 |
|
|
|
|
|
| The
results
for
the
year
reflect
the
good
progress
that
has
been
made
in more
challenging
market
conditions.
The
Group’s
underlying
profit
before
tax,
exceptional
items
and
amortisation
of goodwill
has
increased
to £695
million
(2002:
£627
million),
an increase
of 10.8
per
cent,
continuing
the
double-digit
growth
trend
of last
year.
Profit
before
tax,
after
exceptional
items
and
amortisation
of goodwill
was
£667
million
(2002:
£571
million),
an increase
of 16.8
per
cent. |
| |
| Sainsbury’s Supermarkets has
continued to improve its results
with underlying operating profit
(before exceptional operating
costs) growth of 13.3 per cent
year on year. Like–for–like sales
growth* of 2.3 per cent, including
petrol, was satisfactory in a
market where growth returned to
more normal levels. Huge progress
has been made in delivering the
transformation programme with
significant IT systems changes
becoming operational, with two
major new supply chain depots
opening and with the strengthening
of the customer offer, through
the launch of Nectar and other
significant customer focused initiatives.
This investment programme will
drive sales growth and continue
to deliver significant cost efficiencies
over the long-term, strengthening
Sainsbury’s Supermarkets’ competitive
position and its ability to increase
its operating margin over time. |
| |
| Shaw’s, the Group’s US supermarket
chain, also performed well in
challenging economic conditions
with dollar underlying operating
profit (before exceptional operating
costs and amortisation of goodwill)
increasing by 9.7 per cent to
$215 million (2002: $196 million).
The Group’s US dollar denominated
assets are hedged by maintaining
a corresponding amount of debt
in US dollars. The US dollar continued
to depreciate against sterling
in the year which resulted in
lower sterling operating profit,
financing costs and net debt in
sterling terms. At constant exchange
rates, Group sales would have
increased by 2.9 per cent, Group
underlying operating profit by
12.4 per cent and underlying profit
before tax by 12.1 per cent. |
| |
| Sainsbury’s
Bank’s
operating
profit
was
maintained
at £22
million
(2002:
£22
million)
as expected,
resulting
from
a decision
to invest
in accelerating
growth.
Early
results
are
very
encouraging,
with
the
number
of customer
accounts
up by
29 per
cent. |
|
|
|
| |
| Profit
and
loss
account |
2003
£m
|
2002
£m
|
Increase
%
|
|
|
|
|
| |
| Sales1 |
|
|
|
| Continuing
operations |
18,495 |
18,198 |
1.6 |
| Discontinued
operations |
– |
8 |
|
| |
| |
18,495 |
18,206 |
|
| |
| Underlying
operating profit/(loss) |
| Continuing
operations2 |
752 |
679 |
10.8 |
| Discontinued
operations |
– |
(2) |
|
| Net
interest
payable |
(60) |
(49) |
|
| Share
of profit/(loss) in joint ventures |
3 |
(1) |
|
| |
| Underlying
profit
before
tax3 |
695 |
627 |
10.8 |
| Exceptional
operating costs |
(65) |
(38) |
|
| Other
exceptional
items4 |
50 |
(4) |
|
| Amortisation
of
goodwill |
(13) |
(14) |
|
| |
| Profit
before
tax |
667 |
571 |
16.8 |
| Tax |
(206) |
(200) |
|
| |
| Profit
after
tax |
461 |
371 |
|
| Equity
minority
interest |
(7) |
(7) |
|
| |
| Profit
for the year |
454 |
364 |
24.7 |
| |
| Underlying
earnings
per
share5 |
24.2p |
21.5p |
12.6 |
| Basic
earnings
per
share |
23.7p |
19.1p |
24.1 |
| |
| Dividend
per
share |
15.58p |
14.84p |
5.0 |
| |
| |
|
|
|
| |
| 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
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
supermarkets
profits.
This
growth
was
achieved
despite
an adverse
dollar
exchange
movement
and,
as predicted,
profits
maintained
at £22
million,
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
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
£667
million
(2002:
£571
million)
an increase
of 16.8
per
cent. |
| |
| Results
from
continuing
operations |
| |
| Sales
and
underlying
operating
profit
were
as follows: |
|
| |
|
Underlying |
| |
Sales1 |
operating
profit2 |
| 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 |
| |
| |
|
|
|
| |
| Continuing
operations |
| |
| Sainsbury’s
Supermarkets’
sales
increased
by 3.0
per
cent
to £15,301
million
(2002:
£14,860
million),
and
underlying
operating
profit
was
up by
13.3
per
cent
to £572
million
(2002:
£505
million).
Like–for–like
sales*,
including
petrol,
were
up 2.3
per
cent
for
the
year. |
| |
| The
key
drivers
of sales
growth
were
the
continued
store
expansion
and
reinvigoration
programme,
together
with
further
improvements
in the
customer
offer.
In total
39 new
stores
were
opened,
including
24 locals.
In addition,
29 stores
were
extended
and
40 refurbished.
A total
of 850,000
sq ft
of net
new
space
was
added
to the
estate
in the
year,
compared
to 603,000
sq ft
in 2002,
which
equates
to 5.9
per
cent
of floor
space
added
to its
existing
portfolio. |
| |
| Significant
cost
efficiencies
continue
to be
achieved.
A total
of £210
million,
£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 2004,
thereby
delivering
in excess
of the
targeted
£700
million
by March
2004.
Further
cost
savings
of at
least
£250
million
are
expected
in 2005.
The
successful
implementation
of new
systems
and
the
simplification
of end-to-end
processes
are
now
yielding
results.
New
fulfilment
centres
in the
supply
chain,
which
will
yield
substantial
long-term
benefits
of lower
operating
costs,
improved
in-store
availability
and
lower
working
capital
are
starting
to come
on stream.
Savings
have
also
been
achieved
in the
cost
of products,
whilst
maintaining
or increasing
quality. |
| |
| Underlying
operating
profit
of £572
million
(2002:
£505
million)
included
the
investment
in Sainsbury’s
to You,
the
company’s
home
delivery
service
whose
results
have
improved
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.
The
Board
are
confident
that
Sainsbury’s
to You
results
will
continue
to improve
and
reach
break
even
at the
end
of the
new
financial
year.
Sainsbury’s
Supermarkets’
operating
margin
(VAT
inclusive,
excluding
Sainsbury’s
to You)
for
the
year
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,
operating
margins
will
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 and was in the upper
quartile of results published
by other US food retailers. The
store development programme, a
significant contribution from
the ex-Grand Union stores and
excellent cost control all contributed
to strong profit growth. In total,
20 Shaw’s stores were remodelled,
four stores were extended and
seven Star Markets were rebadged
as Shaw’s. Operating margin continues
to improve, increasing from 4.5
per cent to 4.8 per cent. |
| |
| Shaw’s
acquired
17 stores
from
the
liquidator
of Ames
in November
for
$75
million.
This
acquisition,
together
with
the
store
development
pipeline,
will
increase
new
space
by 15
per
cent
by March
2004. |
| |
| Sainsbury’s
Bank,
55 per
cent
owned
by the
Group
and
45 per
cent
owned
by HBoS,
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. |
| |
| The
number
of customers
of Sainsbury’s
Bank
has
grown
by 29
per
cent
in the
year,
loan
balances
increased
by 86
per
cent
and
insurance
sales
have
doubled. |
| |
| Sainsbury’s
Bank
has
an attractive
operating
model
whereby
customer
acquisition
costs
are
lower
than
other
banking
competitors
through
utilising
in–store
merchandising
and
promotion
of financial
services
products. |
| |
| JS
Developments,
the
Group’s
project
based
property
development
company,
completed
ten
projects
in the
year
and,
as a
result,
made
an operating
profit
of £19
million
(2002:
£15
million).
It is
the
Board’s
intention
to sell
the
remaining
property
development
portfolio
in the
current
year
and
to focus
on the
Group’s
core
food
retailing
opportunities. |
| |
| 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). |
| |
| Exceptional
items |
|
| |
2003
£m |
2002
£m |
|
|
|
| |
| Exceptional
operating
costs |
|
|
| UK
Business
Transformation
Programme1 |
(55) |
(30) |
| Shaw’s
Supermarkets
|
(10) |
(8) |
| |
|
|
(65) |
(38) |
| |
| Non-operating
exceptional
items |
|
|
| Profit
on sale
of Homebase |
61 |
– |
| (Loss)/profit on
sale of properties |
|
|
| – Sainsbury’s Supermarkets |
(7) |
(5) |
| – Shaw’s Supermarkets |
(4) |
1 |
| |
| |
50 |
(4) |
| |
| Total
exceptional
items |
(15) |
(42) |
| |
| |
|
|
|
|
| |
| In October 2000, the Board announced
a major transformation programme
in Sainsbury’s Supermarkets including
upgrading the company’s IT systems,
supply chain and store portfolio.
Due to the scale, scope and pace
of this programme it was estimated
that exceptional operating costs
of between £35 million and £50
million per annum would be incurred
for at least three years. These
costs primarily relate to the
closure of depots and stores and
re-organisation costs associated
with this programme. This year,
these costs amounted to £55 million,
including provision 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.
The exceptional operating costs
of £10 million in Shaw’s relate
to the acquisition of stores from
the liquidator of Ames, 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. |
| |
| Taxation |
| |
| 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).
The underlying rate exceeds the
nominal rate of UK corporation
tax principally due to the higher
rate of tax incurred on US profits
and the lack of effective tax
relief on depreciation of UK retail
properties. |
| |
| Earnings
per share and dividends |
| |
| 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. |
| |
| Cash flow |
| |
| 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. Because of the
timing of Easter and the introduction
of new lines, working capital
was broadly flat for the year,
compared to an inflow of £78 million
in the previous year. |
| |
| Summary cash
flow |
|
| |
| |
2003
£m |
2002
£m |
|
|
|
| |
| Operating
cash
inflows |
1,070 |
1,067 |
| |
| Group
net
interest
and
dividends
from
joint
venture |
(54) |
(69) |
| Taxation |
(224) |
(171) |
| Dividends |
(288) |
(275) |
| Payments
for
fixed
assets |
(1,124) |
(1,073) |
| Acquisition
of Ames
stores |
(48) |
- |
| Sale
of fixed
assets
|
130 |
218 |
| |
| Cash
outflow
before
sale
and
purchase
of businesses |
(538) |
(303) |
| Acquisitions
and
disposals |
210 |
3 |
| |
| Net
cash
outflow
before
financing |
(328) |
(306) |
| Issue
of ordinary
share
capital |
3 |
17 |
| Non-cash
movements |
77 |
(8) |
| |
| Increase
in net
debt |
(248) |
(297) |
| |
| Net
debt
|
1,404 |
1,156 |
| |
|
| |
| The sale of the Group’s
remaining investment in Homebase,
together with the related loan
notes generated cash of £184
million. |
| |
| Capital
expenditure |
| |
| Group capital expenditure for
the year was £1,197 million
(2002: £1,159 million),
excluding the £48 million
cost of acquiring stores from
the liquidator of Ames. |
| |
| 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
towards more normal levels at
around £800 million. This includes
continuing spend on new stores
and on extensions, which add valuable
retail space at attractive financial
returns. 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
2003 as a result of significant
additions of new space during
the year. Group capital expenditure
is forecast to be £1.1 billion
for 2004. |
| |
| Treasury
management |
| |
| Treasury policies are reviewed
and approved by the Board. The
Group Chief Executive and Group
Finance Director have joint delegated
authority from the Board to approve
finance transactions up to £300
million and responsibility for
monitoring treasury activity and
performance. |
| |
| The Group’s central treasury
function operates as a cost centre
with Group-wide responsibility
for funding, interest rate and
currency risk management and UK
cash management. Group policy
permits the use of derivative
instruments but only for reducing
exposures arising from underlying
business activity and not for
speculative purposes. Disclosures
regarding derivatives and other
financial instruments are contained
in note
24 to the financial statements. |
| |
| Treasury operations in respect
of Sainsbury’s Bank are managed
separately through HBoS. Sainsbury’s
Bank does not undertake any trading
activities and only uses derivative
instruments to hedge risk. Credit
limits have been established for
all counterparties and these are
reviewed and approved by Sainsbury’s
Bank’s board and the risk management
committee, a subcommittee of the
board. Details of Sainsbury’s
Bank’s interest rate re-pricing
gap are set out in note
24 to the financial statements. |
| |
| Financial
instruments |
| |
| The Group holds or issues financial
instruments to finance its operations
and to manage the interest rate
and currency risks arising from
its sources of finance. Various
other financial instruments e.g.
trade debtors, trade creditors,
accruals and prepayments also
arise as a direct result of the
Group’s commercial operations. |
| |
| The Group finances its operations
by a combination of bank loans,
Commercial Paper, Notes and Bonds
issued in the capital markets,
leases, share capital and cash
generated by operating subsidiaries.
The Group’s long-term borrowings
are principally raised by the
parent company and lent to operating
subsidiaries on commercial terms.
The Group borrows in a range of
currencies at both fixed and floating
rates of interest, using derivatives
where appropriate to generate
the desired currency and interest
rate profile. The derivatives
used for this purpose are interest
rate swaps and options, cross
currency swaps and forward contracts.
The main risks arising from the
Group’s financial instruments
are interest rate, liquidity,
exchange rate and credit risk. |
| |
| Interest
rate risk |
| |
| The Group’s exposure to interest
rate fluctuations is managed through
the use of interest rate swaps
and options. The Group’s objective
is to reduce interest rate volatility
by holding a proportion of the
Group’s net debt at fixed or capped
rates of interest. Group policy
allows the proportion of fixed
rate borrowings to vary between
20 per cent and 80 per cent of
net debt. As at 29 March 2003,
after taking into account the
effect of swaps, the proportion
of the Group’s net debt at fixed
rates of interest was 39 per cent
(2002: 56 per cent) and the average
period for which the fixed rate
financial liabilities, including
finance leases, were fixed was
9.5 years (2002: 6.3 years). |
| |
| Liquidity
risk |
| |
| The Group’s exposure to liquidity
risk is managed by conservative
pre-funding of cash flow, maintaining
a diversity of funding sources
and spreading debt repayment obligations
over a range of maturities. |
| |
| The Group’s principal debt raising
operations are arranged through
the Company’s £750 million Euro
Commercial Paper programme and
£2 billion Euro Medium Term Note
programme. Contingency liquidity
is maintained through the bank
market where the Group holds a
portfolio of 11 committed revolving
credit facilities totalling £635
million as at 29 March 2003. The
facilities all expire within one
year, although facilities of £460
million contain term out options
under which the Company has the
option to draw funds for terms
up to 12 months prior to the maturity
date. The facilities act as a
back stop for the Group’s commercial
paper programme. |
| |
| As at 29 March 2003 there were
no drawings under these facilities
(2002: nil). |
| |
| Group policy requires that
not more than 25 per cent of borrowings
should mature in any one financial
year. The repayment analysis of
the Group’s borrowings is set
out in note
25. As at 29 March 2003 the
weighted average maturity of the
Group’s borrowings was 9.6 years
(2002: 6 years). |
| |
| Currency
risk |
| |
| The Group is subject to currency
exposure on the translation of
the US dollar denominated income
and net assets of its US subsidiaries.
The Group’s policy is to minimise
volatility arising from unfavourable
exchange rate movements by arranging
the currency composition of net
debt to match the Group’s US dollar
denominated cash flows. Exchange
movements on US dollar liabilities
created in the UK for the purpose
of hedging US investments are
taken directly to reserves. The
Group does not actively hedge
exchange rate movements on the
translation of overseas profits
except where those profits are
matched by foreign currency interest
costs. |
| |
| The Group also incurs currency
exposure on overseas trade purchases
made in currencies other than
the relevant operating subsidiaries’
functional currency. The Company
employs a layered hedging programme
of rolling forward contracts to
reduce the exchange rate risk
associated with these purchases,
which may be either contracted
or not contracted. Gains and losses
on these contracts are deferred
until recognition of the purchase,
which is normally within one year. |
| |
| Credit
risk |
| |
| The Group’s exposure to credit
risk is managed by limiting credit
positions to banks or financial
institutions with first-class
credit ratings. Counter party
positions are monitored on a regular
basis and dealing activity is
controlled through dealing mandates
and the operation of standard
settlement instructions. |
| |
| Balance
sheet |
| |
| Shareholders’ funds increased
by £155 million to £5,003 million
and net debt has increased by
£248 million to £1,404 million
in the year, increasing Group
gearing to 28 per cent (2002:
24 per cent). As a result of issuing
two long-term bonds in the year,
the weighted average maturity
of the Group’s borrowings increased
from 6 years to 9.6 years. Return
on Group capital employed increased
from 11.1 per cent to 11.5 per
cent in a year of major capital
investment. |
| |
| Summary
balance sheet |
|
| |
2003
£m |
2002
£m |
|
|
|
| |
| Fixed
assets |
7,878 |
7,343 |
| Stock |
800 |
751 |
| Debtors
and
other
assets |
2,694 |
2,591 |
| Cash
and
current
asset
investments |
659 |
386 |
| Debt |
(2,063) |
(1,542) |
| Net
debt |
(1,404) |
(1,156) |
| Other
creditors
and
provisions |
(4,896) |
(4,620) |
| |
| Net
assets |
5,072 |
4,909 |
| |
| Equity shareholders’
funds |
5,003 |
4,848 |
| Minority
interests |
69 |
61 |
| |
| Capital
employed |
5,072 |
4,909 |
| |
|
| |
| 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
opportunities
to secure
their
financial
well-being
for
retirement. |
| |
| The
Board
believes,
irrespective
of the
notional
numbers
reported
under
FRS
17,
that
the
actuarial
valuation
of the
Group’s
UK schemes,
currently
being
prepared,
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:
£257
million).
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 (excluding
settlement
and
curtailment
gains)
profit
and
loss
account
charge
for
the
year
would
have
been
£13
million
higher
than
the
normal
pension
cost. |
| |
| IT
outsourcing |
| |
| As
outlined
last
year
the
importance
of the
need
to completely
replatform
and
redesign
all
of Sainsbury’s
Supermarkets’
IT systems
was
identified
in October
2000.
The
Board
felt
that,
in view
of the
scale
and
pace
necessary,
outside
expertise
was
required.
As a
result,
in November
2000,
Sainsbury’s
Supermarkets
entered
into
an agreement
with
Swan
Infrastructure
plc
(‘Swan’),
a wholly-owned
subsidiary
of Barclays
UK Infrastructure
Fund.
Under
the
terms
of this
agreement,
Sainsbury’s
Supermarkets
sold
its
IT assets
to Swan,
which
will
manage
its
IT operations
and
build
a new
systems
infrastructure
for
Sainsbury’s
Supermarkets
under
a seven
year
contract.
In turn,
Swan
contracted
with
Accenture
to manage
IT operations
for
Sainsbury’s
Supermarkets
and
build
the
new
system.
All
Sainsbury’s
Supermarkets’
IT staff
were
transferred,
through
Swan,
to Accenture. |
| |
| Since
2000,
Accenture
has
been
wholly
responsible
for
managing
the
ongoing
operation
of IT
support
and
systems
to specified
service
levels.
In addition,
Accenture
is responsible
for
developing
and
delivering
a new
systems
infrastructure
to position
the
UK supermarket
business
with
modern
state
of the
art
technology.
This
programme
is progressing
well
and
will
deliver
substantial
business
benefits. |
| |
| Details
of the
financial
commitment
under
the
seven year
contract
with
Swan
are
given
in note
31.
Its
operations
are
funded
by net
borrowings
which
will
peak
at £540
million. |
| |
| Shareholder
return |
| |
| The
share
price
decreased
from
399.5
pence
at the
start
of the
financial
year
to 226
pence
at 29
March
2003
with
a range
of 220
pence
to 422
pence.
The
Company’s
equity
market
capitalisation
at 29
March
2003
was
£4.4
billion. |
| |
| Total
shareholder
return
(‘TSR’)
was
negative
37.7
per
cent
(the
increase
in the
value
of a
share
including
reinvested
dividend
based
on the
average
share
price
for
the
three
months
ended
29 March
2003
compared
with
the
equivalent
period
in 2002),
due
to the
overall
fall
in the
stock
market
and
the
uncertainty
surrounding
the
various
potential
bidders
for
Safeway
plc,
together
with
the
implications
on the
future
structure
of the
UK food
retailing
market.
Over
a three
year
period
from
31 March
2000,
the
Company’s
TSR
has
outperformed
the
FTSE
100
Index
by 48
per
cent. |
|
|
|
|
|
|
