A N N UA L R E P O R T & AC C O U N T S
J A N UA RY 2024
CONTENTS
Strategic Report
3
4
Chairman’s Statement
Chief Executive’s Review
74 Business Model
Financial Statements
Group Financial Statements
180 Consolidated Income Statement
181 Consolidated Statement of Comprehensive Income
76 Key Performance Indicators
182 Consolidated Balance Sheet
78 Risks and Uncertainties
87 Viability Assessment
89 Corporate Responsibility
112 Section 172 Statement
116 Non-Financial and Sustainability Information Statement
Governance
120 Directors’ Biographies
122 Directors’ Responsibilities Statement
123 Corporate Governance Report
130 Nomination Committee Report
132 Audit Committee Report
140 Remuneration Report
168 Directors’ Report
170 Independent Auditors’ Report
183 Consolidated Statement of Changes in Equity
184 Consolidated Cash Flow Statement
185 Group Accounting Policies
199 Notes to the Consolidated Financial Statements
Parent Company Financial Statements
248 Parent Company Balance Sheet
249 Parent Company Statement of Changes in Equity
250 Notes to the Parent Company Financial Statements
Shareholder Information
254 Half Year and Segment Analysis
255 Five Year History
256 Glossary
260 Notice of Meeting
267 Other Shareholder Information
FINANCIAL
HIGHLIGHTS
NEXT TOTAL GROUP SALES APM
£5.8bn
Jan 24
Jan 23
NEXT GROUP PBT APM
£918m
Jan 24
Jan 23
NEXT GROUP EPS APM
578.8p
Jan 24
Jan 23
£5.8bn
£5.5bn
£918m
£875m
578.8p
576.8p
FINANCIAL HIGHLIGHTS
ON STATUTORY BASIS
Total revenue (£bn)
Profit before tax (£m)
Basic Earnings Per Share (p)
Jan 24
5.5
1,015.8
661.6
Jan 23
5.0
869.3
573.4
APM Alternative Performance Measure as defined
in the Glossary on pages 256 to 259.
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3
STRATEGIC
REPORT
3 Chairman’s Statement
4 Chief Executive’s Review
74 Business Model
76 Key Performance Indicators
78 Risks and Uncertainties
87 Viability Assessment
89 Corporate Responsibility
112 Section 172 Statement
116
Non-Financial and Sustainability
Information Statement
4
CHAIRMAN’S STATEMENT
In the context of the wider economic environment, the year to January 2024 was a very good year
NEXT Group profit
for NEXT and the business materially outperformed our ini�al expecta�ons.
before tax 1 rose to a record high of £918m, up +5.0%. Cash flow remained strong and we returned
£425 million to shareholders through a combina�on of dividends (£248 million) and share buybacks
(£177 million).
In the last year we have focused on improving our product ranges, improving our online service
levels, managing costs and profitability, whilst also laying the founda�ons for future growth
businesses.
We launched three new Total Pla�orm clients (JoJo Maman Bébé, Joules and MADE),
taking our total number of clients to seven. We also made a number of new investments, increasing
our equity stake in Reiss by 21% to 72% and taking a 97% equity stake in FatFace. We also acquired
100% of the intellectual property in Cath Kidston.
The year ahead will see a number of changes to our Board. Amanda James, who has been with NEXT
for 28 years and our Finance Director for nine years, re�res from the Board in July. Amanda has seen
many changes over that �me and has made a huge contribu�on to the Group.
She has been an
excep�onal guardian of our finances and an integral part of the leadership of the Company. Our
financial posi�on today is testament to her diligence and hard work and, on behalf of all of us at
NEXT, I thank Amanda for her amazing work.
I am delighted that Jonathan Blanchard will succeed Amanda on the Board.
Jonathan was most
recently the Chief Financial Officer and Chief Opera�ng Officer of the Reiss Group, having joined
Reiss as a Board Director in 2017. We have worked closely with Jonathan for over three years since
we acquired an equity stake in Reiss. Jonathan brings to the Board a wealth of retail experience, a
strong eye for financial detail and a good understanding of our opera�ons, gained through managing
Reiss’s transi�on onto Total Pla�orm. I am very confident that he will make an excellent addi�on to
our Board.
Dame Dianne Thompson, one of our non-execu�ve directors, is leaving the Board in May. Dianne has
In par�cular, I would like to
made a valuable contribu�on to the Board over the last nine years.
thank Dianne for the �me and insight she has given to the Board’s rela�onship with colleagues
through her par�cipa�on in our people and communica�on forums.
Finally, I am pleased that Amy S�rling and Vene�a Bu�erfield will be joining our Board in April as
independent non-execu�ve directors.
Between them they bring a breadth and depth of exper�se
that will enhance and broaden the Board’s collec�ve knowledge.
The con�nued success of NEXT is built on the hard work, dedica�on and decision making of all the
I would like to thank them all for their contribu�on during the year; I
people who work for NEXT.
have li�le doubt and much expecta�on that they will rise to the new challenges and opportuni�es
that are presented in 2024.
Michael Roney
Chairman
21 March 2024
1 NEXT Group profit before tax excludes: (1) an excep�onal gain, (2) the cost of brand amor�sa�on and (3) the profit
aributable to shares that we do not own in subsidiary companies. Statutory profit before tax, including excep�onals,
brand amor�sa�on and consolida�ng subsidiaries in which we have a controlling interest, is £1,016m, up +16.9%.
See page 30 for a bridge between NEXT Group profit and statutory profit, and Note 1 of the financial statements for
further details.
3
Strategic ReportGovernanceFinancial StatementsShareholder Information CHIEF EXECUTIVE’S REVIEW
STRUCTURE OF THIS REPORT
PART ONE
p6
Headlines and Summary of Financial Performance, gives a short overview of the
financial performance of the Group in 2023/24 and our guidance for 2024/25.
PART TWO
p7 - p20
The Big Picture summarises the way we are thinking about the Company’s future
in the context of the last twenty-five years. The Company is entering a new era,
and this sec�on explains the approach we are taking to the next phase of the
Company's development, along with the most important tasks we need to
undertake.
PART THREE
p21 - p27
Focus on Infrastructure, provides more detail on how the Group is developing its
infrastructure, with a focus on Warehousing, Technology and Total Pla�orm
enhancements.
PART FOUR
p28 - p34
Group Financial Performance and Full Year Guidance, details our Group sales and
profit performance for 2023/24, summarised by business division, along with our
sales and profit guidance for 2024/25.
PART FIVE
p35 - p60
Retail, Online, Finance, Total Pla�orm, and Other, is a very detailed sec�on,
describing the financial performance of each major business division. This sec�on
is designed for analysts and investors who want a deeper understanding of the
Group.
PART SIX
p61 - p67
Cash Flow, Shareholder Returns, Net Debt and Financing, gives a detailed
breakdown of our cash flow guidance and shareholder distribu�ons for 2023/24
and guidance for 2024/25.
4
CHIEF EXECUTIVE’S REVIEW
STRUCTURE OF THIS REPORT
PART ONE
Headlines and Summary of Financial Performance, gives a short overview of the
p6
financial performance of the Group in 2023/24 and our guidance for 2024/25.
PART TWO
p7 - p20
The Big Picture summarises the way we are thinking about the Company’s future
in the context of the last twenty-five years. The Company is entering a new era,
and this sec�on explains the approach we are taking to the next phase of the
Company's development, along with the most important tasks we need to
PART THREE
Focus on Infrastructure, provides more detail on how the Group is developing its
p21 - p27
infrastructure, with a focus on Warehousing, Technology and Total Pla�orm
undertake.
enhancements.
PART FOUR
p28 - p34
Group Financial Performance and Full Year Guidance, details our Group sales and
profit performance for 2023/24, summarised by business division, along with our
sales and profit guidance for 2024/25.
PART FIVE
p35 - p60
Retail, Online, Finance, Total Pla�orm, and Other, is a very detailed sec�on,
describing the financial performance of each major business division. This sec�on
is designed for analysts and investors who want a deeper understanding of the
Group.
PART SIX
p61 - p67
Cash Flow, Shareholder Returns, Net Debt and Financing, gives a detailed
breakdown of our cash flow guidance and shareholder distribu�ons for 2023/24
and guidance for 2024/25.
________________________
_________________________________________________________________________________
FOCUS ON WAREHOUSING
FOCUS ON TECHNOLOGY
FOCUS ON TOTAL PLATFORM ENHANCEMENTS
TABLE OF CONTENTS
6
PART ONE - HEADLINES AND SUMMARY OF FINANCIAL PERFORMANCE
PART TWO - THE BIG PICTURE
7
INTRODUCTION ___________________________________________________________________________________________________________________________
7
____________________________________________________________________________________________ 11
THE NEXT BRAND - MOVING ON UP
__________________________________________________________________________________________ 13
IMPROVING NEXT INFRASTRUCTURE
__________________________________________________________________________________ 14
DEVELOPING THE NEXT BRAND OVERSEAS
_______________________________________________________________________________________________________________________ 17
TOTAL PLATFORM
_______________________________________________________________________________________________________ 18
DEVELOPING GREAT PEOPLE
_________________________________________________________________________________________________________________________________ 19
SUMMARY
PART THREE - FOCUS ON INFRASTRUCTURE ________________________________________________________________ 21
21
23
26
________________________________ 28
PART FOUR - GROUP FINANCIAL PERFORMANCE AND GUIDANCE
________________________________________________________________________________________ 29
GROUP SALES AND PROFIT SUMMARY
________________________________________________________________________________ 31
SALES AND PROFIT GUIDANCE FOR 2024/25
PART FIVE - RETAIL, ONLINE, FINANCE, TOTAL PLATFORM AND OTHER ___________________________ 35
__________________________________________________________________________________________________________ 35
NEXT RETAIL
35
36
37
38
__________________________________________________________________________________________________________________ 39
40
41
42
44
46
_____________________________________________________________ 48
FOCUS ON WHOLLY-OWNED BRANDS AND LICENCES
NEXT FINANCE _________________________________________________________________________________________________________________ 50
TOTAL PLATFORM: SERVICES AND INVESTMENTS ________________________________________________________ 53
OTHER BUSINESS ACTIVITIES ______________________________________________________________________________________________ 57
INTEREST, TAX, PENSIONS AND ESG _____________________________________________________________________________________ 59
____________________ 61
PART SIX - CASH FLOW, SHAREHOLDER RETURNS, NET DEBT & FINANCING
____________________________________________________________________________________________________________________ 61
CASH FLOW
CAPITAL EXPENDITURE ______________________________________________________________________________________________________ 63
_______________________________________________________________________________________ 65
DIVIDENDS & SHAREHOLDER RETURNS
_______________________________________________________________________________ 66
NET DEBT, BOND AND BANK FACILITIES
_________________________________________________________ 68
APPENDIX 1: RECONCILIATION TO STATUTORY RESULTS
__________________ 71
APPENDIX 2: NOTE FOR ANALYSTS ON THE TREATMENT OF BRAND AMORTISATION
____________________________________________ 72
APPENDIX 3: REPORTING OF SUBSIDIARIES’ SALES AND PROFITS
APPENDIX 4: TOTAL PLATFORM CLIENTS AND EQUITY INVESTMENTS ________________________________________ 73
SUMMARY OF RETAIL SALES AND PROFIT
RETAIL MARGIN ANALYSIS
LEASE RENEWALS AND COMMITMENTS
RETAIL SPACE
ONLINE SALES ANALYSIS
ONLINE CUSTOMER ANALYSIS
ONLINE NET MARGIN
ONLINE OVERSEAS
ONLINE LABEL UK
NEXT ONLINE
5
Strategic ReportGovernanceFinancial StatementsShareholder Information SALES AND PROFIT IN THE YEAR TO JANUARY 2024
Sales, profit and EPS
Total Group sales 2
NEXT Group profit before tax (including brand amor�sa�on)
NEXT Group profit before tax (excluding brand amor�sa�on)
NEXT Group profit a�er tax
NEXT Group post-tax Earnings Per Share 3
Statutory revenue
Statutory profit before tax
Jan 2024
Jan 2023
£5,842m
£5,516m
£908m
£918m
£702m
578.8p
£870m
£875m
£716m
576.8p
Var %
+5.9%
+4.4%
+5.0%
- 2.0%
+0.3%
£5,491m
£5,034m
+9.1%
£1,016m
£869m
+16.9%
In our January Trading Statement we explained that going forward we would report our headline
profit excluding the amor�sa�on of acquired brands. This more accurately reflects the underlying
profitability of the Group. Hereina�er, we will report NEXT Group profit and Earnings Per Share (EPS)
excluding brand amor�sa�on as shown above. Prior year figures are stated on the same basis.
HEADLINES
● NEXT Trading full price sales 4 up +4.0% and total Group sales (including subsidiaries) up +5.9%.
● NEXT Group profit before tax £918m , up +5.0% . This is £3m ahead of the guidance of £915m 5
given in January, largely due to be�er than expected clearance rates of Sale stock in January.
● Over and above this, we made an excep�onal gain (non-cash) on the Reiss acquisi�on of £109m.
We have excluded this gain from our headline profit number.
Guidance for the Year Ahead
● Underlying full price sales growth of +2.5% and total Group sales (including subsidiaries) +6.0% .
● NEXT Group profit guidance £960m , up +4.6%.
● Post-tax Earnings Per Share (EPS) is forecast to be 606.3p, up +4.8%.
For a more detailed analysis of our guidance see page 31.
2 Total Group sales for January 2023 are restated (previously £5,415m) due to a change in the presenta�on of Total
Pla�orm revenue and sales in subsidiaries, see page 28. Total Group sales are not statutory sales. See page 29 for a
bridge between total Group sales and statutory revenue, and Note 1 of the financial statements for further details.
3 All references to EPS in the CEO Review are ‘Basic’ EPS, based on ‘NEXT Group profit’, unless otherwise stated.
4 NEXT Trading full price sales include items sold in Retail and Online plus NEXT Finance interest income, but excludes Sale
events, Clearance, Total Pla�orm commission and the sales from subsidiaries.
5 Guidance in our January Trading Statement was £905m including brand amor�sa�on and £915m excluding amor�sa�on.
6
PART ONE HEADLINES AND SUMMARY OF FINANCIAL PERFORMANCE SALES AND PROFIT IN THE YEAR TO JANUARY 2024
Sales, profit and EPS
Total Group sales 2
NEXT Group profit before tax (including brand amor�sa�on)
NEXT Group profit before tax (excluding brand amor�sa�on)
NEXT Group profit a�er tax
NEXT Group post-tax Earnings Per Share 3
Statutory revenue
Statutory profit before tax
Jan 2024
Jan 2023
£5,842m
£5,516m
£908m
£918m
£702m
578.8p
£870m
£875m
£716m
576.8p
Var %
+5.9%
+4.4%
+5.0%
- 2.0%
+0.3%
£5,491m
£5,034m
+9.1%
£1,016m
£869m
+16.9%
In our January Trading Statement we explained that going forward we would report our headline
profit excluding the amor�sa�on of acquired brands. This more accurately reflects the underlying
profitability of the Group. Hereina�er, we will report NEXT Group profit and Earnings Per Share (EPS)
excluding brand amor�sa�on as shown above. Prior year figures are stated on the same basis.
HEADLINES
● NEXT Trading full price sales 4 up +4.0% and total Group sales (including subsidiaries) up +5.9%.
● NEXT Group profit before tax £918m , up +5.0% . This is £3m ahead of the guidance of £915m 5
given in January, largely due to be�er than expected clearance rates of Sale stock in January.
● Over and above this, we made an excep�onal gain (non-cash) on the Reiss acquisi�on of £109m.
We have excluded this gain from our headline profit number.
Guidance for the Year Ahead
● Underlying full price sales growth of +2.5% and total Group sales (including subsidiaries) +6.0% .
● NEXT Group profit guidance £960m , up +4.6%.
● Post-tax Earnings Per Share (EPS) is forecast to be 606.3p, up +4.8%.
For a more detailed analysis of our guidance see page 31.
2 Total Group sales for January 2023 are restated (previously £5,415m) due to a change in the presenta�on of Total
Pla�orm revenue and sales in subsidiaries, see page 28. Total Group sales are not statutory sales. See page 29 for a
bridge between total Group sales and statutory revenue, and Note 1 of the financial statements for further details.
3 All references to EPS in the CEO Review are ‘Basic’ EPS, based on ‘NEXT Group profit’, unless otherwise stated.
4 NEXT Trading full price sales include items sold in Retail and Online plus NEXT Finance interest income, but excludes Sale
events, Clearance, Total Pla�orm commission and the sales from subsidiaries.
5 Guidance in our January Trading Statement was £905m including brand amor�sa�on and £915m excluding amor�sa�on.
INTRODUCTION
A GOOD PLACE TO START THE YEAR…
It has been a long �me since we started a year in a more posi�ve frame of mind. Last year was much
be�er than we an�cipated at this �me last year, and the Group has delivered its highest ever levels
of revenue and profit. Perhaps more encouragingly, we enter the financial year with new avenues of
growth along with a cost base that feels under control.
A valuable point of self-relection
So this report should have been easy to write; it has not. The Group has evolved so much in the last
seven years and, in many ways, it feels like we are now entering a new era. With so much to explain,
ar�cula�ng how we plan to take the Group forward in a concise and simple way has been
demanding. The aim has been to add enough detail to make it meaningful, without so much detail
as to make it arduous.
As is so o�en the case, the requirement to explain ourselves has been instruc�ve. It has prompted
us to step back from the myriad of day-to-day ini�a�ves with which we busy ourselves and reflect on
where we are; take a hard look at our two main engines of growth - the NEXT brand and its
Infrastructure - clarify our priori�es; and determine what we need to do to maximise our chances of
success going forward. Before going into all that, it is worth pu�ng where we are in context.
WHERE WE ARE IN CONTEXT
The Company’s financial goal is to deliver sustainable, long term, growth in Earnings Per Share (EPS).
Whilst there are many ways to boost share prices in the short term, in the long run the best way to
grow the value of a company is to grow its EPS. The chart below shows the growth in the Company's
pre-tax EPS since 1997; the blue bars show the effect of underlying profit growth, the red bars show
the enhancement from share buybacks, and finally the green bars show the effect of reinves�ng
dividends. It clearly illustrates two very different eras for the Group; twenty ‘glorious’ years to 2017
and seven leaner (though respectable) years, from 2017 to the present day.
7
PART TWO THE BIG PICTURE PART ONE HEADLINES AND SUMMARY OF FINANCIAL PERFORMANCE Strategic ReportGovernanceFinancial StatementsShareholder Information 1997 - 2017: Twenty years of plain sailing
In hindsight, the twenty years from 1997 to 2017 were plain sailing, though it did not feel like it at
the �me.
There were three avenues of profitable growth: (1) increased Retail space, (2) more
Directory/Online customers and (3) the expansion of our product offer. These ac�vi�es were highly
From 1997 to 2017 £4.4bn of surplus cash was returned to shareholders through
cash genera�ve.
share buybacks and special dividends. In total, during this period, we bought back 61.5% of shares in
issue.
The combined effect of rising profits, reducing share numbers and regular dividends meant
that pre-tax EPS 6 increased by a compound annual growth rate (CAGR) of 17.5% in the period.
2017: The formula stopped working
We had a formula, or so we thought. In 2017 the formula stopped working (as all business formulas
NEXT’s own growth Online, coupled with growing online compe��on, began to cannibalise
do).
revenues in our stores. Maintaining top line sales across the Group was not enough. With every new
Online sale there were addi�onal variable costs; with every lost Retail sale the dead weight of rent,
rates, and other fixed costs grew heavier.
And then these deep-seated structural challenges were
compounded by the pandemic and the subsequent cost-of-living squeeze.
2017 - 2024: A very respectable performance in the circumstances
In the end, we managed to deliver be�er Online growth than expected, Retail like-for-like sales
declines were not quite as bad as we feared and, we painstakingly rebased our Retail cost base to be
more commensurate with reduced Retail sales.
Group net margins declined, as expected, but
revenue growth more than made up for the loss of profitability and we delivered a respectable, if
unexci�ng, increase in profits of 16% in the period.
Group Pre-Tax Profit 7 and Margins
6 EPS CAGR calcula�on accounts for dividends by assuming they were reinvested in NEXT shares when paid.
7 Profit in the years ending January 2023 and January 2024 are given excluding the cost of brand amor�sa�on. (January
2023 was previously reported as £870m.) Prior to January 2023 brand amor�sa�on costs in our accounts were minimal.
8
1997 - 2017: Twenty years of plain sailing
In hindsight, the twenty years from 1997 to 2017 were plain sailing, though it did not feel like it at
the �me.
There were three avenues of profitable growth: (1) increased Retail space, (2) more
Directory/Online customers and (3) the expansion of our product offer. These ac�vi�es were highly
cash genera�ve.
From 1997 to 2017 £4.4bn of surplus cash was returned to shareholders through
share buybacks and special dividends. In total, during this period, we bought back 61.5% of shares in
issue.
The combined effect of rising profits, reducing share numbers and regular dividends meant
that pre-tax EPS 6 increased by a compound annual growth rate (CAGR) of 17.5% in the period.
2017: The formula stopped working
We had a formula, or so we thought. In 2017 the formula stopped working (as all business formulas
do).
NEXT’s own growth Online, coupled with growing online compe��on, began to cannibalise
revenues in our stores. Maintaining top line sales across the Group was not enough. With every new
Online sale there were addi�onal variable costs; with every lost Retail sale the dead weight of rent,
rates, and other fixed costs grew heavier.
And then these deep-seated structural challenges were
compounded by the pandemic and the subsequent cost-of-living squeeze.
2017 - 2024: A very respectable performance in the circumstances
In the end, we managed to deliver be�er Online growth than expected, Retail like-for-like sales
declines were not quite as bad as we feared and, we painstakingly rebased our Retail cost base to be
more commensurate with reduced Retail sales.
Group net margins declined, as expected, but
revenue growth more than made up for the loss of profitability and we delivered a respectable, if
unexci�ng, increase in profits of 16% in the period.
Group Pre-Tax Profit 7 and Margins
THE LESSONS
Core strengths
The ability to weather the storm has been rooted in three core strengths. The ongoing strength of
the NEXT brand , the excep�onal infrastructure we have built to sell that product, both underpinned
by rigorous financial discipline . A discipline that insists on appropriate margins and healthy returns
on capital; enforces rigorous cost control; and consistently returns surplus cash to shareholders
through share buybacks and dividends.
Cash generation and capital discipline
The ability to generate cash, and return it to shareholders, is o�en overlooked. It is instruc�ve to
note that while profits over the last seven years grew at a compound annual rate of just 2.2%, a�er
accoun�ng for reinvested dividends and share buybacks, the Company delivered a very respectable
CAGR in pre-tax EPS of 8.2%.
The table below powerfully demonstrates the contribu�on of
underlying profit growth, share buybacks and dividends (assuming they are reinvested in shares) to
the growth in pre-tax EPS.
Contribu�on to growth in pre-tax EPS 2017-2024
Underlying pre-tax profits
Share buybacks
Reinvested dividends (including special dividends)
Total growth in pre-tax EPS
% Var
+2.2%
+2.7%
+3.3%
+8.2%
People who embrace change
There is one further asset, as important as the others and probably more, that has gone to the very
heart of the Company’s performance in good and not-so-good �mes.
The value of talented
individuals who are dedicated to the success of the business. People who love our products, ways of
working and values enough to move heaven and earth to get the Company through tough �mes;
people who are open to, and enthusias�c about, change and are prepared to take the ini�a�ve to
develop new opportuni�es. It is this commitment that has given the Company the ability and agility
to adapt and transform the business.
6 EPS CAGR calcula�on accounts for dividends by assuming they were reinvested in NEXT shares when paid.
7 Profit in the years ending January 2023 and January 2024 are given excluding the cost of brand amor�sa�on. (January
2023 was previously reported as £870m.) Prior to January 2023 brand amor�sa�on costs in our accounts were minimal.
9
Strategic ReportGovernanceFinancial StatementsShareholder Information CORE CAPABILITIES AND NEW OPPORTUNITIES
In many ways we emerge from these turbulent years a very different company.
We have quietly
reinvented NEXT plc, reshaping and restructuring the Group and emerging with new avenues of
However, the two capabili�es that ul�mately power the business remain unchanged: the
growth.
ability to develop outstanding product ranges, and the crea�on of highly effec�ve infrastructure to
sell and distribute that product.
These capabili�es have delivered a brand that can play on an
interna�onal stage and infrastructure whose value stretches beyond its service to the NEXT brand.
The con�nuing development of our brand and its infrastructure gives us three dis�nct, exci�ng and
new avenues of growth.
●
The growth of the NEXT brand OVERSEAS .
●
The development of NEW BRANDS and LICENCES .
●
The genera�on of revenues from TOTAL PLATFORM and its associated equity investments.
In some ways these new opportuni�es mirror the three avenues of growth that powered the
company from 1997 to 2017. They all give our product skills and our infrastructure the opportunity
to play to a wider audience. And in doing so, have the poten�al to create a huge amount of value for
our exis�ng customers, new customers and third-party clients.
THE REST OF THE BIG PICTURE SECTION
The rest of this sec�on explains how we are thinking about the development of these capabili�es
and is divided into the following sec�ons:
THE NEXT BRAND - MOVING ON UP
IMPROVING NEXT INFRASTRUCTURE
DEVELOPING THE NEXT BRAND OVERSEAS
TOTAL PLATFORM
DEVELOPING GREAT PEOPLE
SUMMARY
Page 11
Page 13
Page 14
Page 17
Page 18
Page 19
10
CORE CAPABILITIES AND NEW OPPORTUNITIES
In many ways we emerge from these turbulent years a very different company.
We have quietly
reinvented NEXT plc, reshaping and restructuring the Group and emerging with new avenues of
growth.
However, the two capabili�es that ul�mately power the business remain unchanged: the
ability to develop outstanding product ranges, and the crea�on of highly effec�ve infrastructure to
sell and distribute that product.
These capabili�es have delivered a brand that can play on an
interna�onal stage and infrastructure whose value stretches beyond its service to the NEXT brand.
The con�nuing development of our brand and its infrastructure gives us three dis�nct, exci�ng and
new avenues of growth.
●
The growth of the NEXT brand OVERSEAS .
●
The development of NEW BRANDS and LICENCES .
●
The genera�on of revenues from TOTAL PLATFORM and its associated equity investments.
In some ways these new opportuni�es mirror the three avenues of growth that powered the
company from 1997 to 2017. They all give our product skills and our infrastructure the opportunity
to play to a wider audience. And in doing so, have the poten�al to create a huge amount of value for
our exis�ng customers, new customers and third-party clients.
THE REST OF THE BIG PICTURE SECTION
The rest of this sec�on explains how we are thinking about the development of these capabili�es
and is divided into the following sec�ons:
THE NEXT BRAND - MOVING ON UP
IMPROVING NEXT INFRASTRUCTURE
DEVELOPING THE NEXT BRAND OVERSEAS
TOTAL PLATFORM
DEVELOPING GREAT PEOPLE
SUMMARY
Page 11
Page 13
Page 14
Page 17
Page 18
Page 19
THE NEXT BRAND - MOVING ON UP 8
Raising the bar, again
The NEXT brand remains the jewel in our crown; the whole Company's success hinges on the success
So NEXT’s success last year was a reflec�on of the success our product
of NEXT’s product ranges.
teams had in designing and selec�ng their ranges.
It is hard to think of a year when we have
delivered more consistently across all our product ranges. That said, the bar is constantly rising, and
we believe that we can take the NEXT brand to another level.
product
Leading from the ground up…
Our ranges are built ground up; NEXT does not manage its product ranges from the Boardroom.
buyers,
Individual
merchandisers, and product technologists. The success or otherwise of those areas depends on their
talent and decision-making abili�es. And where they have been most successful, three clear themes
These are: backing newness with convic�on, giving our customers genuine breadth of
emerge.
choice , and delivering be�er, more aspira�onal levels of quality .
designers,
inspired
created
ranges
teams
small
and
are
by
of
Each of these themes is mutually reinforcing - embracing newness and improving quality enables
breadth of design, which encourages more newness which leads to greater aspira�on. To explain,
each will be discussed in a li�le more detail below.
NEWNESS - DELIVERED WITH CONVICTION
To maximise success, we must deliver this year’s most inspiring , most relevant trends in depth and
with convic�on; delivered in a way that is accessible and wearable. And nowadays, this year’s best
seller is hardly ever last year’s best seller.
Last year’s best trend will simply never do quite as well in
its second year. The internet gives us all the choices we could possibly want, 24 hours a day. People
who wanted last year’s most important new trend have already bought it; they will not buy as much
of it again.
Teams should start with the
The trick is to learn from sales history without being trapped by it.
range they are inspired to buy for this year. Only once they have a range that sa�sfies their
ambi�ons, should they sense-check it against what they can learn from last year’s data.
BREADTH OF CHOICE
In a single year the NEXT brand produces over 75,000 different products.
We can harness that
volume to address the differing tastes, lifestyles and budgets of our increasingly diverse customer
base; offering genuine breadth of style, fits, colours, fabrics, prints, textures, looks and prices. It is all
too easy to produce mul�ple varia�ons of a similar best-selling style, and as profitable as that may be
in modera�on, this duplica�on should not be confused with real choice. There is a balance.
Every season, there are lots of new trends. They will not all produce the best sellers, but they will
deliver incremental sales if they add genuine choice. Of course there are boundaries. NEXT must
fulfil its mission to deliver beau�fully designed, excellent quality clothing and homeware that meet
But this is a
the aspira�ons of our customers at prices that represent excellent value for money.
broad remit.
Inves�ng in alterna�ve trends, fabrics, price points, or products is rarely a mistake, if we believe in
And today's peripheral trends have an uncanny habit of becoming more important as �me
them.
goes on - perhaps even poin�ng the way to next year’s best sellers.
8 With apologies to M People.
11
Strategic ReportGovernanceFinancial StatementsShareholder Information QUALITY AND ASPIRATION
Developing the ‘better’ and the ‘best’
Historically our price-entry product o�en delivered the greatest cash revenues, but increasingly our
buying teams have improved sales through addi�onal choice in the middle and top end of our price
architecture 9 . There appears to be something of a shi� back to investment dressing with customers
buying somewhat fewer, slightly more expensive items.
Many teams have experimented at prices
that are higher than those we would normally sell; stretching the boundaries of the brand to new
levels of quality and design through improved fabrics, prints, embellishment techniques, textures
and trims 10 .
This ini�a�ve has also opened up new sources of supply previously considered too
expensive.
Focus on fabrics and yarns
The design of great clothing starts with the development and selec�on of great fabric.
We are
ac�vely aiming to further improve the quality of the fabrics and yarns we deliver to our customers.
With �me, effort and investment in the right skills, along with greater collabora�on with our mills,
we believe that we can deliver improved fabrics for no greater cost to our customers. It will take us
�me to invest in the skills and rela�onships we need to achieve this, but we are very clear about our
ambi�ons.
But no excuse for losing sight of value
There is a risk that colleagues reading the paragraphs above might assume that we have lost interest
in our entry price points, for clarity, that is not the case. Many of us can remember the year one of
our product departments simply dropped their entry level product altogether; it was an expensive
mistake and not one we plan to repeat. We are aiming for newness and improved quality across the
whole of our price architecture.
BEYOND THE BRAND
We can and will increase the diversity of the NEXT brand, but there are natural limits to the reach of
any brand; the point at which the products required to a�ract a different type of customer
undermines your exis�ng brand. To this end we have started to successfully develop product ranges
under different brands.
Brands with a different heritage, alterna�ve perspec�ve, and different
customer base.
Firstly, through the development of new
We are delivering these new brands in three ways.
Secondly, through the acquisi�on of exis�ng
wholly-owned brands such as ‘Love & Roses’.
third-party brands, such as Cath Kidston and MADE.
And thirdly, licence agreements with iconic
third-party brands where the combina�on of our specialist sourcing and technical skills with their
brand heritage can deliver something neither of us could deliver alone. See page 48 for further
detail.
9 Price architecture refers to the number of products we have at different price points in any product category.
10 Trim is the generic name given to zips, buons, branding, rivets, piping, lining, etc.
12
QUALITY AND ASPIRATION
Developing the ‘better’ and the ‘best’
Historically our price-entry product o�en delivered the greatest cash revenues, but increasingly our
buying teams have improved sales through addi�onal choice in the middle and top end of our price
architecture 9 . There appears to be something of a shi� back to investment dressing with customers
buying somewhat fewer, slightly more expensive items.
Many teams have experimented at prices
that are higher than those we would normally sell; stretching the boundaries of the brand to new
levels of quality and design through improved fabrics, prints, embellishment techniques, textures
This ini�a�ve has also opened up new sources of supply previously considered too
and trims 10 .
expensive.
Focus on fabrics and yarns
The design of great clothing starts with the development and selec�on of great fabric.
We are
ac�vely aiming to further improve the quality of the fabrics and yarns we deliver to our customers.
With �me, effort and investment in the right skills, along with greater collabora�on with our mills,
we believe that we can deliver improved fabrics for no greater cost to our customers. It will take us
�me to invest in the skills and rela�onships we need to achieve this, but we are very clear about our
ambi�ons.
But no excuse for losing sight of value
There is a risk that colleagues reading the paragraphs above might assume that we have lost interest
in our entry price points, for clarity, that is not the case. Many of us can remember the year one of
our product departments simply dropped their entry level product altogether; it was an expensive
mistake and not one we plan to repeat. We are aiming for newness and improved quality across the
whole of our price architecture.
BEYOND THE BRAND
We can and will increase the diversity of the NEXT brand, but there are natural limits to the reach of
any brand; the point at which the products required to a�ract a different type of customer
undermines your exis�ng brand. To this end we have started to successfully develop product ranges
under different brands.
Brands with a different heritage, alterna�ve perspec�ve, and different
customer base.
We are delivering these new brands in three ways.
Firstly, through the development of new
wholly-owned brands such as ‘Love & Roses’.
Secondly, through the acquisi�on of exis�ng
third-party brands, such as Cath Kidston and MADE.
And thirdly, licence agreements with iconic
third-party brands where the combina�on of our specialist sourcing and technical skills with their
brand heritage can deliver something neither of us could deliver alone. See page 48 for further
detail.
IMPROVING NEXT INFRASTRUCTURE
Retail Infrastructure is part of what we do…
We were once contacted by a senior ‘strategy’ consultant, who explained to me that his (very grand)
consultancy were experts in the specifica�on and development of retail technology and so�ware. I
stopped him and said, “that this was an amazing coincidence, so were we, can we help you?” I was
not being face�ous, and I apologise if it sounds like that. It is just that we believe that specifying and
developing great retail so�ware, great warehousing, effec�ve websites etc. is an essen�al and
important part of what we do. We might not be the best developers of retail systems, but we should
certainly aim to be so; it is part of our job.
The Total Platform opportunity
Over the years we have developed outstanding retail so�ware and infrastructure - point-of-sale
systems, distribu�on networks, websites, contact centre opera�ons, automated warehousing,
product management systems and more. As the complexity and costs of doing these ac�vi�es has
increased, the poten�al to mone�se this infrastructure has emerged. And this business, called Total
Pla�orm, along with its associated equity investments is now making a meaningful contribu�on to
our profits. (See page 53 for further details on the financial performance of Total Pla�orm).
Improving warehousing
Over the course of the coming year we will be delivering a host of important improvements to our
warehouse infrastructure. We will be commissioning warehouse picking and packing automa�on in
our new Elmsall 3 warehouse, a development that will deliver a step change in efficiency and
capacity. See ‘Focus on Warehousing’ on page 21.
Website and digital marketing
We will also con�nue to develop our websites and digital marke�ng so�ware. Here the focus will be
on what is loosely referred to as personalisa�on: connec�ng customers with the products that they
most want to buy.
It is an endeavour that becomes all the more important as the breadth of our
product ranges and customer base increases.
Modernising software
Alongside the development of all this new func�onality and capacity, we will con�nue the task of
modernising and upgrading our legacy so�ware. It is a huge and costly exercise but one that must
be done, and done in such a way that it does not interrupt the flow of new applica�ons to the Group
in the mean�me. The progress of this modernisa�on programme, along with some of the ways we
plan to become more effec�ve and cost efficient, are detailed in the ‘Focus on Technology’ sec�on
on page 23.
The underlying objectives of infrastructure improvement
It would be easy to lose perspec�ve and get lost in the detail of all these improvements.
Developers
and engineers can begin to see their engineering and development as an end in itself - so�ware and
We are very
warehousing improvements for the sake of excellent so�ware and warehousing.
focussed on the fact that ul�mately all these improvements must deliver at least one of the four
following objec�ves:
●
●
●
●
Driving sales growth.
Improving customer service, with par�cular emphasis on the speed and accuracy of our
deliveries.
Enhancing and extending Total Pla�orm services.
Reducing costs.
9 Price architecture refers to the number of products we have at different price points in any product category.
10 Trim is the generic name given to zips, buons, branding, rivets, piping, lining, etc.
13
Strategic ReportGovernanceFinancial StatementsShareholder Information DEVELOPING THE NEXT BRAND OVERSEAS
BETTER THAN EXPECTED GROWTH AND MARGINS
Our Online Overseas business has made good progress, with sales up 17% (+14.5% in constant
currency) and net margins improving from 8.6% to 13.0% (see page 45). It is unusual for a business
to accelerate its top line growth and improve net margins at the same �me. This has been achieved
through a combina�on of:
●
Improved full price sales with overseas third-party aggregators, which grew by +52%.
●
Increased spending on digital marke�ng , funded through targeted price increases .
●
The removal of unprofitable products from our overseas offer.
Improving sales on third-party aggregators
The drama�c growth on overseas aggregator sites shows li�le sign of aba�ng. In part, the growth
has been driven by improved stock availability. However, stock availability alone is unlikely to explain
It appears that in some markets, awareness of NEXT is increasing and the
these levels of growth.
It may well be that the opera�on of AI-driven search engines on
brand is gaining momentum.
third-party websites is accelera�ng the visibility of our brand; doing so in a way that could never be
achieved through conven�onal marke�ng. Encouragingly, in most countries, our direct-to-consumer
business is s�ll increasing alongside growth in sales on partners’ sites.
Overseas marketing
Historically, our approach to interna�onal pricing sought to offer the best possible value, by lowering
prices to the level that delivered our target net margin. This approach assumed that our marke�ng
expenditure, as a percentage of sales, would be commensurate with the UK (3.7% of sales).
However, in many overseas territories, our prices were already very compe��ve, the real challenge
was to let poten�al customers know we existed. In these circumstances, it made sense to selec�vely
raise prices and invest the addi�onal margin into marke�ng. To that end we increased our marke�ng
expenditure as a percentage of overseas direct 11 sales by +18%, taking it from 4.0% to 4.7%.
The results have been encouraging, sales and customer numbers have moved forward; and returns
In the year ahead we expect overseas
on marke�ng expenditure have also increased marginally.
direct marke�ng to increase to 5.1% of sales.
11 Direct sales exclude sales on third-party aggregator sites.
14
DEVELOPING THE NEXT BRAND OVERSEAS
NEAR AND FAR MARKETS
BETTER THAN EXPECTED GROWTH AND MARGINS
Our Online Overseas business has made good progress, with sales up 17% (+14.5% in constant
currency) and net margins improving from 8.6% to 13.0% (see page 45). It is unusual for a business
to accelerate its top line growth and improve net margins at the same �me. This has been achieved
through a combina�on of:
●
Improved full price sales with overseas third-party aggregators, which grew by +52%.
●
Increased spending on digital marke�ng , funded through targeted price increases .
●
The removal of unprofitable products from our overseas offer.
Improving sales on third-party aggregators
The drama�c growth on overseas aggregator sites shows li�le sign of aba�ng. In part, the growth
has been driven by improved stock availability. However, stock availability alone is unlikely to explain
these levels of growth.
It appears that in some markets, awareness of NEXT is increasing and the
brand is gaining momentum.
It may well be that the opera�on of AI-driven search engines on
third-party websites is accelera�ng the visibility of our brand; doing so in a way that could never be
achieved through conven�onal marke�ng. Encouragingly, in most countries, our direct-to-consumer
business is s�ll increasing alongside growth in sales on partners’ sites.
Overseas marketing
Historically, our approach to interna�onal pricing sought to offer the best possible value, by lowering
prices to the level that delivered our target net margin. This approach assumed that our marke�ng
expenditure, as a percentage of sales, would be commensurate with the UK (3.7% of sales).
However, in many overseas territories, our prices were already very compe��ve, the real challenge
was to let poten�al customers know we existed. In these circumstances, it made sense to selec�vely
raise prices and invest the addi�onal margin into marke�ng. To that end we increased our marke�ng
expenditure as a percentage of overseas direct 11 sales by +18%, taking it from 4.0% to 4.7%.
The results have been encouraging, sales and customer numbers have moved forward; and returns
on marke�ng expenditure have also increased marginally.
In the year ahead we expect overseas
direct marke�ng to increase to 5.1% of sales.
Markets closer to home still dominate
The success of our sales in markets that are closer to home comes in part from greater brand
awareness in Europe and the Middle East and as a result of our ability to distribute goods on short
lead �mes at reasonable prices.
The chart below shows just how much faster these markets have
grown than the rest of the world 12 .
Improving service in the Middle East
To help cement our success in the Middle East and further reduce delivery �mes, we have recently
opened a warehouse and distribu�on hub in the UAE.
Around 80% of orders are currently being
fulfilled from the hub, with the balance coming from the UK. We expect this number to increase as
we fine-tune local stock levels. 28% of orders are now delivered next-day, and more than half (55%)
within two days; previously this was just 9%. The graph (below right) clearly demonstrates the scale
of improvement.
THE CHALLENGE OF MORE DISTANT MARKETS
Success in the Far East, the Americas and Australasia remains elusive with most territories’ sales level
with 2019/20 and two significantly down.
We believe there are three reasons why we have lost
trac�on in these ‘long-haul’ territories:
●
●
The improvement in the interna�onal appeal of our brand being outweighed by the (o�en
aggressive) growth of online specialists with local opera�ons.
Serving long haul markets directly from the UK is expensive and slow. Bringing stock from the
Far East to the UK, pu�ng it away in expensive warehousing, only to pick and fly it back to the
Far East (or other long-haul des�na�ons) cannot make sense.
●
Fewer customers have had exposure to the NEXT brand than in Europe and the Middle East.
In order to address these issues we have looked at alterna�ve models for working through
third-par�es in territories that cannot be effec�vely served from the UK.
11 Direct sales exclude sales on third-party aggregator sites.
12 2019/20 excludes sales in Russia, where we stopped trading in March 2022.
15
Strategic ReportGovernanceFinancial StatementsShareholder Information The logic of franchise/wholesale relationships in the Americas, Asia and Australasia
Developing partnerships with strong local retailers and aggregators through wholesale and/or
franchise arrangements has the following advantages:
●
Partners can leverage their retail and online infrastructure and customer base .
●
Partners can use their knowledge of the local market to price and promote our products.
●
Stock can be shipped directly to partners from manufacturers.
The franchise/wholesale model has the addi�onal advantage of lowering the risk of trading in distant
markets (our partners assume most if not all of the stock risk).
In effect, in these markets we are
retail margin in exchange for lower risk, ready-made local
trading
infrastructure and customer base. In our view, it is a trade worth making.
poten�al
some
our
of
Progress in the US and Asia
Following a very encouraging trial, we are ac�vely working with Nordstrom (an important US
mul�-channel retailer with revenues of over USD14bn). We have agreed terms with a second major
US retailer and are in ac�ve discussion with several others. It is very early days, but the signs are
encouraging.
We are also close to finalising a franchising and licensing agreement for NEXT in India and are in very
early-stage conversa�ons for similar arrangements in other Asian territories.
16
The logic of franchise/wholesale relationships in the Americas, Asia and Australasia
Developing partnerships with strong local retailers and aggregators through wholesale and/or
franchise arrangements has the following advantages:
●
Partners can leverage their retail and online infrastructure and customer base .
●
Partners can use their knowledge of the local market to price and promote our products.
●
Stock can be shipped directly to partners from manufacturers.
The franchise/wholesale model has the addi�onal advantage of lowering the risk of trading in distant
markets (our partners assume most if not all of the stock risk).
In effect, in these markets we are
trading
some
of
our
poten�al
retail margin in exchange for lower risk, ready-made local
infrastructure and customer base. In our view, it is a trade worth making.
Progress in the US and Asia
Following a very encouraging trial, we are ac�vely working with Nordstrom (an important US
mul�-channel retailer with revenues of over USD14bn). We have agreed terms with a second major
US retailer and are in ac�ve discussion with several others. It is very early days, but the signs are
encouraging.
We are also close to finalising a franchising and licensing agreement for NEXT in India and are in very
early-stage conversa�ons for similar arrangements in other Asian territories.
TOTAL PLATFORM
Proit and growth
Total Pla�orm (TP) is proving successful. In the year ahead we expect TP, along with its associated
equity investments, to contribute £77m of profit to the Group (see page 53), which would represent
8% of Group profit. Three years ago, that number was zero.
A comprehensive platform
While it is possible to individually source the services offered by Total Pla�orm from various excellent
third-party contractors, no single organisa�on can provide the en�re integrated package – website,
warehousing,
store
point-of-sale-systems and distribu�on, data management, and more. This completeness eliminates
the need for clients to engage in complex integra�on work with mul�ple partners. Perhaps more
importantly, on a day-to-day basis Total Pla�orm manages the complex inter-dependencies and
poten�al conflicts that can arise among these services.
processing,
marke�ng,
payments,
customer
contact,
returns
digital
For clients, there is no need to worry about the increasing complexi�es of online trading or
expensive capital investment in warehousing and so�ware. Costs are variable, which eliminates step
changes as volumes grow and avoids painful fixed costs if sales decline. But the greatest benefit is
that TP allows clients to focus on the ac�vi�es that really make the difference between success and
failure - their product, brand and marke�ng.
A mergers and acquisitions tool
As discussed at our Half Year Results in September, Total Pla�orm has ended up being more useful as
an acquisi�on tool than a so�ware-as-services business. TP allows us to capture the value of what
other acquirers would call synergies.
It does so as a profit stream to NEXT, and cost savings and
service enhancements to our subsidiary clients. So far, our investment in Total Pla�orm clients, taken
as a whole, has been a success; with a return on capital employed of 25% (see page 56 for details).
The value of autonomy
Even if we acquire 100% of a business, we believe it is important to keep thinking about TP services
as if we were providing them to an independent client. We want our subsidiaries to maintain their
autonomy and preserve their brand’s unique points of difference from NEXT.
We are anxious to
avoid the pi�alls of becoming a ‘corporate blob’. 13
In addi�on, this model forces us to maintain the
capital disciplines, cost controls and service improvement programmes that would be business as
usual for a third-party service provider.
Investment criteria and acquisition pipeline
Occasionally great brands will become available in which NEXT can acquire a majority stake, such as
Reiss and FatFace, and we believe there will be more.
It is important to stress that corporate
goal-se�ng will not dictate the pace of our investment. We will only invest in businesses that sa�sfy
our investment criteria.
Prospec�ve investments must be a great brand , with great management
(either in place or available), they must be able to add value through taking on Total Pla�orm and
the price must be right.
Service improvement programme
And although TP is successful, we think that there are a myriad of service improvements,
func�onality enhancements and cost reduc�ons that we can pass on to our clients going forward.
These are explained in more detail in ‘Focus on Total Pla�orm Enhancements' on page 26.
13 See ‘Avoiding the Pi�alls of the Corporate Blob?’ on page 17 of our September 2023 Half Year Results.
17
Strategic ReportGovernanceFinancial StatementsShareholder Information DEVELOPING GREAT PEOPLE
All the above may sound like a good plan. But businesses can spend too much �me talking about
‘strategy’ and forget that, however good the plan may be, execu�on is ninety-five percent of the
ba�le. Ge�ng the detail right is the difference between success and failure; and that is all about the
right people, working together to make the right decisions. With that in mind, it is worth saying a
li�le more about our approach to developing great people.
Avoiding platitudes – words must lead to action
We believe the success of NEXT is built on the ambi�on, hard work and teamwork of its people. But
this type of statement is so widely repeated that it risks becoming a pla�tude: devoid of thought,
prac�cal implica�ons, or ac�on. If the claim is to be meaningful, it must have prac�cal implica�ons
on our day-to-day ways of working. In par�cular, the rapid advancement of talent and determined
improvement of performance that falls below NEXT’s high expecta�ons.
Internal promotions
Whilst it is o�en beneficial to bring in a fresh pair of eyes and new skills from outside the business, at
NEXT we put a great deal of effort into the development and promo�on of those within the
organisa�on. This requires the courage to promote talented, ambi�ous individuals who are unproven
in a new posi�on, rather than bringing in a safe-pair-of-hands from outside and already established
at that level. It is not uncommon to hear people described as being a year away from being ‘ready’
for promo�on. More o�en than not, these people enthusias�cally seize the opportunity and flourish
beyond expecta�ons. Our Chairman talks about his experience of developing ‘ordinary folks’ 14 who
go on to achieve extraordinary things; it is a lesson we have taken to heart.
Honest conversations
Good managers are honest and upfront with people who need to improve. Many people are not
comfortable discussing poor performance or unhelpful a�tudes, but it is an essen�al part of being a
good manager; and it is only fair to let people know where they stand and help them improve.
Conversa�ons about performance can be direct, clear, and �mely, whilst at the same �me being
considerate and polite.
As men�oned in previous reports, there is a world of difference between
being demanding (which is essen�al) and being nasty, for which there is never an excuse.
Developing a great team
The success of a team depends on the collec�ve talents, ambi�ons and efforts of each and every
individual in that team. Managers at every level of the organisa�on should spot and give addi�onal
responsibility to those who can do more.
At the same we must let those who are struggling to
perform know how they can improve, and help them do so. Everyone should have high expecta�ons
of themselves and the people they manage. If it is to thrive, a great team cannot accept mediocrity,
and a company is just a very big team.
14 Our Chairman is American.
18
DEVELOPING GREAT PEOPLE
All the above may sound like a good plan. But businesses can spend too much �me talking about
‘strategy’ and forget that, however good the plan may be, execu�on is ninety-five percent of the
ba�le. Ge�ng the detail right is the difference between success and failure; and that is all about the
right people, working together to make the right decisions. With that in mind, it is worth saying a
li�le more about our approach to developing great people.
Avoiding platitudes – words must lead to action
We believe the success of NEXT is built on the ambi�on, hard work and teamwork of its people. But
this type of statement is so widely repeated that it risks becoming a pla�tude: devoid of thought,
prac�cal implica�ons, or ac�on. If the claim is to be meaningful, it must have prac�cal implica�ons
on our day-to-day ways of working. In par�cular, the rapid advancement of talent and determined
improvement of performance that falls below NEXT’s high expecta�ons.
Internal promotions
Whilst it is o�en beneficial to bring in a fresh pair of eyes and new skills from outside the business, at
NEXT we put a great deal of effort into the development and promo�on of those within the
organisa�on. This requires the courage to promote talented, ambi�ous individuals who are unproven
in a new posi�on, rather than bringing in a safe-pair-of-hands from outside and already established
at that level. It is not uncommon to hear people described as being a year away from being ‘ready’
for promo�on. More o�en than not, these people enthusias�cally seize the opportunity and flourish
beyond expecta�ons. Our Chairman talks about his experience of developing ‘ordinary folks’ 14 who
go on to achieve extraordinary things; it is a lesson we have taken to heart.
Honest conversations
Good managers are honest and upfront with people who need to improve. Many people are not
comfortable discussing poor performance or unhelpful a�tudes, but it is an essen�al part of being a
good manager; and it is only fair to let people know where they stand and help them improve.
Conversa�ons about performance can be direct, clear, and �mely, whilst at the same �me being
considerate and polite.
As men�oned in previous reports, there is a world of difference between
being demanding (which is essen�al) and being nasty, for which there is never an excuse.
Developing a great team
The success of a team depends on the collec�ve talents, ambi�ons and efforts of each and every
individual in that team. Managers at every level of the organisa�on should spot and give addi�onal
responsibility to those who can do more.
At the same we must let those who are struggling to
perform know how they can improve, and help them do so. Everyone should have high expecta�ons
of themselves and the people they manage. If it is to thrive, a great team cannot accept mediocrity,
and a company is just a very big team.
SUMMARY
A LOT TO DO…
Reading back through this document it is apparent that there is a lot to do. But standing back from
the detail, the aims of the business are simple and come down to the following things:
EVEN BETTER PRODUCT
NEXT brand
This is our first and foremost task.
We will strive to deliver more newness,
greater breadth of design and improved quality. Exceeding the expecta�ons of
our exis�ng customers and a�rac�ng customers who, un�l now, might have
thought that the NEXT brand was not for them.
New brands
and licences
Leveraging and extending our product skills to develop products that reach
beyond the natural boundaries of the NEXT brand.
IMPROVING INFRASTRUCTURE
Driving sales
Driving sales, with par�cular focus on digital marke�ng and enhancing our
website - ensuring that our growing number of customers can find the product
they want from within our growing offer.
Improving
service
Focusing par�cularly on the speed and accuracy of our delivery service and
brilliant assistance from our contact centres if things don’t go to plan.
Reducing costs
It is not enough to deliver good growth and great service. To create value, both
must be achieved in a cost-effec�ve way; it is easy to grow amazing services at a
cost that makes them unprofitable.
Total Pla�orm
services
Improving and broadening the services we offer to TP clients: including
improved website content management tools, promo�ons engine and a
comprehensive wholesale system.
All of these objec�ves are underpinned by our bespoke so�ware, much of which will con�nue to be
modernised as the year progresses.
DEVELOP NEW BUSINESSES
NEXT brand
overseas
Extend the global reach of the NEXT brand:
● Europe and the Middle East: In markets that are closer to home (through
direct marke�ng and enhanced opera�ons) and further afield.
● US and Asia: Develop more efficient ways of reaching customers through
the
partnerships
have
infrastructure, knowledge and customer base to accelerate our growth.
Organisa�ons
third-par�es.
already
with
that
14 Our Chairman is American.
Equity and
investments
Con�nue to look for poten�al investments, equity partners and clients that can
leverage our infrastructure through Total Pla�orm and/or our growing licensing
capabili�es.
19
Strategic ReportGovernanceFinancial StatementsShareholder Information CREATING VALUE - THE PRIMARY OBJECTIVE
More than long term growth in earnings per share…
Everything we do at NEXT is underpinned by a very clear financial objec�ve - the delivery of long
term, sustainable growth in Earnings Per Share. It is not just a number on a piece of paper, the profit
and the returns we make are the best measure we have of ensuring that we create value; that the
sum total of what we create is more valuable than the �me and resources we expend to make it
happen. It is not just a financial measure, it is also a measure of something more profound, the value
we add in our working lives to the world around us.
That is important, because every one of us, in some small way, wants to be useful to the world.
Ul�mately, work is not what we do for an inanimate corpora�on, it is what we do for other people -
our customers, clients, colleagues, suppliers and more.
On our own, none of us will make a big
difference to the world, but the sum total of the small differences we make together - an amazing
shoe, a beau�ful print, a more efficient picking system, a brilliant advert, a more reliable delivery
service - when added together DO make a real difference. The success of any organisa�on depends
on the flourishing of individual ini�a�ve along with the teamwork and the leadership necessary to
harness the collec�ve intelligence of the en�re organisa�on.
NEXT aims to create an environment in which people can flourish; a place where they not only feel
empowered to take decisions, but understand that decision making and delivering change is part of
their job. If we can do this, we have a chance of making the very most of the opportuni�es that now
present themselves to NEXT.
20
CREATING VALUE - THE PRIMARY OBJECTIVE
More than long term growth in earnings per share…
Everything we do at NEXT is underpinned by a very clear financial objec�ve - the delivery of long
term, sustainable growth in Earnings Per Share. It is not just a number on a piece of paper, the profit
and the returns we make are the best measure we have of ensuring that we create value; that the
sum total of what we create is more valuable than the �me and resources we expend to make it
happen. It is not just a financial measure, it is also a measure of something more profound, the value
we add in our working lives to the world around us.
That is important, because every one of us, in some small way, wants to be useful to the world.
Ul�mately, work is not what we do for an inanimate corpora�on, it is what we do for other people -
our customers, clients, colleagues, suppliers and more.
On our own, none of us will make a big
difference to the world, but the sum total of the small differences we make together - an amazing
shoe, a beau�ful print, a more efficient picking system, a brilliant advert, a more reliable delivery
service - when added together DO make a real difference. The success of any organisa�on depends
on the flourishing of individual ini�a�ve along with the teamwork and the leadership necessary to
harness the collec�ve intelligence of the en�re organisa�on.
NEXT aims to create an environment in which people can flourish; a place where they not only feel
empowered to take decisions, but understand that decision making and delivering change is part of
their job. If we can do this, we have a chance of making the very most of the opportuni�es that now
present themselves to NEXT.
Part Three gives a feel for the host of improvements we aim to make to our Online and Retail
infrastructure. This investment needs to be seen in the context of Total Pla�orm, because it provides
It is also worth men�oning that providing
addi�onal financial returns for the work we are doing.
services to independent third-par�es, and having to jus�fy our costs to them, has informed our
programme of improvement. The process is not always comfortable but is very valuable.
There are no lasting ‘moats’ or ‘USPs’…
We are, we think rightly, proud of the infrastructure we have built, and it would be easy to convince
ourselves that these assets somehow deliver impregnable compe��ve advantages that others
cannot match. But in retail there are no advantages that cannot, in �me, be copied or surpassed by
But staying ahead requires a constant and obsessive effort to improve our technologies,
others.
infrastructure and services.
The message to colleagues is simple: a good plan is all very well and
good; but execu�on will make the difference between success and failure, and there is much we can
do.
FOCUS ON WAREHOUSING
Elmsall 3
Our new Elmsall 3 flat-packed 15 stock warehouse will increase NEXT Online’s current capacity by
c.50%. Within the shell of the building, we have void space which could add a further 34% of current
capacity when fi�ed out. The project has been delivered in three phases, two of which have been
delivered, in �me and on budget.
●
●
●
Phase One was completed last year when we opened floor space for conven�onal picking. This
reduced opera�onal pressures and meaningfully improved service levels.
Phase Two: Automated picking went live at the beginning of March.
reduces the labour required to pick an item by 56%.
throughout the year so that it accounts for 50% of our picking by November 2024.
Phase Three is planned to go live in October 2024 and facilitates a more automated packing
process.
We aim to ramp up this
automa�on throughout the year so that it acco unts for 50% of our packing by February 2025.
This mechanisa�on
We aim to ramp up this automa�on
This reduces the �me required to pack a parcel by 36%.
The table below demonstrates the financial effect of Elmsall 3 and other warehouse improvement
projects. The phasing of planned cost increases from addi�onal rents, rates, overheads and
deprecia�on are shown in the first row; and es�mated savings from enhanced efficiency are shown
in the second row.
£m
2022/23
2023/24
2024/25
(e)
2025/26
(e)
Annualised
costs
Total cost increases
Total cost savings
Net (costs) / savings
(5.4)
-
(5.4)
(9.9)
13.4
3.5
(16.0)
20.4
4.4
(1.2)
22.5
21.3
(32.5)
56.4
23.8
15 Flat-packed stock is delivered in standard cartons and folded. This type of stock accounts for around 90% of our clothing
sales and the vast majority of Total Pla�orm clients’ stock.
21
PART THREE FOCUS ON INFRASTRUCTURE Strategic ReportGovernanceFinancial StatementsShareholder Information Improving accuracy and costs
Over and above the improvements we expect from the implementa�on of our new warehouse there
are a host of other projects we are undertaking to improve the accuracy of our delivery promise. The
table below sets out our key measure of failure (parcels NOT delivered when promised and in full) for
autumn/winter of 2022 and 2023. This improvement, along with the improvements we made to our
contact centre’s so�ware and procedures, has been reflected in a drama�c reduc�on in the
percentage of customers who called us, rela�ve to orders. These improvements not only enhance
our reputa�on, they also serve to reduce costs; every item missing from a parcel has to be sent
separately, incurring addi�onal cost.
Autumn/winter
2022
Autumn/winter
2023
Variance %
Failure rate (parcels not on �me and in full)
Customer contacts as a % of orders
Trust Pilot scores (January score)
15%
16%
3.8
8%
13%
4.4
↓ 47%
↓ 21%
↑ 16%
Whilst these improvements are impressive, our service levels are s�ll below where we would like
them to be; and we believe we have plenty of room to improve further. We will be disappointed if
we do not reduce our failure rate by at least a third over the course of the coming eighteen months.
Elmsall 3 Warehouse, South Yorkshire
22
Improving accuracy and costs
Over and above the improvements we expect from the implementa�on of our new warehouse there
are a host of other projects we are undertaking to improve the accuracy of our delivery promise. The
table below sets out our key measure of failure (parcels NOT delivered when promised and in full) for
autumn/winter of 2022 and 2023. This improvement, along with the improvements we made to our
contact centre’s so�ware and procedures, has been reflected in a drama�c reduc�on in the
percentage of customers who called us, rela�ve to orders. These improvements not only enhance
our reputa�on, they also serve to reduce costs; every item missing from a parcel has to be sent
separately, incurring addi�onal cost.
Failure rate (parcels not on �me and in full)
Customer contacts as a % of orders
Trust Pilot scores (January score)
Autumn/winter
Autumn/winter
2023
Variance %
2022
15%
16%
3.8
8%
13%
4.4
↓ 47%
↓ 21%
↑ 16%
Whilst these improvements are impressive, our service levels are s�ll below where we would like
them to be; and we believe we have plenty of room to improve further. We will be disappointed if
we do not reduce our failure rate by at least a third over the course of the coming eighteen months.
FOCUS ON TECHNOLOGY
A signiicant increase in technology spend
Over the course of the last five years, we doubled our expenditure on so�ware development. The
number of technology professionals has increased from 1,000 to 1,900; meaning that we now
employ more people developing technology than in our Product teams. There are three reasons:
●
●
●
An increasing number of opportuni�es for new systems to generate addi�onal revenues and
cost savings.
These include Total Pla�orm, new website func�onality, overseas distribu�on
hubs, new product areas, new warehouse automa�on, data security, more advanced customer
contact so�ware and more. It appears that virtually every business idea requires a new system.
The need to modernise all our major legacy so�ware applica�ons.
The rapid expansion of our technology teams reduced efficiency as new hires climbed the
learning curve, familiarised themselves with our legacy code and business opera�ons.
Technology Cash Spend: 2019/20 - 2024/25 (e)
Platform Modernisation
We believe that developing applica�ons in-house has been key to our success over the past thirty
years. However, by 2020, our major so�ware had become overly complex as a result of years of
incremental change.
This complexity made new developments slow, risky and difficult to test. In
response, we have started rewri�ng these applica�ons into discrete modules, using reliable and
scalable cloud technologies where appropriate. We began with opera�onal applica�ons like
E-commerce, Payroll & HR, and Contact Centres, and are now moving on to Finance, Data and
Product systems.
The following table gives a feel for the progress we have made and the costs
involved (note only c.80% of the modernisa�on costs are classed as capex).
2020
2021
2022
2023
2024
2025
2026
Total project
spend (e)
%
complete
Elmsall 3 Warehouse, South Yorkshire
E-Commerce
Payroll & HR
Product systems
Warehousing
Contact centres
Data & analy�cs
Finance
£24m
£6m
£12m
£16m
£4m
£3m
£40m
96%
100%
58%
24%
100%
0%
5%
£106m
55%
>>>
>>>
>>>
23
Strategic ReportGovernanceFinancial StatementsShareholder Information AIMING FOR IMPROVED EFFICIENCY
This year we are planning for our cash spend (opex and capex costs) on Technology to peak at
£216m, and we aim to steadily reduce this going forward. The aim is not just to save money, our
inten�on is to spend less but deliver more new func�onality. We believe that this is achievable for
the following reasons:
●
●
●
Steady State Modernisa�on . Modernisa�on costs have steadily increased in the last few years as
new projects come on stream; we believe we have now reached a steady state which will persist
for the next few years.
The Benefits of Modernisa�on . The whole point of modernising our so�ware is that it serves to
make our so�ware easier to develop, test and maintain going forward.
Increasing Experience . As we reduce the rate at which we take on new technology professionals,
we will reduce the inefficiencies of working with large numbers of people who are unfamiliar with
The chart below shows the percentage of our
our code, business processes and culture.
Technology teams that had spent less than 12 months in the business, over the last five years. As
can be seen, levels of inexperience have dropped drama�cally over the last year.
% of Technology Team With Less Than Twelve Months’ Service
24
AIMING FOR IMPROVED EFFICIENCY
This year we are planning for our cash spend (opex and capex costs) on Technology to peak at
£216m, and we aim to steadily reduce this going forward. The aim is not just to save money, our
inten�on is to spend less but deliver more new func�onality. We believe that this is achievable for
the following reasons:
for the next few years.
●
Steady State Modernisa�on . Modernisa�on costs have steadily increased in the last few years as
new projects come on stream; we believe we have now reached a steady state which will persist
●
The Benefits of Modernisa�on . The whole point of modernising our so�ware is that it serves to
make our so�ware easier to develop, test and maintain going forward.
●
Increasing Experience . As we reduce the rate at which we take on new technology professionals,
we will reduce the inefficiencies of working with large numbers of people who are unfamiliar with
our code, business processes and culture.
The chart below shows the percentage of our
Technology teams that had spent less than 12 months in the business, over the last five years. As
can be seen, levels of inexperience have dropped drama�cally over the last year.
% of Technology Team With Less Than Twelve Months’ Service
YIN-YANG SYSTEMS DEVELOPMENT
Collabora�on between business users and technology professionals, at the specifica�on stage of a
project can radically improve the speed of development and reduce the costs of new func�onality. It
is all too easy for business users to specify requirements that, unbeknownst to them, create huge
technical complexity and cost.
We have learnt that well-informed compromises to our business
requirements can increase the speed of development whilst reducing costs.
For example, we recently introduced a new system for managing items returned a�er the 28-day
�me limit. By simplifying the live data required for the process, we managed to reduce the costs and
development �me by more than 50%, for only a small diminu�on in business func�onality.
Business func�ons have invested �me and resources in improving levels of mutual understanding
This has o�en involved assigning
that exist between their areas and our technology teams.
experienced business managers to act as a point of contact between business opera�ons and
so�ware development.
We call this approach “Yin-Yang development” – some�mes a catchy name and graphic help ideas
catch on, and we will accept the risk of sounding cheesy. The aim is that we give IT professionals a
be�er understanding of the business, and business managers a be�er understanding of the costs,
limita�ons and possibili�es of technology.
25
Strategic ReportGovernanceFinancial StatementsShareholder Information FOCUS ON TOTAL PLATFORM ENHANCEMENTS
Improving the quality and reducing the costs of our services
Whilst Total Pla�orm’s current head start might provide some comfort, we know that in order to
maintain Total Pla�orm's advantage we have much to do. To that end we have a long list of projects
and ideas to improve the quality and scope of our services whilst reducing their costs . The aim is to
pass on the benefit of all these improvements to our clients. Not least, these efforts are essen�al to
support the compe��veness of our most important client, the NEXT brand.
TOTAL PLATFORM WAREHOUSING AND DISTRIBUTION
The paragraphs below set out some of the improvements we are planning in the year ahead for our
Total Pla�orm warehousing and distribu�on services.
Enhanced retail
picking
Enhanced retail
distribu�on for
smaller stores
Different types
of products
Currently TP clients’ retail picking is undertaken from our online warehouse. This
process (1) can be more efficient and (2) needs to allow clients to be�er ‘ring-fence’
stock for their retail and online businesses (currently it is picked on a first-come,
first-served basis).
Our retail distribu�on services provide a host of enhanced func�onality to stores.
For example, they allow them to fulfil online orders from stock held in stores; and
deliver online orders next-day to stores. However, in some very small stores, the
costs of delivering these addi�onal services are dispropor�onate to the rewards.
So, we need to offer clients a cheaper, less func�on-rich service in those stores.
At present, most of our clients deliver their products in standard cartons and
distribute garments to customers folded.
If and when our clients increase their
product categories, we will need to extend our services to our other types of
warehouses
can be delivered to us (1) on hangers, (2) in
non-standard boxes on pallets and (3) as large items of furniture.
goods
that
so
WHOLESALE SYSTEMS AND CAPABILITIES
NEXT wholesales very few of its products at present. We have adapted our exis�ng franchise system
to allow TP clients to serve their wholesale customers, which works but is far from ideal. We are in
the process of designing a comprehensive wholesale system that will drive improvements over the
next eighteen months. This programme will, amongst other things, give clients:
●
●
●
●
●
●
●
A catalogue system allowing their customers to select and order items online.
Price management , allowing different prices to different customers in mul�ple currencies.
Improved contrac�ng , allowing stock to be pre-assigned and reserved for different clients.
On-site stock refurbishment services, allowing TP clients to label and pack stock to comply
with their wholesale customers’ specifica�ons.
More efficient picking and storage of wholesale stock.
The ability to deliver direct from manufacturer to UK wholesale clients.
Improved invoicing and accoun�ng systems.
The wholesale system will also be important in enabling NEXT to wholesale the new brands and
licensed products that we are developing within the Group, such as ‘Love & Roses’, ‘Cath Kidston’
and ‘smAll Saints’ childrenswear. (See page 48 for more informa�on on new wholly-owned brands
and licences.)
26
FOCUS ON TOTAL PLATFORM ENHANCEMENTS
Improving the quality and reducing the costs of our services
Whilst Total Pla�orm’s current head start might provide some comfort, we know that in order to
maintain Total Pla�orm's advantage we have much to do. To that end we have a long list of projects
and ideas to improve the quality and scope of our services whilst reducing their costs . The aim is to
pass on the benefit of all these improvements to our clients. Not least, these efforts are essen�al to
support the compe��veness of our most important client, the NEXT brand.
TOTAL PLATFORM WAREHOUSING AND DISTRIBUTION
The paragraphs below set out some of the improvements we are planning in the year ahead for our
Total Pla�orm warehousing and distribu�on services.
Enhanced retail
Currently TP clients’ retail picking is undertaken from our online warehouse. This
picking
process (1) can be more efficient and (2) needs to allow clients to be�er ‘ring-fence’
stock for their retail and online businesses (currently it is picked on a first-come,
first-served basis).
Enhanced retail
distribu�on for
smaller stores
Our retail distribu�on services provide a host of enhanced func�onality to stores.
For example, they allow them to fulfil online orders from stock held in stores; and
deliver online orders next-day to stores. However, in some very small stores, the
costs of delivering these addi�onal services are dispropor�onate to the rewards.
So, we need to offer clients a cheaper, less func�on-rich service in those stores.
Different types
of products
At present, most of our clients deliver their products in standard cartons and
distribute garments to customers folded.
If and when our clients increase their
product categories, we will need to extend our services to our other types of
warehouses
so
that
goods
can be delivered to us (1) on hangers, (2) in
non-standard boxes on pallets and (3) as large items of furniture.
WHOLESALE SYSTEMS AND CAPABILITIES
NEXT wholesales very few of its products at present. We have adapted our exis�ng franchise system
to allow TP clients to serve their wholesale customers, which works but is far from ideal. We are in
the process of designing a comprehensive wholesale system that will drive improvements over the
next eighteen months. This programme will, amongst other things, give clients:
A catalogue system allowing their customers to select and order items online.
Price management , allowing different prices to different customers in mul�ple currencies.
Improved contrac�ng , allowing stock to be pre-assigned and reserved for different clients.
On-site stock refurbishment services, allowing TP clients to label and pack stock to comply
with their wholesale customers’ specifica�ons.
More efficient picking and storage of wholesale stock.
The ability to deliver direct from manufacturer to UK wholesale clients.
Improved invoicing and accoun�ng systems.
●
●
●
●
●
●
●
The wholesale system will also be important in enabling NEXT to wholesale the new brands and
licensed products that we are developing within the Group, such as ‘Love & Roses’, ‘Cath Kidston’
and ‘smAll Saints’ childrenswear. (See page 48 for more informa�on on new wholly-owned brands
and licences.)
MORE RESPONSIVE WEBSITE CHANGE PROCESS
Total Pla�orm gives clients complete control over the aesthe�cs, content, photography and
promo�on of their online offer. However, the processes used to customise and change the website
are somewhat cumbersome, involving some unnecessary administra�ve steps and delays.
Over the next 12 months, we will deliver new so�ware that streamlines the processes clients use to
update every element of their website – from pricing to photography.
These enhancements will
reduce their reliance on Account Management teams at NEXT, allowing these teams to focus on
increasing the value and effec�veness of our clients' sites, rather than managing rou�ne changes.
TOTAL ENTERPRISE PLATFORM - PROGRESS & DEVELOPMENT
Total Enterprise Pla�orm (TEP) gives an even more comprehensive set of so�ware services to clients,
providing them with the following func�onality:
●
Product Management Systems, which provide end-to-end management of the buying
It allows clients to plan their ranges, price, contract, label, manage freight and
processes.
inbound logis�cs, re-forecast, allocate and replenish (retail stores), franchise, and manage
margin and markdown.
●
Finance and Accoun�ng module provides all management and financial repor�ng services.
●
Payroll & HR module manages retail and other payroll services.
Of these three services, it is the Product Management Systems (PMS) that adds the most value. It
ensures that stock and import processes are compa�ble with our UK bonded warehousing and allows
fric�on-free, re-export to EU and other countries.
The Product func�onality will form part of the
services we provide to FatFace and we believe it is likely that most new clients will adopt PMS as part
of their Total Pla�orm package going forward.
TEP at Joules
Total Enterprise Pla�orm was deployed for Joules in October 2023. In the year ahead we expect TEP
to deliver total cost savings of around £4m to Joules.
27
Strategic ReportGovernanceFinancial StatementsShareholder Information NOTES ON THE PRESENTATION OF SALES AND PROFIT
Note 1 - Group sales
Group sales , previously reported in January 2023 as £5,415m, are now £101m higher at £5,516m. This is a
result of adding £206m through revenue from investments (see note 2 below) and removing £104m from
Total Pla�orm (TP) income (see note 3 below). These changes give a more accurate picture of the Group’s
underlying net margins in our TP Services business and Equity Investments, by aligning the way in which
we report sales with the way we report profits.
Group sales previously reported in January 2023
Revenue from investments (£239m, versus only £33m of Joules' sales previously reported in 'other' sales,
as the only consolidated equity investment)
Total Pla�orm (£126m of sales at gross transac�on value (GTV) replaced with £22m of commission)
Group sales restated for January 2023
5,415
+206
- 104
5,516
Note 2 - Revenue from investments
As set out in our January Trading Statement, we have changed our approach to repor�ng sales in our
subsidiaries. In short, this turnover figure is calculated using our share of our subsidiaries’ turnover. For
example, going forward we own 72% of Reiss so will include 72% of their sales 16 in our top line. Please see
Appendix 3 on page 72 for full details.
Note 3 - Total Platform services income
This year we have changed the presenta�on of Total Pla�orm sales. January 2023’s TP sales, previously
reported as £144m, are now £40m. The £104m reduc�on is because last year we reported TP sales as (1)
the gross transac�on value (GTV) taken through our clients’ websites plus (2) the income generated from
the services we provide on a ‘cost-plus’ basis (such as retail services). This year, we have decided not to
report our clients’ GTV as sales but, instead, report the commission earned by NEXT on our clients’ online
sales. Revenues from cost-plus services remain as reported.
Note 4 - Brand amortisation costs
As explained in January, we now exclude brand amor�sa�on (a non-cash accoun�ng cost) from our
Full details
headline profit.
explaining this change are given in Appendix 2 on page 71.
The table below shows last year’s reported profit and the change made.
Profit adjusted for brand amorsaon £m
Total Pla�orm services and investment
NEXT Group profit before tax
Jan 2023
as reported
Brand
amorsaon
16.3
870.4
+4.3
+4.3
Jan 2023
restated
20.6
874.7
Note 5 - Rounding convention and casting
Figures shown in tables throughout the CEO Review are shown in millions or rounded to one decimal
Subtotals, totals and variances shown in tables are all based on the actual , unrounded figures;
place.
tables are not adjusted for cas�ng purposes.
16 This figure excludes their LABEL sales (100% of which are included in our Online sales), Total Pla�orm commission and
revenue from TP cost-plus services (which are included within Total Pla�orm sales).
28
PART FOUR GROUP FINANCIAL PERFORMANCE IN 2023/24 AND GUIDANCE FOR 2024/25 NOTES ON THE PRESENTATION OF SALES AND PROFIT
Note 1 - Group sales
Group sales , previously reported in January 2023 as £5,415m, are now £101m higher at £5,516m. This is a
result of adding £206m through revenue from investments (see note 2 below) and removing £104m from
Total Pla�orm (TP) income (see note 3 below). These changes give a more accurate picture of the Group’s
underlying net margins in our TP Services business and Equity Investments, by aligning the way in which
we report sales with the way we report profits.
Group sales previously reported in January 2023
Revenue from investments (£239m, versus only £33m of Joules' sales previously reported in 'other' sales,
as the only consolidated equity investment)
Total Pla�orm (£126m of sales at gross transac�on value (GTV) replaced with £22m of commission)
5,415
+206
- 104
5,516
Group sales restated for January 2023
Note 2 - Revenue from investments
As set out in our January Trading Statement, we have changed our approach to repor�ng sales in our
subsidiaries. In short, this turnover figure is calculated using our share of our subsidiaries’ turnover. For
example, going forward we own 72% of Reiss so will include 72% of their sales 16 in our top line. Please see
Appendix 3 on page 72 for full details.
Note 3 - Total Platform services income
This year we have changed the presenta�on of Total Pla�orm sales. January 2023’s TP sales, previously
reported as £144m, are now £40m. The £104m reduc�on is because last year we reported TP sales as (1)
the gross transac�on value (GTV) taken through our clients’ websites plus (2) the income generated from
the services we provide on a ‘cost-plus’ basis (such as retail services). This year, we have decided not to
report our clients’ GTV as sales but, instead, report the commission earned by NEXT on our clients’ online
sales. Revenues from cost-plus services remain as reported.
Note 4 - Brand amortisation costs
As explained in January, we now exclude brand amor�sa�on (a non-cash accoun�ng cost) from our
headline profit.
The table below shows last year’s reported profit and the change made.
Full details
explaining this change are given in Appendix 2 on page 71.
Profit adjusted for brand amorsaon £m
Total Pla�orm services and investment
NEXT Group profit before tax
Jan 2023
Brand
as reported
amorsaon
16.3
870.4
+4.3
+4.3
Jan 2023
restated
20.6
874.7
Note 5 - Rounding convention and casting
Figures shown in tables throughout the CEO Review are shown in millions or rounded to one decimal
place.
Subtotals, totals and variances shown in tables are all based on the actual , unrounded figures;
tables are not adjusted for cas�ng purposes.
GROUP SALES AND PROFIT SUMMARY
Full price sales in the year were up +4.0% versus last year. Total Group sales, including subsidiaries
and equity investments, were up +5.9% . Group profit before tax was £918m , up +5.0%, pre-tax EPS
was up +7.4% and post-tax EPS was up +0.3% .
TOTAL GROUP SALES BY DIVISION
TOTAL GROUP SALES (VAT EX.) £m
Jan 2024
Jan 2023 17
Var %
Online
Retail
Finance
Total NEXT Trading sales
Total Pla�orm
Franchise, Sourcing, Property & Other
Total NEXT sales
Revenue from investments
Total Group sales
Statutory revenue
3,160
1,865
293
5,317
52
89
5,459
383
5,842
5,491
3,007
1,865
274
5,146
40
91
5,277
239
5,516
5,034
+5%
- 0%
+7%
+3.3%
+31%
- 2%
+3.4%
+60%
+5.9%
+9.1%
Walk forward from our headline Group sales to statutory sales
The differences between our headline Group sales and statutory sales are summarised in the table
below. By way of reminder, within NEXT Trading sales we report the gross transac�on value (GTV) of
items that are sold on a commission-basis (mainly in LABEL Online, which sells third-party branded
products). Under statutory repor�ng, instead of repor�ng the GTV, only the commission earned is
reported as revenue.
£m
Total Group sales
less LABEL & Overseas commission sales (full price and markdown)
plus commission earned on LABEL sales
less sales from investments that are not consolidated in NEXT's accounts (Note 1)
plus the minority interests' share of sales in subsidiaries that are consolidated in
NEXT's accounts (Joules, Reiss and FatFace)
plus other income (e.g. delivery charges)
Total Group statutory sales
Jan 2024
Jan 2023 17
5,842
- 564
+206
- 162
+87
+80
5,516
- 552
+206
- 218
+15
+67
5,491
5,034
Note 1 : The drop in this number is mainly due to the change in control in Reiss at the end of
September 2023, which means that sales from that date onwards were consolidated into statutory
sales. Sales in the equivalent �me period last year were not consolidated.
16 This figure excludes their LABEL sales (100% of which are included in our Online sales), Total Pla�orm commission and
revenue from TP cost-plus services (which are included within Total Pla�orm sales).
17 Group sales are restated for January 2023, see page 28.
29
PART FOUR GROUP FINANCIAL PERFORMANCE IN 2023/24 AND GUIDANCE FOR 2024/25 Strategic ReportGovernanceFinancial StatementsShareholder Information SUMMARY OF GROUP PROFIT BY DIVISION
PROFIT £m and EPS
Jan 2024
Jan 2023 18
Online
Retail
Finance (a�er funding costs)
Profit from Trading
Total Pla�orm services and investments 19
Property (including provisions)
Franchise and wholesale
Central costs, FX, Sourcing and Other
Recharge of interest from Finance
Opera�ng profit
Lease interest
Opera�ng profit a�er lease interest
Underlying opera�ng margin
External interest
NEXT Group profit before tax
Taxa�on
Profit a�er tax
Pre-tax Earnings Per Share
Post-tax Earnings Per Share
Statutory profit before tax
517
245
163
925
38
2
6
(23)
48
996
(47)
949
467
240
171
878
21
37
7
(31)
34
947
(47)
900
16.2%
16.3%
(31)
918
(216)
702
757.2p
578.8p
1,016
(25)
875
(159)
716
704.8p
576.8p
Var %
+11%
+2%
- 4%
+5.3%
+86%
- 95%
- 17%
- 24%
+39%
+5.2%
- 1%
+5.5%
+24%
+5.0%
+36%
- 2.0%
+7.4%
+0.3%
869
+16.9%
Walk forward from our headline NEXT Group pre-tax proit to statutory pre-tax proit
Statutory profit of £1,016m is higher than our reported headline figure of £918m mainly due to the
In addi�on, statutory
£109m excep�onal, non-cash, accoun�ng gain from the Reiss acquisi�on.
profit includes the cost of brand amor�sa�on and the consolidated profits/losses from minority
interests in Joules, Reiss and FatFace. These differences are summarised below.
£m
Headline NEXT Group profit before tax
Excep�onal accoun�ng gain on the acquisi�on of Reiss
Cost of brand amor�sa�on (see page 71)
Profit/losses from minority interests in Joules, Reiss and FatFace
Total Group statutory profit before tax
Jan 2024
Jan 2023 18
918
109
-10
-1
1,016
875
n/a
-4
-1
869
18 NEXT Group profit has been restated to remove the cost of brand amor�sa�on, see page 28.
19 TP profit excludes £4m of preference share and loan interest from our investments, which is reported within the interest
line of the P&L. Total Group profit for TP including interest is £43m. See page 53 for more detail.
30
SUMMARY OF GROUP PROFIT BY DIVISION
PROFIT £m and EPS
Jan 2024
Jan 2023 18
Online
Retail
Finance (a�er funding costs)
Profit from Trading
Total Pla�orm services and investments 19
Property (including provisions)
Franchise and wholesale
Central costs, FX, Sourcing and Other
Recharge of interest from Finance
Opera�ng profit
Lease interest
Opera�ng profit a�er lease interest
Underlying opera�ng margin
External interest
NEXT Group profit before tax
Taxa�on
Profit a�er tax
Pre-tax Earnings Per Share
Post-tax Earnings Per Share
Statutory profit before tax
517
245
163
925
38
2
6
(23)
48
996
(47)
949
(31)
918
(216)
702
757.2p
578.8p
1,016
467
240
171
878
21
37
7
(31)
34
947
(47)
900
(25)
875
(159)
716
704.8p
576.8p
16.2%
16.3%
Var %
+11%
+2%
- 4%
+5.3%
+86%
- 95%
- 17%
- 24%
+39%
+5.2%
- 1%
+5.5%
+24%
+5.0%
+36%
- 2.0%
+7.4%
+0.3%
869
+16.9%
Walk forward from our headline NEXT Group pre-tax proit to statutory pre-tax proit
Statutory profit of £1,016m is higher than our reported headline figure of £918m mainly due to the
£109m excep�onal, non-cash, accoun�ng gain from the Reiss acquisi�on.
In addi�on, statutory
profit includes the cost of brand amor�sa�on and the consolidated profits/losses from minority
interests in Joules, Reiss and FatFace. These differences are summarised below.
£m
Headline NEXT Group profit before tax
Excep�onal accoun�ng gain on the acquisi�on of Reiss
Cost of brand amor�sa�on (see page 71)
Profit/losses from minority interests in Joules, Reiss and FatFace
Total Group statutory profit before tax
Jan 2024
Jan 2023 18
918
109
-10
-1
1,016
875
n/a
-4
-1
869
SALES AND PROFIT GUIDANCE FOR 2024/25
Our full year guidance for sales and profit in 2024/25 (before excep�onals) remains unchanged since
our January Trading Statement and is set out below.
OUTLOOK FOR COSTS AND DEMAND IN 2024/25
Our outlook for 2024/25 has changed li�le since our January Trading Statement. On the face of it,
the consumer environment looks more benign than it has for a number of years, albeit there are
some significant uncertain�es. The table below summarises the posi�ve factors and risks we have
balanced in our sales guidance for the year ahead:
Posive Factors
Risk Factors
Wages rising faster than prices
UK wages are rising faster than infla�on. (See
Real Earnings Growth chart below). For many
consumers this will ease the pressure they
have felt on their cost of living for the last
eighteen months.
No infla�on in our selling prices
Selling price infla�on in our own products has
reversed, mainly as a result of decreasing
factory
on
like-for-like goods 20 are currently down -2.0%,
and
we expect defla�on of -0.5% in the
second half.
prices.
Selling
prices
gate
Weakening employment market?
Although rising wages are good for sales, it
seems likely that they will result in reduced
employment
wider
economy.
Vacancy rates con�nue to fall and,
if that trend con�nues, it is likely to result in
increased unemployment.
opportuni�es
the
in
Mortgage rates?
Fixed rate mortgage deals will con�nue to
expire and require refinancing at higher rates.
Suez Canal Update
We do not currently an�cipate any material adverse impact from stock delays. On average, transit
�mes have been extended by 7-10 days and our product teams have adjusted the �ming of their
contract bookings to account for this delay.
In addi�on, higher freight costs have been factored into
our prices going forward but we s�ll an�cipate that our prices will fall as outlined above.
Real Earnings Growth 21
18 NEXT Group profit has been restated to remove the cost of brand amor�sa�on, see page 28.
19 TP profit excludes £4m of preference share and loan interest from our investments, which is reported within the interest
line of the P&L. Total Group profit for TP including interest is £43m. See page 53 for more detail.
20 Price increases are solely assessed based on items that we also sold last year (i.e. like-for-like goods). There is no
compara�ve price for new designs. These like-for-like items account for around 30% of our sales.
21 Source: ONS - Year on year change in Real Average Weekly Earnings, total pay, seasonally adjusted (A3WV).
31
Strategic ReportGovernanceFinancial StatementsShareholder Information GUIDANCE FOR FULL PRICE SALES BY QUARTER
We expect full price sales for the full year to be up +2.5% . Within the first half we an�cipate that the
quarters will perform very differently, with sales in the first quarter up +5% and flat in the second.
This is because Q1 sales last year were poor (down -0.7%), with unusually cold and wet weather in
the run up to Easter; in contrast Q2 was very strong (up +6.9%), with excep�onally warm weather at
the end of May and throughout June. Our guidance by quarter is set out below.
Full Price Sales Guidance 2024/25 (e) vs 2023/24 by Quarter
Full Price Sales Guidance by Division
Full price sales growth versus 2023/24
First half (e) Second half (e)
Full year (e)
Retail
Online
- 2%
+5%
- 2%
+5%
- 2%
+5%
Total full price sales (including Finance interest income)
+2.5%
+2.5%
+2.5%
GUIDANCE FOR TOTAL GROUP SALES
Total Group sales, including subsidiary companies and equity investments, are expected to grow by
+6.0% . This figure is calculated using our share of our subsidiaries’ turnover. For example, we own
72% of Reiss so we include 72% of their sales 22 in our top line. For a more detailed explana�on of
how we report headline Total Group sales please see Appendix 3 on page 72.
22 This figure excludes their LABEL sales (100% of which are included in our Online sales), Total Pla�orm commission and
revenue from cost-plus services.
32
GUIDANCE FOR FULL PRICE SALES BY QUARTER
We expect full price sales for the full year to be up +2.5% . Within the first half we an�cipate that the
quarters will perform very differently, with sales in the first quarter up +5% and flat in the second.
This is because Q1 sales last year were poor (down -0.7%), with unusually cold and wet weather in
the run up to Easter; in contrast Q2 was very strong (up +6.9%), with excep�onally warm weather at
the end of May and throughout June. Our guidance by quarter is set out below.
Full Price Sales Guidance 2024/25 (e) vs 2023/24 by Quarter
Full Price Sales Guidance by Division
Full price sales growth versus 2023/24
First half (e) Second half (e)
Full year (e)
Retail
Online
- 2%
+5%
- 2%
+5%
- 2%
+5%
Total full price sales (including Finance interest income)
+2.5%
+2.5%
+2.5%
GUIDANCE FOR TOTAL GROUP SALES
Total Group sales, including subsidiary companies and equity investments, are expected to grow by
+6.0% . This figure is calculated using our share of our subsidiaries’ turnover. For example, we own
72% of Reiss so we include 72% of their sales 22 in our top line. For a more detailed explana�on of
how we report headline Total Group sales please see Appendix 3 on page 72.
GUIDANCE FOR PROFIT BEFORE TAX AND EPS
Guidance for sales, profit before tax (before excep�onals) and EPS is summarised below.
Guidance for the full year 2024/25
Full price sales (underlying)
Total Group sales including subsidiary companies
NEXT Group profit before tax
Pre-tax EPS
Post-tax EPS
% Versus
2023/24
Full year £ (e)
+2.5%
+6.0%
+4.6%
+6.3%
+4.8%
£960m
805.2p
606.3p 23
Our forecast pre-tax EPS growth is +6.3%. This is +1.7% higher than growth in profit, due to share
buybacks.
An increase in our effec�ve tax rate (ETR) will reduce growth in post-tax EPS down to
+4.8%. In April 2023 the headline UK Corpora�on Tax rate increased from 19% to 25% which led to a
blended tax rate for the year of 24%.
In the year ahead the tax rate will be at the higher level of
25%.
Further details on our ETR are given on page 59.
An exceptional non-cash charge of c.£20m
This year we expect to incur a non-recurring, non-cash, charge of around £20m rela�ng to our
defined benefit pension scheme, which was closed to new members in 2000. In January 2024 the
Trustees, with the Company’s support, purchased an insurance policy to safeguard all future pension
payments (a ‘buy-in’) and within the next two years we expect to move the pension scheme to a full
‘buy-out’, meaning the scheme will be managed by the insurance company and removed from our
balance sheet.
This charge will not affect the Company’s cash flow and will be treated as excep�onal , so it will not
be included in our forecast headline profit.
22 This figure excludes their LABEL sales (100% of which are included in our Online sales), Total Pla�orm commission and
23 Guidance for post-tax EPS was previously 603.4p; this was updated to reflect our latest forecast for tax, surplus cash and
revenue from cost-plus services.
share buybacks.
33
Strategic ReportGovernanceFinancial StatementsShareholder Information Proit Walk Forward from 2023/24 to 2024/25 (e)
The table below walks forward our profit before tax from last year (ending January 2024) to our
guidance for the year ending January 2025.
Profit before tax 2023/24
Profit from full price sales, Total Pla�orm and subsidiaries
Profit from +2.5% (£120m) increase in full price sales
Addi�onal profit from Total Pla�orm services 24
Addi�onal profit from Total Pla�orm equity (including new acquisi�ons)
Total profit from full price sales, Total Pla�orm and subsidiaries
Cost savings
Staff incen�ves (budgeted to return to normal levels)
Bought-in gross margin
Electricity rate
TP integra�on costs
Warehousing (+£20m of cost savings offset by -£16m cost increases from Elmsall 3)
Other
Total cost savings
Cost increases
Wage infla�on (including third-party wages, e.g. couriers)
Technology (of which -£8m is amor�sa�on of so�ware)
Markdown (higher surplus and lower clearance rates)
Marke�ng (growing faster than sales)
Total cost increases
Profit before tax 2024/25 (e)
Growth versus 2023/24
+36
+4
+30
+24
+17
+12
+6
+4
+3
- 60
- 17
- 13
- 4
£m
918
+70
+66
- 94
960
+4.6%
Cost increases and cost savings
The largest cost increase will be wage infla�on, which we expect to be around £60m. Within this,
around £25m is the difference between the expected rate of general UK wage infla�on, and the rise
in the Na�onal Living Wage. To mi�gate some of this cost increase, we plan to recover c.£17m by
increasing our bought-in gross margin by +0.4%. Despite this increase in margin, we expect a small
reduc�on in selling prices in the year ahead.
24 In our January Trading Statement we es�mated that we would make £6m of addi�onal profit from our TP services
Since then we have reallocated £2m of licensing profit, which we believe is more accurately described as
business.
equity profit.
34
Proit Walk Forward from 2023/24 to 2024/25 (e)
The table below walks forward our profit before tax from last year (ending January 2024) to our
guidance for the year ending January 2025.
Profit before tax 2023/24
Profit from full price sales, Total Pla�orm and subsidiaries
Profit from +2.5% (£120m) increase in full price sales
Addi�onal profit from Total Pla�orm services 24
Addi�onal profit from Total Pla�orm equity (including new acquisi�ons)
Total profit from full price sales, Total Pla�orm and subsidiaries
+70
Warehousing (+£20m of cost savings offset by -£16m cost increases from Elmsall 3)
Staff incen�ves (budgeted to return to normal levels)
Cost savings
Bought-in gross margin
Electricity rate
TP integra�on costs
Other
Total cost savings
Cost increases
Wage infla�on (including third-party wages, e.g. couriers)
Technology (of which -£8m is amor�sa�on of so�ware)
Markdown (higher surplus and lower clearance rates)
Marke�ng (growing faster than sales)
Total cost increases
Profit before tax 2024/25 (e)
Growth versus 2023/24
Cost increases and cost savings
The largest cost increase will be wage infla�on, which we expect to be around £60m. Within this,
around £25m is the difference between the expected rate of general UK wage infla�on, and the rise
in the Na�onal Living Wage. To mi�gate some of this cost increase, we plan to recover c.£17m by
increasing our bought-in gross margin by +0.4%. Despite this increase in margin, we expect a small
reduc�on in selling prices in the year ahead.
+36
+4
+30
+24
+17
+12
+6
+4
+3
- 60
- 17
- 13
- 4
£m
918
+66
- 94
960
+4.6%
NEXT RETAIL
HEADLINES
●
●
●
●
●
Full price sales up +0.2% versus last year
Like-for-like 25 full price sales up +1.8%
Total sales (including markdown sales) flat on last year
Retail profit 25 £210m, up +3.0%
Net margin 26 11.3%, up +0.3%
SUMMARY OF RETAIL SALES AND PROFIT
Retail sales and profit for the year are summarised in the table below.
Please note that Retail profits and margins are given a�er accoun�ng for the cost of lease interest 27 .
Retail’s lease interest is down -5% versus last year, due to the reduc�on in lease liabili�es.
£m
Total sales
Opera�ng profit
Lease interest charge
Retail profit including lease interest
Jan 2024
Jan 2023
1,865
1,865
245
(34)
210
240
(36)
204
Var %
- 0.0%
+1.7%
- 5.3%
+3.0%
Retail margin % (including lease interest)
11.3%
11.0%
FULL PRICE SALES BY STORE TYPE
Full price sales, on a like-for-like basis, were up +1.8% on the prior year; growth by store type is
shown below, along with the percentage of sales that each store type accounts for. The par�cipa�on
of sales by store has now returned to those seen pre-COVID as demonstrated in the table on the
right below.
% of sales by store type
2019
2023
City centres
28%
26%
Regional shopping centres
10%
11%
Retail parks
62%
63%
24 In our January Trading Statement we es�mated that we would make £6m of addi�onal profit from our TP services
business.
Since then we have reallocated £2m of licensing profit, which we believe is more accurately described as
equity profit.
25 Like-for-like sales growth excludes the impact of store closures and store refits.
26 A�er deduc�ng Retail lease interest costs.
27 Lease interest is reported in the Interest line of the P&L. £34m is the propor�on of the Group’s total lease interest
(£47m) aributable to the Retail business. The balance is charged to Online (£11m) and other Group ac�vi�es (£2m).
35
PART FIVE RETAIL, ONLINE, FINANCE, TOTAL PLATFORM & OTHER BUSINESS Strategic ReportGovernanceFinancial StatementsShareholder Information RETAIL MARGIN ANALYSIS
Net margin in the year was 11.3%, up +0.3% on last year. The margin impact of major cost categories
is summarised below.
Retail net margin (a�er lease interest) on total sales to January 2023
Bought-in margin
Lower freight costs increased the bought-in margin.
Markdown
Payroll
Store occupancy
costs
Surplus stock levels were down -17% versus last year and clearance
rates were up +3.4%.
Wage infla�on (-0.9%) was par�ally offset by produc�vity
improvements (+0.4%).
Occupancy costs reduced as a percentage of sales for the following
reasons:
● Business rates were lower than last year due to the rates
revalua�on for shops, effec�ve from April 2023 (+0.7%)
● Fully depreciated assets resulted in lower deprecia�on (+0.4%)
● Lease renewals reduced the cost of rent, rates and service
charge (+0.2%)
● Higher electricity rates (-0.9%) were par�ally offset by ini�a�ves
to reduce usage (+0.3%)
● Prior year credits rela�ng to rent se�lements and rates rebates
were not repeated this year (-0.5%)
Warehousing &
distribu�on
Opera�onal efficiencies and the benefit of higher selling prices
(+0.5%) improved margin. This margin benefit was par�ally offset
by cost infla�on, mainly in wages and fuel (-0.3%).
Central costs and
staff incen�ves
Higher staff incen�ves, infla�onary cost increases across head office
departments (-0.5%) and increased spend in technology (-0.2%).
Retail net margin (a�er lease interest) on total sales to January 2024
11.0%
+0.4%
+0.7%
- 0.5%
+0.2%
+0.2%
- 0.7%
11.3%
Guidance for Retail Sales and Proit for the Full Year to January 2025
In the year ahead we are forecas�ng Retail full price sales to be down -2% versus last year. Based on
this sales guidance we expect Retail net margin, including lease interest, to be 10.5%. The reduc�on
in margin is mainly due to infla�onary cost increases, such as wages.
36
RETAIL MARGIN ANALYSIS
is summarised below.
Net margin in the year was 11.3%, up +0.3% on last year. The margin impact of major cost categories
Retail net margin (a�er lease interest) on total sales to January 2023
Bought-in margin
Lower freight costs increased the bought-in margin.
11.0%
+0.4%
Markdown
Surplus stock levels were down -17% versus last year and clearance
+0.7%
rates were up +3.4%.
improvements (+0.4%).
Payroll
Wage infla�on (-0.9%) was par�ally offset by produc�vity
- 0.5%
Store occupancy
Occupancy costs reduced as a percentage of sales for the following
+0.2%
costs
reasons:
● Business rates were lower than last year due to the rates
revalua�on for shops, effec�ve from April 2023 (+0.7%)
● Fully depreciated assets resulted in lower deprecia�on (+0.4%)
● Lease renewals reduced the cost of rent, rates and service
● Higher electricity rates (-0.9%) were par�ally offset by ini�a�ves
charge (+0.2%)
to reduce usage (+0.3%)
● Prior year credits rela�ng to rent se�lements and rates rebates
were not repeated this year (-0.5%)
Warehousing &
distribu�on
Opera�onal efficiencies and the benefit of higher selling prices
+0.2%
(+0.5%) improved margin. This margin benefit was par�ally offset
by cost infla�on, mainly in wages and fuel (-0.3%).
Central costs and
staff incen�ves
Higher staff incen�ves, infla�onary cost increases across head office
- 0.7%
departments (-0.5%) and increased spend in technology (-0.2%).
Guidance for Retail Sales and Proit for the Full Year to January 2025
In the year ahead we are forecas�ng Retail full price sales to be down -2% versus last year. Based on
this sales guidance we expect Retail net margin, including lease interest, to be 10.5%. The reduc�on
in margin is mainly due to infla�onary cost increases, such as wages.
LEASE RENEWALS AND COMMITMENTS
Lease Renewals in the Year to January 2024
In the year, we renewed 56 leases, with an average lease term of 3.9 years (weighted by value, to the
earlier of the break clause or the lease end). These new leases reduce our annualised occupancy
cash costs by £6.7m . The number of leases renewed in the year was lower than the es�mate of 73
given in our Half Year Results in September. The remaining leases are s�ll under nego�a�on; eight
are in the final stages of legal agreement, and we an�cipate renewing the remaining nine in the first
half of 2024.
Lease renewals can be split into two different types of leases: (1) tradi�onal rent leases and (2) ‘total
occupancy cost’ (TOC) leases, where we pay a fixed percentage of turnover to cover rent, business
rates and service charge. The occupancy cost savings (in cash terms 28 ) from these lease renewals are
summarised in the tables below.
For clarity we have shown TOC leases separately, to show the
overall saving in rent, rates and service charge combined.
Tradi�onal rent leases
Fixed rent charge
Turnover rent
Total
Total occupancy (TOC) leases
No. of
leases
Before
renewal
A�er
renewal
39
6
45
£10.7m
£8.9m
- 17%
£3.6m
£1.1m
- 70%
£14.3m
£10.0m
- 30%
Total occupancy lease (rents, rates and service charge)
-
£5.3m
Previous rent
Previous rates and service charge
Total occupancy - rent, rates and service charge
11
£4.3m
£3.4m
£7.7m
-
-
£5.3m
- 31%
Retail net margin (a�er lease interest) on total sales to January 2024
11.3%
TOTAL COMBINED LEASE RENEWALS
Total lease renewals
56
£21.9m
£15.2m
- 31%
In addi�on to the occupancy cost reduc�ons detailed above, we received £3.8m from capital
contribu�ons and rent free periods, which we will spend upgrading and maintaining our stores.
Outstanding Lease Commitments
At the end of January 2024, our average lease commitment (weighted by value) was 4.5 years,
compared with 4.7 years at the same �me last year. Fi�y per cent of our store leases (by value) will
expire or break within 3.9 years and 95% within the next ten years.
Forecast Lease Renewals in the Year Ending January 2025
We an�cipate renego�a�ng 29 74 store leases in the year ahead and based on our latest nego�a�ons
we expect to reduce our annualised occupancy cash costs by around £3m (-16%). The average lease
term (to the earlier of the break clause or lease end) is expected to be 3.9 years. The expected rent
reduc�on of -16% is lower than we have achieved in recent years. This is because some of the leases
coming up for renewal this year have already been renego�ated since 2018; these stores are already
on post-pandemic levels of rent and so reduc�ons are likely to be small.
28 Note that the savings given here are the actual rents payable rather than IFRS 16 rent deprecia�on.
29 This includes renego�a�ons at either lease end or a lease break.
37
Strategic ReportGovernanceFinancial StatementsShareholder Information RETAIL SPACE
The year-on-year change in store numbers and square footage for the year to January 2024 is set out
below.
January 2023
Mainline store reconfigura�ons
Mainline closures
Clearance stores
January 2024
Change
Change %
Store
numbers
NEXT
Sq. �. (k)
Concessions
Sq. �. (k)
Total
Sq. �. (k)
466
0
- 12
+ 4
458
- 8
- 1.7%
7,767
+ 14
- 181
+ 34
7,634
- 133
- 1.7%
479
- 4
- 4
+ 0
471
- 8
- 1.7%
8,246
+ 10
- 185
+ 34
8,105
- 141
- 1.7%
Whilst we will con�nue to open and close a small number of stores, we do not an�cipate any
material net change in our Retail selling space in the year ahead.
NEXT, Fosse Park, Leicester
38
The year-on-year change in store numbers and square footage for the year to January 2024 is set out
RETAIL SPACE
below.
January 2023
Mainline store reconfigura�ons
Mainline closures
Clearance stores
January 2024
Change
Change %
Store
numbers
NEXT
Concessions
Total
Sq. �. (k)
Sq. �. (k)
Sq. �. (k)
466
0
- 12
+ 4
458
- 8
7,767
+ 14
- 181
+ 34
7,634
- 133
- 1.7%
479
- 4
- 4
+ 0
471
- 8
8,246
+ 10
- 185
+ 34
8,105
- 141
- 1.7%
- 1.7%
- 1.7%
Whilst we will con�nue to open and close a small number of stores, we do not an�cipate any
material net change in our Retail selling space in the year ahead.
NEXT ONLINE
HEADLINES
●
●
●
●
Full price sales up +6.0% versus last year
Total sales (including markdown sales) up +5.1%
Online profit (including lease interest costs) was £506m, up +10.8%
Net margin 16.0%, up +0.8%
SUMMARY OF ONLINE SALES, PROFIT AND MARGIN
The table below summarises total sales and profit for our Online business, which includes NEXT
brand UK, LABEL UK and Overseas.
Please note that, consistent with the repor�ng of Retail margins, we include the cost of lease
interest within Online profitability. Lease interest was up +7.2% due to the lease for our new Elmsall
3 warehouse.
£m
Total sales
Opera�ng profit
Lease interest charge
Online profit including lease interest
Online margin including lease interest
Jan 2024
Jan 2023
3,160
517
(11)
506
16.0%
3,007
467
(10)
457
15.2%
Var %
+5.1%
+10.7%
+7.2%
+10.8%
CONTENTS OF THIS SECTION
This part of the document includes the following sec�ons:
●
Online sales analysis (page 40)
●
Online customer analysis (page 41)
●
Online net margin analysis (page 42)
●
Online Overseas (page 44)
●
Online LABEL UK (page 46)
●
Focus on wholly-owned brands & licences (page 48)
NEXT, Fosse Park, Leicester
39
Strategic ReportGovernanceFinancial StatementsShareholder Information ONLINE SALES ANALYSIS
The table below sets out the different categories of Online’s sales for the full year. Further
commentary for Online’s sales performance is given below the table.
Sales category £m
Full price sales
Clearance 30 sales
Total full margin sales
Sale events in-season
Total Online sales
Full price sales by division
Full price sales £m
NEXT Brand UK
LABEL UK
Total UK Online
Overseas (nextdirect.com)
Overseas aggregators
Total Overseas
Total Online full price sales
Jan 2024
Jan 2023
2,840
99
2,939
221
3,160
2,679
76
2,755
252
3,007
Var %
+6%
+31%
+7%
- 12%
+5%
Jan 2024
Jan 2023
Var %
1,265
885
2,149
499
191
691
1,221
869
2,090
463
126
589
2,840
2,679
+4%
+2%
+3%
+8%
+52%
+17%
+6%
LABEL full price sales were up +2%; with growth in the year adversely affected by the fact that we
discon�nued a number of unprofitable brands and items.
Overseas full price sales were up +17%, with the biggest area of growth coming from third-party
aggregators which were up +52%.
Clearance sales
Clearance sales grew by +31%, which was driven by an unusually high amount of Clearance stock
being available online during the first half of the year (up +68% on the prior year). This increase was
due to the combina�on of: (1) having a large Sale at the end of 2022/23; and (2) capacity constraints
in our warehouses in the prior year. As a result, Clearance sales were up +81% in the first half but
normalised in H2 where they were flat on the prior year.
Sale events
Surplus stock levels during the year were down -14% and clearance rates were broadly flat on last
year. Sales from Online sale events were down -12%, which was be�er than the -14% reduc�on in
surplus, due to the �ming of when Sale orders were dispatched to customers.
30 Clearance stock is the unsold Sale stock from previous seasons, which has been wrien down in value and is carried over
to the following season, where it is then sold at a full margin.
40
ONLINE SALES ANALYSIS
The table below sets out the different categories of Online’s sales for the full year. Further
commentary for Online’s sales performance is given below the table.
Jan 2024
Jan 2023
2,840
99
2,939
221
3,160
1,265
885
2,149
499
191
691
2,679
76
2,755
252
3,007
1,221
869
2,090
463
126
589
2,840
2,679
Var %
+6%
+31%
+7%
- 12%
+5%
+4%
+2%
+3%
+8%
+52%
+17%
+6%
Jan 2024
Jan 2023
Var %
Full price sales by division
Sales category £m
Full price sales
Clearance 30 sales
Total full margin sales
Sale events in-season
Total Online sales
Full price sales £m
NEXT Brand UK
LABEL UK
Total UK Online
Overseas (nextdirect.com)
Overseas aggregators
Total Overseas
Total Online full price sales
aggregators which were up +52%.
Clearance sales
LABEL full price sales were up +2%; with growth in the year adversely affected by the fact that we
discon�nued a number of unprofitable brands and items.
Overseas full price sales were up +17%, with the biggest area of growth coming from third-party
Clearance sales grew by +31%, which was driven by an unusually high amount of Clearance stock
being available online during the first half of the year (up +68% on the prior year). This increase was
due to the combina�on of: (1) having a large Sale at the end of 2022/23; and (2) capacity constraints
in our warehouses in the prior year. As a result, Clearance sales were up +81% in the first half but
normalised in H2 where they were flat on the prior year.
Sale events
Surplus stock levels during the year were down -14% and clearance rates were broadly flat on last
year. Sales from Online sale events were down -12%, which was be�er than the -14% reduc�on in
surplus, due to the �ming of when Sale orders were dispatched to customers.
ONLINE CUSTOMER ANALYSIS
Growth in Customer Numbers and Average Spend Per Customer
Customers can be split into three dis�nct groups:
●
●
●
UK credit customers who pay through a NEXT credit account 31 (next pay or next 3step ).
UK cash customers who pay using credit, debit or other tender types.
Overseas customers who shop on our interna�onal websites.
The average number of ac�ve 32 Online customers in the last twelve months was 8.4m, up +4% versus
last year. The table below shows the change in average customer numbers, sales per customer and
their total sales value, versus last year.
For completeness, the table also includes sales achieved
through our third-party aggregators overseas, where we do not have visibility of customer numbers.
AVERAGE
CUSTOMERS
Jan
2024
vs Jan
2023
2.9m
3.9m
6.7m
1.7m
8.4m
+1%
+7%
+5%
0%
+4%
SALES PER
CUSTOMER
Jan
2024
vs Jan
2023
£565
£210
£361
£310
£351
- 2%
+1%
- 3%
+9%
- 1%
TOTAL
SALES VALUE
Jan
2024
vs Jan
2023
£1,620m
£809m
£2,429m
£528m
£2,957m
£203m
£3,160m
- 1%
+9%
+2%
+9%
+3%
+46%
+5%
Full year
UK Credit
UK Cash
UK Total
Overseas (direct to consumer)
Total ex. aggregators
Third-party aggregators
Total
Sales Per Customer
UK sales per customer
In the UK, sales per credit customer were down -2% versus the prior year. We believe this has been
driven by the reduc�on in surplus stock in our end-of-season Sale events, which have a high
par�cipa�on of credit customers. Sales per cash customer increased by +1%.
The growth in cash customers, who on average spend less than credit customers, means that the
overall average spend for UK customers was down -3%.
Overseas sales per customer
Overseas sales per customer increased by +3% in local currency, which translated into a +9% increase
in Pounds Sterling.
30 Clearance stock is the unsold Sale stock from previous seasons, which has been wrien down in value and is carried over
to the following season, where it is then sold at a full margin.
31 Both NEXT credit offers are authorised and regulated by the FCA.
32 Ac�ve customers are defined as those who have either placed an order or received an account statement in the last 20
weeks.
41
Strategic ReportGovernanceFinancial StatementsShareholder Information ONLINE NET MARGIN
Online Margin Analysis
Overall Online net margin was 16.0%, up +0.8% on last year.
categories is summarised below.
Net margin (a�er lease interest) on total sales to January 2023
The margin impact of major cost
15.2%
+0.8%
Bought-in
gross margin
Bought-in margin improved due to Overseas margin improvements
(+0.5%) and lower freight costs (+0.3%).
Markdown
Surplus stock was down -14% versus last year, improving margin.
+1.3%
Warehousing &
distribu�on
Margin improved for the following reasons:
● Opera�onal efficiencies from higher average selling prices and
+0.5%
produc�vity improvements (+1.2%)
● Lower interna�onal parcel rates (+0.4%); offset by
● Infla�onary cost increases (wages and fuel) (-0.8%)
● Higher overheads costs, mainly from our new boxed warehouse
Elmsall 3 (-0.3%).
Marke�ng
Technology 33
Digital marke�ng spend in both the UK and Overseas grew faster
than sales.
Increased spend in technology (so�ware development and
maintenance) along with higher deprecia�on, reduced margin.
Central costs and
staff incen�ves
Higher staff incen�ve costs 34 and investment in head office teams to
support new business ini�a�ves within our LABEL and Overseas
businesses.
Net margin (a�er lease interest) on total sales to January 2024
- 0.4%
- 0.1%
- 1.3%
16.0%
33 Technology includes the recovery of R&D tax credits on qualifying spend.
34 Last year, our Online business missed its profit target, therefore did not take any of the bonus charge. This year, Online
has performed ahead of our expecta�ons therefore has taken a propor�on of the bonus.
42
ONLINE NET MARGIN
Online Margin Analysis
categories is summarised below.
Net margin (a�er lease interest) on total sales to January 2023
15.2%
Bought-in
gross margin
Bought-in margin improved due to Overseas margin improvements
+0.8%
(+0.5%) and lower freight costs (+0.3%).
Markdown
Surplus stock was down -14% versus last year, improving margin.
+1.3%
Warehousing &
Margin improved for the following reasons:
+0.5%
distribu�on
● Opera�onal efficiencies from higher average selling prices and
produc�vity improvements (+1.2%)
● Lower interna�onal parcel rates (+0.4%); offset by
● Infla�onary cost increases (wages and fuel) (-0.8%)
● Higher overheads costs, mainly from our new boxed warehouse
Elmsall 3 (-0.3%).
than sales.
Marke�ng
Digital marke�ng spend in both the UK and Overseas grew faster
Technology 33
Increased spend in technology (so�ware development and
maintenance) along with higher deprecia�on, reduced margin.
Central costs and
staff incen�ves
Higher staff incen�ve costs 34 and investment in head office teams to
support new business ini�a�ves within our LABEL and Overseas
businesses.
Net margin (a�er lease interest) on total sales to January 2024
- 0.4%
- 0.1%
- 1.3%
16.0%
Overall Online net margin was 16.0%, up +0.8% on last year.
The margin impact of major cost
Online division
Total sales £m
Profit £m
Margin %
Net Margin by Online Division
NEXT brand UK
LABEL UK
Overseas
Total Online
1,408
1,021
731
3,160
281
130
95
506
19.9%
12.8%
13.0%
16.0%
Change in
margin
vs Jan 2023
+0.0%
- 0.1%
+4.4%
+0.8%
NEXT UK
Whilst NEXT UK’s margin of 19.9% was in line with the prior year, there have been several
movements in the cost base as summarised below.
●
●
Margin improved due to: lower freight rates (+0.4%), lower levels of surplus stock (+1.5%) and
opera�onal efficiencies within logis�cs (+1.6%).
These margin benefits were offset by:
○
○
○
○
Wage infla�on across all areas (-1.4%)
Addi�onal spend in marke�ng (-0.5%) and technology (-0.2%)
Higher occupancy costs from our new boxed warehouse (-0.3%)
Higher central costs, including staff incen�ves (-1.1%).
LABEL UK
LABEL experienced the same infla�onary cost increases as NEXT UK, but these costs were offset by:
(1) lower levels of surplus stock than last year, along with higher clearance rates, (2) higher
commission rates being charged on products that previously made low margins and (3) the removal
of unprofitable brands/items from our product offer. Further detail of LABEL’s profitability is given
on page 47.
Overseas
Overseas net margin of 13.0% was 4.4% ahead of last year’s margin of 8.6%.
Overseas also
experienced the same infla�onary costs as NEXT UK, but these costs were more than offset by: (1)
price increases (2) removing unprofitable items from our Overseas websites and third-party
aggregators, and (3) renego�a�ng our parcel rates. Further detail of Overseas profitability is given
on page 44.
Guidance for Online Sales and Margin for the Year Ahead
In the year ahead we are forecas�ng for Online’s full price sales to grow by +5% and for net margins
to be 15.4%. The forecast reduc�on in margin against the prior year is mainly due to wage infla�on.
33 Technology includes the recovery of R&D tax credits on qualifying spend.
34 Last year, our Online business missed its profit target, therefore did not take any of the bonus charge. This year, Online
has performed ahead of our expecta�ons therefore has taken a propor�on of the bonus.
43
Strategic ReportGovernanceFinancial StatementsShareholder Information ONLINE OVERSEAS
Overview
We have con�nued to make excellent progress in our Overseas business, with strong sales growth
and improved net margins.
Sales grew by +17% (+14.5% in constant currency) and net margin
improved from 8.6% last year to 13.0%. The table below sets out the headline performance for sales
and profits. Full price sales are split between our own websites and third-party aggregators.
£m
Jan 2024
Jan 2023
Direct to consumer (our own websites)
Third-party aggregators
Total full price sales
Markdown sales
Total sales (including markdown)
Opera�ng profit
Net margin %
499
191
691
41
731
95
463
126
589
36
625
54
13.0%
8.6%
Var %
+8%
+52%
+17%
+14%
+17%
+77%
What’s changed?
As explained in the Big Picture (page 14), sales and margins have grown through a combina�on of:
●
●
●
The development and improvement of our rela�onship with overseas third-party aggregators.
The removal of unprofitable products from our overseas offer. This meant removing items with
a low selling price and high returns rate, as these cannot jus�fy the high logis�cs costs
associated with shipping stock overseas.
Increased online marke�ng, funded through price increases.
Investment in overseas marketing
We increased marke�ng spend as a percentage of total sales 35 from 4.0% to 4.7%.
To assess the
performance of our marke�ng, we calculate the net present value (NPV) of cash returned for each £1
of marke�ng spend. Last year the NPV rose from £2.07 to £2.30 for each £1 spent. It is important to
stress that our returns are based on incremental profit and should not be confused with the industry
prac�ce of using so-called ROAS (return on adver�sing spend) which o�en looks at orders generated
without adjus�ng for cannibalisa�on or profitability.
The table below shows the total spend on marke�ng for the last two years and our es�mate for the
year ahead. If opportuni�es arise to increase our spend, while maintaining profitability thresholds,
we will take advantage of them .
Overseas marke�ng £m
Jan 2023
Jan 2024
Jan 2025 (e)
Social
Search
Display
Digital marke�ng spend
Non-digital spend, and marke�ng teams
Total marke�ng spend
Versus prior year
10.0
5.9
0.7
16.6
2.8
19.4
12.3
9.4
0.5
22.2
2.7
24.8
11.5
13.8
0.7
26.0
2.7
28.7
+28%
+16%
35 Total sales on our own websites, including markdown sales. This excludes sales on third-party aggregator sites.
44
ONLINE OVERSEAS
Overview
We have con�nued to make excellent progress in our Overseas business, with strong sales growth
and improved net margins.
Sales grew by +17% (+14.5% in constant currency) and net margin
improved from 8.6% last year to 13.0%. The table below sets out the headline performance for sales
and profits. Full price sales are split between our own websites and third-party aggregators.
£m
Jan 2024
Jan 2023
Direct to consumer (our own websites)
Third-party aggregators
Total full price sales
Markdown sales
Total sales (including markdown)
Opera�ng profit
Net margin %
What’s changed?
499
191
691
41
731
95
Var %
+8%
+52%
+17%
+14%
+17%
+77%
463
126
589
36
625
54
As explained in the Big Picture (page 14), sales and margins have grown through a combina�on of:
●
●
The development and improvement of our rela�onship with overseas third-party aggregators.
The removal of unprofitable products from our overseas offer. This meant removing items with
a low selling price and high returns rate, as these cannot jus�fy the high logis�cs costs
associated with shipping stock overseas.
●
Increased online marke�ng, funded through price increases.
Investment in overseas marketing
We increased marke�ng spend as a percentage of total sales 35 from 4.0% to 4.7%.
To assess the
performance of our marke�ng, we calculate the net present value (NPV) of cash returned for each £1
of marke�ng spend. Last year the NPV rose from £2.07 to £2.30 for each £1 spent. It is important to
stress that our returns are based on incremental profit and should not be confused with the industry
prac�ce of using so-called ROAS (return on adver�sing spend) which o�en looks at orders generated
without adjus�ng for cannibalisa�on or profitability.
The table below shows the total spend on marke�ng for the last two years and our es�mate for the
year ahead. If opportuni�es arise to increase our spend, while maintaining profitability thresholds,
we will take advantage of them .
Overseas marke�ng £m
Social
Search
Display
Digital marke�ng spend
Non-digital spend, and marke�ng teams
Total marke�ng spend
Versus prior year
Jan 2023
Jan 2024
Jan 2025 (e)
10.0
5.9
0.7
16.6
2.8
19.4
12.3
9.4
0.5
22.2
2.7
24.8
11.5
13.8
0.7
26.0
2.7
28.7
+28%
+16%
35 Total sales on our own websites, including markdown sales. This excludes sales on third-party aggregator sites.
Overseas Margin
The table below sets out the profit margin achieved compared to last year and the main reasons for
the increase.
Net margin (a�er lease interest) on Overseas sales to January 2023
Bought-in
gross margin
Markdown
Warehouse &
distribu�on
Bought-in margin improved due to price increases (in sterling)
(+2.5%) and lower freight costs (+0.3%). These benefits were par�ally
offset by the higher par�cipa�on of sales in countries that incur duty
charges (-0.2%) and a prior year one-off FX revalua�on credit (-0.3%).
Lower surplus improved margin
Margin improved for the following reasons:
● Higher average selling prices & opera�onal efficiencies +2.0%.
● Parcel rate reduc�ons +1.4%
● Infla�onary cost increases (wages and fuel) -0.3%
● Middle East hub set up costs -0.2%
13.0%
8.6%
Marke�ng
Marke�ng costs increase by more than sales.
Central costs
and staff incen�ves
Higher staff incen�ves than last year, due to the over-achievement of
profit against budget.
Net margin (a�er lease interest) on Overseas sales to January 2024
8.6%
+2.3%
+0.8%
+2.9%
- 0.3%
-1.3%
13.0%
45
Strategic ReportGovernanceFinancial StatementsShareholder Information ONLINE LABEL UK
Overview
For
In this sec�on we discuss LABEL, which sells third-party brands through the NEXT website.
clarity, all sales figures reported in this sec�on are given at their gross transac�on value, including
commission-based sales.
LABEL Online sales (including full price and markdown sales) were £1,021m, up +1.6% on last year.
LABEL margins of 12.8% were down -0.1% against last year, as improved bought-in margins and
reduced surplus stock largely compensated for the infla�onary pressures seen across the Online
business. Further details on LABEL margins are given on the following page.
Full Price Sales Analysis
This sec�on shows the full price sales performance of the four different LABEL business models.
Each of these models has different characteris�cs in terms of (1) who is responsible for design, (2)
who sources and manufactures the product and (3) who takes the stock risk. These are summarised
in the table below in descending order of third-party involvement.
Business model
Design
Sourcing
Stock risk
Examples
3rd party Brands sold
on Commission
3rd party Brands sold
on Wholesale
Licensing
Wholly-owned brands
3rd
Party
3rd
Party
3rd
Party
NEXT
Group
3rd
Party
3rd
Party
NEXT
Group
NEXT
Group
3rd
Party
NEXT
Group
NEXT
Group
NEXT
Group
River Island,
White Stuff, Mint Velvet
Nike, Adidas, Superdry
Clarks Schoolwear,
Reebok, Laura Ashley
Lipsy, Love & Roses,
Friends Like These
Total full price sales were up +2% against last year. The -1% decline in third-party brands was as a
result of elimina�ng loss making products; this loss was more than offset by the gains we made
through wholly-owned brands and licensing.
Full price sales category £m
Jan 2024
Jan 2023
Third-party brands (commission)
Third-party brands (wholesale)
Total third-party brands
Wholly-owned brands and licensing
Total LABEL full price sales
411
302
713
171
885
409
311
720
149
869
Var %
+0%
- 3%
- 1%
+15%
+2%
46
ONLINE LABEL UK
Overview
commission-based sales.
LABEL Online sales (including full price and markdown sales) were £1,021m, up +1.6% on last year.
LABEL margins of 12.8% were down -0.1% against last year, as improved bought-in margins and
reduced surplus stock largely compensated for the infla�onary pressures seen across the Online
business. Further details on LABEL margins are given on the following page.
Full Price Sales Analysis
This sec�on shows the full price sales performance of the four different LABEL business models.
Each of these models has different characteris�cs in terms of (1) who is responsible for design, (2)
who sources and manufactures the product and (3) who takes the stock risk. These are summarised
in the table below in descending order of third-party involvement.
Business model
Design
Sourcing
Stock risk
Examples
3rd party Brands sold
on Commission
3rd party Brands sold
on Wholesale
Licensing
Wholly-owned brands
3rd
Party
3rd
Party
3rd
Party
NEXT
Group
3rd
Party
3rd
Party
NEXT
Group
NEXT
Group
3rd
Party
NEXT
Group
NEXT
Group
NEXT
Group
River Island,
White Stuff, Mint Velvet
Nike, Adidas, Superdry
Clarks Schoolwear,
Reebok, Laura Ashley
Lipsy, Love & Roses,
Friends Like These
Total full price sales were up +2% against last year. The -1% decline in third-party brands was as a
result of elimina�ng loss making products; this loss was more than offset by the gains we made
through wholly-owned brands and licensing.
Full price sales category £m
Jan 2024
Jan 2023
Third-party brands (commission)
Third-party brands (wholesale)
Total third-party brands
Wholly-owned brands and licensing
Total LABEL full price sales
411
302
713
171
885
409
311
720
149
869
Var %
+0%
- 3%
- 1%
+15%
+2%
In this sec�on we discuss LABEL, which sells third-party brands through the NEXT website.
For
clarity, all sales figures reported in this sec�on are given at their gross transac�on value, including
Margin walk forward
LABEL Margin Analysis
Overall LABEL margin of 12.8% was down -0.1% versus last year. The margin impact of major cost
categories is summarised below.
12.9%
+0.4%
+1.0%
- 0.3%
- 0.2%
- 0.8%
12.8%
Net margin (a�er lease interest) on LABEL sales to January 2023
Bought-in gross
margin
Margin improved due to higher commission rates on low margin
product ranges (+0.3%) and the growth in sales of our higher
margin wholly-owned brands (+0.1%).
Surplus stock levels were down -18% versus last year, and
clearance rates were up +3%.
Infla�onary cost increases reduced margin.
Markdown
Warehouse &
distribu�on
Marke�ng &
photography
Technology
Digital marke�ng and photography costs grew faster than sales.
- 0.2%
Increased spend in technology (so�ware development and
maintenance) along with higher deprecia�on, reduced margin.
Staff incen�ves &
central costs
Higher staff incen�ve costs and investment in product teams to
support future growth in wholly-owned brands and licensing.
Net margin (a�er lease interest) on LABEL sales to January 2024
Margin by business model
While LABEL’s overall margin was broadly in line with the prior year, there were different margin
movements across our different business models, as summarised below.
Margin by category
Third-party brands (commission)
Third-party brands (wholesale)
Total third-party brands
Wholly-owned brands
Licensing
Total LABEL margin
Jan 2024
Jan 2023
10.6%
15.1%
12.5%
14.7%
12.0%
12.8%
10.9%
14.4%
12.4%
15.7%
14.9%
12.9%
Third-party commission brands' margin of 10.6% was down -0.3% versus last year. We increased
commission rates on low margin brands, which improved margin by +0.7%.
However, this was more
than offset by infla�onary cost increases (wages and fuel), increasing our product teams, increased
marke�ng ac�vity and technology costs.
Third-party wholesale brands’ margin of 15.1% increased +0.7% versus last year, largely due to
lower surplus stock and higher clearance rates, which more than offset cost increases.
Wholly-owned brands’ margin of 14.7% was down -1.0% versus last year.
infla�onary cost increases experienced throughout the Online business and higher surplus stock.
This was due to
Licensing margin of 12.0% reduced by -2.9% due to investment in our product teams to support
future growth and other set up costs.
47
Strategic ReportGovernanceFinancial StatementsShareholder Information FOCUS ON WHOLLY-OWNED BRANDS & LICENCES
Most of our non-NEXT branded products (wholly-owned brands, licensed brands and wholly-owned
licences like MADE and Cath Kidston) are sold through LABEL in the UK and are included in the sales
figures given for LABEL; but we also sell them through Online Overseas, Retail stores and wholesale.
The full price sales figures shown below include all of the revenue streams sold throughout the
Group.
WHOLLY-OWNED BRANDS
Full price sales in our wholly-owned brands grew by £33m to £166m (+25%) (£132m was sold
through LABEL UK and the balance of £34m sold in Online Overseas, Retail and wholesale). Full price
sales by brand are set out below.
Wholly-owned brands £m
Jan 2024
Jan 2023
Lipsy
Love & Roses
Friends Like These
Total wholly-owned brands' full price sales
90
44
33
166
101
16
17
133
Var %
- 10%
+181%
+90%
+25%
Love & Roses and Friends Like These are in-house brands developed by our Lipsy team.
Love &
Roses focus on garments with bold colour combina�ons and beau�ful prints, with a focus on detail
and trims in quality fabrics for both occasionwear and daywear. Friends Like These offer a feminine
and fashionable clothing and footwear range, at affordable prices. Both brands have become more
established and have seen significant growth in the year.
Of course, this growth will not be fully
incremental to the Group and will have come at the expense of lost sales from other product ranges
and brands, including NEXT. Lipsy’s sales were down -10% on last year; we believe that last year’s
sales were excep�onally good and boosted by a return to shopping for dresses and occasionwear
post-COVID.
LICENCES
The opportunity
Over the last few years, we have been able to leverage NEXT’s product skills - sourcing, technical
design, quality assurance, buying and merchandising - to deliver specialist product ranges for
third-party brands.
For example, children’s clothes for smAllsaints; combining AllSaint’s unique
handwri�ng with our ability to develop and deliver the product. The following table shows some of
the brands we are working with under licence agreements.
Childrenswear
Home
Accessories and other
Exis�ng
Li�le Bird By Jools Oliver
Laura Ashley, Lucy Tiffney
Bath & Body Works
New during
2023/24
New
agreements
Clarks, Reebok, Paul Smith
MADE, Jasper Conran,
Nina Campbell, Cath Kidston
Preen, Lucy Tiffney
Superdry,
smAllsaints
Clarke & Clarke,
French Connec�on,
Rocke� St George
Rocke� St George,
Cath Kidston
Under our licensing agreements, a third-party brand (the licensor) supplies NEXT (the licensee) with
design inspira�on and branding. NEXT sources and purchases the stock, which is held at our risk and
the licensor earns a royalty on sales. We also collaborate with third-par�es who provide prints that
we use on products that are designed by NEXT and we include these sales in the analysis below.
48
FOCUS ON WHOLLY-OWNED BRANDS & LICENCES
Most of our non-NEXT branded products (wholly-owned brands, licensed brands and wholly-owned
licences like MADE and Cath Kidston) are sold through LABEL in the UK and are included in the sales
figures given for LABEL; but we also sell them through Online Overseas, Retail stores and wholesale.
The full price sales figures shown below include all of the revenue streams sold throughout the
Group.
WHOLLY-OWNED BRANDS
Full price sales in our wholly-owned brands grew by £33m to £166m (+25%) (£132m was sold
through LABEL UK and the balance of £34m sold in Online Overseas, Retail and wholesale). Full price
sales by brand are set out below.
Lipsy
Love & Roses
Friends Like These
Total wholly-owned brands' full price sales
90
44
33
166
101
16
17
133
Var %
- 10%
+181%
+90%
+25%
Love & Roses and Friends Like These are in-house brands developed by our Lipsy team.
Love &
Roses focus on garments with bold colour combina�ons and beau�ful prints, with a focus on detail
and trims in quality fabrics for both occasionwear and daywear. Friends Like These offer a feminine
and fashionable clothing and footwear range, at affordable prices. Both brands have become more
established and have seen significant growth in the year.
Of course, this growth will not be fully
incremental to the Group and will have come at the expense of lost sales from other product ranges
and brands, including NEXT. Lipsy’s sales were down -10% on last year; we believe that last year’s
sales were excep�onally good and boosted by a return to shopping for dresses and occasionwear
post-COVID.
LICENCES
The opportunity
Over the last few years, we have been able to leverage NEXT’s product skills - sourcing, technical
design, quality assurance, buying and merchandising - to deliver specialist product ranges for
third-party brands.
For example, children’s clothes for smAllsaints; combining AllSaint’s unique
handwri�ng with our ability to develop and deliver the product. The following table shows some of
the brands we are working with under licence agreements.
Childrenswear
Home
Accessories and other
Exis�ng
Li�le Bird By Jools Oliver
Laura Ashley, Lucy Tiffney
Bath & Body Works
New during
2023/24
New
agreements
Clarks, Reebok, Paul Smith
MADE, Jasper Conran,
Nina Campbell, Cath Kidston
Preen, Lucy Tiffney
Superdry,
smAllsaints
Clarke & Clarke,
French Connec�on,
Rocke� St George
Rocke� St George,
Cath Kidston
Under our licensing agreements, a third-party brand (the licensor) supplies NEXT (the licensee) with
design inspira�on and branding. NEXT sources and purchases the stock, which is held at our risk and
the licensor earns a royalty on sales. We also collaborate with third-par�es who provide prints that
we use on products that are designed by NEXT and we include these sales in the analysis below.
Sales performance by product category
The table below sets out the full price sales in our licensing business, through all channels (Online,
Overseas, Retail and wholesale), by product category.
In the year to January 2024 our licensing
business generated a net margin of 12% . This included some start-up costs and, going forward, we
expect margin to increase to around 14%. Some collabora�ons have naturally come to the end of
their agreements, resul�ng in sales being down -31%.
Wholly-owned brands £m
Jan 2024
Jan 2023
Adult Clothing and Accessories
Total licensing
Collabora�ons
Total full price sales
Full price sales £m
Licensing:
Childrenswear
Home
Jan 2024
Jan 2023 36
Var %
32.7
9.7
7.8
50.1
16.3
66.4
25.7
6.2
7.1
39.0
23.7
62.6
+27%
+57%
+10%
+29%
- 31%
+6%
ACQUIRING INTELLECTUAL PROPERTY - WHOLLY OWNED LICENCES
In the last 18 months, NEXT acquired the brand name, domain name and intellectual property of
Cath Kidston and MADE . We operate these brands as independent licensing businesses within the
Group and their management teams focus on delivering inspira�onal and original design , alongside
the development of rela�onships with licensees (e.g. eyewear, beauty products), who can deliver
their products to markets in the UK and overseas.
Where appropriate, other NEXT Group
departments will act as the licensee (e.g., NEXT children’s clothing using Cath Kidston prints). These
licensing businesses operate with their own leadership teams, incen�ve schemes and P&L, with the
licence royalty revenues generated being a�ributed to the business along with its design and
marke�ng costs.
We are budge�ng to achieve total turnover from these two brands of around £20m in the year
ending January 2025.
MADE
Our MADE website launched earlier this year (MADE.com). In addi�on, we have opened a dedicated
showroom in Leeds (Redbrick Mill) as well as adding dedicated retail space in our Sheffield NEXT
Home store.
In the year ahead we are planning to expand our product ranges with a focus on furniture and
ligh�ng.
We will be inves�ng more on targeted marke�ng campaigns with the aim of growing and
reac�va�ng the MADE customer base.
Cath Kidston
We are in the process of re-establishing the Cath Kidston brand and developing a core product
offering.
We launched a small range of products in autumn 2023 (bags and home tex�les), with
plans to offer a more significant product range by autumn/winter 2024 focusing on accessories and
We are developing dis�nc�ve collabora�ons with third-party licensees with a focus
childrenswear.
on hand painted prints and storytelling (e.g. Miffy, Paddington). The Cath Kidston brand has a strong
iden�ty interna�onally and we are focusing on rebuilding the presence of the brand in a number of
markets, par�cularly in Southeast Asia.
36 For January 2023, £11m of sales previously reported as licensing have been recategorised under collabora�ons (£9m)
and wholly-owned brands (£2m).
49
Strategic ReportGovernanceFinancial StatementsShareholder Information NEXT FINANCE
HEADLINES
●
●
●
●
Interest income was up +7% versus last year.
Underlying profit (before prior year one-offs and the cost of funding) was up +6%.
Customer payment rates and default rates were both 0.1% be�er than last year.
Net profit of £163m was down -4%, due to a higher cost of funding charge (see note 5) and prior
year one-off benefits in bad debt not being repeated this year (see note 3).
FINANCE PROFIT & LOSS SUMMARY
£m
Credit sales 37
Average customer receivables
Interest income
Bad debt charge (underlying)
Overheads
Profit before one-offs and cost of funding
Bad debt charge one-offs
Profit before cost of funding
Cost of funding
Profit a�er cost of funding
ROCE (a�er cost of funding)
Closing customer receivables
note 1
note 2
note 3
note 4
note 3
note 5
Jan 2024
Jan 2023
Var %
2,027
1,223
2,035
1,179
293
(32)
(49)
211
0
211
(48)
163
274
(32)
(43)
199
6
205
(34)
171
13.4%
1,270
14.5%
1,255
- 0%
+4%
+7%
- 0%
+14%
+6%
+3%
+39%
- 4%
+1%
The following paragraphs give further explana�on of the year-on-year variances in each line of the
Finance P&L.
37 Credit sales include Online sales and Retail sales paid with a NEXT credit account plus interest income.
50
NEXT FINANCE
HEADLINES
●
●
●
●
Interest income was up +7% versus last year.
Underlying profit (before prior year one-offs and the cost of funding) was up +6%.
Customer payment rates and default rates were both 0.1% be�er than last year.
Net profit of £163m was down -4%, due to a higher cost of funding charge (see note 5) and prior
year one-off benefits in bad debt not being repeated this year (see note 3).
FINANCE PROFIT & LOSS SUMMARY
£m
Credit sales 37
Average customer receivables
Interest income
Bad debt charge (underlying)
Overheads
Bad debt charge one-offs
Profit before cost of funding
Cost of funding
Profit a�er cost of funding
ROCE (a�er cost of funding)
Closing customer receivables
Profit before one-offs and cost of funding
note 1
note 2
note 3
note 4
note 3
note 5
Jan 2024
Jan 2023
Var %
2,027
1,223
2,035
1,179
- 0%
+4%
+7%
- 0%
+14%
+6%
+3%
+39%
- 4%
+1%
293
(32)
(49)
211
0
211
(48)
163
274
(32)
(43)
199
6
205
(34)
171
13.4%
1,270
14.5%
1,255
The following paragraphs give further explana�on of the year-on-year variances in each line of the
Finance P&L.
Note 1 Customer receivables
We started the year with customer receivables up +8% on last year, as customers had rebuilt their
balances over the previous 12 months, following the pandemic. In the year, our average customer
receivables balance was up +4% versus last year and closed the year at +1%.
Con�nued resilience of customers’ payments
The graph below shows the percentage of customer balances being paid each month since 2019
(pre-COVID). As shown, payment rates con�nue to be ahead of pre-COVID levels, and 0.1% ahead of
last year on average.
Note 2 Interest income
Interest income was up +7%. This was higher than the increase in the average customer receivables
balance due to a 1% increase in next pay APR from the end of March 2023 38 .
Note 3 Bad debt charge and default rates
Bad debt charge
The underlying bad debt charge of £32m was flat compared with last year, in line with credit sales.
Last year benefited from two one-off items totalling £6m: (1) a £4m provision release (mainly
COVID-related) and (2) a £2m insolvency debt sale 39 .
Default rates in context
The following chart shows:
●
●
●
Observed annualised default rates 40 since 2009 (blue bars).
The closing rate of provision for future defaults (green do�ed line), which remains above our
current default rates and makes allowance for a material deteriora�on in defaults.
The default rate in the year of 3.2% is 0.1% lower than last year and por�olio risk indicators
remain stable.
38 next pay APR increased by 1% to 24.9% for new customers recruited from January 2023 and for exis�ng customers from
the end of March 2023.
39 The sale of insolvent debt is carried out periodically, according to the value of available debt to sell; typically, this is not
annually.
37 Credit sales include Online sales and Retail sales paid with a NEXT credit account plus interest income.
40 Defaults are net of expected recoveries and presented as a percentage of the average customer receivables balance.
51
Strategic ReportGovernanceFinancial StatementsShareholder Information Note 4 Overheads
Overheads were up +14%, due to increased spending on technology and infla�onary cost increases.
Note 5 Cost of Funding
The cost of funding recharge increased by +£13m versus last year; £1m of this increase was due to
the increase in average receivables and £12m was due to the effect of the increase in our external
cost of borrowing on our calculated internal recharge.
The funding for the Finance business is provided by the NEXT Group 41 , which made an addi�onal
This is because average Group borrowings of £824m were lower
profit of £5m from this lending.
than average lending of £1,039m to the Finance business, as explained in the table below.
Group lending to NEXT Finance £m
Jan 2024
Jan 2023
Variance
Average Group external borrowing (for reference)
Average NEXT Finance borrowing (for reference)
Group underlying net external interest rate
Interest charged by Group to NEXT Finance
Underlying net external interest cost for Group
Group profit on its lending to NEXT Finance
824
1,039
4.6%
(48)
(38)
10
859
1,002
3.4%
(34)
(29)
5
(34)
37
+1.2%
(13)
(8)
5
OUTLOOK FOR THE FULL YEAR TO JANUARY 2025
For the year ahead , we an�cipate that NEXT Finance will generate profits of around £170m , up +4%
versus last year.
We are forecas�ng that the customer receivables balance at the year end will be
£1.27bn , in line with last year.
41 We assume that the Group funds 85% of the Finance business’s receivables, with the balance being funded by the
Finance business’s no�onal equity.
52
Overheads were up +14%, due to increased spending on technology and infla�onary cost increases.
Note 4 Overheads
Note 5 Cost of Funding
The cost of funding recharge increased by +£13m versus last year; £1m of this increase was due to
the increase in average receivables and £12m was due to the effect of the increase in our external
cost of borrowing on our calculated internal recharge.
The funding for the Finance business is provided by the NEXT Group 41 , which made an addi�onal
profit of £5m from this lending.
This is because average Group borrowings of £824m were lower
than average lending of £1,039m to the Finance business, as explained in the table below.
Group lending to NEXT Finance £m
Jan 2024
Jan 2023
Variance
Average Group external borrowing (for reference)
Average NEXT Finance borrowing (for reference)
Group underlying net external interest rate
Interest charged by Group to NEXT Finance
Underlying net external interest cost for Group
Group profit on its lending to NEXT Finance
824
1,039
4.6%
(48)
(38)
10
859
1,002
3.4%
(34)
(29)
5
(34)
37
+1.2%
(13)
(8)
5
OUTLOOK FOR THE FULL YEAR TO JANUARY 2025
For the year ahead , we an�cipate that NEXT Finance will generate profits of around £170m , up +4%
versus last year.
We are forecas�ng that the customer receivables balance at the year end will be
£1.27bn , in line with last year.
TOTAL PLATFORM: SERVICES AND INVESTMENTS
Overview
We consider Total Pla�orm (TP) as two related but separate businesses: a service business and an
investment business, each with its own P&L and returns ra�os.
Each business is analysed
individually in the following sec�ons.
The contribu�on that TP is making to Group profit is now becoming more meaningful, at £43m
(including interest) 42 in the year ending January 2024, and £77m forecast in the year ahead, which
would be around 8% of Group profit. Growth in TP has come through the addi�on of new clients,
the development of new TP services and further acquisi�ons of third-party brands.
In the last year we have launched three new TP clients (JoJo Maman Bébé, Joules and MADE), taking
our total number of clients to seven. We have also developed a new category of TP service, Total
Enterprise Pla�orm (see page 27).
New investments in the last year were as follows:
●
In September 2023 we increased our equity stake in Reiss , by 21% to 72%.
●
In October 2023 we acquired a 97% equity stake in FatFace . We expect to launch FatFace on
Total Pla�orm in September 2024.
Full details of all of our TP clients and third-party equity investments are given in Appendix 4 on page
73.
Financial summary of both businesses combined
The combined profit from Total Pla�orm services and investments was £42.8m, up +63% on last year
and £7.1m ahead of the guidance 43 given in September. The over-achievement against our guidance
was mainly due to the acquisi�on of FatFace in October, which generated £6.5m of addi�onal equity
profit. It should be noted that there was not a corresponding increase in Group profit as £3.2m of
non-trading set up costs were incurred, which are reported within other Group costs (see page 57).
Profit £m
Total Pla�orm services
Total Pla�orm investments 42
Total profit con�nuing clients
Profit from discon�nued clients 44
Total profit
Jan 2024
Jan 2023
10.5
32.3
42.8
-
42.8
5.4
21.1
26.5
(0.3)
26.2
Var %
+94%
+53%
+61%
+63%
In the year ahead we an�cipate total TP profits of £77m (£14m from TP services and £63m from TP
investments).
The increase in forecast profit is driven mainly by (1) recent acquisi�ons (Reiss and
FatFace) and (2) expected improvement in Joules following the ac�ons taken to reduce costs and
improve profitability.
42 Profit includes preference share and loan interest from TP investments, which is reported in the Interest line of the
Group P&L (£4.4m in January 2024 and £5.5m in January 2023).
Profit from investments is now stated excluding brand amor�sa�on; January 2023 has been restated (previously reported
as £16.8m) to exclude £4.3m of brand amor�sa�on.
43 Guidance given in September’s Half Year Results was £28.0m, including the cost of brand amor�sa�on. The equivalent
figure excluding brand-amor�sa�on was £35.7m.
41 We assume that the Group funds 85% of the Finance business’s receivables, with the balance being funded by the
44 In the last year two of our lowest turnover clients transi�oned away from TP because their turnover was not suited to
Finance business’s no�onal equity.
Total Pla�orm.
53
Strategic ReportGovernanceFinancial StatementsShareholder Information TOTAL PLATFORM SERVICES BUSINESS
The table below sets out sales, profits and margins for this year and last year, for con�nuing clients
only. In the prior year, income from discon�nued clients was £4.5m and they made a loss of -£0.3m.
Total Pla�orm services £m
(A) Client online sales 45 (GTV)
(B) Commission income on clients' GTV
(C) Income from cost-plus services inc. TEP
(D) Recharges for services at cost
(E) Total Pla�orm income (accoun�ng)
(F) Total Pla�orm profit from services
Jan 2024
Jan 2023
Var %
148.5
110.3
+35%
30.3
13.3
8.8
52.4
10.5
21.2
+43%
7.7
7.6
+74%
+15%
36.5
+44%
5.4
+94%
(G) Total Pla�orm profit as a % of income = F / E
(H) Total Pla�orm profit as a % of clients' sales = F / (A + C)
20.0%
6.5%
14.8%
4.6%
Total Platform services income
Total income in the year increased by +44% to £52.4m . This growth is predominantly driven by the
launch of new TP clients during the year plus the full year effect of the TP clients who launched part
way through the prior year.
Total Platform services margins
We analyse margins in two ways:
(1) Profit as a percentage of our income, and
(2) Profit as a percentage of our clients’ sales (online sales plus income from cost-plus services).
Profit as a percenta ge of our clients’ sales ro se from 4.6% to 6.5% , which is in line with our target
margin .
Guidance for Total Platform Services in the Year Ahead
We expect TP Services to deliver around £14m of profit for the full year which equates to around 6%
of our clien ts’ sales . This growth is driven by the full year effect of clients who launched during the
year ended January 2024 and FatFace which will launch in September 2024.
45 Note to Analysts - this figure only includes the online sales going through our TP websites. This differs from Note 1 of the
financial statements, which reports revenue from subsidiaries (Reiss, Joules and FatFace only), through all of their outlets
(retail stores, websites, third-par�es and wholesale).
54
TOTAL PLATFORM SERVICES BUSINESS
The table below sets out sales, profits and margins for this year and last year, for con�nuing clients
only. In the prior year, income from discon�nued clients was £4.5m and they made a loss of -£0.3m.
Total Pla�orm services £m
(A) Client online sales 45 (GTV)
(B) Commission income on clients' GTV
(C) Income from cost-plus services inc. TEP
(D) Recharges for services at cost
(E) Total Pla�orm income (accoun�ng)
(F) Total Pla�orm profit from services
Jan 2024
Jan 2023
Var %
148.5
110.3
+35%
30.3
13.3
8.8
52.4
10.5
21.2
+43%
7.7
7.6
+74%
+15%
36.5
+44%
5.4
+94%
(G) Total Pla�orm profit as a % of income = F / E
(H) Total Pla�orm profit as a % of clients' sales = F / (A + C)
20.0%
6.5%
14.8%
4.6%
Total Platform services income
Total income in the year increased by +44% to £52.4m . This growth is predominantly driven by the
launch of new TP clients during the year plus the full year effect of the TP clients who launched part
way through the prior year.
Total Platform services margins
We analyse margins in two ways:
(1) Profit as a percentage of our income, and
(2) Profit as a percentage of our clients’ sales (online sales plus income from cost-plus services).
margin .
Guidance for Total Platform Services in the Year Ahead
We expect TP Services to deliver around £14m of profit for the full year which equates to around 6%
of our clien ts’ sales . This growth is driven by the full year effect of clients who launched during the
year ended January 2024 and FatFace which will launch in September 2024.
TOTAL PLATFORM INVESTMENTS 46
Performance in the year
Investment profit increased from £21.1m in the prior year to £32.3m . This year’s profit includes a
-£5.7m trading loss from Joules, against which we have taken extensive ac�ons to improve the
business going forward.
The large growth in Reiss’s full year profit was driven by our increased
stakes taken in May 2022 and September 2023.
In the year ahead we are forecas�ng equity profit will increase to £63m , driven by (1) the full year
effect of our investments in Reiss and FatFace and (2) reduced trading losses in Joules following the
cost saving ac�ons taken.
Ownership %
Profit from investments £m
Jan 2025 (e)
Jan 2024
Jan 2023
Jan 2025
Jan 2024 47
Jan 2023
Reiss
FatFace
Joules
Other investments
Total investments
37.6
14.9
0.0
10.5
63.0
24.1
6.5
(5.7)
7.4
32.3
15.3
-
(2.8)
8.6
21.1
72%
97%
74%
58%
28%
74%
37%
12%
Note to Analysts on subsidiaries' profit reported at Companies House
Please note that profits previously reported by our subsidiaries, and recorded at Companies
House, cannot be directly translated into their reported profit given here. This disparity is for a
number of reasons:
(1) Results included in the NEXT Group accounts are a�er adjustments made to the fair value of
Profit as a percenta ge of our clients’ sales ro se from 4.6% to 6.5% , which is in line with our target
the balance sheet at the date we acquired our stake.
(2) Results in the NEXT Group accounts will include the elimina�on of any intercompany trade
and related profit. Such profits will correctly remain in the local en�ty accounts.
(3) Accoun�ng policies in the local accounts may differ from those in the NEXT consolidated
accounts.
For example, Reiss accounts are prepared under UK accoun�ng standards (not
Interna�onal) and therefore they, correctly, do not apply IFRS 16 lease accoun�ng in their
local accounts.
(4) The accoun�ng period covered in the local accounts may not always align to the NEXT
repor�ng period. For example, FatFace previously had a May year end.
These differences are common in Group situa�ons where companies have been acquired. The
underlying cash generated by the business is not impacted by this.
Profit guidance for equity investments in the year to January 2025
Please note that profits in both Reiss and FatFace are weighted towards the Christmas period and
in 2023/24 we already held a 72% and 97% share of these profits respec�vely during this period.
Es�mates for 2024/25 should therefore not be calculated on the basis of pro-ra�ng 2023/24’s
profit for our higher equity stake.
In addi�on, in 2024/25 we will not see the same fair value
accoun�ng charges that were made during 2023/24.
45 Note to Analysts - this figure only includes the online sales going through our TP websites. This differs from Note 1 of the
financial statements, which reports revenue from subsidiaries (Reiss, Joules and FatFace only), through all of their outlets
(retail stores, websites, third-par�es and wholesale).
46 Please note, brand amor�sa�on costs are now excluded from TP equity profit for Jan 2023 and Jan 2024. (See Appendix
2 on page 71). The guidance and prior year figures given in our Half Year Results in September included the cost of brand
amor�sa�on. Profit figures for each investment have been restated.
47 This is the weighted average ownership during the year ending January 2024, consis�ng of 51% to 22 September 2023
and 72% therea�er for Reiss, and 97% ownership of FatFace from 13 October 2023.
55
Strategic ReportGovernanceFinancial StatementsShareholder Information Return on Investments
The table below summarises our capital employed, cash returns and return on capital employed
(ROCE) for 2023/24. The total ROCE achieved was 25%, including Total Pla�orm services, and 21%
on our equity investments alone; both represen�ng a very healthy return on capital.
A full explana�on of how our ROCE is calculated is given below the table.
Capital employed £m
Cash profit before tax £m
Return on capital
Investment
Invested Recovered
TP
TOTAL
Equity
A
B
C
D
E
TP
F
TOTAL
Equity
TOTAL
G
= E/(A + B)
= G/D
TOTAL
213.8
(20.3)
24.0
217.5
40.4
13.1
53.5
21%
25%
Capital employed consists of:
(A) Capital invested 48 in equity plus debt, less
(B) Capital recovered, is the cumula�ve post-tax profit (excluding brand amor�sa�on costs) earned
from the equity investment to January 2023, which is a proxy for cash returned as at the
In addi�on, it includes the cash cost of TP integra�on costs 49 for Joules
beginning of 2023/24.
and FatFace during 2023/24.
(C) The TP capex required to provide Total Pla�orm services.
Cash profit before tax consists of:
(E) Equity profit before tax (excluding brand amor�sa�on) plus interest received, for the year to
January 2024.
(F) TP profit before tax and deprecia�on for the year to January 2024.
Note on equity cash profit before tax
To derive our overall cash profit before tax of £40.4m two adjustments, totalling £8.1m, are added
to the profit before tax figure of £32.3m reported on the previous page:
(1) Fair value accoun�ng charges (non-cash) are added back (+£6.9m)
(2) A tax charge is added back, where profit was reported on a post-tax basis (i.e. minority
shareholdings) (+£1.2m).
Return on capital employed (ROCE) is the cash profit before tax, divided into the capital employed.
A ROCE is shown for the equity investment alone, and the overall investment including TP.
48 Capital invested is weighted for our period of ownership during 2023/24. For Reiss, this was 51% to 22 September 2023
and 72% therea�er. For FatFace, we had 97% ownership from 13 October 2023.
49 £10.3m of non-recurring cash costs for TP integra�on in Joules and FatFace are reported in Group central costs in the
P&L. Please note, the total P&L charge of £12.3m reported on page 57 (£9.1m Joules and £3.2m FatFace) includes
non-cash charges such as accelerated deprecia�on.
56
Return on Investments
The table below summarises our capital employed, cash returns and return on capital employed
(ROCE) for 2023/24. The total ROCE achieved was 25%, including Total Pla�orm services, and 21%
on our equity investments alone; both represen�ng a very healthy return on capital.
A full explana�on of how our ROCE is calculated is given below the table.
Capital employed £m
Cash profit before tax £m
Return on capital
Investment
Invested Recovered
TP
TOTAL
Equity
TOTAL
Equity
TOTAL
A
B
C
D
E
G
= E/(A + B)
= G/D
TP
F
TOTAL
213.8
(20.3)
24.0
217.5
40.4
13.1
53.5
21%
25%
Capital employed consists of:
(A) Capital invested 48 in equity plus debt, less
(B) Capital recovered, is the cumula�ve post-tax profit (excluding brand amor�sa�on costs) earned
from the equity investment to January 2023, which is a proxy for cash returned as at the
beginning of 2023/24.
In addi�on, it includes the cash cost of TP integra�on costs 49 for Joules
and FatFace during 2023/24.
(C) The TP capex required to provide Total Pla�orm services.
Cash profit before tax consists of:
January 2024.
(E) Equity profit before tax (excluding brand amor�sa�on) plus interest received, for the year to
(F) TP profit before tax and deprecia�on for the year to January 2024.
Note on equity cash profit before tax
To derive our overall cash profit before tax of £40.4m two adjustments, totalling £8.1m, are added
to the profit before tax figure of £32.3m reported on the previous page:
(1) Fair value accoun�ng charges (non-cash) are added back (+£6.9m)
(2) A tax charge is added back, where profit was reported on a post-tax basis (i.e. minority
shareholdings) (+£1.2m).
Return on capital employed (ROCE) is the cash profit before tax, divided into the capital employed.
A ROCE is shown for the equity investment alone, and the overall investment including TP.
48 Capital invested is weighted for our period of ownership during 2023/24. For Reiss, this was 51% to 22 September 2023
and 72% therea�er. For FatFace, we had 97% ownership from 13 October 2023.
49 £10.3m of non-recurring cash costs for TP integra�on in Joules and FatFace are reported in Group central costs in the
P&L. Please note, the total P&L charge of £12.3m reported on page 57 (£9.1m Joules and £3.2m FatFace) includes
non-cash charges such as accelerated deprecia�on.
OTHER BUSINESS ACTIVITIES
The profits and losses in the year from other business ac�vi�es, including our other Group trading
companies and non-trading ac�vi�es, are summarised below along with our es�mates for the year
ahead. Non-recurring items that are material are shown separately. Significant changes in profit are
explained below the table.
£m
Central costs and other
NEXT Sourcing (NS)
Franchise and wholesale
Total underlying profit/(loss)
Non-recurring central items
Joules' non-trading costs
FatFace non-trading costs
Property transac�on profit
Property provisions
Foreign exchange
Accelerated acquisi�on costs
Total non-recurring items
Total profit/(loss)
Jan 2025 (e)
Jan 2024
Jan 2023
(48.2)
31.0
8.0
(9.2)
-
(6.0)
-
-
4.7
-
(1.3)
(10.5)
(50.5)
27.4
5.8
(17.3)
(9.1)
(3.2)
1.7
-
12.3
-
1.7
(15.6)
(41.9)
33.1
7.0
(1.8)
-
-
14.2
22.8
(16.3)
(5.4)
15.3
13.5
Central Costs
Central costs of £50.5m were £8.6m higher than last year, mainly due to increased share op�on
costs.
NEXT Sourcing (NS)
The majority of NS income and costs are denominated in Dollars (or linked currencies). The table
below sets out NS’s sales and profit for the first half in Dollars and Pounds. The exchange rate used
is the average market rate of exchange during the year.
NS sales were down -7% due to lower NEXT purchases, partly driven by the reduc�on in NEXT
surplus stock. Net margin reduced to 5.6%, due to: (1) fixed costs that did not reduce with sales, (2)
infla�onary cost increases in staff costs and travel.
US Dollars $m
Pounds £m
Jan 2024
Jan 2023
Jan 2024
Jan 2023
Sales (mainly inter-company)
Opera�ng profit
Net margin
Exchange rate
607.0
34.2
5.6%
655.9 - 7%
40.7 - 16%
6.2%
485.6
27.4
5.6%
1.25
533.3 - 9%
33.1 - 17%
6.2%
1.23
In the year ahead, we expect NS sales to increase by around +10%, due to a combina�on of: (1)
increased NEXT purchases, and (2) foreign currency gains. Based on this sales es�mate, we expect
profit to be around £31m .
57
Strategic ReportGovernanceFinancial StatementsShareholder Information Franchise and Wholesale
Profit reduced by £1.2m to £5.8m, due to (1) lower franchise sales in the Middle East and (2) the
closure of our franchise opera�ons in Japan, New Zealand and Greece.
In the year ahead we expect total profit from Franchise and Wholesale to increase to around £8m.
The increase in expected profit is mainly due to agreements with new interna�onal partners
(including Nordstrom in the US), as described in more detail on page 16.
Non-Recurring Items
Joules’ non-trading 50 costs
We incurred £9.1m of non-recurring, non-trading costs rela�ng to Joules when we accelerated our
plans to move Joules onto NEXT’s ‘Total Enterprise Pla�orm’ (TEP). This incurred costs such as:
●
●
●
●
Non-cash write-offs from accelera�ng the deprecia�on of assets.
Redundancy costs.
Dual running certain opera�ons during the transi�on to TEP.
Termina�on costs of third-party contracts which are no longer required under TEP.
In the year ahead, the move to TEP is expected to deliver cost savings of around £4m.
FatFace non-trading costs
In October 2023 we acquired a 97% equity stake in FatFace and we plan to launch FatFace on Total
Pla�orm in September 2024.
In 2023/24, as part of this transi�on, the Group incurred £3.2m of
non-trading costs, which include redundancy provisions and termina�on of third-party contracts that
will no longer be required under TP. In the year ahead we an�cipate a further £6m of non-trading,
non-recurring costs.
Property proit and provisions
Profit of £1.7m came from the sale of land in Rotherham. Prior year profit of £14.2m came from two
warehouse sale and leaseback transac�ons; one of which related to the transac�on completed in
2020/21 and the other being our Elmsall 3 warehouse, which was completed last year.
There was no change in property provisions in the year to January 2024. In the prior year, there was
a £22.8m credit, because some of the store provisions made during COVID were no longer required
due to be�er than expected sales performance when stores reopened.
Foreign exchange (FX)
We enter into FX contracts, some of which cannot be accounted for under Hedge Accoun�ng due to
their structure. Gains and losses on the valua�on of these contracts outstanding at a year end are
recognised in the P&L, as set out below.
We an�cipate that the £4.7m loss seen in 2023/24 will
reverse in 2024/25.
Foreign exchange gains/(losses) £m
Jan 2025 (e)
Jan 2024
Jan 2023
FX contracts placed in 2021/22
FX contracts placed in 2022/23
FX contracts placed in 2023/24
Total
-
-
4.7
4.7
-
17.0
(4.7)
12.3
0.7
(17.0)
-
(16.3)
50 Please note that the trading losses from Joules are reported within Total Pla�orm (see page 55).
58
Franchise and Wholesale
Profit reduced by £1.2m to £5.8m, due to (1) lower franchise sales in the Middle East and (2) the
closure of our franchise opera�ons in Japan, New Zealand and Greece.
In the year ahead we expect total profit from Franchise and Wholesale to increase to around £8m.
The increase in expected profit is mainly due to agreements with new interna�onal partners
(including Nordstrom in the US), as described in more detail on page 16.
Non-Recurring Items
Joules’ non-trading 50 costs
We incurred £9.1m of non-recurring, non-trading costs rela�ng to Joules when we accelerated our
plans to move Joules onto NEXT’s ‘Total Enterprise Pla�orm’ (TEP). This incurred costs such as:
●
●
●
●
Non-cash write-offs from accelera�ng the deprecia�on of assets.
Redundancy costs.
Dual running certain opera�ons during the transi�on to TEP.
Termina�on costs of third-party contracts which are no longer required under TEP.
In the year ahead, the move to TEP is expected to deliver cost savings of around £4m.
FatFace non-trading costs
In October 2023 we acquired a 97% equity stake in FatFace and we plan to launch FatFace on Total
Pla�orm in September 2024.
In 2023/24, as part of this transi�on, the Group incurred £3.2m of
non-trading costs, which include redundancy provisions and termina�on of third-party contracts that
will no longer be required under TP. In the year ahead we an�cipate a further £6m of non-trading,
non-recurring costs.
Property proit and provisions
Profit of £1.7m came from the sale of land in Rotherham. Prior year profit of £14.2m came from two
warehouse sale and leaseback transac�ons; one of which related to the transac�on completed in
2020/21 and the other being our Elmsall 3 warehouse, which was completed last year.
There was no change in property provisions in the year to January 2024. In the prior year, there was
a £22.8m credit, because some of the store provisions made during COVID were no longer required
due to be�er than expected sales performance when stores reopened.
Foreign exchange (FX)
We enter into FX contracts, some of which cannot be accounted for under Hedge Accoun�ng due to
their structure. Gains and losses on the valua�on of these contracts outstanding at a year end are
recognised in the P&L, as set out below.
We an�cipate that the £4.7m loss seen in 2023/24 will
reverse in 2024/25.
Foreign exchange gains/(losses) £m
Jan 2025 (e)
Jan 2024
Jan 2023
FX contracts placed in 2021/22
FX contracts placed in 2022/23
FX contracts placed in 2023/24
Total
-
-
4.7
4.7
-
17.0
(4.7)
12.3
0.7
(17.0)
-
(16.3)
50 Please note that the trading losses from Joules are reported within Total Pla�orm (see page 55).
INTEREST, TAX, PENSIONS AND ESG
INTEREST
The interest charge in the P&L is made up of four categories, as set out below.
£m
Net external interest
Lease interest
Reiss Preference share interest
Total Pla�orm loan interest income
Jan 2025 (e)
Jan 2024
Jan 2023
(33.0)
(48.0)
0.0
1.2
(35.3)
(46.7)
3.2
1.2
(30.3)
(47.3)
4.8
0.7
Total interest
(79.8)
(77.6)
(72.1)
Net External Interest
The net external interest charge of £35.3m was £5.0m higher than last year, due to the higher
interest rates payable on our floa�ng rate instruments.
In the year ahead, we an�cipate external
interest costs to reduce to £33m, due to lower interest rates and lower net debt.
Lease Interest Costs
We have seen a reduc�on in the lease
Lease interest of £46.7m was £0.6m lower than last year.
interest cost in our Retail business as our lease liabili�es for stores fall, however this reduc�on was
par�ally offset in our Online business, where costs have increased due to the new Elmsall 3 Online
warehouse lease.
Reiss Preference Share Interest
Reiss preference shares were acquired as part of our equity investment. The shares accrued interest
at a rate of 8% per annum, giving a benefit of £3.2m in 2023/24.
As part of the transac�on
completed at the end of September 2023, which increased our stake from 51% to 72%, a restructure
in equity was agreed meaning there will be no further preference share income.
Total Platform Loan Interest Income
We have loan agreements with six of our equity investments, with £1.2m of interest generated in
2023/24.
TAX
Our effec�ve tax rate (ETR) in 2023/24 was 23.6%. This is lower than the UK headline rate of 24%
(24% being the blended rate of 19% for February and March, and 25% from April 2023 onwards) as
set out below. In the year ahead we expect an ETR of 24.7%.
Jan 2025 (e)
Jan 2024
Headline UK Corpora�on Tax rate
Overseas tax
Equity profit, which has already been taxed
Non-deduc�ble costs (e.g. acquisi�on fees)
ETR
25.0%
- 0.2%
- 0.2%
+0.1%
24.7%
24.0%
- 0.3%
- 0.2%
+0.1%
23.6%
PENSION SCHEME
On the IFRS accoun�ng basis, the valua�on of our defined benefit schemes’ surplus was £59.3m
(January 2023: £157.5m). In January 2024 £50m of the plan’s accoun�ng surplus was used to fund
the purchase of an insurance contract, which safeguards all future pension payments (a ‘buy-in’).
The remaining £48m reduc�on was mainly due to a change in actuarial assump�ons. Further detail
is provided in Note 21 of the financial statements.
59
Strategic ReportGovernanceFinancial StatementsShareholder Information ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
We con�nue to make good progress on our key areas of focus.
examples of the projects that we have undertaken during the year.
Below we have provided some
Protecting Workers in our Supply Chain
Supporting Children and Young Workers
Our supply chain touches some vulnerable communi�es including migrant workers. Suppor�ng the
children in those communi�es to receive an educa�on is key to building resilience and avoiding the
risk of child labour. As part of a gender empowerment programme in Morocco we have supported
19 child literacy and educa�on sessions.
In Northern India we con�nue to work with a local non-profit organisa�on which holds in-person
sessions with workers and their families, including mentoring and counselling for vulnerable
individuals. They also help those families access healthcare and educa�on. Over 250 students have
received tui�on on a variety of topics including voca�onal skills, compu�ng, self-defence, nutri�on
and health.
Grievance Mechanisms
Key in protec�ng workers is giving them a mechanism to report any concerns. We have supported
the implementa�on of a grievance App which has an agreed formal process to deal with any
concerns raised.
Grievance mechanisms have now been introduced into some of our factories in
Pakistan, South India and Myanmar with a broader roll out in those territories and UAE planned for
early 2024.
Building Safety
We iden�fied that a number of the factories we use in Turkey had extended their facili�es to
respond to the increased demand during COVID without obtaining full building safety cer�fica�on
and sign off.
We commissioned engineers to assess the structural safety of 31 such factories, to
ensure the buildings remained safe and where any unsa�sfactory findings were reported we ensured
that the required remedia�on work was undertaken.
Responsible Sourcing
We con�nue to make good progress towards our targets set in 2018 for achievement by 2025. We
have already met our target in respect of feathers and expect to meet the target for co�on (our
largest material by weight) and �mber as originally planned. Although significant progress has been
made in responsibly sourcing man-made cellulosic fibres, wool and polyester, we have amended our
targets slightly in respect of those materials due to fibre availability in the market and quality issues.
By way of example, we use polyester extensively for upholstery in our Home products. Sourcing
polyester that is both responsible and compliant with fire retardant obliga�ons has proven to be
more challenging than we had expected. We will con�nue to push towards those targets and publish
annual updates on our progress in the Corporate Responsibility Report.
Supporting Workers Health and Mental Wellbeing
We have made the Digicare+ App available to our UK workforce, giving them access to a mul�tude of
health and wellbeing tools and medical advice.
Our Mental Wellbeing Charter encourages an
environment where mental health is discussed openly, without s�gma or fear of discrimina�on. We
have a network of over 165 trained Mental Health First Aiders in all divisions to support colleagues
and direct them to the available resources.
60
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
We con�nue to make good progress on our key areas of focus.
Below we have provided some
examples of the projects that we have undertaken during the year.
Protecting Workers in our Supply Chain
Supporting Children and Young Workers
Our supply chain touches some vulnerable communi�es including migrant workers. Suppor�ng the
children in those communi�es to receive an educa�on is key to building resilience and avoiding the
risk of child labour. As part of a gender empowerment programme in Morocco we have supported
19 child literacy and educa�on sessions.
In Northern India we con�nue to work with a local non-profit organisa�on which holds in-person
sessions with workers and their families, including mentoring and counselling for vulnerable
individuals. They also help those families access healthcare and educa�on. Over 250 students have
received tui�on on a variety of topics including voca�onal skills, compu�ng, self-defence, nutri�on
Key in protec�ng workers is giving them a mechanism to report any concerns. We have supported
the implementa�on of a grievance App which has an agreed formal process to deal with any
concerns raised.
Grievance mechanisms have now been introduced into some of our factories in
Pakistan, South India and Myanmar with a broader roll out in those territories and UAE planned for
and health.
Grievance Mechanisms
early 2024.
Building Safety
We iden�fied that a number of the factories we use in Turkey had extended their facili�es to
respond to the increased demand during COVID without obtaining full building safety cer�fica�on
and sign off.
We commissioned engineers to assess the structural safety of 31 such factories, to
ensure the buildings remained safe and where any unsa�sfactory findings were reported we ensured
that the required remedia�on work was undertaken.
Responsible Sourcing
We con�nue to make good progress towards our targets set in 2018 for achievement by 2025. We
have already met our target in respect of feathers and expect to meet the target for co�on (our
largest material by weight) and �mber as originally planned. Although significant progress has been
made in responsibly sourcing man-made cellulosic fibres, wool and polyester, we have amended our
targets slightly in respect of those materials due to fibre availability in the market and quality issues.
By way of example, we use polyester extensively for upholstery in our Home products. Sourcing
polyester that is both responsible and compliant with fire retardant obliga�ons has proven to be
more challenging than we had expected. We will con�nue to push towards those targets and publish
annual updates on our progress in the Corporate Responsibility Report.
Supporting Workers Health and Mental Wellbeing
We have made the Digicare+ App available to our UK workforce, giving them access to a mul�tude of
health and wellbeing tools and medical advice.
Our Mental Wellbeing Charter encourages an
environment where mental health is discussed openly, without s�gma or fear of discrimina�on. We
have a network of over 165 trained Mental Health First Aiders in all divisions to support colleagues
and direct them to the available resources.
CASH FLOW
In the year to January 2024 we generated £684m of surplus cash. Surplus cash is defined as cash
a�er deduc�ng interest, tax, capital expenditure (including property stock) and growth in customer
receivables, but before investments and distribu�ons to shareholders. The table below sets out a
summarised cash flow forecast for the year, along with last year and our forecast for the year ahead.
Net debt (excluding lease debt) reduced by £97m to £700m. For further details on individual cash
flow movements please see the page references given in the table.
In the year ahead, based on the profit guidance given on page 33, we expect to generate £615m of
surplus cash before investments and distribu�ons. We are currently planning for net debt to reduce
by a further £75m. This reduc�on, along with the £97m reduc�on in net debt in the 2023/24 year,
will contribute towards the poten�al repayment of a £250m bond that matures in August 2025,
should we decide not to refinance (see page 66).
£m
Jan 2025 (e)
Jan 2024 Jan 2023 51
NEXT Group profit before tax (including brand amor�sa�on)
Brand amor�sa�on
NEXT Group profit before tax (excluding brand amor�sa�on)
Deprecia�on/impairment on plant, property and equipment, and
amor�sa�on of so�ware
Capital expenditure
Tax paid
Employee share op�on trust (ESOT)
Working capital/other
Trading cash flow
Customer receivables
Property stock
Surplus cash before investments and distribu�ons
Investments in third-party brands
Ordinary dividends
Share buybacks
Net cash flow
(see page 63)
(see page 62)
(see page 62)
(see page 62)
(see page 65)
(see page 65)
941
19
960
138
(165)
(215)
(76)
(27)
615
-
-
615
-
(252)
(288)
75
908
10
918
128
(167)
(191)
(19)
44
713
(16)
(14)
684
(161)
(248)
(177)
97
870
4
875
110
(206)
(151)
(89)
(140)
398
(92)
53
359
(91)
(237)
(228)
(197)
Closing net debt (excluding lease debt)
(625)
(700)
(797)
51 Please note that working capital previously reported in January 2023’s Year End Results (£225m) included the £4m of
brand amor�sa�on and £89m from ESOT, which are now both shown on individual rows in this table.
61
PART SIX CASH FLOW, SHAREHOLDER RETURNS, NET DEBT & FINANCING Strategic ReportGovernanceFinancial StatementsShareholder Information ESOT
Cash flow movements (purchases and exercises) in the ESOT are set out below.
£m
Share purchases
Share op�ons exercised
Net cash flow
Jan 2025 (e)
Jan 2024
Jan 2023
(136)
60
(76)
(116)
98
(19)
(124)
35
(89)
In the year to January 2024 there was a net ou�low of £19m as the value of shares purchased, to
hedge our share op�ons, exceeded the cash received on exercises. The value of exercises, at £98m,
was par�cularly high as the op�ons granted during 2020 matured in 2023 at a �me when the share
price was significantly higher than the original grant price.
In contrast, we an�cipate lower exercises in the year ahead, because the share op�ons due to
mature were originally granted at a price far closer to the current share price.
WORKING CAPITAL
W orking capital in the year was an inflow of £44m. This is mainly due to staff incen�ves (£46m),
which were accrued in the P&L in the year ending January 2024, but will not be paid un�l April 2024.
Last year’s unusually high working capital ou�low of £140m was explained in detail in our 2023
Annual Report and Accounts (page 58).
This included larger than normal ou�lows into debtors
(£65m), stock (£23m) and staff incen�ves, which were awarded in rela�on to the prior year but paid
during 2022/23 (£44m).
In the year ahead we are forecas�ng a net ou�low of £27m, which is mainly the result of staff
incen�ves being paid (a reversal of the inflow observed in 2023/24).
We are expec�ng other
working capital balances to move largely in line with the underlying growth in the business.
INVESTMENTS IN THIRD-PARTY BRANDS
Investments in the year totalled £161m, as summarised below.
Please note the acquisi�on of
FatFace was funded partly by cash (£58m) and partly through the issue of 745,912 NEXT plc shares
(£53m). Details of last year’s investments were given in our 2023 Annual Report and Accounts (page
59).
£m
Reiss
(This year, acquisi�on of shares from Warburg Pincus)
Reiss dividend received
FatFace
(97% equity stake)
Cath Kidston
(Brand name, domain names and intellectual property)
Joules (equity and loan)
Joules head office
JoJo Maman Bébé
Swoon
MADE
Sealskinz
Victoria's Secret dividend received
Total investments
(Deferred considera�on)
Jan 2024
Jan 2023
(97)
-
(58)
(9)
-
-
(1)
-
-
-
3
(45)
15
-
-
(29)
(7)
(16)
(4)
(3)
(2)
-
(161)
(91)
62
Cash flow movements (purchases and exercises) in the ESOT are set out below.
ESOT
£m
Share purchases
Share op�ons exercised
Net cash flow
Jan 2025 (e)
Jan 2024
Jan 2023
(136)
60
(76)
(116)
98
(19)
(124)
35
(89)
In the year to January 2024 there was a net ou�low of £19m as the value of shares purchased, to
hedge our share op�ons, exceeded the cash received on exercises. The value of exercises, at £98m,
was par�cularly high as the op�ons granted during 2020 matured in 2023 at a �me when the share
price was significantly higher than the original grant price.
In contrast, we an�cipate lower exercises in the year ahead, because the share op�ons due to
mature were originally granted at a price far closer to the current share price.
WORKING CAPITAL
W orking capital in the year was an inflow of £44m. This is mainly due to staff incen�ves (£46m),
which were accrued in the P&L in the year ending January 2024, but will not be paid un�l April 2024.
Last year’s unusually high working capital ou�low of £140m was explained in detail in our 2023
Annual Report and Accounts (page 58).
This included larger than normal ou�lows into debtors
(£65m), stock (£23m) and staff incen�ves, which were awarded in rela�on to the prior year but paid
during 2022/23 (£44m).
In the year ahead we are forecas�ng a net ou�low of £27m, which is mainly the result of staff
incen�ves being paid (a reversal of the inflow observed in 2023/24).
We are expec�ng other
working capital balances to move largely in line with the underlying growth in the business.
INVESTMENTS IN THIRD-PARTY BRANDS
Investments in the year totalled £161m, as summarised below.
Please note the acquisi�on of
FatFace was funded partly by cash (£58m) and partly through the issue of 745,912 NEXT plc shares
(£53m). Details of last year’s investments were given in our 2023 Annual Report and Accounts (page
(This year, acquisi�on of shares from Warburg Pincus)
Jan 2024
Jan 2023
Cath Kidston
(Brand name, domain names and intellectual property)
(97% equity stake)
59).
£m
Reiss
Reiss dividend received
FatFace
Joules (equity and loan)
Joules head office
JoJo Maman Bébé
Swoon
MADE
Sealskinz
Victoria's Secret dividend received
Total investments
(97)
(58)
(9)
-
-
-
-
-
-
3
(45)
15
-
-
(29)
(7)
(16)
(4)
(3)
(2)
-
(161)
(91)
CAPITAL EXPENDITURE
The table below sets out our capital expenditure for this year and our forecast for the year ahead, by
category of spend. For comparison, last year is also shown.
£m
Warehouse
Technology
Total warehouse and technology
Retail space expansion
Retail cosme�c/maintenance capex
Total Retail expenditure
Head office infrastructure and other
Other Group subsidiaries
Total capital expenditure
Jan 2025 (e)
Jan 2024
Jan 2023
60
53
113
22
12
34
6
12
62
49
111
8
33
41
9
7
117
53
170
8
26
34
2
0
165
167
206
Warehousing
Warehouse spend, at £62m in the year to January 2024, includes automa�on projects in Elmsall 3,
the extension of our palle�sed warehouse in Dearne Valley and the refit of our returns opera�on for
hanging garments.
Expenditure was lower than last year as spend on the Elmsall 3 project has begun to slow as it
approaches comple�on. For further details and commentary on our investment in warehousing, see
‘Focus on Warehousing’ on page 21 of this report.
Technology
In the year, we spent £49m of capital modernising and upgrading our systems technology (£42m on
so�ware and £7m on hardware).
In the year ahead we expect this to increase to around £53m.
Expenditure by category is set out below, alongside last year for comparison and our guidance for
the year ahead.
For further details and commentary on our investment in technology, see ‘Focus on Technology’ on
page 23.
Technology capital expenditure by category (£m)
Jan 2025 (e)
Jan 2024
Jan 2023
(Deferred considera�on)
(1)
Total Technology capital expenditure
Modernisa�on projects
Total Pla�orm, LABEL and warehouse projects
Security and head office department projects
Small development projects
Hardware
24
6
4
11
9
53
23
6
3
9
7
49
20
10
5
3
15
53
63
Strategic ReportGovernanceFinancial StatementsShareholder Information Retail stores
Capital expenditure on Retail space expansion was £8m, in line with last year.
Cosme�c and
maintenance spend was £33m compared to £26m last year. Expenditure on cosme�c refits remains
focused on those stores where we have extended the lease.
This year’s maintenance spend has
increased by £7m mainly due to investment in new air condi�oning infrastructure and LED ligh�ng.
In the year ahead, spend on new space is expected to increase to £22m due to three new store
openings. One of these is a large store, where we are reloca�ng from an exis�ng unit in a regional
shopping centre to a much larger site.
Head ofice infrastructure and other
Capex on head office infrastructure increased by £7m to £9m. Most of this increase relates to a new
photo studio, which was relocated from one of our distribu�on centres to a new bespoke standalone
facility in December 2023. This has increased our studio capacity, reduced costs, and will allow more
of our photography to be completed in-house.
In the year ahead, expenditure is expected to be £6m. Projects include the redevelopment of some
of our Head Office facili�es, upgrades to our recycling centre and the reloca�on of our call centre.
Other Group subsidiaries
The increase versus the
In the year ahead, expenditure for all subsidiaries is es�mated at £12m.
prior year spend of £7m is due to the consolida�on of Reiss and FatFace in NEXT’s accounts for the
full year; in the prior year only their capital spend between October and January was consolidated.
OUTLOOK FOR CAPITAL EXPENDITURE
The chart below shows our forecast capital spend by category, for the year ahead and our early
es�mate of what we an�cipate spending in the following two years.
Outlook for Capital Expenditure
64
Retail stores
Capital expenditure on Retail space expansion was £8m, in line with last year.
Cosme�c and
maintenance spend was £33m compared to £26m last year. Expenditure on cosme�c refits remains
focused on those stores where we have extended the lease.
This year’s maintenance spend has
increased by £7m mainly due to investment in new air condi�oning infrastructure and LED ligh�ng.
In the year ahead, spend on new space is expected to increase to £22m due to three new store
openings. One of these is a large store, where we are reloca�ng from an exis�ng unit in a regional
shopping centre to a much larger site.
Head ofice infrastructure and other
Capex on head office infrastructure increased by £7m to £9m. Most of this increase relates to a new
photo studio, which was relocated from one of our distribu�on centres to a new bespoke standalone
facility in December 2023. This has increased our studio capacity, reduced costs, and will allow more
of our photography to be completed in-house.
In the year ahead, expenditure is expected to be £6m. Projects include the redevelopment of some
of our Head Office facili�es, upgrades to our recycling centre and the reloca�on of our call centre.
Other Group subsidiaries
In the year ahead, expenditure for all subsidiaries is es�mated at £12m.
The increase versus the
prior year spend of £7m is due to the consolida�on of Reiss and FatFace in NEXT’s accounts for the
full year; in the prior year only their capital spend between October and January was consolidated.
OUTLOOK FOR CAPITAL EXPENDITURE
The chart below shows our forecast capital spend by category, for the year ahead and our early
es�mate of what we an�cipate spending in the following two years.
DIVIDENDS & SHAREHOLDER RETURNS
The Company remains commi�ed to returning surplus cash to shareholders if it cannot be profitably
invested in our business ac�vi�es.
Surplus cash (a�er deduc�ng interest, tax, capital expenditure,
investments or acquisi�ons and ordinary dividends) will be returned to shareholders by way of share
Any share buybacks would be subject to achieving a minimum 8%
buybacks or special dividends.
equivalent rate of return (ERR).
As a reminder, ERR is calculated by dividing (1) an�cipated NEXT
Group pre-tax profits by (2) the current market capitalisa�on 52 .
Shareholder returns in 2023/24
Ordinary dividends
An ordinary dividend of 140p was paid on 1 August 2023 (with a total value of £168.4m) and an
interim dividend of 66p, in respect of the year to January 2024, was paid on 3 January 2024 (with a
total value of £80m).
The Board has proposed a final ordinary dividend of 141p, to be paid on 1 August 2024, taking the
total ordinary dividends for the year to 207p.
This is subject to approval by shareholders at the
Annual General Mee�ng to be held on 16 May 2024. Shares will trade ex-dividend from 4 July 2024
and the record date will be 5 July 2024.
Share buybacks and share issue
In 2023/24 we purchased 2.6m shares at an average share price of £68.60, totalling £177.3m. This
reduced the number of shares in issue by 2.0% since the January 2023 year end and represents an
ERR of 11%; ahead of our buyback hurdle of 8%.
In addi�on, we issued 745,912 of 10p ordinary shares in October 2023 at £71.61 per share (total
value £53.4m). These shares were issued as part considera�on for the acquisi�on of FatFace.
Outlook for Capital Expenditure
Outlook for shareholder returns in 2024/25
Ordinary dividends
Based on achieving our profit guidance of £960m, we currently expect to return £258m to
shareholders by way of ordinary dividend. This represents 36% of our forecast post-tax profit and
dividend cover of 2.8 �mes.
As is our normal prac�ce, we intend to pay an interim dividend in
January 2025 and the final dividend in August 2025.
Share buybacks
For the purpose of this guidance we have assumed that, a�er paying ordinary dividends, we will
return £288m of surplus cash to shareholders by way of share buybacks, although this figure will
reduce if we make further equity investments. We es�mate that these buybacks, along with those in
the last year, will boost pre-tax EPS in 2024/25 by 1.7%.
52 Market capitalisa�on is calculated based on shares in circula�on, so excludes shares in the NEXT ESOT.
65
Strategic ReportGovernanceFinancial StatementsShareholder Information NET DEBT, BOND AND BANK FACILITIES
For the year ending January 2025, the Group’s bond and bank facili�es will total £1,257m 53 .
Based on our cash flow guidance for the year ahead, we believe that our net debt will peak in
October 2024 at around £800m, leaving headroom of £457m; comfortably within our bond and bank
facili�es of £1,257m. We es�mate that we will end the year with net debt (excluding lease debt) of
around £625m.
The chart below sets out the Group’s bond and bank facili�es. For context, our forecast for customer
receivables at January 2025 is £1.27bn, significantly higher than the value of our net debt.
Group Financing, Net Debt and Headroom 2024/25 (e)
Anticipating the maturity of our August 2025 Bond
The £97m reduc�on in net debt in 2023/24, along with the an�cipated £75m reduc�on in the year
ahead, result in a total reduc�on in net debt of £172m. This means that if we retain a further £78m
the following year (i.e. year ending January 2026), we will not have to refinance the £250m bond due
in August 2025. This gives us the flexibility to avoid the bond market if long term corporate interest
rates remain at their current (high) level.
53 NEXT’s facili�es total £1,225m and Group subsidiaries have facili�es totalling £32m.
66
NET DEBT, BOND AND BANK FACILITIES
For the year ending January 2025, the Group’s bond and bank facili�es will total £1,257m 53 .
Based on our cash flow guidance for the year ahead, we believe that our net debt will peak in
October 2024 at around £800m, leaving headroom of £457m; comfortably within our bond and bank
facili�es of £1,257m. We es�mate that we will end the year with net debt (excluding lease debt) of
around £625m.
The chart below sets out the Group’s bond and bank facili�es. For context, our forecast for customer
receivables at January 2025 is £1.27bn, significantly higher than the value of our net debt.
Group Financing, Net Debt and Headroom 2024/25 (e)
FIRST QUARTER TRADING UPDATE
Our first quarter Trading Statement will cover the thirteen weeks to Saturday 27 April 2024 and is
scheduled for Wednesday 1 May 2024.
Lord Wolfson of Aspley Guise
Chief Execu�ve
21 March 2024
Anticipating the maturity of our August 2025 Bond
The £97m reduc�on in net debt in 2023/24, along with the an�cipated £75m reduc�on in the year
ahead, result in a total reduc�on in net debt of £172m. This means that if we retain a further £78m
the following year (i.e. year ending January 2026), we will not have to refinance the £250m bond due
in August 2025. This gives us the flexibility to avoid the bond market if long term corporate interest
rates remain at their current (high) level.
53 NEXT’s facili�es total £1,225m and Group subsidiaries have facili�es totalling £32m.
67
Strategic ReportGovernanceFinancial StatementsShareholder Information OVERVIEW
The financial informa�on presented in pages 3 to 67 is used by management in assessing business
performance. It is also the financial informa�on used to inform business decisions and investment
Some of these financial metrics and performance measures are not prepared on a full
appraisals.
IFRS statutory accoun�ng basis.
It is common for these performance measures to be called
‘Alterna�ve Performance Measures’ (APMs).
An explana�on of the APMs used by the business is provided in the glossary at the end of the
Financial Statements.
Reconcilia�ons between Total Group sales and statutory revenue, and NEXT Group profit before tax
and statutory profit before tax were given on pages 29 and 30 respec�vely.
In this appendix we provide a reconcilia�on between our APMs and their statutory equivalents for
the following:
1.
2.
3.
NEXT Group EPS and statutory EPS.
Capital expenditure.
Cash flow presented in the CEO Review and the statutory cash flow statement.
1. STATUTORY EPS
The EPS calcula�on on NEXT Group profit before tax, and its statutory equivalent are summarised
below.
NEXT Group profit (£m) and EPS (pence) (APM)
Jan 2024
Jan 2023
NEXT Group profit before tax
Tax
NEXT Group profit a�er tax
Average number of shares (millions)
Earnings Per Share (EPS)
918.2
(216.4)
701.8
121.3
578.8p
874.7
(158.8)
715.9
124.1
576.8p
Statutory profit (£m) and EPS (pence)
Jan 2024
Jan 2023
Statutory profit before tax
Remove non-controlling interests
Statutory tax
Statutory profit a�er tax aributable to NEXT
Average number of shares (millions)
Earnings Per Share (EPS)
1,015.8
1.2
(214.7)
802.3
121.3
661.6p
869.3
1.1
(158.7)
711.7
124.1
573.4p
The statutory tax value of £214.7m is calculated as being the £215.3m tax charge in the statutory
income statement less the tax on the non-controlling interests of £0.6m (see difference between the
profit before tax of £1.2m non-controlling interest and the £1.8m shown on face of the statutory
income statement which is the post-tax equivalent).
68
APPENDIX 1 RECONCILIATION TO STATUTORY RESULTS OVERVIEW
The financial informa�on presented in pages 3 to 67 is used by management in assessing business
performance. It is also the financial informa�on used to inform business decisions and investment
appraisals.
Some of these financial metrics and performance measures are not prepared on a full
IFRS statutory accoun�ng basis.
It is common for these performance measures to be called
‘Alterna�ve Performance Measures’ (APMs).
An explana�on of the APMs used by the business is provided in the glossary at the end of the
Financial Statements.
Reconcilia�ons between Total Group sales and statutory revenue, and NEXT Group profit before tax
and statutory profit before tax were given on pages 29 and 30 respec�vely.
In this appendix we provide a reconcilia�on between our APMs and their statutory equivalents for
Cash flow presented in the CEO Review and the statutory cash flow statement.
The EPS calcula�on on NEXT Group profit before tax, and its statutory equivalent are summarised
NEXT Group profit (£m) and EPS (pence) (APM)
Jan 2024
Jan 2023
the following:
NEXT Group EPS and statutory EPS.
Capital expenditure.
1. STATUTORY EPS
1.
2.
3.
below.
Tax
NEXT Group profit before tax
NEXT Group profit a�er tax
Average number of shares (millions)
Earnings Per Share (EPS)
Statutory profit before tax
Remove non-controlling interests
Statutory tax
Statutory profit a�er tax aributable to NEXT
Average number of shares (millions)
Earnings Per Share (EPS)
918.2
(216.4)
701.8
121.3
578.8p
1,015.8
1.2
(214.7)
802.3
121.3
661.6p
874.7
(158.8)
715.9
124.1
576.8p
869.3
1.1
(158.7)
711.7
124.1
573.4p
Statutory profit (£m) and EPS (pence)
Jan 2024
Jan 2023
The statutory tax value of £214.7m is calculated as being the £215.3m tax charge in the statutory
income statement less the tax on the non-controlling interests of £0.6m (see difference between the
profit before tax of £1.2m non-controlling interest and the £1.8m shown on face of the statutory
income statement which is the post-tax equivalent).
2. CAPITAL EXPENDITURE
Capital expenditure in the cash flow presented in the CEO Review is presented based on the internal
opera�onal view of capital expenditure.
From a statutory viewpoint, there are some differences
which are reconciled below.
£m
Capital expenditure per CEO Review
Add Cath Kidston (acquiring intellectual property)
Add property build costs
Add Waltham land purchase
Less capital accruals
Capital expenditure per statutory repor�ng
Jan 2024
167
9
23
14
(24)
188
The Cath Kidston expenditure is included under investments in third-par�es in the CEO Review while
the property build and Waltham land purchase, being non-opera�onal capital expenditure, are
shown within the “Property stock” sec�on of the cash flow in the CEO Review.
3. STATUTORY CASH FLOW
The cash flow statement presented in the CEO Review is consistent with the cash flow statement
used by management in its decision-making processes and internal repor�ng. It is this view of the
cash flows, and in par�cular the ‘Surplus Cash’ line, that informs decision making on distribu�ons.
However, this approach, while used by management, is not consistent with the presenta�on of cash
flows on a statutory basis.
In this sec�on we provide a walk forward from Surplus Cash presented in the CEO Review cash flow
to ‘net cash from opera�ng ac�vi�es’ in the statutory cash flow. The overall total cash flow is the
same - the difference is limited to presenta�on.
The statutory cash flow is split into three main sec�ons:
●
●
●
Opera�ng ac�vi�es: cash flows primarily derived from our revenue-producing ac�vi�es.
Inves�ng ac�vi�es: cash flows that result in the recogni�on of an asset in the balance sheet
(i.e. capex or inves�ng in another company).
Financing ac�vi�es: cash flows that result from financing - issue of shares, share buybacks,
issue of bonds, interest payments/receipts, dividends and leases.
Trading cash flow
Adjust to get to NEXT Group PBT
Capital expenditure
Purchase of shares by ESOT
Disposal of shares by ESOT
Customer receivables
Lease payments (net of incen�ves)
Working capital and other
Net cash from opera�ng ac�vi�es - per statutory cash flow
Note
1
2
3
4
4
5
6
7
8
£m
713
70
167
116
(98)
(16)
156
12
1,120
69
APPENDIX 1 RECONCILIATION TO STATUTORY RESULTS Strategic ReportGovernanceFinancial StatementsShareholder Information Note 1: As per the cash flow statement on page 61 of the CEO Review, cash from trading ac�vi�es
was £713m for the year to January 2024.
Note 2: The cash flow in the CEO Review starts with the NEXT Group profit before tax of £918m,
which is a�er interest costs of £81m and removes both the non-controlling interests from
subsidiaries (Joules, Reiss and FatFace) of £1m and brand amor�sa�on of £10m. This differs from the
statutory cash flow statement, which starts its cash flow statement with “opera�ng profit” of £988m.
Note 3: Management includes the capital expenditure (capex) which it considers to be part of its
trading ac�vity and deducts this capex when calcula�ng surplus cash. In the statutory cash flow, all
capex is included within inves�ng ac�vity and hence not part of opera�ng cash flows. Therefore the
capex of £167m in the CEO Review has been added back in the bridge above.
Note 4: Surplus cash is recognised a�er the purchase and disposal of shares in the ESOT. In contrast
they are classified as financing ac�vity in the statutory cash flow.
Note 5: The customer receivables cash movement relates to the next pay and next 3step receivables
balance. For management purposes, movements in this balance are excluded from surplus cash. In
contrast, this is included within opera�ng cash flow for statutory repor�ng.
Note 6: The cash flows associated with our leases, which are predominantly store related, are
considered by management to be an integral part of our trading cash flows and hence are included
From a statutory perspec�ve, lease cash flows are included in
in the calcula�on of surplus cash.
financing ac�vity (as a lease is deemed a form of debt).
Note 7: The remaining difference relates to immaterial movements on working capital and other
items such as the equity profit from our investments.
Note 8: This value of £1,120m can be reconciled to the line “Net cash from opera�ng ac�vi�es” in
the statutory cash flow statement.
70
Note 1: As per the cash flow statement on page 61 of the CEO Review, cash from trading ac�vi�es
was £713m for the year to January 2024.
Note 2: The cash flow in the CEO Review starts with the NEXT Group profit before tax of £918m,
which is a�er interest costs of £81m and removes both the non-controlling interests from
subsidiaries (Joules, Reiss and FatFace) of £1m and brand amor�sa�on of £10m. This differs from the
statutory cash flow statement, which starts its cash flow statement with “opera�ng profit” of £988m.
Note 3: Management includes the capital expenditure (capex) which it considers to be part of its
trading ac�vity and deducts this capex when calcula�ng surplus cash. In the statutory cash flow, all
capex is included within inves�ng ac�vity and hence not part of opera�ng cash flows. Therefore the
capex of £167m in the CEO Review has been added back in the bridge above.
Note 4: Surplus cash is recognised a�er the purchase and disposal of shares in the ESOT. In contrast
they are classified as financing ac�vity in the statutory cash flow.
Note 5: The customer receivables cash movement relates to the next pay and next 3step receivables
balance. For management purposes, movements in this balance are excluded from surplus cash. In
contrast, this is included within opera�ng cash flow for statutory repor�ng.
Note 6: The cash flows associated with our leases, which are predominantly store related, are
considered by management to be an integral part of our trading cash flows and hence are included
in the calcula�on of surplus cash.
From a statutory perspec�ve, lease cash flows are included in
financing ac�vity (as a lease is deemed a form of debt).
Note 7: The remaining difference relates to immaterial movements on working capital and other
items such as the equity profit from our investments.
Note 8: This value of £1,120m can be reconciled to the line “Net cash from opera�ng ac�vi�es” in
the statutory cash flow statement.
The explana�on below was given in our January Trading Statement and is repeated here for clarity.
As NEXT acquires new businesses, the accoun�ng effect of amor�sing the value of acquired brands 54
will increasingly understate the underlying profitability of the Group.
Amor�sa�on is a non-cash
accoun�ng adjustment similar to deprecia�on; accoun�ng standards require that the value of brands
is amor�sed over their life. In the case of FatFace and Reiss we are amor�sing the brand over 15 and
This amor�sa�on assumes that the value of these brands will drop to zero
25 years respec�vely.
over the amor�sa�on period; in reality it is more likely that they will increase in value than fall to
zero.
By way of example: If NEXT plc was acquired, at its current market value, by a shell company that
issued new shares in exchange for the company’s current shares then, under statutory repor�ng, the
acquiring company would then add the brand to the balance sheet and amor�se it over the ‘life’ of
the asset. A conserva�ve accoun�ng approach would result in a life of, say, 25 years, which would
result in an annual amor�sa�on charge of around £370m. So, despite having exactly the same cash
flow, assets and debt as the exis�ng company, the new company’s reported profit would be around
40% lower than prior to the transac�on - clearly not a true representa�on of the company’s value.
So from 2024/25 we will adopt the accoun�ng conven�on used by many acquisi�ve Groups, and
report our ‘headline profits’ excluding brand amor�sa�on costs.
In addi�on, to ensure that
comparisons to the current year are consistent, we will also re-state the current year’s headline
profits to exclude brand amor�sa�on.
Re-stated brand proits and EPS
The table below sets out the impact of removing brand amor�sa�on from our actual headline profits
in 2022/23, 2023/24 and our guidance for 2024/25.
2022/23
2023/24
2024/25 (e)
NEXT Group profit before tax (including brand amor�sa�on)
£870.4m
£908.4m
£941.4m
Add back brand amor�sa�on
+£4.3m
+£9.8m
+£18.6m
NEXT Group profit before tax (excluding brand amor�sa�on)
£874.7m
£918.2m
£960.0m
Year on year growth
Pre-tax EPS (excluding brand amor�sa�on)
Year on year growth
Post-tax EPS (excluding brand amor�sa�on)
Year on year growth
704.8p
576.8p
+5.0%
757.2p
+7.4%
578.8p
+0.3%
+4.6%
805.2p
+6.3%
606.3p
+4.8%
54 Acquired brands is used to describe the brand and any other related intangible assets acquired in the business.
71
APPENDIX 2 NOTE FOR ANALYSTS ON THE TREATMENT OF BRAND AMORTISATION Strategic ReportGovernanceFinancial StatementsShareholder Information The explana�on below was given in our January Trading Statement and is repeated here for clarity.
Reporting the headline PROFITS of subsidiaries in which we have a part share
As NEXT begins to acquire new businesses the ques�on arises as to how we report the sales and
profits from companies in which we own a part share. Accoun�ng standards require our statutory
accounts to consolidate the sales and profits of companies in which we have a controlling interest,
but in the case of part ownership that means that we would start to include in our headline
numbers, profit that our shareholders do not “own”. The answer, we believe, is to report our share
of our subsidiaries’ profits; so if we own 50% of the business we will include 50% of its profits in our
headline number.
In summary: We will include our share of subsidiary profits in our headline profit number for the
Group.
Reporting the headline SALES of subsidiaries in which we have a part share
Un�l now we have not included the sales of subsidiary companies in our headline sales number. So
far that has not been a problem, as they have not been material. As we acquire more businesses the
risk is that we overstate the headline net margins of the Group by including our share of their profits
but exclude all of their sales.
To address this problem, going forward, we will adopt the same conven�on for sales as we have done
for profits. So if we own 50% of a company we will report 50% of its profits and 50% of its sales in
our headline numbers (subject to the qualifica�on below). By maintaining the propor�on of sales
and profits in line with our ownership we give a more accurate picture of our profit and net margins.
In summary: We will include our share of subsidiary sales in our headline sales number for the
Group.
ISSUE: Avoiding the double counting of LABEL sales
Historically we have always included LABEL sales within our headline sales number, whether goods
are sold on a wholesale or commission basis 55 and we will con�nue with this conven�on going
However, a subsidiary company’s sales on LABEL will also be reported within their sales
forward.
numbers. So if we include our share of their sales in our headline sales, including their LABEL sales,
we will double count our share of their LABEL sales.
To avoid this problem, we will exclude subsidiaries’ LABEL sales from their sales before accoun�ng for
our share of their sales. So if we own 50% of a subsidiary that turns over £100m, of which £20m are
LABEL sales, then we will add 50% of £80m (i.e. £100m - £20m) to our headline sales number. On
the same logic, we will also deduct the value of Total Pla�orm commission and revenue from
cost-plus services from their sales.
In summary: We will deduct subsidiary sales on LABEL before accoun�ng for our share of their
sales.
55 As previously explained, the gross transac�on value of LABEL items sold on commission are not statutory sales but are
included in our headline numbers.
72
APPENDIX 3 REPORTING OF SUBSIDIARIES’ SALES AND PROFITS The explana�on below was given in our January Trading Statement and is repeated here for clarity.
Reporting the headline PROFITS of subsidiaries in which we have a part share
As NEXT begins to acquire new businesses the ques�on arises as to how we report the sales and
profits from companies in which we own a part share. Accoun�ng standards require our statutory
accounts to consolidate the sales and profits of companies in which we have a controlling interest,
but in the case of part ownership that means that we would start to include in our headline
numbers, profit that our shareholders do not “own”. The answer, we believe, is to report our share
of our subsidiaries’ profits; so if we own 50% of the business we will include 50% of its profits in our
In summary: We will include our share of subsidiary profits in our headline profit number for the
headline number.
Group.
Reporting the headline SALES of subsidiaries in which we have a part share
Un�l now we have not included the sales of subsidiary companies in our headline sales number. So
far that has not been a problem, as they have not been material. As we acquire more businesses the
risk is that we overstate the headline net margins of the Group by including our share of their profits
but exclude all of their sales.
To address this problem, going forward, we will adopt the same conven�on for sales as we have done
for profits. So if we own 50% of a company we will report 50% of its profits and 50% of its sales in
our headline numbers (subject to the qualifica�on below). By maintaining the propor�on of sales
and profits in line with our ownership we give a more accurate picture of our profit and net margins.
In summary: We will include our share of subsidiary sales in our headline sales number for the
Group.
ISSUE: Avoiding the double counting of LABEL sales
Historically we have always included LABEL sales within our headline sales number, whether goods
are sold on a wholesale or commission basis 55 and we will con�nue with this conven�on going
forward.
However, a subsidiary company’s sales on LABEL will also be reported within their sales
numbers. So if we include our share of their sales in our headline sales, including their LABEL sales,
we will double count our share of their LABEL sales.
To avoid this problem, we will exclude subsidiaries’ LABEL sales from their sales before accoun�ng for
our share of their sales. So if we own 50% of a subsidiary that turns over £100m, of which £20m are
LABEL sales, then we will add 50% of £80m (i.e. £100m - £20m) to our headline sales number. On
the same logic, we will also deduct the value of Total Pla�orm commission and revenue from
cost-plus services from their sales.
In summary: We will deduct subsidiary sales on LABEL before accoun�ng for our share of their
sales.
55 As previously explained, the gross transac�on value of LABEL items sold on commission are not statutory sales but are
included in our headline numbers.
Our Total Pla�orm clients and investments in third-party brands are shown in the tables below.
Client
Equity interest or investment
TP launch
date
Sales channels supported
Laura Ashley
Licence to trade in UK and Eire
Mar 2021
Online and retail
Victoria’s Secret
(UK and Eire)
51% share in UK and Eire
franchise
May 2021
Online and retail
Reiss
GAP
72% equity share
Feb 2022
Online, retail and wholesale
51% share in UK JV with GAP
coali�on
Aug 2022
Online and retail
JoJo Maman Bébé
44% share in partnership with
Davidson Kempner
May 2023
Online, retail and wholesale
MADE
Joules
100% acquisi�on of brand
name, domain name and
intellectual property
74% share in partnership with
Tom Joule
July 2023
Online and retail
Oct 2023
Online, retail and wholesale
FatFace
97% equity share
Q3 2024
Online, retail and wholesale
Other investments in brands not on Total Platform
Brand
Swoon
Equity interest or investment
25% share
Sealskinz
19.9% share
Aubin
28.9% share
Cath Kidston
100% acquisi�on of brand name, domain name and intellectual property
In March 2023, we acquired the brand name, domain names and intellectual property of Cath
Kidston. We have decided not to develop a separate website un�l we have rebuilt the brand in the
UK. Cath Kidston products will be available on the NEXT website.
73
APPENDIX 4 TOTAL PLATFORM CLIENTS AND EQUITY INVESTMENTS APPENDIX 3 REPORTING OF SUBSIDIARIES’ SALES AND PROFITS Strategic ReportGovernanceFinancial StatementsShareholder Information BUSINESS MODEL
The key elements
of our business
model are set out
here, together with
the guiding
principles that
have shaped the
direction in which
we have taken
the business.
We focus here on
the core
NEXT business.
For further
information about
our business and
priorities, see
pages 7 to 20 of
the Chief
Executive’s Review.
OUR OBJECTIVES
BUSINESS PRIORITIES
Product
We
product ranges.
continually
improve
our
See The NEXT Brand – Moving on up
in the Chief Executive’s Review on
page 11 for further details.
Service
We constantly upgrade our customer
and online services.
See Improving NEXT Infrastructure in
the Chief Executive’s Review on page
13 for further details.
Cost
We relentlessly manage our costs.
See Parts Four and Five of the Chief
Executive’s Review from page 28 for
further details.
New business
We
future
growth to keep developing new
business opportunities.
foundations
for
lay
See Part Two in the Chief Executive’s
Review on page 7 for further details.
We offer beautifully designed, excellent quality clothing,
homeware and beauty products which are responsibly sourced
and accessibly priced, and in doing so build shareholder value
through long term, sustainable growth in Earnings Per Share.
We are at heart, a fashion, homeware and beauty business with
excellent operations and strong financial disciplines. We have
spent years honing these skills and the supporting infrastructure,
building the trust and confidence of our customers, suppliers and
partners along the way. It is these qualities that we aim to leverage
and develop, supported by our core principles of doing business
responsibly. We look to:
1. Add value
• Use our product skills, distribution networks, systems, services and
sourcing to create goods and provide services that consumers
cannot easily find elsewhere.
• Focus on customers’ satisfaction levels by improving the customer
experience in our stores and continuing to develop and enhance
our website and App.
2. Play to our strengths
• Improve and develop our product ranges by using our design skills
to create quality products at affordable prices.
• Increase the number of profitable Online customers and their
spend, both in the UK and internationally. Our Online business is
complemented by our LABEL offering of branded products and,
in the UK, the credit facilities (nextpay and next3step). Our objective
is to be our customers’ first choice online retailer for clothing,
beauty and home products.
3. Make a margin
• Achieve healthy gross and net margins through efficient product
sourcing, stock management and cost control.
4. Make good returns on capital invested
• Support the Group’s access to low cost finance by maintaining a
strong balance sheet and secure financing structure.
• Make a return on capital commensurate with risk, using robust
financial hurdles,
investment appraisal models,
including cash payback and return on capital invested.
targeting
• Maximise the profitability of retail selling space.
5. Generate and return surplus cash
to shareholders
• This is done by way of share buybacks and/or dividends.
Everything we do at NEXT is underpinned by a clear financial
goal – the delivery of long term, sustainable growth in Earnings
Per Share.
74
OUR INFRASTRUCTURE
HOW WE CREATE VALUE
We draw on all of our assets – warehouses, delivery networks, systems, websites, stores,
marketing, credit facilities, great people – to support a business selling hundreds of third-
party brands alongside our own NEXT products.
Warehousing & Distribution
Our distribution network serves our Retail stores and Online customer deliveries for both
NEXT and third-party branded products. We also facilitate the induction of products held in
third-party warehouses into NEXT’s distribution network for onward delivery to customers.
• 9 UK warehouses
• 7 UK depots
• 3 international hubs which are fully integrated with our cost efficient distribution facilities.
NEXT Online
• Around 7.6 million UK Online customers and
• 1.7 million overseas customers.
Well-Connected Store Network
• Over 800 stores in UK and Eire (includes Reiss, Joules and FatFace stores)
• 267 franchised stores (includes Reiss, Joules and FatFace franchised stores)
• In 34 countries.
Our stores play an important role in supporting our Online customers; nearly half of our UK
Online orders are collected instore and the majority of returns are through our stores.
Digital Marketing Systems
The development of online marketing systems to target products and brands to customers.
Our systems have the ability to manage significant amounts of data and incorporate
sophisticated search facilities and web based marketing tools that link with our email and
social marketing systems.
Consumer Credit
NEXT Finance has built a high quality receivables book with customer credit balances of
£1.5bn. The ability to sell products on credit has proven to be an attractive service to
customers which benefits Online sales and Group profitability. The customer receivables are
a valuable asset, adding to the Group’s financial strength.
Call Centres
NEXT operates multi-language call centres in the UK and overseas to support its worldwide
customer service operations for Retail, Online and NEXT Finance.
Supply Chain
NEXT has a well established supply chain that is supported by our overseas sourcing operation,
NEXT Sourcing Limited (NSL). NSL provides buying, sourcing and design skills which support
the product teams in the UK.
WHAT WE DO
The business has evolved at pace in recent years and continues to do so. The growth in our
LABEL business and, more recently, the Total Platform business has expanded the channels
through which we generate sales. These can be summarised across four key streams:
NEXT Branded Products
Our in-house team develops NEXT branded products offering great design, quality and value
for money which are sold in store and online.
Third-Party Brands
Our LABEL business sells third-party clothing, home and beauty brands online. These are sold
on a commission or wholesale basis.
Third-Party Brand Licences
Our licensing business creates value by combining NEXT’s sourcing and quality expertise
with the design inspiration of partner brands.
Total Platform and Investments
We leverage our infrastructure by offering a complete suite of services to third-party brands
including websites, marketing, warehousing, distribution networks and contact centres.
The combination of NEXT products
and third-party brands, coupled with
infrastructure and our
the strong
core principles, enables the business
to
for
consistently
our stakeholders.
create
value
Our Customers
• More product choice – A combination
of NEXT products and third-party
brands means customers can choose
from an extensive range of products.
• Cost and quality control – Our
sourcing structure provides excellent
quality and accessibly priced products.
• Outstanding customer experience –
Our extensive
logistics operations
provide quick and cost effective
delivery and our call centres help
maintain great customer satisfaction.
Third-Party Brand Partners
• Strong relationships – We aim to be
the most profitable route to market
for our partners.
Total Platform Clients
• We enable our clients to focus on the
areas where they add most value,
such as design and buying, rather than
capital-intensive areas such as website
development and logistics.
Our People
• We strive to create an
workplace
treated with dignity and respect.
in which everyone
inclusive
is
Responsibly
• We source globally to deliver NEXT
products that are responsibly sourced.
We are working closely with suppliers
to fulfil our ambition to source all of
our main raw materials through
known, responsible or certified routes.
Shareholders
• We manage
financial
resources
effectively to maximise shareholder
value. NEXT is highly cash generative;
after investing in the business, surplus
cash is returned to shareholders.
75
Strategic ReportGovernanceFinancial StatementsShareholder Information KEY PERFORMANCE INDICATORS (KPIs)
KPIs are designed to measure the development, performance and financial position of the business. The KPIs include Alternative Performance
Measures (APMs) APM .
All KPIs which show a growth metric are based on a year-on-year calculation of growth. Commentary on business performance is provided in
the Chief Executive’s Review.
NEXT Sales APM
NEXT Trading full price sales¹ growth
NEXT trading sales² growth
+4.0%
+3.3%
2024
2023
+4.0
2024
+3.3
+6.9
2023
+8.4
1. Full price sales are VAT exclusive sales of stock items
excluding items sold in our sale events, our Clearance
operations, Joules, Reiss, FatFace and Total Platform.
It includes interest income on those sales.
2. NEXT Total trading sales are VAT exclusive full price and
markdown sales including the full value of commission
based sales and interest income for our Online,
Retail and Finance divisions (as described in Note 1 to
the financial statements).
NEXT profitability and Group Earnings Per Share (EPS) APM
NEXT Group profit before tax³
NEXT Group EPS⁴
£918.2m
578.8p
2024
2023
918.2
2024
874.7
2023
578.8
576.8
3. For further information on NEXT Group profit before
tax, refer to Appendix 1 at page 68 and Appendix 2 at
page 71.
4. NEXT Group EPS
is pre-amortisation and pre-
exceptionals. For further information on EPS, refer to
Appendix 1 at page 68.
Return to shareholders
Special/Ordinary dividends⁵
Share buybacks⁶
Total return to shareholders
£248.3m
£177.3m
£425.6m
2024
2023
248.3
2024
177.3
2024
237.4
2023
224.0
2023
425.6
461.4
5. Based on dividends paid in the Cash Flow Statement. Refer to Note 8 to the financial statements.
6.
A total of 2,584,970 shares were purchased in the financial year (2023: 3,508,417) at an average cost per share of £68.60 (2023: £63.85) including stamp duty and associated costs.
The average price before costs was £68.18 (2023: £63.45). This does not include the 745,912 shares that were issued in October 2023 in satisfaction of part of the consideration
for FatFace.
76
APM The APMs are not defined by IFRS and therefore may not be directly comparable with other companies’ APMs. These measures are not
intended to be a substitute for, or superior to, IFRS measurements. Where appropriate a reconciliation between an APM and its closest
statutory equivalent is provided in the Glossary on page 256 to 259 and Appendix 1 at page 68.
NEXT Online sales performance APM
Full price sales growth
+6.0%
2024
+6.0
2023
-3.9
Average active customers⁷ (000’s) (cash/credit) Online margin (excl. Finance)
5,557/2,868 +16.0%
2024
2023
5,557
2,868
2024
5,297
2,833
2023
Cash
Credit
+16.0
+15.2
7.
Average active customers are defined as those who have placed an Online order or received a standard account statement in the last 20 weeks. Credit customers are those who order
using an Online credit account, whereas cash customers are those who pay when ordering (including overseas).
NEXT Retail sales performance APM
Full price sales growth
+0.2%
Retail selling space sq ft⁸ (000’s)
Retail margin
7,634 sq ft
+11.3%
2024
+0.2
2024
7,634
2024
2023
+30.0
2023
7,767
2023
+11.3
+11.0
8.
Selling space is defined as the trading floor area of a store which excludes stockroom and administration areas and is shown as at the financial year end (excluding Joules, Reiss and
FatFace). The square footage excludes 471k sq ft (2023: 479k sq ft) of space occupied by concessions.
NEXT Finance
Interest income
£292.7m
Return on Capital Employed
(after cost of funding)⁹ APM
13.4%
Profit (after cost of funding) APM
£163.4m
2024
2023
292.7
2024
13.4
2024
274.4
2023
14.5
2023
163.4
170.5
9. Return on Capital Employed is defined as the NEXT Finance net profit (after the interest charge relating to the cost of funding), divided by the average debtor balance.
77
Strategic ReportGovernanceFinancial StatementsShareholder Information RISKS AND UNCERTAINTIES
Risk management and internal control framework
Approach
The Board has overall responsibility for risk management, the supporting system of internal controls and for reviewing their effectiveness. The Group
operates a policy of continuous identification and review of business risks. This includes the monitoring of key risks, identification of emerging risks and
consideration of risk mitigations after taking into account risk appetite and the impact of how those risks may affect the achievement of business objectives.
The risks and uncertainties that the business faces evolve over time. The Board delegates to the executive directors and senior management the
task of implementing and maintaining controls to ensure that risks are managed appropriately. The risk management process is designed to
identify, evaluate and mitigate the risk of failure to achieve business objectives. This means it can only provide reasonable and not absolute assurance.
Our framework for risk governance
We have a ‘three lines of defence’ model of risk management, as illustrated below.
Board
• Responsible for ensuring that risk is effectively identified, assessed
Audit Committee
• Monitors the Group’s internal financial controls and internal control
and managed across the Group.
and risk management systems.
• Determines the Group’s risk appetite.
• Overall responsibility for monitoring and reviewing the effectiveness
• Supports the Board’s robust review of the above.
• Approves the internal audit programme.
of risk management and internal control systems.
• Reviews the Group’s emerging and principal risks.
First Line
Second Line
Third Line
Executive Risk Owners
• Own the corporate risks and perform
Risk Steering Group
• Review and develop Risk Universe and
bi-annual reviews of these risks.
controls environment.
• Ensure that risks are identified, assessed,
adequately controlled and mitigated.
• Review and identify existing and emerging
risks with the assistance of the risk
management team.
• Oversee the development of the Group’s
and
assessment
risk monitoring,
reporting processes.
• Ongoing consideration of horizon scanning,
emerging risks and significant risk events.
• Oversight to ensure effective
incident
management processes.
Internal Audit
• Agree
internal audit programme by
reference to the Group Risk Register.
• Conduct internal audit programme and
report to the Audit Committee.
• Respond to issues as they arise and amend
the audit programme accordingly.
Business Risk Owners
• Responsible for ensuring that risks are
managed within agreed risk appetite limits.
Risk Management Team
• Manage and report on the risk registers.
• Work with and challenge risk owners to
• Drive design and implementation of controls.
assess risk and identify controls.
• Review, identify and assess existing and
emerging risks twice a year with the
assistance of the risk management team.
• Implement risk management processes and
framework improvements.
Broader Compliance Functions
• NEXT has targeted compliance teams that
provide specific guidance and support in
managing risks.
• Those
teams
support Credit, Data,
Information
Product
Legislation, Code of Practice/Modern
Slavery and Legal risks.
Security/Cyber,
• Each compliance team works closely with
the risk management team and business
risk owners to understand risks and issues
as they arise and put mitigations/controls
in place to bring within risk appetite.
78
How we identify and monitor risk
Our approach to risk identification is illustrated by the following diagram of our Enterprise Risk Management Universe and is described in more
detail in the following pages. The adoption of an Enterprise Risk Management Universe enables a consistent approach to the identification,
management, reporting and oversight of risks.
Principal Risks
Corporate Risks
Underpinned by an Enterprise Risk Management Universe, assigned executive risk custodians and used to manage our business risk appetite.
Business Development
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Map to corporate risks providing a more granular risk categorisation and reporting capability.
Component Risks
Under the management of and assessed by 20 key business entities, mapped to component risks.
Business Risks
Central Finance
Finance Operations
Label, Logistics & Total Platform Projects
Treasury
Central Finance
Legal & Compliance
Brand Marketing
eCommerce
Retail
Human Resources
Customer Services
Technology
International
Product Operations
Warehousing & Distribution
Product
Group Property
3rd Party Brands & LABEL
Lipsy
NEXT Sourcing
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79
Strategic ReportGovernanceFinancial StatementsShareholder Information
RISKS AND UNCERTAINTIES
The business has been divided into 20 operational areas for risk
management, where local business risks are identified, assessed
and managed.
Business risks are identified bottom up through discussions with
operational area owners and mapped to components of our Risk
Universe for reporting purposes. Components are then mapped to
executive-owned corporate risks, which in turn are mapped to the
principal risks that may impact our ability to achieve our business
objectives. The principal risks and key business risks are also subject to
a top down review and challenge process.
Business risks are logged in an integrated risk management system and
each business risk has a named owner. A standard 5x5 risk matrix is
used to assess the potential impact of each risk measured in terms of
the financial impact and the likelihood of the risk crystallising within a
two year timeframe. The assessment considers both the inherent risk
(before any mitigating controls) and residual risk (after mitigating
controls are applied).
Each business entity risk register is assessed through a three stage
management sign off process: initially with the relevant business risk
assessor (a senior manager) then via the business entity owner
(operational director level), and finally with the executive director who
is assigned as the corporate risk owner. The assessment includes
consideration of the key controls and the resulting risk reduction.
The ongoing review and development of the Enterprise Risk
Management Universe and controls environment is the responsibility of
the Risk Steering Group. The Risk Steering Group is chaired by the Legal
& Compliance Director and has responsibility for providing direction
and support to the management of risk across the Group. It meets
quarterly and its activities include:
• Establishing clear governance and accountability for risk and any
associated (remediation) activities.
• Providing a point of escalation for critical or emerging risks.
• Providing the Board and Audit Committee with sufficient information
to enable them to discharge their risk reporting requirements.
• Reviewing the corporate level risks, informed by the most significant
business risks assessed across all business entities.
• Ongoing consideration of horizon scanning, any gaps and assessment
of significant risk events.
• Annual benchmarking against the published principal risks of peers,
particularly those operating in the retail and consumer credit sectors.
• Reviewing the correct approach to risk management for our newly
acquired subsidiary companies and brands.
The key features of our risk governance, assessment and monitoring
processes are:
• Robust risk identification processes – the bottom up identification of
risks is supplemented by top down review by executive directors.
The Risk Steering Group also supports the risk identification process
by: (1) ensuring that the risks or control issues that give rise to any
significant incidents are adequately and accurately captured in the
Risk Universe; and (2) assisting with the assessment of emerging risks.
80
• Clear risk ownership and accountability – each business risk has an
owner and each corporate risk has an executive director owner.
• Target business risk appetite and oversight – as corporate risk owners,
the executive directors are responsible for setting the risk appetite
(subject to Board agreement) and overseeing the appropriateness of
risk mitigation through designated governance groups. Each principal
risk is also mapped to first, second and third line assurance activities.
• Consistency – our 5x5 risk scoring matrix is used to drive consistency
of risk assessment and quantification. Inherent risk and residual risk
is measured, with each business risk assessed both before and after
mitigating controls are applied.
• Key control activities are captured – these are the control activities
the business places reliance on to manage risk within target appetite
and are subject to Internal Audit review and monitoring.
Evaluation of the effectiveness of risk
management and internal control systems
Evaluation of the effectiveness of the Group’s risk management and
internal control systems for all parts of the business has been carried
out twice during the year. This covered all material financial,
operational and compliance controls. The evaluation process involved
the following:
• Executive director review – the most significant corporate level risks
of the Group, as identified by the risk management process, and their
associated controls were assessed in detail by the executive directors.
The objective of this top down review was to ensure that the
appropriate risks had been accurately captured within the risk
management processes described above, that adequate controls
were in place to mitigate these risks and that their potential impact
had been robustly assessed. The executives also considered the
appropriateness of the principal risks identified.
• Audit Committee review – at the November 2023 meeting,
management presented the Committee with details of the risk
management processes, including the Risk Universe, the risk scoring
matrix methodology and the ownership and oversight of risks.
The Committee also considered the nature and circumstances around
significant risk events that had occurred during the year to assess
whether they suggested significant failure or weakness in internal
controls. An internal financial controls matrix summarising the key
processes and oversight of the Group’s financial controls was
reviewed, with
finance management.
The Committee also satisfies itself that management’s response to
any financial reporting or internal financial control issues identified by
the external auditor is appropriate.
senior
input
from
• Board review – at their January 2024 meeting, the Board undertook
its formal review of the effectiveness of the risk management systems
of the Group. Management supported this review by presenting
information about the Group’s risk management systems and
processes, the output of the reviews undertaken by the Audit
Committee and the executive directors, information about the most
significant business risks and a summary of the type and regularity of
key executive director-led risk governance meetings, mapped to the
principal risks.
To support the Audit Committee and Board in discharging their
responsibilities, they were provided with the following information:
• Relevant extracts regarding their responsibilities with regard to risk
from the Corporate Governance Code, the FRC Guidance on the
Strategic Report and also on Risk Management, Internal Control and
Related Financial and Business Reporting.
• A review of the Principal Risks identified by other comparable listed
companies. This helps to ensure that there are no material gaps in our
risk identification or impact assessment.
Following the evaluation process described above, the Board is satisfied
that the material controls have been operating effectively for the
financial year to January 2024 and up to and including the date of this
Annual Report (see page 129 for further details). No significant failings
of internal control were identified during these reviews.
The business will continue to review opportunities to develop,
strengthen and improve the effectiveness of our risk management and
internal control systems.
Climate risk
We have identified the risks posed to NEXT by climate change and how
they might impact our business. The risks include the short to medium
term impacts including transitional changes (for example, legislation and
financial) which we closely monitor, as well as the long term emerging
risk of climate change (for example, physical changes including the
increased likelihood of flooding events) for which we have undertaken
an analysis of our key product sourcing locations. Having assessed and
modelled the risks, we believe that the short to medium term climate-
related risks are not material for our business, although we recognise
that we will need to keep abreast of future climate change legislation as
well as consumer preferences. The risks relating to climate change are
therefore part of the considerations in several of our principal risks,
but are not currently deemed to be a separate principal risk of
the business.
The environmental and climate change related risks are overseen by the
ESG Steering Group, supported by the Risk Management team and are
reported to the executives and ultimately the Board. Further details
regarding NEXT’s climate risks are provided in our TCFD disclosures on
pages 93 to 99.
Risk appetite
Our approach to risk management aims to bring controllable risks
within our appetite and enable our decision making to balance
uncertainty against the objective of building shareholder value through
long term, sustainable returns for our shareholders and other
stakeholders. On page 74 we detail our core principles of doing business
and in this section we explain how those principles contribute to
managing the business objectives within the Board’s risk appetite.
Our financial disciplines ensure that each of our business divisions make
net margins that are sufficient to allow them to withstand the inevitable
vagaries of any consumer facing business. We also ensure that we make
healthy returns on capital employed, commensurate with the risks
involved in our sector.
Emerging risks
Identification and review of emerging risks are integrated into our risk
review process. Emerging risks are those risks or combinations of risks
which are often rapidly evolving for which the impact and probability of
occurrence have not yet been fully understood and consequently the
appropriate mitigations have not yet been fully identified. All risk
owners and managers within the business are challenged to consider
emerging risks and this is enhanced by formal horizon scans by the
executive directors and the Risk Steering Group, and reviewed by the
Audit Committee and Board. Key emerging risks that we are monitoring
include the uncertain economic environment and its potential impact
on our business and customers (see page 31 for further information)
and the impact of increasing reporting requirements on ESG, particularly
carbon emission reduction (see pages 95 and 97).
Black swan events
The Audit Committee has reviewed the way in which very large and
disruptive events would be managed by the business. This review
included looking at the resilience of the business, the various liquidity
levers available to it (with associated estimated quantums and
timescales), the business impact assessment process and continuity
plans in place.
81
Strategic ReportGovernanceFinancial StatementsShareholder Information RISKS AND UNCERTAINTIES
Assessment of principal risks
and uncertainties
The directors confirm that they have carried out a robust assessment of
the principal risks and uncertainties facing the Group, including any
emerging risks and those that would threaten its business model,
future performance, solvency or liquidity. Please refer to the Corporate
Governance Report on page 129 for further details. After review,
the Board agreed that no changes were necessary to the principal risks
and uncertainties this year. They did, however, agree to changes to
some of the principal risk trends, as indicated in the following pages.
The principal risks are described below, together with an explanation of
how they are managed or mitigated.
The Board is committed to ensuring that the key risks are managed on
an ongoing basis and the business operates within its risk appetite and
took into consideration the principal risks of the business when it
assessed the long term viability of the business. Although these risks all
have the potential to affect future performance, work is undertaken to
mitigate and manage these risks such that they should not threaten the
overall viability of the business over the three year assessment period
(see the viability assessment on page 87).
Risk trend
↑ Increasing
↔ Unchanged
↓ Decreasing
Link to strategy
Improving and developing our product ranges
Maximising the profitability of retail selling space
Increasing the number of profitable NEXT Online customers
Managing margins
Focusing on customer experience and satisfaction
Maintaining the Group’s financial strength
Generating and returning surplus cash to shareholders
Principal risk and description
How we manage or mitigate the risk
Business strategy development and implementation
If the Board adopts the wrong business strategy or does not implement
its strategies effectively, our business may suffer. The Board, therefore,
needs to understand and properly manage strategic risk, taking into
account specific retail sector risk factors, in order to deliver long term
growth for the benefit of NEXT’s stakeholders.
• The Board reviews business strategy on a regular basis to determine
how sales and profit can be maximised and business operations
made more efficient.
• The Chief Executive provides regular updates at Board meetings
regarding key opportunities and progress of major initiatives.
• Our International Online business, third-party LABEL business and
Total Platform provide geographic and product diversification.
• Our disciplined approach to sales, budgeting, stock control,
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 products 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.
Link to strategy
Risk trend
↔
82
Principal risk and description
How we manage or mitigate the risk
Product design and selection
Our success depends on designing and selecting products that
customers want to buy, at appropriate price points and stocked in the
right quantities.
In the short term, a failure to manage this risk may result in surplus
stock that cannot be sold and may have to be disposed of at a loss.
Over the longer term, a failure to meet the design, quality and value
expectations of our customers will adversely affect the reputation of the
NEXT Brand.
Link to strategy
Risk trend
↔
Key suppliers and supply chain management
Reliance on our supplier base to deliver products on time and to our
quality standards is essential. Failure to do so may result in an inability
to service customer demand or adversely affect NEXT’s reputation.
Changes in global manufacturing capacity, costs and logistics may
impact profit margins.
Non-compliance by suppliers with the NEXT Code of Practice may
undermine our reputation as a responsible retailer.
Link to strategy
Risk trend
↔
• Executive directors and senior management continually review the
design, selection and performance of NEXT product ranges and those
of other brands sold by NEXT.
• LABEL brands (along with our Beauty business) have served to
increase the breadth of our Online offer far beyond NEXT’s natural
design, fashion and price boundaries. Just as important are the
numerous ways in which our own NEXT product ranges have been
extended and diversified.
• Executive directors and senior management regularly 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 approve quality standards, with in-house
quality control and testing teams in place across all product areas.
• Senior management regularly review product recalls and product
safety related issues.
• There has been sustained improvement in product availability.
• Stock availability is reviewed on an ongoing basis and appropriate
action taken where service or delivery to customers may be
negatively impacted.
• Management continually seeks ways to develop our supplier base to
reduce over-reliance on individual suppliers or single territories and
to maintain the quality and competitiveness of our offer. The Group’s
supplier risk assessment procedures establish contingency plans in
the event of key supplier failure.
• Existing and new sources of product supply are developed in
conjunction with NEXT Sourcing, external agents and/or
direct suppliers.
• We have Code of Practice Principle Standards that set out the standards
we expect for supplier production methods, employee working
conditions, quality control and inspection processes.
• 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. Further details are set out on
page 104.
• 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 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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Strategic ReportGovernanceFinancial StatementsShareholder Information
RISKS AND UNCERTAINTIES
Principal risk and description
How we manage or mitigate the risk
Warehousing and distribution
Our warehousing and distribution operations are fundamental to the
running of the business. Risks include business interruption due to
physical damage, access restrictions, breakdowns, capacity and
resourcing shortages, IT systems failure, inefficient and slow processes
and third-party failures.
Increasing choice in the products NEXT sells has been central to the
development of our Online platform but the proliferation of unique
items, along with a shift from Retail to Online sales has presented our
warehouse operations with significant challenges.
Link to strategy
Risk trend
↓
Business critical systems
NEXT’s performance depends on the engagement, recruitment and
retention of customers and on its ability to drive and service customer
demand. There is a risk that the business fails to adopt and/or maintain
efficient use of suitable software, hardware and mechanisation to
provide both Retail and Online customers with service levels that meet
or exceed their expectations. These systems, software and platforms
are ever changing as technology continues to evolve. Keeping customers
and users up to date and managing the implementation and changes
that come with the evolution of these platforms, in addition to
maintenance of existing systems, can be challenging.
As detailed in the Strategic Report, our business has increased reliance
on technology and the development of business ideas within the Group
(such as Total Platform) increases that reliance further.
• Our new, boxed warehouse, Elmsall 3 has delivered further
improvements in capacity with full automation to be completed in
2024 resulting in increased resilience thereby reducing the risk of
capacity issues.
• Planning processes are in place to ensure there is sufficient warehouse
handling capacity for expected future business volumes over the
short and longer terms.
• Service levels, warehouse handling, inbound logistics and delivery
costs are continually monitored to ensure goods are delivered to our
warehouses, Retail stores and Online customers in a timely and cost-
efficient manner.
• Our warehouse leadership team meets regularly to assess the
opportunities and risks in our warehouse and distribution network.
• Business continuity plans and insurance are in place to mitigate the
impact of business interruption.
• The Board has approved and keeps under regular review an extensive
warehouse investment programme to accommodate further Online
growth and transfer in customer demand from Retail to Online
(see page 21 for further details).
• Continued investment in technology that supports the various
component parts of the NEXT Online platform including improvements
in technology recruitment and retention.
• Continual development and monitoring of the performance of NEXT’s
UK and overseas websites, with a particular focus on improving the
Online customer experience.
• A range of key trade and operational meetings keep under review the
performance, evolution, risks and opportunities of the NEXT
customer facing systems. Executive directors are in attendance at
each of these key meetings.
• Market research and customer feedback are used to assess customer
opinions and satisfaction levels to help ensure that we remain
focused on delivering excellent customer service and improve our
systems to meet these needs.
• Ongoing monitoring of KPIs and feedback from website and call
centre support operations.
Link to strategy
Risk trend
↔
84
Principal risk and description
How we manage or mitigate the risk
Management of long term liabilities and capital expenditure
Poor management of NEXT’s longer term liabilities and capital
expenditure could jeopardise the long term sustainability of the
business. It is important to ensure that the business continues to be
responsive and flexible to meet the challenges of a rapidly changing
retail sector.
• Our predominantly leased store portfolio is actively managed by
senior management, with openings, refits and closures based on
strict store profitability and cash payback criteria. Long term liabilities
continue to be reduced.
• We undertake regular reviews of lease expiry and break clauses to
identify opportunities for exit or renegotiation of commitments.
Leases will not be 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.
• Appropriate amortisation accounting policies reduce the risk of an
unexpected significant write-off.
Link to strategy
Risk trend
↔
Information security, data protection, business continuity and cyber risk
The continued availability and integrity of our IT systems is critical to
successful trading. Our systems must record and process substantial
volumes of data and conduct inventory management accurately and
quickly. Continuous enhancement and investment are required to
prevent obsolescence and maintain responsiveness.
• We operate an Information Security and Data Privacy Steering
Committee. Its main activities include agreement and monitoring of
related key risks, activities and incidents. The Committee comprises
two executive directors and relevant senior management.
The threat of unauthorised or malicious attack is an ongoing risk,
the nature of which is constantly evolving and becoming increasingly
sophisticated. Our brand reputation could be negatively impacted by
cyber security breaches.
Link to strategy
Risk trend
↔
• Significant
investment
in systems development and security
programmes has continued during the year, complemented by
in-house dedicated information and physical security resources.
• Systems vulnerability and penetration testing is carried out regularly
by both internal and external resources to ensure that data is
protected from corruption or unauthorised access or use.
• Critical systems backup facilities and business continuity plans are
reviewed and updated regularly.
• Major incident simulations and business continuity tests are carried
out periodically.
• We have reduced our cyber risk vulnerabilities through a dedicated
programme of work with third-party support which further reduced
our vulnerabilities to cyber risk.
• IT risks are managed through the application of internal policies and
change management procedures, imposing contractual security
requirements, 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 exposures 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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Strategic ReportGovernanceFinancial StatementsShareholder Information
RISKS AND UNCERTAINTIES
Principal risk and description
How we manage or mitigate the risk
Financial, treasury, liquidity and credit risks
NEXT’s ability to meet its financial obligations and to support the
operations of the business is dependent on having sufficient liquidity
over the short, medium and long term.
NEXT is reliant on the availability of adequate financing from banks and
capital markets to meet its liquidity needs.
NEXT is exposed to foreign exchange risk and profits may be adversely
affected by unforeseen moves in foreign exchange rates.
NEXT might suffer financial loss if a counterparty with which it has
transacted fails and is unable to fulfil its contract.
NEXT is also exposed to credit risk, particularly in respect of our Online
customer receivables, which at £1.5bn represents the largest item on
the Group Balance Sheet.
Link to strategy
Risk trend
↓
Legal, regulatory and ethical standards compliance
NEXT must continuously adapt to the increasingly broad, stringent and
fast-evolving regulatory framework applicable to the operation of the
Group’s customer credit and international businesses.
With the growing reliance on our digital online and marketing activities,
the Group could inadvertently process customer or employee data in a
manner deemed unethical or unlawful.
Failure to have appropriate processes for the above in place could result
in significant financial penalties, remediation costs, reputational damage
and/or restrictions on our ability to operate. This is against a backdrop of:
• The changing attitude of UK consumers toward their data and how it
is used
• Increasingly complex and
fast-evolving data protection
law
and regulation
• Rapid technological advances delivering an enhanced ability to gather,
draw insight from and monetise personal data.
With regards 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.
Link to strategy
Risk trend
↑
86
• NEXT operates a centralised Treasury Function which is responsible for
managing liquidity, interest and foreign currency risks. It operates
under a Board approved Treasury Policy. Approved counterparty and
other limits are in place to mitigate NEXT’s exposure to counterparty
failure. Further details of the Group’s treasury operations are given in
Note 29 to the financial statements.
• The Group’s debt position, available liquidity and cash flow projections
are regularly monitored and reported to the Board and has improved
during 2023. The Board will agree funding for the Group in advance of
its requirement to mitigate exposure to illiquid market conditions.
• The Group manages the financing of its debt and liquidity to ensure it
maintains its longstanding investment grade credit rating.
• The Board keeps under review the cash generation levers available to
it, including the potential quantum and timescales of initiatives to
reduce debt and realise cash.
• 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 receive regular updates throughout
the year regarding the customer credit business.
• Policies and training are in place for those employees and contractors
working in the business areas. These are kept under review
and updated.
• A dedicated financial regulatory compliance and quality assurance
team monitors compliance and any changing requirements,
working with external advisers as required. This year it included the
introduction of the Consumer Duty regime.
• NEXT has identified a set of conduct and compliance risks, documented
in a business 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.
• We operate an Information Security and Data Privacy Steering
Committee. Its main activities include agreement and monitoring of
related key risks, activities and incidents. The Committee comprises
two executive directors and relevant senior management.
• With regard to climate risks, the transitional (including regulatory
requirements) and physical risks and opportunities presented by
rising temperatures, climate-related policy, and emerging technologies
will be kept under review using the TCFD framework. Climate risk,
ESG regulatory changes and stakeholder expectations are increasing,
these are considered on an ongoing basis by our ESG Steering Group
and Audit Committee.
VIABILITY ASSESSMENT
Statement of viability
The directors have assessed the prospects of the Group by reference to its current financial position, its recent and historical financial performance
and forecasts, its business model and strategy (pages 74 to 75) and the principal risks and mitigating factors described on pages 82 to 86. In addition,
the directors regularly review the financing position of the Group and its projected funding position and requirements.
The Group is operationally and financially strong and has a long track record of consistently generating profits and cash, which is expected to
continue both in the short and long term. In each of the last three financial years, despite the impact of the cost of living and inflation pressures the
business continued to generate high levels of cash before distributions.
The Group has maintained its net debt (excluding leases) comfortably within its available facilities with headroom of £0.5bn at the year end.
During the year the company renewed its revolving credit facility, securing access to £425m of funds if needed. This facility runs until 2028,
providing security of funding during the period of assessment.
During the period of assessment both the 2025 and 2026 bonds fall due for repayment. The Board expects that, given its current investment grade
credit rating and strong performance, it would be able to renew or replace these bonds well ahead of maturity. However, the assessment of the
viability of the Group is not dependent on securing this financing and the Company is already planning to build its cash reserves ahead of 2025 bond
repayment so that it has additional flexibility to settle in cash if this is considered more cost effective.
The Board considers that this headroom, coupled with the highly cash generative nature of the business and the available cash levers (described
overleaf) provide a strong degree of financial resilience and flexibility.
Assessment period
The retail sector is inherently fast paced, competitive and dynamic, particularly in respect of the fashion product cycle. However, as illustrated in
the diagram below, a wide variety of other time horizons are also relevant in the management of the business.
The directors have assessed the viability of the Group over a three year period, as they believe this strikes an appropriate balance between the
different time horizons which are used in the business and is a reasonable period for a shareholder to expect a fashion retail business like NEXT to
be assessed over.
While the period of assessment was based on a three year horizon, the Board is conscious that a significant portion of the Group’s external bond
debt matures in 2025 and 2026. If the Group’s performance in year three of its forecast was maintained into 2025 and 2026, then the directors
consider the business would have sufficient funds to repay or secure refinancing of the bonds as they mature.
1 year
2 years
3 years
4 years
6 years
10 years+
Detailed budgets
and forecasts
Target payback
period for
new stores
Cash flow
forecasts
Medium term
financing
considerations
Weighted
average remaining
lease life
Long term
investment and
financing
considerations
Warehousing and logistics capacity planning
New lease commitments
Retail space planning
Share-based incentives
IT systems development
Currency hedging
Management succession planning
Pensions
ESG
87
Strategic ReportGovernanceFinancial StatementsShareholder Information VIABILITY ASSESSMENT
Assessment of viability
Viability has been assessed by:
• Preparation of a three year viability model, with year one based on our profit guidance (NEXT Group Profit Before Tax) for the year ending January
2025 (see page 33) of £960m and a cash generation, before distributions, in excess of £600m. Thereafter it assumes that the Group sales and
profit remain flat with a decline in Retail sales being offset by growth in the Online, Finance and Total Platform divisions. This is considered a base
case model for viability testing purposes.
• ‘Top-down’ sensitivity and stress testing is then applied to this model. This included a review of the three year cash projections which were then
stress tested to determine the extent to which sales, and hence trading cash flows, would need to deteriorate before breaching the Group’s
facilities or financial covenants. This was both before and after anticipated shareholder distributions, and assuming that any bank facilities
(i.e. the bonds) which expire during the period are not replaced. The current facilities of the Group include a revolving credit facility of £425m
(maturity date: 2028) and it has financial covenants across its debt relating to interest cover, gearing and an EBIT to debt ratio.
• This testing indicated that the business could withstand a sustained decline in sales, against its base case, across the entire business, of more than
25% over a 12 month period and still remain within its existing financing facilities and covenants. This assessment did not require the business
to seek any additional or new external financing.
• Specific consideration was also given to the impact caused by a ‘black swan’ event which results in a significant and sustained disruption to the
business. This scenario modelled the impact of the total closure of the business for two months followed by a gradual recovery in sales over a six
month period. In this scenario, the business was able to remain within its finance facilities and covenants through the use of mitigating actions,
including the sale of shares in the ESOT and the deferral of non-essential capital expenditure.
• Considering the likelihood and impact of severe but plausible scenarios in relation to each of the principal risks as described on pages 82 to 86.
These principal risks were assessed, both individually and collectively, taking into consideration a broad range of mitigating actions and cash
levers that might be utilised in particular situations. These mitigating actions, some of which the Group used during the COVID pandemic,
include a mix of cost saving measures (such as a deferral of capital expenditure and cancellation of stock purchases) and the ability to realise
additional cash inflows from financing or other initiatives (such as the sale of ESOT shares or assets). Whilst all the principal risks have the
potential to affect future performance, none of them are considered likely either individually or collectively to give rise to a trading deterioration
of the magnitude indicated by the stress testing and to threaten the viability of the business over the three year assessment period.
Viability statement
Based on this review, the directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and to meet
its liabilities as they fall due over the three year period to 30 January 2027.
88
CORPORATE RESPONSIBILITY
Contents
Environment
Our People
Our Suppliers
page 90
Our Customers and Products
page 102
Community
page 104
Human Rights and Modern Slavery
page 107
page 108
page 109
What being a responsible business
means to us
As an international fashion, homeware and beauty business, what we
do and how we do it has an impact on the people and the world
around us. Our stakeholder relationships are key to our success and
inform our decision making on Environmental, Social and Governance
(ESG) matters, now a widely recognised term for what we have always
valued – doing the right thing.
We are seeing a number of developments and new standards which
will help us demonstrate how we continue to evolve a lower carbon
business model and contribute toward a climate-resilient economy.
This year we have scrutinised the achievability of our targets, updating
our Responsible Sourcing Approach to 2030 and continuing the
groundwork for setting a Transition Plan to Net Zero.
Global issues such as responsible sourcing, human rights and climate
change remain key areas of focus. Within this report you can read about:
• Our disclosures under the Task Force on Climate-related Financial
Disclosures (TCFD) and the Sustainability Accounting Standards
Board (SASB).
• Our progress towards a number of our environmental goals, such as
our Responsible Sourcing Approach.
• The progress we have made towards our Science Based Target
Initiative (SBTi) approved carbon emission reductions for Scopes 1,
2 and 3.
• The range of initiatives we continue to work on to help support the
wellbeing of our people.
• Our progress on waste, packaging and recycling.
• The activities of our internal Code of Practice (COP) team, who
continue to work with our suppliers worldwide to meet appropriate
labour standards.
More information can be found in the Group’s Corporate Responsibility
Report which is published on our corporate website at nextplc.co.uk.
Our principles
The principles underpinning our aim to do business responsibly are
unchanged; we seek always to:
• Deliver value to our customers.
• Act in an ethical manner.
• Recognise, respect and protect human rights.
• Develop positive relationships with our suppliers and business partners.
• Recruit and retain high integrity employees.
• Take responsibility for our impact on the environment.
• Provide
support
through
donations
to
charities
and
community organisations.
Our business activities impact a wide range of stakeholders and we
strive to make this impact a positive one. Our purpose is to provide
our customers with beautifully designed, excellent quality products.
These products need to be well made, functional, safe and responsibly
sourced in a way which respects the environment and the people and
animals within our supply chain.
We continue to implement the United Nations Guiding Principles on
Business and Human Rights and align our work with the United Nations
Sustainable Development Goals (SDGs) that are most relevant to our
business operations and products.
The following pages describe how we uphold our principles in relation to
our stakeholders and the work we are doing to reach our chosen SDGs.
Amanda James
Group Finance Director
21 March 2024
We are a member of several leading forums, where we collaborate with others to adopt more sustainable ways of working. These include:
The ZDHC Foundation
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E N V I R O N M E N T
Our environmental reporting comprises a number of sections:
Our Commitment
Greenhouse gas emissions – SECR
TCFD
Governance
Strategy
Risk Management
Metrics and Targets
SASB
page 90
page 90
page 93
page 93
page 95
page 97
page 98
page 101
Our commitment
We are committed to minimising our environmental impact by reducing
the carbon intensity of our activities and the natural resources we use.
Rankings
Our efforts around ESG are
external benchmarks:
reflected
in
the
following
• Constituent of the FTSE4Good Index.
• Sustainalytics: 19.7 risk rating (low risk), ranked 298 out of 505 in our
industry (retail).
• MSCI: ESG rating AA (Leader).
• CDP: Climate change: B, Forests: C, Water security: B-.
Greenhouse gas emissions – Streamlined Energy and Carbon Reporting (SECR)
In accordance with the disclosure requirements for listed companies under the Companies Act 2006, the table below shows the Group’s SECR
disclosure across Scope 1 and 2 together with an appropriate intensity metric and our total energy use of gas, electricity and other fuels during
the financial year. The reported emissions data includes NEXT plc and those of its subsidiaries in which it has a controlling interest. Emissions from
newly acquired subsidiaries will be consolidated in our reporting when reliable and accurate data is evidenced, with the aim to report in the first full
year post acquisition. As such, the table below does not include FatFace, however in relation to Reiss which is otherwise excluded, it does include
owned distribution vehicles for Scope 1 which sit within NEXT’s own data from when Reiss became a TP partner and NEXT distribution was used.
Greenhouse Gas (GHG) Emissions1
Unit
Scope 12
Scope 2 – Location Based3
Scope 2 – Market Based4
tonnes CO2e
tonnes CO2e
tonnes CO2e
Total Scope 1 & 2 Location Based tonnes CO2e
Total Scope 1 & 2 Market Based
tonnes CO2e
2024
UK
43,343
40,190
–
83,533
43,343
Global
44,001
43,373
3,184
87,374
47,185
2023
UK
Global
42,410
(42,170)
43,404
(43,165)
39,085
1,443
43,323
5,638
81,495
(81,255)
86,727
(86,488)
43,853
(43,613)
49,042
(48,803)
Energy consumption5
Electricity Purchased
Renewable Electricity Generated
Natural Gas
Gas Oil
Diesel
Petrol (including plug-in hybrid)
LPG
kWh
194,086,147
200,167,830 202,113,133
kWh
kWh
kWh
kWh
kWh
kWh
5,113,440
5,113,440
5,369,622
41,009,976
41,009,976
42,609,114
334,388
334,388
1,418,671
141,512,840
142,088,152 135,689,785
4,139,079
4,541,148
3,671,175
25,027
274,837
–
209,139,917
5,369,622
42,784,844
1,418,671
137,171,470
3,909,360
282,823
Total Energy Consumption
kWh
386,220,897
393,529,771 390,871,500
400,076,707
Intensity metric6
Location Based tonnes of CO2e/total sales (£m)
Market Based
tonnes of CO2e/total sales (£m)
15
8
15
8
15
8
16
9
90
1. The methodology used to calculate our emissions aligns with our global direct carbon footprint and is measured in alignment with the GHG Protocol Corporate Accounting and
Reporting Standard and RE100 reporting parameters. We adopt the conventional approach in calculating our carbon emissions through the collection of primary, secondary, or tertiary
data in their source units (e.g. kilowatt-hours (kWh), litres (L), kilograms (kg), kilometres (km) etc.). The consumption figures relating to each energy source are converted into carbon
emissions by applying the relevant carbon conversion factor. Factors are updated annually using the most recent factors published by the UK Department for Energy Security and Net
Zero (DESNZ) and the UK Department for Environment, Food and Rural Affairs (DEFRA); 2023 is the most recent accessible update.
2. Scope 1 being emissions from combustion of fuel and refrigerant gas losses.
3. Scope 2 being electricity (from location based calculations), heat, steam and cooling purchased for the Group’s own use (excluding FatFace and Reiss).
4. The calculation of market based emissions is based on our energy suppliers fulfilling their contractual obligations under the terms of renewable tariffs to back all energy supplied to all
of their customers on such tariffs. As members of RE100, our approach is informed by the RE100 quality criteria and GHG protocol guidance. RE100 requires claims to use of renewable
electricity to be based on generation occurring in the same market for renewable electricity that use is claimed in, this includes the single market in Europe. The revised RE guidance
published in December 2022 provided an updated list of countries that make up the single market. Although the UK has been excluded from the list, the RE guidance provided
grandfathering provisions for contracts with operational commencement dates before 1 January 2024, allowing for the UK to continue to be recognised within the single market in
Europe. The operational commencement dates of our contracts occurred prior to 1 January 2024, therefore we have applied the grandfathering provisions when calculating our market
based emissions.
5. Energy from electricity, natural gas, gas oil, transport fuel and LPG have been included. We have used the conversion factors published in 2023 DEFRA GHG conversion factors for
company reporting to convert from passenger miles in company-owned vehicles to kWh.
6. We use tonnes of CO2e/Total Sales (£m) as our intensity metric. Sales for Reiss and FatFace have been excluded as they were acquired part way through the year.
Restated from prior year due to the incorrect application of the conversion factor used to convert the raw data into tCO2e resulting in an understatement of the balance in the prior year.
This changed the emissions for NEXT owned cars from 1,450 to 1,690 which is above our 5% materiality threshold for restatement. This category of Scope 1 emissions sits across multiple
data lines in the table, causing multiple numbers to be restated.
Changes in our SECR
The main cause of our Scope 1 emissions increasing is a greater usage of our own vehicles for distribution. This is in context of business growth,
demonstrated by NEXT Trading Total Sales growth of +3%.
Energy consumption data is captured through monthly bills showing actual or estimated consumption. We continue to look for ways to improve
energy efficiency as this reduces both carbon emissions and costs for our business. We actively track and review energy performance via a central
data collection facility to ensure our properties are operating efficiently. The following initiatives were undertaken during the year:
• Continued to invest in high efficiency LED lighting which are now in 90% of our retail stores. This reduced our lighting energy consumption by
around 75% in comparison to the lighting replaced. The LED lighting solutions are fitted in new stores as standard. At the end of the year we had
refitted 418 out of 464 NEXT stores, and aim to have the balance of stores’ lighting replaced by the end of March 2024.
• Solar panel installation is complete at our Elmsall 3 warehouse. The renewable electricity generated across all our sites in the year was 5.1m
KwH, an increase of approximately 1.5m KwH on last year.
• Maintained our Energy Forums, working closely with our energy provider and other parties to actively identify opportunities in energy efficiency
measures and technology to help reduce our environmental impact and deliver savings for the business.
• We are agreeing a Power Purchase Agreement for longer term commitment to renewable energy usage. Under the agreement we will obtain
13% of our annual energy requirement for 15 years, starting in October 2024.
Renewable energy
NEXT is a signatory to the RE100 initiative and has committed to using 100% renewable energy by 2030. Our UK and Eire operations have been run
using 100% renewable energy since April 2017 and we continue to work towards achieving this target in our direct operations overseas.
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Carbon footprint – including Scope 3
Due to the nature of our business, most of our carbon footprint falls outside of our direct control and is reported under our Scope 3 emissions.
Our Scope 3 total emissions disclosure (CO2e) covers the complete lifecycle of all the products we sell, including branded items sold through LABEL
and Total Platform. As FatFace had not yet transitioned into our warehouse for this reporting period, only sales of their products through LABEL is
included. This extends from the production of raw materials through to the manufacture, transport, how our customers use and care for them and
the eventual end of life treatment of the products we sell. The emissions have been estimated in line with the GHG Protocol Corporate Accounting
and Reporting Standard and are based on a combination of internal data coupled with the best available public sources on CO2 emissions factors
using conservative assumptions.
Our total Scope 3 emissions are reported in the table below, together with our Scope 1 and 2 (location based) emissions. Our carbon reduction
targets are set out on page 98.
Greenhouse Gas (GHG) Emissions1
Scope 1
Scope 2 – Location Based
Scope 3
Total Carbon
Scope 1
Gas Heating (stores, offices, warehouses)
NEXT Owned Distribution Vehicles
NEXT Owned Cars
Building (diesel, oil, refrigerant gases)
Machinery (LPG)
Scope 2
NEXT Group Energy Consumption
Scope 3³
Purchased Goods and Services
Use of Sold Products
Upstream Transportation and Distribution
Downstream Transportation and Distribution
Employee Commuting
Fuel and Energy Related Activities
End of Life Treatment of Sold Products
Capital Goods
Business Travel
Waste Generated in Operations
Tonnes
2024
44,001
43,373
2,275,389
2,362,763
7,502
33,219
1,675
1,552
54
43,373
1,394,622
574,636
135,475
59,868
26,252
24,031
25,182
20,732
13,072
1,519
2023
43,404²
(43,165)
43,323
2,119,736
2,206,463
(2,206,224)
7,810
32,054
1,690²
(1,450)
1,789
61
43,323
1,316,108
559,223
81,087
65,813
20,933
26,811
19,268
23,576
5,428
1,489
Var %
1%
0%
7%
7%
-4%
4%
-1%
-13%
-11%
0%
6%
3%
67%
-9%
25%
-10%
31%
-12%
141%
2%
1. The methodology used to calculate our emissions is set out in our Corporate Responsibility Report which can be found on our corporate website at nextplc.co.uk. It does not include
FatFace and includes Reiss in relation to Scope 1 owned distribution vehicles which sit within NEXT’s own data and Scope 3 for Reiss product that travelled through our warehouse as a
result of being a TP client.
2. Restated from prior year due to the incorrect application of the conversion factor used to convert the raw data into tCO2e, resulting in understatement of the balance in the prior year.
3. We have excluded franchises from our reporting boundary at present due to challenges in obtaining accurate and reliable data.
Restated from prior year.
Changes in our GHG Scope 3 emissions
Our Scope 3 increases have been driven by an increase in air freight within our distribution; increased business travel now that this is possible post-
COVID; and purchased goods for acquisitions including Joules and Reiss. Purchased Goods remains to be the biggest category of impact. We have
rolled out a live ‘Responsible Sourcing Progress Report’ internally, which gives the commercial buying teams the ability to review their progress on
a weekly basis without the need to wait for a formal report. This also encourages collaboration between teams to drive progress and to identify
implementation challenges. We continue to focus on uptake of more responsible materials whilst we are gathering data from our supply chain to
understand where we can best support energy reduction.
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Task Force on Climate-Related Financial Disclosures (TCFD)
Index of TCFD recommended disclosures
1. Governance
a) Describe the board’s oversight of climate-related risks and opportunities
b) Describe management’s role in assessing and managing climate-related risks and opportunities
2. Strategy
a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term
b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C
or lower scenario
3. Risk Management
a) Describe the organisation’s processes for identifying and assessing climate-related risks
b) Describe the organisation’s processes for managing climate-related risks
c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s
overall risk management
page 93
page 94
page 95
page 95
page 96
page 97
4. Metrics and Targets
a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk
page 98
management process
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets
NEXT recognises that climate change poses challenges for our business
and supply chain. We are looking at the ways in which we can best
support the Paris Agreement on climate to limit the rise in global
temperatures to well below 2⁰C. Accurate and relevant disclosures
are essential to demonstrate progress and ensure stakeholder
accountability. Whilst reporting frameworks surrounding sustainability
are still being developed and are evolving, reporting helps us set
a baseline from which appropriate and meaningful actions can be taken.
consistent with
climate-related disclosures are
Statement of compliance
the
NEXT’s
recommendations and recommended disclosures set out in ‘Section
C – All Sector Guidance’ within the Supplementary Guidance Report
‘Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures’ published in 2021 of the TCFD, and in compliance
with the requirements of LR 9.8.6R (UK Listing Rules). These disclosures
set out how NEXT incorporates climate-related risks and opportunities
into governance, strategy, risk management, what we are doing to reduce
our environmental impact and our key metrics and targets.
1. Governance – Disclose the organisation’s governance around climate-related risks and opportunities
Our governance structure around ESG-related activities is relatively simple. This allows emerging issues and matters for decisions to be escalated quickly.
BOARD
• Has delegated oversight of ESG
matters to the Audit Committee.
• Is updated after each Committee meeting.
GROUP FINANCE DIRECTOR
• Executive sponsor of ESG matters.
• Receives updates on ESG matters throughout
the year from key stakeholders.
REMUNERATION
COMMITTEE
• Considers if and how ESG metrics
should be included in variable pay
arrangements of executive directors,
see page 141.
AUDIT COMMITTEE
• Considers ESG risks (including
materiality), opportunities and any
impact on financial statements.
• Monitors progress against goals/targets
and adherence to sustainability principles.
• Receives an ESG report from senior
managers at each meeting.
• Makes recommendations on all
ESG matters to the Board.
ESG STEERING GROUP
• Meets quarterly, focusing on
ESG targets, responsible business
activity, reporting and calibrating ESG
performance against peers.
• Chaired by the Legal & Compliance
Director and attended by Product
teams, the Deputy Company Secretary
and Heads of Supplier Ethical
Compliance and Product Legislation and
Sustainable Development.
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a) Describe the Board’s oversight of climate-related
risks and opportunities
The Board has delegated primary oversight of ESG activities to the
Audit Committee. It decided this was appropriate given the increasing
focus on the potential risks and financial impacts associated with
climate change. ESG is a standing agenda item at each Audit Committee
meeting and the Committee’s remit includes:
• Monitoring progress against climate-related goals and targets.
• Overseeing the Company’s ESG risks and opportunities.
• Keeping under review the materiality of climate-related risk and its
impact on the financial statements.
• Monitoring adherence to externally applicable sustainability codes
and principles.
Wider governance arrangements
There are wider governance arrangements in place to support the
Audit Committee and the Board in discharging their responsibilities.
These include:
• The Nomination Committee is responsible for ensuring the Board
has appropriate knowledge and expertise to assess the climate-
related issues NEXT faces in the short, medium and longer term.
• The Remuneration Committee considers whether the inclusion of
ESG-related targets should be included in pay arrangements. While a
specific ESG metric is not included in targets for performance-related
pay for executive directors, the Remuneration Committee reserves
the discretion to reduce variable pay in certain circumstances which
could be evoked if any material ESG failure came to light.
• An ESG Steering Group meets quarterly to oversee our ESG
workstreams, targets and emerging ESG risks. Climate-related issues
are central to the ESG matters the Steering Group considers.
ESG STRATEGY
Meet business objectives whilst ensuring we “do the right thing”
on Environmental, Social and Governance matters.
ESG TARGETS
Underpinning the
commitment
to do the right thing
with transparent,
challenging but
achievable targets.
RESPONSIBLE
BUSINESS ACTIVITY
Prioritising, engaging and
supporting the business
to move forward
initiatives that assist in
meeting our targets.
REPORTING
Internal and external
reporting to measure
progress and provide a
level of accountability
on our actions.
CALIBRATING
AND ADJUSTING
Taking regular stock of
how we are performing
against our peers and
ensuring we are positioned
where we want to be and
where our stakeholders
would expect us to be.
The Group Finance Director, Amanda James, is the executive sponsor of
ESG activities and directs the activities of the Steering Group. She meets
regularly with the key members of the Steering Group, receives regular
updates throughout the year and is present at Audit Committee and
Board meetings to discuss ESG matters that arise. The Committee
updates the Board and makes recommendations as appropriate.
b) Describe management’s role in assessing and
managing climate-related risks and opportunities.
Senior management are responsible for managing on a day-to-day basis
the climate-related risks and opportunities of the business. In 2021, NEXT
engaged an external climate risk consulting firm to help us complete a
climate opportunity and risk assessment, quantify the financial impacts
of those risks and opportunities and conduct a scenario analysis of
business resilience under a range of climate scenarios. We explain more
about the risks and opportunities on page 95 and our findings of the
scenario analysis on page 96. We intend to repeat that gap analysis and
risk assessment in the 2024/25 financial year.
Climate-related risks are assessed as part of our overarching risk
management framework; for further information please see page 81.
Senior management hold quarterly calls with the Company’s broker to
obtain market updates and stay informed of the views of institutional
shareholders on ESG matters, as well as regularly engaging directly
with shareholders, banks, credit rating agencies and proxy advisors.
During the year, we engaged directly with many of our shareholders
specifically to discuss ESG matters, such as carbon emissions,
responsible sourcing and modern slavery.
94
2. Strategy – disclose the actual and potential impacts of climate-related risks and opportunities
on the organisation’s businesses, strategy, and financial planning where such information
is material
a) Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium and long term.
During our initial review, we considered the transitional and physical risks
and opportunities presented by rising temperatures, climate-related
policy and emerging technologies and agreed on the methodology for
assessing and quantifying financial impacts.
Physical risks arise out of the physical aspects of climate change,
for example extreme weather events or global temperature increase.
Market risks refer to changes in demand of certain products and
commodities due to climate change. Transition risks are those which
arise from the transition to a lower-carbon economy, such as policy
changes. For the purposes of our assessment, the time horizons we
used were as follows:
• Short term: present day to 2025.
• Medium term: from 2025 to 2030.
• Long term: from 2030 to 2040.
The risks identified during our analysis are more likely to present
themselves in the medium or long term. Having assessed and modelled
the risks, we believe that there is no material financial risk or threat
to our business model in the short term. In this context, materiality,
in terms of potential impact, is the threshold at which we believe a risk
becomes sufficiently important to our investors and other stakeholders
that it should be publicly reported. We will continue to review this as we
develop our transition plan towards net zero which is explained in more
detail on page 100.
The risk management recommendations arising from our climate
change scenario analysis (further details on page 96) were:
Policy/Regulation: It is likely that increased policy and regulation will
have the most significant financial impact on NEXT over the longer
term. Incoming regulation and requirements such as digital product
passports, corporate net zero and transition plans and Taskforce on
Nature-related Financial Disclosures are expected to come into force in
the next two to five years. We are already considering the investment
required to meet our future obligations.
The majority of NEXT’s exposure to the impact of increased policy and
regulation and the area where greater understanding is being developed
is in our supply chain, so continuing our supply chain mapping and
engagement through the Higg Index is key to identifying and reducing
our exposure. We are members of the Sustainable Apparel Coalition
and this membership gives us access to a range of tools to support the
standardised measurement of sustainability from our supply chain,
using the Higg Index. The most significant thing the business can do
to reduce exposure to this risk is to reduce the carbon intensity of its
supply chain and operations.
Market: Climate change is expected to impact the supply and demand
for certain commodities, products and services. NEXT mitigates this risk
by continuing to maintain balanced and diverse sourcing routes and
product suppliers.
During the year we continued to participate in industry-wide initiatives,
such as the British Retail Consortium’s Climate Action Roadmap and
Textiles 2030. These forums have enabled us to share learnings as well
as contribute to the development of metrics and measurement of
improvement actions across the supply chain. For example, we played
an active role in the Textiles 2030 Metrics Working and Advisory groups.
In addition, we have begun collecting data from our supply chain using
the Higg Index, and have started to use this information to identify our
biggest risks and opportunities.
Physical: It is through playing our part in reducing the carbon intensity of
our operations, that we will in turn reduce the physical climate-related
risks that impact our business. Our diverse sourcing routes and product
suppliers is also a mitigating factor against physical climate-related risks.
b) Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning.
Risks
We have considered the potential for the financial statements to be
impacted by climate change, with a particular focus on long term assets.
Of the assets on our balance sheet which might be considered to be
at risk from climate change, the majority of our plant, property and
equipment are warehouses, retail stores, plant and machinery and shop
fittings in the UK. These assets have a useful remaining life of less than
10 years other than the leases on our Head Office and warehouses.
These assets are not considered to be at material risk of any physical
impacts or transitional risks arising from climate change.
Even though there is uncertainty around the time horizon over which
climate risks will materialise, stakeholder expectations and regulatory
attention could develop quickly, impacting the rate at which the
business may need to cut carbon emissions. We recognise that we will
need to keep abreast of future climate change legislation as well as
consumer preferences. The retail sector is faster paced than many and
there are likely to be changes in the way retailers do business in the next
few years. However, we have a strong track record of evolving at pace
and we are confident that we can react accordingly.
Opportunities
In the year we introduced ESG-related financing where achieving ESG
targets to be set in our borrowing facilities will result in improved rates
of finance. We are also considering the following opportunities in the
medium to long term:
• Reduced energy spend through energy-saving measures which
incorporate renewable energy.
• Donation schemes.
You can read more details on these in our Corporate Responsibility
Report which can be found at nextplc.co.uk/corporate-responsibility.
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c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2oC or lower scenario.
Our climate change scenario analysis
To further understand and explore how potential climate risks and
opportunities could evolve and impact our business over the medium
to longer term, the TCFD recommends undertaking climate scenario
analysis, which we carried out in 2021.
Climate scenarios are hypothetical plausible future states under
different levels of global warming and states of transition to a low-carbon
world. They provide a forward looking view of how different types of
climate-related risks and opportunities may impact an organisation.
There are a number of scenarios that have been developed by scientific
organisations which are publicly available and widely used within TCFD
scenario analysis.
Scenarios and timeframes assessed
The TCFD specifically recommends that organisations consider a set
of scenarios, including a ‘2°C or lower scenario’ in line with the 2015
Paris Agreement. This low-carbon scenario is centred on ‘transition’
risks and looks at the rapid changes, such as policy, technology and
market risks, that will be needed to cut emissions in line with the Paris
Agreement. The scenario analysis should also consider ‘physical’ risks,
such as temperature rise, sea level rise, and changes to the frequency
and severity of extreme weather events, including droughts and storms.
This is most relevant to our supply chain, the majority of which is based
in Asia.
We examined three climate scenarios against two timeframes for the
purposes of our analysis. The time frames we selected were to 2030
and 2040, to align with our long term planning horizons and with the
British Retail Consortium commitment to net zero by 2040.
The three scenarios we considered were as follows:
Scenario
Description
Reference data1 used in analysis
Late transition
Sudden shift towards low-carbon economy with governments making dramatic
policy interventions to make up for a late start. Global average temperature
increase to be kept within 2°C by 2100.
Scenario based: UNFCCC’s SSP1/
UNFCCC’s SSP2
Physical risk scenario: RCP 2.6
Early transition
Gradual and deliberate shift towards a low-carbon economy with the outcome
of successfully limiting global average temperature increase within 2°C by 2100.
Scenario based: UNFCCC’s SSP1
Physical risk scenario: RCP 2.6
Hothouse world
Continuation of current projection of carbon emissions without any significant
abatement or mitigation. Likely to result in average global temperature increase
of >4°C.
Scenario based: UNFCCC’s SSPs 2-5 w
Physical risk scenario: RCP8.5
1. The reference data refers to existing published scenarios in relation to socioeconomic data and climate projections that we have used to base our forward looking scenarios on.
As NEXT grows and changes, and the reference data evolves, we intend to periodically review the scenarios and timeframes we choose to apply in
our analysis and refine them as needed. Our next review is scheduled for 2024/25.
Overview of our findings
The headline implications for the resilience of our business, as summarised by reference to our scenarios, are:
Scenario
Description
Late transition
Most impactful scenario, driven by the potential for the introduction of the most severe forms of carbon taxation.
Early transition
In this scenario, the impact from the introduction of carbon taxation is still significant but carbon prices are predicted to stay
at lower levels. Therefore, this is the middle impact scenario.
Hothouse world
This is the least impactful analysis, however, it is acknowledged that this is in part due to the physical impacts under this
scenario not being severe until post-2050.
The analysis suggests that NEXT is most exposed to transition risk up to 2040. This is due to:
• The potential for significant exposure to Scope 3 emissions costs.
• The ability to manage physical risks to the supply chain via a diverse supplier base and agile procurement practices. NEXT already has this ability,
therefore it does not require any investment or changes in approach.
Management remain confident that in any of the considered scenarios above, the business is resilient to the impact of climate change.
96
The scenario analysis has confirmed that our mitigation actions to 2040 should focus on transitional risks, and critically on the reduction of
carbon and environmental impacts on which NEXT may be taxed or regulated. The impacts of the physical risks under all scenarios are relatively
modest under both time horizons. Having considered the different types of risks in the table below, we anticipate the time horizons for when
they are most likely to impact will be medium to long term.
Type of risk
Risk
Potential impact
Mitigation/Business response
Transition
Increased regulation
on product
composition or mix
Increase in the raw material costs across
the core fabrics we use.
We already closely monitor the implementation of any
policies related to products to ensure we comply with
appropriate safety regulations. We will continue to monitor
product legislation policies with a view to identifying
potential direct operating costs of the business that relate
to climate change.
Transition
and Market
Introduction of
climate sanctions
Tax levied on imports from countries with
a less environmentally friendly regime.
Balanced sourcing of product suppliers should reduce
exposure to this risk.
Transition
Increased pricing
of greenhouse
gas emissions
Failure to comply with regulations to
reduce our environmental footprint.
Physical
Increasingly extreme
weather events
affecting suppliers’
operations
Factories located in low-lying areas could
be at risk of flooding. A severe weather
event could lead to supply disruption
and loss of materials in the short term
and increased insurance costs over the
long term.
Physical
Severe crop failure in
cotton supply chain
A severe adverse weather event could
cause widespread crop failure. This could
lead to supply disruption, increased raw
material prices, and a decrease in the
quality of products in the short term.
Pay attention to any future policy proposed which may
increase direct operating costs of the business through
carbon taxes. Working to achieve the climate goals will
reduce any cost risks.
NEXT Sourcing, our overseas sourcing operation, undertook
an environmental impact assessment for supplier factories
in China, Bangladesh and India to model the potential
impact of flooding. It was noted that the Bangladesh
floods in 2004, which covered two thirds of the country,
primarily impacted regions in which NEXT Sourcing had no
presence. Assuming that future floods impacted the same
regions, it is considered that there would be little production
risk but likely delays in getting product to ports for onward
transportation. The key mitigation would be to send critical
stock by air freight where necessary. The financial impact
of doing so would be immaterial. The potential increase
in costs to insure buildings in those areas or move them
altogether is a long term risk.
In addition to NEXT Sourcing, we source from a number
of suppliers which provides us with a diversity across
different geographies.
In order to have a significant impact on the business,
there would need to be a significant systemic global failure
of crops. Mitigations would include passing on the increased
cost to the consumer or blending materials together.
3. Risk Management – Describe how the organisation identifies, assesses and manages
climate-related risks
a) Describe the organisation’s processes for identifying
and assessing climate-related risks.
We included climate-related risks within our overall integrated risk
management framework and any risks identified are subject to the
same process and managed in line with all other risks. For further detail
on our risk management framework and processes please see pages
78 to 81.
b) Describe the organisation’s processes for managing
climate-related risks.
Senior management conduct formal assessments of the key risks
relevant to their areas of responsibility twice a year. Climate is discussed
as part of that process but is not currently a material matter in respect
of any risk identified.
c) Describe how processes for identifying, assessing and
managing climate-related risks are integrated into
the organisation’s overall risk management.
The Audit Committee, under delegated authority from the Board,
is accountable for overseeing the effectiveness of our risk management
process, including identification of the principal and emerging risks.
Our ESG Steering Group supports this process and helps to identify,
monitor and assess current and emerging climate risks and report these
to the Audit Committee. Valuable input is received from the Head of
Product Legislation and Sustainable Development who is a member
of the ESG Steering Group. The output of all climate-related risk
assessments is considered by the Board when they assess the principal
risks of the business and is also used to direct focus to our ESG work.
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4. Metrics and Targets – Disclose the metrics and targets used to assess and manage relevant
climate-related risks and opportunities where such information is material
a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities
in line with its strategy and risk management process.
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.
c) Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets.
NEXT’s metrics and targets are used to help us understand our progress and to identify opportunities and risks. These span a number of topics set
out in more detail below and are collectively used to assist in the determination of our priorities. Our primary current targets are set out in the table
below and on pages 90 to 92 for our SECR and GHG disclosures.
Metrics and targets
Strategic goal
Deadline Progress achieved at January 2024
Measures
Responsible Sourcing
Approach1
2030
In progress – 59% (2023: 54%)
Reduce Scope 1 & 2
carbon emissions2
2030
In progress – 46% reduction
(2023: 47%)
Reduce Scope 3
carbon emissions3
Divert operational
waste from landfill
EV100 Pledge5
2030
In progress – 28% (2023: 29%)
Ongoing4 Achieved – 96% (2023: 95%)
2030
We have 858 (2023: 731) Company Cars in our UK fleet, of
which 212 (2023: 63) are fully electric (25%)(2023: 8.6%).
We have 360 (2023: 242) charging points across our
network with 69 at Head Office.
We have workplace e-charging available at 20 of our
employee sites across Head Office and Distribution.
In progress – 97% (2023: 95%)
RE100 Pledge
2030
Source 100% of our main raw materials
through known, responsible or certified
routes by 2030.
Reduce Scope 1 & 2 absolute carbon
emissions by 55% against an absolute
baseline of 2016/17 (SBTi).
Reduce Scope 3 emissions by 40% per
£1m of sales against a relative baseline
of 2019/20 (SBTi).
Divert at least 95% of operational waste
from landfill through recycling.
100% of vehicles up to 3.5 tonnes to be
electric.
Charging points across all staff sites.
Charging points across all customer sites
(car parks with sole use).
100% of electricity purchased to be
certified renewable globally.
1. Source 100% of our main raw materials through known, responsible or certified routes by 2030
We do not source raw materials directly, so our main focus is on supporting our commercial buying teams and working closely with them to
influence positive sourcing and manufacturing decisions. We have an internal ‘Responsible Sourcing Manual’ which gives our commercial teams
guidance on more sustainable materials. This year we revisited our targets and recalibrated our achievement target date from 2025 to 2030.
Whilst we have nearly met our target for leather and expect to meet it for cotton and timber by 2025, manmade cellulosic fibres, wool and
polyester targets have been reviewed to align with the sourcing information we have available to date. As part of this process we evolved our
methodology to make it more accurate by reference to total weight of product rather than the number of products. In addition, we are improving
our visibility of the different tiers of our supply chain to ensure the materials used in our products are sourced and manufactured responsibly.
We have a clear responsible sourcing strategy to source 100% of main raw materials through known, responsible or certified routes by 2030.
In 2021, we started labelling most NEXT products containing at least 50% of an approved raw material under our Responsible Sourcing Approach.
This makes it easier for customers to identify products that contain these materials with our ‘NEXT Generation’ labels.
2. Reduce Scope 1 & 2 absolute carbon emissions by 55%
The reduction in progress versus last year is due to an increased use of our own distribution vehicles to carry out inter-depot movements of stock.
There has been a reduction of third party distribution in Scope 3 which is greater than the increase in Scope 1. Our own operational efficiency
has been improved by the use of ‘double-decker’ trailers and therefore increased volume of stock with less journeys. Third party distribution is
a much smaller element of our Scope 3 footprint, so has minimal impact on the overall emission figure. For Scope 1, in addition we have seen
an increase of top-ups of refrigerant gasses (used for HVAC – Heating, cooling and AV) within our store portfolio and as such are reviewing this
internally. Within Scope 2, we have seen the addition of Joules’ electricity usage as well as an increased grid factor.
3. Reduce our Scope 3 emissions by encouraging our supply chain to improve energy efficiency and reduce carbon emissions
We are members of the Sustainable Apparel Coalition which gives us access to a suite of tools to support the standardised measurement
of sustainability from our supply chain, using Worldly (formerly Higg). In addition, we use the BRC’s Climate Action Roadmap which is a
framework to guide the retail industry to net zero by 2040. As a founding signatory to the Roadmap we commit to working with other retailers,
suppliers, Governments and stakeholders, and to support customers, to collectively deliver the industry’s net zero ambition.
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We are working closely with Worldly to prioritise onboarding our suppliers in Bangladesh as this is our top sourcing territory. We continue to
review opportunities to work closely with our suppliers to reduce our collective environmental impact.
4. Waste Management
As our business operations continue to grow and we continue to make acquisitions, the Group’s waste is also increasing. We still measure the
amount of waste that goes to landfill and consider it important to keep revisiting the target.
5. Reduce emissions caused by transport
One of the main elements within our control is our Scope 1 transport emissions. Currently, we are constrained by the range of electric vehicles
which do not yet meet our operational requirements. We have continued to review and test EVs with a view to replacing our existing fleet as
soon as possible. Unfortunately technology does not appear to be developing as fast as we anticipated, as the distance range of the vehicles
currently available cannot meet our needs. We will continue to review the position with the intention to move to EV or alternatives as soon as
vehicles are available that are viable and commercially reasonable.
We recognise that technology may move away from electric in the future and we are therefore also investigating hydrogen as an alternative fuel.
Strategy
We continue to develop our strategy towards achieving a lower carbon business model and play our part in building a climate-resilient economy.
Our environmental ambition is informed and driven by:
• The direct and potential impact of climate change on our operations, identified through assessing our risks and opportunities in the short,
medium and long term and also climate change scenario analysis.
• Our commitment to reducing our Scope 1, 2 and 3 emissions, which have been set to align with the SBTi footprint approach and methodology.
Our Scope 1 and 2 targets are consistent with achieving a 1.5 degree reduction in line with the SBTi pathway. We also commit to reduce Scope 3
emissions by 40% per £1m of sales and Scope 3 emissions from indirect use of sold products by 40% per £1m of sales by 2030. We gained SBTi
approval for our targets in July 2021.
•
Industry trends with a potential environmental impact.
• Regulation, guidance and stakeholder expectations.
Our Scope 1, 2, 3 and GHG emissions are disclosed on pages 90 to 92. A further breakdown of our 2023/24 emissions is set out in the chart below.
Breakdown of our 2023/24 emissions
Scope 1
Scope 2
Scope 3
70%
53%
35%
18%
0%
Purchased goods
& services
59%
Use of
products sold
24.3%
Other
3.0%
Emissions
from
distribution
vehicles &
cars owned
by NEXT
1.5%
Gas and other
fuel heating
0.4%
Emissions
from energy
consumption
1.8%
Business travel
& employee
commuting
1.7%
Upstream &
downstream
transportation/
distribution
8.3%
CORPORATE EMISSIONS
PRODUCT LIFE CYCLE EMISSIONS
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Transition Plan to Net Zero
By Net Zero, we mean setting corporate net zero targets to reduce our
Scope 1, 2, 3 and residual emissions in line with the SBTi Corporate
Net Zero Standard. Whilst not mandated, we recognise that having a
Transition Plan to Net Zero is likely to be required in the next few years.
We are continuing with our work in setting out our objectives and
priorities which make up our ambition for achieving Net Zero. Our goal
continues to be to ensure our transition plan is realistic, credible and
deliverable when we are required to publish it.
We are a signatory to the British Retail Consortium’s Climate Action
Roadmap, a framework to guide the industry to net zero emissions
by 2040. Through the Roadmap we commit to working with other
retailers, suppliers, Government and other stakeholders, and to support
customers to collectively deliver to the industry’s net zero ambition.
Illustrated below are some of the many carbon reduction initiatives we
are working on.
Packaging and recycling
Packaging
By 2025 we aim to eliminate avoidable plastics in product packaging.
We are also investigating opportunities to reduce packaging throughout
our operations.
Collection points for consumers to return their plastic packaging for
recycling are now in all our stores, our warehouses and our Head
Office. We have successfully collected and recycled 1,758 tonnes of
plastic packaging. We continue to work on methods to improve the
efficiency of this method of packaging take-back. We are working with
our UK packaging suppliers to reuse the collected materials which are
appropriate for use in new packaging.
Recycling
All our packaging is recyclable, although not all local authorities recycle
all materials. We use 100% recycled content carrier bags (excluding the
handles) in our retail stores and we recycle any bags returned to us by
our customers.
We are trialling a scheme to use recycled flexible plastic collected from
customers to make the linings of our NEXT courier sacks which all
contain at least 30% recycled content.
In addition, we reuse or recycle all hangers used in our retail stores,
and accept back unwanted hangers from our customers for recycling.
The recycled hangers are either reprocessed for reuse or made into new
hangers. In 2023, we collected 591 tonnes of hangers for reprocessing
with 143 tonnes of hangers reused within the supply chain and 448
tonnes remade into new hangers.
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Sustainability Accounting Standards Board (SASB)
The following sets out how we comply with the SASB metrics. More information can be found on our website at nextplc.co.uk/corporate-
responsibility.
The Apparel metrics cover four broad areas:
• The Management of Chemicals in Products (Chemicals).
• Environmental Impacts in the Supply Chain (Environment).
• Labour Conditions in the Supply Chain (Labour).
• Raw Materials Sourcing (Raw Materials).
In the areas of Chemicals, Labour and Raw Materials we are well on our way to full compliance.
We are continuing with our programme to meet the standards within the Zero Discharge of Hazardous Chemicals (ZDHC) requirements.
For Labour and Raw Materials, our main efforts were around improving our existing policies and internal metrics to align more closely to the SASB
requirements. While our compliance in these areas is good, we continue to work on disclosure which is covered in more detail within our Corporate
Responsibility Report at nextplc.co.uk/corporate-responsibility. Our policies are available to our suppliers via our Supplier Communication platform,
and we also host key policies on our corporate website at nextplc.co.uk.
We are in the process of significantly improving how we measure our suppliers’ environmental performance across energy use, chemicals, waste and
water use and discharge, through our membership of the Sustainable Apparel Coalition (SAC), where the main impact is at Tier 3 in our supply chain.
SAC allows us to capture the required level of data in a standardised format.
The table below reflects our progress towards compliance with SASB and sets out details of where to find further information.
Topic
Sub-topic
Management of Chemicals
in Products
Processes to maintain compliance with restricted
substances regulations.
Reference
See page 107
Discussion of processes to assess and manage risks and/or hazards
associated with chemicals in products.
Environmental Impacts in the
Supply Chain
Percentage of (1) Tier 1 supplier facilities and (2) supplier facilities
beyond Tier 1 in compliance with wastewater discharge permits and/
or contractual agreement.
Read our SASB Report at
nextplc.co.uk/corporate-
responsibility
Percentage of (1) Tier 1 supplier facilities and (2) supplier facilities
beyond Tier 1 that have completed the Sustainable Apparel Coalition’s
Worldly Facility Environmental Module assessment or an equivalent
environmental data assessment.
Labour Conditions in the
Supply Chain
Percentage of (1) Tier 1 supplier facilities (2) supplier facilities
beyond Tier 1, that have been audited to a labour code of conduct,
(3) percentage of total audits conducted by a third-party auditor.
(1) 74%
(2) 5%
(3) 100%
Priority non-conformance rate and associated corrective action rate
for suppliers’ labour code of conduct audits.
See pages 104 and 105
Description of the greatest risks in the supply chain concerning:
1) Labour.
2) Environmental, health, and safety.
See page 109
See pages 81, 95 and 97
Raw Materials Sourcing
Description of environmental and social risks associated with sourcing
priority raw materials.
See page 105
Percentage of raw materials third-party certified to an environmental
and/or social sustainability standard, by standard.
Cotton: 78% Better Cotton*
Timber: 60% certified and
responsible of which 48% certified
by Forest Stewardship Council
* This is calculated using our product weight methodology and differs from the Better Cotton methodology which uses cotton lint.
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O U R P E O P L E
• Our Financial Wellbeing tool and support network roll-out has been
successfully taken up by 13,559 colleagues to date.
• We are one of the Founding Partners of GenM, pledging to champion
menopause awareness, education and support for employees
across the business.
Equal opportunities and diversity
Alongside our wellbeing activities we have embedded our approach
to diversity and inclusion in the business. In 2023 we brought together
our employee-led communities under a new brand; Together We
Are NEXT. These include communities of employees championing:
LGBT+ issues; cultural diversity; disability support; and neurodiversity
at NEXT. The heads of these communities regularly meet and discuss
programmes, issues and opportunities to engage the wider business.
Actions during the year
• Pride@Next, an employee-led LGBT+ network helps us to shape our
policies as well as continuing to raise awareness of LGBT+ issues at
NEXT and celebrate this community. This year we launched a LOVE
collection in collaboration with the Terrence Higgins Trust.
• We continue to work with Business in the Community (BITC),
in particular to initiate employee listening circles about Together We
Are NEXT, to ensure that we reach and engage the whole business,
regardless of workplace location.
• We participated in the BITC Behind the Scenes Programme to
support 10,000 Ukrainian Refugees who are unemployed find work,
by identifying the skills they have and pairing them with vacancies in
different businesses and roles.
• We are a signatory to BITC’s Race at Work Charter and through their
specialist advisory team, they support our Unity network. This is an
employee-led group, focusing on celebrating the diversity of cultural
backgrounds represented at NEXT.
• We forged a partnership with the Antony Nolan Trust to help raise
awareness of their work in the UK and internationally to help add
more people from minority ethnic backgrounds to their stem
cell register.
• We are a Level 2: Disability Confident Employer. The Disability
Confident Scheme supports employers to make the most of
the talents that disabled people can bring to the workplace.
Our employee network “Able at NEXT” gives a voice to disabled
people, people who care for someone with a disability and to those
who support our aims within the organisation.
• We continued to partner with Carers UK. We have signed up to the
Employers for Carers digital platform to provide employees with
access to dedicated resources for carers.
• We continue to partner with an external training provider to
provide diversity and inclusion awareness training sessions for
managers. This training has been completed by managers across
the business and e-learning sessions are available for the wider
employee population.
Our commitment
Our colleagues are integral to NEXT’s success, their safety and wellbeing
is always our top priority. We want to ensure we provide a workplace in
which everyone is:
• Supported.
• Treated fairly and with respect.
• Listened to.
• Motivated to achieve their full potential.
Our approach
We aim to deliver on our commitment by focusing on the
following elements:
• Health, safety and wellbeing.
• Equal opportunities and diversity.
• Reward, fair pay and employee share ownership.
• Training and development.
Health, safety and wellbeing
Good health and wellbeing is one of our most relevant SDGs. We want
to ensure NEXT is an exciting and rewarding place to work and allow
everyone to work in an environment where they are able to maximise
their creativity, productivity and engagement. It is important therefore
to have a culture that enables all our colleagues to maintain positive
mental health. We have a Mental Wellbeing Charter, aimed at
encouraging an environment where mental wellbeing is discussed
openly, improving how we can identify and help those suffering from
mental ill-health, ensuring that people are treated fairly, with care and
compassion. In recognition of the fact that retail is the largest private
sector employer in the UK, we collaborated with the Samaritans and
our peers to develop Wellbeing in Retail, an initiative that supports the
mental health and wellbeing of retail workers.
Actions during the year
We have maintained a regular flow of communication with our
colleagues to help keep them safe and well. During the year we:
• Continued to update our employee hub to provide support,
health and wellbeing advice, useful information, hints, tips and
monthly initiatives.
• Offered a free flu vaccination programme for all employees.
• Raised awareness of the support services available to employees
should they need them. This includes our Mental Health First Aider
(MHFA) population which has 165 MHFAs trained and upskilled
through our network group Open Minds.
• We have established a new local Wellbeing Manager at our
manufacturing site in Sri Lanka to support our colleagues who work
there. Services we provide include a medical facility, oral health
checks and wider assistance for the nearby community including
supporting clean water supplies and funding for schools and a library.
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NEXT is an equal opportunities employer and we offer career
opportunities without discrimination. Job vacancies are filled by
the candidates who have the most relevant skills and competencies
to succeed. Our policy is to treat all employees fairly and equally
regardless of gender, sexual orientation, marital status, race, colour,
nationality, religion, ethnic or national origin, age, disability or union
membership status. Further details of our diversity policy are included
in our Nomination Committee Report on page 130.
Full consideration is given to applications for employment from disabled
persons, having regard to their particular aptitudes and abilities.
We continue the employment wherever possible of anyone who
becomes disabled during their employment, providing assistance and
modifications to their environment where possible. Opportunities for
training, career development and promotion do not operate to the
detriment of disabled employees.
We continue to look at ways to improve gender diversity. Women are
well represented throughout the Group, although recently reduced
with 40% of our executive directors and 36% of our Board being female
at the financial year end. In relation to our senior management and
their direct reports, NEXT was ranked third in the 2024 FTSE Women
Leaders Review, Achieving Gender Balance.
Recognising that women can be disproportionately affected by
childcare commitments, our Head Office (where over 4,800 of our
colleagues are based) has a purpose-built nursery onsite. This is part
of our ongoing commitment to support our employees with their pre-
school childcare arrangements.
Gender equality is a fundamental human right and is another SDG that
we focus on. Gender equality continues to be particularly challenging
in less developed countries and we are looking at ways to support
improvements in the areas we source from.
The gender mix of the Group’s employees at the end of the financial year is set out in the table below.
Directors of NEXT plc
Operational directors and other senior managers1
Total employees
1. Other directors of the Company’s subsidiary undertakings comprise 13 male and 10 female employees.
2024
2023
Male
7
37
13,188
Female
4
18
30,893
Male
6
26
13,335
Female
4
20
30,713
Reward, gender pay and employee
share ownership
We aim to reward all employees with fair and competitive salaries and
provide the opportunity to earn additional pay in the form of a bonus.
Our annual Gender Pay Report can be found at nextplc.co.uk.
We operate a Sharesave scheme to encourage employees to own
shares in NEXT. All UK employees have the opportunity to save money
over three or five years to buy NEXT plc shares at a discounted price.
We also operate a share option incentive scheme which extends to
more than 2,100 participants.
Around 11,800 employees (circa 26% of our total UK and Irish
employees) held options or awards at the end of January 2024.
These options or awards were held in respect of 6.6m shares in NEXT,
being 5.2% of the total shares then in issue. NEXT’s Employee Share
Ownership Trust (ESOT) purchases shares for issue to employees when
their options are exercised or awards vest. At the year end the ESOT
held 6.2m shares. The ESOT Trustee does not vote on any resolution at
General Meetings.
Pension provision
Details of the pension benefits we provide to participating employees
are set out in the Remuneration Report and in Note 21 to the financial
statements. At January 2024, there were 542 (2023: 590) active
members in the defined benefit section of the 2013 NEXT Group
Pension Plan and 3,188 (2023: 3,760) UK active members of the defined
contribution section. In addition, 22,293 employees (2023: 21,350)
participate in the Group’s auto enrolment defined contribution scheme.
Please see Note 36 of the financial statements on future plans regarding
the defined benefit section of the 2013 NEXT Group Pension Plan.
Training and development
We have a good track record of promoting from within; all our executive
directors were promoted to the Board having previously served as
employees in the Group. We aim to realise our employees’ potential
by supporting their career progression wherever possible. The Group
invests significantly in the training and development of staff and in
education programmes which contribute to the promotion prospects
of employees. We believe these opportunities help employees feel
supported and equipped to carry out their role to the best of their ability.
Our employees can access a range of development tools and appropriate
job-specific training through the integrated training teams within each
area of the business. This includes:
• Job role-specific training covering professional, technical, operational
and skills training.
•
Individually tailored training to address an employee’s individual
needs and specific business requirements.
• We have a Learning Hub for our Head Office population that offers
additional training and development support on management and
recruitment topics.
• Training in areas such as health and safety, first aid and manual
handling to help ensure our employees work in a safe environment.
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O U R S U P P L I E R S
like
safety, human
Ethical trading
rights,
rights
Infringement of workers’
employment and working conditions are a key risk. We induct, train and
support our suppliers to make sure they understand what is expected
of them and to help them raise standards. Where we find issues of non-
compliance we find that working with suppliers to raise their standards
rather than immediately terminating the relationship delivers a better
outcome for workers and the supply chain as a whole. Our aim is to
support factories in resolving issues, but we will not continue to work
with them indefinitely if there is no willingness to improve.
Our drive to support ethical trading in our supply chain includes:
• Working with our suppliers to ensure they understand our
requirements and COP Principle Standards.
• Holding regular meetings with individual suppliers to share
information and develop relationships.
• Our in-house global COP team which comprises 52 employees that
administer our COP programme based on the Ethical Trading Initiative
Base Code (ETI) and International Labour Organisation Conventions.
Our COP team works directly with new and existing suppliers and their
factories. They are based in key sourcing locations around the world which
enables the team to respond quickly if issues occur. It also allows us to
develop trust and strong relationships with suppliers by offering meetings,
training and support, even before orders are placed by our product teams.
Our commitment
We focus on ethical trading, traceability and responsible sourcing to
ensure our products are made by workers who are treated fairly and
whose safety, human rights and wellbeing are respected.
Our approach
In common with other retailers, NEXT’s product supply chain is
both diverse and dynamic. During the year, NEXT products were
manufactured in 39 countries through over 650 suppliers. Our Tier 1
supply chain comprises circa 1.2 million workers.
Diversity of supply provides us with a cost-effective supply chain and an
extensive range of products for our customers. It also increases the risk
of sourcing from unethical suppliers, particularly in the lower tiers of
the supply chain where visibility is more limited.
Payment practices
NEXT calculates and uploads relevant supplier data onto the UK
Government portal under the ‘Duty to report on payment practices
and performance’ legislation under section 3 of the Small Business,
Enterprise and Employment Act 2015.
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Compliance with our COP Principle Standards is monitored through
audits by our COP team which generally take place unannounced.
Our auditing standards provide detailed information to help our
suppliers fulfil their obligations. Our audit plan prioritises the human
rights of workers in our supply chain and is risk-based, taking into account
geographic location, ethical reputation, the type of manufacturing
process and the factory’s most recent audit rating. Where we find areas
for improvement during an audit, we create a Corrective Action Plan
which is agreed with the supplier and factory management. Follow up
reviews are undertaken to monitor progress against the Corrective
Action Plan.
Actions during the year
During the year, the COP team:
• Carried out over 2,400 audits. Of the audits conducted, 88% related
to Tier 1 suppliers and 12% related to Tier 2 suppliers.
• Supported 27 factories to successfully remediate critical issues found.
A further 42 sites are participating in an active remediation process.
• Disengaged with 44 factories that refused to satisfactorily rectify
their critical non-compliance with our COP Principle Standards.
A breakdown of audits by rating is provided in the illustration on the
previous page.
• Carried out 129 audits for JoJo Maman Bébé and 104 for Reiss as
we continue to roll out the COP approach with our Total Platform
partners. We expanded the global COP team to reflect these
broader responsibilities.
Traceability
Traceability and transparency of our suppliers’ factories are an important
part of NEXT’s overall approach. Suppliers are categorised into five tiers:
• Tier 1 are suppliers’ factories where bulk production of NEXT
branded products takes place.
• Tier 2 are factory sites declared and used by a Tier 1 supplier
which include subcontractor locations that manufacture or process
materials, components or parts of a finished product for processing
by a Tier 1 supplier.
• Tier 3 suppliers are fabric and yarn suppliers who spin, knit, weave,
dye and print to produce finished fabric.
• Tier 4 suppliers process the raw materials into a fibre.
• Tier 5 is where the raw materials are sourced.
Tier 1 and Tier 2 suppliers are contractually bound by our COP Principle
Standards that apply to all their declared sites from which they operate
and source. These standards cover workers’ safety, human rights,
employment and working conditions. Our contracts mean we can visit a
supplier (often unannounced) to undertake an audit to ensure it is, and
remains, compliant.
Actions during the year
We have updated our lists of our Tier 1 and Tier 2 supplier
manufacturing sites which produce NEXT branded products and Tier 3
suppliers and published these on our corporate website, nextplc.co.uk.
We are continuing our work to extend the visibility of our supply chain
to include Tier 4 and 5.
Responsible sourcing
Each stage of our supply chain has an environmental and social impact,
from sourcing the materials through to post consumer use and disposal.
The majority of the environmental impact lies in the fibre and fabric
production stage. While we do not source raw materials directly, we work
with our suppliers to ensure traceability where possible. This enables us
to source products in ways which support their replenishment, respect
human rights and protect natural habitats.
The main raw material fibres used in our products include cotton,
polyester, manmade cellulosic fibres (such as viscose), and wool. Timber
and leather are also significant raw materials for us. These materials
can have wide-ranging environmental and social risks associated with
their production and extraction, if not managed correctly.
Actions during the year
• Achieved Brand Certification with Textile Exchange, to ensure
traceable chain of custody of our certified products.
•
Improved internal data tracking with live benchmarking and
visibility by division showing progress against our fibre targets and
priorities. By launching an interactive Responsible Sourcing Progress
dashboard, our Product teams have the ability to see their progress
against targets. This enables teams to understand the impact of their
sourcing decisions without waiting for a formal report.
• Recalibrated our Responsible Sourcing Approach with increased
focus on cotton, wool and manmade cellulosic fibres with revised
targets to 2028 and 2030.
T I E R 5
T I E R 4
T I E R 3
T IE R 2
T I E R 1
VISCOSE
PRINTE R
R a w M a t e ri a l
S ou r c e
F ib r e P r o c e s s o r s
• G i n ne r s
• F i l a m e n t / S t a pl e Fi b r e
F a b r i c & Ya r n
S u p p l ie r s
• S p i n ne r s
S u b c o n t r a c t o r
t o T i e r 1 F a c t o r y
• L a u n dr i e s
G a r m e n t /P r o d u c t
F a c t o r y
• C u t t i n g / S e w in g /
S u p p l i e r s
• We a v e r s / Kn i t t e r s
• P r i n t e r s / E m b r o i d e r e r s
A s s e m b l y
• D y e r s / P r i n t e r s /
• P a c k a g i n g / La b e l s /
• F i n i s h i n g / In s p e c t i o n
F i n i s h e r s
• Ta nn e r i e s
Tr i m S up p l i e r s
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Environmental collaborative initiatives
Solutions to reduce environmental and social impacts can really only be achieved with collaborative global actions. NEXT, along with other retailers,
is involved in a number of initiatives to minimise these adverse impacts. These include:
Zero Discharge of
Hazardous Chemicals
(ZDHC) Roadmap
to Zero
NEXT is a signatory to the ZDHC programme to collaborate on promoting industry-wide change in responsible chemical
management in textile and leather production processes (dyeing, printing and laundering of textiles, and tanning
and dyeing of leather) to protect workers, customers and the environment. NEXT has its own Restricted Substances
Standards which ban or state the limits for harmful chemicals used in or during the manufacture of our products.
We provide specially designed online chemical management training modules to our suppliers (notably our key fabric
mills and wet processors) to educate on good practices to reduce and eliminate the discharge of hazardous chemicals
from production processes into the environment.
Better Cotton (BC)
NEXT joined BC in 2017 and in 2023/24 sourced 78% (2022/23: 65%) of its cotton as Better Cotton. Our target is to
source 100% of cotton from certified sources including BC, recycled or Certified Organic cotton by 2030.
Changing Markets
Foundation’s Roadmap
Towards Responsible
Viscose and Modal
Fibre Manufacturing
CanopyStyle
Sustainable Apparel
Coalition (SAC)
Timber sourcing
NEXT bans the use of cotton from Uzbekistan, Turkmenistan and the Xinjiang region of China in our textile products
due to concerns over the mistreatment of the Uyghur people, child labour and working conditions in these territories.
This Roadmap focuses on the chemicals used to break down timber to make viscose pulp which is spun to create fibre.
It aims to minimise the effects of harmful chemicals in the manufacturing process. NEXT works with its viscose and
modal manufacturers to help them adopt closed-loop production systems to ensure emissions controls and chemical
recovery rates are in line with the EU Best Available Technique standards.
NEXT is working with Canopy through its CanopyStyle initiative to ensure wood based fabrics are responsibly sourced.
We are committed to ensuring cellulosic fibres used in our products do not come from ancient and endangered
forests, endangered species or illegal sources and that the rights and wishes of indigenous communities are respected.
We have updated our Manmade Cellulosics Policy to only accept wood based fabrics sourced from Canopy ‘Green
Shirt’ approved suppliers.
In 2021, NEXT joined the SAC, a global non-profit alliance of more than 250 members working together to reduce
the environmental and social impacts of the apparel, footwear and textile supply chains. SAC’s work includes the
development of the Higg Index, a suite of tools to measure environmental and social performance of suppliers in a
standardised way. We encourage our suppliers to adopt the Higg Index which allows NEXT to monitor and improve
standards at factory level. NEXT has rolled out the Higg Facility Environment Module to our supply chain.
NEXT aims to contribute towards preventing deforestation and forest degradation through our sourcing decisions.
We risk assess all timber products to verify that the material used was harvested, traded and transported in compliance
with the applicable legislation in the country of origin in line with the UK Timber Regulations and our detailed Timber
Sourcing Policy.
The Microfibre
Consortium (TMC)
In 2017, NEXT joined TMC to collaborate on solutions to minimise microfibres being released into the marine
environment. NEXT provides resources from its in-house laboratory, to develop fibre shedding testing methods which
are helping TMC to work towards a robust industry-based solution. The testing methodology is being used to assess
fabrics and create standards for the sector.
Waste Resources Action
Plan – The UK Plastics
Pact
The UK Plastics Pact brings together businesses across the entire plastics supply chain, the UK Government and NGOs
to tackle plastic waste. It is striving to create a circular economy for plastics, capturing their value by keeping them in
the economy and out of the natural environment. Pact members are committed to eliminating problematic plastics,
reducing the total amount of packaging and helping to build a stronger recycling system in the UK. NEXT has been an
associate member since October 2020.
Waste Resources Action
Plan – Textiles 2030
(Replacing the
Sustainable Clothing
Action Plan which is
now closed)
Textiles 2030 is a UK textile sector collaboration making rapid, science-based progress on circularity and climate action.
Launched in April 2021, the voluntary agreement builds on the learning and success of the Sustainable Clothing Action
Plan 2020 and has over 100 signatories across the retail, recycling and reuse sectors. As a founding signatory partner,
by 2030 NEXT aims to reduce its combined greenhouse gas emissions by 50%, sufficient to limit global warming to
1.5oC in line with the UN trajectory to reduce climate change. We collectively also aim to reduce the water footprint
of new products sold by 30%, and develop a clear pathway to improve the sustainability of textiles across their entire
life cycle.
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O U R C U S T O M E R S A N D P R O D U C T S
Our commitment
Our commitment is to offer beautifully designed, excellent quality
clothing, homeware and beauty products that are well made,
functional and safe, sourced responsibly and provide outstanding value
to meet or exceed our customers’ expectations.
Our approach
Understanding what our customers want is essential in the design
and manufacture of our products. 'NEXT Loves to Listen' is our online
survey and is available to every customer who collects an order or
shops in our stores. We also conduct customer interviews and online
surveys, accompanied store visits and run customer discussion groups.
We have processes in place to monitor, evaluate and respond to
customer feedback.
Continuing our circular
economy journey
The circular economy is an economic system aimed at designing out
waste and pollution and maximising the reuse and recycling of resources
along the whole supply chain.
As part of our Responsible Sourcing Strategy, we recognise we must
work to reduce the environmental impact of our business activities.
This will be achieved by supporting the transition to a more circular
economy by designing, producing and selling products which limit
pollution and waste and help to keep materials in use for longer.
Examples of our activities include:
• Working to reduce the packaging we use, both in our store and
online operations, and starting to reuse customers’ returned
packaging to create new packaging or useful materials like liners for
our courier bags.
• Signatory to WRAP’s Textiles 2030 initiative, collaborating on carbon,
water and circular textile targets. Together with peer organisations
we are supporting the development of solutions which will
help minimise the impact clothing and home textiles have on
the environment.
• We are working with Reverse Resources, helping to collect and reuse
textile waste in Bangladesh, typically small pieces of fabric from a
factory cutting room. This waste is being collected by five of our final
product manufacturers and is sold to fibre producers to make into
new yarns for the apparel industry within Bangladesh, including
recycled cotton or MMCFs, and helps strengthen the market for
recycled fibres. Through the Reverse Resources platform, five of
our Bangladesh suppliers segregated and placed onto the market
nine tonnes of material, with 99% going to fibre to fibre mechanical
recycling within Bangladesh. We are looking to replicate the
programme with key suppliers in India.
• We have a number of long-standing initiatives which keep products
in use: we repair products in one of our UK Distribution Centres;
we have staff shops to sell products not able to be sold in stores;
we have take-back boxes for flexible plastics in our Head Office,
and warehouses; and a mattress recycling programme and help for
customers to donate unwanted furniture for reuse. We recognise
there is much more to do and that collaboration across the industry
is vital.
To support this we became one of the founding signatories of WRAP’s
Textile 2030 initiative. Signatories have committed to a collaborative
approach to accelerate progress towards a circular economy for textiles
as well as working to reduce the climate impact of the industry. We will
consider the impact our designs and product development can have
on the environment and what positive choices we can make when
developing our products, such as:
• Product durability and longevity.
• Responsibly sourced materials.
• Safe processing to protect workers and the environment.
The framework will provide a practical tool to support our Product teams
and help to set future product category specific circular economy plans.
Product safety and
legislation compliance
Our product safety standards are based on a range of legislation and
compliance requirements. Technologists in our Product teams work
closely with our suppliers to provide expert guidance to ensure the right
materials are chosen to manufacture high quality, durable products in
factories with robust product safety processes. Suppliers to NEXT have
direct access via our online Supplier Portal to our full range of technical
manuals and quality, safety, ethical and responsible sourcing standards.
Products are inspected on receipt into our UK warehouses by our
quality assurance team to ensure they meet our required standards.
NEXT also works with our LABEL third-party brands to ensure all products
offered for sale are safe for their intended use. Third-party brands need
to demonstrate compliance with legislation as well as being able to
show the product has been sourced from factories which are compliant
with the ETI Base Code and NEXT’s own COP Principle Standards.
Chemical management
Many products contain chemicals in one form or another, most of them
harmless. To make sure our products do not contain chemicals which
could be harmful to our customers, the workers who make them, or the
environment, we require our suppliers to adhere to our Restricted
Substance Standards (RSS) which are part of our Chemical policy.
The RSS bans or limits harmful chemicals used in the manufacture of our
products. We also have a thorough due diligence programme in place
to support compliance with the RSS. If products fail our requirements,
they are removed from sale and may be recalled from customers.
Actions during the year
• Helped to research methods of monitoring and benchmarking
materials’ durability across the industry through our membership of
Textile 2030 Durability group.
• Achieved ‘Aspirational Level’ in the ZHDC Brands to Zero Leader
Programme and met key milestones of the Roadmap to Zero
Programme and fulfilled selected KPIs determined by ZDHC.
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Strategic ReportGovernanceFinancial StatementsShareholder Information CORPORATE RESPONSIBILITY
C O M M U N I T Y
Our commitment
We support charities and organisations that positively impact the
countries in which we operate and source our products. This can be in
the form of financial and product donations, or sharing our expertise,
knowledge and time.
Our approach
We support a wide range of charities and organisations, working with
them to provide donations that are of most benefit. In particular,
we support organisations that have a positive impact on the
following areas:
• Environment: environmental protection or improvement.
• Reducing inequality: supporting the promotion of diversity, inclusion
and human rights and preventing or relieving poverty.
• Health: advancement and promotion of health and supporting
emergency care services.
• Education, skills and amateur sport: advancement of education,
life and work skills and the development of youth amateur sports.
Where possible, we support charities over a number of years with a
specified annual donation as this commitment helps them to plan their
work with confidence.
We provided the following financial support during the year:
Registered charities
Individual requests, local and national groups and organisations
Commercial support
This support was supplemented by the following additional activities:
Gifts in kind – product donations
Charity-linked sales
Employee fundraising
NEXT charity events
Long term partnerships – helping to
reuse products
Disposal of products such as mattresses, sofas and furniture when they
are no longer needed, can be difficult for our customers with many going
unnecessarily to landfill. We have long term partnering relationships
with a number of charitable organisations to reuse products where
possible. These strategic partnerships include:
• Doncaster Refurnish, a social enterprise charity located near our
main warehouses, which has partnered with us for more than ten
years. It aims to help the local community by creating sustainable
employment and training opportunities. Through NEXT’s donation
of safe but unsellable or damaged furniture and home accessories,
Refurnish generates funding by converting items for reuse and sale.
This funding provides much needed services in the community with
the additional benefit of diverting tonnes of product from landfill.
• The British Heart Foundation (BHF). We offer our customers a free
furniture collection service for unwanted items such as mattresses
and sofas that can often be difficult to move and would otherwise
be sent to landfill. Donated items are sold to raise vital funds; our
customers’ donated furniture and home products have helped BHF
raise over £1.8m with over 13,381 items collected from customers’
homes since we first partnered with them in 2016. By donating
these items, hundreds of tonnes of furniture have been diverted
from landfill.
Actions during the year
• Collaborated through ‘Together with NEXT’ with seven new charities.
• Made total NEXT Group charitable contributions of over £2.8m.
• Raised over £800k through carrier bag donation to charities.
2024
£000
1,173
3
0
2024
£000
1,488
164
29
4
2023
£000
1,177
5
60
2023
£000
1,608
298
74
3
The proceeds from the sale of our reusable carrier bags go to our nominated charities across England, Scotland and Wales. We support both
environmental charities and health charities that focus on care for life-limited children, young people and their families. In Northern Ireland,
the monies raised are paid to the Government who use the proceeds to fund environmental projects.
108
H U M A N R I G H T S A N D M O D E R N S L AV E R Y
Our commitment
We will not tolerate any instance of modern slavery in our business or
in our supply chain.
Our approach
Respect for human rights is a cornerstone of any responsible business.
The violation of human rights in our operations is unacceptable and we
deal firmly with any infringements identified in our supply chain.
Human rights abuse and modern slavery are complex issues which
can take many forms. To help us prioritise our efforts, we focus on our
salient human rights – those human rights that stand out because they
are at risk of the most severe negative impact through our activities or
business relationships. We identify our salient human rights taking into
account the severity and scale of the risk and how difficult it would be
for us to put right any harm, as set out in the UN Guiding Principles
Reporting Framework.
The key human rights are:
Salient issue
Why it is important to NEXT
Freedom of association
In a number of countries that we source from, the freedom to join an independent trade union is restricted
by law or is not recognised by management attitudes and practices. This restricts the ability for workers to
have a voice within their place of work.
Health & Safety
Children’s rights
Fire and industrial accidents are a risk within our extended supply chain, impacted by the quality and
management of building design and structure, fire prevention, machinery, chemicals and abrasives.
Use of child labour is a risk in some areas of our supply chain. As part of new supplier inductions, we carry
out training on child labour risks and explain our approach to managing any cases, our Child Labour
Policy and supplier guidelines, to ensure we help to minimise the risk of child labour within our extended
supply chain.
Modern slavery
Some of our sourcing countries hire migrant workers from overseas and such workers can be vulnerable to
the risks of exploitation, such as forced labour or retention of wages by employers.
Wage levels
All workers in our supply chain should be entitled to fair wages for the work they do.
Harassment and
discrimination
Women represent the majority of workers in our supply chain. In many countries, the risk of discrimination
against women is significant in relation to equal opportunities, age or marital status.
Water, sanitation and health We source products from places which frequently encounter periods of water scarcity. This can lead to an
increased risk that communities may not have access to clean, safe water.
Our extended supply chain includes operations such as laundries, mills, dye houses and tanneries;
these facilities carry a particularly high risk of water contamination where untreated effluent can be
discharged into rivers used by local communities.
Working hours
We rely on the workforce of our suppliers to meet order requirements, and those workers want to work to
earn money. These factors can lead to excessive working hours that can impact workers’ wellbeing.
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Strategic ReportGovernanceFinancial StatementsShareholder Information CORPORATE RESPONSIBILITY
In our work on human rights, we:
•
Implement the ‘Protect, Respect and Remedy’ framework of the
United Nations Guiding Principles on Business and Human Rights.
• Use the United Nations Guiding Principles Reporting Framework
to help us identify and manage the risk of harm associated with
unsatisfactory working conditions, discrimination, modern slavery,
human trafficking and forced or bonded labour, particularly to the
most vulnerable and exploited, such as women and children.
• Uphold
internationally recognised human rights principles,
including those encompassed in the Universal Declaration of
Human Rights and the
International Labour Organisation’s
Declaration on Fundamental Principles and Rights at Work.
More information on our salient risks is available at nextplc.co.uk/
corporate-responsibility.
Code of Practice
The standards expected of our suppliers which are integral to our ethical
trading are clearly set out in our COP Principle Standards and Auditing
Standards, further details of which can be found on pages 104 to 105
and at nextplc.co.uk/corporate-responsibility/code-of-practice.
Our COP programme is based on the Ethical Trading Initiative Base Code
(ETI) and International Labour Organisation Conventions.
Actions during the year
Our global teams were able to monitor supply chain issues and work
with suppliers and factories to ensure that our standards were met.
Collaboration and partnering is key to achieving change. Our in-country
COP teams have direct links with locally-based representatives of NGOs
and trade unions. This helps to broaden our understanding of root
causes and solutions. Activities during the year included:
• The roll-out of grievance mechanisms in some of our key sourcing
countries. The ‘This is my back yard’ (TIMBY) platform, which is
an anonymous grievance system, has been piloted in 21 factories,
with plans to expand further in early 2024. In Pakistan we have
TIMBY in two factories and have already received 94 reports – 93
have been resolved with one in remediation. In Turkey, we are
partnering with MUDEM which is a refugee support association,
initially with five factories, to establish a grievance mechanism.
• We have carried out in-person supplier presentations in Morocco,
Tunisia, Poland, Turkey, India and China. We will continue this
approach of contact with our suppliers in-country throughout 2024.
• One-to-one meetings with our top 35 suppliers to discuss common
supply chain issues and agree collaborative solutions. This was an
opportunity for open dialogue to remind suppliers of our ethical
standards and expectations. We also discussed the tools we
have available to support suppliers and factories in maintaining
those standards.
•
Introduction of due diligence to monitor cases of potential financial
difficulty in our supply base. This has included a tool for our internal
teams to identify possible ‘red flags’ as well as conversations with
key suppliers to understand root causes.
• Establishing a flagship Gender Empowerment Programme in
Morocco, Bangladesh and Turkey. Work in Morocco has already
commenced with our partner NGO including baseline assessments.
Turkey building safety
Ensuring the workers in our supply chain have safe, healthy working
environments is important to us. We established a Shared
Premises Policy in 2021 for our suppliers and factory owner
partners. This sets out our expectations and standards for building
safety, due diligence and compliance with local regulations.
Following the tragic earthquake in Turkey in 2023, even though
none of our factories were affected, we took the opportunity
to further enhance our work by initiating a new building safety
assessment process in partnership with a local independent
engineering company. Selected factories were assessed in the
region and out of these, a small number were identified as high risk
so remediation plans were developed together with suppliers and
factory owners to address identified concerns. This will continue to
be monitored by our COP Turkey team.
Aider programme update
We continue to work with Aider, our NGO partner in Gurgaon,
Northern India. We have now reached more than 9,000 workers
through our worker helpline and community visits since the
project first began. Aider provides support in the local community,
holding in-person interactive sessions for workers and their families,
including mentoring and counselling for vulnerable individuals.
They have been working to link homeworkers to government
medical schemes like Ayushman Bharat Digital Health Account
(ABHA Card). Helping workers to access healthcare services
further supports their overall wellbeing and that of their families.
Approximately 180 cards have been issued to date. Further Aider
partnership successes for 2023 include 50 enrolments in pre-
school; 50 students receiving general tuition; 66 students receiving
sewing skills tuition and 95 students placed on computer courses.
A 10-month programme of workshops, training, dance and
yoga classes has been given to students, including self-defence,
nutrition and health – including dental and eye care. Over 2,000
personal items such as clothing, shoes and feminine hygiene kits
have also been distributed to young people.
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Strategic ReportGovernanceFinancial StatementsShareholder Information SECTION 172 STATEMENT
This section describes how we have engaged with and considered the interests of our key stakeholders when exercising our duty to promote the
success of the Company under section 172(1) of the Companies Act 2006. The principles underpinning section 172 are not only considered at Board
level, they are embedded throughout NEXT. Sometimes decisions must be made based on competing priorities of stakeholders. We describe below
how the Board seeks to understand what matters to stakeholders and carefully considers all the relevant factors when selecting the appropriate
course of action.
Our stakeholders
Our key stakeholder groups are set out below, with an explanation of why we have identified each as key to NEXT’s business. Our many and
varied engagement processes help lead us to a better understanding of what matters to our stakeholders. Their views and needs, as well as the
consequences of any decision in the long term, are then considered in the business decisions made by the Board and across the entire Company,
at all levels. We do this through various methods, including: direct engagement by Board members; receiving reports and updates from members
of management who engage with various stakeholders; and coverage in our Board papers of relevant stakeholder interests with regard to
proposed plans.
Our workforce – see pages 112 to 113
The strength of our business is built on the hard work and dedication of all of NEXT’s people.
We also consider the interests of former employees who are members of a Group pension
scheme. Our colleagues rely on us to provide stable employment and opportunities to realise
their potential in a working environment where they can be at their best.
Communities and the
Environment – see page 114
Communities and the wider public expect
us to act as a responsible company and
neighbour, and to minimise any adverse
impact we might have on local communities
and the environment.
Investors – see page 115
We rely on our shareholders and providers
of debt funding as essential sources of
capital to further our business objectives.
They rely on us to protect and manage their
investments in a responsible and sustainable
way that generates value for them.
Regulators – see page 114
We seek to enjoy a constructive and co-operative relationship with the bodies that authorise
and regulate our business activities. This helps us maintain a reputation for high standards of
business conduct.
They expect us to comply with applicable laws, regulations and licence conditions.
Customers – see page 113
Our customers are the reason we exist.
It is essential to our future that we can
consistently and continuously design and
offer attractive, stylish products of high
quality to new and existing customers at an
accessible price. In doing so, we build our
brand value and customer loyalty.
Suppliers – see page 113
We rely on our suppliers to make and
distribute our products, provide the real
estate through which we store, sell and
display our products, and provide essential
services we need to operate our business.
Our suppliers rely on us to generate revenue
and employment for them.
Our workforce
Our current executive directors have a combined services of over 140 years in the NEXT Group. This gives them extensive knowledge of the
business as well as an acute insight into the mood, culture and views of their colleagues. All of our executive directors have a high degree of
personal oversight and engagement in the business. The Board also engages in the following ways:
• Annual Business Review Meetings, described further on page 113.
• Discussing the output of employee engagement surveys and agreeing follow up actions.
• Presentations on performance and strategy from the Chief Executive and the Group Finance Director to our workforce following the
announcements of our key trading results. Where possible, the directors present to the business in person, but a video link is sent to
remote employees.
• Visits to stores and warehouses, providing an opportunity to meet a wide range of our workforce.
• Online performance, development and feedback tools.
Engagement with our employees has always been vital to the success of our business. We continued to engage with our workforce about their
health and safety.
112
Business Review Meetings
This was our second year of Business Review Meetings, which replaced our annual Recruit, Reward and Retain (RRR) workforce forums.
These meetings form the workforce advisory panels as referred to in the UK Corporate Governance Code and focus on specific business outputs
such as efficiencies and ideas to improve engagement. Dame Dianne Thompson, one of our non-executive directors, attended the meetings along
with the Chief Executive, our HR Director and workforce representatives for each division of the business. These meetings offer our employees the
chance to voice their opinions on the issues that are important to them. Following discussion on the key issues in different parts of the business,
actions were agreed and feedback was reviewed by the Board.
Agreed actions from matters raised in 2023 included:
• Further training on handling challenging customers safely and increasing the visibility and impact of our ‘Respect in Retail’ initiative.
• Reviewing the questions of employee engagement survey to elicit responses to which management are able to take action, as well as providing
additional support to management to enable them to respond to comments.
Our Business Review Meetings were supplemented by Your Team Voice meetings which take place regularly throughout the year. Each business
function and area has a nominated Your Team Voice representative, and employees are able to submit questions to Business Review Meetings via
Your Team Voice meetings. One purpose of Your Team Voice meetings is to agree initiatives coming out of the Business Review Meetings.
Employee engagement surveys
In 2023, we undertook our third Group wide employee engagement survey, ‘Your Voice Counts’, which spanned the majority of our business.
The survey was sent to almost 42,000 employees and response rates were improved from the year before. The survey was conducted anonymously
using a third-party tool. The overall engagement score for the whole NEXT Group was slightly higher than our score in 2022.
Employees believe that our main strengths as a Group are: recognition for performance and organisational fit, highlighting equality and health.
Areas identified for improvement included transparency on career paths for development and progression.
The Board considered results of the survey as well as the initiatives planned to address the matters raised.
Continuous performance management and feedback
Our online performance and development tool provides a forum for positive and constructive feedback by individuals, peers and managers.
Our HR Director attended a meeting of the Board to brief the directors on employee-related matters, including workforce demographics,
engagement activities, the results of employee engagement survey, staff retention rates, diversity, whistleblowing, disciplinary and grievance
procedures, learning and development activity, pay and reward including gender pay gap and HR initiatives.
The Board considers that, taken together, these arrangements deliver an effective means of ensuring the Board stays alert to the views of
the workforce.
With regard to health, safety and wellbeing, during the year the Audit Committee received an update from the Group Health and Safety Manager
on safety performance, safety risk management and mental health wellbeing initiatives.
Our relationships with suppliers, customers and others
Suppliers
Throughout the year the Board approved major contract renegotiations and strategy with key suppliers, notably with the Group’s lender for the
revolving credit facility, providers of freight forwarding services and certain landlords. We balanced the benefits of maintaining strong partnerships
with key suppliers alongside the need to obtain value for money for our investors and excellent quality and service for our customers. Further details
on how we engage with our suppliers can be found on pages 104 to 105.
Customers
As a large retail business, the sentiment of customers can be seen in the Company’s underlying sales performance figures, which the Board reviews
regularly. The executive directors provide updates to the Board on their perceptions and the market view of consumer sentiment. The interests of
customers are considered in key decisions, e.g. relating to: store portfolio changes; selection of product lines including third-party brands; selection
and monitoring of suppliers to ensure quality and safety standards are met; freight and logistics arrangements to maximise efficiencies from order
to delivery; the availability of customer credit products; and the development of the NEXT Online platform.
With the interests of customers in mind, during the year the Board reviewed proposals in respect of capital expenditure on warehouses, major
freight forwarding and customer order delivery contracts.
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Regulators
The business is subject to a wide range of regulations. Of particular note is our Finance business which is regulated by the Financial Conduct
Authority (FCA) in respect of the provision of consumer credit. As a responsible authorised company, we seek always to co-operate and engage
constructively with the FCA and meet its standards. The Audit Committee exercises independent oversight over the regulated Finance business that
includes updates on matters under discussion with the FCA.
During the year we engaged with the FCA’s market study on how ‘Buy Now, Pay Later’ products are sold and how customers benefit from such
products. This included sharing information on the forbearance measures we offer to customers in financial difficulties. We have also responded
to regulatory consultations to help the FCA inform and shape future regulation and consumer support in areas such as cost of living, complaint
handling and affordability.
NEXT manages its tax affairs responsibly and proactively to comply with tax legislation. The Company’s approach is to seek to build solid and
constructive working relationships with all tax authorities. NEXT’s UK tax policy can be found at nextplc.co.uk and was reviewed and approved
by the Board during the year. This policy includes that the Company engages with HMRC constructively, honestly and in a timely and professional
manner, and seeks to resolve disputed matters through active and transparent engagement. Engagement with HMRC is led by the Company’s
in-house tax team of qualified tax professionals. The Group Finance Director provides regular updates to the Board on tax matters.
Debt capital/credit facility providers and credit reference agencies
The Group Finance Director and the Company’s Treasury team are responsible for managing the relationships with our banks, bond investors and
credit rating agencies, and the management of the Group’s cash/debt and financing activities. The Group Finance Director provides regular reports
to the Board on these activities including the Company’s access to liquidity, monitoring the headroom and maturity schedules of our primary credit
facilities and future financing plans. The Board approves the Company’s Treasury Policy annually.
Case study: regulator
In February 2023, as part of their assessment of the industry’s readiness for the implementation of Consumer Duty, the FCA invited a number
of firms to provide details of how they were planning to ensure that their products offered fair value to customers – one of the four key
outcomes of the Duty.
NEXT was selected for further engagement and we provided our framework for reviewing our existing products, including the process,
methodology and the data utilised to make our fair value assessments. The feedback from FCA was positive and helped to conclude our
readiness to ensure all of our Consumer Duty obligations are being met. The Audit Committee and the Board maintained oversight of the
engagement via regular meeting updates and provided input to management to shape the engagement approach.
Our impact on the community and the environment
We have a number of targets and initiatives aimed at reducing any adverse impact of our business on the environment and the communities in
which we operate. The ways in which we engage with these communities are set out in more detail on page 108 of our Corporate Responsibility
Report. During the year we considered our approach to climate change and agreed further measures we can take to reduce our impact on the
environment. Details can be found on pages 90 to 101 of the Corporate Responsibility Report.
Doing the right thing – maintaining high standards of business conduct
Corporate governance
We have a robust corporate governance framework in place, details of which are set out in our Corporate Governance Report on pages 123 to 129.
Ethical trading and responsible sourcing
The Audit Committee exercises strong oversight over the Group’s activities in these areas including reviewing the work of the Code of Practice team
and receiving regular updates on Environmental, Social and Governance issues. It reports to the Board on these topics as appropriate. For further
details on our approach to ethical trading and responsible sourcing, please see pages 104 to 105 as well as our Corporate Responsibility Report
which is available on our corporate website.
Political donations
No donations were made for political purposes (2023: £nil).
114
Investors
The Company has just one class of share in issue and so all shareholders benefit from the same rights. The Board does not take any decisions or
actions, such as selectively disclosing confidential or inside information, that would provide any shareholder or group of shareholders with any
unfair advantage or position compared to shareholders as a whole.
How the Board engages:
• Regular calls and meetings between shareholders and the Chief Executive and Group Finance Director.
• Roadshows and conferences with institutional investors.
• Major shareholders are invited to the annual and half year results presentations.
• Meetings and calls between major shareholders and the Chairman and Remuneration Committee Chairman on governance and
remuneration matters.
• Regular communication with institutional investors by the Company Secretary and senior management, particularly on Environmental,
Social and Governance matters.
Shareholder engagement
During 2023 we engaged with investors on a range of topics including:
• Governance including Board composition.
• Human rights and ethical trading.
• The environment, sustainability and responsible sourcing.
• Company performance against its strategy.
• Our 2023 AGM results – see page 125 for further details.
The Board receives regular information on investor views through a number of different channels:
• The Group’s corporate broker provides written feedback on market reaction and investor views after full and half year results announcements
and investor roadshows.
• Reports from the Chairman and other non-executive directors who have direct dialogue with shareholders.
• Analyst/broker reports and views.
• Shareholder feedback reports and statements made by representative associations.
All shareholders have an opportunity to ask questions or represent their views formally to the Board at the AGM, or with directors after the meeting.
The interests of investors were considered as part of the Board’s decisions throughout the year.
Long term decisions
Within the fast-moving fashion retail sector, the operational cycle is short and has become even shorter within recent years. Despite this, we
are mindful that our strategic decisions can have long term implications for the business and its stakeholders and these implications are
carefully assessed.
The most prevalent example of this is in the Board’s decisions with regard to capital allocation. The Board balances:
• The expectations of long term investors on dividends and the return of capital to shareholders via the share buyback programme; with
• The increased need for capital expenditure on warehouses, systems, stores, and our Total Platform investments to support the growth of
the business.
115
Strategic ReportGovernanceFinancial StatementsShareholder Information NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
In accordance with sections 414CA and 414CB of the Companies Act 2006, the following tables summarise where you can find further non-financial
and sustainability information in our reporting.
Our policies
Our impact and related Principal Risks Page reference
Environmental matters
Environment Policy: we recognise that we have a responsibility and an obligation
to work to reduce the direct impact of our business operations on the natural
environment, both now and in the future.
Timber Sourcing and Protecting Forests Through Fabric Choices Policies*:
we aim to reduce our impact and to increase social and environmental benefits
by using only responsibly sourced timber and paper. This includes ensuring man
made cellulosic fabrics used in the products we sell which come from timber are
responsibly sourced.
Cotton Sourcing Policy*: we aim to reduce the social and environmental
impacts of the main raw materials used in our products by, among other things,
sourcing cotton fibre cultivated in a more sustainable way than conventional cotton.
Chemical Policy*: we ensure that all produces manufactured for NEXT meet the
strictest legal requirements or eliminate specific chemicals of concern.
Animal Welfare Policy*: we are committed to sourcing products responsibly and
to working towards improving animal welfare in relation to the animal derived
components used in our products.
Employees
Our colleagues are integral to our success. Their safety and wellbeing is always
our top priority.
Staff Handbook: our handbook sets out expectations of our people to create an
environment where people have the skills and confidence to positively influence
the business and contribute to their full potential. It includes our company HR
policies for consistency and ease of reference.
Diversity and Inclusion Policy: we are dedicated to supporting diversity and
encouraging an inclusive culture. Our business is about people and being
an employer for everyone in an environment where people feel respected,
valued, able to fulfil their potential and be their very best.
Health and Safety Policy Statement*: we are committed to minimising the risk
of injury or ill health to our employees and anyone who may be affected by
our actions.
Social matters
It is a key priority for us to ensure we trade ethically, source responsibly and work
to assure the safety and human rights of the workers within our produce and
services suppliers’ global operation.
Code of Practice Principle Standards: this is our ethical trading programme and
forms an integral part of our business. It was first developed and implemented
in 1998. We became a member of the Ethical Trading Initiative in 2022 and our
Principle Standards are aligned to the ETI Base Code.
Human rights
Respect for human rights is a cornerstone of a responsible business. The violation
of human rights in our operations is unacceptable and we deal firmly with any
infringement identified in our supply chain.
Human Rights and Modern Slavery Policy*: we ensure we trade ethically,
source responsibly and work to prevent modern slavery and human trafficking
throughout our organisation and in our supply chain.
116
• More information can be found in
‘Our Principles’ and ‘Environment’
• Our ‘Principal Risks’ discusses our
approach to environmental and
climate change risks
• 89 and 90
• 81 and 86
• Our commitment and approach to
our people is detailed further in
‘Corporate Responsibility’
• 102 and 103
on Equal
Opportunities
• Whistleblowing
Policy
• Group Health
and Safety
Policy*
• More information can be found in
‘Our Principles’ and ‘Environment’
• 89 and 90
• 83 and 86
• Our ‘Principal Risks’ explain how
we consider ‘Key suppliers and
supply chain management’ and
‘Legal, regulatory and ethical
standards compliance’
• Our approach to human rights is detailed
further in ‘Corporate Responsibility’
• Our Audit Committee oversees and
receives updates on modern slavery
training and awareness
• 109
• 83
• Our
‘Key
suppliers and
supply
chain management’ Principal Risk
considers the training of employees
and communications with suppliers
regarding our expectations in relation
to human rights and modern slavery
Our policies
Our impact and related Principal Risks Page reference
Anti-bribery and anti-corruption
Anti-Bribery and Anti-Corruption Policy*: this formalises our zero tolerance
approach to combat the risks of bribery and corruption by our companies,
employees, agents or third parties acting on our behalf. Our employees receive
training on anti-bribery matters.
• 138
• 83
‘Key
• Our
suppliers and
• Our Audit Committee oversees our
whistleblowing procedures and receives
updates on anti-bribery and awareness.
supply
chain management’ Principal Risk
considers the training of employees
and communications with suppliers
regarding our expectations in relation
to anti-bribery and anti-corruption
Business model
Our Business Model includes non-financial inputs and outputs and creates value
for our stakeholders in a responsible way.
• We describe our Business Model in
• 74 to 75
full within this report
Non-financial KPIs
We continue to evolve a lower-carbon business model, have updated our
Responsible Sourcing Approach and are continuing the groundwork to setting
our Transition Plan to Net Zero.
• Our Section 172 statement sets out
how we have regard to our impact on
the community and environment.
to
• Our approach
‘Environment’,
‘Our People’ and
is
explained further in our Corporate
Responsibility section.
‘Community’
• 114
• 90 to 103
and 108
* The policies highlighted are available to view on our corporate website.
Further information regarding our employees, social, community, human rights and environmental matters is provided in our Corporate
Responsibility Report available on our corporate website at nextplc.co.uk.
Details of our climate-related financial disclosures can be found on the pages of this Report as signposted below.
(a) Governance arrangements
Climate Risk
Legal, regulatory and ethical standards compliance
Governance – Disclose the organisation’s governance around climate-related risks and opportunities
(b) & (c) Risks and opportunities and risk management process
Risk Management – describe how the organisation identifies, assess and manages climate-related risks
• 81
• 86
• 93 to 94
• 97
(d) Principal climate-related risks and opportunities and time periods
Climate Risk
Legal, regulatory and ethical standards compliance
Assessment of principal risks and uncertainties
Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term
• 81
• 86
• 82 and 97
• 95
(e) & (f) Impacts on business model and strategy and resilience
Climate Risk
Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term
Strategy – impacts of climate-related risks and opportunities
(g) & (h) Targets and key performance indicators
Greenhouse gas emissions – SECR and Carbon footprint – including Scope 3
Metrics and Targets – metrics and targets used to assess and manage climate-related risks and opportunities
Strategy towards achieving a lower carbon business model
Transition Plan to Net Zero and Packaging and recycling
• 81
• 95
• 95 to 97
• 90 to 92
• 98 to 99
• 99
• 100
On behalf of the Board
Amanda James
Group Finance Director
21 March 2024
117
Strategic ReportGovernanceFinancial StatementsShareholder Information GOVERNANCE
120 Directors’ Biographies
122 Directors’ Responsibilities Statement
123 Corporate Governance Report
130 Nomination Committee Report
132 Audit Committee Report
140 Remuneration Report
168 Directors’ Report
170 Independent Auditors’ Report
118
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119
DIRECTORS’ BIOGRAPHIES
Directors and Officers
A Audit Committee
Committee key:
R Remuneration Committee
N Nomination Committee
Chair
Key Experience
Michael Roney
CHAIRMAN
R
N
Lord Simon Wolfson
of Aspley Guise
CHIEF EXECUTIVE
Amanda James
GROUP FINANCE
DIRECTOR
joined
Michael
the Board as
Deputy Chairman in February 2017
in August
and became Chairman
2017. Michael brings
significant
international
leadership experience
to the Board; he was previously the
Chief Executive of Bunzl plc from 2005
until his retirement in April 2016, Chief
Executive of Goodyear Dunlop Tires
Europe BV and non-executive director
of Johnson Matthey plc.
Simon has deep knowledge of all
Executive Director
areas of the NEXT business, together
with strong leadership and strategic
expertise, having led as Chief Executive
since 2001. He joined the Group
in 1991 and was appointed Retail
Sales Director in 1993. He became
responsible for NEXT Directory in 1995
and was appointed to the Board in
1997 with additional responsibilities
for Systems. Simon was appointed
Managing Director of the NEXT Brand
in 1999 before his appointment as
Chief Executive.
finance
commercial
Amanda brings extensive financial
Executive Director
knowledge to the Board, having
joined the Group
in 1995 and
the management accounting
led
and
teams
since 2005. In 2009, Amanda was
Finance
Commercial
appointed
to
Director and was promoted
NEXT Brand Finance Director
in
2012. Amanda has comprehensive
knowledge of NEXT’s operations
and has played a central role in the
financial management of the business.
Amanda also has responsibility for
Legal and Compliance. As announced
in the year, Amanda will be stepping
down from the Board in July 2024.
Principal External Appointments
• Chairman of Grafton Group plc
None
until 2 May 2024
• Non-Executive Director of Brown-
Forman Corporation (US firm)
Appointed to the Board
February 2017
February 1997
April 2015
Key Experience
Jane Shields
GROUP SALES,
MARKETING
AND HR DIRECTOR
Richard Papp
GROUP MERCHANDISE
AND OPERATIONS
DIRECTOR
Executive Director
Jane has a profound understanding
of NEXT’s operations, having joined
NEXT Retail
in 1985 as a sales
assistant in one of our London stores.
Jane worked her way through store
management to be appointed Sales
Director
in 2000, responsible for
all store operations and training.
In 2006 Jane was given additional
responsibility for Retail Marketing
and in 2010 was appointed Group
Sales and Marketing Director, adding
Directory and Online Marketing to her
portfolio. She assumed responsibility
the
for Human Resources and
Customer Service Contact Centre in
August 2020.
Executive Director
Richard has a wealth of operational and
merchandising experience. He joined
NEXT in 1991 as a merchandiser and
worked his way through management,
becoming Menswear Product Director
in 2001. In 2005 he gained valuable
experience in a similar role at another
retailer. Richard returned to NEXT in
2006 as Group Merchandise Director,
responsible for NEXT’s Merchandising
function,
Systems,
Product
International Franchise, and Clearance
operations. On appointment to the
Board, Richard took on additional
for Warehousing,
responsibility
Logistics
Systems within
the Group.
and
Jeremy Stakol
GROUP INVESTMENTS,
ACQUISITIONS AND
THIRD PARTY BRANDS
DIRECTOR
Jeremy holds a Masters in Professional
Executive Director
Accounting and spent his early career
in the finance department of a large
media company. Jeremy joined as
Managing Director of Lipsy which was
acquired by NEXT in 2006. In more
recent years Jeremy has successfully
led many of the new investment
deals and related Total Platform
Joules,
(such
opportunities
Victoria’s Secret, Gap and others).
as
Principal External Appointments
None
None
None
Appointed to the Board
July 2013
May 2018
April 2023
120
Jonathan Bewes
Tom Hall
A
R
N
Dame Tristia
Harrison
A
R
N
Dame Dianne
Thompson
A
R
N
A
R
N
Senior Independent
Non-Executive Director
After qualifying as a Chartered
Accountant with KPMG, Jonathan
spent 25 years as an investment
banking adviser, with Robert Fleming,
UBS and Bank of America Merrill Lynch.
As a senior banker, he provided advice
to the boards of many UK and overseas
companies on a wide range of financial
and strategic issues, including financing,
M&A, shareholder engagement and
corporate governance. Jonathan is a
Fellow of the Institute of Chartered
Accountants of England and Wales.
investing activities
Independent
Non-Executive Director
Tom is a partner at Apax Partners, the
global private equity firm. He joined
Apax in 1998 and leads its Internet/
Consumer
in
Europe. In that role, he serves on
the board of a number of retailers
and digital marketplaces. He has
considerable experience of working
with businesses dealing with the
strategic, operational and managerial
challenges and opportunities created
consumer
changing
by
behaviour. Prior to
joining Apax,
Tom worked at S.G. Warburg and
Deutsche Bank.
rapidly
Independent
Tristia has been Chief Executive
Non-Executive Director
Officer of TalkTalk Telecom Group
Limited since 2017 and as such has
experience of running a large-scale
consumer and B2B facing company
and knowledge of digital and cyber
Tristia was Managing
security.
Director of TalkTalk’s
consumer
business when it demerged from
Carphone Warehouse, which she
joined in 2000 and held a number of
senior management and executive
positions. Tristia is also Chair of the
national homelessness charity Crisis.
as
significant
Independent
Dianne has a wealth of marketing
Non-Executive Director
experience gained in retail companies
as well
senior
management experience. Her 42 year
career has included 14 years as Chief
Executive Officer of Camelot Group.
More recently she was Chairman of
RadioCentre and a non-executive
director of the Home Office.
Dianne will not be seeking re-election
at the 2024 AGM.
• Non-Executive Director and Chair
of the Audit and Risk Committee
of The Sage Group plc
• Non-Executive Director and Chair
of the Audit and Risk Committee of
the Bank of England
• Partner at Apax Partners LLP
• Non-Executive Director of Baltic
• Chief Executive of TalkTalk
• Non-executive Director of
Classifieds Group PLC
• Supervisory Board Director
of Wehkamp
TalkTalk’s B2B Wholesale Platform
• Trustee at Crisis
• Trustee at Ambitious about Autism
• Chairman and Non-Executive
Director of Sanderson Design
Group plc
• Non-Executive Director of
Pagefield Communications Limited
October 2016
July 2020
September 2018
January 2015
Soumen Das
Amy Stirling
A
R
N
A
R
N
Venetia Butterfield
Seonna Anderson
COMPANY SECRETARY
A
R
N
Independent
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Executive Director
Soumen
is Chief Financial Officer
of SEGRO plc, the largest UK and
European Real Estate
Investment
Trust and a constituent of the FTSE
100. He has over 14 years’ board level
experience with
listed companies,
having been Managing Director and
Chief Financial Officer of Capital
& Counties Properties plc prior to
joining SEGRO, and was previously
an executive director with UBS within
the investment bank. Soumen is also
Co-Chair of the Parker Review.
Amy
is Chief Financial Officer of
Hargreaves Lansdown plc, a financial
services company and a constituent
of the FTSE 250. Amy has significant
leadership
financial and strategic
experience in client facing businesses
telecommunications
across
and
sectors.
She has considerable transformation
and M&A experience at both
executive and non-executive level and
is a qualified chartered accountant.
the
financial
services
Venetia
is Managing Director of
Cornerstone, the largest adult division
of Penguin Random House. She brings
experience as an accomplished
leader and experienced
business
marketing professional. She was
previously responsible for setting
up the imprint HarperPerennial in
her role at HarperCollins and has led
the marketing operations for both
HarperCollins and Collins Educational.
Venetia serves on the Board of
Governors of the Southbank Centre.
Forthcoming Changes
to the Board
Amy Stirling and Venetia Butterfield
will be joining the Board in April 2024
and their appointments will be put to
shareholders at the 2024 AGM.
Dianne Thompson will be stepping
down from the Board at the end of
the 2024 AGM.
Jonathan Blanchard has joined NEXT
and is the Chief Financial Officer
Designate. It is intended he will join
the Board in July 2024 and his election
will be put to shareholder vote at the
2025 AGM.
• Chief Financial Officer of
SEGRO plc
• Chief Financial Officer of
Hargreaves Lansdown plc
• Managing Director of Cornerstone,
part of the Penguin Group
September 2021
TO BE APPOINTED TO THE BOARD
April 2024
TO BE APPOINTED TO THE BOARD
April 2024
121
Strategic ReportGovernanceFinancial StatementsShareholder Information DIRECTORS’ RESPONSIBILITIES STATEMENT
Directors’ Responsibilities
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 current directors, whose names and functions are listed on
pages 120 to 121, confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in
accordance with UK-adopted International Accounting Standards,
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 Guise
Chief Executive
Amanda James
Group Finance Director
21 March 2024
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. The directors have prepared the Group financial
statements in accordance with UK-adopted International Accounting
Standards 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 UK-adopted International Accounting
Standards 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 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.
The directors are also responsible for the maintenance and integrity of
the NEXT plc website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
122
CORPORATE GOVERNANCE REPORT
Chairman’s Introduction
On behalf of the Board, I am pleased to introduce our Governance
Report for the year ended 27 January 2024. This report sets out our
approach to effective corporate governance and explains the key
features of the Group’s governance structure.
In January 2024 the Company announced the appointments of
Amy Stirling and Venetia Butterfield as non-executive directors with
effect from 2 April 2024. They will each stand for election at the
upcoming AGM.
Good corporate governance runs along the foundations of a well run
organisation and the external governance landscape, guides and rules
continue to evolve. NEXT continues to prioritise doing the right thing
in promoting the success of the Company, and through its governance
structure, always seeks to do so in the right way.
Stakeholder engagement
Uncertainty is known to breed challenges and the environment over
the past few years has put the spotlight on a number of our key
stakeholders. The Board has been required to exercise its judgement
on numerous occasions to ensure that the Group’s stakeholders are
treated as fairly as possible in a year which has remained challenging.
Key engagement pieces this year have been with our customers and
employees, who have been under inflationary pressures. We also
consulted with shareholders to understand some of the reasons for
voting against my re-election at our 2023 AGM.
Further details on how we have engaged with our stakeholders can be
found on pages 112 to 115.
Board effectiveness
It is important that the Board, its Committees and individual directors
rigorously review their performance and embrace the opportunity to
develop where necessary. This year’s annual effectiveness review of our
Board and Committees was facilitated internally with support from the
Company Secretary. The review concluded that the Board continues to
operate effectively; further details can be found on pages 128 to 129.
Board appointments and diversity
In April 2023 we welcomed Jeremy Stakol to the Board as Group
Investments, Acquisition and Third Party Brands Director. His election
was approved by shareholders at the 2023 AGM.
We announced in September 2023 that after 28 years of service at NEXT
our Group Finance Director, Amanda James, will step down from the
Board in July 2024. Amanda has made a huge contribution to the Group
in her 28 years with NEXT and has been an exceptional guardian of our
finances. Our succession planning enabled us to announce Amanda’s
replacement, Jonathan Blanchard, Chief Operating Officer of Reiss,
with sufficient time to avoid any unnecessary disruption to the business
and an orderly handover and thorough induction is currently underway.
Amy is Chief Financial Officer of Hargreaves Lansdown plc, a financial
services company and a constituent of the FTSE 250. Amy has significant
financial and strategic leadership experience in client facing businesses
across the telecommunications and financial services sectors.
Venetia is part of the Penguin Group leadership team and is Managing
Director of the Cornerstone Publishing House. Venetia brings to the
Board experience as an accomplished business leader and experienced
marketing professional. Her successful leadership of an independent
business within a larger conglomerate will be particularly helpful as
NEXT steadily increases the number of businesses it takes on within the
Group through its Total Platform initiatives.
You can read more about the appointment process in the Nomination
Committee Report on page 130.
The Company has once again taken part in the Parker Review and
the FTSE Women Leaders Review in relation to its gender and ethnic
diversity. We talk about this more on pages 130 to 131.
Continuing governance commitment
We believe that good governance provides the framework for stronger
long term value creation for all our stakeholders. We apply corporate
governance in a way that is relevant and meaningful to our business and
consistent with our culture and values.
We welcome the new UK Corporate Governance Code 2024 and work is
underway to implement new provisions as appropriate.
Environmental, Social and Governance (ESG) remains a key area of
focus for stakeholders who want to work for, shop with or invest in
companies who do business responsibly. Our ESG metrics, targets
and reporting have been reviewed, and in particular we continue to
formulate our ambition so we can share our actions and demonstrate
our accountability for how we will decarbonise as part of a Net Zero
Transition Plan. You can read our Corporate Responsibility Report on
pages 89 to 110 and our corporate governance compliance statement
and supporting disclosures on pages 124 to 129.
Michael Roney
Chairman
21 March 2024
123
Strategic ReportGovernanceFinancial StatementsShareholder Information CORPORATE GOVERNANCE REPORT
• Reviewed and approved the scope for a significant finance system
modernisation project planned for the next two years.
• Agreed the assessment period for the statement of viability at the
recommendation of the Audit Committee – see page 135.
At its heart, the purpose of the Company is to source and trade excellent
quality clothing, homeware and beauty products in order to make a
profit for its shareholders. We aim to do this in a responsible way and to
do the right thing by our employees, our customers, our suppliers and
our wider stakeholders. Our Corporate Responsibility Report sets out
the way in which we fulfilled our responsibilities this year.
Culture
The directors are responsible for ensuring a healthy and supportive
culture within the Group. We monitor this through direct employee
engagement activities (see pages 112 to 113) and discussions with
the executive directors, the HR Director and other members of
management. We assess and monitor this in the following ways and it
is through these activities we ensure that the company’s culture aligns
with its purpose, value and strategy:
• Dedicated time at Board meetings, supported by our HR Director, to
hold discussions on culture and employee/workforce matters.
• Reviewing the results of the Group’s employee engagement surveys.
• Monitoring the levels and nature of whistleblowing reports and
grievance and disciplinary hearings.
• Monitoring absenteeism and employee turnover.
• Reporting by Internal Audit on fraud and compliance breaches to the
Audit Committee.
• Reviewing induction and training policies and practices.
• Engaging with employees directly during site visits.
• Overseeing management’s plans to respond to matters raised by
the workforce.
• Reviewing the Group’s key policies and HR initiatives.
During the year we continued with our employee engagement activities,
in particular the workforce Business Review Meetings.
Our values are set out in the Corporate Responsibility Report on page
89 and the Non-Financial Information and Sustainability Statement
summarises the Company’s supporting policies on pages 116 to 117.
Our Whistleblowing Policy encourages workers to report concerns
or suspicions about any wrongdoing or malpractice, and provides a
number of ways to do this, including via the confidential NEXT Integrity
line (managed by Crimestoppers). The Audit Committee Report
contains more details of the Company’s whistleblowing procedures and
the Audit Committee’s oversight.
Our Board members also strive, through their own behaviours, to set
the tone from the top in conducting themselves appropriately and in
line with the Group’s values.
Information on the Company’s approach to investing in and rewarding
its workforce is set out in the Strategic Report on pages 102 to 103.
Corporate Governance Statement
The statement below, together with the rest of the Corporate
Governance Report, provides information on how NEXT has applied
the principles in the UK Corporate Governance Code 2018 (the Code),
which is the version of the Code that applies to its 2023/24 financial year.
For the year ended 27 January 2024, the Board considers that it
has complied in full with the provisions of the Code (available at
www.frc.org.uk). Given the external interest in pension alignment
as recommended by provision 38 of the Code, the Board notes
that the executive directors at NEXT have very long service at the
Company. Whilst the pension provision offered to new joiners has
changed over time (which is consistent with wider market practice),
the Board considers it more relevant to consider the alignment of
the pension contribution rates of the executives in the context of
the workforce recruited at the same time. Each executive director is
provided with pension contributions no more generous than those
provided to colleagues recruited at the same time. Full details of the
pension arrangements of the executive directors are given on page
151 of the Directors’ Remuneration Report including details of some
forthcoming changes.
Disclosures required by the Disclosure Guidance and Transparency
Rules DTR 7.2.6, with regard to share capital are presented in the
Directors’ Report on page 168. Disclosures required by DTR 7.2.8A
relating to diversity policy are presented in the Nomination Committee
Report on page 130.
Directors’ biographies and membership of Board Committees are set
out on pages 120 to 121.
Board leadership and
company purpose
The Board’s role is to promote the long term sustainable success of the
Company. It does this through:
• Discussions with the executive directors and other members of the
senior management team on industry trends.
• Evaluating business development proposals and considering
how these will support and strengthen components of the
business model.
• A policy of continuous identification and review of principal business
risks, including identifying key and emerging risks, determining
control strategies and considering how those risks may affect
the achievement of business objectives, taking into account risk
appetite, as detailed on pages 78 to 86.
• Our annual viability assessment which is undertaken by reference to
the business model, strategy and the principal risks and mitigating
factors as well as the current financial position and historical financial
performance and forecasts – see pages 87 to 88.
In particular, during 2023/24 the Board:
• Assessed a number of potential acquisitions and investment
opportunities, having regard to strict financial criteria. We approved
a number of opportunities including the Cath Kidston brand, further
investment in Reiss and FatFace.
• Reviewed and approved the purchase of a proportion of the
Group’s annual energy requirements under a long term Power
Purchase Agreement.
124
Resourcing
The Board ensures that the necessary resources are in place for the
Company to meet its objectives and measure performance against
them. They have an integral role in setting and approving the Company’s
budget and capital allocation processes and in monitoring availability
of debt capital facilities and the Company’s credit ratings. In regard to
people, they receive reports from management on any development
gaps in key roles and the plans to address these.
Risk management and internal controls
The Board maintains a balanced approach to risk within a framework
of effective controls and taking into account the interests of a diverse
range of stakeholders. It is responsible for keeping the effectiveness of
the systems of risk management and internal controls under review –
see page 129.
Engagement with shareholders
Significant time and effort is invested in providing detailed and
transparent information to shareholders and maintaining regular and
effective dialogue. Rather than delegation to an investor relations
team, Lord Wolfson and Amanda James, as Chief Executive and
Group Finance Director respectively, engage directly with investors
on a regular basis throughout the year. Full year and other public
announcements are presented in a consistent format and are made as
meaningful, understandable, transparent and comparable as possible.
This information is also made publicly available on the Company’s
corporate website nextplc.co.uk.
Our Section 172 Companies Act Statement on page 115 details how the
views of shareholders have been taken into account during the year.
Following our 2023 AGM, at which a minority (20.84%) of shareholders
that voted chose not to support the re-election of the Chair, Michael
Roney, the Company engaged
in a consultation process with
shareholders to gain an understanding of their reasons for voting
against. Based on the views expressed by shareholders, this was
primarily due to him being considered overboarded with a secondary
concern relating to the gender make up of the Board. The Board accepts
that some investors apply a stricter voting policy than the market
generally in relation to Chair and Directorship roles on the boards of
listed companies. Michael provides more than enough time to his role
as Chair and effectively discharges the functions and obligations of the
role. He has attended all Board and Committee meetings held in the
past three years. He is always available when required, as was evident in
the Group’s response to the pandemic, and his involvement in the major
strategic decisions made by the Board in recent years. Michael will step
down from his role as chair of Grafton Group plc on 2 May 2024.
The Board has also strengthened the gender make up of the Board since
the year end following the upcoming appointments of Amy Stirling and
Venetia Butterfield, however, more work is needed in addressing the
Board’s gender balance later in the year when Amanda steps down as
Group Finance Director.
Engagement with other stakeholders
The views of other providers of capital and key stakeholders are also
considered. Please see the Section 172 Statement on page 112 for
information on how the Board does this.
With regard to engagement with the workforce, the Board uses various
methods including engagement with a workforce panel and attendance
by a non-executive director at those panels. More details can be found
in the Section 172 Statement on pages 112 to 113. The Board considers
that, taken together, the arrangements described deliver an effective
means of ensuring the Board stays alert to the views of the workforce.
Division of responsibilities
Chairman and Chief Executive
There is a clear division of responsibilities between the Chairman and
Chief Executive which is set out in writing and agreed by the Board.
The Chairman manages the Board to ensure that:
• The Group has appropriate objectives and an effective strategy.
• There is a high calibre Chief Executive with a team of executive
directors able to implement the strategy.
• There are procedures in place to inform the Board of performance
against objectives.
• The Group is operating in accordance with a high standard of
corporate governance.
The Board sets objectives and annual targets for the Chief Executive.
It is responsible for general policy on how the objectives are achieved
and delegates the implementation of the policy to the Chief Executive.
The Chief Executive reports at each Board meeting all material matters
affecting the Group and its performance.
The Chairman sets the Board’s agenda and is also responsible for
promoting a healthy culture of openness, challenge and scrutiny,
and ensuring constructive relations between executive and non-
executive directors.
Independence of non-executive directors
Half of the directors at our financial year end, excluding the Chairman,
are non-executive directors. The Board considers that all of its non-
executive directors, except for the Chairman, are independent when
assessed against the requirements of the Code and their knowledge,
diversity of experience and other business interests continue to enable
them to contribute significantly to the work of the Board. Michael Roney,
the Chairman, met the independence requirements set out in the Code
on his appointment in 2017.
Directors’ conflicts of interest
In accordance with the Company’s Articles of Association, the Board has
a formal process in place for situational conflicts to be authorised by
non-conflicted directors. In deciding whether to authorise a situational
conflict, the non-conflicted directors take into account their general
duties under the Companies Act 2006. Limits or conditions can be
imposed when giving an authorisation or subsequently if considered
appropriate. Any situational conflicts considered by the Board, and any
authorisations given, are recorded in the Board minutes and in a register
of conflicts which is reviewed annually by the Board.
Senior Independent Director (SID)
Jonathan Bewes is the Company’s Senior Independent Director.
In this role Jonathan is available to provide a sounding board for the
Chairman and to serve as an intermediary for the other directors and
shareholders. He also meets with each of the directors to appraise the
Chair’s performance.
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Governance framework
The structure of the Board and its governance framework is set out below. The Board believes that it facilitates the operation of an open and
straightforward culture without complex hierarchies and over-delegation of responsibilities.
Board
Nomination Committee
Provides effective leadership by
setting business strategy and
overseeing delivery in a way that
delivers long term growth for the
benefit of NEXT’s shareholders.
Committee Terms of Reference
are agreed by the Board and
regularly reviewed. These are
available on
the corporate
website nextplc.co.uk
The Chair, Chief Executive and SID’s
role descriptions are summarised
on the preceding page.
• Keeps under review the composition, size, structure and diversity of the Board and
– see Committee report on pages 130 to 131
its Committees.
• Evaluates the balance of skills, experience and diversity of the Board.
• Provides succession planning for the Board and senior management.
• Leads the process for new Board appointments.
Audit Committee
• Reviews and monitors the integrity of the Group’s Financial Statements.
– see Committee report on pages 132 to 138
• Reviews and monitors the adequacy and effectiveness of the risk management framework
and the systems of internal controls (including whistleblowing procedures).
• Reviews and monitors the effectiveness and independence of the external and
internal auditors.
Remuneration Committee
• Responsible for setting the Remuneration Policy for all executive directors and the Chairman,
– see Committee report on pages 140 to 167
including pension rights and any compensation payments.
• Recommends and monitors the level and structure of remuneration for senior management.
• Reviews the ongoing appropriateness and relevance of the Remuneration Policy when
setting remuneration.
Chief Executive
Other Governance Steering Groups
for
running of
Responsible
day
business
and
of
business strategy.
for
and
the day-to-
the Group’s
performance,
development
of
and
the
implementation
The below steering groups, comprising representatives from Executive/operational
management, held meetings during the year to review and monitor specific risks,
activities and incidents:
• Risk Steering Group – risk identification and risk management activities
• Treasury – Group’s treasury policy, treasury operations and funding activities
•
Information Security & Data Protection – Group’s information security and cyber
related activities
• Health & Safety – Group’s health and safety activities
• ESG Steering Group – ESG risk monitoring and setting of ESG priorities.
Executive/operational management
The Chief Executive has delegated authority for the day-to-day management of the business to operational management comprising other
executive directors and senior management who have responsibility for their respective areas.
This includes important weekly NEXT Brand trading and capital expenditure meetings, which consider the performance and development
of the NEXT Brand through its different distribution channels. This and other meetings also focus on risk management of business areas in
respect of the NEXT Brand, including product, sales, customer experience, property and stores, warehousing, systems and personnel.
126
Noting of directors’ concerns
The Chairman encourages openness and debate at Board meetings to
enable better decision making. Any director who has concerns about
the operation of the Board or the management of the Company that
cannot be resolved would ordinarily (and especially if requested by that
director or the Chairman) be recorded in the minutes of the relevant
meeting. If, on resignation, any non-executive director had any such
concerns they would be invited to provide a written statement to the
Chairman that would be circulated to the Board. No concerns have
been raised in the year.
Review of directors’ performance
As Senior Independent Director, Jonathan Bewes led the appraisal
of Michael Roney’s performance as Chairman in the year through
individual discussions with the other directors. Michael Roney appraised
the performance of Lord Wolfson as Chief Executive.
The performance of the executive directors is monitored throughout
the year by the Chief Executive and the Chairman. The Chairman
also monitors the performance of the non-executive directors.
Appropriate feedback
is provided where necessary. For more
information on the Board effectiveness evaluation process, please see
pages 128 to 129.
At each Board meeting the Board receives reports from the Chief
Executive on the performance of the business. This includes scrutiny of
performance against clear financial objectives.
Matters reserved for the Board
There is a formal schedule of matters reserved for the Board.
These include investments, significant items of capital expenditure,
share buybacks, dividend and treasury policies.
The Board is also responsible for:
• The long term success of the Company, setting and executing the
business strategy and overseeing its delivery.
• Providing effective leadership.
• Setting and monitoring the Group’s risk appetite and the system of
risk management and internal control.
• Monitoring implementation of its policies by the Chief Executive.
• Approving semi-annual Group budgets and regular review of
performance against budget. Forecasts for each half year are revised
and reviewed monthly.
Certain other matters are reported weekly or monthly including sales,
treasury operations and capital expenditure programmes.
Board attendance
The table below shows the attendance at Board and Committee
meetings during the year to 27 January 2024. All independent non-
executive directors are members of the Nomination, Audit and
Remuneration Committees. This allows the non-executive directors
to deepen their understanding of the NEXT business, control and
risk environment and enhance their contribution to the Board and
its Committees.
The Board is satisfied that each of the directors is able to allocate
sufficient time to the Company to discharge their responsibilities
effectively. Contracts and letters of appointment of directors are made
available at the AGM, and are available for inspection at the Company’s
registered office during normal business hours or on request.
Directors
Role
Board
Nomination
Audit
Remuneration
Number of meetings held in the year
Lord Wolfson
Amanda James1
Chief Executive
Group Finance Director
Richard Papp
Jane Shields
Jeremy Stakol2
Michael Roney1
Group Operations & Merchandising Director
Group Sales, Marketing & HR Director
Group Investments & Acquisitions Director
Chairman
Jonathan Bewes
Senior Independent Director
Soumen Das
Tom Hall
Non-executive director
Non-executive director
Dame Tristia Harrison
Non-executive director
Dame Dianne Thompson
Non-executive director
8
8/8
8/8
8/8
8/8
7/7
8/8
8/8
8/8
8/8
8/8
8/8
6
–
–
–
–
–
6/6
6/6
6/6
6/6
6/6
6/6
5
–
–
–
–
–
–
5/5
5/5
5/5
5/5
5/5
6
–
–
–
–
–
6/6
6/6
6/6
6/6
6/6
6/6
1. Michael Roney and Amanda James are not members of the Audit Committee, however they attend all Audit Committee meetings during the year by invitation.
2. Jeremy Stakol was appointed to the Board in April 2023.
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Board Committees
As detailed in the diagram on page 126, the Board has appointed
Committees to carry out certain aspects of its duties. Each is chaired by
a different director and each Committee Chairman reports regularly to
the Board on how that Committee has discharged its responsibilities.
Re-election and election of directors
the Company’s Articles of Association, directors are
Under
required to stand for re-election at least once every three years.
However, in accordance with the Code, all directors stand for election
or re-election at each AGM.
External appointments during the year
During the year, the Board approved Jonathan Bewes’ appointment as
non-executive director and Chair of the Audit and Risk Committee of
the Bank of England. After confirming that there were no conflicts of
interest and considering the likely time commitment required to fulfil
this role, the Board was satisfied that this appointment would not
inhibit Jonathan’s ability to continue to effectively discharge his duties
and responsibilities as a non-executive director of NEXT.
Information and support
There is a regular flow of
information between all directors.
The Company Secretary attended all Board meetings; he advised the
Board on corporate governance matters and facilitated the flow of
information within the Board. The Board approved the appointment of
the new Company Secretary in February 2024.
The Company has an open culture; its non-executive directors meet on
a formal and informal basis with a broad range of NEXT management
and have unrestricted access to the business and its employees.
If directors decide it is necessary to seek independent advice about
the performance of their duties with the Company, they are entitled
to do so at the Company’s expense. Details of professional assistance in
relation to Remuneration Policy matters are shown on page 160.
Composition, succession
and evaluation
Board composition
At the financial year end the Board comprised five independent non-
executive directors (including the Senior Independent Director),
the Chairman and five executive directors who all bring considerable
knowledge, skills and experience to the Group. The Board is continually
assessed and periodically refreshed to ensure
it maintains an
appropriate balance of skills and experience.
Director appointments and the
Nomination Committee
There have been a number of recent and forthcoming changes to
the Board. In April 2023 Jeremy Stakol was appointed as an executive
director, and in January 2024 we announced the appointment of two
new non-executive directors with effect from April 2024. Our new
non-executive directors’ appointments will be put to shareholder vote
at the upcoming AGM. In October 2023 we announced that Amanda
James will retire from the Board with effect from July 2024 and will be
replaced at that time by Jonathan Blanchard whose election vote will be
put forward to shareholders at our 2025 AGM.
The Nomination Committee Report on page 130 contains information
on the procedure for appointment of new directors to the Board,
succession planning for Board and senior management positions and
information on the Company’s diversity approach.
The specific reasons why the Board considers that each director’s
contribution is, and continues to be, important to the Company’s long
term sustainable success are set out in the directors’ biographies on
pages 120 to 121.
Board induction and development
On joining the Board, new members receive a personalised induction,
their experience, background and understanding
tailored
induction
of the Group’s operations and environment. The
programme includes:
to
• Visits to warehouses and stores.
• Attendance at key operational meetings.
• Meetings with operational directors and senior managers, giving an
overview of the business.
• Meetings with the Chairs of each of the Board and its Committees
and the external audit partner.
• A briefing from the Company Secretary, the Group’s corporate broker
and external lawyers on the duties of a public company director.
• Access to past Board, Committee and other key governance papers.
Individual training and development needs are reviewed as part of
the annual Board evaluation process and training is provided where
appropriate, requested or a need is identified. All directors receive
frequent updates on a variety of issues relevant to the Group’s business,
including legal, regulatory and governance developments, with visits
to stores and warehouse operations organised periodically to help
directors’ understanding of the operational aspects of the business.
Board effectiveness evaluation
Every year there is an evaluation of the performance of the Board,
its Committees, the Chair and individual directors. An outcome of last
year’s internal board evaluation was to enhance debate around risk,
achieving a better understanding of the Company’s approach to risk
management and setting risk appetite.
This year’s annual evaluation was internal and facilitated by the Company
Secretary. Following a briefing provided by the Chairman and Company
Secretary, each of the directors completed a questionnaire designed
to elicit their views on all aspects of the effectiveness of the Board,
its members and its Committees. The questions covered eleven main
areas, covering composition, experience, dynamics, the Chairman’s
leadership, directors’ contribution and the extent to which the Board
fulfils its role and responsibilities with particular regard to strategy, risk
oversight and succession planning. The review concluded that the Board
has continued operating effectively, offering a good balance of support
and challenge and adding value to an increasing extent. Examples of
areas positively reported include:
• Board meeting and director engagement.
• Development and induction of new Board members.
128
The Board has carried out a robust assessment of the principal and
emerging risks facing the Company and has also conducted an annual
review of the effectiveness of the systems of internal control during
the year – see page 80 in the Strategic Report for further information.
The Board promotes the development of a strong control culture within
the business. The Audit Committee regularly reviews strategic and
operational risk and the Audit Committee and Board have reviewed
the principal risks (described on pages 82 to 86) and the associated
financial, operational and compliance controls and mitigating factors.
The Audit Committee discusses these risks with the relevant directors
and senior management.
The Board considers that the Group’s management structure and
continuous monitoring of key performance indicators are able to identify
promptly any material areas of concern. Business continuity plans,
procedure manuals and codes of conduct are maintained in respect of
specific risk areas and business processes. The management of business
risk is an integral part of Group policy and the Board will continue to
develop risk management and internal controls where necessary.
The use of a Group accounting manual and prescribed reporting
procedures for finance teams throughout the Group ensures that the
Group’s accounting policies are clearly established and consistently
applied. Information is appropriately reviewed and reconciled as part
of the reporting process and the use of a standard reporting software
package by all entities in the Group ensures that information is
presented consistently to facilitate the production of the consolidated
financial statements.
Remuneration
The Company’s remuneration policies and practices are designed
to support strategy and promote long term sustainable success.
They are aligned to the Company’s purpose and values and linked
to the successful delivery of the Company’s long term strategy. You can
read about the Company’s Remuneration Policy including considerations
taken on board and the work of the Remuneration Committee in the
Remuneration Report on pages 140 to 167.
The Remuneration Report also contains information on the Company’s
compliance with the Code provisions relating to remuneration.
Areas identified as possible opportunities to develop the Board’s
effectiveness further include:
• Board composition to extend skills in cyber and ESG.
• Succession planning with greater exposure of senior managers to
non-executive directors.
The Chairman and Company Secretary are putting in place appropriate
action plans
in response to the evaluation findings and will
review progress.
Audit, risk and internal control
Audit Committee and independent auditor
For further information on the Company’s compliance with the Code
provision relating to the Audit Committee and auditors, please refer
to the Audit Committee Report on pages 132 to 138. The independent
auditors’ responsibilities are set out on page 177 and the Board’s
statement as to the Annual Report and Accounts being fair, balanced
and understandable can be found on page 122.
Going concern and viability assessment
The Group’s business activities, together with the factors likely to affect
its future development, performance and position are set out in the
Strategic Report, which also describes the Group’s financial position,
cash flows and borrowing facilities. Further information on these areas
is detailed in the financial statements. Information on the Group’s
financial management objectives and how derivative instruments are
used to hedge its capital, credit and liquidity risks is provided in Note 29
of the financial statements.
The directors report that, having reviewed current performance
and forecasts, they have a reasonable expectation that the Group has
adequate resources to continue its operations for a period of at least
12 months. For this reason, they have continued to adopt the going
concern basis in preparing the financial statements. The directors have
also assessed the prospects of the Company over a three year period.
Further details of the viability assessment are provided on pages 87
to 88.
Risk management and internal control
The Board is responsible for the Group’s risk management process and
delegates responsibility for its implementation to the Chief Executive
and senior management best qualified in each area of the business.
The Board sets guidance on the general level of risk which is acceptable
and has a considered approach to evaluating risk and reward and
promoting a risk aware culture throughout the business.
Risk management and internal control is a continuous process and
has been considered by the Board on a regular basis throughout the
year (see the description of the Group’s risk management and internal
control framework on page 78 for more information). This includes
identifying and evaluating, principal and emerging risks, determining
control strategies and considering how they may impact on the
achievement of business objectives.
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Strategic ReportGovernanceFinancial StatementsShareholder Information NOMINATION COMMITTEE REPORT
Membership and meetings
Members
Michael Roney (Committee Chairman)
Jonathan Bewes
Soumen Das
Tom Hall
Dame Tristia Harrison
Dame Dianne Thompson
The Committee member attendance table is shown on page 127.
Lord Wolfson also attends the Nomination Committee meetings by
invitation. In addition to formal meetings during the year, there were
regular informal discussions on succession plans and appointments at
the senior leadership team level.
The Committee’s roles and responsibilities are covered in its terms of
reference which are available on our corporate website nextplc.co.uk.
An annual evaluation of the Nomination Committee’s performance
was undertaken as part of the Board evaluation process through
an internal process this year. Further details are set out on pages
128 to 129. The review concluded that the Committee continues to
operate effectively.
Committee activities in 2023/24
Board appointments
The Committee adopts a formal and transparent procedure for the
appointment of new directors to the Board.
in
External consultants are used to assist
identifying suitable
external Board candidates, based on a written specification for each
appointment. The Chairman is responsible for providing a shortlist
of candidates for consideration by the Nomination Committee which
then makes its recommendation to the Board for final approval.
The Nomination Committee is led by the Senior Independent Director
when dealing with the appointment of a successor to the Board
chairmanship. Heidrick & Struggles were appointed during the year to
help identify suitable external candidates for the non-executive director
roles and has no other connection with the Company. A comprehensive
candidate specification was agreed and aligned the role brief to the
desired Board and Committee composition with reference to our Board
skills matrix, governance principles and diversity policy.
Following an extensive search exercise in 2023 and early 2024, the Board
approved the appointment of Amy Stirling and Venetia Butterfield as
non-executive directors with effect from 2 April 2024. In October 2023,
the Company announced the appointment of Jonathan Blanchard
as Chief Financial Officer designate for appointment in the 2024/25
financial year and he will join the Board as CFO in July 2024 when Amanda
James steps down. Jonathan was CFO at Reiss which first became part
of the NEXT Group in 2021. He moved to NEXT in November 2023 and
brings a wealth of experience implementing rigorous financial and
capital controls. NEXT has a good track record of internal promotions to
the Board and has not made an external appointment of an executive
director for over 34 years.
the Committee considered
Succession planning
During
the succession
the year,
arrangements for the Board and for the operational directors below
Board level. We reviewed a skills matrix which captured the core
skills, knowledge, experience and diversity represented by the Board
members. This provides a framework for considering the skills we wish
to focus on when preparing role specifications and evaluating potential
new Board candidates. Our current Board members each bring a broad
range of individual skills, knowledge and experience. A summary of the
skills of our directors is shown below.
Skills and experience
Retail/Commercial/Operational
Listed market experience and governance
CEO experience
Brand marketing
Finance/Accounting
Cyber risk/Digital
Property
Number of directors
9
8
4
4
4
3
2
Dame Dianne Thompson is our longest serving non-executive director,
having been appointed to the Board in 2015. Dianne will stand down
from the Board at the 2024 AGM.
Crisis situation succession
During the year, we also considered crisis situation succession
arrangements in the event of sudden changes in the availability of
executives and key operational director personnel. The business
has a strong track record of successful internal promotions to both
operational director and executive director positions, and we were able
to clearly identify potential candidates to immediately cover for key
personnel should the need arise.
Diversity and inclusion
Appointments to the Board and its Committees, as with other positions
within the Group, are made on merit according to the balance of skills
and experience offered by prospective candidates. As a company,
we acknowledge the benefits of diversity in terms of business
experience and individual appointments are made irrespective of
personal characteristics such as race, religion or gender. The Committee
will always seek to appoint the candidate with the most appropriate
skills and experience.
NEXT’s Diversity & Inclusion Policy sets out our support for diversity
and encourages an inclusive culture. We actively support a culture of
inclusion, to ensure that all our employees are valued, and are treated
with dignity and respect. We recognise that for the business to continue
to be successful we must ensure that we can recruit from as wide a
pool of talent as possible. This policy is to treat all employees fairly and
equally, regardless of gender, sexual orientation, marital status, race,
colour, nationality, religion, ethnic or national origin, age, disability or
union membership status and we do not have a separate formal
policy for the Board and its Committees as the all employee policy is
applicable. We satisfy the Parker Review recommendations to have at
least one Board director from an ethnic minority background.
130
We are pleased to have been recognised in the FTSE Women Leaders Review: Achieving Gender Balance (February 2024) again this year and were
in third place for the combined executive committee and their direct reports. We have remained in the top three since 2017. Women represented
36% of our Board at the year end which is below where we would like to be. This will increase to 46% with the appointments of Amy Stirling and
Venetia Butterfield but will fall with Dame Dianne Thompson stepping down at the 2024 AGM and then again with the change of CFO in July.
The gender balance of the Board will be kept under review and another female non-executive director will likely be recruited in due course.
Further analysis of employees by gender is given in the Strategic Report on page 103.
The Company met two of the three targets on board diversity set out in LR 9.8.6(9) as at the year end as set out below:
1. at least one of the required senior positions on its Board of directors is held by a woman; and
2. at least one individual on its Board of directors is from a minority ethnic background.
3. The Company has not met the target of at least 40% of the individuals on its Board of directors are women at financial year end, which was
36%. As at April 2024, the appointments of two female Board members will bring the percentage to 46%. The target will be met at the time of
our 2024 AGM but later in the year when Amanda James steps down, this will result in the target 3) not being met as well as target 1) a senior
position on the Board being held by a woman.
Number of
Board members
Percentage of
the Board
Number of
senior positions
on the Board
(CEO, CFO, SID
and Chair)
Number in
executive
management
Percentage of
executive
management
7
4
0
10
0
1
0
0
0
64%
36%
0
91%
0
9%
0
0
0
3
1
0
4
0
0
0
0
0
20
14
0
32
0
2
0
0
0
59%
41%
0
94%
0
6%
0
0
0
Gender identity
Men
Women
Not specified/prefer not to say
Ethnic background
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Approach to collating diversity data: data is sourced from our employee database containing all permanent colleague details as at 27 January 2024. Diversity information for ethnicity is
based on voluntary self-declaration.
Michael Roney
Chairman of the Nomination Committee
21 March 2024
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Chairman’s Introduction
Membership and meetings
During the year the Committee comprised the following independent
non-executive directors:
Member
Jonathan Bewes (Committee Chairman)
Soumen Das
Tom Hall
Dame Tristia Harrison
Dame Dianne Thompson
The Committee held five scheduled meetings during the year.
The meeting attendance table is shown on page 127. In advance of
each meeting the Committee Chairman met with the Central Finance
Director and Company Secretary and Legal Director, and separately
with the external audit partner to discuss their reports as well as any
relevant issues. He also had regular meetings with the Head of Internal
Audit where the Group’s internal controls, governance framework
and the progress of the internal audit work programme is reviewed.
The Committee Chairman routinely reported to the Board on the
Committee’s activities and matters of particular relevance, following the
Committee meetings.
The Group Finance Director and the Board Chairman attended all of
this year’s meetings by invitation. Operational directors and senior
managers are invited to attend and present at Committee meetings
regularly in order to reinforce a strong culture of risk management
and to keep the Committee up to date with events in the business.
The Committee meets without management present on a regular basis,
and meets privately with the Head of Internal Audit and the external
auditor as necessary and at least annually.
Details of the directors’ skills, experience and qualifications can be found
in the biographies on pages 120 and 121. The Committee’s wide range
of financial and commercial skills and experience serves to provide the
necessary knowledge and ability to work as an effective committee and
to robustly challenge the Board and senior management as and when
appropriate. The Committee Chairman and Soumen Das, both possess
recent and relevant financial experience and the Committee as a whole
continues to have competence relevant to the sector. None of the
Committee’s members has a connection to PwC, the external auditor.
Committee evaluation
During the year, the Committee’s performance was assessed as part
of the annual Board evaluation process. This year’s assessment was
conducted internally and concluded that the Committee continues to
operate effectively. Further details of this year’s evaluation can be found
on pages 128 to 129.
I am pleased to present the Audit Committee’s report for the year ended
27 January 2024. This report explains the Committee’s responsibilities
and how it has discharged them over the course of the year.
On the following page is a summary of the activities undertaken
by the Committee during the year, which broadly fall into four
categories: (i) financial reporting; (ii) external audit; (iii) internal
control, risk management and internal audit; and (iv) governance and
other matters. The Committee assists the Board through overseeing,
challenging and monitoring the Company’s frameworks and disclosures,
along with management’s judgements in these areas.
It was another busy year for NEXT, which saw growth in its key
performance metrics, alongside the acquisition of equity stakes
in a number of new Total Platform clients and other businesses.
The Committee challenged management on its associated accounting
judgements, and further information about this can be found on
page 134.
Good work is also underway within the NEXT Internal Audit function,
which is working to implement best practice recommendations.
The Company has also commenced work on a new financial system,
which will provide an opportunity to further enhance its control
environment and support the growth of the business. The Committee
was pleased to receive reports from management of the current position
and the proposed timetables for these projects and improvements to
be made.
All that remains is for me to thank the management team at NEXT and
all Committee members for their valuable contributions which support
the work of the Committee.
Jonathan Bewes
Chairman of the Audit Committee
21 March 2024
Role of the Committee
The Committee’s roles and responsibilities are covered in its terms
of reference which are available on our corporate website at
nextplc.co.uk. These terms of reference were most recently reviewed
by the Board in November 2023.
The Committee focuses on ensuring the integrity of the financial
reporting and audit processes and the maintenance of sound internal
control and risk management systems in order to safeguard shareholder
interests. In particular, it focuses on monitoring and/or reviewing:
• The integrity of financial and narrative reporting.
• The going concern and viability statements.
• NEXT’s systems of risk management and internal control.
• The activities and effectiveness of the Internal Audit function.
• The effectiveness of whistleblowing arrangements.
• The effectiveness of the external audit process and the
appropriateness of the relationship with the external auditor.
132
Summary of key Committee activities during the year
• Reviewed the annual report and interim financial statements
Financial reporting
• Reviewed the going concern and viability statements.
for consistency and tone.
• Agreed the application of the key accounting judgements
and estimates and considered whether the accounts are fair,
balanced and understandable.
• Reviewed audit approach, scope and planning. This included
External audit
specific consideration of additional scope caused by
recent acquisitions.
• Reviewed audit findings and challenged management on its
views and actions to address the findings.
• Assessed external auditor effectiveness and independence.
• Reviewed the appropriateness and implementation of the
• Approved the audit and non-audit fee policy and fees.
accounting policies.
• Reviewed the appropriateness, application and disclosure of
Alternative Performance Measures (APMs).
• Reviewed material non-standard transactions.
• Reported and made recommendations to the Board on
financial reporting matters.
• Received auditor views on management and controls.
• Reported to the Board on the audit process, the effectiveness
of the external auditor, the results of the external audit, and
made a recommendation to the Board on the re-appointment
of the external auditor.
Internal control, risk management
• Provided oversight of the risk management systems.
and internal audit
• Reviewed NEXT’s principal risks.
• Considered risk reviews from business areas
including
information security, tax, data protection, Total Platform
operations, FCA compliance and treasury.
• Approved the Internal Audit plan, including amendments to
the plan during the year.
• Received reports and presentations from senior management
Governance and other matters
in other significant business areas such as health and safety,
pensions, the new payroll system, legal, and taxation.
• Considered regular updates on ESG matters, including TCFD
requirements, climate-related risks and Code of Practice.
• Reviewed fraud risk and mitigation.
• Reviewed the adequacy and security of whistleblowing
processes and received regular reports on matters reported.
• Reviewed the results of Internal Audit’s work and proposed
• Assessed NEXT’s compliance with the UK Corporate
remediation plans.
• Met with Internal Audit without management.
• Reviewed a new Assurance Map.
• Assessed the effectiveness of the Internal Audit function.
• Oversight of progress of the Internal Audit improvement
workstreams following an externally facilitated review.
Financial reporting
Review of financial statements
The Committee reviews the financial statements of the Group, assesses
whether suitable accounting policies have been adopted and whether
management has made appropriate estimates and judgements.
In order to assist with this review the Committee requested that
management present detailed papers explaining and substantiating
the basis for the Group’s accounting policies, APMs and key areas of
judgement and estimation. These papers included a sensitivity analysis
on key estimates so that the potential impact of these could be viewed
in the context of the financial statements as a whole.
Governance Code.
The Committee also recognises the importance of the views of the
external auditor and consequently made enquiries to ensure that
suitably robust challenges and audit procedures had been performed
on these judgements during the course of the audit. There were no
significant differences between management and the external auditor.
Having reviewed management’s papers and considered the procedures
and findings of the external auditor, the Committee is satisfied that the
judgements are reasonable, and that suitable accounting policies have
been adopted and disclosed in the accounts.
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Significant matters and judgements for the year ending 27 January 2024
The following areas of significance were all subject to review and challenge by the Committee and were discussed and addressed with our external
auditor throughout the external audit process.
Area of focus
Details of Committee review
Reference to
financial statements
1. Online customer
receivables and
related allowance
for expected credit
losses (ECL)
This represents the largest asset class on the Group’s Balance Sheet (2024: Gross value £1.5bn
and allowance for expected credit losses of £207m).
Page 197
and Note 14
Based on detailed reports and thorough discussions with management and the external auditor,
including the appropriate ECL model specialists, the Committee reviewed the basis and level of
provisions under IFRS 9 “Financial instruments” and the sensitivity of key judgements.
Specific consideration was given to the impact of the increase in interest rates and forecast UK
inflation on customer indebtedness and expected default rates. Sensitivity analysis on the key
assumptions, including management overlays to the base ECL model, has also been reviewed
and, where significant, has been disclosed in the Annual Report and Accounts.
The Committee is satisfied that the judgements made, and the sensitivities disclosed in the
Annual Report and Accounts, are reasonable and appropriate.
2. Pension
scheme funding
and accounting
The Group Balance Sheet shows a funding surplus of £59.3m (2023: £157.5m),
comprising £668.4m assets and £609.1m defined benefit pension schemes’ obligation.
Note 21
The Committee reviewed the actuarial assumptions underlying the calculations, discussed with
the auditor its view on these assumptions, and was satisfied that they are reasonable.
3. Inventory valuation The Group Balance Sheet shows a net valuation of £769.0m (2023: £662.2m). Both management
and the external auditor provided the Committee with updates on the work they performed
to validate the appropriateness of key estimates used in respect of inventory provisions.
Particular consideration was given to the overall increase (year on year) and forecast sales for
the year ahead.
The Committee concluded that the methodology for calculating the net realisable values of
inventories, including management’s estimates on provisions and the impact of acquired
businesses was balanced and appropriate.
4. Acquisitions and
fair value of assets
and liabilities
acquired
During the year, the Group completed two material transactions of Reiss and FatFace respectively.
Under IFRS 3, Business Combinations, the Group was required to assess the fair value of the
identifiable assets and liabilities acquired. This included assessing the value of the brand values
and other intangible assets. To support the valuation work the Group engaged external specialists,
the results of which were shared and reviewed with the Committee.
5. Exceptional items
Given the increase in the value of intangible assets, management also provided the Committee
with an overview of the process for monitoring, identifying and calculating any impairments.
Following specific review and updates from the external auditors on these matters the Committee
concluded that the provisional fair value balance sheet values were appropriate.
The acquisition of Reiss also resulted in the recognition of an exceptional gain of £108.6m.
The Committee was provided with accounting papers setting out how this gain was calculated
and considered whether the presentation of this item, as an exceptional gain, was appropriate.
Given the gain was material, non-cash and not related to underlying trade of the core business the
Committee concluded that it was appropriate to separately present this as an exceptional item.
Having concluded this was appropriate, careful consideration was then given to how this amount
was disclosed and explained in the Annual Report and Accounts. In particular, the Committee
considered whether the disclosure was sufficient and appropriate to enable a user of the accounts
to know whether performance metrics included or excluded the gain.
Page 198
Note 13
Note 6
134
Going concern and viability statement
The Committee reviewed the appropriateness of preparing the accounts
on a going concern basis and the viability assessment for the business.
To inform its assessment of these, the Committee:
• Received a presentation from management which set out the Group’s
financial position and performance, its three year cash projections
and the Group’s available borrowing facilities and covenants,
including the repayment profile of its existing debt structure.
• Reviewed the process behind the preparation of the cash projections,
assessing the completeness of the inputs and appropriateness of key
assumptions made by management.
• Reviewed the stress tests and reverse stress test prepared by
management. The stress tests included the possible cash impact
of a "black swan" event such as the temporary closure of all the
warehouses and retail stores.
• Took into consideration recent updates they had received on the
Group’s principal and emerging risks.
• Noted that the Group had generated significant cash in the
year, which had enabled it to fund acquisitions and continue its
share buyback activity, while also reducing its net debt by £97m.
Furthermore, the Group continued to have access to significant cash
levers which it could utilise if required to support the viability of
the business.
• Received an update from management setting out how it was
managing its cash and net debt so that it retained flexibility over its
ability to settle or replace the bond due to mature in 2025.
Further details of the scenario testing, including the cash levers available
to the business, are provided in the Viability Statement on page 88.
Based on these procedures the Committee approved the disclosures
in relation to both the going concern and viability assessment and
recommended to the Board the preparation of the financial statements
on a going concern basis.
Fair, balanced and understandable
In March 2024, the Committee reviewed the Annual Report and Accounts. The Committee concluded that the Annual Report and Accounts
taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess NEXT’s position,
performance, business model and strategy. It also considered the TCFD (pages 93 to 99) and the potential impact on forward-looking assumptions
supporting going concern and viability assessments. In reaching its conclusion, the Committee considers the Annual Report and Accounts in line
with the steps set out in the diagram below.
The following particular areas of the Annual Report and Accounts changed this year. Detailed consideration was given to these changes by
the Committee:
• The Group’s sales, as reported within the Chief Executive’s Review, has been amended to reflect the impact of recent acquisitions and how
management view and track performance. This is an APM which seeks to reflect sales on the basis of the percentage held in the business.
The rationale for this approach and reconciliation to the statutory revenue has been considered and disclosed within the Annual Report
and Accounts.
• The Group has also amended its APM for profit before tax so that it now removes the impact of non-controlling interests and amortisation
relating to brand acquisitions. The rationale for this approach and reconciliation to the statutory profit before tax has been considered and
disclosed within the Annual Report and Accounts.
• Other APMs and segmental analysis (Note 1) were also considered and the Committee was satisfied these had also been disclosed and explained
appropriately in the Annual Report and Accounts.
Fair, balanced and understandable assessment
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Management
accounts and KPIs
are considered at
Board meetings
to ensure that the
business performance
is appropriately
assessed, reported
and understood.
The reporting is led by
a small team of senior
management which
coordinates the input
into the Annual Report.
Senior management
reviews the Report as
a whole to ensure that
the information
presented is accurate
and the narrative
is consistent with the
fact pattern.
The Committee
reviews the
Annual Report during
the drafting process and
receives regular updates
on progress.
By facilitating input
at an early stage,
there is adequate
time for review
and amendments.
The Internal
Audit function
undertakes a thorough
review process,
verifying information
within the report.
The Committee
receives a report from
management on the
steps it has taken
to ensure that the
report is fair, balanced
and understandable.
The Committee
discusses this with
management, and
challenges any
significant judgements
or estimates made,
as well as the use of
any APMs.
The Committee
considers the views of
the external auditor and
recommends the Annual
Report and Accounts to
the Board for approval.
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Other risk activities
The Committee also:
• Reviewed the key current and emerging risks (including ESG risks),
together with the associated controls and mitigating factors.
• Considered management’s scoring of inherent and residual risks,
and challenged assumptions and methodology to ensure these are
appropriate and robust.
• Considered the output of work undertaken by management,
including its work with an external advisor, to further improve the
documentation around its financial controls matrix.
• Reviewed the 2023/24 risk governance schedule.
• Reported to the Board on its evaluation of the effectiveness of
the Group’s systems of internal control and risk management,
informed by reports from Internal Audit and PwC.
• Received regular updates on fraud prevention and detection activity
and reviewed the oversight and governance framework in place.
• Received updates on material legal matters.
• Received updates from the operations team on key projects such as
Total Platform, including consideration of the associated risks.
Internal audit
The Internal Audit function is an integral feature of the Group’s control
framework. The work undertaken by the team provides invaluable
insight into the practices, processes, systems and controls of the
business. As such, the internal audit plan is approved by the Committee
annually, and the Head of Internal Audit provides a detailed update to
the Committee at each meeting. This update provides insight into the
results of audits, including proposed improvement plans where relevant.
The Committee has oversight of the Internal Audit function’s resource,
experience and expertise. The Committee as a whole and the
Committee Chairman each meet with the Head of Internal Audit without
management present on a regular basis to allow for open discussion.
The Committee is satisfied that the Internal Audit function has
continued to perform effectively during the year.
Risk management, internal control
and internal audit
Risk management
While the Board retains ultimate responsibility for risk management,
the Committee reviews the overall effectiveness of risk management
within the business on a regular basis and at least annually. At each
meeting during the year the Committee received presentations from
management detailing risks and risk management in various areas of
the business. More information about the Committee’s risk oversight
during the year can be found below.
Further details regarding NEXT’s risk framework and approach to
risk management, together with details of the principal risks and risk
assessment can be found on pages 78 to 86.
The Committee’s risk management activities
during the year
IT systems, cyber security and data privacy
• The Committee received progress reports on IT control observations
made by the external auditor during the 2023 audit.
• At every meeting the Committee received updates from the
Information Security Manager on IT ransomware defence and
recovery work.
• Management presented to the Committee on work being done to
enhance information security processes and procedures.
• The Committee reviewed information security and data privacy
(GDPR) key risk indicator and key controls dashboards and
enhancement plans.
• The Committee reviewed the results of a cyber security penetration
test, which ran over the course of six weeks.
Consumer credit
• During the year the Committee received regular briefings on the
Finance business, including reporting on the financial outlook,
work on new customer management scorecards and affordability
assessments and updates on credit account fraud.
• The Committee received regular updates on payment and default
rates, bad debt, and arrears and whether the macroeconomic
uncertainty had been appropriately considered.
• The Committee has oversight of the credit business’ FCA conduct
risk dashboard and has the opportunity to challenge management
as appropriate.
• Updates were provided on the progress to implement the new
Consumer Duty that was successfully completed by the deadline of
31 July 2023.
136
External audit
The Committee is responsible for recommending to the Board the
appointment, re-appointment, remuneration and removal of the
external auditor. A resolution to propose the re-appointment of PwC
was approved by shareholders at the 2023 AGM. When considering
whether to recommend the re-appointment of the external auditor,
the Committee considers a range of factors, including the effectiveness
of the external audit, the period since the last audit tender was
conducted, and the ongoing independence and objectivity of the
external auditor.
Independence and objectivity
PwC conducted its first audit of NEXT’s financial statements in 2018,
following a competitive tender process. The Committee will conduct
an audit services tender at least every ten years to ensure that the
independence of the external auditor is safeguarded. It is currently
expected that the next tender process will take place in 2026 for audit
services to begin in the year ending January 2028. When considering
the appropriate time to conduct an audit tender, the Committee takes
into account the benefit of an incumbent firm with deep knowledge
of the Group’s operations enabling an efficient and high quality audit,
the independence and objectivity of the appointed auditor and audit
partner and the results of the assessment of audit effectiveness.
The Committee currently believes that it is in the best interests of
the shareholders of NEXT to conduct the competitive tender process
in 2026.
Mark Skedgel was appointed as the new Lead Audit Partner for the
2022/23 audit and is now in his second year of the maximum term of
five annual audit cycles.
PwC has reported to the Committee that, in its professional judgement,
it is independent within the meaning of regulatory and professional
requirements and the objectivity of the audit engagement partner and
audit staff is not impaired.
The Audit Committee has assessed the independence of the auditor
by considering, amongst other things, the length of tenure of the
audit firm and the audit partner, the value of non-audit fees provided
by the external auditor, the relationship with the auditor as a whole,
and management responses to the independence questions in the
questionnaire conducted at the end of the audit process. It also
considers the external auditors’ own assessment of its independence.
The Committee is satisfied that PwC meets the required standard of
independence to safeguard the objectivity and integrity of the audit.
The Committee confirms its compliance with the provisions of The
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 for the financial year ended
27 January 2024.
Non-audit work carried out by the
external auditor
In accordance with the FRC’s Ethical Standard and in order to maintain
the continued independence and objectivity of the Group’s external
auditor, NEXT has a policy governing the provision of non-audit services
by the external auditor.
• The Committee’s approval is required in advance of any non-audit
services to be provided by the external auditor.
•
In any one year the aggregate non-audit fees will not exceed £150,000.
• Over a rolling three year period, non-audit fees are limited to 50% of
the average audit fee paid in the previous three years.
• Only permitted non-audit services may be provided by the auditor.
The policy was reviewed in March 2023 and deemed to remain
appropriate. The Committee reviews PwC’s audit and non-audit fees
twice a year. These procedures also ensure that the regulatory cap on
permitted non-audit services of 70% of the average Group audit fee
paid on a rolling three year basis is not exceeded.
In the current year, the non-audit fees exceeded £150,000 due to
the acquisition of Reiss and FatFace where the non-audit services
had already been entered into prior to acquisition. In this case, the
Committee agreed that (i) no new work could be initiated and (ii) the
existing work would need to be completed within three months of
acquisition. Both of these conditions have been met.
Proposed assignments of non-audit services with anticipated fees
in excess of £50,000 are generally subject to competitive tender and
decisions on the award of work are made on the basis of competence
and cost-effectiveness. A tender process may not be undertaken where
existing knowledge of the Group enables the auditor to provide the
relevant services more cost-effectively than other parties. The external
auditor is prohibited from providing any services that would conflict with
their statutory responsibilities or which would otherwise compromise
their objectivity or independence.
During the year, PwC’s audit fee amounted to £2.7m (2023: £1.3m).
The increase in audit fees of £1.4m is mainly due to the acquisitions of
Reiss and FatFace. These acquisitions resulted in one-off, non-recurring
audit work on the opening balance sheets of £0.6m, and a recurring fee
for the local entity audits of £0.8m.
PwC non-audit fees were £349,000 (2023: £106,000). In line with
the above policy, appropriate advance approval was obtained from
the Committee. Non-audit fees related to services to provide limited
assurance over parts of our corporate responsibility reporting from PwC
as they have existing knowledge of the Company and were able to provide
the services in a cost effective manner. Further details are provided in
Note 3 to the financial statements.
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Strategic ReportGovernanceFinancial StatementsShareholder Information AUDIT COMMITTEE REPORT
Effectiveness
It is the Committee’s responsibility to assess the effectiveness of the external audit.
The Committee kept the effectiveness of the external audit under continuous review throughout the year. It did this through:
1.
Reviewing audit plans early in
the planning stages and
discussing audit planning,
audit quality, fees, accounting
policies, audit findings
and internal control with PwC.
2.
Reviewing the findings from
the FRC’s annual audit
inspection and the actions
PwC was taking as
a consequence of
the inspection, particularly in
relation to the audit
of retail companies.
3.
Reviewing PwC’s report
on its own internal
quality procedures.
4.
Attendance by the Committee
Chairman at the audit close
meeting (see below).
5.
Considering the manner
in which the audit was
conducted and the
audit areas in which
most time was spent.
6.
Reviewing the results of a
detailed survey completed by
NEXT management on their
experience with the external
auditor in respect of areas
such as audit strategy,
professional scepticism,
technical strength,
communication and planning.
7.
Considering the areas in which
PwC had challenged
management’s assumptions
in key areas of judgement and
the number and nature of the
accounting and
control observations raised by
the auditor.
The findings of the FRC’s Audit Quality Review of the audit of NEXT’s
2021/22 Annual Report and Accounts provided further comfort to the
Committee of the quality and effectiveness of PwC’s audit (see page
126 of the 2023 Annual Report for further detail).
The Committee Chairman attended the audit close meeting between
the external auditor and management to ensure that he was fully
aware of:
Other matters
ESG
ESG is a standing item on the Audit Committee’s agenda and during the
year the Committee:
• Reviewed the proposed TCFD disclosures.
• Received updates on new regulatory developments as well as
• The issues that arose during the course of the audit and
significant environmental initiatives within the business.
their resolution.
• The level of errors identified during the audit.
• The interaction between management and the auditor.
• The views of the external auditors’ technical specialists and NEXT’s
subject area experts.
The external auditor attended all of this year’s Committee meetings.
Based on these reviews, the Committee concluded that PwC had applied
appropriately robust challenge and professional scepticism throughout
the audit, that it possessed the skills and experience required to fulfil its
duties effectively and efficiently, and that the audit was effective.
Having reviewed the auditors’ independence and objectivity, the audit
quality and the auditor’s performance, the Committee was satisfied
with PwC’s independence and objectivity and recommended its re-
appointment for the year ending 25 January 2025. A resolution to
re-appoint PwC and give authority to the Committee to determine its
remuneration will be submitted to shareholders at the 2024 AGM.
• Had presentations from the Code of Practice team, which works
with NEXT’s suppliers worldwide to uphold and improve labour
standards in our supply chain.
• Received updates at every meeting from the Head of Product
Legislation and Sustainability on ESG governance matters.
Whistleblowing
The Company’s whistleblowing procedures ensure that employees,
suppliers and other third parties are able to raise concerns about
possible improprieties on a confidential basis. Concerns can be raised
via telephone or online directly to NEXT or to an independently provided
third-party service. The policy also provides for concerns to be reported
directly to the Committee Chairman.
During the year, the Committee received updates at every meeting
of reported issues, investigation details and follow up actions.
The Committee also received updates in relation to anti-bribery and
modern slavery training and awareness programmes.
138
139139
Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Contents
Part 1: Annual Statement from the Remuneration Committee Chairman
Part 2: Annual Remuneration Report
Part 3: Directors’ Remuneration Policy
page 140
page 144
page 161
Remuneration compliance
This report complies with Schedule 8 of the Large and Medium-sized Companies and Group (Accounts and Reports) Regulations, the UK Corporate
Governance Code (Code) and the Listing Rules.
Part 1: Annual Statement
As Chairman of the Remuneration Committee and on behalf of the Board, I am pleased to present our report on directors’ remuneration
for 2023/24.
Pay and performance outcome for 2023/24
Total remuneration
Our 2023 Remuneration Policy, tabled at our AGM in May 2023 for its three year renewal, was supported by 84% of the shareholders who voted.
The Policy kept pay arrangements at NEXT unchanged. They are simple, have been broadly consistent over many years and – in part as a consequence
of this consistency – are well understood by the executive team, the wider workforce and shareholders. Although the Remuneration Policy is explicitly
for executive directors, the principles which underlie it are used more widely in the business, at the operational director level and below.
Pay arrangements at NEXT are moderate – overall remuneration levels for executive directors are below the FTSE 100 median. They are also
objective: variable pay is a result only of clear and objective financial performance measures, without any subjective or personal component.
Consequently, these arrangements serve shareholders well; there is a long track record of their variable element paying out when performance is
good, and not paying out when performance is weaker.
As outlined in our Strategic Report, NEXT performed well during the year. Notwithstanding continued macroeconomic and geopolitical uncertainty,
the business overall materially outperformed our initial expectations in the year. This led us to upgrading our guidance five times and the executive
directors oversaw the delivery of record NEXT Group profit before tax (excluding brand amortisation) of £918m (up 5.0% versus 2022/23) and NEXT
Group EPS of 578.8p (+0.3% versus 2022/23).
Annual bonus
2023/24 annual bonus was calculated with reference to pre-tax basic EPS before exceptionals, as described on page 145. In accordance with the
bonus formula, maximum bonus was earned, resulting in a bonus of 150% of salary for Lord Wolfson and 100% of salary for the other executive
directors. This compares to the bonuses in 2022/23 of 81% for Lord Wolfson and 54% for the other executive directors. Any element of bonus above
100% for an executive director (so, for Lord Wolfson in the current year) is payable in shares deferred for two years, and those shares are subject to
forfeiture in the event of voluntary resignation prior to the end of that period.
The out-turn reflects the formulaic result without the exercise of any discretion.
Long Term Incentive Plan (LTIP)
LTIP awards are granted twice a year, each grant at 112.5% of base salary for executive directors; vesting is a function of NEXT’s total shareholder
return (TSR) relative to a comparator group of 20 other quoted UK retailers, as described on page 163.
Two LTIP awards, made in September 2020 and April 2021, reached the end of their three year performance period during the year. Of these, the
first vested at 63% as NEXT’s TSR ranked 6th out of 20 companies in the comparator group and the second vested at 89% as NEXT’s TSR ranked 5th
in the comparator group of 20 companies.
The out-turn reflects the formulaic result without the exercise of any discretion.
Key remuneration decisions
The Committee addressed the following matters during the year:
Committee assessment of performance-related remuneration
The Committee is mindful of the need to ensure that executive pay is inextricably linked to performance. While mathematical outcomes give a strong
indication of the appropriate remuneration, it is the Committee’s role to assess this in the context of the wider environment in which the Company
operates. In allowing the executives’ performance-related pay to vest without adjustment, the Committee took into account the following:
• Our executive directors are high performing, with an excellent track record in delivering strong and resilient Company performance and growth,
as evidenced by the results this year and a TSR of 95% over a ten year period.
140
• The strong performance of the business is a result of continued success by our executive directors in evolving the NEXT product ranges, in
nurturing third-party brands in the business (LABEL has grown by around 100% over the last three years), and in developing our technology. As a
consequence of this, NEXT has navigated with considerable success both the longer-term challenges and opportunities created by the structural
shift of consumer spend from physical stores to online. In addition, NEXT’s well-invested, flexible and robust technology and warehousing
arrangements have placed us in a strong position to acquire, on attractive terms, other retail brands (e.g. Reiss, FatFace, Joules).
• That it was consistent with the approach to performance-related remuneration across the wider workforce.
The Committee believes in consequence that the executive director remuneration earned this year is proportionate and aligned to business
performance and, therefore, approved the formulaic outcomes without the exercise of any discretion.
Annual base salary review for 2024/25
The Committee reviewed and set the remuneration for the Chairman, executive directors and senior management. Whilst the wider workforce’s
base salary increase was on average 8.8%, the executive directors will receive a pay increase of 4%.
Annual bonus review for 2024/25
NEXT has maintained moderate pay arrangements for executive directors, which are below the FTSE 100 median. Given the increased breadth of
the responsibilities borne by the executive directors, as organic initiatives like Total Platform and LABEL have been supplemented by successful
acquisitions like Reiss, and with both elements now meaningful to overall company performance, the Remuneration Committee will increase
the current cap on executive director bonuses (other than the Chief Executive who is already at this level) from 100% to 150%. The Committee
has decided to use the flexibility within the Policy to lessen the current differentials in maximum bonus between the Chief Executive and other
executive directors to accomplish this change. To be clear, this will not change the amount of payout to executive directors at any performance level
that, absent such proposed change, would trigger a payout of less than 100%. The change will mean that for company performance levels beyond
that which, with the current arrangements, would result in a capped payout of 100% to the executive directors, there will be continued payout to
executives until a new, higher cap of 150% is reached. The Committee considers this change to be proportionate and appropriate.
Any annual bonus in excess of 100% of base salary will be payable in shares, deferred for a period of two years and subject to forfeiture should the
executive voluntarily resign prior to the end of that period.
EPS and performance measurement
Each year the Committee reviews the basis and performance measures used for the annual bonus and LTIP. The performance measure for the
annual bonus continues to be based on pre-tax EPS before exceptionals. The principal reasons for using EPS are:
It is consistent and transparent to participants and shareholders.
•
• The primary financial objective of the Group is to deliver long term, sustainable returns to shareholders through a combination of growth in EPS
(including from the impact of share buybacks) and payment of cash dividends.
• The use of EPS is complemented by the application of relative TSR for the LTIP.
As set out in previous years, we consider it right that the impact of share buybacks on EPS (or adjustments for special dividends) should be
included in performance measurement, as share buybacks (and special dividends) have been one of NEXT’s primary strategies in delivering value
to shareholders. Share buybacks or special dividends are regularly considered by the Board. Shares are only bought when the Board is satisfied that
the ability to invest in the business and to grow the ordinary dividend will not be impaired.
ESG metrics in performance measurement
On ESG, the Committee is very conscious of the focus that this topic receives in the investment community, and of the importance that is
placed on it in wider society. It is equally clear to the Committee that the Company focuses a great deal of attention on this area – for instance,
on the working conditions of the factories in which NEXT’s garments are manufactured. Pages 89 to 110 set out in considerable detail
the large number of activities that NEXT pursues in this area. These activities are, in the view of the Committee, well thought-through,
wide-ranging, and interwoven with how NEXT runs its business day-to-day. In this context, it seemed to the Committee unnecessary to introduce
an ESG metric into bonus arrangements in an attempt to motivate activity and behaviour that is already well advanced and widespread. It also
seemed to the Committee that picking one or two particular metrics on which to judge and reward management, in an area that is wide-
ranging and touches on many different aspects of the business, would be arbitrary and subjective. In the context of pay arrangements that have
as one of their principal merits the use of clear and objective financial performance measures, the Committee did not see this as a sensible
step forward. So, the Committee’s approach is not to include any ESG metrics in pay arrangements explicitly, when many of the behaviours that
are the focus of such metrics are already well embedded and implicit at the Company. It should be noted that, while its use should be rare,
the Committee reserves discretion to reduce bonus and LTIP payments if material ESG failures arose. Based on experience elsewhere, where
ESG related measures and personal objectives tend to pay-out at a higher level than financial measures, the effect of this decision is likely to be that
our executive directors’ pay levels are lower than they would be were we to include ESG related measures.
Malus and clawback
The triggers for malus and clawback have sufficient scope to capture circumstances in which the Committee may wish to exercise these rights, including
discretion to reduce variable pay at the point of determination which is in the executive directors’ service agreements (as set out on page 167). The Committee
considers these provisions at the year end as part of its normal review and concluded that it was not appropriate to exercise such provisions.
141
Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Other activity during 2023/24
During the year we announced the appointments of two new non-executive directors and a Chief Financial Officer Designate, all of whom will be
joining the Board in 2024/25. The Committee considered the remuneration levels for these new Board members. Further information about the
work of the Committee is on page 159. Amanda James, after 28 years of service at NEXT including 9 years as Group Finance Director, will retire in
September 2024 and, as she will be retiring, no termination payment will be made; she will however be subject to good leaver treatment. I would
like to take this opportunity to thank Amanda for her outstanding contribution to NEXT over her many years at the business.
Pension entitlements
NEXT operates a DB pension scheme for a limited number of current and former employees. Whilst this scheme was closed to new members in
2000, there remains a liability to NEXT shareholders due to a combination of (a) financial market fluctuations, (b) changes in the lifespan of scheme
members and (c) the fact that active members of the scheme i.e., those members who are still employees, earn the right to additional pension
benefits with each completed month of service. NEXT has been looking at ways of reducing shareholders’ exposure to this liability for some time
and, in conjunction with the scheme Trustees, has now agreed an arrangement which achieves this objective. The key elements are that active
members will cease to accrue additional service benefits, and for all members (including deferred and pension members), their benefits will be
underwritten by a third-party insurance company, not by NEXT shareholders.
Pension members who were previously accruing service will now become deferred members and their accrued pension will be revalued each
year on a basis linked to inflation. To help ensure that these members do not receive a lower overall pension due to the closure of the DB scheme,
the Company will either make contributions into a defined contribution (DC) scheme and/or pay a salary supplement. This contribution or salary
supplement will total 5% of the member’s pensionable earnings as at October 2012. This is in addition to any existing DC fund contributions already
available to these members.
Lord Wolfson has been accruing service in an unfunded, unapproved supplementary pension arrangement. The scheme will also close to future
service accrual and Lord Wolfson will become a deferred member. The obligations under this supplementary pension arrangement are not covered
by the third-party insurance company. The Committee considered the changes outlined above and concluded that it was appropriate to treat
Lord Wolfson’s pension arrangements in a way that is consistent with the previously active members of the main approved DB scheme. As noted
on page 151, Lord Wolfson has twice agreed to take a material reduction in terms of his pension and the Committee concluded that it would not
be reasonable to treat him differently to other employees impacted by the changes to the DB schemes. Therefore, with effect from April, Lord
Wolfson will receive a Company contribution into a DC scheme and/or salary supplement which in total will be 5% of his pensionable earnings as at
October 2012 (being a contribution of £35k). This contribution is in addition to the 15% salary supplement paid to Lord Wolfson since 2012 which
is in lieu of past changes to his pension. The total of Lord Wolfson’s Company contribution and salary supplement will be 19% of his 2024/25 salary,
5 percentage points lower than the current capped DB pension accrual plus salary supplement of 24% which he receives.
Wider employee considerations and employee engagement
The Committee reviews remuneration arrangements across the Group and considers pay and employment conditions to ensure that differences
for executive directors are justified. This includes performance-related pay which is designed to attract and retain high quality employees as well
as ensure that all employees have the potential to benefit from the success of NEXT. The Committee is responsible for approving the remuneration
of the Group’s senior management. It is also responsible for determining the targets for performance-related pay schemes, approving any award
of the Company’s shares under employee share option or incentive schemes, and overseeing any major changes in employee benefit structures.
Rewarding our workforce
There are bonus structures throughout NEXT and employee share ownership is strongly encouraged. Market value options over NEXT shares
are granted each year to approximately 2,100 middle management in our Head Office, call centres and warehouses, as well as senior store staff.
Participation in our Sharesave scheme is open to all our UK employees.
Around 11,800 employees (circa 26% of our total UK and Eire employees) held options or awards in respect of 6.6 million shares in NEXT at the
financial year end.
142
Knowing our workforce
Our annual employee forum meetings for our Head Office, Warehousing & Distribution, Retail and Online divisions were held in person during
2023. Lord Wolfson, Dame Dianne Thompson (non-executive director), our HR Director and a cross-section of workforce representatives from
the relevant business divisions with operational director sponsors attended the meetings. NEXT Sourcing had a representative attend an annual
employee forum meeting and Lipsy company works councils held meetings during the year.
For further details regarding the feedback to the Board on employee views, please see page 112.
Along with the employee forum feedback, earlier this year the Committee reviewed and discussed a range of ‘dashboard’ information on important
employee matters such as pay and reward, bonuses, benefits, diversity, equality of pay, internal promotions, culture and behaviours (including data
on staff turnover by business division, absences, redundancies, disciplinaries and grievances), and learning and development. The remuneration
framework works best when decisions are made in the context of the workforce as a whole rather than in isolation, and so the Committee
considered the output of the workforce dashboard to ensure the executive directors’ pay policy is aligned to the Company’s strategy and, where
relevant, to performance-related pay for managers below Board level. I have circulated a letter to all our employees setting out our approach to
executive pay and inviting them to email me with any queries or comments they had.
Shareholder engagement
The Committee wrote to our largest 20 shareholders (who hold around 50% of our shares in issue) and their representative bodies in 2024 regarding
our proposed increase in the cap to executive director annual bonus.
For further details regarding the feedback to the Board on shareholder views, please see page 115.
2024 AGM
The Committee has continued to be mindful of the requirements of the Code when determining the Remuneration Policy and practices. It considers
that the simplicity and transparency of our remuneration arrangements and their consistent application have contributed positively to NEXT’s
management team delivering strong and resilient performance, despite the continued externally challenging situation. The Remuneration Policy
structure continues to provide a strong and transparent link between pay and performance and has operated as intended. We hope that this
report provides clear insight into the Committee’s decisions and look forward to receiving your support at the 2024 AGM for our 2023/24 Directors’
Annual Remuneration Report together with my Annual Statement.
Tom Hall
Chairman of the Remuneration Committee
21 March 2024
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Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Part 2: Annual Remuneration Report
This Annual Remuneration Report comprises a number of sections:
Implementation of Remuneration Policy
page 144
Performance and CEO remuneration comparison
page 157
Single total figure of remuneration
page 146
Analysis of Chief Executive’s pay over 10 years
page 157
Total remuneration
Executive directors’ external appointments
Pension entitlements
Directors’ shareholding and share interests
page 148
page 151
page 151
page 152
Scheme interests awarded during the financial year
page 155
Deferred bonus
Performance targets for outstanding LTIP awards
Payments to past directors
Payments for loss of office
page 155
page 156
page 156
page 156
Annual change in remuneration of each director
compared to employees
Pay ratios
Relative importance of spend on pay
page 158
page 158
page 159
Dilution of share capital by employee share plans
page 159
Consideration of matters relating to directors’
remuneration
Voting outcomes at General Meetings
Service Contracts
page 159
page 160
page 160
Annual Remuneration Report
This Annual Remuneration Report, together with the Annual Statement on pages 140 to 143, will be put to shareholders for an advisory (non-
binding) vote at the AGM to be held on 16 May 2024. Sections which have been subject to audit are noted accordingly.
Implementation of Remuneration Policy
The Committee has implemented the Remuneration Policy in accordance with the Policy approved by shareholders at the AGM in May 2023.
The table below sets out the way that the Policy was implemented in 2023/24 and any significant changes in the way it will be implemented
in 2024/25.
Element of remuneration
Base salary
Policy implemented during 2023/24 and changes in 2024/25
Base salaries for the executives in the year ahead will increase by 4% compared with base salary increases on
average of 8.8% for the wider Company award.
In July 2024, Jonathan Blanchard will join the Board as Chief Financial Officer. The base annual salaries for the
executive directors for 2024/25 (from July 2024 for Jonathan Blanchard) are:
£000
Lord Wolfson
Amanda James
Richard Papp
Jane Shields
Jeremy Stakol
Jonathan Blanchard
2024/25
944
575
557
557
499
575
2023/24
908
553
536
536
480
n/a
144
Element of remuneration
Annual bonus
LTIP
Recovery and
withholding
provisions
Chairman and
non-executive
director fees
Pension
Policy implemented during 2023/24 and changes in 2024/25
For the year to January 2024, performance targets were set based on requiring pre-tax EPS of at least 656.5p (-6.4%
on 2022/23), adjusted for special dividends and excluding exceptionals. At this threshold, a 12% of maximum
bonus was payable. A maximum bonus of 100% and 150% of salary for the executive directors and Chief Executive
respectively was payable if pre-tax EPS growth was +2.6% (719.8p).
Underlying pre-tax EPS growth achieved in the year was +6.8% versus 2022/23, being an EPS of 749.1p. In accordance
with the bonus formula, maximum bonus was earned which the Committee considered to be appropriate and
approved without adjustment.
For the year to January 2025, whilst no change will be made to the bonus structure overall, the Committee has
decided to increase the cap on executive director bonuses from 100% to 150%. As noted in the Annual Statement,
this change will, at least initially, only impact payout levels to executive directors once the level of performance that
currently results in a maximum bonus of 100% is exceeded, with any excess above 100% to be paid in shares, held
for two years. Bonus performance targets for the year ahead have been set but are not disclosed in advance for
reasons of commercial sensitivity. The targets and performance will be disclosed in next year’s Remuneration Report
and, the Committee ensures that a mechanism exists so that executive directors are not incentivised to recommend
share buybacks to the Board in preference to special dividends, or vice versa. This is achieved by making a notional
adjustment to EPS growth for special dividends, on the basis that the cash distributed had instead been used to
purchase shares at the prevailing share price on the day of the special dividend payment.
No change. See Note 4 to the single total figure of remuneration table for details of LTIP vestings in the year.
LTIP grants in 2024/25 will be made on the same basis as the 2023/24 grants, with any changes to the TSR
comparator group considered immediately prior to each grant.
Consistent with market practice, the LTIP awards increase to reflect dividends paid over the period to vesting
(assuming reinvestment at the prevailing share price). See page 163 for details of the performance conditions
applied to LTIPs.
No change. The Committee previously introduced recovery and withholding provisions in the service contracts of
all executive directors to cover the bonus and LTIP, with the latter covered for five years from the date of the initial
grant (comprising the three year vesting period and a two year holding period for any shares that vest, net of tax,
under the relevant grant). See page 167 for details of the malus and clawback provisions in the service contracts of
the executive directors.
The fees of the Chairman and non-executive directors will be increased by 4% from 1 April 2024. The Chairman,
Michael Roney, will be paid an annual fee of £396,911 (2023/24: £381,646). The basic non-executive director fee
for 2024/25 will increase to £76,440 (2023/24: £73,500), with a further £21,840 (2023/24: £21,000) paid to the
Chairman of each of the Audit and Remuneration Committees respectively, and £13,104 (2023/24: £12,600) paid
to the Senior Independent Director.
With effect from April 2024, Lord Wolfson will receive a Company contribution into a DC scheme and/or salary
supplement which in total will be 5% of his pensionable earnings as at October 2012 (being a contribution of £35k).
This contribution is in addition to the 15% salary supplement paid to Lord Wolfson since 2012 which is in lieu of past
changes to his pension. The total of Lord Wolfson’s Company contribution and salary supplement will be 19% of his
2024/25 salary, 5 percentage points lower than the current capped DB pension accrual plus salary supplement of
24% he currently receives. See the Annual Statement, page 142 for further details.
The value of overall pension provision is consistent with the wider workforce for each director compared with
colleagues with an equivalent length of service.
Shareholding
requirement
Post cessation
shareholding
requirement
Other benefits
Save As You Earn scheme
(Sharesave)
No change.
No change.
No change.
No change.
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Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
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147
Strategic ReportGovernanceFinancial StatementsShareholder Information
REMUNERATION REPORT
TSR compared with comparator
group for performance period ending
July 2023
January 2024
Threshold
(20%)
Maximum
(100%)
Actual position
in comparator
group
Median
Upper quintile
Median
Upper quintile
6/20
5/20
Vesting
percentage
63%
89%
Share price
at vest
£73.12
£79.801
1. This is the average NEXT share price over the final three months of the financial year and has been used in the single figure table to estimate the value of this award as it has not
yet vested.
Simon Wolfson
Amanda James
Richard Papp
Jane Shields
Jeremy Stakol
Total
number
of awards
granted
Value of
award at
grant
(£000)
End of
performance
period
Vesting
percentage
Number
of awards
vesting
Value
attributable
to share price
movement
(£000)
Vesting
date
Value of
LTIP shares
vesting
(£000)
Values
of dividend
equivalents
(£000)
Value of
LTIP award
(single figure)
(£000)
20,757
13,178
12,639
8,024
12,252
7,779
12,252
7,779
2,949
2,986
1,024
July 2023
927 January 2024
623
July 2023
564 January 2024
604
July 2023
547 January 2024
604
July 2023
547 January 2024
145
July 2023
210 January 2024
63%
89%
63%
89%
63%
89%
63%
89%
63%
89%
13,077
Sept 2023
11,728
April 2024
7,963
Sept 2023
7,141
April 2024
7,719
Sept 2023
6,923
April 2024
7,719
Sept 2023
6,923 April 2024
1,858
Sept 2023
2,658 April 2024
311
111
190
68
184
66
184
66
44
25
956
936
582
570
564
553
564
553
136
212
87
93
53
57
51
55
51
55
12
21
1,043
1,029
635
627
615
608
615
608
148
233
LTIP values included in the single figure table for the 2022/23 comparative figures have been updated to reflect the actual market values of the LTIP
awards that vested on 3 April 2023 of £64.52.
Total remuneration
The Committee’s objective is to ensure that the remuneration paid to senior executives is appropriate in both amount and structure, is directly
linked to the Company’s annual and longer term performance, and is aligned with the interests of shareholders.
UK Corporate Governance Code – Provision 40 disclosure
When developing the remuneration policy and considering its implementation, the Committee was mindful of the UK Corporate Governance Code
and considers that the executive remuneration framework appropriately addresses the following factors:
• Clarity – NEXT’s incentive pay arrangements are based entirely on objective financial performance targets. This provides clarity to all stakeholders
on the relationship between pay and performance.
• Simplicity – Remuneration arrangements for our executives are simple and the principles which underpin them are applied at management
levels below the Board and are well understood by both participants and shareholders. Careful consideration is given to ensuring there is an
appropriate balance in the remuneration structure between annual and long term rewards, as well as between cash and share-based payments.
• Risk – The Committee considers that the incentive arrangements do not encourage inappropriate risk-taking. Malus and clawback provisions are
in the service contracts of all executive directors and apply to annual bonus and LTIP awards. The Committee also has overarching discretion to
adjust formulaic outcomes to ensure that they are appropriate.
• Predictability and proportionality – Our policy provides for potential total remuneration below the median levels for companies of our size and
has a strong history of delivering value when performance merits this and of nil payouts when performance has been weaker. Variable pay is
linked to measures which are aligned with the Company’s long term strategy and objectives.
• Alignment to culture – The remuneration performance targets set by the Committee are designed to drive the right behaviours across the
business. The arrangements encourage our executives to focus on making the right decisions for the creation of long term shareholder value.
Total remuneration opportunity
The Committee’s objective is to ensure that the remuneration paid to senior executives is appropriate in both amount and structure, is directly linked to
the Company’s annual and longer term performance and is aligned with the interests of shareholders. Careful consideration is given to ensuring there
is an appropriate balance in the remuneration structure between annual and long term rewards, as well as between cash and share- based payments.
The following charts indicate the level of remuneration that could be received by each executive director in accordance with the Directors’ Remuneration
Policy at different levels of performance. The overall level of executive director pay remains modest compared with that available at other equivalently
sized FTSE 100 companies and the maximum remuneration indicated in the charts below reflects the Committee’s conservative approach to executive pay.
The chart for Jonathan Blanchard is on a full year basis and we have not included a chart for Amanda James as she will step down from the Board in July.
148
Lord Wolfson (Chief Executive)
Fixed
100%
Total £1,158k
Fixed pay
Annual bonus
LTIP (multiple period)
Additional 50% increase
in LTIP share price
Mid-point/
median
Maximum
Maximum
(inc. 50% increase
in share price)
50%
25%
20%
31%
19%
Total £2,290k
30%
25%
45%
37%
Total £4,698k
18%
Total £5,760k
0
1,000
2,000
3,000
AMOUNT £000
4,000
5,000
6,000
Fixed pay
Annual bonus
LTIP (multiple period)
Additional 50% increase
in LTIP share price
Jane Shields (Group Sales, Marketing and HR Director)
Fixed
100%
Total £652k
Mid-point/
median
Maximum
Maximum
(inc. 50% increase
in share price)
49%
24%
19%
32%
19%
Total £1,320k
30%
25%
46%
37%
Total £2,741k
19%
Total £3,367k
0
500
1,000
1,500
2,000
AMOUNT £000
2,500
3,000
3,500
Richard Papp (Group Merchandise and Operations Director)
Fixed
100%
Total £609k
Mid-point/
median
Maximum
Maximum
(inc. 50% increase
in share price)
47%
23%
18%
33%
20%
Total £1,277k
31%
25%
46%
38%
0
500
1,000
1,500
AMOUNT £000
2,000
2,500
Total £2,698k
19%
3,000
Total £3,324k
3,500
Jeremy Stakol (Group Investments, Acquisitions and Third Party Brands Director)
Fixed
100%
Total £523k
Mid-point/
median
Maximum
Maximum
(inc. 50% increase
in share price)
47%
22%
18%
33%
20%
Total £1,122k
31%
25%
47%
38%
Total £2,395k
19%
Total £2,957k
0
500
1,000
1,500
AMOUNT £000
2,000
2,500
3,000
Jonathan Blanchard (Chief Financial Officer from July 2024)
Fixed
100%
Total £615k
Fixed pay
Annual bonus
LTIP (multiple period)
Additional 50% increase
in LTIP share price
Mid-point/
median
Maximum
Maximum
(inc. 50% increase
in share price)
47%
22%
18%
33%
20%
Total £1,305k
31%
25%
47%
38%
Total £2,772k
19%
Total £3,419k
0
500
1,000
1,500
2,000
AMOUNT £000
2,500
3,000
3,500
149
Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
In the charts on page 149, the following assumptions have been made:
Fixed/minimum
Base salaries and salary supplement values as at 2024/25, and benefits values as shown in 2023/24 single figure of
remuneration. The pension value for Lord Wolfson has been set at 19% of his salary (see pages 142 and 145).
Mid-point/median
Includes the performance-related pay a director would receive in the scenario where:
• 50% of maximum annual bonus is earned.
• LTIP performance results in a median TSR ranking and therefore 20% of the maximum award would vest.
Maximum
Includes the performance-related pay a director would receive in the scenario where performance equalled or exceeded
maximum targets:
• Maximum bonus at 150% of salary.
• LTIP performance results in an upper quintile TSR ranking and therefore 100% of the maximum award would vest.
As for the maximum scenario above, plus an increase in the value of the LTIP of 50% across the relevant performance
period to reflect possible share price appreciation. Consistent with the reporting regulations, this does not separately
include the impact of dividend accrual.
Maximum inc.
50% growth in share
price across relevant
performance period
150
Executive directors’ external appointments
No current executive director holds any non-executive directorships outside the Group.
Pension entitlements (audited information)
Lord Wolfson, Jane Shields and Richard Papp are deferred members of the defined benefit 2013 Plan, which has been approved by HMRC.
Amanda James is an active member and Richard Papp is a deferred member of a NEXT defined contribution scheme. Jeremy Stakol is an active
member of a defined contribution scheme. In addition, Lord Wolfson is accruing service in an unfunded, unapproved supplementary pension
arrangement (see below).
Lord Wolfson and a small number of senior employees are entitled to receive a pension of two thirds of pensionable earnings as at October 2012
on retirement at age 65, which accrues uniformly throughout their pensionable service, subject to completion of at least 20 years’ pensionable
service by age 65. The deferred defined benefit pensions for Jane Shields and Richard Papp are based on their pensionable earnings at the time
they became deferred pensioners and accrued uniformly throughout their pensionable service.
Since shortly after joining NEXT in 1991, Lord Wolfson has been a member of a DB pension scheme, as was the normal practice at NEXT and across
the market more widely at the time. In 2012, the value of Lord Wolfson’s DB pension benefits was reduced when his salary was frozen for DB
pension purposes and he began to receive a 15% salary supplement as part of this renegotiation of terms by the Company.
With effect from February 2020, Lord Wolfson volunteered to cap the service accrual under his DB pension annually so that the single figure value
attributed to the DB portion of his pension is no more than 9% of salary (giving a single figure of DB pension and salary supplement in aggregate
of up to 24% of salary). The Committee is appreciative of Lord Wolfson’s offer to cap his pension in this way, acknowledging that he has now twice
taken a material reduction in the terms of his pension.
After introduction of the cap on the service accrual under Lord Wolfson’s DB pension, all the executive directors are on pension arrangements no
more generous than those offered to the wider colleague population recruited at the same time as them so that the pension proposals align with
the relevant all-employee populations. See page 142 for details on forthcoming changes to Lord Wolfson’s pension arrangements.
Save for Jeremy Stakol, our other executive directors receive pension contributions and/or salary supplements of 15% of salary and 5% of salary.
These are consistent with the levels available to staff at the time they joined and, therefore, consistent with the benefits enjoyed by other staff with
an equivalent length of service. For many years, employees promoted to the Board have not received any enhancement to their pension provision
on joining the Board.
Currently, the DB Plan provides a lump sum death in service benefit and dependants’ pensions on death in service or following retirement. In the
case of ill-health retirement, only the accrued pension is payable. All benefits are subject to 2013 Plan limits. Increases to pensions in payment are
at the discretion of the Trustee although pensionable service post 1997 is subject to limited price indexation. From 2006, sales and profit related
bonuses were excluded from pensionable earnings and the normal retirement age was increased from 60 to 65. There are no additional benefits
payable to directors in the event of early retirement.
Active members of the DB scheme contribute 3% or 5% of pensionable earnings as at October 2012, while the Company made contributions at the
rate of 38% for the majority of the year. Certain members (including Lord Wolfson) whose accrued or projected pension fund value exceeded their
personal lifetime allowance are provided with benefits through an unfunded, unapproved supplementary pension arrangement. Lord Wolfson
contributes towards the additional cost of providing these benefits by a payment of 5% on pensionable earnings as at October 2012. Since April
2011, where existing members have reached either the annual or lifetime pension contributions limits, the Company has offered those members
the choice of leaving the DB Plan and either joining the defined contribution scheme (with an enhanced Company contribution) or taking a salary
supplement, in both cases equal to 10% or 15% of their salary (depending on their existing contributions and benefits).
Further information on the Group’s DB and defined contribution pension arrangements is provided in Note 21 to the financial statements.
151
Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Directors’ shareholding and share interests (audited information)
Directors’ interests
Directors’ interests in shares (including those of their connected persons) at the beginning and end of the financial year were as follows:
Lord Wolfson4
Jonathan Bewes
Soumen Das
Tom Hall
Dame Tristia Harrison
Amanda James
Richard Papp
Michael Roney
Jane Shields
Jeremy Stakol5
Dame Dianne Thompson
Ordinary shares
2024
2023
Deferred Bonus Shares1
2023
2024
LTIP2
Sharesave3
2024
2023
1,391,790
1,441,859
6,938
6,938
85,200
85,331
2024
270
2023
344
1,750
1,289
10,000
1,000
26,468
17,216
54,821
59,493
165,770
nil
1,750
1,289
10,000
1,000
44,381
24,732
54,821
53,552
n/a
nil
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n/a
–
–
–
–
–
–
–
–
–
51,879
50,292
–
50,292
20,752
–
51,959
50,369
–
50,369
n/a
–
–
–
–
–
38
139
–
262
186
–
–
–
–
–
287
139
–
323
n/a
–
1. Full details of the basis of allocation and terms of the deferred bonus are set out on page 162.
2. The LTIP amounts above are the maximum potential conditional share awards that may vest subject to performance conditions described on page 163.
3. Executive directors can participate in the Company’s Sharesave scheme (see details on page 165) and the amounts above are the options which will become exercisable at maturity.
4. The connected persons of Lord Wolfson include The Charles Wolfson Charitable Trust which held 164,058 shares as at 27 January 2024 (2023: 164,058).
5.
Includes shares held jointly with spouse.
There have been no changes to the directors’ interests in the shares of the Company from the end of the financial year to 21 March 2024.
Share ownership guidelines
The minimum shareholding is 225% of salary for all executive directors. An executive director has up to five years from date of appointment to
acquire the minimum shareholding. Shares in which the executive director, their spouse/civil partner or minor children have a beneficial interest
count towards the shareholding.
As at the 2023/24 financial year end, the shareholdings of the executives, based on the average share price over the preceding three months, was
as follows:
Lord Wolfson
Amanda James
Richard Papp
Jane Shields
Jeremy Stakol
Date of appointment
to Board
February 1997
April 2015
May 2018
July 2013
April 2023
Shareholding %
of base salary as
at year end
Shareholding
guidelines achieved
10,788%
382%
256%
886%
2,756%
Yes
Yes
Yes
Yes
Yes
Post-cessation shareholding guidelines also apply to all executive directors. Directors must hold a minimum of 225% of salary for one year post-
cessation. The Committee will have the normal discretion to disapply this in exceptional circumstances. The post-cessation guidelines apply and
are enforced through the retention of any (after-tax) shares vesting in respect of 2020 LTIP grants onwards into an escrow account until an amount
equal to 225% of salary is held.
152
The table below shows share awards held by directors and movements during the year. LTIPs are conditional share awards and Sharesaves are
options. All awards are subject to performance conditions except for Sharesave options. LTIP awards granted to executive directors which vest must
be taken in shares and the net shares (after payment of tax and NIC) must be held for a minimum period of two further years.
Maximum
receivable
at start of
financial
year
Dividend
accrual
shares
awarded in
the year
Shares
vested/
exercised
in the
year
Awarded
during
the year
Maximum
receivable
at end of
financial
year
Calculated
price
at award
date1
£
Option/
award
price
£
Market price
on date
of vesting/
exercise
£
Lord Wolfson
LTIP
Date of award
Mar 2020
Sept 2020
Apr 2021
Sept 2021
Mar 2022
Sept 2022
Mar 2023
Sept 2023
Deferred bonus Apr 2022
Oct 2018
Sharesave
Oct 2023
Amanda James
LTIP
Sharesave
Richard Papp
LTIP
Mar 2020
Sept 2020
Apr 2021
Sept 2021
Mar 2022
Sept 2022
Mar 2023
Sept 2023
Oct 2018
Oct 2021
Mar 2020
Sept 2020
Apr 2021
Sept 2021
Mar 2022
Sept 2022
Mar 2023
Sept 2023
Sharesave
Oct 2021
11,955
20,757
13,178
11,615
12,245
15,581
–
–
85,331
6,9384
344
–
344
7,280
12,639
8,024
7,073
7,456
9,487
–
–
51,959
249
38
287
7,057
12,252
7,779
6,856
7,228
9,197
–
–
50,369
139
Lapsed
(8,368)
(7,680)
–
–
–
–
–
–
243
(3,830)
1,185 (14,262)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(344)
–
–
–
–
147
722
–
–
–
–
–
–
(2,332)
(8,685)
–
–
–
–
–
–
(5,095)
(4,676)
–
–
–
–
–
–
–
–
–
–
–
–
17,387
15,194
–
–
270
–
–
–
–
–
–
10,587
9,252
–
–
–
–
(249)
–
–
–
–
–
–
–
–
–
10,263
8,969
143
698
–
–
–
–
–
–
(2,261)
(8,417)
–
–
–
–
–
–
(4,939)
(4,533)
–
–
–
–
–
–
–
–
–
–
–
–
13,178
11,615
12,245
15,581
17,387
15,194
85,200
6,938
–
270
270
–
–
8,024
7,073
7,456
9,487
10,587
9,252
51,879
–
38
38
–
–
7,779
6,856
7,228
9,197
10,263
8,969
50,292
139
Vesting date/
exercisable dates2
Jan 2023
Jul 20233
Jan 20243
Jul 2024
Jan 2025
Jul 2025
Jan 2026
Jul 2026
nil
nil
nil
nil
nil
nil
nil
nil
64.52
73.12
–
–
–
–
–
–
nil
43.48
58.50
–
Apr 2024
80.42 Dec 2023– Jun 2024
– Dec 2028– Jun 2029
nil
nil
nil
nil
nil
nil
nil
nil
64.52
73.12
–
–
–
–
–
–
Jan 2023
Jul 20233
Jan 20243
Jul 2024
Jan 2025
Jul 2025
Jan 2026
Jul 2026
68.49
49.31
70.32
79.78
79.46
62.45
58.76
67.24
59.36
–
–
68.49
49.31
70.32
79.78
79.46
62.45
58.76
67.24
–
–
43.48
64.53
80.42 Dec 2023– Jun 2024
– Dec 2024– Jun 2025
68.49
49.31
70.32
79.78
79.46
62.45
58.76
67.24
nil
nil
nil
nil
nil
nil
nil
nil
64.52
73.12
–
–
–
–
–
–
Jan 2023
Jul 20233
Jan 20243
Jul 2024
Jan 2025
Jul 2025
Jan 2026
Jul 2026
–
64.53
– Dec 2024– Jun 2025
153
Strategic ReportGovernanceFinancial StatementsShareholder Information
REMUNERATION REPORT
Maximum
receivable
at start of
financial
year
Dividend
accrual
shares
awarded in
the year
Shares
vested/
exercised
in the
year
Awarded
during
the year
Maximum
receivable
at end of
financial
year
Calculated
price
at award
date1
£
Option/
award
price
£
Market price
on date
of vesting/
exercise
£
Jane Shields
LTIP
Sharesave
Jeremy Stakol
LTIP
Date of award
Mar 2020
Sept 2020
Apr 2021
Sept 2021
Mar 2022
Sept 2022
Mar 2023
Sept 2023
Oct 2018
Oct 2021
Oct 2023
Mar 20205
Sept 20205
Apr 20215
Sept 20215
Mar 20225
Sept 2022
Mar 2023
Sept 2023
Sharesave
Oct 2022
7,057
12,252
7,779
6,856
7,228
9,197
–
–
50,369
282
41
–
323
2,123
2,949
2,986
2,632
2,775
3,531
–
–
16,996
186
–
–
–
–
–
–
10,263
8,969
–
–
221
–
–
–
–
–
–
9,190
8,031
–
143
698
–
–
–
–
–
–
–
–
–
43
169
–
–
–
–
–
–
–
Lapsed
(4,939)
(4,533)
–
–
–
–
–
–
–
–
–
(1,486)
(1,091)
–
–
–
–
–
–
(2,261)
(8,417)
–
–
–
–
–
–
(282)
–
–
(680)
(2,027)
–
–
–
–
–
–
–
–
–
–
7,779
6,856
7,228
9,197
10,263
8,969
50,292
–
41
221
262
–
–
2,986
2,632
2,775
3,531
9,190
8,031
29,145
186
68.49
49.31
70.32
79.78
79.46
62.45
58.76
67.24
nil
nil
nil
nil
nil
nil
nil
nil
64.52
73.12
–
–
–
–
–
–
Vesting date/
exercisable dates2
Jan 2023
Jul 20233
Jan 20243
Jul 2024
Jan 2025
Jul 2025
Jan 2026
Jul 2026
–
–
43.48
64.53
58.50
80.42 Dec 2023–Jun 2024
– Dec 2026–Jun 2027
– Dec 2028–Jun 2029
68.49
49.31
70.32
79.78
79.46
62.45
58.76
67.24
nil
nil
nil
nil
nil
nil
nil
nil
64.52
73.12
–
–
–
–
–
–
Jan 2023
Jul 20233
Jan 20243
Jul 2024
Jan 2025
Jul 2025
Jan 2026
Jul 2026
–
38.69
Dec 2025 – Jun 2026
1. The calculated LTIP price at award date is NEXT’s average share price over the three months prior to the start of the performance period.
2. For LTIP awards, the date in this column is the end of the three year performance period. Actual vesting will be the date on which the Committee determines whether any performance
conditions have been satisfied, or shortly thereafter.
3. See page 148 for details of the performance conditions and vesting levels applicable to the LTIP schemes with performance periods ending in the financial year 2023/24. For grants
vesting from September 2020, the awards are increased to reflect dividends paid over the period from grant to vesting (assuming reinvestment at the prevailing share price) with such
shares added on vesting.
4. The face value of the deferred bonus award to Lord Wolfson equated to £411k, being the portion of his annual bonus for the year to January 2022 in excess of 100% of base salary.
The share price used to determine the award was the closing NEXT plc share price on 26 April 2022, which was the date the cash element of the bonus was paid.
5.
Jeremy Stakol was granted phantom LTIP awards prior to joining the Board. These mirror the conditional LTIP awards in all respects save for being cash settled.
The aggregate gains of directors arising from any exercise of options granted under the Sharesave scheme and the LTIP conditional share awards
that vested in the 2023/24 year totalled £3,629,000 (2022/23: £3,781,000 – LTIP awards only). At the end of the year there were no options that
had vested but not yet been exercised.
154
Scheme interests awarded during the financial year ended January 2024
(audited information)
LTIP
Face value
In respect of the LTIP conditional share awards granted during the year 2023/24, the maximum “face value” of awards (i.e. the
maximum number of shares that would vest if all performance measures are met, multiplied by the average share price used to
determine the award) is summarised below. Awards are granted twice a year at 112.5% of base salary.
Sept 2023
£000
1,021
Total
£000
2,042
Mar 2023
£000
Lord Wolfson
1,021
Amanda James
Richard Papp
Jane Shields
Jeremy Stakol
622
603
603
540
622
603
603
540
1,244
1,206
1,206
1,080
Vesting if minimum
performance achieved
20% of the entitlement will be earned for relative TSR at median. Full vesting requires relative TSR in the upper quintile.
Performance period
March 2023 grant: three years to January 2026.
September 2023 grant: three years to July 2026.
Performance measures
Performance is measured over a period of three years. Currently performance is measured based on NEXT’s TSR against a group of
other UK listed retail companies.
Relative performance
Below median
Median
Upper quintile
Percentage vesting
0%
20%
100%
If no entitlement has been earned at the end of a three year performance period then that award will lapse; there is no retesting.
The companies in the TSR comparator group for awards granted during the financial year are in the table on page 156.
Dividend roll-up
The award may be increased to reflect dividends paid over the period from grant to vesting (assuming reinvestment at the prevailing
share price).
Deferred bonus
In addition to the scheme interests detailed above, any annual bonus in excess of 100% of base salary is payable in shares, deferred for a period
of two years and subject to forfeiture if the executive voluntarily resigns prior to the end of that period. The award may be increased to reflect
dividends paid over the period to vesting (assuming reinvestment at the prevailing share price) with such shares added on vesting. The value of the
2023/24 deferred bonus payable to the Chief Executive (£454k) is included in the single total figure of remuneration on page 146.
155
Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Performance targets for outstanding LTIP awards (audited information)
Details of the comparator groups for the LTIP three year performance periods commencing August 2020 are shown below.
Comparator Group Companies
Aug 20
Feb 21
Aug 21
Feb 22
Aug 22
Feb 23
Aug 23
Performance period commencing:
AO World
ASOS
B&M European Value Retail
Boohoo
Burberry
Currys
DFS
Dr Martens
Dunelm
Halfords
J Sainsbury
JD Sports Fashion
Kingfisher
Marks and Spencer
N Brown
Pets at Home
Studio Retail Group1
Ted Baker2
Tesco
Watches of Switzerland
WH Smith
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
1. Studio Retail Group went into administration in February 2022, for all in-flight schemes its TSR will be set to -100%.
2. Ted Baker was delisted in October 2022. Following our established practice, it was removed from the comparator group for awards where less than 18 months of the performance period
had elapsed (i.e. performance periods commencing August 2021 and February 2022).
Payments to past directors (audited information)
There were no payments made to past directors during the 2023/24 financial year.
Payments for loss of office (audited information)
There were no payments made to any director in respect of loss of office during the 2023/24 financial year.
156
Performance and CEO remuneration comparison
Performance graph
The graph below illustrates the TSR performance of the Company when compared with the FTSE 100 and FTSE General Retailers indices. These have
been selected to illustrate the Company’s total shareholder return performance against a wide UK index and a sector specific index over the ten
year period ended January 2024.
NEXT plc performance chart 2014 to 2024 Total Shareholder Return
200
175
150
125
100
75
50
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
NEXT
FTSE 100
FTSE General Retailers
Re-based to 24 January 2014 = 100
Analysis of Chief Executive’s pay over 10 years
The table below sets out the remuneration for Lord Wolfson who has been the Chief Executive throughout this period.
Financial year
to January
Single figure of total
remuneration £000
Annual bonus pay-out
against maximum
opportunity1
LTIP pay-out against
maximum opportunity
SMP pay-out against
maximum opportunity
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
4,660
4,295
1,831
1,153
1,327
2,639
3,582
4,148
2,529
4,520
100% Two semi-annual awards vested at 100% each and
total value capped at £2.5m
Two semi-annual awards vested at 76% and 77%
45%
Did not participate in
2012–15 SMP
100%
0%
0%
Two semi-annual awards vested at 61% and 20%
Two semi-annual awards vested at nil
13%2
Two semi-annual awards vested at 20% and nil
29% Two semi-annual awards vested at 67% and 100%
0% Two semi-annual awards vested at 90% and 100%
100%
Two semi-annual awards vested at 83% and 80%
54%
Two semi-annual awards vested at 62% and 30%
100%
Two semi-annual awards vested at 63% and 89%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. The maximum bonus for the Chief Executive is 150% of salary.
2. Lord Wolfson waived his entitlement to a portion of his annual bonus. Had he not done so, his bonus pay-out against maximum opportunity would have been 40% and his total
remuneration would have been £1,642k for the financial year to January 2019.
157
Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Annual change in remuneration of each director compared to employees
The table below shows the year on year percentage changes in the directors’ remuneration (i.e. salary, taxable benefits and annual bonus) over
the last four years compared with the percentage changes in the average of each of those components of pay for Group employees in the UK
and Eire. This group has been selected because we believe it is the most appropriate comparator group and represents 88% of the Group’s
workforce. The Company has chosen to voluntarily disclose this information, given that NEXT plc employs only the directors, not others in our
group of companies.
Taxable benefits
2023/24 2022/23 2021/22 2020/211 2023/24 2022/23 2021/22 2020/21 2023/24 2022/23 2021/22 2020/21
Base salary
Bonus
Executive directors
Lord Wolfson
Amanda James
Richard Papp
Jane Shields
Non-executive directors
Michael Roney
Jonathan Bewes2
Soumen Das3 5
Tom Hall4 5
Dame Tristia Harrison
Dame Dianne Thompson
UK/Eire Employees
(average per FTE)
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
12%
5%
5%
5%
5%
5%
28%
18%
33%
18%
18%
8%
6%
6%
6%
6%
6%
18%
n/a
21%
6%
6%
5%
-3%
-3%
-3%
-3%
-3%
-3%
n/a
n/a
-3%
-3%
2%
-31%
1%
–
4%
-1%
5%
1%
14%
26%
–
–
-78%
-13%
-8%
–
–
94%
94%
94%
94%
-43%
-43%
-43%
-43%
100% -100%
100% -100%
100% -100%
100% -100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-6%
-7%
-10%
4%
91%
-51%
510%
-73%
1. The directors took a 20 per cent voluntary reduction in salary/fees during the initial lockdown period between April and June 2020.
2.
Jonathan Bewes was appointed as Senior Independent Director during 2021/22.
3. Soumen Das was appointed to the Board as a non-executive director on 1 September 2021.
4. Tom Hall was appointed Remuneration Committee Chairman during 2021/22.
5. The 2021/22 percentage changes in base salary for Tom Hall and Soumen Das are calculated on an annualised basis.
Pay ratios
Set out below are ratios which compare the total remuneration of Lord Wolfson (as included in the single total figure of remuneration table on page
146) to the remuneration of the 25th, 50th and 75th percentile of our UK employees. The disclosure will build up over time to cover a rolling ten
year period. We expect the pay ratio to vary from year to year, driven largely by the variable pay outcome for Lord Wolfson, which will significantly
outweigh any other changes in pay.
Year
2023/24
2022/23
2021/22
2020/21
2019/20
Method
Option B
Option B
Option B
Option B
Option B
25th percentile
pay ratio
226:1
127:1
265:1
203:1
151:1
50th percentile
(median) pay ratio
202:1
114:1
232:1
188:1
148:1
75th percentile
pay ratio
152:1
80:1
190:1
168:1
106:1
We have used Option B in the legislation to calculate the full-time equivalent remuneration for the 25th, 50th and 75th percentile UK employees,
leveraging the analysis completed as part of our most recent UK gender pay gap reporting as at 5 April 2023. As we have a very significant employee
base, it was felt to be overly complicated to prepare single figure calculations for each individual. Having identified the employees at these three
percentiles using the gender pay gap data, we have then used base contract salaries and grossed these up to the full-time equivalents to which
we have added actual benefits, bonus, long term incentives and pension (if applicable) of the UK employees falling at these three percentiles.
The Committee has considered the methodology and is confident the employees identified are reasonably representative since the structure of
their remuneration arrangements is in line with that of the majority of the UK workforce. We consider that these ratios are broadly appropriate in
the context of comparison with other retailers.
158
The base salary and total remuneration received during the financial year by the indicative employees on a full-time equivalent basis used in the
above analysis are set out below:
Base salary
Total remuneration
25th percentile
£19,965
£19,965
50th percentile (median)
£20,465
£22,407
75th percentile
£27,412
£29,833
The ratios disclosed above are affected by the following factors:
• Of our UK workforce of 41,000, around 87% work in our retail stores, customer contact centres and warehouses where, in line with the retail
sector more generally, rates of pay will not be as high as management grades and those employees based at our Head Office in more technical
roles. The three indicative employees used in the calculations are either retail sales consultants or warehouse operatives.
• The increase in the pay ratios in 2023/24 as compared to 2022/23 is largely attributable to the increase in the amount of variable remuneration
received by Lord Wolfson, who has received shares relating to vesting of two LTIPs in the year. NEXT’s share price affects the value of these
incentive plans whereas typically incentive plans provided to our non-management employees are unaffected by our share price movements.
Relative importance of spend on pay
The table below shows the total remuneration paid to or receivable by all employees in the Group together with other significant distributions and
payments (i.e. for share buybacks and dividends).
2023/24
2022/23
% change
Total wages and salaries
£907.4m
£772.3m
+17.5%
Buybacks
£177.3m
£224.0m
-20.8%
Dividends
£248.3m
£237.4m
+4.6%
Dilution of share capital by employee share plans
The Company monitors and complies with dilution limits in its various share scheme rules and has not issued new or treasury shares in satisfaction
of share schemes in the last 10 years. Share-based incentives are in most cases satisfied from shares purchased and held by the ESOT (refer to Note
26 to the financial statements).
Consideration of matters relating to directors’ remuneration
Remuneration Committee
During the year, the Committee comprised the following independent non-executive directors and the Chairman:
Member
Tom Hall (Committee Chairman)
Jonathan Bewes
Soumen Das
Dame Tristia Harrison
Michael Roney
Dame Dianne Thompson
Attendance at Committee meetings is shown on page 127.
Role and work of Remuneration Committee
The Committee determines the remuneration of the Group’s Chairman and executive directors, and approves that of senior executives (consistent
with the Code). It is also responsible for determining the targets for performance-related pay schemes, approves any award of the Company’s
shares under share option or incentive schemes to employees, and oversees any major changes in employee benefit structures. The Committee
members have no conflicts of interest arising from cross-directorships and no director is permitted to be involved in any decisions as to his or her
own remuneration. The remuneration of non-executive directors is decided by the Chairman and executive directors of the Board. The Committee’s
terms of reference are available on our corporate website nextplc.co.uk or on request from the Company Secretary.
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Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Assistance to the Committee
During the period, the Committee received input from the Chief Executive and the Group Finance Director. The Committee engaged FIT
Remuneration Consultants LLP and FIT Remuneration Implementation LLP (together FIT) to provide independent external advice, including updates
on legislative requirements, best practice, and other matters of a technical nature and related to share plans. FIT have no other connection with the
Company. Deloitte LLP provided independent verification services of total shareholder returns for NEXT and the comparator group of companies
under the LTIP. Deloitte provides other consultancy services to the Group on an ad hoc basis. FIT and Deloitte were appointed by the Committee
based on their expertise in the relevant areas of interest.
During the year FIT was paid circa £29k and Deloitte was paid circa £5k for the services described above, charged at their standard hourly rates.
Both are members of the Remuneration Consultants Group, the body that oversees the Code of Conduct in relation to executive remuneration
consulting in the UK and have confirmed to us that they adhere to its Code. Based on the nature of the advice, and the relatively modest fees, the
Committee was satisfied that the advice received was objective and independent.
Voting outcomes at General Meetings
To approve the Remuneration Policy
To approve the 2022/23
Remuneration Report
AGM
18 May
2023
18 May
2023
Votes for
82,611,467
%
for
Votes
against
84.0 15,751,694
%
against
16.0
Total
votes cast
98,363,161
% of shares
on register
76.6
Votes
withheld
65,153
93,122,833
94.8
5,114,357
5.2
98,237,190
76.5
190,866
Service contracts
Executive directors
The Company’s policy on notice periods and in relation to termination payments is set out in the Policy table on page 166. Apart from their service
contracts, no director has had any material interest in any contract with the Company or its subsidiaries.
The executive directors’ service contracts do not contain fixed term periods.
Non-executive directors
Letters of appointment for the Chairman and non-executive directors do not contain fixed term periods; however, they are appointed in the
expectation that they will serve for a minimum of six years, subject to satisfactory performance and re-election at Annual General Meetings.
Dates of appointment and notice periods for directors are set out below:
Date of
appointment
to Board
Notice period
where given
by the Company
Notice period
where given
by the director
14 February 2017*
12 months
6 months
3 February 1997
1 April 2015
14 May 2018
1 July 2013
3 April 2023
3 October 2016
1 September 2021
13 July 2020
25 September 2018
1 January 2015
12 months
12 months
12 months
12 months
12 months
1 month
1 month
1 month
1 month
1 month
6 months
6 months
6 months
6 months
6 months
1 month
1 month
1 month
1 month
1 month
Chairman
Michael Roney
Executive directors
Lord Wolfson
Amanda James
Richard Papp
Jane Shields
Jeremy Stakol
Non-executive directors
Jonathan Bewes
Soumen Das
Tom Hall
Dame Tristia Harrison
Dame Dianne Thompson
* Appointed Chairman 2 August 2017
160
Part 3: Remuneration Policy Table
The following table summarises the Company’s policies with regard to each of the elements of remuneration for existing directors, as approved
by shareholders on 18 May 2023 and is provided for ease of reference only. This is an extract of the policy report and has not been amended in
any way. However, as noted earlier in this report (see page 141) and as permitted under the policy, the Committee has decided to increase the
bonus opportunity for the executive directors to 150%, noting that this higher payout will only occur once performance levels of the Company
are above those that, under current arrangements, would trigger the maximum pay out. See also page 142 for details of forthcoming changes
to Lord Wolfson’s pension arrangements. The full Remuneration Policy is set out in the January 2023 Annual Report, pages 138 to 149, which is
available on our corporate website nextplc.co.uk.
A shareholder vote on Remuneration Policy is not required in 2024.
Tom Hall
Chairman of the Remuneration Committee
21 March 2024
Remuneration Policy table, as approved in 2023. For clarity, where the policy table includes page cross references, these references have been
updated to this year’s Remuneration Report.
Base salary
Purpose and link to strategy
To attract, motivate and retain high calibre individuals,
while not overpaying. To provide a satisfactory base
salary within a total package comprising salary and
performance- related pay.
Performance-related components and certain benefits
are calculated by reference to base salary. The level of
salary broadly reflects the value of the individual, their
role, skills and experience.
Operation
Normally reviewed annually, generally effective 1 February.
The Committee focuses particularly on ensuring that
an appropriate base salary is paid to directors and senior
managers. The Committee considers salaries in the context
of overall packages with reference to individual experience
and performance, the level and structure of remuneration
for other employees, the external environment and market
data. External benchmarking analysis is only occasionally
undertaken and the Committee has not adopted
a prescribed objective of setting salaries by reference to
a particular percentile or benchmark.
Maximum opportunity
There is no guaranteed annual increase. The Committee considers it important
that base salary increases are kept under tight control given the multiplier effect
of such increases on future costs. In the normal course of events, increases in
executive directors’ salaries would be in line with the wider Company cost of
living awards.
The Committee reserves flexibility to grant larger increases where considered
appropriate. For instance, where a new executive director, being an internal
promotion, has been appointed to the Board with an initial salary which is
considered below the normal market rate, then the Committee may make staged
increases to bring the salary into line as the executive gains experience in the role.
Also if there have been significant changes in the size and scope of the executive’s
role then the Committee would review salary levels accordingly.
Under the reporting regulations, the Company is required to specify a maximum
potential value for each component of pay. Accordingly, for the period of
this Policy, no base salary paid to an executive director in any year will exceed
£850,000 subject to the amount of the maximum base salary that may be paid
to an executive director in any year increasing in line with the growth in RPI from
the date of approval of that limit in accordance with the Remuneration Policy
approved in 2017.
Performance measures and targets
Not applicable.
Key changes to last approved policy
No change.
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Annual bonus
Purpose and link to strategy
To incentivise delivery of stretching annual goals.
To provide focus on the Company’s key financial objectives.
To provide a retention element in the case of the Chief
Executive as any annual bonus in excess of 100% of base
salary is payable in shares, deferred for a period of two
years and subject to forfeiture if he voluntarily resigns
prior to the end of that period.
Operation
Performance measures and related performance targets
are set at the commencement of each financial year by
the Committee. Company policy is to set such measures
by reference to financial measures (such as pre-tax EPS)
but the Committee retains flexibility to use different
performance measures during the period of this Policy if it
considers it appropriate to do so, although at least 75% of
any bonus will continue to be subject to financial measures.
At the threshold level of performance, no more than 20%
of the maximum bonus may be earned (the Committee
will determine the appropriate percentage each year and
recent awards have been set at a lower level). Typically, a
straight sliding scale of payments operates for performance
between the minimum and maximum levels. There is no
in- line target level although, for the purposes of the
scenario charts on page 149, 50% of maximum bonus has
been assumed.
Dividend accruals (both in respect of special and ordinary
dividends) may be payable on any deferred bonus awards
which vest.
The Company has the flexibility within the rules of the
Deferred Share Bonus Plan to grant nil cost options as an
alternative to conditional share awards or exceptionally to
settle in cash.
Maximum opportunity
At present, Company policy is to provide a maximum bonus opportunity of 150%
of salary for the Chief Executive and 100% of salary for other executive directors.
Although the Committee has no current plan to make any changes, for the period
of this Policy the Committee reserves flexibility to:
•
Increase maximum bonus levels for executive directors in any financial
year to 200% of salary. This flexibility would be used only in exceptional
circumstances and where the Committee considered any such increase to be
in the best interests of shareholders and after appropriate consultation with
key shareholders.
• Lessen the current differentials in bonus maximums which exist between the
•
Chief Executive and other executive directors.
Introduce or extend an element of compulsory deferral of bonus outcomes if
considered appropriate by the Committee.
Performance measures and targets
Currently performance is assessed against pre-tax EPS targets set annually,
which take account of factors including the Company’s budgets and the wider
background of the UK economy. Pre-tax EPS has been chosen as the basic metric
to avoid executives benefiting from external factors such as reductions in the rate
of corporation tax. The Committee reserves flexibility to apply discretion in the
interests of fairness to shareholders and executives by making adjustments it
considers appropriate.
The Committee reserves flexibility to apply different performance measures and
targets in respect of the annual bonus for the period of this Policy but a financial
measure will continue to be used for at least 75% of the award. The Committee
will consult with major shareholders before any significant changes are made to
the use of performance measures.
The basis of performance measurement incorporates an appropriate adjustment
to EPS growth to reflect the benefit to shareholders from special dividends paid in
any period in lieu of share buybacks.
Key changes to last approved policy
No change.
162
Long Term Incentive Plan (LTIP)
Purpose and link to strategy
To incentivise management to deliver superior total
shareholder returns (TSR) over three year performance
periods relative to a selected group of retail companies,
and align the interests of executives and shareholders.
Retention of key, high calibre employees over three
year performance periods and encouraging long term
shareholding, through post vesting holding requirement,
and commitment to the Company.
Operation
A variable percentage of a pre-determined maximum
number of shares can vest, depending on the achievement
of performance conditions.
The maximum number of shares that may be awarded
to each director is a percentage of each director’s base
salary at the date of each grant, divided by NEXT’s average
share price over the three months prior to the start of the
performance period.
LTIP awards are made twice a year to reduce the volatility
inherent in any TSR performance measure and to enhance
the portfolio effect for participants of more frequent, but
smaller, grants.
The Company has the flexibility within the rules of the LTIP
to grant nil cost options as an alternative to conditional
share awards and to settle vested LTIP awards in cash.
Maximum opportunity
The maximum possible aggregate value of awards granted to all executive
directors will be 225% of annual salary (i.e. typically 112.5% every six months)
and up to 300% in exceptional circumstances.
The Committee reserves the right to vary these levels within the overall annual
limits described above. In addition, awards granted to executive directors which
vest must be taken in shares and the net shares (after payment of tax and NIC)
must be held for a minimum period of two further years. The Committee reserves
the right to lengthen (but not reduce) the performance period and to further
increase the holding period or to introduce a retention requirement.
Performance measures and targets
Performance is measured over a period of three years. Currently performance is
measured based on NEXT’s TSR against a group (currently 19 other UK listed retail
companies) which are, in the view of the Committee, broadly comparable with
NEXT in size or nature of their business. Comparison against such a group is more
likely to reflect the Company’s relative performance against its peers, thereby
resulting in awards vesting on an appropriate basis.
Relative performance
Below median
Median
Upper quintile
Percentage vesting
0%
20%
100%
If no entitlement has been earned at the end of a three year performance period
then that award will lapse; there is no retesting. The Committee may set different
performance conditions for future awards subject to consulting with major
shareholders before any significant changes are made.
Dividend accruals (both in respect of special and ordinary
dividends) may be payable on any vested LTIP awards.
Key changes to last approved policy
No change.
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Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Maximum opportunity
Under the DB section and the SPA, the maximum potential pension is only
achieved on completion of at least 20 years of pensionable service at age 65,
when two thirds of the executive director’s annual pensionable salary at October
2012 (plus any element of pension which was accrued on bonus payments made
prior to 2006, when bonus was removed from the definition of pensionable
earnings) could become payable.
The lump sum payable on death in service is four times base salary under the SPA,
three times base salary under the DB and DC sections and one times base salary
under the auto enrolment plan.
No DC contributions, or equivalent cash supplement payments, will be made to
an executive director in any year that will exceed the level offered to the wider
colleague population recruited at or about the same time as them.
Lord Wolfson has volunteered to cap the service accrual under his DB pension
annually so that the single figure attributed to the DB portion of his pension is no
more than 9% of salary (giving single figure of DB pension and salary supplement
in aggregate of up to 24% of salary).
Any newly appointed executive directors, whether
internal or external
appointments, will be invited to join a NEXT Defined Contribution pension
arrangement at the prevailing rate for staff across NEXT at the time. This is
currently an employer pension contribution of 3% of pensionable salary.
Performance measures and targets
Not applicable.
Key changes to last approved policy
No change.
Pension
Purpose and link to strategy
To provide for retirement through Company sponsored
schemes or a cash alternative for personal pension
planning and therefore assist attraction and retention.
Operation
Lord Wolfson, Jane Shields and Richard Papp are deferred
members of the defined benefit (DB) section of the 2013
NEXT Group Pension Plan (the Plan).
In addition to being a deferred member of the DB section of
the Plan, Lord Wolfson is accruing service (subject to a cap,
see opposite) in an unfunded, unapproved supplementary
pension arrangement (SPA), described on page 151.
His future pension is calculated by reference to his October
2012 salary, rather than his final earnings, and any future
salary changes will have no effect.
Jane Shields and Richard Papp ceased to contribute to
the Plan in 2011 and 2004 respectively. Their DB pensions
are no longer linked to salary and will increase in line with
statutory deferred revaluation only (i.e. in line with CPI).
Lord Wolfson and Jane Shields receive salary supplements of
15% in lieu of past changes to their pension arrangements.
This arrangement was in line with other senior employee
members of the DB section of the Plan.
Amanda James participates in a defined contribution
pension scheme and the Company currently makes a
contribution equal to 5% of her salary into her pension
plan. Amanda James can opt to receive an equivalent
cash supplement in lieu of this Company contribution.
Richard Papp is a deferred member of the same defined
contribution pension scheme and receives a 5% cash
equivalent supplement. The arrangements for Amanda
James and Richard Papp are consistent with the pension
provision and alternatives available to employees who
joined the DC scheme at a similar time. The 5% cash
equivalent supplement is only available to members who
have exceeded the Annual or Lifetime Allowance limits.
Bonuses are not taken into account in assessing pensionable
earnings in the Plan.
New employees of the Group can join the auto enrolment
pension plan.
164
Other benefits
Purpose and link to strategy
To provide market competitive non-cash benefits to
attract and retain high calibre individuals.
Operation
Executive directors receive benefits which may include
the provision of a company car or cash alternative, private
medical insurance, subscriptions to professional bodies and
staff discount on Group merchandise. A driver is also made
available to the executive directors.
The Committee reserves discretion to introduce new
benefits where it concludes that it is in the interests of NEXT
to do so, having regard to the particular circumstances
and to market practice, and reserves flexibility to make
relocation related payments.
Whilst not considered necessarily to be benefits, the
Committee reserves the discretion to authorise attendance
by directors and their family members (at the Company’s
cost if required) at corporate events and to receive
reasonable
in accordance with
Company policies.
levels of hospitality
Reasonable business-related expenses will be reimbursed
(including any tax thereon).
Save As You Earn Scheme (Sharesave)
Purpose and link to strategy
To encourage all employees to make a long term
investment in the Company’s shares.
Operation
Executive directors can participate in the Company’s
Sharesave scheme which is HMRC approved and open to
all employees in the UK. Option grants are generally made
annually, with the exercise price discounted by a maximum
of 20% of the share price at the date an invitation is issued.
Options are exercisable three or five years from the date
of grant. Alternatively, participants may ask for their
contributions to be returned.
Maximum opportunity
During the Policy period, the value of benefits (other than relocation costs) paid
to an executive director in any year will not exceed £150,000. In addition, the
Committee reserves the right to pay up to £250,000 relocation costs in any year to
an executive director if considered appropriate to secure the better performance
by an executive director of their duties. Relocation benefits would normally only
be available for up to 12 months and the Committee would make appropriate
disclosures of any provided.
During the Policy period, the actual level of taxable benefits provided will be
included in the single total figure of remuneration.
Performance measures and targets
Not applicable.
Key changes to last approved policy
No change.
Maximum opportunity
Investment is currently limited to a maximum amount of £250 per month.
The Committee reserves the right to increase the maximum amount in line with
limits set by HMRC (currently £500 per month).
Performance measures and targets
Not applicable.
Key changes to last approved policy
No change.
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Strategic ReportGovernanceFinancial StatementsShareholder Information REMUNERATION REPORT
Termination payments
Purpose and link to strategy
Consistent with market practice, to ensure NEXT can
recruit and retain key executives, whilst protecting the
Company from making payments for failure.
Operation
The Committee will consider the need for and quantum of
any termination payments having regard to all the relevant
facts and circumstances at that time.
Future service contracts will take into account relevant
published guidance.
Maximum opportunity
Each of the executive directors has a rolling service contract. Dates of appointment
and notice periods are disclosed on page 160. The contract is terminable by
the Company on giving one year’s notice and by the individual on giving six
months’ notice. For directors appointed prior to the 2017 Remuneration Policy,
the Company has reserved the right to make a payment in lieu of notice on
termination of an executive director’s contract equal to their base salary and
contractual benefits (excluding performance-related pay). For directors appointed
after that time, any payment in lieu of notice is limited to their base salary only.
For directors appointed prior to the date of approval of the 2017 Remuneration
Policy, if notice of termination is given immediately following a change of control
of the Company, the executive director may request immediate termination of
his/her contract and payment of liquidated damages equal to the value of his/her
base salary and contractual benefits. Liquidated damages provisions will not be
present in any service contract for executive directors appointed after that date
and any service contract since that time will include provision for any termination
payments to be made on a phased basis.
In normal circumstances executive directors have no entitlement to compensation
in respect of loss of performance bonuses and all share awards would lapse
following resignation. However, under certain circumstances (e.g. “good leaver”
or change in control), and solely at the Committee’s discretion, annual bonus
payments may be made and would ordinarily be calculated up to the date of
termination only, based on performance. In addition, awards made under the LTIP
would in those circumstances generally be time pro-rated and remain subject to
the application of the performance conditions at the normal measurement date.
The Committee also has a standard discretion to vary the application of time pro-
rating in such cases. “Good leaver” treatments are not automatic.
In the event of any termination payment being made to a director (including
any performance-related pay elements), the Committee will take full account
of that director’s duty to mitigate any loss and, where appropriate, may seek
independent professional advice and consider the views of shareholders as
expressed in published guidance prior to authorising such payment.
Consistent with market practice, in the event of removal from office of an
executive director, the Company may pay a contribution towards the individual’s
legal fees and fees for outplacement services as part of a negotiated settlement
and such other amounts as the Committee considers to be necessary, having taken
legal advice, in settlement of potential claims. Any such fees would be disclosed
with all other termination arrangements. The Committee reserves the right, if
necessary, to authorise additional payments in respect of such professional fees
if not ascertained at the time of reporting such termination arrangements up to
a maximum of £10,000.
A departing gift may be provided up to a value of £10,000 (plus related taxes)
per director.
Performance measures and targets
Not applicable.
Key changes to last approved policy
No change.
166
Maximum opportunity
Not applicable.
Performance measures and targets
Not applicable.
Key changes to last approved policy
No change.
Maximum opportunity
The total of fees paid to the Chairman and the non-executive directors in any year
will not exceed the maximum level for such fees from time to time prescribed by
the Company’s Articles of Association (currently £1,000,000 per annum).
Performance measures and targets
Non-executive directors receive the normal staff discount on Group merchandise
but do not participate in any of the Group’s bonus, pension, share option or other
incentive schemes.
Key changes to last approved policy
No change.
Recovery and withholding provisions
Purpose and link to strategy
To ensure the Company can recover any payments
made or potentially due to executive directors under
performance- related remuneration structures.
Operation
Recovery and withholding provisions are in the service
contracts of all executive directors and will be enforced
where appropriate to recover or withhold performance-
related remuneration which has been overpaid due to:
a material misstatement of the Company’s accounts; errors
made in the calculation of an award; a director’s misconduct;
insolvency of any group company; or circumstances that
would lead to a sufficiently significant negative impact on
the reputation and likely financial strength of the Company.
These provisions allow for the recovery of sums paid and/
or withholding of sums to be paid.
Chairman and non-executive director fees
Purpose and link to strategy
To ensure fees paid to the Chairman and non-executive
directors are competitive and comparable with other
companies of equivalent size and complexity so that
the Company attracts non-executive directors who have
a broad range of experience and skills to oversee the
implementation of our strategy.
Operation
Remuneration of the non-executive directors is normally
reviewed annually and determined by the Chairman and
the executive directors. The Chairman’s fee is determined
by the Committee (excluding the Chairman).
Additional fees are paid to non-executive directors who
chair the Remuneration and Audit Committees, and act as
the Senior Independent Director. The structure of fees may
be amended within the overall limits.
External benchmarking is undertaken only occasionally and
there is no prescribed policy regarding the benchmarks used
or any objective of achieving a prescribed percentile level.
If the Chairman or non-executive directors are required to
spend time on exceptional Company business significantly
in excess of the normal time commitment, the Chairman
will be paid £1,500 and the non-executive directors £1,000
for each day spent. These are subject to an annual review
by the Board. Reasonable business related expenses will be
reimbursed (including any tax thereon).
The policies as set out above would apply to the promotion of an existing Group employee to the Board .
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Strategic ReportGovernanceFinancial StatementsShareholder Information DIRECTORS’ REPORT
Information contained in the
Strategic Report
As permitted by section 414C of the Companies Act 2006,
certain information required to be included in the Directors’ Report has
been included in the Strategic Report. Specifically, this relates to:
•
Information in respect of employee matters (including actions
taken to introduce, maintain or develop arrangements aimed
at employees, details on how the directors have engaged with
employees and had regard to employee interests, our approach to
investing in and rewarding the workforce, employee diversity and
the employment, training and advancement of disabled persons)
(see page 102).
• Likely future developments.
• Risk management (see pages 78 to 86).
• Details on how the directors have had regard to the need to foster
business relationships with stakeholders (see page 112).
• Greenhouse gas emissions (see page 90 for our Streamlined Energy
and Carbon Reporting (SECR) disclosures and page 92 for our
GHG Emissions).
Financial instruments
Information on financial instruments and the use of derivatives is given
in Notes 27 to 30 to the financial statements.
Post balance sheet events
See Note 36 of the financial statements.
Annual General Meeting
The 2024 Annual General Meeting (AGM) of NEXT plc will be held at
Leicester Marriott Hotel, Smith Way, Grove Park, Leicester LE19 1SW
on Thursday 16 May 2024 at 9.30 am. The Notice of Annual General
Meeting, which includes the business to be transacted at the meeting,
is set out from page 260.
Dividends
Information regarding dividends during 2023/24 is provided in the
Strategic Report on page 65.
The Trustee of the NEXT ESOT has waived dividends paid in the year on
the shares held by it. Please refer to Note 26 to the financial statements
for further information.
Share capital and major shareholders
Details of the Company’s share capital are shown in Note 23 to the financial statements.
The Company was authorised by its shareholders at the 2023 AGM to purchase its own shares. During the financial year the Company purchased
and cancelled 2,584,970 ordinary shares with a nominal value of 10 pence each (none of which were purchased off-market), at a cost of £177.3m
and representing 2% of its issued share capital at the start of the year.
On 19 October 2023, the Company issued and allotted 745,912 ordinary shares of 10 pence each for £71.61 per share to satisfy part of the
consideration for the purchase of FatFace.
At the financial year end 27 January 2024, the Company had 127,424,301 shares in issue.
As at 27 January 2024, the Company had been notified under the Disclosure and Transparency Rules (DTR 5) of the following notifiable interests
in the Company’s issued share capital. The information provided below was correct at the date of notification. These holdings are likely to have
changed since the Company was notified; however, notification of any change is not required until the next notifiable threshold is crossed.
BlackRock, Inc.
Invesco Limited
NEXT plc Employee Share Option Trust
FMR LLC (Fidelity)
Norges Bank
Notifications received as at 27 January 2024
No. of voting
rights at date of
notification
12,691,696
6,378,187
6,330,231
6,278,493
3,862,059
% of voting
rights at date
of notification
9.68
4.97
4.96
4.92
2.99
Nature of
holding
Indirect interest
Indirect interest
Direct interest
Indirect interest
Direct interest
Date of
notification
17 May 2022
24 May 2023
19 December 2023
14 November 2023
21 October 2022
No changes to major shareholdings were disclosed to the Company after 27 January 2024 up to 20 March 2024.
Additional information
Shareholder and voting rights
All members who hold ordinary shares are entitled to attend and vote
at the AGM. Voting on all resolutions at the 2024 AGM will be by way
of a poll. On a poll, every member present in person or by proxy has
one vote for every ordinary share held or represented. The Notice of
Meeting specifies the deadlines for exercising voting rights.
The Company is not aware of any agreements between shareholders
that may result in restrictions on the transfer of securities and voting
rights. There are no restrictions on the transfer of ordinary shares in
the Company other than certain restrictions imposed by laws and
regulations (such as insider trading laws and market requirements
relating to closed periods) and requirements of internal rules and
procedures whereby directors and certain employees of the Company
are required to hold certain shares for a set period and also prior
approval to deal in the Company’s securities.
168
The Company’s Articles may only be amended by a special resolution
at a General Meeting. Directors are elected or re-elected by ordinary
resolution at a General Meeting; the Board may appoint a director but
anyone so appointed must be elected by ordinary resolution at the
next General Meeting. Under the Articles, directors retire and may
offer themselves for re-election at a general meeting at least every
three years. However, in line with the provisions of the UK Corporate
Governance Code, all directors stand for re-election annually.
Change of control
The Company is not party to any significant agreements which take
effect, alter or terminate solely upon a change of control of the
Company. However, in the event of a change of control of the Company
or NEXT Group plc, NEXT Group plc’s medium term borrowing facilities
will be subject to early repayment in full if a majority of the lending
banks give written notice, or in part if a lending bank gives written
notice following a change of control. In addition, the holders of NEXT
Group plc’s corporate bonds will be entitled to call for redemption of the
bonds by NEXT Group plc or the Company as guarantor at their nominal
value together with accrued interest in the following circumstances:
• Should a change of control cause a downgrading in the credit rating
of the corporate bonds to sub-investment grade and this is not
rectified within 120 days after the change of control, or
•
If already sub-investment grade, a further credit rating downgrade
occurs and this is not rectified within 120 days after the change of
control, or
•
If the bonds at the time of the change of control have no credit rating
and no investment grade rating is assigned within 90 days after the
change in control.
The Company’s share option plans and its Long Term Incentive Plan
contain provisions regarding a change of control. Outstanding options
and awards may vest on a change of control, subject to the satisfaction
of any relevant performance conditions.
Directors’ service contracts are terminable by the Company on giving
one year’s notice. There are no agreements between the Company and
its directors or employees providing for additional compensation for
loss of office or employment (whether through resignation, redundancy
or otherwise) that occurs because of a takeover bid.
Branches
NEXT, through various subsidiaries, has established branches in a
number of different countries in which the business operates.
Corporate governance
The corporate governance statement as required by the UK Financial
Conduct Authority’s Disclosure Guidance and Transparency Rules
(DTR 7.2.6) comprises the Additional Information section of this
Directors’ Report and the Corporate Governance statement included in
this Annual Report.
The following disclosures are required under Listing Rule 9.8.4 R:
Publication of unaudited
financial information
Shareholder waivers of dividends
On 4 January 2024, NEXT published a Group profit before tax (GPBT) guidance forecast for the
year to January 2024 of £905m. Actual GPBT for the period was £908m.
The NEXT Employee Share Ownership Trust typically waives its rights to receive dividends during
the year.
No further LR 9.8.4 disclosures are required.
In the case of each director in office at the date the Directors’ Report is approved:
• So far as the director is aware, there is no relevant audit information of which the Group and Parent Company’s auditors are unaware; and
• They have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information
and to establish that the Group and Parent Company’s auditors are aware of that information.
This Directors’ Report, comprising pages 120 to 169, has been approved by the Board and is signed on its behalf by
Amanda James
Group Finance Director
21 March 2024
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TO THE MEMBERS OF NEXT PLC
Report on the audit of the financial statements
Opinion
In our opinion:
• NEXT plc’s group financial statements and company financial statements (the “financial statements”) give a true and fair view of the state of
the group’s and of the company’s affairs as at 27 January 2024 and of the group’s profit and the group’s cash flows for the 52 week period
then ended;
• the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards as applied in
accordance with the provisions of the Companies Act 2006;
• the company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report & Accounts (the “Annual Report”), which comprise: consolidated and
parent company balance sheets as at 27 January 2024; the consolidated income statement, the consolidated statement of comprehensive income,
the consolidated and parent company statements of changes in equity and the consolidated cash flow statement for the period then ended;
the group accounting policies; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in Note 3 to the consolidated financial statements, we have provided no non-audit services to the company or its
controlled undertakings in the period under audit.
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Our audit approach
Overview
• We conducted an audit of the complete financial information of one financially significant component. Targeted specified procedures were
Audit scope
• All in-scope components were audited by the UK group engagement team.
performed over a further two components.
•
In addition, the group engagement team performed audit procedures over centralised functions and financial statement line items including
goodwill, intangible assets, leases, taxation, treasury, post-retirement benefits, equity accounted investments, the group consolidation and
financial statement disclosures, as well as audit procedures over business combinations.
• The components on which full scope audits, targeted specified procedures and centralised work was performed accounted for 84% of revenue,
82% of profit before tax and 92% of total assets.
• The application of key judgements and assumptions in relation to applying expected credit loss (ECL) provisioning on customer receivables (group)
Key audit matters
• Net realisable valuation of inventories (group)
• Valuation of acquired intangible assets (group)
• Defined benefit pension assumptions (group)
• Recoverability of investments (parent)
• Overall group materiality: £45,400,000 (2023: £43,500,000) based on 5% of profit before tax before exceptional items.
Materiality
• Overall company materiality: £27,000,000 (2023: £26,700,000) based on 1% of total assets.
• Performance materiality: £34,000,000 (2023: £32,625,000) (group) and £20,250,000 (2023: £20,000,000) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identified by our audit.
Valuation of acquired intangible assets is a new key audit matter this year. Impairment of right-of-use assets and property, plant and equipment
associated with Retail stores, and accounting for the Reiss and Joules investments, which were key audit matters last year, are no longer included
because of the reduced risk of material misstatement in these areas. Otherwise, the key audit matters below are consistent with last year.
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Key audit matter
How our audit addressed the key audit matter
The application of key judgements and assumptions in
relation to applying expected credit loss (ECL) provisioning on
Group
customer receivables
Refer to the audit committee report, the major sources of estimation uncertainty
and judgement within the group accounting policies and Note 14 for customer and
other receivables.
The determination of ECL provisions is inherently judgemental and involves
setting assumptions using forward looking information reflecting the group’s view
of potential future economic events. This can give rise to increased estimation
uncertainty, which is compounded by the inflationary and interest rate environment
in the UK and therefore affordability.
Having assessed the economic outlook and the limitations of any provisioning
model to fully reflect inherent risk in the current economic environment, the group
holds certain post-model adjustments to reflect the impact that the current
cost of living pressures may have on customer payment behaviour, along with
continued uncertainty surrounding the lasting impacts of the COVID period on
household finance.
We consider the following elements of the determination of modelled ECL for
customer receivables to be significant:
• The application of forward-looking unemployment assumptions used in the
models and the weightings assigned to those scenarios; and
• The completeness and appropriateness of post-model adjustments that
are recorded to take into account latent risks and known model limitations,
in particular those addressing the risk associated with customer affordability.
Group
Net realisable valuation of inventories
Refer to the audit committee report and the other areas of estimation uncertainty
and judgement within the group accounting policies.
The valuation of inventory involves judgement in the recording of provisions for
shrinkage, obsolescence and inventory that may have a lower net realisable value
than cost.
With the support of our financial services and credit risk modelling specialists,
we performed the following procedures.
We understood and critically assessed the appropriateness of the ECL
accounting policy, model methodologies, and mathematical accuracy of the
models used by management.
We tested model performance by replicating, on a sample basis, key model
components and comparing actual outcomes with those previously predicted
by the models.
We assessed the reasonableness and likelihood of the forward looking
economic assumptions and weightings assigned to the scenarios using a
benchmarking tool. We assessed their reasonableness against known or likely
economic, political and other relevant events.
The severity and magnitude of the unemployment forecasts were compared
to external forecasts and data from historical economic downturns.
Based on our knowledge and understanding of the limitations in management’s
models and emerging industry risks, we evaluated the appropriateness and
completeness of the post model adjustments proposed by management.
We tested on an aggregate basis the post-model adjustments held to address
the impact that the current cost of living pressures may have on customer
payment behaviour, along with continued uncertainty surrounding the lasting
impacts of the COVID period on household finance, critically assessing the
methodology applied and testing the underlying assumptions used in the
calculation to supporting evidence. We also independently quantified and
sensitised a customer affordability post-model adjustment, based on our own
view of latent and inherent credit risk.
We tested the ECL disclosures made by management to assess compliance
with accounting standards.
We found the application of key judgements and assumptions relating to the
ECL provision to be consistent with the evidence obtained.
We validated the integrity of the provision model and inputs and ensured
that it was using the underlying data correctly and calculating provision
amounts accurately.
We assessed rates against actual profits observed on clearance stock in
the financial period to assess whether they are consistent with the key
assumptions used in the inventory provision model at the year end.
We tested sales price post year-end in comparison to cost, to assess whether
inventory items were held at the lower of cost and net realisable value.
We recalculated the provision based on coverage levels seen in previous years
and benchmarked against other retailers.
We challenged management on the inclusion of specific judgemental parts of
the provisions, in excess of calculations from recent trading results.
We have performed sensitivity analysis over key judgements taken by
management and assessed the impact of this sensitivity analysis on the
provision value.
We found that the provisions recorded were consistent with the
evidence obtained.
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Key audit matter
How our audit addressed the key audit matter
Group
Valuation of acquired intangible assets
Refer to the audit committee report, the major sources of estimation uncertainty
and judgement within the group accounting policies and Note 34 for acquisition
of subsidiaries.
Under IFRS3, on acquisition, the acquirer shall measure the identifiable assets
acquired and the liabilities assumed at their acquisition-date fair values.
The acquired intangibles include material valuations attributable to the brands
which are calculated based on assumptions and key inputs that are subject to
significant estimation uncertainty.
Group
Defined benefit pension assumptions
Refer to the audit committee report, the major sources of estimation
uncertainty and judgement within the group accounting policies and Note 21 for
pension benefits.
The defined benefit pension schemes obligation is calculated based on actuarial
assumptions which are subject to significant estimation uncertainty and are also
sensitive to changes.
Parent
Recoverability of investments
Refer to Note C2 of the parent company financial statements for Investments.
In accordance with IAS 36, the parent company’s investments balance should be
carried at no more than its recoverable amount, being the higher of fair value less
costs to sell and its value in use. IAS 36 requires an entity to determine whether
there are indications that an impairment loss may have occurred and if so, make a
formal estimate of the recoverable amount.
With the support of our internal valuation specialists, we performed the
following procedures.
– assessed the reasonableness of the valuation methodologies, being the
relief from royalty approach;
– checked that the calculations (including terminal value and impact of
discounting) were mathematically accurate;
– assessed the reasonableness of the cash flows used in the calculations
and evaluated the key assumptions used in the brand valuations,
including discount rate, long term growth rate and royalty rate;
– evaluated the reasonableness of the weighted average return on assets
cross check and compared the proportion of intangible assets recognised,
including goodwill, to recent comparable transactions in the market; and
– assessed the adequacy of the disclosures in the financial statements.
We found that the methodology, inputs and key assumptions supporting
the valuations of the brand intangible assets were consistent with the
evidence obtained.
We used actuarial specialists to review the key actuarial assumptions for the
Original Plan, the 2013 Plan and the SPA.
We ensured the sensitivity analysis disclosed in the financial statements was
consistent with the actuarial report.
We found that the assumptions utilised by NEXT in the pension obligation
valuation were reasonable and within our expected ranges.
We evaluated whether there were any indicators of an impairment trigger
in relation to the parent company’s investments balance, with specific
consideration given to the following:
– the market capitalisation of the group, which is significantly in excess
of the investments balance, noting that substantially all of the market
capitalisation is considered to be in relation to one indirect subsidiary
(NEXT Retail Limited) of the parent company;
– the trading results of NEXT Retail Limited, which are no worse than
expected and are not expected to be worse in future periods; and
– any significant changes with an adverse impact in relation to the
technological, market, economic or legal environment in which NEXT Retail
Limited operates, noting that there were no such changes.
We consider management’s conclusion that there are no indicators of
impairment to be appropriate.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate.
Our scoping is based on the group’s consolidation structure. We define a component as a single reporting unit which feeds into the group
consolidation. Of the group’s 57 components, we identified one component which, in our view, required an audit of its complete financial
information both due to its size and risk characteristics (forms the majority of the NEXT Retail, NEXT Online and NEXT Finance segments).
Targeted specified procedures were also performed over two other components which held balances of significance to the group financial statements.
The group engagement team performed audit procedures over centralised functions and financial statement line items including goodwill,
intangible assets, leases, taxation, treasury, post-retirement benefits, equity accounted investments, the group consolidation and financial
statement disclosures, as well as audit procedures over business combinations. The Group engagement team also performed analytical procedures
on all insignificant components.
The components on which full scope audits, targeted specified procedures and centralised work was performed accounted for 84% of revenue,
86% of profit before tax and 94% of total assets.
The parent company is comprised of one reporting unit which was subject to a full scope audit by the group engagement team for the purposes of
the parent company financial statements.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the process adopted to assess the extent of the potential impact of climate
risk on the financial statements and to support the disclosures made within the Strategic Report.
Our risk assessment was based on this enquiry as well as review of NEXT’s most recent corporate responsibility reporting and climate-
related commitments.
As detailed in the group accounting policies, management considers that the impact of climate risk does not give rise to a material financial
statement impact.
We evaluated management’s disclosures based on our knowledge of the business, including from our testing of right-of-use assets and property
plant and equipment, which were considered to be the assets at most risk of the effects of climate change.
We also considered the consistency of the disclosures in relation to climate change (including the disclosures in the Task Force on Climate-related
Financial Disclosures (TCFD) section) within the Annual Report with the financial statements and our knowledge obtained from our audit.
Our procedures did not identify any material impact in the context of our audit of the financial statements as a whole, or our key audit matters for
the year ended 27 January 2024.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark applied
Financial statements – Group
Financial statements – company
£45,400,000 (2023: £43,500,000).
£27,000,000 (2023: £26,700,000).
5% of profit before tax before exceptional items.
1% of total assets.
Profit before tax before exceptional items is a
commonly used benchmark
in assessing the
performance of the group.
The parent company does not
trade and
therefore total assets is considered to be the most
appropriate benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was £15,000,000 to £42,900,000.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% (2023: 75%) of overall materiality, amounting to £34,000,000 (2023: £32,625,000) for the group financial statements and
£20,250,000 (2023: £20,000,000) for the company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
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We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £2,260,000 (group audit)
(2023: £2,200,000) and £1,335,000 (company audit) (2023: £1,335,000) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of
accounting included:
• We obtained management’s going concern assessment which included a base case and other scenarios including a reverse stress test;
• We ensured the base case was consistent with Board approved budgets and we assessed the appropriateness of this budget and other
assumptions during the going concern period;
• We assessed the mathematical accuracy of the calculations for liquidity headroom for the base case and reverse stress test scenarios. We also
tested the forecast covenant compliance for the base case;
• We have evaluated management’s ability to budget based on historical budgets / forecasts and the resulting performance;
• We considered the mitigating actions available to NEXT to increase liquidity, if required, with the key actions being reductions in stock purchases,
capex and share purchases, as well as cessation of dividends; and
• We assessed management’s reverse stress test and were satisfied it was a scenario that, in our view, was not plausible.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the company’s ability
to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the
period ended 27 January 2024 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
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Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement,
included within the Strategic Report and Governance section, is materially consistent with the financial statements and our knowledge obtained
during the audit, and we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting
in preparing them, and their identification of any material uncertainties to the group’s and company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment covers and why the period
is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and company was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is
in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the
financial statements and our knowledge and understanding of the group and company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the group’s and company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the
Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
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Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements
in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for
such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related
to employment law and consumer credit regulations, and we considered the extent to which non-compliance might have a material effect on the
financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as tax legislation
and the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the principal risks were related to posting of inappropriate journal entries to
manipulate revenue and/or profits and management bias in significant accounting estimates and judgements. Audit procedures performed by the
engagement team included:
• Discussions with management, internal audit, internal legal counsel, compliance managers and the Audit Committee, including consideration
of known or suspected instances of non-compliance with laws and regulation or fraud;
• Assessment of matters reported on the group’s whistle-blowing log and the results of management’s investigation of such matters;
• Review of filings and correspondence with the Financial Conduct Authority and tax authorities;
• Searches for news articles which would highlight potential non-compliance with laws and regulations;
•
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and
• Challenging assumptions and judgements made by management in their significant accounting estimates and judgements, in particular in
relation to recoverability of customer receivables (see related key audit matter above).
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target
particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
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Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not
visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements and the part of the Remuneration Report to be audited are not in agreement with the accounting records
and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 18 May 2017 to audit the financial statements for
the year ended 27 January 2018 and subsequent financial periods. The period of total uninterrupted engagement is seven years, covering the years
ended 27 January 2018 to 27 January 2024.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements will
form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance
with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report will
be prepared using the single electronic format specified in the ESEF RTS.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
21 March 2024
178
GROUP
FINANCIAL
STATEMENTS
180 Consolidated Income Statement
181 Consolidated Statement of Comprehensive Income
182 Consolidated Balance Sheet
183 Consolidated Statement of Changes in Equity
184 Consolidated Cash Flow Statement
185 Group Accounting Policies
199 Notes to the Consolidated Financial Statements
179
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany CONSOLIDATED INCOME STATEMENT
Continuing operations
Revenue (including credit account interest)
Cost of sales
Impairment losses on customer and other receivables
Gross profit
Distribution costs
Administrative expenses
Other gains / (losses)
Trading profit
Share of results of associates and joint ventures
Operating profit
Gain on Reiss transaction – exceptional item
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Profit attributable to:
– Equity holders of the Parent Company
– Non-controlling interests
Earnings Per Share
Basic
Diluted
The Notes 1 to 36 are an integral part of these consolidated financial statements.
Notes
1, 2
14
3
13
3
6
5
5
7
52 weeks to
27 January
2024
£m
52 weeks to
28 January
2023
£m
5,491.0
(3,034.5)
(36.0)
2,420.5
(794.1)
(657.7)
12.3
981.0
6.9
987.9
108.6
6.8
(87.5)
1,015.8
(215.3)
800.5
5,034.0
(2,827.7)
(31.0)
2,175.3
(750.0)
(481.8)
(16.3)
927.2
14.3
941.5
–
5.7
(77.9)
869.3
(158.6)
710.7
802.3
(1.8)
800.5
711.7
(1.0)
710.7
9
9
661.6p
655.9p
573.4p
570.5p
180
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Profit for the period
Other comprehensive income and expenses:
Items that will not be reclassified to profit or loss
Actuarial (loss)/gain on defined benefit pension scheme
Tax relating to items which will not be reclassified
Subtotal items that will not be reclassified
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Foreign currency cash flow hedges:
– fair value movements
Cost of hedging:
– fair value movements
Tax relating to items which may be reclassified
Subtotal items that may be reclassified
Other comprehensive income for the period
Total comprehensive income for the period
Total comprehensive income attributable to:
– Equity holders of the Parent Company
– Non-controlling interests
52 weeks to
27 January
2024
£m
800.5
52 weeks to
28 January
2023
£m
710.7
Notes
21
7
7
(103.6)
25.9
(77.7)
(3.8)
1.7
(0.9)
(0.2)
(3.2)
(80.9)
719.6
721.4
(1.8)
719.6
0.6
(0.1)
0.5
1.2
79.2
(0.4)
(19.7)
60.3
60.8
771.5
772.5
(1.0)
771.5
181
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany CONSOLIDATED BALANCE SHEET
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Associates, joint ventures and other investments
Defined benefit pension asset
Deferred tax assets
Current assets
Inventories
Customer and other receivables
Right of return asset
Other financial assets
Cash and short term deposits
Total assets
Current liabilities
Bank loans and overdrafts
Trade payables and other liabilities
Lease liabilities
Other financial liabilities
Current tax liabilities
Non-current liabilities
Bank loans and overdrafts
Corporate bonds
Provisions
Lease liabilities
Other financial liabilities
Other liabilities
Other liabilities
Total liabilities
NET ASSETS
TOTAL EQUITY
27 January
2024
£m
28 January
2023
£m
Notes
10
11
12
13
21
7
14
15
16
17
18
12
19
17
20
22
12
19
18
7
687.5
757.2
734.6
38.0
59.3
–
2,276.6
769.0
1,452.8
30.7
6.9
188.3
2,447.7
4,724.3
(58.7)
(991.8)
(167.8)
(18.8)
(8.6)
(1,245.7)
(29.5)
(790.8)
(52.4)
(869.9)
(37.4)
(11.7)
(48.1)
(1,839.8)
(3,085.5)
1,638.8
1,638.8
644.8
137.1
662.0
114.6
157.5
33.3
1,749.3
662.2
1,425.5
32.7
9.1
105.0
2,234.5
3,983.8
(102.3)
(791.1)
(146.2)
(40.8)
(12.9)
(1,093.3)
–
(790.7)
(33.8)
(877.1)
(9.5)
(14.3)
–
(1,725.4)
(2,818.7)
1,165.1
1,165.1
The financial statements were approved by the Board of directors and authorised for issue on 21 March 2024. They were signed on its behalf by:
Lord Wolfson of Aspley Guise
Chief Executive
Amanda James
Group Finance Director
182
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Attributable to equity holders of the Parent Company
Share
capital
£m
13.3
–
Share
premium
account
£m
Capital
redemption
reserve
£m
0.9
–
16.6
–
ESOT
reserve
£m
(331.7)
–
Cash flow
hedge
reserve
£m
Cost of
hedging
reserve
£m
Foreign
currency
translation
£m
Other
reserves
(Note 24)
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
£m
Total
equity
£m
27.9
–
0.7
–
(4.9) (1,443.8) 2,731.0 1,010.0
711.7
711.7
–
–
– 1,010.0
710.7
(1.0)
At 29 January 2022
Profit for the period
Other comprehensive
income/(expense)
for the period
Total comprehensive
income/(expense) for
the period
Share buybacks and
commitments (Note 23)
ESOT share purchases
(Note 26)
Shares issued by ESOT
(Note 26)
Share option charge
Reclassified to cost
of inventory
Non-controlling interest on
acquisition of subsidiary
Gain on disposal of
investment
Tax recognised directly in
equity (Note 7)
Equity dividends (Note 8)
At 28 January 2023
Profit for the period
Other comprehensive
income/(expense)
for the period
Total comprehensive
income/(expense) for
the period
Shares issued in the year
(Note 23)
Share buybacks and
commitments (Note 23)
ESOT share purchases
(Note 26)
Shares issued by ESOT
(Note 26)
Share option charge
Reclassified to cost
of inventory
Non-controlling interest on
acquisition of subsidiary
Fair value on put options
Tax recognised directly in
equity (Note 7)
Equity dividends (Note 8)
At 27 January 2024
–
–
(0.4)
–
–
–
–
–
–
–
–
12.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9
–
–
–
0.1
53.3
(0.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
–
–
–
–
–
–
–
–
–
0.3
–
–
–
–
–
–
–
–
12.7
–
–
54.2
–
–
17.3
–
–
–
(124.0)
59.0
–
–
–
–
–
–
–
–
(128.7)
–
–
59.4
(0.3)
1.2
59.4
(0.3)
1.2
0.5
60.8
–
60.8
712.2
772.5
(1.0)
771.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(224.0)
(224.0)
–
(124.0)
(18.2)
24.3
40.8
24.3
(128.7)
–
–
–
5.6
0.8
0.8
–
–
–
–
–
–
(224.0)
(124.0)
40.8
24.3
(128.7)
5.6
0.8
–
–
–
–
–
–
–
–
–
–
–
17.0
–
–
–
(396.7)
–
30.1
–
(11.3)
–
–
–
0.4
–
–
–
–
–
(4.2)
(237.1)
25.9
(237.1)
(3.7) (1,443.8) 2,984.8 1,160.5
802.3
802.3
–
–
–
–
25.9
(237.1)
4.6 1,165.1
800.5
(1.8)
–
–
–
–
(116.3)
125.7
–
–
–
–
–
–
(387.3)
1.3
(0.7)
(3.8)
1.3
(0.7)
(3.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
7.1
–
–
–
–
–
–
–
–
–
–
(1.8)
–
(4.7)
–
–
(0.3)
–
–
–
–
–
–
–
–
–
–
(77.7)
(80.9)
–
(80.9)
724.6
721.4
(1.8)
719.6
–
53.4
(177.3)
(177.3)
–
(116.3)
(31.7)
31.9
94.0
31.9
–
7.1
–
–
–
–
–
–
53.4
(177.3)
(116.3)
94.0
31.9
7.1
–
(26.1)
–
(26.1)
124.1
–
124.1
(26.1)
–
–
11.6
(248.3)
(7.5) (1,443.8) 3,271.3 1,511.9
13.4
(248.3)
–
–
–
–
11.6
(248.3)
126.9 1,638.8
183
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany 52 weeks to
27 January
2024
£m
1,313.6
(193.3)
1,120.3
52 weeks to
28 January
2023
£m
950.3
(151.5)
798.8
(160.9)
23.9
(137.0)
2.0
3.3
(51.2)
–
–
(153.2)
(0.9)
–
2.6
–
(334.4)
(177.3)
(116.3)
97.8
(2.5)
–
(156.1)
(79.2)
–
18.6
(248.3)
(663.3)
122.6
2.7
(1.0)
124.3
(207.1)
2.0
(205.1)
–
41.7
(41.0)
11.3
1.8
(28.8)
(64.7)
(1.9)
9.8
5.5
(271.4)
(228.5)
(124.0)
34.3
–
0.1
(157.1)
(74.1)
0.3
59.3
(237.4)
(727.1)
(199.7)
199.9
2.5
2.7
CONSOLIDATED CASH FLOW STATEMENT
Cash generated from operations (Note 32)
Corporation taxes paid
Net cash from operating activities
Cash flows from investing activities
Additions to property, plant and equipment
Movement in capital accruals
Payments to acquire property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale and leaseback transactions
Purchase of intangible assets
Amounts repaid to associates and joint ventures
Disposal of other investment
Investment in subsidiaries
Investment in associates and joint ventures
Acquisition of other investments
Dividend from jointly controlled entity
Disposal of preference shares in jointly controlled entity
Net cash from investing activities
Cash flows from financing activities
Repurchase of own shares
Purchase of shares by ESOT
Disposal of shares by ESOT
Repayment of loan
Incentives received for leases within the scope of IFRS 16
Lease payments
Interest paid (including lease interest)
Interest received
Proceeds from sale and leaseback transactions
Dividends paid (Note 8)
Net cash from financing activities
Net increase / (decrease) in cash and cash equivalents
Opening cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Closing cash and cash equivalents (Note 31)
184
GROUP ACCOUNTING POLICIES
General Information
NEXT plc and its subsidiaries (the “Group”) is a UK based retailer selling beautifully designed, excellent quality clothing, homeware and beauty
products which are responsibly sourced and accessibly priced. The Company is a public limited company, which is listed on the London Stock Exchange
and incorporated in England and Wales and domiciled in the UK. The address of the registered office is Desford Road, Enderby, Leicester LE19 4AT.
Basis of Preparation
The consolidated financial statements of NEXT plc have been prepared in accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The financial statements have been prepared on the historical cost basis except for certain financial instruments, pension assets and liabilities
and share-based payment liabilities which are measured at fair value. As is common in the retail sector, the Group operates a weekly accounting
calendar and this year the financial statements are for the 52 weeks to 27 January 2024 (last year 52 weeks to 28 January 2023).
In adopting the going concern basis for preparing the financial statements, the directors have considered the business activities including the
Group’s principal risks and uncertainties. The Board also considered the Group’s current cash position, the repayment profile of its obligations, its
financial covenants and the resilience of its 12 month cash flow forecasts to a series of severe but plausible downside scenarios such as enforced
store closures. Having considered these factors the Board is satisfied that the Group has adequate resources to continue in operational existence
and therefore it is appropriate to adopt the going concern basis in preparing the consolidated financial statements for the 52 weeks ended
27 January 2024 (see also the Going Concern and Viability Statements in the Annual Report and Accounts).
These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of NEXT plc (the “Company”) and its subsidiary undertakings.
Subsidiaries are entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
Associates and joint ventures are all entities over which the Group has significant influence but not control. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control of those policies. Investments in associates and joint
ventures are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and
the carrying amount is increased or decreased to recognise the Group’s share of the change in net assets of the associate or joint venture after the
acquisition date.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling shareholders
are initially measured at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. Subsequent to
acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’
share of subsequent changes in equity.
Fair Value Measurement
The Group measures financial instruments such as derivatives and non-listed equity investments at fair value at each Balance Sheet date.
The fair value is the price that would have been received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy described in Note 28.
Foreign Currencies
The consolidated financial statements are presented in Pounds Sterling, which is the Company’s functional and presentation currency.
The Group includes foreign entities whose functional currencies are not Sterling. On consolidation, the assets and liabilities of those entities are
translated at the exchange rates at the Balance Sheet date and income and expenses are translated at weighted average rates during the period.
Translation differences are recognised in other comprehensive income.
Transactions in currencies other than an entity’s functional currency are recorded at the exchange rate on the transaction date, whilst assets and
liabilities are translated at exchange rates at the Balance Sheet date. Exchange differences are recognised in the Income Statement.
Revenue
Revenue represents the fair value of amounts receivable for goods and services and is stated net of discounts, value added taxes and returns.
Revenue is recognised when control of the goods or services are transferred to the customer i.e. the customer accepts delivery of those goods.
185
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany GROUP ACCOUNTING POLICIES
Revenue
Goods sold through our Retail stores and websites
It is the Group’s policy to sell its products to the retail customer with a right to return within 28 days. The Group uses the expected value method to
estimate the value of goods that will be returned because this method best predicts the amounts of variable consideration to which the Group will
be entitled. A separate right of return asset is recognised on the face of the Balance Sheet which represents the right to recover product from the
customer. The refund liability due to customers on return of their goods is recognised either as a component of trade payables and other liabilities
(for cash payments) or as a deduction from customer receivables (for purchases using the nextpay credit facility).
(continued)
Service revenue
Revenue from our Total Platform services is measured at the fair value of the consideration received or receivable and represents amounts
receivable for the provision of services (for example the delivery of stock from the warehouse to retail stores) in the normal course of business,
net of discounts, value added tax and other sales-related taxes.
Loyalty programme and gift cards
The Group does not operate any loyalty programmes. Deferred income in relation to gift card redemptions is estimated on the basis of historical
redemption rates. Revenue from gift cards is recognised when the customer redeems the gift card.
Finance credit interest
Online credit account interest is accrued on a time basis by reference to the principal outstanding, the provision held (where credit impaired) and
the effective interest rate.
Royalty income
Royalty income is received from franchisees and is recognised on an accruals basis in accordance with the substance of the relevant agreements.
Commission income
Where third-party goods are sold on a commission basis, only the commission receivable is included in statutory revenue. To aid comparability,
“Total NEXT sales” are disclosed in the Strategic Report and in Note 1 of the financial statements. Total NEXT sales is an APM used by management
and includes the full customer sales value of commission based sales and interest income, excluding VAT.
Dividends
Final dividends are recorded in the financial statements in the period in which they are approved by the Company’s shareholders. Interim dividends
(which include special dividends) are recorded in the period in which they are declared by the directors and paid.
Dividend income is recognised when the right to receive payment is established.
Exceptional items
For the financial period ended 27 January 2024, the Group has used the term ‘exceptional items’. The Group exercises judgement in assessing
whether items should be classified as exceptional items. This assessment covers the nature of the item, cause of occurrence and scale of impact
of that item on the reported performance. In determining whether an item should be presented as exceptional items, the Group considers items
which are significant because of either their size or their nature. In order for an item to be presented as exceptional items, it should typically meet
at least one of the following criteria:
•
•
It is unusual in nature or outside the normal course of business and significant in value.
Items directly incurred as a result of either a significant acquisition or a divestment, or arising from a major business change or restructuring
programme which of itself has significant impact on the Income Statement.
The separate reporting of items, which are presented as exceptional items within the relevant category in the Consolidated Income Statement,
helps provide an indication of the Group’s trading performance in the normal course of business. It is also consistent with how management has
assessed performance in the period.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment.
Depreciation is charged so as to write down the cost of assets to their estimated residual values over their remaining useful lives on a straight-line
basis. Estimated useful lives and residual values are reviewed at least annually.
Estimated useful lives are summarised as follows:
• Freehold and long leasehold property
50 years
• Plant and equipment
6 – 25 years
• Leasehold improvements
the period of the lease, or useful life if shorter
186
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the fair value of the identifiable
net assets acquired. Goodwill is initially measured at cost, being the excess of the acquisition cost over the Group’s interest in the assets and
liabilities recognised. Goodwill is not amortised, but is tested for impairment annually or whenever there is an indication of impairment. For the
purposes of impairment testing, goodwill acquired is allocated to the Cash Generating Unit (CGU) that is expected to benefit from the synergies of
the combination. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use
and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration paid in a business combination is measured at fair
value with acquisition-related costs recognised in profit or loss as incurred. When the consideration paid includes a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred
in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against goodwill.
At the acquisition date, the identifiable assets and liabilities acquired are recognised at their fair value, with the exception of any associated
deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements which are recognised in accordance with IAS 12
Income Taxes and IAS 19 Employee Benefits respectively.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree,
and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed.
Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot
exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. If the initial accounting for a business
combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional
assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that,
if known, would have affected the amounts recognised as of that date.
Software
Capitalised software costs include both external direct costs of goods and services, and internal payroll-related costs for employees who are directly
associated with the software project.
Development costs are recognised as intangible assets when the following criteria are met:
•
It is technically feasible to complete the software so that it is available for use.
• Management controls and intends to complete the software for use in the business.
• There is an ability to use or sell the software.
•
It can be demonstrated how the software will generate probable economic benefits in the future.
• Adequate technical, financial and other resources are available to complete the project.
Capitalised software development costs are amortised on a straight-line basis over their expected economic lives, normally between 3 and 8
years. Computer software under development is held at cost less any recognised impairment loss and presented as “asset under construction”.
Any impairment in value is recognised within the Income Statement.
Other Intangible Assets
Other intangible assets relate to brand names and customer relationships obtained on acquisition which were initially recognised at fair value.
They are amortised on a straight-line basis over their expected useful lives of:
• Brand names: 15 – 25 years
• Customer relationships: 5 – 8 years.
Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate their carrying value may not
be recoverable.
Investments in Subsidiaries (Parent Company Only)
Investments in subsidiary companies (Parent Company only) are stated at cost, less any impairment.
187
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany GROUP ACCOUNTING POLICIES
Investments in Associates and Joint Ventures
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over
those policies. Whereas joint ventures are entities over which the Group has joint control over such policies.
The Group’s share of the results of associates and joint ventures is included in the Group income statement and Group statement of comprehensive
income using the equity method of accounting. Investments in associates and joint ventures are carried in the Group balance sheet at cost plus
post-acquisition changes in the Group’s share of the net assets of the entity, less any dividends received and impairment in value. If the Group’s
share of losses in an associate or joint venture equals or exceeds its investment in the associate or joint venture, the Group does not recognise
further losses, unless it has incurred obligations to do so or made payments on behalf of the associate or joint venture.
Dividends received from associates and joint ventures with nil carrying value are recognised in the Group income statement as part of the Group’s
share of post-tax profits/(losses) of associates and joint ventures. Unrealised gains arising from transactions with joint ventures and associates are
eliminated to the extent of the Group’s interest in the entity.
The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture. When the
Group retains an interest in the former associate or a joint venture, the difference between the carrying amount of the associate or a joint venture
at the date the equity method was discontinued, and the fair value of its new shareholding is included in the determination of the gain or loss on
disposal of the associate or joint venture.
Impairment – Non-Financial Assets
The carrying values of non-financial assets (excluding goodwill) are reviewed quarterly to determine whether there is any indication of impairment.
If any impairment loss arises, the asset value is adjusted to its estimated recoverable amount and the difference is recognised in the Income
Statement. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. An asset’s recoverable amount is the higher of an asset or Cash Generating Units
(CGU’s) fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current
market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market
transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Inventories
Inventories (stocks) are valued at the lower of standard cost or net realisable value. Standard cost comprises direct materials and, where applicable,
direct labour costs and those overheads that have been incurred in bringing the inventories to the present location and condition. Net realisable
value is based on estimated selling prices less further costs to be incurred to disposal. Where hedge accounting applies, an adjustment is applied
such that the cost of stock reflects the hedged exchange rate.
Financial Instruments – Initial Recognition and Subsequent Measurement
A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another entity.
Financial assets
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, Fair Value through Other Comprehensive
Initial recognition and measurement
Income (FVOCI) or Fair Value through Profit or Loss (FVPL). The classification is based on two criteria:
• the Group’s business model for managing the assets; and
• whether the instrument’s contractual cash flows represent “Solely Payments of Principal and Interest” on the principal amount outstanding
(the “SPPI criterion”).
A summary of the Group’s financial assets is as follows:
Financial assets
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
Preference shares
Customer and other receivables
Cash and short term deposits (excluding money market funds)
Non-listed equity instruments
Classification under IFRS 9
Fair value through profit or loss
Fair value – hedging instrument
Amortised cost – hold to collect business model and SPPI met
Amortised cost – hold to collect business model and SPPI met
Amortised cost
Fair value through profit or loss
Call options over non-controlling interests
Fair value through Other Equity
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Financial Instruments – Initial Recognition and Subsequent
Measurement
Financial assets
(continued)
(continued)
Under IFRS 9 the Group initially measures a financial asset at its fair value plus directly attributable transaction costs, unless the asset is classified
Initial recognition and measurement (continued)
as FVPL. Transaction costs of financial assets carried at FVPL are expensed in the Income Statement. Further details on the accounting for customer
and other receivables is included in Note 14.
For details on hedge accounting refer to Note 29.
A summary of the subsequent measurement of financial assets is set out below.
Subsequent measurement
Financial assets at FVPL
Subsequently measured at fair value. Net gains and losses, including any interest or dividend income,
are recognised in profit or loss.
Financial assets at amortised cost
Equity instruments at FVPL
Subsequently measured at amortised cost using the effective interest rate (EIR) method.
The amortised cost is reduced by impairment losses. Interest income, impairment or gain or loss on
derecognition are recognised in profit or loss.
These assets are subsequently measured at fair value. Dividends are recognised as income in profit
or loss unless the dividend clearly represents recovery of part of cost of investment, in which case
they are recognised in the cost of investment. Other net gains and losses are recognised in profit
and loss.
Call options over non-controlling interests These assets are subsequently measured at fair value. Gains and losses are recognised in Other Equity.
A financial asset is derecognised primarily when:
Derecognition
• the rights to receive cash flows from the asset have expired;
• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third-party under a “pass-through” arrangement; and either a) the Group has transferred substantially all the
risks and rewards of the asset, or b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset; or
• the Group has taken actions not to pursue collection, for example in instances of bankruptcy or individual voluntary arrangement.
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at FVPL. The most significant financial assets
Impairment – financial assets
of the Group are its trade receivables, which are referred to as “customer and other receivables”. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation
of the original effective interest rate (EIR). For further details on the accounting for ECLs on customer and other receivables refer to Note 14.
Financial liabilities
The Group has classified its financial liabilities as follows:
Initial recognition and measurement
Financial liabilities
Classification under IFRS 9
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
Interest-bearing loans and borrowings:
Corporate bonds
Bank loans and overdrafts
Trade and other payables
Fair value through profit or loss
Fair value – hedging instrument
Amortised cost – designated in hedge relationships
Amortised cost
Amortised cost
Put options over non controlling interests
Fair value through Other Equity
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable
transaction costs.
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Financial Instruments – Initial Recognition and Subsequent
Measurement
Financial liabilities
(continued)
(continued)
A summary of the subsequent measurement of financial liabilities is set out below.
Subsequent measurement
Financial liabilities at FVPL
Subsequently measured at fair value. Gains and losses are recognised in the Income Statement.
Loans and borrowings
Corporate bonds
Put options over non-
controlling interests
Subsequently measured at amortised cost using the EIR method. The EIR amortisation is included in finance costs
in the Income Statement.
Subsequently measured at amortised cost and adjusted where hedge accounting applies (see interest rate
derivatives in Note 29). Accrued interest is included within other creditors and accruals.
Subsequently measured at fair value. Gains and losses are recognised in Other Equity.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is
Derecognition
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the Income Statement.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to
offset the recognised amounts and there is an intention and ability to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Customer and Other Receivables
Customer receivables are outstanding customer balances less an allowance for impairment. Customer receivables are recognised when the Group
becomes party to the contract which happens when the goods are dispatched. They are derecognised when the rights to receive the cash flows
have expired, e.g. due to the settlement of the outstanding amount or where the Group has transferred substantially all the risks and rewards
associated with that contract. Other trade receivables are stated at invoice value less an allowance for impairment. Customer and other receivables
are subsequently measured at amortised cost as the business model is to collect contractual cash flows and the debt meets the SPPI criterion.
Impairment
In accordance with the accounting policy for impairment – financial assets, the Group recognises an allowance for ECLs for customer and other
receivables. IFRS 9 requires an impairment provision to be recognised on origination of a customer advance, based on its ECL.
The Group has taken the simplification available under IFRS 9 paragraph 5.5.15 which allows the loss amount in relation to a trade receivable to
be measured at initial recognition and throughout its life at an amount equal to lifetime ECL. This simplification is permitted where there is either
no significant financing component (such as customer receivables where the customer is expected to repay the balance in full prior to interest
accruing) or where there is a significant financing component (such as where the customer expects to repay only the minimum amount each
month), but the directors make an accounting policy choice to adopt the simplification. Adoption of this approach means that Significant Increase
in Credit Risk (SICR) and Date of Initial Recognition (DOIR) concepts are not applicable to the Group’s ECL calculations.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.
ECL is the product of the probability of default (PD), exposure at default (EAD) and loss given default (LGD), discounted at the original EIR.
The assessment of credit risk and the estimation of ECL are required to be unbiased, probability-weighted and should incorporate all available
information relevant to the assessment, including information about past events, current conditions and reasonable and supportable forecasts of
economic conditions at the reporting date. The forward looking aspect of IFRS 9 requires considerable judgement as to how changes in economic
factors might affect ECLs. The ECL model applies four macroeconomic scenarios including a base case which is viewed by management to be the
most likely outturn, together with an upside, downside and extreme scenario. A 40% weighting is applied to the base case and 30% to the upside
scenario, 25% to the downside scenario and 5% to the extreme scenario.
190
Customer and Other Receivables
IFRS 9 “Financial instruments” paragraph 5.5.20 ordinarily requires an entity to not only consider a loan, but also the undrawn commitment and
the ECL in respect of the undrawn commitment, where its ability to cancel or demand repayment of the facility does not limit its exposure to the
(continued)
credit risk of the undrawn element. However, the guidance in IFRS 9 on commitments relates only to commitments to provide a loan (that is,
a commitment to provide financial assets, such as cash) and excludes from its scope rights and obligations from the delivery of goods as a result
of a contract with a customer within the scope of IFRS 15 “Revenue from contracts with customers” (that is, a sales commitment). Thus, the sales
commitment (unlike a loan commitment) is not a financial instrument, and therefore the impairment requirements in IFRS 9 do not apply until
delivery has occurred and a receivable has been recognised.
Impairment charges in respect of customer receivables are recognised in the Income Statement within “Impairment losses on customer and
other receivables”.
Delinquency is taken as being in arrears and credit impaired is taken as being the loan has defaulted, which is considered to be the point at which
the debt is passed to an internal or external Debt Collection Agency (DCA) and a default registered to a Credit Reference Agency (CRA), or any debt
90 days past due. Delinquency and default are relevant for the estimation of ECL, which segments the book by customer indebtedness, banded into
four risk bands by arrears stage (see Note 29).
Financial assets are written off when there is no reasonable expectation of recovery, such as when a customer fails to engage in a repayment plan
with the Group. If recoveries are subsequently made after receivables have been written off, they are recognised in profit or loss.
The key inputs into the ECL calculation are:
PD:
EAD:
LGD:
“Probability of Default” is an estimate of the likelihood of default over the expected lifetime of the debt. NEXT has assessed the expected
lifetime of customer receivables and other trade receivables, based on historical payment practices. The debt is segmented by arrears
stage, Experian’s Consumer Indebtedness Index (a measure of customers’ affordability) and expected time of default.
“Exposure at Default” is an estimate of the exposure at that future default date, taking into account expected changes in the exposure after
the reporting date, i.e. repayments of principal and interest, whether scheduled by the contract or otherwise and accrued interest from
missed payments. This is stratified by arrears stage, Experian’s Consumer Indebtedness Index and expected time of default.
“Loss Given Default” is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference
between the contractual cash flows due and those that NEXT would expect to receive, discounted at the original EIR. It is usually expressed
as a percentage of the EAD. NEXT includes all cash collected over five years from the point of default.
The Group uses probability weighted economic scenarios that are integrated into the model, in order to evaluate a range of possible outcomes
as is required by IFRS 9. An analysis of historical performance suggests that the expected performance of the book is most closely aligned to the
forecast change in unemployment rate. However, management considers that the inputs and models used for the ECLs may not always capture
all characteristics of the market at the Balance Sheet date. To reflect this qualitative adjustments or overlays are made, based on external data,
historical performance and future expected performance.
Other Financial Assets and Liabilities
Derivative Financial Instruments and Hedge Accounting
Derivative financial instruments (“derivatives”) are used to manage risks arising from changes in foreign currency exchange rates relating to the
purchase of overseas sourced products, overseas sales, changes in commodity prices of certain purchases and changes in interest rates relating
to the Group’s debt. In accordance with its treasury policy, the Group does not enter into derivatives for speculative purposes. Foreign currency,
commodity and interest rate derivatives are stated at their fair value, being the estimated amount that the Group would receive or pay to terminate
them at the Balance Sheet date based on prevailing foreign currency and interest rates.
The Group designates certain derivatives as either:
a. Hedges of fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or
b. Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).
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Hedge documentation
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge
accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will
assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness
and how the hedge ratio is determined).
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
• There is an “economic relationship” between the hedged item and the hedging instrument.
• The effect of the credit risk does not “dominate the value changes” that result from the economic relationship.
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged items that the Group actually hedges
and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of the hedged item.
Interest rate derivatives – fair value hedges
The Group uses interest rate derivatives to hedge part of the interest rate risk associated with the Group’s corporate bonds. The carrying values of
the relevant bonds are adjusted only for changes in fair value attributable to the interest rate risk being hedged. The adjustment is recognised in
the Income Statement and is offset by movements in the fair value of the derivatives.
For fair value hedges relating to items carried at amortised cost, any adjustment to the carrying value is amortised through profit or loss over the
remaining term of the hedge using the EIR method. The EIR amortisation may begin as soon as an adjustment exists and no later than when the
hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss.
Foreign currency derivatives & commodity derivatives – cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion
is recognised immediately in the Income Statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the
hedging instrument and the cumulative change in fair value of the hedged item.
The Group uses forward currency and option contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm
commitments. Where forward contracts are used to hedge forecast transactions, the Group designates the change in fair value relating to both
the spot and forward components as the hedging instrument. The ineffective portion relating to foreign currency contracts is recognised as other
gains/losses in the Income Statement.
The fair value of option contracts are divided into two portions:
• the intrinsic value – which is determined by the difference between the strike price and the current market price of the underlying; and
• the time value – which is the remaining value of the option which reflects the volatility of the price of the underlying and the time remaining
to maturity.
In accordance with IFRS 9 “Financial instruments”, the Group designates the intrinsic value of foreign currency options as hedging instruments for hedging
relationships entered into. The intrinsic value is determined with reference to the relevant spot market exchange rate. Changes in the time value of the
options that relate to the hedged item are deferred in the cost of hedging reserve and recognised against the related hedge transaction when it occurs.
The amounts accumulated in the cash flow hedge reserve are accounted for depending on the nature of the underlying hedged transaction.
If the hedged transaction subsequently results in the recognition of a non-financial item, the amount accumulated in equity is removed from the
separate component of equity and included in the initial cost for the carrying amount of the hedged asset or liability. The deferred amounts are
ultimately recognised in profit or loss as the hedged item affects profit or loss (e.g. when inventory impacts cost of sales). This is not a reclassification
adjustment and will not be recognised in OCI for the period.
For any other cash flow hedges, the amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the same period
or periods during which the hedged cash flows affect profit or loss.
Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value, credit card receipts and bank overdrafts. Amounts held in money
market funds are held at fair value through the profit and loss and are valued using Level 1 inputs. Bank overdrafts are shown within borrowings in
current liabilities in the Balance Sheet. Refer to Note 31 of the financial statements.
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Pension Arrangements
The Group provides pension benefits which include both defined benefit and defined contribution arrangements. Pension assets are held in
separate trustee administered funds and the Group also provides other unfunded, pension benefits to certain members.
The cost of providing benefits under the defined benefit and unfunded arrangements are determined separately for each plan using the projected
unit credit method, with actuarial valuations being carried out at each Balance Sheet date by external actuaries. The present value of the defined
benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension
obligation. A net pension asset is only recognised to the extent that it is expected to be recoverable in the future through a cash refund or a
reduction in future payments.
The current service cost of the defined benefit plan is recognised in the Income Statement as an employee benefit expense. The net interest cost is
calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of the plan assets.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to other comprehensive
income in the period in which they arise.
The cost of defined contribution schemes is recognised in the Income Statement as incurred. The Group has no further payment obligations once
the contributions have been paid.
Share-based Payments
The fair value of employee share options is calculated when they are granted using a Black-Scholes model and the fair value of equity-settled
Long Term Incentive Plan (“LTIP”) awards is calculated at grant using a Monte Carlo model. The resulting cost is charged in the Income Statement,
as an employee benefit expense, over the vesting period of the option or award together with a corresponding increase in equity. The cumulative
expense recognised is the Group’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the Income
Statement for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-service performance conditions are not taken into account when determining the grant date fair value of awards, but the
likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest.
Market performance conditions are reflected within the grant date fair value.
No expense is recognised for awards that do not ultimately vest because of non-market performance and/or service conditions that have not been
met. When awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-
vesting condition is satisfied, provided that all other performance and/or service conditions are met.
The social security contributions payable in connection with the grant of the share options or LTIP award is considered an integral part of the grant
itself, and the charge is treated as a cash-settled transaction. For cash-settled awards, the fair value of the liability is determined at each Balance
Sheet date and the cost is recognised in the Income Statement over the vesting period.
Taxation
Taxation, comprised of current and deferred tax, is charged or credited to the Income Statement unless it relates to items recognised in other
comprehensive income or directly in equity. In such cases, the related tax is also recognised in other comprehensive income or directly in equity.
Current tax liabilities are measured at the amount expected to be paid, based on tax rates and laws that are enacted or substantively enacted at
the Balance Sheet date.
Deferred tax is accounted for using the Balance Sheet liability method on temporary differences between the tax bases of assets and liabilities and
their carrying amounts. It is calculated using rates of taxation enacted or substantively enacted at the Balance Sheet date which are expected to
apply when the asset or liability is settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are only recognised to the extent that it
is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is not recognised in
respect of investments in subsidiaries and associates where the reversal of any taxable temporary differences can be controlled and are unlikely
to reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset and there is an
intention to settle the balances on a net basis.
Tax provisions are recognised when there is a potential exposure to an uncertain tax position. Management uses professional advisers and in-house
tax experts to determine the amounts to be provided.
During the year the Group adopted the amendments to IAS 12 for the first time in the current year. The IASB amends the scope of IAS 12 to clarify
that the Standard applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published
by the OECD, including tax law that implements qualified domestic minimum top-up taxes described in those rules.
The amendments introduce a temporary exception to the accounting requirements for deferred taxes in IAS 12, so that an entity would neither
recognise nor disclose information about deferred tax assets and liabilities related to Pillar Two income taxes.
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Share Buybacks
The Group has regularly returned surplus cash to shareholders through share buybacks. Shares purchased for cancellation are deducted from
retained earnings at the total consideration paid or payable. The Company also uses contingent share purchase contracts and irrevocable closed
period buyback programmes; the obligation to purchase shares is recognised in full at the inception of the contract, even when that obligation is
conditional on the share price. Any subsequent reduction in the obligation caused by the expiry or termination of a contract is credited back to
equity at that time. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.
Share issue
The issue of ordinary shares is recognised on its settlement date (i.e. the date the proceeds are received and the shares are issued). Upon issuance,
the shares are recorded at their fair value, being the fair value of the proceeds received. Those proceeds are allocated first to the par value of the
shares (if any), with any excess over par value allocated to share premium.
Shares Held by ESOT
The NEXT Employee Share Ownership Trust (ESOT) provides for the issue of shares to Group employees, principally under share option schemes.
Shares in the Company held by the ESOT are included in the Balance Sheet at cost, including any directly attributable incremental costs, as a
deduction from equity.
Provisions
A provision is recognised where the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle the obligation. Provisions are measured at the present value of the expenditures expected
to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Lease Accounting
Group as lessee
At inception of a contract the Group assesses whether the contract is or contains a lease. A lease is present where the contract conveys, over a
period of time, the right to control the use of an identified asset in exchange for consideration. Where a lease term ends and the Group remains
within the site on holdover terms, the rental costs associated with this arrangement are recognised in the Income Statement as incurred.
Where a lease is identified the Group recognises a right-of-use asset and a corresponding lease liability, except for short-term leases (defined as
leases with a lease term of 12 months or less) and leases of low value assets.
Lease liability – initial recognition
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments
are discounted at the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• fixed lease payments (including in-substance fixed payments), less any lease incentives;
• variable lease payments such as those that depend on an index or rate (such as RPI), initially measured using the index or rate at the
commencement date;
• the amount expected to be payable by the lessee under residual value guarantees;
• the exercise price of purchase options where the Group is reasonably certain to exercise the options; and
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the Consolidated Balance Sheet, split between current and non-current liabilities.
Lease liability – subsequent measurement
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments made.
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Lease Accounting
Lease liability – remeasurement
The lease liability is remeasured where:
(continued)
• there is a change in the assessment of exercise of an option, in which case the lease liability is remeasured by discounting the revised lease
payments using a revised discount rate;
• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which
cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments
change is due to a change in a floating interest rate, in which case a revised discount rate is used); or
• the lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured
by discounting the revised lease payments using a revised discount rate.
When the lease liability is remeasured, an equivalent adjustment is made to the right-of-use asset unless its carrying amount is reduced to zero,
in which case any remaining amount is recognised in profit or loss.
Where the lease liability is denominated in a foreign currency it is retranslated at the Balance Sheet date with foreign exchange gains and losses
recognised in profit or loss.
Right-of-use asset – initial recognition
The right-of-use asset comprises the initial measurement of the corresponding lease liability, lease incentives received, lease payments made
at or before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses.
Where the Group has an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying
asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are
included in the related right-of-use asset, unless those costs are incurred to produce inventories.
The right-of-use asset is presented as a separate line in the Balance Sheet.
Right-of-use asset – subsequent measurement
Right-of-use assets are depreciated over the shorter of the lease term and useful life of the underlying asset.
Impairment
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the
‘Impairment – non-financial assets’ policy.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset.
The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-
lease components as a single arrangement. The Group has not used this practical expedient.
Short term leases and low value assets
For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless
another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The Group as lessor
The Group enters into lease agreements as a lessor with respect to some of its properties.
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified as a
finance or operating lease by reference to the right-of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the
lease term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding
in respect of the leases.
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Lease Accounting
Sale and leaseback
A sale and leaseback transaction is where the Group sells an asset and reacquires the use of the asset by entering into a lease with the counterparty.
A sale is recognised when control of the underlying asset passes to the counterparty. The asset sold is derecognised and a lease liability and right-
of-use asset recognised in relation to the lease. Any gain or loss arising on the transaction is recognised in the Income Statement and relates to the
rights transferred to the counterparty.
(continued)
Climate Change
In preparing the financial statements we have considered the potential impact of climate change. Given the identified risks are expected to be
present in the medium to long term our focus has been on the non-current assets within the Balance Sheet.
Specifically, for the material non-current assets, we note the following:
• The plant, property and equipment associated with our stores have relatively short useful lives (in line with the store lease terms which average
less than 5 years) and hence would not be at risk in the medium to long term. Furthermore, based on our current lease profile, we expect any
potential future store refurbishments to be phased over several years and therefore any changes in the requirements associated with climate
change would not have a material impact in any given year.
• For the right-of-use assets associated with our warehouse and head office, and the machinery in our new E3 warehouse, the risk from climate
change is not considered material. The warehouse and head office sites are located in areas which we would not expect to be physically impacted
by climate change, while the risk of impairment on such assets, for example due to the introduction of environmental taxes, is considered
remote given the strong operational margins generated by the Online business which they support.
• The intangible assets, which consist of goodwill, brands and internally generated software, are assessed annually for indicators of impairment.
As part of this assessment consideration is given to the impact of potential climate change related regulations, capital expenditure or other
items. As at the year end no material climate related change matters have been identified.
• The associates, joint ventures and other investments comprise our equity investments. These businesses also operate in the retail and online
fashion sector and consequently have a similar asset and risk profile to NEXT. There is no indication of any specific climate related risks to their
assets or business that would represent a material risk to the carrying value of these investments.
• Defined benefit pension assets primarily relate to insurance contracts. The value of these contracts is linked to the financial strength of the
insurance company. Their financial strength and environmental credentials are reviewed and there was no indication of material risk from
climate change.
The other non-current assets were also reviewed and no risk identified. Current assets, by their nature, are expected to be fully utilised within the
business in the short term and no climate risk has been identified in this time horizon.
As a consequence there has been no material impact on the financial reporting judgements and estimates applied in the preparation of the 2024
Annual Report and Accounts. Please see page 94 of the Annual Report and Accounts for further detail on our climate change assessment.
Major Sources of Estimation Uncertainty and Judgement
The preparation of the financial statements requires estimates and assumptions to be made that affect the reported values of assets, liabilities,
revenues and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the year in which the estimate is revised and in any future years affected.
In applying the Group’s accounting policies described above, the directors have identified that the following areas are the key estimates that have
a significant risk of resulting in a material adjustment to the carrying value of assets and liabilities in the next financial year.
Change in control in investment in Reiss (judgement)
In the prior year, NEXT exercised its option to acquire a further 26% indirect interest in Reiss Limited (“Reiss”), resulting in a total shareholding of
51%. Upon review of the Shareholders’ Agreement there were certain operational and financial matters which require joint agreement from all
shareholders. Therefore, even though NEXT held 51% of the equity shares, management formed a judgement that it did not have control over Reiss
and so it was accounted for as a joint venture.
During the current year, NEXT acquired a further interest in the Reiss, increasing our shareholding to 72%. As a result of this acquisition and related
changes to the Shareholders’ Agreement, management has now assessed that NEXT has control over Reiss.
As a result of the change from significant influence to control, the Group has accounted for this as a step acquisition and have recognised a net
gain of £108.6m within Exceptional Items in the Income Statement. This gain represents the fair value recognised upon remeasurement of the
previously held 51% equity interest to Reiss’ acquisition-date fair value.
196
Major Sources of Estimation Uncertainty and Judgement
Defined benefit pension assumptions (estimation)
The assumptions applied in determining the defined benefit pension obligation (Note 21), are particularly sensitive. Advice is taken from a qualified
actuary to determine appropriate assumptions at each Balance Sheet date. The actuarial valuation involves making assumptions about discount
rates, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long term nature of
these plans, such estimates are subject to significant uncertainty. A sensitivity analysis is shown in Note 21. In determining the appropriate discount
rate, management considers the interest rates of high quality UK corporate bonds, with extrapolated maturities corresponding to the expected
duration of the obligation. The mortality rate is based on publicly available mortality tables.
(continued)
Expected credit losses on Online customer and other receivables (estimation)
The allowance for ECL (Note 14) is calculated on a customer-by-customer basis, using a combination of internally and externally sourced information,
including expected future default levels (derived from historical defaults, overlaid by arrears and indebtedness profiles, and third party macro-
economic forecasts) and future predicted cash collection levels (derived from past trends and future projections).
Prior to default, the greatest sensitivity relates to the ability of customers to afford their payments (impacting the Probability of Default (PD) and,
to a lesser extent, the Exposure at Default (EAD)). Once a customer receivable has defaulted, there is limited sensitivity in expected recoveries due
to the lack of significant variability in cash collection levels post default.
Of the total ECL (Note 29), £94.1m relates to defaulted debt (without significant uncertainty) and £113.0m is for non defaulted debt, where significant
estimation uncertainty exists. The remainder of the section relates to non defaulted debt. The sensitivities disclosed in this section, while not
individually material, would in total be at or approaching a material impact and hence have been disclosed to aid understanding.
• Macroeconomic Uplift
The first main area of major estimation uncertainty in calculating the ECL is the impact of a change in unemployment. Management uses an
independent forecast of unemployment, provided by Experian, and weights the effect of the expected, low, high and extreme scenarios in the
proportions 40/30/25/5. The expected scenario assumes a central unemployment rate peaking at 4.6% in Q2 2024. This weighted view adds £9.6m
to the underlying model ECL. A sensitivity assessment on the unemployment scenarios has been performed by management and the impact of a
significant but plausible change would not be material.
The second main area of major estimation uncertainty in calculating the ECL is the impact that the current cost of living pressures may have on
customer payment behaviour, along with continued uncertainty surrounding the lasting impacts of the COVID period on household finances.
In order to reflect the underlying risk in the loan book, the following factors have been incorporated into the provision:
1. Recognition of the ongoing risk of an increased ECL for customers who have shown
recent indicators of distress and considered to be at higher risk of default
With consumer prices in the UK still elevated following an extended period of high inflation, along with the continued high interest rate,
disposable income is likely to be constricted as mortgage rate rises continue to flow through into household budgets and energy bills remain
elevated. Management believe this may adversely impact the recoverability of customer receivables, specifically customers who are modelled
to have a low income, high mortgage repayment or are renting. A further overlay to increase the provision coverage of these customers has
been applied, which forms £25.1m of the total ECL. We are not explicitly predicting that these customers will move towards a higher level of
indebtedness (per the CII) but we are using this model mechanism to apply an appropriate and understood multiplier on the risk levels of these
particular customers.
2. Downgrading the underlying base to the pre-COVID arrears and indebtedness profile
The underlying distribution of arrears and consumer indebtedness scores from before the COVID pandemic have been overlaid on the ECL
calculation in order to adjust recent performance trends. This is because the consumer indebtedness index (CII) scores and the arrears profile of
customers are key inputs in the underlying ECL model and Management considers that, due to Government support and the effect of a relative
increase in household savings over the period, both elements do not represent the underlying risk created by payments returning to normalised
levels. Adjusting the arrears and indebtedness profiles to those recorded based on current data would reduce the ECL by £20m.
• Sensitivity to the Probability of Default
Following application of the above two overlays, management believes that there is adequate provision for ECL based on a stressed, but realistic
level of payments. The primary area of estimation uncertainty which could have a material impact to the provision is the probability of default.
If the probability of default were to double, this would increase the provision by £32.2m, while significant this is not considered material.
In the five weeks following the year end date, £0.2bn of the £1.3bn NEXT customer and other trade receivables has been recovered.
197
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany GROUP ACCOUNTING POLICIES
Other Areas of Estimation Uncertainty and Judgement
In addition, in applying the Group’s accounting policies described above, the directors have identified the following areas as key estimates and
judgements that relate to balances which the directors consider to be of particular importance to understanding the nature of the Balance Sheet.
A significant change in these estimates could result in a significant (but not material) adjustment to the carrying value of assets and liabilities in the
next financial year.
Net realisable value of inventories (estimation)
The selling prices of inventory are estimated to determine the net realisable value of inventory. Historical sales patterns and post year end trading
performance are used to determine these. A 2% change in the volume of inventories going to clearance would impact the net realisable value by
circa £7m. A 2% change in the level of markdown applied to the selling price would impact the value of inventories going to clearance by circa £3m.
Impairment of Goodwill and Other Intangible Assets (estimation)
Goodwill is allocated to the cash-generating units (‘CGUs’), that are expected to benefit from the business combination from which goodwill was
recognised. Other intangible assets arising on acquisition, such as brand names and customer relationships are also allocated to the same CGUs.
The recoverable amount of an asset or Group CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on
the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or Group CGU. See Note 11 for further detail.
Fair value of assets and liabilities acquired (estimation)
On acquisition of a controlling interest in Reiss and FatFace, NEXT was required to recognise the identifiable assets and liabilities at their fair value
in accordance with IFRS 3. The key fair value adjustments related to the brand and goodwill values which total more than £0.5bn. In particular the
value of the brands is based on forecast cash flows of the acquired business and assumptions on discount rates. To support this fair value, the Group
obtained external specialist advice to both calculate the fair value and benchmark the resulting valuations against comparable brands. In accordance
with IFRS 3, the Group has 12 months following acquisition to finalise its assessment of the fair value for all identified assets and liabilities.
Key assumptions used in the calculation of the Brand valuations were the sales growth and discount rate. A change in the discount rate applied
of 1%, would impact the valuation of the Reiss brand by approximately £25m and the FatFace brand by £5m which would be significant, but not
material. A change in the sales growth applied in the first 3 years of 2% would not have a significant impact on the brand valuations. Given this is
the first year of acquisition it should be noted that, in absence of any impairment, the corresponding adjustment would be within goodwill.
Adoption of New Accounting Standards, Interpretations and Amendments
The Group has applied the following interpretations and amendments for the first time in these financial statements:
•
IFRS 17 Insurance Contracts
• Amendments to IFRS 17
• Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
• Definition of Accounting Estimates – Amendments to IAS 8
•
•
International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12) – application of the exception and disclosure of that fact
International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12) – other disclosure requirements
The application of these new interpretations and amendments did not have a material impact on the financial statements.
Certain new accounting standards and interpretations have been published that are not yet effective and have not been adopted by the
Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions.
Alternative Performance Measures (APMs)
Management exercises judgement in determining the adjustments to apply to IFRS measurements in order to derive suitable APMs. As set out on
pages 76 and 77, APMs are used as management believe these measures provide additional useful information on the trends, performance and
position of the Group. These measures are used for performance analysis by the Board. The APMs are not defined by IFRS and therefore may not
be directly comparable with other companies’ APMs. These measures are not intended to be a substitute for, or superior to, IFRS measurements.
198
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. Segmental Analysis
The Group’s operating segments are determined based on the Group’s internal reporting to the Chief Operating Decision Maker (CODM). The CODM
has been determined to be the Group Chief Executive, with support from the Board. The performance of operating segments is assessed on
operating profit, excluding equity-settled share option charges recognised under IFRS 2 “Share-based payment” and unrealised gains or losses on
derivatives which do not qualify for hedge accounting.
The Property Management segment holds properties and property leases which are recharged to other segments and external parties.
The Franchise, Sourcing and other segment (previously called “International Retail, Sourcing and other”) comprises franchise and our sourcing
business. International online sales are included in the NEXT Online segment. Total Platform represents the sales, profit and related assets from the
Total Platform business which includes Joules, Reiss and FatFace alongside our equity investments. The profits disclosed in this note are all before
exceptional items.
Where third-party branded goods are sold on a commission basis, only the commission receivable is included in statutory revenue. “Total NEXT
sales” represents the full customer sales value of commission based sales, interest income and service income, excluding VAT. Under IFRS 15
“Revenue from contracts with customers”, total sales have also been adjusted for customer delivery charges, promotional discounts, Interest Free
Credit commission costs and expired gift card balances (See “Other IFRS 15 adjustments” in the table overleaf). The CODM uses the Total NEXT
sales as an important metric in assessing segment performance; accordingly, this is presented below and then reconciled to the statutory revenue.
Restatement
In the prior year, Total Platform sales, as reported within “Total NEXT sales”, was based on the total goods transaction value and not the statutory
commission basis. For statutory reporting purposes this was adjusted so that the financial statements showed these sales as commission income in
accordance with IFRS 15. This year, “Total NEXT sales” used in the CEO report has changed so that it now shows these sales on a commission basis.
Therefore no adjustment is required to show these on a statutory basis. This change is reflected in the prior year comparatives within this note.
The change had no impact on statutory sales or profit.
In addition, sales in the Joules segment have now been transferred and included within the Total Platform segment. These changes had no impact
on Statutory revenue or statutory profit.
G
r
o
u
p
C
o
m
p
a
n
y
Segment sales and revenue
52 weeks to 27 January 2024
Total NEXT
sales
excluding
VAT
£m
3,159.7
1,864.9
292.7
5,317.3
52.5
21.5
67.9
5,459.2
–
5,459.2
Revenue
from acquired
businesses
and brands*
£m
–
–
–
–
308.5
–
–
308.5
–
308.5
Commission
sales
adjustment
£m
(334.6)
(22.5)
–
(357.1)
–
–
–
(357.1)
–
(357.1)
Other
IFRS 15
adjustments
£m
76.3
1.3
–
77.6
2.8
–
–
80.4
–
80.4
External
revenue
£m
2,901.4
1,843.7
292.7
5,037.8
363.8
21.5
67.9
5,491.0
–
5,491.0
Internal
revenue
£m
10.5
0.9
–
11.4
–
170.9
475.9
658.2
(658.2)
–
Total
segment
revenue
£m
2,911.9
1,844.6
292.7
5,049.2
363.8
192.4
543.8
6,149.2
(658.2)
5,491.0
NEXT Online
NEXT Retail
NEXT Finance
Total NEXT Trading Sales
Total Platform
Property Management
Franchise, Sourcing and other
Total NEXT Sales
Eliminations
Total
* This relates to sales generated from Joules, Reiss and FatFace who retail through websites other than next.co.uk and their own store portfolio. It also includes revenue from Made.
com, an acquired brand which is 100% owned.
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
I
n
f
o
r
m
a
t
i
o
n
199
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. Segmental Analysis
52 weeks to 28 January 2023 – Restated
(continued)
Total NEXT
Revenue
sales
from acquired
excluding
businesses
and brands*
VAT
£m
£m
–
3,006.6
–
1,865.1
–
274.4
–
5,146.1
35.6
40.1
–
18.9
–
72.3
35.6
5,277.4
–
–
35.6
5,277.4
Commission
sales
adjustment
£m
(329.2)
(17.1)
–
(346.3)
–
–
–
(346.3)
–
(346.3)
Other
IFRS 15
adjustments
£m
66.2
1.1
–
67.3
–
–
–
67.3
–
67.3
External
revenue
£m
2,743.6
1,849.1
274.4
4,867.1
75.7
18.9
72.3
5,034.0
–
5,034.0
Internal
revenue
£m
0.6
0.4
–
1.0
–
156.1
530.2
687.3
(687.3)
–
Total
segment
revenue
£m
2,744.2
1,849.5
274.4
4,868.1
75.7
175.0
602.5
5,721.3
(687.3)
5,034.0
NEXT Online
NEXT Retail
NEXT Finance
Total NEXT Trading Sales
Total Platform
Property Management
Franchise, Sourcing and other
Total NEXT Sales
Eliminations
Total
* This relates to sales generated from Joules, Reiss and FatFace who retail through websites other than next.co.uk and their own store portfolio. It also includes revenue from
Made.com, an acquired brand which is 100% owned.
Included within external revenue is £134.4m (2023: £123.7m) related to sales made through the redemption of gift cards.
Segment profit
Transactions between operating segments are made on an arm’s length basis in a manner similar to those with third-parties. Segment revenue
and segment profit include transactions between business segments which are eliminated on consolidation. The substantial majority of NEXT
Sourcing’s revenues and profits are derived from sales to NEXT Retail and NEXT Online. Further detail on the segment performance is provided in
the Chief Executive’s Review.
NEXT Online
NEXT Retail
NEXT Finance
Profit from Trading
Total Platform1
Property Management
Franchise, Sourcing and wholesale2
Total segment profit
Central and other costs3
Recharge of interest4
Operating profit
Exceptional items
Finance income
Finance costs
Profit before tax
52 weeks to
27 January
2024
£m
517.1
244.7
163.4
925.2
31.2
1.7
33.2
991.3
(53.7)
50.3
987.9
108.6
6.8
(87.5)
1,015.8
52 weeks to
28 January
2023
£m
467.3
240.5
170.5
878.3
15.2
37.0
28.1
958.6
(51.5)
34.4
941.5
–
5.7
(77.9)
869.3
1. Total Platform (TP) includes NEXT’s share of profits from its investments in associates and joint ventures. It also includes the profits from our TP subsidiaries (Joules, FatFace and
Reiss). It excludes the non recurring TP implementation costs for Joules and FatFace which, as noted below, are reported within Central and Other costs. In the prior year, the results
for Joules were shown as its own segment but have now been included within Total Platform. This had no change in the profit before tax.
The Total Platform segment within the CEO Review excludes (1) the operating profit of the non controlling interest of £2.6m (2023: loss of £1.1m) and (2) brand and customer
relationship amortisation (both owned brands and those included within our associate and joint venture investments) of £9.8m (2023: £4.3m).
2. Franchise, Sourcing and Other includes Franchise and Wholesale of £5.8m and Sourcing of £27.4m. Note that Sourcing is shown within “Central costs, FX, Sourcing and Other” in
the CEO Review Summary of Group Profit by Division. It is then analysed further within Other Business Activities within the CEO Review.
3. Central and other costs include (1) Central costs and other of £18.5m (2023: £10.3m), (2) Share option charge of £31.9m (2023: £24.9m) and (3) unrealised foreign exchange gains of
£12.3m (2023: loss of £16.3m). This segment also includes 100% of the non-recurring TP implementation costs associated with Joules and FatFace of £15.6m (2023: £nil) (whereas
the CEO Review excludes the non controlling interest element).
4. Recharge of interest: In the current year, the recharge of interest of £50.3m includes £2.5m of interest that has been reallocated to Total Platform. The remaining element is the
cost of funding relating to the Finance segment.
200
1. Segmental Analysis
Segment assets, capital expenditure and depreciation
Right-of-use
assets
(continued)
Property, plant, equipment
and software
2024
£m
481.3
210.6
–
24.0
53.3
2023
£m
445.1
205.7
–
8.3
55.6
1.9
771.1
1.5
716.2
2024
£m
153.1
488.7
–
90.0
–
2.8
734.6
Capital expenditure
inc. software
2024
£m
86.8
73.7
–
5.4
36.7
2023
£m
144.9
63.6
–
0.5
38.5
Depreciation and
amortisation
2024
£m
54.7
163.1
–
28.4
–
2023
£m
46.8
168.0
–
1.1
0.3
1.0
203.6
0.6
248.1
2.6
248.8
3.8
220.0
2023
£m
132.8
521.0
–
–
5.3
2.9
662.0
NEXT Online
NEXT Retail
NEXT Finance
Total Platform
Property Management
Franchise, Sourcing
and other
Total
These assets are allocated based on the operations of the segment and the physical location of the asset. Impairment charges and reversals in
relation to property, plant and equipment are included in the NEXT Retail segment. Depreciation and amortisation includes depreciation from
property, plant and equipment and right-of-use assets, as well as amortisation of brands, customer relationships and software.
Analyses of the Group’s external revenues (by customer location) and non-current assets (by geographical location) are detailed below. Non current
assets include plant, property and equipment and intangible assets. It does not include right-of-use assets (disclosed separately), investments,
the deferred tax asset or financial assets.
External revenue by geographical location
United Kingdom
Rest of Europe
Middle East
Asia
Rest of World
Total
Non-current assets by geographical location
United Kingdom
Rest of Europe
Middle East
Asia
Total
2024
£m
4,600.6
521.9
255.0
41.9
71.6
5,491.0
2024
£m
1,408.9
3.5
4.3
28.0
1,444.7
For the geographical split of non current assets all of the brand and goodwill has been allocated to the United Kingdom segment.
Right-of-use assets by geographical location
United Kingdom
Rest of Europe
Asia
Other
Total
2024
£m
704.3
21.6
2.8
5.9
734.6
2023
£m
4,290.7
415.3
235.6
48.5
43.9
5,034.0
2023
£m
746.6
3.5
4.3
27.5
781.9
2023
£m
637.0
22.1
2.9
–
662.0
201
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. Revenue
The Group’s disaggregated revenue recognised under contracts with customers relates to the following categories and operating segments:
NEXT Online
NEXT Retail
NEXT Finance
Total Platform
Property Management
Franchise, Sourcing and other
Total
NEXT Online
NEXT Retail
NEXT Finance
Total Platform
Property Management
Franchise, Sourcing and other
Total
Sale of goods
£m
2,901.4
1,843.7
–
346.7
–
58.1
5,149.9
Credit account
interest
£m
–
–
292.7
–
–
–
292.7
52 weeks to 27 January 2024
Rental
income
£m
–
–
–
–
21.5
–
21.5
Royalties
£m
–
–
–
–
–
9.8
9.8
Sale of goods
£m
2,743.6
1,849.1
–
60.2
–
62.3
4,715.2
Credit account
interest
£m
–
–
274.4
–
–
–
274.4
52 weeks to 28 January 2023
Rental
income
£m
–
–
–
–
18.9
–
18.9
Royalties
£m
–
–
–
–
–
10.0
10.0
Service
income
£m
–
–
–
17.1
–
–
17.1
Service
income
£m
–
–
–
15.5
–
–
15.5
Total
£m
2,901.4
1,843.7
292.7
363.8
21.5
67.9
5,491.0
Total
£m
2,743.6
1,849.1
274.4
75.7
18.9
72.3
5,034.0
Note that sales in the Joules segment have now been included within the overall Total Platform segment. These changes had no impact on
Statutory revenue.
In the current year Service income of £17.1m excludes the value of Total Platform services to our controlled entities Joules and Reiss (from the point
of acquisition). In the CEO these sales are reported within the Total Platform segment.
3. Operating Profit
Group operating profit is stated after charging/(crediting):
Depreciation on property, plant and equipment
Depreciation on right-of-use assets
Loss on disposal of property, plant and equipment
Gain on sale and leasebacks
Impairment charge/(reversal) on property, plant and equipment
Reversal of impairment on right-of-use assets
Amortisation and impairment of intangible assets (excluding software)
Amortisation, impairment and loss on software
Gain on lease modifications, early exit and reassessed lease term
(Gain)/loss on financial instruments
Cost of inventories recognised as an expense
Write-down of inventories to net realisable value
Total
202
52 weeks to
27 January
2024
£m
94.9
117.7
0.7
(1.6)
1.7
(5.9)
8.3
30.1
(2.5)
(12.3)
52 weeks to
28 January
2023
£m
100.5
107.6
0.5
(17.7)
(2.7)
(34.9)
0.4
12.1
(1.4)
16.3
1,809.2
125.8
1,935.0
1,785.4
152.4
1,937.8
3. Operating Profit
The Group has reviewed its store impairment models following identification of impairment triggers (principally being a significant change in sales
or cost base). As a result, where stores have performed significantly better than expected a net reversal of amounts previously impaired has been
recognised of £5.9m (2023: £34.9m) on right-of-use assets. Separately, there was a review of technological assets during the year which has partly
resulted in an additional impairment charge of £1.7m (2023: £2.7m reversal) on plant, property and equipment.
(continued)
Cost of inventories recognised as an expense consists of those costs which are directly attributable to goods sold in the year, including packaging
and inbound freight costs.
Gains on financial instruments of £12.3m (2023: losses of £16.3m) relate to derivative contracts which do not qualify for hedge accounting under
IFRS 9. Other foreign exchange gains of £13.7m (2023: £9.6m) were also recognised in the Income Statement.
During the year the Group obtained the following services from the Company’s auditor and its associates, including expenses:
Auditors’ remuneration
Audit of the financial statements
Audit of subsidiaries
Total audit fees
Tax compliance services
Tax advisory services
Other assurance services
Total
52 weeks to
27 January
2024
£000
52 weeks to
28 January
2023
£000
1,473
1,251
2,724
193
57
99
3,073
1,212
110
1,322
–
–
106
1,428
The year on year increase in audit fees from £1.3m to £2.7m is mainly driven by the acquisition of Reiss and FatFace. These acquisitions resulted in
one off audit work on the opening balance sheet of £0.6m and a recurring fee for the local audit of £0.8m.
Non audit services totalled £349,000 in the year. This work included tax services which were initiated by Reiss and FatFace prior to acquisition.
In accordance with regulatory requirements these non audit services provided to Reiss and FatFace were completed within 3 months of acquisition.
Other assurance services relate to work on Corporate Responsibility reporting.
203
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
4. Staff Costs and Key Management Personnel
Total staff costs were as follows:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense – equity settled
Share-based payment expense – cash settled
Total
52 weeks to
27 January
2024
£m
907.4
72.6
42.1
1,022.1
31.5
0.2
1,053.8
52 weeks to
28 January
2023
£m
772.3
62.3
43.7
878.3
24.3
–
902.6
Share-based payments comprise Management, Sharesave and Share Matching Plan options and LTIP share awards, details of which are given in
Note 25.
Total staff costs by business sector were made up as follows:
NEXT Online, Retail and Finance
NEXT Franchise and Sourcing
Total Platform
Other activities
Total
NEXT Online, Retail and Finance
NEXT Franchise and Sourcing
Total Platform
Other activities
Total
52 weeks to
27 January
2024
£m
952.1
34.8
54.5
12.4
1,053.8
52 weeks to
28 January
2023
£m
857.3
30.5
4.9
9.9
902.6
Average employees
Full-time equivalents
2024
Number
42,272
3,749
2,313
83
48,417
2023
Number
42,168
4,224
241
77
46,710
2024
Number
26,741
3,749
1,381
76
31,947
2023
Number
27,889
4,224
140
71
32,324
Included within “Total Platform” staff costs and employee numbers are the Reiss, Joules and FatFace subsidiaries.
The aggregate amounts charged in the financial statements for key management personnel (including employer’s National Insurance contributions),
being the directors of NEXT plc, were as follows:
Short-term employee benefits
Share-based payments
Total
Directors’ remuneration is detailed in the Remuneration Report.
52 weeks to
27 January
2024
£m
7.5
2.9
10.4
52 weeks to
28 January
2023
£m
5.1
2.8
7.9
204
5. Finance Income and Costs
Interest on bank deposits
Other interest receivable
Finance income
Interest on bonds and other borrowings
Discount unwind
Finance costs on lease liability
Finance costs
52 weeks to
27 January
2024
£m
2.5
4.3
6.8
52 weeks to
28 January
2023
£m
0.1
5.6
5.7
39.1
0.5
47.9
87.5
29.8
0.8
47.3
77.9
Other interest receivable includes interest income on preference shares of £3.4m (2023: £4.8m) and amounts accrued on loans to associates and
joint ventures. Online account interest is presented as a component of revenue.
6. Exceptional Items
For the financial period ended 27 January 2024, the Group has used the term ‘exceptional items’. In determining whether an item should be
presented as exceptional items, the Group considers items which are significant because of either their size or their nature. In order for an item to
be presented as exceptional items, it should typically meet at least one of the following criteria:
•
•
It is unusual in nature or outside the normal course of business and significant in value.
Items directly incurred as a result of either a significant acquisition or a divestment, or arising from a major business change or restructuring
programme which of itself has significant impact on the Income Statement.
The separate reporting of items, which are presented as exceptional items within the relevant category in the Consolidated Income Statement,
helps provide an indication of the Group’s trading performance in the normal course of business. It is also consistent with how management has
assessed performance in the period.
– Exceptional gain on acquisition of subsidiary previously presented as a joint venture1
– One-off costs associated with Reiss acquisition2
Exceptional items
52 weeks to
27 January
2024
£m
110.1
(1.5)
108.6
52 weeks to
28 January
2023
£m
–
–
–
1. An exceptional gain has been recognised on the step-acquisition of Reiss which equates to the fair value of our joint venture shareholding less the carrying value as at the date of
the step-acquisition.
2. These one-off costs relate to professional fees associated with the step-acquisition of Reiss.
205
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
7. Taxation
Tax charge for the period
Our tax charge for the period is shown below. Tax is made up of current and deferred tax. Current tax is the amount payable on the taxable income
in the period and any adjustments to tax payable in previous years. Deferred tax is explained on page 207.
Current tax:
Current tax on profits for the year
Adjustments in respect of prior years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Adjustments in respect of prior years
Total deferred tax
52 weeks to
27 January
2024
£m
52 weeks to
28 January
2023
£m
191.5
11.5
203.0
28.6
(16.3)
12.3
137.9
17.7
155.6
17.7
(14.7)
3.0
Tax expense reported in the Consolidated Income Statement
215.3
158.6
The adjustments in respect of prior years relate to the correction of capital gains tax on property disposals and the true-up of deferred tax balances
related to IFRS 16 leases. The prior year adjustments in 2023 related to timing on the recognition of amounts claimed as capital allowances.
Factors affecting the tax charge in the period
The tax rate for the current period varied from the standard rate of corporation tax in the UK due to the following factors:
UK corporation tax rate
Non–taxable income
Non deductible expenses
Capital losses utilised
Overseas tax
Adjustments in respect of prior years
Tax losses for which no deferred tax is recognised
Benefit as a result of capital allowance 130% deduction
Statutory effective tax rate
Non-taxable exceptional income
Effective tax rate before exceptionals
52 weeks to
27 January
2024
%
24.0
(3.2)
1.0
–
(0.6)
(0.4)
0.4
–
21.2
2.5
23.7
52 weeks to
28 January
2023
%
19.0
(0.5)
0.6
(0.2)
(0.6)
0.4
–
(0.4)
18.3
–
18.3
206
7. Taxation
Tax recognised in other comprehensive income and equity
In addition to the amount charged to the Income Statement, tax movements recognised in other comprehensive income and in equity were
as follows:
(continued)
Deferred tax:
Pension benefit obligation
Fair value movements on derivative instruments
Tax charge in other comprehensive income
Current tax:
Share-based payments
Deferred tax:
Fair value movements on derivative instruments
Share-based payments
Total tax credit in the Statement of Changes in Equity
52 weeks to
27 January
2024
£m
52 weeks to
28 January
2023
£m
(25.9)
0.2
(25.7)
0.1
19.7
19.8
52 weeks to
27 January
2024
£m
52 weeks to
28 January
2023
£m
(6.7)
(1.2)
1.8
(6.7)
(11.6)
(30.1)
5.4
(25.9)
Deferred tax
Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences that arise when the carrying value
of assets and liabilities differ between accounting and tax treatments. Deferred tax assets represent the amounts of income taxes recoverable in
the future in respect of those differences, while deferred tax liabilities represent the amounts of income taxes payable in the future in respect of
those differences.
The deferred tax asset is made up of:
Brand and
goodwill
£m
–
Accelerated
capital
allowances
£m
8.5
Derivatives
to fair
value
£m
(6.6)
Pension
benefit
obligation
£m
(36.2)
Share-
based
payments
£m
21.1
IFRS 16
leases
£m
36.2
Other
temporary
differences
£m
11.0
Total
£m
34.0
–
–
–
–
–
1.6
–
–
(111.0)
(109.4)
(2.5)
4.1
–
–
–
6.0
(24.2)
–
–
2.0
(16.2)
(19.7)
30.1
–
7.9
(3.0)
(0.2)
(1.8)
–
2.9
(1.5)
(0.1)
–
–
(37.8)
(2.8)
25.9
–
–
(14.7)
0.8
–
(5.4)
–
16.5
3.1
–
6.7
–
26.3
(2.6)
(1.3)
(3.0)
–
–
–
33.6
7.8
–
–
1.2
42.6
–
(19.8)
–
(2.6)
7.1
5.2
–
–
8.1
20.4
24.7
(2.6)
33.3
(12.3)
25.7
4.9
(99.7)
(48.1)
At 29 January 2022
Recognised in:
– Income Statement
– Other Comprehensive
Income
– Statement of Changes
in Equity
Acquisition of subsidiary
At 28 January 2023
Recognised in:
– Income Statement
– Other Comprehensive
Income
– Statement of Changes
in Equity
Acquisition of subsidiary
At 27 January 2024
The deferred tax asset of £42.6m in relation to IFRS 16 leases primarily relates to the transitional adjustment arising from the initial implementation
of IFRS 16. It also contains a deferred tax liability of £8.6m and a deferred tax asset of £8.7m in relation to the acquisition accounting of deferred
tax on right-of-use assets and the associated lease liability.
207
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
7. Taxation
Deferred tax
Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable
profits is probable. No recognition has been made of the following deferred tax assets:
(continued)
(continued)
Trading losses
Capital losses
Unrecognised
Unrecognised
Gross value
2024
£m
14.3
–
Deferred tax
2024
£m
3.6
–
Gross value
2023
£m
–
18.6
Deferred tax
2023
£m
–
4.7
The benefit of unrecognised capital losses will only accrue if taxable profits are realised on future disposals of the Group’s capital assets. The trading
losses have not been recognised and do not expire.
Factors affecting tax charges in future years
Deferred taxes reflected in these financial statements have been measured using the enacted tax rates at the Balance Sheet date. Effective from
April 2023, the UK headline corporation tax rate increased from 19% to 25%. Deferred tax balances have been measured at the headline rate of
25%. As a result, deferred tax balances have been measured at the rate at which they are expected to unwind in the future.
Provisions, which are immaterial to the financial statements, have been recognised in relation to uncertain tax positions. These relate to the
interpretation of tax legislation, including changes arising from the OECD’s Base Erosion and Profit Shifting project, which impact our NEXT Sourcing
operation in its ordinary course of business.
NEXT manages its tax affairs responsibly and proactively to comply with tax legislation. We seek to build solid and constructive working relationships
with all tax authorities.
As part of the Organisation for Economic Co-operation and Development (OECD)/G20 Base Erosion and Profit Shifting (BEPS) project, the OECD
has introduced the Pillar Two model rules. The Group is within the scope of these OECD Pillar Two model rules. Pillar Two legislation was enacted
in the United Kingdom, the jurisdiction in which NEXT Plc is incorporated, and will come into effect from 1 January 2024. Since the Pillar Two
legislation was not effective at the reporting date, the Group has no related current tax exposure. The Group applies the exception to recognising
and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12
issued in May 2023. Under the legislation, the Group is liable to pay a top-up tax for the difference between their Global Anti-base Erosion Rules
(GloBE) effective tax rate per jurisdiction and the 15% minimum rate. Pillar Two Income Taxes could be payable in the UK, or the local jurisdiction if
it has introduced a Qualifying Domestic Minimum top-up Tax.
The Group has performed an assessment of the Group’s potential exposure to Pillar Two income taxes under UK legislation. This assessment is
based on a combination of tax filings for the 2022 and 2023 financial years, country-by-country reporting for 2022 and financial statements for
constituent entities in the Group for 2022 and 2023. Based on the assessment the Pillar Two effective tax rates in most of the jurisdictions in which
the Group operates are above 15% or will meet the financial thresholds required to apply the transitional safe harbour rules which will exempt the
Group from applying the full Pillar Two rules in those territories. However, there are a limited number of jurisdictions where the transitional safe
harbour relief does not apply and the Pillar Two effective rate is close to 15%. The Group does not expect a material exposure to Pillar Two income
taxes in those jurisdictions.
208
8. Dividends
Year to 27 January 2024
Final ordinary dividend for the year to Jan 2023
Interim ordinary dividend for the year to Jan 2024
Year to 28 January 2023
Final ordinary dividend for the year to Jan 2022
Interim ordinary dividend for the year to Jan 2023
Paid
1 Aug 2023
3 Jan 2024
Paid
1 Aug 2022
3 Jan 2023
Pence per
share
140p
66p
Pence per
share
127p
66p
Cash Flow
Statement
£m
168.4
79.9
248.3
Cash Flow
Statement
£m
156.5
80.9
237.4
Statement
of Changes
in Equity
£m
168.4
79.9
248.3
Statement
of Changes
in Equity*
£m
156.5
80.9
237.4
* Dividends included within the Statement of Changes in Equity in the prior year was £237.1m which included £0.3m of dividends previously payable and which have subsequently lapsed.
The Trustee of the ESOT waived dividends paid in the year on shares held by the ESOT.
The Board has recommended a final dividend for the year ended 27 January 2024 of 141.0p per share. If approved, it will be paid on 1 August 2024
to shareholders who are on the register of members at 5 July 2024. The proposed dividend is subject to approval by shareholders at the Annual
General Meeting to be held on 16 May 2024 and has not been included as a liability in the financial statements.
209
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
9. Earnings Per Share
Basic Earnings Per Share
Basic Earnings Per Share before exceptional items
Diluted Earnings Per Share
52 weeks to
27 January
2024
52 weeks to
28 January
2023
661.6p
572.0p
655.9p
573.4p
573.4p
570.5p
Basic Earnings Per Share is based on the profit for the period attributable to the equity holders of the Parent Company divided by the net of the
weighted average number of shares ranking for dividend less the weighted average number of shares held by the ESOT during the period.
Basic Earnings Per Share before exceptional items is an Alternative Performance Measure (APM). It is calculated as being Basic Earnings Per Share
excluding exceptional items (see Note 6) and their respective tax impact divided by the net of the weighted average number of shares in issue less
the weighted average number of shares held by the ESOT during the period.
Diluted Earnings Per Share is calculated by adjusting the weighted average number of shares used for the calculation of Basic Earnings Per Share
as increased by the dilutive effect of potential ordinary shares. Dilutive shares arise from employee share option schemes where the exercise price
is less than the average market price of the Company’s ordinary shares during the period. Their dilutive effect is calculated on the basis of the
equivalent number of nil cost options. Where the option price is above the average market price, the option is not dilutive and is excluded from the
diluted EPS calculation. There were 2,632,665 non-dilutive share options in the current year (2023: 3,112,796).
The table below shows the key variables used in the Earnings Per Share calculations:
Profit after tax attributable to equity holders of the Parent Company (£m)
Exceptional items (Note 6)
Tax relating to exceptional items
Profit after tax attributable to equity holders of the Parent Company excluding adjusted items (£m)
Weighted average number of shares (millions)
Weighted average shares in issue
Weighted average shares held by ESOT
Weighted average shares for basic EPS
Weighted average dilutive potential shares
Weighted average shares for diluted EPS
52 weeks to
27 January
2024
802.3
108.6
–
693.7
52 weeks to
28 January
2023
711.7
–
–
711.7
127.8
(6.5)
121.3
1.1
122.4
130.2
(6.1)
124.1
0.6
124.7
As detailed in the Remuneration Report, the 2023/24 annual bonus for executive directors, was based on NEXT Group pre-tax Profit (but after
amortisation) Earnings per Share of 749.1p. The NEXT Group Profit before tax, after amortisation, on a 52 week basis of £908.4m (2023: £870.4m),
is divided by the net of the weighted average number of shares in issue less the weighted average number of shares held by the ESOT during the
period. A definition of NEXT Group Profit before tax (or NEXT Group pre tax profit) is included in the Glossary.
In the prior year the annual bonus for executive directors was determined by reference to NEXT Group pre-tax Earnings per share as adjusted to
remove the impact of share buybacks not included in the original target metrics, of 687.2p.
210
10. Property, Plant and Equipment
Cost
At January 2022
Exchange movement
Arising from acquisitions
Additions
Reclassification from assets under the course
of construction
Disposals
At January 2023
Exchange movement
Arising from acquisitions
Additions
Reclassification from assets under the course
of construction
Disposals
At January 2024
Depreciation
At January 2022
Exchange movement
Provided during the year
Net impairment release
Disposals
At January 2023
Exchange movement
Provided during the year
Net impairment charge
Disposals
At January 2024
Carrying amount
At January 2024
At January 2023
At January 2022
Freehold
property
£m
Leasehold
property
£m
Plant and
equipment
£m
Assets under
the course of
construction
£m
26.8
–
–
13.2
64.7
(64.9)
39.8
–
–
13.8
37.1
(37.3)
53.4
0.4
–
0.1
–
–
0.5
–
0.1
1.1
–
1.7
51.7
39.3
26.4
2.6
–
–
–
–
(1.3)
1.3
–
–
–
–
–
1.3
0.1
–
–
–
–
0.1
–
–
–
–
0.1
1.2
1.2
2.5
1,969.0
0.6
1.1
168.6
–
(53.6)
2,085.7
(0.9)
18.6
124.2
–
(51.4)
2,176.2
1,450.7
0.7
100.4
(2.7)
(53.2)
1,495.9
(0.8)
94.8
0.6
(48.6)
1,541.9
634.3
589.8
518.3
53.9
–
–
25.3
(64.7)
–
14.5
–
–
22.9
(37.1)
–
0.3
–
–
–
–
–
–
–
–
–
–
–
0.3
14.5
53.9
Total
£m
2,052.3
0.6
1.1
207.1
–
(119.8)
2,141.3
(0.9)
18.6
160.9
–
(88.7)
2,231.2
1,451.2
0.7
100.5
(2.7)
(53.2)
1,496.5
(0.8)
94.9
1.7
(48.6)
1,543.7
687.5
644.8
601.1
As at January 2024, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to
£33.3m (2023: £33.7m). Plant and equipment includes leasehold improvements.
Additions to assets under the course of construction relate to the build of the Dearne Valley warehouse extension. The assets under the course of
construction in the prior year related to the build of the E3 warehouse.
See Note 3 for further detail on impairment charges and reversals.
211
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
11. Intangible Assets
Cost
At January 2022
Additions
Arising from acquisitions
Reclassified from assets under the course
of construction
Disposals
At January 2023
Additions
Arising from acquisitions
Reclassified from assets under the course
of construction
Transfer between categories
Disposals
Fair value adjustment
At January 2024
Amortisation and Impairment
At January 2022
Amortisation provided during the year
Impairment
Disposals
At January 2023
Amortisation provided during the year
Impairment
Disposals
At January 2024
Carrying amount
At January 2024
At January 2023
At January 2022
Goodwill
£m
Brand
names
£m
Customer
relationships
£m
Software
£m
Software
assets under
the course of
construction
£m
45.7
–
11.6
–
–
57.3
–
169.9
–
–
–
(9.7)
217.5
1.8
–
–
–
1.8
–
–
–
1.8
215.7
55.5
43.9
4.3
–
10.5
–
–
14.8
8.5
430.5
–
3.4
–
–
457.2
4.2
0.4
–
–
4.6
7.6
–
–
12.2
445.0
10.2
0.1
–
–
–
–
–
–
–
13.5
–
–
–
–
13.5
–
–
–
–
–
0.6
–
–
0.6
12.9
–
–
12.6
25.5
7.4
18.3
(0.5)
63.3
33.0
3.0
17.5
(3.4)
(2.0)
–
111.4
3.9
11.5
0.6
(0.3)
15.7
28.0
1.3
(1.2)
43.8
67.6
47.6
8.7
26.6
15.5
–
(18.3)
–
23.8
9.7
–
(17.5)
–
–
–
16.0
–
–
–
–
–
–
–
–
–
16.0
23.8
26.6
Total
£m
89.2
41.0
29.5
–
(0.5)
159.2
51.2
616.9
–
–
(2.0)
(9.7)
815.6
9.9
11.9
0.6
(0.3)
22.1
36.2
1.3
(1.2)
58.4
757.2
137.1
79.3
Assets under the course of construction relate to internally developed software that is not yet complete. Once complete it will be transferred to
“software” and amortised over its useful economic life (see Group Accounting Policies for more detail).
Intangible assets arising from acquisitions in the year relate to the acquisition of the Reiss and FatFace brand names and customer relationships for
£444.0m (2023: Joules brand name of £10.5m), goodwill arising from acquisitions of £169.9m (2023: £11.6m) and software intangibles of £3.0m
(2023: £7.4m). See Note 34 for further details on acquisitions.
In March 2023, the Group acquired the Cath Kidston brand name for a consideration of £8.5m.
212
11. Intangible Assets
The carrying amount of goodwill is allocated to the following cash generating units:
(continued)
NEXT Sourcing
Lipsy
NEXT Beauty
Joules
Reiss
FatFace
Total
2024
£m
30.5
12.1
1.3
1.9
140.6
29.3
215.7
2023
£m
30.5
12.1
1.3
11.6
–
–
55.5
Goodwill is tested for impairment at the balance sheet date on the basis of value in use calculations. The assumptions and basis for the impairment
testing on the significant goodwill balances is set out below.
The key assumptions in testing the goodwill for impairment are the future sourcing requirements of the Group and the ability of NEXT Sourcing
NEXT Sourcing
to meet these requirements based on past experience. In assessing the recoverable amount of goodwill, internal budgets for the next year were
used and extrapolated for five years using a growth rate of 0% (2023: 0% growth rate) with a terminal value applied thereafter. The cash flows were
then discounted at a pre-tax rate of 8% (2023: 8%). In management assessment no reasonable change in assumptions would have resulted in an
impairment of the goodwill.
The key assumptions in testing the goodwill for impairment are the forecast sales for the Lipsy products, particularly through the NEXT website.
Lipsy
In assessing the recoverable amount of goodwill, internal budgets for the next year were used and extrapolated for five years using a growth rate
of 2% (2023: 2% growth rate) with a terminal value applied thereafter. The cash flows were then discounted at a pre-tax rate of 8% (2023: 8%).
In management assessment no reasonable change in assumptions would have resulted in an impairment of the goodwill.
The key assumptions in testing the goodwill for impairment are the forecast sales for the Reiss products through their Retail, Online and wholesale
Reiss
channels. In assessing the recoverable amount of goodwill, internal budgets for next year and a five year forecast at 5% growth were used, with a
long term, terminal value growth at 2%. The cash flows were then discounted at a pre-tax rate of 8%. This was consistent with the business model
used in management appraisal when increasing its equity stake from 51% to 72% in September 2023. Given the Reiss business was acquired
within 6 months of the year end, and with no significant variation in performance or outlook, this was considered reasonable. No impairment
risk identified.
The key assumptions in testing the goodwill for impairment are the forecast sales for the FatFace products through their Retail, Online and wholesale
FatFace
channels. In assessing the recoverable amount of goodwill, internal budgets for next year and a five year forecast at 2% growth were used, with a
long term, terminal value growth at 2%. The cash flows were then discounted at a pre-tax rate of 8%. This was consistent with the business model
used in management appraisal when acquiring 97% of FatFace in October 2023. Given the business was acquired within 6 months of the year end,
and with no significant variation in performance or outlook, this was considered reasonable. No impairment risk identified.
The reduction in the carrying value of Joules goodwill was due to the finalisation of the opening balance sheet valuation.
Joules
12. Leases
Right-of-use assets
The right-of-use assets are comprised of:
Buildings
Stores
Equipment
Vehicles
Total
2024
£m
264.2
455.0
0.7
14.7
734.6
2023
£m
228.0
420.5
1.2
12.3
662.0
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Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
12. Leases
The right-of-use assets movement in the year is as follows:
(continued)
At the beginning of the year
Additions
Arising from acquisitions
Disposals
Modifications and amendments
Depreciation
Reversal of impairment
At the end of the year
Additions to right-of-use assets include new leases and new contracts for leases previously on hold over.
The income from subleasing right-of use assets under operating leases is £21.4m (2023: £18.7m).
Lease liability
The lease liability movement in the year is as follows:
At the beginning of the year
Additions
Arising from acquisitions
Modifications and amendments
Payments
Interest
Disposals
Foreign exchange movement
At the end of the year
Lease liability
Less than 1 year
More than 1 year
Total
Amounts recognised in the Consolidated Income Statement
Depreciation on right-of-use assets
Buildings
Stores
Equipment
Vehicles
Total
Finance costs on leases
Expense on short term and low value leases
Expense on variable leases
Gain on sale and leasebacks
2024
£m
662.0
40.2
80.5
(4.9)
68.6
(117.7)
5.9
734.6
2024
£m
(1,023.3)
(40.1)
(84.7)
(52.9)
204.0
(47.9)
6.3
0.9
(1,037.7)
2024
£m
(167.8)
(869.9)
(1,037.7)
2024
£m
16.5
94.1
0.5
6.6
117.7
2024
£m
(47.9)
(6.3)
(60.1)
1.6
2023
£m
639.1
58.2
–
(4.0)
41.4
(107.6)
34.9
662.0
2023
£m
(1,057.5)
(84.2)
–
(41.5)
204.4
(47.3)
5.5
(2.7)
(1,023.3)
2023
£m
(146.2)
(877.1)
(1,023.3)
2023
£m
19.7
83.3
0.7
3.9
107.6
2023
£m
(47.3)
(4.0)
(26.9)
17.7
During the year, the Group received proceeds of £21.9m in relation to the completion of the sale and leaseback of its Dearne Valley warehouse.
The gain on completion of £1.6m has been recognised in the Income Statement.
214
12. Leases
Amounts recognised in the Consolidated Income Statement
In the prior year, the Group received total proceeds of £101.0m, £41.7m of the proceeds (being the portion of the assets sold and not subject to the
leaseback) have been classified within investing activities. The remaining sale and leaseback proceeds of £59.3m, relating to the asset being leased
back, are presented within financing activity.
(continued)
(continued)
See note 3 for further detail on impairment charges and reversals.
13. Associates, Joint Ventures and Other Investments
Cost
At January 2022
Additions
Retained profit
Interest on preference shares
Preference share dividend received
Divestment of preference shares
Disposal of investment
At January 2023
Additions
Retained profit
Interest on preference shares
Dividend received
Disposal of interest in joint venture (see note below)
At January 2024
Amortisation/Impairment
At January 2022
Provided during the year
Impairment charge in the year
At January 2023
Provided during the year
At January 2024
Carrying amount
At January 2024
At January 2023
At January 2022
Interest in
associates
and
joint ventures
£m
Other
investments
£m
45.8
64.7
14.3
4.8
(9.8)
(5.5)
–
114.3
0.9
6.9
3.2
(2.6)
(84.3)
38.4
0.6
0.3
0.7
1.6
0.9
2.5
35.9
112.7
45.2
1.0
1.9
–
–
–
–
(1.0)
1.9
–
–
0.2
–
–
2.1
–
–
–
–
–
–
2.1
1.9
1.0
Total
£m
46.8
66.6
14.3
4.8
(9.8)
(5.5)
(1.0)
116.2
0.9
6.9
3.4
(2.6)
(84.3)
40.5
0.6
0.3
0.7
1.6
0.9
2.5
38.0
114.6
46.2
Disposal of interest in Reiss as a Joint Venture / Acquisition of controlling interest in Reiss
In September 2023, NEXT acquired a further 21% interest in the Reiss group (“Reiss”) thus increasing its existing shareholding from 51% to 72%.
As NEXT now has control over Reiss’ operational and financial activities, it has been consolidated into the NEXT plc Group and therefore is presented
as a disposal of our investment within this note and then as an acquisition of a subsidiary in Note 34.
In the prior year, NEXT exercised its option to acquire a further 26% in the holding company of Reiss Limited. Upon completion in May 2022,
NEXT acquired the 26% for £45.3m financed from NEXT’s own cash resources. As a result, at the prior year end date, Next held a 51% equity share
and at that point did not have control of Reiss’ operational and financial activities and therefore was treated as a joint venture.
The finance income relates to interest on NEXT’s share of preference shares in the Reiss group’s ultimate holding company. This has been recognised
within the Finance income line of the Income Statement. However, following the acquisition of the additional 21% in the current year, the finance
income is now eliminated upon consolidation (see note 34 for further details on the acquisition).
215
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
13. Associates, Joint Ventures and Other Investments
Other investment acquisitions – prior year
In March 2022, NEXT acquired a 25% equity stake in Swoon Limited for a cash consideration of £3.5m, and in April 2022, a 44% equity stake in
the holding company of JoJo Maman Bébé Limited for a total cash consideration of £15.9m. In both cases NEXT has significant influence, but not
control, over the investments’ operational and financial activities and therefore they have been treated as associates.
(continued)
During the prior year, NEXT also acquired a 19.9% stake in the holding company of Sealskinz Limited for £1.9m comprising ordinary shares and
preference shares. For this acquisition, NEXT does not have significant influence and therefore the investment in ordinary shares has been accounted
for as financial assets at fair value through profit or loss and the preference shares are financial assets measured at amortised cost within this note.
Details of material associates and joint ventures
Set out below are the material associates and joint ventures of the Group as at 27 January 2024. The entities listed below have share capital
consisting of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of
business with the exception of Reiss (see below), and the proportion of ownership interest is the same as the proportion of voting rights held.
% ownership
Carrying amount
Name of entity
Pink Topco Limited* (Reiss)
Pink Topco Limited* (Reiss)
Immaterial associates and
joint ventures
Investment
type
Ordinary shares
Preference shares
2024
%
n/a
n/a
2023
%
51%
51%
Nature of
relationship
Joint venture
Joint venture
Measurement
method
Equity
Amortised cost
2024
£m
–
–
35.9
35.9
2023
£m
17.3
61.2
34.2
112.7
*
Pink Topco Limited was the parent company for the Reiss Group which designs and retails high quality women’s and men’s fashion clothing and accessories. Its product range
complements the Group’s customer offering within stores and online. Its registered office is 22 Grenville Street, St Helier, Jersey, JE4 8PX and its principal place of business is REISS
Building, 12 Picton Place, London W1U 1BW. As noted above, the Reiss Group was a subsidiary of the NEXT Group as at the Balance Sheet date and therefore the carrying amount
of the equity investment is nil at this date.
The table below provides the summarised profit and loss and balance sheet for our material Associates and Joint Ventures. The information
disclosed reflects the amounts presented in the consolidated financial statements of Reiss amended to reflect adjustments made by the Group
when using the equity method, including fair value adjustments and modifications for differences in accounting policy.
Sales
Profit after tax
Group’s share in %
Group share in £’m
Total non–current assets
Total current assets
Total current liabilities
Total non–current liabilities
Net assets/(liabilities)
Group share in %
Group share in £m
Goodwill
Carrying amount
2024
£m
208.1
4.5
51.0%
2.3
–
–
–
–
–
–
–
–
–
2023
£m
325.2
9.0
51.0%
6.8
176.4
85.2
(75.7)
(211.8)
(25.9)
51.0%
(13.2)
30.5
17.3
NEXT’s shareholding in Reiss increased to 72% in September 2023 and at this point NEXT acquired control over the Reiss Group. As at the balance
sheet date, our investment in Reiss is no longer equity accounted for and therefore the disclosure above only shows the profit and loss up to the
point of the change in control. Also note that due to the exercise of the option in the prior year, the Group’s share of Reiss’ profit in the period to
January 2023 was calculated at 25% for the first 3 months and then at 51% for the remainder of the prior year.
As at the point of the change in control, Reiss had cash and cash equivalents of £19.0m (2023: £18.0m), current financial liabilities (excluding trade
and other payables and provisions) of £nil (2023: £nil) and non-current financial liabilities relating to preference shares of £126.8m (2023: £120.4m).
Included within their income statement were depreciation and amortisation of £19.7m (2023: £26.5m), interest income of £nil (2023: £nil) and
interest expense of £8.8m (2023: £14.1m).
216
13. Associates, Joint Ventures and Other Investments
There are no other profits or losses from discontinued operations or other comprehensive income from the Group’s investments in associates and
joint ventures other than the amounts already disclosed above.
(continued)
Aggregate information of associates and joint ventures that are not individually material
The aggregate carrying amount of the individually immaterial associates and joint ventures is £35.9m (2023: £34.2m) with the Group’s share of
their profit from continuing operations in the current period being £4.6m (2023: £7.5m).
14. Customer and Other Receivables
The following table shows the components of net receivables.
Gross customer receivables
Less: refund liabilities
Net customer receivables
Less: allowance for expected credit losses
Other trade receivables
Less: allowance for doubtful debts
Presentation of the above, split by total receivables and allowances:
Net customer receivables
Other trade receivables
Less: allowance for expected credit losses and doubtful debts
Prepayments
Other debtors
Amounts due from associates and joint ventures
2024
£m
1,550.7
(72.9)
1,477.8
(207.4)
1,270.4
64.9
(2.0)
1,333.3
2024
£m
1,477.8
64.9
1,542.7
(209.4)
1,333.3
63.6
43.8
12.1
1,452.8
2023
£m
1,521.1
(64.2)
1,456.9
(202.2)
1,254.7
42.9
(0.3)
1,297.3
2023
£m
1,456.9
42.9
1,499.8
(202.5)
1,297.3
54.9
40.7
32.6
1,425.5
No interest is charged on customer receivables if the statement balance is paid in full and to terms; otherwise balances bear interest at a variable
annual percentage rate of 24.9% (2023: 23.9%) at the year-end date, except for £72.9m (2023: £54.8m) of next3step balance which bears interest
at 29.9% (2023: 29.9%) at the year end date.
The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime
expected loss provision for all trade receivables. To measure the expected credit losses, other trade receivables have been allocated to the Risk
band 1 (defined in Note 29), representing management’s view of the risk and the days past due. The expected credit losses incorporate forward
looking information.
The fair value of customer receivables and other trade receivables is approximately £1,310m (2023: £1,260m). This has been calculated based on
future cash flows discounted at an appropriate rate for the risk of the debt. The fair value is within Level 3 of the fair value hierarchy (refer to the
Fair Value Hierarchy table in Note 28).
Expected irrecoverable amounts on balances with indicators of impairment are provided for based on past default experience, adjusted for
expected behaviour. Receivables which are impaired, other than by age or default, are separately identified and provided for as necessary.
The ECL allowance against other debtors is immaterial in the current and prior year. The maximum exposure to credit risk at the reporting date is
the carrying value of each class of asset.
217
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
14. Customer and Other Receivables
An analysis of changes in the gross carrying amount in relation to customer receivables and other trade receivables is as follows:
Gross carrying amount
At January 2022
New assets originated/recoveries
Transfers from lifetime ECL to credit impaired
Financial assets derecognised during the period
Amounts written off
At January 2023
New assets originated/recoveries
Transfers from lifetime ECL to credit impaired
Financial assets derecognised during the period
Amounts written off
At January 2024
(continued)
Lifetime ECL
£m
1,299.1
159.4
(45.3)
–
(9.8)
1,403.4
93.2
(46.3)
–
(9.3)
1,441.0
Credit
impaired
£m
79.7
(11.7)
45.3
(8.0)
(8.9)
96.4
(14.5)
46.3
(20.7)
(6.0)
101.5
An analysis of the changes in the impairment allowance for customer receivables and other trade receivables is as follows:
Loss allowance
At January 2022
New assets originated/recoveries
Transfers from lifetime ECL to credit impaired
Change in the allowance for expected credit losses
Financial assets derecognised during the period
Amounts written off
At January 2023
New assets originated/recoveries
Transfers from lifetime ECL to credit impaired
Change in the allowance for expected credit losses
Financial assets derecognised during the period
Amounts written off
At January 2024
At January 2022
Impairment
Amounts recovered
Charged to the Income Statement
Used during the year
Total movement
At January 2023
Impairment
Amounts recovered
Charged to the Income Statement
Used during the year
Total movement
At January 2024
Lifetime ECL
£m
(118.5)
(5.2)
3.8
4.4
–
0.8
(114.7)
(3.5)
3.8
(1.7)
–
0.8
(115.3)
Lifetime ECL
£m
(118.5)
(1.9)
0.8
(1.1)
4.9
3.8
(114.7)
(4.9)
0.1
(4.8)
4.2
(0.6)
(115.3)
Credit
impaired
£m
(73.2)
10.5
(40.7)
0.4
7.2
8.0
(87.8)
13.3
(42.5)
(1.6)
19.0
5.5
(94.1)
Credit
impaired
£m
(73.2)
(32.0)
2.1
(29.9)
15.3
(14.6)
(87.8)
(32.6)
1.4
(31.2)
24.9
(6.3)
(94.1)
Total
£m
1,378.8
147.7
–
(8.0)
(18.7)
1,499.8
78.7
–
(20.7)
(15.3)
1,542.5
Total
£m
(191.7)
5.3
(36.9)
4.8
7.2
8.8
(202.5)
9.8
(38.7)
(3.3)
19.0
6.3
(209.4)
Total
£m
(191.7)
(33.9)
2.9
(31.0)
20.2
(10.8)
(202.5)
(37.5)
1.5
(36.0)
29.1
(6.9)
(209.4)
The amount charged to the Income Statement of £36.0m (2023: £31.0m) differs to the bad debt charge of £32.2m (2023: £26.2m) in the Chief
Executive’s Review on page 50 due to recoveries of previously written off assets taken directly to the Income Statement.
Information on the Group’s credit risk in relation to customer receivables is provided in Note 29.
218
15. Other Financial Assets
Foreign exchange contracts
Commodity price contracts
2024
£m
6.8
0.1
6.9
2023
£m
9.1
–
9.1
Foreign exchange contracts comprise forward contracts and options, the majority of which are used to hedge exchange risk arising from the
Group’s merchandise purchases (refer to Note 29). These instruments are primarily for US Dollars and Euros.
16. Cash and Short Term Deposits
Cash at bank and in hand
Money market funds
2024
£m
139.3
49.0
188.3
2023
£m
105.0
–
105.0
Cash at bank represents the gross cash positions, of which the majority are part of the Group’s bank account and interest and balance pooling
arrangements. Money market funds are used to manage the short-term liquidity requirements of the Group and are highly liquid investments that
are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
17. Loans and Overdrafts
Bank overdrafts and short term borrowings
Bank loans
Loan notes
2024
2023
Current
£m
30.1
5.0
23.6
58.7
Non-current
£m
–
28.9
0.6
29.5
Current
£m
102.3
–
–
102.3
Non-current
£m
–
–
–
–
Bank overdrafts represent the gross overdraft positions, of which the majority are part of the Group’s bank account interest and balance pooling
arrangements. Bank overdrafts are repayable on demand and bear interest at a margin over bank base rates.
Bank loans represent facilities provided by external banks to Reiss on which the annual rate of interest is between 2.15% and 2.90% over SONIA
based on net leverage. The loan is secured by a fixed and floating charge over the assets of the Reiss group, charges over credit balances held by
Reiss and unlimited cross guarantees to NatWest Bank PLC from other companies within the Reiss group.
Loan notes were issued to management of Reiss and FatFace as part of their respective acquisitions. The Reiss loan notes of £23.6m are repayable
by January 2025 and the FatFace loan notes of £0.6m are repayable by March 2025. The loan notes are interest bearing on an arm’s length basis.
18. Trade Payables and Other Liabilities
Trade payables
Amounts owed to associates and joint ventures
Refund liabilities
Other taxation and social security
Deferred revenue from the sale of gift cards
Share-based payment liability
Other creditors and accruals
2024
2023
Current
£m
297.1
1.1
11.1
133.4
99.0
–
450.1
991.8
Non-current
£m
–
–
–
–
–
0.2
11.5
11.7
Current
£m
230.1
2.1
8.3
95.7
84.2
0.2
370.5
791.1
Non-current
£m
–
–
–
–
–
–
14.3
14.3
Trade payables do not bear interest and are generally settled on 30 day terms. The year on year increase in trade payables and other liabilities is
largely due to the acquisition of Reiss and FatFace, higher staff incentives and capital accruals.
Other creditors and accruals do not bear interest. Within other creditors and accruals are staff related accruals £93.8m (bonus, holiday pay
and overtime) (2023: £42.7m), warehouse and duty related accruals of £99.4m (2023: £92.1m), property accruals £48.0m (2023: £29.0m),
marketing accruals £15.3m (2023: £17.8m) and IT systems, utilities and deferred income on NEXT Unlimited.
219
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
19. Other Financial Liabilities
Foreign exchange contracts
Interest rate derivatives
Commodity price contracts
Put and call options
2024
2023
Current
£m
18.5
–
0.3
–
18.8
Non-current
£m
–
11.3
–
26.1
37.4
Current
£m
40.8
–
–
–
40.8
Non-current
£m
–
9.5
–
–
9.5
Foreign exchange contracts comprise forward contracts and options, of which the majority are used to hedge exchange risk arising from the
Group’s merchandise purchases (Note 29). These instruments are primarily for US Dollars and Euros. Interest rate derivatives are used to manage
the fixed and floating interest rate risk associated with the corporate bonds (Note 20).
Commodity price contracts are used to hedge against movements in the Group’s purchases of diesel fuel (refer to Note 29).
Put and call options
Put and call options are in place over some of the remaining non-controlling interest shareholding in Reiss and FatFace. These put and call options
are accounted for at fair value. This recognises put and call options over non-controlling interests in its subsidiary undertakings as a liability in the
Consolidated Balance Sheet at the present value of the estimated exercise price of the put and call option.
Put and call options are entered into simultaneously, in contemplation of each other and are documented within a single agreement with the same
counterparty in respect of each minority shareholding. The terms of the put and call are identical in respect of the valuation mechanic and the
period on which they are derived, and therefore the underlying asset and risk associated to the put and call are considered to be the same. The only
distinguishable difference between the put and the call, other than the party choosing to initiate the option, is the timing of the option window.
There is a period of time between the put option window commencing and the call option window commencing. For example, the put option can
be exercised in years 3, 4 and 5 post acquisition, whereas the call option can only be exercised 5 years post acquisition. Accordingly, the Group has
assessed that the put and call options are to be accounted for as a single unit of account.
The present value of the exercise price of the put and call options is estimated using Board approved forecasts multiplied by an earnings ratio.
The option formula is specific to each subsidiary and stated within the shareholder agreement. The forecast cash flows are discounted using
a discount rate reflecting the current market assessment of the time value of money and any specific risk premiums relevant to the individual
businesses involved. These discount rates are considered to be equivalent to the rates a market participant would use. Upon initial recognition of
put and call options a corresponding entry is made to Other Equity, and for subsequent changes on remeasurement of the liability the corresponding
entry is made to Other Equity.
The options relating to the 27 January 2024 total £26.1m comprising Reiss £21.5m and FatFace £4.6m.
220
20. Corporate Bonds
Corporate bond 3.000% repayable 2025
Corporate bond 4.375% repayable 2026
Corporate bond 3.625% repayable 2028
Balance Sheet value
Nominal value
2024
£m
250.0
240.8
300.0
790.8
2023
£m
250.0
240.7
300.0
790.7
2024
£m
250.0
250.0
300.0
800.0
2023
£m
250.0
250.0
300.0
800.0
The Group uses interest rate derivatives to manage the interest rate risk associated with its bonds, the profile of the post hedged interest rate which
is shown below:
2025 Bonds
Fixed
2026 Bonds
Floating
2028 Bonds
Fixed
Total
2024
Nominal value
£m
2024
Aggregate
interest rate
2023
Nominal value
£m
2023
Aggregate
interest rate
250.0
3.000%
250.0
3.000%
250.0
SONIA + 1.7%
250.0
SONIA +1.7%
3.625%
300.0
800.0
300.0
800.0
3.625%
Interest rate risk management is explained in Note 29 and the fair values of the corporate bonds in aggregate are shown in Note 28.
221
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
21. Pension Benefits
The Group operates the following pension arrangements in the UK:
• The NEXT Group Pension Plan (the “Original Plan”)
• The 2013 NEXT Group Pension Plan (the “2013 Plan”)
• Legal & General Master Trust and the NEXT Supplemental Pension Arrangement (the “SPA”)
• NEXT also contributes to the People’s Pension which it uses for auto enrolment.
• Reiss and FatFace operate separate defined contribution plans for its employees.
The Group’s UK pension arrangements include defined benefit and defined contribution arrangements. The Original Plan and 2013 Plan are
established under trust law and comply with all relevant UK legislation. Pension assets are held in separate trustee administered funds which have
equal pension rights with respect to members of either sex. The defined benefit section was closed to new members in 2000 and over recent years
the Group has taken steps to manage the ongoing risks associated with its defined benefit liabilities.
The Group also provides additional retirement benefits through the SPA to some plan members whose benefits would otherwise be affected by
the Lifetime Allowance.
The trustee of both of the NEXT Group Pension Plans is a limited company, NEXT Pension Trustees Limited (the “Trustee”). The Board of the
Trustee currently comprises five directors. Four of these are members of the 2013 Plan, and one director (the Chair) is independent and has no
other connection to NEXT. One of these directors is a member nominated director and cannot be removed by NEXT. The other four directors,
including the independent director, are appointed by and can be removed by NEXT. All directors of the Trustee receive a fee for their services,
including those directors who are also employees of NEXT. No director of the Company is a director of the Trustee.
The Plans’ investments are kept separate from the business of the NEXT Group and the Trustee holds them in separate trusts. Responsibility for
investment of the Plans’ funds has been delegated to professional investment managers. Further details on each plan are set out below.
The Original Plan
The Original Plan comprises predominantly members with pensions in payment, following the transfer of active and deferred members
(and associated liabilities) to the 2013 Plan. The risks associated with the payment of pensions of the Original Plan have been largely mitigated by
the purchase of two insurance contracts (“buy-ins”) with Aviva in 2010 and 2012 to cover the liabilities of this Plan, although it remains the ultimate
responsibility of the Company to provide members with benefits. The pensions and matching insurance contracts held by the Original Plan will be
converted to buy-out in due course and the Original Plan will then be dissolved.
The 2013 Plan
The 2013 Plan was established in 2013 via the transfer of liabilities and assets from the Original Plan. This arrangement provides benefits to
the majority of members whose pensions were not insured with Aviva. The 2013 Plan defined benefit scheme was closed to new members in
2000 and since 2012, the accrual of pension benefits has been based on pensionable salary frozen at October 2012, rather than final earnings.
Those employees affected by the change to pensionable salary in 2012 can also elect to receive up to a 15% salary supplement or additional
contributions to the defined contribution section. The 2013 Plan defined benefit scheme currently provides members with a retirement benefit
of one sixtieth or one eightieth (depending on the member’s chosen contribution rate) of pensionable earnings at October 2012 for each year of
pensionable service.
As at January 2024 more than 90% of the 2013 Plan assets consist of two insurance contracts:
•
•
In August 2018, the Trustees of the 2013 Plan undertook a buy-in in respect of certain pensioner members of the 2013 Plan, with a premium
paid of £94m. As at 27 January 2024 this buy-in policy has a value of £55m (2023: £61m) within the pension scheme assets.
In January 2024, the Trustees of the 2013 Plan undertook another buy-in in respect of all remaining members of the 2013 Plan, with a premium
paid of £511m. As at 27 January 2024 this buy-in policy has a value of £476m (2023: £Nil) within the pension scheme assets.
These insurance contracts provide members with enhanced security over their pension.
Subsequent to the year end and following a consultation process, the plan has been closed to future accrual. The closure will take effect from 1 April
2024. For further details see Note 36.
GMP
Within the 2013 Plan, following a High Court ruling, a proportion of members’ benefits are being equalised to address the inequalities that arise
due to differing Guaranteed Minimum Pensions (GMP) entitlements for men and women. This equalisation increased the IAS 19 liabilities of the
Plan by £0.4m and was recognised in the 2019 disclosures. Following a further High Court ruling on 20 November 2020, transfers out of the Plan
between May 1990 and October 2018 need to be revisited and equalised for GMP. Due to the relatively small impact of GMP equalisation on
benefits in the Plan and the amount of benefits transferred out of the Plan, we believe that the impact of this latest ruling is immaterial.
The Group operates a salary sacrifice scheme whereby members from either section can elect to receive a reduced gross salary in exchange for
enhanced employer pension contributions. The participation of members in the salary sacrifice scheme does not result in any overall increase in
costs to the Group.
222
21. Pension Benefits
Defined contribution arrangements
The defined contribution section is administered by a Legal & General Master Trust which enables the pension scheme members to benefit from
lower running costs, greater flexibility of retirement options and improved range of online tools and advice to support members in decisions they
may make about their financial plans. The Master Trust is run by a board of independent trustees who are responsible for ensuring that the Trust
is run in accordance with the law and that funds are invested properly. Members pay 5% of their pensionable earnings which is matched by the
Company. For death prior to retirement, a lump sum of three times the member’s base salary at the previous April is payable along with the current
value of the member’s fund.
(continued)
The 2013 Plan defined benefit section provides a lump sum death in service benefit and dependants’ pensions on death in service or following
retirement. In the case of ill-health retirement, only the accrued pension is payable. All benefits are subject to 2013 Plan limits. Increases to
pensions in payment are at the discretion of the Trustee although pensionable service post 1997 is subject to limited price indexation. From 2006,
sales and profit related bonuses were excluded from pensionable earnings and the normal retirement age under the Original Plan was increased
from 60 to 65.
Certain members whose accrued or projected pension fund value exceeds their personal lifetime allowance are provided with benefits through
an unfunded, unapproved supplementary pension arrangement. The relevant members contribute towards the additional cost of providing these
benefits by a payment of 5% on all pensionable earnings to the 2013 Plan. Since April 2011, where existing members have reached either the
annual or lifetime pension contributions limits, the Company has offered those members the choice of leaving the 2013 Plan defined benefit
section and either joining the Legal and General Master Trust (with an enhanced Company contribution) or taking a salary supplement, in both
cases equal to 10% or 15% of their salary (depending on their existing contributions and benefits).
Principal risks
The buy-in insurance contracts cover the majority of the 2013 and Original Plan pension liabilities. This significantly offsets the total risks described
above. Derivatives are not used to hedge any of the risks noted above.
The following table summarises the principal risks associated with the Group’s defined benefit arrangements prior to entering another insurance
contract in January 2024:
Investment risk
Interest rate risk
Inflation risk
Longevity risk
The present value of defined benefit liabilities is calculated using a discount rate set by reference to high quality
corporate bond yields. If plan assets underperform corporate bonds, this will create a deficit. Investment risk in the
Original plan is negligible, as almost all liabilities in this plan are covered by insurance contracts.
A fall in corporate bond yields would increase the value of the liabilities. This would be only partially offset by an
increase in the value of bond investments and annuity policies held.
Pensions in payment are increased annually in line with RPI or CPI for Guaranteed Minimum Pensions built up since
1988. Pensions built up since 2005 are capped at 2.5% and pensions built up between 1997 and 2005 are capped at
5%. When discretionary increases have been awarded for pensions built up before 1997, they too have tended to
take inflation into account. Therefore an increase in inflation would increase the value of pension liabilities. The assets
would be expected to also increase, to the extent that they are linked to inflation, but this would not be expected to
fully match the increase in liabilities.
The present value of the defined benefit liabilities is calculated having regards to a best estimate of the mortality of plan
members. If members live longer than this mortality assumption, this will increase liabilities. This is partially offset by
insurance contracts covering part of the liability.
223
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany SPA
£m
0.1
–
0.2
–
0.3
SPA
£m
0.1
3.6
3.7
Total
£m
6.7
1.1
(3.5)
2.5
6.8
Total
£m
(34.7)
346.9
312.2
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
21. Pension Benefits
Income statement
The components of the net defined benefit expense, recognised in the Consolidated Income Statement within administrative expenses are
as follows:
(continued)
2024
Original
Plan
£m
–
–
(0.1)
0.1
–
2013
Plan
£m
3.0
2.4
(7.6)
2.3
0.1
SPA
£m
–
–
0.3
–
0.3
Total
£m
3.0
2.4
(7.4)
2.4
0.4
2023
Original
Plan
£m
–
–
(0.1)
0.1
–
2013
Plan
£m
6.6
1.1
(3.6)
2.4
6.5
Current service cost
Past service cost
Net interest
Administration costs
Net defined benefit expense
Other comprehensive income
The components of the net defined benefit expense recognised in other comprehensive income are as follows:
2024
2013
Plan
£m
Original
Plan
£m
SPA
£m
Total
£m
2023
2013
Plan
£m
Original
Plan
£m
(7.6)
(1.1)
(0.4)
(9.1)
(33.4)
(1.4)
30.6
23.0
3.9
2.8
0.5
0.1
35.0
25.9
311.7
278.3
31.6
30.2
Actuarial gains/(losses) due to
liability experience
Actuarial gains due to liability
assumption changes
Return on plan assets less than
discount rate
Actuarial gains/(losses)
recognised in other
comprehensive income
(126.5)
(3.0)
–
(129.5)
(280.8)
(30.8)
–
(311.6)
(103.5)
(0.2)
0.1
(103.6)
(2.5)
(0.6)
3.7
0.6
The surplus in the scheme has moved from £157.5m at January 2023 to £59.3m at January 2024, mainly due to a reduction in plan obligations of
£25.9m offset by a reduction in the return on plan assets of £129.5m.
Balance Sheet valuation
The net defined benefit pension asset recognised in the Consolidated Balance Sheet is analysed as follows:
2024
2013
Plan
£m
Original
Plan
£m
(512.7)
577.7
65.0
(89.5)
90.7
1.2
SPA
£m
(6.9)
–
(6.9)
Total
£m
(609.1)
668.4
59.3
2013
Plan
£m
(521.1)
684.0
162.9
2023
Original
Plan
£m
(95.2)
96.6
1.4
SPA
£m
(6.8)
–
(6.8)
Total
£m
(623.1)
780.6
157.5
Present value of benefit
obligations
Fair value of plan assets
Net pension asset
A net asset has been recognised as the Trust Deeds of the Original and 2013 Plans provide the Group with an unconditional right to a refund
assuming the gradual settlement of the Plans’ liabilities over time until all members have left the Plans.
224
21. Pension Benefits
Plan obligations
Changes in the present value of defined benefit pension obligations are analysed as follows:
(continued)
2024
2023
2013
Plan
£m
521.1
3.0
2.4
23.7
0.1
(14.6)
(19.5)
7.6
(11.1)
512.7
Original
Plan
£m
95.2
–
–
4.2
–
(7.1)
(3.9)
1.1
–
89.5
SPA
£m
6.8
–
–
0.3
–
(0.1)
(0.4)
0.4
(0.1)
6.9
Total
£m
623.1
3.0
2.4
28.2
0.1
(21.8)
(23.8)
9.1
(11.2)
609.1
2013
Plan
£m
793.0
6.6
1.1
16.9
0.1
(18.3)
(311.4)
33.4
(0.3)
521.1
Original
Plan
£m
129.8
–
–
2.7
–
(7.1)
(31.0)
1.4
(0.6)
95.2
SPA
£m
10.3
0.1
–
0.2
–
(0.1)
(3.6)
(0.1)
–
6.8
Total
£m
933.1
6.7
1.1
19.8
0.1
(25.5)
(346.0)
34.7
(0.9)
623.1
Opening obligation
Current service cost
Past service cost
Interest cost
Employee contributions
Benefits paid
Actuarial (gains)/losses
– financial assumptions
– experience
– demographic assumptions
Closing obligation
The present value of the defined benefit closing obligation of £609.1m (2023: £623.1m) was approximately 20% (2023: 25%) relating to active
participants, 43% (2023: 45%) relating to deferred participants and 37% (2023: 30%) relating to pensioners.
Plan assets
Changes in the fair value of defined benefit pension assets were as follows:
2024
2023
Opening assets
Employer contributions
Employee contributions
Benefits paid
Interest income on assets
Return on plan assets (excluding
amounts included in interest)
Administrative costs
Closing assets
2013
Plan
£m
684.0
5.7
0.1
(14.6)
31.3
(126.5)
(2.3)
577.7
Original
Plan
£m
96.6
–
–
(7.1)
4.3
(3.0)
(0.1)
90.7
The fair value of defined benefit plan assets was as follows:
Equities
Equity-linked bonds
Bonds
Gilts
Property
Insurance contracts
Cash and cash equivalents
2024
Original
Plan
£m
–
–
–
1.4
–
89.3
–
90.7
2013
Plan
£m
–
–
–
–
–
531.4
46.3
577.7
SPA
£m
–
0.1
–
(0.1)
–
–
–
–
Total
£m
–
–
–
1.4
–
620.7
46.3
668.4
Total
£m
780.6
5.8
0.1
(21.8)
35.6
(129.5)
(2.4)
668.4
%
–
–
–
0.2
–
92.9
6.9
100.0
2013
Plan
£m
958.2
6.7
0.1
(18.3)
20.5
(280.8)
(2.4)
684.0
2013
Plan
£m
124.2
54.6
61.9
300.2
78.9
60.5
3.7
684.0
Original
Plan
£m
131.8
–
–
(7.1)
2.8
(30.8)
(0.1)
96.6
2023
Original
Plan
£m
–
–
–
1.6
–
95.0
–
96.6
SPA
£m
–
0.1
–
(0.1)
–
–
–
–
Total
£m
124.2
54.6
61.9
301.8
78.9
155.5
3.7
780.6
Total
£m
1,090.0
6.8
0.1
(25.5)
23.3
(311.6)
(2.5)
780.6
%
15.9
7.0
7.9
38.7
10.1
19.9
0.5
100.0
None of the pension arrangements directly invest in any of the Group’s own financial instruments nor any property occupied by, or other assets
used by, the Group. The fair values of the above equity and debt instruments are determined based on quoted prices in active markets.
225
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
21. Pension Benefits
Plan assets
The majority of the benefits within the Original Plan are covered by two insurance contracts with Aviva. The insurance assets have been valued so
as to match the defined benefit obligations, the value of which was calculated by Aviva.
(continued)
(continued)
Within the 2013 Plan the main asset is the insurance contract with PIC which at January 2024 had a value of £476m (2023: £Nil).
Principal assumptions
The IAS 19 (accounting) valuation of the defined benefit obligation was undertaken by an external qualified actuary as at January 2024 using the
projected unit credit method. The principal actuarial assumptions used in the valuation were as follows:
Discount rate
Inflation – RPI
Inflation – CPI
Salary increases
Pension increases in payment
– RPI with a maximum of 5.0%
– RPI with a maximum of 2.5% and discretionary increases
Life expectancy at age 65 (years)
Male
Female
2024
2023
Original
Plan
5.00%
3.30%
2.30%
n/a
3.10%
2.05%
2013 and
SPA
5.00%
2.95%
2.65%
n/a
2.80%
1.90%
Original
Plan
4.60%
3.40%
2.40%
n/a
3.20%
2.10%
2013 and
SPA
4.60%
3.10%
2.70%
n/a
2.85%
1.85%
2024
2023
Pensioner
aged 65
Non-
pensioner
aged 45
Pensioner
aged 65
Non-
pensioner
aged 45
21.3
23.2
22.8
25.2
22.3
24.7
24.3
26.9
The discount rate has been derived as the single average discount rate appropriate to the term of the liabilities, based on the yields available on
high quality Sterling corporate bonds. The expected average duration of the Original Plan’s liabilities is 9 years, the SPA is 15 years and the 2013
Plan is 16 years.
The rate of retail price inflation (RPI) has been derived in a consistent way to the discount rate, so that it is appropriate to the term of the liabilities.
The RPI assumption for the 2013 Plan and SPA allows for the inflation risk premium of 0.3% per annum. As in previous years, the Original Plan does
not allow for an inflation risk premium because its assets and liabilities are almost fully matched.
The rate of consumer price inflation (CPI) is set lower than the assumption for retail price inflation, reflecting the long term expected gap between
the two indices and takes into account the alignment of RPI to CPI from 2030.
For the 2013 Plan and the SPA, the base mortality assumptions reflect the best estimate output from a postcode mortality study. This results in an
assumption in line with the standard SAPS Series 3 All Pensioner tables (with a multiplier of 105% for male and female pensioners and 107% for
male non-pensioners and 103% for female non-pensioners). Future improvement trends have been allowed for, in line with the most recent CMI
core projection model (CMI 2022) with a long term trend towards 1.5% per annum and a smoothing factor of 7.5.
The base mortality assumption for the Original Plan is in line with the standard SAPS Series 1 All Pensioner tables, with medium cohort improvements
to 2009, and CMI 2013 improvements applied from 2009 with a long term trend towards 1.5% per annum.
226
21. Pension Benefits
Sensitivity analysis
The sensitivity of the pension asset and obligation to changes in the principal assumptions is:
(continued)
Discount rate
Price inflation
Price inflation
Mortality
Sensitivity analysis
0.5% decrease
0.5% increase to RPI and CPI
0.1% decrease to CPI (i.e. increase in the gap between RPI and CPI)
Life expectancy increased by one year
Impact on
pension asset
£46.4m increase
£27.2m increase
£1.8m decrease
£12.1m increase
Impact on
pension obligation
£44.6m increase
£25.1m increase
£1.4m decrease
£12.0m increase
The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur
and changes in some of the assumptions may be correlated. Aside from the matching insurance contracts held in the Original Plan, no allowance has
been made for any change in assets that might arise under any of the scenarios set out above. When calculating the sensitivity of the defined benefit
obligation to changes in the significant assumptions, the same method has been applied as when calculating the pension liability recognised within the
Consolidated Balance Sheet. The inflation assumption impacts the “pension increases in payment” and deferred pension calculations.
The sensitivities shown are just one possible outcome and should not be taken as an indication of the likelihood of a change occurring in the future.
Market metrics used to derive the discount rate and price inflation assumptions could increase or decrease in the future, by more or less than the
change set out.
Full actuarial valuation
An actuarial valuation of the 2013 Plan was undertaken as at 30 September 2022 by Mercer, who are the 2013 Plan Actuary to the Trustees.
The valuation showed a funding surplus on a Technical Provisions basis required by legislation of 114.1% or £85.4m at that date.
With effect from January 2020, the Company has paid contributions of 38% per annum of members’ frozen pensionable salaries as at 31 October
2012 towards the future accrual of benefits for active members. This increased to 47% from 1 October 2023 as stated within the Statement
of Contributions.
The 2022 valuation resulted in the Actuary recommending that the Company should pay regular contributions to the 2013 Plan at the rate of 26.8%
of members’ frozen pensionable salaries at 31 October 2012 from 1 January 2024 (which was advance paid in June 2023).
At 30 September 2023, the 2013 Plan was estimated to be 115.7% funded on a Technical Provisions basis, primarily due to an increase in
government bond yields which has acted to reduce the liabilities, whilst a reduction in future expectations of inflation have also contributed to
this. These factors also reduce the value of the assets, but to a lesser extent meaning the funding level improved, corresponding to a surplus on
this basis in the region of 115.7% or £80.7m.
The next actuarial valuation is due as at 30 September 2025.
Contributions
Members of the defined benefit section of the 2013 Plan contribute 3% or 5% of pensionable earnings; the Group contributes 26.8% per annum.
Members of the Legal & General Master Trust defined contribution scheme contribute 5% of Pensionable Earnings, which is matched by the Group.
Contributions paid by the Group during the year are set out below:
Defined contribution – recognised as an expense
Automatic enrolment – recognised as an expense
Defined benefit
2024
£m
20.0
21.4
0.7
42.1
2023
£m
17.1
19.7
6.7
43.5
Employer contributions to the defined benefit section in the year ahead are expected to be around £4m. Employer contributions for the defined
contribution Master Trust scheme are expected to be circa £21m (including salary sacrifice contributions) for the year ahead. Employer contributions
for the automatic enrolment scheme are expected to be around £23m, including salary sacrifice contributions.
227
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
22. Provisions
At the beginning of the year
Arising from acquisitions
Provisions made in the year
Utilisation of provisions
Release of provision
Unwind of discount
At the end of the year
Provision is made for the committed cost or estimated exit costs of properties occupied by the Group.
23. Share Capital
Allocated, called up and fully paid
Ordinary shares of 10p each
At the start of the year
Issued in the year
Purchased for cancellation in the year
2024
Shares ‘000
2023
Shares ‘000
129,263
746
(2,585)
127,424
132,772
–
(3,509)
129,263
2024
£m
33.8
13.1
9.2
(4.1)
(0.1)
0.5
52.4
2024
£m
12.9
0.1
(0.3)
12.7
The table below shows the movements in equity from share purchases and commitments during the year:
Shares issued in the year
Shares purchased for cancellation in the year
Amount shown in Statement of Changes in Equity
2024
Shares
‘000
(746)
2,585
Cost
£m
(53.4)
177.3
123.9
2023
Shares
‘000
–
3,509
2023
£m
21.9
–
13.3
(2.2)
–
0.8
33.8
2023
£m
13.3
–
(0.4)
12.9
Cost
£m
–
224.0
224.0
During the year 745,912 new ordinary shares were issued as part consideration for the acquisition of Fatface (see Note 34 for more detail).
The shares had a nominal value of £0.10 and a share premium value of £71.51 per share. No amount was unpaid as at year end.
Subsequent to the end of the financial year the Company entered into an irrevocable closed period share buyback programme and during the
period from 20 February 2024 up to and including 20 March 2024 where no shares were purchased for cancellation. Prior to the close period,
between 1 February and 15 February, 298,704 shares were acquired for a cost of £25.1m.
24. Other Reserves
Other reserves in the Consolidated Balance Sheet comprise the reserve created on reduction of share capital through a Scheme of Arrangement under
Section 425 of the Companies Act 1985 of £1,460.7m less share premium account of £3.8m and capital redemption reserve of £8.7m at the time of a
capital reconstruction in 2002, plus the accumulated amount of goodwill arising on acquisition after taking into account subsequent disposals of £0.7m,
less the unrealised component of revaluations of properties arising under previous accounting standards of £5.1m as at the date of transition to IFRS.
25. Share-based Payments
The Group operates a number of share-based payment schemes as follows:
Management share options
The NEXT Management Share Option Plan provides for options over shares, exercisable between three and ten years following their grant, to be
allocated to Group employees at the discretion of the Remuneration Committee. This plan is primarily aimed at middle management and senior store
staff. No options were granted to any directors or changes made to existing entitlements in the year under review. No employee is entitled to be granted
options under the scheme if, in the same financial year, they have received an award under NEXT’s Long Term Incentive Plan or Share Matching Plan.
The total number of options which can be granted is subject to limits. There are no cash-settlement alternatives and they are therefore accounted
for under IFRS 2 as equity-settled awards. Option prices are set at the prevailing market price at the time of grant. The maximum total market
value of shares (i.e. the acquisition price of shares) over which options may be granted to any person during any financial year of the Company
is three times salary, excluding bonuses and benefits in kind. This limit may be increased to five times salary in circumstances considered by the
Remuneration Committee to be exceptional, for example on the grant of options following recruitment. Grants are generally made annually.
228
25. Share-based Payments
Sharesave options
The Company’s Save As You Earn (Sharesave) scheme is open to nearly all UK employees. Invitations to participate are generally issued annually and
the scheme is subject to HMRC rules. The current maximum monthly savings within the schemes detailed below is £250. Options are granted at the
prevailing market rate less a discount of 20% and are exercisable three or five years from the date of grant. Sharesave options are also accounted
for as equity-settled awards under IFRS 2.
(continued)
Management and Sharesave options
The following table summarises the movements in Management and Sharesave options during the year:
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
2024
2023
Weighted
average
exercise
price
£54.04
£63.24
£49.92
£54.02
£58.29
£51.43
No. of
options
5,153,993
2,544,386
(704,448)
(603,599)
6,390,332
1,571,001
Weighted
average
exercise
price
£55.78
£50.19
£49.53
£57.96
£54.04
£54.94
No. of
options
6,390,332
1,912,941
(1,971,039)
(284,806)
6,047,428
1,061,154
Options were exercised on a regular basis throughout the year and the weighted average share price during this period was £72.95 (2023: £62.40).
Options outstanding at 27 January 2024 are exercisable at prices ranging between £38.69 and £80.64 (2023: £38.25 and £80.64) and have
a weighted average remaining contractual life of 6.3 years (2023: 6.1 years), as analysed in the table below:
Exercise price range
£38.25–£41.09
£41.70–£58.50
£59.20–£61.86
£64.50
£64.53–£80.64
2024
2023
Weighted
average
remaining
contractual
life (years)
2.8
4.5
8.2
9.2
5.7
6.3
Weighted
average
remaining
contractual
life (years)
3.8
5.6
9.2
–
6.0
6.1
No. of
options
1,258,787
2,565,334
1,402,172
–
1,164,039
6,390,332
No. of
options
1,074,356
1,252,595
1,307,884
1,469,433
943,160
6,047,428
Share Matching Plan (SMP)
The SMP is an equity-settled scheme open to a small number of senior executives below Board level. Executive directors are not granted SMP
awards. Under the current awards participants who invest a proportion of any annual cash bonus in NEXT shares will receive up to a maximum
of two times the original number of shares they purchase with their bonus. Any matching is conditional upon achieving performance measures
over the following three years. The maximum matching ratio which is permitted under the SMP rules is 3:1, matching the pre-tax equivalent of the
amount invested in shares. For any SMP grants made from 2018, participants will be entitled to receive ordinary and special dividend accruals on
any awards vesting under the SMP.
The Remuneration Committee’s policy has previously been to set performance measures by reference to underlying fully diluted post-tax EPS but
the Committee has flexibility to use different measures. After considering the impact of the increase in the headline Corporation Tax rate from 19%
to 25% in April 2023, the Committee approved a change to the performance measure from underlying fully diluted post-tax EPS to the equivalent
pre-tax measure. This applies to all inflight and future grants. Under the formulae, a notional adjustment is made to actual EPS achieved for special
dividends, on the basis that the cash distributed had instead been used to purchase shares at the prevailing share price on the day of the special
dividend payment.
229
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
25. Share-based Payments
Share Matching Plan (SMP)
The following table summarises the movements in nil cost SMP options during the year:
(continued)
(continued)
Outstanding at beginning of year
Granted
Dividend accrual awarded in the year
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
2024
No. of
options
31,698
7,980
868
(10,672)
(1,672)
28,202
–
2023
No. of
options
18,142
21,894
548
(8,886)
–
31,698
–
The weighted average remaining contractual life of these options is 8.5 years (2023: 8.7 years). During the year ending 27 January 2024, SMP options
were exercised at different times and the weighted average share price during this period was £73.06 (2023: £61.76).
Long Term Incentive Plan (LTIP)
As explained in the Remuneration Report, the Group operates an equity-settled LTIP scheme for executive directors and other senior executives.
Performance conditions for the LTIP awards are detailed in the Remuneration Report.
The following table summarises the movements in nil cost LTIP awards during the year:
Outstanding at beginning of year
Granted
Dividend accrual awarded in the year
Vested
Forfeited
Outstanding at end of year
2024
No. of
awards
530,083
232,517
8,256
(105,877)
(105,288)
559,691
2023
No. of
awards
520,017
204,644
8,538
(140,907)
(62,209)
530,083
The weighted average remaining contractual life of these options is 1.5 years (2023: 1.4 years).
Fair value calculations
The fair value of Management, Sharesave and Share Matching Plan options granted is calculated at the date of grant using a Black-Scholes option
pricing model. Expected volatility was determined by calculating the historical volatility of the Company’s share price over a period equivalent to
the expected life of the option. The expected life applied in the model is based on historical analyses of exercise patterns, taking into account any
early exercises. The following table lists the inputs to the model used for options granted in the years ended 27 January 2024 and 28 January 2023
based on information at the date of grant:
Management share options
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Weighted average fair value per option
2024
£64.50
£64.50
38.90%
4 years
3.43%
2.99%
£17.67
2023
£59.20
£59.20
35.40%
4 years
1.56%
2.15%
£14.57
230
(continued)
25. Share-based Payments
Sharesave plans
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Weighted average fair value per option
Share Matching Plan
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Weighted average fair value per option
2024
£73.12
£58.50
33.53%
3.2 years
4.78%
2.82%
£23.57
2024
£66.02
Nil
35.53%
3 years
3.67%
Nil
£66.02
2023
£48.36
£38.69
38.65%
3.4 years
3.22%
3.99%
£14.77
2023
£61.48
Nil
38.02%
3 years
1.48%
Nil
£61.48
The fair value of LTIP awards granted is calculated at the date of grant using a Monte Carlo option pricing model. Expected volatility was determined
by calculating the historical volatility of the Company’s share price over a period equivalent to the life of the award. The following table lists the
inputs to the model used for awards granted in the year ended 27 January 2024 and 28 January 2023 based on information at the date of grant:
LTIP awards (granted in March)
Share price at date of grant
Award price
Volatility
Life of award
Risk free rate
Dividend yield
Fair value per award
LTIP awards (granted in September)
Share price at date of grant
Award price
Volatility
Life of award
Risk free rate
Dividend yield
Fair value per award
2024
£65.40
Nil
35.22%
3 years
3.47%
0.00%
£30.38
2024
£72.98
Nil
29.88%
3 years
4.48%
0.00%
£31.81
2023
£62.82
Nil
37.35%
3 years
1.41%
0.00%
£30.98
2023
£48.01
Nil
38.99%
3 years
4.35%
0.00%
£23.35
From September 2017, for all new LTIP awards, dividend accruals (both in respect of special and ordinary dividends) may be payable on vested awards.
The charge to the Income Statement for all share option schemes is disclosed in Note 4.
231
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
26. Shares Held by ESOT
The NEXT 2003 ESOT has an independent trustee resident in Jersey and provides for the issue of shares to Group employees to satisfy awards which
vest/are exercised in accordance with the terms of the various share-based schemes detailed in Note 25.
As at 27 January 2024, the ESOT held 6,163,671 (2023: 6,469,007) ordinary shares of 10p each in the Company, the market value of which amounted
to £524.4m (2023: £429.3m). Details of outstanding share awards and options are shown in Note 25.
The consideration paid for the ordinary shares of 10p each in the Company held by the ESOT at 27 January 2024 and 28 January 2023 has been
shown as an ESOT reserve and presented within equity for the Company and the Group. All other assets, liabilities, income and costs of the ESOT
have been incorporated into the financial statements of the Company and the Group.
The table below shows the movements in equity from ESOT transactions during the year:
Shares purchased by ESOT in the year
Shares issued in respect of employee share schemes
2024
Shares
‘000
1,713
2,019
£m
116.3
94.0
2023
Shares
‘000
2,118
951
£m
124.0
40.8
Exercises in the year totalled £97.8m (2023: £35.2m) on Management and Sharesave options. The amount shown in the Statement of Changes in
Equity of £94.0m (2023: £40.8m) is after the issue of any nil cost LTIP, SMP and Deferred bonus shares. The weighted average cost of shares issued
by the ESOT was £125.7m (2023: £59.0m).
As at 21 March 2024, 71,945 employee share options had been exercised subsequent to the Balance Sheet date and had been satisfied by ordinary
shares issued by the ESOT.
27. Financial Instruments: Categories
Financial assets
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
Customer and other receivables at amortised cost*
Cash, short term deposits (Note 16)
Preference shares at amortised cost
Non-listed equity instruments designated at fair value through profit or loss / OCI
Financial liabilities
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
Lease liabilities at amortised cost
Interest bearing loans and borrowings:
Corporate bonds at amortised cost adjusted for the fair value changes attributable to the risk being hedged
Bank loans and overdrafts at amortised cost
Put and call options over non-controlling interests
Trade and other payables at amortised cost**
2024
£m
2023
£m
0.7
6.9
1,388.6
188.3
2.0
0.2
0.5
8.6
1,370.2
105.0
63.1
0.2
(5.9)
(24.2)
(1,037.7)
(17.6)
(32.7)
(1,023.3)
(790.8)
(88.2)
(26.1)
(740.5)
(790.7)
(102.3)
–
(596.9)
* Prepayments of £63.6m (2023: £54.9m) and other debtors of £0.5m (2023: £0.4m) do not meet the definition of a financial instrument.
** Other taxation and social security payables of £133.4m (2023: £95.7m), deferred income of £99.0m (2023: £84.2m), share-based payment liabilities of £0.2m (2023: £0.2m) and
other creditors of £30.5m (2023: £28.5m) do not meet the definition of a financial instrument.
232
28. Financial Instruments: Fair Values
The fair values of each category of the Group’s financial instruments are the same as their carrying values in the Group’s Balance Sheet, other than
corporate bonds and customer receivables, based on the following assumptions:
Other trade receivables, trade payables, short term
deposits and borrowings
The fair value approximates to the carrying amount because of the short maturity
of these instruments.
Preference shares
Non-listed equity instruments
Long term borrowings
Derivative financial instruments
Put and call options
The fair value of corporate bonds is as follows:
Corporate bonds
In hedging relationships
Not in hedging relationships
The fair value approximates to the carrying amount because the percentage
interest earned on the shares is equivalent to the effective interest rate used to
calculate the amortised cost.
The fair value approximates the net assets of the investment given no observable
market rates at the reporting date.
The fair value of bank loans and other borrowings approximates the carrying value
reported in the Balance Sheet as the majority are floating rate where interest
rates are reset at intervals less than one year.
The fair value is determined as the net present value of cash flows using
observable market rates at the reporting date.
The fair value is determined as the present value of the EBITDA forecasts
multiplied by an earnings ratio.
2024
2023
Carrying
amount
£m
240.8
550.0
790.8
Fair value
£m
248.7
535.0
783.7
Carrying
amount
£m
240.7
550.0
790.7
Fair value
£m
249.8
533.5
783.3
Corporate bonds are held at amortised cost, and where hedged, adjusted for the fair value changes attributable to the interest rate risk being
hedged (see Note 20).
Fair Value Hierarchy
The fair values of financial instruments measured by reference to the following levels under IFRS 13 “Fair value measurement”:
Hierarchy level
Inputs
Financial instruments
Valuation methodology
Level 1
Level 2
Level 3
Quoted prices in active markets
for identical assets or liabilities
Corporate bonds and Money
Market Funds
Inputs other than quoted prices
included within Level 1 that are
observable for the asset or liability,
either directly (i.e. as prices) or
indirectly (i.e. derived from prices)
Derivative financial instruments
Inputs for the asset or liability that
are not based on observable market
data (unobservable market data)
Non-listed equity instruments
at fair value through OCI and
Put and Call options at fair value
through other equity
Market value includes accrued interest and
change in credit risk and interest rate risk,
and is therefore different to the reported
carrying amounts.
Valuation techniques include forward pricing
and swap models using net present value
calculation of future cash flows. The model
inputs include the foreign exchange spot and
forward rates, yield curves of the respective
currencies, currency basis spreads between
the respective currencies, commodity price
indices and interest rate curves.
The fair value of these non-listed equity
investments has been estimated using a
discounted cash flow model.
The fair value of the put and call options
have been estimated using a formula as
stated within the relevant shareholder
agreement. The inputs include management
approved future cash flows and earnings
ratios calculated from market quoted prices.
233
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
29. Financial Instruments:
Financial Risk Management and Hedging Activities
The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework and for establishing the
Group’s risk management policies.
The Group has exposure to the following risks arising from financial instruments:
• Liquidity risk
•
Interest rate risk
• Foreign currency risk
• Commodity price risk
• Credit risk
• Capital risk
Treasury function
NEXT operates a centralised treasury function which is responsible for managing the liquidity, interest, commodity and foreign currency risks
associated with the Group’s activities. As part of its strategy for the management of these risks, the Group uses financial instruments. In accordance
with the Group’s treasury policy, financial instruments are not entered into for speculative purposes. The treasury policy is reviewed and
approved by the Board and specifies the parameters within which treasury operations must be conducted, including authorised counterparties,
instrument types and transaction limits, and principles governing the management of liquidity, interest and foreign currency risks.
The Group’s financial instruments also include cash, short term deposits, preference shares, bank overdrafts, loans, and corporate bonds. The main
purpose of these financial instruments is to raise finance for the Group’s operations. In addition, the Group has various other financial assets and
liabilities such as trade receivables and trade payables arising directly from its operations.
Liquidity risk
The Group manages its cash and borrowing requirements centrally to minimise net interest expense within risk parameters agreed by the Board,
whilst ensuring that the Group has sufficient liquid resources to meet the operating needs of its businesses. The forecast cash and borrowings
profile of the Group is monitored to ensure that adequate headroom remains under committed borrowing facilities.
234
29. Financial Instruments:
Financial Risk Management and Hedging Activities
Liquidity risk
The table below shows the maturity analysis of the undiscounted remaining contractual cash flows (including interest) of the Group’s financial
(continued)
liabilities, including cash flows in respect of derivatives:
(continued)
2024
Bank loans and overdrafts
Lease liabilities
Trade and other payables
Corporate bonds
Loan notes
Put and call options
Derivatives: net settled
Derivatives: gross settled
Cash inflows
Cash outflows
Total cash flows
2023
Bank loans and overdrafts
Lease liabilities
Trade and other payables
Corporate bonds
Derivatives: net settled
Derivatives: gross settled
Cash inflows
Cash outflows
Total cash flows
Less than
1 year
£m
37.6
205.7
703.8
29.3
23.6
–
1,000.0
6.4
(1,241.2)
1,250.0
1,015.2
Less than
1 year
£m
102.3
182.7
569.7
29.3
884.0
2.7
(1,139.1)
1,169.4
917.0
1 to 2
years
£m
29.4
175.9
2.8
279.3
0.6
–
488.0
3.3
–
–
491.3
1 to 2
years
£m
–
162.4
4.6
29.3
196.3
2.9
–
–
199.2
2 to 5
years
£m
–
366.1
–
593.6
–
26.1
985.8
2.0
–
–
987.8
2 to 5
years
£m
–
360.3
–
562.0
922.3
2.8
–
–
925.1
Over
5 years
£m
–
735.0
–
–
–
–
735.0
–
–
–
735.0
Over
5 years
£m
–
693.6
–
310.9
1,004.5
–
–
–
1,004.5
Total
£m
67.0
1,482.7
706.6
902.2
24.2
26.1
3,208.8
11.7
(1,241.2)
1,250.0
3,229.3
Total
£m
102.3
1,399.0
574.3
931.5
3,007.1
8.4
(1,139.1)
1,169.4
3,045.8
Within lease liabilities greater than 5 years are leases on stores with cash flows in years 5–10 of £153.0m (2023: £193.4m) and more than 10 years
of £27.8m (2023: £42.3m). The lease liabilities greater than 5 years on warehouses and head office premises with cash flows in years 5–10 are
£146.3m (2023: £137.5m) and more than 10 years of £407.9m (2023: £320.4m).
As at 27 January 2024, the Group had borrowing facilities of £425.0m (2023: £450.0m) committed until June 2028 (2023: committed until November
2024), in respect of which all conditions precedent have been met. £nil of the facilities were drawn down as at January 2024 (2023: £nil).
Interest rate risk
The Group is exposed to fair value interest rate risk on its fixed rate corporate bonds and cash flow interest rate risk on floating rate loans and
overdrafts. The forecast cash and borrowings profile of the Group is monitored regularly to assess the mix of fixed and variable rate debt, and the
Group uses interest rate derivatives where appropriate to manage its exposure to changes in interest rates and the economic environment.
235
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
29. Financial Instruments:
Financial Risk Management and Hedging Activities
Interest rates: fair value hedges
The Group has interest rate swap agreements in place as fair value hedges against part of the interest rate risk associated with the corporate bonds.
Under the terms of the swaps, which have matching features as the bonds, the Group receives a fixed rate of interest equivalent to the relevant
coupon rate, and pays a variable rate interest related to SONIA. Details of the aggregate rates payable are given in Note 20.
(continued)
There is an economic relationship between the hedged item and the hedging instrument as the terms of the interest rate swaps match the terms
of the fixed rate corporate bonds (e.g. notional amount and maturity). The Group has established a hedge ratio of 1:1 for the hedging relationships
as the underlying risk of the interest rate swap is identical to the hedged risk component. To test the hedge effectiveness, the Group compares the
changes in the fair value of the hedging instrument against the changes in the fair value of the hedged item attributable to the hedged risk.
The hedge ineffectiveness can arise from:
• Different interest rate curve applied to discount the hedged item and the hedging instrument.
• Differences in timing of cash flows of the hedged item and hedging instrument.
• The counterparties’ credit risk differently impacts the fair value movements of the hedging instrument and the hedged item.
Fair value of group swaps
The fair values of the Group’s interest rate swaps, including accrued interest, are as follows:
Derivatives in designated fair value hedging relationships
2024
£m
(11.3)
2023
£m
(9.5)
The fair values of derivatives have been calculated by discounting the expected future cash flows at prevailing interest rates and are based on
market prices at the Balance Sheet date.
The timing of the nominal amounts of the interest rate swaps are as follows:
Maturity date of swap
Interest rate swap
Nominal amount (£m)
Average price
The impact of the hedging instrument on the Balance Sheet is as follows:
2024
October 2026
Fixed to floating
250.0
SONIA + 1.7%
2023
October 2026
Fixed to floating
250.0
SONIA + 1.7%
Changes in fair value
used for measuring
ineffectiveness in
the period
£m
–
(0.1)
Line item in the Balance Sheet
Other financial assets
Other financial liabilities
Notional amount
£m
–
250.0
Carrying amount*
£m
–
(9.2)
At 27 January 2024
Interest rate swaps – assets
Interest rate swaps – liabilities
At 28 January 2023
Interest rate swaps – assets
Interest rate swaps – liabilities
Other financial assets
Other financial liabilities
–
250.0
–
(9.5)
–
(27.5)
* Other financial liabilities also includes £2.1m of interest payable (2023: £0.2m interest receivable) on interest rate swaps that has been accrued at the balance sheet date.
The impact of the hedged items on the Balance Sheet is as follows:
Line item in the Balance Sheet
Corporate bonds
Carrying amount
£m
250.0
Accumulated fair
value adjustments
£m
(9.2)
Changes in fair value
used for measuring
ineffectiveness in
the period
£m
(0.1)
Corporate bonds
250.0
(9.3)
(25.0)
At 27 January 2024
Fixed-rate borrowings
At 28 January 2023
Fixed-rate borrowings
The ineffectiveness recognised in the Income Statement for the period ended 27 January 2024 was £nil (2023: £nil).
236
29. Financial Instruments:
Financial Risk Management and Hedging Activities
Foreign currency risk
The Group’s principal foreign currency exposures arise from the purchase of overseas sourced products. Group policy allows for these exposures to
be hedged for up to 24 months ahead in order to fix the cost in Sterling. This hedging activity involves the use of spot, forward and option contracts.
(continued)
The market value of outstanding foreign exchange contracts is reported regularly to the Board and reviewed in conjunction with percentage cover
taken by season and current market conditions, in order to assess and manage the Group’s ongoing exposure.
The Group does not have a material exposure to currency movements in relation to the translation of overseas investments and consequently does
not hedge any such exposure. The Group’s net exposure to foreign currencies, taking hedging activities into account, is illustrated by the sensitivity
analysis in Note 30.
Foreign currency hedges
There is an economic relationship between the hedged items and the hedging instruments as the terms of the foreign exchange contracts match
the terms of highly probable forecast transactions (e.g. notional amount and expected payment date). The Group has established a hedge ratio of
1:1 for the hedging relationships as the underlying risk of the foreign exchange contracts are identical to the hedged risk components. To test hedge
effectiveness, the Group uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against
the changes in the fair value of the hedged items attributable to the hedged risks.
In these hedge relationships, the main sources of ineffectiveness are:
• Differences in the timing of the cash flows of the hedged items and the hedging instruments.
• Different indices (and accordingly different curves) linked to the hedged risk of the hedged items and hedging instruments.
• The counterparties’ credit risk differently impacting the fair value movements of the hedging instruments and hedged items.
• Changes to the forecasted amount of cash flows of hedged items and hedging instruments.
The fair values of foreign exchange derivatives are as follows:
Derivatives in designated hedging relationships
Other foreign exchange derivatives not designated in hedging relationships
Total foreign exchange derivatives
Derivatives designated in hedging relationships at 27 January 2024:
US Dollars (highly probable forecast purchases)
Notional amount (in £m)
Average GBP: USD contract rate
EURO (highly probable forecast purchases)
Notional amount (in £m)
Average GBP: EURO contract rate
EURO (highly probable forecast sales)
Notional amount (in £m)
Average GBP: EURO contract rate
Other (highly probable forecast sales)
Notional amount (in £m)
Average GBP: Other contract rate
* 6 currencies are hedged, which are individually not material to the financial statements.
2024
£m
(6.5)
(5.2)
(11.7)
Maturity
1–6 months 6–12 months
More than
one year
805.0
1.26
45.0
1.16
42.0
1.14
133.5
1.28
–
–
8.8
1.14
–
49.9
Various currencies*
–
–
–
–
–
–
–
2023
£m
(14.6)
(17.0)
(31.6)
Total
938.5
1.26
45.0
1.16
50.8
1.14
49.9
237
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
29. Financial Instruments:
Financial Risk Management and Hedging Activities
Foreign currency hedges
Derivatives designated in hedging relationships at 28 January 2023:
(continued)
US Dollars (highly probable forecast purchases)
Notional amount (in £m)
Average GBP: USD contract rate
EURO (highly probable forecast purchases)
Notional amount (in £m)
Average GBP: EURO contract rate
EURO (highly probable forecast sales)
Notional amount (in £m)
Average GBP: EURO contract rate
Other (highly probable forecast sales)
Notional amount (in £m)
Average GBP: Other contract rate
(continued)
Maturity
1–6 months
6–12 months
More than
one year
663.5
1.20
26.8
1.13
20.0
1.13
40.9
1.22
–
–
–
–
47.5
–
Various currencies*
–
–
–
–
–
–
Total
704.4
1.20
26.8
1.13
20.0
1.13
47.5
* 5 currencies were hedged, which are individually not material to the financial statements.
The impact of the hedging instruments on the Balance Sheet are as follows:
Line item in the Balance Sheet
Other financial assets
Other financial liabilities
Notional amount
£m
548.0
605.9
Carrying amount
£m
6.8
(18.0)
Changes in fair value
used for measuring
ineffectiveness in
the period
£m
29.2
(28.4)
Other financial assets
Other financial liabilities
462.5
407.2
9.1
(40.8)
116.4
(37.6)
At 27 January 2024
Foreign exchange contracts
Foreign exchange contracts
At 28 January 2023
Foreign exchange contracts
Foreign exchange contracts
238
Closing cash
flow hedge
reserve
£m
1.9
(17.0)
Closing cost
of hedging
reserve
£m
–
0.5
Amount
reclassified
from OCI to
the Income
Statement
£m
(5.0)
–
Line item in
the Income
Statement
Revenue
–
29. Financial Instruments:
Financial Risk Management and Hedging Activities
Foreign currency hedges
The impact of the hedged items on the Balance sheet is as follows:
(continued)
27 January 2024
(continued)
28 January 2023
Changes in fair
value used for
measuring
ineffectiveness
in the period
£m
3.5
(1.8)
Closing cash
flow hedge
reserve
£m
0.4
(6.5)
Closing cost
of hedging
reserve
£m
–
(0.4)
Changes in fair
value used for
measuring
ineffectiveness
in the period
£m
(7.0)
86.2
Highly probable forecast sales
Highly probable forecast stock purchases
The effect of the cash flow hedge in the Income Statement or other comprehensive income is as follows:
Ineffectiveness
recognised in
Income
Statement
£m
–
–
Recycled to
cost of
inventories
£m
–
12.4
Cost of
hedging
recognised in
OCI
£m
–
(0.9)
Year ended 27 January 2024
Highly probable forecast sales
Highly probable forecast stock purchases
Year ended 28 January 2023
Highly probable forecast sales
Highly probable forecast stock purchases
–
–
–
(134.8)
–
(0.4)
6.1
–
Revenue
–
Commodity price risk
The Group is exposed to commodity price risk on contracts to purchase commodities at a floating price. In order to mitigate the risk arising from
potential movements in commodity prices, the Group enters into deliverable fixed price contracts or financial derivatives. At 27 January 2024,
the Group had commodity derivative contracts with a fair value loss of £0.3m (2023: £nil) in relation to highly probable forecast diesel purchases.
These contracts committed the Group to pay a fixed price and receive the floating index price on 12,623kL (2023: nil) of diesel and have been
designated as cash flow hedges for reporting purposes.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations
and arises primarily from the Group’s Online customer receivables. The carrying amount of financial assets represents the maximum residual credit
exposure, which was £1,333.2m at the reporting date (2023: £1,297.3m). These are detailed in Note 14.
The Group’s credit risk in relation to customer receivables is influenced mainly by the individual characteristics of each customer. The Board has
established a credit policy under which each new credit customer is analysed individually for creditworthiness and subject to credit verification
procedures. Receivable balances are monitored on an ongoing basis and provision is made for estimated irrecoverable amounts using forward
looking estimates. The concentration of credit risk is limited due to the Online customer base being large and diverse. As at January 2024,
there were 2.94m active customers (2023: 2.87m) with an average balance of £503 (2023: £508). The Group’s outstanding receivables balances
and impairment losses are detailed in Note 14. The performance of our credit risk policies and the risk of the debtor book are monitored weekly by
management. Any trends and deviations from expectations are investigated. Senior management review is carried out monthly.
Customer receivables with a value of £12.1m (2023: £17.6m) were on a Reduced Payment Indicator (RPI) plan. An allowance for Expected Credit
Losses (ECLs) of £8.7m (2023: £12.3m) has been made against these balances. Customers are typically on RPI plans for a period of 12 months
during which no interest is charged and repayment rates are reduced. On completion of the RPI plan the customer would be returned to normal
scoring, which considers multivariate factors, including indebtedness and repayment history, in the assessment of their expected risk levels.
Any modification gain or loss recognised is immaterial to the financial statements.
The Group uses Experian Delphi for Customer Management which provides a suite of characteristics and scores to monitor the credit behaviour
of new and existing customers. The principal score for making risk decisions around credit limit changes, and monitoring the risk of associated
sales, is the Account and Arrears Management (“AAM”) score. The principal measure to assess a customer’s ability to afford repayments, and our
allowance for expected credit losses under IFRS 9, is the Consumer Indebtedness Index (“CII”). The CII is a score within the range of 1 to 99. A lower
CII score is representative of a lower level of risk associated with the debt (i.e. a lower CII score indicates the customer has a greater ability to
afford repayments).
239
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
29. Financial Instruments:
Financial Risk Management and Hedging Activities
Credit risk
The following table contains an analysis of customer and other receivables segmented by CII score at the end of the reporting period. For the
purpose of this analysis, trade receivables are recognised in Risk band 1.
(continued)
(continued)
Risk exposure determined by CII score
Risk band 1 (CII<=5)
Risk band 2 (5CII)
Gross carrying amount before credit impaired
Credit impaired
Gross carrying amount after credit impaired
Less allowance
Carrying amount
2024
Total
£m
954.4
231.1
159.6
96.0
1,441.1
101.5
1,542.6
(209.4)
1,333.2
2023
Total
£m
891.6
211.7
173.8
126.3
1,403.4
96.4
1,499.8
(202.5)
1,297.3
Analysis of customer receivables and other trade receivables, stratified by credit grade, is provided in the tables below. In 2023, CII scores were
based on GEN10 (Risk Band 1 – CII<=10, Risk Band 2 – 10CII). For 2024, the CII scores are
based on GEN11.
1–30
days past
due
£m
Current
£m
942.7
222.7
143.5
65.5
–
1,374.4
2024
Customer receivables and other trade receivables
Risk band 1 (CII<=5)
Risk band 2 (5CII)
Otherwise impaired
Total
Loss allowance
Risk band 1 (CII<=5)
Risk band 2 (5CII)
Otherwise impaired
Total
Expected loss rate %
Risk band 1 (CII<=5)
Risk band 2 (5CII)
Otherwise impaired
Total
5.2%
7.0%
8.9%
19.5%
–
6.6%
(49.0)
(15.5)
(12.8)
(12.8)
–
(90.1)
10.7
7.1
10.3
9.2
–
37.3
(1.4)
(1.1)
(1.7)
(2.0)
–
(6.2)
13.3%
15.2%
16.9%
21.3%
–
16.6%
31–60
days past
due
£m
61–90
days past
due
£m
91–120
days past
due
£m
>120
days past
due
£m
Payment
plans
£m
0.1
0.2
1.8
4.8
–
6.9
–
(0.1)
(0.6)
(2.0)
–
(2.7)
32.8%
33.6%
36.3%
40.8%
–
39.3%
–
–
0.6
3.3
–
3.9
–
–
(0.4)
(2.1)
–
(2.5)
63.7%
62.7%
61.4%
64.3%
–
63.8%
–
–
0.2
2.7
–
2.9
–
–
(0.2)
(2.1)
–
(2.3)
–
–
77.9%
80.6%
–
80.4%
–
–
0.3
3.2
101.5
105.0
–
–
(0.2)
(2.6)
(94.1)
(96.9)
79.3%
79.2%
77.3%
80.6%
92.7%
92.3%
0.9
1.1
2.9
7.2
–
12.1
(0.3)
(0.5)
(1.8)
(6.1)
–
(8.7)
31.3%
40.8%
61.7%
84.6%
–
71.3%
Total
£m
954.4
231.1
159.6
95.9
101.5
1,542.5
(50.7)
(17.2)
(17.7)
(29.7)
(94.1)
(209.4)
5.3%
7.4%
11.1%
31.0%
92.7%
13.6%
240
29. Financial Instruments:
Financial Risk Management and Hedging Activities
Credit risk
(continued)
1–30
days past
due
£m
Current
£m
873.9
202.7
158.4
94.2
–
1,329.2
2023
Customer receivables and other trade receivables
Risk band 1 (CII<=10)
Risk band 2 (10CII)
Otherwise impaired
Total
Loss allowance
Risk band 1 (CII<=10)
Risk band 2 (10CII)
Otherwise impaired
Total
Expected loss rate %
Risk band 1 (CII<=10)
Risk band 2 (10CII)
Otherwise impaired
Total
4.1%
6.2%
10.8%
20.3%
–
6.4%
(35.6)
(12.6)
(17.2)
(19.1)
–
(84.5)
14.0
6.1
8.2
9.1
–
37.4
(1.2)
(0.7)
(1.4)
(2.0)
–
(5.3)
8.8%
11.5%
16.5%
22.1%
–
14.2%
31–60
days past
due
£m
61–90
days past
due
£m
91–120
days past
due
£m
(continued)
>120
days past
due
£m
Payment
plans
£m
0.5
0.6
2.0
4.4
–
7.5
(0.2)
(0.3)
(1.0)
(2.7)
–
(4.2)
32.4%
41.3%
51.4%
61.3%
–
55.1%
0.1
0.1
1.0
3.5
–
4.7
–
(0.1)
(0.6)
(2.3)
–
(3.0)
47.6%
52.2%
60.5%
66.1%
–
64.3%
–
–
0.3
3.0
–
3.3
–
–
(0.2)
(2.3)
–
(2.5)
–
–
73.8%
79.0%
–
78.3%
0.1
0.1
0.4
3.1
96.4
100.1
(0.1)
(0.1)
(0.3)
(2.4)
(87.8)
(90.7)
78.2%
77.4%
76.8%
78.7%
91.1%
90.6%
3.0
2.1
3.5
9.0
–
17.6
(1.9)
(1.4)
(2.3)
(6.7)
–
(12.3)
63.7%
67.6%
64.3%
75.2%
–
70.1%
Total
£m
891.6
211.7
173.8
126.3
96.4
1,499.8
(39.0)
(15.2)
(23.0)
(37.5)
(87.8)
(202.5)
4.4%
7.1%
13.2%
29.8%
91.1%
13.5%
Credit risk on other financial assets
Investments of cash surpluses and derivative contracts are made through banks and companies which must fulfil credit rating and investment
criteria approved by the Board. Risk is further mitigated by diversification and limiting counterparty exposure. The Group does not consider there
to be any impairment loss in respect of these balances (2023: £nil). The maximum exposure to credit risk at the reporting date is the carrying value
of each class of asset as the debt is not collateralized.
Capital risk
The capital structure of the Group consists of debt, as analysed in Note 31, and equity attributable to the equity holders of the Parent Company,
comprising issued capital, reserves and retained earnings as shown in the Consolidated Statement of Changes in Equity. The Group manages its
capital with the objective that all entities within the Group continue as going concerns while maintaining an efficient structure to minimise the cost
of capital. The Group is not restricted by any externally imposed capital requirements.
As part of its strategy for delivering sustainable returns to shareholders, the Group has been returning capital to shareholders by way of share
buybacks in addition to dividends (including special dividends). Share buybacks may be transacted through both on-market purchases and off-
market contingent contracts.
30. Financial Instruments: Sensitivity Analysis
Interest rate sensitivity analysis
The table below illustrates the hypothetical sensitivity of the Group’s reported profit and closing equity to a 1.0% increase or decrease in interest
rates, assuming all other variables were unchanged. The sensitivity rate of 1.0% represents the directors’ assessment of a reasonably possible
change, based on historic volatility.
The analysis has been prepared using the following assumptions:
• For floating rate assets and liabilities, the amount of the asset or liability outstanding at the Balance Sheet date is assumed to have been
outstanding for the whole year.
• Fixed rate financial instruments that are carried at amortised cost are not subject to interest rate risk for the purpose of this analysis.
Positive figures represent an increase in profit or equity.
241
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
30. Financial Instruments: Sensitivity Analysis
Interest rate sensitivity analysis
Interest rate increase of 1.0%
Interest rate decrease of 1.0%
(continued)
(continued)
Income Statement
2024
£m
2023
£m
(1.5)
1.5
(2.8)
2.8
Equity
2024
£m
(1.5)
1.5
2023
£m
(2.8)
2.8
Foreign currency sensitivity analysis
The Group’s principal foreign currency exposures are to US Dollars and the Euro. The table below illustrates the hypothetical sensitivity of the
Group’s reported profit and closing equity to a 10% increase and decrease in the US Dollar/Sterling and Euro/Sterling exchange rates at the
reporting date, assuming all other variables remain unchanged. The sensitivity rate of 10% represents the directors’ assessment of a reasonably
possible change, based on historic volatility.
The analysis assumes that exchange rate fluctuations on currency derivatives that form part of an effective cash flow hedge relationship affect
the fair value reserve in equity and the fair value of the hedging derivatives. For foreign exchange derivatives which are not designated hedges,
movements in exchange rates impact the Income Statement.
Positive figures represent an increase in profit or equity.
Sterling strengthens by 10%
US Dollar
Euro
Sterling weakens by 10%
US Dollar
Euro
Income Statement
Equity
2024
£m
(12.6)
–
3.4
–
2023
£m
(20.9)
–
14.0
–
2024
£m
(60.2)
1.3
66.2
(1.6)
2023
£m
(51.4)
(1.5)
58.6
1.8
Year end exchange rates applied in the above analysis are US Dollar 1.27 (2023: 1.24) and Euro 1.17 (2023: 1.14). Strengthening and weakening of Sterling
may not produce symmetrical results depending on the proportion and nature of foreign exchange derivatives which do not qualify for hedge accounting.
31. Analysis of Net Debt
Cash and short term deposits
Overdrafts and short term borrowings
Cash and cash equivalents
Loan notes
Corporate bonds
Fair value hedges of corporate bonds
Net debt excluding leases
Current lease liability
Non-current lease liability
Net debt including leases
January
2023
£m
Arising on
acquisitions
£m
Cash flow
£m
Other
changes
£m
IFRS 16
£m
105.0
(102.3)
2.7
–
(790.7)
(9.3)
(797.3)
(146.2)
(877.1)
(1,023.3)
(1,820.6)
37.4
(36.4)
1.0
–
–
–
1.0
(25.9)
(58.8)
(84.7)
(83.7)
45.9
74.7
120.6
–
–
–
120.6
–
–
–
120.6
–
–
–
(24.2)
(0.1)
0.1
(24.2)
–
–
–
(24.2)
–
–
–
–
–
–
–
4.3
66.0
70.3
70.3
January
2024
£m
188.3
(64.0)
124.3
(24.2)
(790.8)
(9.2)
(699.9)
(167.8)
(869.9)
(1,037.7)
(1,737.6)
The IFRS 16 movements represent cash movements in relation to lease payments of £204.0m, and non cash movements relating to disposals
of £6.3m and FX/Others of £0.9m, offset by additions of £40.1m, modifications of £52.9m, finance costs £47.9m and additions arising from
acquisitions of £84.7m. See Note 12 for further details.
Interest of £32.8m was accrued and paid on the Corporate bonds and associated hedges during the year. The unpaid interest accrual of £16.4m is
recognised within accruals.
242
32. Cash Generated from Operations
Cash flows from operating activities
Operating profit
Depreciation, reversal of impairment and (profit)/loss on disposal of property, plant and equipment
Depreciation and impairment reversal on right-of-use assets
Amortisation and impairment of intangible assets
Amortisation, impairment & disposals of investments
Share option charge
Share of profit of associates and joint ventures
Interest received
Exchange movement
Decrease/(increase) in inventories and right of return asset
Decrease/(increase) in customer and other receivables
Increase in trade and other payables
Cash generated from operations
52 weeks to
27 January
2024
£m
52 weeks to
28 January
2023
£m
987.9
95.7
111.8
38.5
0.8
31.9
(6.9)
2.8
(15.5)
15.3
3.7
47.6
1,313.6
941.5
80.6
72.7
12.5
1.1
24.3
(14.3)
–
(0.8)
(22.8)
(156.5)
12.0
950.3
In the prior year interest received of £0.3m was presented within “Cash flows from financing activities”. In the current year interest received (£2.8m)
has been presented within “Cash flows from operating activities”. No restatement has been made as the prior year amount was not material. In the
year to January 2024 the movement on inventories, receivables and payables does not include the acquisition balance sheet amounts for Reiss or
FatFace but does include the working capital movement between acquisition and the balance sheet date.
33. Related Party Transactions
During the year, Group entities entered into the following transactions with related parties and their respective subsidiaries who are not members
of the Group:
Related party
Sales
Loans (repaid)/advanced
Transactions and loan interest
Amounts outstanding at year end
Joint ventures
2024
£m
64.2
(5.5)
32.3
7.6
2023
£m
58.1
(14.2)
47.8
27.7
Associates
2024
£m
20.8
0.5
0.2
3.5
2023
£m
7.2
0.5
1.2
2.8
The amounts above are an aggregation of the transactions with the Group’s associates and joint ventures, namely:
• VS Brand Holdings UK Limited and its subsidiaries (joint venture)
• Pink TopCo Limited and its subsidiaries (the “Reiss” Group) (joint venture) – up until September 2023 (see Note 13)
• West Apparel UK Holdings Limited (“GAP”) (joint venture)
• Choice Discount Stores Limited (associate)
• Aubin & Wills Holdings Limited and its subsidiaries (associate)
• Regent Bidco 1 Limited and its subsidiaries (the “JoJo Maman Bébé” Group) (associate)
• Swoon Limited (associate).
All transactions are on an arm’s length basis. Within transactions and loan interest are (i) recharges for payroll costs borne by the NEXT Group and
then recharged to the related party and (ii) certain joint ventures are part of the NEXT VAT Group and accordingly includes transactions for the
settlement of VAT by NEXT on behalf of the joint venture. Such amounts are immediately recharged by NEXT and then settled by the joint venture.
243
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
34. Acquisition of Subsidiaries
Current period acquisitions
Reiss
In September 2023, the Group increased its shareholding in the Reiss Group (“Reiss”) from 51% to 72%. In addition, due to a change in reserved
rights within the Shareholder Agreement, the Group therefore has control of Reiss. Reiss’ principal activity is the design and retail of high quality
women’s, men’s and children’s fashion clothing and accessories sold exclusively under the Reiss brand in the UK and overseas. Following NEXT’s
original equity shareholding and the Total Platform partnership, the Reiss business has grown significantly with excellent results. Through the
additional shareholding, Reiss will be able to reap the infrastructural benefits of being part of a larger Group. This qualifies as a business as defined
in IFRS 3 Business Combinations. NEXT’s direct shareholding is in the Reiss group’s ultimate parent company, Pink Holdco Limited.
The Group recognised a non cash gain of £110.1m as a result of remeasuring the equity interest held in Reiss to fair value before the business
combination. This gain is recognised as an exceptional item in the Consolidated Income Statement (Note 6).
Given the acquisition occurred in the second half of the financial year, the accounting for the acquisition of Reiss has only been provisionally
determined at the end of the reporting period. In accordance with the requirements of IFRS 3 Business Combinations, the Group will finalise the
acquisition balance sheet within 12 months of the acquisition date.
Included within the fair value of the net identifiable assets on acquisition is an intangible asset representing the Reiss brand and customer
relationship value of £365.9m. Total identifiable assets acquired were £291.0m, which results in a goodwill value of £140.6m arising from the
acquisition. The goodwill relates to expected synergies from combining Reiss into the NEXT Group and the effect of a combined workforce with
Brand specific design experience. The goodwill at the year end was £140.6m (Note 11).
For tax purposes, the tax values of Reiss’ assets are required to be reset based on market values of the assets. At the date of finalisation of these
consolidated financial statements, the necessary market valuations and other calculations had not been finalised and they have therefore only
been provisionally determined based on the directors’ best estimate of the likely tax values.
The amounts recognised in respect of the identifiable assets acquired are set out in the table below:
Financial assets including cash
Inventory
Property, plant and equipment, software and right-of-use assets
Identifiable intangible assets
Financial liabilities including loans and lease liabilities
Deferred tax liabilities
Total identifiable assets acquired
Goodwill
Non-controlling interest in 28% of Pink Holdco Limited
Net assets attributable to NEXT
Satisfied by:
Cash
Fair value of joint venture holding
Loan note and deferred consideration
Total consideration
£m
43.3
61.7
42.6
365.9
(135.9)
(86.6)
291.0
140.6
(120.4)
311.2
98.5
194.5
18.2
311.2
The non-controlling interest of 28% ownership interest in Reiss recognised at the acquisition date was measured by reference to the share for share
consideration paid by the non-controlling interest and amounted to £120.4m.
In addition to the cash consideration paid, the Group received a contribution from the vendor of £2.0m towards the due diligence and legal
costs as part of the acquisition. This has been excluded from the consideration amounts above as it did not relate to the purchase price of the
shares themselves.
The existing Reiss management team reinvested their original shareholding into Pink Holdco Limited in exchange for a minority stake of 6.3%.
Put and call options, to enable future exit opportunities for the Reiss management team, have also been agreed and become exercisable in 2027,
2028 and 2029. A valuation of these put options has been performed using an earnings multiple, a suitable discount rate and approved forecasts,
and the initial liability of £18.1m has been recognised with the corresponding entry to Other Equity in accordance with the present value method
of accounting. These options are required to be fair valued at each accounting period date.
Reiss contributed £137.4m of revenue and £16.9m profit before tax to the Group’s profit for the period between the date of acquisition and the
reporting date. Reiss would have contributed £345.5m revenue and £27.0m profit before tax to the Group’s profits had the business combination
occurred at the beginning of the year.
244
34. Acquisition of Subsidiaries
FatFace
In October 2023, the Group acquired 97% of Bridgetown Holdco Limited, the new parent company of the FatFace group, a consolidated group
whose principal activity is the design and retail of lifestyle clothing, footwear and accessories in the UK, Ireland and North America. It is expected
that this acquisition will strengthen the Group’s portfolio of brands while its Total Platform infrastructure will help grow the FatFace business.
This qualifies as a business as defined in IFRS 3 Business Combinations.
(continued)
Given the acquisition occurred in the second half of the financial year, the accounting for the acquisition of FatFace has only been provisionally
determined at the end of the reporting period. In accordance with the requirements of IFRS 3 Business Combinations, the Group will finalise the
acquisition balance sheet within 12 months of the acquisition date.
The identifiable intangible assets include a brand and customer relationship value of £78.2m. Total identifiable assets acquired were £86.0m,
which results in a goodwill value of £29.3m arising from the acquisition. The goodwill relates to expected synergies from combining FatFace into
the NEXT Group and the effect of a combined workforce with Brand specific design experience. The goodwill at the year end was £29.3m (Note 11).
For tax purposes, the tax values of FatFace’s assets are required to be reset based on market values of the assets. At the date of finalisation of these
consolidated financial statements, the necessary market valuations and other calculations had not been finalised and they have therefore only
been provisionally determined based on the directors’ best estimate of the likely tax values.
The amounts provisionally recognised in respect of the identifiable assets acquired are set out in the table below:
Financial assets including cash
Inventory
Property, plant and equipment, software and right-of-use assets
Identifiable intangible assets
Financial liabilities including loans and lease liabilities
Deferred tax liabilities
Total identifiable assets acquired
Goodwill
Non-controlling interest in 3% of Bridgetown Holdco Limited
Net assets attributable to NEXT
Satisfied by:
Cash
Shares
Loan notes
Total consideration
£m
28.3
48.7
59.5
78.2
(115.6)
(13.1)
86.0
29.3
(3.7)
111.6
57.6
53.4
0.6
111.6
The non-controlling interest of 3% ownership interest in FatFace recognised at the acquisition date was measured by reference to the overall
valuation of the FatFace Group and amounted to £3.7m.
As part of the transaction the existing FatFace management team reinvested their original shareholding into Bridgetown Holdco Limited in exchange
for a minority stake of 3%. Management and NEXT hold put and call options over this minority stake which enables future exit opportunities for
the FatFace management team. These options become exercisable in 2027, 2028 and 2029 (or earlier at NEXT discretion if management exit
the business before these dates). A valuation of these put options has been performed using an earnings multiple, a suitable discount rate and
approved forecasts, and the initial liability of £3.8m has been recognised with the corresponding entry to Other Equity in accordance with the
present value method of accounting. These options are required to be fair valued at each accounting period date.
FatFace contributed £90.8m of revenue and £1.7m profit before tax to the Group’s profit for the period between the date of acquisition and the
reporting date. FatFace would have contributed £268.8m revenue and £14.7m profit before tax (including exceptional items of £4.6m) to the
Group’s profits had the business combination occurred at the beginning of the year.
245
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
34. Acquisition of Subsidiaries
Prior period acquisitions – Joules
On 1 December 2022, the Group acquired 74% of the trade and assets from Joules Limited, a consolidated group whose principal activity is the
design and sale of lifestyle clothing, related accessories and a homeware range, through a multi-channel business structure embracing retail stores,
wholesale and online. It is expected that this acquisition will strengthen the Group’s portfolio of brands while its Total Platform infrastructure will
help grow the Joules business. This qualified as a business as defined in IFRS 3 Business Combinations. The trade and assets were transferred into
a new trading company, The Harborough Hare Limited.
(continued)
The amounts recognised in respect of the identifiable assets acquired are set out in the table below:
Financial assets
Inventory
Property, plant and equipment and software
Identifiable intangible assets
Financial liabilities
Deferred tax liabilities
Total identifiable assets acquired
Goodwill
Non-controlling interest in 26% of The Harborough Hare Holdings Limited
Net assets attributable to NEXT
Satisfied by:
Cash
Previously
reported
£m
Fair Value
Adjustments
£m
Restated
£m
1.8
14.3
8.6
10.5
(9.8)
(2.6)
22.8
11.6
(5.6)
28.8
–
8.7
0.9
–
–
0.1
9.7
(9.7)
–
–
1.8
23.0
9.5
10.5
(9.8)
(2.5)
32.5
1.9
(5.6)
28.8
28.8
–
28.8
Due primarily to the short period of time between acquisition and reporting, the accounting for the acquisition of Joules in the January 2023
balance sheet was a provisional assessment. In accordance with the requirements of IFRS 3 Business Combinations, the Group has now finalised
the acquisition balance sheet within 12 months of the acquisition date. The changes were immaterial.
The identifiable intangible assets include a brand value of £10.1m and other intangible assets of £0.4m. Total identifiable assets acquired were
£32.5m, which resulted in a goodwill value of £1.9m arising from the acquisition. The value of goodwill was lower than provisionally calculated
predominantly as a result of reducing the level of inventory provisions previously identified. The goodwill relates to expected synergies from
combining Joules into the NEXT Group and the effect of a combined workforce with Brand specific design experience.
The non-controlling interest of 26% ownership interest in Joules recognised at the acquisition date was measured by reference to the cash
consideration paid by the non-controlling interest and amounted to £5.6m.
Joules contributed £32.8m revenue and £4.1m loss before tax to the Group’s profit for the period between the date of acquisition and the January
2023 reporting date. The Joules business was previously part of the Joules plc group which went into administration in November 2022. It was
not possible to reliably identify the revenue or profit or loss which would have been recognised had the business combination occurred at the
beginning of the annual reporting period. However prior to administration Joules Limited, the main trading entity of the former Joules plc group,
reported revenue of £179.9m and a loss of £0.4m for the 52 weeks ended 30 May 2021.
35. Contingent Liabilities
Since 2018 NEXT has received around 2,500 equal pay complaints from former and current employees in our store network. These claims are
subject to a legal and tribunal process which is expected to last several years. The claims are fact sensitive, legally complex and being defended
vigorously. The directors believe that the likelihood of successful outcome for the claimants is possible (but not probable). The directors also believe
that it is not yet possible to reliably assess the likely outcome or the exact quantum of these claims if they are successful.
Accordingly, there is no provision in these financial statements for any liability that may arise in relation to the above.
36. Post Balance Sheet Events
Subsequent to the year end, and following a consultation process with affected employees, the Company closed its defined benefit plan to future
service accrual. Pension members who were previously accruing service will now become deferred members and their accrued pension will be
revalued each year on a basis linked to inflation. As a result of this closure, it is expected that there will be a curtailment loss in the region of £20m
that will be recognised in the year to January 2025.
246
PARENT
COMPANY
FINANCIAL
STATEMENTS
248 Parent Company Balance Sheet
249 Parent Company Statement of Changes in Equity
250 Notes to the Parent Company Financial Statements
247
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany PARENT COMPANY BALANCE SHEET
Fixed assets
Investments
Current assets
Other debtors
Cash at bank and in hand
Bank loans and overdrafts
Creditors: amounts falling due within one year
Net current liabilities
Total assets less current liabilities
NET ASSETS
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
ESOT reserve
Other reserves
Profit and loss account
TOTAL EQUITY
27 January
2024
£m
28 January
2023
£m
Notes
C2
C3
C4
C5
C5
C5
2,475.7
2,475.7
2,475.7
2,475.7
222.2
–
222.2
(5.5)
(532.5)
(538.0)
(315.8)
195.5
1.5
197.0
–
(818.2)
(818.2)
(621.2)
2,159.9
2,159.9
1,854.5
1,854.5
12.7
54.2
17.3
(387.2)
985.2
1,477.7
2,159.9
12.9
0.9
17.0
(396.6)
985.2
1,235.1
1,854.5
The profit for the year in the accounts of the Company is £668.4m (2023: £400.0m).
The financial statements were approved by the Board of directors and authorised for issue on 21 March 2024. They were signed on its behalf by:
Lord Wolfson of Aspley Guise
Chief Executive
Amanda James
Group Finance Director
248
PARENT COMPANY STATEMENT
OF CHANGES IN EQUITY
At 29 January 2022
Profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Share buybacks (Note C5)
ESOT share purchases (Note C5)
Shares sold/issued by ESOT
Share option charge
Equity dividends
At 28 January 2023
Profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Shares issued in the year (Note C5)
Share buybacks (Note C5)
ESOT share purchases (Note C5)
Shares sold/issued by ESOT
Share option charge
Equity dividends
At 27 January 2024
Share
capital
£m
13.3
–
–
–
Share
premium
account
£m
0.9
–
–
–
Capital
redemption
reserve
£m
16.6
–
–
–
(0.4)
–
–
–
–
12.9
–
–
–
0.1
(0.3)
–
–
–
–
12.7
–
–
–
–
–
0.9
–
–
–
53.3
–
–
–
–
–
54.2
0.4
–
–
–
–
17.0
–
–
–
–
0.3
–
–
–
–
17.3
ESOT
reserve
£m
(331.6)
–
–
–
–
(124.0)
59.0
–
–
(396.6)
–
–
–
–
–
(116.3)
125.7
–
–
(387.2)
Other
reserves
£m
985.2
–
–
–
Retained
earnings
£m
1,290.1
400.0
–
400.0
–
–
–
–
–
985.2
–
–
–
–
–
–
–
–
–
985.2
(224.0)
–
(18.2)
24.3
(237.1)
1,235.1
668.4
–
668.4
–
(177.3)
–
(31.7)
31.5
(248.3)
1,477.7
Total
equity
£m
1,974.5
400.0
–
400.0
(224.0)
(124.0)
40.8
24.3
(237.1)
1,854.5
668.4
–
668.4
53.4
(177.3)
(116.3)
94.0
31.5
(248.3)
2,159.9
249
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS
C1. Accounting Policies
The Parent Company financial statements of NEXT plc have been prepared in accordance with the Companies Act 2006 as applicable to companies
using Financial Reporting Standard 101 “Reduced disclosure framework” (“FRS 101”). FRS 101 enables the financial statements of the Parent
Company to be prepared in accordance with IFRS but with certain disclosure exemptions. The main areas of reduced disclosure are in respect
of equity-settled share-based payments, financial instruments, the Cash Flow Statement, and related party transactions with Group companies.
The accounting policies adopted for the Parent Company, NEXT plc, are otherwise consistent with those used for the Group which are set out
on pages 185 to 198. The ESOT is consolidated on the basis that the parent has control, thus the assets and liabilities of the ESOT are included
in the Balance Sheet and shares held by the ESOT in the Company are presented as a deduction from equity. As permitted by Section 408 of the
Companies Act 2006, the Income Statement of the Company is not presented as part of the financial statements.
C2. Investments
The £2,475.7m (2023: £2,475.7m) investment shown in the Balance Sheet of NEXT plc relates to its investment in NEXT Group plc.
A full list of the Group’s subsidiary undertakings as at 27 January 2024 is contained in the table below.
Registered office address
Desford Road, Enderby, Leicester LE19 4AT, UK
Suite 1 North, 1st Floor, Albert House, South Esplanade, St Peter Port, Guernsey,
GY1 1AJ, Guernsey
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Corporation Service Company, 2711 Centerville Rd, Suite 400, Wilmington, County of New
Castle 19808, United States
199 Bay Street, Suite 4000, Commerce Court West, Toronto, Ontario, Canada M5L 1A
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester, Leicestershire, LE19 4AT, UK
7 Dolgorukovskaya Street, 127006, Moscow, Russian Federation
Suites 1404 to 1413 & Pt14, 1111 King’s Road, Taikoo Shing, Hong Kong
Company name
Agratech Limited
Belvoir Insurance Company Limited
Brecon Debt Recovery Limited
Bridgetown Holdco Limited
FatFace Group Borrowings Limited
Fat Face Holdings Limited
Fat Face Limited
FatFace Corporation
FatFace Canada Corporation
Fulham Parent Limited
Lipsy Limited
LLC Next
Next Sourcing ENA Limited
(previously Next (Asia) Limited)
NEXT (US), LLC
Next Beauty Limited
Next Brand Limited
Next Distribution Limited
Next Europe & North Africa Morocco SARL
Next Europe & North Africa Tunisia SARL
NEXT General Trading LLC
NEXT General Trading FZE
Next Financial Services Limited
Next Germany GmbH
Next Group plc
Next Holding Wholesale Private Limited
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, United States
Desford Road, Enderby, Leicester, Leicestershire, LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Jean Jaures SARL, 49 rue Jean Jaurès, Quartier Gauthier, 6ème étage, Apt N° 12,
Casablanca, Morocco
Residence “El Bechir”, 155 Avenue Habib Bourguiba Office A3.1, 2036
La Soukra – Ariana, Tunisia
Desford Road, Enderby, Leicester LE19 4AT, UK
c/o BDO AG Wirtschaftsprüfungsgesellschaft, Zielstattstr. 40, 81379, Munich, Germany
Desford Road, Enderby, Leicester LE19 4AT, UK
915, Unit No. 9, Corporate Park II, 9th floor, VN Purav Marg, Near Swastik, Chambers,
Chembur, Mumbai, Maharashtra-MH, 400071, India
2nd Floor, Dubai Supreme Court Complex, Umm Hurair 2, Dubai, United Arab Emirates
JAFZA View 18-19, 1st Floor, PO BOX 262746, Jebel Ali Free Zone, Dubai, United
Arab Emirates
Desford Road, Enderby, Leicester LE19 4AT, UK
Phase 1, Ring Road 2, Export Processing Zone, Katunayake,Sri Lanka
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
13–18 City Quay, Dublin 2, D02 ED70, Ireland
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
House No. 14, St. No. 106, Phoum 8, Sangkat Wat Phnom, Khan Daun Penh,
Phnom Penh, Cambodia
Suites 1404 to 1413 & Pt14, 1111 King’s Road, Taikoo Shing, Hong Kong
Room 901-902, 908-921, 9th Floor, Bldg. 3, No. 283 West Jianguo Road,
Xuhui District, Shanghai
Next Sourcing Services (India) Private Limited 207 Jaina Tower, 1 District Centre, Janakpuri, New Delhi, 110058, India
Next Sourcing Services Limited
Next Holdings Limited
Next Manufacturing (Private) Limited
Next Manufacturing Limited
Next Near East Limited
Next Pension Trustees Limited
Next Properties Ltd
Next Retail (Ireland) Limited
Next Retail Limited
Next Sourcing (UK) Limited
Next Sourcing Company Limited
Next Sourcing Limited
Next Sourcing Limited Shanghai Office
Giant Business Tower, Level 4 & 5, Plot #3, Sector-3, Dhaka Mymensingh Road, Uttara
Commercial Area, Dhaka, 1230 Bangladesh
% held by
Group
companies
Direct
or indirect
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
97 Indirect (group interest)
97 Indirect (group interest)
97 Indirect (group interest)
97 Indirect (group interest)
97 Indirect (group interest)
97 Indirect (group interest)
97 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100
Direct
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
250
C2. Investments
(continued)
Registered office address
Company name
Next Sourcıng İç Ve Dış Ticaret Limited Şirketi Esentepe Mah. Büyükdere Cad. Ferko Signature Blok No: 175 İç Kapi No: 69 Şişli / Istanbul
Next-E-NA Portugal, Unipessoal LDA
NSL Limited
Paige Group Limited (The)
Pink Holdco Limited
Pink Topco Limited
Project Norwich Limited
Reiss (Holdings) Limited
Reiss Limited
Reiss (U.S.A) Limited
Reiss (Canada) Limited
Reiss (International) Limited
Reiss (Holland) B.V.
Reiss (Australia) PTY Limited
Reiss Russia LLC
The Harborough Hare Holdings Limited
The Harborough Hare Limited
Tom Joule Europe Limited
The Next Directory Limited
Ventura Group Limited
Ventura Network Distribution Limited
WP R Holdco Limited
WP R Midco 1 Limited
WP R Midco 2 Limited
WP R Topco Limited
R. dos Transitários 182 RCH, 4455–565 Matosinhos, Portugal
Suites 1404 to 1413 & Pt14, 1111 King’s Road, Taikoo Shing, Hong Kong
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
22 Grenville Street, St. Helier, Jersey JE4 8PX
Desford Road, Enderby, Leicester LE19 4AT, UK
Reiss Building, 12 Picton Place, London, England, W1U 1BW
Reiss Building, 12 Picton Place, London, England, W1U 1BW
Reiss Building, 12 Picton Place, London, England, W1U 1BW
Reiss Building, 12 Picton Place, London, England, W1U 1BW
Reiss Building, 12 Picton Place, London, England, W1U 1BW
Hoogoorddreef 15 1101 BA, Amsterdam, Noord-Holland Netherlands
Level 11 1 Margaret Street, 2000, Sydney, NSW, Australia
Poslannikov Pereulok 9, Building 3, 105005, Moscow, Russian Federation
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
13–18 City Quay, Dublin 2, D02 ED70, Ireland
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Reiss Building, 12 Picton Place, London, England, W1U 1BW
Reiss Building, 12 Picton Place, London, England, W1U 1BW
Reiss Building, 12 Picton Place, London, England, W1U 1BW
22 Grenville Street, St Helier, JE4 8PX, Jersey
% held by
Group
companies
Direct
or indirect
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
100 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
74 Indirect (group interest)
74 Indirect (group interest)
74 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
100 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
72 Indirect (group interest)
A full list of the Group’s significant holdings in undertakings other than subsidiary undertakings as at 27 January 2024 is contained in the table below.
Company name
Aubin & Wills Holdings Limited
Choice Discount Stores Limited
Regent Bidco 1 Limited
Swoon Editions Limited
VS Brands Holdings UK Limited
West Apparel UK Holdings Limited
Registered office address
1110 Elliott Court, Coventry Business Park, Herald Avenue, Coventry, CV5 6UB
14–14A Rectory Road, Hadleigh Benfleet, Essex, SS7 2ND, UK
C/O Alter Domus (Uk) Limited, 10th Floor, 30 St Mary Axe, London, EC3A 8BF, UK
7 Bell Yard, London, WC2A 2JR, UK
Desford Road, Enderby, Leicester, Leicestershire, United Kingdom, LE19 4AT
Desford Road, Enderby, Leicester, Leicestershire, United Kingdom, LE19 4AT
C3. Other Debtors
Amounts due from subsidiary undertaking
Other receivables
C4. Creditors Due Within One Year
Amounts due to subsidiary undertaking
% held by
Group
companies
Direct
or indirect
28 Indirect (group interest)
49 Indirect (group interest)
44 Indirect (group interest)
25 Indirect (group interest)
51 Indirect (group interest)
51 Indirect (group interest)
2024
£m
221.0
1.2
222.2
2024
£m
532.5
2023
£m
193.3
2.2
195.5
2023
£m
818.2
C5. Share Capital, ESOT Reserve and Other Reserves
Details of the Company’s share capital and share buybacks are given in Note 23. ESOT transactions are detailed in Note 26. Other reserves in the
Company Balance Sheet of £985.2m (2023: £985.2m) represent the difference between the market price and the nominal value of shares issued
as part of the capital reconstruction in 2002 on acquisition of Next Holdings Limited (formerly NEXT Group plc) which was subject to Section 131
Companies Act 1985 merger relief.
251
Strategic ReportGovernanceShareholder InformationFinancial StatementsGroupCompany C6. UK Registered Subsidiaries Exempt from Audit
The following UK subsidiaries will take advantage of the audit exemption set out within Section 479A of the Companies Act 2006 for the year ended
27 January 2024.
Company name
Agratech Limited
Lipsy Limited
Next Beauty Limited
Next Brand Limited
Next Distribution Limited
Next Holdings Limited
Next Manufacturing Limited
Next Near East Limited
Next Properties Limited
Next Retail Limited
The Next Directory Limited
Project Norwich Limited
Registered office address
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
Desford Road, Enderby, Leicester LE19 4AT, UK
% held by
Group
companies
100
100
100
100
100
100
100
100
100
100
100
100
The Company will guarantee the debts and liabilities of the above UK subsidiary undertakings at the balance sheet date in accordance with Section
479C of the Companies Act 2006. The Company has assessed the probability of loss under the guarantee as remote.
252
SHAREHOLDER
INFORMATION
254 Half Year and Segment Analysis
255 Five Year History
256 Glossary
260 Notice of Meeting
267 Other Shareholder Information
253
Strategic ReportGovernanceFinancial StatementsShareholder Information HALF YEAR AND SEGMENT ANALYSIS (UNAUDITED)
Statutory sales
NEXT Online
NEXT Retail
NEXT Finance
Total Platform1
Property Management
Franchise, Sourcing and other
Total
Profit before tax
NEXT Online
NEXT Retail
NEXT Finance
Total Platform2
Property Management
Franchise, Sourcing and other
Total segmental profit
Recharge of interest
Other activities
Net finance cost
Exceptional items
Profit before tax
First half
£m
Second half
£m
52 weeks to
Jan 2024
£m
First half
£m
Second half
£m
52 weeks to
Jan 2023
£m
1,384.5
875.6
143.1
71.1
10.3
32.0
2,516.6
245.5
101.2
80.2
0.3
1.6
17.1
445.9
23.0
(16.4)
(36.8)
–
415.7
1,516.9
968.1
149.6
292.7
11.2
35.9
2,974.4
271.6
143.5
83.2
30.9
0.1
16.1
545.4
27.3
(37.3)
(43.9)
108.6
600.1
2,901.4
1,843.7
292.7
363.8
21.5
67.9
5,491.0
517.1
244.7
163.4
31.2
1.7
33.2
991.3
50.3
(53.7)
(80.7)
108.6
1,015.8
1,307.9
875.7
133.7
17.4
8.8
36.1
2,379.6
220.9
100.6
86.3
3.7
13.3
15.0
439.8
15.6
(21.0)
(33.8)
–
400.6
1,435.7
973.4
140.7
58.3
10.1
36.2
2,654.4
246.4
139.9
84.2
11.5
23.7
13.1
518.8
18.8
(30.5)
(38.4)
–
468.7
2,743.6
1,849.1
274.4
75.7
18.9
72.3
5,034.0
467.3
240.5
170.5
15.2
37.0
28.1
958.6
34.4
(51.5)
(72.2)
–
869.3
1. Total Platform sales includes commission income from our Total Platform business and sales associated with Joules, Reiss and FatFace.
2. Total Platform Profit before tax includes NEXT’s share of profits from its investments in associates and joint ventures. It also includes the trading profits from Joules, FatFace and Reiss.
254
FIVE YEAR HISTORY (UNAUDITED)
Period to January
Underlying continuing business
Statutory revenue
Operating profit
Exceptional items
Net finance costs
Profit before tax
Taxation
Profit after taxation
Total equity
Shares purchased for cancellation
Shares issued in the year
Dividends per share – ordinary
– special
Earnings Per Share
Basic
2024
£m
2023
£m
2022
£m
2021
£m
2020
£m
5,491.0
5,034.0
4,625.9
3,534.4
4,266.2
987.9
108.6
(80.7)
1,015.8
(215.3)
800.5
941.5
–
(72.2)
869.3
(158.6)
710.7
905.4
–
(82.3)
823.1
(145.6)
677.5
444.5
–
(102.1)
342.4
(55.7)
286.7
853.9
–
(105.4)
748.5
(138.3)
610.2
1,638.8
1,165.1
1,010.0
660.9
441.5
2.6m
0.7m
206.0p
–
3.5m
0.2m
0.3m
5.4m
–
–
193.0p
–
–
270.0p
–
–
–
–
57.5p
–
661.6p
573.4p
530.8p
223.3p
472.4p
255
Strategic ReportGovernanceFinancial StatementsShareholder Information GLOSSARY
Alternative Performance Measures (APMs) and other non-statutory financial measures
APM Definition
Closest equivalent
statutory measure
Purpose and reconciliation to closest statutory measure
where applicable
Those customers who have purchased products using
Average active customers
their Online account or received a standard account
statement in the last 20 weeks. Customers can be
either Online credit or cash customers.
Average customer receivables/
The average amount of money owed by all nextpay
debtor balance
and next3step customers less any provision for bad
debt. This represents the total balances we expect to
recover, averaged across the relevant period.
This is referred to as “customer receivables” or
“debtor balance”.
The charge taken in relation to the performance of our
Bad debt charge
customer debtor book. This consists predominantly of
providing for future defaults.
None
None
Active customers have a strong correlation with interest income
on the Finance P&L and help drive understanding of movements
in income.
Reconciliation
not applicable.
to closest equivalent
statutory measure
Average debtor balance has a strong correlation with interest
income on the Finance P&L and helps drive understanding of
movements in income. It also helps to evaluate the overall health
of the balance sheet for the Finance business.
The average debtor balance in FY24 was £1,223m (FY23: £1,179m).
The statutory accounts do not disclose the monthly debtor
balance needed to calculate the average debtor balance. The year
end balance is disclosed in Note 14 to the financial statements.
Impairment losses
Note 14
Measurement of the quality of the Online debtor book/customer
receivables. A lower bad debt charge indicates that the quality
and recoverability of the balance are higher.
The bad debt charge is the total of the in-year impairment charge,
less amounts recovered. In FY24 the total bad debt charge
disclosed in the CEO Review was £32m (FY23: £26m).
In Note 14 the total Expected Credit Loss charge was £36.0m
(2023: £31.0m) with the difference relating to recoveries on
previously written off assets.
Bought-in gross margin is a measure of the profit made on the sale
of stock at full price. This is a key internal management metric for
assessing category performance.
Reconciliation to closest equivalent statutory measure not
applicable as full price sales not a statutory metric.
Measurement of the Retail business profit by physical branch.
Provides an indication of the performance of the store portfolio.
This is based on costs which are directly attributable to the store.
Therefore, it does not include costs such as central overheads
which will be included in the statutory accounts.
Reconciliation to closest equivalent statutory measure is therefore
not applicable.
Used by the business to evaluate the profitability of the Finance
business. There is no statutory equivalent as this is a metric specific
to how the Group manages its funding and cost allocations. In the
year to January 2024 this has been calculated as:
Average Group interest = Interest cost/Average debt excluding
cash on deposit
= £37.9m / £824.2m = 4.6%
Then apply 4.6% to 85% of the Average Online customer balance of
£1,223m (as we assume that 85% is funded by debt). This equates
to a Cost of Funding charge of £47.8m (2023: £34.4m).
None
None
None
Difference between the cost of stock and the original
Bought-in gross margin
VAT exclusive selling price, expressed as a percentage
of the original VAT exclusive selling price.
total sales
less cost of sales,
Retail store
Branch profitability
payroll, controllable costs, occupancy costs and
depreciation, and before allocation of central
overheads. Expressed as a percentage of VAT inclusive
sales. Net branch profit is a measure of the profitability
on a store by store level.
An internal recharge of interest costs from the Group to
Cost of funding – Finance
the NEXT Finance business, in respect of funding costs
for the Online debtor balance (customer receivable).
It is calculated by applying the average Group
interest rate (i.e. the external borrowing rate of the
NEXT Group divided by the average NEXT Group
borrowing excluding cash) to the average debtor/
customer balance.
256
APM Definition
VAT exclusive sales from customers who have
Credit sales
purchased using their NEXT credit account (nextpay
or next3step),
income
inclusive of any
charges and delivery charges, and after deducting any
applicable promotional discounts.
interest
Divisional profit before interest and tax, excluding
Divisional operating profit
equity-settled share option charges recognised under
IFRS 2 “Share-based payment” and unrealised foreign
exchange gains and losses on derivatives which do not
qualify for hedge accounting.
Closest equivalent
statutory measure
Purpose and reconciliation to closest statutory measure
where applicable
None
Credit sales are a direct indicator of the performance and
profitability of the Finance business.
Segment profit
Reconciliation to closest equivalent statutory measure not
applicable as the statutory accounts split by business segment but
not by the mechanism of customer payment.
A direct indicator of the performance of each division making up
the total Group operating profit. A commonly used metric that
provides a useful method of performance comparison across
the Group.
The divisional operating profits in the CEO are closely aligned
to the Segment profits presented in Note 1 of the financial
statements. The commentary in Note 1 explains the differences
which relate primarily to how the NEXT Group Profit before tax
basis is used in the CEO Review.
Total sales excluding items sold in our sale events,
Full price sales
Total Platform sales and our Clearance operations.
Full price sales include interest income on NEXT
credit accounts.
The gross interest billed to nextpay and next3step
Interest income (NEXT Finance)
customers, before any deduction for unpaid interest
on bad debt.
Change in sales from Retail stores which have been
Like-for-like sales
open for at least one full year and not impacted by any
transfer of trade from nearby store closures.
Comprises cash and cash equivalents, bank loans,
Net debt excluding leases
corporate bonds, and fair value hedges of corporate
bonds but excludes lease debt.
Net debt is a measure of the Group’s indebtedness.
The profit, including interest income and the bad debt
Net profit (NEXT Finance)
charge, and after the allocation of central overheads
and the cost of funding.
Revenue – sale
of goods
Full price sales are a direct indicator of the performance and
profitability of the business.
NEXT Trading full price sales include items sold in Retail and
Online plus NEXT Finance interest income, but excludes Sale
events, Clearance, Total Platform commission and the sales
from subsidiaries.
Revenue – credit
account interest
Interest income for the Finance business is a direct indicator of the
performance and profitability of the Finance business.
None
None
This is presented within revenue on the face of the Income
Statement and Note 2 of the financial statements as “credit
account interest”.
This metric enables the performance of the Retail stores to be
measured on a consistent year-on-year basis and is a common
term used in the retail industry.
Reconciliation
not applicable.
to closest equivalent
statutory measure
This measure is a good indication of the strength of the Group’s
liquidity and is widely used by credit rating agencies.
Net debt excluding leases is reconciled to net debt including
leases in Note 31 of the financial statements.
Profit before tax
(for the Finance
segment)
A measure of direct profitability of the Finance business.
The net profit for the Finance Business is presented in Note 1 to
the financial statements.
257
Strategic ReportGovernanceFinancial StatementsShareholder Information GLOSSARY
Alternative Performance Measures (APMs) and other non-statutory financial measures
APM Definition
Closest equivalent
statutory measure
Purpose and reconciliation to closest statutory measure
where applicable
NEXT Group profit before tax
Profit before tax
NEXT profit before tax differs from the statutory profit before tax
for 3 reasons:
1. Amortisation on brands and related acquired intangibles is
removed from the NEXT Group profit before tax.
2. For management purposes, the non controlling interests
in Joules, Reiss and FatFace are removed from the NEXT
Group profit before tax. In contrast, in line with International
accounting standards, the statutory profit includes 100% of
the Joules, Reiss and FatFace results.
3. Exceptional items – the exceptional item in the year to January
2024 is not included in the headline ‘NEXT Group profit
before tax’.
The NEXT Group profit before tax and statutory profit before tax is
reconciled in Part 4 of the CEO Review.
NEXT operating profit
Operating profit
Within the CEO Review the NEXT Operating profit is based on
the same principles and adjustments (compared to statutory
operating profit) as the NEXT Group profit before tax noted above.
It differs from the Statutory operating profit for 3 reasons:
1. Removal of non controlling interest.
2. It excludes the effect of amortisation of acquired brands and
related intangible assets.
3. Within NEXT operating profit, external interest costs borne by
Joules, Reiss and FatFace are allocated to those businesses.
This contrasts to statutory accounting where finance costs are
reported below operating profit.
Note 1 provides an explanation with values for how the Operating
profit on a statutory basis differs from the approach of the CEO.
A measure of the profit after tax expressed over the
NEXT post tax earning per share
average number of shares.
Basic Earnings
per share
Earning per share provides a measure of how much profit has
been generated for each share in issue. It is a commonly used
metric for listed entities.
NEXT operating profit for the Online business after
Online margin
deducting lease interest, as a percentage of the Trading
sales of the Online division.
None
A comparison of how the NEXT post tax earning per share and
its closest statutory equivalent is provided in Appendix 1 of the
CEO Review.
A measure of the profitability of the Group. A commonly used
metric that can be used to compare performance to other
businesses. Net margin measures whether profitability is changing
at a higher or lower rate relative to revenue.
The margin is based on the segmental operating profit, as
disclosed in Note 1 of the financial statements, less allocation
of lease interest, as a percentage of the NEXT Trading Sales for
that segment.
A reconciliation between Total NEXT sales and statutory revenue
is provided in Note 1 of the financial statements.
258
APM Definition
Closest equivalent
statutory measure
Purpose and reconciliation to closest statutory measure
where applicable
Operating profit after deducting lease interest, as a
Retail margin
percentage of the Trading sales of the Retail division.
None
A measure of the profitability of the Group. A commonly used
metric that can be used to compare performance to other
businesses. Net margin measures whether profitability is changing
at a higher or lower rate relative to revenue.
The margin
is based on the segmental operating profit,
as disclosed in Note 1 of the financial statements, less allocation
of lease interest, as a percentage of the NEXT Trading Sales for
that segment.
A reconciliation between Total NEXT sales and statutory revenue
is provided in Note 1 of the financial statements.
Return on capital employed – ROCE
The NEXT Finance net profit (after the interest charge
(NEXT Finance)
relating to the cost of funding), divided by the average
debtor balance.
Total NEXT sales are a segment level measure of sales
Total NEXT sales
being VAT exclusive full price and markdown sales,
including the full value of commission-based sales in
our Online division, interest income (as described and
reconciled in Note 2 of the financial statements) and
the commission income and service income from our
Total Platform business.
Total Trading sales are the VAT exclusive aggregation
Total Trading sales/Total Group sales
of Total sales from our core trading segments of Retail,
Online and Finance.
Total Group sales are the aggregation of Total sales
for all of the Group segments plus revenue from
investments, which are reported in proportion to our
equity share of our investments. For further detail see
CEO Review Appendix 3.
None
A commonly used metric that can be used to compare
performance to other financial businesses.
It measures the profit (i.e. return) relative to the amount of capital
employed. The higher the ROCE, the greater the return for the
capital employed in the business.
The ROCE for NEXT Finance in the year to January 2024 was
calculated by dividing the Operating profit for the segment of
£163.4m by the average customer receivable balance of £1,223m.
As a percentage, this is 13.4% (2023: 14.5%).
The Operating profit for the segment is disclosed in Note 1 to the
financial statements.
Statutory revenue
Total NEXT sales are a direct indicator of the performance and
profitability of the segment.
Total NEXT sales are reconciled to Statutory revenue in Note 1 to
the financial statements.
Statutory revenue
Total Trading sales are a direct indicator of the performance
and profitability of the business from the Online, Retail and
Finance business.
Total Group sales are a direct indicator of the performance and
profitability of the entire business.
Total Trading sales and Total Group sales are reconciled to
Statutory revenue in Note 1 to the financial statements.
259
Strategic ReportGovernanceFinancial StatementsShareholder Information NOTICE OF MEETING
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR
IMMEDIATE ATTENTION.
If you are in any doubt as to the action you should take, you
should
immediately consult your stockbroker, bank manager,
solicitor, accountant or other independent financial advisor authorised
under the Financial Services and Markets Act 2000.
If you have sold or otherwise transferred all your NEXT plc (NEXT and/
or the Company) shares, please send this document, together with
the accompanying Form of Proxy, to the purchaser or transferee, or to
the stockbroker or other agent through whom the sale or transfer was
effected, for delivery to the purchaser or transferee.
Notice is given that the Annual General Meeting (AGM) of NEXT will be
held at Leicester Marriott Hotel, Smith Way, Grove Park, Leicester LE19
1SW on Thursday 16 May 2024 at 9.30 am. Any changes to the format of
the AGM will be communicated to shareholders through our website at
nextplc.co.uk/investors/shareholder-information/company-meetings
and, where appropriate, by stock exchange announcement.
Shareholders may submit questions in advance on resolutions to be put
to the AGM by emailing investors@next.co.uk. Questions submitted by
5.00 pm on 15 May 2024 will be answered at the meeting as appropriate.
The following resolutions will be proposed at the AGM, resolutions
1 to 18 as ordinary resolutions and 19 to 23 as special resolutions.
Further information on these resolutions can be found in Appendix A
to this Notice. Biographies of the directors are shown on pages 120 to
121 of the Annual Report.
Ordinary resolutions
Report and accounts
1.
To receive the Company’s accounts for the year ended 27 January
2024, together with the Directors’ and Auditors’ Reports (together
the Annual Report).
2.
To approve the Directors’ Remuneration Report set out on pages
140 to 160.
Final dividend
Auditor re-appointment and remuneration
16. To re-appoint PricewaterhouseCoopers LLP (PwC) as the Company’s
auditor, to hold office until the conclusion of the next general
meeting at which accounts are laid.
17. To authorise the Audit Committee of the Board to set the
remuneration of the Company’s auditor.
Directors’ authority to allot shares
18. That the directors be authorised, generally and unconditionally, to
allot equity securities (as defined in Section 560 of the Companies
Act 2006 (the 2006 Act)) in the Company and to grant rights to
subscribe for or convert any security into shares in the Company:
a.
b.
up to a maximum nominal amount of £4,200,000 (as reduced by
any equity securities allotted under paragraph (b) below); and
up to a maximum nominal amount of £8,400,000 (as reduced
by any equity securities allotted under paragraph (a) above) in
connection with a pre-emptive offer (including an offer by way
of a rights issue or open offer);
(i)
to ordinary shareholders in proportion (as nearly as may be
practicable) to their existing holdings; and
(ii) to holders of other equity securities as required by the rights
of those securities or as the directors otherwise consider
necessary, and so that the Board may impose any limits or
restrictions and make any arrangements which it considers
necessary or appropriate to deal with treasury shares,
fractional entitlements, record dates, legal, regulatory or
practical problems in, or under the laws of, any territory or
any other matter.
This authority shall expire at the conclusion of the next AGM of the
Company after the passing of this resolution, or, if earlier, at the close
of business on 16 August 2025. All previous unutilised authorities
under Section 551 of the 2006 Act shall cease to have effect (save to
the extent that the same are exercisable pursuant to Section 551(7)
of the 2006 Act by reason of any offer or agreement made prior to
the date of this resolution which would or might require shares to be
allotted on or after that date).
3. To declare a final dividend of 141 pence per ordinary share.
Special Resolutions
Election and re-election of directors
To elect the following directors appointed by the directors since the
last AGM who are seeking election in accordance with the Company’s
Articles of Association:
4. Venetia Butterfield.
5. Amy Stirling.
To re-elect the following directors who are seeking annual re-election:
6. Jonathan Bewes.
7. Soumen Das.
8. Tom Hall.
9. Dame Tristia Harrison.
10. Amanda James.
11. Richard Papp.
12. Michael Roney.
13. Jane Shields.
14. Jeremy Stakol.
15. Lord Wolfson.
260
Disapplication of pre-emption rights
19. That, subject to resolution 18 being passed:
a.
b.
the directors be given power to allot equity securities (as defined
in the 2006 Act) for cash under the authority given by that
resolution and/or to sell ordinary shares held by the Company
as treasury shares for cash as if section 561 of the 2006 Act did
not apply to any such allotment or sale;
the power under paragraph (a) above shall be limited to the
allotment of equity securities and sale of treasury shares in
connection with an offer of, or invitation to apply for, equity
securities (but in the case of the authority granted under
paragraph (b) of resolution 18, by way of a pre-emptive offer
(including an offer by way of a rights issue or open offer) only):
(i)
to ordinary shareholders in proportion (as nearly as may be
practicable) to their existing holdings; and
(ii) to holders of other equity securities, as required by the rights
of those securities, or as the Board otherwise considers
necessary, and so that the Board may impose any limits or
restrictions and make any arrangements which it considers
necessary or appropriate to deal with treasury shares,
fractional entitlements, record dates, legal, regulatory or
practical problems in, or under the laws of, any territory or
any other matter;
c.
d.
e.
the power under paragraph (a) above shall be limited to, in the
case of the authority granted under paragraph (a) of resolution
18 and/or in the case of treasury shares, to the allotment of
equity securities or sale of treasury shares (otherwise than under
paragraph (b) above) up to a nominal amount not exceeding in
aggregate £1,271,000 representing 10% of the issued ordinary
share capital;
this authority shall expire at the conclusion of the next AGM of
the Company after the passing of this resolution or, if earlier,
at the close of business on 16 August 2025; and
all previous unutilised authorities under Sections 570 and 573 of
the 2006 Act shall cease to have effect (save to the extent that
they are exercisable by reason of any offer or agreement made
prior to the date of this new resolution which would or might
require shares to be allotted on or after that date).
20. Additional disapplication of pre-emption rights that, subject to
resolutions 18 and 19 being passed:
a.
the directors be given the power to allot, in addition to any
power granted under resolution 19, equity securities (as defined
in the 2006 Act) for cash under the authority granted under
paragraph (a) of resolution 18 and/or to sell ordinary shares held
by the Company as treasury shares for cash as if section 561 of
the 2006 Act did not apply to any such allotment or sale;
b. the power under paragraph (a) above shall be:
(i)
limited to the allotment of equity securities having a
nominal amount not exceeding in aggregate £1,271,000
representing 10% of the issued ordinary share capital; and
(ii) used only for the purposes of financing (or refinancing,
if the authority is to be used within twelve months after
the original transaction) a transaction which the directors
determine to be an acquisition or other capital investment
of a kind contemplated by the Statement of Principles on
Disapplying Pre-Emption Rights most recently published by
the Pre-Emption Group prior to the date of this Notice;
this authority shall expire at the conclusion of the next AGM of
the Company after the passing of this resolution or, if earlier,
at the close of business on 16 August 2025; and
other than in respect of authorities granted pursuant to
resolution 19, all previous unutilised authorities under Sections
570 and 573 of the 2006 Act shall cease to have effect (save
to the extent that they are exercisable by reason of any offer
or agreement made prior to the date of this new resolution
which would or might require shares to be allotted on or after
that date).
c.
d.
On-market purchases of own shares
21. That in accordance with the 2006 Act, the Company be granted
general and unconditional authority to make market purchases
(as defined in Section 693 of the 2006 Act) of any of its own ordinary
shares on such terms and in such manner as the directors may
determine provided that:
a.
the authority conferred by this resolution shall be limited to the
lesser of 19,056,000 ordinary shares of 10 pence each and no
more than 14.99% of the issued ordinary shares outstanding at
the date of the AGM, such limit to be reduced by the number
b.
c.
d.
e.
f.
of shares purchased pursuant to the authority granted at
resolution 22 below;
the minimum price which may be paid for ordinary shares
(exclusive of expenses) is 10 pence per ordinary share;
the maximum price which may be paid for each ordinary share
(exclusive of expenses) is an amount not more than the higher
of: (i) 105% of the average of the middle market price of the
ordinary shares of the Company according to the Daily Official
List of the London Stock Exchange for the five business days
immediately preceding the date of purchase and (ii) an amount
equal to the higher of the price of the last independent trade
of an ordinary share of the Company and the highest current
independent bid for an ordinary share of the Company as
derived from the London Stock Exchange Trading System;
this authority shall expire at the conclusion of the next AGM of
the Company after the passing of this resolution or, if earlier, at
the close of business 16 August 2025;
the Company may make a contract or contracts to purchase
ordinary shares under the authority hereby conferred prior
to the expiry of such authority which will or may be executed
wholly or partly after the expiry of such authority and may
make a purchase of ordinary shares in pursuance of any such
contract; and
all existing authorities for the Company to make market
purchases of its own ordinary shares are revoked, except in
relation to the purchase of shares under a contract or contracts
concluded before the date of this resolution and which has or
have not yet been executed.
Off-market purchases of own shares
22. That, in accordance with Section 694 of the 2006 Act, the proposed
programme agreements to be entered into between the Company
and any of Goldman Sachs International, UBS AG London Branch,
BNP Paribas and Barclays Bank plc (the Banks) (in the form produced
to this meeting and initialled by the Chairman for the purpose of
identification) (the Programme Agreements) be and are approved
and the Company be and is authorised to enter into the Programme
Agreements and all and any forward trades which may be effected or
made from time to time for the off-market purchase by the Company
of its ordinary shares of 10 pence each under or pursuant to the
Programme Agreements, as more fully described on pages 263 and
264. The authority conferred by this special resolution shall expire at
the conclusion of the next AGM of the Company after the passing of
this resolution or, if earlier, at close of business on 16 August 2025
(except in relation to the purchase of ordinary shares under any
forward trade effected or made before the expiry of such authority
and which might be completed wholly or partly after such expiry).
Notice of general meetings
23. That a general meeting (other than an AGM) may be called on not
less than 14 clear days’ notice.
By order of the Board
Seonna Anderson
Company Secretary
Registered Office: Desford Road, Enderby, Leicester LE19 4AT
12 April 2024
261
Strategic ReportGovernanceFinancial StatementsShareholder Information
NOTICE OF MEETING
Appendix A
Explanatory notes to resolutions
Ordinary resolutions
1. To receive the Annual Report
The Company is required by the 2006 Act to present its Annual Report
to shareholders at its AGM.
2. To approve the Directors’
Remuneration Report
The Directors’ Remuneration Report sets out the pay and benefits
received by each of the directors for the period ended 27 January
2024 and is subject to an advisory vote by shareholders. The Report
(excluding the Directors’ Remuneration Policy) is set out on pages 140
to 160 of the Annual Report for the period ended 27 January 2024.
3. To declare a final dividend
The Company requires shareholder approval to pay a final dividend.
The directors recommend that a final dividend of 141 pence per share
be paid on 1 August 2024 to shareholders on the register of members
at close of business on 5 July 2024. This resolution relates only to this
dividend. If, in line with the Company’s policy of returning surplus
cash to shareholders, the directors decide to pay special dividends
any such dividends will be paid by the directors as interim dividends.
The announcement of any dividend will clearly indicate whether it is
a special dividend or not. The Trustee of the NEXT ESOT has waived
dividends paid in the year on shares held by it, refer to Note 26 of the
financial statements.
4–15. Election and re-election of Directors
In accordance with the UK Corporate Governance Code 2018,
all directors will stand for election or re-election at this year’s AGM.
Directors’ biographies are set out on pages 120 and 121 of the Annual
Report and provide a summary of the range of skills, knowledge and
experience of each director.
Following a formal performance evaluation, the Chairman confirms that
each director has demonstrated that they continue to be an effective
and valuable member of the Board and that they remain committed
to their role (including making sufficient time available for Board and
Committee meetings and other duties).
In relation to the minority (20.84%) vote against the re-election
of Michael Roney at the 2023 AGM, an explanatory note of the
consultation process with shareholders undertaken can be found on
page 125 of the Annual Report.
The Board is satisfied that, excluding the Chairman, each non-executive
director offering themselves for election or re-election is independent
in both character and
judgement, and that their experience,
knowledge and other business interests enable them to contribute
significantly to the work and balance of the Board.
16 and 17. Auditor re-appointment
and remuneration
The Audit Committee oversees the relationship with the external
auditor. The Audit Committee is also responsible for the external auditor
selection process and for making recommendations to the Board for
shareholder approval regarding the appointment and re-appointment
of the external auditor. An overview of the Audit Committee’s process
and conclusions can be found on pages 137 to 138 of the Annual Report.
On the recommendation of the Audit Committee, the Board
proposes that PwC be re-appointed as the Company’s auditor.
Resolution 17 proposes that the auditors’ remuneration be determined
by the Audit Committee.
18. Renewal of the powers of directors to
allot shares
Ordinary resolution 18(a) seeks authority to allow the directors to allot
ordinary shares up to a maximum nominal amount of £4,200,000,
representing approximately one third of the Company’s existing
issued share capital, excluding treasury shares, as at 20 March 2024.
In accordance with institutional guidelines, resolution 18(b) will also
allow directors to allot further ordinary shares, in connection with a
pre-emptive offer by way of a pre-emptive offer, including a rights issue
or open offer, up to a total maximum nominal amount of £8,400,000,
representing approximately two thirds of the Company’s existing
issued share capital, excluding treasury shares, as at that date. As at
20 March 2024 (being the latest practicable date prior to publication
of this document) the Company’s issued share capital amounted
to £12,712,559.70 comprising 127,125,597 ordinary shares of 10
pence each. No shares were held in treasury. The directors have no
present intention of exercising this authority, however, the Board
wishes to ensure that the Company has maximum flexibility in
managing the Group’s capital resources. The authority sought under
this resolution will expire at the conclusion of the AGM in 2025 or,
if earlier, 16 August 2025.
Special resolutions
19 and 20. Authority to disapply
pre-emption rights
In special resolution 19, the directors are seeking authority to allot
equity securities for cash without first offering them to existing
shareholders in proportion to their holdings. This resolution limits the
aggregate nominal value of ordinary shares which may be issued by the
directors on a non pre-emptive basis to £1,271,000, representing 10% of
the issued ordinary share capital of the Company as at 20 March 2024.
This authority also allows the directors, within the same aggregate limit,
to sell for cash, shares that may be held by the Company in treasury.
Special resolution 20 seeks separate and additional authority to allot
up to an additional 10% of the issued ordinary share capital of the
Company on a non pre-emptive basis in connection with an acquisition
or specified capital investment (within the meaning given in the
Pre-Emption Group’s 2022 Statement of Principles) which is announced
at the same time as the allotment, or which has taken place in the
twelve month period before and is disclosed in the announcement of
the allotment.
262
The directors have no present intention to exercise the powers sought
by resolutions 19 or 20. If the powers sought by resolutions 19 or 20
are used in relation to a non-pre-emptive offer, the directors confirm
their intention to follow the shareholder protections in paragraph 1 of
Part 2B of the Pre-emption Group’s Statement of Principles published in
November 2022 and, where relevant, follow the expected features of a
follow-on offer as set out in paragraph 3 of Part 2B of the Pre-emption
Group’s Statement of Principles. The authority sought under resolutions
19 and 20 will expire at the AGM in 2025 or, if earlier, 16 August 2025.
21. On-market purchase of the Company’s
own shares
NEXT has been returning capital to its shareholders through share
repurchases as well as special and ordinary dividends since March
2000 as part of its strategy for delivering sustainable long term returns
to shareholders. Over this period, and up to 20 March 2024, NEXT has
returned over £4.8bn to shareholders by way of share buybacks
and over £4.5bn in dividends, of which £1.2bn comprised special
dividends. This buyback activity has enhanced Earnings Per Share, given
shareholders the opportunity for capital returns (as well as dividends)
and has been transparent to the financial markets. Share buybacks have
not been made at the expense of investment in the business. Over the
last five years, NEXT has invested over £859m in capital expenditure to
support and grow the business.
The directors intend that this authority will only be exercised if doing so
will result in an increase in Earnings Per Share and, being in the interests
of shareholders generally, it is considered to promote the success of the
Company. The directors will also give careful consideration to financial
gearing levels of the Company and its general financial position.
The purchase price would be paid out of distributable profits. It is the
directors’ present intention to cancel any shares purchased under
this authority.
The repurchase of ordinary shares would give rise to a stamp duty liability
of the Company at the rate currently of 0.5% of the consideration paid.
The Company has no warrants in issue in relation to its shares and no
options to subscribe for its shares outstanding. Exercise of outstanding
employee share options and share awards are generally satisfied by the
transfer of market-purchased shares from the ESOT (refer to Note 26 to
the financial statements).
The renewed authority will expire at the AGM in 2025 or, if earlier,
16 August 2025.
22. Off-market purchases of own shares
The directors consider that share buybacks are an important means
of returning value to shareholders and maximising sustainable long
term growth in Earnings Per Share. Contingent contracts for off-market
share purchases offer a number of additional benefits compared to
on-market share purchases:
• Contingent contracts allow the Company to purchase shares at a
discount to the market price prevailing at the date each contract is
entered into. No shares have been bought back under contingent
purchase contracts pursuant to the authority granted at the 2023
AGM up to 20 March 2024.
• Low share liquidity can often prevent the Company from purchasing
sufficient numbers of shares on a single day without risk of affecting
the prevailing market price. Contingent contracts enable the
Company to purchase shares over time without risk of distorting
the prevailing share price, and also spread the cash outflow.
• Contingent contracts entered into prior to any Closed Period allow
the Company to take delivery of shares during these periods.
• Competitive tendering involving up to five banks is used which
minimises the risk of hidden purchase costs. The pricing mechanism
ensures the Company retains the benefit of declared and
forecast dividends.
• The Company would also have the option to set a suspension price
in individual contracts whereby they would automatically terminate
if the Company’s share price was to fall.
As with any share buyback decision, the directors would use this
authority only after careful consideration, taking into account market
conditions prevailing at the time, other investment opportunities
and the overall financial position of the Company. The directors will
only purchase shares using such contracts if, based on the contract
discounted price (rather than any future price), it is earnings enhancing
and promotes the success of the Company for the benefit of its
shareholders generally. It is the directors’ present intention to cancel
any shares purchased under this authority.
Special resolution 22, passed at the Company’s 2023 AGM,
granted authority to the Company to make off-market purchases of
shares for cancellation under contingent purchase contracts to be
entered into with any of Goldman Sachs International, UBS AG London
Branch, BNP Paribas and Barclays Bank plc. This authority was limited to
a maximum of 3,000,000 shares and expires on the earlier of the date
of the 2024 AGM or 18 August 2024. Pursuant to that authority and
up to 20 March 2024, no shares were bought back under contingent
purchase contracts.
Sections 693 and 694 of the 2006 Act provide that the terms of any
contract to make off-market purchases or contingent purchases of its
shares must be approved by shareholders. The Company also typically
does not purchase its shares during the period commencing 30 days
before the announcement of its interim results and full year results in
September and March respectively each year a Closed Period. In the
absence of a Programme Agreement (as defined above), these Closed
Periods inevitably reduce the number of shares the Company is able
to purchase.
In order to achieve maximum flexibility in its share purchase activities,
the Company is permitted outside of Closed Periods to enter into
irrevocable and non-discretionary programmes and/or contingent
forward purchase contracts which would allow it to buy shares during
Closed Periods. As in previous years, the Company intends to enter into
new agreements with each of the Banks, under which the Company may
(but is not obliged to) enter into contingent forward trades (Contingent
Forward Trades or CFT) from time to time.
The terms of a CFT will be agreed between the Company and the
Bank before it is entered into. The Company is committed to purchase
shares under a CFT on the day it is executed subject to the terms of
the Programme Agreement. The terms of each CFT will provide for the
Company to purchase a fixed number of shares each week over a period
of between 20 to 30 weeks. The maximum number of shares that can
be purchased under each CFT is limited to 30,000 shares per week.
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Appendix A
Whether or not the Company purchases shares in a particular week
during the term of a CFT is dependent upon the Company’s share price
either not rising to, or above, a level (the Upper Suspension Level) or,
if applicable, falling to or below a level (the Lower Suspension Level
and together with the Upper Suspension Level, the Suspension Levels).
The Suspension Levels and duration are determined by the Company
and are set at the time the CFT is entered into. The Upper Suspension
Level must be set between 104% and 110% of the Company’s share
price at the start of the CFT. If the Company chooses to incorporate a
Lower Suspension Level, it must be set between 80% and 95% of the
price at the start of the CFT. The inclusion of a Lower Suspension Level
would help mitigate the Company’s financial commitment under a
CFT if its share price was to fall below this level after the CFT had been
executed. If the Lower Suspension Level is not included, the level of
discount to the market share price would be higher.
The price at which the Company may purchase shares during the term
of a CFT (the Forward Price) is fixed at the start of the CFT. The Forward
Price is determined by the Bank with reference to the volume weighted
average price for shares traded in NEXT on the day the CFT is entered into.
The Forward Price is subject to a maximum of 99% of the share price at
the start of the contract and a minimum of 10 pence (the par value of an
ordinary share). The minimum and maximum period between entering
a CFT and shares being purchased is 5 days and 30 weeks respectively.
The Company will announce the details of each CFT on the day it is
entered into and any subsequent termination via the Financial Conduct
Authority’s Regulatory News Service. This structure would allow the
Company to purchase shares at a discount to the market price (as at the
time each CFT commences), for so long as the Suspension Levels are not
reached, without breaching the Listing Rules. If any Suspension Level is
reached, the CFT terminates automatically at that time and no further
shares would be purchased under that contract.
Under Sections 693 and 694 of the 2006 Act, the Programme Agreements
and Contingent Forward Trades are contingent purchase contracts to
purchase shares by the Company off-market. Accordingly, resolution
22, which will be proposed as a special resolution, seeks shareholder
approval of the terms of the Programme Agreements to be entered
into between the Company and each of the Banks. The Programme
Agreements will have a duration of the shorter of the period to the
date of the next AGM to be held in 2025 and 16 August 2025 and will
incorporate the terms of an ISDA Master Agreement and Schedule.
The Programme Agreements will be entered into and each CFT will be
effected outside a Closed Period but shares may be purchased by the
Company during a Closed Period.
Should shareholder approval be granted, any number of CFT may be
effected with the Banks at any time, provided that:
• the total maximum number of shares which the Company is
permitted to purchase pursuant to this authority would be 3,000,000,
representing circa 2.4% of its issued share capital at 20 March 2024;
• the total cost of shares that the Company would be permitted
to purchase pursuant to this authority may not exceed £200m
(including costs);
• the Forward Price may not exceed 105% of the average of the
middle market price of a share according to the Daily Official List
of the London Stock Exchange for the 5 business days immediately
preceding the day on which the share is purchased;
• the Forward Price will be no more than 99% of the share price at the
time the CFT was effected;
• the minimum price that can be paid for any share is 10 pence; and
• only one CFT will be entered into on any particular day.
Shares purchased under the Programme Agreements will reduce the
number of shares that the Company may purchase under any authority
granted at the AGM on 16 May 2024 for on-market purchases.
No shares will be purchased under that authority on the same day that
a CFT is entered into. The authority granted to the Company under
this resolution will expire at the conclusion of the AGM in 2025 or
on 16 August 2025, whichever is the earlier, unless such authority is
renewed prior to that time (except in relation to the purchase of shares
under any CFT effected before the expiry of such authority and which
might be completed wholly or partly after such expiry). The purchase
of shares under the Programme Agreements will always be physically
settled by delivery of shares to the Company (except in the case of
certain events of default or termination events).
A copy of each of the Programme Agreements will be available for
inspection at the AGM on 16 May 2024. Copies will also be available
for inspection at the Company’s registered office at Desford Road,
Enderby, Leicester LE19 4AT and at the offices of Slaughter and May at
One Bunhill Row, London EC1Y 8YY during usual business hours from
the publication of this Notice until the close of the AGM.
The Company has no warrants in issue in relation to its shares and
no options to subscribe for its shares outstanding. Exercise of all
outstanding employee share options and share awards will generally
be satisfied by the transfer of market-purchased shares from the ESOT
(refer to Note 26 to the financial statements).
264
Meeting Formalities and Voting
23. Notice of general meetings
In accordance with the 2006 Act, the notice period for general meetings
(other than an annual general meeting) is 21 clear days’ notice unless
the Company:
(i) has gained shareholder approval for the holding of general meetings
on 14 clear days’ notice by passing a special resolution at the most
recent AGM; and
(ii) offers the facility for all shareholders to vote by electronic means.
The Company would like to preserve its ability to call general meetings
(other than an AGM) on 14 clear days’ notice. This shorter notice period
would not be used as a matter of routine, but only where the flexibility
is merited by the business of the meeting and is thought to be in the
interests of shareholders as a whole.
Resolution 23 seeks such approval and, should this resolution be
approved, it will be valid until the end of the next AGM. This is the same
authority that was sought and granted at last year’s AGM.
Recommendation
The Board is of the opinion that all resolutions which are to be proposed
at the 2024 AGM are in the best interests of its shareholders as a whole
and, accordingly, unanimously recommend that they vote in favour of
all the resolutions as the directors intend to do in respect of their own
beneficial shareholdings.
Attending the Annual General Meeting
To be entitled to attend, speak and vote at the AGM and for the purposes
of determining the number of votes they may cast, shareholders must
be registered in the register of members of the Company as at 6.30 pm
on 14 May 2024 or, if the meeting is adjourned, at 6.30 pm on the day
which is two working days before the adjourned meeting.
The resolutions being proposed are a very important part of the
governance of the Company and all shareholders are urged to vote.
In line with best practice, voting on all resolutions at the 2024 AGM will
be by way of a poll. On a poll, every member present in person or by
proxy, has one vote for every ordinary share held or represented.
The directors believe a poll is most representative of shareholders’
voting intentions because shareholders’ votes are counted according
to the number of shares held, and the proxy vote is added to the
votes of shareholders present so that all votes are taken into account.
The procedures for the poll votes will be explained during the AGM.
In respect of resolution 22 on off-market share purchase contracts,
the 2006 Act provides that this resolution will not be effective if
any member of the Company holding shares to which it relates
(i.e. shares which may be purchased pursuant to the Programme
Agreements) voted for the resolution and the resolution would not
have been passed if they had not done so. Therefore, NEXT intends
to disregard any poll votes which are cast in favour of resolution 22
attaching to 3,000,000 shares (being the total maximum number of
shares which the Company is permitted to purchase pursuant to the
Programme Agreements) from both the total number of votes cast in
favour of this resolution and the total number of votes cast.
The total number of the Company’s
issued share capital on
20 March 2024, which is the latest practicable date before the publication
of this Notice, is 127,125,597 ordinary shares. All of the ordinary shares
carry one vote each and there are no shares held in treasury.
Voting and proxies
Whether or not you intend to attend the AGM in person, please complete
and return the Form of Proxy to Equiniti, to arrive not later than 9.30 am
on 14 May 2024 (or 48 hours before any adjourned meeting). If you
complete and return a Form of Proxy you can still attend and vote at the
AGM if you wish.
It is possible for you to submit your proxy votes online by going to
Equiniti’s Shareview website, www.shareview.co.uk, and logging in
to your Shareview Portfolio. Once you have logged in, simply click
‘View’ on the ‘My Investments’ page and then click on the link to vote
and follow the on-screen instructions. If you have not yet registered
for a Shareview Portfolio, go to www.shareview.co.uk and enter
the requested information. It is important that you register for a
Shareview Portfolio with enough time to complete the registration and
authentication processes. Electronic proxies must be completed and
lodged in accordance with the instructions on the website by no later
than 9.30 am on 14 May 2024.
If you are unable to attend in person, you are strongly encouraged
to appoint a proxy and return the completed Form of Proxy by the
specified deadline.
A shareholder who is entitled to vote at the AGM may appoint one or
more proxies to vote instead of him/her, provided that each proxy is
appointed to exercise the rights attached to a different share or shares
held by that shareholder. A proxy need not also be a shareholder of
the Company and may vote on any other business which may properly
come before the meeting.
The statements of the rights of members in relation to the appointment
of proxies in the above paragraphs and in the paragraph headed
“CREST voting facility” below can only be exercised by registered
members of the Company and do not apply to a Nominated Person.
Nominated persons should contact the registered holder of their shares
(and not the Company) on matters relating to their investments in
the Company.
In the case of joint holders, where more than one of the joint holders
purports to appoint a proxy, only the appointment submitted by the
most senior holder (i.e. the first named joint holder recorded in the
Company’s share register) will be accepted.
A member who appoints as their proxy someone other than the
Chairman of the meeting, should ensure that the proxy is aware of
the voting intention of the member. If no voting instruction is given,
the proxy has discretion on whether and how to vote.
A person to whom this Notice is sent who is a person nominated under
Section 146 of the 2006 Act to enjoy information rights (a “Nominated
Person”) may, under an agreement between them and the shareholder
by whom they were nominated, have a right to be appointed (or to have
someone else appointed) as a proxy for the AGM. If a Nominated Person
has no such proxy appointment right or does not wish to exercise it,
they may, under any such agreement, have a right to give instructions
to the shareholder as to the exercise of voting rights.
If a member submits more than one valid proxy appointment,
the appointment received last before the latest time for the receipt of
proxies will take precedence.
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Meeting Formalities and Voting
CREST voting facility
Those shareholders who hold shares through CREST may choose to
appoint a proxy or proxies using CREST for the AGM to be held on
16 May 2024 and any adjournment(s) thereof by using the procedures
described in the CREST Manual. CREST personal members or other
CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message (a CREST
Proxy Instruction) must be properly authenticated in accordance
with Euroclear UK & Ireland Limited’s specifications and must contain
the information required for such instructions, as described in the
CREST Manual. The message, regardless of whether it constitutes the
appointment of a proxy or is an amendment to the instruction given to
a previously appointed proxy must, in order to be valid, be transmitted
so as to be received by the issuer’s agent (ID RA19) by the latest time(s)
for receipt of proxy appointments specified in this Notice. For this
purpose, the time of receipt will be taken to be the time (as determined
by the time stamp applied to the message by the CREST Applications
Host) from which the issuer’s agent is able to retrieve the message by
enquiry to CREST in the manner prescribed by CREST. After this time any
change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting
service providers should note that Euroclear UK & Ireland Limited
does not make available special procedures in CREST for any particular
messages. Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the responsibility
of the CREST member concerned to take (or, if the CREST member is a
CREST personal member or sponsored member or has appointed a
voting service provider(s), to procure that his CREST sponsor or
voting service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting service provider(s)
are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
The CREST Manual is available at euroclear.com.
The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
Corporate representatives
Any corporation which is a member can appoint one or more corporate
representatives who may exercise on its behalf all of its powers as a
member provided that they do not do so in relation to the same shares.
Right to ask questions
Shareholders may submit questions in advance on the resolutions to
be put to the AGM by emailing investors@next.co.uk. Any shareholder
attending the meeting has the right to ask questions. The Company will
answer any such question relating to the business being dealt with at
the AGM but no such answer need be given if (i) to do so would interfere
unduly with the preparation for the meeting or involve the disclosure of
confidential information, (ii) the answer has already been given on a
website in the form of an answer to a question, or (iii) it is undesirable
in the interests of the Company or the good order of the AGM that the
question be answered.
Data protection statement
Your personal data includes all data the Company holds which relates
to you as a shareholder, including your name and contact details,
the votes you cast and your Shareholder Reference Number (attributed
to you by the Company). The Company determines the purposes for
which and the manner in which your personal data is to be processed.
The Company and any third party to which it discloses the data
(including the Company’s registrar) may process your personal data
for the purposes of compiling and updating the Company’s records,
fulfilling its legal obligations and processing the shareholder rights
you exercise. A copy of the Company’s privacy policy can be found at
www.nextplc.co.uk/site-services/privacy-and-cookies.
Documents available for inspection
Copies of the following documents will be available for inspection at
the Company’s registered office during usual business hours and for
15 minutes prior to and for the duration of the AGM:
• A copy of each executive director’s contract of service and each
non-executive director’s letter of appointment.
• The Programme Agreements pursuant to resolution 22.
Copies will also be available for inspection at the offices of Slaughter
and May at One Bunhill Row, London EC1Y 8YY during usual business
hours, from publication of this Notice until the close of the AGM.
Company website
A full copy of the Annual Report (which includes this Notice),
together with those for prior years, and other information required by
Section 311A of the 2006 Act can be found at www.nextplc.co.uk.
Under Section 527 of the 2006 Act members meeting the threshold
requirements set out in that section have the right to require the
Company to publish on a website a statement setting out any matter
relating to: (i) the audit of the Company’s accounts (including the
auditors’ report and the conduct of the audit) that are to be laid before
the AGM; or (ii) any circumstance connected with an auditor of the
Company ceasing to hold office since the previous meeting at which
annual accounts and reports were laid in accordance with Section 437
of the 2006 Act. The Company may not require the members requesting
such website publication to pay its expenses in complying with Sections
527 or 528 of the 2006 Act, and it must forward the statement to the
Company’s auditor no later than the time when it makes the statement
available on the website. The business which may be dealt with at the
AGM includes any statement that the Company has been required
under Section 527 of the 2006 Act to publish on its website.
You may not use any electronic address provided in this Notice to
communicate with the Company for any purposes other than those
expressly stated.
266
OTHER SHAREHOLDER INFORMATION
Registered office
Desford Road, Enderby, Leicester LE19 4AT.
Registered in England and Wales, company no. 4412362.
Annual General Meeting
The AGM will be held at Leicester Marriott Hotel, Smith Way, Grove Park,
Leicester LE19 1SW at 9.30 am on Thursday 16 May 2024. The Notice of
Meeting on pages 260 to 266 sets out business to be transacted.
The safety of our shareholders is our main priority. We will not permit
behaviour that may interfere with anyone’s security or safety or the
good order of the meeting. Anyone who does not comply may be
removed from the meeting.
Discount voucher
The Company offers a discount voucher to any first named,
registered shareholder holding a minimum number of 100 ordinary
shares as at 1 April each year. The shareholder discount voucher
entitles the recipient or their immediate family to a 25% discount
against most purchases at any one time of full price NEXT merchandise
in NEXT Retail stores. There is no limit on the value of goods that can
be purchased at that time. The voucher expires on 31 October of the
year in which it was issued. It cannot be used in conjunction with any
other discount voucher or offer, nor can it be used for the purchase of
gift cards, Sale merchandise, electrical goods, non-NEXT branded goods
or purchases from NEXT Online (unless ordered through one of our
Retail stores). Shareholders holding shares in nominee or ISA accounts
are also eligible, but must request the voucher through their nominee
or ISA account manager who should contact the Company Secretary’s
office (companysecretariat@next.co.uk).
Registrars and transfer office
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA.
Telephone +44 (0) 371 384 2164 (if calling from outside the UK,
please ensure the country code is used). Lines are open 8.30 am to
5.30 pm Monday to Friday.
Shareholder enquiries
The Company share register
is maintained by Equiniti (“EQ”).
Please contact them online at www.shareview.co.uk or using the
contact details above if you have any enquiries about your NEXT
shareholding including the following matters:
• change of name and address;
•
•
loss of share certificate, dividend warrant or dividend confirmation;
if you receive duplicate sets of Company mailings as a result of
an inconsistency in name or address and wish, if appropriate,
to combine accounts; and
• help on how to register your email address to receive shareholder
communications electronically.
The Shareview Portfolio service from EQ gives you more online
information about your NEXT shares and other investments. For direct
access to information held for you on the share register, including recent
balance movements and a daily valuation of investments held in your
portfolio, visit www.shareview.co.uk.
For shareholders with disabilities EQ provides the following:
•
if requested, future communications produced by them will be sent
in the appropriate format; and
• hearing loop facilities in their buildings for use by visiting shareholders.
You can also contact EQ by using the Relay UK website at
www.relayuk.bt.com
CREST
The Company’s ordinary shares are available for electronic settlement.
Payments of dividends to mandated accounts
From January 2025, payments to shareholders will no longer be made
by cheque. To continue to receive dividends and any other money
payable to you in connection with your NEXT ordinary shares, you will
need to provide your bank or building society account details so that
payments can be made directly to your nominated account by direct
payment. Shareholders who do not at present have their dividends paid
directly into a bank or building society may wish to do so.
Forward looking statements
This Report and Accounts contains statements which are all matters that
are not historical facts, including anticipated financial and operational
performance, business prospects and similar matters. Forward looking
statements are identifiable by words such as “aim”, “anticipate”,
“believe”, “budget”, “estimate”, “expect”, “forecast”, “intend”, “plan”,
“project” and similar expressions. These statements reflect NEXT’s
current expectations concerning future events but actual results may
differ materially from current expectations or historical results. Any such
forward looking statements are subject to risks and uncertainties,
including but not limited to those risks described in “Risks and
Uncertainties” on pages 78 to 86 failure by NEXT to predict accurately
customer fashion preferences; decline in the demand for merchandise
offered by NEXT; competitive influences; changes in level of store
traffic or consumer spending habits; effectiveness of NEXT’s Brand
awareness and marketing programmes; general economic conditions
or a downturn in the retail industry; the inability of NEXT to successfully
implement relocation or expansion of existing stores; insufficient
consumer interest in NEXT Online; acts of war or terrorism worldwide;
work stoppages, slowdowns or strikes; and changes in financial or
equity markets. These forward looking statements do not amount to
any representation that they will be achieved. They involve risks and
uncertainties and relate to events and depend upon circumstances
which may or may not occur in the future and there can be no guarantee
of future performance. Undue reliance should not be placed on forward
looking statements which speak only as of the date of this document.
NEXT does not undertake any obligation to update publicly or revise
forward looking statements, whether as a result of new information,
future events or otherwise, except to the extent legally required.
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