, proms, races etc.). The chart on the le below shows the performance we are expecng in each half, compared to last year and four years ago, which was the last year before COVID. The chart demonstrates that, whilst performance against last year looks unbalanced, it is sensible when compared to four years ago, which was a more normal year. The chart on the right shows our guidance by quarter (rounded to the nearest whole number). As shown, we expect Q2 to be weaker than Q1.
| Full price sales growth versus 2022/23 | First half | Second half | Full year (e) |
|---|---|---|---|
| Retail | - 5.5% | - 2.7% | - 4.0% |
| Online | - 2.5% | +0.4% | - 1.0% |
| Finance interest income | +7.5% | +8.6% | +8.0% |
| Total full price sales versus last year | - 3.0% | - 0.2% | - 1.5% |
Forecasng sales performance in the year ahead is complicated. No one really knows how the connuing cost of living squeeze will affect consumers, and we do not know what effect lower selling price inflaon will have in the second half. It is equally unclear how much the exceponal summer weather, pent-up demand, and the Jubilee contributed to last year's sales.
Employment levels remain robust and default rates in our credit receivables are below pre-pandemic levels, which is encouraging (see page 45). But we do not have a crystal ball nor a sophiscated economic 'model' (neither of which are accurate anyway). Our sales forecasts are a combinaon of intuion, recent experience and a limited selecon of external economic data. We are no more sure of our sales esmates than is sensible - remaining flexible will be more crical than the accuracy of our current guidance.
Our current trade is broadly in line with our expectaons as set out in the table below, which shows our performance to date versus last year and four years ago compared to our internal forecasts for the first quarter. For completeness the last row shows our guidance for the full year.
| Against last | Against four | |
|---|---|---|
| Full price sales growth so far this year | year | years ago |
| Full price sales performance in the last eight weeks 21 | - 2.0% | +21.3% |
| Full price sales performance guidance for the first quarter | - 2% | +19% |
| Guidance for the full year | - 1.5% | +18.7% |
20Source ONS: Number of People in Employment (aged 16 and over, seasonally adjusted) (MGRZ). Figures are reported in calendar quarters (i.e. Q1 is Jan-Mar), rather than aligned to the NEXT reporng calendar where Q1 is Feb-Apr.
21Full price sales in the last eight weeks include an esmate of expected Online returns.
Guidance for profit before tax and EPS is set out in the table below. In April 2023, the UK Corporaon Tax rate will increase from 19% to 25%, so we have shown EPS on both a pre-tax and post-tax basis.
| Guidance for the full year 2023/24 | Full year guidance | Versus 2022/23 |
|---|---|---|
| Full year full price sales | £4.5bn | - 1.5% |
| NEXT profit before tax | £795m | - 8.7% |
| Pre-tax EPS | 656.1p | - 6.4% |
| Post-tax EPS | 501.9p | - 12.5% |
| Effecve tax rate (new 25% rate effecve from April 2023) | 23.5% | 18.25% |
The table below walks forward our profit before tax from last year (ending January 2023) to our forecast for the year ending January 2024.
| NEXT profit before tax 2022/23 £m | 870 | |
|---|---|---|
| Loss of profit from -1.5% (£70m) decline in full price sales | - 27 | |
| Cost increases | ||
| Wage inflaon (including third-party wages, e.g. couriers) | - 67 | |
| Electricity and gas | - 25 | |
| Spend on Technology | - 19 | |
| Other | - 5 | |
| Total cost increases | - 116 | |
| Cost savings | ||
| Operaonal savings from a reducon in units sold | +25 | |
| Occupancy cost savings | +21 | |
| Markdown and clearance | +22 | |
| Total cost savings | +68 | |
| NEXT profit before tax 2023/24 (e) | 795 |
Retail sales and profit are summarised in the table below, along with the equivalent numbers for last year and three years ago. Please note that Retail profits and margins are given aer accounng for the cost of lease interest, and in this secon we have focused on the three year comparisons. The one year comparisons are shown in grey text.
| £m | Jan 2023 | Jan 2022 | 1 year var % |
Jan 2020 | 3 year var % |
|---|---|---|---|---|---|
| Total sales | 1,865 | 1,432 | +30% | 1,852 | +1% |
| Operang profit | 240 | 107 | +125% | 234 | +3% |
| Lease interest charge 23 | (36) | (42) | - 14% | (57) | - 37% |
| Retail profit including lease interest | 204 | 65 | +214% | 177 | +16% |
| Retail margin % (including lease interest) | 11.0% | 4.5% | 9.5% |
22Aer deducng Retail lease interest costs.
23Lease interest is reported within the Interest line of the consolidated income statement. £36m is the proporon of the total lease interest that is aributable to the Retail business.
During the pandemic, we experienced a shi away from shopping in city centres, with customers preferring to shop in Retail parks in out-of-town locaons. In the last twelve months, we have seen a shi back towards city centres.
The graph below shows the like-for-like sales performance of our Retail stores versus year ending January 2022 (in blue) and the year ending January 2020 (in green).
The graph clearly shows how performance in city centre stores has recovered compared to last year and that the performance across all locaons is much more consistent when compared to the pre-pandemic year ending January 2020.
Overall, full price sales on a like-for-like basis were up +2.6% versus 2019/20.
24Our stores were closed from week 1 to week 11 in the year ending January 2022, like-for-like sales comparisons are based on weeks 12 to week 52.
Overall Retail net margin 25for the year ending January 2023 was 11.0%, up from 9.5% three years ago. The margin impact of major cost categories is summarised below.
| Retail net margin (aer lease interest) on total sales to January 2020 | 9.5% | |
|---|---|---|
| Bought-in margin | Higher freight costs reduced bought-in gross margin. | - 0.5% |
| Markdown | Clearance rates in our Sale events were lower than three years ago, reducing margin. |
- 0.5% |
| Branch payroll | Increased rates of pay -1.3% were offset by improved producvity +1.1%. |
- 0.2% |
| Store occupancy costs |
Occupancy costs fell, improving margin, for the following reasons: ● Fully depreciated assets resulted in lower depreciaon (+1.7%). ● Lower lease interest costs (under IFRS 16) as our lease liabilies have reduced (+1.3%). ● Store closures in the last three years have reduced occupancy costs (+1.0%). ● Lease renewals negoated over the last three years have reduced the costs of rent, rates and service charge (+0.6%). ● Addional concessions have increased rental income (+0.4%). |
+5.0% |
| Energy | Inflaon in energy prices reduced margin. | - 0.9% |
| Warehouse & distribuon costs |
Warehouse and distribuon costs grew faster than sales due to inflaonary cost increases mainly in wages (-0.4%), distribuon costs (-0.4%) and fuel (including energy) (-0.3%). |
- 1.1% |
| Technology | Increased spend in Technology reduced margin. | - 0.3% |
| Retail net margin (aer lease interest) on total sales to January 2023 | 11.0% |
We are forecasng Retail full price sales to be down -4% versus 2022/23. Based on this sales guidance, Retail's operang margin (including lease interest) is forecast to be around 9.0% for the full year. This 2% reducon in operang margin is largely due to inflaonary cost increases in energy and wage costs.
In the year ahead, Retail will benefit from the change in business rates, announced in the Autumn Budget Statement, which saves £12.1m of costs and improves Retail's ancipated net margin by +0.7%. Please note, the Online business will incur a £2.3m cost increase in business rates for our warehouses, giving a net £9.8m saving to the Group as a result of the changes announced in the Autumn 2022 Budget, where rates costs reduced for shops but increased for warehouses.
25Aer deducng Retail lease interest costs.
In the last year we have renewed 62 leases, with an average lease term of five years (to the earlier of the break clause or the lease end). These new leases reduce our annualised occupancy cash costs by £11.1m .
The 62 renewals can be split into two different types of lease: (1) tradional rent leases and (2) 'total occupancy cost' (TOC) leases, where we pay a fixed percentage of turnover to cover rent, business rates and service charge.
The occupancy cost savings (in cash terms 26) from these lease renewals are summarised in the tables below. For clarity, we have shown TOC leases separately, in order to show the overall saving in rent, rates and service charge combined.
| New rent lease category | No. of leases |
Before renewal |
Aer renewal |
|
|---|---|---|---|---|
| Fixed rent charge | 36 | £10.5m | £7.4m | - 29% |
| Turnover rent | 1 | £0.3m | £0.3m | - 18% |
| Total | 37 | £10.8m | £7.7m | - 29% |
| Total occupancy lease (rents, rates and service charge) | £18.3m | |||
|---|---|---|---|---|
| Previous rent | £15.4m | |||
| Previous rates and service charge | £10.9m | |||
| Total occupancy - rent, rates and service charge | 25 | £26.3m | £18.3m | - 30% |
|--|
In addion to the occupancy cost reducons detailed above, we received £6m from capital contribuons and rent free periods. We remain commied to ensuring that all our stores are a credit to our brand, so landlord contribuons will be more than offset by the £21m we intend to spend upgrading the stores where we have renewed leases.
At the end of January 2023, our average lease commitment (weighted by value) was 4.7 years, compared with 4.9 years at the same me last year. 50% of our store leases (by value) will expire or break within 3.9 years and 91% within the next ten years.
We ancipate renewing 75 store leases and based on our latest negoaons we expect to reduce our occupancy cash costs by c.£8.9m (-34%). The average lease term (to the earlier of the break clause or lease end) is expected to be 4.1 years.
26Note that the savings given here are the actual rents payable rather than IFRS 16 right-of-use asset depreciaon.
In recent years we have highlighted the challenge to Retail's profitability from rent, rates and service charge costs during a me when Retail sales declined each year. The graph below shows the change in Retail's sales and annualised occupancy costs (rent, rates 27and service charge), indexed to January 2016, and illustrates the progress made on costs to January 2023 and our forecast for the year ahead.
This reducon in occupancy costs (15% lower than in 2016) shows the posive impact from rent reducons, lower business rates and the shi away from leases that previously aracted a fixed rent, rates and service charge costs to a variable 'total occupancy cost' (TOC) arrangement with landlords.
27Business rates in the year ending January 2021 include rates relief received during COVID, when stores were closed.
The year-on-year change in store numbers and square footage to January 2023 is set out below.
| Store numbers |
NEXT Sq. . (k) |
Concessions Sq. . (k) |
Total Sq. . (k) |
|
|---|---|---|---|---|
| January 2022 | 477 | 7,980 | 421 | 8,401 |
| Mainline store reconfiguraons | + 0 | - 22 | + 61 | + 39 |
| Mainline closures | - 17 | - 240 | - 4 | - 244 |
| Clearance stores | + 6 | + 49 | + 1 | + 50 |
| January 2023 | 466 | 7,767 | 479 | 8,246 |
| Change | - 11 | - 213 | + 58 | - 155 |
| Change % | - 2.3% | - 2.7% | + 13.8% | - 1.8% |
We closed 17 mainline stores this year, 11 of which are in locaons we assessed as no longer being viable, where we forecast that the store would not achieve our target margin on almost any terms. Four store closures were due to them being merged into another local, larger store and the other two are a result of being unable to agree acceptable new terms with landlords. The table below sets out the profitability and turnover of stores falling into each category of closure.
| Store | ||||
|---|---|---|---|---|
| Reason for store closure | No. of stores | turnover | Store profit Store profit % | |
| Locaon not viable | 11 | £18.2m | £0.4m | 2.1% |
| Merged two stores into one site | 4 | £10.3m | £1.2m | 11.7% |
| Failure to agree acceptable terms | 2 | £7.3m | £1.7m | 23.0% |
| Total closed stores | 17 | £35.8m | £3.3m | 9.1% |
This year we closed one Clearance store and opened seven new Clearance stores with an average lease term (to the earlier of break or lease end) of 2.4 ye ars. We have increased the number of Clearance stores in response to the return of Sale stock levels to pre-pandemic norms. The rental charge in all these new clearance stores is linked to store turnover, with three of the seve n leases being TOC deals.
This year we increased the space occupied by concessions in our retail stores by +58k square feet, with brands including Bath & Body Works, Mamas & Papas, GAP and Victoria's Secret. In total, concessions now occupy 6% of our total Retail space.
In the year ahead we expect to reallocate the space currently occupied by 25 Paperchase concessions (21k square feet) with minimal impact on profitability.
Our Online margin analysis now includes the cost of lease interest that is aributable to the Online business. We have restated 28margins for January 2022 and January 2020 to be on the same basis. This is consistent with how we report the Retail margins on page 28.
We have made this change because lease interest costs in our Online business are now more material, at £10m in the year to January 2023 compared with £4m in January 2020. This increase is due to the new leases agreed during the last three years, which include the sale and leaseback of a warehouse complex and our new Elmsall 3 warehouse.
The table below summarises total sales and profit for our Online business (which includes NEXT Brand UK, LABEL and Overseas), compared to last year and three years ago.
| £m | Jan 2023 Jan 2022 | 1 year var % |
Jan 2020 | 3 year var % |
|
|---|---|---|---|---|---|
| Total sales | 3,007 | 3,065 | - 2% | 2,147 | +40% |
| Operang profit | 467 | 604 | - 23% | 417 | +12% |
| Lease interest charge | (10) | (9) | +11% | (4) | +158% |
| Online profit including lease interest | 457 | 595 | - 23% | 413 | +11% |
| Online margin including lease interest | 15.2% | 19.4% | 19.2% |
This part of the document includes the following secons:
28Under IFRS 16, lease interest is reported within the interest line of the P&L. There is no change to Group profit from this restatement.
Full price sales compared to three years ago were up +42% , represenng a compound annual growth rate (CAGR) of +12.3% . Online sales experienced a -4% decline against last year, but this figure is distorted by the surge in Online sales during last year's ten-week lockdown and subsequently by consumer reluctance to return to stores as the pandemic rumbled on.
Excluding Russia and Ukraine, Online full price sales were down -2% versus last year and up +44% versus three years ago.
| 1 year | 3 year | ||||
|---|---|---|---|---|---|
| Full price sales £m | Jan 2023 | Jan 2022 | var % | Jan 2020 | var % |
| NEXT Brand UK | 1,221 | 1,360 | - 10% | 1,022 | +19% |
| LABEL UK | 869 | 777 | +12% | 434 +100% |
|
| Total UK Online | 2,090 | 2,137 | - 2% | 1,456 | +44% |
| Overseas (nextdirect.com) | 463 | 543 | - 15% | 398 +16% |
|
| Overseas aggregators | 126 | 107 | +17% | 38 +232% |
|
| Total Overseas | 589 | 650 | - 9% | 436 +35% |
|
| Total Online full price sales | 2,679 | 2,787 | - 4% | 1,892 | +42% |
| Excluding Russia and Ukraine | - 2% | +44% |
The chart below shows sales over the last seven years. Online's CAGR was +13.1% from 2016 up to the start of the pandemic, and +12.3% over the last three years.
Customers can be split into three disnct groups:
The average number of acve 30Online customers in the last year was 8.1m , up +35% versus three years ago, but down -1% versus last year. The table below shows a three year comparison of average customer numbers, sales per customer and their total full price sales values. For completeness, the table also includes sales achieved through our Overseas third-party aggregators, where we do not have visibility of customer numbers.
| Average customers |
Full price sales per customer |
Full price sales value |
|||||
|---|---|---|---|---|---|---|---|
| Full year | Jan 23 | vs Jan 20 | Jan 23 | vs Jan 20 | Jan 23 | Jan 20 | vs Jan 20 |
| UK Credit | 2.8m | +10% | £487 | +11% | £1,381m | £1,131m | +22% |
| UK Cash | 3.6m | +78% | £198 | +23% | £709m | £325m | +118% |
| UK Total | 6.4m | +40% | £326 | +3% | £2,090m £1,456m | +44% | |
| Connuous overseas | 1.6m | +37% | £280 | - 7% | £450m | £354m | +27% |
| Russia & Ukraine | 0.1m | - 55% | £127 | - 36% | £13m | £44m | - 71% |
| Total ex. aggregators | 8.1m | +35% | £314 | +2% | £2,553m £1,854m | +38% | |
| Aggregators | £126m | £38m | +232% | ||||
| Total | £2,679m £1,892m | +42% |
In the UK, sales per credit customer increased by +11% versus three years ago and cash customers increased by +23%. We believe this has been driven by the increasing breadth of our offer. Credit customers spend over twice as much as our cash customers, resulng in an overall spend per customer increase of +3% in the UK.
In our connuous Overseas business, sales per customer decreased by -7% versus three years ago. This decline is due to a higher proporon of our customers being new customers, who typically spend less than those who are more established.
29Both NEXT credit offers are authorised and regulated by the FCA.
30Acve customers are defined as those who have either placed an order or received an account statement in the last 20 weeks.
Overall Online margin (including lease interest) in the year was 15.2%, down from 19.2% three years ago. The margin impact of major cost categories is summarised below.
| Net margin (including lease interest) on total sales to January 2020 | 19.2% | |
|---|---|---|
| Bought-in gross margin |
A higher parcipaon of lower margin third-party LABEL and Overseas sales reduced margin by -2.5% and higher freight costs eroded margin by -0.3%. |
- 2.8% |
| Markdown | Surplus stock grew at a slower rate than full price sales, improving margin. This benefit more than offset the impact of slightly lower clearance rates. |
+0.2% |
| Warehousing & distribuon |
Margin reduced for the following reasons: ● Inflaonary cost increases, mainly in wages (-1.5%), fuel and energy (-0.3%) ● Internaonal parcel surcharges and EU admin. fees (-0.3%) ● Increased costs from our new boxed warehouse (Elmsall 3), higher depreciaon and other occupancy costs (-0.6%). These cost increases were parally offset by operaonal savings from handling fewer units, relave to sales, due to higher average selling prices (+1.2%). |
- 1.5% |
| Markeng & photography |
We stopped prinng catalogues in 2020, which improved margin by +1.4% and photography costs have not increased in line with sales (+0.4%). This was partly offset by increased spending on digital markeng (-0.6%). |
+1.2% |
| Technology and central costs |
Spending on soware development and maintenance has increased by +90% versus 2019, compared to the sales increase of +40%. |
- 1.1% |
Net margin (including lease interest) on total sales to January 2023 15.2%
The table below sets out the net margins by Online division (NEXT Brand UK, LABEL UK and Overseas). Please note that net margins for January 2022 and January 2020 have been restated to include lease interest.
| Online division | Total sales £m | Profit £m | Jan 2023 margin % |
Jan 2022 margin % |
Jan 2020 margin % |
|---|---|---|---|---|---|
| NEXT Brand UK | 1,377 | 273 | 19.9% | 24.6% | 22.0% |
| LABEL UK | 1,005 | 130 | 12.9% | 16.0% | 15.4% |
| Overseas | 625 | 54 | 8.6% | 12.1% | 16.5% |
| Total Online | 3,007 | 457 | 15.2% | 19.4% | 19.2% |
Margin increased to 24.6% last year, during the pandemic, mainly due to unusually low returns rates and lower markdown costs (due to stock shortages). Those margin gains reversed out during the last twelve months as return rates and surplus stock reverted to more normal levels.
The -2.1% reducon in margin against three years ago is largely due to the following four factors:
Further details on margin movements for LABEL UK and Overseas businesses can be found in the next two secons.
Our expected Online net margins, by division, for the year to January 2024 are set out below.
The -2.4% percent reducon in our UK margin is mainly the result of (1) inflaonary cost increases, mainly in wages, (2) increased occupancy costs arising from the opening of our new boxed warehouse and (3) addional depreciaon on new warehouse mechanisaon and technology.
| Online net margins by division | Jan 2024 (e) | Jan 2023 |
|---|---|---|
| NEXT Brand UK | 17.5% | 19.9% |
| LABEL UK | 11.5% | 12.9% |
| Overseas | 12.0% | 8.6% |
| Online net margin | 14.3% | 15.2% |
LABEL consists of the sale of all the non-NEXT branded products sold through NEXT's websites 31. In the year to January 2023, at £1bn, LABEL's total Online sales (including markdown sales) accounted for one third of our Online business and 19% of Group turnover. LABEL's full price sales have doubled over the last three years, achieving growth through four different types of business. In this secon, we provide insight into LABEL's sales and profit margins for each business model.
Each business model has different characteriscs, in terms of (1) who is responsible for the design, (2) who sources and manufactures the product and (3) who takes the stock risk. These are summarised in the table below along with the net margins of each business.
| Business model | Design | Sourcing | Stock risk | Examples | 2022/23 Net margin |
|---|---|---|---|---|---|
| 3rd party Brands sold on Commission |
3rd Party | 3rd Party | 3rd Party | Fat Face, River Island Boss, Reiss |
10.9% |
| 3rd party Brands purchased Wholesale |
3rd Party | 3rd Party | NEXT Group |
Nike, Adidas, Superdry | 14.4% |
| Licensing and collaboraons |
3rd Party | NEXT Group |
NEXT Group |
Baker by Ted Baker, Myleene Klass |
14.9% |
| Wholly-owned brands |
NEXT Group |
NEXT Group |
NEXT Group |
Lipsy, Love & Roses, Friends Like These |
15.7% |
Although we make lower net margins on the commission model, we encourage our brand partners to adopt it, because we believe that it will generate higher sales growth. This belief is reinforced by our full price sales performance, as demonstrated in the table on page 38. The three year growth rate of commission brands is +135%, compared to +41% on wholesale brands. Unsurprisingly, our brand partners are beer at selecng and merchandising their stock on our website than we are.
Net margins generally increase as the Group takes on more of the workload and risk. The anomaly is the relavely low margins achieved by our high risk/workload wholly-owned brands which, at 15.7%, compares unfavourably with the NEXT brand's 19.9% net margin.
The table below bridges the gap between the margin achieved on the wholly-owned brands and NEXT branded stock. We believe that we have an opportunity to improve margins in this area, through addressing high levels of faulty and damaged stock and, as sales increase, reducing the burden of fixed central costs.
| NEXT UK 2022/23 net operang margin | Comments | 19.9% |
|---|---|---|
| Bought-in gross margin | Beer margins on high fashion lines | +2.0% |
| Faulty and damaged | Higher returning fashion lines | - 0.9% |
| Product teams and central overheads | Fewer economies of scale | - 5.3% |
| Wholly-owned brands net operang margin | 15.7% |
31LABEL does not include branded products sold through Total Plaorm.
The table below sets out full price sales by each LABEL business model, against last year and three years ago. Wholly-owned brands and licensing accounted for 25% of the growth against three years ago.
| Full price sales category £m | Jan 2023 | 1 year var % | 3 year var % |
|---|---|---|---|
| Third-party brands (commission) | 409 | +14% | +135% |
| Third-party brands (wholesale) | 311 | - 3% | +41% |
| Total third-party brands | 720 | +6% | +83% |
| Licensing and collaboraons | 39 | +58% | - |
| Wholly-owned brands | 110 | +50% | +176% |
| Total LABEL full price sales | 869 | +12% | +100% |
The table below explains the contribuon new brands have made to LABEL's three year growth. New brands accounted for 56% of LABEL's growth, of which 15% was delivered by new wholly-owned brands and licensing.
| Connuous | ||||
|---|---|---|---|---|
| Contribuon to 3 year sales growth | New brands | brands | Total | |
| Third-party brands | +41% | +34% | +75% | |
| Licensing and collaboraons | +9% | +9% | ||
| Wholly-owned brands | +6% | +10% | +16% | |
| Total LABEL full price sales | +56% | +44% | +100% |
The pie charts below show the parcipaon of full price sales by business model, for 2019/20 and 2022/23.
Compared to three years ago , we have seen strong growth across all LABEL product categories, with Clothing, Home and Beauty growing faster than Sportswear as a result of the increases in product offer: a combinaon of adding new brands and wider choice within exisng brands.
The table below shows the increase in sales against last year and three years ago. The variances to last year are explained by the sharp reversal of lockdown trends which favoured Home and Sportswear.
| Full price sales by category £m | Jan 2023 | 1 year var % | 3 year var % |
|---|---|---|---|
| Clothing | 601 | +25% | +119% |
| Sports | 138 | - 13% | +31% |
| Home | 84 | - 8% | +125% |
| Beauty | 46 | +0% | +171% |
| Total full price sales | 869 | +12% | +100% |
Under a licensing agreement, a third-party brand (the licensor) supplies NEXT (the licensee) with design inspiraon and branding. NEXT sources and purchases the stock, which is held at our risk and the licensor earns a royalty on sales.
We also collaborate with third-pares who provide prints that we use on products that are designed by the NEXT team. We have included these sales in the analysis below.
Full price sales in the year to January 2023 were £65m (£39m in LABEL UK, £12m Online Overseas and £14m in NEXT's Retail stores). The table below shows how this is split across our product categories.
| Full price sales (VAT ex.) £m | Jan 2023 | Jan 2022 | Var % |
|---|---|---|---|
| Adult clothing and accessories | 27 | 14 | +96% |
| Childrenswear | 30 | 23 | +30% |
| Home | 8 | 6 | +27% |
| Total full price sales | 65 | 43 | +50% |
| Split as: | |||
| Licensing | 50 | 34 | +45% |
| Collaboraons | 15 | 9 | +71% |
In the year ahead, we expect to take on seven new licences and forecast full price sales to grow by +32% to £85m.
| Full price sales (VAT ex.) £m | Jan 2024 (e) | Jan 2023 | Var % |
|---|---|---|---|
| Online LABEL UK | 55 | 39 | +43% |
| Online Overseas | 15 | 12 | +28% |
| Retail | 15 | 14 | +5% |
| Total | 85 | 65 | +32% |
The table below shows net margins for each of the four business models within LABEL compared to last year and three years ago.
| Business model | Jan 2023 margin % |
Jan 2022 margin % |
Jan 2020 margin % |
|---|---|---|---|
| Third-party brands (commission) | 10.9% | 13.1% | 14.8% |
| Third-party brands (wholesale) | 14.4% | 17.8% | 16.6% |
| Total third-party brands | 12.4% | 15.4% | 15.8% |
| Licensing and collaboraons | 14.9% | 18.1% | - |
| Wholly-owned brands | 15.7% | 20.7% | 12.4% |
| Total LABEL margin % | 12.9% | 16.0% | 15.4% |
Last year, in the aermath of the pandemic, margins were flaered by unusually low returns rates and lower markdown costs (arising as a result of stock shortages). However, the 3.4% drop in the net margins of our third-party branded business against three years ago requires some explanaon. The gap is explained in the table below.
| Jan 2020 net margin of third-party brands | 15.8% |
|---|---|
| Higher parcipaon of lower margin brands and reduced commission rates | - 1.4% |
| Improved wholesale bought in gross margins offset by higher surplus | +0.4% |
| Inflaon in warehouse and distribuon costs | - 2.0% |
| Increased spend in technology | - 1.2% |
| Catalogue savings, offset parally by increased digital markeng | +0.8% |
| Jan 2023 net margin of third-party brands | 12.4% |
As we explained in our Half Year Report in September, we are focussed on a number of iniaves that will improve LABEL's margin in the year ahead. However, we ancipate that these margin improvements will be more than offset by inflaonary cost increases. The following table walks forward our achieved net operang margin in 2022/23 to our ancipated margin in 2023/24.
| Jan 2023 net operang margin | 12.9% |
|---|---|
| Control of markdown costs | +0.6% |
| Renegoated commission rates on some low profitability brands | +0.5% |
| Impact of removing low profitability products | +0.3% |
| Inflaonary costs in warehouse and distribuon costs | - 1.1% |
| Technology costs | - 0.7% |
| Inflaonary cost increases, mainly in wages | - 0.8% |
| Jan 2024 net operang margin (e) | 11.7% |
The table below sets out the sales performance against last year and three years ago. The comparison with last year is unfavourable because, last year, online trade benefited from various retail store lockdowns in force across the globe.
| Online Overseas VAT Ex. sales | Sales £m Jan 2023 |
Versus Jan 2022 |
Versus Jan 2020 |
|---|---|---|---|
| Total sales (including markdown) | 625 | - 7% | +37% |
| Full price sales | 589 | - 9% | +35% |
| Full price sales (excluding Russia and Ukraine) | 576 | - 3% | +47% |
Over the last five years, sales in our Overseas Online business have grown through our own websites (nextdirect.com) and third-party aggregators. The chart below sets out the full price sales achieved through both channels over the last five years. It demonstrates the increasing contribuon aggregators have made to growth. Aggregators now account for 21% (£126m) of our Overseas full price sales.
The compound annual growth rate (CAGR) in full price sales in this period has been +14% (+17% excluding Russia and Ukraine).
The table below shows the parcipaon of our sales by region and demonstrates that the vast majority of our sales overseas come from Europe and the Middle East. Much of our European business is serviced by our German hub and we are acvely invesgang opening a hub in the Middle East.
| Region | No. of countries | % of full price sales |
Jan 2023 £m |
|---|---|---|---|
| Europe | 34 | 52% | 303 |
| Middle East | 12 | 35% | 206 |
| Asia | 12 | 7% | 43 |
| Americas and Australia | 8 | 6% | 37 |
| Total full price sales | 66 | 100% | 589 |
The table below sets out the profit and margins achieved compared to last year and three years ago. The main reasons for the decline in margin compared to 2019/20 are also set out below.
| Online Overseas operang profit | Jan 2023 | Jan 2022 | Jan 2020 |
|---|---|---|---|
| Profit £m | 54 | 81 | 65 |
| Net margin % | 8.6% | 12.1% | 16.5% |
| Overseas net margin on total sales to January 2020 | 16.5% | |
|---|---|---|
| Duty & import VAT |
Costs increased largely due to the introducon of duty & import VAT charges in many Middle East countries. |
- 2.4% |
| Aggregator parcipaon & margins |
Erosion in operang margin from aggregator sites, along with their increasing sales parcipaon. |
- 1.8% |
| Delivery costs | This is mainly the result of higher air freight costs and inflaonary increases in UK warehousing costs. |
- 1.5% |
| Technology | Investment in modernising our core systems | - 1.1% |
| Surplus | Surplus stocks in overseas countries grew faster than sales and clearance rates reduced. |
- 1.1% |
At the half year we detailed some of the measures we were planning to improve overseas profitability. We have concentrated on measuring profitability on an item-by-item and territory-by-territory basis, to pinpoint unprofitable products. These are typically items with higher returns rates and lower selling prices. We are also renegoang numerous delivery agreements, as underlying distribuon costs begin to return to pre-pandemic levels.
In the second half, margin improved to 9.8% and in the year ahead we are planning for margin to recover further, to around 12%.
Unlike the analysis in the Online and Retail secons of this document, the comparisons used for sales and profit in this secon are given against LAST YEAR . We believe this provides a more meaningful understanding of the performance of our Finance business because retail lockdown had much less impact on the performance of the Finance business than it had on the other trading businesses.
| £m | Jan 2023 | Jan 2022 | Var % | |
|---|---|---|---|---|
| Credit sales | 2,035 | 1,977 | +3% | |
| Average customer receivables | note 1 | 1,179 | 1,062 | +11% |
| Interest income | note 2 | 274 | 249 | +10% |
| Bad debt charge | note 3 | (26) | (27) | - 3% |
| Overheads | note 4 | (43) | (42) | +3% |
| Profit before cost of funding | 205 | 180 | +14% | |
| Cost of funding | note 5 | (34) | (31) | +11% |
| Net profit | 171 | 150 | +14% | |
| ROCE (aer cost of funding) | 14.5% | 14.1% | ||
| Closing customer receivables | 1,255 | 1,163 | +8% |
The following paragraphs give further explanaon of the movements in each line of the Finance P&L.
32The Finance business now includes all the Finance profits generated from Lipsy sales. Half of this profit was previously reported within the Lipsy division and shown as a cost in NEXT Finance overheads (2023: £11.7m, 2022: £7.7m). See page 19 and Appendix 1 on page 60 for further detail.
33Rounding differences are not adjusted in the table.
Our average customer receivables balance was up +11% compared to last year. The majority of this increase was due to customers building back their balances aer the pandemic, rather than a growth in credit sales (which were only up +3%).
The graph below shows the percentage of outstanding balances paid back each month since 2019. The payment rate is an indirect measure of the financ ial health of c onsumer balance sheets; the more our customers pay back each month, the less pressure there is likely to be on their finances.
Customers significantly increased the rate at which they paid down their balances from May 2020 as their other expenditure decreased during the first COVID lockdown. As the economy reopened, from March 2021, customers' monthly payments fell back to more normal levels, albeit they have remained above pre-COVID levels. Over the coming year, we expect payment rates to reduce to levels closer to, but sll above, the 2019 average.
The graph below shows net customer receivables as a percentage of the previous twelve months' credit sales. This is another indirect measure of the health of consumer balance sheets (the lower the number, the less financial pressure there is likely to be). It can be seen that customer balances relave to sales have connued on an upward trajectory over the course of 2022, but they remain comfortably below pre-pandemic levels.
Interest income was up +10% versus last year, broadly in line with the +11% growth in average customer receivables.
Note 3 Bad debt charge and default rates
The bad debt charge of £26m was £1m lower than last year, despite the fact that credit sales rose in the period and would normally result in an overall increase in bad debt charge. The unexpected decline in bad debt is explained by a £2m provision release in the first half of the year.
| Bad debt walk forward | £m |
|---|---|
| Bad debt charge January 2022 | (27) |
| Higher credit sales (+3%) | (1) |
| Bad debt charge before provision release | (28) |
| Provision release (mainly COVID) | 2 |
| Bad debt charge January 2023 | (26) |
The chart below shows:
34Default rates are net of expected recoveries and presented as a percentage of the average customer receivables balance.
Overheads were up +3% versus last year, mainly due to increased spending on Technology.
The cost of funding is an internal interest recharge from the Group based on the assumpon that 85% of customer receivables are funded by debt lent by the Group to the NEXT Finance business. The year on year growth of +11% is in line with the growth in average customer receivables.
In our Half Year Report, we outlined a number of potenal effects on our Finance business of a deterioraon in consumer finances:
Six months on, we have seen lile further evidence of any deterioraon. Spending has been resilient, payment rates have decreased but remained above pre-pandemic levels, and arrears and default rates have remained at relavely low levels. At present, there is lile evidence of distress in our customer receivables book. As the effects of mortgage rate rises start to flow through into household budgets and energy bills remain elevated, we may start to see a departure from the current levels of stability. The risk of this has been provided for in our bad debt provisions, which allow for a significant increase in default rates compared to today's level.
In the year ahead , we ancipate that NEXT Finance will generate a profit (before cost of funding) of £219m , which would be up +7% on 2022/23. Aer the cost of funding recharge, we ancipate net profit of £172m which would be up +1% versus 2022/23.
| £m | Jan 2024 (e) | Jan 2023 | Var % | |
|---|---|---|---|---|
| Credit sales | 2,008 | 2,035 | - 1% | |
| Average customer receivables | note 1 | 1,242 | 1,179 | +5% |
| Interest income | note 2 | 297 | 274 | +8% |
| Bad debt charge | note 3 | (31) | (26) | +20% |
| Overheads | note 4 | (47) | (43) | +8% |
| Profit before cost of funding | 219 | 205 | +7% | |
| Cost of funding | note 5 | (46) | (34) | +35% |
| Net profit | 172 | 171 | +1% | |
| ROCE (aer cost of funding) | 13.9% | 14.5% | ||
| Closing customer receivables | 1,345 | 1,255 | +7% |
We expect average customer receivables to rise by +5%, close to the increase in the year end debt, which is forecast to rise by +7% to £1,345m.
Underlying interest income is expected to increase by +8%, this is more than the increase in average receivables (up +5%). The addional growth is due to a 1% 35increase in the APR charged on next pay accounts, effecve from 29 March 2023.
The bad debt charge is forecast to increase by +20% versus last year. Underlying bad debt is expected to move in line with credit sales (-1%), but the prior year benefited from (1) net provision releases of £2m and (2) the £3m sale of insolvent debt 36, which had been wrien-off. We do not expect to repeat this sale in the year ahead.
Overheads are forecast to be up +8% versus last year, due to inflaonary cost increases and increased spending on Technology.
The cost of funding recharge is expected to increase by +£12m (+35% on last year). Of this, £2m is due to growth in average receivables and the remaining £10m is due to the effect of higher bank interest rates. The funding for the Finance business is provided by the NEXT Group 37which is forecast to make addional profit of £5m from this lending in the year ahead. This is essenally because expected average Group borrowings of £851m are lower than its expected average lending of £1,056m to the Finance business, as explained in the table below.
| Group lending to NEXT Finance £m | Year ending Jan 2024 (e) |
Year ending Jan 2023 |
Variance |
|---|---|---|---|
| Average Group external borrowing (for reference) | 851 | 859 | (8) |
| Average NEXT Finance borrowing (for reference) | 1,056 | 1,002 | 54 |
| Group underlying net external interest rate | 4.4% | 3.4% | +1.0% |
| Interest charged by Group to NEXT Finance | (46) | (34) | (12) |
| Underlying net external interest cost for Group | (37) | (30) | (7) |
| Group profit on its lending to NEXT Finance | 9 | 4 | 5 |
35APR is set to rise from 23.9% to 24.9%.
36There were similar "non-recurring" recoveries in the year ending January 2022.
37We assume that the Group funds 85% of the Finance business's receivables, with the balance being funded by the Finance business's noonal equity.
We currently have four clients (Reiss, GAP, Victoria's Secret and Laura Ashley) trading on Total Plaorm (TP). JoJo Maman Bébé will commence trading on Total Plaorm in May 2023. We aim to launch MADE.com UK website by August 2023. Joules is scheduled to launch in March/April 2024.
In the year to January 2023 Total Plaorm generated £144.4m of revenue and £21.8m of profit. Sales from connuing partners 38were £125.6m which generated £22.2m of profit 39 .
Total Plaorm sales are a combinaon of two different types of revenue streams:
Profit was generated through a combinaon of:
| Connuing clients Total Plaorm - £m | Jan 2024 (e) | Jan 2023 | Jan 2022 |
|---|---|---|---|
| Gross transacon value of our client sales on the plaorm | 158.1 | 110.3 | 12.7 |
| Income from services provided on cost-plus basis | 18.8 | 15.3 | 0.0 |
| TOTAL PLATFORM SALES | 176.9 | 125.6 | 12.7 |
| Total Plaorm profit on connuing acvies | 9.2 | 5.4 | 0.2 |
| Total Plaorm margin % | 5.2% | 4.3% | 1.6% |
| Underlying equity profit | 13.0 | 10.8 | 4.8 |
| Deferred tax asset (historical) | 1.3 | 3.5 | 0.0 |
| Joules equity | (7.0) | (3.0) | 0.0 |
| Preference shares | 4.9 | 4.8 | 2.4 |
| Loan interest | 1.1 | 0.7 | 1.0 |
| Total Group profit from connuing clients and equity | 22.5 | 22.2 | 8.4 |
38As explained in our Half Year results, our two lowest turnover clients (Childsplay and Aubin) have now transioned away from Total Plaorm. This secon details the Total Plaorm trading performance of connuing operaons.
39Equity profit includes our equity shares of Swoon, Aubin and Sealskinz, which are not on Total Plaorm.
Total Plaorm achieved a margin on connuing partners of 4.3%, which was higher than our previous guidance but lower than our target of between 5% to 7%. We are planning for margin in the year ahead to be 5.2%.
One of our acquisions has access to a deferred tax asset relang to historical trading losses. This means that they can parally offset these losses against their current trading profits. Under equity accounng this benefit is reported in NEXT's pre-tax profits.
Joules incurred some one-off costs relang to its transion from administraon in the year to January 2023, resulng in the business making a £4m loss, of which NEXT's share is £3m. The Joules team is making progress, but we now believe it will take around 12 months to turn the business around as the business adjusts to much lower levels of discounng and promoon. In the year to January 2024, we are forecasng Joules to make a loss. NEXT's share of this loss is £7m.
| Client | Launch date |
Equity interest | Descripon |
|---|---|---|---|
| Laura Ashley | Mar 2021 |
None | Iconic Brish Home and fashion brand |
| Victoria's Secret (UK and Ireland) |
May 2021 |
51% share of the UK and Ireland franchise in partnership with Victoria's Secret & Co. |
Global lingerie, clothing and beauty brand |
| Reiss | Feb 2022 |
Increased to 51% in May 2022 in partnership with Warburg Pincus and Reiss family. |
Affordable luxury men's and women's apparel brand |
| GAP (UK and Ireland) |
Aug 2022 |
51% share of UK and Ireland franchise in partnership with GAP Inc. |
US casual fashion brand |
| JoJo Maman Bébé | Q2 2023 |
44% share in partnership with Davidson Kempner. |
Specialist premium maternity and baby clothing |
| MADE.com | Q3 2023 |
100% acquision of brand name, domain names and intellectual property. |
Design-led homeware and furniture brand |
| Joules | Q1 2024 |
74% share in partnership with Tom Joule. | Brish countryside lifestyle fashion brand |
| Disconnued client | End date |
Equity interest | Descripon |
|---|---|---|---|
| Childsplay | Feb 2023 |
None | Luxury childrenswear retailer |
| Aubin | Sept 2022 |
29% 40 which we are retaining | Premium authencally Brish menswear brand |
40Our equity interest in Aubin was originally 33%, which will reduce to 29% following the compleon of a recent equity raise.
The profits and losses in the year from other business acvies, including our other Group trading companies and non-trading acvies, are summarised below along with last year, three years ago (pre-COVID) and our guidance for the year ahead.
There are three large and non-recurring items in the year to January 2023, within property provisions, foreign exchange and accelerated acquision costs. For clarity, these are shown separately in the table below. These non-recurring items largely offset each other and so do not significantly distort the profitability of the Group. These and other significant changes in profit are explained below the table.
PLEASE NOTE: In contrast to the analysis of our Online and Retail businesses, the analysis for Group businesses, which were less affected by lockdown, focuses on the performance versus last year.
| £m | Jan 2024 (e) | Jan 2023 | Jan 2022 | Jan 2020 |
|---|---|---|---|---|
| NEXT Sourcing | 25.0 | 33.1 | 28.0 | 32.2 |
| Franchise and Retail internaonal | 7.8 | 7.0 | 5.8 | 6.4 |
| Property transacon profit | 0.0 | 14.2 | 13.8 | (0.8) |
| Central costs and other | (42.0) | (41.9) | (40.5) | (22.0) |
| Total underlying profit | (9.2) | 12.4 | 7.1 | 15.8 |
| Non-recurring items | ||||
| Property provisions | 0.0 | 22.8 | (3.0) | (0.9) |
| Foreign exchange | 16.0 | (16.3) | 2.5 | (1.5) |
| Accelerated acquision costs | 0.0 | (5.4) | 0.0 | - |
| Total non-recurring items | 16.0 | 1.1 | (0.5) | (2.4) |
| Total profit | 6.8 | 13.5 | 6.6 | 13.4 |
NEXT Sourcing (NS) is our wholly-owned overseas sourcing agent, it procures around 37% of NEXT branded products. Profit in the year to January 2023 increased by +£5.1m to £33.1m. The table below sets out the performance of the business in Pounds and in Dollars. Sales in Dollars were down -3% due to lower NEXT purchases. Profit in Dollars was up +6% largely due to lower incenve costs and other overhead cost savings.
| US Dollars | £ Sterling | ||||
|---|---|---|---|---|---|
| Jan 2023 USD m |
Jan 2022 USD m |
Jan 2023 £m |
Jan 2022 £m |
||
| Sales (mainly inter-company) | 655.9 | 678.9 - 3% | 533.3 | 495.5 | |
| Operang profit | 40.7 | 38.3 +6% | 33.1 | 28.0 | |
| Net margin | 6.2% | 5.6% | 6.2% | 5.6% | |
| Exchange rate | 1.23 | 1.37 |
In the year ahead, NS sales, in Dollars, are expected to reduce by -15%, mainly due to the weaker Pound. This, combined with cost of living increases, means we are forecasng profit for the year ahead to be around £25m.
Profit of £14.2m in the year ending January 2023 came mainly from two warehouse sale and leaseback transacons.
Central costs of £41.9m were £1.4m higher than in the prior year primarily as a result of professional fees associated with acquisions.
The net movement in property provisions was a release of £22.8m.
Our Retail business has performed beer than expected in the last twelve months. As a result of improved sales and profit, and our outlook for sales and profit in the year ahead, we have reduced our store impairment provisions by £34.9m . Aer this release, the overall provision remaining is c.£16m and reflects our projecon that only five of our stores will not generate a posive cash flow over the life of their lease.
We completed a full review of our provisions required for dilapidaon costs upon exing Retail stores and based on latest esmates we have increased our provisions by -£12.1m .
The loss of £16.3m relates to FX contracts that were entered into earlier in the year when the Pound was weaker against the Dollar. Since then the Pound has strengthened and therefore the value of these contracts has decreased. Due to the structure of these FX contracts, we are unable to use Hedge Accounng, which means (unhelpfully) we see a large debit this year which will be followed by a large credit next year.
We have accelerated the selement of an earn-out agreement that was put in place when we bought Lipsy 15 years ago.
The interest charge in the P&L is made up of four categories, as set out below, along with last year and three years ago. Our forecast for the year ahead is also shown in the le hand column.
| £m | Jan 2024 (e) | Jan 2023 | Jan 2022 | Jan 2020 |
|---|---|---|---|---|
| Net external interest | (37.7) | (30.3) | (35.3) | (43.6) |
| Reiss preference share income | 4.9 | 4.8 | 2.4 | - |
| Total Plaorm loan interest income | 1.1 | 0.7 | 1.0 | - |
| Lease interest | (46.7) | (47.3) | (50.4) | (61.8) |
| Total interest | (78.4) | (72.1) | (82.3) | (105.4) |
Net external interest of £30.3m was £5m (-14%) lower than last year. This reducon is due to the repayment of the £325m bond in October 2021, which was parally offset by an increase in the floang rate interest payable on other instruments. In the year ahead, we expect net external interest to increase to £37.7m due to higher interest rates, which affect our floang rate debt.
Reiss preference shares were acquired as part of our investment, accruing interest at a rate of 8% per annum (£4.8m). This is higher than the £2.4m in the prior year, due to the increase in equity stake from 25% to 51% in May 2022. We have also made commercial loans to four of our Total Plaorm clients, which generated £0.7m of loan interest.
The reducon in lease interest is the result of the fall in average lease debt, from £1,122m (January 2022) to £1,040m (January 2023). Lease debt has decreased due to the net effect of (1) lower rents and shorter terms when we have renewed store leases, offset by (2) our new warehouse lease, Elmsall 3, in May 2022.
Our effecve tax rate (ETR) for the year to January 2023 was 18.25%. This is lower than the UK headline rate of 19%, as set out below.
| Jan 2023 | |
|---|---|
| Headline UK Corporaon Tax rate | 19.00% |
| Provision releases | - 0.50% |
| Equity profit, which has already been taxed | - 0.45% |
| Non-deducble items (e.g. acquision fees) | +0.20% |
| ETR | 18.25% |
In the year ahead we forecast an ETR of 23.5%. This increase is mainly due to the UK headline rate increasing from 19% to 25%, effecve April 2023. The Group's ETR remains lower than the 25% headline rate because: (1) February and March are at the lower rate of 19% and (2) profit from equity investments are reported on a post-tax basis in NEXT's accounts.
On the IFRS accounng basis, the valuaon of our defined benefit schemes' surplus has increased from £157m as at January 2022 to £157.5m as at January 2023. Further detail is provided in Note 6 of the financial statements.
During the year we have connued to make progress on our key areas of focus, which are summarised below.
Our Code of Pracce team conducted 2,039 audits of the worldwide factories supplying NEXT products. With travel restricons eased post-COVID, 93% of audits were conducted in person with two-thirds of the audits unannounced. 89% of the audits achieved a rang of between 1 to 3 (Excellent to Fair) with steps taken to address any issues idenfied from the remaining audits.
By 2030 we aim to reduce our direct and indirect absolute carbon emissions (from NEXT energy consumpon) by 55% against a 2016/17 baseline (Scope 1 & 2) and reduce our other indirect emissions from NEXT's operaons by 40% against a 2019/20 baseline per £1m sales (Scope 3).
In the year to January 2023 our Scope 1 and 2 emissions were reduced by 47% and Scope 3 by 29% relave to the baseline figures.
We aim to source 100% of the main raw materials (Coon, Polyester, Man-Made Cellulosics, Wool, Timber and Leather) we use through known, responsible or cerfied routes by 2025. Progress in relaon to (1) coon (our most significant raw material) and (2) total main raw materials used is set out in the table below.
| % of raw materials responsibly sourced | Jan 2023 | Jan 2022 | Var % |
|---|---|---|---|
| Coon | 67% | 49% | +18% |
| Total main raw materials | 54% | 42% | +12% |
We have been gathering data to record our progress against a baseline of our plasc usage in 2021. The targets we are using are aligned with external stakeholder groups, WRAP Plasc Pact and the Ellen MacArthur Foundaon. Our 2025 targets are:
| Reducon in the use of virgin plascs | 50% |
|---|---|
| Reducon in overall packa ging (relave to sales) | 25% |
| Percentage of packaging to be reusable or recyclable | 100% |
| Plasc packaging to contain at least 30% recycled content | 100% |
Our inial results are encouraging. One of our targets is for 100% of our packaging to be reusable or recyclable and, so far, 96% of our packaging meets this target.
In the year to January 2023 we generated £268m of surplus cash. Surplus cash is defined as cash aer interest, tax, capital expenditure and investments, but before distribuons to shareholders. The table below sets out a summarised cash flow for the year, along with last year, three years ago and our forecast for the year ahead.
Net debt (excluding lease debt) incre ased in the year by £197m to £797m. For further details on individual cash flow movements please see the page references given in the table.
In the year ahead, based on the guidance given on page 24, we expect to generate £467m of surplus cash before distribuons.
| £m | Jan 2024 (e) |
Jan 2023 |
Jan 2022 |
Jan 2020 |
|
|---|---|---|---|---|---|
| Profit before tax | 795 | 870 | 823 | 749 | |
| Depreciaon/impairment on plant, property and equipment | 120 | 110 | 111 | 125 | |
| Capital expenditure | (see page 55) | (170) | (206) | (184) | (139) |
| Tax paid | (165) | (151) | (125) | (138) | |
| Working capital/other | (see page 56) | (18) | (225) | (40) | (72) |
| Surplus cash from trading acvies | 562 | 398 | 585 | 525 | |
| Customer receivables | (see page 44) | (90) | (92) | (135) | (27) |
| Investments | |||||
| Investments in third-party brands | (see page 57) | - | (91) | (33) 42 | - |
| Property stock | (see page 57) | (5) | 53 | (54) | - |
| Surplus cash before distribuon to shareholders | 467 | 268 | 363 | 498 | |
| Shareholder returns | (see page 58) | ||||
| Share buybacks | (220) | (228) | (9) | (300) | |
| Special dividends | - | - | (344) | - | |
| Ordinary dividends | (250) | (237) | - | (214) | |
| Cash flow aer distribuon to shareholders | (3) | (197) | 10 | (16) | |
| Bond repayment | - | - | (325) | - | |
| Cash flow aer bond repayment | (3) | (197) | (315) | (16) | |
| Closing net debt (excluding lease debt) | (800) | (797) | (600) | (1,112) | |
| Facilies (aer repayment of bond) | 1,250 | 1,250 | 1,250 | 1,575 | |
| Headroom | 450 | 453 | 650 | 463 |
41The cash flow reflects the impact of IFRS 16. Depreciaon on right-of-use assets and lease payments are included in working capital.
42A £10m loan to Reiss in the year ending January 2022, previously reported in this line, has been recategorised as working capital. The loan was repaid in the year ending January 2023.
The table below sets out our capital expenditure for the year to January 2023 and, for comparison, the prior three years. The first column shows our outlook for the year ahead.
| £m | Jan 2024 (e) | Jan 2023 | Jan 2022 | Jan 2021 | Jan 2020 |
|---|---|---|---|---|---|
| Warehouse | 75 | 117 | 124 | 100 | 87 |
| Technology | 55 | 53 | 29 | 21 | 9 |
| Total warehouse and Technology | 130 | 170 | 153 | 121 | 96 |
| Retail space expansion | 6 | 8 | 14 | 29 | 24 |
| Retail cosmec/maintenance capex | 26 | 26 | 15 | 8 | 14 |
| Total Retail expenditure | 32 | 34 | 29 | 37 | 38 |
| Head office infrastructure and other | 8 | 2 | 2 | 5 | 5 |
| Total capital expenditure | 170 | 206 | 184 | 163 | 139 |
In the year to January 2023 warehouse capex, at £117m, includes the connued investment of £77m in our new, highly automated, boxed warehouse (Elmsall 3). We plan to deliver Elmsall 3 automaon in phases throughout 2023 and 2024 (as shown in the graphic below). The warehouse building is already being used for convenonal manual storage and customer picking, as an overflow for our exisng operaons. Elmsall 3, once complete, will deliver an esmated increase in boxed capacity of 50%, with marginal labour cost per unit around 40% lower than the equivalent cost today. These savings will not be fully achieved unl the automaon is completed in the year ending January 2025.
In the year ahead, we ancipate that warehouse capex will reduce to £75m, which includes the compleon of Elmsall 3 automaon projects, the extension of our pallesed warehouse in Doncaster and the refit of our returns operaon for hanging garments.
Warehouse Pick and Pack Capacity Volumes (Units), Online Boxed Warehousing
Capex in the year of £53m comprised £15m on hardware and £38m of development costs. The esmate is higher than the £39m 43given in September's Half Year Report, because we have been able to recruit developers at a faster rate than we had previously thought possible. In addion, we have accelerated some of our planned hardware upgrades. Around £20m of our technology capex in the year ahead relates to the soware modernisaon projects outlined in previous reports (see Half Year Report, September 2021, pages 14-15), the other main areas of expenditure are set out in the table below.
| Technology capex by category | Jan 2024 (e) | Jan 2023 |
|---|---|---|
| Modernisaon projects | 25 | 20 |
| Total Plaorm, LABEL and warehouse projects | 9 | 10 |
| Security and head office department projects | 4 | 5 |
| Small development projects | 5 | 3 |
| Hardware | 12 | 15 |
| Total Technology capex | 55 | 53 |
Capex on Retail space expansion reduced to £8m, down from £14m in the prior year, as a result of fewer new store openings. Cosmec and maintenance spend was £26m compared to £15m in the prior year. Expenditure on cosmec refits remains focused on those stores where we have extended the lease. Total store capex in the year ahead is expected to be broadly in line with last year, at £32m.
In the year ahead, expenditure on head office infrastructure is expected to increase by +£6m to £8m. The majority of this increase relates to a new photo studio, which is being relocated from one of our regional distribuon centres to a new bespoke standalone facility. This move will increase our studio capacity and allow more of our photography to be completed in-house.
In the year to January 2023 the net cash oulow on working capital and other items totalled -£225m. The four largest oulows were as follows:
43This esmate included £2m of capex for Head Office and other central projects .
Investments in third-party brands are listed below, along with NEXT's equity stake, where applicable.
| £m | Equity stake | Jan 2023 | Jan 2022 |
|---|---|---|---|
| Reiss | 51.0% | (45.3) | (33.0) |
| Reiss dividend | 15.3 | - | |
| Joules | 74.0% | (15.7) | - |
| Joules loan | (13.1) | - | |
| Joules head office | (7.4) | - | |
| JoJo Maman Bébé | 44.0% | (15.9) | - |
| Swoon | 25.0% | (3.5) | - |
| MADE.com | n/a | (3.4) | - |
| Sealskinz | 19.9% | (1.9) | - |
| Total investments | (90.9) | (33.0) |
In the year to January 2022 we invested £33m in a 25% stake in Reiss. In May 2022 we exercised our opon to buy a further 26% stake for £45m, taking our total shareholding to 51%. During the year we received our first dividend from the investment in Reiss of £15m.
In December 2022 we acquired the trade and assets of Joules out of administraon for £28.8m. This was made up of £15.7m for a 74% equity stake and £13.1m in the form of a loan, which was required by Joules to acquire the trade and assets from the administrators. This acquision was done in partnership with Tom Joule, who has a 26% stake in the new business. Joules connues to trade through its retail stores and its own website and will move onto NEXT's Total Plaorm in Q1 2024. We also purchased Joules' head office property for £7.4m.
In April 2022 we invested £15.9m in a 44% equity stake in JoJo Maman Bebe. The deal was completed in partnership with Davidson Kempner. Subject to certain contractual condions a further £1.3m may be payable as final consideraon.
The sale and leaseback of the new Elmsall 3 warehouse was completed in May 2022, resulng in a net cash inflow of £64m. This inflow is the combinaon of £91m received on the sale, less £16m of build costs in the year, less the related profit on property sale of £11m (the cash flow for which is accounted for in the P&L).
| £m | Jan 2023 | Jan 2022 |
|---|---|---|
| Elmsall 3 warehouse sale and leaseback | 64.1 | (29.6) |
| Development costs for our pallesed warehouse extension in Doncaster | (11.6) | |
| Land acquision for potenal future development | (24.0) | |
| Total | 52.5 | (53.6) |
44See Appendix 2 for detail on how each of these investments are accounted for in the statutory financial statements.
The Company remains commied to its long term policy of returning surplus cash, that cannot be profitably invested in the business, to shareholders. Surplus cash (aer interest, tax, capital expenditure, investments or acquisions and ordinary dividends) will be returned to shareholders by way of share buybacks or special dividends. Any share buybacks would be subject to achieving a minimum 8% equivalent rate of return (ERR). As a reminder, ERR is calculated by dividing the ancipated pre-tax profits by the current market capitalisaon 45. During the year we returned to our pre-pandemic ordinary dividend cycle.
An ordinary dividend of 127p was paid on 1 August 2022 and an interim dividend of 66p in respect of the year to January 2023 was paid on 3 January 2023. The Board has proposed a final ordinary dividend of 140p, to be paid on 1 August 2023, taking the total ordinary dividends for the year to 206p. This is subject to approval by shareholders at the Annual General Meeng to be held on 18 May 2023. Shares will trade ex-dividend from 6 July 2023 and the record date will be 7 July 2023.
In the year ending January 2023 we purchased 3.5m shares at an average share price of £63.85, totalling £224m. This reduced the number of shares in issue by 2.6% since the January 2022 year end and represents an ERR of 10.7%. In addion, in early February 2022, we paid £4m for shares acquired in January 2022, so total payments for buybacks in the financial year 2022/23 were £228m .
Based on achieving our current profit guidance of £795m, it is our intenon to maintain our dividend per share at 206p (66p interim and 140p final), in line with the dividend paid for the year ending January 2023. This would equate to a total pay-out of £250m and represents 41% of our forecast post tax profit, a cover of 2.4 mes.
For the purpose of this guidance we have esmated that, aer paying ordinary dividends, we will return £220m of surplus cash to shareholders by way of share buybacks, although this figure may reduce if we make further investments. We esmate that these buybacks, along with those in the last year, will boost pre-tax EPS by +2.3%. This enhancement is more than offset by the increase in the Corporaon Tax rate, which reduces EPS by -6.1%. See page 25.
45Market capitalisaon is calculated based on shares in circulaon, so excludes shares in the NEXT ESOT.
Our current bond and bank facilies total £1,250m.
Based on our cash flow guidance for the year ahead, we ancipate that our net debt will peak in August at £1,020m, comfortably within our bond and bank facilies of £1,250m, and will end the year at around £800m.
The chart below sets out our bond and bank facilies. For context, our year end forecast for customer receivables is £1.34bn, significantly higher than the value of our net debt.
Our first quarter Trading Statement will cover the thirteen weeks to Saturday 29 April 2023 and is scheduled for Thursday 4 May 2023.
Lord Wolfson of Aspley Guise Chief Execuve 29 March 2023
As set out on page 19 we have changed how we present the profits for our key divisions in the Chief Execuve's Review because of the growth of Lipsy and Total Plaorm, which are now a more significant part of the overall Group performance. We believe these changes help improve our reporng, providing greater clarity as the business evolves and different parts of the business emerge and grow.
To ensure our results in the Chief Execuve's Review and statutory accounts are presented on a consistent basis, we have restated the comparave periods (January 2022 and January 2020) for these changes. The se changes are to allocaons only - there is no impact on overall Group profit.
In the past we have split the profit we generate from selling Lipsy goods through the NEXT website. Half the profit was reported in our Online division. The other half we reported in the Lipsy division which was within Other Group Acvies, along with Property and Sourcing. However, because all of Lipsy's sales were reported in the Online division, this served to understate the margin of the Online business. Three years ago, Lipsy's 'share' of Online profit was immaterial at only £6.8m; today the number would be £27.5m.
To correct this issue, we are now reporng all of Lipsy's Online sales and profits through the Online division. We have adjusted the relevant numbers from last year and three years ago, so that comparisons are on a like-for-like basis. We have also amended our reporng for the Finance division, where half of the Finance profit on Lipsy sales was previously reported in Lipsy.
The table below summarises how the Lipsy profit on the previous basis has been allocated to each area of the business. This shows, for example, that of the £20.5m reported profit in January 2022, £16.7m has now been allocated into LABEL, £1.3m into Overseas, £7.7m into Finance and the residual central costs of £5.2m have now been allocated into the overall Group central costs.
| £m | Jan 2023 | Jan 2022 | Jan 2020 |
|---|---|---|---|
| Lipsy profit (previous basis) | 27.1 | 20.5 | 13.0 |
| Allocaon on restated basis | |||
| LABEL | 24.9 | 16.7 | 5.9 |
| Overseas | 2.6 | 1.3 | 0.9 |
| Total Online | 27.5 | 18.0 | 6.8 |
| Finance | 11.7 | 7.7 | 6.2 |
| Central costs and other | (12.1) | (5.2) | - |
| Total Lipsy allocaon | 27.1 | 20.5 | 13.0 |
Last year, the profit on Total Plaorm was reported across two business areas: (1) profit on sales was reported within the Online division and (2) equity returns were reported within 'Sourcing and Other'.
The Total Plaorm business has grown significantly in the last 12 months and therefore sales and profits will now be presented within its own segment. As a result, the prior year segment revenue and profits have been restated so that all Total Plaorm related profit is presented in its own segment. Total Plaorm did not exist in 2019/20 and hence no restatement is required for that period. The impact is summarised below:
The impact of these two restatements by division is set out in the followin g tables.
Please note that the figures given in the tables below have not been adjusted for rounding/casng differences.
| PROFIT £m | Jan 2023 old basis |
Lipsy adjustment |
Total Plaorm adjustment |
Jan 2023 new basis |
|---|---|---|---|---|
| Online | 444.9 | 27.5 | (5.1) | 467.3 |
| Retail | 240.5 | - | - | 240.5 |
| Finance (aer funding costs) | 158.8 | 11.7 | - | 170.5 |
| Profit from Trading | 844.2 | 39.2 | (5.1) | 878.2 |
| Total Plaorm (inc equity) | - | - | 16.3 | 16.3 |
| Sourcing, Property, FX & Other | 64.0 | (39.2) | (11.2) | 13.6 |
| Recharge of interest to Finance | 34.4 | - | - | 34.4 |
| Operang profit 46 | 942.6 | - | - | 942.6 |
| PROFIT £m | Jan 2022 previously reported |
Lipsy adjustment |
Total Plaorm adjustment |
Jan 2022 restated |
|---|---|---|---|---|
| Online | 588.5 | 18.0 | (2.1) | 604.4 |
| Retail | 107.0 | - | - | 107.0 |
| Finance (aer funding costs) | 141.8 | 7.7 | - | 149.5 |
| Profit from Trading | 837.3 | 25.7 | (2.1) | 860.9 |
| Total Plaorm (inc equity) | - | - | 6.9 | 6.9 |
| Sourcing, Property, FX & Other | 37.2 | (25.7) | (4.7) | 6.8 |
| Recharge of interest to Finance | 30.9 | - | - | 30.9 |
| Operang profit | 905.4 | - | - | 905.4 |
| PROFIT £m | Jan 2020 previously reported |
Lipsy adjustment |
Total Plaorm adjustment |
Jan 2020 restated |
|---|---|---|---|---|
| Online | 410.5 | 6.8 | - | 417.3 |
| Retail | 234.0 | - | - | 234.0 |
| Finance (aer funding costs) | 146.7 | 6.2 | 152.9 | |
| Profit from Trading | 791.2 | 13.0 | - | 804.2 |
| Total Plaorm (inc equity) | - | - | - | - |
| Sourcing, Property, FX & Other | 26.4 | (13.0) | - | 13.4 |
| Recharge of interest to Finance | 36.3 | - | 36.3 | |
| Operang profit | 853.9 | - | - | 853.9 |
46Operang profit excludes the minority interests in Joules.
The financial informaon presented in pages 2 to 59 is used by management in assessing business performance. It is also the financial informaon used to inform business decisions and investment appraisals. Some of these financial metrics and performance measures are not prepared on a full IFRS statutory accounng basis. It is common for these performance measures to be called 'Alternave Performance Measures' (APMs).
An explanaon of the APMs used by the business is provided in the glossary.
In this appendix we provide a reconciliaon between APMs and their statutory equivalents for the following key areas:
In common with many retailers, we use 'Total Sales' and similar metrics to assess the performance of the business, and not statutory revenue. We have applied this approach consistently in prior years and in our Trading Statements. It is our view that this provides both a useful and necessary basis for understanding the Group's performance and results.
Total Trading sales include the sales of all the stock we own and the gross transacon value of sales of LABEL products sold on a commission basis.
Total Group sales include sales through Total Plaorm. Total Plaorm sales consist mainly of the gross transacon value of client sales on Total Plaorm websites, but it also includes £18m of wholesale, licensing sales and revenue from services provided on a cost plus basis. Group sales also include sales from our Franchise division, sales through NEXT Sourcing (our sourcing company), Joules and property income.
Statutory sales are Total Group sales less LABEL commission sales and less Total Plaorm sales plus LABEL and Total Plaorm commissions, plus other income as summarised in the table below:
| £m | Jan 2023 | Jan 2022 |
|---|---|---|
| Total Group sales | 5,414.5 | 4,861.8 |
| less LABEL & Overseas commission sales (full price and markdown) | - 553.8 | - 450.3 |
| less Total Plaorm sales | - 144.4 | - 39.1 |
| plus commission earned on LABEL sales | +207.5 | +169.5 |
| plus commission earned on Total Plaorm sales | +24.6 | +10.6 |
| plus Total Plaorm wholesale, licensing and cost plus revenues | +18.2 | +0.6 |
| plus other income (e.g. delivery charges) | +67.4 | +72.8 |
| Total Group statutory sales | 5,034.0 | 4,625.9 |
During the year NEXT acquired 74% of Joules with the remaining 26% acquired by Tom Joule. The share held by Tom Joule is known, for statutory reporng purposes, as a 'non-controlling interest' or somemes referred to as a 'minority interest'.
For statutory reporng purposes, 100% of the Joules business is consolidated into the NEXT group results. At the boom of the statutory income statement the element of the profit aributable to NEXT shareholders, being 74% of the Joules profit aer tax, is then presented with the residual element shown as being the profit aributable to non-controlling interests (i.e. the 'minority interest').
For the purposes of the CEO report, the effect of the minority interest is removed from the divisional profits and the profit before tax. This means that the following lines show 74% of the Joules results:
This is consistent with how management assesses and measures its performance for internal reporng and management purposes. The reconciliaon between the CEO report and Statutory operang profit, interest and profit before tax is shown below for reference.
| CEO report | Statutory reporng | Difference | |
|---|---|---|---|
| Operang profit | 942.5 | 941.5 | 1.0 |
| Finance income | 5.8 | 5.7 | 0.1 |
| Finance costs | (77.9) | (77.9) | 0.0 |
| Profit before tax | 870.4 | 869.3 | 1.1 |
During the year NEXT has invested in six third-party brands. The table on page 57 of the CEO report sets out the cash cost of these investments.
The legal structure of these investments differs from transacon to transacon and, as a result, the statutory reporng for these transacons may differ from the investment summary set out on page 57 of the CEO report. The table below shows how each transacon is accounted for in the statutory financial statements.
| Investment per CEO report | Value as per CEO report £m |
Equity stake % |
Statutory accounng | Note |
|---|---|---|---|---|
| Reiss | (45.3) | 51% | Equity accounng | 1 |
| Reiss dividend | 15.3 | n/a | Equity accounng | 1 |
| Joules (equity and loan) | (28.8) | 74% | Consolidated | 2 |
| Joules head office | (7.4) | n/a | Plant, property & equipment | 3 |
| JoJo Maman Bébé | (15.9) | 44% | Equity accounng | 4 |
| Swoon | (3.5) | 25% | Equity accounng | 4 |
| MADE.com | (3.4) | n/a | Intangible | 5 |
| Sealskinz | (1.9) | 19.9% | Investment accounng | 6 |
| Total investments | (90.9) |
NEXT increased its equity stake in Reiss from 25% to 51%. While this provides NEXT with the largest shareholding, it does not give NEXT control of the Reiss business. Instead, NEXT has joint control as certain operaonal decisions require agreement of all shareholders. As a result, the investment in Reiss is reported using 'Equity Accounng'. In summary, this means that:
The full accounng policy for 'Equity Accounng' is set out on page 180 of the 2022 Annual Report and Accounts.
NEXT acquired a 74% controlling interest in a company called Harborough Hare Holdings Limited ('Joules'). As NEXT has control of Joules (and its subsidiaries) we consolidate their results into the NEXT Group financial statements. In summary, this means that:
In the financial year 2022/23, the Joules Group reported a loss of -£4m.
Further details on the Group accounng policy for consolidated investments is included on page 178 of the 2022 Annual Report and Accounts.
The acquision of the Joules head office was carried out at the same me as the wider Joules acquision. It has therefore been included in investments. For statutory reporng purposes this is treated as the acquision of a property in Plant, Property and Equipment.
NEXT has taken a non-controlling equity stake in both businesses. However, we consider that from a statutory reporng perspecve NEXT has 'significant influence' and therefore, like Reiss, these have been equity accounted for in the statutory financial statements. The process and basis is therefore the same as set out for the Reiss equity noted above.
NEXT acquired the brand name, domain names and intellectual property of MADE.com for £3.4m. This is an acquision of an intangible asset and therefore for statutory reporng purposes has been included as an addion within the intangible assets line. It will be depreciated over its useful life.
Full detail on the Group accounng policy for intangible assets is included on page 180 of the 2022 Annual Report and Accounts.
NEXT acquired a 19.9% equity stake in Sealskinz. NEXT does not have 'significant influence' over Sealskinz due to the large number of other shareholders, which dilutes the influence of any one shareholder. NEXT has therefore recognised this as an investment in its balance sheet and adjusts this each year for the fair value movement. Any gains or losses are then reported within the Income Statement.
The capital expenditure in the cash flow presented in the CEO report is presented based on the internal operaonal view of capital expenditure. From a statutory viewpoint, there are some differences which are reconciled below.
| Jan 2023 £m | |
|---|---|
| Capital expenditure per CEO report | 206.0 |
| Add MADE.com | 3.4 |
| Add acquision of Joules head office | 7.4 |
| Add property build costs | 31.1 |
| Less capital accruals | (1.1) |
| Capital expenditure per statutory reporng | 246.8 |
In the CEO report, expenditure on MADE.com and Joules head office has been presented as part of the Investment costs while the Property build costs are shown separately within the Property costs secon. Capital accruals are shown as part of working capital in the cash flow in the CEO report.
The cash flow statement presented in the CEO report is consistent with the cash flow statement used by management in its decision making processes and internal reporng. It is this view of the cash flows, and in parcular the 'Surplus Cash' line, that informs decision making on distribuons. However, this approach, while used by management, is not consistent with the presentaon of cash flows on a statutory basis.
In this secon we provide a walk forward from Surplus Cash presented in the CEO report cash flow to 'net cash from operang acvies' in the statutory cash flow. The overall total cash flow is the same the difference is limited to presentaon.
The statutory cash flow is split into three main secons:
| Note | £m | |
|---|---|---|
| Surplus cash from trading acvies | 1 | 398.4 |
| Add back interest charge to get to Group PBT | 2 | 71.1 |
| Depreciaon / impairment on plant, property and equipment | 3 | (16.7) |
| Capital expenditure | 4 | 205.8 |
| Purchase of shares by ESOT | 5 | 124.0 |
| Disposal of shares by ESOT | 5 | (34.3) |
| Customer receivables | 6 | (92.0) |
| Lease payments (net of incenves) | 7 | 157.0 |
| Working capital and other | 8 | (14.5) |
| Net cash from operang acvies - per statutory cash flow | 9 | 798.8 |
Note 1: As per the cash flow statement on page 54 of the CEO report, Surplus Cash from Trading Acvies was £398m for the year to January 2023.
Note 2: The cash flow in the CEO report starts with the NEXT Group profit before tax of £870.4m, which is aer interest costs of £72.2m and removes the Joules non-controlling interest of £1.1m. This differs from the statutory cash flow statement, which starts its cash flow statement with "operang profit" of £941.5m.
Note 3: The cash flow in the CEO report includes the depreciaon, amorsaon, impairment and gains on disposals of our plant, property and equipment including sale and leaseback transacons. In the statutory cash flow these items are presented within operang cash flows and invesng acvies.
Note 4: Management includes the capital expenditure (capex) which it considers to be part of its trading acvity and deducts this capex when calculang Surplus Cash. In the statutory cash flow, all capex is included within invesng acvity and hence not part of operang cash flows. Therefore the capex of £206m in the CEO report has been added back in the bridge above.
Note 5: Surplus cash is recognised aer the purchase and disposal of shares in the ESOT. In contrast they are classified as financing acvity in the statutory cash flow.
Note 6: The customer receivables cash movement relates to the next pay receivables balance. For management purposes, movements in this balance are excluded from Surplus Cash. In contrast, this is included within operang cash flow for statutory reporng.
Note 7: The cash flows associated with our leases, which are predominantly store related, are considered by management to be an integral part of our trading cash flows and hence are included in the calculaon of Surplus Cash. From a statutory perspecve, lease cash flows are included in financing acvity (as a lease is deemed a form of debt).
Note 8: The remaining difference relates to immaterial movements on working capital and other items such as the equity profit from our investments.
Note 9: This value of £798.8m can be reconciled to the line "Net cash from operang acvies" in the statutory cash flow statement.
| 52 weeks to | 52 weeks to | ||
|---|---|---|---|
| 28 January | 29 January | ||
| 2023 | 2022 | ||
| Notes | £m | £m | |
| Continuing operations | |||
| Revenue (including credit account interest) | 2, 3 | 5,034.0 | 4,625.9 |
| Cost of sales | (2,827.7) | (2,625.3) | |
| Impairment losses on customer and other receivables | (31.0) | (28.6) | |
| Gross profit | 2,175.3 | 1,972.0 | |
| Distribution costs | (750.0) | (693.7) | |
| Administrative expenses | (481.8) | (380.2) | |
| Other (losses)/gains | (16.3) | 2.5 | |
| Trading profit | 927.2 | 900.6 | |
| Share of results of associates and joint ventures | 14.3 | 4.8 | |
| Operating profit | 941.5 | 905.4 | |
| Finance income | 5.7 | 4.2 | |
| Finance costs | (77.9) | (86.5) | |
| Profit before taxation | 869.3 | 823.1 | |
| Taxation | (158.6) | (145.6) | |
| Profit for the year | 710.7 | 677.5 | |
| Profit attributable to: | |||
| - Equity holders of the Parent Company | 711.7 | 677.5 | |
| - Non-controlling interests | (1.0) | - | |
| 710.7 | 677.5 | ||
| 52 weeks to | 52 weeks to | ||
| 28 January | 29 January | ||
| Earnings Per Share (Note 4) | 2023 | 2022 | |
| Basic | 573.4p | 530.8p | |
| Diluted | 570.5p | 524.0p |
The Notes 1 to 16 are an integral part of these unaudited consolidated financial statements.
| 52 weeks to 28 | 52 weeks to 29 | |
|---|---|---|
| January 2023 | January 2022 | |
| £m | £m | |
| Profit for the period | 710.7 | 677.5 |
| Other comprehensive income and expenses: | ||
| Items that will not be reclassified to profit or loss | ||
| Actuarial gains on defined benefit pension scheme | 0.6 | 55.1 |
| Tax relating to items which will not be reclassified | (0.1) | (13.8) |
| Subtotal items that will not be reclassified | 0.5 | 41.3 |
| Items that may be reclassified to profit or loss | ||
| Exchange differences on translation of foreign operations | 1.2 | (2.4) |
| Foreign currency cash flow hedges: | ||
| - fair value movements | 79.2 | 36.9 |
| Cost of hedging | ||
| - fair value movements | (0.4) | 0.8 |
| Tax relating to items which may be reclassified | (19.7) | (7.2) |
| Subtotal items that may be reclassified | 60.3 | 28.1 |
| Other comprehensive income for the period | 60.8 | 69.4 |
| Total comprehensive income for the period | 771.5 | 746.9 |
| Total comprehensive income attributable to: | ||
| - Equity holders of the Parent Company | 772.5 | 746.9 |
| - Non-controlling interests | (1.0) | - |
| 771.5 | 746.9 |
| 28 January | 29 January | ||
|---|---|---|---|
| Notes | 2023 £m |
2022 £m |
|
| ASSETS AND LIABILITIES | |||
| Non-current assets | |||
| Property, plant and equipment | 644.8 | 601.1 | |
| Intangible assets | 137.1 | 79.3 | |
| Right-of-use assets | 13 | 662.0 | 639.1 |
| Associates, joint ventures and other investments | 14 | 114.6 | 46.2 |
| Defined benefit pension asset | 6 | 157.5 | 156.9 |
| Other financial assets | 7 | - | 18.0 |
| Deferred tax assets | 33.3 | 34.0 | |
| 1,749.3 | 1,574.6 | ||
| Current assets | |||
| Inventories | 662.2 | 633.0 | |
| Customer and other receivables | 8 | 1,425.5 | 1,280.9 |
| Right of return asset | 32.7 | 24.8 | |
| Other financial assets | 7 | 9.1 | 35.5 |
| Cash and short term deposits | 105.0 | 433.0 | |
| 2,234.5 | 2,407.2 | ||
| Total assets | 3,983.8 | 3,981.8 | |
| Current liabilities | |||
| Bank loans and overdrafts | (102.3) | (233.1) | |
| Trade payables and other liabilities | 9 | (791.1) | (798.4) |
| Lease liabilities | 13 | (146.2) | (162.6) |
| Other financial liabilities | 7 | (40.8) | (1.0) |
| Current tax liabilities | (12.9) | (13.0) | |
| (1,093.3) | (1,208.1) | ||
| Non-current liabilities | |||
| Corporate bonds | 10 | (790.7) | (815.7) |
| Provisions | (33.8) | (21.9) | |
| Lease liabilities | 13 | (877.1) | (894.9) |
| Other financial liabilities | 7 | (9.5) | - |
| Other liabilities | (14.3) | (31.2) | |
| (1,725.4) | (1,763.7) | ||
| Total liabilities | (2,818.7) | (2,971.8) | |
| NET ASSETS | 1,165.1 | 1,010.0 | |
| TOTAL EQUITY | 1,165.1 | 1,010.0 |
| UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |
|---|---|
| £m Share capital |
Share premium account £m |
Capital redemption reserve £m |
ESOT reserve £m |
Cash flow hedge reserve £m |
Cost of hedging reserve £m |
currency £m Foreign translation |
Other reserves £m |
Retained earnings £m |
Total £m |
Non controlling interests £m |
Total equity £m |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At 30 January 2021 | 13.3 | 0.9 | 16.6 | (271.2) | (19.7) | 0.1 | (2.5) | (1,443.8) | 2,367.2 | 660.9 | - | 660.9 |
| Profit for the period | - | - | - | - | - | - | - | - | 677.5 | 677.5 | - | 677.5 |
| Other comprehensive income/(expense) for the period |
- | - | - | - | 29.9 | 0.6 | (2.4) | - | 41.3 | 69.4 | - | 69.4 |
| Total comprehensive income/(expense) for the period |
- | - | - | - | 29.9 | 0.6 | (2.4) | - | 718.8 | 746.9 | - | 746.9 |
| Share buybacks and commitments | - | - | - | - | - | - | - | - | (13.1) | (13.1) | - | (13.1) |
| ESOT share purchases | - | - | - | (151.3) | - | - | - | - | - | (151.3) | - | (151.3) |
| Shares issued by ESOT | - | - | - | 90.8 | - | - | - | - | (24.4) | 66.4 | - | 66.4 |
| Share option charge | - | - | - | - | - | - | - | - | 19.9 | 19.9 | - | 19.9 |
| Reclassified to cost of inventory | - | - | - | - | 21.7 | - | - | - | - | 21.7 | - | 21.7 |
| Tax recognised directly in equity | - | - | - | - | (4.0) | - | - | - | 7.1 | 3.1 | - | 3.1 |
| Equity dividends (Note 5) | - | - | - | - | - | - | - | - | (344.5) | (344.5) | - | (344.5) |
| At 29 January 2022 | 13.3 | 0.9 | 16.6 | (331.7) | 27.9 | 0.7 | (4.9) | (1,443.8) | 2,731.0 | 1,010.0 | - | 1,010.0 |
| Profit for the period | - | - | - | - | - | - | - | - | 711.7 | 711.7 | (1.0) | 710.7 |
| Other comprehensive income/(expense) for the period |
- | - | - | - | 59.4 | (0.3) | 1.2 | - | 0.5 | 60.8 | - | 60.8 |
| Total comprehensive income/(expense) for the period |
- | - | - | - | 59.4 | (0.3) | 1.2 | - | 712.2 | 772.5 | (1.0) | 771.5 |
| Share buybacks and commitments | (0.4) | - | 0.4 | - | - | - | - | - | (224.0) | (224.0) | - | (224.0) |
| ESOT share purchases | - | - | - | (124.0) | - | - | - | - | - | (124.0) | - | (124.0) |
| Shares issued by ESOT | - | - | - | 59.0 | - | - | - | - | (18.2) | 40.8 | - | 40.8 |
| Share option charge | - | - | - | - | - | - | - | - | 24.3 | 24.3 | - | 24.3 |
| Reclassified to cost of inventory | - | - | - | - | (128.7) | - | - | - | - | (128.7) | - | (128.7) |
| Non-controlling interest on acquisition of subsidiary |
- | - | - | - | - | - | - | - | - | - | 5.6 | 5.6 |
| Gain on disposal of investment | - | - | - | - | - | - | - | - | 0.8 | 0.8 | - | 0.8 |
| Tax recognised directly in equity | - | - | - | - | 30.1 | - | - | - | (4.2) | 25.9 | - | 25.9 |
| Equity dividends (Note 5) | - | - | - | - | - | - | - | - | (237.1) | (237.1) | - | (237.1) |
| At 28 January 2023 | 12.9 | 0.9 | 17.0 | (396.7) | (11.3) | 0.4 | (3.7) | (1,443.8) | 2,984.8 | 1,160.5 | 4.6 | 1,165.1 |
| 52 weeks to 28 | 52 weeks to 29 | |
|---|---|---|
| January 2023 £m |
January 2022 £m |
|
| Cash flows from operating activities | ||
| Operating profit | 941.5 | 905.4 |
| Depreciation, reversal of impairment and (profit)/loss on disposal of property, plant and equipment |
80.6 | 90.3 |
| Depreciation and impairment reversal on right-of-use assets | 72.7 | 112.6 |
| Amortisation and impairment of intangible assets | 12.5 | 4.3 |
| Amortisation, impairment & disposals of investments | 1.1 | - |
| Share option charge | 24.3 | 19.9 |
| Share of profit of associates and joint ventures | (14.3) | (4.8) |
| Exchange movement | (0.8) | (1.6) |
| Increase in inventories and right of return asset | (22.8) | (96.5) |
| Increase in customer and other receivables | (156.5) | (165.4) |
| Increase in trade and other payables | 12.0 | 235.2 |
| Net pension contributions less income statement charge | - | (2.7) |
| Cash generated from operations | 950.3 | 1,096.7 |
| Corporation taxes paid | (151.5) | (125.3) |
| Net cash from operating activities | 798.8 | 971.4 |
| Cash flows from investing activities | ||
| Additions to property, plant and equipment | (207.1) | (239.2) |
| Movement in capital accruals | 2.0 | (4.4) |
| Payments to acquire property, plant and equipment | (205.1) | (243.6) |
| Proceeds from sale of property, plant and equipment | - | 3.4 |
| Proceeds from sale and leaseback transactions | 41.7 | 15.5 |
| Purchase of intangible assets | (41.0) | (22.7) |
| Amounts repaid / (lent) to associates and joint ventures | 11.3 | (10.8) |
| Disposal of other investment | 1.8 | - |
| Investment in subsidiaries | (28.8) | - |
| Investment in associates and joint ventures | (64.7) | (34.3) |
| Acquisition of other investments | (1.9) | - |
| Dividend from jointly controlled entity | 9.8 | - |
| Disposal of preference shares in jointly controlled entity | 5.5 | - |
| Net cash from investing activities | (271.4) | (292.5) |
| Cash flows from financing activities | ||
| Repurchase of own shares | (228.5) | (8.7) |
| Purchase of shares by ESOT | (124.0) | (151.3) |
| Disposal of shares by ESOT | 34.3 | 72.5 |
| Repayment of bond | - | (325.0) |
| Incentives received for leases within the scope of IFRS 16 | 0.1 | 11.9 |
| Lease payments | (157.1) | (172.3) |
| Interest paid (including lease interest) | (74.1) | (91.1) |
| Interest received | 0.3 | 0.8 |
| Proceeds from sale and leaseback transactions | 59.3 | 14.3 |
| Dividends paid (Note 5) | (237.4) | (344.5) |
| Net cash from financing activities | (727.1) | (993.4) |
| Net decrease in cash and cash equivalents | (199.7) | (314.5) |
| Opening cash and cash equivalents | 199.9 | 514.8 |
| Effect of exchange rate fluctuations on cash held | 2.5 | (0.4) |
| Closing cash and cash equivalents | 2.7 | 199.9 |
The results for the financial period are for the 52 weeks to 28 January 2023 (last year 52 weeks to 29 January 2022).
The condensed consolidated financial statements for the period ended 28 January 2023 have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The condensed consolidated 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 year to 29 January 2022 have been delivered to the Registrar of Companies. The audit report for those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or (3) of the Companies Act 2006.
In addition to the accounting policies already included in the statutory accounts for the year to 29 January 2022, the Group has also applied the following policies for the year to 28 January 2023:
Revenue from our Total Platform services is measured at the fair value of the consideration received or receivable and represents amounts receivable for the provision of services (for example the delivery of stock from the warehouse to retail stores) in the normal course of business, net of discounts, value added tax and other sales-related taxes.
Acquisitions of businesses are accounted for using the acquisition method. The consideration paid in a business combination is measured at fair value with acquisition-related costs recognised in profit or loss as incurred. When the consideration paid includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
At the acquisition date, the identifiable assets and liabilities acquired are recognised at their fair value, with the exception of any associated deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements which are recognised in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
The accounting policies adopted in the preparation of the condensed consolidated financial statements are the same as those set out in the Group's annual financial statements for the 52 weeks ended 29 January 2022 other than for the interpretations and amendments noted below:
The application of these new interpretations and amendments did not have a material impact on the financial statements.
In adopting the going concern basis for preparing the financial statements, the directors have considered the business activities including the Group's principal risks and uncertainties. The Board also considered the Group's current cash position, the repayment profile of its obligations, its financial covenants and the resilience of its 12 month cash flow forecasts to a series of severe but plausible downside scenarios such as further enforced store closures. Having considered these factors, the Board is satisfied that the Group has adequate resources to continue in operational existence and therefore it is appropriate to adopt the going concern basis in preparing the consolidated financial statements for the 52 weeks ended 28 January 2023.
The Group's operating segments are determined based on the Group's internal reporting to the Chief Operating Decision Maker (CODM). The CODM has been determined to be the Group Chief Executive, with support from the Board. The performance of operating segments is assessed on operating profit, excluding equity-settled share option charges recognised under IFRS 2 "Share-based payment" and unrealised gains or losses on derivatives which do not qualify for hedge accounting.
The Property Management segment holds properties and property leases which are recharged to other segments and external parties. The NEXT International Retail segment comprises franchise and wholly owned stores overseas. International online sales are included in the NEXT Online segment.
Where third-party branded goods are sold on a commission basis, only the commission receivable is included in statutory revenue. "Total Group sales" represents the full customer sales value of commission based sales, interest income and service income, excluding VAT. Under IFRS 15 "Revenue from contracts with customers", total sales have also been adjusted for customer delivery charges, promotional discounts, Interest Free Credit commission costs and expired gift card balances (See "Other IFRS 15 adjustments" in the table overleaf). The CODM uses the Total Group sales as a key metric in assessing segment performance; accordingly, this is presented below and then reconciled to the statutory revenue.
During the financial year to 28 January 2023, the segment revenue and profit used by the CODM changed as set out below:
The Group had previously split the profit generated from selling Lipsy goods through the NEXT website between NEXT Online and the Lipsy division. Given all of Lipsy's online sales are reported within NEXT Online, the Group will now present all of these associated profits within NEXT Online and therefore, for comparative purposes, has restated segment sales and revenue and profit for the 52 weeks to 29 January 2022. This does not impact Group profit and is a change in presentation within this note only. Under the previous approach, prior to the restatement, the Lipsy profit was £27.1m (2022: £20.5m). As a result of this change:
Lipsy's assets, capital expenditure and depreciation continue to be included within NEXT Online.
In the prior financial year, the financial performance of Total Platform was reported across two segments:
(1) profit on sales was reported within NEXT Online; and
(2) equity returns were reported separately within "Share of results of associates and joint venture".
The Total Platform business has grown significantly in the last 12 months and therefore sales and profits will be presented within its own segment for a better understanding of the performance of Total Platform. As a result, the prior year segment revenue and profits have been restated so that all Total Platform related profit is presented in its own segment. This has no impact on Group profit.
As a result of this change:
Total Platform's assets, capital expenditure and depreciation are reported within the NEXT Online segment as the assets are shared with the Online business.
In addition to the above we have aggregated NEXT International Retail and NEXT Sourcing and some residual Lipsy wholesale sales and central costs into a single line "International Retail, Sourcing and Other". None of these changes impacts the overall Group operating profit as they relate to presentation and reclassifications only.
| 52 weeks to 28 January 2023 | ||||||
|---|---|---|---|---|---|---|
| Total sales excluding VAT £m |
Commission sales adjustment £m |
Other IFRS 15 adjustments £m |
External revenue £m |
Internal revenue £m |
Total segment revenue £m |
|
| NEXT Online | 3,006.6 | (329.2) | 66.2 | 2,743.6 | 0.6 | 2,744.2 |
| NEXT Finance | 274.4 | - | - | 274.4 | - | 274.4 |
| NEXT Retail | 1,865.1 | (17.1) | 1.1 | 1,849.1 | 0.4 | 1,849.5 |
| Total Trading Sales | 5,146.1 | (346.3) | 67.3 | 4,867.1 | 1.0 | 4,868.1 |
| Total Platform | 144.4 | (101.5) | - | 42.9 | - | 42.9 |
| Joules | 32.8 | - | - | 32.8 | - | 32.8 |
| Property Management | 18.9 | - | - | 18.9 | 156.1 | 175.0 |
| International Retail, Sourcing and other |
72.3 | - | - | 72.3 | 530.2 | 602.5 |
| Total segment sales/revenue | 5,414.5 | (447.8) | 67.3 | 5,034.0 | 687.3 | 5,721.3 |
| Eliminations | - | - | - | - | (687.3) | (687.3) |
| Total | 5,414.5 | (447.8) | 67.3 | 5,034.0 | - | 5,034.0 |
| 52 weeks to 29 January 2022 *restated | ||||||
|---|---|---|---|---|---|---|
| Total sales excluding |
Commission sales |
Other IFRS 15 | External | Internal | Total segment |
|
| VAT £m |
adjustment £m |
adjustments £m |
revenue £m |
revenue £m |
revenue £m |
|
| NEXT Online | 3,064.7 | (273.7) | 72.1 | 2,863.1 | - | 2,863.1 |
| NEXT Finance | 249.4 | - | - | 249.4 | - | 249.4 |
| NEXT Retail | 1,432.4 | (7.2) | 0.7 | 1,425.9 | 0.2 | 1,426.1 |
| Total Trading Sales | 4,746.5 | (280.9) | 72.8 | 4,538.4 | 0.2 | 4,538.6 |
| Total Platform | 39.1 | (27.8) | - | 11.3 | - | 11.3 |
| Joules | - | - | - | - | - | - |
| Property Management | 12.7 | - | - | 12.7 | 167.3 | 180.0 |
| International Retail, Sourcing and other |
63.5 | - | - | 63.5 | 488.0 | 551.5 |
| Total segment sales/revenue | 4,861.8 | (308.7) | 72.8 | 4,625.9 | 655.5 | 5,281.4 |
| Eliminations | - | - | - | - | (655.5) | (655.5) |
| Total | 4,861.8 | (308.7) | 72.8 | 4,625.9 | - | 4,625.9 |
76
Included within external revenue is £123.7m (2022: £110.4m) related to sales made through the redemption of gift cards.
| 52 weeks to | |||
|---|---|---|---|
| 52 weeks to | 29 January | ||
| 52 weeks to | 29 January | 2022 | |
| 28 January | 2022 | previously | |
| 2023 | *Restated | reported | |
| £m | £m | £m | |
| NEXT Online | 467.3 | 604.4 | 588.5 |
| NEXT Finance | 170.5 | 149.5 | 141.8 |
| NEXT Retail | 240.5 | 107.0 | 107.0 |
| Profit from Trading | 878.3 | 860.9 | 837.3 |
| Total Platform (including share of results from | |||
| associates and joint ventures) | 19.3 | 6.9 | - |
| Joules | (4.1) | - | - |
| Lipsy | - | - | 20.5 |
| Property Management | 37.0 | 10.8 | 10.8 |
| International Retail, Sourcing and other | 28.1 | 28.5 | 33.7 |
| Total segment profit | 958.6 | 907.1 | 902.3 |
| Central costs and other | (10.9) | (15.2) | (15.2) |
| Recharge of interest | 34.4 | 30.9 | 30.9 |
| Share option charge | (24.3) | (19.9) | (19.9) |
| Unrealised foreign exchange (losses)/gains | (16.3) | 2.5 | 2.5 |
| Share of results of associates and joint ventures | - | - | 4.8 |
| Operating profit | 941.5 | 905.4 | 905.4 |
| Finance income | 5.7 | 4.2 | 4.2 |
| Finance costs | (77.9) | (86.5) | (86.5) |
| Profit before tax | 869.3 | 823.1 | 823.1 |
The Group's disaggregated revenue recognised under contracts with customers relates to the following categories and operating segments:
| 52 weeks to 28 January 2023 | ||||||
|---|---|---|---|---|---|---|
| Sale of goods £m |
Credit account interest £m |
Royalties £m |
Rental income £m |
Service income £m |
Total £m |
|
| NEXT Online | 2,743.6 | - | - | - | - | 2,743.6 |
| NEXT Finance | - | 274.4 | - | - | - | 274.4 |
| NEXT Retail | 1,849.1 | - | - | - | - | 1,849.1 |
| Total Platform | 27.4 | - | - | - | 15.5 | 42.9 |
| Joules | 32.8 | - | - | - | - | 32.8 |
| Property Management | - | - | - | 18.9 | - | 18.9 |
| International Retail, Sourcing and other |
62.3 | - | 10.0 | - | - | 72.3 |
| Total | 4,715.2 | 274.4 | 10.0 | 18.9 | 15.5 | 5,034.0 |
| 52 weeks to 29 January 2022 *restated | ||||||
|---|---|---|---|---|---|---|
| Sale of goods £m |
Credit account interest £m |
Royalties £m |
Rental income £m |
Service income £m |
Total £m |
|
| NEXT Online | 2,863.1 | - | - | - | - | 2,863.1 |
| NEXT Finance | - | 249.4 | - | - | - | 249.4 |
| NEXT Retail | 1,425.9 | - | - | - | - | 1,425.9 |
| Total Platform | 11.3 | - | - | - | - | 11.3 |
| Joules | - | - | - | - | - | - |
| Property Management | - | - | - | 12.7 | - | 12.7 |
| International Retail, Sourcing and other |
57.1 | - | 6.4 | - | - | 63.5 |
| Total | 4,357.4 | 249.4 | 6.4 | 12.7 | - | 4,625.9 |
*As explained in Note 2 Segment Analysis, the Lipsy segment has been consolidated within NEXT Online and Total Platform has been separated out into its segment. Therefore the prior year revenues has been restated to reflect this change in segments. This change has no impact on the Group's Total Revenue.
| 52 weeks to | 52 weeks to | |
|---|---|---|
| 28 January | 29 January | |
| 2023 | 2022 | |
| Basic Earnings Per Share | 573.4p | 530.8p |
| Diluted Earnings Per Share | 570.5p | 524.0p |
Basic Earnings Per Share is based on the profit for the period attributable to the equity holders of the Parent Company divided by the net of the weighted average number of shares ranking for dividend less the weighted average number of shares held by the ESOT during the period.
Diluted Earnings Per Share is calculated by adjusting the weighted average number of shares used for the calculation of basic Earnings Per Share as increased by the dilutive effect of potential ordinary shares. Dilutive shares arise from employee share option schemes where the exercise price is less than the average market price of the Company's ordinary shares during the period. Their dilutive effect is calculated on the basis of the equivalent number of nil cost options. Where the option price is above the average market price, the option is not dilutive and is excluded from the diluted EPS calculation. There were 3,112,796 non-dilutive share options in the current year (2022: 1,474,577).
| Paid | Pence per share |
Cash Flow Statement £m |
Statement of Changes in Equity* £m |
|
|---|---|---|---|---|
| Year to 28 January 2023 | ||||
| Final ordinary dividend for the year to Jan 2022 | 1 Aug 2022 | 127p | 156.5 | 156.5 |
| Interim ordinary dividend for the year to Jan 2023 | 3 Jan 2023 | 66p | 80.9 | 80.9 |
| 237.4 | 237.4 | |||
| Year to 29 January 2022 | ||||
| Special interim dividend | 3 Sep 2021 | 110p | 140.3 | 140.3 |
| Special interim dividend | 28 Jan 2022 | 160p | 204.2 | 204.2 |
| 344.5 | 344.5 |
*Dividends included within the Statement of Changes in Equity for the current year is £237.1m which includes £0.3m of dividends previously payable and which have now lapsed.
The Trustee of the ESOT waived dividends paid in the year on shares held by the ESOT.
It is intended that an ordinary dividend of 140.0p per share will be paid to shareholders on 1 August 2023. NEXT plc shares will trade ex-dividend from 6 July 2023 and the record date will be 7 July 2023. The estimated amount payable is £173m. The proposed dividend is subject to approval by shareholders at the Annual General Meeting to be held on 18 May 2023 and has not been included as a liability in the financial statements.
The principal defined benefit pension scheme is the 2013 NEXT Group Pension Plan. The net defined benefit pension asset recognised in the Consolidated Balance Sheet is analysed as follows:
| 2023 | 2022 | |
|---|---|---|
| Present value of benefit obligations | (623.1) | (933.1) |
| Fair value of plan assets | 780.6 | 1,090.0 |
| Net pension asset | 157.5 | 156.9 |
The movement in the defined benefit pension surplus in the period is as follows:
| 52 weeks to 28 January 2023 £m |
52 weeks to 29 January 2022 £m |
|
|---|---|---|
| Surplus in schemes at the beginning of the period | 156.9 | 99.2 |
| Current service cost | (6.7) | (8.4) |
| Past service cost | (1.1) | - |
| Administration costs | (2.5) | (2.5) |
| Net interest | 3.5 | 1.6 |
| Employer contributions | 6.8 | 11.8 |
| SPA Plan benefits paid | - | 0.1 |
| Actuarial gains and returns on plan assets | 0.6 | 55.1 |
| Surplus in schemes at the end of the period | 157.5 | 156.9 |
The main financial assumptions and actuarial valuations have been updated by independent qualified actuaries under IAS 19 "Employee benefits". The following financial assumptions have been used for the main scheme, the 2013 plan:
| 52 weeks to 28 January 2023 |
52 weeks to 29 January 2022 |
|
|---|---|---|
| Discount rate | 4.60% | 2.15% |
| Inflation - RPI | 3.10% | 3.50% |
| Inflation - CPI | 2.70% | 3.05% |
| Salary increases | n/a | n/a |
| Pension increases in payment | ||
| - RPI with a maximum of 5.0% | 2.85% | 3.05% |
| - RPI with a maximum of 2.5% and discretionary increases | 1.85% | 2.00% |
Other financial assets and other financial liabilities include the fair value of derivative contracts which the Group uses to manage its foreign currency and interest rate risks. All derivatives are categorised as Level 2 under the requirements of IFRS 13, as they are valued using techniques based significantly on observed market data.
The following table shows the components of net receivables:
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Gross customer receivables | 1,521.1 | 1,403.3 |
| Less: refund liabilities | (64.2) | (49.4) |
| Net customer receivables | 1,456.9 | 1,353.9 |
| Less: allowance for expected credit losses | (202.2) | (191.2) |
| 1,254.7 | 1,162.7 | |
| Other trade receivables | 42.9 | 24.9 |
| Less: allowance for doubtful debts | (0.3) | (0.5) |
| 1,297.3 | 1,187.1 |
Presentation of the above, split by total receivables and allowances:
| 2023 £m |
2022 £m |
|
|---|---|---|
| Net customer receivables | 1,456.9 | 1,353.9 |
| Other trade receivables | 42.9 | 24.9 |
| 1,499.8 | 1,378.8 | |
| Less: allowance for expected credit losses and doubtful debts | (202.5) | (191.7) |
| 1,297.3 | 1,187.1 | |
| Prepayments | 54.9 | 53.1 |
| Other debtors | 40.7 | 14.1 |
| Amounts due from associates and joint ventures | 32.6 | 26.6 |
| 1,425.5 | 1,280.9 |
No interest is charged on customer receivables if the statement balance is paid in full and to terms; otherwise balances bear interest at a variable annual percentage rate of 23.9% (2022: 23.9%) at the year-end date, except for £54.8m (2022: £40.6m) of next3step balance which bears interest at 29.9% (2022: 29.9%) at the year end date.
The fair value of customer receivables and other trade receivables is approximately £1,260m (2022: £1,150m). This has been calculated based on future cash flows discounted at an appropriate rate for the risk of the debt. The fair value is within Level 3 of the fair value hierarchy.
The amount charged to the Income Statement of £31.0m (2022: £28.6m) differs to the bad debt charge of £26.2m in the Chief Executive's Review due to recoveries of previously written off assets taken directly to the Income Statement.
| 2023 | 2022 | |||
|---|---|---|---|---|
| Current £m |
Non-current £m |
Current £m |
Non-current £m |
|
| Trade payables | 230.1 | - | 275.4 | - |
| Amounts owed to associates and joint ventures | 2.1 | - | 0.5 | - |
| Refund liabilities | 8.3 | - | 4.8 | - |
| Other taxation and social security | 95.7 | - | 76.8 | - |
| Deferred revenue from the sale of gift cards | 84.2 | - | 79.5 | - |
| Share-based payment liability | 0.2 | - | 0.2 | 0.1 |
| Other creditors and accruals | 370.5 | 14.3 | 361.2 | 31.1 |
| 791.1 | 14.3 | 798.4 | 31.2 |
| Balance Sheet value | Nominal value | |||
|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |
| £m | £m | £m | £m | |
| Corporate bond 3.000% repayable 2025 | 250.0 | 250.0 | 250.0 | 250.0 |
| Corporate bond 4.375% repayable 2026 | 240.7 | 265.7 | 250.0 | 250.0 |
| Corporate bond 3.625% repayable 2028 | 300.0 | 300.0 | 300.0 | 300.0 |
| 790.7 | 815.7 | 800.0 | 800.0 |
Movements in the Company's issued share capital during the year are shown in the table below:
| 2023 | 2022 | 2023 | 2022 | |
|---|---|---|---|---|
| Shares '000 | Shares '000 | £m | £m | |
| Allocated, called up and fully paid | ||||
| Ordinary shares of 10p each | ||||
| At the start of the year | 132,772 | 132,949 | 13.3 | 13.3 |
| Purchased for cancellation in the year | (3,509) | (177) | (0.4) | - |
| 129,263 | 132,772 | 12.9 | 13.3 | |
| 2023 | 2022 | |||
| Shares | Cost | Shares | Cost | |
| '000 | £m | '000 | £m | |
| Shares purchased for cancellation in the year | 3,509 | 224.0 | 177 | 13.1 |
| Amount shown in Statement of Changes in Equity | 224.0 | 13.1 |
Subsequent to the end of the financial year the Company entered into an irrevocable closed period share buyback programme and during the period from 27 February 2023 up to and including 28 March 2023 purchased 526,099 shares for cancellation at a cost of £36.2m.
| January | Fair value | January | |||
|---|---|---|---|---|---|
| 2022 | Cash flow | changes | IFRS 16 | 2023 | |
| £m | £m | £m | £m | £m | |
| Cash and short term deposits | 433.0 | (328.0) | - | - | 105.0 |
| Overdrafts and short term borrowings | (233.1) | 130.8 | - | - | (102.3) |
| Cash and cash equivalents | 199.9 | (197.2) | - | - | 2.7 |
| Corporate bonds | (815.7) | - | 25.0 | - | (790.7) |
| Fair value hedges of corporate bonds | 15.7 | - | (25.0) | - | (9.3) |
| Net debt excluding leases | (600.1) | (197.2) | - | - | (797.3) |
| Current lease liability | (162.6) | - | - | 16.4 | (146.2) |
| Non-current lease liability | (894.9) | - | - | 17.8 | (877.1) |
| (1,057.5) | - | - | 34.2 | (1,023.3) | |
| Net debt including leases | (1,657.6) | (197.2) | - | 34.2 | (1,820.6) |
The IFRS 16 movements represent cash movements in relation to lease payments of £204.4m, and non cash movements relating to disposals of £5.5m offset by additions of £84.2m, modifications of £41.5m, finance costs £47.3m and Foreign exchange losses of £2.7m.
Interest of £24.0m was accrued and paid on the Corporate bonds and associated hedges during the year. The unpaid interest accrual of £14.6m is recognised within accruals.
The right-of-use assets are comprised of:
| 2023 £m |
2022 £m |
|
|---|---|---|
| Buildings | 228.0 | 193.0 |
| Stores | 420.5 | 433.5 |
| Equipment | 1.2 | 2.0 |
| Vehicles | 12.3 | 10.6 |
| Total | 662.0 | 639.1 |
The movement in the right-of-use asset is as follows:
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| At the beginning of the year | 639.1 | 720.1 |
| Additions | 58.2 | 27.8 |
| Disposals | (4.0) | (6.0) |
| Modifications and amendments | 41.4 | 9.2 |
| Depreciation | (107.6) | (113.8) |
| Reversal of impairment | 34.9 | 1.8 |
| At the end of the year | 662.0 | 639.1 |
The movement in the lease liability is as follows:
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| At the beginning of the year | (1,057.5) | (1,185.9) |
| Additions | (84.2) | (41.2) |
| Modifications and amendments | (41.5) | (12.9) |
| Payments | 204.4 | 222.7 |
| Interest | (47.3) | (50.4) |
| Disposals | 5.5 | 9.5 |
| Foreign exchange movement | (2.7) | 0.7 |
| At the end of the year | (1,023.3) | (1,057.5) |
The income statement shows the following amounts relating to leases:
| 2023 £m |
2022 £m |
|
|---|---|---|
| Finance costs on leases | (47.3) | (50.4) |
| Expense on short term and low value leases | (4.0) | (3.5) |
| Expense on variable leases | (26.9) | (4.1) |
| Gain on sale and leasebacks | 17.7 | 13.4 |
| 2023 | 2022 | |
|---|---|---|
| £m | £m | |
| Opening balance | 46.2 | 5.0 |
| Additions | 66.6 | 34.3 |
| Retained profit | 14.3 | 4.8 |
| Interest on preference shares | 4.8 | 2.4 |
| Preference share dividend received | (9.8) | - |
| Divestment of preference shares | (5.5) | - |
| Disposal of investment | (1.0) | - |
| Amortisation and impairment in the period | (1.0) | (0.3) |
| Closing balance | 114.6 | 46.2 |
On 28 February 2022, NEXT exercised its option to acquire a further 26% indirect interest in Reiss Limited ("Reiss"). Upon completion in May 2022, NEXT acquired the 26% for £45.3m financed from NEXT's own cash resources. Although NEXT now holds a 51% equity share, it does not have control of Reiss' operational and financial activities and therefore has been treated as a joint venture.
In addition, in March 2022, NEXT acquired a 25% equity stake in Swoon Limited for a cash consideration of £3.5m, and in April 2022, a 44% equity stake in the holding company of JoJo Maman Bébé Limited for a total cash consideration of £15.9m. In both cases NEXT has significant influence, but not control, over the investments' operational and financial activities and therefore they have been treated as associates.
During the year, NEXT also acquired a 19.9% stake in the holding company of Sealskinz Limited for £1.9m comprising ordinary shares and preference shares. For this acquisition, NEXT does not have significant influence and therefore the investment in ordinary shares has been accounted for as financial assets at fair value through profit or loss and the preference shares are financial assets measured at amortised cost within this note.
Additions in the prior period to January 2022 relate to the considerations paid for the initial 25% indirect interest in Reiss Limited ("Reiss"), a 33% direct interest in Aubin and Wills Holdings Limited and a 51% joint venture arrangement with Gap, Inc., West Apparel Limited. West Apparel Limited is treated as a joint venture as NEXT has joint control of its operations and financial activities.
On 1 December 2022, the Group acquired 74% of the trade and assets from Joules Limited, a consolidated group whose principal activity is the design and sale of lifestyle clothing, related accessories and a homeware range, through a multi-channel business structure embracing retail stores, wholesale and online.
The provisional amounts recognised in respect of the identifiable assets and liabilities acquired are set out in the table below:
| £m | |
|---|---|
| Financial assets | 1.8 |
| Inventory | 14.3 |
| Property, plant and equipment and software | 8.6 |
| Identifiable intangible assets | 10.5 |
| Financial liabilities | (9.8) |
| Deferred tax liabilities | (2.6) |
| Total identifiable assets acquired | 22.8 |
| Goodwill | 11.6 |
| Non-controlling interest in 26% of The Harborough Hare Holdings Limited | (5.6) |
| Total consideration | 28.8 |
Cash 28.8
The Annual General Meeting will be held at the Leicester Marriott Hotel, Smith Way, Grove Park, Leicester, LE19 1SW on Thursday 18 May 2023 at 9:30 am and details will be included in the Notice of Meeting which is to be sent to shareholders on 14 April 2023. The Annual Report and Accounts will also be sent to shareholders on 14 April 2023 and copies will be available from the Company's registered office: Desford Road, Enderby, Leicester, LE19 4AT and on our corporate website at nextplc.co.uk.
| APM Definition | Closest equivalent statutory measure |
Purpose and reconciliation to closest statutory measure where applicable |
|---|---|---|
| Average active customers Those customers who have purchased products using their Online account or received a standard statement in the last 20 weeks. account |
None | Active customers have a strong correlation with interest income on the Finance P&L and help drive understanding of movements in income. |
| Customers can be either Online credit or cash customers. |
Reconciliation to closest equivalent statutory measure not applicable. |
|
| Average customer receivables/debtor balance average amount of money owed by all The next3step less any nextpay and customers provision for bad debt. This represents the total balances we expect to recover, averaged across the relevant period. |
None | Average debtor balance has a strong correlation with interest income on the Finance P&L and helps drive understanding of movements in income. It also helps to evaluate the overall health of the balance sheet for the Finance business. |
| This is referred to as 'customer receivable' or 'debtor balance'. |
The average debtor balance in FY23 was £1,179m (FY22: £1,062m). The statutory accounts do not disclose the monthly debtor balance needed to calculate the average debtor balance. The year end balance is disclosed in Note 8 to the financial statements. |
|
| Bad debt charge The charge taken in relation to the performance our customer debtor book. This consists of predominantly of providing for future defaults. |
Impairment losses Note 8 |
of the quality of the Online debtor Measurement book/customer receivables. A lower bad debt charge that the quality and recoverability of the indicates balance are higher. |
| bad debt charge is the total of the in-year The impairment charge, less amounts recovered. In FY23 the total bad debt charge disclosed in the CEO report was £26m (FY22: £27m). |
||
| In Note 8 the total Expected Credit Loss charge was £31.0m (2022: £28.6m) with the difference relating to recoveries on previously written off assets. |
||
| Bought-in gross margin Difference between the cost of stock and initial price, expressed as a percentage of selling achieved total VAT exclusive selling prices. |
None | Bought-in gross margin is a measure of the profit made on the sale of stock at full price. This is a key internal management metric for assessing category performance. |
| Reconciliation to closest equivalent statutory measure not applicable as full price sales not a statutory metric. |
||
| Branch profitability Retail store total sales less cost of sales, payroll, costs, occupancy costs and controllable depreciation, and before allocation of central overheads. Expressed as a percentage of VAT inclusive sales. Net branch profit is a measure of the profitability on a store by store level. |
None | Measurement of the Retail business profit by physical branch. Provides an indication of the performance of the store portfolio. This is based on costs which are directly attributable to the store. Therefore, it does not include costs such as central overheads which will be included in the statutory accounts. |
| Reconciliation to closest equivalent statutory measure is therefore not applicable. |
| APM Definition | Closest equivalent statutory measure |
Purpose and reconciliation to closest statutory measure where applicable |
|---|---|---|
| Cost of funding Interest is charged to the NEXT Finance business in respect of funding costs for the Online debtor balance (customer receivable). |
None | Used by the business to evaluate the profitability of the Finance business. There is no statutory equivalent as this is a metric specific to how the Group manages its funding and cost allocations. In the year to January 2023 this has been calculated as: |
| It is calculated by applying the average Group interest rate (i.e. the external borrowing rate of the NEXT Group divided by the average NEXT Group borrowing excluding cash) to the average |
Average Group interest = Interest cost/Average debt excluding cash |
|
| debtor/customer balance. | = £29.5m/£858.5m = 3.4% | |
| Then apply 3.4% to 85% of the Average Online customer balance of £1,179m (as we assume that 85% is funded by debt). This equates to a Cost of Funding charge of £34.4m (2022: £30.9m). |
||
| Credit sales VAT exclusive sales from Online credit customers who have purchased using their online NEXT |
None | Credit sales are a direct indicator of the performance and profitability of the Finance business. |
| account, inclusive of any interest income charges and delivery charges, and after deducting any applicable promotional discounts. |
Reconciliation to closest equivalent statutory measure not applicable as the statutory accounts split by business but not by the mechanism of customer segment payment. |
|
| Divisional operating profit Divisional profit before interest and tax, excluding equity-settled share option charges recognised IFRS 2 "Share-based payment" and under |
Segment profit | A direct indicator of the performance of each division making up the total Group operating profit. A commonly metric that provides a useful method of used performance comparison across the Group. |
| unrealised foreign exchange gains and losses on which do not qualify for hedge derivatives accounting. |
The divisional operating profits are the same as the Segment profits presented in Note 2 of the financial statements. |
|
| Full price sales Total sales excluding items sold in our sale events, Total Platform sales and our Clearance operations |
– sale Revenue of goods |
Full price sales are a direct indicator of the performance and profitability of the business. |
| and includes interest income relating to those sales. |
They are based on Total Group Sales (defined below) excluding markdown (i.e. discounted). |
|
| Interest income (NEXT Finance) The gross interest billed to nextpay and next3step before any deduction for unpaid customers, |
Revenue – credit account interest |
Interest income for the Finance business is a direct indicator of the performance and profitability of the Finance business. |
| interest on bad debt. | This is presented within revenue on the face of the Income Statement and Note 3 of the financial statements as "credit account interest". |
| APM Definition | Closest equivalent statutory measure |
Purpose and reconciliation to closest statutory measure where applicable |
|---|---|---|
| Like-for-like sales Change in sales from Retail stores which have been open for at least one full year. |
None | This metric enables the performance of the Retail stores to be measured on a consistent year-on-year basis and is a common term used in the retail industry. |
| Reconciliation to closest equivalent statutory measure not applicable. |
||
| Note in the current year like-for-like sales on Retail stores are not being used as a KPI due to the disruption caused by COVID in the prior year. |
||
| Net debt excluding leases Comprises cash and cash equivalents, bank loans, bonds, and fair value hedges of corporate corporate bonds but excludes lease debt. |
None | This measure is a good indication of the strength of the Group's liquidity and is widely used by credit rating agencies. |
| debt is a measure of the Group's Net indebtedness. |
Net debt excluding leases is reconciled to net debt including leases in Note 12 of the financial statements. |
|
| Net profit (NEXT Finance) The profit, including interest income and the bad debt charge, and after the allocation of central overheads and the cost of funding. |
before tax Profit the Finance (for segment) |
A measure of direct profitability of the Finance business. |
| The net profit for the Finance Business is presented in Note 2 to the financial statements. |
||
| NEXT profit before tax | Profit before tax | While NEXT owns 74% of the equity in Joules, the Profit before Tax, on a statutory basis, includes 100% of the loss from Joules. |
| For management purposes, the non controlling interest the 26% which is not attributable to NEXT (i.e. shareholders) is removed so that the NEXT profit before tax only reflects 74% of the results of Joules. |
||
| The NEXT profit before tax and statutory profit before tax is reconciled in Appendix 2. |
||
| NEXT Operating profit | Operating profit | While NEXT owns 74% of the equity in Joules, the Operating Profit, on a statutory basis, includes 100% of the loss from Joules. |
| For management purposes, the non controlling interest the 26% which is not attributable to NEXT (i.e. shareholders) is removed so that the NEXT Operating profit only reflects 74% of the results of Joules. |
||
| The NEXT operating profit and statutory operating profit are reconciled in Appendix 2. |
||
| NEXT Group pre-tax Earning per share | NEXT Group pre-tax EPS is used as a bonus metric for the NEXT executive directors. This APM uses the profit before tax attributable to NEXT plc shareholders (NEXT profit before tax) as this is considered to represent a direct of the value which is attributable to the measure |
| APM Definition | Closest equivalent statutory measure |
Purpose and reconciliation to closest statutory measure where applicable |
|---|---|---|
| shareholders, excluding the impact of tax which is not directly controlled by the Board. |
||
| For January 2023 the number of shares used in this APM those shares which were acquired from excludes budgeted surplus cash. |
||
| This is because the EPS enhancement from such share buybacks was not included in the original targets set and so the directors should not benefit from this. |
||
| In January 2022 the profit before tax was based on a pre-IFRS 16 position. |
||
| Online margin NEXT operating profit for the Online business after deducting lease interest as a percentage of the Trading sales which relate to the Online division |
None | A measure of the profitability of the Group. A commonly used metric that can be used to compare performance to other businesses. |
| The margin is based on the segmental operating profit, as disclosed in Note 2 of the financial statements, less of lease interest, adjusted for the non allocation controlling interest in Joules, as a percentage of the Trading Sales for that segment. |
||
| A reconciliation between Total Group Sales and statutory revenue is provided in Note 2 of the financial statements. |
||
| Net margin measures whether profitability is changing at a higher or lower rate relative to revenue. |
||
| Retail margin Operating profit after deducting lease interest as a percentage of the Trading sales which relate to the Retail division |
None | A measure of the profitability of the Group. A commonly used metric that can be used to compare performance to other businesses. |
| The margin is based on the segmental operating profit, as disclosed in Note 2 of the financial statements, less allocation of lease interest, as a percentage of the Trading Sales for that segment. |
||
| A reconciliation between Total Group Sales and statutory revenue is provided in Note 2 of the financial statements. |
||
| Net margin measures whether profitability is changing at a higher or lower rate relative to revenue. |
||
| on Capital Employed – ROCE (NEXT Return Finance) The NEXT Finance net profit (after the interest charge relating to the cost of funding), divided by the average debtor balance. |
None | A commonly used metric that can be used to compare performance to other financial businesses. |
| It measures the profit (i.e. return) relative to the amount of capital employed. The higher the ROCE, the greater the return for the capital employed in the business. |
||
| The ROCE for NEXT Finance in the year to January 2023 was calculated by dividing the Operating profit for the |
| APM Definition | Closest equivalent statutory measure |
Purpose and reconciliation to closest statutory measure where applicable |
|---|---|---|
| segment of £170.5m by the average customer receivable balance of £1,179m. As a percentage, this is 14.5% (2022 restated due to the change in Lipsy segmental reporting: 14.1%). |
||
| The Operating profit for the segment is disclosed in Note 2 to the financial statements. |
VAT exclusive full price and markdown sales for all segments in the business, including the full value of commission-based sales, interest income (as described and reconciled in Note 2 of the financial statements) and service income from our Total Platform business
VAT exclusive full price and markdown sales including the full value of commission-based sales and interest income from our core trading segments of Retail, Online and Finance.
Revenue – sale of goods and credit account interest
Statutory revenue Total Group Sales are a direct indicator of the performance and profitability of the business.
Total Group Sales (which include Trading Sales) are reconciled to Statutory revenue in Note 2 to the financial statements.
Total Trading Sales are a direct indicator of the performance and profitability of the business from the Online, Retail and Finance business.
Total Trading Sales are reconciled to Statutory revenue in Note 2 to the financial statements.
This statement, the full text of the Stock Exchange announcement and the results presentation can be found on the Company's website at nextplc.co.uk.
To view our range of exciting, beautifully designed, excellent quality clothing and homeware go to next.co.uk.
Certain statements which appear in a number of places throughout this announcement are "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 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; insufficient consumer interest in NEXT Online; 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 does 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.
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