Making progress with our strategy
Financial summary
- Underlying Group sales(1) (inc VAT) down 0.9 per cent to £26,122 million (2013/14: £26,353 million)
- Retail sales (inc VAT, ex fuel) down 0.2 per cent
- Like-for-like sales (inc VAT, ex fuel) down 1.9 per cent
- Underlying profit before tax(2) down 14.7 per cent to £681 million (2013/14: £798 million)
- Underlying basic earnings per share(3) down 19.5 per cent to 26.4 pence (2013/14: 32.8 pence)
- Return on capital employed(4) of 9.7 per cent (2013/14: 11.3 per cent)
- Return on capital employed excluding pension fund deficit of 9.0 per cent (2013/14: 10.4 per cent)
Statutory
- Group sales (ex VAT, inc fuel) down 0.7 per cent to £23,775 million (2013/14: £23,949 million)
- Items excluded from underlying results total a charge of £753 million (2013/14: £100 million credit), including an impairment and onerous contract charge of £628 million (2013/14: £92 million charge)
- Loss before tax of £72 million (2013/14: £898 million profit)
- Basic loss per share 8.7 pence (2013/14: 37.7 pence earnings per share)
- Proposed full-year dividend 13.2 pence per share, down 23.7 per cent, cover 2.0 times (2013/14: 17.3 pence per share, cover 1.9 times)
Operational Highlights
Great products and services at fair prices
- We are investing in lowering prices on products where customers have told us that price is most important. We have never been more competitive on price versus our competition and are seeing encouraging early signs of volume and transaction growth
- Our programme to improve the quality of 3,000 own-brand products that matter most to our customers is well under way and customers will see more of our improved product ranges over the coming year
- General merchandise and clothing are performing strongly, with sales up over nine per cent
- Sainsbury’s Bank delivered sales and profit growth, with operating profit up 17 per cent to £62 million. We are making good progress against our transition plan albeit total capital costs associated with the transition are expected to increase by between £80 million and £120 million
There for our customers
- We have identified sites for our new convenience and supermarket format trials, as we look to make our customer shopping experience easier and more convenient
- We opened 98 convenience stores during the year and delivered over 16 per cent convenience sales growth. We continue to open one to two convenience stores per week
- Groceries online delivered growth in the number of customer orders of 13 per cent, and we have invested in our platform to improve service and availability
Colleagues making the difference
- We restructured the way we work at our store support centres to improve efficiencies, reducing the number of roles by 500. In April 2015, we also announced a restructure of our stores to improve efficiency and customer service, which we expect to result in around 800 fewer roles
- We are developing digital hubs in London and Coventry, creating 480 specialist roles
- We continue to invest in colleague training and development. We won ‘Training Initiative of the Year’ at the Retail Industry Awards for a programme designed to improve operational outcomes and customer experience
We know our customers better than anyone else
- Our customer insight remains a source of competitive advantage and allows us to reward our customers in a personalised way
- In April 2015, we changed the way we reward our Nectar customers, reducing the number of points earned but introducing more high-value bonus events
Our values make us different
- Our values remain a key component of our differentiated offer and we will continue to focus on areas that our customers care about
- We received our second consecutive Green Retailer of the Year award at the 2014 Grocer Gold Awards. Amongst other environmental initiatives, our Triple Zero stores and CO2 refrigerated vehicles were recognised
Maintaining balance sheet strength
- We have taken decisive action to maintain our balance sheet strength and maximise our cash position, to ensure we remain fit for the future and are able to capitalise on our many growth opportunities
- We have delivered operating cost savings of £140 million in 2014/15 and expect to deliver total operating cost savings of £500 million over the next three years
- Core retail capital expenditure(5) was £947 million in 2014/15. We will reduce core retail capital expenditure to between £500 million and £550 million per annum in each of the next three years. The allocation of our capital expenditure is also changing to reflect our strategy
- The value of our property has decreased during the year by £0.9 billion to £11.1 billion, mainly due to a reduction in market rental values
- We have improved retail working capital by more than £300 million as a result of operational efficiencies
- We have an affordable dividend policy and have fixed cover at 2.0 times our underlying earnings
David Tyler, Chairman said: “Sainsbury’s is a business built on strong foundations. With our grocery business at the core, we are confident that we can grow shareholder value through our increasingly multi-channel offer, and by growing businesses across financial services, convenience, online, clothing and general merchandise. I am confident that we have the best management team in the sector to lead us through a time of unprecedented industry change.
“We will maintain the strength of the balance sheet by making significant cost savings, improving working capital and reducing capital expenditure. We remain committed to ensuring we pay an affordable dividend with our policy of fixing it at two times cover for the next three years. With this in mind, we are recommending this year a final dividend of 8.2 pence per share, bringing our full year dividend to 13.2 pence per share.”
Mike Coupe, Chief Executive said: “The UK marketplace is changing faster than at any time in the past 30 years which has impacted our profits, like-for-like sales and market share. However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth.
“We know that our customers still want the best quality food at great prices and our strategy is built on our strong foundations of selling great food with a focus on quality, provenance and sustainability. At the same time, we know that our customers want value for money and we have therefore invested in lowering our prices; our prices versus our competitors have never been better.
“We also have significant opportunities to grow our business. Clothing, general merchandise and financial services have all performed well over the past 12 months, as have our convenience and online channels. We have a significant ambition to grow these areas over the coming years.
“Sainsbury’s is a fantastic business, run by an experienced management team, supported by great colleagues and underpinned by strong values. I believe we are taking the right decisions to ensure we remain fit for the future and are able to capitalise on our many growth opportunities.”
Notes:
- Underlying Group sales excludes a £23 million adjustment (2013/14: £3 million) for fair value unwind relating to the acquisition of Sainsbury’s Bank.
- Underlying profit before tax: Profit before tax before any profit or loss on the disposal of properties, investment property fair value movements, retail financing fair value movements, impairment of goodwill, IAS 19 pension financing element, defined benefit pension scheme expenses, acquisition adjustments and one-off items that are material and infrequent in nature.
- Underlying basic earnings per share: Underlying profit, net of attributable tax, 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.
- 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).
- Core retail capital expenditure: Capital expenditure excluding Sainsbury’s Bank and before proceeds from sale and leasebacks and capital relating to the acquisition of freehold and trading properties.
- 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.
- Sainsbury’s will report its 2015/16 First Quarter Trading Statement at 07:00 (GMT) on 10 June 2015.
A results presentation for analysts and investors will be held at 09:30 on 6 May 2015.
To view the slides of the results presentation and the webcast: We recommend that you register for this event in advance. To do so, visit www.j-sainsbury.co.uk and follow the on-screen instructions. To participate in the live event, please go to the website from 09:00 on the day of the announcement, where there will be further instructions. 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 0800 783 0986 (or +44 (0) 1296 480 900 if you are unable to use the primary number). The pass code for the event is 342686. A transcript of the presentation and an archive recording of this event will be available later in the day at www.j-sainsbury.co.uk