Next PLC

Next PLC (NXT) is a UK based international clothing, home products, accessories and footwear retailer. The group offers products through brick and mortar stores, online services as well as mail-order operations. The group has differentiated its operations in seven operating segments being Retail, Online, International Retail, Sourcing, Finance under the brand name NEXT, Lipsy and Property Management.

Financial Highlights – H1 Financial Year 2020 (27^th July 2019, £, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2020, the company’s revenue surged by 2.7 per cent to £2,014.5 million from £1,961.9 million in the H1 FY2019. The increase in the revenue was driven sales growth from retail and online businesses for the period. The group’s gross profit surged from £713 million in the H1 FY2019 to £764.9 million in H1 FY2020. In H1 FY2020, the trading profit surged from £368.9 million in the H1 FY2019 to £380.7 million. The company’s operating profit surged to £380.8 million in H1 FY2020 from £369 million in the H1 FY2019. The company’s underlying PBT (profit before tax) increased by 2.7 per cent to £319.6 million in H1 FY2020 from £311.1 million in the H1 FY2019. The PBT (Profit before tax) surged by 4 per cent from £314.9 million in the H1 FY2019 to £327.4 million in H1 FY2020. The PAT (Profit after tax) was up by 3.9 per cent from £257.3 million in the H1 FY2019 to £266.9 million in H1 FY2020. The company’s underlying earnings per share increased by 7.5 per cent to 199.5 pence in H1 FY2020 from 185.6 pence in the H1 FY2019. The company’s basic earnings per share surged by 8.8 per cent to 204.4 pence in H1 FY2020 from 187.9 pence in the H1 FY2019. The company’s ordinary dividend per share was up by 4.5 per cent to 57.5 pence in H1 FY2020 from 55 pence in the H1 FY2019.

Share Price Performance

Daily Chart as at 4th October 2019, before the market closed (Source: Thomson Reuters)

On 4th October 2019, Next Plc shares were trading at GBX 5,952.00 (at the time of writing before the market close, GMT 1:03 PM), and declined by 1.26 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 6,358.00/GBX 3,970.00.

Valuation Methodology


Conclusion
The company has shown decent growth in the financial performance for the first half of the financial year 2020. The company’s top-line and the bottom-line performance has improved for the period. The company had witnessed sales growth from retail and online businesses for the period.

The company does not foresee any significant impact of Brexit on its operations and financials. The sales would be assisted by positive earnings with continued strengthening expected in 2019. The growing online segment can help the company to improve its margins, but it will have a negative impact on the retail segment business due to a decrease in demand and higher operational costs burden. There is also the risk that the company might not be able to compete with the established online players. 

Based on the above factors and macro headwinds, we recommend investors to keep a “Watch” at the closing price of GBX 6,028.00 (as on 3rd October 2019), with support from few catalysts needs to be evaluated at a later stage.

*All forecasted figures have been taken from Thomson Reuters. 

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