REG - Sainsbury(J) PLC - Preliminary Results for the 52 weeks to 12/03/2016 <Origin Href="QuoteRef">SBRY.L</Origin> - Part 3
04/05/2016 07:07
- Part 3: For the preceding part double click ID:nRSD1421Xb
1 - 1 - - 1
Items reclassified from cash flow hedge reserve - - 7 - 7 - - 7
Total comprehensive income for the year ended 12 March 2016 - - 16 537 553 13 6 572
Transactions with owners:
Dividends paid 8 - - - (234) (234) - - (234)
Issue of perpetual subordinated capital securities and perpetual subordinated convertible bonds (net of tax) - - - - - 248 248 496
Distributions to holders of perpetual subordinated convertible bonds (net of tax) - - - - - (13) (6) (19)
Amortisation of convertible bond equity component - - (7) 7 - - - -
Share-based payment (net of tax) - - - 23 23 - - 23
Purchase of own shares - - - (20) (20) - - (20)
Allotted in respect of share option schemes 2 6 - - 8 - - 8
At 12 March 2016 550 1,114 835 3,370 5,869 248 248 6,365
Group statement of changes in equity
for the 52 weeks to 12 March 2016
Note Called up share capital Share premium account Capital redemption and other reserves Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m £m
At 16 March 2014 545 1,091 807 3,560 6,003 2 6,005
Loss for the year - - - (166) (166) - (166)
Other comprehensive income/(expense):
Currency translation differences - - 3 - 3 - 3
Remeasurements on defined benefit pension schemes (net of tax) - - - (14) (14) - (14)
Available-for-sale financial assets fair value movements (net of tax):
Attributable to Group - - (30) - (30) - (30)
Items reclassified from available-for-sale financial asset reserve - - 1 - 1 - 1
Cash flow hedges effective portion of changes in fair value (net of tax):
Attributable to Group - - (13) - (13) - (13)
Attributable to joint ventures - - 3 - 3 - 3
Items reclassified from cash flow hedge reserve - - 21 - 21 - 21
Total comprehensive expense for the year ended 14 March 2015 - - (15) (180) (195) - (195)
Transactions with owners:
Dividends paid 8 - - - (330) (330) - (330)
Convertible bond equity component - - 39 - 39 - 39
Amortisation of convertible bond - equity component - - (5) 5 - - --
Share-based payment (net of tax) - - - 21 21 - 21
Purchase of own shares - - - (18) (18) - (18)
Allotted in respect of share option schemes 3 17 - (3) 17 - 17
Purchase of non-controlling interest - - - 2 2 (2) -
At 14 March 2015 548 1,108 826 3,057 5,539 - 5,539
Notes to the financial statements
1 Status of financial information
The financial information, which comprises the Group income statement, Group statement of comprehensive income, Group
balance sheet, Group cash flow statement, Group statement of changes in equity and related notes, is derived from the full
Group financial statements for the 52 weeks to 12 March 2016 and does not constitute full accounts within the meaning of
section 435 (1) and (2) of the Companies Act 2006.
The Group Annual Report and Financial Statements 2016 on which the auditors have given an unqualified report and which does
not contain a statement under section 498(2) or (3) of the Companies Act 2006, will be delivered to the Registrar of
Companies in due course, and made available to shareholders in June 2016.
The financial year represents the 52 weeks to 12 March 2016 (prior financial year 52 weeks to 14 March 2015). The
consolidated financial statements for the 52 weeks to 12 March 2016 comprise the financial statements of the Company and
its subsidiaries (the 'Group') and the Group's share of the post-tax results of its joint ventures and associates.
2 Basis of preparation
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards
('IFRSs') as adopted by the European Union and International Financial Reporting Interpretations Committee ('IFRICs') and
with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs.
The financial statements are presented in sterling, rounded to the nearest million ('£m') unless otherwise stated. They
have been prepared on a going concern basis under the historical cost convention, except for derivative financial
instruments, defined benefit scheme assets and liabilities, investment properties and available-for-sale financial assets
that have been measured at fair value.
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
The Group has considered the following amendments to published standards that are effective for the Group for the financial
year beginning 15 March 2015 and concluded that they are either not relevant to the Group or that they do not have a
significant impact on the Group's financial statements. These standards and interpretations have been endorsed by the
European Union.
· Amendments to IFRS 2, 'Share-based payments' on the definition of vesting conditions
· Amendments to IFRS 3, 'Business combinations' on scope exclusions for joint ventures and the subsequent measurement
of contingent considerations
· Amendments to IFRS 8, 'Operating segments' on aggregation of operating segments and reconciliations of assets
· Amendments to IFRS 13, 'Fair value measurements' on application of the portfolio exception
· Amendments to IAS 16, 'Property, plant and equipment' and IAS 38, 'Intangible assets' on the proportionate
restatement of accumulated depreciation/amortisation
· Amendments to IAS 19, 'Employee benefits' on the recognition of employee contributions to defined benefit plans
· Amendments to IAS 24, 'Related party disclosures' on entities providing key management personnel services
· Amendments to IAS 40, 'Investment property' on the interrelationship between IFRS 3 and IAS 40
3 Non-GAAP performance measures
Certain items recognised in reported profit or loss before tax can vary significantly from year to year and therefore
create volatility in reported earnings which does not reflect the Group's underlying performance. Similarly, whilst defined
benefit pension scheme expenses may not vary significantly, they no longer relate to the Group's ongoing activities given
the closure of the defined benefit pension scheme to future accrual. In addition the coupons on the perpetual securities,
whilst accounted for as equity in line with IAS 32 'Financial instruments: Presentation', are accrued on a straight-line
basis and included as an expense within underlying profit.
The Directors believe that the 'underlying revenue', 'underlying profit before tax' ('UPBT') and 'underlying diluted and
basic earnings per share' measures presented provide a clear and consistent presentation of the underlying performance of
Sainsbury's ongoing business for shareholders. Underlying profit is not defined by IFRS and therefore may not be directly
comparable with the 'adjusted' profit measures of other companies.
The adjusted items are:
· Profit on disposal of properties;
· Investment property fair value movements - these reflect the difference between the fair value of an investment
property at the reporting date and its carrying amount at the previous reporting date;
· Retail financing fair value movements - these are fair value gains and losses on non-derivative financial assets and
liabilities carried at amortised cost, on derivatives relating to financing activities and on hedged items in fair value
hedges;
· The financing element of IAS 19 and defined benefit pension scheme expenses;
· Coupons on perpetual securities - these 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 profit;
· Acquisition adjustments - these reflect the adjustments arising from the Sainsbury's Bank acquisition including the
fair value unwind and amortisation of acquired intangibles; and
· One-off items - these are items which are material and infrequent in nature and do not relate to the Group's
underlying performance.
The adjustments made to reported profit/(loss) before tax to arrive at underlying profit before tax are:
2016 2015
£m £m
Underlying profit before tax 587 681
Profit on disposal of properties1 101 7
Investment property fair value movements (18) 7
Retail financing fair value movements2 (22) (30)
IAS 19 pension financing charge and scheme expenses3 (28) (37)
Perpetual securities coupons4 15 -
Acquisition adjustments5 3 13
One-off items (90) (713)
Total adjustments (39) (753)
Profit/(loss) before tax 548 (72)
1 Profit on disposal of properties for the financial year comprised £100 million for the Group (2015: £5 million) and
£1 million for the property joint ventures (2015: £2 million).
2 Retail financing fair value movements for the financial year comprised £(20) million for the Group (2015: £(23)
million) and £(2) million for the joint ventures (2015: £(7) million).
3 Comprises pension financing charge of £(22) million (2015: £(31) million) and defined benefit scheme expenses of
£(6) million (2015: £(6) million).
4 The coupons on the perpetual subordinated capital securities and the perpetual subordinated 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 profit before tax;
5 Acquisition adjustments include £11 million (2015: £23 million) fair value unwind included in revenue, £2 million
(2015: £8 million) fair value unwind included in cost of sales offset by £(10) million (2015: £(18) million) acquired
intangible amortisation included in administrative expenses.
One-off items
One-off items of £(90) million (2015: £(713) million) include:
2016 2015
£m £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) -
(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
4 Segment reporting
The Group's businesses are organised into three operating segments:
· Retailing (supermarkets and convenience);
· Financial services (Sainsbury's Bank); and
· Property investments (joint ventures with The British Land Company PLC and Land Securities Group PLC).
Management has determined the operating segments based on the information provided to the Operating Board (the Chief
Operating Decision Maker for the Group) to make operational decisions on the management of the Group. All material
operations and assets are in the UK. The business of the Group is not subject to highly seasonal fluctuations, although
within retailing there is an increase in trading in the period leading up to Christmas.
Revenue from operating segments is measured on a basis consistent with the revenue number in the income statement. Revenue
is generated by the sale of goods and services.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire
segment assets that are expected to be used for more than one period.
The Operating Board assesses the performance of all segments on the basis of underlying profit before tax. The
reconciliation provided below reconciles underlying operating profit from each of the segments disclosed to profit/(loss)
before tax.
52 weeks to 12 March 2016 Retailing£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
Profit on disposal of properties 100 - 1 101
Investment property fair value movements - - (18) (18)
Retail financing fair value movements (20) - (2) (22)
IAS 19 pension financing charge and scheme expenses (28) - - (28)
Perpetual securities coupons2 15 - - 15
Acquisition adjustments - 3 - 3
One-off items:
Net impairment and onerous contract charge (1) - - (1)
Sainsbury's Bank transition - (59) - (59)
Internal restructuring (15) - - (15)
Transaction costs (15) - - (15)
Profit/(loss) before tax 543 9 (4) 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)
Other segment items
Capital expenditure3 654 35 - 689
Depreciation expense 552 7 - 559
Amortisation expense4 14 11 - 25
Net impairment and onerous contract charge5 (1) - - (1)
Share-based payments 22 1 - 23
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 3.
3 Retail capital expenditure consists of property, plant and equipment additions of £635 million and intangible asset
additions of £19 million. Financial services capital expenditure consists of property, plant and equipment additions of £20
million and intangible asset additions of £15 million.
4 Amortisation expense within the financial services segment includes £10 million of intangible asset amortisation
arising from Sainsbury's Bank acquisition fair value adjustments.
5 Net impairment and onerous contract charge includes a £9 million impairment reversal recognised against property,
plant and equipment.
52 weeks to 14 March 2015 Retailing£m Financial services£m Property investments£m Group£m
Segment revenue
Retail sales to external customers 23,443 - - 23,443
Financial services to external customers - 309 - 309
Underlying revenue 23,443 309 - 23,752
Acquisition adjustment fair value unwind1 - 23 - 23
Revenue 23,443 332 - 23,775
Underlying operating profit 720 62 - 782
Underlying finance income 19 - - 19
Underlying finance costs (126) - - (126)
Underlying share of post-tax (loss)/profit from joint ventures and associates (9) - 15 6
Underlying profit before tax 604 62 15 681
Profit on disposal of properties 5 - 2 7
Investment property fair value movements - - 7 7
Retail financing fair value movements (23) - (7) (30)
IAS 19 pension financing charge and scheme expenses (37) - - (37)
Acquisition adjustments - 13 - 13
One-off items:
Impairment and onerous contract charge (628) - - (628)
Sainsbury's Bank transition - (53) - (53)
Internal restructuring (17) - - (17)
Pension compensation payments (15) - - (15)
(Loss)/profit before tax (111) 22 17 (72)
Income tax expense (94)
Loss for the financial year (166)
Assets 11,908 4,270 - 16,178
Investment in joint ventures and associates 8 - 351 359
Segment assets 11,916 4,270 351 16,537
Segment liabilities (7,232) (3,766) - (10,998)
Other segment items
Capital expenditure2 968 82 - 1,050
Depreciation expense 540 5 - 545
Amortisation expense3 14 20 - 34
Impairment4 548 - - 548
Share-based payments 21 - - 21
1 Represents fair value unwind on loans and advances to customers resulting from the Sainsbury's Bank acquisition.
2 Retail capital expenditure consists of property, plant and equipment additions of £951 million and intangible asset
additions of £17 million. Financial services capital expenditure consists of property, plant and equipment additions of £14
million and intangible asset additions of £68 million.
3 Amortisation expense within the financial services segment includes £18 million of intangible asset amortisation
arising from Sainsbury's Bank acquisition fair value adjustments.
4 Impairment charge includes £540 million recognised against property, plant and equipment and £8 million against
intangible assets.
5 Finance income and finance costs1,2
2016 2015
£m £m
Interest on bank deposits and other financial assets 19 19
Finance income 19 19
Interest costs:
Secured borrowings (88) (84)
Unsecured borrowings (30) (47)
Obligations under finance leases (9) (9)
Provisions - amortisation of discount (5) (3)
(132) (143)
Other finance costs:
Interest capitalised - qualifying assets 7 17
Retail financing fair value movements3 (20) (23)
IAS 19 pension financing charge (22) (31)
(35) (37)
Finance costs (167) (180)
1 Sainsbury's Bank's interest income is reported in revenue and interest cost is reported in cost of sales, and
therefore not included in this note.
2 The coupons on the perpetual capital securities and the perpetual convertible bonds (included within underlying
profit - see note 3) are accounted for as dividends in accordance with IAS 32 'Financial instruments: Presentation' and
hence are not a finance cost.
3 Retail financing fair value movements includes net fair value movements on derivative financial instruments not
designated in a hedging relationship of £(20) million (2015: £(18) million) and fair value movements on early repayment of
bank loans carried at amortised cost of £nil (2015: £(5) million).
6 Income tax expense
2016 2015
£m £m
Current tax expense 88 98
Deferred tax credit (11) (4)
Total income tax expense in income statement 77 94
The effective tax rate of 14.1 per cent (2015: (130.6) per cent) is lower than (2015: lower than) the standard rate of
corporation tax in the UK. The differences are explained below:
2016 2015
£m £m
Profit/(loss) before tax 548 (72)
Income tax at UK corporation tax rate of 20.05% (2015: 21.09%) 110 (15)
Effects of underlying items:
Disallowed depreciation on UK properties 26 30
Over-provision in prior years (1) (5)
Revaluation of deferred tax balances (20) 1
Other (1) 6
Effects of non-underlying items:
Profit on disposal of properties (21) (6)
Investment property fair value movements 4 (1)
Revaluation of deferred tax balances (15) -
Over-provision in prior years (9) (1)
Impairment - 84
Other one-off items 4 1
Total income tax expense in income statement 77 94
Reductions in the UK corporation tax rate were substantively enacted in the year. The main rate of corporation tax was
reduced from 20 per cent to 19 per cent effective from 1 April 2017 and to 18 per cent from 1 April 2020. 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. A further reduction in the corporation tax rate to 17 per
cent, rather than 18 per cent, from 1 April 2020 was announced in the 2016 Budget. However, this further rate change was
not substantively enacted at the balance sheet date, so its effect is not reflected in these financial statements.
7 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year, excluding those held by the Employee Share Ownership Plan
trusts, which are treated as cancelled.
For diluted earnings per share, the earnings attributable to the ordinary shareholders are adjusted by the interest on the
senior convertible bonds (net of tax) and by the coupons on the perpetual subordinated convertible bonds (net of tax). The
weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares. These represent share options granted to employees where the exercise price is less than the average market price
of the Company's ordinary shares during the year and the number of shares that would be issued if all senior convertible
bonds and perpetual subordinated convertible bonds are assumed to be converted.
Underlying earnings per share is provided by excluding the effect of any profit or loss on disposal of properties,
investment property fair value movements, retail financing fair value movements, impairment of goodwill, IAS 19 pension
financing and defined benefit pension scheme expenses, acquisition adjustments and one-off items that are material and
infrequent in nature (see note 3). This alternative measure of earnings per share is presented to reflect the Group's
underlying trading performance.
All operations are continuing for the periods presented.
2016 2015
million million
Weighted average number of shares in issue 1,920.8 1,911.0
Weighted average number of dilutive share options 14.6 17.3
Weighted average number of dilutive senior convertible bonds 131.4 62.3
Weighted average number of dilutive subordinated perpetual convertible bonds 41.4 -
Total number of shares for calculating diluted earnings per share 2,108.2 1,990.6
£m £m
Profit/(loss) for the financial year (net of tax) 471 (166)
Less profit attributable to:
Holders of perpetual capital securities (8) -
Holders of perpetual convertible bonds (4) -
Profit/(loss) for the financial year attributable to ordinary shareholders1 459 (166)
£m £m
Profit/(loss) for the financial year attributable to ordinary shareholders 459 (166)
Add interest on senior convertible bonds, net of tax2 11 -
Add coupon on subordinated perpetual convertible bonds, net of tax 4 -
Diluted earnings/(loss) for calculating diluted earnings per share 474 (166)
£m £m
Profit/(loss) for the financial year attributable to ordinary shareholders of the parent 459 (166)
Adjusted for (net of tax):
Profit on disposal of properties (103) (17)
Investment property fair value movements 18 (7)
Retail financing fair value movements 18 25
IAS 19 pension financing charge and scheme expenses 22 29
Acquisition adjustments (4) (9)
One-off items 70 650
Revaluation of deferred tax balances (15) -
Underlying profit after tax attributable to ordinary shareholders of the parent3 465 505
Add interest on convertible bonds, net of tax 11 7
Add coupon on subordinated perpetual convertible bonds, net of tax 4 -
Diluted underlying profit after tax attributable to ordinary shareholders of the parent 480 512
Pence Pence
per share per share
Basic earnings/(loss) 23.9 (8.7)
Diluted earnings/(loss)2 22.5 (8.7)
Underlying basic earnings 24.2 26.4
Underlying diluted earnings 22.8 25.7
1 Profit attributable to ordinary shareholders of the parent is calculated in accordance with IAS 33 'Earnings per
share'.
2 Dilutive share options and convertible bonds have been excluded from the calculation in 2015, as in accordance with
IAS 33 'Earnings per share', they are only included where the impact is dilutive.
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 not added back.
8 Dividend
2016 2015
Pence Pence 2016 2015
per share per share £m £m
Amounts recognised as distributions to ordinary shareholders in the year:
Final dividend of prior financial year 8.2 12.3 157 234
Interim dividend of current financial year 4.0 5.0 77 96
12.2 17.3 234 330
After the balance sheet date, a final dividend of 8.1 pence per share (2015: 8.2 pence per share) was proposed by the
Directors in respect of the 52 weeks to 12 March 2016, resulting in a total final proposed dividend of £155 million (2015:
£157 million). The proposed final dividend has not been included as a liability at 12 March 2016. The dividend was approved
by the Board on 3 May 2016.
9 Notes to the cash flow statements
(a) Reconciliation of operating profit to cash generated from operations
2016 2015
£m £m
Profit/(loss) before tax 548 (72)
Net finance costs 148 161
Share of post-tax profits/(losses) of joint ventures 11 (8)
Operating profit 707 81
Adjustments for:
Depreciation expense 559 545
Amortisation expense 25 34
Non-cash acquisition adjustments1 (13) (31)
Sainsbury's Bank impairment losses on loans and advances 15 21
Profit on disposal of properties (100) (5)
(Release)/impairment of property, plant and equipment (9) 540
Impairment of intangible assets - 8
Foreign exchange differences 24 (12)
Share-based payments expense 23 21
Retirement benefit obligations2 (201) (79)
Operating cash flows before changes in working capital 1,030 1,123
Changes in working capital:
Decrease in inventories 12 6
(Increase)/decrease in investment securities (202) 32
Increase in trade and other receivables (25) (57)
Increase in amounts due from Sainsbury's Bank customers and other deposits (318) (426)
(Decrease)/increase in trade and other payables (16) 294
Increase in amounts due to Sainsbury's Bank customers and other deposits 95 114
Increase in provisions and other liabilities 48 50
Cash generated from operations 624 1,136
1 Refer to note 3 for details of acquisition adjustments. This excludes £10 million (2015: £18 million) amortisation
on acquired intangibles included within amortisation in this note.
2 The adjustment for retirement benefit obligations reflects the difference between the defined benefit pension scheme
expenses of £6 million (2015: £6 million), and the cash contributions of £207 million made by the Group to the defined
benefit scheme (2015: £85 million).
(b) Cash and cash equivalents
For the purposes of the cash flow statements, cash and cash equivalents comprise the following:
Group Group
2016 2015
£m £m
Cash in hand and bank balances 374 485
Money market funds and deposits 480 262
Treasury bills 20 53
Deposits at central banks 269 485
Cash and bank balances 1,143 1,285
Bank overdrafts (3) (9)
Net cash and cash equivalents 1,140 1,276
10 Analysis of net debt
Group 2016 Sainsbury's Bank2016 Adjusted Group 20161,2 Group 2015 Sainsbury's Bank2015 Adjusted Group 20151
£m £m £m £m £m £m
Non-current assets
Interest bearing available-for-sale financial assets 35 - 35 37 - 37
Available-for-sale investment securities 156 (156) - - - -
Derivative financial instruments 17 (4) 13 21 (1) 20
208 (160) 48 58 (1) 57
Current assets
Cash and cash equivalents 1,143 (566) 577 1,285 (882) 403
Interest bearing available-for-sale financial assets 48 (48) - - - -
Derivative financial instruments 51 - 51 69 - 69
1,242 (614) 628 1,354 (882) 472
Current liabilities
Bank overdrafts (3) - (3) (9) - (9)
Borrowings (182) - (182) (221) - (221)
Finance leases (38) - (38) (30) - (30)
Derivative financial instruments (43) 2 (41) (75) 1 (74)
(266) 2 (264) (335) 1 (334)
Non-current liabilities
Borrowings (2,053) - (2,053) (2,337) - (2,337)
Finance leases (137) - (137) (169) - (169)
Derivative financial instruments (69) 21 (48) (38) 6 (32)
(2,259) 21 (2,238) (2,544) 6 (2,538)
Total net debt (1,075) (751) (1,826) (1,467) (876) (2,343)
1 The Group's definition of net debt excludes Sainsbury's Bank's own net debt balances.
2 The perpetual capital securities and perpetual convertible bonds are accounted for as equity in accordance with IAS
32 'Financial instruments: Presentation' and therefore are not included within net debt.
Reconciliation of net cash flow to movement in net debt
2016 2015
£m £m
Net debt as at the beginning of the year (2,343) (2,384)
Net decrease in cash and cash equivalents (136) (303)
Elimination of net decrease in Sainsbury's Bank cash and cash equivalents 316 343
Net decrease/(increase) in borrowings1 329 (20)
Net decrease/(increase) of obligations under finance leases 24 (11)
Fair value movements (16) (7)
Equity component of convertible bond - 39
Net debt as at the end of the year (1,826) (2,343)
1 Excluding fair value and Sainsbury's Bank derivative movements.
11 Retirement benefit obligations
Retirement benefit obligations relate to a defined benefit scheme, the Sainsbury's Pension Scheme (the 'Scheme'), and an
unfunded pension liability relating to senior employees. The Scheme is governed by a Trustee board, and the assets of the
Scheme are held separately from the Group's assets. The Scheme is a Registered pension plan with HMRC, subject to UK
legislation with oversight from the Pensions Regulator. The governance of the Scheme is the responsibility of the Trustee;
the Trustee comprises 11 Directors - five selected from members, five appointed by the Company and one Independent
Chairman. In accordance with legislation, the Trustee consults with the Company regarding the Scheme's investment strategy
and agrees an appropriate funding plan with the Company.
The Scheme has three different benefit categories: Final Salary, Career Average and Cash Balance. For Final Salary and
Career Average members, benefits at retirement are determined by length of service and salary. For Cash Balance members,
benefits are determined by the accrued retirement account credits.
The Scheme was closed to new employees on 31 January 2002 and closed to future benefit accrual on 28 September 2013. The
assets of the Scheme are valued at bid price and are held separately from the Group's assets.
The Scheme was subject to a triennial actuarial valuation, carried out by Willis Towers Watson for the Trustee, as at 14
March 2015 on the projected unit basis. The results of this valuation are expected to be finalised in June 2016.
The retirement benefit obligations at the year-end have been calculated by KPMG, as actuarial advisers to the Group, using
the projected unit credit method and based on adjusting the position at 17 March 2012 (being the date of the previous
triennial valuation) for known events and changes in market conditions as allowed under IAS 19, 'Employee benefits'.
The unfunded pension liability is unwound when each employee reaches retirement and takes their pension from the Group
payroll or is crystallised in the event of an employee leaving or retiring and choosing to take the provision as a one-off
cash payment.
The amounts recognised in the balance sheet are as follows:
2016 2015
£m £m
Present value of funded obligations (7,625) (7,680)
Fair value of plan assets 7,235 6,988
(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 retirement benefit obligation and the associated deferred income tax balance are shown within different
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