Good morning! It's Paul & Graham here again today.

Agenda - we've done mostly shorter sections today, to get through more companies, and more quickly - 

Paul’s Section:

Next (LON:NXT) (6746p - £8.7bn pre-open) [no section below] - Q2 (May-July ‘22) trading update - always of interest for sector trends from the best in class operator that also reports so promptly. 

  • Trading better than expected (especially in physical stores) - due to less competition on high streets, and warm/dry weather in June/July.
  • FY 1/23 EPS guidance raised 7.2% (range: 543p-588p, PER = 11.5 to 12.4 = cheap IMO!).
  • Pre-pandemic trends returning in product mix (formal wear up, sports/home down)
  • Online returns rate back up to 42%.
  • Is online in decline? No - just returning to long-term growth trend after a boom during pandemic - this is absolutely key, and confirms my theory that bombed out online shares could now be oversold, as market has wrongly assumed they’re now ex-growth!
  • H2 guidance is cautious - sales growth slowing from +12.4% in H1 to +1.0% in H2 - due to impact on consumer spending from higher inflation.
  • Share buybacks continuing, reduced share count by 2.6% so far this year. Amazing long-term strategy, boosting EPS considerably over time.

My opinion - I’m highly encouraged by Next’s update, as it confirms what I always thought - that the pandemic pulled forward demand for online shopping. We then had a hangover in calendar H2 2021 & H1 2022, but things are now returning to a (more modest) long-term growth rate for online. This could trigger a potentially big re-rating of bombed out eCommerce shares - one of my main investing themes for the rest of this year & next year, as the market realises they are actually still growth stocks (the ones with decent, differentiated product anyway), but many are currently priced too cheaply as if they were ex-growth.

SCS (LON:SCS) (147p down 4% at 10:09 - mkt cap £53m) (I hold) [no section below] - FY TU 52 wks ended 30 July 2022 - profit ahead of market expectations, due to positive trading, strong margin, and cost management - I’m impressed, as I was expecting another profit warning here. Although it does warn for FY 7/2023.

Cash of £70.8m (no debt) is above market cap. £7m share buyback continuing. Also note forecast 9% divi yield, which looks sustainable to me.

Orders…

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