TIDMSBRY
RNS Number : 1422F
Sainsbury(J) PLC
03 November 2022
3 November 2022
J Sainsbury PLC
Interim Results for the 28 weeks ended 17 September 2022
Strategy delivering for customers, colleagues, communities and
shareholders
Simon Roberts, Chief Executive of J Sainsbury plc, said: " Two
years ago we launched our plan to put food back at the heart of
Sainsbury's. We committed to improve shareholder returns by
creating a simpler business and reducing costs to invest in lower
prices, food innovation and maintaining colleague and customer
satisfaction. We have grown market share in both grocery and
general merchandise and investment in our stores and colleagues is
supporting leading supermarket customer satisfaction and
availability. Profits are significantly higher than pre-Covid
levels and we are generating strong cash flow, supporting debt
reduction and dividend payments.
"We really get how tough it is for millions of households right
now. Customers are watching every penny and every pound and we know
that they are relying on us to keep food prices as low as we can.
We will have invested more than GBP500 million by March 2023 in
keeping prices lower by cutting our costs at a faster rate than our
competitors(1) , meaning we have more firepower to battle
inflation. Over the past year and a half we have consistently
passed on less price inflation than our competitors and I am
confident we have never been better value. Argos is also performing
well in a market where customers are looking for reassurance that
they are getting great value and availability.
"We were the first supermarket to give our colleagues a second
pay rise this year and have invested GBP150 million to support them
and drive outstanding service. I want to thank all my colleagues
for their hard work and dedication and for everything they are
doing to deliver for our customers. Our strong results are
testament to the outstanding commitment and contribution from every
member of our team."
Financial Highlights
-- Grocery sales up 0.2 per cent in H1. Strong growth in Q2 of
3.8 per cent as lockdown comparatives eased, market price inflation
accelerated, customers responded well to the strength of our offer
and we benefited from warm weather. Grocery sales were 9.3 per cent
higher than H1 19/20
-- General merchandise sales down 6.1 per cent across H1 but up
1.2 per cent in Q2, driven by improved availability, favourable
summer weather and strong market share gains. Growth was driven by
categories such as consumer electronics and seasonal products
-- Statutory Group sales (excluding VAT) up 4.4 per cent, with
fuel sales up 39.5 per cent. Like-for-like sales (excluding fuel)
down 0.8 per cent, with Q2 up 3.7 per cent after a decline of 4.0
per cent in Q1
-- Retail operating profit down 9 per cent, reflecting our
investment in value, reduced grocery and general merchandise
volumes post-pandemic and higher operating costs, partially offset
by a higher fuel contribution
-- Underlying profit before tax of GBP340 million, down 8 per
cent; Financial Services operating profit of GBP19 million, flat
year-on-year, and finance costs 9 per cent lower. UPBT up 43 per
cent versus H1 19/20
-- Statutory profit before tax of GBP376 million, down 29 per
cent, reflecting higher exceptional income in the prior year from
settlement of legal disputes
-- H1 net funds balance GBP361 million. Strong retail free cash
flow of GBP759 million, up 37 per cent, reflecting higher grocery
sales and more typical seasonal working capital inflows against
last year's impact of Covid unwind. On track to deliver guidance of
at least GBP500 million free cash flow in FY22/23
-- Interim dividend of 3.9 pence
-- Guidance unchanged: continue to expect FY22/23 underlying
profit before tax of between GBP630 million and GBP690 million
Strategic highlights
-- Food First: Strong grocery volume market share performance
and only full choice supermarket to grow volume share versus
pre-pandemic(2) . As customer shopping habits return to normal,
online sales are down, but we are gaining overall grocery market
share as online customers return to shop in our stores(3)
o Value: Consistently inflating behind the market(4) , driven by
more than GBP500 million investment over two years to keep prices
low. Continuing to strengthen value position versus competitors;
value index versus Aldi has improved by 400 basis points in the
past 12 months(5)
o Our mix and basket size trends are proving more resilient than
competitors and we are seeing less switching to Aldi and Lidl than
all other full choice supermarkets(6) , reflecting the strength of
our brand and customer base
o Innovation: Launched over 600 new products and on track to
launch 1,200 new products by the end of this year. Sales of new
Summer Editions products exceeded expectations, over 70 per cent
more products in our Autumn Editions range this year. Launching 300
new Christmas products, over 50 per cent of which are Taste the
Difference. Taste the Difference is outperforming the market(7)
with H1 sales are up 14 per cent versus pre-pandemic, as customers
choose to treat themselves at home
o Service: GBP150 million annual investment in colleague pay and
benefits to support colleagues with the cost of living and drive
outstanding service. We have given hourly paid colleagues two pay
rises this year, as well as free food during shifts and offered all
colleagues improved discounts. We are making significant
investments to enhance our stores, which are attracting more
customers as shopping behaviours normalise post-pandemic, driving
strong satisfaction scores in supermarkets ahead of
competitors(8)
-- Brands that Deliver: We are building brands that deliver both
for our customers and for our shareholders. Argos is considerably
more profitable versus pre-pandemic and over 10 million customers
are now registered with the Nectar app. Habitat is growing strongly
and Tu's great value fashion continues to win customers.
Sainsbury's Bank is delivering on its strategic objectives, focused
on providing financial services products for Sainsbury's and Argos
customers
o Argos delivered market outperformance(9) and is more resilient
than competitors. Argos sales grew 1.6 per cent in Q2. By focusing
on investing in our brands and developing core capabilities, we
have improved availability and range. Hot weather supported sales
of seasonal and electronic goods over the Summer
o Tu clothing full price sales remain above pre-pandemic levels.
Womenswear dress sales up 40 per cent
o Continued focus on building the Habitat brand with strong
sales growth in Habitat Kids and improved customer satisfaction
scores(10)
o Over 10 million customers have downloaded the Nectar app; My
Nectar Prices is helping customers save over GBP100 a year. We now
expect Nectar360 to deliver incremental profits of at least GBP90
million by March 2026, up from previous guidance of GBP60-70
million
o Good progress against plan to simplify and strengthen
Financial Services reflected in solid performance despite
challenging market conditions
-- Save to Invest: Strong delivery of structural cost savings.
We expect to deliver over GBP1.3 billion of cost savings in the
three years to FY23/24, doubling the run rate from the three years
to FY19/20. This is helping mitigate higher than expected operating
cost inflation.
-- Plan for Better: We are making good progress on our Plan for
Better. We have removed 'best before' dates from 100 more products
and, as part of our commitment to Help Everyone Eat Better, at
least 75 per cent of products price matched to Aldi are a healthy
choice. We have distributed over six million meals in partnership
with Neighbourly in the last year and introduced refreshed Human
Rights commitments. We have reduced greenhouse gas emissions within
our own operations by 44.5 per cent year-on-year, supporting our
accelerated commitment to be Net Zero by 2035
H1 Financial Summary 2022/23 2021/22 YoY
Statutory performance
Group revenue (excl. VAT, inc.
fuel) GBP16,408m GBP15,724m 4.4%
Profit before tax GBP376m GBP527m (29%)
Profit after tax GBP285m GBP378m (25%)
Basic earnings per share 12.3p 16.8p (27%)
Business performance
Group sales (inc. VAT) GBP18,338m GBP17,528m 4.6%
Retail sales (inc. VAT, excl. fuel) GBP14,674m GBP14,871m (1.3%)
Underlying profit before tax GBP340m GBP371m (8%)
Underlying basic earnings per share 11.2p 12.2p (8%)
Interim dividend per share 3.9p 3.2p 22%
Net debt (inc. lease liabilities) GBP(6,165)m GBP(6,345)m +GBP180m
Non-lease net funds / (debt) GBP361m GBP(27)m +GBP388m
Return on capital employed 7.7% 6.3% 140bps
Like-for-like 2021/22 2022/23 YoY
sales performance
--------------------------------- -----------------------
Q1 Q2 Q3 Q4 Q1 Q2 H1
------- ------- ------- ------- ------
Like-for-like sales
(excl. fuel) 1.6% (1.4%) (4.5%) (5.6%) (4.0%) 3.7% (0.8%)
------ ------- ------- ------- ------- ------ ------
Like-for-like sales
(incl. fuel) 8.4% 3.0% 0.6% 2.7% 2.9% 7.7% 4.9%
------ ------- ------- ------- ------- ------ ------
Total sales performance 2021/22 2022/23 YoY 2022/23 Yo3Y
--------------------------------- -----------------------
Q1 Q2 Q3 Q4 Q1 Q2 H1 Q1 Q2 H1
------- ------ ------ ------- -------
Grocery 0.8% 0.8% (1.1%) (1.6%) (2.4%) 3.8% 0.2% 8.7% 10.1% 9.3%
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
Total General Merchandise (1.4%) (11.4%) (16.0%) (21.1%) (11.2%) 1.2% (6.1%) (6.2%) (3.6%) (5.0%)
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
GM (Argos) (3.7%) (12.0%) (16.1%) (20.4%) (10.5%) 1.6% (5.5%) (4.5%) (0.9%) (2.9%)
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
GM (Sainsbury's) 11.2% (8.0%) (15.7%) (24.1%) (14.6%) (1.3%) (9.1%) (13.8%) (15.5%) (14.5%)
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
Clothing 57.6% 9.2% (2.7%) (9.3%) (10.1%) (0.2%) (6.0%) 3.9% 0.8% 2.5%
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
Total Retail (excl.
fuel) 1.6% (1.7%) (5.3%) (6.2%) (4.5%) 3.1% (1.3%) 5.4% 6.7% 5.9%
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
Fuel 95.1% 36.1% 47.5% 80.1% 48.3% 29.1% 39.5% 26.9% 24.2% 25.8%
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
Total Retail (incl.
fuel) 8.5% 2.7% (0.1%) 2.2% 2.5% 7.2% 4.4% 8.9% 9.6% 9.2%
------ ------- ------- ------- ------- ------ ------ ------- ------- -------
Outlook
Trading momentum has remained strong in the first few weeks of
the second half and we have continued to make volume market share
gains. This reflects continued investment in our customer offer,
supported by the strength of our financial position and cost
savings programme.
We are well placed through the peak trading period and into next
financial year to support customers as they manage further cost of
living pressures. We are half way through a GBP1.3 billion cost
saving programme that has doubled the run rate of previous years
and we are confident in our competitive position in the face of
macro challenges and operating cost inflation.
We continue to expect underlying profit before tax in FY22/23 to
be between GBP630 million and GBP690 million and to generate retail
free cash flow of at least GBP500 million.
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 and live Q&A will be held at 9:00
(GMT). This will be available to view on our website at the
following link:
https://sainsbury-s-q2-interim-results-presentation.open-exchange.net/registration
A recorded copy of the webcast and Q&A call, alongside
slides and a transcript of the presentation will be available at
www.about.sainsburys.co.uk/investors/results-reports-and-presentations
following the event.
Sainsbury's will issue its 2022/23 Third Quarter Trading
Statement at 07:00 (GMT) on 11 January 2023.
Enquiries
Investor Relations Media
James Collins Rebecca Reilly / Victoria
Durman
+44 (0) 7801 813 074 +44 (0) 20 7695 7295
Food First
We are focused on building on our strong brand heritage and
reputation for quality, range and innovation while lowering prices
and offering consistent value for money in an inflationary
environment. Our strategy is delivering; we are improving the value
we provide for customers, there are more new products on our
shelves and our colleagues are delivering improved customer
service. We are winning market share and growing our grocery
sales.
Value
-- We have consistently inflated prices behind competitors, both
overall and on the best-selling items that are most important to
customers(11) . Our value position across the whole basket
continues to improve versus competitors, including improving by 400
basis points versus Aldi in the last 12 months(5) . We announced
our biggest ever September investment in food of GBP60 million as
part of our commitment to invest GBP500 million by March 2023
-- We are matching Sainsbury's quality with Aldi prices on 240
of our most popular products and we recently increased the number
of own-brand products in Price Lock by 20 per cent as more
customers switch from branded to own-brand products
-- We have improved the visibility in store and online of our
Special Offers and increased our meal bundles, driving improved
customer satisfaction with our promotional offer
-- Our mix and basket size trends are proving more resilient
than competitors and we are seeing less switching to the limited
choice supermarkets than the other full choice supermarkets,
reflecting our improving value position and the strength of our
brand and customer base(6)
Quality and Innovation
-- We are on track to launch 1,200 new products this year,
having already created over 600 new products in H1. Summer Editions
sales were up over 30 per cent year-on-year
-- We also launched our second Autumn Editions range with over
70 per cent more products than last year, including our Stanley
Plum Tart and Tuscan Pork Ragu. We will launch 300 new Christmas
products and 50 per cent of these will be Taste the Difference
-- Taste the Difference sales are up by 14 per cent on a
three-year basis. We launched 160 new Taste the Difference
products, up 40 per cent year-on-year and we outperformed the
market overall(7) and at key events such as Easter and the Queen's
Jubilee. We also launched 21 new Inspired to Cook products to help
customers cook tasty food at home
-- Customer satisfaction scores for quality remain ahead of our
full choice supermarket competitors and we are the only full choice
supermarket to improve on quality perception scores while
maintaining price perception scores over a three-year
period(12)
-- We have invested to change the layout of our supermarkets and
convenience stores in line with the government's High in Fat, Salt
and Sugar (HFSS) guidance and to enhance our Fresh, Food Service
and Grocery sections
-- Through our partnership with Boparan Restaurant Group we have
opened two further "The Restaurant Hub" food halls, bringing the
total to four and we now have 50 Starbucks cafés in Sainsbury's
supermarkets
Service
-- In September we announced a GBP25 million package to support
colleagues with the cost of living. This included a second pay rise
this year for 127,000 hourly-paid colleagues, raising the base rate
to GBP10.25 per hour nationally and GBP11.30 per hour in London.
The package also includes free food during shifts and increased
discounts at Sainsbury's and Argos
-- Investment in colleagues and our stores is supporting strong
supermarket customer satisfaction scores. Customer satisfaction
stores are ahead of competitors in availability, speed of checkout,
quality and colleague availability(13)
-- We are well positioned to serve our customers wherever and
however they want to shop. As customer shopping habits normalise
and people return to stores post-pandemic, we are growing overall
market share with a higher proportion of online customers switching
to our own stores versus competitors(14) . Supermarket sales grew 3
per cent(15)
-- Convenience sales are now 7 per cent higher than
pre-pandemic, driven by particularly strong growth in less urban
convenience stores
-- Our online productivity metrics have improved with item pick
rate per hour up 13 per cent versus pre-pandemic and deliveries per
hour up 9 per cent
-- By the end of the financial year we plan to have opened
around 16 convenience stores, closed three supermarkets and closed
eight convenience stores as part of our focus on having stores that
are in the best locations for customers
-- We now deliver around 118,000 On Demand grocery orders per
week in as little as 30 minutes from nearly 700 stores through our
Chop Chop service and partnerships with Deliveroo and Uber Eats
Brands that Deliver
We are strengthening our brands, so that they deliver more
consistently both for our customers and for our shareholders. They
must contribute positively in their own right and support our
ambitions in food. Argos is performing well in a market where
customers are looking for reassurance on value and is considerably
more profitable than pre-pandemic. Habitat is growing strongly and
Tu is holding up well despite pressure on customers' disposable
incomes. Over 10 million customers are now registered with the
Nectar app and Sainsbury's Bank's performance has been resilient in
a toughening environment.
Argos
-- After declines in Q1 against a lockdown comparative, Argos
sales increased by 1.6 per cent in Q2, helped by significantly
improved product availability year-on-year and the impact of good
Summer weather on seasonal sales. Sales were particularly strong in
consumer electronics and gardening tools, barbecues and outdoor
toys
-- Our Argos transformation programme is on track and
profitability is significantly higher than pre-pandemic levels. We
now have 414 Argos stores inside Sainsbury's supermarkets, making
it easier for customers to shop for general merchandise
conveniently. We have opened 11 Local Fulfilment Centres, ensuring
we can serve more customers with more products faster
Habitat
-- We continue to build the Habitat brand, supporting strong
sales growth. Our Autumn/Winter campaign focused on Habitat's
breadth of range and value for money and products featured in the
campaign are selling well
-- Our Habitat Kids range delivered a particularly strong
performance, especially in bedroom furniture and bedding
-- Customer satisfaction scores have improved; value perception
is up 2.4 percentage points year-on-year and brand awareness is up
2.8 percentage points(10)
-- In October we announced a one-year partnership with British
designer Sebastian Conran, son of Habitat founder Sir Terence
Conran, including new collaborative ranges and a mentoring scheme
for Habitat designers and buyers
Tu
-- Our clothing business remains strong and structurally more
profitable than pre-pandemic, with significantly lower promotional
participation. Overall clothing sales were 2.5 per cent higher than
H1 19/20 and full price sales grew from 64 per cent to 80 per
cent
-- We delivered a record performance in womenswear dress sales,
up 40 per cent, and a good performance in Back to School clothing
sales
-- Our latest Tu & Me campaign Autumn collection was well received by customers
Nectar
-- Nectar is the UK's biggest loyalty programme and over 10
million customers are now registered with the app
-- SmartShop usage continues to increase and helps to drive
value for customers by enabling them to track their spend and
benefit from My Nectar Prices, which offers personalised discounts
where customers can save over GBP100 a year
-- Nectar is also increasingly popular with Argos customers and
is now used in over 30 per cent of Argos sales
-- Nectar360 is now working with more than 700 suppliers and is
tracking ahead of its previous target to deliver incremental
profits of GBP60 million to GBP70 million. We now expect Nectar360
to deliver incremental profits of at least GBP90 million by March
2026
Financial Services
-- We are making good progress with our plan to strengthen and
simplify our Financial Services business and we continue to invest
in digitisation
-- Financial Services delivered underlying operating profit of
GBP19 million in the half, in line with last year. Underlying
revenues were up 19 per cent, driven by an increase in credit
demand and a recovery in ATM and Travel Money commission income.
Additional provisioning has been made on the back of the subdued
economic environment and as portfolio behaviours normalise
post-pandemic, but overall arrears levels remain low
-- In May we re-opened all our Travel Money Bureaux and revenues
have recovered well as travel has returned, although revenues
remain below pre-pandemic levels. ATM transaction volumes are up
over 6 per cent year-on-year
-- We launched our Digital Savings platform, significantly improving the customer experience
-- Sainsbury's Bank paid its first dividend of GBP50 million to the Group in H1
Save to Invest
Two years ago we set out to deliver a step change in efficiency
by transforming our approach to costs, simplifying our organisation
and delivering a structural reduction in our operating cost base.
We are pleased with the level of structural cost savings delivered
so far and we are in a strong place. The scale of our cost savings
delivery is enabling us to make bold investments in our core food
business.
-- We expect to deliver over GBP1.3 billion of cost savings in
the three years to FY23/24, doubling the run rate from the three
years to FY19/20. Halfway through this programme, we have delivered
GBP730 million of savings. Cost inflation is considerably higher
than we had anticipated, but our strong programme of cost savings
is helping us to mitigate the impact of inflation and invest in low
prices for customers and in colleague pay ahead of key
competitors
-- Argos is delivering improved profitability driven by our
end-to-end strategic transformation programme. We expect to close
around 50 Argos standalone stores and open around 25 Argos stores
inside Sainsbury's this financial year
-- By March 2024, we expect to have around 160 Argos standalone
stores, 430-460 Argos stores inside Sainsbury's supermarkets and
450-500 collection points. We had previously guided to around 100
standalone Argos stores by this date; this change reflects progress
in rent negotiations
-- We have opened 11 Local Fulfilment Centres and as a result,
our customers are benefitting from improved availability and faster
delivery. We are on track to make a total saving of GBP105 million
by the end of March 2024 for the overall Argos transformation
programme
-- We continue to review ways to make our stores more efficient,
easy and convenient to shop. Introducing more self-service
checkouts means our colleagues are able to focus on different tasks
and deliver improved service and improves customer satisfaction
scores for speed of checkout
-- We continue to improve the profitability of Groceries Online,
consistently reducing the cost to serve while delivering an
improved customer experience
-- The transformation of our café, bakery and hot food counters
is on track to save over GBP160 million over the three years to
FY22/23. We have so far closed 312 food counters and 260 cafés. We
have opened two further 'The Restaurant Hub' food halls and we now
have 50 Starbucks cafés in Sainsbury's stores. By working with
third parties we can deliver for customers and support our own cost
saving programme
-- We are making good progress with the integration of
Sainsbury's, Argos and Habitat supply chain and logistics networks,
which will save at least GBP250 million over the programme
-- We have made good progress in reducing overall energy
consumption throughout our business which is in turn supporting
cost savings. We have reduced electricity consumption (kWh) across
Sainsbury's and Argos by 23 per cent over the last three years, by
rolling out LED lighting in 100 per cent of our stores and fitting
aerofoil technology in our fridges among other initiatives
-- We believe we are in a good position relative to the industry
on our proportion of Net Zero energy sourcing. We have committed to
the long-term purchasing of renewable energy from new windfarms
which gives us good protection from variable cost inflation
Plan for Better
As a responsible retailer, we want to Help Everyone Eat Better,
offering products that help customers reduce their impact on the
environment one plate at a time. We are making good progress
against our plan to become Net Zero across our own operations by no
later than 2035.
Better for You
Healthy and sustainable diets
-- We are committed to keeping prices low on healthy foods; at
least 75 per cent of products in our Aldi price-matched promotion
are a Healthy or Better For You choice
-- We have reintroduced GBP2 top-up coupons to buy fruit and
vegetables, to accompany the Government-funded NHS Healthy Start
scheme every week over the next six months in England. This could
help feed more than half a million pregnant women and children in
need of support
-- We are inspiring customers to eat well on a budget with the
re-launch of 'Feed your Family for a Fiver' campaign and by sharing
Healthy and Better for You recipes online
Better for the Planet
Carbon
-- We have reduced greenhouse gas emissions (GHG) within our own
operations by 44.5 per cent year-on-year, mainly driven by our
transition to 100 per cent renewable electricity as well as our
ongoing GHG emission reduction initiatives
-- Coming together with other retailers, we collectively
invested GBP9 million in the Responsible Commodities Facility (RCF)
to provide financial incentives to farmers in Brazil who commit to
100 per cent deforestation and conversion-free (DCF) soy
cultivation
-- We launched our new innovation investment programme, in
partnership with Williams Advanced Engineering, and are pledging to
invest GBP5 million to help support small businesses pioneering
sustainable technologies
Food Waste
-- We have removed 'best before' dates from 100 Fresh products
and will have removed these dates from a further 130 products by
the end of the year
-- We reduced operational food waste across our business by 7 per cent
-- In the year since launching our partnership with Neighbourly,
we have distributed over six million meals, supporting an average
of 750,000 people each week
Plastic and Recycling
-- We became the first retailer to launch our own refillable
handwash pouch, saving 26 tonnes of plastic per year and replaced
our double concentrate squash bottles to quadruple concentrate,
saving 185 tonnes of plastic each year
-- We launched new double-length toilet rolls, reducing
packaging by 30 per cent and saving customers money
-- Since launching our partnership with Newlife in 2019, we have
donated 65.5 tonnes of unsellable clothing
Better for Everyone
Human Rights
-- We published our first Human Rights saliency report and set
out five Human Rights commitments, based on our most salient human
rights risks and emerging issues that affect the people within our
supply chain
Diversity and Inclusion
-- We launched the 'Thrive with Sainsbury's' programme, which
supports Black founder-led brands to create food and drink products
and committed GBP1 million to help these businesses grow and to
mentor participating founders
-- We have made good progress against our Diversity and
Inclusion targets and have increased both black and female
representation in senior leadership positions year-on-year
Animal Health and Welfare
-- We were awarded 'UK Retailer of the Year 2022' by the Aquaculture Stewardship Council (ASC)
-- We are focusing on a refreshed commitment to improve animal
health and welfare and practising responsible antibiotic
stewardship
(1) Nielsen panel, Total Average Selling Price growth YoY, 52
weeks to 17 Sept 2022. Total FMCG exc. Kiosk & Tobacco
(2) Nielsen panel volume growth Yo3Y. Total FMCG excl. Kiosk
& Tobacco, 28 weeks to 17 Sept 2022. Total Outlets
(3) Nielsen panel volume growth YoY. Total FMCG excl. K&T,
12 weeks to 17 Sept 2022. Total universe: Total Outlets
(4) Nielsen panel, Total Average Selling Price growth YoY, 52
weeks to 17 Sept 2022. Total FMCG exc. Kiosk & Tobacco
(5) Value Reality. H1 Mar-Sept 2022 vs H1 Mar-Sept 2021; Edge by
Ascential, internal modelling
(6) NielsenIQ panel data. Net volume switching GBPm to Aldi +
Lidl as % of each retailer's relative volume. 28 weeks to 17
September 2022
(7) Nielsen panel, Premium OL market - Total FMCG excl. Kiosk
and Tobacco. Volume growth differential for 12 weeks to 17
September 2022. Total universe: total outlets
(8) Supermarket CSAT. Competitor Benchmarking. 12 weeks to 17
Sept 2022
(9) BRC data, 28 weeks to 17 Sept 2022. Argos differential,
Total NFNC (exc. H&B & stationery) sales
(10) YouGov Value Perception and Brand Awareness scores for
Habitat brand. H1 22/23 average scores vs H1 21/22 average
scores
(11) Nielsen panel data, Top 100 SKUs by retailer. Average
Selling Price YoY growth. 52 weeks to 17 Sept 2022
(12) OC&C Proposition Index, Grocery Price vs Quality,
August 2022 survey
(13) Nielsen panel data. Proportion of H1 22/23 value switching
back into own stores. Average of other online players = Tesco,
Asda, Morrisons
(14) Competitor benchmarking survey. Q2 22/23 supermarket CSAT
scores 12 weeks to 17 September 2022
(15) Including Argos stores in Sainsbury's sales
Financial Review for the 28 weeks to 17 September 2022
In the 28 weeks to 17 September 2022, the Group generated profit
before tax of GBP 376 million (HY 2021/22: GBP527 million) and an
underlying profit before tax of GBP340 million (HY 2021/22: GBP371
million).
A number of Alternative Performance Measures ('APMs') have been
adopted by the Directors to provide additional information on the
underlying performance of the Group. These measures are intended to
supplement, rather than replace the measures provided under IFRS.
Please see Note 2.5 on page 25 for further information.
The prior period (28 weeks to 18 September 2021) 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.
Summary income statement(1) 28 weeks 28 weeks 52 weeks
to to to
17 September 18 September Change 05 March
2022 2021 2022
GBPm GBPm % GBPm
Group sales (including VAT) 18,338 17,528 4.6 33,355
Retail sales (including VAT) 18,084 17,315 4.4 32,924
Retail sales (excluding fuel,
including VAT) 14,674 14,871 (1.3) 28,095
Group sales (excluding VAT) 16,408 15,724 4.4 29,895
Retail sales (excluding VAT) 16,154 15,511 4.1 29,463
Underlying operating profit
Retail 477 523 (9) 1,001
Financial services 19 19 - 38
----------------------------------- ------------- ---------
Total underlying operating profit 496 542 (8) 1,039
Underlying net finance costs(2) (156) (171) 9 (309)
Underlying profit before tax 340 371 (8) 730
Items excluded from underlying
results(3) 36 156 (77) 124
----------------------------------- ------------- ------------- ------- ---------
Profit before tax 376 527 (29) 854
Income tax expense (91) (149) 39 (177)
----------------------------------- ------------- ------------- ------- ---------
Profit for the financial period 285 378 (25) 677
----------------------------------- ------------- ------------- ------- ---------
Underlying basic earnings per
share 11.2p 12.2p (8) 25.4p
Underlying diluted earnings
per share 11.1p 11.6p (4) 24.5p
Basic earnings per share 12.3p 16.8p (27) 29.8p
Diluted earnings per share 12.1p 16.1p (25) 28.8p
Dividend per share 3.9p 3.2p 22 3.2p
1 Prior year restated - refer to note 2 of the financial statements
2 Refer to APMs and note 7 of the financial statements
3 Refer to APMs and note 3 of the financial statements
The first half has seen strong delivery against a tough
comparator which benefitted from elevated sales in Q1 as a result
of the last COVID-19 restrictions. The ongoing delivery of our cost
programme has allowed us to largely mitigate the impact of rising
operating cost inflation and deliver for customers, colleagues and
investors. We have consistently prioritised protecting value for
customers, raising prices less than the market, and this remains
key to our strategy to grow volume market share. We have supported
colleagues through this period of higher inflation with a 2(nd) pay
rise during the year, and are delivering for shareholders with
another strong retail free cash flow result to support the higher
dividend pay-out ratio announced in our preliminary results.
Group sales
Group sales including VAT increased by 4.6 per cent year-on-year
whilst Retail sales (including VAT, including fuel) increased by
4.4 per cent year-on-year, driven by a significant increase in Fuel
sales. Retail sales (including VAT, excluding fuel) decreased by
1.3 per cent.
Total sales performance 28 weeks to 28 weeks to
by category
17 September 18 September Change
2022 2021
GBPbn GBPbn %
------------------------- --------------------------------- --------------------------------- -------
Grocery 11.3 11.3 0.2%
General Merchandise 2.9 3.1 (6.1)%
Clothing 0.5 0.5 (6.0)%
------------------------- --------------------------------- --------------------------------- -------
Retail (exc. fuel) 14.7 14.9 (1.3)%
------------------------- --------------------------------- --------------------------------- -------
Fuel sales 3.4 2.4 39.5%
Retail (inc. fuel) 18.1 17.3 4.4%
------------------------- --------------------------------- --------------------------------- -------
Sales strengthened through the half, with the first quarter
annualising strong sales from COVID-19 restrictions in the prior
year, and the second quarter also benefited from warmer weather
than the prior year. Grocery inflation in the market increased
during the period, but we continued to prioritise value for
customers, inflating behind all key competitors.
General Merchandise sales saw the strongest impact from prior
year comparators and returned to growth in the second quarter,
driven by improved availability and market share gains. Consumer
electronics sales growth was particularly strong against a period
of supply challenges last year and seasonal sales benefited from a
warm summer. Clothing saw a similar pattern with sales broadly flat
in the second quarter.
Fuel sales increased by 39.5 per cent, with higher sterling oil
prices leading to inflation of 36.9 per cent. Fuel sales are now
25.8 per cent above pre-COVID-19 levels.
Total sales performance by channel 28 weeks to 28 weeks to
17 September 18 September
2022 2021
------------- -------------
Total Sales fulfilled by Supermarket
stores (0.5)% (0.5)%
Supermarkets (inc Argos stores
in Sainsbury's) 2.9% (3.0)%
Groceries Online (17.4)% 12.8%
Convenience 10.5% 4.9%
------------- -------------
Overall sales fulfilled from our Supermarkets fell by 0.5 per
cent, driven by a 17.4 per cent decline in Groceries Online as some
customers returned to stores following restrictions in the prior
year. Conversely, sales in Convenience stores continued to recover,
growing 10.5 per cent, with growth strongest in Food on the Move
city centre stores and more urban locations. Overall, compared to
pre-COVID-19 2019/20, Groceries Online sales are up 88.5 per
cent.
Retail like-for-like sales performance 28 weeks to 28 weeks to
17 September 18 September
2022 2021
Like-for-like sales (exc. fuel) (0.8)% 0.3%
Like-for-like sales (inc. fuel) 4.9% 6.1%
----------------------------------------- -------------
Retail like-for-like ('LFL') sales excluding fuel were down in
the half reflecting tough first quarter comparisons, but grew 3.7
per cent in the second quarter.
Space
In the first half of 2022/23, Sainsbury's closed one Supermarket
(2021/22 one opening and one closure). We opened four new
Convenience stores and two were closed (2021/22 opened eight
convenience stores and closed 10). During the period we opened 14
new Argos stores in Sainsbury's and one standalone Argos store, and
closed 25 standalone Argos stores (2021/22 opened 37 stores in
Sainsbury's and closed 36 standalone stores). In total Argos had
718 stores and 375 collection points at the end of the period.
Store numbers and retailing space
As at As at
----------- ------------ ------------------
5 March 17 September
Extensions
Disposals / refurbishments
2022 New stores / closures / downsizes 2022
----------------------------- -------- ----------- ------------ ------------------ -------------
Supermarkets 598 - (1) 14 597
Supermarkets area '000
sq. ft. 20,803 - (16) (16) 20,771
Convenience 809 4 (2) - 811
Convenience area '000
sq. ft. 1,918 11 (4) - 1,925
Sainsbury's total store
numbers 1,407 4 (3) 14 1,408
----------------------------- -------- ----------- ------------ ------------------ -------------
Argos stores 328 1 (25) - 304
Argos stores in Sainsbury's 400 14 - - 414
Argos total store numbers 728 15 (25) - 718
Argos collection points 335 45 (5) - 375
Habitat 3 - - - 3
----------------------------- -------- ----------- ------------ ------------------ -------------
In 2022/23, we expect to open around 16 new convenience stores,
and to close three supermarkets and eight convenience stores. In
addition, we expect to open around 25 Argos stores inside
Sainsbury's, and close around 50 Argos standalone stores.
In the UK, we expect the standalone Argos store estate will
reduce to around 160 stores by March 2024, while we expect to have
430-460 Argos stores inside Sainsbury's supermarkets as well as
450-500 collection points. We had previously guided to around 100
standalone Argos stores by this date, and this change reflects
progress in rent negotiations.
Retail underlying operating profit
Retail underlying operating profit decreased by 8.7 per cent to
GBP477 million (HY 2021/22: GBP523 million) and retail underlying
operating margin decreased by 42 basis points year-on-year to 2.95
per cent (HY 2021/22: 3.37 per cent). This decline in profit
reflects our investment in value, reduced volumes as we annualise
COVID-19 restrictions and higher levels of operating cost
inflation, offset by both higher fuel sales and our ongoing Save to
Invest Programme.
Continued work on our retail operating model delivered strong
savings in both Sainsbury's and Argos, led by enhanced labour
modelling and further savings in Online as we continue to embed the
rapid capacity growth during COVID-19 and improve pick rates. The
Argos Transformation programme continued to deliver savings as we
integrate Argos and Sainsbury's and reduce occupancy and store
operational costs.
Retail underlying operating profit
28 weeks 28 weeks
to to
17 September 18 September YoY
2022 2021 Change
Retail underlying operating profit (GBPm)(1) 477 523 (8.7)%
Retail underlying operating margin (%)(2) 2.95 3.37 (42)bps
Retail underlying EBITDA (GBPm)(3) 1,087 1,141 (4.7)%
Retail underlying EBITDA margin (%)(4) 6.73 7.36 (63)bps
1 Retail underlying earnings before interest, tax and
Sainsbury's underlying share of post-tax profit from joint
ventures.
2 Retail underlying operating profit divided by retail sales excluding VAT.
3 Retail underlying operating profit before underlying
depreciation and amortisation of GBP610 million.
4 Retail underlying EBITDA divided by retail sales excluding VAT.
In 2022/23, we now expect a depreciation and amortisation charge
of around GBP1,150 million, including around GBP500 million right
of use asset depreciation.
Financial Services
Financial Services results
6 months to 31 August 2022
2022 2021 Change
--------------------------------------------
Underlying revenue (GBPm) 254 213 19%
Interest and fees payable (GBPm) (28) (30) (7)%
Total income (GBPm) 226 183 23%
Underlying operating profit (GBPm) 19 19 0%
-------------------------------------------- ------ ------ ------------
Net interest margin (%)(1) 5.2 4.3 Up 90bps
Cost:income ratio (%) 67 72 Down 500bps
Bad debt as a percentage of lending (%)(2) 2.2 1.3 Up 90bps
Active customers (m) - Bank 1.9 1.8 3.6%
Active customers (m) - AFS 2.1 2.1 (1.6)%
Total capital ratio (%)(3, 4) 17.3 20.1 Down 280bps
Total Customer lending (GBPbn)(5) 5.1 5.0 2%
Unsecured lending (GBPbn) 4.4 4.0 11%
Secured lending (GBPbn) 0.7 1.0 (28)%
Customer deposits (GBPbn) (4.6) (4.6) 0%
-------------------------------------------- ------ ------ ------------
1 Net interest receivable divided by average interest-bearing assets.
2 Bad debt expense divided by average net lending.
3 Total capital divided by risk-weighted assets.
4 Total Capital Ratio excludes profits still subject to formal
verification, inclusion of these profits would increase the capital
ratio by 0.4%. In addition, the Bank issued a tender to repurchase
and extinguish GBP120m of its existing Tier 2 on 30th August. This
was executed and replaced with a new issuance on 12th September,
the Total Capital Ratio prior to the new issuance was 15.9%, the
figures shown includes this re-issuance as it is a material
adjustment between 31 August and 17th September.
5 Amounts due from customers at the Balance Sheet date in
respect of loans, mortgages, credit cards and store cards net of
provisions.
Financial Services underlying operating profit of GBP19 million
was flat year-on-year (H1 21/22: profit of GBP19 million). This was
driven by an increase in credit demand and recovery in Travel
Money, offset by higher impairments and increased costs. Higher
impairments reflect both a revision in economic assumptions on
inflation and unemployment, as well as the normalisation of low
arrears levels in the prior year.
Financial Services total income of GBP226 million increased by
23 per cent (H1 21/22: GBP183 million), driven primarily by a
recovery of credit demand with unsecured lending balances up 11 per
cent year-on-year, and a rebound in Travel Money as foreign travel
resumed. Net Interest margin has increased 90bps, with net interest
income up 14 per cent due to a higher unsecured mix, improving
yields and a focus on managing the cost of funding. Fee income has
shown recovery post COVID within Credit Card and ATMs, with higher
retail spend and the demand for cash returning.
The Financial Services cost:income ratio has reduced to 67 per
cent (H1 21/22: 72 per cent), primarily driven by a recovery in
income as volumes recovered.
Bad debt expense as a percentage of lending increased 90 basis
points year-on-year to 2.2 per cent (H1 21/22: 1.3 per cent),
reflecting the higher proportion of unsecured balances, revised
economic assumptions and increased arrears.
A GBP50m dividend was paid from Sainsbury's Bank to the Group
for the first time in April 2022. The Bank remains well capitalised
with a Total Capital ratio of 17.3%.
Underlying net finance costs
Underlying net finance costs reduced by 9 per cent to GBP156
million (HY 2021/22: GBP171 million). These costs include GBP17
million of net non-lease interest cost (HY 2021/22: GBP22 million).
The reduction of net non-lease interest is driven by interest
income from higher cash balances. In addition, the net underlying
interest costs on lease liabilities have reduced to GBP139 million
(HY 2021/22: GBP149 million), mainly due to lower interest rates on
new leases.
We now expect underlying net finance costs in 2022/23 of GBP290
million - GBP300 million, lower than previously guided, including
around GBP260 million of lease interest.
Items excluded from underlying results
In order to provide shareholders with additional insight into
the underlying performance of the business, an adjusted measure of
profit (underlying profit before tax) is provided to supplement the
reported IFRS numbers, reflecting how the business measures
performance internally. Underlying results exclude items recognised
in reported profit or loss before tax which, if included, could
distort comparability between periods. In determining which items
to exclude from underlying profit, the Group considers items which
are significant either by virtue of their size and/or nature, or
that are non-recurring. The adjusted items are below.
Items excluded from underlying results 28 weeks to 28 weeks to
(1)
17 September 18 September
2022 2021
GBPm GBPm
----------------------------------------------- ------------- -------------
Restructuring and integration programmes (33) (47)
Income recognised in relation to legal
disputes 30 181
IAS 19 pension income 35 6
Property, finance and acquisition adjustments 4 16
Items excluded from underlying results 36 156
----------------------------------------------- ------------- -------------
1 Prior year restated - see note 2 of the financial statements
- Restructuring and integrations costs of GBP33 million
(2021/22: GBP47 million) includes GBP33 million (2021/22: GBP37
million) relating to the programme announced in November 2020. Cash
costs in the half were GBP33 million (2021/22: GBP81 million) and
we expect full year cash costs of around GBP60 million.
- We continue to 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 GBP300
million, with the majority in the period to March 2024. To date
charges of GBP673 million and cash costs of GBP181 million have
been incurred. 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 ending March 2024.
- Income recognised in relation to legal disputes of GBP30
million (2021/22: GBP181 million) primarily relates to settlements
for overcharges from payment card processing fees and is shown net
of legal fees. No net cash was received in the half (2021/22: GBP27
million).
- IAS 19 Pension income of GBP35 million (2021/22: GBP6 million)
comprises pension finance income of GBP30 million, a settlement
credit of GBP8 million relating to a gain on payments made to
members exiting the scheme relative to the liabilities
extinguished, and scheme expenses of GBP3 million. The higher
pensions finance income is driven by both an increased pensions
surplus and higher interest rates.
- Other movements of GBP4 million income (2020/21: GBP16
million) relate to property profits, acquisition adjustments and
non-underlying financing costs. The positive value is driven by a
gain on energy derivatives driven by higher energy prices.
Taxation
The tax charge was GBP91 million (HY 2021/22: GBP149 million).
The underlying tax rate was 23.5 per cent (HY 2021/22: 26.4 per
cent) and the effective tax rate was 24.2 per cent (HY 2021/22:
28.3 per cent).
The underlying and effective tax rates are lower than the prior
year. The 2021/22 charge was adversely impacted by restating
deferred tax balances in advance of the legislated 6% increase in
the headline rate of corporation tax.
The 2022/23 effective tax rate of 24.2 per cent is higher than
the standard rate of corporation tax in the UK of 19 per cent. This
is largely a result of the impact of non-deductible expenses,
particularly in respect of non-deductible capital expenditure and
prior year adjustments.
We expect an underlying tax rate in 2022/23 of around 24 per
cent.
Earnings per share
Underlying basic earnings per share decreased to 11.2 pence (HY
2021/22: 12.2 pence) driven by the decrease in underlying earnings.
Basic earnings per share decreased to 12.3 pence (HY 2021/22: 16.8
pence). Underlying diluted earnings per share decreased to 11.1
pence (HY 2021/22: 11.6 pence) and diluted earnings per share
decreased to 12.1 pence (HY 2021/22: 16.1 pence).
Dividends
The Board has recommended an interim dividend of 3.9 pence per
share (2021/22: 3.2 pence) reflecting 30 per cent of the 2021/22
full year dividend per share. This will be paid on 16 December 2022
to shareholders on the Register of Members at the close of business
on 11 November 2022. 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 25 November 2022.
Net debt and retail cash flows
As at 17 September 2022, net debt was GBP6,165 million (18
September 2021: GBP6,345 million), a decrease of GBP180 million.
Excluding the impact of lease liabilities on net debt, Sainsbury's
reduced non-lease net debt by GBP388 million, moving to a net funds
position of GBP361 million (18 September 2021: net debt of GBP27
million).
Net debt includes lease liabilities under IFRS 16 which grew to
GBP6,526 million (HY 2021/22: GBP6,318 million) as a result of
exercising purchase options on a further eight leased supermarkets
held by property investment pools in which the Group holds an
interest in the second half of 2021/22 (taking the total to 21
stores in 2021/22). Group net debt includes the impact of capital
injections to and dividends received from Sainsbury's Bank, but
excludes the net debt of Financial Services. Financial Services'
net debt balances are excluded because they are required as part of
the business as usual operations of the bank, as opposed to
specific forms of financing for the Group.
Having exceeded our GBP950 million net debt reduction target at
last year end, a year ahead of plan, we continue to expect to
generate average retail free cash flow of at least GBP500 million
per year over the three years to March 2025(5) .
Summary cash flow statement (1) Retail Retail Retail
28 weeks 28 weeks to 52 weeks
to to
17 September 18 September 5 March
2022 2021 2022
---------------------------------------------- ------------- ------------- ---------
GBPm GBPm GBPm
Retail underlying operating profit 477 523 1001
Adjustments for:
Retail underlying depreciation and
amortisation(2) 610 618 1,144
Share based payments and other 34 26 54
Retail exceptional operating cash flows
(excluding pensions)(2) (33) (30) (3)
Adjusted retail operating cash flow
before changes in working capital(3) 1,088 1,137 2,196
---------------------------------------------- ------------- ------------- ---------
Decrease/(increase) in working capital(2) 360 135 (185)
---------------------------------------------- ------------- ------------- ---------
Net interest paid(2) (161) (177) (323)
Pension cash contributions (23) (39) (71)
Corporation tax paid (32) - (23)
------------- ------------- ---------
Adjusted net cash generated from operating
activities(2) 1,232 1,056 1,594
---------------------------------------------- ------------- ------------- ---------
Cash capital expenditure(2) (297) (298) (645)
Repayments of lease liabilities (245) (242) (491)
Initial direct costs on right-of-use
assets (9) (1) (3)
Proceeds from disposal of property,
plant and equipment 28 39 46
Dividends and distributions received 50 - 2
Retail free cash flow 759 554 503
---------------------------------------------- ------------- ------------- ---------
Dividends paid on ordinary shares (229) (165) (238)
Repayment of borrowings(2) (22) (231) (256)
Other(2) (23) (30) (27)
Net increase/(decrease) in cash and
cash equivalents 485 128 (18)
---------------------------------------------- ------------- ------------- ---------
Decrease in Debt 267 473 747
Conversion of perpetual convertible-bond - - 240
Other non-cash and net interest movements(4) (158) (477) (1,259)
Movement in net debt 594 124 (290)
---------------------------------------------- ------------- ------------- ---------
Opening net debt (6,759) (6,469) (6,469)
----------------------------------------------
Closing net debt (6,165) (6,345) (6,759)
---------------------------------------------- ------------- ------------- ---------
of which
Lease Liabilities (6,526) (6,318) (6,618)
---------------------------------------------- ------------- ------------- ---------
Net Funds / (Net Debt) Excluding Lease
Liabilities 361 (27) (141)
---------------------------------------------- ------------- ------------- ---------
1 See note 5b for a reconciliation between Retail and Group cash
flow, and Alternative Performance Measures on page 57 for
reconciliations of specific line items as indicated.
2 Refer to the Alternative Performance Measures on pages 57 to 63 for reconciliation.
3 Excludes working capital and pension contributions.
4 Other non-cash includes new leases and lease modifications,
fair value movements on derivatives used for hedging long term
borrowings.
5 The strategic purchase of 21 stores which has yet to complete
is a capital allocation decision and will be reported outside of
retail free cash flow.
Adjusted retail operating cash flow before changes in working
capital was GBP1,088 million (HY 2021/22: GBP1,137 million) and
working capital decreased by GBP360 million since the year end (HY
2021/22: GBP135 million). Working capital typically decreases
between year end and half year, driven by seasonality and the
phasing of payables. HY 2021/22 saw a more subdued effect due to
the unwind of COVID-19 trading patterns, whilst this year sees a
return to a more normal phasing, supported by strong Q2 sales
growth.
Corporation tax of GBP32 million was paid in the half, with no
payments made in the prior half year, reflecting payments made in
2020/21 before the decision to forgo business rates relief which
subsequently impacted taxable profits in that year. Pensions
contributions of GBP23 million (HY 2021/22: GBP39 million) are down
on last year with the Sainsbury's scheme now fully funded and
contributions stopped. Proceeds from disposals of GBP28 million (HY
2021/22: GBP39 million) represents disposal of non-trading sites
and we do not expect any material further proceeds in the second
half of the year.
Retail free cash flow increased by GBP205 million year-on-year
to GBP759 million (HY 2021/22: GBP554 million) reflecting the
material change in working capital pattern noted above, as well as
a GBP50 million dividend received from Sainsbury's Bank given their
strong capital position.
Sainsbury's paid dividends of GBP229 million in the half (HY
2021/22: GBP165 million).
As at 17 September 2022 Sainsbury's has drawn debt facilities of
GBP545 million (HY 2021/22 GBP592 million). The Group holds undrawn
committed credit facilities of GBP1,394 million and undrawn
uncommitted facilities of GBP195 million.
Capital expenditure
Retail cash capital expenditure was GBP297 million (HY 2021/22:
GBP298 million).
We expect annual retail cash capital expenditure (excluding
Financial Services) to be around GBP700 million to GBP750 million
over the three years to March 2025.
Financial ratios
Key financial ratios 28 weeks to 28 weeks to 52 weeks to
17 September 18 September 5 March
2022 2021 2022
Return on capital employed
(%) (1) 7.7 6.3 8.4
Net debt to EBITDA (2) 2.9 times 3.3 times 3.1 times
Fixed charge cover (3) 2.7 times 2.3 times 2.8 times
1 ROCE: Return is defined as a 52 week rolling underlying profit
before interest and tax. Capital employed is defined as group net
assets excluding the pension deficit/surplus and excluding net
debt. The average is calculated on a 14 point basis.
2 Net debt of GBP6,165 million includes lease obligations under
IFRS 16, divided by Group underlying EBITDA of GBP2,158 million,
calculated for a 52-week period to 17 September 2022.
3 Group underlying EBITDA divided by rent (both capital and
interest) and net underlying finance costs, where interest on
perpetual securities is treated as an underlying finance cost.
Return on capital employed (ROCE) has declined in the first
half, reflecting both lower earnings and increased capital employed
driven by lease net debt. The prior half year comparator is
impacted by the decision to forgo business rates relief, which
resulted in a full year's charge being recorded in the second half
of 2020/21.
Sainsbury's continues to target leverage of 3.0x - 2.4x to
deliver a solid investment grade balance sheet. Our net debt to
EBITDA leverage metric has shown strong progress since year end.
However, this is supported by seasonal working capital flows and we
expect to return to the top of this range by year end. Fixed charge
cover is stable.
Defined benefit pensions
The Pension Scheme is valued on different bases for different
purposes. For the corporate annual accounts, the value of the
retirement benefit is calculated under IAS19 while the funding of
the Scheme is determined by the Trustee's triennial valuation.
The Scheme was subject to a triennial actuarial valuation as at
30 September 2021, which has now completed. There was an actuarial
surplus of GBP130 million (Sainsbury's section: a surplus of GBP231
million, Argos section: a deficit of GBP101 million), from a
deficit of GBP538 million in 2018. The asset backed contributions
(ABC) structure established by Sainsbury's in July 2019 continues
to deliver as planned. Under the ABC, properties with a value of
GBP1.35 billion were transferred into a property holding company, a
wholly owned subsidiary of the Group, and leased to other Group
entities. Rental receipts facilitate payments of interest and
capital on loan notes issued to a Scottish Limited Partnership, in
which the Scheme holds an interest. The Scheme's interest in the
Partnership entitles it to annual distributions over up to 20
years.
These were approximately GBP58 million per year until 2030, and
subsequently approximately GBP28 million a year for the remaining
period (increasing by 2% a year). The distributions are made
through three payment streams: 1) Payments to the Sainsbury's
section 2) Payments to the Argos section 3) Switching payment
stream, paid to either the Sainsbury's section or Argos
section.
The payments to the Sainsbury's and Argos sections (streams 1
and 2) will stop in 2030, or when the relevant section reaches its
funding target, if earlier. The third stream is initially paid to
the Sainsbury's section.
As the Sainsbury's section reached its funding target in
December 2021, stream 1 (GBP15 million a year) was permanently
switched off and stream 3 (currently GBP24 million a year) switched
to the Argos section from March 2022. Stream 3 payments will
continue until 2038 or until both sections have reached their
funding targets, if earlier. The Argos section also continues to
receive the stream 2 payments of GBP20 million a year.
At 17 September 2022, the net defined benefit surplus under
IAS19 for the Group was GBP1,455 million (excluding deferred tax).
The GBP828 million decrease from 5 March 2022 was driven by
remeasurement losses resulting from the net impact of rising
interest rates on both plan assets and liabilities.
For 2022/23, total pension scheme cash contributions are
expected to be GBP53 million.
Retirement benefit obligations
Sainsbury's Argos Group Group
as at as at as at as at
17 September 17 September 17 September 5 March
2022 2022 2022 2022
GBPm GBPm GBPm GBPm
Present value of funded
obligations (5,836) (922) (6,758) (9,373)
Fair value of plan assets 7,176 1,064 8,240 11,693
Pension surplus 1,340 142 1,482 2,320
Present value of unfunded
obligations (15) (12) (27) (37)
-------------------------------- ------------- ------------- ------------- --------
Retirement benefit surplus 1,325 130 1,455 2,283
Deferred income tax liability (413) (41) (454) (640)
-------------------------------- ------------- ------------- ------------- --------
Net retirement benefit
surplus 912 89 1,001 1,643
-------------------------------- ------------- ------------- ------------- --------
Post Balance Sheet Events
Borrowings
Subsequent to the balance sheet date, an unsecured term facility
for GBP575m was entered into in October 2022, with an ultimate
maturity date of 30 November 2024. As at the date of signing the
term facility was undrawn.
Retirement benefit obligations
Subsequent to the balance sheet date, there have been
significant movements in gilt markets. In particular the 'mini
budget' announced by the government on 23rd September caused rapid
sales of government bonds which further depressed gilt markets.
Although a temporary intervention by the Bank of England and
subsequent policy changes have stabilised the market, gilt yields
remain significantly higher than they were prior to the mini
budget. This has resulted in a significant decrease in the value of
the Group's pension Scheme's assets, and also its liabilities.
The Group's pension Scheme adopts a collateral sufficiency
framework which ensures sufficient high quality liquid assets are
maintained in order to meet liquidity requirements, even in times
of market stress. The scale and speed of the increase in interest
rate expectations since the 'mini budget', and volatility within
the markets, resulted in the Group deciding to put in place a loan
facility to the Scheme of GBP500m on 18th October. The purpose of
this facility was to further enhance the pensions Scheme's
resilience in the event of unexpected substantial further rises in
interest rates. This facility will remain in place for 3 months and
as at the date of signing has not been drawn.
Group income statement (unaudited)
for the 28 weeks to 17 September 2022
28 weeks to 17 September 28 weeks to 18 September
2022 2021 (restated)
------------------- ----- -------------------------------------------- --------------------------------------------
Before Non-underlying Before Non-underlying
non-underlying items non-underlying items
items (Note items (Note
3) Total 3) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Revenue 4 16,408 - 16,408 15,724 - 15,724
Cost of sales (15,183) (11) (15,194) (14,476) (28) (14,504)
Gross
profit/(loss) 1,225 (11) 1,214 1,248 (28) 1,220
Administrative
expenses (751) (18) (769) (725) (32) (757)
Other income 22 40 62 19 184 203
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Operating profit 496 11 507 542 124 666
Finance income 7 5 30 35 - 36 36
Finance costs 7 (161) (5) (166) (171) (4) (175)
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Profit before tax 340 36 376 371 156 527
Income tax expense 8 (80) (11) (91) (98) (51) (149)
------------------- ----- --------- ---------
Profit for the
financial
period 260 25 285 273 105 378
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Earnings per share 9 pence pence
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Basic earnings 12.3 16.8
Diluted earnings 12.1 16.1
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
52 weeks to 5 March
2022
------------------- ----- -------------------------------------------- --------------------------------------------
Before Non-underlying
non-underlying items
items (Note
3) Total
Note GBPm GBPm GBPm
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Revenue 4 29,895 - 29,895
Cost of sales (27,538) 9 (27,529)
Gross profit 2,357 9 2,366
Administrative
expenses (1,352) (78) (1,430)
Other income 34 186 220
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Operating profit 1,039 117 1,156
Finance income 7 3 17 20
Finance costs 7 (312) (10) (322)
Profit before tax 730 124 854
Income tax expense 8 (154) (23) (177)
------------------- ----- --------- ---------
Profit for the
financial
period 576 101 677
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Earnings per share 9 pence
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Basic earnings 29.8
Diluted earnings 28.8
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
The notes on pages 22 to 53 form an integral part of these
Condensed Consolidated Interim Financial Statements.
Refer to note 2 for details of prior year restatement.
Group statement of comprehensive (loss)/income (unaudited)
for the 28 weeks to 17 September 2022
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 (restated) 2022
--- ---------------- ----------------- ---------
Note GBPm GBPm GBPm
--------- ---------- ----------------- ---------
Profit for the financial period 285 378 677
-------------------------------------------------------- --------- ---------- ----------------- ---------
Items that will not be reclassified subsequently
to the income statement
--------- ---------- ----------------- ---------
Remeasurement on defined benefit pension
schemes 18 (886) 298 1,457
---------
Movements on financial assets at fair value
through other comprehensive income (6) 40 76
Cash flow hedges fair value movements - inventory
hedges 171 53 73
Current tax relating to items not reclassified 14 - -
Deferred tax relating to items not reclassified 208 (165) (461)
(499) 226 1,145
-------------------------------------------------------- --------- ---------- ----------------- ---------
Items that may be reclassified subsequently
to the income statement
---------
Currency translation differences 5 2 (1)
---------
Movements on financial assets at fair value
through other comprehensive income (1) (2) (5)
Items reclassified from financial assets at
fair value through other comprehensive income
reserve (1) - 4
----
Cash flow hedges fair value movements - non-inventory
hedges 31 14 131
---------
Items reclassified from cash flow hedge reserve (10) 4 7
---------
Deferred tax on items that may be reclassified (34) (18) (57)
---------
(10) - 79
---------
Total other comprehensive (loss)/income
for the financial period (net of tax) (509) 226 1,224
Total comprehensive (loss)/income for the
financial period (224) 604 1,901
-------------------------------------------------------- --------- ---------- ----------------- ---------
The notes on pages 22 to 53 form an integral part of these
Condensed Consolidated Interim Financial Statements.
Refer to note 2 for details of prior year restatement.
Group balance sheet (unaudited)
at 17 September 2022
17 September 5 March 18 September
2022 2022 2021 (restated)
Note GBPm GBPm GBPm
----------------------------------------------- ----- ------------- --------- -----------------
Non-current assets
Property, plant and equipment 11 8,272 8,402 8,417
Right-of-use assets 12 5,456 5,560 5,222
Intangible assets 13 1,021 1,006 1,001
Investments in joint ventures and associates 3 3 5
Financial assets at fair value through
other comprehensive income 14a 249 604 640
Trade and other receivables 75 65 39
Amounts due from Financial Services customers
and banks 14d 2,013 2,026 2,049
Derivative financial assets 14c 434 213 44
Net retirement benefit surplus 18 1,455 2,283 1,087
18,978 20,162 18,504
----------------------------------------------- ----- ------------- --------- -----------------
Current assets
Inventories 1,891 1,797 1,682
Trade and other receivables 728 683 740
Amounts due from Financial Services customers
and banks 14d 3,275 3,163 2,973
Financial assets at fair value through
other comprehensive income 14a 522 196 112
Derivative financial assets 14c 112 78 20
Cash and cash equivalents 17 1,580 825 1,636
--------- -----------------
8,108 6,742 7,163
Assets held for sale 8 8 9
----------------------------------------------- ----- --------- -----------------
8,116 6,750 7,172
----------------------------------------------- ----- ------------- --------- -----------------
Total assets 27,094 26,912 25,676
----------------------------------------------- ----- ------------- --------- -----------------
Current liabilities
Trade and other payables (4,966) (4,546) (4,563)
Amounts due to Financial Services customers
and banks 14a (4,719) (4,444) (4,970)
Borrowings 16 (52) (54) (261)
Lease liabilities 12 (1,536) (526) (558)
Derivative financial liabilities 14c (4) (29) (33)
Taxes payable (234) (169) (194)
Provisions (88) (100) (105)
----------------------------------------------- ----- --------- -----------------
(11,599) (9,868) (10,684)
----------------------------------------------- ----- ------------- --------- -----------------
Net current liabilities (3,483) (3,118) (3,512)
----------------------------------------------- ----- ------------- --------- -----------------
Non-current liabilities
Other payables (28) (24) (21)
Amounts due to Financial Services customers
and banks 14a (1,013) (815) (644)
Borrowings 16 (687) (707) (722)
Lease liabilities 12 (4,992) (6,095) (5,764)
Derivative financial liabilities 14c (52) (3) (18)
Deferred income tax liability (651) (806) (490)
Provisions (143) (171) (171)
(7,566) (8,621) (7,830)
Total liabilities (19,165) (18,489) (18,514)
----------------------------------------------- ----- ------------- --------- -----------------
Net assets 7,929 8,423 7,162
----------------------------------------------- ----- ------------- --------- -----------------
Equity
Called up share capital 670 668 666
Share premium 1,408 1,406 1,398
Merger reserve 568 568 568
Capital redemption reserve 680 680 680
Other reserves 509 409 276
Retained earnings 4,094 4,692 3,574
----------------------------------------------- ----- ------------- --------- -----------------
Total equity 7,929 8,423 7,162
----------------------------------------------- ----- ------------- --------- -----------------
The notes on pages 22 to 53 form an integral part of these
Condensed Consolidated Interim Financial Statements.
Refer to note 2 for details of prior year restatement.
Group cash flow statement (unaudited)
for the 28 weeks to 17 September 2022
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
(restated)
Note GBPm GBPm GBPm
------------------------------------------ --------- ------------------- ------------------- -------------------
Cash flows from operating activities
Profit before tax 376 527 854
Net finance costs 131 139 302
Operating profit 507 666 1,156
Adjustments for:
Depreciation expense 11,12 564 581 1,069
Amortisation expense 13 86 78 151
Net impairment charge on property, plant
and equipment, right-of-use assets, and
intangible
assets 11,12,13 20 1 9
Non-cash adjustments arising from (1) - -
acquisitions
Financial Services impairment losses on
loans
and advances 23 35 19
Profit on sale of properties and early
termination
of leases 17 (12) (22) (6)
Non-underlying fair value movements (28) - (76)
Share-based payments expense 37 28 58
Defined benefit scheme (income)/expenses 18 (5) 2 4
Cash contributions to defined benefit
schemes 18 (23) (39) (71)
Operating cash flows before changes in
working
capital 1,168 1,330 2,313
Changes in working capital
Increase in inventories 17 (87) (57) (179)
Decrease in financial assets at fair
value
through other comprehensive income 17 22 130 115
(Increase)/decrease in trade and other
receivables 17 (51) (6) 33
(Increase)/decrease in amounts due from
Financial
Services customers and other deposits 17 (158) 350 161
Increase in trade and other payables 17 438 95 28
Increase/(decrease) in amounts due to
Financial
Services customers and other deposits 17 472 (675) (1,030)
Decrease in provisions and other
liabilities 17 (41) (76) (80)
Cash generated from operations 1,763 1,091 1,361
Interest paid (161) (178) (329)
Corporation tax paid (34) - (23)
Net cash generated from operating
activities 1,568 913 1,009
------------------------------------------ --------- ------------------- ------------------- -------------------
Cash flows from investing activities
Purchase of property, plant and equipment (202) (154) (416)
Initial direct costs on new leases (9) (1) (3)
Purchase of intangible assets (106) (165) (278)
Proceeds from disposal of property, plant
and equipment 28 39 46
Dividends and distributions received - - 2
Net cash used in investing activities (289) (281) (649)
------------------------------------------ --------- ------------------- ------------------- -------------------
Cash flows from financing activities
Proceeds from issuance of ordinary shares 2 11 21
Repayment of borrowings 15 (22) (223) (248)
Repayment of perpetual capital securities - (8) (8)
Purchase of own shares (25) (41) (48)
Repayment of capital element of lease
obligations 15 (246) (243) (493)
Dividends paid on ordinary shares 10 (229) (165) (238)
Dividends paid on perpetual securities - (4) (4)
Net cash used in financing activities (520) (673) (1,018)
------------------------------------------ --------- ------------------- ------------------- -------------------
Net Increase/(decrease) in cash and cash
equivalents 759 (41) (658)
Opening cash and cash equivalents 818 1,476 1,476
Closing cash and cash equivalents 17 1,577 1,435 818
------------------------------------------ --------- ------------------- ------------------- -------------------
The notes on pages 22 to 53 form an integral part of these
Condensed Consolidated Interim Financial Statements.
Refer to note 2 for details of prior year restatement.
Group statement of changes in equity (unaudited)
for the 28 weeks to 17 September 2022
Capital Total equity
Called Share redemption before Perpetual
up share premium Merger and other Retained perpetual convertible Total
capital account reserve reserves earnings securities bonds equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------
At 6 March 2022 668 1,406 568 1,089 4,692 8,423 - 8,423
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
Profit for the
period - - - - 285 285 - 285
Other
comprehensive
income/(loss) - - - 189 (886) (697) - (697)
Tax relating to
other
comprehensive
income/(loss) - - - (34) 222 188 - 188
------------------
Total
comprehensive
income/(loss)
for
the period ended
17 September
2022 - - - 155 (379) (224) - (224)
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
Cash flow hedges
gains and losses
transferred
to inventory - - - (56) - (56) - (56)
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
Transactions with
owners:
Dividends - - - - (229) (229) - (229)
Share-based
payment - - - - 37 37 - 37
Purchase of own
shares - - - - (25) (25) - (25)
Allotted in
respect of
share option
schemes 2 2 - - (2) 2 - 2
Other
adjustments - - - 1 2 3 - 3
Tax on items
charged to
equity - - - - (2) (2 ) - (2)
------------------
At 17 September
2022 670 1,408 568 1,189 4,094 7,929 - 7,929
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
Capital Total equity
Called Share redemption before Perpetual
up share premium Merger and other Retained perpetual convertible Total
capital account reserve reserves earnings securities bonds equity
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
(restated) - - - - 378 378 378
Other
comprehensive
income - - - 111 298 409 - 409
Tax relating to
other
comprehensive
income - - - (42) (141) (183) - (183)
------------------
Total
comprehensive
income for the
period
ended 18
September 2021
(restated) - - - 69 535 604 - 604
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
Cash flow hedges
gains and losses
transferred
to inventory - - - 24 - 24 - 24
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
Transactions with
owners:
Dividends - - - - (165) (165) - (165)
Conversion of
perpetual
convertible
bonds 26 216 - - (2) 240 (240) -
Repayment of
perpetual
convertible
bonds - - - - - - (8) (8)
Share-based
payment - - - - 28 28 - 28
Purchase of own
shares - - - - (41) (41) - (41)
Allotted in
respect of
share option
schemes 3 9 - - (1) 11 - 11
Other
adjustments - - - 16 (16) - - -
Tax on items
charged to
equity - - - - 8 8 - 8
------------------
At 18 September
2021 (restated) 666 1,398 568 956 3,574 7,162 - 7,162
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
Group statement of changes in equity ( unaudited)
Capital Total equity
Called Share redemption before Perpetual
up share premium Merger and other Retained perpetual convertible Total
capital account reserve reserves earnings securities bonds equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 7 March 2021 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 - - - - (238) (238) - (238)
Conversion of
perpetual
convertible (240
bonds 26 216 - - (2 ) 240 ) -
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
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
------------------ ---------- --------- --------- ------------ ---------- ------------- ------------- --------
The notes on pages 22 to 53 form an integral part of these
Condensed Consolidated Interim Financial Statements.
Refer to note 2 for details of prior year restatement.
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
1. General information
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 Condensed Consolidated Interim Financial Statements are
unaudited but have been reviewed by the auditors whose report is
set out on page 56. The financial information presented herein does
not amount to statutory accounts within the meaning of Section 434
of the Companies Act 2006. The Annual Report and Financial
Statements 2022 have been filed with the Registrar of Companies.
The Independent Auditor's report on the Annual Report and Financial
Statements 2022 was unqualified and did not contain a statement
under Section 498 of the Companies Act 2006.
The financial period represents the 28 weeks to 17 September
2022 (comparative financial period 28 weeks to 18 September 2021;
prior financial year 52 weeks to 5 March 2022). The financial
information comprises the results of the Company and its
subsidiaries (the 'Group') and the Group's interests in joint
ventures and associates.
The Group's principal activities are Food, General Merchandise
& Clothing Retailing and Financial Services.
2. Basis of preparation and accounting policies
2.1 Basis of preparation
The Interim Results, comprising the Condensed Consolidated
Interim Financial Statements and the Interim Management Report,
have been prepared in accordance with the Disclosure and
Transparency Rules of the UK's Financial Conduct Authority and with
the requirements of UK adopted IAS 34 'Interim Financial
Reporting'.
The financial information contained in the Interim Results is
presented in sterling, rounded to the nearest million (GBPm) unless
otherwise stated.
The financial information contained in the Condensed
Consolidated Interim Financial Statements should be read in
conjunction with the Annual Report and Financial Statements 2022,
which were prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006.
The annual financial statements of the Group for the period to 4
March 2023 will be prepared in accordance with UK adopted
international accounting standards.
Sainsbury's Bank plc and its subsidiaries have been consolidated
for the six months to 31 August 2022 (18 September 2021: six months
to 31 August 2021; 5 March 2022: twelve months to 28 February
2022). The only significant transaction which occurred between this
date and the Group's balance sheet date was in relation to the
issuance and redemption of Tier 2 Notes of an equivalent amount,
which had a GBPnil impact (refer to note 16). Therefore, no
adjustments have been made to reflect the difference in balance
sheet dates.
Prior period restatement
Business rates within property provisions
The Condensed Consolidated Interim 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 was apparent mixed practice across companies concerning
the treatment of business rates in onerous contract provisions.
However following additional guidance published last 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 for the 28 weeks to 18 September 2021
have therefore been restated in accordance with IAS 8: 'Accounting
Policies, Changes in Accounting Policies and Errors' by removing
business rates from previously recognised property provisions.
Prior period comparatives for the 52 weeks to 5 March 2022 were
restated in the Group's 2022 Annual Report and Financial
Statements. The impacts to the primary financial statements are as
follows:
2. Basis of preparation and accounting policies
Income statement
For the 28 Before non-underlying Non-underlying items Total
weeks to 18 items
September 2021
------------------ -------------------------------------- -------------------------------------- -----------------------------------
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 15,724 - 15,724 - - - 15,724 - 15,724
Cost of sales (14,476) - (14,476) (14) (14) (28) (14,490) (14) (14,504)
Gross
profit/(loss) 1,248 - 1,248 (14) (14) (28) 1,234 (14) 1,220
Administrative
expenses (725) - (725) (31) (1) (32) (756) (1) (757)
Other income 19 - 19 184 - 184 203 - 203
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Operating
profit/(loss) 542 - 542 139 (15) 124 681 (15) 666
Finance income - - - 36 - 36 36 - 36
Finance costs (171) - (171) (5) 1 (4) (176) 1 (175)
------------
Profit/(loss)
before tax 371 - 371 170 (14) 156 541 (14) 527
Income tax
(expense)/credit (98) - (98) (54) 3 (51) (152) 3 (149)
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Profit/(loss)
for the
financial
period 273 - 273 116 (11) 105 389 (11) 378
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Basic earnings 17.3 (0.5) 16.8
Diluted earnings 16.6 (0.5) 16.1
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Balance sheet
As at 18 September 2021 As previously Business As restated
reported rates adjustment
GBPm GBPm GBPm
------------------------------------------ -------------- ------------------ ------------
Current liabilities
Taxes payable (174) (20) (194)
Provisions (113) 8 (105)
------------------------------------------ -------------- ------------------ ------------
Total current liabilities (10,672) (12) (10,684)
------------------------------------------ -------------- ------------------ ------------
Net current liabilities (3,500) (12) (3,512)
------------------------------------------ -------------- ------------------ ------------
Non-current liabilities
Provisions (269) 98 (171)
Total liabilities (18,600) 86 (18,514)
------------------------------------------ -------------- ------------------ ------------
Net assets 7,076 86 7,162
------------------------------------------ -------------- ------------------ ------------
Equity
Retained earnings 3,488 86 3,574
------------------------------------------ -------------- ------------------ ------------
Total equity before perpetual securities 7,076 86 7,162
Total equity 7,076 86 7,162
------------------------------------------ -------------- ------------------ ------------
Cash flow statement
For the 28 weeks to 18 September 2021 As previously Business rates As restated
reported adjustment
GBPm GBPm GBPm
---------------------------------------------- -------------- --------------- ------------
Cash flows from operating activities
Profit/(loss) before tax 541 (14) 527
Net finance costs 140 (1) 139
----------------------------------------------
Operating profit 681 (15) 666
----------------------------------------------
Operating cash flows before changes in
working capital 1,345 (15) 1,330
Changes in working capital
(Decrease)/increase in provisions and
other liabilities (91) 15 (76)
----------------------------------------------
Cash generated from operations 1,091 - 1,091
----------------------------------------------
Net cash generated from operating activities 913 - 913
---------------------------------------------- -------------- --------------- ------------
Net cash used in investing activities (281) - (281)
---------------------------------------------- -------------- --------------- ------------
Net cash used in financing activities (673) - (673)
---------------------------------------------- -------------- --------------- ------------
Net decrease in cash and cash equivalents (41) - (41)
---------------------------------------------- -------------- --------------- ------------
2. Basis of preparation and accounting policies
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 16 months to 2 March 2024.
In assessing the Group's ability to continue as a going concern,
the Directors have considered the Group's most recent corporate
planning and budgeting processes. This includes an annual review
which considers profitability, the Group's cash flows, committed
funding and liquidity positions and forecasted future funding
requirements over three years, with a further two years of
indicative movements.
The Group manages its financing by diversifying funding sources,
structuring core borrowings with 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 17 September 2022, both
Facility (A) and Facility (B) were undrawn.
Additionally, an unsecured term facility for GBP575m was entered
into in October 2022, with an ultimate maturity date of 30 November
2024.
In assessing going concern, scenarios in relation to the Group's
principal risks have been considered in line with those disclosed
at year-end 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,
failure to deliver planned cost savings and the failure of future
property transactions.
In performing the above analysis, the Directors have made
certain assumptions around the availability and effectiveness of
the mitigating actions available to the Group. These include
reducing any non-essential capital expenditure and operating
expenditure on projects, bonuses and dividend payments.
The Group's most recent corporate planning and budgeting
processes includes assumed cashflows to address climate change
risks, including costs associated with initiatives in place as part
of the Plan for Better commitment which include reducing
environmental impacts and meeting customer expectations in this
area, notably through reducing packaging and reducing energy usage
across the estate. Climate-related risks do not result in any
material uncertainties affecting the Group's ability to continue as
a going concern.
As a consequence of the work performed, the Directors considered
it appropriate to adopt the going concern basis in preparing the
Financial Statements with no material uncertainties to
disclose.
2.3 Accounting judgements and estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these Condensed Consolidated Interim Financial
Statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
Consolidated Financial Statements for the year ended 5 March 2022
unless otherwise stated.
2.4 New standards, interpretations and amendments adopted by the Group
The Group has considered the following amendments to published
standards that are effective for the Group for the financial year
beginning 6 March 2022 and concluded that they are either not
relevant to the Group or that they do not have a significant impact
on the Group's financial statements other than disclosures.
- Amendments to IFRS 3 'Business Combinations' - Reference to the Conceptual Framework
- Amendments to IAS 16 'Property, Plant and Equipment' - Proceeds before Intended Use
- Amendments to IAS 37 'Provisions, Contingent Assets and
Contingent Liabilities' - Onerous Contracts - Costs of Fulfilling a
Contract
- Amendments to IFRS 1 'First-time Adoption of International
Financial Reporting Standards' - Subsidiary as a first-time
adopter
2. Basis of preparation and accounting policies continued
- Amendments to IFRS 9 'Financial Instruments' - Fees in the '10
per cent' test for derecognition of financial liabilities
- Amendments to IAS 41 'Agriculture' - Taxation in fair value measurements
The accounting policies have remained unchanged from those
disclosed in the Annual Report for the year ended 5 March 2022.
2.5 Alternative performance measures (APMs)
In the reporting of financial information, the Directors use
various APMs. These APMs are defined and reconciled on pages 57 to
63, and 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.
3. Profit before non-underlying items
In order to provide shareholders with additional insight into
the underlying 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. Underlying results exclude items recognised
in reported profit or loss before tax which, if included, could
distort comparability between periods.
In determining which items to exclude from underlying profit,
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. More details on each item excluded from
underlying profit are included further below.
Underlying profit is not an IFRS measure and therefore not
directly comparable to other companies.
28 weeks to 17 September 2022
----------------------------------
Cost Administrative Other Net Total Tax Total
of expenses income finance adjustments adjustments
sales income/ before
(costs) tax
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- --------------- -------- --------- ------------- ----- -------------
Income recognised in relation
to legal disputes - - 30 - 30 (5) 25
Restructuring and integration
Restructuring programmes (39) (4) 10 - (33) 5 (28)
Total restructuring and
integration (39) (4) 10 - (33) 5 (28)
Property, finance, pension
and acquisition adjustments
Property related transactions - (8) - - (8) 2 (6)
Non-underlying finance and
fair value movements 28 - - (5) 23 (5) 18
IAS 19 pension income - 5 - 30 35 (8) 27
Acquisition adjustments - (11) - - (11) 2 (9)
Total property, finance, pension
and acquisition adjustments 28 (14) - 25 39 (9) 30
Tax adjustments
Revaluation of deferred tax
balances and changes in law - - - - - (1) (1)
Capital loss recognition - - - - - (1) (1)
Total adjustments (11) (18) 40 25 36 (11) 25
---------------------------------- ------- --------------- -------- ---------
Income recognised in relation to legal disputes
During the prior period agreements were reached in relation to
overcharges from payment card processing fees, which largely
reflect inter-bank "interchange fees". This led to net income of
GBP167 million being recognised. During the current period a
further agreement has been reached resulting in net income of GBP30
million being recognised.
Net cash of GBP30 million was received subsequent to the interim
balance sheet date and thus has not been included within the
cashflow statement.
3 . Profit before non-underlying items
Restructuring programmes
Costs/(gains) have been recognised during the period in relation
to the restructuring programmes announced in the year ended 6 March
2021 as follows:
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 (restated) 2022
GBPm GBPm GBPm
---------------------------------------------- -------------- ----------------- ---------
Write downs of property, plant and equipment
(a) 2 - 6
Write downs of leased assets (a) 13 1 3
Write down of intangible assets (a) 5 - -
Closure costs (b) 8 5 24
Accelerated depreciation of assets (c) 12 20 33
Redundancy provisions (d) 5 21 40
Consultancy costs - 8 18
Gain on lease terminations (e) (1) (5) (9)
Profit on disposal of properties (f) (11) (13) (12)
Recognition of sub-lease debtor - - (11)
----------------------------------------------- -------------- ----------------- ---------
Restructuring programmes 33 37 92
----------------------------------------------- -------------- ----------------- ---------
a) Write down of assets associated with Argos stores and IT
assets as a result of the overall restructuring programme to
accelerate the structural integration of Sainsbury's and Argos and
further simplify the Argos business.
b) Closure provisions relate to onerous contract costs,
dilapidations and strip out costs on leased sites that have been
identified for closure. Upon initial recognition of closure
provisions, management uses its best estimates of the relevant
costs to be incurred as well as expected closure dates. Business
rates on leased property where the Group no longer operates from
are recognised in the period they are incurred.
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 has been
announced and a valid expectation raised with the affected
colleagues.
e) Gains on lease terminations relate to sites impaired in a
prior year for which it has been negotiated to exit the leases
before the contractual end date.
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 sold.
As the costs incurred facilitate future underlying cost savings,
it was considered whether it was appropriate to report these costs
within underlying profit. Whilst they arise from changes in the
Group's underlying operations, they can be separately identified,
are material in size and do not relate to ordinary in-year trading
activity. In addition, the areas being closed or restructured no
longer relate to the Group's remaining underlying operations and
their exclusion provides meaningful comparison between financial
years.
The restructuring programme is a multi-year activity which began
in the financial period ended 6 March 2021. Total cumulative costs
including impairment costs to 17 September 2022 are GBP673 million.
Total expected costs are still in the range of GBP900 million to
GBP1 billion, with total expected cash outflows of around GBP300
million.
Property, finance, pension and acquisition adjustments
-- Property related transactions include a write-off of a loan
of GBP(8) million relating to a property transaction. These are
excluded from underlying profit as such losses are not related to
the ongoing operating activities of the Group.
-- Defined benefit pension interest and expenses comprises
pension finance income of GBP30 million, settlement credit of GBP8
million and scheme expenses of GBP(3) million (see note 18).
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.
3. Profit before non-underlying items
-- Non-underlying finance and fair value movements for the
financial period comprised GBP23 million for the Group. These
include fair value remeasurements on derivatives not in a hedging
relationship. 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.
Included within cost of sales is GBP28 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 period have led to gains on the related
derivative financial instruments. In the interim period
comparative, this income was classified as finance income, however
for the full year comparative this income was reclassified to cost
of sales as this better reflects the nature of the costs associated
with the financial instruments and thus the gains recognised. This
reclassification has no impact on the carrying value of the
derivatives, underlying profit before tax, or statutory profit
before tax, and therefore the prior interim period comparatives
have not been restated. Non-underlying finance and fair value
movements also includes lease interest on impaired non-trading
sites, including site closures. Lease interest on impaired,
non-trading sites is excluded as they do not contribute to the
operating activities of the Group. The remaining movements of
GBP(5) million within finance income and costs are analysed further
in note 7.
-- Acquisition adjustments of GBP(11) million reflect the unwind
of non-cash fair value adjustments arising from Home Retail Group
(HRG) 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:
28 weeks to 17 28 weeks to 18 52 weeks to
September 2022 September 2021 5 March 2022
HRG Nectar Total HRG Nectar Total HRG Nectar Total
Group Group Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----- ------- ------- ----- ------- ------- ----- ------- -------
Cost of sales 1 - 1 - - - - - -
Depreciation - - - 1 - 1 3 - 3
Amortisation (9) (3) (12) (10) (2) (12) (18) (5) (23)
(8) (3) (11) (9) (2) (11) (15) (5) (20)
--------------- ----- ------- ------- ----- ------- ------- ----- ------- -------
Comparative information
28 weeks to 18 September 2021
(restated)
----------------------------------
Cost Administrative Other Net Total Tax Total
of expenses income finance adjustments adjustments
sales income before
tax
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- --------------- -------- --------- ------------- ----- -------------
Income recognised in relation
to legal disputes - 13 168 - 181 (34) 147
Restructuring and integration
Restructuring programmes (28) (22) 13 - (37) 5 (32)
Financial Services transition
and other - (10) - - (10) 2 (8)
Total restructuring and
integration (28) (32) 13 - (47) 7 (40)
Property, finance, pension
and acquisition adjustments
Profit on disposal of properties - - 3 - 3 - 3
Non-underlying finance and
fair value movements - - - 24 24 (4) 20
IAS 19 pension (expenses) /
income - (2) - 8 6 (1) 5
Acquisition adjustments - (11) - - (11) 2 (9)
Total property, finance, pension
and acquisition adjustments - (13) 3 32 22 (3) 19
Tax adjustments
Under provision in prior years - - - - - (5) (5)
Revaluation of deferred tax
balances and changes in law - - - - - (20) (20)
Capital loss recognition - - - - - 4 4
Total adjustments (28) (32) 184 32 156 (51) 105
---------------------------------- ------- --------------- -------- --------- ------------- -------------
3. Profit before non-underlying items
52 weeks to 5 March 2022
----------------------------------
Cost Administrative Other Net Total Tax Total
of expenses income finance adjustments adjustments
sales income/ before
(costs) 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) /
income - (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
---------------------------------- ------- --------------- -------- --------- -------------
Financial Services transition and other
In prior years these predominantly comprised Financial Services
transition costs and were incurred in transitioning to new banking
platforms as part of the previously announced New Bank Programme.
The programme ended in the 2022 financial year.
Software as a service accounting adjustment
In the second half of the prior year, the Group revised its
accounting policy in relation to upfront configuration and
customisation costs incurred in implementing software as a service
(SaaS) arrangement. This was in response to the IFRS
Interpretations Committee (IFRIC) agenda decision clarifying its
interpretation of how current accounting standards apply to these
types of arrangements. Costs capitalised prior to the period ended
5 March 2022 totalling GBP21 million were written off in the prior
year as a non-underlying expense. In addition, GBP14 million of
prior year spend that would have been capitalised to intangible
assets under the Group's previous accounting policy was recognised
within prepayments (GBP6 million) and underlying profit (GBP8
million). Had the change in accounting policy been implemented in
the first half of the prior year, GBP7 million of first half spend
that would have been capitalised to intangible assets under the
Group's previous accounting policy would have been recognised
within prepayments (GBP3 million) and underlying profit (GBP4
million).
Cash flow statement
The table below shows the impact of non-underlying items on the
Group cash flow statement:
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
GBPm GBPm GBPm
------------------------------------------ -------------- -------------- ---------
Cash flows from operating activities
IAS 19 pension expenses (3) (2) (7)
Financial Services transition and other - (11) (13)
Restructuring programmes (33) (70) (114)
ATM Rates reimbursement - 13 14
Net income recognised in relation to
legal disputes - 27 93
Cash used in operating activities (36) (43) (27)
Cash flows from investing activities
Proceeds from property disposals(1) 28 39 46
Cash generated from investing activities 28 39 46
Net cash flows (8) (4) 19
------------------------------------------- -------------- -------------- ---------
(1) GBP26 million of the current period proceeds from property
disposals are a result of restructuring programmes.
Refer to Note 2 for details of the prior year restatement.
4. Revenue
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
GBPm GBPm GBPm
----------------------------------------------- -------------- -------------- ---------
Grocery, General Merchandise and Clothing
(GM&C) 13,314 13,475 25,440
Fuel 2,840 2,036 4,023
Total retail sales 16,154 15,511 29,463
Financial Services interest receivable (using
effective interest rate method) 183 161 322
Financial Services fees and commission 71 52 110
----------------------------------------------- -------------- -------------- ---------
Total Financial Services income 254 213 432
Total revenue 16,408 15,724 29,895
----------------------------------------------- -------------- -------------- ---------
5. Segment reporting
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 & Clothing;
-- Financial Services (Sainsbury's Bank plc and Argos Financial Services entities)
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 2.5. All material operations and
assets are in the UK.
a. Income statement and balance sheet
Retail Financial Group
Services
28 weeks to 17 September 2022 GBPm GBPm GBPm
--------------------------------------------- --------- ---------- ---------
Segment revenue
Retail sales to external customers 16,154 - 16,154
Financial Services to external customers - 254 254
Revenue 16,154 254 16,408
--------------------------------------------- --------- ---------- ---------
Underlying operating profit 477 19 496
Underlying finance income 5 - 5
Underlying finance costs (161) - (161)
Underlying profit before tax 321 19 340
Non-underlying income (note 3) 36
Profit before tax 376
Income tax expense (note 8) (91)
Profit for the financial period 285
--------------------------------------------- --------- ----------
Assets 20,078 7,013 27,091
Investment in joint ventures and associates 3 - 3
Segment assets 20,081 7,013 27,094
Segment liabilities (13,042) (6,123) (19,165)
--------------------------------------------- --------- ----------
a. Income statement and balance sheet
Retail (restated) Financial Group (restated)
Services
28 weeks to 18 September 2021 GBPm GBPm GBPm
--------------------------------------------- ------------------ ---------- -----------------
Segment revenue
Retail sales to external customers 15,511 - 15,511
Financial Services to external customers - 213 213
Revenue 15,511 213 15,724
--------------------------------------------- ------------------ ---------- -----------------
Underlying operating profit 523 19 542
Underlying finance costs (171) - (171)
Underlying profit before tax 352 19 371
Non-underlying expense (note 3) 156
Profit before tax 527
Income tax expense (note 8) (149)
Profit for the financial period 378
--------------------------------------------- ------------------ ----------
Assets 18,847 6,824 25,671
Investment in joint ventures and associates 5 - 5
Segment assets 18,852 6,824 25,676
Segment liabilities (12,601) (5,913) (18,514)
--------------------------------------------- ------------------ ----------
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 3) 124
Profit before tax 854
Income tax expense (note 8) (177)
Profit for the financial period 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)
--------------------------------------------- --------- ----------
Refer to Note 2 for details of the prior year restatement.
b. Segmented cash flow statement
28 weeks to 28 weeks to
17 September 18 September
2022 2021 (restated)
APM Retail Financial Group Retail Financial Group
reference Services Services
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------------- ------------ ------- ---------- ------ ------- ---------- ------
Profit before tax 357 19 376 520 7 527
Net finance costs 131 - 131 139 - 139
----------------------------------------------------------- ------- ---------- ------ ------- ---------- ------
Operating profit 488 19 507 659 7 666
Adjustments for:
Depreciation and amortisation expense 634 16 650 649 10 659
Net impairment charge on property, plant
and equipment, right-of-use assets, and
intangible assets 20 - 20 1 - 1
Non-cash adjustments arising from
acquisitions (1) - (1) - - -
Financial Services impairment losses
on loans and advances - 23 23 - 35 35
Profit on sale of properties and
early termination of leases (12) - (12) (22) - (22)
Non-underlying fair value movements (28) - (28) - - -
Share-based payments expense 34 3 37 27 1 28
Defined benefit scheme (income)/expenses (5) - (5) 2 - 2
Cash contributions to defined benefit
schemes (23) - (23) (39) - (39)
Operating cash flows before changes
in working capital 1,107 61 1,168 1,277 53 1,330
Movements in working capital 318 277 595 (44) (195) (239)
Cash generated/(used) from operations 1,425 338 1,763 1,233 (142) 1,091
Interest paid a (161) - (161) (173) (5) (178)
Corporation tax paid (32) (2) (34) - - -
Net cash generated/(used) from operating
activities 1,232 336 1,568 1,060 (147) 913
----------------------------------------------------------- ------- ---------- ------ ------- ---------- ------
Cash flows from investing activities
Purchase of property, plant and equipment (201) (1) (202) (154) - (154)
Initial direct costs on new leases (9) - (9) (1) - (1)
Purchase of intangible assets (96) (10) (106) (144) (21) (165)
Proceeds from disposal of property,
plant and equipment 28 - 28 39 - 39
Dividends and distributions received/(paid) e 50 (50) - - - -
Net cash used in investing activities (228) (61) (289) (260) (21) (281)
----------------------------------------------------------- ------- ---------- ------ ------- ---------- ------
Cash flows from financing activities
Proceeds from issuance of ordinary
shares d 2 - 2 11 - 11
Repayment of borrowings c (22) - (22) (223) - (223)
Repayment of perpetual capital securities c - - - (8) - (8)
Purchase of own shares d (25) - (25) (41) - (41)
Repayment of capital element of lease
obligations b (245) (1) (246) (242) (1) (243)
Dividends paid on ordinary shares (229) - (229) (165) - (165)
Dividends paid on perpetual securities a - - - (4) - (4)
Net cash used in financing activities (519) (1) (520) (672) (1) (673)
----------------------------------------------------------- ------- ---------- ------ ------- ---------- ------
Net increase/(decrease) in cash
and cash equivalents 485 274 759 128 (169) (41)
----------------------------------------------------------- ------- ---------- ------ ------- ---------- ------
b. Segmented cash flow statement
52 weeks to 5 March 2022
APM Retail Financial Group
Services
reference
GBPm GBPm GBPm
Profit before tax 833 21 854
-------------------------------------------------- --------------------- --------------------- --------------------
Net finance income/(costs) 304 (2) 302
-------------------------------------------------- --------------------- --------------------- --------------------
Operating profit 1,137 19 1,156
Adjustments for:
Depreciation and amortisation expense 1,197 23 1,220
Net impairment charge on property, plant
and equipment, right-of-use assets and
intangible assets 8 1 9
Financial Services impairment losses
on loans and advances - 19 19
Profit on sale of properties and early
termination of leases (6) - (6)
Non-underlying fair value movements (76) - (76)
Share-based payments expense 53 5 58
Non-cash defined benefit scheme expenses 4 - 4
Cash contributions to defined benefit
scheme (71) - (71)
-------------------------------------------------- --------------------- --------------------- --------------------
Operating cash flows before changes
in working capital 2,246 67 2,313
Movements in working capital (306) (646) (952)
-------------------------------------------------- --------------------- --------------------- --------------------
Cash generated/(used) from operations 1,940 (579) 1,361
Interest paid a (319) (10) (329)
Corporation tax paid (23) - (23)
Net cash generated/(used) from operating
activities 1,598 (589) 1,009
-------------------------------------------------- --------------------- --------------------- --------------------
Cash flows from investing activities
Purchase of property, plant and equipment (416) - (416)
Initial direct costs on new leases (3) - (3)
Purchase of intangible assets (229) (49) (278)
Proceeds from disposal of property,
plant and equipment 46 - 46
Dividends and distributions received e 2 - 2
------------------------------------- ----------- --------------------- --------------------- --------------------
Net cash used in investing activities (600) (49) (649)
-------------------------------------------------- --------------------- --------------------- --------------------
Cash flows from financing activities
Proceeds from issuance of ordinary
shares d 21 - 21
Repayment of borrowings c (248) - (248)
Repayment of perpetual capital
securities c (8) - (8)
Purchase of own shares d (48) - (48)
Repayment of capital element of
obligations
under lease liabilities b (491) (2) (493)
Dividends paid on ordinary shares (238) - (238)
Dividends paid on perpetual
securities a (4) - (4)
Net cash used in financing activities (1,016) (2) (1,018)
-------------------------------------------------- --------------------- --------------------- --------------------
Net decrease in cash and cash equivalents (18) (640) (658)
-------------------------------------------------- --------------------- --------------------- --------------------
6. 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.
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 period 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.
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
GBPm GBPm GBPm
---------------------------------- -------------- ---------------- -----------------
Fixed amounts 81 103 208
Supplier rebates 47 33 94
Marketing and advertising income 41 45 79
Total supplier arrangements 169 181 381
----------------------------------- -------------- ---------------- -----------------
6. Supplier arrangements
Of the above amounts, the following was outstanding and held on
the balance sheet at the period-end:
28 weeks 28 weeks 52 weeks
to 17 September to 18 September to
2022 2021 5 March
2022
GBPm GBPm GBPm
---------------------------------- ----------------- ----------------- ------------------
Within inventory (4) (5) (4)
Within current trade receivables
Supplier arrangements due 33 30 39
Accrued supplier arrangements 47 49 37
Within current trade payables
Supplier arrangements due 25 23 47
Accrued supplier arrangements 1 2 2
Deferred income due (1) (1) -
Total supplier arrangements 101 98 121
----------------------------------- ----------------- ----------------- ------------------
7. Finance income and finance costs
28 weeks to 17 28 weeks to 18 52 weeks to 5
September 2022 September 2021 March 2022
(restated)
Underlying Non-Underlying Total Underlying Non-Underlying Total Underlying Non-Underlying Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------
Interest on
bank
deposits
and other
financial
assets 4 - 4 - - - 1 - 1
Fair value
measurements - - - - 28 28 - 2 2
IAS 19
pension
financing
income - 30 30 - 8 8 - 15 15
Finance
income on
net
investment
in leases 1 - 1 - - - 2 - 2
Finance
Income 5 30 35 - 36 36 3 17 20
---------------
Secured
borrowings (20) - (20) (22) - (22) (40) - (40)
Unsecured
borrowings (1) - (1) (1) - (1) (2) - (2)
Lease
liabilities (140) (5) (145) (149) (4) (153) (271) (10) (281)
Provisions -
amortisation
of discount - - - - - - (1) - (1)
Interest
capitalised
- qualifying
assets - - - 1 - 1 2 - 2
Finance costs (161) (5) (166) (171) (4) (175) (312) (10) (322)
---------------
Fair value remeasurements relate to net fair value movements on
derivative financial instruments not designated in a hedging
relationship. Refer to note 3 for further details.
Refer to Note 2 for details of the prior year restatement.
8. Income tax expense
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
(restated)
GBPm GBPm GBPm
---------------
Current year UK tax 72 82 131
Current year overseas tax 2 3 6
(Under)/over provision in prior years (1) 4 5
Total current tax expense 73 89 142
Origination and reversal of temporary differences 16 30 52
Over/(under) provision in prior years - 3 (35)
Adjustment from changes in tax rates 1 31 23
Derecognition/(recognition) of capital losses 1 (4) (5)
Total deferred tax expense 18 60 35
Total income tax expense in income statement 91 149 177
---------------
Analysed as:
Underlying tax 80 98 154
Non-underlying tax 11 51 23
Total income tax expense in income statement 91 149 177
---------------
Underlying tax rate 23.5% 26.4% 21.1%
Effective tax rate 24.2% 28.3% 20.7%
---------------
Tax charged within the 28 weeks ended 17 September 2022 has been
calculated by applying the effective rate of tax which is expected
to apply to the Group for the period ending 4 March 2023 using
rates substantively enacted by 17 September 2022 as required by IAS
34 'Interim Financial Reporting'.
8. Income tax expense
The effective tax rate of 24.2 per cent (28 weeks to 18
September 2021 (restated): 28.3 per cent) is higher than the
standard rate of corporation tax in the UK of 19 per cent. This is
largely a result of the impact of non-deductible expenses,
particularly in respect of non-deductible capital expenditure and
prior year adjustments.
It was announced in the UK Government's Budget on 3 March 2021
that the main UK corporation tax rate will increase to 25% from 1
April 2023. This change was enacted during the prior accounting
period and remains enacted at the balance sheet date. As a result,
existing temporary differences on which deferred tax has been
provided have been revalued, where appropriate, to reflect the fact
that they will unwind at 25%.
Finance Act 2020 included legislation restricting the amount of
chargeable gains that a company can relieve with its
carried-forward capital losses from previous accounting periods.
Broadly, from 1 April 2020 a company is only able to offset up to
50 per cent of chargeable gains using carried forward capital
losses. The Group has considered the expected impact of the tax law
in respect of the utilisation of carried-forward tax losses.
Accordingly, approximately GBP197 million of the Group's carried
forward unrestricted capital losses (5 March 2022: GBP194 million)
have not been recognised as at 17 September 2022.
9. 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 Plan trusts, which are treated
as cancelled.
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 senior convertible bonds and 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 3. 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.
17 September 18 September 5 March
2022 2021 (restated) 2022
million million million
Weighted average number of shares in issue 2,314.3 2,245.4 2,271.8
Weighted average number of dilutive share options 35.9 34.8 39.6
Weighted average number of dilutive subordinated
perpetual convertible bonds - 69.3 39.6
Total number of shares for calculating diluted
earnings per share 2,350.2 2,349.5 2,351.0
GBPm GBPm GBPm
Profit for the financial period (net of tax) 285 378 677
Profit for the financial period attributable
to ordinary shareholders 285 378 677
Diluted earnings for calculating diluted earnings
per share 285 378 677
Profit for the financial period attributable
to ordinary shareholders of the parent 285 378 677
Adjusted for non-underlying items (note 3) (36) (156) (124)
Tax on non-underlying items 11 51 23
Underlying profit after tax attributable to
ordinary shareholders of the parent 260 273 576
Diluted underlying profit after tax attributable
to ordinary shareholders of the parent 260 273 576
Pence Pence per Pence
per share share per share
Basic earnings 12.3 16.8 29.8
Diluted earnings 12.1 16.1 28.8
Underlying basic earnings 11.2 12.2 25.4
Underlying diluted earnings 11.1 11.6 24.5
Refer to note 2 for details of prior year restatement.
10. Dividends
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
Amounts recognised as distributions to
ordinary shareholders in the year:
Dividend per share (pence) 9.9 7.4 10.6
Total dividend charge (GBPm) 229 165 238
An interim dividend of 3.9 pence per share (18 September 2021:
3.2 pence per share), has been approved by the Board of Directors
for the financial year ending 4 March 2023, resulting in an interim
dividend of GBP90 million (18 September 2021: GBP74 million). The
interim dividend was approved by the Board on 2 November 2022 and
as such has not been included as a liability at 17 September
2022.
11. Property, plant and equipment
28 weeks 52 weeks 28 weeks
to to to
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
---------
Net book value
At the beginning of the period 8,402 8,587 8,587
Additions 199 417 151
Disposals (14) (5) -
Depreciation charge (310) (591) (321)
Impairment charge (2) (6) -
Transfer to assets classified as held
for sale (3) - -
At the end of the period 8,272 8,402 8,417
---------
The net book value of property, plant and equipment comprises
land & buildings of GBP6,794 million (5 March 2022: GBP6,776
million; 18 September 2021: GBP6,831 million); and fixtures &
fittings of GBP1,478 million (5 March 2022: GBP1,626 million; 18
September 2021: GBP1,586 million).
At 17 September 2022, capital commitments contracted, but not
provided for by the Group, amounted to GBP159 million (5 March
2022: GBP108 million; 18 September 2021: GBP165 million).
At each reporting date, the Group reviews the carrying amounts
of its non-financial assets to determine whether there is any
indication that those assets have suffered an impairment loss. The
Group has considered whether there have been any indicators of
impairment during the 28 weeks ended 17 September 2022 and
subsequently recognised an impairment of GBP2 million in relation
to Argos stores (5 March 2022: GBP6 million in relation to in-store
cafe assets; 18 September 2021: GBPnil).
12. Leases
Set out below are the carrying amounts of right-of-use assets
and the movements during the period:
28 weeks 52 weeks 28 weeks
to to to
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
At the beginning of the period 5,560 4,747 4,747
New leases and modifications 163 1,294 736
Impairment charge (13) (3) (1)
Depreciation charge (254) (478) (260)
At the end of the period 5,456 5,560 5,222
Included within the above are land and buildings with a net book
value of GBP5,164 million (5 March 2022: GBP5,266 million; 18
September 2021: GBP4,916 million), and equipment with a net book
value of GBP292 million (5 March 2022: GBP294 million; 18 September
2021: GBP306 million).
At each reporting date, the Group reviews the carrying amounts
of its non-financial assets to determine whether there is any
indication that those assets have suffered an impairment loss. The
Group has considered whether there have been any indicators of
impairment during the 28 weeks ended 17 September 2022 and
subsequently recognised an impairment of GBP13 million in relation
to Argos stores (5 March 2022: GBP3 million in relation to in-store
cafe assets; 18 September 2021: GBP1 million in relation to
in-store cafe assets).
Set out below are the carrying amounts of lease liabilities and
the movements during the period:
Lease Liability
28 weeks 52 weeks 28 weeks
to to to
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
--------------
At the beginning of the period 6,621 5,834 5,834
New leases and modifications 153 1,280 731
Interest expense 145 281 153
Payments (391) (774) (396)
At the end of the period 6,528 6,621 6,322
--------------
Current 1,536 526 558
Non-current 4,992 6,095 5,764
--------------
The Group presents additions to lease liabilities and
right-of-use assets in line with the disclosure requirements of
IFRS 16 'Leases'. In doing so, additions to right-of-use assets and
lease liabilities above include the net impact of new leases,
terminations, modifications, and reassessments. In the prior year,
the Group exercised purchase options on 21 leased supermarkets held
by a property investment pool in which the Group holds an interest.
The purchase options were first included within the lease liability
in the prior financial year when the Group exercised them. The
Group has now reached an agreement on an acquisition price for
these 21 supermarkets, and thus this acquisition price has been
used to remeasure the lease liabilities.
Income statement disclosures
The following are the amounts recognised in profit or loss:
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
GBPm GBPm GBPm
Depreciation of right-of-use assets (254) (260) (478)
Impairment of right-of-use assets (13) (1) (3)
Interest on lease liabilities (145) (153) (281)
Variable lease payments not included in the
measurement of lease liabilities (1) (1) -
Finance income from sub-leasing of right-of-use
assets 1 - 2
Operating sublet income 32 29 56
Expenses relating to short term leases (14) (18) (32)
Expenses relating to leases of low value
assets (1) (1) (2)
Total amount recognised in profit or loss (395) (405) (738)
Total cash outflow for leases (excluding
sublease income) (407) (416) (808)
Maturity analysis
28 weeks 52 weeks 28 weeks
to to to
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
---------
Contractual undiscounted cash flows
Less than one year 1,775 773 826
One to two years 707 1,683 1,303
Two to three years 655 627 649
Three to four years 611 575 594
Four to five years 570 542 564
Total less than five years 4,318 4,200 3,936
Five to ten years 2,533 2,416 2,443
Ten to fifteen years 2,016 2,005 2,065
More than fifteen years 3,215 3,338 3,500
Total undiscounted lease liability 12,082 11,959 11,944
-------------- ---------
Lease liabilities included in the statement
of financial position 6,528 6,621 6,322
Current 1,536 526 558
Non-current 4,992 6,095 5,764
---------
13. Intangible assets
28 weeks 52 weeks 28 weeks
to to to
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
-------------- ---------
Net book value
At the beginning of the period 1,006 914 914
Additions 106 278 165
Disposals - (35) -
Amortisation charge (86) (151) (78)
Impairment charge (5) - -
At the end of the period 1,021 1,006 1,001
-------------- ---------
The net book value of goodwill and intangible assets
predominantly comprises goodwill of GBP366 million (5 March 2022:
GBP366 million; 18 September 2021: GBP366 million), software assets
of GBP584 million (5 March 2022: GBP556 million; 18 September 2021:
GBP541 million), acquired brands of GBP70 million (5 March 2022:
GBP82 million; 18 September 2021: GBP91 million) and customer
relationships of GBP1 million (5 March 2022: GBP2 million; 18
September 2021: GBP3 million).
Refer to note 3 for details of the impairment recognised in the
period.
14. Financial instruments
a. Financial assets and liabilities by category
Set out below are the accounting classifications of each class
of financial assets and liabilities:
Fair
Fair value
value through
Amortised through profit
cost OCI or loss Total
GBPm GBPm GBPm GBPm
At 17 September 2022
Cash and cash equivalents 1,580 - - 1,580
Trade and other receivables 592 - - 592
Amounts due from Financial Services customers
and banks 5,288 - - 5,288
Financial assets at fair value through other
comprehensive income - 771 - 771
Trade and other payables (4,626) - - (4,626)
Current borrowings (52) - - (52)
Non-current borrowings (687) - - (687)
Amounts due to Financial Services customers
and banks (5,732) - - (5,732)
Derivative financial instruments - - 490 490
Lease liabilities (6,528) - - (6,528)
(10,165) 771 490 (8,904)
----------
Fair
Fair value
value through
Amortised through profit
cost OCI or loss Total
GBPm GBPm GBPm GBPm
At 5 March 2022
Cash and cash equivalents 825 - - 825
Trade and other receivables 552 - - 552
Amounts due from Financial Services customers 5,189 - - 5,189
Financial assets at fair value through other
comprehensive income - 800 - 800
Trade and other payables (4,218) - - (4,218)
Borrowings (761) - - (761)
Amounts due to Financial Services customers
and banks (5,259) - - (5,259)
Derivative financial instruments - - 259 259
Lease liabilities (6,621) - - (6,621)
(10,293) 800 259 (9,234)
----------
Fair
Fair value
value through
Amortised through profit
cost OCI or loss Total
GBPm GBPm GBPm GBPm
At 18 September 2021
Cash and cash equivalents 1,636 - - 1,636
Trade and other receivables 589 - - 589
Amounts due from Financial Services customers 5,022 - - 5,022
Financial assets at fair value through other
comprehensive income - 752 - 752
Trade and other payables (4,227) - - (4,227)
Current borrowings (261) - - (261)
Non-current borrowings (722) - - (722)
Amounts due to Financial Services customers
and banks (5,614) - - (5,614)
Derivative financial instruments - - 13 13
Lease liabilities (6,322) - - (6,322)
(9,899) 752 13 (9,134)
----------
b. Carrying amount versus fair value
Set out below is a comparison of the carrying amount and the
fair value of financial instruments that are carried in the
financial statements at a value other than fair value. The fair
value of financial assets and liabilities are based on prices
available from the market on which the instruments are traded.
Where market values are not available, the fair values of financial
assets and liabilities have been calculated by discounting expected
future cash flows at prevailing interest rates. The fair values of
short-term deposits, trade receivables, overdrafts and payables are
assumed to approximate to their book values.
Carrying
amount Fair value
At 17 September 2022 GBPm GBPm
Financial assets
Amounts due from Financial Services customers and
banks 5,288 5,252
Financial liabilities
Loans due 2031 (558) (594)
Tier 2 Capital (178) (177)
Amounts due to Financial Services customers and banks (5,732) (5,729)
Carrying Fair value
amount
At 5 March 2022 GBPm GBPm
Financial assets
Amounts due from Financial Services customers and
banks 5,189 5,216
Financial liabilities
Loans due 2031 (575) (717)
Tier 2 Capital (179) (180)
Amounts due to Financial Services customers and banks (5,259) (5,260)
Carrying Fair value
amount
At 18 September 2021 GBPm GBPm
Financial assets
Amounts due from Financial Services customers and
banks 5,022 5,037
Financial liabilities
Loans due 2031 (602) (693)
Tier 2 Capital (180) (181)
Amounts due to Financial Services customers and banks (5,614) (5,617)
c. Fair value measurements recognised in the balance sheet
The following table provides an analysis of financial
instruments that are recognised at fair value, grouped into Levels
1 to 3 based on the degree to which the fair value is
observable:
-- Level 1 fair value measurements are derived from quoted
market prices (unadjusted) in active markets for identical assets
or liabilities at the balance sheet date. This level includes
listed equity securities and debt instrument on public
exchanges;
-- Level 2 fair value measurements are derived from inputs other
than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices). The fair value of financial
instruments is determined by discounting expected cash flows at
prevailing interest rates; and
-- Level 3 fair value measurements are derived from valuation
techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Level Level Level Total
1 2 3
At 17 September 2022 GBPm GBPm GBPm GBPm
Financial instruments at fair value through
other comprehensive income
Other financial assets - 376 - 376
Investment securities 395 - - 395
Derivative financial assets - 314 232 546
Derivative financial liabilities - (56) - (56)
Level Level Level Total
1 2 3
At 5 March 2022 GBPm GBPm GBPm GBPm
Financial instruments at fair value through
other comprehensive income
Other financial assets - 15 367 382
Investment securities 418 - - 418
Derivative financial assets - 111 180 291
Derivative financial liabilities - (32) - (32)
Level Level Level Total
1 2 3
At 18 September 2021 GBPm GBPm GBPm GBPm
Financial instruments at fair value through
other comprehensive income
Interest bearing financial assets - 1 - 1
Other financial assets - 17 329 346
Investment securities 405 - - 405
Derivative financial assets - 29 35 64
Derivative financial liabilities - (51) - (51)
Level 3 Financial assets
Details of the determination of Level 3 fair value measurements
are set out below:
Commodity
derivatives Total
GBPm GBPm
At 6 March 2022 180 180
In cost of sales in the Group
income statement 28 28
In other comprehensive income 24 24
At 17 September 2022 232 232
Financial instruments
at FVTOCI Commodity derivatives Total
GBPm GBPm GBPm
At 7 March 2021 291 6 297
In cost of sales in the Group
income statement - 76 76
In other comprehensive income 76 98 174
At 5 March 2022 367 180 547
Financial instruments
at FVTOCI Commodity derivatives Total
GBPm GBPm GBPm
At 7 March 2021 291 6 297
In finance income in the Group
income statement - 29 29
In other comprehensive income 38 - 38
At 18 September 2021 329 35 364
Of the commodity derivative financial assets, as at 17 September
2022, GBP123 million is designated in a cash flow hedge
relationship (5 March 2022: GBP99 million; 18 September 2021:
GBPnil); and GBP109 million is not in a hedge relationship (5 March
2022: GBP81 million; 18 September 2021: GBP35 million).
Level 3 other financial assets
Other financial assets categorised as Level 3 in the prior year
of GBP367 million relate to the Group's beneficial interest in a
property investment pool. Given the Group has reached an agreement
on an acquisition price for the properties within this investment
pool during the period (see note 12 for further details), these
financial assets have been reclassified to Level 2.
Level 3 derivative financial assets - power purchase
agreement
The Group has entered into several long-term fixed-price power
purchase agreements with independent producers. Included within
derivative financial instruments is a net asset of GBP232 million
relating to these agreements at 17 September 2022 (at 18 September
2021: GBP35 million; at 6 March 2022: GBP180 million). The Group
values its power purchase agreements as the net present value of
the estimated future usage at the contracted fixed price less the
market implied forward energy price discounted back at the
prevailing swap rate. The Group also makes an assumption regarding
expected energy output based on the historical performance and the
producer's estimate of expected electricity output. The sensitivity
of this balance to changes of 20 per cent in the assumed rate of
energy output and 20 per cent in the implied forward energy prices
holding other assumptions constant is shown below:
Not in a hedge
relationship
17 September 2022 5 March 2022
Change in electricity Change in electricity
Change in volume forward price Change in volume forward price
+/- 20.0% +/- 20.0% +/- 20.0% +/- 20.0%
GBPm GBPm GBPm GBPm
Derivative financial
instruments 29(29) 22/(22) 23/(23) 16/(16)
18 September 2021
Change in electricity
Change in volume forward price
+/- 20.0% +/- 20.0%
GBPm GBPm
Derivative financial instruments 7/(7) 14/(14)
Designated in a cash flow
hedge relationship
17 September 2022 5 March 2022
Change in Change in electricity Change in Change in electricity
volume forward price volume forward price
+/- 20.0% +/- 20.0% +/- 20.0% +/- 20.0%
GBPm GBPm GBPm GBPm
Derivative financial instruments 35/(35) 24/(24) 32/(32) 20/(20)
18 September 2021
Change in Change in electricity
volume forward price
+/- 20.0% +/- 20.0%
GBPm GBPm
Derivative financial instruments N/A N/A
d. Financial Services expected credit loss (ECL)
Loans and advances are initially recognised at fair value and
subsequently held at amortised cost, using the effective interest
method, less provision for impairment and recognised on the balance
sheet when cash is advanced:
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
-------------
Non-current
Loans and advances to customers 2,065 2,069 2,100
Impairment of loans and advances (52) (43) (51)
2,013 2,026 2,049
-------------
Current
Loans and advances to customers 3,329 3,202 3,094
Loans and advances to banks 120 121 71
Impairment of loans and advances (174) (160) (192)
3,275 3,163 2,973
-------------
Loan commitment provisions (19) (19) (16)
Total impairment provisions for loans and
advances to customers and loan commitments (245) (222) (259)
-------------
Impairment provisions as a percentage of
loans and advances to customers 4.5% 4.2% 5.0%
-------------
The ECL models utilise four scenarios including a 'base case'
scenario considered to be the most likely outcome together with an
upside, downside and severe downside scenario. The base case has
been assigned a probability weighting of 45% with the upside,
downside and severe downside scenarios weighted 35%, 15%, 5%
respectively. These scenarios were updated in August 2022 to
reflect the prevailing inflationary pressures and impacts of the
cost of living crisis. The weighted economic measures from the
scenarios are as follows:
At 17 September 2022
5-year average Base Upside Downside Severe Downside
Unemployment rate 4.9 4.1 5.8 7.4
Consumer price growth 5.4 5.0 5.8 6.4
GDP 1.2 1.6 0.8 0.3
Mortgage debt as a percentage of
household income 98.9 96.5 101.5 104.8
Real household disposable income 0.5 1.1 (0.2) (1.0)
Probability weighting 45 35 15 5
At 5 March 2022
Base Upside Downside Severe
5-year average Downside
Unemployment rate 4.0 3.9 4.7 6.2
Consumer price growth 2.7 2.8 2.6 2.5
GDP 1.8 2.2 1.5 1.0
Mortgage debt as a percentage of
household income 102.8 101.7 104.3 105.9
Real household disposable income 1.0 1.3 0.7 0.4
Probability weighting 45 35 15 5
At 18 September 2021
Base Upside Downside Severe
5-year average Downside
Unemployment rate 4.6 4.2 5.7 7.5
Consumer price growth 2.2 2.3 2.1 1.9
GDP 3.2 3.7 2.8 2.3
Mortgage debt as a percentage of
household income 102.1 101.1 103.3 104.3
Real household disposable income 2.2 2.3 1.9 1.6
Probability weighting 40 30 25 5
Like many other banks, our ECL models were not developed under a
high inflationary environment and as a result exhibit volatility
not well calibrated to the current economic situation. We have
therefore retained the inflation outlook at the year ended 5 March
2022 in our models, supplemented with a new economic overlay
calculated by referencing our updated consumer price growth
scenarios.
ECL sensitivity
The economic conditions impact the probability of default of the
customers. The impact of 100% weighting of each of the economic
scenarios is outlined as follows:
Impact on the loss allowance
17 September 5 March 2022 18 September
2022 GBPm 2021
GBPm GBPm
Closing ECL allowance 245 222 259
Base scenario - (4) (3)
Upside scenario (9) (7) (9)
Downside scenario 12 10 12
Severe Downside scenario 38 30 30
Our ECL models have been upgraded to cope with much of the
anticipated economic forecasts arising from the COVID-19 pandemic,
and as a result the associated post model adjustment (PMA) held as
at 5 March 2022 of GBP10 million has been partially reduced
accordingly (PMA at 18 September 2021 was GBP33 million). However,
other world events have severely impacted the UK's economic outlook
with a high inflation cost-of-living crisis and recession on the
horizon requiring introduction of a new economic PMA. The aggregate
amount of economic PMA now held at 17 September 2022 is GBP8
million.
15. Analysis of net (debt)/funds
The Group's definition of 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. The Group's
definition of net debt includes lease liabilities as recognised
under IFRS 16 and perpetual securities, and excludes derivatives
that are not used to hedge borrowings.
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.
Financial assets at fair value through other comprehensive
income exclude equity related financial assets which predominantly
relate to the Group's beneficial interest in a commercial property
investment pool. Derivatives exclude those not used to hedge
borrowings, and borrowings exclude bank overdrafts as they are
disclosed separately.
Cash Movements Non-Cash Movements
6 March Cash flows Net Accrued Other Changes 17 September
2022 excluding interest Interest non-cash in fair 2022
interest (received) movements value
/ paid
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Retail
Net derivative financial 5 - - 1 - (1) 5
instruments
Borrowings (excluding
overdrafts) (575) 22 16 (21) - - (558)
Lease liabilities (6,618) 245 145 (145) (153) - (6,526)
Arising from financing
activities (7,188) 267 161 (165) (153) (1) (7,079)
Cash and cash equivalents 436 481 - - - - 917
Bank overdrafts (7) 4 - - - - (3)
Retail net debt (6,759) 752 161 (165) (153) (1) (6,165)
Financial Services
Net derivative financial 4 - - - - (3) 1
instruments
Borrowings (excluding
overdrafts) (179) - - - 1 - (178)
Lease liabilities (3) 1 - - - - (2)
Arising from financing
activities (178) 1 - - 1 (3) (179)
Financial assets at
fair value through other
comprehensive income 418 (22) - - - (1) 395
Cash and cash equivalents 389 274 - - - - 663
Financial services
net funds 629 253 - - 1 (4) 879
Group
Net derivative financial 9 - - 1 - (4) 6
instruments
Borrowings (excluding
overdrafts) (754) 22 16 (21) 1 - (736)
Lease liabilities (6,621) 246 145 (145) (153) - (6,528)
Arising from financing
activities (7,366) 268 161 (165) (152) (4) (7,258)
Financial assets at
fair value through other
comprehensive income 418 (22) - - - (1) 395
Cash and cash equivalents 825 755 - - - - 1,580
Bank overdrafts (7) 4 - - - - (3)
Group net debt (6,130) 1,005 161 (165) (152) (5) (5,286)
Retail net debt (6,759) 752 161 (165) (153) (1) (6,165)
Of which:
Leases (6,618) (6,526)
Net (debt)/funds excluding
lease liabilities (141) 361
Other non-cash movements predominantly comprise new leases and
lease modifications.
Overdraft balances are included within borrowings in the Group
balance sheet, and within cash and cash equivalents in the Group
cash flow statement.
Cash Movements Non-Cash Movements
7 March Cash flows Net Accrued Other Changes 18 September
2021 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 (14) - 5 (6) 6 8 (1)
Borrowings (excluding
overdrafts) (826) 223 15 (14) - - (602)
Lease liabilities (5,829) 242 153 (153) (731) - (6,318)
Arising from financing
activities (6,669) 465 173 (173) (725) 8 (6,921)
Financial assets at fair
value through other comprehensive
income 1 - - - - - 1
Cash and cash equivalents 546 230 - - - - 776
Bank overdrafts (99) (102) - - - - (201)
Retail net debt (excluding
perpetual securities) (6,221) 593 173 (173) (725) 8 (6,345)
Financial Services
Net derivative financial
instruments - - - - - 1 1
Borrowings (excluding
overdrafts) (179) - 5 (5) (1) (180)
Lease liabilities (5) 1 - - - - (4)
Arising from financing
activities (184) 1 5 (5) (1) 1 (183)
Financial assets at fair
value through other comprehensive
income 537 (130) - - - (2) 405
Cash and cash equivalents 1,029 (169) - - - - 860
Financial services net
funds 1,382 (298) 5 (5) (1) (1) 1,082
Group
Net derivative financial
instruments (14) - 5 (6) 6 9 -
Borrowings (excluding
overdrafts) (1,005) 223 20 (19) (1) - (782)
Lease liabilities (5,834) 243 153 (153) (731) - (6,322)
Arising from financing
activities (6,853) 466 178 (178) (726) 9 (7,104)
Financial assets at fair
value through other comprehensive
income 538 (130) - - - (2) 406
Cash and cash equivalents 1,575 61 - - - - 1,636
Bank overdrafts (99) (102) - - - - (201)
Group net debt (excluding
perpetual securities)
(restated) (4,839) 295 178 (178) (726) 7 (5,263)
Retail net debt (excluding
perpetual securities) (6,221) 593 173 (173) (725) 8 (6,345)
Perpetual convertible
bonds (248) 8 - - 240 - -
Retail net debt (including
perpetual securities) (6,469) 601 173 (173) (485) 8 (6,345)
Of which:
Leases (5,829) (6,318)
Net debt excluding lease
liabilities (640) (27)
Cash Movements Non-Cash Movements
7 March Cash flows Net Accrued Other Changes 5 March
2021 excluding interest Interest non-cash in fair 2022
interest (received) movements value
/ paid
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Retail
Net derivative financial
instruments (14) - 10 (10) 11 8 5
Borrowings (excluding
overdrafts) (826) 248 28 (25) - - (575)
Lease liabilities (5,829) 491 281 (281) (1,280) - (6,618)
Arising from financing
activities (6,669) 739 319 (316) (1,269) 8 (7,188)
Financial assets at fair
value through other comprehensive
income 1 - - - - (1) -
Cash and cash equivalents 546 (110) - - - - 436
Bank overdrafts (99) 92 - - - - (7)
Retail net debt (excluding
perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Financial Services
Net derivative financial
instruments - - - - - 4 4
Borrowings (excluding
overdrafts) (179) - 10 (11) - 1 (179)
Lease liabilities (5) 2 - - - - (3)
Arising from financing
activities (184) 2 10 (11) - 5 (178)
Financial assets at fair
value through other comprehensive
income 537 (115) - - - (4) 418
Cash and cash equivalents 1,029 (640) - - - - 389
Financial services net
funds 1,382 (753) 10 (11) - 1 629
Group
Net derivative financial
instruments (14) - 10 (10) 11 12 9
Borrowings (excluding
overdrafts) (1,005) 248 38 (36) - 1 (754)
Lease liabilities (5,834) 493 281 (281) (1,280) - (6,621)
Arising from financing
activities (6,853) 741 329 (327) (1,269) 13 (7,366)
Financial assets at fair
value through other comprehensive
income 538 (115) - - - (5) 418
Cash and cash equivalents 1,575 (750) - - - - 825
Bank overdrafts (99) 92 - - - - (7)
Group net debt (excluding
perpetual securities)
(restated) (4,839) (32) 329 (327) (1,269) 8 (6,130)
Retail net debt (excluding
perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Perpetual convertible
bonds (248) 8 - - 240 - -
Retail net debt (including
perpetual securities) (6,469) 729 319 (316) (1,029) 7 (6,759)
Of which:
Leases (5,829) (6,618)
Net debt excluding lease
liabilities (640) (141)
Reconciliation of net cash flow to movement in Retail net
debt
28 weeks 28 weeks 52 weeks
to to to
17 September 18 September 5 March
2022 2021 2022
GBPm GBPm GBPm
Opening net debt (6,759) (6,469) (6,469)
Cash flow movements
Net increase/(decrease) in cash and cash
equivalents (including overdrafts) 759 (41) (658)
Elimination of Financial Services movement
in cash and cash equivalents (274) 169 640
Repayment of perpetual capital securities - 8 8
Repayment of Retail borrowings 22 223 248
Repayment of Retail lease obligations 245 242 491
Net interest paid on components of Retail
net debt 161 173 319
Changes in net debt resulting from cash
flow 913 774 1,048
Non-cash movements
Accrued interest (165) (173) (316)
Retail fair value and other non-cash movements (154) (477) (1,022)
Changes in net debt resulting from non-cash
movements (319) (650) (1,338)
Movement in net debt 594 124 (290)
Closing net debt (6,165) (6,345) (6,759)
16. Borrowings
28 weeks to 17 September 52 weeks to 5 March
2022 2022
Current Non-current Total Current Non-current Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------
Loan due 2031 46 512 558 44 531 575
Bank overdrafts 3 - 3 7 - 7
Sainsbury's Bank Tier 2
Capital 3 175 178 3 176 179
Total borrowings 52 687 739 54 707 761
28 weeks to 18 September
2021
Current Non-current Total
GBPm GBPm GBPm
Loan due 2031 57 545 602
Bank overdrafts 201 - 201
Sainsbury's Bank Tier
2 Capital 3 177 180
Total borrowings 261 722 983
Available facilities
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 17 September 2022, the
Revolving Credit Facility was undrawn (5 March 2022: nil; 18
September 2021: nil).
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 17 September 2022 (5 March
2022: nil; 18 September 2021: nil).
Subsequent to the balance sheet date, an unsecured term facility
for GBP575m was entered into. Refer to note 21 for further
details.
Sainsbury's Bank Tier 2 Capital
The Bank issued GBP120m of fixed rate reset callable
subordinated Tier 2 notes on 12 September 2022. These notes pay
interest on the principal amount at a rate of 10.5 per cent per
annum, payable in equal instalments semi-annually in arrears, until
12 March 2028 at which time the interest rate will reset. The Bank
has the option to redeem these notes on 12 March 2028.
This was issued in conjunction with the repurchase and
extinguishment of GBP120m of the existing GBP175m subordinated Tier
2 notes that were issued on 23 November 2017. Subsequently on 19
October 2022, the Bank announced its intention to redeem the
remaining GBP55m in full on the call date 23 November 2022.
17. Cash and cash equivalents
Cash and cash equivalents comprise the following:
28 weeks
to 52 weeks 28 weeks
17 September to 5 March to 18 September
2022 2022 2021
GBPm GBPm GBPm
Cash in hand and bank balances 586 566 508
Money market funds and deposits 602 25 579
Deposits at central banks 392 234 549
Cash and bank balances as reported in the
Group balance sheet 1,580 825 1,636
Bank overdrafts (within current borrowings) (3) (7) (201)
Net cash and cash equivalents as reported
in the Group cash flow statement 1,577 818 1,435
Of the above balance, GBP16 million (5 March 2022: GBP18
million; 18 September 2021: GBP19 million) was restricted as at the
period-end. Of the GBP16 million (5 March 2022: GBP18 million; 18
September 2021: GBP19 million) restricted cash, GBP15 million (5
March 2022: GBP15 million; 18 September 2021: GBP16 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 GBP1 million (5 March 2022:
GBP3 million; 18 September 2021: GBP2 million) is restricted for
insurance purposes.
Reconciliation of cash flow items
Working capital
Financial Amounts
assets due Amounts
at fair from Trade due
value Trade Financial and to Financial
through and other Services other Services
Inventories OCI receivables customers payables customers Provisions
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------
At 17 September 2022 1,891 771 803 5,288 (4,994) (5,732) (231)
At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271)
----------
Balance sheet movement (94) 29 (55) (99) 424 473 (40)
Fair value movements - (7) - (35) - - -
Hedge adjustment to
inventory 7 - - - - - -
Reclassification to other
lines in the cash flow
statement - - 4 - 24 - -
Financial Services ECL
impairments - - - (23) - - -
Movement in capital accruals - - - - 3 - -
Other - - - (1) (13) (1) (1)
Movement shown in cash flow
statement (87) 22 (51) (158) 438 472 (41)
---------- ----------
Financial Amounts
assets due Amounts
at fair from Trade due
value Trade Financial and to Financial
through and other Services other Services
Inventories OCI receivables customers payables customers Provisions
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------
At 18 September 2021
(restated) 1,682 752 779 5,022 (4,584) (5,614) (276)
At 6 March 2021 1,625 844 775 5,407 (4,508) (6,289) (470)
----------
Balance sheet movement (57) 92 (4) 385 76 (675) (194)
Fair value movements - 38 - - - - -
Reclassification to other
lines in the cash flow
statement - - - - 15 - -
Financial Services ECL
impairments - - - (35) - - -
Movement in capital accruals - - - - 4 - -
Business rates adjustment - - - - - - 106
Other - - (2) - - - 12
----------
Movement shown in cash flow
statement (57) 130 (6) 350 95 (675) (76)
----------
Financial Amounts
assets due Amounts
at fair from Trade due
value Trade Financial and to Financial
through and other Services other Services
Inventories OCI receivables customers payables customers Provisions
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------
At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271)
At 6 March 2021 1,625 844 775 5,407 (4,508) (6,289) (349)
----------
Balance sheet movement (172) 44 27 218 62 (1,030) (78)
Fair value movements - 71 - (38) - - -
Hedge adjustments (7) - - - - - -
Interest in working capital - - - - (6) - -
Transfer of SaaS spend to
prepayments - - 9 - - - -
Reclassification to other
lines in the cash flow
statement - - - - (28) - -
Financial Services ECL
impairments - - - (19) - - -
Movement in capital accruals - - - - 1 - -
Amortisation of discount - - - - - - (1)
Other - - (3) - (1) - (1)
Movement shown in cash flow
statement (179) 115 33 161 28 (1,030) (80)
---------- ----------
Profit on the sale of properties and early termination of leases
in the cash flow statement is reconciled as follows:
28 weeks 28 weeks 52 weeks
to to to 5 March
17 September 18 September 2022
2022 2021
GBPm GBPm GBPm
--------------
Profit on disposal of properties (note 3) - (3) (7)
Non underlying gain on early termination of
leases (note 3) (1) (5) (9)
Profit on disposal of properties within restructuring
programmes (note 3) (11) (13) (12)
Non-underlying SaaS adjustment (note 3) - - 21
Underlying gain on early termination of leases - (1) (3)
Loss on disposal of intangible assets - - 4
Profit on sale of non-current assets and
early termination of leases (12) (22) (6)
--------------
18. Retirement benefit obligations
All retirement benefit obligations relate to the Sainsbury's
Pension Scheme plus two unfunded pension liabilities relating to
former senior employees of Sainsbury's and Home Retail Group.
The Sainsbury's Pension Scheme has two segregated sections: the
Sainsbury's Section and the Argos Section.
The unfunded pension liabilities are unwound when each employee
reaches retirement and takes their pension from the Group payroll
or is crystallised in the event of an employee retiring and
choosing to take the provision as a one-off cash payment.
Triennial valuation
The Trustee's triennial valuation is used to determine the
contributions required for the Scheme to pay all the benefits due,
now and in the future. The Trustee must allow for a level of
prudence and so these assumptions therefore place a relatively high
value on the Scheme's liabilities. By contrast, IAS 19 'Employee
Benefits' requires all companies to value the liabilities on a
'best estimate' basis which places a lower value on the liabilities
and therefore a more favourable financial position. As such, the
accounting value is different to the result obtained using the
Trustee's triennial valuation basis.
The Trustee completed a triennial actuarial valuation as at 30
September 2021, resulting in an actuarial surplus of GBP130 million
(Sainsbury's section was a surplus of GBP231 million, Argos section
was a deficit of GBP101 million), from a deficit of GBP538 million
in 2018. The asset backed contributions (ABC) structure established
by Sainsbury's in July 2019 continues to deliver as planned. Under
the ABC, properties with a value of GBP1.35 billion were
transferred into a property holding company, a wholly owned
subsidiary of the Group, and leased to other Group entities. Rental
receipts facilitate payments of interest and capital on loan notes
issued to a Scottish Limited Partnership, in which the Scheme holds
an interest. The Scheme's interest in the Partnership entitles it
to annual distributions over up to 20 years.
The distributions were approximately GBP58 million per year
until 2030, and subsequently approximately GBP28 million a year for
the remaining period (increasing by 2% a year). The distributions
are made through three payment streams:
1. Payments to the Sainsbury's section
2. Payments to the Argos section
3. Switching payment stream, paid to either the Sainsbury's section or Argos section
The payments to the Sainsbury's and Argos sections (streams 1
and 2) stop in 2030, or when the relevant section reaches its
funding target, if earlier. The third stream is initially paid to
the Sainsbury's section.
As the Sainsbury's section reached its funding target in
December 2021, stream 1 (GBP15 million a year) was permanently
switched off and stream 3 (currently GBP24 million a year) switched
to the Argos section from March 2022. Stream 3 payments will
continue until 2038 or until both sections have reached their
funding targets, if earlier. The Argos section also continues to
receive the stream 2 payments of GBP20 million a year.
The amounts recognised in the balance sheet are as follows:
17 September 2022 5 March 2022
Sainsbury's Argos Group Sainsbury's Argos Group
GBPm GBPm GBPm GBPm GBPm GBPm
Present value of funded obligations (5,836) (922) (6,758) (8,060) (1,313) (9,373)
Fair value of plan assets 7,176 1,064 8,240 10,158 1,535 11,693
Retirement benefit surplus 1,340 142 1,482 2,098 222 2,320
Present value of unfunded obligations (15) (12) (27) (20) (17) (37)
Retirement benefit surplus 1,325 130 1,455 2,078 205 2,283
18 September 2021
Sainsbury's Argos Group
GBPm GBPm GBPm
Present value of funded obligations (9,352) (1,488) (10,840)
Fair value of plan assets 10,394 1,574 11,968
Retirement benefit surplus 1,042 86 1,128
Present value of unfunded obligations (23) (18) (41)
Retirement benefit surplus 1,019 68 1,087
The principal actuarial assumptions used at the balance sheet
date are as follows:
17 September 5 March 18 September
2022 2022 2021
% % %
------------- --------
Discount rate 4.45 2.40 1.75
Inflation rate - RPI 3.45 3.60 3.40
Inflation rate - CPI 2.75 2.90 2.70
2.30 - 2.25 -
Future pension increases 2.30 - 3.35 3.45 3.30
------------- --------
The amounts recognised in the income statement in respect of the
IAS 19 charges for the defined benefit schemes are as follows:
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
Excluded from underlying profit
before tax:
Interest cost on pension liabilities (119) (197) (106)
Interest income on plan assets 149 212 114
Total included in finance income/(costs) 30 15 8
Defined benefit pension scheme
expenses (3) (7) (2)
Past service cost - 3 -
Settlement gains 8 - -
Total excluded from underlying
profit before tax 35 11 6
Total income statement credit 35 11 6
The movements in the net defined benefit surplus are as
follows:
17 September 5 March 18 September
2022 2022 2021
GBPm GBPm GBPm
The movements in the Groups net defined
benefit surplus is as follows:
At the beginning of the year 2,283 744 744
Net interest income 30 15 8
Remeasurement (losses)/gains (886) 1,457 298
Pension scheme expenses (3) (7) (2)
Contributions by employer 23 71 39
Past service charge - 3 -
Settlement gains 8 - -
At the end of the year 1,455 2,283 1,087
Cash contributions
Cash contributions for the full year are expected to be
approximately GBP53 million.
Valuation of pension assets
The Pension Scheme has circa GBP2 billion of private market
assets, split between private debt, private equity and property.
These assets are held as they are expected to deliver a greater
risk/return profile vs public market equivalents over the long
term. The assets are illiquid (likely to be realised over 5+ years)
but the Pension Scheme holds sufficient liquid assets (cash, gilts
and other liquid securities) to be confident that it can meet its
pension and collateral obligations over time.
The valuation of these assets is based on the audited accounts
of the funds, where available, and net asset value statements from
the investment managers where recent accounts are not available.
For many of the investments the valuations provided are at 30 June.
The Group therefore performs a roll-forward for these valuations,
adjusting for cash received or paid and applying the changes seen
in relevant liquid indices as follows:
Asset Class Returns
Global equity USD return (15.15)%
Global High Yield Debt USD return (7.35)%
US loans USD return (1.16)%
UK REITS GBP return (22.36)%
The roll-forward has reduced the valuation of illiquid assets by
GBP15 million. A 1% increase/decrease in the indices used would
have caused a GBP18 million increase/decrease in the
adjustment.
Subsequent to the balance sheet date, there have been
significant movements within the pension market. Refer to note 21
for further details.
Sensitivities
The following sensitivities are based on management's best
estimate of a reasonably anticipated change. The sensitivities are
calculated using the same methodology used to calculate the
retirement benefit obligation, by considering the change in the
retirement benefit obligation for a given change in assumption. The
net retirement benefit obligation is the difference between the
retirement benefit obligation and the fair value of plan assets.
Changes in the assumptions may occur at the same time as changes in
the fair value of plan assets. There has been no change in the
calculation methodology since the prior period.
Sainsbury's Argos Total
GBPm GBPm GBPm
An increase of 0.5% in the discount rate would decrease
the present value of funded obligations by 420 75 495
A decrease of 0.5% in the discount rate would increase
the present value of funded obligations by 469 85 554
An increase of 0.5% in the inflation rate would increase
the present value of funded obligations by 266 68 334
A decrease of 0.5% in the inflation rate would decrease
the present value of funded obligations by 274 67 341
An increase of 0.5% in the inflation rate for future
pension increases in payment only would increase
the present value of funded obligations by 142 39 181
A decrease of 0.5% in the inflation rate for future
pension increases in payment only would reduce the
present value of funded obligations by 161 42 203
Demographic sensitivities
An increase of one year to the life expectancy would
increase the present value of funded obligations
by 193 30 223
Changing the 2020 and 2021 weighting parameters in
CMI 2021 to 0% would increase the present value of
funded obligations by 67 10 77
Changing the 2020 and 2021 weighting parameters in
CMI 2021 to 25% would decrease the present value
of funded obligations by 65 10 75
19. Related party transactions
The Group's related parties are its joint ventures and key
management personnel, comprising members of the J Sainsbury plc
Board of Directors and the Operating Board as disclosed in the
Annual Report and Financial Statements 2022.
Transactions with joint ventures and associates
For the 28 weeks to 17 September 2022, the Group entered into
various transactions with joint ventures and associates as set out
below:
52 weeks
28 weeks to 28 weeks to to
17 September 18 September 5 March
2022 2021 2022
GBPm GBPm GBPm
Services and loans provided to
joint ventures
Dividends and distributions received - - 2
Rental expenses paid (3) (3) (8)
Balances arising from transactions with joint ventures and
associates
17 September 18 September 5 March
2022 2021 2022
GBPm GBPm GBPm
Other payables (1) (1) (1)
20. Contingent liabilities
The Group has a number of contingent liabilities in respect of
historic guarantees, particularly in relation to disposed assets,
which if the current tenant and their ultimate parents become
insolvent, may expose the Group to a material liability. This is
not expected to materialise.
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 10,500 equal pay claims from circa
6,300 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.
21. Post balance sheet events
Retirement benefit obligations
Subsequent to the balance sheet date, there have been
significant movements in gilt markets. In particular the 'mini
budget' announced by the government on 23rd September caused rapid
sales of government bonds which further depressed gilt markets.
Although a temporary intervention by the Bank of England and
subsequent policy changes have stabilised the market, gilt yields
remain significantly higher than they were prior to the mini
budget. This will have resulted in a significant decrease in the
value of the Group's pension Scheme's assets, and also its
liabilities.
The Group's pension Scheme adopts a collateral sufficiency
framework which ensures sufficient high quality liquid assets are
maintained in order to meet liquidity requirements, even in times
of market stress. The scale and speed of the increase in interest
rate expectations since the 'mini budget', and volatility within
the markets, resulted in the Group deciding to put in place a loan
facility to the Scheme of GBP500m on 18th October. The purpose of
this facility was to further enhance the pensions Scheme's
resilience in the event of unexpected substantial further rises in
interest rates. This facility will remain in place for 3 months and
as at the date of signing has not been drawn.
Borrowings
Subsequent to the balance sheet date, an unsecured term facility
for GBP575m was entered into in October 2022, with an ultimate
maturity date of 30 November 2024. As at the date of signing the
term facility was undrawn.
Principal risks and uncertainties
Risk is an inherent part of doing business. The J Sainsbury plc
Board has overall responsibility for the identification and
management of the principal risks, emerging risks and internal
control of the Company. The Board has identified the following
principal potential risks to the successful operation of the
business. These risks, along with the events in the financial
markets and their potential impacts on the wider economy, remain
those most likely to affect the Group in the second half of the
year.
-- Business continuity, operational resilience and major incidents response
-- Business strategy and change
-- Colleague engagement, retention and capability
-- Customer
-- Data security
-- Environment and sustainability
-- Financial and treasury
-- Health and safety
-- Political and regulatory environment
-- Product safety and sourcing
-- Sainsbury's Bank
-- Trading environment and competitive landscape
The trading environment in which we are operating is directly
impacted by inflationary pressures, continued disruption in global
macro environment and the cost-of-living. We continue to monitor
these external pressures and respond accordingly whilst continuing
to focus on delivery of our strategic priorities. As such, the
gross and net position of this risk have regressed.
Aside from the Trading environment and competitive landscape
Principal Risk, the others remain unchanged from those reported in
the Group's Annual Report and Financial Statements 2022. For more
information on these risks, please refer to pages 38 to 50 of the J
Sainsbury plc Annual Report and Financial Statements 2022, a copy
of which is available on the Group's corporate website
www.j-sainsbury.co.uk .
Statement of Directors' responsibilities
The Directors confirm that this set of Condensed Consolidated
Interim Financial Statements has been prepared in accordance with
UK adopted IAS 34 'Interim Financial Reporting' and the Disclosure
and Transparency Rules of the UK's Financial Conduct Authority, and
that the Interim Management Report herein includes a true and fair
review of the information required by DTR 4.2.7R and DTR 4.2.8R,
namely:
-- that the report contains a fair review of important events
that have occurred during the first 28 weeks of the financial year,
and their impact on the condensed set of financial statements, and
of the principal risks and uncertainties for the remaining six
months of the financial year; and
-- that the report contains a fair review of related party transactions.
The Directors of J Sainsbury plc are listed in the J Sainsbury
plc Annual Report and Financial Statements 2022.
A list of current directors is maintained on the Group's website
: www.about.sainsburys.co.uk/about-us/our-management .
By order of the Board
Simon Roberts
Chief Executive
2 November 2022
Kevin O'Byrne
Chief Financial Officer
2 November 2022
INDEPENT REVIEW REPORT TO J SAINSBURY PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the interim financial report for the 28
week period ended 17 September 2022 which comprises the Group
income statement, the Group statement of comprehensive income, the
Group balance sheet, the Group cash flow statement and the Group
statement of changes in equity and the related explanatory notes.
We have read the other information contained in the interim
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim financial report for the 28 week period ended 17
September 2022 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with UK-adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that management have inappropriately adopted
the going concern basis of accounting or that management have
identified material uncertainties relating to going concern that
are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the interim
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the interim report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the interim financial report. Our
conclusions, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
2 November 2022
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.
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.
All of the following APMs relate to the current period's results
and comparative periods.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Income statement
- Revenue
Retail Revenue Group sales less Shows the A reconciliation of the measure is provided
sales Financial annual in note 4 of the financial statements.
Services revenue. rate of
growth in
the Group's
Retail
business
sales.
Like-for-like No direct Year-on-year growth in The measure The reported retail like-for-like
sales equivalent sales including VAT, is used sales decline of 0.8 per
excluding widely in the cent is based on a combination
fuel, excluding retail of Sainsbury's like-for-like
Financial industry as sales and Argos like-for-like 28 weeks
Services, for stores an indicator sales for the 28 weeks to 28 weeks to 18
that of current 17 September 2022. See movements to 17 September September
have been open for trading below: 2022 2021
more performance Retail like-for-like (exc.
than one year. and is Fuel, inc. VAT) (0.8)% 0.3%
useful when Underlying net new space
The relocation of comparing impact (0.5)% (0.1)%
Argos growth Retail sales (decline)/growth
stores into between (exc. Fuel, inc. VAT) (1.3)% 0.2%
Sainsbury's retailers Fuel impact 5.7% 5.8%
supermarkets are that have Total retail sales growth
classified different (inc. fuel, inc. VAT) 4.4% 6.0%
as new space, while profiles of VAT impact (0.3)% (0.6)%
the expansion, Total retail sales growth 4.1% 5.4%
host supermarket is disposals and
classified closures.
like-for-like.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Income statement - Profit
Retail Profit Underlying This is the 28 weeks 28 weeks 52 weeks
underlying before earnings lowest to to to
operating tax before level at which 17 September 18 September 5 March
profit interest, tax, the retail 2022 2021 (restated) 2022
Financial segment GBPm GBPm GBPm
Services can be viewed ----------------
operating from Group PBT (note 5a) 376 527 854
profit and a management Less Group non-underlying
Sainsbury's perspective, items (note 3) (36) (156) (124)
underlying with finance Group UPBT 340 371 730
share of costs ----------------
post-tax managed for Financial Services underlying
profit from the operating profit (19) (19) (38)
joint Group as a Retail underlying profit
ventures and whole. before tax 321 352 692
associates. Net underlying finance costs 156 171 309
----------------
Retail underlying operating
profit 477 523 1,001
----------------
Retail sales (note 5a) 16,154 15,511 29,463
Retail underlying operating
margin 2.95% 3.37% 3.40%
----------------
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 note
before tax exclude items shareholders 3 of the financial statements.
tax recognised with
in reported additional The adjusted items are as described in note 3 of the
profit insight financial statements
or loss before into the
tax underlying
which, if performance of
included, the business,
could distort this
comparability adjusted
between measure
periods. In of profit is
determining provided
which to supplement
items to the
exclude from reported IFRS
underlying numbers,
profit, and reflects
the Group how
considers the business
items which are measures
significant performance
either by internally.
virtue of
their size
and/or
nature, or that
are
non-recurring.
Underlying Basic Earnings per This is a key A reconciliation of the measure is provided in note
basic earnings share measure 9 of the financial statements.
earnings per share using to evaluate
per share underlying the
profit performance of
as described the business
above. and
returns
generated
for investors.
Retail No direct Retail EBITDA is used 28 weeks 28 weeks
underlying equivalent underlying to review the to to
EBITDA operating retail 17 September 18 September
profit as segment's 2022 2021
above, before profit GBPm GBPm
underlying generation and Retail underlying operating profit 477 523
depreciation, the Add: Retail depreciation and amortisation
and sustainability expense 634 649
amortisation. of ongoing Less: Non-underlying depreciation
capital and amortisation (24) (31)
reinvestment Retail underlying EBITDA 1,087 1,141
and
finance costs. Retail sales (note 5a) 16,154 15,511
Retail underlying EBITDA margin 6.73% 7.36%
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Underlying Finance Net finance This provides A reconciliation of this measure is included
net income costs before shareholders in note 7 of the financial statements.
finance less any with
costs finance non-underlying additional The adjusted items are as follows:
costs items as insight * Non-underlying finance and fair value movements -
defined above into the these include fair value remeasurements on
that are underlying derivatives not in a hedging relationship and lease
recognised net finance interest on impaired non-trading sites, including
within finance costs of site closures. The fair value movements are driven
income the Group by by
/ expenses. excluding external market factors and can significantly
non-recurring fluctuate year-on-year. They are therefore excluded
one-off to ensure consistency between periods. Lease intere
items. st
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 in
tax tax rate underlying indication note 3 of the financial statements
rate items, of the tax
divided by rate across
underlying the Group
profit before before the
tax. 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 28 weeks 28 weeks 52 weeks
cash equivalent reader to to to
flow understand 17 September 18 September 5 March
items cash flows 2022 2021 2022
in of the Ref GBPm GBPm GBPm
Financial business a Net interest paid a (161) (177) (323)
Review summarised Repayment of lease
cash flow liabilities b (245) (242) (491)
statement Repayment of borrowings c (22) (231) (256)
is included Other d (23) (30) (27)
within the Dividends and distributions
Financial received e 50 - 2
Review.
As part of
this a
number of
line items
have been
combined.
The cash
flow in
note 5 of
the
financial
statements
includes
a reference
to show
what has
been
combined
in these
line items.
Retail Net cash Net cash This 28 weeks 28 weeks 52 weeks
free generated generated measures to to to
cash from operating from retail cash 17 September 18 September 5 March
flow activities operations, generation, 2022 2021 2022
after working GBPm GBPm GBPm
perpetual capital Cash generated from retail
security efficiency operations 1,425 1,233 1,940
coupons and and capital Net interest paid (ref (a)
cash capital expenditure above) (161) (177) (323)
expenditure of the Corporation Tax (32) - (23)
but before retail Retail purchase of property,
strategic business plant and equipment (201) (154) (416)
capital Retail purchase of intangibles
expenditure, assets (96) (144) (229)
and Retail proceeds from disposal
including of property, plant and equipment 28 39 46
payments Initial direct costs on
of lease right-of-use assets (9) (1) (3)
obligations, Repayments of obligations
cash flows under leases (245) (242) (491)
from joint Dividends and distributions
ventures and received 50 - 2
associates Retail free cash flow 759 554 503
and
Sainsbury's
Bank
capital
injections.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Underlying No direct Removes To provide a 28 weeks
working equivalent working reconciliation to
capital capital of the working 28 weeks 18 September 52 weeks
movements and cash capital to 2021 to
movements movement in 17 September 5 March
relating to the financial 2022 (restated) 2022
non-underlying statements to GBPm GBPm GBPm
items. the Retail working capital movements
underlying per cash flow (note 5) 318 (44) (306)
working
capital Adjustments for:
movement Retail non-underlying impairment
in the charges (note 5) 20 1 8
financial Non-underlying restructuring
review. and impairment charges (note
3) (33) (37) (92)
Accelerated depreciation (note
3) 12 20 33
Bank impairment charges (note
3) - - 7
Gains on early termination of
leases (note 3) (1) (5) (9)
Profit on disposal of properties
within restructuring programme
(note 3) (11) (13) (12)
ATM income (note 3) - - 2
Income recognised in relation
to legal disputes (note 3) 30 181 180
Property related transactions
(note 3) (8) - -
Other - 2 1
Non-underlying working capital
movements before cash movements 9 149 118
Non-underlying cash movements:
Restructuring (note 3) 33 70 114
Bank restructuring - - (4)
ATM income (note 3) - (13) (14)
Net income recognised in relation
to legal disputes (note 3) - (27) (93)
Retail non-underlying operating
cash flows (excluding pensions) 33 30 3
Total adjustments for non-underlying
working capital 42 179 121
Underlying working capital
movements 360 135 (185)
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Adjusted Cash This presents retail This enables 28 weeks 28 weeks 52 weeks
net cash generated operating cash flows management to to to
generated from adjusted for movements to assess 17 September 18 September 5 March
from retail operations in working capital, the cash 2022 2021 2022
operations less net interest generated GBPm GBPm GBPm
(per financial paid (including from its Retail cash generated from
review) distributions core retail operating activities (note
on perpetual securities) operations. 5) 1,232 1,060 1,598
and pension cash Perpetual security coupons - (4) (4)
contributions. Adjusted net cash generated
from operating activities 1,232 1,056 1,594
------------- ---------
Core No direct Capital expenditure This allows 28 weeks 28 weeks 52 weeks
retail equivalent excluding Sainsbury's management to to to
capital Bank. to assess 17 September 18 September 5 March
expenditure core retail 2022 2021 2022
capital GBPm GBPm GBPm
expenditure Purchase of property, plant
in the and equipment (201) (154) (416)
period in Purchase of intangibles (96) (144) (229)
order to Cash capital expenditure (297) (298) (645)
review
the
strategic
business
performance.
Net debt Borrowings, Net debt includes This shows A reconciliation of the measure is provided in
cash, the capital injections the overall note 15 of the financial statements. In addition,
derivatives into Sainsbury's Bank, strength of to aid comparison to the balance sheet, reconciliations
, but excludes the net the between financial assets at FVTOCI and derivatives
financial debt of Sainsbury's balance per the balance sheet and Group net debt (i.e.
assets Bank and its sheet including Financial Services) is included below:
at FVTOCI, subsidiaries. alongside
lease the 28 weeks 28 weeks 52 weeks
liabilities It is calculated as: liquidity to to to
financial assets at and 17 September 18 September 5 March
fair value through its 2022 2021 2022
other comprehensive indebtedness GBPm GBPm GBPm
income (excluding and whether Financial instruments at
equity investments) the FVTOCI per balance sheet 771 752 800
+ net derivatives Group can Less: equity related securities (376) (346) (382)
to hedge borrowings cover Financial instruments
+ net cash and cash its debt at FVTOCI included in net
equivalents + loans commitments. debt 395 406 418
+ lease obligations Net derivatives per balance
+ perpetual securities. sheet 490 13 259
Less: derivatives not used
to hedge borrowings (484) (13) (250)
Derivatives included in
net debt 6 - 9
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Other
Net debt/ No direct Net debt divided This helps Net debt as provided in note 15. 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 This 52 weeks 52 weeks 52 weeks
on capital equivalent capital represents to to to
employed employed is the total 17 September 18 September 5 March
calculated capital 2022 2021 (restated) 2022
as return that the GBPm GBPm GBPm
divided Group has Underlying profit before
by average utilised in tax 699 426 730
capital order Add: Underlying net
employed. to generate interest 294 325 309
profits. Return 993 751 1,039
Return is Management Capital employed is
defined use this reconciled as follows:
as 52 week to assess 52 weeks 52 weeks 52 weeks
rolling the to to to
underlying performance 17 September 18 September 5 March
profit of the 2022 2021 (restated) 2022
before interest business. GBPm GBPm GBPm
and Group net assets 7,929 7,162 8,423
tax. Less: Pension surplus
(note 18) (1,455) (1,087) (2,283)
Capital employed Deferred tax on pension
is surplus 454 367 640
defined as Group Less: net debt (note
net 15) 6,165 6,345 6,759
assets excluding Effect of in-year averaging (228) (792) (1,127)
pension Capital employed 12,865 11,995 12,412
deficit/surplus,
less Return on capital employed 7.7% 6.3% 8.4%
net debt
(excluding
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 24 weeks 28 weeks 52 weeks 52 weeks
charge equivalent EBITDA assess to to to to
cover divided by rent the Group's 5 March 17 September 17 September 5 March
(representing ability 2022 2022 2022 2022
capital and to satisfy GBPm GBPm GBPm GBPm
interest fixed Group underlying
repayments on financing operating profit 497 496 993 1,039
leases) expenses Add: Group depreciation
and underlying from and amortisation
net performance expense 561 650 1,211 1,220
finance costs, of the Less: Non-underlying
where business. depreciation and
interest on amortisation expense (22) (24) (46) (53)
perpetual Group underlying
securities is EBITDA 1,036 1,122 2,158 2,206
treated Repayment of capital
as an underlying element of lease
finance obligations (250) (246) (496) (493)
cost. All items Underlying finance
are income 3 5 8 3
calculated on a Underlying finance
52 costs (141) (161) (302) (312)
week rolling Fixed charges (388) (402) (790) (802)
basis. Fixed charge cover 2.7 2.8 2.7 2.8
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END
IR BKBBDKBDBQDK
(END) Dow Jones Newswires
November 03, 2022 03:00 ET (07:00 GMT)
Sainsbury (j) (LSE:SBRY)
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Sainsbury (j) (LSE:SBRY)
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