NEXT PLC (LON:NXT) has announced its results for the year ending January 2021.
CHAIRMAN’S STATEMENT
In last year’s Full Year Results, published just as the UK went into lockdown, we stated that our sector was facing a crisis unprecedented in living memory. We also stated that our strong balance sheet and profit margins would allow us to weather the storm.
Both statements have proved true. A year on, NEXT has delivered profit before tax of £342m (2019/20: £729m, both pre-IFRS 16) in line with the central guidance issued in our January 2021 Trading Statement. Despite most of our stores being closed for a significant portion of 2020/21, Total1 Group sales decreased by less than 17% to £3.6bn (2019/20: £4.4bn).
In April 2020, we stated our intention to suspend all capital returns to shareholders for the duration of the financial year and until the situation stabilises. Given the continuing uncertainty around when our stores will reopen, no final dividend is proposed for 2020/21 and our share buyback programme remains suspended. We remain committed to returning capital to shareholders in the long term and will review our position later in the year when we have better visibility of our trade once our stores reopen.
Our cash resources have been carefully managed with a number of actions taken to conserve cash during the year. As a result, net debt reduced to £610m (2019/20: £1.1bn).
We expect the shift in consumer behaviour towards Online sales to continue for some time and one of our priorities during the year has been to continue the development of our Online platform. We accelerated part of our planned capital expenditure in the Online business, spending £121m on warehousing and systems.
During the year, the Board appointed Tom Hall as a non-executive director to replace Francis Salway, who has served on our Board for over nine years and will step down at the 20 May 2021 AGM. On behalf of the other directors, I would like to thank Francis for his very significant contribution to the Board and to the Remuneration Committee during his time with NEXT. I have particularly valued his hard work as Chairman of our Remuneration Committee. We will miss Francis’ unflappable and persistent good sense. Tom will take over the role of Chair of the Remuneration Committee and Jonathan Bewes will take over the role of Senior Independent Director on Francis’ retirement at the 2021 AGM.
I believe that in difficult times there is a clearer separation between the stronger corporate performers and the weaker ones. This result is due to the formation of a good management team and the establishment of robust processes during less volatile periods. Our continued investment over many years in our people and our systems has shown resilient results in the past year.
The strength of the Group is built on the hard work and dedication of all NEXT’s people and this year has highlighted their resilience and ability to work together in times of crisis. I would like to thank them for their outstanding work during an extremely demanding year.
Michael Roney
Chairman
1 Total sales are VAT exclusive sales including the full value of commission based sales and interest income (refer to Note 2 of the financial statements).
CHIEF EXECUTIVE’S REVIEW
HEADLINES
Performance in the Year Ending January 2021
● Full price sales2 down -15% on last year.
● Profit before tax of £342m3 and in line with guidance given in January.
● Year end net debt4 reduced by £502m to £610m.
2 Full price sales are Total sales excluding VAT, less items sold in our mid-season and end-of-season Sale events, our Clearance operations and through Total Platform. These are not statutory sales (refer to Note 2 of the financial statements).
3 Profit before tax of £342m is pre-IFRS 16, Leases. The financial information presented in pages 2 – 59 is that used by management to monitor and assess business performance. They are not statutory measures unless stated as such. A reconciliation to the statutory equivalents is provided in the Appendix on page 60.
4 Net debt excludes leases.
Updated Central Guidance for the Full Year Ending January 2022
● Total Brand full price sales guidance remains unchanged and flat against 2019/20 (a two-year comparison).
● The anticipated end of the third lockdown in April5 is two weeks later than we had allowed for in our previous guidance. However, the profit lost from those additional two weeks has been offset by the benefit of the extension of business rates relief announced in March.
● In the first eight weeks of the year, Online sales have been stronger than expected and are up more than +60% on two years ago. This overachievement plus the expected transfer of sales from Retail during the additional two weeks of lockdown, are expected to add £30m of profit. As a result, we are raising our central profit guidance by £30m from £670m to £700m.
5 This refers to the end of the lockdown in England (which represents around 85% of our retail sales). The end of lockdown in parts of Scotland, Northern Ireland and Eire will follow later.
