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