Next Plc · LSE:NXT

Next — FY2014 Earnings Presentation

78 slides from Next's earnings presentation, March 2015

  1. Slide 1: ©Hufton+Crow

    ©Hufton+Crow

  2. Slide 2: Quarterly Brand Sales Growth

    PROFIT £M Quarterly Brand Sales Growth JAN +12.5% 782 11% 11% Sales to 24th December 2013 5% 695 3% Q1 Q2 Compared with same weeks in previous year Q3 Q4

  3. Slide 3: 2014 Sales v Two Years Ago

    PROFIT £M 2014 Sales v Two Years Ago Sales to JAN 24th December +12.5% 782 15% 15% 12% 10% 2013 695 Q1 Q2 Compared with same weeks in previous year Q3 Q4

  4. Slide 4: Income Statement

    Income Statement £m 2015 2014 Total sales 4,028 3,758 + 7.2% Operating profit 812 723 + 12.3% +11.1% Interest (30) (28) Ex. currency Profit before tax (underlying) 782 695 Taxation (160) (142) Profit after tax 622 553 + 12.5% EPS (underlying) 419.8p 366.1p + 14.7% Ordinary dividends per share 150p 1

  5. Slide 5: Cash Flow

    Cash Flow £m 2015 2014 Profit before tax (underlying) 782 695 Depreciation / disposals 117 134 Capital expenditure (110) (105) Working capital / other (27) (80) Tax paid (153) (152) ESOT (35) (55) Cash returned to shareholders (572) (461) Net cash flow 2 (24)

  6. Slide 6: Cash Flow

    Cash Flow £m 2016 2015 2014 Profit before tax (underlying) 782 695 Depreciation / disposals 117 134 Capital expenditure (140) (110) (105) Working capital / other (80) Full Year £27m Tax paid (152) £6m ESOT Warehouse £23m £12m (35) (55) £18m £16m Cash returned Systems & to shareholders £90m (572) (46

  7. Slide 7: Cash Flow

    Cash Flow £m 2015 2014 Profit before tax (underlying) 782 695 Depreciation / disposals 117 134 Capital expenditure (110) (105) Working capital / other Ordinary dividends (27) (211) (80) (165) Tax paid Share buybacks (138) (153) (296) (152) ESOT Special dividends (223) (35) - (55) Cash returned to sh

  8. Slide 8: Balance Sheet

    Balance Sheet £m 2015 2014 Fixed assets & investments 518 517 Goodwill and intangibles 44 44 Stock 417 386 Debtors 844 808 Creditors (911) (869) Dividend payable (74) (74) Pension surplus 38 70 Derivatives 62 (21) Share buybacks (101) (58) Net debt (515) (517) Net assets 322 286

  9. Slide 9: Balance Sheet

    Balance Sheet £m 2015 2014 Fixed assets & investments 518 517 Goodwill and intangibles 44 44 Stock 417 386 Debtors 844 808 + 4.5 % Creditors (911) (869) Dividend payableDirectory Jan 2015 Jan 2014 (74) (74) +4.4% Pension surplus debtors £712m 38 £682m 70 Derivatives 62 (21) Credit sales Share buybac

  10. Slide 10: Balance Sheet

    Balance Sheet £m 2015 2014 Fixed assets & investments 518 517 Goodwill and intangibles 44 44 Stock 417 386 Debtors 844 808 Creditors (911) (869) Dividend payable (74) (74) Pension surplus 38 70 Derivatives 62 (21) Share buybacks (101) (58) Net debt (515) (517) Net assets 322 286

  11. Slide 11: Full Year Debt, Cash Flow and Buybacks

    Full Year Debt, Cash Flow and Buybacks £700m Jan 2014 Jan 2015 £600m 517 515 £500m Special dividends £400m £223m 292 £300m Operational Share buybacks £363m £200m £138m £100m 154

  12. Slide 12: Full Year Debt, Cash Flow and Buybacks

    Full Year Debt, Cash Flow and Buybacks £700m Jan 2015 Jan 2016(e) £600m 515 500 £500m Special dividends/ buybacks £400m 320 £180m(e) £300m Special dividends Operational paid/declared £200m £360m(e) £165m(e) £100m 155

  13. Slide 13: Retail

    Retail ©Hufton+Crow

  14. Slide 14: Retail : Sales Analysis

    Retail : Sales Analysis £m 2015 2014 Total sales 2,348 2,240 + 4.8% Operating profit 384 348 Sales from new space Sales growth from net space + 3.4% Sales growth from existing stores + 1.4% + 4.8%

  15. Slide 15: Retail : Sales Analysis

    Retail : Sales Analysis £m 2015 2014 Total sales 2,348 2,240 + 4.8% Operating profit 384 348 Sales from new space Return on space Sales growth from net space + 3.4% Average net space growth (sq. ft.) + 4.3% = 78%

  16. Slide 16: Retail : Sales Analysis

    Retail : Sales Analysis £m 2015 2014 Total sales 2,348 2,240 + 4.8% Operating profit 384 348 Store movement Stores Jan 2014 541 New and resites 20 Extensions 7 Closed -22 Stores Jan 2015 539 +330k sq. ft.

  17. Slide 17: Retail : Sales Analysis

    Retail : Sales Analysis £m 2015 2014 Total sales 2,348 2,240 + 4.8% Operating profit 384 348 Store performance Sales v target Payback (months) Store profit +10% 20 20% Forecast for stores opened or extended in the last 12 months

  18. Slide 18: Retail : Profit Analysis

    Retail : Profit Analysis £m 2015 2014 Total sales 2,348 2,240 + 4.8% Operating profit 384 348 + 10.4% % to sales 16.3% 15.5% Margin movement Sale stock + 13% Markdown - 0.4% Markdown sales + 9% Bought-in gross margin + 0.5% Achieved gross margin + 0.1%

  19. Slide 19: Retail : Profit Analysis

    Retail : Profit Analysis £m 2015 2014 Total sales 2,348 2,240 + 4.8% Operating profit 384 348 + 10.4% % to sales 16.3% 15.5% Margin movement Achieved gross margin + 0.1% Store payroll - 0.3% Store occupancy + 1.1% Central overheads - 0.1% Margin movement + 0.8%

  20. Slide 20: Directory

    Directory

  21. Slide 21: Directory : Sales Analysis

    Directory : Sales Analysis £m 2015 2014 Total sales 1,541 1,374 + 12.1% Operating profit 377 359 Sales analysis Contribution to growth NEXT Directory UK + 5.7% Label + 1.9% NEXT Directory Overseas + 4.5% Sales growth + 12.1%

  22. Slide 22: Directory : Sales Analysis

    Directory : Sales Analysis £m 2015 2014 Total sales 1,541 1,374 + 12.1% Operating profit 377 359 Customer growth 2015 2014 UK credit 2,700k 2,800k - 3% UK cash 900k 600k + 42% Overseas 500k 300k + 85% Active customers 4.1m 3.7m + 11%

  23. Slide 23: Directory : Profit Analysis

    Directory : Profit Analysis £m 2015 2014 Total sales 1,541 1,374 + 12.1% Operating profit 377 359 + 5.1% % to sales 24.5% 26.1% Margin movement Sale stock + 25% Markdown - 0.4% Markdown sales + 21% Bought-in gross margin - 0.1% Stock write offs - 0.3% Achieved gross margin - 0.8%

  24. Slide 24: Directory : Profit Analysis

    Directory : Profit Analysis £m 2015 2014 Total sales 1,541 1,374 + 12.1% Operating profit 377 359 + 5.1% % to sales 24.5% 26.1% Margin movement Achieved gross margin - 0.8% Interest income - 0.4% Bad debt + 0.3% Creation and print - 0.3% Warehouse and distribution - 0.3% Central overheads - 0.1% Mar

  25. Slide 25: Central Costs and Other Activities

    Central Costs and Other Activities £m 2015 2014 Unrealised foreign exchange 9 (6) + 15 Next Sourcing 41 34 +7 Central costs (23) (31) +7 Property management 7 2 +5

  26. Slide 26: Outlook

    2015 UK IMPROVING Outlook

  27. Slide 27: UK Improving: Inflation, Wages, Employment

    5% ` 31m Inflation Mar 15 UK IMPROVING 4% 30.5 Employment 30.9m Inflation 3% 30m 2% 29.5 Wages 1% Wages 29m Employment Feb 15 Mar 11 12 Mar 13 Mar 14 Mar 15 Source: ONS

  28. Slide 28: Tough comparatives

    Tough S&S 14 comparatives! UK IMPROVING 20°c 11% 11% UK weather Average daytime temperatures 15°c TOUGH 2014 COMPARATIVES 10°c 2013 5°c Feb Mar Apr May Jun Jul

  29. Slide 29: Tough comparatives

    Tough S&S 14 comparatives! UK IMPROVING 11% 11% Ranges 5/5 UK weather TOUGH COMPARATIVES

  30. Slide 30: A&W Opportunity?

    A&W 15 S&S 14 Opportunity? UK IMPROVING 11% 11% A&W 14 TOUGH COMPARATIVES 5% 3% POLITICAL UNCERTAINTY

  31. Slide 31: 2015/16(e) Full Price Sales

    POLITICAL TOUGH UK IMPROVING UNCERTAINTY COMPARATIVES 2015/16(e) Full Price Sales Spring & Summer Autumn & Winter 0% to +3% +3.5% to +7.5%

  32. Slide 32: 2015/16(e) Full Price Sales

    POLITICAL TOUGH UK IMPROVING UNCERTAINTY COMPARATIVES 2015/16(e) Full Price Sales +1.5% to +5.5% +3.5% Midpoint

  33. Slide 33: 2015/16 Full Price Sales Drivers

    2015/16 Full Price Sales Drivers If full price sales are +3.5%... 2014/15 2015/16(e) £3.5bn £3.6bn -40 -20 0 20 40 60 80 100 120 Existing stores -£40m New space +£65m +£115m Next Online UK +£10m +£40m Directory overseas +£40m

  34. Slide 34: Existing Stores | Service Improvements

    Existing Stores | Service Improvements Existing stores

  35. Slide 35: Existing Stores | Service Improvements

    Existing Stores | Service Improvements Retailer 1 Retailer 2 Retailer 3 Retailer 4 Retailer 5 Next Retailer 6 Retailer 7 Retailer 8 46% Retailer 9 6th 1 2 3 4 5 6 7 8 9 10

  36. Slide 36: Existing Stores | Service Improvements

    Existing Stores | Service Improvements Retailer 1 Retailer 2 Retailer 3 Retailer 4 Better contracts Retailer 5 Next Higher pay rates New Retailer bonus 6 Retailer scheme 7 Retailer 8 46% Retailer 9 6th Recruit for attitude New appraisals Shift Marketplace Peak time staffing 1 2 3 4 5 6 7 8 9 10

  37. Slide 37: Existing Stores | Service Improvements

    Existing Stores | Service Improvements Retailer 1 Retailer 2 Next Retailer 4 Retailer 3 Retailer 7 Retailer 9 Retailer 5 57% Retailer 10 Retailer 8 3rd • Focus on temporary staff • Identify weak spots 1 2 3 4 5 6 7 8 9 10

  38. Slide 38: Customer Rating Score | By Day of the Week

    Customer Rating Score | By Day of the Week Sun Mon Tue Wed Thu Fri Sat 54% 54% 50% 50% 50% 49% 46%

  39. Slide 39: Customer Rating Score | By Time of Day

    Customer Rating Score | By Time of Day 12 56% 50% 9am 3pm 8pm 47%

  40. Slide 40: The Long View 2007/8 to 2014/15

    The Long View 2007/8 to 2014/15 New space The Long View 2007/8 to 2014/15

  41. Slide 41: The Long View: Stores

    The Long View 2007/8 to 2014/15 Stores Jan 2008 502 New New & resites 179 space Extensions 82 Total New 261 = 48% Jan 2015 539

  42. Slide 42: The Long View: Square Footage

    The Long View 2007/8 to 2014/15 Sq. ft. (k) Jan 2008 5,201 New New & resites 2,645 space Extensions (gross) 1,789 Total New 4,434 = 60% Jan 2015 7,373

  43. Slide 43: The Long View: Sales and Store Profitability

    The Long View 2007/8 to 2014/15 Jan 2008 Jan 2015 Sq. ft. (k) 5,201 7,373 +42% New Sales £2,255m £2,348m +4% space Store profitability 21.4% 23.7% Profit and cost over VAT inclusive sales

  44. Slide 44: The Long View: Costs and Profitability

    The Long View 2007/8 to 2014/15 Jan 2008 Jan 2015 Sq. ft. (k) 5,201 7,373 New Wages 11.3% 10.9% space 10.8% 12.7% Markdown & shrinkage 8.7% 5.0% Store profitability 21.4% 23.7% Profit and cost over VAT inclusive sales

  45. Slide 45: Store Lease Profile

    Store Lease Profile Lease expiries by rental value 100% 90% 80% at Jan 2015 70% at Jan 2008 New 60% space 50% 40% 30% 20% 10% 0% 0 5 6 10 15 20 Remaining lease commitment (years)

  46. Slide 46: Changing perceptions

    Maidstone New space Changing perceptions

  47. Slide 47: Maidstone

    Maidstone

  48. Slide 48: Maidstone

    Maidstone

  49. Slide 49: The Long View: Retail profit

    The Long View 2007/8 to 2014/15 Total sq. ft. Replaced sq. ft. Retail profit New space +42% +60% +20%

  50. Slide 50: Directory UK: Credit Business, Service Improvements

    Directory UK 1 The Credit Business 2 Service Improvements NEXT Online UK

  51. Slide 51: The Credit Business - Relative sales

    The Credit Business - Relative sales Total Directory Sales Credit Account Sales Credit Account Customers NEXT Online UK

  52. Slide 52: The Credit Business - Relative sales

    The Credit Business - Relative sales 200 Total Directory Sales Credit Account Sales 175 Credit Account Customers Interest Income 150 NEXT Online UK 125 100 2007 2008 2009 2010 2011 2012 2013 2014 Year

  53. Slide 53: Credit Account Usage

    Credit Account Usage Pay in full 20% 50% NEXT Pay in Online UK instalments 80% 50% Leavers

  54. Slide 54: Customer Profitability Account v Cash

    Customer Profitability Account v Cash 25% Net 23% interest 8% 2% Fewer catalogues income 4% Lower returns rate Product margin 17% 17% Product margin NEXT Online UK Account Cash

  55. Slide 55: Customer Profitability Account v Cash

    Customer Profitability Account v Cash 25% Net 23% interest 8% 2% Fewer catalogues income 4% Lower returns rate Product 9% 17% 5% 17% Product margin NEXT margin of balance Online UK

  56. Slide 56: Customer Profitability Account v Cash

    Customer Profitability Account v Cash 25% Net 23% interest 8% 2% Fewer catalogues income 4% Lower returns rate Product 9% 6% 8% 5% 7% 17% 17% Product margin NEXT margin Online UK

  57. Slide 57: Customer Profitability Account v Cash

    Customer Profitability Account v Cash 8% 2% • Flexible payments • Try before you buy 17 17% NEXT Online UK • VIP Sale priority

  58. Slide 58: UK Next Day Delivery Offer

    UK Next Day Delivery Offer Deliver to Store Deliver to Home MAR Next Online UK 2014 10pm Order cut off 10pm

  59. Slide 59: UK Next Day Delivery Offer

    UK Next Day Delivery Offer Deliver to Store Deliver to Home AUG NEXT Online UK 2015 Midnight Order cut off Midnight

  60. Slide 60: UK Directory Orders by Time of Day

    UK Directory Orders by Time of Day Average % of total orders per day 10pm to midnight 9% 8pm to 10pm Next Online UK 21% AW14 UK Full Price

  61. Slide 61: Premium brands with NEXT delivery service and reach

    Premium brands with NEXT delivery service and NEXT reach

  62. Slide 62: Online sales 2015/16(e)

    2015/16(e) £150m + Total 2014/15 online sales 2013/14 £110m 2012/13 £89m £81m Profit % 11% 19% 14% 15% Excluding interest income

  63. Slide 63: NEXT Brands A&W14 Trial

    A&W14 Trial Orders per customer* NEXT £315 £324 +3% Brands £65 £70 +8% £380 £394 +4% * Trial conducted with a sample group

  64. Slide 64: ~50% of orders picked up in store

    ~50% of orders are picked up in store

  65. Slide 65: Directory Overseas

    Directory Overseas 2015/16(e) £200m 2014/15 + £163m 2013/14 £101m 2012/13 2011/12 £54m £33m Directory Profit % 21% 19% 18% 18% 18% overseas

  66. Slide 66: Worldwide Distribution

    Worldwide Distribution Russia Hub Moscow Belfast Hub 8-12 Returns 1-2 Returns Elmsall days £18 days £3 1-2 days 4-5 £2.5m investment China Hub days 1-2 14 21 days Directory overseas

  67. Slide 67: Worldwide Distribution: Russia RUB

    Worldwide Distribution Moscow Russia Belfast Hub Elmsall RUB RUB Prices RUB Sales Currency +43% +45% -40% Directory overseas

  68. Slide 68: Worldwide Distribution: Russia GBP

    Worldwide Distribution Moscow Russia Belfast Hub Elmsall GBP Currency £ prices £ sales -40% -7% -5% Profitability 9% 18% Directory 2015/16(e) 2014/15 overseas

  69. Slide 69: Worldwide Distribution: China Hub

    Worldwide Distribution Moscow Belfast Hub Elmsall China Hub Jan 15 Mar 15 A&W 15 21 14 1-2 days days days Directory overseas

  70. Slide 70: Sales and Profit

    2015/16 (e)—— as = Sales and-Profit. "= iW

  71. Slide 71: +3.5% Sales Growth | Profit Scenario

    +3.5% Sales Growth | Profit Scenario 2015/16(e) £810m New Directory Intl. Cost savings space UK sales sales £43m £14m £14m £8m Cost increases LFL 2014/15 -£36m -£15m £782m 730 740 750 760 770 780 790 800 810

  72. Slide 72: Sales and Profit Guidance 2015/16(e)

    Sales and Profit Guidance 2015/16(e) Full year Brand sales +1.5% to +5.5% Profit before tax £785m to £835m Growth in profit +0.4% to +6.7% Ordinary dividend yield* 2.1% Special dividend yield / buybacks* 3.3% TSR underlying (at constant PE ratio) 5.8% to 12.1% * Based on a share price of £72.33

  73. Slide 73: Long Term TSR Assuming constant PE ratio

    Long Term TSR Assuming constant PE ratio 25% Ordinary dividends Special dividends/Buybacks 21% 20% Profit growth 19% 18% 15% 12% 9% 6% 0% 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16(e)

  74. Slide 74: ©Hufton+Crow

    ©Hufton+Crow

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