Preliminary results for the 52 weeks to 15 March 2014

Preliminary results for the 52 weeks to 15 March 2014

07 May 2014

Good sales and profit growth

Financial summary 1

  • Underlying Group sales (inc VAT) up 2.8 per cent to £26,353 million (2012/13: £25,632 million)2
  • Retail sales (inc VAT, ex fuel) up 2.7 per cent
  • Like-for-like sales (inc VAT, ex fuel) up 0.2 per cent
  • Underlying profit before tax up 5.3 per cent to £798 million (2012/13: £758 million)3
  • Underlying basic earnings per share up 6.5 per cent to 32.8 pence (2012/13: 30.8 pence)4
  • Return on capital employed up 19 bps to 11.3 per cent (2012/13: 11.1 per cent)5
  • Return on capital employed excluding pension fund deficit of 10.4 per cent (2012/13: 10.4 per cent)5
  • Proposed full year dividend of 17.3 pence, up 3.6 per cent, cover 1.90 times (2012/13: 16.7 pence, cover 1.84 times)

Statutory

  • Group sales (ex VAT, inc fuel) up 2.8 per cent to £23,949 million (2012/13: £23,303 million)
  • Profit before tax up 16.3 per cent to £898 million (2012/13: £772 million)
  • Items excluded from underlying results contributed £100 million of profit (2012/13: £14 million profit)
  • Basic earnings per share up 17.8 per cent to 37.7 pence (2012/13: 32.0 pence)

Operating performance

  • Market share maintained in tough retail environment; still at highest for a decade at 16.8 per cent6
  • Operational cost savings of around £120 million
  • Capital expenditure reduced to £888 million (3.4 per cent of sales) and year end net debt £2.4 billion
  • Underlying operating margin improved by 8 bps (up 7 bps at constant fuel prices)
  • Acquisition of Sainsbury’s Bank completed as planned on 31 January 2014; transition remains on track
  • Defined benefit pension fund triennial valuation complete resulting in funding deficit of £592 million, a £635 million improvement on the 2009 valuation. Recovery plan agreed in 2009 remains unchanged

Awarded

  • FTSE100 Business of the Year 2013 – QBE National Business Awards
  • Supermarket of the Year – Retail Industry Awards (sixth time in eight years)
  • Online Retailer of the Year – Grocer Gold awards (second consecutive year)
  • Convenience Retailer of the Year – Retail Industry Awards (fourth consecutive year)
  • Gold Accreditation – Investors In People (only supermarket to achieve this)

Strategy highlights

  • Great food: Our own-brand ranges and our focus on the quality and integrity of our food give us a clear competitive advantage. In both sales and volumes, own-brand is growing at over twice the rate of branded goods. The re-launched by Sainsbury’s range now has over 7,000 lines, while Taste the Difference is showing double-digit growth and has achieved over £1.1 billion in annual sales
  • Compelling general merchandise & clothing: Sales are increasing at over twice the rate of food, and our non-food ranges are now on sale in over 400 stores; 34 per cent of our customers can now access, within a 15 minute drive, the full non-food offer compared with just 11 per cent six years ago. The relaunch of our Tu clothing brand represented the single biggest investment in our clothing business since 2004, and Tu generates annual sales of approximately £750 million
  • Complementary channels & services: In our convenience channel, great locations and an emphasis on fresh food have helped us deliver sales growth of around 19 per cent. Our convenience stores now account for a third of Britain’s convenience market growth. Our groceries online business grew sales by over 12 per cent and achieved over £1 billion in annual sales. This year we re-platformed our groceries online website to improve customer usability and customer satisfaction is at an all-time high. We acquired the remaining 50 per cent shareholding of Sainsbury’s Bank from Lloyd’s Banking Group on 31 January 2014
  • Developing new business: Our 275 in-store pharmacies carried out over 290,000 consultations last year. Sainsbury’s Energy has over 60 per cent more customers than last year as people seek out the best deal in the market. Our Sainsbury’s Entertainment website has moved to a completely on-demand model
  • Growing space & creating property value: We opened 13 supermarkets and 91 convenience stores, and extended six supermarkets, meeting our target of adding one million sq ft of additional space, with full year core capital expenditure of £888 million (excluding Sainsbury’s Bank) below previous guidance of £1.1 billion. Our property portfolio now has a market value of £12.0 billion. This year we delivered profits of £52 million and over the past five years we have raised £1.2 billion through disposals, realising property profits of over £335 million. As announced at our interim results, following a review of our property pipeline we have identified some sites where we no longer wish to build a supermarket, resulting in a £92 million impairment within one-off items

David Tyler, Chairman, said: "Against a challenging backdrop, Sainsbury’s has delivered another year of improving profits, and our market share remains at its highest level for a decade. We have grown underlying earnings per share by 6.5 per cent, to 32.8 pence. As a result the Board is recommending a full year dividend of 17.3 pence, an increase of 3.6 per cent.

"We announced in January that Justin King will step down in July after ten years as Chief Executive. His ‘Making Sainsbury’s Great Again’ plan transformed our business and has seen Sainsbury’s consistently outperform the growth of the market. Under his leadership, customer transactions have increased by ten million a week to around 24 million, annual sales have grown by £10.3 billion to £26.4 billion and underlying profit before tax has trebled to £798 million. He has been a truly exceptional leader and, on behalf of all our colleagues, I thank him for his outstanding achievements."

Justin King, Chief Executive said: "In a competitive retail environment we have focused on delivering high quality, affordable own-brand products across all our channels, helping customers to Live Well for Less.

"While the general economic outlook is showing some signs of improvement, conditions in the food retail sector are likely to remain challenging for the foreseeable future as customers continue to spend cautiously. We remain committed to investing for the future and continue to see significant opportunities for growth. We remain confident that our differentiated offer, supported by the ‘value of values’, Nectar data and Brand Match, will allow us to outperform our peers in the year ahead.

"After ten wonderful years at Sainsbury’s, I will leave the business at our AGM in July and will hand over to Mike Coupe, our Group Commercial Director. I am delighted that Mike will lead Sainsbury’s on the next phase of its journey. Mike played an instrumental role in our ‘Making Sainsbury’s Great Again’ plan and is ideally equipped to lead Sainsbury’s as the Company continues to develop and grow in tune with the changing consumer and industry environment."

Notes to editors

  1. 2012/13 financials have been restated as a result of the amendments made to IAS 19 ‘Employee Benefits’ (‘IAS 19 Revised’)
  2. Underlying group sales excludes a £3 million acquisition adjustment fair value unwind
  3. Underlying profit before tax: Profit before tax before any profit or loss on the disposal of properties, investment property fair value movements, retailing financing fair value movements, impairment of goodwill, IAS 19 Revised pension financing element, defined benefit pension scheme expenses, acquisition adjustments and one-off items that are material and infrequent in nature.
  4. Underlying basic earnings per share: Underlying profit, net of attributable taxation, divided by the weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Share Ownership Plan ESOP trusts, which are treated as cancelled.
  5. Return on capital employed: Underlying profit before interest and tax, divided by the average of opening and closing capital employed (net assets before net debt). 2013/14 closing capital employed has been reduced by 50 per cent of Sainsbury’s Bank closing net assets (£243 million) to reflect the fact that the Bank was only consolidated in the accounts for four weeks of the 2013/14 financial year.
  6. Sainsbury’s market share remained at 16.8 per cent (source: Kantar, 52 weeks ended 2 March 2014)
  7. Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
  8. Sainsbury’s will report its 2014/15 First Quarter Trading Statement at 07:00 (GMT) on 11 June 2014

A results presentation for analysts and investors will be held at 09:30 on 7 May 2014.

To view the slides of the results presentation and the webcast: We recommend that you register for this event in advance. An archive of the webcast will be available later in the day.

To listen to the results presentation: To listen to the live results presentation by telephone, please dial 0844 800 3850 (or +44 20 8996 3900 if you are unable to use the primary number). The pass code for the event is 409 904. A transcript of the presentation and an archive recording of this event will be available later in the day.