Next Sales 'More Resilient' Than Expected

Next has reported on half-year sales for the six months to the end of July 2020, advising of better than expected performance.

HEADLINES

Performance in the First Half

- Profit before tax of £9m1
- Full price sales2 down -33% on last year
- Surplus cash generation (after capex, tax and interest) of £347m

Guidance for the Full Year

-  Full price sales in the last seven weeks up +4% on last year; a strong start but driven by recent cool weather and fewer overseas holidays
- Central guidance: full price sales for the rest of the year to be -12%
- Central guidance: profit before tax of £300m3 , up from the central scenario of £195m given in July’s Trading Statement
- Central guidance: year end net debt to reduce by £462m, to £650m. Year end net debt forecast to be around 65% of £1.0bn customer receivables

There are four main themes that have emerged through the course of the year:

Sales Resilience
The Company’s sales performance through the pandemic has been more resilient than we expected. The scale of our Online business (in the UK and overseas), the breadth of our product offer, and the fact that much of our store portfolio is located out of town, have served to mitigate the worst effects of the pandemic on trade.

Financial Stability
The Company’s finances are in good shape. We have reduced our stock levels and costs as the pandemic progressed. We have also generated cash flow from: (1) our customer credit book and (2) the sale of some assets. These actions, along with the fact that the business went into the pandemic with healthy net margins and low capital requirements, mean that we are likely to go into next year with significantly less net debt than we had at the start of the year.

New Ways of Working
From a business perspective the pandemic has been hugely expensive and disruptive – but there has been much to learn from the experience. We have discovered powerful ways to improve our warehouse and call centre operations. Perhaps more importantly, the experience of having to work from home has opened our eyes to new and better ways of working, collaborating and communicating amongst ourselves and with our suppliers.

Opportunities for New Business Development
The sharp slowdown in our operations has given many of us the time and the motivation to accelerate our efforts to leverage the Company’s skills, people and infrastructure – developing new businesses in a rapidly changing world. We have consciously increased our appetite for new ideas, along with our willingness to take on the risks associated with investing in new projects. The pandemic has created a more fluid environment in which opportunities are likely to emerge at speed.

Next will release its Q3 trading statement on 28th October.

Source : Next PLC

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