REG - Sainsbury(J) PLC - Interim results <Origin Href="QuoteRef">SBRY.L</Origin> - Part 4
09/11/2016 07:06
- Part 4: For the preceding part double click ID:nRSI6797Oc
12,469 - - 12,469
Inter-segmental elimination1 (3) - - (3)
Financial services sales to external customers - 173 - 173
Underlying revenue 12,466 173 - 12,639
Acquisition adjustment fair value unwind2 - 3 - 3
Revenue 12,466 176 - 12,642
Underlying operating profit 308 29 - 337
Underlying finance income 9 - - 9
Underlying finance costs3 (74) - - (74)
Underlying share of post-tax (loss)/profit from joint ventures and associates (2) - 7 5
Underlying profit before tax 241 29 7 277
Non-underlying income 95
Profit before tax 372
Income tax expense (73)
Profit for the financial period 299
Assets 14,213 5,359 - 19,572
Investment in joint ventures and associates 6 - 278 284
Segment assets 14,219 5,359 278 19,856
Segment liabilities (8,767) (4,595) - (13,362)
1 The inter-segmental elimination relates to commissions received from Financial Services, the other side of
which is cost of sales in the Financial Services segment, not shown in the above
2 Represents fair value unwind on loans and advances to customers resulting from the Sainsbury's Bank
acquisition.
3 The coupons on the perpetual securities are accounted for as equity in line with IAS 32 'Financial
Instruments: Presentation', however are accrued on a straight-line basis and included as an expense within underlying
finance costs, as detailed in note 4.
28 weeks to 26 September 2015 Retail£m Financial Services£m Property Investment£m Group£m
Segment revenue
Retail sales to external customers 12,248 - - 12,248
Financial services sales to external customers - 166 - 166
Underlying revenue 12,248 166 - 12,414
Acquisition adjustment fair value unwind1 - 5 - 5
Revenue 12,248 171 - 12,419
Underlying operating profit 332 34 - 366
Underlying finance income 9 - - 9
Underlying finance costs2 (71) - - (71)
Underlying share of post-tax (loss)/profit from joint ventures and associates (5) - 9 4
Underlying profit before tax 265 34 9 308
Non-underlying income 31
Profit before tax 339
Income tax expense (75)
Profit for the financial period 264
Assets 12,247 4,368 - 16,615
Investment in joint ventures and associates 11 - 342 353
Segment assets 12,258 4,368 342 16,968
Segment liabilities (7,002) (3,755) - (10,757)
(10,757)
1 Represents fair value unwind on loans and advances to customers resulting from the Sainsbury's Bank
acquisition.
2 The coupons on the perpetual capital securities and the perpetual convertible bonds are accounted for as equity
in line with IAS 32 'Financial Instruments: Presentation', however are accrued on a straight-line basis and included as an
expense within underlying finance costs, as detailed in note 4.
52 weeks to 12 March 2016 Retail£m Financial Services£m Property Investments£m Group£m
Segment revenue
Retail sales to external customers 23,168 - - 23,168
Financial services to external customers - 327 - 327
Underlying revenue 23,168 327 - 23,495
Acquisition adjustment fair value unwind1 - 11 - 11
Revenue 23,168 338 - 23,506
Underlying operating profit 635 65 - 700
Underlying finance income 19 - - 19
Underlying finance costs2 (140) - - (140)
Underlying share of post-tax (loss)/profit from joint ventures and associates (7) - 15 8
Underlying profit before tax 507 65 15 587
Non-underlying expense (39)
Profit before tax 548
Income tax expense (77)
Profit for the financial year 471
Assets 12,115 4,531 - 16,646
Investment in joint ventures and associates 16 - 311 327
Segment assets 12,131 4,531 311 16,973
Segment liabilities (6,727) (3,881) - (10,608)
1 Represents fair value unwind on loans and advances to customers resulting from the Sainsbury's Bank acquisition.
2 The coupons on the perpetual capital securities and the perpetual convertible bonds are accounted for as equity in
line with IAS 32 'Financial Instruments: Presentation', however are accrued on a straight-line basis and included as an
expense within underlying finance costs, as detailed in note 4.
6 Finance income and finance costs1,2
28 weeks to 28 weeks to 52 weeks to
24 September 26 September 12 March
2016 2015 2016
£m £m £m
Interest on bank deposits and other financial assets 9 9 19
Other finance income:
Retail finance fair value movements3 15 - -
Finance income 24 9 19
Borrowing costs:
Secured borrowings (44) (47) (88)
Unsecured borrowings (16) (16) (30)
Obligations under finance leases (4) (5) (9)
Provisions - amortisation of discount (3) (3) (5)
(67) (71) (132)
Other finance costs:
Interest capitalised - qualifying assets 4 4 7
Retail finance fair value movements3 - (3) (20)
IAS 19 pension financing charge (8) (12) (22)
Interest expense on Pharmacy sale advance proceeds (2) - -
(6) (11) (35)
Finance costs (73) (82) (167)
1 Financial Services interest income is reported in revenue and interest expense reported in cost of sales, and
therefore not included in this note.
2 The coupons on the perpetual securities (included within underlying profit - see note 4) are accounted for as
dividends in accordance with IAS 32: 'Financial Instruments: Presentation' and hence are not a finance cost.
3 Retail finance fair value movements include fair value gains/(losses) on derivative financial instruments not
designated in a hedging relationship of £15 million (26 September 2015: £(3) million, 12 March 2016: £(20) million).
7 Income tax expense
28 weeks to 28 weeks to 52 weeks to
24 September 26 September 12 March
2016 2015 2016
£m £m £m
Current tax expense 61 55 88
Deferred tax expense/(credit) 12 20 (11)
Total income tax expense in income statement 73 75 77
Underlying tax rate 21.3% 25.3% 20.8%
Effective tax rate 19.6% 22.1% 14.1%
£m £m £m
Income tax expense on underlying profit 59 78 122
Income tax expense/(credit) on non-underlying items (including revaluation of non-underlying deferred tax balances) 14 (3) (45)
Total income tax expense in income statement 73 75 77
The main rate of UK corporation tax is reducing from 20 per cent to 19 per cent effective from 1 April 2017. A further
reduction in the corporation tax rate to 17 per cent, rather than 18 per cent, effective from 1 April 2020 has been
substantively enacted in the interim period, so its effect is reflected in these financial statements. Deferred tax on
temporary differences and tax losses as at the balance sheet date is calculated at the substantively enacted rates at which
the temporary differences and tax losses are expected to reverse.
8 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders of the parent by the
weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Share Ownership
Plan trusts, which are treated as cancelled. For diluted earnings per share, the earnings attributable to the ordinary
shareholders are adjusted by the interest on the senior convertible bonds (net of tax) and by the coupons on the perpetual
subordinated convertible bonds (net of tax).
The weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive
ordinary shares. These represent share options granted to employees where the exercise price is less than the average
market price of the Company's ordinary shares during the year and the number of shares that would be issued if all senior
convertible bonds and perpetual subordinated convertible bonds are assumed to be converted.
Underlying earnings per share is calculated by excluding the effect of any profit or loss on disposal of properties,
investment property fair value movements, non-underlying finance movements, IAS 19 pension financing and defined benefit
pension scheme expenses, acquisition adjustments and one-off items that are material and infrequent in nature. This
alternative measure of earnings per share is presented to reflect the Group's underlying trading performance. All
operations are continuing for the periods presented.
28 weeks to 28 weeks to 52 weeks to
24 September 26 September 12 March
2016 2015 2016
million million million
Weighted average number of ordinary shares in issue 1,953.4 1,920.0 1,920.8
Weighted average number of dilutive share options 13.4 15.2 14.6
Weighted average number of dilutive senior convertible bonds 136.3 130.0 131.4
Weighted average number of dilutive subordinated perpetual convertible bonds1 74.3 17.9 41.4
Total number of ordinary shares for calculating diluted earnings per share 2,177.4 2,083.1 2,108.2
£m £m £m
Profit for the financial year (net of tax) 299 264 471
Less profit attributable to:
Holders of perpetual capital securities (7) (1) (8)
Holders of perpetual convertible bonds (3) (1) (4)
Profit for the financial year attributable to ordinary shareholders of the parent2 289 262 459
£m £m £m
Profit for the financial period attributable to ordinary shareholders of the parent 289 262 459
Add interest on senior convertible bonds (net of tax) 6 6 11
Add coupon on subordinated perpetual convertible bonds, net of tax 3 1 4
Diluted earnings for calculating diluted earnings per share 298 269 474
£m £m £m
Profit from continuing operations attributable to ordinary shareholders of the parent 289 262 459
Adjustments for non-underlying items (note 4) (95) (31) 39
Tax (including revaluation of deferred tax balances) on non-underlying items 14 (3) (45)
Add back coupons on perpetual securities (net of tax) 3 10 2 12
Underlying profit after tax attributable to ordinary shareholders of the parent 218 230 465
Add interest on senior convertible bonds (net of tax) 6 6 11
Add coupon on subordinated perpetual convertible bonds (net of tax) 3 1 4
Diluted underlying profit after tax attributable to ordinary shareholders of the parent 227 237 480
pence pence pence
per share per share per share
Basic earnings 14.8 13.6 23.9
Diluted earnings 13.7 12.9 22.5
Underlying basic earnings 11.2 12.0 24.2
Underlying diluted earnings 10.4 11.4 22.8
1 The prior year interim weighted average number of dilutive subordinated perpetual convertible bonds has been
amended. This has the effect of increasing both the diluted earnings per share and underlying diluted earnings per share by
0.3 pence per share. This is as a result of applying a more accurate weighted average calculation to the relevant shares.
2 Profit attributable to ordinary shareholders of the parent is calculated in accordance with IAS 33, 'Earnings per
share'.
3 Underlying earnings per share calculation is based on underlying profit after tax attributable to ordinary
shareholders. Therefore the coupons on the perpetual securities are added back.
9 Dividend on ordinary shares
28 weeks to 28 weeks to 52 weeks to
24 September 26 September 12 March
2016 2015 2016
Amounts recognised as distributions to ordinary shareholders in the period:
Dividend per share (pence) 8.1 8.2 12.2
Total dividend charge (£m) 155 157 234
Post the half-year, an interim dividend of 3.6 pence per share (26 September 2015: 4.0 pence per share) has been approved
by the Board of Directors for the financial year ending 11 March 2017, resulting in a total interim dividend of £78 million
(26 September 2015: £77 million). The interim dividend was approved by the Board on 8 November 2016 and as such has not
been included as a liability at 24 September 2016.
10 Notes to the cash flow statement
(a) Reconciliation of operating profit to cash generated from operations
28 weeks to 28 weeks to 52 weeks to
24 September 26 September 12 March
2016 2015 2016
£m £m £m
Profit before tax 372 339 548
Net finance costs 49 73 148
Share of post-tax loss of joint ventures 36 11 11
Operating profit 457 423 707
Adjustments for:
Depreciation expense 310 294 559
Amortisation expense 17 14 25
Non-cash acquisition adjustments1 (2) (6) (13)
Financial services impairment losses on loans and advances 9 5 15
Profit on disposal of properties (116) (94) (100)
Net gain on disposal of Pharmacy business (98) - -
Impairment/(release) of property, plant and equipment 11 (12) (9)
Foreign exchange differences (17) 5 24
Share-based payment expense 21 15 23
Retirement benefit obligations2 (211) (137) (201)
Operating cash flows before changes in working capital 381 507 1,030
Changes in working capital:
(Increase)/decrease in inventories (127) (35) 12
Increase in investment securities (111) - (202)
Increase in trade and other receivables (172) (97) (25)
Increase in amounts due from financial services customers and other deposits (230) (258) (318)
Increase/(decrease) in trade and other payables 453 283 (16)
Increase/(decrease) in amounts due to financial services customers and other deposits 643 (29) 95
Increase in provisions and other liabilities 9 4 48
Cash generated from operations 846 375 624
1 This excludes £3 million (26 September 2015: £5 million, 12 March 2016: £10 million) amortisation on acquired
intangibles included within amortisation expense in this note.
2 The adjustment for retirement benefit obligations reflects the difference between the defined benefit pension scheme
expenses of £2 million (26 September 2015: £2 million, 12 March 2016: £6 million) and the cash contributions of £(213)
million made by the Group to the defined benefit scheme (26 September 2015: £(139) million, 12 March 2016: £(207)
million).
(b) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise the following:
24 September 26 September 12 March
2016 2015 2016
£m £m £m
Cash in hand and bank balances 303 674 374
Money market funds and deposits 767 352 480
Deposits at central banks 115 120 269
Treasury bills - 120 20
Cash and bank balances 1,185 1,266 1,143
Bank overdrafts (3) (5) (3)
Net cash and cash equivalents 1,182 1,261 1,140
11 Analysis of net debt1,2
At 24 September 2016 At 26 September 2015
Retail Financial Services Group Retail Financial Services Group
£m £m £m £m £m £m
Non-current assets
Interest bearing available-for-sale financial assets 38 - 38 36 - 36
Available-for-sale investment securities - 192 192 - - -
Derivative financial instruments 12 5 17 16 1 17
50 197 247 52 1 53
Current assets
Cash and cash equivalents 874 311 1,185 622 644 1,266
Interest bearing available-for-sale financial assets - 124 124 - - -
Derivative financial instruments 136 - 136 45 - 45
1,010 435 1,445 667 644 1,311
Current liabilities
Bank overdrafts (3) - (3) (5) - (5)
Borrowings (190) - (190) (142) - (142)
Finance leases (34) - (34) (30) - (30)
Derivative financial instruments (36) (4) (40) (45) (1) (46)
(263) (4) (267) (222) (1) (223)
Non-current liabilities
Borrowings (1,989) - (1,989) (2,156) - (2,156)
Finance leases (124) - (124) (158) - (158)
Derivative financial instruments (25) (23) (48) (40) (5) (45)
(2,138) (23) (2,161) (2,354) (5) (2,359)
Total net debt (1,341) 605 (736) (1,857) 639 (1,218)
1 The Group's definition of net debt excludes Financial Services' own net debt balances.
2 The perpetual securities are accounted for as equity in accordance with IAS 32 'Financial Instruments: Presentation'
and therefore not included within net debt.
At 12 March 2016
Retail Financial Services Group
£m £m £m
Non-current assets
Interest bearing available-for-sale financial assets 35 - 35
Available-for-sale investment securities - 156 156
Derivative financial instruments 13 4 17
48 160 208
Current assets
Cash and cash equivalents 577 566 1,143
Interest bearing available-for-sale financial assets - 48 48
Derivative financial instruments 51 - 51
628 614 1,242
Current liabilities
Bank overdrafts (3) - (3)
Borrowings (182) - (182)
Finance leases (38) - (38)
Derivative financial instruments (41) (2) (43)
(264) (2) (266)
Non-current liabilities
Borrowings (2,053) - (2,053)
Finance leases (137) - (137)
Derivative financial instruments (48) (21) (69)
(2,238) (21) (2,259)
Total net debt (1,826) 751 (1,075)
A reconciliation of opening to closing net debt is provided in the Financial Review page 22.
Borrowings
On 16 May 2016, the Group extended the maturity on one tranche of its secured corporate £1,150 million syndicated revolving
credit facility. The facility is structured on a dual tranche basis with a £500 million Facility (A) due May 2019 (extended
from May 2018) and a £650 million Facility (B) due May 2020.
As at 24 September 2016, £nil had been drawn under the Facility (26 September 2015: £nil; 12 March 2016: £nil).
Sainsbury's Bank
As at 24 September 2016, Sainsbury's Bank had £15 million of Bank of England Indexed Long-Term Repo facility (ILTR), which
was fully collateralised by a combination of £20 million Treasury Assets and Personal Loans (26 September 2015: £nil).
As at 24 September 2016, Sainsbury's Bank had pledged the rights to a pool of Bank-issued customer loans in exchange for
£260 million of Treasury Bills (under the Bank of England Funding for Lending Scheme). These Treasury Bills can then be
converted to cash as a source of future funding to the Bank.
12 Financial instruments
Carrying amount versus fair values
Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the
financial statements at a value other than fair value. The fair value of financial assets and liabilities are based on
prices available from the market on which the instruments are traded. Where market values are not available, the fair
values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing
interest rates. The fair values of short-term deposits, trade receivables, overdrafts and payables are assumed to
approximate to their book values.
At 24 September 2016 Carrying amount Fair value
£m £m
Financial assets
Amounts due from Sainsbury's Bank customers1 4,183 4,166
Financial liabilities2
Loans due 20183 (732) (770)
Loans due 2031 (780) (927)
Bank overdrafts (3) (3)
Revolving credit facility due 2019 - -
Bank loans due 2016 (44) (44)
Bank loans due 2019 (200) (200)
Senior convertible bond due 2019 (423) (470)
Finance lease obligations (158) (158)
Amounts due to Sainsbury's Bank customers (4,399) (4,381)
(4,381)
1 Includes £1,881 million accounted for as a fair value hedge.
2 The perpetual securities are accounted for as equity in accordance with IAS 32 'Financial instruments:
Presentation' and therefore are not a financial liability.
3 Includes £183 million accounted for as a fair value hedge.
At 26 September 2015 Carrying amount Fair value
£m £m
Financial assets
Amounts due from Sainsbury's Bank customers1 3,271 3,280
Financial liabilities2
Loans due 20183 (829) (892)
Loans due 2031 (818) (987)
Bank overdrafts (5) (5)
Revolving credit facility due 2018 - -
Bank loans due 2016 (37) (37)
Bank loans due 2019 (200) (200)
Senior convertible bond due 2019 (414) (450)
Finance lease obligations (188) (188)
Amounts due to Sainsbury's Bank customers (3,631) (3,631)
(3,631)
1 Includes £1,776 million accounted for as a fair value hedge.
2 The perpetual securities are accounted for as equity in accordance with IAS 32 'Financial instruments:
Presentation' and therefore are not a financial liability.
3 Includes £211 million accounted for as a fair value hedge.
At 12 March 2016 Carrying amount Fair value
£m £m
Financial assets
Amounts due from Sainsbury's Bank customers1 3,344 3,337
Financial liabilities2
Loans due 20183 (780) (824)
Loans due 2031 (799) (896)
Bank overdrafts (3) (3)
Bank loans due 2016 (39) (39)
Bank loans due 2019 (199) (199)
Convertible bond due 2019 (418) (473)
Obligations under finance leases (175) (175)
Amounts due to Sainsbury's Bank customers and banks (3,755) (3,757)
(3,757)
1 Includes £2,705 million accounted for as a fair value hedge.
2 The perpetual securities are accounted for as equity in accordance with IAS 32 'Financial instruments:
Presentation' and therefore are not a financial liability.
3 Includes £206 million accounted for as a fair value hedge.
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).
At 24 September 2016 Level 1 Level 2 Level 3 Total
£m £m £m £m
Available-for-sale financial assets1
Interest bearing financial assets - 38 - 38
Other financial assets 12 - 145 157
Investment securities 316 - - 316
Financial assets
Derivative financial assets - 153 - 153
Financial liabilities
Derivative financial liabilities - (71) (17) (88)
At 26 September 2015 Level 1 Level 2 Level 3 Total
£m £m £m £m
Available-for-sale financial assets1
Interest bearing financial assets - 36 - 36
Other financial assets - - 144 144
Financial assets at FVTPL
Derivative financial assets - 62 - 62
Financial liabilities at FVTPL
Derivative financial liabilities - (73) (18) (91)
1 Available-for-sale financial assets also includes £2 million in relation to unlisted equity investments which are
carried at cost as the fair value cannot be reliably measured and has been excluded from the fair value hierarchy table
above.
At 12 March 2016 Level 1 Level 2 Level 3 Total
£m £m £m £m
Available-for-sale financial assets1
Interest bearing financial assets - 35 - 35
Other financial assets - - 146 146
Investment securities 203 - 1 204
Financial assets at FVTPL
Derivative financial assets - 68 - 68
Financial liabilities at FVTPL
Derivative financial liabilities - (78) (34) (112)
1 Available-for-sale financial assets also includes £2 million in relation to unlisted equity investments which are
carried at cost as the fair value cannot be reliably measured and has been excluded from the fair value hierarchy table
above.
Reconciliation of Level 3 fair value measurements of financial assets:
Details of the determination of Level 3 fair value measurements are set out below:
Available-for-sale financial assets Derivative financial liabilities Investment Securities Total
28 weeks to 24 September 2016 £m £m £m £m
Opening balance 146 (34) 1 113
Included in finance income/(cost) in the income statement - 17 (1) 16
Included in other comprehensive income (1) - - (1)
Total Level 3 financial assets and liabilities 145 (17) - 128
Available-for-sale financial assets Derivative financial liabilities Total
28 weeks to 26 September 2015 £m £m £m
Opening balance 145 (14) 131
Included in finance cost in the Group income statement - (4) (4)
Included in other comprehensive income (1) - (1)
Total Level 3 financial assets 144 (18) 126
Available-for-sale financial assets Derivative financial liabilities Investment Securities Total
52 weeks to 12 March 2016 £m £m £m £m
Opening balance 145 (14) - 131
Included in finance cost in the Group income statement - (20) - (20)
Included in other comprehensive income 1 - 1 2
Total Level 3 financial assets and liabilities 146 (34) 1 113
Available-for-sale other financial assets
The available-for-sale financial assets relate to the Group's beneficial interest in a property investment pool. The net
present value of the Group's interest in the various freehold reversions owned by the property investment pool has been
derived by assuming a property growth rate of 0.6 per cent per annum (26 September 2015 0.8 per cent; 12 March 2016: 0.6
per cent) and a discount rate of nine per cent (26 September 2015 nine per cent; 12 March 2016: nine per cent). The
sensitivity of this balance to changes of one per cent in the assumed rate of property rental growth and one per cent in
the discount rate holding other assumptions constant is shown below:
24 September 2016 26 September 2015
Change in discount rate +/- 1.0% Change in growth rate +/- 1.0% Change in discount rate +/- 1.0% Change in growth rate +/- 1.0%
£m £m £m £m
Available-for-sale assets (9)/9 14/(13) (10)/11 16/(15)
12 March 2016
Change in discount rate +/- 1.0% Change in growth rate +/- 1.0%
£m £m
Available-for-sale assets (9)/10 15/(14)
Derivative financial liabilities - power purchase agreement
The Group has entered into several long-term fixed-price power purchase agreements with independent producers. Included
within derivative financial instruments is a net liability of £(17) million relating to these agreements at 24 September
2016 (within derivative financial liabilities at 26 September 2015: £(18) million; at 12 March 2016: £(34) million). The
Group values its power purchase agreements as the net present value of the estimated future usage at the contracted fixed
price less the market implied forward energy price discounted back at the prevailing swap rate. The Group also makes an
assumption regarding expected energy output based on the historical performance and the producer's estimate of expected
electricity output. The sensitivity of this balance to changes of 20 per cent in the assumed rate of energy output and 20
per cent in the implied forward energy prices holding other assumptions constant is shown below:
24 September 2016 26 September 2015
Change in volume +/- 20.0% Change in electricity forward price +/- 20.0% Change in volume +/- 20.0% Change in electricity forward price +/- 20.0%
£m £m £m £m
Derivative financial instruments (4)/4 7/(7) (4)/4 8/(8)
12 March 2016
Change in volume +/- 20.0% Change in electricity forward price +/- 20.0%
£m £m
Derivative financial instruments (7)/7 13/(14)
13 Retirement benefit obligations
Retirement benefit obligations relate to a defined benefit scheme, the Sainsbury's Pension Scheme and from 2 September
2016, the Home Retail Group Pension Scheme (the 'Schemes') as well as two unfunded pension liabilities relating to senior
employees of Sainsbury's and Home Retail Group. The Sainsbury's Scheme was closed to new employees in 2002 and closed to
future accrual in 2013. The Home Retail Group scheme was closed to new members and future accrual in 2013. The assets of
both Schemes are held separately from the Group's assets.
The Sainsbury's defined benefit pension scheme was subject to a Trustee's triennial valuation at 14 March 2015. This was
carried out by Willis Towers Watson, the Scheme's independent actuary. On the basis of the assumptions agreed, the
actuarial deficit at 14 March 2015 was £740 million, an increase of £148 million from the March 2012 deficit of £592
million.
The Home Retail Group defined benefit pension scheme was subject to a Trustees' triennial valuation as at 31 March 2015.
This was carried out by Willis Towers Watson, the Scheme's independent actuary. On the basis of the assumptions agreed, the
actuarial deficit as at 31 March 2015 was £315 million, an increase of £157 million from the March 2012 deficit of £158
million.
The unfunded pension liabilities are unwound when each employee reaches retirement and takes their pension from the Group
payroll or is crystallised in the event of an employee leaving or retiring and choosing to take the provision as a one-off
cash payment.
The Consumer Price Index ('CPI') rather than the Retail Price Index ('RPI') has been used as the basis for inflationary
increases to pensions in cases where this is permitted by the Schemes' rules.
The amounts recognised in the balance sheet, based on valuations performed by KPMG, are as follows:
24 September 2016 26 September 2015 12 March 2016
Total Group Home Retail Group1 Sainsbury's
£m £m £m £m £m
Present value of funded obligations (11,305) (1,479) (9,826) (7,470) (7,625)
Fair value of plan assets 9,816 1,183 8,633 6,971 7,235
(1,489) (296) (1,193) (499) (390)
Present value of unfunded obligations (39) (16) (23) (16) (18)
Retirement benefit obligations (1,528) (312) (1,216) (515) (408)
Deferred income tax asset 216 63 153 42 19
Net retirement benefit obligations (1,312) (249) (1,063) (473)
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