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Q4 2021 hedge fund letters, conferences and more
NEXT's Earnings
Commenting on the results, Steve Clayton, HL Select fund manager said:
“We hold NEXT plc in our UK funds because it is a superbly managed retailer, with the highest online exposure of any High Street operator in the UK and a cash generative business model. The business is performing strongly in unusual circumstances. Demand is holding up well, with the stores trading ahead of expectations, although some of this is a function of pulling business back from the website, post lockdowns. Having previously sold well online in Russia, there is an obvious hit that has to be taken, but the business is more than strong enough to cope.
The group have, almost uniquely in our experience, posted a long term model of how the business might be capable of faring over the next fifteen years. Clearly there are lots of assumptions that have to go into such an exercise and NEXT plc are keen to stress this is not a forecast. But their modelling shows that the group should be capable of generating almost £15bn of cash over this period, which compares to a market value of under £9bn currently. The group has long had a policy of returning all excess cash to shareholders, and today announced a return to pre-pandemic dividend levels, augmented by share buy-backs to absorb surplus cash. If their modelling is anywhere near accurate, then shareholders can look forward to a lot more of that in future.
The market’s reaction, knocking the shares back a couple of percent in early trading seems a knee-jerk to the reduction in sales forecasts. But all of that relates to the events in Ukraine and cash generation expectations for the current year are actually improved. Longer term, that cash flow modelling suggests that there is in fact much for investors to look forward to.”
About Hargreaves Lansdown
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Updated on Mar 24, 2022, 1:41 pm
Source valuewalk