This report is prepared from the standpoint of a shareholder who is interested in the financial performance of Next plc with the particular concern for dividends, earnings and share price.
The main findings of this report are the following:
• accounting policies adopted by Next plc correspond to the required standards and, in our views, prove to be relevant, reliable, understandable and consistent.
• Analysis of investment ratios, gearing ratio and profitability ratios was done and, in our view, being a highly financed business Next plc managed to deliver quite decent results in this testing and critical period. It adopted such policies and made such decisions that allowed earning per share rise 24% and increase …show more content…
However, as we have learned from the interim statement the interim dividend has been increased by 6p in spite of zero increase in dividend cover ratio in this period. We think that the EPS ratio makes it a bit clearer. The EPS increased by 16.3 p that makes 24%, but we have learned from the interim statement of Next plc that earning per share rose through cash generation and share buybacks. We can also see in the Note 5 to the interim statement that EPS was specifically enhanced through share buybacks. We suppose it explains the grounds of Next plc taking decision to increase the interim dividend payment by 6p. Price per earning ratio has not changed much and has remained rather low in our views. This ratio measures market confidence in the future of the business (Peter Atrill, Eddie McLaney, 2008) and the higher it is the more investors are prepared to pay. In the case of Next pls this ratio would not certainly encourage investors to pay more. It also provides further clearness on the share buyback policy adopted by the company. We suppose that Next plc takes possible actions to strengthen its shares.
6 months to July 2010 6 months to July 2009
Gearing ratio 47.9% 52.2%
Although gearing ration decreased by 4.3% it has still remained an extremely high ratio, i.e. the Next plc is highly financed business. Its gearing level