REG - Sainsbury(J) PLC - Half-year Report
07/11/2024 07:00
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RNS Number : 2675L Sainsbury(J) PLC 07 November 2024
7 November 2024
J Sainsbury Plc
Interim Results for the 28 weeks ended 14 September 2024
Strong grocery market share gains delivering profit leverage
Simon Roberts, Chief Executive of J Sainsbury plc, said: "Our food business is
going from strength to strength and we're making the biggest market share
gains in the industry, with continued strong volume growth. More and more
customers are coming to us for their big food shop, recognising our winning
combination of value, quality and service.
"Reflecting our leading quality, more customers are choosing Taste the
Difference, with sales up 18 per cent, the strongest premium private label
growth in the market. And with the biggest ever increase in customers' value
perception, we're outperforming the market across the whole basket,
particularly in core fresh food categories.
"Our grocery volume growth has delivered strong profit leverage at
Sainsbury's, partially offset by a tough first quarter at Argos. Argos trading
has improved through the second quarter and in more recent weeks, so we
continue to expect to deliver strong retail underlying operating profit growth
and free cash flow generation for the full year.
"With strong momentum and increasing confidence in the strength of our grocery
offer, we're now investing to bring the best of Sainsbury's to more people in
more locations, including the recent acquisition of eleven Homebase and two
Co-op stores.
"Our brilliant colleagues and suppliers are at the heart of everything we do
and I want to thank them for all their hard work as we set ourselves up to
deliver a fantastic Christmas for our customers. As we head into the festive
season, there is real energy and excitement at Sainsbury's and Argos and we're
expecting another strong performance.
"We remain very focused on delivering for our customers, communities and
shareholders."
Financial Highlights
· Sainsbury's sales (excluding fuel) up 4.6%, with Grocery sales growth of 5.0%
and Sainsbury's General Merchandise & Clothing sales decline of (1.5)%.
Argos sales down (5.0)% and fuel sales down (4.4)%
· Like-for-like Retail sales (excluding fuel) up 3.4% (Q1 2.7%, Q2 4.2%)
· Retail underlying operating profit of £503m, up 3.7%, with strong Sainsbury's
and Nectar growth partially offset by a lower Argos contribution(1)
o Sainsbury's contribution(1) up 8.7%, with operating leverage driven by strong
grocery volume growth. Operating margin 20 basis points higher year on year
o Argos contribution(1) lower year on year, reflecting tougher than anticipated
trading conditions in the first quarter, before sales strengthened in the
second quarter
· Total Financial Services underlying operating profit of £18m, up 38%
· Total underlying profit before tax of £356m, up 4.7%
· Statutory profit after tax of £76m, down (51)%. Non-underlying items of
£(176)m on a post-tax basis predominantly relate to the restructuring of the
Financial Services division
· Retail free cashflow of £425m. On track to deliver retail free cash flow of
at least £500m in 2024/25
· £150m share buyback to date, on track to complete £200m programme in H2
2024/25
· Interim dividend of 3.9 pence
H1 Financial Summary 2024/25 2023/24 YoY
Business performance
Retail sales (inc. VAT, excl. fuel) £16,297m £15,805m 3.1%
Retail underlying operating profit £503m £485m 3.7%
Total underlying profit before tax* £356m £340m 4.7%
Total underlying basic earnings per share* 10.7p 10.5p 1.9%
Interim dividend per share 3.9p 3.9p -
Net debt (inc. lease liabilities) £(5,584)m £(5,643)m £59m
Non-lease net debt £(152)m £(231)m £79m
Return on capital employed* 8.5% 7.9% 60bps
Statutory performance
Group revenue (excl. VAT, inc. fuel) £17,203m £16,813m 2.3%
Profit after tax £76m £155m (51)%
o/w Continuing operations £174m £136m 28%
o/w Discontinued operations £(98)m £19m n/a
Total basic earnings per share* 3.2p 6.6p (52)%
Net cash generated from operating activities (continuing) £592m £1,123m £(531)m
*On a total basis inclusive of discontinued operations
Sales Performance (YoY)* Q1 Q2 H1
Sainsbury's 4.2% 5.1% 4.6%
Grocery 4.8% 5.3% 5.0%
General Merchandise & Clothing (4.3)% 2.2% (1.5)%
Argos** (7.7)% (1.4)% (5.0)%
Total Retail (exc. fuel) 2.3% 4.1% 3.1%
Like-for-like sales (exc. Fuel) 2.7% 4.2% 3.4%
* Revised category disclosure reflects Next Level Sainsbury's strategy
choices.
** Includes the impact of closing the Argos business in the Republic of
Ireland.
Outlook
· We remain confident of delivering strong profit growth in the full year, with
continued leverage from Sainsbury's grocery volume growth and a stronger Argos
H2 performance. Combined with continued growth in Nectar profit contribution
and delivery of cost savings, we continue to expect to deliver Retail
underlying operating profit of between £1,010 million and £1,060 million,
growth of between five per cent and ten per cent
· We now expect total Financial Services underlying operating profit (continuing
operations and discontinued operations) to be between £15 million and £25
million (previously between break even and £15 million)
· We continue to expect to generate Retail free cash flow of at least £500
million
Strategic Highlights
We have made a strong start to the Next Level Sainsbury's strategy that we set
out in February, delivering food volume growth ahead of the market, profit
leverage from sales growth, continued improvement in customer satisfaction and
higher cash returns to shareholders. Across the business, we are focused on
delivering the eight commitments that we made:
· Food volume growth ahead of the market · Deliver profit leverage from sales growth
· Customer satisfaction higher 26/27 vs 23/24 · £1bn of cost savings over three years to 26/27
· Colleague engagement higher 26/27 vs 23/24 · £1.6bn+ Retail free cash flow over three years to 26/27
· Deliver our Plan for Better commitments · Higher return on capital employed
Our progress against these commitments will be driven by our four strategic
outcomes: First choice for food, Loyalty everyone loves, More Argos, more
often and Save and invest to win.
First choice for food
Our winning combination of outstanding quality, great value and leading
service is delivering(2). More customers are choosing Sainsbury's for their
main shop(3), driving the biggest market share gains in the industry(4) and
switching gains from competitors across the whole market(5). Continued
improvement in value perception(6) is increasing our customer loyalty, with
more main shop primary customers(7), and basket size growth significantly
ahead of competitors(8). We have recorded six consecutive quarters of volume
growth against tough comparatives and are well set to build on our strong
Grocery momentum through the peak Christmas period.
Winning more big basket shoppers by consistently delivering outstanding
quality, great value and leading service
· We are outperforming the market across all categories, with core fresh
categories performing particularly well as customers consistently trust us for
the products they buy most often(9). Customers are increasingly shopping with
us for their big weekly shop, driving the biggest share gains in the main shop
mission in the market(3)
· Customer loyalty is increasing and winning more big basket primary customers
than our key competitors(7). Of new primary shoppers at Sainsbury's, one
quarter are new to Sainsbury's, with the remainder converting from secondary
customers as they do more full basket grocery shopping with us(10)
· Taste the Difference products now appear in one in three baskets(11) and
nearly two out of every three big shops(12), as customers treat themselves and
dine in more at home. We are continuing to build on our reputation for quality
and innovation, launching more than 540 new products during the half, with our
Taste the Difference Summer range really resonating with customers and driving
sales growth of 18 per cent in the second quarter
· Our Premium Own Label is the fastest growing in the market(13), with premium
switching gains from all grocers(14) and exceptionally strong performance
against the market across Fresh categories(15)
· Customers are recognising our consistent value, delivering our biggest ever
improvement in value perception, up 8.5 percentage points year-on-year(6). We
have extended our Aldi Price Match campaign to over 650 products in our
supermarkets and are further strengthening our Nectar Prices offers. We have
continued to roll-out Nectar Prices across different promotional offers in
supermarkets, including our popular multi-save wine events and dine-in meal
deals and we are enhancing the Nectar offer with market-leading, exclusive
value events with some of the biggest brands in the UK
· Overall supermarket customer satisfaction remains significantly ahead of key
competitors, putting us in a strong position as we head into the peak
Christmas period(16)
Growing our supermarket coverage and leveraging our existing space to bring
more of our range to more customers
· In recent weeks we have acquired 13 new supermarkets in key target locations
from Homebase and Co-op(17). Combined with our organic store opening
programme, this means we expect to open around 20 supermarkets within the next
18 months. The addition of these new stores will bring our quality and value
to new customers, with the addition of around 400,000 sq ft of supermarket
trading space to our footprint and brings more than 600,000 more people within
a 10-minute drive of Sainsbury's supermarkets. We expect strong returns from
these investments, with forecast return on capital employed in the low teens.
We additionally continue to expect to open around 25 new Convenience stores
per year
· We continue to expect core retail cash capital expenditure in 2024/25 of £800
million to £850 million, with an additional strategic investment in Smart
Charge, our EV charging business, of £25 million (lower than the previous
guidance of £70 million). Our 2024/25 Retail free cash flow guidance is
unchanged, with the impact on free cash flow of lower EV charging spend offset
by the lease premium paid on the acquisition of 11 Homebase stores and 2 Co-op
stores
· Our 'More for More' plan builds on the strength of our grocery performance,
capitalising in particular on the strength of our Fresh food proposition. We
are investing in our supermarkets over the next three years to make more of
our food range available for more of our customers by rebalancing space to add
around 300,000 sq ft of incremental food space. As we optimise our stores for
customer experience, trading intensity and ROCE, we are making more of the
right range and propositions accessible to customers, creating an environment
which enables simple and frictionless shopping missions and improving our
digital capabilities across our supermarkets
Delivering for customers across all our channels with a focus on enhancing our
Convenience store offering
· Convenience sales grew 5 per cent in H1 and we grew market share by 30 basis
points(18). Overall customer satisfaction improved by two percentage points
and satisfaction with availability of products improved by four percentage
points(19)
· We have transformed our Convenience estate in recent weeks, accelerating plans
to address a clear opportunity to better serve our customers. In just two
weeks we rebalanced space and optimised range across our entire Convenience
estate, introducing more than 600 new products. These changes better align our
range with relevant customer missions and the space changes improve the store
environment to deliver a simpler, faster shopping experience
· This week we announced a further strengthening of our value position, as the
only grocer in the market to price match to Aldi in convenience stores. The
offer covers a range of up to 200 of the products that customers buy most
often, across the categories where value matters most
· Groceries Online sales grew 7 per cent in H1, with an increase in basket size
driven by improvements in our digital experience, focusing on greater
showcasing of innovation and promotions on our homepage. These improvements
are resonating with customers, with our Groceries Online customer satisfaction
moving ahead of key competitors(20)
· OnDemand sales grew 86 per cent over the half as we continue to roll out our
offer to more locations. We are strengthening our long-term partnerships with
external providers, have integrated our ChopChop service within our Groceries
Online app and we are delivering strong profit growth, driven by operating
model improvements
Taking a leading position in driving resilience and improving sustainability
in the UK food system
· We have continued to focus on innovation within packaging as the first major
retailer to vacuum pack all lamb mince, using 65 per cent less plastic, and
the first retailer to introduce pulp trays for our fresh salmon and trout
products. We have also introduced cardboard packaging for our fresh breaded
chicken and fish products, saving 649 tonnes of plastic a year. New packaging
across bakery will also deliver a reduction of over 560 tonnes of plastic a
year
· We were also the first UK supermarket to introduce mushrooms that have been
grown without peat, reducing peat usage by 20,465 tonnes per year, as well as
launching Vitamin D enriched mushrooms - enabling us to deliver over 100
million portions of Vitamin D to the nation every year(21)
· We are taking a leadership position on pay for egg farmers as the first UK
retailer to launch an egg farmer group to provide greater financial security
for future investment and to drive continuous improvement in animal welfare
through data and insight sharing across farms
· In collaboration with Woodland Trust, we have launched an agroforestry
initiative to support farmers and growers with planting plans to enable new
farming practices and to support a more positive environmental impact
Improving performance in the products and services that sit alongside our food
offer
· Tu Clothing sales grew 1.3 per cent during the first half, benefitting from
stronger Q2 sales growth of 8.3 per cent. Significant improvements in
availability and style have driven market share gains(22) and a strong
performance in Womenswear over the summer, with sales growth of 10 per cent in
Q2. Our Autumn Winter range is benefitting from our renewed focus on design
and our Christmas clothing ranges are already performing significantly ahead
of last year. We have also identified additional opportunities to improve our
essentials range as well as our kids and babywear offering
· Sainsbury's General Merchandise sales declined (4.4) per cent, driven by
softer demand for consumer electronics and toys within the Sainsbury's channel
and the early impact of space reallocation through our More for More
programme. We are making strong progress in repositioning the Habitat brand,
with Habitat sales ahead of last year as our focus on design-led
collaborations resonates with customers
· Smart Charge, our ultra-rapid EV charging network, is now established in 62
supermarket locations with more than 500 charging bays. In June, we launched
Nectar on Smart Charge and 60 per cent of Nectar Smart Charge customers are
shopping with Sainsbury's whilst charging. We are shifting our focus towards
optimising our existing sites, particularly on building links to fleet card
providers and location service providers and continuing to enhance our
customer offer. In line with this focus, we are now aiming to have rolled out
to 70 locations by the end of the financial year versus an original target of
100 locations
Loyalty everyone loves
We are continuing to build a world-leading loyalty platform, focusing on a
personalised and rewarding Nectar loyalty scheme alongside market-leading
insights and retail media capabilities through Nectar360. We have a very
strong position within the fast-growing UK retail media market and are pleased
with the progress we are making in delivering profitable growth, returns for
our clients, building agency partnerships, extending our coalition programme
and further expanding our connected digital screen network.
Nectar Prices and personalised loyalty are central in our plan to win primary
shoppers
· Nectar Prices is now fully established as a vital component of our value
offering, with over five million customers shopping our offers each week. This
is driving improved value perception as well as greater customer loyalty, with
Nectar participation up 6 percentage points year-on-year(23) and £2 billion
of savings delivered to customers since launch
· Your Nectar Prices has now been live on Groceries Online for a year, with one
million customers regularly accessing personalised savings and £70 million
saved by customers in the last year
· We continue to advance our personalisation capability, extending the range and
reach of our offers as well as creating more individual customer engagement.
Our annual Great Big Fruit and Veg Challenge performed better than ever before
with more than 780,000 customers participating, an increase of 10 per cent
year-on-year, and over 130 million portions of fruit and veg purchased. We
expect more than one million customers to participate in our annual Collect
for Christmas campaign, enabling them to collect additional points to spend
over the festive period
Making strong progress in growing our Nectar360 capabilities
· We continue to grow the Nectar Coalition with two exciting new partnerships.
Launching in early FY25/26, customers will be able to earn points on bookings
with Marriott Bonvoy, Marriott International's travel programme, across a
portfolio of more than 30 hotel brands globally and from Autumn this year our
new partnership with Severn Trent Water will nudge customers towards more
considered water consumption behaviours. Alongside this, we have extended our
successful partnership with British Airways, and our affiliate network Nectar
eShops has grown to over 800 partners, more than double the number of partners
we had in November 2023
· Our agency partnerships continue to grow and we are gaining strong brand
budget investment into our digital retail media services. We have strong
partnerships with all the big four agency groups and have widened our
relationships with independent agencies. During the half, we have deepened our
partnership with two of the big four media agency groups to grant them greater
access to innovations and insights, which will enable enhanced client outcomes
· We are making good progress in building the connected digital screen network
across our store estate, allowing customers to engage with dynamic digital
content. Our Sainsbury's Live partnership with Clear Channel is on track to
reach 800 screens by year-end and we are adding an additional 200 screens as
part of our store digitisation programme this year
More Argos, more often
In a highly competitive General Merchandise market, our strategic focus is on
increasing the frequency of customer visits and growing basket size, alongside
continuing to reduce costs and complexity within the Argos operating model. We
are taking focused action to strengthen the breadth and depth of our ranges
and improve our digital experience whilst at the same time reducing cost to
serve. After a difficult first quarter, we are making progress in delivering
our key change programmes and further strengthening capabilities and capacity
to deliver transformation across Argos.
Sales trend stronger through the second quarter and into the early weeks of Q3
· Argos sales were below our expectations in the half, particularly in the first
quarter and the early weeks of the second quarter, primarily reflecting a slow
start to the Summer and a reduction in online traffic
· Profit margins were impacted by lower sales, leading to heavier promotional
activity and discounting, particularly in seasonal categories. This was
partially offset by operating cost reductions
· Sales strengthened during the second quarter and into the early weeks of the
third quarter, reflecting strategic actions we have taken to improve customer
traffic and volume trends, disciplined clearance activity and better weather
against a weaker comparative
Delivering for our customers with improved range, great value events and an
enhanced digital experience
· We remain focused on extending the breadth of our range and improving customer
perceptions of our product selection. We continue to introduce new brands
through our Supplier Direct Fulfilment model which has driven 7 per cent sales
growth, with more than 1,600 new products across 25 brands launched in the
first half
· We continue to strengthen partnerships with key suppliers, improving ranges
and securing leading stock allocations on the most in demand items, driving
strong market shares on new technology and gaming product launches in
particular(24)
· We've reset our approach to trading events, with more impactful and focused
value activity driving improvements in customer satisfaction scores for
promotions and value(25). Our Big Red promotional events, which we launched
during the first half, included more than 9,000 products across our full range
of categories, covering our most popular brands
· We are taking action to grow our digital presence and traffic, ensuring Argos
is top of mind for more customers. We're making progress to deliver a more
personalised online experience, with homepage enhancements already driving
increased click through rates and improved add-on recommendations delivering
basket size growth
Driving efficiency, speed and productivity across our operating model
· More and more customers are choosing to shop Argos digitally and our stores
are increasingly being used as a best-in-class collection network, with
customers really valuing our consistently fast, convenient and efficient
service. We are continuing to enhance our operating model, refining our
approach to clustering our stores and identifying key efficiencies which can
drive improved productivity. In addition to right-sizing the standalone store
estate (78 fewer standalone stores since the start of last financial year), we
are tailoring store operating models by cluster, reducing cost and improving
service
· We are taking action to deliver smarter, simpler stock flow, optimising
working capital and availability across our network, with a focus on greater
forecast accuracy and improved stock management processes
· During the first half we released phase one of our new warehouse management
system, an important step in our plans for building a more efficient,
right-sized replenishment network. We have also completed a significant
proportion of the automation build for our integrated General Merchandise
warehouse and we are on track to go live in Summer 2025
Save and invest to win
We are making good progress against the ambitions we laid out in February 2024
and we are on track to deliver £1 billion of cost savings by March 2027. We
are investing in high-returning activity that is driving growth as well as
removing cost.
Delivering productivity benefits through end-to-end programmes
· We have now completed the main phase of migration of our Food products to
machine learning forecasting, resulting in an availability improvement of 170
bps. This has additionally driven reductions in stock holdings and a
significant reduction in waste. We have started design work to move Clothing
on to the same forecasting platform
· We are making a number of propositional simplifications in supermarkets to
reduce the need for secondary stock replenishment and to drive range
optimisation. We have rolled out shelf pushers and dividers across several
sub-categories in the half, driving colleague efficiencies as well as improved
customer experience through better stock presentation and visibility. We are
also conducting category resets in Grocery, rationalising ranges and display
of products to improve the efficiency of primary and secondary replenishment
· We are making good progress with the early rollout of intelligent automation
in stores, for example by trialling automated identification of on-shelf stock
gaps. We are also establishing a machine learning model to optimise markdowns
on near-dated products, aiming to reduce waste costs and improve colleague
efficiencies. This is a key contributor to our Plan for Better target of
reducing the amount of unsold food that goes to waste
· We are entering the next phase of rolling out end-to-end efficiency changes in
our Pop In and Out supermarket cluster of around 90 stores. We have already
delivered profit improvements in these stores over the last two years through
optimising ranges and streamlining the operating model through reduced
deliveries, waste and replenishment costs
High returning investments in technology and automation driving efficiencies
· We are on track to complete our three-year future front-end programme of
optimising our checkouts in all of our supermarkets by the end of 2024/25,
with 523 supermarkets completed by the end of the first half. On average, this
has delivered an uplift in self-service participation of around 21 per cent,
while also delivering significant cost savings. We are now entering the next
phase of our front-end strategy, which aims to drive growth in SmartShop
participation for big basket shops and improve the functionality of SmartShop
handsets
· We are simplifying our technology processes and optimising costs using cloud
technology. We have announced a partnership with SAP, Accenture and AWS to
consolidate our core commercial systems into a single cohesive platform, using
cloud-based solutions
· We are rolling out video analytics technology in stores to protect against
shrink costs. We are seeing positive early results in identifying mis-scanned
items and we expect to roll this technology out to up to 200 stores by year
end, and further roll out at pace through the next financial year
· We remain committed to investing in sustainable technologies, having been the
first UK retailer to start purchasing wind energy directly to power our
business back in 2008. With the completion of Pines Burn Wind Farm in Scotland
in October 2024, we are now buying 100 per cent of the energy generated from
eight wind farms across the UK
Financial Services
· Financial Services underlying operating profit grew by 38 per cent in the
first half to £18 million, driven by lower expenses due to improved cost
management, lower bad debts due to reduced new lending and growth in
commission income, partially offset by higher funding costs
· In January we announced a phased withdrawal from core Banking (loans, credit
cards and deposits), moving to a model where financial services that are
complementary to the retail offer will be provided by third parties. We have
made good progress over recent months in implementing this plan
· We announced in June that we have entered into an agreement for the sale of
Sainsbury's Bank personal loan, credit card and retail deposit portfolios to
NatWest Group. The transaction is expected to complete in the first half of
calendar year 2025
· In September, we announced the sale of Sainsbury's Bank ATM business,
comprising around 1,370 cash machines, to NoteMachine to provide end-to-end
ATM managed services. The deal provides a shared commission income stream
· At the end of October, we announced the sale of the Argos Financial Services
("AFS") cards portfolio to NewDay Group. The AFS cards support around 20 per
cent of Argos sales and are held by around two million Argos customers. We
additionally announced that we will be partnering with NewDay to create a new
Argos-branded digital credit proposition. This will, in time, replace the
current Argos credit card propositions with a wider choice of modern, flexible
and more convenient ways to manage the cost of purchases. Completion is
expected to occur in the first half of calendar year 2025
· Following these transactions, we will continue to benefit from financial
services income streams which have a stronger connection to our retail offer.
We expect the combination of commission income from insurance, travel money
and ATMs alongside income from the NewDay partnership to deliver sustainable
annual income from financial services of at least £40 million in the
financial year to March 2028
· We continue to expect Sainsbury's Bank to return excess capital of at least
£250 million to Sainsbury's, which we intend to return to shareholders. We
will provide an update of the potential timing of this expected cash return
with our Preliminary Results in April 2025
Like-for-like sales performance inc. Argos Republic of Ireland 2023/24 2024/25
Q1 Q2 Q3 Q4 Q1 Q2 H1
Like-for-like sales (exc. fuel) 9.8% 6.6% 7.4% 4.8% 2.7% 4.2% 3.4%
Like-for-like sales (inc. fuel) 3.9% 2.2% 5.3% 2.9% 2.4% 1.9% 2.2%
Total sales performance inc. Argos Republic of Ireland 2023/24 2024/25
Q1 Q2 Q3 Q4 Q1 Q2 H1
Sainsbury's 9.9% 7.5% 8.4% 6.5% 4.2% 5.1% 4.6%
Grocery 11.0% 8.9% 9.3% 7.3% 4.8% 5.3% 5.0%
GM (Sainsbury's) & Clothing (2.5)% (8.7)% (0.3)% (5.5)% (4.3)% 2.2% (1.5)%
Argos (inc. ROI) 5.1% (2.6)% (0.9)% (6.6)% (7.7)% (1.4)% (5.0)%
Total Retail (exc. fuel) 9.2% 5.8% 6.5% 4.3% 2.3% 4.1% 3.1%
Fuel (21.4)% (17.1)% (7.2)% (7.8)% 0.4% (10.6)% (4.4)%
Total Retail (inc. fuel) 3.3% 1.5% 4.4% 2.4% 2.1% 1.9% 2.0%
Total sales performance - 2023/24 2024/25
previously reported categorisation
Q1 Q2 Q3 Q4 Q1 Q2 H1
Total General Merchandise: 4.0% (2.6)% (0.6)% (5.6)% (7.3)% (1.7)% (4.9)%
GM (Sainsbury's) (1.2)% (2.7)% 0.9% 0.4% (5.3)% (3.3)% (4.4)%
GM (Argos) (inc. ROI) 5.1% (2.6)% (0.9)% (6.6)% (7.7)% (1.4)% (5.0)%
Clothing (3.7)% (14.6)% (1.7)% (11.7)% (3.3)% 8.3% 1.3%
Total sales performance exc. Argos Republic of Ireland 2023/24 2024/25
Q1 Q2 Q3 Q4 Q1 Q2 H1
Sainsbury's 9.9% 7.5% 8.4% 6.5% 4.2% 5.1% 4.6%
Grocery 11.0% 8.9% 9.3% 7.3% 4.8% 5.3% 5.0%
GM (Sainsbury's) & Clothing (2.5)% (8.7)% (0.3)% (5.5)% (4.3)% 2.2% (1.5)%
Argos (exc. ROI) 6.1% (0.1)% 1.7% (4.7)% (6.2)% (1.4)% (4.2)%
Total Retail (exc. fuel) 9.3% 6.2% 7.1% 4.7% 2.6% 4.1% 3.2%
Fuel (21.4)% (17.1)% (7.2)% (7.8)% 0.4% (10.6)% (4.4)%
Total Retail (inc. fuel) 3.5% 1.9% 4.9% 2.7% 2.3% 1.9% 2.1%
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 9:15 (GMT). This will
be available to view on our website at the following link:
https://sainsburys-24-25-interim-results-announcement.open-exchange.net/
(https://sainsburys-24-25-interim-results-announcement.open-exchange.net/)
A recorded copy of the webcast and Q&A call, alongside slides and a
transcript of the presentation will be available at
www.about.sainsburys.co.uk/investors/results-reports-and-presentations
(http://www.about.sainsburys.co.uk/investors/results-reports-and-presentations)
following the event.
Sainsbury's will issue its 2024/25 Third Quarter Trading Statement at 07:00
(GMT) on 10 January 2025.
Enquiries
Investor Relations Media
James Collins Rebecca Reilly
+44 (0) 7801 813 074 +44 (0) 20 7695 7295
1 £m Contribution - Sainsbury's / Argos operating profit before Group cost
allocation
2 CSAT Supermarket Competitor Benchmarking data - H1 2024/25 scores. Quality
of Items, Value for Money Spent, Overall Satisfaction
3 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Volume Share of Market by
Mission - Main Shop, YoY share % change, 28 weeks to 15 September 2024
4 Kantar Panel data. Total FMCG (excl. Kiosk and Tobacco). Grocery Volume YoY
market share gain. 12 weeks to 15 September 2024
5 Kantar Panel data. Total FMCG (exc. Kiosk and Tobacco). Retailer to/ from
net volume switching, 28 weeks to 1 September 2024
6 YouGov Brand Index - Supermarket Value for Money Perception metric %,
Largest YoY increase since FY09/10
7 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Primary shopper numbers
growth YoY, 28 weeks to 15 September 2024
8 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Packs per trip (basket
size), YoY % growth, 28 weeks to 15 September 2024
9 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Volume by category, YoY %
growth by Retailer, 28 weeks to 15 September 2024
10 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Shoppers Primary &
Secondary churn, 28 weeks to 15 September 2024
11 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), % of baskets containing
Premium Own Label tier
12 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Premium Own Label trip
penetration - % of Main Shop baskets containing Premium Own Label tier
13 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Premium Own Label tier,
YoY % value growth, 28 weeks to 15 September 2024
14 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Premium Own Label tier
switching gains, 28 weeks to 1 September 2024
15 Kantar Panel, Total FMCG (exc. Kiosk and Tobacco), Premium Own Label tier,
YoY % Fresh value growth by category, 28 weeks to 15 September 2024
16 CSAT Supermarket Competitor Benchmarking data - Q2 2024/25 - Overall
Satisfaction
17 Two Co-op stores completing in H2 2024/25
18 Nielsen EPOS. Convenience market share - H1 YoY growth. 28 Weeks to 15
September 2024
19 CSAT Convenience Competitor Benchmarking data - Q2 2024/25. Availability of
Products, Overall Customer Satisfaction
20 CSAT Groceries Online Competitor Benchmarking data - Q2 2024/25 Overall
Satisfaction
21 Conventional mushrooms grown without peat + White and Chestnut mushrooms
enriched with Vitamin D
22 Kantar Panel, Total Clothing, Footwear and Accessories. Retailer share of
volume - YoY% share gains. 24 weeks ending 15 September 2024
23 Nectar participation - Supermarkets and Groceries Online
24 Argos value market share of total GFK GM market - Apple Sales September
2024 & PlayStation sales 6 months to September 2024
25 Argos Customer Satisfaction - internal measure. Q2 2024/25 - Value for
Money and Appealing Promotions
Financial Review for the 28 weeks to 14 September 2024
A number of Alternative Performance Measures ("APMs") have been adopted by the
Directors to provide additional information on the underlying performance of
the Group. These measures are intended to supplement, rather than replace the
measures provided under IFRS. Underlying performance measures are reconciled
to their IFRS equivalents on the face of the income statement with
non-underlying items set out in more detail in note 5 to the financial
statements. Other APMs are defined and reconciled to the nearest IFRS measures
in notes A1.1 to A4.2. Underlying performance within this Financial Review
refers to the Group's performance on a continuing operations and discontinued
operations basis before non-underlying items, unless where otherwise stated.
The comparative results have been re-presented, as Core Banking, ATM
operations and Mortgages have been classified as discontinued operations as
part of the strategic review of financial services. AFS cards portfolio
continues to be presented within continuing operations. Further details can be
found in note 7.
Summary income statement 28 weeks to 28 weeks to Change
14 September 2024 16 September 2023
£m £m %
Group sales (excluding VAT) 17,370 16,983 2.3
- Continuing 17,203 16,813 2.3
- Discontinued 167 170 (1.8)
Retail sales (excluding VAT) 17,050 16,665 2.3
Retail sales (including VAT, excluding fuel) 16,297 15,805 3.1
Underlying operating profit
Retail 503 485 4
Financial services 18 13 38
- Continuing (11) (26) 58
- Discontinued 29 39 (26)
Total underlying operating profit 521 498 5
Underlying net finance costs - continuing (165) (158) (4)
Underlying profit before tax 356 340 5
Items excluded from underlying results (225) (65) (246)
- Continuing (70) (51) (37)
- Discontinued (155) (14) n/a
Profit before tax 131 275 (52)
Income tax expense (55) (120) 54.
- Continuing (83) (114) 27
- Discontinued 28 (6) n/a
Profit for the financial period 76 155 (51)
- Continuing 174 136 28
- Discontinued (98) 19 n/a
Underlying basic earnings per share 10.7p 10.5p 1.9
Underlying diluted earnings per share 10.6p 10.3p 2.9
Basic earnings per share 3.2p 6.6p (51.5)
Diluted earnings per share 3.2p 6.5p (50.8)
Interim dividend per share 3.9p 3.9p -
Retail sales
Total sales (including VAT) performance by category 28 weeks to 28 weeks to Change
On a continuing basis 14 September 2024 16 September 2023
£bn £bn %
Sainsbury's 14.0 13.4 4.6
Grocery 13.1 12.4 5.0
GM (Sainsbury's) & Clothing 0.9 0.9 (1.5)
Argos 2.3 2.4 (5.0)
Total Retail Sales (exc. fuel) 16.3 15.8 3.1
Fuel sales 2.6 2.7 (4.4)
Retail (inc. fuel) 18.9 18.5 2.0
Retail like-for-like sales performance 28 weeks to 28 weeks to
14 September 2024 16 September 2023
Like-for-like sales (exc. fuel) 3.4% 8.4%
Like-for-like sales (inc. fuel) 2.2% 3.2%
Grocery sales increased 5.0 per cent, driven primarily by food volume growth.
We have continued to prioritise value for customers through additional
investment in Aldi Price Match as well as Your Nectar Prices. Customers'
perceptions of our value continue to make significant improvement, catching up
with the progress we have made on our actual value position in recent years.
This has driven volume increases across all major categories as we gain more
spend from existing shoppers and more customers come to Sainsbury's for their
big shop. Volumes in our Taste The Difference premium private label range have
grown ahead of overall grocery sales and led the market, with customers
trading up for special occasions and when dining in rather than dining out.
General merchandise & Clothing sales in Sainsbury's decreased by 1.5 per
cent, primarily reflecting softer demand for consumer electronics and toys,
partially offset by an increase in Clothing sales as a result of improvements
in availability and style, as well as Womenswear and Back To School ranges
both being well received.
Argos sales were below expectations, decreasing by 5 per cent. This was
particularly due to a tough first quarter primarily reflecting a slow start to
summer due to the impact of the weather, weak demand for higher ticket items
and slower online traffic. Stripping out the effect of the closure of Argos in
the Republic of Ireland, Argos sales decreased by 4.2 per cent.
Fuel sales decreased by 4.4 per cent, reflecting declining market volumes and
a lower average pump price year-on-year.
Total sales (including VAT) performance by channel 28 weeks to 28 weeks to
On a continuing basis 14 September 2024 16 September 2023
% %
Total Sales fulfilled by Supermarket stores 4.7 9.6
Supermarkets (inc. Argos stores in Sainsbury's) 4.3 10.8
Groceries Online 7.3 2.3
Convenience 4.9 10.5
Sales fulfilled from our supermarkets grew by 4.7 per cent, driven mainly by
volume growth. Groceries online sales increased by 7.3 per cent, reflecting
stronger growth in the online grocery market and market share gains, driven by
improvements to the customer digital experience, availability and service.
Convenience sales increased by 4.9 per cent, outperforming the wider
convenience market and benefiting from strong growth of our On Demand delivery
business.
Space
Between March and September 2024, Sainsbury's opened one new supermarket and
six new convenience stores and closed one convenience store.
Alongside this, we opened three new Argos stores in Sainsbury's and eight new
Argos collection points within Sainsbury's. We closed six Argos standalone
stores and two Argos collection points within Sainsbury's stores. The net
result was an increase in total Argos points of presence to 1,118 versus 1,115
at 2 March 2024.
Store numbers and retailing space As at New stores Disposals / Closures Extensions / refurbishments / reclassifications(b)) As at 14 September 2024
2 March 2024(a))
Supermarkets 597 1 - 1 599
Supermarkets area '000 sq. ft. 20,857 13 - 10 20,880
Convenience 834 6 (1) (1) 838
Convenience area '000 sq. ft. 2,016 17 (2) (10) 2,021
Sainsbury's total store numbers 1,431 7 (1) - 1,437
Argos stores 213 - (6) - 207
Argos stores in Sainsbury's 446 3 - - 449
Argos total store numbers 659 3 (6) - 656
Argos collection points 456 8 (2) - 462
a) Space (sq. ft.) adjusted at 2 March 2024 to include the net change of all
store re-measures throughout the year including those made post- investment
b) One convenience was reclassified to Supermarket during the period
In total for 2024/25, we are expecting to open four supermarkets, one of which
has already been opened, and 25 convenience stores, where six have already
been opened. We are expecting to close two supermarket stores and two
convenience stores.
As at 14 September 2024, we have also acquired 11 stores from Homebase and
will convert these to Sainsbury's supermarkets. We aim to open the first of
these stores next summer and complete the conversion of all sites by the end
of December 2025. We have acquired an additional two stores from Coop since
the interim date.
For the full financial year we expect to open 13 Argos stores within
Sainsbury's and close nine standalone stores.
Retail underlying operating profit
On a continuing basis Note(a)) 28 weeks to 28 weeks to Change
14 September 2024 16 September 2023
Retail underlying operating profit (£m) A1.2 a) 503 485 3.7%
Retail underlying operating margin (%) A1.2 a) 2.95 2.91 4 bps
Retail underlying EBITDA (£m) A1.2 d) 1,119 1,082 3.4%
Retail underlying EBITDA margin (%) A1.2 d) 6.56 6.49 7 bps
a) Note references for reconciliations refer to the Alternative Performance
Measures
Retail underlying operating profit was up 3.7 per cent, driven primarily by
the strong performance in our grocery business, with continued market share
gains and volume growth. We have continued to protect value for customers
through our ongoing cost savings programme, helping to mitigate the impact of
rising operating costs on our products, driving continued improvement in
customers' value perception and increasing customer loyalty. The impact on
profit growth of our strong grocery performance was partially offset by a
lower Argos contribution versus last year due to the impact of poor weather,
weaker consumer demand and a high level of promotional activity.
In 2024/25, Sainsbury's expects retail underlying operating profit of between
£1,010 million and £1,060 million, growth of between five per cent and ten
per cent.
Retail underlying EBITDA increased to £1,119 million (HY 2023/24: £1,082
million) and retail underlying EBITDA margin improved 7 basis points to 6.56
per cent (HY 2023/24: 6.49 per cent). In 2024/25, Sainsbury's expects a retail
underlying depreciation and amortisation charge of around £1.2 billion
(2023/24: £1.11 billion), including around £0.5 billion right-of-use asset
depreciation.
Financial Services
Personal loans, credit cards and retail deposit portfolios (together the "Core
Banking Business"), which are agreed to be sold to NatWest Group; ATM
operations classified as held for sale; and the previously disposed mortgages
operations have been classified as discontinued operations as they form part
of the single co-ordinated plan to move to a distributed financial services
model as announced in January 2024. The comparative period has been
re-presented to reflect this classification.
Financial Services results
6 months to 31 August 2024 2024 2023 Change
£m £m %
Sales 320 318 0.6
Continuing operations 153 148 3.4
Discontinued operations 167 170 (1.8)
Underlying operating profit / (loss) 18 13 38.5
Continuing operations (11) (26) 57.7
Discontinued operations 29 39 (25.6)
Underlying operating losses from continuing operations improved by £15
million in the 6 months to 31 August 2024, strong growth in Travel Money, Pet
Insurance and Argos Care and lower costs following a fixed asset write off in
January 2024.
Underlying profit on discontinued operations includes only costs wholly
associated with the provision of the Core Banking services and ATMs. There
remain a number of central and cross-product costs which are recognised within
continuing operations. AFS related income and costs are presented within
continuing operations as they did not meet the classification of discontinued
operations at the balance sheet date. Following the announcement on 31 October
2024, these will be classified as discontinued operations at the year end, and
the remaining costs will reduce as we right size the continuing business. We
expect total underlying profit from Financial Services to be in the range of
£15 million and £25 million.
Underlying net finance costs
Underlying net finance costs 28 weeks to 28 weeks to Change
On a continuing basis 14 September 2024 16 September 2023
£m £m %
Non-lease interest costs (41) (34) (20.6)
Non-lease interest income 14 11 27.3
Finance costs on lease liabilities (138) (135) (2.2)
Total underlying net finance costs (165) (158) (4.4)
Underlying net finance costs increased to £165 million (HY 2023/24: £158
million). This includes £27 million of net non-lease interest (HY 2023/24:
£23 million); the increase was driven by the £575 million term loan being
fully drawn in the 28 weeks to HY 2024/25, whereas it was only partially drawn
in stages in the 28 weeks to HY 2023/24. This was partly offset by increased
interest income as we benefitted from higher interest rates.
Sainsbury's expects underlying net finance costs in 2024/25 of between £310
million and £320 million, including around £260 million in lease costs.
Items excluded from underlying results
To provide 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
14 September 2024 16 September 2023
£m £m
From Continuing operations:
Financial Services phased withdrawal (29) -
Retail restructuring programme (37) (32)
Impairment of non-financial assets (12) -
IAS 19 pension income 14 21
Other (6) (40)
Items excluded from underlying results from continuing operations (70) (51)
From Discontinued operations:
Financial Services loss on disposal (104) (14)
Financial Services phased withdrawal (51) -
Total items excluded from underlying results from discontinued operations (155) (14)
Total items excluded from underlying results (225) (65)
Continuing operations
Costs associated with the strategic review of financial services announced in
January 2024 comprise £17 million of onerous contracts, employee costs of £8
million and consultancy fees of £4 million.
Retail restructuring programme costs of £37 million (HY 2023/24: £32
million) related to the multi-year restructuring programme announced in
November 2020. Cash costs in the period were £29 million (HY 2023/24: £40
million). Most of the programme has now completed, with costs incurred to date
of £878 million, and cash costs of £299 million.
IAS 19 Pension income decreased to £14 million (HY 2023/24: £21 million),
driven by the lower opening surplus compared to the prior year.
Other costs relate to £9 million of acquisition adjustments and
non-underlying finance costs of £5 million, offset by a £5 million gain on
disposal of non-trading properties and a £3 million gain on fair value
movements on fixed price power purchase arrangements (HY 2023/24: £6 million
of property losses, £8 million of acquisition adjustments and £26 million of
non-underlying finance and value adjustments).
Discontinued operations
The loss of £104 million primarily relates to the sale of the core banking
portfolios. It is comprised of the difference between the carrying amount of
the net assets to be disposed and the agreed selling price, and disposal costs
including those required to migrate the portfolio to NatWest. During 2023/24,
the Group disposed of its mortgage portfolio for proceeds of £446 million.
This resulted in a loss on disposal of £14 million.
Costs of £51 million associated with the withdrawal primarily relate to
onerous contracts, loss on derivatives no longer classified in an effective
hedge relationship, and employee costs.
We expect to incur retail non-underlying cash costs of around £100 million
for 2024/25, of which £29 million were incurred in H1 2024/25.
Taxation
The total tax charge was £55 million (HY 2023/24: tax charge of £120
million), comprising a tax charge of £83 million (HY 2023/24: tax charge of
£114 million) relating to continuing operations and a tax credit of £28
million (HY 2023/24: tax charge of £6 million) relating to discontinued
operations. The underlying tax rate was 29.2 per cent (HY 2023/24: 27.6 per
cent) and the effective tax rate was 42.1 per cent (HY 2023/24: 43.6 per
cent).
The effective tax rate for the half year is higher than the headline tax rate
due to the effect of depreciation charged on assets which do not qualify for
capital allowances. The impact of non-deductible expenses incurred on the
Financial Services restructuring is reflected in the higher total effective
tax rate for the period.
We expect an underlying tax rate in 2024/25 of around 30 per cent.
Earnings per share
Statutory basic EPS decreased to 3.2 pence (HY 2023/24: 6.6 pence) due to the
costs associated with the Financial Services phased withdrawal. Statutory
diluted EPS also decreased to 3.2 pence (HY 2023/24: 6.5 pence).
Underlying basic EPS increased to 10.7 pence (HY 2023/24: 10.5 pence), due to
an increase in underlying earnings. Underlying diluted EPS increased to 10.6
pence (HY 2023/24: 10.3 pence).
Dividends
The Board has recommended an interim dividend of 3.9 pence per share (HY
2023/24: 3.9 pence). This will be paid on 20 December 2024 to shareholders on
the Register of Members at the close of business on 15 November 2024.
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 29 November 2024.
For the financial year 2024/25, as per our capital allocation policy, we are
committed to a progressive dividend policy. We have also announced the
commencement of a share buyback programme. We will buy back £200 million of
shares in 2024/25 (of which we bought back £136 million in the first half)
and we will review the level of cash return to shareholders through share
buybacks on an annual basis.
A DRIP is provided by Equiniti Financial Services Limited. The DRIP enables
the Company's shareholders to elect to have their cash dividend payments used
to purchase the Company's shares. More information can be found at
www.shareview.co.uk/info/drip (http://www.shareview.co.uk/info/drip)
Net debt and Retail cash flows
Summary Retail cash flow statement Note (a))
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March
2024
£m £m £m
Retail underlying operating profit 4 503 485 966
Adjustments for:
Retail underlying depreciation and amortisation 616 597 1,112
Share-based payments and other 32 36 78
Adjusted retail underlying operating cash flow before changes in working 1,151 1,118 2,156
capital
Decrease in underlying working capital b) 179 273 262
Retail non-underlying operating cash flows (excluding pensions) (29) (40) (72)
Pension cash contributions (23) (23) (44)
Retail cash generated from operations 1,278 1,328 2,302
Interest paid (182) (166) (323)
Corporation tax paid (22) (17) (58)
Retail net cash generated from operating activities 1,074 1,145 1,921
Cash capital expenditure (394) (389) (814)
Repayments of lease liabilities (243) (252) (505)
Initial direct costs on right-of-use assets (34) (11) (6)
Proceeds from disposal of property, plant and equipment 7 16 16
Interest income b) 15 11 27
Retail free cash flow 425 520 639
Dividends paid on ordinary shares (217) (215) (306)
Share buyback (136) - -
Net (repayment)/drawdown of borrowings (22) 555 534
Net consideration paid for Highbury and Dragon property transaction - (670) (670)
Other share related transactions (12) (7) (3)
Financial Services Strategic Review (10) - -
Net increase in cash and cash equivalents 28 183 194
Decrease/(increase) in debt 265 (303) (29)
Highbury and Dragon non-cash lease movements - 1,042 1,042
Other non-cash and net interest movements c) (323) (221) (417)
Movement in net debt 12 (30) 701 790
Opening net debt 12 (5,554) (6,344) (6,344)
Closing net debt 12 (5,584) (5,643) (5,554)
of which
Lease liabilities 12 (5,432) (5,412) (5,354)
Net debt excluding lease liabilities (152) (231) (200)
a) Note references relate to Alternative Performance Measures in Notes A2.1
and A2.2.
b) The Group cash flow statement now classifies interest received within cash
flows from investing activities to provide greater clarity over the Group's
cash flows whereby such cash flows had previously been included within cash
generated from operations. Refer to the Group cash flow statement.
c) Other non-cash movements include new leases and lease modifications and
fair value movements on derivatives used for hedging long-term borrowings
Adjusted retail underlying operating cash flow before changes in working
capital increased by £33 million year-on-year to £1,151 million (HY 2023/24:
£1,118 million), supported by an increase in retail underlying operating
profit. Cash inflow from reduced working capital of £179 million (HY2023/24:
£273 million) was £94 million lower year on year, primarily due to a lower
benefit year on year of timing-related payables. Retail non-underlying
operating cash flows of £29 million relate to restructuring costs. (HY
2023/24: £40 million). Pension cash contributions of £23 million remained
consistent with the prior year as no funding level events occurred.
We paid corporation tax of £22 million in the period (HY 2023/24: £17
million).
Cash capital expenditure was £394 million (HY 2023/24: £389 million),
broadly flat year-on-year. Sainsbury's continues to expect core retail cash
capital expenditure (excluding Financial Services) in 2024/25 to be £800
million to £850 million and now expects strategic investment in our EV
charging business of £25 million (previously £70 million).
The benefit to free cash flow from reduced EV investment will be offset by the
increased lease premium paid on the acquisition of Homebase stores and we
continue to expect to generate retail free cash flow of at least £500
million, in line with our commitment of generating at least £1.6 billion of
retail free cash flow over the next three years.
Initial direct costs of right-of-use assets were £34 million (HY 2023/24:
£11 million), of which £32 million were costs incurred on the acquisition of
Homebase stores.
Dividends of £217 million were paid in the period, covered 1.9 times by free
cash flow (HY 2023/24: 2.4 times). On 26 April 2024, the Group commenced a
share buyback programme to purchase shares of a maximum aggregate market value
of £150 million, of which £136 million had been purchased at the balance
sheet date. The remaining £14 million was purchased subsequent to the balance
sheet date, concluding Tranche One of the programme on 14 October 2024.
As of 14 September 2024, net debt was £5,584 million (2 March 2024: £5,554
million), an increase of £30 million. Excluding the impact of lease
liabilities, non-lease net debt decreased by £48 million in the period to
£152 million (2 March 2024: £200 million).
Net debt includes lease liabilities of £5,432 million (2 March 2023: £5,354
million). Lease liabilities have increased by £78 million, of which £27
million related to the acquisition of Homebase stores.
For the financial year ending 1 March 2025, the definition of retail free cash
flow has changed. This now excludes capital injections to, dividends from, and
any other exceptional cash movements with or on behalf of Sainsbury's Bank and
its subsidiaries. In the period to 14 September 2024, there have been £10
million of retail exceptional costs on behalf of Sainsbury's Bank relating to
core banking withdrawal which have been excluded from retail free cash flow.
Financial Ratios
Key financial ratios (a)) 14 September 16 September 2 March
2024 2023 2024
Return on Capital Employed 8.5% 7.9% 8.3%
Net debt to EBITDA 2.6x 2.6x 2.6x
Fixed charge cover 2.7x 2.6x 2.7x
a) Reconciliations are set out in notes A4.1, A3.2 and A4.2 of the APMs
Return on Capital Employed (ROCE) improved, reflecting increased retail
profits and lower average capital employed.
Sainsbury's continues to target leverage of 3.0x - 2.4x to deliver a solid
investment grade balance sheet. Net debt to EBITDA remains stable within the
targeted leverage range. Fixed charge cover is stable.
Defined benefit pensions
As at 14 September 2024, the net defined benefit surplus under IAS19 for the
Group was £751 million (excluding deferred tax). This represents a £61
million increase from the year-end date of 2 March 2024, primarily driven by
an increase in the value of the assets over the period. Liabilities have
increased due to a decrease in yields, and hence a lower discount rate, offset
slightly by a decrease in expected future inflation.
There was no change during the year to the previously disclosed triennial
valuation information. The next triennial valuation as at 30 September 2024
has now commenced; the Company will share the outcome when discussions have
completed in 2025.
For 2024/25, contributions to the defined benefit pension scheme are expected
to be £45 million.
As at 14 September 2024 As at 2 March 2024
Sainsbury's Argos Group Sainsbury's Argos Group
£m £m £m £m £m £m
Present value of funded obligations (5,270) (836) (6,106) (5,172) (816) (5,988)
Fair value of plan assets 5,912 970 6,882 5,777 925 6,702
Retirement benefit surplus 642 134 776 605 109 714
Present value of unfunded obligations (14) (11) (25) (14) (10) (24)
Retirement benefit surplus 628 123 751 591 99 690
Group income statement
28 weeks to 14 September 2024 28 weeks to 16 September 2023
(unaudited) (unaudited)
Underlying items Non-underlying items Total Underlying items Non-underlying items Total
(Note 3)
(Note 3)
Note £m £m £m £m £m £m
Continuing operations
Revenue 4 17,203 - 17,203 16,813 - 16,813
Cost of sales (15,965) (34) (15,999) (15,619) (65) (15,684)
Impairment loss on financial assets (23) - (23) (20) - (20)
Gross profit/(loss) 1,215 (34) 1,181 1,174 (65) 1,109
Administrative expenses (753) (53) (806) (744) (16) (760)
Other income 30 5 35 29 11 40
Operating profit/(loss) 492 (82) 410 459 (70) 389
Finance income 5 15 18 33 12 25 37
Finance costs 5 (180) (6) (186) (170) (6) (176)
Profit/(loss) before tax - continuing operations 327 (70) 257 301 (51) 250
Income tax (expense)/credit 6 (97) 14 (83) (85) (29) (114)
Profit/(loss) after tax - continuing operations 230 (56) 174 216 (80) 136
Profit/(loss) after tax - discontinued operations 7 22 (120) (98) 30 (11) 19
Profit/(loss) for the financial period 252 (176) 76 246 (91) 155
Total earnings per share 8 pence pence pence pence
Basic - total 10.7 3.2 10.5 6.6
Diluted - total 10.6 3.2 10.3 6.5
Earnings per share - from continuing operations
Basic - continuing 7.4 5.8
Diluted - continuing 7.3 5.7
52 weeks to 2 March 2024
(audited)
Underlying Non-underlying items Total
(Note 3)
items
Note £m £m £m
Continuing operations
Revenue 4 32,358 - 32,358
Cost of sales (30,007) (139) (30,146)
Impairment loss on financial assets (41) - (41)
Gross profit/(loss) 2,310 (139) 2,171
Administrative expenses (1,440) (115) (1,555)
Other income 52 6 58
Operating profit/(loss) 922 (248) 674
Finance income 5 30 51 81
Finance costs 5 (324) (12) (336)
Profit/(loss) before tax - continuing operations 628 (209) 419
Income tax (expense)/credit 6 (167) 4 (163)
Profit/(loss) after tax - continuing operations 461 (205) 256
Profit/(loss) after tax - discontinued operations 7 55 (174) (119)
Profit/(loss) for the financial period 516 (379) 137
Total earnings per share 8 pence pence
Basic - total 22.1 5.9
Diluted - total 21.6 5.7
Earnings per share - from continuing operations
Basic - continuing 11.0
Diluted - continuing 10.7
Comparative periods have been re-presented to separately disclose discontinued
operations
Group statement of comprehensive income/(loss)
28 weeks to 14 September 2024 28 weeks to 16 September 2023 52 weeks to 2 March 2024
(unaudited) (unaudited) (audited)
Note £m £m £m
Profit for the financial period 76 155 137
Items that will not be reclassified subsequently to the income statement
Remeasurement on defined benefit pension schemes 15 24 (46) (389)
Movements on financial assets at fair value through other comprehensive income - (1) 1
(OCI)
Cash flow hedges fair value movements - inventory hedges (23) (48) (67)
Current tax relating to items not reclassified - 1 10
Deferred tax relating to items not reclassified (6) 89 177
(5) (5) (268)
Items that may be reclassified subsequently to the income statement
Currency translation differences - (5) (3)
Movements on financial assets at fair value through other comprehensive income 2 (1) -
Items reclassified from financial assets at fair value through other - 1 -
comprehensive income reserve
Cash flow hedges fair value movements - non-inventory hedges (14) (24) (82)
Items reclassified from cash flow hedge reserve - 1 4
Deferred tax on items that may be reclassified 6 14 17
(6) (14) (64)
Total other comprehensive loss for the financial period (net of tax) (11) (19) (332)
Total comprehensive income/(loss) for the financial period 65 136 (195)
Analysed as:
Continuing operations 163 117 (76)
Discontinued operations (98) 19 (119)
65 136 (195)
Group balance sheet
14 September 2 March 16 September 2023
2024 2024
(unaudited) (audited) (unaudited)
Note £m £m £m
Non-current assets
Property, plant and equipment 9,178 9,282 9,148
Right-of-use assets 4,389 4,296 4,298
Intangible assets 811 806 1,009
Investments in joint ventures and associates 2 2 2
Financial assets at fair value through other comprehensive income 10 1,030 761 666
Trade and other receivables 36 108 73
Amounts due from Financial Services customers and other banks 10 2 1,467 1,508
Derivative financial assets 10 16 68 89
Net retirement benefit surplus 15 751 690 987
16,215 17,480 17,780
Current assets
Inventories 1,926 1,927 2,187
Trade and other receivables 683 582 669
Amounts due from Financial Services customers and other banks 10 844 3,050 3,313
Financial assets at fair value through other comprehensive income 10 248 17 36
Derivative financial assets 10 43 8 107
Cash and cash equivalents 11 1,591 1,987 2,067
5,335 7,571 8,379
Assets of disposal group and non-current assets held for sale 7, 14 3,086 10 10
8,421 7,581 8,389
Total assets 24,636 25,061 26,169
Current liabilities
Trade and other payables (5,093) (5,091) (5,278)
Amounts due to Financial Services customers and other deposits 10 (1,619) (5,515) (5,436)
Borrowings 13 (75) (65) (64)
Lease liabilities (520) (515) (473)
Derivative financial liabilities 10 (74) (28) (30)
Taxes payable (204) (125) (204)
Provisions (65) (113) (109)
Financial liabilities 12 (14) - -
(7,664) (11,452) (11,594)
Liabilities of disposal group held for sale 7, 14 (3,655) - -
(11,319) (11,452) (11,594)
Net current liabilities (2,898) (3,871) (3,205)
Non-current liabilities
Trade and other payables (15) (11) (13)
Amounts due to Financial Services customers and other deposits 10 (18) (206) (621)
Borrowings 13 (1,105) (1,130) (1,151)
Lease liabilities (4,912) (4,839) (4,939)
Derivative financial liabilities 10 (27) (59) (70)
Deferred income tax liability (368) (329) (424)
Provisions (259) (167) (134)
(6,704) (6,741) (7,352)
Total liabilities (18,023) (18,193) (18,946)
Net assets 6,613 6,868 7,223
Equity
Called up share capital 675 678 677
Share premium 1,447 1,430 1,427
Merger reserve 568 568 568
Capital redemption and other reserves (85) 955 997
Retained earnings 4,008 3,237 3,554
Total equity 6,613 6,868 7,223
Group statement of changes in equity
28 weeks to 14 September 2024 (unaudited) Note 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 3 March 2024 678 1,430 568 955 3,237 6,868
Profit for the period - - - - 76 76
Other comprehensive (loss)/income - - - (35) 24 (11)
Tax relating to components of other comprehensive income - - - 6 (6) -
Total comprehensive (loss)/income - - - (29) 94 65
Cash flow hedges gains transferred to inventory - - - 13 - 13
Transfer between reserves a), b) - - - (1,029) 1,029 -
Dividends 9 - - - - (217) (217)
Share-based payment - - - - 42 42
Purchase of own shares for share schemes - - - (32) - (32)
Allotted in respect of share option schemes 12 17 - 32 (42) 19
Purchase of own shares for cancellation 12 - - - (150) - (150)
Cancellation of own shares c) (15) - - 155 (140) -
Tax on items charged to equity - - - - 5 5
At 14 September 2024 675 1,447 568 (85) 4,008 6,613
a) The capital redemption reserve as at 3 March 2024 amounted to £680 million
and was created upon the redemption of class B shares following shareholder
approval at the Company's extraordinary general meeting held on 12 July 2004
to return £680 million of share capital. The final redemption date for such
class B shares was 18 July 2007 with all transactions relating to the class B
shares therefore completed. Following approval by the High Court registered on
31 July 2024, £680 million has been reclassified as available for
distribution to shareholders in accordance with ICAEW Technical Release
02/17BL section 2.8A and as a result has been transferred to retained
earnings.
b) During the period, £349 million has been transferred from Financial asset
reserves (within capital redemption and other reserves) to retained earnings.
This amount represented the fair value gains and losses on the Group's
financial asset relating to its beneficial interest in a commercial property
investment pool, which was held at fair value through other comprehensive
income. Given the financial asset relating to the property pool has been
derecognised, there is no longer a legally separable reserve for these fair
value gains and losses and therefore the amount has been transferred to
retained earnings.
c) During the period, 51.6 million of the Company's own shares were purchased,
and subsequently cancelled, for total consideration of £140 million inclusive
of £4 million directly attributable costs. £140 million has been transferred
from the treasury share reserve (within capital redemption and other reserves)
to retained earnings and £15 million of share capital has been transferred to
the capital redemption reserve owing to the cancellation.
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
Dividends - - - - (215) (215)
Share-based payment - - - - 38 38
Purchase of own shares for share schemes - - - (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
52 weeks to 2 March 2024 (audited) Called up share capital Share premium account Merger reserve Capital redemption and other Retained earnings Total Equity
reserves
£m £m £m £m £m £m
At 5 March 2023 672 1,418 568 954 3,641 7,253
Profit for the period - - - - 137 137
Other comprehensive loss - - - (147) (389) (536)
Tax relating to other comprehensive loss - - - 99 105 204
Total comprehensive loss - - - (48) (147) (195)
Cash flow hedges losses transferred to inventory - - - 32 - 32
Dividends - - - - (306) (306)
Share-based payment - - - - 87 87
Purchase of own shares for share schemes - - - (18) - (18)
Allotted in respect of share option schemes 6 12 - 35 (38) 15
At 2 March 2024 678 1,430 568 955 3,237 6,868
Group cash flow statement
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March
2024
(unaudited) (unaudited) (audited)
Note £m £m £m
Cash flows from operating activities
Cash generated from operations - continuing operations 12 799 1,309 2,407
Interest paid (188) (166) (336)
Corporation tax paid (19) (20) (61)
Net cash generated from operating activities - continuing operations 592 1,123 2,010
Cash flows from investing activities
Purchase of property, plant and equipment (296) (1,041) (1,381)
Initial direct costs on new leases (34) (11) (6)
Purchase of intangible assets (98) (88) (172)
Proceeds from disposal of property, plant and equipment 7 77 77
Interest received 15 11 27
Net cash used in investing activities - continuing operations (406) (1,052) (1,455)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 20 11 15
Proceeds from borrowings 12 - 575 575
Repayment of borrowings 12 (22) (20) (41)
Purchase of own shares for share schemes (32) (18) (18)
Purchase of own shares for cancellation (136) - -
Capital repayment of lease obligations 12 (243) (253) (507)
Dividends paid on ordinary shares 9 (217) (215) (306)
Net cash (used)/generated in financing activities - continuing operations (630) 80 (282)
Net (decrease)/increase in cash and cash equivalents
Continuing operations (444) 151 273
Discontinued operations 7 44 595 395
(400) 746 668
Opening cash and cash equivalents 1,987 1,319 1,319
Closing cash and cash equivalents 11 1,587 2,065 1,987
The Group now classifies interest received within cash flows from investing
activities to provide greater clarity over the Group's cash flows whereby such
cash flows had previously been included within cash generated from operations.
Amounts for the 28 weeks to 16 September 2023 have therefore been re-presented
whereby cash generated from operations and cash flows from investing
activities were previously £1,470 million and £(618) million respectively.
Comparative periods have also been re-presented to separately disclose
discontinued operations.
Notes to the Condensed Group 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 2024 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 14 September 2024 (comparative
financial period 28 weeks to
16 September 2023; prior financial year 52 weeks to 2 March 2024). 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 2024, which were prepared in accordance with UK adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006. The Annual Report and Financial Statements 2024 have been
filed with the Registrar of Companies. The Independent Auditor's report on
those Financial Statements was unqualified and did not contain a statement
under Section 498 of the Companies Act 2006.
Sainsbury's Bank plc and its subsidiaries have been consolidated for the six
months to 31 August 2024
(16 September 2023: six months to 31 August 2023; 2 March 2024: twelve months
to 29 February 2024). No significant transactions occurred in this period and
therefore no adjustments have been made to reflect the difference in balance
sheet dates.
The financial information has been prepared applying consistent accounting
policies to those applied by the Group for the financial year ended 2 March
2024, with the addition of discontinued operations as set out below, and are
expected to be applicable for the year ending 1 March 2025.
Discontinued operations
A discontinued operation is a component of the Group which represents a
separate major line of business which has been disposed of or is classified as
held for sale. Such classification assumes the expectation that the sale will
complete within twelve months of the assessment date.
Non-current assets (or disposal groups) are classified as assets held for sale
when their carrying amount is to be recovered principally through such sale
transactions. Assets and liabilities held for sale are measured at the lower
of their carrying amount and fair value less costs to sell.
Where the carrying amount of a non-current asset or disposal group held for
sale exceeds its fair value less costs to sell, a loss is recognised. This is
allocated firstly against any goodwill attributable to the disposal group, and
then to other non-current assets in the disposal group that are in scope of
IFRS 5 'Non-current assets held for sale and discontinued operations'
measurement requirements. Any excess loss remaining is recognised against the
remaining assets of the disposal group as a whole.
A component of the Group that is held for sale or disposed of is presented as
a discontinued operation either when it is a subsidiary acquired exclusively
with a view to resale or it represents, or is part of a coordinated plan to
dispose of, a separate major line of business.
Operations classified as discontinued are disclosed further in note 7.
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 28 February 2026.
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
facilities. Facility A has a final maturity of December 2028 and Facility B
has a final maturity of December 2027. As at 14 September 2024, the Revolving
Credit Facility was undrawn.
In assessing going concern, scenarios in relation to the Group's principal
risks have been considered in line with those disclosed at the financial 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.
Specific additional consideration has been given to the ongoing impacts of the
strategic review of the Financial Services division, including the
announcement on 20 June 2024 of the disposal of core banking operations to
NatWest and subsequent announcements to dispose of the ATM estate to
NoteMachine and AFS store card portfolios to NewDay on 25 September 2024 and
31 October 2024 respectively. The strategy change introduces new or amended
risks in respect of liquidity and capital adequacy which arise from the move
to offer financial services products by dedicated financial services providers
and the phased withdrawal to a third-party distributed model. Taking into
account the current and forecast levels of liquidity and capital together with
the related headroom, the Directors have considered and assessed the potential
impact of the strategic change and the risks arising thereon. The evaluation
has included the quantification of any potentially adverse impacts of customer
behaviour, the timing of repayment of external funding and costs to exit being
higher than planned. Having undertaken this assessment, the Directors are
satisfied that the Bank has sufficient liquidity and capital resources to
withstand severe but plausible adverse scenarios stemming from the risks of
the strategic change, prior to any additional mitigating actions being taken.
In the event of any mitigations being required, the Directors are confident
that additional liquidity could be raised through other sources of funding.
Accordingly, it has been concluded that this does not result in any material
uncertainties affecting the Group's ability to continue as a going concern. As
a consequence of the work performed, the Directors considered it appropriate
to adopt the going concern basis in preparing the Financial Statements with no
material uncertainties to disclose.
2.3 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 and estimates made by management in applying the
Group's accounting policies were the same as those that applied to the
Consolidated Financial Statements for the year ended 2 March 2024.
2.4 New standards, interpretations and amendments adopted by the
Group
New accounting standards, interpretations or amendments which became
applicable during the period or have been published but are not yet effective
were either not relevant or had no material impact on the Group's results or
net assets other than disclosures.
The impact of IFRS 18 'Presentation and disclosure in financial statements',
which will become effective in the consolidated Group financial statements for
the financial year ending 26 February 2028, subject to UK endorsement, is
still under assessment.
2.5 Alternative performance measures (APMs)
In the reporting of financial information, the Directors use various APMs.
These APMs should be considered in addition to, and are not intended to be a
substitute for, IFRS measurements. As they are not defined by International
Financial Reporting Standards, they may not be directly comparable with other
companies' APMs.
The Directors believe that these APMs provide additional useful information
for understanding the financial performance and health of the Group. They are
also used to enhance the comparability of information between reporting
periods (such as like-for-like sales and underlying performance measures) by
adjusting for non-recurring factors which affect IFRS measures, and to aid
users in understanding the Group's performance. Consequently, APMs are used by
the Directors and management for performance analysis, planning, reporting and
incentive setting purposes.
Non-underlying items
In order to provide shareholders with additional insight into the year-on-year
performance of the business, underlying profit measures are provided to
supplement the reported IFRS numbers and reflects how the business measures
performance internally. These adjusted measures exclude items recognised in
reported profit or loss before tax which, if included, could distort
comparability between periods. Underlying profit is not an IFRS measure and
therefore not directly comparable to other companies.
Reconciliations to IFRS measures
The income statement shows the non-underlying items excluded from reported
results to determine underlying results with a more detailed analysis of the
non-underlying items set out in note 3. Other APMs are detailed in notes A1,
A2, A3 and A4 of this report which includes further information on the
definition, purpose and reconciliation to the closest IFRS measure.
Changes to APMs
Following the Group's announcement over the sale of its Core Banking Business,
the definition of the Group's Retail Free Cash Flow APM has been updated
during the period to now exclude capital injections to, dividends from, and
any other exceptional cash movements with or on behalf of Sainsbury's Bank and
its subsidiaries. This change results in more relevant information as Retail
Free Cash Flow will now solely present Retail cash flows without any impacts
of the phased withdrawal from core Banking, and enables management to assess
solely the cash flows associated with its core Retail operations. No
comparatives have been restated as exceptional cash movements with Sainsbury's
Bank in the prior year were immaterial.
3. Non-underlying items
28 weeks to 14 September 2024 28 weeks to 16 September 2023
Restructuring and impairment Pensions Other Total Restructuring and impairment Pensions Other Total
Note 3.1 3.2 3.3 3.1 3.2 3.3
£m £m £m £m £m £m £m £m
Revenue - - - - - - - -
Cost of sales (38) - 4 (34) (28) - (37) (65)
Administrative expenses (39) (4) (10) (53) (4) (4) (8) (16)
Other income - - 5 5 - - 11 11
Affecting operating profit (77) (4) (1) (82) (32) (4) (34) (70)
Net finance (costs)/income (1) 18 (5) 12 - 25 (6) 19
Affecting profit before tax - continuing operations (78) 14 (6) (70) (32) 21 (40) (51)
Income tax credit/(expense) 6 14 (29)
Affecting profit after tax - continuing operations (56) (80)
Loss on disposal after tax - discontinued operations 7 (81) (11)
Restructuring and impairment costs after tax - discontinued operations 7 (39) -
Affecting profit after tax - discontinued operations (120) (11)
Affecting profit for the financial period (176) (91)
52 weeks to 2 March 2024
Restructuring Pensions Other Total
and
impairment
Note 3.1 3.2 3.3
£m £m £m £m
Revenue - - - -
Cost of sales (73) - (66) (139)
Administrative expenses (92) (7) (16) (115)
Other income - - 6 6
Affecting operating profit (165) (7) (76) (248)
Net finance (costs)/income (1) 51 (11) 39
Affecting profit before tax - continuing (166) 44 (87) (209)
operations
Income tax credit 6 4
Affecting profit after tax - continuing (205)
operations
Loss on disposal after tax - 7 (11)
discontinued operations
Restructuring and impairment costs 7 (163)
after tax - discontinued operations
Affecting profit after tax - discontinued (174)
operations
Affecting profit for the financial period (379)
The impact of non-underlying items on Retail cash generated from operations is
presented in note A2.2.
Comparative periods have been re-presented to separately disclose discontinued
operations.
3.1 Restructuring and impairment
Financial Services model
Further to the announcement in January 2024 regarding the move to a
third-party distributed model, in June 2024, the Group entered into an
agreement for the sale of personal loan, credit card and customer deposit
portfolios (the 'Sale Portfolios') to NatWest Group (NatWest). The sale is
expected to complete in the first half of calendar year 2025.
In September 2024 the Group classified ATM assets as held for sale, resulting
in a reversal of previously recognised impairment £2 million.
In August 2023, the Group disposed of its mortgage portfolio which in
isolation was not sufficiently material to be classified as a discontinued
operation at that time but did form part of the Core Banking Business in prior
periods and accordingly has now been reclassified as a discontinued operation
for the 28 weeks to 16 September 2023 and the 52 weeks to 2 March 2024.
Costs associated with the strategic review of Financial Services were charged
in the 52 weeks to 4 March 2024. Those associated with the Sale Portfolios
and ATM operations have been reclassified to discontinued operations as set
out in note 7.
Costs incurred in the 28 weeks to 14 September 2024 associated with the exit
that are directly attributable to the disposal group have been classified as
discontinued operations as set out in note 7.
Subsequent to the balance sheet date, the Group announced the sale of its AFS
cards portfolio. As a sale was not considered to be highly probable at the
balance sheet date, AFS assets have not been classified as held for sale, and
AFS operations are presented within continuing operations. These will be
classified as discontinued operations in the 52 weeks to 1 March 2025.
Retail restructuring programme
In the year ended 6 March 2021, the Group announced a restructuring programme
to accelerate structural integration, simplify the Argos business, create a
new supply chain and logistics operating model, and further
rationalise/repurpose the Group's supermarkets and convenience estate. The
programme also considered the Group's Store Support Centre ways of working.
Impairment of non-financial assets
Separate from restructuring initiatives and property-related transactions, the
Group has recognised £12 million of impairment in relation to certain
non-trading sites whereby rent reviews at previously impaired sites caused an
increase in the associated right-of-use assets, and sub-tenant defaults. No
impairments outside of restructuring initiatives and property-related
transactions were recognised in the 28 weeks to 16 September 2023 or in the 52
weeks to 2 March 2024.
In light of the lower year on year Argos contribution, reflecting tougher than
anticipated trading conditions in the first quarter, it was determined that an
indicator of impairment existed over the Group's Argos assets and therefore a
full impairment review was undertaken over these assets. No impairments were
recognised as a result of this review.
Analysis of restructuring items
28 weeks to 14 September 2024 28 weeks to 16 September 2023
Financial Services model Retail restructuring programme Impairment of non-financial assets Total Financial Services model Retail restructuring programme Total
£m £m £m £m £m £m £m
Non-financial asset impairment - Property, plant and equipment - - - - - - -
- Right-of-use assets - - (12) (12) - (2) (2)
- Intangible assets - - - - - - -
- - (12) (12) - (2) (2)
Accelerated depreciation of assets a) - (25) - (25) - (8) (8)
Employee costs b) (8) (5) - (13) - (3) (3)
Onerous contracts c) (17) - - (17) - - -
Property closure provisions d) - (4) - (4) - (2) (2)
Other costs e) (4) (3) - (7) - (17) (17)
(29) (37) (12) (78) - (32) (32)
52 weeks to 2 March 2024
Financial Services model Retail restructuring programme Total
£m £m £m
Non-financial asset impairment - Property, plant and equipment (3) (1) (4)
- Right-of-use assets (3) (3) (6)
- Intangible assets (54) - (54)
(60) (4) (64)
Accelerated depreciation of assets a) - (19) (19)
Employee costs b) (6) (33) (39)
Onerous contracts c) (2) - (2)
Property closure provisions d) - (33) (33)
Other costs e) (3) (6) (9)
(71) (95) (166)
a) The remaining useful economic lives of corresponding sites have been
reassessed to align with closure dates, resulting in an acceleration in
depreciation of these assets. The existing depreciation of these assets
(depreciation that would have been recognised absent of a closure decision) is
recognised within underlying expenses, whereas accelerated depreciation above
this is recognised within non-underlying expenses.
b) Comprises severance costs and for the Financial services model also
includes incremental project related employee costs.
c) Comprises long dated IT contracts where anticipated early termination will
result in unavoidable costs of meeting obligations under the contracts which
exceed the economic benefits expected to be received under them. Costs
represent the lower of the costs of fulfilling contracts and the costs of
terminating.
d) Relates to onerous lease costs, dilapidations and strip out costs on sites
that have been identified for closure, as well as business rates for sites the
Group no longer operates from which are recognised as incurred.
e) Other costs comprise predominantly consultancy costs.
3.2 Pensions
Such amounts relate to the defined benefit pension scheme (the Scheme) and are
treated as non-underlying owing to the Scheme being closed to future accrual
and accordingly not forming part of ongoing operating activities.
3.3 Other
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March
2024
£m £m £m
Property related transactions a) 5 (6) (16)
Non-underlying finance and fair value movements b) (2) (26) (56)
Acquisition adjustments c) (9) (8) (15)
(6) (40) (87)
a) Comprises gain on disposal of non-trading properties of £5 million
recognised in other income (28 weeks ended 16 September 2023 and 52 weeks
ended 2 March 2024: comprised an impairment charge of £19 million of
property, plant and equipment recognised in cost of sales as part of an asset
acquisition of 21 stores, whereby the asset base of these stores' CGUs had
significantly changed as a result of the transaction and therefore were
reviewed for impairment; offset by a gain on disposal of non-trading
properties of £11 million and £4 million for each period respectively,
recognised in other income).
b) Comprises £3 million gain (28 weeks ended 16 September 2023: £20 million
loss; 52 weeks ended 2 March 2024: £46 million loss) within cost of sales
relating to favourable movements on long-term, fixed price power purchase
arrangements (PPAs) with independent producers. These are classified as
derivatives which are not in a hedge relationship and owing to potentially
significant fluctuations in value from external market factors are treated as
non-underlying to enable consistency between periods. Remaining movements of
£5 million loss (28 weeks ended 16 September 2023: £6 million loss; 52 weeks
ended 2 March 2024: £10 million loss) within net finance costs relate to
lease interest paid on impaired non-trading sites.
c) Comprises the unwind of non-cash fair value adjustments arising from the
Home Retail Group acquisition. Classification as non-underlying is because
these assets would not normally be recognised outside of a business
combination.
4. 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.
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. As
described in note 2.5, the use of underlying profit before tax aims to provide
parity and transparency between users of the financial statements and the CODM
in assessing the core performance of the business and performance of
management.
Segment results, include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Segment assets and
liabilities, including investments in associates and joint ventures, are not
disclosed because they are not reported to, or reviewed by, the CODM.
In presenting discontinued operations, income and costs directly attributable
to the discontinued operations are presented separately. A high proportion of
central and multi-product costs continue to be recognised within continuing
operations as they are not deemed to be directly attributable to the
discontinued operation.
4.1 Income statement
28 weeks to 14 September 2024
Retail Financial services Group - Continuing operations Group - Discontinued operations Group Total
Note £m £m £m £m £m
Revenue
Grocery, General Merchandise & Clothing 14,868 - 14,868 - 14,868
Fuel 2,182 - 2,182 - 2,182
Interest receivable - 107 107 140 247
Fees and commission - 46 46 27 73
17,050 153 17,203 167 17,370
Underlying operating profit/(loss)
Underlying operating profit/(loss) 503 (11) 492 29 521
Underlying finance income 15 - 15 - 15
Underlying finance costs (180) - (180) - (180)
Underlying profit/(loss) before tax 338 (11) 327 29 356
Non-underlying items 3, 7 (70) (155) (225)
Profit/(loss) before tax 257 (126) 131
Income tax (expense)/credit 6, 7 (83) 28 (55)
Profit/(loss) after tax 174 (98) 76
28 weeks to 16 September 2023
Retail Financial services Group - Continuing operations Group - Discontinued operations Group Total
Note £m £m £m £m £m
Revenue
Grocery, General Merchandise & Clothing 14,380 - 14,380 - 14,380
Fuel 2,285 - 2,285 - 2,285
Interest receivable - 123 123 140 263
Fees and commission - 25 25 30 55
16,665 148 16,813 170 16,983
Underlying operating profit/(loss) 485 (26) 459 39 498
Underlying finance income 12 - 12 - 12
Underlying finance costs (170) - (170) - (170)
Underlying profit/(loss) before tax 327 (26) 301 39 340
Non-underlying items 3, 7 (51) (14) (65)
Profit before tax 250 25 275
Income tax (expense)/credit 6, 7 (114) (6) (120)
Profit after tax 136 19 155
52 weeks to 2 March 2024
Retail Financial services Group - Continuing operations Group - Discontinued operations Group Total
Note £m £m £m £m £m
Revenue
Grocery, General Merchandise & Clothing 27,830 - 27,830 - 27,830
Fuel 4,254 - 4,254 - 4,254
Interest receivable - 187 187 306 493
Fees and commission - 87 87 57 144
32,084 274 32,358 363 32,721
Underlying operating profit/(loss) 966 (44) 922 73 995
Underlying finance income 30 - 30 - 30
Underlying finance costs (324) - (324) - (324)
Underlying profit/(loss) before tax 672 (44) 628 73 701
Non-underlying items 3, 7 (209) (215) (424)
Profit/(loss) before tax 419 (142) 277
Income tax expense 6, 7 (163) 23 (140)
Profit/(loss) after tax 256 (119) 137
Comparative periods have been re-presented to separately disclose discontinued
operations.
5. Finance income and finance costs
28 weeks to 14 September 2024 28 weeks to 16 September 2023 52 weeks to 2 March 2024
Continuing operations Underlying Non-underlying Total Underlying Non-underlying Total Underlying Non-underlying Total
£m £m £m £m £m £m £m £m £m
Finance income
Interest on bank deposits and other financial assets 14 - 14 11 - 11 28 - 28
IAS 19 pension financing income - 18 18 - 25 25 - 51 51
Finance income on net investment in leases 1 - 1 1 - 1 2 - 2
15 18 33 12 25 37 30 51 81
Finance costs
Secured borrowings (19) - (19) (18) - (18) (38) - (38)
Unsecured borrowings (22) - (22) (16) - (16) (33) - (33)
Lease liabilities (139) (6) (145) (136) (6) (142) (253) (11) (264)
Provisions - amortisation of discount - - - - - - - (1) (1)
(180) (6) (186) (170) (6) (176) (324) (12) (336)
6. Income tax expense
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March 2024
Continuing operations £m £m £m
Current year UK tax 42 64 112
Under provision in prior years - (1) (4)
Total current tax expense 42 63 108
Origination and reversal of temporary differences 42 20 32
Under provision in prior years (1) (9) (19)
Adjustment from change in applicable rate of deferred tax - - 2
Derecognition of capital losses - 40 40
Total deferred tax expense 41 51 55
Total income tax expense 83 114 163
Analysed as: 64
Underlying tax 97 85 167
Non-underlying tax (14) 29 (4)
Total income tax expense 83 114 163
Underlying tax rate 29.7% 28.2% 26.6%
Effective tax rate 32.3% 45.6% 38.9%
Comparative periods have been re-presented to separately disclose discontinued
operations. Tax associated with discontinued operations is presented in note
7.
Tax charged within the 28 weeks ended 14 September 2024 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the period ending 1 March 2025 using rates substantively enacted by
14 September 2024 as required by IAS 34 'Interim Financial Reporting'.
The effective tax rate is higher than the standard rate of corporation tax in
the UK of 25% primarily due to the impact of non-qualifying depreciation and
non-deductible transaction costs on the disposal of the Core Banking Business.
The Spring Budget on 21 March 2023 confirmed the introduction of Pillar Two
reporting requirements for the UK, and were enacted on 18 July 2023,
confirming that the rules will apply to the Group for the period ending 1
March 2025. Pillar Two reporting introduced a global minimum 15% tax rate by
the end of 2023 and the Group will be required to file certain returns
evidencing the payment of tax at this rate. The potential impact of this has
been assessed based on the most recent tax filings, country by country
reporting and financial statements for the constituent entities in the Group,
and it is not considered that there is a material top-up tax liability at this
stage under the transitional safe harbour rules.
It is unclear if the Pillar Two model rules create additional temporary
differences, whether to remeasure deferred taxes and which tax rate to use to
measure deferred taxes. The Group has therefore applied the mandatory
temporary exception in the amended IAS 12 'Income taxes' from the requirement
to recognise or disclose information about deferred tax assets and liabilities
related to the proposed Pillar Two model rules.
Deferred tax assets have not been recognised in respect of capital losses of
£355 million (2 March 2024: £355 million; 16 September 2023: £357 million)
for which their use against chargeable capital gains is restricted. These
capital losses have no date of expiry. Deferred income tax assets and
liabilities are only offset where there is a legally enforceable right of
offset and relate to taxes levied by the same tax authority.
7. Discontinued operations
In January 2024 the Group announced it had completed its strategic review of
the Financial Services division, culminating in a single co-ordinated plan to
move to a third-party distributed model. Owing to the complex nature of assets
and liabilities that make up the separate major line of business, this will
result in a phased withdrawal with components completing at various stages.
Following the announcement on 20 June 2024 that the Group had entered into an
agreement for the sale of Sainsbury's Bank plc's personal loan, credit card
and retail deposit portfolios (together the "Core Banking Business") to
NatWest Group ("NatWest"), the associated assets and liabilities of the
disposal group were classified as held for sale. The sale is expected to
complete in the first half of calendar year 2025. Despite the agreement
triggering a change in business model, the financial assets of the disposal
group continue to be measured at amortised cost in accordance with IFRS 9
'Financial Instruments', whilst the disposal group is measured at fair value
less costs to sell in accordance with IFRS 5 'Non-current assets held for sale
and discontinued operations'. Assets of the disposal group held for sale have
been recognised net of associated costs of disposal.
At the balance sheet date, ATM assets have been classified as held for sale as
it is management's expectation that the carrying amount will be recovered
principally through a sale that will complete within twelve months of the
assessment date.
Following the classification of the Core Banking Business and ATMs as held for
sale, and both components forming part of the single co-ordinated plan to move
to a third-party distributed model, results have also been re-presented to
classify the operations as discontinued.
In August 2023, the Group disposed of its mortgage portfolio which in
isolation was not sufficiently material to be classified as a discontinued
operation at that time but did form part of the move to a third-party
distributed model in prior periods and accordingly has now been reclassified
as a discontinued operation for the 28 week period to 16 September 2023 and
the 52 week period to 2 March 2024.
The (loss)/profit for these operations is set out in note 7.2 with associated
non-underlying items previously included in continuing operations set out in
note 7.3. Further costs associated with this restructuring will be incurred in
future years as further detailed plans to execute these changes are formulated
and communicated. Loss on disposal is measured by reference to the fair value
of portfolios at the balance sheet date as set out in note 7.4.
Subsequent to the balance sheet date, the Group announced the sale of its AFS
cards portfolio. As a sale was not considered to be highly probable at the
balance sheet date, AFS assets have not been classified as held for sale, and
AFS operations are presented within continuing operations. These will be
classified as discontinued operations in the 52 weeks to 1 March 2025.
7.1 Total (loss)/profit after tax
28 weeks to 28 weeks to 52 weeks to 2 March 2024
14 September 2024 16 September 2023
Note £m £m £m
(Loss)/profit after tax excluding net loss arising from disposals 7.2 (17) 30 (108)
Net loss arising from disposals 7.4 (81) (11) (11)
(Loss)/profit after tax (98) 19 (119)
Of which:
Underlying items 22 30 55
Non-underlying items 7.3, 7.4 (120) (11) (174)
(Loss)/profit after tax (98) 19 (119)
7.2 (Loss)/profit after tax excluding net loss arising from
disposals
28 weeks to 28 weeks to 52 weeks to 2 March 2024
14 September 2024 16 September 2023
Note £m £m £m
Revenue
Interest receivable 140 140 306
Fees and commission income 27 30 57
167 170 363
Cost of sales (60) (39) (120)
Impairment of financial assets (22) (32) (57)
Administrative expenses (56) (60) (113)
Operating profit, excluding non-underlying restructuring costs 29 39 73
Non-underlying restructuring and impairment costs a) 7.3 (51) - (201)
(Loss)/profit before tax (22) 39 (128)
Income tax credit/(charge) 5 (9) 20
(Loss)/profit after tax (17) 30 (108)
a) Amounts in the 28 weeks to 14 September 2024 have been recognised in
administrative expenses (52 weeks to 2 March 2024: £21 million effective
interest rate adjustment to financial assets was recognised in revenue, with
the remaining £180 million recognised in administrative expenses).
7.3 Non-underlying restructuring and impairment costs included
in discontinued operations
28 weeks to 28 weeks to 16 September 2023 52 weeks to 2 March 2024
14 September 2024
£m £m £m
Impairment reversals/(charges) a) 2 - (152)
Employee costs b) (2) - (2)
Onerous contracts c) (44) - (15)
Effective interest rate adjustment to financial assets d) - - (21)
Other costs e) (7) - (11)
(51) - (201)
Income tax credit 12 - 38
(39) - (163)
a) Comprises £2 million reversal of impairment previously recognised on ATM
assets now classified as held for sale (52 weeks to 2 March 2024: comprises
impairment charges of property, plant and equipment, and intangible assets
including goodwill).
b) Comprises severance costs and incremental project-related employee costs.
c) Comprises long dated IT contracts where early termination will result in
incremental costs to exit. Costs represent the lower of the costs of
fulfilling contracts and the costs of terminating.
d) The withdrawal from core banking operations has a commercial impact upon
future management initiatives and potential impact on customer behaviours.
This required refreshed assumptions in the calculation of the effective
interest rate, reducing the amortised cost of financial assets (credit cards)
shown in loans and advances to customers with the impacts being recognised in
revenue.
e) Comprises loss on derivatives no longer classified in an effective hedge
relationship (52 weeks to 2 March 2024: comprises consultancy costs.)
7.4 Net loss arising from disposals
28 weeks to 28 weeks to 16 September 2023 52 weeks to 2 March 2024
14 September 2024
£m £m £m
Fair value of consideration (payable)/receivable a) (536) 446 446
Fair value of net liabilities/(assets) disposed excluding provisions b) 331 (458) (458)
Reversal of net provisions held against assets disposed 153 1 1
Write down of net liabilities/loss on net assets disposed c) (52) (11) (11)
Costs of disposal d) (52) (3) (3)
Loss on disposal before tax (104) (14) (14)
Income tax credit 23 3 3
Loss on disposal after tax c) (81) (11) (11)
a) 28 weeks to 14 September 2024: Comprises net liabilities disposed for the
core banking activities net of a discount of £162 million on gross assets
based on pricing mechanisms set out in the sale agreement but measured at the
reporting date of 14 September 2024. The discount at expected point of
completion in the first half of calendar year 2025 is £125 million (28 weeks
to 16 September 2023 and 52 weeks to 2 March 2024: comprises proceeds in
respect of the sale of the mortgage portfolio). For the 28 weeks to 14
September 2024 amounts are offset by £2 million related to the ATM assets.
b) 28 weeks to 14 September 2024, and 52 weeks ended 2 March 2024: comprises
the fair value of the assets and liabilities of the mortgage portfolio
inclusive of £7 million goodwill.
c) By the point of completion of the sale in 2025, the write down of net
assets disposed is expected to be up to £40 million lower than the amount
recognised as at 14 September 2024. Furthermore, the total loss on disposal by
this point will also include further incremental legal and consultancy costs
to be incurred.
d) Relates to disposal costs comprising legal, consultancy and migration costs
directly associated with the sale.
7.5 Assets and liabilities of disposal group and non-current
assets classified as held for sale
28 weeks to
14 September 2024
Note £m
Non-current assets classified as held for sale
ATM assets 2
Assets of disposal group classified as held for sale
Unsecured personal loans and credit card balances 3,269
Net allowance for expected credit losses and effective interest rate a) (98)
adjustment
Excess loss on remeasurement of disposal group b) (102)
3,069
Total assets of disposal group and non-current assets classified as held for 14 3,071
sale
Liabilities of disposal group classified as held for sale
Customer deposits (3,655)
Net liabilities held for sale associated with discontinued operations (584)
a) Represents expected credit losses and effective interest rate adjustments
already held on the balance sheet.
b) Represents the incremental costs directly attributable to the disposal of
the disposal group, and the discount applied to write down assets as set out
in the pricing mechanism in the sale agreement.
7.6 Cash flow statement
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March 2024
£m £m £m
Net cash flows from:
Operating activities 44 150 (45)
Investing activities - 445 440
Financing activities - - -
44 595 395
8. Earnings per share
The calculations of basic and underlying basic earnings per share are based on
profit after tax and underlying profit after tax for the financial year,
respectively, divided by the weighted average number of Ordinary shares in
issue during the year, excluding own shares held by the Employee Share
Ownership Trust (ESOT).
Underlying earnings per share figures, which represent alternative performance
measures as defined in note 2.5, have been calculated based on total profit
after tax attributable to shareholders before non-underlying items which are
set out in note 3.
Diluted and underlying diluted earnings per share are calculated on the same
basis as basic and underlying basic earnings per share, but where the weighted
average share numbers have also been adjusted for the weighted average effects
of potentially dilutive shares. Such potentially dilutive shares comprise
share options and awards granted to employees, where the scheme to date
performance is deemed to have been earned.
14 September 2024 16 September 2023 2 March
2024
million million million
Weighted average number of shares in issue for calculating basic earnings per 2,346.3 2,332.5 2,334.8
share
Weighted average number of dilutive share options 41.6 54.4 59.2
Total number of shares for calculating diluted earnings per share 2,387.9 2,386.9 2,394.0
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March
2024
£m £m £m
Underlying profit after tax attributable to ordinary shareholders of the 252 246 516
parent
Non-underlying items after tax (176) (91) (379)
Profit after tax attributable to ordinary shareholders of the parent 76 155 137
(Loss)/profit after tax from discontinued operations (98) 19 (119)
Profit after tax attributable to ordinary shareholders of the parent - 174 136 256
continuing operations
Pence per share Pence per share Pence per share
Basic - total 3.2 6.6 5.9
Diluted - total 3.2 6.5 5.7
Basic - discontinued operations (4.2) 0.8 (5.1)
Diluted - discontinued operations (4.1) 0.8 (5.0)
Basic - continuing operations 7.4 5.8 11.0
Diluted - continuing operations 7.3 5.7 10.7
Basic - underlying 10.7 10.5 22.1
Diluted - underlying 10.6 10.3 21.6
Comparative periods have been re-presented to separately disclose discontinued
operations.
9. Dividends
28 weeks to 14 September 2024 28 weeks 52 weeks 28 weeks to 14 September 2024 28 weeks 52 weeks
to 16 September 2023 to 2 to 16 September 2023 to 2
March March
2024 2024
pence per share pence per share pence per share £m £m £m
Amounts recognised as distributions to ordinary shareholders
Financial year ended 4 March 2023
- Final dividend - 9.2 9.2 - 215 215
Financial year ended 2 March 2024
- Interim dividend - - 3.9 - - 91
- Final dividend 9.2 - - 217 - -
9.2 9.2 13.1 217 215 306
Proposed interim dividend 3.9 91
The proposed interim dividend was approved by the Board on 6 November 2024 and
has not been included as a liability in these financial statements.
10. Financial instruments
14 September 2024 2 March 16 September 2023
2024
£m £m £m
Held at amortised cost
Financial assets
Cash and cash equivalents 1,591 1,987 2,067
Trade and other receivables 426 444 504
Amounts due from Financial Services customers and other banks 846 4,517 4,821
Financial liabilities
Trade and other payables (4,744) (4,768) (4,931)
Borrowings (1,180) (1,195) (1,215)
Amounts due to Financial Services customers and other deposits (1,637) (5,721) (6,057)
Lease liabilities (5,432) (5,354) (5,412)
Held at fair value through other comprehensive income (OCI)
Financial assets 1,278 778 702
Held at fair value through profit or loss
Derivative financial instruments (42) (11) 96
(8,894) (9,323) (9,425)
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.
10.1 Fair value estimation of amounts held at amortised cost
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 cash and cash equivalents, trade and other
receivables, trade and other payables and overdrafts are assumed to
approximate to their book values.
14 September 2024 2 March 2024 16 September 2023
Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
£m £m £m £m £m £m
Financial assets
Amounts due from Financial Services customers and banks 846 828 4,517 4,381 4,821 4,694
Financial liabilities
Loans due 2031 (472) (471) (496) (494) (518) (535)
Term Loan (583) (575) (581) (575) (580) (575)
Tier 2 Capital (124) (141) (122) (136) (118) (127)
Amounts due to Financial Services customers and banks (1,637) (1,655) (5,721) (5,733) (6,057) (6,045)
During the period £3,121 million due from Financial Services customers and
banks, and £3,655 million due to Financial Services customers and banks have
been transferred to amounts held in the disposal group and subsequently
measured at fair value less cost to sell, refer to note 7.5.
10.2 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).
14 September 2024 2 March 2024
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m
Financial instruments at fair value through other comprehensive income
Other financial assets - 12 - 12 - 17 - 17
Investment securities 1,218 48 - 1,266 761 - - 761
Derivative financial assets - 48 11 59 - 67 9 76
Derivative financial liabilities - (101) - (101) - (87) - (87)
16 September 2023
Level 1 Level 2 Level 3 Total
£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)
There have been no transfers of assets between Levels 1, 2 or 3 during the
period.
10.3 Level 3 Financial assets
a) Power purchase agreements
The Group has entered into several long-term fixed and CPI linked price Power
Purchase agreements with independent producers and values these agreements as
the net present value of the estimated future usage at the contracted fixed
price less the market implied forward energy price discounted at the
prevailing swap rate.
All Power Purchase Agreements are physical arrangements. Arrangements
designated in hedging relationships are classified as hedging instruments,
whereas those not designated in hedging relationships are not classified as
hedging instruments. The credit risk exposure associated with the Power
Purchase Agreements is considered immaterial.
Commodity derivative values
14 September 2024 2 March 2024 16 September 2023
£m £m £m
At the beginning of the financial period 9 131 131
In cost of sales in the Group income statement 4 (46) (20)
In other comprehensive income (2) (76) (29)
At the end of the financial period 11 9 82
b) Sensitivity of power purchase agreement derivatives
The Group makes an assumption regarding expected energy output and pricing
based on the historical performance and the producer's estimate of expected
electricity output. The sensitivity to a change in output volume is not
significant, but the sensitivity to forward pricing is shown below:
14 September 2024
Change in output volume Change in forward pricing +/-20.0%
+/-20.0%
£m £m
Not in a hedge relationship 2/(2) 8/(8)
Designated in a cash flow hedge relationship 0/(0) 28/(28)
10.4 Amounts due from Financial Services customers and other banks
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:
14 September 2024 2 March 2024
Non-current Current Total Non-current Current Total
£m £m £m £m £m £m
Loans and advances to customers 2 926 928 1,525 3,227 4,752
Impairment of loans and advances - (82) (82) (58) (177) (235)
2 844 846 1,467 3,050 4,517
16 September 2023
Non-current Current Total
£m £m £m
Loans and advances to customers 1,566 3,503 5,069
Impairment of loans and advances (58) (190) (248)
1,508 3,313 4,821
10.5 Amounts due to Financial Services customers and banks
Following the strategic decision to move to offer Financial Services products
through dedicated Financial Services providers and the phased withdrawal from
the Core Banking Business, amounts due in respect of the Bank of England's
Term Funding Scheme Small and Medium-sized enterprises (TFSME) have been
classified as current liabilities. This is in line with the terms and
conditions of the Term Funding Scheme with additional incentives for SMEs,
although the latest repayment dates remain as August 2025 of £115 million,
and September 2025 of £175 million. As of the date of approval of these
financial statements, these liabilities have been fully repaid.
10.6 Credit risk
a) Sensitivity of ECL to changes in macro-economic assumptions
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.
14 September 2024
Base Upside Downside Severe Downside
5-year average % % % %
Unemployment rate 4.3 3.9 5.2 6.5
Consumer price growth 2.1 1.3 2.9 3.8
GDP 1.6 2.2 1.0 0.4
Mortgage debt as a percentage of household income 89.8 87.1 92.8 95.6
Real household disposable income 1.7 2.4 1.1 0.4
Probability weighting 40 30 25 5
Sensitivity analysis impact on impairment of 100% weighting £(3)m £(11)m £13m £39m
b) Management overlays and post model assumptions (PMAs)
Overlays and PMAs are adjustments to ECL at either a customer or portfolio
level to account for known data or model limitations and are defined
consistently with the most recent recommendations of the Taskforce on
Disclosures about Expected Credit Losses (DECL). Internal governance is in
place to regularly monitor and reduce reliance such overlays through model
recalibration or redevelopment.
Management overlays and PMAs include those arising from modelling specific
economic uncertainties or operational adjustments due to model or data
limitations which require a permanent remodelling solution. The effects of
overlays and PMAs is not significant.
11. Cash and cash equivalents
11.1 Balance sheet
14 September 2 March 16 September
2024
2024
2023
£m £m £m
Cash in hand and bank balances 638 606 680
Money market funds 499 263 250
Money market deposits - 232 210
Deposits at central banks 454 886 927
Cash and bank balances as reported in the Group balance sheet 1,591 1,987 2,067
Bank overdrafts (within current borrowings) (4) - (2)
Net cash and cash equivalents as reported in the Group cash flow statement 1,587 1,987 2,065
Restricted amounts included above
Held as a reserve deposit with the Bank of England - 14 15
For insurance purposes 8 7 7
Held within the Group's Employee Share Ownership Trust 5 - -
13 21 22
11.2 Cash flow statement
Trade and other payables
Cash flows differ from the movement in the balance sheet owing mainly to
reclassifications to other lines in the cash flow statement of £89 million
(52 weeks to 2 March 2024: £92 million; 28 weeks to 16 September 2023: £119
million).
Provisions
Cash flows differ from the movement in the balance sheet owing mainly to the
presentation of cash flows as discontinued operations of £41 million (52
weeks to 2 March 2024: £nil million; 28 weeks to 16 September 2023: £nil
million).
Financial assets at fair value through OCI
Cash flows differ from the movement in the balance sheet owing mainly to the
derecognition of beneficial interest in property pool of £nil million (52
weeks to 2 March 2024: £366 million; 28 weeks to 16 September 2023: £366
million).
Amounts due from Financial Services customers
Cash flows differ from the movement in the balance sheet owing mainly to the
reclassification of these amounts to Assets of disposal group and non-current
assets held for sale on the Balance Sheet of £3,708 million and proceeds of
amounts due from Financial Service customers of £nil (52 weeks to 2 March
2024: £446 million; 28 weeks to 16 September 2023: £446 million) presented
within cash flows from investing activities.
Amounts due to Financial Services Customers
Cash flows differ from the movement in the balance sheet owing mainly to the
reclassification of these amounts to Liabilities of disposal group held for
sale on the Balance Sheet of £4,164 million (52 weeks to 2 March 2024: £nil,
28 weeks to 16 September 2023: £nil).
12. Notes to the cash flow statement
12.1 Reconciliation of operating profit to net cash generated from
operations
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March
2024
£m £m £m
Operating profit - continuing operations 410 389 674
Depreciation expense 557 530 988
Amortisation expense 93 94 177
Net impairment charge on non-financial assets 12 21 83
Profit on sale of non-current assets and early termination of leases (11) (12) (16)
Non-underlying fair value movements (4) 19 46
Share-based payments expense 42 38 89
Defined benefit scheme expenses 4 4 7
Cash contributions to defined benefit schemes (23) (23) (44)
Operating cash flows before changes in working capital 1,080 1,060 2,004
Decrease/(increase) in inventories 13 (274) 5
Increase in financial assets at fair value through OCI (499) (60) (135)
Increase in trade and other receivables (36) (91) (5)
(Increase)/decrease in amounts due from Financial Services customers and other (37) 144 35
deposits
Increase in trade and other payables 195 565 163
Increase in amounts due to Financial Services customers and other deposits 80 1 345
Increase/(decrease) in provisions and other liabilities 3 (36) (5)
Cash generated from operations - continuing operations 799 1,309 2,407
12.2 Analysis of net debt
Cash Movements Non-Cash Movements
3 March 2024 Cash flows excluding interest Net interest (received) / paid Accrued Interest Other non-cash movements 14 September 2024
£m £m £m £m £m £m
Retail
Net derivative financial instruments - - (1) 1 (2) (2)
Borrowings (excluding overdrafts) (1,077) 22 38 (38) - (1,055)
Lease liabilities (5,354) 243 145 (145) (321) (5,432)
Purchase of own shares for cancellation - 136 - - (150) (14)
Arising from financing activities (6,431) 401 182 (182) (473) (6,503)
Cash and cash equivalents 877 32 - - - 909
Bank overdrafts - (4) - - - (4)
Less: Purchase of own shares for cancellation - (136) - - 150 14
Retail net debt (5,554) 293 182 (182) (323) (5,584)
Financial Services
Net derivative financial instruments - - - - 1 1
Borrowings (excluding overdrafts) (122) - 6 (6) (2) (124)
Lease liabilities - - - - - -
Arising from financing activities (122) - 6 (6) (1) (123)
Financial assets at fair value through other comprehensive income 761 505 - - - 1,266
Cash and cash equivalents 1,110 (428) - - - 682
Financial services net funds 1,749 77 6 (6) (1) 1,825
Group
Net derivative financial instruments - - (1) 1 (1) (1)
Borrowings (excluding overdrafts) (1,199) 22 44 (44) (2) (1,179)
Lease liabilities (5,354) 243 145 (145) (321) (5,432)
Purchase of own shares for cancellation - 136 - - (150) (14)
Arising from financing activities (6,553) 401 188 (188) (474) (6,626)
Financial assets at fair value through other comprehensive income 761 505 - - - 1,266
Cash and cash equivalents 1,987 (396) - - - 1,591
Bank overdrafts - (4) - - - (4)
Less: Purchase of own shares for cancellation - (136) - - 150 14
Group net debt (3,805) 370 188 (188) (324) (3,759)
Cash Movements Non-Cash Movements
5 March 2023 Cash flows excluding interest Net interest (received) / paid Accrued Interest Other non-cash movements 2 March 2024
£m £m £m £m £m £m
Retail
Net derivative financial instruments - - (1) 1 - -
Borrowings (excluding overdrafts) (539) (534) 60 (64) - (1,077)
Lease liabilities (6,488) 505 264 (264) 629 (5,354)
Arising from financing activities (7,027) (29) 323 (327) 629 (6,431)
Cash and cash equivalents 683 194 - - - 877
Retail net debt (6,344) 165 323 (327) 629 (5,554)
Financial Services
Net derivative financial instruments - - - - - -
Borrowings (excluding overdrafts) (122) - 13 (13) - (122)
Lease liabilities (1) 2 - - (1) -
Arising from financing activities (123) 2 13 (13) (1) (122)
Financial assets at fair value through other comprehensive income 626 135 - - - 761
Cash and cash equivalents 636 474 - - - 1,110
Financial services net funds 1,139 611 13 (13) (1) 1,749
Group
Net derivative financial instruments - - (1) 1 - -
Borrowings (excluding overdrafts) (661) (534) 73 (77) - (1,199)
Lease liabilities (6,489) 507 264 (264) 628 (5,354)
Arising from financing activities (7,150) (27) 336 (340) 628 (6,553)
Financial assets at fair value through other comprehensive income 626 135 - - - 761
Cash and cash equivalents 1,319 668 - - - 1,987
Group net debt (5,205) 776 336 (340) 628 (3,805)
Cash Movements Non-Cash Movements
5 March 2023 Cash flows excluding interest Net interest (received) / paid Accrued Interest Other non-cash movements 16 September 2023
£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) 825 (6,509)
Cash and cash equivalents 683 185 - - - 868
Bank overdrafts - (2) - - - (2)
Retail net debt (6,344) (120) 166 (170) 825 (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) 825 (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) 825 (3,880)
Net derivatives comprise only those used to hedge borrowings. Non-cash
movements include changes in fair value of £(2) million which arises in
Retail and £(1) million arising in Financial Services (52 weeks to 2 March
2024: £nil; 28 weeks ended 16 September 2023: £1 million and £nil, which
arises in Retail and Financial Services, respectively) on net derivative
financial instruments, borrowings (excluding overdrafts) and financial assets
through OCI. Amounts for these individual components was not significant.
12.3 Reconciliation of own shares purchased for cancellation
The table below presents the reconciliation of own shares purchased for
cancellation between the Group statement of changes in equity and the Group
cash flow statement:
14 September 2024 2 March 16 September 2024
2024
£m £m £m
Included in the Group statement of changes in equity (150) - -
Outstanding amount recognised as financial liabilities 14 - -
Included in the Group cash flow statement (136) - -
13. Borrowings
14 September 2024 2 March 2024
Current Non-current Total Current Non-current Total
£m £m £m £m £m £m
Loan due 2031 58 414 472 54 442 496
Term loan 8 575 583 6 575 581
Bank overdrafts 4 - 4 - - -
Sainsbury's Bank Tier 2 Capital 6 118 124 6 116 122
76 1,107 1,183 66 1,133 1,199
Transaction costs (1) (2) (3) (1) (3) (4)
75 1,105 1,180 65 1,130 1,195
16 September 2023
Current Non-current Total
£m £m £m
Loan due 2031 51 467 518
Term loan 5 575 580
Bank overdrafts 2 - 2
Sainsbury's Bank Tier 2 Capital 6 112 118
64 1,154 1,218
Transaction costs - (3) (3)
64 1,151 1,215
Undrawn facilities
The Group's 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 2028 and Facility B has a maturity of December 2027.
14. Assets and liabilities of disposal group and non-current
assets held for sale
As described in note 7, in the period the Group announced the sale of its Core
Banking Business and ATM estate, which are due to complete in the first half
of the calendar year 2025. Consequently, assets of the disposal group of
£3,069 million and non-current assets of £2 million have been classified as
held for sale during this period. Assets of the disposal group and non-current
assets held for sale are disclosed in note 7.5.
For other assets, 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.
14.1 Assets of disposal group and non-current assets held for sale
28 weeks to 52 weeks to 28 weeks to
14 September 2024 2 March 2024 16 September 2023
£m £m £m
Opening balance 10 8 8
Acquisition - 63 63
Classified as held for sale in the period 3,078 15 8
No longer classified as held for sale - (10) (3)
Sold in the period (2) (66) (66)
Closing balance 3,086 10 10
Of which
Assets of disposal group held for sale 3,069 - -
Non-current assets classified as held for sale 17 10 10
3,086 10 10
14.2 Liabilities of disposal group and non-current assets held for
sale
28 weeks to 52 weeks to 28 weeks to
14 September 2024 2 March 2024 16 September 2023
£m £m £m
Opening balance - - -
Classified as held for sale in the period (3,655) - -
Closing balance (3,655) - -
15. 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 most recent triennial valuation was carried out as at 30 September 2021
resulting in resulting in an actuarial surplus of £130 million (comprising a
surplus of £231 million in the Sainsbury's section and a £101 million
deficit in the Argos section) on a technical provisions basis. The next
triennial valuation as at 30 September 2024 has now commenced; the Company
will share the outcome when discussions have completed in 2025.
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.
On 25 July 2024, the Court of Appeal upheld the High Court's decision in
Virgin Media v NTL Pension Trustees. This case found that changes made between
1997 and 2016 to pension benefits from a contracted-out salary related scheme
could be void where trustees do not have written Section 37 confirmation from
the scheme actuary. The case also confirmed that retrospective confirmation
would not be permissible. This judgement is relevant for the Sainsbury's
Pension Scheme as it was contracted out of the State Second Pension (formerly
SERPS) and there were changes to the Scheme during the relevant period.
Based on a review of the changes made to the Scheme during this period, the
Group does not consider any adjustments to the interim financial statements
are required in respect of this matter. Both the Trustee and the Company have
taken legal advice and are following any developments closely.
15.1 Balance sheet
14 September 2024 2 March 2024
Sainsbury's Argos Group Sainsbury's Argos Group
£m £m £m £m £m £m
Present value of funded obligations (5,270) (836) (6,106) (5,172) (816) (5,988)
Fair value of plan assets 5,912 970 6,882 5,777 925 6,702
Retirement benefit surplus 642 134 776 605 109 714
Present value of unfunded obligations (14) (11) (25) (14) (10) (24)
Net retirement benefit surplus 628 123 751 591 99 690
16 September 2023
Sainsbury's Argos Group
£m £m £m
Present value of funded obligations (4,898) (765) (5,663)
Fair value of plan assets 5,761 911 6,672
Retirement benefit surplus 863 146 1,009
Present value of unfunded obligations (12) (10) (22)
Net retirement benefit surplus 851 136 987
15.2 Movements in net surplus
28 weeks to 52 weeks to 28 weeks to
14 September 2024 2 March 2024 16 September 2023
£m £m £m
At the beginning of the financial period 690 989 989
Net interest income 18 51 25
Remeasurement gains/(losses) 24 (389) (46)
Pension scheme expenses (4) (7) (4)
Contributions by employer 23 44 23
Benefits paid - 2 -
At the end of the period 751 690 987
15.3 Valuation of plan assets
The Pension Scheme has circa £1,220 million of private market assets, split
between private debt, private equity and property. The valuation of these
assets was as at 31 March 2024 and a roll-forward to 14 September 2024 has
been performed (adjusting for cash received or paid and applying the changes
seen in relevant liquid indices) which increased the valuation of these assets
by £21 million. A 1% change in the indices used would have caused a £10
million change in the adjustment.
15.4 Actuarial assumptions for measuring funded obligations
14 September 2024 2 March 16 September 2023
2024
% % %
Discount rate 4.80 5.00 5.40
Inflation rate - RPI 3.10 3.20 3.35
Inflation rate - CPI 2.50 2.55 2.70
Future pension increases 1.90 - 2.90 1.95 - 3.00 1.90 - 3.00
15.5 Sensitivities
The obligations are sensitive to the above assumptions as well as demographic
factors whereby the main impacts of such changes are:
Change in present value of funded obligations - increase / (decrease)
£m £m
Financial sensitivities
Discount rate +/- 0.1% (89) 91
Discount rate +/- 1.0% (811) 1,003
Inflation rate +/- 0.1% 51 (47)
Inflation rate +/- 1.0% 525 (496)
Inflation rate for future pension increases +/- 0.1% 26 (23)
Inflation rate for future pension increases +/- 1.0% 255 (271)
Life expectancy +/- 1 year 200 (199)
Any impact on the obligations at a future balance sheet date due to a change
in the discount rate and/or inflation assumptions would be expected to be at
least partially offset by a change in the value of hedged assets, and so any
impact on the Scheme's surplus would be smaller than indicated above.
16. Contingent liabilities
The Group has a number of contingent liabilities in respect of disposed or
exited businesses and guarantees in relation to disposed assets, which may
expose the Group to a material liability. For disposed property assets, this
could be if the current tenant and their ultimate parents become insolvent. No
historical guarantees are 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
17,000 equal pay claims from circa 11,900 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 pay 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.
17. Post balance sheet events
Share buyback programme
As part of the Group's share buyback programme entered into on 26 April 2024,
3,196,657 shares were purchased, and subsequently cancelled after the balance
sheet date. The financial liability of £14 million recognised at the balance
sheet date has subsequently been derecognised following this share acquisition
and settlement of directly attributable costs. Tranche One of the share
buyback programme concluded on 14 October 2024.
Financial Services withdrawal
ATM assets
On 25 September 2024 the Group announced the sale of its ATM estate assets to
NoteMachine and entered into a partnership for the ongoing provision of ATM
services. The transfer of assets is expected to be completed by May 2025.
Following the transfer, the Group will cease manufactured ATM operations. The
associated assets were classified as held for sale and operations re-presented
as discontinued at the balance sheet date, as disclosed in note 7.
AFS cards portfolio
The Group announced on 31 October 2024 the sale of its AFS cards portfolio to
NewDay Group for total consideration expected to be around £720 million,
comprising £660 million of cash and £60 million of corporate loan notes due
three years after the issue date, and the creation of a partnership for the
ongoing provision of credit through a new Argos-branded digital credit
proposition. The purchase price at completion will be measured in accordance
with the pricing mechanism by reference to the gross loan balance at the point
of beneficial title transfer. This is expected to occur at the end of Q1 of
calendar year 2025.
Following the announcement, associated assets of the AFS disposal group will
be classified as held for sale, including any goodwill associated with the AFS
component recognised as part of the Home Retail Group acquisition in 2016.
Measuring the disposal group as held for sale will result in the recognition
of migration and advisory costs directly attributable to the sale, and
restructuring and advisory costs as a consequence of the exit. Owing to the
classification as held for sale, and the transaction representing the latest
phase in the single co-ordinated plan to move to a third-party distributed
model, the results of the AFS component will be classified and presented as a
discontinued operation.
At the balance sheet date, the AFS cards portfolio continued to be measured at
amortised cost and was not classified as held for sale, nor were operations
re-presented as discontinued operations, as a sale was not considered to be
highly probable at the balance sheet date.
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 Social Sustainability
· Financial and treasury
· Safety and Security
· Political and regulatory environment
· Product safety and sourcing
· Sainsbury's Bank
· Trading environment and customer expectations
The Principal Risks and uncertainties remain those reported in detail in the
Group's Annual Report and Financial Statements 2024. For more information on
these risks, please refer to pages 53 to 61 of the J Sainsbury plc Annual
Report and Financial Statements 2024, 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, to the best of their knowledge, 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 28 weeks of the financial
year; and
· that the report contains a fair review of any material
related party transactions.
At the date of this statement, the directors are those listed in the J
Sainsbury plc Annual Report 2024. A list of current directors is maintained on
the Group's website: www.about.sainsburys.co.uk/about-us/our-management
(https://jsainsbury-my.sharepoint.com/personal/dominic_page2_sainsburys_co_uk/Documents/A_H1%202024/www.about.sainsburys.co.uk/about-us/our-management)
.
By order of the Board
Simon Roberts Bláthnaid Bergin
Chief Executive Chief Financial Officer
6 November 2024 6 November 2024
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 14
September 2024 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 14 September 2024 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
6 November 2024
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.
A1 Income statement measures
A1.1 Revenue
a) Retail like-for-like sales (Closest IFRS equivalent: none)
Definition and purpose
Year-on-year growth in sales including VAT, excluding fuel and Financial
Services, for stores that have been open for more than one year. The
relocation of Argos stores into Sainsbury's supermarkets are classified as new
space, while the host supermarket is classified like-for-like.
The measure is used widely in the retail sector.
Reconciliation
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March 2024
Retail like-for-like (exc. Fuel, inc. VAT) 3.4% 8.4% 7.5%
Underlying net new space impact (0.3)% (0.7)% (0.7)%
Retail sales growth/(decline) (exc. Fuel, inc. VAT) 3.1% 7.7% 6.8%
Fuel impact (1.1)% (5.1)% (3.6)%
Total retail sales growth (inc. Fuel, inc. VAT) 2.0% 2.6% 3.2%
VAT impact 0.3% 0.6% 0.4%
Total retail sales growth 2.3% 3.2% 3.6%
A1.2 Profit
a) Retail underlying operating profit and margin (Closest IFRS
equivalent: Profit before tax)
Definition and purpose
Profit before interest and tax for the retail segment excluding non-underlying
items.
This is the lowest level at which the retail segment can be viewed from a
management perspective, with finance costs managed for the Group as a whole.
Reconciliation
28 weeks to 28 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March 2024
Note £m £m £m
Retail underlying operating profit 4 503 485 966
Retail sales 4 17,050 16,665 32,084
Retail underlying operating margin 2.95% 2.91% 3.01%
b) Underlying profit before tax (Closest IFRS equivalent: Profit before tax)
Definition and purpose
Profit before tax excluding non-underlying items.
Provides shareholders with additional insight into the year-on-year
performance.
Reconciliation
Face of the income statement.
Non-underlying items as set out in note 3 to the consolidated condensed
interim financial statements.
c) Underlying basic and diluted earnings per share (Closest IFRS equivalent:
Basic and diluted earnings per share)
Definition and purpose
Earnings per share using underlying profit as described above.
A key measure to evaluate the performance of the business and returns
generated for investors.
Reconciliation
Note 8 to the consolidated condensed interim financial statements.
d) Retail underlying EBITDA (Closest IFRS equivalent: None)
Definition and purpose
Retail underlying operating profit as above, before underlying depreciation,
and amortisation.
Used to review the retail segment's profit generation and the sustainability
of ongoing capital reinvestment and finance costs.
Reconciliation
28 weeks to 28 weeks to 52 weeks to
14 September 2024
16 September 2023
2 March 2024
Note £m £m £m
Retail underlying operating profit 4 503 485 966
Add: Retail depreciation and amortisation expense A2.1 616 597 1,112
Retail underlying EBITDA 1,119 1,082 2,078
Retail sales 4 17,050 16,665 32,084
Retail underlying EBITDA margin 6.56% 6.49% 6.48%
e) Underlying net finance costs (Closest IFRS equivalent: Finance income less
finance costs)
Definition and purpose
Net finance costs before any non-underlying items that are recognised within
finance income / expenses.
Provides shareholders with additional insight into the underlying net finance
costs.
Reconciliation
Note 5 to the consolidated condensed interim financial statements.
f) Underlying tax rate (Closest IFRS equivalent: Effective tax rate)
Definition and purpose
Tax on underlying items, divided by underlying profit before tax.
Provides an indication of the tax rate across the Group before the impact of
non-underlying items.
Reconciliation
Non-underlying tax for continuing operations is analysed in note 6 to the
consolidated condensed interim financial statements. Tax associated with
discontinued operations is presented in note 7.
A2 Cash flows and borrowings
A2.1 Retail cash flows (Closest IFRS equivalent: Group cash flows)
Definition and purpose
Retail cash flows identified as a separate component of Group cash flows.
Retail free cash flow: Net cash generated from retail operations, after cash
capital expenditure and including payments of lease obligations, and cash
flows from joint ventures and associates. Excludes capital injections to,
dividends from, and any other exceptional cash movements with or on behalf of
Sainsbury's Bank and its subsidiaries. This measures cash generation, working
capital efficiency and capital expenditure of the retail business.
Other retail cash flows: Individual cash flow line items segregated from Group
cash flows to allow individual Retail cash flows to be identified. This
enables management to assess the cash generated from its core retail
operations, and to assess core retail capital expenditure in the financial
year in order to review the strategic business performance.
Reconciliation
28 weeks to 14 September 2024 28 weeks to 16 September 2023
Retail Financial Services Group Retail Financial Services Group
£m £m £m £m £m £m
Operating profit/(loss) - continuing 436 (26) 410 421 (32) 389
Depreciation and amortisation - Underlying 616 - 616 597 11 608
- Non-underlying 34 - 34 16 - 16
650 - 650 613 11 624
Net impairment charge on non-financial assets 12 - 12 21 - 21
Profit on sale of non-current assets and early termination of leases - Underlying b) (4) - (4) - - -
- Non-underlying (7) - (7) (12) - (12)
(11) - (11) (12) - (12)
Non-underlying fair value movements (4) - (4) 19 - 19
Share-based payments expense b) 36 6 42 36 2 38
Non-cash defined benefit scheme expenses 4 - 4 4 - 4
Cash contributions to defined benefit scheme (23) - (23) (23) - (23)
Operating cash flows before changes in working capital 1,100 (20) 1,080 1,079 (19) 1,060
Movements in working capital - Underlying 179 (453) (274) 273 - 273
- Non-underlying (1) (6) (7) (24) - (24)
178 (459) (281) 249 - 249
Cash generated from operations - continuing a) 1,278 (479) 799 1,328 (19) 1,309
Interest paid a) (182) (6) (188) (166) - (166)
Corporation tax paid a) (22) 3 (19) (17) (3) (20)
1,074 (482) 592 1,145 (22) 1,123
Cash flows from investing activities - continuing
Purchase of property, plant and equipment - Additions a) (296) - (296) (309) (1) (310)
- Acquisitions c) - - - (731) - (731)
Purchase of intangible assets a) (98) - (98) (80) (8) (88)
Capital expenditure (394) - (394) (1,120) (9) (1,129)
Initial direct costs on new leases a) (34) - (34) (11) - (11)
Proceeds from disposal of property, plant and equipment - Core disposals a) 7 - 7 16 - 16
- Acquisition related c) - - - 61 - 61
Proceeds from disposal of Financial Services customers - - - - - -
Interest received a) 15 - 15 11 - 11
(406) - (406) (1,043) (9) (1,052)
Cash flows from financing activities - continuing
Proceeds from issuance of ordinary shares 20 - 20 11 - 11
Purchase of own shares for share schemes (32) - (32) (18) - (18)
Other share related transactions (12) - (12) (7) - (7)
Purchase of own shares for cancellation (136) - (136) - - -
Proceeds from borrowings - - - 575 - 575
Repayment of borrowings (22) - (22) (20) - (20)
Net (repayment)/drawdown of borrowings (22) - (22) 555 - 555
Capital repayment of lease obligations a) (243) - (243) (252) (1) (253)
Dividends paid on ordinary shares (217) - (217) (215) - (215)
(630) - (630) 81 (1) 80
Net increase/(decrease) in cash and cash equivalents - continuing 38 (482) (444) 183 (32) 151
Net (decrease)/increase in cash and cash equivalents - discontinued (10) 54 44 - 595 595
operations
28 (428) (400) 183 563 746
Capital expenditure (394) (1,120)
Less amounts paid for asset acquisition - 731
Core Retail capital expenditure (394) (389)
Items in the retail cash flow marked a) to c) reconcile to the summary cash
flow statement in the financial review as outlined in note A2.2.
As set out in the Group cash flow statement the Group now classifies Interest
received within Cash flows from investing activities whereby the previous
treatment was within Cash flows from operations. Amounts for the 28 weeks
ended 16 September 2023 have therefore been re-presented whereby Retail Cash
generated from operations and Retail Cash flows from investing activities were
previously £1,339 million and £(1,054) million respectively. There has been
no impact on cash flows within the Financial Services segment.
52 weeks to 2 March 2024
Retail Financial Services Group
£m £m £m
Operating profit/(loss) - continuing 790 (116) 674
Depreciation and amortisation - Underlying 1,112 19 1,131
- Non-underlying 34 - 34
1,146 19 1,165
Net impairment charge on non-financial assets 23 60 83
Profit on sale of non-current assets and early termination of leases - Underlying b) (5) - (5)
- Non-underlying (11) - (11)
(16) - (16)
Non-underlying fair value movements 46 - 46
Share-based payments expense b) 83 6 89
Non-cash defined benefit scheme expenses 7 - 7
Cash contributions to defined benefit scheme (44) - (44)
Operating cash flows before changes in working capital 2,035 (31) 2,004
Movements in working capital - Underlying 262 135 397
- Non-underlying 6 - 6
268 135 403
Cash generated from operations - continuing a) 2,303 104 2,407
Interest paid a) (323) (13) (336)
Corporation tax paid a) (58) (3) (61)
1,922 88 2,010
Cash flows from investing activities - continuing
Purchase of property, plant and equipment - Additions a) (649) (1) (650)
- Acquisitions c) (731) - (731)
Purchase of intangible assets a) (165) (7) (172)
Capital expenditure (1,545) (8) (1,553)
Initial direct costs on new leases a) (6) - (6)
Proceeds from disposal of property, plant and equipment - Core disposals a) 16 - 16
- Acquisition related c) 61 - 61
Proceeds from disposal of Financial Services receivables - - -
Dividends and distributions received a) - - -
Interest received a) 27 - 27
(1,447) (8) (1,455)
Cash flows from financing activities - continuing
Proceeds from issuance of ordinary shares 15 - 15
Purchase of own shares (18) - (18)
Other share related transactions (3) - (3)
Proceeds from borrowings 575 - 575
Repayment of borrowings (41) - (41)
Net drawdown of borrowings 534 - 534
Capital repayment of lease obligations a) (505) (2) (507)
Dividends paid on ordinary shares (306) - (306)
(280) (2) (282)
Net increase in cash and cash equivalents - continuing 195 78 273
Net (decrease)/increase in cash and cash equivalents - discontinued a) (1) 396 395
operations
194 474 668
Capital expenditure (1,545)
Less amounts paid for asset acquisition 731
Core Retail capital expenditure (814)
Comparative periods have also been re-presented to separately disclose
discontinued operations.
A2.2 Underlying retail cash flow movements (Closest IFRS equivalent: None)
Definition and purpose
Identifies cash movements in respect of Retail non-underlying items and also
sets out a breakdown of items included in the summary cash flow statement set
out in the Financial Review.
Reconciliation
28 weeks to 28 weeks to 16 September 2023 52 weeks to 2 March 2024
14 September 2024
Note £m £m £m
Cash contribution to defined benefit scheme A2.1 (23) (23) (44)
Non-underlying cash movements:
Financial Services model - - (5)
Retail restructuring programme (29) (40) (67)
Operating cash flows (29) (40) (72)
Effect on Retail cash generated from operations (52) (63) (116)
Sum of items marked a), b), and c) in note A2.1 as they appear in the
Financial Review
28 weeks to 28 weeks to 16 September 2023 52 weeks to 2 March 2024
14 September 2024
Reference £m £m £m
Retail free cash flow a) 425 520 639
Share based payments and other b) 32 36 78
Net consideration paid for Highbury & Dragon property transaction c) - (670) (670)
A3 Borrowings
A3.1 Net debt (Closest IFRS equivalent: Borrowings, cash, derivatives,
financial assets at FVTOCI, lease liabilities)
Definition and purpose
Net debt includes the capital injections into Sainsbury's Bank, but excludes
the net debt of Sainsbury's Bank and its subsidiaries. Financial Services'
net debt balances are excluded because they are required as part of the
business as usual operations of a bank, as opposed to specific forms of
financing for the Group. Derivatives exclude those not used to hedge
borrowings, and borrowings exclude bank overdrafts as they are disclosed
separately. Hence net debt is re-presented as Retail net debt.
This metric shows the liquidity and indebtedness of the Group and whether the
Group can cover its debt commitments.
Reconciliation
Note 12.2 to the consolidated condensed interim financial statements.
A3.2 Net debt / underlying EBITDA (Closest IFRS equivalent: none)
Definition and purpose
Net debt divided by Group underlying EBITDA based on a 52 week rolling basis.
Helps management measure the ratio of the business's debt to operational cash
flow.
Reconciliation
28 weeks to 28 weeks to 52 weeks to 2 March 2024
14 September 2024 16 September 2023
Note £m £m £m
Retail net debt 12, A3.1 5,584 5,643 5,554
Group underlying EBITDA A4.2 2,163 2,130 2,139
Net debt/underlying EBITDA 2.6x 2.6x 2.6x
Group underlying EBITDA is reconciled within the fixed charge cover analysis
in note A4.2.
A4 Other measures
A4.1 Return on capital employed (Closest IFRS equivalent: none)
Definition and purpose
Return divided by average capital employed.
Return is defined as 52 week rolling underlying operating profit.
Capital employed is defined as Group net assets excluding pension surplus,
less net debt. The average is calculated on a 14-point basis which uses the
average of 14 data points.
Represents the total capital that the Group has utilised in order to generate
profits. Management use this to assess the performance of the business.
Reconciliation
Net debt as set out in note 12 to the consolidated condensed interim financial
statements.
52 weeks to 52 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March 2024
Note £m £m £m
Return (Group underlying operating profit) 1,019 974 995
Group net assets Balance sheet 6,613 7,223 6,868
Less: Pension surplus Balance sheet (751) (987) (690)
Deferred tax on pension surplus 253 330 244
Less: net debt 12, A3.1 5,584 5,643 5,554
Effect of in-year averaging 262 121 42
Capital employed 11,961 12,330 12,018
Return on capital employed 8.5% 7.9% 8.3%
A4.2 Fixed charge cover (Closest IFRS equivalent: none)
Definition and purpose
Group underlying EBITDA divided by rent (representing capital and interest
repayments on leases) and underlying net finance costs.
All items are calculated on a 52 week rolling basis.
This helps assess the Group's ability to satisfy fixed financing expenses from
performance of the business.
Reconciliation
52 weeks to 52 weeks to 52 weeks to
14 September 2024 16 September 2023 2 March 2024
£m £m £m
Group underlying operating profit 1,019 974 995
Add: Underlying depreciation and amortisation expense 1,144 1,156 1,144
Group underlying EBITDA 2,163 2,130 2,139
Repayment of capital element of lease obligations (496) (521) (507)
Underlying finance income 33 25 30
Underlying finance costs (333) (309) (324)
Fixed charges (796) (805) (801)
Fixed charge cover 2.7x 2.6x 2.7x
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