TIDMSBRY
RNS Number : 6179J
Sainsbury(J) PLC
28 April 2022
28 April 2022 J Sainsbury PLC
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Preliminary Results for the 52 weeks ended 5 March 2022
Delivering for customers, colleagues, communities and
shareholders
Simon Roberts, Chief Executive of J Sainsbury plc, said: "In a
year of unprecedented change we have been relentlessly focused on
putting customers and colleagues first while delivering the first
year of our plan to put food back at the heart of Sainsbury's. We
said we would invest in value, innovation and service and that's
exactly what we're doing. We have outperformed key competitors on
both a one and two-year basis(1) while also delivering strong
underlying profit growth, improved returns and consistent retail
free cash flow. This gives us a strong foundation to keep building
momentum in the year ahead.
"We know just how much everyone is feeling the impact of
inflation, which is why we are so determined to keep delivering the
best value for customers. We have been able to drive more
investment into lowering food prices funded by our comprehensive
cost savings plans. As a result, we continue to inflate behind
competitors on the products customers buy most often. Last week we
announced the next bold phase of investment, lowering prices across
150 of our highest volume fresh products.
"As our colleagues are feeling the impact of inflation too we
prioritised investment of over GBP100 million into colleague pay.
All Sainsbury's and Argos retail colleagues now earn the Living
Wage wherever they work in the UK, we were the first major
supermarket to make this happen. I want to thank every one of my
colleagues for the outstanding job you've done every day. I am
immensely proud of our entire team.
"I would also like to thank our suppliers for all their support
throughout the last year. Partnership and collaboration through
these times of significant industry challenge and change have never
been more important.
"The dreadful situation in Ukraine continues to have a profound
impact. We're doing everything we can to help with the humanitarian
effort, and are working to manage the supply chain impacts.
"We have a clear long term focus on keeping prices low and we
remain committed to helping everyone eat better, whatever the
external environment may bring."
Financial highlights
-- Retail sales inc. fuel up 3.4%, ex. fuel sales down 2.6%. Ex. VAT Group sales up 2.9%
o Grocery sales up 7.6% versus FY 2019/20, broadly flat versus
FY 2020/21, reflecting sustained COVID-19-driven demand and strong
volume market share performance over one and two years
o General Merchandise sales down 4.6% versus FY 2019/20,
reflecting availability challenges in key product areas and our
focus on profitable sales. Down 11.9% versus FY 2020/21
-- Underlying profit before tax(2) of GBP730 million, up 25%
versus FY 2019/20 and up 104% versus FY 2020/21, which included
substantial COVID-19 costs
o Reflects elevated grocery sales and lower finance charges,
with significant investment in core grocery funded by cost savings,
fuel and a more profitable general merchandise and clothing
business
-- Statutory profit before tax of GBP854 million versus GBP278
million(3) in FY 2019/20 and a loss of GBP164 million(3) in FY
2020/21
o Reflects lower restructuring and impairment costs and
exceptional income from settling legal disputes
-- Financial Services GBP38 million profit versus FY 2020/21
GBP21 million loss and GBP48 million profit in FY 2019/20
o We expect further profit improvement in FY 2022/23
o Following the year end, the Bank has paid its first ever
dividend to the Group, of GBP50 million
-- Strong Retail Free Cash Flow of GBP503 million(2) . Average
Free Cash Flow in three years to March 2022 GBP633 million
-- Non-lease Net Debt down GBP1,381 million in three years to
March 2022, ahead of target GBP950 million+ over four years
-- Proposed final dividend of 9.9 pence, full-year dividend of 13.1 pence, up 24%
-- Capital allocation framework updated. Initial commitment to
increase dividend payout ratio to around 60%
-- Outlook: The year ahead will be impacted by significant
external pressures and uncertainties. At this early stage of the
year we expect FY 2022/23 underlying profit before tax(2) of
between GBP630 million and GBP690 million
Strategic highlights
-- Food First: We are focused on giving customers better value
and improved innovation and customer service.
o Significant investment in grocery prices, funded by our cost
saving programme, has driven a strong grocery volume market share
performance over one and two years(1)
o We are inflating behind the market on the highest volume
products(4) . By investing ahead of competitors, with a clear focus
on fresh food, our prices are improving
o We have more than tripled product innovation in the year and
have grown Taste the Difference sales by 15% versus FY 2019/20.
Customer satisfaction scores performed ahead of competitors in our
supermarkets and online customer satisfaction improved relative to
peers(5)
o 39 per cent of our sales came through digital channels, versus
23 per cent in FY 2019/20. Groceries Online accounted for 17 per
cent of overall Grocery sales
-- Brands that Deliver: Nectar, Argos, Habitat, Tu and
Sainsbury's Bank are delivering for our customers and our
shareholders and supporting investments in our wider customer
offer.
o The Argos transformation programme is on track and Argos is a
more profitable business. 80 per cent of Argos sales now originate
online
o Sainsbury's Bank is making good progress with its strategic
plan and has paid the Group a dividend for the first time, of GBP50
million
o Nectar has 9.3 million digital users, with over one million
customers regularly benefitting from personalised promotions
through My Nectar Prices and Nectar360 revenues are ahead of
plan
o Tu Clothing is now a GBP1 billion brand, with sales growth of
3.1% versus FY 2019/20, underpinned by good online sales, up
49%
-- Save to Invest: We are making good progress with our cost saving programme.
o We reduced our cost: sales ratio by 83 basis points versus FY
2019/20 and continue to target reducing our cost: sales ratio by
200 basis points despite significantly higher inflationary
pressures
o Transforming our eat-in, takeaway and delivery food and drink
and bakery offer as well as hot food counter closures will save
GBP125-150 million over three years and integrating the
Sainsbury's, Argos and Habitat supply chain and logistics
operations will save at least GBP250 million when complete
o The cost savings programme is fuelling investment in our
grocery value and our broader customer offer
-- Plan for Better: This year we have accelerated our sustainability goals.
o As a Principal Partner of COP26, we brought forward our
commitment to be Net Zero in our own operations by 2035, five years
ahead of our original target. We have also committed to reduce our
Scope 3 emissions by 30% by 2030.
o We are proud to support our communities and raised over GBP6
million for Comic Relief as part of this year's Red Nose Day and
have already donated a further GBP2 million to Comic Relief to
support the humanitarian crisis in Ukraine
o Through our partnership with Neighbourly, we donated over 2.5
million meals between August and March - the equivalent of GBP4.8
million - to charities and community groups(6) , additionally
supporting our target to reduce food waste by 50% by 2030
Financial Summary 2021/22 2020/21 2019/20 YoY Yo2Y
------------------------------- ----------- ----------- ----------- ------------- ---------------
Statutory performance
Group revenue (excl.
VAT, inc. fuel) GBP29,895m GBP29,048m GBP28,993m 2.9% 3.1%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Profit/(loss) before
tax(3) GBP854m GBP(164)m GBP278m N/A 207%
----------- ----------- ----------- ---------------
Profit/(loss) after tax(3) GBP677m GBP(201)m GBP170m N/A 298%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Basic earnings/(loss)
per share(3) 29.8p (9.4)p 6.7p N/A 367%
-------------
Business performance
Group sales (inc. VAT) GBP33,355m GBP32,285m GBP32,394m 3.3% 3.0%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Retail sales (inc. VAT,
excl. fuel) GBP28,095m GBP28,837m GBP26,868m (2.6)% 4.6%
----------- ----------- ----------- ------------- ---------------
Digital sales GBP10.8bn GBP12.1bn GBP6.0bn (11)% 80%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Underlying profit before
tax (2, 3) GBP730m GBP357m GBP586m 104% 25%
----------- ----------- ----------- ------------- ---------------
Underlying basic earnings
per share (2, 3) 25.4p 11.7p 19.8p 117% 28%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Interim dividend per
share 3.2p 3.2p 3.3p 0% (3.0)%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Proposed Final dividend
per share(7) 9.9p 7.4p 7.3p 34% 36%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Proposed Full-year dividend
per share(7) 13.1p 10.6p 10.6p 24% 24%
------------------------------- ----------- ----------- ----------- ------------- ---------------
Net debt(2) GBP6,759m GBP6,469m GBP6,947m Up GBP290m Down GBP188m
------------------------------- ----------- ----------- ----------- ------------- ---------------
Non-lease net debt GBP141m GBP640m GBP1,179m Down GBP499m Down GBP1,038m
------------------------------- ----------- ----------- ----------- ------------- ---------------
Return on capital employed(2) 8.4% 5.6% 7.4% Up 280bps Up 100bps
------------------------------- ----------- ----------- ----------- ------------- ---------------
Like-for-like sales performance
2020/21 2021/22 YoY
---------------------------- -----------------------------------------------
Q3 Q4 Q1 Q2 Q3 Q4 FY
-------- -------- ------- -------- -------- -------- --------
Like-for-like sales (exc.
fuel) 8.6% 11.3% 1.6% (1.4)% (4.5)% (5.6)% (2.3)%
-------- -------- ------- -------- -------- -------- --------
Like-for-like sales (inc.
fuel) 3.2% 3.2% 8.4% 3.0% 0.6% 2.7% 3.6%
-------- -------- ------- -------- -------- -------- --------
Total sales performance
2020/21 2021/22 YoY 2021/22 Yo2Y
----------------------------------------------- --------------------------------------------------
Q3 Q4 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
---------------------------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
Grocery 7.4% 7.1% 0.8% 0.8% (1.1)% (1.6)% (0.2)% 11.3% 6.0% 6.6% 4.7% 7.6%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
General Merchandise 6.0% 17.6% (1.4)% (11.4)% (16.0)% (21.1)% (11.9)% 5.6% (4.7)% (11.0)% (5.8)% (4.6)%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
GM (Argos) 8.4% 18.1% (3.7)% (12.0)% (16.1)% (20.4)% (12.5)% 6.7% (2.4)% (9.1)% (4.7)% (3.0)%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
GM (Sainsbury's Supermarkets) (5.4)% 14.8% 11.2% (8.0)% (15.7)% (24.1)% (8.6)% 0.9% (14.4)% (20.0)% (10.9)% (12.0)%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
Clothing 0.4% 4.2% 57.6% 9.2% (2.7)% (9.3)% 12.7% 15.5% 1.0% (1.7)% (6.8)% 3.1%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
Total Retail (excl. fuel) 6.8% 9.2% 1.6% (1.7)% (5.3)% (6.2)% (2.6)% 10.3% 3.4% 1.4% 2.2% 4.6%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
Fuel (29.0)% (38.5)% 95.1% 36.1% 47.5% 80.1% 60.0% (14.4)% (3.8)% 3.6% 11.7% (2.6)%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
Total Retail (inc. fuel) 1.7% 1.6% 8.5% 2.7% (0.1)% 2.2% 3.4% 6.2% 2.2% 1.7% 3.7% 3.5%
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
Outlook
We start this year in a good position financially, with
continued operating momentum and sharp execution supporting our
strong competitive position.
The year ahead will be impacted by significant external
pressures and uncertainties, including higher operating cost
inflation and cost of living pressures impacting customers'
disposable incomes.
In that context we are determined to continue our consistent
improvement in grocery value, innovation and customer service,
funded by our comprehensive cost savings programme and we expect to
continue our strong grocery volume market share performance.
At this early stage of the financial year we expect underlying
profit before tax will be between GBP630 million and GBP690 million
in FY 2022/23. This is below the GBP730 million reported in FY
2021/22, a year which benefited by an estimated GBP100 million from
elevated COVID-19 driven grocery volumes, but significantly ahead
of the GBP586 million reported in FY 2019/20.
We continue to expect to generate retail free cash flow of at
least GBP500 million in FY 2022/23. Together with our strong
balance sheet, this is reflected in our commitment to return a
higher proportion of underlying profits to shareholders, initially
through an increased payout ratio.
Capital Allocation
Cash flow and Leverage
We have had another year of strong free cash flow generation,
with retail free cash flow of GBP503 million despite some reversal
of last year's exceptional working capital inflows.
Over the last three years we have generated average retail free
cash flow of GBP633 million, ahead of our target of at least GBP500
million.
Strong cash generation, disciplined spending and a GBP240
million benefit from convertible bond redemptions have enabled us
to reduce non-lease net debt by over GBP1.8 billion, from GBP2
billion five years ago to GBP141 million in FY 2021/22. We have hit
our four-year GBP950 million+ net debt reduction target a year
ahead of schedule and our net debt to EBITDA leverage ratio now
stands at 3.1x.
We have achieved this deleverage while simultaneously paying a
broadly stable dividend per share to shareholders, a total of
GBP1.1 billion over five years and propose a full-year dividend per
share this year of 13.1p, a 24 per cent increase year on year and
the highest dividend per share we have paid since 2015. This will
return around GBP300 million of cash to shareholders.
Capital Allocation
-- Looking forward, we will continue to invest in the business
to support and accelerate our strategy, including the Save to
Invest programme and the ongoing transition to a more digital
future
-- We expect capital expenditure to remain in the range of
GBP700 million to GBP750 million and expect to continue to generate
retail free cash flow of at least GBP500 million per year
-- We will use some of this retail free cash flow to deleverage
further, targeting a solid investment grade balance sheet
consistent with target leverage of net debt to EBITDA of 3.0x -
2.4x
-- We are focused on delivering strong dividends and will return
a higher proportion of underlying earnings to shareholders, in the
first instance through the ordinary dividend, where we will
increase the dividend payout ratio from around 53 per cent of
underlying earnings to around 60 per cent
-- We expect leverage to move below 3x over time, helped by a
reduced impact of lease liabilities relating to property currently
in the Highbury and Dragon property investment pools. Once leverage
is comfortably within our target range, we expect to be able to
return more cash to shareholders through higher dividends and/or
share buybacks
Capital allocation priorities
1. Invest in the business to support and accelerate our strategy
2. A solid investment grade balance sheet, targeting leverage of 3.0x-2.4x net debt/EBITDA
3. Deliver strong ordinary dividends for shareholders, with a
payout ratio of around 60 per cent of underlying net earnings
4. Selectively invest in projects where commercially
interesting/NPV positive opportunities exist, such as lease
buy-ins
5. Return surplus cash to shareholders through higher dividends and/or share buybacks
Dividend
The Board has proposed a final dividend of 9.9 pence per share.
This brings the full-year dividend to 13.1 pence per share, a 24%
increase, reflecting the strong growth in earnings per share and
covered 1.9 times by underlying earnings.
Notes
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
are subject to a number of risks and uncertainties that could cause
actual events or results to differ materially from any expected
future events or results referred to in these forward-looking
statements. They appear in a number of places throughout this
announcement and include statements regarding our intentions,
beliefs or current expectations and those of our officers,
directors and employees concerning, amongst other things, our
results of operations, financial condition, liquidity, prospects,
growth, strategies and the business we operate. Unless otherwise
required by applicable law, regulation or accounting standard, we
do not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future developments or otherwise.
A webcast presentation will be available to view on our website
at 7.30am (BST). The webcast can be accessed at the following link:
https://webcasts.sainsburys.co.uk/sainsbury167
Following the release of the webcast, a Q&A conference call
will be held at 9.30am (BST). This will be available to listen to
on our website at the following link:
https://webcasts.sainsburys.co.uk/sainsbury168
A recorded copy of the webcast and Q&A call, alongside
slides and a transcript of the presentation will be available at
www.about.sainsburys.co.uk/investors/results-reports-and-presentations
following the event.
Sainsbury's will issue its 2022/23 First Quarter Trading
Statement at 07:00 (BST) on 5 July 2022.
S
Enquiries
Investor Relations Media
James Collins Rebecca Reilly
+44 ( 0) 7801 813 074 +44 (0) 20 7695 7295
Strategy Review: Driven by our passion for food, together we
serve and help every customer
We are one year into our three-year plan to transform
Sainsbury's and put food back at the heart of our business. We are
simplifying our operations at pace and accelerating our cost saving
programmes in order to invest in consistently delivering value to
customers, improving food quality and increasing innovation. Our
brands that deliver - Argos, Habitat, Tu, Nectar and Sainsbury's
Bank - support our core food business, delivering for customers and
shareholders in their own right. We will continue to pursue
partnerships and to outsource where appropriate, where a
partnership model can help us improve our customer offer and make
our business more efficient and simpler.
Food First
We are putting food back at the heart of Sainsbury's. This means
we are focused on lowering prices, launching new products and
improving service. We have gained grocery volume market share from
our key supermarket competitors on both a one and two-year basis(1)
and grocery sales are up 7.6 per cent on a two-year basis.
Value
We are making good progress to improve the value of our food. We
know that the current cost of living situation is challenging for
everyone and we are relentlessly focused on delivering consistent
long-term value by offering customers great quality, tasty food at
low prices. As a result of being bold in our cost savings plan, we
are able to drive investment back into lower food prices and we are
consistently inflating behind competitors on the products customers
buy most often - including milk, eggs, potatoes, bread, vegetables,
fish and meat. As a result, our relative price position has
remained strong throughout the year - improving 310 basis points
against Aldi, year on year(9) , leading to more customers shopping
with us. By focusing on fresh and high-volume lines we are offering
customers better value, improving price perception and delivering
strong volume market performance.
Through the year our Price Lock promotion fixed the price of up
to 2,000 items for a minimum of at least eight weeks. Customers can
be assured that prices will not rise on those products, helping
them to plan and budget. Through Price Lock we are holding down the
prices of more products than our competitors.
We have also increased the number of entry price point products
on offer for customers, including Greengrocer fruit &
vegetables, J. James meat and poultry and Stamford Street ready
meals offer customers a wide choice of products.
Innovation
We have delivered our plan to triple the number of new lines we
sell, launching over 1,900 products across all our food brands. We
developed our 'Inspired to Cook' range in response to the shift
towards eating at home and cooking from scratch, launching a range
of over 200 products across Grocery and Fresh Foods which make home
cooking simple and tasty for customers. In March we launched 350
new branded World Food products, our biggest investment into this
category to date and in the first six weeks sales are up
significantly.
Our premium Taste the Difference range continues to perform
well, particularly at key seasonal and celebratory moments when
people want to trade up, such as Christmas and Easter. We have
grown sales by 15 per cent versus two years ago.
In March we began our food hall transformation programme. We
have rolled out our successful Beauty Hall format in more stores,
improved the layout of our fresh ranges to make it easier for
customers to shop, increased our popular World Foods ranges and
improved our in-store bakeries. We have also simplified some of our
ranges and provided a greater breadth of products across others,
delivering more choice for customers on the products they really
want.
Service
We are committed to rewarding our colleagues and all Sainsbury's
and Argos retail colleagues now receive a base rate of pay of GBP10
per hour, above both the National Living Wage and the Living Wage.
In March we increased inner London pay from GBP10.10 to GBP11.05 in
line with the London Living Wage. We have announced that from 1 May
2022 the outer London rate will also be moving to GBP11.05, from
GBP10.50. This means that all Sainsbury's and Argos retail
colleagues earn the Living Wage wherever they are in the UK. We
were the first supermarket among the big four to make this
happen.
Alongside competitive pay we also offer a comprehensive benefits
package, including year-round colleague discount of 10 per cent,
increased to 15 per cent for five days around every pay day,
pension contributions and an improved family leave policy.
We improved customer service scores in supermarkets(5) and are
adapting our Sainsbury's store estate to offer more new and
innovative products. This year we opened four new supermarkets and
as part of our drive to offer a broader range of distinctive food
to customers in-store, on the move and at home, we announced bold
new plans to transform our eat-in, takeaway and home delivery
offer. Through a partnership with Boparan Restaurant Group we have
developed "The Restaurant Hub" format, a food hall style offer with
different brands which we will roll out across 30 stores in the
next year, with more to come in the future. We will also open 30
Starbucks cafés in Sainsbury's stores in the next year, bringing
the total number to 60. We took the decision to close 200
underperforming cafés in the Spring.
Our Convenience business grew 9 per cent driven by more people
returning to the workplace, with sales now broadly back at
pre-pandemic levels. We opened 19 convenience stores and closed 23.
We are making progress with our plan to open more Neighbourhood Hub
stores which give customers a larger, more convenient local store
with a wider produce range, more choice and better services.
39 per cent of our overall business now comes through digital
channels, versus 23 per cent in FY 2019/20. We are seeing a
normalisation of pre-COVID-19 shopping patterns as customers are
returning to shopping in stores and demand for Groceries Online,
non-food home delivery and Click & Collect has stabilised,
although it remains more than double pre-pandemic levels.
Groceries Online accounted for 17 per cent of grocery sales with
an average of 690,000 orders per week. In FY 2021/22 we grew our
Groceries Online market share to become the second largest online
grocery retailer, up from fourth before the pandemic(8) . This
scale gives us advantage. We have improved profitability by
enhancing picking rates and van utilisation. We are exploring new
ways to make our delivery services better for customers and more
efficient and initiatives include one-hour saver slots and changes
to our delivery pass model. Customer satisfaction in Online is
improving relative to competitors(5) .
We relaunched our same day groceries service in 284 stores and
we continue to grow our On Demand grocery offer. In the fourth
quarter we averaged 130,000 weekly orders from over 580 stores in
as little as 30 minutes through our Chop Chop service and
partnerships with Deliveroo and Uber Eats.
Brands that Deliver
Our brands that deliver - Nectar, Argos, Habitat, Tu and
Sainsbury's Bank - are delivering for our customers and our
shareholders and supporting investments in our wider customer
offer.
Argos sales were down 12.5 per cent year on year against last
year's high sales during the pandemic. Sales were down three per
cent over two years and were impacted by availability issues caused
by supply chain disruptions and the strategic decisions we made to
reduce promotions and exit less profitable categories. Reflecting
this focus, household and home and furniture sales grew while sales
of toys, consumer electronics and technology categories declined.
We have grown our furniture market share over the past two years,
driven by Habitat, Sainsbury's and Argos's main home and furniture
brand. Following a relaunch in September, Habitat products are now
available in 600 Sainsbury's stores and online via the Argos and
Habitat websites. We are growing our digital presence to ensure
that we are well placed to serve customers who increasingly want to
buy online. 80 per cent of Argos sales are now online, up from 63
per cent two years ago.
Nectar supports our ambitions in food by giving customers
personalised rewards for their loyalty. 9.3 million digital Nectar
users can benefit from personalised offers with us and with our
Nectar partners. This year we launched My Nectar Prices - an
innovative data-led tool which gives customers discounted prices
that are personal to them, delivering even more value for loyal
customers. Over one million customers are benefitting from lower
prices and we will develop the proposition further. Nectar360, our
marketing services business, is making good progress and we are on
track to hit our 2026 plan on profit.
Tu clothing delivered sales growth of 12.7 per cent over one
year and 3.1 per cent over two years and delivers over GBP1 billion
in sales. We are selling more clothing at full price - with full
priced sales participation now at 89 per cent compared with 65 per
cent two years ago - and running fewer promotions, which improves
profitability and supports increased investment in our core food
business.
We continue to make good progress reshaping, strengthening and
simplifying our Financial Services business, with profits of GBP38
million versus a loss of GBP21 million in FY 2020/21. This compares
with GBP48 million in FY 2019/20. FY 2020/21 was impacted by
COVID-19 where we saw significantly reduced demand across consumer
credit, combined with increased bad debt provisions and less
activity in our fee-based products, particularly Travel Money.
Reflecting the Bank's progress, following the year end, it has paid
dividend to the Group for the first time, of GBP50 million.
We have continued to improve our digital capability with the
launch of the Argos Monthly Payment Plan, which allows customers to
spread the cost of a purchase across fixed monthly repayments for a
period of their choice. We have transformed the Sainsbury's Bank
loan application journey for single and joint applicants with a
fully digital onboarding experience that can transfer funds to
accounts in just minutes. We have also improved the application
journey for savings customers.
Save to Invest
We are making good progress with our cost saving programme,
making bold decisions and prioritising what really matters to
customers. By reducing our retail operating costs, we are able to
invest more into our core food business, delivering better value,
increasing our innovation and improving customer service. Our
retail operating costs to sales ratio has reduced by 83 basis
points versus FY 2019/20 and we continue to target reducing the
ratio by at least 200 basis points by the end of FY 2023/24,
despite cost inflation being significantly higher than was
anticipated when this target was set.
We are working at pace to integrate the Sainsbury's, Argos and
Habitat supply chain and logistics networks, which will save at
least GBP250 million over the programme, improve overall efficiency
and deliver a better service to our customers. Our property
rationalisation programme is on track and this year we closed four
underperforming supermarkets and 23 convenience stores. We are also
working to improve the efficiency of Groceries Online, moving
stores to a new, more efficient routing system and improving pick
rates, which will save the business around GBP50 million overall.
In addition, we are investing to improve the checkout experience
for customers and colleagues which will drive around GBP50 million
of cost efficiencies. This includes trialling improvements to the
layout of self-service areas, making it easier for colleagues to
help customers, reducing queuing times and creating additional
space for shoppers with trolleys, increasing participation.
We are making good progress in Argos's end-to-end transformation
programme, which will save GBP105 million over three years. We have
opened five Local Fulfilment Centres (LFCs) and as a result, our
customers are benefitting from improved availability, faster
delivery and more collection options; we plan to open nine more
LFCs this year. In line with improving availability and convenience
for customers whilst reducing costs, this year we opened 64 Argos
stores inside Sainsbury's supermarkets plus 62 in-store collection
points. We have closed 73 standalone Argos stores this year. As of
5 March 2022, Argos has 728 stores, of which 400 are inside
Sainsbury's supermarkets.
We partner with third parties and outsource where necessary to
deliver for our customers, whilst supporting our own cost saving
programme and our focus on food. The changes we are making to our
cafes, hot food counters and bakeries will create GBP125-150
million of savings over three years and we will continue to explore
ways to work with partners to drive value and improve service for
our customers.
We are proud of our strong relationships with suppliers and are
continuing to work closely with them to drive value and simplify
processes, enabling us to lower our cost to serve and buy better,
as well as minimising the impact of rising inflation as much as
possible for customers.
Plan for Better
This year we have accelerated our sustainability goals, as set
out in our Plan for Better. We have made good progress against our
programme of change and have announced a more ambitious target
towards becoming a Net Zero business.
Better for the planet
We are strengthening our commitment to tackle the climate crisis
by accelerating our target to become Net Zero in our operations by
2035, five years earlier than our initial ambition and in alignment
with the UN's own goal to limit global warming. Outside of our
operations, we also have introduced an ambitious Scope 3 target,
which requires the reduction of absolute GHG (greenhouse gas)
emissions by 30 per cent by 2030, to align to well below the 2degC
scenario of the Paris Agreement. The target includes reducing
emissions from purchased goods, upstream transport and
distribution, services sold and our customers' use and consumption
of the products we sell. By delivering against our Scope 3 targets
by 2030, we will help customers make more sustainable product
choices.
Overall, we have reduced our absolute GHG emissions within our
operations to 762,119 tCO2e, a reduction of 7 per cent year-on-year
and 20 per cent from our 2018/19 baseline, keeping us on course for
our new 2035 target. We have hit some key milestones in our plan,
including the roll out of LED lighting across 100 per cent of our
supermarket estate and transitioning to 100 per cent renewable
electricity. We have also committed to the long-term purchasing of
renewable energy from new wind farms and solar projects,
significantly reducing our reliance on fossil fuels. For the eighth
consecutive year we were awarded an A rating for climate change by
CDP, an environmental impact disclosure system, and are the only UK
retailer to have achieved this.
We were proud to be the Principal Supermarket Partner of COP26
in Glasgow in November. Alongside announcing our commitment to
becoming Net Zero five years ahead of schedule, we joined other
retailers to sign WWF's Retailers' Commitment For Nature, pledging
to come together to halve the environmental impact of the UK food
sector by 2030.
We have introduced measures to reduce the amount of plastic
packaging we use. We no longer sell plastic straws, equating to the
removal of 18.5 million plastic straws from circulation and
reducing plastic by 6.6 tonnes. We have also introduced flexible
plastic recycling collection points at all of our supermarkets to
make it easier for our customers to recycle.
Better for Everyone
In line with our commitment to reduce food waste by 50 per cent
by 2035, we have increased our food distribution to people by 119
per cent year on year. In August, we partnered with Neighbourly and
from August to March we donated over 2.5 million meals, which is
equivalent to a GBP4.8 million saving to charities and community
groups(6) .
Supply chain transparency is one our highest priorities and
having previously published our Tier 1 clothing sites, this year we
also published our Tier 1 food sites. This provides even greater
transparency across our categories and we have committed to
publishing additional lists of our General Merchandise and Goods
Not for Resale sites this year.
Reflecting our drive for inclusivity, this year our ethnically
diverse colleague network 'I AM ME' was recognised in the Top 10
Network Groups at the UK Ethnicity Awards and we joined the Black
British Network to help improve representation even further across
the business. We also committed GBP1 million in donations to Black
charities and community groups supporting education, social
mobility, Black businesses and food insecurity, areas which our
colleagues and customers identified as especially important to
them.
This year we raised over GBP6 million for Comic Relief, in
addition to the GBP2 million we donated as a business to support
the humanitarian crisis in Ukraine, followed by an additional
GBP600,000 raised by our customers. We are proud to support the
communities we serve and this year have raised a total of GBP38.4
million for good causes.
Better for You
Our Better for You pillar prioritises delivering healthy and
sustainable diets for all. As the cost of living rises, we are more
committed than ever to supporting healthy diets by keeping prices
low on every day, staple items, including fresh and produce.
As part of our target to measure healthy and sustainable diets,
we announced our goal to achieve at least 83.1 per cent of
'healthy' and 'better for you' sales by 2025. We are currently flat
year on year at 80 per cent. We also disclosed our protein sales,
with 72 per cent of protein sales being plant based and meat-free
products, of which 12 per cent is entirely plant based.
To encourage customers to follow a healthy diet, we continued to
support the government's Healthy Start vouchers. During the
six-month programme, we topped up these vouchers to a higher value
than any other retailer and helped over 17,000 customers take home
an additional 1.2 million portions of fruit and vegetables.
(1) NielsenIQ Panel volume growth YoY and Yo2Y. Total FMCG
(excluding Kiosk & Tobacco), 52 weeks to March 2022. Market
Universe: Total Outlets
(2) Refer to alternative performance measures for definitions
and reconciliation to statutory measures
(3) Results for 2021 and 2020 have been restated to remove
business rates from onerous contract provisions in line with IFRIC
21. Refer to note 2 of financial statements
(4) Nielsen panel data, Top 100 SKUs by retailer. Average
Selling Price YoY growth to March 2022
(5) Competitor Benchmarking survey, supermarket and online
customer satisfaction
(6) Based on GBP1.90 per meal
(7) Special dividend is included against FY 2019/20 to aid
comparability
(8) NielsenIQ Panel online value share. Total FMCG (excluding
Kiosk & Tobacco), 52 weeks to March 2022. Market Universe:
Total Outlets
(9) Edge by Ascential data, internal modelling
Financial Review of the year results for the 52 weeks to 5 March
2022
In the 52 weeks to 5 March 2022, the Group generated profit
before tax of GBP854 million (2020/21: loss before tax of GBP164
million; 2019/20: profit before tax of GBP278 million) and an
underlying profit before tax of GBP730 million (2020/21: GBP357
million; 2019/20: GBP586 million). COVID-19 caused significant
distortions to trading, operating costs and timing of business
rates costs in 2020/21. Therefore in some cases commentary has been
provided versus the pre-COVID-19 2019/20 financial year.
A number of Alternative Performance Measures ('APMs') have been
adopted by the Directors to provide additional information on the
underlying performance of the Group. These measures are intended to
supplement, rather than replace the measures provided under IFRS.
Please see pages 50 to 54 for further information
Summary income statement 52 weeks to 52 weeks to
05 March 06 March Change
2022 2021(1)
GBPm GBPm %
Group sales (including VAT) 33,355 32,285 3.3
Retail sales (including VAT) 32,924 31,854 3.4
Retail sales (excluding fuel, including VAT) 28,095 28,837 (2.6)
Group sales (excluding VAT) 29,895 29,048 2.9
Retail sales (excluding VAT) 29,463 28,617 3.0
Underlying operating profit/(loss)
Retail 1,001 731 37
Financial services 38 (21) N/A
---------------------------------------------- ------------ ------------ -------
Total underlying operating profit 1,039 710 46
Underlying net finance costs (309) (353) 12
Underlying profit before tax 730 357 104
Items excluded from underlying results 124 (521) N/A
---------------------------------------------- ------------ ------------ -------
Profit/(Loss) before tax 854 (164) N/A
Income tax expense (177) (37) 378
---------------------------------------------- ------------ ------------ -------
Profit/(Loss) for the financial period 677 (201) N/A
---------------------------------------------- ------------ ------------ -------
Underlying basic earnings per share 25.4p 11.7p 117
Basic earnings/(loss) per share 29.8p (9.4)p N/A
Interim Dividend per share 3.2p 3.2p -
Final Dividend per share 9.9p 7.4p 34
Total Dividend per share 13.1p 10.6p 24
---------------------------------------------- ------------ ------------ -------
1 The prior year results have been restated to reflect the
removal of business rates from onerous property contract
provisions. Refer to note 2 of the accounts for further
information.
Underlying profit before tax is up GBP373 million, and up GBP144
million compared to 2019/20, driven by continued elevated sales
despite much lower COVID-19 costs, falling finance costs, and the
delivery of the Argos Transformation programme, offset by increased
variable pay. We have made strong progress on our Save to Invest
plans, with an 83bps reduction in operating costs allowing for
considerable investments to improve value for customers.
Group sales
Group sales (including VAT, including fuel) increased by 3.3 per
cent year-on-year. Retail sales (including VAT, excluding fuel)
decreased by 2.6 per cent, as General Merchandise sales moderated,
but remained ahead of 2019/20. Fuel sales increased by 60.0 per
cent and Financial Services sales increased by 0.2 per cent.
Total sales performance by category 52 weeks to 52 weeks to 52 weeks to YoY Yo2Y
05 March 2022 06 March 2021 07 March 2020 Change Change
GBPbn GBPbn GBPbn % %
Grocery 21.0 21.1 19.5 (0.2)% 7.6%
General Merchandise 6.1 6.9 6.4 (11.9)% (4.6)%
Clothing 1.0 0.9 1.0 12.7% 3.1%
Retail (exc. fuel) 28.1 28.8 26.9 (2.6)% 4.6%
Fuel sales 4.8 3.0 4.9 60.0% (2.6)%
Retail (inc. fuel) 32.9 31.9 31.8 3.4% 3.5%
------------------------------------- -------------- -------------- -------------- -------- -------
Grocery sales remained significantly above pre-pandemic levels
reflecting a sustained shift of consumption in-home. In line with
the reduction of government restrictions during the period, sales
were stronger in the first half, and moderated in the second half,
albeit at a level still higher than 2019/20. We delivered a strong
volume market share performance, supported by our value investments
for customers. We inflated prices behind the market and key
competitors on high volume lines supported by our Sainsbury's
Quality, Aldi Price Match programme and other value
initiatives.
General Merchandise sales declined, reflecting tough comparators
and availability challenges driven by both product supply and
freight availability. Clothing recovered strongly from a year of
suppressed demand with growth driven by full price sales and
increased in-store sales.
Fuel sales increased by 60.0 per cent, driven by both increased
demand as traffic volumes recovered and inflation in the market
driven by higher oil prices, but remained below pre COVID-19
levels.
Total sales performance by channel 52 weeks to 52 weeks to
05 March 2022 06 March 2021
-------------- --------------
Total Sales fulfilled by Supermarket stores (2.0)% 11.4%
Supermarkets (inc Argos stores in Sainsbury's) (1.8)% 2.5%
Groceries Online (4.7)% 119.6%
Convenience 8.8% (9.4)%
------------------------------------------------------ -------------- --------------
Overall sales served from our Supermarkets fell by 2.0 per cent
after rising 11.4 per cent in the prior year. Within this,
Supermarket sales including Argos stores in Sainsbury's fell by 1.8
per cent. Groceries Online sales decreased by 4.7 per cent, as
COVID-19 restrictions ended and demand moderated through the year
after rapid growth of almost 120 per cent in the previous year.
Convenience sales grew by 8.8 per cent, driven by the recovery of
sales in urban sites most impacted by reduced footfall in the
previous year.
Retail like-for-like sales performance 52 weeks to 52 weeks to
05 March 2022 06 March 2021
---------------------------------------- -------------- --------------
Like-for-like sales (exc. fuel) (2.3)% 8.1%
Like-for-like sales (inc. fuel) 3.6% 0.7%
----------------------------------------- --------------
Retail like-for-like ('LFL') sales, excluding fuel, decreased by
2.3 per cent (2020/21: 8.1 per cent increase), reflecting lower
General Merchandise sales, but showed strong growth versus 2019/20
led by Grocery sales. The impact of stores temporarily closed due
to COVID-19 have been included within LFL sales, with only
permanently closed sites treated as not LFL.
Space
In 2021/22, Sainsbury's opened four new supermarkets and closed
four (2020/21: opened one new supermarket and closed 11 ). There
were 19 new Convenience stores opened in the year and 23 were
closed (2020/21: 15 opened and nine stores closed).
During the period 64 new Argos stores in Sainsbury's were opened
and 73 standalone Argos stores were closed, in line with our Argos
Transformation plan. The number of Argos collection points in
Sainsbury's stores increased from 306 to 335. As at 5 March 2022,
Argos had 728 stores including 400 stores in Sainsbury's.
Store numbers and retailing space
As at As at
----------- --------------------- ----------------------------
06 March 05 March
Extensions / refurbishments
2021 New stores Disposals / closures / downsizes 2022
------------------------------ --------- ----------- --------------------- ---------------------------- ---------
Supermarkets 598 4 (4) 65 598
Supermarkets area '000 sq.
ft. 20,822 134 (78) (75) 20,803
Convenience 813 19 (23) 1 809
Convenience area '000 sq. ft. 1,929 42 (54) 1 1,918
Sainsbury's total store
numbers 1,411 23 (27) 66 1,407
------------------------------ --------- ----------- --------------------- ---------------------------- ---------
Argos stores 401 - (73) - 328
Argos stores in Sainsbury's 336 64 - - 400
Argos in Homebase - - - - -
Argos total store numbers 737 64 (73) - 728
Argos collection points 306 62 (33) - 335
Habitat 3 - - - 3
------------------------------ --------- ----------- --------------------- ---------------------------- ---------
In 2022/23, we expect to open one supermarket and around 20 new
convenience stores, and to close around two supermarkets and five
convenience stores. In addition, we expect to open around 25 Argos
stores inside Sainsbury's, and close around 60 Argos standalone
stores.
In the UK, the standalone Argos store estate will reduce to
around 100 stores by March 2024, while we expect to have 430-460
Argos stores inside Sainsbury's supermarkets as well as 450-500
collection points.
Retail underlying operating profit
52 weeks to 52 weeks to 52 weeks to YoY Yo2Y
05 March 06 March 07 March
2022 2021(1) 2020(1) Change Change
Retail underlying operating profit (GBPm)(2) 1,001 731 938 36.9% 6.7%
Retail underlying operating margin (%)(3) 3.40 2.55 3.30 85bps 10bps
Retail underlying EBITDA (GBPm)(4) 2,145 1,910 2,135 12.3% 0.5%
Retail underlying EBITDA margin (%)(5) 7.28 6.67 7.51 61bps (23)bps
---------------------------------------------- ------------ ------------ ------------ ------- --------
1 The prior year results have been restated to reflect the
removal of business rates from onerous property contract
provisions. Refer to note 2 of the accounts for further
information.
2 Retail underlying earnings before interest, tax and
Sainsbury's underlying share of post-tax profit from joint
ventures.
3 Retail underlying operating profit divided by retail sales excluding VAT.
4 Retail underlying operating profit before underlying
depreciation and amortisation of GBP1,144 million.
5 Retail underlying EBITDA divided by retail sales excluding VAT.
Retail underlying operating profit increased by 36.9 per cent to
GBP1,001 million (2020/21: GBP731 million) and retail underlying
operating margin increased by 85 basis points year-on-year to 3.40
per cent (2020/21: 2.55 per cent). COVID-19 costs reduced
materially year on year to GBP82 million (2020/21: GBP485
million).
Retail underlying operating profit was up 6.7 per cent versus
two years ago (2019/20: GBP938 million), reflecting sales growth
and a retail underlying operating margin improvement of 10bps. Our
Save to Invest programme delivered an 83bps reduction in operating
costs as a percentage of sales versus 2019/20. We have invested
much of this benefit, as well as benefits from fuel and more
profitable clothing and general merchandise sales into lower
grocery prices, targeted at key products for customers, driving
strong volume growth.
Savings were delivered across the business, with significant
contributions from our retail operating model work, both for in
Store and Online where annualisation of rapid growth in the prior
year allowed material efficiencies. Argos transformation continued
to deliver savings as we integrate the two businesses and reduce
occupancy and store operational costs . Savings from our Logistics
Transformation programme helped to mitigate the significant cost
pressures felt.
In 2022/23, Sainsbury's expects a retail underlying depreciation
and amortisation charge of around GBP1.2 billion, including around
GBP500 million right of use asset depreciation.
Financial Services
Financial Services results
12 months to 28 February 2022
2022 2021 Change
--------------------------------------------
Underlying revenue (GBPm) 432 431 0%
Interest and fees payable (GBPm) (57) (90) (37)%
Total income (GBPm) 375 341 10%
Underlying operating profit/(loss) (GBPm) 38 (21) N/A
-------------------------------------------- ------ ------ ---------
Net interest margin (%)(1) 4.5 3.5 100bps
Cost:income ratio (%) 74 74 -
Bad debt as a percentage of lending (%)(2) 1.2 1.8 60bps
Active customers (m) - Bank 1.8 1.8 -
Active customers (m) - AFS 2.1 2.2 (4)%
Tier 1 capital ratio (%)(3) 15.6 17.6 (200)bps
Total capital ratio (%)(4) 18.1 20.2 (210)bps
Unsecured lending (GBPbn) 4.3 4.1 5%
Secured lending (GBPbn) 0.8 1.3 (38)%
Customer deposits (GBPbn) (4.2) (5.1) (18)%
-------------------------------------------- ------ ------ ---------
1 Net interest receivable divided by average interest-bearing assets.
2 Bad debt expense divided by average net lending.
3 Common equity Tier 1 capital divided by risk-weighted assets.
Reflects impact of dividend declared.
4 Total capital divided by risk-weighted assets.
Financial Services returned to profit with underlying operating
profit of GBP38 million (2020/21: loss of GBP21 million). This
reflects both a reduction in credit provisioning as the
unemployment outlook improved, a release of some COVID-19 related
bad debt provisions made in 2020/21 and improvements in net
interest margin. Unsecured lending balances were lower on average
through the year, but recovered well in the second half and ended
the year up 5 per cent.
Financial Services total income of GBP375 million increased by
10 per cent year-on-year (FY 2020/21: GBP341 million). Net interest
margin recovery is reflective of management action to reduce
interest payable through savings rates alongside improvements in
unsecured asset margins and a lower mix of secured lending
(following our decision to cease new mortgage lending in 2019). Fee
income has risen as activity post lockdown increased, with ATMs and
Card fees both recovering, whilst Travel Money remains subdued but
is higher than last year.
The Financial Services cost:income ratio is flat at 74.0 per
cent (FY 2020/21: 74.0 per cent). Of the GBP27 million increase in
costs, GBP17m reflects higher royalty payments to Argos, therefore
the ratio is down on a group contribution basis.
Bad debt expense as a percentage of lending decreased 60 basis
points year-on-year to 1.2 per cent (FY 2020/21: 1.8 per cent),
driven by stable arrears and the improving economic outlook. We
released GBP12 million of our COVID provision, reflecting the more
positive economic outlook, particularly in relation to forecast
unemployment.
In line with the group strategic priority Brands that Deliver,
and reflecting the Bank's strong capital position, a GBP50 million
dividend has been paid. This is a key milestone as we start to
deliver on our commitment that Financial Services will be cash
generative for the Group. The Bank remains well capitalised with a
CET1 ratio of 15.6 per cent, a decrease from 17.6 per cent last
year driven by this dividend payment.
We expect a further improvement in Financial Services underlying
operating profit in the year ahead.
Underlying net finance costs
Underlying net finance costs reduced by 12 per cent to GBP309
million (2020/21: GBP353 million). These costs include GBP40
million of net non-lease interest (2020/21: GBP60 million). The
reduction of net non-lease interest is driven by the repayment of
the GBP200m Green loan in August 2021 and redemption of the
perpetual convertible bonds in July 2021. The net interest costs on
lease liabilities have reduced to GBP269 million (202/21: GBP293
million), mainly due to lower interest rates on new leases.
Sainsbury's expects underlying net finance costs in 2022/23 of
between GBP315 million - GBP325 million, including around GBP270
million - GBP280 million lease interest.
Items excluded from underlying results
In order to provide shareholders with insight into the
underlying performance of the business, items recognised in
reported profit or loss before tax which, by virtue of their size
and or nature, do not reflect the Group's underlying performance
are excluded from the Group's underlying results and shown in the
table below.
Items excluded from underlying results 52 weeks to 52 weeks to
05 March 2022 06 March 2021(1)
GBPm GBPm
------------------------------------------------- -------------- -----------------
Restructuring and integration programmes (103) (345)
Impairment charges - (220)
------------------------------------------------- -------------- -----------------
Restructuring, impairment and integration (103) (565)
Income recognised in relation to legal disputes 182 42
Software as a service accounting adjustment (21) -
IAS 19 pension income 11 6
Property, finance and acquisition adjustments 55 (4)
Items excluded from underlying results 124 (521)
------------------------------------------------- -------------- -----------------
1 The prior year results have been restated to reflect the
removal of business rates from onerous property contract
provisions. Refer to note 2 of the accounts for further
information.
- Restructuring, impairment and integration costs of GBP103
million (2020/21: GBP565 million) include GBP92 million (2020/21:
GBP548 million) relating to the programme announced in November
2020 for the structural integration of Sainsbury's and Argos. We
expect that we will incur one off costs from these infrastructure,
operating model and structure changes of GBP900 million to GBP1
billion, with cash costs of around GBP300m million, with the
majority in the period to March 2024. In line with IFRIC 21
"Levies", business rates are now recognised as a periodic cost as
incurred and as such we expect approximately GBP40 million of
business rates associated with leased properties in the
restructuring programme to be recognised after the year ended March
2024. Refer to note 2 for further details. Cash costs in the year
were GBP114 million (2020/21: GBP39 million). To date we have
incurred costs of GBP640 million and cash costs of GBP153 million.
In 2022/23 we expect to incur cash costs of around GBP100 million
in relation to this programme.
- Income recognised in relation to legal disputes of GBP182
million (2020/21: GBP42 million) primarily relates to two
settlements for overcharges from payment card processing fees.
GBP75 million of cash was received in prior financial years and
held as deferred income, with GBP93 million of cash received in the
year net of legal fees. The prior year relates to ATM business
rates reimbursement, and GBP14 million of cash was received in the
year in relation to these.
- Software as a service accounting policy change resulted in a
non-cash cost of GBP21 million (2020/21: Nil) following the IFRS
interpretations committee clarification of how these costs should
be treated. These costs represent the prior year impacts of this
change.
- IAS 19 Pension income of GBP11 million (2020/21: GBP6 million)
comprises pension finance income of GBP15 million and scheme
expenses of GBP4 million.
- Other movements of GBP55 million income (2020/21: cost of GBP4
million) relate to property profits, acquisition adjustments and
non-underlying financing costs. The positive movement year on year
is driven by a gain on energy derivatives of GBP76 million driven
by higher energy prices. The energy derivatives relate to
long-term, fixed price power purchase arrangements (PPAs) with
independent producers. These are accounted for as derivative
financial instruments, however are not designated in hedging
relationships, therefore gains and losses are recognised in the
income statement. Increases in electricity forward prices in the
year have led to gains on the related derivative financial
instruments. During the year, the Group entered into an additional
PPA, however have designated this in a formal hedging relationship,
with gains and losses being recognised within other comprehensive
income.
Taxation
The tax charge was GBP177 million (2020/21: GBP37 million). The
underlying tax rate (UTR) was 21.1 per cent (2020/21: 29.4 per
cent) and the effective tax rate (ETR) was 20.7 per cent (2020/21:
(22.6) per cent).
The UTR is lower than the prior year, with the higher underlying
profit resulting in a smaller percentage impact from non-qualifying
deprecation and the impact of accounting for the rate change on the
recognition of deferred tax. Unlike previous periods, there is a
positive impact on the UTR of prior year adjustments for
corporation tax, reflecting the release of historic provisions held
in respect of now agreed tax returns.
The ETR is significantly higher than the prior year, primarily
due to the accounting loss in FY21. The major impact on the ETR in
the current year relates to the non-deductibility of non-underlying
costs and the impact of prior year adjustments to non-underlying
items.
Sainsbury's expects an underlying tax rate in 2022/23 of around
25 per cent.
Earnings per share
Underlying basic earnings per share increased to 25.4 pence
(2020/21: 11.7 pence) driven by the increase in underlying
earnings, partially offset by a higher share count. Basic earnings
per share was 29.8 pence (2020/21: (9.4) pence loss per share).
Dividends
The Board has recommended a final dividend of 9.9 pence per
share (2020/21: 7.4 pence). This will be paid on 15(th) July 2022
to shareholders on the Register of Members at the close of business
on 10(th) June 2022. In line with the Group's policy to keep the
dividend covered 1.9 times by underlying earnings, this will result
in an increased full-year dividend of 13.1 pence (2020/21: 10.6
pence), an increase of 24 per cent.
Sainsbury's has a Dividend Reinvestment Plan (DRIP), which
allows shareholders to reinvest their cash dividends in our shares.
The last date that shareholders can elect for the DRIP is 24(th)
June 2022.
We have laid out a capital allocation framework, signalling that
we will prioritise the right level of investment to support our
strategy and an investment grade balance sheet but that we expect
to pay a higher proportion of underlying net earnings to
shareholders, in the first instance through an increase in the
dividend pay-out ratio to around 60 per cent from around 53 per
cent.
Net debt and retail cash flows
As at 5 March 2022, net debt was GBP6,759 million (6 March 2021:
GBP6,469 million), an increase of GBP290 million (2020/21: GBP478
million reduction). Excluding the impact of lease liabilities on
net debt, Sainsbury's reduced net debt by GBP499 million in the
year of which GBP240 million results from the conversion of the
perpetual convertible bond in July 2021. Non lease net debt is now
GBP1,381 million lower than at 2018/19 year end, exceeding the
four-year GBP950 million non lease net debt reduction target we had
communicated with a year to spare, even excluding the impact of the
perpetual convertible bond. Sainsbury's expects to generate retail
free cashflow of at least GBP500 million per annum on average for
the next three years.
Group net debt includes the impact of capital injections into
Sainsbury's Bank, less dividends received, but excludes Financial
Services' own net debt balances. Financial Services balances are
excluded because they are part of the daily operating cycle of the
Bank rather than for financing purposes.
Net debt includes lease liabilities under IFRS 16 of GBP6,618
million (2020/21: GBP5,829 million). Lease liabilities increased by
GBP789 million, primarily reflecting the impact of exercising
purchase options on 21 leased supermarkets held by property
investment pools in which the Group holds an interest. Following
the exercise of the options, the lease liabilities have been
remeasured based on the estimated purchase price of the stores.
Summary cash flow statement (1) Retail Retail
52 weeks to 52 weeks to
05 March 2022 06 March 2021
GBPm GBPm
------------------------------------------------------------------------- --------------------------- --------------
Retail underlying operating profit 1,001 731
------------------------------------------------------------------------- --------------------------- --------------
Adjustments for:
Retail underlying depreciation and amortisation 1,144 1,179
Share based payments and other 54 26
Retail exceptional operating cash flows (excluding pensions) (3) (12)
Adjusted retail operating cash flow before changes in working capital(2) 2,196 1,924
------------------------------------------------------------------------- --------------------------- --------------
(Increase)/decrease in working capital(3) (185) 452
------------------------------------------------------------------------- --------------------------- --------------
Net interest paid(3) (323) (372)
Pension cash contributions (71) (101)
Corporation tax paid (23) (94)
--------------------------- --------------
Net cash generated from operating activities(3) 1,594 1,809
------------------------------------------------------------------------- --------------------------- --------------
Cash capital expenditure(3) (645) (568)
Repayments of obligations under leases(3) (491) (499)
Initial direct costs on right-of-use assets (3) (7)
Proceeds from disposal of property, plant and equipment 46 27
Dividends and distributions received(3) 2 22
Retail free cash flow(3) 503 784
------------------------------------------------------------------------- --------------------------- --------------
Dividends paid on ordinary shares (238) (232)
Repayment of borrowings(3) (256) (539)
Other(3) (27) (13)
Net (decrease)/increase in cash and cash equivalents (18) 0
------------------------------------------------------------------------- --------------------------- --------------
Decrease in Debt 747 1,038
Conversion of perpetual convertible bond(4) 240 -
Other non-cash and net interest movements(5) (1,259) (560)
Movement in net debt (290) 478
------------------------------------------------------------------------- --------------------------- --------------
Opening net debt (6,469) (6,947)
-------------------------------------------------------------------------
Closing net debt (6,759) (6,469)
------------------------------------------------------------------------- --------------------------- --------------
of which
Lease Liabilities (6,618) (5,829)
------------------------------------------------------------------------- --------------------------- --------------
Net Debt Excluding Lease Liabilities (141) (640)
------------------------------------------------------------------------- --------------------------- --------------
1 See note 6 for a reconciliation between Retail and Group cash
flow. The prior year results have been restated to reflect the
removal of business rates from onerous property contract
provisions. Refer to note 2 of the accounts for further
information.
2 Excludes working capital and pension contributions.
3 Refer to the Alternative Performance Measures on pages 50 to 54 for reconciliation.
4 GBP242 million of the GBP250 million perpetual convertible
bond converted. Given a carrying value of GBP248 million this
resulted in a GBP240 million reduction in net debt.
5 Other non-cash includes new leases and lease modifications and
fair value movements on derivatives used for hedging long term
borrowings.
Adjusted retail operating cash flow before changes in working
capital increased by GBP272 million year-on-year to GBP2,196
million (2020/21: GBP1,924 million). Retail non underlying
operating cashflows of GBP3 million cost (2020/21: GBP12 million
cost) reflected legal disputes income offsetting restructuring
costs. Working capital increased by GBP185 million (2020/21: GBP452
million decrease), in line with expectations as our working capital
position normalised compared to a prior year where both our stock
and payables positions were heavily impacted by COVID-19 trading
patterns.
Corporation tax paid decreased to GBP23 million (2020/21: GBP94
million) reflecting payments made in the prior year before the
decision to forego business rates relief which subsequently
impacted taxable profits. Proceeds from disposals of GBP46 million
(2020/21: GBP27 million) resulted from disposals of non-trading
sites.
Retail free cash flow decreased by GBP281 million year-on-year
to GBP503 million (2020/21: GBP784 million), driven by the working
capital reduction in the prior year with some of this reversing in
the current year. Retail Free cash flow was used to fund dividends
and reduce borrowings.
Dividends of GBP238 million were paid in the year, which were
covered 2.1 times by free cash flow (2020/21: 3.3 times).
The Group held undrawn committed credit facilities of GBP1,394
million and undrawn uncommitted facilities of GBP245 million as at
5 March 2022.
Capital expenditure
Core retail cash capital expenditure was GBP645 million
(2020/21: GBP568 million). This was lower than expected due to a
number of projects being delayed due to COVID-19.
Sainsbury's expects core retail cash capital expenditure
(excluding Financial Services) to be around GBP700-GBP750 million
per annum over the next three years, reflecting investment in
high-returning supply chain, logistics and infrastructure projects
including the Argos transformation.
Financial Ratios
Key financial ratios 52 weeks to 52 weeks to
05 March 2022 06 March 2021(1)
Return on capital employed (%) (2) 8.4 5.6
Net debt to EBITDA (3) 3.1 times 3.4 times
Fixed charge cover (4) 2.8 times 2.2 times
------------------------------------ -------------- -----------------
1 The prior year results have been restated to reflect the
removal of business rates from onerous property contract
provisions. Refer to note 2 of the accounts for further
information.
2 ROCE: Return is defined as a 52 week rolling underlying profit
before interest and tax. Capital employed is defined as group net
assets excluding the pension deficit/surplus less net debt
(excluding perpetual securities). This is calculated using the
average of 14 datapoints - the prior year closing capital employed,
the current year closing capital employed and 12 intra-year periods
as this more closely aligns to the recognition of profit /
loss.
3 Net debt of GBP6,759 million includes lease obligations under
IFRS 16 and perpetual securities treated as debt, divided by Group
underlying EBITDA of GBP2,206 million.
4 Group underlying EBITDA divided by rent (both capital and
interest) and net underlying finance costs, where interest on
perpetual securities is treated as an underlying finance cost.
All three metrics saw significant improvements due to the
recovery of profit and EBITDA following a prior year heavily
impacted by COVID-19. Our net debt to EBITDA metric showed a
smaller improvement as net debt increased, with the increase in
lease liabilities more than offsetting significant non lease net
debt reduction.
Property value
As at 5 March 2022, Sainsbury's estimated market value of
properties, with values based on a 25 year lease with RPI
increases, including our share of properties held within property
joint ventures or investment vehicles, was GBP10.9 billion (6 March
2021: GBP10.1 billion), with the increase primarily driven by a
reduction in property yields.
Defined benefit pensions
The Pension Scheme is valued on different bases for different
purposes. For the corporate annual accounts, the value of the
retirement benefit is calculated under IAS19 while the funding of
the Scheme is determined by the Trustee's triennial valuation. The
last triennial valuation, as at 30 September 2018, showed a deficit
of GBP538 million. The Trustee is currently carrying out the latest
triennial valuation as at 30 September 2021.
At 5 March 2022, the net defined benefit surplus under IAS19 for
the Group was GBP2,283 million (excluding deferred tax). The
GBP1,539 million increase from 6 March 2021 was driven by both
changes in financial assumptions which resulted in a net gain, an
adjustment to mortality assumptions and updated experience which
lowered liabilities, in addition to gains on plan assets.
During the year, the Sainsbury's section of the Scheme reached
full funding on the stronger, secondary funding target agreed as
part of the 2018 triennial valuation. This has resulted in one of
the three streams of contributions payable to the Scheme under the
Asset Backed Contributions funding framework switching off and
another stream switching to the Argos section, until that section
is also fully funded. Total contributions to the Scheme will
therefore reduce by GBP15 million a year.
For 2022/23, total pension scheme cash contributions are
expected to be GBP62 million.
Retirement benefit obligations
Sainsbury's Argos Group Group
as at as at as at as at
05 March 2022 05 March 2022 05 March 2022 06 March 2021
GBPm GBPm GBPm GBPm
Present value of funded obligations (8,060) (1,313) (9,373) (10,218)
Fair value of plan assets 10,158 1,535 11,693 11,000
Pension surplus 2,098 222 2,320 782
Present value of unfunded obligations (20) (17) (37) (38)
--------------------------------------- -------------- -------------- -------------- --------------
Retirement benefit surplus 2,078 205 2,283 744
Deferred income tax liability (562) (78) (640) (192)
--------------------------------------- -------------- -------------- -------------- --------------
Net retirement benefit surplus 1,516 127 1,643 552
--------------------------------------- -------------- -------------- -------------- --------------
Consolidated income statement
for the 52 weeks to 5 March 2022
52 weeks to 5 March 52 weeks to 6 March
2022 2021
(Restated)
------------------- ----- -------------------------------------------- --------------------------------------------
Before Non-underlying Total Before Non-underlying Total
non-underlying items non-underlying items
items (Note items (Note
4) 4)
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Revenue 5 29,895 - 29,895 29,048 - 29,048
Cost of sales (27,538) 9 (27,529) (26,870) (333) (27,203)
Gross
profit/(loss) 2,357 9 2,366 2,178 (333) 1,845
Administrative
expenses (1,352) (78) (1,430) (1,480) (222) (1,702)
Other income 34 186 220 12 1 13
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Operating
profit/(loss) 1,039 117 1,156 710 (554) 156
Finance income 8 3 17 20 3 29 32
Finance costs 8 (312) (10) (322) (356) 4 (352)
---------
Profit/(loss)
before tax 730 124 854 357 (521) (164)
Income tax
(expense)/credit 9 (154) (23) (177) (105) 68 (37)
------------------- ----- --------- ---------
Profit/(loss) for
the financial
period 576 101 677 252 (453) (201)
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Earnings/(loss)
per share 10 pence pence
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Basic
earnings/(loss) 29.8 (9.4)
Diluted
earnings/(loss) 28.8 (9.4)
------------------- ----- ---------------- --------------- --------- ---------------- --------------- ---------
Refer to note 2 for details of prior year restatements.
Consolidated statement of comprehensive income/(loss)
for the 52 weeks to 5 March 2022
52 weeks
to 6
March
2021
52 weeks
to 5
March
2022 (Restated)
----- --------- -------------
Note GBPm GBPm
----- --------- -------------
Profit/(loss) for the financial year 677 (201)
--------------------------------------------------------- ----- --------- -------------
Items that will not be reclassified subsequently to
the income statement
----- --------- -------------
Remeasurement on defined benefit pension schemes 19 1,457 (482)
-----
Movements on financial assets at fair value through
other comprehensive income 76 55
Cash flow hedges fair value movements - inventory
hedges 73 (60)
Current tax relating to items not reclassified - 44
Deferred tax relating to items not reclassified (461) 9
--------------------------------------------------------- ----- --------- -------------
1,145 (434)
--------------------------------------------------------- ----- --------- -------------
Items that may be reclassified subsequently to the
income statement
-----
Currency translation differences (1) (5)
-----
Movements on financial assets at fair value through
other comprehensive income (5) 2
-----
Items reclassified from financial assets at fair value
through other comprehensive income reserve 4 -
-----
Cash flow hedges fair value movements - non-inventory
hedges 131 (1)
-----
Items reclassified from cash flow hedge reserve 7 13
-----
Deferred tax on items that may be reclassified (57) 10
--------------------------------------------------------- ----- --------- -------------
79 19
Total other comprehensive income/(loss) for the year
(net of tax) 1,224 (415)
--------------------------------------------------------- ----- --------- -------------
Total comprehensive income/(loss) for the year 1,901 (616)
--------------------------------------------------------- ----- --------- -------------
Refer to note 2 for details of prior year restatements.
Consolidated balance sheet
At 5 March 2022, 6 March 2021 and 7 March 2020
6 March 7 March
2021 2020
5 March
2022 (Restated) (Restated)
Note GBPm GBPm GBPm
----------------------------------------------- ----- --------- ------------- -------------
Non-current assets
Property, plant and equipment 12 8,402 8,587 8,949
Right of use assets 13 5,560 4,747 4,826
Intangible assets 14 1,006 914 974
Investments in joint ventures and associates 3 5 9
Financial assets at fair value through other
comprehensive income 604 754 972
Trade and other receivables 65 50 43
Amounts due from Financial Services customers
and other banks 2,026 2,280 3,453
Derivative financial assets 213 8 6
Net retirement benefit surplus 19 2,283 744 1,119
----------------------------------------------- ----- --------- ------------- -------------
20,162 18,089 20,351
----------------------------------------------- ----- --------- ------------- -------------
Current assets
Inventories 1,797 1,625 1,732
Trade and other receivables 683 725 811
Amounts due from Financial Services customers
and other banks 3,163 3,127 3,951
Financial assets at fair value through other
comprehensive income 196 90 82
Derivative financial assets 78 5 12
Cash and cash equivalents 16 825 1,575 994
----------------------------------------------- ----- ------------- -------------
6,742 7,147 7,582
Assets held for sale 8 24 4
----------------------------------------------- ----- --------- ------------- -------------
6,750 7,171 7,586
----------------------------------------------- ----- --------- ------------- -------------
Total assets 26,912 25,260 27,937
----------------------------------------------- ----- --------- ------------- -------------
Current liabilities
Trade and other payables (4,546) (4,488) (4,275)
Amounts due to Financial Services customers
and other deposits (4,444) (6,086) (6,890)
Borrowings 18 (54) (356) (48)
Lease liabilities 13 (526) (524) (510)
Derivative financial liabilities (29) (93) (53)
Taxes payable (169) (83) (168)
Provisions 15 (100) (199) (106)
----------------------------------------------- ----- ------------- -------------
(9,868) (11,829) (12,050)
----------------------------------------------- ----- --------- ------------- -------------
Net current liabilities (3,118) (4,658) (4,464)
----------------------------------------------- ----- --------- ------------- -------------
Non-current liabilities
Other payables (24) (20) (11)
Amounts due to Financial Services customers
and other deposits (815) (203) (1,204)
Borrowings 18 (707) (748) (1,248)
Lease liabilities 13 (6,095) (5,310) (5,264)
Derivative financial liabilities (3) (44) (36)
Deferred income tax liability (806) (255) (265)
Provisions 15 (171) (150) (68)
(8,621) (6,730) (8,096)
Total liabilities (18,489) (18,559) (20,146)
----------------------------------------------- ----- --------- ------------- -------------
Net assets 8,423 6,701 7,791
----------------------------------------------- ----- --------- ------------- -------------
Equity
Called up share capital 668 637 634
Share premium 1,406 1,173 1,159
Merger reserve 568 568 568
Capital redemption reserve 680 680 680
Other reserves 409 167 168
Retained earnings 4,692 3,228 4,086
----------------------------------------------- ----- ------------- -------------
Total equity before perpetual securities 8,423 6,453 7,295
Perpetual securities - 248 496
----------------------------------------------- ----- --------- ------------- -------------
Total equity 8,423 6,701 7,791
----------------------------------------------- ----- --------- ------------- -------------
Refer to note 2 for details of restatements.
Consolidated cash flow statement
for the 52 weeks to 5 March 2022
52 weeks 52 weeks
to 5 March to 6
2022 March
2021
(Restated)
Note GBPm GBPm
---------------------------------------------------------- ------- -------------------------- --------------------
Cash flows from operating activities
Profit/(loss) before tax 854 (164)
Net finance costs 302 320
Operating profit 1,156 156
Adjustments for:
12,
Depreciation expense 13 1,069 1,113
Amortisation expense 14 151 136
Net impairment loss on property, plant and equipment, 12,13,
right of use assets, intangible assets 14 9 321
Non-cash adjustments arising from acquisitions - (1)
Financial Services movement in loss allowance
for loans and advances to customers 19 85
Loss/(profit) on sale of non-current assets and
early termination of leases (6) (17)
Non-underlying fair value movements 4 (76) -
Share-based payments expense 58 29
Defined benefit scheme expenses 19 4 13
Cash contributions to benefit schemes 19 (71) (101)
Operating cash flows before changes in working
capital 2,313 1,734
Changes in working capital
(Increase)/decrease in inventories (179) 117
Decrease in financial assets at fair value through
other comprehensive income 115 267
Decrease in trade and other receivables 33 62
Decrease in amounts due from Financial Services
customers and other deposits 161 1,912
Increase in trade and other payables 28 321
(Decrease) in amounts due to Financial Services
customers and other deposits (1,030) (1,805)
(Decrease)/increase in provisions and other liabilities (80) 177
Cash generated from operations 1,361 2,785
Interest paid (329) (349)
Corporation tax paid (23) (93)
Net cash generated from operating activities 1,009 2,343
---------------------------------------------------------- ------- -------------------------- --------------------
Cash flows from investing activities
Purchase of property, plant and equipment (416) (423)
Initial direct costs on new leases (3) (7)
Purchase of intangible assets (278) (172)
Proceeds from disposal of property, plant and
equipment 46 27
Dividends and distributions received 2 22
Net cash used in investing activities (649) (553)
---------------------------------------------------------- ------- -------------------------- --------------------
Cash flows from financing activities
Proceeds from issuance of ordinary shares 21 17
Proceeds from borrowings - 660
Repayment of borrowings (248) (289)
Repayment of short term borrowings - (660)
Repayment of perpetual capital securities (8) (250)
Purchase of own shares (48) (30)
Repayment of capital element of lease obligations (493) (501)
Dividends paid on ordinary shares 11 (238) (232)
Dividends paid on perpetual securities (4) (23)
Net cash used in financing activities (1,018) (1,308)
---------------------------------------------------------- ------- -------------------------- --------------------
Net (decrease)/increase in cash and cash equivalents (658) 482
Opening cash and cash equivalents 1,476 994
Closing cash and cash equivalents 16 818 1,476
---------------------------------------------------------- ------- -------------------------- --------------------
Refer to note 2 for details of prior year restatement.
Consolidated statement of changes in equity
for the 52 weeks to 5 March 2022
Capital Total
Called redemption equity
up Share and before Perpetual Perpetual
share premium Merger other Retained perpetual capital convertible Total
capital account reserve reserves earnings securities securities bonds equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 7 March 2021
(as previously
reported) 637 1,173 568 847 3,131 6,356 - 248 6,604
----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Opening balance
adjustment - - - - 97 97 - - 97
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
At 7 March 2021
(restated) 637 1,173 568 847 3,228 6,453 - 248 6,701
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Profit for the
period - - - - 677 677 - - 677
-----
Other
comprehensive
income - - - 285 1,457 1,742 - - 1,742
-----
Tax relating to
other
comprehensive
income - - - (87) (431) (518) - - (518)
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Total
comprehensive
income
for the period
ended 5 March
2022 - - - 198 1,703 1,901 - - 1,901
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Cash flow
hedges gains
and
losses
transferred to
inventory - - - 28 - 28 - - 28
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Transactions
with owners:
Dividends 11 - - - - (238) (238) - - (238)
---------------- -----
Share-based
payment - - - - 60 60 - - 60
---------------- -----
Purchase of
own shares - - - - (48) (48) - - (48)
---------------- -----
Allotted in
respect of
share
option
schemes 5 17 - - (1) 21 - - 21
---------------- -----
Conversion of
perpetual
convertible
bonds 26 216 - - (2) 240 - (240) -
-----
Repayment of
perpetual
convertible
bonds - - - - - - - (8) (8)
-----
Other
adjustments - - - 16 (13) 3 - - 3
-----
Tax on items
charged to
equity - - - - 3 3 - - 3
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
At 5 March 2022 668 1,406 568 1,089 4,692 8,423 - - 8,423
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Capital Total
Called redemption equity
up Share and before Perpetual Perpetual
share premium Merger other Retained perpetual capital convertible Total
capital account reserve reserves earnings securities securities bonds equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 8 March 2020
(as previously
reported) 634 1,159 568 848 4,068 7,277 248 248 7,773
----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Opening balance
adjustment - - - - 18 18 - - 18
At 8 March 2020
(restated) 634 1,159 568 848 4,086 7,295 248 248 7,791
----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
(Loss)/profit
for the period - - - - (208) (208) - 7 (201)
-----
Other
comprehensive
income/(loss) - - - 4 (482) (478) - - (478)
-----
Tax relating to
other
comprehensive
income/(loss) - - - (4) 67 63 - - 63
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Total
comprehensive
loss
for the period
ended 6 March
2021 - - - - (623) (623) - 7 (616)
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Cash flow
hedges gains
and
losses
transferred to
inventory - - - (1) - (1) - - (1)
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Transactions
with owners:
Dividends - - - - (232) (232) - - (232)
---------------- -----
Distribution
to holders
of perpetual
securities - - - - - - - (7) (7)
---------------- -----
Share-based
payment - - - - 29 29 - - 29
---------------- -----
Purchase of
own shares - - - - (30) (30) - - (30)
---------------- -----
Allotted in
respect of
share
option
schemes 3 14 - - - 17 - - 17
---------------- -----
Redemption of
perpetual
capital
securities - - - - (2) (2) (248) - (250)
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
At 6 March 2021 637 1,173 568 847 3,228 6,453 - 248 6,701
---------------- ----- -------- -------- -------- ----------- --------- ----------- ----------- ------------ -------
Refer to note 2 for details of prior year restatement.
Notes to the consolidated financial statements
1 General information
The financial information, which comprises the Group income
statement, Group statement of comprehensive income, Group balance
sheet, Group cash flow statement, Group statement of changes in
equity and related notes, is derived from the full Group financial
statements for the 52 weeks to 5 March 2022 and does not constitute
full accounts within the meaning of section 435 (1) and (2) of the
Companies Act 2006.
The Group Annual Report and Financial Statements 2022 on which
the auditors have given an unqualified report and which does not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006, will be delivered to the Registrar of Companies in due
course, and made available to shareholders in June 2022.
J Sainsbury plc is a public limited company (the 'Company')
incorporated in the United Kingdom, whose shares are publicly
traded on the London Stock Exchange. The Company is domiciled in
the United Kingdom and its registered address is 33 Holborn, London
EC1N 2HT, United Kingdom.
The financial year represents the 52 weeks to 5 March 2022
(prior financial year: 52 weeks to 6 March 2021). The consolidated
financial statements for the 52 weeks to 5 March 2022 comprise the
financial statements of the Company and its subsidiaries (the
'Group') and the Group's share of the post-tax results of its joint
ventures and associates.
The Group's principal activities are Food, General Merchandise
and Clothing retailing and Financial Services.
2 Basis of preparation
The Group's financial statements have been prepared in
accordance with UK-adopted international accounting standards.
The financial statements are presented in sterling, rounded to
the nearest million ('GBPm') unless otherwise stated. They have
been prepared under the historical cost convention, except for
derivative financial instruments, defined benefit pension scheme
assets and financial assets at fair value through other
comprehensive income that have been measured at fair value.
Sainsbury's Bank Plc and its subsidiaries have been consolidated
for the twelve months to 28 February 2022 being the Bank's year-end
date (prior financial year: 28 February 2021). There have been no
significant transactions or events that occurred between this date
and the Group's balance sheet date, and therefore no adjustments
have been made to reflect the difference in year-end dates.
Unless otherwise stated, significant accounting policies have
been applied consistently to all periods presented in the financial
statements.
2.1 Prior period restatements
Business rates within property provisions
The consolidated financial statements include a prior year
restatement in relation to the treatment of business rates within
property provisions. Where the Group no longer operates from a
leased property, onerous property contract provisions are
recognised for the least net cost of exiting from the contract.
Unless a separate exit agreement with a landlord has already been
agreed, the Group's policy is that this onerous contract provision
includes all unavoidable costs of meeting the obligations of the
contract - these include service charges and insurance, and have
also historically included business rates.
There is apparent mixed practice across companies concerning the
treatment of business rates in onerous contract provisions. However
following additional guidance published this year by accounting
advisory firms, the Group has reassessed its policy in this area,
and concluded that business rates are a statutory obligation rather
than a contractual one, and should be recognised as a periodic cost
in line with IFRIC 21 "Levies". Prior period comparatives have
therefore been restated to remove business rates from previously
recognised property provisions.
Notional cash pooling
The consolidated financial statements include a prior year
restatement in relation to notional cash pooling arrangements where
the intention to net settle cannot be clearly demonstrated, and
therefore do not meet the requirements for offsetting in accordance
with IAS 32: 'Financial Instruments: Presentation'. Prior period
comparatives have been restated by grossing up cash and overdrafts
(reported within current borrowings). There is no impact on the
income statement, cash flow statement nor earnings and diluted
earnings per share.
Prior period comparatives
The prior period comparatives have been restated in accordance
with IAS 8: 'Accounting Policies, Changes in Accounting Policies
and Errors' and have impacted the primary financial statements as
follows:
Income statement
For the 52 weeks to 6 March 2021
Before non-underlying Non-underlying items Total
items
------------------ -------------------------------------- -------------------------------------- -----------------------------------
As Business As restated As Business As restated As Business As
previously rates previously rates previously rates restated
reported adjustment reported adjustment reported adjustment
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Revenue 29,048 - 29,048 - - - 29,048 - 29,048
Cost of sales (26,871) 1 (26,870) (412) 79 (333) (27,283) 80 (27,203)
Gross
profit/(loss) 2,177 1 2,178 (412) 79 (333) 1,765 80 1,845
Administrative
expenses (1,480) - (1,480) (238) 16 (222) (1,718) 16 (1,702)
Other income 12 - 12 1 - 1 13 - 13
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Operating
profit/(loss) 709 1 710 (649) 95 (554) 60 96 156
Finance income 3 - 3 29 - 29 32 - 32
Finance costs (356) - (356) 3 1 4 (353) 1 (352)
------------
Profit/(loss)
before
tax 356 1 357 (617) 96 (521) (261) 97 (164)
- - -
Income tax
(expense)/credit (105) - (105) 86 (18) 68 (19) (18) (37)
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Profit/(loss) for
the financial
period 251 1 252 (531) 78 (453) (280) 79 (201)
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Earnings per
share 11.7 - 11.7 (13.0) 3.6 (9.4)
Diluted EPS 11.4 - 11.4 (13.0) 3.6 (9.4)
------------------ ----------- ----------- ------------ ----------- ----------- ------------ ----------- ----------- ---------
Balance sheets
As at 6 March 2021 As previously Notional Business As restated
reported cash rates
pooling adjustment
adjustment
GBPm GBPm GBPm GBPm
Cash and cash equivalents 1,477 98 - 1,575
------------------------------------------ -------------- ------------ ------------ ------------
Total assets 25,162 98 - 25,260
------------------------------------------ -------------- ------------ ------------ ------------
Current liabilities
Borrowings (258) (98) - (356)
Taxes payable (59) - (24) (83)
Provisions (209) - 10 (199)
------------------------------------------ -------------- ------------ ------------
Total current liabilities (11,717) (98) (14) (11,829)
------------------------------------------ -------------- ------------ ------------ ------------
Net current liabilities (4,644) - (14) (4,658)
------------------------------------------ -------------- ------------ ------------ ------------
Non-current liabilities
Provisions (261) - 111 (150)
Total liabilities (18,558) (98) 97 (18,559)
------------------------------------------ -------------- ------------ ------------ ------------
-
Net assets 6,604 - 97 6,701
------------------------------------------ -------------- ------------ ------------ ------------
Equity
Retained earnings 3,131 - 97 3,228
------------------------------------------ -------------- ------------ ------------ ------------
Total equity before perpetual securities 6,356 - 97 6,453
Total equity 6,604 - 97 6,701
------------------------------------------ -------------- ------------ ------------ ------------
As at 7 March 2020 As previously Business As restated
reported rates
adjustment
GBPm GBPm GBPm
------------------------------------------ -------------- ------------ ------------
Current liabilities
Taxes payable (163) (5) (168)
Provisions (108) 2 (106)
------------------------------------------ ------------ ------------
Total current liabilities (12,047) (3) (12,050)
------------------------------------------ -------------- ------------ ------------
Net current liabilities (4,461) (3) (4,464)
------------------------------------------ -------------- ------------ ------------
Non-current liabilities
Provisions (89) 21 (68)
Total liabilities (20,164) 18 (20,146)
------------------------------------------ -------------- ------------ ------------
-
Net assets 7,773 18 7,791
------------------------------------------ -------------- ------------ ------------
Equity
Retained earnings 4,068 18 4,086
------------------------------------------ -------------- ------------ ------------
Total equity before perpetual securities 7,277 18 7,295
Total equity 7,773 18 7,791
------------------------------------------ -------------- ------------ ------------
Cash flow statement
For the 52 weeks to 6 March 2021
As previously Business As
reported rates restated
adjustment
GBPm GBPm GBPm
---------------------------------------------------------- -------------- ------------ ----------
Cash flows from operating activities
Profit/(loss) before tax (261) 97 (164)
Net finance costs 321 (1) 320
----------------------------------------------------------
Operating profit 60 96 156
----------------------------------------------------------
Operating cash flows before changes in working capital 1,638 96 1,734
Changes in working capital -
(Decrease)/increase in provisions and other liabilities 273 (96) 177
----------------------------------------------------------
Cash generated from operations 2,785 - 2,785
----------------------------------------------------------
Net cash generated from operating activities 2,343 - 2,343
---------------------------------------------------------- -------------- ------------ ----------
Net cash used in investing activities (553) - (553)
---------------------------------------------------------- -------------- ------------ ----------
Net cash used in financing activities (1,308) - (1,308)
---------------------------------------------------------- -------------- ------------ ----------
Net (decrease)/increase in cash and cash equivalents 482 - 482
---------------------------------------------------------- -------------- ------------ ----------
Change in accounting policy - Software as a Service (SaaS)
arrangements
During the year, the Group revised its accounting policy in
relation to upfront configuration and customisation costs incurred
in implementing software as a service (SaaS) arrangements. This is
in response to the IFRS Interpretations Committee (IFRIC) agenda
decision clarifying its interpretation of how current accounting
standards apply to these types of arrangements during the current
financial year. Adjustments in relation to costs capitalised in
prior years have therefore been recognised as follows:
GBPm
--------------------------- -----
Intangible assets (30)
Prepayments 9
----------------------------- -----
Total assets / net assets (21)
----------------------------- -----
Administrative expenses (21)
----------------------------- -----
Profit before tax (21)
----------------------------- -----
The impact is not considered to have a material impact on the
prior year balance sheet nor income statement, therefore the prior
year results have not been restated. Given this is an out of period
cost and could distort comparability between reporting periods,
this has been included within non-underlying profit before tax.
Intangible asset write-offs have been included within
disposals.
In addition to the above, GBP14 million of current year spend
that would have been capitalised to intangible assets under the
Group's previous accounting policy has now been recognised within
prepayments (GBP6 million) and underlying profit (GBP8 million).
There is no impact on cash flows.
2.2 Going concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for a period of at least 12
months from the date of approval. Accordingly, they continue to
adopt the going concern basis in preparing the financial
statements. The assessment period for the purposes of considering
going concern is the 12 months to 27 April 2023.
In assessing the Group's ability to continue as a going concern,
the Directors have considered the Group's most recent corporate
planning and budgeting processes. This includes an annual review
which considers profitability, the Group's cash flows, committed
funding and liquidity positions and forecasted future funding
requirements over three years, with a further two years of
indicative movements.
The Group manages its financing by diversifying funding sources,
structuring core borrowings with long-term maturities and
maintaining sufficient levels of standby liquidity via the
Revolving Credit Facility. This seeks to minimise liquidity risk by
maintaining a suitable level of undrawn additional funding
capacity.
The Revolving Credit Facility is split into two Facilities, a
GBP300 million Facility (A) and a GBP1,094 million Facility (B).
Facility A has a final maturity of April 2025 and Facility B has a
final maturity of October 2024. As at 5 March 2022, both Facility
(A) and Facility (B) were undrawn.
In assessing going concern, scenarios in relation to the Group's
principal risks have been considered by overlaying them into the
corporate plan and assessing the impact on cash flows, net debt and
funding headroom. These severe but plausible scenarios included
modelling inflationary pressures on both food margins and general
recession-related risks, the impact of any regulatory fines, and
the failure to deliver planned cost savings.
In performing the above analysis, the Directors have made
certain assumptions around the availability and effectiveness of
the mitigating actions available to the Group. These include
reducing any non-essential capital expenditure and operating
expenditure on projects, bonuses and dividend payments.
The Group's most recent corporate planning and budgeting
processes incorporates assumed cashflows to address climate change
risks, including those associated with the Group's Plan for Better
commitment which include reducing environmental impacts and meeting
customer expectations in this area, notably through reducing
packaging and energy usage across the estate. Climate-related risks
do not result in any material uncertainties affecting the Group's
ability to continue as a going concern.
Consideration was also given to the conflict in Ukraine which
has continued to develop subsequent to the Group's balance sheet
date. Inflationary pressures which may be caused by the conflict
are already incorporated into the overall going concern assessment,
as such the impact of the conflict in Ukraine does not impact the
conclusions reached over going concern.
As a consequence of the work performed, the Directors considered
it appropriate to adopt the going concern basis in preparing the
Financial Statements with no material uncertainties to
disclose.
2.3 Amendments to published standards
Effective for the Group and Company in these financial
statements:
The Group has considered the following amendments to published
standards that are effective for the Group for the financial year
beginning 7 March 2021 and concluded that they are either not
relevant to the Group or that they do not have a significant impact
on the Group's financial statements other than disclosures.
- Amendments to IFRS 9 'Financial Instruments', IAS 39
'Financial Instruments: Recognition and Measurement' and IFRS 7
'Financial Instruments: Disclosures' on the Interest Rate Benchmark
Reform - Phase 2
- Amendment to IFRS 16 'Leases' with regards to the exemption
granted in the 'COVID-19-related rent concessions'
The Group early adopted the Interest Rate Benchmark Reform Phase
2 amendments in the financial year ended 6 March 2021. The Group
has elected not to apply the exemption granted in the
'COVID-19-related rent concessions' as the Group has not received
material COVID-19-related rent concessions as a lessee.
Standards and revisions effective for future periods:
The following standards and revisions will be effective for
future periods:
- Amendments to IFRS 3 'Business Combinations' with reference to
the Conceptual Framework
- Amendments to IAS 37 'Provisions, Contingent Liabilities and
Contingent Assets' on Onerous Contracts - Cost of Fulfilling a
Contract
- Amendments to IAS 16 'Property, Plant and Equipment' on
Proceeds before Intended Use
- Amendments to IAS 1 'Presentation of Financial Statements' on
the classification of liabilities as current or non-current
- Amendments to IAS 1 'Presentation of Financial Statements' and
IFRS Practice Statement 2 'Making Materiality Judgements' on the
disclosure of accounting policies
- Amendments to IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors' on the definition of accounting
estimates
- Amendments to IAS 12 'Income Taxes' on Deferred Tax Related to
Assets and Liabilities Arising from a Single Transaction
- IFRS 17 'Insurance Contracts'
The Group has considered the impact of the remaining above
standards and revisions and have concluded that they will not have
a significant impact on the Group's financial statements.
3 Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors use
various APMs. These APMs should be considered in addition to, and
are not intended to be a substitute for, IFRS measurements. As they
are not defined by International Financial Reporting Standards,
they may not be directly comparable with other companies' APMs.
The Directors believe that these APMs provide additional useful
information for understanding the financial performance and health
of the Group. They are also used to enhance the comparability of
information between reporting periods (such as like-for-like sales
and underlying profit) by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid users in
understanding the Group's performance. Consequently, APMs are used
by the Directors and management for performance analysis, planning,
reporting and incentive setting purposes.
The APMs that the Group has focused on in the period are defined
and reconciled on page 50 to 54. All of the APMs relate to the
current period's results and comparative periods.
4 Profit before non-underlying items
In order to provide shareholders with additional insight into
the year-on-year performance of the business, an adjusted measure
of profit (underlying profit before tax) is provided to supplement
the reported IFRS numbers, and reflects how the business measures
performance internally. This adjusted measure excludes items
recognised in reported profit or loss before tax which, if
included, could distort comparability between periods.
Determining which items are to be adjusted requires judgement,
in which the Group considers items which are significant either by
virtue of their size and/or nature, or that are non-recurring. The
same assessment is applied consistently to any reversals of prior
non-underlying items.
Underlying profit is not an IFRS measure and therefore not
directly comparable to other companies.
The most significant non-underlying items in the current year
relate to income received in relation to the settlement of legal
disputes over interchange fees, and costs associated with
restructuring programmes. More details on each are included further
below.
The Group has not included any additional costs incurred or
credits received directly in relation to the impacts of COVID-19
within non-underlying items. Whilst some items (such as additional
expenses incurred protecting colleagues and customers) are discrete
and can be separately quantified, others, such as incremental food
sales cannot be reliably disaggregated from the Group's underlying
performance. The Group has therefore concluded that presenting some
movements as underlying and others as non-underlying would give an
imbalanced view that is not easily comparable to past and
subsequent periods.
Cost Administrative Other Net finance Total Tax Total
of sales expenses income income/(costs) adjustments adjustments
before
tax
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ---------- --------------- -------- ---------------- ----- -------------
Income recognised in
relation
to legal disputes - 13 167 - 180 (35) 145
Restructuring and
integration
Restructuring
programmes (69) (35) 12 - (92) 17 (75)
Financial Services
transition
and other - (11) - - (11) 2 (9)
Total restructuring and
integration (69) (46) 12 - (103) 19 (84)
Software as a service
accounting
adjustment - (21) - - (21) 4 (17)
Property, finance,
pension
and acquisition
adjustments
ATM business rates
reimbursement 2 - - - 2 - 2
Profit on disposal of
properties - - 7 - 7 - 7
Non-underlying finance
and
fair value movements 76 - - (8) 68 (13) 55
IAS 19 pension expenses - (4) - 15 11 (2) 9
Acquisition adjustments - (20) - - (20) 4 (16)
Total property,
finance,
pension and
acquisition
adjustments 78 (24) 7 7 68 (11) 57
Tax adjustments
Over provision in prior
years - - - - - (2) (2)
Revaluation of deferred
tax balances - - - - - 9 9
Other tax adjustments - - - - - (7) (7)
Total adjustments 9 (78) 186 7 124 (23) 101
------------------------ ---------- --------------- -------- ---------------- -------------
Income recognised in relation to legal disputes
During the current period, agreements were reached and two legal
cases settled in relation to overcharges from payment card
processing fees, which largely reflect inter-bank "interchange
fees". This has led to net income of GBP167 million being
recognised. The Group has one ongoing legal case remaining.
Of the GBP167 million, cash of GBP75 million was received in a
prior year and held as deferred income. Net cash of GBP93 million
was received during the current financial year and GBP1 million of
legal fees remains outstanding.
In addition, a provision for a legal claim totalling GBP13
million has been released as it was assessed during the financial
period that a pay-out is no longer considered probable.
Restructuring programmes
In the prior year, the Group announced a restructuring programme
to accelerate the structural integration of Sainsbury's and Argos
and further simplify the Argos business; create a new supply chain
and logistics operating model, moving to a single integrated supply
chain and logistics network across Sainsbury's and Argos; and
further rationalise / repurpose the Group's supermarkets and
convenience estate. The programme also considered the Group's Store
Support Centre ways of working.
The programme is a multi-year activity which began in the prior
year and has continued into the current year. Total cumulative
costs to 5 March 2022 are GBP(640) million split between GBP(548)
million in the prior year and GBP(92) million in the current period
as detailed in the table below. Total expected costs are still in
the range of GBP900 million to GBP1 billion to March 2024, with the
majority in the period to March 2024. In line with IFRIC 21
"Levies", business rates are now recognised as a periodic cost and
as such approximately GBP40 million of business rates associated
with leased properties in the restructuring programme will be
recognised after the year ended March 2024. Refer to note 2 for
further details.
(Costs)/gains recognised in the current year are as follows:
52 weeks to 52 weeks to
5 March 2022 6 March 2021
(Restated)
GBPm GBPm
---------------------------------------------- -------------- --------------
Write downs of property, plant and equipment
(a) (6) (26)
Write downs of leased assets (a) (3) (72)
Write downs of intangible assets - (3)
Closure provisions (b) (24) (145)
Accelerated depreciation of assets (c) (33) (27)
Redundancy provisions (d) (40) (61)
Consultancy costs (18) (10)
Gain on lease terminations (e) 9 16
Property Profits (f) 12 -
Recognition of sub lease debtor (g) 11 -
---------------------------------------------- -------------- --------------
Restructuring programmes (92) (328)
Impairment of non-financial assets - (220)
---------------------------------------------- -------------- --------------
Total restructuring and impairment costs (92) (548)
---------------------------------------------- -------------- --------------
a) During the financial year, the Group announced the closure of
200 of its in-store cafes. Related assets have been written down as
a result.
b) Closure provisions relate to onerous contract costs,
dilapidations and strip out costs on leased sites that have been
identified for closure. Upon initial recognition of closure
provisions, management uses its best estimates of the relevant
costs to be incurred as well as expected closure dates. Business
rates on leased property where the Group no longer operates from
are recognised in the period they are incurred.
c) The remaining useful economic lives of corresponding sites
have been reassessed to align with closure dates, resulting in an
acceleration in depreciation of these assets. The existing
depreciation of these assets (depreciation that would have been
recognised absent of a closure decision) is recognised within
underlying expenses, whereas accelerated depreciation above this is
recognised within non-underlying expenses.
d) Redundancy costs are recognised as the plan is announced and
a valid expectation raised with the affected colleagues. The
current year charge relates to redundancies announced as part of
Argos store closures, depot closures, and café and food counter
closures.
e) Gains on lease terminations relate to sites impaired in the
prior year for which it has been negotiated to exit the leases
before the contractual end date. This includes the release of any
lease liabilities and right of use assets, as well as any closure
provisions previously recognised.
f) Profit on disposal of properties relates to profits
recognised in the period as sites previously impaired as part of
the restructuring programmes have been disposed of.
g) During the year, the Group was able to negotiate a sub-lease
on a previously impaired site for the duration of the remaining
headlease. This resulted in the creation of a sub-lease debtor,
with any difference between the lease receivable and right of use
asset being recognised in the income statement.
As the costs incurred facilitate future underlying cost savings,
it was considered whether it was appropriate to report these costs
within underlying profit. Whilst they arise from changes in the
Group's underlying operations, they can be separately identified,
are material in size and do not relate to ordinary in-year trading
activity. In addition, the areas being closed or restructured no
longer relate to the Group's remaining underlying operations and
their exclusion provides meaningful comparison between financial
years.
Software as a service accounting adjustment
During the year, the Group revised its accounting policy in
relation to upfront configuration and customisation costs incurred
in implementing software as a service (SaaS) arrangements; refer to
note 2.1 for further details. Costs capitalised in prior years
totalling GBP21 million have been written off this year. Given this
is an out of period cost and could distort comparability between
reporting periods, this has been included within non-underlying
profit before tax.
Financial Services transition and other
These comprise Financial Services transition costs of GBP(11)
million and were incurred in transitioning to new banking platforms
as part of the previously announced New Bank Programme. These
principally comprise contractor and service provider costs relating
to the migration of data and other services to the Bank's new
infrastructure and operating model. These costs of integration do
not reflect the business's trading performance and so are adjusted
to ensure consistency between periods. The programme ended this
financial year.
Property, finance, pension and acquisition adjustments
-- A further GBP2 million of ATM rates reimbursement income is
due to be received from the Valuation Office following the Supreme
Court's ruling that ATMs outside stores should not be assessed for
additional business rates on top of normal store rates.
-- Profit on disposal of non-trading properties for the
financial period comprised GBP(7) million for the Group. These are
excluded from underlying profit as such profit is not related to
the ongoing operating activities of the Group.
-- Non-underlying finance and fair value movements for the
financial period comprised GBP68 million for the Group. These
include fair value remeasurements on derivatives not in a hedging
relationship and lease interest on impaired non-trading sites,
including site closures. The fair value movements are driven by
external market factors and can significantly fluctuate
year-on-year. They are therefore excluded to ensure consistency
between periods. Lease interest on impaired, non-trading sites is
excluded as they do not contribute to the operating activities of
the Group. Included within cost of sales is GBP76 million of income
in relation to favourable movements on long-term, fixed price power
purchase arrangements (PPAs) with independent producers. These are
accounted for as derivative financial instruments, however are not
designated in hedging relationships, therefore gains and losses are
recognised in the income statement. Increases in electricity
forward prices in the year have led to gains on the related
derivative financial instruments. During the year, the Group
entered into an additional PPA, however have designated this in a
formal hedging relationship, with gains and losses being recognised
within other comprehensive income. The remaining movements of
GBP(8) million within finance income and costs are analysed further
in note 8.
-- Defined benefit pension interest and expenses comprises
pension finance income of GBP15 million and scheme expenses of
GBP(4) million (see note 19). Although a recurring item, the Group
has chosen to exclude net retirement benefit income and costs from
underlying profit as, following closure of the defined benefit
scheme to future accrual, it is not part of the ongoing operating
activities of the Group and its exclusion is consistent with how
the Directors assess the performance of the business.
-- Acquisition adjustments of GBP(20) million reflect the unwind
of non-cash fair value adjustments arising from Home Retail Group
and Nectar UK acquisitions. The Group would not normally recognise
these as assets outside of a business combination. Therefore the
unwinds are classified as non-underlying and are recognised as
follows:
52 weeks to 5 March 52 weeks to 6 March
2022 2021
-------------- ------------------------ ------------------------
Argos Nectar Total Argos Nectar Total
Group Group
GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------ ------- ------- ------ ------- -------
Depreciation 3 - 3 5 - 5
Amortisation (18) (5) (23) (18) (6) (24)
(15) (5) (20) (13) (6) (19)
-------------- ------ ------- ------- ------ ------- -------
Comparative information (restated)
Cost Administrative Other Net finance Total Tax Total
of expenses income income/(costs) adjustments adjustments
sales before
tax
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- --------------- -------- ---------------- ------------- ----- -------------
Restructuring programmes (263) (65) - - (328) 58 (270)
Impairment of
non-financial
assets (112) (108) - - (220) 33 (187)
Financial Services
transition
and other - (17) - - (17) 3 (14)
Total restructuring,
impairment
and integration (375) (190) - - (565) 94 (471)
Property, finance, pension
and acquisition
adjustments
ATM business rates
reimbursement 42 - - - 42 (8) 34
Profit on disposal of
properties - - 1 - 1 7 8
Perpetual securities
coupons - - - 14 14 - 14
Non-underlying finance - - - -
movements - - -
IAS 19 pension (expenses )
/ income - (13) - 19 6 (1) 5
Acquisition adjustments - (19) - - (19) 4 (15)
Total property, finance,
pension
and acquisition
adjustments 42 (32) 1 33 44 2 46
Tax adjustments
Derecognition of capital
losses - - - - - (28) (28)
Total adjustments (333) (222) 1 33 (521) 68 (453)
--------------------------- ------- --------------- -------- ---------------- ----- -------------
Refer to note 2 for details of prior year restatements.
Cash flow statement
The table below shows the impact of non-underlying items on the
Group cash flow statement
52 weeks 52 weeks
to 5 March to 6 March
2022 2021
GBPm GBPm
------------------------------------------------- ------------ ------------
Cash flows from operating activities
IAS 19 pension expenses (7) (7)
Financial Services transition and other (13) (15)
Restructuring programmes (114) (39)
Income recognised in relation to legal disputes 93 -
ATM rates reimbursement 14 27
-------------------------------------------------- ------------ ------------
Cash used in operating activities (27) (34)
Cash flows from investing activities
Proceeds from property disposals(1) 46 27
-------------------------------------------------- ------------ ------------
Cash generated from investing activities 46 27
Net cash flows 19 (7)
-------------------------------------------------- ------------ ------------
1. GBP19 million of the current period proceeds from property
disposals are a result of restructuring programmes.
5 Revenue
5 March 2022 6 March 2021
GBPm GBPm
--------------------------------------------------- ------------- -------------
Grocery and General Merchandise & Clothing (GM&C) 25,440 26,103
Fuel 4,023 2,514
Total retail sales 29,463 28,617
Financial Services interest receivable 322 344
Financial Services fees and commission 110 87
Total Financial Services income 432 431
Total revenue 29,895 29,048
--------------------------------------------------- ------------- -------------
6 Segment reporting
Background
Management has determined the operating segments based on the
information provided to the Operating Board (the Chief Operating
Decision Maker for the Group) to make operational decisions on the
management of the Group. Three operating segments were identified
as follows:
- Retail - Food
- Retail - General Merchandise and Clothing
- Financial Services
Management has considered the economic characteristics, in
particular average gross margin, similarity of products, production
processes, customers, sales methods and regulatory environment of
its two Retail segments. In doing so it has been concluded that
they should be aggregated into one 'Retail' segment in the
financial statements. This aggregated information provides users
the financial information needed to evaluate the business and the
environment in which it operates.
The Operating Board assesses the performance of all segments on
the basis of underlying profit before tax. Underlying profit before
tax is an APM as described in note 3. All material operations and
assets are in the UK.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Segment capital expenditure is the total cost
incurred during the period to acquire segment assets that are
expected to be used for more than one period. Segment revenue
presents a disaggregation of revenue from customers consistent with
the Group's primary revenue streams.
Income statement and balance sheet
Retail Financial Group
Services
52 weeks to 5 March 2022 GBPm GBPm GBPm
--------------------------------------------- --------- ---------- ---------
Segment revenue
Retail sales to external customers 29,463 - 29,463
Financial Services to external customers - 432 432
Revenue 29,463 432 29,895
--------------------------------------------- --------- ---------- ---------
Underlying operating profit 1,001 38 1,039
Underlying finance income 3 - 3
Underlying finance costs (312) - (312)
Underlying profit before tax 692 38 730
Non-underlying expense (note 4) 124
Profit before tax 854
Income tax expense (note 9) (177)
Profit for the financial year 677
--------------------------------------------- --------- ----------
Assets 20,368 6,541 26,909
Investment in joint ventures and associates 3 - 3
Segment assets 20,371 6,541 26,912
Segment liabilities (12,870) (5,619) (18,489)
--------------------------------------------- --------- ----------
Other segment items
Additions to non-current assets
Property, plant and equipment 417 - 417
Intangible assets 229 49 278
Right-of-use assets 1,294 - 1,294
Depreciation expense(1)
Property, plant and equipment 590 1 591
Right-of-use assets 477 1 478
Amortisation expense(2)
Intangible assets 130 21 151
Impairment charges 8 1 9
Share based payments 53 5 58
--------------------------------------------- --------- ---------- ---------
1. Depreciation within the Retail segment includes a GBP(3)
million credit in relation to the unwind of fair value adjustments
recognised on acquisition of HRG.
2. Amortisation within the Retail segment includes a GBP23
million charge in relation to the unwind of fair value adjustments
recognised on acquisition of HRG and Nectar UK.
Financial
Retail Services Group
52 weeks to 6 March 2021 (Restated) GBPm GBPm GBPm
--------------------------------------------- --------- ---------- ---------
Segment revenue
Retail sales to external customers 28,617 - 28,617
Financial Services to external customers - 431 431
Revenue 28,617 431 29,048
--------------------------------------------- --------- ---------- ---------
Underlying operating profit/(loss) 731 (21) 710
Underlying finance income 3 - 3
Underlying finance costs (356) - (356)
Underlying profit/(loss) before tax 378 (21) 357
Non-underlying expense (521)
Loss before tax (164)
Income tax expense (37)
Loss for the financial year (201)
--------------------------------------------- --------- ---------- ---------
Assets 17,735 7,520 25,255
Investment in joint ventures and associates 5 - 5
Segment assets 17,740 7,520 25,260
--------------------------------------------- --------- ---------- ---------
Segment liabilities (11,941) (6,618) (18,559)
--------------------------------------------- --------- ---------- ---------
Other segment items
Additions to non-current assets
Property, plant and equipment 419 - 419
Intangible assets 145 27 172
Right-of-use assets 542 - 542
Depreciation expense(1)
Property, plant and equipment 627 2 629
Right-of-use assets 483 1 484
Amortisation expense(2)
Intangible assets 116 20 136
Impairment charges 216 105 321
Restructuring charges 227 - 227
Share based payments 26 3 29
--------------------------------------------- --------- ---------- ---------
1. Depreciation within the Retail segment includes a GBP(5)
million credit in relation to the unwind of fair value adjustments
recognised on acquisition of HRG and Nectar UK. 2. Amortisation
expense within the Retail segment includes GBP24 million charge in
relation to the unwind of fair value adjustments recognised on
acquisition of HRG and Nectar UK.
Refer to note 2 for details of prior year restatements.
Geographical segments
The Group trades predominantly in the UK and the Republic of
Ireland and consequently the majority of revenues, capital
expenditure and segment net assets arise there. The profits,
turnover and assets of the businesses in the Republic of Ireland
are not material to the Group.
Cash flow
52 weeks to 5 March 52 weeks to 6 March
2022 2021 (Restated)
APM Retail Financial Group Retail Financial Group
Services Services
reference
GBPm GBPm GBPm GBPm GBPm GBPm
Profit/(loss) before
tax 833 21 854 (17) (147) (164)
---------------------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Net finance costs 304 (2) 302 320 - 320
--------------------- --------------------- ---------------------
Operating profit 1,137 19 1,156 303 (147) 156
Adjustments for:
Depreciation and amortisation
expense 1,197 23 1,220 1,226 23 1,249
Net impairment charge
on property, plant
and equipment, right-of-use
assets and intangible
assets 8 1 9 216 105 321
Non-cash adjustments
arising from acquisitions - - - (1) - (1)
Financial Services
movement in loss allowance
for loans and advances
to customers - 19 19 - 85 85
(Profit)/loss on sale
of non-current assets
and early termination
of leases (6) - (6) (19) 2 (17)
Non-underlying fair
value movements (76) - (76) - - -
Share-based payments
expense 53 5 58 26 3 29
Non-cash defined benefit
scheme expenses 4 - 4 13 - 13
Cash contributions
to defined benefit
scheme (71) - (71) (101) - (101)
Operating cash flows
before changes in
working capital 2,246 67 2,313 1,663 71 1,734
Changes in working
capital
Movements in working
capital (306) (646) (952) 612 439 1,051
Cash generated from
operations 1,940 (579) 1,361 2,275 510 2,785
Interest paid a (319) (10) (329) (349) - (349)
Corporation tax (paid)/received (23) - (23) (94) 1 (93)
Net cash generated/(used)
from operating activities 1,598 (589) 1,009 1,832 511 2,343
---------------------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Cash flows from
investing
activities
Purchase of property,
plant and equipment (416) - (416) (423) - (423)
Initial direct costs
on new leases (3) - (3) (7) - (7)
Purchase of intangible
assets (229) (49) (278) (145) (27) (172)
Proceeds from disposal
of property, plant
and equipment 46 - 46 27 - 27
Dividends and
distributions
received e 2 - 2 22 - 22
Net cash used in investing
activities (600) (49) (649) (526) (27) (553)
---------------------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Cash flows from
financing
activities
Proceeds from
issuance
of ordinary shares d 21 - 21 17 - 17
Proceeds from short
term borrowings c - - - 660 - 660
Repayment of
borrowings c (248) - (248) (289) - (289)
Repayment of short
term borrowings c - - - (660) - (660)
Repayment of
perpetual
capital securities c (8) - (8) (250) - (250)
Purchase of own
shares d (48) - (48) (30) - (30)
Repayment of capital
element of
obligations
under lease
liabilities b (491) (2) (493) (499) (2) (501)
Dividends paid on
ordinary shares (238) - (238) (232) - (232)
Dividends paid on
perpetual
securities a (4) - (4) (23) - (23)
Net cash used in financing
activities (1,016) (2) (1,018) (1,306) (2) (1,308)
---------------------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Net (decrease)/increase
in cash and cash equivalents (18) (640) (658) - 482 482
---------------------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Refer to note 2 for details of prior year restatements.
7 Supplier arrangements
Supplier incentives, rebates and discounts, collectively known
as 'supplier arrangements', represent a material deduction to cost
of sales and directly affect the Group's reported margin.
Income is recognised when earned by the Group when all
obligations per the terms of the contract have been performed. Any
supplier arrangements which are linked to inventory purchases are
included within the cost of the related inventory, and therefore
recognised within cost of sales once the inventory is sold. Unpaid
amounts relating to supplier arrangements are recognised within
trade and other receivables, unless there is a legal right of
offset, in which case it is recognised within trade and other
payables.
The types of supplier arrangements applicable to the Group are
as follows:
-- Discounts and supplier incentives - these represent the
majority of all supplier arrangements and are linked to individual
unit sales. The incentive is typically based on an agreed sum per
item sold on promotion for a period and therefore is considered
part of the purchase price of that product.
-- Fixed amounts - these are agreed with suppliers primarily to
support in-store activity including promotions, such as utilising
specific space.
-- Supplier rebates - these are typically agreed on an annual
basis, aligned with the Group's financial year. The rebate amount
is linked to pre-agreed targets such as sales volumes.
-- Marketing and advertising income - advertising income from
suppliers through the Group's subsidiary Nectar 360 Services LLP
and online marketing and advertising campaigns within Argos.
Amounts recognised in the income statement during the year for
fixed amounts, volume-based rebates and marketing and advertising
income are shown below. Discounts and supplier incentives are not
shown as they are deemed to be part of the cost price of
inventory.
52 weeks 52 weeks
to 5 March to 6 March
2022 2021
GBPm GBPm
-------------------------------------- ------------ ------------------
Fixed amounts 208 236
Supplier rebates 94 55
Marketing and advertising income (1) 79 69
Total supplier arrangements 381 360
--------------------------------------- ------------ ------------------
1. The prior year has been restated. There is no impact to any
of the primary statements.
Of the above amounts, the following was outstanding and held on
the balance sheet at the period-end:
52 weeks 52 weeks
to 5 March to 6 March
2022 2021
GBPm GBPm
---------------------------------- ------------ --------------------
Within inventory (4) (5)
Within current trade receivables
Supplier arrangements due 39 49
Accrued supplier arrangements 37 37
Within current trade payables
Supplier arrangements due 47 32
Accrued supplier arrangements 2 5
Deferred income due - (2)
Total supplier arrangements 121 116
----------------------------------- ------------ --------------------
8 Finance income and finance costs
2022 2021 (restated)
Underlying Non-Underlying Total Underlying Non-Underlying Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----------- --------------- ------ ----------- --------------- ------
Interest on bank deposits and
other financial assets 1 - 1 1 - 1
Fair value measurements - 2 2 - 10 10
IAS 19 pension financing income - 15 15 - 19 19
Finance income on net investment
in leases 2 - 2 2 - 2
Finance Income 3 17 20 3 29 32
----------------------------------- ----------- --------------- ------ ----------- --------------- ------
Secured borrowings (40) - (40) (49) - (49)
Unsecured borrowings (2) - (2) (1) - (1)
Lease liabilities (271) (10) (281) (295) (10) (305)
Provisions - amortisation of
discount (1) - (1) (1) - (1)
Interest capitalised - qualifying
assets 2 - 2 4 - 4
Perpetual securities coupon - - - (14) 14 -
Finance costs (312) (10) (322) (356) 4 (352)
----------------------------------- ----------- --------------- ------ ----------- --------------- ------
Refer to note 2 for details of prior year restatements.
9 Taxation
52 weeks to 52 weeks to
5 March 2022 6 March 2021
(Restated)
GBPm GBPm
--------------------------------------------------- -------------- --------------
Current year UK tax 131 34
Current year overseas tax 6 6
Under/(over) provision in prior years 5 (12)
Total current tax expense 142 28
Origination and reversal of temporary differences 52 (46)
(Over)/under provision in prior years (35) 27
Adjustment from changes in tax rates 23 -
Derecognition of capital losses (5) 28
Total deferred tax expense 35 9
Total income tax expense in income statement 177 37
--------------------------------------------------- -------------- --------------
Analysed as:
Underlying tax 154 105
Non-underlying tax 23 (68)
Total income tax expense in income statement 177 37
--------------------------------------------------- -------------- --------------
Underlying tax rate 21.1% 29.4%
Effective tax rate 20.7% (22.6)%
--------------------------------------------------- -------------- --------------
Refer to note 2 for details of prior year restatements.
10 Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, excluding those
held by the Employee Share Ownership Trusts, which are treated as
cancelled.
In calculating the diluted earnings per share, the weighted
average number of ordinary shares in issue is adjusted to assume
conversion of all potentially dilutive ordinary shares. These
represent share options granted to employees where the exercise
price is less than the average market price of the Company's
ordinary shares during the year and the number of shares that would
be issued if all perpetual subordinated convertible bonds are
assumed to be converted.
Underlying earnings per share is provided by excluding the
effect of any non-underlying items as defined in note 4. This
alternative measure of earnings per share is presented to reflect
the Group's underlying trading performance. All operations are
continuing for the periods presented.
2022 2021
(Restated)
million million
----------------------------------------------------------------- ----------- -------------
Weighted average number of shares in issue 2,271.8 2,210.0
Weighted average number of dilutive share options 39.6 21.7
Weighted average number of dilutive subordinated perpetual
convertible bonds 39.6 88.4
Total number of shares for calculating diluted earnings
per share 2,351.0 2,320.1
----------------------------------------------------------------- ----------- -------------
GBPm GBPm
----------------------------------------------------------------- ----------- -------------
Profit/(loss) for the financial period (net of tax) 677 (201)
Less profit attributable to:
Holders of perpetual convertible bonds - (7)
Profit/(loss) for the financial period attributable to
ordinary shareholders 677 (208)
----------------------------------------------------------------- ----------- -------------
Diluted earnings/(loss) for calculating diluted earnings/(loss)
per share 677 (208)
----------------------------------------------------------------- ----------- -------------
Profit/(loss) for the financial period attributable to
ordinary shareholders of the parent 677 (208)
Adjusted for non-underlying items (note 4) (124) 521
Tax on non-underlying items 23 (68)
Add back coupons on perpetual securities (net of tax) - 14
Underlying profit after tax attributable to ordinary
shareholders of the parent 576 259
Add coupon on subordinated perpetual convertible bonds
(net of tax) - 6
Diluted underlying profit after tax attributable to ordinary
shareholders of the parent 576 265
----------------------------------------------------------------- ----------- -------------
Pence Pence
per share per share
----------------------------------------------------------------- ----------- -------------
Basic earnings/(loss) 29.8 (9.4)
Diluted earnings/(loss)(1) 28.8 (9.4)
Underlying basic earnings 25.4 11.7
Underlying diluted earnings 24.5 11.4
----------------------------------------------------------------- ----------- -------------
1. Basic and diluted loss per share are the same in the prior
year as the dilutive share options and their respective earnings
adjustments are anti-dilutive.
Refer to note 2 for details of prior year restatements.
11 Dividends
2022 2021 2022 2021
pence pence
per per
share share GBPm GBPm
------------------------------------------------- ------- ------- ----- -----
Amounts recognised as distributions to ordinary
shareholders in the year:
Final dividend of prior financial year 7.4 - 164 -
Interim dividend of current financial year 3.2 3.2 74 71
Special dividend of prior financial year - 7.3 - 161
10.6 10.5 238 232
------------------------------------------------- ------- ------- ----- -----
After the balance sheet date on 27 April 2022 a final dividend
of 9.9 pence per share (2021: 7.4 pence per share) was proposed by
the Directors in respect of the 52 weeks to 5 March 2022. This
results in a total final proposed dividend of GBP230 million (2021:
GBP164 million).
Subject to shareholders' approval at the Annual General Meeting,
the dividend will be paid on 15 July 2022 to the shareholders on
the register at 10 June 2022. The proposed final dividend has not
been included as a liability at 5 March 2022.
12 Property, plant and equipment
Land and Fixtures
buildings and equipment Total
GBPm GBPm GBPm
----------------------------------------- ----------- --------------- -------
Cost
At 7 March 2021 9,655 5,288 14,943
Additions 87 330 417
Disposals (40) (330) (370)
Transfer to asset held for sale (9) - (9)
----------------------------------------- ----------- --------------- -------
At 5 March 2022 9,693 5,288 14,981
----------------------------------------- ----------- --------------- -------
Accumulated depreciation and impairment
At 7 March 2021 2,793 3,563 6,356
Depreciation expense for the year 170 421 591
Impairment loss for the year - 6 6
Disposals (37) (328) (365)
Transfer to asset held for sale (9) - (9)
----------------------------------------- ----------- --------------- -------
At 5 March 2022 2,917 3,662 6,579
----------------------------------------- ----------- --------------- -------
Net book value at 5 March 2022 6,776 1,626 8,402
----------------------------------------- ----------- --------------- -------
Capital work-in-progress included above 103 314 417
----------------------------------------- ----------- --------------- -------
Cost
At 8 March 2020 9,716 5,362 15,078
Additions 89 330 419
Disposals (59) (404) (463)
Transfer to asset held for sale (91) - (91)
----------------------------------------- ------ ------ -------
At 6 March 2021 9,655 5,288 14,943
----------------------------------------- ------ ------ -------
Accumulated depreciation and impairment
At 8 March 2020 2,693 3,436 6,129
Depreciation expense for the year 173 456 629
Impairment loss for the year 26 62 88
Disposals (32) (391) (423)
Transfer to asset held for sale (67) - (67)
----------------------------------------- ------ ------ -------
At 6 March 2021 2,793 3,563 6,356
----------------------------------------- ------ ------ -------
Net book value at 6 March 2021 6,862 1,725 8,587
----------------------------------------- ------ ------ -------
Capital work-in-progress included above 122 320 442
----------------------------------------- ------ ------ -------
13 Leases
Group as lessee
The Group's lease portfolio is principally comprised of property
leases of land and buildings in relation to stores, distribution
centres and support offices, but also includes other assets such as
motor vehicles. The leases have varying terms and often include
break clauses or options to renew beyond the non-cancellable
periods.
Set out below are the carrying amounts of right-of-use assets
recognised and the movements during the period:
Land and
buildings Equipment Total
Net book value GBPm GBPm GBPm
--------------------------------- ----------- ---------- ------
At 7 March 2021 4,414 333 4,747
New leases and modifications(1) 1,244 50 1,294
Depreciation charge (389) (89) (478)
Impairment charge (3) - (3)
At 5 March 2022 5,266 294 5,560
--------------------------------- ----------- ---------- ------
(1) Includes new leases, terminations, modifications and
reassessments
At 8 March 2020 4,536 290 4,826
--------------------------------- ------ ----- ------
New leases and modifications(1) 413 129 542
Depreciation charge (398) (86) (484)
Impairment charge (137) - (137)
At 6 March 2021 4,414 333 4,747
--------------------------------- ------ ----- ------
1. Includes new leases, terminations, modifications and
reassessments
Set out below are the carrying amounts of lease liabilities and
the movements during the period:
2022 2021
GBPm GBPm
---------------------------------- ------ ------
At 7 March 2021 and 8 March 2020 5,834 5,774
New leases and modifications 1,280 561
Interest expense 281 305
Payments (774) (806)
At 5 March 2022 and 6 March 2021 6,621 5,834
---------------------------------- ------ ------
Current 526 524
Non-current 6,095 5,310
---------------------------------- ------ ------
The Group presents additions to lease liabilities and
right-of-use assets in line with the disclosure requirements of
IFRS 16 'Leases'. In doing so, additions to right-of-use assets and
lease liabilities above include the net impact of new leases,
terminations, modifications, and reassessments. This year includes
the impact of exercising purchase options on 21 leased supermarkets
held by a property investment pool in which the Group holds an
interest. The purchase options were not included within the lease
liabilities at inception of the lease as the Group was not
reasonably certain to exercise them. Following the exercise of the
options, the respective lease liabilities have been remeasured to
include the assumed purchase price, leading to an increase in lease
liabilities with a corresponding increase to the right-of-use
asset. The purchases will be completed in the financial year ended
2 March 2024 when the existing leases end.
The purchase price is subject to negotiation and at the year-end
had not yet been agreed. Therefore to remeasure the lease
liability, the purchase price has been estimated based on up to
date property valuations carried out by independent valuers not
connected with the Group. The lease liabilities (and right-of-use
assets) may be subsequently adjusted as the property valuations
change, and when purchase prices are agreed. This is not considered
a significant estimate in line with IAS 1 "Presentation of
financial statements".
Guarantee in relation to property pool
When the properties are sold by the property investment pool in
the financial year ended 2 March 2024, the proceeds will be used to
settle bonds issued by the structure. The Group has previously
issued a financial guarantee in relation to this, which is
triggered if there is a shortfall in the property proceeds and the
bonds cannot be fully repaid. The guarantee is up to GBP300
million.
The current property valuations indicate that there is
significant headroom and therefore no shortfall.
In the event of a delay in the property negotiations, meaning
the bond repayment is due before the properties have been sold, the
guarantee will be called upon in full. In such an event, once the
properties are sold, Sainsbury's will recover the guarantee payment
in full from the property proceeds.
14 Intangible assets
Computer Acquired Customer
Goodwill software brands relationships Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- ---------- --------- --------------- ------
Cost
At 7 March 2021 394 899 229 32 1,554
Additions - 278 - - 278
Disposals (1) (2) (100) - - (102)
-------------------------------- --------- ---------- --------- --------------- ------
At 5 March 2022 392 1,077 229 32 1,730
-------------------------------- --------- ---------- --------- --------------- ------
Accumulated amortisation and
impairment
--------------------------------
At 7 March 2021 28 457 127 28 640
Amortisation expense for the
year - 129 20 2 151
Disposals (2) (65) - - (67)
-------------------------------- --------- ---------- --------- --------------- ------
At 5 March 2022 26 521 147 30 724
-------------------------------- --------- ---------- --------- --------------- ------
Net book value at 5 March 2022 366 556 82 2 1,006
-------------------------------- --------- ---------- --------- --------------- ------
Cost
At 8 March 2020 400 749 231 32 1,412
Additions - 172 - - 172
Disposals (6) (22) (2) - (30)
-------------------------------- --------- ---------- --------- --------------- ------
At 6 March 2021 394 899 229 32 1,554
-------------------------------- --------- ---------- --------- --------------- ------
Accumulated depreciation and
impairment
At 8 March 2020 22 281 109 26 438
Amortisation expense for the
year - 114 20 2 136
Impairment loss for the year 12 84 - - 96
Disposals (6) (22) (2) - (30)
-------------------------------- --------- ---------- --------- --------------- ------
At 6 March 2021 28 457 127 28 640
-------------------------------- --------- ---------- --------- --------------- ------
Net book value at 6 March 2021 366 442 102 4 914
-------------------------------- --------- ---------- --------- --------------- ------
1. Disposals include write offs of software-as-a-service
balances as disclosed in note 2.
15 Provisions
Property provisions
Where the Group no longer operates from a leased property,
onerous property contract provisions are recognised for the least
net cost of exiting from the contract. Unless a separate exit
agreement with a landlord has already been agreed, the Group's
policy is that this onerous contract provision includes all
unavoidable costs of meeting the obligations of the contract. The
amounts provided are based on the Group's best estimates of the
likely committed outflows and site closure dates. These provisions
do not include rent in accordance with IFRS 16, however do include
unavoidable costs related to the lease such as service charges and
insurance. These provisions historically included business rates,
however business rates are considered a statutory obligation rather
than a contractual one, and are therefore now recognised as a
periodic cost in line with IFRIC 21 "Levies". Prior period
comparatives have been restated to remove business rates from
previously recognised property provisions. Refer to note 2 for
further details.
Property provisions also include provisions for dilapidations
which are recognised where the Group has the obligation to
make-good its leased properties. These provisions are recognised
based on historically settled dilapidations which form the basis of
the estimated future cash outflows. Any difference between amounts
expected to be settled and the actual cash outflow will be
accounted for in the period when such determination is made.
Where the Group is able to exit lease contracts before the
expiry date or agree sublets, this results in the release of any
associated property provisions. Such events are subject to the
agreement of landlords, therefore the Group makes no assumptions on
the ability to either exit or sublet a property until a position is
agreed.
Insurance provisions
The provision relates to the Group's outstanding insurance
claims liabilities in relation to public and employer's liability
claims, and third party motor claims. Claims provisions are based
on assumptions regarding past claims experience and on assessments
by an independent actuary and are intended to provide a best
estimate of the most likely or expected outcome.
Restructuring provisions
A restructuring provision is recognised when the Group has
developed a detailed formal plan for the restructuring and has
raised a valid expectation in those affected that it will carry out
the restructuring by starting to implement the plan or announcing
its main features to those affected by it. The measurement of a
restructuring provision includes only the direct expenditures
arising from the restructuring.
The charge for the year mostly comprises redundancy payments as
part of Argos store closures, depot closures, and café and food
counter closures announced during the year as detailed in note
4.
Financial services related provisions
Financial services loan commitment provisions reflect expected
credit losses modelled in relation to loan commitments not yet
recognised on the balance sheet, including on credit cards and
Argos store cards.
Other financial services related provisions are primarily in
relation to Argos Financial Services customers in respect of
potential redress payable arising from the historic sales of
Payment Protection Insurance (PPI).
The eventual cost is dependent on response rates, uphold rates,
complaint rates, redress costs and claim handling costs. The
provision represents management's best estimate of future costs.
These assumptions are inherently uncertain and the ultimate
financial impact may differ from the amount provided.
Property Insurance Restructuring Financial Other Total
provisions provisions services provisions
related
provisions
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------------ -------------- ------------ ------------ ------
At 7 March 2021 (restated) 164 67 54 26 38 349
Additional provisions 9 34 44 6 1 94
Unused amounts reversed (7) (5) (16) (3) (24) (55)
Utilisation of provision (27) (34) (53) (3) (1) (118)
Amortisation of discount 1 - - - - 1
At 5 March 2022 140 62 29 26 14 271
------------ ------------ -------------- ------------ ------------ ------
Current 16 22 28 26 8 100
Non-current 124 40 1 - 6 171
---------------------------- ------------ ------------ -------------- ------------ ------------ ------
At 8 March 2020 (restated) 38 63 20 37 16 174
Additional provisions 146 33 61 7 32 279
Unused amounts reversed (5 ) (2) - (2) - (9)
Utilisation of provision (16 ) (27) (27) (16) (10) (96)
Amortisation of discount 1 - - - - 1
At 6 March 2021 (restated) 164 67 54 26 38 349
---------------------------- ------------ ------------ -------------- ------------ ------------ ------
Current 72 24 53 21 29 199
Non-current 92 43 1 5 9 150
---------------------------- ------------ ------------ -------------- ------------ ------------ ------
16 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents comprise the following:
2022 2021
(restated)
GBPm GBPm
-------------------------------------------------- ----- -----------
Cash in hand and bank balances 566 325
Money market funds and deposits 25 398
Deposits at central banks 234 852
Cash and bank balances as reported in the Group
balance sheet 825 1,575
-------------------------------------------------- -----
Bank overdrafts (7) (99)
Net cash and cash equivalents as reported in the
Group cash flow statement 818 1,476
-------------------------------------------------- -----
Of the above balance, GBP18 million (2021: GBP20 million) was
restricted as at year-end. Of the GBP18 million (2021: GBP20
million) restricted cash, GBP15 million (2021: GBP17 million) is
held as a reserve deposit with the Bank of England in accordance
with statutory requirements. This deposit is not available for use
in day-to-day operations. A further GBP3 million (2021: GBP3
million) is restricted for Insurance purposes.
Refer to note 2 for details of restatement.
17 Analysis of net debt
The Group's definition of net debt includes the following:
-- Cash
-- Borrowings and overdrafts
-- Lease liabilities
-- Perpetual securities
-- Debt-related financial assets at fair value through other comprehensive income
-- Derivatives used in hedging borrowings
Net debt includes the capital injections to Sainsbury's Bank,
but excludes the net debt of Sainsbury's Bank and its subsidiaries
(Financial Services). Financial Services' net debt balances are
excluded because they are required as part of the business as usual
operations of a bank, as opposed to specific forms of financing for
the Group. Derivatives exclude those not used to hedge borrowings,
and borrowings exclude bank overdrafts as they are disclosed
separately.
A reconciliation of opening to closing net debt is included
below. Balances and movements for the total Group and Financial
Services are shown in addition to Retail to enable reconciliation
between the Group balance sheet and Group cash flow statement.
Cash Movements Non-Cash Movements
7 March Cash flows Net Accrued Other Changes 5 March
2021 excluding interest Interest non-cash in fair 2022
interest (received) movements value
/ paid
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Retail
Net derivative financial
instruments (14) - 10 (10) 11 8 5
Borrowings (excluding
overdrafts) (826) 248 28 (25) - - (575)
Lease liabilities (5,829) 491 281 (281) (1,280) - (6,618)
Arising from financing
activities (6,669) 739 319 (316) (1,269) 8 (7,188)
Financial assets at fair
value through other comprehensive
income 1 - - - - (1) -
Cash and cash equivalents
(restated) 546 (110) - - - - 436
Bank overdrafts (restated) (99) 92 - - - - (7)
Retail net debt (excluding
perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Financial Services
Net derivative financial
instruments - - - - - 4 4
Borrowings (excluding
overdrafts) (179) - 10 (11) - 1 (179)
Lease liabilities (5) 2 - - - - (3)
Arising from financing
activities (184) 2 10 (11) - 5 (178)
Financial assets at fair
value through other comprehensive
income 537 (115) - - - (4) 418
Cash and cash equivalents 1,029 (640) - - - - 389
Financial services net
debt 1,382 (753) 10 (11) - 1 629
Group
Net derivative financial
instruments (14) - 10 (10) 11 12 9
Borrowings (excluding
overdrafts) (1,005) 248 38 (36) - 1 (754)
Lease liabilities (5,834) 493 281 (281) (1,280) - (6,621)
Arising from financing
activities (6,853) 741 329 (327) (1,269) 13 (7,366)
Financial assets at fair
value through other comprehensive
income 538 (115) - - - (5) 418
Cash and cash equivalents
(restated) 1,575 (750) - - - - 825
Bank overdrafts (restated) (99) 92 - - - - (7)
Group net debt (excluding
perpetual securities) (4,839) (32) 329 (327) (1,269) 8 (6,130)
Retail net debt (excluding
perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Perpetual convertible
bonds (248) 8 - - 240 - -
Retail net debt (including
perpetual securities) (6,469) 729 319 (316) (1,029) 7 (6,759)
Of which:
Leases (5,829) (6,618)
Net debt excluding lease
liabilities (640) (141)
Other non-cash movements relate to interest accruals and new
leases. Refer to note 2 for details of restatement.
Cash Movements Non-Cash Movements
8 March Cash flows Net Accrued Other Changes 6 March
2020 excluding interest Interest non-cash in fair 2021
interest (received) movements value
/ paid
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Retail
Net derivative financial
instruments (15) - 6 (5) 5 (5) (14)
Borrowings (excluding
overdrafts) (1,116) 289 38 (37) - - (826)
Lease liabilities (5,768) 499 305 (305) (560) - (5,829)
Arising from financing
activities (restated) (6,899) 788 349 (347) (555) (5) (6,669)
Financial assets at fair
value through other comprehensive
income 1 - - - - - 1
Cash and cash equivalents
(restated) 506 40 - - - - 546
Bank overdrafts (restated) (59) (40) - - - - (99)
Retail net debt (excluding
perpetual securities)
(restated) (6,451) 788 349 (347) (555) (5) (6,221)
Financial Services
Net derivative financial
instruments 4 - - - - (4) -
Bank overdrafts - - - - - - -
Borrowings (excluding
overdrafts) (180) - - - - 1 (179)
Lease liabilities (6) 2 - - (1) - (5)
Arising from financing
activities (182) 2 - - (1) (3) (184)
Financial assets at fair
value through other comprehensive
income 802 (267) - - - 2 537
Cash and cash equivalents 547 482 - - - - 1,029
Financial services net
debt 1,167 217 - - (1) (1) 1,382
Group
Net derivative financial
instruments (11) - 6 (5) 5 (9) (14)
Borrowings (excluding
overdrafts) (1,296) 289 38 (37) - 1 (1,005)
Lease liabilities (5,774) 501 305 (305) (561) - (5,834)
Arising from financing
activities (restated) (7,081) 790 349 (347) (556) (8) (6,853)
Financial assets at fair
value through other comprehensive
income 803 (267) - - - 2 538
Cash and cash equivalents
(restated) 1,053 522 - - - - 1,575
Bank overdrafts (restated) (59) (40) - - - - (99)
Group net debt (excluding
perpetual securities)
(restated) (5,284) 1,005 349 (347) (556) (6) (4,839)
Retail net debt (excluding
perpetual securities) (6,451) 788 349 (347) (555) (5) (6,221)
Perpetual capital securities (248) 250 - - (2) - -
Perpetual convertible
bonds (248) - - - - - (248)
Retail net debt (including
perpetual securities) (6,947) 1,038 349 (347) (557) (5) (6,469)
Of which:
Leases (5,768) (5,829)
Net debt excluding lease
liabilities (1,179) (640)
Refer to note 2 for details of restatement.
Reconciliation of net cash flow to movement in net debt
52 weeks to 52 weeks
to
5 March 6 March
2022 2021
GBPm GBPm
Opening net debt (6,469) (6,947)
Cash flow movements
Net (decrease)/increase in cash and cash
equivalents (including overdrafts) (658) 482
Elimination of Financial Services movement
in cash and cash equivalents 640 (482)
Repayment of perpetual capital securities 8 250
Decrease in Retail borrowings 248 289
Decrease in Retail lease obligations 491 499
Net interest paid on components of Retail
net debt 319 349
Changes in net debt resulting from cash
flow 1,048 1,387
Non-cash movements
Accrued interest (316) (347)
Retail fair value and other non-cash movements (1,022) (562)
Changes in net debt resulting from non-cash
movements (1,338) (909)
Movement in net debt (290) 478
Closing net debt (6,759) (6,469)
18 Borrowings
2022 2021
Current Non-current Total Current Non-current Total
GBPm GBPm GBPm GBPm GBPm GBPm
Loan due 2031 44 531 575 55 572 627
Bank overdrafts (restated) 7 - 7 99 - 99
Bank loans due 2021 - - - 199 - 199
Sainsbury's Bank Tier 2
Capital due 2027 3 176 179 3 176 179
54 707 761 356 748 1,104
Refer to note 2 for details of restatement.
a) Loan due 2031
The loan is secured against 48 (2021: 48) supermarket
properties. This is an inflation linked amortising loan from the
finance company Longstone Finance plc with an outstanding principal
value of GBP566 million (2021: GBP614 million) fixed at a real rate
of 2.36 per cent where principal and interest rate are uplifted
annually by RPI subject to a cap at five per cent and a floor at
nil per cent. The carrying value of the loan is GBP575 million
(2021: GBP627 million) with a final repayment date of April
2031.
The Group has entered into inflation swaps to convert GBP490
million (2021: GBP490 million) of the GBP566 million (2021: GBP614
million) loan from RPI linked interest to fixed rate interest until
April 2023. These transactions have been designated as cash flow
hedges.
The principal activity of Longstone Finance plc is the issuing
of commercial mortgage-backed securities and applying the proceeds
towards the secured loans due 2031 with the Group as summarised
above.
Intertrust Corporate Services Limited holds all the issued share
capital of Longstone Finance Holdings Limited on trust for
charitable purposes. Longstone Finance Holdings Limited
beneficially owns all the issued share capital of Longstone Finance
plc. As the Group has no interest, power or bears any risk over
these entities they are not included in the Group
consolidation.
b) Bank overdrafts
Bank overdrafts are repayable on demand and bear interest at a
spread above Bank of England base rate.
c) Bank loan due 2021
On 6(th) August 2021 the Group repaid the secured GBP200m Green
Loan and subsequently ensured the release of all security
interests.
d) Sainsbury's Bank Tier 2 Capital due 2027
The Bank issued GBP175 million of fixed rate reset callable
subordinated Tier 2 notes on 23 November 2017. The notes pay
interest on the principal amount at a rate of six per cent per
annum, payable in equal instalments semi-annually in arrears, until
23 November 2022 at which time the interest rate will reset. The
Bank has the option to redeem these notes on 23 November 2022.
e) Short term borrowings
The Revolving Credit Facility is split into two Facilities, a
GBP300 million Facility (A) and a GBP1,094 million Facility (B).
Facility A has a final maturity of April 2025 and Facility B has a
final maturity of October 2024. At 5 March 2022, the Revolving
Credit Facility was undrawn (2021: undrawn).
The Revolving Credit Facility incurs commitment fees at market
rates and drawdowns bear interest at a margin above SONIA.
The Group maintains uncommitted facilities to provide additional
capacity to fund short-term working capital requirements. Drawdowns
on these uncommitted facilities bear interest at a margin. The
uncommitted facilities were undrawn at 5 March 2022 (2021:
undrawn).
19 Retirement benefit obligations
Background
The retirement benefit obligations relate to the Sainsbury's
Pension Scheme plus three unfunded pension liabilities for former
senior employees of Sainsbury's and Home Retail Group.
The Sainsbury's Pension Scheme has two sections, the Sainsbury's
Section which holds the assets and liabilities of the original
Sainsbury's Pension Scheme, and the Argos Section which holds the
assets and liabilities of the Home Retail Group Pension Scheme.
Each section's assets are segregated by deed and ring fenced for
the benefit of the members of that section. The Scheme is run by a
corporate trustee with nine directors.
The Scheme is also used to pay life assurance benefits to
current (including new) colleagues.
The retirement benefit obligations at the year-end have been
calculated by Isio, the actuarial advisers to the Group, using the
projected unit credit method and based on adjusting the position at
the date of the previous triennial valuation for known events and
changes in market conditions as allowed under IAS 19 'Employee
Benefits'.
The amounts recognised in the balance sheet are as follows:
2022 2021
Sainsbury's Argos Group Sainsbury's Argos Group
GBPm GBPm GBPm GBPm GBPm GBPm
Present value of funded obligations (8,060) (1,313) (9,373) (8,808) (1,410) (10,218)
Fair value of plan assets 10,158 1,535 11,693 9,596 1,404 11,000
Retirement benefit surplus/(deficit) 2,098 222 2,320 788 (6) 782
Present value of unfunded obligations (20) (17) (37) (21) (17) (38)
Retirement benefit surplus/(deficit) 2,078 205 2,283 767 (23) 744
The retirement benefit surplus and the associated deferred
income tax balance are shown within different line items on the
face of the balance sheet.
The movements in the Group's net defined benefit surplus are as
follows:
2022 2021
GBPm GBPm
As at the beginning of the year 744 1,119
Net interest income 15 19
Remeasurement gains/(losses) 1,457 (482)
Pension scheme expenses (7) (7)
Contributions by employer 71 101
Past service credit/(charge) 3 (6)
As at the end of the year 2,283 744
The principal actuarial assumptions used at the balance sheet
date are as follows:
2022 2021
% %
--------
Discount rate 2.40 1.95
Inflation rate - RPI 3.60 3.15
Inflation rate - CPI 2.90 2.45
Future pension increases 2.30 - 2.15
3.45 - 3.10
--------
20 Contingent liabilities and contingent assets
The Group has a number of contingent liabilities in respect of
historic lease guarantees, particularly in relation to the disposal
of assets, which if the current tenant and their ultimate parents
become insolvent, may expose the Group to a material liability.
This liability decreases over time as the leases expire. The Group
has considered a number of factors, including past history of
default as well as the profitability and cash generation of the
current leaseholders, and has concluded that the likelihood of pay
out is remote.
Along with other retailers, the Group is currently subject to
claims from current and ex-employees in the Employment Tribunal for
equal pay under the Equality Act 2010 and/or the Equal Pay Act
1970. There are currently circa 8,600 equal pay claims from circa
4,400 claimants, in which the claimants are alleging that their
work within Sainsbury's stores is or was, of equal value to that of
colleagues working in Sainsbury's distribution centres, and that
differences in terms and conditions relating to pay are not
objectively justifiable. The claimants are seeking the differential
back pay based on the higher wages in distribution centres, and the
equalisation of wages and terms and conditions on an ongoing basis.
The Group believes further claims will be served.
There are three stages in the tribunal procedure for equal value
claims of this nature and the claimants will need to succeed in all
three. The first stage is whether store claimants have the legal
right to make the comparison with depot workers. Following European
and Supreme Court decisions in other similar litigation,
Sainsbury's has conceded this point. The second stage is the
lengthy process to determine whether any of the claimants' roles
are of equal value to their chosen comparators. This process is
likely to continue for several more years. In the event that any of
the claimants succeed at the second stage there will be further
hearings, in the years following, to consider whether any pay
differential is justified.
Given that the outcome of the second and third stages in the
litigation remains highly uncertain at this stage, the Group cannot
make any assessment of the likelihood nor quantum of any outcome.
No provision has therefore been recognised on the Group's balance
sheet. There are substantial factual and legal defences to these
claims and the Group intends to defend them vigorously.
As disclosed in note 4 to the financial statements, the Group
had a number of ongoing legal cases in relation to overcharges
arising from payment card interchange fees. During the year
settlements have been reached in two of these cases, resulting in
non-underlying income of GBP167 million being recognised. The last
of these cases goes to trial for a final determination of quantum
in early 2023. A range of possible outcomes is possible, including
GBPnil. As the outcome and quantum of any award is not virtually
certain no income has been recognised in accordance with IAS 37:
'Provisions, Contingent Liabilities and Contingent Assets'.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors use
various APMs which they believe provide additional useful
information for understanding the financial performance and
financial health of the Group. These APMs should be considered in
addition to, and are not intended to be a substitute for IFRS
measurements. As they are not defined by International Financial
Reporting Standards, they may not be directly comparable with other
companies who use similar measures.
All of the following APMs relate to the current period's results
and comparative periods where provided.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Income statement
- Revenue
Retail Revenue Group sales Shows the A reconciliation of the measure is provided
sales less Financial annual in note 5 of the financial statements.
Services rate of
revenue. growth in
the Group's
Retail
business
sales.
Like-for-like No direct Year-on-year The measure
sales equivalent growth is used The reported retail like-for-like
in sales widely in sales decline of (2.3) per
including VAT, the retail cent is based on a combination
excluding industry as of Sainsbury's like-for-like
fuel, an indicator sales and Argos like-for-like
excluding of current sales for the 2022. See movements
Financial trading below : 2022 2021
Services, performance Retail like-for-like (exc.
for stores and is Fuel, inc. VAT) (2.3)% 8.1%
that have useful when Underlying net new space impact (0.3)% (0.8)%
been open for comparing Retail sales growth (exc. Fuel,
more than growth inc. VAT) (2.6)% 7.3%
one year. between Fuel impact 6.0% (7.2)%
retailers Total retail sales growth (inc.
The relocation that have fuel, inc. VAT) 3.4% 0.1%
of Argos different VAT impact (0.4)% 0.6%
stores into profiles of Total retail sales growth 3.0% 0.7%
Sainsbury's expansion,
supermarkets disposals
are classified and
as new space, closures.
while
the host
supermarket
is classified
like-for-like.
The impact on
sales
of stores
which were
temporarily
closed due
to COVID-19
have been
included
within LFL
sales. Only
permanently
closed sites
and those
temporarily
closed for
non COVID-19
related
reasons are
treated
as non LFL.
Income statement - Profit
Retail Profit Underlying This is the 2022 2021 (Restated)
underlying before earnings lowest GBPm GBPm
operating tax before level at which Group PBT (note 6) 854 (164)
profit interest, tax, the (Less)/Add back Group non-underlying
Financial retail segment items (note 4) (124) 521
Services can Group UPBT 730 357
operating be viewed from Financial Services underlying
profit and a operating (profit)/loss (38) 21
Sainsbury's management Retail underlying profit
underlying perspective, before tax 692 378
share of with finance Net underlying finance costs 309 353
post-tax costs Retail underlying operating
profit from managed for profit 1,001 731
joint ventures the Group
and as a whole. Retail sales (note 6) 29,463 28,617
associates. Retail underlying operating
margin 3.40% 2.55%
Underlying Profit Underlying In order to Underlying profit before tax is bridged to statutory
profit before results provide profit before tax in the income statement and
before tax exclude shareholders note 4 of the financial statements.
tax items with
recognised in additional The adjusted items are as described in note
reported insight 4 of the financial statements
profit or loss into the
before tax year-on-year
which, if performance of
included, the
could distort business, this
comparability adjusted
between measure of
periods. In profit
determining is provided to
which items to supplement
exclude the reported
from IFRS
underlying numbers and
profit, reflects
the Group how the
considers business
items which measures
are performance
significant internally.
either by
virtue of
their size
and/or nature,
or that are
non-recurring.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Income statement
- Profit
Underlying Basic Earnings per This is a key A reconciliation of the measure is provided
basic earnings share using measure in note 10 of the financial statements.
earnings per share underlying to evaluate
per share profit as the
described performance
above. of the
business and
returns
generated
for investors.
Retail No direct Retail EBITDA is used 2022 2021 (Restated)
underlying equivalent underlying to GBPm GBPm
EBITDA operating review the Retail underlying operating
profit as above, retail profit 1,001 731
before segment's Add: Retail depreciation
underlying profit and amortisation expense 1,197 1,226
depreciation, generation and Less: Non-underlying depreciation
and the and amortisation (53) (47)
amortisation. sustainability Retail underlying EBITDA 2,145 1,910
of
ongoing Retail sales (note 6) 29,463 28,617
capital Retail underlying EBITDA
reinvestment margin 7.28% 6.67%
and finance
costs.
Underlying Finance Net finance This provides A reconciliation of this measure is included
net income costs before shareholders in note 8 of the financial statements.
finance less finance any with
costs costs non-underlying additional The adjusted items are as follows:
items insight
as defined above into the * Perpetual securities coupons - these are accounted
that are underlying for as equity in line with IAS 32 'Financial
recognised net finance instruments: Presentation', however are accrued on a
within finance costs straight-line basis and included as an expense within
income / of the Group underlying profit as they are included by management
expenses. by excluding when assessing Group borrowings. These are now GBPnil
non-recurring following the redemption of the perpetual convertible
one-off bond during the year.
items.
* Non-underlying finance movements - these include fair
value remeasurements on derivatives not in a hedging
relationship and lease interest on impaired
non-trading sites, including site closures. The fair
value movements are driven by external market factors
and can significantly fluctuate year-on-year. They
are therefore excluded to ensure consistency between
periods. Lease interest on impaired, non-trading
sites is excluded as they do not contribute to the
operating activities of the Group.
* IAS 19 pension interest. Although a recurring item,
the Group has chosen to exclude net retirement
benefit income and costs from underlying profit as,
following closure of the defined benefit scheme to
future accrual, it is not part of the ongoing
operating activities of the Group and its exclusion
is consistent with how the Directors assess the
performance of the business.
Underlying Effective Tax on Provides an The tax on non-underlying items is included
tax rate tax rate underlying indication in note 4 of the financial statements
items, of the tax
divided by rate across
underlying the Group
profit before
before tax. the impact of
non-underlying
items.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS measure
Cash flows and net debt
Retail No direct N/A To help the
cash flow equivalent reader 5 March 6 March
items understand 2022 2021
in Financial cash flows Ref GBPm GBPm
Review of the Net interest paid a (323) (372)
business a Repayment of lease liabilities b (491) (499)
summarised Repayment of borrowings c (256) (539)
cash flow Other d (27) (13)
statement Dividends and distributions
is included received e 2 22
within
the
Financial
Review.
As part of
this a
number
of line
items have
been
combined.
The
cash flow in
note 6
of the
financial
statements
includes a
reference
to show what
has been
combined in
these line
items.
Retail Net cash Net cash This
free cash generated generated measures 5 March 6 March
flow from from retail cash 2022 2021
operating operations, generation, GBPm GBPm
activities after working Cash generated from retail operations 1,940 2,275
perpetual capital Net interest paid (ref (a) above) (323) (372)
security efficiency Corporation Tax (23) (94)
coupons and capital Retail purchase of property, plant
and cash expenditure and equipment (416) (423)
capital of the Retail purchase of intangibles
expenditure retail assets (229) (145)
and business Retail proceeds from disposal
including of property, plant and equipment 46 27
payments Initial direct costs on right-of-use
of lease assets (3) (7)
obligations, Repayments of obligations under
cash flows leases (491) (499)
from Dividends and distributions received 2 22
joint Retail free cash flow 503 784
ventures
and
associates
and
Sainsbury's
Bank capital
injections.
Adjusted Cash This presents This enables 5 March 6 March
net cash generated retail management 2022 2021
generated from operating to assess GBPm GBPm
from retail operations cash flows the cash Retail cash generated from operating
operations adjusted generated activities (note 6) 1,598 1,832
(per Financial for movements from its Perpetual security coupons (4) (23)
Review) in working core retail Adjusted net cash generated from
capital, operations. operating activities 1,594 1,809
less net
interest
paid
(including
distributions
on perpetual
securities)
and
pension cash
contributions
.
Core retail No direct Capital This allows 2022 2021
capital equivalent expenditure management GBPm GBPm
expenditure excluding to assess Purchase of property, plant and
Sainsbury's core retail equipment (416) (423)
Bank. capital Purchase of intangibles (229) (145)
expenditure Cash capital expenditure (645) (568)
in the
period in
order
to review
the
strategic
business
performance.
APM Closest Definition Purpose Reconciliation
equivalent
IFRS
measure
Underlying No direct Removes To provide a 6 March
working equivalent working reconciliation 5 March 2021
capital capital of the working 2022 (Restated)
movements and cash capital GBPm GBPm
movements movement Retail working capital movements
relating to in the per cash flow (note 6) (306) 612
non-underlying Financial
items. statements to Adjustments for:
the underlying Retail non-underlying impairment
working charges (note 6) 8 216
capital Non-underlying restructuring and
movement in impairment charges (note 4) (92) (548)
the Bank non-underlying restructuring
Financial and impairment charges 7 105
review. Accelerated depreciation (note 4) 33 27
Gains on early termination of leases
(note 4) (9) (16)
Profit on disposal of properties
within restructuring programme (note
4) (12) -
ATM income (note 4) 2 42
Income recognised in relation to
legal disputes (note 4) 180 -
Other 1 2
Non-underlying working capital movements
before cash movements 118 (172)
Non-underlying cash movements:
Restructuring (note 4) 114 39
Bank restructuring (4) -
ATM income (note 4) (14) (27)
Income recognised in relation to
legal disputes (note 4) (93) -
Retail non-underlying operating
cash flows (excluding pensions) 3 12
Total adjustments for non-underlying
working capital 121 (160)
Underlying working capital movements (185) 452
APM Closest Definition Purpose Reconciliation
equivalent
IFRS measure
Net debt Borrowings, Net debt includes This shows the A reconciliation of the measure is provided in note
cash, the capital overall 17 of the financial statements. In addition, to
derivatives, injections strength of aid comparison to the balance sheet, reconciliations
financial into Sainsbury's the between financial assets at FVTOCI and derivatives
assets Bank, balance sheet per the balance sheet and Group net debt (i.e. including
at FVTOCI, but excludes the alongside Financial Services) is included below:
lease net the liquidity
liabilities debt of and 5 March 6 March
Sainsbury's its 2022 2021
Bank and its indebtedness GBPm GBPm
subsidiaries. and whether Financial instruments at FVTOCI
the per balance sheet 800 844
It is calculated Group can Less: equity related securities (382) (306)
as: cover Financial instruments at FVTOCI
financial assets its debt included in net debt 418 538
at commitments.
fair value through Net derivatives per balance sheet 259 (124)
other Less: derivatives not used to
comprehensive hedge borrowings (250) 110
income (excluding Derivatives included in net debt 9 (14)
equity
investments)
+ net derivatives
to hedge
borrowings
+ net cash and
cash
equivalents +
loans
+ lease
obligations
+ perpetual
securities.
Other
Net debt/ No direct Net debt divided This helps Net debt as provided in note 17. Group underlying
underlying equivalent by management EBITDA is reconciled within the fixed charge cover
EBITDA Group underlying measure the analysis below.
EBITDA. ratio
of the
business's
debt to
operational
cash flow.
Return No direct Return on capital This 52 weeks 52 weeks
on capital equivalent employed is represents to 5 March to 6 March
employed calculated the total 2022 2021 (Restated)
as return divided capital GBPm GBPm
by average capital that the Group Underlying profit before tax 730 357
employed. has Add: Underlying net interest 309 353
utilised in Return 1,039 710
Return is defined order
as 52 week rolling to generate
underlying profit profits. Capital employed is reconciled
before interest Management use as follows:
and this 52 weeks 52 weeks
tax. to assess the to 5 March to 6 March
performance 2022 2021 (Restated)
Capital employed of the GBPm GBPm
is business. Group net assets 8,423 6,701
defined as Group Less: Pension surplus (note 19) (2,283) (744)
net Deferred tax on pension surplus 640 192
assets excluding Less: net debt (ex-perpetual securities)
pension (note 17) 6,759 6,221
deficit/surplus, Effect of in-year averaging (1,127) 240
less Capital employed 12,412 12,610
net debt
(excluding Return on capital employed 8.4% 5.6%
perpetual
securities).
The average is
calculated
on a 14 point
basis.
The 14-point basis
uses the average
of
14 datapoints -
the
prior year closing
capital employed,
the current year
closing
capital employed
and
12 intra-year
periods
as this more
closely
aligns to the
recognition
of amounts in the
income statement.
Fixed No direct Group underlying This helps 52 weeks 52 weeks
charge equivalent EBITDA assess to 5 March to 6 March
cover divided by rent the Group's 2022 2021 (Restated)
(representing ability GBPm GBPm
capital and to satisfy Group underlying operating
interest fixed profit 1,039 710
repayments on financing Add: Group depreciation and
leases) expenses amortisation expense 1,220 1,249
and underlying net from Less: Non-underlying depreciation
finance costs, performance and amortisation expense (53) (47)
where of the Group underlying EBITDA 2,206 1,912
interest on business. Repayment of capital element
perpetual of lease obligations (493) (501)
securities is Underlying finance income 3 3
treated Underlying finance costs (312) (356)
as an underlying Fixed charges (802) (854)
finance Fixed charge cover 2.8 2.2
cost. All items
are
calculated on a 52
week rolling
basis.
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April 28, 2022 02:02 ET (06:02 GMT)
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