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LONDON (Alliance News) - UK high-street and catalogue retailer Next PLC on Thursday announced a further special dividend of 60 pence per share for its shareholders, as it has been unable to return cash through share buybacks as its share price has remained too high.
Next said the special dividend reflects its expectations for cash flow in the current financial year, rather than any recent improvement and kept its profit guidance unchanged.
At the end of December, Next declared a special dividend of 50 pence per share, having already returned GBP361 million of surplus cash to shareholders this year in addition to ordinary dividends. Prior to that, the retailer had said in October that it was not intending to pay any further special dividends this year.
"In our December statement, we set out how we would determine the price limit for share buybacks. Using the lower end of our January 2016 profit guidance and an 8% equivalent rate of return investment hurdle, the price limit calculated was GBP67," Next said Thursday.
Next said that, as its share price has remained above GBP67 since December, it has been unable to return cash through share buybacks. The retail chain said it has therefore decided to pay a further special dividend of 60 pence per share, which will be paid to shareholders on May 1.
Next shares were trading 0.1% higher Thursday mid-morning at 7,125.00 pence.
"The increase in our special dividend (from 50p to 60p per share) reflects our expectations for cash flow in the year ahead and is not a reflection of current trade. It should not be taken as an indication of any improvement in the trading or profit outlook for the company since our December statement," the retailer said.
"We remain cautious for the year ahead and are not changing our buyback price limit or profit guidance at this time," it added.
Next said that at the lower end of its profit guidance for the coming year, it expects to generate around GBP360 million of surplus cash.
"If we are unable to buy back shares, we currently intend to return this cash in four quarterly special dividends of approximately GBP90 million each, which equates to 60p per share per quarter, the first of which is announced today," it added.
In December, Next said that it was expecting its full-year pretax profit for the year to end-January 2015 to be around GBP775 million, up 11.5% on the year before, with earnings per share growth of 13.5%. However, the retail chain gave a cautious outlook for the new financial year, stating that the economic outlook for the UK consumer looks "relatively benign", citing low inflation, an end to real wage decline and healthy credit markets.
Next is currently budgeting sales growth of between 2.5% and 7.5% in the financial year ending January 2016, with the first half expected to perform at the lower end of the range. It said profits are expected to grow in line with sales, pointing at a full-year profit of around GBP795 million for next year.
"However we remain very cautious in our sales budgets for the year ahead. In Spring and Summer the company will face very tough comparative numbers," Next said back in December, adding: "There is potential upside in the second half as our sales comparisons weaken, although uncertainty in the UK political outlook and turbulence in the international economy present potential downside risks."
Next said it will release its full-year results for the year to January 2015 on March 19. It said it will also give further information on its share buybacks and special dividends for the year ahead.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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