Interim Results
Sainsbury(J) PLC
19 November 2003
19 November 2003
J Sainsbury plc - New Group Chief Executive Appointed
and Interim Results for 28 weeks ended 11 October 2003
• Justin King appointed as new Group Chief Executive from 29 March 2004
Group Results
• Sales up 1.0 per cent to £9,840m (2002: £9,744m).* At constant
currencies up 2.1 per cent
• Underlying profit before tax up 7 per cent to £366m (2002: £342m)**
• Sixth half year of continuous profit growth
• Interim dividend up 2.5 per cent to 4.33 pence per share (2002: 4.22
pence)
• Capex peaked and now reducing. Expect to be cash-flow positive by
2005/06
Sainsbury's Supermarkets (UK)
• Total sales up 1.8 per cent to £8,192m (2002: £8,048m)* and
like-for-like sales growth of 0.1 per cent++
• Underlying operating profit up 9.4 per cent to £313m (2002: £286m)+
• Successful launch of general merchandise ranges
• Third year of Business Transformation Programme delivering major
operational change
• Improved levels of customer service
• Delivered £110m of cost savings. Confident of achieving cumulative
savings of £710m by March 2004 and £960m by March 2005
• Sainsbury to You sales increased by 35 per cent.* Losses
substantially reduced to £10m in first half (2002: £19m). Expect to
break even by March 2004
• Underlying operating margins increased from 3.6 per cent to 3.8 per
cent (including Sainsburys to You)*+
Shaw's Supermarkets (US)
• Total sales up 2.7 per cent to $2,473m (2002: $2,409m)*
• Strong profit performance and underlying operating margins up from 4.6
per cent to 4.9 per cent*+
• Underlying operating profit up 9.1 per cent to $120m (2002: $110m)+
• Significant store development activity. Expect 12 per cent increase in
selling space in 2003/04
Sainsbury's Bank
• Net Income up 39 per cent
• Excellent growth potential
Sir George Bull, Non-Executive Chairman, said: 'I am delighted to announce the
appointment of Justin King as the new Group Chief Executive from 29 March 2004.
His appointment follows a thorough search and the Non-Executive Directors were
unanimous in selecting Justin as the ideal candidate. His talent and food
retailing experience give him a very sound base from which to drive this
business forward.'
____________________________
* Including VAT (UK- £568 million) and sales tax (US - £12 million)
** Before exceptional items of £36 million and amortisation of goodwill of £7
million
++ Easter adjusted, including petrol
+ Before exceptional Business Transformation operating costs of £29
million and Safeway bid costs of £8 million in Sainsbury's Supermarkets
and amortisation of goodwill of £7 million in Shaws Supermarkets
____________________________
Sir Peter Davis, Group Chief Executive, said: 'We are reporting Group underlying
profit before tax** up 7 per cent to £366 million and an increase of 2.5 per
cent in the interim dividend to 4.33 pence per share. This has been achieved
during the peak third year of our ambitious transformation programme for
Sainsbury's Supermarkets, a period of immense change, when we will have
completed the majority of our systems changes, substantially modernised our
supply chain and upgraded 80 per cent of our store portfolio. We have also
relaunched general merchandise, the largest product launch in our history, and
we are reducing our cost base in line with our target of £710 million by March
2004.
'During this year our priority has been on improving our operational capability
so that we are in a position to leverage benefits in 2004/05. Implementing any
one element of our transformation programme would have been significant but
doing them all at the same time has been an enormous exercise. Simultaneously
we have also been simplifying our organisational structure and have reduced
headcount by more than 20 per cent this year at our Holborn Business Centre. We
are not satisfied with the impact these activities have had on our sales
performance, but the marketplace has been moving fast and we needed to rebuild
the infrastructure of our business quickly and to restore long-term growth.
'We have come a very long way in the past three years and it is vital that we
concentrate on delivering this substantial programme. The Board is committed to
completing this by Summer 2004. We have grown our customer base averaging 13.5
million customer transactions a week during the first half of the year, and
delivered significant customer benefits. We introduced 10,000 new jobs in April
2003 and our service is now back to market leading levels. We have refocused
attention on fresh food and have extended our quality lead. We recently won the
coveted Gold Award at our industry's Quality Food and Drink Awards with our
organic Somerset Brie, the first time an organic product has won in the Award's
24 year history. We became European Wine and Spirits Retailer of the Year in
October and picked up the Corporate Social Responsibility accolade at the
National Business Awards.
'Nectar continues to give us more customer contact and greater customer
insights. The UK's leading loyalty programme with 13 million active collectors
has given our customers the chance to earn 80 per cent more points than with
Reward card and redeem them against a wide range of rewards.
Information Technology
'In August this year we completed the conversion of our store systems. In just
13 months, this was the fastest such roll-out in Europe. We have also installed
major merchandising and trading systems which greatly increase our ranging
flexibility. We are pleased with the step change in our IT capability. A major
enabler in this process has been our relationship with Accenture and we have
decided to extend our contract for a further three years, until 2010. This
extension will allow us to build further on the achievements to date and enable
Accenture to deliver additional cost reductions to Sainsbury's of around £150
million by 2007.
Supply Chain
'We are continuing the ramp-up of our new distribution centres and opened the
fourth automated centre at Hoddesdon in Hertfordshire in October. These centres
are complex facilities, which take time to become fully operational, but our
Stoke depot recently became the first of the new automated centres to issue in
excess of one million cases a week with Hams Hall not far behind. As we ramp-up
the new centres before closing down existing facilities we have incurred double
running costs of £13 million in the first half and expect a total of £25 million
for the full year. By Spring 2004 we expect to have around 60 per cent of our
volume going through the new network rising to 70 per cent by the autumn.
Non Food
'We have launched the first phase of our general merchandise range of 2,500
homeware products which will be in 75 stores by the end of this month and a
further 35 by March 2004. The early signs here are very encouraging with the new
product categories such as tabletop and soft furnishings proving popular with
customers. We are building a long-term general merchandise capability. We have
developed a much improved health and beauty offer in-house and have reviewed our
clothing strategy with a view to launching a new offer under our own brand for
autumn/winter 2004.
Sainsbury's to You
'Sainsbury's to You has delivered 35 per cent year-on-year sales growth and
order levels are five times those of three years ago. It has become a very
strong contender in its market, continuing to grow market share. Losses in the
first half have been substantially reduced to £10 million and we expect to break
even by March 2004. The service now covers 74 per cent of UK households.
Sainsbury's Bank
'Our growth plans for Sainsbury's Bank are producing good results and we have
had an excellent half year as we continue to benefit from increased integration
of activities with Sainsbury's Supermarkets. We are delivering growth and
broadening income streams. We now have 1.7 million customer accounts and net
income in the first half is up 39 per cent. The Bank has excellent growth
potential.
Beyond the Transformation Programme
'We are confident that customers are beginning to see an improved Sainsbury's.
By summer 2004 the significant achievements we have accomplished during the
Business Transformation Programme will provide the platform for refocusing on
accelerating sales growth.
'It is important that we maximise the strength of the Sainsbury's brand. The
store format trials we have conducted have provided a clear vision of the
opportunity that lies ahead for a company that can differentiate itself from the
other main supermarket players. Customers want us to focus on what we do best,
quality, choice and value, and our brand is very effective when these principles
are the central point of our offer.
'The heart of the Sainsbury's brand is delivering great quality at affordable
prices. This is a powerful proposition and appeals to a wide range of
customers. We are therefore driving our quality and product innovation even
further and have significantly strengthened our team over the past twelve months
in order to deliver a re-energised brand. As we complete our transformation
programme we will be better placed to both reinvest in our quality and further
improve our competitive offer.
'We have significant growth opportunities through extending our products, our
services and our channels to serve customers better and need to ensure our
estate is aligned to capitalise on our strengths. Only 57 per cent of the
population lives within three miles of one of our stores, providing a
significant opportunity to grow our business. We will seek to buy and build
stores where we trade most successfully and will also be prepared to consider
swapping a small number of stores to strengthen our portfolio.
'We know that our Main Plus and convenience formats work very successfully with
our brand. The first of our additional 100 Sainsbury's Locals in conjunction
with Shell opens today in Battersea. Seven more will be trading by Christmas
and a further eight by March 2004.
Shaw's Supermarkets
'Shaw's has delivered a strong profit performance in what remains a challenging
trading environment. With total sales up 2.7 per cent (in dollars) and
like-for-like sales growth up 0.6 per cent (Easter adjusted), performance
compares favourably with other US food retailers. Shaw's is driving through a
period of significant store development activity, during the first half six new
stores, five replacement and six extended stores opened. The first former Ames
store opened in September with three more scheduled to open in the second half.
We expect to increase selling space by 12 per cent this year providing a key
driver for future growth.
'Excellent cost controls and a significant improvement in the contribution from
both the Connecticut and ex-Grand Union stores contributed towards a strong
increase in underlying operating profit of 9.1 per cent to $120 million and
increase in underlying operating margin from 4.6 per cent to 4.9 per cent.
Outlook
'I am pleased that we have delivered our sixth half year of continuous Group
underlying pre-tax profit growth. We expect the rate of pre-tax profit growth
for the rest of this year to continue to reflect the unprecedented level of
change we are driving through to ensure our business is competitive longer term.
Despite all the challenges this year we expect to deliver another year of
progress. We are clear on the opportunities that lie ahead for Sainsbury's.
The real benefits of our recovery will come through as we come to the end of our
transformation programme in Summer 2004, providing the platform for accelerating
sales growth thereafter.'
Group financial summary
Group sales (including VAT and sales tax) increased by 1.0 per cent to £9,840
million (2002: £9,744 million). Group underlying operating profit, before
exceptional operating costs and amortisation of goodwill, was £401 million, an
increase of £30 million or 8.1 per cent over the previous year. This growth was
achieved despite an adverse dollar exchange movement and, as expected, no profit
growth in Sainsbury's Bank resulting from the Board's decision to invest in
accelerating customer accounts growth.
The US dollar depreciated against sterling in the first half, which resulted in
lower operating profit, financing costs and net debt in sterling terms. At
constant exchange rates, Group sales increased by 2.1 per cent, Group underlying
operating profit by 9.6 per cent and Group underlying profit before tax,
exceptional items and amortisation of goodwill, by 8.3 per cent.
Group underlying profit before tax, exceptional items and amortisation of
goodwill, increased by 7.0 per cent to £366 million (2002: £342 million). Profit
before tax in the first half was £323 million (2002: £320 million) as a result
of exceptional operating costs being higher than in the first half of last year,
but exceptional operating costs are expected to be the same as 2003 for the full
year.
Sales+ Operating profit
2003 2003
£m % £m %
Sainsbury's Supermarkets 8,192 1.8 313 9.4
Shaw's Supermarkets 1,528 (4.1) 74 1.4
Sainsbury's Bank 107 20.2 8 (11.1)
JS Developments 13 - 6 100.0
Sales/Underlying operating profit* 9,840 1.0 401 8.1
Exceptional operating costs (37)
Amortisation of goodwill (7)
Sales/Total operating profit 9,840 1.0 357 0.8
+ Including VAT at Sainsbury's Supermarkets of £568 million and sales tax at
Shaw's Supermarkets of £12 million.
* Underlying operating profit is before exceptional operating costs of £29
million in Sainsbury's Supermarkets (2002: £10 million) and £8 million Safeway
plc bid costs and amortisation of goodwill of £7 million (2002: £7 million) in
Shaw's Supermarkets.
++ All like-for-like sales are Easter adjusted.
Sainsbury's Supermarkets' total sales+ grew by 1.8 per cent to £8,192 million
(2002: £8,048 million). Like-for-like sales growth++ (including petrol) was 0.1
per cent (2002: 2.5 per cent). Sales growth for the first half was impacted by
an unprecedented level of change affecting the in-store delivery of our customer
offer. In particular, the trading and merchandising systems were completely
replaced, three new fully automated depots were building operational capacity
and we launched the new non-food ranges.
Cost savings programmes have again contributed significantly to the growth in
underlying operating profit* and underlying operating margin.+* Cost savings
amounted to £110 million in the first half, just over half relating to
structural buying efficiencies and the balance relating to labour and other
operating cost efficiencies resulting from modernising processes and systems.
Sainsbury's Supermarkets is on track to deliver £250 million of cost savings for
the year and cumulative savings of £710 million from the start of the Business
Transformation Programme to March 2004.
Offsetting the cost savings delivery in the first half has been additional
operating costs in implementing the change programme. These include additional
labour, training, property and supply chain dual running costs. Dual running
costs in the supply chain increased operating costs by £13 million during the
first half and are expected to be £25 million for the full year. National
insurance and insurance costs increased by £13 million in the first half.
Sainsbury's to You sales+ have increased by 34.5 per cent in the half year and
losses have reduced significantly to £10 million (2002: £19 million).
Sainsbury's to You is targeted to achieve break-even before the year-end.
Sainsbury's Supermarkets' underlying operating profit,* for the first half was
£313 million (2002: £286 million), an increase of 9.4 per cent over the previous
year. The underlying operating margin+* increased from 3.6 per cent to 3.8 per
cent (including Sainsbury's to You).
Shaw's Supermarkets delivered a strong trading performance during the first
half, in what remains a challenging trading environment. Sales+ grew by 2.7 per
cent to $2,473 million (2002: $2,409 million). Like-for-like sales growth++ for
the first half was 0.6 per cent (2002: 1.3 per cent) and Shaw's maintained its
strong No. 2 position in the New England market.
Underlying operating profit* increased by 9.1 per cent to $120 million (2002:
$110 million) as a result of strict cost control and good performances by the
ex-Grand Union and Connecticut stores. Underlying operating margin+* increased
from 4.6 per cent to 4.9 per cent.
Occupancy costs of the ex-Ames stores prior to opening amounted to $7 million in
the first half. Excluding these costs, underlying operating profit* would have
increased by 15.5 per cent and the underlying operating margin+* would have
increased to 5.1 per cent.
An adverse dollar to sterling currency movement depressed Shaw's reported
earnings when translated into sterling, with underlying operating profit*
increasing by 1.4 per cent to £74 million (2002: £73 million).
Sainsbury's Bank achieved net income growth of 39.2 per cent in the first half,
but operating profit was, as expected, £1 million lower than last year at £8
million (2002: £9 million), due to further revenue investment in growing the
long-term customer base of the business. Since the growth strategy started
customer accounts have increased by 37 per cent to 1.7 million and personal loan
balances are up 78 per cent to nearly £1 billion. Profit for the full year is
expected to be ahead of last year.
JS Developments' operating profit in the first half was £6 million (2002: £3
million), with two sites being sold during the period. The main focus, during
this period, has been on the sale of this business.
Net interest payable increased to £35 million (2002: £30 million), as a result
of higher net debt, partially offset by a US dollar exchange rate benefit and
lower short-term interest rates. Interest capitalised in the first half amounted
to £9 million (2002: £12 million).
Exceptional operating costs were £37 million (2002: £10 million). These relate
to re-organisation and closure costs arising from the Business Transformation
Programme in Sainsbury's Supermarkets of £29 million (2002: £10 million) and £8
million for Safeway plc bid costs. The Board estimates the full year exceptional
operating costs arising from the UK Business Transformation Programme will be
£55 million, the same level as last year.
The Group tax charge was £114 million (2002: £111 million). The underlying
effective tax rate, before exceptional items and amortisation of goodwill, in
the first half was 32.5 per cent (2002: 33.0 per cent), the same level as in the
2003 full year.
Underlying earnings per share, before exceptional items and amortisation of
goodwill, was 12.8 pence (2002: 11.8 pence), an increase of 8.5 per cent on
the previous year. Basic earnings per share was 10.8 pence (2002: 10.8 pence) as
a result of exceptional operating costs being higher than in the first half last
year.
The Board has declared an interim dividend of 4.33 pence per share which
represents an increase of 2.5 per cent over the previous year. The interim
dividend will be paid on 9 January 2004 to shareholders on the Register of
Members at the close of business on 28 November 2003.
Group capital expenditure in the first half was reduced by £245 million to £350
million (2002: £595 million). Sainsbury's Supermarkets' capital expenditure was
down by £300 million to £212 million, with substantial reductions in all
categories. Nine extensions and two refurbishments were completed during the
first half, a reduction of 26 refurbishments against the same period last year.
Capital expenditure relating to the supply chain has also reduced significantly
with three of the four new depots now operational and the fourth came on stream
during October 2003.
Shaw's capital expenditure increased by £52 million to £133 million (2002: £81
million), partly due to expenditure on the newly acquired ex-Ames stores of £10
million and a substantial development programme for this year. Shaw's opened six
new and five replacement stores in the first half and extended a further six
stores. Selling space is forecast to increase by 12 per cent for the full year.
Group capital expenditure is forecast to be £1.0 billion for the year, with
Sainsbury's Supermarkets' expenditure decreasing by £300 million to below £700
million.
Sainsbury's Supermarkets return on capital employed increased by 0.2 per cent to
10.9 per cent (2002: 10.7 per cent), whilst Group return on capital
employed was maintained at 11.5 per cent (2002: 11.5 per cent).
Underlying EBITDA before exceptional operating costs increased by 5.9 per cent
to £610 million (2002: £576 million). Net debt at the half-year increased by
£0.3 billion to £1.7 billion (29 March 2003: £1.4 billion) with gearing
increasing to 33 per cent (29 March 2003: 28 per cent).
For enquiries:
Investor Relations: Media:
Roger Matthews Jan Shawe
Lynda Ashton +44 (0) 20 7695 7162 Pip Wood +44 (0) 20 7695 6127
The preliminary results presentation will begin at 09.45am GMT in our Auditorium
at 33 Holborn, London, EC1N 2HT. Breakfast will be available from 09.15am.
If you would like to attend please telephone/fax 020 7695 6431 or email
rosemarie.fallah@sainsburys.co.uk. Strict security operates throughout the
building and all external guests must be notified to us in advance.
If you are unable to attend in person, please phone our live-teleconference
facilities at 09.35 by dialling +44 (0) 207 784 1004. You will be asked to give
your name and company. You will then be placed on hold and music will be heard.
To view the slide show go to the Direct Access Link: http://www.placeware.com/cc
/premconfeurope/P?id=f589027&pw=824436. Shortly before the presentation begins
you will hear an announcement and list of the speakers present.
To listen to the presentation for up to 7 days after the event dial
+44 (0) 207 784 1024, using the pin number 589027
To view the slides and the web cast of the presentation go to
www.j-sainsbury.co.uk from 9.30am GMT onwards and the event will be available to
view via the delayed web cast from 3.30pm BST on the day.
Group profit and loss account
28 weeks to 28 weeks to
11 October 12 October
2003 2002
(unaudited) (unaudited)
Note £m £m
Turnover including VAT and sales tax+ 2 9,840 9,744
VAT and sales tax (580) (560)
Turnover excluding VAT and sales tax 9,260 9,184
Operating profit before exceptional costs and amortisation of 401 371
goodwill
Exceptional operating costs 3 (37) (10)
Amortisation of goodwill (7) (7)
Operating profit 357 354
Share of operating profit in joint ventures - 1
Profit/(loss) on sale of properties 3 1 (5)
Profit on ordinary activities before interest 358 350
Net interest payable and similar items (35) (30)
Underlying profit on ordinary activities before tax* 366 342
Exceptional items (36) (15)
Amortisation of goodwill (7) (7)
Profit on ordinary activities before tax 323 320
Tax on profit on ordinary activities 4 (114) (111)
Profit on ordinary activities after tax 209 209
Equity minority interest (3) (3)
Profit for the financial period 206 206
Equity dividends (83) (81)
Retained profit for the financial period 123 125
Basic earnings per share 5 10.8p 10.8p
Underlying earnings per share* 5 12.8p 11.8p
Diluted earnings per share 5 10.8p 10.7p
Underlying diluted earnings per share* 5 12.7p 11.7p
Dividend per share 4.33p 4.22p
+ Including VAT at Sainsbury's Supermarkets and sales tax at Shaw's
Supermarkets.
* Before exceptional items and amortisation of goodwill.
Group statement of total recognised gains and losses
28 weeks to 28 weeks to
11 October 2003 12 October 2002
(unaudited) (unaudited)
£m £m
Profit for the financial period 206 206
Currency translation differences on foreign currency net investments (4) (5)
Total recognised gains since last annual report 202 201
There is no material difference between the above profit for the financial
period and the historical cost equivalent.
Reconciliation of movements in equity shareholders' funds
28 weeks to 28 weeks to
11 October 2003 12 October
2002
(unaudited) (unaudited)
£m £m
Profit for the financial period 206 206
Equity dividends (83) (81)
123 125
Currency translation differences (4) (5)
Proceeds from ordinary shares issued for cash 4 3
Net movement in equity shareholders' funds 123 123
Opening equity shareholders' funds 5,003 4,848
Closing equity shareholders' funds 5,126 4,971
Group balance sheet
11 October 12 October 29 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£m £m £m
Note
Fixed assets
Intangible assets 206 235 226
Tangible assets 7,559 7,159 7,540
Investments 110 121 112
7,875 7,515 7,878
Current assets
Stock 898 872 800
Debtors 246 310 297
Sainsbury's Bank's current assets 6 2,410 2,279 2,397
Investments 26 15 20
Cash at bank and in hand 352 509 639
3,932 3,985 4,153
Creditors: amounts falling due within one year
Sainsbury's Bank's current liabilities 6 (2,236) (2,139) (2,237)
Other (2,248) (2,247) (2,537)
(4,484) (4,386) (4,774)
Net current liabilities (552) (401) (621)
Total assets less current liabilities 7,323 7,114 7,257
Creditors: amounts falling due after more than one year (1,870) (1,874) (1,885)
Provisions for liabilities and charges (255) (205) (300)
Total net assets 5,198 5,035 5,072
Capital and reserves
Called up share capital 485 484 484
Share premium account 1,427 1,424 1,424
Revaluation reserve 22 39 22
Profit and loss account 3,192 3,024 3,073
Equity shareholders' funds 5,126 4,971 5,003
Equity minority interest 72 64 69
Total capital employed 5,198 5,035 5,072
Group cash flow statement
28 weeks to 28 weeks to
11 October 12 October
2003 2002
(unaudited) (unaudited)
£m £m
Note
Net cash inflow from operating activities 7 444 445
Dividend received from joint venture 1 8
Returns on investments and servicing of finance
Interest received 16 44
Interest paid (59) (72)
Interest element of finance lease payments (20) (16)
Net cash outflow from returns on investments and servicing of finance (63) (44)
Taxation (100) (90)
Capital expenditure and financial investment
Purchase of tangible fixed assets (439) (580)
Sale of tangible fixed assets 77 76
Purchase of intangible fixed assets - (2)
Net cash outflow from capital expenditure and financial investment (362) (506)
Acquisitions and disposals
Repayment of loans to joint ventures - 3
(Payments)/receipts relating to disposal of fixed asset investments (23) 75
Net cash (outflow)/inflow from disposals (23) 78
Equity dividends paid to shareholders (217) (207)
Net cash outflow before use of liquid resources and financing (320) (316)
Financing
Issue of ordinary share capital 4 3
Increase/(decrease) in short-term borrowings 87 (236)
(Decrease)/increase in long-term borrowings (1) 550
Increase in finance leases - 151
Capital element of finance lease payments (35) (4)
Net cash inflow from financing 55 464
(Decrease)/increase in net cash in the period (265) 148
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in net cash in the period (265) 148
Increase in debt and lease financing (86) (314)
Movement in finance leases (9) (154)
Exchange adjustments 53 82
Movement in net debt in the period 8 (307) (238)
Net debt at the beginning of the period 8 (1,404) (1,156)
Net debt at the end of the period 8 (1,711) (1,394)
Notes to the results
1. Accounting policies
The financial information has been prepared using the accounting policies set
out in the Annual Report and Financial Statements 2003.
2. Group turnover and operating profit
Set out below are the Group turnover and operating profit.
28 weeks to 28 weeks to Change %
11 October 2003 12 October 2002
(unaudited) (unaudited)
£m £m
Turnover including VAT and sales tax
Food retailing and financial services - UK 8,299 8,137 2.0
Property development - UK 13 13 -
Food retailing - US 1,528 1,594 (4.1)
Total 9,840 9,744 1.0
Turnover excluding VAT and sales tax
Food retailing and financial services - UK 7,731 7,589 1.9
Property development - UK 13 13 -
Food retailing - US 1,516 1,582 (4.2)
Total 9,260 9,184 0.8
Operating profit
Food retailing and financial services - UK 321 295 8.8
Property development - UK 6 3 100.0
Food retailing - US 74 73 1.4
Operating profit before exceptional costs and
amortisation of goodwill 401 371 8.1
Exceptional operating costs - Food retailing - UK (37) (10)
Food retailing - US - -
Amortisation of goodwill - Food retailing - US (7) (7)
Total 357 354 0.8
2. Group turnover and operating profit (continued)
US sales and operating profit have been translated at an average exchange rate
for the period of £1 = $1.6191 (2002: £1 = $1.5113).
28 weeks to 28 weeks to Change %
11 October 2003 12 October 2002
(unaudited) (unaudited)
$m $m
Shaw's sales and operating profit
Sales (including sales tax) 2,473 2,409 2.7
Operating profit 120 110 9.1
3. Exceptional items
3.1 Exceptional operating costs
28 weeks to 28 weeks to
11 October 2003 12 October 2002
(unaudited) (unaudited)
£m £m
Sainsbury's Supermarkets 29 10
Safeway bid costs 8 -
Exceptional operating costs 37 10
The costs in Sainsbury's Supermarkets relate to the Business Transformation
Programme which involves upgrading its IT systems, supply chain and store
portfolio.
3.2 Exceptional non-operating items
Profit/(loss) on sale of properties were as follows:
28 weeks to 28 weeks to
11 October 2003 12 October 2002
(unaudited) (unaudited)
£m £m
Sainsbury's Supermarkets 1 (2)
Shaw's Supermarkets - (3)
1 (5)
4. Taxation
The tax charge in the profit and loss account comprises:
28 weeks to 28 weeks to
11 October 12 October
2003 2002
(unaudited) (unaudited)
£m £m
Current tax 112 107
Deferred tax 7 6
Tax relief on exceptional items (5) (2)
114 111
The above tax charge exceeds the charge based on the statutory 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.
5. 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 period, 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. These represent share options granted to employees where the exercise
price is less than the average market price of the Company's ordinary shares
during the period to 11 October 2003.
28 weeks to 28 weeks to
11 October 2003 12 October 2002
(unaudited) (unaudited)
million million
Weighted average number of shares in issue 1,912.7 1,911.7
Weighted average number of dilutive share options 1.6 13.0
Total number of shares for calculating diluted earnings per share 1,914.3 1,924.7
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.
28 weeks to 28 weeks to
11 October 12 October
2003 2002
(unaudited) (unaudited)
Earnings Per share Earnings Per share
£m amount £m amount
pence pence
Basic earnings 206 10.8 206 10.8
Exceptional items net of tax:
Operating profit 32 1.7 8 0.4
(Profit)/loss on sale of properties (1) (0.1) 5 0.2
Amortisation of goodwill 7 0.4 7 0.4
Underlying earnings before exceptional items 244 12.8 226 11.8
and amortisation of goodwill
Diluted earnings 206 10.8 206 10.7
Underlying diluted earnings before exceptional 244 12.7 226 11.7
items and amortisation of goodwill
6. Current assets and creditors of Sainsbury's Bank
11 October 12 October 29 March
2003 2002 2003
(unaudited) (unaudited) (audited)
£m £m £m
Current assets
Cash 47 31 40
Treasury bills and other eligible bills 70 74 70
Loans and advances to banks 109 482 298
Loans and advances to customers* 1,777 1,153 1,528
Debt securities 374 522 448
Prepayments and accrued income 33 17 13
2,410 2,279 2,397
Creditors: amounts falling due within one year
Loan from minority shareholder 20 - 11
Deposits by banks 5 - 12
Customer accounts 2,132 2,063 2,166
Accruals and deferred income 79 76 48
2,236 2,139 2,237
*Loans and advances to customers include £996 million (12 October 2002: £484
million; 29 March 2003: £867 million) of loans and advances repayable in
more than one year.
In addition to the above assets, Sainsbury's Bank had fixed assets of £16
million at 11 October 2003 (12 October 2002: £8 million;
29 March 2003: £12 million) included in tangible fixed assets and inter company
liabilities of £31 million (12 October 2002: £4 million; 29 March 2003: £18
million) included in creditors due within one year.
7. Reconciliation of operating profit to net cash inflow from operating
activities
28 weeks to 28 weeks to
11 October 2003 12 October 2002
(unaudited) (unaudited)
£m £m
Group operating profit 357 354
Depreciation 214 205
Amortisation of intangible assets 8 9
Loss on sale of equipment, fixtures and vehicles 10 5
Increase in stocks (107) (139)
Decrease in debtors 34 1
(Decrease)/increase in creditors and provisions (58) 17
Increase in Sainsbury's Bank current assets (13) (86)
(Decrease)/increase in Sainsbury's Bank creditors (1) 79
Net cash inflow from operating activities 444 445
8. Analysis of net debt
At 29 March Cash Other Exchange At 11 October
2003 flow non-cash movements 2003
(audited) £m movements £m (unaudited)
£m £m £m
Current asset investments 20 6 - - 26
Cash at bank and in hand 639 (280) - (7) 352
Bank overdrafts (14) 9 - - (5)
645 (265) - (7) 373
Due within one year:
Borrowings (162) (87) - 48 (201)
Finance leases (37) 35 (39) - (41)
Due after one year:
Borrowings (1,564) 1 - 2 (1,561)
Finance leases (286) - (5) 10 (281)
(2,049) (51) (44) 60 (2,084)
Total net debt (1,404) (316) (44) 53 (1,711)
9. Financial information
The Interim Results are unaudited but have been reviewed by the Auditors. The
financial information presented herein does not amount to full accounts within
the meaning of Section 240 of the Companies Act 1985 (as amended). The figures
for the 52 weeks to 29 March 2003 have been extracted from the Annual Report and
Financial Statements 2003 which have been filed with the Registrar of Companies.
The audit report on the Annual Report and Financial Statements 2003 was
unqualified and did not contain a statement under Section 237 (2) or (3) of the
Companies Act 1985.
The Company's results will be published in the Interim Statement which will be
posted to shareholders on 20 November 2003. Copies will also be
available from J Sainsbury plc, 33 Holborn, London EC1N 2HT and at its paying
agents Citibank, N.A., 336 Strand, London WC2R 1HB and Chase Manhattan Bank,
Trinity Tower, 9 Thomas More Street, London E1 9YT.
Review report by the Auditors to the Board of Directors of J Sainsbury plc
Independent review report to J Sainsbury plc
Introduction
We have been instructed by the Company to review the financial information which
comprises a Group profit and loss account, Group statement of total recognised
gains and losses, Group balance sheet, Group cash flow statement, comparative
figures and associated notes. We have read the other information contained in
the Interim Report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Directors are
responsible for preparing the Interim Report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information. This report, including
the conclusion, has been prepared for and only for the Company for the purpose
of the Listings Rules of the Financial Services Authority and for no other
purpose. We do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in
writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 28 weeks ended
11 October 2003.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
1 Embankment Place
London
WC2N 6RH
18 November 2003
Notes:
(a) The maintenance and integrity of the J Sainsbury plc web site
is the responsibility of the Directors; the work carried out by the Auditors
does not involve consideration of these matters and, accordingly, the Auditors
accept no responsibility for any changes that may have occurred to the Interim
Report since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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