Half Yearly Report

RNS Number : 7379R

Sainsbury(J) PLC

09 November 2011

 



 

 

9 November 2011

Interim results for the 28 weeks to 1 October 2011

Good sales and profit growth; with strong growth plans

Financial summary

·     Total sales (inc VAT, inc fuel) up 7.6 per cent to £12,848 million (2010/11: £11,944 million)

·     Total sales (inc VAT, ex fuel) up 4.3 per cent

·     Like-for-like sales (inc VAT, ex fuel) up 1.9 per cent

·     Underlying operating profit up 7.0 per cent to £396 million (2010/11: £370 million)

·     Underlying profit before tax up 6.6 per cent to £354 million (2010/11: £332 million)⁽¹⁾

·     Underlying basic earnings per share up 6.1 per cent to 13.9 pence (2010/11: 13.1 pence)⁽²⁾

·     Interim dividend of 4.5 pence per share up 4.7 per cent (2010/11: 4.3 pence)⁽³⁾

Statutory

·     Revenue (ex VAT, inc fuel) up 6.1 per cent to £11,693 million (2010/11: £11,020 million)

·     Profit before tax of £395 million, reflecting lower property profits (2010/11: £466 million)

·     Basic earnings per share of 16.2 pence (2010/11: 18.7 pence)

Operating highlights

·     Good sales growth in a challenging environment

·     Cost savings of £50 million broadly offset inflationary increases

·     Weekly customer transactions up almost one million on last year, to nearly 22 million

·     Successful launch of 'Live Well For Less' and 'Sainsbury's Brand Match'

·     Over 2,700 jobs created and 15,000 seasonal jobs to be created at Christmas

·     Capital programme continues to achieve a pre-tax internal rate of return of over 15 per cent

·     Supermarket of the Yearand Convenience Chain of the Year at the 2011 Retail Industry Awards

Five areas of focus

·     Food:  Over 3,200 new and improved 'by Sainsbury's' products launched

·     General merchandise and clothing:  Continued good growth and launch of 'Gok for TU'

·     Channels:  Opened 400th convenience store; online growing by around 20 per cent; 'Click & Collect' now in over 700 stores

·     New business:  Share of Sainsbury's Bank post-tax operating profit at £7 million, up 16.7 per cent

·     Property: 596,000 sq ft of gross new space; value of properties up £0.4 billion to £10.9 billion⁽⁴⁾

David Tyler, Chairman, said: "We are pleased with our sales and profit performance, given the challenging economic environment.  We have continued to make good progress against our five areas of focus, strengthening our position for the long-term, particularly the investment in our food and clothing ranges as well as new channels and services.  Our interim dividend is 4.5 pence, which is in line with our policy to pay this at 30 per cent of the previous year's full-year dividend."

Justin King, Chief Executive, said: "Our further good sales growth reflects our continued hard work to help our customers cope with the tough economic environment.  They are recognising the efforts we are making to help them manage their budgets and to 'Live Well For Less'. This is reflected in customer visits, with transactions up almost one million on last year, to nearly 22 million a week.  We continue to apply a tight control on costs, achieving £50 million savings so far this year. Combined with our strong sales this has helped us to grow profits, with underlying operating profit up seven per cent.

"We were proud to announce our ambitious '20 by 20 Sustainability Plan' in October, to help our customers 'Live Well' and also to transform the way we do business. We also recently launched 'Sainsbury's Brand Match' which has helped bring 'Live Well for Less' to life.  We are delighted with the response from customers. 

"The launch of 'Gok for TU' clothing has also been well received and has added to the continued sales growth of general merchandise and clothing. We opened our 400th convenience store and we now serve over 135,000 customers every week online.

"We have also made good progress in the development of our store estate.  We have added a gross 596,000 sq ft of new space, with seven new stores (including two replacements), 15 extensions and 37 convenience stores, creating over 2,700 new jobs in the process.  We were delighted that the achievements of our colleagues were recognised at the 2011 Retail Industry Awards when Sainsbury's was named Supermarket of the Year and Convenience Retailer of the Year.

"We expect the economic environment to remain challenging for the foreseeable future but we are confident of further good progress in the Christmas period ahead and our ability to grow by continuing to do a great job in helping our customers 'Live Well For Less'."

Notes:

1.     Underlying profit before tax: Profit before tax before any profit or loss on the disposal of properties, investment property fair value movements, impairment of goodwill, financing fair value movements, IAS 19 pension financing element and one-off items that are material and infrequent in nature.

2.     Underlying basic earnings per share: Profit after tax before any profit or loss on the disposal of properties, investment property fair value movements, impairment of goodwill, financing fair value movements, IAS 19 pension financing element and one-off items that are material and infrequent in nature, divided by the weighted average number of ordinary shares in issue during the period, excluding those held by the ESOP trusts, which are treated as cancelled.

3.     This is in line with our policy to pay at 30 per cent of the previous year's full-year dividend.

4.     The property value at 1 October 2011 has been estimated based on independent third party valuations at 19 March 2011, covering a representative sample of around 50 per cent of our freehold and long leasehold properties. The basis of valuation is investment market value based on rent and yield, assuming sale and leaseback on the standard institutional lease which the Company currently uses when transacting its disposals of mature assets.

5.     Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. 

6.     Sainsbury's will report its 2011/12 Third Quarter Trading Statement at 07:00 on 11 January 2012.

7.     Sainsbury's 2011/12 Third Quarter Trading Statement will reflect the 14 weeks ending 7 January 2012 and its 2011/12 Fourth Quarter Trading statement will reflect the 10 weeks ending 17 March 2012.

A results presentation for analysts and investors will be held at 09:45 on 9 November 2011.

To view the slides of the results presentation and the Webcast: We recommend that you register for this event in advance. To do so, please visit www.j-sainsbury.co.uk and follow the on-screen instructions. To participate in the live event, please go to the website from 09:30 on the day of the announcement, and further instructions will be on the website. An archive of the webcast will be available from 12:00.

To listen to the results presentation: You may dial in to listen to the results on [phone], pass code 242 127. An archive recording of this event will be available from 12:00 by calling [phone] (freephone) or  [phone], pass code 41313470.  The archive is available for 28 days.

A transcript of the presentation will be available at www.j-sainsbury.co.uk.

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

Operating Review 

Trading and operational review

We have seen a step up in sales growth from the end of the last financial year, a good performance in a challenging consumer environment.  Total sales (including VAT, excluding fuel) were up 4.3 per cent, with like-for-like sales up 1.9 per cent.  Tight control of costs helped us to grow our underlying operating profit by seven per cent to £396 million.

Operational cost efficiencies of £50 million have broadly offset cost inflation and we are on track to achieve around £100 million cost savings over the year.  This is a result of improved productivity, on-going procurement savings and simplification of in-store processes.  For example, in logistics we continue to make improvements in vehicle efficiency, fill levels and route optimisation.  Our Energy Reset programme has also continued in existing stores, identifying the most sustainable energy savings for each store.   Since 2007, we have now implemented over 10,000 energy initiatives in our supermarkets, with energy savings equivalent to running 90 supermarkets for a year.

The high price of fuel continues to influence consumer spending and shopping habits.  With fuel costs representing a higher proportion of disposable income, customers are reducing what they spend on their weekly grocery shopping and are continuing to budget prudently.  By purchasing fewer items on each shopping trip and doing more top-up shopping, customers are not only demonstrating a desire to keep a tight rein on budgets but also to reduce food waste. 

This behaviour has played a part in the rise in customer transactions, up almost one million on last year to nearly 22 million a week, and also in the growth of our convenience business which has delivered like-for-like sales growth of approximately twice that of our supermarkets business.  Separately, Easter and the royal wedding saw us significantly outperform the market and these events show our strength in supporting family occasions.

Early in the financial year we launched our 'Feed your Family for £50' weekly meal planner, which captured customers' imagination with some very popular offers and suggestions for tasty and nutritious meals for a family of four.  It attracted over a million visitors to our website and sales of the products featured increased by over 20 per cent.  As a result of customers' budgeting we have also seen a high level of participation in our various promotions, most notably with our market-leading fuel promotions, as customers shop around for the best deals. 

Despite the challenging economic environment, we continue to work hard to help our customers.  In September, we launched a major new customer commitment, 'Live Well For Less', which aims to provide products that meet customers' needs for both quality and price, all for less than customers think.  In line with this we continue to invest in our own-brand products, improving quality while ensuring they offer customers the same or better quality as the branded equivalent, at prices at least 20 per cent lower.   This is best demonstrated through the major re-launch of our core own-label range, 'by Sainsbury's', which has now seen over 3,200 products re-launched.  Increasingly, customers are turning to our own-brand ranges and both 'basics' and 'Taste the Difference' are performing well; in the half, our 'basics' range became the second biggest selling supermarket value brand (by value).

We know our customers want to reduce the impact their decisions have on the environment and society and to 'Live Well'.  So in October we launched our new '20 by 20 Sustainability Plan', one which we believe is industry-leading.  We have set ourselves 20 ambitious targets for the year 2020, to transform the way we do business and to help our customers make more nutritious, sustainable and ethical purchasing decisions week in, week out.  Our targets include: reaching £1 billion of sales of fairly traded products; reducing our operational carbon emissions by 30 per cent in absolute terms; and creating 50,000 new jobs in the UK. 

Another commitment is to double the amount of British food we sell and we have already seen some good advances in the first half of this year.  By offering 51 varieties of British apples, we retained our number one position (by volume) selling more than any other retailer of these fruits, with nearly 32,000 tonnes sold in the last season.  We sold more British asparagus than we have ever sold before and alongside the national rollout of our regional 'Taste the Difference Cornish King' potatoes, we launched our exclusive 'Taste the Difference British Gem' potatoes.

Another key strand of 'Live Well For Less' is our major new 'Brand Match' initiative; a commitment that ensures our customers do not pay more for branded goods at Sainsbury's than they would at Tesco or Asda.  Through the research we have done, we know that there is gap between customer price perception and reality and that customers are also increasingly shopping around to find the best deals.  We tested the unique till technology in our stores in Northern Ireland; in a fraction of a second it checks the prices of over 14,000 branded goods against those at Tesco and Asda.  If customers would have paid less on comparable products at those stores we immediately give them a coupon for the difference on their shop, to spend with us on their next visit.  After a positive response to the trial, on 12 October we introduced 'Sainsbury's Brand Match' across all our supermarkets in the UK, removing the need for customers to have to shop around for the best price on branded products.  The trial and early stages of the roll-out have shown that in around half of the qualifying transactions, the basket of branded products was already the same price or cheaper at Sainsbury's than it would have been at Tesco or Asda. 

Among other achievements this half year, we were delighted to be recognised at the 2011 Retail Industry Awards as the Supermarket of the Year for the fourth time in six years and Convenience Chain of the Year for the second year in a row.  In addition, we received The Grocer 33 Availability Award.

Our five areas of focus

Our five areas of focus provide us with a strong, long-term vision for growth and are key to us achieving a successful business performance. 

Great food at fair prices

Sainsbury's is famous for the quality of its own-label products and it is something that really sets us apart from our competition.  We are now halfway through the re-launch of over 6,500 products in our 'by Sainsbury's' range.  We are improving the taste and reducing the amount of salt and fats where possible.  We are also making products easier to use and redesigning packaging to cut cost, limit waste and increase convenience.  As part of the re-launch we were the first retailer to launch an extensive fresh, chilled Mexican range, as Mexican food becomes increasingly popular in the UK.  We have seen a good step up in the performance of our 'by Sainsbury's' range since the re-launch.

Our 'Great Food' programme and investment in our food counters is proving very popular with customers looking for great quality fresh foods and this is being reflected through a step-up in their performance.  In the half 153 supermarkets went through the programme, meaning over half our supermarkets have now received this investment.  Our food counters are operated by colleagues trained in our six food colleges and we were delighted that, in June, City & Guilds formally accredited the high standards of training available at our colleges - the largest accreditation of its kind.  Over 6,000 colleagues have received this training so far this year and a further 14,000 will do so in the second half of the year.

The market-leading quality of our food has once again been recognised with several major industry awards.  These include being the most successful retailer at the Grocer Own-Label Food & Drink Awards with 12 gold winners and awards in nine categories at the Supermeat & Fish Awards, including Overall Best Product for our 'Taste the Difference' Beef Bourguignon.  We also collected a fantastic 86 medals at the International Cheese Awards, including the most prestigious Supreme Champion Award for our 'Taste the Difference' Wookey Hole Cave Aged Cheddar.  In addition, we won The Best Volume Supermarket Award for the third year running at the CIWF Good Farm Animal Welfare Awards and The Green Supply Chain Award at the Supply Chain Distinction Awards, for helping farmers to reduce their carbon footprint while becoming more competitive.

While family budgets are under pressure we continue to ensure families can 'Live Well' with products which are not only better quality but also more sustainable and healthier.  For example, with our 'Switch the fish' campaign, we offered customers samples of sustainable fish alternatives free of charge.  This was to encourage them to try something new and help to alleviate pressure on rapidly depleting world stocks of the 'Big 5' fish.  As a result, in just two days we gave away 40,000 portions of fish such as pouting, rainbow trout and mackerel and in the first week regional fish sales rose by over 30 per cent.  We also received much acclaim from Defra and Greenpeace.  In addition, all of our solid block chocolate is now made from Fairtrade ingredients, while our 'Ingredients for Cooks' range has launched 22 new or improved products, focusing on using British flour and sustainable palm oil.  Maintaining our values on health, our no added sugar, Zero and diet drinks are now sweetened only with sucralose and our regular soft drinks are sweetened only with natural sugars. 

Compelling general merchandise and clothing

Our general merchandise and clothing businesses continue to grow well and at a faster rate than our grocery business.  Against the economic backdrop, this demonstrates the strength of our offer.  We are growing our share in the key categories of clothing, home and seasonal items, by offering high street style at supermarket prices.   Through the development of our store estate we are continuing to expand the selling area dedicated to these ranges.  We now have 93 stores with a non-food sales area of over 10,000 sq ft, which is 26 stores up on last year.

In clothing, our range goes from strength to strength.  We announced the exciting partnership with Gok Wan, who will be creating a number of womenswear collections with us.  The range, 'Gok for TU', was launched on 6 October to high anticipation and received a fantastic reception.  It is available in 200 stores with prices starting from just £20.  In addition, in childrenswear we saw record-breaking 'Back-to-school' sales, up 38 per cent on last year and in our peak week we sold over 100,000 pairs of trousers and 70,000 packs of polo shirts.

Our new clothing format in our three 100,000 sq ft stores has been very well received, with positive feedback from customers on the significant improvement in the presentation of our offer.   Following this success, we have rolled out the new format to 26 stores so far this year, across new stores, extensions, and existing stores.  Over 40 further stores are planned before the end of the year. 

In our home ranges, we re-branded our top-tier cookshop items to 'Cook's Collection' with much success, showing a 32 per cent sales increase on last year's 'Different by Design' range.  Our July home event was our biggest ever, with customers snapping up our great value 'TU' cookshop and tableware products along with products such as our better than half price 'bed-in-a-bag'.   We also launched our latest cookery book, Classics recipe collection, with sales of own brand cookery books reaching over 260,000 copies since the first launch last October.

In entertainment, we were the leading DVD retailer for The King's Speech with a 34 per cent market share in the week of its release.  We achieved significant success on sales of both Harry Potter and the Deathly Hallows Part 1 and Tangled.  On 11 October, we announced the acquisition of online entertainment company Global Media Vault Ltd from MBL Group plc. This acquisition will support our drive into the growing online and digital entertainment market following the launch of the Sainsbury's Entertainment website in November 2010. 

To support our growth in general merchandise and clothing, we stepped up our direct sourcing from our three sourcing offices in Hong Kong, Dhaka and Shanghai.  Total shipments from Asia grew by 23 per cent and clothing shipments, driven by the opening of the office in Dhaka, have more than doubled.   We have also seen a big increase in the amounts sourced across general merchandise, from toys to electrical accessories.

Complementary channels and services

Our Convenience business is now well established and continues to perform strongly.  In the first half of the year we opened 37 new convenience stores and we are hitting our target of one to two openings a week, with the investments continuing to see good returns.  We also stepped up our refurbishment programme, with 15 convenience stores refitted.  This programme, updating stores to our latest blueprints for layout and range, has seen strong sales uplifts.  In May, we opened a new dedicated convenience depot in Greenford to service primarily London stores to support the growth of our Convenience business.  This depot now serves over 100 stores, with the capacity to double this, and offers a complete solution across fresh, ambient and frozen foods.

Having opened our first Sainsbury's Local in 1998, we now have over 400 convenience stores, generating an annualised £1.2 billion of sales.  The popularity of our convenience stores reflects the strength of our fresh food offer and also the growing trend for local top-up shopping as customers look to reduce waste, conserve fuel and manage their budgets.  We were delighted to win the Convenience Retailer of the Year award at the 2011 Retail Industry Awards for the second year in a row.

We have also seen strong growth in our online business, with an increase in grocery sales of around 20 per cent.  This has been driven through further growth in orders and new customers.  Our availability continues to improve and customer satisfaction levels remain high.  Our 'Click & Collect' service now accounts for over 40 per cent of our online general merchandise orders and is available in over 700 stores (including convenience stores).  Our new target is for over 900 stores to have this service by the end of this financial year.

Developing new business

Sainsbury's Bank has made further good progress, with pre-tax operating profits of £19 million up 11.8 per cent, and our share of post-tax profits at £7 million, up 16.7 per cent.  This has been driven through our commitment to reward Sainsbury's shoppers with Double Nectar Points for choosing to bank with us, which has led to further strong growth in our insurance business, in particular.  The Bank continues to innovate with unique products, launching a range of credit card options, as well as a new car insurance product.   Following the re-launch of our car insurance, we have seen new business grow over 140 per cent on last year.  We also introduced an on-line ordering service for travel money and we now have 123 travel money bureaux, which have attracted over half a million customers this year alone.  Travel money sales are up more than 90 per cent on last year.

Our market-leading offers and continued innovation have been recognised through several awards.  In July, Sainsbury's Finance was named Best Overall Online Provider for the second year running in the annual personal finance awards of Your Money magazine.  It was also awarded Best Online Pet Insurance Provider, Best Direct Home Insurance provider and Best Online Personal Loan Provider.

We know that our customers are increasingly looking to engage with us digitally and we continue to look at how we can become a true cross-channel retailer.  Sainsbury's mobile app, launched in August 2010, has now been downloaded over 325,000 times.  Alongside the rollout of 'Click and Collect', we launched in July a mobile version of our general merchandise shopping website, allowing customers to shop for home and garden, appliances, technology, toys, games, sport and leisure products on their mobile devices.

We are also expanding our pharmacy offer.  We have now trained over 200 pharmacists as healthy eating advisors, providing free tailored information to customers.  We also launched our third GP and nurse-led clinic at our Newcastle-Under-Lyme store.  The facility is located in a fully equipped consultation room and will offer patients the opportunity to get medical assistance in a convenient, easy to access location.

Growing space and creating property value

We opened a gross 596,000 sq ft of new space across seven new stores, 15 extensions and 37 convenience stores in the half year. Much of the additional space brings our compelling general merchandise and clothing ranges to more customers.  We also continued our strategy of bringing the Sainsbury's brand into new markets, with three of our new stores opening in areas in which Sainsbury's has historically been under-represented, which is key to the growth we are seeing.  We opened our most northerly store in Nairn, Scotland, on the same day as we opened our latest environmental store in Dawlish, Devon, 600 miles away.

As we expand our store space across the country, we believe that we can make a positive difference to the local communities we serve.  Over the half year, we have created over 2,700 jobs through store expansions and new store openings.  We will also create an additional 15,000 seasonal jobs in the run up to Christmas.  In past years, many of these seasonal jobs have proved to be a stepping stone to permanent employment with us.

The pace of activity is also continuing within our property joint ventures, where we are working with our partners to add property value and trading space.  During the first half year, we completed five extensions within the British Land JV, adding a total of 79,000 sq ft in addition to the property value uplift, as well as securing planning consent for three further extensions for an additional 59,000 sq ft.  Our joint venture with Land Securities also continues to make good progress, in particular with our developments at Wandsworth and Thanet.

As a result of our investment programme, our property value has increased to an estimated £10.9 billion, as at 1 October 2011.  This uplift of £0.4 billion has been driven by our investment in new stores and extensions, whilst the yield has remained stable at 4.9 per cent.  We also continue to review for sale stores which are fully developed, recycling capital to invest in profitable growth.  In the first half of the year, we generated a profit of £39 million on the disposal of properties.  

 

Financial Review 

Sainsbury's continues to invest in its customer offer and grow profitable sales despite the challenging economic backdrop. Sainsbury's is also investing in the long-term growth of the business with gross space of 596,000 sq ft added in the first half of the year. At the same time, the business is taking advantage of market conditions to generate funds from sale and leasebacks of supermarkets that have no further property development potential. Overall, the strength of the balance sheet is maintained (now backed by £10.9 billion of property value), leaving the Group well placed to deliver sustainable growth going forward.

Sales (including VAT) increased by 7.6 per cent to £12,848 million (2010/11: £11,944 million). Underlying profit before tax ("UPBT") improved by 6.6 per cent to £354 million (2010/11: £332 million). Profit before tax was down 15.2 per cent, at £395 million (2010/11: £466 million), with lower property profits of £39 million (2010/11: £106 million) and a smaller surplus on the revaluation of properties within the joint ventures ("JV") of £3 million (2010/11: £20 million).

Underlying basic earnings per share increased to 13.9 pence (2010/11: 13.1 pence), up 6.1 per cent. This was lower than the increase in underlying profit before tax due to a slightly higher underlying tax rate and a small increase in the number of shares in issue. Basic earnings per share decreased to 16.2 pence (2010/11: 18.7 pence). These are higher than the underlying basic earnings per share due to the inclusion of non-underlying items.

An interim dividend of 4.5 pence has been approved by the Board (2010/11: 4.3 pence). This is in line with Sainsbury's policy to pay 30 per cent of the previous year's full-year dividend as an interim dividend.

Summary income statement	28 weeks to 1 October 2011	28 weeks to 2 October 2010	Change	52 weeks to 19 March 2011
	£m	£m	%	£m
Sales (including VAT) (1)	12,848	11,944	7.6	22,943
Sales (excluding VAT)	11,693	11,020	6.1	21,102
Underlying operating profit	396	370	7.0	738
Underlying net finance costs (2)	(57)	(51)	(11.8)	(97)
Underlying share of post-tax profit from JVs (3)	15	13	15.4	24
Underlying profit before tax	354	332	6.6	665
Profit on disposal of properties	39	106	n/a	108
Investment property fair value movements	3	20	n/a	39
Financing fair value movements	(10)	6	n/a	7
IAS 19 pension financing credit	9	2	n/a	3
One-off items	-	-	n/a	5
Profit before tax	395	466	(15.2)	827
Income tax expense	(93)	(119)	21.8	(187)
Profit for the financial period	302	347	(13.0)	640
Underlying basic earnings per share	13.9p	13.1p	6.1	26.5p
Basic earnings per share	16.2p	18.7p	(13.4)	34.4p
Dividend per share	4.5p	4.3p	4.7	15.1p

(1)    The standard rate of VAT increased from 17.5 per cent to 20 per cent on 4 January 2011.

(2)    Net finance costs before financing fair value movements and the IAS 19 pension financing element.

(3)    The underlying share of post-tax profits from joint ventures is stated before investment property fair value movements, financing fair value movements and profit on disposal of properties.

Sales (including VAT) and space

Sales (including fuel) increased by 7.6 per cent through a combination of good like-for-like ("LFL") growth despite difficult trading conditions, a contribution from new space in line with expectations and higher fuel prices.

The 7.6 per cent growth includes a 2.5 per cent contribution from net new space (excluding extensions and replacements). LFL sales (including fuel) were up 5.1 per cent, higher than for sales excluding fuel due to the impact of higher fuel prices.

Sales growth (including VAT, including fuel)	28 weeks to 1 October 2011 %	28 weeks to 2 October 2010 %	52 weeks to 19 March 2011 %
Like-for-like sales	5.1	4.4	4.7
Net new space (excluding extensions and replacements)	2.5	2.6	2.4
Total sales growth	7.6	7.0	7.1

Sales (excluding fuel) grew by 4.3 per cent in a challenging economic environment. LFL sales growth was 1.9 per cent in both the first and second quarters. The contribution from net new space (excluding extensions and replacements) was 2.4 per cent, in line with Sainsbury's expectations. Non-food sales grew at more than twice the rate of grocery growth, and online sales increased by around 20 per cent.

Sales growth (including VAT, excluding fuel)	28 weeks to 1 October 2011 %	28 weeks to 2 October 2010 %	52 weeks to 19 March 2011 %
Like-for-like sales(1)	1.9	2.0	2.3
Net new space (excluding extensions and replacements)	2.4	2.8	2.6
Total sales growth	4.3	4.8	4.9

(1)    This includes a 1.1 per cent contribution from stores extended in the first half of 2011/12 and the second half of 2010/11.

Sainsbury's has added a gross 596,000 sq ft of selling space (including replacements and extensions) since the start of the year, an increase of 3.1 per cent (2010/11: 3.0 per cent). Including the impact of closures, this translated into net space growth of 530,000 sq ft, an increase of 2.8 per cent since the start of the year (2010/11: 2.9 per cent).

The pace of supermarket property activity continued with 516,000 sq ft of gross space either opened or extended in the first half of the year (2010/11: 514,000 sq ft). The number of stores opened, extended or refurbished (25 stores) was slightly higher than in the first half of 2010/11 (21 stores). The 2011/12 opening programme included seven new supermarkets, of which two were replacement stores. These generated an additional 247,000 sq ft of gross selling space (a net 181,000 sq ft) with no closures other than the replaced stores. Three of the seven new store openings were in areas in which Sainsbury's has historically been under-represented, for example Dawlish in the South West, and Nairn in Scotland. Fifteen supermarket extensions and three refurbishments added 269,000 sq ft of selling space.

There was continued rapid growth in the convenience estate, with 37 stores added during the first half of the year (2010/11: 13 stores in the first half). Net convenience space has grown by 80,000 sq ft during the first half of the year, an increase of 8.8 per cent (2010/11: 3.0 per cent). Convenience stores continue to outperform the supermarket estate in terms of LFL growth.

Net of replacements, closures and disposals, closing space of 19,638,000 sq ft was 7.5 per cent higher than last year (2 October 2010: 18,262,000 sq ft).

Store numbers and retailing space
at 1 October 2011	Supermarkets		Convenience		Total
	Number	Area 000 sq ft	Number	Area 000 sq ft	Number	Area 000 sq ft
At 19 March 2011	557	18,199	377	909	934	19,108
New stores	7	247	37	83	44	330
Disposals/closures	(2)	(66)	-	-	(2)	(66)
Extensions/ refurbishments/downsizes		269	-	(3)	-	266
At 1 October 2011	562	18,649	414	989	976	19,638
Memorandum:
Extensions	15	270	-	-	15	270
Refurbishments/downsizes	3	(1)	15	(3)	18	(4)
Total projects	18	269	15	(3)	33	266

Sainsbury's expects gross space growth of 7 to 8 per cent in 2011/12. Net new store space excluding extensions and replacements is expected to contribute around 2.5 per cent to total sales growth excluding fuel.

Underlying operating profit

Underlying operating profit increased by 7.0 per cent to £396 million (2010/11: £370 million), reflecting the good sales performance and cost efficiency savings, which broadly offset the impact of cost inflation.

Underlying operating margin improved by 3 basis points, to 3.39 per cent (2010/11: 3.36 per cent), which was an increase of 10 basis points at constant fuel prices.  Underlying EBITDAR margin reduced by 8 basis points to 7.66 per cent, but was 8 basis points higher at constant fuel prices.

Underlying operating profit	28 weeks to 1 October 2011	28 weeks to 2 October 2010	Change	Change at constant fuel prices	52 weeks to 19 March 2011
Underlying operating profit (£m) (1)	396	370	7.0%		738
Underlying operating margin (%) (2)	3.39	3.36	3 bps	10 bps	3.50
Underlying EBITDAR (£m) (3)	896	853	5.0%		1,649
Underlying EBITDAR margin (%) (4)	7.66	7.74	(8) bps	8 bps	7.81

(1)    Underlying earnings before interest and tax before Sainsbury's share of post-tax profits from joint ventures.

(2)    Underlying operating profit divided by sales excluding VAT.

(3)    Underlying operating profit before rent, depreciation and amortisation.

(4)    Underlying EBITDAR divided by sales excluding VAT.

Cost inflation in the financial year is expected to be in the middle of the two to three per cent range, with cost savings for the full year of around £100 million, almost entirely offsetting the impact of inflation.

Sainsbury's Bank joint venture

Sainsbury's share of Sainsbury's Bank post-tax profit amounted to £7 million for the half year (2010/11: £6 million) with further progress and innovation from the Bank. The Sainsbury's Bank JV is expected to deliver a further step-up in profit in the full year.

Property joint ventures

Sainsbury's underlying share of post-tax profits from its JV with British Land was £7 million for the half year (2010/11: £6 million). Its underlying share of post-tax profits from the JV with Land Securities was £1 million for the half year (2010/11: £1 million). Full-year profits from the property JVs are expected to be similar to 2010/11.

A surplus on revaluation of £3 million was recognised within the share of post-tax profit from the JVs in the income statement (2010/11: £20 million), with property yields remaining unchanged at 4.9 per cent. 

Underlying net finance costs

Underlying net finance costs increased by £6 million to £57 million (2010/11: £51 million) mainly as a result of the higher RPI rate, which increases the rate on Sainsbury's inflation-linked debt (capped at 5.0 per cent). Capitalised interest increased to £19 million in the first half of the year (2010/11: £13 million) in line with the increase in new space activity.

Interest cover was 7.2 times (2010/11: 7.5 times), with fixed charge cover of 2.2 times (2010/11: 2.2 times).

Underlying net finance costs (1)		28 weeks to 1 October 2011 £m	28 weeks to   2 October 2010 £m	52 weeks to 19 March 2011 £m
Underlying finance income (1)		9	11	19
Interest costs		(85)	(75)	(143)
Capitalised interest		19	13	27
Underlying finance costs (1)		(66)	(62)	(116)
Net underlying finance costs (1)		(57)	(51)	(97)

(1)    Finance income/costs pre financing fair value movements and IAS 19 pension financing element.

Sainsbury's expects underlying net finance costs in 2011/12 to be £10 to £15 million higher than in 2010/11.

Taxation

The income tax charge was £93 million (2010/11: £119 million), with an underlying tax rate of 26.6 per cent (2010/11: 26.5 per cent) and an effective tax rate of 23.5 per cent (2010/11: 25.5 per cent). The underlying rate is marginally higher than last year due to the benefit of the resolution of a number of outstanding items last year, which more than offset the benefit of a two per cent lower statutory rate of corporation tax in this year.

Underlying tax rate
28 weeks to 1 October 2011	Profit £m	Tax £m	Rate %
Profit before tax, and tax thereon	395	93	23.5
Adjustments (and tax thereon) for:
Profit on disposal of properties	(39)	-
Investment property fair value movements	(3)	-
Financing fair value movements	10	-
IAS 19 pension financing element	(9)	-
Revaluation of deferred tax balances	-	1
Underlying profit before tax, and tax thereon	354	94	26.6

Sainsbury's expects the underlying tax rate to be in the range of 26 to 27 per cent in 2011/12.

Earnings per share

Underlying basic earnings per share increased by 6.1 per cent to 13.9 pence in the first half of 2011/12 (2010/11: 13.1 pence), reflecting the improvement in underlying profit after tax.

The weighted average number of shares in issue was 1,868.6 million (2010/11: 1,857.3 million), an increase of 11.3 million shares or 0.6 per cent. Basic earnings per share were down 13.4 per cent, at 16.2 pence (2010/11: 18.7 pence), primarily as a result of lower profits on the sale of properties than in the first half of 2010/11.

Underlying earnings per share	28 weeks to 1 October 2011	28 weeks to 2 October 2010
	pence	pence
Basic earnings per share	16.2	18.7
Adjustments (net of tax) for:
Profit on disposal of properties	(2.1)	(4.7)
Investment property fair value movements	(0.2)	(1.1)
Financing fair value movements	0.5	(0.3)
IAS 19 pension financing element	(0.5)	(0.1)
Revaluation of deferred tax balances	-	0.6
Underlying basic earnings	13.9	13.1

Dividends

The Board has approved an interim dividend of 4.5 pence per share (2010/11: 4.3 pence), equivalent to 30 per cent of Sainsbury's previous full-year dividend. This will be paid on 6 January 2012 to shareholders on the Register of Members at the close of business on 18 November 2011. The interim dividend was approved by the Board on 8 November 2011 and has not, therefore, been included as a liability as at 1 October 2011.

Return on capital employed

The return on average capital employed ("ROCE") over the 52 weeks to 1 October 2011 was 10.9 per cent, 20 basis points lower than for the 52 weeks to 19 March 2011 (11.1 per cent). ROCE growth was held back by the cumulative effect of the acceleration in Sainsbury's investment in space growth since June 2009, which has an initially dilutive impact on earnings as the stores mature, whilst increasing the value of capital employed.

Return on capital employed	52 weeks to 1 October 2011	52 weeks to 19 March 2011	52 weeks to 2 October 2010
Underlying operating profit (£m)	764	738	699
Underlying share of post-tax profit from joint ventures (£m)	26	24	22
Underlying profit before interest and tax (£m)	790	762	721
Average capital employed (1) (£m)	7,262	6,877	6,433
Return on average capital employed (%)	10.9	11.1	11.2
Movement since 52 weeks to 19 March 2011	(20)bps
Movement since 52 weeks to 2 October 2010	(33)bps

(1)    Average of opening and closing net assets before net debt.

Net debt and cash flows

Sainsbury's net debt as at 1 October 2011 was £2,115 million (2 October 2010: £1,722 million).  This is an increase of £301 million since 19 March 2011, driven primarily by investment in estate development through an acceleration of the programme into the first half of the year and increased working capital, partially offset by cash generated from sale and leasebacks.

Working capital increased by £104 million, mainly due to higher inventories, which have risen by £164 million since 19 March 2011. Grocery inventory increased through inflation in cost prices and the need to hold more inventory for promotional purposes. Non-food inventory was higher due to challenging market conditions and an increase in goods in transit driven by direct sourcing.

Summary cash flow statement	28 weeks to 1 October 2011 £m	28 weeks to 2 October 2010 £m	52 weeks to 19 March 2011 £m
Operating cash flow before changes in working capital	657	657	1,216
Increase in working capital	(104)	(187)	(78)
Cash generated from operations	553	470	1,138
Interest paid	(73)	(61)	(126)
Corporation tax paid	(24)	(69)	(158)
Net cash from operating activities	456	340	854
Net cash used in investing activities	(498)	(358)	(902)
Proceeds from issue of shares	3	4	17
Receipt of new debt	119	45	45
Repayment of borrowings	(42)	(39)	(79)
Dividends paid	(201)	(189)	(269)
Decrease in cash and cash equivalents	(163)	(197)	(334)
(Decrease) / increase in debt	(129)	30	71
Fair value and other non-cash movements	(9)	(6)	(2)
Movement in net debt	(301)	(173)	(265)

Sainsbury's expects net debt to be around £2.0 billion at the end of 2011/12.

Financing

Sainsbury's seeks to manage its financing by diversifying funding sources, minimising refinancing risk and maintaining sufficient stand-by liquidity. Sainsbury's has drawn debt of £2.5 billion and an undrawn credit facility of £0.7 billion at its disposal.

The principal elements of Sainsbury's core funding comprise two long-term loans of £1,053 million due 2018 and £841 million due 2031 secured over property assets. In addition, Sainsbury's has six unsecured bank loans totalling £276 million with maturity ranging from 2012 to 2016, £190 million of convertible bonds due July 2014, £48 million of hire purchase facilities in respect of movable in-store assets, and £55 million of other finance leases.

Sainsbury's maintains a £690 million syndicated revolving credit facility due October 2015 for standby purposes. Interest on drawings under this facility is charged at a margin over LIBOR. There were £nil drawings under the facility as at 1 October 2011 (2 October 2010: £nil drawings).

Capital expenditure

Core capital expenditure increased to £682 million (2010/11: £560 million) in the half year, through an acceleration of Sainsbury's store development programme into the first half of the year, with 15 extensions (2010/11: nine extensions) and 37 new convenience stores (2010/11: 13 new convenience stores) opened in the half year.

Sainsbury's also took advantage of continued good property yields in the half year to achieve £129 million in sale and leaseback proceeds (2010/11: £254 million), which contributed to a total profit on disposal of properties of £39 million (2010/11: £106 million). Net capital expenditure was £556 million (2010/11: £315 million).

Capital expenditure	28 weeks to 1 October 2010	28 weeks to 2 October 2010	52 weeks to 19 March 2011
	£m	£m	£m
New store development	321	245	547
Extensions and refurbishments	274	240	470
Other - including supply chain and IT	87	75	121
Core capital expenditure	682	560	1,138
Acquisition of freehold and trading properties	3	9	17
Proceeds from property transactions	(129)	(254)	(275)
Net capital expenditure	556	315	880

Sainsbury's expects full year 2011/12 core capital expenditure of around £1.2 billion.

Summary balance sheet

Shareholders' funds as at 1 October 2011 were £5,646 million (19 March 2011: £5,424 million), an increase of £222 million. This is mainly attributable to the continued profitable growth of the underlying business, an increase in working capital from increased overseas sourcing and to support future sales, a reduction in net retirement benefit obligations and the crystallisation of property profits on disposal.

The book value of property, plant and equipment, including land and buildings, has grown by £292 million since the start of the year as a result of increased space growth.

Net debt is £301 million higher than at 19 March 2011, similar to the increase in property, plant and equipment. Gearing increased year on year to 39.5 per cent (2 October 2010: 39.2 per cent).

Summary balance sheet
	1 October 2011 £m	Movement since 19 March 2011 £m	2 October 2010 £m	19 March 2011 £m
Land and buildings (freehold and long leasehold)	6,682	242	6,318	6,440
Land and buildings (short leasehold)	687	65	570	622
Fixtures and fittings	1,707	(15)	1,536	1,722
Property, plant and equipment	9,076	292	8,424	8,784
Other non-current assets	877	35	815	842
Inventories	976	164	809	812
Trade and other receivables	415	112	328	303
Cash and cash equivalents	364	(137)	651	501
Debt	(2,479)	(164)	(2,373)	(2,315)
Net debt	(2,115)	(301)	(1,722)	(1,814)
Trade and other payables and provisions	(3,395)	(133)	(3,196)	(3,262)
Retirement benefit obligations, net of deferred tax	(188)	53	(415)	(241)
Net assets	5,646	222	5,043	5,424

As at 1 October 2011, Sainsbury's estimated market value of properties increased to £10.9 billion (19 March 2011: £10.5 billion). The £0.4 billion increase is solely driven by the additional value from Sainsbury's new store and extension programme, with the yield remaining constant at 4.9 per cent.

Pensions

As at 1 October 2011, the present value of retirement benefit obligations less the fair value of plan assets was a deficit after deferred tax of £188 million (2 October 2010: £415 million deficit). The decrease in net obligations since the year end (19 March 2011: £241 million) reflects in part the step down in the inflation rate from 3.3 per cent to 3.1 per cent, decreasing the value of funded obligations by £0.2 billion to £4.8 billion. There was, in addition, a 1.6 per cent increase in the value of assets from £4.6 billion to £4.7 billion.

The IAS 19 pension service cost included within UPBT was £32 million, £2 million higher than in the first half of last year. Sainsbury's expects the full year charge to be around £60 million.

Retirement benefit obligations
	1 October 2011 £m	2 October 2010 £m	19 March 2011 £m
Present value of funded obligations	(4,793)	(5,058)	(4,945)
Fair value of plan assets	4,689	4,486	4,614
Pension deficit	(104)	(572)	(331)
Present value of unfunded obligations	(9)	(9)	(9)
Retirement benefit obligations	(113)	(581)	(340)
Deferred income tax (liability) / asset	(75)	166	99
Net retirement benefit obligations	(188)	(415)	(241)

 

Group income statement (unaudited)

for the 28 weeks to 1 October 2011

							28 weeks to	28 weeks to	52 weeks to
							1 October	2 October	19 March
							2011	2010	2011
						Note	£m	£m	£m
	Revenue					4	11,693	11,020	21,102
	Cost of sales						(11,074)	(10,425)	(19,942)
	Gross profit						619	595	1,160
	Administrative expenses						(223)	(225)	(417)
	Other income						38	106	108
	Operating profit						434	476	851
	Finance income					5	18	20	32
	Finance costs					5	(73)	(62)	(116)
	Share of post-tax profit from joint ventures						16	32	60
	Profit before taxation					4	395	466	827
	Analysed as:
	Underlying profit before tax					4	354	332	665
	Profit on disposal of properties					3	39	106	108
	Investment property fair value movements					3	3	20	39
	Financing fair value movements					3	(10)	6	7
	IAS 19 pension financing credit					3	9	2	3
	One-off item: Office of Fair Trading dairy inquiry					3	-	-	5
							395	466	827
	Income tax expense					6	(93)	(119)	(187)
	Profit for the financial period						302	347	640
	Earnings per share					7	pence	pence	pence
	Basic						16.2	18.7	34.4
	Diluted						15.9	18.4	33.8
	Underlying basic						13.9	13.1	26.5
	Underlying diluted						13.8	13.0	26.1

The notes on pages 22 to 32 form an integral part of these consolidated Interim Statements.

Group statement of comprehensive income (unaudited)

for the 28 weeks to 1 October 2011

		28 weeks to	28 weeks to	52 weeks to
		1 October	2 October	19 March
		2011	2010	2011
		£m	£m	£m
Profit for the period		302	347	640
Other comprehensive income/(expense):
Actuarial gains/(losses) on defined benefit pension scheme		209	(162)	29
Available-for-sale financial assets fair value movements:
Group		2	10	14
Joint ventures		(4)	(1)	2
Cash flow hedges effective portion of fair value movements:
Group		4	(11)	(8)
Joint ventures		2	(2)	2
Current tax on items recognised directly in other comprehensive income		-	3	(1)
Deferred tax on items recognised directly in other comprehensive income		(103)	52	(5)
Total other comprehensive income/(expense) for the period (net of tax)		110	(111)	33
Total comprehensive income/(expense) for the period		412	236	673

The notes on pages 22 to 32 form an integral part of these consolidated Interim Statements.

Group balance sheet (unaudited)

at 1 October 2011

		1 October	2 October	19 March
		2011	2010	2011
	Note	£m	£m	£m
Non-current assets
Property, plant and equipment		9,076	8,424	8,784
Intangible assets		148	151	151
Investments in joint ventures		528	466	502
Available-for-sale financial assets		178	172	176
Other receivables		37	36	36
Derivative financial instruments		43	37	29
		10,010	9,286	9,678
Current assets
Inventories		976	809	812
Trade and other receivables		415	368	343
Derivative financial instruments		78	67	52
Cash and cash equivalents	9b	364	651	501
		1,833	1,895	1,708
Non-current assets held for sale		20	25	13
		1,853	1,920	1,721
Total assets		11,863	11,206	11,399
Current liabilities
Trade and other payables		(2,730)	(2,490)	(2,597)
Borrowings		(165)	(110)	(74)
Derivative financial instruments		(87)	(75)	(59)
Taxes payable		(202)	(238)	(201)
Provisions		(11)	(16)	(11)
		(3,195)	(2,929)	(2,942)
Net current liabilities		(1,342)	(1,009)	(1,221)
Non-current liabilities
Other payables		(127)	(126)	(120)
Borrowings		(2,378)	(2,366)	(2,339)
Derivative financial instruments		(4)	(1)	-
Deferred income tax liability		(340)	(92)	(172)
Provisions		(60)	(68)	(62)
Retirement benefit obligations	11	(113)	(581)	(340)
		(3,022)	(3,234)	(3,033)
Net assets		5,646	5,043	5,424
Equity
Called up share capital		537	533	535
Share premium account		1,051	1,037	1,048
Capital redemption reserve		680	680	680
Other reserves		(105)	(355)	(213)
Retained earnings		3,483	3,148	3,374
Total equity		5,646	5,043	5,424

 

The notes on pages 22 to 32 form an integral part of these consolidated Interim Statements.

Group cash flow statement (unaudited)

for the 28 weeks to 1 October 2011

		28 weeks to	28 weeks to	52 weeks to
		1 October	2 October	19 March
		2011	2010	2011
	Note	£m	£m	£m
Cash flows from operating activities
Cash generated from operations	9a	553	470	1,138
Interest paid		(73)	(61)	(126)
Corporation tax paid		(24)	(69)	(158)
Net cash inflow from operating activities		456	340	854
Cash flows from investing activities
Purchase of property, plant and equipment and other assets		(675)	(564)	(1,136)
Purchase of intangible assets		(7)	(7)	(15)
Proceeds from disposal of property, plant and equipment and other assets		137	256	282
Acquisition of and investment in subsidiaries and businesses, net of cash acquired		-	(1)	(1)
Investment in joint ventures		-	(2)	(2)
Increase in loans to joint ventures		(1)	-	-
Investment in financial assets		40	(50)	(50)
Interest received		8	10	19
Dividends received		-	-	1
Net cash outflow from investing activities		(498)	(358)	(902)
Cash flows from financing activities
Proceeds from issuance of ordinary shares		3	4	17
Repayment of short-term borrowings		-	(11)	(11)
Proceeds from long-term borrowings		119	45	45
Repayment of long-term borrowings		(35)	(24)	(61)
Repayment of capital element of obligations under finance lease payments		(5)	(2)	(3)
Interest elements of obligations under finance lease payments		(2)	(2)	(4)
Dividends paid		(201)	(189)	(269)
Net cash outflow from financing activities		(121)	(179)	(286)
Net decrease in cash and cash equivalents		(163)	(197)	(334)
Opening cash and cash equivalents		500	834	834
Closing cash and cash equivalents	9b	337	637	500

The notes on pages 22 to 32 form an integral part of these consolidated Interim Statements.

Group statement of changes in equity (unaudited)

for the 28 weeks to 1 October 2011

	Called up share capital	Share premium account	Capital redemption and other reserves	Retained earnings	Total equity
	£m	£m	£m	£m	£m
At 20 March 2011	535	1,048	467	3,374	5,424
Profit for the period	-	-	-	302	302
Other comprehensive income/(expense):
Actuarial gains on defined benefit pension scheme (net of tax)	-	-	105	-	105
Available-for-sale financial assets fair value movements (net of tax):
Group	-	-	3	-	3
Joint ventures	-	-	(4)	-	(4)
Cash flow hedges effective portion of changes in fair value (net of tax):
Group	-	-	4	-	4
Joint ventures	-	-	2	-	2
Total comprehensive income/(expense) for the period ended 1 October 2011	-	-	110	302	412
Transactions with owners:
Dividends paid	-	-	-	(201)	(201)
Amortisation of convertible bond equity component	-	-	(2)	2	-
Share-based payment (net of tax)	-	-	-	8	8
Shares vested	-	-	-	1	1
Allotted in respect of share option schemes	2	3	-	(3)	2
At 1 October 2011	537	1,051	575	3,483	5,646
At 21 March 2010	532	1,033	438	2,963	4,966
Profit for the period	-	-	-	347	347
Other comprehensive income/(expense):
Actuarial losses on defined benefit pension scheme (net of tax)	-	-	(106)	-	(106)
Available-for-sale financial assets fair value movements (net of tax):
Group	-	-	9	-	9
Joint ventures	-	-	(1)	-	(1)
Cash flow hedges effective portion of changes in fair value (net of tax):
Group	-	-	(11)	-	(11)
Joint ventures	-	-	(2)	-	(2)
Total comprehensive income/(expense) for the period ended 2 October 2010	-	-	(111)	347	236
Transactions with owners:
Dividends paid	-	-	-	(189)	(189)
Amortisation of convertible bond equity component	-	-	(2)	2	-
Share-based payment (net of tax)	-	-	-	26	26
Allotted in respect of share option schemes	1	4	-	(1)	4
At 2 October 2010	533	1,037	325	3,148	5,043

 

The notes on pages 22 to 32 form an integral part of these consolidated Interim Statements.

  

Group statement of changes in equity (continued) (unaudited)

for the 28 weeks to 2 October 2010

	Called up share capital	Share premium account	Capital redemption and other reserves	Retained earnings	Total equity
	£m	£m	£m	£m	£m
At 21 March 2010	532	1,033	438	2,963	4,966
Profit for the period	-	-	-	640	640
Other comprehensive income/(expense):
Actuarial gains on defined benefit pension scheme (net of tax)	-	-	26	-	26
Available-for-sale financial assets: fair value movements (net of tax):
Group	-	-	11	-	11
Joint ventures	-	-	2	-	2
Cash flow hedges effective portion of changes in fair value (net of tax):
Group	-	-	(8)	-	(8)
Joint ventures	-	-	2	-	2
Total comprehensive income/(expense) for the 52 weeks to 19 March 2011	-	-	33	640	673
Transactions with owners:
Dividends paid	-	-	-	(269)	(269)
Amortisation of convertible bond equity component	-	-	(4)	4	-
Share-based payment (net of tax)	-	-	-	37	37
Allotted in respect of share option schemes	3	15	-	(1)	17
At 19 March 2011	535	1,048	467	3,374	5,424

 

The notes on pages 22 to 32 form an integral part of these consolidated Interim Statements.

Notes to the Interim Results (unaudited)

1    General information

J Sainsbury plc is a public limited company ("Company") incorporated in the United Kingdom, whose shares are publicly traded on the London Stock Exchange.  The Company is domiciled in the United Kingdom and its registered address is 33 Holborn, London EC1N 2HT, United Kingdom.

The Interim Results are unaudited but have been reviewed by the auditors whose report is set out on page 34.  The financial information presented herein does not amount to full statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The Annual Report and Financial Statements 2011 have been filed with the Registrar of Companies.  The Independent Auditors' report on the Annual Report and Financial Statements 2011 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

The financial period represents the 28 weeks to 1 October 2011 (prior financial period 28 weeks to 2 October 2010; prior financial year 52 weeks to 19 March 2011). The financial information comprises the results of J Sainsbury plc and its subsidiaries (the "Group") and the Group's interests in joint ventures.

2    Basis of preparation

The Interim Results have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

The financial information contained in the Interim Results is presented in sterling, rounded to the nearest million (£m) unless otherwise stated.

The financial information contained in the Interim Results should be read in conjunction with the Annual Report and Financial Statements 2011, which have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  The accounting policies have remained unchanged since the year ended 19 March 2011. 

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

The Group has considered the following new standards, interpretations and amendments to published standards that are effective for the Group for the financial year beginning 20 March 2011 and concluded that they are either not relevant to the Group or that they do not have a significant impact on the Group's financial statements.

·     IAS 24 'Related Party Disclosures' revised definition of related parties

·     IFRIC 19 'Extinguishing financial liabilities with equity instruments'

·     Amendment to IFRIC 14 'Prepayments of a minimum funding requirement'

·     Amendments to various IFRSs and IASs arising from the May 2010 Annual Improvements to IFRSs by the IASB

3    Non-GAAP performance measures

Certain items recognised in reported profit before tax can vary significantly from year to year and therefore create volatility in reported earnings which does not reflect the Group's underlying performance. The Directors believe that the 'underlying profit before tax' ("UPBT") and 'underlying diluted and basic earnings per share' measures presented provide a clear and consistent presentation of the underlying performance of Sainsbury's ongoing business for shareholders.  Underlying profit is not defined by IFRS and therefore may not be directly comparable with the 'adjusted' profit measures of other companies.  The adjusted items are:

·     Profit/loss on disposal of properties;

·     Investment property fair value movements - these reflect the difference between the fair value of an investment property at the reporting date and its carrying amount at the previous reporting date;

·     Financing fair value movements - these are fair value gains and losses on non-derivative financial assets and liabilities carried at amortised cost, on derivatives relating to financing activities and on hedged items in fair value hedges;

·     Impairment of goodwill;

·     The financing element of IAS 19 'Employee Benefits'; and

·     One-off items - these are items which are material and infrequent in nature and do not relate to the Group's underlying performance.

The adjustments made to reported profit before tax to arrive at underlying profit before tax are:

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Underlying profit before tax	354	332	665
Profit on disposal of properties (1)	39	106	108
Investment property fair value movements	3	20	39
Financing fair value movements (2)	(10)	6	7
IAS 19 pension financing credit	9	2	3
One-off items (3)	-	-	5
Total adjustments	41	134	162
Profit before tax	395	466	827

(1)    Profit on disposal of properties for the 28 weeks to 1 October 2011 comprised £38 million for the Group (2 October 2010: £106 million) and £1 million for

         the joint ventures (2 October 2010: £nil).

(2)    Financing fair value movements for the 28 weeks to 1 October 2011 comprised £(7) million for the Group (2 October 2010: £7 million) and £(3) million for

         the joint ventures (2 October 2010: £(1) million).

(3)    The £5 million one-off item for the 52 weeks to 19 March 2011 related to the release of a disposal provision which was no longer required.

4    Operating segments

The Group's businesses are organised into three operating segments:

·     Retailing (Supermarkets and Convenience);

·     Financial services (Sainsbury's Bank joint venture); and

·     Property investment (The British Land Company PLC joint venture and Land Securities PLC joint venture).

Management have determined the operating segments based on the information provided to the Operating Board (the Chief Operating Decision Maker) to make operational decisions on the management of the Group. All material operations and assets are in the UK.  The business of the Group is not subject to highly seasonal fluctuations although there is an increase in trading in the period leading up to Christmas.  The Group has continued to include additional voluntary disclosure analysing the Group's Financial services and Property investment joint ventures into separate reportable segments.

Revenue from operating segments is measured on a basis consistent with the income statement.  All revenue is generated by the sale of goods and services.  Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.  The reconciliation provided below reconciles underlying operating profit from each of the segments disclosed to profit before tax.

28 weeks to 1 October 2011	Retailing £m	Financial services £m	Property investment £m	Group £m
Segment revenue	11,693	-	-	11,693
Underlying operating profit	396	-	-	396
Underlying finance income	9	-	-	9
Underlying finance costs	(66)	-	-	(66)
Underlying share of post-tax profit from joint ventures	-	7	8	15
Underlying profit before tax	339	7	8	354
Profit on disposal of properties	38	-	1	39
Investment property fair value movements	-	-	3	3
Financing fair value movements	(7)		(3)	(10)
IAS 19 pension financing credit	9	-	-	9
Profit before tax	379	7	9	395
Income tax expense				(93)
Profit for the financial period				302
Assets	11,335	-	-	11,335
Investment in joint ventures	-	120	408	528
Segment assets	11,335	120	408	11,863
Segment liabilities	(6,217)	-	-	(6,217)

4    Operating segments (continued)

28 weeks to 2 October 2010	Retailing £m	Financial services £m	Property investment £m	Group £m
Segment revenue	11,020	-	-	11,020
Underlying operating profit	370	-	-	370
Underlying finance income	11	-	-	11
Underlying finance costs	(62)	-	-	(62)
Underlying share of post-tax profit from joint ventures	-	6	7	13
Underlying profit before tax	319	6	7	332
Profit on disposal of properties	106	-	-	106
Investment property fair value movements	-	-	20	20
Financing fair value movements	7	-	(1)	6
IAS 19 pension financing credit	2	-	-	2
Profit before tax	434	6	26	466
Income tax expense				(119)
Profit for the financial period				347
Assets	10,740	-	-	10,740
Investment in joint ventures	-	107	359	466
Segment assets	10,740	107	359	11,206
Segment liabilities	(6,163)	-	-	(6,163)

52 weeks to 19 March 2011	Retailing £m	Financial services £m	Property investment £m	Group £m
Segment revenue	21,102	-	-	21,102
Underlying operating profit	738	-	-	738
Underlying finance income	19	-	-	19
Underlying finance costs	(116)	-	-	(116)
Underlying share of post-tax profit from joint ventures	-	11	13	24
Underlying profit before tax	641	11	13	665
Profit on disposal of properties	108	-	-	108
Investment property fair value movements	-	-	39	39
Financing fair value movements	10	-	(3)	7
IAS 19 pension financing credit	3	-	-	3
One-off item (note 3)	5	-	-	5
Profit before tax	767	11	49	827
Income tax expense				(187)
Profit for the financial year				640
Assets	10,897	-	-	10,897
Investment in joint ventures	-	115	387	502
Segment assets	10,897	115	387	11,399
Segment liabilities	(5,975)	-	-	(5,975)

5    Finance income and finance costs

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Interest on bank deposits and other financial assets	9	11	19
IAS 19 pension financing credit	9	2	3
Financing fair value gains (1)	-	7	10
Finance income	18	20	32
Borrowing costs:
Secured borrowings	(58)	(51)	(97)
Unsecured borrowings	(24)	(21)	(39)
Obligations under finance leases	(2)	(2)	(4)
Provisions - amortisation of discount	(1)	(1)	(3)
	(85)	(75)	(143)
Other finance costs:
Interest capitalised - qualifying assets	19	13	27
Financing fair value losses (1)	(7)	-	-
Finance costs	(73)	(62)	(116)

(1)    Financing fair value gains and losses relate to fair value adjustments on non-derivative financial assets and liabilities carried at amortised cost and on derivatives relating to financing activities and hedged items in fair value hedges.

6    Income tax expense

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Current tax expense	28	119	163
Deferred tax expense	65	-	24
Total income tax expense in income statement	93	119	187
Underlying tax rate	26.6%	26.5%	26.0%
Effective tax rate	23.5%	25.5%	22.6%
	£m	£m	£m
Income tax expense on underlying profit	94	88	173
Tax on items below:
Profit on sale of properties	-	19	3
Financing fair value movements	-	-	3
IAS 19 pension financing element	-	1	1
Revaluation of deferred tax balances	(1)	11	7
Total income tax expense in income statement	93	119	187

The current and deferred tax in relation to the Group's defined benefit pension scheme's actuarial gains and losses and available-for-sale fair value movements have been charged or credited through other comprehensive income. 

In the March 2011 Budget statement, it was announced that the main rate of UK corporation tax would reduce from 26 per cent to 25 per cent with effect from 1 April 2012. This was substantively enacted in July 2011 and hence the effect of the change on the deferred tax balances has been included in the figures above. 

Further changes to the rate are proposed to reduce the rate by 1 per cent per annum to 23 per cent by 1 April 2014, but have not yet been substantively enacted and therefore are not included in the figures above.  

7    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 Plan trusts, which are treated as cancelled.

For diluted earnings per share, the earnings attributable to the ordinary shareholders are adjusted by the interest on the convertible bonds (net of tax).  The weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares.  These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and the number of shares that would be issued if all convertible bonds are assumed to be converted.

Underlying earnings per share is provided by excluding the effect of any profit or loss on disposal of properties, investment property fair value movements, impairment of goodwill, financing fair value movements, IAS 19 pension financing element and one-off items that are material and infrequent in nature. This alternative measure of earnings per share is presented to reflect the Group's underlying trading performance.

All operations are continuing for the periods presented.

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	million	million	million
Weighted average number of shares in issue	1,868.6	1,857.3	1,858.7
Weighted average number of dilutive share options	11.7	9.7	16.9
Weighted average number of dilutive convertible bonds	45.4	45.4	45.4
Total number of shares for calculating diluted earnings per share	1,925.7	1,912.4	1,921.0
	£m	£m	£m
Profit for the financial period	302	347	640
Add interest on convertible bonds, net of tax	5	5	10
Diluted earnings for calculating diluted earnings per share	307	352	650
	£m	£m	£m
Profit for the financial period attributable to equity holders of the parent	302	347	640
(Less)/add (net of tax):
Profit on disposal of properties	(39)	(87)	(105)
Investment property fair value movements	(3)	(20)	(39)
Financing fair value movements	10	(6)	(4)
IAS 19 pension financing credit	(9)	(1)	(2)
One-off items (note 3)	-	-	(5)
Revaluation of deferred tax balances	(1)	11	7
Underlying profit after tax	260	244	492
Add interest on convertible bonds, net of tax	5	5	10
Diluted underlying profit after tax	265	249	502
	pence	pence	pence
	per share	per share	per share
Basic earnings	16.2	18.7	34.4
Diluted earnings	15.9	18.4	33.8
Underlying basic earnings	13.9	13.1	26.5
Underlying diluted earnings	13.8	13.0	26.1

8    Dividend

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
Amounts recognised as distributions to equity holders in the period:
Dividend per share (pence)	10.80	10.20	14.50
Total dividend charge (£m)	201	189	269

Post the period end, an interim dividend of 4.5 pence per share (2 October 2010: 4.3 pence per share) has been approved by the Board of Directors for the financial year ending 17 March 2012, resulting in a total interim dividend of £84 million (2 October 2010: £80 million).  The interim dividend was approved by the Board on 8 November 2011 and as such has not been included as a liability at 1 October 2011.

9    Notes to the cash flow statement

(a)  Reconciliation of operating profit to cash generated from operations

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Operating profit	434	476	851
Adjustments for:
Depreciation expense	253	246	468
Amortisation expense	7	8	14
Profit on disposal of properties	(38)	(106)	(108)
Foreign exchange differences	2	6	5
Share-based payment expense	8	27	35
Retirement benefit obligations (1)	(9)	-	(49)
Operating cash flows before changes in working capital	657	657	1,216
Changes in working capital:
Increase in inventories	(164)	(107)	(110)
Increase in trade and other receivables	(116)	(123)	(64)
Increase in trade and other payables	178	39	105
(Decrease)/increase in provisions and other liabilities	(2)	4	(9)
Cash generated from operations	553	470	1,138

(1)    The adjustment for retirement benefit obligations reflects the difference between the IAS 19 service charge of £32 million (2 October 2010: £30 million,

         19 March 2011: £56 million) for the defined benefit scheme and the cash contributions of £41 million made by the Group to the defined benefit scheme

        (2 October 2010: £30 million, 19 March 2011: £105 million).

(b) Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise the following:

	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Cash and cash equivalents	364	651	501
Bank overdrafts	(27)	(14)	(1)
	337	637	500

10  Analysis of net debt

	1 October 2011	2 October  2010	19 March 2011
	£m	£m	£m
Non-current assets
Interest bearing available-for-sale financial assets	34	35	36
Derivative financial instruments	43	37	29
	77	72	65
Current assets
Cash and cash equivalents	364	651	501
Interest bearing deposit	-	40	40
Derivative financial instruments	78	67	52
	442	758	593
Current liabilities
Bank overdrafts	(27)	(14)	(1)
Borrowings	(128)	(93)	(70)
Obligations under finance leases	(10)	(3)	(3)
Derivative financial instruments	(87)	(75)	(59)
	(252)	(185)	(133)
Non-current liabilities
Borrowings	(2,285)	(2,309)	(2,285)
Obligations under finance leases	(93)	(57)	(54)
Derivative financial instruments	(4)	(1)	-
	(2,382)	(2,367)	(2,339)
Total net debt	(2,115)	(1,722)	(1,814)

Reconciliation of net cash flow to movement in net debt

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Net debt at beginning of the period	(1,814)	(1,549)	(1,549)
Decrease in cash and cash equivalents	(163)	(197)	(334)
Increase in interest bearing available-for-sale assets (1)	-	10	10
(Decrease)/increase in interest bearing deposits	(40)	40	40
Net (increase)/decrease in borrowings (1)	(43)	(24)	12
Net decrease in derivatives (1)	-	2	6
Net (increase)/decrease of obligations under finance leases	(46)	2	3
Fair value movements	(9)	(6)	(4)
Other non-cash movements	-	-	2
Net debt at the end of the period	(2,115)	(1,722)	(1,814)

(1)    Excluding fair value movements.

The Group maintains a £690 million syndicated revolving credit facility due October 2015 for standby purposes. Interest on drawings under this facility is charged at a margin over LIBOR. There were £nil drawings under the facility as at 1 October 2011 (2010: £nil drawings).

In May 2011, the Group entered into a £50 million master sale and hire purchase facility with respect to certain funded and moveable in-store assets.  During the half year a total of £50 million was advanced under the facility with payment instalments scheduled over seven years.

In July 2011, the Group entered into a bilateral £25 million three-year term loan.  The loan was fully drawn at the balance sheet date.

In September 2011, the Group entered into a bilateral €50 million five-year term loan.  The loan was fully drawn on 30 September 2011 and the proceeds swapped into sterling.

11  Retirement benefits

Retirement benefits relate to the funded defined benefit scheme, the Sainsbury's Pension Scheme (the 'Scheme'), and an unfunded pension liability relating to certain senior employees. The Scheme was closed to new employees on 31 January 2002.  The assets of this Scheme are held separately from the Group's assets.

The Scheme was subject to a triennial valuation carried out by Towers Watson, the Scheme's independent actuaries at March 2009 on the projected unit basis.  The retirement benefit obligations at 1 October 2011 have been calculated, where appropriate, on a basis consistent with this valuation.

The unfunded pension liability is unwound when each employee reaches retirement and takes their pension from the Group payroll or is crystallised in the event of an employee leaving or retiring and choosing to take the provision as a one-off cash payment.

The Consumer Price Index (CPI) rather than the Retail Price Index (RPI) has been used as the basis for inflationary increases to pensions in all cases where this is permitted by the Scheme rules.

The amounts recognised in the balance sheet, based on valuations performed by Towers Watson, are as follows:

	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Present value of funded obligations	(4,793)	(5,058)	(4,945)
Fair value of plan assets	4,689	4,486	4,614
	(104)	(572)	(331)
Present value of unfunded obligations	(9)	(9)	(9)
Retirement benefit obligations	(113)	(581)	(340)
Deferred income tax (liability)/asset	(75)	166	99
Net retirement benefit obligations	(188)	(415)	(241)
	1 October	2 October	19 March
	2011	2010	2011
	%	%	%
Discount rate	5.5	5.2	5.5
Inflation rate (RPI)	3.1	3.0	3.3
Real discount rate	2.4	2.2	2.2

The net retirement benefit obligations and the associated deferred income tax liability or asset are shown within different line items on the balance sheet.  The deferred tax liability or asset includes the impact of the Sainsbury's Property Scottish Limited Partnership.

The amounts recognised in the income statement in respect of the IAS 19 charges for the defined benefit scheme are as follows:

	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Included in underlying profit before tax:
IAS 19 pension service costs	(32)	(30)	(56)
Excluded from underlying profit before tax:
Interest cost on pension scheme liabilities	(145)	(143)	(265)
Expected return on plan assets	154	145	268
IAS 19 pension financing credit	9	2	3
Total IAS 19 income statement expense	(23)	(28)	(53)

12  Capital expenditure and commitments

In the financial period, there were additions to property, plant and equipment of £661 million (2 October 2010: £671 million) and additions to intangible assets of £4 million (2 October 2010: £15 million).

In the financial period, there were disposals of property, plant and equipment with a net book value of £108 million (2 October 2010: £233 million) and disposals of intangible assets of £nil (2 October2010: net book value £nil).

At 1 October 2011, capital commitments contracted, but not provided for by the Group, amounted to £281 million (2 October 2010: £235 million).

13  Related party transactions

The Group's significant related parties are its joint ventures as disclosed in its Annual Report and Financial Statements 2011. 

Transactions with joint ventures

For the 28 weeks to 1 October 2011, the Group entered into various transactions with joint ventures as set out below.

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Management services provided	7	9	14
Interest income received in respect of interest bearing loans	-	2	1
Dividend income received	-	-	1
Sale of assets (1)	-	74	74
Purchase of assets	-	-	(16)
Acquisition of companies	-	-	(58)
Rental expenses paid	(39)	(41)	(72)
Loan to joint venture	1	-	-

(1)    This income was generated as part of a non-cash substitution of properties, which generated a profit of £13 million for the Group.

Balances arising from transactions with joint ventures

	28 weeks to	28 weeks to	52 weeks to
	1 October	2 October	19 March
	2011	2010	2011
	£m	£m	£m
Receivables
Other receivables	2	3	1
Loans due from joint ventures:
Floating rate subordinated undated loan capital	25	25	25
Floating rate subordinated dated loan capital	30	30	30
Other	9	-	9
Payables
Other payables	(48)	(48)	(48)

Principal risks and uncertainties

Risk is an inherent part of doing business.  The J Sainsbury plc Board has overall responsibility for the management of the principal risks and internal control of the Company.  The Board has identified the following factors as the principal potential risks to the successful operation of the business.  These risks, along with the events in the financial markets and their potential impacts on the wider economy, remain those most likely to affect the Group in the second half of the year.

·     Business continuity and acts of terrorism

·     Business strategy

·     Colleague engagement, retention and capability

·     Environment and sustainability

·     Financial strategy and treasury risk

·     Fraud

·     Health and safety

·     IT systems and infrastructure

·     Pension risk

·     Product quality

·     Regulatory environment

·     Trading environment

For greater detail of these risks, which are unchanged from the Group's Annual Report and Financial Statements 2011, please refer to page 36 and 37 of the Group's Annual Report and Financial Statements 2011, a copy of which is available on the Group's website www.j-sainsbury.co.uk.

Statement of Directors' responsibilities

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

The Directors of J Sainsbury plc are listed in the J Sainsbury plc Annual Report and Financial Statements 2011. On 13 July 2011, Darren Shapland stood down from his position as Group Development Director.

By order of the Board

Justin King

Chief Executive

8 November 2011

John Rogers

Chief Financial Officer

8 November 2011

Independent review report to J Sainsbury plc

 

Introduction

We have been engaged by the Company to review the interim financial information included in the half-yearly financial report ("Interim Results") for the 28 weeks ended 1 October 2011, which comprises the Group income statement, Group statement of comprehensive income, Group balance sheet, Group cash flow statement, Group statement of changes in equity and related notes. We have read the other information contained in the Interim Results and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

Directors' responsibilities

The Interim Results is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Results in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The interim financial information included in the Interim Results has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the interim financial information included in the Interim Results based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information included in the Interim Results for the 28 weeks ended 1 October 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

London

8 November 2011

Notes:

The maintenance and integrity of the J Sainsbury plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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