Next Plc · LSE:NXT
Next — H1 2014 Earnings Presentation
60 slides from Next's earnings presentation, July 2014
Slide 1: Next July 2014
Slide 2: Income Statement
Income Statement £m July 2014 July 2013 Full Price Revenue 1,850 1,677 + 10.3% +11.5% Operating profit 339 285 + 19.0% Interest (15) (13) Profit before tax 324 272 Taxation (66) (55) Profit after tax 258 217 + 18.6% EPS 173.3p 142.1p + 22.0%
Slide 3: Income Statement
Income Statement £m July 2014 July 2013 Full Price Revenue 1,850 1,677 + 10.3% +11.5% Operating profit 339 285 + 19.0% Interest (15) (13) Profit before tax 324 272 Taxation (66) (55) Profit after tax 258 217 + 18.6% Ordinary interim dividend 50.0p 36.0p Ordinary dividend full year (e) 150.0p 129.0p
Slide 4: Cash Flow
Cash Flow £m July 2014 July 2013 Profit before tax 324 272 Depreciation / disposals 57 61 Capital expenditure (54) (53) Working capital / other (16) (13) Tax paid (75) (75) ESOT (36) (63) Special dividends paid (149) - Share buybacks (105) (170) Net cash flow (54) (41)
Slide 5: Cash Flow
Cash Flow £m July 2014 July 2013 Profit before tax 324 272 Depreciation / disposals 57 61 Capital expenditure (54) (53) Working capital / other (16) Jan 2015(e) (13) Jan 2014 Fullpaid Tax Year £117m (75) (75) £105m Warehouse & other ESOT £34m (36) (63) £22m Special dividends paid Refurbishments (149
Slide 6: Cash Flow
Cash Flow £m July 2014 July 2013 Profit before tax 324 272 Depreciation / disposals 57 61 Capital expenditure (54) (53) Working capital / other Jan 2015(e) (16) (13) Fullpaid Tax Year £117m (75) (75) HQ Warehouse & other ESOT £34m (36) (63) £7m Warehouse Special dividends paid £12m Refurbishments (1
Slide 7: Balance Sheet
Balance Sheet £m July 2014 July 2013 Fixed assets 513 536 Goodwill and intangibles 44 45 Stock 428 372 Debtors 780 716 Creditors (867) (847) Dividend payable (212) (111) Pension surplus 69 68 Buyback commitment (62) (48) Net debt (571) (533) Net assets 122 198
Slide 8: Balance Sheet
Balance Sheet £m July 2014 July 2013 Fixed assets 513 536 Goodwill and intangibles 44 45 Stock 428 372 Debtors 780 716 + 9% Creditors (867) Directory debtors (847) Dividend payable (212) July 2014 (111) July 2013 Pension surplus 69 +11% 68 Buyback commitment £654m (62) £588m (48) Net debt Credit sal
Slide 9: Full Year Debt, Cash Flow and Buybacks
Full Year Debt, Cash Flow and Buybacks 700 Jan 2014 Jan 2015(e) 600 517 515 500 Share buybacks 410 £105m 400 Special dividends 300 Operational £223m £330m 200 187 £m
Slide 10: Retail
Retail
Slide 11: Retail: Sales Analysis
Retail : Sales Analysis £m July 2014 July 2013 Revenue (statutory sales) 1,075.6 1,000.6 + 7.5% Operating profit 152.3 124.3 Sales from new space Sales growth from net space 3.8% Average net space growth (sq. ft.) 4.4% Return on space 86%
Slide 12: Retail: Profit Analysis
Retail : Profit Analysis £m July 2014 July 2013 Full Price Markdown Revenue (statutory sales) 1,075.6 1,000.6 + 7.5% + 9% - 4% Operating profit 152.3 124.3 + 22.6% % to revenue 14.2% 12.4% Lower stock Margin movement for Sale Markdown + 0.3% Bought-in gross margin + 0.2% - 1% Achieved gross margin +
Slide 13: Retail: Profit Analysis
Retail : Profit Analysis £m July 2014 July 2013 Revenue (statutory sales) 1,075.6 1,000.6 + 7.5% Operating profit 152.3 124.3 + 22.6% % to revenue 14.2% 12.4% Margin movement Achieved gross margin + 0.5% Store payroll + 0.2% Store occupancy + 0.9% Warehouse + 0.2% Margin movement + 1.8%
Slide 14: Directory
~ ~~ a Directory
Slide 15: Directory: Sales Analysis
Directory : Sales Analysis £m July 2014 July 2013 Revenue (statutory sales) 694.3 597.6 + 16.2% Operating profit 172.1 156.1 Sales analysis Contribution to growth UK + 10.8% Overseas + 5.4% Sales growth + 16.2%
Slide 16: Directory: Sales Analysis
Directory : Sales Analysis £m July 2014 July 2013 Revenue (statutory sales) 694.3 597.6 + 16.2% Operating profit 172.1 156.1 Active customers Increase on Contribution to last year customer growth UK credit 2,700k - 80k UK cash 810k + 190k Overseas 430k + 210k Active customers 3.9m + 320k + 9%
Slide 17: Directory: Profit Analysis
Directory : Profit Analysis £m July 2014 July 2013 Full Price Markdown Revenue (statutory sales) 694.3 597.6 + 16.2% + 16% + 15% Operating profit 172.1 156.1 + 10.2% % to revenue 24.8% 26.1% Higher stock Margin movement for Sale Markdown - 0.2% Bought-in gross margin - 0.1% + 26% Achieved gross marg
Slide 18: Directory: Profit Analysis
Directory : Profit Analysis £m July 2014 July 2013 Revenue (statutory sales) 694.3 597.6 + 16.2% Operating profit 172.1 156.1 + 10.2% % to revenue 24.8% 26.1% Margin movement Achieved gross margin - 0.3% Interest income - 0.5% Marketing - 0.4% Creation and print - 0.3% Central overheads + 0.2% Margi
Slide 19: Growth
Growth
Slide 20: Five Growth Drivers
Five Growth Drivers New 2.4% Total space Retail Existing Total stores 2.3% + 4.7% NEXT Brand Directory sales UK 3.2% Total + 10.7% Directory Directory overseas 2.0% + 6.0% Brands 0.8%
Slide 21: Stores July 2014
Stores July 2014 New Stores Jan 2014 541 space New 3 Existing stores Resites 4 Extensions 5 Directory UK Closed -7 Stores July 2014 537 Directory overseas Brands
Slide 22: Stores Jan 2015(e)
Stores Jan 2015(e) New Stores Jan 2014 541 Avg. sq. ft. space New 12 Existing stores Resites 9 21,000 Extensions 8 Directory UK Closed -13 7,000 Stores Jan 2015(e) 540 Directory overseas Brands
Slide 23: Jan 2015(e) Space Allocation
Jan 2015(e) Space Allocation New space New sq. ft. Total sq. ft. Existing + 350,000(e) 7,360,000(e) stores Home Fashion 25% Home Directory 42% Fashion 58% 75% UK Directory overseas Brands
Slide 24: Large Format
Large Format 70% New space of new space Existing stores Directory UK Directory overseas Brands
Slide 25: Large Format
Large Format Bespoke build New 11 open space 1. Shoreham Existing 2. Camberley stores 3. Warrington 4. Ipswich 5. Romford Directory 6. York UK 7. Basildon 8. Northampton Directory 9. Shrewsbury 2014 overseas 10. Hedge End 11. Cwmbran 10 Brands
Slide 26: Hedge End Large Format
Hedge End 58,000 sq. ft. Appraised turnover £19.5m Large Format Appraised profit £3.4m Appraised payback 35 months Forecast turnover £21m
Slide 27: Large Format
Large Format New 11 open space 10 planned Existing stores 26 under negotiation Directory 7 bespoke buildings UK Directory overseas Brands
Slide 28: Town Centre Projects: Skipton
Town Centre Projects New space Skipton Old store sales New store sales Existing stores £1.4M £3.4M Directory UK Directory overseas Brands
Slide 29: Town Centre Projects
Town Centre Projects New space 25 proposals Existing stores Directory UK Directory overseas Brands
Slide 30: New Space Performance
New Space Performance* New Sales Payback Store space v target (months) profit % Existing stores Total + 12% 15 24% Directory UK Directory overseas Brands * Forecast for stores opened or extended in the last 12 months
Slide 31: Service June 2013
Service June 2013 New Service rated as space 68% ‘outstanding/very good’ Source: Simpson Carpenter Existing 62% stores 57% 54% 53% Directory 46% UK 40% 39% 39% 35% Directory overseas 1 2 3 4 5 6 7 8 9 10 Brands
Slide 32: Service Improvements
Service Improvements New space Changed… Existing Recruitment stores Staff bonus scheme Training Directory UK Appraisal system Manhour planning Directory overseas Rates of pay Brands
Slide 33: Service June 2014
Service June 2014 New 73% Service rated as space ‘outstanding/very good’ 63% Source: Simpson Carpenter Existing 61% stores 56% 56% 53% 49% 48% Directory UK 43% 41% Directory overseas 1 2 3 4 5 6 7 8 9 10 Brands
Slide 34: Transitional Stock
Transitional Stock New space Existing stores Transitional stock Directory UK Directory overseas Brands
Slide 35: Transitional Stock
Transitional Stock 2013 Spring / Summer Autumn / Winter New space Existing 1 2 3 4 5 1 2 3 4 stores Directory 2014 UK Spring Summer Autumn Winter Directory overseas 1 2 1 2 3 1 2 1 2 Brands
Slide 36: 2014 Publications
2014 Publications Spring Summer Autumn Winter New space 1 2 13 24 35 1 2 13 24 Existing stores Directory UK Directory overseas Winter New In Brands
Slide 37: Next Day to Store
Next Day to Store New No. of stores Coverage space Existing October 13 FREE 327 72% stores May 14 406 83% Directory UK September 14 490 94% Directory overseas Brands
Slide 38: Next Day to Store
Next Day to Store ~30% of Directory UK sales New % orders delivered to store Sept 14 space 55% 52% October 2014 Existing 50% Order by midnight stores Directory 45% UK Sept 13 40% Directory 38% overseas 35% Brands Oct 13 Dec 13* Feb 14 Apr 14 Jun 14 Aug 14 *Next day to store not available during end
Slide 39: Overseas Sales
Overseas Sales Done / In Progress 2014/15 New 14 New 14 New 3 New space countries local languages tender types China French Existing Saudi Arabia Polish Oman Spanish stores Egypt Hebrew Malta Mainland Chinese 14 New Cyprus Arabic Directory Brazil Ukrainian domestic currencies UK Belarus Slovak UAE D
Slide 40: Overseas Sales
Overseas Sales New 2011/12 2012/13 2013/14 2014/15(e) space £150m+ Existing stores £101m Directory UK £54m £33m Directory Profit £7m £10m £18m £28m overseas Brands
Slide 41: Overseas Sales: Speed of Delivery
Overseas Sales New space Speed of delivery Existing stores Directory UK Directory overseas Brands
Slide 42: Speed of Delivery
Speed of Delivery New October 2014 Northern Ireland space Belfast hub 10pm Midday Existing for next day stores for next day October 2014 Directory Eire UK 10pm • Fully stocked Directory 2 for tonext 3 days day • Replenished daily overseas December 2014 • Emergency airfreight Brands
Slide 43: SS14 Label Trial
SS14 Label Trial New space 400,000 books Existing Profitable stores No evidence Directory of deflection UK Directory overseas Brands
Slide 44: Commercial Terms: Wholesale or Commission
Commercial Terms New space Wholesale Existing stores or Directory Commission UK Directory overseas Brands
Slide 45: Advantages to Brand Partners
Advantages to Brand Partners New space 4m customer base Existing NEXT delivery service stores Deliveries to store Directory Catalogue production UK Price integrity Directory overseas Brands
Slide 46: Branded Sales
Branded Sales New space Profit* ~15% £110m(e) Existing stores £77m £65m Directory UK Directory overseas 2012/13 2013/14 2014/15 Brands * Exc. start up costs and interest income
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Slide 49: Outlook
Outlook • Economic environment • Sales growth • Profit guidance
Slide 50: The Weather
The Weather 30˚ Average 25˚ UK daytime temperature 20˚ 15˚ 2014 10˚ 2013 5˚ Source: www.wunderground.com 0 Feb Mar Apr May Jun Jul
Slide 51: The UK Economy: Employment
The UK Economy June 14 31m Employment Total employment 30.6m Three month rolling average 30.5m Credit 30m Housing 29.5m Real wages 29m Interest rates Jan Jan Jan 12 13 14 Source: ONS, August 2014
Slide 52: The UK Economy: Credit
The UK Economy 1.5bn Employment UK credit flow Monthly changes, unsecured lending to individuals 1bn Credit 0.5bn Housing 0 Real wages -0.5bn Interest rates Jan Jan Jan 12 13 14 Source: Bank of England, September 2014
Slide 53: The UK Economy: Housing
The UK Economy 120k Employment Housing transactions No. of monthly residential property transactions 100k Credit 80k Housing 60k Real wages 40k Interest rates Jan Jan Jan 12 13 14 Source: HMRC, August 2014
Slide 54: The UK Economy: Real Wages
The UK Economy 6% Employment UK real earnings 5% Avg. weekly earnings exc. bonus Credit 4% CPI 3% Housing 2% Real wages 1% Earnings 0% Interest rates Jan Jan Jan Jan Jan 10 11 12 13 14 Source: ONS, August 2014
Slide 55: The UK Economy: Interest Rates
The UK Economy Employment Credit Housing Real wages Interest rates …still low
Slide 56: Brand Sales Growth by Quarter
Brand Sales Growth by Quarter 16% Last year vs two years This year vs last year 12% 11% 11% 11% 8% 10%(e) 4% 4% 4%(e) 1% 4% 0% Q1 Q2 Q3 Q4
Slide 57: Brand Sales Growth by Quarter
Brand Sales Growth by Quarter This year vs two years 16% 16%(e) 12% 15% 15%(e) 12% 8% 4% 0% Q1 Q2 Q3 Q4
Slide 58: Sales and Profit Guidance 2014/15
Sales and Profit Guidance 2014/15 Full year Brand sales + 7% to + 10% Profit before tax £775m to £815m Growth in profit + 11% to + 17% Buyback enhancement ~ +2% Growth in EPS + 13% to + 19% Ordinary dividend yield* ~ +2% Special dividend yield* ~ +2% TSR underlying (at constant PE ratio) + 17% to +
Slide 59: Long Term TSR
Long Term TSR Assuming constant PE ratio Dividend yield 25% 23% EPS enhancement 21% 20% Profit growth 18% 15% 17% 9% 0% 2010/11 2011/12 2012/13 2013/14 2014/15(e)
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