next plc competitive advantage
NEXT PLC is retailing company and primarily operating in UK from last 150 years. Company has strong position in the market. Company was established in 1982. Company offers raging of the accessories, clothing, footwear and home ware. This company sells moderately priced clothing for children, women and men. Moreover, it sells furniture through 530 plus stores and in UK and Ireland. According to YahooFinance, (2015), company has 165 franchises stores in 30 countries in Middle East, Europe and Asia. The target market of the NEXT is between the ages of 20 to 30, which are looking for affordable but stylish clothes for fashion. Company generates sale from retail stores and web site. Moreover, directory catalogue is also available for 50 countries catering to their customers.
Company outsources its procurement material from Asian merchandises from 50 Lipsy stores. The headquarters of the company are located in UK. Simon Wolfsan runs head quarter. He is the Chief executive of the company. This company is distributing their products or services with three main or the important channels, which are NEXT Directory and NEXT Retail. This is operating more than 500 hundred stores around Ireland and UK. This company also operates the website and the list of catalogue for 2 million active users is available (FT, 2015). NEXT international chain includes wholesaling, designing, and management of the customer services. They come with the next sourcing and identify the source of the finance
Assignment on NEXT PLC By ABC Date Introduction: NEXT PLC is retailing company and primarily operating in UK from last 150 years. Company has strong position in the market. Company was established in 1982. Company offers raging of the accessories, clothing, footwear and home ware. This company sells moderately priced clothing for children, women and men. Moreover, it sells furniture through 530 plus stores and in UK and Ireland. According to YahooFinance, (2015), company has 165 franchises stores in 30 countries in Middle East, Europe and Asia. The target market of the NEXT is between the ages of 20 to 30, which are looking for affordable but stylish clothes for fashion. Company generates sale from retail stores and web site. Moreover, directory catalogue is also available for 50 countries catering to their customers. Company outsources its procurement material from Asian merchandises from 50 Lipsy stores. The headquarters of the company are located in UK. Simon Wolfsan runs head quarter. He is the Chief executive of the company. This company is distributing their products or services with three main or the important channels, which are NEXT Directory and NEXT Retail. This is operating more than 500 hundred stores around Ireland and UK. This company also operates the website and the list of catalogue for 2 million active users is available CITATION FT15 \l 1033 (FT, 2015). NEXT international chain includes wholesaling, designing, and management of the customer services. They come with the next sourcing and identify the source of the finance. Chairman’s Statement According to the chairperson of this company, 2015 year was better for NEXT in terms of performance. In this year, Earnings per share grew with the rate of 15%. Increase in earnings proposes company to increase dividends of the full year by the 16%. According to the Chairman, it was the six consecutive years that our ordinary and EPS dividends have grown with the rate of 15% or more. NEXT directory sales, catalogue and online business increase with the rate of 12% and retails of the company by 5%. Total group sales reached £4 billion, which rose with the rate of 7% for the first time. During this year, share price rose with the percentage of 14%. During this year, our share price rose with the percentage of 14% from £ 62.80 TO £ 71.50. With the increase in the prices of the shares, we did not buy our own shares in the previous year. Instead, we return towards the cash surplus with the help of the special dividends to the shareholders. We returned £572 million to the shareholders due to the strong cash flows with the help of the combination of buybacks and dividends. According to the CEO of this company, our company is also paying special dividend in February, which is 50 percent per share and has since announced 60 percent special dividend for the future. Our company will also continue to undertake buybacks to give the effective return on the expansion of cash at least 8%. To the board, we have different changes. Chrisrtos and geliders left the company in September after the 28 years of service. Finally, Dame Dianne joined our company as the non-executive director of the company. She has distinguished and long career with the good. Camelot is also an addition to our board. The continuous success of company builds the dedication and hard work for management team of the company and other people who are working for NEXT. In the next year, our company strategy will remain same. We have to focus our profitability, our products and returning cash to our shareholders. Director’s Report and Business review: Jane Shields and Michael is the Chief executive Directors of NEXT that were appointed in 2013. In 1985, Jane joined NEXT retail as a sale Assistant in the London stores of the company. He worked in store with the help of the store management and in 2010. He was appointed as a marketing director. Under the Act of 2006, director of the company allot the shares or grant the rights to convert and subscribe any security. General meeting of shares holders authorized to do by the best interest of the shareholders. In March 2014, as reported in the annual reports of Next (2014), director of NEXT issued capital amounts and ordinary shares for ten percent each. According to the director of NEXT, he considers buyback shares as the important way of maximizing sustainable long-term growth and returning the values to the shareholders. He said that, low share liquidity prevent the company from the purchasing of the shares without the risk on a single day. Director of company say competitive tendering involve up to the five banks that use minuses to minimize the risk of the hidden purchase costs. The director of the company presents their audited accounts and annual report for the financial year 2014. Director recommends that on first of august 2014, final dividend of 93 per share will be paid for the register members and shareholders at the closing of the business on 11 July 2014. The chief executive of NEXT reviews that director very well decided about special dividends, which are to pay as long as share prices will remain constant above the price limit of Boards buybacks. Independent Auditor’s UK Report: We have audited the financial statement of NEXT for the year ended 2014, which comprises the consolidated statement of the comprehensive income, consolidated income statement, consolidated statement of change in equity, consolidated balance sheet , related notes of 1 to 32 and consolidated cash flow statement. Financial reporting framework has been applied that follows the international financial reporting standards. These are applicable by the European Union. This report has been prepared solely to the members of the company in accordance with chapter 3 of the part 16 of company act of 2006. Our audit work has undertaken for stating the members of the company to that were requiring in the auditor’s report. This was an important consideration. We do not assume or accept to the responsibly if company is fully permitted by the law. In our audit, we apply materiality in performing and planning for our audit. For determining whether the financial statements are free from misstatements, we define magnitude of the misstatements that make probable in the economic decision. For auditing, we use overall audit strategy. Consolidated/Group financial statements and segmental analysis The operating segment of group under IFRS 8 had determined the management accounts that are reviewed by board. The operating segment’s performance is measured by PBIT (profit before interties and tax included equity (which is settled by the charges of shares option). It recognized by IFRS 2 “Share-Based Payment” and unrealized. The gain and losses of foreign exchanges on derivatives that is not qualified for the hedge accounting. In the business model, the activities of the operating segment related to the products and services are mentioned. The segment that deals with the management, it holds the property leases and properties, and have sub-let with the other segments and external parties. The total segment revenue of NEXT in January 2015 was 3,999.8 £ million. The profit before tax is 794.8 £ million in January 2015, which is greater than January 2014. Total assets of Next in January 2015 were 503.3 £ million which are less than January 2104. External revenues (by geographical location) of Next in January 2015 were greater than January 2014. While the non-current assets (by geographical location) are greater in United Kingdom in January 2015 as compared to January 2014, In rest of the Europe, Middle East, Asia and rest of the world decreases in January 2015 as compare to the January 2014. Based on the data presented in Appendix, important ratios are analyzed in the next paragraph. The operating profit margin of the company has declined, which shows that magnitude of increase in revenues was less as compared to the increase in the cost of revenues. This indicates that Next must improve its sales, general and administrative expenses. Asset turnover ratios have also declined marginally indicating that company’s ability to generate sales from its assets has declined. In other words, its efficiency in handling it assets has declined which reflects the most likely that management or production problems at Next. Also, it shows that Next is now earning less pounds out of pounds invested in the company. Liquidity position of the company has considerably improved, indicating that company has enhanced its capability to pay its liabilities in short term. In other words, company has more cash on its disposal than before and it indicates the improvement in its efficiency. It indicates to investors and creditors that company has no immediate threat to its cash position and liquidity. So, Next now have more cash available at its disposal as compared to its assets. Therefore, company is now in more favorable position as it enhanced its ability to pay off current debt payments more easily. Additional Information NEXT PLC is the UK brand, which is bases retailer offering beautifully designed excellent quality of the accessories and other home products. Company has believed on the investment in proper time and has focus to improve the design content of our range. Company range in 2014 summer and spring were successful across the division of the five products. With the further investment, they continuously have the focus on the design in print or the fabric resources. NEXT Inc has aim to improve or develop the buying process. Company started to develop the themes of the designs before the eight month of launching season. Company will continue to work in the same way, because management of NEXT have believe that they can make better use of intervening time to improve the prints, designs, details, trims, fabrics, shapes and prices on long lead product. NEXT is going to expand their business. They want to open more stores in different countries. They have change the appearance of adding glass frontage, existing retail park building and the quality of the shop fit. They want to build two stores, which enabled us to create the iconic and beautiful buildings. In the next three years, NEXT have the hope to make plan for opening eight more bespoke new stores. Conceptual Framework – IASB Conceptual framework is established that financial reporting is the coherent system of the concepts that flow from an objective. The purpose of this framework is to identify their objectives. That is the reason that for identifying their objectives NEXT uses this framework for the financial analysis of the organization. With this framework, NEXT use the international accounting standards so that company can get the correct results. Most of the companies that traded the securities regulate the public market e.g. London stock exchange. IASB framework describes the document of the company, framework for preparation and presentation of the financial Statement. IASB is working in the joint projects. NEXT, use this framework to get the sound foundation for the further development of the accounting standards for the company. By using this framework, NEXT Inc gets the qualitative characteristics that makes the elements of the financial statements and makes accounting information useful. With the help of this conceptual framework, organizations measure recognizes and discloses the concepts that organizations apply or establish in accounting standards and the specific concept to implement the objectives. Discussion The overall performance of Next is good as compare to the previous years. The reason behind is the active management. They also change their strategies time to time. The board continuously involved in finding the risk associated with the business. It also develops new business process to overcome the risk as well as for the better performance of the employees. It has a disciplined chain of command and management hierarchy. All departments work like a team and the direction of achieving organization goals and objectives. The focus o the board is on strategy building. Performance of a company depends on the strategies. If it falls due to wrong strategies, it is extremely difficult to get the success again. The success and good performance of next depend on the designing and innovative products. It brings innovation in their products according to the demand of their customers. The culture and environment of Next is very suitable for the employees of the company. The financial performance of Next is very god as compare to the last years. There is proper system to manage all the process of Next. If it will work with the same pattern, then in coming future it becomes the market leaders. Over the last few years, directory of the company has the focus to make the transition from the catalogue online. NEXT Inc wants to make new customers. To attract new customers, company is making different and innovative strategies. They have dramatically increased performance and now company have 900000 active cash customers. This is overall good signs for the company. However, it is important to maintain same performance level over the nest coming years for sustainable performance. Appendix 2015 2014 ROCE 2.47 2.43 Operating Profit Margin 20.30% 19.30% Diluted EPS 4.18 3.56 Asset Turnover 1.81 1.85 Net profit before tax 795 695 Net Profit after tax 635 553 Current Ratio 1.82 1.76 Acid Test Ratio 1.24 1.18 Recollection Period 63 62 Gearing Interest 25.90 29.16 P/E Ratio 17.08 18.12 Dividend Cover 1.46 3.35 Change in Price (52 weeks) 1745 701.09 References: YahooFinance. (2015). Next Plc. [Online] Available from: https://uk.finance.yahoo.com/q/pr?s=NXT.L [Accessed 16 November 2015] Next, 2014. Annual reports 2014-15. [online] Available at: http://www.nextplc.co.uk/investors/reports-and-results/2014.aspx [Accessed 16 November 2015] Financialtimes. (2015). Equities-Next PLC. . [online] Available at: http://markets.ft.com/research/Markets/Tearsheets/Business-profile?s=NXT:LSE [Accessed 16 November 2015]