TIDMSBRY

RNS Number : 6179J

Sainsbury(J) PLC

28 April 2022

   28 April 2022                                                                       J Sainsbury PLC 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Preliminary Results for the 52 weeks ended 5 March 2022

Delivering for customers, colleagues, communities and shareholders

Simon Roberts, Chief Executive of J Sainsbury plc, said: "In a year of unprecedented change we have been relentlessly focused on putting customers and colleagues first while delivering the first year of our plan to put food back at the heart of Sainsbury's. We said we would invest in value, innovation and service and that's exactly what we're doing. We have outperformed key competitors on both a one and two-year basis(1) while also delivering strong underlying profit growth, improved returns and consistent retail free cash flow. This gives us a strong foundation to keep building momentum in the year ahead.

"We know just how much everyone is feeling the impact of inflation, which is why we are so determined to keep delivering the best value for customers. We have been able to drive more investment into lowering food prices funded by our comprehensive cost savings plans. As a result, we continue to inflate behind competitors on the products customers buy most often. Last week we announced the next bold phase of investment, lowering prices across 150 of our highest volume fresh products.

"As our colleagues are feeling the impact of inflation too we prioritised investment of over GBP100 million into colleague pay. All Sainsbury's and Argos retail colleagues now earn the Living Wage wherever they work in the UK, we were the first major supermarket to make this happen. I want to thank every one of my colleagues for the outstanding job you've done every day. I am immensely proud of our entire team.

"I would also like to thank our suppliers for all their support throughout the last year. Partnership and collaboration through these times of significant industry challenge and change have never been more important.

"The dreadful situation in Ukraine continues to have a profound impact. We're doing everything we can to help with the humanitarian effort, and are working to manage the supply chain impacts.

"We have a clear long term focus on keeping prices low and we remain committed to helping everyone eat better, whatever the external environment may bring."

Financial highlights

   --      Retail sales inc. fuel up 3.4%, ex. fuel sales down 2.6%. Ex. VAT Group sales up 2.9% 

o Grocery sales up 7.6% versus FY 2019/20, broadly flat versus FY 2020/21, reflecting sustained COVID-19-driven demand and strong volume market share performance over one and two years

o General Merchandise sales down 4.6% versus FY 2019/20, reflecting availability challenges in key product areas and our focus on profitable sales. Down 11.9% versus FY 2020/21

-- Underlying profit before tax(2) of GBP730 million, up 25% versus FY 2019/20 and up 104% versus FY 2020/21, which included substantial COVID-19 costs

o Reflects elevated grocery sales and lower finance charges, with significant investment in core grocery funded by cost savings, fuel and a more profitable general merchandise and clothing business

-- Statutory profit before tax of GBP854 million versus GBP278 million(3) in FY 2019/20 and a loss of GBP164 million(3) in FY 2020/21

o Reflects lower restructuring and impairment costs and exceptional income from settling legal disputes

-- Financial Services GBP38 million profit versus FY 2020/21 GBP21 million loss and GBP48 million profit in FY 2019/20

   o   We expect further profit improvement in FY 2022/23 

o Following the year end, the Bank has paid its first ever dividend to the Group, of GBP50 million

-- Strong Retail Free Cash Flow of GBP503 million(2) . Average Free Cash Flow in three years to March 2022 GBP633 million

-- Non-lease Net Debt down GBP1,381 million in three years to March 2022, ahead of target GBP950 million+ over four years

   --      Proposed final dividend of 9.9 pence, full-year dividend of 13.1 pence, up 24% 

-- Capital allocation framework updated. Initial commitment to increase dividend payout ratio to around 60%

-- Outlook: The year ahead will be impacted by significant external pressures and uncertainties. At this early stage of the year we expect FY 2022/23 underlying profit before tax(2) of between GBP630 million and GBP690 million

Strategic highlights

-- Food First: We are focused on giving customers better value and improved innovation and customer service.

o Significant investment in grocery prices, funded by our cost saving programme, has driven a strong grocery volume market share performance over one and two years(1)

o We are inflating behind the market on the highest volume products(4) . By investing ahead of competitors, with a clear focus on fresh food, our prices are improving

o We have more than tripled product innovation in the year and have grown Taste the Difference sales by 15% versus FY 2019/20. Customer satisfaction scores performed ahead of competitors in our supermarkets and online customer satisfaction improved relative to peers(5)

o 39 per cent of our sales came through digital channels, versus 23 per cent in FY 2019/20. Groceries Online accounted for 17 per cent of overall Grocery sales

-- Brands that Deliver: Nectar, Argos, Habitat, Tu and Sainsbury's Bank are delivering for our customers and our shareholders and supporting investments in our wider customer offer.

o The Argos transformation programme is on track and Argos is a more profitable business. 80 per cent of Argos sales now originate online

o Sainsbury's Bank is making good progress with its strategic plan and has paid the Group a dividend for the first time, of GBP50 million

o Nectar has 9.3 million digital users, with over one million customers regularly benefitting from personalised promotions through My Nectar Prices and Nectar360 revenues are ahead of plan

o Tu Clothing is now a GBP1 billion brand, with sales growth of 3.1% versus FY 2019/20, underpinned by good online sales, up 49%

   --      Save to Invest: We are making good progress with our cost saving programme. 

o We reduced our cost: sales ratio by 83 basis points versus FY 2019/20 and continue to target reducing our cost: sales ratio by 200 basis points despite significantly higher inflationary pressures

o Transforming our eat-in, takeaway and delivery food and drink and bakery offer as well as hot food counter closures will save GBP125-150 million over three years and integrating the Sainsbury's, Argos and Habitat supply chain and logistics operations will save at least GBP250 million when complete

o The cost savings programme is fuelling investment in our grocery value and our broader customer offer

   --      Plan for Better: This year we have accelerated our sustainability goals. 

o As a Principal Partner of COP26, we brought forward our commitment to be Net Zero in our own operations by 2035, five years ahead of our original target. We have also committed to reduce our Scope 3 emissions by 30% by 2030.

o We are proud to support our communities and raised over GBP6 million for Comic Relief as part of this year's Red Nose Day and have already donated a further GBP2 million to Comic Relief to support the humanitarian crisis in Ukraine

o Through our partnership with Neighbourly, we donated over 2.5 million meals between August and March - the equivalent of GBP4.8 million - to charities and community groups(6) , additionally supporting our target to reduce food waste by 50% by 2030

 
 Financial Summary                2021/22      2020/21      2019/20      YoY            Yo2Y 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Statutory performance 
 Group revenue (excl. 
  VAT, inc. fuel)                 GBP29,895m   GBP29,048m   GBP28,993m   2.9%           3.1% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Profit/(loss) before 
  tax(3)                          GBP854m      GBP(164)m    GBP278m      N/A            207% 
                                 -----------  -----------  -----------                 --------------- 
 Profit/(loss) after tax(3)       GBP677m      GBP(201)m    GBP170m      N/A            298% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Basic earnings/(loss) 
  per share(3)                    29.8p        (9.4)p       6.7p         N/A            367% 
                                                                        ------------- 
 
 Business performance 
 Group sales (inc. VAT)           GBP33,355m   GBP32,285m   GBP32,394m   3.3%           3.0% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Retail sales (inc. VAT, 
  excl. fuel)                     GBP28,095m   GBP28,837m   GBP26,868m   (2.6)%         4.6% 
                                 -----------  -----------  -----------  -------------  --------------- 
 Digital sales                    GBP10.8bn    GBP12.1bn    GBP6.0bn     (11)%          80% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Underlying profit before 
  tax (2, 3)                      GBP730m      GBP357m      GBP586m      104%           25% 
                                 -----------  -----------  -----------  -------------  --------------- 
 Underlying basic earnings 
  per share (2, 3)                25.4p        11.7p        19.8p        117%           28% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Interim dividend per 
  share                           3.2p         3.2p         3.3p         0%             (3.0)% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Proposed Final dividend 
  per share(7)                    9.9p         7.4p         7.3p         34%            36% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Proposed Full-year dividend 
  per share(7)                    13.1p        10.6p        10.6p        24%            24% 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Net debt(2)                      GBP6,759m    GBP6,469m    GBP6,947m    Up GBP290m     Down GBP188m 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Non-lease net debt               GBP141m      GBP640m      GBP1,179m    Down GBP499m   Down GBP1,038m 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 Return on capital employed(2)    8.4%         5.6%         7.4%         Up 280bps      Up 100bps 
-------------------------------  -----------  -----------  -----------  -------------  --------------- 
 

Like-for-like sales performance

 
                                        2020/21                         2021/22 YoY 
    ----------------------------                      ----------------------------------------------- 
                                     Q3        Q4        Q1       Q2        Q3        Q4        FY 
                                  --------  --------  -------  --------  --------  --------  -------- 
  Like-for-like sales (exc. 
   fuel)                            8.6%      11.3%     1.6%    (1.4)%    (4.5)%    (5.6)%    (2.3)% 
                                  --------  --------  -------  --------  --------  --------  -------- 
  Like-for-like sales (inc. 
   fuel)                            3.2%      3.2%      8.4%     3.0%      0.6%      2.7%      3.6% 
                                  --------  --------  -------  --------  --------  --------  -------- 
 
  Total sales performance 
                                        2020/21                         2021/22 YoY                                       2021/22 Yo2Y 
                                                      -----------------------------------------------  -------------------------------------------------- 
                                     Q3        Q4        Q1       Q2        Q3        Q4        FY        Q1        Q2        Q3         Q4         FY 
    ----------------------------  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  Grocery                           7.4%      7.1%      0.8%     0.8%     (1.1)%    (1.6)%    (0.2)%     11.3%     6.0%      6.6%       4.7%       7.6% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  General Merchandise               6.0%      17.6%    (1.4)%   (11.4)%   (16.0)%   (21.1)%   (11.9)%    5.6%     (4.7)%    (11.0)%    (5.8)%     (4.6)% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  GM (Argos)                        8.4%      18.1%    (3.7)%   (12.0)%   (16.1)%   (20.4)%   (12.5)%    6.7%     (2.4)%    (9.1)%     (4.7)%     (3.0)% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  GM (Sainsbury's Supermarkets)    (5.4)%     14.8%    11.2%    (8.0)%    (15.7)%   (24.1)%   (8.6)%     0.9%     (14.4)%   (20.0)%    (10.9)%    (12.0)% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  Clothing                          0.4%      4.2%     57.6%     9.2%     (2.7)%    (9.3)%     12.7%     15.5%     1.0%     (1.7)%     (6.8)%      3.1% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  Total Retail (excl. fuel)         6.8%      9.2%      1.6%    (1.7)%    (5.3)%    (6.2)%    (2.6)%     10.3%     3.4%      1.4%       2.2%       4.6% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  Fuel                             (29.0)%   (38.5)%   95.1%     36.1%     47.5%     80.1%     60.0%    (14.4)%   (3.8)%     3.6%       11.7%     (2.6)% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
  Total Retail (inc. fuel)          1.7%      1.6%      8.5%     2.7%     (0.1)%     2.2%      3.4%      6.2%      2.2%      1.7%       3.7%       3.5% 
                                  --------  --------  -------  --------  --------  --------  --------  --------  --------  --------  ----------  -------- 
 
 

Outlook

We start this year in a good position financially, with continued operating momentum and sharp execution supporting our strong competitive position.

The year ahead will be impacted by significant external pressures and uncertainties, including higher operating cost inflation and cost of living pressures impacting customers' disposable incomes.

In that context we are determined to continue our consistent improvement in grocery value, innovation and customer service, funded by our comprehensive cost savings programme and we expect to continue our strong grocery volume market share performance.

At this early stage of the financial year we expect underlying profit before tax will be between GBP630 million and GBP690 million in FY 2022/23. This is below the GBP730 million reported in FY 2021/22, a year which benefited by an estimated GBP100 million from elevated COVID-19 driven grocery volumes, but significantly ahead of the GBP586 million reported in FY 2019/20.

We continue to expect to generate retail free cash flow of at least GBP500 million in FY 2022/23. Together with our strong balance sheet, this is reflected in our commitment to return a higher proportion of underlying profits to shareholders, initially through an increased payout ratio.

Capital Allocation

Cash flow and Leverage

We have had another year of strong free cash flow generation, with retail free cash flow of GBP503 million despite some reversal of last year's exceptional working capital inflows.

Over the last three years we have generated average retail free cash flow of GBP633 million, ahead of our target of at least GBP500 million.

Strong cash generation, disciplined spending and a GBP240 million benefit from convertible bond redemptions have enabled us to reduce non-lease net debt by over GBP1.8 billion, from GBP2 billion five years ago to GBP141 million in FY 2021/22. We have hit our four-year GBP950 million+ net debt reduction target a year ahead of schedule and our net debt to EBITDA leverage ratio now stands at 3.1x.

We have achieved this deleverage while simultaneously paying a broadly stable dividend per share to shareholders, a total of GBP1.1 billion over five years and propose a full-year dividend per share this year of 13.1p, a 24 per cent increase year on year and the highest dividend per share we have paid since 2015. This will return around GBP300 million of cash to shareholders.

Capital Allocation

-- Looking forward, we will continue to invest in the business to support and accelerate our strategy, including the Save to Invest programme and the ongoing transition to a more digital future

-- We expect capital expenditure to remain in the range of GBP700 million to GBP750 million and expect to continue to generate retail free cash flow of at least GBP500 million per year

-- We will use some of this retail free cash flow to deleverage further, targeting a solid investment grade balance sheet consistent with target leverage of net debt to EBITDA of 3.0x - 2.4x

-- We are focused on delivering strong dividends and will return a higher proportion of underlying earnings to shareholders, in the first instance through the ordinary dividend, where we will increase the dividend payout ratio from around 53 per cent of underlying earnings to around 60 per cent

-- We expect leverage to move below 3x over time, helped by a reduced impact of lease liabilities relating to property currently in the Highbury and Dragon property investment pools. Once leverage is comfortably within our target range, we expect to be able to return more cash to shareholders through higher dividends and/or share buybacks

Capital allocation priorities

   1.     Invest in the business to support and accelerate our strategy 
   2.     A solid investment grade balance sheet, targeting leverage of 3.0x-2.4x net debt/EBITDA 

3. Deliver strong ordinary dividends for shareholders, with a payout ratio of around 60 per cent of underlying net earnings

4. Selectively invest in projects where commercially interesting/NPV positive opportunities exist, such as lease buy-ins

   5.     Return surplus cash to shareholders through higher dividends and/or share buybacks 

Dividend

The Board has proposed a final dividend of 9.9 pence per share. This brings the full-year dividend to 13.1 pence per share, a 24% increase, reflecting the strong growth in earnings per share and covered 1.9 times by underlying earnings.

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 webcast presentation will be available to view on our website at 7.30am (BST). The webcast can be accessed at the following link: https://webcasts.sainsburys.co.uk/sainsbury167

Following the release of the webcast, a Q&A conference call will be held at 9.30am (BST). This will be available to listen to on our website at the following link: https://webcasts.sainsburys.co.uk/sainsbury168

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 2022/23 First Quarter Trading Statement at 07:00 (BST) on 5 July 2022.

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 one year into our three-year plan to transform Sainsbury's and put food back at the heart of our business. We are simplifying our operations at pace and accelerating our cost saving programmes in order to invest in consistently delivering value to customers, improving food quality and increasing innovation. Our brands that deliver - Argos, Habitat, Tu, Nectar and Sainsbury's Bank - support our core food business, delivering for customers and shareholders in their own right. We will continue to pursue partnerships and to outsource where appropriate, where a partnership model can help us improve our customer offer and make our business more efficient and simpler.

Food First

We are putting food back at the heart of Sainsbury's. This means we are focused on lowering prices, launching new products and improving service. We have gained grocery volume market share from our key supermarket competitors on both a one and two-year basis(1) and grocery sales are up 7.6 per cent on a two-year basis.

Value

We are making good progress to improve the value of our food. We know that the current cost of living situation is challenging for everyone and we are relentlessly focused on delivering consistent long-term value by offering customers great quality, tasty food at low prices. As a result of being bold in our cost savings plan, we are able to drive investment back into lower food prices and we are consistently inflating behind competitors on the products customers buy most often - including milk, eggs, potatoes, bread, vegetables, fish and meat. As a result, our relative price position has remained strong throughout the year - improving 310 basis points against Aldi, year on year(9) , leading to more customers shopping with us. By focusing on fresh and high-volume lines we are offering customers better value, improving price perception and delivering strong volume market performance.

Through the year our Price Lock promotion fixed the price of up to 2,000 items for a minimum of at least eight weeks. Customers can be assured that prices will not rise on those products, helping them to plan and budget. Through Price Lock we are holding down the prices of more products than our competitors.

We have also increased the number of entry price point products on offer for customers, including Greengrocer fruit & vegetables, J. James meat and poultry and Stamford Street ready meals offer customers a wide choice of products.

Innovation

We have delivered our plan to triple the number of new lines we sell, launching over 1,900 products across all our food brands. We developed our 'Inspired to Cook' range in response to the shift towards eating at home and cooking from scratch, launching a range of over 200 products across Grocery and Fresh Foods which make home cooking simple and tasty for customers. In March we launched 350 new branded World Food products, our biggest investment into this category to date and in the first six weeks sales are up significantly.

Our premium Taste the Difference range continues to perform well, particularly at key seasonal and celebratory moments when people want to trade up, such as Christmas and Easter. We have grown sales by 15 per cent versus two years ago.

In March we began our food hall transformation programme. We have rolled out our successful Beauty Hall format in more stores, improved the layout of our fresh ranges to make it easier for customers to shop, increased our popular World Foods ranges and improved our in-store bakeries. We have also simplified some of our ranges and provided a greater breadth of products across others, delivering more choice for customers on the products they really want.

Service

We are committed to rewarding our colleagues and all Sainsbury's and Argos retail colleagues now receive a base rate of pay of GBP10 per hour, above both the National Living Wage and the Living Wage. In March we increased inner London pay from GBP10.10 to GBP11.05 in line with the London Living Wage. We have announced that from 1 May 2022 the outer London rate will also be moving to GBP11.05, from GBP10.50. This means that all Sainsbury's and Argos retail colleagues earn the Living Wage wherever they are in the UK. We were the first supermarket among the big four to make this happen.

Alongside competitive pay we also offer a comprehensive benefits package, including year-round colleague discount of 10 per cent, increased to 15 per cent for five days around every pay day, pension contributions and an improved family leave policy.

We improved customer service scores in supermarkets(5) and are adapting our Sainsbury's store estate to offer more new and innovative products. This year we opened four new supermarkets and as part of our drive to offer a broader range of distinctive food to customers in-store, on the move and at home, we announced bold new plans to transform our eat-in, takeaway and home delivery offer. Through a partnership with Boparan Restaurant Group we have developed "The Restaurant Hub" format, a food hall style offer with different brands which we will roll out across 30 stores in the next year, with more to come in the future. We will also open 30 Starbucks cafés in Sainsbury's stores in the next year, bringing the total number to 60. We took the decision to close 200 underperforming cafés in the Spring.

Our Convenience business grew 9 per cent driven by more people returning to the workplace, with sales now broadly back at pre-pandemic levels. We opened 19 convenience stores and closed 23. We are making progress with our plan to open more Neighbourhood Hub stores which give customers a larger, more convenient local store with a wider produce range, more choice and better services.

39 per cent of our overall business now comes through digital channels, versus 23 per cent in FY 2019/20. We are seeing a normalisation of pre-COVID-19 shopping patterns as customers are returning to shopping in stores and demand for Groceries Online, non-food home delivery and Click & Collect has stabilised, although it remains more than double pre-pandemic levels.

Groceries Online accounted for 17 per cent of grocery sales with an average of 690,000 orders per week. In FY 2021/22 we grew our Groceries Online market share to become the second largest online grocery retailer, up from fourth before the pandemic(8) . This scale gives us advantage. We have improved profitability by enhancing picking rates and van utilisation. We are exploring new ways to make our delivery services better for customers and more efficient and initiatives include one-hour saver slots and changes to our delivery pass model. Customer satisfaction in Online is improving relative to competitors(5) .

We relaunched our same day groceries service in 284 stores and we continue to grow our On Demand grocery offer. In the fourth quarter we averaged 130,000 weekly orders from over 580 stores in as little as 30 minutes through our Chop Chop service and partnerships with Deliveroo and Uber Eats.

Brands that Deliver

Our brands that deliver - Nectar, Argos, Habitat, Tu and Sainsbury's Bank - are delivering for our customers and our shareholders and supporting investments in our wider customer offer.

Argos sales were down 12.5 per cent year on year against last year's high sales during the pandemic. Sales were down three per cent over two years and were impacted by availability issues caused by supply chain disruptions and the strategic decisions we made to reduce promotions and exit less profitable categories. Reflecting this focus, household and home and furniture sales grew while sales of toys, consumer electronics and technology categories declined. We have grown our furniture market share over the past two years, driven by Habitat, Sainsbury's and Argos's main home and furniture brand. Following a relaunch in September, Habitat products are now available in 600 Sainsbury's stores and online via the Argos and Habitat websites. We are growing our digital presence to ensure that we are well placed to serve customers who increasingly want to buy online. 80 per cent of Argos sales are now online, up from 63 per cent two years ago.

Nectar supports our ambitions in food by giving customers personalised rewards for their loyalty. 9.3 million digital Nectar users can benefit from personalised offers with us and with our Nectar partners. This year we launched My Nectar Prices - an innovative data-led tool which gives customers discounted prices that are personal to them, delivering even more value for loyal customers. Over one million customers are benefitting from lower prices and we will develop the proposition further. Nectar360, our marketing services business, is making good progress and we are on track to hit our 2026 plan on profit.

Tu clothing delivered sales growth of 12.7 per cent over one year and 3.1 per cent over two years and delivers over GBP1 billion in sales. We are selling more clothing at full price - with full priced sales participation now at 89 per cent compared with 65 per cent two years ago - and running fewer promotions, which improves profitability and supports increased investment in our core food business.

We continue to make good progress reshaping, strengthening and simplifying our Financial Services business, with profits of GBP38 million versus a loss of GBP21 million in FY 2020/21. This compares with GBP48 million in FY 2019/20. FY 2020/21 was impacted by COVID-19 where we saw significantly reduced demand across consumer credit, combined with increased bad debt provisions and less activity in our fee-based products, particularly Travel Money. Reflecting the Bank's progress, following the year end, it has paid dividend to the Group for the first time, of GBP50 million.

We have continued to improve our digital capability with the launch of the Argos Monthly Payment Plan, which allows customers to spread the cost of a purchase across fixed monthly repayments for a period of their choice. We have transformed the Sainsbury's Bank loan application journey for single and joint applicants with a fully digital onboarding experience that can transfer funds to accounts in just minutes. We have also improved the application journey for savings customers.

Save to Invest

We are making good progress with our cost saving programme, making bold decisions and prioritising what really matters to customers. By reducing our retail operating costs, we are able to invest more into our core food business, delivering better value, increasing our innovation and improving customer service. Our retail operating costs to sales ratio has reduced by 83 basis points versus FY 2019/20 and we continue to target reducing the ratio by at least 200 basis points by the end of FY 2023/24, despite cost inflation being significantly higher than was anticipated when this target was set.

We are working at pace to integrate the Sainsbury's, Argos and Habitat supply chain and logistics networks, which will save at least GBP250 million over the programme, improve overall efficiency and deliver a better service to our customers. Our property rationalisation programme is on track and this year we closed four underperforming supermarkets and 23 convenience stores. We are also working to improve the efficiency of Groceries Online, moving stores to a new, more efficient routing system and improving pick rates, which will save the business around GBP50 million overall. In addition, we are investing to improve the checkout experience for customers and colleagues which will drive around GBP50 million of cost efficiencies. This includes trialling improvements to the layout of self-service areas, making it easier for colleagues to help customers, reducing queuing times and creating additional space for shoppers with trolleys, increasing participation.

We are making good progress in Argos's end-to-end transformation programme, which will save GBP105 million over three years. We have opened five Local Fulfilment Centres (LFCs) and as a result, our customers are benefitting from improved availability, faster delivery and more collection options; we plan to open nine more LFCs this year. In line with improving availability and convenience for customers whilst reducing costs, this year we opened 64 Argos stores inside Sainsbury's supermarkets plus 62 in-store collection points. We have closed 73 standalone Argos stores this year. As of 5 March 2022, Argos has 728 stores, of which 400 are inside Sainsbury's supermarkets.

We partner with third parties and outsource where necessary to deliver for our customers, whilst supporting our own cost saving programme and our focus on food. The changes we are making to our cafes, hot food counters and bakeries will create GBP125-150 million of savings over three years and we will continue to explore ways to work with partners to drive value and improve service for our customers.

We are proud of our strong relationships with suppliers and are continuing to work closely with them to drive value and simplify processes, enabling us to lower our cost to serve and buy better, as well as minimising the impact of rising inflation as much as possible for customers.

Plan for Better

This year we have accelerated our sustainability goals, as set out in our Plan for Better. We have made good progress against our programme of change and have announced a more ambitious target towards becoming a Net Zero business.

Better for the planet

We are strengthening our commitment to tackle the climate crisis by accelerating our target to become Net Zero in our operations by 2035, five years earlier than our initial ambition and in alignment with the UN's own goal to limit global warming. Outside of our operations, we also have introduced an ambitious Scope 3 target, which requires the reduction of absolute GHG (greenhouse gas) emissions by 30 per cent by 2030, to align to well below the 2degC scenario of the Paris Agreement. The target includes reducing emissions from purchased goods, upstream transport and distribution, services sold and our customers' use and consumption of the products we sell. By delivering against our Scope 3 targets by 2030, we will help customers make more sustainable product choices.

Overall, we have reduced our absolute GHG emissions within our operations to 762,119 tCO2e, a reduction of 7 per cent year-on-year and 20 per cent from our 2018/19 baseline, keeping us on course for our new 2035 target. We have hit some key milestones in our plan, including the roll out of LED lighting across 100 per cent of our supermarket estate and transitioning to 100 per cent renewable electricity. We have also committed to the long-term purchasing of renewable energy from new wind farms and solar projects, significantly reducing our reliance on fossil fuels. For the eighth consecutive year we were awarded an A rating for climate change by CDP, an environmental impact disclosure system, and are the only UK retailer to have achieved this.

We were proud to be the Principal Supermarket Partner of COP26 in Glasgow in November. Alongside announcing our commitment to becoming Net Zero five years ahead of schedule, we joined other retailers to sign WWF's Retailers' Commitment For Nature, pledging to come together to halve the environmental impact of the UK food sector by 2030.

We have introduced measures to reduce the amount of plastic packaging we use. We no longer sell plastic straws, equating to the removal of 18.5 million plastic straws from circulation and reducing plastic by 6.6 tonnes. We have also introduced flexible plastic recycling collection points at all of our supermarkets to make it easier for our customers to recycle.

Better for Everyone

In line with our commitment to reduce food waste by 50 per cent by 2035, we have increased our food distribution to people by 119 per cent year on year. In August, we partnered with Neighbourly and from August to March we donated over 2.5 million meals, which is equivalent to a GBP4.8 million saving to charities and community groups(6) .

Supply chain transparency is one our highest priorities and having previously published our Tier 1 clothing sites, this year we also published our Tier 1 food sites. This provides even greater transparency across our categories and we have committed to publishing additional lists of our General Merchandise and Goods Not for Resale sites this year.

Reflecting our drive for inclusivity, this year our ethnically diverse colleague network 'I AM ME' was recognised in the Top 10 Network Groups at the UK Ethnicity Awards and we joined the Black British Network to help improve representation even further across the business. We also committed GBP1 million in donations to Black charities and community groups supporting education, social mobility, Black businesses and food insecurity, areas which our colleagues and customers identified as especially important to them.

This year we raised over GBP6 million for Comic Relief, in addition to the GBP2 million we donated as a business to support the humanitarian crisis in Ukraine, followed by an additional GBP600,000 raised by our customers. We are proud to support the communities we serve and this year have raised a total of GBP38.4 million for good causes.

Better for You

Our Better for You pillar prioritises delivering healthy and sustainable diets for all. As the cost of living rises, we are more committed than ever to supporting healthy diets by keeping prices low on every day, staple items, including fresh and produce.

As part of our target to measure healthy and sustainable diets, we announced our goal to achieve at least 83.1 per cent of 'healthy' and 'better for you' sales by 2025. We are currently flat year on year at 80 per cent. We also disclosed our protein sales, with 72 per cent of protein sales being plant based and meat-free products, of which 12 per cent is entirely plant based.

To encourage customers to follow a healthy diet, we continued to support the government's Healthy Start vouchers. During the six-month programme, we topped up these vouchers to a higher value than any other retailer and helped over 17,000 customers take home an additional 1.2 million portions of fruit and vegetables.

(1) NielsenIQ Panel volume growth YoY and Yo2Y. Total FMCG (excluding Kiosk & Tobacco), 52 weeks to March 2022. Market Universe: Total Outlets

(2) Refer to alternative performance measures for definitions and reconciliation to statutory measures

(3) Results for 2021 and 2020 have been restated to remove business rates from onerous contract provisions in line with IFRIC 21. Refer to note 2 of financial statements

(4) Nielsen panel data, Top 100 SKUs by retailer. Average Selling Price YoY growth to March 2022

(5) Competitor Benchmarking survey, supermarket and online customer satisfaction

(6) Based on GBP1.90 per meal

(7) Special dividend is included against FY 2019/20 to aid comparability

(8) NielsenIQ Panel online value share. Total FMCG (excluding Kiosk & Tobacco), 52 weeks to March 2022. Market Universe: Total Outlets

(9) Edge by Ascential data, internal modelling

Financial Review of the year results for the 52 weeks to 5 March 2022

In the 52 weeks to 5 March 2022, the Group generated profit before tax of GBP854 million (2020/21: loss before tax of GBP164 million; 2019/20: profit before tax of GBP278 million) and an underlying profit before tax of GBP730 million (2020/21: GBP357 million; 2019/20: GBP586 million). COVID-19 caused significant distortions to trading, operating costs and timing of business rates costs in 2020/21. Therefore in some cases commentary has been provided versus the pre-COVID-19 2019/20 financial year.

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 to   52 weeks to 
                                                    05 March      06 March   Change 
                                                        2022       2021(1) 
                                                        GBPm          GBPm        % 
 
 Group sales (including VAT)                          33,355        32,285      3.3 
 Retail sales (including VAT)                         32,924        31,854      3.4 
 Retail sales (excluding fuel, including VAT)         28,095        28,837    (2.6) 
 
 Group sales (excluding VAT)                          29,895        29,048      2.9 
 Retail sales (excluding VAT)                         29,463        28,617      3.0 
 
 
 Underlying operating profit/(loss) 
 Retail                                                1,001           731       37 
 Financial services                                       38          (21)      N/A 
----------------------------------------------  ------------  ------------  ------- 
 Total underlying operating profit                     1,039           710       46 
 
 Underlying net finance costs                          (309)         (353)       12 
 Underlying profit before tax                            730           357      104 
 Items excluded from underlying results                  124         (521)      N/A 
----------------------------------------------  ------------  ------------  ------- 
 Profit/(Loss) before tax                                854         (164)      N/A 
 Income tax expense                                    (177)          (37)      378 
----------------------------------------------  ------------  ------------  ------- 
 Profit/(Loss) for the financial period                  677         (201)      N/A 
----------------------------------------------  ------------  ------------  ------- 
 
 Underlying basic earnings per share                   25.4p         11.7p      117 
 Basic earnings/(loss) per share                       29.8p        (9.4)p      N/A 
 Interim Dividend per share                             3.2p          3.2p        - 
 Final Dividend per share                               9.9p          7.4p       34 
 Total Dividend per share                              13.1p         10.6p       24 
----------------------------------------------  ------------  ------------  ------- 
 

1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information.

Underlying profit before tax is up GBP373 million, and up GBP144 million compared to 2019/20, driven by continued elevated sales despite much lower COVID-19 costs, falling finance costs, and the delivery of the Argos Transformation programme, offset by increased variable pay. We have made strong progress on our Save to Invest plans, with an 83bps reduction in operating costs allowing for considerable investments to improve value for customers.

Group sales

Group sales (including VAT, including fuel) increased by 3.3 per cent year-on-year. Retail sales (including VAT, excluding fuel) decreased by 2.6 per cent, as General Merchandise sales moderated, but remained ahead of 2019/20. Fuel sales increased by 60.0 per cent and Financial Services sales increased by 0.2 per cent.

 
 Total sales performance by category      52 weeks to     52 weeks to     52 weeks to       YoY     Yo2Y 
                                        05 March 2022   06 March 2021   07 March 2020    Change   Change 
                                                GBPbn           GBPbn           GBPbn         %        % 
 Grocery                                         21.0            21.1            19.5    (0.2)%     7.6% 
 General Merchandise                              6.1             6.9             6.4   (11.9)%   (4.6)% 
 Clothing                                         1.0             0.9             1.0     12.7%     3.1% 
 Retail (exc. fuel)                              28.1            28.8            26.9    (2.6)%     4.6% 
 Fuel sales                                       4.8             3.0             4.9     60.0%   (2.6)% 
 Retail (inc. fuel)                              32.9            31.9            31.8      3.4%     3.5% 
-------------------------------------  --------------  --------------  --------------  --------  ------- 
 

Grocery sales remained significantly above pre-pandemic levels reflecting a sustained shift of consumption in-home. In line with the reduction of government restrictions during the period, sales were stronger in the first half, and moderated in the second half, albeit at a level still higher than 2019/20. We delivered a strong volume market share performance, supported by our value investments for customers. We inflated prices behind the market and key competitors on high volume lines supported by our Sainsbury's Quality, Aldi Price Match programme and other value initiatives.

General Merchandise sales declined, reflecting tough comparators and availability challenges driven by both product supply and freight availability. Clothing recovered strongly from a year of suppressed demand with growth driven by full price sales and increased in-store sales.

Fuel sales increased by 60.0 per cent, driven by both increased demand as traffic volumes recovered and inflation in the market driven by higher oil prices, but remained below pre COVID-19 levels.

 
 Total sales performance by channel                        52 weeks to     52 weeks to 
                                                         05 March 2022   06 March 2021 
                                                        --------------  -------------- 
 Total Sales fulfilled by Supermarket stores                    (2.0)%           11.4% 
      Supermarkets (inc Argos stores in Sainsbury's)            (1.8)%            2.5% 
      Groceries Online                                          (4.7)%          119.6% 
 Convenience                                                      8.8%          (9.4)% 
------------------------------------------------------  --------------  -------------- 
 

Overall sales served from our Supermarkets fell by 2.0 per cent after rising 11.4 per cent in the prior year. Within this, Supermarket sales including Argos stores in Sainsbury's fell by 1.8 per cent. Groceries Online sales decreased by 4.7 per cent, as COVID-19 restrictions ended and demand moderated through the year after rapid growth of almost 120 per cent in the previous year. Convenience sales grew by 8.8 per cent, driven by the recovery of sales in urban sites most impacted by reduced footfall in the previous year.

 
 Retail like-for-like sales performance       52 weeks to     52 weeks to 
                                            05 March 2022   06 March 2021 
----------------------------------------   --------------  -------------- 
 Like-for-like sales (exc. fuel)                   (2.3)%            8.1% 
 Like-for-like sales (inc. fuel)                     3.6%            0.7% 
-----------------------------------------  -------------- 
 
 

Retail like-for-like ('LFL') sales, excluding fuel, decreased by 2.3 per cent (2020/21: 8.1 per cent increase), reflecting lower General Merchandise sales, but showed strong growth versus 2019/20 led by Grocery sales. The impact of stores temporarily closed due to COVID-19 have been included within LFL sales, with only permanently closed sites treated as not LFL.

Space

In 2021/22, Sainsbury's opened four new supermarkets and closed four (2020/21: opened one new supermarket and closed 11 ). There were 19 new Convenience stores opened in the year and 23 were closed (2020/21: 15 opened and nine stores closed).

During the period 64 new Argos stores in Sainsbury's were opened and 73 standalone Argos stores were closed, in line with our Argos Transformation plan. The number of Argos collection points in Sainsbury's stores increased from 306 to 335. As at 5 March 2022, Argos had 728 stores including 400 stores in Sainsbury's.

 
 Store numbers and retailing space 
                                    As at                                                                        As at 
                                           -----------  ---------------------  ---------------------------- 
                                 06 March                                                                     05 March 
                                                                                Extensions / refurbishments 
                                     2021   New stores   Disposals / closures                   / downsizes       2022 
------------------------------  ---------  -----------  ---------------------  ----------------------------  --------- 
 
 Supermarkets                         598            4                    (4)                            65        598 
 Supermarkets area '000 sq. 
  ft.                              20,822          134                   (78)                          (75)     20,803 
 
 Convenience                          813           19                   (23)                             1        809 
 Convenience area '000 sq. ft.      1,929           42                   (54)                             1      1,918 
 Sainsbury's total store 
  numbers                           1,411           23                   (27)                            66      1,407 
------------------------------  ---------  -----------  ---------------------  ----------------------------  --------- 
 
 Argos stores                         401            -                   (73)                             -        328 
 Argos stores in Sainsbury's          336           64                      -                             -        400 
 Argos in Homebase                      -            -                      -                             -          - 
 Argos total store numbers            737           64                   (73)                             -        728 
 Argos collection points              306           62                   (33)                             -        335 
 Habitat                                3            -                      -                             -          3 
------------------------------  ---------  -----------  ---------------------  ----------------------------  --------- 
 

In 2022/23, we expect to open one supermarket and around 20 new convenience stores, and to close around two supermarkets and five convenience stores. In addition, we expect to open around 25 Argos stores inside Sainsbury's, and close around 60 Argos standalone stores.

In the UK, the standalone Argos store estate will reduce to around 100 stores by March 2024, while we expect to have 430-460 Argos stores inside Sainsbury's supermarkets as well as 450-500 collection points.

Retail underlying operating profit

 
 
                                                 52 weeks to   52 weeks to   52 weeks to      YoY      Yo2Y 
                                                    05 March      06 March      07 March 
                                                        2022       2021(1)       2020(1)   Change    Change 
 Retail underlying operating profit (GBPm)(2)          1,001           731           938    36.9%      6.7% 
 Retail underlying operating margin (%)(3)              3.40          2.55          3.30    85bps     10bps 
 
 Retail underlying EBITDA (GBPm)(4)                    2,145         1,910         2,135    12.3%      0.5% 
 Retail underlying EBITDA margin (%)(5)                 7.28          6.67          7.51    61bps   (23)bps 
----------------------------------------------  ------------  ------------  ------------  -------  -------- 
 

1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information.

2 Retail underlying earnings before interest, tax and Sainsbury's underlying share of post-tax profit from joint ventures.

   3      Retail underlying operating profit divided by retail sales excluding VAT. 

4 Retail underlying operating profit before underlying depreciation and amortisation of GBP1,144 million.

   5      Retail underlying EBITDA divided by retail sales excluding VAT. 

Retail underlying operating profit increased by 36.9 per cent to GBP1,001 million (2020/21: GBP731 million) and retail underlying operating margin increased by 85 basis points year-on-year to 3.40 per cent (2020/21: 2.55 per cent). COVID-19 costs reduced materially year on year to GBP82 million (2020/21: GBP485 million).

Retail underlying operating profit was up 6.7 per cent versus two years ago (2019/20: GBP938 million), reflecting sales growth and a retail underlying operating margin improvement of 10bps. Our Save to Invest programme delivered an 83bps reduction in operating costs as a percentage of sales versus 2019/20. We have invested much of this benefit, as well as benefits from fuel and more profitable clothing and general merchandise sales into lower grocery prices, targeted at key products for customers, driving strong volume growth.

Savings were delivered across the business, with significant contributions from our retail operating model work, both for in Store and Online where annualisation of rapid growth in the prior year allowed material efficiencies. Argos transformation continued to deliver savings as we integrate the two businesses and reduce occupancy and store operational costs . Savings from our Logistics Transformation programme helped to mitigate the significant cost pressures felt.

In 2022/23, Sainsbury's expects a retail underlying depreciation and amortisation charge of around GBP1.2 billion, including around GBP500 million right of use asset depreciation.

Financial Services

 
 Financial Services results 
 12 months to 28 February 2022 
                                                2022    2021     Change 
-------------------------------------------- 
 
 Underlying revenue (GBPm)                       432     431         0% 
 Interest and fees payable (GBPm)               (57)    (90)      (37)% 
 Total income (GBPm)                             375     341        10% 
 Underlying operating profit/(loss) (GBPm)        38    (21)        N/A 
--------------------------------------------  ------  ------  --------- 
 
 Net interest margin (%)(1)                      4.5     3.5     100bps 
 Cost:income ratio (%)                            74      74          - 
 Bad debt as a percentage of lending (%)(2)      1.2     1.8      60bps 
 Active customers (m) - Bank                     1.8     1.8          - 
 Active customers (m) - AFS                      2.1     2.2       (4)% 
 Tier 1 capital ratio (%)(3)                    15.6    17.6   (200)bps 
 Total capital ratio (%)(4)                     18.1    20.2   (210)bps 
 Unsecured lending (GBPbn)                       4.3     4.1         5% 
 Secured lending (GBPbn)                         0.8     1.3      (38)% 
 Customer deposits (GBPbn)                     (4.2)   (5.1)      (18)% 
--------------------------------------------  ------  ------  --------- 
 
   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. Reflects impact of dividend declared.

   4      Total capital divided by risk-weighted assets. 

Financial Services returned to profit with underlying operating profit of GBP38 million (2020/21: loss of GBP21 million). This reflects both a reduction in credit provisioning as the unemployment outlook improved, a release of some COVID-19 related bad debt provisions made in 2020/21 and improvements in net interest margin. Unsecured lending balances were lower on average through the year, but recovered well in the second half and ended the year up 5 per cent.

Financial Services total income of GBP375 million increased by 10 per cent year-on-year (FY 2020/21: GBP341 million). Net interest margin recovery is reflective of management action to reduce interest payable through savings rates alongside improvements in unsecured asset margins and a lower mix of secured lending (following our decision to cease new mortgage lending in 2019). Fee income has risen as activity post lockdown increased, with ATMs and Card fees both recovering, whilst Travel Money remains subdued but is higher than last year.

The Financial Services cost:income ratio is flat at 74.0 per cent (FY 2020/21: 74.0 per cent). Of the GBP27 million increase in costs, GBP17m reflects higher royalty payments to Argos, therefore the ratio is down on a group contribution basis.

Bad debt expense as a percentage of lending decreased 60 basis points year-on-year to 1.2 per cent (FY 2020/21: 1.8 per cent), driven by stable arrears and the improving economic outlook. We released GBP12 million of our COVID provision, reflecting the more positive economic outlook, particularly in relation to forecast unemployment.

In line with the group strategic priority Brands that Deliver, and reflecting the Bank's strong capital position, a GBP50 million dividend has been paid. This is a key milestone as we start to deliver on our commitment that Financial Services will be cash generative for the Group. The Bank remains well capitalised with a CET1 ratio of 15.6 per cent, a decrease from 17.6 per cent last year driven by this dividend payment.

We expect a further improvement in Financial Services underlying operating profit in the year ahead.

Underlying net finance costs

Underlying net finance costs reduced by 12 per cent to GBP309 million (2020/21: GBP353 million). These costs include GBP40 million of net non-lease interest (2020/21: GBP60 million). The reduction of net non-lease interest is driven by the repayment of the GBP200m Green loan in August 2021 and redemption of the perpetual convertible bonds in July 2021. The net interest costs on lease liabilities have reduced to GBP269 million (202/21: GBP293 million), mainly due to lower interest rates on new leases.

Sainsbury's expects underlying net finance costs in 2022/23 of between GBP315 million - GBP325 million, including around GBP270 million - GBP280 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 or loss 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.

 
  Items excluded from underlying results              52 weeks to        52 weeks to 
                                                    05 March 2022   06 March 2021(1) 
                                                             GBPm               GBPm 
-------------------------------------------------  --------------  ----------------- 
 Restructuring and integration programmes                   (103)              (345) 
 Impairment charges                                             -              (220) 
-------------------------------------------------  --------------  ----------------- 
 Restructuring, impairment and integration                  (103)              (565) 
 Income recognised in relation to legal disputes              182                 42 
 Software as a service accounting adjustment                 (21)                  - 
 IAS 19 pension income                                         11                  6 
 Property, finance and acquisition adjustments                 55                (4) 
 Items excluded from underlying results                       124              (521) 
-------------------------------------------------  --------------  ----------------- 
 

1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information.

- Restructuring, impairment and integration costs of GBP103 million (2020/21: GBP565 million) include GBP92 million (2020/21: GBP548 million) relating to the programme announced in November 2020 for the structural integration of Sainsbury's and Argos. We expect that we will incur one off costs from these infrastructure, operating model and structure changes of GBP900 million to GBP1 billion, with cash costs of around GBP300m million, with the majority in the period to March 2024. In line with IFRIC 21 "Levies", business rates are now recognised as a periodic cost as incurred and as such we expect approximately GBP40 million of business rates associated with leased properties in the restructuring programme to be recognised after the year ended March 2024. Refer to note 2 for further details. Cash costs in the year were GBP114 million (2020/21: GBP39 million). To date we have incurred costs of GBP640 million and cash costs of GBP153 million. In 2022/23 we expect to incur cash costs of around GBP100 million in relation to this programme.

- Income recognised in relation to legal disputes of GBP182 million (2020/21: GBP42 million) primarily relates to two settlements for overcharges from payment card processing fees. GBP75 million of cash was received in prior financial years and held as deferred income, with GBP93 million of cash received in the year net of legal fees. The prior year relates to ATM business rates reimbursement, and GBP14 million of cash was received in the year in relation to these.

- Software as a service accounting policy change resulted in a non-cash cost of GBP21 million (2020/21: Nil) following the IFRS interpretations committee clarification of how these costs should be treated. These costs represent the prior year impacts of this change.

- IAS 19 Pension income of GBP11 million (2020/21: GBP6 million) comprises pension finance income of GBP15 million and scheme expenses of GBP4 million.

- Other movements of GBP55 million income (2020/21: cost of GBP4 million) relate to property profits, acquisition adjustments and non-underlying financing costs. The positive movement year on year is driven by a gain on energy derivatives of GBP76 million driven by higher 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, however are not designated in hedging relationships, therefore gains and losses are recognised in the income statement. Increases in electricity forward prices in the year have led to gains on the related derivative financial instruments. During the year, the Group entered into an additional PPA, however have designated this in a formal hedging relationship, with gains and losses being recognised within other comprehensive income.

Taxation

The tax charge was GBP177 million (2020/21: GBP37 million). The underlying tax rate (UTR) was 21.1 per cent (2020/21: 29.4 per cent) and the effective tax rate (ETR) was 20.7 per cent (2020/21: (22.6) per cent).

The UTR is lower than the prior year, with the higher underlying profit resulting in a smaller percentage impact from non-qualifying deprecation and the impact of accounting for the rate change on the recognition of deferred tax. Unlike previous periods, there is a positive impact on the UTR of prior year adjustments for corporation tax, reflecting the release of historic provisions held in respect of now agreed tax returns.

The ETR is significantly higher than the prior year, primarily due to the accounting loss in FY21. The major impact on the ETR in the current year relates to the non-deductibility of non-underlying costs and the impact of prior year adjustments to non-underlying items.

Sainsbury's expects an underlying tax rate in 2022/23 of around 25 per cent.

Earnings per share

Underlying basic earnings per share increased to 25.4 pence (2020/21: 11.7 pence) driven by the increase in underlying earnings, partially offset by a higher share count. Basic earnings per share was 29.8 pence (2020/21: (9.4) pence loss per share).

Dividends

The Board has recommended a final dividend of 9.9 pence per share (2020/21: 7.4 pence). This will be paid on 15(th) July 2022 to shareholders on the Register of Members at the close of business on 10(th) June 2022. In line with the Group's policy to keep the dividend covered 1.9 times by underlying earnings, this will result in an increased full-year dividend of 13.1 pence (2020/21: 10.6 pence), an increase of 24 per cent.

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 24(th) June 2022.

We have laid out a capital allocation framework, signalling that we will prioritise the right level of investment to support our strategy and an investment grade balance sheet but that we expect to pay a higher proportion of underlying net earnings to shareholders, in the first instance through an increase in the dividend pay-out ratio to around 60 per cent from around 53 per cent.

Net debt and retail cash flows

As at 5 March 2022, net debt was GBP6,759 million (6 March 2021: GBP6,469 million), an increase of GBP290 million (2020/21: GBP478 million reduction). Excluding the impact of lease liabilities on net debt, Sainsbury's reduced net debt by GBP499 million in the year of which GBP240 million results from the conversion of the perpetual convertible bond in July 2021. Non lease net debt is now GBP1,381 million lower than at 2018/19 year end, exceeding the four-year GBP950 million non lease net debt reduction target we had communicated with a year to spare, even excluding the impact of the perpetual convertible bond. Sainsbury's expects to generate retail free cashflow of at least GBP500 million per annum on average for the next three years.

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.

Net debt includes lease liabilities under IFRS 16 of GBP6,618 million (2020/21: GBP5,829 million). Lease liabilities increased by GBP789 million, primarily reflecting the impact of exercising purchase options on 21 leased supermarkets held by property investment pools in which the Group holds an interest. Following the exercise of the options, the lease liabilities have been remeasured based on the estimated purchase price of the stores.

 
 Summary cash flow statement (1)                                                                Retail          Retail 
                                                                                           52 weeks to     52 weeks to 
                                                                                         05 March 2022   06 March 2021 
                                                                                                  GBPm            GBPm 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 Retail underlying operating profit                                                              1,001             731 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 
 Adjustments for: 
 Retail underlying depreciation and amortisation                                                 1,144           1,179 
 Share based payments and other                                                                     54              26 
 Retail exceptional operating cash flows (excluding pensions)                                      (3)            (12) 
 Adjusted retail operating cash flow before changes in working capital(2)                        2,196           1,924 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 (Increase)/decrease in working capital(3)                                                       (185)             452 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 Net interest paid(3)                                                                            (323)           (372) 
 Pension cash contributions                                                                       (71)           (101) 
 Corporation tax paid                                                                             (23)            (94) 
                                                                           ---------------------------  -------------- 
 Net cash generated from operating activities(3)                                                 1,594           1,809 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 Cash capital expenditure(3)                                                                     (645)           (568) 
 Repayments of obligations under leases(3)                                                       (491)           (499) 
 Initial direct costs on right-of-use assets                                                       (3)             (7) 
 Proceeds from disposal of property, plant and equipment                                            46              27 
 Dividends and distributions received(3)                                                             2              22 
 Retail free cash flow(3)                                                                          503             784 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 Dividends paid on ordinary shares                                                               (238)           (232) 
 Repayment of borrowings(3)                                                                      (256)           (539) 
 Other(3)                                                                                         (27)            (13) 
 Net (decrease)/increase in cash and cash equivalents                                             (18)               0 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 Decrease in Debt                                                                                  747           1,038 
 Conversion of perpetual convertible bond(4)                                                       240               - 
 Other non-cash and net interest movements(5)                                                  (1,259)           (560) 
 Movement in net debt                                                                            (290)             478 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 
 Opening net debt                                                                              (6,469)         (6,947) 
------------------------------------------------------------------------- 
 Closing net debt                                                                              (6,759)         (6,469) 
-------------------------------------------------------------------------  ---------------------------  -------------- 
       of which 
                     Lease Liabilities                                                         (6,618)         (5,829) 
-------------------------------------------------------------------------  ---------------------------  -------------- 
                     Net Debt Excluding Lease Liabilities                                        (141)           (640) 
-------------------------------------------------------------------------  ---------------------------  -------------- 
 

1 See note 6 for a reconciliation between Retail and Group cash flow. The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information.

   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 increased by GBP272 million year-on-year to GBP2,196 million (2020/21: GBP1,924 million). Retail non underlying operating cashflows of GBP3 million cost (2020/21: GBP12 million cost) reflected legal disputes income offsetting restructuring costs. Working capital increased by GBP185 million (2020/21: GBP452 million decrease), in line with expectations as our working capital position normalised compared to a prior year where both our stock and payables positions were heavily impacted by COVID-19 trading patterns.

Corporation tax paid decreased to GBP23 million (2020/21: GBP94 million) reflecting payments made in the prior year before the decision to forego business rates relief which subsequently impacted taxable profits. Proceeds from disposals of GBP46 million (2020/21: GBP27 million) resulted from disposals of non-trading sites.

Retail free cash flow decreased by GBP281 million year-on-year to GBP503 million (2020/21: GBP784 million), driven by the working capital reduction in the prior year with some of this reversing in the current year. Retail Free cash flow was used to fund dividends and reduce borrowings.

Dividends of GBP238 million were paid in the year, which were covered 2.1 times by free cash flow (2020/21: 3.3 times).

The Group held undrawn committed credit facilities of GBP1,394 million and undrawn uncommitted facilities of GBP245 million as at 5 March 2022.

Capital expenditure

Core retail cash capital expenditure was GBP645 million (2020/21: GBP568 million). This was lower than expected due to a number of projects being delayed due to COVID-19.

Sainsbury's expects core retail cash capital expenditure (excluding Financial Services) to be around GBP700-GBP750 million per annum over the next three years, reflecting investment in high-returning supply chain, logistics and infrastructure projects including the Argos transformation.

Financial Ratios

 
 
 Key financial ratios                    52 weeks to        52 weeks to 
                                       05 March 2022   06 March 2021(1) 
 
 Return on capital employed (%) (2)              8.4                5.6 
 Net debt to EBITDA (3)                    3.1 times          3.4 times 
 Fixed charge cover (4)                    2.8 times          2.2 times 
------------------------------------  --------------  ----------------- 
 

1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information.

2 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 / loss.

3 Net debt of GBP6,759 million includes lease obligations under IFRS 16 and perpetual securities treated as debt, divided by Group underlying EBITDA of GBP2,206 million.

4 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.

All three metrics saw significant improvements due to the recovery of profit and EBITDA following a prior year heavily impacted by COVID-19. Our net debt to EBITDA metric showed a smaller improvement as net debt increased, with the increase in lease liabilities more than offsetting significant non lease net debt reduction.

Property value

As at 5 March 2022, Sainsbury's estimated market value of properties, with values based on a 25 year lease with RPI increases, including our share of properties held within property joint ventures or investment vehicles, was GBP10.9 billion (6 March 2021: GBP10.1 billion), with the increase primarily driven by a reduction in property yields.

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 IAS19 while the funding of the Scheme is determined by the Trustee's triennial valuation. The last triennial valuation, as at 30 September 2018, showed a deficit of GBP538 million. The Trustee is currently carrying out the latest triennial valuation as at 30 September 2021.

At 5 March 2022, the net defined benefit surplus under IAS19 for the Group was GBP2,283 million (excluding deferred tax). The GBP1,539 million increase from 6 March 2021 was driven by both changes in financial assumptions which resulted in a net gain, an adjustment to mortality assumptions and updated experience which lowered liabilities, in addition to gains on plan assets.

During the year, the Sainsbury's section of the Scheme reached full funding on the stronger, secondary funding target agreed as part of the 2018 triennial valuation. This has resulted in one of the three streams of contributions payable to the Scheme under the Asset Backed Contributions funding framework switching off and another stream switching to the Argos section, until that section is also fully funded. Total contributions to the Scheme will therefore reduce by GBP15 million a year.

For 2022/23, total pension scheme cash contributions are expected to be GBP62 million.

 
 Retirement benefit obligations 
                                            Sainsbury's           Argos           Group           Group 
                                                  as at           as at           as at           as at 
                                          05 March 2022   05 March 2022   05 March 2022   06 March 2021 
 
                                                   GBPm            GBPm            GBPm            GBPm 
 Present value of funded obligations            (8,060)         (1,313)         (9,373)        (10,218) 
 Fair value of plan assets                       10,158           1,535          11,693          11,000 
 Pension surplus                                  2,098             222           2,320             782 
 Present value of unfunded obligations             (20)            (17)            (37)            (38) 
---------------------------------------  --------------  --------------  --------------  -------------- 
 Retirement benefit surplus                       2,078             205           2,283             744 
 Deferred income tax liability                    (562)            (78)           (640)           (192) 
---------------------------------------  --------------  --------------  --------------  -------------- 
 Net retirement benefit surplus                   1,516             127           1,643             552 
---------------------------------------  --------------  --------------  --------------  -------------- 
 

Consolidated income statement

for the 52 weeks to 5 March 2022

 
                                         52 weeks to 5 March                           52 weeks to 6 March 
                                                 2022                                          2021 
                                                                                            (Restated) 
-------------------  -----  --------------------------------------------  -------------------------------------------- 
                                      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              29,895                -     29,895            29,048                -     29,048 
 Cost of sales                      (27,538)                9   (27,529)          (26,870)            (333)   (27,203) 
 Gross 
  profit/(loss)                        2,357                9      2,366             2,178            (333)      1,845 
 Administrative 
  expenses                           (1,352)             (78)    (1,430)           (1,480)            (222)    (1,702) 
 Other income                             34              186        220                12                1         13 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 Operating 
  profit/(loss)                        1,039              117      1,156               710            (554)        156 
 Finance income        8                   3               17         20                 3               29         32 
 Finance costs         8               (312)             (10)      (322)             (356)                4      (352) 
                                                               --------- 
 Profit/(loss) 
  before tax                             730              124        854               357            (521)      (164) 
 
 Income tax 
  (expense)/credit     9               (154)             (23)      (177)             (105)               68       (37) 
-------------------  -----                                     ---------                                     --------- 
 Profit/(loss) for 
  the financial 
  period                                 576              101        677               252            (453)      (201) 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 
 Earnings/(loss) 
 per share             10                                          pence                                         pence 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 Basic 
  earnings/(loss)                                                   29.8                                         (9.4) 
 Diluted 
  earnings/(loss)                                                   28.8                                         (9.4) 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 

Refer to note 2 for details of prior year restatements.

Consolidated statement of comprehensive income/(loss)

for the 52 weeks to 5 March 2022

 
                                                                                  52 weeks 
                                                                                      to 6 
                                                                                     March 
                                                                                      2021 
                                                                   52 weeks 
                                                                       to 5 
                                                                      March 
                                                                       2022     (Restated) 
                                                           -----  ---------  ------------- 
                                                            Note       GBPm           GBPm 
                                                           -----  ---------  ------------- 
 Profit/(loss) for the financial year                                   677          (201) 
---------------------------------------------------------  -----  ---------  ------------- 
 
 Items that will not be reclassified subsequently to 
  the income statement 
                                                           -----  ---------  ------------- 
  Remeasurement on defined benefit pension schemes           19       1,457          (482) 
                                                           ----- 
  Movements on financial assets at fair value through 
   other comprehensive income                                            76             55 
  Cash flow hedges fair value movements - inventory 
   hedges                                                                73           (60) 
  Current tax relating to items not reclassified                          -             44 
  Deferred tax relating to items not reclassified                     (461)              9 
---------------------------------------------------------  -----  ---------  ------------- 
                                                                      1,145          (434) 
---------------------------------------------------------  -----  ---------  ------------- 
 Items that may be reclassified subsequently to the 
  income statement 
                                                           ----- 
  Currency translation differences                                      (1)            (5) 
                                                           ----- 
  Movements on financial assets at fair value through 
   other comprehensive income                                           (5)              2 
                                                           ----- 
  Items reclassified from financial assets at fair value 
   through other comprehensive income reserve                             4              - 
                                                           ----- 
  Cash flow hedges fair value movements - non-inventory 
   hedges                                                               131            (1) 
                                                           ----- 
  Items reclassified from cash flow hedge reserve                         7             13 
                                                           ----- 
  Deferred tax on items that may be reclassified                       (57)             10 
---------------------------------------------------------  -----  ---------  ------------- 
                                                                         79             19 
 Total other comprehensive income/(loss) for the year 
  (net of tax)                                                        1,224          (415) 
---------------------------------------------------------  -----  ---------  ------------- 
 Total comprehensive income/(loss) for the year                       1,901          (616) 
---------------------------------------------------------  -----  ---------  ------------- 
 

Refer to note 2 for details of prior year restatements.

Consolidated balance sheet

At 5 March 2022, 6 March 2021 and 7 March 2020

 
                                                                         6 March        7 March 
                                                                            2021           2020 
                                                          5 March 
                                                             2022     (Restated)     (Restated) 
                                                  Note       GBPm           GBPm           GBPm 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 Non-current assets 
 Property, plant and equipment                     12       8,402          8,587          8,949 
 Right of use assets                               13       5,560          4,747          4,826 
 Intangible assets                                 14       1,006            914            974 
 Investments in joint ventures and associates                   3              5              9 
 Financial assets at fair value through other 
  comprehensive income                                        604            754            972 
 Trade and other receivables                                   65             50             43 
 Amounts due from Financial Services customers 
  and other banks                                           2,026          2,280          3,453 
 Derivative financial assets                                  213              8              6 
 Net retirement benefit surplus                    19       2,283            744          1,119 
-----------------------------------------------  -----  ---------  -------------  ------------- 
                                                           20,162         18,089         20,351 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 Current assets 
 Inventories                                                1,797          1,625          1,732 
 Trade and other receivables                                  683            725            811 
 Amounts due from Financial Services customers 
  and other banks                                           3,163          3,127          3,951 
 Financial assets at fair value through other 
  comprehensive income                                        196             90             82 
 Derivative financial assets                                   78              5             12 
 Cash and cash equivalents                         16         825          1,575            994 
-----------------------------------------------  -----             -------------  ------------- 
                                                            6,742          7,147          7,582 
 Assets held for sale                                           8             24              4 
-----------------------------------------------  -----  ---------  -------------  ------------- 
                                                            6,750          7,171          7,586 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 Total assets                                              26,912         25,260         27,937 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 
 Current liabilities 
 Trade and other payables                                 (4,546)        (4,488)        (4,275) 
 Amounts due to Financial Services customers 
  and other deposits                                      (4,444)        (6,086)        (6,890) 
 Borrowings                                        18        (54)          (356)           (48) 
 Lease liabilities                                 13       (526)          (524)          (510) 
 Derivative financial liabilities                            (29)           (93)           (53) 
 Taxes payable                                              (169)           (83)          (168) 
 Provisions                                        15       (100)          (199)          (106) 
-----------------------------------------------  -----             -------------  ------------- 
                                                          (9,868)       (11,829)       (12,050) 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 Net current liabilities                                  (3,118)        (4,658)        (4,464) 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 Non-current liabilities 
 Other payables                                              (24)           (20)           (11) 
 Amounts due to Financial Services customers 
  and other deposits                                        (815)          (203)        (1,204) 
 Borrowings                                        18       (707)          (748)        (1,248) 
 Lease liabilities                                 13     (6,095)        (5,310)        (5,264) 
 Derivative financial liabilities                             (3)           (44)           (36) 
 Deferred income tax liability                              (806)          (255)          (265) 
 Provisions                                        15       (171)          (150)           (68) 
                                                          (8,621)        (6,730)        (8,096) 
 Total liabilities                                       (18,489)       (18,559)       (20,146) 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 
 Net assets                                                 8,423          6,701          7,791 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 Equity 
 Called up share capital                                      668            637            634 
 Share premium                                              1,406          1,173          1,159 
 Merger reserve                                               568            568            568 
 Capital redemption reserve                                   680            680            680 
 Other reserves                                               409            167            168 
 Retained earnings                                          4,692          3,228          4,086 
-----------------------------------------------  -----             -------------  ------------- 
 Total equity before perpetual securities                   8,423          6,453          7,295 
 Perpetual securities                                           -            248            496 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 Total equity                                               8,423          6,701          7,791 
-----------------------------------------------  -----  ---------  -------------  ------------- 
 

Refer to note 2 for details of restatements.

Consolidated cash flow statement

for the 52 weeks to 5 March 2022

 
                                                                                       52 weeks              52 weeks 
                                                                                     to 5 March                  to 6 
                                                                                           2022                 March 
                                                                                                                 2021 
                                                                                                           (Restated) 
                                                              Note                         GBPm                  GBPm 
----------------------------------------------------------  -------  --------------------------  -------------------- 
 Cash flows from operating activities 
 Profit/(loss) before tax                                                                   854                 (164) 
 Net finance costs                                                                          302                   320 
 Operating profit                                                                         1,156                   156 
 Adjustments for: 
                                                              12, 
  Depreciation expense                                         13                         1,069                 1,113 
  Amortisation expense                                         14                           151                   136 
  Net impairment loss on property, plant and equipment,      12,13, 
   right of use assets, intangible assets                      14                             9                   321 
  Non-cash adjustments arising from acquisitions                                              -                   (1) 
  Financial Services movement in loss allowance 
   for loans and advances to customers                                                       19                    85 
  Loss/(profit) on sale of non-current assets and 
   early termination of leases                                                              (6)                  (17) 
  Non-underlying fair value movements                          4                           (76)                     - 
  Share-based payments expense                                                               58                    29 
  Defined benefit scheme expenses                              19                             4                    13 
  Cash contributions to benefit schemes                        19                          (71)                 (101) 
 Operating cash flows before changes in working 
  capital                                                                                 2,313                 1,734 
 Changes in working capital 
  (Increase)/decrease in inventories                                                      (179)                   117 
  Decrease in financial assets at fair value through 
   other comprehensive income                                                               115                   267 
  Decrease in trade and other receivables                                                    33                    62 
  Decrease in amounts due from Financial Services 
   customers and other deposits                                                             161                 1,912 
  Increase in trade and other payables                                                       28                   321 
  (Decrease) in amounts due to Financial Services 
   customers and other deposits                                                         (1,030)               (1,805) 
  (Decrease)/increase in provisions and other liabilities                                  (80)                   177 
 Cash generated from operations                                                           1,361                 2,785 
 Interest paid                                                                            (329)                 (349) 
 Corporation tax paid                                                                      (23)                  (93) 
 Net cash generated from operating activities                                             1,009                 2,343 
----------------------------------------------------------  -------  --------------------------  -------------------- 
 
 Cash flows from investing activities 
 Purchase of property, plant and equipment                                                (416)                 (423) 
 Initial direct costs on new leases                                                         (3)                   (7) 
 Purchase of intangible assets                                                            (278)                 (172) 
 Proceeds from disposal of property, plant and 
  equipment                                                                                  46                    27 
 Dividends and distributions received                                                         2                    22 
 Net cash used in investing activities                                                    (649)                 (553) 
----------------------------------------------------------  -------  --------------------------  -------------------- 
 
 Cash flows from financing activities 
 Proceeds from issuance of ordinary shares                                                   21                    17 
 Proceeds from borrowings                                                                     -                   660 
 Repayment of borrowings                                                                  (248)                 (289) 
 Repayment of short term borrowings                                                           -                 (660) 
 Repayment of perpetual capital securities                                                  (8)                 (250) 
 Purchase of own shares                                                                    (48)                  (30) 
 Repayment of capital element of lease obligations                                        (493)                 (501) 
 Dividends paid on ordinary shares                             11                         (238)                 (232) 
 Dividends paid on perpetual securities                                                     (4)                  (23) 
 Net cash used in financing activities                                                  (1,018)               (1,308) 
----------------------------------------------------------  -------  --------------------------  -------------------- 
 
 Net (decrease)/increase in cash and cash equivalents                                     (658)                   482 
 
 Opening cash and cash equivalents                                                        1,476                   994 
 Closing cash and cash equivalents                             16                           818                 1,476 
----------------------------------------------------------  -------  --------------------------  -------------------- 
 

Refer to note 2 for details of prior year restatement.

Consolidated statement of changes in equity

for the 52 weeks to 5 March 2022

 
                                                           Capital                   Total 
                           Called                       redemption                  equity 
                               up     Share                    and                  before    Perpetual     Perpetual 
                            share   premium    Merger        other   Retained    perpetual      capital   convertible    Total 
                          capital   account   reserve     reserves   earnings   securities   securities         bonds   equity 
                   Note      GBPm      GBPm      GBPm         GBPm       GBPm         GBPm         GBPm          GBPm     GBPm 
 At 7 March 2021 
  (as previously 
  reported)                   637     1,173       568          847      3,131        6,356            -           248    6,604 
                  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 Opening balance 
  adjustment                    -         -         -            -         97           97            -             -       97 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 At 7 March 2021 
  (restated)                  637     1,173       568          847      3,228        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 
  and 
  losses 
  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         -            -        (1)           21            -             -       21 
----------------  ----- 
  Conversion of 
   perpetual 
   convertible 
   bonds                       26       216         -            -        (2)          240            -         (240)        - 
                  ----- 
  Repayment of 
   perpetual 
   convertible 
   bonds                        -         -         -            -          -            -            -           (8)      (8) 
                  ----- 
  Other 
   adjustments                  -         -         -           16       (13)            3            -             -        3 
                  ----- 
  Tax on items 
   charged to 
   equity                       -         -         -            -          3            3            -             -        3 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 At 5 March 2022              668     1,406       568        1,089      4,692        8,423            -             -    8,423 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
                                                           Capital                   Total 
                           Called                       redemption                  equity 
                               up     Share                    and                  before    Perpetual     Perpetual 
                            share   premium    Merger        other   Retained    perpetual      capital   convertible    Total 
                          capital   account   reserve     reserves   earnings   securities   securities         bonds   equity 
                             GBPm      GBPm      GBPm         GBPm       GBPm         GBPm         GBPm          GBPm     GBPm 
 At 8 March 2020 
  (as previously 
  reported)                   634     1,159       568          848      4,068        7,277          248           248    7,773 
                  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 Opening balance 
  adjustment                    -         -         -            -         18           18            -             -       18 
 At 8 March 2020 
  (restated)                  634     1,159       568          848      4,086        7,295          248           248    7,791 
                  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 (Loss)/profit 
  for the period                -         -         -            -      (208)        (208)            -             7    (201) 
                  ----- 
 Other 
  comprehensive 
  income/(loss)                 -         -         -            4      (482)        (478)            -             -    (478) 
                  ----- 
 Tax relating to 
  other 
  comprehensive 
  income/(loss)                 -         -         -          (4)         67           63            -             -       63 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 Total 
  comprehensive 
  loss 
  for the period 
  ended 6 March 
  2021                          -         -         -            -      (623)        (623)            -             7    (616) 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 Cash flow 
  hedges gains 
  and 
  losses 
  transferred to 
  inventory                     -         -         -          (1)          -          (1)            -             -      (1) 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 Transactions 
 with owners: 
  Dividends                     -         -         -            -      (232)        (232)            -             -    (232) 
----------------  ----- 
  Distribution 
   to holders 
   of perpetual 
   securities                   -         -         -            -          -            -            -           (7)      (7) 
----------------  ----- 
  Share-based 
   payment                      -         -         -            -         29           29            -             -       29 
----------------  ----- 
  Purchase of 
   own shares                   -         -         -            -       (30)         (30)            -             -     (30) 
----------------  ----- 
  Allotted in 
   respect of 
   share 
   option 
   schemes                      3        14         -            -          -           17            -             -       17 
----------------  ----- 
  Redemption of 
   perpetual 
   capital 
   securities                   -         -         -            -        (2)          (2)        (248)             -    (250) 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 At 6 March 2021              637     1,173       568          847      3,228        6,453            -           248    6,701 
----------------  -----  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 

Refer to note 2 for details of prior year restatement.

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 5 March 2022 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 2022 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 2022.

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 5 March 2022 (prior financial year: 52 weeks to 6 March 2021). The consolidated financial statements for the 52 weeks to 5 March 2022 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 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 that have been measured at fair value.

Sainsbury's Bank Plc and its subsidiaries have been consolidated for the twelve months to 28 February 2022 being the Bank's year-end date (prior financial year: 28 February 2021). 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.

Unless otherwise stated, significant accounting policies have been applied consistently to all periods presented in the financial statements.

2.1 Prior period restatements

Business rates within property provisions

The consolidated financial statements include a prior year restatement in relation to the treatment of business rates within 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. Unless a separate exit agreement with a landlord has already been agreed, the Group's policy is that this onerous contract provision includes all unavoidable costs of meeting the obligations of the contract - these include service charges and insurance, and have also historically included business rates.

There is apparent mixed practice across companies concerning the treatment of business rates in onerous contract provisions. However following additional guidance published this year by accounting advisory firms, the Group has reassessed its policy in this area, and concluded that business rates are a statutory obligation rather than a contractual one, and should be recognised as a periodic cost in line with IFRIC 21 "Levies". Prior period comparatives have therefore been restated to remove business rates from previously recognised property provisions.

Notional cash pooling

The consolidated financial statements include a prior year restatement in relation to notional cash pooling arrangements where the intention to net settle cannot be clearly demonstrated, and therefore do not meet the requirements for offsetting in accordance with IAS 32: 'Financial Instruments: Presentation'. Prior period comparatives have been restated by grossing up cash and overdrafts (reported within current borrowings). There is no impact on the income statement, cash flow statement nor earnings and diluted earnings per share.

Prior period comparatives

The prior period comparatives have been restated in accordance with IAS 8: 'Accounting Policies, Changes in Accounting Policies and Errors' and have impacted the primary financial statements as follows:

Income statement

For the 52 weeks to 6 March 2021

 
                             Before non-underlying                   Non-underlying items                          Total 
                                     items 
------------------  --------------------------------------  --------------------------------------  ----------------------------------- 
                             As     Business   As restated           As     Business   As restated           As     Business         As 
                     previously        rates                 previously        rates                 previously        rates   restated 
                       reported   adjustment                   reported   adjustment                   reported   adjustment 
                           GBPm         GBPm          GBPm         GBPm         GBPm          GBPm         GBPm         GBPm       GBPm 
------------------  -----------  -----------  ------------  -----------  -----------  ------------  -----------  -----------  --------- 
 Revenue                 29,048            -        29,048            -            -             -       29,048            -     29,048 
 Cost of sales         (26,871)            1      (26,870)        (412)           79         (333)     (27,283)           80   (27,203) 
 Gross 
  profit/(loss)           2,177            1         2,178        (412)           79         (333)        1,765           80      1,845 
 Administrative 
  expenses              (1,480)            -       (1,480)        (238)           16         (222)      (1,718)           16    (1,702) 
 Other income                12            -            12            1            -             1           13            -         13 
------------------  -----------  -----------  ------------  -----------  -----------  ------------  -----------  -----------  --------- 
 Operating 
  profit/(loss)             709            1           710        (649)           95         (554)           60           96        156 
 Finance income               3            -             3           29            -            29           32            -         32 
 Finance costs            (356)            -         (356)            3            1             4        (353)            1      (352) 
                                              ------------ 
 Profit/(loss) 
  before 
  tax                       356            1           357        (617)           96         (521)        (261)           97      (164) 
                                           -                                       -                                       - 
 Income tax 
  (expense)/credit        (105)            -         (105)           86         (18)            68         (19)         (18)       (37) 
------------------  -----------  -----------  ------------  -----------  -----------  ------------  -----------  -----------  --------- 
 Profit/(loss) for 
  the financial 
  period                    251            1           252        (531)           78         (453)        (280)           79      (201) 
------------------  -----------  -----------  ------------  -----------  -----------  ------------  -----------  -----------  --------- 
 
 Earnings per 
  share                    11.7            -          11.7                                               (13.0)          3.6      (9.4) 
 Diluted EPS               11.4            -          11.4                                               (13.0)          3.6      (9.4) 
------------------  -----------  -----------  ------------  -----------  -----------  ------------  -----------  -----------  --------- 
 

Balance sheets

 
 As at 6 March 2021                          As previously      Notional      Business   As restated 
                                                  reported          cash         rates 
                                                                 pooling    adjustment 
                                                              adjustment 
                                                      GBPm          GBPm          GBPm          GBPm 
 Cash and cash equivalents                           1,477            98             -         1,575 
------------------------------------------  --------------  ------------  ------------  ------------ 
 Total assets                                       25,162            98             -        25,260 
------------------------------------------  --------------  ------------  ------------  ------------ 
 
 Current liabilities 
 Borrowings                                          (258)          (98)             -         (356) 
 Taxes payable                                        (59)             -          (24)          (83) 
 Provisions                                          (209)             -            10         (199) 
------------------------------------------  --------------                ------------  ------------ 
 Total current liabilities                        (11,717)          (98)          (14)      (11,829) 
------------------------------------------  --------------  ------------  ------------  ------------ 
 Net current liabilities                           (4,644)             -          (14)       (4,658) 
------------------------------------------  --------------  ------------  ------------  ------------ 
 
 Non-current liabilities 
 Provisions                                          (261)             -           111         (150) 
 Total liabilities                                (18,558)          (98)            97      (18,559) 
------------------------------------------  --------------  ------------  ------------  ------------ 
                                                                                     - 
 Net assets                                          6,604             -            97         6,701 
------------------------------------------  --------------  ------------  ------------  ------------ 
 
 Equity 
 Retained earnings                                   3,131             -            97         3,228 
------------------------------------------  --------------  ------------  ------------  ------------ 
 Total equity before perpetual securities            6,356             -            97         6,453 
 Total equity                                        6,604             -            97         6,701 
------------------------------------------  --------------  ------------  ------------  ------------ 
 
 
 As at 7 March 2020                          As previously      Business   As restated 
                                                  reported         rates 
                                                              adjustment 
                                                      GBPm          GBPm          GBPm 
------------------------------------------  --------------  ------------  ------------ 
 Current liabilities 
 Taxes payable                                       (163)           (5)         (168) 
 Provisions                                          (108)             2         (106) 
------------------------------------------                  ------------  ------------ 
 Total current liabilities                        (12,047)           (3)      (12,050) 
------------------------------------------  --------------  ------------  ------------ 
 Net current liabilities                           (4,461)           (3)       (4,464) 
------------------------------------------  --------------  ------------  ------------ 
 
 Non-current liabilities 
 Provisions                                           (89)            21          (68) 
 Total liabilities                                (20,164)            18      (20,146) 
------------------------------------------  --------------  ------------  ------------ 
                                                                       - 
 Net assets                                          7,773            18         7,791 
------------------------------------------  --------------  ------------  ------------ 
 
 Equity 
 Retained earnings                                   4,068            18         4,086 
------------------------------------------  --------------  ------------  ------------ 
 Total equity before perpetual securities            7,277            18         7,295 
 Total equity                                        7,773            18         7,791 
------------------------------------------  --------------  ------------  ------------ 
 

Cash flow statement

For the 52 weeks to 6 March 2021

 
                                                             As previously      Business          As 
                                                                  reported         rates    restated 
                                                                              adjustment 
                                                                      GBPm          GBPm        GBPm 
----------------------------------------------------------  --------------  ------------  ---------- 
 Cash flows from operating activities 
 Profit/(loss) before tax                                            (261)            97       (164) 
 Net finance costs                                                     321           (1)         320 
---------------------------------------------------------- 
 Operating profit                                                       60            96         156 
---------------------------------------------------------- 
 Operating cash flows before changes in working capital              1,638            96       1,734 
 Changes in working capital                                                            - 
  (Decrease)/increase in provisions and other liabilities              273          (96)         177 
---------------------------------------------------------- 
 Cash generated from operations                                      2,785             -       2,785 
---------------------------------------------------------- 
 Net cash generated from operating activities                        2,343             -       2,343 
----------------------------------------------------------  --------------  ------------  ---------- 
 
 Net cash used in investing activities                               (553)             -       (553) 
----------------------------------------------------------  --------------  ------------  ---------- 
 
 Net cash used in financing activities                             (1,308)             -     (1,308) 
----------------------------------------------------------  --------------  ------------  ---------- 
 
 Net (decrease)/increase in cash and cash equivalents                  482             -         482 
----------------------------------------------------------  --------------  ------------  ---------- 
 

Change in accounting policy - Software as a Service (SaaS) arrangements

During the year, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred in implementing software as a service (SaaS) arrangements. This is in response to the IFRS Interpretations Committee (IFRIC) agenda decision clarifying its interpretation of how current accounting standards apply to these types of arrangements during the current financial year. Adjustments in relation to costs capitalised in prior years have therefore been recognised as follows:

 
                                GBPm 
---------------------------    ----- 
 Intangible assets              (30) 
 Prepayments                       9 
-----------------------------  ----- 
 Total assets / net assets      (21) 
-----------------------------  ----- 
 
 Administrative expenses        (21) 
-----------------------------  ----- 
 Profit before tax              (21) 
-----------------------------  ----- 
 

The impact is not considered to have a material impact on the prior year balance sheet nor income statement, therefore the prior year results have not been restated. Given this is an out of period cost and could distort comparability between reporting periods, this has been included within non-underlying profit before tax. Intangible asset write-offs have been included within disposals.

In addition to the above, GBP14 million of current year spend that would have been capitalised to intangible assets under the Group's previous accounting policy has now been recognised within prepayments (GBP6 million) and underlying profit (GBP8 million). There is no impact on cash flows.

2.2 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 27 April 2023.

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 long-term maturities 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 Revolving Credit Facility is split into two Facilities, a GBP300 million Facility (A) and a GBP1,094 million Facility (B). Facility A has a final maturity of April 2025 and Facility B has a final maturity of October 2024. As at 5 March 2022, both Facility (A) and Facility (B) were undrawn.

In assessing going concern, scenarios in relation to the Group's principal risks have been considered by overlaying them into the corporate plan and assessing the impact on cash flows, net debt and funding headroom. 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 incorporates assumed cashflows to address climate change risks, including those associated with the Group's Plan for Better commitment which include reducing environmental impacts and meeting customer expectations in this area, notably through reducing packaging and 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.

Consideration was also given to the conflict in Ukraine which has continued to develop subsequent to the Group's balance sheet date. Inflationary pressures which may be caused by the conflict are already incorporated into the overall going concern assessment, as such the impact of the conflict in Ukraine does not impact the conclusions reached over 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.

2.3 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 7 March 2021 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 9 'Financial Instruments', IAS 39 'Financial Instruments: Recognition and Measurement' and IFRS 7 'Financial Instruments: Disclosures' on the Interest Rate Benchmark Reform - Phase 2

- Amendment to IFRS 16 'Leases' with regards to the exemption granted in the 'COVID-19-related rent concessions'

The Group early adopted the Interest Rate Benchmark Reform Phase 2 amendments in the financial year ended 6 March 2021. The Group has elected not to apply the exemption granted in the 'COVID-19-related rent concessions' as the Group has not received material COVID-19-related rent concessions as a lessee.

Standards and revisions effective for future periods:

The following standards and revisions will be effective for future periods:

- Amendments to IFRS 3 'Business Combinations' with reference to the Conceptual Framework

- Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' on Onerous Contracts - Cost of Fulfilling a Contract

- Amendments to IAS 16 'Property, Plant and Equipment' on Proceeds before Intended Use

- 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'

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 or uncontrollable factors which affect IFRS measures, 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 that the Group has focused on in the period are defined and reconciled on page 50 to 54. All of the APMs relate to the current period's results and comparative periods.

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, and 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.

The most significant non-underlying items in the current year relate to income received in relation to the settlement of legal disputes over interchange fees, and costs associated with restructuring programmes. More details on each are included further below.

The Group has not included any additional costs incurred or credits received directly in relation to the impacts of COVID-19 within non-underlying items. Whilst some items (such as additional expenses incurred protecting colleagues and customers) are discrete and can be separately quantified, others, such as incremental food sales cannot be reliably disaggregated from the Group's underlying performance. The Group has therefore concluded that presenting some movements as underlying and others as non-underlying would give an imbalanced view that is not easily comparable to past and subsequent periods.

 
                                Cost   Administrative     Other       Net finance          Total    Tax          Total 
                            of sales         expenses    income    income/(costs)    adjustments           adjustments 
                                                                                          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) 
 Revaluation of deferred 
  tax balances                     -                -         -                 -              -      9              9 
 Other tax adjustments             -                -         -                 -              -    (7)            (7) 
 
 Total adjustments                 9             (78)       186                 7            124   (23)            101 
------------------------  ----------  ---------------  --------  ----------------                        ------------- 
 

Income recognised in relation to legal disputes

During the current period, agreements were reached and two legal cases settled in relation to overcharges from payment card processing fees, which largely reflect inter-bank "interchange fees". This has led to net income of GBP167 million being recognised. The Group has one ongoing legal case remaining.

Of the GBP167 million, cash of GBP75 million was received in a prior year and held as deferred income. Net cash of GBP93 million was received during the current financial year and GBP1 million of legal fees remains outstanding.

In addition, a provision for a legal claim totalling GBP13 million has been released as it was assessed during the financial period that a pay-out is no longer considered probable.

Restructuring programmes

In the prior year, 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 which began in the prior year and has continued into the current year. Total cumulative costs to 5 March 2022 are GBP(640) million split between GBP(548) million in the prior year and GBP(92) 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. In line with IFRIC 21 "Levies", business rates are now recognised as a periodic cost and as such approximately GBP40 million of business rates associated with leased properties in the restructuring programme will be recognised after the year ended March 2024. Refer to note 2 for further details.

(Costs)/gains recognised in the current year are as follows:

 
                                                   52 weeks to     52 weeks to 
                                                  5 March 2022    6 March 2021 
                                                                    (Restated) 
                                                          GBPm            GBPm 
----------------------------------------------  --------------  -------------- 
 Write downs of property, plant and equipment 
  (a)                                                      (6)            (26) 
 Write downs of leased assets (a)                          (3)            (72) 
 Write downs of intangible assets                            -             (3) 
 Closure provisions (b)                                   (24)           (145) 
 Accelerated depreciation of assets (c)                   (33)            (27) 
 Redundancy provisions (d)                                (40)            (61) 
 Consultancy costs                                        (18)            (10) 
 Gain on lease terminations (e)                              9              16 
 Property Profits (f)                                       12               - 
 Recognition of sub lease debtor (g)                        11               - 
----------------------------------------------  --------------  -------------- 
 Restructuring programmes                                 (92)           (328) 
 Impairment of non-financial assets                          -           (220) 
----------------------------------------------  --------------  -------------- 
 Total restructuring and impairment costs                 (92)           (548) 
----------------------------------------------  --------------  -------------- 
 

a) During the financial year, the Group announced the closure of 200 of its in-store cafes. Related assets have been written down as a result.

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.

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 café and food counter closures.

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 and right of use assets, as well as any closure provisions previously recognised.

f) Profit on disposal of properties relates to profits recognised in the period as sites previously impaired as part of the restructuring programmes have been disposed of.

g) During the year, the Group was able to negotiate a sub-lease on a previously impaired site for the duration of the remaining headlease. This resulted in the creation of a sub-lease debtor, with any difference between the lease receivable and right of use asset being recognised in the income statement.

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.

Software as a service accounting adjustment

During the year, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred in implementing software as a service (SaaS) arrangements; refer to note 2.1 for further details. Costs capitalised in prior years totalling GBP21 million have been written off this year. Given this is an out of period cost and could distort comparability between reporting periods, this has been included within non-underlying profit before tax.

Financial Services transition and other

These comprise Financial Services transition costs of GBP(11) million and were incurred in transitioning to new banking platforms as part of the previously announced New Bank Programme. These principally comprise contractor and service provider costs relating to the migration of data and other services to the Bank's new infrastructure and operating model. These costs of integration do not reflect the business's trading performance and so are adjusted to ensure consistency between periods. The programme ended this financial year.

Property, finance, pension and acquisition adjustments

-- A further GBP2 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.

-- Profit on disposal of non-trading properties for the financial period comprised GBP(7) million for the Group. These are excluded from underlying profit as such profit is not related to the ongoing operating activities of the Group.

-- Non-underlying finance and fair value movements for the financial period comprised GBP68 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 GBP76 million of income in relation to favourable 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. Increases in electricity forward prices in the year have led to gains on the related derivative financial instruments. During the year, the Group entered into an additional PPA, however have designated this in a formal hedging relationship, with gains and losses being recognised within other comprehensive income. The remaining movements of GBP(8) million within finance income and costs are analysed further in note 8.

-- Defined benefit pension interest and expenses comprises pension finance income of GBP15 million and scheme expenses of GBP(4) million (see note 19). 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 5 March       52 weeks to 6 March 
                                    2022                      2021 
--------------  ------------------------  ------------------------ 
                 Argos   Nectar    Total   Argos   Nectar    Total 
                                   Group                     Group 
                  GBPm     GBPm     GBPm    GBPm     GBPm     GBPm 
--------------  ------  -------  -------  ------  -------  ------- 
 Depreciation        3        -        3       5        -        5 
 Amortisation     (18)      (5)     (23)    (18)      (6)     (24) 
                  (15)      (5)     (20)    (13)      (6)     (19) 
--------------  ------  -------  -------  ------  -------  ------- 
 

Comparative information (restated)

 
                                Cost   Administrative     Other       Net finance          Total    Tax          Total 
                                  of         expenses    income    income/(costs)    adjustments           adjustments 
                               sales                                                      before 
                                                                                             tax 
                                GBPm             GBPm      GBPm              GBPm           GBPm   GBPm           GBPm 
---------------------------  -------  ---------------  --------  ----------------  -------------  -----  ------------- 
 Restructuring programmes      (263)             (65)         -                 -          (328)     58          (270) 
 Impairment of 
  non-financial 
  assets                       (112)            (108)         -                 -          (220)     33          (187) 
 Financial Services 
  transition 
  and other                        -             (17)         -                 -           (17)      3           (14) 
 Total restructuring, 
  impairment 
  and integration              (375)            (190)         -                 -          (565)     94          (471) 
 
 Property, finance, pension 
 and acquisition 
 adjustments 
 ATM business rates 
  reimbursement                   42                -         -                 -             42    (8)             34 
 Profit on disposal of 
  properties                       -                -         1                 -              1      7              8 
 Perpetual securities 
  coupons                          -                -         -                14             14      -             14 
 Non-underlying finance            -                -         -                                       - 
 movements                                                                      -              -                     - 
 IAS 19 pension (expenses ) 
  / income                         -             (13)         -                19              6    (1)              5 
 Acquisition adjustments           -             (19)         -                 -           (19)      4           (15) 
 Total property, finance, 
  pension 
  and acquisition 
  adjustments                     42             (32)         1                33             44      2             46 
 
 Tax adjustments 
 Derecognition of capital 
  losses                           -                -         -                 -              -   (28)           (28) 
 
 Total adjustments             (333)            (222)         1                33          (521)     68          (453) 
---------------------------  -------  ---------------  --------  ----------------                 -----  ------------- 
 

Refer to note 2 for details of prior year restatements.

Cash flow statement

The table below shows the impact of non-underlying items on the Group cash flow statement

 
                                                        52 weeks      52 weeks 
                                                      to 5 March    to 6 March 
                                                            2022          2021 
                                                            GBPm          GBPm 
-------------------------------------------------   ------------  ------------ 
 Cash flows from operating activities 
 IAS 19 pension expenses                                     (7)           (7) 
 Financial Services transition and other                    (13)          (15) 
 Restructuring programmes                                  (114)          (39) 
 Income recognised in relation to legal disputes              93             - 
 ATM rates reimbursement                                      14            27 
--------------------------------------------------  ------------  ------------ 
 Cash used in operating activities                          (27)          (34) 
 
 Cash flows from investing activities 
 Proceeds from property disposals(1)                          46            27 
--------------------------------------------------  ------------  ------------ 
 Cash generated from investing activities                     46            27 
 
 Net cash flows                                               19           (7) 
--------------------------------------------------  ------------  ------------ 
 

1. GBP19 million of the current period proceeds from property disposals are a result of restructuring programmes.

5 Revenue

 
                                                      5 March 2022   6 March 2021 
                                                              GBPm           GBPm 
---------------------------------------------------  -------------  ------------- 
 Grocery and General Merchandise & Clothing (GM&C)          25,440         26,103 
 Fuel                                                        4,023          2,514 
 Total retail sales                                         29,463         28,617 
 
 Financial Services interest receivable                        322            344 
 Financial Services fees and commission                        110             87 
 Total Financial Services income                               432            431 
 
 Total revenue                                              29,895         29,048 
---------------------------------------------------  -------------  ------------- 
 

6 Segment reporting

Background

Management has determined the operating segments based on the information provided to the Operating Board (the Chief Operating Decision Maker for the Group) to make operational decisions on the management of the Group. Three operating segments were identified as follows:

   -        Retail - Food 
   -        Retail - General Merchandise and Clothing 
   -        Financial Services 

Management has considered the economic characteristics, in particular average gross margin, similarity of products, production processes, customers, sales methods and regulatory environment of its two Retail segments. In doing so it has been concluded that they should be aggregated into one 'Retail' segment in the financial statements. This aggregated information provides users the financial information needed to evaluate the business and the environment in which it operates.

The Operating Board assesses the performance of all segments on the basis of underlying profit before tax. Underlying profit before tax is an APM as described in note 3. All material operations and assets are in the UK.

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 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 (note 4)                                            124 
 Profit before tax                                                          854 
 Income tax expense (note 9)                                              (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 charges                                    8           1          9 
 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.

 
                                                           Financial 
                                                  Retail    Services      Group 
 52 weeks to 6 March 2021 (Restated)                GBPm        GBPm       GBPm 
---------------------------------------------  ---------  ----------  --------- 
 Segment revenue 
 Retail sales to external customers               28,617           -     28,617 
 Financial Services to external customers              -         431        431 
 Revenue                                          28,617         431     29,048 
---------------------------------------------  ---------  ----------  --------- 
 
 Underlying operating profit/(loss)                  731        (21)        710 
 Underlying finance income                             3           -          3 
 Underlying finance costs                          (356)           -      (356) 
 Underlying profit/(loss) before tax                 378        (21)        357 
 Non-underlying expense                                                   (521) 
 Loss before tax                                                          (164) 
 Income tax expense                                                        (37) 
 Loss for the financial year                                              (201) 
---------------------------------------------  ---------  ----------  --------- 
 
 Assets                                           17,735       7,520     25,255 
 Investment in joint ventures and associates           5           -          5 
 Segment assets                                   17,740       7,520     25,260 
---------------------------------------------  ---------  ----------  --------- 
 Segment liabilities                            (11,941)     (6,618)   (18,559) 
---------------------------------------------  ---------  ----------  --------- 
 
 
 Other segment items 
 Additions to non-current assets 
  Property, plant and equipment                      419           -        419 
  Intangible assets                                  145          27        172 
  Right-of-use assets                                542           -        542 
 Depreciation expense(1) 
   Property, plant and equipment                     627           2        629 
   Right-of-use assets                               483           1        484 
 Amortisation expense(2) 
  Intangible assets                                  116          20        136 
 Impairment charges                                  216         105        321 
 Restructuring charges                               227           -        227 
 Share based payments                                 26           3         29 
---------------------------------------------  ---------  ----------  --------- 
 

1. Depreciation within the Retail segment includes a GBP(5) million credit in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. 2. Amortisation expense within the Retail segment includes GBP24 million charge in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK.

Refer to note 2 for details of prior year restatements.

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 5 March                           52 weeks to 6 March 
                                                                    2022                                   2021 (Restated) 
                           APM                     Retail              Financial                  Group                 Retail              Financial                  Group 
                                                                        Services                                                             Services 
             reference 
 
                                                     GBPm                   GBPm                   GBPm                   GBPm                   GBPm                   GBPm 
 
 Profit/(loss) before 
  tax                                                 833                     21                    854                   (17)                  (147)                  (164) 
----------------------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  --------------------- 
 Net finance costs                                    304                    (2)                    302                    320                      -                    320 
                                                           ---------------------  ---------------------  --------------------- 
 Operating profit                                   1,137                     19                  1,156                    303                  (147)                    156 
 Adjustments for: 
 Depreciation and amortisation 
  expense                                           1,197                     23                  1,220                  1,226                     23                  1,249 
 Net impairment charge 
  on property, plant 
  and equipment, right-of-use 
  assets and intangible 
  assets                                                8                      1                      9                    216                    105                    321 
 Non-cash adjustments 
  arising from acquisitions                             -                      -                      -                    (1)                      -                    (1) 
 Financial Services 
  movement in loss allowance 
  for loans and advances 
  to customers                                          -                     19                     19                      -                     85                     85 
 (Profit)/loss on sale 
  of non-current assets 
  and early termination 
  of leases                                           (6)                      -                    (6)                   (19)                      2                   (17) 
 Non-underlying fair 
  value movements                                    (76)                      -                   (76)                      -                      -                      - 
 Share-based payments 
  expense                                              53                      5                     58                     26                      3                     29 
 Non-cash defined benefit 
  scheme expenses                                       4                      -                      4                     13                      -                     13 
 Cash contributions 
  to defined benefit 
  scheme                                             (71)                      -                   (71)                  (101)                      -                  (101) 
 Operating cash flows 
  before changes in 
  working capital                                   2,246                     67                  2,313                  1,663                     71                  1,734 
 Changes in working 
  capital 
 Movements in working 
  capital                                           (306)                  (646)                  (952)                    612                    439                  1,051 
 Cash generated from 
  operations                                        1,940                  (579)                  1,361                  2,275                    510                  2,785 
 Interest paid              a                       (319)                   (10)                  (329)                  (349)                      -                  (349) 
 Corporation tax (paid)/received                     (23)                      -                   (23)                   (94)                      1                   (93) 
 Net cash generated/(used) 
  from operating activities                         1,598                  (589)                  1,009                  1,832                    511                  2,343 
----------------------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  --------------------- 
 
 Cash flows from 
 investing 
 activities 
 Purchase of property, 
  plant and equipment                               (416)                      -                  (416)                  (423)                      -                  (423) 
 Initial direct costs 
  on new leases                                       (3)                      -                    (3)                    (7)                      -                    (7) 
 Purchase of intangible 
  assets                                            (229)                   (49)                  (278)                  (145)                   (27)                  (172) 
 Proceeds from disposal 
  of property, plant 
  and equipment                                        46                      -                     46                     27                      -                     27 
 Dividends and 
  distributions 
  received                  e                           2                      -                      2                     22                      -                     22 
 Net cash used in investing 
  activities                                        (600)                   (49)                  (649)                  (526)                   (27)                  (553) 
----------------------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  --------------------- 
 
 Cash flows from 
 financing 
 activities 
 Proceeds from 
  issuance 
  of ordinary shares        d                          21                      -                     21                     17                      -                     17 
 Proceeds from short 
  term borrowings           c                           -                      -                      -                    660                      -                    660 
 Repayment of 
  borrowings                c                       (248)                      -                  (248)                  (289)                      -                  (289) 
 Repayment of short 
  term borrowings           c                           -                      -                      -                  (660)                      -                  (660) 
 Repayment of 
  perpetual 
  capital securities        c                         (8)                      -                    (8)                  (250)                      -                  (250) 
 Purchase of own 
  shares                    d                        (48)                      -                   (48)                   (30)                      -                   (30) 
 Repayment of capital 
  element of 
  obligations 
  under lease 
  liabilities               b                       (491)                    (2)                  (493)                  (499)                    (2)                  (501) 
 Dividends paid on 
  ordinary shares                                   (238)                      -                  (238)                  (232)                      -                  (232) 
 Dividends paid on 
  perpetual 
  securities                a                         (4)                      -                    (4)                   (23)                      -                   (23) 
 Net cash used in financing 
  activities                                      (1,016)                    (2)                (1,018)                (1,306)                    (2)                (1,308) 
----------------------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  --------------------- 
 
 Net (decrease)/increase 
  in cash and cash equivalents                       (18)                  (640)                  (658)                      -                    482                    482 
----------------------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  --------------------- 
 

Refer to note 2 for details of prior year restatements.

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 performed. 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.

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.

 
                                             52 weeks            52 weeks 
                                           to 5 March          to 6 March 
                                                 2022                2021 
                                                 GBPm                GBPm 
--------------------------------------   ------------  ------------------ 
 
 Fixed amounts                                    208                 236 
 Supplier rebates                                  94                  55 
 Marketing and advertising income (1)              79                  69 
 Total supplier arrangements                      381                 360 
---------------------------------------  ------------  ------------------ 
 

1. The prior year has been restated. There is no impact to any of the primary statements.

Of the above amounts, the following was outstanding and held on the balance sheet at the period-end:

 
                                         52 weeks              52 weeks 
                                       to 5 March            to 6 March 
                                             2022                  2021 
                                             GBPm                  GBPm 
----------------------------------   ------------  -------------------- 
 Within inventory                             (4)                   (5) 
 
 Within current trade receivables 
 Supplier arrangements due                     39                    49 
 Accrued supplier arrangements                 37                    37 
 
 Within current trade payables 
 Supplier arrangements due                     47                    32 
 Accrued supplier arrangements                  2                     5 
 Deferred income due                            -                   (2) 
 Total supplier arrangements                  121                   116 
-----------------------------------  ------------  -------------------- 
 

8 Finance income and finance costs

 
                                                     2022                             2021 (restated) 
                                      Underlying   Non-Underlying   Total   Underlying   Non-Underlying   Total 
                                            GBPm             GBPm    GBPm         GBPm             GBPm    GBPm 
-----------------------------------  -----------  ---------------  ------  -----------  ---------------  ------ 
 Interest on bank deposits and 
  other financial assets                       1                -       1            1                -       1 
 Fair value measurements                       -                2       2            -               10      10 
 IAS 19 pension financing income               -               15      15            -               19      19 
 Finance income on net investment 
  in leases                                    2                -       2            2                -       2 
 Finance Income                                3               17      20            3               29      32 
-----------------------------------  -----------  ---------------  ------  -----------  ---------------  ------ 
 
 Secured borrowings                         (40)                -    (40)         (49)                -    (49) 
 Unsecured borrowings                        (2)                -     (2)          (1)                -     (1) 
 Lease liabilities                         (271)             (10)   (281)        (295)             (10)   (305) 
 Provisions - amortisation of 
  discount                                   (1)                -     (1)          (1)                -     (1) 
 Interest capitalised - qualifying 
  assets                                       2                -       2            4                -       4 
 Perpetual securities coupon                   -                -       -         (14)               14       - 
 Finance costs                             (312)             (10)   (322)        (356)                4   (352) 
-----------------------------------  -----------  ---------------  ------  -----------  ---------------  ------ 
 

Refer to note 2 for details of prior year restatements.

9 Taxation

 
                                                        52 weeks to     52 weeks to 
                                                       5 March 2022    6 March 2021 
                                                                         (Restated) 
                                                               GBPm            GBPm 
---------------------------------------------------  --------------  -------------- 
 Current year UK tax                                            131              34 
 Current year overseas tax                                        6               6 
 Under/(over) provision in prior years                            5            (12) 
 Total current tax expense                                      142              28 
 
 Origination and reversal of temporary differences               52            (46) 
 (Over)/under provision in prior years                         (35)              27 
 Adjustment from changes in tax rates                            23               - 
 Derecognition of capital losses                                (5)              28 
 Total deferred tax expense                                      35               9 
 
 Total income tax expense in income statement                   177              37 
---------------------------------------------------  --------------  -------------- 
 
 Analysed as: 
   Underlying tax                                               154             105 
   Non-underlying tax                                            23            (68) 
 Total income tax expense in income statement                   177              37 
---------------------------------------------------  --------------  -------------- 
 
 Underlying tax rate                                          21.1%           29.4% 
 Effective tax rate                                           20.7%         (22.6)% 
---------------------------------------------------  --------------  -------------- 
 

Refer to note 2 for details of prior year restatements.

10 Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Share Ownership Trusts, which are treated as cancelled.

In calculating the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and the number of shares that would be issued if all perpetual subordinated convertible bonds are assumed to be converted.

Underlying earnings per share is provided by excluding the effect of any non-underlying items as defined in note 4. This alternative measure of earnings per share is presented to reflect the Group's underlying trading performance. All operations are continuing for the periods presented.

 
                                                                          2022           2021 
                                                                                   (Restated) 
                                                                       million        million 
-----------------------------------------------------------------  -----------  ------------- 
 Weighted average number of shares in issue                            2,271.8        2,210.0 
 Weighted average number of dilutive share options                        39.6           21.7 
 Weighted average number of dilutive subordinated perpetual 
  convertible bonds                                                       39.6           88.4 
 Total number of shares for calculating diluted earnings 
  per share                                                            2,351.0        2,320.1 
-----------------------------------------------------------------  -----------  ------------- 
 
                                                                          GBPm           GBPm 
-----------------------------------------------------------------  -----------  ------------- 
 Profit/(loss) for the financial period (net of tax)                       677          (201) 
 Less profit attributable to: 
   Holders of perpetual convertible bonds                                    -            (7) 
 Profit/(loss) for the financial period attributable to 
  ordinary shareholders                                                    677          (208) 
-----------------------------------------------------------------  -----------  ------------- 
 
 Diluted earnings/(loss) for calculating diluted earnings/(loss) 
  per share                                                                677          (208) 
-----------------------------------------------------------------  -----------  ------------- 
 
 Profit/(loss) for the financial period attributable to 
  ordinary shareholders of the parent                                      677          (208) 
 Adjusted for non-underlying items (note 4)                              (124)            521 
 Tax on non-underlying items                                                23           (68) 
 Add back coupons on perpetual securities (net of tax)                       -             14 
 Underlying profit after tax attributable to ordinary 
  shareholders of the parent                                               576            259 
 Add coupon on subordinated perpetual convertible bonds 
  (net of tax)                                                               -              6 
 Diluted underlying profit after tax attributable to ordinary 
  shareholders of the parent                                               576            265 
-----------------------------------------------------------------  -----------  ------------- 
 
                                                                         Pence          Pence 
                                                                     per share      per share 
-----------------------------------------------------------------  -----------  ------------- 
 Basic earnings/(loss)                                                    29.8          (9.4) 
 Diluted earnings/(loss)(1)                                               28.8          (9.4) 
 Underlying basic earnings                                                25.4           11.7 
 Underlying diluted earnings                                              24.5           11.4 
-----------------------------------------------------------------  -----------  ------------- 
 

1. Basic and diluted loss per share are the same in the prior year as the dilutive share options and their respective earnings adjustments are anti-dilutive.

Refer to note 2 for details of prior year restatements.

11 Dividends

 
                                                      2022     2021   2022   2021 
                                                     pence    pence 
                                                       per      per 
                                                     share    share   GBPm   GBPm 
-------------------------------------------------  -------  -------  -----  ----- 
 Amounts recognised as distributions to ordinary 
  shareholders in the year: 
 Final dividend of prior financial year                7.4        -    164      - 
 Interim dividend of current financial year            3.2      3.2     74     71 
 Special dividend of prior financial year                -      7.3      -    161 
                                                      10.6     10.5    238    232 
-------------------------------------------------  -------  -------  -----  ----- 
 

After the balance sheet date on 27 April 2022 a final dividend of 9.9 pence per share (2021: 7.4 pence per share) was proposed by the Directors in respect of the 52 weeks to 5 March 2022. This results in a total final proposed dividend of GBP230 million (2021: GBP164 million).

Subject to shareholders' approval at the Annual General Meeting, the dividend will be paid on 15 July 2022 to the shareholders on the register at 10 June 2022. The proposed final dividend has not been included as a liability at 5 March 2022.

12 Property, plant and equipment

 
                                              Land and         Fixtures 
                                             buildings    and equipment    Total 
                                                  GBPm             GBPm     GBPm 
-----------------------------------------  -----------  ---------------  ------- 
 Cost 
 At 7 March 2021                                 9,655            5,288   14,943 
 Additions                                          87              330      417 
 Disposals                                        (40)            (330)    (370) 
 Transfer to asset 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 asset 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 
-----------------------------------------  -----------  ---------------  ------- 
 
 
 Cost 
 At 8 March 2020                            9,716   5,362   15,078 
 Additions                                     89     330      419 
 Disposals                                   (59)   (404)    (463) 
 Transfer to asset held for sale             (91)       -     (91) 
-----------------------------------------  ------  ------  ------- 
 At 6 March 2021                            9,655   5,288   14,943 
-----------------------------------------  ------  ------  ------- 
 
 Accumulated depreciation and impairment 
 At 8 March 2020                            2,693   3,436    6,129 
 Depreciation expense for the year            173     456      629 
 Impairment loss for the year                  26      62       88 
 Disposals                                   (32)   (391)    (423) 
 Transfer to asset held for sale             (67)       -     (67) 
-----------------------------------------  ------  ------  ------- 
 At 6 March 2021                            2,793   3,563    6,356 
-----------------------------------------  ------  ------  ------- 
 
 Net book value at 6 March 2021             6,862   1,725    8,587 
-----------------------------------------  ------  ------  ------- 
 
 Capital work-in-progress included above      122     320      442 
-----------------------------------------  ------  ------  ------- 
 

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 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 
---------------------------------  -----------  ----------  ------ 
 

(1) Includes new leases, terminations, modifications and reassessments

 
 At 8 March 2020                    4,536    290   4,826 
---------------------------------  ------  -----  ------ 
 New leases and modifications(1)      413    129     542 
 Depreciation charge                (398)   (86)   (484) 
 Impairment charge                  (137)      -   (137) 
 At 6 March 2021                    4,414    333   4,747 
---------------------------------  ------  -----  ------ 
 

1. Includes new leases, terminations, modifications and reassessments

Set out below are the carrying amounts of lease liabilities and the movements during the period:

 
                                      2022    2021 
                                      GBPm    GBPm 
----------------------------------  ------  ------ 
 At 7 March 2021 and 8 March 2020    5,834   5,774 
 New leases and modifications        1,280     561 
 Interest expense                      281     305 
 Payments                            (774)   (806) 
 At 5 March 2022 and 6 March 2021    6,621   5,834 
----------------------------------  ------  ------ 
 Current                               526     524 
 Non-current                         6,095   5,310 
----------------------------------  ------  ------ 
 

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. This year includes the impact of exercising purchase options on 21 leased supermarkets held by a property investment pool in which the Group holds an interest. The purchase options were not included within the lease liabilities at inception of the lease as the Group was not reasonably certain to exercise them. Following the exercise of the options, the respective lease liabilities have been remeasured to include the assumed purchase price, leading to an increase in lease liabilities with a corresponding increase to the right-of-use asset. The purchases will be completed in the financial year ended 2 March 2024 when the existing leases end.

The purchase price is subject to negotiation and at the year-end had not yet been agreed. Therefore to remeasure the lease liability, the purchase price has been estimated based on up to date property valuations carried out by independent valuers not connected with the Group. The lease liabilities (and right-of-use assets) may be subsequently adjusted as the property valuations change, and when purchase prices are agreed. This is not considered a significant estimate in line with IAS 1 "Presentation of financial statements".

Guarantee in relation to property pool

When the properties are sold by the property investment pool in the financial year ended 2 March 2024, the proceeds will be used to settle bonds issued by the structure. The Group has previously issued a financial guarantee in relation to this, which is triggered if there is a shortfall in the property proceeds and the bonds cannot be fully repaid. The guarantee is up to GBP300 million.

The current property valuations indicate that there is significant headroom and therefore no shortfall.

In the event of a delay in the property negotiations, meaning the bond repayment is due before the properties have been sold, the guarantee will be called upon in full. In such an event, once the properties are sold, Sainsbury's will recover the guarantee payment in full from the property proceeds.

14 Intangible assets

 
                                               Computer   Acquired         Customer 
                                   Goodwill    software     brands    relationships   Total 
                                       GBPm        GBPm       GBPm             GBPm    GBPm 
--------------------------------  ---------  ----------  ---------  ---------------  ------ 
 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 amortisation 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 
--------------------------------  ---------  ----------  ---------  ---------------  ------ 
 
 Cost 
 At 8 March 2020                        400         749        231               32   1,412 
 Additions                                -         172          -                -     172 
 Disposals                              (6)        (22)        (2)                -    (30) 
--------------------------------  ---------  ----------  ---------  ---------------  ------ 
 At 6 March 2021                        394         899        229               32   1,554 
--------------------------------  ---------  ----------  ---------  ---------------  ------ 
 
 Accumulated depreciation and 
  impairment 
 At 8 March 2020                         22         281        109               26     438 
 Amortisation expense for the 
  year                                    -         114         20                2     136 
 Impairment loss for the year            12          84          -                -      96 
 Disposals                              (6)        (22)        (2)                -    (30) 
--------------------------------  ---------  ----------  ---------  ---------------  ------ 
 At 6 March 2021                         28         457        127               28     640 
--------------------------------  ---------  ----------  ---------  ---------------  ------ 
 
 Net book value at 6 March 2021         366         442        102                4     914 
--------------------------------  ---------  ----------  ---------  ---------------  ------ 
 

1. Disposals include write offs of software-as-a-service balances as disclosed in note 2.

15 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. Unless a separate exit agreement with a landlord has already been agreed, the Group's policy is that this onerous contract provision includes all unavoidable costs of meeting the obligations of 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. These provisions historically included business rates, however business rates are considered a statutory obligation rather than a contractual one, and are therefore now recognised as a periodic cost in line with IFRIC 21 "Levies". Prior period comparatives have been restated to remove business rates from previously recognised property provisions. Refer to note 2 for further details.

Property provisions also include provisions for dilapidations which are recognised where the Group has the obligation to make-good its leased properties. 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.

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

A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring.

The charge for the year mostly comprises redundancy payments as part of Argos store closures, depot closures, and café and food counter closures announced during the year as detailed in note 4.

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 7 March 2021 (restated)            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 
----------------------------  ------------  ------------  --------------  ------------  ------------  ------ 
 
 At 8 March 2020 (restated)             38            63              20            37            16     174 
 Additional provisions                 146            33              61             7            32     279 
 Unused amounts reversed              (5 )           (2)               -           (2)             -     (9) 
 Utilisation of provision            (16 )          (27)            (27)          (16)          (10)    (96) 
 Amortisation of discount                1             -               -             -             -       1 
 At 6 March 2021 (restated)            164            67              54            26            38     349 
----------------------------  ------------  ------------  --------------  ------------  ------------  ------ 
 Current                                72            24              53            21            29     199 
 Non-current                            92            43               1             5             9     150 
----------------------------  ------------  ------------  --------------  ------------  ------------  ------ 
 

16 Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise the following:

 
                                                     2022         2021 
                                                            (restated) 
                                                     GBPm         GBPm 
--------------------------------------------------  -----  ----------- 
 Cash in hand and bank balances                       566          325 
 Money market funds and deposits                       25          398 
 Deposits at central banks                            234          852 
 Cash and bank balances as reported in the Group 
  balance sheet                                       825        1,575 
--------------------------------------------------  ----- 
 
 Bank overdrafts                                      (7)         (99) 
 Net cash and cash equivalents as reported in the 
  Group cash flow statement                           818        1,476 
--------------------------------------------------  ----- 
 

Of the above balance, GBP18 million (2021: GBP20 million) was restricted as at year-end. Of the GBP18 million (2021: GBP20 million) restricted cash, GBP15 million (2021: GBP17 million) is held as a reserve deposit with the Bank of England in accordance with statutory requirements. This deposit is not available for use in day-to-day operations. A further GBP3 million (2021: GBP3 million) is restricted for Insurance purposes.

Refer to note 2 for details of restatement.

17 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 
                                     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 
 (restated)                              546       (110)            -          -           -         -      436 
Bank overdrafts (restated)              (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 
 (restated)                            1,575       (750)            -          -           -         -      825 
Bank overdrafts (restated)              (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) 
 

Other non-cash movements relate to interest accruals and new leases. Refer to note 2 for details of restatement.

 
                                                  Cash Movements             Non-Cash Movements 
                                     8 March  Cash flows          Net    Accrued       Other   Changes  6 March 
                                        2020   excluding     interest   Interest    non-cash   in fair     2021 
                                                interest   (received)              movements     value 
                                                               / paid 
                                        GBPm        GBPm         GBPm       GBPm        GBPm      GBPm     GBPm 
Retail 
Net derivative financial 
 instruments                            (15)           -            6        (5)           5       (5)     (14) 
Borrowings (excluding 
 overdrafts)                         (1,116)         289           38       (37)           -         -    (826) 
Lease liabilities                    (5,768)         499          305      (305)       (560)         -  (5,829) 
Arising from financing 
 activities (restated)               (6,899)         788          349      (347)       (555)       (5)  (6,669) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                    1           -            -          -           -         -        1 
Cash and cash equivalents 
 (restated)                              506          40            -          -           -         -      546 
Bank overdrafts (restated)              (59)        (40)            -          -           -         -     (99) 
Retail net debt (excluding 
 perpetual securities) 
 (restated)                          (6,451)         788          349      (347)       (555)       (5)  (6,221) 
 
Financial Services 
Net derivative financial 
 instruments                               4           -            -          -           -       (4)        - 
Bank overdrafts                            -           -            -          -           -         -        - 
Borrowings (excluding 
 overdrafts)                           (180)           -            -          -           -         1    (179) 
Lease liabilities                        (6)           2            -          -         (1)         -      (5) 
Arising from financing 
 activities                            (182)           2            -          -         (1)       (3)    (184) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                  802       (267)            -          -           -         2      537 
Cash and cash equivalents                547         482            -          -           -         -    1,029 
Financial services net 
 debt                                  1,167         217            -          -         (1)       (1)    1,382 
 
 
Group 
Net derivative financial 
 instruments                            (11)           -            6        (5)           5       (9)     (14) 
Borrowings (excluding 
 overdrafts)                         (1,296)         289           38       (37)           -         1  (1,005) 
Lease liabilities                    (5,774)         501          305      (305)       (561)         -  (5,834) 
Arising from financing 
 activities (restated)               (7,081)         790          349      (347)       (556)       (8)  (6,853) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                  803       (267)            -          -           -         2      538 
Cash and cash equivalents 
 (restated)                            1,053         522            -          -           -         -    1,575 
Bank overdrafts (restated)              (59)        (40)            -          -           -         -     (99) 
Group net debt (excluding 
 perpetual securities) 
 (restated)                          (5,284)       1,005          349      (347)       (556)       (6)  (4,839) 
 
Retail net debt (excluding 
 perpetual securities)               (6,451)         788          349      (347)       (555)       (5)  (6,221) 
Perpetual capital securities           (248)         250            -          -         (2)         -        - 
Perpetual convertible 
 bonds                                 (248)           -            -          -           -         -    (248) 
Retail net debt (including 
 perpetual securities)               (6,947)       1,038          349      (347)       (557)       (5)  (6,469) 
 
Of which: 
Leases                               (5,768)                                                            (5,829) 
Net debt excluding lease 
 liabilities                         (1,179)                                                              (640) 
 

Refer to note 2 for details of restatement.

Reconciliation of net cash flow to movement in net debt

 
                                                  52 weeks to  52 weeks 
                                                                     to 
                                                      5 March   6 March 
                                                         2022      2021 
                                                         GBPm      GBPm 
Opening net debt                                      (6,469)   (6,947) 
 
Cash flow movements 
Net (decrease)/increase in cash and cash 
 equivalents (including overdrafts)                     (658)       482 
Elimination of Financial Services movement 
 in cash and cash equivalents                             640     (482) 
Repayment of perpetual capital securities                   8       250 
Decrease in Retail borrowings                             248       289 
Decrease in Retail lease obligations                      491       499 
Net interest paid on components of Retail 
 net debt                                                 319       349 
Changes in net debt resulting from cash 
 flow                                                   1,048     1,387 
 
Non-cash movements 
Accrued interest                                        (316)     (347) 
Retail fair value and other non-cash movements        (1,022)     (562) 
Changes in net debt resulting from non-cash 
 movements                                            (1,338)     (909) 
 
Movement in net debt                                    (290)       478 
 
Closing net debt                                      (6,759)   (6,469) 
 

18 Borrowings

 
                                        2022                         2021 
                             Current  Non-current  Total  Current  Non-current  Total 
                                GBPm         GBPm   GBPm     GBPm         GBPm   GBPm 
Loan due 2031                     44          531    575       55          572    627 
Bank overdrafts (restated)         7            -      7       99            -     99 
Bank loans due 2021                -            -      -      199            -    199 
Sainsbury's Bank Tier 2 
 Capital due 2027                  3          176    179        3          176    179 
                                  54          707    761      356          748  1,104 
 

Refer to note 2 for details of restatement.

a) Loan due 2031

The loan is secured against 48 (2021: 48) supermarket properties. This is an inflation linked amortising loan from the finance company Longstone Finance plc with an outstanding principal value of GBP566 million (2021: GBP614 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 GBP575 million (2021: GBP627 million) with a final repayment date of April 2031.

The Group has entered into inflation swaps to convert GBP490 million (2021: GBP490 million) of the GBP566 million (2021: GBP614 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 issuing 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) Bank loan due 2021

On 6(th) August 2021 the Group repaid the secured GBP200m Green Loan and subsequently ensured the release of all security interests.

d) Sainsbury's Bank Tier 2 Capital due 2027

The Bank issued GBP175 million of fixed rate reset callable subordinated Tier 2 notes on 23 November 2017. The notes pay interest on the principal amount at a rate of six per cent per annum, payable in equal instalments semi-annually in arrears, until 23 November 2022 at which time the interest rate will reset. The Bank has the option to redeem these notes on 23 November 2022.

e) Short term borrowings

The Revolving Credit Facility is split into two Facilities, a GBP300 million Facility (A) and a GBP1,094 million Facility (B). Facility A has a final maturity of April 2025 and Facility B has a final maturity of October 2024. At 5 March 2022, the Revolving Credit Facility was undrawn (2021: 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 5 March 2022 (2021: undrawn).

19 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:

 
                                                        2022                           2021 
                                        Sainsbury's    Argos    Group  Sainsbury's    Argos     Group 
                                               GBPm     GBPm     GBPm         GBPm     GBPm      GBPm 
Present value of funded obligations         (8,060)  (1,313)  (9,373)      (8,808)  (1,410)  (10,218) 
Fair value of plan assets                    10,158    1,535   11,693        9,596    1,404    11,000 
Retirement benefit surplus/(deficit)          2,098      222    2,320          788      (6)       782 
Present value of unfunded obligations          (20)     (17)     (37)         (21)     (17)      (38) 
Retirement benefit surplus/(deficit)          2,078      205    2,283          767     (23)       744 
 

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:

 
                                   2022   2021 
                                   GBPm   GBPm 
As at the beginning of the year     744  1,119 
Net interest income                  15     19 
Remeasurement gains/(losses)      1,457  (482) 
Pension scheme expenses             (7)    (7) 
Contributions by employer            71    101 
Past service credit/(charge)          3    (6) 
As at the end of the year         2,283    744 
 

The principal actuarial assumptions used at the balance sheet date are as follows:

 
                               2022      2021 
                                  %         % 
                                     -------- 
Discount rate                  2.40      1.95 
Inflation rate - RPI           3.60      3.15 
Inflation rate - CPI           2.90      2.45 
Future pension increases     2.30 -      2.15 
                               3.45    - 3.10 
                                     -------- 
 

20 Contingent liabilities and contingent assets

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 8,600 equal pay claims from circa 4,400 claimants, in which 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 centres, and the equalisation of wages and terms and conditions on an ongoing basis. The Group believes further claims will be served.

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 similar 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. This process is likely to continue for several more years. In the event that any of the claimants succeed at the second stage there will be further hearings, in the years following, to consider whether any pay differential is justified.

Given that the outcome of the second and third stages in the litigation remains highly uncertain at this stage, the Group cannot make any assessment of the likelihood nor quantum of any outcome. No provision has therefore been recognised on the Group's balance sheet. There are substantial factual and legal defences to these claims and the Group intends to defend them vigorously.

As disclosed in note 4 to the financial statements, the Group had a number of ongoing legal cases in relation to overcharges arising from payment card interchange fees. During the year settlements have been reached in two of these cases, resulting in non-underlying income of GBP167 million being recognised. The last of these cases goes to trial for a final determination of quantum in early 2023. A range of possible outcomes is possible, including GBPnil. As the outcome and quantum of any award is not virtually certain no income has been recognised in accordance with IAS 37: 'Provisions, Contingent Liabilities and Contingent Assets'.

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 
                           revenue.        growth in 
                                           the Group's 
                                           Retail 
                                           business 
                                           sales. 
Like-for-like  No direct   Year-on-year    The measure 
 sales         equivalent  growth          is used         The reported retail like-for-like 
                           in sales        widely in        sales decline of (2.3) per 
                           including VAT,  the retail       cent is based on a combination 
                           excluding       industry as      of Sainsbury's like-for-like 
                           fuel,           an indicator     sales and Argos like-for-like 
                           excluding       of current       sales for the 2022. See movements 
                           Financial       trading          below :                               2022    2021 
                           Services,       performance     Retail like-for-like (exc. 
                           for stores      and is           Fuel, inc. VAT)                     (2.3)%    8.1% 
                           that have       useful when     Underlying net new space impact      (0.3)%  (0.8)% 
                           been open for   comparing       Retail sales growth (exc. Fuel, 
                           more than       growth           inc. VAT)                           (2.6)%    7.3% 
                           one year.       between         Fuel impact                            6.0%  (7.2)% 
                                           retailers       Total retail sales growth (inc. 
                           The relocation  that have        fuel, inc. VAT)                       3.4%    0.1% 
                           of Argos        different       VAT impact                           (0.4)%    0.6% 
                           stores into     profiles of     Total retail sales growth              3.0%    0.7% 
                           Sainsbury's     expansion, 
                           supermarkets    disposals 
                           are classified  and 
                           as new space,   closures. 
                           while 
                           the host 
                           supermarket 
                           is classified 
                           like-for-like. 
 
                           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      Underlying      This is the                                               2022  2021 (Restated) 
 underlying    before      earnings        lowest                                                     GBPm             GBPm 
 operating     tax         before          level at which    Group PBT (note 6)                        854            (164) 
 profit                    interest, tax,  the               (Less)/Add back Group non-underlying 
                           Financial       retail segment     items (note 4)                         (124)              521 
                           Services        can               Group UPBT                                730              357 
                           operating       be viewed from    Financial Services underlying 
                           profit and      a                  operating (profit)/loss                 (38)               21 
                           Sainsbury's     management        Retail underlying profit 
                           underlying      perspective,       before tax                               692              378 
                           share of        with finance      Net underlying finance costs              309              353 
                           post-tax        costs             Retail underlying operating 
                           profit from     managed for        profit                                 1,001              731 
                           joint ventures  the Group 
                           and             as a whole.       Retail sales (note 6)                  29,463           28,617 
                           associates.                       Retail underlying operating 
                                                              margin                                 3.40%            2.55% 
Underlying     Profit      Underlying      In order to     Underlying profit before tax is bridged to statutory 
 profit        before      results         provide          profit before tax in the income statement and 
 before        tax         exclude         shareholders     note 4 of the financial statements. 
 tax                       items           with 
                           recognised in   additional       The adjusted items are as described in note 
                           reported        insight          4 of the financial statements 
                           profit or loss  into the 
                           before tax      year-on-year 
                           which, if       performance of 
                           included,       the 
                           could distort   business, this 
                           comparability   adjusted 
                           between         measure of 
                           periods. In     profit 
                           determining     is provided to 
                           which items to  supplement 
                           exclude         the reported 
                           from            IFRS 
                           underlying      numbers and 
                           profit,         reflects 
                           the Group       how the 
                           considers       business 
                           items which     measures 
                           are             performance 
                           significant     internally. 
                           either by 
                           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 using       measure          in note 10 of the financial statements. 
 earnings    per share    underlying        to evaluate 
 per share                profit as         the 
                          described         performance 
                          above.            of the 
                                            business and 
                                            returns 
                                            generated 
                                            for investors. 
Retail      No direct     Retail            EBITDA is used                                         2022  2021 (Restated) 
underlying   equivalent   underlying        to                                                      GBPm             GBPm 
EBITDA                    operating         review the        Retail underlying operating 
                          profit as above,  retail             profit                              1,001              731 
                          before            segment's         Add: Retail depreciation 
                          underlying        profit             and amortisation expense            1,197            1,226 
                          depreciation,     generation and    Less: Non-underlying depreciation 
                          and               the                and amortisation                     (53)             (47) 
                          amortisation.     sustainability    Retail underlying EBITDA             2,145            1,910 
                                            of 
                                            ongoing           Retail sales (note 6)               29,463           28,617 
                                            capital           Retail underlying EBITDA 
                                            reinvestment       margin                              7.28%            6.67% 
                                            and finance 
                                            costs. 
Underlying  Finance       Net finance       This provides         A reconciliation of this measure is included 
net         income        costs before      shareholders          in note 8 of the financial statements. 
finance     less finance  any               with 
costs       costs         non-underlying    additional            The adjusted items are as follows: 
                          items             insight 
                          as defined above  into the               *    Perpetual securities coupons - these are accounted 
                          that are          underlying                  for as equity in line with IAS 32 'Financial 
                          recognised        net finance                 instruments: Presentation', however are accrued on a 
                          within finance    costs                       straight-line basis and included as an expense within 
                          income /          of the Group                underlying profit as they are included by management 
                          expenses.         by excluding                when assessing Group borrowings. These are now GBPnil 
                                            non-recurring               following the redemption of the perpetual convertible 
                                            one-off                     bond during the year. 
                                            items. 
 
                                                                   *    Non-underlying finance movements - 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. 
 
 
                                                                   *    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 rate    tax rate     underlying        indication       in note 4 of the financial statements 
                          items,            of the tax 
                          divided by        rate across 
                          underlying        the Group 
                          profit            before 
                          before tax.       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                                                 5 March  6 March 
 items                                        understand                                                2022     2021 
 in Financial                                 cash flows                                       Ref      GBPm     GBPm 
 Review                                       of the          Net interest paid                 a      (323)    (372) 
                                              business a      Repayment of lease liabilities    b      (491)    (499) 
                                              summarised      Repayment of borrowings           c      (256)    (539) 
                                              cash flow       Other                             d       (27)     (13) 
                                              statement       Dividends and distributions 
                                              is included      received                         e          2       22 
                                              within 
                                              the 
                                              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                                                5 March  6 March 
 flow           from           from retail    cash                                                       2022     2021 
                operating      operations,    generation,                                                GBPm     GBPm 
                activities     after          working         Cash generated from retail operations     1,940    2,275 
                               perpetual      capital         Net interest paid (ref (a) above)         (323)    (372) 
                               security       efficiency      Corporation Tax                            (23)     (94) 
                               coupons        and capital     Retail purchase of property, plant 
                               and cash       expenditure      and equipment                            (416)    (423) 
                               capital        of the          Retail purchase of intangibles 
                               expenditure    retail           assets                                   (229)    (145) 
                               and            business        Retail proceeds from disposal 
                               including                       of property, plant and equipment            46       27 
                               payments                       Initial direct costs on right-of-use 
                               of lease                        assets                                     (3)      (7) 
                               obligations,                   Repayments of obligations under 
                               cash flows                      leases                                   (491)    (499) 
                               from                           Dividends and distributions received          2       22 
                               joint                          Retail free cash flow                       503      784 
                               ventures 
                               and 
                               associates 
                               and 
                               Sainsbury's 
                               Bank capital 
                               injections. 
Adjusted        Cash           This presents  This enables                                          5 March  6 March 
net cash        generated      retail         management                                                2022     2021 
generated       from           operating      to assess                                                 GBPm     GBPm 
from retail     operations     cash flows     the cash        Retail cash generated from operating 
operations                     adjusted       generated        activities (note 6)                     1,598    1,832 
(per Financial                 for movements  from its        Perpetual security coupons                 (4)     (23) 
Review)                        in working     core retail     Adjusted net cash generated from 
                               capital,       operations.      operating activities                    1,594    1,809 
                               less net 
                               interest 
                               paid 
                               (including 
                               distributions 
                               on perpetual 
                               securities) 
                               and 
                               pension cash 
                               contributions 
                               . 
Core retail     No direct      Capital        This allows                                       2022   2021 
 capital         equivalent    expenditure    management                                         GBPm   GBPm 
 expenditure                   excluding      to assess       Purchase of property, plant and 
                               Sainsbury's    core retail      equipment                        (416)  (423) 
                               Bank.          capital         Purchase of intangibles           (229)  (145) 
                                              expenditure     Cash capital expenditure          (645)  (568) 
                                              in the 
                                              period in 
                                              order 
                                              to review 
                                              the 
                                              strategic 
                                              business 
                                              performance. 
 
 
APM         Closest     Definition       Purpose         Reconciliation 
            equivalent 
            IFRS 
            measure 
Underlying  No direct   Removes          To provide a                                                             6 March 
 working    equivalent  working          reconciliation                                               5 March         2021 
 capital                capital          of the working                                                  2022   (Restated) 
 movements              and cash         capital                                                         GBPm         GBPm 
                        movements        movement          Retail working capital movements 
                        relating to      in the             per cash flow (note 6)                      (306)          612 
                        non-underlying   Financial 
                        items.           statements to     Adjustments for: 
                                         the underlying    Retail non-underlying impairment 
                                         working            charges (note 6)                                8          216 
                                         capital           Non-underlying restructuring and 
                                         movement in        impairment charges (note 4)                  (92)        (548) 
                                         the               Bank non-underlying restructuring 
                                         Financial          and impairment charges                          7          105 
                                         review.           Accelerated depreciation (note 4)               33           27 
                                                           Gains on early termination of leases 
                                                            (note 4)                                      (9)         (16) 
                                                           Profit on disposal of properties 
                                                            within restructuring programme (note 
                                                            4)                                           (12)            - 
                                                           ATM income (note 4)                              2           42 
                                                           Income recognised in relation to 
                                                            legal disputes (note 4)                       180            - 
                                                           Other                                            1            2 
                                                           Non-underlying working capital movements 
                                                            before cash movements                         118        (172) 
 
                                                           Non-underlying cash movements: 
                                                           Restructuring (note 4)                         114           39 
                                                           Bank restructuring                             (4)            - 
                                                           ATM income (note 4)                           (14)         (27) 
                                                           Income recognised in relation to 
                                                            legal disputes (note 4)                      (93)            - 
                                                           Retail non-underlying operating 
                                                            cash flows (excluding pensions)                 3           12 
 
                                                           Total adjustments for non-underlying 
                                                            working capital                               121        (160) 
 
                                                           Underlying working capital movements         (185)          452 
 
 
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          17 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: 
            lease            net                 the liquidity 
            liabilities      debt of             and                                                  5 March  6 March 
                             Sainsbury's         its                                                     2022     2021 
                             Bank and its        indebtedness                                            GBPm     GBPm 
                             subsidiaries.       and whether      Financial instruments at FVTOCI 
                                                 the               per balance sheet                      800      844 
                             It is calculated    Group can        Less: equity related securities       (382)    (306) 
                             as:                 cover            Financial instruments at FVTOCI 
                             financial assets    its debt          included in net debt                   418      538 
                             at                  commitments. 
                             fair value through                   Net derivatives per balance sheet       259    (124) 
                             other                                Less: derivatives not used to 
                             comprehensive                         hedge borrowings                     (250)      110 
                             income (excluding                    Derivatives included in net debt          9     (14) 
                             equity 
                             investments) 
                             + net derivatives 
                             to hedge 
                             borrowings 
                             + net cash and 
                             cash 
                             equivalents + 
                             loans 
                             + lease 
                             obligations 
                             + perpetual 
                             securities. 
Other 
Net debt/     No direct    Net debt divided    This helps      Net debt as provided in note 17. 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          52 weeks 
 on capital    equivalent  employed is         represents                                                    to 5 March        to 6 March 
 employed                  calculated          the total                                                           2022   2021 (Restated) 
                           as return divided   capital                                                             GBPm              GBPm 
                           by average capital  that the Group    Underlying profit before tax                       730               357 
                           employed.           has               Add: Underlying net interest                       309               353 
                                               utilised in       Return                                           1,039               710 
                           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          52 weeks 
                           tax.                to assess the                                                 to 5 March        to 6 March 
                                               performance                                                         2022   2021 (Restated) 
                           Capital employed    of the                                                              GBPm              GBPm 
                           is                  business.         Group net assets                                 8,423             6,701 
                           defined as Group                      Less: Pension surplus (note 19)                (2,283)             (744) 
                           net                                   Deferred tax on pension surplus                    640               192 
                           assets excluding                      Less: net debt (ex-perpetual securities) 
                           pension                                (note 17)                                       6,759             6,221 
                           deficit/surplus,                      Effect of in-year averaging                    (1,127)               240 
                           less                                  Capital employed                                12,412            12,610 
                           net debt 
                           (excluding                            Return on capital employed                        8.4%              5.6% 
                           perpetual 
                           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 5 March        to 6 March 
 cover                     divided by rent     the Group's                                                  2022   2021 (Restated) 
                           (representing       ability                                                      GBPm              GBPm 
                           capital and         to satisfy        Group underlying operating 
                           interest            fixed              profit                                   1,039               710 
                           repayments on       financing         Add: Group depreciation and 
                           leases)             expenses           amortisation expense                     1,220             1,249 
                           and underlying net  from              Less: Non-underlying depreciation 
                           finance costs,      performance        and amortisation expense                  (53)              (47) 
                           where               of the            Group underlying EBITDA                   2,206             1,912 
                           interest on         business.         Repayment of capital element 
                           perpetual                              of lease obligations                     (493)             (501) 
                           securities is                         Underlying finance income                     3                 3 
                           treated                               Underlying finance costs                  (312)             (356) 
                           as an underlying                      Fixed charges                             (802)             (854) 
                           finance                               Fixed charge cover                          2.8               2.2 
                           cost. All items 
                           are 
                           calculated on a 52 
                           week rolling 
                           basis. 
 
 

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(END) Dow Jones Newswires

April 28, 2022 02:02 ET (06:02 GMT)

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