JANUARY 2018 - AnnualReports.co.uk · 2019-07-22 · Jan 15 Jan 16† Jan 17 Jan 18 Jan 14 £3.8 bn £4.0bn £4.1bn £4.1bn £4.1bn TOTAL SALES*-0.5% Underlying continuing business

ANNUAL REPORT AND ACCOUNTS

JANUARY 2018

ANN

UAL REPORT AN

D ACCO

UNTS

27 JANUARY 2018

Strategic Report 3 Chairman’s Statement 4 Chief Executive’s Review 38 Business Model40 Key Performance Indicators 42 Risks and Uncertainties 47 Viability Assessment48 Employees 49 Social, Community and Human Rights 50 Environmental Matters

Group Financial Statements102 Consolidated

Income Statement 103 Consolidated Statement

of Comprehensive Income 104 Consolidated Balance Sheet 105 Consolidated Statement

of Changes in Equity 106 Consolidated Cash

Flow Statement 107 Group Accounting Policies 113 Notes to the Consolidated

Financial StatementsCompany Financial Statements 145 Parent Company Balance

Sheet 146 Parent Company Statement

of Changes in Equity 147 Notes to the Parent

Company Financial Statements

Shareholder Information150 Half Year and

Segment Analysis 151 Five Year History 152 Glossary 154 Notice of Meeting 160 Other Shareholder

Information

Governance 54 Directors’ Report Including

Annual General Meeting & Other Matters

61 Directors’ Responsibilities Statement

62 Corporate Governance66 Nomination Committee

Report 67 Audit Committee Report 71 Remuneration Report 94 Independent Auditor’s

Report

NEXT is a UK based retailer which offers exciting, beautifully designed, wonderful quality clothing and homeware.

NEXT distributes through three main channels:

• NEXT Retail, a chain of around 530 stores in the UK and Eire

• NEXT Online, our home shopping division with over 4.9 million active customers in the UK and overseas

• NEXT International Retail, with around 200 mainly franchised stores

This symbol signposts the reader to other sections within this report

Investor website

Please note: you can register to receive electronic shareholder communications at www.nextplc.co.uk

To view our range of exciting, beautifully designed, wonderful quality clothing and homeware, go to www.next.co.uk

We maintain a corporate website at www.nextplc.co.uk containing a wide range of information of interest to investors

This document contains Forward Looking Statements – see page 161.

Contents

Jan 15 Jan 16† Jan 17 Jan 18Jan 14

£3.8

bn

£4.0

bn

£4.1

bn

£4.1

bn

£4.1

bn

-0.5%TOTAL SALES*

Underlying continuing business

Jan 15◊ Jan 16†Jan 17

Jan 18Jan 14

£695

m

£782

m

£821

m

£790

m

£726

m

-8.1%PROFIT BEFORE TAXUnderlying continuing business

Jan 15◊ Jan 16† Jan 17Jan 18

Jan 14

366.

1p

419.

8p

442.

5p

441.

3p

416.

7p

-5.6%EARNINGS PER SHAREUnderlying

Jan 15 Jan 16 Jan 17 Jan 18

Jan 14

129p

150p

158p

158p

158p

no changeDIVIDENDSPER SHAREExcluding special dividends

FINANCIAL HIGHLIGHTS

HIGHLIGHTS• Total sales marginally down -0.5% to £4.1bn.

• Profit before tax down -8.1% to £726m.

• Earnings Per Share down -5.6% to 416.7p.

• £480m paid to shareholders in dividends through a combination of ordinary dividends £224m and special dividends £256m. A further £106m was returned through share buybacks.

• Final ordinary dividend of 105p, making 158p for the year, flat on last year. Covered 2.6 times by Earnings Per Share.

• Strategy continues to be focused on products, profitability and returning cash to shareholders through dividends and share buybacks.

* Total sales are VAT exclusive sales and include the full value of commission based sales and interest income (refer to Note 1 of the financial statements).

† Sales, profit and EPS figures for Jan 16 are shown on a comparable 52 week basis.

◊ Underlying results for 2015 are shownpre-exceptional items.

Read more in the Chief Executive’s Review on pages 4 to 37

See our Group financial statements on pages 102 to 143

Strategic ReportG

overnanceFinancial Statem

entsShareholder Inform

ation

STRATEGIC REPORT 3 Chairman’s Statement 4 Chief Executive’s Review38 Business Model 40 Key Performance Indicators 42 Risks and Uncertainties 47 Viability Assessment48 Employees 49 Social, Community and Human Rights 50 Environmental Matters

Strategic ReportChairman’s Statement

IjoinedtheBoardofNEXTjustoverayearagoandbecameChairmaninAugust2017.IamenjoyingworkingwiththeBoardandhavebeenimpressedbythepassionandcommitmentshownbytheExecutiveBoardandalltheemployeesofNEXT.

Asanticipated,theyeartoJanuary2018waschallengingforNEXTand,inlinewithourJanuary2018guidance,EarningsPerSharedeclinedby-5.6%to416.7p.Weareproposingafinalordinarydividendof105ptakingthetotalordinarydividendto158p,flatonlastyear.

NEXT Retail full price1salesdeclinedby-7.0%andOnline2fullpricesalesincreasedby+11.2%.Total3Groupsalesof£4.1bnweremarginallydownonlastyearby-0.5%.

Despitedifficulttradingconditions,cashflowremainedstrongandwereturned£586mtoshareholdersthroughacombinationofordinarydividends(£224m),specialdividends(£256m)andsharebuybacks(£106m).Duringtheyearwepurchased2.2msharesatanaveragepriceof£48.81andreducedoursharesinissueby1.5%.

Wehavecontinuedtoinvest inthebusiness,spending£104monnewstores,warehousingandsystems.Netdebt increasedto£1,002mfrom£861mdrivenmainlybythesalesgrowthinnextpay, our online credit business. Net debt remains well within our bond andbankfacilitiesof£1.4bn.

MichaelLaw,ourGroupOperationsDirectorwhohasbeenwithNEXTfor23years,retiresfromtheBoardattheAGMinMay.MichaelhasmadeahugecontributiontotheGroup,inparticularleadingthetransformationofourWarehousing,LogisticsandSystemsoperations.OnbehalfoftheBoard,IwouldliketothankMichaelforhisoutstandingservice.IamdelightedtoannounceRichardPapp,ourGroupMerchandiseDirectorwith25years’serviceatNEXT,willsucceedMichaelontheBoardasGroupMerchandiseandOperationsDirector.

The continued strength of the Group is built on the hard work and dedication of all the people who work for NEXT. I would like to thankthemallfortheircontribution,especiallyforthedeterminationandcommitmenttheyhaveshownduringthisdemandingyear.

Eventhoughthewidereconomy,clothingmarketandHighStreetlooksettoremainchallenging,atourcentralguidancefortheyearahead,EarningsPerSharewillmodestlymoveforward.TheBoardcontinuestobefocusedonbuildingshareholdervaluethroughthedeliveryoflongtermsustainablegrowthinEarningsPerShare.Ourcorestrategyremainsunchanged,focusedonourproducts,ourprofitabilityandreturningsurpluscashtoourshareholders.

Michael RoneyChairman

Read about our Governance on pages 62 to 65Read more in the Chief Executive’s Review on pages 4 to 37

1. Fullpricesalesaretotalsales,excludingitemssoldinourmid-seasonorend-of-seasonSaleeventsandourClearanceoperations.Theyincludeinterestincomerelating to those sales.

2. FormerlyknownasNEXTDirectory.

3. Total sales are VAT exclusive sales including the full value of commission based sales and interest income (refer to Note 1 of the financial statements).

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IntroductionInmanyways2017wasthemostchallengingyearwehavefacedfortwenty-fiveyears.Adifficultclothingmarketcoincidedwithself-inflictedproductrangingerrorsandomissions.Atthesametime,thebusinesshashadtomanagethecosts,systemsrequirementsand opportunities of an accelerating structural shift in spending from retail stores to online. In the end our profits were in line with the forecastweissuedinJanuary2017andtheCompanygoesintothecomingyearingoodfinancialhealth.

Whilstithasbeenanuncomfortableyearithasalsopromptedustotakeafreshlookatalmosteverythingwedo:fromthestructureofourstoreportfolio,thein-storeexperienceandthegenerationofalternativeretailrevenuestreams,themanagementofourcostbase,oursourcingandbuyingmethods,stockmanagementand,mostimportantly,ouronlinesystems,marketingandfulfilmentplatform.Asaresultoftheseendeavours,manychallengesandopportunitieshaveemerged.

Structure of this reviewWehave structured this review to give readers: (1) a clear anddetailedpicture of the financial performance of theCompany, (2)ananalysisofthecyclicalandstructuralchangesaffectingthebusinessandourplanstorespondtothesechallengesand(3)ourguidancefortheyearahead.Anoverviewofeachofthesesectionsissetoutinthetablebelow.

Section DescriptionPart 1 Review of Financial Performance page 5 This section gives a detailed description of the Group’s

financial performance by business division (Retail, Onlineandotheractivities).ItalsogivesthestructureoftheGroup’sBalance Sheet, financing and cash flows.

Part 2 StrategicResponsetoaChangingMarket page20 This section describes the structural and cyclical changes affecting our industry and our thoughts as to how thesetrendswilldevelopintheyearahead.

This section also gives a flavour of some of our plans to address the challenges and harness the opportunities of the current environment.

Part 3 Sales and Profit Guidance for the Year Ahead

page37 This section gives our guidance for full price sales, profits and Earnings Per Sharefortheyearahead.

Strategic ReportChief Executive’s Review

4

Financial performance – key numbersNEXTBrandfullpricesalesfortheyearwereup+0.7% and total sales (including markdown) were down -0.6%onlastyear.InlinewiththeguidancewegaveinourChristmastradingstatement,Groupprofitbeforetaxwasdown-8.1% and Earnings Per Share (EPS) were down -5.6%.

DuringtheyearwehavechangedthecostallocationbetweenourRetailandOnlinebusinesses.TheaimistoreflectmoreaccuratelythecostsoffulfillingOnlineordersthroughourshops.PrioryearoperatingprofitforRetailandOnlinehasbeenrestatedthroughoutthis report for comparison; there is no change to total Group operating profit, refer to page 6.

Weareproposinganordinarydividendof105ppershare,making158pintotalfortheyear,whichisinlinewithlastyearandcovered2.6timesbyEPS.

Total sales excluding VAT

Jan 2018

£m

Jan 2017

£mNEXT Retail 2,123.0 2,304.6 -7.9%NEXTOnline 1,887.4 1,728.5 +9.2%NEXT Brand 4,010.4 4,033.1 -0.6%Other 107.1 103.7Total NEXT Group sales 4,117.5 4,136.8 -0.5%Statutory revenue 4,055.5 4,097.3

Profit and EPS

Jan 2018

£m

Jan 2017

Restated £m

NEXT Retail 268.7 353.3 -24.0%NEXTOnline 461.2 429.5 +7.4%NEXT Brand 729.9 782.8 -6.8%Other 30.0 44.9Operatingprofit 759.9 827.7 -8.2%Net interest (33.8) (37.5)Profit before tax 726.1 790.2 -8.1%Taxation (134.3) (154.9)Profit after tax 591.8 635.3

EPS 416.7p 441.3p -5.6%Ordinarydividendspershare 158.0p 158.0p 0.0%

Part 1 – Review of Financial Performance

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Note on cost allocationWithRetailprofitabilityincreasinglyunderthemicroscopeithasbecomemoreimportanttocorrectlyallocatecostsbetweenRetailandOnline.OuranalysisofcostrechargesbetweenthetwobusinessesidentifiedthattherewasasignificantshortfallintheamountthatRetailwasrechargingforthecostoffulfillingOnlineordersinstore.Theunderchargewas£14.6m.

PrioryearoperatingprofitforRetailandOnlinehasbeenrestatedthroughoutthisreportforcomparison;thereisnochangetototalGroup operating profit. The table below sets out the change made between the two businesses and the corresponding effect on their2016/17netoperatingmargins.

Activity Explanation Value £m

Effect on Retail

margin

Effect on Online margin

HandlingOnlineordersandreturnsinRetail stores.

Costperparcelincreasedfrom57pto89ptoreflecttotalstaffingrequirementsincluding management costs. 14.6 +0.6% -0.9%

NEXT, Gateshead Metrocentre

6

NEXT RetailRetail sales and profit analysisTotalRetailsalesreducedby-7.9%andfullpricesalesweredown-7.0%.Netnewspacecontributed+2.0%tototalsalesgrowth.Asexpected,ourRetailbusinesshashadaparticularlydifficultyearandprofitsfell-24.0%,asshowninthetablebelow.

£mJan

2018Jan20174

Retail total sales 2,123.0 2,304.6 -7.9%Retail operating profit 268.7 353.3 -24.0%Retail net margin 12.7% 15.3%

ThetablebelowsetsoutsignificantRetailmarginmovementsbymajorheadsofcosts.

Net operating margin on total sales last year – restated 15.3%Bought-in gross margin Improvedunderlyingbought-ingrossmarginhasadded+0.1%tomargin. +0.1%

Markdown StockforSalewasdown-9%withmarkdownsalesdown-15.5%.Reducedclearance ratesloweredmarginby-0.3%.

-0.3%

Stock loss TheSterlingvalueofbranchstocklosswasinlinewithlastyear,butasaresultoffalling sales, was a larger percentage of turnover.

-0.1%

Store payroll Productivityinitiativesmorethanoffsetincreasesinratesofpay. +0.2%

Store occupancy Falling sales increased fixedcostsasapercentageof sales.Underlying rentalinflationwasnegligibleat+0.4%.

-1.7%

Warehouse & distribution Fallingsalesincreasedfixedcostsasapercentageofsales;thishasbeenpartiallyoffsetbycostsavinginitiativesinourdistributionnetwork.

-0.2%

Central overheads Centraloverheadsincreasedasapercentageofsales. -0.6%

Net operating margin on total sales this year 12.7%

BasedonourcentralguidancefortheyearaheadweexpectRetailmarginsin2018/19toreducefrom12.7%toaround10%,mainlyasaresultoflowerlike-for-like5 sales.

4. 2016/17netoperatingprofitandmarginhasbeenrestated,refertopage6.

5. Changeinsalesfromstoreswhichhavebeenopenforatleastoneyear.

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Retail space expansionNettradingspaceincreasedby51,000squarefeetthisyear,takingourportfolioto8.0msquarefeet.InSeptember2017weforecastourtradingspacetoincreaseby85,000squarefeet.However,thisestimateincludedtwolargestoresthatwereplannedtoopenin2017whicharenowexpectedtoopenin2018.

Thetablebelowsetsoutthechangeinstorenumbersandspaceforthefullyear.

Store numbers

Sq. ft. (‘000)

January 2017 538 7,978New stores +7 +70Extensions(4),re-sites(11) – +143Closed(14),re-sites(3) -17 -162January 2018 528 8,029 +0.6%

Theprofitability6oftheportfolioofstoresopenedorextendedinthelast12monthsisforecasttobe21%ofVATinclusivesalesandpaybackonthenetcapitalinvestedisexpectedtobe24.8months.Theforecastperformanceoftheportfolioofstoresopenedduringtheyearissetoutinthetablebelow.

Performance of new store portfolioSales versus target -1.5%Profitabilityofnewstoreportfolio 21%Paybackonnetcapitalinvested 24.8months

Thenewstoreportfoliomarginallymisseditssalestarget,largelybecausemanyofthetargetsweresetsometimeagoatthepointwenegotiatedtermsfortheseproperties;atimewhenprospectsforretailstoresweremorebenign.Paybackisforecasttobeslightlyhigherthanour24monthgoal.

Ofthe17storeclosures,threewereasaresultofconsolidatingtwostoresintoonelocation.Assetout inthetablebelow,theremaining14storesmadeanaverage12%profit(beforecentraloverheads).Excludingtheonestorewhichwassubjecttoacompulsorypurchase,theaverageprofitabilityofthestoreswas9%.Wewouldnotnecessarilyactivelyseektoclosestoresmakinga9%marginhoweverwewouldrarelyagreetoanewleaseattheselevelsofprofit.

Reason for closureNo. of stores

Profit£m

Profit%

Compulsorypurchase 1 0.8 24%Lease end 11 1.7 10%Sublet 2 0.2 8%Total 14 2.7 12%

During2018,weexpecttoincreasenettradingspacebyaround100,000squarefeet;thisestimateisbasedonplannedclosuresandonleasetermscurrentlycontractedorunderoffer.

6. Store profit refers to net branch contribution. Net branch contribution is defined as profit before central overheads and is expressed as a percentage of VAT inclusive sales.

8

Next OnlineOnline sales performanceTotalOnlinesalesgrewby+9.2%,withfullpricesalesgrowthof+11.2%.ThetablebelowshowsthegrowthinfullpricesalesforeachelementoftheOnlinebusiness.FullpricesalesintheUKgrewby+8.6%andourOverseasbusinessgrewby+25.5%.ThetwocolumnsontherightshowOnlineperformancesplitbetweenthefirstandsecondhalfoftheyear,highlightingthesignificantimprovementinUKNEXTBrandsalesinthesecondhalf.Overseassales,onaconstantcurrencybasis,grewby+13%inthefirsthalfand+8%inthesecond half.

Full price sales growth £m % var H1 H2 NEXTBrandUK +16 +1.6% -4.1% +6.9% LABELUK +92 +42.7% +40.6% +44.8%Total UK +108 +8.6% +3.1% +13.6%Overseas +59 +25.5% +30.7% +20.8%Total +167 +11.2% +7.4% +14.7%

Online customer baseAverage active customers7increasedby+4%to4.9million,drivenbythegrowthinoverseasandUK“cash”customers(thosewhodonot use our credit account, nextpay, when ordering). The table below sets out the growth in the respective parts of our customer base.

Average active customers (m)Jan

2018Jan 2017

UKcreditaccount 2.49 2.50 +0%UKcash 1.50 1.38 +8%Total UK 3.99 3.88 +3%Overseas 0.94 0.85 +10%Total 4.93 4.73 +4%

7. ActivecustomersaredefinedasthosewhohaveplacedanOnlineorderorreceivedastandardaccountstatementinthelast20weeks.

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Increasing stability of our credit customer baseThechartbelowshowsthat,twoyearsago,ourcreditcustomerbasewasindecline.WeclosedtheyearendingJanuary2016withcreditcustomersdown-5.6%.Sincethen,wehavere-launchedourcreditaccountasnextpayandactivelypromotedittoour”cash”customers.AsatJanuary2018,creditcustomerswereup+0.6%ontheprioryear.

We are pleasedwith progressmade to date and feelmore confident aboutmaintaining stability in our credit customer basegoing forward.

AnnualChangeinUKActiveCreditCustomers

* Prior year active customers have been restated as reflected last year

-5.6%

Jan 2018

+0.6%

Jan 2016*

Jan 2017

-0.8%

-6%

-5%

-4%

-3%

-2%

-1%

0%

+1%

The table below shows the relationship between the number of active credit customers and credit sales. As can be seen, the increase increditsaleshasbeenentirelydrivenbyanincreaseinsalespercustomer.Webelievethishasbeendrivenbyacombinationofthere-launchofnextpay,theintroductionofNEXTUnlimitedandinvestmentinthefunctionalityofourwebsite.

Jan 2018

Jan 2017

Average active credit customers 2.49m 2.50m -0%Onlinecreditsales(VATex.)peractivecustomer £454 £419 +8%Average balance per customer £441 £414 +7%

10

8. 2016/17netoperatingprofitandmarginhasbeenrestated,refertopage6.

Online profit analysisTotalOnlinesalesgrewby+9.2%andprofitgrewby+7.4%,asshowninthetablebelow.

£mJan

2018Jan20178

Onlinetotalsales 1,887.4 1,728.5 +9.2%Onlineoperatingprofit 461.2 429.5 +7.4%Onlinenetmargin 24.4% 24.8%

ThetablebelowsetsoutsignificantOnlinemarginmovementsbymajorheadsofcosts.

Net operating margin on total sales last year – restated 24.8%Bought-in gross margin Improved underlying NEXT bought-in gross margin added +0.2%. Overseas

marginhasbenefitedfromfavourableexchangerates,adding+0.2%tomargin.Thishasbeenoffsetbyanincreaseinthird-partybrandedsales,whichreducedprofitabilityby-1.0%.

-0.6%

Markdown Stock for Sale was up +5.2% with markdown sales down -0.7%. Reducedclearanceratesloweredmarginby-0.2%.

-0.2%

Interest income Creditsaleshavenotgrownasfastastotalsales,reducingmarginby-0.2%.Inaddition,interestfreepromotionshavefurtherreducedmarginby-0.1%.

-0.3%

Warehouse & distribution Under normal circumstances we would expect to gain some leverage overwarehouse fixed costs. However growth in Overseas sales increased ourdistributioncostsandcapacitypressures in the runup toChristmas increasedoperational costs.

+0.0%

Catalogues and mailshots Productionoffewercataloguesandprintedmailshotshasincreasedmarginby+0.8%.Photographysavingshaveincreasedmarginby+0.2%.

+1.0%

Online marketing Investment in digital marketing means costs have grown faster than sales. -0.3%

Systems Investmentinonlinesystemssoftwareanddevelopmenthasreducedmargin. -0.2%

Central overheads Centraloverheadshavenotgrownasfastassales,increasingmarginby+0.2%. +0.2%

Net operating margin on total sales this year 24.4%

Basedonourcentralguidancefortheyearahead,weexpectOnlinemarginsin2018/19toincreasefrom24.4%toaround25%,mainlyas a result of our fixed cost base not growing in line with sales.

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9. Operatingprofitfor2017/18and2018/19nowincludesanallocationofcentraloverheadsandmarkdowncosts.Thiscostallocationreducesoverseasprofitabilityby3%.

Online OverseasOnlineOverseascontinuestotradewell.Fullpricesalesfortheyearwereup+26%andup+10%onaconstantcurrencybasis.Marginalsoimprovedto22%,mainlyasaresultofefficienciesachievedthroughouroverseasdistributionhubs.OurGermanhubnowservices14countriesinContinentalEurope.

Overseassalesareachievedthroughourownwebsitenextdirect.comandviathird-partywebsites.Growthbyeachchannelissetoutin the table below.

Total sales £mJan

2018Jan 2017

Nextdirect.com 265 211 +25%Third-partysites 30 23 +35%Total Overseas sales 295 234 +26%

Thefunctionalityofouroverseaswebsitehasnotyetbenefited frommanyof the improvementswehavemadeto theUKsite.WeintendtorolloutmanyofthesuccessfulchangesthathavebeendeployedintheUK.Theseimprovementsinclude:bettermobilefunctionality,retainingandpromotingabandonedbaskets,improvedregistration/checkoutandintelligentrecommendations.

Intheyearahead,weexpectfullpricesalesonaconstantcurrencybasistobeup+8%,andinPoundsSterlingup+10%.

Sales and profitThetablebelowsetsoutthelastfouryears’sales,profitsandnetmarginsinPoundsSterlingforOnlineOverseas,alongwithanestimatefortheyearahead.

£mJan 2015

Jan 2016

Jan 2017

Jan 2018

Jan 2019 (e)

Total sales 163 197 234 295 325Operatingprofit9 30 31 46 65 71Net margin 18% 16% 20% 22% 22%

12

LABELLABELhashadastrongyearwithfullpricesalesup+43%andtotalsales(includingmarkdownsales)up+40%.Growthhasbeendrivenpredominantly throughexistingpartnerbrandswherewehavesuccessfully increasedourbreadthofofferand improvedstockavailability.

LABELsalesareachievedonbothawholesaleandcommissionbasis;salesbythesechannelsaresetoutinthetablebelow.

Total sales £mJan

2018Jan 2017

Wholesale 151 125 +21%Commission 139 81 +72%Total LABEL sales 290 206 +40%

Nearlyhalfofour third-partybrandedbusiness isnowsoldonacommissionbasis (for thepurposesof thissectionwe includeLipsysalesasa third-partybrandedbusiness).Althoughwemake lowernetmarginson thecommissionmodel,weencouragebrandpartnerstoadoptitbecausewebelievethat,inthelongrun,itwillgeneratehighersalesgrowth,abeliefreinforcedbyoursales performance.

Duringtheyearandlookingahead,wehavebeenworkingcloselywithourbrandpartnerstosimplifytheprocessofworkingwithLABEL.Wearedevelopingourstocksystemstoenablebrandpartnerstodirectlymanagetheirstockintoourwarehouseandontoour website.

OuraimisforLABELtobethemostprofitableroutetomarketforourcommissionbrandpartnersandfortherelationshipbetweenourbusinessestobebasedonmutualtrustandtransparency.

Sales and profitThetablebelowsetsoutthelastfouryears’sales,profits10andnetmarginsforLABEL,alongwithourestimatefortheyearahead.

£mJan 2015

Jan 2016

Jan 2017

Jan 2018

Jan 2019 (e)

Total sales 145 180 206 290 375Operatingprofit 20 22 34 50 64Net margin 14% 12% 16% 17% 17%

Intheyearahead,weexpectfullpricesalestobeup+30%andnetmargintoremaininlinewiththepreviousyearat17%.Thisforecastisflatteredbythefactthatitincludesc.£10mofLipsy&Co.fullpricesales,previouslytakenviathelipsy.co.ukwebsite.Followingtheclosureofthelipsy.co.ukwebsiteinFebruary2018,theseordersandsaleswillberoutedthroughnext.co.ukandreportedwithinLABEL.

10. Sales and profit referred to in this section exclude interest income on LABEL items purchased on a nextpay account.

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Other business activity NEXT SourcingNEXTSourcing(NS)isourinternalsourcingagent,whichprocuresaround40%ofNEXTbrandedproduct.Incommonwiththewidermanufacturingsector,NSexperiencedpressureonitsmarginsduringtheyear.NSsalesweredown-10%inUSDollars,mainlyasaresultofthereductionsintheDollarcostpricesNEXThasnegotiatedacrossitssupplybase.

Fallingsalesandincreasedinvestmentinproductdesignmeantnetmarginfellby-1.4%to6.0%.

TheprofitimpactinPoundsSterlingwaspartiallymitigatedbythestrongerDollar.Thetablebelowsetsouttheperformanceofthebusiness in Sterling and in Dollars.

Jan 2018

£m

Jan 2017

£m

Jan 2018

USD m

Jan 2017

USDmSales(mainlyinter-company) 554.4 605.2 -8% 726.3 811.0 -10%Operatingprofit 33.0 44.7 -26% 43.2 59.9 -28%Net margin 6.0% 7.4% 6.0% 7.4%Exchange rate 1.31 1.34

WeareanticipatingthatNSwillhaveanotherchallengingyearin2018/19.WeexpectNStomakearound$40mprofit,adeclineof-7%ontheyeartoJanuary2018.Atour2018/19costingrate11thiswouldequatetoaprofitofaround£31minPoundsSterling,down-£2mon2017/18.

LipsyLipsyisawhollyownedsubsidiarymanagedfromitsheadquartersinLondonbyanindependentmanagementteam.Lipsysellsproduct through a number of different channels, including the NEXT website and NEXT Retail stores. Sales through NEXT are sold ona50:50profitsharebasisandreportedthroughOnlineandRetailrespectively.TheworkingrelationshipbetweenNEXTOnlineandLipsyisverysimilartothewayLABELworkswithcommissionbrands.ThetablebelowsetsoutLipsy’stotalsalesperformancebydistribution channel.

Sales £mJan

2018Jan 2017

Wholesale 8.5 11.9Franchise 4.2 4.1Lipsystand-aloneretailstores 1.1 2.2Lipsy.co.uk 10.4 8.9Total Lipsy sales 24.2 27.1 -11%LipsysalesthroughNEXTRetail(reportedinNEXTRetail) 14.6 16.5 -12%LipsysalesthroughNEXTOnline(reportedinNEXTOnline) 76.1 47.0 +62%Total sales 114.9 90.6 +27%

LipsyhascontinuedtoreduceitsUKwholesalebusinesswhichislessprofitablethan(andcompeteswith)itsothersaleschannels.ThishasbeenmorethanoffsetbyincreasedsalesthroughNEXTOnline.

Operatingprofitexcludingacquisitioncostswas£12.3mwhichwasup+39%onlastyear.Netoperatingprofitincludingacquisitioncostswas£6.0m,up+9%onlastyear.

Intheyearahead,weareforecastingnetoperatingprofitofaround£11m;anincreaseof£5m.Thisestimatedincreaseisduetoacombinationofsalesgrowth(+24%)andcostsavingsassociatedwiththeclosureofthelipsy.co.ukwebsite.

11. Details of costing rates can be found on page 21.

14

12. Franchiseincomeisacombinationofroyaltiesorcommissionaddedtothecostofgoodssoldtofranchisepartners.

International Retail and franchise stores Ourfranchisepartnerscurrentlyoperate194storesin32countries.Duringtheyearourpartnersopenedeightnewstoresandsaleshaveincreasedby+7.8%.Revenueandprofitaresetoutbelow.

£mJan

2018Jan 2017

Franchise income12 55.7 51.6Ownstoresales 11.5 12.1Total revenue 67.2 63.7 +5%Operating profit 7.7 9.3 -17%

Profithas reduceddue to franchisepartners lowering their local sellingprices (which reduced the royaltywe received)and theimpairment of assets in six of our overseas stores.

Non-trading activitiesThetablebelowsummarisescentralcostsandtheprofitonothernon-tradingactivities.

£mJan

2018Jan 2017

Centralcostsandemployeeshareschemes (20.2) (22.5)Propertymanagement 3.6 6.8Unrealisedforeignexchange (1.1) 0.1Associate 1.0 1.0Total (16.7) (14.6)

Thereductionincentralcostsreflectsthereleaseofaprovisionagainstalegalclaiminthecurrentyear.Thereductioninprofitinpropertymanagementisdrivenbyanincreaseinouronerousleaseprovisionsof£4m,mainlydrivenbytwoLondonstores.

Pension schemeOntheIFRSaccountingbasis,ourdefinedbenefitschemeshavemovedfrom£63msurplusatJanuary2017to£106msurplusatJanuary2018.Thisisprimarilyduetotheimpactofreturnsoninvestmentswithintheschemes.

Afullactuarialvaluationofourdefinedbenefitpensionschemewasundertakenasat30September2016.Thetechnicalfundingpositionwasasurplusof£37mwhenrolledforwardto31December2017.

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Cost inflation and cost controlIntheyeartoJanuary2018,costincreasesof£44mhavebeenlargelyoffsetwithcostsavingsof£38m.Thetablesbelowoutlinethemaincontributorstocostincreasesandcostsavingsoverthelastyear.Costcontrolremainsattheheartofthebusinessandweremaindeterminedthatcostsavingsmustcomethroughinnovationandefficiency,ratherthananycompromisetoourproductqualityor services.

Thenetincreaseinourcostswas£8mhigherthanweanticipatedatthehalfyear.ThisismainlyduetotheadditionalcostsweincurredinourwarehousesintherunuptoChristmasaswebegantorunintocapacityconstraints.Operationallywewereabletoserveourcustomers, however the cost of providing our normal service was high.

Costs and savings for the year ending January 2018

Cost increases £mGeneral wage inflation 12Investmentinonlinesystemsandmarketing 11Warehousing&distribution 8Taxes(rates,ApprenticeshipLevy,energytaxes) 4NationalLivingWage 4Onerousleases 4Otherincreases 1Total cost increases 44

Clearance costs £mLower clearance rates of Sale stock 22

Cost savings £mReductionindepreciationduetofullydepreciatedassets 11Retailproductivityandcostimprovements 10Brand marketing and catalogue creation 8Interestpayableonbondsandbankdebt 4Othersavings 5Total cost savings 38

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Net debt and financingOuryearendnetdebtwas£1,002m,whichwas£141mhigherthanlastyear.TheentirevalueoftheCompany’snetdebtismorethanmatchedbythevalueofournextpaydebtorbook,afinancialassetworth£1,117m.

Intheyearaheadweareforecastingcontinuedsalesgrowthfromcustomersusingourcreditfacility,nextpay. As a result we are forecasting nextpaydebtorstoincreaseby£110m.Wewillfinancethisincreasethroughnetdebtwhichweexpecttoincreasetoaround£1.1bnbyJanuary2019.

Netdebt,whichisforecasttopeakintheyearaheadataround£1.2bn,issecurelyfinancedthroughacombinationofbondsandcommittedbankfacilities.AtJanuary2018ourfinancingconsistsof£875mofbondsand£525mofcommittedbankfacilitiesassetout in the chart below.

Financing (£m)

Funding Net debt nextpay debtors

Peak

1.2bn(e)Jan 2019

Jan 2019

1.1bn(e)

1.2bn(e)

Bonds

875

Bank facility

525

£m

2028

2026

2021

2022

2020

1.4bn

200

400

600

800

1,000

1,200

1,400

TheGroupmaintainsitsobjectiveofretaininginvestmentgradestatus.TheGroup’scurrentandestimatedpeaknetdebtiswithinthelimit of investment grade status which we estimate to be around £1.5bn.

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13. £106mofsharebuybackswerecompletedintheyear;however£1mpurchasedhadnotbeenpaidforattheyearend.

Strategic Report

Cash flowCashgeneratedintheyearbeforeinterest,tax,depreciationandamortisationwas£882m.Cashflowafternon-discretionaryoutflowsoftaxation,interestandworkingcapitalwas£663m.Afterinvestingincapitalexpenditureandpayingordinarydividends,theGroupgenerated surplus cash of £335m.

Intotal,wereturned£361mtoshareholdersthroughacombinationofspecialdividends(£256m)andsharebuybacks(£105m13).Ofthe£105mofsharebuybacks,£79mrelatedtosurpluscashgeneratedin2017/18.Afurther£26mofbuybackswerebroughtforwardfromsurpluscashgenerationexpectedin2018/19.Duringtheyearwepurchased2.2msharesatanaveragepriceof£48.81andreducedoursharesinissueatthestartoftheyearby1.5%.

ThetablebelowsummarisesourmaincashflowsintheyearendedJanuary2018andourforecastfortheyearahead,baseduponourcentralprofitguidance.Weexpecttogenerate£300mofsurpluscash(afterinterest,tax,capitalexpenditureandordinarydividends).AsoutlinedinourJanuary2018tradingstatement,weintendtoreturn£275mofremainingsurpluscash(£300msurplusless£26mpurchasedin2017/18)toshareholdersthroughsharebuybacks,subjecttomarketconditions.

£mJan

2018

Centralguidance

Jan 2019(e)

Profit before Interest, Tax, Depreciation & Amortisation 882 866Interest (32) (39)Tax (106) (144)Workingcapitalandother (81) (38)Discretionary cash flow 663 645Capitalexpenditure (104) (130)Ordinarydividends (224) (215)Surplus cash 335 300FinancingadditionalOnlinedebt (115) (110)Special dividends (256) – SharebuybacksfromcashgeneratedJan2018 (79) –SharebuybacksfromcashgeneratedJan2019 (26) (275)Movement in net debt (141) (85)

DuringFebruary2018,beforethestartoftheclosedperiod,wepurchased1.4msharesforcancellationatanaveragepriceof£49.23andtotalcostof£69.1m.Basedonourcentralguidance,thiswouldleaveabalanceremainingof£206mtoreturntoshareholdersduring2018/19.

Interest and taxationInterestpaidintheyearwas£32m.However,asaresultoftimingdifferencestheinterestchargedintheyearendingJanuary2018was£34m,areductionof£3.7montheprioryear.Thiswasprimarilyduetotheprioryearcostofdoublerunningbondsaheadofmaturity.Wearebudgetingfortheinterestchargenextyeartoincreaseto£39m,duetohighernetdebtandinterestrates.

Ourfullyeartaxrateof18.5%isslightlylowerthantheheadlineUKcorporationtaxrateof19.2%(forthecorrespondingtimeperiod)duemainlytoclosingpreviousyears’opentaxfilingswithHMRCandoverseastaxdifferentials.Thetaxpaymentof£106mintheyearincludedataxrefundfromHMRCof£31mrelatingtooverpaidcorporationtaxattributabletoprioryears.WeexpectoureffectivetaxratefortheyearendingJanuary2019tobearound18.5%.

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Capital expenditureAssetoutinthetablebelow,capitalexpenditurethisyearwas£104m,whichis£57mlowerthantheprioryear.Thisreductionwasduetolowerspendonretailspace,includingfourlargestoreprojects(c.£12m)thatweredelayeduntil2018.Inaddition,therewaslessspentonwarehousingbecauselastyearwemadealargeinvestmentinanewautomatedfurniturewarehouse.

£mJan

2018Jan 2017

Retail space expansion 56 108Retail cosmetic capex 22 11Total capex on stores 78 119Warehouse 11 28HeadOfficeinfrastructure 6 10Systems 9 4Total capital expenditure 104 161

Newretailspaceremainsourbiggestinvestmentat£56m.Cosmeticcapexof£22mismuchhigherthannormalbecauseitincludes£12mfortherefitofourstoreintheArndaleCentre,Manchesterwhichincludesanumberofimportantconcessiontrials.

The£5mincreaseinsystemscapitalexpendituremainlyrelatestotheinvestmentinnewRFIDscannersforourstores.ExpenditureonHeadOfficeinfrastructurereducedto£6maswecompletedthethreeyearprogrammetoupgradeourcentralfacilities.

Intheyearaheadweexpectcapitalexpendituretobearound£130m,anincreaseof£26monthecurrentyear.Nextyear’scapexincludesadditionalinvestmentinourOnlinewarehousesinordertoincreasecapacitytomanagefutureOnlinesalesgrowth.

Ordinary dividendsTheBoardhasproposedafinalordinarydividendof105p,tobepaidon1August2018andtakingthetotalordinarydividendsfortheyearto158p,flatonlastyear.ThisissubjecttoapprovalbyshareholdersattheAnnualGeneralMeetingtobeheldon17May2018.Shareswilltradeex-dividendfrom5July2018andtherecorddatewillbe6July2018.

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Strategic ReportPart 2 – Strategic Response to a Changing Market

The challenges of 2017 & outlook for 2018 Overview2017waschallenging inseveraldifferentways.Aweakclothingmarketcoincidedwithself-inflictedproduct rangingerrorsandomissions,atthesametime,thebusinesshashadtomanagethecosts,systemsrequirementsandopportunitiesofanacceleratingstructural shift in spending from retail stores to online.

Thenextthreesectionsdealwitheachoftheaboveissuesinturn:(1)theclothingmarket,(2)productrangingissuesand(3)thestructuralshiftonline.Undereachheadingwesetoutwhatwefeeltheissueshavebeenin2017,howtheyhaveaffectedourbusinessandaprognosisfortheyearahead.

The clothing marketDuring2017theclothingandhomewaremarketswereadverselyaffectedbythefollowingeconomicfactors:

• Unusuallyhighcost price inflation meant we had to increase selling prices to maintain margins.

• Asqueezeonreal incomesasgeneralinflationrosefasterthanaverageearningsputpressureondiscretionaryspending.• A sectorial shiftawayfromourcoremarketsofclothingandhomewareintoleisure,entertainmentandotherexperientialspending

acted as a further drain on our revenues.

Webelievethatallofthesefactorsareessentiallycyclicalandarelikely,atsomepoint,toreverse.Thefollowingthreesectionsexpandon each of the above.

Cost price inflation2017experienceThefollowingchartshowsthetradeweightedvalueofthePoundoverthelasttwoyears.Sincethesharppost-referendumcorrectioninJune2016thePoundhasfoundanewlevelandappearstohavestabilisedaround11%lowerthanitslevelinJanuary2016.

GBP Effective Exchange Rate Index

January 2005 = 100

Source: BoE, Effective Exchange Rate Index: XUDLBK67 (20 March 2018)

Jan 16 Jan 17 Jan 1870

75

80

85

90

20

WewereabletomitigatemuchofthePound’sdevaluationthroughnegotiatingbetterpriceswithexistingsuppliersanddevelopingnewsourcesof supply.NEXT’sprice increaseof+4%wasclose to the inflationexperienced in theUKclothingandhomewaremarket as a whole (see graph below) and we have no evidence that our overall pricing has become less competitive as a result of last year’sincreases.

UKTotalMarketClothingandFootwearInflation

Source: ONS, Clothing and Footwear Actual (20 March 2018)

Jan 17 Mar 17 May 17 Jul 17 Sep 17 Nov 17 Jan 18-1%

0%

1%

2%

3%

4%

5%

Outlookforcostpriceinflation2018andbeyondLookingaheadto2018/19thepricingenvironmentismuchmorebenign.ThedevaluationofthePoundhasnowworkeditswaythroughthesystemandwenowhavecomparableyear-on-yearcostingrates.ThetablebelowsetsouttheexchangerateswesecuredinDollars(ourmostimportanttradingcurrency)bybuyingseason,thechangeversustheprioryearandthecorrespondingpriceincreasesonlike-for-likeproduct.

Buying season£/USD

costing ratevs Previous

year

Average selling price

varianceSpring&Summer17 $1.39 -10% +4%Autumn&Winter17 $1.26 -14% +4%Spring&Summer18 $1.26 -9% +2%Autumn&Winter18(e) $1.32 +5% 0%Spring&Summer19(provisional) $1.39 +10% TBC

Wehavesecured98%ofcurrencyrequiredfor2018/19soourcostingratesforthecurrentyeararefixed.OurprovisionalcostingrateforSpring2019is10%betterthanthecurrentyear,sowemayseeareturntomodestpricedeflationaswemoveinto2019.Ifwedoexperienceanyimprovementincostpricesitisourintentiontopassonanybenefittoourcustomersbywayoflowerprices.

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Strategic Report

Declining real incomesRealincomesin2017RealincomesintheUKdeclinedasinflationinthewidereconomyovertookrealearnings.Inevitablythisplacedpressureonourcustomers’discretionaryspendingasthepriceofessentialgoodsrosefasterthanourcustomers’income.

Thegraphbelowshows thegrowth inaverageearningsandCPI inflation; theblue lineshows thedifferencebetween the twonumbersandisameasureofrealincome.Realincomeswereindeclineforalmostallof2017,albeitthedeclinemoderatedasweapproachedtheendoftheyear.

AverageEarnings,CPIandRealEarningsGrowth

Source: ONS, CPI Actual (20 March 2018)/Average Weekly Earnings (21 March 2018)

Jan 16 Jul 16 Jan 17 Jul 17 Jan 18

Real earnings

CPI

Average earnings

-1.0%

-0.5%

0.0%

+0.5%

+1.0%

+1.5%

+2.0%

+2.5%

+3.0%

OutlookforrealincomeintheyearaheadItappears that theeasingof inflation inourownsector isbeing reflected in thewidereconomy,asothersectorsbenefit fromstabilisingcurrencyrates.Ifthatisthecaseandaveragenominalincomegrowthremainsatcurrentlevels,thenweshouldexpecttoseelittleornodeclineinrealincomesduring2018.

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Sectorial shiftSinceOctober2016wehaveseenashiftawayfromconsumerspendingonclothingandhomewareintoothermoreexperientialspending sectors. The illustration below contrasts the spending on entertainment, pubs and restaurants with women’s andmen’sclothing.

Webelievethatthisshifthasbeendrivenpartlybyinnovation,investmentandchangeinexperientialsectors.Thisisevidencedbythesurgeinchoiceandqualityofstreamingservices,TVshows,restaurants,pubs,barsandotherleisuredestinations.Atsomepointthiscyclicaleffectwillchange,butconsumercyclesareveryhardtopredictandcantakealongtimetoreverse,sowearenotanticipatinganyeasingofthisheadwindintheyearahead.

SectorGrowth2017vs2016

Source: Average of monthly Barclaycard UK spend data from February 2017 to January 2018

Women’sclothing

spend fell by

-2.9%

Men’sclothinggrew by

4.1%

-4%

0%

4%

8%

12%

16%

Entertainmentspend grew by

10.3%

Pubspend grew by

11.7%

Restaurantspend grew by

12.0%

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Strategic Report

Product rangingIssue and timescale for improvementAtourresultspresentationinMarchlastyearwetalkedaboutthemistakeswehadmadeinourproductranges.Inshort,wehadallowedourrangestobecometoofocusedonmorefashionablelinesandomittedsomeofoureasier-to-wearheartlandproduct.

Atthattimewesetouttimescalesforrangeimprovementusingthesimplifiedgraphicshownbelow.Webelievethattheimprovementstoourrangesweredeliveredin linewithourforecast.Ourquarterlyfullpricesalesperformanceclearlyreflectstheprogressiveimprovements to our ranges.

FullPriceSalesbyQuarter2017/2018

Brand full price sales performance as per NEXT plc quarterly trading statements

-3%

-2%

-1%

0%

+1%

+2%

-3.0%

+0.7%

+1.3%+1.5%

To Christmas Eve

Comparative numbers and effect on sales in the year aheadWearemuchhappierwithour rangesaswego into2018andexpectsalesperformance in the firsthalf tobe flatteredbythecomparisonwiththemistakesoflastyear.Thiswillbeimportanttorememberasweissueourtradingstatementsthroughouttheyear.Comparativenumberswillhardenastheyearprogressessoshareholdersshouldnotexpecttheperformanceoflaterquarterstobeinlinewiththefirstquarter.

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Structural change – the move onlineWebelievethatthecontinuingtransferofsalesfromstorestoonlinerepresentsapermanentandprofoundchangeinthestructureofourindustry.LastyearwesawanaccelerationintherateatwhichsaleshavetransferredtoOnline.ThischangeispartlyasaresultoftheimprovementswehavemadeinourOnlinesystemsandmarketingbutitismainlydowntochangingconsumerpreferences.

Full Price Sales Growth

-8%

-4%

0%

+4%

+8%

+12%

-5%

+4%

-7%

+11%Retail

Online

2016/17vs previous year

2017/18vs previous year

InthelongrunthisshiftofferstheNEXTGroupavaluableopportunitytoleverageitsdistribution,marketingandcreditinfrastructureintheUKanditsbrandoverseas.However,theimmediateeffectofthischangehasbeenthatalthoughGroupsaleshavebeenmaintained, profit has not.

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Strategic Report

The changing shape of NEXTThetablebelowclarifiesthecurrenttotalsales,profitandthecontributionmadebyeachbusinessdivision.TheOnlinebusinessis,ineffect,twobusinesses:atradingbusinessandafinancebusiness.Forcompleteness,anapproximatedivisionbetweenthetradingand finance business is shown below.

BusinessSales

£mProfit

£mSales

participation Profit

participationNEXTOnline 1,665 307 40% 43%NEXT Finance 223 119 5% 16%Total Online (inc. Finance) 1,888 42614 45% 59%NEXT Retail 2,123 269 52% 37%NEXT Group 107 31 3% 4%Total 4,118 726 100% 100%

The impact of structural shift on profits in 2017Lookingatlastyear’snumbersitappearsthateveryPoundoffullpricesaleslostinRetailcostus60pwhilsteveryPoundgainedOnlinedeliveredonly19pofprofit.

FullPriceSalesandProfit2017/18(£m)

-200

-150

-100

-50

0

50

100

150

200

Sales-141m

Sales+167m

Profit+32m

Profit-85m

Retail

Cha

nge

£m

Online

This margin erosion is partlyaresultoftheshiftinsalesfromRetailtoOnline.Retailcarrieslargefixedcosts(suchasrent,ratesandenergy)which,intheshortterm,areunabletocontractwithreducingsales.Ontheotherhand,theOnlinebusinesshassignificantvariablecostswhichincreasewithsales(delivery,warehousepicking,returnsprocessing,callcentreactivityetc.).

Inadditiontothistransfercost,lastyear,therewerealsootherfactorswhicherodedprofitabilityinbothbusinesses.Itisimportanttoseparatethesemoretemporaryprofitabilityissuesfromthemarginerosioncausedbysalestransferringfromonebusinesstotheother,asthelatterislikelytoremainanissueforsometimewhilsttheotherscanbemanagedoutofourprofitandlossaccount.

14. Group interest of £35m has been charged to the Finance profit and loss account.

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ThetablebelowisasimplifiedmodelwhichwalksforwardthedeclineinRetailsalesandgrowthinOnlinesales.

Profit walk forward 2017/18 £m Retail Online TotalA Changeinfullpricesales -141 167 26B Gain/(loss)ongrossmarginonNEXTbrandedstock -92 109 17C Less(increase)/decreaseinvariablecostsandnewspace 6 -29 -23D Change in margin from sales growth -86 80 -6E Marginerosionfromlowermarginthird-partybrands – -30 -30F Totalgain/(loss)inmargin -86 50 -36G Loss from lower clearance rates -15 -7 -22H Costincreases -12 -12 -24I Costsavings 28 1 29

Total gain/(loss) in margin -85 32 -53J ChangeinGroupcosts -11

Total gain/(loss) in margin after Group costs -64

Thewalkforwardusesapproximatemarginsandrequiresabitofexplanationwhichisgivenfortherelevantlinesreferencingtheletters in the left column.

Line B shows the lost gross margin on sales assuming that all items are sold at the gross margin of NEXT branded stock.Inreality,muchofthesalesgrowthwasdeliveredbythird-partybrandsthataresoldatlowermargins.

LineCaccountsforthenormalvariablecoststhatwouldbeincurredorsavedasbusinesslevelschange.

Line D shows the net effect of the change in sales and variable costs; in effect this is the cost of the structural shift in sales from Retail toOnline.ItismitigatedbythefactthatsalesgrewfasterOnlinethantheydidinstore.IfOnlinesalesgrowthhadexactlymatchedtheRetailsalesdeclinethelosswouldhavebeen£18m,13pforeveryPoundtransferred.

LineEshowsthemarginerosionfromgrowthinlowermarginthird-partybrandedbusiness.

LineGshowsthemarginerosioncausedbypoorerclearancerates.

LinesHandIshowtheimpactofcostincreasesandsavingsinourfixedcostbase.

Line J shows the change in Group costs.

TheanalysisshowsthatalthoughsomeofthemarginerosionwascausedbytheswitchfromRetailtoOnline,thelion’sshareoftheerosioncamefromotherfactors.Themostimportantwere:thecostofpoorerclearancerates(-£22m),themarginerosionfromthird-partybrands(-£30m)andthestepchangeinOnlinesystemsandmarketingcosts(-£11m)meantthatcostincreasesoutweighedcost savings.

Profit attrition in the year aheadOurcentralguidancefortheyearaheadisforBrandfullpricesalestobeup+1.0%,averysimilarincreasetotheyearjustended.However,wearenotexpectinganythinglikethesamelevelofprofitattritionintheyearahead.Thewalkforwardinthefollowingtablemirrors the format of the table explained in the previous section.

Weestimatethatlowermarginerosionwillbedeliveredbyacombinationofslightlyhighersalesgrowth,lowerrentalincreasesfromnewspace,lesserosionfromthird-partybrandsand(mostsignificantly)lesserosionfromSaleclearancerates.

Profit walk forward 2018/19 (e) £m Retail Online TotalA Changeinfullpricesales -137 172 35B Gain/(loss)ongrossmarginonNEXTbrandedstock -89 112 23C Less(increase)/decreaseinvariablecostsandnewspace 13 -29 -16D Change in margin from sales growth -76 83 7E Marginerosionfromlowermarginthird-partybrands – -23 -23F Totalgain/(loss)inmargin -76 60 -16G Loss from lower clearance rates -2 -1 -3H Costincreases -14 -10 -24I Costsavings 18 12 30

Total gain/(loss) in margin -74 61 -13J ChangeinGroupcosts -8

Total gain/(loss) in margin after Group costs -21

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Summary table of challengesThetablebelowsummarisesthechallengesfacingthebusiness,distinguishingbetweenthosewebelievearecyclicalandthereforetemporaryandthosethatarestructuralandpermanent.

Cyclical Internal/external Outlook CommentsRising cost prices External Improvement2018. Shorttermissuewithpriceinflationlikelytobeeliminated

bysecondhalf.

Consumersqueeze External Possible improvement end2018.

Somepossiblerelieftowardstheendoftheyearasgeneralinflationlikelytofallbacktobelowwagegrowth.

Sectorial shift External No foreseeable improvementyet.

Difficult to predict when this will correct and no sign of improvementyet.Ultimatelycyclicalsolikelytoreverseatsomepointinthenextthreeyears.

Range omissions Internal Improvement2018. Exceptional level of errors and omissions corrected as we headinto2018.

Structural Internal/external Outlook CommentsShift of sales online External No change to

underlyingtrend.Permanent change to retail environment with further to go. Continuing implications for cost management andinvestment across the business.

Onlinesystems Internal Improvements ongoing.

Much improved and delivering material benefits, much more to do going forward.

Action plan for the year ahead Inmanywaysthechallengesofthecurrentenvironmentalongwiththeconsequenteconomicchangestoourbusinesssetstheagendafortheyearahead.Weareveryclearaboutourpriorities:

• Continuetoimproveanddevelopourproductranges.

• DefendRetailsalesandprofitability.

• AttackcostsacrosstheGroup(throughinnovationandnegotiationandneverattheexpenseofserviceorquality).

• MaximisethepotentialforprofitablegrowthOnline.

Improving product rangesThequalityanddesignofourproductrangesremainallimportantandimprovingthemisattheheartofwhatwedo.Theimprovementswehavemadetoourbuyinganddesignprocessesarethesumofmanysmallchanges,whichwewillnotdetailhere.Theimprovementwesaw inourquarterlyperformance lastyear (seepage24)givesus theconfidencethatwearemoving in the rightdirection.Webelievethatwehavefurthertogo.Ingeneraltermswearelookingtoachievethefollowing:

• Ensurethatourrangeshavewell-designed,greatqualityheartlandproductateverylevelofourpricearchitecture.

• Domoretoharnessandreacttothedesignexpertisewithinthebusinessanditssupplybase.

• Extendchoiceonlinewhererelativelylowstockinvestmentallowsustoexperimentandextendthebreadthofouroffer.

• Developnewsourcesofsupply.

Defend Retail sales and profitabilityWearereconciledtothefactthatRetailsalesarelikelytodeclineinthemediumtermandhavesetourbudgetsaccordingly(seeStoreportfolio stress test on page 31).

However, thatdoes notmean thatwe candonothing tomitigate theeffects ofdeclining like-for-like sales.We can introducerestaurants,cafésandotherconcessionswhichgenerateadditionalrevenueandincreasefootfalltoourshops.Wecanmanagebothouroperationalandoccupancycostsdowntoalevelthatsuitsthecurrentretailenvironment.Mostimportantly,wecandevelopthepositiveroleourstoresalreadyplayasanintegralpartofourOnlineplatformbearinginmindaround50%ofourordersaredeliveredthroughstores.Theaveragevalueofstoreordersislowerthanhomedeliveriesbuttheystillaccountfor43%ofallOnlinesales.ThereismuchmorethatcanbedonetomakeourstoresandtheirstockholdinganactivepartofourOnlinebusiness.

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These ideas are developed in the following sections.

Maximise online value of retail storesOneofthegreatadvantagesanyonlinebusinesshasoverretailstoresisthatallitsstockisheldinonecentrallocation.Thismeanschoiceisnotlimitedbyphysicaldisplayspaceorstockinvestment.Inaddition,storeshavethedisadvantagethatoncetheyhavereceived their allocation, some sell more than planned whilst others sell less. So some stores end up in surplus whilst others are out of stock.

OverthepastyearwehavegivenmuchthoughtastohowwecanexploittheonebigadvantageshopshaveoverOnlinewarehouses–thefactthatthestockisalreadyclosetoourcustomers.WealsolookedathowwecanmitigatesomeofthedisadvantagescausedbythefragmentationofRetail’sdistributedstockholding.

Find-in-storeandsamedayclick-and-collectTenpercentofthestockourcustomersattempttoorderonlineissoldout.Afurther20%isnotavailableforimmediatedeliveryeitherbecausewearewaitingforreturnsorasuppliershipment.Oftheitemsthataresoldoutonline,10%arelikelytobeavailableinastorewithin10milesfromourcustomers’homes.40%ofthedelayeditemsarealsoavailableinlocalstores.

Toaddressthisissuewelaunchedafind-in-storefunctionjustbeforeChristmaswhichenablescustomerstolocatestockthatisoutofstockonline.InSeptemberweaimtolaunchafullclick-and-collectservicethatwillallowcustomerstopurchasethesescarceitemsonline and collect them in a store within one hour.

Store-to-storeorderingandtransfersInJunewewillalsoenablestore-to-storetransferstofulfilcustomerordersandintroduceanelementofstockrebalancingbetweenstores – transferring surplus stock in one store to fill a deficit in another.

Thefind-in-store,click-and-collectandstockrebalancingprojectsarepartofawiderprojecttomakebetteruseofourstorenetworkinitsroleasadistributedstockholding.OurlongtermaimistofurtherintegrateourshopsevermorecloselyintoourOnlinetradingplatform.TheseprojectsaregreatlyassistedbythefactthatwecurrentlydelivertomostofourstoreseverydaytofulfilOnlineorderstostore.Theleveragingofthisinternaldeliverynetworkmeansthatweareabletotransferstockbetweenourstores,depotsandwarehousesatrelativelylowcost.

Improving the retail experienceManchester Arndale experimentLastyearwesetoutourplansfortherefitofourManchesterArndalestore.Arndalehasaflorist,proseccobar,restaurant,children’sactivitycentre,café,card&stationeryshop,barberandshortlyacarshowroom.Wearealsoinnegotiationtoaddaspaoperatorandbridalwearconcession.WeestimatethattheconcessionsinManchesterwilldeliverc.£800kofincometothestore,accountingforaround40%ofourrent,and22%oftotaloccupancycost(rent,ratesandservicecharge).

Therestaurantisa50/50jointventurewithGinoD’AcampoandIndividualRestaurantsGroupandwetake50%oftheprofitratherthanarent.WehaveoneotherGino’srestaurantopeninHull.Wehaveverymuchappreciatedtheprofessionalism,acumenandenergyofourrestaurantpartners.Thecombinedappraisalforthetwostoresissetoutbelow.Theeconomicsoftherestaurantsarehealthybutnotascompellingastheappraisalhurdleswesetforourinvestmentinretailspace.Sothekeyforuswillbethepositiveeffecttheyhaveonthesalesofthestoresinwhichtheyoperate.WeplantoinvestinfourmoreGinorestaurantsintheyearahead.

Combined appraisal for Hull & Arndale Gino restaurantsTurnover £4mProfit £490kProfit% 12%Capex £2.7mIRR 28%

ConcessionexpansionandprojectedincomeintheyearaheadIn addition to the concessions opened in Arndale we are also in discussions with a travel operator, branded footwear concession and cosmeticsconcession.Intheyearaheadwecurrentlyplantoopen98concessionsacrossourstoreportfolioandexpecttogenerateannualised income of around £5m from these concessions.

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Retail creditItisoftenassumedthatallofour£1.6bncreditsalesaremadeOnline.Infact,manyofourOnlinecustomersusetheirnextpay home shoppingaccountinstoreandc.£240mofRetailsalesarechargedtoOnlineaccountsusingtheiraccountcard.

WeareadaptingnextpaytoallowustomarketitdirectlytoRetailcustomers.Initiallywewillofferthisthroughonlinemarketingandemails to known Retail customers. Going forward we will trial offering it in stores, though this needs to be done with extreme care to ensurethatcustomersarecorrectlyinformedofeverythingtheyneedtoknowbeforeopeningacreditaccountandwecomplywithall credit regulations.

Retailcreditislikelytobehigherriskthanhomeshoppingcreditandwewillhavemuchtolearnaboutthisproduct.HowevertheintroductionofaretailcreditofferputsstoresonanequalfootingwithOnlinebyenablingcustomerstospreadthecostoftheirpurchases. All the evidence we have from the nextpay account cards is that customers who are able to spread the cost of their retail purchasesarelikelytoincreasetheirretailspend.

Managing occupancy costsOneofthereasonsRetailprofitabilityissohighlygearedisthatouroccupancycostsareahighandfixedcostasapercentageofsales.Managingthesecostsintheshorttermisverydifficultbutinthelongertermthereisscopeforsomeofouroccupancycoststo reduce.

Thevastmajorityofourleasesareonupwardonlyrentreviewssorentsdonotcomedownduringthelifetimeofalease.Howeverourstoreportfoliohasanaverageleasetermofjustundersevenyearsand240ofourleases,representing32%ofourrentalliabilities,willbeupforrenewalwithinthenextthreeyears.

OptionsatleaseendWhenaleasecomesupforrenewalwehavethreeoptions:

• Remain:renegotiaterent,leaseterm,andacapitalcontributiontotherefitoftheshop.

• Closethestore.

• Holdover:remaininoccupationpayingthehistoricrentonaveryshorttermleasewithamutualbreak.

Leaserenewals2017Ourexperienceoverthelastyearisthatwhenwerenewleaseswegetsignificantlybetterterms.Whereweareunabletosecurebettertermswegenerallyarenotrenewingthelease.

DuringtheyearendingJanuary2018werenewedtheleaseson19stores.Thetablebelowsetsouttherentbeforeandaftertherenewal and gives the capital contribution paid to us. These capital contributions were used to refit the renewed stores and get them toastandardthatwillseethemthroughtotheendofthenewlease.Inmanycaseswehavetakentheopportunityoftherenewaltoadd new concessions. The concession income is also shown in the table.

Ascanbeseenfromthetablethenetrentfellby-28%.Thecapitalcontributionof£5mwouldpayforasignificantpart(thoughnotall)ofthecostofrefittingthesestores.Theaverageleasetermwassevenyearsandtheportfolioprofitabilitybeforecentraloverheadsisnow21%.Thislevelofprofitabilityissuchthatthestoreshouldremainprofitableforthelifeofthelease,eveninadverselike-for-liketradingconditions.Beforeweapproveanynewstorewenowtesttheyeartenprofitabilityassuming-10%annualcompoundlike-for-like sales decline.

19 stores renewals 2017/18Before

renewalAfter

renewalGross rent (before concession income) £6,500k £4,900k -25%Concessionincome £80k £250kNet rent £6,420k £4,650k -28%Netrent/sales(VATinc.) 10.3% 7.5%Capitalcontribution £5,000kAverage lease term 7yearsAverage net branch contribution 21%

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Prospectiveleaserenewals2018Lookingforwardtotheyearaheadwebelievewearelikelytorenegotiate29leases;theremainingstoresthataredueforrenewalwilleitherbeheldoveratthepassingrent,pendingfuturenegotiation,orwillbeclosed.Wecurrentlyplantoclose10smallstoresnextyearofwhichmostareattheendoftheirlease.

Thetablebelowshowswhatweexpecttoachieveinthe29storesweplantorenewintheyearahead.Itisasimilarpatterntolastyear,thoughimportantlytheaverageleasetermisexpectedtocomedowntofiveyears.

29 stores renewals 2018/19 (e)Before

renewalAfter

renewalGross rent (before concession income) £9,300k £7,300k -22%Concessionincome £90k £560kNet rent £9,210k £6,740k -27%Netrent/sales(VATinc.) 9.0% 6.5%Capitalcontribution £7,000kAverage lease term 5yearsAverage net branch contribution 21%

Store portfolio stress testA more pessimistic longer term scenarioWhilstthereismuchwecandotomakeourstoresmoreprofitableandrelevantinanonlineworld,wealsoneedtomodelaworstcase scenario for our stores. In our last report we projected what would happen to the economics of our store portfolio in the event oftenyearsof-6%negativelike-for-likesales.Withlastyear’slike-for-likesalesof-9.1%,wehavetestedwhatwouldhappentoourstoresat-10%overalongerperiodoftime.

Itisimportanttoemphasisethatthescenariowesetoutbelowisonlyascenario.Itisnotwhatweactuallythinkwillhappen.IhavelittledoubtthatshareholdersmayreadthatthisworstcasescenarioiswhatNEXTisplanningandthattheprojectedstoreclosuresrequiredinthesecircumstancesarewhattheCompanywillactivelyseektoachieve.Thatisnotthecase,althoughitdoesmakeforabetternewsstory!Thepurposeofthisscenarioisnottoplanthefuture;ratheritistotestwhetherourstoreportfolioisanassetoraliabilityinextremecircumstances.

Ourverdictisthatitremainsanasset,albeitonethatisdeclininginvalue,andnotaliability.

AveryprofitableportfolioBeforediscussingthestresstest,itisimportanttopointoutthatourcurrentstoreportfolioisextremelyprofitable.Currentlythevastmajorityofourstoresmakeahealthyprofit,with94%ofturnoverdeliveringanetbranchprofitofmorethan10%.

ThelefthandtablebelowsetsoutthepercentageofourturnoverwithinstoresofdifferentlevelsofprofitabilityasatJanuary2018.Thesecondtableshowsthesameinformationprojectedforwardoneyear,basedontheassumptionthatlike-for-likesalesaredown-8.5%,whichisinlinewithourcentralguidance.

January 2018 January 2019 (e)Store profitability % of turnover Store profitability % of turnover

>20% 59% >20% 46%>15% 85% >15% 74%>10% 94% >10% 90%>5% 97% >5% 95%>0% 98.7% >0% 96.8%

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Stress test assumptionsThefollowingstresstestisbasedonthefollowingassumptions:

• Weshutunprofitablestoresattheirleaseexpiry.

• Whenprofitablestoresreachtheendoftheirleaseweareabletocontinuetrading,payingthesamerentonashorttermlease(“holdingover”).

• Wetakeonnonewspace,areunabletoreduceanyrentsandtakeonnoconcessionincome.

• FixedcoststhataresharedbetweentheRetailandOnlinebusinessesareabsorbedastheOnlinebusinessgrows.Forthepurposeofthismodel,itisassumedthatOnlinesalesgrowthmatchestheRetailsalesdecline.

Base scenario: like-for-like sales at -10% for fifteen yearsInthisscenariothecumulativecashgeneratedbyourstoresoverfifteenyearsis£86mandinyear15thereisa£19mcashlossfromthe remaining portfolio.

Mainline stores excluding Clearance stores

Cumulative net cash

Net cash per annum

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Years

2028 2029 2030 2031

-£19m

-£200m

-£100m

£0m

£100m

£200m

£300m

£400m

£500m

£600m

£700m

£800m

15

LFL-10%

Net cash£86m

Scenario accounting for rent reductions, interest income and sales transferThescenarioabovedoesnotaccountforthreefactorsthatwouldimprovetheportfolioprofitability.Thesefactorsaresetoutinthetablebelow:

Factor DescriptionCum cash

effectYear 15

cash effectRetail interest income

RetailstoresgenerateaprofitfromtheuseofourOnlinecreditaccountinstores. This profit is a genuine Retail profit but is not accounted for in the Retail profit and loss account. +£167m +£1m

Rent reductions In the scenarioof -10% like-for-like sales it is very likely that retail rentswould fall at lease renewal.Our experience last yearwas that rents fellby -25% on average at lease renewal. This scenario assumes that rentreductionsare-15%atrenewal. +£23m +£0m

Sales transfer When we open new shops that are close to existing stores we wouldnormally experience some cannibalisation, whereby some of the salesgainedinthenewstorecomeattheexpenseofanearbyshop.Whenweclose storeswewouldexpect to see this effect in reverse.Currentlywegenerallyexperiencecannibalisationof15% to25%. In this scenariowehaveassumeda15%transferofsalesfromclosingstorestonearbyshops. +£155m +£10m

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Mainline stores excluding Clearance stores

Cumulative net cash

Net cash per annum

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Years

2028 2029 2030 2031-£200m

-£100m

£0m

£100m

£200m

£300m

£400m

£500m

£600m

£700m

£800m

15

LFL

-10%

Net cash

£431m+ TRANSFER SALES (15%)+ RENT REDUCTION (15%)+ INTEREST INCOME

-£8m

In this, more complete scenario, the store portfolio generates £431mofcashandonlyloses-£8minyear15.WhilsttheoutlookforRetailina-10%like-for-likescenarioseverelyunderminesthevalueofourRetailbusiness,itdoesnotcreatealiability.NordoesitinanywaydetractfromthevalueofourOnlinebusinesswhichisverylikelytogrowintheeventRetailsalesmovebackatthisrate.

Maximise growth onlineWecontinuetodevelopourproductofferonline:expandingthebreadthofourownproductoffersalongsidethoseofourpartnerbrandsthroughLABELandLipsy&Co.(whoseprogressisdescribedonpages13and14).Thissectionfocusesonoursystemsandlogistics infrastructure.

Online investment paying dividendsInMarch2016weacknowledgedthatwehadfallenbehindbestinclassintermsofourwebsitefunctionality,onlinemarketinganddatamanagement.Duringthelasttwenty-fourmonthswehavesignificantlyincreasedourinvestmentinthesystemsandthepeoplerequiredtoimproveourperformance.Wespentanadditional£11mintheyearonsoftwareandITandmarketingprofessionals.ThisinvestmentincludedanewDataManagementPlatform,ContentManagementSystem,CustomerSegmentationSystem,andOptimisationandTestingPlatform.Noneofthissoftwarehasbeencapitalisedandisfullyexpensedintheyearofpurchase.

Thesesystemsallservedtoimproveouronlinecapabilityandresultedinalargenumberofsmallimprovementstotheonlineshoppingexperience. Initiatives include intelligent recommendations, a new mobile site, new flowers site, faster checkout and registration, the introductionofNEXTUnlimited(unlimiteddeliveriestohomefor£20ayear)andawholehostofothersmallimprovements.

ThegraphbelowshowsthatboththeRetailandOnlinebusinessesimprovedasourrangesrecovered.However,theaccelerationonlinewasmuchmorepronounced,andwebelievethatthiswaslargelyasaresultoftheimprovementswemadetoourwebsite,marketing and online services.

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Interestingly,nosingledevelopmentmadeasignificantdifferenceonitsown.EachimprovementmadeshoppingwithNEXTjustalittle bit easier and delivered a small increase in sales. It appears that sales have benefitted more than might have been expected from thesumoftheparts,asthecumulativeeffectofdevelopmentscollectivelymadeforamuchbettershoppingexperience.

2017/18FullPriceSalesGrowth(Cumulative)

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

2017 2018

-12.5%

-10.5%

-8.5%

-6.5%

-4.5%

-2.5%

-0.5%

0.5%

2.5%

4.5%

6.5%

8.5%

10.5%

12.5%

Online

Retail

Online systems and marketing development in the year aheadThereisstillagreatdealmorethatwecandoto improveourOnlinebusinesssystemsandweintendtomaintainthelevelsofincreasedinvestmentreachedlastyear,althoughwearenotplanningforanotherstepchangeinourOnlinecostbase.Thegraphicbelowshowsthetimetableforsomeofourmoreimportantprojectsintheupcomingyear.Thisisbynomeansadefinitivelistandwehavemanyothersmallerprojectsthatwewilldeliverduringtheyear.Thetablebeneaththegraphicsummarisesthenatureandbenefits of each project.

Q1 Q2 Q3 Q4

Targeted marketing

New search engine

3 step credit

Personalised promotions

Homepagepersonalisation

Product personalisation – Phase 2

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Project DescriptionTargeted marketing roll out TodatewehaveonlyreallyexperimentedwithourDataManagementPlatform.Inthecoming

yearwewilldeployitinanger.Thistechnologyenablesustomoreaccuratelytargetourspendonthird-partywebsites,tailoringtheproductsweofferandtheamountwepayforanadverttotheexpectedproductivityandpreferencesofeachpotentialcustomer.

Earlysignsareencouraging.Trialsindicatethatwecandeliveranimprovementofatleast12%returnonadvertisingspend(i.e.12%moresalesforthesameinvestmentinadvertising).

Howeverthisapplicationisnotjustaboutimprovingreturnsonmarketingspend,italsoallowsustotargetcustomergroupswecouldnotidentifyinthepast.

New search engine WeaimtolaunchanewArtificialIntelligencebasedsearchengineinthesecondquarteroftheyear.Themainadvantageitwillhaveoverourcurrentsearchengineisthatitwillbeabletolearnfromcustomerbehaviour.Soitismuchlessreliantontheattributeswemanuallyallocatetoourproducts.

3 Step credit offer This is a new credit product for NEXT, aimed at customers who do not have (or do not want) a nextpay account. Itwill enable customers to split the costof anypurchase into threeequalmonthlyamountswithoutincurringinterest,aslongaseachmonthly3Steppaymentismadeinfullandontime.Customerswillhavetheflexibilitytopaylessthanthemonthly3Steppaymentprovidedtheypayat leastthemonthlyminimum,but if theydo,theywill incur interestonthebalancetheyhavenotyetpaid.

Weanticipatethatthisproductwillgeneratesomeinterestincomefromthosewhochoosenottopaythefull3Steppayments;butthemainaimoftheproductistodrivesalesgrowthbyallowingcustomers to spread the cost of their purchases.

Personalised promotions Wewilldeliverapersonalisedpromotionsenginethatwillallowustotargetspecificpromotionsonspecificproductstospecificcustomers.Webelievethattheremaybeparticularmeritinselectivelypromotingnewproductcategoriestoexistingcustomers(e.g.women’sjeanstofemalecustomerswhocurrentlyonlybuyourchildren’sclothing).

True personalised home pages

Currently our level of home page personalisation is crude. This application will allow us toserve12,000homepagevariationsdrivenbytheproductandservicepreferencesofindividualcustomers.

Product personalisation This will allow us to embellish and personalise our own NEXT product, for example embroidering namesonNEXTbabygrowsorjeans.

Developing our delivery networkWehavealreadydiscussedthewaysinwhichwecanfurtherintegrateourstorenetworkintoouronlinetradingplatform(seesectionentitled“MaximiseonlinevalueofRetailstores”onpage29).Wearealsoplanningtointegratesomeofournewestsuppliersintoouronline platform.

Lastyearwestartedtosellpersonalisedproductsonourwebsite.Ordersarepassedtoanetworkofindependentsupplierswhopersonalisetheirproductsandsendthemdirectlytoourcustomers.Thenewbusinessstartedwellandlooksasthoughitwilltakeatleast£7mthisyear.

Thisservicehastwooperationalproblems.Firstly,weareunabletodelivertheseproductsthroughourstores.Secondly,deliverytrackingandproblemresolutionisconvolutedifitemsdonotarriveasexpected.Inaddition,welosetheopportunitytoconsolidateitemsintoasingledeliverywhichwouldbemorecosteffective.

InOctoberweintendtointegratekeypersonalisedgiftsuppliersintoourdeliverynetwork.Wewilluseournext-daytostoredeliveryfleet to collect items from suppliers and inject them into our network when our vans return from their rounds. Most of these suppliers arenotmorethanafewmilesfromoneofourexistingdeliveryroutessothecostofcollectionwillbelow.Webelievethatbybringingthesedeliveriesintoournetworkwehavetheopportunitytoincreasethequalityofthedeliveryservice,reducecostsandpotentiallyincreasespeedofdelivery.

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Attack costs Saving money in the right wayInlightofthecostsinherentinthestructuralshiftonlinetheneedtomakecostsavingsisgreaterthanever.However,weneedtobecareful.Itwouldbeeasytocutcostsbyreducingthequalityofgoodsandservicesorunderinvestatatimeinvestmentiscentraltoonlinegrowth.

Weareacutelyawareoftheserisksandareclearthatcostsavingsmustnotcomeattheexpenseofourcustomersorthebusiness.Costsavingsneedtocomethroughworkingsmarter,usingnewtechnology,rightsizingourRetailfixedcostsandensuringthatwearecutting the marketing expenditure which is losing relevance in the online world. Three case studies illustrate these points.

RFIDstockcounting–technologydrivingefficiencyEveryweekourstoresscanallstockontheirshopfloorstoensurethatweaccuratelyreplenishfromstockroomstotheshopfloor.UsingatraditionalHandHeldTerminal(HHT)staffcanscan1,275itemsperhour.

WehaverecentlyintroducednewRadioFrequencyIdentification(RFID)tagsinourstoresallowingustoscanusingnewRFIDenabledHHTs.Thisisforecasttoincreasehourlyscanningratesto5,100,saving£2mperannuminwagecosts.

Newdeliveryschedule–rightsizingourdeliveryfleetOverthelastthreeyearsourRetailsaleshavefallenby10%butthenumberofdeliverieswemakehasremainedbroadlyinlinewith2014.Weareintheprocessofchangingourdeliveryscheduletobringitinlinewiththevolumeofunitsmovingthroughthebusiness.Weanticipatethatthiswilleliminate£4mofunnecessarycostatatimeourRetailbusinessdesperatelyneedstosavemoney.Thegraphbelowshowsoursalesanddeliveriesindexedto2014.

No. of deliveries

Retail sales

2014 2015 2016 2017

90%

95%

100%

105%

110%Indexed from 2014

Reduction in the costs of catalogue productionOurcataloguesandotherbrochuresremainanimportantpartofourbusiness.Wedistributeourmajorpublicationsninetimesintheyear,tocoincidewiththelaunchesofnineseasonalranges.Thesebrochuresremainpopularwithlargenumbersofcustomersandareproven to drive sales if sent to the right people.

Howeverasdigitaltechnologyadvancescatalogueshavebecomelessrelevanttoanincreasingnumberofnewcustomers.Weareconstantlyanalysingtheeffectofcataloguesondifferentcustomersegmentsandarecarefultopreventdistributionoffreebrochureswhentheynolongergenerateareturn.Thisexercise,alongwithefficiencysavingsinphotographyandreducedpagenumbers,isexpectedtosave£7minthecomingyear.

Costs and savings in the year aheadIn our central forecast we are budgeting for cost increases of around £35m, as set out in the table below.

Cost increase forecast for 2018/19 £m (e)General wage inflation 17Interestpayableonbondsandbankdebt 5Investmentinonlinesystems 4NationalLivingWage 3Occupancy(rates,energytaxes) 3Lower clearance rates of Sale stock 3Total cost increases 35

Todate,wehaveidentifiedaround£30mofcostsavingswhichmitigatesomeofthecostincreasesdetailedabove.Thisincludesanon-cash£12msavingindepreciation.

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Part 3 – Sales and Profit Guidance

Outlook for salesThetablebelowsetsoutthecentralguidanceforfullpricesalesgrowthinRetailandOnlinefortheyearahead.Forcomparisonwegivetheactualfigureforlastyearinthesecondcolumn.Thedivisionalguidancecomeswithahealthwarning:itisveryearlyintheyeartobegivingsalesguidancebydivisionbutwehavemoreconfidenceinguidancefortheGroupasawholethanwedofortheindividual parts.

% Variance on previous yearCentral guidance

for 2018/19Performance

in 2017/18Retailfullpricelike-for-likesales -8.5% -9.1%Total Retail full price sales (inc. contribution from new space) -7.4% -7.0%Onlinefullpricesales +10.3% +11.2%Total full price sales +1.0% +0.7%

Wearebudgetingforaslightlybetterfullpricesalesperformanceintheyearaheadthanlastyear.Thisisbecauseinthefirsthalflastyearwewereadverselyaffectedbyrangingerrors,whichwebelievewehavenowcorrected.Asaresultweexpectgrowthinthefirsthalftobestrongerthanthesecondwhencomparativesalesimprove(forquarterlysaleshistoryandguidanceseepage24).

Outlook for profitsWearemaintainingtheguidancerangeweissuedforthefullyearinourJanuary2018tradingstatement.Atourcentralguidanceoffullpricesalesgrowthof+1.0%,weestimatethatGroupprofitwouldbearound£705m.Thisprofitismarginallydownonthecurrentyearasweexpectoperationalcoststocontinuetogrowfasterthansales.WeexpectEPStobeenhancedby+4.3%asaresultofthecontinuingdistributionofsurpluscashgenerationintheformofsharebuybacks.So,atourcentralguidanceEPSwouldgrowby+1.4%.Ourcentralguidanceforsales,profitsandEPSissetoutinthetablebelow.

Full year estimate to January 2019 Central

guidanceTotalfullpricesalesversus2017/18 +1.0%Group profit before tax £705mGroupprofitbeforetaxversus2017/18 -2.9%Earnings Per Share growth versus 2017/1815 +1.4%

First quarter trading updateOurfirstquartertradingstatementwillcoverthefourteenweeksto5May2018andisscheduledforThursday10May2018.ThisisoneweeklaterthanoriginallyplannedinordertogiveamoremeaningfulcomparisonwithlastyearduetothetimingoftheMayDayBankHoliday.

Lord Wolfson of Aspley GuiseChiefExecutive

23March2018

15. EPSgrowthisbasedonourlatestforecastofthetimingofsharebuybacks.

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1 Great productsNEXTproductsaredevelopedbyourin-housedesignteamtooffergreatstyle,qualityandvalueformoneywithacontemporaryfashionedge.

2 Global sourcingOver140millionproductsaresourcedgloballyfromaround40countries.

During the year, NEXT Sourcing provided around 40% of theNEXT brandedproductsfromourglobalsupplierbaseincluding4ownedfactorysites.

Over100brandsaresoldthroughLABELonline.

3 Efficient supply chainOurnetworkofwarehousesandinternationalhubsdeliverproductcosteffectivelyandefficiently.

9warehouses,6depotsand4internationalhubs.

Next-daydeliveryisstandardforUKNEXTOnlineordersplacedbeforemidnight.

4 Outstanding customer experienceProviding value formoney and outstanding customer service is key to NEXT.WeoffercustomersacreditfacilityforUKNEXTOnlinepurchases,callednextpay.

Our large number of stores, complemented by an integrated multi-channeloffering, offers convenience to customers.

In store design and concession partners provide an exciting shopping environment.

5 Returning value to shareholdersWearehighlycashgenerative,allowingusto invest inthebusinessandreturnvaluetoshareholdersthroughdividends,sharebuybacksandearningsgrowth.

What we do

Great products12

3

4

5

Global sourcing

Efficient supply chain

Outstanding customer

experience

Returning value to

shareholders

NEXTisaUKbasedretailerwhichoffersexciting,beautifullydesigned,wonderfulqualityclothingandhomewarewhichmeetsandexceedstheaspirationsofourcustomers,atpricesthatarewithinthereachofmostpeople.Ourcustomerscanbeconfidentinourdesign,ourqualityandthattheyaregettingvalueformoney.NEXTisoneofthelargestclothingandHomeproductsretailersintheUKbysales,andamemberoftheFTSE100index.

In1981,JHepworth&Son,Gentleman’sTailors,boughtachainofshopswiththeaimofdevelopingawomenswearbrandcalledNEXT.ThefirstNEXTwomenswearstoreopenedin1982andoverthefollowingyearsmenswear,homeandchildrenswearwereaddedtotheproductranges.In1991themovetolargerstorescommenced,bringingtogetherallfourproductgroupsandrangesacrossbothretailandhomeshoppingformats.TheNEXTOnlinewebsitewaslaunchedin1999toenhancethetraditionalcatalogueofferandhasbecomeasignificantdriverofthegrowthoftheGroup’ssalesandprofitability.Thestrategyoflargerstoresandmulti-channelretailinghasbeencontinuouslydevelopedoverthepasttwodecades.

TheGroupisprimarilycomprisedof:

• NEXTRetail,achainofaround530storesintheUKandEire. The majority of our stores sell clothing, footwear, accessories and/or home products; and we now operate 35 large

combined fashion and home stores.

• NEXTOnline(formerlyNEXTDirectory),anonlineandcatalogueshoppingbusinesswithover4.9millionactivecustomersandinternationalwebsitesservingapproximately70countries.

By embracing the internet, providing exceptional customer service and developing overseas opportunities, NEXT Online’s sales have grown by more than 130% over the last ten years. The NEXT Online business provides customers with the option of a credit facility for purchases called nextpay. Through LABEL, NEXT Online offers premium brands to customers.

• NEXTInternationalRetail,witharound200mainlyfranchisedstoresacrosstheworld. NEXT’s franchise partners operate over 190 stores in 32 countries; there are also a small number of overseas

stores which NEXT operates directly.

• Lipsy,whichdesignsandsellsLipsyandotherbrandedfashionproducts. Lipsy trades from 46 stores, through NEXT Online, and through wholesale and franchise channels.

• NEXT Sourcing, which designs and sources NEXT branded products. NEXT Sourcing (NS) is our Hong Kong based internal sourcing agent which competes for business against other

suppliers to NEXT Retail and Online.

NEXT Retail 35%

NEXTOnline 59%

NEXT International Retail 1%

NEXT Sourcing 4%

Other 1%

2017/18 profit by segment

38

Our key resources and relationships

PeopleThecustomersandemployeesofNEXTarekeytoachievingtheobjectivesofthebusiness.

Customersareattheheartofeverythingwedo.

Knowledge and know howOver35yearsofretailingexperience.

TheNEXTBrandoffersuniquelydesignedandhighqualityproducts;forginglongtermrelationshipswith customers and suppliers.

SuppliersSourcinggloballytodeliverqualityandvalueunderethicaltradingprinciples.

Buildings and InfrastructureThepredominantlyleasedstoreportfolioisactivelymanaged,withopeningandclosuredecisionsbasedonstoreprofitabilityandpayback.

Ourwarehouseandlogisticsoperationsprovideanefficientandagileproductdistributionnetwork.

Wellestablished,andengagingwebsites,relevantforallourcustomers.

FinanceEffectivemanagementoffinancialresourcesincludingfocusoncostmanagementandmaximisingreturnsfromspace.

Further detail on the performance and development of the Group’s businesses can be found in the Chief Executive’s Review on pages 4 to 37, which forms part of this Strategic Report along with Key Performance Indicators (pages 40 and 41), Risks and Uncertainties (page 42), Employees (page 48), Social, Community and Human Rights (page 49) and Environmental Matters (page 50).

Business strategies and objectivesHow we create valueTheBoardregularlyreviewstheGroup’sstrategicframeworkforlongtermvaluecreation.TheprimaryfinancialobjectiveoftheGroup is to deliver long term, sustainable returns to shareholders through a combination of growth in Earnings Per Share (EPS) andpaymentofcashdividends.Overthelasttenyears,EPSandordinarydividendspersharehavebothincreasedbyover140%andtheCompany’ssharepricehasincreasedbyover250%.Thislongtermvaluehasbeencreatedthroughthepursuitofthefollowingstrategies:

• Improvinganddevelopingourproductranges,successinwhichismeasuredbysalesperformance.

• Maximisingtheprofitabilityofretailsellingspace.Newstoreappraisalsmustmeetdemandingfinancialcriteriabeforetheinvestmentismade,andsuccessismeasuredbyachievedprofitcontributionandreturnoncapitalagainstappraisedtargets.

• IncreasingthenumberofprofitableNEXTOnlinecashandcreditcustomersandtheirspend,bothintheUKandinternationally,complemented by our LABEL offering of branded products and the credit facility (nextpay) we offer to our UKNEXTOnlinecustomers.

• Managing gross and net margins through efficient product sourcing, stock management and cost control.

• FocusingoncustomerexperienceandsatisfactionlevelsinbothRetailstoresandOnline.

• MaintainingtheGroup’sfinancialstrengththroughanefficientbalancesheetandsecurefinancingstructure.

• Generatingandreturningsurpluscashtoshareholdersbywayofsharebuybacksand/orspecialdividends.

Read about the outlook for sales and profit on page 37Read about our action plan for the year ahead on page 28

For further details refer to page 49



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Key Performance Indicators (KPIs) KPIsaredesignedtomeasurethedevelopment,performance and position of the business. Group cash flows and divisional results are detailed in the Chief Executive’s Review andelsewhere in this Annual Report. Refer to the Glossaryonpage152forfurtherdetails.

Sales (%)

NEXT profitability

NEXT Retail sales performance

NEXT Retail selling space

Full price sales are VAT exclusive sales of stock items excluding items sold in our mid-season and end-of-season Sale events and our Clearance operations, and includes interest income on those sales.

Total sales are VAT exclusive full price and markdown sales including the full value of commission based sales and interest income (as described in Note 1 of the financial statements).

Divisional operating margin is profit after deducting markdowns and all direct and indirect trading costs expressed as a percentage of achieved total sales (refer to Note 1 of the financial statements).

The 2017 operating margin has been restated to reflect the change in recharges (refer to page 6 of the Chief Executive’s Review).

Selling space is defined as the trading floor area of a store which excludes stockroom and administration areas and is shown as at the financial year end.

Underlying like-for-like sales represents the growth in sales from stores which have been open for at least one full year, excluding stores impacted by new openings.

2018 2017restated restated

NEXT Retailoperating margin

NEXT Onlineoperating margin

Group profitbefore tax (£m)

+15.3%+12.7%

2018 2017

+24.8%+24.4%

2018 2017

790.2726.1

2018 2017

Full price sales growth

Total sales growth

Underlying totallike-for-like sales

-4.6%-7.0%

2018 2017

-2.9%-7.9%

2018 2017

-5.4%-9.8%

Underlying full pricelike-for-like sales

2018 2017

-6.9%-9.1%

2018 2017

Store numbers Square feet (000’s)

538528

7,978

8,029

20182017

2018 2017

NEXT Brand fullprice sales growth

-1.3%+0.7%

2018 2017

NEXT Brand total sales growth

+0.0%-0.6%

40

NEXT Online Sales performance

Credit

Average active customers (000’s)

Returns to shareholders (£m)

Earnings Per Share

Refer to Note 8 of the financial statements.

2,174,357 shares were purchased in the financial year (2017: 3,613,121) at an average cost per share of £48.81 (2017: £51.91) including stamp duty and associated costs. The average price before costs was £48.51 (2017: £51.59). Buybacks represented 1.5% (2017: 2.4%) of opening share capital.

Based on dividends paid in the Cash Flow Statement. Refer to Note 7 of the financial statements.

Average active customers are defined as those who have placed an Online order or received a standard account statement in the last 20 weeks.

Credit customers are those who order using an Online credit account, whereas cash customers are those who pay when ordering.

Full price sales growth

+11.2%

2,494

2,436

2,496

2,235

+3.6%

20182017

Cash

4,930 4,731

Total

2018 2017

Ordinary dividends

225.8224.1

2018 2017

88.3255.6

Special dividends

2018 2017

Share buybacks

187.6106.1

2018 2017

501.7585.8

Total

2018

2017441.3p

416.7p

+9.2%

+4.2%

Total sales growth

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Strategic ReportRisks and Uncertainties

Risk management and internal control frameworkTheBoardhasapolicyofcontinuousidentificationandreviewof principal business risks, and oversees risk management. Thisincludesidentifyingkeyrisks,determiningcontrolstrategiesandconsideringhowthoserisksmayaffecttheachievementofbusiness objectives, taking into account risk appetite.

Executive directors and operational management are delegated the task of implementing processes to ensure that risksaremanagedappropriately.Onaday-to-daybasis,theriskmanagement process is managed and co-ordinated by thecorporate compliance team. Each business area is responsible for preparing and maintaining operational risk registers which involves identifying, evaluating, managing, measuring andmonitoring the risks in their respective areas. Risk registers are prepared using consistent risk factors and incorporate business impact and likelihood ratings, both before and after the effect ofanymitigating factorsor controls.Progressand issuesarereported to the corporate compliance team on a regular basis, and more formal annual reviews are also carried out to ensure robustness and consistency across the business. In addition,internal audit plans are agreed with the Audit Committeebased on the risks and controls identified through this risk management process.

DuringtheyeartheBoardcarriedoutadetailedevaluationofthe effectiveness of the risk management and internal controls systems for all partsof thebusiness. This coveredallmaterialcontrols including financial, operational and compliance controls, and the Board is satisfied that they are operating effectivelyfor the financialyear toJanuary2018anduptoand includingthe date of this report. The evaluation incorporated a review of reports, discussion, challenge and assessment of the principal businessriskswithrelevantseniormanagement.Duringtheyear,the directors also received presentations from management on specifichigherriskareasandagreedkeyactionplansincludingfurther enhancement of mitigating controls.

The work and findings of the corporate compliance team are also reviewed,discussedandagreedbytheAuditCommitteeonaregularbasis;anysignificantmattersarecommunicatedtotheBoard. No significant failings of internal control were identified during these reviews.Operational risk registers detail limited,though not significant, control weaknesses and clear action plans are in place to address these.

Following last year’s independent reviewundertakenby ErnstandYoung (EY) in relation to theassessmentofNEXT’scyberrisk,EYcompletedafurtherprogressreviewthisyear.Theoutputfrom this review was discussed in detail with relevant senior managementandpresented to theAuditCommitteeand theBoard. Cyber risk has been on the agenda for discussion ateveryAuditCommitteemeeting thisyear.Goodprogresshasbeenmadeduring the year, such as the furtherdevelopmentofsecuritymonitoringandalerting,andworkingtoachievethekey requirements of the General Data Protection Regulation(GDPR)whichtakeseffectfromMay2018.GDPRwillhavelimitedoperationalimpactonourbusiness.Theagreedcyberriskactionplan continues to be prioritised and tracked and we support this important area with significant resources devoted to the development,maintenanceandsecurityofITsystems.

BrexitFollowing the outcome of the UK referendum to leave theEU, thereareanumberofuncertainties that continue toexistregarding how the exit will be engineered. Therefore, the extent towhichouroperationsandfinancialperformancearelikelytobeaffectedinthelongertermwillonlybecomeclearasmoredetailsemerge.WehaveconsideredthepossibleconsequencesthatBrexitcouldhaveuponourbusinessandduringtheyearweestablishedaBrexitSteeringCommittee,comprisedofrelevantseniormanagers.TheBrexitSteeringCommitteeformallyreportsto the Group Finance Director.

Wehavealsoperformedadetailed risk assessment across allbusiness areas to ensure that we have a clear view of where the Brexit related risks and impact could occur. Brexit does not raise a new principal risk for us, however it does have the potential to impact a number of our existing risks at an individual risk level, e.g. exchange rates, changes in tariffs and duties, regulatorychangesandeconomicuncertainty.

Wewillmonitor the risks anduncertainties arising fromBrexitwithin the risk management and control process described above.Thisprovidesamoreeffectiveandoperationallyfocusedmitigationoftheserisksonanongoingandtimelybasis.

Assessment of principal risks and uncertaintiesThe directors confirm that they have carried out a robustassessment of the principal risks and uncertainties facing the Group, including those that would threaten its business model, futureperformance, solvencyor liquidity.Thoseprincipal risksaredescribedbelowalongwith explanationsof how they aremanaged or mitigated. The principal risks areas remain the same asreportedlastyear.Reputationalriskisnotinitselfoneoftheprincipal risks detailed below, however, it does have the potential to impact a number of our existing risks and is an important consideration when we assess our risks and potential impacts. The Board is committed to ensuring that the key risks aremanaged on an ongoing basis and operate within an acceptable level.Whilst these risks all have the potential to affect futureperformance, work is undertaken to mitigate and manage these risks such that they shouldnot threaten theoverall viabilityofthebusinessoverthethreeyearassessmentperiod(refertotheviabilityassessmentonpage47).

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Description of principal risk or uncertainty How the risk or uncertainty is managed or mitigatedBusiness strategy development and implementation

If theBoardadopts thewrongbusiness strategyordoes not implement its strategies effectively, thebusiness may suffer. The Board therefore needsto understand and properly manage strategic risk,taking into account specific retail sector risk, in order todeliverlongtermgrowthforthebenefitofNEXT’sstakeholders.

TheBoardreviewsbusinessstrategyonaregularbasistodeterminehow sales and profit budgets can be achieved or bettered, and business operations made more efficient. Seasonal and annual budgets together with longer term financial objectives and cash flow forecasts are produced.

The Board and senior management consider strategic risk factors, widereconomicandindustryspecifictrendsthataffecttheGroup’sbusinesses, the competitive position of its product offer and the financial structure of the Group.

In common with other retailers we continue to experience a significant shiftbycustomersfromshoppinginretailstorestoshoppingonline.Longer term financial forecasts for our Retail business have therefore been prepared and stress tested during the year (see page 31). These forecasts provide a mechanism for ensuring that business profitability is reviewed andmanaged and agreed actions are inplace to take into account changing behaviours and trends.

The Audit Committee monitors strategic and operational riskregularlyandanysignificantmattersarereportedtotheBoard.

Management team

The success of NEXT relies on the continued service of its senior management and technical personnel, andonitsabilitytocontinuetoattract,motivateandretainhighlyqualifiedemployees.TheretailsectorisverycompetitiveandNEXT’sstaffmaybetargetedbyother companies.

The Remuneration and Nomination Committees identify seniorpersonnel, review remuneration at least annually and formulatepackagestoretainandmotivatetheseemployees, including longterm incentive schemes.

The Board considers the development of senior managers to ensure adequate career development opportunities for key personnel,withorderlysuccessionandpromotionto importantmanagementpositions.

Link to StrategyImproving and developing our product ranges Focusing on customer experience and satisfaction

Maximisingtheprofitabilityofretailsellingspace MaintainingtheGroup’sfinancialstrength

Increasing the number of profitable NEXT Onlinecustomers Generating and returning surplus cash to shareholders

Managing margins

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Description of principal risk or uncertainty How the risk or uncertainty is managed or mitigatedProduct design and selection

NEXT’ssuccessdependsondesigningandselectingproductsthatcustomerswanttobuy,atappropriatepricepointsand in the rightquantities. In theshortterm,afailuretoproperlymanagethisareamaymeanthat NEXT is faced with surplus stocks that cannot be soldatfullpriceandmayhavetobedisposedofataloss. In the longer term, the reputation of the NEXT Brand may suffer. Product design and selection istherefore at the heart of the business.

Executivedirectorsandseniormanagementcontinuallyreviewthedesign,selectionandperformanceofNEXT’sownproductrangesandthoseofotherbrandssoldbyNEXT.Tosomeextent,productriskisalsomitigatedbythediversityofNEXT’sranges.

Inaddition,executivedirectorsand seniormanagement regularlyreviewproductrangetrendstoassessandcorrectanykeyselectionorproductissues.Correctionstosignificantmissedtrendsorpoorerperforming ranges are targeted for amendment, with alternative productsbeingsourcedwithinsixmonthswheredeemednecessary.

Key suppliers and supply chain management

NEXT relies on its supplier base to deliver products on timeandtothequalitystandardsitspecifies.FailuretodosomayresultinaninabilitytoservicecustomerdemandoradverselyaffectNEXT’sreputation.

NEXT continually seeks ways to develop its supplier base so asto reduce over reliance on individual suppliers of products and services,andmaintainthequalityandcompetitivenessofitsoffer.TheGroup’s riskassessmentprocedures forkeysuppliers identifyalternatives and develop contingency plans in the event of keysupplier failure.

Changesinglobalmanufacturingcapacityandcostsmayimpactonprofitmargins.

Existing and new sources of product supply are developed inconjunction with NEXT Sourcing, external agents and/or directsuppliers.

Non-compliancebysupplierswiththeNEXTCodeofPracticemayincreasereputationalrisk.

NEXTcarriesoutregularinspectionsofitssuppliers’operationstoensurecompliancewiththestandardssetoutinthisCode;coveringproductionmethods,employeeworkingconditions,qualitycontrolandinspectionprocesses.Furtherdetailscanbefoundonpage49.

NEXT monitors and reviews the financial, political and geographical aspectsofitssupplierbasetoidentifyanyfactorsthatmayaffectthecontinuityorqualityofsupplyofitsproducts.

NEXTalsomonitors and reviews stockavailabilityonanongoingbasis to ensure that issues are identified and appropriate action is takenwhereanyissuesareimpactingservicedeliverytocustomers.

Warehousing and distribution

NEXT regularly reviews the warehousing anddistribution operations that support the business. Risks include business interruption due to physicaldamage, access restrictions, breakdowns, capacityshortages,ITsystemsfailure(seenextpage),inefficient processesandthird-partyfailures.

Planning processes are in place to ensure there is sufficient warehousehandlingcapacityforexpectedfuturebusinessvolumesover the short and longer terms.

Servicelevels,warehousehandling,inboundlogisticsanddeliverycostsaremonitoredcontinuouslytoensuregoodsaredeliveredtoourwarehouses,RetailstoresandOnlinecustomersinatimelyandcost efficient manner.

During the year we reviewed our warehousing and logisticsoperations to ensure thatweproactivelymanage changes in ourcustomerdemandbetweenRetailstoresandOnlinecustomers.

Businesscontinuityplansandinsuranceareinplacetomitigatetheimpact of business interruption.

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Description of principal risk or uncertainty How the risk or uncertainty is managed or mitigatedCustomer experience

NEXT’s performance depends on the recruitmentand retention of customers, and on its ability todrive and service customer demand. This includes having an attractive, functional and reliable website, effective call centres, operating successful marketing strategies, and providing both Retail and Onlinecustomers with service levels that meet or exceed their expectations.

Market research and customer feedback is used to assess customer opinions and satisfaction levels to help to ensure that staff remain focused on delivering excellent customer service.

TheGroupcontinuouslymonitorswebsiteandcallcentreoperationsthatsupportthebusinesstoensurethatthereissufficientcapacityto handle volumes.

Callcentreemployeesreceivecomprehensiveandrelevanttrainingon an ongoing basis, targeting our service to be at its highest possible levels.

TheCompanyiscontinuingtoinvestinthedevelopmentofourUKandoverseaswebsites.Thesedevelopmentsareformallyappraisedand are designed to further improve the online customer experience.

Retail store network

NEXT Retail’s performance depends on profitablydeveloping the trading space of the store network. The successful development of new stores depends on a number of factors including the identification of suitable properties, obtaining planning permissions and the negotiation of acceptable lease terms. Prime retail sites will generally remain in demand, and increasedcompetition for these can result in higher future rents.

The predominantly leased store portfolio is activelymanaged bysenior management, with openings, refits and closures based on storeprofitabilityandcashpaybackcriteria.

Regular reviewsof leaseexpiryandbreakclausesareundertakentoidentifyopportunitiesforexitorrenegotiationofcommitments.ProfilingoftheGroup’sleasecommitmentsisalsoregularlyreviewedbytheBoard.

NEXT will continue to invest in new space where its financial criteria are met, and will renew and refurbish its existing portfolio when appropriate.

Information security, business continuity and cyber risk

NEXT is dependent upon the continued availabilityandintegrityof itsITsystems,whichmustrecordandprocess substantial volumes of data and conduct inventory management accurately and quickly.TheGroup’ssystemsrequirecontinuousenhancementand investment to prevent obsolescence and maintain responsiveness. The threat of unauthorised or malicious attackisanongoingrisk,thenatureofwhichisconstantlyevolvingandbecomingincreasinglysophisticated.

Systems’vulnerabilityandpenetrationtestingiscarriedoutregularlyto ensure that data is protected from corruption or unauthorised access or use.

Criticalsystemsarereviewedandtestedperiodicallytoensuretheyhavebackupfacilitiesandbusinesscontinuityplansinplace;theseare updated on an ongoing basis to reflect business risk.

Majorincidentsimulationsandbusinesscontinuitytestsarecarriedoutperiodically.

IT risks are also managed through the application of internal policies and change management procedures, contractual service level agreementswiththird-partysuppliers,andITcapacitymanagement.

The Audit Committee and Board received updates and agreedappropriate actions relating to cyber risk andbusiness continuityduringtheyear(seepage42).

As the nature of cyber attack risk is constantly changing andbecomingevermoresophisticated,NEXTcontinuallyworkstowardsimproving mitigating controls and supports significant resource and investmentinthisarea,includingemployeedatasecurityawarenesstraining(seepage42regardingtheindependentcyberriskfollowupreviewundertakenduringtheyear).

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Description of principal risk or uncertainty How the risk or uncertainty is managed or mitigatedFinancial, treasury, liquidity and credit risks

Themain financial risksaretheavailabilityof fundstomeet business needs, default by counterparties tofinancial transactions, the effect of fluctuations in foreign exchange rates and interest rates, and compliance with regulation.

NEXToperatesacentralisedtreasuryfunctionwhichisresponsibleformanaging its liquidity, interest and foreign currency risks. TheGroup’streasuryfunctionoperatesunderaBoardapprovedpolicy.This includes approved counterparty and other limits which aredesigned to mitigate NEXT’s exposure to financial risk. FurtherdetailsoftheGroup’streasuryoperationsaregiveninNote24ofthe financial statements.

NEXT has a longstanding policy of returning surpluscash to shareholders through share buybacks andspecial dividends, whilst maintaining an appropriate level of debt. Adequate financing facilities arethereforerequiredtosupporttheoperationalneedsofthe business.

NEXThasadequatemediumand long term financing inplace tosupportitsbusinessoperations,andtheGroup’scashpositionandforecastsareregularlymonitoredandreportedtotheBoard.

NEXT is also exposed to credit risk, particularly inrespect of its Online customer receivables, whichat £1.1bn represents the largest item on the Group Balance Sheet.

RigorousproceduresareinplacewithregardtotheGroup’screditaccount customers, including the use of external credit reference agencies and applying set risk criteria before acceptance. Theseproceduresareregularlyreviewedandupdated.

The Audit Committee received a formal update regarding thecustomercreditbusinessduringtheyear.

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Viability Assessment

ThedirectorshaveassessedtheprospectsoftheGroupbyreferencetoitscurrentfinancialposition,itsrecentandhistoricalfinancialperformanceandforecasts,andtheprincipalrisksandmitigatingfactorsdescribedabove.Inaddition,theBoardregularlyreviewsthefinancingpositionoftheGroupanditsprojectedfundingpositionandrequirements.TheGroupisoperationallyandfinanciallystrongandhasatrackrecordofconsistentlygeneratingprofitsandcash,whichisexpectedtocontinue.Thedirectorsreviewcashflowprojectionsonaregularbasis.This includedarecentreviewbytheAuditCommitteeof threeyearcashprojectionswhichwerestresstestedtodeterminetheextenttowhichtradingcashflowswouldneedtodeterioratebeforebreachingtheGroup’sfacilities, both before and after anticipated shareholder distributions. In addition, the likelihood and impact of severe but plausible scenariosinrelationtotheprincipalriskswereassessed,asdescribedonpages42to46,bothindividuallyandcollectively,takingintoconsideration mitigating actions that might be undertaken in particular situations.

Whilsttheprincipalrisksallhavethepotentialtoaffectfutureperformance,noneofthemareconsideredlikelyeitherindividuallyorcollectivelytothreatentheviabilityofthebusinessoverthethreeyearassessmentperiod.

Theretailsectorisinherentlyfastpaced,competitiveanddynamic,particularlyinrespectofthefashionproductcycle.However,asillustratedinthediagrambelow,awidevarietyofothertimehorizonsarealsorelevantinthemanagementofthebusiness:

ThedirectorshaveassessedtheviabilityoftheGroupoverathreeyearperiod,astheybelievethisstrikesanappropriatebalancebetweenthedifferenttimehorizonswhichareusedinthebusinessandisareasonableperiodforashareholdertoexpectafashionretailbusinesstobeassessedupon.Basedonthisreview,thedirectorsconfirmthattheyhaveareasonableexpectationthattheGroupwillcontinueinoperationandmeetitsliabilitiesastheyfalldueoverthisperiod.

Detailedbudgets

and forecasts

Target payback period for new stores

Long term investment and

financing considerations

New lease commitments

Pensions

Weighted average

remaining lease life

Medium term financing

considerationsCash flow forecasts

Logistics capacity planning

Retail space planning

Share-based incentives

Fashion lifecycle

Currency hedging

Management succession planning

IT systems development

1 year 2 years 3 years 5 years 7 years 10 years+

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Furtherinformationregardingouremployees,social,communityand human rights, and environmental matters is provided in our latestCorporateResponsibilityReportavailableonourcorporatewebsite at www.nextplc.co.uk.

EmployeesNEXT’s employees are integral to achieving its businessobjectivesandtheCompanyactivelytakesstepstoattractandretain the right people towork at every level throughout thebusiness. NEXT has established policies for recruitment, training and development of personnel and is committed to achieving excellence in health, safety, welfare and the protection ofemployeesandtheirworkingenvironment.

Equal opportunities and diversityNEXT isanequalopportunitiesemployerandwillcontinuetoensure that it offers career opportunities without discrimination. Fullconsiderationisgiventoapplicationsforemploymentfromdisabled persons, having regard to their particular aptitudes and abilities and in accordance with relevant legislation. The Group continues the employment wherever possible of any personwho becomes disabled during their employment, providingassistanceandmodificationswherepossible.Opportunitiesfortraining, career development and promotion do not operate tothedetrimentofdisabledemployees.Furtherdetailsofourdiversity policy are included in the Nomination CommitteeReport on page 66.

The following charts show the gender mix of the Group’semployeesattheendofthefinancialyear:

Gender payNEXT published its first Gender Pay Report in March 2018.The report can be found at www.nextplc.co.uk.

Training and developmentNEXTaimstorealisethepotentialofitsemployeesbysupportingtheir career progression and promotion wherever possible. It makes significant investment in the training and development of staff and in training and education programmes which contribute tothepromotionprospectsofemployees.

Employee communicationNEXThasapolicyofprovidingemployeeswithfinancialandotherinformation about the business and ensures that the suggestions andviewsofemployeesare taken intoaccount.NEXThasanemployee forum made up of elected representatives fromthroughout the business who attend meetings at least twice a yearwithdirectorsandseniormanagers.Thisforumenablesandencouragesopendiscussiononkeybusinessissues,policiesandthe working environment.

Employee share ownershipApproximately 10,000 employees held options or awards inrespect of 6.1m shares in NEXT at the end of January 2018,being4.2%ofthetotalsharestheninissue.Itsemployeeshareownershiptrust(ESOT)purchasessharesforissuetoemployeeswhentheiroptionsareexercisedorawardsvest.AttheyearendtheESOTheld4.8mshares;theTrusteegenerallydoesnotvoteonthisholdingonanyresolutionatGeneralMeetings.

Pension provisionNEXT provides pension benefits to participating employees,details of which are set out in the Remuneration Report and in Note18ofthefinancialstatements.AtJanuary2018,therewere878(2017:943)activemembersinthedefinedbenefitsectionofthe2013NEXTGroupPensionPlanand2,977(2017:2,949)UKactive members of the defined contribution section. In addition, 15,413employees(2017:15,033)participateintheGroup’sautoenrolment defined contribution scheme.

TaxationNEXT manages its tax affairs responsibly and proactivelyto comply with tax legislation. We seek to build solid andconstructiveworkingrelationshipswithalltaxauthorities.NEXT’sUKtaxpolicycanbefoundatwww.nextplc.co.uk.

Subsidiary directors and other senior managers

Directors of NEXT plc

4

564

Total employees

28,923

13,973

14,860

31,037

13

2926

12

2018

Male

Female

2017

Male

Female

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Social, Community and Human RightsNEXTiscommittedtotheprinciplesofresponsiblebusinessbyaddressingkeybusinessrelatedsocial,ethicalandenvironmentalmatters.Seniordirectorsandmanagersrepresentingkeyareasofthebusinesstakeresponsibilityforcorporateresponsibilityandsustainability.NEXTstrivescontinuallytomakeimprovementsby:

• acting in an ethical manner;

• recognising, respecting and protecting human rights;

• developing positive relationships with our suppliers and business partners;

• recruitingandretainingresponsibleemployees;

• takingresponsibilityforourimpactontheenvironment;and

• delivering support through donations to charities and communityorganisations.

A third-partyprovides independent assuranceon theGroup’sCorporate Responsibility Report which is published on ourcorporate website (www.nextplc.co.uk). NEXT is also a member oftheFTSE4GoodIndexSeries.

Human rights NEXT recognises its responsibility to respect human rightsthroughout itsoperations.Wearecommittedtoensuringthatpeople are treated with dignity and respect by upholdinginternationallyrecognisedhumanrightsprinciplesencompassedintheUniversalDeclarationofHumanRightsandtheInternationalLabour Organisation’s Declaration on Fundamental PrinciplesandRightsatWork.

Our approach is to implement the United Nations GuidingPrinciplesonBusinessandHumanRights(UNGuidingPrinciples).As a business we seek to avoid infringing the human rights of othersandworktoaddressanyadversehumanrightsimpactsweidentify.OurcorporateresponsibilityreportingalignswiththeUnitedNationsGuidingPrinciplesReportingFramework.

NEXT takes seriously any allegationof human rights abuse inallitsformsandwillnottoleratehumanrightsabuseanywherein its operations.We have developed training and awarenessinitiatives for our employees, suppliers, business partners andserviceproviderswhichwerefirstimplementedin2017.

For further information, refer to theNEXTHumanRights andModernSlaveryPolicyand the latestCorporateResponsibilityReport at www.nextplc.co.uk. In line with the requirementsof theModern Slavery Act 2015, our second annual modernslavery statementwill be published on our corporatewebsiteduring2018.

Suppliers NEXTcontinuestofocusonitssupplychainasitrecognisesthatthere is potential for human rights issues to arise in this area. Incommonwithotherretailers,NEXT’sproductsupplychainisbothdiverseanddynamic.Duringtheyear,NEXTproductsweresourcedfromover1,500directandindirect(i.e.sourcedviaagents)suppliers,withproductsmanufactured inaround40countries.Thechallengeoftradingethicallyandactingresponsiblytowardstheworkersinourownandoursuppliers’factoriesisakeyprioritywhichismanagedbytheNEXTCodeofPractice(COP)Team,madeupof47employeesbasedinkeysourcinglocations.

NEXT’s COP programme is based on the Ethical TradingInitiative base code and international labour conventions and has nine key principles that stipulate the minimum standardswith which suppliers are required to comply. The COP teamcontinue to deliver training to our product teams, other relevant employees and to third parties providing NEXT product,ensuringtheyunderstandthevitalroletheyplayinourethicaltrading programme.

TheCOPteamcarriedoutover1,900factoryauditsin2017/18andworkdirectlywithsupplierstoidentifyandaddresscausesofnon-compliance. NEXT also recognises the importance of partnership and collaboration, both with our suppliers and with other brands and organisations, to work to resolve some of the more complex problemswhichweareunabletosolvealone.Traceabilityandtransparencyofoursuppliers’ factories isan importantpartofNEXT’s overall approach to corporate responsibility.We havepublishedalistofoursuppliers’manufacturingsitesproducingNEXT branded products at www.nextplc.co.uk.

CustomersNEXT is committed to offering stylish, quality products to itscustomers which are well made, functional, safe and are sourced inaresponsiblemanner.NEXTtechnologistsworkcloselywithbuyers,designersandsupplierstoensure itsproductscomplywith all relevant legislation and its own internal standards where thesearehigher.Theexpertiseofindependentsafetyspecialistsforclothing,footwear,accessories,beautyandhomeproductsisusedwhererequired.

NEXT endeavours to provide a high quality service to itscustomers, whether they are shopping through our stores oronline.NEXTCustomerServicesinteractswithRetailandOnlinecustomerstoresolveenquiriesandissues.Findingsarereviewedand the information is usedbyother areasof thebusiness toreview how products or services can be improved.

Health and safetyNEXT recognises the importance of health and safety.TheGroup’sobjective is tomanageallaspectsof itsbusinessin a safe manner and take practical measures to ensure that its activities and products do not harm the public, customers, employeesorcontractors.Policiesandproceduresarereviewedandauditedregularly.

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Supporting charity and communityNEXTsupportsawiderangeofcharitiesandorganisations,andprovidedthefollowingfinancialsupportduringtheyear:

2018 £000

2017 £000

Registered charities 1,065 1,020Individualrequests,localandnationalgroupsandorganisations 13 46Commercialsupport 92 103

Thissupportwassupplementedbythefollowingadditionalactivities:

2018 £000

2017 £000

NEXTcharityevents 221 53Gifts in kind – product donations 1,836 1,730Charitylinkedsales 372 441Employeefundraising 52 55

Political donationsNodonationsweremadeforpoliticalpurposes(2017:£nil).

Environmental MattersNEXTrecognisesthatithasaresponsibilitytomanagetheimpactofitsbusinessontheenvironmentbothnowandinthefuture.ForseveralyearswehavemeasuredandreportedagainstenvironmentaltargetsforNEXTintheUKandEire.In2016/17,wesetthefollowingfiveyeartargetswhichwillbemeasuredinrelationtothefinancialyears2016/17throughto2020/21inclusive:

Focus Five year target: 2016/17 to 2020/21 2017/18 progressEnergyuseandemissionsfromstores,warehouses, distribution centres and offices.

Electricityconsumption:-10%reductioninkgCO2e/m2overthefiveyearperiod.

-31%*reductioninkgCO2e/m2.

Wastecreatedinstores,warehouses,distribution centres and offices.

Todivertmorethan95%ofoperationalwaste from landfill.

90%ofoperationalwastedivertedfrom landfill.

*areductionof22%isattributabletotheimprovementintheemissionfactorprovidedbyDEFRA.

Greenhouse gas emissionsInaccordancewiththedisclosurerequirementsforlistedcompaniesundertheCompaniesAct2006,thetablebelowshowstheGroup’sgreenhousegasemissionsduringthefinancialyear:

2018 Tonnes of CO2

equivalent

2017 Tonnes ofCO2

equivalentCombustionoffuel&operationoffacilities(Scope1) 48,157 52,901Electricity,heat,steamandcoolingpurchasedforownuse(Scope2) 89,687 109,584Total Scope 1 and Scope 2 emissions 137,844 162,485Intensity metric: tonnes of CO2e per £m of sales 33.48 39.28

FurtherinformationregardingenvironmentalmatterswillbepublishedinourCorporateResponsibilityReportissuedlaterin2018.

Find out more on our website by visiting www.nextplc.co.uk/corporate-responsibility

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MethodologyThemethodologyused to calculateouremissions isbasedonoperational control in accordancewith2017BEIS/DEFRAusingGuidelinesWRI/WBCSDGHGReportingProtocols(Revisededition)and2016Scope2Guidelines.

NEXTremainscommittedtoreducingitscarbonfootprintbyreducingenergyconsumptionthroughoutitsoperations,minimisingandrecyclingwasteandcuttingtransportemissions.FurtherdetailedinformationonNEXT’sglobalemissionsfootprintcanbefoundinourCorporateResponsibilityReportonourcorporatewebsiteatwww.nextplc.co.uk.

OnbehalfoftheBoard

Amanda JamesDirector

23March2018

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GOVERNANCE54 Directors’ Report including Annual

General Meeting & Other Matters 61 Directors’ Responsibilities Statement 62 Corporate Governance 66 Nomination Committee Report 67 Audit Committee Report 71 Remuneration Report 94 Independent Auditor’s Report

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Directors’ ReportDirectors and Officers

Michael Roney CHAIRMAN

Lord Wolfson of Aspley Guise CHIEF EXECUTIVE EXECUTIVEDIRECTOR

Amanda James GROUP FINANCE DIRECTOR EXECUTIVEDIRECTOR

Michael joined the Board as DeputyChairman inFebruary2017andbecameChairman in August 2017. He is alsoChairman of Grafton Group plc anda non-executive director of US firmBrown-FormanCorporation.Michaelhasextensive business experience; he was previouslytheChiefExecutiveofBunzlplcfrom2005untilhisretirementinApril2016,ChiefExecutiveofGoodyearDunlopTiresEuropeBVandnon-executivedirectorofJohnsonMattheyplc.

Simon joined the Group in 1991 andwas appointed Retail Sales Director in 1993.He became responsible forNEXTDirectory in 1995 and was appointedto the Board in 1997 with additionalresponsibilities for Systems. Simon wasappointed Managing Director of the NEXT Brandin1999andChiefExecutivein2001.

Amanda joined the Group in 1995 andhas led the management accounting and commercial finance teams since 2005. In 2009 Amanda was appointedCommercial Finance Director and waspromoted to NEXT Brand Finance Director in 2012. Amanda has comprehensiveknowledge of NEXT’s operations andhasplayed a central role in the financialmanagement of the business.

APPOINTEDTOTHEBOARDFebruary2017

APPOINTEDTOTHEBOARD February1997

APPOINTEDTOTHEBOARD April2015

COMMITTEEMEMBERSHIP Remuneration and Nomination(Chairman)

Michael Law GROUP OPERATIONS DIRECTOR EXECUTIVEDIRECTOR(to17May2018)

Jane Shields GROUP SALES AND MARKETING DIRECTOR EXECUTIVEDIRECTOR

Richard Papp GROUP MERCHANDISE AND OPERATIONS DIRECTOR EXECUTIVEDIRECTOR(from14May2018)

MichaeljoinedtheGroupin1995asCallCentreManagerfortheNEXTDirectory.Michael was appointed Call CentreDirector in 2003 and in 2006 becameresponsibleforGroupIT.In2010hewasappointed Group Operations Director,addingWarehousingandLogisticstohisportfolio. Michael is now responsible for all Systems, Warehousing, Logistics andCallCentreswithintheGroup.

Michael will step down from the Board on 17May,immediatelyafterthe2018AGM.

Jane joined NEXT Retail in 1985 as aSales Assistant in one of our London stores. Jane worked her way throughstore management to be appointed Sales Directorin2000,responsibleforallstoreoperationsandtraining.In2006Janewasgiven additional responsibility for RetailMarketing and in 2010 was appointedGroup Sales and Marketing Director, addingDirectoryandonlinemarketingtoher portfolio.

Richard joined NEXT in 1991 as aMerchandiser. Richard worked his way through management, becomingMenswear Product Director in 2001.In 2005 he gained valuable experiencein a similar role at another retailer. Richard returned to NEXT in 2006and has since that time been Group Merchandise Director, responsible for NEXT’sMerchandising function, ProductSystems, International Franchise, andClearanceoperations.

APPOINTEDTOTHEBOARD July2013

APPOINTEDTOTHEBOARD July2013

WILLBEAPPOINTEDTOTHEBOARDMay2018

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Francis Salway SENIORINDEPENDENT NON-EXECUTIVEDIRECTOR

Jonathan Bewes INDEPENDENT NON-EXECUTIVEDIRECTOR

Company SecretarySeonna Anderson

FrancisisalsoChairmanofTown&CountryHousingGroup,ChairmanofthePropertyAdvisoryGroupforTransportforLondon,anon-executivedirectorofCadoganGroupLimited and a Visiting Professor in Practice at the London School of Economics. Formerly Chief Executive of LandSecurities Group plc and past president of theBritishPropertyFederation.

AfterqualifyingasaCharteredAccountantwith KPMG, Jonathan spent 25 years ininvestment banking, with Robert Fleming, UBSandBankofAmericaMerrill Lynch.As a senior banker, he has provided advice to theBoardsofmanyUKandoverseascompanies on a wide range of financial and strategic issues, including financing, M&A and general corporate matters.InApril2017hejoinedStandardCharteredBank as Vice Chairman, Corporate andInstitutional Banking. Jonathan is a Fellow oftheInstituteofCharteredAccountantsofEnglandandWales.

Past DirectorsJohn Barton CHAIRMAN

APPOINTEDTOTHEBOARD February2002

RETIREDFROMTHEBOARD 1August2017

Steve Barber INDEPENDENT NON-EXECUTIVEDIRECTOR

APPOINTEDTOTHEBOARD June2007

RETIREDFROMTHEBOARD 18May2017

APPOINTEDTOTHEBOARD June2010

APPOINTEDTOTHEBOARD October2016

COMMITTEEMEMBERSHIP Audit, Remuneration and Nomination

COMMITTEEMEMBERSHIP Audit(Chairman),Remunerationand Nomination

Caroline Goodall INDEPENDENT NON-EXECUTIVEDIRECTOR

Dame Dianne Thompson INDEPENDENT NON-EXECUTIVEDIRECTOR Board Committees

CarolineisalsoaTrusteeoftheNationalTrust and Chair of its Audit Committee.Shewaspreviouslyanindependentnon-executive on the Partnership Board of the accountancyfirmGrantThorntonUKLLPforsevenyearsuntilJune2017andwasanon-executivedirectorofSVGCapitalplc,aFTSE250listedprivateequityinvestor,from2010toOctober2014.Priortothat,Carolinehadoverthirtyyears’experiencein corporate finance and was a corporate finance partner at the international law firmHerbertSmithincludingfiveyearsasHeadoftheGlobalCorporateDivision.

Dianne has significant senior management experience including fourteen years asChiefExecutiveOfficerofCamelotGroup.Duringher42yearcareer,shehasworkedin marketing for several retail companies. More recently she was Chairman ofRadioCentreandanon-executivedirectoroftheHomeOffice.SheisalsoaTrusteeof the Born Free Foundation.

Audit Committee SteveBarber(Chairmanto18May2017) JonathanBewes(Chairmanfrom18May2017) CarolineGoodall FrancisSalway Dame Dianne Thompson

Remuneration Committee CarolineGoodall(Chairman)Jonathan Bewes MichaelRoney FrancisSalway Dame Dianne Thompson

Nomination Committee MichaelRoney(Chairman) Jonathan Bewes CarolineGoodall FrancisSalway Dame Dianne Thompson

APPOINTEDTOTHEBOARD January2013

APPOINTEDTOTHEBOARD January2015

COMMITTEEMEMBERSHIP Audit,Remuneration(Chairman)and Nomination

COMMITTEEMEMBERSHIP Audit, Remuneration and Nomination

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Disclosuresrequiredunderthe2013amendmenttotheLargeandMedium-sizedCompaniesandGroups(AccountsandReports)Regulations2008inrespectofemployeematters(includingtheemployment, training and advancement of disabled persons),future developments, political donations and greenhouse gas emissions are given in the Strategic Report. Information on financial instruments and the use of derivatives is given in Notes 24to27ofthefinancialstatements.

Annual General Meeting & Other MattersNotice of the Annual General Meeting (AGM) is on pages 154to159andincludesthefollowingbusiness:

DividendsThe directors recommend that a final dividend of 105p persharebepaidon1August2018toshareholdersontheregisterofmembersatcloseofbusinesson6July2018.Thisresolutionrelatesonlytothefinaldividend.ThedirectorsmaydecidetopayspecialdividendsinlinewiththeCompany’spolicyofreturningsurplus cash generated from operations to shareholders via special dividends or share buybacks. Any such specialdividends will be paid by the directors as interim dividends.Theannouncementofanydividendwillclearlyindicatewhetherit is a special dividend or not.

The Trustee of the NEXT Employee Share Ownership Trust(ESOT)haswaiveddividendspaidintheyearonthesharesheldbyit,refertoNote23ofthefinancialstatements.

DirectorsDirectors’biographiesaresetoutonpages54and55.

MichaelLaw,GroupOperationsDirector,willstepdownfromtheBoardatthecloseofthe2018AGM,priortoretiringfromthebusinessinJuly2018.Michael,accordingly,willnotstandforre-election as a director at the AGM.

InFebruary2018, theCompanyannouncedthatRichardPappwill succeed Michael Law on the Board and will be appointed as anexecutivedirectorwitheffectfrom14May2018.Richardwillstandforelectionatthe2018AGMand,subjecttotheoutcomeofthatprocess,willbecomeGroupMerchandiseandOperationsDirector.RichardhasbeenwithNEXTforover25yearsandhasbeenGroupMerchandiseDirector since2006, responsible forNEXT’sMerchandisingfunction,ProductSystems,InternationalFranchise,andClearanceoperations.HehasworkedextremelycloselywithourWarehousing,LogisticsandSystems teams todevelopouronlineplatformandisperfectlyplacedtoleadthecontinueddevelopmentoftheGroup’soperations.

TheUKCorporateGovernanceCode(the“Code”)recommendsthatalldirectorsofFTSEcompaniesstandforelectioneveryyearand all members of the Board, other than Michael Law, will do so atthisyear’sAGM.Eachofthedirectorsstandingforre-electionhas undergone performance evaluation and has demonstrated that they remain committed to their role (including makingsufficient time available for Board and Committee meetingsandotherdutiesas required) andcontinue tobeaneffective

and valuable member of the Board. The Board is satisfied that eachnon-executivedirectorofferingthemselvesforre-electionis independent in both character and judgement, and that their experience, knowledge and other business interests enable them tocontributesignificantlytotheworkandbalanceoftheBoard.

Theinterestsofthedirectorswhoheldofficeat27January2018and their connected persons are shown in the Remuneration Reportonpage80.

AuditorTheCompany is required toappointauditorsateachgeneralmeeting at which its report and accounts are presented to shareholders. PricewaterhouseCoopers LLP, having been firstappointedatthe2017AGMfollowingatenderprocessduring2016,hasexpresseditswillingnesstocontinueinofficeanditsre-appointmentwillbeproposedatthe2018AGM.Thisresolutionalsoproposesthattheauditor’sremunerationbedeterminedbythedirectors.Inpractice,theAuditCommitteewillconsiderandapprove the audit fees on behalf of the Board in accordance with theCompetitionandMarketsAuthorityAuditOrder.

Disclosure of information to the auditorInaccordancewiththeprovisionsofSection418oftheCompaniesAct2006(the“2006Act”),eachofthepersonswhoisadirectoratthedateofapprovalofthisreportconfirmsthat:

• so far as the director is aware, there is no relevant audit informationofwhichtheCompany’sauditorisunaware;and

• eachdirectorhastakenallthestepsthattheyoughttohavetakenasadirectortomakethemselvesawareofanyrelevantauditinformationandtoestablishthattheCompany’sauditoris aware of that information.

Authority to allot sharesUnder the 2006 Act, the directors may only allot shares orgrantrightstosubscribefor,orconvertanysecurityinto,sharesif authorised to do so by shareholders in general meeting.Theauthorityconferredonthedirectorsatlastyear’sAGMunderSection551ofthe2006ActexpiresonthedateoftheforthcomingAGMandordinaryresolution14seeksanewauthoritytoallowthedirectorstoallotordinarysharesuptoamaximumnominalamountof£4,700,000,representingapproximatelyonethirdoftheCompany’sexistingissuedsharecapitalasat22March2018.Inaccordancewithinstitutionalguidelines,resolution14willalsoallowdirectorstoallotfurtherordinaryshares,inconnectionwithapre-emptiveofferbywayofarightsissue,uptoatotalmaximumnominalamountof£9,500,000,representingapproximatelytwothirdsoftheCompany’sexistingissuedsharecapitalasatthatdate. As at 22March 2018 (being the latest practicable dateprior to publication of this document) the Company’s issuedsharecapitalamountedto£14,347,898comprising143,478,977ordinary shares of 10 pence each, none of which are held intreasury.Thedirectorshavenopresent intentionofexercisingthisauthoritywhichwillexpireattheconclusionoftheAGMin2019or,ifearlier,17August2019.

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Authority to disapply pre-emption rights Special resolution 15 will, if passed, renew the directors’authoritypursuanttoSections570to573ofthe2006Acttoallotequitysecuritiesforcashwithoutfirstofferingthemtoexistingshareholders in proportion to their holdings. This resolution limits the aggregate nominal value of ordinary shares whichmaybeissuedbythedirectorsonanonpre-emptivebasisto£717,000,representing5%ofthe issuedordinarysharecapitaloftheCompanyasat22March2018(excludingtreasuryshares).Thisauthorityalsoallowsthedirectors,withinthesameaggregatelimit,tosellforcash,sharesthatmaybeheldbytheCompanyintreasury.

InMarch2015,thePre-EmptionGroupissuedarevisedStatementofPrinciplesstatingthatanallotmentofuptoanadditional5%oftheissuedordinarysharecapitaloftheCompanymaybemadeonanonpre-emptivebasisifthatallotmentisinconnectionwithanacquisitionorspecifiedcapitalinvestment(withinthemeaninggiveninthePre-EmptionGroup’sStatementofPrinciples)whichis announced at the same time as the allotment, or which has taken place in the six month period before and is disclosed in the announcement of the allotment. Special resolution 16 seeks this separateandadditionalauthority.

In accordance with the Pre-Emption Group’s Statement ofPrinciples,thedirectorsdonotintendtoissuemorethan7.5%ofthesharecapitaloftheCompanyforcash(excludingtreasuryshares)underthisorpreviousauthoritiesinanyrollingthreeyearperiod without prior consultation with shareholders, except in connectionwithanacquisitionorspecifiedcapitalinvestment.

Thedirectors do not have any present intention of exercisingthisauthoritywhichwillexpireattheAGMin2019or,ifearlier,17August2019.

On-market purchase of own sharesNEXT has been returning capital to its shareholders through share repurchases as well as special and ordinary dividendssinceMarch2000aspartofitsstrategyfordeliveringsustainablelongtermreturnstoshareholders.Overthisperiod,andupto22March2018,NEXThasreturnedover£3.8bntoshareholdersbywayofsharebuybacksandover£3.3bnindividends,ofwhich£907mcomprisedspecialdividends.ThisbuybackactivityhasenhancedEarningsPerShare,givenshareholderstheopportunityfor capital returns (as well as dividends) and has been transparent to the financialmarkets.Sharebuybackshavenotbeenmadeattheexpenseofinvestmentinthebusiness.Overthelastfiveyears,NEXThasinvestedover£631mincapitalexpendituretosupport and grow the business.

Specialresolution17willrenewtheauthorityfortheCompanytomakemarketpurchases(asdefinedinSection693ofthe2006Act)ofitsordinarysharesof10peachprovidedthat:

a. the aggregatenumberofordinary shares authorised tobepurchasedshallbe the lesserof21,521,000ordinarysharesof10peach(beinglessthan15%oftheissuedsharecapitalat22March2018)andnomore than14.99%of the issuedordinarysharecapitaloutstandingat thedateof theAGM,such limits to be reducedby the number of any shares tobepurchasedpursuant to special resolution18:Off-marketpurchases of own shares, see below;

b.thepaymentperordinaryshareisnotlessthan10pandisanamountnotmorethanthehigherof:(i)105%oftheaverageofthemiddlemarketpriceoftheordinarysharesoftheCompanyaccording to the Daily Official List of the London StockExchangefor the fivebusinessdays immediatelyprecedingthedateofpurchaseand(ii)anamountequaltothehigherofthepriceofthelastindependenttradeofanordinaryshareoftheCompanyandthehighestcurrentindependentbidforanordinaryshareoftheCompanyasderivedfromtheLondonStockExchangeTradingsystem;and

c. the renewedauthoritywillexpireat theAGM in2019or, ifearlier,17August2019.

The directors intend that this authority to purchase theCompany’sshareswillonlybeexercisedifdoingsowillresultinan increase in Earnings Per Share and, being in the interests of shareholdersgenerally,itisconsideredtopromotethesuccessoftheCompany.ThedirectorswillalsogivecarefulconsiderationtofinancialgearinglevelsoftheCompanyanditsgeneralfinancialposition. The purchase price would be paid out of distributable profits.Itisthedirectors’presentintentiontocancelanysharespurchasedunderthisauthority.

The repurchaseofordinary shareswouldgive rise toa stampdutyliabilityoftheCompanyattheratecurrentlyof0.5%oftheconsideration paid.

TheCompanyhasnowarrantsinissueinrelationtoitssharesandno options to subscribe for its shares outstanding. Exercise of alloutstandingemployee shareoptionsand shareawardswillbesatisfiedbythetransferofmarket-purchasedsharesfromtheESOT(refertoNote23ofthefinancialstatements).

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Off-market purchases of own shares The directors consider that share buybacks are an important means of returning value to shareholders and maximising sustainable long term growth in Earnings Per Share. Contingent contracts for off-market share purchases offera number of additional benefits compared to on-marketsharepurchases:

• ContingentcontractsallowtheCompanytopurchasesharesat a discount to the market price prevailing at the date each contract is entered into. No shares have been bought back undercontingentpurchasecontractspursuanttotheauthoritygrantedatthe2017AGMupto22March2018.

• Low share liquidity can often prevent the Company frompurchasing sufficient numbers of shares on a single daywithout risk of affecting the prevailing market price. ContingentcontractsenabletheCompanytopurchasesharesover time without risk of distorting the prevailing share price, and also spread the cash outflow.

• Contingent contracts entered into prior to any closedperiodallowtheCompanytotakedeliveryofsharesduringthese periods.

• Competitive tendering involving up to five banks is usedwhich minimises the risk of hidden purchase costs. The pricing mechanism ensures the Company retains the benefit ofdeclared and forecast dividends.

• TheCompanywouldalsohavetheoptiontosetasuspensionpriceinindividualcontractswherebytheywouldautomaticallyterminateiftheCompany’ssharepricewastofall.

Aswithanysharebuybackdecision,thedirectorswouldusethisauthority only after careful consideration, taking into accountmarket conditions prevailing at the time, other investment opportunitiesandtheoverallfinancialpositionoftheCompany.Thedirectorswillonlypurchasesharesusingsuchcontracts if,basedonthecontractdiscountedprice(ratherthananyfutureprice), it is earnings enhancing and promotes the success of the Companyforthebenefitof itsshareholdersgenerally. It isthedirectors’presentintentiontocancelanysharespurchasedunderthisauthority.

Special resolution18willgive theCompanyauthority toenterintocontingentpurchasecontractswithanyofGoldmanSachsInternational,UBSAG,DeutscheBankAG,HSBCBankplcandBarclays Bank plc under which sharesmay be purchased off-market at a discount to the market price prevailing at the date eachcontractisenteredinto.ThemaximumwhichtheCompanywouldbepermittedtopurchasepursuanttothisauthoritywouldbethelowerof3,000,000sharesoratotalcostof£200m.

The principal features of the contracts are set out in the appendixtotheNoticeoftheAGM.CopiesoftheagreementstheCompanyproposestoenterintowithanyofthebanks(theProgramme Agreements) will be available for inspection at the registeredofficeoftheCompany,andattheofficesofSlaughterandMay,OneBunhill Row, EC1Y 8YYduring normalworkinghours from the date of the Notice of the AGM up to the date of the AGM and at the Meeting itself.

Notice of general meetingsThenoticeperiodrequiredbythe2006ActforgeneralmeetingsoftheCompanyis21daysunlessshareholdersapproveashorternoticeperiod,whichcannothoweverbelessthan14cleardays.However,theCompany’sAGMmustalwaysbeheldonatleast21cleardays’notice.AttheAGMoftheCompanyheldin2017,shareholders authorised the calling of general meetings other than anAGMon not less than 14 clear days’ notice and it isproposedthatthisauthorityberenewed.Theauthoritygrantedby special resolution 19, if passed, will be effective until theCompany’sAGMin2019. Inordertobeabletocallageneralmeetingonlessthan21cleardays’notice,theCompanywillmakeelectronic voting available to all shareholders for that meeting. The flexibility offered by this resolutionwill not be used as amatterofroutineforsuchmeetings,butonlywherethedirectorsconsider it appropriate, taking account of the business to be conductedatthemeetingandtheinterestsoftheCompanyandits shareholders as a whole.

RecommendationThe Board are of the opinion that all resolutions which are to beproposedatthe2018AGMwillpromotethesuccessoftheCompanyandareinthebestinterestsofitsshareholdersasawholeand,accordingly,unanimouslyrecommendthattheyvotein favour of the resolutions.

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Share capital and major shareholdersDetailsoftheCompany’ssharecapitalareshowninNote20ofthefinancialstatements.

TheCompanywasauthorisedby its shareholdersat the2017AGMtopurchase itsownshares.During theyear theCompanypurchasedandcancelled2,174,357ordinaryshareswithanominalvalueof10peach(noneofwhichwerepurchasedoff-market),atacostof£106.1mandrepresenting1.5%ofitsissuedsharecapitalatthestartoftheyear.

Atthefinancialyearend27January2018,theCompanyhad144,882,205sharesinissue.Subsequenttotheendofthefinancialyearandbeforethestartoftheclosedperiod,theCompanypurchasedforcancellation1,403,228ofitsownsharesatacostof£69.1m.Asat22March2018thenumberofsharesinissuewas143,478,977.

Asat27January2018, theCompanyhadbeennotifiedunder theDisclosureandTransparencyRules (DTR5)of the followingnotifiableinterestsintheCompany’sissuedsharecapital.Theinformationprovidedbelowwascorrectatthedateofnotification.TheseholdingsarelikelytohavechangedsincetheCompanywasnotified,howevernotificationofanychangeisnotrequireduntilthenextnotifiablethresholdiscrossed:

Notifications received as at 27 January 2018No. of voting

rights at date of notification

% of voting rights at date of

notificationNature of

holdingDate of

notificationFMRLLC(Fidelity) 17,638,953 11.99 Indirect interest 29June2017BlackRock, Inc. 15,449,829 9.97 Indirect interest 8January2014Invesco Limited 14,446,360 9.89 Indirect interest 4January2018NEXTplcEmployeeShareOptionTrust 4,484,874 3.05 Direct interest 8May2017

Thefollowingnotificationwasreceivedafter27January2018upto22March2018:

No. of voting rights at date of

notification

% of voting rights at date of

notificationNature of

holdingDate of

notificationInvesco Limited 14,391,788 10.03 Indirect interest 12March2018

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Additional informationShareholder and voting rightsAllmemberswhoholdordinarysharesareentitledtoattendandvoteattheAGM.Onashowofhandsatageneralmeetingeverymemberpresentinpersonandeverydulyappointedproxyshallhaveonevoteandonapoll,everymemberpresentinpersonorbyproxyshallhaveonevoteforeveryordinaryshareheldorrepresented.Itisintendedthatvotingatthe2018AGMwillbeonapoll.TheNoticeofMeetingonpages154to159specifiesdeadlines for exercising voting rights.

The Company is not aware of any agreements betweenshareholders that may result in restrictions on the transfer ofsecurities and voting rights. There are no restrictions on the transferofordinary shares in theCompanyother than certainrestrictions imposed by laws and regulations (such as insidertradinglawsandmarketrequirementsrelatingtoclosedperiods)and requirements of internal rules and procedures wherebydirectorsandcertainemployeesoftheCompanyrequirepriorapprovaltodealintheCompany’ssecurities.

The Company’s Articles may only be amended by a specialresolution at a general meeting. Directors are elected or re-electedbyordinaryresolutionatageneralmeeting;theBoardmayappointadirectorbutanyonesoappointedmustbeelectedbyordinary resolutionat thenextgeneralmeeting.Under theArticles,directorsretireandmayofferthemselvesforre-electionatageneralmeetingatleasteverythreeyears.However,inlinewiththeprovisionsoftheUKCorporateGovernanceCode,alldirectorswillstandforre-electionatthe2018AGMotherthanMichael Law (refer to page 66).

Change of controlTheCompanyisnotpartytoanysignificantagreementswhichtakeeffect,alteror terminatesolelyuponachangeofcontroloftheCompany.However,intheeventofachangeofcontrol,theCompany’smediumtermborrowingfacilitieswillbesubjecttoearlyrepaymentinfullifamajorityofthelendingbanksgivewritten notice or in part if a lending bank gives written notice following a change of control.

Inaddition,theholdersoftheCompany’scorporatebondswillbeentitledtocallforredemptionofthebondsbytheCompanyat their nominal value together with accrued interest in the followingcircumstances:

• should a change of control cause a downgrading in the credit ratingoftheCompany’scorporatebondstosub-investmentgradeandthisisnotrectifiedwithin120daysafterthechangeof control; or

• if already sub-investment grade, a further credit ratingdowngradeoccurs and this is not rectifiedwithin 120daysafter the change of control; or

• if the bonds at the time of the change of control have no credit ratingandnoinvestmentgraderatingisassignedwithin90daysafterthechangeincontrol.

TheCompany’sshareoptionplans,anditsLongTermIncentivePlan, contain provisions regarding a change of control. Outstandingoptionsandawardsmayvestonachangeofcontrol,subjecttothesatisfactionofanyrelevantperformanceconditions.

Directors’servicecontractsareterminablebytheCompanyongivingoneyear’snotice.TherearenoagreementsbetweentheCompanyanditsdirectorsoremployeesprovidingforadditionalcompensationforlossofofficeoremployment(whetherthroughresignation,redundancyorotherwise)thatoccursbecauseofatakeover bid.

Directors’ Report

Corporate governanceThecorporategovernancestatementasrequiredbytheUKFinancialConductAuthority’sDisclosureGuidanceandTransparencyRules(DTR7.2.6)comprisestheAdditionalInformationsectionoftheDirectors’ReportandtheCorporateGovernancestatementincluded in this Annual Report.

ThefollowingdisclosuresarerequiredunderListingRule9.8.4R:

Publication of unaudited financial information

InJanuary2018,NEXTpublishedaProfitBeforeTax(PBT)forecastfortheyeartoJanuary2018of£718mto£732m.ActualPBTfortheperiodwas£726.1m.

Shareholder waivers of dividends TheNEXTEmployeeShareOwnershipTrustwaiveditsrightstoreceivedividendsduringtheyear.

NofurtherLR9.8.4disclosuresarerequired.

ByorderoftheBoard

Amanda JamesGroup Finance Director

23March2018

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Directors’ Responsibilities StatementDirectors’ Responsibilities

The directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations.

Asa listedcompanywithin theEuropeanUnion, thedirectorsare required to prepare the Group financial statements inaccordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. The directors have elected topreparetheParentCompanyfinancialstatementsinaccordancewiththeCompaniesAct2006andUKAccountingStandardFRS101“Reduced disclosure framework”.

UndercompanylawthedirectorsmustnotapprovethefinancialstatementsunlesstheyaresatisfiedthattheygiveatrueandfairviewofthestateofaffairsoftheGroupandtheCompanyandofthe profit or loss of the Group for that period. In preparing the financialstatements,thedirectorsarerequiredto:

• select suitable accounting policies and then applythemconsistently;

• make judgements and estimates that are reasonable and prudent;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• in respect of the Group financial statements, provide additional disclosureswhencompliancewiththespecificrequirementsof IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’sfinancialpositionandperformance;

• state that the Group has complied with IFRS, subject to any material departures disclosed and explained in thefinancial statements;

• inrespectoftheParentCompanyfinancialstatements,statewhether applicable UK accounting standards have beenfollowed, subject to anymaterial departures disclosed andexplained in the financial statements; and

• prepare the financial statements on a going concern basis, unlesstheyconsiderthattobeinappropriate.

Thedirectorsconfirmthatthefinancialstatementscomplywiththeaboverequirements.

Thedirectorsareresponsibleforkeepingadequateaccountingrecordsthataresufficient toshowandexplaintheCompany’stransactionsanddisclosewithreasonableaccuracyatanytimethefinancialpositionoftheCompanyandtheGroupandenablethemtoensurethatthefinancialstatementscomplywiththeCompaniesAct2006and,asregardstheGroupfinancialstatements,Article4 oftheIASRegulation.Theyarealsoresponsibleforsafeguardingthe assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Responsibilities statement Weconfirmthattothebestofourknowledge:

a. the Group financial statements, which have been prepared in accordancewithIFRSsasadoptedbytheEU,giveatrueandfair view of the assets, liabilities, financial position and results of the Group;

b. the Strategic Report contained in this Annual Report includes a fair review of the development and performance of thebusiness and thepositionof theCompany and theGroup, together with a description of the principal risks and uncertaintiesthattheyface;

c. the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’sperformance,businessmodelandstrategy;and

d.theParentCompany financial statements,whichhavebeenprepared in accordancewithUKAccounting Standard FRS101 “Reduced disclosure framework”, give a true and fair view of the assets, liabilities, financial position and results of theCompany.

OnbehalfoftheBoard

Lord Wolfson of Aspley Guise Amanda JamesChiefExecutive GroupFinanceDirector

23March2018

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Corporate GovernanceChairman’s Introduction

Corporategovernance,especiallydirectors’duties,diversityandremuneration,hasremainedinthespotlightin2017.TheBoardisverymindfulofitsresponsibilitiesinthisareaandwillcontinuetodevelopandrefineitsapproachandpractices.

The Board considers the culture at NEXT to be an essential ingredient in meeting our objective of delivering long term, sustainable returnstoshareholders.Wehaveaveryhandsonexecutiveteamwhoworkday-to-daywithseniormanagementtodriveaclearfocusonproductqualityandvalue,andonmeetingorexceedingtheexpectationsofourcustomersregardingtheirexperienceandsatisfaction.OurdirectorsandseniormanagementpromoteNEXT’scultureandstandardsthroughoutthebusinessandleadbyexample to provide a strong corporate governance framework.

NEXThasalonghistoryofcreatingshareholdervalueagainstthebackdropofchallengingandchangingexternalenvironments.This is the ultimatemeasure of our success and is supported by our strong corporate governance structure and an effectivemanagement team. In a challenging trading environment, we remain committed to a robust approach to governance which has served the business well.

Michael RoneyChairman

23March2018

Compliance with UK Corporate Governance CodeTheCompanycompliedthroughouttheyearunderreviewwiththe provisions set out in the 2016UKCorporateGovernanceCode(the“Code”)whichistheversionoftheCodethatappliestoits2017/18financialyear.ThesectionsbelowdetailhowtheCompanyhascompliedwiththeCode,whichisavailablefromthe Financial Reporting Council website at www.frc.org.uk.ThesedisclosuresareorderedintothesectionsastheyappearintheCode.

DisclosuresrequiredbytheDisclosureGuidanceandTransparencyRulesDTR 7.2.6,with regard to share capital are presented inthe “Share capital and major shareholders” and “Additionalinformation”sectionsoftheDirectors’Reportonpages60and61.DisclosuresrequiredbyDTR7.2.8relatingtodiversitypolicyarepresentedintheNominationCommitteeReportonpage66.

Directors’biographiesandmembershipofBoardCommitteesaresetoutonpages54and55.

A. LeadershipA.1 Role of the BoardTheBoardiscollectivelyresponsibleforthelongtermsuccessoftheCompanyandforsettingandexecutingthebusinessstrategy.

The Board is responsible for providing effective leadership whilst delegatingmoredetailedmatterstoitsCommitteesandofficersincludingtheChiefExecutive.TheBoardsetsstrategicprioritiesandoverseestheirdeliveryinawaythatenablessustainablelongterm growth. The Board is responsible for setting and monitoring theGroup’sriskappetiteandthesystemofriskmanagementandinternal control and for monitoring implementation of its policies

bytheChiefExecutive.Thesystemofinternalcontrolisdesignedto manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and notabsolute assurance against material misstatement or loss.

The Board has a formal schedule of matters reserved for it and holds regular meetings where it approves major decisions, including investments, treasury and dividend policies andsignificant items of capital expenditure. The Board is responsible forapprovingsemi-annualGroupbudgets.Performanceagainstbudget is reported to theBoardmonthly and any substantialvariancesareexplained.Forecastsforeachhalfyeararerevisedand reviewed monthly. Certain other important matters aresubject toweeklyormonthly reportingtotheBoardorBoardCommittee, including sales, treasury operations and capitalexpenditure programmes. Board papers including reports from theChiefExecutiveandotherexecutivedirectorsarecirculatedin advance of each Board meeting.

In addition, our executive directors drive forward operational businessstrategiesbywayofattendanceatkeytradingmeetingsand working closely with our business areas on a day-to-daybasis. This style of management serves to align with our riskmanagement framework and facilitates senior management setting the tone from the top.

Management delegationThe Chief Executive has delegated authority for the day-to-daymanagementof thebusiness tooperationalmanagementdrawn from executive directors and other senior management who have responsibility for their respective areas. The mostimportantmanagementmeetingsare theweeklyNEXTBrandtrading and capital expenditure meetings which consider the performance and development of the NEXT Brand through its different distribution channels. These and other senior management meetings cover risk management of all business areas in respect of the NEXT Brand, including product, sales, property,warehousing,systemsandpersonnel.Keyperformanceindicatorsaremonitoreddaily,weeklyandmonthly.

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Attendance at Board and Committee meetingsTheBoardheldtenformalmeetingsduringtheyear,theAuditCommitteeheld fourmeetings, theRemunerationCommitteeheld fivemeetings and the Nomination Committee held onemeeting.AllmeetingswerefullyattendedbytherelevantBoardorCommitteemembers.

TheBoardhasappointedCommitteestocarryoutcertainofitsduties, three of which are detailed below. Each of these is chaired byadifferentdirectorandhaswrittentermsofreferencewhichwerelastreviewedandupdatedinJanuary2018andareavailableonourcorporatewebsiteoronrequest.

Audit CommitteeThe Committee consists of the four independent non-executive directors and at least one member (Jonathan Bewes, the Committee Chairman) has recent and relevant financialexperience. The Audit Committee Report on pages 67 to 70describestheroleandactivitiesoftheCommittee.

Remuneration CommitteeThe Committee consists of the Chairman and all four of theindependentnon-executivedirectorsandischairedbyCarolineGoodall. TheCommittee determines the remuneration of theexecutivedirectorsinaccordancewiththeRemunerationPolicyandreviewstheremunerationofseniormanagement.Page86ofthe Remuneration Report summarises the role and activities of theCommittee.

Nomination CommitteeThe Committee consists of the Chairman and all four of theindependent non-executive directors. The Committee meetswhenevernecessarytoconsidersuccessionplanningfordirectorsandotherseniorexecutivesandtoensurethatrequisiteskillsandexpertise are available to the Board to address future challenges andopportunities.TheNominationCommitteeReportonpage66 summarises the role and activities of the Committee anddescribes the Board appointment process and its approach todiversity.

A.2 Division of responsibilitiesThere is a clear division of responsibilities between the offices of Chairman and Chief Executive, which is set out in writingand agreedby theBoard. TheChairmanmanages theBoardto ensure that the Group has appropriate objectives and an effectivestrategy;thatthereisahighcalibreChiefExecutivewithateamofexecutivedirectorsabletoimplementthestrategy;thatthere are procedures in place to inform the Board of performance against objectives; and that the Group is operating in accordance with a high standard of corporate governance.

The Board sets objectives and annual targets for the ChiefExecutive to achieve. The Board is responsible for general policyonhowtheseobjectivesareachievedanddelegatestheimplementationofthatpolicytotheChiefExecutive.TheChiefExecutiveisrequiredtoreportateachBoardmeetingallmaterialmatters affecting the Group and its performance.

A.3 The ChairmanTheroleofChairmanistoleadtheBoard,ensuringitoperateseffectivelyandcontainstherightbalanceofskillsandexperience.He is also responsible for promoting a healthy culture ofopenness, challenge and scrutiny, and ensuring constructiverelationsbetweenexecutiveandnon-executivedirectors.

Michael Roney succeeded John Barton as Chairman whenhe retired on 1 August 2017.Michaelmet the independencerequirementssetoutintheUKCorporateCodeonappointment.Hisothersignificantcommitmentsarenotedonpage54,andthe Board considers that these are not a constraint on his agreed timecommitmenttotheCompany.

A.4 Non-executive directorsFrancis Salway is our Senior Independent Director.Meetingsof thenon-executivedirectorswithout theexecutivedirectorsbeingpresentareheldatleastannually,bothwithandwithouttheChairman.

B. EffectivenessB.1 Composition of the BoardThe Board currently includes four independent non-executivedirectorsandtheChairmanwhoallbringconsiderableknowledge,judgement and experience to the Group. As is best practice, we continuallyassessandrefreshtheBoardtoensurewemaintainanappropriate balance of skills and experience and the Board has a goodrecordofrecruitingnewnon-executivedirectorsatregularintervalstoachieveappropriaterotationandcontinuity.

TherewereanumberofchangestotheBoardduringtheyear.AfterfifteenyearsontheBoard,JohnBartonretiredasChairmanon1August2017andwassucceededatthattimebyMichaelRoney.Michaelhadbeenappointedon14February2017asanon-executivedirector,DeputyChairmanandChairmanDesignate.

Steve Barber stepped down from the Board at the end of the 2017 AGM after serving on the Board for ten years.Atthattime,JonathanBewessucceededhimasChairmanoftheAuditCommittee.

The Board also appointed Richard Papp as an executive director witheffectfrom14May2018.RichardwillsucceedMichaelLawwhen he steps down from the Board at the end of the 2018AGM. Further details about his appointment are provided in the NominationCommitteeReportonpage66.

Francis Salway is our longest serving non-executive director,having firstbeenelectedat the2011AGM.TheCoderequiresthatanytermbeyondsixyearsforanon-executivedirectorshouldbe subject to a particularly rigorous review, and should takeinto account the need for progressive refreshing of the Board. After giving thorough consideration to the matter, the Board considerthatFrancisSalway’sindependence,skillsandexperienceallowhimtocontinuetomakeaveryeffectivecontributionasanon-executivedirectorandSeniorIndependentDirector.

TheBoardalsoconsidersthatallofitsnon-executivedirectorsareindependent in character and judgement, and their knowledge, diversityofexperienceandotherbusinessinterestscontinuetoenablethemtocontributesignificantlytotheworkoftheBoard.

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B.2 Appointments to the BoardFor information on the procedure for appointment of new directorstotheBoard,andtheroleoftheNominationCommitteein thisprocess, refer totheNominationCommitteeReportonpage 66.

B.3 CommitmentFollowing the Board evaluation process, detailed further below, the Board is satisfied that each of the directors is able to allocate sufficienttimetotheCompanytodischargetheirresponsibilitieseffectively. No executive director holds any non-executivedirectorships outside the Group.

Contracts and letters of appointment of directors are madeavailable at the AGM, and are available for inspection at the Company’s registered office during normal business hours oronrequest.

B.4 DevelopmentOn joining the Board, new members receive a personalisedinduction, tailored to their experience, background and understandingoftheGroup’soperations.Individualtraininganddevelopment needs are reviewed as part of the annual Board evaluationprocessandtrainingisprovidedwhererequestedoraneed is identified.Alldirectors receive frequentupdatesona variety of issues relevant to theGroup’s business, includinglegal, regulatory and governance issues, with visits to storesand warehouse operations organised periodically to assistwith directors’ understanding of the operational aspects ofthe business.

B.5 Information and supportThere is a regular flow of written and oral information between all directors irrespective of the timing of Board meetings. The Company Secretary attends all Board meetings and isresponsible for advising the Board on corporate governance matters and facilitating the flow of information within the Board.

ShoulddirectorsjudgeitnecessarytoseekindependentadviceabouttheperformanceoftheirdutieswiththeCompany,theyare entitled to do so at the Company’s expense. Details ofprofessionalassistanceinrelationtoRemunerationPolicymattersareshownonpage86.

B.6 EvaluationThisyearaninternalevaluationoftheBoardandCommitteeswascompletedwiththeprocessbeingfacilitatedbytheCompanySecretary.ThereviewcoveredallaspectsoftheeffectivenessoftheBoardanditsCommitteesincludingcomposition,experience,dynamics,theChairman’sleadership,andtheBoard’sroleandresponsibilities with particular regard to strategy, oversight ofrisk and succession planning. All directors continue to be of the opinion that the Board and its Committees were functioningeffectively and that the processes underpinning the Board’seffectiveness remained appropriate.

An externally facilitated review was carried out in the2015/16 financial year by Independent Audit Limited. This reviewhighlighted that theBoarddynamicswerepositiveand

constructive, with a strong focus on shareholder interests and that thenon-executiveshaveabroadrangeofskillsandexperienceand a good degree of commitment.

The Board intends to conduct the next externally facilitatedreviewduring2018/19,inlinewiththeCode’srecommendationthatoneisconductedeverythreeyears.

The Senior Independent Director leads the appraisal of the performanceof theChairman throughdiscussionswithall thedirectorsindividuallyand,togetherwiththeChairman,appraisestheperformanceoftheChiefExecutive.TheperformanceoftheexecutivedirectorsismonitoredthroughouttheyearbytheChiefExecutive and theChairman.TheChairmanalsomonitors theperformanceofthenon-executivedirectors.

B.7 Re-electionTheCompany’sArticlesofAssociationrequiredirectorstosubmitthemselves for re-electionbyshareholdersat leastonceeverythreeyears.However,theBoardhasdeterminedthatalldirectorswillstandforre-electionorelectionateachAGMinaccordancewiththeCode,withtheexceptionofMichaelLawwhowillbesteppingdownfromtheBoardatthecloseofthe2018AGM.

C. AccountabilityC.1 Financial and business reportingPleasereferto:

• page61fortheBoard’sstatementontheAnnualReportandAccounts being fair, balanced and understandable;

• page 99 for details of the Independent Auditor’sresponsibilities; and

• pages38and39oftheStrategicReportforanexplanationoftheCompany’sbusinessmodelandstrategyfordeliveringtheobjectivesoftheCompany.

Going concern and viability assessmentTheGroup’sbusinessactivities, togetherwiththefactors likelyto affect its future development, performance and position are set out in the Strategic Report, which also describes the Group’s financial position, cash flows and borrowing facilities.Further information on these areas is detailed in the financial statements. Informationon theGroup’s financialmanagementobjectives, and how derivative instruments are used to hedge itscapital,creditandliquidityrisksisprovidedinNote24ofthefinancial statements.

The directors report that, having reviewed current performance and forecasts, they have a reasonable expectation that theGrouphasadequateresourcestocontinueitsoperationsfortheforeseeablefuture.Forthisreason,theyhavecontinuedtoadoptthe going concern basis in preparing the financial statements. ThedirectorshavealsoassessedtheprospectsoftheCompanyoverathreeyearperiod.Furtherdetailsoftheviabilityassessmentareprovidedonpage47.

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C.2 Risk management and internal controlThe Board is responsible for the Group’s risk managementprocessandhasdelegatedresponsibilityforitsimplementationto theChief Executive and seniormanagementbestqualifiedin each area of the business. The Board sets guidance on the general level of risk which is acceptable and has a considered approach to evaluating risk and reward and promoting a risk aware culture throughout the business.

The Board has carried out a robust assessment of the principal risks facing the Company and has also conducted an annualreview of the effectiveness of the systems of internal controlduringtheyear.Pleaserefertopage42intheStrategicReportfor further information. Risk management and internal control isacontinuousprocessandhasbeenconsideredbytheBoardonaregularbasisthroughouttheyear.Thisincludesidentifyingand evaluating principal risks, determining control strategies andconsideringhow theymay impacton theachievementofthe business objectives. The Board promotes the development of a strong control culture within the business. The Audit Committeeregularlyreviewsstrategicandoperationalrisk,andhasreviewedtheprincipalrisks (describedonpages43to46)and the associated controls and mitigating factors. The Audit CommitteediscussestheseriskswiththerelevantdirectorsandseniormanagementbothatCommitteemeetingsandviaotherfacetofacemeetingsheldduringtheyearwhererequired.

TheBoardconsidersthattheGroup’smanagementstructureandcontinuousmonitoringofkeyperformanceindicatorsprovidetheopportunitytoidentifypromptlyanymaterialareasofconcern.Business continuity plans, procedures manuals and codes ofconduct are maintained in respect of specific major risk areas and business processes. Through these measures the management ofbusinessriskisanintegralpartofGrouppolicyandtheBoardwill continue to develop risk management and internal controls wherenecessary.

The use of a Group accounting manual and prescribed reporting requirements for financeteamsthroughouttheGroupensuresthat the Group’s accounting policies are clearly establishedandconsistentlyapplied.Informationisappropriatelyreviewedand reconciled as part of the reporting process and the use of a standard reporting package by all entities in the Groupensuresthatinformationispresentedconsistentlytofacilitatetheproduction of the consolidated financial statements.

C.3 Audit Committee and auditorsForfurtherinformationontheCompany’scompliancewiththeCodeprovision relating to theAuditCommitteeandauditors,pleaserefertotheAuditCommitteeReportonpages69and70.

D. RemunerationForfurtherinformationontheCompany’scompliancewiththeCode provision relating to remuneration, please refer to theRemunerationReportonpages71to87.

E. Relations with shareholdersE.1 Dialogue with shareholdersThe Company actively engages with investors and the ChiefExecutiveandGroupFinanceDirectorareinvolvedinregularone-to-onemeetings,roadshowsandconferenceswithinstitutionalinvestors. During the year a large number of formal investormeetings were held, supplemented by many other calls andmeetingswhichLordWolfsonandAmandaJamesundertook.There is also regular communication with institutional investors onkeybusinessissues.

The Board communicates with its shareholders in respect of the Group’sbusinessactivitiesthroughitsAnnualReport,yearlyandhalfyearlyannouncementsandotherregulartradingstatements.Full year and other public announcements are presentedin a consistent format with a particular focus on making the presentations as meaningful, understandable and comparable as possible.Thisinformationisalsomadepubliclyavailableviaourcorporate website (www.nextplc.co.uk).

TheCompany’s largest shareholders are invited to the annualandhalfyearresultspresentations,atwhichexecutiveandnon-executivedirectorsarepresent.Non-executivedirectorsattendothermeetingswithshareholdersifrequested.Ourshareholderviews are also communicated to the Board through regular reports of shareholder feedback and statements made byrepresentativeassociations.WhilsttheBoardrecognisesthatitisprimarilyaccountabletotheCompany’sshareholders,theviewsof other providers of capital are also considered.

The Board takes care not to disseminate information of a share price sensitive nature which is not available to the market as a whole.

E.2 Constructive use of the Annual General MeetingAllshareholdershaveanopportunitytoaskquestionsorrepresenttheirviewsformallytotheBoardattheAGM,orinformallywithdirectors after the meeting.

Other disclosuresDirectors’ conflicts of interestIn accordance with the Company’s Articles of Association,theBoardhasaformalsysteminplacefordirectorstodeclaresituationalconflictstobeconsideredforauthorisationbythosedirectors who have no interest in the matter being considered. Indecidingwhethertoauthoriseasituationalconflict,thenon-conflicted directors consider the situation in conjunction with theirgeneraldutiesundertheCompaniesAct2006.Theymayimpose limits or conditions when giving an authorisation or subsequentlyifconsideredappropriate.Anysituationalconflictsconsidered by the Board, and any authorisations given, arerecorded in the Board minutes and in a register of conflicts which isreviewedannuallybytheBoard.

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Nomination Committee Report

Membership and meetingsThe composition of the Nomination Committee is describedonpage 55; LordWolfson is also invited to attendmeetings.The Committee held one formal meeting during the year aswell as regular informal discussions on succession plans and new appointments to the Board.

Committee activitiesThe Committee’s roles and responsibilities are covered inits Terms of Reference, which were last reviewed in January2018. A copy of the Terms of Reference is available on ourcorporate website (www.nextplc.co.uk). Annual evaluation of theNominationCommittee’sperformanceisundertakenaspartof the Board evaluation process; further details are included on page64.

Board appointments process TheCommitteeadoptsaformalandtransparentprocedureforthe appointment of new directors to the Board.

Externalconsultantsmaybeusedtoassistinidentifyingsuitableexternal Board candidates, based on a written specification for each appointment. TheChairman is responsible for providinga shortlist of candidates for consideration by theNominationCommittee which then makes its recommendation for finalapprovalbytheBoard.TheNominationCommitteeisledbytheSenior Independent Director when dealing with the appointment of a successor to the Board chairmanship.

New Board appointmentsInFebruary2018,theCompanyannouncedthatMichaelLawwillstepdownfromtheBoardatthecloseofthe2018AGM,priortoretiringfromthebusinessinJuly2018.Atthesametime,wealsoannounced that Richard Papp would be appointed as an executive directorwitheffectfrom14May2018.NEXThasagoodtrackrecord of internal promotions to the Board and has not made an externalappointmentofanexecutivedirectorforover29years.Richardwillstandforelectionatthe2018AGMand,subjecttothe outcome of that process, will become Group Merchandise andOperationsDirectorwitheffectfromtheendoftheAGM.RichardhasbeenwithNEXTfor25years.HejoinedtheGroupin1991asaMerchandiser,becomingaMerchandiseManagerin 1996 and was promoted toMenswear Product Director in2001.In2005hegainedvaluableexperienceinasimilarroleatanotherretailer,returningtoNEXTin2006totakeuptheroleof Group Merchandise Director. In this role he is responsible for NEXT’sMerchandisingfunction,ProductSystems,InternationalFranchise,andClearanceoperations.HehasworkedextremelycloselywithourWarehousing,LogisticsandSystems teams todevelopouronlineplatformandisperfectlyplacedtoleadthecontinueddevelopmentoftheGroup’soperations.

DiversityAppointments to the Board, as with other positions within the Group, are made on merit according to the balance of skills and experience offered by prospective candidates.NEXTacknowledgesthebenefitsofdiversityintermsofbusinessexperience and individual appointments are made irrespective of personal characteristics such as race, religion or gender. TheCommitteewillalwaysseektoappointthecandidatewiththe most appropriate skills and experience.

EmploymentpositionsthroughouttheCompanyarefilledwiththe candidates who possess the most appropriate skills and competencies relevant for the particular job role. NEXT has a policy to treat all employees fairly and equally regardless ofgender,sexualorientation,maritalstatus,race,colour,nationality,religion, ethnic or national origin, age, disability or unionmembership status.

Although we do not set specific targets for diversity, womencurrently represent 44% of our Board and 47% of our seniorleadershipteam.NEXTwasrankedfirst inthe2017Hampton-Alexander Review “FTSEWomen Leaders: Improving genderbalance inFTSE leadership”.FurtheranalysisofemployeesbygenderisgivenintheStrategicReportonpage48.

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Audit Committee ReportChairman’s Introduction

This ismy first reportasChairmanof theAuditCommittee. I joined theBoard inOctober2016andbecameChairmanof the CommitteeinMay2017.Myprioritysincethenhasbeentoinvesttimeinvisitingareasofthebusiness,meetingwithNEXTmanagementteams and understanding the risk management framework and internal controls of the business.

DuringtheyeartheAuditCommitteehascontinuedtoassisttheBoardindischargingitsresponsibilitieswithregardtofinancialreporting, controls, internal audit and external audit. It has reviewed and challenged management on the robustness and effectiveness ofinternalcontrolsandriskmanagementsystems,ensuringthatitdiscusseskeymattersdirectlywiththerelevantseniormanagementwherenecessary.Inparticular,thisyeartheCommitteehascontinuedtopayattentiontodataandcybersecurity;goodprogressisbeingmadeinidentifyingandmanagingtheserisks.

Followinganaudittenderduring2016andtheappointmentatthe2017AGMofPriceWaterhouseCoopersLLP(PwC),theCommitteeoversawasmoothtransitionfromthepreviousauditorErnst&YoungLLP.WearepleasedwiththeprofessionalandeffectivedeliveryofthefirstyearexternalauditbyPwC.

ThesignificantactivitiesoftheCommitteeduringtheyeararesetoutbelow.

Finally,IshouldalsoliketothankthemanagementteamatNEXTandallAuditCommitteemembersfortheirworkandsupportduringtheyear.

Jonathan BewesChairmanoftheAuditCommittee

23March2018

Membership and meetingsThe composition of theCommittee is describedonpage 55.TheCommittee’swiderangeof financialandcommercialskillsandexperienceservestoprovidethenecessaryexpertiseandknowledge required for the efficient and robust working oftheCommittee.TheAuditCommitteeChairman, aCharteredAccountant, possesses recent and relevant financial experience andtheCommitteeasawholecontinuestohavecompetencerelevant to the Retail sector.

TheCommitteeholdsregular,structuredmeetingsandconsultswith external auditors and senior management, including internalaudit,whereappropriate.AuditCommitteemembers’attendance is detailed on page 63. In addition, the Group Finance Director attended all of this year’smeetings. The Committeefrequentlyrequeststhatexecutivedirectorsandseniormanagersattend meetings in order to reinforce a strong culture of risk managementandtokeeptheCommitteeuptodatewitheventsin the business.

Committee activitiesThe Committee’s roles and responsibilities are covered in itsTermsofReference,whichwerelastreviewedinJanuary2018.AcopyoftheTermsofReferenceisavailableonourcorporatewebsite (www.nextplc.co.uk). The Committee’s main activitiesduringthefinancialyeararedescribedinthefollowingsections.

Review of financial statementsTheCommittee reviews the financial statementsof theGroupand assesses whether suitable accounting policies have been adopted and whether management has made appropriate estimatesandjudgements.TheCommitteeissatisfiedthatthejudgements made by management are reasonable, and thatsuitable accounting policies have been adopted and appropriate disclosures have been made in the accounts.

TheCommittee’s reviewof thehalfyearand full year financialstatements focused on the following areas of significance, all of which were discussed and addressed with our external auditor throughoutthefullyearexternalauditprocess.Therewerenosignificant differences between management and external auditor conclusions.

a. Online customer receivables and related provisions fordoubtful debts. These, at £1.1bn, represent the largest asset classontheGroup’sBalanceSheet.

Based on detailed reports and through discussions with management and the external auditor, the Committeereviewed and assessed the basis and level of provisions (£138.7masdisclosedinNote11ofthefinancialstatements)and their sensitivity and is satisfied that the judgementsmade were reasonable, consistent with the prior yearand appropriate.

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b. Pension scheme funding, accounting and actuarial reports. Prepared in accordance with International Accounting Standards, theGroup’s Balance Sheet shows a net surplusof £106.2m, comprised of £936.5m assets and £830.3mliabilities.Thiscompareswithanetsurplusof£62.9minthepreviousyear.

TheCommitteereviewedtheactuarialassumptionsunderlyingthe calculations andwas satisfied that they are reasonable.They are highly sensitive to small changes, particularly inrespect of discount rates and inflation, and are not intended toreflectthefullcostofafullyfundedpensionbuyout(refertoNote18ofthefinancialstatements).

c. Hedgeaccounting.Forwardcontractsandoptionsareusedto manage the Sterling cost of future product purchases; this provides certainty to the cost of purchases and thereforeenables selling prices and gross margins to be set. Interest rate swaparrangementsareusedtoreducetheGroup’sexposureto changes in interest rates.

The Committee discussed the systems and processesin relation to the valuation and accounting treatment of such contracts with management and the external auditor. In addition, the Board reviewed and renewed the detailed operatingauthorityframeworkandlimitsinplaceforexecutionof such arrangements.

d. Inventory valuation. The Committee reviewed and agreedthemethodologyforcalculatingthenetrealisablevaluesofinventories,whichhasbeenappliedconsistently.

e. Otheraccountingestimates.TheCommitteereviewedreportson the reasonableness and consistency of other estimatesin the financial statements such as product return rates and propertyprovisions.Throughdiscussionswithmanagementandtheexternalauditor,theCommitteeissatisfiedthattheyremain appropriate and reasonable.

New accounting standardsDuring the year the Committee considered the potentialimpact on the Group’s financial statements of three newaccountingstandards:

a. IFRS 15 “Revenue from contracts with customers” will be effectivefortheyearendingJanuary2019onwards,andwillnot impact theGroup’s profit. Themajority of theGroup’ssales are for standalone products made direct to customers at standardpriceseitherin-storeoronline.Estimatesarealreadymade of anticipated returns and sales awaiting delivery tothecustomer.Certainincomestreamstotallingaround£30mcurrently netted off costs will be recognised as statutoryrevenue on transition to IFRS 15. The alternative performance measure “total sales” will not be adjusted for the impact of IFRS 15.

b. IFRS9“Financial instruments”willbeeffective for theyearending January 2019 onwards, themain impact being theimpairment assessment methodology used to value ourOnlinecustomer receivables.TheGrouphascompletedanassessmentof the impactof IFRS9and it isexpected thatadoptionwillnothaveamaterialimpactontheConsolidatedIncomeStatementorConsolidatedBalanceSheet.Processandmodelling amendments will be implemented in line with the requiredeffectivedate.

c. IFRS 16 “Leases”willbeeffectivefortheyearendingJanuary2020onwardsandtheimpactonthefinancialstatementswillbesignificant.OntheadoptionofIFRS16,leaseagreementswillgiverisetobotharight-of-useassetandaleaseliabilityforfutureleasepayables.Theright-of-useassetwillbedepreciatedonastraight-linebasisoverthelifeofthelease.Interestwillberecognisedontheleaseliability,resultinginahigherinterestexpenseintheearlieryearsoftheleaseterm.TherewillbenoimpactoncashflowsalthoughthepresentationoftheCashFlowStatementwillchangesignificantly.

The Audit Committee received regular updates from theIFRS16projectteamtoensureallnecessarystepstocomplywith the requirements of this standard were being taken.Significant work has been completed to date, including collectionofrelevantdata,changestoITsystemsandprocessesand the determination of relevant accounting policies.

TheGroupintendstoapplythefullyretrospectiveapproachon transition and will restate prior year comparatives.Further details are provided in the Group Accounting Policies section of the financial statements on page 112.

Viability statement and going concern The Committee performed a detailed review of the Group’sprojected cash flows, facilities and covenants which covered a threeyearperiod(ourviabilityassessmentperiod).Theproposedapproach was discussed and agreed by the Committee inNovember 2017 and followedup inMarch2018by reviewingthe Group’s financial position and performance, budgets for2018/19andthreeyearcashprojectionswhichwerestresstestedfor different scenarios having regard to the principal risks faced bythebusiness.TheCommitteereportedtotheBoardthat,inits view, the going concern assumption remains appropriate. In addition, as regards the Group’s viability assessment, thedirectorsconfirmedthattheyhaveareasonableexpectationthatthe Group will continue in operation and meet its liabilities as theyfalldueoverthethreeyearreviewperiod.Furtherdetailsofthisreviewareonpage47.

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Risk management and internal controlThe Committee regularly reviews the effectiveness of riskmanagement, and during the year has reviewed the key riskstogether with the associated controls and mitigating factors. Further details regarding the risk framework and approach, togetherwithdetailsofNEXT’sprincipalrisksandriskassessmentareonpage42.

Internal auditThe Committee reviewed the level of internal audit resource,experienceandexpertise, andbelieves that it is adequate forthe size, structure and business risks of the Group andis supplemented with appropriate external resources where needed.

TheCommitteereviewsandapprovesthescopeoftheinternalauditworkplanandensuresitisalignedtothekeyrisksofthebusiness. TheCommittee reviews the results of internal auditworkperformedandmeetstheHeadofInternalAuditwithoutmanagement present to discuss the internal audit charter, resourcesandauditplans.TheHeadof InternalAuditattendsall Audit Committee meetings and provides regular reportsandupdatesbothtotheCommitteeandtheAuditCommitteeChairman. TheHeadof InternalAudit has direct access to allCommitteemembersandisgiventheopportunitytomeettheCommittee Chairman and Committee members separately.During the year the Committee Chairman met the Head ofInternalAudit twice tocarryout formal reviewsof the internalaudit department’s resources, approach,workperformedandresults.TheCommitteeissatisfiedthattheinternalauditfunctionhascontinuedtoperformeffectivelyduringtheyear.

IT systems and cyber securityTheoperationsoftheGrouparehighlyreliantonitsITsystems.The Committee asked for regular updates from the IT andoperations teams covering various aspects of IT and cybersecurity.Inthisrapidlymovingarea,thereisinevitablyariskthatasystemsfailureorcyberattackcouldcausesignificantbusinessdisruption. Substantial resources are therefore devoted to the developmentandsecurityoftheGroup’sITsystems.CyberriskhasbeenontheagendaateachCommitteemeetingthisyear.Followingthepreviousyear’sindependentcybersecurityreview,acyber risk strategicplanandan independent reviewupdatewerediscussedatAuditCommitteemeetingsduringtheyear.Pleaserefertomoredetailprovidedonpage42oftheprincipalrisks section of the Strategic Report.

Other activitiesDuring the year the Committee received reports andpresentations from senior management on other significant activities of the Group, including regulatory compliance anddevelopments, tax, modern slavery, corporate responsibility,suppliersandCodeofPractice(ethicalandresponsiblesourcing)and treasury activities. The Group’s internal controls in areassuchas finance, ITandproductarealsoregularly reviewedbytheCommittee.Frequentupdatesare receivedonhealthandsafety,riskmanagement,businesscontinuity,whistleblowingandcorporate governance.

WhistleblowingThe Company’s whistleblowing procedures ensure thatarrangementsareinplacetoenableemployees,suppliersandother third parties to raise concerns about possible improprieties on a confidential basis. These were reviewed and updated in theyear.TheCommitteerequestedthatanupdateofreportedissuesisprovidedateachAuditCommitteemeetingandrelevantfollow up actions are discussed and agreed.

External auditorEffectivenessThe Committee had discussions with the external auditor onaudit planning, fees, accounting policies, audit findings and internalcontrol.Theexternalauditorattendedallofthisyear’sCommitteemeetings.TheCommitteeassessedtheeffectivenessof the external audit through the review of audit plans, reports and conclusions and through discussions with management (both with and without the external auditor present) and with the external auditor (both with and without management present). As2017/18wasPwC’sfirstyearastheGroup’sexternalauditor,theCommittee also paid particular attention to ensuring thatit was satisfied with the effectiveness and timeliness of audit planning, scope and deliverables, and that PwC had allowedsufficient time and resources to understand and assess the business,itskeyrisksandcontrols.TheCommitteewassatisfiedthat the audit was effective.

Inaddition,theChairmanoftheAuditCommitteeregularlymeetswiththeAuditPartner,AndrewLyon,outsideformalmeetings.TheCommittee is satisfied that PwCpossesses the skills andexperiencerequiredtofulfilitsdutieseffectivelyandefficiently.

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Independence and objectivityPwC has reported to the Committee that, in its professionaljudgement,it is independentwithinthemeaningofregulatoryandprofessional requirementsandtheobjectivityof theauditengagement partner and audit staff is not impaired. The Audit Committeehasassessedtheindependenceoftheauditor,andconcurs with this statement.

Non-audit work carried out by the external auditorInordertoensurethecontinuedindependenceandobjectivityoftheGroup’sexternalauditor,theBoardhasstrictpoliciesregardingtheprovisionofnon-auditservicesbytheexternalauditor.

The Committee’s approval is required in advance for theprovisionofanynon-auditservicesifthefeeexceeds£100,000foranindividualassignment,oriftheaggregatenon-auditfeesfortheyearexceedthelowerof£150,000or20%oftheauditfee. TheCommitteereviewsauditandnon-audit feestwiceayear.Proposed assignments of non-audit services with anticipatedfees inexcessof£50,000aregenerallysubject tocompetitivetender and decisions on the award of work are made on the basis of competence, cost effectiveness and legislation. A tender processmaynotbeundertakenwhereexisting knowledgeofthe Group enables the auditor to provide the relevant services more cost effectively thanotherparties. TheGroup’s externalauditor is prohibited from providing any services that wouldconflict with their statutory responsibilities or which wouldotherwise compromise their objectivity or independence.During the year, PwC’s audit fee amounted to £0.6m andPwC’s non-audit fees were £0.1m in total. In line with theabove policy, appropriate advance approval was obtainedfrom the Committee. Further details are provided in Note 3 of the financial statements.

InlinewiththenewEUauditreformregulationswhichcameintoforce forNEXT for the first time for the financialyear2017/18,theAuditCommitteehassetinplaceprocedurestoensureonlypermittednon-audit services areprovidedby theauditor andtheseareinlinewiththeabovepolicy.Theseprocedureswillalsoensurethatthenewcaponpermittednon-auditservicesof70%oftheaverageGroupauditfeepaidonarollingthreeyearbasisisnotexceeded,eventhoughthiswillnotapplytoNEXTuntilthefinancialyear2020/21.

External audit tenderTheAuditCommittee is responsible for recommendingtotheBoard the appointment, re-appointment and removal of theexternal auditor.

As disclosed in last year’s Audit Committee Report, andfollowingchangestotheUKCorporateGovernanceCodeandEURegulationrequiringauditortenderingandrotation,during2016 the Committee led a process to select a new externalauditor. Details of the audit tender process were disclosed in the 2016/17AuditCommittee report.A resolution topropose theappointmentofPwCwasapprovedbyshareholdersatthe2017AGM. TheCommittee has assessed andpositively concludedon the effectiveness of the external audit; further details of this reviewareprovidedonpage69.

CMA Order 2014 Statement of ComplianceNEXT confirms that it was in compliance with the provisions of The Statutory Audit Services for Large Companies MarketInvestigation(MandatoryUseofCompetitiveTenderProcessesandAuditCommittee Responsibilities)Order 2014during thefinancialyearended27January2018.

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Remuneration Report

Contents

Part1:AnnualStatementfromtheRemunerationCommitteeChairman

Part2:AnnualRemunerationReport

Part3:Directors’RemunerationPolicyExtract

page71

page74

page88

Remuneration complianceThisreportiscompiledinaccordancewithSchedule8oftheLargeandMedium-sizedCompaniesandGroup(AccountsandReports)(Amendment)Regulations2013.TheRemunerationCommitteebelievesthattheCompanyhascompliedwiththeprovisionsregardingremunerationmatterscontainedwithintheUKCorporateGovernanceCode.

Part 1: Annual Statement AsChairmanoftheRemunerationCommitteeandonbehalfoftheBoard,Iampleasedtopresentourreportondirectors’remunerationfor2017/18.

Atthe2017AGM,shareholdersendorsedarevisedRemunerationPolicyfortheperiodtothe2020AGMwith98.6%ofvotescastinfavour.Thisyear,ratherthanreproduceinfulltheapprovedPolicy,wehaveinsteadprovidedextractsfromit.AcopyofthecompleteRemunerationPolicycanbefoundinourJanuary2017AnnualReportandAccountswhichisavailableonourwebsite.

Pay and performance outcome for 2017/18Total remuneration AsoutlinedinourStrategicReport,theuncertaineconomicenvironmentandchangingconsumerbehaviourhavemeantthat2017/18hasbeenayearofchangeandchallengeforNEXT.GiventhestretchingperformancetargetssetbytheCommittee,totalremunerationearnedbytheexecutivethroughtheyearwassignificantlylowerversusthepreviousyear.

TheCommittee’soverarchinggoalistoensurethattheremunerationpaidtoseniorexecutivesisappropriateinbothamountandstructure,isdirectlylinkedtotheCompany’sannualandlongtermperformanceandisalignedwiththeinterestsofshareholders.ThecurrentRemunerationPolicyisdesignedtosupportthisobjectiveandtheincentivepayoutcomesfortheexecutivedirectorsfortheyearreflectNEXT’sperformanceaccordingly,withnoannualbonusawardsandnoLongTermIncentivePlansvesting.Totalannualremunerationearnedfor2017/18byLordWolfsonwas37%lowerthanhistotalremunerationin2016/17(whichitselfwaslowerthanthatearnedin2015/16),andbetween16%and23%lowerfortheotherexecutives.

TheCommittee considers that the current structure of the remuneration arrangements promote the long term success of theCompanywithinanappropriateriskframeworkandaresuitablyalignedtoenhancingshareholdervalueandtheCompany’sobjectiveofdeliveryoflongtermsustainablegrowthintotalshareholderreturns(TSR).Moreover,webelieveourrigorousapproachtotargetsettingandlinkingpaytoperformancemeansthattheactualremunerationearnedbytheexecutivedirectorscontinuestobeagoodreflectionoftheirandNEXT’soverallperformance.

Annual bonus AshasbeenthecaseformanyyearsatNEXT,annualbonusiscalculatedwithreferencetopre-taxEPS,includingtheimpactofsharebuybacks.Inthe2014RemunerationReportwefirstsetoutthebasisonwhichwewouldensurethatexecutivedirectorsarenotincentivisedtorecommendsharebuybackstotheBoardinpreferencetospecialdividends,orviceversa.Thisisachievedbymakinga notional adjustment to EPS growth for special dividends, on the basis that the cash distributed had instead been used to purchase sharesattheprevailingsharepriceonthedayofthespecialdividendpayment.

Thegrowthinpre-taxEPSintheyear,asadjustedforspecialdividends,wasbelowthetargetthresholdandnobonuswasearnedfor2017/18,aswasalsothecasein2016/17.Detailsofthetargetssetfor2017/18areonpage75.

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ation

Long Term Incentive Plan (LTIP)LTIPawardsaregranted twiceayear (eachat100%ofbasesalary forexecutivedirectors)andduring theyear theCommitteeapprovedtwogrants.TwoLTIPawardsreachedtheendoftheirthreeyearperformanceperiodandforbothawardsNEXT’sTSRrankedbelowmedian(i.e.threshold)outof21companiesinthecomparatorgroup,sotheseawardsdidnot/willnotpayout.Detailsofthecomparatorgrouparesetoutonpage83.

Awardsgrantedtoexecutivedirectorswhichvestmustbetakeninsharesandthenetshares(afterpaymentoftaxandNIC)mustbeheldforaminimumperiodoftwofurtheryears.

Matters addressed during the yearTheCommitteehasaddressedthefollowingmattersthisyear:

Remuneration policy TheCommitteegavefullconsiderationtotheoperationofthePolicypriortoproposingittoshareholdersatthe2017AGMandconsidersthelevelofsupportobtainedtobeastrongendorsement.DuringtheyeartheCommitteealsoreviewedthelatestbestpracticeguidanceandconsideredthecurrentremunerationlandscapetoidentifyifanypotentialamendmentstothePolicymayberequired.TheCommitteeconcludedthatthecurrentRemunerationPolicycontinuestobetherightonefortheCompanyanditsshareholdersasitisalignedwiththeCompany’sannualandlongtermperformance,withshareholderexperienceandwiththeCompany’sstrategy,objectivesandbusinessmodel.

TheCommitteewillkeepunderreviewtheFinancialReportingCouncilconsultationonanewUKCorporateGovernanceCode.Asdetailedonpage48oftheStrategicReport,NEXThasanemployeeforummadeupofelectedrepresentativesfromthroughoutthebusinesswhoattendmeetingsatleasttwiceayearwithdirectorsandseniormanagers.Thisforumenablesandencouragesopendiscussiononkeybusinesspoliciesandpractices.

Annual base salary review for 2018/19The base salaries for the executive directorswere increased in February 2018 by 2%, in linewith thewiderCompany award.LordWolfson’sannualbasesalaryincreaseshavebeeninlinewiththewiderCompanyawardssince2009.

TheCommittee’stypicalapproachtosalaryprogressionforthoseexecutivedirectorswhoareappointedtotheBoardfromaninternalseniormanagerialpositionistoawardsalaryincreaseswhicharetimedtoreflectperformanceandcontributionatBoardlevel,ratherthanautomaticallyappliedimmediatelyonpromotion.Salaryprogressionisthereforeusuallyphasedoveraperiodofapproximately1to4yearsafterpromotiontotheBoard,subjecttoprovenperformanceanddevelopmentduringthatperiod.AsnotedinmyStatementlastyear,inlightofthelowerthanexpected2016/17profitandEPSoutcome,theCommitteedecidedtodefertheplannedincreasesinthebasesalariesofMichaelLawandJaneShieldswhichwouldhaverepresentedthefinalstageinsettingtheirpaylevelsatanappropriatelevel,reflectingexcellentprogressionintheirrespectiverolessincetheirpromotiontotheBoardinJuly2013.TheCommitteealsodecidedtomoderateafurtherinterimincreaseinthebasesalaryofAmandaJames,notwithstandingherstrongperformanceintheroleofGroupFinanceDirectorsinceherpromotiontotheBoardinApril2015.

Withregardtothesalaryreviewfor2018/19,giventhecontinuingchallengesinthefashionretailingsector,theCommitteeconsideredthatitwasappropriatetoagaindeferanysignificantphasedsalaryincreases.However,duringtheyearaheadtheCommitteewillfurther review the salaries of the executive directors.

InFebruary2018,theCompanyannouncedthatMichaelLawwillstepdownfromtheBoardatthecloseofthe2018AGM,priortoretiringfromthebusinessinJuly2018.TheCompanyalsoannouncedinthesamestatementthatRichardPappwillbepromotedfromwithinthebusinessandappointedasanexecutivedirectorwitheffectfrom14May2018.Richardwillstandforelectionbyshareholdersatthe2018AGMand,subjecttotheoutcomeofthatprocess,willbecomeGroupMerchandiseandOperationsDirectorwitheffectfromtheendoftheAGM.ItisintendedthatRichard’ssalaryisalignedwiththoseofJaneShieldsandAmandaJames.

Forinformation,thecurrentexecutivedirectors’andCEO’ssalariescontinuetobepositionedbelowthemedianofcomparablerolesinotherFTSE100companiesingeneralandotherFTSE100retailersmorespecifically.Webelievethisdemonstratesouroverallconservativeapproachtopay.

Remuneration Report

72

EPS and performance measurementTheCommitteereviewseachyearthebasisandperformancemeasuresusedfortheannualbonusandLTIP.Theperformancemeasurefortheannualbonuscontinuestobebasedonpre-taxEPS.

TheprincipalreasonsforusingEPSare:

• it is consistent and transparent to participants and shareholders;

• NEXTispredominantlyasinglebusinesssellingproductsthroughanumberofchannelsundertheNEXTandthird-partybrands.No significant earnings are derived from unrelated businesses and, therefore, a group metric such as EPS is logical and consistent withstrategy;

• theprimaryfinancialobjectiveoftheGroupistodeliverlongterm,sustainablereturnstoshareholdersthroughacombinationofgrowthinEPSandpaymentofcashdividends;and

• theuseofEPSiscomplementedbytheapplicationofTSRandconsiderationofthegeneraleconomicunderpinconditionforthe LTIP.

Assetoutinpreviousyears,weconsideritrightthattheimpactofsharebuybacksonEPS(oradjustmentsforspecialdividends)shouldbeincludedinperformancemeasurementassharebuybacks,andmorerecentlyspecialdividends,havebeenoneofNEXT’sprimarystrategiesinreturningvaluetoshareholders.SharebuybacksorspecialdividendsareregularlyconsideredbytheBoard.Sharebuybacksaresubjecttopriorapprovalastotiming,priceandvolume.SharesareonlyboughtwhentheBoardissatisfiedthattheabilitytoinvestinthebusinessandtogrowtheordinarydividendwillnotbeimpaired.

Other activity during 2017/18FurtherinformationabouttheworkoftheCommitteecanbefoundonpage86.

Context to the Committee’s decisionsTheRemunerationCommitteemembersarekeenlyawareoftheimportanceandsensitivityofremunerationissuesamonginvestors,employeesandthewiderpublicandtheresponsibilitieswhichthatplacesonus.TheCommittee’sobjectiveistoensurethattheremunerationpaid toseniorexecutives isappropriate inbothamountandstructure, isdirectly linkedto theCompany’sannualandlongtermperformanceandisalignedwiththeinterestsofshareholders.Webelievethatstableandtransparentremunerationstructuresarekeyelementsinafairsystemforrewardingpersonalandcollectivecontributionacrossthebusiness.TherearebonusstructuresthroughouttheCompany,includingHeadOffice,stores,callcentresandwarehouses.

Wealsofocusonmaintaininganappropriatebalancebetweenannualandlongtermincentiveelementsandalsobetweencashandshare-basedelements,withtheaimofensuringthatremunerationdrivestherightbehavioursandrewardstherightoutcomes.Webelievethatweightingrewardstowardsthelongtermensurespropershareholderalignment.

Executive directors receive a mix of annual and long term incentives which reward strong business and financial performance in linewiththeCompany’sstrategyandwhicharemeasuredagainstrobustbenchmarks.Weplacespecialimportanceonrewardingconsistentlystrongperformanceoverlongerperiodsand,therefore,thebalanceofincentivesistiltedtowardstheLTIP,withits3yearperformanceperiodand2yearholdingperiodfollowingvesting.

PayandemploymentconditionselsewhereintheGroupareconsideredtoensurethatdifferencesforexecutivedirectorsarejustified.RemunerationPolicydoesnotconflictwiththeCompany’sapproachtoenvironmental,socialandcorporategovernancemattersandwe believe the current arrangements do not encourage directors to take undue business risks.

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ation

Wider employee considerations TheRemunerationCommitteeisverymindfulaboutremunerationarrangementsacrosstheGroup,includingperformance-relatedpaywhichensuresthatallemployeeshavethepotentialtobenefitfromthesuccessofNEXT.TherearebonusstructuresthroughouttheCompanyandemployeeshareownershipisstronglyencouraged.MarketvalueoptionsoverNEXTsharesaregrantedeachyeartomiddlemanagementinHeadOfficeaswellasseniorstorestaffandparticipationinourSharesaveschemeisopentoallofourUKandEireemployees.Around10,000employees(circa25%ofourtotalUKandEireemployees)heldoptionsorawardsinrespectof6.1millionsharesinNEXTatthefinancialyearend.

2018 AGMTheCommitteeconsidersthatthesimplicityandtransparencyofourremunerationarrangementsandtheirconsistentapplicationhavecontributedpositivelytoNEXT’sstrongmanagementteamcontinuingtodeliverresilientperformanceinbothbenignandmorechallengingtradingenvironments.IverymuchhopethatshareholderswillsupporttheCommittee’soverallapproachand,onbehalfoftheCommittee,Icommendour2017/18Directors’AnnualRemunerationReporttoyou.

IlookforwardtoreceivingyoursupportattheAGMwhereIwillbepleasedtorespondtoanyquestionsshareholdersmayhaveonthisreportorinrelationtoanyoftheCommittee’sactivities.

Caroline GoodallChairmanoftheRemunerationCommittee

23March2018

Part 2: Annual Remuneration ReportThis Annual Remuneration Report comprises a number of sections:

ImplementationofRemunerationPolicy

Single total figure of remuneration

Totalremunerationopportunity

Executivedirectors’externalappointments

Pension entitlements

Directors’shareholdingandshareinterests

Schemeinterestsawardedduringthefinancialyear

Performance targets for outstanding awards

Paymentstopastdirectors

page75

page76

page78

page79

page79

page80

page83

page83

page84

Paymentsforlossofoffice

PerformanceandCEOremunerationcomparison

ChangeinremunerationofChiefExecutive

Relativeimportanceofspendonpay

Dilutionofsharecapitalbyemployeeshareplans

RemunerationCommittee

Voting outcomes at General Meetings

Service contracts

page84

page84

page85

page85

page86

page86

page87

page87

Annual Remuneration ReportTheRemunerationCommitteepresents theAnnualRemunerationReport,which, togetherwith theChairman’s introductionon pages71to74,willbeputtoshareholdersasanadvisory(non-binding)voteattheAnnualGeneralMeetingtobeheldon17May2018.Sectionswhichhavebeensubjecttoauditarenotedaccordingly.

Remuneration Report

74

Implementation of Remuneration PolicyTheCommitteehasimplementedtheRemunerationPolicyinaccordancewiththepolicyapprovedbyshareholdersattheAGMinMay2017.Thetablebelowsetsoutthewaythatthepolicywasimplementedin2017/18andanysignificantchangesinthewaythepolicywillbeimplementedin2018/19.

Element of remuneration Policy implemented during 2017/18 and changes in 2018/19Base salary Thebasesalaryoftheexecutivedirectorswasincreasedby2%inFebruary2018,inlinewiththe

widerCompanyaward.ItisintendedthatRichardPapp’ssalaryisalignedwiththoseofJaneShieldsand Amanda James. As the salaries of Jane, Amanda and Richard remain below the planned level forsomeoneoftheirexperienceandthebenchmarkmedian,theCompanywillfurtherreviewtheirsalariesduringtheyearahead(withaviewtoimplementingtheplannedfinalinstalmentsoftheirincreases).ThebasesalariesfortheexecutivedirectorsfromFebruary2018are:

£000 2018/19 2017/18LordWolfson 789 773Amanda James 425 416Michael Law 425 416Jane Shields 425 416

Annual bonus No changes to the bonus structure were made.

FortheyeartoJanuary2018,performancetargetsweresetrequiringpre-taxEPSgrowthofatleast-1.5%ontheprioryear,adjustedforspecialdividendsandexcludingexceptionalgains,beforeanybonusbecamepayable(beingpre-taxEPSof540.7p).Maximumbonusof100%and150%ofsalaryfortheexecutivedirectorsandChiefExecutiverespectivelywaspayableifpre-taxEPSexceededgrowthof18.5%(beingpre-taxEPSof650.4p).

Pre-taxEPSgrowthachievedintheyear,adjustedforspecialdividends,was-2.9%.Inaccordancewith the bonus formula, no bonus was earned.

Bonusperformance targets for the year aheadhavebeen set but are not disclosed in advanceforreasonsofcommercialsensitivity.Thetargetsandperformancewillbedisclosedinnextyear’sRemuneration Report.

LTIP Nochangein2017/18.Seesingletotalfigureofremunerationtable,Note5fordetailsofLTIPvestingsintheyear.

InaccordancewiththeRemunerationPolicyapprovedbyshareholdersattheMay2017AGM,foranyLTIPgrantsmadeafterthatdateparticipantswillbeentitledtoreceiveordinaryandspecialdividendaccrualsonanyawardsvestingundertheLTIP.

Grantsin2018/19willbeotherwisemadeonthesamebasistothe2017/18grants(withanychangestotheTSRcomparatorgroupconfirmedimmediatelypriortoeachgrant).

Recovery and withholding provisions

Nochange.TheCommitteepreviouslyintroducedrecoveryandwithholdingprovisionsintheservicecontractsofallexecutivedirectorstocoverthebonusandLTIP,anda5year fromgrantholdingperiod(comprisinga3yearvestingperiodanda2yearholdingperiod)undertheLTIPforexecutivedirectors. TheCommittee reconsidered these requirementsduring the year and concluded thatthese provisions remain appropriate.

Chairman and non- executive director fees

ThefeesoftheChairmanandnon-executivedirectorswereincreasedby2%inFebruary2018,inlinewiththewiderCompanyaward.TheChairman,MichaelRoney,willbepaidanannualfeeof£331,500(2017/18 annual fee asChairman: £325,000). Thebasic non-executivedirector fee for 2018/19 is£56,834(2017/18:£55,720),withafurther£11,367(2017/18:£11,144)paidtotheChairmanofeachoftheAuditandRemunerationCommitteesrespectively,andtotheSeniorIndependentDirector.

Pension No change.

Other benefits No material change.

Save As You Earn scheme (Sharesave)

No change.

75

Strategic ReportG



ation

Sing

le to

tal f

igur

e of

rem

uner

atio

n (a

udite

d in

form

atio

n)

Dire

ctor

s’ re

mun

erat

ion

£000

Sala

ry/f

ees

Bene

fits1

Pens

ion2

Sala

ry

supp

lem

ent3

Subt

otal

Ann

ual b

onus

4LT

IP5

Shar

e M

atch

ing

Plan

6Sh

ares

ave

Subt

otal

Tota

l re

mun

erat

ion

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

2017

/182016/17

Chai

rman

MichaelRoney*

237

n/a

––

––

––

237

n/a

––

––

––

––

––

237

n/a

John

Bar

ton*

136

268

––

––

––

136

268

––

––

––

––

––

136

268

Exec

utiv

e di

rect

ors

LordWolfson

773

766

3977

225

278

116

115

1,15

31,

236

––

–595

––

––

–595

1,15

31,831

Am

anda

Jam

es41

6360

3837

718

14–

475

415

––

–89

–59

–1

–149

475

564

Mic

hael

Law

416

412

2323

5028

6262

551

525

––

–195

––

––

–195

551

720

Jane

Shi

elds

416

412

3735

4825

6262

563

534

––

–195

––

–1

–196

563

730

Non

-exe

cutiv

e di

rect

ors

Stev

e B

arbe

r Δ

2066

––

––

––

2066

––

––

––

––

––

2066

Jona

than

Bew

es †

6418

––

––

––

6418

––

––

––

––

––

6418

CarolineGoodall

6766

––

––

––

6766

––

––

––

––

––

6766

FrancisSalway

6766

––

––

––

6766

––

––

––

––

––

6766

Dam

e D

iann

e

Thom

pson

5655

––

––

––

5655

––

––

––

––

––

5655

2,66

82,489

137

172

330

349

254

239

3,38

93,249

––

–1,074

–59

–2

–1,

135

3,38

94,384

*MichaelRoneywasappointedasanindependentnon-executivedirector,DeputyChairmanandChairmanDesignatewitheffectfrom14February2017.MichaelsucceededJohnBartonasChairmanwhenheretiredon1August2017.

Michaelwaspaidanannualfeeof£162,500upuntil31July2017,thereafterhewaspaidanannualfeeof£325,000.JohnBartonwaspaidanannualfeein2017/18of£270,635untilheretiredon1August2017.

ΔSteveBarbersteppeddownfromtheBoardon18May2017.Nocompensationforlossofofficewaspaidtohim.

†JonathanBewesjoinedtheBoardinOctober2016andbecameChairmanoftheAuditCommitteeon18May2017,followingtheretirementfromtheBoardofSteveBarber.

Totalemolumentspaidtodirectors(salary/fees,benefits,salarysupplementsandannualbonus)fortheyeartoJanuary2018were£3,059,000(2017:£2,900,000).

Rem

uner

atio

n Re

por

t

76

Fixe

d pa

yPe

rform

ance

-rela

ted

pay

Not

e 1:

Ben

efits Ca

r/ch

auffe

ur

char

ges/

cash

al

low

ance

Fu

el

Med

ical

insu

ranc

e &

N

EXT

clot

hing

al

low

ance

Tota

l20

17/1

8£0

002016/17

£000

2017

/18

£000

2016/17

£000

2017

/18

£000

2016/17

£000

2017

/18

£000

2016/17

£000

LordWolfson

3466

28

33

3977

Am

anda

Jam

es27

268

83

338

37

Mic

hael

Law

2020

––

33

2323

Jane

Shi

elds

2725

77

33

3735

Not

e 2:

Pen

sion

Definedbenefit(DB)pensionvaluesarecalculatedusingthemethodrequiredbyremuneration

regulations,i.e.thetotalpensionaccruedatJanuary2018lessthetotalpensionaccruedatthe

endofthepreviousyear,adjustedforinflationandmultipliedbyafactorof20,lessthedirector’s

owncontribution.Itdoesnotnecessarilyrepresenttheeconomicvalueofthepensionrights

accruedandthisbenefitisnotimmediatelyavailabletothedirector.Consistentwithotherstaff

participatingintheplans,directors’salariesarefrozenforDBpensionpurposesatOctober

2012,butdirectorsmaycontinuetoaccruepensionableservice.

Insummary,thepensionentitlementsofthedirectorswhoweremembersoftheDBsectionof

the2013NEXTGroupPensionPlanduringtheyearareasfollows:

Age

at

Janu

ary

2018

Year

s of

pe

nsio

nabl

e se

rvic

e

Acc

rued

ann

ual

pens

ion

£000

Chan

ge in

ac

crue

d an

nual

pe

nsio

n £0

00

Chan

ge in

ac

crue

d an

nual

pe

nsio

n ne

t of i

nfla

tion

£000

LordWolfson

5023

387

1713

Mic

hael

Law

5625

129

42

Jane

Shi

elds

5419

124

42

Yearsofpensionableserviceshownabovemayincludebought-inservicefromthetransferof

otherpensionentitlementsintothePlan.Directors’pensionarrangementsaresubjecttothe

sameactuarialreductionasotheremployeesonterminationorearlyretirement.

AmandaJamesisamemberofthedefinedcontributionsectionofthe2013NEXTGroup

PensionPlan.Forfourmonthsofthe2017/18yearAmandamadeacontributionequalto5%

ofhersalaryintoherpensionplanwhichwasmatchedbytheCompany.Fortheremainderof

theyear,asAmandahadreachedtheannualpensionallowancelimit(i.e.thetotalamountof

cont

ribut

ions

that

can

be

paid

to d

efin

ed c

ontr

ibut

ion

pens

ion

sche

mes

and

the

tota

l am

ount

ofbenefitsthatcanbuildupindefinedbenefitpensionschemeseachyear,forUKincometax

reliefpurposes),sheoptedtoreceiveanequivalentcashsupplementinlieuofthisCompany

contribution.ThisisconsistentwiththeRemunerationPolicyandwiththepensionprovision

andalternativesavailabletoemployeesgenerally.

Not

e 3:

Sal

ary

supp

lem

ent i

n lie

u of

pen

sion

Supplementsof15%ofbasesalaryarepaidinlieuofpensionprovisionafterthedirectors

beca

me

defe

rred

mem

bers

of t

he D

B se

ctio

n of

the

NEX

T G

roup

Pen

sion

Pla

n. J

ane

Shie

lds

hasreceivedthissupplementfrom2011,andMichaelLawandLordWolfsonfrom2012.

See

Not

e 2

abov

e fo

r inf

orm

atio

n re

gard

ing

Am

anda

Jam

es.

Not

e 4:

Ann

ual b

onus

Detailsoftheperformancetargetsfortheannualbonusaresetoutonpage75.Forthe

yeartoJanuary2018,inaccordancewiththebonusformula,nobonuswasawardedtoany

exec

utiv

e di

rect

or.

ToprovidearetentionelementinthecaseoftheChiefExecutive,anyannualbonusinexcess

of100%ofbasesalaryispayableinshares,deferredforaperiodoftwoyearsandsubjectto

forfeitureifhevoluntarilyresignspriortotheendofthatperiod.

Not

e 5:

LTIP

PerformancetargetsfortheLTIParesetoutonpage90.ForthethreeyearperiodtoJuly2017,

NEXT’sTSRrankednumber18inthecomparatorgroupof21andthereforenoneoftheaward

grantedinthesecondhalfof2014vested.

ForthethreeyearperiodtoJanuary2018,NEXT’sTSRrankednumber16inthecomparator

groupof21andthereforenoneoftheawardgrantedinJanuary2015vested.

LTIPvaluesincludedinthesinglefiguretableforthe2016/17comparativefigureshavebeen

calc

ulat

ed a

nd u

pdat

ed t

o re

flect

the

act

ual m

arke

t va

lues

of t

he L

TIP

awar

ds t

hat

vest

ed in

respectofperformanceperiodsendinginthatfinancialyear(assetoutinthetableonpages

81and82).

Not

e 6:

Sha

re M

atch

ing

Plan

(SM

P)

ExecutivedirectorsnolongerreceiveSMPgrants,howeverlegacyawardsruntheircourse,

includingthosethatweregrantedtoexecutivedirectorsbeforetheywerepromotedto

the

Boar

d.

The2014SMPawardgrantedtoAmandaJamesbeforeshewaspromotedtotheBoardvested

at96%ofthemaximumawardinMay2017.ThatvalueshowninDirectors’Remunerationtable

abovefor2016/17comparativefigurehasbeencalculatedandupdatedtoreflecttheactual

marketvalueoftheSMPawardsonthedateofvesting(at£43.62pershare).

77

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ation

Remuneration Report

Total remuneration opportunity The Committee’s objective is to ensure that the remuneration paid to senior executives is appropriate in both amount andstructure,isdirectlylinkedtotheCompany’sannualandlongertermperformanceandisalignedwiththeinterestsofshareholders.Carefulconsiderationisgiventoensuringthereisanappropriatebalanceintheremunerationstructurebetweenannualandlongtermrewards,aswellasbetweencashandshare-basedpayments.

Variablepayis linkedtomeasureswhicharealignedwiththeCompany’slongtermstrategyandobjectives.Theoverall levelofexecutivedirector pay remainsmodest comparedwith that available at other FTSE100 companies and the chosenmaximumremuneration indicated inthechartsbelowreflects theCommittee’sconservativeapproachtoexecutivepaywhich itconsidersis appropriate.

The charts below show the 2017/18 actual remuneration achieved, as disclosed in the single total figure of remuneration on page76,comparedwiththe2017/18opportunityatmid-point,maximumandmaximumincludingassumedsharepriceappreciationanddividendroll-upof10%perannumcombined.Asnotedonpage72,MichaelLawwillstepdownfromtheBoardatthecloseofthe2018AGMandRichardPappwillbepromotedfromwithinthebusinessandappointedasanexecutivedirectorwitheffectfrom14May2018.ItisintendedthatRichard’ssalaryisalignedwiththoseofJaneShieldsandAmandaJames.

[Chartstobeadded]

In the above charts, the following assumptions have been made:Fixed/minimum Valuesasfor2017/18singlefigureofremuneration.

Mid-point/median Includestheperformance-relatedpayadirectorwouldreceiveinthescenariowhere:

• 50%ofmaximumannualbonusisearned(beingthemid-point).• LTIPperformanceresultsinamedianTSRrankingandtherefore20%ofthemaximumawardwouldvest.

Maximum Includestheperformance-relatedpayadirectorwouldreceiveinthescenariowhereperformanceequalledorexceededmaximumtargets:

• 100%oftheannualbonus.• LTIPperformanceresultsinanupperquintileTSRrankingandtherefore100%ofthemaximumawardwouldvest.

Maximuminc.10%per annum increase in total return

Asforthemaximumscenarioabove,plusanincreaseinthevalueoftheLTIPof10%perannumtoreflectpossibleshareprice appreciation and dividend accrual combined.

0 1000 2000 3000 4000 5000

15%

27%

100%

57% 28%

30% 40%

47%

30%

26%

Total £1,153k

AMOUNT £000

Total £3,858k

Total £2,042k

Total £4,370k

Lord Wolfson (Chief Executive)

Mid-point/median

Maximum

Maximum (inc. 10% pa increase in

total return

Actual

Fixed pay Annual bonus LTIP (multiple period)

0 500 1000 1500 2000 2500

18%

20%

100%

60% 22%

46%

53%

31%

27%

Total £563k

AMOUNT £000

Total £1,811k

Total £937k

Total £2,086k

Jane Shields (Group Sales and Marketing Director)

23%

Mid-point/median

Maximum


total return

Actual

0 500 1000 1500 2000

20%

21%

100%

56% 24%

48%

55%

28%

24%

Total £475k

AMOUNT £000

Total £1,723k

Total £849k

Total £1,998k

Amanda James (Group Finance Director)

24%

Mid-point/median

Maximum


total return

Actual

78

Executive directors’ external appointmentsNocurrentexecutivedirectorholdsanynon-executivedirectorshipsoutsidetheGroup.

Pension entitlements (audited information)In2013allactivemembersoftheNEXTGroupPensionPlan(the“OriginalPlan”),weretransferredtothenew2013NEXTGroupPensionPlan(the“2013Plan”)sothatpensionersoftheOriginalPlancouldbeissuedindividualpolicieswithAviva.Mostdeferredpensionersandpensionerswhohadnotpreviouslybeensubjecttoabuy-inthroughAvivawerealsotransferredtothe2013Plan.Benefitswithinthe2013PlanmirrorthoseinthepreviousOriginalPlan.

Executivedirectorsaremembersofthe2013PlanwhichhasbeenapprovedbyHMRCandconsistsofdefinedbenefitanddefinedcontribution sections.

ThetrusteeofbothPlansisalimitedcompany,NEXTPensionTrusteesLimited(the“Trustee”).TheBoardoftheTrusteecurrentlycomprisessixdirectors.Fourofthesearemembersofthe2013Plan,andtwodirectors(includingtheChairman)areindependentandhavenootherconnectiontoNEXT.TwoofthesedirectorsaremembernominateddirectorsandcannotberemovedbyNEXT.Theotherfourdirectors,includingthetwoindependentdirectors,areappointedbyandcanberemovedbyNEXT.AlldirectorsoftheTrusteereceiveafeefortheirservices,includingthosedirectorswhoarealsoemployeesofNEXT.NodirectoroftheCompanyis a director of the Trustee.

ThePlans’ investmentsarekeptseparate fromthebusinessof theNEXTGroupandtheTrusteeholds theminseparatetrusts.ResponsibilityforinvestmentofthePlans’fundshasbeendelegatedtoprofessionalinvestmentmanagers.

TheGroupoperatesasalarysacrificeschemewherebymembersfromeithersectioncanelecttoreceiveareducedgrosssalaryinexchangeforenhancedemployerpensioncontributions.TheparticipationofmembersinthesalarysacrificeschemedoesnotresultinanyoverallincreaseincoststotheGroup.

Defined contribution sectionEmployeesoftheGroupcanjointhedefinedcontributionsectionofthe2013Plan.Memberselecttopayeither3%or5%oftheirpensionableearningswhichismatchedbytheCompany.Fordeathpriortoretirement,alumpsumofthreetimesthemember’sbasesalaryatthepreviousAprilispayablealongwiththecurrentvalueofthemember’sfund.

Defined benefit sectionThedefinedbenefitsectionwasclosedtonewmembersin2000.Since2012,theaccrualofpensionbenefitshasbeenbasedonpensionablesalaryfrozenatOctober2012,ratherthanfinalearnings.Thoseemployeescanalsoelecttoreceiveuptoa15%salarysupplement or additional contributions to the defined contribution section. The defined benefit section now provides members with aretirementbenefitofonesixtiethoroneeightieth(dependingonthemember’schosencontributionrate)ofpensionableearningsatOctober2012foreachyearofpensionableservice.

LordWolfsonandasmallnumberofsenioremployees,oncompletionofatleast20years’pensionableserviceatage65,receivearetirementbenefitoftwothirdsofpensionableearningsasatOctober2012,whichaccruesuniformlythroughouttheirpensionableservice.ThedeferredpensionsforJaneShieldsandMichaelLawarebasedontheirpensionableearningsatthetimetheybecamedeferredpensionersandaccrueduniformlythroughouttheirpensionableservice.

Thedefinedbenefitsectionprovidesalumpsumdeathinservicebenefitanddependants’pensionsondeathinserviceorfollowingretirement. In thecaseof ill-health retirement,only theaccruedpension ispayable.Allbenefitsaresubject to2013Plan limits.IncreasestopensionsinpaymentareatthediscretionoftheTrusteealthoughpensionableservicepost1997issubjecttolimitedpriceindexation.From2006,salesandprofitrelatedbonuseswereexcludedfrompensionableearningsandthenormalretirementageunder theOriginalPlanwas increasedfrom60to65.Therearenoadditionalbenefitspayable todirectors in theeventofearlyretirement.

Memberscontribute3%or5%ofpensionableearnings,whilsttheCompanymakescontributionsattherateof31.3%.Thelastfulltriennialactuarialvaluationofthe2013Planwascarriedoutasat30September2016.AscalculatedinaccordancewithInternationalFinancialReportingStandards,thenetpensionsurplusatJanuary2018was£106.2m.FurtherdetailsareprovidedinNote18ofthefinancial statements.

Certainmembers(includingLordWolfson)whoseaccruedorprojectedpensionfundvalueexceedstheirpersonallifetimeallowanceareprovidedwithbenefitsthroughanunfunded,unapprovedsupplementarypensionarrangement.Therelevantmemberscontributetowardstheadditionalcostofprovidingthesebenefitsbyapaymentof5%onallpensionableearningstothe2013Plan.SinceApril2011,whereexistingmembershavereachedeithertheannualorlifetimepensioncontributionslimits,theCompanyhasofferedthosemembers the choice of leaving the defined benefit section and either joining the defined contribution section (with an enhanced Companycontribution)ortakingasalarysupplement,inbothcasesequalto10%or15%oftheirsalary(dependingontheirexistingcontributions and benefits).

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Remuneration Report

Directors’ shareholding and share interests (audited information)Directors’ interests Directors’interestsinshares(includingthoseoftheirconnectedpersons)atthebeginningandendofthefinancialyearwereasfollows:

Ordinary shares Deferred Bonus

Shares1 LTIP2 SMP Sharesave3

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

LordWolfson 1,527,204 1,518,184 – 5,180 81,968 71,127 – 9,204 364 364Steve Barber4 7,500 7,500 – – – – – – – –John Barton5 14,000 14,000 – – – – – – – –Jonathan Bewes 1,750 1,750 – – – – – – – –CarolineGoodall 450 nil – – – – – – – –Amanda James 18,076 17,107 – – 39,522 25,553 – 1,418 372 372Michael Law 29,648 27,765 – – 44,108 36,605 – 2,468 163 163MichaelRoney6 24,079 n/a – – – – – – – –FrancisSalway 9,040 9,040 – – – – – – – –Jane Shields 58,894 57,013 – – 44,108 36,605 – 2,466 369 369Dame Thompson nil nil – – – – – – – –

1. Fulldetailsofthebasisofallocationandtermsofthedeferredbonusaresetoutonpage89.

2. TheLTIPamountsabovearethemaximumpotentialawardsthatmayvestsubjecttoperformanceconditionsdescribedonpage90.

3. Executivedirectors canparticipate in theCompany’sSharesave scheme (seedetailsonpage91)and theamountsaboveare theoptionswhichwillbecomeexercisableatmaturity.

4. SteveBarbersteppeddownfromtheBoardinMay2017.

5. JohnBartonsteppeddownfromtheBoardinAugust2017.

6. MichaelRoneyjoinedtheBoardinFebruary2017.

Therehavebeennootherchangestothecurrentdirectors’interestsinthesharesoftheCompanyfromtheendofthefinancialyearto22March2018.Fulldetailsofdirectors’interestsinthesharesandshareoptionsoftheCompanyarecontainedintheRegisterofDirectors’InterestswhichisopentoinspectionattheCompany’sregisteredoffice.

Minimum shareholdingTheminimumshareholdingrequiredofexecutivedirectorsis200%ofbasesalaryandeachdirectorhas5yearsfromthedateoftheirappointmenttotheBoardtoacquiretheminimumshareholding.Asatthe2017/18financialyearend,thevalueofshareholdingsofallof the executives exceeded the share ownership guidelines.

Shareholding % of base salary as at

Jan 2018 Shareholding

guidelines achievedLordWolfson 10,309% 100%Amanda James 227% 100%Michael Law 297% 100%Jane Shields 555% 100%

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Thetablebelowshowsshareawardsheldbydirectorsandmovementsduringtheyear:

Date of award

Maximum receivable at start of

financial year

Awarded during the

year

Shares vested/

exercised intheyear

Optionslapsed

Maximum receivable at end of financial

year

Market price at

award date

£

Optionprice

£

Market price on date of vesting/exercise

£Vestingdate/

exercisable dates1

Lord WolfsonDeferred Bonus Shares Apr2015 5,180 – 5,180 – – 71.75 n/a 43.12 Apr2017

LTIP Mar2014 13,187 – 2,637 10,550 – 56.37 nil 42.32 Jan2017

Sept2014 11,421 – – 11,4212 – 65.09 nil – Jul2017

Mar2015 11,2632 – – – 11,263 66.66 nil – Jan2018

Sept2015 10,106 – – – 10,106 74.29 nil – Jul2018

Mar2016 10,360 – – – 10,360 73.92 nil – Jan2019

Sept2016 14,790 – – – 14,790 51.78 nil – Jul2019

Mar2017 – 16,552 – – 16,552 46.733 nil – Jan2020

Sept2017 – 18,897 – – 18,897 40.933 nil – Jul2020

71,127 81,968SMP Apr2013 9,204 – 9,204 – – 43.81 nil 41.66 Apr2016–Apr2023

Sharesave Oct2013 364 – – – 364 – 41.12 – Dec2018–Jun2019

Amanda JamesLTIP Mar2014 2,342 – 468 1,874 – 56.37 nil 42.32 Jan2017

Sept2014 2,765 – – 2,7652 – 65.09 nil – Jul2017

Mar2015 4,5452 – – – 4,545 66.66 nil – Jan2018

Sept2015 4,079 – – – 4,079 74.29 nil – Jul2018

Mar2016 4,870 – – – 4,870 73.92 nil – Jan2019

Sept2016 6,952 – – – 6,952 51.78 nil – Jul2019

Mar2017 – 8,907 – – 8,907 46.733 nil – Jan2020

Sept2017 – 10,169 – – 10,169 40.933 nil – Jul2020

25,553 39,522SMP May2014 1,418 – 1,361 57 – 66.50 nil 44.77 May2017–May2024


Oct2016 108 – – – 108 – 38.25 – Dec2021–Jun2022

372 372

Michael LawLTIP Mar2014 5,428 – 1,085 4,343 – 56.37 nil 42.32 Jan2017

Sept2014 6,145 – – 6,1452 – 65.09 nil – Jul2017

Mar2015 6,0612 – – – 6,061 66.66 nil – Jan2018

Sept2015 5,438 – – – 5,438 74.29 nil – Jul2018

Mar2016 5,575 – – – 5,575 73.92 nil – Jan2019

Sept2016 7,958 – – – 7,958 51.78 nil – Jul2019

Mar2017 – 8,907 – – 8,907 46.733 nil – Jan2020

Sept2017 – 10,169 – – 10,169 40.933 nil – Jul2020



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Date of award

Maximum receivable at start of

financial year

Awarded during the

year

Shares vested/

exercised intheyear

Optionslapsed

Maximum receivable at end of financial

year

Market price at

award date

£

Optionprice

£

Market price on date of vesting/exercise

£Vestingdate/

exercisable dates1

Jane ShieldsLTIP Mar2014 5,428 – 1,085 4,343 – 56.37 nil 42.32 Jan2017

Sept2014 6,145 – – 6,1452 – 65.09 nil – Jul2017

Mar2015 6,0612 – – – 6,061 66.66 nil – Jan2018

Sept2015 5,438 – – – 5,438 74.29 nil – Jul2018

Mar2016 5,575 – – – 5,575 73.92 nil – Jan2019

Sept2016 7,958 – – – 7,958 51.78 nil – Jul2019

Mar2017 – 8,907 – – 8,907 46.733 nil – Jan2020

Sept2017 – 10,169 – – 10,169 40.933 nil – Jul2020



Oct2016 70 – – – 70 – 38.25 – Dec2021–Jun2022

369 369

1. ForLTIPawards,thedateinthiscolumnistheendofthethreeyearperformanceperiod.ActualvestingwillbethedateonwhichtheCommitteedetermineswhetheranyperformanceconditionshavebeensatisfied,orshortlythereafter.

2. Seepage77fordetailsoftheperformanceconditionsandvestinglevelsapplicabletotheLTIPschemeswithperformanceperiodsendinginthefinancialyear2017/18.

3. TheLTIPpriceatawarddateisNEXT’saveragesharepriceoverthethreemonthspriortothestartoftheperformanceperiod.

4. Withintheabovetable,allawardsaresubjecttoperformanceconditionsexceptforSharesaveoptionsandDeferredBonusShares.From2014onwards,LTIPawardsgrantedtoexecutivedirectorswhichvestmustbetakeninsharesandthenetshares(afterpaymentoftaxandNIC)mustbeheldforaminimumperiodoftwofurtheryears.

The aggregate gains of directors arising from the exercise of options granted under the SMP and Sharesave, and the LTIP that vested inthe2017/18yeartotalled£874,000(2016/17:£2,325,000).

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Scheme interests awarded during the financial year ended January 2018 (audited information)

LTIPFace value InrespectoftheLTIPconditionalshareawardsgrantedduringtheyear2017/18,themaximum“facevalue”ofawards

(i.e.themaximumnumberofsharesthatwouldvestifallperformancemeasuresaremetmultipliedbytheaveragesharepriceusedtodeterminetheaward)issummarisedbelow:

Mar2017 £000

Sep2017 £000

Total £000

LordWolfson 773 773 1,546Amanda James 416 416 832Michael Law 416 416 832Jane Shields 416 416 832

Vesting if minimum performance achieved

20%oftheentitlementwillbeearnedforrelativeTSRatmedian.FullvestingrequiresrelativeTSRintheupperquintile.

Performance period March2017grant:threeyearstoJanuary2020.

September2017grant:threeyearstoJuly2020.Performance measures TheLTIPperformancemeasuresaredetailedonpage90.Thecompanies intheTSRcomparatorgroupforawards

grantedduringthefinancialyearare:

ASOS

B&MEuropeanValueRetail

Burberry

Carpetright

Debenhams

DixonsCarphone

Dunelm

Halfords

JSainsbury

JD Sports

Kingfisher

Marks&Spencer

Morrisons

Mothercare

N Brown

PetsatHome

Superdry

Ted Baker

Tesco

WHSmith

Dividendroll-up ForgrantsfromSeptember2017,theawardmaybeincreasedtoreflectdividendspaidovertheperiodtovesting(assuming reinvestment at the prevailing share price).

Deferred bonusInadditiontotheschemeinterestsdetailedabove,anyannualbonusinexcessof100%ofbasesalarypayabletotheChiefExecutiveispayableinshares,deferredforaperiodoftwoyearsandsubjecttoforfeitureifhevoluntarilyresignspriortotheendofthatperiod.No2017/18annualbonuswasearned.

Performance targets for outstanding awardsSummarisedbelowaretheperformancetargetsforalloutstandingawardsmadeundertheLTIPandSMPschemes:

LTIPDetailsofpotentialawardsgrantedtoexecutivedirectorsforoutstandingperformanceperiodsareasfollows:

Maximum potential award granted (% of base salary)

Three year performance periods commencing Lord WolfsonAmanda James, Michael

Law & Jane ShieldsAugust2015 100% 100%February2016andAugust2016 100% 100%February2017andAugust2017 100% 100%

DetailsofthecomparatorgroupfortheLTIPthreeyearperformanceperiodscommencingFebruary2017andAugust2017areshownabove.ThecomparatorgroupfortheperformanceperiodcommencinginAugust2016isalsothesame.

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ThecomparatorgroupfortheperformanceperiodscommencinginAugust2014,February2015,August2015andFebruary2016isthesameasabovewiththeexceptionofHomeRetailGroupandPoundlandwhowereincluded,andPetsatHomeandB&MEuropean Value Retail who were not included.

FollowingtheacquisitionbyJSainsburyofHomeRetailGroupinSeptember2016,HomeRetailGroupwasdelistedfromtheLondonStockExchange.FortheLTIPgrantspriortothattime,JSainsburyandHomeRetailGroupwillcontinueastwoseparateentrieswiththeir relative TSRs being measured on pre (independent) and post (identical) takeover performance over each performance period.

Poundlandwasalsodelisted following itsacquisition inSeptember2016.For theLTIPgrantsprior to that timewhich includedPoundlandinthecomparatorgroup,fromSeptember2016,therelativeTSRofB&MEuropeanValueRetailreplacesthatofPoundland.

SMP (legacy only)TheCommitteedecidedin2014thatexecutivedirectorsshouldnolongerparticipateintheSMP.AmandaJameswaspromotedtotheBoardin2015andAmanda’sSMPsawardedpriortoherpromotioncontinuedtoruntheircourse,withthelastonevestinginMay2017.NoexecutivedirectorheldanyoutstandingSMPawardsasatthe2017/18financialyearend.TheSMPremainsopentoasmallnumber of senior executives below Board level.

Vestingofawards isdependentsolelyonachievingtheunderlying fullydilutedpost-taxEPStargetsdetailedbelow.Under theformulae, a notional adjustment is made to actual EPS achieved for special dividends, on the basis that the cash distributed had insteadbeenusedtopurchasesharesattheprevailingsharepriceonthedayofthespecialdividendpayment.

Payments to past directors (audited information)Therewerenopaymentsmadetopastdirectorsduringthe2017/18financialyear.

Payments for loss of office (audited information)Therewerenopaymentsmadetoanydirectorinrespectoflossofofficeduringthe2017/18financialyear.

Performance and CEO remuneration comparisonPerformance graphThegraphbelowillustratestheTotalShareholderReturns(TSR)performanceoftheCompanywhencomparedwiththeFTSEAllShareandFTSEGeneralRetailersindices.ThesehavebeenselectedtoillustratetheCompany’stotalshareholderreturnperformanceagainstawideUKindexandasectorspecificindexforthenineyearperiodendedJanuary2018.

NEXTplcperformancechart2009-2018TotalShareholderReturn

NEXT FTSE All Share FTSE General Retailers Re-based to 31 January 2009 = 100

2009 2010 2011 2012 2013 2014 2015 2016 2017 201820

100

180

260

340

420

500

580

660

740

820

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Analysis of Chief Executive’s pay over 9 yearsThetablebelowsetsouttheremunerationforLordWolfsonwhohasbeentheChiefExecutivethroughoutthisperiod.

Financial year to January 2010 2011 2012 2013 2014 2015 2016 2017 2018Single figure of total remuneration£000

2,833 3,010 4,106 4,630 4,646 4,660 4,295 1,831 1,153

Annualbonuspay-outagainstmaximumopportunity1

100% 100% 72% 99% 100% 100% 45% 0% 0%

LTIPpay-outagainstmaximumopportunity2

100% 65% Twosemi-annual awards vested at100%and83%,however

total value capped at

£2.5m

Twosemi-annual awards vested at96%

and98%,however


£2.5m


each, however


£2.5m


each, however


£2.5m


and77%


and20%

Twosemi-annual awards vested

at nil

SMPpay-outagainstmaximumopportunity

n/a n/a n/a Entitlement waived3

Entitlement waived3

Did not participate in2012-15

SMP

100% n/a n/a

1. ThemaximumbonusfortheChiefExecutiveis150%ofsalary.

2. Thefirstofsemi-annual,ratherthanannual,awardsvestedinJuly2011.

3. LordWolfsonwaivedhisentitlementtoSMPawardsintheseyears.Hadhenotdoneso,histotalremunerationwouldhavebeen£8,947kforthefinancialyeartoJanuary2014and£7,601kforthefinancialyeartoJanuary2013.

Change in remuneration of Chief Executive Thetablebelowshows thepercentagechanges inLordWolfson’s remuneration (i.e. salary, taxablebenefitsandannualbonus)between2016/17and2017/18comparedwiththepercentagechangesintheaverageofeachofthosecomponentsofpayforGroupemployeesintheUKandEire.Thisgrouphasbeenselectedasthemostappropriatecomparatorandrepresentsover86%oftheGroup’sworkforce.

Salary% change

Annualbonus

% change

Taxable benefits

% changeLordWolfson +1.0% – -49.3%UK/EireEmployees(averageperFTE) +5.8% +18.1% +17.7%

Relative importance of spend on payThegraphbelow illustrates for the years 2017/18 and 2016/17 the relative and actual spendon total remunerationpaid to allemployeesoftheGrouptogetherwithothersignificantdistributionsandpayments(i.e.forsharebuybacks/specialdividendsandordinarydividends).

Allemployeeremunerationcomparedwithotherdisbursements

£586.1m £594.6m

£361.7m£255.6mSpecial

dividends £88.3m Special dividends

£187.6m Buybacks

£106.1mBuybacks

Total wages and salaries Buybacks and special dividends Ordinary dividends

£275.9m£224.1m £225.8m

2017/18

2016/17

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Dilution of share capital by employee share plansTheCompanymonitorsandcomplieswithdilutionlimitsinitsvariousshareschemerulesandhasnotissuedasignificantnumberofnewortreasurysharesinsatisfactionofshareschemesinthelast10years.Share-basedincentivesareinmostcasessatisfiedfromsharespurchasedandheldbytheESOT(refertoNote23ofthefinancialstatements).

Consideration of matters relating to directors’ remunerationRemuneration CommitteeDuringtheyeartheCommitteecomprisedthefollowingindependentnon-executivedirectors:

CarolineGoodall(CommitteeChairman)SteveBarber(untilMay2017)JohnBarton(untilAugust2017)Jonathan Bewes MichaelRoney(fromFebruary2017)FrancisSalwayDame Dianne Thompson

TheCommitteemetfivetimesduringtheyearunderreviewandallmeetingswerefullyattended.

Role and work of Remuneration CommitteeTheCommitteedeterminestheremunerationoftheGroup’sChairmanandexecutivedirectors,andreviewsthatofseniorexecutives.It is also responsible fordetermining the targets forperformance-relatedpay schemes, approvesanyawardof theCompany’ssharesundershareoptionorincentiveschemestoemployees,andoverseesanymajorchangesinemployeebenefitstructures.TheCommitteemembershavenoconflictsofinterestarisingfromcross-directorshipsandnodirectorispermittedtobeinvolvedinanydecisionsastohisorherownremuneration.Theremunerationofnon-executivedirectorsisdecidedbytheChairmanandexecutivedirectorsoftheBoard.TheCommittee’sTermsofReferenceareavailableonourcorporatewebsite(www.nextplc.co.uk)oronrequestfromtheCompanySecretary.

Assistance to the CommitteeDuringtheperiodtheCommitteereceivedinputfromtheChiefExecutiveandtheGroupFinanceDirector.AonHewittLtdandFITRemunerationConsultantsLLP(FIT)alsoprovidedindependentexternaladvice,includingupdatesonlegislativerequirements,bestpractice, and other matters of a technical nature and related to share plans.

AonHewittandFIThavenootherconnectionwiththeCompanyandwereappointedbytheCommitteebasedontheirexpertiseintherelevantareasofinterest.Basedonthenatureoftheadvice,therelativelysmallfeesandnootherconnectionexistingwiththeseadvisers,theCommitteewassatisfiedthattheadvicereceivedwasobjectiveandindependent.AonHewittandFITaremembersoftheRemunerationConsultantsGroup,thebodythatoverseestheCodeofConductinrelationtoexecutiveremunerationconsultingintheUK,andhaveconfirmedtousthattheyadheretoitsCode.AtthebeginningoftheyearPricewaterhouseCoopersLLP(PwC)provided independent verification services of total shareholder returns for NEXT and the comparator group of companies under the LTIPandothertechnicalassistance.ThisworkwasthenmovedtoDeloitteLLP,priortotheappointmentofPwCasexternalauditorof NEXT.

DuringtheyearAonHewittandFITwereeachpaidlessthan£17kandPwCandDeloittewereeachpaidlessthan£3kfortheservicesdescribedabove,chargedattheirstandardhourlyrates.

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Voting outcomes at General Meetings

AGM Votes for%

forVotes

against%

againstTotal votes

cast% of shares on register

Votes withheld

To approve the Remuneration Policy 2017 107,107,291 98.6 1,471,317 1.4 108,578,608 73.8 900,892

Toapprovethe2016/17Remuneration Report 2017 108,223,045 99.6 436,396 0.4 108,659,441 73.9 820,060

Authorityforthedirectorstoamend the rules of the NEXT LTIP (to permit new awards under this plan to receive the benefit of dividends paid in the period between grant and vesting)

2017 108,796,669 99.4 665,001 0.6 109,461,670 74.4 17,832

Service contractsExecutive directorsTheCompany’spolicyonnoticeperiodsandinrelationtoterminationpaymentsissetoutinthepolicytableonpage92.Apartfromtheirservicecontracts,nodirectorhashadanymaterialinterestinanycontractwiththeCompanyoritssubsidiaries.

Non-executive directors LettersofappointmentfortheChairmanandnon-executivedirectorsdonotcontainfixedtermperiods;however,theyareappointedintheexpectationthattheywillserveforaminimumofsixyears,subjecttosatisfactoryperformanceandre-electionatAnnualGeneral Meetings.

Datesofappointmentandnoticeperiodsfordirectorsaresetoutbelow:

Date of appointment to the

Board

Notice period where given by the

Company

Notice period where given by the

employeeChairmanMichaelRoney 14February2017* 12 months 6 monthsExecutive directorsLordWolfson 3February1997 12 months 6 monthsAmanda James 1April2015 12 months 6 monthsMichael Law 1July2013 12 months 6 monthsJane Shields 1July2013 12 months 6 monthsNon-executive directorsJonathan Bewes 3October2016 1 month 1 monthCarolineGoodall 1January2013 1 month 1 monthFrancisSalway 1June2010 1 month 1 monthDame Dianne Thompson 1January2015 1 month 1 month

* AppointedChairman2August2017

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Remuneration ReportPart 3: Remuneration Policy Table

ThetablefollowingsummarisestheCompany’spolicieswithregardtoeachoftheelementsofremunerationforexistingdirectors,asapprovedbyshareholdersinMay2017,andisprovidedforeaseofreferenceonly.Thisisaneditedversionofthepolicyreportandhasnotbeenupdatedoramendedinanyway.ThefullRemunerationPolicyissetoutintheJanuary2017AnnualReport,pages63to72,andisavailableonourcorporatewebsitewww.nextplc.co.uk.

A shareholder vote on Remuneration Policy is not required in 2018.

OnbehalfoftheBoard

Caroline GoodallChairmanoftheRemunerationCommittee

23March2018

RemunerationPolicytable,asapprovedin2017.AllpagereferencesbelowaretotheJanuary2017AnnualReportandAccountswhich is available on our website.

Base salaryPurpose and link to strategyTo attract, motivate and retain high calibre individuals, while not overpaying. To provide a satisfactory base salary within a total package comprising salary and performance-related pay.

Performance-related components and certain benefits are calculated by reference to base salary. The level of salary broadly reflects the value of the individual, their role, skills and experience.

OperationNormally reviewed annually, generally effective 1 February. The Committee focusesparticularlyonensuringthatanappropriatebasesalaryispaidtodirectorsandseniormanagers.TheCommitteeconsiderssalariesinthecontextofoverallpackages with reference to individual experience and performance, the level andstructureofremunerationforotheremployees,theexternalenvironmentandmarketdata.ExternalbenchmarkinganalysisisonlyoccasionallyundertakenandtheCommitteehasnotadoptedaprescribedobjectiveofsettingsalariesbyreference to a particular percentile or benchmark.

Maximum opportunityThereisnoguaranteedannualincrease.TheCommitteeconsidersitimportantthatbasesalaryincreasesarekeptundertightcontrolgiven the multiplier effect of such increases on future costs. In the normalcourseofevents,increasesinexecutivedirectors’salarieswouldbeinlinewiththewiderCompanycostoflivingawards.

TheCommitteereservesflexibilitytograntlargerincreaseswhereconsidered appropriate, such as where a new executive director, being an internal promotion, has been appointed to the Board withaninitialsalarywhichisconsideredbelowthenormalmarketrate, then theCommitteemaymake staged increases tobringthesalaryintolineastheexecutivegainsexperienceintherole.Alsoiftherehavebeensignificantchangesinthesizeandscopeoftheexecutive’srolethentheCommitteewouldreviewsalarylevelsaccordingly.

Under the reporting regulations the Company is required tospecifyamaximumpotentialvalueforeachcomponentofpay.Accordingly,fortheperiodofthispolicynobasesalarypaidtoan executive director in any year will exceed £850,000 (beingthe currentmedianbase salary of FTSE 100Chief Executives).TheamountofthemaximumbasesalarywhichmaybepaidtoanexecutivedirectorinanyyearshallincreaseinlinewiththegrowthinRPIfromthedateofapprovalofthispolicy.

Performance measures and targetsNot applicable.

Key changes to last approved policyNo material changes. To comply with the latest regulatoryguidance,thesalarycaphasbeenexpressedasafixedamount.

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Annual bonusPurpose and link to strategyTo incentivise delivery of stretching annual goals.

To provide focus on the Company’s key financial objectives.

To provide a retention element in the case of the Chief Executive as any annual bonus in excess of 100% of base salary is payable in shares, deferred for a period of two years and subject to forfeiture if he voluntarily resigns prior to the end of that period.

OperationPerformance measures and related performance targets are set at the commencementofeachfinancialyearbytheCommittee.Companypolicyistosetsuchmeasuresbyreferencetofinancialmeasures(suchaspre-taxEPS)buttheCommitteeretainsflexibilitytousedifferentperformancemeasuresduringtheperiodofthispolicyifitconsidersitappropriatetodoso,althoughatleast75%ofanybonuswillcontinuetobesubjecttofinancialmeasures.

At the threshold level ofperformance, 20%of themaximumbonusmaybeearned.Astraightslidingscaleofpaymentsoperatesforperformancebetweentheminimumandmaximumlevels.Thereisnoin-linetargetlevelalthough,forthepurposesofthescenariochartsonpage71,50%ofmaximumbonushasbeenassumedbecauseitisthemid-point.

Dividendaccruals(bothinrespectofspecialandordinarydividends)maybepayableonanydeferredbonusawardswhichvest.

TheCompanyhastheflexibilitywithintherulesoftheDeferredShareBonusPlan to grant nil cost options as an alternative to conditional share awards or exceptionallytosettleincash.

Maximum opportunityAtpresentCompanypolicy is toprovideamaximumbonusof150%ofsalaryfortheChiefExecutiveand100%ofsalaryforotherexecutive directors.

AlthoughtheCommitteehasnocurrentplantomakeanychanges,fortheperiodofthispolicytheCommitteereservesflexibilityto:

• increase maximum bonus levels for executive directors in any financial year to200%of salary.This flexibilitywouldbeusedonly inexceptionalcircumstancesandwheretheCommitteeconsideredanysuchincreasetobeinthebestinterests of shareholders and after appropriate consultation withkeyshareholders;

• lessen the current differentials in bonus maximums which exist between the Chief Executive and other executivedirectors; and

• introduce or extend an element of compulsory deferralof bonus outcomes if considered appropriate bytheCommittee.

Performance measures and targetsCurrentlyperformanceisassessedagainstpre-taxEPStargetssetannually,whichtakeaccountoffactorsincludingtheCompany’sbudgetsandthewiderbackgroundoftheUKeconomy.Pre-taxEPS has been chosen as the basic metric to avoid executives benefitting from external factors such as reductions in the rate of corporationtax.Generally,thethresholdforstaffbonusesissetatalowerlevelthanfordirectors.TheCommitteereservesflexibilitytoapplydiscretionintheinterestsoffairnesstoshareholdersandexecutivesbymakingadjustmentsitconsidersappropriate.

TheCommitteereservesflexibilitytoapplydifferentperformancemeasures and targets in respect of the annual bonus for the period ofthispolicybutafinancialmeasurewillcontinuetobeusedforatleast75%oftheaward.TheCommitteewillconsultwithmajorshareholdersbeforeanysignificantchangesaremadetotheuseof performance measures.

The basis of performance measurement incorporates an appropriate adjustment to EPS growth to reflect the benefit to shareholdersfromspecialdividendspaidinanyperiod.

Key changes to last approved policyDividend accruals (both in respect of special and ordinarydividends)maybepayableonvesteddeferredbonusawards.

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Long Term Incentive Plan (LTIP)Purpose and link to strategyTo incentivise management to deliver superior total shareholder returns (TSR) over three year performance periods relative to a selected group of retail companies, and align the interests of executives and shareholders.

Retention of key, high calibre employees over three year performance periods and encouraging long term shareholding, through post vesting holding requirement, and commitment to the Company.

OperationAvariablepercentageof apre-determinedmaximumnumberof shares canvest, depending on the achievement of performance conditions.

Themaximumnumberof shares thatmaybe awarded to eachdirector is apercentageofeachdirector’sbase salaryat thedateofeachgrant,dividedbyNEXT’saveragesharepriceoverthethreemonthspriortothestartoftheperformance period.

LTIPawardsaremadetwiceayeartoreducethevolatilityinherentinanyTSRperformance measure and to enhance the portfolio effect for participants of morefrequent,butsmaller,grants.

TheCompanyhas the flexibilitywithin the rulesof theLTIP tograntnil costoptions as an alternative to conditional share awards and to settle vested LTIP awards in cash.

Dividendaccruals(bothinrespectofspecialandordinarydividends)maybepayableonanyvestedLTIPawards.

Maximum opportunityThe maximum possible aggregate value of awards granted to all executivedirectorswillbe200%ofannualsalary(i.e.100%everysixmonths)andupto300%inexceptionalcircumstances.

TheCommitteereservestherighttovarytheselevelswithintheoverall annual limits described above. In addition, awards granted to executive directors which vest must be taken in shares and thenetshares(afterpaymentoftaxandNIC)mustbeheldforaminimumperiodof two furtheryears.TheCommittee reservesthe right to lengthen (but not reduce) the performance period and to further increase the holding period or to introduce a retentionrequirement.

Performance measures and targetsPerformance is measured over a period of three years.CurrentlyperformanceismeasuredbasedonNEXT’sTSRagainstagroup(currently20otherUKlistedretailcompanies)whichare,intheviewoftheCommittee,mostcomparablewithNEXTinsizeornatureoftheirbusiness.Comparisonagainstsuchagroupismorelikely to reflect theCompany’s relativeperformanceagainst itspeers,therebyresultinginawardsvestingonanappropriatebasis.

Relative performance Percentage vestingBelow median 0%Median 20%Upperquintile 100%

If no entitlement has been earned at the end of a three yearperformance period then that award will lapse; there is no retesting.

Key changes to last approved policyDividend accruals (both in respect of special and ordinarydividends)maybepayableonvestedawards.

PensionPurpose and link to strategyTo provide for retirement through Company sponsored schemes or a cash alternative for personal pension planning and therefore assist attraction and retention.

OperationLordWolfson,Michael Law and Jane Shields are deferredmembers of thedefinedbenefit(DB)sectionofthe2013NEXTGroupPensionPlan(the“Plan”).

In addition to being a deferred member of the DB section of the Plan, Lord Wolfson is amember of the unfunded, unapproved supplementary pensionarrangement(SPA),describedonpage77.HisfuturepensionwillbecalculatedbyreferencetohisOctober2012salary,ratherthanhisfinalearnings,andanyfuturesalarychangeswillhavenoeffect.

JaneShieldsandMichaelLawceasedtocontributetothePlanin2011andin2012respectively.Theirpensionsarenolongerlinkedtosalaryandwillincreaseinlinewithstatutorydeferredrevaluationonly(i.e.inlinewithCPI).

LordWolfson,MichaelLawandJaneShieldsreceivesalarysupplementsof15%in lieu of past changes to their pension arrangements, in line with other senior employeemembersoftheDBsectionofthePlan.

Amanda James is a member of the defined contribution section of the Plan and theCompanycurrentlymakesacontributionequalto5%ofhersalaryintoherpensionplan.AmandacanopttoreceiveanequivalentcashsupplementinlieuofthisCompanycontribution.Thisisconsistentwiththepensionprovisionandalternativesavailabletoemployeesgenerally.

NewemployeesoftheGroupcanjointhedefinedcontribution(DC)sectionoftheNEXTPlanorthestatutoryautoenrolmentplanorreceiveacashsupplement.

Bonuses are not taken into account in assessing pensionable earnings in the Plan.

Maximum opportunityUnder the DB section and the SPA, the maximum potentialpension isonly achievedoncompletionof at least20yearsofpensionable service at age 65, when two thirds of the executive director’s annual pensionable salary at October 2012 couldbecomepayable.The lumpsumpayableondeath inservice isfourtimesbasesalary.

NoDCcontributions,orequivalentcashsupplementpayments,willbemadetoanexecutivedirectorinanyyearthatwillexceed25% of base salary (being slightly below the median level ofcontributionsorpaymentsmadetoFTSE100ChiefExecutives).


Key changes to last approved policyNo material changes. To comply with the latest regulatoryguidance, the pension cap has been expressed as a fixed percentageofsalary.

Remuneration Report

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Other benefitsPurpose and link to strategyTo provide market competitive non-cash benefits to attract and retain high calibre individuals.

OperationExecutivedirectorsreceivebenefitswhichmayincludetheprovisionofacompanycar or cash alternative, private medical insurance, subscriptions to professional bodies and staff discount on Group merchandise. A driver is also made available to the executive directors.

TheCommitteereservesdiscretiontointroducenewbenefitswhereitconcludesthat it is in the interests of NEXT to do so, having regard to the particular circumstancesandtomarketpracticeandreservesflexibilitytomakerelocationrelatedpayments.

Whilstnotconsiderednecessarily tobebenefits, theCommitteereservesthediscretiontoauthoriseattendancebydirectorsandtheirfamilymembers(attheCompany’scostifrequired)atcorporateeventsandtoreceivereasonablelevelsofhospitalityinaccordancewithCompanypolicies.

Reasonable business related expenses will be reimbursed (including anytax thereon).

Maximum opportunityDuring the policy period, the value of benefits (other thanrelocation costs) paid to an executivedirector in any yearwillnotexceed£150,000. Inaddition,theCommitteereservestheright topayup to£250,000 relocationcosts inanyyear toanexecutive director if considered appropriate to secure the better performancebyanexecutivedirectoroftheirduties.

During the policy period, the actual level of taxable benefitsprovided will be included in the single total figure of remuneration.


Key changes to last approved policyIncreasedthebenefitscapby£50,000to£150,000toprovidesuitableflexibilityovertheperiodoftheRemunerationPolicy.

Save As You Earn Scheme (Sharesave)Purpose and link to strategyTo encourage all employees to make a long term investment in the Company’s shares.

OperationExecutivedirectorscanparticipateintheCompany’sSharesaveschemewhichisHMRCapprovedandopentoallemployeesintheUK.AsimilarschemeisavailabletoemployeesinEire.Optiongrantsaregenerallymadeannually,withtheexercisepricediscountedbyamaximumof20%ofthesharepriceatthedateaninvitationisissued.Optionsareexercisablethreeorfiveyearsfromthedateofgrant.Alternatively,participantsmayaskfortheircontributionstobe returned.

Maximum opportunityInvestment currently limited to a maximum amount of £250permonth. TheCommittee reserves the right to increase themaximumamountinlinewithlimitssetbyHMRC(currently£500per month).


Key changes to last approved policyUpdated topermit themaximumamount to reflect the latestHMRClimits.

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Remuneration Report

Termination paymentsPurpose and link to strategyConsistent with market practice, to ensure NEXT can recruit and retain key executives, whilst protecting the Company from making payments for failure.

OperationTheCommitteewillconsidertheneedforandquantumof any terminationpayments having regard to all therelevant facts and circumstances at that time.

Future service contracts will take into account relevant published guidance.

Maximum opportunityEach of the executive directors has a rolling service contract. Dates of appointment and noticeperiodsaredisclosedonpage85.ThecontractisterminablebytheCompanyongivingoneyear’snoticeandbytheindividualongivingsixmonths’notice.Forcurrentdirectors, theCompanyhasreservedtherighttomakeapayment in lieuofnoticeonterminationofanexecutivedirector’scontractequaltotheirbasesalaryandcontractualbenefits(excludingperformance-relatedpay).Forfuturedirectors,anypaymentinlieuofnoticewouldbelimitedtotheirbasesalaryonly.

Forcurrentdirectors,ifnoticeofterminationisgivenimmediatelyfollowingachangeofcontroloftheCompany,theexecutivedirectormayrequestimmediateterminationofhis/hercontractandpaymentofliquidateddamagesequaltothevalueofhis/herbasesalaryandcontractualbenefits.Liquidateddamagesprovisionswillnotbepresentinanyservicecontractforanewexecutivedirector.Anynewservicecontractwillincludeprovisionforanyterminationpaymentstobemadeonaphasedbasis.

In normal circumstances executive directors have no entitlement to compensation in respect of loss of performance bonuses and all share awards would lapse following resignation. However, under certain circumstances (e.g. “good leaver” or change incontrol), and solely at the Committee’s discretion, annual bonus payments may bemadeandwouldordinarilybecalculateduptothedateofterminationonly,basedonperformance. In addition, awards made under the LTIP would in those circumstances generallybetimepro-ratedandremainsubjecttotheapplicationoftheperformanceconditionsatthenormalmeasurementdate.TheCommitteealsohasastandarddiscretiontovarytheapplicationoftimepro-rating insuchcases.“Goodleaver”treatmentsareappliedinexceptionalcasesonly.

In the event of any termination payment being made to a director (including anyperformance-relatedpayelements),theCommitteewilltakefullaccountofthatdirector’sduty tomitigateany lossand,whereappropriate,mayseek independentprofessionaladvice and consider the views of shareholders as expressed in published guidance prior toauthorisingsuchpayment.

Consistent with market practice, in the event of removal from office of an executivedirector,theCompanymaypayacontributiontowardstheindividual’slegalfeesandfeesfor outplacement services as part of a negotiated settlement and such other amounts as theCommitteeconsiders tobenecessary,having taken legaladvice, in settlementof potential claims. Any such fees would be disclosed with all other terminationarrangements.TheCommittee reserves the right, ifnecessary, toauthoriseadditionalpaymentsinrespectofsuchprofessionalfeesifnotascertainedatthetimeofreportingsuchterminationarrangementsuptoamaximumof£10,000.

Adepartinggiftmaybeprovideduptoavalueof£10,000(plusrelatedtaxes)perdirector.


Key changes to last approved policyPaymentinlieuofnoticewillbelimitedtobasesalaryforanynewexecutivedirectors.Liquidateddamageswillnotbeusedforanynewexecutivedirectorappointment.Anynewservicecontractswillincludeprovisionforphasedpayments.

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Recovery and withholding provisionsPurpose and link to strategyTo ensure the Company can recover any payments made or potentially due to executive directors under performance-related remuneration structures.

OperationRecoveryandwithholdingprovisionsareintheservicecontractsofallexecutivedirectors and will be enforced where appropriate to recover or withhold performance-relatedremunerationwhichhasbeenoverpaiddueto:amaterialmisstatementoftheCompany’saccounts;errorsmadeinthecalculationofanaward;oradirector’smisconduct.Theseprovisionsallowfortherecoveryofsumspaidand/orwithholdingofsumstobepaid.

Maximum opportunityNot applicable.


Key changes to last approved policyNo material changes.

Chairman and non-executive director feesPurpose and link to strategyTo ensure fees paid to the Chairman and non-executive directors are competitive and comparable with other companies of equivalent size and complexity so that the Company attracts non-executive directors who have a broad range of experience and skills to oversee the implementation of our strategy.

OperationRemunerationofthenon-executivedirectorsisnormallyreviewedannuallyanddeterminedbytheChairmanandtheexecutivedirectors.TheChairman’sfeeisdeterminedbytheCommittee(excludingtheChairman).

Additionalfeesarepaidtonon-executivedirectorswhochairtheRemunerationand Audit Committees, and act as the Senior Independent Director.Thestructureoffeesmaybeamendedwithintheoveralllimits.

External benchmarking is undertaken only occasionally and there is noprescribedpolicyregardingthebenchmarksusedoranyobjectiveofachievinga prescribed percentile level.

Currently,foreachdayspentonCompanybusinessinexcessofthenormaltimecommitment,theChairmanwillbepaid£1,500andthenon-executivedirectors£1,000.ThesearesubjecttoanannualreviewbytheBoard.Reasonablebusinessrelatedexpenseswillbereimbursed(includinganytaxthereon).

Maximum opportunityThe totalof feespaid to theChairmanand thenon-executivedirectorsinanyyearwillnotexceedthemaximumlevelforsuchfeesfromtimetotimeprescribedbytheCompany’sArticlesofAssociation(currently£750,000perannum).

Performance measures and targetsNon-executive directors receive the normal staff discount onGroupmerchandisebutdonotparticipateinanyoftheGroup’sbonus, pension, share option or other incentive schemes.

Key changes to last approved policyNo material changes.

AllpagereferencesabovearetotheJanuary2017AnnualReportandAccountswhichisavailableonourwebsite.

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Independent Auditor’s Report to the Members of NEXT plc

Report on the audit of the financial statementsOpinionInouropinion:

• NEXTplc’sGroupfinancialstatementsandParentCompanyfinancialstatements(the“financialstatements”)giveatrueandfairviewofthestateoftheGroup’sandoftheParentCompany’saffairsasat27January2018andoftheGroup’sprofitandcashflowsforthe52weekperiod(the“period”)thenended;

• theGroupfinancialstatementshavebeenproperlypreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnion;

• theParentCompanyfinancialstatementshavebeenproperlypreparedinaccordancewithUnitedKingdomGenerallyAcceptedAccounting Practice (United Kingdom Accounting Standards, comprising FRS 101, “Reduced disclosure framework”, and applicable law); and

• thefinancialstatementshavebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006and,asregardstheGroupfinancialstatements,Article4oftheIASRegulation.

Wehaveauditedthefinancialstatements,includedwithintheAnnualReportandAccounts(the“AnnualReport”),whichcomprise:theConsolidatedandParentCompanyBalanceSheetsasat27January2018,theConsolidatedIncomeStatementandConsolidatedStatementofComprehensiveIncome,theConsolidatedandParentCompanyStatementsofChangesinEquity,andtheConsolidatedCashFlowStatementforthe52weekperiodthenended;theaccountingpolicies;andtheNotestothefinancialstatements.

OuropinionisconsistentwithourreportingtotheAuditCommittee.

Basis for opinionWeconductedourauditinaccordancewithInternationalStandardsonAuditing(UK)(“ISAs(UK)”)andapplicablelaw.OurresponsibilitiesunderISAs(UK)arefurtherdescribedintheAuditors’responsibilitiesfortheauditofthefinancialstatementssectionofourreport.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

IndependenceWeremainedindependentoftheGroupinaccordancewiththeethicalrequirementsthatarerelevanttoourauditofthefinancialstatementsintheUK,whichincludestheFRC’sEthicalStandard,asapplicabletolistedpublicinterestentities,andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeserequirements.

Tothebestofourknowledgeandbelief,wedeclarethatnon-auditservicesprohibitedbytheFRC’sEthicalStandardwerenotprovidedtotheGrouportheParentCompany.

OtherthanthosedisclosedintheAuditCommitteeReport,wehaveprovidednonon-auditservicestotheGrouportheParentCompanyintheperiodfrom29January2017to27January2018.

Our audit approachOverview

Materiality

Audit scope

Key audit matters

• OverallGroupmateriality:£36.0million,basedonapproximately5%ofprofitbeforetax.

• OverallParentCompanymateriality:£25.0million,basedonapproximately1%oftotalassets.

• Weconductedanauditofthecompletefinancialinformationofonefinanciallysignificantreporting unit as well as five other reporting units.

• Five of these components were audited by the UKGroup Engagement Teamwith theremainingcomponentauditedbyalocalcomponentteamlocatedinHongKong.

• Ourscopingresultedincoverageof95%ofrevenue,97%ofprofitbeforetaxand98%oftotal assets.

• RecoverabilityofOnlinecustomerreceivables(Group).

• Inventorybeinginexcessofnetrealisablevalue(Group).

• Appropriateness of other provisions (Group).

• Valuationoffinancialinstruments(GroupandParentCompany).

• Accounting for defined benefit pension arrangements (Group).

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The scope of our auditAspartofdesigningouraudit,wedeterminedmaterialityandassessedtherisksofmaterialmisstatementinthefinancialstatements.In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates thatinvolvedmakingassumptionsandconsideringfutureeventsthatareinherentlyuncertain.

WegainedanunderstandingofthelegalandregulatoryframeworkapplicabletotheGroupandtheindustryinwhichitoperates,andconsideredtheriskofactsbytheGroupwhichwerecontrarytoapplicablelawsandregulations,includingfraud.Wedesignedaudit procedures at Group and significant component level to respond to the risk, recognising that the risk of not detecting a material misstatementduetofraudishigherthantheriskofnotdetectingoneresultingfromerror,asfraudmayinvolvedeliberateconcealmentby,forexample,forgeryorintentionalmisrepresentations,orthroughcollusion.WefocusedonlawsandregulationsthatcouldgiverisetoamaterialmisstatementintheGroupandParentCompanyfinancialstatements,including,butnotlimitedto:theCompaniesAct2006,theListingRules,Pensionslegislation,UKtaxlegislationandtheFinancialConductAuthority’shandbookwithrespecttocreditrelatedregulatedactivity.

Ourtestsincluded,butwerenotlimitedto:reviewofthefinancialstatementdisclosurestounderlyingsupportingdocumentation,reviewofcorrespondencewiththeregulators,enquiriesofmanagement,enquiriesofinternallegalteamandreviewofinternalauditreportsinsofarastheyrelatedtothefinancialstatements.Thereareinherentlimitationsintheauditproceduresdescribedaboveandthefurtherremovednon-compliancewithlawsandregulationsisfromtheeventsandtransactionsreflectedinthefinancialstatements,thelesslikelywewouldbecomeawareofit.

Wedidnotidentifyanykeyauditmattersrelatingtoirregularities,includingfraud.Asinallofourauditswealsoaddressedtheriskofmanagementoverrideofinternalcontrols,includingtestingjournalsandevaluatingwhethertherewasevidenceofbiasbythedirectors that represented a risk of material misstatement due to fraud.

Key audit mattersKeyauditmattersarethosemattersthat,intheauditors’professionaljudgement,wereofmostsignificanceintheauditofthefinancialstatements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identifiedbytheauditors,includingthosewhichhadthegreatesteffecton:theoverallauditstrategy;theallocationofresourcesintheaudit;anddirectingtheeffortsoftheengagementteam.Thesematters,andanycommentswemakeontheresultsofourproceduresthereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we donotprovideaseparateopiniononthesematters.Thisisnotacompletelistofallrisksidentifiedbyouraudit.

Key audit matter How our audit addressed the key audit matterRecoverabilityofOnlinecustomerreceivablesGroup

Refer to the Audit Committee Report on page 67, major sources ofestimationuncertaintywithintheGroupAccountingPoliciesandNote11for customer and other receivables.

Anallowanceof£138.7misrecognisedagainstOnlinecustomerreceivablesof£1,255.6m.TheallowanceagainstOnlinecustomerreceivablesinvolvesjudgement in determining the expected loss to NEXT where a loss event has occurred by the year end date. The significant judgements andassumptionsasappliedwhencalculatingtheallowanceare:

• howimpairmenttriggers(or“lossevents”)areidentified;

• the default rate representing the likelihood of eventual default for debt within each risk or ageing category of the gross receivablebalance; and

• the recovery rateondefaulteddebtwhichhasbeenpassedontodebt collection agencies.

Theabove judgementsandassumptionsare influencedbyamixtureofinternallyandexternallysourcedinformation.

WehaveperformedcontrolstestingontheoriginationandservicingoftheunderlyingOnlinecustomerreceivablesandrelatedITsystemsandhavesubstantivelytestedtheyearendreceivablesbalancetowhichmanagement have applied their provision assumptions.

We assessed management’s provision methodology against therequirementsofIAS39,utilisingourfinancialservicesspecialists.

Wehavetestedhistoricaldefaultexperienceandrecoveriesandthestratificationof theyearendbookbyarrearspositionandcustomercreditratings,beingthetwokeydriverstotheprovisioncalculatedbymanagement.Wehavethenindependentlyre-calculatedtheprovision,basedonmanagement’sassumptions.

Independently,wehaveassessedtheappropriatenessofmanagement’sassumptions based on NEXT’s historical book experience andexternally sourced evidence. For those assumptionswhich involvedmostmanagementjudgement,wehaveperformedsensitivityanalysis,based on alternative assumptions.

In relation to management’s estimate of losses which have beenincurredasattheyearenddatebuthavenotyetemergedthroughmissedpayments,wehavelookedcloselyattheperformanceofthebookinthemonthsleadinguptotheyearendandsubsequentandapplied additional sensitivities.

Our testing included assessing whether the performing Onlinecustomer receivablesaregenuinelyperforming toensure loansandadvancesareappropriatelyrecorded.

Weformedourownindependentexpectationoftheallowanceamountandconcludedthatthepositiontakenbymanagementwasreasonable.

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Key audit matter How our audit addressed the key audit matterInventorybeinginexcessofnetrealisablevalueGroup

RefertotheAuditCommitteeReportonpage68andthemajorsourcesofestimationuncertaintywithintheGroupAccountingPolicies.

The valuation of inventory involves judgement in recording provisionsfor slowmoving or obsolete inventory. The significant judgements andassumptionsasappliedwhencalculatingtheprovisionsare:

• the forecasted sell through rates of current and prior season inventorytodetermineinventoryexpectedtobesoldviaclearancechannels; and

• the forecasted cash recovery rates on inventory sold viaclearance channels.

In addition, provisions are recognised for shrinkage and faultyinventory which require an estimate of expected inventory losses andrealisable amounts.

We evaluated the forecasted sell through and cash recovery ratesby corroborating historical rates and then assessingmanagement’sjudgement as to changes in customer behaviour/macro-economicconditions and the impact of this on forecasted rates.

Wehaveperformedsensitivityanalysisoverkeyjudgementstakenbymanagementandassessedtheimpactofthissensitivityanalysisontheprovision value.

We tested the integrity of the provision model to ensure that itwas using the underlying data correctly and calculating provisionamountsaccurately.

Wereviewedinventorywrite-offsinthefinancialperiodtoensuretheyareconsistentwiththetotalinventoryprovisionheldatyearend.

We found that the provisions recorded were consistent with theevidence obtained.

Appropriateness of other provisionsGroup

Refer totheAuditCommitteeReportonpage68, themajorsourcesofestimationuncertaintywithintheGroupAccountingPolicies,Note15fortradepayablesandotherliabilitiesandNote19forprovisions.

Revenue returns provisions involve judgement in determining the expected amountofreturnstobereceivedsubsequenttotheyearenddate.

Property-relatedprovisionsinvolvejudgementindeterminingtheextentto which certain leases are considered to be onerous and the expected valueofrectificationcoststobeincurredonleasedpropertieswhentheyare vacated.

We evaluated revenue returns provisions by testing the expectedreturnsrateacrosstheNEXTRetailandNEXTOnlinesegmentsandthegrossmarginamounts as applied to thenetprovision.Wealsounderstood the rights of customers to return goods, tested the amount ofreturnsreceivedintheperiodandpostyearendandthencomparedthat to the return rate per the provision calculation.

Weevaluatedtheproperty-relatedprovisionsbytestingmanagement’sassessment of the onerous elements of lease agreements and agreeing management’sassumptionsinrelationtofuturepropertyrectificationcosts tothespend incurredduringtheyear.Wealsoevaluated lossmaking stores where impairments and provisions were not in place to confirm that it was reasonable that no impairments or provisions had been recognised.

We found that the provisions recorded were consistent with theevidence obtained.

Valuation of financial instrumentsGroup and Parent Company

Refer to the Audit Committee Report on page 68 and Note 24 forfinancial instruments.

ThenatureoftheGroup’sbusinessmeansthatitisexposedtofluctuationsin foreign exchange rates on purchases and sales. As such, the Group takes out a number of foreign exchange derivatives which are valued on a marked to market basis and are therefore valued on an estimated basis with referencetomarketinputsratherthandirectlyobservablemarketvalues.The Group also has in place interest rate derivatives on a similar basis.

Wehaveobtainedthird-partyconfirmationsforall foreignexchangeand interest rate derivatives and ensured these are consistent with the amountsrecognisedbyNEXT.

We used valuation specialists to form an independent expectationoftheriskfreevaluationrecognisedbyNEXTforasampleofforeignexchange and interest rate derivatives.

Our valuation specialists also estimated the impact of a credit riskadjustmentarisingfromthecounterparty’screditriskwhenNEXTholdsanassetandarisingfromNEXT’screditriskwhenholdingaliability.

Wefoundthevaluationofforeignexchangeandinterestratederivativesto be consistent with the evidence obtained.

Accounting for defined benefit pension arrangementsGroup

Refer totheAuditCommitteeReportonpage68, themajorsourcesofestimationuncertaintywithintheGroupAccountingPoliciesandNote18for pension benefits.

The defined benefit pension scheme obligation of £830.3 million iscalculated based on actuarial assumptions which are subject to significant management judgement and are also sensitive to small changes.

Inaddition,therearerestrictionsunderIAS19andIFRIC14astowhenanetpension surplus should be recognised.

WeusedactuarialspecialiststoreviewthekeyactuarialassumptionsacrosstheOriginalPlan,the2013PlanandtheSPA.WefoundthattheassumptionsutilisedbyNEXTinthepensionobligationvaluationwerereasonable and within our expected range.

Wereviewedthetrustdeedsforthe2013Planwhereamaterialnetsurplus is recognised by NEXT. From this review, we concur withmanagement’sassessmentthatundertherequirementsof IFRIC14,NEXT should recognise the net surplus on the pension scheme.

We are satisfied that the valuation of the defined benefit pensionscheme obligations and the recognition of the net surplus is consistent with the evidence obtained.


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How we tailored the audit scopeWetailoredthescopeofouraudittoensurethatweperformedenoughworktobeabletogiveanopiniononthefinancialstatementsasawhole,takingintoaccountthestructureoftheGroupandtheParentCompany,theaccountingprocessesandcontrols,andtheindustryinwhichtheyoperate.

TheGroupfinancialstatementsareaconsolidationofanumberofreportingunits,comprisingtheGroup’soperatingbusinesseswithinitssixsegmentswithourauditworkfocusedontheNEXTRetail,NEXTOnline,NEXTSourcingandPropertyManagementsegments.

InestablishingtheoverallapproachtotheGroupaudit,weidentifiedonereportingunit(Retail)which,inourview,requiredanauditofitscompletefinancialinformationbothduetoitssizeandriskcharacteristics(formsthemajorityoftheNEXTRetailandNEXTOnlinesegments).

In addition, full scope audits were performed over five other reporting units which contribute to the highlighted segments, though thesearenotconsideredtobeindividuallysignificanteitherfinanciallyorduetoriskcharacteristics.

The audit work performed at these six reporting units, together with additional procedures performed on centralised functions at the Group level, including audit procedures over the consolidation and intangible asset impairment testing, gave us the evidence we needed for our opinion on the Group financial statements as a whole. This scoping as described above results in the following coverageatthekeymetrics:

• 95%ofrevenue;

• 97%ofprofitbeforetax;and

• 98%oftotalassets.

Fiveofthesix in-scopecomponentswereauditedbytheUKGroupEngagementTeamwiththeremainingcomponentauditedbyateaminHongKong.Throughouttheauditcycle,seniormembersoftheGroupEngagementTeamworkedcloselywiththelocal component team including review of risk assessment and attendance via video conference at the local closing meeting with management.TheirworkpaperswerealsosubjecttoreviewbytheGroupEngagementTeam.

TheParentCompanyiscomprisedofonereportingunitwhichwassubjecttoafullscopeauditforthepurposesoftheGroupandParentCompanyfinancialstatements.

MaterialityThescopeofourauditwasinfluencedbyourapplicationofmateriality.Wesetcertainquantitativethresholdsformateriality.These,togetherwithqualitativeconsiderations,helpedustodeterminethescopeofourauditandthenature,timingandextentofouraudit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individuallyandinaggregateonthefinancialstatementsasawhole.

Basedonourprofessionaljudgement,wedeterminedmaterialityforthefinancialstatementsasawholeasfollows:

Group financial statements Parent Company financial statementsOverallmateriality £36.0million. £25.0million.

Howwedeterminedit 5%ofprofitbeforetax. 1%ofTotalassets.

Rationale for benchmark applied Based on the benchmarks used in the Annual Report, profit before tax is the primarymeasureusedbytheshareholdersin assessing the performance of the Group, and is a generally acceptedauditing benchmark.

TheParentCompany’smainoperationsarethe holding and servicing of the Group's corporatebondsandpaymentofdividendstoexternalequityshareholders.Itdoesnottrade and therefore total assets is considered to be the most appropriate benchmark.

Foreachcomponent in thescopeofourGroupaudit,weallocatedamateriality that is less thanouroverallGroupmateriality.Therangeofmaterialityallocatedacrosscomponentswas£6.0millionto£33.0million.CertaincomponentswereauditedtoalocalstatutoryauditmaterialitythatwasalsolessthanouroverallGroupmateriality.

WeagreedwiththeAuditCommitteethatwewouldreporttothemmisstatementsidentifiedduringourauditabove£1.8million(Groupaudit)and£1.3million(ParentCompanyaudit)aswellasmisstatementsbelowthoseamountsthat,inourview,warrantedreportingforqualitativereasons.

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Going concernInaccordancewithISAs(UK)wereportasfollows:

Reporting obligationWearerequiredtoreportifwehaveanythingmaterialtoaddordrawattentiontoinrespectofthedirectors’statementinthefinancialstatementsaboutwhetherthedirectors considered it appropriate to adopt the going concern basis of accounting inpreparingthefinancialstatementsandthedirectors’identificationofanymaterialuncertaintiestotheGroup’sandtheParentCompany’sabilitytocontinueasagoingconcern over a period of at least twelve months from the date of approval of the financial statements.

OutcomeWehavenothingmaterialtoaddortodrawattentionto.However,becausenotallfutureevents or conditions can be predicted, this statement is not a guarantee as to the Group’s and Parent Company’s ability tocontinue as a going concern.

Weare required to report if the directors’ statement relating to going concern inaccordancewithListingRule9.8.6R(3) ismaterially inconsistentwithourknowledgeobtained in the audit.

Wehavenothingtoreport.

Reporting on other information TheotherinformationcomprisesalloftheinformationintheAnnualReportotherthanthefinancialstatementsandourauditors’reportthereon.Thedirectorsareresponsiblefortheotherinformation.Ouropiniononthefinancialstatementsdoesnotcovertheotherinformationand,accordingly,wedonotexpressanauditopinionor,excepttotheextentotherwiseexplicitlystatedinthisreport,anyformofassurancethereon.

Inconnectionwithourauditofthefinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismaterially inconsistentwiththefinancialstatementsorourknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.Ifweidentifyanapparentmaterial inconsistencyormaterialmisstatement,wearerequired toperformprocedures toconcludewhether there isamaterialmisstatementof the financial statementsoramaterialmisstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of thisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportbasedontheseresponsibilities.

WithrespecttotheStrategicReportandDirectors’Report,wealsoconsideredwhetherthedisclosuresrequiredbytheUKCompaniesAct2006havebeenincluded.

Basedontheresponsibilitiesdescribedaboveandourworkundertakeninthecourseoftheaudit,theCompaniesAct2006,(CA06),ISAs(UK)andtheListingRulesoftheFinancialConductAuthority(FCA)requireusalsotoreportcertainopinionsandmattersasdescribedbelow(requiredbyISAs(UK)unlessotherwisestated).

Strategic Report and Directors’ ReportInouropinion,basedontheworkundertakeninthecourseoftheaudit,theinformationgivenintheStrategicReportandDirectors’Reportfortheperiodended27January2018isconsistentwiththefinancialstatementsandhasbeenpreparedinaccordancewithapplicablelegalrequirements.(CA06)

InlightoftheknowledgeandunderstandingoftheGroupandParentCompanyandtheirenvironmentobtainedinthecourseoftheaudit,wedidnotidentifyanymaterialmisstatementsintheStrategicReportandDirectors’Report.(CA06)

98

The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the GroupWehavenothingmaterialtoaddordrawattentiontoregarding:

• Thedirectors’confirmationonpage42oftheAnnualReportthattheyhavecarriedoutarobustassessmentoftheprincipalrisksfacingtheGroup,includingthosethatwouldthreatenitsbusinessmodel,futureperformance,solvencyorliquidity.

• ThedisclosuresintheAnnualReportthatdescribethoserisksandexplainhowtheyarebeingmanagedormitigated.

• Thedirectors’explanationonpage47oftheAnnualReportastohowtheyhaveassessedtheprospectsoftheGroup,overwhatperiodtheyhavedonesoandwhytheyconsiderthatperiodtobeappropriate,andtheirstatementastowhethertheyhaveareasonableexpectationthattheGroupwillbeabletocontinueinoperationandmeetitsliabilitiesastheyfalldueovertheperiodoftheirassessment,includinganyrelateddisclosuresdrawingattentiontoanynecessaryqualificationsorassumptions.

Wehavenothingtoreporthavingperformedareviewofthedirectors’statementthattheyhavecarriedoutarobustassessmentoftheprincipalrisksfacingtheGroupandstatementinrelationtothelongertermviabilityoftheGroup.Ourreviewwassubstantiallylessinscopethananauditandonlyconsistedofmakinginquiriesandconsideringthedirectors’processsupportingtheirstatements;checkingthatthestatementsareinalignmentwiththerelevantprovisionsoftheUKCorporateGovernanceCode(the“Code”);andconsideringwhetherthestatementsareconsistentwiththeknowledgeandunderstandingoftheGroupandParentCompanyandtheir environment obtained in the course of the audit. (Listing Rules)

Other Code provisionsWehavenothingtoreportinrespectofourresponsibilitytoreportwhen:

• Thestatementgivenbythedirectors,onpage61,thattheyconsidertheAnnualReporttakenasawholetobefair,balancedandunderstandable,andprovidestheinformationnecessaryforthememberstoassesstheGroup’sandParentCompany’spositionandperformance,businessmodelandstrategyismateriallyinconsistentwithourknowledgeoftheGroupandParentCompanyobtained in the course of performing our audit.

• ThesectionoftheAnnualReportonpages67to70describingtheworkoftheAuditCommitteedoesnotappropriatelyaddressmatterscommunicatedbyustotheAuditCommittee.

• Thedirectors’statementrelatingtotheParentCompany’scompliancewiththeCodedoesnotproperlydiscloseadeparturefromarelevantprovisionoftheCodespecified,undertheListingRules,forreviewbytheauditors.

Directors’ RemunerationInouropinion,thepartoftheDirectors’RemunerationReporttobeauditedhasbeenproperlypreparedinaccordancewiththeCompaniesAct2006.(CA06)

Responsibilities for the financial statements and the auditResponsibilities of the directors for the financial statementsAs explainedmore fully in theDirectors’ Responsibilities Statement set out on page 61, the directors are responsible for thepreparationofthefinancialstatementsinaccordancewiththeapplicableframeworkandforbeingsatisfiedthattheygiveatrueandfairview.Thedirectorsarealsoresponsibleforsuchinternalcontrolastheydetermineisnecessarytoenablethepreparationoffinancial statements that are free from material misstatement, whether due to fraud or error.

Inpreparing the financial statements, thedirectorsare responsible forassessing theGroup’sand theParentCompany’sabilityto continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accountingunlessthedirectorseitherintendtoliquidatetheGrouportheParentCompanyortoceaseoperations,orhavenorealisticalternative but to do so.

Auditors’ responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free frommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditors’reportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAs(UK)willalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.

AfurtherdescriptionofourresponsibilitiesfortheauditofthefinancialstatementsislocatedontheFRC’swebsiteat:www.frc.org.uk/auditorsresponsibilities.ThisdescriptionformspartofourAuditors’Report.

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Use of this reportThisreport,includingtheopinions,hasbeenpreparedforandonlyfortheParentCompany’smembersasabodyinaccordancewithChapter3ofPart16oftheCompaniesAct2006andfornootherpurpose.Wedonot,ingivingtheseopinions,acceptorassumeresponsibilityforanyotherpurposeortoanyotherpersontowhomthisreportisshownorintowhosehandsitmaycomesavewhereexpresslyagreedbyourpriorconsentinwriting.

Other required reportingCompanies Act 2006 exception reportingUndertheCompaniesAct2006wearerequiredtoreporttoyouif,inouropinion:

• wehavenotreceivedalltheinformationandexplanationswerequireforouraudit;or

• adequateaccountingrecordshavenotbeenkeptbytheParentCompany,orreturnsadequateforouraudithavenotbeenreceivedfrombranchesnotvisitedbyus;or

• certaindisclosuresofdirectors’remunerationspecifiedbylawarenotmade;or

• theParentCompanyfinancialstatementsandthepartoftheDirectors’RemunerationReporttobeauditedarenotinagreementwith the accounting records and returns.

Wehavenoexceptionstoreportarisingfromthisresponsibility.

AppointmentFollowing the recommendation of the Audit Committee, we were appointed by the members on 18 May 2017 to audit thefinancial statements for the year ended 27 January 2018 and subsequent financial periods. This is therefore our first year ofuninterrupted engagement.

Andrew Lyon (Senior Statutory Auditor)forandonbehalfofPricewaterhouseCoopersLLP CharteredAccountantsandStatutoryAuditors East Midlands

23March2018


100

GROUP FINANCIAL STATEMENTS 102 Consolidated Income Statement103 Consolidated Statement

of Comprehensive Income 104 Consolidated Balance Sheet105 Consolidated Statement of Changes in Equity 106 Consolidated Cash Flow Statement 107 Group Accounting Policies 113 Notes to the Consolidated

Financial Statements

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Group

Company

Consolidated Income Statement

Notes

52 weeks to27 January

2018£m

52 weeks to28January

2017£m

Continuing operationsRevenue 1, 2 4,055.5 4,097.3Costofsales (2,699.3) (2,710.7)Gross profit 1,356.2 1,386.6Distribution costs (363.9) (345.1)Administrative expenses (232.3) (214.9)Other(losses)/gains 3 (1.1) 0.1Trading profit 758.9 826.7Share of results of associate and joint venture 1.0 1.0Operating profit 3 759.9 827.7Finance income 5 1.3 0.3Finance costs 5 (35.1) (37.8)Profit before taxation 726.1 790.2

Taxation 6 (134.3) (154.9)

Profit for the year attributable to equity holders of the Parent Company 591.8 635.3

Earnings Per Share Basic 8 416.7p 441.3p

Diluted 8 415.7p 438.1p

TheNotes1to30areanintegralpartoftheseconsolidatedfinancialstatements.

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Consolidated Statement of Comprehensive Income

Notes


2018£m


2017£m

Profit for the year 591.8 635.3

Other comprehensive income and expenses:

Items that will not be reclassified to profit or lossActuarialgains/(losses)ondefinedbenefitpensionscheme 18 43.4 (2.4)Tax relating to items which will not be reclassified 6 (7.4) 0.2Subtotal items that will not be reclassified 36.0 (2.2)

Items that may be reclassified to profit or lossExchange differences on translation of foreign operations 7.8 0.3Foreigncurrencycashflowhedges:– fair value movements (79.8) 111.6– reclassified to the Income Statement (12.3) (91.2)– recognised in inventories 8.8 (25.6)Taxrelatingtoitemswhichmaybereclassified 6 14.2 2.0Subtotal items that may be reclassified (61.3) (2.9)

Othercomprehensiveexpensefortheyear (25.3) (5.1)Total comprehensive income for the year 566.5 630.2

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Group

Company

Notes

27 January2018

£m

28January2017

£mASSETS AND LIABILITIES Non-current assetsProperty,plantandequipment 9 558.9 578.6Intangible assets 10 42.9 43.3Associate, joint venture and other investment 2.1 2.1Defined benefit pension asset 18 106.2 62.9Otherfinancialassets 12 48.1 57.3Deferred tax assets 6 5.8 –

764.0 744.2Current assetsInventories 490.1 451.1Customerandotherreceivables 11 1,248.2 1,125.8Otherfinancialassets 12 5.7 34.0Cashandshorttermdeposits 13 53.5 49.7

1,797.5 1,660.6Total assets 2,561.5 2,404.8

Current liabilitiesBank loans and overdrafts 14 (180.0) (35.3)Tradepayablesandotherliabilities 15 (580.2) (615.8)Otherfinancialliabilities 16 (59.3) (3.2)Currenttaxliabilities (95.3) (70.7)

(914.8) (725.0)Non-current liabilitiesCorporatebonds 17 (908.5) (913.5)Provisions 19 (10.4) (6.7)Otherfinancialliabilities 16 (12.4) (16.5)Otherliabilities 15 (232.8) (226.9)Deferred tax liabilities 6 – (5.7)

(1,164.1) (1,169.3)

Total liabilities (2,078.9) (1,894.3)

NET ASSETS 482.6 510.5

TOTAL EQUITY 482.6 510.5

ThefinancialstatementswereapprovedbytheBoardofdirectorsandauthorisedforissueon23March2018.Theyweresignedonitsbehalfby:


Consolidated Balance Sheet

104

Sharecapital

£m

Sharepremiumaccount

£m

Capital redemption

reserve£m

ESOTreserve

£m

Fair valuereserve

£m

Foreigncurrency

translation£m

Other reserves

(Note 21) £m

Retained earnings

£m

Total equity

£m

At 30 January 2016 15.1 0.9 14.8 (208.7) 29.4 (4.8) (1,443.8) 1,908.9 311.8Profitfortheyear – – – – – – – 635.3 635.3Othercomprehensive(expense)/incomefortheyear – – – – (3.2) 0.3 – (2.2) (5.1)Total comprehensive (expense)/incomefortheyear – – – – (3.2) 0.3 – 633.1 630.2Sharebuybacksandcommitments(Note20) (0.4) – 0.4 – – – – (187.6) (187.6)ESOTsharepurchasesandcommitments (Note 23) – – – (50.9) – – – – (50.9)SharesissuedbyESOT – – – 44.2 – – – (13.7) 30.5Share option charge – – – – – – – 13.1 13.1Taxrecogniseddirectlyinequity(Note6) – – – – – – – (10.8) (10.8)Equitydividends(Note7) – – – – – – – (225.8) (225.8)At 28 January 2017 14.7 0.9 15.2 (215.4) 26.2 (4.5) (1,443.8) 2,117.2 510.5

Profitfortheyear – – – – – – – 591.8 591.8Othercomprehensive(expense)/incomefortheyear – – – – (69.1) 7.8 – 36.0 (25.3)Total comprehensive (expense)/incomefortheyear – – – – (69.1) 7.8 – 627.8 566.5Sharebuybacksandcommitments(Note20) (0.2) – 0.2 – – – – (106.1) (106.1)ESOTsharepurchasesandcommitments (Note 23) – – – (37.0) – – – – (37.0)SharesissuedbyESOT – – – 20.8 – – – (10.5) 10.3Share option charge – – – – – – – 14.1 14.1Acquisitionofminorityinterestinsubsidiary – – – – – – – (0.4) (0.4)Taxrecogniseddirectlyinequity(Note6) – – – – – – – 4.4 4.4Equitydividends(Note7) – – – – – – – (479.7) (479.7)At 27 January 2018 14.5 0.9 15.4 (231.6) (42.9) 3.3 (1,443.8) 2,166.8 482.6

Consolidated Statement of Changes in Equity

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Company


2018£m


2017£m

Cash flows from operating activitiesOperatingprofit 759.9 827.7 Depreciation,impairmentandlossondisposalofproperty,plantandequipment 122.6 116.3 Amortisation of intangible assets 0.4 0.4 Share option charge 14.1 13.1 Exchange movement 6.1 0.3 (Increase)/decreaseininventories (39.0) 35.3 Increase in customer and other receivables (126.0) (73.7) Decreaseintradeandotherpayables (16.9) (49.7) Net pension contributions less income statement charge – (19.3)Cashgeneratedfromoperations 721.2 850.4 Corporationtaxespaid (106.0) (150.9)Net cash from operating activities 615.2 699.5

Cash flows from investing activities Additionstoproperty,plantandequipment (104.2) (160.8) Movement in capital accruals (8.6) 3.8 Paymentstoacquireproperty,plantandequipment (112.8) (157.0) Proceedsfromsaleofproperty,plantandequipment 1.0 2.7 Outflowontheacquisitionofminorityinterestinasubsidiary (0.4) –Net cash from investing activities (112.2) (154.3)

Cash flows from financing activities Repurchase of own shares (105.1) (187.6) PurchaseofsharesbyESOT (37.0) (50.9) DisposalofsharesbyESOT 11.3 29.9 Proceedsfrom/(repaymentof)unsecuredbankloans 135.0 (115.0) Issue of corporate bond – 297.3 Repaymentofcorporatebond – (212.6) Interest paid (33.4) (31.5) Interest received 1.3 0.1 Dividendspaid(Note7) (479.7) (314.1)Net cash from financing activities (507.6) (584.4)

Netdecreaseincashandcashequivalents (4.6) (39.2)Openingcashandcashequivalents 14.4 52.7Effect of exchange rate fluctuations on cash held (1.3) 0.9Closing cash and cash equivalents (Note 28) 8.5 14.4

Consolidated Cash Flow Statement

106

Group Accounting Policies

General InformationNEXTplcand itssubsidiaries (the“Group”) isaUKbasedretailerwhichoffersexciting,beautifullydesigned,wonderfulqualityclothingandhomeware.TheCompanyisapubliclimitedcompany,whichislistedontheLondonStockExchangeandincorporatedinEnglandandWalesanddomiciledintheUK.TheaddressoftheregisteredofficeisDesfordRoad,Enderby,Leicester,LE194AT.

Basis of PreparationThe financial statements of NEXT plc and the Group have been prepared in accordance with International Financial Reporting Standards(IFRS)adoptedforuseintheEuropeanUnionandinaccordancewiththeCompaniesAct2006.Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforcertainfinancial instruments,pensionassetsandliabilitiesandshare-basedpaymentliabilitieswhicharemeasuredatfairvalue.Asiscommonintheretailsector,theGroupoperatesaweeklyaccountingcalendarandthisyearthefinancialstatementsareforthe52weeksto27January2018(lastyear52weeksto28January2017).

Therehavebeennochangestoouraccountingpoliciesthisyearandtheprincipalpoliciesadoptedaresetoutbelow.

Basis of ConsolidationThe consolidated financial statements incorporate the financial statements of NEXT plc (the “Company”) and its subsidiaryundertakings.SubsidiariesareentitiesoverwhichtheGrouphascontrol.Allintra-grouptransactions,balances,incomeandexpensesare eliminated on consolidation.

Associates and joint ventures are all entities over which the Group has significant influence but not control. Investments in associates andjointventuresareaccountedforusingtheequitymethodofaccounting.Undertheequitymethod,theinvestmentisinitiallyrecognisedatcost,andthecarryingamountisincreasedordecreasedtorecognisetheGroup’sshareofthechangeinnetassetsoftheassociateorjointventureaftertheacquisitiondate.

Foreign CurrenciesTheconsolidatedfinancialstatementsarepresentedinPoundsSterling,whichistheCompany’sfunctionalandpresentationcurrency.TheGroupincludesforeignentitieswhosefunctionalcurrenciesarenotSterling.Onconsolidation,theassetsandliabilitiesofthoseentities are translated at the exchange rates at the balance sheet date and income and expenses are translated at weighted average rates during the period. Translation differences are recognised in other comprehensive income.

Transactionsincurrenciesotherthananentity’sfunctionalcurrencyarerecordedattheexchangerateonthetransactiondate,whilstassets and liabilities are translated at exchange rates at the balance sheet date. Exchange differences are recognised in the Income Statement,exceptwhendeferredinothercomprehensiveincomeasqualifyingcashflowhedges.

RevenueRevenue represents the fair value of amounts receivable for goods and services and is stated net of discounts, value added taxes and returns.Salesofgoodsarerecognisedondelivery.

ItistheGroup’spolicytosellitsproductstotheretailcustomerwitharighttoreturnwithin14days.Accumulatedexperienceisusedtoestimateandprovideforsuchreturnsatthetimeofsale.TheGroupdoesnotoperateanyloyaltyprogrammes.Revenuefromthesale of gift cards is deferred until their redemption.

Onlinecreditaccountinterestisaccruedonatimebasisbyreferencetotheprincipaloutstandingandtheeffectiveinterestrate.

Wherethird-partygoodsaresoldonacommissionbasis,onlythecommissionreceivableisincludedinstatutoryrevenue.Toaidcomparability,“totalsales”aredisclosedintheStrategicReportandinNote1ofthefinancialstatements.Totalsalesincludesthefullcustomer sales value of commission based sales and interest income, excluding VAT.

Royalty income is received from franchisees and is recognised on an accruals basis in accordance with the substance of therelevant agreements.

Dividend IncomeDividendincomeisrecognisedwhentherighttoreceivepaymentisestablished.

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Company

Property, Plant and EquipmentProperty,plantandequipmentarestatedatcostlessaccumulateddepreciationandimpairment.

Depreciation is charged so as to write down the cost of assets to their estimated residual values over their remaining useful lives on astraightlinebasis.Estimatedusefullivesandresidualvaluesarereviewedatleastannually.Estimatedusefullivesaresummarisedasfollows:

Freeholdandlongleaseholdproperty 50years

Plantandequipment 6–25years

Leasehold improvements the period of the lease, or useful life if shorter

GoodwillGoodwillarisesontheacquisitionofsubsidiariesandrepresentstheexcessoftheconsiderationtransferredoverthefairvalueoftheidentifiablenetassetsacquired.Goodwillisinitiallymeasuredatcost,beingtheexcessoftheacquisitioncostovertheGroup’sinterestintheassetsandliabilitiesrecognised.Goodwillisnotamortised,butisreviewedforimpairmentannuallyorwheneverthereisanindicationofimpairment.Forthepurposesofimpairmenttesting,goodwillacquiredisallocatedtotheCashgeneratingunit(CGU)thatisexpectedtobenefitfromthesynergiesofthecombination.ThecarryingvalueoftheCGUcontainingthegoodwilliscomparedtotherecoverableamount,whichisthehigherofvalueinuseandthefairvaluelesscostsofdisposal.Anyimpairmentisrecognisedimmediatelyasanexpenseandisnotsubsequentlyreversed.

Other Intangible AssetsOtherintangibleassetsrelatetotheLipsybrandnamesandtrademarksobtainedonacquisitionwhichwereinitiallyrecognisedatfairvalue.Theyareamortisedonastraightlinebasisovertheirexpectedusefullivesof10years.

Otherintangibleassetsarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatetheircarryingvaluemaynot be recoverable.

InvestmentsInvestmentsinsubsidiarycompanies(ParentCompanyonly)andequityinstrumentsthatdonothaveaquotedmarketpriceinanactivemarketandwhosefairvaluecannotbereliablymeasuredarestatedatcost,subjecttoreviewforimpairment.

ImpairmentThecarryingvaluesofnon-financialassetsarereviewedateachbalancesheetdatetodeterminewhetherthereisanyindicationofimpairment.Ifanyimpairmentlossarises,theassetvalueisadjustedtoitsestimatedrecoverableamountandthedifferenceisrecognised in the Income Statement.

Inventories Inventories (stocks) are valued at the lower of standard cost or net realisable value. Net realisable value is based on estimated selling priceslessfurthercoststobeincurredtodisposal.Wherehedgeaccountingapplies,anadjustmentisappliedsuchthatthecostofstock reflects the hedged exchange rate.

Online Customer and Other ReceivablesOnlinecustomerreceivablesrepresentoutstandingcustomerbalanceslessanyallowanceforimpairmentwhichisbasedonobjectiveevidenceandrelevantdefaultexperiencebycustomeraccountcategory.Othertradereceivablesarestatedatinvoicevaluelessanyallowance for impairment.

Cash and Cash EquivalentsForthepurposesoftheConsolidatedCashFlowStatement,cashandcashequivalentsconsistofcashandshorttermdeposits,lessbankoverdraftswhicharerepayableondemand.Shorttermdepositsarethosewithanoriginalmaturityofthreemonthsorless.RefertoNote28ofthefinancialstatements.


108

Corporate Bonds and Bank BorrowingsCorporatebondsandbankborrowingsare initially recognisedat fair value,netof transactioncosts incurredandsubsequentlymeasuredatamortisedcostandadjustedwherehedgeaccountingapplies(seeinterestratederivativesonpage110).Accruedinterestis included within other creditors and accruals.

Pension ArrangementsThe Group provides pension benefits which include both defined benefit and defined contribution arrangements. Pension assets are held in separate trustee administered funds and the Group also provides other, unfunded, pension benefits to certain plan members.

Thecostofprovidingbenefitsunder thedefinedbenefitandunfundedarrangementsaredeterminedseparately foreachplanusingtheprojectedunitcreditmethod,withactuarialvaluationsbeingcarriedoutateachbalancesheetdatebyexternalactuaries.Thepresentvalueofthedefinedbenefitobligationisdeterminedbydiscountingtheestimatedfuturecashoutflowsusinginterestratesofhighqualitycorporatebondsthataredenominatedinthecurrencyinwhichthebenefitswillbepaid,andthathavetermstomaturityapproximatingtothetermsoftherelatedpensionobligation.Anetpensionassetisonlyrecognisedtotheextentthatitisexpectedtoberecoverableinthefuturethroughacashrefundorareductioninfuturepayments.

ThecurrentservicecostofthedefinedbenefitplanisrecognisedintheIncomeStatementasanemployeebenefitexpense.Thenetinterestcostiscalculatedbyapplyingthediscountratetothenetbalanceofthedefinedbenefitobligationandthefairvalueoftheplan assets.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to other comprehensiveincomeintheperiodinwhichtheyarise.

ThecostofdefinedcontributionschemesisrecognisedintheIncomeStatementasincurred.TheGrouphasnofurtherpaymentobligations once the contributions have been paid.

Share-based PaymentThefairvalueofemployeeshareoptionsiscalculatedwhentheyaregrantedusingaBlack-Scholesmodelandthefairvalueofequity-settledLTIPawardsiscalculatedatgrantusingaMonteCarlomodel.TheresultingcostischargedintheIncomeStatementoverthevestingperiodoftheoptionoraward,andisregularlyreviewedandadjustedfortheexpectedandactualnumberofoptionsorawardsvesting.Thesocialsecuritycontributionspayableinconnectionwiththegrantoftheshareoptionsisconsideredanintegralpartofthegrantitself,andthechargeistreatedasacash-settledtransaction.

Forcash-settledawards,thefairvalueoftheliabilityisdeterminedateachbalancesheetdateandthecostisrecognisedintheIncome Statement over the vesting period.

TaxationTaxation, comprised of current and deferred tax, is charged or credited to the Income Statement unless it relates to items recognised inothercomprehensiveincomeordirectlyinequity.Insuchcases,therelatedtaxisalsorecognisedinothercomprehensiveincomeordirectlyinequity.

Currenttaxliabilitiesaremeasuredattheamountexpectedtobepaid,basedontaxratesandlawsthatareenactedorsubstantivelyenacted at the balance sheet date.

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodandiscalculatedusingratesoftaxationenactedorsubstantivelyenactedatthebalancesheetdatewhichareexpectedtoapplywhentheassetorliabilityissettled.

Deferredtaxliabilitiesaregenerallyrecognisedforalltaxabletemporarydifferences.Deferredtaxassetsareonlyrecognisedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichdeductibletemporarydifferencescanbeutilised.Deferredtaxisnotrecognisedinrespectofinvestmentsinsubsidiariesandassociateswherethereversalofanytaxabletemporarydifferencescanbecontrolledandareunlikelytoreverseintheforeseeablefuture.Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetandthereisanintentiontosettlethebalancesonanetbasis.

Tax provisions are recognised when there is a potential exposure under changes to international tax legislation. Management uses professionaladvisersandin-housetaxexpertstodeterminetheamountstobeprovided.

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Other Financial Assets and Liabilities: Derivative Financial Instruments and Hedge AccountingDerivativefinancial instruments(“derivatives”)areusedtomanagerisksarisingfromchangesinforeigncurrencyexchangeratesrelatingtothepurchaseofoverseassourcedproductsandchangesininterestratesrelatingtotheGroup’sdebt.Inaccordancewithitstreasurypolicy,theGroupdoesnotenterintoderivativesforspeculativepurposes.Foreigncurrencyandinterestratederivativesarestatedattheirfairvalue,beingtheestimatedamountthattheGroupwouldreceiveorpaytoterminatethematthebalancesheetdatebasedonprevailingforeigncurrencyandinterestrates.

TheGroupdesignatescertainderivativesaseither:

a. Hedgesoffairvalueofrecognisedassetsorliabilitiesorafirmcommitment(fairvaluehedge);or

b. Hedgesofaparticularriskassociatedwitharecognisedassetorliabilityorahighlyprobableforecasttransaction(cashflowhedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as wellasitsriskmanagementobjectivesandstrategyforundertakingvarioushedgingtransactions.TheGroupalsodocumentsitsassessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highlyeffectiveinoffsettingchangesinfairvaluesorcashflowsofhedgeditems.

Interest rate derivatives – fair value hedgesTheGroupusesinterestratederivativestohedgepartoftheinterestrateriskassociatedwiththeCompany’scorporatebonds.Thecarryingvaluesoftherelevantbondsareadjustedonlyforchangesinfairvalueattributabletotheinterestrateriskbeinghedged.TheadjustmentisrecognisedintheIncomeStatementandisoffsetbymovementsinthefairvalueofthederivatives.

ChangesinthefairvalueofinterestratederivativeswhichareineffectiveordonotmeetthecriteriaforhedgeaccountinginIAS39are recognised in the Income Statement.

Foreign currency derivatives – cash flow hedgesChanges in the fairvalueof foreigncurrencyderivativeswhicharedesignatedandeffectiveashedgesof futurecash flowsarerecognisedinothercomprehensiveincomeandinthefairvaluereserve,andsubsequentlytransferredtothecarryingamountofthe hedged item or the Income Statement. Realised gains or losses on cash flow hedges are therefore recognised in the Income Statement in the same period as the hedged item.

Hedgeaccountingisdiscontinuedwhenthehedginginstrumentexpiresorissold,terminatedorexercised,ornolongerqualifiesforhedgeaccounting.Atthattime,anycumulativegainorlossonthehedginginstrumentpreviouslyrecognisedinequityisretainedinequityuntilthehedgedtransactionoccurs.Ifthehedgedtransactionisnolongerexpectedtooccur,thenetcumulativegainorlossrecognisedinequityisthentransferredtotheIncomeStatement.

Changesinthefairvalueofforeigncurrencyderivativeswhichareineffectiveordonotmeetthecriteriaforhedgeaccountingin IAS39arerecognisedintheIncomeStatement.

Share BuybacksTheGrouphas regularly returned surplus cash to shareholders through sharebuybacks. Sharespurchased for cancellation aredeductedfromretainedearningsatthetotalconsiderationpaidorpayable.TheCompanyalsousescontingentsharepurchasecontractsandirrevocableclosedperiodbuybackprogrammes;theobligationtopurchasesharesisrecognisedinfullattheinceptionofthecontract,evenwhenthatobligationisconditionalontheshareprice.Anysubsequentreductionintheobligationcausedbytheexpiryorterminationofacontractiscreditedbacktoequityatthattime.

Shares Held by ESOTTheNEXTEmployeeShareOwnershipTrust(ESOT)providesfortheissueofsharestoGroupemployees,principallyundershareoptionschemes.SharesintheCompanyheldbytheESOTareincludedintheBalanceSheetatcost,includinganydirectlyattributableincrementalcosts,asadeductionfromequity.

ProvisionsA provision is recognised where the Group has a legal or constructive obligation as a result of a past event and it is probable thatanoutflowofeconomicbenefitswillberequiredtosettletheobligation.Provisionsaremeasuredatthepresentvalueoftheexpendituresexpectedtoberequiredtosettletheobligationusingapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheobligation.


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Leasing CommitmentsRentalspayableunderoperatingleasesarechargedtotheIncomeStatementonastraightlinebasisovertheperiodofthelease.Contingentrentalspayablebasedonstorerevenuesareaccruedinlinewiththerelatedsales.

Premiumspayable,rentfreeperiods,leaseincentivesandcapitalcontributionsreceivableonenteringanoperatingleasearereleasedto the Income Statement on a straight line basis over the lease term.

Major Sources of Estimation UncertaintyThepreparationofthefinancialstatementsrequiresestimationsandassumptionstobemadethataffectthereportedvaluesofassets, liabilities, revenues and expenses. The nature of estimation means that actual outcomes could differ from expectation. SignificantareasofestimationuncertaintyfortheGroupinclude:

Recoverable amount of Online customer receivablesTheprovisionforpotentiallyirrecoverabledebtors(refertoNote11)iscalculatedusingacombinationofinternallyandexternallysourcedinformation,includinghistoricaldefaultandcollectionratesandothercreditdata.Thebasisforidentifyingwhendebtorsare potentially impaired has been applied consistently. A 1%movement in default ratewouldmove the provision by c£2.5m. A1%movementinthecollectionsratewouldchangetheprovisionbalancebyc£0.8m.

Net realisable value of inventoriesThe selling prices of inventory are estimated to determine the net realisable value of inventory (£490.1m at 27 January 2018).Historicalsalespatternsandpostyearendtradingperformanceareusedtodeterminethese.A2%changeinthevolumeofinventoriesgoingtoclearancewouldimpactthenetrealisablevaluebyc£4m.A2%changeinthelevelofmarkdownappliedtothesellingpricewouldimpactthevalueofinventoriesgoingtoclearancebyc£8m.

Defined benefit pension valuationTheassumptionsappliedindeterminingthedefinedbenefitpensionobligation(Note18),areparticularlysensitivetosmallchangesinassumptions.Adviceistakenfromaqualifiedactuarytodetermineappropriateassumptionsateachbalancesheetdate.Theactuarialvaluationinvolvesmakingassumptionsaboutdiscountrates,mortalityratesandfuturepensionincreases.Duetothecomplexityofthevaluation,theunderlyingassumptionsandthelongtermnatureoftheseplans,suchestimatesaresubjecttosignificantuncertainty.AsensitivityanalysisisshowninNote18.Indeterminingtheappropriatediscountrate,managementconsiderstheinterestratesofhighqualityUKcorporatebonds,withextrapolatedmaturitiescorrespondingtotheexpecteddurationoftheobligation.Themortalityrateisbasedonpubliclyavailablemortalitytables.

OtherOtherareasofestimationandjudgementincludeproductreturnsratesandpropertyprovisions.Productreturnsratesarebasedonhistorical returns rate patterns and are recorded so as to allocate them to the same period in which the original revenue is recorded. Sensitivitiestotheassumptionsforproductreturnsandpropertyprovisionsarenotexpectedtoresultinamaterialchangeinthecarryingamount.Theseprovisionsarereviewedregularlyandupdatedtoreflectmanagement’slatestbestestimates.

New Accounting Standards Variousneworrevisedaccountingstandardshavebeenissuedwhicharenotyeteffective.ThekeyonesaffectingtheGrouparedescribedbelow.TheGroupdoesnotintendtoearlyadoptthesestandards.

a. IFRS 15 “Revenue from contracts with customers”willbeeffectivefortheyearendingJanuary2019onwards,andwillnotimpacttheGroup’sprofit.ThemajorityoftheGroup’ssalesareforstandaloneproductsmadedirecttocustomersatstandardpriceseitherin-storeoronline.Estimatesarealreadymadeofanticipatedreturnsandsalesawaitingdeliverytothecustomer.Certainincomestreams totalling around £30m currently netted off costs, will be recognised as statutory revenue on transition to IFRS 15.Thealternativeperformancemeasure“totalsales”willnotbeadjustedfortheimpactofIFRS15.

b. IFRS9“Financial instruments”willbeeffectivefortheyearendingJanuary2019onwards.IFRS9introduces:

• newrequirementsfortheclassificationandmeasurementoffinancialassetsandfinancialliabilities;

• a new model for recognising provisions based on expected credit losses; and

• simplifiedhedgeaccountingbyaligninghedgeaccountingmorecloselywithanentity’sriskmanagementmethodology.

TheGrouphascompletedanassessmentoftheimpactofIFRS9anditisexpectedthatadoptionwillnothaveamaterialimpactonConsolidatedIncomeStatementorConsolidatedBalanceSheet.Asaretailer,NEXTisnotrequiredtoprovideagainstundrawncreditunderthe“expectedcreditloss”modelofOnlinecustomerreceivables.

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New Accounting Standards (continued)c. IFRS 16 “Leases”willbeeffectivefortheyearendingJanuary2020.TheGrouphasalargeportfolioofleasedpropertiesandotherequipment,includingstoresandwarehouses;theminimumleasecommitmentontheseatthefinancialyearendisdisclosedinNote29.

OntheadoptionofIFRS16,leaseagreementswillgiverisetobotharight-of-useassetandaleaseliabilityforfutureleasepayables.Theright-of-useassetwillbedepreciatedonastraight-linebasisoverthelifeofthelease.Interestwillberecognisedontheleaseliability,resultinginahigherinterestexpenseintheearlieryearsoftheleaseterm.ThetotalexpenserecognisedintheIncomeStatementoverthelifeoftheleasewillbeunaffectedbythenewstandard.However,IFRS16willresultinthetimingofleaseexpenserecognitionbeingacceleratedforleaseswhichwouldbecurrentlyaccountedforasoperatingleases.

Therewillbenoimpactoncashflows,althoughthepresentationoftheCashFlowStatementwillchangesignificantly,withanincreaseincashflowsfromoperatingactivitiesbeingoffsetbyanincreaseincashflowsfromfinancingactivities.

TheGrouphasestablishedaworkinggrouptoensurewetakeallnecessarystepstocomplywiththerequirementsof IFRS16.Significantworkhasbeencompletedtodate,includingcollectionofrelevantdata,changestoITsystemsandprocessesandthedetermination of relevant accounting policies.

TheGroup intends to apply the fully retrospective approach on transition andwill restate prior year comparatives.Given thecomplexitiesofIFRS16andthematerialsensitivitytokeyassumptions,suchasdiscountrates,itisnotyetpracticabletofullyquantifythe effect of IFRS 16 on the financial statements of the Group.


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1. Segmental Analysis TheGroup’soperatingsegmentsaredeterminedbasedontheGroup’sinternalreportingtotheChiefOperatingDecisionMaker(CODM).TheCODMhasbeendeterminedtobetheGroupChiefExecutive,withsupportfromtheBoard.Theperformanceofoperatingsegmentsisassessedonprofitsbeforeinterestandtax,excludingequity-settledshareoptionchargesrecognisedunderIFRS 2 “Share-based payment” andunrealised foreignexchangegainsor lossesonderivativeswhichdonotqualify forhedgeaccounting. The activities, products and services of the operating segments are detailed in the Strategic Report on page 38.ThePropertyManagementsegmentholdspropertiesandpropertyleaseswhicharesublettoothersegmentsandexternalparties.TheNEXTInternationalRetailsegmentcomprisesfranchiseandwhollyownedstoresoverseas.InternationalonlinesalesareincludedintheNEXTOnline(formerlyNEXTDirectory)segment.

Wherethird-partybrandedgoodsaresoldonacommissionbasis,onlythecommissionreceivableisincludedinstatutoryrevenue.“Totalsales”representsthefullcustomersalesvalueofcommissionbasedsalesandinterestincome,excludingVAT.

Segment sales and revenue52 weeks to 27 January 2018

Total sales excluding VAT £m

Commission sales adjustment

£m

External revenue £m

Internal revenue £m

Totalsegmentrevenue

£mNEXT Retail 2,123.0 (1.0) 2,122.0 5.5 2,127.5NEXTOnline 1,887.4 (59.8) 1,827.6 – 1,827.6NEXT International Retail 67.2 – 67.2 – 67.2NEXT Sourcing 6.6 – 6.6 547.8 554.4

4,084.2 (60.8) 4,023.4 553.3 4,576.7Lipsy 24.2 (1.2) 23.0 53.9 76.9PropertyManagement 9.1 – 9.1 206.2 215.3Totalsegmentsales/revenue 4,117.5 (62.0) 4,055.5 813.4 4,868.9Eliminations – – – (813.4) (813.4)Total 4,117.5 (62.0) 4,055.5 – 4,055.5

52weeksto28January2017Total sales

excluding VAT £m

Commission sales

adjustment £m

External revenue £m

Internal revenue £m

Totalsegmentrevenue

£mNEXT Retail 2,304.6 (3.9) 2,300.7 5.9 2,306.6NEXTOnline 1,728.5 (34.1) 1,694.4 – 1,694.4NEXT International Retail 63.7 – 63.7 – 63.7NEXT Sourcing 5.3 – 5.3 599.9 605.2

4,102.1 (38.0) 4,064.1 605.8 4,669.9Lipsy 27.1 (1.5) 25.6 38.8 64.4PropertyManagement 7.6 – 7.6 205.6 213.2Totalsegmentsales/revenue 4,136.8 (39.5) 4,097.3 850.2 4,947.5Eliminations – – – (850.2) (850.2)Total 4,136.8 (39.5) 4,097.3 – 4,097.3

Notes to the Consolidated Financial Statements

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1. Segmental Analysis (continued)

Segment profitDuringtheyeartoJanuary2018,therechargesbetweenNEXTRetailandNEXTOnlinewerealteredtobetterreflectthecostsofthestandalonebusinesses.Prioryearsegmentprofitresultsfor2017havebeenrestatedtoprovidecomparability.

Segment profit2018

£m

2017Restated

£m2017

£mNEXT Retail 268.7 353.3 338.7NEXTOnline 461.2 429.5 444.1NEXT International Retail 7.7 9.3 9.3NEXT Sourcing 33.0 44.7 44.7

770.6 836.8 836.8Lipsy 6.0 5.5 5.5PropertyManagement 3.6 6.8 6.8Total segment profit 780.2 849.1 849.1Centralcostsandother (6.1) (9.4) (9.4)Share option charge (14.1) (13.1) (13.1)Other(losses)/gains (1.1) 0.1 0.1Trading profit 758.9 826.7 826.7Share of results of associate and joint venture 1.0 1.0 1.0Finance income 1.3 0.3 0.3Finance costs (35.1) (37.8) (37.8)Profit before tax 726.1 790.2 790.2

Transactions between operating segments aremade on an arm’s length basis in amanner similar to thosewith third-parties.Segment revenue and segment profit include transactions between business segments which are eliminated on consolidation. ThesubstantialmajorityofNEXTSourcing’srevenuesandprofitsarederivedfromsalestoNEXTRetailandNEXTOnline.


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1. Segmental Analysis (continued)

Segment assets, capital expenditure and depreciationProperty, plant and

equipmentCapital

expenditure Depreciation2018

£m2017

£m2018

£m2017

£m2018

£m2017

£mNEXT Retail 390.7 405.4 88.6 138.2 98.9 96.0NEXTOnline 82.3 88.6 10.9 19.0 17.4 15.7NEXT International Retail 1.0 0.7 0.6 – 0.2 0.3NEXT Sourcing 2.6 2.8 1.1 1.0 0.9 1.0Lipsy 3.5 3.2 1.0 0.9 0.9 1.0PropertyManagement 78.8 77.9 2.0 1.7 0.3 0.3Total 558.9 578.6 104.2 160.8 118.6 114.3

Reporting to the Board with respect to assets includes values measured in a manner consistent with that of these financial statements. Theseassetsareallocatedbasedontheoperationsofthesegmentandthephysicallocationoftheasset.

Impairmentchargesinrelationtoproperty,plantandequipmentareincludedintheNEXTRetailsegment.SegmentliabilitieshavenotbeendisclosedasthesearenotregularlyprovidedtotheCODM.

AnalysesoftheGroup’sexternalrevenues(bycustomerlocation)andnon-currentassets(excludinginvestments,thedefinedbenefitpensionsurplus,otherfinancialassetsanddeferredtaxassets)bygeographicallocationaredetailedbelow:

External revenue by geographical location2018

£m2017

£mUnitedKingdom 3,606.1 3,713.5Rest of Europe 244.5 218.2Middle East 113.8 88.1Asia 60.3 50.2RestofWorld 30.8 27.3Total 4,055.5 4,097.3

Non-current assets by geographical location2018

£m2017

£mUnitedKingdom 564.0 583.0Rest of Europe 4.5 5.3Middle East 4.3 4.3Asia 29.0 29.3Total 601.8 621.9

2. Revenue by Type2018

£m2017

£mSale of goods 3,814.0 3,866.0Onlineaccountinterest 223.2 213.7Royalties 9.2 9.9Rental income 9.1 7.7Revenue 4,055.5 4,097.3

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3. Operating Profit Groupoperatingprofitisstatedaftercharging/(crediting):

2018£m

2017£m

Depreciation on tangible assets 118.6 114.3Loss/(profit)ondisposalofproperty,plantandequipment 0.8 (1.2)Impairment charges on tangible assets 3.2 3.2Amortisation of intangible assets 0.4 0.4

Operatingleaserentals: Minimumleasepayments(netofamortisationofincentives) 225.1 219.8 Contingentrentalspayable 5.1 5.8

Customerandotherreceivables: Impairment charge 28.5 35.0 Amounts recovered (4.2) (6.9)

Costofinventoriesrecognisedasanexpense 1,433.9 1,441.0Writedownofinventoriestonetrealisablevalue 116.1 109.9

1,550.0 1,550.9

Costofinventoriesrecognisedasanexpenseconsistsofthosecostswhicharedirectlyattributabletogoodssoldintheyear,includingpackaging and inbound freight costs.

GainsoncashflowhedgesremovedfromequityandincludedintheIncomeStatementfortheperiodare£12.3m(2017:£91.2m)included in cost of sales.

Other(losses)/gainsreportedintheIncomeStatementrepresentforeignexchangelossesof£1.1m(2017:gainsof£0.1m)inrespectofderivativecontractswhichdonotqualifyforhedgeaccountingunderIAS39.

OtherforeignexchangedifferencesrecognisedintheIncomeStatementweregainsof£3.4m(2017:£4.2m).

DuringtheyeartheGroup(includingitsoverseassubsidiaries)obtainedthefollowingservicesfromtheCompany’sauditoranditsassociates,includingexpenses:

2018£000

2017£000

Auditor's remunerationAudit of the financial statements 262 240Audit of subsidiaries 368 358Total audit fees 630 598Otherservices: Tax compliance – 20 Taxadvisoryservices – 10 Otherassuranceservices 71 159

701 787

Auditfeespresentedinthetableaboverepresentauditor’sremunerationinrespectofPwCandaffiliatesintheyearended27January2018andauditor’sremunerationinrespectofEYandaffiliatesintheyearended28January2017.


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4. Staff Costs and Key Management PersonnelTotalstaffcostswereasfollows:

2018£m

2017£m

Wagesandsalaries 586.1 594.6Socialsecuritycosts 42.5 39.5Otherpensioncosts 21.9 20.5

650.5 654.6Share-basedpaymentsexpense–equity-settled 14.1 13.1Share-basedpaymentsbenefit–cash-settled (5.8) (2.3)

658.8 665.4

Share-basedpaymentscompriseManagementoptions,SharesaveoptionsandpotentialLTIPandSMPawards,detailsofwhicharegiven in Note 22.

InMarch2017thetermsandconditionsofthecash-settledshare-basedpaymentschemeswerealteredmandatingthatallawardswouldbetakenasshares.Anetcreditof£4.8mwasrecognisedinthe2018financialyearonconversionofthoseshareawardsfromcash-settledtoequity-settled.

Totalstaffcostsbybusinesssectorweremadeupasfollows:2018

£m2017

£mNEXTRetailandOnline 604.3 619.2NEXT International Retail 2.0 1.9NEXT Sourcing 29.6 27.5Otheractivities 22.9 16.8Total 658.8 665.4

Average employees Full-time equivalents 2018

Number2017

Number2018

Number2017

NumberNEXTRetailandOnline 39,859 44,887 24,265 26,445NEXT International Retail 133 135 106 111NEXT Sourcing 3,725 3,760 3,725 3,760Otheractivities 253 251 222 209Total 43,970 49,033 28,318 30,525

The aggregate amounts charged in the accounts for key management personnel (including employer’s National Insurancecontributions),beingthedirectorsofNEXTplc,wereasfollows:

2018£m

2017£m

Shorttermemployeebenefits 3.1 2.9Post-employmentbenefits 0.3 0.3Share-basedpayments 1.5 (0.4)

4.9 2.8

Directors’remunerationisdetailedintheRemunerationReport.

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Notes to the Consolidated Financial Statements5. Finance Income and Costs

2018£m

2017£m

Interest on bank deposits 0.1 0.2Otherfairvaluemovements – 0.1Otherinterestreceivable 1.2 –Finance income 1.3 0.3

Interest on bonds and other borrowings 35.0 37.8Otherfairvaluemovements 0.1 –Finance costs 35.1 37.8

Onlineaccountinterestispresentedasacomponentofrevenue.

6. TaxationTax charge for the yearOurtaxchargefortheyearisshownbelow.Taxismadeupofcurrentanddeferredtax.Currenttaxistheamountpayableonthetaxableincomeintheyearandanyadjustmentstotaxpayableinpreviousyears.Deferredtaxisexplainedonpage119.

2018£m

2017£m

Current tax:Currenttaxonprofitsfortheyear 147.8 157.1Adjustmentsinrespectofprioryears (12.2) –Total current tax 135.6 157.1

Deferred tax:Originationandreversaloftemporarydifferences (6.3) 1.1Adjustmentsinrespectofprioryears 5.0 (3.3)Tax expense reported in the Consolidated Income Statement 134.3 154.9

Includedwithintheadjustmentsinrespectofprioryearsisanamountof£3.2mrelatingtotheclosureofopentaxfilingswithHMRC.

Factors affecting the tax charge in the yearThetaxrateforthecurrentyearvariedfromthestandardrateofcorporationtaxintheUKduetothefollowingfactors:

2018%

2017%

UKcorporationtaxrate 19.2 20.0Non-deductibleexpenses 0.5 0.6Overseastaxdifferentials (0.2) (0.6)Adjustmentsinrespectofprioryears (1.0) (0.4)Effective total tax rate on profit before taxation 18.5 19.6

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6. Taxation (continued)

Tax recognised in other comprehensive income and equityIn addition to the amount charged to the Income Statement, tax movements recognised in other comprehensive income and in equitywereasfollows:

2018£m

2017£m

Deferred tax:Pension benefit obligation 7.4 (0.2)Fair value movements on derivative instruments (14.2) (2.0)Tax (credit) in other comprehensive income (6.8) (2.2)

2018£m

2017£m

Current tax:Share-basedpayments (1.0) (2.0)

Deferred tax:Share-basedpayments (3.4) 12.8Tax (credit)/charge in the Statement of Changes in Equity (4.4) 10.8

Deferred taxDeferredtaxisthetaxexpectedtobepayableorrecoverableinthefuturearisingfromtemporarydifferencesthatarisewhenthecarryingvalueofassetsandliabilitiesdifferbetweenaccountingandtaxtreatments.Deferredtaxassetsrepresenttheamountsofincome taxes recoverable in the future in respect of those differences, while deferred tax liabilities represent the amounts of income taxespayableinthefutureinrespectofthosedifferences.

Thedeferredtaxasset/(liability)ismadeupof:2018

£m2017

£mAccelerated capital allowances 2.5 (0.4)Revaluation of derivatives to fair value 9.1 (5.2)Pension benefit obligations (18.1) (10.7)Share-basedpayments 7.7 3.3Othertemporarydifferences 4.6 7.3

5.8 (5.7)

Thedeferredtaxmovementintheyearisasfollows:2018

£m2017

£mAtthebeginningoftheyear (5.7) 2.7RecognisedintheIncomeStatement: Accelerated capital allowances 2.9 0.7 Revaluation of derivatives to fair value 0.1 (0.1) Pension benefit obligations – (1.7) Share-basedpayments 1.0 (2.1) Othertemporarydifferences (2.7) 5.4RecognisedinOtherComprehensiveIncome 6.8 2.2RecognisedintheStatementofChangesinEquity 3.4 (12.8)At the end of the year 5.8 (5.7)

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Notes to the Consolidated Financial Statements6. Taxation (continued)

Deferred tax (continued)Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through futuretaxableprofitsisprobable.Norecognitionhasbeenmadeofthefollowingdeferredtaxassets:

Gross value2018

£m

Unrecogniseddeferred tax

2018£m

Gross value2017

£m

Unrecogniseddeferred tax

2017£m

Capitallosses 27.9 4.7 34.5 5.8

ThebenefitofunrecognisedcapitallosseswillonlyaccrueiftaxableprofitsarerealisedonfuturedisposalsoftheGroup’scapitalassets.

Factors affecting tax charges in future yearsChanges to theUK corporation tax rateswere substantively enacted as part of the Finance Bill 2016 (on 6 September 2016).Theseincludereductionstothemainrateofcorporationtaxto19%from1April2017andto17%from1April2020.Deferredtaxesat the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

TheGroup’seffectivetaxrateisforecasttoremainbroadlyinlinewiththecurrentyear.

Provisions, which are immaterial to the accounts, have been recognised in relation to uncertain tax positions. These relate to the interpretationoftaxlegislation,includingchangesarisingfromtheOECD’sBaseErosionandProfitShiftingproject,thatimpactourNEXTSourcingoperationinitsordinarycourseofbusiness.Anyuncertaintyislikelytolessenasthebusinessrespondstotheserule changes.

NEXTmanagesitstaxaffairsresponsiblyandproactivelytocomplywithtaxlegislation.Weseektobuildsolidandconstructiveworking relationships with all tax authorities.

7. Dividends

Year to 27 January 2018 PaidPence per

share

Cash FlowStatement

£m

Statement of Changes in Equity £m

Special interim dividend 2May2017 45p 64.3 64.3FinalordinarydividendforyeartoJan2017 1Aug2017 105p 149.3 149.3Special interim dividend 1Aug2017 45p 64.0 64.0Special interim dividend 1Nov2017 45p 63.8 63.8InterimordinarydividendforyeartoJan2018 2Jan2018 53p 74.8 74.8Special interim dividend 25Jan2018 45p 63.5 63.5

479.7 479.7

Year to 28 January 2017 PaidPence per

share

CashFlowStatement

£m

Statement ofChanges inEquity £m

Special interim dividend 1Feb2016 60p 88.3 –FinalordinarydividendforyeartoJan2016 1Aug2016 105p 150.2 150.2InterimordinarydividendforyeartoJan2017 3Jan2017 53p 75.6 75.6

314.1 225.8

Itisintendedthatthisyear’sordinaryfinaldividendof105ppersharewillbepaidtoshareholderson1August2018.NEXTplcshareswilltradeex-dividendfrom5July2018andtherecorddatewillbe6July2018.Theestimatedamountpayableis£144.0m.TheproposedfinaldividendissubjecttoapprovalbyshareholdersattheAnnualGeneralMeetingandhasnotbeenincludedasaliabilityinthesefinancialstatements.

TheTrusteeoftheESOThaswaiveddividendspaidintheyearonsharesheldbytheESOT.

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8. Earnings Per Share2018 2017

Basic Earnings Per Share 416.7p 441.3p

BasicEarningsPerShareisbasedontheprofitfortheyearattributabletotheequityholdersoftheParentCompanydividedbythenetoftheweightedaveragenumberofsharesrankingfordividendlesstheweightedaveragenumberofsharesheldbytheESOTduring the period.

2018 2017Diluted Earnings Per Share 415.7p 438.1p

DilutedEarningsPerShareiscalculatedbyadjustingtheweightedaveragenumberofsharesusedforthecalculationofbasicEarningsPerShareasincreasedbythedilutiveeffectofpotentialordinaryshares.DilutivesharesarisefromemployeeshareoptionschemeswheretheexercisepriceislessthantheaveragemarketpriceoftheCompany’sordinarysharesduringtheperiod.Theirdilutiveeffectiscalculatedonthebasisoftheequivalentnumberofnilcostoptions.Wheretheoptionpriceisabovetheaveragemarketprice,theoptionisnotdilutiveandisexcludedfromthedilutedEPScalculation.Therewere4,779,181non-dilutiveshareoptionsinthecurrentyear(2017:2,578,878).

2018 2017Fully diluted Earnings Per Share 399.7p 426.2p

FullydilutedEarningsPerShareisbasedontheweightedaveragenumberofsharesusedforthecalculationofbasicEarningsPerShare, increasedbytheweightedaveragetotalemployeeshareoptionsoutstandingduringtheperiod.UnderlyingfullydilutedEarnings Per Share is used for the purposes of the Share Matching Plan, described further in Note 22.

ThetablebelowshowsthekeyvariablesusedintheEarningsPerSharecalculations:

2018 2017Profit after tax attributable to equity holders of the Parent Company (£m) 591.8 635.3

Weighted average number of shares (millions) Weightedaveragesharesinissue 146.7 148.4 WeightedaveragesharesheldbyESOT (4.7) (4.4) Weighted average shares for basic EPS 142.0 144.0 Weightedaveragedilutivepotentialshares 0.4 1.0 Weighted average shares for diluted EPS 142.4 145.0

Weighted average shares for basic EPS 142.0 144.0 Weightedaveragetotalshareoptionsoutstanding 6.0 5.1 Weighted average shares for fully diluted EPS 148.0 149.1

AsdetailedintheRemunerationReport,theannualbonusforexecutivedirectorsisdeterminedbyreferencetounderlyingpre-taxEarningsperShareof511.3p(2017:548.9p).Thisiscalculatedusing52weekunderlyingpre-taxprofitof£726.1m(2017:£790.2m)asshowninNote1dividedbythenetoftheweightedaveragenumberofsharesinissuelesstheweightedaveragenumberofsharesheldbytheESOTduringtheperiod.

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Notes to the Consolidated Financial Statements9. Property, Plant and Equipment

Freeholdproperty

£m

Leaseholdproperty

£m

Plant andequipment

£mTotal

£mCostAt January 2016 77.4 9.4 1,596.9 1,683.7Exchange movement – – 1.6 1.6Additions 1.8 – 159.0 160.8Disposals (0.8) – (54.2) (55.0)At January 2017 78.4 9.4 1,703.3 1,791.1Exchange movement – – (1.4) (1.4)Additions 2.0 – 102.2 104.2Disposals (0.9) – (75.6) (76.5)At January 2018 79.5 9.4 1,728.5 1,817.4

DepreciationAt January 2016 8.0 1.6 1,137.7 1,147.3Exchange movement – – 1.3 1.3Providedduringtheyear 0.2 – 114.1 114.3Impairment charge – – 3.2 3.2Disposals – – (53.6) (53.6)At January 2017 8.2 1.6 1,202.7 1,212.5Exchange movement – – (1.1) (1.1)Providedduringtheyear 0.2 – 118.4 118.6Impairment charge – – 3.2 3.2Disposals – – (74.7) (74.7)At January 2018 8.4 1.6 1,248.5 1,258.5

Carrying amountAt January 2018 71.1 7.8 480.0 558.9AtJanuary2017 70.2 7.8 500.6 578.6AtJanuary2016 69.4 7.8 459.2 536.4

AtJanuary2018theGrouphadenteredintocontractualcommitmentsfortheacquisitionofproperty,plantandequipmentamountingto£12.8m(2017:£14.2m).

Impairmentchargesrelatetotheimpairmentofshopfittingsonloss-makingstores.

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10. Intangible AssetsBrand

names and trademarks

£mGoodwill

£mTotal

£mCostAt January 2016, January 2017 and January 2018 4.0 44.2 48.2Amortisation and impairmentAt January 2016 2.9 1.6 4.5Amortisationprovidedduringtheyear 0.4 – 0.4At January 2017 3.3 1.6 4.9Amortisationprovidedduringtheyear 0.4 – 0.4At January 2018 3.7 1.6 5.3

Carrying amountAt January 2018 0.3 42.6 42.9AtJanuary2017 0.7 42.6 43.3AtJanuary2016 1.1 42.6 43.7

Thecarryingamountofgoodwillisallocatedtothefollowingcashgeneratingunits:

2018£m

2017£m

NEXT Sourcing 30.5 30.5Lipsy 12.1 12.1

42.6 42.6

Goodwillistestedforimpairmentatthebalancesheetdateonthebasisofvalueinusecalculations.Asthisexceededcarryingvalueforeachofthecashgeneratingunitsconcerned,noimpairmentlosswasrecognised(2017:£nil).

NEXT SourcingThekeyassumptionsintestingthegoodwillforimpairmentarethefuturesourcingrequirementsoftheGroupandtheabilityofNEXTSourcingtomeettheserequirementsbasedonpastexperience.Inassessingvalueinuse,budgetsforthenextyearwereusedandextrapolatedforfourfurtheryearsusingagrowthrateof-10%(2017:0%growthrate)anddiscountedat10%(2017:10%).

LipsyInassessingtherecoverableamountofgoodwill,internalbudgetsfornextyearwereusedandextrapolatedforninefurtheryearsusingagrowthrateof2%(2017:2%)anddiscountedat12%(2017:12%).

ForbothNEXTSourcingandLipsy,thecalculatedvalueinusesignificantlyexceededthecarryingvalueofthegoodwill.Therefore,thereisnoreasonablypossiblechangeinanyofthekeyassumptionsthatwouldgiverisetoanimpairment.

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Notes to the Consolidated Financial Statements11. Customer and Other Receivables

2018£m

2017£m

Onlinecustomerreceivables 1,255.6 1,139.3Less:allowancefordoubtfuldebts (138.7) (137.5)

1,116.9 1,001.8Othertradereceivables 21.7 23.6Less:allowancefordoubtfuldebts (0.1) (0.3)

1,138.5 1,025.1

Prepayments 94.2 91.7Otherdebtors 13.4 8.6Amounts due from associate and joint venture 2.1 0.4

1,248.2 1,125.8

NointerestischargedonOnlinecustomerreceivablesifthestatementbalanceispaidinfullandtoterms;otherwisebalancesbearinterestatavariableannualpercentagerateof22.9%attheyearenddate(2017:22.9%).Thecarryingvaluesofcustomerandotherreceivablesmateriallyapproximatetheirfairvalue.

Expected irrecoverable amounts on balances with indicators of impairment are provided for based on past default experience. Receivableswhichareimpaired,otherthanbyageordefault,areseparatelyidentifiedandprovidedforasnecessary.

Managementconsiderthecreditqualityofcustomerreceivablesthatareneitherpastduenorimpairedcanbestbeassessedbyreferencetothehistoricaldefaultrateforthepreceding365daysofapproximately1%(2017:1%).£Nil(2017:£nil)ofcustomerandother receivables are past due but not impaired.

Otherdebtorsandprepaymentsdonotincludeimpairedassets.Themaximumexposuretocreditriskatthereportingdateisthecarryingvalueofeachclassofasset.

TheGroupdoesnotholdanycollateraloverthesebalances.

Ageingofcustomerandothertradereceivables:2018

£m2017

£mNot past due 1,137.9 1,043.61–30dayspastdue 42.8 33.231–60dayspastdue 9.9 8.861–90dayspastdue 5.3 4.991–120dayspastdue 6.9 4.4Over120dayspastdue 58.1 55.3Otherwiseimpaired 16.4 12.7Total customer and other trade receivables 1,277.3 1,162.9

Movementintheallowancefordoubtfuldebts:2018

£m2017

£mOpeningposition 137.8 162.5 ChargedtotheIncomeStatement 28.5 35.0 Writtenoffasuncollectible (23.3) (52.8) Recoveredduringtheyear (4.2) (6.9)Closing position 138.8 137.8

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12. Other Financial Assets 2018 2017

Current£m

Non-current£m

Current£m

Non-current£m

Foreign exchange contracts 5.7 – 34.0 –Interest rate derivatives – 48.1 – 57.3

5.7 48.1 34.0 57.3

Foreignexchangecontractscompriseforwardcontractsandoptions,themajorityofwhichareusedtohedgeexchangeriskarisingfromtheGroup’smerchandisepurchases(refertoNote24).TheseinstrumentsareprimarilyforUSDollarsandEuros.Interestratederivativesrelatetothecorporatebonds(refertoNote17).

13. Cash and Short Term Deposits2018

£m2017

£mCashatbankandinhand 52.8 49.7Short term deposits 0.7 –

53.5 49.7

Cashatbankearnsinterestatfloatingratesbasedondailybankdepositrates.ShorttermdepositsaremadeforvaryingperiodsofbetweenonedayandthreemonthsdependingonthecashrequirementsoftheGroupandearninterestatshorttermmarketdeposit rates.

14. Bank Loans and Overdrafts2018

£m2017

£mBank overdrafts and short term borrowings 45.0 35.3Unsecuredcommittedbankloans 135.0 –

180.0 35.3

Bankoverdraftsarerepayableondemandandbearinterestatamarginoverbankbaserates.UnsecuredbankloansrelatetoamountsdrawnunderamediumtermbankrevolvingcreditfacilitywhichbearinterestatamarginaboveLIBOR(refertoNote24).

15. Trade Payables and Other Liabilities 2018 2017

Current£m

Non-current£m

Current£m

Non-current£m

Tradepayables 168.4 – 186.1 –Othertaxationandsocialsecurity 62.4 – 62.5 –Deferred revenue from sale of gift cards 78.1 – 77.3 –Propertyleaseincentives 32.6 218.1 31.9 212.9Share-basedpaymentliability 0.8 0.7 1.9 5.6Othercreditorsandaccruals 237.9 14.0 256.1 8.4

580.2 232.8 615.8 226.9

Tradepayablesdonotbearinterestandaregenerallysettledon30dayterms.Othercreditorsandaccrualsdonotbearinterest.Propertyleaseincentivesareclassifiedasnon-currenttotheextentthattheywillbecreditedtotheIncomeStatementmorethanoneyearfromthebalancesheetdate.

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Notes to the Consolidated Financial Statements16. Other Financial Liabilities

2018 2017Current

£mNon-current

£mCurrent

£mNon-current

£mForeign exchange contracts 59.3 – 3.2 –Interest rate derivatives – 12.4 – 16.5

59.3 12.4 3.2 16.5

Foreignexchangecontractscompriseforwardcontractsandoptions,themajorityofwhichareusedtohedgeexchangeriskarisingfromtheGroup’smerchandisepurchases(Note24).TheseinstrumentsareprimarilyforUSDollarsandEuros.Interestratederivativesrelatetothecorporatebonds(Note17).

17. Corporate Bonds Balance Sheet value Nominal value

2018£m

2017£m

2018£m

2017£m

Corporatebond5.375%repayable2021 328.4 329.5 325.0 325.0Corporatebond4.375%repayable2026 280.1 284.0 250.0 250.0Corporatebond3.625%repayable2028 300.0 300.0 300.0 300.0

908.5 913.5 875.0 875.0

TheGroupusesinterestratederivativestomanagetheinterestrateriskassociatedwithitsbonds,theprofileofwhichisshownbelow:

2018 Nominal value £m

2018Aggregate

interest rate

2017 Nominal value £m

2017Aggregate

interest rate

2021 bondsFixed 150.0 5.375% 150.0 5.375%Fixed 50.0 5.200% 50.0 5.200%Fixed 50.0 5.150% 50.0 5.150%Fixed 50.0 5.050% 50.0 5.050%Floating 25.0 6m LIBOR +1.9% 25.0 6mLIBOR+1.9%

325.0 325.0

2026 bondsFloating 250.0 6m LIBOR +1.4% 250.0 6mLIBOR+1.4%

2028 bondsFixed 300.0 3.625% 300.0 3.625%Total 875.0 875.0

InterestrateriskmanagementisexplainedinNote24andthefairvaluesofthecorporatebondsareshowninNote26.

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18. Pension BenefitsTheGroupoperatesthreepensionarrangementsintheUK:theNextGroupPensionPlan(the“OriginalPlan”),the2013NEXTGroupPensionPlan(the“2013Plan”)andtheNEXTSupplementaryPensionArrangement(the“SPA”).

TheGroup’sUKpensionarrangementsincludedefinedbenefitanddefinedcontributionsections.TheOriginalPlanand2013PlanareestablishedundertrustlawandcomplywithallrelevantUKlegislation.Pensionassetsareheldinseparatetrusteeadministeredfundswhichhaveequalpensionrightswithrespecttomembersofeithersexinsofarasthisisrequiredbycurrentlegislation.Thedefinedbenefitsectionwasclosedtonewmembersin2000andoverrecentyearstheGrouphastakenstepstomanagetheongoingrisksassociated with its defined benefit liabilities.

The Group also provides additional retirement benefits through the SPA to some plan members whose benefits would otherwise be affectedbythelifetimeallowance.

TheOriginal Plan comprises predominantlymembers with pensions in payment, following the transfer of active and deferredmembers(andassociatedliabilities)tothe2013Plan.TherisksassociatedwiththepaymentofpensionsoftheOriginalPlanhavebeenlargelymitigatedbythepurchaseoftwoinsurancecontracts(“buy-ins”)withAvivain2010and2012tocovertheliabilitiesofthisPlan,althoughitremainstheultimateresponsibilityoftheCompanytoprovidememberswithbenefits.ThepensionsandmatchinginsurancecontractsheldbytheOriginalPlanarebeingconvertedtobuy-outandtheOriginalPlanwillthenbedissolved.

The2013Planwasestablishedin2013viathetransferofliabilitiesandassetsfromtheOriginalPlan.ThisarrangementprovidesbenefitstothemajorityofmemberswhosepensionswerenotinsuredwithAviva.FromNovember2012,thefutureaccrualofbenefitsforremainingactiveemployeemembershasbeenbasedonpensionableearningsfrozenatthattime,ratherthanfinalearnings.

FurtherinformationontheGroup’spensionarrangementsisgivenintheRemunerationReportonpage79.

Principal risksThefollowingtablesummarisestheprincipalrisksassociatedwiththeGroup’sdefinedbenefitarrangements:

Investment risk Thepresentvalueofdefinedbenefitliabilitiesiscalculatedusingadiscountratesetbyreferencetohighquality corporate bond yields. If plan assets underperform corporate bonds, this will create a deficit.Investment risk in theOriginalPlan isnegligible,asalmostall liabilities in thisplanarecoveredby theinsurancecontracts.Thestrategicallocationofassetsinthe2013Planiscurrentlyweightedtowardsequityassetsasitsliabilityprofileisrelativelyimmatureanditisexpectedthattheseassetclasseswill,overthelongterm, outperform gilts and corporate bonds.

Interest rate risk Afallincorporatebondyieldswouldincreasethevalueoftheliabilities.Thiswouldbeonlypartiallyoffsetbyanincreaseinthevalueofbondinvestmentsheld.

Inflation risk PensionsinpaymentareincreasedannuallyinlinewithRPIorCPIforGuaranteedMinimumPensionsbuiltupsince1988.Pensionsbuiltupsince2005arecappedat2.5%andpensionsbuiltupbetween1997and2005arecappedat5%.Whendiscretionaryincreaseshavebeenawardedforpensionsbuiltupbefore1997,theytoohavetendedtoreflectRPI,cappedat2.5%.Thereforeanincreaseininflationwouldincreasethevalueofpensionliabilities.Theassetswouldbeexpectedtoalsoincrease,totheextentthattheyarelinkedtoinflation,butthiswouldnotbeexpectedtofullymatchtheincreaseinliabilities.

Longevityrisk The present value of the defined benefit liabilities is calculated having regards to a best estimate of themortalityofplanmembers. Ifmembers live longer thanthismortalityassumption, thiswill increasethe liabilities.

Thebuy-ininsurancecontractsrepresentover99%oftheOriginalPlanpensionliabilitiesand18%ofthetotalpensionliabilities.Thispartiallyoffsetsthetotalrisksdescribedabove.Derivativesarenotusedtohedgeanyoftherisksnotedabove.

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Notes to the Consolidated Financial Statements18. Pension Benefits (continued)

Income statementThecomponentsofthenetdefinedbenefitexpenserecognisedintheConsolidatedIncomeStatementareasfollows:

2018 20172013Plan£m

OriginalPlan£m

SPA£m

Total£m

2013Plan£m

OriginalPlan£m

SPA£m

Total£m

Currentservicecost 8.3 – 0.4 8.7 7.4 – 0.4 7.8Net interest (2.2) – 0.5 (1.7) (2.2) – 0.4 (1.8)Administration costs 1.4 0.1 – 1.5 1.8 0.1 – 1.9Net defined benefit expense 7.5 0.1 0.9 8.5 7.0 0.1 0.8 7.9

Other comprehensive incomeThecomponentsofthenetdefinedbenefitexpenserecognisedinothercomprehensiveincomeareasfollows:

2018 20172013Plan£m

OriginalPlan£m

SPA£m

Total£m

2013Plan£m

OriginalPlan£m

SPA£m

Total£m

Actuarialgains/(losses)duetoliabilityexperience 4.4 (0.2) 0.4 4.6 12.2 2.4 (1.6) 13.0Actuarial losses due to liabilityassumptionchanges (15.4) (1.7) (0.2) (17.3) (121.9) (11.8) (1.9) (135.6)

(11.0) (1.9) 0.2 (12.7) (109.7) (9.4) (3.5) (122.6)Return on plan assets greater than discount rate 54.1 2.0 – 56.1 108.8 11.4 – 120.2Actuarial gains/(losses) recognised in other comprehensive income 43.1 0.1 0.2 43.4 (0.9) 2.0 (3.5) (2.4)

Balance sheet valuationThenetdefinedbenefitpensionasset/(liability)recognisedintheConsolidatedBalanceSheetisanalysedasfollows:

2018 20172013Plan£m

OriginalPlan£m

SPA£m

Total£m

2013Plan£m

OriginalPlan£m

SPA£m

Total£m

Present value of benefit obligations (667.3) (146.0) (17.0) (830.3) (646.6) (148.0) (16.3) (810.9)Fair value of plan assets 788.5 148.0 – 936.5 723.8 150.0 – 873.8Net pension asset/(liability) 121.2 2.0 (17.0) 106.2 77.2 2.0 (16.3) 62.9

AnetassethasbeenrecognisedastheTrustDeedsoftheOriginaland2013PlansprovidetheGroupwithanunconditionalrighttoarefundassumingthegradualsettlementofthePlans’liabilitiesovertimeuntilallmembershaveleftthePlans.

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18. Pension Benefits (continued)

Plan obligationsChangesinthepresentvalueofdefinedbenefitpensionobligationsareanalysedasfollows:

2018 20172013Plan£m

OriginalPlan£m

SPA£m

Total£m

2013Plan£m

OriginalPlan£m

SPA£m

Total£m

Openingobligation 646.6 148.0 16.3 810.9 521.3 146.1 12.0 679.4Currentservicecost 8.3 – 0.4 8.7 7.4 – 0.4 7.8Interest cost 17.9 3.8 0.5 22.2 18.8 4.7 0.4 23.9Employeecontributions 0.1 – – 0.1 0.1 – – 0.1Benefits paid (16.6) (7.7) – (24.3) (13.5) (9.4) – (22.9)Transfers between plans – – – – 2.8 (2.8) – –Actuarial(gains)/losses– financial assumptions 32.5 3.9 (0.4) 36.0 113.3 12.0 1.9 127.2– experience (4.4) 0.2 (0.4) (4.6) (12.2) (2.4) 1.6 (13.0)– demographic assumptions (17.1) (2.2) 0.6 (18.7) 8.6 (0.2) – 8.4Closing obligation 667.3 146.0 17.0 830.3 646.6 148.0 16.3 810.9

Thepresentvalueof thedefinedbenefitclosingobligationof£830.3mwascomprisedofapproximately28%relatingtoactiveparticipants,47%relatingtodeferredparticipantsand25%relatingtopensioners.

Plan assetsChangesinthefairvalueofdefinedbenefitpensionassetswereasfollows:

2018 20172013Plan£m

OriginalPlan£m

SPA£m

Total£m

2013Plan£m

OriginalPlan£m

SPA£m

Total£m

Openingassets 723.8 150.0 – 873.8 579.2 146.2 – 725.4Employercontributions 8.4 – – 8.4 27.2 – – 27.2Employeecontributions 0.1 – – 0.1 0.1 – – 0.1Benefits paid (16.6) (7.7) – (24.3) (13.5) (9.4) – (22.9)Transfers between plans – – – – 2.8 (2.8) – –Interest income on assets 20.1 3.8 – 23.9 21.0 4.7 – 25.7Return on plan assets (excluding amounts included in interest) 54.1 2.0 – 56.1 108.8 11.4 – 120.2Administrative costs (1.4) (0.1) – (1.5) (1.8) (0.1) – (1.9)Closing assets 788.5 148.0 – 936.5 723.8 150.0 – 873.8

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Plan assets (continued)Thefairvalueofplanassetswasasfollows:

2018 20172013Plan£m

OriginalPlan£m

Total£m %

2013Plan£m

OriginalPlan£m

Total£m %

Equities 369.4 – 369.4 39.4 459.2 1.5 460.7 52.8Equity-linkedbonds 62.6 – 62.6 6.7 95.4 – 95.4 10.9Bonds 102.4 – 102.4 10.9 53.0 – 53.0 6.1Gilts 187.8 2.2 190.0 20.3 61.4 0.7 62.1 7.1Property 56.0 – 56.0 6.0 29.2 – 29.2 3.3Insurance contracts – 145.8 145.8 15.6 – 147.8 147.8 16.9Cashandcashequivalents 10.3 – 10.3 1.1 25.6 – 25.6 2.9

788.5 148.0 936.5 100.0 723.8 150.0 873.8 100.0

NoneofthepensionarrangementsdirectlyinvestinanyoftheGroup’sownfinancialinstrumentsnoranypropertyoccupiedby,orotherassetsusedby,theGroup.Thefairvaluesoftheaboveequityanddebtinstrumentsaredeterminedbasedonquotedpricesinactivemarkets.Thepropertyassetsrelatetoinvestmentsinpropertyfundsandtheirfairvalueisbasedonquotedpricesinactivemarkets.ThemajorityofthebenefitswithintheOriginalPlanarecoveredbytwoinsurancecontractswithAviva.Theinsuranceassetshavebeenvaluedsoastomatchthedefinedbenefitobligations,thevalueofwhichwascalculatedbyAviva.

Principal assumptionsTheIAS19(accounting)valuationofthedefinedbenefitobligationwasundertakenbyanexternalqualifiedactuaryasatJanuary2018usingtheprojectedunitcreditmethod.Theprincipalactuarialassumptionsusedinthevaluationwereasfollows:

2018 2017Original

Plan2013 and

SPAOriginal

Plan2013and

SPADiscount rate 2.40% 2.50% 2.65% 2.80%Inflation – RPI 3.45% 3.20% 3.60% 3.40%Inflation–CPI 2.45% 2.20% 2.60% 2.40%Salaryincreases – – – –Pensionincreasesinpayment–RPIwithamaximumof5.0% 3.15% 3.00% 3.25% 3.10%–RPIwithamaximumof2.5%anddiscretionaryincreases 2.05% 1.95% 2.10% 2.00%

2018 2017

Pensioner aged 65

Non-pensioner

aged 45Pensioner

aged 65

Non-pensioneraged45

Lifeexpectancyatage65(years)Male 22.7 24.5 22.9 23.3Female 25.0 26.7 25.3 25.8

Thediscountratehasbeenderivedasthesingleaveragediscountrateappropriatetothetermoftheliabilities,basedontheyieldsavailableonhighqualitySterlingcorporatebonds.TheexpectedaveragedurationoftheOriginalPlan’sliabilitiesis13yearsandfortheSPAand2013Plansitis26years.

Therateofretailpriceinflation(RPI)hasbeenderivedinaconsistentwaytothediscountrate,sothatitisappropriatetothetermoftheliabilities.Asinpreviousyears,theRPIassumptionforthe2013andSPAallowfortheinflationriskpremiumof0.2%perannumwhereasthatfortheOriginalPlandoesnot,becauseitsassetsandliabilitiesarealmostfullymatched.

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18. Pension Benefits (continued)

Principal assumptions (continued)Therateofconsumerpriceinflation(CPI)issetat1.0%lowerthantheassumptionforretailpriceinflation,reflectingthelongtermexpected gap between the two indices.

Forthe2013PlanandtheSPA,thebasemortalityassumptionsreflectthebestestimateoutputfromapostcodemortalitystudy.ThisresultsinanassumptioninlinewiththestandardSAPSSeries2AllPensionertables(withamultiplierof95%formalesand92%forfemales)withimprovementsinlinewiththeCMI2015CoreProjectionmodelwithalongtermtrendtowards1.5%perannumfrom2007to2016.Futureimprovementsfrom2016havebeenallowedforinlinewiththemostrecentCMI2016coreprojectionmodelwithalongtermtrendtowards1.5%perannum.

ThebasemortalityassumptionfortheOriginalPlanisinlinewiththestandardSAPSSeries1AllPensionertableswithmediumcohortimprovementsto2009andCMI2013improvementswithalongtermtrendtowards1.5%perannumfrom2009to2016.Futureimprovementsfrom2016havebeenallowedforinlinewiththemostrecentCMI2016coreprojectionmodel,withalongtermtrendtowards1.5%perannum.

Sensitivity analysisThesensitivityofthenetpensionassettochangesintheprincipalassumptionsis:

Sensitivity analysisImpact on net pension asset as at 27 January 2018

Discount rate 0.5%decrease £89.2mdecreasePrice inflation 0.5%increasetoRPIandCPI £48.6mdecreasePrice inflation 0.1%decreasetoCPI(i.e.increaseinthegapbetweenRPIandCPI) £4.4mincreaseMortality Lifeexpectancyincreasedbyoneyear £21.9mdecrease

Theabovesensitivityanalysesarebasedonachangeinanassumptionwhileholdingallotherassumptionsconstant.Inpractice,thisisunlikelytooccurandchangesinsomeoftheassumptionsmaybecorrelated.AsidefromthematchinginsurancecontractsheldintheOriginalPlan,noallowancehasbeenmadeforanychangeinassetsthatmightariseunderanyofthescenariossetoutabove.Whencalculatingthesensitivityofthedefinedbenefitobligationtochangesinthesignificantassumptions,thesamemethodhasbeenappliedaswhencalculatingthepensionliabilityrecognisedwithintheConsolidatedBalanceSheet.Theinflationassumptionimpactsthe“pensionincreasesinpayment”anddeferredpensioncalculations.

The sensitivities shown are just one possible outcome and should not be taken as an indication of the likelihood of a change occurring inthefuture.Economicmarketshavebeenparticularlyvolatileinrecentmonthsandmarketmetricsusedtoderivethediscountrateandpriceinflationassumptionscouldincreaseordecreaseinthefuture,bymoreorlessthanthechangesetout.

Full actuarial valuationThelatestfullactuarialvaluationofthe2013Planwasundertakenasat30September2016byWillisTowersWatson(whoactasActuarytotheTrustees).ThevaluationshowedafundingdeficitontheTechnicalProvisionsbasisrequiredbylegislationof£70.2mat that date.

TheGrouphasagreedarecoveryplantomeetthefundingdeficit,whichisintendedtorestorethePlanassetstoafullyfundedpositiononaTechnicalProvisionsbasisby30September2021.Underthatagreement,theGroupwillcontributefiveannualpaymentsofupto£14.0mby31Januaryeachyear.Thefirstpaymentof£14.0munderthisagreementwasmadeinJanuary2017andfuturecontributionswillonlyberequiredtobepaidtotheextentthatthereisafundingdeficitatthepreceding31December.

At31December2017the2013PlanwasestimatedtobefullyfundedonaTechnicalProvisionsbasiswithasurplusintheregionof£37m,thereforeadeficitcontributionwasnotpayableinJanuary2018.

WitheffectfromJanuary2018,theCompanyalsoagreedtopaycontributionsof31.3%perannumofmembers’frozenpensionablesalariesasat31October2012towardsthefutureaccrualofbenefitsforactivemembers,anincreasefrom17.5%perannum.

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ContributionsMembersoftheDefinedBenefitSectionofthe2013Plancontribute3%or5%ofpensionableearnings.WitheffectfromJanuary2018,employercontributionsincreasedfrom17.5%perannumto31.3%(c£6mtoc£8m)perannum.Membersofthedefinedcontributionsectioncontribute3%or5%ofpensionableearningswhichismatchedbytheGroup.

ContributionspaidbytheGrouparesetoutbelow:2018

£m2017

£mDefined contribution – recognised as an expense 11.6 10.8Automatic enrolment – recognised as an expense 1.8 1.8Defined benefit 8.4 27.2

21.8 39.8

The£27.2mpaidintothedefinedbenefitsectionofthe2013Planin2017includedanadditionalcontributionof£14mpaidinrespectoftherecoveryplanagreedwiththeTrusteesfollowingtheSeptember2016fullactuarialvaluationandaprepaymentofcontributionsof£6mforthecostoffutureaccrualintheyeartoJanuary2018.

Employercontributionstothedefinedbenefitsectionintheyearaheadareexpectedtobearound£22massumingacontributionof£14mispaidinJanuary2019,althoughinpracticethisiscontingentontherebeingadeficitonafunding(TechnicalProvisions)basisatthistime(refertodetailsinFullactuarialvaluationsectionabove).Employercontributionsforthedefinedcontributionschemeisexpectedtobesimilarintheyearahead.Employercontributionsfortheautomaticenrolmentschemeareexpectedtoincreasetoaround£9m,includingsalarysacrificecontributions.

19. Provisions Vacant property costs

2018£m

2017£m

Atthebeginningoftheyear 6.7 7.3Provisionsmadeintheyear 7.0 4.4Utilisationofprovisions (2.0) (1.8)Release of provisions (1.6) (3.4)Unwindofdiscount 0.3 0.2At the end of the year 10.4 6.7

ProvisionismadeforthecommittedcostoffuturerentalsorestimatedexitcostsofpropertiesnolongeroccupiedbytheGroup.Theaverageremainingleasetermforthesepropertiesis8years(2017:11years).

20. Share Capital2018

Shares ‘0002017

Shares‘0002018

£m2017

£mAllotted, called up and fully paidOrdinary shares of 10p eachAtthestartoftheyear 147,057 150,670 14.7 15.1Purchasedforcancellationintheyear (2,175) (3,613) (0.2) (0.4)At the end of the year 144,882 147,057 14.5 14.7

Thetablebelowshowsthemovementsinequityfromsharepurchasesandcommitmentsduringtheyear:

2018 2017Shares

‘000Cost

£mShares ‘000

Cost£m

Sharespurchasedforcancellationintheyear 2,175 106.1 3,613 187.6AmountshowninStatementofChangesinEquity 106.1 187.6

Subsequenttotheendofthefinancialyearandbeforethestartoftheclosedperiod,theCompanypurchasedforcancellation1,403,228sharesatacostof£69.1m.

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21. Other ReservesOtherreservesintheConsolidatedBalanceSheetcomprisethereservecreatedonreductionofsharecapitalthroughaSchemeofArrangementunderSection425oftheCompaniesAct1985(£1,460.7m)lesssharepremiumaccount(£3.8m)andcapitalredemptionreserve(£8.7m)atthetimeofacapitalreconstructionin2002,plustheaccumulatedamountofgoodwillarisingonacquisitionaftertakingintoaccountsubsequentdisposals(£0.7m),lesstheunrealisedcomponentofrevaluationsofpropertiesarisingunderpreviousaccounting standards (£5.1m) as at the date of transition to IFRS.

22. Share-based PaymentsTheGroupoperatesanumberofshare-basedpaymentschemesasfollows:

Management share optionsTheNEXTManagementShareOptionPlanprovidesforoptionsovershares,exercisablebetweenthreeandtenyearsfollowingtheirgrant,tobeallocatedtoGroupemployeesatthediscretionoftheRemunerationCommittee.Thisplanisprimarilyaimedatmiddlemanagementandseniorstorestaff.Nooptionsweregrantedtoanydirectorsorchangesmadetoexistingentitlementsintheyearunderreview.Noemployeeisentitledtobegrantedoptionsundertheschemeif,inthesamefinancialyear,theyhavereceivedanawardunderNEXT’sLongTermIncentivePlanorShareMatchingPlan.

Thetotalnumberofoptionswhichcanbegrantedissubjecttolimits.Therearenocash-settlementalternativesandtheyarethereforeaccounted for under IFRS2 asequity-settledawards.Optionprices are set at theprevailingmarketprice at the timeofgrant.Themaximumtotalmarketvalueofshares(i.e.theacquisitionpriceofshares)overwhichoptionsmaybegrantedtoanypersonduringanyfinancialyearoftheCompanyisthreetimessalary,excludingbonusesandbenefitsinkind.ThislimitmaybeincreasedtofivetimessalaryincircumstancesconsideredbytheCommitteetobeexceptional,forexampleonthegrantofoptionsfollowingrecruitment.Grantsaregenerallymadeannually.

Sharesave optionsTheCompany’sSaveAsYouEarn(Sharesave)schemeisopentoallUKemployees.InvitationstoparticipatearegenerallyissuedannuallyandtheschemeissubjecttoHMRCrules.Thecurrentmaximummonthlysavingsfortheschemesdetailedbelowis£250.Optionsaregrantedattheprevailingmarketratelessadiscountof20%andareexercisablethreeorfiveyearsfromthedateofgrant.AsimilarSharesaveschemeisopentotheCompany’sEireemployees.Sharesaveoptionsarealsoaccountedforasequity-settledawards under IFRS 2.

Management and Sharesave optionsThefollowingtablesummarisesthemovementsinManagementandSharesaveoptionsduringtheyear:

2018 2017

No. of options

Weighted average exercise

priceNo. of

options

Weightedaverage exercise

priceOutstandingatbeginningofyear 5,064,951 £47.61 4,624,159 £47.60Granted 1,696,653 £41.31 2,129,400 £45.54Exercised (411,350) £28.49 (883,097) £33.94Forfeited (767,459) £47.46 (805,511) £56.97Outstandingatendofyear 5,582,795 £47.12 5,064,951 £47.61Exercisableatendofyear 1,610,693 £45.06 1,392,536 £31.90

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22. Share-based Payments (continued)

Management and Sharesave options (continued)Optionswereexercisedonaregularbasisthroughouttheyearandtheweightedaveragesharepriceduringthisperiodwas£44.24(2017:£52.89).OptionsoutstandingatJanuary2018areexercisableatpricesrangingbetween£10.81and£70.80(2017:£10.81and£70.80)andhaveaweightedaverageremainingcontractuallifeof6.0years(2017:5.7years),asanalysedbelow:

2018 2017

No. of options

Weighted average

remaining contractual

life (years)

No. of options

Weightedaverage

remaining contractual

life (years)

Exercise price range £10.81–£38.25 1,290,078 2.8 1,889,021 3.6£41.09 1,257,902 9.2 – –£41.12–£42.08 917,899 4.3 757,351 5.3£54.10–£59.76 1,024,461 6.9 1,219,448 7.4£66.95–£70.80 1,092,455 6.7 1,199,131 7.7

5,582,795 6.0 5,064,951 5.7

Share Matching Plan (SMP) TheSMPisanequity-settledschemeopentoasmallnumberofseniorexecutivesbelowBoardlevel.FromJanuary2014,executivedirectorsarenolongergrantedSMPawards.ParticipantswhoinvestaproportionofanyannualcashbonusinNEXTshareswillreceiveuptoamaximumoftwotimestheoriginalnumberofsharestheypurchasewiththeirbonus.Anymatchingisconditionaluponachievingperformancemeasuresoverthefollowingthreeyears.ThemaximummatchingratioavailableundertheSMPrulesis3:1,matchingthepre-taxequivalentoftheamountinvestedinshares.ForanySMPgrantsmadefrom2018,participantswillbeentitledtoreceiveordinaryandspecialdividendaccrualsonanyawardsvestingundertheSMP.

TheRemunerationCommittee’spolicyistosetperformancemeasuresbyreferencetounderlyingfullydilutedpost-taxEPSbuttheCommitteehasflexibilitytousedifferentmeasures.Undertheformulae,anotionaladjustmentismadetoactualEPSachievedforspecial dividends, on the basis that the cash distributed had instead been used to purchase shares at the prevailing share price on thedayofthespecialdividendpayment.

ThefollowingtablesummarisesthemovementsinnilcostSMPoptionsduringtheyear:2018

No. of options

2017 No. of

optionsOutstandingatbeginningofyear 76,946 85,657Granted 17,298 15,002Exercised (43,228) (21,081)Forfeited (5,452) (2,632)Outstandingatendofyear 45,564 76,946Exercisableatendofyear – 21,390

Theweightedaverageremainingcontractuallifeoftheseoptionsis5.8years(2017:7.6years).SMPoptionswereexercisedatdifferenttimesintheyearandtheweightedaveragesharepriceduringthisperiodwas£43.12(2017:£52.47).

Long Term Incentive Plan (LTIP)As explained in the Remuneration Report, the Group operates an LTIP scheme for executive directors and other senior executives. PriortoJanuary2014,allLTIPawardswereaccountedforascash-settledshare-basedpayments.FromJanuary2014onwards,newLTIPgrantstoexecutivedirectorsaresettledinshareswithnocash-settlementalternative.Awardstootherseniorexecutivesweregenerallycash-settleduntilMarch2017,sincethatdatetheyaresettledinshares.Asaresult,allLTIPawardswereaccountedforunderIFRS2asequity-settledintheyearended27January2018.PerformanceconditionsfortheLTIPawardsaredetailedintheRemuneration Report.


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Equity-settled LTIP awardsThefollowingtablesummarisesthemovementsinnilcostequity-settledLTIPawardsduringtheyear:

2018No. of

awards

2017No. of

awardsOutstandingatbeginningofyear 164,783 100,745Granted 222,467 64,038Vested (12,752) –Forfeited (134,668) –Changeinaccounting(cashtoequity) 247,612 –Outstandingatendofyear 487,442 164,783

Theweightedaverageremainingcontractuallifeoftheseoptionsis1.6years(2017:1.5years).

Cash-settled LTIP awardsThefollowingtablesummarisesthemovementsincash-settledLTIPawardsduringtheyear:

2018No. of

awards

2017No. of

awardsOutstandingatbeginningofyear 247,612 338,760Granted – 92,912Vested – (114,345)Forfeited – (69,715)Changeinaccounting(cashtoequity) (247,612) –Outstandingatendofyear – 247,612

Acreditof£5.8mfortheyear(2017:creditof£2.3m)hasbeenmadeintheaccountsinrespectofcash-settledLTIPgrants,ofwhichacreditof£0.1m(2017:creditof£2.1m)relatedtotheexecutivedirectors.Theweightedaverageremainingcontractuallifeoftheseawardsin2018wasnilyears(2017:1.4years).

Fair value calculationsThefairvalueofManagement,SharesaveandSMPoptionsgrantediscalculatedatthedateofgrantusingaBlack-Scholesoptionpricingmodel.ExpectedvolatilitywasdeterminedbycalculatingthehistoricalvolatilityoftheCompany’ssharepriceoveraperiodequivalenttotheexpectedlifeoftheoption.Theexpectedlifeappliedinthemodel isbasedonhistoricalanalysesofexercisepatterns,takingintoaccountanyearlyexercises.Thefollowingtableliststheinputstothemodelusedforoptionsgrantedintheyearsended27January2018and28January2017basedoninformationatthedateofgrant:

Management share options (granted in April) 2018 2017

Share price at date of grant £41.09 £54.10Exercise price £41.09 £54.10Volatility 25.90% 20.60%Expected life 4 years 4yearsRisk free rate 0.32% 0.64%Dividendyield 3.85% 2.83%Weightedaveragefairvalueperoption £5.35 £6.22

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Fair value calculations (continued)

Sharesave plans (granted in October) 2018 2017Share price at date of grant £52.60 £47.81Exercise price £42.08 £38.25Volatility 29.20% 25.22%Expected life 3.3 years 3.3yearsRisk free rate 0.63% 0.31%Dividendyield 3.00% 3.30%Weightedaveragefairvalueperoption £12.77 £10.04

SMP (granted in May) 2018 2017Share price at date of grant £41.85 £52.65Exercise price Nil NilVolatility 27.80% 21.53%Expected life 3 years 3yearsRisk free rate 0.21% 0.58%Dividendyield 3.78% 2.91%Weightedaveragefairvalueperoption £37.37 £48.25

Thefairvalueofequity-settledLTIPawardsgrantediscalculatedatthedateofgrantusingaMonteCarlooptionpricingmodel.ExpectedvolatilitywasdeterminedbycalculatingthehistoricalvolatilityoftheCompany’ssharepriceoveraperiodequivalenttothelifeoftheaward.Thefollowingtableliststheinputstothemodelusedforawardsgrantedintheyearended27January2018and28January2017basedoninformationatthedateofgrant:

Equity-settled LTIP awards (granted in March) 2018 2017Share price at date of grant £41.99 £56.35Award price Nil NilVolatility 27.10% 20.92%Life of award 3 years 3yearsRisk free rate 0.30% 0.64%Dividendyield 3.76% 2.72%Fair value per award £16.74 £23.27

Equity-settled LTIP awards (granted in September) 2018 2017Share price at date of grant £50.45 £50.05Award price Nil NilVolatility 29.40% 24.54%Life of award 3 years 3yearsRisk free rate 0.52% 0.16%Dividendyield 0.00% 3.16%Fair value per award £23.45 £20.60

FromSeptember2017,forallnewLTIPawards,dividendaccruals(bothinrespectofspecialandordinarydividends)maybepayableon vested awards.


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23. Shares Held by ESOTTheNEXT2003EmployeeShareOwnershipTrust(ESOT)hasanindependenttrusteeresidentinJerseyandprovidesfortheissueofsharestoGroupemployees,includingshareissuesundershareoptions,atthediscretionoftheTrustee.AllManagementandSharesaveoptionswhichwereexercisedduringtheyearweresatisfiedbysharesissuedfromtheESOT.

At27January2018theESOTheld4,826,665(2017:4,414,892)ordinarysharesof10peachintheCompany,themarketvalueofwhichamountedto£251.8m(2017:£170.0m).DetailsofoutstandingshareoptionsareshowninNote22.

Theconsiderationpaidfortheordinarysharesof10peachintheCompanyheldbytheESOTat27January2018and28January2017hasbeenshownasanESOTreserveandpresentedwithinequityfortheCompanyandtheGroup.Allotherassets,liabilities,incomeandcostsoftheESOThavebeenincorporatedintotheaccountsoftheCompanyandtheGroup.

ThetablebelowshowsthemovementsinequityfromESOTsharepurchasesduringtheyear:

2018 2017Shares

‘000 £mShares‘000 £m

SharespurchasedbyESOTintheyear 842 37.0 978 50.9Sharesissuedonemployeeoptionexercises 431 10.3 911 30.5

Proceedsof£11.3m(2017:£29.9m)werereceivedontheexerciseofManagementandSharesaveoptions.TheamountshownintheStatementofChangesinEquityof£10.3m(2017:£30.5m)isaftertheissueofnilcostLTIP,SMPandDeferredbonusshares.TheweightedaveragecostofsharesissuedbytheESOTwas£20.8m(2017:£44.2m).

At22March2018,employeeshareoptionsover14,812shareshadbeenexercisedsubsequenttothebalancesheetdateandhadbeensatisfiedbyordinarysharesissuedbytheESOT.

24. Financial Instruments: Risk Management and Hedging Activities

NEXToperatesacentralisedtreasuryfunctionwhichisresponsibleformanagingtheliquidity,interestandforeigncurrencyrisksassociatedwiththeGroup’sactivities.Aspartofitsstrategyforthemanagementoftheserisks,theGroupusesfinancialinstruments.InaccordancewiththeGroup’streasurypolicy,financialinstrumentsarenotenteredintoforspeculativepurposes.TreasurypolicyisreviewedandapprovedbytheBoardandspecifiestheparameterswithinwhichtreasuryoperationsmustbeconducted,includingauthorisedcounterparties,instrumenttypesandtransactionlimits,andprinciplesgoverningthemanagementofliquidity,interestandforeigncurrencyrisks.

TheGroup’sfinancialinstruments,alsoincludescash,shorttermdeposits,bankoverdrafts,loans,andcorporatebonds.ThemainpurposeofthesefinancialinstrumentsistoraisefinancefortheGroup’soperations.Inaddition,theGrouphasvariousotherfinancialassetsandliabilitiessuchastradereceivablesandtradepayablesarisingdirectlyfromitsoperations.

Liquidity riskTheGroupmanagesitscashandborrowingrequirementscentrallytominimisenetinterestexpensewithinriskparametersagreedbytheBoard,whilstensuringthattheGrouphassufficientliquidresourcestomeettheoperatingneedsofitsbusinesses.TheforecastcashandborrowingsprofileoftheGroupismonitoredtoensurethatadequateheadroomremainsundercommittedborrowingfacilities.

Thetablebelowshowsthematurityanalysisoftheundiscountedremainingcontractualcashflows(includinginterest)oftheGroup’sfinancialliabilities,includingcashflowsinrespectofderivatives:

2018

Less than 1 year£m

1 to 2 years

£m

2 to 5 years

£m

Over 5 years

£mTotal

£mBank loans and overdrafts 180.0 – – – 180.0Tradeandotherpayables 382.4 12.8 – – 395.2Corporatebonds 39.3 39.3 425.4 659.0 1,163.0

601.7 52.1 425.4 659.0 1,738.2Derivatives:netsettled (7.0) (5.8) (12.3) (10.7) (35.8)Derivatives:grosssettled Cashinflows (1,051.7) – – – (1,051.7) Cashoutflows 1,114.8 – – – 1,114.8Total cash flows 657.8 46.3 413.1 648.3 1,765.5

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24. Financial Instruments: Risk Management and Hedging Activities (continued)

Liquidity risk (continued)

2017

Less than 1 year£m

1 to 2 years

£m

2 to 5 years

£m

Over5years

£mTotal

£mBank loans and overdrafts 35.3 – – – 35.3Tradeandotherpayables 479.4 7.7 – – 487.1Corporatebonds 39.3 39.3 442.8 680.8 1,202.2

554.0 47.0 442.8 680.8 1,724.6Derivatives:netsettled (7.2) (7.1) (18.2) (16.9) (49.4)Derivatives:grosssettled Cashinflows (1,106.0) – – – (1,106.0) Cashoutflows 1,067.9 – – – 1,067.9Total cash flows 508.7 39.9 424.6 663.9 1,637.1

At27January2018,theGrouphadborrowingfacilitiesof£525.0m(2017:£525.0m)inrespectofwhichallconditionsprecedenthavebeenmet.£225.0miscommitteduntilSeptember2020andafurther£300.0miscommitteduntilNovember2022.£135.0mofthisfacilitywasdrawndownatJanuary2018(2017:£nil).

Interest rate riskThe Group is exposed to fair value interest rate risk on its fixed rate corporate bonds and cash flow interest rate risk on floating rate bankloansandoverdrafts.TheforecastcashandborrowingsprofileoftheGroupismonitoredregularlytoassessthemixoffixedand variable rate debt, and the Group uses interest rate derivatives where appropriate to reduce its exposure to changes in interest rates and the economic environment.

Interest rates: fair value hedgesThe Group has interest rate swap agreements in place as fair value hedges of part of the interest rate risk associated with the corporatebonds.Underthetermsoftheswaps,whichhavethesamekeyfeaturesasthebonds,theGroupreceivesafixedrateofinterestequivalenttotherelevantcouponrate,andpaysavariablerate.TheGroupalsohasinterestrateswapswheretheGroupreceivesavariablerateofinterest,andpaysafixedrate.DetailsoftheaggregateratespayablearegiveninNote17.

ThefairvaluesoftheGroup’sinterestrateswaps,includingaccruedinterest,areasfollows:2018

£m2017

£mDerivatives in designated fair value hedging relationships 35.7 40.8

Thefairvaluesofderivativeshavebeencalculatedbydiscountingtheexpectedfuturecashflowsatprevailinginterestratesandarebasedon-marketpricesatthebalancesheetdate.

Foreign currency riskTheGroup’sprincipalforeigncurrencyexposuresarisefromthepurchaseofoverseassourcedproducts.Grouppolicyallowsfortheseexposurestobehedgedforupto24monthsaheadinordertofixthecostinSterling.Thishedgingactivityinvolvestheuseofspot,forward and option contracts.

ThemarketvalueofoutstandingforeignexchangecontractsisreportedregularlyatBoardlevel,andreviewedinconjunctionwithpercentagecovertakenbyseasonandcurrentmarketconditionsinordertoassessandmanagetheGroup’songoingexposure.

TheGroupdoesnothaveamaterialexposuretocurrencymovementsinrelationtothetranslationofoverseasinvestmentsandconsequentlydoesnothedgeanysuchexposure.TheGroup’snetexposuretoforeigncurrencies,takinghedgingactivitiesintoaccount,isillustratedbythesensitivityanalysisinNote27.


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24. Financial Instruments: Risk Management and Hedging Activities (continued)

Foreign currency hedgesThefairvaluesofforeignexchangederivativesareasfollows:

2018£m

2017£m

Derivatives in designated hedging relationships (51.8) 31.6Otherforeignexchangederivatives (1.8) (0.8)Total foreign exchange derivatives (53.6) 30.8

Thetotalnotionalamountofoutstandingforeignexchangecontractsatthebalancesheetdateisasfollows:2018

£m2017

£mUSDollar 963.9 1,003.4Euro 44.7 39.2Other 43.1 63.3

1,051.7 1,105.9

Credit riskInvestments of cash surpluses, borrowing commitments and other contracts in financial instruments are made through banks and companieswhichmustfulfilcreditratingandinvestmentcriteriaapprovedbytheBoard.Riskisfurthermitigatedbydiversificationandlimitingcounterpartyexposure.Allcustomerswhowishtotradeoncredittermsaresubjecttocreditverificationprocedures.Receivable balances are monitored on an ongoing basis and provision is made for estimated irrecoverable amounts. The concentration ofcreditriskislimitedduetotheOnlinecustomerbasebeinglargeanddiverse.TheGroup’soutstandingreceivablesbalancesaredetailed in Note 11.

Capital riskThecapitalstructureoftheGroupconsistsofdebt,asanalysedinNote28,andequityattributabletotheequityholdersoftheParentCompany,comprisingissuedcapital,reservesandretainedearningsasshownintheConsolidatedStatementofChangesinEquity.The Group manages its capital with the objective that all entities within the Group continue as going concerns while maintaining an efficientstructuretominimisethecostofcapital.TheGroupisnotrestrictedbyanyexternallyimposedcapitalrequirements.

AspartofitsstrategyfordeliveringsustainablelongtermgrowthinEarningsPerShare,theGrouphasbeenreturningcapitaltoshareholdersbywayofsharebuybacksinadditiontodividends(includingspecialdividends).Sharebuybacksmaybetransactedthroughbothon-marketpurchasesandoff-marketcontingentcontracts.

25. Financial Instruments: Categories2018

£m2017

£mFinancial assetsDerivatives at fair value through profit and loss – held for trading 2.4 –Derivatives in designated hedging relationships 51.4 91.3Loans and receivables 1,153.0 1,033.2Cashandshorttermdeposits 53.5 49.7Available for sale financial assets 1.0 1.0Financial liabilitiesDerivatives at fair value through profit and loss – held for trading (4.2) (0.8)Derivatives in designated hedging relationships (67.5) (18.9)Corporatebonds (908.5) (913.5)Amortised cost (575.2) (446.3)

AllderivativesarecategorisedasLevel2undertherequirementsofIFRS13“Fair value measurement”,astheyarevaluedusingtechniquesbasedsignificantlyonobservedmarketdata.

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26. Financial Instruments: Fair ValuesThefairvaluesofeachcategoryoftheGroup’sfinancialinstrumentsarethesameastheircarryingvaluesintheGroup’sBalanceSheet,otherthanasnotedbelow:

2018 2017Carryingamount

£mFair value

£m

Carryingamount

£mFair value

£mCorporate bondsIn hedging relationships 458.5 478.8 463.5 478.5Not in hedging relationships 450.0 487.9 450.0 481.3

908.5 966.7 913.5 959.8

Corporatebondsareheldatamortisedcostadjustedfortheeffectofthechangeinfairvaluehedge.

Thefairvaluesofcorporatebondsaretheirmarketvaluesatthebalancesheetdate(IFRS13Level1)reflectingquoted(unadjusted)prices in active markets for identical assets or liabilities. Market values include accrued interest and changes in credit risk and interest raterisk,andarethereforedifferenttothereportedcarryingamounts.

27. Financial Instruments: Sensitivity AnalysisForeign currency sensitivity analysisTheGroup’sprincipalforeigncurrencyexposuresaretoUSDollarsandtheEuro.ThetablebelowillustratesthehypotheticalsensitivityoftheGroup’sreportedprofitandclosingequitytoa10%increaseanddecreaseintheUSDollar/SterlingandEuro/Sterlingexchangeratesat theyearenddate,assumingallothervariablesremainunchanged.Thesensitivity rateof10%represents thedirectors’assessmentofareasonablypossiblechange,basedonhistoricvolatility.

Theanalysisassumesthatexchangeratefluctuationsoncurrencyderivativesthatformpartofaneffectivecashflowhedgerelationshipaffectthefairvaluereserveinequityandthefairvalueofthehedgingderivatives.Forforeignexchangederivativeswhicharenotdesignated hedges, movements in exchange rates impact the Income Statement.

Positivefiguresrepresentanincreaseinprofitorequity.

Income statement Equity2018

£m2017

£m2018

£m2017

£mSterling strengthens by 10%USDollar (1.6) (3.6) (46.5) (64.2)Euro – – (2.7) (2.2)Sterling weakens by 10%USDollar 1.8 (0.4) 57.8 73.0Euro – – 3.3 2.7

YearendexchangeratesappliedintheaboveanalysisareUSDollar1.42(2017:1.25)andEuro1.14(2017:1.17).StrengtheningandweakeningofSterlingmaynotproducesymmetricalresultsdependingontheproportionandnatureofforeignexchangederivativeswhichdonotqualifyforhedgeaccounting.


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27. Financial Instruments: Sensitivity Analysis (continued)

Interest rate sensitivity analysisThetablebelowillustratesthehypotheticalsensitivityoftheGroup’sreportedprofitandclosingequitytoa0.5%increaseordecreaseininterestrates,assumingallothervariableswereunchanged.Thesensitivityrateof0.5%representsthedirectors’assessmentofareasonablypossiblechange,basedonhistoricvolatility.

Theanalysishasbeenpreparedusingthefollowingassumptions:

• Forfloatingrateassetsandliabilities,theamountoftheassetorliabilityoutstandingatthebalancesheetdateisassumedtohavebeenoutstandingforthewholeyear.

• Fixedratefinancialinstrumentsthatarecarriedatamortisedcostarenotsubjecttointerestrateriskforthepurposeofthisanalysis.

Positivefiguresrepresentanincreaseinprofitorequity.

Income statement Equity2018

£m2017

£m2018

£m2017

£mInterestrateincreaseof0.5% (2.1) (2.2) (2.1) (2.2)Interestratedecreaseof0.5% 2.1 2.2 2.1 2.2

28. Analysis of Net DebtOthernon-cashchanges

January2017

£m CashflowForeign

exchange

Fair value changes

£m

January2018

£mCashandshorttermdeposits 49.7 53.5Overdraftsandshorttermborrowings (35.3) (45.0)Cashandcashequivalents 14.4 (4.6) (1.3) – 8.5Unsecuredbankloans – (135.0) – – (135.0)Corporatebonds (913.5) – – 5.0 (908.5)Fair value hedges of corporate bonds 38.6 – – (5.1) 33.5Total net debt (860.5) (139.6) (1.3) (0.1) (1,001.5)

29. Operating Lease CommitmentsTheGrouphasenteredintooperatingleasesprimarilyinrespectofretailstoresandlesseramountsforwarehouses,vehiclesandequipment.Thesenon-cancellableleaseshaveremainingtermsofbetweenonemonthandapproximately25years.Contingentrentalsarepayableoncertainretailstoreleasesbasedonstorerevenues.ThemajorityoftheGroup’spropertyleasesprovidefortheirrenewalbymutualagreementattheexpiryoftheleaseterm.

Futureminimumrentalspayable(tothenearestbreak-clause)undernon-cancellableoperatingleaseswheretheGroupisthelessee:

Leases expiring:2018

£m2017

£mWithinoneyear 243.3 246.3Intwotofiveyears 779.6 825.6Overfiveyears 824.8 963.6

1,847.7 2,035.5

AtJanuary2018,futurerentalsreceivableundernon-cancellablesub-leaseswheretheGroupisthelessorwere£12.7m(2017:£12.0m).

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29. Operating Lease Commitments (continued)AdditionalinformationontheGroup’sleasingcommitmentsasat27January2018isdetailedinthetablebelow:

Minimum lease

payments£m

Less sub-lease

income£m

Net total£m

YeartoJanuary2017(Actual) 243.5 (7.7) 235.8Year to January 2018 (Actual) 250.0 (9.2) 240.8

YeartoJanuary2019 243.3 (7.4) 235.9YeartoJanuary2020 239.0 (4.0) 235.0YeartoJanuary2021 206.3 (0.8) 205.5YeartoJanuary2022 178.8 (0.2) 178.6YeartoJanuary2023 155.5 (0.1) 155.4Subtotal5yearstoJanuary2023 1,022.9 (12.5) 1,010.4

5yearsfromFebruary2023toJanuary2028 508.2 (0.2) 508.010yearsfromFebruary2028toJanuary2038 299.3 – 299.32038andbeyond 17.3 – 17.3Total future obligations 1,847.7 (12.7) 1,835.0

Futureminimumrentalspayabletotheendoftheleasetermareasfollows:Minimum

leasepayments

£mYeartoJanuary2017(Actual) 243.5Year to January 2018 (Actual) 250.0

YeartoJanuary2019 244.0YeartoJanuary2020 242.7YeartoJanuary2021 214.3YeartoJanuary2022 189.8YeartoJanuary2023 168.1Subtotal5yearstoJanuary2023 1,058.9

5yearsfromFebruary2023toJanuary2028 566.810yearsfromFebruary2028toJanuary2038 368.82038andbeyond 17.3Total future obligations 2,011.8


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30. Related Party TransactionsDuringtheyeartheGroupsoldgoodsandservicesinthenormalcourseofbusinesstoitsassociateundertaking,ChoiceDiscountStoresLimited,asfollows:

2018£m

2017£m

Sales 7.1 8.6Trade receivables 0.6 0.4

DuringtheyeartheGroupenteredintothefollowingtransactionswithitsjointventureRetailRestaurantsLimited,asfollows:

2018£m

2017£m

Loan receivable 1.5 –Recharges of costs 0.6 –

Theloanof£1.5mearnsinterestatacommercialarms-lengthrate.

TheGroup’sotherrelatedpartytransactionsweretheremunerationofkeymanagementpersonnel(refertoNote4).

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PARENT COMPANY FINANCIAL STATEMENTS 145 Parent Company Balance Sheet146 Parent Company Statement of Changes

in Equity 147 Notes to the Parent Company Financial

Statements

144

Parent Company Balance Sheet

Notes

27 January2018

£m

28January2017

£mFixed assetsInvestments C2 2,475.7 2,475.7Otherfinancialassets C3 48.1 57.3

2,523.8 2,533.0

Current assetsOtherdebtors C4 99.5 7.9Cashatbankandinhand 0.3 –

99.8 7.9

Creditors:amountsfallingduewithinoneyear C5 (170.0) (48.0)Net current liabilities (70.2) (40.1)

Total assets less current liabilities 2,453.6 2,492.9

Creditors:amountsfallingdueaftermorethanoneyear C5 (920.9) (923.8)Total liabilities (1,090.9) (971.8)NET ASSETS 1,532.7 1,569.1

Capital and reservesCalledupsharecapital C6 14.5 14.7Share premium account 0.9 0.9Capitalredemptionreserve 15.4 15.2ESOTreserve C6 (231.6) (215.4)Otherreserves C6 985.2 985.2Profit and loss account C7 748.3 768.5

TOTAL EQUITY 1,532.7 1,569.1

TheprofitfortheyeardealtwithintheaccountsoftheCompanyis£562.0m(2017:£540.7m).

ThefinancialstatementswereapprovedbytheBoardofdirectorsandauthorisedforissueon23March2018.Theyweresignedonitsbehalfby:


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Parent Company Statement of Changes in Equity

Sharecapital

£m

Sharepremiumaccount

£m

Capital redemption

reserve£m

ESOTreserve

£m

Other reserves

£m

Profit andloss account

£m

Total equity

£m

At 30 January 2016 15.1 0.9 14.8 (208.7) 985.2 641.8 1,449.1Profitfortheyear – – – – – 540.7 540.7Othercomprehensiveincomefortheyear – – – – – – –Totalcomprehensiveincomefortheyear – – – – – 540.7 540.7

Sharebuybacksandcommitments(NoteC6) (0.4) – 0.4 – – (187.6) (187.6)ESOTsharepurchasesandcommitments(NoteC6) – – – (50.9) – – (50.9)SharesissuedbyESOT – – – 44.2 – (13.7) 30.5Share option charge – – – – – 13.1 13.1Equitydividends – – – – – (225.8) (225.8)At 28 January 2017 14.7 0.9 15.2 (215.4) 985.2 768.5 1,569.1Profitfortheyear – – – – – 562.0 562.0Othercomprehensiveincomefortheyear – – – – – – –Totalcomprehensiveincomefortheyear – – – – – 562.0 562.0

Sharebuybacksandcommitments(NoteC6) (0.2) – 0.2 – – (106.1) (106.1)ESOTsharepurchasesandcommitments(NoteC6) – – – (37.0) – – (37.0)SharesissuedbyESOT – – – 20.8 – (10.5) 10.3Share option charge – – – – – 14.1 14.1Equitydividends – – – – – (479.7) (479.7)

At 27 January 2018 14.5 0.9 15.4 (231.6) 985.2 748.3 1,532.7

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Notes to the Parent Company Financial StatementsC1. Accounting PoliciesTheParentCompanyfinancialstatementsofNEXTplchavebeenpreparedinaccordancewiththeCompaniesAct2006andFinancialReportingStandard101“Reduced disclosure framework”(“FRS101”).FRS101enablesthefinancialstatementsoftheParentCompanytobepreparedinaccordancewithEU-adoptedIFRSbutwithcertaindisclosureexemptions.Themainareasofreduceddisclosureareinrespectofequity-settledshare-basedpayments,financialinstruments,theCashFlowStatement,andrelatedpartytransactionswithGroupcompanies.TheaccountingpoliciesadoptedfortheParentCompany,NEXTplc,areotherwiseconsistentwiththoseusedfortheGroupwhicharesetoutonpages107to112.TheESOTisconsolidatedonthebasisthattheparenthascontrol,thustheassetsandliabilitiesoftheESOTareincludedintheBalanceSheetandsharesheldbytheESOTintheCompanyarepresentedasadeductionfromequity.AspermittedbySection408oftheCompaniesAct2006,theIncomeStatementoftheCompanyisnotpresented as part of the financial statements.

C2. InvestmentsThe£2,475.7m(2017:£2,475.7m)investmentshownintheBalanceSheetofNEXTplcrelatestoitsinvestmentinNEXTGroupLimited(2017:NEXTHoldingsLimited).AfulllistoftheGroup’srelatedundertakingsiscontainedinthetablebelow.

Company name Registered office address

% held by Group

companiesAgraTech Limited GlenHouse,200-208TottenhamCourtRoad,London,W1T7PL 100

BelvoirInsuranceCompanyLimited MaisonTrinity,TrinitySquare,StPeterPort,GY14AT,Guernsey 100

BreconDebtRecoveryLimited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

CairnsLimited 14/FCityplaza1,1111King’sRoad,TaikooShing,QuarryBay,HongKong 100

Callscan,Inc. McSwiney, Semple, Hankin-Birke &Wood PC, PO Box 2450, 280 Main Street, NewLondon,NH03257,USA

100

ChoiceDiscountStoresLimited 14-14ARectoryRoad,HadleighBenfleet,Essex,SS72ND,UK 49

LipsyLimited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

LLCNext 7DolgorukovskayaStreet,127006,Moscow,RussianFederation 100

Next (Asia) Limited 14/FCityplaza1,1111King'sRoad,TaikooShing,QuarryBay,HongKong 100

Next (Europe) BV Herikerbergweg238,LunaArena,1101CMAmsterdam,Netherlands 100

NextSourcingLimitedShanghaiOffice 9F,Building1,Highstreetloft,No.508JiashanRoad,Shanghai 100

Next AV s.r.o. Pribinova8,81109,Bratislava,Slovakia 100

Next Brand Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

Next Distribution Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

Next Financial Services Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

NextGermanyGmbH LandsbergerStra.155,80687München 100

Next Group Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

NextHempelFashions(Shanghai)CoLtd Room201A-201B,InfinitiPlaza,No.138HuaiHaiZhongRoad,HuangPuDistrict,ShanghaiPRC,200021

100

NextHoldingsLimited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

NextHoldingWholesalePrivateLimited Level2Raheja,CentrePoint,294CSTRoadNear,MumbaiUniversity,Santacruz,EastMumbai,MumbaiCity,MH400098India

100

Next Manufacturing (Pvt) Limited Phase1,RingRoad,2,E.P.Z,Katunayake,SriLanka 100

Next Manufacturing Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

Next Near East Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

Next Pension Trustees Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

NextPKs.r.o. Rohanskénábreží671/15,Karlín,Prague8,18600,CzechRepublic 100

Next Procurement (Private) Limited HouseNo.680,SafariVillas,SectorBBahriaTown,Lahore,Pakistan 100

Next Properties Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

Next Retail Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

NextSourcingCompanyLimited 2ndFloorS.I.Building,No.93PreashSihanoukBlvd,SangkatChaktomuk,KhanDaunPenh,PhnomPenh,Cambodia

100

NextSourcing(UK)Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

Next Sourcing Limited 14/FCityplaza1,1111King'sRoad,TaikooShing,QuarryBay,HongKong 100

NextSourcingLimitedDomesticand/orForeignTradeLimitedLiabilityCompany

KemankesKaramustafapasaMahallesiTophaneiskeleCad.No:12/5Beyoglu,Istanbul,Turkey

100

Next Sourcing Services (India) Private Limited 207JainaTower,1DistrictCentre,Janakpuri,NewDelhi,110058,India 100

Next Sourcing VM Limited 14/FCityplaza1,1111King'sRoad,TaikooShing,QuarryBay,HongKong 100

Next Sweden AB DesfordRoad,Enderby,Leicester,LE194AT,UK 100

NextCommercialTrading(Shanghai)CoLimited Room301,BuildingNo.4,No.58RuixingLu,ShanghaiFTC,PRC,201306 100

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Group

Company

C2. Investments (continued)

Company name Registered office address

% held by Group

companiesNSL Limited 14/FCityplaza1,1111King'sRoad,TaikooShing,QuarryBay,HongKong 100

PerimeterTechnologyInc. McSwiney, Semple, Hankin-Birke &Wood PC, PO Box 2450, 280 Main Street, NewLondon,NH03257,USA

100

Retail Restaurants Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 50

TheNextDirectoryLimited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

The Paige Group Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

UJNextKereskedelmiKorlatoltFelelossegu Tarsasag

1132Budapest,Vaciut22-24,Budapest,Hungary 100

Ventura Group Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

Ventura Network Distribution Limited DesfordRoad,Enderby,Leicester,LE194AT,UK 100

C3. Other Financial Assets OtherfinancialassetscompriseinterestratederivativesasdetailedinNote12oftheconsolidatedfinancialstatements,whicharecarried at their fair value.

C4. Other Debtors2018

£m2017

£mAmountsduefromsubsidiaryundertaking 91.1 –Prepayments 8.4 7.9

99.5 7.9

C5. Current and Non-current Creditors2018 2017

Current£m

Non-current£m

Current£m

Non-current£m

Corporatebonds – 908.5 – 907.3Unsecuredbankloans 135.0 – – –Short term borrowings 15.0 – – –Amountsduetosubsidiaryundertaking – – 32.1 –Corporationtaxcreditor 1.0 – – –Otherfinancialliabilities – 12.4 – 16.5Accruals and other creditors 19.0 – 15.9 –

170.0 920.9 48.0 923.8

Further informationontheCompany’scorporatebonds isgiveninNote17.Otherfinancial liabilities includeinterestrateswapscarried at fair value (refer to Note 16).

C6. Share Capital, ESOT and Other ReservesDetails of theCompany’s share capital and share buybacks are given inNote 20. ESOT transactions are detailed inNote 23.OtherreservesintheCompanyBalanceSheetof£985.2m(2017:£985.2m)representthedifferencebetweenthemarketpriceandthenominalvalueofsharesissuedaspartofthecapitalreconstructionin2002onacquisitionofNEXTHoldingsLimited(formerlyNEXTGroupplc)whichwassubjecttoSection131CompaniesAct1985mergerrelief.

C7. Profit and Loss Account and Distributable ReservesTheprofitandlossaccountoftheParentCompanydoesnotincludeanyunrealisedprofits,howevertheamountavailablefordistributionundertheCompaniesAct2006byreferencetotheseaccountsiseffectivelyreducedbytheESOTreserveof£231.6m(2017:£215.4m).AtJanuary2018,therefore,theamountavailablefordistributionbyreferencetotheseaccountsis£516.7m(2017:£553.1m).TheGroupalsohassubstantialretainedprofitsinitssubsidiarycompanieswhichareexpectedtoflowuptotheParentCompanyinduecourse,such that surplus cash generated can continue to be returned to our external shareholders.

Notes to the Parent Company Financial Statements

148

SHAREHOLDER INFORMATION150 Half Year and Segment Analysis (unaudited) 151 Five Year History (unaudited) 152 Glossary 154 Notice of Meeting 160 Other Shareholder Information

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Half Year and Segment Analysis (unaudited)

First half£m

Second half£m

52 weeks toJan 2018

£m

First half£m

Second half£m

52 weeks toJan2017

£mTotal sales1

NEXT Retail 993.2 1,129.8 2,123.0 1,083.6 1,221.0 2,304.6NEXTOnline 868.4 1,019.0 1,887.4 821.2 907.3 1,728.5NEXT International Retail 32.6 34.6 67.2 32.1 31.6 63.7NEXT Sourcing 3.2 3.4 6.6 2.5 2.8 5.3Lipsy 12.1 12.1 24.2 14.1 13.0 27.1PropertyManagement 4.5 4.6 9.1 3.6 4.0 7.6Total 1,914.0 2,203.5 4,117.5 1,957.1 2,179.7 4,136.8

Profit before taxNEXT Retail 89.5 179.2 268.7 133.9 204.8 338.7NEXTOnline 217.1 244.1 461.2 204.2 239.9 444.1NEXT International Retail 4.1 3.6 7.7 4.2 5.1 9.3NEXT Sourcing 16.1 16.9 33.0 21.8 22.9 44.7Lipsy 3.1 2.9 6.0 2.8 2.7 5.5PropertyManagement 2.9 0.7 3.6 3.0 3.8 6.8Otheractivities (7.6) (12.7) (20.3) (9.4) (12.0) (21.4)Operating profit 325.2 434.7 759.9 360.5 467.2 827.7Net finance costs (15.8) (18.0) (33.8) (18.4) (19.1) (37.5)Total 309.4 416.7 726.1 342.1 448.1 790.2

Theyearended28January2017balanceshavenotbeenrestatedforthechangeinrechargesbetweentheNEXTRetailandNEXTOnlinesegments(refertoNote1oftheconsolidatedfinancialstatementsforfurtherdetails).

1. As defined in Note 1 of the consolidated financial statements.

150

Five Year History (unaudited)

Year to January2018

£m2017

£m2016

£m2015

£m2014

£mUnderlying2 continuing businessTotal sales1 4,117.5 4,136.8 4,213.7 4,027.8 3,758.2Statutoryrevenue 4,055.5 4,097.3 4,176.9 3,999.8 3,740.0

Operatingprofit–underlying52weeks 759.9 827.7 851.8 812.1 722.8Netfinancecosts–underlying52weeks (33.8) (37.5) (30.5) (29.9) (27.6)Profit before tax – underlying 52 weeks 726.1 790.2 821.3 782.2 695.253rdweek(pre-tax) – – 14.8 – –Exceptionalitems(pre-tax) – – – 12.6 –Taxation (134.3) (154.9) (169.3) (159.9) (142.0)Profit after taxation 591.8 635.3 666.8 634.9 553.2

Totalequity 482.6 510.5 311.8 321.9 286.2

Shares purchased for cancellation 2.2m 3.6m 2.2m 2.2m 6.2m

Dividendspershare–ordinary 158.0p 158.0p 158.0p 150.0p 129.0p– special 180.0p – 240.0p 150.0p 50.0p

Basic Earnings Per Share Underlying(52weeks) 416.7p 441.3p 442.5p 419.8p 366.1p Total 416.7p 441.3p 450.5p 428.3p 366.1p

1. As defined in Note 1 of the consolidated financial statements.

2. Underlyingisshownpre-exceptionalitems.

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Glossary

Alternative performance measuresThedirectorsusealternativeperformancemeasures(APMs)astheybelievethesemeasuresprovideadditionalusefulinformationontheunderlyingtrends,performanceandpositionoftheGroup.Thesemeasuresareusedforperformanceanalysis.TheAPMsarenotdefinedbyIFRSandthereforemaynotbedirectlycomparablewithothercompanies’APMs.Thesemeasuresarenotintendedtobea substitute for, or superior to, IFRS measurements.

Divisional operating profitDivisionalprofitbeforeinterestandtax,excludingequity-settledshareoptionchargesrecognisedunderIFRS2“Share-based payment” andunrealisedforeignexchangegainsandlossesonderivativeswhichdonotqualifyforhedgeaccounting.RefertoNote1ofthefinancial statements.

Earnings Per Share (EPS)The levelofgrowth inEPSprovidesasuitablemeasureof the financialhealthof theGroupand itsability todeliver returns toshareholders.RefertoNote8ofthefinancialstatements.

Full price salesTotalsalesexcludingitemssoldinourmid-seasonorend-of-seasonSaleeventsandourClearanceoperationsandincludesinterestincomerelatingtothosesales.Fullpricesalesareadirectindicatoroftheperformanceandprofitabilityofthebusiness.

Bought-in gross marginDifference between the cost of stock and initial selling price, expressed as a percentage of achieved total VAT exclusive selling prices. Bought-ingrossmarginisameasureoftheprofitmadeonthesaleofstockatfullprice.

Like-for-like salesGrowthinsalesfromRetailstoreswhichhavebeenopenforatleastonefullyear.ThismetricenablestheperformanceoftheRetailstorestobemeasuredonaconsistentyear-on-yearbasisandisacommontermusedintheretailindustry.

Net branch profit/contributionRetailstoretotalsaleslesscostofsales,payroll,controllablecosts,occupancycostsanddepreciation.ExpressedasapercentageofVATinclusivesales.Netbranchprofitisameasureoftheprofitabilityonastorebystorelevel.

Net debtComprisescashandcashequivalents,bankloans,corporatebonds,fairvaluehedgesofcorporatebondsandfinanceleases.RefertoNote28ofthefinancialstatements.NetdebtisameasureoftheGroup’sindebtedness.

Net operating marginProfit after deducting markdowns and all direct and indirect trading costs, expressed as a percentage of achieved total sales. Netmarginmeasureswhetherprofitabilityischangingatahigherorlowerraterelativetorevenue.

Total salesVAT exclusive full price and markdown sales including the full value of commission based sales and interest income (as described and reconciled in Note 1 of the financial statements). Total sales is a direct indicator of performance.

Underlying like-for-like salesLike-for-likesales,excludingstoresimpactedbynewopenings.Thisisameasureoftheannualperformanceofstorestakingintoaccount the impact of new store openings on existing stores.

Underlying profit and Earnings Per ShareUnderlyingprofitandEarningsPerSharemeasuresexcludeexceptionalitemsandareshownonaconsistent52weekbasis,whererelevant.Allowsformoreconsistentcomparison,excludingone-offitems.

152

Other definitionsCapital expenditure (“Capex”)Theadditionstoproperty,plantandequipment.

Exceptional itemsExceptional items relate to certain costs or incomes that derive from events or transactions that fall within the normal activities of the Groupbutwhich,individuallyor,ifofasimilartype,inaggregate,areexcludedfromtheGroup’sunderlyingperformancemeasuresbyvirtueoftheirsizeandnatureinordertobetterreflectmanagement’sviewoftheperformanceoftheGroup.

FTEFTEreferstofulltimeequivalentnumberofemployees.

Internal rate of return (IRR)Internalrateofreturnisadiscountratethatmakesthenetpresentvalueofallcashflowsfromaparticularprojectequaltozero.

Like-for-like storesRetailstoreswhichhavetradedforatleastonefullyear.

Mainline storeNon-clearancestore.ClearancestoressellstockleftoverfromtheNEXTend-of-seasonSaleactivity.

Markdown salesVATexclusivesalesofstockitemsinourmid-seasonorend-of-seasonSaleeventsandourClearanceoperations.

Online active customersCustomerswhohaveplacedanOnlineorderorreceivedastandardaccountstatementinthelast20weeks.

Online cash customersOnlinecustomerswhopayatthetimeoforderingonlineorviatheCallCentre.

Online credit customersCustomerswhoorderusinganOnlinecreditaccount(nextpay account).

Retail selling spaceSelling space is defined as the trading floor area of a store which excludes stockroom and administration areas.

LTIPLongTermIncentivePlan(refertopage77).

SMPShareMatchingPlan(refertopage77).

Total Shareholder Returns (TSR)TSRhasbeencalculatedbyreferencetothegrowthinsharepricecombinedwiththenotionalinvestmentofgrossdividendson ex-dividenddatestocreateadividendfraction.

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Notice of Meeting

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other financial advisor authorised under the Financial Services and Markets Act 2000.

If you have sold or otherwise transferred all your NEXT plc (“NEXT” and/or the “Company”) shares, please send this document, together with the accompanying Form of Proxy, as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee.

Notice is given that the Annual General Meeting (AGM) of NEXT willbeheldat theLeicesterMarriottHotel,SmithWay,GrovePark,LeicesterLE191SWonThursday17May2018at9.30amatwhich the following resolutions will be proposed, resolutions 1 to 14asOrdinaryResolutionsand15to19asSpecialResolutions.

Further information on these resolutions can be found in the Directors’ Report on pages 56 to 58 and in the Appendix to this Notice. Biographies of the directors are shown on pages 54 and 55 of the Annual Report.

1 To receive and adopt the accounts and reports of the directorsandauditorfortheyearended27January2018.

2 To approve the Remuneration Report (excluding the Directors’RemunerationPolicysetoutonpages88to93)fortheyearended27January2018.

3 Todeclareafinaldividendof105ppershareinrespectoftheyearended27January2018.

4 Tore-electJonathanBewesasadirector.

5 Tore-electCarolineGoodallasadirector.

6 Tore-electAmandaJamesasadirector.

7 ToelectRichardPappasadirector.

8 Tore-electMichaelRoneyasadirector.

9 Tore-electFrancisSalwayasadirector.

10 Tore-electJaneShieldsasadirector.

11 Tore-electDameDianneThompsonasadirector.

12 Tore-electLordWolfsonasadirector.

13 To re-appoint PricewaterhouseCoopers LLP as auditor oftheCompany,toholdofficeuntiltheconclusionofthe2019AGMoftheCompanyandtoauthorisethedirectorstosettheir remuneration.

14 Directors’authoritytoallotshares

That:

a. thedirectorsbeauthorisedtoallotequitysecurities (asdefinedinSection560oftheCompaniesAct2006(the“2006Act”))intheCompany:

i. inaccordancewitharticle7oftheCompany’sArticlesof Association (the “Articles”), up to a maximumnominal amount of £4,700,000 (as reduced by anyequity securities allotted under paragraph (a)(ii)below); and

ii. up to a maximum nominal amount of £9,500,000(as reducedby any equity securities allotted underparagraph (a)(i) above) in connection with an offer bywayofarightsissue(asdefinedinarticle8(b)(ii)ofthe Articles);

b. inaccordancewitharticle7oftheArticlesthisauthorityshall expire at the conclusion of the next AGM of the Companyafterthepassingofthisresolution,or,ifearlier,atthecloseofbusinesson17August2019;and

c. all previous unutilised authorities under Section 551 of the 2006Actshallceasetohaveeffect(savetotheextentthatthesameareexercisablepursuanttoSection551(7)ofthe2006Actbyreasonofanyofferoragreementmadepriortothedateofthisresolutionwhichwouldormightrequireshares to be allotted on or after that date).

15 Generaldisapplicationofpre-emptionrights

That,subjecttoresolution14beingpassed:

a. inaccordancewitharticle8oftheArticles,thedirectorsbegivenpowertoallotequitysecuritiesforcash;

b. the power under paragraph (a) above (other than in connectionwitharights issue,asdefinedinarticle8(b)(ii) of the Articles) shall be limited to the allotment of equitysecuritieshavinganominalamountnotexceedingin aggregate £717,000 representing 5% of the issuedordinarysharecapital;

c. inaccordancewitharticle8oftheArticlesthisauthorityshall expire at the conclusion of the next AGM of the Companyafterthepassingofthisresolutionor,ifearlier,atthecloseofbusinesson17August2019;and

d. allpreviousunutilisedauthoritiesunderSections570and573ofthe2006Actshallceasetohaveeffect(savetotheextentthattheyareexercisablebyreasonofanyofferoragreement made prior to the date of this new resolution whichwouldormightrequiresharestobeallottedonorafter that date).

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16 Additionaldisapplicationofpre-emptionrights

That,subjecttoresolutions14and15beingpassed:

a. inaccordancewitharticle8oftheArticles,thedirectorsbegiven thepower toallotadditionalequitysecuritiesfor cash;

b. the power under paragraph (a) above (other than in connectionwitharightsissue,asdefinedinarticle8(b)(ii)oftheArticles)shallbe:

i. limitedtotheallotmentofequitysecuritieshavinganominalamountnotexceedinginaggregate£717,000representing5%oftheissuedordinarysharecapital;and

ii. usedonlyforthepurposesoffinancing(orrefinancing,iftheauthorityistobeusedwithinsixmonthsaftertheoriginal transaction) a transaction which the directors determine to be an acquisition or other capitalinvestmentofakindcontemplatedbytheStatementofPrinciplesonDisapplyingPre-emptionRightsmostrecentlypublishedbythePre-EmptionGrouppriortothe date of this notice;

c. inaccordancewitharticle8oftheArticlesthisauthorityshall expire at the conclusion of the next AGM of the Companyafterthepassingofthisresolutionor,ifearlier,atthecloseofbusinesson17August2019;and

d. other than in respect of authorities granted pursuant to resolution 15, all previous unutilised authorities under Sections570and573ofthe2006Actshallceasetohaveeffect (save to the extent that they are exercisable byreasonofanyofferoragreementmadepriortothedateofthisnewresolutionwhichwouldormightrequiresharesto be allotted on or after that date).

17 On-marketpurchaseofownshares

That in accordance with the 2006 Act, the Company begrantedgeneralandunconditionalauthoritytomakemarketpurchases(asdefinedinSection693ofthe2006Act)ofanyofitsownordinarysharesonsuchtermsandinsuchmannerasthedirectorsmaydetermineprovidedthat:

a. theauthorityconferredbythisresolutionshallbelimitedtothelesserof21,521,000ordinarysharesof10peachandnomorethan14.99%oftheissuedordinarysharesoutstanding at the date of the AGM, such limit to be reducedbythenumberofanysharespurchasedpursuanttotheauthoritygrantedatresolution18below;

b. theminimumpricewhichmaybepaidforordinaryshares(exclusiveofexpenses)is10pperordinaryshare;

c. themaximumpricewhichmaybepaidforeachordinaryshare (exclusive of expenses) is an amount not more than thehigherof:(i)105%oftheaverageofthemiddlemarketpriceoftheordinarysharesoftheCompanyaccordingtotheDailyOfficialListoftheLondonStockExchangeforthefivebusinessdaysimmediatelyprecedingthedateofpurchaseand (ii)anamountequal to thehigherof thepriceofthelastindependenttradeofanordinaryshareoftheCompanyandthehighestcurrentindependentbidforanordinaryshareoftheCompanyasderivedfromtheLondonStockExchangeTradingSystem;

d. this authority shall expireat theconclusionof thenextAGMoftheCompanyafterthepassingofthisresolutionor,ifearlier,atthecloseofbusiness17August2019;

e. the Company may make a contract or contracts topurchase ordinary shares under the authority herebyconferredpriortotheexpiryofsuchauthoritywhichwillormaybeexecutedwhollyorpartlyaftertheexpiryofsuch authority and may make a purchase of ordinarysharesinpursuanceofanysuchcontract;and

f. allexistingauthoritiesfortheCompanytomakemarketpurchasesofitsownordinarysharesarerevoked,exceptin relation to the purchase of shares under a contract or contracts concluded before the date of this resolution andwhichhasorhavenotyetbeenexecuted.

18 Off-marketpurchasesofownshares

That, in accordance with Section 694 of the 2006 Act,the proposed programme agreements to be entered into between the Company and any of Goldman SachsInternational, UBS AG, Deutsche Bank AG, HSBC Bankplc and Barclays Bank plc (in the form produced to thismeetingand initialledby theChairman for thepurposeofidentification) (the “Programme Agreements”) be and areapprovedandtheCompanybeand isauthorisedtoenterinto the ProgrammeAgreements and all and any forwardtradeswhichmaybeeffectedormade from time to timeunderorpursuanttotheProgrammeAgreementsfortheoff-marketpurchaseby theCompanyof itsordinarysharesof10penceeach,asmorefullydescribedintheappendixonpages156to157ofthisNotice(theauthorityconferredbythis special resolution shall expire at the conclusion of the next AGMoftheCompanyafterthepassingofthisresolutionor,ifearlier,atthecloseofbusinesson17August2019,(exceptinrelationtothepurchaseofordinarysharesunderanyforwardtradeeffectedormadebeforetheexpiryofsuchauthorityandwhichmightbecompletedwhollyorpartlyafter suchexpiry)),andprovidedthatsharespurchasedpursuanttothisauthoritywillreducethenumberofsharesthattheCompanymay purchase under the general authority granted underresolution17above.

19 Noticeofgeneralmeetings

That, in accordance with the Articles, a general meeting (otherthananAGM)maybecalledonnotlessthan14cleardays’notice.

ByorderoftheBoard

Seonna AndersonCompanySecretary RegisteredOffice:DesfordRoad,Enderby,Leicester,LE194AT

16April2018

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Notice of Meeting

AppendixFurther information on resolution 18: Off-market purchases of own shares AsnotedintheDirectors’Reportonpage58,approvalwillbesoughtfromshareholderstorenewtheCompany’sauthoritytomakeoff-marketpurchasesofitsshares.

By virtue of special resolution 20 passed at the Company’s2017AGM,shareholderauthoritywasgiventotheCompanytomakeon-marketpurchasesofshares.Thisauthoritywaslimitedtoamaximumof22,043,000sharesandexpiresontheearlierofthedateoftheAGMheldin2018or18August2018.AtthesameAGM,authoritywasgrantedtotheCompanytomakeoff-market purchases of shares for cancellation under contingent purchasecontractstobeenteredintowithanyofGoldmanSachsInternational,UBSAG,DeutscheBankAG,HSBCBankplcandBarclaysBankplc(the“Bank(s)”).Thisauthoritywaslimitedtoamaximum of 3 million shares and expires on the earlier of the date oftheAGMtobeheldin2018or18August2018.Pursuanttothoseauthoritiesandup to22March2018, theCompanyhasbought back 3,577,585 shares for cancellation, representing2.4%ofitsissuedsharecapitalasatthedateofthe2017AGM,atatotalcostof£175.2m.Noshareswereboughtbackundercontingent purchase contracts.

UnderSections693and694ofthe2006Act,theCompanyisnotpermittedtomakeoff-marketpurchasesorcontingentpurchasesof its shares unless it obtains advance shareholder approval to the proposed contract terms. Furthermore, the Market Abuse Regulations (MAR) limit the Company’s ability to purchase itssharesatatimewhenanydirectorisinreceiptofunpublishedpricesensitiveinformationabouttheCompany.Accordingly,nopurchasesofshareswouldnormallybemade inperiodswhenthe directors might be in receipt of unpublished price sensitive information (“ClosedPeriods”).TheCompany typically followsthedefinitionofClosedPeriod inArticle19(11)ofMARwhichincludes30daysbeforetheannouncementofitsinterimresultsin September and full year results inMarch each year. In theabsence of a Programme Agreement (as defined below), these Closed Periods inevitably reduce the number of shares theCompanyisabletopurchase.

In order to achieve maximum flexibility in its share purchaseactivities,theCompanyisabletoenterintoirrevocableandnon-discretionaryprogrammestoallowittobuysharesduringClosedPeriods.Anothermethodof providing flexibility and reducingthecost, is for theCompany toenter intocontingent forwardpurchase contracts outside of Closed Periods. As in previousyears,theCompanyintendstoenterintonewagreements(the“Programme Agreements”), with each of the Banks, underwhichtheCompanymay(althoughitisnotobligedto)enterintocontingentforwardtrades(ContingentForwardTradesorCFT)from time to time.

ThetermsofaCFTwillbeagreedbetweentheCompanyandtheBankbeforeit isenteredinto.TheCompanyiscommittedtopurchasesharesunderaCFTonthedayitisexecutedsubjectto the terms of the Programme Agreement. The terms of each CFTwillprovidefortheCompanytopurchaseafixednumberofshareseachweekoveraperiodofbetween20to30weeks.The maximum number of shares that can be purchased under eachCFTislimitedto30,000sharesperweek.

Whetherornot theCompanypurchases shares inaparticularweekduringthetermofaCFTisdependentupontheCompany’sshare price either not rising to, or above, a level (the “UpperSuspensionLevel”)or, if applicable, falling toorbelowa level(the “Lower Suspension Level” and together with the UpperSuspension Level, the “Suspension Levels”). The SuspensionLevelsanddurationaredeterminedby theCompanyandaresetatthetimetheCFTisenteredinto.TheUpperSuspensionLevelmustbesetbetween104%and110%oftheCompany’ssharepriceatthestartoftheCFT.IftheCompanychoosestoincorporate a Lower Suspension Level, it must be set between 80%and95%ofthepriceatthestartoftheCFT.TheinclusionofaLowerSuspensionLevelwouldhelpmitigatetheCompany’sfinancialcommitmentunderaCFT if itssharepricewasto fallbelowthislevelaftertheCFThadbeenexecuted.IftheLowerSuspension Level is not included, the level of discount to the market share price would be higher.

ThepriceatwhichtheCompanymaypurchasesharesduringthetermofaCFT(the“ForwardPrice”)shallalsobefixedatthestartoftheCFT.TheForwardPricewillbedeterminedbytheBankwithreference to the volume weighted average price for shares traded inNEXTonthedaytheCFTisenteredinto.TheForwardPriceissubjecttoamaximumof99%ofthesharepriceatthestartofthecontractandaminimumof10pence(theparvalueofanordinaryshare). The minimum and maximum amount of time between enteringaCFTandsharesbeingpurchasedis5daysand30weeksrespectively.TheCompanywillannouncethedetailsofeachCFTonthedayitisenteredintoandanysubsequentterminationviatheUKListingAuthority’sRegulatoryNewsService.ThisstructurewouldallowtheCompanytopurchasesharesatadiscounttothemarketprice(asatthetimeeachCFTcommences),forsolongas the Suspension Levels are not reached, without breaching the ListingRules.IfanySuspensionLevelisreached,theCFTwouldterminateautomaticallyatthattimeandnofurthershareswouldbe purchased under that contract.

UndertheprovisionsofSections693and694ofthe2006Act,the Programme Agreements and Contingent Forward Tradesare contingent purchase contracts to purchase shares by theCompany off-market. Accordingly resolution 18,whichwill beproposed as a special resolution, seeks shareholder approval to the terms of the Programme Agreements to be entered into betweentheCompanyandeachoftheBanks.TheProgrammeAgreements will have a duration of the shorter of the period to thedateofthenextAGMtobeheldin2019and17August2019and will incorporate the terms of an ISDA Master Agreement and Schedule. The Programme Agreements will be entered into and eachCFTwillbeaffectedoutsideaClosedPeriodbutsharesmaybepurchasedduringaClosedPeriodbytheCompany.

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Should shareholder approval begranted, any number ofCFTmaybeaffectedwiththeBanksatanytime,providedthat:

• thetotalmaximumnumberofshareswhichtheCompanyispermitted to purchase pursuant to this authoritywould be3million,representingcirca2%ofitsissuedsharecapitalat22March2018;

• thetotalcostofsharesthattheCompanywouldbepermittedtopurchasepursuanttothisauthoritymaynotexceed£200m(including costs);

• theForwardPricemaynotexceed105percentoftheaverageof the middle market price of a share according to the DailyOfficialListoftheLondonStockExchangeforthefivebusinessdays immediatelyprecedingthedayonwhichtheshare is purchased;

• theForwardPricewillbenomorethan99%ofthesharepriceatthetimetheCFTwaseffected;

• theminimumpricethatcanbepaidforanyshareis10p;and

• onlyoneCFTwillbeenteredintoonanyparticularday.

Shares purchased under the Programme Agreements will reduce thenumberof shares that theCompanymaypurchaseunderanyauthoritygrantedattheAGMon17May2018foron-marketpurchases.NoshareswillbepurchasedunderthatauthorityonthesamedaythataCFTisenteredinto.TheauthoritygrantedtotheCompanyunderthisresolutionwillexpireattheconclusionoftheAGMoftheCompanyheldin2019oron17August2019,whicheveristheearlier,unlesssuchauthorityisrenewedpriortothattime(exceptinrelationtothepurchaseofsharesunderanyCFTeffectedbeforetheexpiryofsuchauthorityandwhichmightbecompletedwhollyorpartlyaftersuchexpiry).Thepurchaseof shares under the Programme Agreements will always bephysicallysettledbydeliveryofsharestotheCompany(exceptinthe case of certain events of default or termination events).

AcopyofeachoftheProgrammeAgreementswillbeavailableat theAGMon17May2018.Copieswillalsobeavailable forinspectionattheCompany’sregisteredofficeatDesfordRoad,Enderby,LeicesterLE194ATandattheofficesofSlaughterandMayatOneBunhillRow,London,EC1Y8YYduringusualbusinesshours until the date of the AGM and at the AGM itself.

TheCompanyhasnowarrantsinissueinrelationtoitssharesandno options to subscribe for its shares outstanding. Exercise of alloutstandingemployee shareoptionsand shareawardswillbesatisfiedbythetransferofmarket-purchasedsharesfromtheESOT(refertoNote23ofthefinancialstatements).

Meeting formalities and voting Attending the Annual General Meeting To be entitled to attend and vote at the AGM (and in accordance with the Articles and pursuant to Regulation 41 of theUncertificatedSecuritiesRegulations2001)andforthepurposesof determining the number of votes shareholders may cast,shareholders must be registered in the register of members of theCompanyasat6.30pmon15May2018or,ifthemeetingisadjourned,shareholdersmustbeenteredontheCompany’sregisterofmembersat6.30pmonthedaytwodaysbeforetheadjourned meeting.

The total number of the Company’s issued share capital on22March2018,whichisthelatestpracticabledatebeforethepublicationofthisNotice,is143,478,977ordinaryshares.Alloftheordinarysharescarryonevoteeachandtherearenosharesheldintreasury.Onavotebyashowofhandseverymemberwhoispresenthasonevoteandeveryproxypresentwhohasbeendulyappointedbyamemberentitledtovotehasonevote.Onapoll voteeverymemberwho ispresent inpersonorbyproxyhasonevoteforeveryordinarysharetheyhold.

In line with best practice, all resolutions will be put to poll votes. The directors believe a poll is more representative of shareholders’votingintentionsbecauseshareholders’votesarecounted according to the number of shares held and all votes tendered are taken into account. The procedures for the poll votes will be explained at the AGM.

In respect of resolution 18 on off-market share purchasecontracts,the2006ActprovidesthatthisresolutionwillnotbeeffectiveifanymemberoftheCompanyholdingsharestowhichit relates (i.e. thosewhichmay be purchased pursuant to theProgrammeAgreements)exercisedthevotingrightscarriedbyanyofthosesharesinvotingontheresolutionandtheresolutionwouldnothavebeenpassediftheyhadnotdoneso.Therefore,NEXTintendstodisregardanypollvoteswhicharecastinfavourof resolution 18 attaching to 3million shares (being the totalmaximumnumberofshareswhichtheCompanyispermittedtopurchase pursuant to the Programme Agreements) from both the total number of votes cast in favour of this resolution and the total number of votes cast.

The results of the AGM will be posted on our corporate website (www.nextplc.co.uk) after themeeting and notified to the UKListingAuthority.

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Voting and proxiesWhetherornotyouintendtoattendtheAGMinperson,youarerequestedtocompleteandreturntheformofproxytoEquiniti,toarriveassoonaspossiblebutinanyeventnotlaterthan9.30 am on 15 May 2018(or48hoursbeforeanyadjournedmeeting).ThecompletionandreturnoftheformofproxywillnotpreventyoufromattendingandvotingattheAGMifyousowish.

A shareholder who is entitled to attend and vote at the AGM may appoint one ormore proxies to attend, speak and voteinstead of him/her, provided that each proxy is appointed toexercise the rights attached to a different share or shares held bythatshareholder.AproxyneednotalsobeashareholderoftheCompanyandmayvoteonanyotherbusinesswhichmayproperlycomebeforethemeeting.

The statements of the rights of members in relation to the appointment of proxies in the above paragraph and in the paragraphs headed “Electronic voting” and “CREST votingfacility”belowdonotapplytoaNominatedPerson.Therightsdescribedintheseparagraphscanonlybeexercisedbyregisteredmembers of theCompany.Nominatedpersons are remindedthat they should contact the registered holder of their shares(andnottheCompany)onmattersrelatingtotheirinvestmentsintheCompany.

In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointmentsubmittedbythemostseniorholderwillbeaccepted,theseniorholder being the first named of the joint holders to appear in the Company’sshareregister.

AmemberwhoappointsastheirproxysomeoneotherthantheChairman,isresponsibleforensuringthattheproxyattendsthemeeting and is aware of the voting intention of the member. If no votinginstructionisgiven,theproxyhasdiscretiononwhetherand how to vote.

A person to whom this Notice is sent who is a person nominated underSection146of the2006Acttoenjoy informationrights(a “Nominated Person”) may, under an agreement betweenthemandtheshareholderbywhomtheywerenominated,havea right to be appointed (or to have someone else appointed) as aproxyfortheAGM.IfaNominatedPersonhasnosuchproxyappointment right or does not wish to exercise it, they may,underanysuchagreement,havearighttogiveinstructionstothe shareholder as to the exercise of voting rights.

Ifamembersubmitsmorethanonevalidproxyappointment,theappointment received last before the latest time for the receipt of proxies will take precedence.

Electronic votingAsanalternativetocompletingandreturningaformofproxy,youmaysubmityourproxyelectronicallybyaccessingourregistrar’swebsite www.sharevote.co.uk. You will require your uniqueVoting ID, Task ID and Shareholder Reference Number as printed ontheproxycard.Theusebymembersoftheelectronicproxyappointmentservicewillbegovernedbythetermsandconditionsof use which appear on the website. Electronic proxies must be completed and lodged in accordance with the instructions on thewebsitebynolaterthan9.30 am on 15 May 2018.

CREST voting facilityThoseshareholderswhoholdsharesthroughCRESTmaychoosetoappointaproxyorproxiesusingCRESTfortheAGMtobeheldon17May2018andanyadjournment(s)thereofbyusingtheproceduresdescribedintheCRESTManual.CRESTpersonalmembersorotherCRESTsponsoredmembers,andthoseCRESTmembers who have appointed a voting service provider(s), shouldrefertotheirCRESTsponsororvotingserviceprovider(s),who will be able to take the appropriate action on their behalf.

InorderforaproxyappointmentorinstructionmadeusingtheCRESTservicetobevalid, theappropriateCRESTmessage(a“CRESTProxy Instruction”)mustbeproperly authenticated inaccordancewithEuroclearUK&IrelandLimited’sspecificationsandmustcontaintheinformationrequiredforsuchinstructions,as described in the CRESTManual. Themessage, regardlessofwhether it constitutes the appointment of a proxy or is anamendmenttotheinstructiongiventoapreviouslyappointedproxymust, in order to be valid, be transmitted so as to bereceivedbytheissuer’sagent(IDRA19)bythelatesttime(s)forreceiptofproxyappointmentsspecifiedintheNoticeofMeeting.For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to themessage bytheCRESTApplicationsHost) fromwhich the issuer’sagent isabletoretrievethemessagebyenquirytoCRESTinthemannerprescribedbyCREST.AfterthistimeanychangeofinstructionstoproxiesappointedthroughCRESTshouldbecommunicatedto the appointee through other means.

CRESTmembersand,whereapplicable,theirCRESTsponsorsor voting service providers should note that Euroclear UK &Ireland Limited does not make available special procedures in CRESTforanyparticularmessages.NormalsystemtimingsandlimitationswillthereforeapplyinrelationtotheinputofCRESTProxyInstructions.ItistheresponsibilityoftheCRESTmemberconcernedtotake(or,iftheCRESTmemberisaCRESTpersonalmember or sponsored member or has appointed a voting service provider(s),toprocurethathisCRESTsponsororvotingserviceprovider(s)take(s))suchactionasshallbenecessarytoensurethatamessageistransmittedbymeansoftheCRESTsystembyanyparticulartime.Inthisconnection,CRESTmembersand,whereapplicable, their CREST sponsors or voting service provider(s)arereferred,inparticular,tothosesectionsoftheCRESTManualconcerningpracticallimitationsoftheCRESTsystemandtimings.TheCRESTManualisavailableatwww.euroclear.com.

TheCompanymaytreatasinvalidaCRESTProxyInstructioninthecircumstancessetoutinRegulation35(5)(a)oftheUncertificatedSecuritiesRegulations2001.

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Corporate representativesAnycorporationwhich isamembercanappointoneormorecorporaterepresentativeswhomayexerciseonitsbehalfallofitspowersasamemberprovidedthattheydonotdosoinrelationto the same shares.

Right to ask questionsAny shareholder attending the meeting has the right to askquestions. The Company must answer any such questionrelating to the business being dealt with at the AGM but no suchanswerneedbegivenif(i)todosowouldinterfereundulywith the preparation for the meeting or involve the disclosure of confidential information,(ii)theanswerhasalreadybeengivenonawebsiteintheformofananswertoaquestion,or(iii)itisundesirableintheinterestsoftheCompanyorthegoodorderoftheAGMthatthequestionbeanswered.

Documents available for inspectionCopiesofthefollowingdocumentswillbeavailableforinspectionattheCompany’sregisteredofficeduringusualbusinesshoursand will be available for 15 minutes prior to and for the duration of the AGM.

• Termsofappointmentofthenon-executivedirectors

• TheProgrammeAgreementspursuanttoresolution18

Copies will also be available for inspection at the offices ofSlaughterandMayatOneBunhillRow,London,EC1Y8YYduringusual business hours until the close of the AGM.

Company websiteA full copy of theAnnual Report (which includes thisNotice),together with those for prior years, and other informationrequiredbySection311Aofthe2006ActcanbefoundontheNEXT plc website at www.nextplc.co.uk.Under Section 527 of the 2006 Act members meeting thethresholdrequirementssetoutinthatsectionhavetherighttorequiretheCompanytopublishonawebsiteastatementsettingoutanymatterrelatingto:(i)theauditoftheCompany’saccounts(includingtheauditor’sreportandtheconductoftheaudit)thataretobelaidbeforetheAGM;or(ii)anycircumstanceconnectedwithanauditoroftheCompanyceasingtoholdofficesincetheprevious meeting at which annual accounts and reports were laid inaccordancewithSection437ofthe2006Act.TheCompanymay not require the members requesting such websitepublicationtopayitsexpensesincomplyingwithSections527or528of the2006Act,and itmust forward thestatement totheCompany’sauditornotlaterthanthetimewhenitmakesthestatementavailableonthewebsite.ThebusinesswhichmaybedealtwithattheAGMincludesanystatementthattheCompanyhasbeenrequiredunderSection527ofthe2006Acttopublishon its website.

You may not use any electronic address provided in this Notice of Meeting to communicate with the Company for any purposes other than those expressly stated.

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Other Shareholder Information

Registered officeDesfordRoad,Enderby,Leicester,LE194AT

RegisteredinEnglandandWales,no.4412362

Payment of dividendThe recommended final dividend, if approved, will be paid on 1August 2018 to holders of ordinary shares registered atcloseofbusinesson6July2018.Theordinaryshareswilltrade ex-dividendfrom5July2018.

Annual General MeetingTheAGMwillbeheldat9.30amonThursday17May2018attheLeicesterMarriottHotel,SmithWay,GrovePark, LeicesterLE191SW.TheNoticeoftheMeetingonpages154to159setsout business to be transacted. Full access is available to the venueforthosewithspecialrequirements.

Share price data (StockExchangeCode:NXT.L)

2018 2017Sharepriceatfinancialyearend £52.18 £38.50Market capitalisation £7,560m £5,662mSharepricemovementduringyear:Highmid-marketquotation £53.20 £70.20Lowmid-marketquotation £36.17 £38.26

Discount voucherThe Company offers a discount voucher to any first named,registered shareholder holding a minimum number of 100ordinarysharesasat1Aprileachyear.Theshareholderdiscountvoucher entitles the recipient or their immediate family to a25% discount againstmost purchases at any one time of fullprice NEXT merchandise in NEXT Retail stores. There is no limit on the value of goods that can be purchased at that time. Thevoucherexpireson31Octoberoftheyearinwhichitwasissued.Itcannotbeusedinconjunctionwithanyotherdiscountvoucher or offer, nor can it be used for the purchase of gift cards, Salemerchandise,electricalgoods,non-NEXTbrandedgoodsor purchases fromNEXTOnline (unless ordered through oneof our Retail stores). Shareholders holding shares in nominee orISAaccountsarealsoeligible,butmustrequestthevoucherthrough their nominee or ISA account manager who should email [email protected].

Registrars and transfer officeEquiniti, AspectHouse, Spencer Road, Lancing,West Sussex,BN996DA.

Telephone+44(0)3713842164.Callstothisnumberarechargedat 8p per minute plus network extras. Overseas ShareholderHelplineNumber+44(0)1214157047.Linesareopen8.30amto5.30pmMondaytoFriday.

Shareholder enquiriesThe Company’s share register is maintained by Equiniti.Please contact them online at www.shareview.co.uk or using the contactdetailsaboveifyouhaveanyenquiriesaboutyourNEXTshareholdingincludingthefollowingmatters:

• change of name and address;

• loss of share certificate, dividend warrant or dividend confirmation;

• ifyoureceiveduplicatesetsofCompanymailingsasaresultofaninconsistencyinnameoraddressandwish,ifappropriate,to combine accounts.

The Shareview Portfolio service from Equiniti gives youmoreonlineinformationaboutyourNEXTsharesandotherinvestments.Fordirectaccesstoinformationheldforyouontheshareregister,including recent balancemovements and a daily valuation ofinvestmentsheldinyourportfolio,visitwww.shareview.co.uk.

ForshareholderswithdisabilitiesEquinitiprovidesthefollowing:

• ifrequestedfuturecommunicationsproducedbythemwillbesent in the appropriate format;

• telephonenumber+44(0)3713842255forshareholderswithhearing difficulties;

• hearing loop facilities in their buildings for use by visiting shareholders.

CRESTThe Company’s ordinary shares are available for electronic settlement.

Payments of dividends to mandated accountsShareholders who do not at present have their dividends paid directlyintoabankorbuildingsocietymaywishtodoso.Amandateformisattachedtoyourdividendconfirmationorisavailabletodownload from the NEXT website on www.nextplc.co.uk or from Equiniti,telephone+44(0)3713842164.

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Forward looking statements This Report and Accounts contains “forward looking statements” which are all matters that are not historical facts, including anticipated financial and operational performance, business prospects and similar matters. These forward looking statements are identifiable by words such as “aim”, “anticipate”, “believe”, “budget”, “estimate”, “expect”, “forecast”, “intend”, “plan”, “project” and similar expressions. These forward looking statements reflect NEXT’s current expectations concerning future events and actual results may differ materially from current expectations or historical results. Any such forward looking statements are subject to risks and uncertainties, including but not limited to those risks described in “Risks & Uncertainties” on pages 42 to 46; failure by NEXT to predict accurately customer fashion preferences; decline in the demand for merchandise offered by NEXT; competitive influences; changes in level of store traffic or consumer spending habits; effectiveness of NEXT’s Brand awareness and marketing programmes; general economic conditions or a downturn in the retail industry; the inability of NEXT to successfully implement relocation or expansion of existing stores; insufficient consumer interest in NEXT Online; acts of war or terrorism worldwide; work stoppages, slowdowns or strikes; and changes in financial or equity markets. These forward looking statements do not amount to any representation that they will be achieved as they involve risks and uncertainties and relate to events and depend upon circumstances which may or may not occur in the future and there can be no guarantee of future performance. Undue reliance should not be placed on forward looking statements which speak only as of the date of this document. NEXT does not undertake any obligation to update publicly or revise forward looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

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