REG - Sainsbury(J) PLC - Half-year Report
02/11/2023 07:16
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RNS Number : 1159S Sainsbury(J) PLC 02 November 2023
2 November 2023
J Sainsbury Plc
Interim Results for the 28 weeks ended 16 September 2023
Investment in value, innovation and service delivering strong volume and
market share growth
We're gaining volume from all of our grocery competitors, have grown ahead of
the market throughout the first half and made record market share gains. This
is the result of the strategic investment we have made in our food business
over the last three years, improving value, innovation and customer service.
Customers are noticing and they're doing more of their grocery shopping with
us, trusting us to deliver consistent value as well as the great quality and
service they've always expected from Sainsbury's.
We're continuing to make balanced choices, so while we're investing to help
customers and colleagues, we also expect the strength of our volume
performance to result in underlying profit before tax in FY2023/24 of between
£670 million and £700 million, the upper half of our previous guidance
range, and retail free cash flow of at least £600 million, higher than our
previous guidance of at least £500 million.
As we look to build on the success of Food First and towards our next phase of
progress, we will host a Strategy Update on 7 February 2024.
Financial Highlights
· Grocery sales up 10.1%. Volume growth across both quarters
driving record market share gains and consistent market outperformance
· General Merchandise sales up 1.1% despite tough weather
comparatives over the summer (up 2.5% excluding the impact of the closure of
Argos in the Republic of Ireland)
· Clothing sales down 8.4%, reflecting a disciplined trading
approach in a seasonally weak and promotionally-driven market
· Statutory Group sales up 3.5%, with fuel sales down 19.6% driven
by lower input prices. Like-for-like Retail sales (excluding fuel) up 8.4%
· Retail operating profit £485 million, up 2%, reflecting strong
volume-driven grocery profit growth and continued delivery of Save to Invest
cost saving benefits, partially offset by the impact of weaker seasonal sales
on General Merchandise profits
· Financial Services operating profit of £13 million versus £19
million last year. This primarily reflects net interest margin reduction, with
higher funding costs not being fully passed on through higher lending costs
· Underlying profit before tax of £340 million, flat year-on-year
· Underlying earnings per share 10.5 pence, down 6% due to the
higher rate of corporation tax
· Statutory profit before tax of £275 million, down 27%,
predominantly reflecting non-cash movements and one-off income from legal
settlements in the prior year. Statutory earnings per share 6.6 pence, down
46%
· Retail free cashflow of £520 million, driven by strong grocery
sales growth and seasonal H1 benefit from timing of payments
· Net debt including leases £701 million lower at £5,643 million,
reflecting strong cash generation and a £1,042 million reduction in lease
debt as a result of the Highbury & Dragon property transaction. Net debt
excluding leases increased by £375 million to £231 million, reflecting the
£670 million cash costs of funding the consideration for the transaction
· Interim dividend of 3.9 pence, unchanged year-on-year in line
with our policy of paying 30% of the prior full year dividend per share
Simon Roberts, Chief Executive of J Sainsbury plc, said: "Food is firmly back
at the heart of Sainsbury's. We've never been more competitive on price and
our focus on value, innovation and service is giving more customers more
reasons to shop with us.
"We know people are still finding things tough and we're working harder than
ever to reduce our costs, putting the money back into our customers' pockets
through lower prices on the products they buy most often. I'm pleased to say
food inflation is coming down and we are passing savings on to customers.
We've rolled out Nectar Prices to over 6,000 products and the vast majority of
customers are now shopping with Nectar, saving over £450 million since April.
"We have extended increased colleague discount and free food during shifts
indefinitely and, thanks to the hard work across our entire team, we're
delivering leading customer service and availability. I want to thank all of
my colleagues for their fantastic efforts.
"We're ready to give customers at Sainsbury's and Argos everything they want
to have a brilliant Christmas. We're helping everyone to treat themselves with
fantastic value and more delicious new food than ever before. As we head into
this key trading period, we are encouraged by our strong momentum and we
remain fully focused on delivering for customers and shareholders."
Strategic highlights
· Food First: Customers want consistently good value, exciting products
and great service and our relentless focus has helped us deliver record market
share gains(1)
o We're the most competitive we have ever been(2) and customers' perception
of our value is consistently improving(3), which is why we're the only
full-choice supermarket gaining spend from limited choice competitors(4,5)
o We have invested £118 million since March in keeping prices low and our
targeted investment choices are delivering. Our focus on lowering prices on
centre of the plate products - those our customers buy most often - has led to
more customers doing their big shop with us(6) and we have driven volumes
ahead of the market across the full basket(7)
o We launched and rapidly rolled out Nectar Prices across all supermarkets
and to Groceries Online. It is now available on over 6,000 products and has
saved customers over £450 million since the launch. Customer response has
exceeded our expectations, with more than three million new Digital Collectors
since April. The vast majority of Sainsbury's customers regularly use Nectar
Prices, saving almost £10 on a typical £80 weekly shop
o Supporting our Good food for all of us brand promise, we continue to be
bold and ambitious on innovation, launching 600 new products in the half and
growing Taste the Difference volumes by 8.4 per cent in Q2, outperforming the
market and all competitors in Premium Own Label volume growth(8), driven in
part by our Summer innovation
o We have invested significantly in colleague pay and extended our increased
colleague discount and free food during shifts indefinitely and our colleague
engagement scores have increased 8 percentage points(9). We believe having
highly engaged colleagues delivers leading customer service and our overall
customer satisfaction is consistently ahead of full-choice competitors(10)
· Brands that Deliver: We remain focused on improving the
efficiency and resilience of our brands, supporting our strong customer offers
and investment in our food business
o Nectar sales participation has increased significantly and we now have 14
million Nectar Digital Collectors, driven by the rapid rollout of Nectar
Prices. This will support the growth of Nectar360, which is on track to
deliver £90 million of additional profit by March 2026, as will the expansion
of our connected digital screen network to over 800 screens - making our
'Sainsbury's Live' network one of the largest digital retailer screen networks
in the UK
o Argos profitability has improved in recent years as we have lowered the
fixed cost base, while improving our product range and expanding the number of
points where customers can conveniently collect products. Lower fixed costs
helped reduce the impact in the half of significantly lower seasonal sales
during a colder and wetter Summer
o Argos sales were resilient, with sales up 3.3 per cent excluding the
impact of closing Argos in the Republic of Ireland, driven by continuing
market share gains(11), strong consumer electronics sales and activity
supporting Argos's 50(th) birthday
o Tu maintained a disciplined trading approach, with lower sales but stable
full-price sales participation protecting profitability in a seasonally weak
and promotionally driven market. We now have 37 third party brands on
Tu.co.uk, with nine new branded fashion destination hubs in Sainsbury's
supermarkets driving higher average customer spend
o Financial Services profits declined, with net interest margin compression
as higher funding costs were not passed through to lending costs. This
reflects the nature of our lending products, including buy now pay later at
Argos and customers continuing to clear balances rather than incur interest
costs. We now expect full year Financial Services profits to be lower than
last year
· Save to Invest: We are on track to deliver £1.3 billion of cost
savings by March 2024, future proofing our business with a structurally lower
cost base and fuelling investment in our customer proposition. As we move
towards the next phase of our strategy we have a strong plan and are confident
of continued momentum and competitive advantage through unique cost savings
opportunities
o Delivered £1.1 billion of cost savings over the last two and a half years
o We progressed key structural change projects, are continuing to transform
and simplify our logistics operations and have begun to consolidate our data
centres, which will modernise, simplify and future-proof our technology estate
· Plan for Better: We are making good progress on our Plan for Better,
investing in sustainable supply chains and continue to make progress against
targets including plastic packaging and carbon reduction
o Our new Taste the Difference Aberdeen Angus beef range is revolutionising
how we produce beef in the UK, with a 25 per cent lower carbon footprint
compared to industry standard
o We won the Marine Stewardship Council UK Supermarket of the Year and
Aquaculture Stewardship Council UK Retailer of the Year titles, recognising
our commitment to sourcing from certified sustainable, responsibly managed
fisheries and aquaculture
H1 Financial Summary 2023/24 2022/23 YoY
Statutory performance
Group revenue (excl. VAT, inc. fuel) £16,983m £16,408m 3.5%
Profit before tax £275m £376m (27)%
Profit after tax £155m £285m (46)%
Basic earnings per share 6.6p 12.3p (46)%
Business performance
Group sales (inc. VAT) £18,865m £18,338m 2.9%
Retail sales (inc. VAT, excl. fuel) £15,805m £14,674m 7.7%
Underlying profit before tax £340m £340m -
Underlying basic earnings per share 10.5p 11.2p (6)%
Interim dividend per share 3.9p 3.9p -
Net debt (inc. lease liabilities) £(5,643)m £(6,165)m £522m
Non-lease net (debt)/funds £(231)m £361m £(592)m
Return on capital employed 7.9% 7.7% 20bps
Like-for-like sales performance 2022/23 2023/24 YoY 2023/24 exc. Argos ROI
Q1 Q2 Q3 Q4 Q1 Q2 H1 Q1 Q2 H1
Like-for-like sales (excl. fuel) (4.0)% 3.7% 5.9% 7.8% 9.8% 6.6% 8.4% 10.0% 6.6% 8.5%
Like-for-like sales (incl. fuel) 2.9% 7.7% 6.8% 5.9% 3.9% 2.2% 3.2% 4.0% 2.2% 3.2%
Total sales performance 2022/23 2023/24 YoY 2023/24 exc. Argos ROI
Q1 Q2 Q3 Q4 Q1 Q2 H1 Q1 Q2 H1
Grocery (2.4)% 3.8% 5.6% 7.4% 11.0% 8.9% 10.1% 11.0% 8.9% 10.1%
Total General Merchandise (11.2)% 1.2% 4.6% 7.6% 4.0% (2.6)% 1.1% 4.9% (0.6)% 2.5%
GM (Argos) (10.5)% 1.6% 4.5% 9.3% 5.1% (2.6)% 1.7% 6.1% (0.1)% 3.3%
GM (Sainsbury's) (14.6)% (1.3)% 5.4% (1.0)% (1.2)% (2.7)% (1.9)% (1.2)% (2.7)% (1.9)%
Clothing (10.1)% (0.2)% 1.3% (1.9)% (3.7)% (14.6)% (8.4)% (3.7)% (14.6)% (8.4)%
Total Retail (excl. fuel) (4.5)% 3.1% 5.2% 7.1% 9.2% 5.8% 7.7% 9.3% 6.2% 8.0%
Fuel 48.3% 29.1% 12.2% (2.8)% (21.4)% (17.1)% (19.6)% (21.4)% (17.1)% (19.6)%
Total Retail (incl. fuel) 2.5% 7.2% 6.2% 5.4% 3.3% 1.5% 2.6% 3.5% 1.9% 2.8%
Outlook
Consistent investment in our customer proposition has driven strong momentum
and profit growth in our grocery business and continued market share gains for
Argos. This strong trading momentum has continued in recent weeks and we are
confident heading into the peak trading period. Hence, despite headwinds in
Financial Services and some tough comparatives ahead, we now expect to report
underlying profit before tax in FY 2023/24 of between £670 million and £700
million, the upper half of our previous guidance range (£640 million to £700
million). We expect to generate Retail free cash flow of at least £600
million, higher than our previous guidance of at least £500 million.
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 9:00 (GMT). This will
be available to view on our website at the following link:
https://sainsburys-interim-results-nov-2023.open-exchange.net/registration
(https://sainsburys-interim-results-nov-2023.open-exchange.net/registration)
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 2023/24 Third Quarter Trading Statement at 07:00
(GMT) on 10 January 2024.
Enquiries
Investor Relations Media
James Collins Rebecca Reilly / Fleur Wylie
+44 (0) 7801 813 074 +44 (0) 20 7695 7295
Food First
Food is firmly back at the heart of Sainsbury's. Our relentless focus on
value, innovation and service has helped us drive volumes, improve absolute
value(2), increase value perception(3) and win new customers(12). More
customers are shopping their full basket with us(7) and we are gaining volumes
from every supermarket including limited-choice competitors(4).
Value
· We have never been more competitive on price(2) and customers are
noticing: value perception is improving consistently(3, ) we are
outperforming the market on volume growth every week of the half(13) and we
are the only full-choice supermarket winning volumes from limited choice
competitors(4), with more customers doing more of their shopping with us(12),
particularly their big shops(6)
· We invested a further £118 million in lowering prices and led
the industry on passing lower cost prices through to customers, so hundreds of
the products they buy most often, like cheese, pasta and fish fingers, now
cost less. We are consistently inflating behind key competitors(14) and our
biggest ever Aldi Price Match campaign now includes over 400 products
· We know that when customers are getting great value on the items
they buy most often, they'll do more of their shop with us. Our focus on
investing in the centre of the plate - fresh food like meat, fish and fruit
and veg - is winning, we are outperforming the market across the full
basket(7) and growing our market share(1)
· We launched and rolled out Nectar Prices across all supermarkets
and to Groceries Online. Nectar Prices are now available on over 6,000
products across all areas of food and grocery, saving customers almost £10 on
a typical £80 weekly shop. Customers know they can find market-leading offers
through Nectar Prices and suppliers are providing great support for the deals.
The vast majority of our customers are now regularly using Nectar and
customers have saved over £450 million since launch in April, helping drive
improved value perceptions(3) and leading to strong customer satisfaction
scores for offers(15)
· Groceries Online customers are already highly engaged with Nectar
Prices and we anticipate this growing following this week's launch of Your
Nectar Prices online, offering personalised discounts based on the items our
customers buy the most often. SmartShop customers have already saved £80
million through using Your Nectar Prices(16) in store
· Our new value range Stamford Street is bigger than ever at over
200 products, growing sales by almost 60 per cent year-on-year and driving
Economy Own Label volume growth ahead of the market(17)
Innovation
· Supporting our Good food for all of us brand promise, we launched
almost 600 new products in H1, with more than 70 per cent of those in Fresh.
Customer favourites included our Taste the Difference Chorizo, Nduja and
Mozzarella sandwich, by Sainsbury's Sweet and Sticky BBQ British Pork Skewers
and Taste the Difference Lemon Cheesecake Inspired Cookies
· Driven by strong performance over the Summer and the successful
refresh of our Taste the Difference £12 Dine In deal, Taste the Difference
volumes grew by 8.4 per cent in Q2, outperforming the market and all
competitors in Premium Own Label volume growth(8)
· With our Food to Go range now more popular than pre-pandemic, we
increased the options available to customers with the launch of Kitchen Deli,
a specialty selection of fresh ready-prepared sandwiches, salads, cold and
heat-up ready meals, giving customers a new and convenient way to sample the
best of what Sainsbury's has to offer
· We continue to be bold and ambitious on innovation, with over 360
products launching through Autumn and Winter. We are launching 170 new Taste
the Difference products this Christmas and are well set up for success
Best of British
· We're committed to working with our suppliers to build
sustainable, resilient supply chains which are fit for the future. Our
suppliers and partners are key to delivering our promise of Good food for all
of us
· We announced an additional investment of £6 million annually
into supporting our dairy farmers, on top of the independently calculated Cost
of Production price of milk
· We are investing in supply chain innovation, launching a new
Taste the Difference Aberdeen Angus beef range which is revolutionising how we
produce beef in the UK. The reinvigorated range will offer a 25 per cent lower
carbon footprint compared to industry standard, making it the largest low
carbon beef range ever produced in the UK and is one of the ways we're
progressing towards our ambition to become Net Zero across our own operations
by 2035 and our value chain by 2050
· We made changes to our chicken welfare standards in March: they
now have 20 per cent more space than industry standard, helping us raise
happier, healthier by Sainsbury's chickens. With great value for customers,
often matched to the lowest market prices, this has helped to contribute
towards a 3.6 per cent market share increase(18) for this category
Service
· We have invested significantly in colleague pay and extended
indefinitely our increased colleague discount and free food during shifts. Our
colleague engagement scores have increased 8 percentage points(9) and we have
had better retention and lower absence
· We believe having engaged colleagues delivers leading customer
service and our overall customer satisfaction scores are consistently ahead of
full-choice competitors(10). Our strong colleague availability and speed of
checkout scores(14) reflect changes we've made that free up colleagues to
better serve customers, including colleague headset rollout and better
efficiencies in stock and ordering processes
· Our focus on service and efficiency in Groceries Online has led
to customer satisfaction improving and moving ahead of all competitors during
Q2, with strong improvements in availability, variety, ease of checkout and
delivery slot availability(19)
· Our Convenience performance was strong, with 11 million more
Convenience transactions year-on-year. We have diversified the offer to meet
customer needs, growing Taste the Difference share of sales 8 percentage
points since May, while our Pocket Friendly Prices highlight our value offer
to customers. Our Convenience customer satisfaction scores have improved 6
percentage points year-on-year(20)
· On Demand sales through our partnerships with Deliveroo, Uber
Eats and Just Eat and our Chop Chop service continue to grow, increasing 50
per cent. With almost 900 stores live with at least one app, we continue to
have market leading coverage in all cities and further opportunities for
growth
Brands that Deliver
We remain focused on improving the efficiency and resilience of our brands,
supporting strong customer offers and our core food business. Argos has proved
resilient, delivering strong market share gains(11) and benefiting from its
leaner cost structure, while Tu prioritised full price clothing sales in a
more promotional market.
Nectar
· We have rapidly rolled out Nectar Prices across the store and
it's now available across all grocery categories - delivering additional value
to customers. The customer response has exceeded our expectations,
strengthening value perception(3) and driving Nectar participation levels,
with more than three million new Nectar Digital Collectors since April
· Revenues for Nectar360, our digital media and shopper marketing
agency, are continuing to grow supported by Nectar's growing Digital Collector
base and the business is on track to deliver at least £90 million of
additional profit by March 2026. This profit will also be supported by the
expansion of our connected digital screen network to over 800 screens, making
our 'Sainsbury's Live' network one of the largest digital retailer screen
networks in the UK
· Our off-site Digital Trading Platform revenue is growing, driven
by market-leading innovation and strong returns on advertising spend
Argos and Habitat
· Argos continues to gain market share(11), reflecting the
increasing strength and depth of the product offer, a continually-improving
digital experience and the speed and convenience of our market-leading Click
& Collect and Home Delivery propositions. 93% of households have access to
our same day delivery service
· Sales increased 1.7%, with seasonal declines offset by strong
Consumer Electronics & Technology sales and a positive customer and
colleague response to the Argos 50(th) birthday celebrations. Excluding the
impact of the planned closure of Argos in the Republic of Ireland, Argos sales
were up 3.3 per cent
· Argos product availability has improved by almost 5 percentage
points versus this time last year and we have made improvements to the online
checkout experience across all three General Merchandise brands, adding guest
check out and a new "email when back in stock" function, resulting in higher
sales conversion
· To better serve the increasing number of online customers,
Habitat launched a digital showroom, an online service showcasing the product
offering and offering advice via video call
Tu
· Tu sales declined, reflecting weak seasonal demand as a result of
poor summer weather and a warm early September. We maintained a disciplined
trading approach in a highly promotional market, with stable full price sales
participation and good stock control, mitigating the impact of the sales
decline
· We remain focused on offering customers choice and are growing
our third party brands proposition at pace. We now have 37 third party brands
- including Simply Be, Sosandar, Finery and French Connection - on Tu.co.uk
and launched new branded fashion destination hubs in nine Sainsbury's
supermarkets in September. Through the new venture, we will create at least 50
fashion destination hubs in stores
Financial Services
· We continue to simplify our Financial Services business,
completing the sale of the mortgage book during the half and further focusing
on providing Financial Services for Sainsbury's and Argos customers
· Financial Services underlying operating profit reduced to £13
million in the half, down £6 million versus last year. This primarily
reflected net interest margin compression. Higher funding costs on bank
deposits, the result of the significant and rapid increase in Bank of England
base rates, were not fully passed on to customers
· This was driven largely by the nature of our lending book. This
includes buy now pay later at Argos, an important element of the Argos
customer proposition, and a high proportion of both credit card and Argos card
customers continuing to clear balances rather than incurring interest costs
· Impairments remain stable, with the bad debt ratio down 10 basis
points year-on-year
Save to Invest
We have focused on simplifying our business, making tougher prioritisation
decisions and investing capital to drive efficiencies, future proofing our
business with a structurally lower cost base and providing fuel to invest in
our customer proposition
· Our Save to Invest cost saving programme has delivered £1.1
billion of cost savings since March 2021 and is on track to deliver £1.3
billion of cost savings in the three years to March 2024, which is double the
run rate of savings in the previous three years
· We are transforming and simplifying our logistics operations by
moving to three dedicated partnerships across transport, food, General
Merchandise and clothing, instead of multiple different contracts across the
network. We have already transferred 12 of our depot contracts, delivered with
no impact to depot performance metrics. The remaining moves are on track for
completion next year
· We have further transformed the Argos store and distribution
network, increasing the speed at which we can fulfil customer orders,
improving product availability and contributing to customer satisfaction. More
than 90 per cent of UK households are conveniently located within a 15-minute
drive of Argos. Additionally, we made structural savings through the closure
of Argos in the Republic of Ireland, including all 34 stores and the website,
further rationalising our property estate and reducing complexity
· We are moving at pace to deliver leading automation and machine
learning in our supply chain. Our new systems are driving end-to-end
efficiencies, reducing manual tasks and leading to better outcomes across
supply chain, commercial and retail teams
Plan for Better
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 continue to make progress against targets, including plastic
packaging and carbon reduction and are encouraging our customers to eat
healthier and more sustainable diets through offering great value on healthy
choices and sharing recipes to inspire a greater variety of meal choices.
Better for the Planet
· Plastic reduction initiatives launched in the first half of the
year will save nearly 1,000 tonnes of plastic per year. We announced the
biggest plastics reduction in our grocery business to date when 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. We also
led the market in changing our range of babywear to cardboard hangers, with
the new packaging set to save 103 tonnes. Our efforts to reduce plastic in
meat ranges have delivered big results, such as removing the plastic trays
from steaks and whole chickens, each delivering around a 70 per cent plastic
saving - or an estimated 395 tonnes
· In Q2, we announced that we will be swapping use-by dates for
best-before dates across our own-brand milk range in 2024, making us the
biggest UK retailer to make this change and empowering customers to make their
own decisions on whether their food is good to eat, helping to prevent them
from disposing of food too early
· We also donated almost 17 million meals through our partnership
with Neighbourly - helping manage our back of store food donation programme
and connecting our stores with local partners who will redistribute food to
those in need
· We announced a 15-year investment into the Longhill Burn Wind
Farm in Scotland. This will add up to 50 megawatts of electrical capacity to
the grid in the form of renewable energy. The turbines are the largest and
most powerful available onshore in the UK
Better for Everyone
· In recognition of our commitment to sourcing from fisheries and
aquaculture that are certified as sustainable and responsibly managed, we won
the Marine Stewardship Council UK Supermarket of the Year and Aquaculture
Stewardship Council UK Retailer of the Year titles - the first time a major
retailer has won both awards
· To help tackle food poverty, we donated over £3 million to Comic
Relief through our Nourish the Nation campaign. Running from May to July 2023,
the campaign donated 50p for every Inspired to Cook range product sold. The
campaign has funded initiatives designed to tackle food insecurity and ensure
communities have access to balanced, nutritional and sustainable food sources
· We are passionate about playing an active role in our communities
and aim to help positively impact those in need through fundraising,
volunteering, donations and by raising awareness. We donated £500,000 to
Oxfam and the British Red Cross, supporting those affected by the recent
devastating events in Morocco and Libya
· Tu donated £100,000 from the proceeds of school uniform sales to
Comic Relief to help support free school meals and kids' food clubs across the
UK
Better for You
· We know how important it is for our customers to eat a varied and
healthy diet, which is why it's our ambition to deliver good food for all of
us by helping customers eat well at affordable prices
· Our Aldi Price Match campaign helps customers balance their diets
and their budgets, including oily fish, wholewheat brown rice and pasta and
healthy dairy alternatives, inspiring customers with healthy and sustainable
recipe suggestions for all mealtimes
· The Great Fruit and Veg challenge returned to Sainsbury's for the
fourth year running from August to October. Over 710,000 customers took part,
the highest we have seen for a Nectar event, awarding customers nearly £1.7
million of Nectar points
(1) Nielsen Panel volume market share H1 17/18 - H1 23/24. Total FMCG
(Excluding Kiosk & Tobacco), Market Universe: Total Outlets
(2) Value Reality. Acuity, internal modelling - H1 23/24 vs each half year
period since tracking began in 2016
(3) CSAT Competitor Benchmark, Sainsbury's Value Perception Score H1 23/24, 28
weeks to 16 September 2023
(4) Nielsen Panel data, Sainsbury's to / from net volume switching - Total
FMCG excl. Kiosk and Tobacco. Trended 12 week rolling for Q2 23/24
(5) "Full-choice" supermarkets refers to Tesco, Morrisons and Asda and
"Limited choice" refers to Aldi and Lidl
(6) Nielsen panel data, Total FMCG excl. Kiosk and Tobacco. Shopper missions
growth by volume. 28 weeks to 16 September 2023
(7) Nielsen panel data, Total FMCG excl. Kiosk and Tobacco. Volume growth
differential to the market by category, 28 weeks to 16 September 2023
(8) Nielsen Panel Premium Own Label Volume Growth YoY - Total FMCG excl. Kiosk
and Tobacco. 28 weeks to 16 September 2023
(9) eSAT scores July 2023 vs. April 2021 (baseline)
(10) Competitor benchmarking survey. Overall Supermarket customer satisfaction
% score April 2022 - September 2023
(11) GfK tracked market share 6 months to September 2023
(12) Nielsen panel data, Total FMCG excl. Kiosk and Tobacco. Primary and
Secondary Shoppers numbers growth YoY. 28 weeks to 16 September 2023
(13) Nielsen EPOS data - Sainsbury's weekly volume growth differential to
market. Weekly data from 5 March to 16 September 2023
(14) Nielsen panel data, Total FMCG excl. Kiosk and Tobacco. Top 100 SKUs by
retailer. Average Selling Price YoY growth. 52 weeks to 16 September 2023
(15) Competitor benchmarking survey. Q2 23/24 supermarket CSAT scores 12 weeks
to 16 September 2023
(16) Since launch in September 2021
(17) Nielsen Panel Economy Own Label Volume Growth YoY - Total FMCG excl.
Kiosk and Tobacco. 12 weeks to 16 September 2023
(18) Nielsen Panel data, volume market share % growth YoY, H1 23/24 vs H1
22/23, Chicken category
(19) Competitor benchmarking survey. Q2 23/24 Online CSAT scores 12 weeks to
16 September 2023
(20) Lettuce know Convenience Satisfaction % score, Q2 23/24, 12 weeks to 16
September 2023, versus Q2 22/23, 12 weeks to 17 September 2022
Financial Review for the 28 weeks to 16 September 2023
In the 28 weeks to 16 September 2023, the Group generated profit before tax of
£275 million (HY 2022/23: £376 million) and an underlying profit before tax
of £340 million (HY 2022/23: £340 million).
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. APMs are defined and reconciled to the nearest
IFRS measure on pages 54 to 60.
Summary income statement 28 weeks to 28 weeks to 52 weeks to
16 September 2023 17 September 2022 Change 4 March 2023
£m £m % £m
Group sales (including VAT) 18,865 18,338 2.9 35,157
Retail sales (including VAT) 18,547 18,084 2.6 34,626
Retail sales (excluding fuel, including VAT) 15,805 14,674 7.7 28,664
Group sales (excluding VAT) 16,983 16,408 3.5 31,491
Retail sales (excluding VAT) 16,665 16,154 3.2 30,960
Underlying operating profit
Retail 485 477 2 926
Financial services 13 19 (32) 46
Total underlying operating profit 498 496 - 972
Underlying net finance costs (158) (156) (1) (282)
Underlying profit before tax 340 340 - 690
Items excluded from underlying results (65) 36 N/A (363)
Profit before tax 275 376 (27) 327
Income tax expense (120) (91) (32) (120)
Profit for the financial period 155 285 (46) 207
Underlying basic earnings per share 10.5p 11.2p (6) 23.0p
Underlying diluted earnings per share 10.3p 11.1p (7) 22.7p
Basic earnings per share 6.6p 12.3p (46) 9.0p
Diluted earnings per share 6.5p 12.1p (46) 8.8p
Interim Dividend per share 3.9p 3.9p - 3.9p
We have continued to invest in our grocery business over the first half,
protecting value for customers, inflating behind the market and passing cost
price reductions through to customers. This has driven grocery volume growth
and consistent market share gains. Our ongoing cost programme helped us
mitigate the impact of rising operating cost inflation in order to deliver for
customers, colleagues and shareholders. The combination of volume gains and
cost reductions delivered strong grocery profit growth in the half, partially
offset by the impact, year-on-year, of poor weather on general merchandise and
clothing sales and lower financial services profits. Another strong retail
free cash flow result further strengthened our balance sheet and supports
consistent 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 2.9 per cent year-on-year as a 7.7
per cent increase in Retail sales (including VAT, excluding fuel) and a 25.2
per cent increase in Financial Services sales more than offset a 19.6 per cent
decrease in Fuel sales (including VAT).
Total sales (including VAT) by category 28 weeks to 16 September 2023 28 weeks to 17 September 2022 Change
£bn £bn %
Grocery 12.4 11.3 10.1
General Merchandise 2.9 2.9 1.1
Clothing 0.5 0.5 (8.4)
Retail (exc. fuel) 15.8 14.7 7.7
Fuel sales 2.7 3.4 (19.6)
Retail (inc. fuel) 18.5 18.1 2.6
Like-for-like sales growth (exc. fuel) 8.4
Like-for-like sales growth (inc. fuel) 3.2
Grocery sales increased 10.1 per cent as we continued to prioritise value for
customers, inflating behind key competitors. This included the successful
launch of Nectar Prices, offering lower prices for every loyalty customer
alongside extra personalised prices through 'Your Nectar Prices'.
General Merchandise sales increased 1.1 per cent. Strong sales of Consumer
Electronics and Technology products, driven by continued strong Argos market
share gains and improved availability more than offset significantly lower
seasonal sales, which were impacted by a wetter and cooler summer compared to
a very warm and dry summer last year. 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 2.5 per
cent.
Clothing sales were adversely impacted by a cooler summer and warm early
autumn, reducing demand for seasonal items.
Fuel sales decreased by 19.6 per cent, driven primarily by the year-on-year
reduction of average pump price.
Total sales (including VAT) performance by channel 28 weeks to 28 weeks to
16 September 2023 17 September 2022
Total Sales fulfilled by Supermarket stores 9.6% (0.5)%
Supermarkets (inc Argos stores in Sainsbury's) 10.8% 2.9%
Groceries Online 2.3% (17.4)%
Convenience 10.5% 10.5%
Sales fulfilled from our Supermarkets grew by 9.6 per cent, primarily driven
by grocery inflation. Groceries Online sales increased by 2.3 per cent, with
order numbers returning to growth in the second quarter, driven by
improvements in availability and service. Convenience sales increased by 10.5
per cent, with growth strongest in 'Food on the Move' city centre stores and
more urban locations.
Space
In the first half of 2023/24, Sainsbury's opened one new supermarket (HY
2022/23: one closed), and opened nine new Convenience stores, closing two (HY
2022/23: four opened and two stores closed).
During the period, we opened seven new Argos stores in Sainsbury's while 47
standalone Argos stores were closed, of which 34 were closed as a result of
the cessation of Republic of Ireland operations, in line with our Argos
transformation plan. The number of Argos collection points in Sainsbury's
stores increased from 420 to 434. As at 16 September 2023, Argos had 669
stores including 431 stores in Sainsbury's and a total of 1,103 points of
presence.
Store numbers and retailing space
As at New stores Disposals / closures As at
4 March 16 September
2023(1) 2023
Supermarkets 595 1 - 596
Supermarkets area '000 sq. ft. 20,610 25 - 20,635
Convenience 814 9 (2) 821
Convenience area '000 sq. ft. 1,961 26 (4) 1,983
Sainsbury's total store numbers 1,409 10 (2) 1,417
Argos stores 285 - (47) 238
Argos stores in Sainsbury's 424 7 - 431
Argos total store numbers 709 7 (47) 669
Argos collection points 420 15 (1) 434
Habitat 3 - (3) -
1. In H1 2023/24 there was a store re-measurement exercise resulting
in changes to sales areas for 577 Supermarkets and 788 Convenience stores.
In total for 2023/24, we expect to open three supermarkets, around 25 new
convenience stores, with one supermarket and five to ten convenience stores to
close. In addition, we expect to open around 25 Argos stores inside
Sainsbury's and close around 100 Argos standalone stores, including 34 stores
in the Republic of Ireland which were closed during the first half.
In the UK, we expect the standalone Argos store estate will reduce to around
180 stores by March 2024, while we expect to have 430-460 Argos stores inside
Sainsbury's supermarkets as well as 450-500 collection points.
Retail underlying operating profit
28 weeks to 28 weeks to
16 September 17 September
2023 2022 Change
Retail underlying operating profit (£m)(1) 485 477 1.7%
Retail underlying operating margin (%)(1) 2.91 2.95 (4)bps
Retail underlying EBITDA (£m) (1) 1,082 1,087 (0.5)%
Retail underlying EBITDA margin (%)(1) 6.49 6.73 (24)bps
1 Refer to the Alternative Performance Measures on pages 54 to 60
for reconciliation
Retail underlying operating profit increased by 1.7 per cent to £485 million
(HY 2022/23: £477 million) and retail underlying operating margin decreased
by 4 basis points year-on-year to 2.91 per cent (HY 2022/23: 2.95 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 impact of
lower seasonal sales and higher Consumer Electronics sales.
Continued step changes in our retail operating model delivered savings, led by
enhanced labour productivity, structural distribution platform savings and
ongoing optimisation of our estate through front end configuration.
In 2023/24, Sainsbury's expects a retail underlying depreciation and
amortisation charge of around £1,150 million, including around £450 million
right of use asset depreciation.
Financial Services
Financial Services results
6 months to 31 August
2023 2022 Change
Underlying revenue (£m) 318 254 25%
Interest and fees payable (£m) (97) (28) (246)%
Total income (£m) 221 226 (2)%
Underlying operating profit (£m) 13 19 (32)%
Net interest margin (%)(1) 4.7 5.2 (50)bps
Cost:income ratio (%) 70 67 300bps
Bad debt as a percentage of lending (%)(2) 2.1 2.2 (10)bps
Tier 1 Capital ratio (%) 15.6 14.9 70bps
Total Capital ratio (%)(3) 18.1 17.3 80bps
Customer deposits (£bn) (4.8) (4.6) 4%
Total customer lending (£bn)(4) 4.8 5.1 (6)%
of which Unsecured lending (£bn) 4.8 4.4 8%
of which Secured lending (£bn) - 0.7 (100)%
1 Net interest income divided by average interest-bearing assets
2 Bad debt expense divided by average net lending
3 Total capital divided by risk-weighted assets
4 Amounts due from customers at the Balance Sheet date in respect of
loans, mortgages, credit cards and store cards net of provisions
Financial Services underlying operating profit of £13 million reduced by £6
million (HY 2022/23: £19 million), reflecting the impact of both higher
funding costs and higher operating costs not being fully passed on to
customers. This in part is due to a high proportion of non-interest bearing
credit balances, including a high quality credit card book where many
customers pay off balances every month.
Financial Services total income of £221 million reduced by two per cent and
net interest margin reduced by 50 basis points. Strong underlying revenue
growth of 25 per cent was driven by selective unsecured customer lending
growth alongside strong growth in Travel Money. Interest and fees payable grew
246 per cent, driven by the increase in the Bank of England base rate since HY
2022/23.
The Financial Services cost:income ratio increased to 70 per cent (HY 2022/23:
67 per cent), reflecting the pressure on income from higher funding costs, and
the impact of inflation on operating costs and higher depreciation costs.
Bad debt as a percentage of lending improved 10 basis points to 2.1 per cent
(HY 2022/23: 2.2 per cent) as impairments remain low and stable with the
normalisation of low arrears levels post COVID-19.
As previously disclosed, the Mortgage portfolio was sold to The Co-operative
Bank on 15(th) August 2023 reflecting the earlier strategic decision to exit
mortgages to simplify the business. This reduced customer lending by £449
million on sale.
Financial Services remains well capitalised, with a Total Capital ratio of
18.1 per cent, an increase of 80 basis points since prior half year and 20
basis points since full year 2022/23 (HY 2022/23: 17.3 per cent, FY 2022/23:
17.9 per cent).
Underlying net finance costs
Underlying net finance costs increased to £158 million (HY 2022/23: £156
million). These costs include £23 million of net non-lease interest (HY
2022/23: £17 million). The increase of net non-lease interest was driven by a
term loan that was used to fund the acquisition of the commercial property
investment pool, known as Highbury & Dragon. This was partly offset by
increased interest income as we benefited from higher interest rates. Net
financing costs on lease liabilities reduced to £135 million (HY 2022/23:
£139 million), due primarily to the declining remaining term of the existing
lease portfolio, with lower costs associated with leases as they age.
We expect underlying net finance costs in 2023/24 of between £295 million -
£305 million, including around £245 million - £255 million of lease
interest.
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 28 weeks to 28 weeks to
16 September 17 September
2023 2022
£m £m
Restructuring programmes (32) (33)
Income recognised in relation to legal disputes - 30
Disposal of mortgage book (14) -
Net defined benefit pension scheme income 21 35
Property, finance and acquisition adjustments (40) 4
Items excluded from underlying results (65) 36
- Restructuring costs of £32 million (HY 2022/23: £33 million)
were recognised in relation to the restructuring programmes announced in the
year ended 6 March 2021. Cash costs in the period were £40 million (HY
2022/23: £33 million). We still expect to incur one off costs from these
retail infrastructure and operating model changes of around £900 million to
£1 billion, with cash costs of around £300 million, with the majority to be
incurred in the period to March 2024. To date we have incurred costs of £778
million and cash costs of £243 million. In addition to the £40 million cash
costs in the period, for 2023/24 we expect to incur a further £20 million in
relation to this programme, giving total cash costs of £60 million for
2023/24.
- The 28 weeks to 17 September 2022 included £30 million of
income recognised in relation to legal disputes relating to settlements for
overcharges from payment card processing fees net of legal fees. No income
from legal disputes has been recognised in the current period.
- 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, which includes a loss on disposal including goodwill,
transaction costs and the recognition of onerous contract provisions.
- Net defined benefit pension scheme income of £21 million (HY
2022/23: £35 million) comprises pension finance income of £25 million and
scheme expenses of £4 million. The lower pension income in the current period
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.
- Other movements of £40 million expense (HY 2022/23: £4 million
income) include £6 million related to property transactions, £8 million of
acquisition adjustments and £26 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 £20 million (HY 2022/23: £28
million gain) caused by decreases in electricity forward prices in the period.
Taxation
The tax charge was £120 million (HY 2022/23: £91 million). The underlying
tax rate was 27.6 per cent (HY 2022/23: 23.5 per cent) and the effective tax
rate was 43.6 per cent (HY 2022/23: 24.2 per cent). The 2023/24 charges are
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.
The effective tax rate for the half year is significantly higher than the
prior year and headline tax rates due to the discrete 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
& Dragon structure (against which a deferred tax liability was
recognised). During the period, an £80 million credit to reserves was
recognised in respect of the release of the deferred tax liability; this
credit had no impact on the effective tax rate.
We expect an underlying tax rate in 2023/24 of around 29 per cent.
Earnings per share
Underlying basic earnings per share decreased to 10.5 pence (HY 2022/23: 11.2
pence), driven by the increase in corporation tax rate. Basic earnings per
share decreased to 6.6 pence (HY 2022/23: 12.3 pence). Underlying diluted
earnings per share decreased to 10.3 pence (HY 2022/23: 11.1 pence) and
diluted earnings per share decreased to 6.5 pence (HY 2022/23: 12.1 pence).
Dividends
The Board has recommended an interim dividend of 3.9 pence per share (HY
2022/23: 3.9 pence) reflecting 30 per cent of the 2022/23 full year dividend
per share. This will be paid on 15 December 2023 to shareholders on the
Register of Members at the close of business on 10 November 2023. 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 24 November 2023.
Net debt and retail cash flows
As at 16 September 2023, net debt was £5,643 million (4 March 2023: £6,344
million), a decrease of £701 million (HY 2022/23: £594 million decrease).
Excluding the impact of lease liabilities on net debt, non-lease net debt
increased by £375 million in the year, moving to a net debt position of £231
million (4 March 2023: net funds of £144 million), impacted by the £670
million net consideration relating to the Highbury & Dragon property
transaction and partially offset by positive cash generation. We continue to
expect to generate retail free cash flow of at least £600 million in the
coming year (excluding the Highbury & Dragon property transaction).
Net debt includes lease liabilities of £5,412 million (4 March 2023: £6,488
million). Lease liabilities have decreased by £1,076 million, largely
impacted by the Highbury & Dragon property transaction which resulted in a
reduction of lease debt of £1,042 million.
Summary cash flow statement(1) Retail Retail Retail
28 weeks to 28 weeks to 52 weeks to
16 September 17 September 4 March
2023 2022 2023
£m £m £m
Retail underlying operating profit 485 477 926
Adjustments for:
Retail underlying depreciation and amortisation 597 610 1,134
Share based payments and other 36 34 49
Retail exceptional operating cash flows (excluding pensions) (40) (33) (23)
Adjusted retail operating cash flow before changes in working capital(2) 1,078 1,088 2,086
Decrease in working capital(3) 284 360 174
Net interest paid(3) (166) (161) (307)
Cash contributions to defined benefit schemes (23) (23) (44)
Corporation tax paid (17) (32) (99)
Net cash generated from operating activities 1,156 1,232 1,810
Cash capital expenditure(3) (389) (297) (717)
Repayments of lease liabilities (252) (245) (512)
Initial direct costs on right-of-use assets (11) (9) (16)
Proceeds from disposal of property, plant and equipment(3) 16 28 29
Dividends and distributions received(3) - 50 51
Retail free cash flow(3) 520 759 645
Dividends paid on ordinary shares (215) (229) (319)
Net Drawdown / (Repayment) of borrowings(3) 555 (22) (40)
Net consideration paid for Highbury & Dragon property transaction (670) - -
Other(3) (7) (23) (32)
Net increase in cash and cash equivalents 183 485 254
(Increase) / decrease in debt (303) 267 552
Highbury & Dragon non-cash lease movements 1,042 - -
Other non-cash and net interest movements(4) (221) (158) (391)
Movement in net debt 701 594 415
Opening net debt (6,344) (6,759) (6,759)
Closing net debt (5,643) (6,165) (6,344)
of which
Lease Liabilities (5,412) (6,526) (6,488)
(Net Debt) / Net Funds Excluding Lease Liabilities (231) 361 144
1 See note 5b for a reconciliation between Retail and Group cash
flow
2 Excludes working capital and pension contributions
3 Refer to the Alternative Performance Measures on pages 54 to 60
for reconciliation
4 Other non-cash includes new leases and lease modifications and
fair value movements on derivatives used for hedging long-term borrowings
Adjusted retail operating cash flow before changes in working capital
decreased by £10 million year-on-year to £1,078 million (HY 2022/23: £1,088
million) mainly due to lower underlying EBITDA and increased retail
exceptional operating cash flows. Retail exceptional operating cash flows of
£40 million (HY 2022/23: £33 million) reflect restructuring costs, including
costs associated with the closure of Argos operations in Republic of Ireland.
Working capital reduced by £284 million (HY 2022/23: £360 million
reduction). Working capital balances typically decrease between year end and
half year, driven by seasonality and the phasing of payables.
Corporation tax of £17 million was paid in the half (HY 2022/23: £32
million). Pension contributions of £23 million (HY 2022/23: £23 million) are
consistent with the prior year as no funding level events have occurred.
Proceeds of £16 million (HY 2022/23: £28 million) resulted from disposals of
non-trading sites. No dividends and distributions were received in the period
while the prior year included a £50 million dividend received from
Sainsbury's Bank.
Cash capital expenditure was £389 million (HY 2022/23: £297 million). This
is in line with expectations and our full year 2023/24 guidance of £750
million - £800 million.
Retail free cash flow declined by £239 million year-on-year to £520 million
(HY 2022/23: £759 million), with the year-on-year movement driven by the
lower working capital inflow (£76 million), increase in capital investment
(£92 million) and prior year dividend received from Sainsbury's Bank (£50
million).
Dividends of £215 million were paid in the period to 16 September 2023 (HY
2022/23: £229 million). Net drawdown of borrowings includes £575 million
drawdown of the three year unsecured term loan facility used to part fund the
Highbury & Dragon property transaction.
On 17 March 2023, the Group completed the purchase of a commercial property
investment pool, known as Highbury & 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 in the half, and one is
held for sale. The total consideration paid for the asset acquisition was
£731 million, which included fully funding the £300 million bond redemptions
attached to the property pool. Proceeds of £61 million were received for the
four supermarkets sold and leased back.
Financial Ratios
Key financial ratios(1) 16 September 17 September 4 March
2023 2022 2023
Return on capital employed (%) 7.9 7.7 7.6
Net debt to EBITDA 2.6 times 2.9 times 3.0 times
Fixed charge cover 2.6 times 2.7 times 2.7 times
1 Refer to the Alternative Performance Measures on pages 54 to 60
for reconciliation
Return on capital employed (ROCE) has 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
& Dragon transaction.
Sainsbury's continues to target leverage of 3.0x - 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 timing benefit from working capital
flows and overall net debt benefit from the Highbury & Dragon property
transaction. Fixed charge cover is stable.
Defined benefit pensions
At 16 September 2023, the net defined benefit surplus under IAS19 for the
Group was £987 million (excluding deferred tax). The surplus remained stable
over the half, with a £2 million decrease from 4 March 2023. This primarily
reflected increased discount rates and updated mortality assumptions, offset
by inflation and a reduction in matching assets.
There have been no changes in the half to the previously disclosed triennial
valuation information.
For 2023/24, total Defined Benefit pension scheme contributions are expected
to be £45 million.
Retirement benefit obligations
Sainsbury's Argos Group Group
as at as at as at as at
16 September 2023 16 September 2023 16 September 2023 4 March
2023
£m £m £m £m
Present value of funded obligations (4,898) (765) (5,663) (5,921)
Fair value of plan assets 5,761 911 6,672 6,934
Pension surplus 863 146 1,009 1,013
Present value of unfunded obligations (12) (10) (22) (24)
Retirement benefit surplus 851 136 987 989
Deferred income tax liability (262) (68) (330) (330)
Net retirement benefit surplus 589 68 657 659
Group income statement
28 weeks to 16 September 2023 28 weeks to 17 September 2022
(unaudited)
(unaudited)
Underlying Non-underlying Total Underlying Non-underlying Total
(Note 3)
(Note 3)
Note £m £m £m £m £m £m
Revenue 4 16,983 - 16,983 16,408 - 16,408
Cost of sales (15,658) (65) (15,723) (15,167) (11) (15,178)
Impairment loss on financial assets (52) - (52) (72) - (72)
Gross profit/(loss) 1,273 (65) 1,208 1,169 (11) 1,158
Administrative expenses (804) (30) (834) (695) (18) (713)
Other income 29 11 40 22 40 62
Operating profit/(loss) 498 (84) 414 496 11 507
Finance income 7 12 25 37 5 30 35
Finance costs 7 (170) (6) (176) (161) (5) (166)
Profit/(loss) before tax 340 (65) 275 340 36 376
Income tax expense 8 (94) (26) (120) (80) (11) (91)
Profit/(loss) for the financial period 246 (91) 155 260 25 285
Earnings per share 9 pence pence
Basic 6.6 12.3
Diluted 6.5 12.1
52 weeks to 4 March 2023
(audited)
Underlying Non-underlying Total
(Note 3)
Note £m £m £m
Revenue 4 31,491 - 31,491
Cost of sales (28,996) (413) (29,409)
Impairment loss on financial assets (78) - (78)
Gross profit/(loss) 2,417 (413) 2,004
Administrative expenses (1,480) (35) (1,515)
Other income 35 38 73
Operating profit/(loss) 972 (410) 562
Finance income 7 18 56 74
Finance costs 7 (300) (9) (309)
Profit/(loss) before tax 690 (363) 327
Income tax (expense)/credit 8 (157) 37 (120)
Profit/(loss) for the financial period 533 (326) 207
Earnings per share 9 pence
Basic 9.0
Diluted 8.8
Impairment loss on financial assets has been disclosed separately in the
current period and prior interim comparative. Refer to note 2 for further
details.
Group statement of comprehensive income/(loss)
28 weeks to 28 weeks to 52 weeks to
16 September
17 September
4 March
2023
2022
2023
(unaudited)
(unaudited)
(audited)
Note £m £m £m
Profit for the financial period 155 285 207
Items that will not be reclassified subsequently to the income statement
Remeasurement on defined benefit pension schemes 18 (46) (886) (1,398)
Movements on financial assets at fair value through other comprehensive (1) (6) 1
income (OCI)
Cash flow hedges fair value movements - inventory hedges (48) 171 123
Current tax relating to items not reclassified 1 14 25
Deferred tax relating to items not reclassified 89 208 322
(5) (499) (927)
Items that may be reclassified subsequently to the income statement
Currency translation differences (5) 5 4
Movements on financial assets at fair value through other comprehensive (1) (1) 1
income
Items reclassified from financial assets at fair value through other 1 (1) (1)
comprehensive income reserve
Cash flow hedges fair value movements - non-inventory hedges (24) 31 (30)
Items reclassified from cash flow hedge reserve 1 (10) (18)
Deferred tax on items that may be reclassified 14 (34) 14
(14) (10) (30)
Total other comprehensive loss for the financial period (net of tax) (19) (509) (957)
Total comprehensive income/(loss) for the financial period 136 (224) (750)
Group balance sheet
16 September 4 March 17 September
2023
2023
2022
(unaudited)
(audited)
(unaudited)
Note £m £m £m
Non-current assets
Property, plant and equipment 11 9,148 8,201 8,272
Right-of-use assets 12 4,298 5,345 5,456
Intangible assets 13 1,009 1,024 1,021
Investments in joint ventures and associates 2 2 3
Financial assets at fair value through other comprehensive income 14a 666 515 249
Trade and other receivables 73 56 75
Amounts due from Financial Services customers and other banks 14d 1,508 1,908 2,013
Derivative financial assets 14c 89 217 434
Net retirement benefit surplus 18 987 989 1,455
17,780 18,257 18,978
Current assets
Inventories 2,187 1,899 1,891
Trade and other receivables 669 627 728
Amounts due from Financial Services customers and other banks 14d 3,313 3,484 3,275
Financial assets at fair value through other comprehensive income 14a 36 494 522
Derivative financial assets 14c 107 70 112
Cash and cash equivalents 17 2,067 1,319 1,580
8,379 7,893 8,108
Assets held for sale 19 10 8 8
8,389 7,901 8,116
Total assets 26,169 26,158 27,094
Current liabilities
Trade and other payables (5,278) (4,837) (4,966)
Amounts due to Financial Services customers and other deposits 14a (5,436) (4,880) (4,719)
Borrowings 16 (64) (53) (52)
Lease liabilities 12 (473) (1,533) (1,536)
Derivative financial liabilities 14c (30) (16) (4)
Taxes payable (204) (155) (234)
Provisions (109) (140) (88)
(11,594) (11,614) (11,599)
Net current liabilities (3,205) (3,713) (3,483)
Non-current liabilities
Trade and other payables (13) - (28)
Amounts due to Financial Services customers and other deposits 14a (621) (1,066) (1,013)
Borrowings 16 (1,151) (603) (687)
Lease liabilities 12 (4,939) (4,956) (4,992)
Derivative financial liabilities 14c (70) (58) (52)
Deferred income tax liability (424) (476) (651)
Provisions (134) (132) (143)
(7,352) (7,291) (7,566)
Total liabilities (18,946) (18,905) (19,165)
Net assets 7,223 7,253 7,929
Equity
Called up share capital 677 672 670
Share premium 1,427 1,418 1,408
Merger reserve 568 568 568
Capital redemption and other reserves 997 954 1,117
Retained earnings 3,554 3,641 4,166
Total equity 7,223 7,253 7,929
Group statement of changes in equity
For the 28 weeks to 16 September 2023 (unaudited)
Called up share capital Share premium account Merger reserve Capital redemption and other reserves Retained earnings Total Equity
£m £m £m £m £m £m
At 5 March 2023 672 1,418 568 954 3,641 7,253
Profit for the period - - - - 155 155
Other comprehensive loss - - - (77) (46) (123)
Tax relating to other comprehensive loss - - - 92 12 104
Total comprehensive income - - - 15 121 136
Cash flow hedges gains transferred to inventory - - - 14 - 14
Transactions with owners:
Dividends - - - - (215) (215)
Share-based payment - - - - 38 38
Purchase of own shares - - - (18) - (18)
Allotted in respect of share option schemes 5 9 - 32 (34) 12
Tax on items charged to equity - - - - 3 3
At 16 September 2023 677 1,427 568 997 3,554 7,223
For the 28 weeks to 17 September 2022 (unaudited)
Called up share capital Share premium account Merger reserve Capital redemption and other reserves* Retained earnings* Total equity
£m £m £m £m £m £m
At 6 March 2022 668 1,406 568 1,021 4,760 8,423
Profit for the period - - - - 285 285
Other comprehensive income/(loss) - - - 189 (886) (697)
Tax relating to other comprehensive income/(loss) - - - (34) 222 188
Total comprehensive income/(loss) - - - 155 (379) (224)
Cash flow hedges losses transferred to inventory - - - (56) - (56)
Transactions with owners:
Dividends - - - - (229) (229)
Share-based payment - - - - 37 37
Purchase of own shares - - - (25) - (25)
Allotted in respect of share option schemes 2 2 - 21 (23) 2
Other adjustments - - - 1 2 3
Tax on items charged to equity - - - - (2) (2)
At 17 September 2022 670 1,408 568 1,117 4,166 7,929
* In order to provide better visibility of reserves, the Group presented the
Own share reserve within Capital redemption and other reserves for the first
time in the prior year. The Own Share Reserve of £72 million as at 17
September 2022 has subsequently been reclassified from Retained Earnings to
Capital redemption and other reserves.
For the 52 weeks to 4 March 2023 (audited)
Called up share capital Share premium account Merger reserve Capital redemption and other reserves Retained earnings Total equity
£m £m £m £m £m £m
At 6 March 2022 668 1,406 568 1,021 4,760 8,423
Profit for the period - - - - 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 - - - - (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
Group cash flow statement
28 weeks to 28 weeks to 52 weeks to
16 September
17 September
4 March
2023
2022
2023
(unaudited)
(unaudited)
(audited)
Note £m £m £m
Cash flows from operating activities
Profit before tax 275 376 327
Net finance costs 139 131 235
Operating profit 414 507 562
Adjustments for:
Depreciation expense 11,12 530 564 1,036
Amortisation expense 13 101 86 172
Net impairment charge on property, plant and equipment, right-of-use 11,12,13 21 20 315
assets, and intangible assets
Non-cash adjustments arising from acquisitions - (1) -
Loss/(profit) on sale of non-current assets and early termination of leases 17 2 (12) (15)
Non-underlying fair value movements 19 (28) 29
Share-based payments expense 38 37 59
Defined benefit scheme expenses/(income) 18 4 (5) (2)
Cash contributions to defined benefit schemes 18 (23) (23) (44)
Operating cash flows before changes in working capital 1,106 1,145 2,112
Changes in working capital
Increase in inventories 17 (274) (87) (105)
(Increase)/decrease in financial assets at fair value through other 17 (60) 22 (207)
comprehensive income
(Increase)/decrease in trade and other receivables 17 (80) (51) 68
Decrease/(increase) in amounts due from Financial Services customers and 17 126 (135) (231)
other deposits
Increase in trade and other payables 17 570 438 280
Increase in amounts due to Financial Services customers and other deposits 17 111 472 687
Decrease in provisions and other liabilities 17 (29) (41) -
Cash generated from operations 1,470 1,763 2,604
Interest paid (166) (161) (316)
Corporation tax paid (20) (34) (103)
Net cash generated from operating activities 1,284 1,568 2,185
Cash flows from investing activities
Purchase of property, plant and equipment(1) (1,041) (202) (525)
Initial direct costs on new leases (11) (9) (16)
Purchase of intangible assets (89) (106) (213)
Proceeds from disposal of amounts due from Financial Services customers 3 446 - -
Proceeds from disposal of property, plant and equipment(1) 77 28 29
Dividends and distributions received - - 1
Net cash used in investing activities (618) (289) (724)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 11 2 13
Proceeds from borrowings 15 575 - -
Repayment of borrowings 15 (20) (22) (95)
Purchase of own shares (18) (25) (45)
Capital repayment of lease obligations 15 (253) (246) (514)
Dividends paid on ordinary shares 10 (215) (229) (319)
Net cash generated/(used) in financing activities 80 (520) (960)
Net Increase in cash and cash equivalents 746 759 501
Opening cash and cash equivalents 1,319 818 818
Closing cash and cash equivalents 17 2,065 1,577 1,319
1. Amounts in the current period include cashflows in relation to the asset
acquisition transaction, as detailed in note 2.4.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
1. General information
The Condensed Consolidated Interim Financial Statements are unaudited but have
been reviewed by the auditors. The financial information presented herein does
not amount to statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The Annual Report and Financial Statements 2023 have been
filed with the Registrar of Companies. The Auditor's report on those Financial
Statements was unqualified and did not contain a statement under Section 498
of the Companies Act 2006.
The financial period represents the 28 weeks to 16 September 2023 (comparative
financial period 28 weeks to 17 September 2022; prior financial year 52 weeks
to 4 March 2023). The financial information comprises the results of the
Company and its subsidiaries (the 'Group') and the Group's interests in joint
ventures and associates.
The Group's principal activities are Food, General Merchandise & Clothing
Retailing and Financial Services.
2. Basis of preparation and accounting policies
2.1 Basis of preparation
The Interim Results, comprising the Condensed Consolidated Interim Financial
Statements and the Interim Management Report, have been prepared in accordance
with the Disclosure and Transparency Rules of the UK's Financial Conduct
Authority and with the requirements of UK adopted IAS 34 'Interim Financial
Reporting'.
The financial information contained in the Condensed Consolidated Interim
Financial Statements should be read in conjunction with the Annual Report and
Financial Statements 2023, which were prepared in accordance with UK adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006.
Sainsbury's Bank plc and its subsidiaries have been consolidated for the six
months to 31 August 2023 (17 September 2022: six months to 31 August 2022; 4
March 2023: twelve months to 28 February 2023). No significant transactions
occurred in this period and therefore, no adjustments have been made to
reflect the difference in balance sheet dates.
In accordance with IAS 1 Presentation of Financial Statements, Impairment loss
on financial assets has been separately disclosed within the Consolidated
income statement. At the previous interim reporting date, these amounts were
included within Cost of sales and Administrative expenses. The interim
comparative amount of Cost of sales has therefore been restated from £15,183
million to £15,167 million before non-underlying items, and from £15,194
million to £15,178 million in total. The interim comparative amount of
Administrative expenses has also been restated from £751 million to £695
million before non-underlying items, and from £769 million to £713 million
in total. There is no impact to Operating profit or Profit before tax. As part
of this, adjustments for Financial Services impairment losses on loans and
advances within the cash flow statement are now presented within changes in
working capital.
2.2 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 16 months to 1 March 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 two years 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
tranches. Tranche A has a final maturity of December 2026 and Tranche B has a
final maturity of December 2027. As at 16 September 2023, 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 at year-end 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 and general
recession-related risks, the impact of any regulatory fines and 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, bonuses 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.
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.
2.3 Accounting judgements and estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these Condensed Consolidated Interim Financial Statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the Consolidated Financial Statements for the year ended 4
March 2023 unless otherwise stated.
2.4 Asset Acquisition
The Group purchased Supermarket Income REIT's beneficial interest in a
commercial property investment pool, in which the Group already held a
beneficial interest, on 17 March 2023, through the acquisition of Hobart
Property plc, Avenell Property plc, Horndrift Limited and Cornerford Limited.
This investment pool 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.
The impact of this transaction on the Group's accounts is explained within the
notes to the accounts as set out over the following pages. 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,
which included fully funding the bond redemptions attached to the property
pool of £300 million. 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. The consideration and bond repayments
are presented within the Group cashflow statement as investing activities as
shown below.
28 weeks to
16 September 2023
£m
Cash flows from investing activities
Proceeds from property disposal 61
Purchase of property, plant and equipment (731)
Previously the Group had held a portion of the beneficial interest in this
commercial property investment pool, recognised within financial assets at
fair value through other comprehensive income. This balance of £366 million
was fully derecognised as part of the acquisition.
2.5 New standards, interpretations and amendments adopted by the
Group
New accounting standards, interpretations or amendments which became
applicable during the period were either not relevant or had no impact on the
Group's results or net assets other than disclosures. This includes the
adoption of IFRS 17 Insurance Contracts, which became effective in the current
financial period.
The accounting policies have remained unchanged from those disclosed in the
Annual Report for the year ended 4 March 2023.
2.6 Alternative performance measures (APMs)
In the reporting of financial information, the Directors use various APMs.
These APMs are defined and reconciled to the nearest IFRS measure on pages 54
to 60, and 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.
3. Non-underlying items
In order to provide shareholders with additional insight into the year-on-year
performance of the business, an adjusted measure of profit (underlying profit
before tax) is provided to supplement the reported IFRS numbers, which
reflects how the business measures performance internally. This adjusted
measure excludes items recognised in reported profit or loss before tax which,
if included, could distort comparability between periods.
Determining which items are to be adjusted requires judgement, in which the
Group considers items which are significant either by virtue of their size
and/or nature, or that are non-recurring. The same assessment is applied
consistently to any reversals of prior non-underlying items.
Underlying profit is not an IFRS measure and therefore not directly comparable
to other companies.
Below highlights the grouping in which non-underlying items have been
allocated and provides further detail on why such items have been recognised
within non-underlying items.
28 weeks to 16 September 2023
Cost of sales Administrative expenses Other income Net finance income/ (costs) Total adjustments before tax Tax Total adjustments
£m £m £m £m £m £m £m
Disposal of mortgage book - (14) - - (14) 3 (11)
Restructuring programmes (28) (4) - - (32) 8 (24)
Property, finance, pension and acquisition adjustments
Property related transactions (17) - 11 - (6) (1) (7)
Non-underlying finance and fair value movements (20) - - (6) (26) 7 (19)
Defined benefit pension scheme (expenses)/income - (4) - 25 21 (5) 16
Acquisition adjustments - (8) - - (8) 2 (6)
Total property, finance, pension and acquisition adjustments (37) (12) 11 19 (19) 3 (16)
Tax - Capital loss recognition - - - - - (40) (40)
Total adjustments (65) (30) 11 19 (65) (26) (91)
Disposal of the mortgage book
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,
which includes a loss on disposal including goodwill, transaction costs and
the recognition of onerous contract provisions.
Restructuring programmes
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.
The programme is a multi-year activity and has continued into the current
year. Total cumulative costs to 16 September 2023 are £(778) million split
between £(746) million in the prior years and £(32) million in the current
period as detailed in the table below. Total costs are still expected to be in
the range of £900 million to £1 billion, with the majority in the period to
March 2024.
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
Write downs of property, plant and equipment - (2) (8)
Write downs of leased assets (2) (13) (21)
Write down of intangible assets - (5) (5)
Closure provisions (a) (2) (8) 1
Accelerated depreciation of assets (b) (8) (12) (20)
Redundancy provisions (c) (3) (5) (54)
Consultancy costs (6) - (12)
Other costs (d) (12) - -
Gain on lease terminations (e) 1 1 2
Profit on disposal of properties - 11 11
Restructuring programmes (32) (33) (106)
a) Closure provisions relate to onerous contract costs, dilapidations and
strip out costs on leased sites that have been identified for closure.
Business rates on leased property where the Group no longer operates from are
recognised in the period they are incurred.
b) 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.
c) Redundancy costs are recognised as the plan is announced and a valid
expectation raised with the affected colleagues.
d) Other costs predominantly consist of costs associated with moving to a
single integrated supply chain and logistics network across Sainsbury's and
Argos.
e) Gains on lease terminations relate to sites impaired in a prior year
for which it has been negotiated to exit the leases before the contractual end
date. This includes the release of any lease liabilities, as well as any
closure provisions previously recognised.
As the costs incurred facilitate future underlying cost savings, it was
considered whether it was appropriate to report these costs within underlying
profit. Whilst they arise from changes in the Group's underlying operations,
they can be separately identified, are material in size and do not relate to
ordinary in-year trading activity. In addition, the areas being closed or
restructured no longer relate to the Group's remaining underlying operations
and their exclusion provides meaningful comparison between financial years.
Property, finance, pension and acquisition adjustments
- Property related transactions predominantly relate to the gain on
disposal of non-trading properties, which comprised of £11 million in the
period, and an impairment charge of £(19) million recognised as part of the
asset acquisition of 21 stores. These are excluded from underlying profit as
such profit/(charges) are not related to the ongoing operating activities of
the Group.
- Non-underlying finance movements for the financial period comprised
£(26) million for the Group. Included within cost of sales is £(20) million
in relation to unfavourable movements on long-term, fixed price power purchase
arrangements (PPAs) with independent producers. These are accounted for as
derivative financial instruments, however are not designated in hedging
relationships, therefore gains and losses are recognised in the income
statement. The fair value movements are driven by external market factors and
can significantly fluctuate year-on-year, and are therefore excluded to ensure
consistency between periods. The remaining movements of £(6) million within
finance income and costs includes lease interest on impaired non-trading
sites, including site closures, which is excluded as they do not contribute to
the operating activities of the Group. These are analysed further in note 7.
- Defined benefit pension interest and expenses comprises pension finance
income of £25 million, and scheme expenses of £(4) million (see note 18).
The Group has chosen to exclude net retirement benefit income and costs from
underlying profit as, following closure of the defined benefit scheme to
future accrual, it is not part of the ongoing operating activities of the
Group and its exclusion is consistent with how the Directors assess the
performance of the business.
- Acquisition adjustments of £(8) million reflect the unwind of non-cash
fair value adjustments arising from the Home Retail Group acquisition. The
Group would not normally recognise these as assets outside of a business
combination. Therefore the unwinds are classified as non-underlying and are
recognised as follows:
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
HRG Nectar Total Group HRG Nectar Total Group HRG Nectar Total Group
£m £m £m £m £m £m £m £m £m
Cost of sales - - - 1 - 1 1 - 1
Depreciation 1 - 1 - - - 1 - 1
Amortisation (9) - (9) (9) (3) (12) (18) (4) (22)
(8) - (8) (8) (3) (11) (16) (4) (20)
Comparative information
28 weeks to 17 September 2022
Net finance income/ (costs) Total adjustments before tax
Cost of sales Administrative expenses Other income Tax Total adjustments
£m £m £m £m £m £m £m
Income recognised in relation to legal disputes - - 30 - 30 (5) 25
Restructuring programmes (39) (4) 10 - (33) 5 (28)
Property, finance, pension and acquisition adjustments
Property related transactions - (8) - - (8) 2 (6)
Non-underlying finance and fair value movements 28 - - (5) 23 (5) 18
Defined benefit pension scheme (expenses)/income - 5 - 30 35 (8) 27
Acquisition adjustments - (11) - - (11) 2 (9)
Total property, finance, pension and acquisition adjustments 28 (14) - 25 39 (9) 30
Tax adjustments
Revaluation of deferred tax balances and changes in law - - - - - (1) (1)
Capital loss recognition - - - - - (1) (1)
Total tax adjustments - - - - - (2) (2)
Total adjustments (11) (18) 40 25 36 (11) 25
52 weeks to 4 March 2023
Net finance income/ (costs) Total adjustments before tax
Cost of sales Administrative expenses Other income Tax Total adjustments
£m £m £m £m £m £m £m
Income recognised in relation to legal disputes - - 30 - 30 (6) 24
Restructuring and impairment
Restructuring programmes (103) (14) 11 - (106) 7 (99)
Impairment of non-financial assets (281) - - - (281) 38 (243)
Total restructuring and impairment (384) (14) 11 - (387) 45 (342)
Property, finance, pension and acquisition adjustments
ATM business rates reimbursement 3 - - - 3 (1) 2
Property related transactions (3) (3) (3) - (9) 2 (7)
Non-underlying finance and fair value movements (29) - - (9) (38) 7 (31)
Defined benefit pension scheme (expenses)/income - 2 - 56 58 (11) 47
Acquisition adjustments - (20) - - (20) 4 (16)
Total property, finance, pension and acquisition adjustments (29) (21) (3) 47 (6) 1 (5)
Tax adjustments
Over provision in prior years - - - - - 2 2
Difference due to change in applicable rate of deferred tax - - - - - (5) (5)
Total tax adjustments - - - - - (3) (3)
Total adjustments (413) (35) 38 47 (363) 37 (326)
Income recognised in relation to legal disputes
In the prior year, an agreement was reached in relation to overcharges from
payment card processing fees, which largely reflect inter-bank "interchange
fees". This led to net income of £30 million being recognised.
Impairment of non-financial assets
In the prior year, a non-cash impairment charge of £(281) million was
recognised on non-financial assets, driven by an increase in discount rates.
Discount rates have remained largely stable since 4 March 2023, and no
impairment charge or reversal of impairment has been recognised in the period
to 16 September 2023.
Cash flow statement
The table below shows the impact of non-underlying items on the Group cash
flow statement:
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
Cash flows from operating activities
Defined benefit scheme expenses (4) (3) (7)
Restructuring programmes (40) (33) (50)
Net income recognised in relation to legal disputes - - 30
ATM Rates reimbursement - - 3
Property related transactions - - (6)
Cash used in operating activities (44) (36) (30)
Cash flows from investing activities
Proceeds from property disposals 16 28 29
Proceeds from disposal of amounts due from Financial Services customers 446 - -
Cash generated from investing activities 462 28 29
Net cash flows 418 (8) (1)
4. Disaggregation of revenue
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
Grocery, General Merchandise & Clothing (GM&C) 14,380 13,314 25,993
Fuel 2,285 2,840 4,967
Total retail sales 16,665 16,154 30,960
Financial Services interest receivable 264 183 394
Financial Services fees and commission 54 71 137
Total Financial Services revenue 318 254 531
Total revenue 16,983 16,408 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 CODM is presented information for the following operating segments:
· Retail - Food
· Retail - General Merchandise and Clothing
· Financial Services
In determining the Group's reportable segments, management have considered the
economic characteristics, in particular average gross margin, similarity of
products, production processes, customers, sales methods and regulatory
environment of its two Retail segments. In doing so it has been concluded that
they should be aggregated into one 'Retail' segment within the financial
statements given the similar economic characteristics between the two. This
aggregated information provides users the financial information needed to
evaluate the business and the environment in which it operates.
The Group's reportable operating segments have therefore been identified as
follows:
· 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.
a. Income statement and balance sheet
Retail Financial Services Group
28 weeks to 16 September 2023 £m £m £m
Segment revenue
Retail sales to external customers 16,665 - 16,665
Financial Services to external customers - 318 318
Revenue 16,665 318 16,983
Underlying operating profit 485 13 498
Underlying finance income 12 - 12
Underlying finance costs (170) - (170)
Underlying profit before tax 327 13 340
Non-underlying expense (note 3) (65)
Profit before tax 275
Income tax expense (note 8) (120)
Profit for the financial period 155
Assets 18,859 7,308 26,167
Investment in joint ventures and associates 2 - 2
Segment assets 18,861 7,308 26,169
Segment liabilities (12,548) (6,398) (18,946)
Retail Financial Services Group
28 weeks to 17 September 2022 £m £m £m
Segment revenue
Retail sales to external customers 16,154 - 16,514
Financial Services to external customers - 254 254
Revenue 16,154 254 16,408
Underlying operating profit 477 19 496
Underlying finance income 5 - 5
Underlying finance costs (161) - (161)
Underlying profit before tax 321 19 340
Non-underlying income (note 3) 36
Profit before tax 376
Income tax expense (note 8) (91)
Profit for the financial period 285
Assets 20,078 7,013 27,091
Investment in joint ventures and associates 3 - 3
Segment assets 20,081 7,013 27,094
Segment liabilities (13,042) (6,123) (19,165)
Retail Financial Services Group
52 weeks to 4 March 2023 £m £m £m
Segment revenue
Retail sales to external customers 30,960 - 30,960
Financial Services to external customers - 531 531
Revenue 30,960 531 31,491
Underlying operating profit 926 46 972
Underlying finance income 18 - 18
Underlying finance costs (300) - (300)
Underlying profit before tax 644 46 690
Non-underlying expense (note 3) (363)
Profit before tax 327
Income tax expense (note 8) (120)
Profit for the financial period 207
Assets 18,925 7,231 26,156
Investment in joint ventures and associates 2 - 2
Segment assets 18,927 7,231 26,158
Segment liabilities (12,584) (6,321) (18,905)
b. Segmented cash flow statement
28 weeks to 16 September 28 weeks to 17 September 2022
2023
APM Retail Financial Services Group Retail Financial Services Group
reference(1)
£m £m £m £m £m £m
Profit/(loss) before tax 277 (2) 275 357 19 376
Net finance costs 139 - 139 131 - 131
Operating profit/(loss) 416 (2) 414 488 19 507
Adjustments for:
Depreciation and amortisation expense 613 18 631 634 16 650
Net impairment charge on property, plant and equipment, right-of-use assets, 21 - 21 20 - 20
and intangible assets
Non-cash adjustments arising from acquisitions - - - (1) - (1)
(Profit)/loss on sale of non-current assets and early termination of leases (12) 14 2 (12) - (12)
Non-underlying fair value movements 19 - 19 (28) - (28)
Share-based payments expense 36 2 38 34 3 37
Defined benefit scheme expenses/(income) 4 - 4 (5) - (5)
Cash contributions to defined benefit schemes (23) - (23) (23) - (23)
Operating cash flows before changes in working capital 1,074 32 1,106 1,107 38 1,145
Movements in working capital 265 99 364 318 300 618
Cash generated from operations 1,339 131 1,470 1,425 338 1,763
Interest paid a (166) - (166) (161) - (161)
Corporation tax paid (17) (3) (20) (32) (2) (34)
Net cash generated from operating activities 1,156 128 1,284 1,232 336 1,568
Cash flows from investing activities
Purchase of property, plant and equipment(2) (1,040) (1) (1,041) (201) (1) (202)
Initial direct costs on new leases (11) - (11) (9) - (9)
Purchase of intangible assets (80) (9) (89) (96) (10) (106)
Proceeds from disposal of property, plant and equipment(2) 77 - 77 28 - 28
Proceeds from disposal of amounts due from Financial Services customers - 446 446 - - -
Dividends and distributions received/(paid) e - - - 50 (50) -
Net cash (used in)/generated from in investing activities (1,054) 436 (618) (228) (61) (289)
Cash flows from financing activities
Proceeds from issuance of ordinary shares d 11 - 11 2 - 2
Proceeds from borrowings c 575 - 575 - - -
Repayment of borrowings c (20) - (20) (22) - (22)
Purchase of own shares d (18) - (18) (25) - (25)
Capital repayment of lease obligations b (252) (1) (253) (245) (1) (246)
Dividends paid on ordinary shares (215) - (215) (229) - (229)
Net cash generated from/(used in) financing activities 81 (1) 80 (519) (1) (520)
Net increase in cash and cash equivalents 183 563 746 485 274 759
1. Refer to the Retail Cash flow items in Financial Review APM for
reconciliation.
2. Amounts in the current period include cashflows in relation to the asset
acquisition transaction, as detailed in note 2.4.
52 weeks to 4 March
2023
APM Retail Financial Services Group
Reference(1)
£m £m £m
Profit before tax 284 43 327
Net finance costs 235 - 235
Operating profit 519 43 562
Adjustments for:
Depreciation and amortisation expense 1,175 33 1,208
Net impairment charge on property, plant and equipment, right-of-use assets, 315 - 315
and intangible assets
Profit on sale of properties and early termination of leases (15) - (15)
Non-underlying fair value movements 29 - 29
Share-based payments expense 54 5 59
Defined benefit scheme (income)/expenses (2) - (2)
Cash contributions to defined benefit schemes (44) - (44)
Operating cash flows before changes in working capital 2,031 81 2,112
Changes in working capital
Movements in working capital 185 307 492
Cash generated from operations 2,216 388 2,604
Interest paid a (307) (9) (316)
Corporation tax paid (99) (4) (103)
Net cash generated from operating activities 1,810 375 2,185
Cash flows from investing activities
Purchase of property, plant and equipment (523) (2) (525)
Initial direct costs on new leases (16) - (16)
Purchase of intangible assets (194) (19) (213)
Proceeds from disposal of property, plant and equipment 29 - 29
Dividends and distributions received/(paid) e 51 (50) 1
Net cash used in investing activities (653) (71) (724)
Cash flows from financing activities
Proceeds from issuance of ordinary shares d 13 - 13
Repayment of borrowings c (40) (55) (95)
Purchase of own shares d (45) - (45)
Capital repayment of lease obligations b (512) (2) (514)
Dividends paid on ordinary shares (319) - (319)
Net cash used in financing activities (903) (57) (960)
Net increase in cash and cash equivalents 254 247 501
1. Refer to the Retail Cash flow items in Financial Review APM for
reconciliation.
6. Supplier arrangements
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 types of supplier arrangements applicable to the Group are as follows:
· Discounts and supplier incentives - these 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 - 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 - advertising income
from suppliers through online marketing and advertising campaigns.
Amounts recognised in the income statement during the period for fixed
amounts, volume-based rebates and marketing and advertising income are shown
below. Discounts and supplier incentives are not shown as they are deemed to
be part of the cost price of inventory.
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
Fixed amounts 115 81 192
Supplier rebates 29 47 94
Marketing and advertising income 59 41 97
Total supplier arrangements 203 169 383
Of the above amounts, the following was outstanding and held on the balance
sheet at the period-end:
16 September 2023 4 March 2023 17 September 2022
£m £m £m
Within inventory (4) (4) (4)
Within current trade receivables
Supplier arrangements due 29 45 33
Accrued supplier arrangements 58 43 47
Within current trade payables
Supplier arrangements due 30 49 25
Accrued supplier arrangements - 2 1
Deferred income (2) - (1)
Total supplier arrangements 111 135 101
7. Finance income and finance costs
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
Underlying Non-underlying Total Underlying Non-underlying Total Underlying Non-underlying Total
£m £m £m £m £m £m £m £m £m
Interest on bank deposits and other financial assets 11 - 11 4 - 4 16 - 16
IAS 19 pension financing income - 25 25 - 30 30 - 56 56
Finance income from sub-leasing of right-of-use assets 1 - 1 1 - 1 2 - 2
Finance Income 12 25 37 5 30 35 18 56 74
Secured borrowings (19) - (19) (20) - (20) (41) - (41)
Unsecured borrowings (16) - (16) (1) - (1) (2) - (2)
Lease liabilities (136) (6) (142) (140) (5) (145) (258) (9) (267)
Interest capitalised - qualifying assets 1 - 1 - - - 1 - 1
Finance costs (170) (6) (176) (161) (5) (166) (300) (9) (309)
8. Income tax expense
Tax charged within the 28 weeks ended 16 September 2023 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the period ending 2 March 2024 using rates substantively enacted by 16
September 2023 as required by IAS 34 'Interim Financial Reporting'.
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
Current year UK tax 70 72 105
Current year overseas tax - 2 3
(Under)/over provision in prior years (1) (1) 2
Total current tax expense 69 73 110
Origination and reversal of temporary differences 20 16 9
(Under)/over provision in prior years (9) - 3
Adjustment from change in applicable rate of deferred tax - 1 (2)
Derecognition of capital losses 40 1 -
Total deferred tax expense 51 18 10
Total income tax expense in income statement 120 91 120
Analysed as:
Underlying tax 94 80 157
Non-underlying tax 26 11 (37)
Total income tax expense in income statement 120 91 120
Underlying tax rate 27.6% 23.5% 22.8%
Effective tax rate 43.6% 24.2% 36.7%
The effective tax rate is significantly higher than the standard rate of
corporation tax in the UK of 25% primarily due to the impact of a release of a
deferred tax asset held against the fair value gains on the Group's beneficial
interest in the commercial property investment pool (refer to note 2). The
gains were extinguished on the acquisition of the entities which held the
remainder of the beneficial interest, and therefore the asset could no longer
be carried.
Finance Act 2020 included legislation restricting the amount of chargeable
gains that a company can relieve with its carried-forward capital losses from
previous accounting periods. Broadly, from 1 April 2020 a company is only able
to offset up to 50 per cent of chargeable gains using carried forward capital
losses. The Group has considered the expected impact of the tax law in respect
of the utilisation of carried-forward tax losses. Accordingly, approximately
£357 million of the Group's carried forward unrestricted capital losses (4
March 2023: £194 million) have not been recognised as at 16 September 2023.
Finance (No.2) Act 2023 was substantively enacted in the UK on 20 June 2023,
introducing a global minimum effective tax rate of 15%. The legislation will
implement a domestic and a multinational top-up tax, effective for accounting
periods starting on or after 31 December 2023. Initial work undertaken by the
group indicates that the impact of this legislation is not expected to be
material. The Group has applied the exception under IAS 12 to recognising and
disclosing information about deferred tax assets and liabilities related to
top-up income taxes.
9. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
ordinary shareholders of J Sainsbury plc by the weighted average number of
Ordinary shares in issue during the year, excluding own shares held by the J
Sainsbury Employee Share Ownership Trust (ESOT).
Diluted earnings per share amounts are calculated by dividing the profit
attributable to ordinary shareholders of J Sainsbury plc by the weighted
average number of Ordinary shares in issue during the year, excluding own
shares held, and adjusted for the effects of potentially dilutive shares. The
dilutive impact is calculated as the weighted average of all potentially
diluted ordinary shares. These represent share options granted by the Group,
including performance-based options, where the scheme to date performance is
deemed to have been earned.
In addition, underlying basic earnings per share and underlying diluted
earnings per share are presented to reflect the underlying profit attributable
to ordinary shareholders of J Sainsbury plc and the underlying trading
performance of the Group. In calculating the APMs, the profit attributable is
adjusted for items considered non-underlying as defined in note 3. No
adjustments have been made to the weighted average number of Ordinary or
potentially dilutive shares which continue to be determined in accordance with
IAS.
All operations are continuing for the periods presented.
16 September 2023 17 September 4 March
2022
2023
million million million
Weighted average number of shares in issue for calculating basic earnings per 2,332.5 2,314.3 2,312.6
share
Weighted average number of dilutive share options 54.4 35.9 39.6
Total number of shares for calculating diluted earnings per share 2,386.9 2,350.2 2,352.2
£m £m £m
Profit for the financial period attributable to ordinary shareholders 155 285 207
Profit for the financial period attributable to ordinary shareholders of the 155 285 207
parent
Adjusted for non-underlying items (note 3) 65 (36) 363
Tax on non-underlying items 26 11 (37)
Underlying profit after tax attributable to ordinary shareholders of the 246 260 533
parent
Pence per share Pence per share Pence per share
Basic earnings 6.6 12.3 9.0
Diluted earnings 6.5 12.1 8.8
Underlying basic earnings 10.5 11.2 23.0
Underlying diluted earnings 10.3 11.1 22.7
10. Dividends
28 weeks to 28 weeks to 52 weeks to
16 September
17 September
4 March
2023
2022
2023
£m
£m
£m
Amounts recognised as distributions to ordinary shareholders in the year:
Final dividend for the year ended 5 March 2022 of 9.9p - 229 229
Interim dividend for the year ended 4 March 2023 of 3.9p - - 90
Final dividend for the year ended 4 March 2023 of 9.2p 215 - -
215 229 319
An interim dividend of 3.9 pence per share has been approved by the Board of
Directors for the financial year ending 2 March 2024, resulting in an interim
dividend of £91 million. The interim dividend was approved by the Board on 1
November 2023 and as such has not been included as a liability at 16 September
2023.
11. Property, plant and equipment
28 weeks to 16 September 2023 52 weeks to 4 March 2023 28 weeks to 17 September 2022
£m £m £m
Net book value
At the beginning of the period 8,201 8,402 8,402
Additions 1,263 534 199
Disposals - (15) (14)
Depreciation expense for the period (292) (566) (310)
Impairment loss for the period (19) (149) (2)
Transfer to assets held for sale (5) (5) (3)
At the end of the period 9,148 8,201 8,272
Comprising
Land and buildings 7,706 6,712 6,794
Fixtures and fittings 1,442 1,489 1,478
9,148 8,201 8,272
Capital commitments contracts, but not provided for 251 159 159
As part of the asset acquisition detailed in note 2, the Group has recognised
£1,021 million of property, plant and equipment. This is presented within
additions in Land and Buildings.
Transfer to assets held for sale include £3 million of assets no longer
classified as held for sale during the period (4 March 2023: £nil; 17
September 2022: £nil).
At each reporting date, the Group reviews the carrying amounts of its
non-financial assets to determine whether there is any indication that those
assets have suffered an impairment loss. As a result of the recognition of
property, plant and equipment as part of the asset acquisition, all 21 stores
acquired were reviewed for impairment, as the asset base of these stores'
cash-generating units (CGUs) has significantly changed. This review resulted
in the recognition of £19 million of impairment.
12. Leases
28 weeks to 16 September 2023 52 weeks to 4 March 2023 28 weeks to 17 September 2022
Right-of-use-assets £m £m £m
At the beginning of the period 5,345 5,560 5,560
New leases and modifications(1) 224 398 163
Derecognised as part of asset acquisition (1,031) - -
Depreciation charge (238) (470) (254)
Impairment charge (2) (143) (13)
At the end of the period 4,298 5,345 5,456
Comprising
Land and buildings 4,006 5,032 5,164
Equipment 292 313 292
4,298 5,345 5,456
1. Includes new leases, terminations, modifications and reassessments.
28 weeks to 16 September 2023 52 weeks to 4 March 2023 28 weeks to 17 September 2022
Lease liabilities £m £m £m
At beginning of the period 6,489 6,621 6,621
New leases and modifications(1) 218 382 153
Derecognised as part of asset acquisition (1,042) - -
Interest expense 142 267 145
Payments (395) (781) (391)
At the end of the period 5,412 6,489 6,528
Comprising
Current 473 1,533 1,536
Non-current 4,939 4,956 4,992
5,412 6,489 6,528
1. Includes new leases, terminations, modifications and reassessments.
The 26 occupied stores in a commercial property investment pool (refer note 2)
were previously leased to the Group, and as such were recognised within lease
liabilities and right-of-use assets. Consequently, these balances have been
derecognised as part of the asset acquisition. Four of these stores have been
sold and leased back in the current period as part of the transaction; these
balances have been presented within new leases and modifications.
Income statement disclosures
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
Depreciation of right-of-use assets (238) (254) (470)
Impairment of right-of-use assets (2) (13) (143)
Interest on lease liabilities (142) (145) (267)
Variable lease payments not included in the measurement of lease liabilities - (1) (1)
Finance income from sub-leasing of right-of-use assets 1 1 2
Operating sublet income 26 32 48
Expenses relating to short-term leases (14) (14) (26)
Expenses relating to leases of low-value assets (2) (1) (2)
Total amount recognised in profit or loss (371) (395) (859)
Total cash outflow for leases (excluding sublet income) (411) (407) (810)
Maturity analysis
28 weeks to 16 September 2023 52 weeks to 4 March 2023 28 weeks to 17 September 2022
£m £m £m
Contractual undiscounted cash flows
Less than one year 722 1,798 1,775
One to two years 675 680 707
Two to three years 637 632 655
Three to four years 590 591 611
Four to five years 554 541 570
Total less than five years 3,178 4,242 4,318
Five to ten years 2,569 2,473 2,533
Ten to fifteen years 1,983 1,981 2,016
More than fifteen years 3,005 3,505 3,215
Total undiscounted lease liability 10,735 12,201 12,082
Lease liabilities included in the balance sheet 5,412 6,489 6,528
Current 473 1,533 1,536
Non-current 4,939 4,956 4,992
13. Intangible assets
28 weeks to 16 September 2023 52 weeks to 4 March 2023 28 weeks to 17 September 2022
£m £m £m
Net book value
At the beginning of the period 1,024 1,006 1,006
Additions 93 213 106
Disposals (7) - -
Amortisation expense for the period (101) (172) (86)
Impairment loss for the period - (23) (5)
At the end of the period 1,009 1,024 1,021
Comprising
Goodwill 345 352 366
Software 612 610 584
Acquired brands 52 62 70
Customer relationships - - 1
1,009 1,024 1,021
14. Financial instruments
a. Financial assets and liabilities by category
Amortised cost Fair value through OCI Fair value through profit or loss Total
At 16 September 2023 £m £m £m £m
Cash and cash equivalents 2,067 - - 2,067
Trade and other receivables 504 - - 504
Amounts due from Financial Services customers and other banks 4,821 - - 4,821
Financial assets at fair value through other comprehensive income - 702 - 702
Trade and other payables (4,931) - - (4,931)
Borrowings (1,215) - - (1,215)
Amounts due to Financial Services customers and other deposits (6,057) - - (6,057)
Derivative financial instruments - - 96 96
Lease liabilities (5,412) - - (5,412)
(10,223) 702 96 (9,425)
At 4 March 2023 Amortised cost Fair value through OCI Fair value through profit or loss Total
£m £m £m £m
Cash and cash equivalents 1,319 - - 1,319
Trade and other receivables 477 - - 477
Amounts due from Financial Services customers and other banks 5,392 - - 5,392
Financial assets at fair value through other comprehensive income - 1,009 - 1,009
Trade and other payables (4,495) - - (4,495)
Borrowings (656) - - (656)
Amounts due to Financial Services customers and other deposits (5,946) - - (5,946)
Derivative financial instruments - - 213 213
Lease liabilities (6,489) - - (6,489)
(10,398) 1,009 213 (9,176)
At 17 September 2022 Amortised cost Fair value through OCI Fair value through profit or loss Total
£m £m £m £m
Cash and cash equivalents 1,580 - - 1,580
Trade and other receivables 592 - - 592
Amounts due from Financial Services customers and other banks 5,288 - - 5,288
Financial assets at fair value through other comprehensive income - 771 - 771
Trade and other payables (4,626) - - (4,626)
Borrowings (739) - - (739)
Amounts due to Financial Services customers and other deposits (5,732) - - (5,732)
Derivative financial instruments - - 490 490
Lease liabilities (6,528) - - (6,528)
(10,165) 771 490 (8,904)
Trade and other receivables excludes prepayments and accrued income. Trade and
other payables excludes deferred income, other taxes and social security costs
payable, and other accruals.
b. 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 16 September 2023 £m £m
Financial assets
Amounts due from Financial Services customers and banks 4,821 4,694
Financial liabilities
Loans due 2031 (518) (535)
Term Loan (580) (575)
Tier 2 Capital (118) (127)
Amounts due to Financial Services customers and banks (6,057) (6,045)
Carrying amount
Fair value
At 4 March 2023 £m £m
Financial assets
Amounts due from Financial Services customers and banks 5,392 5,340
Financial liabilities
Loans due 2031 (539) (639)
Tier 2 Capital (122) (131)
Amounts due to Financial Services customers and banks (5,946) (5,954)
Carrying amount
Fair value
At 17 September 2022 £m £m
Financial assets
Amounts due from Financial Services customers and banks 5,288 5,252
Financial liabilities
Loans due 2031 (558) (594)
Tier 2 Capital (178) (177)
Amounts due to Financial Services customers and banks (5,732) (5,729)
c. 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 16 September 2023 £m £m £m £m
Financial instruments at fair value through other comprehensive income
Other financial assets - 16 - 16
Investment securities 686 - - 686
Derivative financial assets - 114 82 196
Derivative financial liabilities - (100) - (100)
Level 1 Level 2 Level 3 Total
At 4 March 2023 £m £m £m £m
Financial instruments at fair value through other comprehensive income
Other financial assets - 383 - 383
Investment securities 626 - - 626
Derivative financial assets - 156 131 287
Derivative financial liabilities - (74) - (74)
Level 1 Level 2 Level 3 Total
At 17 September 2022 £m £m £m £m
Financial instruments at fair value through other comprehensive income
Other financial assets - 376 - 376
Investment securities 395 - - 395
Derivative financial assets - 314 232 546
Derivative financial liabilities - (56) - (56)
During the period, the Group derecognised its financial asset at fair value
through other comprehensive income of £366 million, which was previously
presented within Other financial assets. This amount represented the Group's
beneficial interest in a property investment pool, and was derecognised as
part of the asset acquisition. Refer to note 2 for further details.
There have been no transfers of assets between Levels 1, 2 or 3 during the
period.
Level 3 Financial assets
A reconciliation of recurring fair value measurements categorised within Level
3 of the fair value hierarchy is set out below:
Commodity derivatives Total
£m £m
At 5 March 2023 131 131
In cost of sales in the Group income statement (20) (20)
In other comprehensive income (29) (29)
At 16 September 2023 82 82
Commodity derivatives Total
£m £m
At 6 March 2022 180 180
In cost of sales in the Group income statement (30) (30)
In other comprehensive income (19) (19)
At 4 March 2023 131 131
Commodity derivatives Total
£m £m
At 6 March 2022 180 180
In finance income in the Group income statement 28 28
In other comprehensive income 24 24
At 17 September 2022 232 232
16 September 2023 4 March 2023 17 September 2022
Commodity derivative financial assets £m £m £m
Designated in a cash flow hedge relationship 48 79 123
Not in a hedge relationship 34 52 109
82 131 232
Level 3 derivative financial assets - 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 asset of £82 million relating to these agreements at 16
September 2023 (at 17 September 2022: £232 million; at 4 March 2023: £131
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, which are unobservable (Level 3) inputs. 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:
Not in a hedge relationship
16 September 2023 4 March 2023
Change in volume +/-20.0% Change in electricity forward pricing +/-20.0% Change in volume +/-20.0% Change in electricity forward pricing +/-20.0%
£m £m £m £m
Derivative financial instruments 7/(7) 15/(15) 20/(20) 11/(11)
17 September 2022
Change in volume Change in electricity
+/- 20.0% forward price
+/- 20.0%
£m £m
Derivative financial instruments 29/(29) 22/(22)
Designated in a cash flow hedge relationship
16 September 2023 4 March 2023
Change in volume +/-20.0% Change in electricity forward pricing +/-20.0% Change in volume +/-20.0% Change in electricity forward pricing +/-20.0%
£m £m £m £m
Derivative financial instruments 10/(10) 37/(37) 43/(44) 15/(16)
17 September 2022
Change in electricity
Change in forward price
volume
+/- 20.0% +/- 20.0%
£m £m
Derivative financial instruments 35/(35) 24/(24)
d. Financial Services expected credit loss (ECL)
Loans and advances are initially recognised at fair value and subsequently
held at amortised cost, using the effective interest method, less provision
for impairment and recognised on the balance sheet when cash is advanced:
16 September 2023 4 March 2023 17 September 2022
£m £m £m
Non-current
Loans and advances to customers 1,566 1,959 2,065
Impairment of loans and advances (58) (51) (52)
1,508 1,908 2,013
Current
Loans and advances to customers 3,503 3,573 3,329
Loans and advances to banks - 100 120
Impairment of loans and advances (190) (189) (174)
3,313 3,484 3,275
Loan commitment provisions (14) (19) (19)
Total impairment provisions for loans and advances to customers and loan (262) (259) (245)
commitments
Impairment provisions as a percentage of loans and advances to customers 5.2% 4.7% 4.5%
The ECL models utilise four scenarios including a 'base case' scenario
considered to be the most likely outcome together with an upside, downside
and severe downside scenario. The base case has been assigned a probability
weighting of 40% with the upside, downside and severe downside scenarios
weighted 30%, 25%, 5% respectively.
16 September 2023
Base Upside Downside Severe Downside
5-year average % % % %
Unemployment rate 4.2 3.8 5.3 7.0
Consumer price growth 2.7 2.0 3.8 5.0
GDP 1.2 1.8 0.4 (0.6)
Mortgage debt as a percentage of household income 93.2 91.0 96.5 99.6
Real household disposable income 1.4 2.0 0.6 (0.4)
Probability weighting 40 30 25 5
At 4 March 2023
Base Upside Downside Severe
Downside
5-year average % % % %
Unemployment rate 5.3 4.5 6.2 7.6
Consumer price growth 3.4 2.9 3.8 4.3
GDP 0.8 1.4 0.3 (0.3))
Mortgage debt as a percentage of household income 99.9 97.6 102.0 104.5
Real household disposable income 0.8 1.2 0.2 (0.3)
Probability weighting 40 30 25 5
At 17 September 2022
Base Upside Downside Severe
Downside
5-year average % % % %
Unemployment rate 4.9 4.1 5.8 7.4
Consumer price growth 5.4 5.0 5.8 6.4
GDP 1.2 1.6 0.8 0.3
Mortgage debt as a percentage of household income 98.9 96.5 101.5 104.8
Real household disposable income 0.5 1.1 (0.2) (1.0)
Probability weighting 45 35 15 5
Like many other banks, the Group's ECL models were developed under a more
benign interest rate and inflationary environment, and the current volatility
in these measures requires additional post model adjustments (PMAs) to be
held. The aggregate amount of economic PMA now held at 16 September 2023 is
£3.3 million.
ECL sensitivity
The economic conditions impact the probability of default of the customers.
The impact of 100% weighting of each of the economic scenarios is outlined as
follows:
ECL Sensitivity
Impact on the loss allowance
16 September 2023 4 March 2023 17 September 2022
£m £m £m
Closing ECL Allowance 262 259 245
Base scenario (5) (3) -
Upside scenario (13) (13) (9)
Downside scenario 16 13 12
Severe Downside scenario 57 45 38
15. Analysis of net (debt)/funds
The Group's definition of net debt includes lease liabilities as recognised
under IFRS 16 and the capital injections to Sainsbury's Bank, but excludes
derivatives that are not used to hedge borrowings and the net debt of
Sainsbury's Bank and its subsidiaries (Financial Services). 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.
Financial assets at fair value through other comprehensive income exclude
equity related financial assets which predominantly relate to the Group's
beneficial interest in a commercial property investment pool. Derivatives
exclude those not used to hedge borrowings, and borrowings exclude bank
overdrafts as they are disclosed separately.
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 16 September 2023
£m £m £m £m £m £m £m
Retail
Net derivative financial instruments - - (2) 1 - 1 -
Borrowings (excluding overdrafts) (539) (555) 26 (29) - - (1,097)
Lease liabilities (6,488) 252 142 (142) 824 - (5,412)
Arising from financing activities (7,027) (303) 166 (170) 824 1 (6,509)
Cash and cash equivalents 683 185 - - - - 868
Bank overdrafts - (2) - - - - (2)
Retail net debt (6,344) (120) 166 (170) 824 1 (5,643)
Financial Services
Net derivative financial instruments - - - - - (4) (4)
Borrowings (excluding overdrafts) (122) - 6 (6) - 4 (118)
Lease liabilities (1) 1 - - - - -
Arising from financing activities (123) 1 6 (6) - - (122)
Financial assets at fair value through other comprehensive income 626 60 - - - - 686
Cash and cash equivalents 636 563 - - - - 1,199
Financial Services net funds 1,139 624 6 (6) - - 1,763
Group
Net derivative financial instruments - - (2) 1 - (3) (4)
Borrowings (excluding overdrafts) (661) (555) 32 (35) - 4 (1,215)
Lease liabilities (6,489) 253 142 (142) 824 - (5,412)
Arising from financing activities (7,150) (302) 172 (176) 824 1 (6,631)
Financial assets at fair value through other comprehensive income 626 60 - - - - 686
Cash and cash equivalents 1,319 748 - - - - 2,067
Bank overdrafts - (2) - - - - (2)
Group net debt (5,205) 504 172 (176) 824 1 (3,880)
Retail net debt (6,344) (120) 166 (170) 824 1 (5,643)
Of which:
Leases (6,488) (5,412)
Net funds/(debt) excluding lease liabilities 144 (231)
Other non-cash movements predominantly comprise new leases and lease
modifications.
Overdraft balances are included within borrowings in the Group balance sheet,
and within cash and cash equivalents in the Group cash flow statement.
Cash Movements Non-Cash Movements
6 March 2022 Cash flows excluding interest Net interest (received) / paid Accrued Interest Other non-cash movements Changes in fair value 17 September 2022
£m £m £m £m £m £m £m
Retail
Net derivative financial instruments 5 - - 1 - (1) 5
Borrowings (excluding overdrafts) (575) 22 16 (21) - - (558)
Lease liabilities (6,618) 245 145 (145) (153) - (6,526)
Arising from financing activities (7,188) 267 161 (165) (153) (1) (7,079)
Cash and cash equivalents 436 481 - - - - 917
Bank overdrafts (7) 4 - - - - (3)
Retail net debt (6,759) 752 161 (165) (153) (1) (6,165)
Financial Services
Net derivative financial instruments 4 - - - - (3) 1
Borrowings (excluding overdrafts) (179) - - - 1 - (178)
Lease liabilities (3) 1 - - - - (2)
Arising from financing activities (178) 1 - - 1 (3) (179)
Financial assets at fair value through other comprehensive income 418 (22) - - - (1) 395
Cash and cash equivalents 389 274 - - - - 663
Financial Services net funds 629 253 - - 1 (4) 879
Group
Net derivative financial instruments 9 - - 1 - (4) 6
Borrowings (excluding overdrafts) (754) 22 16 (21) 1 - (736)
Lease liabilities (6,621) 246 145 (145) (153) - (6,528)
Arising from financing activities (7,366) 268 161 (165) (152) (4) (7,258)
Financial assets at fair value through other comprehensive income 418 (22) - - - (1) 395
Cash and cash equivalents 825 755 - - - - 1,580
Bank overdrafts (7) 4 - - - - (3)
Group net debt (6,130) 1,005 161 (165) (152) (5) (5,286)
Retail net debt (6,759) 752 161 (165) (153) (1) (6,165)
Of which:
Leases (6,618) (6,526)
Net (debt)/funds excluding lease liabilities (141) 361
Cash Movements Non-Cash Movements
6 March 2022 Cash flows excluding interest Net interest (received) / paid Accrued Interest Other non-cash movements Changes in fair value 4 March 2023
£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 funds 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)
Retail net debt (6,759) 806 307 (302) (396) - (6,344)
Of which:
Leases (6,618) (6,488)
Net (debt)/funds excluding lease liabilities (141) 144
Reconciliation of net cash flow to movement in Retail net debt
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
Opening net debt (6,344) (6,759) (6,759)
Cash flow movements
Net increase in cash and cash equivalents (including overdrafts) 746 759 501
Elimination of Financial Services movement in cash and cash equivalents (563) (274) (247)
(Increase)/decrease in retail borrowings (555) 22 40
Decrease in retail lease obligations 252 245 512
Net interest paid on components of Retail net debt 166 161 307
Changes in net debt resulting from cash flow 46 913 1,113
Non-cash movements
Accrued interest (170) (165) (302)
Retail fair value and other non-cash movements 825 (154) (396)
Changes in net debt resulting from non-cash movements 655 (319) (698)
Movement in net debt 701 594 415
Closing net debt (5,643) (6,165) (6,344)
16. Borrowings
16 September 2023 4 March 2023
Current Non-current Total Current Non-current Total
£m £m £m £m £m £m
Loan due 2031 51 467 518 48 491 539
Term loan 5 575 580 - - -
Bank overdrafts 2 - 2 - - -
Transaction costs - (3) (3) (1) (4) (5)
Sainsbury's Bank Tier 2 Capital 6 112 118 6 116 122
Total borrowings 64 1,151 1,215 53 603 656
17 September 2022
Current Non-current Total
£m £m £m
Loan due 2031 46 512 558
Bank overdrafts 3 - 3
Sainsbury's Bank Tier 2 Capital 3 175 178
Total borrowings 52 687 739
Available facilities
The Group refinanced its Revolving Credit Facility in December 2022. The
Revolving Credit Facility is split into two Facilities, a £500 million
Facility (A) and a £500 million Facility (B). Facility A has a maturity of
December 2027 and Facility B has a maturity of December 2026. As at 16
September 2023, the Revolving Credit Facility was undrawn (4 March 2023:
£nil; 17 September 2022: £nil).
The Revolving Credit Facility incurs commitment fees at market rates and
drawdowns bear interest at a margin above SONIA.
The Group maintains uncommitted facilities to provide additional capacity to
fund short-term working capital requirements. Drawdowns on these uncommitted
facilities bear interest at a margin. Uncommitted facilities of £2 million
were drawn at 16 September 2023 (4 March 2023: £nil; 17 September 2022: £3
million).
The Group entered into a £575 million unsecured term loan in December 2022,
with maturity of March 2026. As at 16 September 2023, the term loan was fully
drawn (4 March 2023: £nil; 17 September 2022: £nil). Included within the
current term loan balance is £5 million of interest accrued.
17. Cash and cash equivalents
16 September 4 March 17 September
2023
2023
2022
£m £m £m
Cash in hand and bank balances 680 569 586
Money market funds 250 255 372
Money market deposits 210 150 230
Deposits at central banks 927 345 392
Cash and bank balances as reported in the Group balance sheet 2,067 1,319 1,580
Bank overdrafts (within current borrowings) (2) - (3)
Net cash and cash equivalents as reported in the Group cash flow statement 2,065 1,319 1,577
Restricted amounts included above:
Held as a reserve deposit with the Bank of England 15 15 15
For insurance purposes 7 3 1
Held within the Group's Employee Share Ownership Trust - 10 -
22 28 16
Restricted amounts with the Bank of England are not available for use in
day-to-day operations.
Reconciliation of cash flow items
Working capital
Inventories Financial assets at fair value through OCI Trade and other receivables Amounts due from Financial Services customers Trade and other payables Amounts due to Financial Services customers Provisions
£m £m £m £m £m £m £m
At 16 September 2023 2,187 702 742 4,821 (5,291) (6,057) (243)
At 4 March 2023 1,899 1,009 683 5,392 (4,837) (5,946) (272)
Balance sheet movement (288) 307 (59) 571 454 111 (29)
Fair value movements - (1) - - - - -
Hedge adjustment to inventory 14 - - - - - -
Reclassification to other lines in the cash flow statement - - (23) - 119 - -
Movement in capital accruals - - (2) - 9 - -
Derecognition of beneficial interest in property pool - (366) - - (19) - -
Proceeds from disposal of mortgage book - - - (446) - - -
Other - - 4 1 7 - -
Movement shown in cash flow statement (274) (60) (80) 126 570 111 (29)
Inventories Financial assets at fair value through OCI Trade and other receivables Amounts due from Financial Services customers Trade and other payables Amounts due to Financial Services customers Provisions
£m £m £m £m £m £m £m
At 17 September 2022 1,891 771 803 5,288 (4,994) (5,732) (231)
At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271)
Balance sheet movement (94) 29 (55) (99) 424 473 (40)
Fair value movements - (7) - (35) - - -
Hedge adjustment to inventory 7 - - - - - -
Reclassification to other lines in the cash flow statement - - 4 - 24 - -
Movement in capital accruals - - - - 3 - -
Other - - - (1) (13) (1) (1)
Movement shown in cash flow statement (87) 22 (51) (135) 438 472 (41)
Inventories Financial assets at fair value through OCI Trade and other receivables Amounts due from Financial Services customers Trade and other payables Amounts due to Financial Services customers Provisions
£m £m £m £m £m £m £m
At 4 March 2023 1,899 1,009 683 5,392 (4,837) (5,946) (272)
At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271)
Balance sheet movement (102) (209) 65 (203) 267 687 1
Fair value movements - 2 - (27) - - -
Hedge adjustment to inventory (3) - - - (2) - -
Interest in working capital - - - - 9 - -
Reclassification to other lines in the cash flow statement - - 3 - 11 - -
Movement in capital accruals - - - - (8) - -
Other - - - (1) 3 - (1)
Movement shown in cash flow statement (105) (207) 68 (231) 280 687 -
Loss/(profit) on the sale of non-current assets and early termination of
leases in the cash flow statement is reconciled as follows:
28 weeks to 16 September 2023 28 weeks to 17 September 2022 52 weeks to 4 March 2023
£m £m £m
(Profit)/loss on disposal of properties (note 3) (11) - 3
Non underlying gain on early termination of leases (note 3) (1) (1) (2)
Profit on disposal of properties within restructuring programmes (note 3) - (11) (11)
Underlying gain on early termination of leases - - (4)
Profit on disposal of intangible assets - - (1)
Loss on disposal of amounts due from Financial Services customers 14 - -
Loss/(profit) on sale of non-current assets and early termination of leases 2 (12) (15)
18. Retirement benefit obligations
All retirement benefit obligations relate to the Sainsbury's Pension Scheme
plus three unfunded pension liabilities relating to former senior employees of
Sainsbury's and Home Retail Group.
The Sainsbury's Pension Scheme has two segregated sections: the Sainsbury's
Section and the Argos Section.
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 retiring and choosing to take the provision as a
one-off cash payment.
The Trustee's triennial valuation is used to determine the contributions
required for the Scheme to pay all the benefits due, now and in the future.
There have been no changes to the previously disclosed triennial valuation
information, which can be found in note 35 of the Group's Annual Report and
Financial Statements 2023.
16 September 2023 4 March 2023
Sainsbury's Argos Group Sainsbury's Argos Group
£m £m £m £m £m £m
Present value of funded obligations (4,898) (765) (5,663) (5,128) (793) (5,921)
Fair value of plan assets 5,761 911 6,672 6,007 927 6,934
Retirement benefit surplus 863 146 1,009 879 134 1,013
Present value of unfunded obligations (12) (10) (22) (12) (12) (24)
Retirement benefit surplus 851 136 987 867 122 989
17 September 2022
Sainsbury's Argos Group
£m £m £m
Present value of funded obligations (5,836) (922) (6,758)
Fair value of plan assets 7,176 1,064 8,240
Retirement benefit surplus 1,340 142 1,482
Present value of unfunded obligations (15) (12) (27)
Retirement benefit surplus 1,325 130 1,455
The principal actuarial assumptions used at the balance sheet date are as
follows:
16 September 4 March 17 September
2023 2023 2022
% % %
Discount rate 5.40 5.00 4.45
Inflation rate - RPI 3.35 3.25 3.45
Inflation rate - CPI 2.70 2.55 2.75
Future pension increases 1.90-3.00 1.90 - 2.95 2.30 - 3.35
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
16 September 2023
17 September 2022
4 March
2023
£m £m £m
Excluded from underlying profit before tax:
Interest cost on pension liabilities (145) (119) (221)
Interest income on plan assets 170 149 277
Total included in finance income 25 30 56
Defined benefit pension scheme expenses (4) (3) (6)
Settlement gains - 8 8
Total excluded from underlying profit before tax 21 35 58
Total income statement credit 21 35 58
The movements in the net defined benefit surplus are as follows:
28 weeks to 16 September 2023 52 weeks to 4 March 2023 28 weeks to 17 September 2022
£m £m £m
At the beginning of the period 989 2,283 2,283
Net interest income 25 56 30
Remeasurement losses (46) (1,398) (886)
Pension scheme expenses (4) (6) (3)
Contributions by employer 23 44 23
Benefits paid - 2 -
Settlement gains - 8 8
At the end of the period 987 989 1,455
Cash contributions
Cash contributions for the full year are expected to be approximately £45
million.
Valuation of pension assets
The Pension Scheme has circa £2 billion of private market assets, split
between private debt, private equity and property. These assets are held as
they are expected to deliver a greater risk/return profile vs public market
equivalents over the long term. The assets are illiquid (likely to be realised
over 5+ years) but the Pension Scheme holds sufficient liquid assets (cash,
gilts and other liquid securities) to be confident that it can meet its
pension and collateral obligations over time.
The valuation of these assets is based on the audited accounts of the funds,
where available, and net asset value statements from the investment managers
where recent accounts are not available. For many of the investments the
valuations provided are at 31 March. The Group therefore performs a
roll-forward for these valuations to 16 September 2023, adjusting for cash
received or paid and applying the changes seen in relevant liquid indices as
follows:
Asset Class Returns
Global equity USD return 6.94%
Global High Yield Debt USD return 3.41%
US loans USD return 6.71%
UK REITS GBP return (3.64)%
The roll-forward has increased the valuation of illiquid assets by £55.7
million. A 1% increase/decrease in the indices used would have caused a £14.4
million increase/decrease in the adjustment.
Sensitivities
The following sensitivities are based on management's best estimate of a
reasonably anticipated change. The sensitivities are calculated using the same
methodology used to calculate the retirement benefit obligation, by
considering the change in the retirement benefit obligation for a given change
in assumption. The net retirement benefit obligation is the difference between
the retirement benefit obligation and the fair value of plan assets. Changes
in the assumptions may occur at the same time as changes in the fair value of
plan assets. There has been no change in the calculation methodology since the
prior period.
Sainsbury's Argos Total
£m £m £m
An increase of 0.5% in the discount rate would decrease the present value of 321 57 378
funded obligations by
A decrease of 0.5% in the discount rate would increase the present value of 356 64 420
funded obligations by
An increase of 0.5% in the inflation rate would increase the present value of 174 42 216
funded obligations by
A decrease of 0.5% in the inflation rate would decrease the present value of 170 39 209
funded obligations by
An increase of 0.5% in the inflation rate for future pension increases in 81 21 102
payment only would increase the present value of funded obligations by
A decrease of 0.5% in the inflation rate for future pension increases in 85 20 105
payment only would reduce the present value of funded obligations by
Demographic sensitivities
An increase of one year to the life expectancy would increase the present 154 22 176
value of funded obligations by
Changing the 2020, 2021 and 2022 weighting parameters in CMI 2022 to 0% would 37 6 43
increase the present value of funded obligations by
Changing the 2020, 2021 and 2022 weighting parameters in CMI 2022 to 25% would 31 5 36
decrease the present value of funded obligations by
19. Assets held for sale
28 weeks to 16 September 2023 52 weeks to 4 March 2023 28 weeks to 17 September 2022
£m £m £m
Opening balance 8 8 8
Classified as held for sale in the period 8 5 3
Acquisitions 63 - -
No longer classified as held for sale (3) - -
Sold in the period (66) (5) (3)
Closing balance 10 8 8
As part of the asset acquisition detailed in note 2, £63 million of assets
held for sale were acquired by the Group, of which £61 million had been sold
to third parties by 16 September 2023. For the remaining assets, the sale is
still considered probable in the next 12 months and so they remain classified
as held for sale. The fair value of assets held for sale is based on
independent market valuations of the assets. Proceeds from disposals of assets
held for sale have been presented within proceeds from disposal of property,
plant and equipment in the Group's cash flow statement.
20. Contingent liabilities
The Group has a number of contingent liabilities in respect of historical
guarantees, particularly in relation to disposed assets, which if the current
tenant and their ultimate parents become insolvent, may expose the Group to a
material liability. This is not expected to materialise.
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
14,300 equal pay claims from circa 10,200 claimants, in which 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 centres, and the equalisation of wages and terms
and conditions on an ongoing basis. The Group believes further claims will be
served.
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
similar 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. This process is likely to continue
for several more years. In the event that any of the claimants succeed at the
second stage there will be further hearings, in the years following, to
consider whether any pay differential is justified.
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. No provision has therefore been
recognised on the Group's balance sheet. There are substantial factual and
legal defences to these claims and the Group intends to defend them vigorously
Principal risks and uncertainties
Risk is an inherent part of doing business. The J Sainsbury plc Board has
overall responsibility for the identification and management of the principal
risks, emerging 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, operational resilience and major incidents
response
· Business strategy and change
· Colleague engagement, retention and capability
· Customer
· Data security
· Environment and sustainability
· Financial and treasury
· Health and safety
· Political and regulatory environment
· Product safety and sourcing
· Sainsbury's Bank
· Trading environment and competitive landscape
All Principal Risks remain unchanged from those reported in the Group's Annual
Report and Financial Statements 2023. For more information on these risks,
please refer to pages 44 to 57 of the J Sainsbury plc Annual Report and
Financial Statements 2023, a copy of which is available on the Group's
corporate website www.sainsburys.co.uk (http://www.sainsburys.co.uk) .
Statement of Directors' responsibilities
The Directors confirm that this set of Condensed Consolidated Interim
Financial Statements has been prepared in accordance with UK adopted IAS 34
'Interim Financial Reporting' and the Disclosure and Transparency Rules of the
UK's Financial Conduct Authority, and that the Interim Management Report
herein includes a true and fair review of the information required by DTR
4.2.7R and DTR 4.2.8R, namely:
· that the report contains a fair review of important events that
have occurred during the first 28 weeks of the financial year, and their
impact on the condensed set of financial statements, and of the principal
risks and uncertainties for the remaining six months of the financial year;
and
· that the report contains a fair review of material related party
transactions.
The Directors of J Sainsbury plc are listed in the J Sainsbury plc Annual
Report and Financial Statements 2023.
A list of current directors is maintained on the Group's website:
www.about.sainsburys.co.uk/about-us/our-management
(www.about.sainsburys.co.uk/about-us/our-management) .
By order of the Board
Simon Roberts
Chief Executive
1 November 2023
Bláthnaid Bergin
Chief Financial Officer
1 November 2023
INDEPENDENT REVIEW REPORT TO J SAINSBURY PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the interim financial report for the 28 week period ended 16
September 2023 which comprises the Group income statement, the Group statement
of comprehensive income/(loss), the Group balance sheet, the Group statement
of changes in equity, the Group cash flow statement 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 set of
financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the 28 week period ended 16 September 2023 is not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this interim financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of 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.
In preparing the interim financial report, the Directors are responsible for
assessing the company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the interim report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
interim financial report. Our conclusions, including our Conclusions Relating
to Going Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. 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.
Ernst & Young LLP
London
1 November 2023
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.
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 profit) by adjusting for
non-recurring or uncontrollable factors which affect IFRS measures, 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.
Adjusted net cash generated from retail operations is no longer used as an APM
as there were no adjusting items to cash generated from retail operations in
the current or comparative periods.
All of the following APMs relate to the current period's results and
comparative periods.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS measure
Income statement - Revenue
Retail sales Revenue Group sales less Financial Services revenue. Shows the annual rate of growth in the Group's Retail business sales. A reconciliation of the measure is provided in note 4 of the financial
statements.
Like-for-like sales No direct equivalent Year-on-year growth in sales including VAT, excluding fuel and Financial The measure is used widely in the retail industry as an indicator of current
Services, for stores that have been open for more than one year. trading performance and is useful when comparing growth between retailers that
28 weeks to 16 September 2023 28 weeks to 17 September 2022
have different profiles of expansion, disposals and closures. Retail like-for-like (exc. Fuel, inc. VAT) 8.4% (0.8)%
Underlying net new space impact (0.7)% (0.5)%
Retail sales growth/(decline) (exc. Fuel, inc. VAT) 7.7% (1.3)%
The relocation of Argos stores into Sainsbury's supermarkets are classified as Fuel impact (5.1)% 5.7%
new space, while the host supermarket is classified like-for-like. Total retail sales growth (inc. Fuel, inc. VAT) 2.6% 4.4%
VAT impact 0.6% (0.3)%
Total retail sales growth 3.2% 4.1%
APM Closest equivalent IFRS measure Definition Purpose Reconciliation
Income statement - Profit
Retail underlying operating profit Profit before tax Underlying earnings before interest, tax, Financial Services operating profit This is the lowest level at which the retail segment can be viewed from a
and Sainsbury's underlying share of post-tax profit from joint ventures and management perspective, with finance costs managed for the Group as a whole.
28 weeks to 28 weeks to 17 September 2022 52 weeks to 4 March 2023
associates.
16 September 2023
£m £m £m
Group PBT (note 5a) 275 376 327
Less Group non-underlying items (note 3) 65 (36) 363
Group UPBT 340 340 690
Financial Services underlying operating profit (13) (19) (46)
Retail underlying profit before tax 327 321 644
Net underlying finance costs 158 156 282
Retail underlying operating profit 485 477 926
Retail sales (note 5a) 16,665 16,154 30,960
Retail underlying operating margin 2.91% 2.95% 2.99%
Underlying profit before tax Profit before tax Underlying results exclude items recognised in reported profit or loss before In order to provide shareholders with additional insight into the underlying Underlying profit before tax is bridged to statutory profit before tax in the
tax which, if included, could distort comparability between periods. In performance of the business, this adjusted measure of profit is provided to income statement and note 3 of the financial statements.
determining which items to exclude from underlying profit, the Group considers supplement the reported IFRS numbers, and reflects how the business measures
items which are significant either by virtue of their size and/or nature, or performance internally.
that are non-recurring.
The adjusted items are as described in note 3 of the financial statements.
Underlying basic earnings per share Basic earnings per share Earnings per share using underlying profit as described above. This is a key measure to evaluate the performance of the business and returns A reconciliation of the measure is provided in note 9 of the financial
generated for investors. statements.
Underlying diluted earnings per share Diluted earnings per share Diluted earnings per share using underlying profit as described above. This is a key measure to evaluate the performance of the business and returns A reconciliation of the measure is provided in note 9 of the financial
generated for investors. statements.
Retail underlying EBITDA No direct equivalent Retail underlying operating profit as above, before underlying depreciation, EBITDA is used to review the retail segment's profit generation and the
and amortisation. sustainability of ongoing capital reinvestment and finance costs.
28 weeks to 28 weeks to 52 weeks to
16 September
17 September
4 March
2023
2022
2023
£m £m £m
Retail underlying operating profit 485 477 926
Add: Retail depreciation and amortisation expense 613 634 1,175
Less: Non-underlying depreciation and amortisation (16) (24) (41)
Retail underlying EBITDA 1,082 1,087 2,060
Retail sales (note 5a) 16,665 16,154 30,960
Retail underlying EBITDA margin 6.49% 6.73% 6.65%
Underlying profit before tax
Profit before tax
Underlying results exclude items recognised in reported profit or loss before
tax which, if included, could distort comparability between periods. In
determining which items to exclude from underlying profit, the Group considers
items which are significant either by virtue of their size and/or nature, or
that are non-recurring.
In order to provide shareholders with additional insight into the underlying
performance of the business, this adjusted measure of profit is provided to
supplement the reported IFRS numbers, and reflects how the business measures
performance internally.
Underlying profit before tax is bridged to statutory profit before tax in the
income statement and note 3 of the financial statements.
The adjusted items are as described in note 3 of the financial statements.
Underlying basic earnings per share
Basic earnings per share
Earnings per share using underlying profit as described above.
This is a key measure to evaluate the performance of the business and returns
generated for investors.
A reconciliation of the measure is provided in note 9 of the financial
statements.
Underlying diluted earnings per share
Diluted earnings per share
Diluted earnings per share using underlying profit as described above.
This is a key measure to evaluate the performance of the business and returns
generated for investors.
A reconciliation of the measure is provided in note 9 of the financial
statements.
Retail underlying EBITDA
No direct equivalent
Retail underlying operating profit as above, before underlying depreciation,
and amortisation.
EBITDA is used to review the retail segment's profit generation and the
sustainability of ongoing capital reinvestment and finance costs.
28 weeks to 28 weeks to 52 weeks to
16 September
17 September
4 March
2023
2022
2023
£m £m £m
Retail underlying operating profit 485 477 926
Add: Retail depreciation and amortisation expense 613 634 1,175
Less: Non-underlying depreciation and amortisation (16) (24) (41)
Retail underlying EBITDA 1,082 1,087 2,060
Retail sales (note 5a) 16,665 16,154 30,960
Retail underlying EBITDA margin 6.49% 6.73% 6.65%
APM Closest equivalent IFRS measure Definition Purpose Reconciliation
Underlying net finance costs Finance income less finance costs Net finance costs before any non-underlying items as defined above that are This provides shareholders with additional insight into the underlying net A reconciliation of this measure is included in note 7 of the financial
recognised within finance income / expenses. finance costs of the Group by excluding non-recurring one-off items. statements.
The adjusted items are as follows:
· Non-underlying finance and fair value movements - these
include fair value remeasurements on derivatives not in a hedging relationship
and lease interest on impaired non-trading sites, including site closures. The
fair value movements are driven by external market factors and can
significantly fluctuate year-on-year. They are therefore excluded to ensure
consistency between periods. Lease interest on impaired, non-trading sites is
excluded as they do not contribute to the operating activities of the Group.
· Defined benefit pension interest. The Group has chosen to
exclude net retirement benefit income and costs from underlying profit as,
following closure of the defined benefit scheme to future accrual, it is not
part of the ongoing operating activities of the Group and its exclusion is
consistent with how the Directors assess the performance of the business.
Underlying tax rate Effective tax rate Tax on underlying items, divided by underlying profit before tax. Provides an indication of the tax rate across the Group before the impact of The tax on non-underlying items is included in note 3 of the financial
non-underlying items. statements
APM Closest equivalent IFRS measure Definition Purpose Reconciliation
Cash flows and net debt
Retail cash flow items in Financial Review No direct equivalent N/A To help the reader understand cash flows of the business a summarised cash
flow statement is included within the Financial Review.
28 weeks to 28 weeks to 17 September 2022 52 weeks to 4 March
As part of this a number of line items have been combined. The cash flow in 16 September 2023 2023
note 5 of the financial statements includes a reference to show what has been Ref £m £m £m
combined in these line items. Net interest paid a (166) (161) (307)
Repayment of lease liabilities b (252) (245) (512)
Proceeds from/(repayment of) borrowings c 555 (22) (40)
Other d (7) (23) (32)
Dividends and distributions received e - 50 51
Retail free cash flow Net cash generated from operating activities Net cash generated from retail operations, after cash capital expenditure but This measures cash generation, working capital efficiency and capital
before strategic capital expenditure, and including payments of lease expenditure of the retail business
28 weeks to 28 weeks to 17 September 2022 52 weeks to 4 March 2023
obligations, cash flows from joint ventures and associates and Sainsbury's
Bank capital injections.
16 September 2023
£m £m £m
Cash generated from retail operations 1,339 1,425 2,216
Net interest paid (ref (a) above) (166) (161) (307)
Corporation Tax (17) (32) (99)
Retail purchase of property, plant and equipment (1,040) (201) (523)
Less: amounts paid for asset acquisition 731 - -
Retail purchase of intangibles assets (80) (96) (194)
Retail proceeds from disposal of property, plant and equipment 77 28 29
Less: amounts received from asset acquisition (61) - -
Initial direct costs on right-of-use assets (11) (9) (16)
Repayments of obligations under leases (252) (245) (512)
Dividends and distributions received - 50 51
Retail free cash flow 520 759 645
Retail free cash flow
Net cash generated from operating activities
Net cash generated from retail operations, after cash capital expenditure but
before strategic 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
28 weeks to 28 weeks to 17 September 2022 52 weeks to 4 March 2023
16 September 2023
£m £m £m
Cash generated from retail operations 1,339 1,425 2,216
Net interest paid (ref (a) above) (166) (161) (307)
Corporation Tax (17) (32) (99)
Retail purchase of property, plant and equipment (1,040) (201) (523)
Less: amounts paid for asset acquisition 731 - -
Retail purchase of intangibles assets (80) (96) (194)
Retail proceeds from disposal of property, plant and equipment 77 28 29
Less: amounts received from asset acquisition (61) - -
Initial direct costs on right-of-use assets (11) (9) (16)
Repayments of obligations under leases (252) (245) (512)
Dividends and distributions received - 50 51
Retail free cash flow 520 759 645
APM Closest equivalent IFRS measure Definition Purpose Reconciliation
Cash flows and net debt
Underlying working capital movements No direct equivalent Removes working capital and cash movements relating to non-underlying items. To provide a reconciliation of the working capital movement in the financial
statements to the underlying working capital movement in the financial review.
28 weeks to 28 weeks to 52 weeks to
16 September
17 September
4 March
2023
2022
2023
£m £m £m
Retail working capital movements per 265 318 185
cash flow (note 5)
Adjustments for:
Retail non-underlying impairment charges 21 20 315
(note 3)
Non-underlying restructuring and impairment (32) (33) (387)
charges (note 3)
Accelerated depreciation (note 3) 8 12 20
Gains on early termination of leases (note 3) (1) (1) (2)
Profit on disposal of properties within restructuring - (11) (11)
programme (note 3)
ATM income (note 3) - - 3
Income recognised in relation to legal disputes - 30 30
(note 3)
Property related transactions (note 3) (17) (8) (9)
Other - - 7
Non-underlying working capital movements before (21) 9 (34)
cash movements
Non-underlying cash movements (note 3):
Restructuring 40 33 50
ATM income - - (3)
Income recognised in relation to legal disputes - - (30)
Property related transactions - - 6
Retail non-underlying operating cash flows 40 33 23
(excluding pensions)
Total adjustments for non-underlying working capital 19 42 (11)
Underlying working capital movements 284 360 174
APM Closest equivalent IFRS measure Definition Purpose Reconciliation
Core retail capital expenditure No direct equivalent Capital expenditure excluding Sainsbury's Bank. This allows management to assess core retail capital expenditure in the period
in order to review the strategic business performance.
28 weeks to 28 weeks to 17 September 2022 52 weeks to 4 March 2023
16 September 2023
£m £m £m
Purchase of property, plant and equipment (1,040) (201) (523)
Purchase of intangibles (80) (96) (194)
Less: amounts paid for asset acquisition transaction 731 - -
reported outside of Retail free cashflow
Cash capital expenditure (389) (297) (717)
Net debt Borrowings, cash, derivatives, financial assets at FVTOCI, lease liabilities Net debt includes the capital injections into Sainsbury's Bank, but excludes This shows the overall strength of the balance sheet alongside the liquidity A reconciliation of the measure is provided in note 15 of the financial
the net debt of Sainsbury's Bank and its subsidiaries. and its indebtedness and whether the Group can cover its debt commitments. statements. In addition, to aid comparison to the balance sheet,
reconciliations between financial assets at FVTOCI and derivatives per the
balance sheet and Group net debt (i.e. including Financial Services) is
included below:
It is calculated as: financial assets at fair value through other
comprehensive income (excluding equity investments) + net derivatives to hedge
borrowings + net cash and cash equivalents + loans + lease obligations.
28 weeks to 28 weeks to 17 September 2022 52 weeks to 4 March 2023
16 September 2023
£m £m £m
Financial instruments at FVTOCI per balance sheet 702 771 1,009
Less: equity related securities (16) (376) (383)
Financial instruments at FVTOCI included in net debt 686 395 626
Net derivatives per balance sheet 96 490 213
Less: derivatives not used to hedge borrowings (100) (484) (213)
Derivatives included in net debt (4) 6 -
Net debt
Borrowings, cash, derivatives, financial assets at FVTOCI, lease liabilities
Net debt includes the capital injections into Sainsbury's Bank, but excludes
the net debt of Sainsbury's Bank and its subsidiaries.
It is calculated as: financial assets at fair value through other
comprehensive income (excluding equity investments) + net derivatives to hedge
borrowings + net cash and cash equivalents + loans + lease obligations.
This shows the overall strength of the balance sheet alongside the liquidity
and its indebtedness and whether the Group can cover its debt commitments.
A reconciliation of the measure is provided in note 15 of the financial
statements. In addition, to aid comparison to the balance sheet,
reconciliations between financial assets at FVTOCI and derivatives per the
balance sheet and Group net debt (i.e. including Financial Services) is
included below:
28 weeks to 28 weeks to 17 September 2022 52 weeks to 4 March 2023
16 September 2023
£m £m £m
Financial instruments at FVTOCI per balance sheet 702 771 1,009
Less: equity related securities (16) (376) (383)
Financial instruments at FVTOCI included in net debt 686 395 626
Net derivatives per balance sheet 96 490 213
Less: derivatives not used to hedge borrowings (100) (484) (213)
Derivatives included in net debt (4) 6 -
APM Closest equivalent IFRS measure Definition Purpose Reconciliation
Other
Net debt/ No direct equivalent Net debt divided by Group underlying EBITDA where EBITDA is calculated on a 52 This helps management measure the ratio of the business's debt to operational Net debt as provided in note 15. Group underlying EBITDA is reconciled within
week rolling basis. cash flow. the fixed charge cover analysis below.
underlying EBITDA
Return on capital employed No direct equivalent Return on capital employed is calculated as return divided by average capital This represents the total capital that the Group has utilised in order to
employed. generate profits. Management use this to assess the performance of the
52 weeks to 52 weeks to 17 September 2022 52 weeks to 4 March 2023
business.
16 September 2023
Return is defined as 52 week rolling underlying profit before interest and £m £m £m
tax. Underlying profit before tax 690 699 690
Add: Underlying net interest 284 294 282
Return 974 993 972
Capital employed is defined as Group net assets excluding pension surplus, Capital employed is reconciled as follows:
less net debt. The average is calculated on a 14 point basis. Group net assets 7,221 7,929 7,253
Less: Pension surplus (note 18) (987) (1,455) (989)
Deferred tax on pension surplus 330 454 330
Less: net debt (note 15) 5,643 6,165 6,344
The 14-point basis uses the average of 14 datapoints - the prior year closing Effect of in-year averaging 121 (228) (101)
capital employed, the current year closing capital employed and 12 intra-year Capital employed 12,328 12,865 12,837
periods as this more closely aligns to the recognition of amounts in the
income statement. Return on capital employed 7.9% 7.7% 7.6%
Fixed charge cover No direct equivalent Group underlying EBITDA divided by rent (representing capital and interest This helps assess the Group's ability to satisfy fixed financing expenses from
repayments on leases). All items are calculated on a 52 week rolling basis. performance of the business.
24 weeks to 28 weeks to 52 weeks to 52 weeks to 4 March 2023
16 September 2023
4March 16 September 2023
2023
£m £m £m £m
Group underlying operating profit 476 498 974 972
Add: Group depreciation and amortisation expense 558 631 1,189 1,208
Less: Non-underlying depreciation and amortisation expense (17) (16) (33) (41)
Group underlying EBITDA 1,017 1,113 2,130 2,139
Repayment of capital element of lease obligations (268) (253) (521) (514)
Underlying finance income 13 12 25 18
Underlying finance costs (139) (170) (309) (300)
Fixed charges (394) (411) (805) (796)
Fixed charge cover 2.6 2.7 2.6 2.7
Fixed charge cover
No direct equivalent
Group underlying EBITDA divided by rent (representing capital and interest
repayments on leases). 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.
24 weeks to 28 weeks to 52 weeks to 52 weeks to 4 March 2023
16 September 2023
4 March 16 September 2023
2023
£m £m £m £m
Group underlying operating profit 476 498 974 972
Add: Group depreciation and amortisation expense 558 631 1,189 1,208
Less: Non-underlying depreciation and amortisation expense (17) (16) (33) (41)
Group underlying EBITDA 1,017 1,113 2,130 2,139
Repayment of capital element of lease obligations (268) (253) (521) (514)
Underlying finance income 13 12 25 18
Underlying finance costs (139) (170) (309) (300)
Fixed charges (394) (411) (805) (796)
Fixed charge cover 2.6 2.7 2.6 2.7
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