23rd Mar 2005 07:00
Next PLC23 March 2005 Date: Embargoed until 07.00am, Wednesday 23 March 2005 Contacts: Simon Wolfson, Chief Executive David Keens, Group Finance Director NEXT PLC Tel: 020 7796 4133 (23/03/05) Tel: 08454 567777 Alistair Mackinnon-Musson Philip Dennis Hudson Sandler Tel: 020 7796 4133 Email: [email protected] Photographs available: http://www.next.co.uk/press/ (or Hudson Sandler, as above) NEXT PLC Results for the Year Ended January 2005 • Group turnover up 13% to £2,858m • Group profit before tax up 18% to £423m • Buyback 1.5% of share capital for £57m • Earnings per share up 26% to 118p • Total dividend up 17% to 41p Chairman's Statement I am pleased to report that NEXT has had another successful year, in which weachieved good growth in both sales and profit. Earnings per share increased by26% and the total dividend rose by 17% to 41p. The success of the business has been based on the continued drive to deliverwell designed, good quality ranges to our customers. We have continued to offerimproved value by passing on the benefits of better buying. Alongside thedevelopment of our ranges we have continued to expand our store portfolio, thenew space has performed well and has provided an excellent return on the capitalinvested. Profits resulting from a successful trading strategy have continued to beenhanced through share buybacks. We began to buy back our shares in March 2000and since then we have bought and cancelled 113 million shares representing 30%of the shares in issue at that date, at an average price of 797p. During the year we appointed two new non-executive directors, Jonathan Dawsonwho joined the Board on 13 May 2004, and Christine Cross who joined on 19January 2005. In September of last year we indicated that we expected 2005 to be morechallenging. Whilst it is important not to draw too many conclusions from shortperiods of time, the first seven weeks of the current year would suggest thatour caution was well placed. After many years in retail I am acutely aware thatover-reaction to a difficult consumer environment can do more damage than thepoor environment itself, and I am pleased that NEXT is clear about what needs tobe done. We will continue to focus, first and foremost, on delivering the right productranges to our customers. We will not be diverted from taking profitable newspace and we will make extra efforts to manage our costs without making cutsthat may damage the long term prospects of the Company. NEXT has a strongbalance sheet, very healthy net margins and is well placed to cope with thechallenges of the year ahead. I remain confident that despite challengingtrading conditions we will be able to advance both total sales and profits inthe coming year. David Jones C.B.EChairman Chief Executive's Review INTRODUCTION In the year to January 2005 Group turnover was £2,858m, 13.6% ahead of theprevious year. Sales in NEXT Retail were up 13.7% and in NEXT Directory were up12.9%. The net margins of the business moved forward mainly as a result of improvedbuying margins and good control over central overheads, this resulted inoperating profits increasing by more than sales at 17.5%. Profits afterinterest were up 18.1%, a lower tax rate and share buybacks further enhancedearnings per share to give growth of 26.2%. Our financial objective is the delivery of long term sustainable growth inearnings per share. The diagram below shows how healthy growth in sales hasdelivered exceptional growth in earnings per share. Improved Operating Financial Profit before Tax and share Earnings per margin profit gearing tax buybacks share Sales +13.6% +17.5% +18.1% +26.2% PROFIT AND LOSS ACCOUNT Turnover Profit & excluding VAT Earnings per share 2005 2004 2005 2004 £m £m £m £m Restated NEXT Retail 2,057.6 1,809.3 307.4 259.4NEXT Directory 602.6 533.7 89.5 77.0 The NEXT Brand 2,660.2 2,343.0 396.9 336.4 NEXT Sourcing 20.2 17.6 28.5 23.7 NEXT Franchise 33.5 28.8 6.0 5.3 Ventura 131.8 112.0 12.9 15.4 Other activities 12.8 14.6 (1.8) (5.1)Share option charge - (1.4) - (0.2) Turnover & operating profit 2,858.5 2,516.0 441.1 375.5 Interest expense (18.2) (17.3) Profit before tax 422.9 358.2 Taxation (121.9) (108.1) Profit after tax 301.0 250.1 Earnings per share 118.5p 93.9p STATEMENT OF FINANCIAL OBJECTIVE The financial objective of the NEXT Group is to maximise sustainable long termgrowth in earnings per share. We aim to achieve this in our operatingbusinesses in the following ways: • Improving and developing NEXT product ranges • Profitably increasing NEXT selling space • Increasing the number of customers shopping from home with the NEXT Directory • Buying back shares for cancellation as and when it is in the interests of our shareholders generally We explained last September that we felt that the retail environment would bemore challenging for NEXT in 2005. We are still very cautious about theoutlook for consumer spending; however we believe that NEXT will continue togrow both its sales and profits in the year ahead even though achievingunderlying like-for-like growth may be challenging. THE DEVELOPMENT OF NEXT PRODUCT RANGES Improving style, quality and value NEXT's approach to improving value is simple: as long as we can maintain ourprofitability then we will pass on the benefits of improved buying to ourcustomers. Over the last year we have continued to make significant advances insourcing and this, combined with a weaker dollar, has enabled us to pass onnoticeable improvements in value to our customers without sacrificing grossmargin. Outlook for improving value in 2005/6 We will continue, where trading conditions permit, with our drive to deliverbetter value products to our customers. Although price remains important webelieve that improving quality and design will be more important to the consumerfor the Autumn Winter season. THE DEVELOPMENT OF NEXT RETAIL Rationale for space expansion We have made excellent progress in the acquisition of profitable new space.Most of this growth has come from retail parks on the edge of, or out of, town.In these locations we have sufficient critical mass with Womenswear, Menswear,Childrenswear and Home to make a real difference to the popularity of the parkswe go onto. The acquisition of new space remains governed by strict financial criteria.Every new store aims to pay back the net capital invested in less than 24 monthsand to achieve at least 15% store profit on sales before distribution andcentral costs. When appraising new stores we account for downturn inneighbouring stores and do not factor in any future like-for-like growth. Thestore must achieve the investment criteria based on its expected first yearsales. Performance of new space New space opened during the year is exceeding its appraised sales target by 11%and is forecast to pay back the net capital invested in 15 months. Profile of new space During the year we added a net 483,000 square feet to our trading space,increasing the total by 17% to 3,327,000 square feet. The table below shows howour store portfolio has changed over the last three years. Store Size Number of Stores % of Selling Space(square feet) 2005 2004 2003 2005 2004 2003Less than 5,000 152 166 182 14% 18% 23%5,000-10,000 112 99 96 25% 26% 29%10,000-15,000 61 45 34 22% 19% 18%15,000-20,000 29 25 19 15% 15% 14%Greater than 20,000 30 23 13 24% 22% 16%TOTAL 384 358 344 Deflection and like-for-like sales NEXT defines like-for-like stores as those that have traded for at least onefull year and have not benefited from significant capital expenditure.Inevitably this includes all those stores that have been adversely affected bynew openings. Total like-for-like sales for the year were up 1.4% whilst thosestores unaffected by new openings were up 3.6%. When preparing our budgets or analysing the performance of our ranges we focuson the true like-for-like sales before deflection. If we were to use totallike-for-likes as a measure of success, it would discourage us from acquiringprofitable new space. Putting profit first NEXT is aware that some commentators use total like-for-like sales as the keymeasure of retail success. Indeed some reports do not mention total salesgrowth or growth in earnings per share. Nonetheless, it would not be logical toallow this potential for adverse publicity to inhibit our efforts to acquireprofitable new space, which will continue. New space in the year ahead We currently expect to increase net selling space by at least 800,000 squarefeet in the year ahead, significantly more than was achieved in each of the lasttwo years. We believe that taking new space in a potentially difficult year is the rightstrategy, as long as the space we are taking is the right space. A leasecommitment is rarely for less than fifteen years, so the economic environment inany one particular year should not be the determining factor when considering anew store. In this respect, it is an important feature of our appraisal processthat we do not assume any like-for-like growth when considering a new site. Trial store in Denmark Last year we opened a trial store in Copenhagen. After one full year theforecast ongoing profitability of the store before central overheads is 5% andthe payback on capital invested is 52 months. Clearly neither the return oncapital nor the profitability satisfies our appraisal criteria. Whilst thestore is not yet successful enough to warrant any roll out, it is sufficientlyprofitable to justify continuing our trial in Denmark. THE DEVELOPMENT OF NEXT DIRECTORY Growing the customer base The growth in new customers has been the most significant contributor to thegrowth of sales in our home shopping division. We start the new year with 14.8%more customers than a year ago. January 2005 January 2004 GrowthTotal active customers 1,905,000 1,660,000 14.8% Expansion of pages and product offer Growth in pages has been more limited and we do not foresee the opportunity tosignificantly increase the Directory product offer in the coming year. PAGES 2005 2004 GrowthWomens 906 890 +2%Mens 534 490 +9%Childrens 448 476 -6%Home 712 652 +9%TOTAL 2,600 2,508 +4% Increasing importance of the Internet The Internet continues to grow in importance to the Directory, both as a methodof recruitment and as a sales vehicle. We currently take more than 30% of ourorders this way and envisage that its participation will grow in the future. Inthe coming year we estimate sales over the Internet will be in the region of£200m. However, the vast majority of Internet customers use the Directory toselect garments then use the Internet to order and manage their accounts. Webelieve we can further develop our website, in particular through the additionof much improved search facilities. WAREHOUSE INVESTMENT During the year we extended and consolidated our warehousing for palletisedstock to accommodate the growth in our home furnishings business. This involvedthe successful commissioning of a 600,000 square foot warehouse with a capitalspend of £10m. Warehouse development 2005/6 By the end of the year our boxed and palletised warehouses were working to theirmaximum capacity and this produced a significant strain on warehouse operations.In August of this year we expect to further increase capacity in both boxedand palletised warehousing. We will open the highly mechanised extension to our boxed warehouse which isbeing fitted out at a cost of £40m. We will also lease a 500,000 square footwarehouse for palletised product with a fit out cost of circa £4m. The openingof these facilities will result in a rise in our fixed costs of approximately£5m per annum, but are necessary to support continued growth. Outlook for warehousing 2006/7 In 2006 we expect to open the extension to our bulk storage of hanging garments.The capital expenditure for this project will be in the order of £10m, some ofwhich will be spent in the year ahead. Beyond 2006/7 By 2008 we anticipate we will need to spend a further £50m opening additionalboxed and palletised warehouses. The timing of this will depend very much onthe growth of the business between now and then, as yet we have made nocommitments in respect of this potential investment. Average selling price and warehouse requirements The decreases we have achieved in average selling prices over the last few yearshas placed particular pressure on warehouse operations, as unit sales have grownfaster than cash revenue. In the Autumn Winter 2005 season we will be focusingmore on improving quality than reducing prices, so we expect the rate of growthin units to be more in line with sales growth going forward. NEXT SOURCING We have merged NEXT Asia and NEXT Near East into one overseas sourcingoperation, and renamed it NEXT Sourcing Limited (NSL). In Hong Kong, Turkey,Sri Lanka, Romania and other locations we now employ over 1,000 people engagedin the design, sourcing, buying, merchandising and quality control of NEXTproducts. In Sri Lanka, NSL owns and operates a garment sewing factory whichemploys a further 2,000 people. NSL operates as a profit centre and must compete on an even footing with otherfactories and independent sourcing offices. It charges commission on theproduct it sources, operating costs are deducted and the balance is reported asprofit. This year NSL profits amounted to £28.5m compared with £23.7m lastyear. We are not budgeting for a significant change in NSL profits for thecoming year, as any increase in turnover is likely to be offset by the cost ofdeveloping the new structure. NEXT FRANCHISE Our overseas franchise operation had another successful year, with salesincreasing by 16.4% and profit by 13.6% at £6m. At the end of January 2005there were 80 franchise stores compared with 70 the previous year. The MiddleEast continues to be our largest region with 32 stores. Our partner in Japannow has 24 stores. VENTURA At the beginning of the last financial year we indicated that we expectedVentura's profit to fall back significantly as a result of re-negotiating itsbiggest contract to a much more competitive margin. This affected the last sixmonths of the financial year. The detrimental effect of this re-negotiation wasto some extent mitigated by better than expected growth in new business. As aresult Ventura achieved profits of £12.9m as against £15.4m last year. Ventura currently subcontracts some work to a partner in India. We believethat, in the long run, we cannot be reliant on third parties for what is anincreasingly important resource for Ventura. As a result we will be opening ourown call centre in Pune, near to Mumbai. Capital investment will be in theorder of £8.5m. It is anticipated that both NEXT Directory and Ventura will beoperating out of this facility by the end of the current year. Ventura now has a broad client base and its services are priced competitively.However, much of our revenue is dependent on the underlying growth of ourclients' businesses. Given our caution about the general economy we remaincautious for Ventura's underlying prospects in the year ahead. As a result ofthis, and approximately £2m of start up costs for the Indian call centre, weexpect Ventura's profit for the coming year to be in the order of £10m. OTHER ACTIVITIES The Other Activities charge was £1.8m. Other activities include our PropertyManagement Division, Choice (an associated company which operates a chain offourteen discount stores), Cotton Traders (an associated company selling its ownbrand products) and Central Costs, the largest element of which is a pensioncharge. The total cost of the Group's pension schemes increased to £18.6m from £17.6mlast year, including a charge of £5m in respect of the past service deficit. Weestimate that the year end deficit was £44m, unchanged from last year. Duringthe year the Company made additional cash contributions of £7.5m and we expectthese further contributions to continue for the foreseeable future. SHARE OPTIONS Over 9,500 of our employees currently hold options over almost 10 million sharesin NEXT. Our employee share ownership trust purchases shares in the market andissues them to employees when options are exercised. It currently holds 9million shares. Our main employee share scheme, which was first approved byshareholders in 1995, is due for renewal and a resolution will be put to thisyear's AGM. Due to a change in accounting standards we are required to recalculate thecharge for share options. This results in reducing the previous year's chargeof £5.1m down to £0.2m and a charge for the year just ended of £1.4m. For thecoming year, accounting standards are changing again and, whilst we can not yetbe certain of the impact, we currently anticipate a charge in the region of £7m. SHARE BUYBACKS During the year we purchased a further 4 million shares for cancellation at anaverage price of 1444p, for a cash cost of £57m. This was 1.5% of the shares inissue at the beginning of the year. We intend to continue with our strategy ofbuying back shares as and when it is in the interests of shareholders generally. Share buybacks are not made at the expense of capital investment in thebusiness. The primary use of capital will continue to be investment in thedevelopment of the core businesses and we aim to maintain the Company'sinvestment grade credit rating. BALANCE SHEET AND CASH FLOW At January 2005 net borrowings were £250m compared with £306m the previous year.The cash inflow of £56m was after the £57m cost of shares purchased forcancellation. Borrowings are financed through a £300m 5.25% 10 year bond, whichwas issued in June 2003, and medium term bank facilities. The majority of ourborrowings are at fixed interest rates and therefore, at current levels of debt,any rate changes in the medium term will not have a significant impact on ourcost of borrowing. Capital expenditure amounted to £144m, of which £97m was spent on stores and£36m on warehousing. Stock levels at £302m were broadly in line with ourrequirements. Debtors of £436m include the £311m account balances of ourDirectory customers. DIVIDEND The Directors recommend a final dividend of 28p against 24p last year, bringingthe total for the year to 41p compared with 35p last year, an increase of 17%.The dividend is covered 2.9 times by earnings per share of 118.5p. CURRENT TRADING Current trade For the seven weeks to 20 March, NEXT Retail sales are 8.2% ahead of theprevious year. Like-for-like sales in the 279 stores which have been tradingfor at least one year and have not been affected by the opening of new space aredown 0.9%. Like-for-like sales in the 333 stores including those which, asplanned, have been impacted by the opening of new space are 3.5% below lastyear. NEXT Directory sales for the seven weeks are 10.4% ahead of the previous year. Taken together, sales for the NEXT Brand are 8.8% ahead. Outlook Whilst there are parts of our ranges that we believe could be better, we thinkthat the poor performance during the last seven weeks is indicative of anunderlying easing of consumer demand. As we indicated in September 2004, weanticipated a more challenging consumer environment in the current year and donot foresee any significant economic improvement for at least six months. Weare clear about what our response to the challenge of a tougher environment willbe: • We will continue to focus on delivering well designed, good quality clothing and where possible pass on the benefit of better buying to the consumer. However, increasing fixed costs will require a more conservative approach to selling price reductions. • We will continue to invest in profitable new space where our strict investment criteria are met. • We will place even greater emphasis on controlling costs in the business but will not sacrifice the long term prospects of the Company in return for short term cost savings. Our next trading statement will be made on 18 May 2005, which is the date of ourAnnual General Meeting. Simon Wolfson23 March 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the financial year ended 29 January 2005 2004 £m £m Restated Turnover 2,858.5 2,516.0 _________ _________Profit before interest 441.1 375.5 Net interest payable (18.2) (17.3) _________ _________ Profit on ordinary activities before taxation 422.9 358.2 Taxation on profit on ordinary activities (121.9) (108.1) _________ _________ Profit on ordinary activities after taxation 301.0 250.1 Dividends (103.0) (89.3) _________ _________ Profit for the year transferred to reserves 198.0 160.8 _________ _________ Earnings per share 118.5p 93.9p Diluted earnings per share 116.7p 93.0p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the financial year ended 29 January 2005 2004 £m £m Restated Profit attributable to members of the parent company 301.0 250.1Exchange difference on translation of net assets of subsidiary undertakings 0.6 (1.6) Total recognised gains and losses relating to the year 301.6 248.5 Prior period adjustment (Share options) 6.9 - _________ _________ 308.5 248.5 _________ _________ CONSOLIDATED BALANCE SHEET As at 29 January 2005 2004 £m £m RestatedFixed assets Goodwill 31.9 36.2Tangible assets 422.1 355.7Investments 1.5 1.0 ________ ________ 455.5 392.9 ________ ________ Current assets Property development stocks 5.9 5.9Stocks 295.7 263.5Debtors 436.0 378.5Cash at bank and in hand 72.3 62.3 ________ ________ 809.9 710.2 Current liabilities Creditors: amounts falling due within one year 620.1 576.6 ________ ________Net current assets 189.8 133.6 ________ ________ Total assets less current liabilities 645.3 526.5 Creditors: amounts falling due after more than one year 349.3 352.7Provision for liabilities and charges 23.3 18.7 ________ ________ Net assets 272.7 155.1 ________ ________ Capital and reserves Called up share capital 26.1 26.5Share premium account 0.6 0.6Revaluation reserve 9.4 14.0Capital redemption reserve 3.8 3.4ESOP reserve (93.3) (72.8)Other reserves (1,448.9) (1,448.9)Profit and loss account 1,775.0 1,632.3 ________ ________ Shareholders' funds 272.7 155.1 ________ ________ CONSOLIDATED CASH FLOW STATEMENT For the financial year ended 29 January 2005 2004 £m £m Net cash inflow from operating activities 506.5 402.2 _______ ________Returns on investments and servicing of financeInterest paid (19.0) (9.7) _______ ________Taxation UK corporation tax paid (113.6) (91.8)Overseas tax paid (3.5) (4.5) _______ ________ (117.1) (96.3) _______ ________Capital expenditure and financial investmentPurchase of tangible fixed assets (144.0) (99.8)Proceeds from disposal of fixed assets 7.7 4.2 _______ ________ (136.3) (95.6) _______ ________Acquisitions and disposals Purchase of investment in associated company (1.2) - _______ ________ (1.2) - _______ ________ Equity dividends paid (94.2) (85.4) _______ ________ Cash inflow before management of liquid resources and financing 138.7 115.2 Management of liquid resources (2.0) 4.3 Financing Issue of equity shares - 0.6Company shares purchased for cancellation (57.3) (209.0)Capital element of finance lease repayments (0.2) (0.1)Unsecured bank loans (60.0) (150.0)Issue of corporate bond - 300.0Purchase of own shares by ESOP (41.1) (40.2)Proceeds from disposal of shares by ESOP 16.0 16.2 _______ ________ (142.6) (82.5) _______ ________ (Decrease)/increase in cash in the year (5.9) 37.0 _______ ________ Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the year (5.9) 37.0Cash outflow/(inflow) from management of liquid resources 2.0 (4.3)Decrease in cash from unsecured bank loan 60.0 150.0Cash inflow from corporate bond issue - (300.0)Capital element of finance lease repayments 0.2 0.1 _______ ________ Changes in net debt resulting from cash flows 56.3 (117.2) New finance leases (0.2) (0.9) _______ ________ Movement in net debt in the period 56.1 (118.1) Net debt at January 2004 (306.9) (188.8) _______ ________ Net debt at January 2005 (250.8) (306.9) _______ ________ BASIS OF PREPARATION The report was approved by the Board of Directors on 23 March 2005. Thefinancial information for the year ended 29 January 2005 is unaudited and doesnot constitute full accounts within the meaning of Section 240 of the CompaniesAct 1985. The results for the year ended 31 January 2004 have been restatedfollowing the implementation of UITF 38 Accounting for ESOP Trusts and therevision of UITF 17 Employee Share Schemes. All other accounting policiesadopted are consistent with those set out in the accounts for the year ended 31January 2004. Full accounts for that period incorporating an unqualified auditreport have been delivered to the Registrar of Companies. SEGMENTAL INFORMATION The results for the year are for the 52 weeks to 29 January 2005 (last year 52weeks to 31 January 2004) with the exception of Ventura, NEXT Sourcing andcertain other activities which relate to the year to 31 January. By business sector: Turnover Operating profit 2005 2004 2005 2004 £m £m £m £m NEXT Retail 2,057.6 1,809.3 307.4 259.4NEXT Directory 602.6 533.7 89.5 77.0NEXT Sourcing 20.2 17.6 28.5 23.7NEXT Franchise 33.5 28.8 6.0 5.3Ventura 131.8 112.0 12.9 15.4Other activities 12.8 14.6 (3.2) (5.3) _________ _________ _______ _______ 2,858.5 2,516.0 441.1 375.5 _________ _________ _______ _______By geographical destination: United Kingdom 2,761.2 2,438.3 410.1 348.8Rest of Europe 68.6 53.2 1.6 1.4North America - - 0.1 0.2Middle East 19.7 16.8 4.4 3.0Asia 9.0 7.7 24.9 22.1 _________ _________ _______ _______ 2,858.5 2,516.0 441.1 375.5 _________ _________ _______ _______ EARNINGS PER SHARE The calculation of earnings per share is based on £301.0m (2004 restated:£250.1m) being the profit for the year after taxation and 254.1m ordinary sharesof 10p each (2004: 266.3m), being the weighted average number of shares rankingfor dividend less the weighted average number of shares held by the ESOP duringthe year. The calculation of diluted earnings per share is based on £301.0m (2004restated: £250.1m) being the profit for the year after taxation and 257.9mordinary shares of 10p each (2004: 268.9m) being the weighted average number ofshares used for the calculation of earnings per share above increased by thedilutive effect of potential ordinary shares from employee share option schemesof 3.8m shares (2004: 2.6m shares). HALF YEAR ANALYSIS Year ended January First Second 2005 First Second 2004 half half half half Restated £m £m £m £m £m £mTurnover NEXT Retail 924.3 1,133.3 2,057.6 797.4 1,011.9 1,809.3NEXT Directory 278.2 324.4 602.6 247.1 286.6 533.7NEXT Sourcing 8.6 11.6 20.2 6.3 11.3 17.6NEXT Franchise 14.2 19.3 33.5 13.2 15.6 28.8Ventura 64.1 67.7 131.8 52.9 59.1 112.0Other activities 4.1 8.7 12.8 4.1 10.5 14.6 _________ _________ _________ _________ _________ _________ 1,293.5 1,565.0 2,858.5 1,121.0 1,395.0 2,516.0 _________ _________ _________ _________ _________ _________ Profit before tax NEXT Retail 114.9 192.5 307.4 85.8 173.6 259.4NEXT Directory 38.6 50.9 89.5 30.2 46.8 77.0NEXT Sourcing 10.4 18.1 28.5 9.6 14.1 23.7NEXT Franchise 2.5 3.5 6.0 2.4 2.9 5.3Ventura 6.4 6.5 12.9 5.9 9.5 15.4Other activities (0.3) (1.5) (1.8) (1.0) (4.1) (5.1)Share option charge (restated) (0.6) (0.8) (1.4) (0.4) 0.2 (0.2) _______ _______ _______ _______ _______ _______ Profit before interest 171.9 269.2 441.1 132.5 243.0 375.5Interest charge (9.2) (9.0) (18.2) (7.2) (10.1) (17.3) _______ _______ _______ _______ _______ _______ Profit before tax 162.7 260.2 422.9 125.3 232.9 358.2 _______ _______ _______ _______ _______ _______ RECONCILIATION OF SHAREHOLDERS' FUNDS 2005 2004 £m £m RestatedTotal recognised gains and losses relating to the year 301.6 248.5Dividends (103.0) (89.3)Shares purchased for cancellation (57.3) (209.0)New ordinary share capital issued - 0.6Purchase of own shares by ESOP (41.1) (40.2)Proceeds from issue of shares by ESOP 16.0 16.2Share option charge 1.4 0.2 _______ _______ Total movement during the year 117.6 (73.0)Opening shareholders' funds (originally £221.0m before deducting prior periodadjustment of £65.9m) 155.1 228.1 _______ _______ Closing shareholders' funds 272.7 155.1 _______ _______ CASH FLOW: RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW 2005 2004 £m £m Restated Profit before interest 441.1 375.5Depreciation 70.9 62.3Amortisation of goodwill 4.3 4.4(Profit)/loss on disposal of fixed assets (0.9) 1.4Share option charge 1.4 0.2Income from interest in associated undertakings 0.5 (0.7)Increase in stock (32.2) (25.6)Increase in debtors (57.4) (61.9)Increase in creditors 78.1 48.3Exchange movement 0.7 (1.7) _______ _______ Net cash inflow from operating activities 506.5 402.2 _______ _______ CASH FLOW: ANALYSIS OF NET DEBT January Cash Other non January 2004 flow cash 2005 £m £m changes £m £m Cash in hand 57.3 10.0 - 67.3Overnight deposits/(borrowings) 2.0 (17.6) - (15.6)Overdrafts (8.4) 1.7 - (6.7) _______ ________ ________ ________ 50.9 (5.9) - 45.0Short term deposits 3.0 2.0 - 5.0Unsecured bank loans (60.0) 60.0 - -Corporate bond (300.0) - - (300.0)Finance leases (0.8) 0.2 (0.8) (0.2) _______ ________ ________ ________ Total (306.9) 56.3 (0.2) (250.8) ________ ________ ________ ________ INTERNATIONAL FINANCIAL REPORTING STANDARDS The Group is required to prepare its financial statements for the year endedJanuary 2006 and all subsequent periods in accordance with InternationalFinancial Reporting Standards ("IFRS"). This will require an opening balancesheet as at 1 February 2004 to be prepared under IFRS, together with a fullprofit and loss account, balance sheet and cash flow statement for the yearended January 2005 for comparative purposes. The Group intends to publish theserestated figures in advance of the announcement of its first IFRS results forthe six months ended July 2005. The review of the impact of the change to IFRS has continued during the year.The principal adjustments to the Group's financial statements are expected toarise from changes to accounting for financial instruments, operating leaseincentives, share based payments, goodwill, pensions, deferred taxation and thepresentation of dividends. AGM / DIVIDEND / ANNUAL REPORT AND ACCOUNTS It is intended that the recommended dividend will be paid on 1 July 2005 toshareholders registered on 27 May 2005. The Annual General Meeting will be heldat One Great George Street, Westminster, London SW1P 3AA on Wednesday 18 May2005. The Annual Report and Accounts will be sent to shareholders by 14 April2005 and copies will be available from the Company's registered office: DesfordRoad, Enderby, Leicester LE19 4AT and on the Company's website atwww.next.co.uk. This statement, the full text of the Stock Exchange announcement and the resultspresentation can be found on the Company's website at www.next.co.uk. Statements made in this announcement that look forward in time or that expressmanagement's beliefs, expectations or estimates regarding future occurrences andprospects are "forward-looking statements" within the meaning of the UnitedStates federal securities laws. These forward-looking statements reflect NEXT'scurrent expectations concerning future events and actual results may differmaterially from current expectations or historical results. Any suchforward-looking statements are subject to various risks and uncertainties,including but not limited to failure by NEXT to predict accurately customerfashion preferences; decline in the demand for merchandise offered by NEXT;competitive influences; changes in levels of store traffic or consumer spendinghabits; effectiveness of NEXT's brand awareness and marketing programmes;general economic conditions or a downturn in the retail industry; the inabilityof NEXT to successfully implement relocation or expansion of existing stores;lack of sufficient consumer interest in NEXT Directory; acts of war or terrorismworldwide; work stoppages, slowdowns or strikes; and changes in financial andequity markets. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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