Christmas doesn’t always live up to expectations — especially once the relatives come round. But, then, not everyone is as fortunate as Lord Wolfson of Aspley Guise. The Next boss invariably has a more joyous Noel than he’s bargaining for.
Rewind to 2020 and sales were “better than our internal forecast”. A year later they were “much better” than October’s guidance, despite the ravages of Covid. Last year they were “£70 million ahead of our previous guidance”. So, it would have been a bit remiss of his lordship to turn up in 2023 with a Christmas turkey. He hasn’t disappointed. In the nine weeks to December 30, sales were up 4.8 per cent — £66 million more sparkly than his earlier forecasts of a 2 per cent drop. All in all, enough to send the shares up 6.9 per cent to £65.18.
True, he lucked out on the weather. The cold snap delivered higher sales of what he calls “heavier weight” clobber, known to the rest of us as coats and jumpers: enough to turn what was a below-budget category into an above-budget performer. But the kicker was Wolfson “underestimating” the Omicron effect on Christmas 2021, with 2022’s return of a proper party season boosting sales of formal wear. Nowhere was that more evident than in Next’s 500 shops, where extra footfall drove sales 12.5 per cent higher versus 0.2 per cent for the bigger online wing. On top, after last year’s supply chain gridlock, Next capitalised on having a lot more stock to sell.
So, does it mean Wolfson’s lifted full-year guidance? Well, yes and no. In fact, his forecast of £860 million pre-tax profits is bang on where he said they’d be last January — only he lopped £20 million off estimates at the half year, which he’s now reinstated. As he puts it, despite his reputation for being a bit of a grinch on the forecasting front, he’s been proved “very realistic”. Even so, you wonder if his predictions of a 7.6 per cent profits fall this year to £795 million aren’t over-egging it.
As he admits, despite the recession, “the difficulties for the consumer are probably not as difficult as the headlines suggest” — also implied by upbeat festive figures from Greggs and the B&M discount chain. This downturn comes with jobs shortages, not unemployment. And while rising mortgage costs don’t help, Wolfson reckons cost price inflation will peak at 8 per cent this spring: a figure he plans to pass on to shoppers.
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The key puzzler is how much cash consumers will have after essentials like food and energy. And, as he notes, retailers suffer “very little punishment for an overly cautious budget” but a lot if they overstock.
Still, there’s one other factor: he runs a better business than most rivals, with Liberum analysts expecting Next to “take share in a tough operating environment” and not just from buying bust retailers like Joules and Made.com. Trading on 12 times forecast earnings, Next hardly looks pricey either. Not least when Christmas 2023’s bound to be better than Wolfson thinks.
Merger not in stars
How long before Capricorn Energy caves in and offers up some sacrificial board seats to its rebel shareholders?
Yes, maybe the group, chaired by Nicoletta Giadrossi and led by chief executive Simon Thomson, has some sort of arcane case that its agreed reverse takeover by Tel Aviv-listed NewMed Energy can deliver more value than a standalone group. Investors will see a swift $620 million cash return, they argue, rather than risk seeing $120 million lost in working capital; the deal will house Capricorn’s Egypt assets that’ll otherwise soak up funds; and investors will get 10.3 per cent of the merged group, starring NewMed’s Leviathan gas field off the coast of Israel.
But, first, who’d believe any valuation maths from Giadrossi and Thomson: a pair whose hapless Tullow Oil deal would have sold investors down the river unless they’d ganged up to stop it. And, second, whatever their spreadsheet sums, it’s not the main point — as implied by shares unmoved at 245p, valuing the business at £772 million.
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Revolting investors, led by Capricorn’s third biggest, Palliser Capital, with 6.96 per cent, have called an EGM to oust seven of the nine directors. It’s claiming 40 per cent support, including from 4 per cent holder Legal & General as well as hedgier types such as Madison Avenue and Kite Lake. Together they probably have enough votes to oust the board and block the NewMed deal, whatever Capricorn’s claims that it would “destroy value”.
The board has two options ahead of February 1’s shareholder meeting: screw a far better deal out of NewMed and/or make way for two or three Palliser nominees. Indeed, Capricorn’s missive hints at the latter direction, inviting nominees “to sign non-disclosure agreements” and “review” its books and the NewMed deal. After that, some may as well become directors. The only question is which of Giadrossi and Thomson should be the first to go.
Standard in play
Sneaky stuff from Abu Dhabi. As if owning Erling Haaland and his Man City pals wasn’t enough. Look at this: First Abu Dhabi Bank, around half state-controlled, has been plotting to take over the shirt sponsor of rival Liverpool FC — Standard Chartered. Is that even allowed under Premier League rules?
Who knows, because no sooner had the game kicked off to create a lender with more than $1 trillion assets than FAB, as it likes to be known, called things off. It’s now ruled offside for six months under takeover rules. As for Standard Chartered shares that had shot up by a fifth, they ended the non-match up just 7 per cent at 705p: a chunky discount to its £10.43 book value. Someone should tell Jürgen Klopp that it’s probably now in play.
