NEXT plc · LSE:NXT
NEXT — H1 2017 Earnings Presentation
75 slides from NEXT's earnings presentation, September 2017
Slide 1: Income Statement
Income Statement Brand £m July 2017 July 2016 Full Price Total sales 1,914 1,957 - 2.2% - 1.2% Operating profit 325 360 - 9.8% Interest (16) (18) + £2m Profit before tax 309 342 - 9.5% Taxation (57) (69) Profit after tax 252 273 - 7.8% EPS (underlying) 176.9p 188.6p - 6.2% Ordinary dividends per sha
Slide 2: Cash Flow
Cash Flow £m July 2017 July 2016 Profit before tax 309 342 Depreciation / disposals 63 59 Capital expenditure (54) (77) Working capital / other (14) (70) Tax paid (48) (71) ESOT (25) (15) Cash flow before distribution 231 168
Slide 3: Cash Flow
Cash Flow £m July 2017 July 2016 Capital expenditure (54) (77) Profit before tax 309 342 Jan 2018 (e) Jan 2018 (e) Depreciation / disposals £130m 63 £122m 59 Warehouse Stated at Latest March 2017 estimate Head Office infrastructure Systems £16m Cosmetic refits £5m £13m £7m Stores £6m £9m £19m £21m £
Slide 4: Cash Flow
Cash Flow £m July 2017 July 2016 Profit before tax 309 342 Depreciation / disposals 63 59 Capital expenditure (54) (77) Working capital / other (14) (70) Tax paid (48) (71) ESOT (25) (15) Special dividends paid (64) (88) Share buybacks 0 (176) Net cash flow 167 (96)
Slide 5: Balance Sheet
Balance Sheet £m July 2017 July 2016 Fixed assets and investments 572 560 Goodwill and intangibles 43 43 Stock 493 491 Debtors 1,126 1,077 Creditors / derivatives (964) (854) Dividends payable (213) (150) Pension surplus / (deficit) 65 (35) Net debt (692) (946) Net assets 430 186
Slide 6: Balance Sheet
Balance Sheet £m July 2017 July 2016 Fixed assets and investments 572 560 Goodwill and intangibles 43 43 Stock 493 491 + 0.3% Debtors 1,126 1,077 + £49m Creditors / derivatives (964) (854) Dividends payableDirectory July 2017 (213) + 5% July 2016 (150) debtors £997m £953m + £44m Pension surplus / (d
Slide 7: Balance Sheet
Balance Sheet £m July 2017 July 2016 Fixed assets and investments 572 560 Goodwill and intangibles 43 43 Stock 493 491 Debtors 1,126 1,077 Creditors / derivatives (964) (854) Dividends payable (213) (150) Pension surplus / (deficit) 65 (35) Net debt (692) (946) Net assets 430 186
Slide 8: Full Year Debt and Cash Flow (£m)
Full Year Debt and Cash Flow (£m) 1000 Jan 2017 Jan 2018 861 861 (e) 900 Buybacks 800 Special dividends 50(e) 700 260(e) Operational 600 310(e) 500
Slide 9: Retail
Retail Hull Kingswood
Slide 10: Retail : Sales Analysis
Retail : Sales Analysis Full Price £m July 2017 July 2016 Total sales 993 1,084 - 8.3% - 7.7% Operating profit 90 134 Sales from new space + 2.5% Performance of new space Sales v target Payback (months) Store profit Extensions & refits - 7% 46.6 22% New & resites - 3% 24.9 23% All* - 5% 28.6 23% * F
Slide 11: Birmingham Bullring Before
Birmingham Bullring Before
Slide 12: Birmingham Bullring After
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Slide 13: Birmingham Bullring | Cosmetic Spend
Birmingham Bullring | Cosmetic Spend Total company spend Last 5 years £11m Next 5 years £16m
Slide 14: Retail : Store Openings and Closures
Retail : Store Openings and Closures Sq. ft. Stores 000’s January 2017 538 7,978 New / resites (12) 20 345 Extensions (4), resite (1) 18 Closed (13), resites (15) (28) (278) January 2018 530 8,063 (e) -8 + 85 (e)
Slide 15: Retail : Store Openings and Closures
Retail : Store Openings and Closures Stores NBC Closed 13 £2.9m Lease end 10 £1.9m Sublet 2 £0.2m Redevelopment 1 £0.8m
Slide 16: Retail : Store Openings and Closures
Retail : Store Openings and Closures 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Remaining lease commitment (years)
Slide 17: Retail : Profit Analysis
Retail : Profit Analysis Full Price £m July 2017 July 2016 Total sales 993 1,084 - 8.3% - 7.7% Operating profit 90 134 - 33% % to sales 9.0% 12.4% Margin movement Bought-in gross margin - 0.1% Markdown - 0.5% Sale stock - 6% Achieved gross margin - 0.6% Markdown sales - 14%
Slide 18: Retail : Profit Analysis
Retail : Profit Analysis Full Price £m July 2017 July 2016 Total sales 993 1,084 - 8.3% - 7.7% Operating profit 90 134 - 33% % to sales 9.0% 12.4% Achieved gross margin - 0.6% Full year Store payroll + 0.2% margin circa (e) Store occupancy - 2.2% 11.8% Warehousing and distribution - 0.3% Last year C
Slide 19: Directory
Directory
Slide 20: Directory : Sales Analysis
Directory : Sales Analysis £m July 2017 July 2016 Full Price Total sales 868 821 + 5.7% + 7.4% Operating profit 217 204 Full price sales analysis Increase on last year Q1 Q2 NEXT Directory UK - £21m - 4% - 7% - 1% LABEL + £40m + 41% + 31% + 50% Directory UK total + £19m + 3% - 1% + 7%
Slide 21: Directory : Sales Analysis
Directory : Sales Analysis £m July 2017 July 2016 Full Price Total sales 868 821 + 5.7% + 7.4% Operating profit 217 204 Full price sales analysis Increase on last year Avg. customers Directory UK total + £19m + 3% + 3% Directory overseas + £34m + 31% * + 6% Directory total + £53m + 7% + 4% * Directo
Slide 22: Directory : Sales Analysis
Directory : Sales Analysis £m July 2017 July 2016 Full Price Total sales 868 821 + 5.7% + 7.4% Operating profit 217 204 Full price sales analysis Increase on last year Avg. customers UK credit + £17m + 3% 0% UK cash + £2m + 2% + 11% Directory UK total + £19m + 3% + 3%
Slide 23: Directory : Profit Analysis
Directory : Profit Analysis £m July 2017 July 2016 Full Price Total sales 868 821 + 5.7% + 7.4% Operating profit 217 204 + 6.3% % to sales 25.0% 24.9% Margin movement Bought-in gross margin - 0.8% Markdown + 0.2% Sale stock + 1% Achieved gross margin - 0.6% Markdown sales - 4%
Slide 24: Directory : Profit Analysis
Directory : Profit Analysis £m July 2017 July 2016 Full Price Total sales 868 821 + 5.7% + 7.4% Operating profit 217 204 + 6.3% % to sales 25.0% 24.9% Achieved gross margin - 0.6% Interest income - 0.2% Full year Warehouse and distribution + 0.3% margin circa Photography and catalogues + 0.4% (e) 25
Slide 25: Retail Profitability, Directory Modernisation, Consumer Environment
• Retail Profitability • Directory Modernisation • Consumer Environment
Slide 26: Retail: An asset or a liability?
Retail An asset or a liability? Hull Kingswood
Slide 27: Retail An asset …YES
Retail An asset …YES • Declining in financial value • Increasing value to Directory Hull Kingswood
Slide 28: Retail Store Portfolio Stress Test
Retail Store Portfolio Stress Test* Branch contribution 20% LFL scenario - 2% pa Assumptions 19% 1. No new store openings - 4% pa 2. Unprofitable stores are closed on lease expiry 15% - 6% pa 3. Profitable stores are held over on lease expiry 70% of leases expire within 10 years 10% £100m 2017 2018
Slide 29: Store Portfolio | 10 Year Stress Test
Store Portfolio | 10 Year Stress Test £515m LFL scenario - 6% pa Forecast overheads £230m £100m 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 * Mainline stores excluding clearance stores
Slide 30: Store Portfolio | Overheads 10 Year Projection
Store Portfolio | Overheads 10 Year Projection 2017/18 Sales LFL £230m over 10 years scenario - 57% pa - 6% pa Marketing £40m Warehousing £50m Distribution £60m Systems, Product, £80m Other
Slide 31: Store Portfolio | Overheads 10 Year Projection (Indexed)
Store Portfolio | Overheads 10 Year Projection (Indexed) 2017/18 Sales LFL 100% over 10 years scenario Variable cost savings - 57% pa - 6% pa Marketing - 20% Shared Warehousing costs * Further cost - 22% savings 2026/27 - 6% 52% Distribution 58 36 44 Systems, Product, Other 66 * Assuming Brand sales
Slide 32: Store Portfolio | 10 Year Stress Test
Store Portfolio | 10 Year Stress Test £515m Sales LFL over 10 years scenario - 57% pa - 6% pa £230m £120m £100m 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 * Mainline stores excluding clearance stores
Slide 33: Store Portfolio | 10 Year Stress Test
Store Portfolio | 10 Year Stress Test £515m Net Cash Sales LFL over 10 years scenario (e) £1bn - 57% pa - 6% pa £300m £230m £200m £120m £100m £100m £0m 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 * Mainline stores excluding clearance stores
Slide 34: Store Portfolio | 10 Year Stress Test
Store Portfolio | 10 Year Stress Test Net Cash LFL scenario (e) (e) £1bn to £2bn - 2% pa Excludes new store openings Sales LFL over 10 years scenario £300m Excludes rental reduction - 57% pa - 6% pa £200m £100m £0m 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 * Mainline stores excluding clearan
Slide 35: New Store | 10 Year Example
New Store | 10 Year Example 1,000 Capex New store openings £1m Net cash inflow 500k Payback 24 mths Cash Total cash £k 0 Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 £2.5m IRR 34% LFL scenario £1m - 6% pa - 1,000
Slide 36: Rent Renewals | Opportunities
Rent Renewals | Opportunities 8 renewals in SS17 Before After Rent £2.9m £2.2m Net rent to sales 9.5% 7.0%
Slide 37: Rent Renewals | Opportunities
Rent Renewals | Opportunities 8 renewals in SS17 Before After Rent £2.9m £2.2m Concession - £175k £2.0m Net rent to sales 9.5% 6.5% Average lease length Average profit 7 years 23%
Slide 38: Rent Renewals | Opportunities: Concession
Rent Renewals | Opportunities Concession CAFÉ STATIONERY PROSECCO BAR HAIRDRESSER GYM RESTAURANT LIPSY & CO.
Slide 39: Rent Renewals | Opportunities: Concession
Rent Renewals | Opportunities Concession Estimated annual profit share £300k Two restaurant trial
Slide 40: Increasing Value to Directory
Increasing Value to Directory Edinburgh Straiton
Slide 41: Increasing Value to Directory
Increasing Value to Directory >40% >50% 80% 15% of new of Directory orders of Directory returns Directory customers (by (byvolume) value) are are are returned via our opened an account via picked up from store store network our store network
Slide 42: Directory Modernisation
Directory Modernisation
Slide 43: SS17 Brand Full Price Sales Variance vs 2016
SS17 Brand Full Price Sales Variance vs 2016 Jan Feb Mar & Apr * May Jun Jul * March and April have been added together to account for the change in timing of Easter
Slide 44: SS17 Brand Full Price Sales Variance vs 2016
SS17 Brand Full Price Sales Variance vs 2016 Retail Directory Mar & Jan Feb Apr * May Jun Jul Jan Feb Mar & May Jun Jul Apr Growth trend line * March and April have been added together to account for the change in timing of Easter
Slide 45: Directory Modernisation | Investment Software
Directory Modernisation | Investment Software Web Merchandising System WMS Analytics and Segmentation SAS Content Management System CMS £5.5m Data Management Platform DMP Security and Testing SEC New Credit Platform NCP
Slide 46: Directory Modernisation | Investment Software People
Directory Modernisation | Investment Software People New heads WMS Development and Testing 51 £5.5m Software SAS Data and Marketing 21 CMS DMP Content design 19 £6.5m People UX design 10 SEC NCP Security and other 20 £12.0mTotal 121
Slide 47: Mobile
Directory Modernisation | Usability MOBILE Mobile Jan 2016 July 2017 Orders Pn 27% 38% Conversion rate 4.2% 5.3% + 26%
Slide 48: Next Unlimited
Directory Modernisation | Usability MOBILE NEXT UNLIMITED Next Unlimited Unlimited deliveries to home for £20 per year £5m cost >10% of all orders delivered free to home >50% of all orders delivered free to store >60% FREE DELIVERY
Slide 49: nextpay
Directory Modernisation | Usability MOBILE NEXT UNLIMITED nextpay NEXTPAY + 0.2% Jan 2016 Jan 2017 July 2017 0% - 1% Active Credit - 2% Customers - 3% - 4% - 5% - 6%* * Prior year active customers have been restated - 6%
Slide 50: Personalised home pages
Directory Modernisation | Personalisation MOBILE NEXT UNLIMITED Personalised home pages NEXTPAY PERSONALISED HOME PAGES ~ 1% increase in sales Offered to 40% of customers
Slide 51: Intelligent recommendations
Directory Modernisation | Personalisation MOBILE NEXT UNLIMITED Intelligent recommendations NEXTPAY PERSONALISED HOME PAGES INTELLIGENT RECOMMENDATIONS
Slide 52: Bags across devices
Directory Modernisation | Personalisation MOBILE NEXT UNLIMITED Bags across devices NEXTPAY PERSONALISED HOME PAGES INTELLIGENT RECOMMENDATIONS BAGS ACROSS DEVICES
Slide 53: Abandoned basket reminders
Directory Modernisation | Personalisation MOBILE NEXT UNLIMITED Abandoned basket reminders NEXTPAY PERSONALISED HOME PAGES ~ 2% fewer abandoned baskets INTELLIGENT RECOMMENDATIONS BAGS ACROSS DEVICES ABANDONED BASKET REMINDERS
Slide 54: Next UK Overseas
Directory Modernisation MOBILE NEXT UNLIMITED NEXTPAY PERSONALISED HOME PAGES Next UK Overseas INTELLIGENT RECOMMENDATIONS BAGS ACROSS DEVICES ABANDONED BASKET REMINDERS
Slide 55: Directory Modernisation | Future developments
Directory Modernisation | Future developments MOBILE FAST CHECKOUT NEXT UNLIMITED Coming soon… FAST REGISTRATION NEXTPAY TARGETED EMAILS PERSONALISED HOME PAGES INTELLIGENT RECOMMENDATIONS Fast checkout TARGETED ADS BAGS ACROSS DEVICES ABANDONED BASKET REMINDERS Fast registration Targeted emails Tar
Slide 56: Directory Modernisation | Future developments
Directory Modernisation | Future developments MOBILE FAST CHECKOUT NEXT UNLIMITED Coming soon… FAST REGISTRATION NEXTPAY TARGETED EMAILS PERSONALISED HOME PAGES TARGETED ADS INTELLIGENT RECOMMENDATIONS New search engine NEW SEARCH ENGINE BAGS ACROSS DEVICES ABANDONED BASKET REMINDERS
Slide 57: Consumer Environment
Consumer Environment
Slide 58: 'More experience, less stuff'
‘More experience, less stuff’ Restaurant spend grew by Entertainment spend grew by Pub 12.4% spend grew by On the 9.4% 9.2% High Street Womens Clothing spend fell by Source: Barclaycard August 2017 Report UK - 2.3%
Slide 59: CPI and UK Average Weekly Earnings
CPI and UK Average Weekly Earnings 4% Sectorial Shift Avg. weekly earnings ONS, 13th September 2017 3% CPI forecast BoE, 3rd August 2017 2% UK Employment CPI + 1.2% ONS, 12th September 2017 1% ONS “UK Labour Market Release”, 13th September 0 Jan Jan Jan Jan 2015 2016 2017 2018
Slide 60: Average Selling Price Increases
Average Selling Price Increases Currency rates $ Sectorial Shift ASP annual LY TY +/- increase SS17 1.54 1.39 - 10% + 4% AW17 1.47 1.26 - 14% + 4% Average Earnings (e) SS18 1.39 1.26 - 9% + 2% (e) AW18 1.26 1.29(e) + 2% Flat
Slide 61: General Environment
General Environment Sectorial Shift Average Earnings Next Pricing 2017/18 + 4%
Slide 62: Next Ranges
Next Ranges • Heartland product • Easy to wear • ‘Power Programs’ at mid price points
Slide 63: Sales Outlook | 2017/18(e)
Sales Outlook | 2017/18(e) + 2% - 1.2% + 1% + 0.7% ? ? 0% - 1% - 2% - 3.0% - 3% Brand Full Price including interest income v previous year - 4%
Slide 64: Sales Outlook | 2017/18(e)
Sales Outlook | 2017/18(e) + 2% - 1.2% - 2.8% to + 3.8% + 1% New guidance + 0.7% 0% - 1% - 2% - 3.0% - 3% Brand Full Price including interest income v previous year - 4%
Slide 65: Sales Outlook | 2017/18(e)
Sales Outlook | 2017/18(e) Midpoint new guidance + 2% - 1.2% + 0.5% + 1% + 0.7% 0% - 1% - 2% - 3.0% - 3% Brand Full Price including interest income v previous year - 4%
Slide 66: Sales Outlook | 2017/18(e)
Sales Outlook | 2017/18(e) + 2% + 1% + 0.7% 2016 0% - 0.4% To Christmas Eve - 1% - 2% - 3.0% - 3% - 3.5% Brand Full Price including interest income v previous year - 4%
Slide 67: The UK economy remains challenging
J U L Y 2 0 1 7 The UK economy remains challenging Our stores are an asset Encouraging signs in Directory
Slide 68: Sales and Profit Guidance | 2017/18(e)
Sales and Profit Guidance | 2017/18(e) Sales - 3.5% - 1.5% + 0.5% Trading statement, May 2017
Slide 69: Sales and Profit Guidance | 2017/18(e)
Sales and Profit Guidance | 2017/18(e) Sales - 2.0% - 0.3% + 1.5% Current guidance
Slide 70: Profit Scenario | 2017/18(e)
Profit Scenario | 2017/18(e) 2017/18(e) 2016/17 If FP sales are - 0.3% £736m £790m Cost increases LFL sales £29m £90m New space Cost savings Directory £31m £9m + £25m Spring Summer Clearance rates £11m
Slide 71: Profit Scenario | 2017/18(e)
Profit Scenario | 2017/18(e) 2017/18(e) 2016/17 If FP sales are - 0.3% £717m £790m Cost increases LFL sales £29m £90m New space Cost savings Directory £31m £9m + £25m Full Year Clearance rates £19m
Slide 72: Sales and Profit Guidance | 2017/18(e)
Sales and Profit Guidance | 2017/18(e) Full year Brand full price sales - 2.0% to + 1.5% Profit before tax £687m to £747m Growth in profit - 13.1% to - 5.5% Growth in EPS - 10.9% to - 3.1% Ordinary dividend yield* 4.1% Special dividend yield* 4.7% TSR underlying (at constant PE ratio) - 2.1% to + 5.
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