Preliminary Results
2019/20
Kevin O'Byrne
Chief Financial Officer
Agenda
01 | 02 | 03 | ||||
Financial highlights | 19/20 performance | COVID-19 update |
3Preliminary Results 2019/20 - April 2020
Group performance overview
£m | 2019/20 | 2018/19 | Change | |
Underlying results1 | ||||
Group sales (inc VAT) | 32,394 | 32,412 | 0% | |
Retail operating profit | 938 | 981 | 4% | |
Financial Services operating profit | 48 | 31 | 55% | |
Underlying profit before tax | 586 | 601 | 2% | |
Underlying basic EPS | 19.8p | 20.7p | 4% | |
Retail free cash flow | 611 | 456 | 34% | |
Net debt2 | (6,947) | (7,346) | 5% | |
Non-lease net debt2 | (1,179) | (1,522) | 23% | |
Statutory results | ||||
Items excluded from underlying results | (331) | (399) | 17% | |
Profit for the financial period before tax | 255 | 202 | 26% | |
Basic EPS | 5.8p | 7.6p | 24% | 1Full breakdown of definitions available in the |
Alternative Performance Measures | ||||
2Including perpetual securities | ||||
4Preliminary Results 2019/20 - April 2020
Retail sales
(0.6)%(0.4)%
LFL sales growth1 | Total sales growth1 | ||
0.2% | Categories | Channels | |
Sales from | 0.4% | (0.1)% | |
net new space | 1 | ||
Grocery | Supermarkets2 | ||
(2.9)% | 1.3% | ||
General | Convenience | ||
Merchandise | 7.6% | ||
1.2% | |||
Groceries | |||
Clothing | Online |
- Sales including VAT, excluding fuel
- Supermarket sales include Argos stores in Sainsbury's sales
- Guidance on openings and closures is subject to potential disruption fromCOVID-19
2020/21 FY Guidance3
- Expect to open around 2 new Sainsbury's supermarkets and around 15 convenience stores
-
Expect to close around
8 supermarkets and around
14 convenience stores, as part of announced property closure programme - Expect to open35-40 Argos in Sainsbury's and close around 50 Argos standalone stores
5Preliminary Results 2019/20 - April 2020
Sales Momentum
Grocery:Total sales growth
2.0%
Q1 | 0.6% | 0.4% | ||
-0.5% | Q2 | Q3 | Q4 | |
General Merchandise: Total sales growth
Q1 Q2 Q3 Q4
0%
Total GM | Argos | |
-5% | (inc. Habitat) | |
JS GM
-10%
Clothing:Total sales growth
3.3% | 4.4% | |
2.5% | ||
Q1 | ||
Q2 | Q3 | Q4 |
-4.5%
6Preliminary Results 2019/20 - April 2020
Sales performance versus market
Grocery:Volume growth1 | Argos:Value growth v BRC2 |
4% | Q4 | ||||
Argos YoY | |||||
19/20 | |||||
Q2 | 0% | ||||
0% | 19/20 | BRC YoY | |||
Total | Q3 | (excluding Argos) | |||
grocers | 19/20 | FY 2019/20 | |||
Q1 | Tesco | Asda | Clothing:Value Growth (%YOY)3 | ||
19/20 | |||||
Sainsbury's | Sainsbury's | ||||
-5% | Morrisons | ||||
0% | Total market | ||||
1Kantar unit growth YoY. Q1: 11 Mar - 30 Jun 2019, Q2: 1 Jul - 22 Sep, Q3: 23 Sep - 5 Jan, Q4: 6 Jan - 8 Mar 2020
2 | Argos vs BRC non-foodnon-clothing market, 52 weeks to 7 March 2020 | |||||
3 | Kantar world panel 52 weeks to 8 March 2020 | 8 Mar 19 | 9 Mar 20 | |||
7 | Preliminary Results 2019/20 - April 2020 |
Underlying profit before tax
UPBT Waterfall (£m) | H1/ H2 UPBT | ||||||||||||||||||||||||
+8% | |||||||||||||||||||||||||
348 | |||||||||||||||||||||||||
601 | |||||||||||||||||||||||||
19 | (8) | ||||||||||||||||||||||||
322 | |||||||||||||||||||||||||
(43) | JVs | 586 | |||||||||||||||||||||||
-15% | |||||||||||||||||||||||||
17 | Interest | 279 | |||||||||||||||||||||||
RetailFinancial | 238 | ||||||||||||||||||||||||
Services | |||||||||||||||||||||||||
18/19 | 19/20 | 18/19 | 19/20 | ||||||||||||||||||||||
18/19 UBPT | 19/20 UBPT | H1 | H2 |
8Preliminary Results 2019/20 - April 2020
Items excluded from underlying results
£m | 2019/20 | 2018/19 |
Retail restructuring programme | (32) | (81) |
Financial Services transition and other | (29) | (70) |
Argos integration costs | - | (40) |
Asda transaction costs | - | (46) |
Defined benefit pension expenses | 19 | (118) |
Other | 7 | (44) |
Total ex. Property strategy | (35) | (399) |
Property strategy programme | (296) | - |
Total | (331) | (399) |
Property Strategy Programme
Impairment
126charges
Store closure | 126 |
write-downs |
8 | 36 | |
Other closure | ||
Other closure | ||
costs - non-cash | ||
costs - cash | ||
9Preliminary Results 2019/20 - April 2020
Financial services
Financial Services UPBT (£m) | Customer Assets (£bn) | Deposits | ||||||
+10% | +6% | +5% | ||||||
68 | 75 | 7.0 | 7.4 | |||||
34 | 2.6 | £6.3bn | ||||||
24 | Bank | 2.9 | Personal | |||||
£6.0bn | ||||||||
loans | ||||||||
7 | 14 | AFS | 1.7 | 2.0 | Credit cards | |||
37 | ||||||||
(recognised in | ||||||||
27 | Financial Services) | 1.4 | 1.9 | Mortgages | ||||
AFS | ||||||||
(recognised in | 0.8 | 0.9 | Store cards | |||||
Retail) | ||||||||
2018/19 | 2019/20 | Feb 19 | Feb 20 | 2018/19 | 2019/20 | |||
10 | Preliminary Results 2019/20 - April 2020 |
Financial Services Costs
Costs1(£m)
+5%
286 | 300 | ||
Depreciation | |||
Colleague | |||
costs |
Other expenses
2018/19 2019/20
Headcount | |
-12% | |
2,535 | |
2,226 | |
Feb 19 | Feb 20 |
No. of registered customers to AFS mobile App
+39% | |
1.7m | |
1.2m | |
2018/19 | 2019/20 |
1Group contribution basis
11Preliminary Results 2019/20 - April 2020
Retail capital expenditure
Retail capital expenditure
£599m£544m2019/202018/19
2020/21 FY Guidance
- Retail capital expenditure is expected to be around£550m-£600m per annum over the medium term
- Update on 2020/21 to be given at Interim Results in November
Maintenance
Growth
Efficiency
Argos integration
Core retail capital expenditure (£bn)
0.9
1.8
2.6 | 1.6 |
Supply chain and IT | |
0.7Extensions and refurbishments
0.5New store development
5 years | 5 years |
to 14/15 | to 19/20 |
12Preliminary Results 2019/20 - April 2020
Net debt and retail free cash flow
£m - Restated for IFRS 16 | 2019/20 | 2018/19 | ||
Net cash from operating activities | 1,453 | 1,437 | ||
Capital expenditure1 | (599) | (508) | ||
Disposal proceeds2 | 224 | 78 | ||
Bank capital injections | (35) | (110) | ||
Lease repayments3 | (432) | (441) | ||
Retail free cash flow | 611 | 456 | ||
Dividends paid on ordinary shares | (247) | (224) | ||
Other | 35 | (3) | ||
Movement in net debt | 399 | 229 | ||
Opening net debt4 | (7,346) | (7,575) | ||
Closing net debt4 | (6,947) | (7,346) | ||
Of which: | ||||
Lease liabilities | (5,768) | (5,824) | ||
Net debt excluding lease liabilities5 | (1,179) | (1,522) | (343) |
2020/21 FY Guidance
- No capital injections into the Bank are expected
- Expect underlying retail depreciation and amortisation of around £1.2bn, including c.£500m right of use asset depreciation
- Net finance costs of between£370m-£380m, including c.£310m lease interest in 2020/21, following the introduction of IFRS 16
- Excludes Argos integration capital expenditure in 18/19
- Includes dividends received from JVs, net of JV capital injections
- Includes initial direct costs onright-of-use assets
- Net debt definition excludes derivatives not linked to borrowings, and includes perpetual securities as debt
- FY18/19 Net Debt exc. Leases of £1,522m compares to the previously reported Net Debt of £1,636m less £(122)m of finance leases, plus £8m other (predominantly derivatives no longer reported within net debt)
13Preliminary Results 2019/20 - April 2020
Balance sheet targets
- Non-leasenet debt reduction of at least £750m over the three years from 18/19 to 21/22
- Medium leverage reduction targets
- Net debt/EBITDAR2less than 3x
Net debt exc. Lease liabilities1(£m)
2,125
(603)
1,5223(343)
1,1793(750)+
Target
£m | FY | FY |
2019/20 | 2018/19 | |
Net debt | (6,947) | (7,346) |
Of which lease liabilities | (5,768) | (5,824) |
Net debt exc. leases1 | (1,179) | (1,522)3 |
FY | FY | FY | FY | ||
15/16 | 18/19 | 19/20 | 21/22 |
- Net debt definition now excludes derivatives not linked to borrowings, and includes perpetual securities as debt
- Net debt (inc. perpetual securities) on apost-IFRS 16 basis divided by Group underlying EBITDAR. We previously disclosed adjusted Net debt/ EBITDAR, but net debt on a post-IFRS 16 basis now includes lease liabilities
- FY18/19 Net Debt exc. Leases of £1,522m compares to the previously reported Net Debt of £1,636m less £(122)m of finance leases, plus £8m other (predominantly derivatives no longer reported within net debt)
14Preliminary Results 2019/20 - April 2020
Summary
- Strong customer response to changes in our Grocery business
- General Merchandise remained tough
- Good progress on Financial Services
- H2 profit growth
- Strong free cash flow, net debt reduction in line with guidance
15Preliminary Results 2019/20 - April 2020
Mike Coupe
Chief Executive Officer
Performance
Our purpose - To help our customers live well for less
Our priorities
Be competitive | Distinctive | Personalised | Fast, friendly | Drive | Be a place | Net Zero | ||||||
on price | products and | and seamless | and convenient | efficiency | where we all | by 2040 | ||||||
categories | physical and | to reinvest | love to work | |||||||||
digital | ||||||||||||
18Preliminary Results 2019/20 - April 2020
Improved grocery value
Commodity Value Index1 | Base Price Index1 | ||||||||
-60bps | |||||||||
-390bps | |||||||||
-30bps | Cheapest Supermarket for | ||||||||
Branded Groceries | |||||||||
18/19 | 19/20 | 14/15 | 18/19 | 19/20 | in 2019 | ||||
Which? Awards 2019 |
1
Be
competitive
on price
1Sainsbury's value index, based on Edge by Ascential SKU matching data, to March 2020
19Preliminary Results 2019/20 - April 2020
Major growth initiatives delivered in FY19/20
12,500 | More than 1,000 major store projects | |||||
investments | ||||||
£164m | Invested in | Invested in | Invested in | |||
Invested in 19/20 | 451 | 362 | 398 | |||
supermarkets | convenience | Argos stores |
4
Fast, friendly
and
convenient
Beauty 124 | Food to go 210 | Digital 256 |
Rapid Exit & SmartShop 118 | Ambient 250 | Argos in Sainsbury's 25 |
Tu features 110 | ||
Food Partners & Concessions 93 | ||
Wellness 42 | ||
GM rebalance 40 |
20Preliminary Results 2019/20 - April 2020
Improving customer satisfaction ranking
All supermarket measures improved year on year
CSAT scores %1
19/20 + 20/21 to date
18/19
Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Jan | Feb | Mar | Apr | |||||||||||||||||
2019 | 2020 | |||||||||||||||||||||||||||||
1Lettuce Know in-store programme, combined Food Business
4
Fast, friendly
and
convenient
21Preliminary Results 2019/20 - April 2020
Channels:Convenience
On the Go | Neighbourhood hub |
4
Fast, friendly
and
convenient
Mansion House | Woodhall Spa |
22Preliminary Results 2019/20 - April 2020
Channels:Groceries Online
4
Fast, friendly
and
convenient
Items picked per hour improvement | Sales (£bn)and YOY growth rates |
1.8
+14% | +7.6% | ||
1.6 | |||
+6.9% | |||
+13% | 1.4 | +6.8% | |
+8.2% | |||
+10% | 1.2 | ||
1.0
0.8
FY17/18 | FY18/19 | FY19/20 | 15/16 | 16/17 | 17/18 | 18/19 | 19/20 |
23Preliminary Results 2019/20 - April 2020
Financial Services Priorities
3
Personalised and seamless physical and digital
Reshape
the balance sheet
- Stop mortgage origination
- Develop AFS proposition
- Improve margins
- Improve card and insurance momentum
Simplify
the organisation
- Right size the cost base
- Rationalise product offering
- Review vendor/supplier arrangements
- Optimisecross-business synergies
Strengthen
the business
- Focus on:
- Operational resilience
- Conduct
- Capital efficiency
- Build core competency in:
- Customer experience
- Digital
- Data and analytics
- Credit/ operational risk
- Partnerships
24Preliminary Results 2019/20 - April 2020
Nectar
Digital Nectar | Coalition strengthened | Nectar 360 | ||
4.5m+
digital collectors
Oct Nov Dec Jan Feb Mar
20192020
3
Personalised and seamless physical and digital
25Preliminary Results 2019/20 - April 2020
Digital
Digital Sales | SmartShop | Single Search |
3
Personalised and seamless physical and digital
£6.3bn | •Rolled out to all | |||
supermarkets | ||||
•Sales participation in | Seamless | Universal | ||
handset stores: 18% | financial | discovery | ||
services | ||||
£1.1bn | Single | |||
basket | ||||
14/15 | 19/20 |
26Preliminary Results 2019/20 - April 2020
Strategic cost transformation: 5 year plan
All programmes largely in execution
Converge | Tackle | End to end | |||||||||
fixed cost | reviews | ||||||||||
Technology, Digital and Corporate | Services | ||||||||||
Retail Operations, Marketing and Commercial Operations | |||||||||||
£250-£350m | |||||||||||
Other central support | |||||||||||
Logistics and Supply Chain | |||||||||||
Shared Services/ Business Process Optimisation | |||||||||||
Capital prioritisation | Project A | ||||||||||
GNFR procurement | Project B | £150-£250m | |||||||||
Property strategy | Project C | ||||||||||
Project D | |||||||||||
£400-£600m | |||||||||||
Well progressed | Execution underway | In planning | |||||||||
5
Drive
efficiency to
reinvest
27Preliminary Results 2019/20 - April 2020
Seven key areas of focus
We will invest £1bn over the next 20 years
7
Net Zero by
2040
Reduce | Minimise | Healthy | Reduce | Reduce | Increase | Net positive | ||||||
carbon | use of | sustainable | use of | food | recycling | for | ||||||
emissions | water | diets | plastic | waste | biodiversity | |||||||
packaging | ||||||||||||
We will use science based targets and report progress
against these every six months
28Preliminary Results 2019/20 - April 2020
COVID-19
COVID-19:Sainsbury's Timeline
Feeding the nation | Keeping our customers and colleagues safe | Supporting our communities | |||||||||||||||||||||||
12 weeks full pay | Contacted | ||||||||||||||||||||||||
for extremely | Strict social | 450,000 vulnerable | |||||||||||||||||||||||
14 days full pay for | vulnerable | Closed | distancing measures | customers | c.50% increase | ||||||||||||||||||||
self-isolating | colleagues / | standalone | for stores, including | and prioritised | |||||||||||||||||||||
colleagues | shielding | Argos stores | safety screens | for online | in online slots | ||||||||||||||||||||
March 15 | 17 | 19 | 20 | 22 | 23 | 23 | 24 | 25 | April 3 | 8 | 10 | 27 | |||||||||||||
Product | Closed | Priority shopping | Thank you | Immediate | Donated £3m Donated over £4m | ||||||||||||||||||||
purchasing | cafes; meat, | for elderly, | payment | payment terms | to Fareshare | to Comic Relief's | |||||||||||||||||||
limits | fish and pizza | vulnerable, | for store, DC | for at least 1,500 | 'Big Night In' | ||||||||||||||||||||
counters | NHS & social | and Careline | small suppliers | 800,000 vulnerable | |||||||||||||||||||||
care workers | colleagues on | ||||||||||||||||||||||||
customers contacted |
hours worked | and prioritised for |
online |
30Preliminary Results 2019/20 - April 2020
Initial Impact: Sales Shape
Grocery
40%
20%
0%
(20)%
51 | 52 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Week |
Clothing
20%
0%
(20)%
(40)%
(60)%
(80)%
51 | 52 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Week |
Sales figures have been seasonally adjusted
Total General Merchandise
40%
20%
0%
(20)%
51 | 52 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Week |
Fuel
20%
0%
(20)%
(40)%
(60)%
(80)%
51 | 52 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Week |
31Preliminary Results 2019/20 - April 2020
Initial Impact: Groceries Online
Groceries Online Sales
Click & Collect
Home Delivery
51 | 52 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
Week |
32Preliminary Results 2019/20 - April 2020
Initial Impact: SmartShop
Sales Participation1
35% | |||||||||
30% | |||||||||
25% | |||||||||
20% | |||||||||
15% | 51 | 52 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
Week
1Average sales participation of handset stores
33Preliminary Results 2019/20 - April 2020
Initial Impact: Argos
Average weekly sales by fulfilment channel (£m)
100
80 | |||||
Walk | |||||
+86% | Home Delivery | ||||
60 | -in | ||||
40 | |||||
+32% | Click & Collect | ||||
20 | |||||
0 | |||||
Q4 19/20 | Since Argos store | ||||
closures
34Preliminary Results 2019/20 - April 2020
Sales Outlook
Base case
Key assumptions - sales
- Q1:Lockdown
- Q2:Continued disruption
- H2:Normalisation but a weaker economy
Net FY impact
- Grocery positive
- General merchandise, clothing and fuel volumes negative
Sales Growth Assumptions (%)
General | Clothing | Fuel | |||
Merchandise | |||||
H1 | H2 | H1 | H2 | H1 | H2 |
H1 H2
Grocery
35Preliminary Results 2019/20 - April 2020
Profit Outlook
Base case
Higher Retail Costs
- Materially higher operating expenses
- Stock clearance - clothing and seasonal
- Reduced tenant and concession income
Sales weakness | Financial Services | |
•General Merchandise | •Travel Money | |
•Clothing | •ATMs | |
•Fuel | •Reduced consumer spend | |
•Impairments | ||
•Colleague absence | ||
•Costs | ||
£500m+
profit impact
36Preliminary Results 2019/20 - April 2020
Profit Outlook
Base case
Year on Year Profit Impact | |||
£500m+ | £500m+ | ||
• | Material COVID-19 related costs | •Grocery sales | |
• | GM, clothing and fuel sales | ||
•£450m business | |||
• | Stock write-downs | ||
rates relief | |||
• | Financial services | ||
Net impact
unchanged
37Preliminary Results 2019/20 - April 2020
Liquidity
Significant financing headroom
Financial resilience stress testing
Significant headroom - cash and committed funding:
- £1.45bn RCF undrawn at March year end
- £500m now drawn down for prudence
- Capex H2 weighted
Financial Services balance sheet is strong
- Regulatory capital surplus, significant excess liquidity
- Confident that business will not require capital from Group
38Preliminary Results 2019/20 - April 2020
Dividend
Dividend decision deferred
Prudent approach
- Wide range of potential outcomes
- Visibility on full impact ofCOVID-19 will be greater later in the year
39Preliminary Results 2019/20 - April 2020
Summary
Results
- Good momentum in our Grocery business
- Coming together as one multi brand, multi channel business
- Strong cash generation
COVID-19 Response
- Great response across the business toCOVID-19; supporting customers, colleagues, communities and suppliers
- Strength and flexibility of the multi brand multi channel platform
- Balance sheet strength helping support suppliers, tenants and concessions
Outlook
- Significant incremental costs associated withCOVID-19 response
- Business rates relief and uplifts in grocery sales likely to broadly offset incremental costs and weaker general merchandise, clothing and financial services contributions
- Balance sheet strong, liquidity good, prudent deferral of dividend decision
40Preliminary Results 2019/20 - April 2020
Q&A
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Disclaimer
J. Sainsbury plc published this content on 30 April 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 April 2020 08:17:09 UTC