Next – dividends return despite lower guidance

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Full year revenue rose 30.9% to £4.6bn, helped by a 32.4% increase in full price sales and growth in online. Combined with lower sales and finance costs meant profits more than doubled to £823m, and were up 10% compared to pre-pandemic levels.

Slower growth in some overseas markets and the closure of its Russian and Ukrainian websites led management to reduce its sales and profit guidance by 2% and 1.2% respectively. The group’s seen a stronger-than-expected return to shopping in-store, which is expected to reduce online sales.

A 127p ordinary dividend was announced. Next aims to return to its pre-pandemic ordinary dividend cycle this year.

Shares fell 4.3% following the announcement.

View the latest Next share price and how to deal

Our view

HL View to follow.

Register for updates on Next

Full Year Results

Full price sales in the Retail business fell 23% compared to 2019, though that improves to -5% on a like-for-like basis. Together with increased freight costs and wage inflation, this meant profits declined 54% compared to pre-pandemic levels to £107m. The group reduced the number of stores in operation by 14 to 477.

Online sales rose 31.1% to £3.1bn, 44.6% ahead of pre-pandemic levels. They now make up 64% of total group sales. Full price online sales were up 47% versus 2019, helped by strong growth in the group’s third party Label sales. Profit margins fell slightly to 19% from 19.1% two years ago reflecting a higher proportion of less profitable LABEL and overseas sales as well as increased labour, IT and freight costs. Despite this, profit rose 43.4% to £588.5m over the same period.

Finance, where Next charges interest on store credit accounts, saw profits fall 3.3% to £141.8m compared to pre-pandemic levels, reflecting lower customer balances. However, trends are improving.

In February, the group added its largest client to date, Reiss, to its Total Platform business, which manages online growth for third-party clients. This part of the business brought in £10.3m in profits, which is expected to nearly double next year.

Surplus cash fell from £521m to £363m, reflecting the investment in Reiss, the construction of a new warehouse, land acquisitions and growth in Finance customer balances. Net debt fell slightly from £610m to £600m.

Next key facts

  • Price/Earnings ratio: 11.6
  • 10-Year Average Price/Earnings ratio: 14.1
  • Prospective dividend yield (next 12 months): 3.5%

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.

Find out more about Next shares including how to invest

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.

Leave a Reply

Your email address will not be published. Required fields are marked *