FINANCIAL REPORTING

Financial Reporting



Financial Reporting - Next Plc

Introduction

In this paper, the focus would be on analyzing the financial performance and position of Next plc for the year ended 26th January 2013 compared to the previous year. This essay will also cover conceptual framework i.e. qualitative characteristics that make financial information useful to users.

Discussion

Overview of the Company

Next Plc is largest British based multinational company involved Retail business. Next Plc main products comprises of clothing, footwear and home product. Company headquartered in Enderby, Leicestershire, UK and was established in 1986 by Joseph Hepworth. Next Plc has been operating in more than 700 stores and out of which 540 are in UK, 200 stores in continental Europe, Asia and the Middle East. In terms of sales, Next Plc is largest clothing retailer after Marks & Spencer (Next Plc Annual report 2013, p. 1).

Operations Next Plc

Next Plc has three main channels through which they do their business. These channels are as followed:

Next Retail: 500 plus retail branches in UK as well as Ireland.

Next Directory: Home shopping catalogue and Website with 2 million customers.

Next International: International stores up to 180 plus (Next Plc Annual report 2013, p. 1).

Financial Highlights Next Plc

2012 was a very good year was Next Plc as there was increased in earnings as well as returned to shareholders shoot to £241m i.e. 16% increased from last year. Next Plc has increased their full year dividends to 105p i.e. 16.7%. Company has managed to maintain their EPS and dividends growth by 15% from last four years. Net income in 2012 was £474.8 while this increased to £508.6 in 2013. Company has posted strong cash flow from last year i.e. £324m. With increase competition and economic condition, future years will remain challenging to company, but Next Plc would continue their operation with their strategies i.e. investing in Brands and further improving their products (Next Plc Annual report 2013, p. 2).

a) Financial Analysis Company

To see whether company has been performing well or not, investors, shareholders and management has been utilizing different methods. Among these methods, the best methods consider is Ratio analysis due to its attractive features and quick picture of financial position of the company in market (Mukherjee & Hanif, 2012, p. n.d). Next Plc Ratio Analysis will be conducted in this section for two years i.e. from January 2012 to January 2013.

Profitability Ratios

Profitability ratios are an important measure for company since it shows how much company has been producing earning with respect to sales and investments (Porte, Norton, 2012, p. 63).

Profitability Ratios

Ratio

Ratio Formula

2012

2013

Profit Margin

Net Income / Net sales

13.80%

14.28%

Return on Equity

Net Income / Total Equity

213.20%

178.08%

Source: Next Plc Annual report 2013

Profit margin shows relationship between Net Income and Sales i.e. it demonstrates efficiency of management in administrating, manufacturing and selling the products. Profit margin of Next Plc indicates an improved picture. In 2012, PM was 13.8% while it increased to 14.28% in 2013 due to increase in sales and net ...