2011/12 - about.sainsburys.co.uk/media/files/s/... · market value of property up £0.7bn to...
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Preliminary results2011/12
David TylerChairman
John RogersChief 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
Full year dividend per share
Statutory results
Items excluded from underlying results
Profit before tax
2011/12
£m2010/11
£m
6.8
4.5
6.9
(12.4)
33.3
7.1
(12)
6.0
6.6
n/a
(3.4)
Change
%
%
p
p
%
p
p
24,511
789
(109)
32
712
26.1
28.1
16.1
87
799
(1)
Underlying basic earnings per share(1)
22,943
738
(97)
24
665
26.0
26.5
15.1
162
827
Retailing Continued sales outperformance
2012/13 GuidanceFull year LFLs similar to FY 2011/12Contribution from net new store space (excluding extensions and replacements) around 2%
Sales excluding fuel and including VAT(1)
LFL outperformance to market
Contribution from extensions 1.1%
LFL sales
growthSales from net
new spaceTotal
sales growth
Up 2.1% 2.4% 4.5%
(1)(1)
Retailing Trading intensity
Structural impact from strategic growth initiatives
Sales including VAT and excluding fuel, divided by average space(1)
Movement in Trading Intensity(1)
£ per sq ft per week
10
12
14
16
18
20
22
2010/11 New Supermarkets
NewExtensions
Core Estate 2011/12
Retailing Good improvement in underlying profit
bp
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
2011/12
£m2010/11
£m
6.8 5.6
5.5
(1)
12
6.9
4
10
Change
%
24,511
22,294
1,740
7.80
789
3.54
22,943
21,102
1,649
7.81
738
3.50
Retailing Cost inflation of 2.5% offset by over £100m of savings
Annual operating cost savings (£m)
07/08 08/09 09/10 10/11 11/12
50
100
150
200
2012/13 Guidance
Cost inflation towards the upper end of 2-3% range
Efficiency savings of around £100m
Other
Retailing £600m of cost savings delivered in last 5 years
Self checkout
Labour matching
Simpler processes
Stock-loss
Counters’ procedures
Network efficiencies
Routing improvements
Fuel efficiency
LED light bulbs
Chiller cabinets
Store wiring
ProcurementIT contracts
Commercial services
Store GNFR
Central costs
Range reviews
Energy
Logistics
Store costs
Retailing Operating margin improvement
Supermarkets open less than one year(1)
bps
17
(3)
(2)
(2)
10
(6)
4
Underlying business
Sale and leasebacks
New space(1)
Investments in growth
Operating profit margin improvement (fuel adjusted)
Fuel price inflation
Operating profit margin improvement
Delivering margin progression against challenging market backdrop
Underlying business continues to improve profitability
Joint Ventures Continued strong delivery
Sainsbury’s Bank
2012/13 Guidance
Sainsbury’s Bank – Expect a step up in profit
Property JVs – Expect a similar level of profit
Property joint ventures
Sainsbury’s Bank
Property joint ventures
16
16
11
13
2011/12
£m2010/11
£mChange
%
45
23
Steady growth in loans and insurance
Tight control on bad debt
Extended 5 stores, adding a total of 80,000 sq ft
Underlying Finance Costs In line with guidance
2012/13 GuidanceUnderlying net finance costs expected to increase by around £5-10m
Finance income
Interest costs
Capitalised interest
Net finance costs
Net interest cover
Fixed charge cover1
18
(162)
35
(109)
7.5
3.1
19
(143)
27
(97)
7.9
3.1
2011/12
£m2010/11
£m
x
x
x
x
Underlying EBITDAR/(Underlying net finance costs + rent)(1)
Items Excluded From Underlying Results
c. 5.0% yield (March 2011: c. 4.9%)
Profit on disposal of properties
Investment property
fair value movements
Financing fair value movements
Pensions accounting
One-off items
Total
2011/12
£m2010/11
£m
108
39
7
3
162
108
39
7
3
5
162
83
0
(16)
17
3
87
Retailing Margins and returns
Not fuel adjusted
12 month rolling earnings before interest and tax divided by average shareholder funds and net debt
(2)
(1)
Underlying operating margin
(1)
2.0
11/1207/08 08/09
2.5
3.0
3.5
4.0
%
09/10 10/11
Return on capital employed
(2)
4
6
8
10
12
%
11/1207/08 08/09 09/10 10/11
EBITDAR margin
(1)
6.007/08 08/09
6.5
7.0
7.5
8.0
%
09/10 10/11 11/12
Growing Space Delivering space growth plans
As at March 2011
Openings:
New/replacement supermarkets
Extensions/refurbishments
New convenience stores
Gross new space
Closures:
Replacement stores/closures
Net new space
As at March 2012
Stores ‘000 sq ft
7.3%
6.5%
c.18k sq ft average size
Store development
934
19
OULT
73
(4)/(10)
1,012
19,108
750
491
160
1,401
(162)
1,239
20,347
4 supermarkets/10 convenience
2012/13 GuidanceExpect to deliver around 5% gross space growthExpect to open 1-2 convenience stores per week
c.39k sq ft average size
Growing Space Amount of immature space has peaked
Returning to a steady-state of space growth
Drag of new space on margins to reduce across next 5 years
0
5
10
15
20
25%
of total space
15/16e14/15e13/14e12/13e11/1210/1109/1008/09
Accretive space
Immature space
Forecast
2012/13 Guidance
Operating profit to grow in line with sales
Capital Expenditure Core capital expenditure to reduce by 20% next year
2012/13 GuidanceFull year core capital expenditure of around £1bn
Core capital expenditure
Acquisition of freehold properties
Net disposal proceeds
Net capital expenditure
2011/12
£m2010/11
£m
1,138
17
(275)
880
1,240
25
(303)
962
Capital Expenditure Rebalancing capital spend to existing space
Increased spend on refurbishing existing stores and IT platform to support online growth
Continued focus on new stores and convenience
Space growth returning to normalised levels
New Stores
Convenience
Extensions
Refurbishments
IT
Maintenance
2011/12 -
£1.2bn 2012/13 -
£1.0bn
Cash Flow Improving cash flow from operations
2010/11
£m
Operating cash flow
Change in working capital
Cash from operations
Interest
Tax
Dividend
Net cash used in investing activities
Other funding movements
Movement in net debt
Net Debt
1,238
53
1,291
(142)
(82)
(285)
(883)
(65)
(166)
(1,980)
1,216
(78)
1,138
(126)
(158)
(269)
(902)
52
(265)
(1,814)
2011/12
£m
2
168
13
(13)
48
(6)
2
(225)
37
(9)
Change
%
Market value of property up £0.7bn to £11.2bn (March 2011: £10.5bn)-
£2.2bn added through investment and development of assets over 3 years-
£3.7bn total increase in property value since March 2009
IAS 19 net pension deficit £(455)m (March 2011: £(241)m)-
0.5% decrease in real discount rate-
increase in asset value of £578m
Net debt £1,980m (March 2011: £1,814m)-
secured, low-cost, long-dated debt-
facilities of £3.4bn
Retail operating cash flow up 13.4% to £1,291m (March 2011: £1,138m)-
£53m improvement in working capital
Balance Sheet Maintained strong position
2012/13 GuidanceYear-end net debt position expected to be around £2.2bn
Balance Sheet
Balance sheet gearing
0
20
40
50
10
30
(net debt/total equity)
EBITDAR/(interest + rent)
(Core capex / sales inc fuel inc VAT)
Core capex/sales
0
4.0
2.0
6.0
Fixed charge cover
0
3.5
07/08 08/09 09/10 10/11 11/12
07/08 08/09 09/10 10/11 11/12 07/08 08/09 09/10 10/11 11/12
Lease adjusted net debt/EBITDAR
07/08 08/09 09/10 10/11 11/12
% %
timestimes
1
2
3
0
1
2
3
4
4.5
Dividend Policy Continuing to grow dividend
Dividend payout at top of current policy range
Policy to increase dividend each year, building to 2x cover over the medium term
DPS and dividend cover1
history
5
10
15
20
05/06 06/07 07/08 08/09 09/10 10/11 11/12
Underlying basic earnings per share divided by dividend per share(1)
1.19x
1.33x
1.45x1.61x
1.68x1.75x
1.75xDPS(p)
Summary
Trading and operations
7 years of like-for-like sales growth, outperforming the market
Delivered operating margin accretion while investing for the future
Property profits of £83m
Key financial measures
Continued focus on ROCE
Space growth of 5% and reduction in capex in 2012/13
Continue to drive operational cash flows and improved working capital
Balance sheet
Key balance sheet metrics remain stable
Property value increases to £11.2bn
Justin KingChief Executive
Good sales and profit growth against challenging market backdrop
Helping our customers iáîÉ=tÉää=Ñçê=iÉëë
Continuing to deliver our long term vision for growth
2011/12 Operating review
Market Backdrop Consumers to remain under pressure in 2012
Inflation has outstripped wage growthCustomer confidence remains depressed
0
20
40
60
80
100
120
140
JM A M J A S O N D J F M JA M J A S O N D J F M JA M J A S O N D J F M
2009 2010 2011 2012
Source: Nationwide Consumer confidence
Expectations Index
Present situation Index
Nationwide Consumer Confidence Index
0
1
2
3
4
5
6
CPI
Wage
increaseForecast growth
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: CEBR
% %
Market Backdrop Customers shopping more frequently
Source: Kantar Worldpanel 12we Total Grocery data to 22 Jan 12
• Customers shopping more frequently, locally, to manage total spend and waste
• Trend reflected in convenience and online growth
• Negative volumes expected to continue through 2012/13
(6)
(4)
(2)
0
2
4
6
Con
trib
uti
on
to g
row
th %
Frequency contribution Items per basket contribution Overall volume contribution
2008/09 2011/122010/112009/10
Market Backdrop Savvy shopper managing budget over time
Kantar total till roll, 4 w/e
2
4
6
8
10
12
Christmas
Royal
wedding&
Easter
Christmas
Easter
ChristmasEaster
% 2009/10 2010/11 2011/12
Grocery market growth
Spend
Save
Market Backdrop Sainsbury’s well placed for key events in 2012
Live Well For LessReflecting the customer mood
Live Well For LessReflecting the customer mood
Launched our OM=Äó=OM commitments – better for our customers, colleagues, suppliers and communities
Customers continue to endorse our commitment to our values
Live Well For Less Our values make us different
Live Well For Less Brand Match reinforces competitiveness of our pricing
‘Cheaper here today’ coupons >50% of time
Over half of coupons issued are <£1
More customers now agree that Sainsbury’s sells brands at the same price as other Supermarkets
60
70
80
90
100
Launch Today
%
Source: Weekly Sainsbury’s Brand Match Nectar Customer Tracking
Live Well For Less Nectar is a key driver of customer loyalty and insight
Almost £200m in points redeemed in the year
375m coupons at till issued to customers
125 suppliers used coupon at till to promote their products across 650 campaigns
A Long-Term Vision for Growth
Great Food Maintaining our advantage in quality food
Source: Ipsos-MORI unweighted rolling 8 wk data, questionnaire completed online since Jan 2009Base sizes per rolling period: Sainsbury’s (c800), Tesco (c400), Asda (c250), Morrisons (c200)
Mean
score
7.5
7.75
8
8.25
8.5
08/09 09/10 10/11 11/12
Quality of products (scale of 1–10)
JS
Tesco
Asda
Morrisons
8.2
8.1
8.4
7.8
Great Food Own label a point of difference
Continuous development to retain our quality lead
Converted 60% of Äó=p~áåëÄìêóÛë=range this year – 70% of which is new or improved
In last 2 years launched or improved 9,000 products across own label
10
20
30
2 4 6 8 10
Contribution to food sales growth
Year on year sales growth (%)
Co
ntr
ibu
tio
n t
o t
ota
l fo
od
sal
es g
row
th (
%)
Great FoodGreat service and inspiration from our counters
18,000 colleagues trained at our Food & Bakery colleges
Great Food counters rolled out to 333 stores so far
Fastest growing counter sales of any major retailer
Compelling General Merchandise and Clothing Complementary to a great weekly food shop
Best food store in town, complemented by great non-food
Focus on ‘hero’ categories: home, TU clothing, papershop
Growing faster than food and gaining market share
50
100
150
200
Store #
Distribution of Supermarket stores
Under10,000
10,000-25,000
25,000-40,000
40,000-60,000
60,000 –80,000
80,000+
Store Space (‘000 sq ft)
25
35
40
50
Food
0
5
20
30
NonFood
Average store space allocation
25
40
60
80
Total
Proportion of food space
Proportion of non-food space
Complementary Channels and Services Fast growing businesses of scale
Convenience business of £1.3bn and online business of £0.8bn
Adding 1-2 stores per week to reach 500th convenience store in 2012/13
Over 50 stores delivering 1,000+ online orders per week
Sainsbury’s vs Market Growth
Convenience Online
0
5
10
15
20
25
30
08/09 09/10 10/11 11/12
Sainsbury’s
IGD Convenience and forecourt
08/09 09/10 10/11 11/12
Sainsbury’s
IGD Groceries online
% %
Developing New Business Investing to build our multi-channel capability
Most Click & Collect sites of any UK supermarket retailer
Launched online music download service
Investing in IT systems to support growing digital and multi-channel platforms
200
400
600
800
1000
March 2011 March 2012
Increase in Click & Collect Stores
Store #
Sainsbury’s Entertainment
Supermarkets
Convenience
Developing New Business Sainsbury’s Bank
(20)
(10)
0
10
20
30
40
50
06/07 07/08 08/09 09/10 10/11 11/12
£m
Sainsbury’s Bank operating profit
Sainsbury’s Bank operating profit
Sainsbury’s share of post tax profits
Driving growth by rewarding the Sainsbury’s shopper
Preferential pricing on Home and Car insurance for Nectar Card holders
Growing Space and Creating Property Value A unique space growth opportunity
Supermarket space added 2011/12
New Stores Extensions
Market share weighted to the South
Kantar 52 w/e 18 March 2012
25% of the UK population not within 15 minute drive of a Sainsbury’s
Market share below 10% in 60% of UK postcodes
Space Growthby region (%)Market Share (%)
Summary
Good sales and profit performance
Challenging economic environment to continue
iáîÉ=tÉää=Ñçê=iÉëë reflects the customer mood
Consistent delivery of our long term vision for growth
Q&A
Preliminary Results2011/12
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