| |
 |
|
 |
| |
|
| |
|
2003
£m |
2002
£m |
|
|
|
|
| |
|
|
|
| |
Turnover including
VAT and sales taxA |
18,495 |
18,206 |
| |
VAT and sales tax |
(1,065) |
(1,044) |
| |
|
|
|
| |
| |
Continuing operations |
17,430 |
17,154 |
| |
Discontinued operations |
– |
8 |
| |
Turnover excluding
VAT and sales tax |
17,430 |
17,162 |
| |
|
|
|
| |
| |
Continuing operations
– operating profit before exceptional costs
and amortisation of goodwill |
752 |
679 |
| |
Exceptional operating costs |
(65) |
(38) |
| |
Amortisation of goodwill |
(13) |
(14) |
| |
|
|
|
| |
Continuing operations
– operating profit |
674 |
627 |
| |
Discontinued operations
– operating loss |
– |
(2) |
| |
|
|
|
| |
| |
Group operating profit |
674 |
625 |
| |
Share of profit/(loss) in
joint ventures |
3 |
(1) |
| |
Loss on sale of properties |
(11) |
(4) |
| |
Disposal of operations –
discontinued |
61 |
– |
| |
|
|
|
| |
Profit on ordinary
activities before interest |
727 |
620 |
| |
Net interest payable and
similar items |
(60) |
(49) |
| |
|
|
|
| |
| |
Underlying profit
on ordinary activities before taxB |
695 |
627 |
| |
Exceptional items |
(15) |
(42) |
| |
Amortisation of goodwill |
(13) |
(14) |
| |
|
|
|
| |
Profit on ordinary
activities before tax |
667 |
571 |
| |
Tax on profit on ordinary
activities |
(206) |
(200) |
| |
|
|
|
| |
Profit on ordinary
activities after tax |
461 |
371 |
| |
Equity minority interest |
(7) |
(7) |
| |
|
|
|
| |
Profit for the financial
year |
454 |
364 |
| |
Equity dividends |
(298) |
(285) |
| |
|
|
|
| |
Retained profit for
the financial year |
156 |
79 |
| |
|
|
|
| |
| |
Basic earnings per
share |
23.7p |
19.1p |
| |
Underlying earnings
per shareB |
24.2p |
21.5p |
| |
Diluted earnings
per share |
23.7p |
18.9p |
| |
Underlying diluted
earnings per shareB |
24.1p |
21.3p |
| |
|
|
|
| |
| |
|
| |
|
| |
Group sales, including
VAT and sales tax, from
continuing operations
were £18,495 million
(2002: £18,198 million),
an increase of 1.6 per
cent. |
| |
|
| |
Total underlying operating
profit (before exceptional
operating costs and amortisation
of goodwill) from continuing
operations at £752
million (2002: £679
million), was 10.8 per
cent up on the previous
year, driven by a 13.3
per cent increase in UK
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. |
| |
|
| |
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). |
| |
|
| |
Underlying profit before tax (before exceptional
items and amortisation of goodwill) at £695
million (2002: £627 million) was 10.8 per
cent up on the previous year, the second year of
double-digit profit growth. |
| |
|
| |
Profit before tax, after
exceptional items and
amortisation of goodwill
was £667 million
(2002: £571 million)
an increase of 16.8 per
cent. |
| |
|
| |
The Group’s underlying
tax charge (before exceptional
items and amortisation
of goodwill) at £226
million (2002: £210
million), gives an underlying
rate of 32.5 per cent
(2002: 33.5 per cent). |
| |
|
| |
Underlying earnings
per share, before exceptional
items and amortisation
of goodwill increased
by 12.6 per cent to 24.2
pence (2002: 21.5 pence).
Basic earnings per share
increased by 24.1 per
cent to 23.7 pence (2002:
19.1 pence). |
| |
|
| |
A final dividend of
11.36 pence per share
is proposed, which represents
an increase of 5.0 per
cent over last year. The
total proposed dividend
for the year is 15.58
pence which represents
an increase of 5.0 per
cent on last year and
dividend cover of 1.52
times. This increase reflects
the Directors’ aim
to continue to deliver
double-digit profit growth
during the coming year
and, if achieved, to increase
the dividend by 5.0 per
cent, thereby recognising
the need to restore dividend
cover. |
| |
|
| |
|
| |
|
| |
Results
from continuing operations |
| |
|
| |
Sales and underlying
operating profit before
exceptional costs and
amortisation of goodwill
were as follows: |
| |
|
Sales1
2003 |
Underlying
operating profit2
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 |
| |
|
|
|
|
|
| |
| |
|
| |
|
| |
Sainsbury’s
Supermarkets’
sales increased by 3.0
per cent to £15,301
million (2002: £14,860
million). Like–for–like
sales, including petrol,*
were up 2.3 per cent for
the year. A total of £210
million in cost efficiencies
was delivered in the year,
in addition to the £90
million and £160
million in the last two
years. The Board are confident
of achieving £250
million of savings in
2003/04, thereby delivering
in excess of the targeted
£700 million by
March 2004. Further cost
savings of at least £250
million are expected in
2004/05. |
| |
|
| |
Underlying operating
profit of £572 million
includes the investment
in Sainsbury’s to
You, the company’s
home delivery service,
whose results have improved
by £21 million due
to the acquisition and
retention of new customers
increasing sales, lower
customer acquisition costs
and improved operating
efficiencies. |
| |
|
| |
Underlying operating
profit was up by 13.3
per cent to £572
million (2002: £505
million). Operating margins
(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. The store
development programme,
a significant contribution
from the ex-Grand Union
stores and excellent cost
control all contributed
to strong profit growth. |
| |
|
| |
Operating margin continues
to improve, increasing
from 4.5 per cent to 4.8
per cent. |
| |
|
| |
Sainsbury’s
Bank, achieved
net income growth of 31.1
per cent and maintained
profits at £22 million
(2002: £22 million),
after substantial revenue
investment in growing
the long-term customer
base of the business.
Adjusting for a VAT credit
in 2002, underlying profit
increased by 10.0 per
cent. |
| |
|
| |
JS
Developments, made
an operating profit of
£19 million (2002:
£15 million). |
| |
|
| |
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) |
| |
|
|
|
|
| |
| |
|
| |
|
| |
UK exceptional business
transformation costs amounted
to £55 million,
including the cost of
providing for the closure
of two major depots. Over
the last two years, these
costs have been in line
with the Board’s
original indications of
between £35 million
and £50 million
per annum. The exceptional
operating costs in Shaw’s
of £10 million 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 amounted
to £15 million compared
to £42 million last
year. |
| |
|
| |
Cash
flow |
| |
|
| |
The Group’s net
debt has increased by
£248 million, during
the year, to £1,404
million increasing Group
gearing to 28 per cent
(2002: 24 per cent). |
| |
|
| |
Operating cash inflow
remained strong at £1,070
million. Cash 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 |
| |
|
|
|
| |
|
| |
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 2004 as a result of
significant additions
of new space during the
year. Group capital expenditure
is forecast to be £1.1
billion for 2004. |
| |
|
| |
|
| |
|
| |
|
| |
Shareholders’
funds |
| |
|
| |
Shareholders’
funds increased by £155
million to £5,003
million. Return on Group
capital employed increased
from 11.1 per cent to
11.5 per cent in the year. |
| |
|
| |
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. |
| |
|
| |
An actuarial valuation
of the Group’s UK
schemes is currently being
prepared which the Board
believes will provide
a more 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. |
| |
|
| |
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. |
| |
|
| |
Roger Matthews
Group Finance Director |
|
|
|
