Next Plc · LSE:NXT
Next — FY2015 Earnings Presentation
74 slides from Next's earnings presentation, January 2016
Slide 1: January 2016
JANUARY 2016
Slide 2: Group results summary
£m Total sales Operating profit Interest Profit before tax Taxation Profit after tax EPS (underlying) Ordinary dividends per share +5.4% + 5.3% Brand Full Price + 3.9%
Slide 3: Profit before tax and cash flow
£m Profit before tax (underlying) Depreciation / disposals Capital expenditure Working capital / other Tax paid ESOT Cash flow before distribution 53 weeks 836
Slide 4: Cash Flow (53 weeks)
Cash Flow (53 weeks) next 2016 Capital expenditure (110) Jan 2017(e) Jan 2016 Jan 2015 £148m £151m £110m | Warehouse £27m an £8m | Head Office infrastructure =< Systems Stores | Cosmetic refits
Slide 5: New 'Doncaster 3' Furniture Warehouse
New ‘Doncaster 3’ Furniture Warehouse Capital Additional Capacity Additional Annual Cost Jan 2016 £12m Jan 2017(e) £19m 50% £8.8m Total £31m
Slide 6: Labour cost per unit
Labour cost per unit £4.50 (3) Two man moves 4 Forklift moves Storage and retrieval Moveto Highbay highbay See pick Unload 2 Y Transferto Picking and Load lorry = picking grid _sortation lorry e o - = a 2 | 2 2 o aia it _ih fant ?? Baa > > > > > > >
Slide 7: New 'Doncaster 3' Handling
New ‘Doncaster 3’ Handling EA-50 £2.40 (3) Two man moves next | | | | || || next
Slide 8: Slide 8
Slide 9: New 'Doncaster 3' Furniture Warehouse
New ‘Doncaster 3’ Furniture Warehouse Additional Annual Cost £3.5m
Slide 10: Profit before tax and cash flow
£m Profit before tax (underlying) Depreciation / disposals Capital expenditure Working capital / other Tax paid ESOT Ordinary dividends Special dividends / buybacks Share buybacks brought forward Net cash flow
Slide 11: Balance sheet
£m Fixed assets & investments Goodwill and intangibles Stock Debtors Creditors / derivatives Dividends payable Pension surplus Buyback commitment Net debt Net assets
Slide 12: Balance Sheet
Balance Sheet next 2016 539 44 486 Debtors 844 + 24% Directory Jan 2016 Jan 2015 debtors £932m ele £712m Credit sales moememems Jan 2016@erygg Jan 2015
Slide 13: Change in Directory Debtors
Change in Directory Debtors Balance Sheet Minimum payment impact =a +£200m(e) 2016 Additional interest income 539 ' 44 Lower APR 486 290% 22.9% Febts Jans Directory Jan 2016 Jan 2015 debtors Mack pdin) £712m Credit sales CH@EES AF wT +2% Jan 2015
Slide 14: Fixed assets & investments
£m 2016 2015 Fixed assets & investments 539 518 Goodwill and intangibles 44 44 Stock 486 417 Debtors 1,050 844 Creditors / derivatives (915) (849) Dividends payable ¢:f:)) (74) Pension surplus 46 38 Buyback commitment - (101) Net assets 312 322
Slide 15: Full Year Debt and Cash Flow
Full Year Debt and Cash Flow Jan 2016 850 1000 900 800 Share buybacks $39 151 700 Jan 2015 600 ——— 515 500 Directory debt 215 400 Special dividends 300 Operational 341 372* 200 100 £m * Includes £14m 53'4 week and £8m Cotton Traders
Slide 16: Full Year Debt and Cash Flow
Full Year Debt and Cash Flow next Jan 2016 850 900 Jan 2017(e) 1000 800 Share buybacks yN 700 Directory debt Special dividends 600 & buybacks 40 (e) 500 400 300 200 100 £m
Slide 17: Funding Requirements
Funding Requirements next 1600 1400 1 5350 1200 Peak Bank facility lbn 1000 5 50 800 600 Ptormels Jan 2017(e) 788 Zl) 400 200 £m
Slide 18: Funding Requirements
Funding Requirements next 1600 1400 1200 1,125 Peak Bank facility lbn 1000 550 800 600 Jan 2017(e) 400 Bonds 740 500 575 £m
Slide 19: Funding Requirements
Funding Requirements next 1 °° Investment grade £1.5bn 1400 1,338 1200 Bank facility 1000 550 800 600 Bonds 2021 Jan 2017(e) 788 740 400 2026 200 2024 to 2028? £m
Slide 20: Retail: Norwich Opened August 2015
NORWICH LONGW. ‘ Opened August 2015
Slide 21: Retail: Sales Analysis
Retail : Sales Analysis Sales from new space Return on space Sales growth from net space +2.4% = 64% Average net space growth (sq. ft.) + 3.7%
Slide 22: Retail: Sales Analysis
Retail : Sales Analysis New store performance Sales v target Payback (months) Store profit Forecast for stores opened or extended in the last 12 months
Slide 23: Retail: Sales Analysis
Retail : Sales Analysis Full year space 539 New (8 re-sites) 21 Extensions 14 Closed (11 re-sites) - 20 SEI + 275k sq. ft. + 3.7%
Slide 24: Retail: Sales Analysis
Retail : Sales Analysis Space pipeline (e) Increase in sq. ft. Fashion +11% Home +24% 2016/17 2017/18 2018/19 and beyond
Slide 25: Retail: Profit Analysis
Retail : Profit Analysis Bought-in gross margin + 0.4% Markdown + 0.1% Achieved gross margin +0.5%
Slide 26: Retail: Profit Analysis
Retail : Profit Analysis Margin movement Achieved gross margin + 0.5% Store payroll + 0.0% Store occupancy + 0.0% Warehousing and distribution - 0.1% Central overheads + 0.2% Margin movement + 0.6%
Slide 27: Directory
Slide 28: Directory: Sales Analysis
Directory : Sales Analysis 2016 1,659 405 Full price sales analysis increase on last A NEXT Directory UK + £24m + 2% Label + £31m + 21% Directory UK total + £55m +5%
Slide 29: Directory: Sales Analysis
Directory : Sales Analysis 2016 1,659 405 . . Increase on last year Full price sales analysis € % Customers Directory UK total +£55m + 5% + 5% Directory overseas + £32m + 20%* + 54% Directory total +£87m + 6.5% +11% * Directory overseas (constant currency) +41%
Slide 30: Directory: Sales Analysis
Directory : Sales Analysis 2016 1,659 405 Full price sales analysis crease oniest ae Customers UK credit + £13m + 1% - 4% UK cash + £42m + 31% + 35% Directory UK total + £55m +5% +5%
Slide 31: Directory: Profit Analysis
Directory : Profit Analysis 2016 1,659 405 24.4% Margin movement Bought-in gross margin Markdown Achieved gross margin +0.4% - 0.2% + 0.2% Markdown sales +9%
Slide 32: Directory: Profit Analysis
Directory : Profit Analysis 2016 1,659 405 24.4% Margin movement Achieved gross margin + 0.2% Interest income +0.6% Bad debt - 0.5% Warehouse and distribution - 0.5% Marketing and catalogues + 0.1% Margin movement - 0.1%
Slide 33: Outlook
Slide 34: Referendum
Referendum
Slide 35: Referendum: Currency Costing Rates
Referendum Currency Costing Rates US$/£ -7% - 8%
Slide 36: UK Real Earnings Growth 2014 to 2016
UK Real Earnings Growth | 2014 to 2016 3.5% 3.0% 2.5% Real Earnings Growth % 2.0% 1.5% 1.0% 0.5% Nov Jan Mar May Jul Sep Nov Jan 2014 2015 2015 2015 2015 2015 2015 2016 Growth in Real Earnings (Earnings growth less CPI) Source: ONS
Slide 37: UK Output Growth 2014 to 2016
UK Output Growth | 2014 to 2016 10% 8% : Construction 6% 4% Services 2% 0% Manufacturing - 2% - 4% Nov Jan Mar May Jul Sep Nov Jan 2014 2015 2015 2015 2015 2015 2015 2016 Source: HM Treasury Pocket Databank
Slide 38: Strength in consumer spending looks very unlikely
10% 3.5% ~ Aw Construction 3.0% / ~\ 9 — 6% = 25% Bl Services / Real Earnings Growth aN 2.0% = r~ Ne \ 15% / 1.0% Manufacturing - 2% Ul - 4% 0.5% Nov Jan Mar May Jul Sep Nov Jan Nov Jan Mar May Jul Sep Nov Jan 2014 2015 2015 2015 2015 2015 2015 2016 2014 2015 2015 2015 2015 2015 2015 2016 Strength i
Slide 39: Mid point +1.5%
-1% to +4% MID POINT +1.5%
Slide 40: Q3 2015 GDP Growth: UK Spending Trends
Q3 2015 GDP Growth £m | vs Q3 2014 NeXt UK Spending Trends +£4.2bn Travel, recreation Groceries and going out* “1% = wm \ Ya * Includes restaurants, . meals out, holidays £243m Source: ONS, 23 Dec 2015
Slide 41: Queen of Shops
QUEEN OF SHOPS SUS A N
Slide 42: Hotel Secrets
RICARD ae Al HOTEL SECRETS
Slide 43: Product Opportunities: Eveningwear
Product Opportunities Eveningwear
Slide 44: Eveningwear week
Slide 45: Eveningwear week
Slide 46: Priorities for 2016/17
Priorities for 2016/17 Directory stock availability Upgrading Directory Retail space Cost Control ee = me a pe ea a : , =, eee! ae ma oe 0 = i = sath = mS ~ on _— af
Slide 47: AW15 vs AW14
AW15 | vs AW14 Average 65% November
Slide 48: AW15 Sales by Publication
AW'115 Sales by Publication | v AW14 next Autumn Autumn Winter Winter Main Book New In Main Book New In
Slide 49: AW15 Sales by Publication
AW'115 Sales by Publication | v AW14 next * More initial stock in Spring and Summer ¢ New merchandise system from Autumn
Slide 50: User Interface
User Interface Books & Marketing Delivery
Slide 51: Customer behaviour: desktop and main book
95% buy on desktop 89% take main book Ney eye 95% of orders on account 87% of orders to home
Slide 52: Customer behaviour: desktop and main book
37% 84% buy on desktop of orders on account 53% 4 45% take main book y of orders to home
Slide 53: Mobile v Desktop
10% 5% 0% Mobile v Desktop Directory Sales Conversion Rates by Device 8.5% 4.2% Directory Sales by Device Desktop 37% 0 Mobile 27% DesiO> ll Tablet Mobile
Slide 54: Mobile v Desktop
Mobile v Desktop Directory Sales Conversion Rates by Device 10% 5% Mobile Site March 2016 0% Desktop Tablet Mobile L_] | ~~ ea ll
Slide 55: Mobile v Desktop
Mobile v Desktop Directory Sales Conversion Rates by Device HII HK He 10% MT Mts ASTPA 5% iPad Mobile iPhone App Site mSite August 2015 March 2016 May 2016
Slide 56: Mobile v Desktop
Mobile v Desktop J Directory Sales Conversion Rates by Device | WI KK 10% 5% iPad Mobile iPhone iPhone Android App Site mSite App App August 2015 = March 2016 May 2016 June 2016 July 2016
Slide 57: Customer behaviour: desktop and main book
37% 2015 Mm 84% buy on desktop of orders on account 45% take main book . of orders to home
Slide 58: Fewer main books
ba jAseul] 2.7m er UK customers 2.4m receive main books 2010 Fewer main books... {net ry a os a S UK customers| 2.0m receive main books 3.8m P 2015
Slide 59: Better targeting in 2016/17
next “= marie claire ® Order before 12 MIDNIGHT for next day delivery Better targeting in 2016/17 _- |
Slide 60: Customer behaviour: desktop and main book
>= 37% EE 2015 uw 84% buy on desktop of orders on account oO: SY 45% of orders to home 53% take main book
Slide 61: UK Credit Customers 2012 to 2016(e)
hal UK Credit Customers* | 2012 to 2016(e) 3.0m Year on year reduction in average actives 2.8m - 3% 2.6m 2.4m 2.2m *6 month moving average 2.0m 2012/13 2013/14 2014/15 2015/16 2016/17(e)
Slide 62: UK Credit Customers 2012 to 2016(e)
UK Credit Customers | 2012 to 2016(e) 3.0m 2012 2015 2.8m Credit customers Credit customers 26m 24M 2.6m - 3% Avg. credit sales (pa) Avg. credit sales (pa) 24m £404 £476 +18% 2.2m __ Totalcredit sales Total credit sales £1.1bn £1.2bn +14% 2.0m 2012/13 2013/14 2014/15 2010/17)
Slide 63: UK Credit Customers 2012 to 2016(e)
J UK Credit Customers* | 2012 to 2016(e) 3.0m = Year on year reduction in average actives 2.8m - 3% 2.6m e fee, = 5%(e) 2.4m SoS 2.2m *6 month moving average 2.0m 2012/13 2013/14 2014/15 2015/16 2016/17(e)
Slide 64: Take main book and orders to home
53% : 45% Take main book “ of orders to home
Slide 65: Improving the NEXT delivery offer
Ln Parcel shops Tighter time slots circa 5,000 from September 2016 from 2017 Improving the NEXT delivery offer
Slide 66: User Interface
User Interface Books & Marketing Delivery
Slide 67: Full Price Sales Drivers 2016/17(e)
Full Price Sales Drivers | 2016/17(e) 2015/16 If full price £3.5bn sales are + 1.5% mid point guidance rage’. | i. Existing stores
Slide 68: Full Price Sales Drivers 2016/17(e)
Full Price Sales Drivers | 2016/17(e) 2015/16 If full price £3.5bn sales are + 1.5% mid point guidance rage’. || :
Slide 69: Full Price Sales Drivers 2016/17(e)
Full Price Sales Drivers | 2016/17(e) 2015/16 If full price £3.5bn sales are + 1.5% mid point guidance rage’ 2 ||
Slide 70: Cost Inflation and Cost Control 2016/17(e)
Cost Inflation and Cost Control | 2016/17(e) £55m increases £m £59m savings and other income Interest income and bad debt Cost of living and other wage costs Surplus stock and Central overheads lower clearance rates Directory marketing Fewer books Property savings including fully depreciated assets
Slide 71: Mid Point Profit Scenario 2016/17(e)
Mid Point Profit Scenario | 2016/17(e) next Ta 2016/17(e) et ere? + 1.5% £821m 0% | 740 | Ea |_780 | 800 220 | Cost savings New space £59m £12m 4£14m
Slide 72: Sales and Profit Guidance 2016/17(e)
Sales and Profit Guidance | 2016/17(e) next - 1% to + 4% £784m to £858m - 4.5% to +4.5% TSR underlying (at constant PE ratio) 1% to 10% * Based ona share price of £67.66
Slide 73: Long Term TSR assuming constant PE ratio
Long Term TSR Assuming constant PE ratio next 25% © Ordinary dividends Special dividends/Buybacks Profit growth 1% 2010/11 201/12 2012/13 2013/14 2014/15 2015/16 ~—- 2016/17) 0%
Slide 74: January 2016
JANUARY 2016