Interim results 2012/13 1 David Tyler Chairman 2 John Rogers - PowerPoint PPT Presentation

Interim results 2012/13 1

David Tyler Chairman 2

John Rogers Chief Financial Officer 3

Group performance Highlights H1 H1 2012/13 2011/12 Change Underlying results £m £m % Sales (inc VAT) 13,365 12,848 4.0 Sales (inc VAT, ex fuel) 4.1 Operating profit 412 396 4.0 Net finance costs (59) (57) (3.5) Share of JV profits 20 15 33.3 Profit before tax 373 354 5.4 Tax rate % % bps 23.6 26.6 300 (1) Basic EPS p p 15.2 13.9 9.4 Interim dividend per share p p 4.8 4.5 6.7 Statutory results Items excluded from underlying results 32 41 (22.0) Profit before tax 405 395 2.5 (1) Underlying basic earnings per share 4

Retailing Continued sales outperformance LFL sales Sales from net Total (1) growth new space sales growth (1) Up 1.7% 2.4% 4.1%  LFL outperformance to market (2)  Contribution from extensions 0.8% 2012/13 FY Guidance  LFLs in H2 similar to those in H1  Contribution from net new store space (excluding extensions and replacements) just above 2% for the FY (1) Sales excluding fuel and including VAT (2) Net of disruptions 5

Retailing Good improvement in underlying profit H1 H1 2012/13 2011/12 Change £m £m % Sales (inc VAT, inc fuel) 13,365 12,848 4.0 (ex VAT, inc fuel) 12,160 11,693 4.0 Underlying EBITDAR 930 896 3.8 Underlying EBITDAR margin % bp 7.65 7.66 (1) at constant fuel prices bp 1 Underlying operating profit 412 396 4.0 Underlying operating margin % 3.39 3.39 - at constant fuel prices bp 1 6

Retailing Cost inflation of just under 3% offset by around £60m of savings  Operating cost savings of around £60m in H1 Annual operating cost savings (£m) 100 2008/09 2009/10 145 2010/11 100 105 2011/12 2012/13 100 0 50 100 2012/13 FY Guidance  Cost inflation towards the upper end of 2-3% range  Savings of around £100m 7

Joint Ventures Continued strong delivery H1 H1 2012/13 2011/12 £m £m Sainsbury’s Bank 12 7 Property joint ventures 8 8 Sainsbury’s Bank Property joint ventures  Lending and insurance new  Profits similar to last year business volumes are up c.30%  Bad debt levels have continued to reduce 2012/13 FY Guidance  Sainsbury’s Bank – to contribute a similar run rate of profit in H2 (FY 2011/12: £16m)  Property JVs – expect a similar level of profit (FY 2011/12: £16m) 8

Underlying finance costs Lower than guided H1 H1 2012/13 2011/12 Change £m £m % Net interest cost 59 57 (3.5) Net interest cover 7.3 x 7.2 x 1.4 Fixed charge cover 3.0 x 3.0 x -  Capitalised interest £20m (2011/12: £19m) 2012/13 FY Guidance  Underlying net finance costs expected to be around £0-5m higher than FY 2011/12 9

Items excluded from underlying results H1 H1 2012/13 2011/12 £m £m Profit on disposal of properties 48 39 Investment property c.5.0% yield (March 2012: c.5.0%) fair value movements (1) 3 Financing fair value movements (11) (10) Pensions accounting (1) 9 One-off items - (3) Total 41 32 10

Retailing Margins and returns  Overall returns in line with plans Underlying EBITDAR margin (half year) % (1) Underlying operating margin (half year) % (1) 7.55 3.13 2008/09 2008/09 7.72 3.28 2009/10 2009/10 7.74 3.36 2010/11 2010/11 7.66 3.39 2011/12 2011/12 7.65 3.39 2012/13 2012/13 0 5 0 2 Return on capital employed % (2) 9.0 2008/09 10.4 2009/10 11.2 2010/11 10.9 2011/12 10.9 (1) 2012/13 Not fuel adjusted (2) 12 month rolling earnings before interest and tax divided by average shareholder funds and net debt 0 5 10 11

Growing space Delivering space growth plans ‘000 sq ft Store development Stores As at March 2012 1,012 20,347 Openings: New/replacement supermarkets 5 178 c.36k sq ft average size Supermarket extensions 3 56 c.19k sq ft average size Refurbishments 14 12 New convenience stores 49 105 Gross new space 351 1.7% Closures: Replacement stores/closures (3) (30) 1 supermarket/2 convenience Net new space 321 1.6% As at October 2012 1,063 20,668 2012/13 FY Guidance  Expect to deliver around 5% gross space growth  Expect to open 1-2 convenience stores per week 12

Growing space and creating property value Maximising our property profits  Significant property portfolio, valued at £11.2bn - £141m added due to investment and development of assets (1) - £128m of cash proceeds from sale and leasebacks  Strong delivery of property profits through sale and leasebacks Property proceeds and profits (£m) Market value of properties (£bn) 219 2008/09 7.5 2008/09 57 131 2009/10 9.8 2009/10 27 275 2010/11 2010/11 10.5 108 303 2011/12 2011/12 11.2 83 131 (1) 2012/13 H1 2012/13 H1 11.2 48 Property proceeds (1) £128m from sale and leasebacks and £3m from other disposal proceeds Property profits 13

Capital expenditure Core capital expenditure reduced in line with guidance H1 H1 2012/13 2011/12 £m £m Core capital expenditure 682 576 Acquisition of freehold properties 3 42 Net disposal proceeds (1) (129) (131) Net capital expenditure 487 556 2012/13 FY Guidance  Full year core capital expenditure of around £1bn  Step up in refurbishments and IT capital spend, investing in the future (1) £128m from sale and leasebacks and £3m from other disposal proceeds 14

Growing space Investing in our supermarket estate  Continually investing in our property estate to maximise our customers’ in -store experience  Over 90% of our supermarket estate has received investment in the last 10 years Year supermarket last received investment 100 80 60 Number of stores 40 20 0 Prior to 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2001 Note: Investment includes new stores, conversions, extensions, refresh and refurbishments excluding convenience stores 15

Cash flow Improving cash flow from operations H1 H1 Change 2012/13 2011/12 % £m £m Operating cash flow 684 657 4.1 Change in working capital (47) (104) 54.8 Cash from operations 637 553 15.2 Interest (79) (73) (8.2) Tax (28) (24) (16.7) Dividend (218) (201) (8.5) Net cash used in investing activities (476) (498) 4.4 Other funding movements (35) (58) 39.7 Movement in net debt (199) (301) 33.9 Net debt (2,179) (2,115) (3.0) 16

Balance sheet Maintained strong position  Market value of property flat at £11.2bn (March 2012: £11.2bn)  Net debt £2,179m (October 2011: £2,115m) - secured, low-cost, long-dated debt - facilities of £3.4bn  Retail operating cash flow up 15.2% to £637m (October 2011: £553m)  IAS 19 net pension deficit £(697)m (March 2012: £(455)m) - 0.6% decrease in the discount rate - increase in asset value of £151m 2012/13 FY Guidance  Year-end net debt position expected to be around £2.2bn 17

Balance sheet Lease adjusted net debt/underlying EBITDAR Fixed charge cover (H1) (EBITDAR / interest + rent) (Rolling 12 month) 4.3 3.2 2008/09 2008/09 4.1 3.1 2009/10 2009/10 4.0 2010/11 2010/11 3.0 4.2 3.0 2011/12 2011/12 4.1 3.0 2012/13 2012/13 times times 0 2 4 0 2 Balance sheet gearing (H1) Core capex/sales (H1) (net debt / total equity) (Core capex / sales inc fuel ex VAT) 5.2 40.9 2008/09 2008/09 4.9 40.7 2009/10 2009/10 5.1 34.1 2010/11 2010/11 37.5 5.8 2011/12 2011/12 4.7 39.6 2012/13 2012/13 per cent per cent 0 20 40 0 2 4 18

Summary Trading and operations  Continued outperformance of the market with 31 quarters of LFL growth  Underlying operating margin maintained against tough industry backdrop  On target to deliver space growth of 5% Key financial measures  Continued focus on ROCE  Underlying profit before tax up 5.4% to £373m  Property profits of £48m Balance sheet  Key balance sheet metrics remain stable  Property value remains at £11.2bn 19

Justin King Chief Executive 20

First half 2012/13 Operating review  Delivering continued outperformance in a challenging market  Helping our customers to Live Well For Less  Cross-channel strategy delivering value for customers and shareholders  Consistent delivery of our long-term vision for growth 21

First half 2012/13 Trading performance  Market beating sales performance in a challenging market - total sales up 4.1%, like-for-like sales up 1.7% (1)  31 quarters of like-for-like sales growth  Underlying operating profit up 4.0% in line with sales growth Sainsbury’s sales growth is strong in a tough market Total sales growth (2) 6.5 5.5 4.5 3.5 2.5 1.5 0.5 -0.5 Q2 Q3 Q4 Q1 Q2 Sainsbury’s Morrisons Tesco Asda Total Grocery (2) (1) Sales including VAT and excluding fuel Kantar Total Till roll 12 w/e 22

Market backdrop Consumers remain under pressure Customer confidence remains depressed Inflation has outstripped wage growth % 6 -10 Forecast growth 5 4 -20 3 2 1 -30 0 -1 Source: CEBR -2 2001 2003 2005 2007 2009 2011 2013 2015 2017 2009 2010 2011 2012 (1) Wage Growth: Average gross earnings (inc bonus) (1) GfK Consumer Confidence Wage growth Consumer price inflation Household disposable income 23