Bottom Line: Bargain from Next

DAVID JONES, chief executive of Next, is turning his mind to the enviable problem of how to spend its growing cash pile. But plans to open up to three more US stores this year will not make much of a dent in the pounds 123m balance, excluding Club 24, at the year-end.

Likewise, the home furnishings experiment is unlikely to eat up much capital unless it decides to open a stand-alone furniture chain - and there is little sign of that.

But Mr Jones' caution is shareholders' gain. The dividend was increased a bumper 120 per cent to 5.5p, yet was still more than three times covered by earnings of 17.3p.

Earnings growth will be dimmed by a doubling of the tax charge this year and an increase to the standard rate next. But even if, as analysts expect, the dividend is lifted 27 per cent to 7p this year it will still be more than twice covered if the group achieves the pounds 90m-plus being forecast and will offer a 3.8 per cent yield.

Last year's 17.8 per cent rise in sales at the core retail chain looked a hard act to follow, but it is being exceeded so far this year. Directory, which lagged last year, is now beating the high street, vindicating the group's decision to combine ranges for the two outlets.

Shoppers are fickle, however, and such rapid growth cannot go on for ever. But the market's mistake in the past has been underestimating, not overestimating. Even allowing for the rising tax charge, a forward multiple of 12.5 times compared with a sector average of 17 is a bargain.