Next Plc · LSE:NXT
Next — H1 2015 Earnings Presentation
48 slides from Next's earnings presentation, July 2015
Slide 1: Next | July 2015
Slide 2: Income Statement
Income Statement £m July 2015 July 2014 Full Price Total sales 1,907 1,856 + 2.7% + 3.5% Operating profit 362 339 + 6.7% Interest (15) (15) Profit before tax 347 324 + 7.1% Taxation (70) (66) Profit after tax 277 258 EPS 187.1p 173.3p + 8.0% Ordinary interim dividend 53.0p 50.0p + 6.0%
Slide 3: Cash Flow
Cash Flow £m July 2015 July 2014 Profit before tax 347 324 Depreciation / disposals 57 57 Capital expenditure (81) (54) Working capital / other (84) (16) Tax paid (70) (75) ESOT (40) (36) Cash flow before distribution 129 200
Slide 4: Cash Flow: Capital Expenditure
Cash Flow £m July 2015 July 2014 Capital expenditure Profit before tax (81) 347 (54) 324 Jan 2016(e) Jan 2015 Depreciation Full Year / disposals £155m57 57 £110m £27m Warehouse £16m Head Office infrastructure Store systems 6 £12m £12m General IT 6 Systems £100m £13m £5m Stores £80m Cosmetic Refits £
Slide 5: Cash Flow
Cash Flow £m July 2015 July 2014 Profit before tax 347 324 Depreciation / disposals 57 57 Capital expenditure (81) (54) Working capital / other (84) (16) Tax paid (70) (75) ESOT (40) (36) Special dividends paid (163) (149) Share buybacks - (105) Net cash flow (34) (54)
Slide 6: Balance Sheet
Balance Sheet £m July 2015 July 2014 Fixed assets & investments 530 513 Goodwill and intangibles 44 44 Stock 451 428 Debtors 926 780 Creditors (896) (867) Dividends payable (237) (212) Pension surplus 37 69 Buyback commitment - (62) Net debt (549) (571) Net assets 306 122
Slide 7: Balance Sheet
Balance Sheet £m July 2015 July 2014 Fixed assets & investments 530 513 Goodwill and intangibles 44 44 Stock 451 428 Debtors 926 780 + 18.6% Creditors (896) (867) Directory July 2015 July 2014 Dividends payable (237) +21% (212) Pension surplus debtors £790m 37 £655m 69 Buyback commitment Credit sale
Slide 8: Balance Sheet
Balance Sheet £m July 2015 July 2014 Fixed assets & investments 530 513 Goodwill and intangibles 44 44 Stock 451 428 Debtors 926 780 Creditors (896) (867) Dividends payable (237) (212) Pension surplus 37 69 Buyback commitment - (62) Net debt (549) (571) Net assets 306 122
Slide 9: Full Year Debt and Cash Flow
Full Year Debt and Cash Flow 800 January 2016(e) 700 670 (e) January 2015 600 515 Directory debt 500 200 (e) 400 Special dividends 300 341(e) Operational 200 386 (e) 100 £m
Slide 10: Funding Requirements
Funding Requirements 1600 Investment grade <£1.5bn 1400 1,338 Secure financing 2017 Bank facility 1200 550 Directory debt is a 1000 high yield, secure 900 (e) 2020 Peak 800 asset 2016 Bonds 600 Year end 788 400 670 (e) 2021 200 2026 £m
Slide 11: Retail
Retail High Wycombe Opened July 2015
Slide 12: Retail: Sales Analysis
Retail : Sales Analysis £m July 2015 July 2014 Full Price Total sales 1,083 1,081 + 0.2% + 0.8% Operating profit 161 152 Sales from new space Return on space Sales growth from net space + 2.2% Average net space growth (sq. ft.) + 3.6% = 61%
Slide 13: Retail: Sales Analysis
Retail : Sales Analysis £m July 2015 July 2014 Total sales 1,083 1,081 + 0.2% Operating profit 161 152 New store performance Sales v target Payback (months) Store profit +10% 18 24% Forecast for stores opened or extended in the last 12 months
Slide 14: Retail: Sales Analysis
Retail : Sales Analysis £m July 2015 July 2014 Total sales 1,083 1,081 + 0.2% Operating profit 161 152 Full year space Stores Jan 2015 539 New (8 re-sites) 22 Extensions 13 Closed (11 re-sites) - 19 Stores Jan 2016(e) 542 + 293k sq. ft. + 4.0%
Slide 15: Retail: Profit Analysis
Retail : Profit Analysis £m July 2015 July 2014 Total sales 1,083 1,081 + 0.2% Operating profit 161 152 + 5.7% % to sales 14.9% 14.1% Margin movement Bought-in gross margin + 0.8% Markdown + 0.2% Achieved gross margin + 1.0%
Slide 16: Retail: Profit Analysis
Retail : Profit Analysis £m July 2015 July 2014 Total sales 1,083 1,081 + 0.2% Operating profit 161 152 + 5.7% % to sales 14.9% 14.1% Margin movement Achieved gross margin + 1.0% Store payroll - 0.2% Store occupancy - 0.1% Warehousing and distribution - 0.2% Central overheads + 0.3% Margin movement
Slide 17: Directory
Directory
Slide 18: Directory: Sales Analysis
Directory : Sales Analysis £m July 2015 July 2014 Total sales 767 709 + £58m + 8.2% Operating profit 184 172 Increase on last year Sales analysis £ % NEXT Directory UK + £19m + 3.3% Label + £22m + 30.5% Directory UK total + £41m + 6.3%
Slide 19: Directory: Sales Analysis
Directory : Sales Analysis £m July 2015 July 2014 Total sales 767 709 + £58m + 8.2% Operating profit 184 172 Increase on last year Sales analysis £ % Customers Directory UK total + £41m + 6.3% + 7% NEXT Directory overseas + £17m + 24.1% + 65% Directory total + £58m + 8.2% + 13%
Slide 20: Directory: Profit Analysis
Directory : Profit Analysis £m July 2015 July 2014 Total sales 767 709 + 8.2% Operating profit 184 172 + 7.0% % to sales 24.0% 24.3% Margin movement Sale stock + 22% Bought-in gross margin + 0.5% Markdown sales 0% Markdown - 0.5% Markdown sales to date + 18% Achieved gross margin 0.0%
Slide 21: Directory: Profit Analysis
Directory : Profit Analysis £m July 2015 July 2014 Total sales 767 709 + 8.2% Operating profit 184 172 + 7.0% % to sales 24.0% 24.3% Margin movement Achieved gross margin 0.0% Interest income - 0.2% Bad debt + 0.1% Marketing costs + 0.4% Warehouse and distribution - 0.9% Central overheads + 0.3% Mar
Slide 22: Focus
Focus Directory Credit Retail Wages
Slide 23: UK Customer Analysis
UK Customer Analysis July 2015 July 2014 Cash customers 1.14m 0.81m + 40% Credit customers 2.66m 2.74m - 3% Total UK customers 3.80m 3.55m + 7%
Slide 24: Credit Starters and Leavers
Credit Starters and Leavers 30% Starters + 28% 20% + 25% + 19% + 15% 10% +6% +4% 0% -3% -3% - 10% - 18% - 22% - 21% - 22% - 20% Leavers - 30% July 2012 July 2013 July 2014 July 2015
Slide 25: Credit Starters and Leavers
Credit Starters and Leavers 30% 20% Credit Sales +12% 10% +10% +6% +5% +4% +2% 0% -3% -3% - 10% - 20% - 30% July 2012 July 2013 July 2014 July 2015
Slide 26: Promoting Credit
Promoting Credit Credit take up from 7% to 14% …but still not enough Payment option screen at March 2015
Slide 27: Greater Flexibility
Greater Flexibility 9% of balance 5% ‘More like a credit card, less like home shopping’ Payment option screen at March 2015
Slide 28: Change in Directory Debtors
Change in Directory Debtors Minimum payment impact 1000 Minimum +£200m(e) payment impact +£120m 900 800 Additional interest income 700 Lower APR 600 24.99% 22.9% £m Jan 15 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-16
Slide 29: APR Tracker Competitor Benchmarking July 2015
APR Tracker Competitor Benchmarking July 2015 29.9% to 40.8% 42% Home Shopping 40% 38% 36% 19.9% to 29.95% 34% Store Cards 32% 15.9% to 25.9% 30% Credit Cards 28% 26% Oct 2015 24% 22% 22.9% 20% 18% Future? 16% 14%
Slide 30: Profitability
Profitability Annualised (e) 2015/16 (e) Average increase in balance £200m £96m Additional interest income £50m £22m Additional bad debt provision (6.5%) (£13m) (£13m) Cost of funding (4%) (£8m) (£4m) Sub total £29m £5m APR reduction to 22.9% (£19m) (£4m) Net effect £10m £1m 5% * * % return
Slide 31: Retail Wages
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Slide 32: Retail Wages
Retail Wages £7.25 Improved pay rates £7.04 NEXT £7.00 £6.75 £6.70 NMW £6.50 £6.25 £6.21 £6.19 £6.00 2012 2013 2014 2015
Slide 33: Indexed Earnings Growth
Indexed Earnings Growth 50% Improved pay rates + 43% Earnings 40% Improved productivity Longer contracted hours 30% + 26% Hours worked 20% + 13% Pay rate 10% Payroll % Payroll % 11.9% * 12.1% * 0% 2012 2013 2014 2015 * % of payroll over VAT ex. sales
Slide 34: July Budget: Living Wage Premium
July Budget Living Wage Premium “…reaching 60% of median earnings by 2020.” “…set to reach £9 by 2020.”
Slide 35: Living Wage Premium (LWP)
Living Wage Premium (LWP) 2015 2016 2020 1 OBR forecast £10 +4.5% pa 1 £9.35 inflation1 £9 £8 £7.85 LWP Median 60% £7 £7.20 £6.70 LWP Median 55% NMW £6
Slide 36: Living Wage Premium (LWP)
Living Wage Premium (LWP) 2015 2016 2020 £10 +3.5% pa £9 £9.00 inflation £8 £7.85 LWP Median 60% £7 £6.70 NMW £6
Slide 37: Impact on NEXT Rates of Pay
Impact on NEXT Rates of Pay £15 £14 2016 £13 £12 £11 55% of median £10 60% of median £9 +9.0% £8 £7 £7.20 £7.87 £8.75 £9.72 £10.37 £6 Staff Mgr 1 Mgr 2 Mgr 3 Mgr 4 Age 25 yrs + Managers hourly rates at Feb 2016 (estimate)
Slide 38: Impact on NEXT Rates of Pay
Impact on NEXT Rates of Pay £15 £14 2016 £13 £12 £11 +0.5% 60% of median £11m +2.7% £10 +4.6% Knock on £16m £9 +6.7% £8 +9.0% Cost of impact £27m £7 £7.85 £8.40 £9.16 £9.98 £10.43 £6 Staff Mgr 1 Mgr 2 Mgr 3 Mgr 4 Age 25 yrs + Managers hourly rates at Feb 2016 (estimate)
Slide 39: Impact on NEXT Rates of Pay: 2020 wage inflation 4.5%
Impact on NEXT Rates of Pay £15 £14 2020 If…wage inflation + 4.5% pa £13 +0.5% +2.7% £12 +4.6% £11 +6.7% 60% of median £11m £10 +9.0% Knock on £16m £9 £8 Inflation £120m £7 £9.35 £10.02 £10.92 £11.90 £12.44 Cost of impact £147m £6 Staff Mgr 1 Mgr 2 Mgr 3 Mgr 4 Prices + 6%? Age 25 yrs + Managers hour
Slide 40: Impact on NEXT Rates of Pay: 2020 wage inflation 2.0%
Impact on NEXT Rates of Pay £15 £14 2020 If…wage inflation + 2.0% pa £13 and £9 target +6.6% £12 +8.8% £11 +10.9% Inflation £10 +13.1% +15.6% 60% of median £9 £8 Knock on £7 £9.01 £9.64 £10.51 £11.45 £11.97 £6 Staff Mgr 1 Mgr 2 Mgr 3 Mgr 4 Age 25 yrs + Managers hourly rates at Feb 2016 (estimate)
Slide 41: Impact on NEXT Rates of Pay: 2020 wage inflation 2.0%
Impact on NEXT Rates of Pay +1.1% £15 £14 2020 If…wage inflation + 2.0% pa +3.3% £13 and £9 target +6.1% +6.6% £12 +8.8% £11 +10.9% £10 +13.1% +15.6% £9 £8 £7 £9.01 £9.64 £10.51 £11.45 £11.97 £12.66 £13.86 £14.93 £6 Staff Mgr 1 Mgr 2 Mgr 3 Mgr 4 Mgr 5 Mgr 6 Mgr 7 Age 25 yrs + Managers hourly rates a
Slide 42: 2015/16(e) Sales and Profit Guidance
2015/16(e) Sales and Profit Guidance 2015/16(e) Full Year Full Price Sales + 3.5% to + 6.0%
Slide 43: 2015/16(e) Sales and Profit Guidance
2015/16(e) Sales and Profit Guidance 2nd Half + 3.5% to + 7.5% + 5.5% Midpoint
Slide 44: 2015/16(e) Sales and Profit Guidance
2015/16(e) Sales and Profit Guidance v two years ago + 16% v two years ago + 10% + 5.5% + 3.5% Midpoint 1st Half 2nd Half
Slide 45: 2015/16(e) Sales and Profit Guidance
2015/16(e) Sales and Profit Guidance Full Year Full Price Sales + £160m + 5.5% + 3.5% Midpoint 1st Half 2nd Half
Slide 46: 2015/16(e) Full Price Sales Drivers
2015/16(e) Full Price Sales Drivers If full price sales 2014/15 2015/16(e) + £160m £3.5bn £3.6bn -20 0 20 40 60 80 100 120 140 160 Existing -£15m stores New space + £55m NEXT online UK + £50m +£30m Directory overseas +£40m
Slide 47: Sales and Profit Guidance 2015/16(e)
Sales and Profit Guidance 2015/16(e) Full year Brand full price sales + 3.5% to + 6.0% Profit before tax (52 weeks) £805m to £845m Growth in profit + 2.9% to + 8.0% Ordinary dividend yield* 2.2% Special dividend yield / buybacks* 3.3% TSR underlying (at constant PE ratio) 8.4% to 13.5% * Based on a
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