TIDMNXT
RNS Number : 0428W
Next PLC
20 April 2021
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 (the "Company")
Annual Financial Report for period ended January 2021
including the Notice of Annual General Meeting ("AGM") -
convened for
20 May 2021
The Company announces that the Annual Financial Report for the
period ended January 2021 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 2021 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
AGM
The ongoing Government restrictions on mass gatherings,
non-essential travel and social contact in relation to COVID are
likely to impact the ability of shareholders to attend the AGM.
Based on current restrictions, the Board has concluded that it is
appropriate to strongly urge shareholders not to attend the AGM in
person this year. Shareholders are instead requested to make use of
the electronic facilities to participate and vote remotely.
Shareholders can access the AGM by visiting
https://web.lumiagm.com . Further information on how to join the
AGM electronically, including a step by step user guide, can be
found in the Notice of AGM.
We strongly encourage shareholders who will not be participating
in the meeting electronically to submit a proxy vote in advance of
the meeting.
S L Anderson
Company Secretary
Next plc
The Appendix to this announcement is a supplement to our
preliminary statement of financial results made on 1 April 2021
(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 1 April 2021 includes a
commentary on the primary uncertainties affecting the Group's
businesses for 2021/22.
Further details of other key risks and uncertainties relating to
the Group are set out on pages 72 to 76 of the 2021 Annual Report.
The directors' responsibilities statement can be found on page 100
of the 2021 Annual Report. The following is extracted in full
unedited text from the 2021 Annual Report. Accordingly, page
references in the text below refer to page numbers in the 2021
Annual Report.
Risk trend: Increasing Unchanged Decreasing
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.
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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.
points and stocked in the right
quantities.
* LABEL brands (along with our new Beauty business)
In the short term, a failure to have served to increase the breadth of our website
manage this risk may result in surplus offer far beyond NEXT's natural design, fashion and
stocks that cannot be sold and may price boundaries. Just as important, but much less
have to be disposed of at a loss. obvious, has been the numerous ways in which our own
NEXT product ranges have been extended and
Over the longer term a failure to diversified.
meet the design, quality and value
expectations of our customers will
adversely affect the reputation * Executive directors and senior management regularly
of the NEXT Brand. review product range trends to assess and correct any
key selection or product issues. Corrections to
significant missed trends or poorer performing ranges
are targeted for amendment, with alternative products
being sourced within six months where necessary.
* 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.
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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 81.
* 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.
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Warehousing and 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,
breakdowns, capacity and resourcing * Service levels, warehouse handling, inbound logistics
shortages, IT systems failure, inefficient and delivery costs are continually monitored to
and slow processes and third-party ensure goods are delivered to our warehouses, Retail
failures. stores and Online customers in a timely and
cost-efficient manner.
Increasing choice in the products
NEXT sells has been central to the
development of our Online Platform * Our Warehouse Leadership Team meets regularly to
but the proliferation of unique assess the opportunities and risks in our warehouse
items, along with an accelerated and logistics network.
shift from Retail to Online sales
resulting from COVID lockdowns has
presented our warehouse operation * Business continuity plans and insurance are in place
with significant challenges. 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 26 for further details).
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Business critical 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.
engagement, recruitment and retention
of customers, and on its ability
to drive and service customer demand. * Continual development and monitoring of performance
There is a risk that the business of NEXT's UK and overseas websites, with a particular
fails to adopt and/or maintain efficient focus on improving the online customer experience.
use of suitable software, hardware
and mechanization to provide both
Retail and Online customers with * A range of key trade and operational meetings keep
service levels that meet or exceed under review the performance, evolution, risks and
their expectations. These systems, opportunities of the NEXT customer-facing systems.
software and platforms are ever Executive directors are in attendance at each of
changing, as technology continues these key meetings.
to evolve. Keeping customers and
users up to date and managing the
implementation and changes that * Market research and customer feedback is used to
come with the evolution of these assess customer opinions and satisfaction levels to
platforms, in addition to maintenance help to ensure that we remain focused on delivering
of existing systems, can be challenging. excellent customer service.
As detailed in the Strategic Report,
our business has an increased reliance * Ongoing monitoring of KPIs and feedback from website
on technology and the development and call centre support operations.
of new business ideas within the
Group (such as Total Platform) increases
that reliance further.
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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
to ensure that the business continues * We undertake regular reviews of lease expiry and
to be responsive and flexible to break clauses to identify opportunities for exit or
meet the challenges of a rapidly renegotiation of commitments. Leases will not be
changing Retail sector. automatically renewed if acceptable terms are not
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.
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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.
* Critical systems backup facilities and business
continuity plans are reviewed and updated regularly.
* Major incident simulations and business continuity
tests are carried out periodically.
* IT risks are managed through the application of
internal policies and change management procedures,
imposing contractual security requirements and
service level agreements on third-party suppliers,
and IT capacity management.
* All staff and contractors are required to read,
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 are reviewed during the year by both the
Audit Committee and the Board; this informs an
executive-sponsored programme of continuous
improvement.
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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 liquidity and
liquidity needs. cash flow projections are regularly monitored and
reported to the Board. The Board will agree funding
NEXT is exposed to foreign exchange for the Group in advance of its requirement to
risk and profits may be adversely mitigate exposure to illiquid market conditions.
affected by unforeseen moves in
foreign exchange rates.
* The events of 2020 led to very significant focus on
NEXT might suffer financial loss the Group's liquidity position. The Board continues
if a counterparty with which it to keep under review the cash generation levers
has transacted fails and is unable available to it, including the potential quantum and
to fulfil its contract. timescales of initiatives to reduce debt and realise
cash. Net debt has been significantly reduced in the
NEXT is also exposed to credit risk, year and actions taken have further strengthened the
particularly in respect of our Online liquidity of the business.
customer receivables, which at GBP1bn
represents the largest item on the
Group Balance Sheet. * NEXT has a Treasury Committee which includes the
Group Finance Director. The Treasury Committee
usually meets weekly to review the Group's treasury
and liquidity risks including foreign exchange
exposures.
* Rigorous procedures are in place with regards to our
credit account customers, including the use of
external credit reference agencies and applying set
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.
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Legal, regulatory and ethical standards How we manage or mitigate the risk
compliance * 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.
With growing reliance on our digital * NEXT has identified a set of Conduct and Compliance
online and marketing activities, risks, documented in an operational risk register,
the Group could inadvertently process with owners and associated controls.
customer or employee data in a manner
deemed unethical or unlawful, resulting
in significant financial penalties, * Key risk and control performance indicators are
remediation costs, reputational managed through a series of operational meetings and
damage and/or restrictions on our reported quarterly to the Retail Credit Board.
ability to operate. This is against
a backdrop of:
* We operate an Information Security and Data Privacy
* The changing attitude of UK consumers toward their Steering Committee. Its main activities include
data and how it is used. agreement and monitoring of related key risk
activities and incidents. The Committee comprises two
executive directors and relevant senior management.
* Increasingly complex and fast-evolving data
protection law and regulation.
* With regard to climate risk, the transitional
(including regulatory requirements) and physical
* Rapid technological advances delivering an enhanced risks and opportunities presented by rising
ability to gather, draw insight from and monetise temperatures, climate-related policy, and emerging
personal data. technologies will be kept under review using the TCFD
framework. Climate risk, regulatory changes and
stakeholder expectations are considered on an ongoing
basis by our ESG Steering Group and Audit Committee.
With regard to climate risk, stakeholder
expectations and regulatory attention
could develop at pace, impacting
the rate at which the business may
need to cut carbon emissions.
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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 year. Under that law the directors
have prepared the Group financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. Additionally the Financial
Conduct Authority's Disclosure Guidance and Transparency Rules
require the directors to prepare the group financial statements in
accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and parent company financial statements in
accordance with United Kingdom General Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 1010 "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, for the Group and Parent Company,
international accounting standards in conformity with the
requirements of the Companies Act 2006 and, for the Group,
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101 have been followed
for the Parent 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
-- 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 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.
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 responsible for the maintenance and integrity
of the Parent Company's website. 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 98 and 99, confirm that to the best of their knowledge:
-- the Group financial statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and, additionally
for the Group, international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Group;
-- the Parent Company financial statements, which have been
prepared in accordance with United Kingdom Accounting Standards
comprising FRS 101, give a true and fair view of the assets,
liabilities, financial position and profit of the Parent Company
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
1 April 2021
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