TIDMSBRY
RNS Number : 6136X
Sainsbury(J) PLC
27 April 2023
27 April 2023
J Sainsbury Plc
Preliminary Results for the 52 weeks ended 4 March 2023
Delivering greater value for customers, colleagues, communities
and shareholders
Two years into our Food First plan, we are a fundamentally
stronger business. We have made bold choices to reduce costs, make
Argos and Tu more profitable and resilient, grow profits at Nectar
and strengthen our balance sheet. We have reinvested the benefits
in our food business, prioritising value, customer service and
innovation, which is driving improved market share performance(1) .
This has also given us the financial flexibility to make balanced
choices, investing to help customers and colleagues, while also
delivering results at the top end of expectations.
Financial highlights
-- Retail sales up 5.2%, ex. fuel sales up 2.0%. Statutory Group
sales (ex. VAT) up 5.3%. Q4 ex. fuel retail sales up 7.1% (7.8%
like-for-like)
-- Grocery sales up 3.0%, driven by inflation and improved
market share performance. Q4 grocery sales up 7.4%
-- General Merchandise (GM) sales down 0.4%, with Argos gaining
share in a weak general merchandise market. Q4 GM sales up 7.6%
(Argos sales up 9.3%)
-- Underlying profit before tax of GBP690 million, down 5% and
at the top end of GBP630 million to GBP690 million guidance range.
Up 18% versus 2019/20 pre-pandemic UPBT of GBP586 million.
Year-on-year decline reflects annualisation of COVID-19 driven
grocery volume, investment in the customer proposition and
operating cost inflation, partially offset by operating cost
savings and lower finance charges
-- Statutory profit before tax of GBP327 million versus GBP854
million last year. Impacted by non-cash asset impairments, driven
by a higher discount rate, and one-off income from legal
settlements in the prior year
-- Retail free cash flow GBP645 million
-- Year end net funds, excluding leases, of GBP144 million, a
GBP285 million improvement. Net debt including leases improved by
GBP415 million to GBP6,344 million
-- Underlying earnings per share 23.0 pence, down 9%. Basic
earnings per share 9.0 pence, down 70%
-- Proposed final dividend of 9.2 pence, full-year dividend of
13.1 pence, in line with last year
-- Outlook: At this early stage of the year, we expect UPBT
between GBP640 million and GBP700 million in FY2023/24 and we
continue to expect to generate at least GBP500 million of Retail
free cash flow
Simon Roberts, Chief Executive of J Sainsbury plc, said: "We
really get how tough life is for so many households right now which
is why we are absolutely determined to battle inflation for our
customers. Our focus on value has never been greater and we have
spent over GBP560 million keeping our prices low over the last two
years. As a result, we are now the best value compared to our
competitors that we have been in many years and we are delivering
improved market share performance in Sainsbury's and Argos.
"We are two years into our plan to put food back at the heart of
Sainsbury's and have focused our efforts on reducing costs right
across the business, which has enabled us to make the right
decisions for our colleagues and customers. At the same time, we
have improved the performance and profitability of Argos, Tu,
Nectar and Financial Services so that we can invest further in the
areas that customers and colleagues care about most.
"Our colleagues do a fantastic job serving our customers every
day and we know that they are also dealing with the impact of the
rising cost of living. That's why, over the last 12 months, we took
the decision to invest GBP225 million in supporting colleagues
including raising colleague pay three times, becoming the first
major supermarket to pay our people the Living Wage across the
whole country and providing free food at work and increased
colleague discount. The results we have achieved this year are
testament to the outstanding contribution across our entire team. I
want to thank every one of my colleagues for their dedication and
hard work.
"We continue to work closely with our suppliers and farmers and
I am grateful for their support in what has been another difficult
year for food supply chains. We know just how vital the agriculture
industry is not only to Sainsbury's, but to the country as a whole
and this is why we have made the choice to give GBP66 million of
additional support to British farmers over the last year.
"We made these very deliberate decisions and investments because
they make our business stronger , but more importantly because they
are simply the right thing to do. While there is still much to be
done and there is no doubt that the year ahead will remain
challenging, I'm confident we will continue to deliver for our
customers, colleagues, communities and shareholders."
Strategic highlights
-- Food First: Customers want low prices, exciting new products
and great customer service. This is where we are focusing our time,
energy and investment and is why more customers are choosing to
shop with us(2) . We have:
o Invested over GBP560 million in keeping prices lower over the
last two years, GBP10 million more than the commitment we announced
in December, helping us significantly improve our price position
against all our competitors by as much as 16 per cent(3)
o Launched Nectar Prices, offering discounts to every Nectar
customer in supermarkets and online, building on Your Nectar Prices
which offers personalised discounts. The most active Your Nectar
Prices users are saving almost GBP200 a year on their
shopping(4)
o Exceeded our innovation target and launched more Taste the
Difference products, helping to win market share around big
events(5) as customers increasingly celebrate at home
o Invested record amounts to increase colleague pay, provide
free food and improve discount, driving up colleague and customer
satisfaction scores
-- Brands that Deliver: We have significantly improved
profitability across our brands, creating GBP145 million(6) more
firepower to invest in our core food business. We have:
o Grown our Nectar digital users to 11 million and now have over
18 million Nectar members. Nectar360 is on track with its plan to
deliver at least GBP90 million incremental profit by March 2026
o Transformed the Argos sales and cost base, making the business
considerably more profitable and more competitive than
pre-pandemic. Argos has gained market share(7) in a weak general
merchandise market
o Launched more Habitat partnerships with third-party designers
and delivered value market share gains in a number of homeware
categories(8)
o Grown full-price sales to now make up 80 per cent of our
Clothing sales, up 15 percentage points versus pre-pandemic whilst
also extending our range of third party clothing brands to offer
more choice and convenience
o Increased Financial Services profits, reflecting higher credit
demand and travel money volumes
-- Save to Invest: We are making tough but necessary decisions
to simplify, prioritise and partner right across the business.
These create cost savings that fuel investments in price,
innovation and customer service. We have:
o Delivered more than GBP900 million of cost savings over the
last two years, remaining on track to deliver GBP1.3 billion of
cost savings over three years, doubling the run rate from the three
years to FY2019/20
o Reduced our operating cost to sales ratio further, now 97
basis points lower than FY2019/20 despite significantly higher than
anticipated operating cost inflation. Productivity improvements
have driven a reduction in our labour cost to sales ratio despite
significant investment in colleague wages
-- Plan for Better: We are committed to playing a leading role
in offering affordable high quality food that supports healthy and
sustainable diets and helps customers reduce their impact on the
planet. We have:
o Reduced absolute greenhouse gas (GHG) emissions within our
operations to 461,692 tCO2e, a reduction of 38.2 per cent
year-on-year. We were awarded an A rating for our Climate Change
CDP submission for the ninth consecutive year and are the only UK
food retailer to have achieved this
o Donated over 10 million meals through our partnership with
Neighbourly since launching in 2021, preventing over 4,500 tonnes
of food from going to waste
o Reduced absolute plastic packaging by 17.5 per cent from our
baseline(9) . We are focused on reducing plastic packaging on high
volume products and were the first retailer to vacuum-pack all beef
mince, which will save over 450 tonnes of plastic a year
Financial Summary 2022/23 2021/22 2019/20 YoY Yo3Y
Statutory performance
Group revenue (excl. VAT,
inc. fuel) GBP31,491m GBP29,895m GBP28,993m 5.3% 8.6%
Profit before tax GBP327m GBP854m GBP278m (62)% 13%
Profit after tax GBP207m GBP677m GBP170m (69)% 15%
Basic earnings per share 9.0p 29.8p 6.7p (70)% 27%
Business performance
Group sales (inc. VAT) GBP35,157m GBP33,355m GBP32,394m 5.4% 8.5%
Retail sales (inc. VAT,
excl. fuel) GBP28,664m GBP28,095m GBP26,868m 2.0% 6.7%
Underlying profit before
tax(10) GBP690m GBP730m GBP586m (5)% 18%
Underlying basic earnings
per share(10) 23.0p 25.4p 19.8p (9)% 16%
Interim dividend per share 3.9p 3.2p 3.3p 22% 18%
Proposed Final dividend
per share(11) 9.2p 9.9p 7.3p (7)% 26%
Proposed Full-year dividend
per share(11) 13.1p 13.1p 10.6p - 24%
Net debt(10) GBP(6,344)m GBP(6,759)m GBP(6,947)m +GBP415m +GBP603m
Non-lease net funds /
(debt) GBP144m GBP(141)m GBP(1,179)m +GBP285m +GBP1,323m
Return on capital employed(10) 7.6% 8.4% 7.4% (80)bps 20bps
Like-for-like 2021/22 2022/23 YoY
sales performance
Q3 Q4 Q1 Q2 Q3 Q4 FY
------ ------ ---- ---- ---- ----
Like-for-like
sales (excl. fuel) (4.5%) (5.6%) (4.0%) 3.7% 5.9% 7.8% 2.6%
------ ------ ------ ---- ---- ---- ----
Like-for-like
sales (incl. fuel) 0.6% 2.7% 2.9% 7.7% 6.8% 5.9% 5.7%
------ ------ ------ ---- ---- ---- ----
Total sales 2021/22 2022/23 YoY 2022/23 Yo3Y
performance
Q3 Q4 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
Grocery (1.1%) (1.6%) (2.4%) 3.8% 5.6% 7.4% 3.0% 8.7% 10.1% 12.5% 12.4% 10.8%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
Total General
Merchandise (16.0%) (21.1%) (11.2%) 1.2% 4.6% 7.6% (0.4)% (6.2%) (3.6%) (6.9%) 1.4% (4.9)%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
GM (Argos) (16.1%) (20.4%) (10.5%) 1.6% 4.5% 9.3% 0.1% (4.5%) (0.9%) (5.0%) 4.2% (2.9)%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
GM
(Sainsbury's) (15.7%) (24.1%) (14.6%) (1.3%) 5.4% (1.0)% (2.9)% (13.8%) (15.5%) (15.6%) (11.8)% (14.6)%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
Clothing (2.7%) (9.3%) (10.1%) (0.2%) 1.3% (1.9)% (3.0)% 3.9% 0.8% (0.4%) (8.6)% 0.0%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
Total Retail
(excl. fuel) (5.3%) (6.2%) (4.5%) 3.1% 5.2% 7.1% 2.0% 5.4% 6.7% 6.7% 9.5% 6.7%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
Fuel 47.5% 80.1% 48.3% 29.1% 12.2% (2.8)% 23.4% 26.9% 24.2% 16.2% 8.6% 20.3%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
Total Retail
(incl. fuel) (0.1%) 2.2% 2.5% 7.2% 6.2% 5.4% 5.2% 8.9% 9.6% 8.0% 9.3% 8.8%
------- ------- ------- ------ ----- ------ ------ ------- ------- ------- ------- -------
Outlook
Our Food First strategy has given us the financial flexibility
to make the right decisions for customers, for colleagues, for
communities and ultimately for our shareholders. This has delivered
strong results and we're starting the new financial year with great
momentum. We're determined to build on this stronger base and
sustain this momentum, retaining the flexibility to make the right
choices given a still uncertain outlook for consumer spending.
Therefore, at this early stage of the year we expect underlying
profit before tax will be between GBP640 million and GBP700 million
in FY2023/24. We continue to expect to generate at least GBP500
million of Retail free cash flow.
Dividend
The Board has proposed a final dividend of 9.2 pence per share.
This brings the full year dividend to 13.1 pence per share, in line
with last year.
Notes
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.
A live webcast presentation and Q&A will be held at 09:15
(BST). The webcast can be accessed at the following link:
https://sainsburys-2022-23-preliminary-results-announcement.open-exchange.net/registration
A recorded copy of the webcast and Q&A call, alongside
slides and a transcript of the presentation will be available at
www.about.sainsburys.co.uk/investors/results-reports-and-presentations
following the event.
Sainsbury's will issue its 2023/24 First Quarter Trading
Statement at 07:00 (BST) on 4 July 2023.
S
Enquiries
Investor Relations Media
James Collins Rebecca Reilly
+44 (0) 7801 813 074 +44 (0) 20 7695 7295
Strategy Review: Driven by our passion for food, together we
serve and help every customer
We are two years into our three-year plan to transform
Sainsbury's, putting food back at the heart of our business and we
are fundamentally stronger. Prioritising food, building on our
strong brand heritage and reputation for quality, innovation and
service while offering customers more consistent value has enabled
us to deliver strong results.
Bolder prioritisation has allowed us to make more focused
investments in our brands - Argos, Habitat, Tu, Nectar and
Sainsbury's Bank - and these have continued to support our core
food business while consistently delivering for customers and
shareholders in their own right. By making our brands more
profitable, we have been able to continue to invest in food, offer
greater value, an improved product range, better service and we
find that customers who love our food will also shop with us across
our brands.
Underpinning all of this is our ambitious cost savings
programme, Save to Invest. While we have had to make some difficult
decisions, the investments we have made through this programme are
delivering strong results and putting us ahead of our competitors.
Our work to build a simpler and more efficient business enables us
to reinvest where it makes the biggest difference to customers.
Food First
We are making good progress to put food back at the heart of
Sainsbury's by offering better value, more new products and
improved service. Our grocery volume market share performance has
improved considerably(1) since we launched our Food First plan and
we are growing our volumes ahead of other full-choice grocers(12)
.
Value
As the cost of living crisis continues to put pressure on
millions of households, we are relentlessly focused on delivering
consistent value for customers. Driven by our bold cost savings
programme, we have invested over GBP560 million over the last two
years to keep food prices low through campaigns that prioritise the
products customers buy most often. Over 60 per cent of this
investment has gone into fresh products such as meat, fish,
poultry, fruit and vegetables and dairy. As a result, we have
consistently inflated behind our key competitors(13) and we are
seeing less switching of customer spend to limited-choice
supermarkets than our competitors(14) .
At the end of December we increased the number of products in
Aldi Price Match by 20 per cent and our largest ever campaign
matched the price on around 300 fresh products and household
staples including chicken breasts, milk, eggs, nappies and cereal.
Own brand ranges are performing strongly and our entry price range
is the fastest growing product tier.
We recently launched Nectar Prices, offering discounts to all
supermarket and online customers using the Nectar app or card and
results are already exceeding our expectations. Your Nectar Prices
- previously My Nectar Prices, which launched in 2021 - offers
customers their own personalised discounts, generating more than 70
million unique offers a week for customers using SmartShop in
supermarkets. The most active Your Nectar Prices users are saving
almost GBP200 a year on their shopping(4) .
Innovation
We have exceeded our innovation target by 15 per cent and
launched nearly 1,400 new products during the year. More customers
are celebrating special occasions, treating themselves at home and
we outperformed the market at key seasonal events(5) . We expanded
our Taste the Difference range by 33 per cent year-on-year and
Taste the Difference sales are up 16 per cent versus FY2019/20.
Our seasonal ranges are popular with customers and our second
Autumn Editions range included 70 per cent more products
year-on-year. Since launching Inspired to Cook last year, the range
has been popular with customers as more people look for creative
solutions to home cooking from scratch and our World Foods range is
also performing well.
In January we launched Flourish, a new range with 70 fresh and
healthy convenient products that help people eat better whilst on
the move. The range is already popular and bestselling lines so far
include the Pesto Chicken Sandwich and Immune Boosting
smoothie.
We are also changing the way we work with suppliers to build
long term partnerships that drive better results. Last year we
agreed a long-term contract with Moy Park, our chicken supplier, to
ensure that from March 2023 all our by Sainsbury's fresh and frozen
chicken is grown under better welfare conditions. Our investment
has enabled Moy Park to have better product control and we have
been able to make these improvements without increasing prices for
customers.
Service
We have announced a record GBP225 million of investment over the
last 12 months in colleague pay and benefits. In 2022 we became the
first major supermarket to pay the Living Wage across the country
and the first to give hourly-paid colleagues a third pay rise in
one year. All Sainsbury's and Argos retail colleagues now receive a
base rate of pay of GBP11 per hour and colleagues in London receive
GBP11.95 per hour, increasing pay for frontline, hourly paid
colleagues by 10 per cent in the last year and 44 per cent over
seven years.
Alongside competitive pay we have invested heavily in extra
support for colleagues in response to increased financial pressure.
Colleagues told us that free food at work was important and so we
recently extended the provision of free food during shifts for a
further six months. To help our colleagues have more control over
their monthly budgets, we also introduced a pay advance scheme
where colleagues can access their pay as they earn it and invested
in more frequent deeper discounts at Argos and Sainsbury's to help
colleagues save money on their shopping.
Rewarding our colleagues is driving higher colleague engagement
scores and higher customer satisfaction scores. Supermarket
satisfaction is consistently performing ahead of full choice
competitors(15) , particularly in product quality and availability
and colleague availability(16) . Colleague engagement scores have
also improved over the last two years.
Customers are increasingly returning to stores post-pandemic and
more people are prioritising convenience and speed as they return
to the workplace. As a result, we have grown Convenience sales to
GBP3 billion for the first time and sales are up 10 per cent
year-on-year. Convenience and On Demand sales combined are up 9 per
cent versus pre-pandemic and On Demand is averaging 118,000 weekly
orders in as little as 30 minutes through our Chop Chop service and
partnerships with Deliveroo, Uber Eats and Just Eat.
Groceries Online sales were down 13 per cent year-on-year but
were 81 per cent higher than pre-pandemic levels. Groceries Online
accounts for 14 per cent of grocery sales versus 8 per cent in
FY2019/20. We introduced more Christmas delivery slots to serve
customers and brought forward Easter grocery slots and availability
scores are up(17) . Online productivity has improved with items
picked per hour up 6 per cent year-on-year and up 9 per cent on
pre-pandemic levels.
Brands that Deliver
Our portfolio of brands - Argos, Habitat, Tu, Nectar and
Sainsbury's Bank - are now GBP145 million more profitable than
before the pandemic(6) , helping to support our ambition in food.
By offering a wide range of great quality, affordable General
Merchandise products alongside our food range, customers can do
more of their shopping in one place and as a result, more are
choosing to shop with us(2) . Our brands are more profitable and,
combined with our Save to Invest programme, are giving us greater
firepower to invest in price, innovation and customer service.
Nectar is the UK's largest coalition loyalty programme and
continues to grow, providing value for customers and helping drive
increased profitability through Nectar360. We recently awarded our
one trillionth Nectar point, equivalent to GBP5 billion worth of
points over the last 20 years and we now have over 11 million
digital Nectar users. We launched Nectar Prices in April, offering
great discounts to Nectar customers in supermarkets and online. At
the same time, Your Nectar Prices gives Nectar users personalised
prices. Through Nectar, we are the only supermarket to have both a
broad and personalised capability. Growing Nectar participation
creates richer data, further fuelling the growth of our Nectar360
business. This allows us to offer over 700 brands more relevant
content and activations across a range of marketing channels.
Nectar360 is on track to deliver at least GBP90 million of
incremental profit contribution by March 2026.
Argos has consistently outperformed the General Merchandise
market over the last year(7) as we have built on its reputation for
value and delivered better convenience and availability. Customers
value the certainty and speed of Fast Track delivery and Click
& Collect and towards the end of the year more sales went
through Argos stores inside supermarkets than standalone Argos
stores for the first time. Argos's market-leading Click &
Collect and delivery offering made an especially big difference
during the postal strikes over Christmas and last summer's hot
weather, when many customers used Fast Track delivery - often under
four hours - for seasonal products including paddling pools and
barbecues. We have extended the breadth of range at Argos,
including more premium brands, and continue to invest in Argos's
digital capabilities, with 73 per cent of sales now originating
online.
The transformation of the Argos store and distribution network
continues at pace, reducing cost and improving availability and
service for customers. We now have 17 Local Fulfilment Centres, a
network that is transforming the speed at which we can fulfil
customer orders and is improving product availability and driving
improved customer satisfaction(18) . We now have the best national
same and next day delivery proposition of any UK retailer. Over the
last year we have closed 45 standalone Argos stores and opened 24
Argos stores inside Sainsbury's supermarkets and 92 in-store
collection points. We now have 424 stores inside Sainsbury's
supermarkets, 285 standalone stores and Collection points inside
420 Sainsbury's stores.
Tu is the sixth largest UK clothing brand by volume(19) .
Full-price sales now make up 80 per cent of our Clothing sales, up
15 percentage points versus pre-pandemic and we are working with
more online third-party brands including Sosandar, Little Mistress
and Finery to provide a wider choice. We have migrated the Tu
clothing online web platform onto the Argos platform, improving the
quality of the web experience and enabling customers to use their
Nectar points for purchases, further integrating our portfolio of
brands and helping customers save money. This integration is also
saving the business money and driving greater simplicity. Online
sales are up 46 per cent versus pre-pandemic.
Habitat is performing well against a challenging General
Merchandise backdrop and we have gained value market share in a
number of homeware categories including bedding and decorations(8)
. We are working with third-party designers including Sanderson
Design Group to offer more choice to customers and have launched a
one-off range with Kew Botanical Gardens for the summer.
Our Financial Services business is benefitting from a tighter
focus on providing services for Sainsbury's and Argos customers.
Profits have recovered to pre-pandemic levels as lending activity
and travel money demand have increased but the loan book remains
smaller than pre-pandemic levels.
Save to Invest
Our cost saving programme, Save to Invest, provides the fuel
that drives our ability to invest in the areas that make the
biggest difference for customers. We have made bold and deliberate
decisions over the last two years to ensure we can invest in
keeping prices low for customers and colleague pay. We are on track
to deliver around GBP1.3 billion of cost savings in the three years
to FY2023/24 and have reduced our operating cost to sales ratio by
97 basis points over the last two years, despite significantly
higher than anticipated operating cost inflation.
We are making structural savings by rationalising our property
estate and focusing on ensuring our stores are in the right
locations to deliver for customers and serve communities. In the
last year, we have closed eight convenience stores and three
supermarkets. We have also opened 13 new convenience stores
including one Neighbourhood Hub. We made the difficult decision to
close our Argos operations in Republic of Ireland, including 34
stores and the website, in addition to the ongoing programme of
Argos standalone store closures and the opening of Argos stores
inside Sainsbury's supermarkets.
In February, we announced plans to close two of our warehouses
and invest GBP90 million to improve automation at our Daventry
warehouse, enabling a reduction of stock, faster delivery to
customers and a simpler delivery process for suppliers.
Industry-leading automation alongside improved training and
development for colleagues is a key focus for future investment as
we look at how we can improve our logistics network to get better
and faster results for customers.
We plan to transform and simplify our logistics operations by
working more effectively with the expert partners who already run
significant parts of our network. We have announced plans to move
to three dedicated partnerships across transport, food, general
merchandise and clothing by the end of 2024, instead of multiple
different contracts across the network. This will make the best use
of our partners' expertise to provide better service and
availability for customers, drive innovation and facilitate the
sharing of industry best practice.
We are also focused on making our supply chains more efficient
and increasing productivity in order to improve performance whilst
creating simpler and more streamlined end-to-end processes. We have
rolled out new supply chain capabilities across our food business
including changing the way we forecast demand, how we purchase and
order goods and the way our suppliers plan production. This is
driving better availability and reducing waste.
We are becoming a simpler, nimbler and more efficient business
so that we can reinvest in what matters most to customers. We have
made changes to some of our office space and the way some of our
Store Support Centre teams work in order to simplify processes.
More than ever, our office-based colleagues are able to work
remotely or from home and we have seen a significant reduction in
the number that regularly use Sainsbury's offices across our
locations in the UK. These changes were therefore a necessary step
in adapting our ways of working to become more flexible,
particularly following the pandemic.
Plan for Better
We know that the environmental and social challenges facing the
world have never been greater and that these are issues our
customers and colleagues care about too. As a UK retailer serving
communities across the country with a global supply base, we have a
responsibility to put environmental and social sustainability at
the core of how we do business to protect our planet and our people
and ensure we can continue to deliver for our customers now and in
the future.
Better for the planet
We recognise the importance of investing in environmental
sustainability to help reduce our impact on the planet and ensure
the long-term success of our business. This is why we are
continuing to take bold and decisive actions to meet our
accelerated target to become Net Zero in our own operations by
2035.
As part of the WWF's Retailer Commitment for Nature, we (along
with the other signatories) have increased our ambition to reduce
Scope 3 emissions by 50 per cent by 2030 and net zero Scope 3
emissions by 2050. We have submitted this updated target to the
SBTi (Science Based Targets initiative) for approval by the end of
2023.
We have reduced our Scope 1 and 2 absolute greenhouse gas (GHG)
emissions within our operations to 461,692 tCO2e, a reduction of
38.2 per cent year-on-year and 51.4 per cent from our 2018/19
baseline. We were proud that our environmental transparency was
again recognised by CDP, an environmental impact disclosure system.
We were awarded an A rating for climate change for the ninth
consecutive year, the only UK food retailer to reach this standard.
We were also recognised by CDP as a Supplier Engagement Leader for
our work in engaging with our suppliers to tackle climate
change.
This year we finalised the rollout of LED lighting to 100 per
cent of our entire estate, helping to reduce our lighting energy
consumption by an average of 70 per cent. From December 2023, 40
per cent of our electricity consumption will originate from New to
Planet sources.
We have committed to reducing our own-brand plastic packaging by
50 per cent by 2025, so far achieving absolute reduction in plastic
packaging of 17.5 per cent from our baseline(9) . We have
introduced initiatives such as quadruple strength fruit squash,
double length toilet rolls and removing single-use plastic lids and
were the first UK retailer to vacuum-pack all beef mince, one of
our highest volume products. This uses at least 55 per cent less
plastic and saves over 450 tonnes of plastic annually. We also
recently removed single-use plastic trays from our by Sainsbury's
whole chicken range, saving 140 tonnes of plastic a year.
We are supporting our communities to help reduce food waste at
home to decrease carbon emissions and help households save money.
Since the launch of our partnership with Neighbourly in 2021, we
have donated over 10 million meals to local partners who
redistribute food to those who need it most. This is equivalent to
a GBP19 million donation to charities and community groups and has
prevented over 4,500 tonnes of food going to waste.
Better for Everyone
We are passionate about making a positive impact on the lives of
millions of people by making the right choices for our customers,
colleagues and communities.
Being an inclusive business with diverse representation at all
levels is important to us. We came third in the latest FTSE Women
Leaders Review, with 50.7 per cent senior women across our combined
executive committee and direct reports. Only 23 FTSE 100 companies
have met or exceeded the 40 per cent target. We also featured in
The Times's Top 50 Employers for Women 2022: Taking Action on
Gender Equality. Whilst we are proud of the progress we have made,
we still have more to do and are committed to driving positive,
sustainable change.
As part of our mission to be a truly inclusive retailer, last
summer we launched 'Thrive with Sainsbury's', a free programme that
invested GBP1 million to support Black founder-led start-up
businesses transition to supermarket shelves. In partnership with
Foundervine and Mission Ventures, the programme seeks to combat the
barriers Black and ethnic minority start-up businesses face by
offering one-to-one training, support with business branding and
product improvements. So far, three brands - Mirror Margarita,
Riddles Ice Tea and RAISE snacks - will be stocked in supermarkets
later this year.
In response to the rising cost of living and as part of our
commitment to Helping everyone eat better, we launched our Nourish
the Nation community programme to provide food and urgent support
for those most in need. Working with our longstanding charity
partners Comic Relief, FareShare and other key redistribution
partners, we are providing funding to initiatives designed to
tackle food insecurity and ensure communities have access to
balanced, nutritional and sustainable food sources. Through our
Nourish the Nation programme we have raised GBP7.2 million to
support Comic Relief and our food redistribution partners.
Better for You
Our ambition is to provide every customer with accessible
information, affordable products and incentives to help them make
better choices for themselves and for the planet. In 2022, we
announced our revised health target based on changes to our
nutrient criteria following updated government reformulation
targets and expert advice, to increase our Healthy and Better for
You sales tonnage to 85 per cent of total sales by FY2025/26. At
least 70 per cent of the products in Aldi Price Match are also
Healthy or Better for You choices.
We launched The Great Fruit & Veg Challenge for the third
year to reward shoppers with extra Nectar points for purchasing
fruit and vegetables between July and September. Over 585,000
customers signed up to take part and bought 88 million portions of
fruit and vegetables during the challenge.
(1) Nielsen Panel volume market share FY2017/18 - FY2022/23.
Total FMCG (excluding Kiosk & Tobacco), Market Universe: Total
Outlets
(2) Nielsen Panel data, Proportion of Sainsbury's shoppers
within the total market, 52 weeks to P13, Total market= Total
Outlets, FMCG excluding Kiosk & Tobacco
(3) Value Reality. 1,610bps improvement vs Aldi - March 2023 vs
November 2020; Edge by Ascential, internal modelling
(4) Average annual saving across our top 30,000 most active Your
Nectar Price users
(5) Nielsen EPOS data - JS volume growth YoY% difference to
Total Market growth YoY% for key events week growth versus last
year events week
(6) Combined operating profit of Sainsbury's Bank, Argos (inc.
Habitat) and Nectar FY2019/20 to FY2022/23
(7) GfK tracked market share 12 months to March 2023
(8) Global Data, Retail % of Value, Homewares, full-year to
March 2023
(9) Baseline reflects 2018 CY for Food + 2020 CY for GM
(10) Refer to alternative performance measures for definitions
and reconciliation to statutory measures
(11) Special dividend is included against FY2019/20 to aid
comparability
(12) Nielsen Panel volume growth Yo3Y. Total FMCG (excluding
Kiosk & Tobacco), 52 weeks to March 2023. Market Universe:
Total Outlets
(13) Nielsen panel data. Top 100 SKUs by retailer. Average
Selling Price YoY growth. 52 weeks to 4 March 2023
(14) Nielsen panel data. Net volume switching GBPm to Aldi +
Lidl as % of each retailer's volume. 52 weeks to 4 March 2023
(15) Competitor benchmarking survey. Overall Supermarket
customer satisfaction % score. January 2022 to March 2023
(16) Competitor benchmarking survey. Q4 22/23 supermarket CSAT
scores 12 weeks to 4 March 2023
(17) Competitor benchmarking survey. Q4 22/23 Groceries Online
CSAT scores 12 weeks to 4 March 2023. Availability = Availability
of Items Offered
(18) Customer Satisfaction - Argos, % score FY2022/23 average vs
FY2021/22 average
(19) Kantar Retail Share Total Clothing, Footwear &
Accessories - % sales volume. 24 weeks ending 5 Feb 2023
Financial Review of the year results for the 52 weeks to 4 March
2023
In the 52 weeks to 4 March 2023, the Group generated profit
before tax of GBP327 million (2021/22: GBP854 million) and an
underlying profit before tax of GBP690 million (2021/22: GBP730
million).
A number of Alternative Performance Measures ('APMs') have been
adopted by the Directors to provide additional information on the
underlying performance of the Group. These measures are intended to
supplement, rather than replace the measures provided under IFRS.
Please see pages 50 to 54 for further information.
Summary income statement 52 weeks 52 weeks
to to
4 March 5 March Change
2023 2022
GBPm GBPm %
Group sales (including VAT) 35,157 33,355 5.4
Retail sales (including VAT) 34,626 32,924 5.2
Retail sales (excluding fuel, including
VAT) 28,664 28,095 2.0
Group sales (excluding VAT) 31,491 29,895 5.3
Retail sales (excluding VAT) 30,960 29,463 5.1
Underlying operating profit
Retail 926 1,001 (7)
Financial services 46 38 21
----------------------------------------- --------- --------- -------
Total underlying operating profit 972 1,039 (6)
Underlying net finance costs (282) (309) 9
Underlying profit before tax 690 730 (5)
Items excluded from underlying results (363) 124 N/A
----------------------------------------- --------- --------- -------
Profit before tax 327 854 (62)
Income tax expense (120) (177) 32
----------------------------------------- --------- --------- -------
Profit for the financial period 207 677 (69)
----------------------------------------- --------- --------- -------
Underlying basic earnings per share 23.0p 25.4p (9)
Basic earnings per share 9.0p 29.8p (70)
Interim Dividend per share 3.9p 3.2p 22
Final Dividend per share 9.2p 9.9p (7)
Total Dividend per share 13.1p 13.1p -
----------------------------------------- --------- --------- -------
The business delivered a strong performance against a tough
comparison last year which benefited from elevated COVID-19 sales.
The ongoing cost programme helped us mitigate the impact of rising
operating cost inflation and invest ahead of competitors to deliver
for customers, colleagues and shareholders. We have consistently
prioritised protecting value for customers, raising prices behind
the market, and this remains key to our strategy to grow volume
market share. We have supported colleagues throughout the year with
three pay rises and are delivering a higher dividend payout ratio
for shareholders, supported by strong cash generation.
Group sales
Group sales (including VAT, including fuel) increased by 5.4 per
cent year-on-year. Retail sales (including VAT, excluding fuel)
increased by 2.0 per cent, Fuel sales increased by 23.4 per cent
and Financial Services sales increased by 23.0 per cent.
Total sales performance by 52 weeks 52 weeks to
category to
4 March 5 March 2022 Change
2023
GBPbn GBPbn %
------------------------------- -------------------- ----------------------------- --------------------------------
Grocery 21.7 21.0 3.0
General Merchandise 6.0 6.1 (0.4)
Clothing 1.0 1.0 (3.0)
------------------------------- -------------------- -----------------------------
Retail (exc. fuel) 28.7 28.1 2.0
------------------------------- -------------------- ----------------------------- --------------------------------
Fuel sales 6.0 4.8 23.4
Retail (inc. fuel) 34.6 32.9 5.2
------------------------------- -------------------- ----------------------------- --------------------------------
Our Grocery customers managed their spend carefully, buying into
own branded products and our strong promotional plan to partly
offset the impact of significant market-wide grocery inflation.
This helped us deliver relatively resilient volumes within a
context of volume decline across the market. We continued to
prioritise value for customers, inflating behind key competitors.
Grocery sales strengthened through the year as inflation increased.
The successful delivery of key events (Platinum Jubilee, World Cup,
Christmas and Valentine's Day) and an exceptionally hot summer also
helped drive sales growth after a tough first quarter COVID-19
comparative.
General Merchandise sales declined against strong COVID-19
comparatives in the first quarter but grew from the second quarter,
with Argos delivering market share gains in a weak market. A strong
performance in Consumer Electronics & Technology was driven by
improved availability and increased collaboration with suppliers on
key product lines. Small Domestic Appliances, particularly air
fryers and clothes airers, also proved popular as customers reacted
to cost-of-living concerns and social media trends.
Clothing sales growth was adversely impacted by a first quarter
that annualised elevated sales the prior year when COVID-19
restrictions closed non-essential retail stores.
Fuel sales increased by 23.4 per cent, driven entirely by higher
market prices reflecting oil price inflation and a weakened
sterling exchange rate. Sainsbury's increased its share of the fuel
market.
Total sales performance by channel 52 weeks to 52 weeks to
4 March 2023 5 March 2022
------------- -------------
Total Sales fulfilled by Supermarket
stores 1.9% (2.0)%
Supermarkets (inc. Argos stores in
Sainsbury's) 4.8% (1.8)%
Groceries Online (13.5)% (4.7)%
Convenience 9.9% 8.8%
------------------------------------------ ------------- -------------
Sales in Supermarkets grew by 4.8 per cent as customers returned
to stores following COVID-19 distortions in the prior year.
Conversely, Groceries Online sales decreased by 13.5 per cent over
the year as demand normalised, but were 81 per cent higher than
pre-pandemic levels in 2019/20. Convenience sales increased by 9.9
per cent, with growth strongest in Food on the Move city centre
stores and more urban locations.
Retail like-for-like sales performance 52 weeks to 52 weeks to
4 March 2023 5 March 2022
Like-for-like sales (exc. fuel) 2.6% (2.3)%
Like-for-like sales (inc. fuel) 5.7% 3.6%
----------------------------------------- ------------- -------------
Retail like-for-like ('LFL') sales, excluding fuel, increased by
2.6 per cent (2021/22: 2.3 per cent decrease), driven by Grocery,
with sales growth strengthening throughout the year.
Space
In 2022/23, Sainsbury's did not open any new supermarkets and
closed three (2021/22: opened four new supermarkets and closed
four). There were 13 new Convenience stores opened in the year and
eight were closed (2021/22: 19 opened and 23 stores closed).
During the period, two standalone Argos stores were opened
alongside 24 new Argos stores in Sainsbury's while 45 standalone
Argos stores were closed, in line with our Argos transformation
plan. The number of Argos collection points in Sainsbury's stores
increased from 335 to 420. As at 4 March 2023, Argos had 709 stores
including 424 stores in Sainsbury's.
Store numbers and retailing space
As at As at
----------- ------------ ------------------
5 March 4 March
Extensions
Disposals / refurbishments
2022 New stores / closures / downsizes 2023
----------------------------- -------- ----------- ------------ ------------------ --------
Supermarkets 598 - (3) 24 595
Supermarkets area '000
sq. ft. 20,803 - (62) (25) 20,716
Convenience 809 13 (8) - 814
Convenience area '000
sq. ft. 1,918 40 (22) - 1,936
Sainsbury's total store
numbers 1,407 13 (11) 24 1,409
----------------------------- -------- ----------- ------------ ------------------ --------
Argos stores 328 2 (45) - 285
Argos stores in Sainsbury's 400 24 - - 424
Argos total store numbers 728 26 (45) - 709
Argos collection points 335 92 (7) - 420
Habitat 3 - - - 3
----------------------------- -------- ----------- ------------ ------------------ --------
In 2023/24, we expect to open three supermarkets and around 25
new convenience stores, and to close around one supermarket and
five to ten convenience stores. In addition, we expect to open
around 30 Argos stores inside Sainsbury's and close around 100
Argos standalone stores, including 34 stores in Ireland.
In the UK, we expect the standalone Argos store estate will
reduce to around 180 stores by March 2024, while we expect to have
430-460 Argos stores inside Sainsbury's supermarkets as well as
450-500 collection points. We had previously guided to around 160
standalone Argos stores by this date. This change reflects further
progress in rent negotiations.
Retail underlying operating profit
52 weeks 52 weeks YoY
to to
4 March 5 March
2023 2022 Change
Retail underlying operating profit (GBPm)(1) 926 1,001 (7.5)%
Retail underlying operating margin (%)(2) 2.99 3.40 (41)bps
Retail underlying EBITDA (GBPm)(3) 2,060 2,145 (4.0)%
Retail underlying EBITDA margin (%)(4) 6.65 7.28 (63)bps
--------------------------------------------- -------- -------- -------
1 Retail underlying earnings before interest, tax and
Sainsbury's underlying share of post-tax profit from joint
ventures.
2 Retail underlying operating profit divided by retail sales excluding VAT.
3 Retail underlying operating profit before underlying
depreciation and amortisation of GBP1,134 million.
4 Retail underlying EBITDA divided by retail sales excluding VAT.
Retail underlying operating profit decreased by 7.5 per cent to
GBP926 million (2021/22: GBP1,001 million) and retail underlying
operating margin decreased by 41 basis points year-on-year to 2.99
per cent (2021/22: 3.40 per cent). These declines reflect our
investment in value, reduced volumes and higher levels of operating
cost inflation, offset by both higher fuel sales and our ongoing
Save to Invest programme.
Continued step changes in our retail operating model delivered
savings, led by enhanced labour productivity, structural
distribution platform savings and ongoing optimisation of our
estate through front end configuration.
In 2023/24, Sainsbury's expects a retail underlying depreciation
and amortisation charge of around GBP1,150 million, including
around GBP450 million right of use asset depreciation.
Financial Services
Financial Services results
12 months to 28 February 2023
2023 2022 Change
--------------------------------------------
Underlying revenue (GBPm) 531 432 23%
Interest and fees payable (GBPm) (84) (57) 47%
Total income (GBPm) 447 375 19%
Underlying operating profit (GBPm) 46 38 21%
-------------------------------------------- ------ ------ ---------
Net interest margin (%)(1) 5.1 4.5 60bps
Cost:income ratio (%) 66 74 (800bps)
Bad debt as a percentage of lending (%)(2) 2.1 1.2 90bps
Active customers (m) - Bank 1.9 1.8 2%
Active customers (m) - AFS 2.1 2.1 -
Tier 1 capital ratio (%)(3) 15.5 15.6 (10bps)
Total capital ratio (%)(4) 17.9 18.1 (20bps)
Total Customer lending (GBPbn)(5) 5.3 5.1 4%
Unsecured lending (GBPbn) 4.7 4.3 10%
Secured lending (GBPbn) 0.6 0.8 (27%)
Customer deposits (GBPbn) (4.7) (4.2) 12%
-------------------------------------------- ------ ------ ---------
1 Net interest receivable divided by average interest-bearing assets.
2 Bad debt expense divided by average net lending.
3 Common equity Tier 1 capital divided by risk-weighted assets.
4 Total capital divided by risk-weighted assets.
5 Amounts due from customers at the Balance Sheet date in
respect of loans, mortgages, credit cards and AFS credit, net of
provisions.
Financial services underlying operating profit of GBP46 million
is up GBP8 million (2021/22: GBP38 million), primarily driven by
increased customer demand for credit and Travel Money, tempered by
higher impairments and increased costs.
Net Interest Margin increased 60bps, with net interest income up
15 per cent due to a higher mix proportion of unsecured lending,
improving yields and a focus on managing the increased cost of
funding. Fee income has shown recovery post COVID-19 within Travel
Money as demand for foreign travel returns and in Credit Cards due
to higher Retail spend. The recovery of credit demand helped drive
unsecured lending balances growth of 10 per cent year-on-year,
resulting in total income up 19 per cent to GBP447 million
(2021/22: GBP375 million).
The Cost:income ratio reduced to 66 per cent (2021/22: 74 per
cent), driven primarily by the volume-driven recovery in income,
together with careful management of yields, funding and costs.
Higher impairments reflect both the latest economic outlook
assumptions on inflation and unemployment, as well as higher
unsecured lending balances and tough comparators in the prior year.
Bad debt expense as a percentage of lending increased 90bps
year-on-year to 2.1 per cent (2021/22: 1.2 per cent), reflecting
the above as well as the higher proportion of unsecured lending
balances as the mortgage book runs down.
As disclosed at last year's preliminary results, a GBP50 million
dividend was paid from Sainsbury's Bank to the Group for the first
time in April 2022. The Bank remains well capitalised with a Total
Capital ratio of 17.9 per cent (2021/22: 18.1 per cent).
We expect Financial Services underlying operating profit for
2023/24 to be broadly in line with 2022/23.
Underlying net finance costs
Underlying net finance costs reduced by 9 per cent to GBP282
million (2021/22: GBP309 million). These costs include GBP26
million of net non-lease interest (2021/22: GBP40 million). The
reduction of net non-lease interest was driven by increased
interest income, where the benefit from higher interest rates was
supported by higher cash balances. Financing costs on lease
liabilities reduced to GBP256 million (2021/22: GBP269 million),
due primarily to the declining remaining term of the existing lease
portfolio, with lower costs associated with leases as they age.
Sainsbury's expects underlying net finance costs in 2023/24 of
between GBP295 million - GBP305 million, including around GBP245
million - GBP255 million lease interest.
Items excluded from underlying results
In order to provide shareholders with insight into the
underlying performance of the business, items recognised in
reported profit before tax which, by virtue of their size and or
nature, do not reflect the Group's underlying performance are
excluded from the Group's underlying results and shown in the table
below.
52 weeks 52 weeks
to 4 March to 5 March
2023 2022
Items excluded from underlying
results GBPm GBPm
----------------------------------- ------------ ------------
Restructuring and integration
programmes (106) (103)
Impairment charges (281) -
----------------------------------- ------------ ------------
Restructuring, impairment
and integration (387) (103)
Income recognised in relation
to legal disputes 30 182
Software as a service accounting
adjustment - (21)
IAS 19 pension income 58 11
Property, finance and acquisition
adjustments (64) 55
Items excluded from underlying
results (363) 124
----------------------------------- ------------ ------------
- Restructuring and integration costs of GBP106 million
(2021/22: GBP103 million) include GBP106 million (2021/22: GBP92
million) relating to the structural integration of Sainsbury's and
Argos announced in November 2020. Cash costs in the year were GBP50
million (2021/22: GBP114 million). We still expect to incur one off
costs from these retail infrastructure and operating model changes
of around GBP900 million to GBP1 billion, with cash costs of around
GBP300 million, with the majority to be incurred in the period to
March 2024. To date we have incurred costs of GBP746 million and
cash costs of GBP203 million. In 2023/24 we expect to incur cash
costs of around GBP60 million in relation to this programme.
- Non-cash impairments of GBP281 million were driven by a
material increase in the underlying discount rate, following
sustained increases in gilt interest rates (2021/22: GBPnil).
- Income recognised in relation to legal disputes of GBP30
million (2021/22: GBP182 million) primarily relates to settlements
for overcharges from payment card processing fees and is shown net
of legal fees. GBP30 million of cash was received in the year
(2021/22: GBP107 million).
- 2021/22 included a non-cash cost of GBP21 million relating to
software as a service following the IFRS interpretations committee
clarification of how these costs should be treated and represented
the out of period impacts of this change.
- IAS 19 Pension income rose to GBP58 million (2021/22: GBP11
million) driven by the increased net surplus brought forward from
the 2021/22 year end and an increased discount rate which reduced
pension scheme liabilities.
- Other movements of GBP64 million expense (2021/22: GBP55
million income) relate to property losses, acquisition adjustments
and non-underlying financing costs. The adverse year-on-year
movement is primarily driven by a loss on energy derivatives of
GBP29 million (2021/22: GBP76 million gain) caused by lower energy
prices. The energy derivatives relate to long-term, fixed price
power purchase arrangements (PPAs) with independent producers.
These are accounted for as derivative financial instruments, but
are not designated in hedging relationships. Therefore gains and
losses are recognised in the income statement. Decreases in
electricity forward prices in the year have led to loss on the
related derivative financial instruments. In addition, the Group
recorded a total cost of GBP10 million related to property
transactions, including expenses related to the Post Balance Sheet
Event disclosed below, and a loss on disposal of non-trading
properties (2021/22: GBP7 million profit).
Taxation
The tax charge was GBP120 million (2021/22: GBP177 million). The
underlying tax rate (UTR) was 22.8 per cent (2021/22: 21.1 per
cent) and the effective tax rate (ETR) was 36.7 per cent (2021/22:
20.7 per cent).
The UTR is higher than the previous year. This reflects the
impact of a similar value of tax adjusting items as last year
having a greater proportional impact on lower profits in the
current year. In addition, the previous year benefited from the
agreement of a number of open returns with HMRC.
The ETR is higher than the prior year largely due to
non-deductible expenses, particularly in respect of non-underlying
impairment charges and the impact of restructuring in Ireland,
giving rise to trade losses which will extinguish rather than being
available for future offset. The effective tax rate is also higher
than the standard rate of UK corporation tax due to the impact of
non-deductible capital expenditure and non-underlying costs.
Sainsbury's expects an underlying tax rate in 2023/24 of around
29 per cent, with the increase being driven primarily by the change
in the standard rate of UK corporation tax from 1 April 2023.
Earnings per share
Underlying basic earnings per share decreased to 23.0 pence
(2021/22: 25.4 pence), primarily driven by the decrease in
underlying profits. Basic earnings per share was 9.0 pence
(2021/22: 29.8 pence per share).
Dividends
The Board has recommended a final dividend of 9.2 pence per
share (2021/22: 9.9 pence). This will be paid on 14 July 2023 to
shareholders on the Register of Members at the close of business on
9 June 2023. The Group's policy to pay a dividend of around 60 per
cent of underlying earnings has allowed us to maintain a full-year
dividend of 13.1 pence (2021/22: 13.1 pence).
Sainsbury's has a Dividend Reinvestment Plan (DRIP), which
allows shareholders to reinvest their cash dividends in our shares.
The last date that shareholders can elect for the DRIP is 23 June
2023.
Net debt and retail cash flows
As at 4 March 2023, net debt was GBP6,344 million (5 March 2022:
GBP6,759 million), a reduction of GBP415 million (2021/22: GBP290
million increase). Excluding the impact of lease liabilities on net
debt, Sainsbury's reduced net debt by GBP285 million in the year,
moving to a net funds position of GBP144 million (5 March 2022: net
debt of GBP141 million). We continue to expect to generate retail
free cash flow of at least GBP500 million in the coming year.
Net debt includes lease liabilities under IFRS 16 of GBP6,488
million (2021/22: GBP6,618 million). Lease liabilities decreased by
GBP130 million.
Group net debt includes the impact of capital injections into
Sainsbury's Bank, less dividends received, but excludes Financial
Services' own net debt balances. Financial Services balances are
excluded because they are part of the daily operating cycle of the
Bank rather than for financing purposes.
Summary cash flow statement (1) Retail Retail
52 weeks 52 weeks to
to
4 March 2023 5 March 2022
GBPm GBPm
Retail underlying operating profit 926 1,001
Adjustments for:
Retail underlying depreciation and
amortisation 1,134 1,144
Share based payments and other 49 54
Retail exceptional operating cash
flows (excluding pensions)(2) (23) (3)
Adjusted retail operating cash flow
before changes in working capital(2) 2,086 2,196
------------------------------------------------- ------------- -------------
Decrease/(increase) in working capital(3) 174 (185)
------------------------------------------------- ------------- -------------
Net interest paid(3) (307) (323)
Pension cash contributions (44) (71)
Corporation tax paid (99) (23)
------------- -------------
Adjusted net cash generated from
operating activities(3) 1,810 1,594
------------------------------------------------- ------------- -------------
Cash capital expenditure(3) (717) (645)
Repayments of lease liabilities (512) (491)
Initial direct costs on right-of-use
assets (16) (3)
Proceeds from disposal of property,
plant and equipment 29 46
Dividends and distributions received(3) 51 2
Retail free cash flow 645 503
------------------------------------------------- ------------- -------------
Dividends paid on ordinary shares (319) (238)
Repayment of borrowings(3) (40) (256)
Other(3) (32) (27)
Net increase/(decrease) in cash and
cash equivalents 254 (18)
------------------------------------------------- ------------- -------------
Decrease in Debt 552 747
Conversion of perpetual convertible
bond(4) - 240
Other non-cash and net interest movements(5) (391) (1,259)
Movement in net funds/(debt) 415 (290)
------------------------------------------------- ------------- -------------
Opening net debt (6,759) (6,469)
-------------------------------------------------
Closing net debt (6,344) (6,759)
------------------------------------------------- ------------- -------------
of which
Lease liabilities (6,488) (6,618)
------------------------------------------------- ------------- -------------
Net funds/(debt) excluding lease
liabilities 144 (141)
------------------------------------------------- ------------- -------------
1 See note 7 for a reconciliation between Retail and Group cash flow
2 Excludes working capital and pension contributions.
3 Refer to the Alternative Performance Measures on pages 50 to 54 for reconciliation.
4 GBP242 million of the GBP250 million perpetual convertible
bond converted. Given a carrying value of GBP248 million this
resulted in a GBP240 million reduction in net debt.
5 Other non-cash includes new leases and lease modifications and
fair value movements on derivatives used for hedging long-term
borrowings.
Adjusted retail operating cash flow before changes in working
capital decreased by GBP110 million year-on-year to GBP2,086
million (2021/22: GBP2,196 million) due to lower underlying profit
and increased non-underlying costs. Higher retail non-underlying
operating cashflows of GBP23 million (2021/22: GBP3 million)
largely reflected lower legal disputes income offsetting
restructuring costs. Working capital decreased by GBP174 million
(2021/22: GBP185 million increase), in line with expectations,
primarily driven by sales growth and a return to normal phasing of
working capital following COVID-19 impacts.
Corporation tax paid increased to GBP99 million (2021/22: GBP23
million) with last year benefiting from payments made in 2020/21
before the decision to forgo business rates relief which
subsequently reduced taxable profits in that year.
Pensions contributions of GBP44 million (2021/22: GBP71 million)
are down versus last year, in line with the long-term pension
funding framework and the triennial valuation agreed with the
pension Trustee. Proceeds of GBP29 million (2021/22: GBP46 million)
resulted from disposals of non-trading sites. A GBP50 million
dividend was received from Sainsbury's Bank (2021/22: GBPnil).
Retail free cash flow increased by GBP142 million year-on-year
to GBP645 million (2021/22: GBP503 million), with the year-on-year
movement driven by the working capital reduction and the dividend
received from Sainsbury's Bank, partly offset by higher capital
expenditure and corporation tax. Retail free cash flow was used to
fund dividends and reduce borrowings.
Dividends of GBP319 million were paid in the year, which were
covered 2.0 times by free cash flow (2021/22: 2.1 times).
The Group has right sized its access to contingent funding with
credit facilities reduced from GBP1,450 million to GBP1,000
million. At 4 March 2023, this facility remained undrawn. During
the year, the Group arranged a three-year unsecured GBP575 million
Term Loan facility with a maturity date of March 2026 to part fund
the transaction disclosed in Post Balance Sheet Events below. This
replaced the GBP575 million unsecured term facility that was due to
mature in November 2024 detailed at Interims as a Post Balance
Sheet Event.
Capital expenditure
Core retail cash capital expenditure was GBP717 million
(2021/22: GBP645 million). This was in line with expectations and
higher than recent years, when projects were delayed due to
COVID-19.
Sainsbury's expects core retail cash capital expenditure
(excluding Financial Services) in 2023/24 to be GBP750-GBP800
million.
Financial Ratios
Key financial ratios 52 weeks to 52 weeks to
4 March 2023 5 March 2022
Return on capital employed (%) (1) 7.6 8.4
Net debt to EBITDA (2) 3.0 times 3.1 times
Fixed charge cover (3) 2.7 times 2.8 times
------------------------------------ ------------- -------------
---------------------------------------------------------------------
1 ROCE: Return is defined as a 52 week rolling underlying profit
before interest and tax. Capital employed is defined as Group net
assets excluding the pension deficit/surplus less net debt
(excluding perpetual securities). This is calculated using the
average of 14 datapoints - the prior year closing capital employed,
the current year closing capital employed and 12 intra-year periods
as this more closely aligns to the recognition of profit.
2 Net debt of GBP6,344 million includes lease obligations under
IFRS 16, divided by Group underlying EBITDA of GBP2,139
million.
3 Group underlying EBITDA divided by rent (both capital and
interest) and net underlying finance costs, where interest on
perpetual securities is treated as an underlying finance cost.
Sainsbury's continues to target leverage of 3.0x - 2.4x to
deliver a solid investment grade balance sheet and net debt
continues to reduce. Year-end leverage of 3.0x reflects higher
average capital employed as a consequence of the exercise of
purchase options on 21 leased supermarkets previously disclosed in
last year's Group's results. The completion of the property
transaction detailed within Post Balance Sheet Events will result
in lower lease debt and an overall reduction in net debt.
Return on capital employed (ROCE) has declined primarily due to
lower earnings, with higher capital employed driven by an increase
in the average value of right of use assets and derivatives. Fixed
charge cover is stable.
Defined benefit pensions
The Pension Scheme is valued on different bases for different
purposes. For the corporate annual accounts, the value of the
retirement benefit is calculated under IAS 19 while the funding of
the Scheme is determined by the Trustee's triennial valuation. The
last triennial valuation, as at 30 September 2021 and agreed in
October 2022, showed a surplus of GBP130 million (when the IAS 19
Surplus was recorded as GBP720 million) and there was no change to
the Asset Backed Contributions structure that was agreed in
2019.
At 4 March 2023, the net defined benefit surplus under IAS 19
for the Group was GBP989 million (excluding deferred tax). This
represents a GBP1,294 million reduction from the prior year-end
date of 5 March 2022. This was driven by a lower accounting value
of the Scheme's liabilities (higher discount rate used to calculate
the present value of benefits, an adjustment to the expected future
improvements in mortality slightly offset by higher than expected
inflation), more than offset by a decrease in the market value of
assets. The asset value decrease was due to a reduction in the
value of liability driven investment assets which the Scheme used
to match the value of liabilities and provide a hedge against
changes in inflation and interest rates.
Significant movements in gilt markets as a consequence of the
political events of late 2022 resulted in the Trustee reducing the
level of interest rate hedging in the Scheme. Coinciding with a
fall in gilt yields, this reduced the ongoing funding level.
However, there has been no change to the contributions to the
Scheme, and the Company does not currently anticipate there to be
any impact on the contributions from the 2024 triennial
valuation.
The Trustee has since taken action to partially reinstate the
interest rate hedging ratios. The Trustee has also reviewed the
collateral sufficiency framework which ensures sufficient high
quality liquid assets are maintained in order to meet liquidity
requirements, even in times of market stress and volatility. The
level of collateral that the Scheme can call on at any time is well
above the limits suggested recently by the Pensions Regulator.
For 2023/24, total pension scheme cash contributions are
expected to be around GBP45 million.
Retirement benefit obligations
Sainsbury's Argos Group Group
as at as at as at as at
4 March 2023 4 March 2023 4 March 5 March 2022
2023
GBPm GBPm GBPm GBPm
Present value of funded obligations (5,128) (793) (5,921) (9,373)
Fair value of plan assets 6,007 927 6,934 11,693
Pension surplus 879 134 1,013 2,320
Present value of unfunded
obligations (12) (12) (24) (37)
------------------------------------- ------------- ------------- -------- -------------
Retirement benefit surplus 867 122 989 2,283
Deferred income tax liability (262) (68) (330) (640)
------------------------------------- ------------- ------------- -------- -------------
Net retirement benefit surplus 605 54 659 1,643
------------------------------------- ------------- ------------- -------- -------------
Post Balance Sheet Events
Property transaction - Supermarket Income REIT
Subsequent to the balance sheet date, on 17 March 2023 the Group
completed the purchase of a commercial property investment pool,
known as Highbury and Dragon, in which it already held a beneficial
interest. The investment pool contained 26 supermarkets, all of
which were formerly leased to Sainsbury's. Of the 26 stores
acquired, 21 will be retained and five sold. We will enter into new
15-year leases on four of the five divested stores.
The total consideration of GBP431 million (excluding costs)
consists of three tranches: GBP279 million was paid immediately,
GBP117 million is due on 10 July 2023, and the third tranche of
GBP35 million is conditional on the sale of five stores from the
property pool. In addition, the Group will fully fund the bond
redemptions attached to the property pool, of which GBP170.5
million was paid on 20 March 2023, and GBP130.4 million will be
paid on 13 July 2023. The Group will fully fund the consideration
and bond redemptions by utilising the Group's cash resources and
also by drawing under the three-year unsecured term loan. This will
result in a reduction of lease debt of GBP1,042 million and drives
an overall reduction in net debt and ongoing lease costs.
Consolidated income statement
for the 52 weeks to 4 March 2023
52 weeks to 4 March 52 weeks to 5 March
2023 2022
------------------- ----- -------------------------------------------- --------------------------------------------
Before Non-underlying Total Before Non-underlying Total
non-underlying items non-underlying items
items (Note items (Note
4) 4)
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 5 31,491 - 31,491 29,895 - 29,895
Cost of sales (28,996) (413) (29,409) (27,523) 9 (27,514)
Impairment loss on
financial
assets (78) - (78) (15) - (15)
Gross
profit/(loss) 2,417 (413) 2,004 2,357 9 2,366
Administrative
expenses (1,480) (35) (1,515) (1,352) (78) (1,430)
Other income 35 38 73 34 186 220
Operating
profit/(loss) 972 (410) 562 1,039 117 1,156
Finance income 8 18 56 74 3 17 20
Finance costs 8 (300) (9) (309) (312) (10) (322)
Profit/(loss)
before tax 690 (363) 327 730 124 854
Income tax
(expense)/credit 9 (157) 37 (120) (154) (23) (177)
Profit/(loss) for
the financial
period 533 (326) 207 576 101 677
Earnings per share 10 pence pence
Basic earnings 9.0 29.8
Diluted earnings 8.8 28.8
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Impairment loss on financial assets has been disclosed
separately in the current year and prior year comparative. Refer to
note 2 for further details.
Consolidated statement of comprehensive income/(loss)
for the 52 weeks to 4 March 2023
52
weeks 52 weeks
to 4 to 5
March March
2023 2022
----- -------- ---------
Note GBPm GBPm
--------------------------------------------------------- ----- -------- ---------
Profit for the financial period 207 677
--------------------------------------------------------- ----- -------- ---------
Items that will not be subsequently reclassified
to the income statement
----- -------- ---------
Remeasurement on defined benefit pension schemes 20 (1,398) 1,457
-----
Movements on financial assets at fair value through
other comprehensive income 1 76
Cash flow hedges fair value movements - inventory
hedges 123 73
Current tax relating to items not reclassified 25 -
Deferred tax relating to items not reclassified 322 (461)
--------------------------------------------------------- ----- -------- ---------
(927) 1,145
--------------------------------------------------------- ----- -------- ---------
Items that may be subsequently reclassified to the
income statement
-----
Currency translation differences 4 (1)
-----
Movements on financial assets at fair value through
other comprehensive income 1 (5)
-----
Items reclassified from financial assets at fair value
through other comprehensive income reserve (1) 4
-----
Cash flow hedges fair value movements - non-inventory
hedges (30) 131
-----
Items reclassified from cash flow hedge reserve (18) 7
Deferred tax on items that may be reclassified 14 (57)
--------------------------------------------------------- ----- -------- ---------
(30) 79
Total other comprehensive (loss)/income for the period
(net of tax) (957) 1,224
--------------------------------------------------------- ----- -------- ---------
Total comprehensive (loss)/income for the period (750) 1,901
--------------------------------------------------------- ----- -------- ---------
Consolidated balance sheet
At 4 March 2023 and 5 March 2022
4 March 5 March
2023 2022
Note GBPm GBPm
----------------------------------------------- ----- --------- ---------
Non-current assets
Property, plant and equipment 12 8,201 8,402
Right-of-use-assets 13 5,345 5,560
Intangible assets 14 1,024 1,006
Investments in joint ventures and associates 2 3
Financial assets at fair value through other
comprehensive income 515 604
Trade and other receivables 56 65
Amounts due from Financial Services customers
and other banks 1,908 2,026
Derivative financial assets 217 213
Net retirement benefit surplus 20 989 2,283
----------------------------------------------- ----- --------- ---------
18,257 20,162
----------------------------------------------- ----- --------- ---------
Current assets
Inventories 1,899 1,797
Trade and other receivables 627 683
Amounts due from Financial Services customers
and other banks 3,484 3,163
Financial assets at fair value through other
comprehensive income 494 196
Derivative financial assets 70 78
Cash and cash equivalents 17 1,319 825
----------------------------------------------- ----- ---------
7,893 6,742
Assets held for sale 8 8
----------------------------------------------- ----- --------- ---------
7,901 6,750
----------------------------------------------- ----- --------- ---------
Total assets 26,158 26,912
----------------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables (4,837) (4,546)
Amounts due to Financial Services customers
and other deposits (4,880) (4,444)
Borrowings 19 (53) (54)
Lease liabilities 13 (1,533) (526)
Derivative financial liabilities (16) (29)
Taxes payable (155) (169)
Provisions 16 (140) (100)
----------------------------------------------- ----- --------- ---------
(11,614) (9,868)
----------------------------------------------- ----- --------- ---------
Net current liabilities (3,713) (3,118)
----------------------------------------------- ----- --------- ---------
Non-current liabilities
Trade and other payables - (24)
Amounts due to Financial Services customers
and other deposits (1,066) (815)
Borrowings 19 (603) (707)
Lease liabilities 13 (4,956) (6,095)
Derivative financial liabilities (58) (3)
Deferred income tax liability (476) (806)
Provisions 16 (132) (171)
----------------------------------------------- ----- --------- ---------
(7,291) (8,621)
----------------------------------------------- ----- --------- ---------
Total liabilities (18,905) (18,489)
Net assets 7,253 8,423
Equity
Called up share capital 672 668
Share premium 1,418 1,406
Merger reserve 568 568
Capital redemption reserve 680 680
Other reserves 274 341
Retained earnings 3,641 4,760
----------------------------------------------- ----- --------- ---------
Total equity 7,253 8,423
----------------------------------------------- ----- --------- ---------
Consolidated cash flow statement
for the 52 weeks to 4 March 2023
52 weeks 52 weeks
to 4 March to 5 March
2023 2022
Note GBPm GBPm
------------------------------------------------------- ----- ------------------------- -------------------
Cash flows from operating activities
Profit before tax 327 854
Net finance costs 235 302
Operating profit 562 1,156
Adjustments for:
12,
Depreciation expense 13 1,036 1,069
Amortisation expense 14 172 151
12,
Net impairment loss on property, plant and equipment, 13,
right of use assets, intangible assets 14 315 9
Financial Services movement in loss allowance
for loans and advances to customers 76 19
Profit on sale of non-current assets and early
termination of leases (15) (6)
Non-underlying fair value movements 4 29 (76)
Share-based payments expense 59 58
Defined benefit scheme (income)/expenses 20 (2) 4
Cash contributions to defined benefit scheme 20 (44) (71)
Operating cash flows before changes in working
capital 2,188 2,313
Changes in working capital
Increase in inventories (105) (179)
(Decrease)/increase in financial assets at fair
value through other comprehensive income (207) 115
Decrease in trade and other receivables 68 33
(Increase)/decrease in amounts due from Financial
Services customers and other deposits (307) 161
Increase in trade and other payables 280 28
Increase/(decrease) in amounts due to Financial
Services customers and other deposits 687 (1,030)
Decrease in provisions and other liabilities - (80)
Cash generated from operations 2,604 1,361
Interest paid (316) (329)
Corporation tax paid (103) (23)
Net cash generated from operating activities 2,185 1,009
------------------------------------------------------- ----- ------------------------- -------------------
Cash flows from investing activities
Purchase of property, plant and equipment (525) (416)
Initial direct costs on new leases (16) (3)
Purchase of intangible assets (213) (278)
Proceeds from disposal of property, plant and
equipment 29 46
Dividends and distributions received 1 2
Net cash used in investing activities (724) (649)
------------------------------------------------------- ----- ------------------------- -------------------
Cash flows from financing activities
Proceeds from issuance of ordinary shares 13 21
Repayment of borrowings (95) (248)
Repayment of perpetual capital securities - (8)
Purchase of own shares (45) (48)
Capital repayment of lease obligations (514) (493)
Dividends paid on ordinary shares 11 (319) (238)
Dividends paid on perpetual securities - (4)
Net cash used in financing activities (960) (1,018)
------------------------------------------------------- ----- ------------------------- -------------------
Net increase/(decrease) in cash and cash equivalents 501 (658)
Opening cash and cash equivalents 818 1,476
Closing cash and cash equivalents 17 1,319 818
------------------------------------------------------- ----- ------------------------- -------------------
Consolidated statement of changes in equity
for the 52 weeks to 4 March 2023
Capital
Called Share redemption
up share premium Merger and other Retained
capital account reserve reserves* earnings* Total equity
Note GBPm GBPm GBPm GBPm GBPm GBPm
At 6 March 2022 668 1,406 568 1,021 4,760 8,423
----- ---------- --------- --------- ------------ ----------- -------------
Profit for the period - - - - 207 207
-----
Other comprehensive income/(loss) - - - 80 (1,398) (1,318)
Tax relating to other
comprehensive
income/(loss) - - - 14 347 361
----------------------------------- ----- ---------- --------- --------- ------------ ----------- -------------
Total comprehensive income/(loss)
for the period ended 4 March 2023 - - - 94 (844) (750)
----------------------------------- ----- ---------- --------- --------- ------------ ----------- -------------
Cash flow hedges losses
transferred
to inventory - - - (139) - (139)
----------------------------------- ----- ---------- --------- --------- ------------ ----------- -------------
Transactions with owners:
Dividends 11 - - - - (319) (319)
----------------------------------- -----
Share-based payment - - - - 58 58
----------------------------------- -----
Purchase of own shares - - - (45) - (45)
----------------------------------- -----
Allotted in respect of share
option
schemes 4 12 - 23 (26) 13
----------------------------------- -----
Other adjustments - - - - 5 5
Tax on items charged to equity - - - - 7 7
----------------------------------- ----- ---------- --------- --------- ------------ -----------
At 4 March 2023 672 1,418 568 954 3,641 7,253
----------------------------------- ----- ---------- --------- --------- ------------ ----------- -------------
Total
Called Capital equity
up Share redemption before Perpetual
share premium Merger and other Retained perpetual convertible Total
capital account reserve reserves* earnings* securities bonds equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 7 March
2021 637 1,173 568 814 3,261 6,453 248 6,701
----- --------- --------- ---------- ----------- ---------- ----------- ------------ --------
Profit for the
period - - - - 677 677 - 677
-----
Other
comprehensive
income - - - 285 1,457 1,742 - 1,742
Tax relating
to other
comprehensive
income - - - (87) (431) (518) - (518)
--------------- ----- --------- --------- ---------- ----------- ----------
Total
comprehensive
income for
the period
ended 5 March
2022 - - - 198 1,703 1,901 - 1,901
--------------- ----- --------- --------- ---------- ----------- ---------- ----------- ------------ --------
Cash flow
hedges gains
transferred
to inventory - - - 28 - 28 - 28
--------------- ----- --------- --------- ---------- ----------- ---------- ----------- ------------ --------
Transactions
with owners:
Dividends 11 - - - - (238) (238) - (238)
--------------- -----
Share-based
payment - - - - 60 60 - 60
--------------- -----
Purchase of
own shares - - - (48) - (48) - (48)
--------------- -----
Allotted in
respect of
share option
schemes 5 17 - 14 (15) 21 - 21
--------------- -----
Conversion of
perpetual
convertible
bonds 26 216 - - (2) 240 (240) -
-----
Redemption of
perpetual
capital
securities - - - - - - (8) (8)
-----
Other
Adjustments - - - 15 (12) 3 - 3
Tax on items
charged to
equity - - - - 3 3 - 3
At 5 March
2022 668 1,406 568 1,021 4,760 8,423 - 8,423
----- --------- --------- ---------- ----------- ---------- ----------- ------------ --------
* In order to provide better visibility of reserves, the Group
has presented the Own share reserve within Capital redemption and
other reserves for the first time in the period. The Own Share
Reserve of GBP68 million as at 5 March 2022 and GBP33 million as at
6 March 2021 has subsequently been reclassified from Retained
Earnings to Capital redemption and other reserves.
Notes to the consolidated financial statements
1 General 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 4 March 2023 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 2023 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 2023.
J Sainsbury plc is a public limited company (the 'Company')
incorporated in the United Kingdom, whose shares are publicly
traded on the London Stock Exchange. The Company is domiciled in
the United Kingdom and its registered address is 33 Holborn, London
EC1N 2HT, United Kingdom.
The financial year represents the 52 weeks to 4 March 2023
(prior financial year: 52 weeks to 5 March 2022). The consolidated
financial statements for the 52 weeks to 4 March 2023 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.
The Group's principal activities are Food, General Merchandise
and Clothing retailing and Financial Services.
2 Basis of preparation
The Group's financial statements have been prepared in
accordance with UK-adopted international accounting standards.
The financial statements are presented in pound sterling,
rounded to the nearest million ('GBPm') unless otherwise stated.
They have been prepared under the historical cost convention,
except for derivative financial instruments, defined benefit
pension scheme assets and financial assets at fair value through
other comprehensive income.
Sainsbury's Bank plc and its subsidiaries have been consolidated
for the twelve months to 28 February 2023 being the Bank's year-end
date (prior financial year: 28 February 2022). There have been no
significant transactions or events that occurred between this date
and the Group's balance sheet date, and therefore no adjustments
have been made to reflect the difference in year-end dates.
Significant accounting policies have been included in the
relevant notes to which the policies relate, and those relating to
the financial statements as a whole can be read further below.
Unless otherwise stated, significant accounting policies have been
applied consistently to all periods presented in the financial
statements.
Impairment of financial assets disclosure
In accordance with IAS 1 Presentation of Financial Statements,
Impairment loss on financial assets has been separately disclosed
within the Consolidated income statement. Previously, this amount
was included within Cost of sales, which has therefore been
restated from GBP27,538 million to GBP27,523 million before
non-underlying items; and from GBP27,529 million to GBP27,514
million in total. There is no impact to Gross profit, Operating
profit or Profit before tax.
2.1 Going concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for a period of at least 12
months from the date of approval. Accordingly, they continue to
adopt the going concern basis in preparing the financial
statements. The assessment period for the purposes of considering
going concern is the 12 months to 26 April 2024.
In assessing the Group's ability to continue as a going concern,
the Directors have considered the Group's most recent corporate
planning and budgeting processes. This includes an annual review
which considers profitability, the Group's cash flows, committed
funding and liquidity positions and forecasted future funding
requirements over three years, with a further two years of
indicative movements.
The Group manages its financing by diversifying funding sources,
structuring core borrowings with phased maturities to manage
refinancing risk and maintaining sufficient levels of standby
liquidity via the Revolving Credit Facility. This seeks to minimise
liquidity risk by maintaining a suitable level of undrawn
additional funding capacity.
The Group successfully reduced net debt over the past year as
part of the continued focus on deleveraging. Furthermore, the
committed Revolving Credit Facility, which enables the Group to
maintain sufficient levels of contingent funding, has been
successfully refinanced and right-sized during the year with a new
GBP1,000 million facility comprising two GBP500 million tranches.
Tranche A has a final maturity of December 2026 and Tranche B has a
final maturity of December 2027. As at 4 March 2023, the Revolving
Credit Facility was undrawn. In addition, the Group successfully
arranged a GBP575 million committed term loan facility with
maturity of March 2026 in order to part fund the acquisition of a
property portfolio.
In assessing going concern, scenarios in relation to the Group's
principal risks have been considered in line with those disclosed
in the viability statement by overlaying them into the corporate
plan and assessing the impact on cash flows, net debt, funding
headroom and financial covenants. These severe but plausible
scenarios included modelling inflationary pressures on both food
margins and general recession-related risks, the impact of any
regulatory fines, and the failure to deliver planned cost
savings.
In performing the above analysis, the Directors have made
certain assumptions around the availability and effectiveness of
the mitigating actions available to the Group. These include
reducing any non-essential capital expenditure and operating
expenditure on projects, bonuses and dividend payments.
The Group's most recent corporate planning and budgeting
processes includes assumed cashflows to address climate change
risks, including costs associated with initiatives in place as part
of the Plan for Better commitment which include reducing
environmental impacts and meeting customer expectations in this
area, notably through reducing packaging and reducing energy usage
across the estate. Climate-related risks do not result in any
material uncertainties affecting the Group's ability to continue as
a going concern.
As a consequence of the work performed, the Directors considered
it appropriate to adopt the going concern basis in preparing the
Financial Statements with no material uncertainties to
disclose.
2.2 Amendments to published standards
Effective for the Group and Company in these financial
statements:
The Group has considered the following amendments to published
standards that are effective for the Group for the financial year
beginning 6 March 2022 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 other than disclosures .
- Amendments to IFRS 3 'Business Combinations' - Reference to
the Conceptual Framework
- Amendments to IAS 16 'Property, Plant and Equipment' -
Proceeds before Intended Use
- Amendments to IAS 37 'Provisions, Contingent Assets and
Contingent Liabilities' - Onerous Contracts - Costs of Fulfilling a
Contract
- Amendments to IFRS 1 'First-time Adoption of International
Financial Reporting Standards' - Subsidiary as a first-time
adopter
- Amendments to IFRS 9 'Financial Instruments' - Fees in the '10
per cent' test for derecognition of financial liabilities
- Amendments to IAS 41 'Agriculture' - Taxation in fair value
measurements
The accounting policies have remained unchanged from those
disclosed in the Annual Report for the year ended 5 March 2022.
Standards and revisions effective for future periods:
The following standards and revisions will be effective for
future periods:
- Amendments to IAS 1 'Presentation of Financial Statements' on
the classification of liabilities as current or non-current
- Amendments to IAS 1 'Presentation of Financial Statements' and
IFRS Practice Statement 2 'Making Materiality Judgements' on the
disclosure of accounting policies
- Amendments to IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors' on the definition of accounting
estimates
- Amendments to IAS 12 'Income Taxes' on Deferred Tax Related to
Assets and Liabilities Arising from a Single Transaction
- IFRS 17 'Insurance Contracts'
- Amendments to IFRS 16 'Leases' on Lease Liability in a Sale
and Leaseback
- Amendments to IAS 1 'Presentation of Financial Statements' on
Non-current Liabilities with Covenants
The Group has considered the impact of the remaining above
standards and revisions and have concluded that they will not have
a significant impact on the Group's financial statements.
3 Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors use
various APMs. These APMs should be considered in addition to, and
are not intended to be a substitute for, IFRS measurements. As they
are not defined by International Financial Reporting Standards,
they may not be directly comparable with other companies' APMs.
The Directors believe that these APMs provide additional useful
information for understanding the financial performance and health
of the Group. They are also used to enhance the comparability of
information between reporting periods (such as like-for-like sales
and underlying profit) by adjusting for non-recurring factors which
affect IFRS measures, and to aid users in understanding the Group's
performance. Consequently, APMs are used by the Directors and
management for performance analysis, planning, reporting and
incentive setting purposes.
The APMs used by the Group are detailed on pages 51-54 of this
report. This includes further information on the definition,
purpose and reconciliation to the closest IFRS measure. All APMs
relate to the current and comparative periods and are consistent
with those used previously. There have been no changes to APMs in
the year.
4 Profit before non-underlying items
In order to provide shareholders with additional insight into
the year-on-year performance of the business, an adjusted measure
of profit (underlying profit before tax) is provided to supplement
the reported IFRS numbers, which reflects how the business measures
performance internally. This adjusted measure excludes items
recognised in reported profit or loss before tax which, if
included, could distort comparability between periods.
Determining which items are to be adjusted requires judgement,
in which the Group considers items which are significant either by
virtue of their size and/or nature, or that are non-recurring. The
same assessment is applied consistently to any reversals of prior
non-underlying items.
Underlying profit is not an IFRS measure and therefore not
directly comparable to other companies.
Below highlights the grouping in which non-underlying items have
been allocated and provides further detail on why such items have
been recognised within non-underlying items.
Total
Net adjustments
Cost Administrative Other finance before
of sales expenses income income/(costs) Tax Tax Total adjustments
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ---------- --------------- -------- ---------------- ------------- ------------------
Income recognised
in relation to
legal
disputes - - 30 - 30 (6) 24
Restructuring and
impairment
Restructuring
programmes (103) (14) 11 - (106) 7 (99)
Impairment of
non-financial
assets (281) - - - (281) 38 (243)
Total
restructuring
and impairment (384) (14) 11 - (387) 45 (342)
Property, finance,
pension and
acquisition
adjustments
ATM business rates
reimbursement 3 - - - 3 (1) 2
Property related
transactions (3) (3) (3) - (9) 2 (7)
Non-underlying
finance
and fair value
movements (29) - - (9) (38) 7 (31)
IAS 19 pension
income - 2 - 56 58 (11) 47
Acquisition
adjustments - (20) - - (20) 4 (16)
Total property,
finance,
pension and
acquisition
adjustments (29) (21) (3) 47 (6) 1 (5)
Tax adjustments
Over provision in
prior years - - - - - 2 2
Difference due to
change in
applicable
rate of deferred
tax - - - - - (5) (5)
---------------- ----- ------------------
Total adjustments (413) (35) 38 47 (363) 37 (326)
------------------- ---------- --------------- -------- ---------------- ------------- ----- ------------------
Income recognised in relation to legal disputes
In the prior year, agreements were reached in relation to
overcharges from payment card processing fees, which largely
reflect inter-bank "interchange fees". This led to net income of
GBP167 million being recognised. During the current period a
further agreement has been reached resulting in net income of GBP30
million being recognised.
Net cash of GBP30 million was received during the year.
Restructuring programmes
In the year ended 6 March 2021, the Group announced a
restructuring programme to accelerate the structural integration of
Sainsbury's and Argos and further simplify the Argos business;
create a new supply chain and logistics operating model, moving to
a single integrated supply chain and logistics network across
Sainsbury's and Argos; and further rationalise/repurpose the
Group's supermarkets and convenience estate. The programme also
considered the Group's Store Support Centre ways of working.
The programme is a multi-year activity and has continued into
the current year. Total cumulative costs to 4 March 2023 are
GBP(746) million split between GBP(640) million in the prior years
and GBP(106) million in the current period as detailed in the table
below. Total expected costs are still in the range of GBP900
million to GBP1 billion to March 2024, with the majority in the
period to March 2024.
(Costs)/gains recognised in the current year are as follows:
52 weeks to 52 weeks to
4 March 2023 5 March 2022
GBPm GBPm
---------------------------------------------- -------------- --------------
Write downs of property, plant and equipment
(a) (8) (6)
Write downs of leased assets (a) (21) (3)
Write downs of intangible assets (5) -
Closure provisions (b) 1 (24)
Accelerated depreciation of assets (c) (20) (33)
Redundancy provisions (d) (54) (40)
Consultancy costs (12) (18)
Gain on lease terminations (e) 2 9
Property profits (f) 11 12
Recognition of sub lease debtor - 11
---------------------------------------------- -------------- --------------
Total restructuring costs (106) (92)
---------------------------------------------- -------------- --------------
a) Write down of assets associated with Argos stores and IT
assets as a result of the overall restructuring programme to
accelerate the structural integration of Sainsbury's and Argos and
further simplify the Argos business.
b) Closure provisions relate to onerous contract costs,
dilapidations and strip out costs on leased sites that have been
identified for closure. Upon initial recognition of closure
provisions, management uses its best estimates of the relevant
costs to be incurred as well as expected closure dates. Business
rates on leased property where the Group no longer operates from
are recognised in the period they are incurred. The current year
includes amounts reversed in relation to sites no longer being
exited as part of the programme.
c) The remaining useful economic lives of corresponding sites
have been reassessed to align with closure dates, resulting in an
acceleration in depreciation of these assets. The existing
depreciation of these assets (depreciation that would have been
recognised absent of a closure decision) is recognised within
underlying expenses, whereas accelerated depreciation above this is
recognised within non-underlying expenses.
d) Redundancy costs are recognised as the plan is announced and
a valid expectation raised with the affected colleagues. The
current year charge relates to redundancies announced as part of
Argos store closures, depot closures, and the exit of operations in
Ireland.
e) Gains on lease terminations relate to sites impaired in the
prior year for which it has been negotiated to exit the leases
before the contractual end date. This includes the release of any
lease liabilities, as well as any closure provisions previously
recognised.
f) Property profits relate to profits recognised in the period
as sites previously impaired as part of the restructuring
programmes have been sold.
As the costs incurred facilitate future underlying cost savings,
it was considered whether it was appropriate to report these costs
within underlying profit. Whilst they arise from changes in the
Group's underlying operations, they can be separately identified,
are material in size and do not relate to ordinary in-year trading
activity. In addition, the areas being closed or restructured no
longer relate to the Group's remaining underlying operations and
their exclusion provides meaningful comparison between financial
years.
Impairment of non-financial assets
In addition to the above, in line with IAS 36 'Impairment of
Non-financial Assets', the Group is required to assess whether
there is any indication that an asset (or cash-generating unit
(CGU)) may be impaired.
Management considered whether the level of uncertainty within
the wider macroeconomic environment, including sustained increases
in the Bank of England gilt rates, represented an indicator of
impairment at the reporting date. It was determined that the
increase in discount rates was a significant impairment indicator
and therefore a full impairment review was undertaken.
A non-cash impairment charge of GBP281 million has been
recognised in the period and comprises the below amounts, and has
all been recognised within the Retail segment. Further details of
the impairment charge are included within note 15.
GBPm
---------------------------------------------- ------
Write downs of property, plant and equipment (141)
Write downs of leased assets (122)
Write downs of intangible assets (18)
Impairment of non-financial assets (281)
---------------------------------------------- ------
Property, finance, pension and acquisition adjustments
-- A further GBP3 million of ATM rates reimbursement income is
due to be received from the Valuation Office following the Supreme
Court's ruling that ATMs outside stores should not be assessed for
additional business rates on top of normal store rates. The total
cumulative amount recognised to 4 March 2023 is GBP45 million.
-- Property related transactions relate to the loss on disposal
of non-trading properties, which comprised of GBP(3) million in the
financial period, and GBP(6) million of costs relating to a
property transaction. These are excluded from underlying profit as
such profit is not related to the ongoing operating activities of
the Group.
-- Non-underlying finance movements for the financial period
comprised GBP(38) million for the Group. These include fair value
remeasurements on derivatives not in a hedging relationship and
lease interest on impaired non-trading sites, including site
closures. The fair value movements are driven by external market
factors and can significantly fluctuate year-on-year. They are
therefore excluded to ensure consistency between periods. Lease
interest on impaired, non-trading sites is excluded as they do not
contribute to the operating activities of the Group. Included
within cost of sales is GBP(29) million in relation to unfavourable
movements on long-term, fixed price power purchase arrangements
(PPAs) with independent producers. These are accounted for as
derivative financial instruments, however are not designated in
hedging relationships, therefore gains and losses are recognised in
the income statement. Decreases in electricity forward prices in
the year have led to losses on the related derivative financial
instruments. Non-underlying finance and fair value movements also
includes lease interest on impaired non-trading sites, including
site closures. Lease interest on impaired, non-trading sites is
excluded as they do not contribute to the operating activities of
the Group. The remaining movements of GBP(9) million within finance
income and costs are analysed further in note 8.
-- Defined benefit pension interest and expenses comprises
pension finance income of GBP57 million, settlement credit of GBP8
million and scheme expenses of GBP(6) million (see note 20).
Although a recurring item, the Group has chosen to exclude net
retirement benefit income and costs from underlying profit as,
following closure of the defined benefit scheme to future accrual,
it is not part of the ongoing operating activities of the Group and
its exclusion is consistent with how the Directors assess the
performance of the business.
-- Acquisition adjustments of GBP(20) million reflect the unwind
of non-cash fair value adjustments arising from Home Retail Group
and Nectar UK acquisitions. The Group would not normally recognise
these as assets outside of a business combination. Therefore the
unwinds are classified as non-underlying and are recognised as
follows:
52 weeks to 4 March 52 weeks to 5 March
2023 2022
--------------- ------------------------ ------------------------
Argos Nectar Total Argos Nectar Total
Group Group
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------ ------- ------- ------ ------- -------
Cost of sales 1 - 1 - - -
Depreciation 1 - 1 3 - 3
Amortisation (18) (4) (22) (18) (5) (23)
(16) (4) (20) (15) (5) (20)
--------------- ------ ------- ------- ------ ------- -------
Comparative information
Cost Administrative Other Net Total Tax Total
of expenses income finance adjustments adjustments
sales income/(costs) before
tax
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- --------------- -------- ---------------- ----- -------------
Income recognised in
relation
to legal disputes - 13 167 - 180 (35) 145
Restructuring and
integration
Restructuring programmes (69) (35) 12 - (92) 17 (75)
Financial Services
transition
and other - (11) - - (11) 2 (9)
--------------------------- ------- --------------- -------- ---------------- -----
Total restructuring and
integration (69) (46) 12 - (103) 19 (84)
Software as a service
accounting
adjustment - (21) - - (21) 4 (17)
Property, finance, pension
and acquisition
adjustments
ATM business rates
reimbursement 2 - - - 2 - 2
Profit on disposal of
properties - - 7 - 7 - 7
Non-underlying finance and
fair value movements 76 - - (8) 68 (13) 55
IAS 19 pension expenses - (4) - 15 11 (2) 9
Acquisition adjustments - (20) - - (20) 4 (16)
Total property, finance,
pension
and acquisition
adjustments 78 (24) 7 7 68 (11) 57
Tax adjustments
Over provision in prior
years - - - - - (2) (2)
Difference due to change
in
applicable rate of
deferred
tax - - - - - 9 9
Other tax adjustments - - - - - (7) (7)
Total adjustments 9 (78) 186 7 124 (23) 101
--------------------------- ------- --------------- -------- ---------------- ------------- ----- -------------
Cash flow statement
The table below shows the impact of non-underlying items on the
Group cash flow statement:
52 weeks 52 weeks
to 4 March to 5 March
2023 2022
GBPm GBPm
------------------------------------------ ------------ ------------
Cash flows from operating activities
IAS 19 pension expenses (7) (7)
Financial Services transition and other - (13)
Restructuring programmes (50) (114)
Income recognised in relation to legal
disputes 30 93
ATM rates reimbursement 3 14
Property related transactions (6) -
Cash used in operating activities (30) (27)
Cash flows from investing activities
Proceeds from property disposals(1) 29 46
Cash generated from investing activities 29 46
Net cash flows (1) 19
------------------------------------------- ------------ ------------
(1) GBP26 million of the current period proceeds from property
disposals are a result of restructuring programmes (2022: GBP19
million).
5 Revenue
2023 2022
GBPm GBPm
--------------------------------------------------- ------- -------
Grocery and General Merchandise & Clothing (GM&C) 25,993 25,440
Fuel 4,967 4,023
Total retail sales 30,960 29,463
Financial Services interest receivable 394 322
Financial Services fees and commission 137 110
Total Financial Services income 531 432
Total revenue 31,491 29,895
--------------------------------------------------- ------- -------
6 Segment reporting
The Group's operating segments have been determined based on the
information regularly provided to the Chief Operating Decision
Maker (CODM), which has been determined to be the Group Operating
Board, which is used to make optimal decisions on the allocation of
resources and assess performance.
The CODM is presented information for the following operating
segments:
- Retail - Food
- Retail - General Merchandise and Clothing
- Financial Services
The CODM uses underlying profit before tax as the key measure of
segmental performance as it represents the ongoing trading
performance with additional insight into year-on-year performance
that is more comparable over time. The use of underlying profit
before tax aims to provide parity and transparency between users of
the financial statements and the CODM in assessing the core
performance of the business and performance of management.
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.
Segment revenue presents a disaggregation of revenue from
customers consistent with the Group's primary revenue streams.
Income statement and balance sheet
Retail Financial Group
Services
52 weeks to 4 March 2023 GBPm GBPm GBPm
--------------------------------------------- --------- ---------- ---------
Segment revenue
Retail sales to external customers 30,960 - 30,960
Financial Services to external customers - 531 531
Revenue 30,960 531 31,491
--------------------------------------------- --------- ---------- ---------
Underlying operating profit 926 46 972
Underlying finance income 18 - 18
Underlying finance costs (300) - (300)
Underlying profit before tax 644 46 690
Non-underlying expense (note 4) (363)
Profit before tax 327
Income tax expense (note 9) (120)
Profit for the financial year 207
--------------------------------------------- --------- ----------
Assets 18,925 7,231 26,156
Investment in joint ventures and associates 2 - 2
Segment assets 18,927 7,231 26,158
Segment liabilities (12,584) (6,321) (18,905)
--------------------------------------------- --------- ----------
Other segment items
Additions to non-current assets
Property, plant and equipment 532 2 534
Intangible assets 194 19 213
Right-of-use assets 398 - 398
Depreciation expense(1)
Property, plant and equipment 565 1 566
Right-of-use assets 469 1 470
Amortisation expense(2)
Intangible assets 141 31 172
Impairment of non-financial assets 315 - 315
Impairment loss on financial assets 2 76 78
Share based payments 54 5 59
--------------------------------------------- --------- ---------- ---------
1. Depreciation within the Retail segment includes a GBP(1)
million credit in relation to the unwind of fair value adjustments
recognised on acquisition of HRG.
2. Amortisation within the Retail segment includes a GBP22
million charge in relation to the unwind of fair value adjustments
recognised on acquisition of HRG and Nectar UK.
Retail Financial Group
Services
52 weeks to 5 March 2022 GBPm GBPm GBPm
--------------------------------------------- --------- ---------- ---------
Segment revenue
Retail sales to external customers 29,463 - 29,463
Financial Services to external customers - 432 432
Revenue 29,463 432 29,895
--------------------------------------------- --------- ---------- ---------
Underlying operating profit 1,001 38 1,039
Underlying finance income 3 - 3
Underlying finance costs (312) - (312)
Underlying profit before tax 692 38 730
Non-underlying expense 124
Profit before tax 854
Income tax expense (177)
Profit for the financial year 677
--------------------------------------------- --------- ----------
Assets 20,368 6,541 26,909
Investment in joint ventures and associates 3 - 3
Segment assets 20,371 6,541 26,912
Segment liabilities (12,870) (5,619) (18,489)
--------------------------------------------- --------- ----------
Other segment items
Additions to non-current assets
Property, plant and equipment 417 - 417
Intangible assets 229 49 278
Right-of-use assets 1,294 - 1,294
Depreciation expense(1)
Property, plant and equipment 590 1 591
Right-of-use assets 477 1 478
Amortisation expense(2)
Intangible assets 130 21 151
Impairment of non-financial assets 8 1 9
Impairment (reversal)/loss on financial
assets (4) 19 15
Share based payments 53 5 58
--------------------------------------------- --------- ---------- ---------
1. Depreciation within the Retail segment includes a GBP(3)
million credit in relation to the unwind of fair value adjustments
recognised on acquisition of HRG.
2. Amortisation within the Retail segment includes a GBP23
million charge in relation to the unwind of fair value adjustments
recognised on acquisition of HRG and Nectar UK.
Geographical segments
The Group trades predominantly in the UK and the Republic of
Ireland and consequently the majority of revenues, capital
expenditure and segment net assets arise there. The profits,
turnover and assets of the businesses in the Republic of Ireland
are not material to the Group.
Cash flow
52 weeks to 4 March 52 weeks to 5 March 2022
2023
Retail Financial Group Retail Financial Group
Services Services
APM
reference
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- --- ------------------------ ------------------------------- ---------- ------------------------------------------- ---------------------------- ---------------------------
Profit before
tax 284 43 327 833 21 854
Net finance
costs 235 - 235 304 (2) 302
-------------------------- ------------------------ ------------------------------- ---------- ------------------------------------------- ---------------------------- ---------------------------
Operating profit 519 43 562 1,137 19 1,156
Adjustments
for:
Depreciation
and amortisation
expense 1,175 33 1,208 1,197 23 1,220
Net impairment 315 - 315 8 1 9
charge on property,
plant and equipment,
right-of-use
assets and
intangible
assets
Financial Services - 76 76 - 19 19
movement in
loss allowance
for loans and
advances to
customers
Profit on sale (15) - (15) (6) - (6)
of non-current
assets and early
termination
of leases
Non-underlying
fair value movements 29 - 29 (76) - (76)
Share-based
payments expense 54 5 59 53 5 58
Non-cash defined (2) - (2) 4 - 4
benefit scheme
expenses
Cash contributions (44) - (44) (71) - (71)
to defined benefit
scheme
Operating cash
flows before
changes in working
capital 2,031 157 2,188 2,246 67 2,313
Changes in
working capital
Movements in
working capital 185 231 416 (306) (646) (952)
Cash generated
from operations 2,216 388 2,604 1,940 (579) 1,361
Interest paid a (307) (9) (316) (319) (10) (329)
Corporation
tax paid (99) (4) (103) (23) - (23)
Net cash generated
from/(used in)
operating activities 1,810 375 2,185 1,598 (589) 1,009
-------------------------- ------------------------ ------------------------------- ---------- ------------------------------------------- ---------------------------- ---------------------------
Cash flows
from investing
activities
Purchase of
property, plant
and equipment (523) (2) (525) (416) - (416)
Initial direct (16) - (16) (3) - (3)
costs on new
leases
Purchase of
intangible assets (194) (19) (213) (229) (49) (278)
Proceeds from
disposal of
property, plant
and equipment 29 - 29 46 - 46
Dividends and e 51 (50) 1 2 - 2
distributions
received/(paid)
Net cash used
in investing
activities (653) (71) (724) (600) (49) (649)
-------------------------- ------------------------ ------------------------------- ---------- ------------------------------------------- ---------------------------- ---------------------------
Cash flows
from financing
activities
Proceeds from d 13 - 13 21 - 21
issuance of
ordinary shares
Repayment of
borrowings c (40) (55) (95) (248) - (248)
Repayment of
perpetual capital
securities c - - - (8) - (8)
Purchase of
own shares d (45) - (45) (48) - (48)
Capital repayment
of lease
obligations b (512) (2) (514) (491) (2) (493)
Dividends paid
on ordinary
shares (319) - (319) (238) - (238)
Dividends paid
on perpetual
securities a - - - (4) - (4)
Net cash used
in financing
activities (903) (57) (960) (1,016) (2) (1,018)
-------------------------- ------------------------ ------------------------------- ---------- ------------------------------------------- ---------------------------- ---------------------------
Net increase/(decrease)
in cash and
cash equivalents 254 247 501 (18) (640) (658)
-------------------------- ------------------------ ------------------------------- ---------- ------------------------------------------- ---------------------------- ---------------------------
7 Supplier arrangements
Supplier incentives, rebates and discounts, collectively known
as 'supplier arrangements', represent a material deduction to cost
of sales and directly affect the Group's reported margin.
Income is recognised when earned by the Group when all
obligations per the terms of the contract have been satisfied. Any
supplier arrangements which are linked to inventory purchases are
included within the cost of the related inventory, and therefore
recognised within cost of sales once the inventory is sold. Unpaid
amounts relating to supplier arrangements are recognised within
trade and other receivables, unless there is a legal right of
offset, in which case it is recognised within trade and other
payables. Amounts which have been invoiced at the balance sheet
date are categorised as supplier arrangements due and those not yet
invoiced are categorised as accrued supplier arrangements.
The types of supplier arrangements applicable to the Group are
as follows:
-- Discounts and supplier incentives - these represent the
majority of all supplier arrangements and are linked to individual
unit sales. The incentive is typically based on an agreed sum per
item sold on promotion for a period and therefore is considered
part of the purchase price of that product.
-- 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 Group's financial year. The rebate amount
is linked to pre-agreed targets such as sales volumes.
-- Marketing and advertising income - advertising income from
suppliers through the Group's subsidiary Nectar 360 Services LLP
and online marketing and advertising campaigns within Argos.
Amounts recognised in the income statement during the year for
fixed amounts, volume-based rebates and marketing and advertising
income are shown below. Discounts and supplier incentives are not
shown as they are deemed to be part of the cost price of
inventory.
2023 2022
GBPm GBPm
---------------------------------- ----- ---------------
Fixed amounts 192 208
Supplier rebates 94 94
Marketing and advertising income 97 79
Total supplier arrangements 383 381
----------------------------------- ----- ---------------
Of the above amounts, the following was outstanding and held on
the balance sheet at the period-end:
2023 2022
GBPm GBPm
---------------------------------- ----- -----------------
Within inventory (4) (4)
Within current trade receivables
Supplier arrangements due 45 39
Accrued supplier arrangements 43 37
Within current trade payables
Supplier arrangements due 49 47
Accrued supplier arrangements 2 2
Total supplier arrangements 135 121
----------------------------------- ----- -----------------
8 Finance income and finance costs
52 weeks to 4 March 52 weeks to 5 March
2023 2022
----------------------------------- ------------------------------------ ------------------------------------
Underlying Non-Underlying Total Underlying Non-Underlying Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----------- --------------- ------ ----------- --------------- ------
Interest on bank deposits and
other financial assets 16 - 16 1 - 1
Fair value measurements - - - - 2 2
IAS 19 pension financing income - 56 56 - 15 15
Finance income on net investment
in leases 2 - 2 2 - 2
Finance Income 18 56 74 3 17 20
----------------------------------- ----------- --------------- ------ ----------- --------------- ------
Secured borrowings (41) - (41) (40) - (40)
Unsecured borrowings (2) - (2) (2) - (2)
Lease liabilities (258) (9) (267) (271) (10) (281)
Provisions - amortisation of
discount - - - (1) - (1)
Interest capitalised - qualifying
assets 1 - 1 2 - 2
Finance costs (300) (9) (309) (312) (10) (322)
----------------------------------- ----------- --------------- ------ ----------- --------------- ------
9 Taxation
52 weeks to 52 weeks to
4 March 2023 5 March 2022
GBPm GBPm
--------------------------------------------------- -------------- --------------
Current year UK tax 105 131
Current year overseas tax 3 6
Over-provision in prior years 2 5
Total current tax expense 110 142
Origination and reversal of temporary differences 9 52
Under/(over) provision in prior years 3 (35)
Adjustment from change in applicable rate
of deferred tax (2) 23
Derecognition of capital losses - (5)
Total deferred tax expense 10 35
Total income tax expense in income statement 120 177
--------------------------------------------------- -------------- --------------
Analysed as:
Underlying tax 157 154
Non-underlying tax (37) 23
Total income tax expense in income statement 120 177
--------------------------------------------------- -------------- --------------
Underlying tax rate 22.8% 21.1%
Effective tax rate 36.7% 20.7%
--------------------------------------------------- -------------- --------------
10 Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders of J Sainsbury plc by the
weighted average number of Ordinary shares in issue during the
year, excluding own shares held by the J Sainsbury Employee Share
Ownership Trust (ESOT).
Diluted earnings per share amounts are calculated by dividing
the profit attributable to ordinary shareholders of J Sainsbury plc
by the weighted average number of Ordinary shares in issue during
the year, excluding own shares held, and adjusted for the effects
of potentially dilutive shares. The dilutive impact is calculated
as the weighted average of all potentially diluted ordinary shares.
These represent share options granted by the Group, including
performance-based options, where the scheme to date performance is
deemed to have been earned.
For the comparative period, the weighted average number of
dilutive shares includes the number of shares that would have been
issued if all perpetual subordinated convertible bonds are assumed
to be converted at the beginning of the period.
In addition, underlying basic earnings per share and underlying
diluted earnings per share are presented to reflect the underlying
profit attributable to ordinary shareholders of J Sainsbury plc and
the underlying trading performance of the Group. In calculating the
APMs, the profit attributable is adjusted for items considered
non-underlying as defined in note 4. No adjustments have been made
to the weighted average number of Ordinary or potentially dilutive
shares which continue to be determined in accordance with IAS.
All operations are continuing for the periods presented.
2023 2022
million million
------------------------------------------------------------ ----------- -----------
Weighted average number of shares in issue 2,312.6 2,271.8
Weighted average number of dilutive share options 39.6 39.6
Weighted average number of dilutive subordinated perpetual
convertible bonds - 39.6
Total number of shares for calculating diluted earnings
per share 2,352.2 2,351.0
------------------------------------------------------------ ----------- -----------
GBPm GBPm
------------------------------------------------------------ ----------- -----------
Profit for the financial period attributable to ordinary
shareholders 207 677
------------------------------------------------------------ ----------- -----------
Diluted earnings for calculating diluted earnings per
share 207 677
------------------------------------------------------------ ----------- -----------
Profit for the financial period attributable to ordinary
shareholders of the parent 207 677
Adjusted for non-underlying items (note 4) 363 (124)
Tax on non-underlying items (note 4) (37) 23
Underlying profit after tax attributable to ordinary
shareholders of the parent 533 576
Diluted underlying profit after tax attributable to
ordinary shareholders of the parent 533 576
------------------------------------------------------------ ----------- -----------
Pence Pence
per share per share
------------------------------------------------------------ ----------- -----------
Basic earnings 9.0 29.8
Diluted earnings 8.8 28.8
Underlying basic earnings 23.0 25.4
Underlying diluted earnings 22.7 24.5
------------------------------------------------------------ ----------- -----------
11 Dividends
2023 2022 2023 2022
pence pence
per per
share share GBPm GBPm
------------------------------------------------- ------- ------- ----- -----
Amounts recognised as distributions to ordinary
shareholders in the year:
Final dividend of prior financial year 9.9 7.4 229 164
Interim dividend of current financial year 3.9 3.2 90 74
13.8 10.6 319 238
------------------------------------------------- ------- ------- ----- -----
Proposed final dividend at financial year
end 9.2 9.9 213 230
------------------------------------------------- ------- ------- ----- -----
The proposed final dividend was approved by the Board on 26
April 2023 and is subject to shareholders' approval at the Annual
General Meeting. If approved, it will be paid on 14 July 2023 to
shareholders on the register as at 9 June 2023. No amount for the
proposed final dividend has been recognised at the balance sheet
date.
Distributions to shareholders will have no tax consequences to
the Group.
12 Property, plant and equipment
Land and Fixtures
buildings and equipment Total
GBPm GBPm GBPm
----------------------------------------- ----------- --------------- -------
Cost
At 6 March 2022 9,693 5,288 14,981
Additions 250 284 534
Disposals (71) (540) (611)
Transfer to assets held for sale (7) (3) (10)
----------------------------------------- ----------- --------------- -------
At 4 March 2023 9,865 5,029 14,894
----------------------------------------- ----------- --------------- -------
Accumulated depreciation and impairment
At 6 March 2022 2,917 3,662 6,579
Depreciation expense for the year 184 382 566
Impairment loss for the year 110 39 149
Disposals (56) (540) (596)
Transfer to assets held for sale (2) (3) (5)
----------------------------------------- ----------- --------------- -------
At 4 March 2023 3,153 3,540 6,693
----------------------------------------- ----------- --------------- -------
Net book value at 4 March 2023 6,712 1,489 8,201
----------------------------------------- ----------- --------------- -------
Capital work-in-progress included above 206 314 520
----------------------------------------- ----------- --------------- -------
Cost
At 7 March 2021 9,655 5,288 14,943
Additions 87 330 417
Disposals (40) (330) (370)
Transfer to assets held for sale (9) - (9)
----------------------------------------- ------ ------ -------
At 5 March 2022 9,693 5,288 14,981
----------------------------------------- ------ ------ -------
Accumulated depreciation and impairment
At 7 March 2021 2,793 3,563 6,356
Depreciation expense for the year 170 421 591
Impairment loss for the year - 6 6
Disposals (37) (328) (365)
Transfer to assets held for sale (9) - (9)
----------------------------------------- ------ ------ -------
At 5 March 2022 2,917 3,662 6,579
----------------------------------------- ------ ------ -------
Net book value at 5 March 2022 6,776 1,626 8,402
----------------------------------------- ------ ------ -------
Capital work-in-progress included above 103 314 417
----------------------------------------- ------ ------ -------
13 Leases
Group as lessee
The Group's lease portfolio is principally comprised of property
leases of land and buildings in relation to stores, distribution
centres and support offices, but also includes other assets such as
motor vehicles. The leases have varying terms and often include
break clauses or options to renew beyond the non-cancellable
periods.
Set out below are the carrying amounts of right-of-use assets
recognised and the movements during the period:
Land
and buildings Equipment Total
Net book value GBPm GBPm GBPm
--------------------------------- --------------- ---------- ------
At 6 March 2022 5,266 294 5,560
New leases and modifications(1) 283 115 398
Depreciation charge (375) (95) (470)
Impairment charge (142) (1) (143)
At 4 March 2023 5,032 313 5,345
--------------------------------- --------------- ---------- ------
1 Includes new leases, terminations, modifications and
reassessments
At 7 March 2021 4,414 333 4,747
New leases and modifications(1) 1,244 50 1,294
Depreciation charge (389) (89) (478)
Impairment charge (3) - (3)
At 5 March 2022 5,266 294 5,560
--------------------------------- ------ ----- ------
1Includes new leases, terminations, modifications and
reassessments
Set out below are the carrying amounts of lease liabilities and
the movements during the period:
2023 2022
GBPm GBPm
---------------------------------- ------ ------
At 6 March 2022 and 7 March 2021 6,621 5,834
New leases and modifications 382 1,280
Interest expense 267 281
Payments (781) (774)
At 4 March 2023 and 5 March 2022 6,489 6,621
---------------------------------- ------ ------
Current 1,533 526
Non-current 4,956 6,095
---------------------------------- ------ ------
Maturity analysis
2023 2022
GBPm GBPm
-------------------------------------------------------- ------- -------
Contractual undiscounted cash flows
Less than one year 1,798 773
One to two years 680 1,683
Two to three years 632 627
Three to four years 591 575
Four to five years 541 542
Total less than five years 4,242 4,200
Five to ten years 2,473 2,416
Ten to fifteen years 1,981 2,005
More than fifteen years 3,505 3,338
Total undiscounted lease liability 12,201 11,959
-------------------------------------------------------- ------- -------
Lease liability included in the statement of financial
position 6,489 6,621
-------------------------------------------------------- ------- -------
Current 1,533 526
Non-current 4,956 6,095
-------------------------------------------------------- ------- -------
The Group presents additions to lease liabilities and
right-of-use assets in line with the disclosure requirements of
IFRS 16 'Leases'. In doing so, additions to right-of-use assets and
lease liabilities above include the net impact of new leases,
terminations, modifications, and reassessments. In the prior year,
the Group exercised purchase options on 21 leased supermarkets held
by a property investment pool in which the Group holds an interest.
The purchase options were first included within the lease liability
in the prior financial year when the Group exercised them. During
the current year, the Group reached an agreement on an acquisition
price on these 21 supermarkets and thus this acquisition price was
used to remeasure the lease liabilities.
14 Intangible assets
Computer Acquired Customer
Goodwill software brands relationships Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- ---------- --------- --------------- ------
Cost
At 6 March 2022 392 1,077 229 32 1,730
Additions - 213 - - 213
Disposals (1) (185) - - (186)
------------------------------ --------- ---------- --------- --------------- ------
At 4 March 2023 391 1,105 229 32 1,757
------------------------------ --------- ---------- --------- --------------- ------
Accumulated amortisation and
impairment
------------------------------
At 6 March 2022 26 521 147 30 724
Amortisation expense for the
year - 150 20 2 172
Impairment loss for the year 14 9 - - 23
Disposals (1) (185) - - (186)
------------------------------ --------- ---------- --------- --------------- ------
At 4 March 2023 39 495 167 32 733
------------------------------ --------- ---------- --------- --------------- ------
Net book value at 4 March
2023 352 610 62 - 1,024
------------------------------ --------- ---------- --------- --------------- ------
Cost
At 7 March 2021 394 899 229 32 1,554
Additions - 278 - - 278
Disposals(1) (2) (100) - - (102)
------------------------------ --------- ---------- --------- --------------- ------
At 5 March 2022 392 1,077 229 32 1,730
------------------------------ --------- ---------- --------- --------------- ------
Accumulated depreciation and
impairment
At 7 March 2021 28 457 127 28 640
Amortisation expense for the
year - 129 20 2 151
Disposals (2) (65) - - (67)
------------------------------ --------- ---------- --------- --------------- ------
At 5 March 2022 26 521 147 30 724
------------------------------ --------- ---------- --------- --------------- ------
Net book value at 5 March
2022 366 556 82 2 1,006
------------------------------ --------- ---------- --------- --------------- ------
1 Disposals included write offs of software-as-a-service
balances.
15 Impairment of non-financial assets
Goodwill
Goodwill is not amortised but tested for impairment annually or
more frequently where there is an indication that the asset may be
impaired.
At the acquisition date goodwill is allocated to the CGU or
group of CGUs within the Retail or Financial Services segments that
are expected to benefit from the combination.
Impairment is assessed by measuring the recoverable amount of
the CGU, calculated as the higher of fair value less cost to
dispose and value-in-use, at the level at which this is monitored
by management. Where the carrying value of the CGU exceeds the
recoverable amount an impairment loss is recognised in the income
statement. The impairment charge is allocated first against
goodwill and then pro-rata over other assets within the CGU by
reference to the carrying amount of each remaining asset in the
unit. Impairment losses recognised for goodwill are not
subsequently reversed.
Property, plant and equipment, right-of-use assets, and finite
lived intangible assets
Property, plant and equipment (PPE), right-of-use assets, and
finite-lived intangible assets are assessed on an ongoing basis to
determine whether there is an indication that the net book value is
no longer supportable. If any such indication exists, the
recoverable amount of the asset, being the higher of its fair value
less costs to dispose and its value-in-use, is estimated in order
to determine the extent of the impairment loss. Where it is not
possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the CGU to which the
asset belongs.
If the recoverable amount of an asset or CGU is estimated to be
less than its carrying amount, the carrying amount of the asset or
CGU is reduced to its recoverable amount and an impairment loss is
recognised immediately in the income statement.
Where there has been a change in the estimates used to determine
the recoverable amount and an impairment loss subsequently
reverses, the carrying amount of the asset or CGU is increased to
the revised estimate of its recoverable amount, not to exceed the
carrying amount that would have been determined had no impairment
loss been recognised for the asset or CGU in prior years. An
impairment loss reversal is recognised in the income statement.
Identification of cash generating units
Cash generating units are deemed the smallest group of assets
that independently generate cash inflows and are independent of the
cash flows generated by other assets. The CGUs identified within
the respective reportable operating segments are as follows:
Retail
Cash generating units are deemed to be corporate level business
units, trading stores, store pipeline development sites or in
certain cases for Argos, a cluster of stores.
PPE, intangible assets and right-of-use assets are allocated to
the store CGU they are associated with. For non-store assets,
including depots and IT assets, these are allocated to store CGUs
where it can be done on a reasonable and consistent basis,
otherwise these are allocated to the CGU corporate level to which
they relate.
Goodwill recognised on acquisition of retail chains of stores
(Bells and Jacksons) is allocated to its respective store CGUs.
Goodwill arising on the purchase of Home Retail Group is allocated
to the Home Retail Group CGU. Nectar is a separate CGU.
Financial Services
Cash generating units are deemed to be each respective product
or product group that is capable of generating cash flows
independent of other products. Non-product assets are reviewed
separately as collective CGUs with the products that they
support.
Goodwill arising on the purchase of Sainsbury's Bank plc is
allocated to the Financial Services CGU.
Identification of a triggering event
Management considered whether the level of uncertainty within
the wider macroeconomic environment, including sustained increases
in the Bank of England gilt rates, represented an indicator of
impairment at the reporting date. It was determined that the
increase in discount rates was a significant impairment indicator
and therefore a full impairment review was undertaken.
Approach and assumptions
The recoverable amount for CGUs have been determined based on
the fair value less cost to dispose and a value-in-use calculation
which is based upon the cash flows expected to be generated,
derived from the latest budget and forecast data which are reviewed
by the Board. Budget and forecast data reflects both past
experience and future expectations of market conditions.
A vacant possession valuation basis is used to approximate the
fair value less costs to dispose. This is not considered to be a
significant accounting judgement.
The key assumptions in measuring the value-in-use are as
follows:
Assumption Retail Segment Financial Services Segment
Cash flow -Derived from the Board approved -Derived from the Board approved
years / cash flow projections for four cash flow projections for
assumptions years and then for owned stores, four years and then extrapolated
extrapolated into perpetuity with over the remaining useful
an assumed growth rate of 2.0%. lives of the assets being
-For leased stores, cash flows tested for impairment with
are taken to lease end with an no assumed growth rate.
assumed growth rate of 2.0% beyond
the four-year forecast period.
-In the case of properties identified
for closure, cash flow years relate
to the remaining period that the
store will trade for.
-Online grocery sales are fulfilled
by individual stores and therefore
these cash flows are allocated
to the individual store CGUs which
fulfil the online sales. In Argos,
online GM&C sales for Click &
Collect are allocated to the individual
store CGUs which fulfil the online
sales.
----------------------------------------- ----------------------------------
Discount -A post-tax discount rate representing -A post-tax discount rate
rate the Retail segment's weighted representing the Financial
average cost of capital (WACC), Services segment's weighted
subsequently grossed up to a pre-tax average cost of capital (WACC),
rate of 9.1%. subsequently grossed up to
a pre-tax rate of 15.1%.
-The post-tax WACC has been calculated
using the capital asset pricing -The post-tax WACC has been
model, the inputs of which include calculated using a combination
a 20-year average risk-free rate of adjusted market analysis
for the UK, a UK equity risk premium, and the actual cost of debt
levered debt premium and risk on Tier 2 capital instruments.
adjustment and an average beta
for the Group. -The discount rate is applied
consistently to all individual
-The discount rate is applied product CGUs and the collective
consistently to all individual CGUs which support the products.
store CGUs and the Group of CGUs
supported by Sainsbury's or Argos
stores.
----------------------------------------- ----------------------------------
For store pipeline development sites, where there are plans to
develop the store, the carrying value of the asset is compared with
its value-in-use using a methodology consistent with the store CGU
approach described above. Future cash flows include the estimated
costs to completion. For sites where there is no plan to develop a
store, the recoverable amount is based on its fair value less costs
to dispose.
Climate change considerations
The Group's scenario analysis performed as part of the Task
Force on Climate-Related Financial Disclosures (TCFD) report
identified that the most material climate-related risks were heat
events, labour capacity, drought, flooding, regulation and changes
in consumer preferences. Produce, Cotton, Coffee, Tea, Clothing,
Meat, Fish and Poultry (MFP), and Fuel were the product categories
most exposed to the climate-related risks.
The most material transitional climate risk was in fuel. As
such, the Group's current year impairment review included cashflow
assumptions in relation to the expected future revenue loss within
the fuel category. As such, the impairment conclusions reached have
incorporated the expected climate-related risks associated with
fuel sales.
Other than fuel, changes in consumer preferences in MFP was
identified as the risk most vulnerable to transitional risks and
modelling this risk in isolation to 2030 in a 1.5degC scenario
calculated a GBP300m to GBP350m loss in revenue. The Group has
considered what the impact that this revenue loss (if unmitigated)
could have on the carrying value of the Group's store assets. In
doing so, a corresponding reduction in margin and therefore cash
flows has been modelled. Immaterial impairment risks were
identified. As such, all other climate change related risks do not
have a material impact on the Group's impairment
considerations.
Output and sensitivities
Impairment charges recognised in the Retail Segment relate to
both sites identified for closure as part of the restructuring
programme as well as impairments on stores that will continue to
trade but for which the cash flows no longer support the carrying
amount of the assets. There were no charges recognised in the
Financial Services Segment. The overall charges are as follows:
Restructuring
programme Impairments Total
GBPm GBPm GBPm
--------------------------------------------- -------------- ------------ ------
Impairment of property, plant and equipment 8 141 149
Impairment of leased assets 21 122 143
Impairment of intangible assets 5 18 23
34 281 315
--------------------------------------------- -------------- ------------ ------
Of the above assumptions, the value-in-use calculations are most
sensitive to changes in the discount rate, forecast cash flows, and
the long-term growth rate used beyond the forecast four-year
forecast period. The table below sets out the key sensitivities
performed on the value-in-use models and considered the reasonable
possible changes in these assumptions. The impact of changing one
sensitivity does not have a consequential impact on other
sensitivities.
Sensitivity area Sensitivities Increase / (decrease) in
impairment
GBPm
------------------
Discount rate Increase of 2% 163
-----------------------
Decrease of 2% (105)
------------------------------------------ -------------------------
Cash flows Increase of 10% (77)
-----------------------
Decrease of 10% 57
------------------------------------------ -------------------------
Long-term growth rate Increase of 0.5% (30)
-----------------------
Decrease of 1% 58
------------------------------------------ -------------------------
Goodwill
Goodwill was separately tested at the year-end as required under
IAS 36. Goodwill comprises the following:
2023 2022
GBPm GBPm
------------------------- ----- -----
Jacksons Stores Limited 18 28
Home Retail Group 119 119
Sainsbury's Bank plc 45 45
Nectar 147 147
Bells Stores Limited 5 9
Other 18 18
------------------------- ----- -----
352 366
------------------------- ----- -----
Value-in-use calculations used to derive the recoverable amount
of the CGU to which the respective goodwill has been allocated are
based on the following key assumptions:
Cash flow Cash flows relating to Home Retail Group, Sainsbury's Bank
years / assumptions plc and Nectar are derived from Board approved cash flow
projections for four years and then extrapolated into perpetuity
with an assumed growth rate of 2.0%.
Cash flows relating to goodwill attributable to stores are
consistent with the assumptions detailed above.
Discount rate A post-tax discount rate representing the Retail segment's
weighted average cost of capital (WACC), as detailed above,
has been used for all goodwill balances, except Sainsbury's
Bank plc where the post-tax discount rate representing the
Financial Services segment's WACC, as detailed above, has
been used.
------------------------------------------------------------------
Jackson Stores Limited and Bells Stores Limited goodwill
balances are allocated to individual store CGUs to which they
relate, within the Retail segment detailed above. Home Retail Group
goodwill is allocated to the collective Argos store and non-store
CGUs. Sainsbury's Bank plc goodwill is allocated to the Financial
Services collective CGUs, as noted above. Nectar is a separate
CGU.
Goodwill impairments of GBP14 million were recognised in the
year as part of the year-end impairment review, detailed above.
This impairment was in relation to the store CGUs to which Jacksons
Stores Limited and Bells Stores Limited goodwill amounts are
allocated to. There was no impairment identified at the collective
CGU level for Argos nor Financial Services, thus there was nil
impairment in the Home Retail Group or Sainsbury's Bank plc
goodwill amounts. No impairments were recognised to Nectar
goodwill.
Sensitivity analysis on the impairment tests for each group of
cash-generating units to which goodwill has been allocated has been
performed. The valuations indicate sufficient headroom such that a
reasonably possible change to key assumptions would not result in
any impairment of goodwill.
While goodwill impairments of GBP14 million were noted on
certain store CGUs to which Jacksons Stores Limited and Bells
Stores Limited goodwill amounts are allocated to, any reasonable
possible changes in assumptions would not lead to changes in this
impairment amount of more or less than GBP2 million.
The headroom disclosed below for goodwill in Jacksons Stores
Limited and Bells Stores Limited relates to all store CGUs to which
these goodwill amounts are allocated. Overall, management are
satisfied that there are no reasonable possible changes to
assumptions that would lead to further impairments in Jacksons
Stores Limited, or impairments in any other goodwill.
Sensitivities (revised headroom)
------------------------------------------
Discount rate Cash flows
-------------------- --------------------
Carrying Decrease Increase Decrease Increase
amount Headroom of 2% of 2% of 10% of 10%
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----------------- --------- --------- --------- --------- ---------
Jacksons Stores Limited 18 13 20 9 10 15
Home Retail Group 119 1,257 2,072 803 1,050 1,464
Sainsbury's Bank
plc 45 418 525 338 358 477
Nectar UK 147 1,165 1,692 871 1,031 1,300
Bells Stores Limited 5 1 1 - - 1
Other 18 21 41 10 16 27
---------------------------- ------- --------- --------- --------- --------- ---------
16 Provisions
Property provisions
Where the Group no longer operates from a leased property,
onerous property contract provisions are recognised for the least
net cost of exiting from the contract. The amounts provided are
based on the Group's best estimates of the likely committed
outflows and site closure dates. These provisions do not include
rent in accordance with IFRS 16, however do include unavoidable
costs related to the lease such as service charges and
insurance.
Property provisions also include provisions for dilapidations
which are recognised where the Group has the obligation to
make-good its leased properties, which is when a decision to exit a
lease has been made. This is the point at which a reliable estimate
of the expected cost for dilapidations can be made. These
provisions are recognised based on historically settled
dilapidations which form the basis of the estimated future cash
outflows. Any difference between amounts expected to be settled and
the actual cash outflow will be accounted for in the period when
such determination is made.
Where the Group is able to exit lease contracts before the
expiry date or agree sublets, this results in the release of any
associated property provisions. Such events are subject to the
agreement of landlords, therefore the Group makes no assumptions on
the ability to either exit or sublet a property until a position is
agreed. Utilisation of the above amounts is expected to be incurred
in conjunction with the profile of the leases to which they
relate.
Insurance provisions
The provision relates to the Group's outstanding insurance
claims liabilities in relation to public and employer's liability
claims, and third party motor claims. Claims provisions are based
on assumptions regarding past claims experience and on assessments
by an independent actuary and are intended to provide a best
estimate of the most likely or expected outcome.
Restructuring provisions
The current year charge relates to redundancies announced as
part of Argos store closures, depot closures, and the exit of
operations in Ireland. Utilisation of restructuring provisions is
expected to be incurred in line with the closure date of the site
to which the provision relates.
Financial Services related provisions
Financial Services loan commitment provisions reflect expected
credit losses modelled in relation to loan commitments not yet
recognised on the balance sheet, including on credit cards and
Argos store cards.
Other Financial Services related provisions are primarily in
relation to Argos Financial Services customers in respect of
potential redress payable arising from the historic sales of
Payment Protection Insurance (PPI).
The eventual cost is dependent on response rates, uphold rates,
complaint rates, redress costs and claim handling costs. The
provision represents management's best estimate of future costs.
These assumptions are inherently uncertain and the ultimate
financial impact may differ from the amount provided.
Property Insurance Restructuring Financial Other Total
provisions provisions Services provisions
related
provisions
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ -------------- ------------ ------------ ------
At 6 March 2022 140 62 29 26 14 271
Additional provisions 26 30 64 5 - 125
Unused amounts reversed (33) (4) (3) (1) (1) (42)
Utilisation of provision (19) (29) (32) (2) - (82)
At 4 March 2023 114 59 58 28 13 272
------------ ------------ -------------- ------------ ------------ ------
Current 55 19 30 28 8 140
Non-current 59 40 28 - 5 132
-------------------------- ------------ ------------ -------------- ------------ ------------ ------
At 7 March 2021 164 67 54 26 38 349
Additional provisions 9 34 44 6 1 94
Unused amounts reversed (7) (5) (16) (3) (24) (55)
Utilisation of provision (27) (34) (53) (3) (1) (118)
Amortisation of discount 1 - - - - 1
At 5 March 2022 140 62 29 26 14 271
------------ ------------ -------------- ------------ ------------ ------
Current 16 22 28 26 8 100
Non-current 124 40 1 - 6 171
-------------------------- ------------ ------------ -------------- ------------ ------------ ------
17 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents comprise the following:
2023 2022
GBPm GBPm
-------------------------------------------------- ----- -----
Cash in hand and bank balances 569 566
Money market funds 255 25
Money market deposits 150 -
Deposits at central banks 345 234
Cash and bank balances as reported in the Group
balance sheet 1,319 825
--------------------------------------------------
Bank overdrafts - (7)
Net cash and cash equivalents as reported in the
Group cash flow statement 1,319 818
--------------------------------------------------
Of the above balance, GBP28 million was restricted at the
balance sheet date (2022: GBP18 million). The balance includes
GBP15 million (2022: GBP15 million) held as a reserve deposit with
the Bank of England in accordance with statutory requirements is
not available for use in day-to-day operations, GBP10 million
(2022: GBPnil) held within the ESOT, and GBP3 million (2022: GBP3
million) is restricted for insurance purposes.
18 Analysis of net debt
The Group's definition of net debt includes the following:
-- Cash
-- Borrowings and overdrafts
-- Lease liabilities
-- Perpetual securities
-- Debt-related financial assets at fair value through other comprehensive income
-- Derivatives used in hedging borrowings
Net debt includes the capital injections to Sainsbury's Bank,
but excludes the net debt of Sainsbury's Bank and its subsidiaries
(Financial Services). Financial Services' net debt balances are
excluded because they are required as part of the business as usual
operations of a bank, as opposed to specific forms of financing for
the Group.
Derivatives exclude those not used to hedge borrowings, and
borrowings exclude bank overdrafts as they are disclosed
separately.
A reconciliation of opening to closing net debt is included
below. Balances and movements for the total Group and Financial
Services are shown in addition to Retail to enable reconciliation
between the Group balance sheet and Group cash flow statement.
Cash Movements Non-Cash Movements
6 Cash flows Net Accrued Other Changes 4 March
March excluding interest Interest non-cash in fair 2023
2022 interest (received) movements value
/ paid
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Retail
Net derivative financial
instruments 5 - (5) 5 (5) - -
Borrowings (excluding
overdrafts) (575) 40 45 (40) (9) - (539)
Lease liabilities (6,618) 512 267 (267) (382) - (6,488)
Arising from financing
activities (7,188) 552 307 (302) (396) - (7,027)
Financial assets at fair - - - - - - -
value through other comprehensive
income
Cash and cash equivalents 436 247 - - - - 683
Bank overdrafts (7) 7 - - - - -
Retail net debt (6,759) 806 307 (302) (396) - (6,344)
Financial Services
Net derivative financial 4 - - - - (4) -
instruments
Borrowings (excluding
overdrafts) (179) 55 9 (12) - 5 (122)
Lease liabilities (3) 2 - - - - (1)
Arising from financing
activities (178) 57 9 (12) - 1 (123)
Financial assets at fair
value through other comprehensive
income 418 207 - - - 1 626
Cash and cash equivalents 389 247 - - - - 636
Financial services net
debt 629 511 9 (12) - 2 1,139
Group
Net derivative financial
instruments 9 - (5) 5 (5) (4) -
Borrowings (excluding
overdrafts) (754) 95 54 (52) (9) 5 (661)
Lease liabilities (6,621) 514 267 (267) (382) - (6,489)
Arising from financing
activities (7,366) 609 316 (314) (396) 1 (7,150)
Financial assets at fair
value through other comprehensive
income 418 207 - - - 1 626
Cash and cash equivalents 825 494 - - - - 1,319
Bank overdrafts (7) 7 - - - - -
Group net debt (6,130) 1,317 316 (314) (396) 2 (5,205)
Retail net debt (6,759) 806 307 (302) (396) - (6,344)
Of which:
Leases (6,618) (6,488)
Net debt excluding lease
liabilities (141) 144
Other non-cash movements relate to new leases, interest accruals
and foreign exchange.
Cash Movements Non-Cash Movements
7 March Cash flows Net Accrued Other Changes 5 March
2021 excluding interest Interest non-cash in fair 2022
interest (received) movements value
/ paid
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Retail
Net derivative financial
instruments (14) - 10 (10) 11 8 5
Borrowings (excluding
overdrafts) (826) 248 28 (25) - - (575)
Lease liabilities (5,829) 491 281 (281) (1,280) - (6,618)
Arising from financing
activities (6,669) 739 319 (316) (1,269) 8 (7,188)
Financial assets at fair
value through other comprehensive
income 1 - - - - (1) -
Cash and cash equivalents 546 (110) - - - - 436
Bank overdrafts (99) 92 - - - - (7)
Retail net debt (excluding
perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Financial Services
Net derivative financial
instruments - - - - - 4 4
Borrowings (excluding
overdrafts) (179) - 10 (11) - 1 (179)
Lease liabilities (5) 2 - - - - (3)
Arising from financing
activities (184) 2 10 (11) - 5 (178)
Financial assets at fair
value through other comprehensive
income 537 (115) - - - (4) 418
Cash and cash equivalents 1,029 (640) - - - - 389
Financial services net
debt 1,382 (753) 10 (11) - 1 629
Group
Net derivative financial
instruments (14) - 10 (10) 11 12 9
Borrowings (excluding
overdrafts) (1,005) 248 38 (36) - 1 (754)
Lease liabilities (5,834) 493 281 (281) (1,280) - (6,621)
Arising from financing
activities (6,853) 741 329 (327) (1,269) 13 (7,366)
Financial assets at fair
value through other comprehensive
income 538 (115) - - - (5) 418
Cash and cash equivalents 1,575 (750) - - - - 825
Bank overdrafts (99) 92 - - - - (7)
Group net debt (excluding
perpetual securities) (4,839) (32) 329 (327) (1,269) 8 (6,130)
Retail net debt (excluding
perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Perpetual convertible
bonds (248) 8 - - 240 - -
Retail net debt (including
perpetual securities) (6,469) 729 319 (316) (1,029) 7 (6,759)
Of which:
Leases (5,829) (6,618)
Net debt excluding lease
liabilities (640) (141)
Reconciliation of net cash flow to movement in net debt
52 weeks to 52 weeks
to
4 March 5 March
2023 2022
GBPm GBPm
Opening net debt (6,759) (6,469)
Cash flow movements
Net increase/(decrease) in cash and cash equivalents
(including overdrafts) 501 (658)
Elimination of Financial Services movement in
cash and cash equivalents (247) 640
Repayment of perpetual capital securities - 8
Decrease in Retail borrowings 40 248
Decrease in Retail lease obligations 512 491
Net interest paid on components of Retail
net debt 307 319
Changes in net debt resulting from cash
flow 1,113 1,048
Non-cash movements
Accrued interest (302) (316)
Retail fair value and other non-cash movements (396) (1,022)
Changes in net debt resulting from non-cash
movements (698) (1,338)
Movement in net debt 415 (290)
Closing net debt (6,344) (6,759)
19 Borrowings
2023 2022
Current Non-current Total Current Non-current Total
GBPm GBPm GBPm GBPm GBPm GBPm
Loan due 2031 48 491 539 44 531 575
Bank overdrafts - - - 7 - 7
Transaction costs (1) (4) (5) - - -
Sainsbury's Bank Tier
2 Capital 6 116 122 3 176 179
53 603 656 54 707 761
a) Loan due 2031
The loan is secured against 48 (2022: 48) supermarket properties
(note 12). This is an inflation linked amortising loan from the
finance company Longstone Finance plc with an outstanding principal
value of GBP527 million (2022: GBP566 million) fixed at a real rate
of 2.36 per cent where principal and interest rate are uplifted
annually by RPI subject to a cap at five per cent and a floor at
nil per cent. The carrying value of the loan is GBP539 million
(2022: GBP575 million) with a final repayment date of April
2031.
The Group has entered into inflation swaps to convert GBP490
million (2022: GBP490 million) of the GBP527 million (2022: GBP566
million) loan from RPI linked interest to fixed rate interest until
April 2023. These transactions have been designated as cash flow
hedges.
The principal activity of Longstone Finance plc is the issuance
of commercial mortgage-backed securities and applying the proceeds
towards the secured loans due 2031 with the Group as summarised
above.
Intertrust Corporate Services Limited holds all the issued share
capital of Longstone Finance Holdings Limited on trust for
charitable purposes. Longstone Finance Holdings Limited
beneficially owns all the issued share capital of Longstone Finance
plc. As the Group has no interest, power or bears any risk over
these entities they are not included in the Group
consolidation.
b) Bank overdrafts
Bank overdrafts are repayable on demand and bear interest at a
spread above Bank of England base rate.
c) Sainsbury's Bank Tier 2 Capital
The Bank issued GBP120 million of fixed rate reset callable
subordinated Tier 2 notes in September 2022. These notes pay
interest on the principal amount at a rate of 10.5 per cent per
annum, payable in equal instalments semi-annually in arrears, until
March 2028 at which time the interest rate will reset. This was
issued in conjunction with a tender to repurchase and extinguish
GBP120 million of the existing GBP175 million subordinated Tier 2
notes that were issued in November 2017. The Bank subsequently
redeemed the remaining GBP55 million of the existing GBP175 million
issued in November 2022.
d) Short term borrowings
The Group refinanced its Revolving Credit Facility in December
2022. The new Revolving Credit Facility is unsecured and is split
into two Facilities, a GBP500 million Facility (A) and a GBP500
million Facility (B). Facility A has a maturity of December 2026
and Facility B has a maturity of December 2027. At 4 March 2023,
the Revolving Credit Facility was undrawn (2022: undrawn).
The Revolving Credit Facility incurs commitment fees at market
rates and drawdowns bear interest at a margin above SONIA.
The Group maintains uncommitted facilities to provide additional
capacity to fund short-term working capital requirements. Drawdowns
on these uncommitted facilities bear interest at a margin. The
uncommitted facilities were undrawn at 4 March 2023 (2022:
undrawn).
e) Term loan
The Group issued a GBP575 million unsecured term loan in
December 2022, with maturity of March 2026. This new term loan
refinanced the GBP575m Bridge Loan Facility arranged in October
2022 with maturity of November 2024.
At 4 March 2023, the term loan was undrawn.
f) Transaction costs
Transaction costs are amortised on a straight-line basis over
the life of the facility they relate to.
20 Retirement benefit obligations
Background
The retirement benefit obligations relate to the Sainsbury's
Pension Scheme plus three unfunded pension liabilities for former
senior employees of Sainsbury's and Home Retail Group.
The Sainsbury's Pension Scheme has two sections, the Sainsbury's
Section which holds the assets and liabilities of the original
Sainsbury's Pension Scheme, and the Argos Section which holds the
assets and liabilities of the Home Retail Group Pension Scheme.
Each section's assets are segregated by deed and ring fenced for
the benefit of the members of that section. The Scheme is run by a
corporate trustee with nine directors.
The Scheme is also used to pay life assurance benefits to
current (including new) colleagues.
The retirement benefit obligations at the year-end have been
calculated by Isio, the actuarial advisers to the Group, using the
projected unit credit method and based on adjusting the position at
the date of the previous triennial valuation for known events and
changes in market conditions as allowed under IAS 19 'Employee
Benefits'.
The amounts recognised in the balance sheet are as follows:
2023 2022
Sainsbury's Argos Group Sainsbury's Argos Group
GBPm GBPm GBPm GBPm GBPm GBPm
Present value of funded obligations (5,128) (793) (5,921) (8,060) (1,313) (9,373)
Fair value of plan assets 6,007 927 6,934 10,158 1,535 11,693
Retirement benefit surplus 879 134 1,013 2,098 222 2,320
Present value of unfunded obligations (12) (12) (24) (20) (17) (37)
Retirement benefit surplus 867 122 989 2,078 205 2,283
The retirement benefit surplus and the associated deferred
income tax balance are shown within different line items on the
face of the balance sheet.
The movements in the Group's net defined benefit surplus are as
follows:
2023 2022
GBPm GBPm
As at the beginning of the year 2,283 744
Net interest income 56 15
Remeasurement (losses)/gains (1,398) 1,457
Pension scheme expenses (6) (7)
Contributions by employer 44 71
Benefits paid 2 -
Past service credit - 3
Settlement gains 8 -
As at the end of the year 989 2,283
The principal actuarial assumptions used at the balance sheet
date are as follows:
2023 2022
% %
Discount rate 5.00 2.40
Inflation rate - RPI 3.25 3.60
Inflation rate - CPI 2.55 2.90
Future pension increases 1.90 2.30
- 2.95 - 3.45
Discount rate
The discount rate for the Scheme is derived from the expected
yields on high quality corporate bonds over the duration of the
Group's pension scheme and extrapolated in line with gilts with no
theoretical growth assumptions. High quality corporate bonds are
those for which at least one of the main ratings agencies considers
to be at least AA (or equivalent).
Inflation
On 25 November 2022, the Government and UK Statistics
Authority's joint consultation response on RPI reform was
published. This confirmed their intention to amend the RPI
calculation methodology to be aligned to that already in use for
the calculation of the CPI (including housing) with effect from
2030. As a result, the Group reduced the post 2030 gap between RPI
and CPI to nil in the prior year, effectively assuming RPI will be
aligned with CPI post 2030, resulting in a single weighted average
RPI-CPI gap of 0.70% p.a. for the 4th March 2023 year-end. This
approach has been applied consistently in the current year.
Mortality
The base mortality assumptions are based on the SAPS S2 tables,
with adjustments to reflect the Scheme's population. Following the
completion of the 2021 triennial valuation and consideration of the
previous three years of mortality experience both in the Scheme and
the UK as a whole, the Company has decided to update the actuarial
mortality base tables that determine the life expectancy
assumptions to reflect a best-estimate adjustment derived from
analysis carried out for the valuation. Future mortality
improvements for the 2023 year-end are CMI 2021 projections with a
long term rate of improvement of 1.25 per cent p.a. Future
mortality improvements for the 2023 year-end are CMI 2021
projections with a long term rate of improvement of 1.25 per cent
p.a. Future mortality improvements for the 2022 year-end were CMI
2021 projections with a long term rate of improvement of 1.25 per
cent p.a.
While COVID-19 had an impact on mortality in 2020, the impact on
future mortality trends is currently unknown. All IAS 19
calculations use the CMI model, which measures potential changes to
future mortality trends. The Group's policy is to use the available
version as at the year-end which is still CMI 2021 which was
released on 9 March 2022.
As a result of the significant change to mortality in the CMI
2020 model, the CMI modified the calibration process for CMI 2020
to allow choice on the weighting placed on an individual year's
data. For the Core version of CMI 2020, a weight of zero per cent
was applied to 2020 data and weightings of 100 per cent for other
years, so the potentially exceptional 2020 experience was ignored
when modelling future improvements. This approach was maintained
for CMI 2021, with zero per cent weighting applied to 2020 and 2021
data.
A 10 per cent weighting has therefore been applied again to the
2020 and 2021 mortality data, broadly reflecting that the effects
of the pandemic were significantly reduced going forwards with
mortality rates for 2022 immediately returning to those in 2019.
Thereafter, mortality improvements are in line with the CMI 2021
Core model. The impact of different weightings on the Scheme
liabilities is included in the sensitivities section within this
note.
The life expectancy for members aged 65 years at the balance
sheet date is as follows:
Sainsbury's Sainsbury's Argos Sainsbury's Sainsbury's Argos
section section section section section section
Main Scheme Executive Main Executive
Scheme Scheme Scheme
2023 2023 2023 2022 2022 2022
Years Years Years Years Years Years
------------ --------
Male pensioner 19.5 22.7 20.3 19.6 23.8 21.3
Female pensioner 23.3 24.0 23.4 23.5 25.0 23.9
------------
The life expectancy at age 65 for members aged 45 years at the
balance sheet date is as follows:
Sainsbury's Sainsbury's Argos Sainsbury's Sainsbury's Argos
section section section section section section
Main Scheme Executive Main Executive
Scheme Scheme Scheme
2023 2023 2023 2022 2022 2022
Years Years Years Years Years Years
------------ --------
Male pensioner 20.7 24.0 21.6 20.8 25.0 22.5
Female pensioner 24.9 25.5 24.8 25.0 26.5 25.4
------------ --------
21 Contingent liabilities
The Group has a number of contingent liabilities in respect of
historic lease guarantees, particularly in relation to the disposal
of assets, which if the current tenant and their ultimate parents
become insolvent, may expose the Group to a material liability.
This liability decreases over time as the leases expire. The Group
has considered a number of factors, including past history of
default as well as the profitability and cash generation of the
current leaseholders, and has concluded that the likelihood of
pay-out is remote.
Along with other retailers, the Group is currently subject to
claims from current and ex-employees in the Employment Tribunal for
equal pay under the Equality Act 2010 and/or the Equal Pay Act
1970. There are currently circa 13,000 equal pay claims from circa
8,100 claimants and the Group believes that further claims may be
served. The claimants are alleging that their work within
Sainsbury's stores is or was of equal value to that of colleagues
working in Sainsbury's distribution centres, and that differences
in terms and conditions relating to pay are not objectively
justifiable. The claimants are seeking the differential back pay
based on the higher wages in distribution depots, and the
equalisation of wages and terms and conditions on an ongoing
basis.
There are three stages in the tribunal procedure for equal value
claims of this nature and the claimants will need to succeed in all
three. The first stage is whether store claimants have the legal
right to make the comparison with depot workers. Following European
and Supreme Court decisions in other litigation, Sainsbury's has
conceded this point. The second stage is the lengthy process to
determine whether any of the claimants' roles are of equal value to
their chosen comparators. In the event that any of the claimants
succeed at the second stage, there will be a third stage comprising
further hearings, in the following years, to consider Sainsbury's
material factor defences, relating to non-discriminatory reasons
for any pay differential. Completion of these two stages is likely
to take many years which may involve hearings and appeals. It is
not possible to predict a final date with any certainty.
If the Group is unsuccessful at the end of the litigation the
liability could be material but due to the complexity and
multitudinous factual and legal uncertainties we are not in a
position to predict an outcome, quantum or impact at this
stage.
There are substantial factual and legal defences to these claims
and the Group intends to defend them vigorously.
22 Post balance sheet events
Subsequent to the Group's balance sheet date, on 14 March 2023
the Group exchanged contracts for the purchase of Supermarket
Income REIT's beneficial interest in a commercial property
investment pool, in which the Group already held a beneficial
interest. The purchase has been implemented through the acquisition
of Cornerford Limited, Horndrift Limited, Avenell Property PLC and
Hobart Property PLC.
The transaction completed on 17 March 2023 for a total
consideration of GBP431 million (excluding costs), which is being
paid in three tranches. GBP279 million was paid on 17 March 2023
and GBP117 million will be paid on 10 July 2023, whilst the third
tranche of GBP35 million is conditional on the sale of five stores
from the property pool by the Group. Additionally, the Group will
fully fund the bond redemptions attached to the property pool, of
which GBP170.5 million was paid on 20 March 2023 and GBP130.4
million will be paid on 13 July 2023.
The total consideration and bond redemptions are to be funded by
utilising the Group's cash resources and also by drawing under the
committed unsecured term facility, from which the Group drew GBP200
million on 14 March 2023.
As this transaction took place subsequent to the Group's balance
sheet date, no adjustments are required to be made to the Group's
financial statements. As the transaction exchanged and completed
after the balance sheet date, control of the entities acquired only
passed to the Group after the balance sheet date and therefore the
initial accounting for this transaction has not yet been
completed.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors use
various APMs which they believe provide additional useful
information for understanding the financial performance and
financial health of the Group. These APMs should be considered in
addition to, and are not intended to be a substitute for IFRS
measurements. As they are not defined by International Financial
Reporting Standards, they may not be directly comparable with other
companies who use similar measures.
All of the following APMs relate to the current period's results
and comparative periods where provided.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS measure
Income statement - Revenue
Retail Revenue Group sales Shows the A reconciliation of the measure is provided
sales less Financial annual in note 5 of the financial statements.
Services rate of growth
revenue. in the Group's
Retail business
sales.
Like-for-like No direct Year-on-year The measure is The reported retail like-for-like
sales equivalent growth used widely in sales increase of 2.6 per
in sales the retail cent is based on a combination
including industry of Sainsbury's like-for-like
VAT, excluding as an indicator sales and Argos like-for-like
fuel of current sales for 2023. See movements
and Financial trading below: 2023 2022
Services, performance and Retail like-for-like (exc.
for stores that is useful when Fuel, inc. VAT) 2.6% (2.3)%
have comparing Underlying net new space
been open for growth impact (0.6)% (0.3)%
more between Retail sales growth (exc.
than one year. retailers Fuel, inc. VAT) 2.0% (2.6)%
that have Fuel impact 3.2% 6.0%
The relocation different Total retail sales growth
of profiles of (inc. fuel, inc. VAT) 5.2% 3.4%
Argos stores expansion, VAT impact (0.1)% (0.4)%
into disposals and Total retail sales growth
Sainsbury's closures. per note 5 5.1% 3.0%
supermarkets
are classified
as
new space,
while the
host
supermarket is
classified
like-for-like.
Within the
comparative
period, the
impact
on sales of
stores
which were
temporarily
closed due to
COVID-19
have been
included
within LFL
sales.
Only
permanently
closed
sites and those
temporarily
closed for non
COVID-19
related reasons
are
treated as non
LFL.
Income statement - Profit
Retail Profit before Underlying This is the 2023 2022
underlying tax earnings lowest GBPm GBPm
operating before level at which Group PBT (note 6) 327 854
profit interest, tax, the retail Add back/(less) Group
Financial segment non-underlying items (note
Services can be viewed 4) 363 (124)
operating from Group UPBT 690 730
profit and a management Financial Services underlying
Sainsbury's perspective, operating profit (46) (38)
underlying with finance Retail underlying profit
share of costs before tax 644 692
post-tax managed for the Net underlying finance
profit from Group as a costs 282 309
joint whole. Retail underlying operating
ventures and profit 926 1,001
associates.
Retail sales (note 5) 30,960 29,463
Retail underlying operating
margin 2.99% 3.40%
Underlying Profit before Underlying In order to Underlying profit before tax is bridged
profit tax results provide to statutory profit before tax in the income
before exclude items shareholders statement and note 4 of the financial statements.
tax recognised with
in reported additional The adjusted items are as described in
profit insight note 4 of the financial statements.
or loss before into the
tax year-on-year
which, if performance of
included, the business,
could distort this
comparability adjusted
between measure
periods. In of profit is
determining provided
which to supplement
items to the
exclude from reported IFRS
underlying numbers
profit, and reflects
the Group how
considers the business
items which are measures
significant performance
either by internally.
virtue of
their size
and/or
nature, or that
are
non-recurring.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Income statement -
Profit
Underlying Basic Earnings per This is a key A reconciliation of the measure is provided
basic earnings share measure to in note 10 of the financial statements.
earnings per share using evaluate
per underlying the
share profit performance
as described of the
above. business
and returns
generated
for investors.
Retail No direct Retail EBITDA is used
underlying equivalent underlying to review the 2023 2022
EBITDA operating retail GBPm GBPm
profit as segment's Retail underlying operating
above, before profit profit 926 1,001
underlying generation Add: Retail depreciation and
depreciation, and the amortisation expense 1,175 1,197
and sustainability Less: Non-underlying depreciation
amortisation. of ongoing and amortisation (41) (53)
capital Retail underlying EBITDA 2,060 2,145
reinvestment
and Retail sales (note 5) 30,960 29,463
finance costs. Retail underlying EBITDA
margin 6.65% 7.28%
Underlying Finance Net finance This provides A reconciliation of this measure is included
net income costs shareholders in note 8 of the financial statements.
finance less before any with
costs finance non-underlying additional The adjusted items are as follows:
costs items as insight
defined above into the * Non-underlying finance movements - these include fair
that are underlying value remeasurements on derivatives not in a hedging
recognised net finance relationship and lease interest on impaired
within finance costs non-trading sites, including site closures. The fair
income of the Group value movements are driven by external market factors
/ expenses. by and can significantly fluctuate year-on-year. They
excluding are therefore excluded to ensure consistency between
non-recurring periods. Lease interest on impaired, non-trading
one-off items. sites is excluded as they do not contribute to the
operating activities of the Group.
* IAS 19 pension interest - Although a recurring item,
the Group has chosen to exclude net retirement
benefit income and costs from underlying profit as,
following closure of the defined benefit scheme to
future accrual, it is not part of the ongoing
operating activities of the Group and its exclusion
is consistent with how the Directors assess the
performance of the business.
Underlying Effective Tax on Provides an The tax on non-underlying items is included
tax tax underlying indication in note 4 of the financial statements.
rate rate items, divided of the tax
by rate
underlying across the
profit Group
before tax. before the
impact
of
non-underlying
items.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS measure
Cash flows and net debt
Retail No direct N/A To help the
cash flow equivalent reader
items understand 4 March 5 March
in Financial cash flows 2023 2022
Review of the Ref GBPm GBPm
business a Net interest paid a (307) (323)
summarised Capital repayment of
cash flow lease liabilities b (512) (491)
statement Repayment of borrowings c (40) (256)
is included Other d (32) (27)
within Dividends and distributions
the received e 51 2
Financial
Review.
As part of
this a
number
of line
items have
been
combined.
The
cash flow in
note 6
of the
financial
statements
includes a
reference
to show what
has been
combined in
these line
items.
Retail Net cash Net cash This
free cash generated generated measures
flow from from retail cash 4 March 5 March
operating operations, generation, 2023 2022
activities after cash working GBPm GBPm
capital capital Cash generated from retail operations 2,216 1,940
expenditure efficiency Net interest paid (ref (a) above) (307) (323)
and including and capital Corporation Tax (99) (23)
payments of expenditure Retail purchase of property,
lease of the plant and equipment (523) (416)
obligations, retail Retail purchase of intangibles
cash flows business. assets (194) (229)
from Retail proceeds from disposal
joint of property, plant and equipment 29 46
ventures Initial direct costs on right-of-use
and assets (16) (3)
associates Capital repayment of lease liabilities (512) (491)
and Dividends and distributions received 51 2
Sainsbury's Retail free cash flow 645 503
Bank capital
injections.
Adjusted Cash This presents This enables
net cash generated retail management 4 March 5 March
generated from operating to assess 2023 2022
from retail operations cash flows the cash GBPm GBPm
operations adjusted generated -------
(per Financial for movements from its Retail cash generated from operating
Review) in working core retail activities (note 6) 1,810 1,598
capital, operations. Perpetual security coupons - (4)
less net Adjusted net cash generated
interest from operating activities 1,810 1,594
paid
(including
distributions
on perpetual
securities)
and pension
cash
contributions
.
Core No direct Capital This allows
retail equivalent expenditure management 2023 2022
capital excluding to assess GBPm GBPm
expenditure Sainsbury's core retail Purchase of property, plant
Bank. capital and equipment (523) (416)
expenditure Purchase of intangibles (194) (229)
in the Cash capital expenditure (717) (645)
period in
order
to review
the
strategic
business
performance.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS measure
Underlying No direct Removes working To provide a 4 March 5 March
working equivalent capital and reconciliation 2023 2022
capital cash movements of the working GBPm GBPm
movements relating to capital Retail working capital movements
non-underlying movement in per cash flow (note 6) 185 (306)
items. the Financial
statements to Adjustments for:
the underlying Retail non-underlying impairment
working charges (note 6) 315 8
capital Non-underlying restructuring and
movement impairment charges (note 4) (387) (92)
in the Bank non-underlying restructuring
Financial and impairment charges - 7
review. Accelerated depreciation (note
4) 20 33
Gains on early termination of leases
(note 4) (2) (9)
Profit on disposal of properties
within restructuring programme
(note 4) (11) (12)
ATM income (note 4) 3 2
Income recognised in relation to
legal disputes (note 4) 30 180
Property related transactions (note
4) (9) -
Other 7 1
Non-underlying working capital
movements before cash movements (34) 118
Non-underlying cash movements:
Restructuring (note 4) 50 114
Bank restructuring - (4)
ATM income (note 4) (3) (14)
Income recognised in relation to
legal disputes (note 4) (30) (93)
Property related transactions (note
4) 6 -
Retail non-underlying operating
cash flows (excluding pensions) 23 3
Total adjustments for non-underlying
working capital (11) 121
Underlying working capital movements 174 (185)
APM Closest Definition Purpose Reconciliation
equivalent
IFRS measure
Net debt Borrowings, Net debt includes This shows the A reconciliation of the measure is provided in note
cash, the capital overall 18 of the financial statements. In addition, to
derivatives, injections strength of aid comparison to the balance sheet, reconciliations
financial into Sainsbury's the between financial assets at FVTOCI and derivatives
assets Bank, balance sheet per the balance sheet and Group net debt (i.e. including
at FVTOCI, but excludes the alongside Financial Services) is included below: 4 March 5 March
lease net the liquidity 2023 2022
liabilities debt of and GBPm GBPm
Sainsbury's its Financial instruments at FVTOCI
Bank and its indebtedness per balance sheet 1,009 800
subsidiaries. and whether Less: equity related securities (383) (382)
the Financial instruments at FVTOCI
It is calculated Group can included in net debt 626 418
as: cover
financial assets its debt Net derivatives per balance sheet 213 259
at commitments. Less: derivatives not used to hedge
fair value through borrowings (213) (250)
other Derivatives included in net debt - 9
comprehensive
income (excluding
equity
investments)
+ net derivatives
to hedge
borrowings
+ net cash and
cash
equivalents +
loans
+ lease
obligations.
Other
Net debt/ No direct Net debt divided This helps Net debt as provided in note 18. Group underlying
underlying equivalent by management EBITDA is reconciled within the fixed charge cover
EBITDA Group underlying measure the analysis below.
EBITDA. ratio
of the
business's
debt to
operational
cash flow.
Return No direct Return on capital This 52 weeks to 52 weeks to
on capital equivalent employed is represents 4 March 2023 5 March 2022
employed calculated the total GBPm GBPm
as return divided capital Underlying profit before
by average capital that the Group tax 690 730
employed. has Add: Underlying net interest 282 309
utilised in Return 972 1,039
Return is defined order
as 52 week rolling to generate
underlying profit profits. Capital employed is reconciled
before interest Management use as follows:
and this 52 weeks to 52 weeks to
tax. to assess the 4 March 2023 5 March 2022
performance GBPm GBPm
Capital employed of the Group net assets 7,253 8,423
is business. Less: Pension surplus
defined as Group (note 20) (989) (2,283)
net Deferred tax on pension
assets excluding surplus (note 9) 330 640
pension Less: net debt (ex-perpetual
deficit/surplus, securities) (note 18) 6,344 6,759
less Effect of in-year averaging (101) (1,127)
net debt Capital employed 12,837 12,412
(excluding
perpetual Return on capital employed 7.6% 8.4%
securities).
The average is
calculated
on a 14-point
basis.
The 14-point basis
uses the average
of
14 datapoints -
the
prior year closing
capital employed,
the current year
closing
capital employed
and
12 intra-year
periods
as this more
closely
aligns to the
recognition
of amounts in the
income statement.
Fixed No direct Group underlying This helps 52 weeks 52 weeks
charge equivalent EBITDA assess to 4 March to 5 March
cover divided by rent the Group's 2023 2022
(representing ability GBPm GBPm
capital and to satisfy Group underlying operating profit 972 1,039
interest fixed Add: Group depreciation and amortisation
repayments on financing expense 1,208 1,220
leases) expenses Less: Non-underlying depreciation
and underlying net from and amortisation expense (41) (53)
finance costs, performance Group underlying EBITDA 2,139 2,206
where of the Repayment of capital element of
interest on business. lease obligations (514) (493)
perpetual Underlying finance income 18 3
securities is Underlying finance costs (300) (312)
treated Fixed charges (796) (802)
as an underlying Fixed charge cover 2.7 2.8
finance
cost. All items
are
calculated on a 52
week rolling
basis.
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END
FR EANLKASKDEFA
(END) Dow Jones Newswires
April 27, 2023 02:00 ET (06:00 GMT)
Grafico Azioni Sainsbury (j) (LSE:SBRY)
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Da Mar 2024 a Apr 2024
Grafico Azioni Sainsbury (j) (LSE:SBRY)
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