TIDMNXT

RNS Number : 8882M

Next PLC

19 September 2019

 
 Date:          Embargoed until 07.00hrs, Thursday 19 September 2019 
 
 Contacts:      Lord Wolfson, Chief Executive 
                Amanda James, Group Finance Director (analyst calls) 
                NEXT PLC                         Tel: 0333 777 8888 
 
                Alistair Mackinnon-Musson        Email: next@rowbellpr.com 
                Rowbell PR                       Tel: 020 7717 5239 
 
 Photographs:   http://www.nextplc.co.uk/media/image-gallery/campaign-images 
 

NEXT PLC

Results for the

Half Year Ending

July 2019

To view the full half year report please refer to the associated PDF which is available at http://www.rns-pdf.londonstockexchange.com/rns/8882M_1-2019-9-18.pdf or on the NEXT corporate website www.nextplc.co.uk.

financial headlines

NEXT Brand full price sales(1) were up +4.3% and Brand total sales(2) (including markdown sales) were up +3.8% on last year. Group profit before tax was up +2.7% and Earnings Per Share (EPS) were up +7.5% on last year. We are declaring an ordinary interim dividend of 57.5p per share, which is up +4.5% on last year. We are maintaining our guidance for the full year, as set out in our July Trading Statement, for profit before tax to be GBP725m (up +0.3% on last year) and EPS growth to be up +5.2%.

 
 TOTAL SALES GBPm     July 2019   July 2018 
 Retail                   874.3       925.1   - 5.5% 
 Online                 1,004.9       892.3   +12.6% 
 Finance                  134.0       122.0    +9.9% 
 Brand                  2,013.2     1,939.4    +3.8% 
 Other(3)                  45.6        46.8 
                     ==========  ========== 
 Total Group sales      2,058.8     1,986.2    +3.7% 
===================  ==========  ==========  ======= 
 
 
 PROFIT GBPm and EPS (excluding 
  IFRS 16)                             July 2019   July 2018 
 Retail                                     56.0        73.2   - 23.5% 
 Online                                    177.1       163.3     +8.4% 
 Finance (after funding costs)(4)           75.8        60.9    +24.6% 
 Brand                                     308.9       297.4     +3.9% 
 Other(5)                                   14.2        16.3 
 Recharge of interest to Finance(4)         17.8        16.8 
                                      ==========  ========== 
 Operating profit                          340.9       330.5     +3.1% 
 Net external interest                    (21.3)      (19.4) 
                                      ==========  ========== 
 Profit before tax                         319.6       311.1     +2.7% 
 Taxation                                 (59.1)      (56.9) 
                                      ==========  ========== 
 Profit after tax                          260.5       254.2 
                                      ==========  ========== 
 Earnings Per Share                       199.5p      185.6p     +7.5% 
 Ordinary dividends per share              57.5p       55.0p     +4.5% 
====================================  ==========  ==========  ======== 
 

(1) Full price sales are VAT exclusive sales, excluding items sold in our mid-season, end-of-season Sale events and our Clearance operations.

(2) Total sales are VAT exclusive sales including the full value of commission based sales (refer to Note 3 of the financial statements).

(3) Other sales includes: NEXT Sourcing external sales, Franchise and Lipsy non-NEXT business.

(4) Finance profit for the half year to July 2018 has been restated to reflect a change in treatment of funding costs.

(5) Other profit includes NEXT sourcing, franchise and Lipsy.

Statutory sales were up +2.7% and profit before tax, including the effect of IFRS 16, was up +4.0%.

 
 STATUTORY BASIS GBPm and    July 2019   July 2018 
  EPS 
 Sales                         2,014.5     1,961.9   +2.7% 
 Profit before tax               327.4       314.9   +4.0% 
 Profit after tax                266.9       257.3   +3.9% 
 Earnings Per Share             204.4p      187.9p   +8.8% 
==========================  ==========  ==========  ====== 
 

Interim Dividends

We are declaring an ordinary dividend of 57.5p, up +4.5% on last year, to be paid on 2 January 2020. Shares will trade ex-dividend from 5 December 2019 and the record date will be 6 December 2019.

Bond and Bank Facilities

At July 2019 our committed financing amounted to GBP1.6bn and consisted of GBP1,075m of bonds and GBP525m of committed bank facilities. In April, we successfully issued a GBP250m six-year bond (maturity August 2025), with a coupon of 3.0%. We initially retained GBP50m of these bonds which were issued in early August. In addition, we are in the process of renegotiating our bank facilities which we expect to complete by the end of the year.

Outlook for Profits and Earnings Per Share

Our guidance for the full year remains unchanged since our July 2019 Trading Statement was issued and, for completeness, it is set out below.

At our central guidance of full price sales growth of +3.6%, we estimate that Group profit before tax would be around GBP725m, up +0.3% on last year. We estimate the enhancement to EPS from GBP300m of share buybacks to be +5.1%. As a result, EPS for the full year is expected to rise by +5.2%. Our central guidance for sales, profits and EPS is set out in the table below.

 
 Full year estimate to January 2020          Central guidance 
==========================================  ================= 
 Total full price sales versus 2018/19                  +3.6% 
 Group profit before tax                              GBP725m 
 Group profit before tax versus 2018/19                 +0.3% 
 Earnings Per Share growth versus 2018/19               +5.2% 
                                            ================= 
 

UNAUDITED CONSOLIDATED

INCOME STATEMENT

 
                                                          26 weeks         26 weeks 
                                                                to               to 
                                                           27 July          28 July 
                                                              2019             2018 
                                                              GBPm         Restated 
                                                                               GBPm 
 
Continuing operations 
Revenue                                                    2,014.5          1,961.9 
Cost of sales                                            (1,249.6)        (1,248.9) 
                                                    (____________)   (____________) 
Gross profit                                                 764.9            713.0 
Distribution costs                                         (249.6)          (214.5) 
Administrative expenses                                    (131.4)          (130.6) 
Other (losses)/gains                                         (3.2)              1.0 
                                                    (____________)   (____________) 
Trading profit                                               380.7            368.9 
Share of results of associates and joint venture               0.1              0.1 
                                                    (____________)   (____________) 
Operating profit                                             380.8            369.0 
Finance income                                                 0.1              0.1 
Finance costs                                               (53.5)           (54.2) 
                                                    (____________)   (____________) 
Profit before taxation                                       327.4            314.9 
Taxation (Note 6)                                           (60.5)           (57.6) 
                                                    (____________)   (____________) 
Profit for the period attributable to equity 
 holders of the Parent Company                               266.9            257.3 
                                                    (____________)   (____________) 
 
 
                                                          26 weeks         26 weeks 
                                                                to               to 
                                                           27 July          28 July 
                                                              2019             2018 
                                                                           Restated 
 
Earnings Per Share (Note 7) 
     Basic                                                  204.4p           187.9p 
     Diluted                                                203.3p           186.8p 
 
 

The 26 weeks to 28 July 2018 Income Statement and Earnings Per Share have been restated to reflect the impact of IFRS 16 'Leases' (Refer to Note 1 and 17).

Please refer to Note 7 for Earnings Per Share excluding the impact of IFRS 16.

UNAUDITED CONSOLIDATED

STATEMENT OF COMPREHENSIVE INCOME

 
                                                              26 weeks         26 weeks 
                                                                    to               to 
                                                               27 July          28 July 
                                                                  2019             2018 
                                                                  GBPm         Restated 
                                                                                   GBPm 
 
Profit for the period                                            266.9            257.3 
 
Other comprehensive income and expenses: 
 
Items that will not be reclassified to profit 
 or loss 
Actuarial gains on defined benefit pension scheme                 16.6             60.4 
Tax relating to items which will not be reclassified             (2.8)           (10.3) 
                                                        (____________)   (____________) 
Subtotal items that will not be reclassified                      13.8             50.1 
                                                        (____________)   (____________) 
Items that may be reclassified to profit or 
 loss 
Exchange differences on translation of foreign 
 operations                                                      (1.0)            (4.3) 
Foreign currency cash flow hedges: 
- fair value movements                                            46.8             64.8 
- reclassified to the Income Statement                           (7.2)            (4.5) 
- recognised in inventories                                      (8.8)             18.3 
Cost of hedging 
- fair value movements                                             0.7              2.1 
- reclassified to the Income Statement                               -                - 
- recognised in inventories                                          -                - 
Tax relating to items which may be reclassified                  (5.3)           (13.8) 
                                                        (____________)   (____________) 
Subtotal items that may be reclassified                           25.2             62.6 
                                                        (____________)   (____________) 
Other comprehensive income for the period                         39.0            112.7 
                                                        (____________)   (____________) 
Total comprehensive income for the period                        305.9            370.0 
                                                        (____________)   (____________) 
 

UNAUDITED CONSOLIDATED BALANCE SHEET

 
                                         Notes          27 July          28 July      26 Jan 2019 
                                                           2019             2018         Restated 
                                                           GBPm         Restated             GBPm 
                                                                            GBPm 
ASSETS AND LIABILITIES 
Non-current assets 
Property, plant and equipment                             569.7            555.6            564.9 
Intangible assets                                          44.5             42.8             42.6 
Right of use asset                          17            916.6            975.3            943.8 
Associates, joint venture and 
 other investment                                           5.1              5.1              5.1 
Defined benefit pension asset                9            142.0            163.1            125.0 
Other financial assets                      10             60.5             53.4             41.5 
Deferred tax assets                                        42.2             45.0             43.6 
                                                 (____________)   (____________)   (____________) 
                                                        1,780.6          1,840.3          1,766.5 
Current assets 
Inventories                                               551.1            518.6            502.8 
Customer and other receivables              11          1,254.0          1,225.5          1,285.4 
Right of return asset                                      32.6             24.0             23.4 
Other financial assets                      10             35.8             31.3              9.9 
Cash and short term deposits                              156.9             66.1            156.3 
                                                 (____________)   (____________)   (____________) 
                                                        2,030.4          1,865.5          1,977.8 
                                                 (____________)   (____________)   (____________) 
Total assets                                            3,811.0          3,705.8          3,744.3 
                                                 (____________)   (____________)   (____________) 
Current liabilities 
Bank loans and overdrafts                               (274.8)          (327.6)          (377.3) 
Trade payables and other liabilities        12          (598.8)          (572.1)          (605.7) 
Lease liabilities                        16/17          (154.5)          (171.7)          (175.6) 
Dividends payable                            8          (140.3)          (141.9)                - 
Other financial liabilities                 10            (4.8)            (2.5)            (9.4) 
Current tax liabilities                                  (77.9)           (89.7)           (85.1) 
                                                 (____________)   (____________)   (____________) 
                                                      (1,251.1)        (1,305.5)        (1,253.1) 
Non-current liabilities 
Corporate bonds                             13        (1,114.6)          (906.1)          (905.2) 
Provisions                                               (15.2)           (17.6)           (15.7) 
Other financial liabilities                 10           (13.1)           (14.3)            (9.2) 
Lease liabilities                        16/17        (1,176.3)        (1,231.9)        (1,190.7) 
Other liabilities                                        (17.7)            (8.7)            (9.1) 
Deferred tax liabilities                                  (4.4)           (10.9)            (2.8) 
                                                 (____________)   (____________)   (____________) 
                                                      (2,341.3)        (2,189.5)        (2,132.7) 
                                                 (____________)   (____________)   (____________) 
Total liabilities                                     (3,592.4)        (3,495.0)        (3,385.8) 
                                                 (____________)   (____________)   (____________) 
NET ASSETS                                                218.6            210.8            358.5 
                                                 (____________)   (____________)   (____________) 
TOTAL EQUITY                                              218.6            210.8            358.5 
                                                 (____________)   (____________)   (____________) 
 

The 28 July 2018 and 26 January 2019 Balance Sheets have been restated to reflect the impact of IFRS 16 'Leases' (Refer to Note 1 and 17).

UNAUDITED CONSOLIDATED

STATEMENT OF CHANGES IN EQUITY

 
 
                                   Share       Capital                  Cash    Cost of        Foreign                Retained       Total 
                        Share    premium    redemption       ESOT       flow    hedging       currency       Other    Earnings      Equity 
                      capital    account       reserve    reserve      hedge    reserve    translation    reserves    Restated    Restated 
                         GBPm       GBPm          GBPm       GBPm    reserve       GBPm           GBPm        GBPm        GBPm        GBPm 
                                                                        GBPm 
 
 At 26 January 
  2019                   13.9        0.9          16.0    (271.6)        0.4        0.4          (2.0)   (1,443.8)     2,044.3       358.5 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 Profit for the 
  period                    -          -             -          -          -          -              -           -       266.9       266.9 
 Other 
  comprehensive 
  income/(expense) 
  for the period            -          -             -          -       25.6        0.6          (1.0)           -        13.8        39.0 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 Total 
  comprehensive 
  income/(expense) 
  for the period            -          -             -          -       25.6        0.6          (1.0)           -       280.7       305.9 
 
 Share buybacks 
  and commitments       (0.5)          -           0.5          -          -          -              -           -     (280.2)     (280.2) 
 ESOT share 
  purchases                 -          -             -     (46.2)          -          -              -           -           -      (46.2) 
 Shares issued by 
  ESOT                      -          -             -       15.0          -          -              -           -       (3.3)        11.7 
 Share option 
  charge                    -          -             -          -          -          -              -           -         6.4         6.4 
 Tax recognised 
  directly in 
  equity                    -          -             -          -          -          -              -           -         2.8         2.8 
 Equity dividends 
  (Note 8)                  -          -             -          -          -          -              -           -     (140.3)     (140.3) 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 At 27 July 2019         13.4        0.9          16.5    (302.8)       26.0        1.0          (3.0)   (1,443.8)     1,910.4       218.6 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 
 At 27 January 
  2018                   14.5        0.9          15.4    (231.6)     (42.9)          -            3.3   (1,443.8)     1,962.8       278.6 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 Profit for the 
  period                    -          -             -          -          -          -              -           -       257.3       257.3 
 Other 
  comprehensive 
  income/(expense) 
  for the period            -          -             -          -       65.2        1.7          (4.3)           -        50.1       112.7 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 Total 
  comprehensive 
  income/(expense) 
  for the period            -          -             -          -       65.2        1.7          (4.3)           -       307.4       370.0 
 
 Share buybacks 
  and commitments       (0.5)          -           0.5          -          -          -              -           -     (274.0)     (274.0) 
 ESOT share 
  purchases                 -          -             -     (41.9)          -          -              -           -           -      (41.9) 
 Shares issued by 
  ESOT                      -          -             -       14.9          -          -              -           -       (4.1)        10.8 
 Share option 
  charge                    -          -             -          -          -          -              -           -         6.4         6.4 
 Tax recognised 
  directly in 
  equity                    -          -             -          -          -          -              -           -         2.8         2.8 
 Equity dividends 
  (Note 8)                  -          -             -          -          -          -              -           -     (141.9)     (141.9) 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 At 28 July 2018         14.0        0.9          15.9    (258.6)       22.3        1.7          (1.0)   (1,443.8)     1,859.4       210.8 
                      _______    _______       _______    _______    _______    _______        _______     _______     _______     _______ 
 

UNAUDITED CONSOLIDATED

CASH FLOW STATEMENT

 
                                                                   26 weeks         26 weeks 
                                                                         to               to 
                                                               27 July 2019     28 July 2018 
                                                                       GBPm         Restated 
                                                                                        GBPm 
 Cash generated from operations                                       474.8            412.6 
      Corporation taxes paid                                         (70.2)           (68.5) 
                                                             (____________)   (____________) 
 Net cash from operating activities                                   404.6            344.1 
                                                             (____________)   (____________) 
 Cash flows from investing activities 
      Additions to property, plant and equipment                     (65.1)           (58.2) 
      Movement in capital accruals                                      2.2              4.1 
                                                             (____________)   (____________) 
      Payments to acquire property, plant and equipment              (62.9)           (54.1) 
      Proceeds from sale of property, plant and equipment               0.2              0.2 
      Purchase of shares in associate                                     -            (3.0) 
                                                             (____________)   (____________) 
 Net cash from investing activities                                  (62.7)           (56.9) 
                                                             (____________)   (____________) 
 Cash flows from financing activities 
      Repurchase of own shares                                      (280.2)          (275.0) 
      Purchase of shares by ESOT                                     (46.2)           (41.9) 
      Disposal of shares by ESOT                                       11.7             10.8 
 Issue of corporate bonds                                             198.6                - 
      (Repayment)/proceeds from unsecured bank loans                 (95.0)            150.0 
      Lease repayment                                                (75.1)           (67.6) 
      Interest paid                                                  (48.1)           (49.7) 
      Interest received                                                 0.2              0.1 
                                                             (____________)   (____________) 
 Net cash from financing activities                                 (334.1)          (273.3) 
                                                             (____________)   (____________) 
 Net increase in cash and cash equivalents                              7.8             13.9 
 
 Opening cash and cash equivalents                                     34.0              8.5 
 Effect of exchange rate fluctuations on cash 
  held                                                                  0.3              1.1 
                                                             (____________)   (____________) 
 Closing cash and cash equivalents (Note 15)                           42.1             23.5 
                                                             (____________)   (____________) 
 

NOTES TO THE UNAUDITED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

   1.        Basis of preparation 

The Group's interim results for the 26 weeks to 27 July 2019 (prior year 26 weeks to 28 July 2018) were approved by the Board of Directors on 19 September 2019 and have been prepared in accordance with IAS 34 "Interim financial reporting", as adopted by the European Union.

The interim financial statements have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on "Review of interim financial information" and do not include all of the information required for full annual financial statements.

The financial information contained in this report is condensed and does not include all of the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual consolidated financial statements for the 52 weeks to 26 January 2019 which have been delivered to the Registrar of Companies. The audit report for those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The financial statements have been prepared on the historical cost basis except for certain financial instruments, pension assets and liabilities and share-based payment liabilities which are measured at fair value. Where applicable, disclosures required by paragraph 16A of IAS 34 are given either in these interim financial statements or in the accompanying Chief Executive's Review.

New accounting standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim financial statements are the same as those set out in the Group's annual financial statements for the 52 weeks ended 26 January 2019, except for the adoption of new standards effective as of 27 January 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not effective.

The Group applies, for the first time, IFRS 16 "Leases". The nature and effect of this change is disclosed below. Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the interim consolidated financial statements of the Group.

IFRS 16 is effective for all accounting periods beginning on or after 1 January 2019. The Group applied IFRS 16 retrospectively, restating prior year comparatives. It applied the practical expedient to grandfather the definition of a lease on transition and apply the recognition exemption for both short term and low value assets.

Revised accounting policies for IFRS 16 are detailed below.

The Group as Lessee

At inception of a contract the Group assesses whether the contract is or contains a lease. A lease is present where the contract conveys, over a period of time, the right to control the use of an identified asset in exchange for consideration.

Where a lease is identified the Group recognises a right-of-use asset and a corresponding lease liability, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets.

Lease liability - initial recognition

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted at the Group's incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:

   --    fixed lease payments (including in-substance fixed payments), less any lease incentives; 

-- variable lease payments such as those that depend on an index or rate (such as RPI), initially measured using the index or rate at the commencement date;

   --    the amount expected to be payable by the lessee under residual value guarantees; 

-- the exercise price of purchase options where the Group is reasonably certain to exercise the options; and

-- payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the Consolidated Balance Sheet, split between current and non-current liabilities.

Lease liability - subsequent measurement

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

Lease liability - re-measurement

The lease liability is re-measured where:

-- there is a change in the assessment of exercise of a purchase option, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount rate or

-- the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is re-measured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used) or

-- the lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount rate.

When the lease liability is re-measured, an equivalent adjustment is made to the right-of-use asset unless its carrying amount is reduced to zero, in which case any remaining amount is recognised in profit or loss.

Where the lease liability is denominated in a foreign currency it is retranslated at the balance sheet date with foreign gains and losses recognised in profit or loss.

Right-of-use asset - initial recognition

The right-of-use asset comprises the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Where the Group has an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

The right-of-use asset is presented as a separate line in the Balance Sheet.

Right-of-use asset - subsequent measurement

Right-of-use assets are depreciated over the shorter of the lease term and useful life of the underlying asset.

Impairment

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Impairment - non-financial assets' policy.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs.

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.

Short term leases and low value assets

For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The Group as Lessor

The Group enters into lease agreements as a lessor with respect to some of its properties.

Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.

The impact of IFRS 16 on the Income Statement and Balance Sheet is set out in Note 17 of these Interim Financial Statements.

Going concern

The directors report that, having reviewed current performance and forecasts, they are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

   2.        Risks and uncertainties 

The Board has considered the principal risks and uncertainties for the remaining half of the financial year and determined that the risks presented in the 2019 Annual Report, described as follows, also remain relevant to the rest of the financial year: Business strategy development and implementation; Management team; Product design and selection; Key suppliers and supply chain management; Warehousing and distribution; Customer experience; Retail store network; Information security, business continuity and cyber risk; Financial, treasury, liquidity and credit risks. These are detailed on pages 54 to 58 of the 2019 Annual Report, a copy of which is available on the Company's website at www.nextplc.co.uk.

   3.        Segmental analysis 

The Group's operating segments have been determined based on the Group's internal reporting to the Chief Operating Decision Maker (CODM). The CODM has been determined to be the Group Chief Executive, with support from the Board. The performance of operating segments is assessed on profits before interest and tax, excluding equity-settled share option charges recognised under IFRS 2 'Share-based payment' and unrealised foreign exchange gains or losses on derivatives which do not qualify for hedge accounting. Where third-party branded goods are sold on a commission basis, only the commission receivable is included in statutory revenue. Total sales represent the amount payable by the customer, excluding VAT.

The activities, products and services of the operating segments are detailed on page 50 of the 2019 Annual Report. The Property Management segment holds properties and property leases which are sublet to other segments and external parties. The NEXT International Retail segment comprises franchise and wholly owned stores overseas. International online sales are included in the NEXT Online segment.

During the 2020 financial year the CODM has altered the internal reporting of finance costs allocated to NEXT Finance. The NEXT Finance segment revenue represents the interest charged to customers on their credit account balances. Previously all of the external debt and the associated interest, excluding lease debt, was allocated to the NEXT Finance segment. Following a review of this allocation it was decided to allocate 85% of the debt and associated interest costs to the Finance Business with the remaining element held as part of the overall group funding. This allocation better reflects the utilisation of funds across the business. The impact of this change has increased the NEXT Finance profit by GBP3.1m (2018: GBP3.0m) but had no impact on overall Group profit.

In common with many retailers, revenue and trading profit are subject to seasonal fluctuations and are weighted towards the second half of the year which includes the key Christmas period for the business.

 
Segment sales and revenue 
 
26 weeks to 27              Total       Commission                          External         Internal            Total 
July                        sales            sales          IFRS 15          revenue          revenue          segment 
2019                    excluding       adjustment      adjustments             GBPm             GBPm          revenue 
                              VAT             GBPm             GBPm                                               GBPm 
                             GBPm 
 
NEXT Retail                 874.3            (1.5)            (0.5)            872.3              1.6            873.9 
NEXT Online               1,004.9           (63.5)             21.2            962.6                -            962.6 
NEXT Finance                134.0                -                -            134.0                -            134.0 
NEXT 
 International 
 Retail                      28.9                -                -             28.9                -             28.9 
NEXT Sourcing                 3.4                -                -              3.4            262.7            266.1 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
                          2,045.5           (65.0)             20.7          2,001.2            264.3          2,265.5 
Lipsy                         5.9                -                -              5.9             32.1             38.0 
Property 
 Management                   7.4                -                -              7.4             98.5            105.9 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
Total segment 
 sales/revenue            2,058.8           (65.0)             20.7          2,014.5            394.9          2,409.4 
Eliminations                    -                -                -                -          (394.9)          (394.9) 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
Total                     2,058.8           (65.0)             20.7          2,014.5                -          2,014.5 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
 
 
Segment sales and revenue 
 
26 weeks to 28              Total       Commission          IFRS 15         External         Internal            Total 
July                        sales            sales      adjustments          revenue          revenue          segment 
2018                    excluding       adjustment             GBPm             GBPm             GBPm          revenue 
                              VAT             GBPm                                                                GBPm 
                             GBPm 
 
NEXT Retail                 925.1            (0.6)            (2.0)            922.5              2.3            924.8 
NEXT Online                 892.3           (39.7)             18.1            870.7                -            870.7 
NEXT Finance                122.0                -                -            122.0                -            122.0 
NEXT 
 International 
 Retail                      30.9                -                -             30.9                -             30.9 
NEXT Sourcing                 2.9                -                -              2.9            261.5            264.4 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
                          1,973.2           (40.3)             16.1          1,949.0            263.8          2,212.8 
Lipsy                         7.8            (0.1)                -              7.7             32.9             40.6 
Property 
 Management                   5.2                -                -              5.2            102.6            107.8 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
Total segment 
 sales/revenue            1,986.2           (40.4)             16.1          1,961.9            399.3          2,361.2 
Eliminations                    -                -                -                -          (399.3)          (399.3) 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
Total                     1,986.2           (40.4)             16.1          1,961.9                -          1,961.9 
                   (____________)   (____________)   (____________)   (____________)   (____________)   (____________) 
 

In the CEO report, Label commission sales include sales of all Lipsy stock on the NEXT website, as NEXT trades on a commission basis with Lipsy. However, as Lipsy is a group company no commission adjustment is required in respect of this for external revenue in the notes above.

Segment profit

The prior year segment profit results for the first half of 2018 have been restated to reflect the impact of IFRS 16 "Leases" and the change in the allocation of finance costs to NEXT Finance. Finance costs associated with the leases have been assigned to the segments to which the lease relates.

 
                                        26 weeks to         26 weeks         26 weeks 
                                       27 July 2019               to               to 
                                               GBPm     28 July 2018     28 July 2018 
                                                            Restated      As reported 
                                                                GBPm             GBPm 
 
NEXT Retail                                    61.3             73.7             73.2 
NEXT Online                                   180.4            165.8            163.3 
NEXT Finance                                   75.8             60.9             57.9 
NEXT International Retail                       3.2              3.7              3.0 
NEXT Sourcing                                  16.9             14.9             14.8 
                                     (____________)   (____________)   (____________) 
                                              337.6            319.0            312.2 
Lipsy                                           5.5              3.4              3.6 
Property Management                           (0.4)              4.6              4.4 
                                     (____________)   (____________)   (____________) 
Total segment profit                          342.7            327.0            320.2 
Central costs and other                       (4.5)            (4.6)            (4.6) 
Recharge of interest                           17.8             16.8             19.8 
Interest associated with leasing               32.1             34.7                - 
Share option charge                           (6.4)            (6.8)            (6.8) 
Unrealised foreign exchange 
 (losses)/gains                               (0.9)              1.8              1.8 
                                     (____________)   (____________)   (____________) 
Trading profit                                380.8            368.9            330.4 
Share of results of associates 
 and joint venture                              0.1              0.1              0.1 
Finance income                                  0.1              0.1              0.1 
Finance costs                                (21.5)           (19.5)           (19.5) 
Interest associated with leasing             (32.1)           (34.7)                - 
                                     (____________)   (____________)   (____________) 
Profit before tax                             327.4            314.9            311.1 
                                      (___________)   (____________)   (____________) 
 
   4.        Revenue 

The Group's disaggregated revenue recognised under contracts with customers relates to the following categories and operating segments:

 
26 weeks to 27 July 
 2019 
                              Sale of           Credit        Royalties           Rental            Total 
                                goods          account                            income 
                                              interest 
                                 GBPm             GBPm             GBPm             GBPm             GBPm 
 
NEXT Online                     962.6                -                -                -            962.6 
NEXT Finance                        -            134.0                -                -            134.0 
NEXT Retail                     872.3                -                -                -            872.3 
NEXT International 
 Retail                          26.1                -              2.8                -             28.9 
NEXT Sourcing                     3.4                -                -                -              3.4 
Lipsy                             4.8                -              1.1                -              5.9 
Property Management                 -                -                -              7.4              7.4 
                       (____________)   (____________)   (____________)   (____________)   (____________) 
Total                         1,869.2            134.0              3.9              7.4          2,014.5 
                       (____________)   (____________)   (____________)   (____________)   (____________) 
 
 
26 weeks to 28 July 
 2018 
                              Sale of           Credit        Royalties           Rental            Total 
                                goods          account                            income 
                                              interest 
                                 GBPm             GBPm             GBPm             GBPm             GBPm 
 
NEXT Online                     870.7                -                -                -            870.7 
NEXT Finance                        -            122.0                -                -            122.0 
NEXT Retail                     922.5                -                -                -            922.5 
NEXT International 
 Retail                          28.0                -              2.9                -             30.9 
NEXT Sourcing                     2.9                -                -                -              2.9 
Lipsy                             6.8                -              0.9                -              7.7 
Property Management                 -                -                -              5.2              5.2 
                       (____________)   (____________)   (____________)   (____________)   (____________) 
Total                         1,830.9            122.0              3.8              5.2          1,961.9 
                       (____________)   (____________)   (____________)   (____________)   (____________) 
 
   5.        Operating Profit 

Group operating profit is stated after charging/(crediting):

 
                                                 26 weeks to     26 weeks to 
                                                27 July 2019    28 July 2018 
                                                        GBPm        Restated 
                                                                        GBPm 
Impairment charges on tangible assets                      -             1.4 
Write down of inventories to net realisable 
 value                                                  56.9            51.5 
 
Customer and other receivables: 
  Impairment charge                                     20.8            27.5 
  Amounts recovered                                    (1.6)           (2.8) 
 
Depreciation of right-of-use asset                      67.4            68.7 
Interest on lease liabilities                           32.1            34.7 
Foreign exchange loss on lease liabilities               2.3             0.8 
 
   6.        Taxation 

Income tax expense is recognised based on management's best estimate of the full year effective tax rate based on estimated full year profits.

   7.        Earnings Per Share 
 
                         26 weeks to      26 weeks to      26 weeks to      26 weeks to 
                        27 July 2019     28 July 2018     27 July 2019     28 July 2018 
                      Including IFRS   Including IFRS   Excluding IFRS   Excluding IFRS 
                                  16               16               16               16 
Basic Earnings Per 
 Share                        204.4p           187.9p           199.5p           185.6p 
                     ---------------  ---------------  --------------- 
 
Diluted Earnings 
 Per Share                    203.3p           186.8p           198.4p           184.5p 
-------------------  ---------------  ---------------  ---------------  --------------- 
 

Basic Earnings Per Share (EPS) is based on the profit for the period attributable to the equity holders of the Parent Company divided by the net of the weighted average number of shares ranking for dividend less the weighted average number of shares held by the ESOT during the period.

Diluted Earnings Per Share is calculated by adjusting the weighted average number of shares used for the calculation of basic Earnings Per Share as increased by the dilutive effect of potential ordinary shares. Dilutive shares arise from employee share option schemes where the exercise price is less than the average market price of the Company's ordinary shares during the period. Their dilutive effect is calculated on the basis of the equivalent number of nil cost options. Where the option price is above the average market price, the option is not dilutive and is excluded from the diluted EPS calculation. In the current period, there were 2.3 million non-dilutive share options which were excluded from the diluted EPS calculation (2018: 2.6 million).

The table below shows the key variables used in the Earnings Per Share calculations:

 
                                                   26 weeks to         26 weeks to 
                                                  27 July 2019        28 July 2018 
                                                          GBPm            Restated 
                                                                              GBPm 
 
Profit after tax attributable 
 to equity holders of the Parent 
 Company                                                 266.9               257.3 
 
Weighted average number of shares 
 (millions): 
     Weighted average shares in issue                    136.2               142.0 
     Weighted average shares held by 
      ESOT                                               (5.6)               (5.0) 
                                             (_______________)   (_______________) 
Weighted average shares for basic 
 EPS                                                     130.6               137.0 
     Weighted average dilutive potential 
      shares                                               0.7                 0.7 
                                             (_______________)   (_______________) 
Weighted average shares for diluted 
 EPS                                                     131.3               137.7 
                                             (_______________)   (_______________) 
 
   8.        Dividends 

It is intended that this year's ordinary interim dividend of 57.5p per share will be paid to shareholders on 2 January 2020. NEXT plc shares will trade ex-dividend from 5 December 2019 and the record date will be 6 December 2019. Dividends paid or declared during the period were as follows:

 
26 weeks to 27 July 2019 
                                     Paid     Pence      Cash Flow      Statement      July 2019 
                                                per      Statement     of Changes        Balance 
                                              share           GBPm      in Equity          Sheet 
                                                                             GBPm           GBPm 
 
Ordinary final dividend for 
 year to Jan 2019              1 Aug 2019      110p              -          140.3          140.3 
                                                     (___________)  (___________)  (___________) 
                                                                 -          140.3          140.3 
                                                     (___________)  (___________)  (___________) 
 
 
26 weeks to 28 July 2018 
                                     Paid     Pence      Cash Flow      Statement      July 2018 
                                                per      Statement     of Changes        Balance 
                                              share           GBPm      in Equity          Sheet 
                                                                             GBPm           GBPm 
 
Ordinary final dividend for 
 year to Jan 2018              1 Aug 2018      105p              -          141.9          141.9 
                                                     (___________)  (___________)  (___________) 
                                                                 -          141.9          141.9 
                                                     (___________)  (___________)  (___________) 
 
   9.        Defined benefit pension 

The principal pension scheme is the 2013 NEXT Group Pension Plan, which includes defined benefit and defined contribution sections.

The movement in the defined benefit pension surplus in the period is as follows:

 
                                                26 weeks     26 weeks to     52 weeks to 
                                                      to    28 July 2018      26 January 
                                            27 July 2019                            2019 
                                                    GBPm            GBPm            GBPm 
Surplus in schemes at the beginning 
 of the period                                     125.0           106.2           106.2 
Current service cost                               (3.6)           (4.2)           (8.2) 
Administration costs                               (1.2)           (1.1)           (1.9) 
Net interest                                         1.9             1.3             2.8 
Employer contributions                               3.5             0.5             7.8 
Actuarial gains                                     16.4            60.4            18.7 
Guaranteed Minimum Pension equalisation                -               -           (0.4) 
                                           (___________)   (___________)   (___________) 
Surplus in schemes at the end 
 of the period                                     142.0           163.1           125.0 
                                           (___________)   (___________)   (___________) 
 

The main financial assumptions and actuarial valuations have been updated by independent qualified actuaries under IAS 19 "Employee benefits". The following financial assumptions have been used:

 
                                                     26 weeks     26 weeks to   52 weeks to 
                                                           to    28 July 2018    26 January 
                                                 27 July 2019                          2019 
 
Discount rate                                           2.20%           2.85%         2.90% 
Inflation - RPI                                         3.10%           3.15%         3.15% 
Inflation - CPI                                         2.10%           2.15%         2.15% 
Salary increases                                            -               -             - 
Pension increases in payment 
            - RPI with a maximum of 5%                  2.95%           2.95%         2.95% 
            - RPI with a maximum of 2.5% and 
             discretionary increases                    2.00%           2.00%         2.05% 
 
   10.      Other financial assets and liabilities 

Other financial assets and other financial liabilities include the fair value of derivative contracts which the Group uses to manage its foreign currency and interest rate risks. All derivatives are categorised as Level 2 under the requirements of IFRS 13, as they are valued using techniques based significantly on observed market data.

   11.      Customer and other receivables 
 
                                      27 July 2019    28 July 2018     26 Jan 2019 
                                              GBPm        Restated        Restated 
                                                              GBPm            GBPm 
 
Gross Online customer receivables          1,415.0         1,340.4         1,417.2 
Less: Refund liabilities                    (60.7)          (48.4)          (44.5) 
                                     (___________)   (___________)   (___________) 
Net Online customer receivables            1,354.3         1,292.0         1,372.7 
Less: Allowance for expected 
 credit losses                             (168.5)         (150.5)         (165.5) 
                                     (___________)   (___________)   (___________) 
                                           1,185.8         1,141.5         1,207.2 
Other trade receivables                       19.4            27.2            23.8 
Less: Allowance for doubtful 
 debts                                       (0.1)           (0.1)           (0.5) 
                                     (___________)   (___________)   (___________) 
                                           1,205.1         1,168.6         1,230.5 
Prepayments                                   36.6            42.7            37.2 
Other debtors                                 10.4            11.5            14.7 
Amounts due from associates and 
 joint venture                                 1.9             2.7             3.0 
                                     (___________)   (___________)   (___________) 
                                           1,254.0         1,225.5         1,285.4 
                                     (___________)   (___________)   (___________) 
 

No interest is charged on customer receivables if the statement balance is paid in full and to terms; otherwise balances bear interest at a variable annual percentage rate of 23.9% at the year-end date (2018: 22.9%).

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on a very low credit risk characteristic, representing management's view of the risk, and the days past due. The expected credit losses incorporate forward looking information.

The fair value of customer receivables and other trade receivables is approximately GBP1,150.0m. This has been calculated based on future cash flows discounted at an appropriate rate for the risk of the debt. The fair value is within Level 3 of the fair value hierarchy (refer to the Fair Value Hierarchy table in Note 26 of the January 2019 Annual Report).

Expected irrecoverable amounts on balances with indicators of impairment are provided for based on past default experience, adjusted for expected behaviour. Receivables which are impaired, other than by age or default, are separately identified and provided for as necessary.

   12.      Trade payables and other liabilities (current) 
 
                                       27 July 2019    28 July 2018     26 Jan 2019 
                                               GBPm        Restated        Restated 
                                                               GBPm            GBPm 
 
Trade payables                                229.8           190.6           218.8 
Refund liabilities                              6.1             7.6             6.2 
Other taxation and social security             64.1            60.2            68.3 
Deferred revenue from the sale 
 of gift cards                                 60.3            62.2            75.4 
Share-based payment liability                   0.4             0.9             0.2 
Other creditors and accruals                  238.1           250.6           236.8 
                                      (___________)   (___________)   (___________) 
                                              598.8           572.1           605.7 
                                      (___________)   (___________)   (___________) 
 
   13.      Corporate bonds 

The table below shows the nominal and balance sheet values of the Group's outstanding corporate bonds:

 
                                                    Nominal value                         Balance Sheet value 
                                       27 July       28 July        26 Jan       27 July       28 July        26 Jan 
                                          2019          2018          2019          2019          2018          2019 
                                          GBPm          GBPm          GBPm          GBPm          GBPm          GBPm 
 
Corporate bond 5.375% repayable 
 2021                                    325.0         325.0         325.0         327.6         328.1         327.5 
Corporate bond 3.000% repayable 
 2025                                    200.0             -             -         200.0             -             - 
Corporate bond 4.375% repayable 
 2026                                    250.0         250.0         250.0         287.0         278.0         277.7 
Corporate bond 3.625% repayable 
 2028                                    300.0         300.0         300.0         300.0         300.0         300.0 
                                   (_________)   (_________)   (_________)   (_________)   (_________)   (_________) 
                                       1,075.0         875.0         875.0       1,114.6         906.1         905.2 
                                   (_________)   (_________)   (_________)   (_________)   (_________)   (_________) 
 

As explained in the January 2019 Annual Report, the Group uses interest rate derivatives to manage part of the interest rate risk associated with its corporate bonds, whereby the carrying value of the relevant bonds is adjusted for changes in fair value attributable to the hedged risk. At July 2019, the fair value of the Group's corporate bonds was GBP1,185.6m (July 2018: GBP953.3m, January 2019: GBP930.3m). The fair values are market values at the balance sheet date (IFRS 13 Level 1).

   14.      Share buybacks 

Movements in the Company's issued share capital during the year are shown in the table below:

 
                                                       2019             2019                 2018             2018 
                                                     Shares             GBPm               Shares             GBPm 
                                                       '000                                  '000 
 
Shares in issue at start of year                    138,605             13.9              144,882             14.5 
Shares purchased for cancellation 
 in the period                                      (5,040)            (0.5)              (5,197)            (0.5) 
                                               (__________)     (__________)       (____________)     (__________) 
Shares in issue at July                             133,565             13.4              139,685             14.0 
                                               (__________)     (__________)       (____________)     (__________) 
 

The total cost of shares purchased for cancellation as shown in the Statement of Changes in Equity was GBP280.2m (2018: GBP274.0m).

   15.      Analysis of net debt 
 
                                  27 July 2019   28 July 2018    26 Jan 2019 
                                          GBPm       Restated       Restated 
                                                         GBPm           GBPm 
 
Cash and short term deposits             156.9           66.1          156.3 
Overdrafts and short term 
 borrowings                            (114.8)         (42.6)        (122.3) 
                                  (__________)   (__________)   (__________) 
Cash and cash equivalents                 42.1           23.5           34.0 
 
Unsecured bank loans                   (160.0)        (285.0)        (255.0) 
Corporate bonds                      (1,114.6)        (906.1)        (905.2) 
Fair value hedges of corporate 
 bonds                                    39.2           31.1           30.4 
                                  (__________)   (__________)   (__________) 
Net debt excluding leases            (1,193.3)      (1,136.5)      (1,095.8) 
 
Current lease liability                (154.5)        (171.7)        (175.6) 
Non-current lease liability          (1,176.3)      (1,231.9)      (1,190.7) 
                                  (__________)   (__________)   (__________) 
                                     (1,330.8)      (1,403.6)      (1,366.3) 
                                  (__________)   (__________)   (__________) 
Net debt including leases            (2,524.1)      (2,540.1)      (2,462.1) 
                                  (__________)   (__________)   (__________) 
 
   16.      Lease liabilities 
 
                        27 July   28 July 2018    26 Jan 2019 
                           2019       Restated       Restated 
                                          GBPm           GBPm 
                           GBPm 
 
Maturity profile 
Less than 1 year          154.5          171.7          175.6 
More than 1 year        1,176.3        1,231.9        1,190.7 
                    (_________)   (__________)   (__________) 
Total                   1,330.8        1,403.6        1,366.3 
                    (_________)    (_________)    (_________) 
 
   17.      IFRS 16 transition note 
 
                                       26 weeks to                         Adjustments 
                                      27 July 2019                                  on      28 weeks to 
                                    Excluding IFRS                         adoption of     27 July 2019 
                                                16                             IFRS 16 
Impact on profit for the period               GBPm                                GBPm             GBPm 
 
Total revenue                              2,014.5                                   -          2,014.5 
Cost of sales (i)                        (1,290.9)                                41.3        (1,249.6) 
                                    (____________)                      (____________)   (____________) 
Gross profit                                 723.6                                41.3            764.9 
Distribution costs                         (250.5)                                 0.9          (249.6) 
Administrative costs                       (131.4)                                   -          (131.4) 
Other gains/(losses)                         (0.9)                               (2.3)            (3.2) 
                                    (____________)                      (____________)   (____________) 
Trading profit                               340.8                                39.9            380.7 
Share of results of associates 
 and joint venture                             0.1                                  -               0.1 
                                    (____________)                      (____________)   (____________) 
Operating profit                             340.9                                39.9            380.8 
                                    (____________)                      (____________)   (____________) 
Finance income                                 0.1                                   -              0.1 
Finance costs (i)                           (21.4)                              (32.1)           (53.5) 
                                    (____________)                      (____________)   (____________) 
Profit before taxation                       319.6                                 7.8            327.4 
Taxation (v)                                (59.1)                               (1.4)           (60.5) 
                                    (____________)                      (____________)   (____________) 
Profit attributable to equity 
 holders                                     260.5                                 6.4            266.9 
                                    (____________)                      (____________)   (____________) 
 
 
                                       26 weeks to      Adjustments 
                                      28 July 2018      on adoption      26 weeks to 
                                    Excluding IFRS               of     28 July 2018 
                                                16          IFRS 16         Restated 
Impact on profit for the period               GBPm             GBPm             GBPm 
 
Total revenue                              1,961.9                -          1,961.9 
Cost of sales (i)                        (1,287.8)             38.9        (1,248.9) 
                                    (____________)   (____________)   (____________) 
Gross profit                                 674.1             38.9            713.0 
Distribution costs                         (214.9)              0.4          (214.5) 
Administrative costs                       (130.6)                -          (130.6) 
Other gains/(losses)                           1.8            (0.8)              1.0 
                                    (____________)   (____________)   (____________) 
Trading profit                               330.4             38.5            368.9 
Share of results of associates 
 and joint venture                             0.1                -              0.1 
                                    (____________)   (____________)   (____________) 
Operating profit                             330.5             38.5            369.0 
                                    (____________)   (____________)   (____________) 
Finance income                                 0.1                -              0.1 
Finance costs (i)                           (19.5)           (34.7)           (54.2) 
                                    (____________)   (____________)   (____________) 
Profit before taxation                       311.1              3.8            314.9 
Taxation (v)                                (56.9)            (0.7)           (57.6) 
                                    (____________)   (____________)   (____________) 
Profit attributable to equity 
 holders                                     254.2              3.1            257.3 
                                    (____________)   (____________)   (____________) 
 

Impact on Net assets and Retained earnings as at 27 January 2018

 
                                          Notes       27 January          IFRS 16       27 January 
                                                            2018       Adjustment             2018 
                                                            GBPm             GBPm         Restated 
                                                                                              GBPm 
ASSETS AND LIABILITIES 
Non-current assets 
Property, plant and equipment                              558.9                -            558.9 
Intangible assets                                           42.9                -             42.9 
Right of use asset                         (ii)                -            948.9            948.9 
Associates, joint venture and 
 other investment                                            2.1                -              2.1 
Defined benefit pension asset                              106.2                -            106.2 
Other financial assets                                      48.1                -             48.1 
Deferred tax assets                         (v)              5.8             45.7             51.5 
                                                  (____________)   (____________)   (____________) 
                                                           764.0            994.6          1,758.6 
Current assets 
Inventories                                                466.7                -            466.7 
Customer and other receivables             (iv)          1,248.2           (55.7)          1,192.5 
Right of return asset                                       23.4                -             23.4 
Other financial assets                                       5.7                -              5.7 
Cash and short term deposits                                53.5                -             53.5 
                                                  (____________)   (____________)   (____________) 
                                                         1,797.5           (55.7)          1,741.8 
                                                  (____________)   (____________)   (____________) 
Total assets                                             2,561.5            938.9          3,500.4 
                                                  (____________)   (____________)   (____________) 
Current liabilities 
Bank loans and overdrafts                                (180.0)                -          (180.0) 
Trade payables and other liabilities       (iv)          (580.2)             30.5          (549.7) 
Lease liabilities                         (iii)                -          (165.8)          (165.8) 
Other financial liabilities                               (59.3)                -           (59.3) 
Current tax liabilities                                   (95.3)                -           (95.3) 
                                                  (____________)   (____________)   (____________) 
                                                         (914.8)          (135.3)        (1,050.1) 
Non-current liabilities 
Corporate bonds                                          (908.5)                -          (908.5) 
Provisions                                 (iv)           (10.4)            (6.7)           (17.1) 
Other financial liabilities                               (12.4)                -           (12.4) 
Lease liabilities                         (iii)                -        (1,213.8)        (1,213.8) 
Other liabilities                          (iv)          (232.8)            212.9           (19.9) 
                                                  (____________)   (____________)   (____________) 
                                                       (1,164.1)        (1,007.6)        (2,171.7) 
                                                  (____________)   (____________)   (____________) 
Total liabilities                                      (2,078.9)        (1,142.9)        (3,221.8) 
                                                  (____________)   (____________)   (____________) 
NET ASSETS                                                 482.6          (204.0)            278.6 
                                                  (____________)   (____________)   (____________) 
TOTAL EQUITY                                               482.6          (204.0)            278.6 
                                                  (____________)   (____________)   (____________) 
 

Impact on Net assets and Retained earnings as at 28 July 2018

 
                                          Notes          28 July          IFRS 16          28 July 
                                                            2018       Adjustment             2018 
                                                            GBPm             GBPm         Restated 
                                                                                              GBPm 
ASSETS AND LIABILITIES 
Non-current assets 
Property, plant and equipment                              555.6                -            555.6 
Intangible assets                                           42.8                -             42.8 
Right of use asset                         (ii)                -            975.3            975.3 
Associates, joint venture and 
 other investment                                            5.1                -              5.1 
Defined benefit pension asset                              163.1                -            163.1 
Other financial assets                                      53.4                -             53.4 
Deferred tax assets                         (v)                -             45.0             45.0 
                                                  (____________)   (____________)   (____________) 
                                                           820.0          1,020.3          1,840.3 
Current assets 
Inventories                                                518.6                -            518.6 
Customer and other receivables             (iv)          1,281.7           (56.2)          1,225.5 
Right of return asset                                       24.0                -             24.0 
Other financial assets                                      31.3                -             31.3 
Cash and short term deposits                                66.1                -             66.1 
                                                  (____________)   (____________)   (____________) 
                                                         1,921.7           (56.2)          1,865.5 
                                                  (____________)   (____________)   (____________) 
Total assets                                             2,741.7            964.1          3,705.8 
                                                  (____________)   (____________)   (____________) 
Current liabilities 
Bank loans and overdrafts                                (327.6)                -          (327.6) 
Trade payables and other liabilities       (iv)          (606.1)             34.0          (572.1) 
Lease liabilities                         (iii)                -          (171.7)          (171.7) 
Dividends payable                                        (141.9)                -          (141.9) 
Other financial liabilities                                (2.5)                -            (2.5) 
Current tax liabilities                                   (89.7)                -           (89.7) 
                                                  (____________)   (____________)   (____________) 
                                                       (1,167.8)          (137.7)        (1,305.5) 
Non-current liabilities 
Corporate bonds                                          (906.1)                -          (906.1) 
Provisions                                 (iv)           (10.2)            (7.4)           (17.6) 
Other financial liabilities                               (14.3)                -           (14.3) 
Lease liabilities                         (iii)                -        (1,231.9)        (1,231.9) 
Other liabilities                          (iv)          (220.7)            212.0            (8.7) 
Deferred tax liabilities                                  (10.9)                -           (10.9) 
                                                  (____________)   (____________)   (____________) 
                                                       (1,162.2)        (1,027.3)        (2,189.5) 
                                                  (____________)   (____________)   (____________) 
Total liabilities                                      (2,330.0)        (1,165.0)        (3,495.0) 
                                                  (____________)   (____________)   (____________) 
NET ASSETS                                                 411.7          (200.9)            210.8 
                                                  (____________)   (____________)   (____________) 
TOTAL EQUITY                                               411.7          (200.9)            210.8 
                                                  (____________)   (____________)   (____________) 
 

Impact on Net assets and Retained earnings as at 26 January 2019

 
                                          Notes       26 January          IFRS 16       26 January 
                                                            2019       Adjustment             2019 
                                                            GBPm             GBPm         Restated 
                                                                                              GBPm 
ASSETS AND LIABILITIES 
Non-current assets 
Property, plant and equipment                              564.9                -            564.9 
Intangible assets                                           42.6                -             42.6 
Right of use asset                         (ii)                -            943.8            943.8 
Associates, joint venture and 
 other investment                                            5.1                -              5.1 
Defined benefit pension asset                              125.0                -            125.0 
Other financial assets                                      41.5                -             41.5 
Deferred tax assets                         (v)                -             43.6             43.6 
                                                  (____________)   (____________)   (____________) 
                                                           779.1            987.4          1,766.5 
Current assets 
Inventories                                                502.8                -            502.8 
Customer and other receivables             (iv)          1,339.8           (54.4)          1,285.4 
Right of return asset                                       23.4                -             23.4 
Other financial assets                                       9.9                -              9.9 
Cash and short term deposits                               156.3                -            156.3 
                                                  (____________)   (____________)   (____________) 
                                                         2,032.2           (54.4)          1,977.8 
                                                  (____________)   (____________)   (____________) 
Total assets                                             2,811.3            933.0          3,744.3 
                                                  (____________)   (____________)   (____________) 
Current liabilities 
Bank loans and overdrafts                                (377.3)                -          (377.3) 
Trade payables and other liabilities       (iv)          (640.7)             35.0          (605.7) 
Lease liabilities                         (iii)                -          (175.6)          (175.6) 
Other financial liabilities                                (9.4)                -            (9.4) 
Current tax liabilities                                   (85.1)                -           (85.1) 
                                                  (____________)   (____________)   (____________) 
                                                       (1,112.5)          (140.6)        (1,253.1) 
Non-current liabilities 
Corporate bonds                                          (905.2)                -          (905.2) 
Provisions                                 (iv)           (10.3)            (5.4)           (15.7) 
Other financial liabilities                                (9.2)                -            (9.2) 
Lease liabilities                         (iii)                -        (1,190.7)        (1,190.7) 
Other liabilities                          (iv)          (217.5)            208.4            (9.1) 
Deferred tax liabilities                                   (2.8)                -            (2.8) 
                                                  (____________)   (____________)   (____________) 
                                                       (1,145.0)          (987.7)        (2,132.7) 
                                                  (____________)   (____________)   (____________) 
Total liabilities                                      (2,257.5)        (1,128.3)        (3,385.8) 
                                                  (____________)   (____________)   (____________) 
NET ASSETS                                                 553.8          (195.3)            358.5 
                                                  (____________)   (____________)   (____________) 
TOTAL EQUITY                                               553.8          (195.3)            358.5 
                                                  (____________)   (____________)   (____________) 
 
   (i)           Income Statement 

Under the previous accounting standard for leases, IAS 17, lease costs were recognised on straight line basis over the term of the lease. The Group recognised these costs within cost of sales and distribution costs.

On adoption of IFRS 16 these costs have been removed and replaced with costs calculated on an IFRS 16 basis. The impact of removing these costs on the July 2019 Income Statement was GBP109.6m (2018: GBP108.0m).

Under IFRS 16 the right-of-use asset is depreciated over the lease term. The Group has recognised the depreciation costs on the right-of-use asset in cost of sales. The impact of this adjustment in the July 2019 Income Statement was GBP67.4m (2018: GBP68.7m).

The costs under IAS 17 were higher than the depreciation costs recognised under IFRS 16 which has resulted in a net credit under IFRS 16 to cost of Sales and distribution costs. The net impact of this adjustment in the July 2019 Income Statement was GBP42.2m (2018: GBP39.3m).

Under IFRS 16 Finance costs are charged on the lease liability recognised. These costs are recognised within finance costs. The impact of this adjustment on the July 2019 Income Statement was GBP32.1m (2018: GBP34.7m). Foreign exchange losses of GBP2.3m (GBP2018: GBP0.8m) on foreign currency denominated leases have been recognised in other gains and losses.

The net impact of the above adjustments to the July 2019 profit before tax was GBP7.8m (2018: GBP3.8m).

   (ii)          Right-of-use Asset 

IFRS 16 has resulted in the recognition of a right-of-use asset. This asset represents the Group's contractual right to access an identified asset under the terms of the lease contract.

   (iii)         Lease liability 

IFRS 16 has resulted in the recognition of a lease liability. This liability represents the Group's contractual obligation to minimum lease payments during the lease term.

The element of the liability payable in next 12 months is recognised as a current liability with the balance recognised in non-current liabilities.

   (iv)         Working capital 

Under IAS 17 certain lease incentives, rent prepayments, accruals and similar amounts were held on the balance as part of working capital. Such balances are no longer recognised as all payments, lease incentives and related costs are reflected in either the right-of-use asset or the lease liability.

   (v)          Taxation 

A deferred tax asset has been recognised on the transition to IFRS 16 representing the timing difference on the amounts taken to reserves.

   18.      Post balance sheet event 

On 14 August the Group issued the GBP50m retained element of the GBP250m bond which had been issued in the 26 weeks to 27 July 2019.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

a) The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim financial reporting';

b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

   Lord Wolfson of Aspley Guise                                                       Amanda James 

Chief Executive Group Finance Director

19 September 2019

The full half year report and the results presentation can be found on the Company's website at www.nextplc.co.uk.

To view our range of exciting, beautifully designed, excellent quality clothing and homeware go to www.next.co.uk

Certain statements which appear in a number of places throughout this document are "forward looking statements" which are all matters that are not historical facts, including anticipated financial and operational performance, business prospects and similar matters. These forward looking statements are identifiable by words such as "aim", "anticipate", "believe", "budget", "estimate", "expect", "forecast", "intend", "plan", "project" and similar expressions. These forward looking statements reflect NEXT's current expectations concerning future events and actual results may differ materially from current expectations or historical results. Any such forward looking statements are subject to risks and uncertainties, including but not limited to the risks described in "Risks & Uncertainties" on pages 54 to 58 of the 2019 Annual Report and those matters highlighted in the Chief Executive's review; failure by NEXT to accurately predict customer fashion preferences; decline in the demand for merchandise offered by NEXT; competitive influences; changes in level of store traffic or consumer spending habits; effectiveness of NEXT's brand awareness and marketing programmes; general economic conditions or a downturn in the retail industry; the inability of NEXT to successfully implement relocation or expansion of existing stores; insufficient consumer interest in NEXT Online; acts of war or terrorism worldwide; work stoppages, slowdowns or strikes; and changes in financial and equity markets. These forward looking statements do not amount to any representation that they will be achieved as they involve risks and uncertainties and relate to events and depend upon circumstances which may or may not occur in the future and there can be no guarantee of future performance. Undue reliance should not be placed on forward looking statements which speak only as of the date of this document. NEXT does not undertake any obligation to update publicly or revise forward looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR LPMJTMBTBTTL

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September 19, 2019 02:02 ET (06:02 GMT)

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