REG - Sainsbury(J) PLC - Half-year Report <Origin Href="QuoteRef">SBRY.L</Origin> - Part 4
09/11/2017 07:07
- Part 4: For the preceding part double click ID:nRSI9865Vc
Supplier incentives, rebates and discounts, collectively known as 'supplier arrangements', represent a material deduction
to cost of sales and directly affect the Group's reported margin. The arrangements can be complex, with amounts spanning
multiple products over different time periods, and there can be multiple triggers and discounts. The accrued value at the
reporting date is included in trade receivables or trade payables, depending on the right of offset.
The types that involve a level of judgement and estimation are as follows:
· Fixed amounts - these are agreed with suppliers primarily to support in-store activity including promotions, such as
utilising specific space.
· Supplier rebates - these are 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 - income which is directly linked to the cost of producing the Argos catalogue.
The amounts recognised in the income statement for the above types of supplier arrangements are as follows:
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Fixed amounts 104 73 204
Supplier rebates 42 27 87
Marketing and advertising income 48 2 52
Total supplier arrangements 194 102 343
Of the above amounts, the following was outstanding and held on the balance sheet at the period-end:
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Within inventory (9) (7) (9)
Within current trade receivables
Supplier arrangements due 48 34 29
Within current trade payables
Supplier arrangements due 12 10 25
Accrued supplier arrangements 17 11 13
The above amounts exclude supplier income in relation to discounts and supplier incentives which do not involve any level
of judgement or estimation.
7 Finance income and finance costs
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Interest on bank deposits and other financial assets 8 9 18
Finance fair value movements1 3 15 16
Finance income 11 24 34
Borrowing costs:
Secured borrowings (41) (44) (81)
Unsecured borrowings (16) (16) (30)
Obligations under finance leases (4) (4) (8)
Provisions - amortisation of discount (4) (3) (6)
(65) (67) (125)
Other finance costs:
Interest capitalised - qualifying assets 4 4 7
IAS 19 pension financing charge (14) (8) (16)
Interest expense on Pharmacy sale advance proceeds - (2) (2)
(10) (6) (11)
Finance costs (75) (73) (136)
1 Finance fair value movements relate to net fair value movements on derivative financial instruments not
designated in a hedging relationship.
8 Income tax expense
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Current tax expense 52 61 113
Deferred tax expense 2 12 13
Total income tax expense in income statement 54 73 126
Underlying tax rate 23.9% 21.3% 23.2%
Effective tax rate 24.5% 19.6% 25.0%
The Finance Act 2016 included legislation which reduced the main rate of UK corporation tax from 20 per cent to 19 per cent
from 1 April 2017 and to 17 per cent from 1 April 2020. These rate reductions were substantively enacted before this
interim period. Therefore, there is no remeasurement of deferred tax balances in this period. Deferred tax on temporary
differences and tax losses as at the balance sheet date are calculated at the substantively enacted rates at which the
temporary differences and tax losses are expected to reverse.
9 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year, excluding those held by the Employee Share Ownership Plan
trusts, which are treated as cancelled. For diluted earnings per share, the earnings attributable to the ordinary
shareholders are adjusted by the interest on the senior convertible bonds (net of tax) and by the coupons on the perpetual
subordinated convertible bonds (net of tax).
The weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive
ordinary shares. These represent share options granted to employees where the exercise price is less than the average
market price of the Company's ordinary shares during the year and the number of shares that would be issued if all senior
convertible bonds and perpetual subordinated convertible bonds are assumed to be converted.
Underlying earnings per share is provided by excluding the effect of any non-underlying items as defined in note 3. This
alternative measure of earnings per share is presented to reflect the Group's underlying trading performance.
All operations are continuing for the periods presented.
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
million million million
Weighted average number of shares in issue 2,185.1 1,953.4 2,049.0
Weighted average number of dilutive share options 18.7 13.4 18.2
Weighted average number of dilutive senior convertible bonds 142.2 136.3 137.7
Weighted average number of dilutive subordinated perpetual convertible bonds 77.6 74.3 75.1
Total number of shares for calculating diluted earnings per share 2,423.6 2,177.4 2,280.0
£m £m £m
Profit for the financial period, net of tax 166 299 377
Less profit attributable to:
Holders of perpetual capital securities (7) (7) (12)
Holders of perpetual convertible bonds (3) (3) (6)
Profit for the period attributable to ordinary shareholders, net of tax 156 289 359
£m £m £m
Profit for the financial period attributable to ordinary shareholders 156 289 359
Add interest on senior convertible bonds, net of tax 6 6 12
Add coupon on subordinated perpetual convertible bonds, net of tax 3 3 6
Diluted earnings for calculating diluted earnings per share 165 298 377
Profit from continuing operations attributable to ordinary shareholders of the parent 156 289 359
Adjusted for non-underlying items 31 (95) 78
Tax on non-underlying items (6) 14 (9)
Add back coupons on perpetual securities, net of tax1 10 10 18
Underlying profit after tax attributable to ordinary shareholders of the parent 191 218 446
Add interest on senior convertible bonds, net of tax 6 6 12
Add coupon on subordinated perpetual convertible bonds, net of tax 3 3 6
Diluted underlying profit after tax attributable to ordinary shareholders of the parent 200 227 464
Pence Pence Pence
per share per share per share
Basic earnings 7.1 14.8 17.5
Diluted earnings 6.8 13.7 16.5
Underlying basic earnings 8.7 11.2 21.8
Underlying diluted earnings 8.3 10.4 20.4
1 Underlying earnings per share calculation is based on underlying profit after tax attributable to ordinary
shareholders. Therefore the coupons on the perpetual securities are added back.
10 Dividends
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
Amounts recognised as distributions to equity holders in the period:
Dividend per share (pence) 6.6 8.1 11.7
Total dividend charge (£m) 144 155 232
Post the half-year, an interim dividend of 3.1 pence per share (24 September 2016: 3.6 pence per share) has been approved
by the Board of Directors for the financial year ending 10 March 2018, resulting in a total interim dividend of £68 million
(24 September 2016: £78 million). The interim dividend was approved by the Board on 8 November 2017 and as such has not
been included as a liability at 23 September 2017.
Of the prior year dividend of £232 million, £2 million remained unpaid at the year-end and remains unpaid.
11 Cash and cash equivalents
Cash and cash equivalents comprise the following:
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Cash in hand and bank balances 515 303 439
Money market funds and deposits 575 767 403
Deposits at central banks 245 115 241
Cash and bank balances 1,335 1,185 1,083
Bank overdrafts (3) (3) (6)
Net cash and cash equivalents 1,332 1,182 1,077
12 Financial instruments
a. Carrying amount versus fair value
Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the
financial statements at a value other than fair value. The fair value of financial assets and liabilities are based on
prices available from the market on which the instruments are traded. Where market values are not available, the fair
values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing
interest rates. The fair values of short-term deposits, trade receivables, overdrafts and payables are assumed to
approximate to their book values.
Carrying amount Fair value
At 23 September 2017 £m £m
Financial assets
Amounts due from Financial Services customers1 5,141 5,156
Financial liabilities
Loans due 20182 (628) (641)
Loans due 2031 (746) (974)
Bank overdrafts (3) (3)
Bank loans due 2019 (199) (199)
Convertible bond due 2019 (432) (456)
Obligations under finance leases (130) (130)
Amounts due to Financial Services customers (5,565) (5,567)
1 Includes £2,437 million of interest rate swaps in a portfolio fair value hedging relationship.
2 Includes £136 million accounted for in a fair value hedge relationship.
Carrying amount Fair value
At 24 September 2016 £m £m
Financial assets
Amounts due from Financial Services customers1 4,183 4,166
Financial liabilities
Loans due 20182 (732) (770)
Loans due 2031 (780) (927)
Bank overdrafts (3) (3)
Bank loans due 2016 (44) (44)
Bank loans due 2019 (200) (200)
Convertible bond due 2019 (423) (470)
Obligations under finance leases (158) (158)
Amounts due to Financial Services customers (4,399) (4,381)
(4,381)
1 Includes £1,881 million accounted for as a fair value hedge.
2 Includes £183 million accounted for in a fair value hedge relationship.
Carrying amount Fair value
At 11 March 2017 £m £m
Financial assets
Amounts due from Financial Services customers1 4,602 4,640
Financial liabilities
Loans due 20182 (680) (706)
Loans due 2031 (761) (1,062)
Bank overdrafts (6) (6)
Bank loans due 2019 (199) (199)
Convertible bond due 2019 (427) (473)
Obligations under finance leases (138) (138)
Amounts due to Financial Services customers and banks (4,921) (4,924)
(4,924)
1 Includes £3,000 million of interest rate swaps in a portfolio fair value hedging relationship.
2 Includes £160 million accounted for in a fair value hedge relationship.
b. Fair value measurements recognised in the balance sheet
The following table provides an analysis of financial instruments that are recognised at fair value, grouped into Levels 1
to 3 based on the degree to which the fair value is observable:
· Level 1 fair value measurements are derived from quoted market prices (unadjusted) in active markets for identical
assets or liabilities at the balance sheet date. This level includes listed equity securities and debt instrument on public
exchanges;
· Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair
value of financial instruments is determined by discounting expected cash flows at prevailing interest rates; and
· Level 3 fair value measurements are derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
Level 1 Level 2 Level 3 Total
At 23 September 2017 £m £m £m £m
Available-for-sale financial assets
Interest bearing financial assets - 40 - 40
Other financial assets 13 - 155 168
Investment securities 391 - - 391
Financial assets
Derivative financial assets - 19 - 19
Financial liabilities
Derivative financial liabilities - (105) (12) (117)
Level 1 Level 2 Level 3 Total
At 24 September 2016 £m £m £m £m
Available-for-sale financial assets
Interest bearing financial assets - 38 - 38
Other financial assets 12 - 145 157
Investment securities 316 - - 316
Financial assets
Derivative financial assets - 153 - 153
Financial liabilities
Derivative financial liabilities - (71) (17) (88)
Level 1 Level 2 Level 3 Total
At 11 March 2017 £m £m £m £m
Available-for-sale financial assets
Interest bearing financial assets - 39 - 39
Other financial assets 13 - 148 161
Investment securities 333 - - 333
Financial assets
Derivative financial assets - 104 - 104
Financial liabilities
Derivative financial liabilities - (45) (15) (60)
c. Reconciliation of Level 3 fair value measurements of financial assets
Details of the determination of Level 3 fair value measurements are set out below:
Available-for-sale financial assets Commodity derivatives Investment Securities Total
28 weeks to 23 September 2017 £m £m £m £m
Opening balance 148 (15) - 133
Included in finance income in the income statement - 3 - 3
Included in other comprehensive income 7 - - 7
Total Level 3 financial assets and liabilities 155 (12) - 143
Available-for-sale financial assets Commodity derivatives Investment Securities Total
28 weeks to 24 September 2016 £m £m £m £m
Opening balance 146 (34) 1 113
Included in finance income/(cost) in the income statement - 17 (1) 16
Included in other comprehensive income (1) - - (1)
Total Level 3 financial assets and liabilities 145 (17) - 128
Available-for-sale financial assets Commodity derivatives Investment Securities Total
52 weeks to 11 March 2017 £m £m £m £m
Opening balance 146 (34) 1 113
Included in finance income/(cost) in the income statement - 19 (1) 18
Included in other comprehensive income 2 - - 2
Total Level 3 financial assets and liabilities 148 (15) - 133
Level 3 available-for-sale other financial assets
The available-for-sale other financial assets relate to the Group's beneficial interest in a property investment pool. The
net present value of the Group's interest in the various freehold reversions owned by the property investment pool has been
derived by assuming a property growth rate of 0.5 per cent per annum (24 September 2016: 0.6 per cent; 11 March 2017: 0.5
per cent) and a discount rate of nine per cent (24 September 2016: nine per cent; 11 March 2017: nine per cent). The
sensitivity of this balance to changes of one per cent in the assumed rate of property rental growth and one per cent in
the discount rate holding other assumptions constant is shown below:
23 September 2017 24 September 2016
Change in discount rate +/- 1.0% Change in growth rate +/- 1.0% Change in discount rate +/- 1.0% Change in growth rate +/- 1.0%
£m £m £m £m
Available-for-sale assets (8)/9 13/(12) (9)/9 14/(13)
11 March 2017
Change in discount rate +/- 1.0% Change in growth rate +/- 1.0%
£m £m
Available-for-sale assets (8)/9 13/(13)
Level 3 derivative financial liabilities - power purchase agreement
The Group has entered into several long-term fixed-price power purchase agreements with independent producers. Included
within derivative financial instruments is a net liability of £(13) million relating to these agreements at 23 September
2017 (within derivative financial liabilities at 24 September 2016: £(17) million; at 11 March 2017: £(15) million). The
Group values its power purchase agreements as the net present value of the estimated future usage at the contracted fixed
price less the market implied forward energy price discounted back at the prevailing swap rate. The Group also makes an
assumption regarding expected energy output based on the historical performance and the producer's estimate of expected
electricity output. The sensitivity of this balance to changes of 20 per cent in the assumed rate of energy output and 20
per cent in the implied forward energy prices holding other assumptions constant is shown below:
23 September 2017 24 September 2016
Change in volume +/- 20.0% Change in electricity forward price +/- 20.0% Change in volume +/- 20.0% Change in electricity forward price +/- 20.0%
£m £m £m £m
Derivative financial instruments (3)/3 12/(13) (4)/4 7/(7)
11 March 2017
Change in volume +/- 20.0% Change in electricity forward price +/- 20.0%
£m £m
Derivative financial instruments (3)/3 12/(13)
13 Retirement benefit obligations
Retirement benefit obligations relate to two defined benefit schemes, the Sainsbury's Pension Scheme and from 2 September
2016, the Home Retail Group Pension Scheme (the 'Schemes') as well as two unfunded pension liabilities relating to senior
former employees of Sainsbury's and Home Retail Group. The Schemes are both closed to new entrants and future accruals.
The unfunded pension liabilities are unwound when each employee reaches retirement and takes their pension from the Group
payroll or is crystallised in the event of an employee leaving or retiring and choosing to take the provision as a one-off
cash payment.
The amounts recognised in the balance sheet, based on valuations performed by KPMG, are as follows:
23 September 2017 24 September 2016
Sainsbury's Home Retail Group Group Sainsbury's Home Retail Group Group
£m £m £m £m £m £m
Present value of funded obligations (9,257) (1,369) (10,626) (9,826) (1,479) (11,305)
Fair value of plan assets 8,645 1,207 9,852 8,633 1,183 9,816
(612) (162) (774) (1,193) (296) (1,489)
Additional liability due to minimum funding requirements (IFRIC 14) - (4) (4) - - -
Retirement benefit deficit (612) (166) (778) (1,193) (296) (1,489)
Present value of unfunded obligations (22) (15) (37) (23) (16) (39)
Retirement benefit obligations (634) (181) (815) (1,216) (312) (1,528)
Deferred income tax asset 54 38 92 153 63 216
Net retirement benefit obligations (580) (143) (723) (1,063) (249) (1,312)
11 March 2017
Sainsbury's Home Retail Group Group
£m £m £m
Present value of funded obligations (9,441) (1,413) (10,854)
Fair value of plan assets 8,708 1,212 9,920
(733) (201) (934)
Present value of unfunded obligations (23) (17) (40)
Retirement benefit obligations (756) (218) (974)
Deferred income tax asset 77 47 124
Net retirement benefit obligations (679) (171) (850)
The retirement benefit obligations and the associated deferred income tax balance are shown within different line items on
the face of the balance sheet.
The principal actuarial assumptions used at the balance sheet date are as follows:
23 September 24 September 11 March
2017 2016 2017
% % %
Discount rate 2.75 2.20 2.70
Inflation rate - RPI 3.25 2.95 3.30
Inflation rate - CPI 2.25 1.95 2.30
Future pension increases 1.95 - 3.10 1.80 - 2.85 2.00 - 3.15
The amounts recognised in the income statement in respect of the IAS 19 charges for the defined benefit schemes are as
follows:
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Excluded from underlying profit before tax:
Interest cost on pension liabilities (156) (150) (292)
Interest income on plan assets 142 142 276
Total included in finance costs (note 7) (14) (8) (16)
Defined benefit pension scheme expenses (4) (2) (8)
Total excluded from underlying profit before tax (note 3) (18) (10) (24)
Total income statement expense (18) (10) (24)
The movements in the net defined benefit obligations are as follows:
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
As at the beginning of the year (974) (408) (408)
Acquisition of Home Retail Group plc (note 14) - (454) (454)
Interest cost (14) (8) (16)
Remeasurement gains/(losses) 147 (869) (407)
Pension scheme expenses (4) (2) (8)
Contributions by employer 30 213 319
As at the end of the period (815) (1,528) (974)
Cash contributions
Cash contributions for the full-year are expected to be £130 million.
Following agreement of the triennial actuarial valuations of both schemes, the Group is committed to make annual
contributions of £124 million to the schemes (Sainsbury's scheme: £84 million; Argos scheme: £40 million). The next
triennial valuations are for the March 2018 year-ends for both schemes.
Cash contributions in the prior year include a £125 million special contribution to the Sainsbury's defined benefit scheme,
a £24 million special contribution to the Home Retail Group defined benefit scheme in relation to the capital return (see
note 14) and a £50 million special contribution paid to the Home Retail Group defined benefit scheme as a result of the
acquisition. There were no special contributions in the current financial period.
14 Acquisition of Home Retail Group plc
On 2 September 2016, the Group acquired 100 per cent of the issued share capital of Home Retail Group plc ('HRG'), a listed
company based in the United Kingdom, for a consideration of £1,093 million. The full analysis of the consideration is shown
below:
Form of consideration Consideration fair value at acquisition date£m
Cash of £447 million (being 55p per existing share); fair value is based on Home Retail Group plc's share capital of 813,445,001 shares in existence as at the acquisition date 447
£3 million in relation to the contractual requirement to settle certain existing HRG share scheme awards and options 3
261 million new J Sainsbury plc shares of 28p nominal value each were issued (being 0.321 new J Sainsbury plc shares per existing Home Retail Group plc share); fair value of the consideration is based on a J Sainsbury plc share price of £2.4610 as of 2 September 2016 643
Total 1,093
The assets and liabilities recognised as a result of the acquisition have now been finalised and are as follows:
As consolidated at As consolidated at As consolidated at
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Fair value of net assets acquired
Fixed assets 262 273 262
Intangible assets 322 324 322
Inventories 810 816 810
Trade and other receivables 146 146 146
Deferred tax assets 55 36 45
Amounts due from Financial Services customers (the "loan book") 615 615 615
Other financial assets1 59 59 59
Cash and cash equivalents2 548 548 548
Total assets acquired 2,817 2,817 2,807
Trade and other payables2 (1,214) (1,202) (1,214)
Provisions (175) (86) (104)
Defined benefit obligations (454) (454) (454)
Total liabilities acquired (1,843) (1,742) (1,772)
Net identifiable assets acquired at fair value 974 1,075 1,035
Goodwill arising on acquisition 119 18 58
Purchase consideration transferred 1,093 1,093 1,093
1 Other financial assets include £9 million of J Sainsbury plc shares (converted from Home Retail Group plc own
shares at the point of acquisition). On consolidation these become J Sainsbury plc own shares in the consolidated statement
of changes in equity.
2 Cash and cash equivalents and trade and other payables acquired are both presented gross of the capital return of
£226 million.
None of the goodwill recognised of £119 million is expected to be deductible for income tax purposes. This was calculated
as the difference between the fair value of consideration paid and the fair value of net assets acquired.
Certain assets and liabilities as at 24 September 2016 have been reclassified. None of the changes are material.
(a) Intangible assets
Intangible assets include a brand of £179 million relating to the Argos brand name. This reflects its fair value at the
acquisition date and is estimated to have a useful economic life of ten years.
(b) Trade and other receivables
Trade and other receivables include £40 million of trade receivables, against which a bad debt provision of £(1) million
was held. Also included are prepayments and accrued income of £29 million, and other debtors of £78 million.
(c) Amounts due from Financial Services customers (the "loan book")
The loan book fair value of £615 million includes a fair value increase of £20 million and a provision for impairment of
£(66) million.
(d) Acquisition-related costs
Acquisition-related costs (included in administrative expenses and recognised outside of underlying profit) amounted to £22
million in the prior year (see note 3). In addition £3 million of costs relating to the issuance of J Sainsbury plc shares
were recognised directly within equity in the prior year.
(e) Cash impact of acquisition
£m
Cash consideration (447)
Cash acquired 548
Acquisition of subsidiaries, net of cash acquired (included in prior year cash flow statement) 101
Capital return to shareholders of Home Retail Group plc (see below) (226)
Net cash impact of acquisition (125)
(f) Capital return
Prior to the acquisition of Home Retail Group plc, it was announced that Home Retail Group plc shareholders would be
entitled to a £226 million capital return comprising the following:
· 25.0 pence per share, reflecting the £200 million return to shareholders in respect of the sale of Homebase by Home
Retail Group plc on 29 February 2016; and
· 2.8 pence per share (totalling £26 million) in lieu of a final dividend in respect of Home Retail Group plc's
financial year ended 27 February 2016.
This was recorded as a liability in the net assets acquired above within trade and other payables. The full amount was paid
on 12 September 2016.
(g) Finalisation of acquisition balance sheet
As a result of finalising the valuation of acquired assets and liabilities, the Group has reported in a material change in
goodwill to £119 million (24 September 2016: £18 million; 11 March 2017: £58 million).
The effect on the Group consolidated balance sheet as at prior reporting dates is as follows:
Restated Prior period adjustment As previously reported
£m £m £m
Balance sheet at 24 September 2016
Property, plant and equipment 10,036 (11) 10,047
Intangible assets 795 99 696
Inventories 1,903 (6) 1,909
Current trade and other payables (4,263) (12) (4,251)
Current provisions (171) (19) (152)
Deferred income tax liability (63) 19 (82)
Non-current provisions (194) (70) (124)
Balance sheet at 11 March 2017
Intangibles 803 61 742
Current provisions (148) (13) (135)
Deferred income tax liability (162) 10 (172)
Non-current provisions (186) (58) (128)
There has been no impact on the previously reported income statement, statement of other comprehensive income, statement of
changes in equity or cash flow statement.
Since the year-end date of 11 March 2017, movements in the acquisition balance sheet relate to the following:
Provisions
An in-depth review of provisions within HRG has been performed since the acquisition, resulting in changes to the estimates
and assumptions applied.
Deferred income tax liability
Relates to deferred tax on the above adjustments.
Intangible assets
Movement to goodwill of £61 million since year-end is as a result of the above adjustments.
15 Capital expenditure and commitments
In the financial period, the following additions and disposals were made:
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 20161 20171
£m £m £m
Additions
Property, plant and equipment 293 376 695
Intangibles 57 41 104
Disposals - net book value
Property, plant and equipment (11) (20) (51)
Intangibles (2) - (43)
Assets held for sale (2) (25) (27)
1 Property, plant and equipment and intangible assets acquired as part of the acquisition of Home Retail Group
plc are excluded.
At 23 September 2017, capital commitments contracted, but not provided for by the Group, amounted to £103 million (24
September 2016: £181 million; 11 March 2017: £118 million), and £81 million for the property joint ventures (24 September
2016: £nil; 11 March 2017: £nil).
16 Related party transactions
The Group's related parties are its joint ventures as disclosed in its Annual Report and Financial Statements 2017.
Transactions with joint ventures and associates
For the 28 weeks to 23 September 2017, the Group entered into various transactions with joint ventures and associates as
set out below:
28 weeks to 28 weeks to 52 weeks to
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Services and loans provided to joint ventures
Management services provided - 3 8
Revenue received from joint ventures 14 16 29
Dividend income received 16 23 65
Repayment of loan to joint ventures - - 2
Investment in joint ventures and associates 8 (16) (18)
Rental expenses paid (25) (28) (57)
Balances arising from transactions with joint ventures and associates
23 September 24 September 11 March
2017 2016 2017
£m £m £m
Receivables
Other receivables 10 20 12
Loans due from joint ventures 3 3 3
Payables
Loans due to joint ventures (5) (5) (5)
17 Contingent liabilities
The Group has a contingent liability for indemnities arising from the disposal of subsidiaries. No provision has been
recognised on the basis that any potential liability is not considered probable. It is not possible to quantify the impact
of this liability with any certainty.
Along with other retailers, the Group is subject to claims in respect of pay rates across supermarket and distribution
centre workers. There is also a potential obligation in respect of holiday pay on voluntary overtime. The Group is keeping
these matters under close review but considers the likelihood of a material payout to be remote.
Principal risks and uncertainties
Risk is an inherent part of doing business. The J Sainsbury plc Board has overall responsibility for the management of the
principal risks and internal control of the Company. The Board has identified the following principal potential risks to
the successful operation of the business. These risks, along with the events in the financial markets and their potential
impacts on the wider economy, remain those most likely to affect the Group in the second half of the year.
· Business continuity and major incidents response
· Business strategy and change
· Colleague engagement, retention and capability
· Data security
· Environment and sustainability
· Financial and treasury risk
· Health and safety - people and product
· Political and regulatory environment
· Trading environment and competitive landscape
The above principal risks remain unchanged from those reported in the Group's Annual Report and Financial Statements 2017.
For detail of these risks, please refer to pages 42 to 44 of the J Sainsbury plc Annual Report and Financial Statements
2017, a copy of which is available on the Group's corporate website www.j-sainsbury.co.uk.
Statement of Directors' responsibilities
The Directors confirm that this set of Condensed Consolidated Interim Financial Statements has been prepared in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the European Union, and that the Interim Management Report herein
includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.
The Directors of J Sainsbury plc are listed in the J Sainsbury plc Annual Report and Financial Statements 2017 with the
exception of Mary Harris who resigned from the Board on 5 July 2017 and Jo Harlow who joined the Board on 11 September
2017. A list of current directors is maintained on the Group's website: www.j-sainsbury.co.uk
By order of the Board
Mike Coupe
Chief Executive
8 November 2017
Kevin O'Byrne
Chief Financial Officer
8 November 2017
INDEPENDENT REVIEW REPORT TO J SAINSBURY PLC
Introduction
We have been engaged by J Sainsbury plc ("the company") to review the condensed consolidated set of financial statements in
the interim financial report for the 28 weeks ended 23 September 2017 which comprises the Group income statement, the Group
statement of comprehensive income, the Group balance sheet, the Group cash flow statement and the Group statement of
changes in equity and the related explanatory notes. We have read the other information contained in the interim financial
report and considered whether it contains any apparent misstatements or material inconsistencies with the information in
the condensed consolidated interim financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review
Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are
responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International
Financial Reporting Standards as adopted by the
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