Final Results
Sainsbury(J) PLC
21 May 2003
21st May 2003
J Sainsbury plc - Preliminary Results for the 52 weeks ending 29 March 2003
Group Highlights
• Underlying profit before tax of £695 million up 10.8% (2002: £627 million)
1
• Profit before tax of £667 million up 16.8% (2002 £571 million)
• Proposed final dividend per share of 11.36 pence up 5%
• Underlying earnings per share of 24.2 pence up 12.6% (2002: 21.5 pence)1
• Basic earnings per share of 23.7 pence up 24.1% (2002: 19.1 pence)
Sainsbury's Supermarkets
• Total sales of £15,301 million up 3.0% (2002: £14,860 million)2
• LFL Sales up 2.3% (including petrol)3
• Underlying operating profit of £572 million up 13.3% (2002: £505 million)4
• Cost savings of £210 million delivered. On track to achieve £700 million
by March 2004
• Cumulative cost savings extended to £960 million by March 2005
• Store, IT and supply chain modernisation on track
• 10,000 jobs created to improve customer service
Sainsbury's to You
• Sales up 71% year on year significantly out-performing online grocery
market
• On track to break even in second half of 2003/04
Sainsbury's Bank
• Accelerated growth strategy
• Customer numbers up 29%
Shaw's
• Continued strong performance
• Sales of $4,436 million up 1.2% (2002: $4,385 million)2
• LFL sales growth up 0.9%3
• Underlying operating profit up 9.7 percent to $215 million (2002: $196
million)4
1 Before operating exceptional costs, non-operating exceptional items
and amortisation of goodwill
2 Including VAT in Sainsbury's Supermarkets Limited and sales tax in
Shaw's
3 Easter adjusted
4 Before exceptional operating costs and amortisation of goodwill
Sir Peter Davis, group chief executive said:
'We have made sound progress and continued to deliver on our promises during the
past year despite increasingly tougher market conditions. We are reporting a
second consecutive year of double-digit growth in underlying Group profit before
tax at 10.8 per cent and an increase in underlying operating profit growth for
Sainsbury's Supermarkets of 13.3 per cent. In the US, Shaw's has had an
excellent year despite difficult economic conditions, achieving a 9.7% increase
in underlying operating profit.
'In the UK we have made significant achievements in modernising our business
through our transformation programme and continued to deliver an improved sales
performance despite more normal market growth following the previous year's
buoyant conditions.
'We delivered £210 million of cost savings, £10 million above target giving a
cumulative total of £460 million. We are confident we can deliver £250 million
of savings in 2003/04 exceeding our March 2004 target of £700 million and also
expect further savings of at least £250 million in 2004/05 to extend the
cumulative total to £960 million. UK capital expenditure peaked at £1,035
million due to the high level of Business Transformation activity and will
reduce to around £800 million for 2003/04. Shaw's capital expenditure in 2003/04
will increase due to a significant increase in sales area and we estimate Group
capital expenditure to be £1.1 billion.
'The Group has increased its return on capital employed from 11.1 per cent to
11.5 per cent in a year of significant capital investment. Overall we remain
confident we are making real progress across the Group to achieve our targets'
Sir George Bull, chairman said:
'We have delivered another year of major progress against our key corporate
objectives delivering Group underlying profit before tax growth in excess of 10
per cent for the second year running. As a result the Board proposes a final
dividend of 11.36 pence per share, which is an increase of 5% over last year.
The total proposed dividend for the year is 15.58 pence, which represents an
increase of 5% on last year and dividend cover of one and half times. This
increase reflects the Directors' aim to continue to deliver double-digit profit
growth during the coming year and, if achieved, to increase the dividend by 5%,
thereby recognising the need to restore dividend cover.'
Sainsbury's Supermarkets - Quality, Choice and Service at Competitive Price
Differentiation in terms of Quality, Choice and Service at competitive price is
the focus of our brand. We know our customers want choice including superior
ranges and 70 per cent regularly buy our biggest sub brand, Taste the
Difference, made with extra time, care and attention.
During the past year we have continued to win important industry awards
underlining our product quality such as Fresh Produce Retailer of the Year, Wine
Retailer of the Year and the Honest Food Award. We were elected the Soil
Association's Organic Supermarket of the Year and source more organic products
from the UK than the industry average. We continue to support British producers
and overall we source over 90 per cent of fresh foods that can be sourced in the
UK from the UK.
We match competitors on the price of basic everyday lines and score well in the
industry's most respected basket survey - the Grocer 33. The survey also tracks
availability and service and again we achieve consistently high scores as we
offer customers a much wider choice of food and grocery products in our stores.
In April 2003 we launched a major service initiative, Scan and Pack, creating
10,000 new jobs to significantly improve our check-out service. Early results
are encouraging with significant reductions in queue lengths already achieved.
Non-Foods
Developing our non-food offer to meet our customer needs is another priority and
we have strengthened our specialist team this year. Customers want us to focus
on food but also develop non-food ranges the Sainsbury's way - offering quality
and choice at good value prices. Our store portfolio has changed considerably
over recent years as we have introduced convenience stores and increased the
number of larger stores. We now have 152 stores over 40,000 sq ft. Extensions,
format development and new stores all provide additional space for exciting new
non-food ranges starting this autumn.
We are committed to growing our own Health and Beauty offer. During the year we
introduced Active Naturals, our first major own label health, beauty and
household range with products containing at least two natural ingredients. We
also successfully tested an enhanced Sainsbury's offer by increasing our range
to 6,000 products and are now adding new own-label and international brands. To
minimise customer disruption roll-out is being combined with that of the new
non-food ranges.
Nectar
In September 2002 we launched our new customer loyalty programme with
Barclaycard, BP and Debenhams. Just two months after launch Nectar became the
UK's largest loyalty programme with over 11 million active users.
Customers prefer Nectar to our previous Reward Card, participation is higher and
cross party redemptions - a key sales driver - have increased. Collector
numbers have continued to grow with the addition of Threshers. The offer will
be strengthened further as the extended sponsor group of Vodafone, Ford Motor
Company and Adams Childrenswear come on board providing more opportunities to
earn points. Additional sales build up will come through over time.
Nectar also provides a wealth of data to help shape our offer and target
potential new customers. It has helped us increase our direct marketing to an
additional one million people.
Reinvigorating our Stores
During the year we opened 15 new supermarkets and 24 Locals. We are also well
advanced with our store reinvigoration programme. This year we delivered 40
refurbishments and 29 extensions bringing the cumulative total to over 230
stores. Cumulative ultimate sales uplifts of 7 per cent and 23 per cent
respectively have been achieved resulting in post tax real returns above our
cost of capital. In total we added 850,000 sq ft of selling space. The
reinvigoration activity is planned to reduce in 2003/04 to 10 refurbishments and
23 extensions. We have gained many insights from our work on stores and
continue to adapt the programme going forward, implementing learnings and
benefits across our estate and testing new concepts and ranges in line with
market conditions.
Our Local format is well established with 57 stores and the convenience sector
provides a real opportunity to create value. We have also used selected stores
as test beds for new concepts and ranges. Our store at Hazelgrove (Manchester)
which trialled technology led service initiatives won Retail Week's 'Retail
Launch of the Year' award and we are now rolling out some key elements across
our network. In April 2003 we opened Sainsbury's Market at Bluebird on London's
Kings Road where we trial new ranges and showcase our passion for food whether
fresh, regional or seasonal.
Modernising Information Technology Systems
IT is a major enabler as we upgrade and modernise our company and we have made
considerable progress updating our infrastructure in association with Accenture.
We installed new electronic point-of-sale equipment and in-store computer
systems in 318 stores and 132 petrol filling stations in 2002/03 and have
continued this programme in the new financial year. Averaging 18 conversions a
week we now have 395 stores and 142 petrol stations using the new technology and
believe this is the fastest such roll-out by a UK retailer. Around 100,000
colleagues will also have been retrained when the programme is completed this
summer. We are now replacing core systems in our buying, ranging and
merchandising departments.
Driving Cost Efficiencies
We are on track to deliver in excess of our increased total of £700 million cost
savings by March 2004. We achieved savings of £210 million this year giving a
cumulative total of £460 million and are confident we will deliver £250 million
of savings in 2003/04. Further cost savings of at least £250 million are now
expected in 2004/05 extending our cumulative total to £960 million. Savings are
being achieved across the business helping us to become a more efficient and
competitive operator in the long term. We are also reviewing our Business
Centre operation as the level of resource for our Business Transformation
reduces and new systems and processes take effect. As the level of cost savings
increase and transformation revenue costs reduce, operating margins will
continue to improve towards the levels of our major competitors. In 2002/03
operating margins before Sainsbury's to You increased by 0.2 per cent to 4.0 per
cent (VAT inclusive) and 4.3 per cent (VAT exclusive).
Rebuilding our Supply Chain
We are implementing unprecedented changes in our supply chain. Four new
automated depots coming on stream along with new transport and warehouse
management systems, will improve service to stores. Our 700,000 sq ft centre in
Hams Hall (West Midlands) and a 690,000 sq ft Waltham Point (Hertfordshire)
centre will each serve 80 stores. Our 550,000 sq ft Stoke (Staffordshire)
centre for slower-moving products already serves 100 stores. It will deliver to
250 stores by the end of the year with the remainder of our estate served by our
new Hoddesdon (Hertfordshire) depot, opening this autumn.
By March 2004 our new facilities will deliver 60% of our total network volume
giving us a much more efficient and competitive supply chain.
Sainsbury's to You
We have strengthened our position in the UK online grocery market this year with
sales up 71% year on year and like-for-like sales in existing postcodes up 41%.
Independent data shows we have taken share from key competitors. We launched
Sainsbury's to You in a further 29 stores bringing the nationwide total to 82
covering around 72% of UK households. We improved our website in July 2002 and
higher volumes and better slot utilisation have both contributed to a 27%
reduction in fulfilment costs per order. We are confident we will continue to
grow market share and break even in the second half of 2003/04.
Sainsbury's Bank
Six months ago we announced a major decision to accelerate the growth of our
Bank by maintaining profit levels to re-invest more in growth. We have
continued to offer simple, consistently excellent value and results are very
encouraging with a 29 per cent increase in our customer base year on year and
with many customers taking more than one product. We have boosted sales with a
number of cross category promotions, such as travel insurance on bottles of sun
cream, car insurance on petrol vouchers and a pet insurance promotion with the
launch of the '101 Dalmatians' video and DVD. We also embarked on our first
national TV advertising campaign, featuring Jamie Oliver, which ran alongside
in-store promotion.
Property and JS Developments
Our property division is focused on enhancing our store estate. As a result of
this focus we announced in March 2003 our intention to sell JSD, our project
based property development company. We also continue to look at ways of
unlocking value from our property portfolio. We are redeveloping our former
Stamford Street sites and in March 2003 announced the sale of four remaining
properties on London's South Bank to Land Securities for over £38 million.
Shaw's Supermarkets
Shaw's continues to be a strong performer in the US despite difficult economic
conditions. With total sales up 1.2 per cent (in dollars) and like-for-like
sales up 0.9 per cent (Easter adjusted), performance is in the upper quartile
compared to other US food retailers.
During the year we improved 32 of our 185 stores and successfully bid for 17
former Ames Department Stores. In 2003/04 we plan to increase selling space by
15 per cent. Our Prudential Center store opened in April 2003 and is our first
flagship store in central Boston and focuses on creating a dynamic fresh foods
department with a strong emphasis on food-to-go in our LaCarte Department. This
ongoing development programme will consolidate our position as New England's
second largest food retailer.
Shaw's now has over 5.4 million Card-holders, capturing 89% of all sales. Over
70% of customers use a Rewards Card, making the programme one of the top US
performers. Since September 2002, using our experience in the UK we have also
mined customer data and produced customer profiles to implement targeted
marketing activities increasing promotional effectiveness and tailoring product
ranges and choice.
We are also sharing the development of cost efficient processes. In the UK we
have saved around £15 million by purchasing a range of goods through on-line
auctions via the Global Net Xchange (GNX). In early 2003 Shaw's made its first
purchase through a GNX auction and has now conducted 39 on-line negotiations.
Looking Forward
The coming year will be a period of huge change in our UK Business
Transformation Programme and our aim remains to balance profit growth with sales
growth while investing in our business. Following the softer sales performance
in Quarter four we have taken action to improve sales with a significant
investment in customer service creating 10,000 new jobs, today launched a major
campaign on fresh food consolidating our lead in this area and will be following
with our non-food launch in the autumn.
It will take a little time to show the full benefit of these activities and in
the second half of this quarter we also face a challenge to beat our outstanding
performance last year with the Royal Jubilee and successful sponsorship of the
England football team in the World Cup. We will provide a full trading update on
the first quarter at the AGM on July 23rd.
We believe we have a strong case for being allowed to bid for Safeway as our
differentiated offer of quality products and greater choice at competitive
prices offers a real alternative to price based operators. We believe the next
few months could see significant change in the food retailing market and we are
poised to take advantage.
Financial review
Group sales, including VAT and sales tax, from continuing operations were
£18,495 million
(2002: £18,198 million), an increase of 1.6 per cent.
Total underlying operating profit (before exceptional operating costs and
amortisation of goodwill) from continuing operations at £752 million (2002: £679
million), was 10.8 per cent up on the previous year, driven by a 13.3 per cent
increase in UK supermarket's profits. This growth was achieved despite an
adverse dollar exchange movement and, as predicted, profits maintained at £22m,
the same level as last year, in Sainsbury's Bank, resulting from the Board's
decision to invest in the accelerated growth strategy.
Underlying profit before tax, exceptional items and amortisation of goodwill at
£695 million
(2002: £627 million) was 10.8 per cent up on the previous year, the second year
of double digit profit growth.
Profit before tax, after exceptional items and amortisation of goodwill was
£667million
(2002: £571 million) an increase of 16.8 per cent.
Results from continuing operations
Sales and underlying operating profit were as follows:
Sales 1 Underlying
operating profit 2
2003 2003
£m % change £m % change
Continuing operations
Sainsbury's Supermarkets 15,301 3.0 572 13.3
Sainsbury's Bank 183 10.9 22 -
JS Developments 145 29.5 19 26.7
Shaw's Supermarkets (US) 2,866 (6.4) 139 1.5
Total 18,495 1.6 752 10.8
1 Includes VAT at Sainsbury's Supermarkets of £1,043 million and sales tax at
Shaw's Supermarkets of £22 million.
2 Profit before exceptional operating costs of £55 million in Sainsbury's
Supermarkets, £10 million in Shaw's Supermarkets and amortisation of
goodwill of £13 million in Shaw's Supermarkets. A detailed profit and loss
account is shown on page 8.
* All like-for-like sales are Easter adjusted.
Sainsbury's Supermarkets' sales increased by 3.0 per cent to £15,301 million
(2002: £14,860 million). Like-for-like sales, including petrol*, were up 2.3 per
cent for the year.
A total of £210 million in cost efficiencies, £10 million above target, were
delivered in the year, in addition to the £90 million and £160 million in the
last two years. The Board are confident of achieving £250 million of savings in
2003/04, thereby delivering in excess of the targeted
£700 million by March 2004. Further cost savings of at least £250 million are
expected in 2004/05.
Sainsbury's to You, the company's home delivery service, has improved its
results due to the acquisition and retention of new customers increasing sales,
lower customer acquisition costs and improved operating efficiencies. As a
result, the loss reduced to £29 million this year from £50 million last year.
Sainsbury's Supermarkets' underlying operating profit was up by 13.3 per cent to
£572 million (2002: £505 million). Operating margin (VAT inclusive, excluding
Sainsbury's to You) increased from 3.8 per cent to 4.0 per cent (VAT exclusive,
excluding Sainsbury's to You, 4.1 per cent to 4.3 per cent). Going forward, as
the level of cost savings increases and the revenue costs associated with the
transformation programme reduce, the Board expects operating margins to
continue to improve towards the levels of the company's major competitors.
Shaw's Supermarkets had another good year, underlying operating profit was up
9.7 per cent to $215 million (2002: $196 million), but up 1.5 per cent in
sterling terms. Like-for-like sales,* up 0.9 per cent, was a satisfactory
performance in difficult economic conditions. The store development programme, a
significant contribution from the ex-Grand Union stores and excellent cost
control, all contributed to strong profit growth.
Underlying operating margin continues to improve, increasing from 4.5 per cent
to 4.8 per cent.
Sainsbury's Bank achieved net income growth of 31.1 per cent and maintained
operating profits at £22 million (2002: £22 million), after substantial revenue
investment in growing the long-term customer base of the business. Adjusting for
a VAT credit in 2002, underlying profit increased by 10.0 per cent.
JS Developments made an operating profit of £19 million (2002: £15 million).
Net interest payable of £60 million was £11 million higher than the previous
year, due to higher Group net borrowings. Capitalised interest increased to £22
million (2002: £16 million).
UK exceptional business transformation costs amounted to £55 million, including
provisions for the costs of closure of two major depots. Over the last two
years, these costs have been in line with the Board's original indications of
between £35 million and £50 million per annum. The exceptional operating costs
of £10 million in Shaw's relate to the acquisition of stores from the liquidator
of Ames in the year, being asset write offs and onerous lease provisions in
respect of replacement stores.
The Homebase disposal was concluded in the year with the sale of the remaining
equity investment and the redemption of the loan notes for total proceeds of
£184 million, which generated a net profit of £61 million. Total gross proceeds
in excess of £1 billion have been generated from the sale of Homebase and the
total profit on disposal was £125 million.
Surplus properties were sold in the year generating cash proceeds of £130
million and a property loss of £11 million.
Net exceptional operating costs and non-operating exceptional items amount to
£15 million compared to £42 million last year.
The Group's underlying tax charge (before exceptional items and amortisation of
goodwill) at £226 million (2002: £210 million), gives an underlying rate of 32.5
per cent (2002: 33.5 per cent).
Underlying earnings per share, before exceptional items and amortisation of
goodwill, increased by 12.6 per cent to 24.2 pence (2002: 21.5 pence). Basic
earnings per share increased by 24.1 per cent to 23.7 pence (2002: 19.1 pence).
A final dividend of 11.36 pence per share is proposed, which represents an
increase of 5.0 per cent over last year. The total proposed dividend for the
year is 15.58 pence which represents an increase of 5.0 per cent on last year
and dividend cover of 1.52 times. This increase reflects the Directors' aim to
continue to deliver double digit profit growth during the coming year and, if
achieved, to increase the dividend by 5 per cent thereby recognising the need to
restore dividend cover.
The Group's net debt has increased by £248 million during the year, to £1,404
million. Operating cash inflow remained strong at £1,070 million. Underlying
EBITDA, excluding exceptional items, increased by 10.3 per cent, virtually in
line with earnings. Working capital was broadly flat for the year, compared to
an inflow of £78 million in the previous year, because of the timing of Easter
and the introduction of new lines.
Group capital expenditure for the year was £1,197 million (2002: £1,159
million). Sainsbury's Supermarkets' capital expenditure was £1,035 million
(2002: £1,023 million). Expenditure over the last two years has been high due
to Business Transformation activities, primarily increased expenditure on
refurbishments and the supply chain. On refurbishments, capital expenditure
reduced from £230 million in 2002 to £93 million in 2003 and will be lower in
2004. On the supply chain £374 million has been invested over the last two
years. This is a long term investment. Four new fulfilment centres will be open
by the end of 2004 and significant operating efficiencies will be delivered in
2005. In the current financial year, Sainsbury's Supermarkets' capital
expenditure will be reduced to around £800 million. Shaw's capital expenditure
was £155 million (2002: £133 million), excluding the £48 million cost of
acquiring stores from the liquidator of Ames, and will increase in 2004 as a
result of significant additions of new space during the year. Group capital
expenditure is forecast to be £1.1 billion for 2004.
Shareholders' funds increased by £155 million to £5,003 million. Group gearing
increased to 28 per cent (2002: 24 per cent). Return on Group capital employed
increased from 11.1 per cent to 11.5 per cent in a year of major capital
investment.
Pensions
The Board has been proactive in the area of pensions and has taken a number of
decisions to reduce pension fund liabilities and address the potential fund
deficit. These include additional Company contributions of £15 million in 2002
and 2003, closing the defined benefit final salary schemes to new members and
introducing defined contribution stakeholder schemes. Additionally, this year
the Company has offered existing members of the defined benefit final salary
schemes the option of increasing their contributions from 4.25 per cent to 7.00
per cent, or moving to a career average arrangement at the current 4.25 per cent
contribution level. The Company's remuneration policy, now reinforced, is to
limit budgets for salary and wage increases to RPI, relying on non-pensionable
bonus payments and share based incentive schemes to provide additional
performance related rewards. The Board believes these actions will significantly
reduce pension liabilities while continuing to achieve the necessary motivation
of colleagues and offering them competitive opportunities to secure their
financial well-being for retirement.
An actuarial valuation of the Group's UK schemes, is currently being prepared,
which the Board believes will provide an appropriate basis for decisions to be
made about funding for these schemes.
At 29 March 2003, the notional deficit, net of deferred tax, of the Group's
defined benefit pension schemes, under FRS 17, was £607 million (2002:
£257million). The increase is due to weak global stock markets and lower
discount rates on AA corporate bonds. Since the year end the net deficit has
reduced by 10 per cent to £543 million due to improved asset values.
The Group is not currently required to account for the profit and loss effect of
FRS 17. The underlying FRS 17 (before settlement and curtailment gains) profit
and loss account charge for the year would have been £13 million higher than the
normal pension cost.
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 0945 BST in our Auditorium at
33 Holborn, London, EC1N 2HT. Coffee and breakfast will be available from 0915
BST.
If you would like to attend please telephone 020 7695 6227. 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 0935 BST by dialling +44 (0) 1452 542 305. You will be asked to
give your name and company. You will then be placed on hold and music will be
heard. 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) 1452
55 00 00, using the pin number 113614#
To view the slides and the web cast of the presentation go to
www.j-sainsbury.co.uk. The slides will be available from 0930 BST and the web
cast will go live from 1530 BST.
A video of an interview with Sir Peter Davis will be available to view from 0700
BST on the morning of the announcement at www.j-sainsbury.co.uk. The audio and
text transcript of this interview will also be available for download.
Group profit and loss account
for the 52 weeks to 29 March 2003
2003 2002 %
Note £m £m Increase
Turnover including VAT and sales taxA 18,495 18,206 1.6
VAT and sales tax (1,065) (1,044)
Continuing operations 17,430 17,154
Discontinued operations - 8
Turnover excluding VAT and sales tax 3 17,430 17,162 1.6
Cost of sales (including exceptional costs) (16,039) (15,905)
Gross profit 1,391 1,257
Group administrative expenses (including exceptional costs) (717) (632)
Continuing operations - operating profit before exceptional costs and 2
amortisation of goodwill
752 679 10.8
Exceptional operating costs (65) (38)
Amortisation of goodwill (13) (14)
Continuing operations - operating profit 674 627
Discontinued operations - operating loss - (2)
Group operating profit 3 674 625
Share of profit/ (loss) in joint ventures 3 (1)
Loss on sale of properties 4 (11) (4)
Disposal of operations - discontinued 5 61 -
Profit on ordinary activities before interest 727 620
Net interest payable and similar items 6 (60) (49)
Underlying profit on ordinary activities before taxB 695 627 10.8
Exceptional items (15) (42)
Amortisation of goodwill (13) (14)
Profit on ordinary activities before tax 667 571 16.8
Tax on profit on ordinary activities 7 (206) (200)
Profit on ordinary activities after tax 461 371
Equity minority interest (7) (7)
Profit for the financial year 454 364
Equity dividends 8 (298) (285)
Retained profit for the financial year 156 79
Basic earnings per share 9 23.7p 19.1p 24.1
Underlying earnings per shareB 9 24.2p 21.5p 12.6
Diluted earnings per share 9 23.7p 18.9p
Underlying diluted earnings per shareB 9 24.1p 21.3p
A Including VAT at Sainsbury's Supermarkets and sales tax at Shaw's
Supermarkets.
B Before exceptional items and amortisation of goodwill.
Group statement of total recognised gains and losses
for the 52 weeks to 29 March 2003
2003 2002
£m £m
Profit for the financial year 454 364
Currency translation differences on foreign currency net investments (4) 1
Total recognised gains relating to the financial year 450 365
Change in accounting policy for deferred tax - (160)
Total recognised gains since last annual report 450 205
The above profit for the financial year, on an historical cost equivalent basis,
would be £463 million (2002: £364 million) as a result of the realisation of a
property revaluation gain of £9 million
(2002: £nil) in previous years.
Reconciliation of movements in Group equity shareholders' funds
for the 52 weeks to 29 March 2003
2003 2002
£m £m
Profit for the financial year 454 364
Equity dividends (298) (285)
156 79
Currency translation differences (4) 1
Proceeds from ordinary shares issued for cash 3 21
Amounts deducted in respect of shares issued to the QUEST - (4)
Net movement in equity shareholders' funds 155 97
Opening equity shareholders' funds 4,848 4,751
Closing equity shareholders' funds 5,003 4,848
Group balance sheet
at 29 March 2003 and 30 March 2002
2003 2002
£m £m
Fixed assets
Intangible assets 226 263
Tangible assets 7,540 6,906
Investments 112 174
7,878 7,343
Current assets
Stock 800 751
Debtors 297 398
Sainsbury's Bank's current assets 2,397 2,193
Investments 20 16
Cash at bank and in hand 639 370
4,153 3,728
Creditors: amounts falling due within one year
Sainsbury's Bank's current liabilities (2,237) (2,060)
Other (2,537) (2,648)
(4,774) (4,708)
Net current liabilities (621) (980)
Total assets less current liabilities 7,257 6,363
Creditors: amounts falling due after more than one year (1,885) (1,223)
Provisions for liabilities and charges (300) (231)
Total net assets 5,072 4,909
Capital and reserves
Called up share capital 484 484
Share premium account 1,424 1,421
Revaluation reserve 22 39
Profit and loss account 3,073 2,904
Equity shareholders' funds 5,003 4,848
Equity minority interest 69 61
Total capital employed 5,072 4,909
Group cash flow statement
for the 52 weeks to 29 March 2003
2003 2002
Note £m £m
Net cash inflow from operating activities 10 1,070 1,067
Dividend received from joint venture 8 -
Returns on investments and servicing of finance
Interest received 67 66
Interest paid (108) (114)
Interest element of finance lease payments (21) (21)
Net cash outflow from returns on investments and servicing of finance (62) (69)
Taxation (224) (171)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,169) (1,070)
Sale of tangible fixed assets 130 218
Purchase of intangible fixed assets (3) (3)
Net cash outflow from capital expenditure and financial investment (1,042) (855)
Acquisitions and disposals
Repayments of loans from to ventures 27 -
Investment in joint ventures and fixed asset investments (1) (6)
Proceeds from sale of subsidiary undertakings - 3
Proceeds from disposal of other fixed asset investments 184 -
Net cash inflow/(outflow) for acquisitions and from disposals 210 (3)
Equity dividends paid to shareholders (288) (275)
Net cash outflow before use of liquid resources and financing (328) (306)
Financing
Issue of ordinary share capital 3 17
Decrease in short-term borrowings (88) (116)
Increase in long-term borrowings 550 434
Increase in finance leases 151 -
Capital element of finance lease payments (5) (4)
Net cash inflow from financing 611 331
Increase in net cash 283 25
Reconciliation of net cash flow to movement in net debt
Increase in net cash 283 25
Increase in debt and lease financing (462) (314)
Movement in finance leases (156) (8)
Exchange adjustments 87 -
Movement in net debt in the year 11 (248) (297)
Net debt at the beginning of the year 11 (1,156) (859)
Net debt at the end of the year 11 (1,404) (1,156)
Notes to the results
1. Accounting policies
This financial statement has been prepared using the same accounting policies as
set out in the Annual Report and Financial Statements for the year ended 30
March 2002.
The financial year represents the 52 weeks ended Saturday 29 March 2003 (prior
year the 52 weeks ended Saturday 30 March 2002).
2. Sales and underlying operating profit - continuing operations
Sales and underlying operating profit of continuing operations (before
exceptional operating costs and amortisation of goodwill) were as follows:
Sales 1 Underlying
operating profit 2
2003 2002 2003 2002
£m £m £m £m
Continuing operations
Sainsbury's Supermarkets 15,301 14,860 572 505
Sainsbury's Bank 183 165 22 22
JS Developments 145 112 19 15
Shaw's Supermarkets (US) 2,866 3,061 139 137
Total 18,495 18,198 752 679
1 Includes VAT at Sainsbury's Supermarkets of £1,043 million (2002: £1,019
million) and sales tax at Shaw's Supermarkets of £22 million (2002:
£25 million).
2 Profit before exceptional operating costs of £55 million (2002: £30
million) in Sainsbury's Supermarkets and £10 million (2002: £8 million) in
Shaw's Supermarkets and amortisation of goodwill of £13 million (2002:
£14 million) in Shaw's Supermarkets.
3. Analysis of operating profit
2003 2002
Continuing Continuing Discontinued
operations operations operations Total
£m £m £m £m
Turnover 17,430 17,154 8 17,162
Cost of sales (15,988) (15,867) (10) (15,877)
Exceptional cost of sales (51) (28) - (28)
Gross profit 1,391 1,259 (2) 1,257
Administrative expenses (690) (608) - (608)
Exceptional administrative expenses (14) (10) - (10)
Amortisation of goodwill (13) (14) - (14)
Group administrative expenses (717) (632) - (632)
Operating profit 674 627 (2) 625
The exceptional operating costs comprise the following:
2003 2002
£m £m
Sainsbury's Supermarkets 51 20
Shaw's Supermarkets - 8
Exceptional cost of sales 51 28
Sainsbury's Supermarkets 4 10
Shaw's Supermarkets 10 -
Exceptional administrative expenses 14 10
Total exceptional operating costs 65 38
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 asset
write-off and re-organisation costs. The cost of closure of the Taste joint
venture of £5 million in 2002 is also included in Sainsbury's Supermarkets'
exceptional administrative expenses for that year.
At Shaw's Supermarkets, the exceptional costs relate to the costs associated
with the acquisition of stores from the liquidator of Ames during the year.
Exceptional cost of sales for Shaw's Supermarket's in 2002 relates to the
closure of a depot.
4. Loss on sale of properties
2003 2002
£m £m
Loss on disposal of Sainsbury's Supermarkets' properties (7) (5)
(Loss)/profit on disposal of Shaw's Supermarkets' properties (4) 1
(11) (4)
5. Disposal of operations-discontinued
2003 2002
£m £m
Disposal of investment in Homebase 61 -
The Group sold its remaining investment in Homebase Limited and redeemed the
outstanding loan notes in the year for a total consideration of £184 million.
The profit on sale of the investment, after making provision for further
liabilities arising from sites associated with the sale in 2001, amounted to £61
million.
6. Capitalised interest
2003 2002
£m £m
Capitalised interest included in net interest payable 22 16
7. Tax on profit on ordinary activities
2003 2002
£m £m
The tax charge based on the profit for the year is:
UK Corporation tax at 30 per cent (2002 : 30 per cent) 173 151
Over provision in prior periods - UK (9) (1)
164 150
Deferred tax 23 26
Overseas tax - current 43 38
- deferred (4) (4)
Taxation on exceptional items - current (11) (7)
- deferred (9) (3)
Tax on profit on ordinary activities 206 200
The taxation credit on exceptional items comprises £20 million (2002 : £10
million) on the exceptional operating costs.
8. Dividends
2003 2002
pence pence 2003 2002
per share per share £m £m
Interim 4.22 4.02 81 78
Final proposed 11.36 10.82 217 207
15.58 14.84 298 285
The final dividend will be paid on 25 July 2003 to shareholders on the register
at the close of business 30 May 2003. The shares will become ex-dividend on 28
May 2003.
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 dilutive potential ordinary
shares.
2003 2002
million million
Weighted average number of shares in issue 1,911.9 1,907.5
Weighted average number of dilutive share options 7.4 16.0
Total number of shares for calculating diluted earnings per share 1,919.3 1,923.5
9. Earnings per share (continued)
The alternative measure of earnings per share is provided because it reflects
the Group's underlying trading performance by excluding the effect of
exceptional items and amortisation of goodwill.
2003 2002
Per
Per share share
Earnings amount Earnings amount
£m pence £m pence
Basic earnings 454 23.7 364 19.1
Exceptional items net of tax:
Included in operating profit 45 2.4 28 1.5
Loss on sale of properties 11 0.6 4 0.2
Disposal of operations (61) (3.2) - -
Amortisation of goodwill 13 0.7 14 0.7
Underlying earnings before exceptional items and
amortisation of goodwill 462 24.2 410 21.5
Diluted earnings 454 23.7 364 18.9
Underlying diluted earnings before exceptional items and
amortisation of goodwill 462 24.1 410 21.3
10. Reconciliation of operating profit to net cash inflow from operating
activities
2003 2002
£m £m
Group operating profit 674 625
Depreciation 393 358
Amortisation of intangible assets 18 18
Loss on sale of equipment, fixtures and vehicles 9 3
(Increase)/decrease in stocks (62) 23
Increase in debtors (20) (2)
Increase in creditors and provisions 85 57
Increase in Sainsbury's Bank current assets (204) (279)
Increase in Sainsbury's Bank current liabilities 177 264
Net cash inflow from operating activities 1,070 1,067
11. Analysis of net debt
At Other At 29 March
31 March Cash non-cash Exchange 2003
2002 flow movements movements
£m £m £m £m £m
Current asset investments 16 4 - - 20
Cash at bank and in hand 370 279 - (10) 639
Bank overdrafts (14) - - - (14)
372 283 - (10) 645
Due within one year:
Borrowings (327) 88 - 77 (162)
Finance leases (4) (33) - - (37)
Due after one year:
Borrowings (1,017) (550) - 3 (1,564)
Finance leases (180) (113) (10) 17 (286)
(1,528) (608) (10) 97 (2,049)
Total net debt (1,156) (325) (10) 87 (1,404)
12. Financial statements
The financial information is derived from the full Group Financial Statements
for the 52 weeks to
29 March 2003 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.
Copies may be obtained through our website www.j-sainsbury.co.uk or by calling
Freephone 0800 0154330.
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