TIDMSBRY

RNS Number : 2860R

Sainsbury(J) PLC

04 November 2021

4 November 2021

J Sainsbury plc

Interim Results for the 28 weeks ended 18 September 2021

Strong performance with market share gains as we put food back at the heart of Sainsbury's

Financial Highlights

-- Grocery sales grew by 0.8 per cent versus H1 20/21 and 9.1 per cent versus H1 19/20 and we gained market share, driven by improved value, innovation and service, supported by customers continuing to eat at home more

-- General Merchandise sales reduced by 5.8 per cent versus H1 20/21, as expected against strong lockdown and seasonal sales comparatives, but grew 1.1 per cent versus H1 19/20

-- Strong digital sales of GBP5.8 billion, consistent with H1 20/21 at 39 per cent of retail sales

   --      Statutory Group sales (excluding VAT) up 5.3 per cent, with fuel sales up 62.7 per cent 

-- Underlying profit before tax of GBP371 million, up 23 per cent versus H1 20/21(1) . Up 56 per cent versus H1 19/20, reflecting higher grocery sales and effective cost reduction programmes, particularly at Argos

-- Statutory profit before tax of GBP541 million reflects significantly lower restructuring and impairment costs versus H1 20/21 and GBP181 million of exceptional income from settling legal disputes

-- Strong retail free cash flow of GBP554 million(1) . On track to meet free cash flow and net debt reduction targets

   --      Interim dividend of 3.2 pence 

-- We continue to expect to report underlying profit before tax of at least GBP660 million in the financial year to March 2022

Strategic highlights

-- Food First: Good progress against the plan we set out last November to put food back at the heart of Sainsbury's

o Value: Significantly improved versus competitors, driving sales, market share and switching gains

o Innovation: On track to triple the number of new products this year; new lines very popular with customers

o Customer Service: Maintained strong customer satisfaction scores with supermarket scores ahead of key competitors(2) . Investing to improve our Groceries Online customer offer and improve productivity, attracting more customers and gaining market share; sales are up 13 per cent this year and 128 per cent over the past two years

-- Brands that Deliver: Nectar, Argos, Habitat, Tu and Sainsbury's Bank are clearly focused on supporting the core food business and delivering for customers and shareholders

o Continuing to transform Argos, significantly reducing the cost base and improving the customer offer

o Relaunched the iconic Habitat brand and introduced Habitat Kids

o Tu clothing sales grew strongly, helped by increased full price sales. Clothing online sales remain strong

o Grown digital Nectar to over 8 million customers and launched My Nectar Prices, currently offering customers approximately 95 million personalised discounts and promotions every week

o Financial Services returned to profit; strong capital position

-- Save to invest: Three-year structural cost reduction programme on track to reduce retail operating costs to sales ratio of at least 200 basis points

-- Plan for Better: Ahead of our trajectory to become net zero in our own operations no later than 2040 and accelerated this commitment to 2035 ahead of the COP26 summit in Glasgow, where we are a Principal Partner

 
 H1 Financial summary              2021/22       2020/21       2019/20     % change v     % change v 
                                                                                20/21          19/20 
 Statutory performance 
 Group revenue (excl. 
  VAT, inc. fuel)               GBP15,724m    GBP14,934m    GBP15,097m           5.3%           4.2% 
 Profit / (Loss) before            GBP541m     GBP(137)m         GBP9m            N/A            N/A 
  tax 
 Profit / (Loss) after             GBP389m     GBP(179)m      GBP(38)m            N/A            N/A 
  tax 
 Basic earnings / (loss) 
  per share                          17.3p        (8.3)p        (2.2)p            N/A            N/A 
 
 Business performance(1) 
 Group sales (inc. VAT)         GBP17,528m    GBP16,557m    GBP16,856m           5.9%           4.0% 
 Retail sales (inc. 
  VAT, excl. fuel)              GBP14,871m    GBP14,836m    GBP13,857m           0.2%           7.3% 
 Digital sales                    GBP5.8bn      GBP5.8bn      GBP2.7bn             0%           108% 
 Underlying profit before 
  tax                              GBP371m       GBP301m       GBP238m            23%            56% 
 Underlying basic earnings 
  per share                          12.2p         10.1p          7.9p            21%            54% 
 Interim dividend per 
  share                               3.2p          3.2p          3.3p             0%         (3.0)% 
 Net debt (including           GBP(6,345)m   GBP(6,168)m   GBP(6,778)m     Up GBP177m   Down GBP433m 
  lease liabilities) 
 Non-lease net debt               GBP(27)m     GBP(267)m   GBP(1,008)m   Down GBP240m   Down GBP981m 
 Return on capital employed           6.3%          7.9%          7.1%       (160)bps        (80)bps 
 

Simon Roberts, Chief Executive of J Sainsbury plc, said :

"We are making good progress delivering our plan to put food back at the heart of Sainsbury's. We have grown market share through improving value for customers, tripling our rate of food innovation and delivering customer satisfaction ahead of our key competitors.

"Whilst customers are returning to many pre-pandemic shopping habits, online sales have remained very strong and we continue to grow market share. At the same time, our plan to transform Argos is on track, delivering significantly improved profitability.

"I'm really proud of my colleagues for the outstanding job they continue to do for our customers in such exceptional circumstances. Our teams have worked tirelessly over the past eighteen months and to say thank you we are closing all Sainsbury's and Argos stores on Boxing Day this year to give colleagues an extra day to spend with friends and family.

"We are proud to be the Principal Supermarket Partner of COP26 and are accelerating our carbon reduction ambitions and will now reach net zero in our own operations by 2035.

"Our industry faces labour and supply chain challenges. However our scale, advanced cost saving programme, logistics operations and strong supplier relationships put us in a good position as we head into Christmas. I would like to thank all my colleagues and all our suppliers for their hard work, commitment and dedication in the weeks ahead to ensure we deliver the best possible Christmas for our customers."

Outlook

The business performed well through the first half, benefiting from higher in-home grocery consumption and outperforming grocery competitors, while general merchandise sales declined, as expected, against an exceptionally strong period last year. Against further strong comparatives in the second half of the year we continue to expect customer behaviour to normalise and grocery growth to moderate and we will continue to invest to further improve our value position. We are well placed to deal with a backdrop of global supply challenges and a tight labour market, with scale, strong supplier relationships and a well-developed and accelerating cost saving programme. We continue to expect to report underlying profit before tax of at least GBP660 million in the financial year to March 2022 and reduce non-lease net debt by at least GBP950 million(3) by March 2023, generating average retail free cash flow of at least GBP500 million per year over the three years to March 2025.

Like-for-like sales performance(1)

 
                                   2020/21                        2021/22 
-------------------- 
                        Q1       Q2       Q3       Q4       Q1      Q2       H1 
                      -------  -------  -------  -------  ------  -------  ------ 
   Like-for-like 
    sales 
    (exc. fuel)        8.2%     5.1%     8.6%     11.3%    1.6%   (1.4)%    0.3% 
                      -------  -------  -------  -------  ------  -------  ------ 
   Like-for-like 
    sales 
    (inc. fuel)       (2.3)%   (0.5)%    3.2%     3.2%     8.4%    3.0%     6.1% 
                      -------  -------  -------  -------  ------  -------  ------ 
 
Total sales performance 
                               -------  -------           ------                   ------------------------ 
                                   2020/21                        2021/22                  2021/22 
                                                                    YoY                      Yo2Y 
                                                          -----------------------  ------------------------ 
                        Q1       Q2       Q3       Q4       Q1      Q2       H1      Q1       Q2       H1 
--------------------  -------                             ------  -------  ------  -------  -------  ------ 
   Grocery             10.5%    5.1%     7.4%     7.1%     0.8%    0.8%     0.8%    11.3%    6.0%     9.1% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
   General 
    Merchandise        7.2%     7.6%     6.0%     17.6%   (1.4)%  (11.4)%  (5.8)%   5.6%    (4.7)%    1.1% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
      GM (Argos)       10.7%    10.9%    8.4%     18.1%   (3.7)%  (12.0)%  (7.3)%   6.7%    (2.4)%    2.7% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
      GM 
       (Sainsbury's 
       Supermarkets)  (9.3)%   (6.9)%   (5.4)%    14.8%   11.2%   (8.0)%    2.4%    0.9%    (14.4)%  (5.9)% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
   Clothing           (26.7)%  (7.5)%    0.4%     4.2%    57.6%    9.2%    33.6%    15.5%    1.0%     9.1% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
   Total Retail 
    (excl. 
    fuel)              8.5%     5.2%     6.8%     9.2%     1.6%   (1.7)%    0.2%    10.3%    3.4%     7.3% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
   Fuel               (56.1)%  (29.3)%  (29.0)%  (38.5)%  95.1%    36.1%   62.7%   (14.4)%  (3.8)%   (9.9)% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
   Total Retail 
    (inc. 
    fuel)             (2.1)%   (0.4)%    1.7%     1.6%     8.5%    2.7%     6.0%    6.2%     2.2%     4.5% 
                      -------  -------  -------  -------  ------  -------  ------  -------  -------  ------ 
 
 

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 7:30 (GMT). The webcast can be accessed at the following link: https://webcasts.sainsburys.co.uk/sainsbury165

Following the release of the webcast, a Q&A conference call will be held at 9:30 (GMT). This will be available to listen to on our website at the following link: https://webcasts.sainsburys.co.uk/sainsbury164

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 2021/22 Third Quarter Trading Statement at 07:00 (GMT) on 12 January 2022.

S

Enquiries

 
 Investor Relations      Media 
 James Collins           Rebecca Reilly 
  +44 (0) 7801 813 074   +44 (0) 20 7695 7295 
 

Food First

We are putting food back at the heart of Sainsbury's. We have accelerated our cost saving programme and simplified our operations to invest in lowering prices, speeding up innovation and improving service. This is delivering results - customers are buying more with us more often, switching to us from our competitors and we are increasing sales and market share, enabling us to invest further in our food offer.

Market share gains and improving customer satisfaction

   --      We grew grocery sales by 0.8 per cent and increased volume market share(4) 

-- We maintained strong customer satisfaction scores despite supply chain challenges and our supermarket customer service scores are ahead of our key competitors(2)

   --      We were named the safest retailer during the pandemic by the UK's leading consumer champion 

Improving real and perceived value for money

-- We are matching Sainsbury's quality with Aldi prices on nearly 300 of our most popular products and this is driving a halo benefit, with customers doing more of their shopping at Sainsbury's

-- We have invested most in key fresh food areas such as meat, fish, poultry, fruit and vegetables, focusing on the products customers buy most often and delivering market outperformance(5)

   --      Our value index versus Aldi has improved by 400 basis points(6) 

-- The growth in the number of secondary customers choosing to shop at Sainsbury's is ahead of our key competitors(7)

-- Our core Price Lock commitment continues to deliver great value and our Autumn campaign is one of our biggest ever, with over 2,500 products held in price for at least eight weeks

Increasing the speed of innovation

-- We launched almost 650 new products this half and are on track to triple the number of new food products by the end of the year

-- To help make Christmas special for our customers, this year we will launch around 300 innovative new Christmas products including Taste the Difference Maple & Marmalade Gammon and by Sainsbury's Pigs in Snowy Blanket Dragon Sushi Rolls

-- Our Summer Editions range, including new barbecue and salad ranges, proved to be particularly popular. Building on this success, we are offering customers almost 50 new products in our first ever Autumn Editions range, featuring on-trend flavours such as truffle and pumpkin

-- To Help Everyone Eat Better we are launching a number of delicious, healthy and sustainable ranges as well as introducing new lines in our own-brand Plant Pioneers range including innovative plant-based alternatives to fish and our first SO Organic British veg box

-- We are working with new partners such as Carluccio's and Coco di Mama to offer customers a wider range of food to go products and we will continue to explore new partnerships that bring new products and services to our customers

Growing Groceries Online capacity and extending routes to market

-- With more customers returning to shopping in our stores, online grocery demand has reduced from peak levels. However, demand remains around double pre-pandemic levels and we are the biggest online market share winner, becoming the second largest online grocery retailer(8)

-- Investment in online has driven a strong performance relative to our competitors. Sales are up 13 per cent year-on-year and 128 per cent on a two-year basis. Groceries Online accounted for 17 per cent of grocery sales this half versus 15 per cent this time a year ago and 8 per cent two years ago

-- We are improving online fulfilment productivity, with picking rates and basket size higher than two years ago

-- We successfully relaunched same day Click & Collect and home delivery, giving customers more options and greater convenience for shopping online

-- We are growing our On Demand grocery offer, delivering over 70,000 average weekly orders from around 440 stores in as little as 30 minutes through Chop Chop, Deliveroo and Uber Eats

Expanding physical points of distribution and adapting supermarket formats

-- Our Convenience business grew 4.9 per cent with a strong recovery of our most urban stores although sales remain below pre-pandemic levels

   --      This year we aim to open around 25 convenience stores 

-- We plan to open four supermarkets in this financial year and are adapting our existing estate by offering new food services in our food counter spaces. Introducing self-serve patisserie has increased sales and reduced costs

Brands that Deliver

Nectar, Argos, Habitat, Tu and Sainsbury's Bank support our core food business, delivering for our customers and contributing strong, sustainable and profitable growth.

Nectar

-- 8.2 million customers are now registered with the Nectar digital app and we are on track to reach 10 million next year

-- We launched My Nectar Prices, becoming the first UK grocer to offer customers personalised digital rewards

-- We continue to grow our Nectar360 business and invested to strengthen the platform. 170 of our Nectar360 customers have signed up to our insights platform to understand shoppers better

-- We expect Nectar group profit contribution to increase by GBP60-70 million by FY 25/26, driven by growth in digital media

Argos

-- Argos sales were down 7.3 per cent year-on-year but were up 2.7 per cent on two years. In line with the market, recent performance has been impacted by supply challenges, unseasonal weather and lower demand for home office equipment and technology in the second quarter. Our consumer electronics and home and furniture categories performed well

   --      83 per cent of sales are generated online, up from 61 per cent two years ago 

-- We opened 37 Argos stores within Sainsbury's and more than half of Argos stores are in Sainsbury's supermarkets, making it easier for customers to shop for general merchandise

Habitat

-- Habitat is now our main home and furniture brand and is available in 610 Sainsbury's stores and online via the Argos and Habitat websites. This has helped us grow our overall furniture market share over the past two years(9)

-- We launched a new Habitat brand commitment - 'make your home a happy habitat' to help reposition the brand as affordable and accessible for all. In September we launched Habitat's first furniture range for kids

Tu

-- Our clothing business remains strong, with sales up year-on-year and year-on-two years, despite competitors reopening. We have reduced promotions and grown full-price sales

   --      Online sales are up 70 per cent on a two-year basis 

-- With COVID-19 restrictions lifting, customers have been updating their wardrobes, with Womenswear and Seasonal performing particularly strongly

Financial Services

-- We continue to make progress strengthening and simplifying our Financial Services business in line with our strategy and we remain comfortable with consensus profit forecasts for the division(10)

-- Sainsbury's Bank offers rewards to loyal Sainsbury's and Argos customers and over 77 per cent of Bank customers have a Nectar card

-- We are focused on offering digital-led services. 66 per cent of Car and Home insurance customers now use our online servicing capability and 96 per cent of Argos Storecard sales are through digital channels

-- Following the re-launch of our Credit Card app in 2020, the number of active customers using it has increased by 39 per cent to 64 per cent, with the app becoming our primary credit card payment channel

Save to Invest

-- We have made good progress on the cost saving programme we outlined last November and remain on track to deliver a reduction in our retail operating costs to sales ratio of at least 200 basis points

-- Savings during the half were predominantly driven by key structural changes to the in-store operating model, online operating model and supporting customers to shop digitally in store

-- We are making significant progress with our Argos Transformation Programme and are on track to lower our costs by GBP105 million. We closed 36 standalone Argos stores during the half and opened 37 Argos stores in Sainsbury's

-- We opened our second Argos Local Fulfilment Centre in Leeds which will help give customers quicker access to more products

-- Integrating Argos and Habitat logistics and supply chains with Sainsbury's will reduce costs by GBP250-300 million and improve overall efficiency. We closed one distribution centre in the half and will close another by the Spring of 2022

-- We are making progress with the rollout of our new Integrated Transport Planning System which is designed to maximise vehicle usage, reduce CO(2) emissions and ensure our drivers work as safely and efficiently as possible

-- We are rationalising our property estate and closed one underperforming supermarket and 10 convenience stores

-- Closing our food counters is generating cost savings and reducing food waste. A good proportion of counter sales have transferred to the aisles and we have converted the space in 312 of 477 stores to offer customers products tailored to their local area

Plan for Better

Better for You

Healthy and sustainable diets

-- We announced a new brand commitment, Helping Everyone Eat Better, to raise awareness and drive behaviour change

-- Over 97,000 colleagues engaged in the launch and took part in a campaign to cook a healthy, sustainable meal

-- We aim to achieve 83 per cent of Healthy and Better for You sales by tonnage by 2025. We continue to reformulate our own-brand products to reduce sugar and salt, as well as increasing the number of healthier and plant-based choices

-- Over 500,000 customers took part in Nectar's 'The Great Big Fruit And Veg Challenge'. The challenge incentivises shoppers to increase the amount of fruit and vegetables they eat, one plate at a time

Better for the Planet

-- We are proud to be the Principal Supermarket Partner of COP26, the United Nations Climate Change Conference, currently taking place in Glasgow

Carbon

-- We are ahead of trajectory on our Net Zero target and have accelerated our target for Scopes 1 and 2 greenhouse gas emission reduction from 2040 to Net Zero by 2035

   --      We have committed to reducing our Scope 3 emissions by 30 per cent by 2030 

-- We are working with our suppliers to understand how they are delivering against their own Scope 1 and 2 targets. We expect them to set their own net zero ambitions and work towards science based targets. We asked 400 of our key suppliers, who are significant contributors to our highest emission hotspot areas, to disclose their carbon reduction targets through industry disclosures, CDP and Higg

-- By the end of 2021 we will be sourcing 100 per cent electricity from renewable sources and all of our supermarkets will have 100 per cent LED lighting installed

Plastic

-- To encourage our customers to recycle, we have rolled out a flexible plastic recycling scheme to all supermarkets

-- To support meeting our target to reduce plastic packaging by 50 per cent by 2025, we have: replaced plastic with pulp trays for all our own-brand eggs, removing 237 tonnes; removed 17 tonnes of plastic wrap from tea boxes and are continuing to reduce the weight of our own-brand water packaging

-- Together with the support of Prevented Ocean Plastic, we are turning plastic collected from the coast into packaging for our strawberry and fresh fish range, preventing 297 tonnes of plastic from entering the ocean each year

Food waste

-- We have partnered with Neighbourly to manage our back of store food donation programme. This will help to connect our stores with local partners who will redistribute food to those in need. This half we have seen a 157 per cent increase in the redistribution of food for human consumption

-- We will complete the roll-out of Neighbourly into all supermarkets by the end of 2021, supporting our target to reduce food waste by 50 per cent by 2030 target

Better for Everyone

-- We want to treat people fairly throughout our business and supply chains and we remain committed to championing human rights. This year we published our fifth Modern Slavery Statement, which can be found on our corporate website

-- In September we launched our new GBP1 million Helping Everyone Eat Better Community Grant Scheme. Our colleagues will nominate partner organisations who are tackling food insecurity for grants of GBP500 - part of our commitment to leave a measurable positive impact on the communities we serve and source from

-- 94 per cent of colleagues on an apprenticeship scheme successfully completed their programme over the past half year, ahead of the national rate

-- We are committed to diverse representation in leadership positions, with stretching targets taking us to 2024

-- We partnered with Show Racism the Red Card, supporting them through a donation which will provide new educational resources to every school in England, Scotland and Wales for the first time in its 25-year history

-- We announced our enhanced Family Leave policy to support those taking maternity, paternity or adoption leave

(1) The Group's alternative performance measures are defined and reconciled on pages 54-60. 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

(2) Service Management Group Competitor Benchmark Survey, Q2 2021/22

(3) Excluding the GBP242m beneficial impact to net debt of the July 2021 conversion of Perpetual Securities

(4) NielsenIQ Panel YoY volume growth, 28 weeks to 18 September 2021.Total FMCG (excluding Kiosk & Tobacco), Market Universe: Total Outlets

(5) NielsenIQ Panel volume growth Yo2Y. Meat, Fish and Poultry and Produce categories. 28 weeks to 18 September 2021 vs 28 weeks to 21 September 2019. Market Universe: Total Outlets

(6) Value Reality. Mar-Sep 2021 vs Mar 2020-Mar 2021; Edge by Ascential; internal modelling. Price index data vs Aldi unavailable in weeks 4-26 of 20/21

(7) Secondary Shoppers - Contribution to Volume Growth. Nielsen Panel, Total FMCG (excluding Kiosk & Tobacco), 12wks to September 2021. Market Universe: Total Outlets

(8) Nielsen panel data, value share of top 5 competitors between FY 18/19 and H1 21/22

(9) GfK Homewares Total Category Report

(10) Current analyst consensus for Financial Services Underlying Operating Profit: FY21/22 GBP26m, FY22/23 GBP43m, FY23/24 GBP49m

Financial Review for the 28 weeks to 18 September 2021

In the 28 weeks to 18 September 2021, the Group generated profit before tax of GBP 541 million (HY 2020/21: loss before tax of GBP137 million; HY 2019/20: profit before tax of GBP9 million) and an underlying profit before tax of GBP371 million (HY 2020/21: GBP301 million; HY 2019/20: GBP238 million). COVID-19 caused significant distortions to trading, operating costs and business rates assumptions in HY 2020/21. Therefore in some cases commentary has been provided versus the pre-COVID-19 HY 2019/20.

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 54 to 60 for further information.

 
 Summary income statement                 28 weeks       28 weeks            52 weeks 
                                                to             to                  to 
                                      18 September   19 September   Change    6 March 
                                              2021           2020                2021 
                                              GBPm           GBPm        %       GBPm 
 
 Group sales (including VAT)                17,528         16,557      5.9     32,285 
 Retail sales (including VAT)               17,315         16,338      6.0     31,854 
 Retail sales (excluding fuel, 
  including VAT)                            14,871         14,836      0.2     28,837 
 
 Group sales (excluding VAT)                15,724         14,934      5.3     29,048 
 Retail sales (excluding VAT)               15,511         14,715      5.4     28,617 
 
 
 Underlying operating profit 
 Retail                                        523            555      (6)        730 
 Financial services                             19           (55)      N/A       (21) 
-----------------------------------                 -------------  -------  --------- 
 Total underlying operating profit             542            500        8        709 
 
 Underlying net finance costs(1)             (171)          (199)       14      (353) 
 Underlying profit before tax                  371            301       23        356 
 Items excluded from underlying 
  results(2)                                   170          (438)      N/A      (617) 
-----------------------------------  -------------  -------------  -------  --------- 
 Profit/(Loss) before tax                      541          (137)      N/A      (261) 
 Income tax expense                          (152)           (42)    (265)       (19) 
-----------------------------------  -------------  -------------  -------  --------- 
 Profit/(Loss) for the financial 
  period                                       389          (179)      N/A      (280) 
-----------------------------------  -------------  -------------  -------  --------- 
 
 Underlying basic earnings per 
  share                                      12.2p          10.1p       21      11.7p 
 Underlying diluted earnings per 
  share                                      11.6p           9.8p       18      11.4p 
 Basic earnings/(loss) per share             17.3p         (8.3)p      N/A    (13.0)p 
 Diluted earnings/(loss) per share           16.6p         (8.3)p      N/A    (13.0)p 
 Dividend per share                           3.2p           3.2p        -      10.6p 
-----------------------------------  -------------  -------------  -------  --------- 
 
   1      Refer to APMs and note 7 of the financial statements 
   2      Refer to APMs and note 3 of the financial statements 

Through the first half grocery sales remained elevated in line with last year reflecting the ongoing impact of COVID-19 on in-home consumption.

COVID-19 costs have been significantly lower this year despite the continued elevated sales, which together with ongoing delivery of our cost programme has resulted in strong profit delivery. The prior year results were published before the decision to forgo business rates relief in Sainsbury's. Had this decision been taken prior to publication, the impact of additional business rates on the prior half year would have been to reduce retail operating profits by GBP204m.

Group sales

Group sales including VAT increased by 5.9 per cent year-on-year whilst Retail sales (including VAT, including fuel) increased by 6.0 per cent year-on-year, driven by a significant recovery in Fuel sales. Retail sales (including VAT, excluding fuel) increased by 0.2 per cent.

 
 Total sales performance        28 weeks       28 weeks       28 weeks      YoY     Yo2Y 
  by category                         to             to             to 
                            18 September   19 September   21 September   Change   Change 
                                    2021           2020           2019 
                                   GBPbn          GBPbn          GBPbn        %        % 
 Grocery                            11.3           11.2           10.3     0.8%     9.1% 
 General Merchandise                 3.1            3.2            3.0   (5.8)%     1.1% 
 Clothing                            0.5            0.4            0.5    33.6%     9.1% 
 Retail (exc. fuel)                 14.9           14.8           13.9     0.2%     7.3% 
 Fuel sales                          2.4            1.5            2.7    62.7%   (9.9)% 
-------------------------  -------------  -------------  -------------  -------  ------- 
 Retail (inc. fuel)                 17.3           16.3           16.6     6.0%     4.5% 
-------------------------  -------------  -------------  -------------  -------  ------- 
 

Grocery sales remained high with the COVID-19 pandemic continuing to move eating occasions in-home. In line with the reduction of government restrictions during the period, this trend was more pronounced in Q1, with sales moderating in Q2 across the Summer. Sales were supported by our Sainsbury's Quality, Aldi Price Match programme and we saw improved base prices against all tracked competitors in the half.

General Merchandise sales declined, reflecting annualisation of very high demand for home office and home entertainment products during the first COVID-19 lockdown when many competitor stores were closed. Clothing recovered strongly from a year of suppressed demand with no full range promotions run in the half and growth driven by full price sales.

Fuel sales increased by 62.7 per cent, driven by increased demand as traffic volumes recovered although they remained 9.9 per cent below pre-COVID-19 levels.

 
 Total sales performance by channel          28 weeks to    28 weeks to 
                                            18 September   19 September 
                                                    2021           2020 
                                           -------------  ------------- 
 Total Sales fulfilled by Supermarket 
  stores                                          (0.5)%          11.8% 
      Supermarkets (inc Argos stores in 
       Sainsbury's)                               (3.0)%           3.2% 
      Groceries Online                             12.8%         102.2% 
 Convenience                                        4.9%         (8.0)% 
                                           -------------  ------------- 
 
 

Overall sales served from our Supermarkets fell by 0.5 per cent after rising 11.8 per cent in the prior year. Within this, Supermarket sales including Argos stores in Sainsbury's fell by 3.0 per cent. Groceries Online sales increased by 12.8 per cent, with sales moderating during the half as we began to annualise large increases in the prior year. Convenience sales grew by 4.9 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      28 weeks to    28 weeks to 
                                            18 September   19 September 
                                                    2021           2020 
 Like-for-like sales (exc. fuel)                    0.3%           6.9% 
 Like-for-like sales (inc. fuel)                    6.1%         (1.6)% 
-----------------------------------------  ------------- 
 
 

Retail like-for-like ('LFL') sales excluding fuel were broadly flat, with groceries growth offset by General Merchandise declines.

Space

In the first half of 2021/22, Sainsbury's opened one new Supermarket and closed one (2020/21 no openings or closures). We opened eight new Convenience stores and 10 were closed (2020/21 opened five convenience stores and closed two). During the period we opened 37 new Argos stores in Sainsbury's and closed 36 standalone Argos stores (2020/21 opened four and closed 14). This now brings the total number of Argos stores in Sainsbury's to 373, over half the store estate. In total Argos had 738 stores and 280 collection points at the end of the period.

 
 Store numbers and retailing space 
                                  As at                                                         As at 
                                         -----------  ------------  ------------------ 
                                6 March                                                  18 September 
                                                                            Extensions 
                                                         Disposals    / refurbishments 
                                   2021   New stores    / closures         / downsizes           2021 
-----------------------------  --------  -----------  ------------  ------------------  ------------- 
 
 Supermarkets                       598            1           (1)                  39            598 
 Supermarkets area '000 
  sq. ft.                        20,822           17           (6)                (33)         20,800 
 
 Convenience                        813            8          (10)                   -            811 
 Convenience area '000 
  sq. ft.                         1,929           18          (24)                   -          1,923 
 Sainsbury's total store 
  numbers                         1,411            9          (11)                  39          1,409 
-----------------------------  --------  -----------  ------------  ------------------  ------------- 
 
 Argos stores                       401            -          (36)                   -            365 
 Argos stores in Sainsbury's        336           37             -                   -            373 
 Argos total store numbers          737           37          (36)                   -            738 
 Argos collection points            306            -          (26)                   -            280 
 Habitat                              3            -             -                   -              3 
-----------------------------  --------  -----------  ------------  ------------------  ------------- 
 

In 2021/22, we expect to open four supermarkets and around 25 new convenience stores, and to close around 5 supermarkets and around 25 convenience stores.

In 2021/22, we expect to open around 70 Argos stores inside Sainsbury's, and close around 70 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 leveraging our nationwide Sainsbury's store estate.

Retail underlying operating profit

Retail underlying operating profit decreased by 5.7 per cent to GBP523 million (HY 2020/21: GBP555 million) and retail underlying operating margin decreased by 40 basis points year-on-year to 3.37 per cent (HY 2020/21: 3.77 per cent). The reduction from last year was driven by business rates relief which was reflected in the half year accounts before we subsequently decided to forgo this relief. Had this decision been taken prior to publication, the prior year's profits would have been GBP204 million lower, worth 139 basis points to retail underlying operating margin. The year-on-year impact of this was largely offset by a reduction in COVID-19 costs, the recovery of fuel sales, and benefits from the cost saving programme.

Retail underlying operating profit was up 19.7% vs two years ago (HY 2019/20: GBP437 million), reflecting both sales growth and retail underlying operating margin expansion of 42bps. This margin growth reflects the early success of our Save to Invest programme, having been achieved despite further investment in lower prices.

The Argos Transformation programme continued to deliver savings as we integrate the two businesses and reduce occupancy and store operational costs. Within the Sainsbury's business, savings were generated from further expansion of self check-out as well as efficiencies in the Online operating model following last year's focus on rapidly expanding capacity.

 
 Retail underlying operating 
  profit 
                                    28 weeks       28 weeks       28 weeks       YoY     Yo2Y 
                                          to             to             to 
                                18 September   19 September   21 September 
                                        2021           2020           2019    Change   Change 
 Retail underlying operating 
  profit (GBPm)(1)                       523            555            437    (5.7)%    19.7% 
 Retail underlying operating 
  margin (%)(2)                         3.37           3.77           2.95   (40)bps    42bps 
 
 Retail underlying EBITDA 
  (GBPm)(3)                            1,141          1,190          1,073    (4.1)%     6.3% 
 Retail underlying EBITDA 
  margin (%)(4)                         7.36           8.08           7.25   (72)bps    11bps 
 
 

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

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

3 Retail underlying operating profit before underlying depreciation and amortisation of GBP618 million.

   4      Retail underlying EBITDA divided by retail sales excluding VAT. 

In 2021/22, we expect a depreciation and amortisation charge of around GBP1.2 billion, including around GBP500 million right of use asset depreciation.

Financial Services

 
 Financial Services results 
 6 months to 31 August 2021 
                                                2021    2020    Change 
-------------------------------------------- 
 
 Underlying revenue (GBPm)                       213     219      (3)% 
 Interest and fees payable (GBPm)               (30)    (54)     (44)% 
 Total income (GBPm)                             183     165       11% 
 Underlying operating profit/(loss) (GBPm)        19    (55)       N/A 
--------------------------------------------  ------  ------  -------- 
 
 Active customers (m) - Bank                     1.8     2.0     (10)% 
 Active customers (m) - AFS                      2.1     2.3      (9)% 
                                                                 (500) 
 Cost:income ratio (%)                          72.0    77.0       bps 
 Net interest margin (%)(1)                      4.3     3.1   120 bps 
 Bad debt as a percentage of lending (%)(2)      1.3     2.7   140 bps 
 Tier 1 capital ratio (%)(3)                    17.4    14.9   250 bps 
 Total capital ratio (%)(4)                     20.1    17.8   230 bps 
 Customer lending (GBPbn)(5)                     5.0     6.2     (19)% 
 Customer deposits (GBPbn)                     (4.6)   (5.4)     (15)% 
--------------------------------------------  ------  ------  -------- 
 
   1      Net interest receivable divided by average interest-bearing assets. 
   2      Bad debt expense divided by average net lending. 
   3      Common equity Tier 1 capital divided by risk-weighted assets. 
   4      Total capital divided by risk-weighted assets. 

5 Amounts due from customers at the Balance Sheet date in respect of loans, mortgages, credit cards and store cards net of provisions.

Underlying operating profit of GBP19 million has returned to pre-COVID-19 levels (HY 2019/20: GBP20 million) which has been aided by management action on funding and operating costs. We have seen an increase in consumer spending, but unsecured balances remain subdued as a result of higher levels of customer repayments and lower credit demand. We have also seen increased trading in our fee-based products as lockdown restrictions were removed, but these remain below pre-COVID-19 levels.

Financial Services total income of GBP183 million has improved year-on-year (HY 2020/21: GBP165 million) but remains below pre-COVID-19 levels (HY 2019/20: GBP227 million). Net Interest Income recovery is reflective of action to reduce interest payable through reduced savings rates, but remains down on two years ago due to the significant reduction in customer balances. Fee income has increased due to the increase in activity post lockdown, with ATMs and Card fees both recovering. Travel Money remains subdued but is higher than last year.

The number of Bank active customers reduced by 10 per cent year-on-year to 1.8 million as new business demand has not recovered enough to offset the normal levels of attrition in the book. Argos Financial Services customers decreased 9 per cent to 2.1 million, largely due to lower new account volumes from lower Retail sales.

The Financial Services cost:income ratio decreased 500 basis points to 72.0 per cent (HY 2020/21: 77.0 per cent) and is reflective of the material rise in income and ongoing cost management.

Net interest margin increased by 120 basis points year-on-year to 4.3 per cent (HY 2020/21: 3.1 per cent) driven by the continued reduction in savings rates, improvements in unsecured asset margins and a lower mix of secured lending (following our decision to cease new mortgage lending in 2019).

Bad debt expense as a percentage of lending decreased 140 basis points year-on-year to 1.3 per cent (HY 2020/21: 2.7 per cent), reflecting the significant COVID-19 provision posted last year with underlying trends stable.

The capital position is strong with CET1 capital ratio increasing by 250 basis points since August 2020 to 17.4 per cent (HY 2020/21: 14.9 per cent) as a result of the contraction in balances and improved profit performance.

We expect financial services to continue to deliver profit in the second half of 2021/22 as more normal levels of consumer demand return.

Underlying net finance costs

Underlying net finance costs reduced by 14 per cent to GBP171 million (HY 2020/21: GBP199 million). These costs include GBP22 million of net non-lease interest (HY 2020/21: GBP37 million). The reduction of net non-lease interest is driven by the repayment of the GBP250 million bilateral loan and redemption of the GBP250 million perpetual subordinated capital securities, both in July 2020, and the redemption of the perpetual convertible bonds in July 2021. In addition, the net underlying interest costs on lease liabilities have reduced to GBP149 million (HY 2020/21: GBP162 million), mainly due to lower interest rates on new leases.

We now expect underlying net finance costs in 2021/22 of GBP320 million - GBP330 million, including around GBP280 million of lease interest.

Items excluded from underlying results

In order to provide shareholders with additional insight into the underlying performance of the business, an adjusted measure of profit (underlying profit before tax) is provided to supplement the reported IFRS numbers, reflecting how the business measures performance internally. Underlying results exclude items recognised in reported profit or loss before tax which, if included, could distort comparability between periods. In determining which items to exclude from underlying profit, the Group considers items which are significant either by virtue of their size and/or nature, or that are non-recurring. The adjusted items are below.

 
  Items excluded from underlying results           28 weeks to    28 weeks to 
                                                  18 September   19 September 
                                                          2021           2020 
                                                          GBPm           GBPm 
-----------------------------------------------  -------------  ------------- 
 Restructuring and integration programmes                 (32)          (266) 
 Impairment charges                                          -          (214) 
 Restructuring, impairment and integration                (32)          (480) 
 
 Income recognised in relation to legal 
  disputes                                                 181             42 
 IAS 19 pension income                                       6              8 
 Property, finance and acquisition adjustments              15            (8) 
 Items excluded from underlying results                    170          (438) 
-----------------------------------------------  -------------  ------------- 
 

- Restructuring, impairment and integrations costs of GBP32 million (2020/21: GBP480 million) includes GBP22 million (2020/21: GBP473 million) relating to the programme announced in November 2020 for the structural integration of Sainsbury's and Argos. We still expect that we will incur one off costs from these infrastructure, operating model and structure changes of GBP900 million to GBP1 billion in the period to March 2024 with GBP75 million to GBP100 million in the current year. We expect cash costs from this programme of around GBP300 million in total, with around GBP125 million in the current year.

- Income recognised in relation to legal disputes of GBP181 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, GBP27 million was received during the half, GBP67 million is a current receivable and GBP13 million relates to a provision release. The prior year relates to ATM business rates reimbursement.

- IAS 19 Pension income of GBP6 million (2020/21: GBP8 million) comprises pension finance income of GBP8 million and scheme expenses of GBP2 million.

- Other movements of GBP15 million income (2020/21: cost of GBP8 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 driven by higher energy prices.

Taxation

The tax charge was GBP152 million (HY 2020/21: GBP42 million). The underlying tax rate was 26.4 per cent (HY 2020/21: 27.6 per cent) and the effective tax rate was 28.1 per cent (HY 2020/21: negative 30.7 per cent).

The underlying tax rate is lower than the prior year. The tax charge is adversely impacted by a similar value of tax adjusting items as for 2020/21, however due to the increased 2021/22 half year profit, these adjustments have a smaller impact on the rate than in the prior year.

The effective tax rate is higher than the prior year but this is distorted by the fact there was an accounting loss before tax for HY 2020/21 which also resulted in a tax charge, rather than an expected tax credit. This was largely a result of the amount of non-deductible expenses, particularly in respect of non-underlying items, the de-recognition of previously recognised deferred tax assets on capital losses and prior year adjustments.

The 2021/22 effective tax rate of 28.1 per cent is higher than the standard rate of corporation tax in the UK of 19 per cent. This is largely a result of the impact of the future tax rate change, combined with the impact of non-deductible expenses, particularly in respect of non-deductible capital expenditure, the de-recognition of previously recognised deferred tax assets on capital losses, and prior year adjustments.

We expect an underlying tax rate in 2021/22 of around 25 per cent.

Earnings per share

Underlying basic earnings per share increased to 12.2 pence (HY 2020/21: 10.1 pence) driven by an increase in underlying earnings. Basic earnings per share increased to 17.3 pence (HY 2020/21: negative 8.3 pence). Underlying diluted earnings per share increased to 11.6 pence (HY 2020/21: 9.8 pence) and diluted earnings per share increased to 16.6 pence (HY 2020/21: negative 8.3 pence).

During the half the remaining GBP248 million of perpetual convertible bonds matured. Of these, GBP242 million were redeemed by conversion to shares, resulting in the creation of 91 million new shares, an increase of 4.1 per cent on the opening balance of shares.

Dividends

The Board has recommended an interim dividend of 3.2 pence per share (2020/21: 3.2 pence) reflecting 30 per cent of the 2020/21 full year dividend per share. This will be paid on 17 December 2021 to shareholders on the Register of Members at the close of business on 12 November 2021. 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 26 November 2021.

Sainsbury's plans to maintain a full-year dividend covered 1.9 times by our full-year underlying earnings.

Net debt and retail cash flows

As at 18 September 2021, net debt was GBP6,345 million (19 September 2020: GBP6,168 million), an increase of GBP177 million (2020/21: GBP610 million reduction). Excluding the impact of lease liabilities on net debt, Sainsbury's reduced non-lease net debt by GBP240 million.

Net debt includes lease liabilities under IFRS 16 which grew to GBP6,318 million (HY 2020/21: GBP5,901 million) as we served notice to purchase 13 stores when their leases end in 2023/24. In the half, GBP248 million of perpetual convertible bonds were redeemed leaving no remaining balance (HY 2020/21: GBP248 million). Of these, GBP242 million were converted to shares as noted above, and are included in the summary cash flow statement within other non-cash and interest movements. Group net debt includes the impact of capital injections to Sainsbury's Bank, but excludes the net debt of Financial Services. Financial Services' net debt balances are excluded because they are required as part of the business as usual operations of the bank, as opposed to specific forms of financing for the Group.

We remain on track to meet our target of at least GBP950 million non-lease net debt reduction in the four years to March 2023, before the beneficial impact of the perpetual convertible bond, and to generate average retail free cash flow of at least GBP500 million per year over the three years to March 2025.

 
 Summary cash flow statement (1)                                   Retail         Retail     Retail 
                                                              28 weeks to    28 weeks to   52 weeks 
                                                                                                 to 
                                                             18 September   19 September    6 March 
                                                                     2021           2020       2021 
                                                                     GBPm           GBPm       GBPm 
 Retail underlying operating profit                                   523            555        730 
 Adjustments for: 
 Retail underlying depreciation and 
  amortisation(2)                                                     618            635      1,179 
 Share based payments and other                                        26             15         26 
  Retail exceptional operating cash 
   flows (excluding pensions)(2)                                     (30)              3       (12) 
 Adjusted retail operating cash flow 
  before changes in working capital(3)                              1,137          1,208      1,922 
----------------------------------------------------------  -------------  -------------  --------- 
 Decrease in underlying working capital(2)                            135            571        453 
----------------------------------------------------------  -------------  -------------  --------- 
 Net interest paid(2)                                               (177)          (213)      (372) 
 Pension cash contributions                                          (39)           (60)      (101) 
 Corporation tax paid                                                   -           (88)       (94) 
                                                            -------------  -------------  --------- 
 Adjusted net cash generated from/(used 
  in) operating activities(2)                                       1,056          1,418      1,809 
----------------------------------------------------------  -------------  -------------  --------- 
 Cash capital expenditure(2)                                        (298)          (290)      (568) 
 Repayments of lease liabilities                                    (242)          (223)      (499) 
 Initial direct costs on right-of-use 
  assets                                                              (1)            (3)        (7) 
 Proceeds from disposal of property, 
  plant and equipment                                                  39             19         27 
 Dividends and distributions received                                   -             22         22 
 Retail free cash flow                                                554            943        784 
----------------------------------------------------------  -------------  -------------  --------- 
 Dividends paid on ordinary shares                                  (165)              -      (232) 
 Repayment of borrowings(2)                                         (231)          (519)      (539) 
 Other(2)                                                            (30)           (26)       (13) 
 Net increase/(decrease) in cash and 
  cash equivalents                                                    128            398          0 
----------------------------------------------------------  -------------  -------------  --------- 
 Decrease in Debt                                                     473            742      1,038 
 Other non-cash and net interest movements(4)                       (477)          (361)      (560) 
 Movement in net debt                                                 124            779        478 
----------------------------------------------------------  -------------  -------------  --------- 
 
 Opening net debt                                                 (6,469)        (6,947)    (6,947) 
---------------------------------------------------------- 
 Closing net debt                                                 (6,345)        (6,168)    (6,469) 
----------------------------------------------------------  -------------  -------------  --------- 
       of which 
                     Lease Liabilities                            (6,318)        (5,901)    (5,829) 
----------------------------------------------------------  -------------  -------------  --------- 
                     Net Debt Excluding Lease Liabilities            (27)          (267)      (640) 
----------------------------------------------------------  -------------  -------------  --------- 
 

1 See note 5b for a reconciliation between Retail and Group cash flow, and Alternative Performance Measures on page 57 for reconciliations of specific line items as indicated.

   2      Refer to the Alternative Performance Measures on pages 57 to 59 for reconciliation. 
   3      Excludes working capital and pension contributions. 

4 Other non-cash includes new leases and lease modifications, fair value movements on derivatives used for hedging long term borrowings and the impact of the perpetual security conversion.

Adjusted retail operating cash flow before changes in working capital was GBP1,137 million (HY 2020/21: GBP1,208 million) and underlying working capital decreased by GBP135 million since the year end (HY 2020/21: GBP571 million). Working capital typically decreases between year end and half year, driven by seasonality and the phasing of payables. HY 2020/21 saw a more pronounced effect due to the initial impact of COVID-19 trading patterns, whilst this year has seen a lower than usual decrease due to a partial reversal of this as guided at year end.

No corporation tax was paid in the half (HY 2020/21: GBP88 million). This reflects payments made in the prior year before the decision to forgo business rates relief which subsequently impacted taxable profits. Pensions contributions of GBP39 million (HY 2020/21: GBP60 million) were down on the prior year in line with the asset backed contribution structure established in July 2019 as previously guided. Proceeds from disposals of GBP39 million (HY 2020/21: GBP19 million) represents disposal of non-trading sites and we do not expect any material further proceeds in the second half of the year.

Retail free cash flow decreased by GBP389 million year-on-year to GBP554 million (HY 2020/21: GBP943 million) reflecting the material change in working capital pattern noted above, as well as timings of business rates payments in the prior year.

Sainsbury's paid dividends of GBP165 million in the half, after having not paid a final dividend in the prior year due to COVID-19 uncertainty (HY 2020/21: GBP0 million). This was subsequently paid as a special dividend in December 2020.

As at 18 September 2021 Sainsbury's has drawn debt facilities of GBP0.59 billion (HY 2020/21 GBP1.08 billion including the Perpetual securities). The Group holds undrawn committed credit facilities of GBP1.45 billion and undrawn uncommitted facilities of GBP195 million.

Capital expenditure

Core retail cash capital expenditure was GBP298 million (HY 2020/21: GBP290 million).

We expect annual core retail cash capital expenditure (excluding Financial Services) to be around GBP700 million to GBP750 million in the 3 years to March 2024.

Financial ratios

 
 Key financial ratios           52 weeks to    52 weeks to   52 weeks to 
                               18 September   19 September       6 March 
                                       2021           2020          2021 
 Return on capital employed 
  (%) (1)                               6.3            7.9           5.5 
 Net debt to EBITDA (2)           3.3 times      2.7 times     3.4 times 
 Fixed charge cover (3)           2.3 times      2.8 times     2.2 times 
 
 

1 ROCE: Return is defined as a 52 week rolling underlying profit before interest and tax. Capital employed is defined as group net assets excluding the pension deficit/surplus and excluding net debt. The average is calculated on a 14 point basis.

2 Net debt of GBP6,345 million includes lease obligations under IFRS 16, divided by Group underlying EBITDA of GBP1,932 million, calculated for a 52-week period to 18 September 2021.

3 Group underlying EBITDA divided by rent (both capital and interest) and net underlying finance costs, where interest on perpetual securities is treated as an underlying finance cost.

Return on capital employed (ROCE) is a 52 week measure and so is still impacted by the H2 2020/21 decision to forgo Business rates relief. Adjusted for the phasing impact of GBP204 million relating to business rates, ROCE would have been 8.0 per cent. Our medium term net debt to EBITDA leverage target remains less than 3.0 times.

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 Trustee has started the next triennial valuation which is due as at 30 September 2021; the Company will share the outcome when discussions have completed in 2022.

At 18 September 2021, the net defined benefit surplus under IAS19 for the Group was GBP1,087 million (excluding deferred tax). The GBP343 million increase from 6 March 2021 was primarily driven by higher than expected asset returns, partially offset by a decrease in yields and increased future inflation expectations.

For 2021/22, total pension scheme cash contributions are expected to be GBP76 million.

 
 Retirement benefit obligations 
                                         Sainsbury's          Argos          Group      Group 
                                               as at          as at          as at      as at 
                                        18 September   18 September   18 September    6 March 
                                                2021           2021           2021       2021 
                                                GBPm           GBPm           GBPm       GBPm 
 Present value of funded obligations         (9,352)        (1,488)       (10,840)   (10,218) 
 Fair value of plan assets                    10,394          1,574         11,968     11,000 
 Pension surplus/(deficit)                     1,042             86          1,128        782 
 Present value of unfunded 
  obligations                                   (23)           (18)           (41)       (38) 
-------------------------------------  -------------  -------------  -------------  --------- 
 Retirement benefit obligations                1,019             68          1,087        744 
 Deferred income tax liability                 (311)           (56)          (367)      (192) 
-------------------------------------  -------------  -------------  -------------  --------- 
 Net retirement benefit obligations              708             12            720        552 
-------------------------------------  -------------  -------------  -------------  --------- 
 

Group income statement (unaudited)

for the 28 weeks to 18 September 2021

 
                                      28 weeks to 18 September                      28 weeks to 19 September 
                                                 2021                                          2020 
-------------------  -----  --------------------------------------------  -------------------------------------------- 
                                      Before   Non-underlying      Total            Before   Non-underlying      Total 
                              non-underlying            items               non-underlying            items 
                                       items            (Note                        items            (Note 
                                                           3)                                            3) 
                      Note              GBPm             GBPm       GBPm              GBPm             GBPm       GBPm 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 Revenue               4              15,724                -     15,724            14,934                -     14,934 
 Cost of sales                      (14,476)             (14)   (14,490)          (13,644)            (298)   (13,942) 
 Gross 
  profit/(loss)                        1,248             (14)      1,234             1,290            (298)        992 
 Administrative 
  expenses                             (725)             (31)      (756)             (801)            (154)      (955) 
 Other income                             19              184        203                11              (5)          6 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 Operating 
  profit/(loss)                          542              139        681               500            (457)         43 
 Finance income        7                   -               36         36                 2               14         16 
 Finance costs         7               (171)              (5)      (176)             (201)                5      (196) 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 Profit/(loss) 
  before tax                             371              170        541               301            (438)      (137) 
 Income tax 
  (expense)/credit     8                (98)             (54)      (152)              (83)               41       (42) 
-------------------  -----                                     ---------                                     --------- 
 Profit/(loss) for 
  the financial 
  period                                 273              116        389               218            (397)      (179) 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 
 Earnings/(loss) 
 per share             9                                           pence                                         pence 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 Basic 
  earnings/(loss)                                                   17.3                                         (8.3) 
 Diluted 
  earnings/(loss)                                                   16.6                                         (8.3) 
-------------------  -----  ----------------  ---------------  ---------  ----------------  ---------------  --------- 
 
 
                                                           52 weeks to 6 March 
                                                                   2021 
---------------------------------  -----      -------------------------------------------- 
                                                        Before   Non-underlying      Total 
                                                non-underlying            items 
                                                         items            (Note 
                                                                             3) 
                                    Note                  GBPm             GBPm       GBPm 
---------------------------------  -----      ----------------  ---------------  --------- 
 Revenue                             4                  29,048                -     29,048 
 Cost of sales                                        (26,871)            (412)   (27,283) 
 Gross profit/(loss)                                     2,177            (412)      1,765 
 Administrative expenses                               (1,480)            (238)    (1,718) 
 Other income                                               12                1         13 
---------------------------------  -----      ----------------  ---------------  --------- 
 Operating profit/(loss)                                   709            (649)         60 
 Finance income                      7                       3               29         32 
 Finance costs                       7                   (356)                3      (353) 
 Profit/(loss) before tax                                  356            (617)      (261) 
 Income tax (expense)/credit         8                   (105)               86       (19) 
---------------------------------  -----                                         --------- 
 Profit/(loss) for the financial 
  period                                                   251            (531)      (280) 
---------------------------------  -----      ----------------  ---------------  --------- 
 
 Loss per share                      9                                               pence 
---------------------------------  -----      ----------------  ---------------  --------- 
 Basic loss                                                                         (13.0) 
 Diluted loss                                                                       (13.0) 
---------------------------------  -----      ----------------  ---------------  --------- 
 

The notes on pages 22 to 50 form an integral part of these Condensed Consolidated Interim Financial Statements.

Group statement of comprehensive income/(loss) (unaudited)

for the 28 weeks to 18 September 2021

 
                                                                    28 weeks     28 weeks   52 weeks 
                                                                       to 18        to 19       to 6 
                                                                   September    September      March 
                                                                        2021         2020       2021 
                                                          -----  -----------  -----------  --------- 
                                                           Note         GBPm         GBPm       GBPm 
                                                          -----  -----------  -----------  --------- 
 Profit/(loss) for the financial period                                  389        (179)      (280) 
--------------------------------------------------------  -----  -----------  -----------  --------- 
 
 Items that will not be reclassified subsequently 
  to the income statement 
                                                          -----  -----------  -----------  --------- 
  Remeasurement on defined benefit pension schemes          18           298        (175)      (482) 
                                                          ----- 
  Movements on financial assets at fair value 
   through other comprehensive income                                     40           28         55 
  Cash flow hedges fair value movements - inventory 
   hedges                                                                 53            -       (60) 
  Current tax relating to items not reclassified                           -           23         44 
  Deferred tax relating to items not reclassified                      (165)         (24)          9 
                                                                         226        (148)      (434) 
--------------------------------------------------------  -----  -----------  -----------  --------- 
 Items that may be reclassified subsequently 
  to the income statement 
                                                          ----- 
  Currency translation differences                                         2            -        (5) 
                                                          ----- 
  Movements on financial assets at fair value 
   through other comprehensive income                                    (2)            1          2 
                                                          ----- 
  Cash flow hedges fair value movements - non-inventory 
   hedges                                                                 14            6        (1) 
                                                          ----- 
  Items reclassified from cash flow hedge reserve                          4            -         13 
                                                          ----- 
  Deferred tax on items that may be reclassified                        (18)          (2)         10 
                                                          ----- 
                                                                           -            5         19 
                                                          ----- 
 Total other comprehensive income/(loss) for 
  the financial period (net of tax)                                      226        (143)      (415) 
 Total comprehensive income/(loss) for the 
  financial period                                                       615        (322)      (695) 
--------------------------------------------------------  -----  -----------  -----------  --------- 
 

The notes on pages 22 to 50 form an integral part of these Condensed Consolidated Interim Financial Statements.

Group balance sheet (unaudited)

at 18 September 2021

 
                                                         18 September    6 March   19 September 
                                                                 2021      2021*          2020* 
                                                  Note           GBPm       GBPm           GBPm 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Non-current assets 
 Property, plant and equipment                     11           8,417      8,587          8,759 
 Right-of-use assets                               12           5,222      4,747          4,796 
 Intangible assets                                 13           1,001        914            858 
 Investments in joint ventures and associates                       5          5              5 
 Financial assets at fair value through 
  other comprehensive income                      14a             640        754            863 
 Trade and other receivables                                       39         50             52 
 Amounts due from Financial Services customers 
  and banks                                       14d           2,049      2,280          2,812 
 Derivative financial assets                      14c              44          8              4 
 Net retirement benefit surplus                    18           1,087        744          1,012 
                                                               18,504     18,089         19,161 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Current assets 
 Inventories                                                    1,682      1,625          1,635 
 Trade and other receivables                                      740        725            748 
 Amounts due from Financial Services customers 
  and banks                                       14d           2,973      3,127          3,380 
 Financial assets at fair value through 
  other comprehensive income                      14a             112         90             61 
 Derivative financial assets                      14c              20          5             28 
 Cash and cash equivalents                         17           1,636      1,575          2,068 
                                                                       ---------  ------------- 
                                                                7,163      7,147          7,920 
 Assets held for sale                                               9         24              2 
-----------------------------------------------  -----                 ---------  ------------- 
                                                                7,172      7,171          7,922 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Total assets                                                  25,676     25,260         27,083 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Current liabilities 
 Trade and other payables                                     (4,563)    (4,488)        (4,702) 
 Amounts due to Financial Services customers 
  and banks                                       14a         (4,970)    (6,086)        (5,906) 
 Borrowings                                        16           (261)      (356)          (872) 
 Lease liabilities                                 12           (558)      (524)          (538) 
 Derivative financial liabilities                 14c            (33)       (93)           (38) 
 Taxes payable                                                  (174)       (59)           (29) 
 Provisions                                                     (113)      (209)          (136) 
-----------------------------------------------  -----                 ---------  ------------- 
                                                             (10,672)   (11,815)       (12,221) 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Net current liabilities                                      (3,500)    (4,644)        (4,299) 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Non-current liabilities 
 Other payables                                                  (21)       (20)            (1) 
 Amounts due to Financial Services customers 
  and banks                                       14a           (644)      (203)          (904) 
 Borrowings                                        16           (722)      (748)          (772) 
 Lease liabilities                                 12         (5,764)    (5,310)        (5,369) 
 Derivative financial liabilities                 14c            (18)       (44)           (60) 
 Deferred income tax liability                                  (490)      (255)          (328) 
 Provisions                                                     (269)      (261)          (241) 
                                                              (7,928)    (6,841)        (7,675) 
 Total liabilities                                           (18,600)   (18,656)       (19,896) 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Net assets                                                     7,076      6,604          7,187 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Equity 
 Called up share capital                                          666        637            635 
 Share premium                                                  1,398      1,173          1,163 
 Merger reserve                                                   568        568            568 
 Capital redemption reserve                                       680        680            680 
 Other reserves                                                   276        167            194 
 Retained earnings                                              3,488      3,131          3,699 
-----------------------------------------------  -----                 ---------  ------------- 
 Total equity before perpetual securities                       7,076      6,356          6,939 
 Perpetual convertible bonds                                        -        248            248 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 Total equity                                                   7,076      6,604          7,187 
-----------------------------------------------  -----  -------------  ---------  ------------- 
 

(* The comparative balance sheets have been restated. Refer to note 2 for further information.)

The notes on pages 22 to 50 form an integral part of these Condensed Consolidated Interim Financial Statements.

Group cash flow statement (unaudited)

for the 28 weeks to 18 September 2021

 
                                                                    28 weeks             28 weeks             52 weeks 
                                                                          to                   to                   to 
                                                                18 September         19 September              6 March 
                                                                        2021                 2020                 2021 
                                                 Note                   GBPm                 GBPm                 GBPm 
--------------------------------------------  ---------  -------------------  -------------------  ------------------- 
 Cash flows from operating activities 
 Profit/(Loss) before tax                                                541                (137)                (261) 
 Net finance costs                                                       140                  180                  321 
 Operating profit                                                        681                   43                   60 
 Adjustments for: 
  Depreciation expense                          11,12                    581                  596                1,113 
  Amortisation expense                            13                      78                   65                  136 
  Net impairment loss on property, plant and 
   equipment, right-of-use assets, 
   intangible 
   assets                                      11,12,13                    1                  292                  321 
  Non-cash adjustments arising from 
   acquisitions                                                            -                  (1)                  (1) 
  Financial Services impairment losses on 
   loans 
   and advances                                                           35                   39                   85 
  (Profit)/loss on sale of properties and 
   early 
   termination of leases                          17                    (22)                    7                 (17) 
  Share-based payments expense                                            28                   16                   29 
  Defined benefit scheme expenses                 18                       2                    3                   13 
  Cash contributions to benefit schemes           18                    (39)                 (60)                (101) 
 Operating cash flows before changes in 
  working 
  capital                                                              1,345                1,000                1,638 
 Changes in working capital 
  (Increase)/decrease in inventories              17                    (57)                   97                  117 
  Decrease in financial assets at fair value 
   through other comprehensive income             17                     130                  159                  267 
  (Increase)/decrease in trade and other 
   receivables                                    17                     (6)                   58                   62 
  Decrease in amounts due from Financial 
   Services 
   customers and other deposits                   17                     350                1,173                1,912 
  Increase in trade and other payables            17                      95                  409                  321 
  (Decrease) in amounts due to Financial 
   Services 
   customers and other deposits                   17                   (675)              (1,284)              (1,805) 
  (Decrease)/increase in provisions and 
   other 
   liabilities                                    17                    (91)                  180                  273 
 Cash generated from operations                                        1,091                1,792                2,785 
 Interest paid                                                         (178)                (193)                (349) 
 Corporation tax paid                                                      -                 (88)                 (93) 
 Net cash generated from operating 
  activities                                                             913                1,511                2,343 
--------------------------------------------  ---------  -------------------  -------------------  ------------------- 
 
 Cash flows from investing activities 
 Purchase of property, plant and equipment                             (154)                (257)                (423) 
 Initial direct costs on new leases                                      (1)                  (3)                  (7) 
 Purchase of intangible assets                                         (165)                 (44)                (172) 
 Proceeds from disposal of property, plant 
  and equipment                                                           39                   19                   27 
 Dividends and distributions received                                      -                   22                   22 
 Net cash used in investing activities                                 (281)                (263)                (553) 
--------------------------------------------  ---------  -------------------  -------------------  ------------------- 
 
 Cash flows from financing activities 
 Proceeds from issuance of ordinary shares                                11                    4                   17 
 Proceeds from short term borrowings                                       -                  660                  660 
 Repayment of borrowings                                               (223)                (269)                (289) 
 Repayment of short term borrowings                                        -                (660)                (660) 
 Repayment of perpetual capital securities                               (8)                (250)                (250) 
 Purchase of own shares                                                 (41)                 (30)                 (30) 
 Repayment of capital element of lease 
  obligations                                                          (243)                (224)                (501) 
 Dividends paid on ordinary shares                10                   (165)                    -                (232) 
 Dividends paid on perpetual securities                                  (4)                 (20)                 (23) 
 Net cash used in financing activities                                 (673)                (789)              (1,308) 
--------------------------------------------  ---------  -------------------  -------------------  ------------------- 
 
 Net (decrease)/increase in cash and cash 
  equivalents                                                           (41)                  459                  482 
 
 Opening cash and cash equivalents                                     1,476                  994                  994 
 Closing cash and cash equivalents                17                   1,435                1,453                1,476 
--------------------------------------------  ---------  -------------------  -------------------  ------------------- 
 

The notes on pages 22 to 50 form an integral part of these Condensed Consolidated Interim Financial Statements.

Group statement of changes in equity (unaudited)

for the 28 weeks to 18 September 2021

 
                                                                             Total 
                   Called                          Capital                  equity 
                       up     Share             redemption                  before    Perpetual     Perpetual 
                    share   premium    Merger    and 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 7 March 
  2021                637     1,173       568          847      3,131        6,356            -           248    6,604 
                 --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 Profit for the 
  period                -         -         -            -        389          389            -             -      389 
 Other 
  comprehensive 
  income                -         -         -          111        298          409            -             -      409 
 Tax relating 
  to other 
  comprehensive 
  income                -         -         -         (42)      (141)        (183)            -             -    (183) 
 Total 
  comprehensive 
  income for 
  the 
  period ended 
  18 September 
  2021                  -         -         -           69        546          615            -             -      615 
---------------  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 Cash flow 
  hedges gains 
  and losses 
  transferred 
  to inventory          -         -         -           24          -           24            -             -       24 
                 --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 Transactions 
 with owners: 
  Dividends             -         -         -            -      (165)        (165)            -             -    (165) 
--------------- 
  Conversion of 
   perpetual 
   convertible 
   bonds               26       216         -            -        (2)          240            -         (240)        - 
  Repayment of 
   perpetual 
   convertible 
   bonds                -         -         -            -          -            -            -           (8)      (8) 
  Share-based 
   payment              -         -         -            -         28           28            -             -       28 
--------------- 
  Purchase of 
   own shares           -         -         -            -       (41)         (41)            -             -     (41) 
--------------- 
  Allotted in 
   respect of 
   share option 
   schemes              3         9         -            -        (1)           11            -             -       11 
--------------- 
  Other 
   adjustments          -         -         -           16       (16)            -            -             -        - 
  Tax on items 
   charged to 
   equity               -         -         -            -          8            8            -             -        8 
 At 18 
  September 
  2021                666     1,398       568          956      3,488        7,076            -             -    7,076 
---------------  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 
                                                                             Total 
                   Called                          Capital                  equity 
                       up     Share             redemption                  before    Perpetual     Perpetual 
                    share   premium    Merger    and 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                634     1,159       568          848      4,068        7,277          248           248    7,773 
                 --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 (Loss)/profit 
  for the 
  period                -         -         -            -      (183)        (183)            -             4    (179) 
 Other 
  comprehensive 
  income/(loss)         -         -         -           35      (175)        (140)            -             -    (140) 
 Tax relating 
  to other 
  comprehensive 
  income/(loss)         -         -         -          (9)          6          (3)            -             -      (3) 
 Total 
  comprehensive 
  income/(loss) 
  for 
  the period 
  ended 19 
  September 
  2020                  -         -         -           26      (352)        (326)            -             4    (322) 
---------------  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 Transactions 
 with owners: 
  Distribution 
   to holders 
   of perpetual 
   securities           -         -         -            -          -            -            -           (4)      (4) 
--------------- 
  Share-based 
   payment              -         -         -            -         16           16            -             -       16 
--------------- 
  Purchase of 
   own shares           -         -         -            -       (30)         (30)            -             -     (30) 
--------------- 
  Allotted in 
   respect of 
   share option 
   schemes              1         4         -            -        (1)            4            -             -        4 
--------------- 
  Redemption of 
   perpetual 
   capital 
   securities           -         -         -            -        (2)          (2)        (248)             -    (250) 
  Tax on items 
  charged to 
  equity                -         -         -            -          -            -            -             -        - 
 At 19 
  September 
  2020                635     1,163       568          874      3,699        6,939            -           248    7,187 
---------------  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 
                                                                             Total 
                   Called                          Capital                  equity 
                       up     Share             redemption                  before    Perpetual     Perpetual 
                    share   premium    Merger    and 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                634     1,159       568          848      4,068        7,277          248           248    7,773 
                 --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 (Loss)/profit 
  for the 
  period                -         -         -            -      (287)        (287)            -             7    (280) 
 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                  -         -         -            -      (702)        (702)            -             7    (695) 
---------------  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 
 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) 
  Tax on items 
  charged to 
  equity                -         -         -            -          -            -            -             -        - 
 At 6 March 
  2021                637     1,173       568          847      3,131        6,356            -           248    6,604 
---------------  --------  --------  --------  -----------  ---------  -----------  -----------  ------------  ------- 
 

The notes on pages 22 to 50 form an integral part of these Condensed Consolidated Interim Financial Statements.

Notes to the Condensed Consolidated Interim Financial Statements (unaudited)

   1.            General information 

J Sainsbury plc is a public limited company (the 'Company') incorporated in the United Kingdom, whose shares are publicly traded on the London Stock Exchange. The Company is domiciled in the United Kingdom and its registered address is 33 Holborn, London EC1N 2HT, United Kingdom.

The Condensed Consolidated Interim Financial Statements are unaudited but have been reviewed by the auditors whose report is set out on page 53. The financial information presented herein does not amount to statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Annual Report and Financial Statements 2021 have been filed with the Registrar of Companies. The Independent Auditors' report on the Annual Report and Financial Statements 2021 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

The financial period represents the 28 weeks to 18 September 2021 (comparative financial period 28 weeks to 19 September 2020; prior financial year 52 weeks to 6 March 2021). The financial information comprises the results of the Company and its subsidiaries (the 'Group') and the Group's interests in joint ventures and associates.

The Group's principal activities are Food, General Merchandise & Clothing Retailing and Financial Services.

   2.            Basis of preparation and accounting policies 
   2.1          Basis of preparation 

The Interim Results, comprising the Condensed Consolidated Interim Financial Statements and the Interim Management Report, have been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Conduct Authority and with the requirements of UK adopted IAS 34 'Interim Financial Reporting'.

The financial information contained in the Interim Results is presented in sterling, rounded to the nearest million (GBPm) unless otherwise stated.

The financial information contained in the Condensed Consolidated Interim Financial Statements should be read in conjunction with the Annual Report and Financial Statements 2021, which were prepared in accordance with International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union, and also in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

The annual financial statements of the Group for the period to 5 March 2022 will be prepared in accordance with UK adopted international accounting standards. This change in basis of preparation is required by UK Company Law for the purposes of financial reporting as a result of the UK's exit from the EU on 31 January 2020 and the cessation of the transition period on 31 December 2020. This change does not constitute a change in accounting policy but rather a change in framework which is required to ground the use of IFRS in Company Law. There is no impact on recognition, measurement or disclosure between the two frameworks in the period reported.

Sainsbury's Bank plc and its subsidiaries have been consolidated for the six months to 31 August 2021 (19 September 2020: six months to 31 August 2020; 6 March 2021: twelve months to 28 February 2021). Adjustments have been made for the effects of significant transactions or events that occurred between this date and the Group's balance sheet date.

Balance sheet restatements

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 in accordance with IAS 8: 'Accounting Policies, Changes in Accounting Policies and Errors' by grossing up cash and overdrafts (reported within current borrowings) as follows:

 
 Balance sheet at     Increase in cash   Increase in current borrowings 
                                  GBPm                             GBPm 
-------------------  -----------------  ------------------------------- 
 6 March 2021                       98                             (98) 
 19 September 2020                 615                            (615) 
 7 March 2020                       59                             (59) 
-------------------  -----------------  ------------------------------- 
 

There is no impact on net assets, net debt, profit, basic and diluted earnings per share, the cash flow statement nor any other financial ratios and KPIs. Furthermore, as the adjustment affects two financial statement line items by equal and opposite amounts with no change in net assets, it is not considered to have a material affect on the overall balance sheet position reported as at 7 March 2020. As a result the Group has concluded that the presentation of a full restated balance sheet as at 7 March 2020 is not required.

Fixed assets and intangible assets presentation

Consistent with the Annual Report and Financial Statements 2021, the prior year has been restated to reflect reclassifications between property, plant and equipment and intangible assets of GBP38 million. These related to work in progress originally capitalised into intangibles that should have been recognised within property, plant & equipment. The impact on comparatives is an increase in property, plant and equipment of GBP38 million and a decrease in intangible assets of GBP38 million, with no change in net assets, profit, cash flow nor basic and diluted earnings per share.

   2.2          Going concern 

The Directors are satisfied that the Group has sufficient resources to continue in operation f or a period of at least 12 months from the date of approval. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The assessment period for the purposes of considering going concern is the 16 months to 4 March 2023.

In assessing the Group's ability to continue as a going concern, the Directors have considered the Group's most recent corporate planning process. 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 most recent corporate plan was prepared in October 2021 and was reviewed by the Operating Board and ultimately by the PLC Board with involvement throughout from both the Chief Financial Officer and Chief Executive.

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 GBP1,150 million Facility (B). Facility A has a final maturity of April 2025 and Facility B has a final maturity of October 2024. As at 18 September 2021, the Revolving Credit Facility (both Facility A and Facility B) was undrawn. In addition, the Group maintains uncommitted facilities of GBP195 million to provide additional capacity to fund short term working capital requirements. The uncommitted facilities were undrawn at 18 September 2021.

In assessing going concern, scenarios in relation to the Group's principal risks have been considered in line with those disclosed at year-end by overlaying them into the corporate plan and assessing the impact on cash flows, net debt and funding headroom. These severe but plausible scenarios include modelling the ongoing impact of COVID-19, recognising the degree of uncertainty that continues to exist, the impact of any regulatory fines, failure to deliver planned cost savings and the impact of the UK's withdrawal from the EU on the Group's Northern Ireland operations where trade flows have proved more difficult.

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 bonuses and dividend payments.

As a consequence of the work performed, the Directors considered it appropriate to adopt the going concern basis in preparing the Financial Statements with no material uncertainties to disclose.

   2.3          Accounting judgements and estimates 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these Condensed Consolidated Interim Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements for the year ended 6 March 2021 unless otherwise stated.

   2.4          New standards, interpretations and amendments adopted by the Group 

The Group has considered the following amendments to published standards that are effective for the Group for the financial year beginning 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.

The accounting policies have remained unchanged from those disclosed in the Annual Report for the year ended 6 March 2021.

   2.5        Alternative performance measures (APMs) 

In the reporting of financial information, the Directors use various APMs. These APMs are defined and reconciled on pages 54 to 60, and should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies' APMs.

   3.         Profit before non-underlying items 

In order to provide shareholders with additional insight into the underlying performance of the business, an adjusted measure of profit (underlying profit before tax) is provided to supplement the reported IFRS numbers, and reflects how the business measures performance internally. Underlying results exclude items recognised in reported profit or loss before tax which, if included, could distort comparability between periods.

In determining which items to exclude from underlying profit, the Group considers items which are significant either by virtue of their size and/or nature, or that are non-recurring.

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 also chosen to exclude the following items from underlying profit:

-- Financial Services transition - multi-year costs incurred in transitioning to a new, more flexible banking platform as part of the previously announced New Bank Programme. These costs of integration do not reflect the business's trading performance and so are adjusted to ensure consistency between periods. The programme is expected to end this financial year.

-- Profit or loss on disposal of non-trading properties - these are excluded from underlying profit as such profit is not related to the ongoing operating activities of the Group.

-- Perpetual securities coupons - these are accounted for as equity in line with IAS 32 'Financial instruments: Presentation', however are accrued on a straight-line basis and included as an expense within underlying profit as they are included by management when assessing Group borrowings. These are now GBPnil following the redemption of the perpetual convertible bond during the year.

-- 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 and expenses include the financing element and scheme expenses of the Group's defined benefit scheme. 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 - these reflect the adjustments arising from acquisitions, predominantly the fair value unwind of acquired intangibles, such as brands and customer relationships. The Group would not normally recognise these as assets outside of a business combination. Therefore the unwind is classified as non-underlying.

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.

 
 28 weeks to 18 September 
 2021 
---------------------------  -------  ---------------  --------  ----------------  -------------  -----  ------------- 
                                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 
---------------------------  -------  ---------------  --------  ----------------  -------------  -----  ------------- 
 Income recognised in 
  relation 
  to legal disputes                -               13       168                 -            181   (34)            147 
 
 Restructuring and 
 integration 
 Restructuring programmes       (14)             (21)        13                 -           (22)      2           (20) 
 Financial Services 
  transition 
  and other                        -             (10)         -                 -           (10)      2            (8) 
 Total restructuring and 
  integration                   (14)             (31)        13                 -           (32)      4           (28) 
 
 Property, finance, pension 
 and acquisition 
 adjustments 
 Profit on disposal of 
  properties                       -                -         3                 -              3      -              3 
 Non-underlying finance 
  movements                        -                -         -                23             23    (4)             19 
 IAS 19 pension (expenses) 
  / income                         -              (2)         -                 8              6    (1)              5 
 Acquisition adjustments           -             (11)         -                 -           (11)      2            (9) 
 Total property, finance, 
  pension 
  and acquisition 
  adjustments                      -             (13)         3                31             21    (3)             18 
 
 Tax adjustments 
 Under provision in prior 
  years                            -                -         -                 -              -    (5)            (5) 
 Revaluation of deferred 
  tax 
  balances and changes in 
  law                              -                -         -                 -              -   (20)           (20) 
 Capital loss recognition          -                -         -                 -              -      4              4 
 
 Total adjustments              (14)             (31)       184                31            170   (54)            116 
---------------------------  -------  ---------------  --------  ---------------- 
 

Income recognised in relation to legal disputes

The Group has a number of ongoing legal cases in relation to overcharges from payment card processing fees, which largely reflect inter-bank "interchange fees". Agreements have been reached for two of these during the year, leading to net income of GBP168 million to be recognised during the current period.

Of the GBP168 million, cash of GBP75 million was received in a prior year and held as deferred income. Net cash of GBP27 million was received during the current financial period, with the remainder expected to be received later this financial year.

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

Costs have been recognised during the period in relation to the restructuring programmes announced in the prior year as follows:

 
                                                          28 weeks           28 weeks      52 weeks 
                                                   to 18 September    to 19 September    to 6 March 
                                                              2021               2020          2021 
                                                              GBPm               GBPm          GBPm 
----------------------------------------------   -----------------  -----------------  ------------ 
 Write downs of property, plant and equipment                    -                  9            26 
 Write downs of leased assets                                    1                 66            72 
 Write downs of intangible assets                                -                  3             3 
 Closure provisions (a)                                       (10)                151           240 
 Accelerated depreciation of assets (b)                         20                  -            27 
 Redundancy provisions (c)                                      21                 30            61 
 Consultancy costs                                               8                  -            10 
 Gain on lease terminations (d)                                (5)                  -          (16) 
 Profit on disposal of properties (e)                         (13)                  -             - 
 Restructuring programmes                                       22                259           423 
 Impairment of non-financial assets (f)                          -                214           220 
-----------------------------------------------  -----------------  -----------------  ------------ 
 Total restructuring and impairment costs                       22                473           643 
-----------------------------------------------  -----------------  -----------------  ------------ 
 

a) Closure provisions relate to onerous contract costs, dilapidations and strip out costs on leased sites. These provisions have been re-assessed in the current period based on revised closure dates and settlement of lease exits.

b) 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.

c) Redundancy costs are recognised as the plan has been announced and a valid expectation raised with the affected colleagues.

d) 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.

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

f) Impairments recognised as part of the prior year full impairment review undertaken as a result of store rationalisation, changes in channel mix, and changes in customer borrowing and cash usage behaviour.

As the costs incurred facilitate future underlying cost savings, it was considered whether it was appropriate to report these costs within underlying profit. Whilst they arise from changes in the Group's underlying operations, they can be separately identified, are material in size and do not relate to ordinary in-year trading activity. In addition, the areas being closed or restructured no longer relate to the Group's remaining underlying operations and their exclusion provides meaningful comparison between financial years.

The restructuring programme is a multi-year activity which began in the financial period ended 6 March 2021. Total cumulative costs to 18 September 2021 are GBP(665) million split between GBP(643) million in the prior year and GBP(22) million in the current period as per the above table. Total expected costs are still in the range of GBP900 million to GBP1 billion to March 2024, with total expected cash outflows of around GBP300 million.

Financial Services transition and other

These comprise Financial Services transition costs of GBP(10) 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. The programme is expected to end this financial year.

Property, finance, pension and acquisition adjustments

-- Profit on disposal of properties for the financial period comprised GBP(3) million for the Group.

-- Non-underlying finance movements for the financial period comprised GBP23 million income for the Group. These are presented separately in note 7.

-- Defined benefit pension interest and expenses comprises pension finance income of GBP8 million and scheme expenses of GBP(2) million (see note 18).

-- Acquisition adjustments of GBP(11) million reflect the unwind of non-cash fair value adjustments arising from Home Retail Group and Nectar UK acquisitions and are recognised as follows:

 
                      28 weeks to 18 September            28 weeks to 19               52 weeks to 
                                          2021            September 2020              6 March 2021 
---------------  -----------------------------  ------------------------  ------------------------ 
                    Argos     Nectar     Total   Argos   Nectar    Total   Argos   Nectar    Total 
                                         Group                     Group                     Group 
                     GBPm       GBPm      GBPm    GBPm     GBPm     GBPm    GBPm     GBPm     GBPm 
---------------  --------  ---------  --------  ------  -------  -------  ------  -------  ------- 
 Cost of sales          -          -         -       1        -        1       1        -        1 
 Depreciation           1          -         1       1        -        1       4        -        4 
 Amortisation        (10)        (2)      (12)    (10)      (3)     (13)    (18)      (6)     (24) 
---------------  --------  ---------  --------  ------  -------  -------  ------  -------  ------- 
                      (9)        (2)      (11)     (8)      (3)     (11)    (13)      (6)     (19) 
---------------  --------  ---------  --------  ------  -------  -------  ------  -------  ------- 
 

Comparative information

 
 28 weeks to 19 September 2020 
---------------------------------------------------  --------  ------------  -------------  -----  --------------- 
                              Cost   Administrative     Other   Net finance          Total    Tax          Total 
                                of         expenses    income       income/    adjustments           adjustments 
                             sales                                                  before 
                                                                                       tax 
                                                                    (costs) 
                              GBPm             GBPm      GBPm          GBPm           GBPm   GBPm           GBPm 
-------------------------  -------  ---------------  --------  ------------  -------------  -----  ------------- 
 Restructuring programmes    (244)             (15)         -             -          (259)     45          (214) 
 Impairment of 
  non-financial 
  assets                      (96)            (118)         -             -          (214)     37          (177) 
 Financial Services 
  transition                     -              (7)         -             -            (7)      -            (7) 
-------------------------  -------  ---------------  --------  ------------  -------------  -----  ------------- 
 Total restructuring, 
  impairment 
  and integration            (340)            (140)         -             -          (480)     82          (398) 
 
 Property, finance, 
 pension 
 and acquisition 
 adjustments 
 ATM business rates 
  reimbursement                 42                -         -             -             42    (8)             34 
 Loss on disposal of 
  properties                     -                -       (5)             -            (5)      1            (4) 
 Perpetual securities 
  coupons                        -                -         -            10             10      -             10 
 Non-underlying finance 
  movements                      -                -         -           (2)            (2)      -            (2) 
 IAS 19 pension interest 
  and 
  expenses                       -              (3)         -            11              8    (2)              6 
 Acquisition adjustments         -             (11)         -             -           (11)      2            (9) 
-------------------------  -------  ---------------  --------  ------------  -------------  -----  ------------- 
 Total property, finance, 
  pension 
  and acquisition 
  adjustments                   42             (14)       (5)            19             42    (7)             35 
 
 Tax adjustments 
 Under provision in prior 
 years                           -                -         -             -              -      -              - 
 Revaluation of deferred 
  tax 
  balances                       -                -         -             -              -   (34)           (34) 
 
 Total adjustments           (298)            (154)       (5)            19          (438)     41          (397) 
-------------------------  -------  ---------------  --------  ------------  -------------  -----  ------------- 
 
 
 
 52 weeks to 6 March 2021 
                                                                                                   ------------- 
                                 Cost   Administrative     Other        Net          Total    Tax          Total 
                                   of         expenses    income    finance    adjustments           adjustments 
                                sales                               income/         before 
                                                                    (costs)            tax 
                                 GBPm             GBPm      GBPm       GBPm           GBPm   GBPm           GBPm 
----------------------------  -------  ---------------  --------  ---------  -------------  -----  ------------- 
 Restructuring programmes       (342)             (81)         -          -          (423)     76          (347) 
 Impairment of non-financial 
  assets                        (112)            (108)         -          -          (220)     33          (187) 
 Financial Services 
  transition 
  and other                         -             (17)         -          -           (17)      3           (14) 
----------------------------  -------  ---------------  --------  ---------  -------------  -----  ------------- 
 Total restructuring, 
  impairment 
  and integration               (454)            (206)         -          -          (660)    112          (548) 
 
 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                         -                -         -        (1)            (1)      -            (1) 
 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         32             43      2             45 
 
 Tax adjustments 
 Derecognition of capital 
  losses                            -                -         -          -              -   (28)           (28) 
 
 Total adjustments              (412)            (238)         1         32          (617)     86          (531) 
----------------------------  -------  ---------------  --------  ---------  -------------  -----  ------------- 
 
 

Cash flow statement

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

 
                                                      28 weeks           28 weeks      52 weeks 
                                               to 18 September    to 19 September    to 6 March 
                                                          2021               2020          2021 
                                                          GBPm               GBPm          GBPm 
------------------------------------------   -----------------  -----------------  ------------ 
 Cash flows from operating activities 
 IAS 19 pension expenses                                   (2)                (3)           (7) 
 Financial Services transition and other                  (11)                (7)          (15) 
 Restructuring programmes                                 (70)                (9)          (39) 
 ATM Rates reimbursement                                    13                 12            27 
 Income recognised in relation to legal                     27                  -             - 
  disputes 
 Cash used in operating activities                        (43)                (7)          (34) 
 
 Cash flows from investing activities 
 Proceeds from property disposals(1)                        39                 19            27 
 Cash generated from investing activities                   39                 19            27 
 
 Net cash flows                                            (4)                 12           (7) 
-------------------------------------------  -----------------  -----------------  ------------ 
 

(1) GBP18 million of the current period proceeds from property disposals are a result of restructuring programmes.

ATM business rates reimbursement

GBP13 million of cash was received in the financial period from the Valuation Office in relation to income recognised in the prior year following the Supreme Court's ruling that ATMs outside stores should not be assessed for additional business rates on top of normal store rates.

   4.         Revenue 
 
                                                      28 weeks           28 weeks      52 weeks 
                                               to 18 September    to 19 September    to 6 March 
                                                          2021               2020          2021 
                                                          GBPm               GBPm          GBPm 
-------------------------------------------  -----------------  -----------------  ------------ 
 Grocery, General Merchandise and Clothing 
  (GM&C)                                                13,475             13,464        26,103 
 Fuel                                                    2,036              1,251         2,514 
 Total retail sales                                     15,511             14,715        28,617 
 
 Financial Services interest receivable 
  (using effective interest rate method)                   161                176           344 
 Financial Services fees and commission                     52                 43            87 
-------------------------------------------  -----------------  -----------------  ------------ 
 Total Financial Services income                           213                219           431 
 
 Total revenue                                          15,724             14,934        29,048 
-------------------------------------------  -----------------  -----------------  ------------ 
 
   5.         Segment reporting 

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

   --     Retail - Food; 
   --     Retail - General Merchandise & Clothing; 
   --     Financial Services (Sainsbury's Bank plc and Argos Financial Services entities); 

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

The Operating Board assesses the performance of all segments on the basis of underlying profit before tax. Underlying profit before tax is an APM as described in note 2.5. All material operations and assets are in the UK.

   a.         Income statement and balance sheet 
 
                                                  Retail   Financial      Group 
                                                            Services 
 28 weeks to 18 September 2021                      GBPm        GBPm       GBPm 
---------------------------------------------  ---------  ----------  --------- 
 Segment revenue 
 Retail sales to external customers               15,511           -     15,511 
 Financial Services to external customers              -         213        213 
 Revenue                                          15,511         213     15,724 
---------------------------------------------  ---------  ----------  --------- 
 
 Underlying operating profit                         523          19        542 
 Underlying finance costs                          (171)           -      (171) 
 Underlying profit before tax                        352          19        371 
 Non-underlying income (note 3)                                             170 
 Profit before tax                                                          541 
 Income tax expense (note 8)                                              (152) 
 Profit for the financial period                                            389 
---------------------------------------------  ---------  ---------- 
 
 Assets                                           18,847       6,824     25,671 
 Investment in joint ventures and associates           5           -          5 
 Segment assets                                   18,852       6,824     25,676 
 Segment liabilities                            (12,687)     (5,913)   (18,600) 
---------------------------------------------  ---------  ---------- 
 
 
                                                  Retail   Financial      Group 
                                                            Services 
 28 weeks to 19 September 2020                      GBPm        GBPm       GBPm 
---------------------------------------------  ---------  ----------  --------- 
 Segment revenue 
 Retail sales to external customers               14,715           -     14,715 
 Financial Services to external customers              -         219        219 
 Revenue                                          14,715         219     14,934 
---------------------------------------------  ---------  ----------  --------- 
 
 Underlying operating profit/(loss)                  555        (55)        500 
 Underlying finance income                             2           -          2 
 Underlying finance costs                          (201)           -      (201) 
 Underlying profit/(loss) before tax                 356        (55)        301 
 Non-underlying expense (note 3)                                          (438) 
 Loss before tax                                                          (137) 
 Income tax expense (note 8)                                               (42) 
 Loss for the financial period                                            (179) 
---------------------------------------------  ---------  ---------- 
 
 Assets (restated)                                19,027       8,051     27,078 
 Investment in joint ventures and associates           5           -          5 
 Segment assets (restated)                        19,032       8,051     27,083 
 Segment liabilities (restated)                 (12,748)     (7,148)   (19,896) 
---------------------------------------------  ---------  ---------- 
 
 
                                                  Retail   Financial      Group 
                                                            Services 
 52 weeks to 6 March 2021                           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)                  730        (21)        709 
 Underlying finance income                             3           -          3 
 Underlying finance costs                          (356)           -      (356) 
 Underlying profit/(loss) before tax                 377        (21)        356 
 Non-underlying expense (note 3)                                          (617) 
 Loss before tax                                                          (261) 
 Income tax expense (note 8)                                               (19) 
 Loss for the financial period                                            (280) 
---------------------------------------------  ---------  ---------- 
 
 Assets (restated)                                17,735       7,520     25,255 
 Investment in joint ventures and associates           5           -          5 
 Segment assets (restated)                        17,740       7,520     25,260 
 Segment liabilities (restated)                 (12,038)     (6,618)   (18,656) 
---------------------------------------------  ---------  ---------- 
 

Refer to note 2 for details of the prior year restatements.

   b.         Segmented cash flow statement 
 
                                                          28 weeks to 18                                         28 weeks to 19 September 
                                                           September 2021                                                   2020 
                           APM                  Retail           Financial               Group                        Retail                     Financial                         Group 
                                                                  Services                                                                        Services 
             reference 
 
                                                  GBPm                GBPm                GBPm                          GBPm                          GBPm                          GBPm 
---------------------  -----------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Profit/(loss) before tax                          534                   7                 541                            31                         (168)                         (137) 
----------------------------------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 Net finance costs                                 140                   -                 140                           180                             -                           180 
----------------------------------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 Operating profit                                  674                   7                 681                           211                         (168)                            43 
 Adjustments for: 
 Depreciation and amortisation 
  expense                                          649                  10                 659                           647                            14                           661 
 Net impairment charge 
  on property, plant and 
  equipment, right-of-use 
  assets and intangible 
  assets                                             1                   -                   1                           187                           105                           292 
 Non-cash adjustments arising 
  from acquisitions                                  -                   -                   -                           (1)                             -                           (1) 
 Financial Services impairment 
  losses on loans and advances                       -                  35                  35                             -                            39                            39 
 (Profit)/loss on sale of 
  properties 
  and early termination of leases                 (22)                   -                (22)                             5                             2                             7 
 Share-based payments expense                       27                   1                  28                            14                             2                            16 
 Non-cash defined benefit 
  scheme expenses                                    2                   -                   2                             3                             -                             3 
 Cash contributions to 
  defined benefit scheme                          (39)                   -                (39)                          (60)                             -                          (60) 
----------------------------------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 Operating cash flows before 
  changes in working capital                     1,292                  53               1,345                         1,006                           (6)                         1,000 
 Movements in working capital                     (59)               (195)               (254)                           713                            79                           792 
----------------------------------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 Cash generated from operations                  1,233               (142)               1,091                         1,719                            73                         1,792 
 Interest paid              a                    (173)                 (5)               (178)                         (193)                             -                         (193) 
 Corporation tax paid                                -                   -                   -                          (88)                             -                          (88) 
 Net cash generated/(used) 
  from operating activities                      1,060               (147)                 913                         1,438                            73                         1,511 
----------------------------------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Cash flows from 
 investing 
 activities 
 Purchase of property, 
  plant and equipment                            (154)                   -               (154)                         (257)                             -                         (257) 
 Initial direct costs on 
  new leases                                       (1)                   -                 (1)                           (3)                             -                           (3) 
 Purchase of intangible 
  assets                                         (144)                (21)               (165)                          (33)                          (11)                          (44) 
 Proceeds from disposal 
  of property, plant and 
  equipment                                         39                   -                  39                            19                             -                            19 
 Dividends and 
  distributions 
  received                  e                        -                   -                   -                            22                             -                            22 
---------------------  -----------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 Net cash used in investing 
  activities                                     (260)                (21)               (281)                         (252)                          (11)                         (263) 
----------------------------------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Cash flows from 
 financing 
 activities 
 Proceeds from 
  issuance 
  of ordinary shares        d                       11                   -                  11                             4                             -                             4 
 Proceeds from 
  short-term 
  borrowings                c                        -                   -                   -                           660                             -                           660 
 Repayment of 
  borrowings                c                    (223)                   -               (223)                         (269)                             -                         (269) 
 Repayment of 
  short-term 
  borrowings                c                        -                   -                   -                         (660)                             -                         (660) 
 Repayment of 
  perpetual 
  capital securities        c                      (8)                   -                 (8)                         (250)                             -                         (250) 
 Purchase of own 
  shares                    d                     (41)                   -                (41)                          (30)                             -                          (30) 
 Repayment of capital 
  element 
  of obligations 
  under lease 
  liabilities               b                    (242)                 (1)               (243)                         (223)                           (1)                         (224) 
 Dividends paid on ordinary 
  shares                                         (165)                   -               (165)                             -                             -                             - 
 Dividends paid on 
  perpetual 
  securities                a                      (4)                   -                 (4)                          (20)                             -                          (20) 
 Net cash used in financing 
  activities                                     (672)                 (1)               (673)                         (788)                           (1)                         (789) 
 
 Net increase/(decrease) 
  in cash and cash equivalents                     128               (169)                (41)                           398                            61                           459 
----------------------------------  ------------------  ------------------  ------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 
 
                                                         52 weeks to 6 March 
                                                                 2021 
                                          APM                 Financial 
                                       reference     Retail    Services     Group 
                                                       GBPm        GBPm      GBPm 
 
 Loss before tax                                      (114)       (147)     (261) 
-------------------------------------------------  --------  ----------  -------- 
 Net finance costs                                      321           -       321 
 Share of post-tax loss/(profit) 
  from joint ventures and 
  associates                                              -           -         - 
 Operating profit                                       207       (147)        60 
 Adjustments for: 
 Depreciation and amortisation 
  expense                                             1,226          23     1,249 
 Net impairment charge on 
  property, plant and equipment, 
  right-of-use asset, investment 
  property and intangible 
  assets                                                216         105       321 
 Non-cash adjustments arising 
  from acquisitions                                     (1)           -       (1) 
 Financial Services impairment 
  losses on loans and advances                            -          85        85 
 (Profit)/loss on sale of 
  properties and early termination 
  of leases                                            (19)           2      (17) 
 Share-based payments expense                            26           3        29 
 Non-cash defined benefit 
  scheme expenses                                        13           -        13 
 Cash contributions to defined 
  benefit scheme                                      (101)           -     (101) 
 Operating cash flows before 
  changes in working capital                          1,567          71     1,638 
 Changes in working capital 
 Decrease/(increase) in 
  working capital                                       708         439     1,147 
 Cash generated from operations                       2,275         510     2,785 
 Interest paid                             a          (349)           -     (349) 
 Corporation tax paid/(received)                       (94)           1      (93) 
 Net cash generated/(used) 
  from operating activities                           1,832         511     2,343 
-------------------------------------------------  --------  ----------  -------- 
 
 Cash flows from investing 
  activities 
 Purchase of property, plant 
  and equipment excluding 
  strategic capital expenditure                       (423)           -     (423) 
 Initial direct costs on 
  new leases                                            (7)           -       (7) 
 Purchase of intangible 
  assets                                              (145)        (27)     (172) 
 Proceeds from disposal 
  of property, plant and 
  equipment                                              27           -        27 
 Interest received                         a              -           -         - 
 Dividends and distributions 
  received                                 e             22           -        22 
 Net cash used in investing 
  activities                                          (526)        (27)     (553) 
-------------------------------------------------  --------  ----------  -------- 
 
 Cash flows from financing 
  activities 
 Proceeds from issuance 
  of ordinary shares                       d             17           -        17 
 Proceeds from short-term 
  borrowings                               c            660           -       660 
 Repayment of borrowings                   c          (289)           -     (289) 
 Repayment of short-term 
  borrowings                               c          (660)           -     (660) 
 Repayment upon maturity 
  of convertible bonds                     c              -           -         - 
 Repayment of perpetual 
  capital securities                       c          (250)           -     (250) 
 Purchase of own shares                    d           (30)           -      (30) 
 Repayment of capital element 
  of obligations under lease 
  liabilities                              b          (499)         (2)     (501) 
 Dividends paid on ordinary 
  shares                                              (232)           -     (232) 
 Dividends paid on perpetual 
  securities                               a           (23)           -      (23) 
 Net cash used in financing 
  activities                                        (1,306)         (2)   (1,308) 
-------------------------------------------------  --------  ----------  -------- 
 
 Net increase in cash and 
  cash equivalents                                        -         482       482 
-------------------------------------------------  --------  ----------  -------- 
 
 
   6.         Supplier arrangements 

Supplier incentives, rebates and discounts, collectively known as 'supplier arrangements', represent a material deduction to cost of sales and directly affect the Group's reported margin.

The types of supplier arrangements applicable to the Group are as follows:

-- Discounts and supplier incentives - these represent the majority of all supplier arrangements and are linked to individual unit sales. The incentive is typically based on an agreed sum per item sold on promotion for a period and therefore is considered part of the purchase price of that product.

-- Fixed amounts - these are agreed with suppliers primarily to support in-store activity including promotions, such as utilising specific space.

-- Supplier rebates - these are typically agreed on an annual basis, aligned with the Group's financial year. The rebate amount is linked to pre-agreed targets such as sales volumes.

-- Marketing and advertising income - advertising income from suppliers through the Group's subsidiary Nectar 360 Services LLP and online marketing and advertising campaigns within Argos.

Amounts recognised in the income statement during the 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.

 
                                              28 weeks             28 weeks              52 weeks 
                                       to 18 September                to 19            to 6 March 
                                                  2021            September                  2021 
                                                                       2020 
                                                  GBPm                 GBPm                  GBPm 
----------------------------------   -----------------  -------------------  -------------------- 
 
 Fixed amounts                                     103                   89                   236 
 Supplier rebates                                   33                   32                    55 
 Marketing and advertising income                   45                   34                    83 
 Total supplier arrangements                       181                  155                   374 
-----------------------------------  -----------------  -------------------  -------------------- 
 

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

 
                                              28 weeks              28 weeks               52 weeks 
                                       to 18 September                 to 19             to 6 March 
                                                  2021             September                   2021 
                                                                        2020 
                                                  GBPm                  GBPm                   GBPm 
----------------------------------   -----------------  --------------------  --------------------- 
 Within inventory                                  (5)                   (7)                    (5) 
 
 Within current trade receivables 
 Supplier arrangements due                          30                    32                     49 
 Accrued supplier arrangements                      49                    45                     37 
 
 Within current trade payables 
 Supplier arrangements due                          23                     8                     32 
 Accrued supplier arrangements                       2                     3                      5 
 Deferred income due                               (1)                   (1)                    (2) 
 Total supplier arrangements                        98                    80                    116 
-----------------------------------  -----------------  --------------------  --------------------- 
 
   7.         Finance income and finance costs 
 
                           28 weeks to 18                        28 weeks to 19                         52 weeks to 6 
                            September 2021                        September 2020                          March 2021 
                 Underlying   Non-Underlying   Total   Underlying   Non-Underlying   Total   Underlying   Non-Underlying   Total 
                       GBPm             GBPm    GBPm         GBPm             GBPm    GBPm         GBPm             GBPm    GBPm 
--------------  -----------  ---------------  ------  -----------  ---------------  ------  -----------  ---------------  ------ 
 Interest on 
  bank 
  deposits 
  and other 
  financial 
  assets                  -                -       -            1                -       1            1                -       1 
 Fair value 
  measurements            -               28      28            -                3       3            -               10      10 
 IAS 19 
  pension 
  financing 
  income                  -                8       8            -               11      11            -               19      19 
 Finance 
  income on 
  net 
  investment 
  in leases               -                -       -            1                -       1            2                -       2 
 Finance 
  Income                  -               36      36            2               14      16            3               29      32 
--------------  -----------  ---------------  ------  -----------  ---------------  ------  -----------  ---------------  ------ 
 
 
 
 Secured 
  borrowings           (22)                -    (22)         (29)                -    (29)         (49)                -    (49) 
 Unsecured 
  borrowings            (1)                -     (1)          (1)                -     (1)          (1)                -     (1) 
 Lease 
  liabilities         (149)              (4)   (153)        (163)              (5)   (168)        (295)             (10)   (305) 
 Provisions - 
  amortisation 
  of discount             -              (1)     (1)            -                -       -          (1)              (1)     (2) 
 Interest 
  capitalised 
  - qualifying 
  assets                  1                -       1            2                -       2            4                -       4 
 Perpetual 
  securities 
  coupon                  -                -       -         (10)               10       -         (14)               14       - 
 Finance costs        (171)              (5)   (176)        (201)                5   (196)        (356)                3   (353) 
--------------  -----------  ---------------  ------  -----------  ---------------  ------  -----------  ---------------  ------ 
 

Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship.

   8.         Income tax expense 
 
                                            28 weeks to        28 weeks   52 weeks 
                                           18 September              to         to 
                                                   2021    19 September    6 March 
                                                                   2020       2021 
                                                   GBPm            GBPm       GBPm 
---------------------------------------  --------------  --------------  --------- 
 Current year UK tax                                 85             (5)         16 
 Current year overseas tax                            3               2          6 
 Over-provision in prior years                        4               8       (12) 
 Total current tax expense                           92               5         10 
 
 Origination and reversal of temporary 
  differences                                        30             (2)       (46) 
 Under provision in prior years                       3               5         27 
 Adjustment from changes in tax rates                31             (1)          - 
 Derecognition of capital losses                    (4)              35         28 
 Total deferred tax expense                          60              37          9 
 
 Total income tax expense in income 
  statement                                         152              42         19 
---------------------------------------  --------------  --------------  --------- 
 
 Analysed as: 
   Underlying tax                                    98              83        105 
   Non-underlying tax                                54            (41)       (86) 
 Total income tax expense in income 
  statement                                         152              42         19 
---------------------------------------  --------------  --------------  --------- 
 
 Underlying tax rate                              26.4%           27.6%      29.5% 
 Effective tax rate                               28.1%         (30.7)%     (7.3)% 
---------------------------------------  --------------  --------------  --------- 
 

Tax charged within the 28 weeks ended 18 September 2021 has been calculated by applying the effective rate of tax which is expected to apply to the Group for the period ending 5 March 2022 using rates substantively enacted by 18 September 2021 as required by IAS 34 'Interim Financial Reporting'.

The effective tax rate of 28.1 per cent (28 weeks to 19 September 2020: (30.7) per cent) is higher than the standard rate of corporation tax in the UK of 19 per cent. This is largely a result of the impact of the future tax rate change, combined with the impact of non-deductible expenses, particularly in respect of non-deductible capital expenditure, the de-recognition of previously recognised deferred tax assets on capital losses, and prior year adjustments.

A reduction in the main rate of corporation tax from 19 per cent to 17 per cent, intended to apply from 1 April 2020, was substantively enacted in a prior period and its effect was reflected in the Group's balance sheet as at 7 March 2020. A change to the corporation tax rate, so that it remained at 19 per cent rather than reducing to 17 per cent from 1 April 2020, was announced in the 2020 Budget and substantively enacted on 17 March 2020, and was reflected in the Group's balance sheet as at 6 March 2021. Furthermore, an increase in the UK corporation rate from 19 per cent to 25 per cent (effective 1 April 2023) was substantively enacted on 24 May 2021. This will increase the Group's future current tax charge accordingly. Deferred tax on temporary differences and tax losses as at the balance sheet date is calculated at the substantively enacted rates at which the temporary differences and tax losses are expected to reverse.

Finance Act 2020 included legislation restricting the amount of chargeable gains that a company can relieve with its carried-forward capital losses from previous accounting periods. Broadly, from 1 April 2020 a company is only able to offset up to 50 per cent of chargeable gains using carried forward capital losses. The Group has considered the expected impact of the tax law in respect of the utilisation of carried-forward tax losses. Accordingly, approximately GBP124 million of the Group's carried forward unrestricted capital losses (6 March 2021: GBP162 million) have not been recognised as at 18 September 2021.

   9.         Earnings/(Loss) per share 

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

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

Underlying earnings per share is provided by excluding the effect of any non-underlying items as defined in note 3. This alternative measure of earnings per share is presented to reflect the Group's underlying trading performance. All operations are continuing for the periods presented.

 
                                                        18 September   19 September      6 March 
                                                                2021           2020         2021 
                                                             million        million      million 
-----------------------------------------------------  -------------  -------------  ----------- 
 Weighted average number of shares in issue                  2,245.4        2,211.7      2,210.0 
 Weighted average number of dilutive share options              34.8           18.7         21.7 
 Weighted average number of dilutive subordinated 
  perpetual convertible bonds                                   69.3           86.7         88.4 
 Total number of shares for calculating diluted 
  earnings per share                                         2,349.5        2,317.1      2,320.1 
-----------------------------------------------------  -------------  -------------  ----------- 
 
                                                                GBPm           GBPm         GBPm 
-----------------------------------------------------  -------------  -------------  ----------- 
 Profit/(loss) for the financial period (net 
  of tax)                                                        389          (179)        (280) 
 Less profit attributable to: 
  Holders of perpetual convertible bonds                           -            (4)          (7) 
 Profit/(loss) for the financial period attributable 
  to ordinary shareholders                                       389          (183)        (287) 
-----------------------------------------------------  -------------  -------------  ----------- 
 
 Diluted earnings/(loss) for calculating diluted 
  earnings/(loss) per share                                      389          (183)        (287) 
-----------------------------------------------------  -------------  -------------  ----------- 
 
 Profit/(loss) for the financial period attributable 
  to ordinary shareholders of the parent                         389          (183)        (287) 
 Adjusted for non-underlying items (note 3)                    (170)            438          617 
 Tax on non-underlying items                                      54           (41)         (86) 
 Add back coupons on perpetual securities (net 
  of tax)                                                          -             10           14 
 Underlying profit after tax attributable to 
  ordinary shareholders of the parent                            273            224          258 
 Add coupon on subordinated perpetual convertible 
  bonds (net of tax)                                               -              3            6 
 Diluted underlying profit after tax attributable 
  to ordinary shareholders of the parent                         273            227          264 
-----------------------------------------------------  -------------  -------------  ----------- 
 
                                                           Pence per          Pence        Pence 
                                                               share      per share    per share 
-----------------------------------------------------  -------------  -------------  ----------- 
 Basic earnings/(loss)                                          17.3          (8.3)       (13.0) 
 Diluted earnings/(loss)(1)                                     16.6          (8.3)       (13.0) 
 Underlying basic earnings                                      12.2           10.1         11.7 
 Underlying diluted earnings                                    11.6            9.8         11.4 
-----------------------------------------------------  -------------  -------------  ----------- 
 

1 Basic and diluted loss per share are the same in the 28 weeks to 19 September 2020 and 52 weeks to 6 March 2021 as the dilutive share options and their respective earnings adjustments are anti-dilutive.

   10.        Dividends 
 
                                                          28 weeks           28 weeks                  52 weeks 
                                                   to 18 September    to 19 September                to 6 March 
                                                              2021               2020                      2021 
----------------------------------------  ------------------------  -----------------  ------------------------ 
 Amounts recognised as distributions 
  to ordinary shareholders in the year: 
     Dividend per share (pence)                                7.4                  -                      10.5 
     Total dividend charge (GBPm)                              165                  -                       232 
----------------------------------------  ------------------------  -----------------  ------------------------ 
 

An interim dividend of 3.2 pence per share (19 September 2020: 3.2 pence per share), has been approved by the Board of Directors for the financial year ending 5 March 2022, resulting in an interim dividend of GBP74 million (19 September 2020: GBP71 million). The interim dividend was approved by the Board on 3 November 2021 and as such has not been included as a liability at 18 September 2021.

In the prior year the Board chose in April 2020, due to limited visibility at the time on the potential impact of COVID-19 on the business, to defer dividend payment decisions and did not pay a final dividend for the 2019/20 financial year. Subsequently, the Board chose to pay a special dividend in lieu of a final dividend for the 2019/20 financial year that was approved by the Board of Directors on 4 November 2020 .

   11.        Property, plant and equipment 
 
                                          28 weeks   52 weeks           28 weeks 
                                                to         to                 to 
                                      18 September    6 March       19 September 
                                              2021       2021    2020 (restated) 
                                              GBPm       GBPm               GBPm 
----------------------------------  --------------  ---------  ----------------- 
 Net book value 
 At the beginning of the period              8,587      8,949              8,949 
 Additions                                     151        419                230 
 Disposals                                       -       (40)               (20) 
 Depreciation charge                         (321)      (629)              (331) 
 Impairment charge                               -       (88)               (69) 
 Transfer to assets held for sale                -       (24)                  - 
 At the end of the period                    8,417      8,587              8,759 
                                    --------------  ---------  ----------------- 
 

The net book value of property, plant and equipment comprises land & buildings of GBP6,831 million (6 March 2021: GBP6,862 million; 19 September 2020: GBP6,938 million); and fixtures & fittings of GBP1,586 million (6 March 2021: GBP1,725 million; 19 September 2020: GBP1,821 million).

At 18 September 2021, capital commitments contracted, but not provided for by the Group, amounted to GBP165 million (6 March 2021: GBP112 million; 19 September 2020: GBP113 million).

At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. The Group has considered whether there have been any indicators of impairment during the 28 weeks ended 18 September 2021 and concluded that there are none.

Refer to note 2 for details of the prior year restatement.

   12.        Leases 

Set out below are the carrying amounts of right-of-use assets and the movements during the period:

 
                                     28 weeks to      52 weeks     28 weeks to 
                                    18 September    to 6 March    19 September 
                                            2021          2021            2020 
                                            GBPm          GBPm            GBPm 
--------------------------------  --------------  ------------  -------------- 
 At the beginning of the period            4,747         4,826           4,826 
 New leases and modifications                736           542             363 
 Impairment charge                           (1)         (137)           (128) 
 Depreciation charge                       (260)         (484)           (265) 
At the end of the period                   5,222         4,747           4,796 
 

Included within the above are land and buildings with a net book value of GBP4,916 million (6 March 2021: GBP4,414 million; 19 September 2020: GBP4,496 million), and equipment with a net book value of GBP306 million (6 March 2021: GBP333 million; 19 September 2020: GBP300 million).

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

 
                                     28 weeks to      52 weeks     28 weeks to 
                                    18 September    to 6 March    19 September 
                                            2021          2021            2020 
                                            GBPm          GBPm            GBPm 
 At the beginning of the period            5,834         5,774           5,774 
 New leases and modifications                731           561             357 
 Interest expense                            153           305             168 
 Payments                                  (396)         (806)           (392) 
At the end of the period                   6,322         5,834           5,907 
 
 
Current                                      558           524             538 
Non-current                                5,764         5,310           5,369 
 

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 13 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 half-year 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.

Income statement disclosures

The following are the amounts recognised in profit or loss:

 
                                                           28 weeks           28 weeks     52 weeks 
                                                    to 18 September    to 19 September   to 6 March 
                                                               2021               2020         2021 
                                                               GBPm               GBPm         GBPm 
Depreciation of right-of-use assets                           (260)              (265)        (484) 
Impairment of right-of-use assets                               (1)              (128)        (137) 
Interest on lease liabilities                                 (153)              (168)        (305) 
Variable lease payments not included in 
 the measurement of lease liabilities                           (1)                (1)          (1) 
Finance income from sub-leasing of right-of-use 
 assets                                                           -                  1            2 
Operating sublet income                                          29                 17           42 
Expenses relating to short term leases                         (18)               (19)         (33) 
Expenses relating to leases of low value 
 assets                                                         (1)                (1)          (2) 
Total amount recognised in profit or loss                     (405)              (564)        (918) 
                                                  -----------------  ----------------- 
 
Total cash outflow for leases (excluding 
 sublease income)                                             (416)              (412)        (841) 
                                                  -----------------  ----------------- 
 

Maturity analysis

 
                                                       28 weeks      52 weeks           28 weeks 
                                                to 18 September    to 6 March    to 19 September 
                                                           2021          2021               2020 
                                                           GBPm          GBPm               GBPm 
Contractual undiscounted cash flows 
Less than one year                                          826           748                857 
One to two years                                          1,303           716                809 
Two to three years                                          649           643                707 
Three to four years                                         594           594                632 
Four to five years                                          564           547                590 
Total less than five years                                3,936         3,248              3,595 
Five to ten years                                         2,443         2,420              2,496 
Ten to fifteen years                                      2,065         2,078              2,144 
More than fifteen years                                   3,500         3,706              3,678 
Total undiscounted lease liability                       11,944        11,452             11,913 
Lease liabilities included in the statement 
 of financial position                                    6,322         5,834              5,907 
Current                                                     558           524                538 
Non-current                                               5,764         5,310              5,369 
 
   13.        Intangible assets 
 
                                                            52 weeks           28 weeks 
                                              28 weeks to         to                 to 
                                             18 September    6 March       19 September 
                                                     2021       2021    2020 (restated) 
                                                     GBPm       GBPm               GBPm 
                                                           ---------  ----------------- 
Net book value 
At the beginning of the 
 period                                               914        974                974 
Additions                                             165        172                 64 
Disposals                                               -          -               (20) 
Amortisation charge                                  (78)      (136)               (65) 
Impairment charge                                       -       (96)               (95) 
At the end of the period                            1,001        914                858 
                                                           ---------  ----------------- 
 

The net book value of goodwill and intangible assets predominantly comprises goodwill of GBP366 million (6 March 2021: GBP366 million; 19 September 2020: GBP367 million), software assets of GBP541 million (6 March 2021: GBP442 million; 19 September 2020: GBP374 million), acquired brands of GBP91 million (6 March 2021: GBP102 million; 19 September 2020: GBP111 million) and customer relationships of GBP3 million (6 March 2021: GBP4 million; 19 September 2020: GBP6 million).

Refer to note 2 for details of the prior year restatement.

   14.        Financial instruments 
   a.         Financial assets and liabilities by category 

Set out below are the accounting classifications of each class of financial assets and liabilities:

 
                                                                         Fair 
                                                               Fair     value 
                                                              value   through 
                                                Amortised   through    profit 
                                                     cost       OCI   or loss    Total 
                                                     GBPm      GBPm      GBPm     GBPm 
At 18 September 2021 
Cash and cash equivalents                           1,636         -         -    1,636 
Trade and other receivables                           589         -         -      589 
Amounts due from Financial Services customers 
 and banks                                          5,022         -         -    5,022 
Financial assets at fair value through other 
 comprehensive income                                   -       752         -      752 
Trade and other payables                          (4,227)         -         -  (4,227) 
Current borrowings                                  (261)         -         -    (261) 
Non-current borrowings                              (722)         -         -    (722) 
Amounts due to Financial Services customers 
 and banks                                        (5,614)         -         -  (5,614) 
Derivative financial instruments                        -         -        13       13 
Lease liabilities                                 (6,322)         -         -  (6,322) 
                                                  (9,899)       752        13  (9,134) 
 
                                                                         Fair 
                                                               Fair     value 
                                                              value   through 
                                                Amortised   through    profit 
                                                     cost       OCI   or loss    Total 
                                                     GBPm      GBPm      GBPm     GBPm 
At 6 March 2021 (restated) 
Cash and cash equivalents                           1,575         -         -    1,575 
Trade and other receivables                           609         -         -      609 
Amounts due from Financial Services customers       5,407         -         -    5,407 
Financial assets at fair value through other 
 comprehensive income                                   -       844         -      844 
Trade and other payables                          (4,102)         -         -  (4,102) 
Current borrowings                                  (356)         -         -    (356) 
Non-current borrowings                              (748)         -         -    (748) 
Amounts due to Financial Services customers 
 and banks                                        (6,289)         -         -  (6,289) 
Derivative financial instruments                        -         -     (124)    (124) 
Lease liabilities                                 (5,834)         -         -  (5,834) 
                                                  (9,738)       844     (124)  (9,018) 
 
                                                                         Fair 
                                                               Fair     value 
                                                              value   through 
                                                Amortised   through    profit 
                                                     cost       OCI   or loss    Total 
                                                     GBPm      GBPm      GBPm     GBPm 
At 19 September 2020 (restated) 
Cash and cash equivalents                           1,957         -       111    2,068 
Trade and other receivables                           453         -       190      643 
Amounts due from Financial Services customers       6,192         -         -    6,192 
Financial assets at fair value through other 
 comprehensive income                                   -       924         -      924 
Trade and other payables                          (4,332)         -         -  (4,332) 
Current borrowings                                  (872)         -         -    (872) 
Non-current borrowings                              (772)         -         -    (772) 
Amounts due to Financial Services customers 
 and banks                                        (6,810)         -         -  (6,810) 
Derivative financial instruments                        -         -      (66)     (66) 
Lease liabilities                                 (5,907)         -         -  (5,907) 
                                                 (10,091)       924       235  (8,932) 
 

Refer to note 2 for details of the prior year restatement.

   b.   Carrying amount versus fair value 

Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the financial statements at a value other than fair value. The fair value of financial assets and liabilities are based on prices available from the market on which the instruments are traded. Where market values are not available, the fair values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values of short-term deposits, trade receivables, overdrafts and payables are assumed to approximate to their book values.

 
                                                        Carrying  Fair value 
                                                          amount 
At 18 September 2021                                        GBPm        GBPm 
Financial assets 
Amounts due from Financial Services customers and 
 banks                                                     5,022       5,037 
 
Financial liabilities 
Loans due 2031                                             (602)       (693) 
Tier 2 Capital due 2023                                    (180)       (181) 
Amounts due to Financial Services customers and banks    (5,614)     (5,617) 
 
 
                                                        Carrying  Fair value 
                                                          amount 
At 6 March 2021                                             GBPm        GBPm 
Financial assets 
Amounts due from Financial Services customers and 
 banks                                                     5,407       5,418 
 
Financial liabilities 
Loans due 2031                                             (627)       (761) 
Bank loans due 2021                                        (199)       (199) 
Tier 2 Capital due 2023                                    (179)       (183) 
Amounts due to Financial Services customers and banks    (6,289)     (6,298) 
 
 
                                         Carrying  Fair value 
                                           amount 
At 19 September 2020                         GBPm        GBPm 
Financial assets 
Amounts due from Financial Services 
 customers                                  6,192       6,235 
 
Financial liabilities 
Loans due 2031                              (649)       (791) 
Bank loans due 2021                         (200)       (200) 
Tier 2 Capital due 2023                     (180)       (179) 
Amounts due to Financial Services 
 customers and banks                      (6,810)     (6,820) 
 
   c.         Fair value measurements recognised in the balance sheet 

The following table provides an analysis of financial instruments that are recognised at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

-- Level 1 fair value measurements are derived from quoted market prices (unadjusted) in active markets for identical assets or liabilities at the balance sheet date. This level includes listed equity securities and debt instrument on public exchanges;

-- Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments is determined by discounting expected cash flows at prevailing interest rates; and

-- Level 3 fair value measurements are derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 
                                              Level  Level  Level  Total 
                                                  1      2      3 
At 18 September 2021                           GBPm   GBPm   GBPm   GBPm 
Financial instruments at fair value through 
 other comprehensive income 
   Interest bearing financial assets              -      1      -      1 
   Other financial assets                         -     17    329    346 
   Investment securities                        405      -      -    405 
 
Derivative financial assets                       -     29     35     64 
 
Derivative financial liabilities                  -   (51)      -   (51) 
 
                                              Level  Level  Level  Total 
                                                  1      2      3 
At 6 March 2021                                GBPm   GBPm   GBPm   GBPm 
Financial instruments at fair value through 
 other comprehensive income 
   Interest bearing financial assets              -      1      -      1 
   Other financial assets                         -     15    291    306 
   Investment securities                        537      -      -    537 
 
Derivative financial assets                       -      7      6     13 
 
Derivative financial liabilities                  -  (137)      -  (137) 
 
                                              Level  Level  Level  Total 
                                                  1      2      3 
At 19 September 2020                           GBPm   GBPm   GBPm   GBPm 
Financial instruments at fair value through 
 other comprehensive income 
   Interest bearing financial assets              -      1      -      1 
   Other financial assets                         -     14    265    279 
   Investment securities                        644      -      -    644 
 
Derivative financial assets                       -     30      2     32 
 
Derivative financial liabilities                  -   (98)      -   (98) 
 

Level 3 Financial assets

Details of the determination of Level 3 fair value measurements are set out below:

 
                                        Financial instruments      Commodity 
                                                    at FVTOCI    derivatives  Total 
                                                         GBPm           GBPm   GBPm 
                                                               ------------- 
At 7 March 2021                                           291              6    297 
In finance income in the Group income 
 statement                                                  -             29     29 
In other comprehensive income                              38              -     38 
At 18 September 2021                                      329             35    364 
                                                               ------------- 
 
 
                                           Financial 
                                         instruments     Commodity 
                                           at FVTOCI   derivatives  Total 
                                                GBPm          GBPm   GBPm 
At 8 March 2020                                  237           (3)    234 
In finance income in the Group income 
 statement                                         -             9      9 
In other comprehensive income                     54             -     54 
At 6 March 2021                                  291             6    297 
 
 
                                           Financial 
                                         instruments     Commodity 
                                           at FVTOCI   derivatives  Total 
                                                GBPm          GBPm   GBPm 
At 8 March 2020                                  237           (3)    234 
In finance income in the Group income 
 statement                                         -             5      5 
In other comprehensive income                     28             -     28 
At 19 September 2020                             265             2    267 
 

Level 3 other financial assets

Other level 3 financial assets relate to the Group's beneficial interest in a property investment pool. The net present value of the Group's interest in the various freehold reversions owned by the property investment pool has been derived by assuming a property growth rate of zero per cent per annum (6 March 2021: zero per cent ; 19 September 2020: zero per cent) and a discount rate of seven per cent (6 March 2021: seven per cent; 19 September 2020: eight per cent). The sensitivity of this balance to changes of one per cent in the assumed rate of property rental growth and one per cent in the discount rate holding other assumptions constant is shown below:

 
                                   18 September 2021                      6 March 2021 
                   Change in discount      Change in  Change in discount     Change in 
                                 rate    growth rate                rate   growth rate 
                             +/- 1.0%       +/- 1.0%            +/- 1.0%      +/- 1.0% 
                                 GBPm           GBPm                GBPm          GBPm 
Financial assets                (6)/6          8/(8)               (6)/6         9/(9) 
 
 
                                       19 September 2020 
                        Change in discount     Change in 
                                      rate   growth rate 
                                  +/- 1.0%      +/- 1.0% 
                                      GBPm          GBPm 
Financial assets                     (7)/7       10/(10) 
 

Level 3 derivative financial assets - power purchase agreement

The Group has entered into several long-term fixed-price power purchase agreements with independent producers. Included within derivative financial instruments is a net asset of GBP35 million relating to these agreements at 18 September 2021 (at 19 September 2020: GBP2 million; at 6 March 2021: GBP6 million). The Group values its power purchase agreements as the net present value of the estimated future usage at the contracted fixed price less the market implied forward energy price discounted back at the prevailing swap rate. The Group also makes an assumption regarding expected energy output based on the historical performance and the producer's estimate of expected electricity output. The sensitivity of this balance to changes of 20 per cent in the assumed rate of energy output and 20 per cent in the implied forward energy prices holding other assumptions constant is shown below:

 
 
                                                     18 September 2021                    6 March 2021 
                                                             Change in                       Change in 
                                         Change in         electricity       Change in     electricity 
                                            volume       forward price          volume   forward price 
                                         +/- 20.0%           +/- 20.0%       +/- 20.0%       +/- 20.0% 
                                              GBPm                GBPm            GBPm            GBPm 
Derivative financial 
 instruments                                 7/(7)             14/(14)           1/(1)           7/(7) 
 
 
                                                                                     19 September 2020 
                                                                             Change in 
                                                             Change in     electricity 
                                                                volume   forward price 
                                                             +/- 20.0%       +/- 20.0% 
                                                                  GBPm            GBPm 
Derivative financial 
 instruments                                                     0/(1)           6/(8) 
 
 
   d.         Financial Services expected credit loss (ECL) 

Loans and advances are initially recognised at fair value and subsequently held at amortised cost, using the effective interest method, less provision for impairment and recognised on the balance sheet when cash is advanced:

 
                                              18 September  6 March  19 September 
                                                      2021     2021          2020 
                                                      GBPm     GBPm          GBPm 
Non-current 
Loans and advances to customers                      2,100    2,332         2,890 
Impairment of loans and advances                      (51)     (52)          (78) 
                                                     2,049    2,280         2,812 
 
Current 
Loans and advances to customers(1)                   3,094    3,338         3,608 
Impairment of loans and advances                     (192)    (211)         (228) 
                                                     2,902    3,127         3,380 
 
Loan commitment provisions                            (16)     (16)          (22) 
Total impairment provisions for loans and 
 advances to customers and loan commitments          (259)    (279)         (328) 
Impairment provisions as a percentage of 
 loans and advances to customers                      5.0%     4.9%          5.1% 
 

(1) Excludes GBP71 million of amounts due from banks as at 18 September 2021 (6 March 2021: GBPnil; 19 September 2020: GBPnil).

The ECL models utilise four scenarios including a 'base case' scenario considered to be the most likely outcome together with an upside, downside and severe downside scenario. The base case has been assigned a probability weighting of 40% with the upside, downside and severe downside scenarios weighted 30%, 25%, 5% respectively.

The weighted economic measures from the scenarios are as follows:

 
                                           As at 18 September 2021 
5-year average                      Base  Upside  Downside  Severe Downside 
Unemployment rate                    4.6     4.2       5.7              7.5 
Consumer price growth                2.2     2.3       2.1              1.9 
GDP                                  3.2     3.7       2.8              2.3 
Mortgage debt as a percentage of 
 household income                  102.1   101.1     103.3            104.3 
Real household disposable income     2.2     2.3       1.9              1.6 
Probability weighting                 40      30        25                5 
 
 
                                           As at 6 March 2021 
                                    Base  Upside  Downside     Severe 
5-year average                                               Downside 
Unemployment rate                    5.2     4.5       6.4        8.2 
Consumer price growth                1.8     1.9       1.7        1.6 
GDP                                  3.1     4.0       2.7        2.3 
Mortgage debt as a percentage of 
 household income                  101.6   100.6     102.0      102.4 
Real household disposable income     1.9     2.2       1.7        1.4 
Probability weighting                 40      30        25          5 
 

Due to the unique nature of the COVID-19 pandemic and the UK government actions to support businesses and employees, the ECL models did not respond appropriately to updated economic forecasts as at 19 September 2020. The multiple economic scenarios applied to the modelled outputs at that time reflected an assessment of economic uncertainty prior to COVID-19, with the expected increased credit losses resulting from COVID-19 calculated separately under a range of scenarios which were then risk weighted and applied as an overlay to the IFRS 9 models. Since then the Group has worked to revise its ECL models so as to respond more appropriately to economics scenarios as impacted by COVID-19, incorporating at 18 September 2021 and 6 March 2021 those detailed above. The Group has not presented the scenarios included in the models at 19 September 2020 due to a lack of comparability given the approach at that time.

ECL sensitivity

The economic conditions impact the probability of default of the customers. The impact of 100% weighting of each of the economic scenarios is outlined as follows:

 
                            Impact on the loss allowance 
                             18 September    6 March 2021 
                                     2021            GBPm 
                                     GBPm 
Closing ECL allowance                 259             279 
Base scenario                         (3)             (1) 
Upside scenario                       (9)            (14) 
Downside scenario                      12              13 
Severe Downside scenario               30              29 
 

The COVID-19 pandemic continues to have a significant impact on the global economy with the full impact unlikely to be known for some time, with the Coronavirus Job Retention Scheme and other Government support distorting historic data upon which ECL models have been developed.

The forecasted level of unemployment has reduced since the year end, however significant arrears emergence has yet to be observed in the lending portfolio. Therefore, the Group continues to hold a post model adjustment (PMA) for the potential impact of COVID-19 and the inherent uncertainty in arrears emergence. The PMA for COVID-19 is GBP33 million (GBP40 million at 6 March 2021) with the reduction relating to improvements made to the models to improve their responsiveness to extreme economic shifts and to reflect the overall improvement in the economic environment.

   15.        Analysis of net debt 

The Group's definition of net debt includes the capital injections to Sainsbury's Bank, but excludes the net debt of Sainsbury's Bank and its subsidiaries (Financial Services). Financial Services' net debt balances are excluded because they are required as part of the business as usual operations of a bank, as opposed to specific forms of financing for the Group. The Group's definition of net debt includes lease liabilities as recognised under IFRS 16 and perpetual securities, and excludes derivatives that are not used to hedge borrowings.

A reconciliation of opening to closing net debt is included below. Balances and movements for the total Group and Financial Services are shown in addition to Retail to enable reconciliation between the Group balance sheet and Group cash flow statement.

Financial assets at fair value through other comprehensive income exclude equity related financial assets which predominantly relate to the Group's beneficial interest in a commercial property investment pool. Derivatives exclude those not used to hedge borrowings, and borrowings exclude bank overdrafts as they are disclosed separately.

 
                                                   Cash Movements              Non-Cash Movements 
                                                                                                          ------------ 
                                     7 March  Cash flows   Net interest    Accrued       Other   Changes  18 September 
                                        2021   excluding     (received)   Interest    non-cash   in fair          2021 
                                                interest         / paid              movements     value 
                                        GBPm        GBPm           GBPm       GBPm        GBPm      GBPm          GBPm 
Retail 
Net derivative financial 
 instruments                            (14)           -              5        (6)           6         8           (1) 
Borrowings (excluding 
 overdrafts)                           (826)         223             15       (14)           -         -         (602) 
Lease liabilities                    (5,829)         242            153      (153)       (731)         -       (6,318) 
Arising from financing 
 activities                          (6,669)         465            173      (173)       (725)         8       (6,921) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                    1           -              -          -           -         -             1 
Cash and cash equivalents 
 (restated)                              546         230              -          -           -         -           776 
Bank overdrafts (restated)              (99)       (102)              -          -           -         -         (201) 
Retail net debt (excluding 
 perpetual securities) 
 (restated)                          (6,221)         593            173      (173)       (725)         8       (6,345) 
 
Financial Services 
Net derivative financial 
 instruments                               -           -              -          -           -         1             1 
Borrowings (excluding 
 overdrafts)                           (179)           -              5        (5)         (1)         -         (180) 
Lease liabilities                        (5)           1              -          -           -         -           (4) 
Arising from financing 
 activities                            (184)           1              5        (5)         (1)         1         (183) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                  537       (130)              -          -           -       (2)           405 
Cash and cash equivalents              1,029       (169)              -          -           -         -           860 
Financial services net 
 debt                                  1,382       (298)              5        (5)         (1)       (1)         1,082 
 
Group 
Net derivative financial 
 instruments                            (14)           -              5        (6)           6         9             - 
Borrowings (excluding 
 overdrafts)                         (1,005)         223             20       (19)         (1)         -         (782) 
Lease liabilities                    (5,834)         243            153      (153)       (731)         -       (6,322) 
Arising from financing 
 activities                          (6,853)         466            178      (178)       (726)         9       (7,104) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                  538       (130)              -          -           -       (2)           406 
Cash and cash equivalents 
 (restated)                            1,575          61              -          -           -         -         1,636 
Bank overdrafts (restated)              (99)       (102)              -          -           -         -         (201) 
Group net debt (excluding 
 perpetual securities)               (4,839)         295            178      (178)       (726)         7       (5,263) 
 
Retail net debt (excluding 
 perpetual securities)               (6,221)         593            173      (173)       (725)         8       (6,345) 
Perpetual convertible 
 bonds                                 (248)           8              -          -         240         -             - 
Retail net debt (including 
 perpetual securities)               (6,469)         601            173      (173)       (485)         8       (6,345) 
 
Of which: 
                                                          ------------- 
Leases                               (5,829)                                                                   (6,318) 
Net debt excluding lease 
 liabilities                           (640)                                                                      (27) 
                                                          ------------- 
 

Other non-cash movements predominantly comprise new leases and lease modifications.

Overdraft balances are included within borrowings in the Group balance sheet, and within cash and cash equivalents in the Group cash flow statement.

Refer to note 2 for details of the prior year restatement.

 
                                                  Cash Movements             Non-Cash Movements 
                                                                                                        ------------ 
                                     8 March  Cash flows          Net    Accrued       Other   Changes  19 September 
                                        2020   excluding     interest   Interest    non-cash   in fair          2020 
                                                interest   (received)              movements     value 
                                                               / paid 
                                        GBPm        GBPm         GBPm       GBPm        GBPm      GBPm          GBPm 
Retail 
Net derivative financial 
 instruments                            (15)           -            3        (3)           2       (3)          (16) 
Borrowings (excluding 
 overdrafts)                         (1,116)         269           22       (24)           -         -         (849) 
Lease liabilities                    (5,768)         223          168      (168)       (356)         -       (5,901) 
Arising from financing 
 activities                          (6,899)         492          193      (195)       (354)       (3)       (6,766) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                    1           -            -          -           -         -             1 
Cash and cash equivalents 
 (restated)                              506         954            -          -           -         -         1,460 
Bank overdrafts (restated)              (59)       (556)            -          -           -         -         (615) 
Retail net debt (excluding 
 perpetual securities) 
 (restated)                          (6,451)         890          193      (195)       (354)       (3)       (5,920) 
 
Financial Services 
Net derivative financial 
 instruments                               4           -            -          -           -       (6)           (2) 
Bank overdrafts                            -           -            -          -           -         -             - 
Borrowings (excluding 
 overdrafts)                           (180)           -            -          -           -                   (180) 
Lease liabilities                        (6)           1            -          -         (1)         -           (6) 
Arising from financing 
 activities                            (182)           1            -          -         (1)       (6)         (188) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                  802       (159)            -          -           -         1           644 
Cash and cash equivalents                547          61            -          -           -         -           608 
Financial services net 
 debt                                  1,167        (97)            -          -         (1)       (5)         1,064 
 
Group 
Net derivative financial 
 instruments                            (11)           -            3        (3)           2       (9)          (18) 
Borrowings (excluding 
 overdrafts)                         (1,296)         269           22       (24)           -         -       (1,029) 
Lease liabilities                    (5,774)         224          168      (168)       (357)         -       (5,907) 
Arising from financing 
 activities                          (7,081)         493          193      (195)       (355)       (9)       (6,954) 
 
Financial assets at fair 
 value through other comprehensive 
 income                                  803       (159)            -          -           -         1           645 
Cash and cash equivalents 
 (restated)                            1,053       1,015            -          -           -         -         2,068 
Bank overdrafts (restated)              (59)       (556)            -          -           -         -         (615) 
Group net debt (excluding 
 perpetual securities) 
 (restated)                          (5,284)         793          193      (195)       (355)       (8)       (4,856) 
 
Retail net debt (excluding 
 perpetual securities)               (6,451)         890          193      (195)       (354)       (3)       (5,920) 
Perpetual capital securities           (248)         250            -          -         (2)         -             - 
Perpetual convertible 
 bonds                                 (248)           -            -          -           -         -         (248) 
Retail net debt (including 
 perpetual securities)               (6,947)       1,140          193      (195)       (356)       (3)       (6,168) 
 
Of which: 
Leases                               (5,768)                                                                 (5,901) 
Net debt excluding lease 
 liabilities                         (1,179)                                                                   (267) 
 

Refer to note 2 for details of the prior year 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                           (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                           (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 the prior year restatement.

Reconciliation of net cash flow to movement in net debt

 
                                                                  28 weeks          28 weeks  52 weeks 
                                                           to 18 September   to 19 September      to 6 
                                                                      2021              2020     March 
                                                                                                  2021 
                                                                      GBPm              GBPm        GBPm 
Opening net debt                                                   (6,469)           (6,947)     (6,947) 
 
Cash flow movements 
Net (decrease)/increase in cash and cash 
 equivalents (including overdrafts)                                   (41)               459         482 
Elimination of Financial Services movement 
 in cash and cash equivalents                                          169              (61)       (482) 
Repayment of perpetual capital securities                                8               250         250 
Repayment of Retail borrowings                                         223               269         289 
Repayment of Retail lease obligations                                  242               223         499 
Net interest paid on components of Retail 
 net debt                                                              173               193         349 
Changes in net debt resulting from cash 
 flow                                                                  774             1,333       1,387 
 
Non-cash movements 
Accrued interest                                                     (173)             (195)       (347) 
Retail fair value and other non-cash movements                       (477)             (359)       (562) 
Changes in net debt resulting from non-cash 
 movements                                                           (650)             (554)       (909) 
 
Movement in net debt                                                   124               779         478 
 
Closing net debt                                                   (6,345)           (6,168)     (6,469) 
 
 
   16.        Borrowings 
 
                                28 weeks to 18 September        52 weeks to 6 March 
                                          2021                          2021 
                              Current  Non-current   Total  Current  Non-current   Total 
                                 GBPm         GBPm    GBPm     GBPm         GBPm    GBPm 
                                                    ------                        ------ 
Loan due 2031                      57          545     602       55          572     627 
Bank overdrafts (restated)        201            -     201       99            -      99 
Bank loans due 2021                 -            -       -      199            -     199 
Sainsbury's Bank Tier 2 
 Capital due 2023                   3          177     180        3          176     179 
Total borrowings (restated)       261          722     983      356          748   1,104 
 
 
                                      28 weeks to 19 September 
                                                 2020 
                                    Current   Non-current   Total 
                                       GBPm          GBPm    GBPm 
                                             ------------  ------ 
Loan due 2031                            53           596     649 
Bank overdrafts (restated)              615             -     615 
Bank loans due 2021                     200             -     200 
Sainsbury's Bank Tier 2 
 Capital due 2023                         4           176     180 
Total borrowings (restated)             872           772   1,644 
 

The bank loan due 2021 was repaid in full on 9 August 2021.

Refer to note 2 for details of the prior year restatement.

Available facilities

The Revolving Credit Facility is split into two Facilities, a GBP300 million Facility (A) and a GBP1,150 million Facility (B). Facility A has a final maturity of April 2025 and Facility B has a final maturity of October 2024. As at 18 September 2021, the Revolving Facility was undrawn (6 March 2021: nil; 19 September 2020: nil).

The Revolving Credit Facility incurs commitment fees at market rates and drawdowns bear interest at a margin above SONIA.

The Group maintains uncommitted facilities to provide additional capacity to fund short-term working capital requirements. Drawdowns on these uncommitted facilities bear interest at a margin. The uncommitted facilities were undrawn at 18 September 2021 (6 March 2021: nil; 19 September 2020: nil).

   17.        Cash and cash equivalents 

Cash and cash equivalents comprise the following:

 
                                                                                     28 weeks 
                                                           28 weeks      52 weeks       to 19 
                                                    to 18 September    to 6 March   September 
                                                               2021          2021        2020 
                                                                         restated    restated 
                                                               GBPm          GBPm        GBPm 
------------------------------------------------- 
 Cash in hand and bank balances                                 508           325       1,076 
 Money market funds and deposits                                579           398         580 
 Deposits at central banks                                      549           852         412 
 Cash and bank balances as reported in the Group 
  balance sheet                                               1,636         1,575       2,068 
-------------------------------------------------                    ------------ 
 
 Bank overdrafts (within current borrowings)                  (201)          (99)       (615) 
 Net cash and cash equivalents as reported in 
  the Group cash flow statement                               1,435         1,476       1,453 
-------------------------------------------------                    ------------ 
 

Of the above balance, GBP19 million (6 March 2021: GBP20 million; 19 September 2020: GBP22 million) was restricted as at the period-end. Of the GBP19 million (6 March 2021: GBP20 million; 19 September 2020: GBP22 million) restricted cash, GBP16 million (6 March 2021: GBP17 million; 19 September 2020: 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 GBP2 million (6 March 2021: GBP3 million; 19 September 2020: GBP2 million) is restricted for insurance purposes.

Refer to note 2 for details of the prior year restatement.

Reconciliation of cash flow items

Working capital

 
                                             Financial                   Amounts 
                                                assets                       due                   Amounts 
                                               at fair                      from      Trade            due 
                                                 value         Trade   Financial        and   to Financial 
                                               through     and other    Services      other       Services 
                                Inventories        OCI   receivables   customers   payables      customers  Provisions 
                                       GBPm       GBPm          GBPm        GBPm       GBPm           GBPm 
At 18 September 2021                  1,682        752           779       5,022    (4,584)        (5,614)       (382) 
At 6 March 2021                       1,625        844           775       5,407    (4,508)        (6,289)       (470) 
Balance sheet movement                 (57)         92           (4)         385         76          (675)        (88) 
Fair value movements                      -         38             -           -          -              -           - 
Reclassification to other 
 lines in the cash flow 
 statement                                -          -             -           -         15              -           - 
Amortisation of discounts                 -          -             -           -          -              -         (1) 
Financial Services ECL 
 impairments                              -          -             -        (35)          -              -           - 
Movement in capital accruals              -          -             -           -          4              -           - 
Other                                     -          -           (2)           -          -              -         (2) 
Movement shown in cash flow 
 statement                             (57)        130           (6)         350         95          (675)        (91) 
 
 
                                              Financial 
                                                 assets                    Amounts                 Amounts 
                                                at fair                   due from      Trade       due to 
                                                  value         Trade    Financial        and    Financial 
                                                through     and other     Services      other     Services 
                                Inventories         OCI   receivables    customers   payables    customers  Provisions 
                                       GBPm        GBPm          GBPm         GBPm       GBPm         GBPm 
                                             ----------                -----------             ----------- 
At 19 September 2020                  1,635         924           800        6,192    (4,703)      (6,810)       (377) 
At 7 March 2020                       1,732       1,054           854        7,404    (4,286)      (8,094)       (197) 
                                             ----------                -----------             ----------- 
Balance sheet movement                   97         130            54        1,212        417      (1,284)         180 
Fair value movements                      -          29             -            -          -            -           - 
Reclassification to other 
 lines in the cash flow 
 statement                                -           -             -            -       (31)            -           - 
Financial Services ECL 
 impairments                              -           -             -         (39)          -            -           - 
Dividends received from 
 JVs                                      -           -          (18)            -          -            -           - 
Movement in capital accruals              -           -             -            -         31            -           - 
Other                                     -           -            22            -        (8)            -           - 
Movement shown in cash 
 flow statement                          97         159            58        1,173        409      (1,284)         180 
                               ------------  ----------                -----------             ----------- 
 
 
 
                                          Financial 
                                             assets                    Amounts                   Amounts 
                                            at fair                   due from                    due to 
                                              value         Trade    Financial        Trade    Financial 
                                            through     and other     Services    and other     Services 
                            Inventories         OCI   receivables    customers     payables    customers  Provisions 
                                   GBPm        GBPm          GBPm         GBPm         GBPm         GBPm 
                                         ----------                             ----------- 
At 6 March 2021                   1,625         844           775        5,407      (4,508)      (6,289)       (470) 
At 7 March 2020                   1,732       1,054           854        7,404      (4,286)      (8,094)       (197) 
                                         ----------                             ----------- 
Balance sheet movement              107         210            79        1,997          222      (1,805)         273 
Fair value movements                  -          57             -            -            -            -           - 
Hedge adjustment 
 to inventory                        10           -             -            -            -            -           - 
Reclassification 
 to other lines in 
 the cash flow statement              -           -             -            -           80            -           - 
Dividends received 
 from JVs                             -           -          (18)            -            -            -           - 
Financial Services 
 ECL impairments                      -           -             -         (85)            -            -           - 
Movement in capital 
 accruals                             -           -             -            -            8            -           - 
Other                                 -           -             1            -           11            -           - 
Movement shown in 
 cash flow statement                117         267            62        1,912          321      (1,805)         273 
                           ------------  ----------                -----------  -----------  ----------- 
 

(Profit)/loss on the sale of properties and early termination of leases in the cash flow statement is reconciled as follows:

 
                                                                28 weeks    28 weeks     52 weeks 
                                                         to 18 September       to 19   to 6 March 
                                                                    2021   September         2021 
                                                                                2020 
                                                                    GBPm        GBPm         GBPm 
(Profit)/loss on disposal of properties (note 
 3)                                                                  (3)           5          (1) 
Non underlying gain on early termination of 
 leases (note 3)                                                     (5)           -         (16) 
Profit on disposal of properties within restructuring 
 programmes (note 3)                                                (13)           -            - 
Underlying gain on early termination of leases                       (1)           -            - 
Financial services loss on disposal of property, 
 plant and equipment (note 5b)                                         -           2            - 
(Profit)/loss on sale of properties and early 
 termination of leases                                              (22)           7         (17) 
 
   18.        Retirement benefit obligations 

All retirement benefit obligations relate to the Sainsbury's Pension Scheme plus two unfunded pension liabilities relating to former senior employees of Sainsbury's and Home Retail Group.

The Sainsbury's Pension Scheme has two segregated sections: the Sainsbury's Section and the Argos Section.

The unfunded pension liabilities are unwound when each employee reaches retirement and takes their pension from the Group payroll or is crystallised in the event of an employee retiring and choosing to take the provision as a one-off cash payment.

The amounts recognised in the balance sheet are as follows:

 
                                                     18 September 2021          6 March 2021 
                                        Sainsbury's    Argos     Group  Sainsbury's    Argos     Group 
                                               GBPm     GBPm      GBPm         GBPm     GBPm      GBPm 
Present value of funded obligations         (9,352)  (1,488)  (10,840)      (8,808)  (1,410)  (10,218) 
Fair value of plan assets                    10,394    1,574    11,968        9,596    1,404    11,000 
Retirement benefit surplus/(deficit)          1,042       86     1,128          788      (6)       782 
Present value of unfunded obligations          (23)     (18)      (41)         (21)     (17)      (38) 
Retirement benefit surplus/(deficit)          1,019       68     1,087          767     (23)       744 
 
 
 
                                                        19 September 2020 
                                           Sainsbury's    Argos     Group 
                                                  GBPm     GBPm      GBPm 
Present value of funded obligations            (9,043)  (1,457)  (10,500) 
Fair value of plan assets                       10,072    1,478    11,550 
Retirement benefit surplus                       1,029       21     1,050 
Present value of unfunded obligations             (21)     (17)      (38) 
Retirement benefit surplus                       1,008        4     1,012 
 

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

 
                               18 September  6 March  19 September 
                                       2021     2021          2020 
                                          %        %             % 
Discount rate                          1.75     1.95          1.60 
Inflation rate - RPI                   3.40     3.15          2.90 
Inflation rate - CPI                   2.70     2.45          1.90 
                                     2.25 -   2.15 -        1.80 - 
Future pension increases               3.30     3.10          2.85 
 

The amounts recognised in the income statement in respect of the IAS 19 charges for the defined benefit schemes are as follows:

 
                                    18 September  6 March  19 September 
                                            2021     2021          2020 
                                            GBPm     GBPm          GBPm 
 
Excluded from underlying 
 profit before tax: 
  Interest cost on pension 
   liabilities                             (106)    (163)          (88) 
  Interest income on plan 
   assets                                    114      182            99 
Total included in finance 
 income/(costs)                                8       19            11 
Defined benefit pension 
 scheme expenses                             (2)      (7)           (3) 
Past service cost                              -      (6)             - 
Total excluded from underlying 
 profit before tax                             6        6             8 
Total income statement 
 credit                                        6        6             8 
 
 

The movements in the net defined benefit obligations are as follows:

 
                                             18 September  6 March  19 September 
                                                     2021     2021          2020 
                                                     GBPm     GBPm          GBPm 
The movements in the Groups net defined 
 benefit obligations are as follows: 
As at the beginning of the period                     744    1,119         1,119 
Net interest income                                     8       19            11 
Remeasurement gains/(losses)                          298    (482)         (175) 
Pension scheme expenses                               (2)      (7)           (3) 
Contributions by employer                              39      101            60 
Past service charge                                     -      (6)             - 
As at the end of the period                         1,087      744         1,012 
 

Cash contributions

Cash contributions for the full year are expected to be approximately GBP76 million.

Valuation of pension assets

The Pension Scheme has circa GBP2 billion of private market assets, split between private debt, private equity and property. These assets are held as they are expected to deliver a greater risk/return profile vs public market equivalents over the long term. The assets are illiquid (likely to be realised over 5+ years) but the Pension Scheme holds sufficient liquid assets (cash, gilts and other liquid securities) to be confident that it can meet its pension and collateral obligations over time.

The valuation of these assets is based on the audited accounts of the funds, where available, and net asset value statements from the investment managers where recent accounts are not available. For many of the investments the valuations provided are at 30 June. The Group therefore performs a roll-forward for these valuations, adjusting for cash received or paid and applying the changes seen in relevant liquid indices as follows:

 
Asset Class                         Return 
Global equity USD return            2.91% 
Global High Yield Debt USD return   1.30% 
US loans USD return                 0.94% 
UK REITS GBP return                 9.08% 
 

The roll-forward has increased the valuation of illiquid assets by GBP33 million. A 1% increase/decrease in the indices used would have caused a GBP8 million increase/decrease in the adjustment.

Sensitivities

The following sensitivities are based on management's best estimate of a reasonably anticipated change. The sensitivities are calculated using the same methodology used to calculate the retirement benefit obligation, by considering the change in the retirement benefit obligation for a given change in assumption. The net retirement benefit obligation is the difference between the retirement benefit obligation and the fair value of plan assets. Changes in the assumptions may occur at the same time as changes in the fair value of plan assets. There has been no change in the calculation methodology since the prior period.

 
                                                           Sainsbury's  Argos  Total 
                                                              GBPm      GBPm   GBPm 
An increase of 0.5% in the discount rate would decrease 
 the present value of funded obligations by                   (836)     (146)  (982) 
A decrease of 0.5% in the discount rate would increase 
 the present value of funded obligations by                    957       168   1,125 
An increase of 0.5% in the inflation rate would increase 
 the present value of funded obligations by                    542       131    673 
A decrease of 0.5% in the inflation rate would decrease 
 the present value of funded obligations by                   (579)     (129)  (708) 
An increase of 0.5% in the inflation rate for future 
 pension increases would increase the present value 
 of funded obligations by                                      316       104    420 
A decrease of 0.5% in the inflation rate for future 
 pension increases would increase the present value 
 of funded obligations by                                     (395)     (107)  (502) 
An increase of one year to the life expectancy would 
 increase the present value of funded obligations 
 by                                                            368       57     425 
 
   19.        Related party transactions 

The Group's related parties are its joint ventures and key management personnel, comprising members of the J Sainsbury plc Board of Directors and the Operating Board as disclosed in the Annual Report and Financial Statements 2021.

Transactions with joint ventures and associates

For the 28 weeks to 18 September 2021, the Group entered into various transactions with joint ventures and associates as set out below:

 
                                            28 weeks       28 weeks 
                                                  to             to  52 weeks to 
                                        18 September   19 September      6 March 
                                                2021           2020         2021 
                                                GBPm           GBPm         GBPm 
Services and loans provided to joint 
 ventures 
Dividends and distributions received               -              4            4 
Rental expenses paid                             (3)            (3)          (6) 
 

Balances arising from transactions with joint ventures and associates

 
                 18 September  19 September  6 March 
                         2021          2020     2021 
                         GBPm          GBPm     GBPm 
Other payables            (1)           (1)      (2) 
 
   20.        Contingent liabilities 

The Group has a number of contingent liabilities in respect of historic guarantees, particularly in relation to disposed assets, which if the current tenant and their ultimate parents become insolvent, may expose the Group to a material liability. This is not expected to materialise.

Along with other retailers, the Group is currently subject to claims from current and ex-employees in the Employment Tribunal for equal pay under the Equality Act 2010 and/or the Equal Pay Act 1970. There are currently circa 8,500 equal pay claims from circa 4,430 claimants, in which the claimants are alleging that their work within Sainsbury's stores is 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 may be served.

Typically, claims of this nature can take many years to be determined. Given that the claims against the Group are still at a relatively early stage and the outcome of such claims is 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.

Principal risks and uncertainties

Risk is an inherent part of doing business. The J Sainsbury plc Board has overall responsibility for the identification and management of the principal risks, emerging risks and internal control of the Company. The Board has identified the following principal potential risks to the successful operation of the business. These risks, along with the events in the financial markets and their potential impacts on the wider economy, remain those most likely to affect the Group in the second half of the year.

   --      Business continuity, operational resilience and major incidents response 
   --      Business strategy and change 
   --      Colleague engagement, retention and capability 
   --      Customer 
   --      Data security 
   --      Environment and sustainability 
   --      Financial and treasury 
   --      Health and safety 
   --      Political and regulatory environment 
   --      Product safety and sourcing 
   --      Sainsbury's Bank 
   --      Trading environment and competitive landscape 

The Group expanded the Environment and sustainability Principal Risk to include climate-related risks, which reflects how these are monitored and reported within the business. These were previously referenced across a number of the Group's principal risks. As such, the gross and net position of this risk have regressed.

The Group continues to monitor and respond to any potential disruption in its supply chains in response to the impact of COVID-19 globally and Brexit.

Aside from the Environment and sustainability Principal Risk, the others remain unchanged from those reported in the Group's Annual Report and Financial Statements 2021. For more information on these risks, please refer to pages 32 to 43 of the J Sainsbury plc Annual Report and Financial Statements 2021, a copy of which is available on the Group's corporate website www.j-sainsbury.co.uk .

Statement of Directors' responsibilities

The Directors confirm that this set of Condensed Consolidated Interim Financial Statements has been prepared in accordance with UK adopted IAS 34 'Interim Financial Reporting' and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority, and that the Interim Management Report herein includes a true and fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

-- that the report contains a fair review of important events that have occurred during the first 28 weeks of the financial year, and their impact on the condensed set of financial statements, and of the principal risks and uncertainties for the remaining six months of the financial year; and

   --      that the report contains a fair review of related party transactions. 

The Directors of J Sainsbury plc are listed in the J Sainsbury plc Annual Report and Financial Statements 2021.

A list of current directors is maintained on the Group's website : www.about.sainsburys.co.uk/about-us/our-management .

By order of the Board

Simon Roberts

Chief Executive

3 November 2021

Kevin O'Byrne

Chief Financial Officer

3 November 2021

INDEPENT REVIEW REPORT TO J SAINSBURY PLC

Introduction

We have been engaged by the J Sainsbury plc (the Company) to review the condensed set of financial statements in the interim financial report for the 28 week period ended 18 September 2021 which comprises of the Group income statement, the Group statement of comprehensive income, the Group balance sheet, the Group cash flow statement and the Group statement of changes in equity and the related explanatory notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 28 week period ended 18 September 2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2, the annual financial statements of the group will be prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this interim financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Responsibilities of the directors

The directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Auditor's Responsibilities for the review of the financial information

In reviewing the interim report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the interim financial report. Our conclusion is based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

London

3 November 2021

Alternative performance measures (APMs)

In the reporting of financial information, the Directors use various APMs which they believe provide additional useful information for understanding the financial performance and financial health of the Group. These APMs should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies who use similar measures.

The Directors believe that these APMs provide additional useful information for understanding the financial performance and health of the Group. They are also used to enhance the comparability of information between reporting periods (such as like-for-like sales and underlying profit) by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid users in understanding the Group's performance.

Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes.

All of the following APMs relate the current period's results and comparative periods.

 
APM            Closest     Definition        Purpose      Reconciliation 
               equivalent 
               IFRS 
               measure 
Income statement 
 - Revenue 
Retail         Revenue     Group sales less  Shows the    A reconciliation of the measure is provided 
 sales                     Financial         annual        in note 4 of the financial statements. 
                           Services          rate of 
                           revenue.          growth in 
                                             the Group's 
                                             Retail 
                                             business 
                                             sales. 
Like-for-like  No direct   Year-on-year      The measure   The reported retail like-for-like 
 sales         equivalent  growth in         is used         sales growth of 0.3 per 
                           sales including   widely in       cent is based on a combination 
                           VAT, excluding    the retail      of Sainsbury's like-for-like 
                           fuel, excluding   industry as     sales and Argos like-for-like                          28 weeks 
                           Financial         an              sales for the 28 weeks to                  28 weeks       to 19 
                           Services, for     indicator       18 September 2021. See movements    to 18 September   September 
                           stores that       of current      below:                                         2021        2020 
                           have been open    trading        Retail like-for-like (exc. 
                           for more          performance     Fuel, inc. VAT)                                0.3%        6.9% 
                           than one year.    and is         Underlying net new space 
                                             useful when     impact                                       (0.1)%        0.2% 
                           The relocation    comparing      Retail sales growth (exc. 
                           of Argos          growth          Fuel, inc. VAT)                                0.2%        7.1% 
                           stores into       between        Fuel impact                                     5.8%      (8.5)% 
                           Sainsbury's       retailers      Total retail sales growth 
                           supermarkets are  that have       (inc. fuel, inc. VAT)                          6.0%      (1.4)% 
                           classified        different      VAT impact                                    (0.6)%        0.8% 
                           as new space,     profiles of    Total retail sales growth 
                           while the         expansion,      per note 4                                     5.4%      (0.6)% 
                           host supermarket  disposals 
                           is classified     and 
                           like-for-like.    closures. 
 
                           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. 
 
 
 
 
APM  Closest      Definition  Purpose  Reconciliation 
       equivalent 
       IFRS 
       measure 
Income statement - Profit 
Retail      Profit        Underlying       This is the                                        28 weeks    28 weeks  52 weeks 
underlying  before        earnings before  lowest                                                 to 18       to 19      to 6 
operating   tax           interest, tax,   level at which                                     September   September     March 
profit                    Financial        the                                                     2021        2020      2021 
                          Services         retail segment                                          GBPm        GBPm      GBPm 
                          operating        can               Group PBT (note 5a)                    541       (137)     (261) 
                          profit           be viewed from    (Less)/Add back Group 
                          and Sainsbury's  a                  non-underlying items (note 
                          underlying       management         3)                                  (170)         438       617 
                          share of         perspective,      Group UPBT                             371         301       356 
                          post-tax profit  with finance      Financial Services underlying 
                          from joint       costs              operating loss/(profit)              (19)          55        21 
                          ventures and     managed for       Retail underlying profit 
                          associates.      the                before tax                            352         356       377 
                                           Group as a        Net underlying finance 
                                           whole.             costs                                 171         199       353 
                                                             Retail underlying operating 
                                                              profit                                523         555       730 
 
                                                             Retail sales (note 5a)              15,511      14,715    28,617 
                                                             Retail underlying operating 
                                                              margin                              3.37%       3.77%     2.55% 
Underlying  Profit        Underlying       In order to     Underlying profit before tax is bridged to statutory 
 profit     before        results exclude  provide          profit before tax in the income statement and 
 before     tax           items            shareholders     note 3 of the financial statements. 
 tax                      recognised in    with 
                          reported         additional       The adjusted items are as described in note 3 
                          profit or loss   insight          of the financial statements 
                          before           into the 
                          tax which, if    underlying 
                          included,        performance of 
                          could distort    the 
                          comparability    business, this 
                          between          adjusted 
                          periods. In      measure of 
                          determining      profit 
                          which items to   is provided to 
                          exclude          supplement 
                          from underlying  the reported 
                          profit,          IFRS 
                          the Group        numbers, and 
                          considers items  reflects 
                          which are        how the 
                          significant      business 
                          either by        measures 
                          virtue of their  performance 
                          size and/or      internally. 
                          nature, or 
                          that are 
                          non-recurring. 
Underlying    Basic         Earnings per   This is a key     A reconciliation of the measure is provided in 
 basic         earnings     share using    measure            note 9 of the financial statements. 
 earnings      per share    underlying     to evaluate the 
 per                        profit as      performance of 
 share                      described      the 
                            above.         business and 
                                           returns 
                                           generated for 
                                           investors. 
Retail        No direct     Retail         EBITDA is used                                           28 weeks    28 weeks 
 underlying    equivalent   underlying     to                                                           to 18       to 19 
 EBITDA                     operating      review the                                               September   September 
                            profit as      retail                                                        2021        2020 
                            above, before  segment's profit                                              GBPm        GBPm 
                            underlying     generation and      Retail underlying operating 
                            depreciation,  the                  profit                                    523         555 
                            and            sustainability      Add: Retail depreciation and 
                            amortisation.  of                   amortisation expense                      649         647 
                                           ongoing capital     Less: Non-underlying depreciation 
                                           reinvestment and     and amortisation                         (31)        (12) 
                                           finance costs.      Retail underlying EBITDA                 1,141       1,190 
 
                                                               Retail sales (note 5a)                  15,511      14,715 
                                                               Retail underlying EBITDA margin          7.36%       8.08% 
 
 
 
APM         Closest     Definition      Purpose         Reconciliation 
            equivalent 
            IFRS 
            measure 
Underlying  Finance     Net finance     This provides         A reconciliation of this measure is included 
 net         income     costs before    shareholders          in note 7 of the financial statements. 
 finance     less       any             with 
 costs       finance    non-underlying  additional            The adjusted items are as follows: 
             costs      items           insight 
                        as defined      into the               *    Perpetual securities coupons - these are accounted 
                        above that      underlying                  for as equity in line with IAS 32 'Financial 
                        are recognised  net finance                 instruments: Presentation', however are accrued on a 
                        within          costs                       straight-line basis and included as an expense within 
                        finance 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 in 
 tax         tax rate   underlying      indication       note 3 of the financial statements 
 rate                   items,          of the tax 
                        divided by      rate across 
                        underlying      the Group 
                        profit before   before 
                        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                                                                       28 weeks  52 weeks 
 cash         equivalent                 help                                                         28 weeks       to 19      to 6 
 flow                                    the                                                   to 18 September   September     March 
 items                                   reader                                                           2021        2020      2021 
 in                                      understand                                     Ref               GBPm        GBPm      GBPm 
 Financial                               cash          Net interest paid                 a               (177)       (213)     (372) 
 Review                                  flows         Repayment of lease liabilities    b               (242)       (223)     (499) 
                                         of            Repayment of borrowings           c               (231)       (519)     (539) 
                                         the           Other                             d                (30)        (26)      (13) 
                                         business      Dividends and distributions 
                                         a              received                         e                   -          22        22 
                                         summarised 
                                         cash 
                                         flow 
                                         statement 
                                         is 
                                         included 
                                         within 
                                         the 
                                         Financial 
                                         Review. 
 
                                         As 
                                         part 
                                         of 
                                         this 
                                         a 
                                         number 
                                         of 
                                         line 
                                         items 
                                         have 
                                         been 
                                         combined. 
                                         The 
                                         cash 
                                         flow 
                                         in 
                                         note 
                                         5 
                                         of 
                                         the 
                                         financial 
                                         statements 
                                         includes 
                                         a 
                                         reference 
                                         to 
                                         show 
                                         what 
                                         has 
                                         been 
                                         combined 
                                         in 
                                         these 
                                         line 
                                         items. 
Retail     Net cash        Net cash     This                                                   28 weeks          28 weeks     52 weeks 
 free      generated       generated    measures                                         to 18 September   to 19 September   to 6 March 
 cash      from operating  from retail  cash                                                        2021              2020         2021 
 flow      activities      operations,  generation,                                                 GBPm              GBPm         GBPm 
                           after        working        Cash generated from retail 
                           perpetual    capital         operations                                 1,233             1,719        2,275 
                           security     efficiency     Net interest paid (ref 
                           coupons and  and             (a) above)                                 (177)             (213)        (372) 
                           cash         capital        Corporation Tax                                 -              (88)         (94) 
                           capital      expenditure    Retail purchase of property, 
                           expenditure  of              plant and equipment                        (154)             (257)        (423) 
                           but before   the            Retail purchase of intangibles 
                           strategic    retail          assets                                     (144)              (33)        (145) 
                           capital      business       Retail proceeds from 
                           expenditure                  disposal of property, 
                           , and                        plant and equipment                           39                19           27 
                           including                   Initial direct costs 
                           payments of                  on right-of-use assets                       (1)               (3)          (7) 
                           lease                       Repayments of obligations 
                           obligations                  under leases                               (242)             (223)        (499) 
                           , cash                      Dividends and distributions 
                           flows from                   received                                       -                22           22 
                           joint                       Retail free cash flow                         554               943          784 
                           ventures 
                           and 
                           associates 
                           and 
                           Sainsbury's 
                           Bank 
                           capital 
                           injections. 
 
 
 
APM         Closest     Definition       Purpose         Reconciliation 
            equivalent 
            IFRS 
            measure 
Underlying  No direct   Removes          To provide a                                              28 weeks    28 weeks  52 weeks 
 working    equivalent  working          reconciliation                                                to 18       to 19      to 6 
 capital                capital          of the working                                            September   September     March 
 movements              and cash         capital                                                        2021        2020      2021 
                        movements        movement                                                       GBPm        GBPm      GBPm 
                        relating to      in the            Retail working capital movements 
                        non-underlying   financial          per cash flow (note 5)                      (59)         713       708 
                        items.           statements to 
                                         the underlying    Adjustments for: 
                                         working           Retail non-underlying impairment 
                                         capital            charges (note 5)                               1         187       216 
                                         movement in       Non-underlying restructuring 
                                         the                and impairment charges (note 
                                         Financial          3)                                          (22)       (473)     (643) 
                                         Review.           Accelerated depreciation (note 
                                                            3)                                            20           -        27 
                                                           Less: Bank impairment charges 
                                                            (note 3)                                       -         105       105 
                                                           Gains on early termination of 
                                                            leases (note 3)                              (5)           -      (16) 
                                                           Profit on disposal of properties 
                                                            within restructuring programme 
                                                            (note 3)                                    (13)           -         - 
                                                           ATM income (note 3)                             -          42        42 
                                                           Income recognised in relation 
                                                            to legal disputes (note 3)                   181           -         - 
                                                           Other                                           2           -         2 
                                                           Non-underlying working capital 
                                                            movements before cash movements              164       (139)     (267) 
 
                                                           Non-underlying cash movements: 
                                                           Restructuring (note 3)                         70           9        39 
                                                           ATM income (note 3)                          (13)        (12)      (27) 
                                                           Income recognised in relation 
                                                            to legal disputes (note 3)                  (27)           -         - 
                                                           Retail non-underlying operating 
                                                            cash flows (excluding pensions)               30         (3)        12 
 
                                                           Total adjustments for non-underlying 
                                                            working capital                              194       (142)     (255) 
 
                                                           Underlying working capital movements          135         571       453 
 
 
APM             Closest       Definition               Purpose       Reconciliation 
                equivalent 
                IFRS 
                measure 
Adjusted        Cash         This presents retail      This enables                                                     28 weeks  52 weeks 
net cash        generated    operating cash flows      management                                            28 weeks       to 19      to 6 
generated       from         adjusted for movements    to assess                                      to 18 September   September     March 
from retail     operations   in working capital,       the cash                                                  2021        2020      2021 
operations                   less net interest         generated                                                 GBPm        GBPm      GBPm 
(per Financial               paid (including           from its        Retail cash generated from 
Review)                      distributions             core retail      operating activities (note 
                             on perpetual securities)  operations.      5)                                      1,060       1,438     1,832 
                             and pension cash                          Perpetual security coupons                 (4)        (20)      (23) 
                             contributions.                            Adjusted net cash generated 
                                                                        from operating activities               1,056       1,418     1,809 
Core retail     No direct    Capital expenditure       This allows                                                      28 weeks  52 weeks 
 capital         equivalent   excluding Sainsbury's    management                                            28 weeks       to 19      to 6 
 expenditure                  Bank.                    to assess                                      to 18 September   September     March 
                                                       core retail                                               2021        2020      2021 
                                                       capital                                                   GBPm        GBPm      GBPm 
                                                       expenditure     Purchase of property, plant 
                                                       in the           and equipment                           (154)       (257)     (423) 
                                                       period in       Purchase of intangibles                  (144)        (33)     (145) 
                                                       order to        Cash capital expenditure                 (298)       (290)     (568) 
                                                       review 
                                                       the 
                                                       strategic 
                                                       business 
                                                       performance. 
Net debt        Borrowings,  Net debt includes         This shows    A reconciliation of the measure is provided in 
                cash,        the capital injections    the overall    note 15 of the financial statements. In addition, 
                derivatives  into Sainsbury's Bank,    strength of    to aid comparison to the balance sheet, reconciliations 
                ,            but excludes the net      the            between financial assets at FVTOCI and derivatives 
                financial    debt of Sainsbury's       balance        per the balance sheet and Group net debt (i.e. 
                assets       Bank and its              sheet          including Financial Services) is included below: 
                at FVTOCI,   subsidiaries.             alongside                                          28 weeks          28 weeks     52 weeks 
                lease                                  the                                         to 18 September   to 19 September   to 6 March 
                liabilities  It is calculated as:      liquidity                                              2021              2020         2021 
                             financial assets at       and                                                    GBPm              GBPm         GBPm 
                             fair value through        its            Financial instruments 
                             other comprehensive       indebtedness    at FVTOCI per balance 
                             income (excluding         and whether     sheet                                   752               924          844 
                             equity investments)       the            Less: equity related 
                             + net derivatives         Group can       securities                            (346)             (279)        (306) 
                             to hedge borrowings       cover          Financial instruments 
                             + net cash and cash       its debt        at FVTOCI included in 
                             equivalents + loans       commitments.    net debt                                406               645          538 
                             + lease obligations                      Net derivatives per 
                             + perpetual securities.                   balance sheet                            13              (66)        (124) 
                                                                      Less: derivatives not 
                                                                       used to hedge borrowings               (13)                48          110 
                                                                      Derivatives included 
                                                                       in net debt                               -              (18)         (14) 
 
 
APM         Closest      Definition       Purpose      Reconciliation 
            equivalent 
            IFRS 
            measure 
Other 
Net debt/   No direct   Net debt divided  This helps   Net debt as provided in note 15. Group underlying 
underlying  equivalent  by                management    EBITDA is reconciled within the fixed charge cover 
EBITDA                  Group underlying  measure the   analysis below. 
                        EBITDA.           ratio 
                                          of the 
                                          business's 
                                          debt to 
                                          operational 
                                          cash flow. 
Return      No direct   Return on         This                                               52 weeks      52 weeks  52 weeks 
on capital  equivalent  capital           represents                                                to            to        to 
employed                employed is       the total                                       18 September  19 September   6 March 
                        calculated        capital                                                 2021          2020      2021 
                        as return         that the                                                GBPm          GBPm      GBPm 
                        divided           Group has      Underlying profit before 
                        by average        utilised in     tax                                      426           649       356 
                        capital           order          Add: Underlying net interest              325           380       353 
                        employed.         to generate    Return                                    751         1,029       709 
                                          profits.       Capital employed is reconciled 
                        Return is         Management      as follows: 
                        defined           use this                                            52 weeks      52 weeks  52 weeks 
                        as 52 week        to assess                                                 to            to        to 
                        rolling           the                                             18 September  19 September   6 March 
                        underlying        performance                                             2021          2020      2021 
                        profit            of the                                                  GBPm          GBPm      GBPm 
                        before interest   business.      Group net assets                        7,076         7,187     6,604 
                        and                              Less: Pension surplus (note 
                        tax.                              18)                                  (1,087)       (1,012)     (744) 
                                                         Deferred tax on pension 
                        Capital employed                  surplus                                  367           192       192 
                        is                               Less: net debt (ex-perpetual 
                        defined as Group                  securities) (note 15)                  6,345         5,920     6,221 
                        net                              Effect of in-year averaging             (792)           708       546 
                        assets excluding                 Capital employed                       11,909        12,995    12,819 
                        pension 
                        deficit/surplus,                 Return on capital employed               6.3%          7.9%      5.5% 
                        less 
                        net debt 
                        (excluding 
                        perpetual 
                        securities). 
                        The average is 
                        calculated 
                        on a 14 point 
                        basis. 
 
                        The 14-point 
                        basis 
                        uses the average 
                        of 
                        14 datapoints - 
                        the 
                        prior year 
                        closing 
                        capital 
                        employed, 
                        the current year 
                        closing 
                        capital employed 
                        and 
                        12 intra-year 
                        periods 
                        as this more 
                        closely 
                        aligns to the 
                        recognition 
                        of amounts in 
                        the 
                        income 
                        statement. 
Fixed       No direct   Group underlying  This helps                              24 weeks                      52 weeks  52 weeks 
 charge     equivalent  EBITDA            assess                                       to 6          28 weeks       to 18      to 6 
 cover                  divided by rent   the Group's                                 March   to 18 September   September     March 
                        (representing     ability                                      2021              2021        2021      2021 
                        capital and       to satisfy                                   GBPm              GBPm        GBPm      GBPm 
                        interest          fixed          Group underlying 
                        repayments on     financing       operating profit              209               542         751       709 
                        leases)           expenses       Add: Group depreciation 
                        and underlying    from            and amortisation 
                        net               performance     expense                       588               659       1,247     1,249 
                        finance costs,    of the         Less: Non-underlying 
                        where             business.       depreciation and 
                        interest on                       amortisation expense         (35)              (31)        (66)      (47) 
                        perpetual                        Group underlying 
                        securities is                     EBITDA                                                    1,932     1,911 
                        treated                          Repayment of capital 
                        as an underlying                  element of lease 
                        finance                           obligations                 (277)             (243)       (520)     (501) 
                        cost. All items                  Underlying finance 
                        are                               income                          1                 -           1         3 
                        calculated on a                  Underlying finance 
                        52                                costs                       (155)             (171)       (326)     (356) 
                        week rolling                     Fixed charges                                              (845)     (854) 
                        basis.                           Fixed charge cover                                           2.3       2.2 
 

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November 04, 2021 03:00 ET (07:00 GMT)

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