REG - Sainsbury(J) PLC - Preliminary Results for the 52 weeks to 12/03/2016 <Origin Href="QuoteRef">SBRY.L</Origin> - Part 2
04/05/2016 07:06
- Part 2: For the preceding part double click ID:nRSD1421Xa
Refurbishments/downsizes 7 16 6 (2) 13 14
Total projects 7 16 7 - 14 16
In 2016/17, contribution from net new space (excluding extensions and replacements) is expected to be around 1.0 per cent.
In 2016/17, Sainsbury's expects to deliver around 250,000 sq ft of gross new space, including 40 to 50 Convenience stores
and five new Supermarkets.
Retail underlying operating profit
Retail underlying operating profit decreased by 11.8 per cent to £635 million (2014/15: £720 million), reflecting the
underlying food price deflation, price investment and operating cost inflation, partly offset by increased cost savings
year-on-year of £225 million (2014/15: £140 million).
Retail underlying operating margin declined by 33 basis points year-on-year to 2.74 per cent (2014/15: 3.07 per cent),
equivalent to a 39 basis points decline at constant fuel prices. Retail underlying EBITDAR margin decreased by 18 basis
points to 7.58 per cent, or a 34 basis points decline to 7.42 per cent at constant fuel prices.
Retail underlying operating profit
52 weeks to 12 March 2016 2016 2015 Change Change at constant fuel prices
Retail underlying operating profit (£m)1 635 720 (11.8)%
Retail underlying operating margin (%)2 2.74 3.07 (33)bps (39)bps
Retail underlying EBITDAR (£m)3 1,755 1,819 (3.5)%
Retail underlying EBITDAR margin (%)4 7.58 7.76 (18)bps (34)bps
1 Underlying earnings before interest, tax, Sainsbury's Bank underlying operating profit and Sainsbury's underlying
share of post-tax profit from JVs.
2 Retail underlying operating profit divided by retail sales excluding VAT.
3 Retail underlying operating profit before rent, depreciation and amortisation.
4 Retail underlying EBITDAR divided by retail sales excluding VAT.
In 2016/17, Sainsbury's expects cost inflation at the lower end of the two to three per cent range. Operational cost
savings are expected to be around £120 million. Sainsbury's remains on track to deliver our three-year £500 million cost
saving programme by the end of 2017/18.
Sainsbury's will remain competitive on price in the market. Food price deflation is likely to continue in to the second
half of 2016/17.
Supplier arrangements
We have considered our disclosures in respect of supplier arrangements, and as a result of this we have decided to disclose
quantified balance sheet and income statement amounts for any areas of supplier arrangements that involve a level of
judgement or estimation, but not those which are calculated through a mechanical process. We believe this represents best
practice disclosure.
The two types of supplier arrangements that involve a level of judgement or estimation are:
• Fixed amounts - these are agreed with suppliers primarily to support in-store activity including promotions, such as
utilising specific space.
• Supplier rebates - these are typically agreed on an annual basis, aligned with the financial year, with the rebate
amount linked to pre-agreed targets such as sales volumes.
Supplier arrangement amounts are offset against cost of sales, and have reduced by £268 million to £371 million (2014/15:
£639 million). The year-on-year reduction has been driven by the conscious decision to move away from supplier arrangements
and towards a reduction in the base cost of goods.
Supplier arrangements
52 weeks to 12 March 2016 2016£m 2015£m
Supplier rebates 69 88
Fixed amounts 302 551
Total supplier arrangements 371 639
Of the above amounts, the following was outstanding and held on the balance sheet at 12 March 2016:
Supplier arrangementsAs at 12 March 2016 2016£m 2015£m
Within current trade receivables
Supplier arrangements due 6 13
Within current trade payables
Supplier arrangements due 39 94
Accrued supplier arrangements 25 47
Financial services - Sainsbury's Bank
Sainsbury's Bank delivered an underlying operating profit of £65 million, a 4.8 per cent increase year-on-year. This
increase was driven by higher total income and favourable bad debt levels, partly offset by additional administrative costs
as a result of taking full ownership of the Travel Money operation.
Sainsbury's Bank results
20161 20152 Change%
Total income (£m)3 274 260 5.4
Underlying operating profit (£m) 65 62 4.8
Net interest margin (%)4 4.1 3.9 24bps
Bad debt as a percentage of lending (%)5 0.4 0.7 22bps
Tier 1 capital ratio (%)6 15.8 12.7 313bps
1 12 months to 29 February 2016.
2 12 months to 28 February 2015.
3 Net interest, net commission and other operating income.
4 Net interest receivable divided by average interest-bearing assets.
5 Bad debt expense divided by average gross lending.
6 Tier 1 capital divided by risk-weighted assets.
Net interest margin increased by 24 basis points year-on-year to 4.1 per cent (2014/15: 3.9 per cent) driven by the growth
in the personal loans book and an in-year reclassification of certain credit card fees from commission to interest income.
Bad debt levels as a percentage of lending improved to 0.4 per cent (2014/15: 0.7 per cent) as a result of continued
improvement in recovery processes, low market interest rates and stable economic conditions. The Tier 1 capital ratio
increased by 313 basis points year-on-year to 15.8 per cent (2014/15: 12.7 per cent), reflecting profit retained for the
year and ongoing capital injections in support of transitioning the Bank to a new, more flexible banking platform.
J Sainsbury plc completed its purchase of the remaining 50 per cent share of Sainsbury's Bank on 31 January 2014. Since
then Sainsbury's Bank has embarked upon a business transformation programme to exit from Lloyds Banking Group and build a
new, more flexible banking platform. The migration of savings customers to the new banking platform is expected to be in
late summer 2016 and the timing of the migration of cards and loans customers is currently being re-planned, particularly
in light of the Group's proposed acquisition of Home Retail Group plc. Total transition costs are forecast to be at the top
of the £340 million to £380 million range.
In 2016/17, Sainsbury's expects Bank operating profit to be around ten per cent lower year-on-year due to investment
required to enter the mortgage market and the impact of reduced interchange fees. Results prior to the impact of entering
the mortgage market and the reduced interchange fees, would result in a year-on-year profit improvement.
Capital injections to the Bank in 2016/17 are expected to be circa £20 million.
Property and other joint ventures ('JV')
Sainsbury's underlying share of post-tax profit from its JV with British Land was £14 million (2014/15: £13 million). The
underlying share of post-tax profit from the JV with Land Securities was £1 million (2014/15: £2 million).
An investment property fair value decrease of £18 million was recognised outside underlying profit (2014/15: £7 million
increase), driven by the average property yield of the British Land JV increasing to 5.1 per cent, 13 basis points higher
than the prior year (2014/15: 5.0 per cent).
Sainsbury's recognised a net £7 million share of loss (2014/15: net £9 million share of loss) from the three start-up JVs:
Netto, Mobile by Sainsbury's and I2C. This loss was driven by start-up costs alongside closure costs of Mobile by
Sainsbury's. On 14 October 2015, it was announced that Mobile by Sainsbury's, a joint venture with Vodafone, would close on
15 January 2016.
In 2016/17, Sainsbury's expects the share of profit from the property JVs to be slightly lower year-on-year. Sainsbury's
share of loss from the start-up JVs, including Netto, is expected to be slightly higher year-on-year.
Underlying net finance costs
Underlying net finance costs increased by £14 million year-on-year to £121 million (2014/15: £107 million), as a result of
a reduction in capitalised interest and the perpetual securities coupons.
Underlying net finance costs152 weeks to 12 March 2016 2016£m 2015£m
Underlying finance income 19 19
Interest costs (132) (143)
Perpetual securities coupons (15) -
Capitalised interest 7 17
Underlying finance costs (140) (126)
Underlying net finance costs (121) (107)
1 Finance income/costs before financing fair value movements and the IAS 19 pension financing charge.
Sainsbury's expects underlying net finance costs in 2016/17 to be slightly higher year-on-year. Capitalised interest is
expected to be similar year-on-year.
Items excluded from underlying results
Items excluded from underlying results totalled a charge of £39 million (2014/15: £753 million charge), mainly due to
one-off items.
Items excluded from underlying results52 weeks to 12 March 2016 2016£m 2015£m
Profit on disposal of properties 101 7
Investment property fair value movements (18) 7
Retail financing fair value movements (22) (30)
IAS 19 pension financing charge and scheme expenses (28) (37)
Perpetual securities coupons1 15 -
Acquisition adjustments 3 13
One-off items (90) (713)
Total items excluded from underlying results (39) (753)
1 Perpetual securities coupons are added back as accounting standards determine that for statutory reporting purposes
they are treated as dividends.
One-off items
The charge to one-off items of £90 million (2014/15: £713 million) includes: costs of £59 million in relation to
transitioning Sainsbury's Bank to a new, more flexible banking platform (capital costs relating to the transition were £19
million), £15 million of costs mainly relating to the proposed acquisition of Home Retail Group plc; and £15 million of
internal restructuring costs.
One-off items52 weeks to 12 March 2016 2016£m 2015£m
Net impairment and onerous contract charge (1) (628)
Sainsbury's Bank transition (59) (53)
Pension compensation payments - (17)
Internal restructuring (15) (15)
Transaction costs1 (15) -
Total one-off items (90) (713)
1 Transaction costs in 2016 are those incurred as part of the approach to Home Retail Group plc and the sale of the
pharmacy business.
In 2016/17, Sainsbury's Bank transition costs are expected to be around £40 million. Capital costs relating to the
transition are also expected to be around £40 million
Property profits mainly from mixed-use developments, are expected to be just over £100 million in 2016/17.
The sale of our pharmacy business to LloydsPharmacy is expected to complete in 2016/2017, subject to Competition and
Markets Authority approval. Sainsbury's expect to recognise a profit on disposal of around £100 million.
Taxation
The income tax charge was £77 million (2014/15: £94 million), with an underlying tax rate of 20.8 per cent (2014/15: 25.8
per cent) and an effective tax rate of 14.1 per cent (2014/15: (130.6) per cent). The underlying rate is lower than last
year, mainly due to the revaluation of deferred tax balances from 20 to 18 per cent reducing the rate in the current year.
The effective tax rate was lower than the underlying rate also as a result of the revaluation of non-underlying deferred
tax balances and the majority of profits on the disposal of properties not being taxable.
Underlying tax rate
52 weeks to 12 March 2016 Profit Tax Rate %
£m £m
Underlying profit before tax, and tax thereon 587 (122) 20.8
Adjustments, and tax thereon, for:
Profit on disposal of properties 101 2
Investment property fair values movements (18) -
Retail financing fair value movements (22) 4
IAS 19 pension financing charge and scheme expenses (28) 6
Perpetual securities coupons 15 (3)
Acquisition adjustments 3 1
One-off items (90) 20
Revaluation of deferred tax balance - 15
Profit before tax, and tax thereon 548 (77) 14.1
Profit before tax, and tax thereon
548
(77)
14.1
In 2016/17, Sainsbury's expects the full-year underlying tax rate to be between 22 and 23 per cent.
In the UK, there are a large number of taxes, of which many are relevant for Sainsbury's. During the year ended 12 March
2016, Sainsbury's paid £1.7 billion (2014/15: £1.7 billion) to the UK Government, of which £890 million (2014/15: £854
million) was borne by Sainsbury's and the remaining £822 million (2014/15: £863 million) was collected on behalf of our
colleagues, customers and suppliers. Sainsbury's participate in the Total Tax Contribution PwC Survey for The 100 Group
Finance Directors. For the year ended 14 March 2015, our total taxes borne ranked sixth (in the year to 15 March 2014:
sixth) amongst the survey participants. The results of the Total Tax Contribution Survey for 2016 had not been published at
the date of this report.
The key taxes paid by Sainsbury's were business rates of £483 million (2014/15: £489 million), employers' national
insurance of £141 million (2014/15: £145 million) and UK corporation tax of £117 million (2014/15: £90 million). Other
taxes including customs duty, excise duty, VAT and energy taxes, totalled £149 million (2014/15: £130 million).
Earnings per share
Underlying basic earnings per share decreased by 8.3 per cent to 24.2 pence (2014/15: 26.4 pence) reflecting the fall in
underlying profits and the effect of additional shares issued during the year, partly offset by a lower underlying tax rate
year-on-year.
The weighted average number of shares in issue was 1,920.8 million (2014/15: 1,911.0 million), an increase of 9.8 million
shares or 0.5 per cent. Basic earnings per share were 23.9 pence (2014/15: 8.7 pence loss). The basic earnings per share is
lower than the underlying basic earnings per share due to items that are excluded from underlying results.
Underlying earnings per share
52 weeks to 12 March 2016 2016pence per share 2015pence per share
Basic earnings/(loss) per share attributable to ordinary shareholders 23.9 (8.7)
Adjustments (net of tax) for:
Profit on disposal of properties (5.4) (0.9)
Investment property fair value movements 0.9 (0.4)
Retail financing fair value movements 0.9 1.3
IAS 19 Revised pension financing charge and scheme expenses 1.1 1.6
Acquisition adjustments (0.2) (0.5)
Deferred tax rate change (0.8) -
One-off items 3.8 34.0
Underlying basic earnings per share attributable to ordinary shareholders1 24.2 26.4
1 Underlying EPS calculation is based on underlying profit after tax attributable to ordinary shareholders. Therefore
the coupons on the perpetual securities are not added back.
Dividends
The Board has recommended a final dividend of 8.1 pence per share (2014/15: 8.2 pence). This will be paid on 8 July 2016 to
shareholders on the Register of Members at the close of business on 13 May 2016, subject to approval by shareholders at the
AGM. This will result in a decrease to the full-year dividend of 8.3 per cent to 12.1 pence per share (2014/15: 13.2
pence).
The proposed final dividend was recommended by the Board on 3 May 2016 and, as such, has not been included as a liability
as at 12 March 2016.
In 2016/17, Sainsbury's will maintain dividend cover at two times our underlying earnings.
Financing
The Group's key financing objectives are to diversify funding sources, to minimise refinancing risk and to maintain
appropriate contingent liquidity. As at 12 March 2016, the Group had drawn debt facilities of £2.9 billion (including the
perpetual securities) and undrawn but committed borrowing facilities of £1.2 billion at its disposal.
The principal elements of the Group's drawn debt facilities comprise two long-term loans of £764 million maturing 2018 and
£779 million maturing 2031, both secured over property assets. In addition, the Group has further secured loans of £200
million maturing August 2019 and E50 million maturing September 2016, a five-year £450 million Convertible Bond maturing
November 2019 and £175 million hire purchase facilities and finance leases.
On 5 May 2015, the Group refinanced its unsecured Revolving Credit Facility ('RCF') with a new secured recourse £1,150
million RCF, with a final maturity of 2020. The new secured corporate facility is the same size as, and has substantially
similar economic terms to, the previous unsecured facility. The new facility is secured against supermarket properties, and
contains no financial covenants. The facility is split into two tranches, a £500 million Facility (A) maturing in April
2018 and a £650 million Facility (B) maturing in April 2020. As at 12 March 2016, £nil had been drawn from Facility (A)
(March 2014/15: £120 million) and £nil from Facility (B) (March 2014/15: £nil). As part of this transaction, two further
bank loans totalling £244 million were secured on supermarket properties.
On 30 July 2015, the Group issued £250 million of Perpetual Subordinated Non-Convertible Bonds and £250 million of
Perpetual Subordinated Convertible Bonds. Costs of £6 million directly associated with the issue have been set off against
the value of the proceeds. In line with accounting standards, both instruments have been accounted for as equity and the
coupon cost as dividends. In addition, the coupon cost has been included within Sainsbury's definition of underlying
finance costs and UPBT.
Since 14 March 2015 two bilateral bank loans, amounting to £95 million have matured and were repaid.
Net debt and cash flows
Group net debt includes the capital injections in to Sainsbury's Bank, but excludes Sainsbury's Bank's own net debt
balances1. As at 12 March 2016, net debt was £1,826 million (14 March 2015: £2,343 million), a decrease of £517 million
year-on-year. The year-on-year decrease was primarily driven by the issue of the perpetual securities and improved working
capital, partly offset by a £125 million exceptional pension contribution. Net debt, treating the perpetual securities as
debt, was £2,320 million, a decrease of £23 million year-on-year.
Retail operating cash flow before changes in working capital increased by 3.8 per cent to £1,126 million (2014/15: £1,085
million), however retail cash generated from operations decreased 17.8 per cent to £1,149 million (2014/15; £1,398 million)
mainly due to a reduction in the improvement of retail working capital year-on-year. The £23 million improvement in retail
working capital was driven by operational efficiencies within trade payables and a decrease in inventories year-on-year,
partly offset by a reduction in Fuel trade payables due to price deflation.
Bank working capital has increased by £429 million from 14 March 2015 driven by positive steps taken within the Bank to
increase customer lending and diversify funding sources.
The net cash used in investing activities of £525 million was £375 million lower year-on-year (2014/15: £900 million),
driven by lower capital spend The £494 million proceeds from the issue of the perpetual securities, net of fees, was partly
offset by a repayment of borrowings of £372 million during the year.
1 Net debt balances within Sainsbury's Bank's balance sheet are required for business as usual activities and as such
are excluded from Sainsbury's definition of Group Net debt.
Summary cash flow statement
52 weeks to 12 March 2016 2016 £m 2015 £m
Retail operating cash flow before changes in working capital 1,126 1,085
Decrease in retail working capital 23 313
Retail cash generated from operations 1,149 1,398
Bank operating cash flow before changes in working capital 29 38
Increase in Sainsbury's Bank working capital (429) (300)
Group cash generated from operations1 749 1,136
Interest paid (108) (134)
Corporation tax paid (124) (91)
Net cash generated from operating activities 517 911
Proceeds from sale of pharmacy business 125 -
Net cash used in investing activities (525) (900)
Proceeds from issue of ordinary shares 8 19
Purchase of own shares (20) (18)
Receipt of new debt - 674
Proceeds from issue of perpetual securities 247 -
Proceeds from issue of convertible bonds 247 -
Repayment of borrowings (372) (659)
Exceptional pension contribution (125) -
Dividends paid on ordinary shares (234) (330)
Dividends paid on perpetual securities (4) -
Decrease in cash and cash equivalents (136) (303)
Elimination of net increase in Sainsbury's Bank cash and cash equivalents 316 343
Decrease/(increase) in debt 353 (31)
Fair value and other non-cash movements (16) 32
Movement in net debt 517 41
1 Statutory definition of cash generated from operations includes exceptional pension contribution of £125 million
Sainsbury's expects 2016/17 year-end net debt to reduce year-on-year and a small improvement in retail working capital.
Retail capital expenditure
Core retail capital expenditure decreased by £405 million year-on-year to £542 million (2014/15: £947 million). Core retail
capital expenditure as a percentage of retail sales (including fuel, including VAT) was 2.1 per cent (2014/15: 3.7 per
cent).
Supermarket openings decreased by two during the year to six (2014/15: eight supermarkets). Sainsbury's opened 69 new
convenience stores in the year (2014/15: 98 convenience stores).
During the year, there were no supermarket extensions completed (2014/15: five extensions) and one convenience extension
(2014/15: nil extensions). Sainsbury's also delivered 13 refurbishments during the year (2014/15: 56 refurbishments)
consisting of seven supermarkets (2014/15: 13 supermarkets) and six convenience stores (2014/15: 43 convenience stores).
There were no sale and leaseback proceeds in the year (2014/15: £nil), resulting in net retail capital expenditure of £543
million (2014/15: £941 million).
Retail capital expenditure
52 weeks to 12 March 2016 2016 2015
£m £m
New store development (£m) 207 425
Extensions and refurbishments (£m) 183 284
Other - including supply chain and digital & technology (£m) 152 238
Core retail capital expenditure (£m) 542 947
Acquisition of freehold and trading properties (£m)1 - (9)
Debtor/Creditor movements 1 3
Net retail capital expenditure 543 941
Capex/sales ratio (%)2 2.1 3.7
1 2014/15 balance includes income from Harvest, our JV with Land Securities, relating to the repayment of a loan.
2 Core retail capital expenditure divided by retail sales (including fuel, including VAT).
In 2016/17, Sainsbury's expects core retail capital expenditure (excluding Sainsbury's Bank) to be around £550 million.
2015/16 year-on-year increase in depreciation was impacted by the impairment taken in 2014/15. 2016/17 depreciation is
expected to increase by around £20 million year-on-year primarily due to investment in Digital & Technology assets that are
depreciated over a short lifetime.
Return on capital employed
The return on capital employed ('ROCE') over the 52 weeks to 12 March 2016 was 8.8 per cent (2014/15: 9.7 per cent), a
decrease of 88 basis points year-on-year. ROCE is enhanced by the net retirement benefit obligations, which reduces capital
employed.
ROCE excluding the net retirement benefit obligations over the 52 weeks to 12 March 2016 was 8.3 per cent (2014/15: 9.0 per
cent), a year-on-year decrease of 68 basis points. ROCE decline was mainly due to the fall in underlying operating profit.
Return on capital employed52 weeks to 12 March 2016 2016 2015
Total underlying operating profit (£m) 700 782
Underlying share of post-tax profit from JVs (£m) 8 6
Underlying profit before interest and tax (£m) 708 788
Average capital employed1 (£m) 8,037 8,136
Return on capital employed (%) 8.8 9.7
Return on capital employed (%) (excluding net retirement benefit obligations) 8.3 9.0
52 week ROCE movement to 12 March 2016 (88)bps
52 week ROCE movement to 12 March 2016 (excluding net retirement benefit obligations) (68)bps
1 Average of opening and closing net assets before net debt.
Summary balance sheet
Total equity as at 12 March 2016 was £6,365 million (14 March 2015: £5,539 million), an increase of £826 million, mainly
attributable to the issue of the perpetual securities, net of fees, of £494 million, £181 million due to trade and other
receivables and £116 million due to property, plant and equipment.
Net debt was £517 million lower than at 14 March 2015 primarily driven by the issue of the perpetual securities.
Sainsbury's Bank net assets at 29 February 2016 of £650 million (28 February 2015: £504 million) have been consolidated and
separately identified.
Accounting for the perpetual securities as equity, adjusted net debt to EBITDAR was 4.0 times (2014/15: 4.1 times). Gearing
decreased during the year to 28.7 per cent (14 March 2015: 42.3 per cent) as a result of the increase in equity shareholder
funds. Excluding the net retirement benefit obligations, gearing decreased to 27.0 per cent (14 March 2015: 37.9 per cent).
Treating the perpetual securities as debt, adjusted net debt to EBITDAR increases to 4.3 times. Gearing increases to 39.5
per cent and gearing excluding the net retirement benefit obligations increases to 37.1 per cent.
Interest cover reduced year-on-year to 5.9 times (2014/15: 7.4 times). Fixed charge cover reduced year-on-year to 2.7 times
(2014/15: 2.9 times). Excluding the perpetual securities coupon from underlying net finance costs, interest cover increases
to 6.7 times and fixed charge cover increases to 2.8 times.
Summary balance sheet (Sainsbury's Bank separated)at 12 March 2016 2016£m 2015£m Movement £m
Land and buildings (Freehold & long leasehold) 6,978 6,890 88
Land and buildings (Short leasehold) 820 791 29
Fixtures and fittings 1,926 1,941 (15)
Property, plant and equipment 9,724 9,622 102
Other non-current assets 736 828 (92)
Inventories 968 997 (29)
Trade and other receivables 338 294 44
Sainsbury's Bank Assets1 4,531 4,267 264
Cash and cash equivalents 577 403 174
Debt (2,403) (2,746) 343
Net debt (1,826) (2,343) 517
Trade and other payables and provisions (3,836) (3,712) (124)
Retirement benefit obligations, net of deferred tax (389) (651) 262
Sainsbury's Bank Liabilities1 (3,881) (3,763) (118)
Net assets 6,365 5,539 826
1 As at 29 February 2016.
Impact of perpetual securities on key financial ratios Perpetual securities accounted for as equity Perpetual securities treated as debt
As at 12 As at 12 As at 14
March 2016 March 2016 March 2015
Net debt1 (1,826) (2,320) (2,343)
Adj. net debt to EBITDAR2 4.0 times 4.3 times 4.1 times
Gearing3 28.7% 39.5% 42.3%
Gearing (excluding net retirement benefit obligations)4 27.0% 37.1% 37.9%
Impact on key financial ratios of recognising perpetual securities coupon within underlying finance costs5 UPBT ex. perpetual securities coupon UPBT inc. perpetual securities coupon
52 weeks to 52 weeks to 52 weeks to
12 March 2016 12 March 2016 14 March 2015
Interest cover6 6.7 times 5.9 times 7.4 times
Fixed charge cover7 2.8 times 2.7 times 2.9 times
1 Treating the perpetual securities, net of transaction fees, as debt increases net debt to £2,320 million, and
reduces net assets to £5,871 million.
2 Net debt of £1,826 million plus capitalised lease obligations of £5,500 million (5.5 per cent discount rate),
divided by Group underlying EBITDAR of £1,830 million, calculated for a 52 week period to 12 March 2016.
3 Net debt divided by net assets.
4 Net debt divided by net assets, excluding net retirement benefit obligations.
5 Excluding the perpetual securities coupons, underlying net finance costs reduces to £106 million.
6 Underlying profit before interest and tax divided by underlying net finance costs.
7 Group underlying EBITDAR divided by net rent and underlying net finance costs.
As at 12 March 2016, Sainsbury's estimated market value of properties, including our 50 per cent share of properties held
within property JVs, was £10.6 billion (14 March 2015: £11.1 billion). The £0.5 billion decrease year-on-year was due to
property valuation movements relating to rental value decrease of £0.2 billion, a yield movement of £0.2 billion and
British Land JV valuation decline of £0.1 billion. The summary balance sheet discloses Sainsbury's Bank assets and
liabilities separately to aid interpretation. A summary balance sheet is also presented with Sainsbury's Bank consolidated
by line.
Summary balance sheet (Sainsbury's Bank consolidated)at 12 March 2016 2016£m 2015£m Movement£m
Land and buildings (Freehold & long leasehold) 6,981 6,892 89
Land and buildings (Short leasehold) 820 791 29
Fixtures and fittings 1,963 1,965 (2)
Property, plant and equipment 9,764 9,648 116
Other non-current assets 2,748 2,411 337
Inventories 968 997 (29)
Trade and other receivables 2,251 2,070 181
Sainsbury's Bank cash and cash equivalents 566 882 (316)
Cash and cash equivalents 577 403 174
Debt (2,403) (2,746) 343
Net debt (1,826) (2,343) 517
Trade and other payables and provisions (7,717) (7,475) (242)
Retirement benefit obligations, net of deferred tax (389) (651) 262
Net assets 6,365 5,539 826
Defined benefit pensions
As at 12 March 2016, the post-tax pension deficit was £389 million, an improvement of £262 million since the year-end (14
March 2015: £651 million). The reduction in the deficit was mainly driven by a contribution of £206 million to the Group's
pension scheme which included the first 50 per cent of a one-off £250 million contribution, with the second 50 per cent to
follow in 2016/17, and an increase in the discount rate, partly offset by lower fair value of plan assets.
Retirement benefit obligations
at 12 March 2016 2016 2015
£m £m
Present value of funded obligations (7,625) (7,680)
Fair value of plan assets 7,235 6,988
Pension deficit (390) (692)
Present value of unfunded obligations (18) (16)
Retirement benefit obligations (408) (708)
Deferred income tax asset 19 57
Net retirement benefit obligations (389) (651)
The scheme is subject to a triennial actuarial valuation at 14 March 2015, carried out by Willis Towers Watson on the
projected units basis. The results of this valuation are expected to be finalised in June 2016.
Group income statement
for the 52 weeks to 12 March 2016
2016 2015
Note £m £m
Revenue 4 23,506 23,775
Cost of sales (22,050) (22,567)
Gross profit 1,456 1,208
Administrative expenses (850) (1,132)
Other income 101 5
Operating profit 707 81
Finance income 5 19 19
Finance costs 5 (167) (180)
Share of post-tax (loss)/profit from joint ventures and associates (11) 8
Profit/(loss) before tax 548 (72)
Analysed as:
Underlying profit before tax 3 587 681
Profit on disposal of properties 3 101 7
Investment property fair value movements 3 (18) 7
Retail financing fair value movements 3 (22) (30)
IAS 19 pension financing charge and scheme expenses 3 (28) (37)
Perpetual securities coupons 3 15 -
Acquisition adjustments 3 3 13
One-off items 3 (90) (713)
548 (72)
Income tax expense 6 (77) (94)
Profit/(loss) for the financial year 471 (166)
Earnings/(loss) per share 7 pence pence
Basic 23.9 (8.7)
Diluted 22.5 (8.7)
Underlying basic 24.2 26.4
Underlying diluted 22.8 25.7
Dividends per share 8 pence pence
Interim 4.0 5.0
Proposed final (not recognised as a liability at balance sheet date) 8.1 8.2
Group statement of comprehensive income
for the 52 weeks to 12 March 2016
2016 2015
£m £m
Profit/(loss) for the financial year 471 (166)
Items that will not be reclassified subsequently to the income statement
Remeasurement on defined benefit pension schemes 121 (19)
Current tax relating to items not reclassified - 6
Deferred tax relating to items not reclassified (36) (1)
85 (14)
Items that may be reclassified subsequently to the income statement
Currency translation differences 2 3
Available-for-sale financial assets fair value movements
Attributable to Group (1) (39)
Items reclassified from available-for-sale assets reserve - 1
Cash flow hedges effective portion of fair value movements
Attributable to Group 4 (13)
Attributable to joint ventures and associates 1 3
Items reclassified from cash flow hedge reserve 7 21
Deferred tax relating to items that may be reclassified 3 9
16 (15)
Total other comprehensive income/(expense) for the financial year (net of tax) 101 (29)
Total comprehensive income/(expense) for the financial year 572 (195)
Group balance sheet
At 12 March 2016 and 14 March 2015
2016 2015
Note £m £m
Non-current assets
Property, plant and equipment 9,764 9,648
Intangible assets 329 325
Investments in joint ventures and associates 327 359
Available-for-sale financial assets 340 184
Other receivables 103 83
Amounts due from Sainsbury's Bank customers 1,649 1,412
Derivative financial instruments 17 21
12,529 12,032
Current assets
Inventories 968 997
Trade and other receivables 508 471
Amounts due from Sainsbury's Bank customers 1,695 1,599
Available-for-sale financial assets 48 -
Derivative financial instruments 51 69
Cash and bank balances 9b 1,143 1,285
4,413 4,421
Assets held for sale 31 84
4,444 4,505
Total assets 16,973 16,537
Current liabilities
Trade and other payables (3,077) (2,961)
Amounts due to Sainsbury's Bank customers and banks (3,173) (3,395)
Borrowings (223) (260)
Derivative financial instruments (43) (75)
Taxes payable (158) (188)
Provisions (46) (44)
(6,720) (6,923)
Liabilities held for sale (4) -
(6,724) (6,923)
Net current (liabilities)/assets (2,280) (2,418)
Non-current liabilities
Other payables (269) (265)
Amounts due to Sainsbury's Bank customers and other deposits (582) (266)
Borrowings (2,190) (2,506)
Derivative financial instruments (69) (38)
Deferred income tax liability (237) (215)
Provisions (129) (77)
Retirement benefit obligations 11 (408) (708)
(3,884) (4,075)
Net assets 6,365 5,539
Equity
Called up share capital 550 548
Share premium account 1,114 1,108
Capital redemption reserve 680 680
Other reserves 155 146
Retained earnings 3,370 3,057
Total equity before perpetual securities 5,869 5,539
Perpetual capital securities 248 -
Perpetual convertible bonds 248 -
Total equity 6,365 5,539
Group cash flow statement
for the 52 weeks to 12 March 2016
2016 2015
Note £m £m
Cash flows from operating activities
Cash generated from operations 9a 624 1,136
Interest paid (108) (134)
Corporation tax paid (124) (91)
Net cash generated from operating activities 392 911
Cash flows from investing activities
Purchase of property, plant and equipment (646) (951)
Purchase of intangible assets (34) (78)
Proceeds from disposal of property, plant and equipment 109 40
Receipt of advance disposal proceeds 125 -
Acquisition of subsidiaries net of cash acquired - (6)
Investment in joint ventures (18) (12)
Disposal of subsidiaries (1) -
Proceeds from repayment of loan to joint venture - 17
Interest received 19 20
Dividends and distributions received 46 70
Net cash used in from investing activities (400) (900)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 8 19
Repayment of short-term borrowings (95) (381)
Proceeds from long-term borrowings - 674
Repayment of long-term borrowings (238) (240)
Proceeds from issue of perpetual capital securities 247 -
Proceeds from issue of perpetual convertible bonds 247 -
Purchase of own shares (20) (18)
Repayment of capital element of obligations under finance lease payments (30) (29)
Interest elements of obligations under finance lease payments (9) (9)
Dividends paid on ordinary shares 8 (234) (330)
Dividends paid on perpetual securities (4) -
Net cash used in from financing activities (128) (314)
Net decrease in cash and cash equivalents (136) (303)
Net opening cash and cash equivalents 1,276 1,579
Closing cash and cash equivalents 9b 1,140 1,276
Group statement of changes in equity
for the 52 weeks to 12 March 2016
Called up share capital Share premium account Capital redemption and other reserves Retained earnings Total equity before perpetual securities Perpetual capital securities Perpetual convertible bonds Total equity
Note £m £m £m £m £m £m £m £m
At 15 March 2015 548 1,108 826 3,057 5,539 - - 5,539
Profit for the year - - - 452 452 13 6 471
Other comprehensive income:
Currency translation differences - - 2 - 2 - - 2
Remeasurements on defined benefit pension schemes (net of tax) - - - 85 85 - - 85
Available-for-sale financial assets fair value movements (net of tax):
Attributable to Group - - 2 - 2 - - 2
Cash flow hedges effective portion of changes in fair value (net of tax):
Attributable to Group - - 4 - 4 - - 4
Attributable to joint ventures - -
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