Final Results
Sainsbury(J) PLC
29 May 2002
J Sainsbury plc, the UK and US food retailer - Preliminary Results
For the 52 weeks to 30 March 2002
Sir Peter Davis, group chief executive said:
'We have now completed the first full year of our recovery programme and I'm
pleased to report strong progress on delivering our promises. We are reporting
14 per cent underlying profit growth for the Group after two years of decline
and 10 per cent underlying profit growth for our supermarkets in the UK after
three years of decline. We have exceeded targets for our cost reduction
programme by £10 million in 2001/02 and have now raised our savings target by a
further £100 million to £700 million by March 2004. In the UK supermarket
business we have achieved a step change in our sales performance with
like-for-like sales growth of 6.3 per cent excluding petrol (Easter contributing
0.3 per cent), our best performance in over a decade. This positive progress to
date along with our current plans gives us confidence in achieving results in
line with expectations in the current year.'
Highlights
• Group sales -continuing operations up 7.4% to £18.2bn.
• Underlying profit before tax up 14.2% to £627m.*
• Profit before tax up 30.7% to £571m.
• Proposed final dividend up 5% to 10.82 pence.
• Underlying earnings per share up 14.4% to 21.5 pence.*
Sainsbury's Supermarkets
• Sales up 7% to £14.9bn.
• LFL sales growth was 6.3% excluding petrol (Easter contributing 0.3%)
- a step change in sales performance.
• Customer visits up 7%.
• Cost savings of £160m delivered in year, cumulative savings of
£250m.
• Underlying operating profit up 9.5% to £515m.*
• 117 store reinvigorations completed in year; encouraging sales
uplifts.
• IT and supply chain programmes progressing well.
Sainsbury's Bank
• Operating profit up 66.4% to £22m.
Shaw's
• Continuation of strong performance.
• Sales up 11.6% to £3.1bn.
• LFL sales growth was 3.9% (Easter contributing 0.4%).
• Operating profit up 18.9% to £137m.
(*before exceptional items and amortisation of goodwill)
Sir George Bull, chairman said:
' The business is in better shape than it has been for some years. We are
strengthening the performance culture throughout Sainsbury's and we are becoming
more confident of growing the business for the longer term. As a result, we are
restoring dividend growth by recommending a final dividend of 10.82 pence, an
increase of 5 per cent, to be paid on 26 July 2002, making a total for the year
of 14.84 pence.'
Sainsbury's Supermarkets
In the UK we have driven a step change in our sales performance resulting in
five consecutive quarters of strong like-for-like sales growth. It is over a
decade since the company experienced this level of growth and this momentum is
giving us confidence that our recovery is sustainable.
Quality food
Quality food is a priority for our customers and a key component of the
Sainsbury's brand. We have invested in our food ranges and, during the year,
have improved or developed over 3,200 products. Our own label sub-brands are
again amongst the best in the UK.
We are working to develop a stronger complementary non-food offer through Adam's
childrens clothes, Jeff & Co and a trial of a home enhancements range. We are
working on developing our own health and beauty offer through up-grading our
in-house capability. We have also been trialling Boots health & beauty and
pharmacy shops in six of our out of town stores and are now extending these by a
further three stores. We will evaluate the performance of this trial by the end
of this year.
Pricing
We rigorously monitor 10,000 lines weekly to ensure that we remain competitive.
We have reinvested some of our cost savings in price adjustments, and throughout
this year we have maintained our position relative to competitors. Alongside
this we continue to run a highly attractive, sustainable promotional programme.
Service
Delivering Great Service is a key objective of our business transformation
programme and during the year we made great strides in retraining our colleagues
to serve our customers better. Our Mystery Shopper measure is now embedded in
the company; this and our customer satisfaction index demonstrate the progress
we are making.
Cost efficiencies
We have achieved cost savings of £160 million in the year delivering a total of
£250 million since we began the programme and £10 million more than the initial
target we set ourselves. These savings come from buying efficiencies (£80
million) and other operating efficiencies, including productivity improvements
in store and central departments (£80 million). We anticipate achieving further
cost efficiencies of £200 million in 2002/03. In light of progress to date we
have increased our cost savings target by a further £100 million to £700 million
by March 2004. These savings will be reinvested in enhancing the customer offer,
building sales and in improving our operating margins.
Modernising our IT systems
We are replacing our legacy systems with 'best in class' IT solutions to help us
gain competitive advantage. The Accenture relationship continues to go well and
systems, which have already been implemented, are delivering substantial
business benefits, such as the customer data warehouse, which is crucial to our
format development strategy. Our original plan was to complete all core
re-platforming first and then undertake discretionary projects to meet emerging
business needs. During the year we re-prioritised our programme in light of new
opportunities and have updated the original sequence of work. Our stated IT
re-platforming project retains its scope and is on target.
Rebuilding the supply chain
We embarked on a major programme to modernise our supply chain by developing a
network of new, highly automated depots around the country. We have made good
progress and three depots, Emerald Park, Haydock and Langlands Park, are already
operating.
Our first fully automated fulfilment centre at Hams Hall, Birmingham, will open
later this year. Three additional fulfilment centres are under construction at
Stoke, Hoddesdon and Waltham Point; these will be operational by the end of
2003. Two further sites are secured subject to planning consent and we are
currently negotiating on one further site.
We anticipate double running costs of £6 million will be incurred in the 2002/03
financial year as we transition between old and new warehouses. The new depots
will serve the majority of our stores within the period of the plan. We are
confident that the new supply chain structure will deliver significant cost
efficiencies and improved product availability in-store.
Reinvigorating our stores
We committed to upgrading our estate through the reinvigoration of our stores.
During the year we reinvigorated 117 stores including 27 extensions and 90
refurbishments. We have added 467,000 sq ft of selling space in reinvigorated
stores, 77 salad bars, 61 hot food counters, 32 meat counters, 28 fish counters
and 16 pharmacies.
We have also stepped up our new store opening programme, having opened 10
supermarkets and 15 locals during the year, adding a further 422,000 sq ft of
new space.
Through our customer data warehouse we analyse data from our Reward Card to help
us understand our customer needs and shopping missions better. Our programme of
reinvigorating stores has evolved as we develop formats and trial them.
We now have four trial Mixed Mission stores and early results are encouraging.
In March we opened our first Main Plus average superstore (with 16,000 new lines
and 20 per cent of floor space focused on non-foods) and customer feedback has
been positive. We are developing a new Broad Appeal format under the Sainsbury's
Savacentre brand, which will offer an attractive range of foods and non-foods at
good value prices. The first store opens in Northfields, Birmingham on 30 May
and the format, if successful, will considerably extend our trading reach.
Sainsbury's to You
We are second in the UK online grocery market with current annualised sales of
around £110 million and around 71 per cent coverage of UK households, with
27,000 orders per week. Our current market share in London is 36 per cent.
Improved volumes and better integration of our home delivery service into stores
has reduced new customer acquisition costs by 60 per cent and fulfilment costs
by 30 per cent in the second half as compared to the first half of the year.
During the year we launched the service into 20 stores bringing the total
nationwide to 53 stores, including three refurbished stores in Manchester,
through which we expect to replace the service provided by the Gorton picking
centre. We expect this business to be profitable in the second half of 2003/04.
Sainsbury's Bank
Operating profit grew by 66 per cent to £22 million including a one-off credit
of £3 million relating to VAT. We have aligned our Bank business more closely
with our supermarket customers. We have introduced permanent point of sale
materials into 127 stores and this has helped deliver sales increases of 70 per
cent per store. We have also driven down acquisition costs to below 1/3 of
industry averages, through making better use of existing store, colleague and
communication channels. We are building on the offer; insurance sales are up
threefold and personal loans are up 100 per cent. We have a stronger partner in
HBoS (since the merger of the Bank of Scotland with the Halifax), a new
management team, an increased capability and appetite for growth. We are
currently considering some interesting choices about the rate at which we should
grow this business in the future.
Property and JS Developments
We undertook to unlock value from our property portfolio and we are continuing
to realise opportunities as they arise. Our priority is retail enhancement
opportunities on existing sites, which improve our retail offer. Currently we
have 22 projects in development.
Planning consent was granted in September 2001 for the redevelopment of Stamford
House and Drury House, our former head office sites in Stamford Street, for
375,000 sq ft of offices and a 10,000 sq ft Central store. We are working on
plans for the redevelopment of further sites, Rennie House and Wakefield House.
Shaw's Supermarkets
We are the 12th largest food retailer in the US, and a strong regional player,
with 185 stores. We are number two in revenue terms in the six states that make
up the New England market.
Shaw's has produced another good performance. In the year, 50 of our 185 stores
were improved. We opened 5 new or replacement stores and completed 2 extensions
and 15 re-furbishments. We have integrated 17 stores purchased from Grand Union
and re-badged a further 11 Star Market stores to increase our presence in
Vermont and Connecticut and to consolidate Shaw's position in the New England
market. We reviewed the supply chain process and have rationalised and
streamlined our distribution system.
Shaw's has a successful track record and is a profitable growth opportunity for
the Group. We continue to look for suitable acquisition opportunities both in,
and adjacent to, New England. Our US and UK businesses are working well together
on developing and sharing benefits and synergies. We have stimulated the two-way
flow of knowledge and ideas between Shaw's and Sainsbury's, a good example being
the use, in the UK, of some fresh produce merchandising ideas from the US.
Looking forward
We have experienced continuing growth since the beginning of this financial year
albeit at a slower rate against tougher comparatives. We will provide a full
trading update on the first quarter at the AGM on 24th July. We remain
confident of delivering results in line with market expectations for the current
year.
Profit and dividend growth have been restored. To deliver a successful business
longer term we are looking for profit growth through a balance of strong sales
growth, reducing our cost base further and continuing margin improvements.
The development of our formats presents a bigger sales growth opportunity than
we originally anticipated. We are committed to achieving industry leading
margins, but it is too early to be precise about when. The market is dynamic and
competition very active. We have choices about the rate of sales growth against
margin targets. However we are committed to delivering strong double digit
underlying profit growth each year of our business transformation programme.
FINANCIAL SUMMARY
The results for the year reflect good progress across the Group.
Total Group sales reached £18,206 million (2001 : £18,441 million), with sales
from our continuing operations increasing by 7.4 per cent to £18,198 million
(2001 : £16,940 million). Total operating profit from continuing operations at
£679 million (2001 : £615 million), was 10.4 per cent up on the previous year
with all operations, except JS Developments, making a strong contribution to
growth. Total operating profit includes an investment in Sainsbury's to You, our
home delivery service which amounted to £50 million, an increase of £10 million
over the previous year.
Net interest payable of £49 million was £27 million lower than the previous
year, benefiting from the Homebase disposal proceeds and lower interest rates.
The Group's underlying profit before tax has increased to £627 million (2001 :
£549 million), an increase of 14.2 per cent, reversing the profit declines in
recent years. Profit before tax after exceptional items and amortisation of
goodwill was £571 million (2001 : £437 million), an increase of 30.7 per cent.
Results from continuing operations
Sales and underlying operating profit before exceptional costs and amortisation
of goodwill were as follows:
Sales1 Operating profit2
2002 2002
£m % change £m % change
Continuing operations
Sainsbury's Supermarkets 14,860 7 515 10
Sainsbury's Bank 165 7 22 66
JS Developments 112 (25) 15 (40)
Shaw's Supermarkets ( US ) 3,061 12 137 19
Profit Sharing (10) (30)
Total 18,198 7 679 10
1 Includes VAT at Sainsbury's Supermarkets and sales tax at Shaw's
Supermarkets.
2 Profit before exceptional operating costs and amortisation of goodwill.
Sainsbury's Supermarkets' sales increased by 7.0 per cent to £14,860 million
(2001 : £13,894 million), and underlying operating profit was up by 9.5 per cent
to £515 million (2001 : £470 million). Like-for-like sales were up 6.3 per cent
excluding petrol (Easter contributing 0.3 per cent) for the year. This
represents a step change in sales performance. We have now had five quarters of
strong like-for-like growth and outperformed the industry average for total and
like-for-like sales growth in the year.
Underlying operating profits of £515 million included the investment in
Sainsbury's to You, our home delivery service. This investment increased from
£40 million last year to £50 million in the current year. Results improved in
the second half due to increased sales, lower customer acquisition costs and
improved operating efficiencies. We are confident that Sainsbury's to You
results will improve significantly in the new financial year as sales grow and
operating efficiencies continue to improve.
Excluding Sainsbury's to You, operating profit increased by 10.8 per cent to
£565 million (2001 : £510 million) and operating margins (VAT inclusive) for the
year increased from 3.7 per cent to 3.8 per cent (VAT exclusive 4.0 per cent to
4.1 per cent). We are confident that operating margins will continue to improve
in the future.
Results from continuing operations (continued)
Shaw's Supermarkets had another excellent year with like-for-like sales up 3.9
per cent (Easter contributing 0.4 per cent). Underlying operating profit
was up 18.9 per cent to £137 million (2001 : £115 million) reflecting the full
year impact of the successful acquisition of 19 Grand Union stores in 2001, of
which 17 have now been smoothly integrated and re-badged as Shaw's. Operating
margins continued to improve from 4.2 per cent to 4.5 per cent.
Sainsbury's Bank, 55 per cent owned by the Group and 45 per cent owned by HBOS,
achieved strong profit growth of 66.4 per cent to £22 million (2001 : £13
million). Adjusting for VAT credits in both years, underlying profit increased
by 95 per cent.
JS Developments is the Group's project based property development company where,
depending on activity, profits can fluctuate from year to year. Fewer projects
were completed in the year and three substantial projects, were carried forward
into 2003. As a result, operating profit at £15 million was down on the previous
year (2001 : £25 million).
Discontinued operations
Losses from discontinued businesses were £2 million (2001 : profits of £13
million). The withdrawal from Egypt benefited operating profit by £33 million
with losses reducing from £35 million last year to £2 million this year. The
disposal of Homebase was slightly earnings positive during the year, last year's
profit contribution of £48 million being offset by the interest benefit on the
disposal proceeds.
Exceptional items
2002 2001 1
£m £m
Exceptional operating costs
UK business transformation programme2 (30) (68)
Shaw's Supermarkets (8) (10)
Homebase - (1)
Non operating exceptional items (38) (79)
Profit on sale of Homebase - 24
(Loss)/profit on sale of properties - Homebase - 43
- Other (4) 27
(4) 70
Impairment of Egyptian business - (111)
(4) (17)
Total exceptional items (42) (96)
1 Restated for FRS 19.
2 Including the closure of the Taste joint venture amounting to £5 million.
In October 2000, we announced a major transformation programme in Sainsbury's
Supermarkets including upgrading our IT systems, supply chain and store
portfolio. Due to the scale, scope and pace of this programme it was estimated
that exceptional operating costs of between £35 million and £50 million per
annum would be incurred for at least 3 years. These costs primarily relate to
the closure of depots and stores and reorganisation costs associated with this
programme. In the year, total exceptional operating costs were £38 million, a
£41 million reduction over the previous year. These costs included
transformation programme costs of £25 million, the cost of the closure of the
Taste joint venture amounting to £5 million, and costs of £8 million at Shaw's
relating to the closure of the East Bridgewater depot.
Surplus properties were sold in the year generating cash proceeds of £54 million
and a property loss of £4 million. No further adjustments were made this year
end to the Homebase profit on disposal nor to the Egyptian impairment provision
reported in last year's accounts.
A full withdrawal from the Egyptian business was completed during the year
within the costs provided.
Substantial progress has been made in completing outstanding matters associated
with the Homebase disposal. It is now estimated that total gross proceeds of
around £1 billion will be generated and a further profit on disposal will be
realised when the Group's 17.8 per cent retained equity investment in Homebase
is sold, and when all outstanding property matters are resolved.
Taxation
The Group's underlying tax charge at £210 million (2001 restated : £187
million), gives an effective underlying rate of 33.5 per cent (2001 restated :
34.1 per cent) before exceptional items and amortisation of goodwill. The
underlying rate exceeds the nominal rate of UK corporation tax principally due
to the higher rate of tax incurred on US profits and the lack of effective tax
relief on depreciation of UK retail properties.
FRS 19 on deferred tax was adopted this year, which has increased the underlying
rate for the year by 2 per cent and reduced opening shareholders' funds by £160
million.
FRS 19 requires that deferred tax be recognised in respect of all timing
differences that have originated, but not reversed, by the balance sheet date.
Prior to FRS 19, the Group's accounting policy was to provide for the deferred
tax which was likely to be payable or recoverable.
Earnings per share and dividends
Underlying earnings per share before exceptional items and amortisation of
goodwill increased by 14.4 per cent to 21.5 pence (2001 restated : 18.8 pence).
Basic earnings per share increased by 31.7 per cent to 19.1 pence (2001
restated : 14.5 pence).
A final dividend of 10.82 pence per share is proposed, which represents an
increase of 5 per cent over last year. The total proposed dividend for the year
is 14.84 pence which represents an increase of 3.6 per cent on last year and
dividend cover of 1.3 times. The decision to propose an increase in the final
dividend reflects the Directors' confidence in the Group's future growth
prospects. This increase is at a lower rate than the increase in earnings,
recognising the need to restore dividend cover.
Cash flow
The Group's net debt has increased by £297 million during the year to £1,156
million. Operating cash inflow remained strong at £1,067 million, up 16 per cent
on last year.
Group capital expenditure for the year was £1,156 million (2001: £956 million).
Sainsbury's Supermarkets capital expenditure was £1,023 million including £221
million on new stores, £530 million on existing stores , £171 million on the
supply chain and £101 million on other capital expenditure. Shaw's capital
expenditure was £133 million. Group capital expenditure is forecast to be £1.1
billion for 2003.
Cash flow
Summary cash flow
2002 2001
£m £m
Operating cash inflows 1,067 922
Net interest (69) (95)
Taxation (171) (168)
Dividends (275) (274)
Payments for fixed assets (1,073) (960)
Purchase of own shares - (18)
Sale of fixed assets 218 453
Cash outflow before sale and purchase of businesses (303) (140)
Sale of business 3 636
Investment in joint ventures (6) (45)
Other - 9
Net cash (outflow)/inflow before financing (306) 460
Issue of ordinary share capital 17 24
Non cash movements (8) (79)
(Increase)/decrease in net debt (297) 405
Net debt 1,156 859
Sale of fixed assets benefited from Homebase freehold properties disposal
proceeds amounting to £196 million, less indemnity payments provided for at the
time of the Homebase sale. Surplus property disposals generated £54 million in
the year.
Since the year end £78 million has been received being the partial repayment of
vendor loan notes in Homebase.
Balance sheet
Shareholders' funds increased by £97 million to £4,848 million and net debt has
increased by £297 million to £1,156 million in the year, increasing Group
gearing to 24 per cent (2001 restated : 18 per cent). The adjustment for the
change in accounting policy for deferred tax reduced opening reserves by £160
million and increased gearing by 1 per cent.
FRS 17- Retirement benefits
FRS 17 will be fully adopted by the Group over the next two years. This
accounting standard gives rise to a notional surplus or deficit on defined
benefit pension schemes based on certain required parameters, some of which are
tied specifically to the last day of the financial year and could, therefore, be
subject to large year on year fluctuations.
At 30 March 2002, the notional deficit, using these prescribed parameters, on
the Group's defined benefit pension schemes was £257 million (a gross deficit of
£368 million offset by a notional deferred tax asset of £111 million). The new
standard does not allow the amortisation of any pension surpluses through the
profit and loss account. This credit amounted to £19 million in 2002.
The Group will not account for the profit and loss effect until 2004 as required
by FRS 17. If the Group were to do this today, the additional profit before tax
charge is estimated to be less than £15 million.
Whatever notional numbers are reported under FRS 17, the Board firmly believes
that funding decisions for the Group's schemes should be based on actuarial
valuations, undertaken every three years. The Board is committed to balancing
the financial security of employees with the needs of the Group's shareholders.
Shareholder return
The share price increased from 385.0 pence at the start of the financial year to
399.5 pence at 30 March 2002 with a range of 326.75 pence to 447.75 pence. The
Company's equity market capitalisation at 30 March 2002 was £7.7 billion.
Total shareholder return was 10 per cent (the increase in the value of a share,
including reinvested dividend, based on the average share price for the three
months ended 30 March 2002 compared with the equivalent period in 2001) with J
Sainsbury plc ranked seventh in its peer group of 13 European retailers.
Group profit and loss account
for the 52 weeks to 30 March 2002
Restated
2002 2001A %
Note £m £m Increase
Turnover including VAT and sales taxB 18,206 18,441
VAT and sales tax (1,044) (1,197)
Continuing operations 17,154 15,954 7.5
Discontinued operations 8 1,290
Turnover excluding VAT and sales tax 3 17,162 17,244
Cost of sales (including exceptional costs) 3 (15,905) (16,082)
Gross profit 1,257 1,162
Group administrative expenses (including exceptional costs) 3 (632) (629)
Continuing operations - operating profit before exceptional costs and
amortisation of goodwill
679 615 10.4
Exceptional operating costs (38) (78)
Amortisation of goodwill (14) (12)
Continuing operations - operating profit 627 525
Discontinued operations - operating (loss)/profit (2) 8
Operating profit 3 625 533
Share of loss in joint ventures (1) (3)
(Loss)/profit on sale of properties 4 (4) 70
Disposal of operations - discontinued - (87)
Profit on ordinary activities before interest 620 513
Net interest payable 5 (49) (76)
Underlying profit on ordinary activities before taxC 627 549 14.2
Exceptional items (42) (96)
Amortisation of goodwill (14) (16)
Profit on ordinary activities before tax 571 437 30.7
Taxation 6 (200) (157)
Profit on ordinary activities after tax 371 280
Equity minority interest (7) (4)
Profit for the financial year 364 276 31.9
Equity dividends 7 (285) (274)
Retained profit for the financial year 79 2
Basic earnings per share 8 19.1p 14.5p
Underlying earnings per shareC 8 21.5p 18.8p 14.4
Diluted earnings per share 8 18.9p 14.4p
Underlying diluted earnings per shareC 8 21.3p 18.7p
A Restated for change in accounting policy for deferred tax (see notes 1 and
6).
B Including VAT at Sainsbury's Supermarkets and Homebase and sales tax at
Shaw's Supermarkets.
C Before exceptional items and amortisation of goodwill.
Group statement of total recognised gains and losses
for the 52 weeks to 30 March 2002
2002 2001*
£m £m
Profit for the financial year 364 276
Currency translation differences on foreign currency net investments 1 10
Total recognised gains relating to the financial year 365 286
Change in accounting policy for deferred tax (160)
Total recognised gains since last annual report 205
There is no material difference between the above profit for the financial year
and the historical cost equivalent.
* Restated for change in accounting policy for deferred tax (see notes 1 and 6).
Reconciliation of movements in equity shareholders' funds
for the 52 weeks to 30 March 2002
2002 2001*
£m £m
Profit for the financial year 364 276
Equity dividends (285) (274)
79 2
Currency translation differences 1 10
Goodwill on disposal of subsidiaries charged to profit for the - 149
year
Proceeds from ordinary shares issued for cash 21 24
Amounts deducted in respect of shares issued to the QUEST (4) (2)
Net movement in equity shareholders' funds 97 183
Opening equity shareholders' funds as restated* 4,751 4,568
Closing equity shareholders' funds 4,848 4,751
* Restated for change in accounting policy for deferred tax (see notes 1 and
6). Shareholders' funds as published were £4,911 million at 31 March 2001 before
deducting prior year adjustment of £160 million (£4,742 million at 1st April
2000 before deducting prior year adjustment of £174 million).
Balance sheets
at 30 March 2002 and 31 March 2001
2002 2001*
£m £m
Fixed assets
Intangible assets 263 278
Tangible assets 6,906 6,215
Investments 174 164
7,343 6,657
Current assets
Stocks 751 763
Debtors 398 546
Sainsbury's Bank 2,193 1,914
Investments 16 12
Cash at bank and in hand 370 475
3,728 3,710
Creditors: amounts falling due within one year
Sainsbury's Bank (2,060) (1,796)
Other (2,648) (2,529)
(4,708) (4,325)
Net current liabilities (980) (615)
Total assets less current liabilities 6,363 6,042
Creditors: amounts falling due after more than one year (1,223) (1,000)
Provisions for liabilities and charges (231) (238)
Total net assets 4,909 4,804
Capital and reserves
Called up share capital 484 483
Share premium account 1,421 1,401
Revaluation reserve 39 39
Profit and loss account 2,904 2,828
Equity shareholders' funds 4,848 4,751
Equity minority interest 61 53
Total capital employed 4,909 4,804
* Restated for change in accounting policy for deferred tax (see notes 1 and 6).
Group cash flow statement
for the 52 weeks to 30 March 2002
2002 2001
Note £m £m
Net cash inflow from operating activities 9 1,067 922
Returns on investment and servicing of finance
Interest received 66 55
Interest paid (114) (130)
Interest element of finance lease rental payments (21) (20)
Net cash outflow from returns on investments and servicing of finance (69) (95)
Taxation (171) (168)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,070) (951)
Sale of tangible fixed assets 218 453
Purchase of own shares - (18)
Purchase of intangible fixed assets (3) (9)
Net cash outflow from capital expenditure and financial investment (855) (525)
Acquisitions and disposals
Investment in joint ventures (6) (45)
Investment in Sainsbury's Bank by minority shareholder - 4
Sale of subsidiary undertakings 3 636
Proceeds from disposal of other fixed asset investments - 5
Net cash (outflow)/inflow for acquisitions and from disposals (3) 600
Equity dividends paid to shareholders (275) (274)
Net cash (outflow)/inflow before use of liquid resources and financing (306) 460
Financing
Issue of ordinary share capital 17 24
Decrease in short-term borrowings (116) (497)
Increase/(decrease) in long-term borrowings 434 (36)
Capital element of finance lease payments (4) (3)
Net cash inflow/(outflow) from financing 331 (512)
Increase/(decrease) in net cash 25 (52)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in net cash 10 25 (52)
Cash (outflow)/inflow from increase/(decrease) in debt and lease financing 10 (314) 536
Movement in finance leases 10 (8) (28)
Exchange adjustments - (51)
Movement in net debt in the year (297) 405
Net debt at the beginning of the year 10 (859) (1,264)
Net debt at the end of the year 10 (1,156) (859)
Notes to the results
1. Accounting policies
This financial statement has been prepared using the same accounting policies as
set out in the financial statements for the year ended 31 March 2001, with the
exception of the policy on deferred tax. Financial Reporting Standard (FRS) 19 '
Deferred Tax' has been adopted with effect from 1 April 2001. FRS 19 requires
that deferred tax be recognised in respect of all timing differences that have
originated, but not reversed, by the balance sheet date. Prior to 1 April 2001
the Group's accounting policy was to provide the deferred tax which was likely
to be payable or recoverable.
The Group has adopted FRS 18 'Accounting Policies', FRS 19 'Deferred tax' and
the transitional provisions of FRS 17 'Retirement benefits' in the financial
statements. Details of the changes arising from FRS 19 are given below.
The adoption of FRS 18 did not require any other change in accounting policies.
Accounting policies are periodically reviewed to ensure that they continue to be
the most appropriate for the Group.
Compliance with FRS 19 results in an additional tax charge of £10 million in the
current financial year, which reduces profit after tax from £381 million to £371
million and earnings per share by 0.5 pence.
The prior year comparatives have been restated to comply with FRS 19. The effect
is to increase profit after tax by £14 million from £266 million to £280 million
and to reduce opening net assets by £160 million to £4,751 million. Earnings per
share have been restated from 13.8 pence to 14.5 pence. Underlying earnings per
share have been restated from 19.2 pence to 18.8 pence.
The financial year represents the 52 weeks ended Saturday 30 March 2002 (prior
year the 52 weeks ended Saturday 31 March 2001).
2. Sales and underlying operating profit - continuing operations
Sales and underlying operating profit of continuing operations (before
exceptional operating costs and amortisation of goodwill) were as follows:
Sales1 Operating profit2
2002 2001 2002 2001
£m £m £m £m
Continuing operations
Sainsbury's Supermarkets 14,860 13,894 515 470
Sainsbury's Bank 165 154 22 13
JS Developments 112 149 15 25
Shaw's Supermarkets (US) 3,061 2,743 137 115
Profit Sharing (10) (8)
Total 18,198 16,940 679 615
1 Includes VAT at Sainsbury's Supermarkets and sales tax at Shaw's
Supermarkets.
2 Profit before exceptional operating costs and amortisation of goodwill.
3. Analysis of operating profit
2002 2001
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
£m £m £m £m £m £m
Turnover 17,154 8 17,162 15,954 1,290 17,244
Cost of sales (15,867) (10) (15,877) (14,862) (1,175) (16,037)
Exceptional cost of sales (28) - (28) (45) - (45)
Gross profit 1,259 (2) 1,257 1,047 115 1,162
Administrative expenses (598) - (598) (469) (102) (571)
Exceptional administrative
expenses
(10) - (10) (33) (1) (34)
Profit sharing (10) - (10) (8) - (8)
Amortisation of goodwill (14) - (14) (12) (4) (16)
Group administration (632) - (632) (522) (107) (629)
expenses
Operating profit 627 (2) 625 525 8 533
The exceptional operating costs comprise the following:
2002 2001
£m £m
Sainsbury's Supermarkets 20 37
Shaw's Supermarkets 8 8
Exceptional cost of sales 28 45
Sainsbury's Supermarkets 10 31
Shaw's Supermarkets - 2
Discontinued operations - 1
Exceptional administrative expenses 10 34
Total exceptional operating costs 38 79
The costs in Sainsbury's Supermarkets relate to the business transformation
programme which involves upgrading its IT systems, supply chain and store
portfolio. These costs are exceptional operating costs due to the scale, scope
and pace of the transformation programme. These costs primarily relate to the
closure of depots and stores and associated re-organisation costs. The cost of
closure of the Taste joint venture of £5 million is also included in Sainsbury's
Supermarkets exceptional administrative expenses.
At Shaw's Supermarkets, the exceptional costs relate to the closure of a depot
during the year.
4. (Loss)/profit on sale of properties
2002 2001
£m £m
Sale and leaseback of UK supermarket freeholds - 51
Disposal of Shaw's supermarket freeholds 1 -
Disposal of Homebase properties - 43
Other (5) (24)
(4) 70
5. Capitalised interest
2002 2001
£m £m
Capitalised interest included in net interest payable 16 24
6. Tax on profit on ordinary activities
2002 2001*
£m £m
The tax charge based on the profit for the year is:
UK Corporation tax at 30 per cent (2001: 30 per cent) 151 162
Over provision in prior periods - UK (1) (6)
150 156
Deferred tax 26 7
Overseas tax - current 38 30
- deferred (4) (6)
Taxation on exceptional items - current (7) (13)
- deferred (3) (17)
Tax on profit on ordinary activities 200 157
* Restated for change in accounting policy for deferred tax (see note 1).
The taxation credit on exceptional items comprises a tax credit of £10 million
(2001 : £21 million) on the exceptional operating costs and a tax credit of £9
million in 2001 on the divestment of Homebase.
7. Dividends
2002 2001
pence pence 2002 2001
per share per share £m £m
Interim 4.02 4.02 78 77
Final proposed 10.82 10.30 207 197
14.84 14.32 285 274
The final dividend will be paid on 26 July 2002 to shareholders on the register
at the close of business on 14 June 2002. The shares will become ex-dividend on
12 June 2002.
8 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the year, excluding those held by the Employee Share Ownership Trusts
which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares.
2002 2001
million million
Weighted average number of shares in issue 1,907.5 1,901.5
Weighted average number of dilutive share options 16.0 9.9
Total number of shares for calculating diluted earnings per share 1,923.5 1,911.4
8 Earnings per share (continued)
The alternative measure of earnings per share is provided because it reflects
the Group's underlying trading performance by excluding the effect of
exceptional items and amortisation of goodwill.
2002 2001*
Per
Per share share
Earnings amount Earnings amount
£m pence £m pence
Basic earnings 364 19.1 276 14.5
Exceptional items net of tax:
Included in operating profit 28 1.5 64 3.4
Profit on sale of properties, disposal of operations and
impairment write down 4 0.2 2 0.1
Amortisation of goodwill 14 0.7 16 0.8
Underlying earnings before exceptional items and
amortisation of goodwill 410 21.5 358 18.8
Diluted earnings 364 18.9 276 14.4
Underlying diluted earnings before exceptional items and
amortisation of goodwill 410 21.3 358 18.7
* Restated for change in accounting policy for deferred tax (see notes 1 and 6)
9. Reconciliation of operating profit to net cash inflow from operating
activities
2002 2001
£m £m
Operating profit 625 533
Depreciation 358 409
Amortisation of intangible assets 18 17
Loss on sale of equipment, fixtures and vehicles 3 2
Decrease/(increase) in stocks 23 (36)
Increase in debtors (2) (147)
Increase in creditors and provisions 57 151
Increase in Sainsbury's Bank current assets (279) (196)
Increase in Sainsbury's Bank creditors 264 189
Net cash inflow from operating activities 1,067 922
10. Analysis of net debt
At Other At 30
1 April Cash non-cash March
2001 flow movements 2002
£m £m £m £m
Current asset investments 12 4 - 16
Cash at bank and in hand 475 (105) - 370
Bank overdrafts (140) 126 - (14)
347 25 - 372
Due within one year:
Borrowings (230) 116 (213) (327)
Finance leases (4) - - (4)
Due after one year:
Borrowings (796) (434) 213 (1,017)
Finance leases (176) 4 (8) (180)
(1,206) (314) (8) (1,528)
Total net debt (859) (289) (8) (1,156)
11. Financial statements
The financial information is derived from the full Group Financial Statements
for the 52 weeks to 30 March 2002 and does not constitute full accounts within
the meaning of section 240 of the Companies Act 1985 (as amended). The Group
Accounts on which the auditors have given an unqualified report which does not
contain a statement under section 237(2) or (3) of the Companies Act 1985, will
be delivered to the Registrar of Companies in due course, and posted to
shareholders next month.
Copies may be obtained through our website www.j-sainsbury.co.uk or by calling
Freephone 0800 387504.
Contacts: Roger Matthews/Lynda Ashton Investor relations +44 (0) 20 7695 7162
Jan Shawe/Mandy Pursey Media +44 (0) 20 7695 6469
To watch Sir Peter Davis, group chief executive be interviewed in depth on the
preliminary results go to http://www.j-sainsbury.co.uk . Interviews are
available in video, audio and text.
This information is provided by RNS
The company news service from the London Stock Exchange
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