Income Statement m July 2015 July 2014 Total sales 1,907 1,856 Operating profit 362 339 Interest (15) (15) Profit before tax 347 324 Taxation (70) (66) Profit after tax 277 258 + 2.7% + 6.7% + 7.1% EPS 187.1p 173.3p + 8.0% Ordinary interim dividend 53.0p 50.0p + 6.0% Full Price + 3.5%
Cash Flow m Profit before tax Depreciation / disposals Capital expenditure Working capital / other Tax paid ESOT Cash flow before distribution July 2015 347 57 (81) (84) (70) (40) 129 July 2014 324 57 (54) (16) (75) (36) 200
Cash Flow m July 2015 July 2014 Capital Profit before expenditure tax 347 (81) 324 (54) Jan 2016(e) Jan 2015 Depreciation Full Year / disposals 155m 57 110m 57 Warehouse Head Office infrastructure Systems Stores Cosmetic Refits Store systems 6 General IT 6 27m 16m 12m 100m 12m 13m 5m 80m 15m 6m
Cash Flow m Profit before tax Depreciation / disposals Capital expenditure Working capital / other Tax paid ESOT Special dividends paid Share buybacks Net cash flow July 2015 347 57 (81) (84) (70) (40) (163) - July 2014 324 57 (54) (16) (75) (36) (149) (105) (34) (54)
Balance Sheet m Fixed assets & investments Goodwill and intangibles Stock Debtors Creditors July 2015 530 44 451 926 (896) July 2014 513 44 428 780 (867) Dividends payable (237) (212) Pension surplus Buyback commitment Net debt Net assets 37 - (549) 306 69 (62) (571) 122
Balance Sheet m Fixed assets & investments Goodwill and intangibles Stock Debtors Creditors Dividends payable Directory debtors Pension surplus Buyback commitment Net debt Net assets Credit sales increase July 2015 530 513 44 44 451 428 926 780 (896) (867) (237) (212) 37 655m 69 - (62) (549) (571) July 2015 306 July 2014 790m +21% July 2014 July 2015 +2% July 2014 122 + 18.6%
Balance Sheet m Fixed assets & investments Goodwill and intangibles Stock Debtors Creditors July 2015 530 44 451 926 (896) July 2014 513 44 428 780 (867) Dividends payable (237) (212) Pension surplus Buyback commitment Net debt Net assets 37 - (549) 306 69 (62) (571) 122
Full Year Debt and Cash Flow 800 700 600 500 January 2015 515 January 2016(e) 670 (e) Directory debt 200 (e) 400 300 200 100 m Operational 386 (e) Special dividends 341(e)
Funding Requirements 1600 1400 1200 1000 800 600 Investment grade Secure financing Directory debt is a high yield, secure asset < 1.5bn 900 (e) Peak Year end 1,338 2017 2020 2016 Bank facility 550 Bonds 788 400 670 (e) 2021 200 m 2026
Retail High Wycombe Opened July 2015
Retail : Sales Analysis m July 2015 July 2014 Total sales 1,083 1,081 + 0.2% Full Price + 0.8% Operating profit 161 152 Sales from new space Sales growth from net space + 2.2% Average net space growth (sq. ft.) + 3.6% Return on space = 61%
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 +10% Payback (months) 18 Store profit 24% Forecast for stores opened or extended in the last 12 months
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%
Retail : Profit Analysis m July 2015 July 2014 Total sales 1,083 1,081 Operating profit 161 152 + 0.2% + 5.7% % to sales 14.9% 14.1% Margin movement Bought-in gross margin + 0.8% Markdown + 0.2% Achieved gross margin + 1.0%
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 + 0.8%
Directory
Directory : Sales Analysis m July 2015 July 2014 Total sales 767 709 Operating profit 184 172 + 58m + 8.2% Sales analysis NEXT Directory UK Label Directory UK total Increase on last year % + 19m + 3.3% + 22m + 30.5% + 41m + 6.3%
Directory : Sales Analysis m July 2015 July 2014 Total sales 767 709 Operating profit 184 172 + 58m + 8.2% Sales analysis Increase on last year % Directory UK total + 41m + 6.3% NEXT Directory overseas + 17m + 24.1% Directory total + 58m + 8.2% Customers + 7% + 65% + 13%
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 Bought-in gross margin + 0.5% Markdown - 0.5% Achieved gross margin 0.0% Sale stock Markdown sales Markdown sales to date + 22% 0% + 18%
Directory : Profit Analysis m Total sales Operating profit % to sales July 2015 July 2014 767 709 184 172 24.0% 24.3% + 8.2% + 7.0% 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% Margin movement - 0.3%
Focus Directory Credit Retail Wages
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%
Credit Starters and Leavers 30% 20% 10% 0% - 10% - 20% - 30% + 28% + 25% Starters + 19% + 15% +6% +4% -3% -3% - 18% - 22% - 21% - 22% Leavers July 2012 July 2013 July 2014 July 2015
Credit Starters and Leavers 30% 20% 10% 0% +12% +6% +4% +5% Credit Sales +10% +2% -3% -3% - 10% - 20% - 30% July 2012 July 2013 July 2014 July 2015
Promoting Credit Credit take up from 7% to 14% but still not enough Payment option screen at March 2015
Greater Flexibility 9% 5% of balance More like a credit card, less like home shopping Payment option screen at March 2015
Change in Directory Debtors 1000 900 800 700 600 Minimum payment impact + 120m Minimum payment impact + 200m(e) Additional interest income Lower APR 24.99% 22.9% m Jan 15 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-16
APR Tracker Competitor Benchmarking July 2015 42% 40% 38% 36% 34% 32% 30% 28% 26% 24% 22% 20% 18% 16% 14% 29.9% to 40.8% Home Shopping 19.9% to 29.95% Store Cards 15.9% to 25.9% Credit Cards Future? Oct 2015 22.9%
Profitability Annualised (e) Average increase in balance 200m Additional interest income 50m Additional bad debt provision (6.5%) Cost of funding (4%) ( 13m) ( 8m) Sub total 29m APR reduction to 22.9% ( 19m) Net effect 10m 2015/16 (e) 96m 22m ( 13m) ( 4m) 5m ( 4m) 1m 5% * * % return
Retail Wages
Retail Wages 7.25 Improved pay rates 7.04 NEXT 7.00 6.75 6.50 6.70 NMW 6.25 6.00 6.21 6.19 2012 2013 2014 2015
Indexed Earnings Growth 50% 40% 30% Improved pay rates Improved productivity Longer contracted hours + 43% Earnings + 26% Hours worked 20% + 13% Pay rate 10% 0% Payroll % 11.9% * Payroll % 12.1% * 2012 2013 2014 2015 * % of payroll over VAT ex. sales
July Budget Living Wage Premium reaching 60% of median earnings by 2020. set to reach 9 by 2020.
Living Wage Premium (LWP) 10 2015 2016 2020 1 OBR forecast 9 9.35 1 +4.5% pa inflation 1 8 7 6 6.70 NMW 7.20 LWP Median 55% 7.85 LWP Median 60%
Living Wage Premium (LWP) 10 2015 2016 2020 9 9.00 +3.5% pa inflation 8 7 6 6.70 NMW 7.85 LWP Median 60%
Impact on NEXT Rates of Pay 15 14 13 2016 12 11 10 9 8 +9.0% 55% of median 60% of median 7 6 7.20 Staff Age 25 yrs + 7.87 Mgr 1 8.75 9.72 10.37 Mgr 2 Mgr 3 Mgr 4 Managers hourly rates at Feb 2016 (estimate)
Impact on NEXT Rates of Pay 15 14 2016 13 12 11 10 9 8 +9.0% +6.7% +4.6% +2.7% +0.5% 60% of median Knock on Cost of impact 11m 16m 27m 7 6 7.85 Staff Age 25 yrs + 8.40 Mgr 1 9.16 9.98 10.43 Mgr 2 Mgr 3 Mgr 4 Managers hourly rates at Feb 2016 (estimate)
Impact on NEXT Rates of Pay 15 14 2020 If wage inflation + 4.5% pa 13 12 +2.7% +0.5% 11 10 9 8 +9.0% +6.7% +4.6% 60% of median Knock on 11m 16m Inflation 120m 7 6 9.35 Staff Age 25 yrs + 10.02 Mgr 1 10.92 11.90 12.44 Mgr 2 Mgr 3 Mgr 4 Managers hourly rates at Feb 2016 (estimate) Cost of impact Prices 147m + 6%?
Impact on NEXT Rates of Pay 15 14 13 12 2020 If wage inflation + 2.0% pa and 9 target +6.6% +8.8% 11 +10.9% 10 9 8 7 6 +15.6% 9.01 9.64 10.51 11.45 11.97 Staff Age 25 yrs + +13.1% Mgr 1 Mgr 2 Mgr 3 Mgr 4 Managers hourly rates at Feb 2016 (estimate) Inflation 60% of median Knock on
Impact on NEXT Rates of Pay 15 14 13 12 2020 If wage inflation + 2.0% pa and 9 target +6.6% +8.8% +6.1% +3.3% +1.1% 11 +10.9% 10 9 8 7 6 +15.6% 9.01 9.64 10.51 11.45 11.97 12.66 13.86 14.93 Staff Age 25 yrs + +13.1% Mgr 1 Mgr 2 Mgr 3 Mgr 4 Managers hourly rates at Feb 2016 (estimate) Mgr 5 Mgr 6 Mgr 7
2015/16(e) Sales and Profit Guidance 2015/16(e) Full Year Full Price Sales + 3.5% to + 6.0%
2015/16(e) Sales and Profit Guidance 2 nd Half + 3.5% to + 7.5% + 5.5% Midpoint
2015/16(e) Sales and Profit Guidance v two years ago + 16% v two years ago + 10% + 3.5% + 5.5% Midpoint 1 st Half 2 nd Half
2015/16(e) Sales and Profit Guidance Full Year Full Price Sales + 160m + 3.5% + 5.5% Midpoint 1 st Half 2 nd Half
2015/16(e) Full Price Sales Drivers If full price sales + 160m Existing stores New space NEXT online UK 2014/15 3.5bn -20 0 20 40 60 80 100 120 140 160-15m + 55m + 50m 2015/16(e) 3.6bn + 30m Directory overseas + 40m
Sales and Profit Guidance 2015/16(e) Full year Brand full price sales Profit before tax (52 weeks) + 3.5% to + 6.0% 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 share price of 72.33