Next Directory continues to shine

14th Sep 2011 07:28

Clothing retail chain Next claimed it has put in a resilient performance in 2011 against a backdrop of rising costs, and said 'retail headwinds are likely to ease as we move into 2012'.Revenue excluding value added tax (VAT) rose to £1,630.3m in the six months to the end of July from £1,587.2m in the corresponding period of 2010.The UK Retail arm saw sales dip 1.8% year-on-year, but the Directory business grew sales by 15.1% and Next International's sales rose 9.2% from a year earlier."Retail sales were in line with our internal budgets, finishing -1.8% down on last year. The reported figure is given excluding VAT and as such is a little misleading in the context of consumer spending. The amount customers spent with us was broadly flat at -0.3%," the company said.On the profit side, profit before tax from continuing businesses advanced 8.5% to £228.0m from £210.2m the year before, while earnings per share rose 18.6%, helped by the company's share buy-back programme, to 98.3p from 82.9p the year before.Profits are Next Retail were barely changed at £122.5m from last year's interim performance of £122.9m, while Next Directory's profit climbed to £112.8m from £101.3m. Next International's profit contribution rose to £3.2m from £2.3m the year before, while Next Sourcing's profit fell to £10.1m from £12.5m, mainly as a result of the lower commission rates the division now charges, in response to a very competitive sourcing market.Net debt increased by £110m to £640m in a period in which the company spent £188m buying back shares. Debt will generally fluctuate between £600m and £700m during the second half and should finish the year around £580m, the company advised.Excluding the now-sold Ventura business, Next expects full-year profit before tax to be between £545m and £590m, which implies year-on-year growth of 0.4% and 8.7%. Basic earnings per share is seen rising to somewhere between 238p (+7.5%) and 258p (+16.4%)."We have already negotiated a third of our prices for Spring 2012 so we are confident that we will see little or no inflation in our own selling prices in the first half of next year. This change is important, as we believe that rising prices in the current year have moderately suppressed demand," revealed Next's chief executive, Lord Wolfson."Looking at the wider economy it seems likely that other inflationary pressures will begin to moderate in the first half of next year. The current VAT increase annualises in January and, assuming commodity prices rise no further, many essential commodities (most notably oil) will progressively annualise during the course of the first half. Importantly, employment numbers are also holding steady. If this trend continues then consumer finances should be in better shape as we progress through 2012," Wolfson added, while cautioning that the group is not expecting a consumer boom in 2012.The interim dividend has been increased by 10% to 27.5p. --jh