Higher sales and underlying profits from continuing businesses
 - recovery on track.

GROUP RESULTS
· Continuing businesses perform strongly:
- sales up 8.4 per cent to £9.6bn;
- underlying* operating profit before e-commerce up 10.2 per cent to £366m.
· Underlying profit before tax and continuing e-commerce up 7.0 per cent to  £338m.
· Underlying profit before tax up 3.2 per cent to £309m.
· Interim dividend maintained at 4.02 pence per share.

UK SUPERMARKETS
· Sales up 7.5 per cent to £7.8bn.
· Like-for-like sales growth (ex petrol) up 6.0 per cent - 3 consecutive quarters of strong growth.
· Customer visits up 6.2 per cent.
· Underlying operating profit before e-commerce up 10.0 per cent to £282m
· Business Transformation - programme on track:
 - delivery of new systems and modernisation of supply chain going well;
 - store reinvigoration accelerated - improving sales uplifts;
 - on track to deliver £150m cost savings target for year.

SHAW'S
· Sales up 8.4 per cent to $2,355m.
· Like-for-like sales growth of 4.5 per cent.
· Operating profit up 22.1 per cent to $101m.

* Underlying profits are before amortisation of goodwill, exceptional costs and non-operating items.

Sir Peter Davis, Group Chief Executive, said:

"Sainsbury's Supermarkets in the UK and Shaw's in the US have both performed strongly.   Sainsbury's sales growth is particularly encouraging.   We have now delivered three consecutive quarters of strong like-for-like sales; this is the best  sustained growth the company has delivered for over 10 years.  We have also started to increase profits whilst investing substantially both in the Sainsbury brand and in transforming the business.

To achieve these results we have improved the quality of our customer offer, extending choice through the creation of new ranges, improving our standards of service in-store and working to ensure that our offer is priced competitively in the market.

At the same time we are investing in the long-term growth of the business through our business transformation programme.  We have completed 54 extensions and refurbishments in this first half year and sales uplifts are very encouraging.   For the 13 stores refurbished in Q1 we have already achieved an average sales uplift of 10 per cent and we have raised our projections of the ultimate sales uplifts to 12 per cent.  This is in line with the uplifts achieved on stores reinvigorated last year.

We have made significant progress over the last year in updating our systems.   The programme is running on time and on budget; it has already had a positive impact on the business.

We have built a new customer data warehouse to enable us to better use the very valuable customer data from the Reward card.  We have also re-launched our Sainsbury's to You website on a new IT platform; this has improved speed, performance and the visual attributes of the site.   We have introduced much improved IT systems in our new business centre which deliver a quantum leap in performance and facilitate new ways of working.

We are making good progress with the renewal of our supply chain.   During this first phase we have doubled the size of our Haydock depot, making it one of the largest in the UK, acquired and opened Emerald Park, serving 63 stores in the South West, whilst closing Middleton and Yate.   In phase II we have four major facilities under construction at Stoke-On-Trent, Hams Hall in Birmingham, Waltham Point and Hoddesdon in Hertfordshire.   

We have moved successfully our entire Business Centre into one modern facility from nine dispersed and rather dated offices.   We have also secured planning permission to develop our Stamford Street site and demolition will commence in January 2002.

We have also opened four of the scheduled six  Boots 'implants' within selected
Sainsbury's out-of-town stores and will open the balance by the end of this month, all ahead of plan.

We have appointed Sara Weller and Stuart Mitchell as joint assistant managing directors of Sainsbury's Supermarkets. Sara is responsible for Strategy and Marketing and also for Sainsbury's Bank and Sainsbury's to You.  This will ensure that all parts of the UK business work together to achieve the objectives of our brand. Stuart is responsible for Trading, Retail and Distribution - all the operational facets of our business in an end-to-end process. This focus should ensure that we work faster, simpler and together to generate maximum customer benefit and operational efficiencies. In the first half we delivered cost savings of £60m and we are on track to achieve our target of £150m cost savings.

Shaw's has delivered an excellent first half profit performance with good sales growth of 8.4 per cent.  We have completed the integration of 18 stores we bought from Grand Union in March and will achieve distribution efficiencies this year through the closure of our East Bridgewater site.  We are well placed to continue to grow Shaw's as a strong regional player.

Our continuing businesses have performed strongly in the first half. In the first 5 weeks of the second half I am happy to say that sales have remained encouraging.  I am confident that we are making excellent progress in delivering our 3 year business transformation programme."

Group Financial Summary

The results for the first half year reflect substantial progress across the Group.  This progress is evidenced by underlying Group profit before tax and continuing e-commerce increasing by 7.0 per cent year on year to £338m (2000: £316m), a significant improvement on the stabilisation of Group profits achieved last year.

Group sales (including VAT) from continuing operations increased by 8.4 per cent to £9.6bn. Underlying operating profit from continuing operations before e-commerce was £366m, an increase of £34m or 10.2 per cent over the previous year. 

 

Operating Profit  2001 Change
  £m  %
Sainsbury's Supermarkets  282  10.0
Shaw's  70  27.8
Sainsbury's Bank  10  12.9
JS Developments  8  (38.9)
Profit share  (4)  -
Underlying operating profit 366  10.2
  before e-commerce 
Sainsbury's to You  (29)  (75.6)
Amortisation of goodwill  (8)  (14.9)
Operating profit ex. exceptionals  
and discontinued operations  329  6.6

The operating loss from discontinued businesses was £2m resulting from the final 6 weeks trading of our Egyptian business sold on 15th May 2001. 

Underlying Group profit before tax and continuing e-commerce was £338 million (2000: £316m) an increase of 7.0 per cent  After continuing e-commerce of £29m (2000: £16m), underlying Group profit before tax was £309m (2000: £300m), an increase of 3.2 per cent over the previous year.

Exceptional operating costs were £21m (2000: nil).  These include severance and closure costs of £8m  relating to the business transformation programme in Sainsbury's Supermarkets, closure costs of £5m relating to the  termination of the Taste joint venture and depot closure costs in Shaw's amounting to £8m.  As previously communicated, we expect the exceptional operating costs for the full year to be between £35m and £50m.

The Group tax charge was £99m (2000 restated for FRS 19 : £102m).  We have adopted FRS19 on deferred tax; this will raise our underlying tax rate in 2001/02 by approximate 2 per cent to 34 per cent.  The underlying effective tax rate in the first half was 34 per cent (2000:  32 per cent).

Underlying earnings per share was 10.7 pence (2000 restated for FRS19: 10.4 pence), an increase of 2.9 per cent on the previous year.

The Board has declared an interim dividend of 4.02 pence per share which remains unchanged from last year.   The interim dividend will be paid on 11th January 2002 to shareholders on the Register of Members at the close of business on Friday 30th November 2001.

Group capital expenditure in the half year was £561m (2000: £476m). UK capital expenditure was £506m including £95m on new stores, £265m on extensions and refurbishments and £94m on the construction of new distribution depots. Shaw's capital expenditure was £55m (2000: £57m).  We forecast Group capital expenditure to be £1.1bn for the year.

Net debt at the half year increased by £284m to £1.1bn (31 March 2001 : £859m) with gearing increased to 23 per cent from 18 per cent at 31 March 2001 (22 per cent and 17 per cent respectively before restatement for FRS19).

Sainsbury's Supermarkets

Total sales grew by 7.5 per cent to £7,814m (2000: £7,267m).  Like-for-like sales growth (excluding petrol) was 6.0 per cent, the third consecutive quarter of strong like-for-like sales growth.  The business has been competing more effectively by offering a compelling combination of extraordinary quality at ordinary prices, supported by the acceleration of our store reinvigoration programme.

Sainsbury's Supermarkets sales, including VAT, excluding Petrol

00/01 00/01 01/02 01/02 01/02
% Growth   Q3 Q4  Q1  Q2  H1
Volume  (0.7) 4.1  3.9  4.5  4.2
Inflation  1.1  0.7  2.1  1.5  1.8
Like-for-like 0.4  4.8  6.0  6.0  6.0

sales growth  

 

 

Net new space  2.0  2.1  2.6  1.7  2.1
Total growth  2.4  6.9  8.6  7.7  8.1

 

Cost savings of £60m were delivered during the first half, of which £30m related to buying efficiencies.  We are on track to deliver £150m of cost savings for the year.  In the first half, there has been a significant investment in the brand to deliver higher sales growth.  Additional costs have been incurred in implementing the transformation programmes, such as systems, supply chain and store reinvigoration, which is necessary to deliver operating efficiencies in the future. 

Fifty-four extensions and refurbishments were completed in the first half, compared with 50 for the whole of last year. The sales uplifts from reinvigorated stores continue to exceed our expectations.

Underlying operating profit before e-commerce for the first half year was £282m (2000: £256m), an increase of 10.0 per cent over the previous year.  The operating margin increased from 3.5 per cent to 3.6 per cent.

E-commerce investment in Sainsbury's to You in the first half was £29m (2000: £16m).  This excludes pre-closure operating losses of £4m in the Taste joint venture which was terminated on 1st September 2001.  The operating losses of Sainsbury's to You increased during the first half due to increased geographic coverage, with 24 more in-store picking centres than at the same time last year, related marketing costs and low operating efficiencies in the 2 dedicated picking centres while operating models and sales volumes are established.

Shaw's (US Operations)

Sales grew by 8.4 per cent to $2,355m (2000: $2,173m).  Like-for-like growth was 4.5 per cent.  Good sales uplifts were generated from increased ranging and development initiatives.

Shaw's sales

  00/01 00/01 01/02 01/02 01/02
% Growth  Q3 Q4 Q1 Q2 H1
Like-for-like growth  1.3 2.5 3.8 5.0 4.5
New space  (0.5) 0.7 3.4 4.4 3.9
Total growth  0.8 3.2 7.2 9.4 8.4

The new formats are performing well and the development programme has been accelerated.  Ten refurbishments and extensions (excluding Grand Union) were completed in the first half, an increase from 4 in the previous year.  Eighteen Grand Union stores purchased on the 4th March 2001 have been rebadged as Shaw's and the integration is proceeding smoothly.

A local union agreement was successfully renegotiated at the end of July this year together with the announced closure of the East Bridgewater depot.  This facility was outdated and poorly located for Shaw's business today and the closure will generate significant distribution efficiencies. 

Operating profit for the year increased by 22.1 per cent to $101m (2000: $83m) and the operating margin increased from 3.8 per cent to 4.3 per cent. 

Sainsbury's Bank

Sainsbury's Bank performed well during the first half year with strong growth in operating profit.  Turnover increased by 10.7 per cent to £83m (2000: £75m) and operating profit was £10m (2000: £9m) an increase of 12.9 per cent.  The first half included a VAT credit of £2.8m compared with £3.5m in the first half of last year.  Adjusting for the impact of the VAT credits, the underlying profit increase was an impressive 36 per cent.

The application of retail style in-store product merchandising and promotions has resulted in commission income being up 33 per cent, customer deposits were up 22 per cent and lending was up 15 per cent.  Use of our in-store channel has allowed us to keep acquisition costs low.

Property development

JS Developments operating profit in the first half was £8m (2000: £13m).  Only 1 major project was completed during the first half.

We are currently evaluating 45 property schemes on existing sites which will release value and at the same time increase customer footfall in our stores.  This will lead to a more effective utilisation of our extensive property assets.

Group profit and loss account

                    table

  28 weeks to13 October2001unaudited   28 weeks to13 October2001unaudited  28 weeks to14 October2000unaudited*   28 weeks to14 October2000unaudited*
          
Note    Excluding exceptionals & discontinued operations  Excluding exceptionals & discontinued operations   
  £m   £m  £m   £m
Turnover including VAT and sales taxes 2 9,601   9,593  8,850   9,754
VAT and sales taxes  (556)    (556)  (509)    (637)
            
Continuing operations  9,037   9,037  8,341   8,341
Discontinued operations  8          776
            
Turnover excluding VAT and sales taxes  9,045        9,117
               
Cost of sales and administrative expenses  (8,706)   (8,696)  (8,024)   (8,777)
Amortisation of goodwill  (8)   (8)  (7)   (8)
Exceptional operating costs 3 (21)          - 
Profit sharing  (4)    (4)  (1)    (1)
  (8,739)   (8,708)  (8,032)   (8,786)
                
Continuing operations  308          309
Discontinued operations  (2)          22
            
Operating profit  306   329  309   331
Share of operating loss in joint ventures  (4)          - 
(Loss) / Profit on sale of properties 3 (3)          46
            
Profit on ordinary activities before interest 299        377
Net interest payable  (22)          (39)
             
Underlying profit before tax**  309        300
Amortisation of goodwill  (8)        (8)
Exceptional operating costs  (21)        - 
(Loss) / Profit on sale of properties  (3)          46
          
Profit on ordinary activities before tax  277        338
          
Tax on profit on ordinary  activities 4 (99)          (102)
          
Profit on ordinary activities after tax  178        236
Equity minority interest  (3)                 -
          
Profit for the financial period  175        236
Dividends  (78)            (77)
        
Retained profit  97            159
            
Earnings per share 5 9.2p          12.4p
Underlying earnings per share** 5 10.7p          10.4p
Diluted earnings per share 5 9.1p          12.4p
Underlying diluted earnings per share** 5 10.6p          10.4p
Dividend per share  4.02p          4.02p

*   Restated for change in accounting policy for deferred tax (see note 1)
**  Before amortisation of goodwill, exceptional operating costs and non-operating items

Group statement of total recognised gains and losses

 28 weeks to 13 October 2001 (unaudited) £m  28 weeks to 14 October 2000 (unaudited)* £m
Profit for the financial period 175 236
Currency translation differences on foreign currency net investments (1)   15
Total recognised gains relating to the financial period 174 251
Change in accounting policy for deferred tax (160) 
Total recognised gains since last annual report 14 

There is no material difference between the above profit for the period and the historical cost equivalent.
* Restated for change in accounting policy for deferred tax (see note 1)

Group balance sheet

 Note 13 October2001(unaudited) £m  14 October 2000 (unaudited)* £m  31 March 2001 (audited)* £m
Fixed assets     
 Intangible assets   266 331  278
 Tangible assets   6,546 6,583  6,215
 Investments  168    139     164
  6,980 7,053  6,657
Current assets    
 Stocks  880 1,092  763
 Debtors  365 327  546
 Sainsbury's Bank 6 2,138 1,759  1,914
 Investments  14 17  12
 Cash at bank and in hand  839   498  475
  4,236 3,693  3,710
Creditors: due within one year    
 Sainsbury's Bank 6 (2,014) (1,638) (1,796)
 Other  (2,843) (2,914) (2,529)
  (4,857) (4,552) (4,325)
Net current liabilities  (621)    (859) (615)
Total assets less current liabilities  6,359 6,194  6,042
Creditors: due after one year   (1,226) (1,182) (1,000)
Provisions for liabilities and charges     (223) (216) (238)
Total net assets  4,910 4,796 4,804
Capital and reserves    
 Called up share capital   484 482  483
 Share premium account  1,408 1,383  1,401
 Revaluation reserve  39 39  39
 Profit and loss account  2,923 2,843 2,828
Group shareholders' funds  4,854 4,747 4,751
  Equity minority interest  56 49  53
Total capital employed  4,910 4,796 4,804

* Restated for change in accounting policy for deferred tax (see note 1)

Group cash flow statement

 Note 28 weeks to 13 October  2001 (unaudited) £m  28 weeks to14 October2000(unaudited)£m
Net cash inflow from operating activities 7 290 378
Returns on investments and servicing of finance    
Interest received  41 22
Interest paid  (46) (63)
Interest element of finance lease rental payments  (11) (10)
Net cash outflow from returns on investments and servicing of finance  (16) (51)
Taxation  (69) (59)
Capital expenditure and financial investment   
Payments to acquire tangible fixed assets  (490) (475)
Receipts from sale of tangible fixed assets  184 333
Purchase of own shares  - (20)
Payments to acquire intangible assets  (3)         (2)
Net cash outflow from capital expenditure and financial investment  (309) (164)
Acquisitions and disposals   
Proceeds from disposal of operations  14 -
Investment in other fixed asset investments  (7)   (21)
Net cash inflow/(outflow) from acquisitions and disposals  7 (21)
Equity dividends paid  (197) (197)
Net cash outflow before management of liquid resources and financing  (294) (114)
Financing   
Issue of ordinary share capital  7 5
Increase/(decrease) in short-term borrowings  472 (180)
Increase in long-term borrowings  230  136
Increase/(decrease) in finance leases  1 -
Capital element of finance lease rental payments  (1) (3)
Net cash inflow/(outflow) from financing   709 (42)
Increase/(decrease) in cash in the period  415 (156)