Report on Analysis of Next Plc

1. Key success factors & company performance…………………………………………………..3 2. Bank perspective regarding the performance…………………………………………………..7 3. Bank financing perspective at the end of 1998……………………………………………….10 4. Management perspective regarding the bank financing………………………………….13 5. Exhibit 1 – Annual Income Statements (1994-1997)………………………………………17 6. Exhibit 2 – Annual Balance Sheets (1994-1997)……………………………………………..18 7. Exhibit 3 – Quarterly Income Statements 1997……………………………………………….19 8. Exhibit 4 – Quarterly Balance Sheets 1997………………………………………………………20 9. Exhibit 5 – Forecasting………………………………………………………………………………………21 10. Exhibit 6 – Annual Ratios………………………………………………………………………………….22 11. Exhibit 7 –

This report will analyse and outline the company’s profitability, liquidity, solvency and investment potentials based on 15 ratios. All information is taken from the Next plc 2011 statement.

In order to maintain its credit rating, Diageo’s Treasury team recommends an interest coverage of 5x to 8x, but the simulation-based model calculated an optimal interest coverage.  Figure 2 shows minimal cost corresponding with an interest coverage of approximately 4.2.  Shown in the gray bars, the cost of taxes paid decreases as EBIT/Interest

From the perspective of an investor, M&S have showed a consistent growth of earnings per share. Figures stated in the key performance measures highlight the significant growth of the EPS over the past five years. Similarly the five year record of Tesco Plc also shows an increase in EPS from 15.05p to 26.95p. Both M&S and Tesco’s, like many other competitors in

NEXT PLC is a retailing company that primarily operates in the UK, and has been trading for almost 150 years; however, the brand itself was first created in 1982 (Next plc, 2010a). The company offers a range of clothing, accessories, home ware and footwear. The company’s headquarters is located in Leicester, UK and is currently run by Chief Executive Simon Wolfson. NEXT distributes through three main channels: NEXT Retail, operating in more than 500 stores around the UK and Ireland, NEXT Directory, a website and catalogue list for over 2 million active users. And NEXT International, with chains of over 180 stores worldwide including an international website. However, NEXT also

Ratio analysis is a very useful tool when it comes to understanding the performance of the company. It highlights the strengths and the weaknesses of the company and pinpoints to the mangers and their subordinates as to which area of the company requires their attention be it prompt or gradual. The return on shareholder’s fund gives an estimate of the amount of profit available to be shared amongst the ordinary shareholders; where as the return on capital employed measures an organization 's profitability and the productivity with which its capital is utilized. Return on total assets is a profitability ratio that measures the net income created by total assets amid a period.

The first ratio used in the financial analysis was a profit ratio which is the Return on Total Assets (ROA).

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

A graph below represents Earning per Share ratio. EPS ratio is used when the company wants to know how are they doing in their businesses from year to year. EPS is shown in pence. (Dyson, 2010) A year 2009 was not so profitable for company as EPS was -2,79p. This means that business was making little money, which was not good for shareholders. However, in 2010 the EPS was quite high, 14,76p, what means the company is making profit and shareholders want to invest in business.

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

Based on Next Annual Report and Account January (2011), the chief executive's review present the A New Normal of company overview, due to the changing consumer environment, Next PLC need to have New avenues of growth, and brand new way to control cost, also, it will be important that retailer have to generate the healthy cash flow with cautious management. Furthermore, enable to know how company efficiently use asset to generate revenue and whether there was improvement between 2010 and 2011, the activity ratios have to calculate out. The ROCE in 2010 and 2011 were 38.91%,41.79%, this number showed how profit generated by capital employed, and the growth figure of ROCE lead to level up efficiency asset used.((NEXT PLC, 2011 page43, 45) The figure for inventory turnover, receivable turnover, and payable turnover in 2010 and 2011 were 46.81 days, 54.98 days; 66.07days, 68.23 days; 83.36days,81.3days; respectively. (ibid) It is clearly show that the inventory and receivable turnover in 2010 was taken lesser day than 2011, in which means inventories took less day to sold out to costumer and the cash credit receive more faster than the 2011, besides, the payable turnover had longer period than 2011, it was also a good example to illustrate that there was more cash flow holding by company, and the overall image of these figure present that the resource had been

This assignment will analyse and compare the financial performance between NEXT and DEBENHAMS by examining their latest Annual Reports. In order to conclude and comment on these two businesses, appropriate ratios will be calculated through the figures in their business financial statements and the information regarding their industry and market conditions in Annual Reports will also be analysed.

Profitability ratios are basically figures to measure if the company is doing well in the terms of profit[13]. ROCE ratio has increased in 2011 but in 2012 it deteriorates by 3%. This fall indicates that company was not successfully getting high returns as a percentage of its resources available, compared to 2011.

Abbott’s fixed asset and total asset turnover ratios can tell us how well the firm uses its assets to generate revenue. The fixed asset ratio provides the proportion of sales to fixed assets and tells us how much revenue is

According to current figures given by the FTSE 100 as at 27 Nov 2006, BP is listed as the one of the top six listed companies with the FTSE 100. This in itself is a major achievement.