REG - Sainsbury(J) PLC - Final Results
25/04/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240425:nRSY9399La&default-theme=true
RNS Number : 9399L Sainsbury(J) PLC 25 April 2024
25 April 2024
J Sainsbury Plc
Preliminary Results for the 52 weeks ended 2 March 2024
Strongest year of grocery performance driving momentum for Next Level
Sainsbury's strategy
The strength of our grocery performance over the last year, with record market
share gains(1) and volume growth accelerating every quarter, is a clear
demonstration of the success of our Food First strategy. Over the last three
years this strategy has enabled us to make consistent and balanced choices for
customers, colleagues, suppliers and shareholders. Customers continue to
respond to the investments we have made in value, innovation, availability and
service and are doing more of their grocery shopping with Sainsbury's(2).
Higher grocery volumes are feeding through to better profit leverage. This has
driven profit and free cash flow results above the top end of our guidance
range despite lower Financial Services profits and softer General Merchandise
trading.
We are building on this momentum and the strength of our position in the UK
grocery market through our Next Level Sainsbury's strategy, announced in
February. We expect to continue to outperform the grocery market and for this
volume advantage to drive strong profit leverage in the year ahead, with
retail underlying operating profit of between £1,010 million and £1,060
million, growth of between five per cent and ten per cent. Reflecting the
strength of our balance sheet and our commitment to deliver enhanced
shareholder returns, we announced in February that we will buy back £200
million of shares in 2024/25. We will commence the buyback programme tomorrow.
Financial Summary 2023/24 2022/23 YoY
Business performance
Group sales (inc. VAT) £36,337m £35,157m 3.4%
Retail sales (inc. VAT, excl. fuel) £30,615m £28,664m 6.8%
Retail underlying operating profit £966m £926m 4.3%
Financial services underlying operating profit £29m £46m (37.0)%
Underlying profit before tax £701m £690m 1.6%
Underlying basic earnings per share 22.1p 23.0p (3.9)%
Proposed Full-year dividend per share 13.1p 13.1p -
Net debt (inc. lease liabilities) £(5,554)m £(6,344)m £790m
Statutory performance
Group revenue (excl. VAT, inc. fuel) £32,700m £31,491m 3.8%
Profit before tax £277m £327m (15.3)%
Profit after tax £137m £207m (33.8)%
Basic earnings per share 5.9p 9.0p (34.4)%
Financial Highlights
· Retail sales (excl. fuel) up 6.8%. Grocery sales growth of 9.4%, General
Merchandise sales up 1.2% (down 0.5% including the impact of the closure of
Argos in the Republic of Ireland) and Clothing sales down 6.4%. Fuel sales
down 14.3%, reflecting lower input prices. Statutory sales up 3.8%
· Retail underlying operating profit of £966 million, up 4.3%, with
volume-driven grocery profit growth and continued strong delivery of cost
savings partially offset by weaker General Merchandise profits
· Financial Services underlying operating profit of £29 million versus £46
million last year, reflecting the impact of higher funding costs from
increased interest rates not being fully passed on to customers, as previously
guided
· Underlying profit before tax of £701 million, up 1.6%
· Statutory profit before tax of £277 million, down 15.3%. Non-underlying items
predominantly relate to the restructuring of the Financial Services division
· Retail free cashflow of £639 million, broadly flat year-on-year
· Net debt including leases of £5,554 million, £790 million lower, reflecting
strong cash generation and a £372 million net reduction as a result of the
Highbury and Dragon property transaction(3). Net debt to EBITDA 2.6x
· Proposed final dividend of 9.2 pence, full year dividend of 13.1 pence, in
line with last year
2024/25 Outlook
· We are confident of delivering strong profit growth in the year ahead. We
expect to continue to grow grocery volumes ahead of the market, driving profit
leverage. Combined with continued growth in Nectar profit contribution, a
resilient Argos profit performance and continued strong cost saving delivery,
we expect this to deliver retail underlying operating profit of between
£1,010 million and £1,060 million, growth of between five per cent and ten
per cent
· Our strong grocery momentum has continued into the new financial year and
while we will face tougher comparatives, we expect to continue to generate
volume growth and outperform the market. Against last year's cool and wet
Summer, we additionally expect a sales benefit across the business from more
normal seasonal weather
· We expect a lower profit contribution from Financial Services this year as we
prepare to change the scope of the business. We expect a continued healthy
profit contribution from the commission-based products we will retain.
However, profits from our core banking products will continue to be impacted
by higher funding costs and will additionally be impacted by preparations for
phased withdrawal from these areas. Therefore we expect these products to be
loss-making and hence a net Financial Services contribution of between break
even and £15 million
· We expect to generate Retail free cash flow of at least £500 million
Simon Roberts, Chief Executive of J Sainsbury plc, said:
"We said we'd put food back at the heart of Sainsbury's and that's what we've
done. Our food business is firing on all cylinders. We have the best
combination of value and quality in the market and that's winning us customers
from all our key competitors, driving consistent volume market share growth as
more customers choose us for their weekly shop and all their special
occasions.
"We've done that by relentlessly investing in price; £780 million over the
past three years. We know it's still tough out there for so many households
and we're doing all we can to save money right across our business to keep
prices low - we have reduced 4,000 products over the last year alone. Nectar
Prices has also been a game changer for customers, saving them £12 on a
typical £80 shop. And we're not compromising on quality: we've doubled our
rate of innovation and Taste the Difference is performing especially well.
"As we embark on our Next Level Sainsbury's strategy, we'll continue to make
deliberate, balanced choices to support our customers, colleagues, communities
and farmers. I want to say a big thank you to all our colleagues and suppliers
for all their hard work in delivering another record year. The business has
real momentum and we're excited by our goal of making good food joyful,
accessible and affordable for everyone, every day."
Delivering our Strategy
In February, we announced eight commitments that our Next Level Sainsbury's
strategy will deliver by March 2027:
· Food volume growth ahead of the market · Deliver profit leverage from sales growth
· Customer satisfaction higher 26/27 vs 23/24 · £1bn of cost savings over three years to 26/27
· Colleague engagement higher 26/27 vs 23/24 · £1.6bn+ Retail free cash flow over three years to 26/27
· Deliver our Plan for Better commitments · Higher return on capital employed
Progress against these commitments will be driven by four strategic outcomes:
First choice for food, Loyalty everyone loves, More Argos, more often and Save
and invest to win.
· First choice for food: Consistent focus on improving our food offer, investing
in value, innovation, availability and great service has driven market share
gains over the course of the Food First plan. This year we've grown volumes in
every quarter and made record market share gains, accelerating through the
year(4).
o We're the most competitive we have ever been(5). We have invested £220
million since March 2023 and £780 million over the last three years in
keeping prices low and passing on less inflation than the market(6).
Customers' perception of the value we offer is the strongest it's been in six
years(7), which is why we're the only full-choice supermarket gaining volume
from limited choice competitors(8)
o We're also gaining more volume from premium competitors than all other
full-choice grocers(9) by continuing to be bold and ambitious on innovation.
In the year we launched nearly 1,200 new products and delivered Taste the
Difference sales growth of 12 per cent. With sales of £1.6 billion, Taste the
Difference is proportionately the biggest Premium own-label brand of the
full-choice grocers(10), in more than one in four baskets during the year and
more than one in three over Christmas
o We led the market in paying our colleagues the new Real Living Wage and
invested significantly in other benefits including free food. Our colleague
engagement scores have increased nine percentage points(11). We believe highly
engaged colleagues deliver leading customer service and our overall customer
satisfaction is consistently ahead of full-choice competitors(12)
o We're growing customer numbers for both primary and secondary customers faster
than other full-choice grocers(13). Through the rapid rollout of Nectar Prices
this year and by focusing our investment on key centre of the plate items,
we're delivering better value on the products customers buy most often and as
a result more customers are shopping with us across the full basket and
increasingly trusting us for their bigger shops(14)
o In the next phase of our strategy, our ambition is to build on this momentum
and deliver more food choice to more customers. Currently only 15 per cent of
our grocery stores carry our full food range and so we are investing to bring
more of our range to more customers, particularly enhancing choice in fresh
food, re-allocating space currently used for general merchandise and clothing
to food. We will focus on around 180 of our highest potential stores over the
next three years
o In the final quarter, we opened two new supermarkets, in Talbot Green and
Southport, which showcase the 'more for more' investments we will be making:
featuring our full food offering, a refreshed and innovative look and feel,
optimum proposition balance and excellent sustainability credentials. These
stores are performing significantly ahead of expectations
o Our strong, long-term relationships with suppliers put us in a strong position
to play a leading role in creating a resilient and sustainable food system in
the UK. We continue to make investments and changes to the way we work with
and support our British farmers. This year, for example, we have introduced a
cost model with a predictable margin for our potato suppliers
o We're making deliberate choices about the products and services that sit
alongside our core food offer. Lower Tu clothing sales in the year in part
reflected a disciplined trading approach, with good stock management
protecting profitability in a seasonally weak and promotionally-driven market.
However, there were also some disappointing range performances and in the
fourth quarter we experienced availability challenges on some core lines, both
of which are being addressed in plans for the year ahead
o Sainsbury's general merchandise sales were broadly unchanged year-on-year,
despite poor Summer weather in the second quarter. Looking ahead, general
merchandise and clothing inside Sainsbury's stores will become more aligned to
customers' grocery missions, ensuring ranges are more relevant and desirable
o We're building further on the strength of our supermarket locations by rolling
out Smart Charge ultra-rapid EV charging. We now have 371 charging bays in 45
stores with plans to extend our network over the year ahead
· Loyalty everyone loves: The role Nectar plays for customers and within our
business continues to develop at pace as we further build a world-leading
loyalty platform and market-leading retail media capabilities. Nectar has
delivered ahead of our plan this year, with the April 2023 launch of Nectar
Prices exceeding expectations and the continued growth of our Nectar360
business delivering strong returns for clients on their advertising spend.
o The vast majority of Sainsbury's customers now regularly shop with Nectar
Prices, saving £12 on a typical £80 weekly shop. Nectar sales participation
has increased significantly since the launch of Nectar Prices and we now have
over 17 million Nectar Digital Collectors. Nectar Prices are now available on
around 7,000 products, with customers saving £1.3 billion since the launch
o Your Nectar Prices, Nectar's personalised offers, are available to online and
SmartShop customers and are shopped by more than one million customers each
week
o The strength of our Nectar loyalty programme is fuelling the performance of
Nectar360. With a scaled dataset and deep media capabilities, Nectar360 is
very well-positioned to continue to grow within the UK retail media market and
we expect Nectar360 to deliver an incremental £100 million of profit
contribution over the three years to March 2027
· More Argos, more often: We have transformed the Argos operating model in
recent years, creating a much more resilient business. Through reducing the
standalone store estate, opening more Argos stores inside Sainsbury's and
driving greater operating efficiency, we have reduced operating costs by more
than 3 per cent of sales since 2019/20. This helped protect profits over the
last year, where sales were resilient at a headline level but were skewed
towards lower margin consumer electronics and technology categories, with poor
weather against tough comparatives impacting sales in higher margin seasonal
categories.
o We forecast a resilient Argos profit performance in the year ahead, with some
benefit from cost saving plans and the expectation of more normal seasonal
weather. The effect on Argos sales of the closure of Argos in the Republic of
Ireland, (2.4)% during H2 2023/24, will reduce to around (1.5)% in Q1 2024/25
and will be fully annualised in Q2
o We are focused on improving growth through further development of our branded
ranges, strengthening our own-label products and growing awareness of our
leading service proposition. We also aim to build customer engagement through
improving our digital, loyalty and services experiences. We will continue to
refine our operating model in stores and deliver better availability and
service at a lower cost to serve
· Save and invest to win: We have delivered £1.3 billion of cost savings over
the last three years, future-proofing our business with a structurally lower
cost base and fuelling investment in our customer proposition. As we start the
next phase of our strategy, we are confident of continued momentum and
competitive advantage through unique cost savings opportunities and are
already significantly underway with a programme of high-returning activities.
o We're increasingly delivering productivity benefits through end-to-end
programmes, making decisions across a full cross functional chain of costs.
For example, we are unlocking significant savings and have already improved
ambient availability by 170bps year-on-year(15) through our partnership with
Blue Yonder, which enables us to use real-time forecasting to optimise the
sales, waste and stock equation. We are in the process of rolling this out
across our fresh ranges, with the migration due to be completed by Summer 2024
o We have committed to delivering a further £1 billion of cost savings by March
2027, more than offsetting cost inflation. High returning investments in
technology and automation will drive big steps forward in efficiency with more
agile, flexible systems bringing greater efficiency to decision making and
accelerating the speed at which we can bring improvements to customers
· Plan for Better: We are making good progress on Plan for Better, investing in
resilient supply chains and continuing to make progress against targets
including plastic packaging and carbon reduction in our own operations
o We are accelerating our emission reduction commitments, with our revised
targets for decreasing greenhouse gas emissions in our own operations and in
our value chain now formally validated by the Science Based Targets Initiative
(SBTi). In February, we were the only UK supermarket awarded an A rating for
our environmental commitments on climate change for the tenth consecutive year
by the Carbon Disclosure Project and we were also recognised as a 2023
Supplier Engagement Leader
o We reduced relative plastic packaging by 2.8 per cent year-on-year and 12.9
per cent from our baseline. This year we launched our biggest ever plastic
packaging removal, moving to cardboard trays across our full mushroom range,
which will save over 775 tonnes of plastic per year
o We raised £36 million for good causes and our stores now support and donate
to over 2,500 good causes across the UK. We increased our surplus food
donations to communities by 57.8 per cent year-on-year in partnership with
Neighbourly, with 13.5 million meals donated over the course of the year
· Financial Services: Underlying profit contribution declined for the year, with
lower net interest margins reflecting higher funding costs not being fully
passed through to customers, impacting profits on core banking products in
particular. This offset more resilient income from commission-based products
such as Travel Money and insurance. In January 2024, we announced a phased
withdrawal from core banking activities, with any financial services products
offered in future to be provided by dedicated financial services partners
through a distributed model. We expect to provide an update on this process at
our Interim results in November
Like-for-like sales performance 2022/23 2023/24 YoY
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
Like-for-like sales (excl. fuel) (4.0)% 3.7% 5.9% 7.8% 9.8% 6.6% 7.4% 4.8% 7.5%
Like-for-like sales (incl. fuel) 2.9% 7.7% 6.8% 5.9% 3.9% 2.2% 5.3% 2.9% 3.8%
Total sales performance 2022/23 2023/24 YoY
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
Grocery (2.4)% 3.8% 5.6% 7.4% 11.0% 8.9% 9.3% 7.3% 9.4%
Total General Merchandise (11.2)% 1.2% 4.6% 7.6% 4.0% (2.6)% (0.6)% (5.6)% (0.5)%
GM (Argos) (10.5)% 1.6% 4.5% 9.3% 5.1% (2.6)% (0.9)% (6.6)% (0.5)%
GM (Sainsbury's) (14.6)% (1.3)% 5.4% (1.0)% (1.2)% (2.7)% 0.9% 0.4% (0.5)%
Clothing (10.1)% (0.2)% 1.3% (1.9)% (3.7)% (14.6)% (1.7)% (11.7)% (6.4)%
Total Retail (excl. fuel) (4.5)% 3.1% 5.2% 7.1% 9.2% 5.8% 6.5% 4.3% 6.8%
Fuel 48.3% 29.1% 12.2% (2.8)% (21.4)% (17.1)% (7.2)% (7.8)% (14.3)%
Total Retail (incl. fuel) 2.5% 7.2% 6.2% 5.4% 3.3% 1.5% 4.4% 2.4% 3.2%
Like-for-like performance exc. Argos ROI in 2023/24 2022/23 YoY inc. Argos ROI 2023/24 YoY exc. Argos ROI
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
Like-for-like sales (excl. fuel) (4.0)% 3.7% 5.9% 7.8% 10.0% 6.6% 7.4% 4.8% 7.6%
Like-for-like sales (incl. fuel) 2.9% 7.7% 6.8% 5.9% 4.0% 2.2% 5.3% 2.9% 3.9%
Total sales performance exc. Argos ROI in 2023/24 2022/23 YoY inc. Argos ROI 2023/24 YoY exc. Argos ROI
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
Grocery (2.4)% 3.8% 5.6% 7.4% 11.0% 8.9% 9.3% 7.3% 9.4%
Total General Merchandise (11.2)% 1.2% 4.6% 7.6% 4.9% (0.6)% 1.5% (3.9)% 1.2%
GM (Argos) (10.5)% 1.6% 4.5% 9.3% 6.1% (0.1)% 1.7% (4.7)% 1.6%
GM (Sainsbury's) (14.6)% (1.3)% 5.4% (1.0)% (1.2)% (2.7)% 0.9% 0.4% (0.5)%
Clothing (10.1)% (0.2)% 1.3% (1.9)% (3.7)% (14.6)% (1.7)% (11.7)% (6.4)%
Total Retail (excl. fuel) (4.5)% 3.1% 5.2% 7.1% 9.3% 6.2% 7.1% 4.7% 7.2%
Fuel 48.3% 29.1% 12.2% (2.8)% (21.4)% (17.1)% (7.2)% (7.8)% (14.3)%
Total Retail (incl. fuel) 2.5% 7.2% 6.2% 5.4% 3.5% 1.9% 4.9% 2.7% 3.5%
Notes
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.
A webcast presentation and live Q&A will be held at 9:30 (BST). This will
be available to view on our website at the following link:
https://sainsbury-2023-24-preliminary-results-announcement.open-exchange.net/
(https://sainsbury-2023-24-preliminary-results-announcement.open-exchange.net/)
A recorded copy of the webcast and Q&A call, alongside slides and a
transcript of the presentation will be available at
www.about.sainsburys.co.uk/investors/results-reports-and-presentations
(http://www.about.sainsburys.co.uk/investors/results-reports-and-presentations)
following the event.
Sainsbury's will issue its 2024/25 First Quarter Trading Statement at 07:00
(BST) on 2 July 2024.
Enquiries
Investor Relations Media
James Collins Rebecca Reilly
+44 (0) 7801 813 074 +44 (0) 20 7695 7295
Strategy Review: Next Level Sainsbury's
In February we announced our Next Level Sainsbury's strategy, building on the
success of the Food First strategy launched in 2020. Food First put food back
at the heart of Sainsbury's, reset our competitive position and created a
strong financial platform from which we will grow, invest in further
strengthening the business and deliver enhanced returns to shareholders. Next
Level Sainsbury's is underpinned by a new purpose: We make good food joyful,
accessible and affordable for everyone, every day. The strategy focuses on
four key outcomes: First choice for food, Loyalty everyone loves, More Argos,
more often and Save and invest to win.
First choice for food
Our work on improving value, innovation and service has driven volume market
share gains over the course of our Food First plan. Our performance was
particularly strong over the last financial year, with volume growth every
quarter and at an accelerating rate of growth. More customers are choosing
Sainsbury's and we are growing primary and secondary customers ahead of all
full-choice competitors(13).
Value that sticks
We reset our pricing position over the course of Food First, investing £780
million to improve our value versus all competitors. We are now the most
competitive we have ever been(5) and we are gaining volumes from all key
competitors(16). In 2023/24, we invested £220 million in lowering prices on
the products customers buy most often and we passed on less inflation than our
competitors(6). We also launched Nectar Prices in April 2023, rapidly rolling
out to around 7,000 products over the year. Customers are noticing, with value
perception scores improving through the year and now the strongest they have
been for six years(7).
In January we doubled the number of products price matched to Aldi, with over
600 products now included across fresh, grocery and household ranges. We also
made it easier for customers to identify lower prices in store by moving all
of our entry price point products into a single brand, Stamford Street and by
introducing Low Everyday Prices, which has replaced Price Lock and includes
over 1,000 products, primarily branded.
Innovate to lead
We are being bold and ambitious on innovation, bringing more new products to
customers. We launched over 4,000 products over the course of Food First and
grew our Taste the Difference brand from £1.2 billion in 2019/20 to £1.6
billion in 2023/24. We launched nearly 1,200 new products in the year, 40 per
cent of those in Taste the Difference, growing the Taste the Difference range
by 7 per cent year-on-year. More customers are choosing to treat themselves:
sales of our Premium tier grew 12 per cent year-on-year and significantly
ahead of the market(17). Ready-prepared meals, Bakery, Food to Go and FreeFrom
all performed particularly well.
Customer favourites across the year included our Taste the Difference
Mushroom, Mascarpone and Truffle Pizza, our Signature Beef Burger and at
Christmas, our Buttermilk Turkey Crown with maple cured bacon and buttery sage
and onion stuffing.
We consistently outperformed the market at every seasonal event(18), finishing
Q4 with a strong Valentine's Day, with standout sales across flowers,
confectionery and our Taste the Difference meal deal, which was the best value
in the market. We are well set up to continue our momentum in events and began
2024/25 with a record-breaking Easter week, performing ahead of the market(18)
with our biggest ever Easter grocery sales.
A more resilient food system
Our strong, long-term relationships with suppliers put us in a strong position
to play a leading role in creating a resilient and sustainable food system in
the UK. We continue to make investments and changes to the way we work with
and support British farmers. This year, for example, we have introduced a cost
model with a predictable margin for our potato suppliers, working closely
together to protect supply. On a global scale, working in collaboration with
longstanding partner Fairtrade, we are contributing towards paying banana
workers a living wage three years ahead of the industry commitment.
Alongside this, we are increasingly moving to more long-term partnerships with
key suppliers to enable them to invest for the future with confidence. For
example, in March 2023 we began a new long-term partnership with Moy Park
which has provided our chickens with 20 per cent more space than industry
standard along with environmental enrichments such as perches and play bales.
Results indicate that our birds are happier and more comfortable. We have made
this change while keeping our price position as sharp as ever and our chicken
market share has grown since launch(19).
We were the first large supermarket to launch a dedicated 'Best of British'
page on our Groceries Online website, better championing British grown and
produced products. The page highlights over 450 products which are 100 per
cent British sourced, including popular fruit, vegetable, meat, dairy, eggs
and chilled essentials.
More food choice for more customers
Our strengths in fresh food, range and innovation are at the heart of
Sainsbury's heritage and brand promise, Good Food For All Of Us. However, we
do not currently offer our full range to enough customers in enough locations,
with just 15 per cent of our supermarkets offering our full range. We are
investing to bring more of our range to more customers, particularly enhancing
choice in fresh food, focusing on around 180 of these highest-potential stores
over the next three years. While carrying out these changes we are also
updating the look and feel of many stores and selectively introducing
innovations which we have trialled in a number of stores in recent months,
bringing customer and efficiency benefits.
We opened two new supermarkets in Q4, Talbot Green and Southport, both centred
around a food hall designed to help customers rediscover the joy of food.
Offering our full range, both stores also feature new digital signage and
displays designed to help customers feel more inspired and make the stores
easier to navigate. To support our Plan for Better targets, each store has a
unified refrigeration, ventilation and heating system that removes the need
for fossil fuel gas heating and runs on natural CO2 refrigeration, with 100
per cent LED lighting throughout. These new supermarkets are performing
significantly ahead of expectations.
Products and services that complement the Food offer
We are tightening our general merchandise and clothing ranges, aligning them
more closely to customers' shopping missions. In combination with a more
profitable food offer where it's needed, this will generate significantly
better sales and profit returns on store space.
Tu clothing continued to maintain a disciplined trading approach in the year.
Versus a 2019/20 base, this trading approach has created a more profitable
sales mix over the last three years, with higher full price sales,
significantly lower markdowns, stronger gross margins, higher average selling
price and lower stock. This helped protect profitability over 2023/24 in a
seasonally weak and promotionally-driven market. However, our performance
during the year and particularly the fourth quarter, when we were further
impacted by stock shortages, was below expectations and we have taken action
to improve ranges in the year ahead.
We continue to expand our Habitat range, with our new home fragrance
collection performing ahead of expectations. Looking ahead, Habitat will
celebrate its 60(th) birthday in May with an innovative 60 Years of Design
collection in partnership with designers including Sebastian Conran.
In January, we launched our Smart Charge ultra-rapid EV charging network, now
in 45 supermarket locations with 371 charging bays. Smart Charge provides a
quick and reliable offer using 100 per cent renewable energy. We will build
further on the strength of our supermarket locations and customer traffic,
investing in Smart Charge to increase our network of reliable ultra-rapid
charging bays.
Engaged colleagues delivering leading customer service
In January we announced that we would be investing £200 million to increase
colleague pay in line with the new Real Living Wage, increasing pay to £12
per hour nationally and £13.15 for colleagues in London; leading the market
and taking our investment in colleague pay over three years to more than £500
million. Over the course of Food First, we have improved our colleague
engagement scores by nine percentage points(11). We believe more engaged
colleagues deliver better service, and our overall customer satisfaction
scores were ahead of full-choice competitors throughout the year, leading in
areas including speed and ease of checkout and friendliness and availability
of colleagues(20).
Convenience sales grew ten per cent, with overall customer satisfaction
improving by five percentage points(21). We grew Groceries Online ahead of the
market in the second half(22), supporting our strong grocery sales momentum.
Increased customer numbers are driving higher sales volumes and we have
improved customer satisfaction and retention through better availability and
the launch of Your Nectar Prices on Groceries Online(23). We have expanded our
On Demand business to 1,157 stores, resulting in 69 per cent sales growth
year-on-year.
We are always looking for ways we can improve customer experience while saving
money to invest back into our product offer. We have made significant progress
in our programme of automating some simple customer services functions to
provide a more seamless customer experience and free up colleague time to
provide customers with better service.
Plan for Better
Plan for Better is at the heart of how we will deliver our new purpose, to
make good food joyful, accessible and affordable for everyone, every day. We
are committed to playing a leading role in offering affordable high-quality
food that supports healthy and sustainable diets and helps customers reduce
their impact on the planet. We know how important it is for our customers,
colleagues, communities and shareholders that we deliver on our Plan for
Better goals. We are making good progress on our plan, investing in resilient
supply chains and continue to make progress towards our targets.
We have a long history of providing good food and leading change to help our
customers eat healthier, more sustainable diets. Our Healthy and Better for
you sales tonnage as a proportion of total sales is at 80.9 per cent and we
recognise there is more to do as we work towards our target of 85 per cent by
2025. Our progress is reflected in our market outperformance of Produce volume
sales(24), the fact that 87 per cent of our own-brand sales are Healthy and
Better for you choices and that our primary customers rate us ahead of our
competitors for making it easy for them to choose food that is healthy. We
have also designed our value offering to complement this work and this year at
least 75 per cent of our Aldi Price Match campaign featured Healthy or Better
for you products like fresh produce, wholewheat pasta, salmon and alternative
milk products.
Plastic reduction initiatives launched in the year will save nearly 1,800
tonnes of plastic per year and we reduced relative plastic packaging by 2.8
per cent year-on-year and 12.9 per cent from our baseline. We became the first
UK retailer to switch from plastic to paper packaging across our entire
own-brand toilet paper and kitchen towel ranges, saving 485 tonnes. Other
plastic saving initiatives included leading the market in changing our range
of babywear to cardboard hangers and reducing plastic in meat packaging
ranges.
In the last year, we raised £36 million for good causes and redistributed
57.8 per cent more surplus food to communities through our partnership with
Neighbourly. Over the course of this partnership, we have donated over 23
million meals to communities. Our stores now support and donate to over 2,500
good causes across the UK. We also moved from use-by dates to best-before
dates across our own-brand milk range, helping reduce food waste and impacting
730 million pints of milk sold by Sainsbury's every year(25).
We have restated the 2022/23 result for food waste to anaerobic digestion
reported in the 2022/23 Annual Report from 23,443 tonnes to 30,399 tonnes due
to an identified reporting error. The 2019/20 baseline is restated from 31,615
tonnes to 34,609 tonnes. This means that in 2022/23 we reduced absolute food
waste by 12.2 per cent rather than the 25.8 per cent reported versus our
2019/20 baseline. This year we have reduced food waste to anaerobic digestion
by 12.5 per cent absolute and 13.9 per cent relative to total tonnes handled
versus our 2019/20 baseline. We are focused on accelerating our progress and
have put in place a number of new measures including a partnership with Olio
to redistribute 'use by' foods from all of our stores and are extending trials
on new ways to repurpose food waste for animal feed.
We are building the resilience of our business and accelerating our emission
reduction commitments. In February, our revised commitments for lowering
greenhouse gas emissions in our own operations and in our value chain were
formally validated by the Science Based Targets initiative. In the same month,
the Carbon Disclosure project awarded us an A rating for our environmental
commitments on climate change for the tenth consecutive year - the only UK
supermarket to be recognised at this level.
Loyalty everyone loves
We are continuing to build a world-leading Nectar loyalty platform, offering
personalised, rewarding and integrated loyalty and market-leading retail media
capabilities. This platform has been a key component in transforming our value
offering and value perception. It has delivered ahead of our plan and is
playing an ever-greater role for customers and within our business, with over
17 million digital subscribers.
We launched Nectar Prices in April last year and rapidly rolled it out across
our ranges. It is now available on around 7,000 products and is saving
customers an average of £12 on a typical £80 shop. The customer response to
Nectar Prices has exceeded our expectations, strengthening value perception
and driving Nectar participation levels, with more than five million new
Nectar Digital Collectors since launch. In October, we also introduced Your
Nectar Prices on Sainsburys.co.uk and our grocery app, with plans on track to
roll this out more widely. Your Nectar Prices is powered by Nectar's
personalised offers which are world-leading in their scale, generating over
280 million different personalised offers each week.
Nectar360 is well positioned within the fast-growing UK retail media market,
with a scaled dataset and deep media capabilities. Nectar360 serves over 870
brands directly and has built partnerships with the 10 key agency groups. Over
the last year we signed two new partners, allowing advertisers to better
target campaigns and launching a new supply chain data sharing and insight
platform for our suppliers. We also announced the expansion of our connected
digital screen network to over 800 screens. To continue to build stronger
digital engagement and deliver even more value to Nectar customers, we are
investing in high return growth by expanding our team and unifying our
capabilities across instore, onsite and offsite. As we continue to build our
coalition of strong partners, we are also investing further in the integration
of Nectar across all our digital platforms and into payment solutions.
Our Next Level Sainsbury's strategy will continue to build a world-leading
loyalty platform - one that's even more personalised, joyful, rewarding and
transparent - for everyone. We expect to generate an incremental £100 million
of Nectar360 profit contribution over the three years to March 2027.
More Argos, more often
We are focused on transforming Argos around the three things that have always
made it brilliant - curated range, famously convenient experience and great
value - so that more customers buy more complete baskets more often.
Over the last three years we have significantly improved Argos's profitability
by transforming our store operating model, reducing the standalone store
estate and opening more Argos stores inside Sainsbury's. This has reduced the
fixed cost base while expanding the number of points where customers can
conveniently collect products. Argos sales and gross profit last year were
impacted by poor seasonal weather against tough comparatives in challenging
market conditions, but lower fixed costs helped reduce the impact of weaker
sales on Argos profitability.
Famous for convenience
Customers love and recognise Argos for the convenience and consistently great
value we provide and this has remained at the heart of the Argos proposition
over the last year. Half of UK households shop at Argos every year(26) and we
have the fourth most visited retail website in the UK(27). More than 70 per
cent of sales start online, 70 per cent of sales are collected in store and
nearly 70 per cent of online Click and Collect orders are available for
immediate collection. Over the next three years our focus will be on building
customer awareness of our great service and convenience, with an ambition to
drive greater frequency of customers shopping with Argos.
Inspiring choice, always great value
Our aim is to inspire customers to shop bigger baskets with Argos more often
by continuing to improve our ranges and enhance customer experience. Gaming
remains a strong contributor to growth, powered by strong Black Friday deals,
consistent availability and continued demand for hardware and accessories.
Mobile phone sales have also been strong, particularly iPhones, where we have
had better stock allocations and as a result have grown market share. Premium
product sales continue to perform well.
Argos's key brand health metrics significantly increased versus last year(28)
and customer satisfaction improved over the course of the year in appealing
promotions, value for money, quality and variety of items(29).
Supercharged digital capabilities
We are supercharging Argos's digital capabilities by further developing the
website, app and customer relationship management capabilities, with the aim
of driving traffic, basket spend and conversion. We continue to improve the
digital customer journey by testing new promotional and personalisation
mechanics and enhancing search and browsing experiences - making checkout
easier and faster. We recently relaunched our delivery checkout to provide a
better customer experience and a more stable platform.
Accessible and relevant credit, care and services
Having the right range of accessible and relevant credit solutions is
important to help our customers buy what they want, when they want it. We
announced in January the completion of a strategic review of our Financial
Services division which will over time result in a phased withdrawal from our
core banking business. Whilst financial services will continue to be an
important part of the Argos proposition, we expect to move to third party
provision of Argos financial services products, improving the range and
quality of payment solutions we can offer customers and increasing
penetration, currently 21 per cent of sales.
Next level service, efficiency and stock flow
We have significantly transformed Argos to be a digital first business and
have integrated Nectar. At the same time, we have moved from standalone stores
towards a store-in-store model, increased the number of our collection points
and continued to build a market-leading fulfilment network, as well as
completing our withdrawal from the Republic of Ireland.
We have made significant changes to how and where we move and hold stock,
driving efficiency and improving availability by making sure we have the right
stock closer to customers when they need it. The next phase of our store
operating model refinement is moving to a clustering model, which will replace
a one-size-fits-all approach. This approach will unlock efficiencies and
reduce operational complexity. As a result we will have better tailored
ranges, availability and service, delivering cost-to-serve reductions
alongside improved customer satisfaction. An example of this is our Croydon
store, where we've already moved from three floors to one, resulting in faster
service and improved customer satisfaction.
Save and invest to win
We have delivered £1.3 billion in savings over the last three years - double
the rate of savings during Food First compared to prior years - which has been
central to the delivery of our strategy. This has created the fuel to invest
in what matters for our customers and has reset our value position. In the
next three years, we will create a further £1 billion in savings, more than
offsetting cost inflation and taking another big leap forward in efficiency,
productivity and customer focus.
Our investments in technology and automation are driving big steps forward.
More agile, flexible systems are bringing greater efficiency to decision
making and accelerating the speed at which we can improve customer experience.
For example, we are unlocking significant savings through accurate real-time
grocery forecasting that optimises the sales, waste and stock equation. We
have already migrated all of our ambient grocery products to machine learning
forecasting, resulting in availability gains of 170bps year-on-year(15) - the
equivalent of 150 more products available in each of our supermarkets, driving
up basket size. We are underway with rolling this out across our Fresh ranges,
with the migration due to be completed by Summer 2024.
We are also simplifying our technology processes using cloud technology. This
is helping with allocation and replenishment processes, enhancing customer
personalisation and rewards and supporting the safety and stability of our
ongoing operations. By automating some of the processes within our contact
centre, we are delivering a more seamless customer experience and faster
resolution times, while saving colleagues' time.
We are making bold decisions on business structure and propositions. We are
simplifying our Store Support Centre structure and looking at where we can
work more effectively with third party partners. We are also making good
progress on the programme we began in 2022 to transform our eat-in, takeaway
and home delivery food and drink offer, with fewer Sainsbury's cafés and more
third-party outlets.
A smaller proportion of cost savings will be driven by structural changes in
the future, but we continue to transform our food service offerings to reduce
cost and complexity across our business while enhancing our customer offer.
For example, leading the market on freshly baked goods is an important part of
our ambition to be First choice for food. We are well underway with a
programme to move many stores to a more efficient way of freshly baking
products in-store, improving range and quality but also unlocking significant
savings.
Plan for Better is fully integrated into our Save and invest to win
initiatives. We are rolling out the latest integrated refrigeration and
heating technology, delivering both a saving on energy and helping reduce our
carbon footprint. The Longhill Burn Wind Farm was completed in August and the
wind turbines are the largest and most powerful onshore in the UK. When all
the turbines are operating at maximum capacity together they can provide
enough electricity to supply up to 33 per cent of our total electricity needs.
We have also started to roll out double decker trailers in our fleet, which
will reduce the number of vehicles on the road, thereby reducing our carbon
footprint, while maintaining the same levels of stock movement.
1 Nielsen Panel volume market share 2017/18 to 2023/24. Total FMCG (excluding
Kiosk and Tobacco), Market Universe: Total Outlets
2 Nielsen Panel, total FMCG (exc. Kiosk and Tobacco). Primary and Secondary
Volume Share of wallet %pt YoY change, 52 weeks to 2 March 2024
3 Please refer to note 2.4 in the Notes to the consolidated financial
statements
4 Nielsen Panel data. Total FMCG excl. Kiosk and Tobacco, volume market share
change YoY
5 Value Reality, 2023/24; Acuity, internal modelling. Data available from
2016.
6 Nielsen Panel data. Total FMCG excl. Kiosk and Tobacco. Top 100 SKUS Average
4 weekly Trended ASP (Average Selling Price) vs Total Market - 52 weeks to 2
March 2024
7 YouGov Brand Index - Supermarket Value for Money Perception metric %
8 Nielsen Panel data. Total FMCG excl. Kiosk and Tobacco. Net volume switching
to/from Aldi and Lidl, 52 weeks to 2 March 2024
9 Nielsen Panel data. Total FMCG excl. Kiosk and Tobacco. Net volume switching
to/from M&S and Waitrose, 52 weeks to 2 March 2024
10 Nielsen Panel data. Total FMCG excl. Kiosk and Tobacco, Nielsen Panel data.
Contribution of Premium Own Label to Total Sales
11 eSAT scores March 2024 vs April 2021
12 CSAT Supermarket Competitor Benchmark data - Overall Supermarket
satisfaction score
13 Nielsen Panel, total FMCG (exc. Kiosk and Tobacco). Customer numbers YoY
growth, 52 weeks to 2 March 2024
14 Nielsen Panel, total FMCG (exc. Kiosk and Tobacco), Total Shopper Mission
customer numbers, YoY %pt change, 52 weeks to 2 March 2024
15 Q3 23/24 YoY improvement in availability
16 Nielsen Panel data. Total FMCG excl. Kiosk and Tobacco. Sainsbury's to/
from net volume switching, 52 weeks to 2 March 2024
17 Nielsen Panel Premium Own Label Volume Growth YoY - Total FMCG excl. Kiosk
and Tobacco. 52 weeks to 2 March 2024
18 Nielsen EPOS data. JS volume growth YoY% difference to Total Market growth
YoY% for key events week growth versus last year events week
19 Nielsen Panel data, volume market share % growth YoY, FY23/24 vs FY22/23,
Chicken category (raw chicken)
20 CSAT Supermarket Competitor Benchmarking data - FY23/24 scores
21 Lettuce Know Convenience customer satisfaction scores, FY23/24 vs FY22/23.
Overall Satisfaction measure
22 Nielsen, Sainsbury's Online market share, 24 weeks to 2 March 2024
23 Lettuce Know Groceries Online customer satisfaction scores, FY23/24 vs
FY22/23. Overall Satisfaction measure
24 Nielsen panel data, Produce category, volume growth YoY, 52w to 2nd March
2024
25 Includes all fresh and organic milk sold across England, Scotland, and
Wales
26 Kantar Worldpanel. UK households vs ONS Total UK households 2022
27 SimilarWeb traffic share, 52 weeks to 2 March 2024
28 YouGov - General Retail Brand Health metrics
29 Argos E2E CSAT Survey
Financial Review of the year results for the 52 weeks to 2 March 2024
A number of Alternative Performance Measures ('APMs') have been adopted by the
Directors to provide additional information on the underlying performance of
the Group. These measures are intended to supplement, rather than replace the
measures provided under IFRS. Underlying performance measures are reconciled
to their IFRS equivalents on the face of the income statement with
non-underlying items set out in more detail in note 3 to the financial
statements. Other APMs are defined and reconciled to their nearest IFRS
measures in notes A1 to A4.
Summary income statement 52 weeks to 2 March 2024 52 weeks to 4 March 2023 Change
£m £m %
Group sales (including VAT) 36,337 35,157 3.4
Retail sales (including VAT) 35,721 34,626 3.2
Retail sales (excluding fuel, including VAT) 30,615 28,664 6.8
Group sales (excluding VAT) 32,700 31,491 3.8
Retail sales (excluding VAT) 32,084 30,960 3.6
Underlying operating profit
Retail 966 926 4.3
Financial Services 29 46 (37.0)
Total underlying operating profit 995 972 2.4
Underlying net finance costs (294) (282) 4.3
Underlying profit before tax 701 690 1.6
Items excluded from underlying results (424) (363) 16.8
Profit before tax 277 327 (15.3)
Income tax expense (140) (120) 16.7
Profit for the financial period 137 207 (33.8)
Underlying basic earnings per share 22.1p 23.0p (3.9)
Basic earnings per share 5.9p 9.0p (34.4)
Interim Dividend per share 3.9p 3.9p -
Final Dividend per share 9.2p 9.2p -
Total Dividend per share 13.1p 13.1p -
In the 52 weeks to 2 March 2024, the Group generated profit before tax of
£277 million (2022/23: £327 million) and an underlying profit before tax of
£701 million (2022/23: £690 million).
This strong underlying profit performance was driven by the performance of our
grocery business, which delivered both grocery volume growth and consistent
market share gains throughout the year. This reflected the investment we have
made in our grocery business in recent years to strengthen the customer
proposition, in particular through the improvement of our value position. The
grocery volume performance was further supported this year by the successful
launch of Nectar Prices. Our ongoing cost savings programme helped us reduce
the impact of rising operating cost inflation in order to deliver for
customers, colleagues and shareholders. The combination of volume growth and
cost savings delivered strong grocery profit growth, partially offset by the
impact of poor weather on general merchandise and clothing sales and lower
Financial Services profits. Strong cash generation, with retail free cash flow
of £639 million, strengthened our balance sheet and supported dividend
payments. We continue to make balanced investment choices, supporting our
customers and colleagues whilst also delivering for shareholders.
Group sales
Group sales (including VAT) increased by 3.4 per cent year-on-year as a 6.8
per cent increase in Retail sales (including VAT, excluding fuel) more than
offset a 14.3 per cent decrease in Fuel sales (including VAT).
Total sales performance by category 52 weeks to 2 March 2024 52 weeks to 4 March 2023 Change
£bn £bn %
Grocery 23.7 21.7 9.4
General Merchandise 6.0 6.0 (0.5)
Clothing 0.9 1.0 (6.4)
Retail (exc. Fuel) 30.6 28.7 6.8
Fuel sales 5.1 6.0 (14.3)
Retail (inc. Fuel) 35.7 34.6 3.2
Retail like-for-like sales performance 52 weeks to 2 March 2024 52 weeks to 4 March 2023
Like-for-like sales (exc. Fuel) 7.5% 2.6%
Like-for-like sales (inc. Fuel) 3.8% 5.7%
Grocery sales increased 9.4 per cent, reflecting strengthening volume growth
as inflation reduced, particularly in the second half of the year. We
continued to prioritise value for customers, inflating behind key competitors.
This included the positive launch of Nectar Prices, offering lower prices for
Nectar customers alongside extra personalised prices through 'Your Nectar
Prices'. As a result, we have seen volume increases across all major
categories and our own brand participation increased 93 basis points as
customers opted to trade in to better value private label products from
branded items to help manage the cost of living whilst also treating
themselves through our Taste the Difference range, particularly at key events.
General merchandise sales decreased by 0.5 per cent. Seasonal and Kids and
Home and Furniture sales both declined due to a cooler, wetter summer and
warmer winter impacting seasonal sales, alongside tough market conditions.
This was partially offset by Electronics and Tech sales increasing
year-on-year, with Gaming being the primary driver. Sales were also affected
by the closure of Argos Republic of Ireland on 24 June. Stripping out the
effect of the Republic of Ireland closure, general merchandise sales increased
by 1.2 per cent. Clothing sales decreased by 6.4 per cent, with lower volumes
partially driven by unseasonable weather.
Fuel sales decreased by 14.3 per cent, reflecting a lower average pump price
year-on-year.
Total sales (including VAT) performance by channel 52 weeks to 2 March 2024 52 weeks to 4 March 2023
% %
Total sales fulfilled by supermarket stores 10.3 1.9
Supermarkets (inc. Argos stores in Sainsbury's) 11.0 4.8
Groceries online 5.5 (13.5)
Convenience 10.3 9.9
Sales fulfilled from our supermarkets grew by 10.3 per cent, driven by both
grocery inflation and, particularly in the second half, volume growth.
Groceries online sales increased by 5.5 per cent, driven by improvements in
availability and service. Convenience sales increased by 10.3 per cent, with
growth strongest in 'Food on the Move' city centre stores and more urban
locations.
Space
During 2023/24, Sainsbury's opened three new supermarkets and closed one, and
opened 23 new convenience stores, closing three.
During the year, we opened 22 new Argos stores in Sainsbury's and closed 73
standalone Argos stores. The number of Argos collection points in Sainsbury's
stores increased from 420 to 456. As at 2 March 2024, Argos had 659 stores,
including 446 stores in Sainsbury's, and a total of 1,115 points of presence.
Store numbers and retailing space As at 4 March 2023 (a)) New stores Disposals / Closures As at 2 March 2024
Supermarkets 595 3 (1) 597
Supermarkets area '000 sq. ft. 20,691 120 (10) 20,801
Convenience 814 23 (3) 834
Convenience area '000 sq. ft. 1,961 61 (6) 2,016
Sainsbury's total store numbers 1,409 26 (4) 1,431
Argos stores 285 1 (73) 213
Argos stores in Sainsbury's 424 22 - 446
Argos total store numbers 709 23 (73) 659
Argos collection points 420 42 (6) 456
Habitat 3 - (3) -
a) Space (sq. ft.) adjusted at 4 March 2023 to include the net change
of all store re-measures throughout the year including those made post-
investment
In total for 2024/25, we expect to open three supermarkets and around 25 new
convenience stores, with four supermarkets and three to five convenience
stores to close. In addition, we expect to open around ten Argos stores inside
Sainsbury's and close around 15-20 Argos stand-alone stores.
We expect the stand-alone Argos store estate will reduce to around 190 stores
by March 2025 and we expect to have 450-460 Argos stores inside Sainsbury's
supermarkets as well as 480-500 collection points.
Retail underlying operating profit
Retail underlying operating profit Note (a)) 52 weeks to 2 March 2024 52 weeks to 4 March 2023 Change
Retail underlying operating profit (£m) A1.2 a) 966 926 4.3%
Retail underlying operating margin (%) A1.2 a) 3.01 2.99 2bps
Retail underlying EBITDA (£m) A1.2 d) 2,078 2,060 0.9%
Retail underlying EBITDA margin (%) A1.2 d) 6.48 6.65 (17)bps
a) Note references for reconciliations refer to the Alternative
Performance Measures.
Retail underlying operating profit increased by 4.3 per cent to £966 million
(2022/23: £926 million) and retail underlying operating margin increased by
two basis points year-on-year to 3.01 per cent (2022/23: 2.99 per cent).
Strong grocery profit growth was driven by higher volumes and cost savings
offsetting higher operating costs and value investment. This was partially
offset by lower general merchandise margins, which reflected the mix impacts
of lower seasonal sales and higher Consumer Electronics sales.
In 2024/25, Sainsbury's expects retail underlying operating profit of between
£1,010 million and £1,060 million, growth of between five per cent and ten
per cent.
Retail underlying EBITDA increased to £2,078 million (2022/23: £2,060
million). However, retail underlying EBITDA margin declined 17 basis points to
6.48 per cent (2022/23: 6.65 per cent). In 2024/25, Sainsbury's expects a
retail underlying depreciation and amortisation charge of around £1.15
billion (2023/24: £1.11 billion), including around £0.4 billion right-of-use
asset depreciation.
Financial Services
Financial Services results
12 months to 29 February 2024 Note 2024 2023 Change
Underlying revenue (£m) 637 531 20.2%
Interest and fees payable (£m) (211) (84) 152.4%
Total income (£m) 426 447 (4.7)%
Underlying operating profit (£m) 29 46 (37.0)%
Net interest margin (%) a) 4.7 5.1 (40)bps
Cost:income ratio (%) 70 66 400bps
Bad debt as a percentage of lending (%) b) 2.1 2.1 0bps
Tier 1 capital ratio (%) 17.1 15.4 170bps
Total capital ratio (%) c),e) 19.4 17.8 160bps
Customer deposits (£bn) (4.2) (4.7) (10.6)%
Total customer lending (£bn) d) 4.5 5.3 (15.1)%
of which unsecured lending (£bn) 4.5 4.7 (4.3)%
of which secured lending (£bn) - 0.6 (100.0)%
a) Net interest income divided by average interest-bearing assets
b) Bad debt expense divided by average net lending
c) Total capital divided by risk-weighted assets
d) Amounts due from customers at the balance sheet date in respect of
loans, mortgages, credit cards and store cards net of provisions
e) The prior year (February 2023) unaudited CET 1 (15.5 per cent) and
total capital ratio (17.9 per cent) have been updated to reflect a revised
credit value adjustment (CVA) calculation as outlined in the Pillar 3
Disclosures published in July 2023.
Financial Services underlying operating profit of £29 million (2022/23: £46
million) reduced by £17 million, primarily reflecting the impact of higher
funding costs from increased interest rates not being fully passed on to
customers.
Total income of £426 million reduced by 4.7 per cent and net interest margin
reduced by 40 basis points. Strong underlying revenue growth of 20 per cent
was driven by selective unsecured customer lending growth (with average
balance up five per cent) and customer rate increases, alongside strong growth
in Travel Money and Argos Care. Interest and fees payable grew 152 per cent,
driven by the increase in the Bank of England base rate since the financial
year ended in 2022.
The Financial Services cost:income ratio increased to 70 per cent (2022/23: 66
per cent), reflecting the pressure on net income from higher funding costs and
the impact of inflation on operating costs.
Bad debt as a percentage of lending stayed flat at 2.1 per cent (2022/23: 2.1
per cent) with slightly higher arrears in Loans offset by lower arrears in
Store Cards.
Financial Services remains well capitalised, with a total capital ratio of
19.4 per cent (2022/23: 17.8 per cent), an increase of 160 basis points since
prior full-year.
The scope of our Financial Services business is likely to change during the
year. Profits from our core banking products will continue to be impacted by
higher funding costs and will additionally be impacted by preparations for the
phased withdrawal from these products. Therefore we expect these products to
be loss-making, offsetting profits from Argos Financial Services and
commission-based products such as insurance and travel money to make an
underlying net Financial Services contribution of between break even and £15
million.
Underlying net finance costs
Underlying net finance costs 52 weeks to 2 March 2024 52 weeks to 4 March 2023 Change
£m £m %
Non-lease interest costs (71) (42) 69.0
Non-lease interest income 28 16 75.0
Net finance costs on lease liabilities (251) (256) (2.0)
Total underlying net finance costs (294) (282) 4.3
Underlying net finance costs increased by 4.3 per cent to £294 million
(2022/23: £282 million). These costs include £43 million of net non-lease
interest (2022/23: £26 million). The increase of net non-lease interest was
driven by increased interest costs of £28 million in respect of the £575
million term loan which was fully drawn from July 2023 to partially fund the
Highbury and Dragon property transaction. This was partially offset by
increased interest income of £12 million due to the benefit of higher
interest rates on cash deposits. Net finance costs on lease liabilities
reduced to £251 million (2022/23: £256 million), including the impact of the
reduction in lease liabilities resulting from the Highbury and Dragon
transaction.
Sainsbury's expects underlying net finance costs in 2024/25 of between £310
million and £320 million, including £260 million lease interest costs.
Items excluded from underlying results
In order to provide shareholders with insight into the underlying performance
of the business, items recognised in reported profit before tax which, by
virtue of their size and/or nature, do not reflect the Group's underlying
performance are excluded from the Group's underlying results and shown in the
table below.
Items excluded from underlying results 52 weeks to 2 March 2024 52 weeks to 4 March 2023
£m £m
Sainsbury's structural integration (95) (106)
Impairment charges - (281)
Income recognised in relation to legal disputes - 30
IAS 19 pension income 44 58
Property, finance and acquisition adjustments (86) (64)
Items excluded from underlying results before Financial Services (137) (363)
Financial Services phased withdrawal (273) -
Disposal of mortgage book (14) -
Total items excluded from underlying results (424) (363)
Sainsbury's structural integration costs of £95 million (2022/23: £106
million) were recognised in relation to the programme relating to the
structural integration of Sainsbury's and Argos announced in November 2020.
Cash costs in the year were £67 million (2022/23: £50 million). The majority
of the programme has now completed, with costs incurred to date of £841
million, and cash costs of £270 million.
In January 2024, the Group announced that Financial Services products to be
offered in the future will be provided by dedicated financial services
providers through a distributed model. Costs of £273 million associated with
this decision comprise mainly of impairment of non-financial assets,
additional allowances arising from a reassessment of the effective interest
rate applied to the amortised cost of financial assets, onerous contracts
relating to long-dated computer software contracts, and impairment of the
remaining goodwill held in the Bank. Cash costs in the year were £5 million
(2022/23: £nil). Further costs associated with this restructuring will be
incurred in future years once more detailed plans to execute these changes are
formulated and communicated.
Non-cash impairments of £281 million were recognised in 2022/23, driven by a
material increase in the underlying discount rate, following sustained
increases in gilt interest rates.
During the year, the Bank disposed of its mortgage portfolio for proceeds of
£446 million, which resulted in a non-underlying charge of £14 million. This
loss on disposal includes goodwill, transaction costs and the recognition of
onerous contract provisions.
IAS 19 pension income decreased to £44 million (2022/23: £58 million). The
lower pension income in the current year is primarily driven by a settlement
credit of £8 million recognised in the prior year relating to a gain on
payments made to members exiting the scheme relative to the liabilities
extinguished, as well as the impact of the lower opening surplus at the
beginning of the financial year, compared to the prior year.
2022/23 included legal disputes income of £30 million from credit card
companies in respect of overcharges for credit card processing (interchange)
fees.
Other movements of £86 million expense (2022/23: £64 million expense)
include £15 million related to property transactions, £15 million of
acquisition adjustments and £56 million of non-underlying finance and fair
value adjustments. Non-underlying finance and fair value adjustments were
impacted by a loss on energy derivatives of £46 million (2022/23: £29
million loss) caused by decreases in electricity forward prices in the period.
The energy derivatives relate to long-term, fixed price power purchase
arrangements (PPAs) with independent producers. These are accounted for as
derivative financial instruments, but are not designated in hedging
relationships. Therefore, gains and losses are recognised in the income
statement.
Taxation
The income tax expense was £140 million (2022/23: £120 million). The
underlying tax rate was 26.4 per cent (2022/23: 22.8 per cent) and the
effective tax rate was 50.5 per cent (2022/23: 36.7 per cent). The 2023/24
charges were structurally higher due to an increase in the headline rate of
corporation tax to 25 per cent (previously 19 per cent), effective from 1
April 2023, partially offset by beneficial prior period adjustments (mainly
due to super deduction claims).
The effective tax rate, of 50.5 per cent for the year, is significantly higher
than the prior year and headline tax rates due to the impact of the release of
a deferred tax asset on capital losses (giving rise to a tax charge of £40
million) previously recognised against fair value gains within the Highbury
and Dragon structure (against which a deferred tax liability was recognised).
During the period, an £80 million credit was recognised in reserves in
respect of the derecognition of the deferred tax liability against the
property pool; this credit had no impact on the effective tax rate. In
addition, the effective rate is adversely affected by the write off of
goodwill as part of the Financial Services restructuring, for which no tax
deduction is available.
We expect an underlying tax rate in 2024/25 of around 30 per cent. This is
higher than prior years, because of the headline rate continuing at 25 per
cent, but without any anticipated beneficial prior period adjustments.
Earnings per share
Underlying basic earnings per share decreased to 22.1 pence (2022/23: 23.0
pence) as the increase in corporation tax more than offset the increase in
underlying pre-tax earnings. Basic earnings per share decreased to 5.9 pence
(2022/23: 9.0 pence). Underlying diluted earnings per share decreased to 21.6
pence (2022/23: 22.7 pence) and diluted earnings per share decreased to 5.7
pence (2022/23: 8.8 pence).
Dividends
The Board has recommended a final dividend of 9.2 pence per share (2022/23:
9.2 pence). This will be paid on 12 July 2024 to shareholders on the Register
of Members at the close of business on 7 June 2024. This is in line with the
Group's policy to pay a dividend of around 60 per cent of underlying earnings,
allowing us to maintain a full-year dividend of 13.1 pence (2022/23: 13.1
pence).
Sainsbury's has a Dividend Reinvestment Plan (DRIP), which allows shareholders
to reinvest their cash dividends in our shares. The last date that
shareholders can elect for the DRIP is 21 June 2024.
From financial year 2024/25, as per our capital allocation policy, we are
committed to a progressive dividend policy. We have also announced that we
will buyback £200 million of shares in 2024/25 and that we will review the
level of cash return to shareholders through buyback on an annual basis.
Net debt and Retail cash flows
Summary Retail cash flow statement
52 weeks to 52 weeks to
Note (a)) 2 March 2024 4 March 2023
£m £m
Retail underlying operating profit 5 966 926
Adjustments for:
Retail underlying depreciation and amortisation 1,112 1,134
Share-based payments and other 78 49
Adjusted retail underlying operating cash flow before changes in working 2,156 2,109
capital
Decrease in underlying working capital b) 262 159
Retail non-underlying operating cash flows (excluding pensions) (72) (23)
Pension cash contributions (44) (44)
Retail net cash generated from operations 2,302 2,201
Interest paid (323) (307)
Corporation tax paid (58) (99)
Net cash generated from operating activities 1,921 1,795
Cash capital expenditure (814) (717)
Repayments of lease liabilities (505) (512)
Initial direct costs on right-of-use assets (6) (16)
Proceeds from disposal of property, plant and equipment 16 29
Interest income b) 27 15
Dividends and distributions received - 51
Retail free cash flow 639 645
Dividends paid on ordinary shares (306) (319)
Net drawdown / (repayment) of borrowings 534 (40)
Net consideration paid for Highbury and Dragon property transaction (670) -
Share related transactions (3) (32)
Net increase in cash and cash equivalents 194 254
(Increase) / decrease in debt (29) 552
Highbury and Dragon non-cash lease movements 12 1,042 -
Other non-cash and net interest movements c) (417) (391)
Movement in net debt 17 790 415
Opening net debt 17 (6,344) (6,759)
Closing net debt 17 (5,554) (6,344)
of which
Lease liabilities 17 (5,354) (6,488)
(Net debt) / net funds excluding lease liabilities (200) 144
a) Note references relate to the financial statements. Other figures
are reconciled in Notes A2.1 and A2.2 of the APMs
b) The Group cash flow statement now classifies Interest received
within cash flows from investing activities to provide greater clarity over
the Group's cash flows whereby such cash flows had previously been included
within cash generated from operations. Refer to Consolidated cash flow
statement.
c) Other non-cash movements include new leases and lease modifications
and fair value movements on derivatives used for hedging long-term borrowings
Adjusted retail underlying operating cash flow before changes in working
capital increased by £47 million year-on-year to £2,156 million (2022/23:
£2,109 million) supported by an increase in retail underlying operating
profit. Working capital reduced by £262 million, with payables increasing
whilst maintaining a flat inventories and receivables position
overall (2022/23: £159 million working capital reduction). Retail
non-underlying operating cash flows of £72 million relate to restructuring
costs, including cash flows associated with the closure of Argos operations in
Republic of Ireland. Pension cash contributions of £44 million remained
consistent with the prior year as no funding level events occurred.
We paid corporation tax of £58 million in the year (2022/23: £99 million),
£41 million lower than the prior year benefitting from overpayments on
account due to closing prior years, as well as current year benefits relating
to a partial relief taken on full expensing allowances on our fixed assets
investments. Proceeds of £16 million (2022/23: £29 million) resulted from
disposals of non-trading sites. No dividends and distributions were received
in the year while the prior year included a £50 million dividend received
from Sainsbury's Bank.
Cash capital expenditure was £814 million (2022/23: £717 million). The
year-on-year increase was primarily driven by investment in electric vehicles
(EV) charging infrastructure (£63 million) and in-store investment.
Sainsbury's expects core retail cash capital expenditure (excluding Financial
Services) in 2024/25 to be £800 million to £850 million, with an additional
£70 million of strategic investment in our EV charging business.
Retail free cash flow declined by £6 million year-on-year to £639 million
(2022/23: £645 million). In 2024/25 we expect to generate retail free cash
flow of at least £500 million, in line with our commitment of generating at
least £1.6 billion of retail free cash flow over the next three years.
Dividends of £306 million were paid in the year, covered 2.1 times by free
cash flow (2022/23: 2.0 times). Net drawdown of borrowings includes £575
million drawdown of the unsecured term loan facility used to part fund the
Highbury and Dragon property transaction.
On 17 March 2023, the Group completed the purchase of a commercial property
investment pool, known as Highbury and Dragon, in which it already held a
beneficial interest. The investment pool contained 26 supermarkets, all of
which were formerly leased to Sainsbury's. Of the 26 stores acquired, 21 have
been retained, four have been sold and leased back, and one was held for sale
at the balance sheet date. The total consideration paid for the asset
acquisition was £731 million, which included fully funding the bond
redemptions attached to the property pool of £300 million. Proceeds of £61
million were received for the four supermarkets sold and leased back.
As at 2 March 2024, net debt was £5,554 million (4 March 2023: £6,344
million), a decrease of £790 million. Excluding the impact of lease
liabilities, non-lease net debt increased by £344 million in the year, moving
to a net debt position of £200 million (4 March 2023: net funds of £144
million), impacted by the £670 million net consideration relating to the
Highbury and Dragon property transaction and partially offset by positive cash
generation.
Net debt includes lease liabilities of £5,354 million (4 March 2023: £6,488
million). Lease liabilities have decreased by £1,134 million, largely
impacted by the Highbury and Dragon property transaction which resulted in a
reduction of lease debt of £1,042 million.
For the financial year ending 1 March 2025, the definition of retail free cash
flow will change to now exclude capital injections to, dividends from, and any
other exceptional cash movements with, Sainsbury's Bank.
Financial Ratios
Key financial ratios (a)) As at As at
2 March 2024 4 March 2023
Return on capital employed 8.3% 7.6%
Net debt to EBITDA 2.6x 3.0x
Fixed charge cover 2.7x 2.7x
a) Reconciliations are set out in notes A4.1, A3.2 and A4.2 of the
APMs
Return on capital employed (ROCE) improved primarily due to lower capital
employed, driven by a decline in the average value of derivatives,
right-of-use assets and property, plant and equipment, and the impacts of the
Highbury and Dragon transaction.
Sainsbury's continues to target leverage of 3.0x to 2.4x to deliver a solid
investment grade balance sheet. An improvement in net debt to EBITDA to 2.6x
from 3.0x at 4 March 2023 reflects the improvement in net debt benefiting from
positive retail free cash flow and the Highbury and Dragon property
transaction. Fixed charge cover is stable.
Defined benefit pensions
At 2 March 2024, the net defined benefit surplus under IAS 19 for the Group
was £690 million (excluding deferred tax). This represented a reduction of
£299 million from the prior year-end date of 4 March 2023, primarily driven
by a reduction in the value of matching assets used to hedge against movements
in gilt yields and inflation, and experience losses due to higher deferred
pension increase assumptions, partially offset by updated mortality
assumptions reducing scheme liabilities.
The net surplus reduced as the Trustees' funding basis is linked to government
bond yields, which increased over the year by circa 0.3 per cent, reducing the
value of the liabilities on the schemes funding basis and consequently the
value of those matching assets. However, the IAS 19 basis in the financial
statements is linked to yields on AA rated corporate bonds. Despite government
bond yields increasing, AA bonds have remained broadly unchanged over the
year. As a result of this 'valuation mis-match', the value of the scheme's
liabilities on an IAS 19 basis was also broadly unchanged over the year,
leading to the overall reduction in the net surplus.
There was no change during the year to the previously disclosed triennial
valuation information. The next triennial valuation is due 30 September 2024.
For 2024/25, the total defined benefit pension scheme contributions are
expected to be £45 million (2023/24: £44 million).
Retirement benefit obligations
Sainsbury's Argos Group Group
as at as at as at as at
2 March 2024 2 March 2024 2 March 2024 4 March 2023
£m £m £m £m
Present value of funded obligations (5,172) (816) (5,988) (5,921)
Fair value of plan assets 5,777 925 6,702 6,934
Pension surplus 605 109 714 1,013
Present value of unfunded obligations (14) (10) (24) (24)
Retirement benefit surplus 591 99 690 989
Deferred income tax liability (201) (43) (244) (330)
Net retirement benefit surplus 390 56 446 659
Consolidated income statement
52 weeks to 2 March 2024 52 weeks to 4 March 2023
Note Underlying Non-underlying items (Note 3) Total Underlying Non-underlying items (Note 3) Total
£m £m £m £m £m £m
Revenue 4 32,721 (21) 32,700 31,491 - 31,491
Cost of sales (30,127) (139) (30,266) (28,996) (413) (29,409)
Impairment loss on financial assets (98) - (98) (78) - (78)
Gross profit/(loss) 2,496 (160) 2,336 2,417 (413) 2,004
Administrative expenses (1,553) (309) (1,862) (1,480) (35) (1,515)
Other income 52 6 58 35 38 73
Operating profit/(loss) 995 (463) 532 972 (410) 562
Finance income 7 30 51 81 18 56 74
Finance costs 7 (324) (12) (336) (300) (9) (309)
Profit/(loss) before tax 701 (424) 277 690 (363) 327
Income tax (expense)/credit 8 (185) 45 (140) (157) 37 (120)
Profit/(loss) for the financial year 516 (379) 137 533 (326) 207
Earnings per share 9 pence pence pence pence
Basic earnings 22.1 5.9 23.0 9.0
Diluted earnings 21.6 5.7 22.7 8.8
Consolidated statement of comprehensive income/(loss)
52 weeks to 2 March 2024 52 weeks to 4 March 2023
Note £m £m
Profit for the financial year 137 207
Items that will not be subsequently reclassified to the income statement
Remeasurement on defined benefit pension schemes 19 (389) (1,398)
Movements on financial assets at fair value through other comprehensive income 1 1
Cash flow hedges fair value movements - inventory hedges (67) 123
Current tax relating to items not reclassified 10 25
Deferred tax relating to items not reclassified 177 322
(268) (927)
Items that may be subsequently reclassified to the income statement
Currency translation differences (3) 4
Movements on financial assets at fair value through other comprehensive income - 1
Items reclassified from financial assets at fair value through other - (1)
comprehensive income reserve
Cash flow hedges fair value movements - non-inventory hedges (82) (30)
Items reclassified from cash flow hedge reserve 4 (18)
Deferred tax on items that may be reclassified 17 14
(64) (30)
Total other comprehensive loss for the year (net of tax) (332) (957)
Total comprehensive loss for the year (195) (750)
Consolidated balance sheet
2 March 2024 4 March 2023
Note £m £m
Non-current assets
Property, plant and equipment 11 9,282 8,201
Right-of-use assets 12 4,296 5,345
Intangible assets 13 806 1,024
Investments in joint ventures and associates 2 2
Financial assets at fair value through other comprehensive income 761 515
Trade and other receivables 108 56
Amounts due from Financial Services customers and other banks 1,467 1,908
Derivative financial assets 68 217
Net retirement benefit surplus 19 690 989
17,480 18,257
Current assets
Inventories 1,927 1,899
Trade and other receivables 582 627
Amounts due from Financial Services customers and other banks 3,050 3,484
Financial assets at fair value through other comprehensive income 17 494
Derivative financial assets 8 70
Cash and cash equivalents 16 1,987 1,319
7,571 7,893
Assets held for sale 10 8
7,581 7,901
Total assets 25,061 26,158
Current liabilities
Trade and other payables (5,091) (4,837)
Amounts due to Financial Services customers and other deposits (5,515) (4,880)
Borrowings 18 (65) (53)
Lease liabilities 12 (515) (1,533)
Derivative financial liabilities (28) (16)
Taxes payable (125) (155)
Provisions 15 (113) (140)
(11,452) (11,614)
Net current liabilities (3,871) (3,713)
Non-current liabilities
Trade and other payables (11) -
Amounts due to Financial Services customers and other deposits (206) (1,066)
Borrowings 18 (1,130) (603)
Lease liabilities 12 (4,839) (4,956)
Derivative financial liabilities (59) (58)
Deferred income tax liability (329) (476)
Provisions 15 (167) (132)
(6,741) (7,291)
Total liabilities (18,193) (18,905)
Net assets 6,868 7,253
Equity
Called up share capital 678 672
Share premium 1,430 1,418
Merger reserve 568 568
Capital redemption and other reserves 955 954
Retained earnings 3,237 3,641
Total equity shareholders' funds 6,868 7,253
Consolidated statement of changes in equity
Called up share capital Share premium account Merger reserve Capital redemption and other reserves Retained earnings Total equity
Note £m £m £m £m £m £m
At 5 March 2023 672 1,418 568 954 3,641 7,253
Profit for the financial year - - - - 137 137
Other comprehensive loss - - - (147) (389) (536)
Tax relating to other comprehensive loss - - - 99 105 204
Total comprehensive loss - - - (48) (147) (195)
Cash flow hedges losses transferred to inventory - - - 32 - 32
Transactions with owners:
Dividends 10 - - - - (306) (306)
Share-based payment - - - - 87 87
Purchase of own shares - - - (18) - (18)
Allotted in respect of share option schemes 6 12 - 35 (38) 15
At 2 March 2024 678 1,430 568 955 3,237 6,868
Called up share capital Share premium account Merger reserve Capital redemption and other reserves Retained earnings Total equity
Note £m £m £m £m £m £m
At 6 March 2022 668 1,406 568 1,021 4,760 8,423
Profit for the financial year - - - - 207 207
Other comprehensive income/(loss) - - - 80 (1,398) (1,318)
Tax relating to other comprehensive income/(loss) - - - 14 347 361
Total comprehensive income/(loss) - - - 94 (844) (750)
Cash flow hedges losses transferred to inventory - - - (139) - (139)
Transactions with owners:
Dividends 10 - - - - (319) (319)
Share-based payment - - - - 58 58
Purchase of own shares - - - (45) - (45)
Allotted in respect of share option schemes 4 12 - 23 (26) 13
Other adjustments - - - - 5 5
Tax on items charged to equity - - - - 7 7
At 4 March 2023 672 1,418 568 954 3,641 7,253
Consolidated cash flow statement
52 weeks to 2 March 2024 52 weeks to 4 March 2023
Note £m £m
Cash flows from operating activities
Profit before tax 277 327
Net finance costs 7 255 235
Operating profit 532 562
Depreciation 11,12 989 1,036
Amortisation 13 189 172
Net impairment loss on non-financial assets 11,12,13 235 315
Profit on sale of non-current assets and early termination of leases (2) (15)
Non-underlying fair value movements 3 46 29
Share-based payments expense 89 59
Defined benefit scheme expense/(income) 19 7 (2)
Cash contributions to defined benefit scheme 19 (44) (44)
Operating cash flows before changes in working capital 2,041 2,112
Decrease/(increase) in inventories 5 (105)
Decrease in financial assets at fair value through other comprehensive income (135) (207)
(Increase)/decrease in trade and other receivables (5) 53
Decrease/(increase) in amounts due from Financial Services customers and other 459 (231)
deposits
Increase in trade and other payables 214 280
(Decrease)/increase in amounts due to Financial Services customers and other (225) 687
deposits
Increase in provisions 8 -
Cash generated from operations 2,362 2,589
Interest paid (336) (316)
Corporation tax paid (61) (103)
Net cash generated from operating activities 1,965 2,170
Cash flows from investing activities
Purchase of property, plant and equipment (1,381) (525)
Initial direct costs on new leases (6) (16)
Purchase of intangible assets (178) (213)
Proceeds from disposal of property, plant and equipment 77 29
Proceeds from disposal of amounts due from Financial Services customers 446 -
Interest received 27 15
Dividends and distributions received - 1
Net cash used in investing activities (1,015) (709)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 15 13
Proceeds from borrowings 18 575 -
Repayment of borrowings (41) (95)
Purchase of own shares (18) (45)
Capital repayment of lease obligations (507) (514)
Dividends paid on ordinary shares 10 (306) (319)
Net cash used in financing activities (282) (960)
Net increase in cash and cash equivalents 668 501
Opening cash and cash equivalents 1,319 818
Closing cash and cash equivalents 16 1,987 1,319
The Group now classifies interest received within cash flows from investing
activities to provide greater clarity over the Group's cash flows whereby such
cash flows had previously been included within cash generated from operations.
The 2023 amounts have therefore been re-presented whereby cash generated from
operations and cash flows from investing activities were previously £2,604
million and £(724) million respectively.
Notes to the consolidated financial statements
1 General information
The financial information, which comprises the Consolidated income statement,
Consolidated statement of comprehensive income, Consolidated balance sheet,
Consolidated cash flow statement, Consolidated statement of changes in equity
and related notes, is derived from the full Consolidated financial statements
for the 52 weeks to 2 March 2024 (prior financial year: 52 weeks to 4 March
2023) and does not constitute full accounts within the meaning of section 435
(1) and (2) of the Companies Act 2006.
The Annual Report and Financial Statements 2024 on which the auditors have
given an unqualified report and which does not contain a statement under
section 498 (2) or (3) of the Companies Act 2006, will be delivered to the
Registrar of Companies in due course, and made available to shareholders in
June 2024.
J Sainsbury plc is a public limited company (the '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 consolidated financial statements for the 52 weeks to 2 March 2024
comprise the financial statements of the Company and its subsidiaries (the
'Group') and the Group's share of the post-tax results of its joint ventures
and associates.
The Group's principal activities are Food, General Merchandise and Clothing
retailing and Financial Services.
2 Basis of preparation
The Group's financial statements have been prepared in accordance with
UK-adopted international accounting standards.
They have been prepared under the historical cost convention, except for
derivative financial instruments, defined benefit pension scheme assets and
financial assets at fair value through other comprehensive income (FVOCI).
Sainsbury's Bank plc and its subsidiaries have been consolidated for the
twelve months to 29 February 2024 being the Bank's year-end date (2023: 28
February 2023). Adjustments have been made for the effects of significant
transactions or events that occurred between this date and the Group's balance
sheet date.
Unless otherwise stated, material accounting policies have been applied
consistently to all periods presented in the financial statements although
certain presentational changes have been made with the objective of
simplification and to assist in and aid the users' understanding.
2.1 Going concern
The Directors are satisfied that the Group has sufficient resources to
continue in operation for a period of at least 12 months from the date of
approval. Accordingly, they continue to adopt the going concern basis in
preparing the financial statements. The assessment period for the purposes of
considering going concern is the 12 months to 24 April 2025.
In assessing the Group's ability to continue as a going concern, the Directors
have considered the Group's most recent corporate planning and budgeting
processes. This includes an annual review which considers profitability, the
Group's cash flows, committed funding and liquidity positions and forecasted
future funding requirements over three years, with a further year of
indicative movements.
The Group manages its financing by diversifying funding sources, structuring
core borrowings with phased maturities to manage refinancing risk and
maintaining sufficient levels of standby liquidity via the Revolving Credit
Facility. This seeks to minimise liquidity risk by maintaining a suitable
level of undrawn additional funding capacity.
The Revolving Credit Facility of £1,000 million comprises two £500 million
facilities which were both extended by a further 12 months during the year.
Facility A has a final maturity of December 2028 and Facility B has a final
maturity of December 2027. As at 2 March 2024, the Revolving Credit Facility
was undrawn.
In assessing going concern, scenarios in relation to the Group's principal
risks have been considered in line with those disclosed in the viability
statement by overlaying them into the corporate plan and assessing the impact
on cash flows, net debt and funding headroom. These severe but plausible
scenarios included modelling inflationary pressures on both food margins and
general recession-related risks, the impact of any regulatory fines, and the
failure to deliver planned cost savings.
In performing the above analysis, the Directors have made certain assumptions
around the availability and effectiveness of the mitigating actions available
to the Group. These include reducing any non-essential capital expenditure and
operating expenditure on projects, bonus and pay awards, and dividend
payments.
The Group's most recent corporate planning and budgeting processes includes
assumed cashflows to address climate change risks, including costs associated
with initiatives in place as part of the Plan for Better commitment which
include reducing environmental impacts and meeting customer expectations in
this area, notably through reducing packaging and reducing energy usage across
the estate. Climate-related risks do not result in any material uncertainties
affecting the Group's ability to continue as a going concern.
Specific additional consideration has been given to the impacts of the
strategic review of the Financial Services division. The strategy change
introduces new or amended risks in respect of liquidity and capital adequacy
which arise from the move to offer financial services products by dedicated
financial services providers and the phased withdrawal from the core banking
business. Taking into account the current and forecast levels of liquidity and
capital together with the related headroom, the Directors have considered and
assessed the potential impact of the strategic change and the risks arising
thereon. The evaluation has included the quantification of any potentially
adverse impacts of customer behaviour as well as the timing of repayment of
external funding. Having undertaken this assessment, the Directors are
satisfied that the Bank has sufficient liquidity and capital resources to
withstand severe but plausible adverse scenarios stemming from the risks of
the strategic change, prior to any additional mitigating actions being taken.
In the event of any mitigations being required, the Directors are confident
that additional liquidity could be raised through future asset securitisations
or other sources of funding. Accordingly, it has been concluded that this does
not result in any material uncertainties affecting the Group's ability to
continue as a going concern.
As a consequence of the work performed, the Directors considered it
appropriate to adopt the going concern basis in preparing the Financial
Statements with no material uncertainties to disclose.
2.2 New accounting pronouncements
New accounting standards, amendments to standards and IFRIC interpretations
which became applicable during the year or have been published but are not yet
effective, were either not relevant or had no impact, or no material impact,
on the Group's results or net assets.
In respect of IFRS 17 Insurance Contracts, which became effective for the
current financial year, an assessment was made as to whether any of the
Group's arrangements met the definition of an insurance contract. While some
contracts may transfer an element of insurance risk, they relate to warranty
agreements and therefore will continue to be accounted for under the existing
revenue and provisions standards. The Group has identified that IFRS 17 will
impact the results of its captive insurance company as it issues insurance
contracts, however the impact on the income statement and balance sheet is
immaterial. The Group has also assessed its parent company guarantee
arrangements but concluded that the adoption of IFRS 17 has no impact on
these.
The accounting policies have remained unchanged from those disclosed in the
Annual Report for the financial year ended 4 March 2023.
2.3 Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors use various APMs.
These APMs should be considered in addition to, and are not intended to be a
substitute for, IFRS measurements. As they are not defined by International
Financial Reporting Standards, they may not be directly comparable with other
companies' APMs.
The Directors believe that these APMs provide additional useful information
for understanding the financial performance and health of the Group. They are
also used to enhance the comparability of information between reporting
periods (such as like-for-like sales and underlying performance measures) by
adjusting for non-recurring factors which affect IFRS measures, and to aid
users in understanding the Group's performance. Consequently, APMs are used by
the Directors and management for performance analysis, planning, reporting and
incentive setting purposes.
The income statement shows the non-underlying items excluded from reported
results to determine underlying results with a more detailed analysis of the
non-underlying items set out in note 3. Other APMs are detailed in notes A1,
A2, A3 and A4 of this report which includes further information on the
definition, purpose and reconciliation to the closest IFRS measure. APMs used
by the Group are consistent with those used in the prior financial year.
2.4 Asset acquisition
During the financial year the Group purchased Supermarket Income REIT's
beneficial interest in a commercial property investment pool, in which the
Group already held a beneficial interest, through the acquisition of Hobart
Property plc, Avenell Property plc, Horndrift Limited and Cornerford Limited.
The Group signed a Master Framework Agreement on 13 March 2023 subject to
certain conditions being met including providing sufficient up-front funding
to the Security Trustee for them to redeem each of the bond liabilities
attached to the property pools. These investment pools consisted of 26
supermarket stores, all of which were formerly leased to Sainsbury's. Of the
26 stores acquired, 21 stores have been retained and one store has been
vacated and recognised within assets held for sale. The remaining four stores
have been sold and leased back to the Group.
The Group considered both the optional 'concentration test' and the
'substantive process test' set out within IFRS 3 Business Combinations to
assess whether the assets and liabilities acquired in the transaction
constituted a business. The value of investment properties represented
substantially all of the fair value of the gross assets acquired and as such
the transaction has been accounted for as an asset acquisition, with a
corresponding derecognition of lease liabilities and right of use assets
whereby the Group already had a beneficial interest in these assets.
The impact of this transaction on the Group's accounts is set out in notes to
the financial statements and is summarised as follows.
The Group recognised £1,021 million of property, plant and equipment for the
stores acquired and derecognised £1,042 million in lease liabilities and
£1,031 million in right-of-use assets respectively as a result of the
transaction. The net difference in the lease liabilities and right-of-use
assets derecognised is included within the recognition of the property, plant
and equipment. The lease balances had included the payment of purchase options
at the end of the lease terms, which were rescinded as part of the
transaction.
The total consideration paid for the asset acquisition was £731 million. As
part of the purchase agreement, the Group pre-funded £170 million of
consideration in escrow for the benefit of the Security Trustee on 14 March
2023, to enable them to redeem the Avenell Bond on 20 March 2023. Similarly,
the Group pre-funded £130 million of consideration in escrow for the benefit
of the Security Trustee on 5 July 2023, to enable them to redeem the Hobart
Bond on 13 July 2023.
The total consideration paid of £731 million, including the pre-funded £300
million noted above, is all presented within the Group cashflow statement as
investing activities within purchases of property, plant and equipment.
Proceeds of £61 million were received for the four stores sold and leased
back. As the proceeds in the sale and leaseback were equal to the fair value
of the assets sold, these cashflows have been presented within investing
cashflows.
Previously the Group had held a portion of the beneficial interest in this
commercial property investment pool, recognised within financial assets at
FVOCI. This balance of £366 million was fully derecognised as part of the
acquisition.
The asset acquisition is referred to as the Highbury & Dragon property
transaction.
3 Non-underlying items
2024 2023
Restructuring and impairment Pensions Other Total Restructuring and impairment Pensions Other Total
3.1 3.2 3.3 3.1 3.2 3.3
£m £m £m £m £m £m £m £m
Revenue (21) - - (21) - - - -
Cost of sales (73) - (66) (139) (384) - (29) (413)
Administrative (expense)/income (273) (7) (29) (309) (14) 2 (23) (35)
Other income - - 6 6 11 - 27 38
Affecting operating profit (367) (7) (89) (463) (387) 2 (25) (410)
Net finance (costs)/income (1) 51 (11) 39 - 56 (9) 47
Affecting profit before tax (368) 44 (100) (424) (387) 58 (34) (363)
Income tax credit 45 37
Affecting profit after tax (379) (326)
The impact of non-underlying items on Retail cash generated from operations is
presented in note A2.2.
3.1 Restructuring and impairment
Comprises restructuring charges of £368 million (2023: £106 million) and
non-restructuring related impairment charges of £nil million (2023: £281
million, all of which was recognised within cost of sales).
a) Restructuring
Financial Services model
In January 2024, the Group announced that financial services products to be
offered in the future will be provided by dedicated financial services
providers through a distributed model and over time this would result in a
phased withdrawal from the core Banking business. Costs associated with this
restructuring are set out in the table below with key components comprising
full impairment of non-financial assets (comprising mainly computer software
for which the level of activities which it was designed to fulfil is now
significantly curtailed in terms of both volume and period use), additional
allowances arising from a reassessment of the effective interest rate applied
to the amortised cost of financial assets, onerous contracts and goodwill.
Further costs associated with this restructuring will be incurred in future
years once more detailed plans to execute these changes are formulated and
communicated.
Sainsbury's structural integration
In the year ended 6 March 2021, the Group announced a restructuring programme
to accelerate the structural integration of Sainsbury's and Argos and further
simplify the Argos business; create a new supply chain and logistics operating
model, moving to a single integrated supply chain and logistics network across
Sainsbury's and Argos; and further rationalise/repurpose the Group's
supermarkets and convenience estate. The programme also considered the Group's
Store Support Centre ways of working.
b) Non-Restructuring items
Impairments of non-financial assets
Separate from restructuring initiatives and property related transactions, the
Group has assessed whether there were any indicators of impairment or
reversals of impairment. No indicators were present in the current financial
year which therefore resulted in no non-restructuring related impairments or
reversals of impairment. In the prior financial year, the level of uncertainty
within the wider macroeconomic environment, including sustained increases in
the Bank of England gilt rates, represented an indicator of impairment. It was
determined that the increase in discount rates was a significant impairment
indicator and therefore a full impairment review was undertaken.
Analysis of restructuring and non-restructuring impairment items
2024 2023
Financial Services model Sainsbury's structural integration Total Sainsbury's structural integration Impairment of non-financial assets Total
Note £m £m £m £m £m £m
Non-financial asset impairment - Property, plant and equipment (9) (1) (10) (8) (141) (149)
- Right-of-use assets (3) (3) (6) (21) (122) (143)
- Intangible assets (200) - (200) (5) (18) (23)
(212) (4) (216) (34) (281) (315)
Accelerated depreciation of assets a) - (19) (19) (20) - (20)
Employee costs b) (8) (33) (41) (54) - (54)
Onerous contracts c) (17) - (17) - - -
Property closure provisions d) - (33) (33) 1 - 1
Effective interest rate adjustment to financial assets e) (21) - (21) - - -
Other (costs)/gains f) (15) (6) (21) 1 - 1
(273) (95) (368) (106) (281) (387)
a) The remaining useful economic lives of corresponding sites have
been reassessed to align with closure dates, resulting in an acceleration in
depreciation of these assets. The existing depreciation of these assets
(depreciation that would have been recognised absent of a closure decision) is
recognised within underlying expenses, whereas accelerated depreciation above
this is recognised within non-underlying expenses.
b) Comprises severance costs and for the Financial services model also
includes retention bonuses relating to performance in 2024.
c) Comprises long dated IT contracts where anticipated early
termination will result in unavoidable costs of meeting obligations under the
contracts which exceed the economic benefits expected to be received under
them. Costs represent the lower of the costs of fulfilling contracts and the
costs of terminating.
d) Relates to onerous lease costs, dilapidations and strip out costs on
sites that have been identified for closure, as well as business rates for
sites the Group no longer operates from which are recognised as incurred. The
prior year includes amounts reversed in relation to sites no longer being
exited as part of the programme. Upon initial recognition of such provisions,
management uses its best estimates of the relevant costs to be incurred as
well as expected closure dates.
e) The withdrawal from core banking operations has a commercial impact
upon future management initiatives and actions which could lead to different
customer behaviours than previously forecasted. This resulted in revised
assumptions about customer behaviours which led to a reduction in the
amortised cost of financial assets (credit cards) with the impacts being
recognised in revenue.
f) Other costs comprise predominantly consultancy costs offset by
profits recognised on properties sold during the financial year which had
previously been impaired as part of the restructuring programme.
3.2 Pensions
Such amounts relate to the defined benefit pension scheme (the Scheme) and are
treated as non-underlying owing to the Scheme being closed to future accrual
and accordingly not forming part of ongoing operating activities.
3.3 Other
2024 2023
£m £m
Disposal of mortgage book a) (14) -
Legal disputes b) - 30
Property related transactions c) (15) (9)
Non-underlying finance and fair value movements d) (56) (38)
Acquisition adjustments e) (15) (20)
ATM business rates reimbursement - 3
(100) (34)
a) During the period, the Group disposed of its mortgage portfolio for
proceeds of £446 million which resulted in a non-underlying charge of £(14)
million, included within administrative expenses, which includes a loss on
disposal including goodwill, transaction costs and the recognition of onerous
contract provisions.
b) Consists of other income representing receipt from credit card
companies in respect of overcharges for credit card processing (interchange)
fees.
c) Comprises an impairment charge of £19 million of property, plant
and equipment recognised in cost of sales as part of the asset acquisition of
21 stores, whereby the asset base of these stores' CGUs had significantly
changed as a result of the transaction and therefore were reviewed for
impairment. Offset by a gain on disposal of non-trading properties of £4
million recognised in other income. (2023: loss on disposal of non-trading
properties of £3 million recognised in other income, and £6 million of costs
relating to a property transaction recognised in cost of sales and
administrative expenses).
d) Comprises £46 million (2023: £29 million) within cost of sales
relating to unfavourable movements on long-term, fixed price power purchase
arrangements (PPAs) with independent producers. These are classified as
derivatives which are not in a hedge relationship and owing to potentially
significant fluctuations in value from external market factors are treated as
non-underlying to enable consistency between periods. Remaining movements of
£10 million (2023: £9 million) are within net finance costs and relate to
lease interest paid on impaired non-trading sites.
e) Comprises the unwind of non-cash fair value adjustments arising
from the Home Retail Group and Nectar UK acquisitions. Classification as
non-underlying is because these assets would not normally be recognised
outside of a business combination.
4 Revenue
Disaggregated revenue
2024 2023
£m £m
Retail
Grocery and General Merchandise & Clothing (GM&C) 27,830 25,993
Fuel 4,254 4,967
32,084 30,960
Financial Services
Interest receivable 472 394
Fees and commissions 144 137
616 531
Total 32,700 31,491
5 Segment reporting
The Group's operating segments have been determined based on the information
regularly provided to the Chief Operating Decision Maker (CODM), which has
been determined to be the Group Operating Board, which is used to make optimal
decisions on the allocation of resources and assess performance.
The Group's reportable operating segments have been identified as:
· Retail: comprising the sale of food, household, general
merchandise, clothing and fuel primarily through store and online channels.
· Financial Services: comprising banking and insurance services
through Sainsbury's Bank and Argos Financial Services.
The CODM uses underlying profit before tax as the key measure of segmental
performance as it represents the ongoing trading performance with additional
insight into year-on-year performance that is more comparable over time. The
use of underlying profit before tax aims to provide parity and transparency
between users of the financial statements and the CODM in assessing the core
performance of the business and performance of management.
Segment results, assets and liabilities include items directly attributable to
a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to
acquire segment assets that are expected to be used for more than one period.
5.1 Income statement
2024 2023
Retail Financial Group Retail Financial Group
Services
Services
£m £m £m £m £m £m
Underlying revenue
Retail sales to customers 32,084 - 32,084 30,960 - 30,960
Financial Services to customers - 637 637 - 531 531
32,084 637 32,721 30,960 531 31,491
Underlying operating profit 966 29 995 926 46 972
Underlying finance income 30 - 30 18 - 18
Underlying finance costs (324) - (324) (300) - (300)
Underlying profit before tax 672 29 701 644 46 690
Non-underlying items (424) (363)
Profit before tax 277 327
Income tax expense (140) (120)
Profit for the financial year 137 207
5.2 Balance sheet
2024 2023
Retail Financial Group Retail Financial Group
Services
Services
£m £m £m £m £m £m
Assets 18,288 6,771 25,059 18,925 7,231 26,156
Investments in joint ventures and associates 2 - 2 2 - 2
Segment assets 18,290 6,771 25,061 18,927 7,231 26,158
Segment liabilities (12,171) (6,022) (18,193) (12,584) (6,321) (18,905)
5.3 Other segment items
2024 2023
Retail Financial Group Retail Financial Group
Services
Services
£m £m £m £m £m £m
Additions to non-current assets
Property, plant and equipment 1,654 1 1,655 532 2 534
Intangible assets 165 13 178 194 19 213
Right-of-use assets 435 3 438 398 - 398
Depreciation expense
Property, plant and equipment 538 1 539 565 1 566
Right-of-use assets 449 1 450 469 1 470
Amortisation expense
Intangible assets 159 30 189 141 31 172
Impairment of non-financial assets 23 174 197 301 - 301
Impairment of goodwill - 38 38 14 - 14
Impairment (reversal)/ loss on financial assets (4) 102 98 2 76 78
Share based payments 83 6 89 54 5 59
5.4 Geographical segments
In the current year and the prior year, the Group predominantly traded in the
UK and the Republic of Ireland and consequently the majority of revenues,
capital expenditure and segment net assets arise there. The profits, revenues
and assets of the businesses in the Republic of Ireland are not material.
6 Supplier arrangements
The types of supplier arrangements applicable to the Group are as follows:
· Discounts and supplier incentives: Represent the majority of
all supplier arrangements and are linked to individual unit sales. The
incentive is typically based on an agreed sum per item sold on promotion for a
period and therefore is considered part of the purchase price of that product.
· Fixed amounts: Agreed with suppliers primarily to support
in-store activity including promotions, such as utilising specific space.
· Supplier rebates: Typically agreed on an annual basis, aligned
with the Group's financial year. The rebate amount is linked to pre-agreed
targets such as sales volumes.
· Marketing and advertising income: Advertising income from
suppliers and online marketing and advertising campaigns within Argos.
Recognised in income statement
2024 2023
£m £m
Fixed amounts 271 192
Supplier rebates 76 94
Marketing and advertising income 134 97
481 383
Discounts and supplier incentives are not shown as they are deemed to be part
of the cost price of inventory.
Held on the balance sheet
2024 2023
£m £m
Within inventory (3) (4)
Within current trade receivables
Supplier arrangements due 47 45
Accrued supplier arrangements 48 43
Within current trade payables
Supplier arrangements due 39 49
Accrued supplier arrangements 1 2
Total supplier arrangements 132 135
7 Finance income and finance costs
2024 2023
Underlying Non-underlying Total Underlying Non-underlying Total
£m £m £m £m £m £m
Interest on bank deposits and other financial assets 28 - 28 16 - 16
IAS 19 pension financing income - 51 51 - 56 56
Finance income on net investment in leases 2 - 2 2 - 2
Finance Income 30 51 81 18 56 74
Secured borrowings (38) - (38) (41) - (41)
Unsecured borrowings (33) - (33) (1) - (1)
Lease liabilities (253) (11) (264) (258) (9) (267)
Provisions - amortisation of discount - (1) (1) - - -
Finance costs (324) (12) (336) (300) (9) (309)
8 Taxation
8.1 Income statement
2024 2023
£m £m
Current tax
UK Corporation tax 100 105
Overseas tax - 3
(Over)/under provision in prior years (4) 2
96 110
Deferred Tax
Origination and reversal of temporary differences 24 9
(Over)/under provision in prior years (19) 3
Adjustment from change in applicable rate of deferred tax (1) (2)
Derecognition of capital losses 40 -
44 10
Total income tax expense 140 120
Analysed as:
Underlying tax 185 157
Non-underlying tax (45) (37)
Total income tax expense 140 120
Underlying tax rate 26.4% 22.8%
Effective tax rate 50.5% 36.7%
The Spring Budget on 21 March 2023 confirmed the introduction of Pillar Two
reporting requirements for the UK, and were enacted on 18 July 2023,
confirming that the rules will apply to the Group for the period ending 1
March 2025. Pillar Two reporting introduced a global minimum 15 per cent tax
rate by the end of 2023 and the Group will be required to file certain returns
evidencing the payment of tax at this rate. The potential impact of this has
been assessed based on the most recent tax filings, country by country
reporting and financial statements for the constituent entities in the Group,
and it is not considered that there is a material top up tax liability at this
stage under the transitional safe harbour rules.
It is unclear if the Pillar Two model rules create additional temporary
differences, whether to remeasure deferred taxes and which tax rate to use to
measure deferred taxes. The Group has therefore applied the mandatory
temporary exception in the amended IAS 12 'Income taxes' from the requirement
to recognise or disclose information about deferred tax assets and liabilities
related to the proposed Pillar Two model rules.
9 Earnings per share
The calculations of basic and underlying basic earnings per share are based on
profit after tax and underlying profit after tax for the financial year,
respectively, divided by the weighted average number of Ordinary shares in
issue during the year, excluding own shares held by the Employee Share
Ownership Trust (ESOT).
Underlying earnings per share figures, which represent alternative performance
measures as defined in note 2.3, have been calculated based on earnings before
non-underlying items which are set out in note 3.
Diluted and underlying diluted earnings per share are calculated on the same
basis as basic and underlying basic earnings per share, but where the weighted
average share numbers has also been adjusted for the weighted average effects
of potentially dilutive shares. Such potentially dilutive shares comprise
share options and awards granted to employees, where the scheme to date
performance is deemed to have been earned.
2024 2023
million million
Weighted average number of shares in issue for calculating basic earnings per 2,334.8 2,312.6
share
Weighted average number of dilutive share options 59.2 39.6
Weighted average number of shares in issue for calculating diluted earnings 2,394.0 2,352.2
per share
£m £m
Profit attributable to ordinary shareholders of the parent 137 207
Adjustment for non-underlying items net of tax 379 326
Profit attributable to ordinary shareholders of the parent - underlying 516 533
Earnings per share Pence per share Pence per share
Basic 5.9 9.0
Diluted 5.7 8.8
Underlying basic 22.1 23.0
Underlying diluted 21.6 22.7
10 Dividends
2024 2023 2024 2023
pence pence per share £m £m
per share
Amounts recognised as distributions to ordinary shareholders
Final dividend for financial year ended 5 March 2022 - 9.9 - 229
Interim dividend for financial year ended 4 March 2023 - 3.9 - 90
Final dividend for financial year ended 4 March 2023 9.2 - 215 -
Interim dividend for financial year ended 2 March 2024 3.9 - 91 -
13.1 13.8 306 319
Proposed final dividend at financial year-end 9.2 217
The proposed final dividend was approved by the Board on 24 April 2024 and is
subject to shareholders' approval at the Annual General Meeting. If approved,
it will be paid on 12 July 2024 to shareholders on the register as at 7 June
2024. No amount for the proposed final dividend has been recognised at the
balance sheet date.
11 Property, plant and equipment
2024 2023
Land and buildings Fixtures and equipment Total Land and buildings Fixtures and equipment Total
£m £m £m £m £m £m
Cost
At beginning of financial year 9,865 5,029 14,894 9,693 5,288 14,981
Acquisition 1,021 - 1,021 - - -
Additions - Capitalised expenditure 273 360 633 249 284 533
- Capitalised interest 1 - 1 1 - 1
Disposals (1) (470) (471) (71) (540) (611)
Transfer to assets held for sale (5) - (5) (7) (3) (10)
At end of financial year 11,154 4,919 16,073 9,865 5,029 14,894
Accumulated depreciation and impairment
At beginning of financial year 3,153 3,540 6,693 2,917 3,662 6,579
Depreciation expense 186 353 539 184 382 566
Impairment loss 8 21 29 110 39 149
Disposals - (470) (470) (56) (540) (596)
Transfer to assets held for sale - - - (2) (3) (5)
At end of financial year 3,347 3,444 6,791 3,153 3,540 6,693
Net book value 7,807 1,475 9,282 6,712 1,489 8,201
Capital work-in-progress included above 115 56 171 206 314 520
12 Leases
Group as a lessee
a) Right-of-use assets
2024 2023
Land and buildings Equipment Total Land and buildings Equipment Total
Net book value £m £m £m £m £m £m
At beginning of financial year 5,032 313 5,345 5,266 294 5,560
New leases and modifications 334 104 438 283 115 398
Impairment loss (6) - (6) (142) (1) (143)
Depreciation expense (353) (97) (450) (375) (95) (470)
Derecognised as part of asset acquisition (1,031) - (1,031) - - -
At end of financial year 3,976 320 4,296 5,032 313 5,345
b) Lease liabilities
2024 2023
£m £m
At beginning of financial year 6,489 6,621
New leases and modifications 414 382
Derecognised as part of asset acquisition (1,042) -
Interest expense 264 267
Payments (771) (781)
At end of financial year 5,354 6,489
c) Maturity analysis
2024 2023
£m £m
Contractual undiscounted cash flows
Less than 1 year 703 1,798
1 to 2 years 660 680
2 to 3 years 619 632
3 to 4 years 562 591
4 to 5 years 534 541
Total less than 5 years 3,078 4,242
5 to 10 years 2,467 2,473
10 to 15 years 1,779 1,981
More than 15 years 2,770 3,505
Total undiscounted lease liability 10,094 12,201
Lease liability in the balance sheet 5,354 6,489
Analysed as:
Current 515 1,533
Non-current 4,839 4,956
13 Intangible assets
Goodwill Computer software Acquired brands Customer relationships Total
£m £m £m £m £m
Cost
At 5 March 2023 391 1,105 229 32 1,757
Additions - 178 - - 178
Disposals (7) (48) - - (55)
At 2 March 2024 384 1,235 229 32 1,880
Accumulated amortisation and impairment
At 5 March 2023 39 495 167 32 733
Amortisation expense - 171 18 - 189
Impairment loss 38 162 - - 200
Disposals - (48) - - (48)
At 2 March 2024 77 780 185 32 1,074
Net book value at 2 March 2024 307 455 44 - 806
Capital work-in-progress included above - 44 - - 44
Cost
At 6 March 2022 392 1,077 229 32 1,730
Additions - 213 - - 213
Disposals (1) (185) - - (186)
At 4 March 2023 391 1,105 229 32 1,757
Accumulated amortisation and impairment
At 6 March 2022 26 521 147 30 724
Amortisation expense - 150 20 2 172
Impairment loss 14 9 - - 23
Disposals (1) (185) - - (186)
At 4 March 2023 39 495 167 32 733
Net book value at 4 March 2023 352 610 62 - 1,024
Capital work-in-progress included above - 48 - - 48
14 Impairment of non-financial assets
14.1 Key assumptions in measuring VIU
The recoverable amount of Retail CGUs is measured at the higher of fair value
less cost to dispose and the value-in-use of cash flows expected to be
independently generated. For owned store related assets, a vacant possession
valuation is used as an approximation of fair value less cost to dispose.
The announcement of the restructuring of the Financial Services business as
described further in note 3, which will result in a phased withdrawal from the
core Banking business such that in future such services will be offered by
dedicated financial services providers, represented an indicator of
impairment, and as such full impairment review was undertaken, with a
value-in-use calculation adopted as the measure of recoverability.
Cash flows and discount rate
Assumption Retail Segment Financial Services Segment
Cash flows · Derived from the Board approved cash flow projections for four years with · Two scenarios of cash flow projection which assume a sale of financial
an assumed growth rate of 2% beyond the four-year forecast period. services products or a run down were prepared which represent either end of a
reasonably possible range of outcomes that could occur and have been
· owned stores: extrapolated into perpetuity probability weighted in determining value in use.
· leased stores: taken to lease end · Value in use has been derived from the Board approved cash flow
projections for four years, measured with reference to the assets' remaining
· properties identified for closure: remaining period of trading. useful economic life that is being tested, adjusted for any estimated
reduction in life arising from the phased withdrawal of the core banking
· Online grocery are allocated to the individual store CGUs which fulfil business. For products not directly impacted by the phased withdrawal, the
the online sales. assumed growth rate of up to 2%, depending on product line, has been
extrapolated beyond management's four year forecast over the remaining useful
life of the assets.
Discount rate · Post-tax rate representing the weighted average cost of capital (WACC), · Post-tax rate representing weighted average cost of capital (WACC),
subsequently grossed up to a pre-tax rate of 8.9%. subsequently grossed up to a pre-tax rate of 14.7%.
· Post-tax WACC calculated using the capital asset pricing model, the · Post-tax WACC calculated using a combination of adjusted market analysis
inputs of which include a 20-year average risk-free rate for the UK, a UK and the actual cost of debt on Tier 2 capital instruments.
equity risk premium, levered debt premium and risk adjustment and an average
beta for the Group. · Discount rate is applied consistently to all individual product CGUs and
the collective CGUs which support the products.
· Discount rate is applied consistently to all individual store CGUs and
the Group of CGUs supported by Sainsbury's or Argos stores.
For store pipeline development sites, where there are plans to develop the
store, the carrying value of the asset is compared with its VIU using a
methodology consistent with the store CGU approach described above. Future
cash flows include the estimated costs to completion. For sites where there is
no plan to develop a store, the recoverable amount is based on its fair value
less costs to dispose.
14.2 Non-financial assets
a) Impairment charges
2024 2023
Retail Financial Services Total Retail Financial Services Total
£m £m £m £m £m £m
Balance sheet
Property, plant and equipment 20 9 29 149 - 149
Right-of-use assets 3 3 6 143 - 143
Intangible assets - 200 200 23 - 23
Total impairment loss 23 212 235 315 - 315
Income statement
Comprising
Restructuring programmes 4 212 216 34 - 34
Non-restructuring programmes 19 - 19 281 - 281
Total impairment loss 23 212 235 315 - 315
b) Sensitivity
For all impairments recognised, management is satisfied that there are no
reasonably possible changes in assumptions that would lead to the recognition
of a materially different impairment charge.
14.3 Goodwill
a) Impairment charges
The following impairment charges are included within the intangible assets
impairment presented in note 14.2.
2024 2023
£m £m
Sainsbury's Bank plc a) 38 -
Jacksons Stores Limited b) - 10
Bells Stores Limited b) - 4
38 14
(a) As described in note 3.3, following the sale of the Group's mortgage
portfolio, goodwill of £7 million in respect of Sainsbury's Bank plc was
derecognised on disposal. Following the restructuring of the financial
services business announced on 18 January 2024 and described in further detail
in note 3.1, the remaining balance of goodwill of Sainsbury's Bank plc has
been fully impaired.
(b) Related to the store CGUs to which Jacksons Stores Limited and Bells
Stores Limited goodwill amounts are allocated to.
The recoverable amount of CGUs to which the respective goodwill has been
allocated are based on the same key assumptions as noted in 14.1.
b) Sensitivities
Sensitivity analysis on the impairment tests for each group of CGUs to which
goodwill has been allocated has been performed. The valuations indicate
sufficient headroom such that a reasonably possible change to key assumptions
would not result in any impairment of goodwill that differs to that
recognised. Management is satisfied that there are no reasonable possible
changes to assumptions that would lead to further impairments.
Headroom
Discount rate Cash flows
Headroom -2% +2% -10% +10%
£m £m £m £m £m
Home Retail Group a), b) 1,920 3,066 1,291 1,653 2,188
Sainsbury's Bank plc a), c) - n/a n/a n/a n/a
Nectar UK a) 1,656 2,412 1,241 1,473 1,838
Jacksons Stores Limited d) 92 116 77 80 104
Bells Stores Limited d) 38 44 34 33 43
Other 45 74 29 36 54
a) Cash flows derived from Board approved projections for four years and
then extrapolated into perpetuity with an assumed growth rate of 2.0%.
b) Allocated to the collective Argos store and non-store CGU.
c) Sainsbury's Bank plc goodwill is allocated to the Financial Services
collective CGUs and has been fully impaired as described in note 3. There
are no reasonably possible changes in key assumptions that would cause the
goodwill to not be impaired.
d) Goodwill balances are allocated to individual store CGUs to which
they relate.
15 Provisions
Property provisions Insurance provisions Sainsbury's structural integration provisions Financial Services- related provisions Other provisions Total
a) b) c) d)
£m £m £m £m £m £m
At 5 March 2023 114 59 58 28 13 272
Additional provisions 77 22 42 18 - 159
Unused amounts released (19) - (8) (6) (2) (35)
Utilisation of provision (52) (22) (42) (1) - (117)
Amortisation of discount - - 1 - - 1
At 2 March 2024 120 59 51 39 11 280
Current 45 13 28 22 5 113
Non-current 75 46 23 17 6 167
At 6 March 2022 140 62 29 26 14 271
Additional provisions 26 30 64 5 - 125
Unused amounts released (33) (4) (3) (1) (1) (42)
Utilisation of provision (19) (29) (32) (2) - (82)
At 4 March 2023 114 59 58 28 13 272
Current 55 19 30 28 8 140
Non-current 59 40 28 - 5 132
a) Property provisions comprise onerous property contract provisions
for the least net cost of exiting from the contract and provisions for
dilapidations.
b) Insurance provisions comprise liabilities in respect of outstanding
insurance claims in relation to public liability, employer's liability and
third party motor.
c) Sainsbury's structural integration restructuring provisions
comprise mainly redundancies as described in note 3.
d) Financial Services related provisions comprise mainly Financial
Services loan commitment provisions reflecting expected credit losses modelled
in relation to loan commitments not yet recognised on the balance sheet,
including on credit cards and Argos store cards. Additional provisions in the
current year relate to onerous contracts arising from the changes to the
Financial Services model restructuring programme as described in note 3.
16 Cash and cash equivalents
16.1 Balance sheet
2024 2023
£m £m
Cash in hand and bank balances 606 569
Money market funds 263 255
Money market deposits 232 150
Deposits at central banks 886 345
1,987 1,319
Restricted amounts included above
Held as a reserve deposit with the Bank of England 14 15
For insurance purposes 7 3
Held within the Group's Employee Share Ownership Trust - 10
21 28
17 Analysis of net debt
The Group's definition of net debt includes the following:
· Cash
· Borrowings and overdrafts
· Lease liabilities
· Debt-related financial assets at fair value through other
comprehensive income
· Derivatives used in hedging borrowings
Derivatives exclude those not used to hedge borrowings, and borrowings exclude
bank overdrafts as they are disclosed separately.
17.1 Reconciliation of opening to closing net debt
Cash Movements Non-Cash Movements
5 March 2023 Cash flows excluding interest Net interest (received) / paid Accrued interest Other non-cash movements Changes in fair value 2 March 2024
£m £m £m £m £m £m £m
Retail
Net derivative financial instruments - - (1) 1 - - -
Borrowings (excluding overdrafts) (539) (534) 60 (64) - - (1,077)
Lease liabilities (6,488) 505 264 (264) 629 - (5,354)
Arising from financing activities (7,027) (29) 323 (327) 629 - (6,431)
Cash and cash equivalents 683 194 - - - - 877
Retail net debt (6,344) 165 323 (327) 629 - (5,554)
Financial Services
Net derivative financial instruments - - - - - - -
Borrowings (excluding overdrafts) (122) - 13 (13) - - (122)
Lease liabilities (1) 2 - - (1) - -
Arising from financing activities (123) 2 13 (13) (1) - (122)
Financial assets at fair value through other comprehensive income 626 135 - - - - 761
Cash and cash equivalents 636 474 - - - - 1,110
Financial services net debt 1,139 611 13 (13) (1) - 1,749
Group
Net derivative financial instruments - - (1) 1 - - -
Borrowings (excluding overdrafts) (661) (534) 73 (77) - - (1,199)
Lease liabilities (6,489) 507 264 (264) 628 - (5,354)
Arising from financing activities (7,150) (27) 336 (340) 628 - (6,553)
Financial assets at fair value through other comprehensive income 626 135 - - - - 761
Cash and cash equivalents 1,319 668 - - - - 1,987
Group net debt (5,205) 776 336 (340) 628 - (3,805)
Other non-cash movements relate to new leases and foreign exchange.
Cash Movements Non-Cash Movements
6 March 2022 Cash flows excluding interest Net Accrued interest Other non-cash movements Changes in fair value 4 March 2023
interest (received)/ paid
£m £m £m £m £m £m £m
Retail
Net derivative financial instruments 5 - (5) 5 (5) - -
Borrowings (excluding overdrafts) (575) 40 45 (40) (9) - (539)
Lease liabilities (6,618) 512 267 (267) (382) - (6,488)
Arising from financing activities (7,188) 552 307 (302) (396) - (7,027)
Financial assets at fair value through other comprehensive income - - - - - - -
Cash and cash equivalents 436 247 - - - - 683
Bank overdrafts (7) 7 - - - - -
Retail net debt (6,759) 806 307 (302) (396) - (6,344)
Financial Services
Net derivative financial instruments 4 - - - - (4) -
Borrowings (excluding overdrafts) (179) 55 9 (12) - 5 (122)
Lease liabilities (3) 2 - - - - (1)
Arising from financing activities (178) 57 9 (12) - 1 (123)
Financial assets at fair value through other comprehensive income 418 207 - - - 1 626
Cash and cash equivalents 389 247 - - - - 636
Financial services net debt 629 511 9 (12) - 2 1,139
Group
Net derivative financial instruments 9 - (5) 5 (5) (4) -
Borrowings (excluding overdrafts) (754) 95 54 (52) (9) 5 (661)
Lease liabilities (6,621) 514 267 (267) (382) - (6,489)
Arising from financing activities (7,366) 609 316 (314) (396) 1 (7,150)
Financial assets at fair value through other comprehensive income 418 207 - - - 1 626
Cash and cash equivalents 825 494 - - - - 1,319
Bank overdrafts (7) 7 - - - - -
Group net debt (6,130) 1,317 316 (314) (396) 2 (5,205)
18 Borrowings
2024 2023
Current Non-current Total Current Non-current Total
£m £m £m £m £m £m
Loan due 2031 54 442 496 48 491 539
Term loan due 2026 6 575 581 - - -
Sainsbury's Bank Tier 2 Capital 6 116 122 6 116 122
66 1,133 1,199 54 607 661
Transaction costs (1) (3) (4) (1) (4) (5)
65 1,130 1,195 53 603 656
18.1 Loan due 2031
The loan is secured against 48 (2023: 48) supermarket properties. This is an
inflation linked amortising loan from the finance company Longstone Finance
plc with an outstanding principal value of £486 million (2023: £527 million)
fixed at a real rate of 2.36 per cent where principal and interest rate are
uplifted annually by RPI subject to a cap at five per cent and a floor at nil
per cent. The loan has a final repayment date of April 2031. The principal
activity of Longstone Finance plc is the issuance of commercial
mortgage-backed securities and applying the proceeds towards the secured loans
due 2031.
The Group has entered into forward starting inflation swaps to convert £155
million (2023: £490 million) from RPI linked interest to fixed rate interest
from April 2025 until April 2026. These transactions have been designated as
cash flow hedges.
Intertrust Corporate Services Limited holds all the issued share capital of
Longstone Finance Holdings Limited on trust for charitable purposes. Longstone
Finance Holdings Limited beneficially owns all the issued share capital of
Longstone Finance plc. As the Group has no interest, power or bears any risk
over these entities they are not included in the Group consolidation.
18.2 Sainsbury's Bank Tier 2 Capital
The Group has £120 million of fixed rate reset callable subordinated Tier 2
notes in issuance (2023: £120 million), which were issued in September 2022.
These notes pay interest on the principal amount at a rate of 10.5 per cent
per annum, payable in equal instalments semi-annually in arrears, until March
2028 at which time the interest rate will reset. The Bank has the option to
redeem these notes in March 2028.
18.3 Term loan due 2026
The Group entered into a £575 million unsecured term loan in December 2022,
with maturity of March 2026. As at 2 March 2024, the term loan was fully drawn
(4 March 2023: £nil).
18.4 Undrawn facilities
The Group's Revolving Credit Facility (RCF) is unsecured and is split into two
Facilities, a £500 million Facility (A) and a £500 million Facility (B).
Facility A has a maturity of December 2028 and Facility B has a maturity of
December 2027.
19 Retirement benefit obligations
19.1 Background
Retirement benefit obligations relate to the Sainsbury's Pension Scheme plus
three unfunded pension liabilities for former senior employees of Sainsbury's
and Home Retail Group.
The Sainsbury's Pension Scheme has two sections, the Sainsbury's Section which
holds the assets and liabilities of the original Sainsbury's Pension Scheme,
and the Argos Section which holds the assets and liabilities of the former
Home Retail Group Pension Scheme. Each section's assets are segregated by deed
and ring fenced for the benefit of the members of that section. The Scheme
is run by a corporate trustee with nine directors.
The Scheme is also used to pay life assurance benefits to current (including
new) colleagues.
19.2 Balance sheet
2024 2023
Sainsbury's Argos Group Sainsbury's Argos Group
£m £m £m £m £m £m
Present value of funded obligations (5,172) (816) (5,988) (5,128) (793) (5,921)
Fair value of plan assets 5,777 925 6,702 6,007 927 6,934
Retirement benefit surplus 605 109 714 879 134 1,013
Present value of unfunded obligations (14) (10) (24) (12) (12) (24)
Retirement benefit surplus 591 99 690 867 122 989
The retirement benefit surplus and the associated deferred income tax balance
are shown within different line items on the face of the balance sheet.
Movements in net defined benefit surplus
2024 2023
Assets Obligations Net Assets Obligations Net
£m £m £m £m £m £m
As at the beginning of the financial year 6,934 (5,945) 989 11,693 (9,410) 2,283
Interest income/(cost) 341 (290) 51 277 (221) 56
Remeasurement (losses)/gains (335) (54) (389) (4,739) 3,341 (1,398)
Pension scheme expenses - (7) (7) (6) - (6)
Employer contributions 44 - 44 44 - 44
Benefits (paid)/received (282) 284 2 (306) 308 2
Settlement (losses)/gains - - - (29) 37 8
As at the end of the financial year 6,702 (6,012) 690 6,934 (5,945) 989
19.3 Actuarial assumptions for measuring liabilities
Principal actuarial assumptions
2024 2023
% %
Discount rate 5.00 5.00
Inflation rate - RPI 3.20 3.25
Inflation rate - CPI 2.55 2.55
Future pension increases 1.95 - 3.00 1.90 - 2.95
a) Discount rate
The discount rate for the Scheme is derived from the expected yields on high
quality corporate bonds over the duration of the Group's pension scheme and
extrapolated in line with gilts with no theoretical growth assumptions. High
quality corporate bonds are those for which at least one of the main ratings
agencies considers to be at least AA (or equivalent).
b) Inflation
The Government's intention to amend the RPI calculation methodology to be
aligned to that already in use for the calculation of the CPI (including
housing) takes effect from 2030. As a result, the Group has assumed that RPI
will be aligned with CPI post 2030, resulting in a single weighted average
RPI-CPI gap of 1.00% p.a. up to 2030 (2023: 0.70% p.a.).
c) Mortality
The base mortality assumptions use the SAPS S2 and SAPS S3 tables for the
Sainsbury's and Argos sections, respectively, with adjustments to reflect the
Scheme's population.
Following the completion of the 2021 triennial valuation and consideration of
the previous three years of mortality experience both in the Scheme and the UK
as a whole, the Company has decided to update the actuarial mortality base
tables that determine the life expectancy assumptions to reflect a
best-estimate adjustment derived from analysis carried out for the valuation.
Future mortality improvements for the 2024 year-end are CMI 2022 projections
with a long-term rate of improvement of 1.0 per cent p.a. Future mortality
improvements for the 2023 year-end were CMI 2021 projections with a long-term
rate of improvement of 1.25 per cent p.a.
While COVID-19 had an impact on mortality in 2020, the impact on future
mortality trends is currently unknown. All IAS 19 calculations use the CMI
model which measures potential changes to future mortality trends. The Group's
policy is to use the available version as at the year-end which is CMI 2022
which was released in June 2023.
As a result of the significant change to mortality in the CMI 2020 model, the
CMI modified the calibration process for CMI 2020 to allow choice on the
weighting placed on an individual year's data. For the Core version of CMI
2020, a weight of zero per cent was applied to 2020 data and weightings of 100
per cent for other years, so the potentially exceptional 2020 experience was
ignored when modelling future improvements. This approach has been amended for
CMI 2022, with zero per cent weighting applied to 2020 and 2021 data and 25%
weighting applied to 2022 data, to reflect the view that the sustained and
less volatile mortality experience provides greater evidence of a change to
future mortality trends.
A 10 per cent weighting above the core parameters has been applied, reflecting
that mortality rates for 2022 were higher and for 2023 are expected to be
higher than 2019, and recognising the uncertain outlook. From 2028, mortality
improvements are in line with the CMI 2022 Core model. The impact of different
weightings on the Scheme liabilities is included in the sensitivities section
within this note.
Life expectancy at age 65
2024 2023
Sainsbury's section Main Scheme Sainsbury's section Executive Scheme Argos section Sainsbury's section Main Scheme Sainsbury's section Executive Scheme Argos section
Years Years Years Years Years Years
Members aged 65 at balance sheet date
Male pensioner 18.9 22.2 19.7 19.5 22.7 20.3
Female pensioner 22.8 23.4 22.8 23.3 24.0 23.4
Members aged 45 at balance sheet date
Male pensioner 19.8 23.1 20.7 20.7 24.0 21.6
Female pensioner 23.9 24.6 24.0 24.9 25.5 24.8
20 Contingent liabilities
The Group has a number of contingent liabilities in respect of historical
lease guarantees, particularly in relation to the disposal of assets, which if
the current tenant and their ultimate parents become insolvent, may expose the
Group to a material liability, however this liability decreases over time as
the leases expire. The Group has considered a number of factors, including
past history of default as well as the profitability and cash generation of
the current leaseholders, and has concluded that the likelihood of pay-out is
remote.
Along with other retailers, the Group is currently subject to claims from
current and ex-employees in the Employment Tribunal for equal pay under the
Equality Act 2010 and/or the Equal Pay Act 1970. There are currently
circa 16,300 equal pay claims from circa 10,900 claimants and the Group
believes that further claims may be served. The claimants are alleging that
their work within Sainsbury's stores is or was of equal value to that of
colleagues working in Sainsbury's distribution centres, and that differences
in terms and conditions relating to pay are not objectively justifiable. The
claimants are seeking the differential back pay based on the higher wages in
distribution depots, and the equalisation of wages and terms and conditions on
an ongoing basis.
There are three stages in the tribunal procedure for equal value claims of
this nature and the claimants will need to succeed in all three. The first
stage is whether store claimants have the legal right to make the comparison
with depot workers. Following European and Supreme Court decisions in other
litigation, Sainsbury's has conceded this point. The second stage is the
lengthy process to determine whether any of the claimants' roles are of equal
value to their chosen comparators. In the event that any of the claimants
succeed at the second stage, there will be a third stage comprising further
hearings, in the following years, to consider Sainsbury's material factor
defences, relating to non-discriminatory reasons for any pay differential.
Completion of these two stages is likely to take many years which will
involve hearings and appeals. It is not possible to predict a final date with
any certainty. If the Group is unsuccessful at the end of the litigation the
liability could be material but due to the complexity and multitudinous
factual and legal uncertainties we are
not in a position to predict an outcome, quantum or impact at this
stage. There are substantial factual and legal defences to these claims and
the Group intends to defend them vigorously.
Given that the outcome of the second and third stages in the litigation
remains highly uncertain at this stage, the Group cannot make any assessment
of the likelihood nor quantum of any outcome and accordingly, no provision has
been recognised.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors use various APMs
which they believe provide additional useful information for understanding the
financial performance and financial health of the Group. These APMs should be
considered in addition to, and are not intended to be a substitute for, IFRS
measurements. As they are not defined by International Financial Reporting
Standards, they may not be directly comparable with other companies who use
similar measures.
All of the following APMs relate to the current financial year's results and
comparative financial year where provided.
A1 Income statement measures
A1.1 Revenue
a) Retail like-for-like sales (Closest IFRS equivalent: none)
Definition and purpose
Year-on-year growth in sales including VAT, excluding Fuel and Financial
Services, for stores that have been open for more than one year. The
relocation of Argos stores into Sainsbury's supermarkets are classified as new
space, while the host supermarket is classified as like-for-like.
The measure is used widely in the retail sector.
Reconciliation
2024 2023
Retail like-for-like (exc. Fuel, inc. VAT) 7.5% 2.6%
Underlying net new space impact (0.7)% (0.6)%
Retail sales growth (exc. Fuel, inc. VAT) 6.8% 2.0%
Fuel impact (3.6)% 3.2%
Total retail sales growth (inc. Fuel, inc. VAT) 3.2% 5.2%
VAT impact 0.4% (0.1)%
Total retail sales growth 3.6% 5.1%
A1.2 Profit
a) Retail underlying operating profit and margin (Closest IFRS equivalent:
Profit before tax)
Definition and purpose
Profit before interest and tax for the retail segment excluding non-underlying
items.
This is the lowest level at which the retail segment can be viewed from a
management perspective, with finance costs managed for the Group as a whole.
Reconciliation
2024 2023
Note £m £m
Retail underlying operating profit 5.1 966 926
Retail sales 4 32,084 30,960
Retail underlying operating margin 3.01% 2.99%
b) Underlying profit before tax (Closest IFRS equivalent: Profit before
tax)
Definition and purpose
Profit before tax excluding non-underlying items.
Provides shareholders with additional insight into the year-on-year
performance.
Reconciliation
Face of the income statement.
Non-underlying items as set out in note 3 to the financial statements.
c) Underlying basic and diluted earnings per share (Closest IFRS
equivalent: Basic and diluted earnings per share)
Definition and purpose
Earnings per share using underlying profit as described above.
A key measure to evaluate the performance of the business and returns
generated for investors.
Reconciliation
Note 9 to the financial statements.
d) Retail underlying EBITDA (Closest IFRS equivalent: None)
Definition and purpose
Retail underlying operating profit as above, before underlying depreciation,
and amortisation.
Used to review the retail segment's profit generation and the sustainability
of ongoing capital reinvestment and finance costs.
Reconciliation
2024 2023
Note £m £m
Retail underlying operating profit 5.1 966 926
Add: Retail underlying depreciation and amortisation A2.1 1,112 1,134
Retail underlying EBITDA 2,078 2,060
Retail sales 4 32,084 30,960
Retail underlying EBITDA margin 6.48% 6.65%
e) Underlying net finance costs (Closest IFRS equivalent: Finance income
less finance costs)
Definition and purpose
Net finance costs before any non-underlying items that are recognised within
finance income / expenses.
Provides shareholders with additional insight into the underlying net finance
costs.
Reconciliation
Note 7 to the financial statements.
f) Underlying tax rate (Closest IFRS equivalent: Effective tax rate)
Definition and purpose
Tax on underlying items, divided by underlying profit before tax.
Provides an indication of the tax rate across the Group before the impact of
non-underlying items.
Reconciliation
Non-underlying tax items as set out in note 3 to the financial statements.
A2 Cash flows and borrowings
A2.1 Retail cash flows (Closest IFRS equivalent: Group cash flows)
Definition and purpose
Retail cash flows identified as a separate component of Group cash flows.
Retail free cash flow: Net cash generated from retail operations, after cash
capital expenditure and including payments of lease obligations, cash flows
from joint ventures and associates and Sainsbury's Bank capital injections.
This measures cash generation, working capital efficiency and capital
expenditure of the retail business.
Other retail cash flows: Individual cash flow line items segregated from Group
cash flows to allow individual Retail cash flows to be identified. This
enables management to assess the cash generated from its core retail
operations, and to assess core retail capital expenditure in the financial
year in order to review the strategic business performance.
Reconciliation
2024 2023
Retail Financial Services Group Retail Financial Services Group
£m £m £m £m £m £m
Profit before tax 483 (206) 277 284 43 327
Net finance costs 255 - 255 235 - 235
Operating profit/(loss) 738 (206) 532 519 43 562
Depreciation and amortisation - Underlying 1,112 32 1,144 1,134 33 1,167
- Non-underlying 34 - 34 41 - 41
1,146 32 1,178 1,175 33 1,208
Net impairment charge on non-financial assets 23 212 235 315 - 315
(Profit)/loss on sale of non-current assets and early termination of leases - Underlying b) (5) - (5) (5) - (5)
- Non-underlying (11) 14 3 (10) - (10)
(16) 14 (2) (15) - (15)
Non-underlying fair value movements 46 - 46 29 - 29
Share-based payments expense b) 83 6 89 54 5 59
Defined benefit scheme expense/(income) 7 - 7 (2) - (2)
Cash contributions to defined benefit scheme (44) - (44) (44) - (44)
Operating cash flows before changes in working capital 1,983 58 2,041 2,031 81 2,112
Movements in working capital -Underlying 262 (20) 242 159 307 466
-Non-underlying 57 22 79 11 - 11
319 2 321 170 307 477
Cash generated from operations a) 2,302 60 2,362 2,201 388 2,589
Interest paid a) (323) (13) (336) (307) (9) (316)
Corporation tax paid a) (58) (3) (61) (99) (4) (103)
Net cash generated from operating activities 1,921 44 1,965 1,795 375 2,170
Cash flows from investing activities
Purchase of property, plant and equipment -Additions a) (649) (1) (650) (523) (2) (525)
-Acquisitions c) (731) - (731) - - -
Purchase of intangible assets a) (165) (13) (178) (194) (19) (213)
Capital expenditure (1,545) (14) (1,559) (717) (21) (738)
Initial direct costs on new leases a) (6) - (6) (16) - (16)
Proceeds from disposal of property, plant and equipment -Core disposals a) 16 - 16 29 - 29
-Acquisition related c) 61 - 61 - - -
Proceeds from disposal of amounts due from Financial Services Customers - 446 446 - - -
Dividends and distributions received/(paid) a) - - - 51 (50) 1
Interest received a) 27 - 27 15 - 15
Net cash (used in)/generated from investing activities (1,447) 432 (1,015) (638) (71) (709)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 15 - 15 13 - 13
Purchase of own shares (18) - (18) (45) - (45)
Share related transactions (3) - (3) (32) - (32)
Proceeds from borrowings 575 - 575 - - -
Repayment of borrowings (41) - (41) (40) (55) (95)
Net drawdown/(repayment) of borrowings 534 - 534 (40) (55) (95)
Capital repayment of lease obligations a) (505) (2) (507) (512) (2) (514)
Dividends paid on ordinary shares (306) - (306) (319) - (319)
Net cash used in financing activities (280) (2) (282) (903) (57) (960)
Net increase in cash and cash equivalents 194 474 668 254 247 501
Capital expenditure (1,545) (717)
Less amounts paid for asset acquisition (note 2.6) 731 -
Core Retail capital expenditure (814) (717)
Items in the retail cash flow marked a) to c) reconcile to the summary cash
flow statement in the financial review as outlined in note A2.2.
As set out in the Group cash flow statement the Group now classifies Interest
received within Cash flows from investing activities whereby the previous
treatment was within Cash flows from operations. 2023 amounts have therefore
been re-presented whereby Retail Cash generated from operations and Retail
Cash flows from investing activities were previously £2,216 million and
£(653) million respectively. There has been no impact on cash flows within
the Financial Services segment.
A2.2 Underlying retail cash flow movements (Closest IFRS equivalent: None)
Definition and purpose
Identifies cash movements in respect of Retail non-underlying items and also
sets out a breakdown of items included in the summary cash flow statement set
out in the Financial Review.
Reconciliation
2024 2023
Note £m £m
Cash contribution to defined benefit scheme A2.1 (44) (44)
Non-underlying cash movements:
Financial services model (5) -
Sainsbury's structural integration (67) (50)
Legal disputes income - 30
ATM business rates reimbursement - 3
Property-related transactions - (6)
Operating cash flows (72) (23)
Effect on Retail cash generated from operations (116) (67)
Sum of items marked a), b), and c) in note A2.1 as they appear in the
financial review
2024 2023
Reference £m £m
Retail free cash flow a) 639 645
Share based payments and other b) 78 49
Net consideration paid for Highbury & Dragon property transaction c) (670) -
A3 Borrowings
A3.1 Net debt (Closest IFRS equivalent: Borrowings, cash, derivatives,
financial assets at FVTOCI, lease liabilities)
Definition and purpose
Net debt includes the capital injections into Sainsbury's Bank, but excludes
the net debt of Sainsbury's Bank and its subsidiaries. Financial Services'
net debt balances are excluded because they are required as part of the
business as usual operations of a bank, as opposed to specific forms of
financing for the Group. Derivatives exclude those not used to hedge
borrowings, and borrowings exclude bank overdrafts as they are disclosed
separately. Hence net debt is represented as Retail net debt.
This metric shows the liquidity and indebtedness of the Group and whether the
Group can cover its debt commitments.
Reconciliation
Note 17 to the financial statements.
A3.2 Net debt / underlying EBITDA (Closest IFRS equivalent: None)
Definition and purpose
Net debt divided by Group underlying EBITDA.
Helps management measure the ratio of the business's debt to operational cash
flow.
Reconciliation
2024 2023
Note £m £m
Net debt 17 5,554 6,344
Group underlying EBITDA A4.2 2,139 2,139
Net debt/underlying EBITDA 2.6x 3.0x
Group underlying EBITDA is reconciled within the fixed charge cover analysis
in note A4.2.
A4 Other measures
A4.1 Return on capital employed (Closest IFRS equivalent: None)
Definition and purpose
Return divided by average capital employed.
Return is defined as 52 week rolling underlying profit before interest and
tax.
Capital employed is defined as Group net assets excluding pension surplus,
less net debt. The average is calculated on a 14-point basis which uses the
average of 14 data points.
Represents the total capital that the Group has utilised in order to generate
profits. Management use this to assess the performance of the business.
Reconciliation
Net debt as set out in note 17.
2024 2023
Note £m £m
Return (Group underlying operating profit) 5.1 995 972
£m £m
Group net assets Balance sheet 6,868 7,253
Less: Pension surplus Balance sheet (690) (989)
Deferred tax on pension surplus 244 330
Less: Net debt 17 5,554 6,344
Effect of in-year averaging 42 (101)
Capital employed 12,018 12,837
Return on capital employed 8.3% 7.6%
A4.2 Fixed charge cover (Closest IFRS equivalent: None)
Definition and purpose
Group underlying EBITDA divided by rent (representing capital and interest
repayments on leases) and underlying net finance costs, where interest on
perpetual securities is treated as an underlying finance cost. All items are
calculated on a 52 week rolling basis.
This helps assess the Group's ability to satisfy fixed financing expenses from
performance of the business.
Reconciliation
2024 2023
Note £m £m
Group underlying operating profit 5.1 995 972
Add: Group underlying depreciation and amortisation expense A2.1 1,144 1,167
Group underlying EBITDA 2,139 2,139
Capital repayment of lease obligations A2.1 (507) (514)
Underlying finance income 7 30 18
Underlying finance costs 7 (324) (300)
Fixed charges (801) (796)
Fixed charge cover 2.7x 2.7x
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAELLADALEAARecent news on J Sainsbury
See all newsREG - Sainsbury(J) PLC - Director/PDMR Shareholding
AnnouncementREG - Sainsbury(J) PLC - Transaction in Own Shares
AnnouncementREG - Sainsbury(J) PLC - Additional Listing
AnnouncementREG - Sainsbury(J) PLC - Transaction in Own Shares
AnnouncementREG - Sainsbury(J) PLC - Total Voting Rights
Announcement