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LONDON (Alliance News) - Fashion and home goods retailer Next PLC Thursday reported a 19.3% rise in pretax profit for the first half of the year, citing a range of factors including the improving UK economy and much better summer weather, although it kept most of its full-year outlook unchanged having already raised it twice this year.
Next's pretax profit was GBP324.2 million in the six months to end-July, up from GBP271.8 million a year earlier, as revenue rose to GBP1.85 billion, from GBP1.68 billion. The growth was driven by a 7.5% revenue increase in its stores and 16.2% growth in its directory business.
In a statement, the retailer described the sales growth as its strongest for many years, citing its extended ranges, new store openings and the growth of its online business.
"However it is important for us to recognise that this performance is, in some part, down to external factors. An improving economy, low interest rates, increasing availability of credit, less general discounting on the high street and much better summer weather have, we believe, all contributed to an improvement in our sales performance. In addition, an improved housing market has helped our Home business," it added.
That has made it more cautious for next year's performance, because it will be facing tough comparatives and potentially higher UK interest rates. "We remain mindful that some of these factors are likely to be less favourable next year and this year's fine summer weather could present tough comparatives next year, when interest rates are also expected to rise."
The company's strong growth has already prompted it to raise its guidance twice this year, but on Thursday it kept its guidance that pretax profit will be between GBP775 million and GBP815 million in the current financial year as a whole, up between 11% and 17% on last year. It expects total brand sales to rise between 7% and 10%.
It slightly increased its earnings per share forecast, to growth of between 13% and 19%, compared with the 12% and 18% growth forecast it gave in July.
Next raised its interim dividend to 50.0 pence, from 26.0p, but said it wouldn't be paying any more special dividends for the time being. It expects to pay a total dividend of 150 pence this financial year, up 16.3% from last year.
Strong cash generation had enabled it to return GBP223 million to shareholders through three special 50p dividends, of which two were paid in the first half. A further GBP105 million has been returned through share buybacks.
"The company has now distributed our expected surplus cash flow for the current year. So we do not intend to pay a further special dividend this year. However, the company has the financial capacity to buy back further shares and it may do so if the share price were to fall below our upper price limit and we judged such purchases to be in shareholders' interests," it said.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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