Sainsbury(J) PLC Sainsbury's to forgo business rates relief (3632H)
03 Dicembre 2020 - 8:00AM
UK Regulatory
TIDMSBRY
RNS Number : 3632H
Sainsbury(J) PLC
03 December 2020
3 December 2020
J Sainsbury plc
Sainsbury's to forgo business rates relief
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF REGULATION (EU) NO 596/2014 (MAR)
Having considered this issue, particularly since the
announcement of a second national lockdown in England, the Board of
J Sainsbury plc has chosen to forgo the business rates relief on
Sainsbury's stores granted by the UK Government and the Devolved
Administrations since March.
Sainsbury's welcomed the Chancellor's announcement in March that
all retail, hospitality and leisure businesses in England would be
given a business rates holiday for 12 months. At that time and at
the time of our preliminary results in April, we had limited
visibility of the nature and extent of the financial impact on the
business of COVID-19. Our base case assumption for the 2020/21
financial year was that the costs of protecting customers and
colleagues and the negative impacts of COVID-19 on financial
services profits, fuel, general merchandise and clothing sales
would be broadly offset by stronger grocery sales and around GBP450
million of business rates relief.
Since then:
-- Sainsbury's has played a vital role in helping to feed the
nation through the pandemic, prioritising the elderly, disabled and
vulnerable and working hard to protect customers and colleagues
from COVID-19. We have hired 56,000 people, paid 13,000 colleagues
to self-isolate for 12 weeks and made nearly nine million grocery
deliveries to elderly, disabled and vulnerable customers. We have
not taken any furlough payments or any other form of government
support. Since March we have also committed to donate GBP10 million
to charities and local communities
-- In the first half of our financial year, we spent GBP290
million keeping our colleagues and customers safe, partially offset
by GBP230 million of business rates relief. In addition to these
incremental costs, we reported significant fuel and clothing sales
declines and the impact of COVID-19 on our financial services
business resulted in a first half financial services loss of GBP55
million
-- Argos standalone stores were classed as non-essential retail
and therefore closed in line with government guidance
However, lockdown restrictions have remained in place for longer
than originally expected and throughout the pandemic all
Sainsbury's stores have been deemed essential retail. Almost all
have been open and trading strongly, with the exception of a small
number of convenience stores. As a result of this, Sainsbury's
sales and profits have been stronger than originally expected,
particularly since the start of the second national lockdown in
England and we have therefore taken the decision to forego the
business rates relief on all Sainsbury's stores.
Simon Roberts, CEO, said:
"We have been proud to play our part in feeding the nation in
this extraordinary year and every one of our colleagues has gone
above and beyond to support each other, our customers and our
communities. While we have incurred significant costs in keeping
colleagues and customers safe, food and other essential retailers
have benefited from being able to open throughout. With regional
restrictions likely to remain in place for some time, we believe it
is now fair and right to forgo the business rates relief that we
have been given on all Sainsbury's stores. We are very mindful that
non-essential retailers and many other businesses have been forced
to close again in the second lockdown and we hope that this goes
some way towards helping them.
"We remain focused on delivering the plan we set out at our half
year results. We continue to urge government to review the business
rates system to create more of a level playing field between
physical and online retailers."
Financial Impact
-- Including business rates payments within underlying profit
before tax (1) (UPBT), we now expect UPBT of at least GBP270
million for the financial year to March 2021. This includes the
assumption that we will now forgo approximately GBP410 million of
business rates relief
-- Reflecting the strategy update published in November, we
continue to expect UPBT in the financial year to March 2022 to
exceed the GBP586 million reported in the year to March 2020,
despite now forgoing business rates relief of approximately GBP30
million
-- We additionally continue to expect to generate average retail
free cash flow of GBP500 million per year over the three years to
March 2025
-- In the event that the business delivers profits and cash
generation at least in line with its current expectations, the
Board believes that shareholders should not bear the full
short-term financial impact this year of the business making the
right decisions for customers and colleagues through the COVID-19
pandemic. Therefore, when considering free cash flow allocation
this year the Board will prioritise payment of dividends to
shareholders over net debt reduction
-- As a consequence, while we expect to make good progress
towards our target of at least GBP750 million net debt reduction in
the three years to March 2022, we now expect to achieve this target
by March 2023
-- We will agree with government an appropriate way to forgo the
business rates relief as repayment is not required by law
(1) Final accounting treatment remains subject to review
ENDS
Tim Fallowfield, Company Secretary and Corporate Services
Director, was responsible for the disclosure of this announcement
for the purposes of MAR.
Enquiries
Investor Relations Media
James Collins Rebecca Reilly
+44 (0) 7801 813 074 +44 (0) 20 7695 7295
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