TIDMNXT
RNS Number : 6318J
Next PLC
14 April 2020
Contacts: Alistair Mackinnon-Musson
Rowbell PR
Email: next@rowbellpr.com Tel: 020 7717 5239
Photographs: Photographs available at:
http://press.next.co.uk/media/company-images/campaignimages.aspx
Next plc
Annual Financial Report for year ended January 2020
including the Notice of Annual General Meeting ("AGM") -
convened for
14 May 2020
The Company announces that the Annual Financial Report for the
year ended January 2020 is today being posted or otherwise made
available to shareholders and published on its website,
www.nextplc.co.uk .
In accordance with Listing Rule 9.6.1 a copy of this Report
together with a Form of Proxy for the 2020 Annual General Meeting
has been uploaded to the National Storage Mechanism and will be
available for viewing shortly at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Update subsequent to the signing of the Annual Financial
Report
Since the Board approved the Annual Financial Report, the scale
of the Coronavirus pandemic and its impact on the business has
become clearer. During this challenging period, all directors have
agreed to waive 20% of their salaries and fees. In addition, the
payment to the executive directors of bonuses due for performance
in respect of 2019/20 will be deferred for the period of the crisis
.
AGM
The Company has been closely monitoring developments relating to
the Coronavirus pandemic, including the related public health
guidance and legislation issued by the UK Government. At the time
of writing, the UK Government has prohibited public gatherings of
more than two people and non-essential travel, save in certain
limited circumstances.
In light of these measures, the 2020 AGM will be run as a closed
meeting and shareholders will not be able to attend in person. The
Company will make arrangements such that the legal requirements to
hold the meeting can be satisfied through the attendance of a
minimum number of people and the format of the meeting will be
purely functional.
Shareholders are therefore strongly encouraged to submit a proxy
vote in advance of the meeting. Shareholders are encouraged to
appoint the Chairman of the Meeting as their proxy rather than a
named person who will not be permitted to attend the meeting.
This situation is constantly evolving, and the UK Government may
change current restrictions or implement further measures relating
to the holding of general meetings during the affected period. Any
changes to the AGM (including any change to the location of the
AGM) will be communicated to shareholders before the meeting
through our website at
nextplc.co.uk/investors/shareholder-information/company-meetings
and, where appropriate, by RIS announcement.
S L Anderson
Company Secretary
Next plc
The Appendix to this announcement is a supplement to our
preliminary statement of financial results made on 19 March 2020
(the "Final Results Announcement"). It contains the information
required pursuant to DTR 6.3.5 that is in addition to the
information communicated in the Final Results Announcement, and
should be read together with the Final Results Announcement.
APPIX
The Chief Executive's Review in the preliminary statement of the
Financial Results Announcement issued on 19 March 2020 includes a
commentary on the primary uncertainties affecting the Group's
businesses for 2020/21.
Further details of other key risks and uncertainties relating to
NEXT group are set out on pages 59 to 64 of the 2020 Annual Report.
The directors' responsibilities statement can be found on page 82
of the 2020 Annual Report. The following is extracted in full
unedited text from the 2020 Annual Report. Accordingly, page
references in the text below refer to page numbers in the 2020
Annual Report.
Risk trend: Limited increase Unchanged
Principal risk and description
Business strategy development and How we manage or mitigate the risk
implementation * The Board reviews business strategy on a regular
If the Board adopts the wrong business basis to determine how sales and profit can be
strategy or does not implement its maximised, and business operations made more
strategies effectively, our business efficient
may suffer. The Board therefore
needs to understand and properly
manage strategic risk, taking into * The Chief Executive provides regular updates at Board
account specific retail sector risk meetings regarding key opportunities and progress of
factors, in order to deliver long major initiatives.
term growth for the benefit of NEXT's
stakeholders.
* Our International Online business and our third-party
label business provide geographic and product
diversity
* Our disciplined approach to sales, budgeting,
investment returns and cost control ensures the
Company continues to generate strong profits and cash
flows
* The Board and senior management consider strategic
risk factors, wider economic and industry specific
trends that affect the Group's businesses, the
competitive position of its product and the financial
structure of the Group
* A detailed plan to manage the business going forward
and its longer term direction of travel exists and is
clearly articulated to our stakeholders in our annual
and half yearly reports
* Longer term financial scenarios for our Retail
business have been prepared and stress tested. This
process provides a mechanism for ensuring that
business profitability is maximised through efficient
allocation of resources and management of costs
------------------------------------------------------------------------
Product design and selection How we manage or mitigate the risk
* Executive directors and senior management continually
Our success depends on designing review the design, selection and performance of NEXT
and selecting products that customers product ranges and those of other brands sold by
want to buy, at appropriate price NEXT. To some extent, product risk is mitigated by
points and stocked in the right the diversity of our ranges and our third-party label
quantities. product ranges
In the short term, a failure to
manage this risk may result in surplus * Executive directors and senior management regularly
stocks that cannot be sold and may review product range trends to assess and correct any
have to be disposed of at a loss. key selection or product issues. Corrections to
significant missed trends or poorer performing ranges
Over the longer term a failure to are targeted for amendment, with alternative products
meet the design, quality and value being sourced within six months where necessary
expectations of our customers will
adversely affect the reputation
of the NEXT Brand. * Senior product management approves quality standards,
with in-house quality control and testing teams in
place across all product areas
* Senior management regularly reviews product recalls
and product safety related issues
------------------------------------------------------------------------
Key suppliers and supply chain How we manage or mitigate the risk
management * Stock availability is reviewed on an ongoing basis
and appropriate action taken where service or
Reliance on our supplier base to delivery to customers may be negatively impacted
deliver products on time and to
quality standards is essential.
Failure to do so may result in an * Management continually seeks ways to develop our
inability to service customer demand supplier base to reduce over-reliance on individual
or adversely affect NEXT's reputation. suppliers and to maintain the quality and
competitiveness of our offer. The Group's supplier
Changes in global manufacturing risk assessment procedures establish contingency
capacity and costs may impact on plans in the event of key supplier failure
profit margins.
Non-compliance by suppliers with * Existing and new sources of product supply are
the NEXT Code of Practice may increase developed in conjunction with NEXT Sourcing, external
reputational risk or undermine our agents and/or direct suppliers
reputation as a responsible retailer.
* Our in-house global Code of Practice team carry out
regular audits of our product-related suppliers'
operations to ensure compliance with the standards
set out in our Code. These standards cover supplier
production methods, employee working conditions,
quality control and inspection processes. Further
details are set out on page 67
* We train relevant employees and communicate with
suppliers regarding our expectations in relation to
responsible sourcing, anti-bribery, human rights and
modern slavery
* The Audit Committee receives Code of Practice and
modern slavery updates from senior management during
the year
* The Audit Committee receives modern slavery and
anti-bribery training progress updates together with
whistleblowing reports at each meeting. Significant
matters are reported to the Board
------------------------------------------------------------------------
Warehousing distribution How we manage or mitigate the risk
* Planning processes are in place to ensure there is
Our warehousing and distribution sufficient warehouse handling capacity for expected
operations provide fundamental support future business volumes over the short and longer
to the running of the business. terms
Risks include business interruption
due to physical damage, access
restrictions, * Service levels, warehouse handling, inbound logistics
breakdowns, capacity and resourcing and delivery costs are continually monitored to
shortages, IT systems failure, ensure goods are delivered to our warehouses, Retail
inefficient stores and Online customers in a timely and
and slow processes and third-party cost-efficient manner
failures.
Increasing choice in the products * Our Warehouse Leadership Team meets regularly to
NEXT sells has been central to the assess the opportunities and risks in our warehouse
development of our Online Platform and logistics network
but the proliferation of unique
items has presented our warehouse
operation with significant challenges. * Business continuity plans and insurance are in place
to mitigate the impact of business interruption
* The Board has approved and keeps under regular review
a
warehouse investment proposal to accommodate
further Online growth and transfer
in customer demand from Retail to
Online (see page 20 for further details)
* During the year, the Audit Committee requested and
received updates of key warehouse fire risks and
mitigation plans from our Warehousing and Logistics
directors. Following a detailed review of the risk of
business interruption arising from a catastrophic
event in one of our key warehouses, the Board
approved an increase in the value of risk covered by
insurance
------------------------------------------------------------------------
Customer-facing systems How we manage or mitigate the risk
* Continued investment in technology which supports the
NEXT's performance depends on the various component parts of the NEXT Online Platform
recruitment and retention of customers,
and on its ability to drive and
service customer demand. This includes * Continual development and monitoring of performance
having an attractive, functional of NEXT's UK and overseas websites, with a particular
and reliable website, a well organised focus on improving the online customer experience
and attractive store environment,
effective call centres, operating
successful marketing strategies, * A range of key trade and operational meetings keep
and providing both Retail and Online under review the performance, evolution, risks and
customers with service levels that opportunities of the NEXT customer facing systems.
meet or exceed their expectations. Executive directors are in attendance at each of
these key meetings
* Market research and customer feedback is used to
assess customer opinions and satisfaction levels to
help to ensure that we remain focused on delivering
excellent customer service
* Ongoing monitoring of KPIs and feedback from website
and call centre support operations
------------------------------------------------------------------------
Management of long term liabilities How we manage or mitigate the risk
and capital expenditure * Our predominantly leased store portfolio is actively
managed by senior management, with openings, refits
Poor management of NEXT's longer and closures based on strict store profitability and
term liabilities and capital expenditure cash payback criteria
could jeopardise the long term
sustainability
of the business. It is important * We undertake regular reviews of lease expiry and
to ensure that the business continues break clauses to identify opportunities for exit or
to be responsive and flexible to renegotiation of commitments. Leases will not be
meet the challenges of a rapidly automatically renewed if acceptable terms are not
changing Retail sector. agreed
* The Board regularly reviews our lease commitments,
new store openings and potential store closures
* We ensure that we make healthy returns on capital
employed, commensurate with the risks involved in our
sector (in practical terms this means a return of no
less than 15% on capital invested).
* Appropriate amortisation accounting policies reduce
the risk of unexpected significant write-off
------------------------------------------------------------------------
Information security, business continuity How we manage or mitigate the risk
and cyber risk * We operate an Information Security and Data
Protection Steering Committee. Its main activities
The continued availability and integrity include agreement and monitoring of related key risks,
of our IT systems is critical to activities and incidents. The Committee comprises two
successful trading. Our systems executive directors and relevant senior management
must record and process substantial
volumes of data and conduct inventory
management accurately and quickly. * Significant investment in systems' development and
Continuous enhancement and investment security programmes has continued during the year,
is required to prevent obsolescence complemented by in- house dedicated information and
and maintain responsiveness. physical security resources
The threat of unauthorised or malicious
attack is an ongoing risk, the nature * Systems vulnerability and penetration testing is
of which is constantly evolving carried out regularly by both internal and external
and becoming increasingly sophisticated. resources to ensure that data is protected from
Our brand reputation could be negatively corruption or unauthorised access or use
impacted by cyber security breaches.
The Group could inadvertently process * Critical systems backup facilities and business
customer or employee data in a manner continuity plans are reviewed and updated regularly
deemed unethical or unlawful, resulting
in significant financial penalties,
remediation costs, reputational * Major incident simulations and business continuity
damage and/or restrictions on our tests are carried out periodically
ability to operate. This is against
a backdrop of:
The changing attitude of UK consumers * IT risks are managed through the application of
toward their data and how it is internal policies and change management procedures,
used imposing contractual security requirements and
Increasingly complex and fast-evolving service level agreements on third-party suppliers,
data protection law and regulation and IT capacity management
Rapid technological advances delivering
an enhanced ability to gather, draw
insight from and monetise personal * All staff and contractors are required to read,
data accept and comply with the Group's data protection
and information security policies, which are kept
under regular review and supported by training
* Information security and data protection risk
exposure was reviewed during the year by both the
Audit Committee and the Board, target risk appetites
were agreed and the controls necessary to achieve
target were documented. A roadmap was prepared and
approved to address gaps between current and target
risk exposures
------------------------------------------------------------------------
Financial, treasury, liquidity and How we manage or mitigate the risk
credit risks * NEXT operates a centralised treasury function which
is responsible for managing liquidity, interest and
NEXT's ability to meet its financial foreign currency risks. It operates under a Board
obligations and to support the operations approved Treasury policy. Approved counterparty and
of the business is dependent on other limits are in place to mitigate NEXT's exposure
having sufficient funding over the to counterparty failure. Further details of the
short, medium and long term. Group's treasury operations are given in Note 28 to
the financial statements
NEXT is reliant on the availability
of adequate financing from banks
and capital markets to meet its * The Group's debt position, available funding and cash
liquidity needs. flow projections are regularly monitored and reported
to the Board. The Board will agree funding for the
NEXT is exposed to foreign exchange Group in advance of its requirement to mitigate
risk and profits may be adversely exposure to illiquid market conditions
affected by unforeseen moves in
foreign exchange rates.
* NEXT has a Treasury Committee which includes the
NEXT might suffer financial loss Group Finance Director. The Treasury Committee
if a counterparty with which it usually meets weekly to review the Group's treasury
has transacted fails and is unable and liquidity risks including foreign exchange
to fulfil its contract. exposures
NEXT is also exposed to credit risk,
particularly in respect of our Online * Rigorous procedures are in place with regards to our
customer receivables, which at GBP1.4bn credit account customers, including the use of
represents the largest item on the external credit reference agencies and applying set
Group Balance Sheet. risk criteria before acceptance. These procedures are
regularly reviewed and updated
* Continual monitoring of our credit customers' payment
behaviours and credit take up levels is in place
* The Board and Audit Committee receives regular
updates throughout the year regarding the customer
credit business
------------------------------------------------------------------------
Regulatory compliance in relation How we manage or mitigate the risk
to our consumer credit business * Policies and training are in place for those
employees and contractors working in the business
Failure to continuously adapt to areas that are subject to financial regulation. These
the increasingly broad, stringent are kept under review and updated.
and fast-evolving regulatory framework
applicable to the operation of the
Group's customer credit business * A dedicated financial regulatory compliance and
could result in significant financial quality assurance team monitors compliance and any
penalties and remediation costs, changing requirements, working with external advisers
reputational damage and/ or restrictions as required.
on our ability to operate.
* NEXT has identified a set of Conduct and Compliance
risks, documented in an operational risk register,
with owners and associated controls.
* Key risk and control performance indicators are
managed through a series of operational meetings and
reported quarterly to the Retail Credit Board.
------------------------------------------------------------------------
Directors' Responsibilities statement
Directors' Responsibilities
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the directors to prepare financial
statements for each financial 52 week period. Under that law the
directors have prepared the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Parent Company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 "Reduced Disclosure Framework", and applicable
law).
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
the profit or loss of the Group and Parent Company for that period.
In preparing the financial statements, the directors are required
to:
-- select suitable accounting policies and then apply them
consistently
-- state whether applicable IFRSs as adopted by the European
Union have been followed for the group financial statements and
United Kingdom Accounting Standards, comprising FRS 101, have been
followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial
statements
-- make judgements and accounting estimates that are reasonable
and prudent and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Parent
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Parent Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Parent Company
and enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the
IAS Regulation.
The directors are also responsible for safeguarding the assets
of the Group and Parent Company and hence for taking reasonable
steps for
the prevention and detection of fraud and other
irregularities.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors' confirmations
The directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the
information necessary for shareholders to assess the Group and
Parent Company's position and performance, business model and
strategy.
Each of the directors, whose names and functions are listed on
pages 80 and 81, confirm that to the best of their knowledge:
-- the Parent Company financial statements, which have been
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 "Reduced Disclosure Framework", and applicable
law), give a true and fair view of the assets, liabilities,
financial position and profit of the company
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the group and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Group and Parent Company, together with a description of the
principal risks and uncertainties that it faces.
On behalf of the Board
Lord Wolfson of Aspley Amanda James
Guise Group Finance Director
Chief Executive
14 April 2020
This information is provided by RNS, the news service of the
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END
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