Next PLC Annual Financial Report (6109C)

TIDMNXT

RNS Number : 6109C

Next PLC

18 April 2017

 
 Contacts:      Alistair Mackinnon-Musson 
                Rowbell PR 
                Email: [e-mail]                Tel: [phone] 
 
                Lord Wolfson, Chief 
                 Executive 
                Amanda James, Group                      Tel: [phone] 
                 Finance Director 
                NEXT PLC 
 
 Photographs:   Photographs available at: 
                 http://press.next.co.uk/media/company-images/campaignimages.aspx 
 

Next plc

Annual Report and Accounts for year ended January 2017

including the Notice of Annual General Meeting ("AGM") - convened for

18 May 2017

The Company announces that the Annual Report and Accounts for the year ended January 2017 is today being posted or otherwise made available to shareholders and published on its website, www.nextplc.co.uk.

In accordance with Listing Rule 9.6.1 a copy of this Report together with a Form of Proxy for the 2017 AGM has been uploaded to the National Storage Mechanism and will be available for viewing shortly at www.hemscott.com/nsm.do.

The Company's 2017 AGM will be held at the Leicester Marriott Hotel, Smith Way, Grove Park, Leicester on Thursday 18 May 2017, commencing 9.30 am.

S L Anderson

Company Secretary

Next plc

The Appendix to this announcement is a supplement to our preliminary statement of financial results made on 23 March 2017 (the "Final Results Announcement"). It contains the information required pursuant to DTR 6.3.5 that is in addition to the information communicated in the Final Results Announcement, and should be read together with the Final Results Announcement.

Appendix

The Chief Executive's Review in the preliminary statement of the Financial Results Announcement issued on 23 March 2017 includes a commentary on the primary uncertainties affecting the Group's businesses for 2017/18.

Further details of other key risks and uncertainties relating to the NEXT group are set out on pages 30 to 34 of the 2017 Report and Accounts. The following is extracted in full unedited text from the 2017 Annual Report and Accounts. Accordingly, page references in the text below refer to page numbers in the Annual Report and Accounts.

 
 Description of principal          How the risk or uncertainty 
  risk or uncertainty               is managed or mitigated 
 
 Business strategy 
  development and implementation 
  If the Board adopts                The Board reviews business 
  the wrong business                 strategy on a regular basis 
  strategy or does not               to determine how sales and 
  implement its strategies           profit budgets can be achieved 
  effectively, the business          or bettered, and business 
  may suffer. The Board              operations made more efficient. 
  therefore needs to                 Seasonal and annual budgets 
  understand and properly            together with longer term 
  manage strategic risk,             financial objectives and 
  taking into account                cash flow forecasts are produced. 
  specific retail sector 
  risk, in order to                  The Board and senior management 
  deliver long term                  consider strategic risk factors, 
  growth for the benefit             wider economic and industry 
  of NEXT's stakeholders.            specific trends that affect 
                                     the Group's businesses, the 
                                     competitive position of its 
                                     product offer and the financial 
                                     structure of the Group. 
 
                                     The Audit Committee monitors 
                                     strategic and operational 
                                     risk regularly and any significant 
                                     matters are reported to the 
                                     Board. 
 Management team 
  The success of NEXT                The Remuneration and Nomination 
  relies on the continued            Committees identify senior 
  service of its senior              personnel, review remuneration 
  management and technical           at least annually and formulate 
  personnel, and on                  packages to retain and motivate 
  its ability to continue            these employees, including 
  to attract, motivate               long term incentive schemes. 
  and retain highly 
  qualified employees.               The Board considers the development 
  The retail sector                  of senior managers to ensure 
  is very competitive                adequate career development 
  and NEXT's staff may               opportunities for key personnel, 
  be targeted by other               with orderly succession and 
  companies.                         promotion to important management 
                                     positions. 
 Product design and 
  selection                          Executive directors and senior 
  NEXT's success depends             management continually review 
  on designing and selecting         the design, selection and 
  products that customers            performance of NEXT's product 
  want to buy, at appropriate        ranges. To some extent, product 
  price points and in                risk is also mitigated by 
  the right quantities.              the diversity of NEXT's ranges. 
  In the short term, 
  a failure to properly 
  manage this area may 
  mean that NEXT is 
  faced with surplus 
  stocks that cannot 
  be sold at full price 
  and may have to be 
  disposed of at a loss. 
  In the longer term, 
  the reputation of 
  the NEXT Brand may 
  suffer. Product design 
  and selection is therefore 
  at the heart of the 
  business. 
 Key suppliers and 
  supply chain management            NEXT continually seeks ways 
  NEXT relies on its                 to develop its supplier base 
  supplier base to deliver           so as to reduce over-reliance 
  products on time and               on individual suppliers of 
  to the quality standards           products and services, and 
  it specifies. Failure              maintain the quality and 
  to do so may result                competitiveness of its offer. 
  in an inability to                 The Group's risk assessment 
  service customer demand            procedures for key suppliers 
  or adversely affect                identify alternatives and 
  NEXT's reputation.                 develop contingency plans 
                                     in the event of key supplier 
  Changes in global                  failure. 
  manufacturing capacity 
  and costs may impact               Existing and new sources 
  on profit margins.                 of supply are developed in 
                                     conjunction with NEXT Sourcing, 
  Non-compliance by                  external agents and/or direct 
  suppliers with the                 suppliers. 
  NEXT Code of Practice 
  principles may increase            NEXT carries out regular 
  reputational risk.                 inspections of its suppliers' 
                                     operations to ensure compliance 
                                     with the standards set out 
                                     in this code; covering production 
                                     methods, employee working 
                                     conditions, quality control 
                                     and inspection processes. 
                                     Further details can be found 
                                     on page 37. 
 
                                     NEXT monitors and reviews 
                                     the financial, political 
                                     and geographical aspects 
                                     of its supplier base to identify 
                                     any factors that may affect 
                                     the continuity or quality 
                                     of supply of its products. 
 
                                     NEXT also monitors and reviews 
                                     stock availability on an 
                                     ongoing basis to ensure that 
                                     issues are identified and 
                                     appropriate action is taken 
                                     where any issues are impacting 
                                     service delivery to customers. 
 Warehousing and distribution 
  NEXT regularly reviews             Planning processes are in 
  the warehousing and                place to ensure there is 
  distribution operations            sufficient warehouse handling 
  that support the business.         capacity for expected future 
  Risks include business             business volumes over the 
  interruption due to                short and longer terms. 
  physical damage, access 
  restrictions, breakdowns,          Service levels, warehouse 
  capacity shortages,                handling, inbound logistics 
  IT systems failure                 and delivery costs are monitored 
  (see next page), inefficient       continuously to ensure goods 
  processes and third-party          are delivered to our warehouses, 
  failures.                          Retail stores and Directory 
                                     customers in a timely and 
                                     cost-efficient manner. 
 
                                     Business continuity plans 
                                     and insurance are in place 
                                     to mitigate the impact of 
                                     business interruption. 
 Customer experience 
  NEXT's performance                 Market research is used to 
  depends on the recruitment         assess customer opinions 
  and retention of customers,        and satisfaction levels, 
  and on its ability                 and regular customer experience 

  to drive and service               visits to our stores help 
  customer demand. This              to ensure that staff remain 
  includes having an                 focussed on delivering excellent 
  attractive, functional             customer service. 
  and reliable website 
  and effective call                 The Group continuously monitors 
  centres, operating                 website and call centre operations 
  successful marketing               that support the business 
  strategies, and providing          to ensure that there is sufficient 
  both Retail and Directory          capacity to handle volumes. 
  customers with service 
  levels that meet or                Call centre employees receive 
  exceed their expectations.         comprehensive and relevant 
                                     training on an ongoing basis, 
                                     targeting our service to 
                                     be at its highest possible 
                                     levels. 
 Retail store network 
  NEXT Retail's performance          The predominantly leased 
  depends on profitably              store portfolio is actively 
  developing the trading             managed by senior management, 
  space of the store                 with openings, refits and 
  network. The successful            closures based on store profitability 
  development of new                 and cash payback criteria. 
  stores depends on 
  a number of factors                Regular reviews of lease 
  including the identification       expiry and break clauses 
  of suitable properties,            are undertaken to identify 
  obtaining planning                 opportunities for exit or 
  permissions and the                renegotiation of commitments. 
  negotiation of acceptable          Profiling of the Group's 
  lease terms. Prime                 lease commitments is also 
  retail sites will                  regularly reviewed by the 
  generally remain in                Board. 
  demand, and increased 
  competition for these              NEXT will continue to invest 
  can result in higher               in new space where its financial 
  future rents.                      criteria are met, and will 
                                     renew and refurbish its existing 
                                     portfolio when appropriate. 
 Information security, 
  business continuity 
  and cyber risk                     Systems' vulnerability and 
  NEXT is dependent                  penetration testing are carried 
  upon the continued                 out regularly to ensure that 
  availability and integrity         data is protected from corruption 
  of its IT systems,                 or unauthorised access or 
  which must record                  use. 
  and process substantial 
  volumes of data and                Critical systems are reviewed 
  conduct inventory                  and tested periodically to 
  management accurately              ensure they have back up 
  and quickly. The Group's           facilities and business continuity 
  systems require continuous         plans in place; these are 
  enhancement and investment         updated on an ongoing basis 
  to prevent obsolescence            to reflect business risk. 
  and maintain responsiveness. 
  The threat of unauthorised         IT risks are also managed 
  or malicious attack                through the application of 
  is an ongoing risk,                internal policies and change 
  the nature of which                management procedures, contractual 
  is constantly evolving             service level agreements 
  and becoming increasingly          with third-party suppliers, 
  sophisticated.                     and IT capacity management. 
 
                                     The Audit Committee received 
                                     updates and agreed appropriate 
                                     actions relating to cyber 
                                     risk and business continuity 
                                     during the year (see page 
                                     56). 
 
                                     As the nature of cyber attack 
                                     risk is constantly changing 
                                     and becoming ever more sophisticated, 
                                     NEXT continually works towards 
                                     improving mitigating controls 
                                     in this critical area (see 
                                     page 56 regarding the independent 
                                     cyber risk review undertaken 
                                     during the year). 
 Financial, treasury, 
  liquidity and credit               NEXT operates a centralised 
  risks                              treasury function which is 
  The main financial                 responsible for managing 
  risks are the availability         its liquidity, interest and 
  of funds to meet business          foreign currency risks. The 
  needs, default by                  Group's treasury function 
  counterparties to                  operates under a Board approved 
  financial transactions,            policy. This includes approved 
  and the effect of                  counterparty and other limits 
  fluctuations in foreign            which are designed to mitigate 
  exchange rates and                 NEXT's exposure to financial 
  interest rates, and                risk. Further details of 
  compliance with regulation.        the Group's treasury operations 
                                     are given in Note 24 of the 
                                     financial statements. 
 
                                     Compliance teams are responsible 
                                     for regulatory compliance 
                                     in specific areas. NEXT continually 
                                     strives to maintain and develop 
                                     the systems and processes 
                                     that underpin these areas 
                                     (see page 30). The Audit 
                                     Committee received regular 
  NEXT has a longstanding            briefings on regulatory compliance 
  policy of returning                during the year, for example 
  surplus cash to shareholders       in relation to requirements 
  through share buybacks             for the Payment Card Industry 
  and special dividends,             Data Security Standards (PCI 
  whilst maintaining                 DSS), and the FCA regulated 
  an appropriate level               credit business. 
  of debt. Adequate 
  financing facilities               NEXT has adequate medium 
  are therefore required             and long term financing in 
  to support the operational         place to support its business 
  needs of the business.             operations, and the Group's 
                                     cash position and forecasts 
  NEXT is also exposed               are regularly monitored and 
  to credit risk, particularly       reported to the Board. 
  in respect of its 
  Directory customer 
  receivables, which 
  at GBP1bn represents 
  the largest item on                Rigorous procedures are in 
  the Group balance                  place with regard to the 
  sheet.                             Group's Directory account 
                                     customers, including the 
                                     use of external credit reference 
                                     agencies and applying set 
                                     risk criteria before acceptance. 
                                     These procedures are regularly 
                                     reviewed and updated. 
 
                                     The Audit Committee received 
                                     a formal update regarding 
                                     the customer credit business 
                                     during the year. 
 

Directors' Responsibilities Statement

Directors' Responsibilities

The directors are responsible for preparing the Strategic Report, Directors' Report and the financial statements in accordance with applicable law and regulations.

As a listed company within the European Union, the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. The directors have elected to prepare the parent company financial statements in accordance with the Companies Act 2006 and UK Accounting Standard FRS 101 "Reduced Disclosure Framework".

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 the Company and of the profit or loss of the Group for that period. In preparing the financial statements, the directors are required to:

   --              select suitable accounting policies and then apply them consistently; 
   --              make judgements and estimates that are reasonable and prudent; 

-- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

-- in respect of the Group financial statements, provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and performance;

-- state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements;

-- in respect of the parent company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

-- prepare the financial statements on a going concern basis, unless they consider that to be inappropriate.

The directors confirm that the financial statements comply with the above requirements.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Responsibilities statement

We confirm that to the best of our knowledge:

a) the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and results of the Group;

b) the Strategic Report contained in this annual report includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that they face; and

c) the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

On behalf of the Board

 
 Lord Wolfson of Aspley Guise Amanda James 
 

Chief Executive Group Finance Director

23 March 2017

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