Next annual results

Next's annual results are out today. No surprises, but a slightly gloomy outlook for the coming year. Last year's EPS was 156p, so they are on a historical P/E ratio of 8 (at 1274p).

Next have £550 of debt, maturing in 2013 and 2016. Their £450m of bank facilities are committed until November 2010, but they expect to use no more than £200m of these in the coming year.

Next's expectations for the coming year are downbeat, but they still expect to meet analyst's expectations, which apear to be ~126p. So they are on a forward P/E ratio of 10. That is based on a healthy net margin of >10%.

Last year's ROCE is 42%, based on earnings of £302m, average net assets for the year of £76m and average net debt of £638m. Expectations for the coming year are still >30% by my calculations.

In summary:

• Next will weather the storm.
• Based on reduced margins and profits they are still cheap.
• When recovery comes, they have excellent potential for growth.