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

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END

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