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May 13, 2002

UK: Somerfield sees “satisfactory” unaudited full year sales growth

UK grocery chain Somerfield has posted a "satisfactory" unaudited trading outcome for the year ended 27 April 2002, which the group sayis is in line with the board’s recovery plans. Profit before taxation excluding exceptional items is expected to be in line with market expectations. Somerfield's like for like sales growth for the full year was 1.4%. In the H2 of the financial year, like-for-like sales growth was 0.1%. Notwithstanding the figures in the H2, a significant proportion of the group’s expected trading profit growth will have come from Somerfield due to the re-balancing of promotions resulting in improved earnings.

UK grocery chain Somerfield has posted a “satisfactory” unaudited trading outcome for the year ended 27 April 2002, which the group sayis is in line with the board’s recovery plans. Profit before taxation excluding exceptional items is expected to be in line with market expectations.

Somerfield’s like for like sales growth for the full year was 1.4%. In the H2 of the financial year, like-for-like sales growth was 0.1%. Notwithstanding the figures in the H2, a significant proportion of the group’s expected trading profit growth will have come from Somerfield due to the re-balancing of promotions resulting in improved earnings.

Supermarket subsidiary Kwik Save saw like-for-like sales growth for the full year of 2.5%. In the H2, like-for-like sales growth was 1.4%. Retail partner turnover is excluded from these statistics, however, Somerfield noted that “their sales and our related income are growing significantly”.

Group like for like sales growth for the full year was 1.8%. In the H2, the like for like sales growth was 0.6%. Estimated sales for the year, including sales from retail partners, have increased by 2.4% to £4.97bn (US$7.27bn).

When published on 3 July, the preliminary announcement is due to include (inter alia) a number of exceptional items that occurred in the H2 of the year. These were: the previously announced profit of £8m on the sale and lease back of the distribution centre near York, costs of about £2m relating to a depot closure at Winsford, Cheshire, and about £6m cost for group refinancing.

At the end of April the group concluded an important refinancing of all debt facilities. Over 40 lenders providing term facilities have been repaid early and just five lenders now provide a revolving credit facility of £100m, maturing in April 2005. In addition, overdraft and finance leasing facilities totalling £50m are available. At the year end, the group is expected to be in a net funds position and the new arrangements will save about £4m of financing costs in the current year due to lower commitment fees and the elimination of expensive US dollar borrowings.

The strengthening of the company’s balance sheet, together with improving prospects, will enable capital expenditure to be increased in the current year to over £150m from about £110m.

Executive Chairman, John von Spreckelsen said: “Having successfully completed the first phase of the recovery programme, we have restored financial stability to the Group which has a strong balance sheet and a modest level of profitability.

“We are now moving into the second phase which is to accelerate profitable growth. However, there is still a stretching task ahead of us in respect of sales growth, particularly as the comparable base in the Q1 of the current year is quite demanding. Based upon the improving trend of profitability in the year which has just closed, I expect the year ahead to deliver further progress in line with the board’s recovery plan.”

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