Preliminary Results 2012/13 David Tyler Chairman John Rogers - - PowerPoint PPT Presentation

Preliminary Results

2012/13

David Tyler

Chairman

John Rogers

Chief Financial Officer

bps

Group performance

Highlights

Underlying results Sales (inc VAT) Sales (inc VAT, ex fuel) Operating profit Net finance costs Share of JV profits Profit before tax Tax rate Basic EPS

(1)

Full year dividend per share Statutory results Items excluded from underlying results Profit before tax 2012/13 £m 2011/12 £m 4.6 4.3 5.1 (1.8) 18.8 6.2 245 9.3 3.7 (63.2) (1.4) Change % % p p % p p 25,632 829 (111) 38 756 23.7 30.7 16.7 32 788 24,511 789 (109) 32 712 26.1 28.1 16.1 87 799

Underlying basic earnings per share

(1)

• Continued LFL outperformance to the market
• Contribution from extensions 0.7%

(2)

LFL sales growth Sales from net new space Total sales growth Up 1.8% 2.5% 4.3%

(1) (1)

2013/14 FY Guidance

• Full year LFL 1.0 - 1.5%, reflecting similar challenging market conditions with reduced contribution from

extensions of 0.2%

(2)

• Contribution from net new space (excluding extensions and replacements) similar to 2012/13

Retailing

Good sales growth over the year

Sales, excluding fuel, including VAT

(1)

Net of disruptions

(2)

bps bps bps bps Sales (inc VAT, inc fuel)

(ex VAT, inc fuel)

Underlying EBITDAR Underlying EBITDAR margin %

at constant fuel prices

Underlying operating profit Underlying operating margin % at constant fuel prices 2012/13 £m 2011/12 £m 4.6 4.5 4.8 3 4 5.1 2 2 Change % 25,632 23,303 1,824 7.83 829 3.56 24,511 22,294 1,740 7.80 789 3.54

2013/14 FY Guidance

• Expect operating profit to grow in line with sales

Retailing

Good improvement in underlying profit

Retailing

Cost inflation of around 2.5% offset by over £100m

• f savings

2013/14 FY Guidance

• Cost inflation towards the middle of 2-3% range
• Efficiency savings of around £100m

100 145 100 105 104 2008/09 2009/10 2010/11 2011/12 2012/13

Annual operating cost savings (£m)

Sainsbury’s Bank

Continues to attract new customers

• Sainsbury’s brand and in-store marketing reduce costs
• f acquiring new customers
• Ability to leverage Nectar data to reward and

incentivise customers

• Strong track record of profit growth
• 8% increase in active accounts over the year to 1.5m
• Strengthened management team

59 42 30 19 13 2012/13 2011/12 2010/11 2009/10 2008/09

Bank profit before tax(1) (£m)

100% Sainsbury’s Bank PBT adjusted to J Sainsbury plc year end

(1)

Sainsbury’s Bank

Clear benefits for customers and shareholders

• Opportunity to increase the number of Sainsbury’s customers with a banking product from 1 in 20
• Offering accessible, high quality and tailored products which reward customers who bank and shop

with us

• Bank customers are more loyal and spend more in-store
• Future investment in the Bank aligned to Sainsbury’s strategy
• Cash payback within 8 years, returns above IRR hurdle rate
• Highly cash generative in later years
• Expected to complete January 2014

Sainsbury’s Bank

Transaction terms

• Acquire 50% for £248m – 1.03x Tangible Net Asset Value
• Net capital injection of £40m over 3 years
• Bank headline profit CAGR expected to be in the high teens over the next 5 years
• Underlying profit expected to be broadly flat in the first 2 years due to double running costs,

increasing thereafter as costs reduce

• Bank will incur non-underlying transition costs of £170m and capex of £90m over 4 years to build

and move onto a new, flexible banking platform

Joint Ventures

Continued strong delivery

2013/14 FY Guidance

• Profits in line with

guidance

• Sainsbury’s Bank – UPBT broadly flat year-on-year, full consolidation from January 2014
• Property JVs – Expect a similar level of profit

Property joint ventures Sainsbury’s Bank(1) Property joint ventures 2012/13 £m 2011/12 £m 16 16 22 16

• Strong growth in key

product areas Sainsbury’s Bank

Sainsbury’s underlying share of Sainsbury’s Bank post-tax profit

(1)

• Capitalised interest £32m (2011/12: £35m)

Underlying finance costs

In line with guidance

2013/14 FY Guidance

• Expect underlying net finance costs to remain broadly flat year-on-year

Net interest cost Net interest cover Fixed charge cover 2012/13 £m 2011/12 £m (109) 7.5x 3.1x (111) 7.8x 3.1x Change % (1.8) 4.0

Items excluded from underlying results

c.5.1% yield (March 2012: c.5.0%)

Profit on disposal of properties Investment property fair value movements Financing fair value movements Pensions accounting One-off items Total 2011/12 £m 2012/13 £m 83 (16) 17 3 87 66 (10) (10) (5) (9) 32

Pensions accounting

Triennial Valuation

• March 2012 valuation expected to be finalised June 2013

Consultation

• Proposed closure of the defined benefit pension scheme to future accrual
• If proposal proceeds, it is expected to:
• Decrease the defined benefit pension cost;
• Increase the contribution to defined contribution plans; and
• Reduce the defined benefit pension liability

2013/14 FY Guidance

• Expect underlying service cost to be around £64m under IAS 19 (Revised)

Retailing

Margins and returns

• Overall returns in line with guidance

Underlying operating margin %

(1)

3.26 3.36 3.50 3.54 3.56 2008/09 2009/10 2010/11 2011/12 2012/13

7.62 7.79 7.81 7.80

7.83 2008/09 2009/10 2010/11 2011/12 2012/13

Underlying EBITDAR margin %

(1)

Return on capital employed %

(2)

10.12 10.97 11.08 11.06 11.18 2008/09 2009/10 2010/11 2011/12 2012/13 10.24 10.53 10.66 10.56 10.41 2008/09 2009/10 2010/11 2011/12 2012/13

Pension adjusted return on capital employed %

(2)

12 month rolling earnings before interest and tax divided by average shareholder funds and net debt

(1) (2)

Not fuel adjusted

Growing space

Delivering space growth plans

As at March 2012 Openings: New/replacement supermarkets Supermarket extensions Refurbishments New convenience stores Gross new space Closures: Replacement stores/closures Net new space As at March 2013 Stores ‘000 sq ft 4.9% 4.5% c.21k sq ft average size Store development 1,012 14 8 35 87 (7) 1,106 20,347 634 165 18 190 1,007 (89) 918 21,265 3 supermarkets/4 convenience c.45k sq ft average size

2013/14 FY Guidance

• Expect to deliver around 1m sq ft gross new space
• Expect to open around 2 convenience stores per week

Growing space and creating property value

Unlocking property profits

• Significant property portfolio, valued at £11.5bn
• £0.5bn added due to investment and development of assets
• £0.2bn of cash proceeds from sale and leasebacks
• Property profits of £66m have been realised (nearly £350m over the last 5 years)

Market value of properties (£bn)

7.5 9.8 10.5 11.2 11.5 2008/09 2009/10 2010/11 2011/12 2012/13

Valuation Gains £4.0bn Property Proceeds £1.3bn £5.3bn Land & Buildings Capex (£2.5bn) Increase £2.8bn Over the last 5 years

Capital expenditure

Core capital expenditure reduced in line with guidance

Core capital expenditure Acquisition of freehold properties Net disposal proceeds

(1)

Net capital expenditure 2012/13 £m 2011/12 £m 1,240 25 (303) 962 1,040 37 (202) 875 2013/14 FY Guidance

• Full year core capital expenditure of around £1.1bn, excluding

the investment in Sainsbury’s Bank

£192m from sale and leasebacks and £10m from

• ther disposal proceeds

(1)

Capital expenditure

Rebalancing capital spend and targeted reduction in the medium term

• Increased focus on convenience, digital and cost saving initiatives with quick pay-back

2011/12 - £1.2bn 2012/13 - £1.0bn 2013/14 - £1.1bn

2013/14 FY Guidance

• Capex/sales ratio similar to 2012/13
• Targeted reduction from 4.1% to <3.5% capex/sales ratio over the medium term

New Stores Convenience Extensions Refurbishments Logistics and Commercial Initiatives IT

Cash flow

Small decline in cash from operations due to increase in working capital requirement

Operating cash flow Change in working capital Cash from operations Net interest Tax Net dividend Net cash used in investing activities Proceeds from shares Other non cash movements Movement in net debt Net debt 2011/12 £m 2012/13 £m 1,238 53 1,291 (129) (82) (285) (940) 14 (35) (166) (1,980) 1,294 (26) 1,268 (131) (144) (290) (899) 17 (3) (182) (2,162)

Balance sheet

Maintained strong position

• Market value of property increased to £11.5bn (March 2012: £11.2bn)
• Net debt £2,162m (March 2012: £1,980m)
• secured, low-cost, long-dated debt
• facilities of £3.4bn
• IAS 19 net pension deficit(1) £(688)m (March 2012: £(455)m)
• 0.6% decrease in the real discount rate
• increase in asset value of £649m

2013/14 FY Guidance

• Year-end net debt position expected to be around £2.4bn, £2.6bn including the consideration to be

paid for Sainsbury’s Bank

• When Sainsbury’s Bank transaction completes in January 2014, Bank assets and liabilities will be fully

consolidated at 2013/14 year end

Net of deferred tax

(1)

Balance sheet

4.1 3.9 4.1 4.1 4.1

2008/09 2009/10 2010/11 2011/12 2012/13

Lease adjusted net debt/underlying EBITDAR

(Rolling 12 month)

times

3.1 3.2 3.1 3.1 3.1 2008/09 2009/10 2010/11 2011/12 2012/13

times

Balance sheet gearing

38 31 33 35 38

2008/09 2009/10 2010/11 2011/12 2012/13

(net debt / total equity)

per cent

4.2 4.1 5.0 5.1 4.1

2008/09 2009/10 2010/11 2011/12 2012/13 per cent

(Core capex / sales inc fuel inc VAT)

Core capex/sales Fixed charge cover

(EBITDAR / interest + rent)

Dividend

Growing dividend in line with guidance

• Dividend cover increased to 1.83 times

13.2 14.2 15.1 16.1 16.7 2008/09 2009/10 2010/11 2011/12 2012/13

Dividend per share history (p) Dividend cover history(1)

1.61 1.68 1.75 1.75 1.83 2008/09 2009/10 2010/11 2011/12 2012/13

Underlying profit after tax from continuing operations attributable to equity shareholders divided by the total value of dividends declared during the year

(1)

times

Summary

Trading and operations

• Continued outperformance of the market, with 33 quarters of LFL growth
• Delivered operating margin accretion against tough industry backdrop

Key financial measures

• Continued focus on ROCE
• Underlying profit before tax up 6.2% to £756m
• Property profits of £66m (nearly £350m over 5 years)

Balance sheet

• Key balance sheet metrics remain stable
• Property value increases by £0.3bn to £11.5bn

Justin King

Chief Executive

2012/13

Operating review

• Delivered good sales and profit growth, outperforming the market
• Quality own-brand offer remains a key point of difference
• Nectar, coupon-at-till and Brand Match key to success
• Online and convenience businesses continue to grow strongly
• Acquisition of Sainsbury’s Bank allows continued development of complementary channels

2012/13

Strong trading performance

• Significant market beating sales performance in a challenging market
• total sales up 4.3%, like-for-like sales up 1.8%(1)
• Underlying operating profit up 5.1%, slightly ahead of sales growth

Kantar Total Till roll 12 w/e

(1) (2)

Sales including VAT and excluding fuel

Morrisons Sainsbury’s Tesco Total Grocery Asda

Sainsbury’s sales growth is strong in a tough market

Total sales growth (2)

Q1 Q2 Q3 Q4 Q1 2012/13

• 3
• 2
• 1

1 2 3 4 5 6 7

Market backdrop

Consumers remain under pressure

Customer confidence remains depressed but outlook has improved over the year

• 10
• 30
• 20

2010 2011 2012 2013 GfK Consumer Confidence Index

Household disposable income Wage growth

(1)

Consumer price inflation

Inflation has outstripped wage growth

(1)Wage Growth: Average gross earnings (inc bonus)

2001 2003 2007 2009 2013 2015

Forecast growth

Source: CEBR

% 2011 2005

• 5
• 4
• 3
• 2
• 1

1 2 3 4 5

Source: Kantar Worldpanel 12we Total Grocery data to 17 March 13

• Volume decline is starting to abate
• Transaction frequency has stabilised at a new, higher level

Market backdrop

Changes in shopping behaviours annualising

Items per basket contribution Overall volume contribution Frequency contribution

2008/09 2009/10 2010/11 2011/12 2012/13

Contribution to growth %

Market backdrop

A year like no other

• Queen's Diamond Jubilee, Olympics and Paralympics
• High levels of customer awareness and colleague engagement
• Legacy programmes launched
• Active Kids for All
• Sainsbury’s Anniversary Games

Live Well For Less

Increasing the number of own-brand customers

• Own-brand sales have grown faster than branded sales
• Total own-brand sales up nearly 5% year-on-year
• Growth in all three tiers
• Our values are a long term, strategic point of difference
• Invested in our supply chain and sourcing credentials
• DNA testing for over 10 years

Live Well For Less

Unique combination of Nectar, CAT and Brand Match

• Brand Match is helping to close the price perception gap
• Around 350m coupons issued to date
• ‘Cheaper than’ coupons issued over 50% of the time
• Unique combination of Nectar and coupon-at-till (CAT)
• Issue relevant and personalised promotions
• Incentivises customers to shop different channels
• Reward loyal customers – over £110m

redeemed in-store last Christmas

• Health: Trained pharmacists in over 270 stores as

Healthy Eating Advisors

• Sourcing: RSPCA ‘Retailer of the Year’ and

continue to be the largest retailer of Fairtrade, MSC fish and Freedom Foods products

• Environment: 82,000 solar panels on 189 stores –

largest multi-site solar array in Europe

Our values make us different

Continue to work towards our 20x20 commitments

• Community: Presented a record cheque

for £10.5m to Comic Relief

• Great place to work: Created 400

apprenticeship places

Performance

Brand performance

• Winner of Supermarket of the Year for 5 of the last 7 years
• Winner of Convenience Chain of the Year for the last 3 years
• Winner of Online Retailer of the Year
• Winner of Employer of the Year
• Business In The Community – Platinum Big Tick 2013

A long-term vision for growth

Sources: Ipsos-MORI (from Jan 2009 to P1 2012/13) and Brand Face (from P1 2012/13 to date) unweighted rolling 8 week data. Base sizes per rolling period : Sainsbury’s (c.800), Tesco (c.400), Asda (c.250), Morrisons (c.200).

Great Food

Continued leadership in quality food

Morrisons Sainsbury’s Tesco Asda

2009/10 2010/11 2011/12 2012/13 8.4 8.2 7.8 7.7

Quality of products (scale of 1-10)

7.50 7.75 8.00 8.25 8.50

• Completed our re-launch of by Sainsbury’s
• Over 6,500 lines, many new or improved
• Winner of Own-Label Range of the Year
• Fresh counters in over 500 stores
• Over 20,000 colleagues trained at

7 food colleges

• Continue to invest in British food
• Biggest volume retailer of British apples

and pears

Great Food

Continual investment in own-brand

Compelling General Merchandise and Clothing

Strong contribution to overall performance

• GM and Clothing has grown at over twice the rate
• f food over the year
• Strong clothing sales growth has continued
• 7th largest UK clothing retailer by volume
• Launched a further 4 Gok for Tu ranges
• Achieved the milestone of £1bn annual GM sales
• 7th largest UK retailer for homeware by value

• Convenience sales of over £1.5bn and growing at 17% year-on-year
• Opened 87 stores during the year and a second dedicated convenience depot, located at

Thameside

• Number of convenience stores set to overtake number of supermarkets next year

Complementary Channels and Services

Convenience business continues to grow strongly

Complementary Channels and Services

Groceries online growing at around 20% year-on-year

• Groceries online business of nearly £1bn
• Nectar helps understand and drive cross-shopping
• Customer service and availability improvements over the year
• Improvement in operational efficiency over the year
• 10% increase in items picked per hour
• 15% increase in deliveries per van

• Nectar data key to understanding the developing customer behaviour
• New channels incrementalise spend
• When customers shop all three channels,

total spend more than doubles

• Bank ownership will further enhance loyalty

Less than 1.0 1.0 - 1.1 1.1 - 2.0 Greater than 2.0

Multiples of supermarket spend

Complementary Channels and Services

Multi-channel participation increases total spend

Groceries Online Supermarkets Convenience

• Sainsbury’s Pharmacies: Over 270 in-store pharmacies and 3 hospital pharmacies
• Sainsbury’s Energy: 83% increase in customers over the year
• Insight 2 Communication: JV with Aimia that allows suppliers

to deliver targeted offers to our customers

• Launched a number of digital businesses:
• Rovi
• Sainsbury’s Entertainment
• eBooks by Sainsbury’s

Developing new business

Expanding our brand into new areas

Growing Space and Creating Property Value

A unique space growth opportunity

Convenience

• Increasing the proportion of

convenience space, reflecting the change in consumer shopping habits

• Highly accretive

investments, generating strong returns Extensions

• Increasing the proportion of

customers with access to a full non-food offer – from 11% to 33% over the last 5 years Supermarkets

• Opening stores in select

locations where Sainsbury’s does not currently have a presence – there are 35% of postcodes where Sainsbury’s market share <5%

A long-term vision for growth

Summary

• Good sales and profit performance
• Continued strength in own-brand
• Competitive advantage through Nectar, coupon-at-till and Brand Match
• Strong growth in our multi-channel businesses
• Opportunities to further develop Sainsbury’s Bank
• Consistent delivery of our long-term vision for growth

Q&A

Preliminary Results

2012/13