Notice of AGM

RNS Number : 0139I

Sainsbury(J) PLC

07 June 2011

 



 

 

7 June 2011

Annual financial report announcement for the 52 weeks to 19 March 2011

In accordance with Listing Rule 9.6.1, copies of the following documents have been submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism, which can be accessed at www.hemscott.com/nsm.do:

·      Annual Report and Accounts 2011

·      Notice of Annual General Meeting 2011

The above documents may be viewed online at www.j-sainsbury.co.uk/ar11 and www.j-sainsbury.co.uk/notice11 respectively.  In addition an illustrated review of Sainsbury's during the 2010/11 financial year is also available online at our corporate website.

A condensed set of Sainsbury's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in J Sainsbury plc's preliminary announcement on 11 May 2011.  That information together with the information set out below which is extracted from the Annual Report and Financial Statements 2011 constitute the material required by Disclosure and Transparency Rule 6.3.5 which is required to be communicated to the media in full unedited text through a Regulatory Information Service.  This announcement is not a substitute for reading the full Annual Report and Financial Statements 2011.  Page and note references in the text below refer to page numbers in the Annual Report and Financial Statements 2011. To view the preliminary announcement, slides of the results presentation, the transcript of the presentation and the webcast: please visit www.j-sainsbury.co.uk.

Enquiries:
Investor Relations	Media
Erica Judge	Ben Crowther
[phone]	[phone]

Principal Risks and Uncertainties

The Risk Management process is closely aligned to accelerating our growth plan which focuses on growing the business through the addition of new range, space, channels to market and property management. Risk is an inherent part of doing business. The system of Risk Management used to identify the principal risks the Group faces and to develop and closely monitor key controls, is described on page 35 of the Annual Report and Financial Statements 2011. The management of the risks is based on a balance of risk and reward determined through careful assessment of both the potential likelihood and impact.  Consideration is given to both reputational as well as financial impact, recognising the significant commercial value attributable to the Sainsbury's brand. The principal risks identified by the Board and the corresponding mitigating controls are set out below in no order of priority.

Business continuity and acts of terrorism

A major incident or act of terrorism could impact on the Group's ability to trade.

Sainsbury's has detailed plans in place, supported by senior representatives who are trained in dealing with major incidents and have the authority levels to make decisions, in the event of a potentially disruptive incident.

The Business Continuity Steering Group meets quarterly to ensure that the business continuity (BC) policy and strategy is fit for purpose.  In addition, it oversees the mitigation of all risks associated with BC and IT disaster recovery.  In the event of any unplanned or unforeseen events the Business Continuity Management Team is convened at short notice to manage any associated risk to the business.

All key strategic locations have secondary backup sites which would be made available within pre-defined timescales and are regularly tested.

Business strategy

If the Board adopts the wrong business strategy or does not implement its strategies effectively, the business may be negatively impacted. Risks to delivering the strategy need to be properly understood and managed to deliver long-term growth for the benefit of all stakeholders.

A clear strategy remains in place with five key areas of focus:

·     Great food at fair prices;

·     Accelerating the growth of complementary non-food and services;

·     Reaching more customers through additional channels;

·     Growing supermarket space; and

·     Active property management.

Progress against these areas of focus and any risks to delivery, such as the availability of suitable new store sites, are regularly reviewed by the Board and the overall strategy is reviewed at the two-day Strategy Conference. The Operating Board also hold regular sessions to discuss strategy. This activity is supported by a dedicated Strategy team. To ensure the strategy is communicated and understood, the Group engages with a wide range of stakeholders including shareholders, colleagues, customers and suppliers on a continual basis.

Colleague engagement, retention and capability

The Group employs around 150,000 colleagues who are critical to the success of our business. Attracting and maintaining good relations with talented colleagues and investing in their training and development is essential to the efficiency and sustainability of the Group's operations. 

The Group's employment policies and remuneration and benefits packages are regularly reviewed and are designed to be competitive with other companies, as well as providing colleagues with fulfilling career opportunities. Colleague surveys, performance reviews, communications with trade unions and regular communication of business activities are some of the methods the Group uses to understand and respond to colleagues' needs, whilst processes are also in place to identify talent and actively manage succession planning throughout the business.

Environment and sustainability

Environment and Sustainability are core to Sainsbury's values.  The key risk facing the Group in this area relates to reducing the environmental impact of the business with a focus on reducing packaging and new ways of reducing waste and energy usage across stores, depots and offices.

A number of initiatives are in place, which are being led by the Environmental Action team and the Corporate Responsibility Steering Group to reduce our environmental impact and to meet our customers' requirements in this area. Further details are included in the Corporate Responsibility review on pages 14 to 17 of the Annual Report and Financial Statements 2011.

Financial strategy and treasury risk

The main financial risks are the availability of short and long term funding to meet business needs, counterparty liabilities and fluctuations in interest and foreign currency rates which continue to be impacted by the turbulence in the financial markets.

The central Group Treasury function is responsible for managing the Group's liquid resources, funding requirements, and interest rate and currency exposures and the associated risks as set out in note 28 of the Annual Report and Financial Statements 2011 on pages 84 to 88. The Group Treasury function has clear policies and operating procedures which are regularly reviewed and audited.

Fraud

As with any business, there is always a risk of fraudulent activity by our colleagues.

The Group has a strong control framework in respect of potential fraud or other dishonest behaviour, which is regularly reviewed by Internal Audit. A set of policies are in place to provide colleagues with clear guidance on behaviour. In addition, there are 'whistleblowing' procedures in place to enable colleagues and suppliers to raise concerns about possible improprieties on a confidential basis. Internal Audit undertakes detailed investigations and highlights its findings to the Audit Committee.

Health and safety

Prevention of injury or loss of life for both colleagues and customers is of utmost importance.  In addition it is paramount to maintaining the confidence our customers have in our business.

Clear policies and procedures are in place detailing the controls required to mitigate health and safety risks across the business.  These capture the end-to-end operation, from the auditing and vetting of construction contractors, to the health and safety processes in place in our depots, stores and offices.  Compliance to these processes is closely monitored and reported.

Process compliance is supported by external accreditation and internal training programmes, which are aligned to both health and safety laws and Sainsbury's internal policies.  In addition, resource is dedicated to manage the risk effectively, in the form of the Group Safety Committee and specialist teams including Convenience Risk Managers and Logistics and Commercial Safety Specialists.

IT systems and infrastructure

The Group is reliant on its IT systems and operational infrastructure in order to trade efficiently.  A failure in these systems could have a significant impact on our business.

The Group has extensive controls in place to maintain the integrity and efficiency of its systems including detailed recovery plans in the event of a significant failure. New innovations and upgrades to systems are ongoing to improve both the customer experience and colleague efficiency. Prior to introducing system changes rigorous testing is completed.

Pension risk

The Group operates a number of pension arrangements which includes a defined benefit scheme. This scheme is subject to risks in relation to its liabilities as a result of changes in life expectancy, inflation and future salary increases, and to risks regarding the value of investments and the returns derived from such investments.

An investment strategy is in place which has been developed by the pension trustee, in consultation with the Company, to mitigate the volatility of liabilities, to diversify investment risk, and to manage cash. 

Product Quality

The quality and safety of our products is of the highest importance and any failure in standards would significantly affect the confidence of our customers. 

There are stringent controls in place to ensure product safety and integrity. Food hygiene practices are taken very seriously and are monitored regularly to ensure compliance with standards. All aspects of product safety are governed through a Group Safety Committee. All suppliers are expected to conform to the Group's code of conduct for Socially Responsible Sourcing which launched in 1998 and covers fair terms of trading, protection of children, worker health and safety, equal opportunities, freedom of association, freedom of employment, hours of work and wages.

Regulatory environment

The Group's operations are subject to a broad spectrum of regulatory requirements.  Key areas subject to regulation include planning, competition and environmental issues, employment, pensions and tax laws and regulations over the Group's products and services.

Two key pieces of new legislation are the Grocery Supply Code of Practice (GSCOP), which came into effect in 2010/11, and the Bribery Act 2010, which is expected to come into force in the first half of 2011.

Failure to comply with laws and regulations could lead to civil and/or criminal legal prosecution and fines or imprisonment imposed on Sainsbury's or our colleagues.  In addition, a breach could lead to reputational damage.

There is an established governance process in place to monitor regulatory developments and to ensure that all existing and forthcoming regulations are complied with. Regular reviews are completed across the estate to ensure compliance and that training needs are addressed as required.

Sainsbury's has invested significant time and resource in providing comprehensive training to the relevant members of the Buying Team in the requirements of GSCOP.  This training is reinforced by online post training testing and supported by training and reference materials on our intranet.  Sainsbury's also has a dedicated internal legal resource to provide its Buying Team with advice and guidance.

Trading Environment

The continued economic downturn could affect the performance of the Group in terms of sales, costs and operations, through:

·     the ongoing challenges to household disposable income;

·     competitor pricing positions; and

·     commodity costs driving up the cost of goods.

In addition, the downturn may also affect the risk of supplier or other counterparty failure, with possible operational or financial consequences for the Group

We continue to focus on delivering quality products with 'universal appeal', at a range of price points ensuring value for all our customers. This is achieved through the continuous review of our key customer metrics, active management of price positions, development of sales propositions and increased promotion and marketing activity. While external cost pressures including oil-related costs, commodity pricing and business rates affect our business, the Group continues to work hard to mitigate the impact of these cost pressures on customers and on our overall profitability through the delivery of cost savings.  Sainsbury's undertakes credit checks on suppliers and maintains regular, open dialogue with key suppliers concerning their ability to trade.

Related party transactions

Group

a)   Key management personnel

The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board.

The key management personnel compensation is as follows:

	2011	2010
	£m	£m
Short-term employee benefits	8	17
Post-employment employee benefits	1	1
Share-based payments	10	8
	19	26

Six key management personnel had credit card balances with Sainsbury's Bank plc (2010: five). These arose in the normal course of business and were immaterial to the Group and the individuals.  Four key management personnel held saving deposit accounts with Sainsbury's Bank plc (2010: six).  These balances arose in the normal course of business and were immaterial to the Group and the individuals.

b)   Joint ventures

Transactions with joint ventures

For the 52 weeks to 19 March 2011, the Group entered into various transactions with joint ventures as set out below.

	2011	2010
	£m	£m
Sales of inventories	-	3
Management services provided	14	14
Interest income received in respect of interest bearing loans	1	1
Dividend income received	1	2
Sale of assets	74	-
Purchase of assets	(16)	-
Acquisition of companies	(58)	-
Rental expenses paid	(72)	(72)

Year end balances arising from transactions with joint ventures

	2011	2010
	£m	£m
Receivables
Other receivables	1	2
Loans due from joint ventures
Floating rate subordinated undated loan capital1	25	25
Floating rate subordinated dated loan capital2	30	30
Other	9	1
Payables
Loans due to joint ventures	(48)	(48)

1      The undated subordinated loan capital shall be repaid on such date as the Financial Services Authority shall agree in writing for such repayment and in any event not less than five years and one day from the dates of draw down.  In the event of a winding up of Sainsbury's Bank plc, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 1.0 per cent per annum for the duration of the loan.

2      No repayment of dated subordinated debt prior to its stated maturity may be made without the consent of the Financial Services Authority.  In the event of a winding up of Sainsbury's Bank plc, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 0.6 per cent per annum for the duration of the loan.

c)  Retirement benefit obligations

As discussed in note 30 of the Annual Report and Financial Statements 2011, the Group has entered into an arrangement with the Pension Scheme Trustee as part of the funding plan for the actuarial deficit in the Scheme.  Full details of this arrangement are set out in note 30 of the Annual Report and Financial Statements 2011.

Company

a)   Key management personnel

The key management personnel of the Company comprise members of the J Sainsbury plc Board of Directors.  The Directors do not receive any remuneration from the Company (2010: £nil) as their emoluments are borne by subsidiaries.  The Company did not have any transactions with the Directors during the financial year (2010: £nil).

b)   Subsidiaries

The Company enters into loans with its subsidiaries at both fixed and floating rates of interest on a commercial basis.  Hence, the Company incurs interest expense and earns interest income on these loans and advances.  The Company also received dividend income from its subsidiaries during the financial year.

Transactions with subsidiaries

	2011	2010
	£m	£m
Loans and advances given to, and dividend income received from subsidiaries
Loans and advances given	702	310
Loans and advances repaid by subsidiaries	(125)	(103)
Interest income received in respect of interest bearing loans and advances	135	126
Dividend income received	250	268
Loans and advances received from subsidiaries
Loans and advances received	(321)	(350)
Loans and advances repaid	64	377
Interest expense paid in respect of interest bearing loans and advances	(64)	(69)

Year end balances arising from transactions with subsidiaries

	2011	2010
	£m	£m
Receivables
Loans and advances due from subsidiaries	2,191	1,625
Payables
Loans and advances due to subsidiaries	(5,282)	(5,267)

c)   Joint ventures

Transactions with joint ventures

For the 52 weeks to 19 March 2011, the Company entered into transactions with joint ventures as set out below. 

		2011		2010
		£m		£m
Services and loans provided to joint ventures
Interest income received in respect of interest bearing loans		1		1
Dividend income received		1		2

Year end balances arising from transactions with joint ventures

	2011	2010
	£m	£m
Receivables
Loans due from joint ventures
Floating rate subordinated undated loan capital1	25	25
Floating rate subordinated dated loan capital2	30	30
Payables
Loans due to joint ventures	(5)	(5)
		-

1      The undated subordinated loan capital shall be repaid on such date as the Financial Services Authority shall agree in writing for such repayment and in any event not less than five years and one day from the dates of draw down.  In the event of a winding up of Sainsbury's Bank plc, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 1.0 per cent per annum for the duration of the loan.

2      No repayment of dated subordinated debt prior to its stated maturity may be made without the consent of the Financial Services Authority.  In the event of a winding up of Sainsbury's Bank plc, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 0.6 per cent per annum for the duration of the loan.

Statement of Directors' Responsibilities

As set out above, this statement is repeated here solely for the purposes of complying with Disclosure and Transparency Rule 6.3.5.  The statement relates to and is extracted from the Annual Report and Financial Statements 2011.  It is not connected to the extracted information presented in this announcement or the preliminary results announcement released on 13 May 2011. 

The Directors are responsible for preparing the Annual Report, the Remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

·     select suitable accounting policies and then apply them consistently;

·     make judgements and accounting estimates that are reasonable and prudent;

·     state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

·     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on page 25 of the Annual Report and Financial Statements 2011 confirm that, to the best of their knowledge:

·      the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·      the Directors' report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

 

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