J Sainsbury PLC
Annual Report 1995

Plain-text annual report

Annual Review 1995 and Summary Financial Statement Group Profile Company Objectives J Sainsbury plc is one of the world’s leading retailers, operating four separate retail chains in the UK and US which together serve more than 11 million customers a week. The UK supermarket business is the largest part of the Sainsbury Group, accounting for 87% of Group operating profit before profit sharing and 80% of Group sales. The other UK retailing arms are Savacentre, the country’s only specialist hypermarket company, and the Homebase chain of house and garden centres. Over the next two years, Homebase will be integrating Texas Homecare into its trading operations. In the US, Shaw’s Supermarkets, Inc. operates a chain of supermarkets in New England. In November 1994, Sainsbury’s acquired a 16.7% holding in Giant Food Inc., a supermarket group which is the market leader in the Washington and Baltimore areas. Founded in London in 1869, Sainsbury’s was privately owned until its public flotation in 1973. The Sainsbury family and its charitable trusts remain major shareholders, and the present Chairman, David Sainsbury, is a great-grandson of the founders. To discharge the responsibility as leaders in our trade by acting with complete integrity, by carrying out our work to the highest standards, and by contributing to the public good and to the quality of life in the community. To provide unrivalled value to our customers in the quality of the goods we sell, in the competitiveness of our prices and in the range of choice we offer. To achieve the highest standards of cleanliness and hygiene, efficiency of operation, convenience and customer service in our stores, and thereby create as attractive and friendly a shopping environment as possible. To offer our staff outstanding opportunities in terms of personal career development and in remuneration relative to other companies in the same market, practising always a concern for the welfare of every individual. To generate sufficient profit to finance continual improvement and growth of the business whilst providing our shareholders with an excellent return on their investment. Contents Financial Highlights Chairman’s Statement Board of Directors J Sainsbury Supermarkets Savacentre Hypermarkets 1 2-5 6-7 8-13 14-15 Homebase House and Garden Centres Shaw’s Supermarkets, Inc. Giant Food Inc. US Maps and New Store Openings Growing the Business 16-17 18-19 20 21 22-23 Financial Highlights GROUP SALES £ b i l l i o n 1 2 . 1 1 1 . 2 1 0 . 3 9 . 2 8 . 2 £ million 1995 1994 52 weeks to 52 weeks to % 11th March 12th March Change UK Sales . . . . . . . . . . . . . 10,719.5 US Sales* . . . . . . . . . . . . . 1,345.9 9,909.3 1,314.5 GROUP SALES (including taxes) 12,065.4 11,223.8 UK Operating Profit . . . . . . . . US Operating Profit* . . . . . . . . 858.6 40.3 764.8 31.0 8.2 2.4 7.5 12.3 30.0 13.0 1 9 9 1 1 9 9 2 1 9 9 5 Group sales increased by 7.5% 1 9 9 3 1 9 9 4 to £12.1 billion. GROUP PROFIT £ m i l l i o n 8 0 9 . 2 7 3 2 . 8 7 3 8 . 3 6 2 8 . 0 5 1 8 . 2 GROUP OPERATING PROFIT before profit sharing and exceptional costs . . . . . . . . . Profit Sharing . . . . . . . . . . Associates . . . . . . . . . . . . Net Interest Payable . . . . . . . 898.9 (60.6) 6.0 (36.1) 795.8 (56.3) 0.5 (8.7) GROUP PROFIT before tax, exceptional costs and profit on sale of properties . . Profit on sale of properties . . . . . 808.2 1.0 731.3 7.0 10.5 Exceptional costs . . . . . . . . . — (369.5) 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 Group profit before exceptional costs and tax increased by 9.6% to £809.2 million. DIVIDEND PER SHARE Tax . . . . . . . . . . . . . . GROUP PROFIT BEFORE TAX . . . 809.2 (269.9) 368.8 (227.3) P e n c e 1 1 . 7 1 0 . 6 1 0 . 0 8 . 7 5 7 . 2 7 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 Dividend per share increased by 10.4% to 11.7 pence. GROUP PROFIT AFTER TAX . . . 539.3 141.5 EARNINGS PER SHARE . . . . . . 29.8p 8.0p FULLY DILUTED EARNINGS PER SHARE before exceptional costs and profit on sale of properties . . . DIVIDEND PER SHARE . . . . . . 29.0p 11.7p 27.0p 10.6p 7.4 10.4 *In dollar terms, US sales rose by 5.3% to $ $$2.1 billion and US operating profit rose 34.0% to $$62.3 million Training for Teamwork Concern for the Environment Community Involvement Group Ten Year Record Group Financial Review Summary Financial Statement Auditors’ Statement Investor Information Registered Office and Advisers 24-25 26-27 28-29 30-31 32-33 34-36 37 38-40 41 $ $ ¢ Chairman’s Statement The Year’s Performance The past year marked the 125th anniversary of Sainsbury’s, and I am pleased to report that the Group has again achieved a very satisfactory performance in line with our consistent record. Group sales increased by 7.5% to exceed £12 billion for the first time. Group operating profit increased by 13% to reach almost £900 million, and Group[ profit before tax, exceptional costs and property items grew by 10.5% to £808 million. We have followed our policy of raising dividend per share in line with improvements in our profitability by increasing it by 10.4% to 11.7p. The Group’s performance has been particularly encouraging in view of the conditions of low inflation and intense competition present in all the markets in which we are represented. It is a testimony to our success throughout the Group in meeting the needs of our customers and achieving higher levels of efficiency. The Sainsbury’s supermarket business increased operating profit by 12.5% to £784 million on sales up 8.3% to £9.6 billion. The performance of Savacentre, Homebase and Shaw’s has been outstanding. In total they increased their operating profit by 21.7% to £112 million. New Opportunities in UK Food Retailing The expectations of our customers for quality, value for money, product range, store facilities and customer service are rising all the time. During the past year we have taken many initiatives to meet and exceed these expectations and the coming year will see many more being implemented. Across our total range, our prices were typically more than 3% below the average of other large supermarket chains. This, together with the range and quality of our products, enabled our supermarkets to achieve sales of £18.5 per sq. ft. of sales area on average each week, a figure substantially higher than that of any other major supermarket chain in the UK. A large Sainsbury supermarket now typically stocks a range of over 19,000 products, an increase of 20% in the last three years. A key factor in our attractiveness to customers is the value provided by Sainsbury’s own brand products, and during the year we introduced over 1,200 new own brand lines. These included First Menu baby foods and Performers nappies, which follow Novon detergents, Gio soft drinks and Classic Cola as outstandingly successful introductions of the Sainsbury brand into markets dominated by manufacturers’ brands. The Sainsbury brand is one of the few retail brands that has the necessary stature to enter such markets. In the last year we have also taken major initiatives to improve the service we give our customers. We have undertaken substantial market research to establish their views and put in place programmes to make our stores easier and more enjoyable places in which to shop. We have invested an additional £10 million per annum to improve the level of staffing at our checkouts, and we have a major programme to install key customer facilities such as meat counters, coffee shops and petrol stations in our existing stores. We are constantly updating older stores. Last year three stores were extended and 52 were remodelled. During the course of last year we completed the major review of our operations that we started in July of the previous year. This review produced savings of £26 million during the year, and will produce additional savings of a similar size in the current year. This reduction in our cost structure enabled us to improve the service to our customers while maintaining our low prices and our rate of profit growth. New sales-based ordering and stock management systems introduced during the last year have also allowed our stores to improve the availability of fresh products, and to increase the number of ranges and lines on offer to our customers. Twenty new Sainsbury supermarkets were opened in the past year and these contributed to a net increase of approximately 500,000 sq. ft. or 5.8% of total sales area. In the year ahead, due to the Government’s new planning policy, we 2 The Chairman, David Sainsbury, joined in the Company’s 125th birthday celebrations with (l to r) Abdul Goni, Sharon Philipcien and Deidra Verrion at our new Whitechapel store. Chairman’s Statement continued will be able to open only 12 new supermarkets, but the total addition to sales area will be similar to the past year due to a decrease in closures, and a large increase in store extensions which will result in 120,000 sq. ft. of new sales area and in many new facilities in existing stores. In the year ahead, 19 stores will be extended and over 80 stores will be remodelled. The Government’s Planning Policy The reduction in the number of our new supermarket openings in the coming year reflects a shift in Government planning policy concerning new retail development. Although this policy emphasises the importance of competition and innovation in retailing, and the need to respond to customer requirements, there is now a bias against developing food retail stores away from town centres. I do not believe that this policy recognises the benefits of new retail development in out-of-centre locations. Such developments permit lower journey times for shoppers, surface level parking, and the provision of a size of store that can accommodate the wide range of products and services our customers now demand. Also, this policy will not encourage investment in town centres, as shoppers will drive to another town if they cannot get the facilities they want in the nearest one. There should not be a single, prescriptive policy for the location of all new retail development. There will be opportunities in some town centres to build stores which provide the level of access, the quality of car parking and the services which our customers now expect. There will be other places where suitable sites in town centres do not exist, or where there are insurmountable difficulties in accommodating new stores on available sites. In these cases new developments should be allowed to take place on sites outside town centres where the benefits of modern food retailing can be fully realised. Diversification Savacentre, Homebase and Shaw’s have over the last three years increased sales by 31.2% to £2.4 billion and operating profit by 74.2% to £112 million. We have built up these businesses using our core skills in buying, own brand development, systems, logistics and store operations. In total these businesses are becoming a substantial part of the Group, and their existence means that the Group is able to pursue profitable investment opportunities over a wide range of activities rather than being restricted to the UK food retail market for future expansion. In the coming year they will continue to expand rapidly and will open over 1 million sq. ft. of new sales area. In November, we completed the purchase of 16.7% of the equity in Giant Food Inc. at a total cost of approximately £214 million. This purchase included 50% of the company’s voting shares and the right to elect three of the seven members of the board of directors. In the year to 25th February 1995, Giant achieved sales of $3.7 billion and profit before tax of $155 million. We have long admired Giant, which we believe to be one of the finest supermarket operators in the US. They are supportive of our involvement and we look forward to a very productive relationship in the future. Giant is the market leader in the Washington and Baltimore areas, and taking into account our ownership of Shaw’s in New England, we will now be represented in seven of the ten wealthiest states in the US. Giant also has a substantial expansion programme, and plans to open 11 stores in Philadelphia and in its current trading area over the next 18 months. Shortly after the year end Homebase completed the acquisition of Texas Homecare from Ladbroke Group PLC at a provisional cost of £290 million. Texas is the second largest DIY retailer in the UK and achieved sales of £658 million in 1994 from over 240 stores. There is very little overlap between the two store chains and it is intended that the Texas stores will be converted to the highly successful Homebase format over a period of two years. After expected store closures, the combined 4 business will have sales of over £900 million and a market share of approximately 10%. Profitability of the combined business will benefit from substantial economies of scale in buying, own brand development, advertising and head office support. The Group has a clear plan for profitable expansion in the future. During the coming year, as well as integrating the Texas Homecare chain, we will be opening 1.5 million sq. ft. of new selling space across the whole Group. Thanks to Suppliers Across the Group we have over 6,500 suppliers. In our UK supermarket business we trade with over 2,000 suppliers world wide. Many are large multi-nationals but others are small, often family-run businesses. A number have supplied us since the turn of the century whilst some commenced their association with us recently. We aim to work closely with all our suppliers so that together we achieve the highest standards of quality, exceptional value for money, rapid and imaginative innovation, cost efficiency throughout the supply chain, and good environmental practices. In the last year we have extended our international buying activities and in particular have identified a number of suppliers who are able to supply us in both the UK and the US, to our mutual benefit. I would like to take this opportunity to express my appreciation to all our suppliers for their whole-hearted support throughout this past year, and we look forward to working closely with them in the future. Board Changes Lady Eccles will be retiring at the Annual General Meeting. During the nine years she has been on the Board she has made a major contribution to the Company, and we will miss her incisive comments and deep knowledge of consumer issues. Mr Angus Clark retired from the Board in April after 30 years’ service with the Company. He leaves with our deepest appreciation and gratitude for his exceptional contribution to the Company’s development in distribution, personnel and information systems over a period of great change and growth. Tribute to Staff In a year of very considerable challenge and change, both in the marketplace and in the Company, our staff have once again demonstrated their commitment and their skill. Management and staff have shown great dedication and professionalism in tackling the new ways of working together, resulting from the review of our operations over the last 18 months and the reorganisation of many of our activities. Throughout the Group, they have enthusiastically taken up new initiatives in the area of quality management, and have brought forward a wealth of ideas and practical proposals for enhancing the efficiency of our operations, for serving our customers better, and for improving our ranges and products. In our stores, performance improvement teams involving all levels of staff are becoming a way of life, as well as making a real difference to the shopping experience of our customers. Like any service company, we depend entirely on the quality and skills of our people, and this year they have demonstrated once again that they are the best in our industry. David Sainsbury Joint Presidents Lord Sainsbury of Drury Lane Sir Robert Sainsbury Lord Sainsbury of Preston Candover KG Board of Directors (Pictured top left) D J Sainsbury* (centre) Chairman and Chief Executive Chairman, Shaw’s Supermarkets, Inc. Age 54 Appointed to Board in 1966 R T Vyner (left) Deputy Chairman and Joint Managing Director Age 58 Appointed to Board in 1978 D A Quarmby (right) Joint Managing Director Responsible for non-trading functions Chairman, Savacentre Limited Age 53 Appointed to Board in 1984 (Pictured bottom left, reading left to right) I D> Coull Responsible for property development and environmental issues Deputy Chairman, Homebase Limited Age 44 Appointed to Board in 1988 J E Adshead Responsible for personnel, information systems, logistics and distribution Age 49 Appointed to Board in 1989 D B Adriano Chairman and Managing Director, Homebase Limited Deputy Chairman, Shaw’s Supermarkets, Inc. Age 52 Appointed to Board in 1990 R P Thorne Finance Director Age 43 Appointed to Board in 1992 (Pictured top right, reading left to right) R Cooper Responsible for meat, fresh fish, off-licence, delicatessen, dairy and frozen foods buying, and procurement Age 46 Appointed to Board in 1988 C I Harvey Responsible for retail operations Age 53 Appointed to Board in 1989 R P Whitbread Responsible for grocery and non-foods buying Age 44 Appointed to Board in 1990 D J Clapham Responsible for produce and bakery buying, scientific services, and specialist businesses Age 48 Appointed to Board in 1992 I J Hunt Marketing Director Age 54 Appointed to Board in 1994 (Pictured bottom right, reading left to right) Lady Eccles of Moulton*† Non-Executive Director Chairman of Ealing Health Authority, Vice Chairman of Durham University Council and inter alia a Non-Executive Director of the National Provincial Building Society and Yorkshire Electricity Group plc. Age 61 Appointed to Board in 1986 Sir Terence Heiser GCB*† Non-Executive Director Permanent Secretary, Department of the Environment 1985-1992, also a Non-Executive Director of Abbey National plc, Smith New Court PLC and Wessex Water Plc Age 62 Appointed to Board in 1992 Dr J M> Ashworth*† Non-Executive Director Director of the London School of Economics and inter alia a Non-Executive Director of Granada Group PLC. Age 56 Appointed to Board in 1993 6 Departmental Directors listed under the Board Directors to whom they report David Quarmby Richard Chadwick - Business Development Savacentre Mike Broomfield - Managing Director Ken Barden - Operations Director Alan Webb - Food and Marketing Director Ian Coull Robin Anderson - Property Services Bob Cooper Allan Cheesman - Off Licence Angela Megson - Cheese, Dairy, Frozen Food and Delicatessen Stuart Mitchell - Meat and Fish Martin Webb - Procurement John Adshead Nigel Broome - Retail Personnel Judith Evans - Corporate Personnel Chris Montagnon - Information Systems Bob Parle - Distribution Operations John Rowe - Corporate Logistics Colin Harvey Colin Etheridge - Regional Director, South East Hamish Elvidge - Branch Services Trefor Hales - Branch Operations Peter Ibbotson - Store Format Graham Naylor - Regional Director, North John Phillipson - Regional Director, East Dave L Smith - Regional Director, South West David W Smith - Regional Director, Midlands Terry Wigley - Regional Director, Central and Western Dino Adriano Homebase Ross McLaren - Deputy Managing Director Steve Bradbury - Finance Director Mike Powell - Information Systems and Logistics Director Bill Williams - Retail Director Shaw’s Supermarkets, Inc. Phil Francis - President and Chief Executive Officer Verne Powell - Executive Vice President, Corporate Development and External Affairs John Maxwell - Senior Vice President, Operations Andrew Mitcham - Senior Vice President, Marketing and Sales Scott Ramsay - Senior Vice President, Administration Robin Whitbread Michael Morgan - Grocery and International Buying John Ramsden - Non-Foods Rosemary Thorne Nigel Matthews - Group Secretary and Public Affairs David Roberts - Treasury, Tax and Corporate Finance Bernard Willis - Group Financial Controller David Clapham Bob Emmott - Specialist Businesses Ian Merton - Produce Geoff Spriegel~ - Scientific Services Ivor Hunt Mike Conolly - Operational Marketing Christopher Leaver - Corporate Communications Anthony Rees - Strategic Marketing John Renshaw - Market Intelligence * Member of Remuneration and Nomination Committee (Chairman, D> J Sainsbury) † Member of Audit Committee (Chairman, Sir Terence Heiser GCB) J Sainsbury Supermarkets Our supermarket business traded strongly in a challenging economic climate, with sales growing by 8.3% of which 7.2% came from net new sales area. Sales in like-for- like stores grew by 1.1%, giving a small volume gain after deducting sales inflation of 0.8% for the year. The weekly number of customers increased to around 9 million and our market share, including Savacentre food sales, increased from 11.4% to 11.7% on the basis of Central Statistical Office figures. \Operating profit increased by 12.5% to £784.3 million. Net operating margin UK SUPERMARKETS ANALYSIS 1995 1994 Sales (including taxes) £9,597.2m £8,864.6m increased by 0.31% of sales to 8.17% despite the fact that gross margins declined Operating Profit slightly. Operating profit increased by 18.2% in the second half of the year, compared £784.3m £697.0m* to 7.7% in the first half. Number of supermarkets 355 341 A major factor in our increased profitability was the cost saving achieved as a result of the extensive review of our supermarket operations which we began in July 1993 Sales area (’000 sq. ft.) and completed during the year. As a result of this review we have restructured our 9,338 8,827 store management, reorganised the management of our logistics function, rationalised Full-time employees our systems for purchasing goods and services not for resale, simplified the 33,568 34,225 construction of new stores and reduced clerical support through the introduction of Part-time employees new systems. In consequence, head office costs have been reduced by 0.16% of sales, 67,911 60,788 and total branch operating costs (including stock losses) have declined by *Before exceptional costs approximately 0.2% of sales. Productivity, in terms of sales per full-time equivalent employee, increased by 4%. Overall we now have a significantly improved cost structure and have been able to devote additional resources to improving customer service. For example, we have invested an additional £10 million a year in increased staffing at the checkout: where there is more than one customer waiting at a checkout, we open more checkouts until all are open. This is now having a significant impact on checkout queues. Low Prices During the course of the year we re-focused our low price Essential for the Essentials programme to concentrate on basic commodities, and featured these with more prominent point-of-sale advertising. The introduction of our Essentials programme 18 months ago led down industry prices and gross margins on basic commodities with the result that limited range discounters now struggle to undercut major supermarkets and their profitability has been depressed. Price competition in the sector continues to be intense but, despite much publicised competitor initiatives, we maintained our competitive price position at over 3% below the average for major supermarket chains. Our price message was reinforced with a strong programme of special offers, particularly during our 125th birthday campaign. We continue to improve the choice of products on offer. A typical large Sainsbury’s supermarket now stocks over 19,000 products, an increase of 3,000 in the last three years. 8 To mark the 125th anniversary of the company’s founding, our archivist, Bridget Williams, wrote this history. It has proved to be a best-seller, with nearly 50,000 copies already distributed to customers and staff. Working with advisers on nutrition and health, we classified (and identified with a new symbol) products that can help maintain a healthy diet. A Sainsbury’s health adviser Beryl McIndoe talks to a customer at our Burpham store. Adjacent service counters for meat and fish at 35 of our stores allow customers to choose from up to 70 lines of meat and 100 of fish, and seek advice and information from expert staff. Hand-held laser guns help staff on the sales floor to check what stocks of a particular product are held in the warehouse, and when further goods should be ordered. J Sainsbury Supermarkets continued It is our policy to buy British goods whenever we can, and over 75% of the food we sell is sourced from within the UK. But in the search to satisfy customer choice our buyers actively seek supplies from all five continents. Fresh foods continue to be a major strength. We are the largest greengrocer and largest butcher in the country; we have introduced service meat counters in 68 of our stores and will do so in many more this year. Other ranges have been extended in our stores: 24 stores sell hot food, 54 stores stock the Sainsbury’s Lifestyle clothing range and 76 stock CDs and tapes. A hundred and seventeen of our stores now have a coffee shop and 152 of our stores have petrol stations offering a wide range of petrol at keenly competitive prices. We are particularly pleased with customer response to our new Special Selection range of some 350 specialist cooking ingredients and gourmet foods from Britain and around the world. These include items such as olive oils, vinegars, preserves, fine spices, teas and sweetmeats normally only to be found in specialist outlets. We have also developed the Cookshop range of high quality and unusual cooking utensils and kitchen accessories. The Sainsbury Brand The attractiveness and reputation of the Sainsbury brand is a major factor in our sales success. It has been a feature of our offer to customers throughout our history and is constantly being developed. During the year we launched more than 1,200 Sainsbury brand products, making a total of over 9,000 which accounted for 65% of supermarket sales. We believe that Sainsbury’s has the most extensive range of own brand foods of any retailer in the world. In recent years we have moved our brand strongly into product areas previously dominated by powerful proprietary brands. Building on the success which includes Novon detergents and Gio soft drinks, we introduced during the year our ranges of First Menu baby foods and Performers nappies, as well as Sainsbury’s Classic Cola. Classic Cola has been a huge success and has achieved a national market share of around 13%. It has won a number of awards including the Best New Product Award in the coveted Marketing Society/ITV Awards. Our long-standing reputation as a wine retailer was further enhanced by the award, for the third time, of the title Supermarket Wine Merchant of the YearÆ, in Wine Magazine’s International Wine challenge, with over 150 medals and commendations. We were also the first large UK retailer to open an off-licence in Calais, which we did in April 1994 at the Mammouth hypermarket. With wines from throughout the world and an excellent range of British beers offered at prices which reflect the lower French duty rates, it quickly found favour with British customers. It has also gained a local following and the accolade of Cross Channel Supermarket of the Year. Our Wine Direct mail order service is now available through the Internet. We aim for complete integrity in all our dealings, and are particularly concerned about 10 A 21-year-old single malt whisky – one of a collection of twelve that provided whisky connoisseurs with a welcome choice in our stores at Christmas. Dry Cure Bacon has all the characteristics of the traditionally cured product: it cooks and tastes like the bacon sold in our first shops. Over 350 of the finest products from around the world were chosen by our experts to make up the Special Selection range. Sainsbury’s Classic Cola increased our own-brand share of cola sales in our stores from 12% to over 60% and has taken around 13% of the total UK grocers’ cola market. Performers nappies were an immediate hit with wearers and their parents, and quickly tripled the share of business taken by our own brand in our stores. J Sainsbury Supermarkets continued such ethical matters as animal testing and husbandry. For example, our policy for many years has been to sell only British veal reared in humane conditions. Fair trading with the Third World is also important to us. We have many trading links with Third World countries and were pleased to support the Fairtrade Mark by being the first GOODS DELIVERED PER supermarket to stock all its accredited products – Cafédirect coffee, Maya Gold MILE TRAVELLED (1992 = 100) 112 10 0 101 10 4 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 Through close management of the depot network and better vehicle utilisation, we are now moving more goods for every mile our vehicles travel, despite the considerable increase in the size of our trading area. chocolate and Clipper Teas. We continue to place a high priority on providing our customers with clear and useful information about our products. We have now distributed more than 73 million free recipe cards for the recipes featured in our very popular series of celebrity TV advertisements; the eighteenth in the series came from a customer recipe competition held last autumn. We have also been at the forefront of Government activities to encourage a healthier diet, and distributed 14 million leaflets when we launched our new Healthy Eating design symbol. Many Sainsbury brand products now carry on-pack information about the number of calories and the amount of fat per serving. Sainsbury’s The Magazine has become the seventh most popular women’s magazine in the UK and, in the last 12 months, has received four major awards, including the 1995 Glenfiddich Award for Magazine of the Year. Investing for Efficiency We have invested more than £35 million in additions and improvements to store layout and equipment. Behind the scenes, further investment in distribution facilities and new systems has led to considerable improvements in efficiency throughout the food chain – ordering goods, bringing them to the stores and allocating shelf space. We monitor the sales of each product very closely in order to allow for changing space requirements. Our sales-based ordering system allows us to have fresh goods in store just when customers want them. Yet another system allows us to schedule staff requirements to meet the peaks and troughs of customer demand. Last year we opened 20 new stores adding 617,000 sq. ft. of sales area. These ranged in size from 20,000 sq. ft. of sales area at Biggleswade to 40,000 sq. ft. at Plymouth and Harlow. After extensions and closures, the net addition to sales area was 511,000 sq. ft. or 5.8% of our total sales area. In the current year our opening programme for new supermarkets will decline to 12 new stores as a result of the Government’s more restrictive planning policy. The effect of the lower number of store openings will, however, be largely offset by a lower number of store closures and a large increase in the number of store extensions which will add 120,000 sq. ft. of sales area compared to 24,000 sq. ft. in the last year. The net additions to total sales area will be approximately 500,000 sq. ft. 12 English cheese is a perennial favourite with customers. Here buyer Jeff Abbott (right) samples a traditional farmhouse “rind-on” Cheddar with Nigel Pooley of Chewton Farms. Sainsbury’s distinctive new livery can now be seen on petrol tankers as well as on our conventional delivery vehicles. Savacentre Hypermarkets Sales at Savacentre, the only specialist hypermarket company in the UK, exceeded last year’s levels by 5.9%, reaching a total of almost £700 million. Like-for-like sales increased, particularly in the second half of the year, despite clothing sales being restricted by the very mild winter weather which significantly affected the whole of the textile sector. The increase in operating profit of 6.5% was assisted by firm control of operating costs and improved efficiency. This included further benefits from systems SAVACENTRE ANALYSIS 1995 1994 Sales (including taxes) £697.7m £658.7m development; in particular, the installation of Sainsbury’s food supply chain system was Operating Profit £40.9m completed and the Sainsbury’s sales-based replenishment system was introduced. £38.4m† A major review of the hypermarket format, assisted by our partnership with Docks Number of hypermarkets 10 Sales area (’000 sq. ft.) 864 Full-time employees 10 864 de France (operators of the Mammouth hypermarket chain), has led to a radical new look and a more distinct hypermarket trading style. This was first applied in the London Colney Savacentre; then, at the year end, in the 11-year-old Calcot store – in each case with great success and enthusiastic customer response. Most departments have been redesigned and other new ones introduced, such as the Babyshop and the 2,458 2,571 Cookshop, as well as an exclusive range of patisserie. Part-time employees 5,698 5,650 Widening the Choice †Before exceptional costs DIRECTORS D A Quarmby (Chairman)* M W Broomfield (Managing Director) R A Anderson*, W T Hales*, D J Empson, During the year, the scope of Savacentre’s offer was extended in a number of ways. The experience gained through the Bulksava outlet, which has now closed, has led to the introduction of bulk packs of around 100 products in all stores. In the main these are manufacturers’ brands but they also include, for instance, large packs of perishables. The Lifestyle clothing collection, launched in 1991, has been extended K W Barden, A E S Webb, E F Bonner, with the introduction of a new range of children’s clothes marketed under Lifestyle’s F R Emmott*. *Non-Executive Directors. first sub-brand, The Excellent Clothing Company. Savacentre has also introduced its first Lifestyle swimwear collection. Homebase lighting was added to the Home Interiors range. New service initiatives made the stores even more welcoming: specially- designated wider parking spaces to help those with young children, a play area in many of the restaurants and a range of trolleys to suit everyone’s needs – including a miniature size for use by small children. Although no new hypermarkets were opened during the year, there are significant opportunities for developing new Savacentres. The eleventh store, in Sydenham south London, will open in August 1995. The next, at the White Rose Centre in Leeds, is due to open in the 1996/7 year, and this will be followed by another at Braehead, Glasgow (a joint development with Marks & Spencer). In future, one or two new store openings a year are expected. Savacentre’s first clothing sub- brand for 7- to 14-year-olds is the style-conscious Excellent Clothing Company range. 14 A purpose-built in-store demonstration area provides a popular focus for customers eager to sample new products. A radical new look for layout and signage is being adopted by Savacentre in all its stores. Savacentre Managing Director, Mike Broomfield, talks to a customer in the new Cookshop department at London Colney. Homebase House and Garden Centres With sales 14.9% ahead of the previous year, and an increase in operating profit of 36.3%, the year was an excellent one for Homebase. In a static home and garden products market with negligible sales price inflation, the company nonetheless achieved a like-for-like sales increase of 4.8%. Christmas trading was particularly dynamic, with very strong turnover. The success of the company was all the more remarkable for the challenges it had to face. While clarification of the Sunday trading laws was welcome, the restriction of HOMEBASE ANALYSIS 1995 1994 Sales (including taxes) £376.9m £328.1m Homebase’s second busiest trading day to just six hours, and the decision of many other shopping centres to open on a Sunday, meant far greater competition for the £22.6m† ‘Sunday £’ in an already intensely competitive market. Operating Profit £30.8m Number of stores 83 Sales area (’000 sq. ft.) 3,082 Full-time employees 1,957 Part-time employees 3,390 76 2,810 1,764 3,248 †Before exceptional costs DIRECTORS D B Adriano The Homebase Brand Homebase brand development remains a priority; during the year, over 700 own brand lines were launched, of which about 500 were extensions to existing ranges and the remainder were new or re-designed lines. For the first time sales of Homebase brand products accounted for 25% of total sales. Customers understand that the value-for-money policy of the Sainsbury brand in food and drink is echoed by the quality and competitive pricing of the Homebase brand. Customer service was improved further by the completion of the programme to install scanning checkouts in all Homebase stores. Store design evolved significantly during the year. The introduction of garden (Chairman and Managing Director) centre canopies has made it possible to extend the selling season for plants. A new I D Coull (Deputy Chairman)* R McLaren (Deputy Managing Director) R Cooper*, concept, trialled at the Enfield store, presents important departments such as houseplants, paint, wallpaper, shelving and gardening products as “shops-within-shops”. D du Monceau de Bergendal*, J A Pitz*, This format has proved highly successful; it is being used for all new stores and is S W Bradbury, B Williams. *Non-Executive Directors. gradually being introduced into existing stores. Purchase of Texas Homecare In January 1995, agreement was reached to acquire the Texas Homecare business from Ladbroke Group PLC and the purchase was completed on 14th March 1995. Texas has an excellent geographic fit with Homebase and, until recently, had traded very profitably. Following integration over a two-year period, the Homebase chain will comprise some 300 stores with a share of the home improvement and garden products market of around 10%. This will place it second only to the market leader, B&Q, which has a share of approximately 14%. Homebase opened nine new stores during the year, all of which have traded in line with or above expectations. The home and garden products market is forecast to grow strongly and the combined company will continue to expand with all new openings under the Homebase name. In the current year Homebase will open 14 new stores. 16 The Homebase ‘Spend and Save’ loyalty card, introduced in 1991, has now been issued to over 2.5 million customers. Homebase Chairman, Dino Adriano, talks to DIY Assistant, Mark Richardson, in the new Paint Shop at the Hampton store. The new Homebase store at Woking - one of nine opened during the year. Homebase, the country’s leading supplier of real Christmas trees, sold 86,000 last year. Buyer, Ian Rankin (left), makes a check on the growth of the coming year’s supply with Christopher Hood of Yattendon Estate at Newbury, Berkshire. Shaw’s Supermarkets, Inc. SHAW’S ANALYSIS 1995 1994 Sales (including taxes) $2.08bn $1.97bn Operating Profit Shaw’s, our US supermarket chain and principal overseas business, achieved record store sales and operating profit for the year. It now operates 87 supermarkets in Massachusetts, New Hampshire, Maine and Rhode Island. Annual sales surpassed $2 billion for the first time; and operating profit reached a record $62.3 million, an increase of 34% over the previous year, and 98% higher than two years ago. This progress reflects the success of continued management pressure to control costs and improve buying. $62.3m $46.5m Shaw’s reported a positive increase in like-for-like sales and also saw an increase in Number of stores 87 Sales area (’000 sq. ft.) average transaction size – an indication of the improved economic environment and 87 customers’ recognition of Shaw’s value-for-money offer. Shaw’s added more than 560 products to its own brand range during the year, 2,762 2,740 bringing the total to over 2,500 lines. Customer reaction to these developments is very Full-time employees positive, and Shaw’s own brand products now account for 25% of sales. Shaw’s is able 4,547 4,248 to draw on Sainsbury’s great experience in this area; the fact that both companies Part-time employees share a significant number of suppliers opens up many opportunities for own brand 11,204 11,913 development. DIRECTORS D J Sainsbury (Chairman)* D B Adriano (Deputy Chairman)* P L Francis (President and Chief Executive Officer), I D Coull*, R P Whitbread*, H Beckner*, S Dubrul Jr*, J D Kelleher, J R Maxwell, A J Mitcham† ‡, H V Powell, S W Ramsay. *Non-Executive Directors. ‡Seconded from Sainsbury’s. The Novon detergent range, a direct import of the Sainsbury’s UK sub-brand, was launched at Shaw’s in June 1994 with equal success. There were a number of new developments in the use of technology during the year. These included the upgrading of the automated warehouse system to provide extra flexibility, and the widening of choice of payment methods for customers throughout the company. Payment can now be made by debit or credit cards and electronic cheque transactions will be introduced to all stores in the coming year. Expansion and Extension Shaw’s opened a new store in Plymouth, Massachusetts, and a replacement store at North Windham, Maine. The store in South Lawrence, Massachusetts, which had suffered from disappointing results for several years, was closed. The construction programme at nine other locations involved one major and four minor extensions as well as four remodellings during the year. Shaw’s has been developing a new store format which will give a competitive edge in new trading areas. Features which are currently on trial in existing stores include a food court, an in-store pharmacy, dry cleaning and one-hour photo processing departments, as well as an in-store bank. The first store to be built to this format will be in Fairhaven, Massachusetts, scheduled to open in August 1995. In the current year a strong development programme includes eight new stores, one of which is a replacement. This will increase sales area by more than 10%. Three major and 12 minor remodels are due for completion during the year. Plans for moving into Connecticut are well advanced: eight stores are being developed in that State during the next two years. 18 Phil Francis, Shaw’s President and Chief Executive Officer, checks the new in-store bank at the Plymouth, Massachusetts, store. Shaw’s new store at Plymouth, which opened in November. Nicola de Felice, seconded to Shaw’s from Sainsbury’s, is now working full-time for Shaw’s as Category Manager for Health and Beauty Products. Giant Food Inc. In November 1994 the purchase was completed of 16.7% of the equity of Giant, one of North America’s leading food retailers. This included 50% of the voting shares in the company. Centred on Washington DC and Baltimore, Maryland, Giant operates 161 supermarkets with a total gross area of about 6.5 million sq. ft. and employs 25,000 people. Sales per sq. ft. are amongst the highest in US retailing which is reflected in its higher than average net margin. In the year to 25th February 1995, Giant increased sales by 3.6% to $3.7 billion. Profit before tax increased by 2.3% to $155 million and return on capital was 23.1%. The association with Giant will offer clear benefits to the Sainsbury Group, both in the UK and in North America. Giant is very similar to Sainsbury’s in its trading philosophy, in the quality of its offer to its customers and in its strength in own brand which, at 20% of sales, is well above the US average. There will be considerable opportunities for practical co-operation. Giant is, for example, advising Shaw’s on the establishment of in-store pharmacies. Giant is a clear market leader in both its present trading areas, with a 44% share in the greater Washington DC metropolitan community (which includes suburban Virginia and suburban Maryland) and a 29% share in metropolitan Baltimore, Maryland. It opened four stores during the year and has a strong store opening programme. Eleven new stores are to be opened over the next 18 months, which includes expansion into the Philadelphia market, where there is a wealth of opportunity. In-store pharmacies are an important feature of the Giant offer. The one shown right is in the Cascades Marketplace store, Sterling, Virginia (also pictured above). 20 US Maps Group New Store Openings STORES OPENED 1994/95 PLANNED STORE OPENINGS 1995/96 MAINE 17 Stores VERMONT NEW HAMPSHIRE 19 Stores MASSACHUSETTS 45 Stores CONNECTICUT RI 6 Stores UK Stores SAINSBURY’S Epsom Beaconsfield Chingford East Kilbride Taplow Kidderminster Cwmbran Woking Harlow Truro Whitechapel Newbury Ferndown Plymouth Warlingham Biggleswade Banbury Newhaven Leeds Nantwich UK Stores SAINSBURY’S Horsham Watford Cheadle Emerson Green, Bristol Witney Hamilton Wigan New Cross, London Kenton Street, Somerset Brislington, Bristol Straiton, Edinburgh A further 19 existing stores will have major extensions New store sales area. . . 617,000 sq. ft. New store sales area . . . 390,000 sq. ft. Store extensions. . . . . . . 24,000 sq. ft. Store extensions . . . . . . 120,000 sq. ft. Total new sales area. . . 641,000 sq. ft. Total new sales area . . . 510,000 sq. ft. U S A U S A HOMEBASE Enfield Harrow Weald Woking High Wycombe Arnold, Nottingham Oldbury Lincoln Northampton Hampton MARYLAND 97 Stores SAVACENTRE Sydenham, London New sales area . . . . . . . . 85,000 sq. ft. HOMEBASE Preston Staines Wolverhampton Winchester Aintree Ruislip Hedge End, Southampton Warrington Hermiston Gait, Edinburgh Falkirk Newbury Park, London Christchurch Wigan Newport, Gwent New sales area . . . . . . . 348,000 sq. ft. New sales area . . . . . . . 606,000 sq. ft. WASHINGTON DC 7 Stores VIRGINIA 56 Stores US Stores SHAW’S N. Windham (Maine) Plymouth (Massachusetts) DELAWARE 1 Store US Stores SHAW’S N. Providence (Rhode Island) Fairhaven (Massachusetts) Northbridge (Massachusetts) N. Quincy (Massachusetts) New Britain (Connecticut) Manchester (Connecticut) Bristol (Connecticut) Vernon (Connecticut) New sales area . . . . . . . . 66,000 sq. ft New sales area . . . . . . . 325,000 sq. ft. Group total new sales area. . . . . . . . . 1.1m sq. ft. Group total planned new sales area . . . . 1.5m sq. ft. Growing the Business GROUP CAPITAL EXPENDITURE £ m i l l i o n 7 8 0 7 6 6 7 8 7 7 6 9 The Sainsbury Group has a major investment programme to support the organic growth of the business. During the year we opened 31 new stores, and these, together with extensions and enlargements to existing stores, represented 1.1 million sq. ft. of new sales space. 4 9 2 The last year has seen a shift of emphasis in our store building programme. While we will continue to build new Sainsbury’s supermarkets where profitable opportunities are available to us, we forecast we will only be able to open some 12 to 15 stores a year rather than the 20 or more we have built on average in recent years. Our primary concern is that we should build our stores on sites which meet customer requirements. Town centre locations are attractive, and we will build stores there whenever we can, but it must be recognised that such locations seldom provide 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 Group Capital Expenditure totalled £492 million, 74% of which was spent on the access, car parking and size of store that our customers now expect. In the absence adding to and improving our store portfolio. of these facilities we prefer to develop outside the town centre. We will continue to AGE OF SAINSBURY’S SUPERMARKET SALES AREA pursue a substantial supermarket development programme in future years, but will only invest in stores which meet customer needs in the long term and are financially viable. % o f t o t a l s a l e s a r e a 3 8 . 2 The tightening planning environment for supermarkets in the UK has emphasised 3 0 . 9 2 2 . 6 the benefits we derive from being a diversified Group. Not only has it given us the opportunity to devote more resources to our existing Sainsbury portfolio, extending and improving existing stores, but we have also accelerated the development 1 4 . 5 6 . 9 L e s s t h a n o n e y e a r L e s s t h a n t w o y e a r s L e s s t h a n t h r e e y e a r s L e s s t h a n f o u r y e a r s L e s s t h a n f i v e y e a r s As a result of sustained investment, 38.2% of Sainsbury’s sales area is less programme of our other Group companies. Savacentre will be able to grow its business more rapidly because most of its developments involve a major element of urban regeneration, which is strongly favoured by Local Authorities. We have an accelerated development programme for Homebase, for the coming year and in the future. Both Shaw’s and Giant are expanding into new market areas in America, with all the new opportunities that will emerge as a result. than five years old – greater than that of Over the Group as a whole, we plan to open more than 1.5 million sq. ft. in any other supermarket company. 1995/96 and, by the end of the year, we expect to have around 775 stores trading GROUP SALES AREA M i l l i o n s s q u a r e f e e t 1 6 . 0 1 5 . 2 1 4 . 2 1 3 . 1 1 2 . 2 from more than 25 million sq. ft. of selling space. Our construction costs have fallen in real terms by 18% over the last three years; and we continue to take an industry lead on construction procurement methods, including involvement in the implementation stages of the Report on the Construction Industry by Sir Michael Latham. Our concern for the quality of the stores we build is greater than ever and, as a result of the Government’s Quality Initiative, has taken on even further significance. We have a long and proud tradition of building stores of high architectural merit which harmonise well with their surroundings, and this has continued in the past year. Recognition has come through a number of awards, including a Civic Trust Award for our new building at Harlow, designed by Terry Farrell. 22 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 Group sales area increased by 5.3% last year to 16.0 million sq. ft. The new Savacentre hypermarket at Sydenham, south London, is shown here under construction. It is scheduled to open in August 1995. The Kidderminster supermarket, which opened in May 1994, has a sales area of 28,000 sq. ft. and employs more than 300 people – 130 of them new recruits. The architecture of our new Marsh Mills supermarket at Plymouth makes it one of the most outstanding stores to be opened last year. The link with the site’s maritime associations provides a striking silhouette. Training for Teamwork At the year end we employed over 130,000 people throughout the Group. Women represent 65% of the total, and a similar proportion work part-time. Maintaining the skills needed by every member of this large workforce to the highest levels is a major SAINSBURY’S SUPERMARKET SALES PER EMPLOYEE (Full-time equivalent) objective of the Group. Each company in the Group has an extensive training programme focusing on managerial and technical requirements, and on customer service and retail trade skills. We regularly move staff between companies in order to £ 1 5 4 , 2 8 4 transfer those skills, and secondments between Sainsbury’s and Shaw’s have been £ 1 4 8 , 2 5 2 £ 1 4 3 , 6 6 0 particularly successful. £ 1 3 5 , 1 0 0 £ 1 2 5 , 1 4 0 Management and staff have responded positively to the changes in management structure at our supermarkets. A major training programme for new responsibilities was undertaken during the year, with a particular emphasis on vocational training for staff at all levels. In this respect, our Choices careers development programme has encouraged non-management staff to enrol for further education courses: some 500 employees at 150 supermarkets are now engaged in these, and the Choices programme is being extended to all stores in the coming year. We strongly support the development of National Vocational Qualifications, which we regard as a practical means both of training for appropriate skills and of 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 recognising the achievements of our staff. They are as valuable for existing staff as for Sales per employee ( full-time equivalent) rose by 4.1% last year, and have risen by 23.3% in the last four years. SAINSBURY’S SUPERMARKET OPERATING PROFIT PER EMPLOYEE (Full-time equivalent) trainees. Young people joining us as retail trainees each year complete training to achieve the Retail Certificate NVQ Level 2. Some 1,500 adult staff have also now registered for NVQs, and some 500 have achieved Level 2. We are also using the qualifications for management training. For instance, 49 trainees in Homebase are currently working towards the NVQ Level 4 Management Certificate in conjunction with a course at a local college on Garden Centre Management. Five years after the launch of our distance learning degree with Manchester £ 1 2 , 4 2 0 £ 1 2 , 5 8 4 Metropolitan University 250 young managers are studying part-time for a BA in Retail £ 11 , 0 9 0 £ 11, 6 4 8 Marketing, 35 have achieved pass degree level and this summer we will be congratulating £ 9 , 9 0 0 our first honours graduates. Twenty-four middle managers across the Group in the UK are studying for a Management MBA in the course that we run with the City University Business School. Four more have graduated this year, making a total of 11. During the year, Savacentre linked its involvement with the Prince’s Trust Volunteer Initiative with the training programmes at its Meadowhall, Sheffield, store. This approach to off-the-job training has been effective in raising skills as well as in building local partnerships. At Shaw’s, a new organisational structure has been developed which encourages store staff to improve their technical expertise and achieve a higher level of customer 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 service. One hundred senior managers are currently enrolled in a personal Operating profit per employee (full-time equivalent) increased by 8% last year. development programme and 40 have completed the course. 24 Star Teams are the stores’ own think-tanks. New ideas and suggestions flow from their discussion groups. A new training programme gives staff an understanding of the difficulties encountered by disabled shoppers. Sarah Rose and Paul Chillman learn how to help them. Over 2,000 girls joined us for Take Our Daughters to Work day. Richard Gardiner’s daughter, Lucy, discovered the contrast between old and new career opportunities, watched by her father and Janet Cameron, Personnel Policy Manager. Sue Plummer, Checkout Supervisor at our Camden store, helps Steven Aylward, Provisions Assistant, with his NVQ Level 2 workbook. Concern for the Environment Sainsbury’s takes a serious and practical approach to environmental issues. We aim to integrate environmental concerns into the normal framework of business decisions, and emphasise the importance of these concerns to all our managers. The Group Environment Affairs Committee, reporting to the Board, is specifically charged with monitoring Group performance against this objective, identifying areas PERCENTAGE OF CROPS for positive action, and encouraging the adoption of best practice throughout the COVERED BY ICMS PROTOCOLS 5 7 % Group. This leads to a continuing search for improvement in existing programmes, such as energy conservation and recycling, and to new initiatives such as the car exhaust emission tests illustrated opposite. During the year we signed the Making a Corporate Commitment declaration promoted by the Department of the Environment, which seeks commitment from companies’ top management to energy efficiency policies targeted at reducing carbon dioxide emissions. 2 2 % 9 % Energy efficiency is a long-standing Sainsbury’s objective. During the year we 2 0 % installed our Thermie system into 100 supermarkets. This system, which collects and analyses data on energy consumption and significantly assists in energy management, has received financial support from the European Union. In the US, Shaw’s Green 2 % Lights programme, which promotes energy conservation in lighting design, was 1 9 9 2 1 9 9 3 1 9 9 4 recognised by an award from the Federal Environmental Protection Agency. UK Overseas Preventing Pollution Through the implementation of our Integrated Crop Management Systems (ICMS) we are now sourcing increasing quantities of fresh fruit and vegetables from growers in the UK and overseas, who produce crops in accordance with our strict environmental standards. During the next two years we shall be focusing on suppliers world wide. During the year we worked with the National Rivers Authority in the production of its Pollution Prevention Guidance for drainage systems for food retail stores. This has led us to adjust our own new store specifications and make modifications at some of our existing stores. We also supported the NRA’s January consumer campaign to promote the safe disposal of engine oil – a major water pollutant – by distributing leaflets in outlets which stock engine oil. The next steps will be to offer guidelines to customers on disposing of waste engine oil and to provide some recycling facilities. Recycling of waste packaging continues to be a major preoccupation. Savacentre has embarked on a campaign for recycling the containers used for delivering cut flowers and produce: mushroom crates, flower buckets and banana boxes are all cleaned and returned for re-use. Sainsbury’s has been closely involved in industry discussions with Government on ways to achieve the targets for packaging recovery that have been accepted under the EU Packaging Waste Directive. The key to achieving these targets will be in creating markets which can utilise the materials recovered and, with our suppliers, we are seeking positive ways of doing so. At the same time we are actively continuing to look for ways of minimising our packaging requirements. 26 Over 4,000 cars were tested for exhaust emissions in a trial at eight of our stores last year, and a major campaign is being rolled out in the coming months. This Scandinavian forest illustrates how natural selection, which produces stronger trees than manual planting, is carried out through allowing self-seeding by ‘mother’ trees. Sainsbury’s and Savacentre have joined Homebase as members of the World Wide Fund for Nature’s 95 Group, which is committed to sourcing wood and wood-derived products from well-managed forests. We were the first UK supermarket group to join this scheme. Community Involvement During the year we contributed some £2 million to charitable causes in the UK. We make donations in response to a wide variety of appeals and, wherever we can, we look for a practical outcome to our involvement. This has led us to seek out appropriate organisations with whom we can develop specific projects relating to our business and to the interests of our employees and customers. One such project linked to health, diet and nutrition, examining the effect of diet on osteoporosis, was concluded during the year by the Dunn Nutrition Centre. We also funded the charity Gingerbread to research and write a national guide to childcare provision, which is available in our stores. Sainsbury’s is a member of several organisations which support inner city regeneration: Business in the Community, the Community Development Foundation and the London Enterprise Agency, as well as others in Inner London. For the past 12 years our Good Neighbour Scheme has supported local organisations nominated by our stores for financial support. This year, to help our staff become more involved in the area where they live and work, we are trialling a new programme called Side by Side, to encourage employee volunteering. Additional resourcing will allow staff to take paid time off to help local charities. Supporting the Arts Arts sponsorship retains a significant place in our community investment programme. The Sainsbury’s Choir of the Year competition provides a focus for amateur choirs, and the sixth biennial event, transmitted by BBC TV during the winter, drew a record 300 choirs from throughout the UK. Our Pictures for Schools and Arts for All projects both have strong educational backing. This year more than 1,500 primary schools received a set of four framed prints of recognised masterpieces and a BBC video. Arts for All concentrates on developing new audiences for the performing arts. In addition to Sainsbury’s central community programme, our staff are active in fund-raising, collecting remarkable amounts through their activities: Children in Need alone benefited by £200,000. Funds raised by Savacentre employees were used to buy three Sunshine Coaches for the Variety Club of Great Britain. Homebase staff raised £115,000 for the Leukaemia Research Fund. Homebase has also given practical support to schools without gardens by providing containers to grow daffodils for the Marie Curie fund-raising project, and by loaning security equipment to help those setting up Neighbourhood Watch programmes. ‘Free to Work’, which we sponsored through the charity Gingerbread, is helping customers and staff to find solutions to their childcare needs. Shaw’s, too, has a long-standing commitment to community support, donating over $1 million to youth services, education and the arts during the year. There is also a strong tradition of individual staff helping the community through national programmes such as United Way and Make a Wish, which supports terminally-ill children. 28 Our Penny Back scheme allows customers to help local charities – such as this club for youngsters in Burton-on-Trent – by donating money refunded to them for re-using carrier bags. We have provided funds for the charity Horticultural Therapy, giving a new interest and outlook to a wide range of people with special needs. Lord Sainsbury of Preston Candover KG congratulates the winners of this year’s Sainsbury’s Choir of the Year, the London Adventist Chorale – an outstanding Gospel choir whose members are drawn from churches in and around London. Group Ten Year Record RESULTS (£ MILLION) RESULTS (£ MILLION) 1986 1986 1987 1987 1988 1988 Group Sales (including VAT & sales taxes) Group Sales (including VAT & sales taxes) Increase on previous year Increase on previous year UK Operating Margin UK Operating Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,575.2 3,575.2 14.0% 5.30% 14.0% 5.30% 4,043.5 4,043.5 13.1% 5.75% 13.1% 5.75% 5,009.5 5,009.5 23.9% 6.16% 23.9% 6.16% Group Operating Profit (before profit sharing) Profit sharing Profit/(Loss) on sale of properties Associates Group Operating Profit (before profit sharing) Profit sharing Profit/(Loss) on sale of properties Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189.6 (15.8) 5.9 13.6 189.6 (15.8) 5.9 13.6 Group Profit before Interest Group Profit before Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193.3 193.3 232.5 (21.2) 9.1 17.9 232.5 (21.2) 9.1 17.9 238.3 238.3 295.7 (23.9) 9.8 18.2 295.7 (23.9) 9.8 18.2 299.8 299.8 Increase on Previous Year Interest receivable/(payable) Increase on Previous Year Interest receivable/(payable) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.2% (0.6) 27.2% (0.6) 23.3% 8.6 23.3% 8.6 25.8% 8.6 25.8% 8.6 Profit before Tax Profit before Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192.7 192.7 246.9 246.9 308.4 308.4 Increase on Previous Year Increase on Previous Year Tax charge Tax charge Profit after Tax Profit after Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.2% 65.4 127.3 23.2% 65.4 127.3 EARNINGS PER SHARE* EARNINGS PER SHARE* Basic Increase/(decrease) on previous year Basic Increase/(decrease) on previous year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fully diluted (excluding profit/loss on sale of properties) Increase/(decrease) on previous year Fully diluted (excluding profit/loss on sale of properties) Increase/(decrease) on previous year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.01p 16.6% 9.01p 16.6% 8.62p 13.2% 8.62p 13.2% 28.1% 88.9 158.0 28.1% 88.9 158.0 11.04p 22.6% 11.04p 22.6% 10.48p 21.6% 10.48p 21.6% 24.9% 109.0 199.4 24.9% 109.0 199.4 13.42p 21.5% 13.42p 21.5% 12.90p 23.1% 12.90p 23.1% DIVIDEND PER SHARE* DIVIDEND PER SHARE* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RETAIL STATISTICS RETAIL STATISTICS 2.72p 2.72p 3.46p 3.46p 4.15p 4.15p 1986 1986 1987 1987 1988 1988 NUMBER OF OUTLETS AT FINANCIAL YEAR END NUMBER OF OUTLETS AT FINANCIAL YEAR END Sainsbury’s – over 25,000 sq. ft. sales area Sainsbury’s – over 25,000 sq. ft. sales area 15,000-25,000 sq. ft. sales area 15,000-25,000 sq. ft. sales area under 15,000 sq. ft. sales area under 15,000 sq. ft. sales area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sainsbury’s Sainsbury’s Savacentre Savacentre Homebase Homebase Shaw’s Shaw’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 39 122 122 119 119 ——————————— ——————————— 280 280 6 6 28 28 — — ——————————— ——————————— 54 54 119 119 110 110 ——————————— ——————————— 283 283 6 6 32 32 — — ——————————— ——————————— 74 74 115 115 94 94 ——————————— ——————————— 283 283 6 6 38 38 60 60 ——————————— ——————————— TOTAL NUMBER OF STORES TOTAL NUMBER OF STORES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 314 321 321 387 387 SALES AREA (’000 SQ. FT.) Sainsbury’s Savacentre Homebase (approx. 60% covered sales area) Shaw’s SALES AREA (’000 SQ. FT.) Sainsbury’s Savacentre Homebase (approx. 60% covered sales area) Shaw’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,692 4,692 433 433 1,261 1,261 — — ——————————— ——————————— 5,034 5,034 433 433 1,424 1,424 — — ——————————— ——————————— 5,463 5,463 436 436 1,645 1,645 1,592 1,592 ——————————— ——————————— Group Total Net increase on previous year Group Total Net increase on previous year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Sainsbury’s openings Average size of new Sainsbury’s (sq. ft.) Average size of all Sainsbury’s (sq. ft.) New Sainsbury’s openings Average size of new Sainsbury’s (sq. ft.) Average size of all Sainsbury’s (sq. ft.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AVERAGE SAINSBURY’S SALES (including VAT) AVERAGE SAINSBURY’S SALES (including VAT) Per store (£ per week) Per square foot (£ per week) Per store (£ per week) Per square foot (£ per week) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share of national trade in food and drink shops, chemists, confectioners, tobacconists and newsagents** Share of national trade in food and drink shops, chemists, confectioners, tobacconists and newsagents** . . . . . . . . . . . . . . . . . . . . . . . . 6,386 6,386 10.4% 10.4% 6,891 6,891 7.9% 7.9% 9,136 9,136 32.6% 32.6% 15 15 27,430 27,430 16,760 16,760 15 15 29,150 29,150 17,790 17,790 16 16 30,650 30,650 19,300 19,300 244,100 14.87 244,100 14.87 267,800 15.43 267,800 15.43 304,900 16.30 304,900 16.30 8.0% 8.0% 8.5% 8.5% 8.8% 8.8% 30 1989 5,915.1 18.1% 6.89% 372.9 (26.7) 22.8 15.6 384.6 28.3% (9.5) 375.1 21.6% 125.1 250.0 16.57p 23.5% 14.44p 11.9% 4.99p 1989 1990 7,257.0 22.7% 7.04% 1991 8,200.5 13.0% 7.67% 1992†† 9,202.3 12.2% 7.92% 470.7 (33.8) 30.7 1.6 469.2 22.0% (17.8) 451.4 20.3% 140.5 310.9 20.57p 24.1% 18.15p 25.7% 6.03p 1990 585.0 (44.0) 12.5 0.3 553.8 18.0% (35.6) 518.2 14.8% 163.4 354.8 23.11p 12.4% 21.74p 19.7% 7.27p 1991 666.0 (49.4) (2.5) 1.2 615.3 11.1% 12.7 628.0 21.2% 184.5 443.5 25.69p 11.2% 25.34p 16.6% 8.75p 1992 1993 10,269.7 1994†† 1995 11,223.8 12,065.4 11.6% 8.35% 785.0 (58.6) (2.4) (0.4) 723.6 17.6% 9.2 732.8 16.7% 228.8 504.0 28.47p 10.8% 28.07p 10.8% 10.0p 1993 9.3% 7.72% 795.8 (56.3) 7.0 0.5 747.0 3.2% (8.7) 738.3 0.8% 236.5 501.8 28.0p (1.6)% 27.0p (3.7)% 10.6p 7.5% 8.01% 898.9 (60.6) 1.0 6.0 845.3 13.2% (36.1) 809.2 9.6% 269.9 539.3 29.8p 6.3% 29.0p 7.4% 11.7p 1994 1995 95 110 87 ——————————— 292 7 48 61 ——————————— 116 106 69 ——————————— 291 8 55 66 ——————————— 136 102 61 ——————————— 299 9 61 70 ——————————— 159 98 56 ——————————— 313 9 64 73 ——————————— 177 99 52 ——————————— 328 9 70 79 ——————————— 193 99 49 ——————————— 341 10 76 87 ——————————— 208 98 49 ——————————— 355 10 83 87 ——————————— 408 420 439 459 486 514 535 5,964 543 1,886 1,693 ——————————— 6,434 665 2,107 1,928 ——————————— 6,951 798 2,317 2,107 ——————————— 7,632 798 2,406 2,229 ——————————— 8,303 798 2,609 2,448 ——————————— 8,827 864 2,810 2,740 ——————————— 9,338 864 3,082 2,762 ——————————— 10,086 10.4% 20 31,360 20,430 11,134 10.4% 22 32,320 22,110 12,173 9.3% 20 33,550 23,250 13,065 7.3% 21 34,890 24,380 14,158 8.4% 23 32,710 25,310 15,241 7.6% 23 30,250 25,890 16,046 5.3% 20 30,839 26,304 327,500 16.50 373,500 17.26 425,400 18.17 460,800 18.51 494,000 18.84 510,000 18.60 529,200 18.53 9.0% 9.6% 10.1% 10.6% 11.3% 11.4% 11.7% Adjusted in respect of capitalisation issues in1984 and 1987 and rights issue in 1991. * ** Based on Central Statistical Office data (re-based 1993) and Sainsbury’s and Savacentre sales, excluding petrol. †† †† 1994 figures for profits and earnings per share are stated before exceptional costs of £369.5 million Property profits for 1992 restated to comply with FRS 3. (previous years nil) but after changes in accounting for depreciation of £38.7 million. Grou[p Financial Review MATURITY PROFILE OF DEBT (including leases) £193.5m due after one and within two years £230.5m due within one year £193.5m (21.7%) £230.5m (25.9%) £191.2m (21.5%) £274.6m (30.9%) £191.2m due after two and within five years £274.6m due after five years Group Financial Performance In highly competitive market conditions the Group increased sales by 7.5% to £12.1 billion – the largest turnover of any UK-based retailer. Group operating profits, before profit sharing and exceptional administrative expenses, increased by 13.0% to £898.9 million. These results confirm both the strength of the core supermarket business and the increasing importance of the new businesses to Group profitability and future growth. The increase in the Group’s share of associates’ profits from £0.5 million to £6.0 million reflects the contribution of Giant Food Inc., following completion of the acquisition of the 16.7% equity stake in November 1994. The £6.9 million share of Giant’s profit since acquisition is £2.7 million more than the associated finance costs of our investment. Group profit sharing increased to a record £60.6 million, which represents to those 87,000 employees eligible to participate in the scheme, a distribution rate of approximately 9.6% of pay (1994: 9.1%). Group net interest payable increased from £8.7 million to £36.1 million largely as a result of lower capital expenditure and delays in planning consent, which reduced the level of interest capitalised from £44.0 million to £16.5 million. Group profit before tax, exceptional costs and property items rose by 10.5% to £808.2 million. Despite benefiting from accelerated capital allowances, the combination of no relief on depreciation of land and buildings and higher tax rates on profits generated in the US resulted in an effective tax charge of 33.4%. This is unlikely to fall to the standard UK rate of 33% in the foreseeable future. Earnings before exceptional costs rose by 6.7% to £535.5 million. The profit before tax for the period represents a return on shareholders’ funds of 25.6% (1994: 24.8%). Before tax, Group return on capital employed before exceptional costs rose to 21.9% from 20.5%. Fully diluted earnings per share before property profits and exceptional costs amounted to 29.0p which represents an increase of 7.4%. Dividends per share of 11.7p (with an interim of 3.2p and a proposed final of 8.5p) compare with 10.6p for 1994, an increase of 10.4%. This reflects the Company’s policy to increase dividends in line with growth in profits. The total dividend for 1995 of £211.6 million represents 39.5% of attributable profits. Cash Flow and Capital Expenditure The Group’s net cash flow from operating activities amounted to £1,070.4 million (1994: £990.9 million), of which £453.9 million was expended on dividends, interest and tax. While Group capital expenditure decreased significantly, the acquisition of the equity stake in Giant contributed to an overall increase in net Group borrowing of £10.3 million. 32 Group capital expenditure, excluding the purchase of an interest in Giant, declined from £769 million to £492 million, reflecting the tougher planning environment and the slow-down in new supermarket openings. In the current year, Group capital expenditure is likely to increase to over £650 million as a result of the growth in the Group’s development programmes. Capital Structure Total shareholders’ funds as at 11th March 1995 amounted to £3,289.0 (1994: £3,039.5 CURRENCY COMPOSITION OF DEBT £432.0m $723.9m million) following a transfer to the profit and loss account of £323.9 million, the deduction from reserves of £128.6 million of goodwill on the purchase of the equity stake in Giant, new share capital subscriptions of £54.7 million and miscellaneous net recognised losses £432.0m (48.6%) £457.8m (51.4%) of £0.5 million.\ Over the period the Group’s net debt increased from £678.5 million to £688.8 million, which includes the funding of the purchase of the equity stake in Giant for £214 million in November 1994. This gives a balance sheet gearing (net debt as a Figures expressed as sterling equivalents percentage of shareholders’ funds) of 20.8% at that date (1994: 22.2%) which lies well within the Group’s target maximum for gearing of 40%. Excluding the acquisition of Texas, it is expected that cash generation from Group operating activities will exceed total payments for tax, dividends, interest and capital investment in the current year. Treasury Management Policy changes and significant treasury transactions are reviewed and approved by the Board. Foreign currency transactions are actively managed to reduce or eliminate exchange rate exposure. Use is made of forward cover for currency payments to foreign suppliers. The Group protects its balance sheet from adverse currency movements by matching overseas investments with liabilities of the same currency. Movements on foreign currency borrowings used for hedging purposes are taken directly to reserves. The interest payable on these borrowings serves partially to reduce the Group’s profit and loss exposure to foreign exchange movements. All funding requirements are covered by committed borrowing facilities. A series of committed bank facilities with maturities of three and five years has been arranged to meet the funding requirements of the Texas acquisition and to serve as an additional source of Group liquidity. It is the Group’s policy to provide a degree of protection against interest rate volatility. At least 50% of debt should be at fixed rates, although the approximate mix may vary with market conditions. As at 11th March 1995 the overall fixed rate component of gross borrowings was 54%. Summary Financial Statement The Directors present the Summary Financial Statement of the Group for the 52 weeks ended 11th March 1995. This Summary Financial Statement does not contain sufficient information to allow for a full understanding of the results of the Group and the state of affairs of the Company or of the Group. For further information the separate publication, entitled Annual Accounts 1995, containing the Directors’ Report, the Accounts and the Auditors’ Report on those Accounts (which is unqualified) should be consulted. Group Performance A review of the performance of the Company and its subsidiaries during the period and at the period end, with an indication of likely developments in the Group, is contained in the Chairman’s Statement on pages 2 to 5 and in the Operational Review on pages 8 to 29. A review of the Group’s financial performance is given on pages 32 and 33. On 14th March 1995, after the period end, the Group completed the purchase of the Texas Homecare businesses from Ladbroke Group PLC for a provisional consideration of £290 million. Corporate Governance As is more fully explained in the Directors’ Report in the Annual Accounts, the Group has complied throughout the period under review with all the provisions of the Code of Best Practice contained in the Cadbury Committee’s Report which were applicable during that period. Reference is also made in the Directors’ Report to the report that our auditors have made to the Company in respect of compliance with the Cadbury Code. The role of the Board and certain of its Committees is explained below. The Board The Board of Directors meets regularly and is responsible for the effective management of the business. Following the Cadbury Committee’s recommendations in respect of companies where the Chairman is also the Chief Executive, the Board includes a number of widely experienced Non-Executive Directors, one of whom, Sir Terence Heiser GCB, is the nominated senior Non-Executive Director. All Directors have access to the advice and services of the Company Secretary. In addition there is an agreed procedure for Directors to take independent professional advice, if necessary, at the Company’s expense. Neither the Chairman nor the Non-Executive Directors has a service contract. The service contracts for the Executive Directors have either less than 24 months to run or are on a rolling 24 month basis. Board Committees The Company’s Remuneration and Nomination Committee is responsible for advising on Executive Directors’ pay and benefits. The Audit Committee receives reports regularly from the Company’s Internal Audit Department and ensures that an objective and professional relationship is maintained between the Board and the external auditors. The membership of these committees is set out on pages 6 and 7 of this Review. Directors The Directors are shown on pages 6 and 7. All the Directors shown held office throughout the year. Sir James Spooner retired on 6th July 1994, K C Worrall on 31st December 1994 and R A Clark on 28th April 1995. The emoluments of the Executive Directors are determined on the advice of the Remuneration and Nomination Committee. The aggregate emoluments of the Directors of the Company including pension contributions were £4,382,000 (1994: £3,365,000). 34 The emoluments, excluding pension contributions, of all Directors fell within the following ranges: 0 – £ £ 5,000 . . . £ 15,001 – £ 20,000 . . . £ 55,001 – £ 60,000 . . . £ 145,001 – £ 150,000 . . . £ 150,001 – £ 155,000 . . . £ 165,001 – £ 170,000 . . . £ 180,001 – £ 185,000 . . . £ 185,001 – £ 190,000 . . . 1995 1994 — 6 1 — 1 1 2 1 1 3 — 1 — — 1 — £ 190,001 – £ 195,000 . . . £ 195,001 – £ 200,000 . . . £ 210,001 – £ 215,000 . . . £ 220,001 – £ 225,000 . . . £ 225,001 – £ 230,000 . . . £ 235,001 – £ 240,000 . . . £ 245,001 – £ 250,000 . . . £ 270,001 – £ 275,000 . . . 1995 1994 1 1 1 1 — — — 1 — 1 — — 2 1 2 1 £ 275,001 – £ 280,000 . . . £ 285,001 – £ 290,000 . . . £ 330,001 – £ 335,000 . . . £ 340,001 – £ 345,000 . . . £ 360,001 – £ 365,000 . . . £ 385,001 – £ 390,000 . . . £ 415,001 – £ 420,000 . . . £ 485,001 – £ 490,000 . . . 1995 1994 — 1 1 — — 1 — — 1 — — 1 1 — 1 1 Group Balance Sheet 11th March 1995 Fixed Assets Tangible assets Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current Assets Stocks Debtors Investments Cash at bank and in hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Creditors: due within one year . . . . . . . . . . . . . . . . . . . . . . . Net Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1995 £m 1994 £m 4,851.9 98.4 ———————————— 4,950.3 ———————————— 508.8 172.1 1.6 199.4 ———————————— 881.9 4,641.5 18.0 ———————————— 4,659.5 ———————————— 460.0 147.0 52.7 171.3 ———————————— 831.0 (1,835.9) ———————————— (954.0) ———————————— (1,782.9) ———————————— (951.9) ———————————— Total Assets less Current Liabilities . . . . . . . . . . . . . . . . . . . . . 3,996.3 3,707.6 Creditors: due after one year Convertible capital bond Other Provisions for Liabilities and Charges Minority Equity Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital and Reserves Called up share capital Share premium account Revaluation reserve Profit and loss account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity Shareholders’ Funds . . . . . . . . . . . . . . . . . . . . . . . . (200.0) (469.6) (16.6) (21.1) ———————————— 3,289.0 ————————————— 451.6 1,000.6 38.6 1,798.2 ———————————— 3,289.0 ————————————— (200.0) (410.7) (40.1) (17.3) ———————————— 3,039.5 ———————————— 447.6 949.9 32.7 1,609.3 ———————————— 3,039.5 ———————————— The Summary Financial Statement on pages 34 to 36 was approved by the Board of Directors on 9th May 1995, and is signed on its behalf by D J Sainsbury Chairman Summary Financial Statement continued Group Profit and Loss Account for the 52 weeks to 11th March 1995 1995 £m 1994 £m Group Sales including VAT & sales taxes . . . . . . . . . . . . . . . . . . 12,065.4 11,223.8 VAT & sales taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Group Sales excluding VAT & sales taxes . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . Group Operating Profit before profit sharing and exceptional administrative expenses Profit sharing Provision for costs of reorganisation Write down of property values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . Associated undertakings – share of profit Profit on sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit on Ordinary Activities before Interest . . . . . . . . . . . . . . . . . Net interest payable . . . . . . . . . . . . . . . . . . . . . . . . . Profit on Ordinary Activities before Tax . . . . . . . . . . . . . . . . . . . Tax on profit on ordinary activities . . . . . . . . . . . . . . . . . . . Profit on Ordinary Activities after Tax . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit for the Financial Year . . . . . . . . . . . . . . . . . . . . . . . . Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained Profit/(Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exceptional administrative expenses Profit on sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .§ Earnings Per Share before exceptional administrative expenses and profit on sale of property . . . . . . . . . . . . . . . . . . . . . . .§ Fully Diluted Earnings Per Share Fully Diluted Earnings Per Share before exceptional administrative expenses and profit on sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708.4 ———————————— 11,357.0 10,241.3 ———————————— 1,115.7 216.8 ———————————— 898.9 60.6 — — ———————————— 838.3 6.0 1.0 ———————————— 845.3 36.1 ———————————— 809.2 269.9 ———————————— 539.3 (3.8) ———————————— 535.5 211.6 ———————————— 323.9 ————————————— 640.6 ———————————— 10,583.2 9,574.5 ———————————— 1,008.7 212.9 ———————————— 795.8 56.3 28.0 341.5 ———————————— 370.0 0.5 7.0 ———————————— 377.5 8.7 ———————————— 368.8 227.3 ———————————— 141.5 0.1 ———————————— 141.6 189.6 ———————————— (48.0) ———————————— 29.8p — (0.1p) 8.0p 20.1p (0.5p) ———————————— ———————————— 29.7p 27.6p ————————————— ———————————— 29.0p 29.0p 8.6p 27.0p 36 Auditors’ Statement to the Shareholders of J Sainsbury plc We have audited the Summary Financial Statement on pages 34 to 36. Respective Responsibilities of Directors and Auditors The Summary Financial Statement is the responsibility of the Directors. Our responsibility is to report to you our opinion as to whether the statement is consistent with the Annual Accounts and Directors’ Report. Basis of Opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. The audit of a summary financial statement comprises an assessment of whether the statement contains all information necessary to ensure consistency with the Annual Accounts and Directors’ Report and of whether the detailed information required by law has been properly extracted from those documents and included in the summary statement. Our report on the Company’s Annual Accounts includes information on the responsibilities of Directors and Auditors relating to the preparation and audit of financial statements and on the basis of our opinion on the financial statements. Opinion In our opinion the Summary Financial Statement on pages 34 to 36 is consistent with the Annual Accounts and the Directors’ Report of J Sainsbury plc for the 52 weeks ended 11th March 1995 and complies with the requirements of Section 251 of the Companies Act 1985 and the regulations made thereunder. Coopers & Lybrand Chartered Accountants and Registered Auditors London 9th May 1995 Clark Whitehill Chartered Accountants and Registered Auditor London Investor Information Annual General Meeting The Annual General Meeting will be held at 12 noon on Wednesday 5th July 1995 at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE. The Notice of Meeting and the proxy card accompany this Annual Review. Registrars On 1st September 1994, The Royal Bank of Scotland plc acquired the share registration business of the National Westminster Bank Plc, the Company’s former Registrars. This change does not affect your shareholding in any way. Shareholders’ Interests Number of Shareholders at 11th March 1995: 110,820 (1994: 111,436) Range of Shareholdings Shareholders % 1995 1994 Shares % 1995 1994 500 and under 501 to 1,000 1,001 to 10,000 10,001 to 100,000 100,001 to 1,000,000 over 1,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.07 22.72 39.16 2.38 0.49 0.18 ————————————————————————————— 36.47 21.56 38.94 2.34 0.49 0.20 100.00 ————————————————————————————— 100.00 Pension Funds Insurance Companies Investment Trusts Banks and Nominee Companies Other Corporate Bodies Other Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.07 0.39 0.87 14.71 1.38 82.58 ————————————————————————————— 0.07 0.50 0.10 14.82 1.89 82.62 100.00 ————————————————————————————— 100.00 ————————————————————————————— 100.00 100.00 ————————————————————————————— Category of Shareholders Shareholders % 1995 1994 Shares % 1995 1994 0.43 1.01 6.08 3.77 10.31 78.40 3.96 4.95 0.09 36.33 5.05 49.62 0.43 1.09 6.27 3.82 10.01 78.38 4.54 5.69 0.06 33.31 5.76 50.64 ————————————————————————————— 100.00 100.00 ————————————————————————————— At the year end, the Trustees of the J Sainsbury Profit Sharing Scheme Share Trust held 20.1 million shares (1994: 20.5 million) on behalf of 41,749 participants (1994: 40,199) in the Scheme. The Trustees’ holding is included in ‘Other Shareholders’ above. American Depositary Receipts (ADRs) The Company’s ordinary shares are traded in the over-the-counter market (“OTC”) in the form of American Depositary Shares, evidenced by ADRs, and trade under the symbol JSNSY. Each American Depositary Share represents four ordinary shares. Citibank is the Authorised Depositary Bank for the Sainsbury ADR programme. All enquiries regarding ADR holder accounts and payment of dividends should be directed to: Citibank, N.A., ADR Shareholder Services, 111 Wall Street, New York, NY 10043. 38 Dividend Payments to ADR Holders Dividend payments to ADR holders are made in US dollars by Citibank. Payment of the final dividend for the year ended 11th March 1995 will be made on 4th August 1995 to ADR holders of record on 9th June 1995. Voting at the Annual General Meeting The 1995 Annual General Meeting of shareholders takes place in London on 5th July 1995. Citibank will distribute the Notice of Meeting and a proxy card to ADR holders. Scrip Dividend Scheme The Company is again offering the option of a scrip dividend to holders of ordinary shares. An ‘evergreen’ system is now in operation so shareholders who have already completed a mandate and wish to receive scrip for the final dividend 1994/95 need take no action. Mandate forms and terms and conditions booklets may be obtained from the Registrar, The Royal Bank of Scotland plc, Registrar’s Department, PO Box 82, Caxton House, Redcliffe Way, Bristol BS99 7NH, telephone number 0117 930 6600. Key Dates in respect of the Scrip Dividend: Final 1994/95 Calculation period for scrip dividend price . . . . . . . . . . . . . . . . . . . . . . . 22nd May – 26th May 1995 Ordinary shares record date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Last date for receipt by Registrars of mandates/revocations (Return Date) . . . . . . . . . Scrip dividend share certificates posted . . . . . . . . . . . . . . . . . . . . . . . . . First day of dealing in new shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . The cash equivalent of the new shares is as follows: Final Dividend 1994 (paid 29th July 1994) . . . . . . . . . . . . . . Interim Dividend 1995 (paid 18th January 1995) . . . . . . . . . . . *Cash equivalent grossed up for tax at 20% Shares have been issued in respect of scrip dividends at the following prices: Cash Equivalent 389.0p 418.2p 9th June 1995 29th June 1995 27th July 1995 28th July 1995 Gross Income for UK Tax Purposes* 486.25p 522.75p Dividend Interim Payment Date Issue Price Final Payment Date Issue Price 1990/91 . . . . . . . . . . – 1991/92 . . . . . . . . . . 20th January 1992 1992/93 . . . . . . . . . . 18th January 1993 1993/94 . . . . . . . . . . 17th January 1994 1994/95 . . . . . . . . . . 18th January 1995 pence – 349.0 483.4 406.8 418.2 29th July 1991 31st July 1992 30th July 1993 29th July 1994 pence 375.8 471.6 476.6 389.0 Investor Information continued Low Cost Share Dealing Service The Company offers a share dealing service for J Sainsbury plc ordinary shares through The Share Centre Ltd., in conjunction with S G Warburg Securities Ltd., the Company’s corporate stockbroker. Dealing commission on both purchases and sales of J Sainsbury plc ordinary shares is 1%, with no minimum charge, although purchases are subject to a minimum investment of £500. For further information, please write to: J Sainsbury Share Dealing Service, The Share Centre Ltd., PO Box 1000, Tring, Hertfordshire HP23 4JR. The publication of the above information relating to the low cost dealing service has been approved, for the purposes of Section 57 of the Financial Services Act 1986, by The Share Centre Ltd., a member of the Securities and Futures Authority. Personal Equity Plans On the Company’s behalf, Bradford & Bingley (PEPs) Limited operates the following Personal Equity Plans: The Sainsbury’s General Personal Equity Plan The Sainsbury’s Single Company Personal Equity Plan For further information you may write to Bradford & Bingley (PEPs) Limited, PO Box 50, Main Street, Bingley, West Yorkshire BD16 2LW or telephone 01274 555677. Tax Information Capital Gains Tax For Capital Gains Tax purposes, the market value of ordinary shares on 31st March 1982 is 69.375p. Share Price The middle market price of the Company’s ordinary shares on 11th March 1995 was 415p per share and the range during the year was 457p to 346p. The Company’s market capitalisation on 11th March 1995 was £7,497 million in comparison with £6,437 million on 12th March 1994. Financial Calendar 1. Dividend and Interest Payments Ordinary Dividend Interim . . . . . . . . . . . . announced November . . . . . . . . . . . . . proposed May Final . . . . . . . . . . . paid January . . . . . . . . . . . . . . paid July . . . . . . . 1st March 8% Irredeemable Unsecured Loan Stock 91/8% Notes 1996 8_1/2% Convertible Capital Bonds 2005 . . . . . . . . . 6th March 8_1/2_% Bonds 1996 $150m 7_3/8% MTN 1997 . . . . . . . . . . . . . . . . . 9th May . . . . . . . . . . . . . . . . 2nd October . . . . . . . . . . . . 17th November . . . . . . . . . . . . . . . . 1st September . . . . . . . . . . . . . . . . 6th September 2. Other Dates – Financial Year 1995/96 Results for half year Interim Report Results for the year Report and Accounts Annual General Meeting . . . . . . . . . . . . . . . . announced November . . . . . . . . . . . . . . . . . . . circulated in November . . . . . . . . . . . . . . . . announced May . . . . . . . . . . . . . . . circulated in June . . . . . . . . . . . . . . July 40 REGISTERED OFFICE AND ADVISERS Registered Office J Sainsbury plc Stamford House, Stamford Street, London SE1 9LL Registered Number 185647 Registrar The Royal Bank of Scotland plc Registrar’s Department, PO Box No 82 Caxton House, Redcliffe Way, Bristol BS99 7NH Auditors Coopers & Lybrand 1 Embankment Place, London WC2N 6NN Clark Whitehill 25 New Street Square, London EC4A 3LN Solicitors Denton Hall Five Chancery Lane, Clifford’s Inn, London EC4A 1BU Stockbrokers S.G. Warburg Securities Ltd. 1 Finsbury Avenue, London EC2M 2PA Annual Review and Summary Financial Statement This Annual Review and the Summary Financial Statement on pages 34 to 36 do not contain sufficient information to allow for a full understanding of the results of the Group and state of affairs of the Company or of the Group. The Directors’ Report, the Accounts and Auditors’ Report on those Accounts are contained in a separate publication, entitled Annual Accounts 1995, which, together with this publication, comprise the full Annual Report and Accounts of J Sainsbury plc for 1995. Copies may be obtained, free of charge, by telephoning Freephone 0800 387 504. d e t i m L i t n i r P e l y o R y b d n a l g n E n i d e t n i r P . d t L o C & n o s n h o J - l e o N , n i a B c M y b d e c u d o r P d n a d e n g i s e D J Sainsbury plc Stamford House Stamford Street London SE1 9LL Annual Accounts 1995 Group Profile J Sainsbury plc is one of the world’s leading retailers, operating four separate store chains in the UK and US which together serve more than 11 million customers a week. The UK supermarket business is the largest part of the Sainsbury Group, accounting for 87% of Group operating profit before profit sharing and 80% of Group sales. The other UK retailing arms are Savacentre, the country’s only specialist hypermarket company, and Homebase, our chain of home improvement and garden centres. Over the next two years, Homebase will be integrating Texas Homecare into its trading operations. In the US, Shaw’s Supermarkets, Inc., operates a chain of supermarkets in New England. In November 1994, Sainsbury's acquired a 16.7% holding in Giant Food Inc., a supermarket group which is the market leader in the Washington and Baltimore areas. Founded in London in 1869, Sainsbury's was privately owned until our public flotation in 1973. The Sainsbury family and its charitable trusts remain major shareholders, and the present Chairman, David Sainsbury, is a great-grandson of the founders. Contents Report of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3 Statement of Directors’ Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Report of the Auditors to the Shareholders of J Sainsbury plc . . . . . . . . . . . . . . . . . . . . . . . . . . Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group Profit and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group Statement of Recognised Gains and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reconciliation of Movements in Shareholders’ Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 5 6 7 8 9 9 Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-24 Registered Office and Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Annual Accounts This publication contains the Directors’ Report, the Accounts and the Auditors’ Report for the period ended 11th March 1995. The Chairman’s Statement and review of the business are contained in a separate publication entitled Annual Review and Summary Financial Statement 1995\. These Annual Accounts together with the Annual Review and Summary Financial Statement 1995 comprise the full Annual Report and Accounts of J Sainsbury plc for 1995, in accordance with the Companies Act 1985. Copies may be obtained, free of charge, by telephoning Freephone 0800 387 504. Report of the Directors for the 52 weeks to 11th March 1995 Principal Activity The principal activity of the Group is the retail distribution of food and home improvement and garden products. Group Performance A review of the Group’s performance during the period, with comments on the financial results and future developments, is contained in the Annual Review which is published separately and together with this document comprises the full J Sainsbury plc Report and Accounts. Corporate Governance The Group has complied throughout the period under review with all the provisions of the Code of Best Practice contained in the Cadbury Committee’s Report which were applicable during that period. THE BOARD The Board of Directors meets regularly and is responsible for the effective management of the business. Following the Cadbury Committee’s recommendations in respect of companies where the Chairman is also the Chief Executive, the Board includes a number of widely experienced Non-Executive Directors, one of whom, Sir Terence Heiser GCB, is the nominated senior Non-Executive Director. All Directors have access to the advice and services of the Company Secretary. In addition there is an agreed procedure for Directors to take independent professional advice, if necessary, at the Company’s expense. Neither the Chairman nor the Non- Executive Directors has a service contract. The service contracts for the Executive Directors have either less than 24 months to run or are on a rolling 24 month basis. BOARD COMMITTEES The Company’s Remuneration and Nomination Committee is responsible for advising on Executive Directors’ pay and benefits. The Audit Committee receives reports regularly from the Group Internal Audit Department and ensures that an objective and professional relationship is maintained between the Board and the external auditors. The membership of these committees is shown on page 3. INTERNAL FINANCIAL CONTROL The Directors are responsible for the Group’s systems of internal financial control. Within each business the Directors and senior management of those operations are responsible for establishing and operating detailed control procedures to overall Group standards. There are clearly defined levels of responsibility and authority and well-established reporting procedures. The guidance for companies on reporting on internal financial control has now been issued by the Cadbury Committee. The Company is currently carrying out a formal review of the effectiveness of internal financial controls throughout the Group and will report in accordance with the requirements of the Code in next year’s Report and Accounts. The systems of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement and loss. The key procedures in operation to provide effective internal financial control within the Group are as follows: Policies and procedures Internal financial controls and procedures are set out in procedures manuals. These include Group standards and policies for key control activities. Financial reporting The Group uses a long term corporate plan, annual budgets and monthly reporting of current year results in managing the business. The Board receives detailed monthly reports of actual results and revised current year forecasts, with comparison against budget, forecast and prior year. Capital investment The Group has clearly defined guidelines for capital investment decisions. These include annual budgets together with detailed appraisal, authorisation and post investment review procedures. Internal audit Group Internal Audit monitors and reports on the systems of internal financial control. The Head of Group Internal Audit reports significant matters to, and has direct access to, the Audit Committee. GOING CONCERN In order to comply with the Code, the Directors confirm that they are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group Accounts. 1 AUDITORS The auditors have confirmed to the Directors that, in their opinion, the comments above relating to going concern provide the disclosures required by paragraph 4.6 of the Code (as supplemented by the related guidance for Directors), and such statement is not inconsistent with the information of which they are aware from their audit work on the accounts. The auditors have also confirmed that the DirectorsÆ’ statement on internal financial control meets the requirements of paragraph 4.5 of the Code to the extent that is currently required, and that the Company has complied with the other paragraphs of the Code that are specified for review by the auditors. The auditors are not required by the Code to perform the additional work necessary to express any opinion on the effectiveness of either the Group’s systems of internal financial control or its corporate governance procedures, nor the ability of the Group to continue as a going concern. Profit and Dividend The profit on the ordinary activities of the Group before tax amounted to £809.2 million. After deducting £269.9 million for tax and £211.6 million for dividends paid and proposed, £323.9 million has been transferred to reserves. The Directors are proposing the payment of a final dividend of 8.5p per share on 28th July 1995 to shareholders on the Register at the close of business on 9th June 1995; together with the interim dividend paid of 3.2p per share, this makes a total dividend for the year of 11.7p (1994: 10.6p) per share. Share Capital The principal changes in share capital during the period were as follows: – 9.77 million shares were allotted and further options granted under the Company’s share schemes for employees; – 6.27 million shares were allotted under the terms of the scrip dividend offers to shareholders. Further details are given in note 12 on page 15. A Resolution will be proposed at the Annual General Meeting to renew the authority of the Directors to issue shares without applying the statutory pre-emption rights. The full text of the Resolution is set out in the Notice of Meeting which is included in the Annual Review and Summary Financial Statement. Giant Food Inc. On 14th November 1994 the Group purchased approximately 16.7% of the equity of Giant Food Inc., including 50% of voting stock, at a cost of £214.0 million. Further details are given in notes 4 and 5 on pages 12 and 13. Post Balance Sheet Event On 14th March 1995, after the period end, the Group completed the purchase of the Texas Homecare businesses from Ladbroke Group PLC for a provisional consideration of £290 million. Details of the transaction are outlined in note 33 on page 24. Scrip Dividend Around 26,000 shareholders elected to take shares instead of cash for both the final dividend for 1994 and the interim dividend for 1995. Shareholders are to be offered a similar choice in respect of the final dividend payable in July 1995 and the interim dividend for 1996. Market Value of Properties The Directors believe that the aggregate open market value of Group properties exceeds the net book value of £3,822.2 million by a considerable margin. Fixed Assets The movements in tangible fixed assets are shown in note 1 on page 10. Employment Policies Group employment policies respect the individual and offer career opportunities regardless of gender, race or religion. Full and fair consideration is given to the employment and opportunities for training and development of people with disabilities according to their skills and capacity. The services of any existing employee who becomes disabled are retained wherever possible. The Group also has a very extensive and well-established structure for communicating with employees, especially in relation to the financial results at the period end. The Company has a full range of employee share schemes and about one third of all shareholders are employees or former employees. Donations Donations to charitable organisations and local community projects amounted to £2.1 million (1994: £1.9 million), which included contributions to enterprise agencies, job creation, educational schemes, community projects and the arts. There were no political donations. 2 Research and Development The Scientific Services Division employs 132 people and has an annual expenditure of £5.5 million. It works in close co-operation with suppliers to achieve the highest standards of product quality, hygiene and safety, and to maintain them throughout the Company’s distribution chain and stores. It also works with the Company’s buyers to develop new products. Directors’ and Officers’ Liability During the period the Group maintained insurance cover for the Directors and Officers against liabilities incurred whilst acting in their capacity as Directors or Officers of the Company, its Subsidiaries and Associated undertakings. Directors and Directors’ Interests The Directors are as follows:– D J Sainsbury† (Chairman and Chief Executive), R T Vyner (Deputy Chairman and Joint Managing Director), D A Quarmby (Joint Managing Director), I D Coull, R Cooper, J E Adshead, C I Harvey, D B Adriano, R P Whitbread, R P Thorne, D J Clapham, I J Hunt, Lady Eccles of Moulton*† (Non-Executive), Sir Terence Heiser GCB*† (Non-Executive), Dr J M Ashworth*† (Non-Executive). Committee membership: *Audit Committee; †Remuneration and Nomination Committee. All the above Directors held office throughout the period. Sir James Spooner retired on 6th July 1994, K C Worrall on 31st December 1994 and R A Clark on 28th April 1995. Following the adoption of new Articles of Association at the Annual General Meeting on 6th July 1994 all Directors are required to retire by rotation. In this first period, the Executive Directors retiring by rotation are D J Sainsbury, R T Vyner, I D Coull and R Cooper, who, being eligible, offer themselves for re-election. The service contract of R T Vyner expires on 21st January 1997; the service contracts of I D Coull and R Cooper are terminable by two years’ written notice by either party. D J Sainsbury does not hold a service contract. Lady Eccles retires at the Annual General Meeting and does not offer herself for re-election. No Director had, during or at the end of the period, any material interest in any contract of significance to the Group’s business. Details of Directors’ interests in the ordinary shares of the Company are shown on pages 20 and 21. Substantial Interests The substantial material interests notified to the Company, all of which include duplications, are set out below. Miss J S Portrait, a partner of Denton Hall, the Company’s solicitors and C T S Stone are trustees of various settlements, including charitable settlements. At 9th May 1995 the total holdings of the trusts of which the above are trustees amounted to 18% and 6% respectively. Mr C R Greene, a trustee of a number of the above settlements with a total interest amounting to 1%, is an employee of Clark Whitehill, the Company’s joint auditors. At 9th May 1995, the interests, as trustees of charitable and other trusts and beneficially, of D J Sainsbury, the Hon. S D Sainsbury and Lord Sainsbury of Preston Candover were 18%, 5% and 4% respectively. Annual General Meeting The 1995 Annual General Meeting of shareholders will take place at 12 noon on Wednesday 5th July 1995 at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE. The Notice of Meeting and proxy card accompany these Annual Accounts. Auditors Coopers & Lybrand were appointed jointly with Clark Whitehill at the Annual General Meeting last year. A resolution to re-appoint Coopers & Lybrand as Auditors of the Company and to authorise the Directors to fix their remuneration will be put to the Annual General Meeting. By Order of the Board N F Matthews Secretary 9th May 1995 3 Statement of Directors’ Responsibilities Company law requires the Directors to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Company and the Group at the end of the period, and of the profit or loss of the Group for that period. In preparing accounts, the Directors are required to: (cid:2) (cid:2) (cid:2) (cid:2) select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; prepare the accounts on the going concern basis unless it is inappropriate to assume that the Company will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the accounts comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention of fraud and other irregularities. Report of the Auditors to the Shareholders of J Sainsbury plc We have audited the accounts on pages 5 to 24. Respective responsibilities of Directors and Auditors As described above the Company’s Directors are responsible for the preparation of accounts. It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion to you. Basis of opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. Opinion In our opinion the accounts give a true and fair view of the state of affairs of the Company and the Group at 11th March 1995 and of the profit, total recognised gains and cash flows of the Group for the 52 weeks then ended and have been properly prepared in accordance with the Companies Act 1985. Coopers & Lybrand Chartered Accountants and Registered Auditors London 9th May 1995 Clark Whitehill Chartered Accountants and Registered Auditor London 4 Accounting policies Basis of Accounts These accounts have been prepared under the historical cost convention as modified by the revaluation of certain properties. They comply with all applicable Accounting and Financial Reporting Standards. No Profit and Loss Account is presented for the Company as provided by Section 230(3) of the Companies Act 1985. In 1995 profit sharing has been charged in the Profit and Loss Account before Group Operating Profit and the comparative figures for 1994 have been restated accordingly. All the activities in the Group are continuing businesses. Consolidation The results of Subsidiaries and Associated undertakings are included in the Group Profit and Loss Account from the date of acquisition. Goodwill arising in connection with the acquisition of shares in Subsidiaries and Associated undertakings is deducted from reserves in the period of acquisition. Goodwill comprises the excess of the purchase price over the fair value of the net tangible assets acquired. Sales Sales consist of sales through retail outlets and sales of development properties. Rental and other income is excluded. Cost of Sales Cost of sales consists of all costs to the point of sale including warehouse and transportation costs and all the costs of operating retail outlets. Deferred Tax Deferred tax is accounted for, at anticipated tax rates, in respect of all timing differences between accounting and tax treatment, except to the extent that it is thought reasonably probable that the tax effects of such deferrals will continue for the foreseeable future. Depreciation Freehold land is not depreciated. Freehold buildings, and leasehold buildings with more than 50 years unexpired, are depreciated in equal instalments at the rate of 2% per annum. Leasehold properties with less than 50 years unexpired are depreciated to write off their book value in equal annual instalments over the unexpired period of the lease. Certain tenants’ fixtures, which have been capitalised as part of leasehold properties, are depreciated in equal annual instalments over the estimated useful life of the asset to the Group. Fixtures, equipment and vehicles are depreciated in equal annual instalments to write off their cost over their estimated useful lives, which range from 3 to 15 years, commencing when they are brought into use. A permanent diminution in value of any fixed asset is charged to the Profit and Loss Account. Capitalisation of Interest Interest incurred on borrowings to finance specific property developments is capitalised net of tax relief. Research Research and development expenditure is written off as incurred against the profits of the period. Pension Costs The costs of providing pensions for employees are charged in the Profit and Loss Account in accordance with the recommendations of independent qualified actuaries. Any funding surpluses or deficits that may arise from time to time are amortised over the average service life of members of the relevant scheme. Leased Assets Assets used by the Group which have been funded through finance leases are capitalised and the resulting lease obligations are included in creditors net of finance charges. Interest costs on finance leases and all payments in respect of operating leases are charged directly to the Profit and Loss Account. The requirements of UITF 12, “Lessee accounting for reverse premiums and other similar incentives”, have been adopted. The effect relating to prior periods is not material and hence comparative figures have not been restated. Stocks Stocks are valued at the lower of cost and net realisable value. Stocks at warehouse are valued at invoiced prices, and at retail outlets at calculated average cost prices. Foreign Currencies Foreign currency assets and liabilities are translated at the exchange rates ruling at the Balance Sheet date. Results from overseas companies are translated at the average rates of exchange for the relevant accounting period and at the period end rates for the balance sheets. Differences on translation of investments in overseas companies and related loans are taken directly to reserves. 5 Balance Sheets 11th March 1995 Group Company Fixed Assets Tangible assets Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current Assets Stocks Debtors Investments Cash at bank and in hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . note 1 2 6 7 8 Creditors: due within one year . . . . . . . . . . . . . . 9 Net Current Liabilities . . . . . . . . . . . . . . . . . ——————————————————————————— ——————————————————————————— 1994 £m 1994 £m 1995 £m 1995 £m 4,641.5 18.0 4,851.9 98.4 3,806.6 659.2 ———————————— ———————————— ———————————— ———————————— 4,465.8 ———————————— ———————————— ———————————— ———————————— 3,981.5 887.1 4,950.3 4,868.6 4,659.5 508.8 172.1 1.6 199.4 263.2 91.7 52.7 95.0 ———————————— ———————————— ———————————— ———————————— 502.6 303.2 160.3 — 88.7 460.0 147.0 52.7 171.3 881.9 552.2 831.0 (1,782.9) (1,835.9) (1,537.2) ———————————— ———————————— ———————————— ———————————— (1,034.6) ———————————— ———————————— ———————————— ———————————— (1,055.2) (1,607.4) (954.0) (951.9) Total Assets less Current Liabilities . . . . . . . . . . . 3,996.3 3,707.6 3,813.4 3,431.2 Creditors: due after one year Convertible capital bond Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for Liabilities and Charges Minority Equity Interest 9 9 11 (200.0) (410.7) (40.1) (17.3) (200.0) (469.6) (16.6) (21.1) — (583.1) (34.8) — ———————————— ———————————— ———————————— ———————————— 2,813.3 ————————————— ———————————— ————————————— ———————————— — (665.7) (7.2) — 3,289.0 3,140.5 3,039.5 447.6 949.9 32.7 1,609.3 451.6 1,000.6 38.6 1,798.2 447.6 949.9 34.0 1,381.8 ———————————— ———————————— ———————————— ———————————— 2,813.3 ————————————— ———————————— ————————————— ———————————— 451.6 1,000.6 39.9 1,648.4 3,289.0 3,140.5 3,039.5 Capital and Reserves Called up share capital Share premium account Revaluation reserve Profit and loss account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 14 15 Equity Shareholders’ Funds . . . . . . . . . . . . . . . Notes to the accounts are on pages 10 to 24]. The Accounts on pages 5 to 24 were approved by the Board of Directors on 9th May 1995, and are signed on its behalf by D J Sainsbury Chairman R T Vyner Deputy Chairman 6 Group Profit and Loss Account for the 52 weeks to 11th

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