Final Results
Sainsbury(J) PLC
19 May 2004
19th May 2004
J Sainsbury plc - Preliminary Results for the 52 weeks ending 27 March 2004
Group Highlights
• Sales from continuing operations of £15,517 million up 2.4 per cent
(2003: £15,147 million) (i, ii)
• Underlying operating profit from continuing operations £590 million
(2003: £594 million) (iv)
• Underlying profit before tax of £675 million down 2.9% (2003: £695
million) (v)
• Proposed final dividend per share of 11.36 pence (2003: 11.36 pence).
Full year 15.69 pence (2003: 15.58 pence)
• Underlying earnings per share of 23.4 pence (2003: 24.2 pence) (v)
• Group reshaped to focus on UK
• Sale of Shaw's to Albertson's Inc. for $2,475 million
• Proposed capital return of 35 pence per share: EGM 12 July 2004
Sainsbury's Supermarkets
• Total sales of £15,297 million up 2.2% (2003 restated: £14,967 million)
(i, ii)
• Underlying operating profit of £564 million (2003: £572 million) (iv)
• Cost savings of £250 million delivered. Hit cumulative target of £710
million by March 2004
• Acquisition of 54 Bells convenience stores
• Acquisition of 14 supermarkets from Morrisons
• Sainsbury's to You broke even as expected in the month of March 2004.
Sainsbury's Bank
• First full year of accelerated growth plan. Net income up 40%
• Customer accounts up 30%
i. Turnover, throughout this review, in 2003 has been restated for the change in
accounting policy in accordance with FRS 5 Application note G (see notes 1 and 2
on page 14)
ii. Turnover, throughout this review, is stated including VAT at Sainsbury's
Supermarkets of £1,077 million (2003: £1,043 million) and sales tax at Shaw's
Supermarkets of £21 million (2003: £22 million).
iii. All like-for-like sales in this review are Easter adjusted.
iv. Underlying operating profit and underlying operating margin throughout this
review are stated before exceptional operating costs of £68 million (2003: £55
million) in Sainsbury's Supermarkets and before exceptional operating costs of
£nil (2003: £10 million) and amortisation of goodwill of £11 million (2003: £13
million) in Shaw's Supermarkets.
v. Underlying profit before tax and underlying earnings per share throughout
this review are stated before exceptional items of £54 million (2003: £15
million) and before amortisation of goodwill of £11 million (2003: £13 million).
Peter Davis, Chairman, said 'As predicted this was a year of tremendous change.
We have substantially completed the investment to modernise Sainsbury's
Supermarkets and rolled out an ambitious growth strategy for Sainsbury's Bank.
We acquired Swan Infrastructure Holdings Ltd, part of our IT outsourcing
arrangement, and Bells Stores, a chain of 54 neighbourhood convenience stores.
We also sold JS Developments, our specialist property development company, and
announced the sale of Shaw's, our US supermarket business, together with the
proposed capital return of 35 pence per share to shareholders, retaining the
balance of the proceeds to reinvest in our business.
'The scale of change and the associated disruption in Sainsbury's Supermarkets
and the weakening of the dollar have impacted our results for the year.
Underlying Group profit before tax was £675 million, down 2.9 per cent.
Underlying Group operating profit from continuing operations was £590 million
(2003: £594 million).
'The Board has proposed a final dividend of 11.36 pence per share, maintained at
the same level as last year, which means a full year dividend of 15.69 pence per
share. In the context of a slight reduction in underlying earnings per share
and dividend cover, this payment is indicative of the importance the Board
attaches to dividends.'
Looking forward
Justin King, Chief Executive, said 'The past three years have seen enormous
change but we must now build on the investments made and re-focus our attention
on delivering a better offer for our customers. The sale of Shaw's gives us a
single-minded focus on the UK business. We have today announced changes to the
senior team and management structure of the company as a result.
'We are clear about the qualities and strengths of the Sainsbury's brand. Our
job is to provide even better quality products at good value prices. We know
that the disruption of change has meant we have not served customers as well as
we would wish and are committed to ensuring that customers see the benefits of
our investments in the coming months.
'We indicated in our fourth quarter trading statement on 26 March 2004 that we
expected the current competitive environment in the UK to continue and that this
would impact underlying profits in 2004/05. We made our first moves on pricing
earlier this month and customers are already seeing the benefit in their
shopping baskets. This is the first step in a much longer journey as we focus
on improving our customer offer.'
Sainsbury's Supermarkets
Sainsbury's Supermarkets' sales increased by 2.2 per cent to £15,297 million and
underlying operating profit was down by 1.4 per cent to £564 million.
Like-for-like sales were down 0.2 per cent for the year. Underlying operating
margins (VAT inclusive) for the year decreased from 3.8 per cent to 3.7 per cent
(VAT exclusive 4.1 per cent to 4.0 per cent) and capital expenditure decreased
by 45 per cent to £572 million as we approach the end of our change programme.
In the second half, underlying operating profit reduced by 12.2 per cent and
underlying operating margin from 4.0 per cent to 3.5 per cent due to
disappointing sales and increased competitive pressures.
The priority in the UK this year was to complete the three-year modernisation
programme so that we can make a sustainable improvement in our customer offer.
This programme entailed upgrading a significant proportion of our IT systems,
closing 15 of our older depots and transferring operations into seven new
facilities, opening four automated depots during the last 18 months. Eighty per
cent of our stores are now new, refurbished or extended and we have introduced
new general merchandise ranges. Much has been undertaken in a relatively short
space of time and in a changing and challenging marketplace. Our task is now to
make sure that we get maximum benefit from our investments and concentrate on
giving customers the best quality, service and price.
Our modernisation programme
The overhaul of our IT systems has provided modern technology to improve many
important administrative and operational tasks. We have converted store
point-of-sale systems, created one central customer information system and
installed major merchandising and trading systems to improve product selection,
ranging and promotion.
In November 2003 we announced the extension of the outsourcing contract with
Accenture by three years to 2010. This reinforces the commercial relationship
and will deliver £150 million of lower IT costs between 2004 and 2007. Further
simplification was announced in January 2004 by acquiring Swan Infrastructure
Holdings Ltd, part of the outsourcing arrangements.
By the end of March 2004 we had met our target of delivering 60 per cent of our
volume through our new network. Depots at Hams Hall, Waltham Point and Stoke are
each handling more than one million cases a week. We are close to hitting our
full capacity target of 70 per cent and the major task now is to improve
productivity and reduce cost.
We have also continued to reshape our store estate to ensure we trade from
locations that best suit the key strengths of the Sainsbury's brand and sold two
stores during the year.
Driving cost efficiency is now part of everyday business and we continue to look
for practical ways to increase our efficiency. During the year we delivered
£250 million of cost savings, £40 million more than the previous year, bringing
cumulative savings to £710 million against our original target of £600 million.
Driving product innovation and quality
The Sainsbury's brand stands for great quality at affordable prices; a powerful
proposition when executed well. We have continued to introduce new ranges and
improve established products throughout the year such as our successful 'Just
Cook', Italian and 'Taste the Difference' ranges.
Working in conjunction with our suppliers we have continued to give customers
innovative and exclusive products which provide clear benefits. We have
launched pip-free lemons, the 'Kumato', a unique black tomato, sweeter than its
red counterpart, pollen free lilies helping millions of hay fever sufferers
enjoy fresh cut flowers and recently introduced a new type of cork, specially
treated with carbon dioxide, to seal wine bottles and eliminate cork-tainted
wine.
We are committed to offering customers a choice of products with high
environment and social standards. In March 2004 we extended our popular organic
traceability website. In addition to tracing fruit and vegetables, customers
can now trace organic chicken back to the farm of origin.
We continue to lead the way in organics having increased the proportion of
British organic fresh meat, dairy and produce to 65 per cent, 20 per cent above
the market average and became the Soil Association's 'Organic Supermarket of
the Year' for the third time in a row. Our Organic Somerset Brie won the
industry's coveted Gold Q (Quality) Award in November 2003, the first time an
organic product had won since the Awards started over 24 years ago.
We are committed to having fair and constructive relationships with our
suppliers and partner local and regional suppliers to help them develop their
businesses. In 1998 we launched our first supplier development programme to
help smaller businesses supply local products to local customers. We ran two
programmes during the past year comprising 24 companies in the South West and
Wales. A total of 90 companies have now taken part in eight programmes.
General merchandise
We launched 2500 new homeware products into 95 stores during the year and have
learned lessons from the first two seasons' ranges. These have worked well in
larger stores where we have the full range, equipment and decor and we are
refining our range for autumn/winter 2004.
We recently announced an exclusive agreement with three of Europe's leading
designers, Terence Conran, Orlando Hamilton and Orla Kiely to develop quality
ranges at value for money prices which will be in store in October. We are also
launching our own clothing brand, called 'TU' in September offering good value
quality stylish casual wear for men, women and children. In readiness for the
launch of TU, we took more direct control of the Jeff & Co range, previously
operated as a franchise, and have improved sales demonstrating our increasing
knowledge in this area.
Our stores
During the year we opened 10 new supermarkets and 16 were refurbished or
extended. We also announced plans to open Sainsbury's Local stores on 100 Shell
petrol station forecourts. With the acquisition of 54 Bells neighbourhood
convenience stores in north-east England, we now have 146 convenience stores.
Around half of the proceeds from the sale of Shaw's was set aside for future
opportunities to develop our business. In May 2004 we announced the acquisition
of 14 stores from Morrisons and one from Somerfield, all located primarily in
the Midlands and the north of England, increasing our UK selling space by over
400,000 sq ft, around 3 per cent.
Most people live or work near to the store where they shop, so communities
around Sainsbury's stores comprise many of our customers and colleagues. We are
committed to being a good neighbour and playing an active role in local
communities through our Local Heroes scheme. Our Sainsbury's Assisting Village
Enterprises (S.A.V.E.) scheme now supports 250 small shops serving rural
communities and celebrated its fifth anniversary in September 2003.
Customer service
While the changes we have been making have been disruptive to store operations
we have continued to invest in improving customer service and this has been
recognised in recent customer research.
In April 2003 we introduced 'Scan and Pack', helping customers to pack bags at
the checkout and we have also installed self-checkout facilities at 58 stores
for customers who want an even quicker checkout when buying a few products. Four
self-service units overseen by one assistant replace two regular checkouts. The
units have been well received and are now used by thousands of customers each
week buying over a million items.
Nectar
Nectar, our customer loyalty programme, is the UK's largest loyalty programme
with more than 50 per cent of UK households currently participating. It has the
most active collectors of all the mainstream loyalty programmes and continues to
grow. The number of partners issuing points increased from five to 13 over the
twelve months to March 2004.
Collectors receive statements four times a year and we have increased the number
of customers we can mail. We are also able to supply de-personalised trend data
to suppliers helping them improve their own products providing further benefit
for Sainsbury's customers.
Sainsbury's to You
Our online home delivery service, Sainsbury's to You, grew by 19 per cent year
on year and broke even, as planned, in the month of March 2004. The announced
closure of our Park Royal depot in London and transfer to a store based
operation, with the in-sourcing of delivery drivers, will reduce costs further
in 2004/05.
New technology assists colleagues to find products in store and 'zone picking'
enables them to specialise in picking orders from specific product areas. This
means they can fulfil orders more quickly and with greater accuracy. A new
system to plan the best delivery routes was rolled out in November 2003. With
these changes we now provide a more efficient service and have a solid base from
which to grow.
Sainsbury's Bank
This was the first full year of our growth strategy for Sainsbury's Bank,
jointly owned with HBoS and we have invested in products and services that will
provide future growth prospects and income streams. We increased customer
numbers, income and profit and now have 1.9 million customer accounts. We
launched new products including life insurance, health insurance and saving
bonds and improved existing products such as pet insurance.
We are focused on giving outstanding customer service. By March 2004 we had 50
in-store banking centres. We re-launched our website so that customers can
service credit accounts and savings on line and have installed nearly 200 cash
point machines for customers in our stores bringing our total to 532. We are
also introducing deposit boxes in store so that customers can deposit cheques
and cash and will have 200 by the end of July 2004.
Corporate social responsibility (CSR)
Corporate Social Responsibility is an everyday part of how we do business. We
are delighted that this has been regularly recognised through the year. In
March 2004 Sainsbury's came first in its sector in Business in the Community's
Corporate Responsibility Index. We also achieved number one in our sector in
the Dow Jones Sustainability Index and we are included in the FTSE4Good Index.
Through Sainsbury's Supermarkets we support the national and local communities
in which we operate via donations to nutrition, health and exercise initiatives,
such as our popular educational programme 'Taste of Success'. We also operate
a very active 'Local Heroes' programme whereby we support the activities of
colleagues in the community and the charities that they choose. This year we
gave £110,000 through this scheme, an increase of 20 per cent on the previous
year.
In addition to cash donations we donate food to homeless people through
FareShare and the Salvation Army. In total, Sainsbury's Supermarkets donated £6
million this year through cash and 'in-kind' donations and customers and
colleagues raised a further £5 million through our stores and business centre.
We have supported Comic Relief since 1999 and in April 2004, Northern Ireland
store manager Nick Fletcher visited Ethiopia to see how some of the £6 million
raised in March 2003 has been invested to improve quality of life for local
communities throughout the country.
JS Developments (JSD)
During the year we sold our specialist property development company, JSD, for a
total consideration of £199 million. Prior to this disposal JSD made an
operating profit of £7 million.
Shaw's Supermarkets
Shaw's continued to perform well. Despite low like-for-like sales growth of 0.4
per cent, underlying operating profit in dollars increased by 8.8 per cent to
$234 million and the underlying operating margin was up 0.2 per cent to 5.1 per
cent.
Given the increasingly competitive New England environment, the Board decided
that shareholders' interests were best served by selling Shaw's allowing us to
focus back on the core UK market. On 26 March 2004 we announced the sale of
Shaw's to Albertson's Inc for $2,475 million. This was an excellent deal,
realising value and allowing us to propose returning 35 pence per share to
shareholders via a B share scheme and share consolidation and reinvest the
remaining proceeds to develop Sainsbury's Supermarkets. The sale completed on 30
April 2004 and the profit on disposal of Shaw's is estimated to be in excess of
£250 million, which will be recognised in the 2004/05 accounts.
Financial review
Profit and loss account
Accounting adjustments have been made to bring the Group in line with the latest
guidance issued in November 2003 by the Accounting Standards Board in relation
to FRS 5 on revenue recognition. The total impact is a £280 million reduction in
sales this year and £351 million last year. This increases total sales growth
for continuing operations from 1.9 per cent to 2.4 per cent and 0.1 per cent to
0.5 per cent for total sales. Profit and cash flow are not impacted.
Group sales, including VAT, from continuing operations increased by 2.4 per cent
to £15,517 million (2003 restated: £15,147 million). Underlying Group operating
profit before exceptional operating costs from continuing operations at £590
million (2003: £594 million), was slightly down on last year (0.7 per cent)
despite the disruption to stores and additional costs of the business
transformation programme during the year. Underlying Group profit before tax,
exceptional items and amortisation of goodwill at £675 million (2003: £695
million) was 2.9 per cent down on the previous year.
Profit before tax and after exceptional items and amortisation of goodwill was
£610 million(2003: £667 million) a decrease of 8.5 per cent. Last year's
exceptional items included a residual profit on disposal of Homebase of
£61 million. In the 2004/05 accounts exceptional items will include the profit
on disposal of Shaw's expected to be in excess of £250 million.
Sales and underlying operating profit before exceptional costs and amortisation
of goodwill were as follows:
Underlying operating
Sales profit
2004 2004
change change
£m % £m %
Continuing operations
Sainsbury's Supermarkets 15,297 2.2 564 (1.4)
Sainsbury's Bank 220 22.2 26 18.2
Total continuing operations 15,517 2.4 590 (0.7)
JS Developments 13 7
Shaw's Supermarkets (US) 2,709 (5.0) 138 (0.7)
Total 18,239 0.5 735 (2.3)
i. Turnover, throughout this review, in 2003 has been restated for the
change in accounting policy in accordance with FRS 5 Application
note G (see notes 1 and 2 on page 14).
ii. Turnover, throughout this review, is stated including VAT at Sainsbury's
Supermarkets of £1,077 million (2003: £1,043 million) and sales tax at
Shaw's Supermarkets of £21 million (2003: £22 million).
iii. All like-for-like sales in this review are Easter adjusted.
iv. Underlying operating profit and underlying operating margin throughout
this review are stated before exceptional operating costs of £68 million
(2003: £55 million) in Sainsbury's Supermarkets and before exceptional
operating costs of £nil (2003: £10 million) and amortisation of
goodwill of £11 million (2003: £13 million) in Shaw's Supermarkets.
v. Underlying profit before tax and underlying earnings per share
throughout this review are stated before exceptional items of
£54 million (2003: £15 million) and before amortisation of goodwill
of £11 million (2003: £13 million).
Sainsbury's Supermarkets
Sainsbury's Supermarkets' sales increased by 2.2 per cent to £15,297 million
(2003 restated: £14,967 million), and underlying operating profit was down by
1.4 per cent to £564 million (2003: £572 million). Like-for-like sales were down
0.2 per cent for the year. Dual running costs of £24 million (2003: £9 million)
were incurred in the supply chain in the year as the new depots were phased in.
Underlying operating profit of £564 million included the losses in Sainsbury's
to You, the company's home delivery service, which reduced from £29 million to
£15 million for the year. The business broke even, as planned, for the first
time in March 2004.
Underlying operating margins (VAT inclusive) for the year decreased from 3.8 per
cent to 3.7 per cent (VAT exclusive 4.1 per cent to 4.0 per cent). In the second
half, underlying operating margins reduced from 4.0 per cent to 3.5 per cent as
a result of a disappointing sales performance and increasing competitive
pressure.
Sainsbury's Bank
Sainsbury's Bank achieved net income growth of 40 per cent and increased profits
by 18 per cent to £26 million (2003: £22 million), despite substantial revenue
investment in growing the long-term customer base of the business. Adjusting for
a VAT credit (£2 million) in the current year, profit increased by 9 per cent.
Shaw's Supermarkets
Shaw's Supermarkets delivered a good profit performance in dollars, despite low
like-for-like sales growth of 0.4 per cent and an ambitious store development
programme. Underlying operating profit was 8.8 per cent higher at $234 million
(2003: $215 million) and the underlying operating margin continued to improve,
increasing from 4.9 per cent to 5.1 per cent.
JSD
JSD, the Group's specialist property development company, made an operating
profit of £7 million prior to its disposal in November 2003 (2003: £19 million).
Net interest payable
Net interest payable of £60 million was in line with the previous year, due to
interest on higher Group net borrowings being offset by increased capitalised
interest and lower interest rates.
Exceptional items
Exceptional operating costs from continuing operations amounted to £59 million
(2003: £55 million), due mainly to the costs of closure of supply chain depots.
In addition Safeway bid costs amounted to £9 million.
The JSD disposal was concluded in the year for a total consideration of £199
million and a loss on disposal of £3 million.
In total, surplus properties were sold in the year generating cash proceeds of
£152 million and a property profit of £17 million.
Total exceptional items amounted to a charge of £54 million, £39 million higher
than last year, as last year included the residual profit on disposal of
Homebase of £61 million.
Taxation
The Group's underlying tax charge at £206 million (2003: £206 million) gives an
effective underlying rate of 32.4 per cent (2003: 32.5 per cent) before
exceptional items and amortisation of goodwill.
Earnings per share and dividends
Underlying Group earnings per share before exceptional items and amortisation of
goodwill decreased by 3.3 per cent to 23.4 pence (2003: 24.2 pence). Basic
earnings per share decreased by 12.7 per cent to 20.7 pence (2003: 23.7 pence)
due mainly to higher profits on business disposals last year.
A final dividend of 11.36 pence per share is proposed, which is maintained at
the same level as last year. The total proposed dividend for the year is 15.69
pence which represents an increase of 0.7 per cent on last year. The decision to
maintain the final dividend at last year's level, rather than increasing it,
reflects the reduction in underlying earnings per share of 3.3 per cent and the
slight reduction in dividend cover (pre-exceptional items) from 1.51 to 1.45
times.
Post balance sheet events
The sale of Shaw's Supermarkets completed on 30 April 2004 and the Group has
received cash proceeds of £1,177 million (net of expenses). The profit on
disposal of Shaw's is estimated to be in excess of £250 million, and will be
reported in the 2004/05 accounts.
Following the completion of the sale, the Board has proposed a capital return of
35p per share to shareholders, representing approximately £680 million.
The remaining proceeds from the sale will be reinvested to develop Sainsbury's
core UK retail business, to support future growth and to strengthen Sainsbury's
market position.
The sale of Shaw's Supermarkets will lead to earnings per share dilution in
2004/05, but this will be mitigated by the proposed return of capital and share
consolidation together with the re-investment in growth opportunities in the UK.
On a proforma basis the Board expects the combination of the disposal, the
return of capital and the reinvestment of residual proceeds to be accretive.
Cash flow
The Group's net debt has increased by £684 million during the year to £2,088
million of which £554 million relates to the purchase of IT assets through the
acquisition of Swan.
Operating cash inflow remained strong at £847 million (2003: £1,070 million),
but was lower than last year due to an adverse working capital movement. Working
capital increased in the year by £221 million as a result of higher stock levels
in Sainsbury's Supermarkets, due to the timing of Easter and the expansion of
the General Merchandising activities. Creditors and other provisions decreased
due to lower incentive accruals and exceptional provisions required at the end
of the year.
Proforma net debt, at 27 March 2004, after the sale of Shaw's and the proposed
return of capital, reduces to £1,421 million and gearing decreases to 29 per
cent.
Group capital expenditure
Group capital expenditure for the year was £838 million (2003: £1,197 million).
Sainsbury's Supermarkets capital expenditure was substantially reduced to £572
million (2003: £1,035 million) and Shaw's capital expenditure was £248 million
(2003: £155 million). Group capital expenditure (excluding Shaw's) is forecast
to be £715 million for 2004/05.
The Group purchased Swan Infrastructure Holdings Limited, part of its IT
outsourcing arrangements, on 19 February 2004. IT services continue to be
outsourced to Accenture including the maintenance and operations of existing
systems and the development and delivery of new business critical systems and
systems infrastructure. The purchase resulted in an increase in fixed assets and
net debt of £554 million.
Balance sheet
Shareholders' funds increased by £101 million to £5,104 million and net debt has
increased by £684 million, of which £554 million relates to the purchase of the
IT fixed assets through the acquisition of Swan, to £2,088 million in the year
increasing Group gearing to 41 per cent (2003: 28 per cent). Return on Group
capital employed decreased from 11.5 per cent to 10.1 per cent in the year,
partly due to the timing of the acquisition of the Swan IT assets, the benefits
from which will accrue in 2004/05, and partly due to the second half performance
of Sainsbury's Supermarkets.
Pensions
An actuarial valuation of the Group's UK defined benefit schemes as at 29 March
2003 indicated a deficit of £161 million.
At 27 March 2004, the notional net deficit (after tax), under FRS 17, on the UK
defined benefit pension schemes was £441 million (2003: £574 million).
The Group is not currently required to account for the profit and loss effect of
FRS 17. If the Group were to do this today, however, the profit before tax
charge would increase by £9 million.
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 take place at 9:45am BST in our
Auditorium at 33 Holborn, London, EC1N 2HT. Breakfast will be available from
9:15am
If you would like to attend please telephone +44 (0) 20 7695 6431
or e-mail kally.wilson@sainsburys.co.uk
Strict security operates throughout the building and all external guests must be
notified to the above in advance. Please ensure that we are advised of any name
changes.
If you are unable to attend on the day, please make use of one of the following
options:
To view the slides of the Results Presentation and the Web-cast:
For the live event, go to www.j-sainsbury.co.uk from 9.30am BST onwards, further
instructions will be on the web-site. You will need to register for this event
in advance. This archived event will become available from 2.30pm BST on the day
in the form of a delayed web cast.
To listen to the Results Presentation:
Dial +44 (0) 20 7984 7582 ten minutes prior to the start of the presentation.
You will be asked to give your name and company details. You will then be placed
on hold and will hear music until the presentation starts. An archive of this
event will be available for a further seven days. If you would like to listen to
the archive of this call, please contact Kally Wilson on
kally.wilson@sainsburys.co.uk for details.
To participate in the afternoon Conference Call:
Dial +1 718 354 1158 or +44 (0) 20 7984 7582 at least ten minutes prior to the
start of the call. You will be asked to give your name and company. You will
then be placed on hold and will hear music until the presentation starts. An
archive of this event will be available for a further seven days. If you would
like to listen to the archive of this call, please contact Kally Wilson on
kally.wilson@sainsburys.co.uk for details.
To view the transcripts of any of the above activities:
Go to www.j-sainsbury.co.uk from 2.30pm BST on Thursday 20 May 2004.
Group profit and loss account
for the 52 weeks to 27 March 2004
Restated(i)
2004 2003
£m £m
Note
Turnover including VAT and sales tax(ii) 18,239 18,144
VAT and sales tax (1,098) (1,065)
Continuing operations 14,440 14,104
Discontinued operations 2,701 2,975
Turnover excluding VAT and sales tax 3 17,141 17,079
Cost of sales (including exceptional costs) (15,658) (15,688)
Gross profit 1,483 1,391
Group administrative expenses (including exceptional costs) (827) (717)
Continuing operations - operating profit before exceptional costs 2 590 594
Exceptional operating costs (68) (55)
Continuing operations - operating profit 522 539
Discontinued operations
- operating profit before exceptional costs
and amortisation of goodwill 2 145 158
- exceptional operating costs - (10)
- amortisation of goodwill (11) (13)
Group operating profit 3 656 674
Share of profit in joint ventures - 3
Profit/(loss) on sale of properties 4 17 (11)
Disposal of operations - discontinued 5 (3) 61
Profit on ordinary activities before interest 670 727
Net interest payable and similar items 6 (60) (60)
Underlying profit on ordinary activities before tax(iii) 675 695
Exceptional items (54) (15)
Amortisation of goodwill (11) (13)
Profit on ordinary activities before tax 610 667
Tax on profit on ordinary activities 7 (206) (206)
Profit on ordinary activities after tax 404 461
Equity minority interest (8) (7)
Profit for the financial year 396 454
Equity dividends 8 (301) (298)
Retained profit for the financial year 95 156
Basic earnings per share 9 20.7p 23.7p
Underlying earnings per share(iii) 9 23.4p 24.2p
Diluted earnings per share 9 20.6p 23.7p
Underlying diluted earnings per share(iii) 9 23.3p 24.1p
i. Restated for the change in accounting policy for turnover in accordance
with FRS 5 Application note G (see notes 1 and 2).
ii. Including VAT at Sainsbury's Supermarkets and sales tax at Shaw's
Supermarkets.
iii. Before exceptional items and amortisation of goodwill.
Group statement of total recognised gains and losses
for the 52 weeks to 27 March 2004
2004 2003
£m £m
Profit for the financial year 396 454
Currency translation differences on foreign currency net investments (10) (4)
Total recognised gains relating to the financial year 386 450
There is no material difference between the above profit for the financial year
and the historical cost equivalent (2003: £9 million difference as a result of
the realisation of a property revaluation gain of previous years).
Reconciliation of movements in Group equity shareholders' funds
for the 52 weeks to 27 March 2004
2004 2003
£m £m
Profit for the financial year 396 454
Equity dividends (301) (298)
95 156
Currency translation differences (10) (4)
Proceeds from ordinary shares issued for cash 16 3
Net movement in equity shareholders' funds 101 155
Opening equity shareholders' funds 5,003 4,848
Closing equity shareholders' funds 5,104 5,003
Group balance sheet
at 27 March 2004 and 29 March 2003
2004 2003
£m £m
Fixed assets
Intangible assets 208 226
Tangible assets 8,214 7,540
Investments 116 112
8,538 7,878
Current assets
Stock 753 800
Debtors 319 297
Sainsbury's Bank's current assets 1,329 1,530
Sainsbury's Bank's debtors due after more than one year 1,170 867
Investments 19 20
Cash at bank and in hand 465 639
4,055 4,153
Creditors: amounts falling due within one year
Sainsbury's Bank's current liabilities (2,306) (2,237)
Other (2,600) (2,537)
(4,906) (4,774)
Net current liabilities (851) (621)
Total assets less current liabilities 7,687 7,257
Creditors: amounts falling due after more than one year (2,194) (1,885)
Provisions for liabilities and charges (308) (300)
Total net assets 5,185 5,072
Capital and reserves
Called up share capital 486 484
Share premium account 1,438 1,424
Revaluation reserve 22 22
Profit and loss account 3,158 3,073
Equity shareholders' funds 5,104 5,003
Equity minority interest 81 69
Total capital employed 5,185 5,072
Group cash flow statement
for the 52 weeks to 27 March 2004
2004 2003
Note £m £m
Net cash inflow from operating activities 10 847 1,070
Dividend received from joint venture - 8
Returns on investments and servicing of finance
Interest received 12 67
Interest paid (71) (108)
Interest element of finance lease payments (29) (21)
Net cash outflow from returns on investments and servicing
of finance (88) (62)
Taxation (183) (224)
Capital expenditure and financial investment
Purchase of tangible fixed assets (801) (1,169)
Purchase of IT assets (187) -
Sale of tangible fixed assets 152 130
Purchase of intangible fixed assets - (3)
Net cash outflow from capital expenditure and financial investment (836) (1,042)
Acquisitions and disposals
Repayments of loans to joint ventures - 27
Investment in joint ventures and fixed asset investments (5) (1)
Acquisition of subsidiaries (23) -
Investment in Sainsbury's Bank by minority shareholder 4 -
Proceeds from disposal of operations 185 -
(Payments)/proceeds relating to disposal of other fixed
asset investments (28) 184
Net cash inflow for acquisitions and from disposals 133 210
Equity dividends paid to shareholders (300) (288)
Net cash outflow before use of liquid resources and financing
Financing (427) (328)
Issue of ordinary share capital 16 3
Increase/(decrease) in short-term borrowings 305 (88)
Increase in long-term borrowings 2 550
Increase in finance leases - 151
Capital element of finance lease payments (41) (5)
Net cash inflow from financing 282 611
(Decrease)/increase in net cash (145) 283
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in net cash (145) 283
Increase in debt (307) (462)
Assumption of Swan loan notes (314) -
Loans acquired with subsidiaries (4) -
Movement in finance leases (31) (156)
Exchange adjustments 117 87
Movement in net debt in the year 11 (684) (248)
Net debt at the beginning of the year 11 (1,404) (1,156)
Net debt at the end of the year 11 (2,088) (1,404)
Notes to the results
1. Accounting policies
These financial statements have been prepared using the same accounting policies
as set out in the Annual Report and Financial Statements for the 52 weeks ended
29 March 2003 with the exception of the accounting policy for turnover following
the issue of FRS 5 Application note G ('FRS 5 ANG') which provides detailed
guidance on revenue recognition.
In accordance with FRS 5 ANG, sales through retail outlets are shown net of the
cost of Nectar reward points issued and redeemed, staff discounts, vouchers and
sales made on an agency basis. Previously, these costs were reported as an
expense in cost of sales. FRS 5 ANG requires that only commission earned from
sales through concessions can be recognised in turnover, whereas previously
gross concession turnover was included as sales.
The effect of these changes in accounting policy is to reduce turnover in 2004
by £280 million (2003: £351 million) and to reduce cost of sales
correspondingly.
The financial year represents the 52 weeks ended Saturday 27 March 2004 (prior
year the 52 weeks ended Saturday 29 March 2003).
2. Sales and underlying operating profit
Sales and underlying operating profit (before exceptional costs and amortisation
of goodwill) were as follows:
Sales(i) Underlying
operating profit(iii)
Restated(ii)
2004 2003 2004 2003
£m £m £m £m
Continuing operations
Sainsbury's Supermarkets 15,297 14,967 564 572
Sainsbury's Bank 220 180 26 22
Total continuing operations 15,517 15,147 590 594
JS Developments 13 145 7 19
Shaw's Supermarkets (US) 2,709 2,852 138 139
Discontinued operations 2,722 2,997 145 158
Total 18,239 18,144 735 752
i. Includes VAT at Sainsbury's Supermarkets of £1,077 million (2003:
£1,043 million) and sales tax at Shaw's Supermarkets of £21 million
(2003: £22 million).
ii. Prior year comparative sales have been restated in order to comply with
FRS 5 ANG and are now shown net of Nectar reward points issued and
redeemed, staff discounts, vouchers and sales made on an agency basis.
iii. Profit before exceptional operating costs of £68million (2003:
£55 million) in Sainsbury's Supermarkets and £nil million (2003:
£10 million) in Shaw's Supermarkets and amortisation of goodwill of £11
million (2003: £13 million) in Shaw's Supermarkets.
3. Analysis of operating profit
2004 2003
Restated(i) Restated(i)
Continuing Total
Continuing Discontinued Total operations Restated(i)
operations operations Discontinued
£m £m £m £m operations £m
£m
Turnover 14,440 2,701 17,141 14,104 2,975 17,079
Cost of sales (13,147) (2,459) (15,606) (12,920) (2,717) (15,637)
Exceptional cost of sales (52) - (52) (51) - (51)
Gross profit 1,241 242 1,483 1,133 258 1,391
Administrative expenses (703) (97) (800) (590) (100) (690)
Exceptional administrative
Expenses (16) - (16) (4) (10) (14)
Amortisation of goodwill - (11) (11) - (13) (13)
Group administrative expenses
(108) (827)
(719) (594) (123) (717)
Operating profit 522 134 656 539 135 674
i. Restated for change in accounting policy in accordance with FRS 5 (ANG)
(see notes 1 and 2).
The exceptional operating costs comprise the following:
2004 2003
£m £m
Exceptional cost of sales - Sainsbury's Supermarkets 52 51
Exceptional administrative expenses :
Sainsbury's Supermarkets 7 4
Safeway bid costs 9 -
Shaw's Supermarkets - 10
Total exceptional operating costs 68 65
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 depot
and store closure costs and reorganisation costs.
At Shaw's Supermarkets, the exceptional costs in 2003 relate to costs associated
with the acquisition of stores from the liquidator of Ames.
4. Profit/(loss) on sale of properties
2004 2003
£m £m
Profit/(loss) on disposal of Sainsbury's Supermarkets' properties 18 (7)
Loss on disposal of Shaw's Supermarkets' properties (1) (4)
17 (11)
5. Disposal of operations-discontinued
On 27 November 2003 the Group agreed the sale of J Sainsbury Development Limited
('JSD') and associated properties held within Sainsbury's Supermarkets Ltd ('
associated SSL properties') for a total consideration of £167 million.
On 26 March 2004 the Group sold the remainder of JSD's properties together with
associated SSL properties for a total consideration of £32 million.
An overall loss of £3 million was realised on the sales.
2004 2003
£m £m
Loss on disposal of JSD and associated properties (3) -
Profit on disposal of investment in Homebase - 61
(3) 61
6. Capitalised interest
2004 2003
£m £m
Capitalised interest included in net interest payable 26 22
7. Tax on profit on ordinary activities
2004 2003
£m £m
The tax charge based on the profit for the year is:
UK Corporation tax at 30 per cent (2003: 30 per cent) 165 173
Over provision in prior periods - UK (9) (9)
156 164
Deferred tax 24 23
Overseas tax - current 33 43
Overseas tax - deferred 6 (4)
Taxation on exceptional items - current (15) (11)
Taxation on exceptional items - deferred 2 (9)
Tax on profit on ordinary activities 206 206
8. Dividends
2004 2003 2004 2003
pence pence £m £m
per share per share
Interim 4.33 4.22 83 81
Final proposed 11.36 11.36 218 217
15.69 15.58 301 298
The final dividend will be paid on 23 July 2004 to shareholders on the register
at the close of business 28 May 2004. The shares will become ex-dividend on 26
May 2004.
9. 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 potential dilutive ordinary
shares.
2004 2003
million million
Weighted average number of shares in issue 1,913.8 1,911.9
Weighted average number of dilutive share options 4.4 7.4
Total number of shares for calculating diluted earnings per share 1,918.2 1,919.3
The alternative measure of earnings per share is provided by excluding the
effect of exceptional items and amortisation of goodwill to reflect the Group's
underlying trading performance.
2004 2003
Per Per
share share
Earnings amount Earnings amount
£m pence £m pence
Basic earnings 396 20.7 454 23.7
Exceptional items net of tax:
Included in operating profit 55 2.9 45 2.4
(Profit)/loss on sale of properties (17) (0.9) 11 0.6
Disposal of operations 3 0.1 (61) (3.2)
Amortisation of goodwill 11 0.6 13 0.7
Underlying earnings before exceptional items and 448 23.4 462 24.2
amortisation of goodwill
Diluted earnings 396 20.6 454 23.7
Underlying diluted earnings before exceptional items and
amortisation of goodwill
448 23.3 462 24.1
10. Reconciliation of operating profit to net cash inflow from operating
activities
2004 2003
£m £m
Group operating profit 656 674
Depreciation 423 393
Amortisation of intangible assets 13 18
Loss on sale of equipment, fixtures and vehicles 9 9
Increase in stocks (116) (62)
Increase in debtors (6) (20)
(Decrease)/increase in creditors and provisions (99) 85
Increase in Sainsbury's Bank current assets (102) (204)
Increase in Sainsbury's Bank current liabilities 69 177
Net cash inflow from operating activities 847 1,070
11. Analysis of net debt
At Cash Acquisition Other Exchange At 27
30 March flow of non-cash movements March
2003 subsidiaries movements 2004
£m £m £m £m £m £m
Current asset investments 20 (1) - - - 19
Cash at bank and in hand 639 (158) - - (16) 465
Bank overdrafts (14) 14 - - - -
645 (145) - - (16) 484
Due within one year:
Borrowings (162) (305) - - 105 (362)
Finance leases (37) (4) - - - (41)
Due after one year:
Borrowings (1,564) (2) (4) (314) 5 (1,879)
Finance leases (286) 45 - (72) 23 (290)
(2,049) (266) (4) (386) 133 (2,572)
Total net debt (1,404) (411) (4) (386) 117 (2,088)
12. Post Balance Sheet Event
Sale of Shaw's Supermarkets Inc.
On 26 March 2004 the Group signed a conditional contract to sell its US
supermarkets business ('Shaw's') to Albertson's Inc. for a consideration of
$2,475 million, including $368 million in assumed lease liabilities.
The sale, which was subject to a price adjustment mechanism and competition
clearance, completed on 30 April 2004, when proceeds of £1,177 million (net of
expenses) were received by the Group.
The profit on disposal is estimated to be in excess of £250 million and will be
recognised in the 2004/05 accounts.
Of the total proceeds, the Company proposes to return 35 pence per share to
shareholders representing approximately £680 million.
The trading results of Shaw's have been included within discontinued operations
as, under FRS 3, the sale of Shaw's represents a material reduction in the
Group's operating facilities in the US market.
A proforma statement of net assets of the Group as at 27 March 2004, reflecting
the sale of Shaw's and the share buy-back is as follows:
Existing Deduct Sales Share Remaining
Group Shaw's proceeds buy-back Group
£m £m £m £m £m
Tangible fixed assets 8,214 781 7,433
Intangible fixed assets 208 160 48
Fixed asset investments 116 10 106
Stock 753 156 597
Debtors and other assets 2,818 74 2,744
Cash and current asset investments 484 51 1,177 (680) 930
Debt (2,572) (221) (2,351)
Net Debt (2,088) (170) 1,177 (680) (1,421)
Other creditors and provisions (4,836) (242) (4,594)
Net assets 5,185 769 1,177 (680) 4,913
Equity minority interest (81) (81)
Equity shareholders' funds 5,104 769 1,177 (680) 4,832
13. Financial statements
The financial information is derived from the full Group Financial Statements
for the 52 weeks to 27 March 2004 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 in June.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 21 minutes ago Next
- 50 minutes ago Wizz Air Holdings
- 1 hour ago RHI Magnesita N.V. (DI)
- 1 hour ago London Stock Exchange Group
- 1 hour ago London Stock Exchange Group