J Sainsbury PLC Annual Report 2000

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FY2000 Annual Report · J Sainsbury PLC

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Useful contacts

For information about the AGM, shareholdings,
dividends and changes to personal details all
shareholders should contact:
Computershare Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Telephone: 0870 702 0106

For information about
low cost dealing facilities contact:
The Share Centre
PO Box 1000
Tring
Hertfordshire HP23 4JR
Telephone: 01442 890844

Institutional investors may wish to
contact Investor Relations:
020 7695 6215/6227

Information about ISAs can be obtained from:
Sainsbury’s Corporate ISA
Bank of Scotland
101 George Street
Edinburgh EH2 3JH
Telephone: 0131 442 8271

An audio tape of the Annual Review and
Summary Financial Statement can be obtained
by calling: 01435 862737

The Group’s Environment Report
is available on the Internet and by calling:
0800 387504

For general enquiries about
Sainsbury’s Bank call: 0500 405060

For any other enquiries
please contact our Customer Services:
0800 636262

Information about the Group may be found on the Internet at:

www.j-sainsbury.co.uk

J Sainsbury plc · Stamford House · Stamford Street · London SE1 9LL

Annual report and accounts 2000

Financial summary

Financial calendar, registered office and advisers

Sales (including VAT and sales tax) £ million
Underlying profit before tax2 £ million
Underlying earnings per share2 pence
Dividend per share pence3

2000
52 weeks

19991
52 weeks

17,414

16,378

580

20.5p

755

27.0p

14.32p

%
change

6.3

(23.2)

(24.1)

–

2
3

The audited statutory accounts are for the 56 weeks to 3 April 1999. For the purpose of comparability, the figures for the 52 week period to
3 April 1999 (unaudited) are shown.
Before amortisation of goodwill, exceptional costs and non-operating items.
On a 56 week basis, dividend per share was 15.32p in 1999.

Business summary

New management team accelerating pace of change.

Clear leadership and focus on Sainsbury’s Supermarkets.

Strong performance at Shaw’s Supermarkets – including Star Markets.

Strong like-for-like sales growth at Homebase.

Acceleration of e-commerce strategy across the Group.

Financial calendar 2000/2001

Dividend and interest payments

Ordinary dividend:
Final payable
Interim payable

28 July 2000
January 2001

8% Irredeemable Unsecured Loan Stock

1 March/1 September

£150m 8.25% Notes 2000

22 December

$200m 6.25% Notes 2002

£200m 7.25% Notes 2002

Other dates

Interim results announced

Interim report circulated

Results for the year announced

Report and accounts circulated

Annual General Meeting

27 March

7 June

November 2000

May 2001

June 2001

July 2001

Registered office
J Sainsbury plc
Stamford House
Stamford Street
London SE1 9LL
Registered number 185647

Registrars
Computershare Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH

Auditors
PricewaterhouseCoopers
1 Embankment Place
London WC2N 6NN

Solicitors
Denton Wilde Sapte
One Fleet Place
London EC4M 7WS

Stockbrokers
SBC Warburg Dillon Read
1 Finsbury Avenue
London EC2M 2PP

Hoare Govett Limited
250 Bishopsgate
London EC2M 4AA

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Chairman’s statement
J Sainsbury plc at a glance 2000
Group Chief Executive’s review
Themes:
Recapturing a passion for food
Taking pride in customer service
Seizing e-commerce opportunities
Designing our stores to meet
customer needs
Operating review:
Sainsbury’s Supermarkets
Sainsbury’s Egypt
Sainsbury’s Bank
Shaw’s Supermarkets
Homebase
Environment and community

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Financial review
Board of Directors
Report of the Directors
Corporate Governance
Report of the Remuneration
Committee
Statement of Directors’
responsibilities in respect of
the financial statements
Auditors’ report to the members
of J Sainsbury plc

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Group profit and loss account
Group statement of total recognised
gains and losses
Reconciliation of movements in
equity shareholders’ funds
Balance sheets
Group cash flow statement
Accounting policies
Notes to the financial statements
Five year financial record
Investor information
Inside back cover
Financial calendar, registered office
and advisers

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J Sainsbury plc Annual report and accounts 2000

(cid:2)
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Chairman’s statement

Sainsbury’s is a great company and a strong brand.
Our key concern now is to restore our unique brand values
for the benefit of customers and the confidence of staff.

The steps we are taking to speed up the rate of change and
improvement in Sainsbury’s are clearly necessary in the light
of these results. Last year was a difficult year for the Sainsbury
Group, in which strong performances at Shaw’s and Homebase
were unable to compensate for the significant decline in profit
at Sainsbury’s Supermarkets.

On a comparable basis, Group sales increased by 6.3 per cent
to £17.4 billion. Underlying Group profit before tax (before
amortisation of goodwill, exceptional costs and property items)
was £580 million, 23.2 per cent lower than the previous year.
Underlying basic earnings per share was 20.5 pence, a reduction
of 24.1 per cent. A final dividend of 10.30 pence is proposed
which results in a total dividend for the year of 14.32 pence,
unchanged from the previous year after adjusting for the
one-off 1.0 pence per share payment to cover the extra weeks
in that financial year.

As we have put in place a new management team, there have
been many changes to the Board and these are recorded
elsewhere in this report. I would, however, like to welcome
Roger Matthews who has joined us from Compass Group as
Group Finance Director. I would also like to thank Sir David
Scholey, who retired in February, and Sir Terence Heiser,
who will retire at the Annual General Meeting, for their
valued contribution in their capacity as Non-Executive Directors.
We welcome June de Moller and Keith Butler-Wheelhouse who
joined the Board in September as Non-Executive Directors.

In April 2000, the Company was very saddened to hear of the
death of Sir Robert Sainsbury, after a brief illness, at the age
of 93. His death, which followed that of Lord Sainsbury of
Drury Lane in October 1998, marked the passing of a
generation of the Sainsbury family that laid the foundations
for the subsequent success of the supermarkets business.

Last year we initiated a major programme of change in our
UK supermarkets business. However, it became clear during
the year that to deliver shareholder value, we had to step up
our pace of change. We therefore recruited Sir Peter Davis as
Group Chief Executive who started in March, the final month
of the last financial year.

Sir Peter is a respected leader with proven experience in
implementing change. He has the confidence of the City
and the Sainsbury Group as a whole. Moreover, he has a
strong background in retail and 10 years’ prior experience
with Sainsbury’s.

Our new Group Chief Executive outlines his plans for the
Group on page four. I am committed to helping Sir Peter
succeed in these and will continue to support him closely
in my role as part-time Chairman. With his leadership, drive
and vision I am confident we will soon be able to show the
world that Sainsbury’s is back where we believe it belongs;
the brand leader in every sense and people’s first choice for
food shopping.

This decision is not a reflection on the contribution of
Dino Adriano, who has retired, rather an acknowledgement
of the difficulty of the task we face. He deserves special thanks
from everyone at Sainsbury’s for the significant role he has
played in our business over 35 years, particularly in helping
establish and grow Homebase.

Sir George Bull
30 May 2000

J Sainsbury plc Annual report and accounts 2000

J Sainsbury plc at a glance 2000

J Sainsbury plc is one of the world’s leading retailers, playing
From the freshest food to the widest choice of products for the

Sainsbury’s Supermarkets was established in 1869 by John
James and Mary Ann Sainsbury and is Britain’s longest standing
major food retailing chain. The founders’ principles and values
guide us as strongly today as they did at the outset – to be the
customers’ first choice for food shopping by providing high
quality, value for money, excellent service and attention to detail.

Our people
Sainsbury’s Supermarkets employs over 138,000 people.
Of these 70 per cent are part-time and 30 per cent are full-time.
58 per cent of colleagues are women.

Our products
Over 40 per cent of Sainsbury’s Supermarkets’ products are
own brand. In addition to a wide range of quality food and grocery
products, many stores offer meat and fish counters, pharmacies,
coffee shops, restaurants and petrol stations.

Our stores
We serve nearly 10 million customers at 432 stores throughout
the UK each week. Of these stores, 17 are in Scotland, nine in
Wales and seven in Northern Ireland. Nearly 60 per cent of our
stores are in town-centre or edge-of-centre locations; many of
these are built on previously derelict sites.

New store openings 1999-2000
Bourne; Bristol, Clifton Down; Dartford; Derby, Eagle Centre;
Edinburgh; Glasgow, Braehead; Greenwich; Huntingdon; Isle of
Wight; Linlithgow; Londonderry; North Walsham; Stirling; Tooting,
London; Tottenham Court Road, London; Wallington and
Localsat Camden, Paddington Station, Seven Sisters and Victoria,
London, adding a total of 422,000 sq ft.

Store extensions and refurbishments 1999-2000
Extensions and refurbishments at 38 stores added 281,000 sq ft
of sales area.

New stores planned 2000-2001
New Sainsbury’s supermarkets are planned in 13 locations as well
as 25 Sainsbury’s Locals– an additional 357,000 sq ft of sales area.

Store extensions and refurbishments planned 2000-2001
Extensions at 35 stores will add another 360,000 sq ft of sales
area. In addition, we plan to refurbish 15 stores.

Sainsbury’s Bank opened in February 1997, the first bank to be
opened by a British supermarket. It is a joint venture owned
55 per cent by J Sainsbury plc and 45 per cent by Bank of
Scotland PLC, offering telephone banking 24 hours a day. To date
it has attracted over 1.25 million customers.

Sainsbury’s Bank attracts customers via Bank Information Points
which have been established in branches of Sainsbury’s
Supermarkets. Sainsbury’s Supermarkets also has 12 Sainsbury’s
Bank outlets where customers can arrange financial services
face to face and obtain information from specially trained staff.
Customers will be able to access information at
www.sainsburysbank.co.uk, a new website which is due to
be launched in June. Customers can call for information free
on 0500 40 50 60.

Sainsbury’s Bank continues to research and launch new
products and its current product portfolio includes instant
access savings accounts; bonds; ISAs; investment products; loans;
mortgages; credit cards; a car purchase plan and a number of
insurance plans, including travel cover; pet insurance; and home
and contents insurance.

£13,267m

Sales (incl. taxes) 52 weeks

J Sainsbury plc Annual report and accounts 2000

a part in the lives of 15 million customers a week.
home to the best service and value in banking.

Shaw’s Supermarkets Inc. has been fully-owned by J Sainsbury plc
since 1987 and prior to that was part-owned from 1983. Shaw’s
serves over four million customers a week at 168 stores in the six
New England states of the USA.

Homebase was founded in 1979 and opened its first store in
1981. In 1995 the Company bought Texas Homecare and the
acquired stores were converted to the Homebase format.

In 1999–2000, Shaw’s acquired Star Markets. This acquisition
introduced 52 new stores into the Shaw’s group of which eight
were subsequently sold.

Like Sainsbury’s Supermarkets, Shaw’s places an emphasis on
high quality food at value for money prices, and is constantly
improving its range of fresh foods. The Company offers 50,000
different lines with up to 35,000 per store at any one time.
Over 5,000 popular own brand products account for almost
40 per cent of sales. Shaw’s employs 28,000 associates.

New stores opened 1999-2000
Three new Shaw’s stores were opened at Gorham and North Conway
in New Hampshire and Barrington, RI creating 113,000 sq ft of
sales area.

New stores planned 2000-2001
Gilford, NH; Taunton, MA, and Canton, MA creating an additional
141,000 sq ft of sales area.

In 1999–2000 Homebase acquired Hampden Group PLC
(previously an associate). Hampden has 10 stores (seven in
Northern Ireland and three in the Republic of Ireland).

Homebase serves over 1.5 million customers a week at 297 stores
throughout the UK employing 17,000 people of which 12,000 are
part-time.

A Homebase store stocks on average 25,000 DIY, home
enhancement and gardening products. There is a growing
emphasis on lifestyle, design and decorative goods.
The Homebase own brand accounts for 35 per cent of sales
and has a reputation for quality and value for money.

New stores opened 1999-2000
Hamilton; Dundee and Greenwich creating a total of 191,000 sq ft
in new sales area.

New stores planned 2000-2001
Six new large format stores are planned at Bristol; Enfield;
Glasgow; Ipswich; Kidderminster and Norwich. A further four
standard format stores are planned at Frome, Marston Road;
Sittingbourne; Worle and Wrexham, Plas Coch. These will add
a total new sales area of 912,000 sq ft.

$3,857m £1,428m

J Sainsbury plc Annual report and accounts 2000

Group Chief Executive’s review

At the time of writing this report it is three months since I
rejoined Sainsbury’s. In the 15 years since I left, the market
has become increasingly more competitive and we have lost
our market leadership. However, the challenge to come back as
Chief Executive was irresistible. I am passionate about Sainsbury’s
and everything that it stands for. One of the things that I said
when I was appointed was that my purpose was to make shopping
at Sainsbury’s special again and also make working at Sainsbury’s
special too.

costs, this will result in an improving trend in profits in the main
supermarket business.

We have put in place a robust implementation programme in
the Sainsbury’s Supermarkets business and I think that with
a series of marketing and trading initiatives, as well as a drive
to upgrade store standards, you will see a difference during the year.
In addition, we are accelerating our home delivery and Internet
shopping service to offer much wider geographical coverage.

In my first three months, I have concentrated on learning what
has gone on in the business in recent years and talking a great
deal, or rather listening a great deal, both to customers and
colleagues. It has become quite clear to me from literally
hundreds and hundreds of letters and e-mails from customers
and colleagues that there is enormous affection for Sainsbury’s
and that people want us to get back on top. There is a huge
commitment from within to get back to being special.

What do I mean by being special? It’s about food of the highest
quality, good value for money, outstanding store standards and
service. It’s also about interesting new ideas in food and advice.
What I have outlined in my strategy for the supermarket business
going forward is to re-establish our position by doing even better
the things we have always been good at. Sainsbury’s has always
aimed to appeal to all customers and an intention to widen the
quality gap against our competitors does not mean losing any
price competitiveness. When you improve the quality but remain
competitive then you improve the value for money. That has been
at the heart of the trading philosophy of Sainsbury’s for 130 years.

We need to invest over the next three years to renew and improve
our infrastructure. Our better stores are extremely good but there
is a bigger gap than there should be between the bottom and
the top of the range. We need to accelerate the programme to
refurbish and extend stores to improve the quality of shopping
wherever possible.

Industry benchmarking studies show that several of our major
competitors are more cost-efficient at getting goods to the shelf.
The reason for this is because we have not invested sufficiently
in our distribution and systems in recent years. We need to
re-engineer the business by investing in and upgrading our
distribution network and our systems. We have said that this
will take a little time to pay back in terms of profits but I am
confident that with the other actions we are taking to improve
our competitiveness, to streamline the business and to reduce

Our new London Colney store is a good example of how larger
stores will operate in the future and our Centraland Local
formats, designed with specific customer requirements in mind,
have also been successful. Last year we opened 20 stores
(including four Locals), extended 22 and refurbished 16.
We will be accelerating this work, building 13 new supermarkets,
25 new Locals, extending 35 stores and refurbishing 15 this year
as part of a three year programme of investment in extensions
and new stores.

In many ways we regard the issues raised by the Competition
Commission as a distraction from our real goal – to have
outstanding relationships with our suppliers and partners and
provide customers with the greatest choice at the optimum price.
However, we are developing our own voluntary suppliers’ code
of conduct as well as cooperating with an Institute of Grocery
Distribution initiative. We do believe that UK food retailing
is amongst the most competitive in the world.

J Sainsbury plc is made up of a number of businesses, not just
the Sainsbury’s Supermarkets business. Homebase has shown
real sales growth this year and our US supermarket business,
Shaw’s, has shown a healthy increase in profit. In addition, the
opportunities in Sainsbury’s Bank are very exciting.

However, the key priority in the next couple of years must be
to turn round the performance of Sainsbury’s Supermarkets.
I had to make a number of management changes but I am now
happy that we have the right team in place, both at the Group
level and in the main operating companies, to take the business
forward. We have also streamlined the committee structure and
clarified the interface between the Group and the operating
companies to expedite decision making. As part of this, we are
creating a property company to manage our property portfolio
more aggressively to create value across our existing estate,
including our head office complex, by radically reviewing
development potential.

J Sainsbury plc Annual report and accounts 2000

I believe the fundamental attraction of Sainsbury’s over
the years for its customers has been the ability to offer
quality at competitive prices. We are determined to make
shopping at Sainsbury’s special again. There is a huge
commitment in the business to get it right.

E-commerce initiatives
One strategic objective is to increase our e-commerce activities
across the Group. I have never, in my career, seen quite as much
change taking place in business as now. One area that has not
been fully appreciated is the opportunity to streamline processes
through the use of business-to-business Internet initiatives.
We were the first UK retailer to invest in GlobalNetXchangewhich,
through Oracle, already has the technology in place to help us
reduce costs, streamline systems and improve product availability.
It will also allow us to leapfrog today’s systems into the next
generation, partly by working with our partners.

The other part of e-commerce, which is about business-to-
consumer, is the one that is more visible. In June Sainsbury’s
Supermarkets will launch a major website, Taste for Life, which
will be a huge source of recipe ideas and product information
for customers and interested consumers.

We’ve also recently announced our intention to form a joint
venture with Carlton Communications. We are seeking to create
a world-leading partnership between Sainsbury’s with our
expertise in food and wine, and Carlton with their expertise in
media. Carlton is contributing their website ‘Simply Food’ as well
as their interactive digital TV and cable interests, particularly
the Carlton Food Network.

Linked into this will be Sainsbury’s new upgraded home delivery
and Internet shopping service Sainsbury’s to You. We are about
to open a new highly automated picking centre in West London
to serve customers within the M25. We have also announced
plans to accelerate development outside London by increasing
the number of stores that can serve customers and by the
rapid roll-out of intermediate picking centres. Our aim is to
cover 60 per cent of the UK within a year.

We are taking the opportunities of e-commerce very seriously
throughout the Group and will shortly be launching websites for
Homebase and Sainsbury’s Bank, which will enable people to shop
and arrange personal finance on-line. We are giving a lot of
thought to the implications of the growth of Internet shopping on
the kind of stores that we operate and what customers will be
looking for. I believe that the pattern of shopping will change and
that the ability to offer different formats of store, all under the
Sainsbury brand, will be a considerable advantage. If people move
to more replenishment shopping through home delivery and the
Internet, there will always be a significant group of customers who
enjoy visiting stores and selecting their own fresh foods. Formats

like Central,with a much higher proportion of perishable foods,
prepared foods and ready meals, and Localoffering convenient
top-up shopping will, I think, come into their own.

Other Group companies
Homebase produced excellent sales growth during the year and,
adjusting for the timing of Easter, which is a key trading period in
this sector, operating profit increased by 9.1 per cent. Management
is clearly focused on its unique market positioning and successful
value positioning. Homebase is now a substantial number two
in the UK DIY market with many opportunities for growth, both
home and abroad. Its large store trials have been successful and
we are embarking on a major roll-out programme. E-commerce
will provide another significant growth opportunity.

In the US, Shaw’s has benefited enormously from the successful
integration of Star Markets to strengthen its position as New
England’s second largest food retailer. Including Star Markets,
operating profits increased by 46 per cent to $129 million.
Shaw’s is developing an attractive store format based around
a strong fresh produce and food and drug concept, a format
which is competing well in the competitive US market. Growth
prospects are encouraging with further benefits expected from
the Star Markets acquisition.

Sainsbury’s Bank has outperformed expectations, reporting its
first operating profit of £3 million and there are opportunities
to grow. We are very encouraged by the response to the trial
of staffed units in certain stores and the opportunities to use
more fully the Sainsbury’s and Homebase databases.

Together we will make Sainsbury’s special again
Returning to my main point, however successful Homebase,
Shaw’s or Sainsbury’s Bank are, we will only get our profits
moving upwards again and shareholder value improving, if
we can restore the health of our main supermarket business.
I recognise the scale of the challenge but I believe that there
is a huge commitment in the business to get it right. We are
all determined to make Sainsbury’s special again for our
customers, our staff and our shareholders.

Sir Peter Davis
30 May 2000

J Sainsbury plc Annual report and accounts 2000

1
Rosemary Quadrato bread, one of three new Italian
breads from Sainsbury’s, is among a new range launched
during the year. Most recently launched is Dill Barbari bread,
stonebaked, unleavened bread with a strong Middle Eastern
influence.

Sainsbury’s Indian Takeaway Bagoffers a quick meal for

2
entertaining and is typical of the superb quality and value
that has earned us leadership in the ready meals sector.

Sales of Fresh ‘n’ Ready products continue to grow.

3
What could be more delicious than this melon and
strawberry salad, one of 111 products in the range?

4 North American lobster is sold in all Shaw’s locations.

Customers increasingly want a blend of fresh, quality food
that saves them time as well as delivering excellent value.
Our passion for creating good food that meets these needs
has made us leaders in today’s rapidly growing food sectors.

Recapturing a
passion for food

The growing popularity of organic food reflects
people’s desires for simpler, less processed foods.
Asparagus, salmon and pasta are just three of more
than 600 organic products now available in this
growing sector which Sainsbury’s leads.

Our aim is to give our staff the tools, the time and above all
the confidence to serve our customers well. The confidence
to catch the customer’s eye and work with a smile. We believe
if we look after the customer, success will follow.

Taking pride in
customer service

1
David Simons, a specialist electrician at Greenwich
Homebase, one of the team of specialists in areas ranging
from interior design to gardening that we employ to help
our customers make the right choice.

2 Meat cutter Michael Haslam in the Shaw’s Barrington, RI
store proudly displays his latest creation, steak florentine,
offered to customers from the meat service counter.

3
People like to discuss their financial affairs with
informed staff. Louise Haggas, customer service assistant,
at our London Colney store, works in one of 12 in-store units
currently being tested by Sainsbury’s Bank.

Sainsbury’s Choices programme offers colleagues the

4
opportunity to learn new skills – and put them into practice
at work. Karen Bush from Hampden Park store in Eastbourne,
uses her newly-acquired signing skills to communicate with
hearing-impaired customers and colleagues.

Rachel Swain, customer services assistant, at our
Greenwich store wears one of the headsets we
introduced into 200 Sainsbury’s stores. They really
help speed things up at the checkouts by reducing
queue lengths and resolving customer queries quickly.

1
On Sainsbury’s Bank’s new website www.sainsburysbank.co.uk,
due to be launched in June, customers will be able to obtain quotations,
receive additional information and apply for loans on-line.

2 Our membership of GlobalNetXchange is a step change in the way
we and our suppliers conduct business and it will create greater
efficiencies for buyer and seller. Sainsbury’s has already held a number
of global on-line reverse auctions. We aim to purchase 75 per cent of
our goods in this way.

3 Sainsbury’s to You, our revamped home shopping service, provides
customers with an easy, time-efficient way to do their weekly shopping
– guaranteed to deliver Sainsbury’s quality direct to the doorstep.
www.sainsburystoyou.co.uk is a simple, fast, easy-to-use new website
where customers can use ready-made shopping lists, uniquely
customised for them. It also provides useful information on new
products and promotions.

4
Sainsbury’s has invested £11 million in revolutionising the way we
interact with our customers on-line – www.tasteforlife.co.uk is an easy-
to-use and inspiring website containing 4,000 recipes, a comprehensive
wine section and an essential guide to organic food in the ‘Organic
Village’. This new site will be launched in June and provides a superb
platform for the future as we work with Carlton Communications to
establish a leading presence in the new Internet and interactive TV
channels of communication and commerce with our customers.

5 Homebase is developing an £8 million home and garden website
which will feature home shopping.

We’re expanding our business on-line, enhancing the ways
customers can shop and bank with us. We’ve launched a bold
business-to-business venture that will radically change the way
we buy goods, creating greater efficiencies and cost savings.

Seizing e-commerce
opportunities

Homebase
new site
coming soon

Our award winning store on the Greenwich
peninsula is a leading edge energy saving design.
Winner of the environmental category at the
Property Awards 2000, it uses natural ventilation
and daylight to create a bright and comfortable
shopping environment. Solar and wind power
are just two of the environmentally-friendlier
technologies employed.

1 When Sainsbury’s opened its Local store on London’s
Paddington station it became the first major supermarket
to serve the public from a railway concourse. The store
serves the 71,000 busy people who pass through the
station each day and are looking for quick and easy meals.

The Shaw’s Barrington, RI store design fits comfortably

2
into a traditional New England village and sells around
35,000 different products to the local community.

3 Our new large format Homebase is a home improver’s
dream come true. Spurred on by popular TV makeover
programmes people are decorating more often and more
adventurously. Our 68,000 sq ft store at Greenwich offers
inspirational ideas for home and garden with new textile,
flooring and lighting ranges.

The stock in our Central store in London’s Tottenham

4
Court Road changes throughout the day. Aisles bearing
sandwiches for city workers are restocked with ready meals
and wine for homebound shoppers. The store’s layout is
also designed to make top up shopping a simple task.

5 Our newly refurbished store at London Colney in
Hertfordshire is setting the style for our large supermarkets.
The accent is on choice and ease of shopping. The new layout
enables both express shopping and full weekly shopping. The
store has the widest choice of any Sainsbury’s in the country.

Today’s changing lifestyles mean we are shopping in different
ways. From a quick top up visit to weekly bulk shop, for a
lunchtime snack or a quick evening meal . . . not to mention
that complete home makeover . . . our store portfolio is
meeting the needs of every kind of customer with some
of the most innovative stores around.

Designing our stores to
meet customer needs

Operating review: Sainsbury’s Supermarkets

We are working hard to refresh the Sainsbury’s brand, developing new formats
to suit our customers’ changing shopping habits. We are recapturing our
passion for food and working to improve the service we give to customers.

Sainsbury’s Supermarkets – responding to customer needs
Sainsbury’s Supermarkets experienced a difficult year in an
increasingly competitive environment. Underlying operating profit
of £541.5 million was 27.2 per cent lower than the comparative
52 week period, despite sales increasing by 1.8 per cent to
£13.3 billion.

Our aim is to make Sainsbury’s special again and, last year, we began
our programme of refreshing our brand. The foundations were laid
by responding to our customers’ desire for more healthy foods, fresh
foods, ready meals and organic foods. We also developed a range
of store formats, such as Sainsbury’s Localand Sainsbury’s Central,
to meet customers’ needs in specific locations. We continue to
encourage our colleagues to use their own individual talents in
the workplace for the benefit of our customers.

Maintaining a lead on quality
Sainsbury’s customers want and expect a high standard of food.
We go to great lengths to ensure that they get the very best, with
ingredients of the highest quality and exacting technical standards.
This policy has put us in a leading position in the major growth
areas of food retailing.

Perhaps the best example is the lead we have taken in the fast-
growing organics market. Over 600 products, which we plan to

raise to 1,000 during this year, bring us sales of over £3 million
a week. Sainsbury’s sells nearly one-third of all organic products
bought in the UK, giving us clear market leadership. The range
grows ever broader – we were the first in the world to sell organic
gin, for example. The range is increasingly popular – for example,
over 30 per cent of our baby food sales, and in many stores
over 20 per cent of milk sales, are now organic. Underpinning this
success is our encouragement and support for suppliers, ranging
from financial guarantees to milk producers and SOuRCe
(Sainsbury’s Organic Resourcing Club), our networking partnership
with organic suppliers, to smaller initiatives like our work with
banana planters in the Windward Isles.

In response to the growing trend for healthier foods, we’ve also
been actively reducing the amount of salt in our own brand ranges.
Our low fat Be Good To Yourselfrange, launched in May 1999,
has sales of over £100 million a year, placing it in the UK’s top
20 consumer brands. We also gained market leadership in ready
meals, one of the fastest growing areas of our industry, and we
will continue to develop quality meals in response to customer
demand. Another success is our partnership with leading sushi
company Yo! Sushito put our Yo to Go Sushiinto 200 stores.
This venture is delivering exceptional results.

Other notable hits with our customers last year (all with sales
increases of over 30 per cent) include our market leading
Fresh ’n’ Readyrange of prepared produce, Italian breads, our

Now the UK’s leading retailer of
champagne, our market share of
beers, wines and spirits increased
over the year. Particularly
successful was Australian wine.

Sushi – this year’s most fashionable food – is enjoying fast
growing sales and is set to become even more popular.

J Sainsbury plc Annual report and accounts 2000

A successful local product, Hermitage Farms
Herefordshire organic Red Pippin apple juice
demonstrates our skill in working with
small suppliers.

Reward Pointterminals feature in many stores offering customers
discounts relating specifically to their regular shopping habits. Our
loyalty clubs and magazines are another way we offer customers
information, advice and special offers on items we know they
care about. During the year we added the Drinks Clubto our
successful 0-5s Cluband Pet Club. Our bright new branding
and Making Life Taste Betterstrapline has given a fresh and
consistent look to all our communications. This has been well
received by colleagues and customers alike.

Putting a smile on colleagues’ faces
During the year we continued our programme of change aimed
at releasing the talents of our colleagues, helping them to
focus on the customer, and restoring their pride in working
for Sainsbury’s. It’s clear to us that new and exciting working
environments add to this pride. This will grow as we increase the
pace of our programme of developing and extending stores. It is
also why we’re keen to tell everybody about our acknowledged
successes, such as organics and ready meals, our record in
protecting the environment and supporting farmers, and new
initiatives, such as our innovations in e-commerce.

Meanwhile we’re also concentrating hard on the changes we make
in store. We’re increasing the number of colleagues available
to deal with customer enquiries. We’re stepping up investment
in management and colleague training, and simplifying our
processes and back room operations, so that when we do identify

Our Islington store in North London was one of 38 stores which were
either extended or refurbished during the year and which are now enjoying
increased sales.

J Sainsbury plc Annual report and accounts 2000

Launched in May 1999, our Be Good to Yourselfrange
has gone from strength to strength thanks to its
superlative quality. So good in fact that Best magazine
named Sainsbury’s as ‘Healthy Eating Retailer of the Year’.

Sainsbury’s Supermarkets analysis

Sales (incl. taxes)
Operating profit2
Number of stores
Sales area (000 sq ft)
Full-time employees
Part-time employees

2000

19991
£13,266.7m £13,033.5m
£743.8m
418
12,571
42,883
96,327

£541.5m
432
13,055
40,900
97,646

1 52 weeks to 3 April 1999.
2 Before e-commerce costs, Year 2000 costs, profit sharing and exceptional costs.

competitively priced CD selection, and southern hemisphere
wines, especially Australian. Our floral range was relaunched,
and last Mother’s Day over one million mums received plants or
flowers bought from Sainsbury’s. We also introduced a policy of
stocking more regional lines from small suppliers. This has been
particularly successful in sales of local sausages, and even
extends to items like organic Red Pippin apple juice. Only available
at our Hereford store, we sell three times as much there as our
standard organic apple juice.

Taking a lead on issues
We’ve always recognised the need for large retailers to be
responsible in their relationship with suppliers and the environment,
and on other issues close to customers’ hearts. In response to
consumer concerns, Sainsbury’s Supermarkets became one
of the first retail chains to eliminate genetically-modified (GM)
ingredients from all its own brand products.

We also enjoy a good relationship with British farmers
and we’ve been working very hard with the National
Farmers Union (NFU) to maintain this, supporting them
in many ways. Our commitment to buying British

wherever we can remains, and at prices realistic for all parties.
Of the food that can be grown in this country, we source 90 per
cent from Britain and customers can choose British meat at all
times. We’ve been fully supportive of the NFU’s British Farm
Standard Red Tractor logo by promoting it in our stores.

Closer relationships with customers
Our Reward Cardgoes from strength to strength, and last year
we issued a new look card with special promotions and extra
benefits available with third party companies. Our interactive

Operating review: Sainsbury’s Supermarkets

We are applying the
knowledge gained from our
experience at Greenwich as we build
new stores and remodel others.

Two smaller styles of Sainsbury’s
store, Localand Central, both had
successful years beating tough sales
targets. Both are good examples of
releasing the talents of colleagues within
our business. Colleagues all feel part of
something new and successful and the
attitude is infectious. Centralsexist to serve people
working or living in busy urban locations, with a layout
designed to cater efficiently for customers wishing to do either
full grocery shopping or just a top up, and for the thousands of
customers simply buying lunch daily. The format is flexible – for
instance part of the sandwich display reverts to ready meals after
lunch in preparation for late afternoon shoppers. We’ll be adding
to our portfolio of Centralsduring the year ahead.

The wellbeingsection at our London Colney store brings together over
300 products normally found in specialist health stores. The unique layout
with wooden flooring and contemporary signage creates a calming
environment from which to select a diverse range of products.

opportunities for cost savings, customer service is enhanced
rather than affected.

Efficiency through e-commerce
We have joined Sears, Carrefour and Oracle as an equity holding
Charter Member of GlobalNetXchange, a worldwide Internet based
exchange for retailers. This will rapidly increase cost savings and
efficiencies in our business while increasing choice and value for
customers. GlobalNetXchangeis just one of a series of advances
which will make e-commerce an integral part of our business.

A Sainsbury’s Localstore is on average just 3,000 sq ft and, like
a Central, is designed for a specific location and set of shoppers.
For instance, the Victoria Localis trading very successfully
without it taking sales from our existing supermarket just
400 yards away. Locals aim to succeed by bringing a quality
and value for money option into the large convenience store
market, and we plan to open 25 more in the year ahead.

A new generation of Sainsbury’s stores
We’re determined to ensure that there is a Sainsbury’s to suit
everyone – from home delivery ordered by Internet or phone,
to a whole variety of types and sizes of store. In keeping with
our commitment to open stores which suit distinct locations
and shoppers, we were delighted to open a 3,000 sq ft Sainsbury’s
Localin the very same month that we reopened our 86,000 sq ft
store in London Colney.

The new look London Colney store is a good example of how our
larger stores will operate in the future. It draws heavily on
knowledge gained from our successfully remodelled Calcot store,
with the focus well and truly on fresh food and prepared meals.
There is also the widest choice of any Sainsbury’s in the country,
with non-food ranges like stylish childrenswear, games and toys,
all part of today’s regular family shopping trip. London Colney
also incorporates our first wellbeingshop – an idea developed
in our American supermarkets – a collection of organic foods,
herbal remedies and household products normally found only
in specialist health stores.

Following the natural theme, our award-winning new supermarket
in Greenwich is the trial for many ingenious techniques and
designs aimed at reducing in-store energy consumption by as
much as 50 per cent. The store makes use of solar and wind
power, natural ventilation and lighting. As well as being
environmentally-friendlier, these technologies have the added
benefit of making Greenwich a very pleasant place to shop.

J Sainsbury plc Annual report and accounts 2000

Completing our range of store formats are Small Supermarkets.
Very often situated in country towns, the focused range of goods
on offer in the 12–20,000 sq ft of sales area varies enormously
from shop to shop depending on the specific requirements of
customers in each town.

KidZone, the new 2,000 sq ft section at our extended Kiln Lane, Epsom store,
is the first complete children’s shop in a UK supermarket.

The successful relaunch of our floral
range saw sales grow by10 per cent.

A new way to shop at Sainsbury’s
The other way of shopping with Sainsbury’s is to have goods
delivered by Sainsbury’s to You. Customers within the M25 area
will be served from our new picking centre in Park Royal which
opens in the summer. From a combination of warehouses and
in-store order picking, we’ll soon be able to offer the service
across a wider area. Customers are able to telephone their orders
as well as visiting www.sainsburystoyou.co.uk. We’ll also be using
the website to offer information, advice and deliveries for special
product areas, such as wine, organics and entertaining at home.

Significant improvements from extensions
As well as devising new types of store for Sainsbury’s customers,
we are accelerating our programme of extending or refurbishing
older stores with 22 extensions last year and 35 planned for the
current year. The changes are far more than cosmetic – we add
to choice and services, giving greater prominence to fresh foods,
and with more space we also make it easier to shop. As a result of
applying what we learn from each new store and extension, both
in terms of building costs and sales patterns, sales increases have
been well ahead of expectations and well ahead of the amounts
needed to justify the extensions.

Sainsbury’s Egypt
Sainsbury’s Egypt operates 100 stores, nine of which now bear
the Sainsbury’s name on their fascia. All are situated in and around
the Cairo metro area. The first of the Sainsbury’s branded stores
opened in September 1999, testing the Neighbourhood Store
concept based on convenience and value, and all openings have
shown strong sales.

In January 2000, we opened our first Food, Family & Home
store, which is much larger, and has a focus on quality and choice.
Our own brand ranges have been very popular, with one of the
largest successes being freshly squeezed juices such as orange,
strawberry and mango.

Our rapidly expanding product portfolio,
Internet site and increasing in-store
presence, are all part of our commitment
to provide a comprehensive range of
easy-to-use financial services.

Sainsbury’s Bank – instant access to great products adds up
to a healthy profit
Over the last three years, Sainsbury’s Bank has attracted deposits
of £1.6 billion and lent or made commitments of £1.5 billion with
1.25 million customers. As expected, we made a profit last year,
the first supermarket bank to do so. Under Chief Executive
Hamish Taylor, we also added many new products to our portfolio
during the year, and will continue to expand our innovative
product range over the coming year.

To make our offer even more consumer-friendly, we’ve made
access to the Bank’s products even easier. To complement our
Bank Information Points in supermarkets and free phone lines,
we are testing 12 staffed in-store sales units which are receiving
very positive feedback. If successful, we intend to roll-out this
additional in-store presence, offering a solution for customers
unable to visit a High Street bank. Our new Internet site at
www.sainsburysbank.co.uk, due to be launched in June 2000, will
also offer customers another way to conduct their financial
affairs. We are continuing to install more Sainsbury’s Bank cash
machines, and believe firmly in not charging for withdrawals.

We’re not just popular because we’re convenient – our products
win awards. Your Moneymagazine named us as best direct home
and contents insurance for the second successive year, and best
direct personal loans provider. Sales and administration of our
loans now takes place in a new call centre in Chester, where
we’ve employed experienced financial services telesales staff.

The product portfolio itself now offers five choices
of fixed or variable rate mortgages, four different
savings bonds, and we are testing an ISA.

We launched drive, a popular
car purchase plan, which includes
sourcing the car as well as arranging
the innovative financing scheme.

J Sainsbury plc Annual report and accounts 2000

Operating review: Shaw’s Supermarkets

Shaw’s focus on fresh food and its highly successful own brand programme,
combined with the best ideas and knowledge from Star Markets, has
contributed to Shaw’s strengthening its position as the second largest
food retailer in New England.

Shaw’s – fresh ideas delivering outstanding success
Shaw’s Supermarkets in New England has again delivered excellent
results in the face of significant competition. Under Ross McLaren,
Chief Executive Officer, we achieved nearly $4 billion sales and
over $100 million profits. Highlight of the year was the acquisition
of Star Markets in June 1999, which added 44 stores in the Greater
Boston area. This strengthened our position as the second largest
retailer in the New England market.

Greater choice for customers
Integration of Star Markets has been successfully completed.
The key to this achievement was our ability to blend the best
ideas from both companies to improve our overall offer to
customers. The acquisition brought their wealth of knowledge of
pharmacy operations, natural foods, prepared foods and, to meet
the diverse needs of shoppers, micro merchandising. This is the
method of offering different products – such as popular ethnic
foods – store by store, to best meet local demands.

All new Shaw’s stores feature spotlighting in
produce sections which, with over 850 lines
on offer, makes for a dramatic display.

J Sainsbury plc Annual report and accounts 2000

Shaw’s Supermarkets analysis (including Star Markets)

Sales (incl. taxes)
Operating profit2
Number of stores
Sales area (000 sq ft)
Full-time associates
Part-time associates

2000

19991
$3,856.7m $3,069.0m
$88.3m
127
4,410
7,675
12,796

$128.9m
168
5,617
8,864
19,019

1 52 weeks to 3 April 1999.
2 Before Year 2000 costs, amortisation of goodwill and exceptional costs.

A range of traditionally
popular American
squashes appeals to
New England customers.

With Star Markets came the Wild Harvestbrand which provides
natural and organic foods in selected stores to a rapidly growing
market. This concept is now being tested at Sainsbury’s London
Colney store in the UK as wellbeing. Another successful introduction
from Star Markets is the A La Carterange of prepared meals.
This range offers high quality fresh foods that require a minimum
of preparation time – a relatively new concept to American
consumers even though it is already popular in the UK.

During the past year, Shaw’s introduced its first bi-lingually
labelled range of Hispanic beans. This range further demonstrates
the growing diversity of the communities we serve and our ability
to respond to a changing market place. The World Marketis a
grocery section dedicated to offering a variety of ethnic products.
Hispanic, Italian and lndian are just a few of the choices for ethnic
shoppers and adventurous cooks in search of new ingredients.

Responding to the continuing demand for
salsa, now outselling ketchup in the US,
Shaw’s introduced three new flavours to
their own range of 15 salsas during the year.

Own brand improvements and innovations
We evaluated over 800 non-perishable Star Markets and Shaw’s
own brand products for quality and value, and are now in the process
of converting all of the best product specifications and packaging
to the Shaw’s brand. Introduction of Shaw’s own brand products
into Star Markets will be completed over the next two years.

A good example of our own brand innovation is the Shaw’s
Safe Sciencerange, eight cleaners and detergents launched in
September 1999. These unique products were well received by
our customers and we aim to introduce similar ranges into other
own brand categories.

With own brand innovations plus product introductions from
Star Markets, there has been a large increase in choice for
customers, with the balance continuing to move in favour of
fresh foods – all stores now offer over 850 lines of fresh produce.
We are also introducing our new range and store format ideas
to all extended and remodelled stores and we have incorporated
them very successfully in new stores such as Barrington, RI.

Commitment to associates
Shaw’s is committed to developing its associates with
comprehensive training and also has a number of initiatives under
way to strengthen the leadership abilities of our management team.
These include Shaw’s University 2000 offering specific career
tracks for the various areas of the business and competency models
which identify traits and abilities appropriate to key positions.

Cathy Leet of our Cedarville Star Market is a candidate for
the President’s Award that recognises outstanding customer
service, teamwork and overall performance. Starting with the
company 24 years ago, Bill Oliver, now manages consumer
research for Shaw’s.

Among the most popular convenience foods available from the
A La Carterange of prepared meals is pizza. In addition to pizza,
in-store chefs prepare foods on grills and in woks for customers
looking for ready-to-eat meals.

Shaw’s Safe Science
products enjoyed high
sales thanks to customer
satisfaction with their
cleaning performance.

Shaw’s quickly introduced Star Markets’ highly successful Wild Harvest
brand and store-within-a-store format into selected Shaw’s stores during
the year.

Operating review: Homebase

More and more people are turning to Homebase for ideas and solutions
to enhance their homes and gardens. We’re making their lives easier
by offering outstanding choice, excellent value for money and inspirational
new products and services.

Homebase – clear differentiation in a growing market
Homebase, under Managing Director, Kate Swann, enjoyed
another successful year in a buoyant market, with like-for-like
sales growth ahead of our main competitors and the market in
general. This was delivered by building on a market positioning
distinctly different to that of our competitors, combined with our
strong value for money platform which we introduced at the start
of the year.

Sales at Homebase increased by 10.0 per cent to £1,428 million
with a decrease in operating profit before e-commerce costs
of 13.4 per cent to £64.6 million. Given the importance of Easter
trade to Homebase, it is necessary to look at comparable trading
periods. On this basis, sales show an increase of 13.2 per cent on
the previous year, including an increase in like-for-like sales of
12.1 per cent and an increase in operating profit of 9.1 per cent.
(See Financial review, page 24).

The market is still expanding as the level of consumer interest
in home and garden enhancement continues to grow, especially
at the more inspirational end, which encompasses interior design
and furnishings. More people are decorating more rooms, more
frequently and want to find everything to complete the job in
one place. Our positioning – home enhancement rather than
traditional ’nuts and bolts’ DIY, makes us uniquely placed to take
advantage of this by offering a complete home enhancement
solution and pleasurable shopping experience. We are developing
this opportunity still further by moving to larger stores.

Our new outlets at Dundee and Greenwich are around 70,000 sq ft,
and offer more expansive ranges in home enhancement and
gardening as well as specialist advisers, and a new layout with
substantially improved merchandising concepts. Both stores
launched very successfully and are trading ahead of targets,
with sales intensities far greater than our previous stores in
the same areas. Initial consumer research results reinforce the

The home enhancement market is
growing thanks to consumer interest
in interior design. We have added
curtains, textiles, bedding and
flooring ranges at our larger stores.

Homebase analysis

Sales (incl. taxes)
Operating profit2
Number of stores
Sales area (000 sq ft)
Full-time employees
Part-time employees

2000

19991
£1,428.1m £1,297.9m
£74.6m
288
10,851
6,006
12,219

£64.6m
297
11,339
5,215
12,005

1 52 weeks to 3 April 1999.
2 Before e-commerce costs, Year 2000 costs, profit sharing and exceptional costs.

The garden is now an outdoor
room. Our garden centres
stock a range of stylish garden
decorations and plants, like
this cactus.

J Sainsbury plc Annual report and accounts 2000

Quarry tiles are one of the 400 products in
our Value Basicsrange which is positioning
Homebase as a value brand in a price
conscious market.

New layouts and new merchandising concepts, like this
cookshop, are a feature of our larger stores.

clear opportunity that exists to provide all DIY, gardening and
home enhancement needs in a one-stop-shop concept.

Building on our experiences at Dundee and Greenwich, and
strengthening this still further, we opened the first Homebase
megastore at Braehead, Glasgow on 26 May. This store has around
100,000 sq ft of internal sales area and features major increases
in our DIY range as well as substantial improvements in our new
home enhancement categories. In the autumn we will open
a megastore at Ipswich with 130,000 sq ft of indoor space
and an outdoor garden centre with 18,000 sq ft of space.
Further megastores will follow.

Improved ranges and better value
New ranges and promotional activity on Outdoor Livingproducts,
garden furniture, as well as Christmas products gained us substantial
market share in these areas. Our TV campaign, aimed at both men
and women and featuring Neil Morrissey and Leslie Ash, produced
our best-ever awareness ratings; it continues to emphasise our
positioning as a store to visit for all home and garden
enhancement needs.

We have also been watching customers’ priorities closely and
adjusting our ranges in response to their needs and changing
market dynamics. We closed our loss making kitchen business
to make room for more flooring, rugs, cookshop items and textiles.

The market remains extremely price conscious and we have
successfully underpinned our value position by launching our
Value Basicsentry price products. We have successfully combined
a clear price challenge statement with excellent value seasonal
promotions which meet the demands of key markets at key times
of the year. We have supported our new value offer both in-store
and through advertising.

Focus on infrastructure
We are also investing heavily in the business infrastructure
required to manage our multiple channels. Recognising the
need for flexibility in the supply chain, we have transferred the
operation of two depots to Tibbett & Britten, who also operate
an international supply centre to manage our imported goods
for us. We continue to improve efficiency in our business – for
instance establishing partnerships in low-cost sourcing. We have
restructured many of our business processes which will reduce
our cost base by a total of around £30 million over the next
three years, as well as enabling us to simplify our activity in-store
and so improve our focus on serving the customer at the point
of purchase.

More than traditional DIY, Homebase’s home enhancement market
position provides a pleasurable shopping experience with Costa Coffee
bars in larger stores.

J Sainsbury plc Annual report and accounts 2000

Operating review:

Environment and community

Reducing our impact on the environment
We recognise that almost every activity we undertake, from the
way we source and transport food, to the design and operation
of our stores, has some impact on the environment.

Our aim is to reduce this impact through a programme of continuous
improvement – a programme that has led to us achieving national
recognition. In 2000 J Sainsbury plc was named as the leading
food retailer in the Index of Corporate Environmental Engagement
and Performance published by Business in the Environment,
ranking seventh of the 76 FTSE 100 companies surveyed.
A key highlight of the activity which led to this ranking was
the opening of a low-energy Sainsbury’s supermarket on the
Greenwich peninsula.

The Index acknowledges Group performance. Typical of our
sharing of best practice across the Group is support for the
Marine Stewardship Council (MSC) to prevent over-fishing.
Sainsbury’s Supermarkets and Shaw’s were among the first
companies in the world to offer public support to the MSC.
As Britain’s largest fishmonger, Sainsbury’s is proud to offer the
first products to be certified as sustainable by the MSC: Western
Australian rock lobster and Thames herring. Sainsbury’s and
Shaw’s are looking forward to launching canned Alaskan salmon
certified as sustainable later in the year.

Marine Stewardship Council-endorsed
Thames herring, one of the world’s first
sustainable seafood products, sold for
the first time in Sainsbury’s.

N
I
R

S T E W A RD

H
I
P

C O U N C I L

J Sainsbury plc Annual report and accounts 2000

Homebase is forging ahead with stocking timber products
endorsed by the Forest Stewardship Council. We now sell
1,600 products.

Another global issue is timber sourcing, and we have increased
the number of products we sell that are endorsed by the Forest
Stewardship Council (FSC) – the independent organisation that
certifies forests as well-managed. Homebase now sells 1,600
FSC-endorsed products including 500 individual lines of chipboard
most of which is UK-sourced thanks to the Forestry Commission
gaining certification for all UK state-owned forests. Sainsbury’s
also sells the world’s first FSC paper product – its Softrange
of toilet tissue.

Sainsbury’s and Shaw’s donate surplus food to charities.
Sainsbury’s Supermarkets is working with UK charities Crisis
FareShare and Grocery Aid to donate fresh, surplus food – past
its ’sell by’ date but within its ’use by’ date – to homeless people.
More than 100 Sainsbury’s stores and three depots take part
and during the year we donated around 800 tonnes of food.
We anticipate that all Sainsbury’s stores will take part within two
years. Our food donation scheme won the Food Industry Award
for social commitment in 1999.

Shaw’s is a founding member of the Greater Boston Food Bank
and active in six other food banks throughout New England.
The donated food is redistributed to over 3,000 programmes,
providing food to 1.3 million people each month.

Sainsbury’s supports
Express Link-up a charity
which provides computers,
printers and software to
children’s wards. Carol
Vorderman (centre),
the charity’s patron, receives
our donation at Manchester
Children’s Hospital.

Our main focus is on families and young children with particular
emphasis on educational and caring projects, including disability.
Before deciding upon projects, we seek the opinion of colleagues
and customers to ensure we support the charities and initiatives
closest to their interests.

Ambitious nationwide projects include the Homebase Woodlands
for the Millenniumscheme which aims to plant 165,000 trees
in 20 new community woods by 2001. To date the programme
has planted 66,000 trees in eight 15-acre sites. There’s also
Sainsbury’s Equipment for Schoolsscheme launched in 1995,
which has presented schools with 380,000 pieces of equipment,
from crayons to computers, worth a total of £24 million.

As well as the successful food donation scheme, Sainsbury’s and
Homebase also donate to charities many items of second-hand
equipment and furniture when these are replaced due to store
refits. As an example of this, generators, cold rooms, paint and
other equipment were sent to Streetwise, a charity in Humberside
which was opening a detox unit. Sainsbury’s has recently appointed
a Resources Manager to oversee the donation of equipment to
charity, one of the very few UK companies to do so.

Naturally, we encourage staff to share our caring approach
– and we succeed! Over the last three years alone 6,000 staff
at Sainsbury’s Supermarkets have donated £1 million to charity
under our Give As You Earnscheme. And during the past year,
Shaw’s and its associates pledged $1.9 million to its preferred
charity, United Way. This organisation co-ordinates financial
assistance for people of all ages and income levels whose needs
are not covered by traditional healthcare and community service
programmes. Over the last three years, Shaw’s has contributed
more than $4.5 million to the United Way.

Community volunteers, above, sort
donated food products to be distributed
to food pantries, homeless shelters and
safe havens for families from domestic
violence.

Adrian Harris, right, is seconded from
Sainsbury’s to Grocery Aid to assist
with their food donation project.

We are investigating alternative fuels and renewable energy and
have added two further solar-powered refrigerated trailers to our
original prototype. These are now delivering from our depots at
Charlton, Basingstoke and Buntingford. In addition to selling
Liquefied Petroleum Gas from three petrol stations at Beckton,
Cobham and London Colney, Sainsbury’s is trialling Compressed
Natural Gas (CNG) for its delivery fleet. Homebase has taken
delivery of a fleet of two CNG trucks and 36 trailers.

We also gained certification under the European Management and
Audit Scheme for our distribution depot at Basingstoke – the first
UK distribution depot to achieve this. While our Charlton depot
gained certification to ISO 14001.

Our 1999 Interim Environment Report is available at
www.j-sainsbury.co.uk or by calling 0800 387504.

Imaginative support for communities
One of our most worthwhile achievements is creating a rich and
varied community involvement programme that draws on our
retail strengths. We give everything from cash and equipment to
the time and expertise of our staff supporting local and national
causes as diverse as Talking Newspapers, the National Asthma
Campaign and Help the Hospices.

Homebase has a fleet of Compressed Natural Gas powered trucks and trailers which it
uses to deliver plants to its garden centres.

In the Side-by-sideprogramme Sainsbury’s colleagues
give their money and time to help the community.
Bolton store donated £1,000 and helped decorate the
Sunday School room in a local church.

J Sainsbury plc Annual report and accounts 2000

Financial review

Group sales (inc VAT and sales tax) £ billion

Group underlying profit before tax* £ million

2000

1999
1998
1997
1996

17.4

2000

16.4
15.5
14.3
13.5

1999
1998
1997
1996

580
755
728
651
764

* Before amortisation of goodwill, exceptional costs and non-operating items.

Review of performance

1
The Group has experienced a difficult year with underlying profit
before tax (i.e. before amortisation of goodwill, exceptional costs
and non-operating items) declining to £580 million, a reduction of
23.2 per cent on the comparative 52 week period. This was entirely
due to the reduction in profit in Sainsbury’s Supermarkets of
£210 million or 28.7 per cent year-on-year. Shaw’s, including the first
contribution from Star Markets, performed well and Homebase
delivered strong like-for-like sales growth. Total dividend per share
of 14.32 pence is at the same level as last year (after adjusting for
the additional payment for the four extra weeks in that year).

Accounting periods
The previous financial year ending 3 April 1999 covered a period
of 56 weeks. Unless otherwise stated, references to profit and loss
items for the previous financial year including earnings per share
information relate to the 52 week accounting period ended 3 April
1999 (unaudited), whereas references to cash flow items relate to
the 56 week accounting period.

The movement of the date of Easter from year to year distorts
trading comparisons, particularly in Homebase. Whilst sales
and operating profit in 1999 benefited from two pre-Easter
build-up weeks there were none in the financial year just ended.
The underlying trend, adjusted for Easter, is also commented on
where appropriate.

Analysis of operating results
Group sales increased by 6.3 per cent to £17.4 billion. Group
operating profit before Year 2000 costs, amortisation of goodwill,
exceptional costs, and profit sharing was £667 million, £200 million
or 23.1 per cent lower than in the previous year.

Sales in Sainsbury’s Supermarkets (including the integrated
Savacentre stores in both years) increased by 1.8 per cent to
£13.3 billion. The underlying trend is distorted by the timing of
Easter and using comparable trading weeks for the previous year
shows that after an underlying like-for-like sales decline of

0.9 per cent in the first half, performance improved in the second
half with an increase of 1.4 per cent. Sales in the third quarter
benefited from a strong Christmas trading period which was
boosted by sales generated by the Millennium celebrations.
Sales growth in Sainsbury’s Supermarkets was impacted by price
competition and, during the second half, by food price deflation.
During the year, price inflation was around 1 per cent and in the
fourth quarter was 0.6 per cent, due primarily to petrol price
inflation, with underlying food inflation being negative.

The overall cost base increased largely due to inflation in labour
and rents. This, combined with slightly lower sales volumes and
low price inflation, resulted in a decrease in underlying operating
profit (before e-commerce costs, Year 2000 costs and exceptional
costs) to £542 million, a reduction of 27.2 per cent compared
to the previous year. The underlying operating margin was
4.1 per cent of sales compared to 5.7 per cent in 1998–99.
E-commerce development costs amounted to £19.7 million.

Sales in Homebase increased by 10.0 per cent to £1,428 million
with a decrease in underlying operating profit before e-commerce
costs of 13.4 per cent to £65 million. Given the importance of
Easter trade to Homebase it is necessary to look at comparable
trading periods. The most recent year that includes a full Easter
trading period in both the current and comparative years is the
52 weeks to the 4 March 2000 (i.e. four weeks earlier than the
statutory reporting period end). Sales for this period show an
increase of 13.2 per cent on the previous year, including an
increase in like-for-like sales of 12.1 per cent, and an increase
in operating profit of 9.1 per cent. The improvement from the
figures set out above is partly due to the timing of Easter and
partly due to a particularly strong trading performance in the
four weeks to 3 April 1999. The very strong like-for-like sales
growth was a result of a repositioning on price supported by a
strong promotional campaign with the associated price reductions
and advertising impacting first half profitability. On an Easter
adjusted basis, however, underlying operating profit increased

Analysis of operating results

Sainsbury’s Supermarkets
Homebase
Sainsbury’s Bank
JS Developments

UK total
Shaw’s Supermarkets
Sainsbury’s Egypt

Overseas total

Total

Sales
(inc VAT)

£m

% change

13,267
1,428
136
165

14,996
2,394
24

2,418

17,414

1.8
10.0
(7.2)
422.8

3.3
29.0
–

30.4

6.3

Operating profit*

Operating profit*
(pre e-commerce)

£m

522
57
3
16

598
80
(11)

667

% change

(28.7)
(23.6)
–
82.2

(26.6)
49.8
–

29.6

(23.1)

(27.2)
(13.4)
–
–

(24.3)
–
–

–

(21.0)

Operating profit before Year 2000 costs, amortisation of goodwill, exceptional costs and profit sharing.

J Sainsbury plc Annual report and accounts 2000

Dividend per share pence

Group capital expenditure £ million

2000

1999
1998
1997
1996

14.32
14.32*
13.90
12.30
12.10

2000
52 weeks

1999
56 weeks

242

299

395

319

803

772

Sainsbury’s – New stores
Sainsbury’s –
Existing stores and infrastructure

Shaw’s
Homebase
Other

* Excludes a one-off 1.0 pence per share payment to cover the extra four weeks in
that financial year.

in the second half compared to the previous year. E-commerce
development costs amounted to £7.6 million.

On a combined basis the US operations increased operating profit in
local currency by 46.0 per cent to $129 million (£80 million) including
$14 million (£9 million) of synergies from merging the two operations.
Star Markets contributed $8 million (£5 million) to operating profit
before amortisation of goodwill and exceptional costs. Shaw’s
performed very well with growth in like-for-like sales of 3.1 per cent
and an increase in operating profit of 37.3 per cent to $121 million
(£75 million). The synergies were ahead of expectations with central
functions now combined in one head office and the distribution
function fully integrated so allowing the former Star Markets
distribution facility at Norwood to be closed. Eight stores have
been disposed of in accordance with the requirements of the
Federal Trade Commission following the acquisition.

Sainsbury’s Bank significantly improved profitability with a profit
of £3 million compared with a loss of £5 million in the previous
year. Turnover declined by 7.2 per cent as, although commissions
grew significantly, interest income declined as a consequence
of a lower average base rate. This was, however, more than offset
by the impact of lower interest rates on costs. Sainsbury’s Bank
is trialling a new in-store presence at 12 Sainsbury’s stores with
a prospective roll-out during the course of the current year.

Sainsbury’s Egypt (EDGE) was an associate company (25.1 per
cent ownership) until 20 October 1999, from which time it has
been consolidated as a subsidiary (80.1 per cent ownership).
The operating loss of £11 million reflected a drive for market
share and the costs associated with opening new stores.
Annualised sales of £77 million at the year-end were
substantially ahead of the levels achieved the year before.
The new Sainsbury’s store at El Haram has had an impressive
sales performance since opening in January 2000.

JS Developments successfully completed and sold on six major
developments tenanted by Group companies and a number of
other retailers. It increased its operating profit from £9 million to
£16 million. The most prestigious development was at Greenwich,
which included an award-winning Sainsbury’s supermarket and
a large, new format, Homebase store.

Group profit before tax
During the year, there was a significant amount of change across
the Group which was reflected in a number of exceptional costs and
profits. Consequently, in reviewing the performance of the Group
it is relevant to focus on underlying profit before tax, amortisation
of goodwill, exceptional costs and non-operating items.

Underlying Group profit before tax declined by 23.2 per cent to
£580 million. The decrease was in line with the 23.1 per cent
decline in Group operating profit as reductions in Year 2000 costs
and profit sharing were offset by an increase in finance costs
and a reduced contribution from associated undertakings.

The Year 2000 project was successfully completed with no
disruption to the business or in our ability to serve customers.
Profit sharing fell significantly due to the high gearing of the profit
sharing formula to the profitability of the UK retailing businesses.
Finance costs increased due to net debt rising from £704 million
as at 3 April 1999 to £1,264 million as at 1 April 2000.

2000
52 weeks
£m

1999
52 weeks
£m

Group operating profit
Year 2000 costs
Profit sharing
Associated undertakings
Net interest payable

667
(6)
(10)
1
(72)

Underlying Group profit before tax* 580
(11)
Amortisation of goodwill
(112)
Exceptional costs
52
Property profits
–
Profit on sale of associate

Group profit before tax

509

867
(28)
(45)
11
(50)

755
–
(21)
11
84

829

%
change

(23.1)

(23.2)

(38.6)

* Group profit before tax, amortisation of goodwill, exceptional costs and non-
operating items.

The exceptional operating costs of £112 million were incurred in
connection with simplifying central and store operations in
Sainsbury’s Supermarkets and Homebase; integrating Savacentre
into Sainsbury’s Supermarkets; closing all kitchen studios within
Homebase; integrating the Star Markets acquisition and providing
for a number of store closures and onerous leases across the Group.

Exceptional items

£m

First half

Second half

Full year

Exceptional operating items
Severance and reorganisation
Closure costs

Exceptional non-operating items
Property profits

(55)
–

(55)

–

(55)

(11)
(46)

(57)

(5)

(66)
(46)

(112)

(60)

At the half year stage, exceptional costs of £55 million were
disclosed relating to severance and reorganisation costs. These
increased to £66 million for the full year. In the second half, value
was released from the store portfolio through an innovative sale
and leaseback of 16 supermarket properties generating proceeds
of £325 million, a level one third over book value, to give a
property profit of £82 million. A review of the store portfolio
identified several properties that produced insufficient economic
profit. As a result, in order to generate future value, a number
of stores were closed across the Group resulting in a further

J Sainsbury plc Annual report and accounts 2000

Financial review

exceptional operating cost of £46 million, and a commitment was
made to sell 19 shopping centres owned by Shaw’s with proceeds
of £72 million resulting in a loss of £15 million. A number of
other property disposals resulted in a loss of £15 million. As a
consequence, total exceptional items increased by only £5 million
from the level at the half year to £60 million.

Acquisitions
Three acquisitions were made during the year. Disclosure of trading
performance, fair values and goodwill arising is set out in note 33.
Star Markets was acquired on 28 June 1999 for a consideration
of £311 million including debt acquired. Star Markets is a leading
supermarket chain operating mainly in the Greater Boston area
and the acquisition enabled Shaw’s to strengthen its position
as No. 2 in the New England market. Full ownership of Hampden
was achieved on 7 January 2000 through the acquisition of the
70.8 per cent of ordinary shares not previously owned for a
consideration of £14 million. Hampden operates seven Homebase
stores in Northern Ireland and three stores in the Republic of Ireland
through a franchise agreement. A further 55 per cent of the share
capital of Egyptian Distribution Group (EDGE) was acquired for
£40 million (including contingent consideration of £11 million).

The goodwill arising on the acquisition of Star Markets, Hampden
and EDGE is being amortised over 20 years with £11 million being
charged since acquisition.

Taxation
The Group tax charge of £162 million for the year results in an
effective underlying tax rate of 32.0 per cent (1999: 31.7 per cent).
The effective rate for the Group exceeds the nominal rate of UK
corporation tax due to the higher rate of tax incurred on US profits
and the lack of effective tax relief on depreciation of UK retail
properties, amortisation of goodwill and start-up losses in Egypt.

Earnings per share and dividends
Basic earnings per share decreased by 37.3 per cent to
18.3 pence on a comparable basis. Basic earnings per share
before amortisation of goodwill, exceptional costs and non-
operating items decreased by 24.1 per cent to 20.5 pence.

A final dividend of 10.30 pence is proposed which results in a total
dividend for the year of 14.32 pence, unchanged from the previous
year after adjusting for the one-off 1.0 pence per share payment
to cover the extra four weeks in the previous financial year.

Cash flow

Summary of cash flow

Operating cash flows
Net interest paid
Taxation
Dividends
Payments for fixed assets
Purchase of own shares
Sale of fixed assets

Cash flow before corporate activity
and financing
Acquisition of businesses
Sale of businesses
Other items

Net cash flow before financing

2000
52 weeks
£m

1999
56 weeks
£m

838
(80)
(218)
(294)
(761)
(68)
385

(198)
(293)
–
3

(488)

1,322
(83)
(287)
(249)
(803)
(2)
107

5
–
348
1

354

The figures for 1999 relate to the 56 week period. Whilst impacted
by reduced profits, particularly at Sainsbury’s Supermarkets,

J Sainsbury plc Annual report and accounts 2000

operating cash inflow remained strong at £838 million. The tax
payment reduced, mainly reflecting the inclusion in the 1999
payment of £40 million relating to the disposal of the stake in
Giant Food Inc.. Payments for fixed assets were £761 million, a
spend which was below that of the previous 56 week year. There
was a continuing emphasis on improving Sainsbury’s Supermarkets’
estate with 22 extensions and 16 refurbishments having been
completed during the year. The trading performance of these
stores is very encouraging indicating a good prospective return on
investment. The purchase of own shares is to satisfy obligations
arising under the employee share schemes.

The sale and leaseback of 16 supermarket stores resulted in
a cash inflow of £325 million which comprised the majority of the
cash inflow of £385 million generated by the sale of fixed assets.
The three acquisitions in the year resulted in a cash outflow
of £293 million (excluding debt acquired of £76 million).

Capital structure and finance
Total Group shareholders’ funds as at 1 April 2000 increased
to £4,742 million from £4,644 million as at 3 April 1999,
largely due to retained profits of £75 million. Group net debt
at the year end amounted to £1,264 million (1999: £704 million)
giving a balance sheet gearing (net debt to equity) of 27 per cent
(1999: 15 per cent).

Accounting policies

2
Software
The previous policy was to write off software costs as incurred
unless they formed an integral part of a purchased tangible asset.
Costs incurred in acquiring and developing computer software
are now capitalised as fixed assets where the software supports
a significant business system and the expenditure leads to the
creation of an identifiable durable asset. Computer software
assets are depreciated over their expected useful lives. This is
common practice for major retailers and increasingly the Group
purchases ready-made applications software for clearly defined
projects from which benefits are derived over a number of years.

Expenditure on projects which has been capitalised as fixed assets
in the 52 weeks to 1 April 2000 amounted to £18 million and
depreciation where the software assets were already in use
amounted to £3 million so giving a net impact of £15 million.
It is not practicable to restate prior years as the required detail
covering previous years is not available across all Group companies.

Goodwill
There has been a change in emphasis on accounting for goodwill.
As is common with most other companies, goodwill will be
amortised over a finite life of a maximum of 20 years and, only
under specific circumstances, will it be assumed that goodwill
has an indefinite life. Accordingly, the goodwill arising on the
acquisitions made during the year is being amortised over an
estimated economic life of 20 years.

Treasury management

3
Treasury policy and significant treasury transactions are
reviewed and approved by the Board and the Finance Committee
of the Board is responsible for monitoring treasury activity and
performance. Disclosures regarding derivatives and other financial
instruments are contained in note 23 to the financial statements.

Treasury operations in respect of Sainsbury’s Bank are managed
separately through Bank of Scotland which has a conservative
approach to treasury management. Sainsbury’s Bank does not
undertake any trading activities and only uses derivative
instruments to hedge risk. Credit limits have been established

for all counterparties and these are reviewed and approved by
Sainsbury’s Bank’s Board and the Risk Management Committee,
a subcommittee of the Board. Details of Sainsbury’s Bank’s
interest rate repricing gaps are set out in note 23 to the financial
statements.

The Group aims to structure debt issues so that not more than
25 per cent of borrowings mature in any one financial year.
The repayment analysis of the Group’s borrowings is set out
in note 22. As at 1 April 2000 the weighted average maturity
of the Group’s borrowings was 2.7 years (1999: 3.1 years).

The Group’s other major treasury activities are centralised in
the Group Treasury function. Group Treasury operates as a cost
centre with Group wide responsibilities for cash management,
funding and interest rate and currency risk management. In this
context Group policy permits the use of derivative instruments
but only for reducing exposures arising from underlying business
activity and not for speculative purposes.

Financial instruments
The Group holds or issues financial instruments to finance its
operations and to manage the interest rate and currency risks
arising from its sources of finance. In addition, various financial
instruments eg. trade debtors, trade creditors, accruals and
prepayments arise directly from the Group’s operations.

The Group finances its operations by a combination of cash generated
by operating subsidiaries, bank loans, commercial paper, private
placements, public debt issues, leases and share capital. The
Group’s long-term borrowings are raised centrally by the parent
company and on-lent to operating subsidiaries on commercial
terms. The Group borrows in a range of currencies at both fixed
and floating rates of interest, using derivatives where appropriate
to generate the desired currency and interest rate profile. The
derivatives used for this purpose are principally interest rate
swaps and options, cross currency swaps and forward contracts.

The main risks arising from the Group’s financial instruments
are interest rate risk, liquidity risk, exchange risk and credit risk.
The Board reviews and agrees policies for managing each of these
risks and the policies remain unchanged since 3 April 1999.

Interest rate risk
The Group’s exposure to interest rate fluctuations is managed by
using interest rate swaps and options. The Group’s objective is to
provide a degree of protection against interest rate volatility by
holding a proportion of the Group’s net debt portfolio at fixed or
capped rates of interest. Group policy allows the proportion of
fixed rate borrowing to vary between 20 per cent and 80 per cent
of net debt. As at the year end, and after taking into account
interest rate swaps, the proportion of the Group’s net debt at fixed
rates was 44 per cent (1999: 79 per cent). The average period for
which the fixed rate financial liabilities, including finance leases,
were fixed as at 1 April 2000 was 5.5 years (1999: 6.3 years).

Liquidity risk
The Group’s exposure to liquidity risk is managed by promoting
a diversity of funding sources and a spread of debt maturities.

The Group’s principal debt raising operations are arranged through
the Group’s £750 million Euro Commercial Paper Programme and
£1 billion Euro Medium Term Note Programme. In addition the
Group maintains a portfolio of committed bank facilities amounting
to £765 million as at 1 April 2000 (1999: £815 million). Of this
total, £135 million expires within one year; £555 million expires
also within one year but has 12 month term out options;
£35 million in more than one year and less than two years; and
£40 million in more than two years. The facilities act as a store of
liquidity as well as providing support for the Group’s commercial
paper programme and other borrowing activity. As at 1 April
2000 there were no drawings under these facilities (1999: £nil).

Currency risk
The Group has two principal overseas subsidiaries, Shaw’s
Supermarkets in the USA and Sainsbury’s Egypt, whose revenues
and expenses are denominated exclusively in US dollars and
Egyptian pounds respectively. The Group’s policy is to limit the
effects of exchange rate translation on Group shareholder funds
by maintaining, where practicable, foreign currency liabilities
equivalent to at least the value of foreign currency tangible net
assets. Exchange movements on foreign currency liabilities
created for this purpose are taken directly to reserves. The Group
does not actively hedge exchange rate movements on the
translation of overseas profits except where those profits are
matched by foreign currency interest costs.

The Group incurs transactional foreign currency exposures arising
from overseas purchases made predominantly in currencies other
than the operating subsidiaries’ functional currency. Forward
contracts are used to hedge future overseas purchases, which
may be either contracted or uncontracted. Gains and losses on
these contracts are deferred until recognition of the purchase,
which is normally within one year.

Credit risk
Group policy requires that credit exposures may only be taken
on a limited basis with banks or financial institutions that maintain
a strong credit rating. Counterparty positions are monitored on a
regular basis. The Group controls its dealing activity by providing
dealing mandates to, and operating standard settlement
instructions with, its banking counterparties.

Euro
The position regarding UK membership of EMU remains uncertain
but the Group continues its preparations for the possibility of the
UK joining. The Group is considering the impact the EMU may
have on all new systems development and equipment specifications.
During the course of this year, the Group will develop an internal
conversion plan in order to respond to EMU requirements as
necessary.

Shareholder return

4
The share price declined from 384.75 pence at the start of
the financial year to 283 pence at 1 April 2000 and the range
was 239 pence to 453 pence. The Company’s equity market
capitalisation at 1 April 2000 was £5.4 billion.

Total shareholder return (the increase in the value of a share
including reinvested dividends) decreased by 21 per cent over
the year, with Sainsbury’s ranked seventh in its peer group of
14 European retailers.

During the year, the Group adopted value-based management
principles to provide a rigorous framework for managing the
business. This framework has generated valuable insights into
economic profit by store, store format, and product category. It
has also supported the decision to release value from the property
portfolio and puts the Group in a stronger position to make value
based decisions in the future. In this context, the Group recently
announced a decision to create a property company within the
Sainsbury’s Group focusing on maximising the value from the
existing portfolio of property assets.

J Sainsbury plc Annual report and accounts 2000

Board of Directors

Sir George Bull

Sir Peter Davis

Sir Terence Heiser

Ian Coull

Sir Clive Thompson

June de Moller

John Adshead

Roger Matthews

Sir Terence Heiser GCB
Non–Executive Director
Appointed to the Board October
1992. Chairman of the Audit
Committee. Member of the
Remuneration and Nomination
Committees. Director, J Sainsbury
Pension Trustees. Non-Executive
Director, Abbey National plc.
Board member, PIA. Trustee of
the Victoria and Albert Museum.
Trustee of the Prince of Wales
Phoenix Trust. Member of the
Executive Council of the National
Trust. Governor of Birkbeck College,
University of London. Freeman of
the City of London. Permanent
Secretary, Department of the
Environment 1985–92. Age 68.

John Adshead CBE
Director
Group Human Resources and
Information Systems Director.
Director, Sainsbury’s Supermarkets
Ltd responsible for information
systems and human resources
and supply chain. Chairman,
J Sainsbury Pension Trustees.
Joined Sainsbury’s and appointed
to the Board 1989. Non-Executive
Director of the Tablet Publishing
Company. Age 55.

Ian Coull
Director
Group Property and Environmental
Affairs Director. Director, Sainsbury’s
Supermarkets Ltd with responsibility
for property. Director, J Sainsbury
Pension Trustees. Joined Sainsbury’s
and appointed to the Board 1988.
Fellow of the Royal Institution of
Chartered Surveyors. Member
of the Scottish Valuation and
Rating Council. Member of the
Government’s Property Industry
Forum. Chairman, the South Bank
Employers’ Group. Age 49.

Roger Matthews
Director
Group Finance Director. Director,
Sainsbury’s Supermarkets Ltd,
Homebase Limited, Sainsbury’s
Bank plc and Shaw’s Supermarkets
Inc. Joined Sainsbury’s and
appointed to the Board in
November 1999. Formerly Group
Managing Director and Finance
Director of Compass Group Plc.
Age 45.

President
Lord Sainsbury of
Preston Candover KG

Keith Butler-Wheelhouse

Robin Whitbread

Sir George Bull
Non–Executive Chairman
Appointed to the Board April
1998, succeeded Lord Sainsbury
of Turville as Chairman in July 1998.
Chairman of the Nomination
Committee and member of the Audit
and Remuneration Committees.
Former Chairman of Diageo plc.
Previously Group Chief Executive
and then Chairman of Grand
Metropolitan PLC. Director of the
Marketing Council. Age 63.

Sir Clive Thompson
Non–Executive Director
Appointed to the Board July 1995.
Chairman of the Remuneration
Committee. Member of the Audit
and Nomination Committees.
Chief Executive of Rentokil Initial plc.
Non-Executive Director of Kleeneze
PLC. President of the CBI, Vice
President of the Chartered Institute
of Marketing. Deputy Chairman of
the Financial Reporting Council.
Age 57.

Keith Butler-Wheelhouse
Non–Executive Director
Appointed to the Board September
1999. Member of the Audit,
Nomination and Remuneration
Committees. Currently Chief
Executive of Smiths Industries plc
which he joined in 1996, prior to
which he was President of SAAB
Automobile Sweden. From
1987–1992 he was Chairman and
Chief Executive of Delta (MBO of
General Motors South African).
He remains on the Delta Board as
a Non-Executive Director. Age 54.

Sir Peter Davis
Group Chief Executive
Chairman and Managing Director
of Sainsbury’s Supermarkets Ltd.
Chairman of Homebase Limited and
Director of Sainsbury’s Bank plc.
Member of the Nomination
Committee. Formerly Group Chief
Executive of Prudential plc since
1995. From 1986 to 1994 he was
Chief Executive and then Chairman
of Reed International. He became
Chairman of Reed Elsevier following
the merger of Reed International
and Elsevier. Sir Peter worked
previously for Sainsbury’s, from
1976 until 1986, latterly as
Assistant Managing Director with
responsibility for all buying and
marketing activities. Age 58.

June de Moller
Non–Executive Director
Appointed to the Board September
1999. Member of the Audit,
Nomination and Remuneration
Committees. Was a Director of
Carlton Communications from 1983
until January 1999 and served
as Managing Director from 1993.
Non-Executive Director, British
Telecommunications plc, Lynx Group
plc and the Cookson Group plc.
Age 52.

Robin Whitbread
Director
Retail Director, Sainsbury’s
Supermarkets Ltd. Director of
Sainsbury’s Bank plc. Non-Executive
Director, Shaw’s Supermarkets Inc
from 1987–2000. Joined Sainsbury’s
in 1969 serving in a variety of senior
retail and commercial positions
before joining the Board in 1990.
Age 49.

J Sainsbury plc Annual report and accounts 2000

Report of the Directors
for the 52 weeks to 1 April 2000

J Sainsbury plc
An outline of the Group’s principal activities and the performance
of the main operating subsidiaries during the period is contained
in the Chairman’s Statement, the Group Chief Executive’s Review
and the Operating and Financial Reviews on pages 1 to 27.

The financial year is for the 52 weeks to 1 April 2000 compared to
the 56 weeks to 3 April 1999.

The profit on the ordinary activities of the Group before tax
amounted to £509 million (1999: £888 million). The Directors are
proposing the payment of a final dividend of 10.30 pence per share
on 28 July 2000 to shareholders on the Register at the close of
business on 16 June 2000; together with the interim dividend paid
of 4.02 pence per share, this makes a total dividend for the year of
14.32 pence per share (1999: 15.32 pence per share including a
one-off 1.0 pence per share payment to cover the extra four weeks).

Share capital
Principal changes
A total of 6.3 million shares were allotted for the Group’s employee
share schemes (note 26). Additionally, 21.6 million shares were
purchased in the market for £77 million to satisfy obligations
under these schemes. Of these, 19.5 million are held in trust as
described in note 14.

A resolution will be put to the Annual General Meeting to increase
the authorised share capital of the Company by 10 per cent to
2.2 billion ordinary shares of 25 pence each.

The Dividend Reinvestment Plan operated for the first time in
conjunction with the final dividend paid on 18 August 1999. No
new shares are allotted under this Plan but the cash dividend of
participating shareholders is used to purchase shares in the market.
Some 24,500 shareholders have taken advantage of this scheme.

Star Markets
In November 1998, the Group agreed to acquire Star Markets
Holdings Inc., the fifth largest food retailer in New England.
Federal Trade Commission approval of this agreement was
subsequently received and the transaction completed on
28 June 1999.

Hampden
Following a public offer in October 1999, the Group acquired full
ownership of Hampden Group PLC in which it previously had a
holding of 29.2 per cent. Hampden operates seven Homebase
stores in Northern Ireland and three stores in the Republic of
Ireland through a franchise agreement.

Directors’ interests
No Director had, during or at the end of the financial period, any
material interest in any contract of significance to the Group’s
business.

Details of Directors’ interests in the ordinary shares and options
over ordinary shares of the Company are set out in the Report
of the Remuneration Committee on pages 36 and 37.

Substantial interests
The substantial interests in shares notified to the Company,
all of which include duplications, are as follows:

Sainsbury’s Egypt
On 20 October 1999, the Group increased its ownership in the
Egyptian Distribution Group SAE (EDGE) from 25.1 per cent to
80.1 per cent.

Judith Portrait is a trustee of various settlements, including
charitable trusts and a blind trust for Lord Sainsbury of Turville.
As at 27 May 2000, the total holding of these trusts amounted
to 29 per cent.

Changes to the Board
On 14 May 1999, David Clapham retired as a Director.

On 21 July 1999, the Rt Hon Sir Timothy Sainsbury retired
after 25 years on the Board. June de Moller and Keith Butler-
Wheelhouse joined the Board on 23 September 1999 as
Non-Executive Directors.

Roger Matthews joined the Board as Group Finance Director on
15 November 1999. Rosemary Thorne retired from the Board
on 30 November 1999.

Sir David Scholey resigned as a Non-Executive Director on
1 February 2000.

Sir Peter Davis joined the Board as Group Chief Executive on
1 March 2000 and assumed responsibility for the UK supermarket
business on 10 March. David Bremner and Kevin McCarten retired
as Directors on 9 March 2000. Dino Adriano retired from the
Board on 26 May 2000.

Details of the Board structure and its responsibilities are given on
pages 31 and 32.

Christopher Stone, Andrew Cahn and John Rosenheim are
trustees of various settlements, including charitable settlements.
As at 27 May 2000, the total holdings of the trusts of which
the above are trustees amounted to 5 per cent, 5 per cent and
3 per cent respectively.

As at 27 May 2000, the interests, beneficially and as trustees of
charitable and other trusts, of Lord Sainsbury of Preston Candover KG,
the Hon Simon Sainsbury and the Rt Hon Sir Timothy Sainsbury
were 4 per cent, 3 per cent and 3 per cent respectively.

Market value of properties
The Directors believe that the aggregate open market value
of Group properties exceeds the net book value of £5.1 billion
by a considerable margin.

Year 2000
As expected the Year 2000 computer issue did not have a
significant impact on the Group’s activities. During the year costs
of £6 million (1999: £30 million) were incurred by the Group.

J Sainsbury plc Annual report and accounts 2000

Report of the Directors

Staff, social responsibility and the environment
Employment policies
We continue to place great emphasis on effective communication,
regular performance reviews and offering career and other
development opportunities.

One key indicator of our success in this area is that 170 (1999: 48)
of our Sainsbury’s Supermarkets stores, five central departments
and three distribution centres have gained the Investors in People
(IiP) award. All Sainsbury’s supermarkets, depots and central
departments are targeted to achieve IiP by March 2001.

Both Sainsbury’s Supermarkets and Homebase conduct regular
employee attitude surveys and value this important feedback
as a measure of how ’well we are doing’ in managing our people.
The Staff Council framework at local and company level is being
used increasingly for two-way communication and discussion, to
encourage all colleagues to contribute towards making business
improvements.

The Company is committed to providing fair and equal treatment
for all colleagues and recognises the importance of diversity within
the organisation. During 1999, Sainsbury’s Supermarkets was
highly commended in the ’Ease’ awards from the Queen Elizabeth’s
Foundation for Disabled People as the Best Supermarket for
Customers with Disabilities, and at the ’Opportunity Now’ awards
for our Women in Retail Management Group and our new Fair
Treatment Policy, ’Allsorts’. For the third year running, Homebase
achieved the ‘(cid:2)
a Government agency, in recognition of its commitment to
employing disabled people.

’ symbol awarded by Employment Services,

Employee share ownership
We have always encouraged colleagues to own shares in the
Company. One half of UK colleagues are shareholders either
directly or through the Profit Sharing Scheme Share Trust.
In August 1999, we introduced a new scheme offering share
options to all 111,000 eligible UK colleagues with one financial
year’s service who did not otherwise participate in our
executive schemes.

In December 1999, the Company received a prestigious ProShare
award for ‘Employee Participation and Involvement’ for its
employee share schemes.

Policy on payment of suppliers
The policy of the Company and its principal operating subsidiaries
is to agree terms of payment prior to commencing trade with
a supplier and to abide by those terms based on the timely
submission of satisfactory invoices. The Company subscribes to
the DTI’s Better Payment Practice Code on the prompt payment
of suppliers. This replaced the CBI Code of Good Practice to which
the Company previously subscribed. A copy of the guide can be
obtained from the DTI, 1 Victoria Street, London SW1H 0ET.
The creditor days of the principal operating subsidiaries in
respect of payment to suppliers are contained in their accounts.

J Sainsbury plc Annual report and accounts 2000

Donations
Donations to charitable organisations and local community
projects amounted to £5 million which included contributions
of money, materials and time to enterprise agencies, job creation
and educational schemes, town centre management initiatives,
community projects and the arts. Sainsbury’s Supermarkets is
working with the charity Crisis FareShare for the distribution of
surplus food to those in need. There were no political donations.

Research and development
The Technical Division employs 185 people and has an annual
expenditure of £8 million. It works in close co-operation with
suppliers to achieve the highest standards of product quality,
integrity, hygiene and safety and to maintain these throughout
the Group’s distribution chain and stores. The Division also
develops and co-ordinates policies to address issues of concern
and interest to our customers, for example environmental
management and healthy eating. The Company Environment
Report, produced by the Division, describes the environmental
policies adhered to by the Company and outlines our progress
in achieving our objectives.

Annual General Meeting
The Annual General Meeting of shareholders will take place at
11.30 am on Wednesday 26 July 2000 at the Queen Elizabeth II
Conference Centre, Broad Sanctuary, Westminster, London SW1P
3EE. The Notice of the Meeting and proxy card are sent to
registered shareholders with these annual accounts.

At the AGM, resolutions will be proposed to increase the
authorised share capital, to amend the Articles of Association,
to renew the general authority of the Directors to issue shares
together with the authority to issue shares without applying the
statutory pre-emption rights, to enable the Company to make
market purchases of its own shares up to a maximum of
192 million shares, to approve the new all employee share
scheme arrangements and to re-appoint PricewaterhouseCoopers
as auditors. Further details of these resolutions are contained in
the Chairman’s letter which accompanies the Notice of Meeting.

In accordance with the Articles of Association, Sir George Bull will
retire by rotation and will seek re-appointment. Sir Peter Davis,
Keith Butler-Wheelhouse, June de Moller and Roger Matthews
who were appointed since the last AGM, will also be retiring and
will seek re-appointment. Sir Peter Davis and Roger Matthews
have service contracts on a rolling 12 month basis. Sir Peter who
joined the Company on 1 March 2000 may not be given notice
before 1 March 2001. Sir Terence Heiser will be retiring and will
not be seeking re-appointment.

By order of the Board

Nigel Matthews
Secretary
30 May 2000

(cid:2)
Corporate Governance

J Sainsbury plc is committed to high standards of corporate
governance in its business.

The Company has complied throughout the period under review
with all the provisions of the Combined Code of good practice in
corporate governance as laid down in the Listing Rules of the
London Stock Exchange.

This statement together with the Report of the Remuneration
Committee explains how the Company has applied the
governance principles set out in Section 1 of the Combined Code.

The Company and its subsidiaries have clear terms of reference
to guide the operations of the various boards in their decision
making processes and in maintaining appropriate corporate
governance standards.

The Board
Composition
The Board currently comprises five Executive Directors and
five Non-Executive Directors, including the Chairman. All the
Non-Executive Directors (NEDs) are considered independent
and Sir Terence Heiser is the nominated senior NED. New NEDs
are appointed for an initial term of two years and, subject to
re-election, serve thereafter on a mutually agreed basis.
On appointment they follow a process of induction to familiarise
themselves with the Group’s operations.

Biographical details of the Directors are set out on page 28.
Changes to the composition of the Board which occurred during
the year are detailed on page 29.

A change in the Articles of Association will be proposed at the
Annual General Meeting to require re-election every three years.
Under the present Articles of Association concerning retirement
of Directors by rotation, it is possible in certain circumstances for
a Director to serve for four years before retiring.

There is an agreed procedure by which members of the Board
may take independent professional advice in the furtherance of
their duties. All Directors have access to the advice and services
of the Company Secretary.

Responsibilities
The Board is responsible to the shareholders for the strategic
development of the Company, the management of the Company’s
assets in a way that maximises performance, and the control of
the operation of the business.

The Board meets ten times a year and there is a list of matters
reserved exclusively for its consideration. These, and the levels
and nature of delegated authority, are reviewed annually. The
Board approves the strategic plans of the Group and its annual
budget and, throughout the year, reviews the performance of the
operating subsidiaries against their budgets and targets.

The Group Chief Executive has authority delegated by the Board
for implementing the strategy and for managing the Group. In
doing so, he works with the Executive Committee comprising all
the Executive Directors and certain other senior executives of
the Group.

The Group Chief Executive also chairs the Board of Sainsbury’s
Supermarkets Ltd, the Company’s principal operating subsidiary.

Other Board Committees
The Remuneration, Nomination and Audit Committees have
written terms of reference which define their authorities and
duties, as well as detailing composition and membership of each
committee. Details of membership are shown on page 28.

The Remuneration Committee is comprised solely of the
Non-Executive Directors and is responsible for making
recommendations on the remuneration framework for all
Executive Directors and determining the remuneration
arrangements for individual Executive Directors. The report
of the Committee is set out on pages 33 to 37.

The Nomination Committee, whose membership includes a
majority of Non-Executive Directors, advises the Board on the
appointment of Directors.

The Audit Committee is comprised solely of Non-Executive
Directors. It is responsible inter alia for making recommendations
on the accounting and reporting policies of the Company and on
defining and monitoring internal financial control. The Committee
receives regular reports from the Group Internal Audit Department
and the external auditors. It also reviews the interim and annual
financial statements before they are considered by the Board.

The Head of Group Internal Audit has direct access to the
Chairman of this Committee. The Company’s external auditors
attend Committee meetings and also have the opportunity of
a private meeting with the Committee.

Internal control
The Company maintains a well established control framework
comprising clear structures and accountabilities, well understood
policies and procedures and budgeting and review processes.

J Sainsbury plc Annual report and accounts 2000

Corporate Governance

Internal control continued
In addition, the Group has developed a Risk Self Assessment
(RSA) process which it has used for several years at Group level
and in each of the operating subsidiaries. This process defines the
significant business risks and the controls in place to manage
them. New areas are introduced for assessment as the business
risk profile changes. The controls are monitored by each
operating subsidiary through the RSA process itself, internal audit
coverage and routine management review. The results are
reviewed by the Boards of each of the operating subsidiaries
and following review by the Audit Committee, by the Group Board.
Action is taken to address areas of non-compliance or to improve
the effectiveness of controls. In the light of the guidance issued by
the Stock Exchange in September 1999, following the Turnbull
Committee’s report, the Audit Committee was charged by the
Board to review the process for monitoring the effectiveness of
internal control. As a result, a number of changes have been
made to the RSA process designed to improve the consistency of
the assessments across the operating subsidiaries and to monitor
and manage risk more effectively. Accordingly, the Company
is confident that its procedures satisfy the guidance and that
it will be able to comply with Section D2 of the Combined Code
in respect of the Company’s financial year commenced on
2 April 2000.

For this report, the Company has adopted the transitional
approach to Section D2 and is reporting only in respect of internal

financial controls. The system of internal financial control can only
provide reasonable and not absolute assurance against material
misstatements. Nevertheless, following the review of the system
described above, the Directors believe that proper accounting
records are maintained and that financial information used within
the business and for external publication is reliable.

Going concern
The Directors confirm that they are satisfied that the Company
has sufficient resources to continue in operation for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the Group Financial Statements.

Shareholder relations
The Company maintains a regular programme of meetings
with major institutional shareholders to discuss information
that is publicly available and the progress of the business.
Developments in our internet site have allowed us to make a
great deal of published material, including results information
and presentations, more accessible to our shareholders and
customers at all times. At the Annual General Meeting the
Directors welcome the opportunity to gather the views of private
shareholders. Many of our shareholders are also customers and
about half of our UK colleagues are shareholders.

J Sainsbury plc Annual report and accounts 2000

Report of the Remuneration Committee

The following is a report by the Remuneration Committee which
has been approved by the Board for submission to shareholders.

with lower maxima for other senior executives) calculated
according to performance against achievement of profit before
tax targets and individual business targets.

Composition and terms of reference
The Remuneration Committee’s composition and terms of
reference are in line with the Combined Code of the London Stock
Exchange’s Listing Rules. The Company complies fully with
Section B of the Combined Code provisions on Directors’
remuneration and Schedule B to the Code in respect of the
Remuneration Report content. The Committee is chaired by
Sir Clive Thompson; the other members are Sir George Bull,
Sir Terence Heiser, June de Moller and Keith Butler-Wheelhouse.

Remuneration of Executive Directors
The Remuneration Committee recommends to the Board a
remuneration framework for Executive Directors and determines
the remuneration arrangements for individual Executive Directors.

The Committee aims to maintain a remuneration policy consistent
with the Company’s business objectives which:

•

attracts, retains and motivates high calibre Directors;

is responsive to both personal and Company performance;

aligns the interests of Directors with those of the shareholders
by linking share and cash incentive payments to performance;
and

is based on information from independent remuneration
sources and from within the retail sector, as well as other
large companies of a comparable size and complexity.

The main components of Executive Directors’ remuneration are:

i) Basic salary
Basic salary for each Director is determined taking into account
assessments of the Director’s performance, experience and
responsibility, together with market factors.

Incentive arrangements

ii)
In addition to basic salary, the Company maintains incentive
arrangements which combine an annual bonus plan with a long term
performance share plan and an executive share option scheme.

The Committee believes that these arrangements, introduced
following shareholder approval in 1999, provide for rewards which
reflect an appropriate balance between personal performance and
Company performance. As such, they align the rewards of
Directors with the Company’s immediate business priorities and
the long-term interests of shareholders.

The arrangements may be summarised as follows:

Performance Share Plan– this long term incentive plan allows
shares to be allocated to individuals but not released to them
unless future performance criteria are met. The number of shares
allocated will depend on the Company’s long-term performance
compared with a sample of comparator companies. The measure
used to compare the Company’s relative performance is total
shareholder return (being the increase in the value of a share,
including reinvested dividends) over a three year period. Initial
share allocation will be based on a percentage of salary (up to
50 per cent for Executive Directors). After three years have
elapsed and subject to the Company’s position in the comparator
group, some or all of the initial allocation may be released to the
individual. An initial allocation was made on 26 July 1999 for the
financial period ended 1 April 2000. The first release of these
shares will occur after the end of the 2001-02 financial year
subject to the Company’s position in the comparator group.

Executive Share Option Scheme– grants are normally made
annually to a value of annual basic salary for Directors and senior
executives (and to a lesser value for other executives). The
current performance criterion for the exercise of options is the
achievement by the Company of an average of three per cent per
annum real growth in earnings per share (EPS) over three years.
If this criterion is not achieved, a fourth year is added. If three per
cent average real EPS growth per annum is still not achieved after
the fourth year, the option will lapse. Where following a grant of
options, the total value of a Director’s outstanding share options
exceeds four times annual remuneration then a more stringent
performance criterion, determined by the Remuneration
Committee, will apply in respect of such options.

iii) Other share options
Directors may hold options under the Savings-Related Share
Option Scheme.

iv) Employee profit sharing
Directors participate in the Company’s Employee Profit Sharing
Scheme in the same way as all other employees. Although profit
sharing is accounted for on an accruals basis, payments are not
finally calculated and paid until after the Annual General Meeting.
Accordingly, Directors’ profit sharing is included on a paid basis in
the table of Directors’ emoluments on page 34, based on the
profitability of the Group in the previous year.

Profit sharing in respect of the 52 week period ended 1 April
2000 will be paid in August 2000 and is expected to amount to
approximately 1.1 per cent of qualifying pay (1999: 4.5 per cent
of qualifying pay).

Annual Bonus Scheme– a cash bonus is payable subject to the
achievement of both business and individual targets which are key
to the businesses’ performance. The bonus will be a percentage of
salary (up to a maximum of 50 per cent for Executive Directors

v) Benefits
Benefits include the provision of a company car and medical
insurance premia.

J Sainsbury plc Annual report and accounts 2000

Report of the Remuneration Committee

Contracts of service for Directors
Non-Executive Directors including the Chairman do not have
service contracts. All service contracts for Executive Directors are
on a 12 month rolling basis – save that in the case of Sir Peter
Davis, who joined the Company on 1 March 2000, notice may not
be given before 1 March 2001. Sir Peter’s contract (unless
otherwise terminated or renewed) will automatically terminate on
27 March 2004 at which point Sir Peter will be aged 62. In all
other cases Executive Directors will normally retire on their 60th
birthday. Also exceptionally, on joining the Company, Sir Peter was
granted an option over 3,009,596 shares at a price of 260.5 pence
per share. This option was granted under the Company’s Executive
Share Option Scheme and is subject to the normal performance
criterion. The Committee was of the view that the extension of
the contract terms and the grant of options above one year’s
salary were necessary in order to attract Sir Peter to the Company.

Company pension policy regarding Executive Directors
The Group’s policy is to offer its most senior executives
membership of the J Sainsbury Executive Pension Scheme.

The scheme is a funded, Inland Revenue approved, final salary,
occupational pension scheme. Under the Group’s pension
arrangements, Directors are entitled after a minimum of 20
years of pensionable service to a pension on retirement at age 60
(or earlier in the event of 40 years’ service, or ill health) of up to
two thirds of their pensionable earnings (defined as salary in the
last 12 months of service) subject to Inland Revenue limits.
Pensions are also payable to dependants on death and a lump
sum is payable if death occurs in service.

In the case of four Directors, the Company has agreed to make
up that portion of the standard pension entitlement which is in
excess of Inland Revenue limits. This last obligation is unfunded,
although full provision of £269,000 has been made in respect
of the period ended 1 April 2000 (1999: £404,000).

Directors’ emoluments
The aggregate emoluments of the Directors of the Company were as follows:

Executive Directors
Basic salary
Profit sharing
Benefits
Compensation for loss of office

Non-Executive Directors
Fees
Benefits

2000
£000

1999
£000

2,346
108
143
2,201

4,798

349
15

2,882
138
147
231

3,398

285
8

5,162

3,691

The emoluments set out above and in the following tables cover a 52 week period in 2000 compared to a 56 week period in 1999.

The emoluments of each of the Executive Directors are set out below:

Note

Basic salary
£000

Profit sharing
£000

Benefits
£000

Compensation for
loss of office
£000

Dino Adriano
John Adshead CBE
Ian Coull
Sir Peter Davis
Roger Matthews
Robin Whitbread
David Bremner
David Clapham
Bob Cooper
Kevin McCarten
David Sainsbury
Rosemary Thorne

500
276
285
66
131
245
368
45
–
256
–
174

24
13
14
–
–
12
12
10
–
12
–
11

22
18
15
2
9
15
19
9
–
19
–
15

–
–
–
–
–
–
788
486
–
525
–
402

No amounts were payable under the Annual Bonus Scheme because the performance criterion was not achieved.

2,346

108

143

2,201

Total
2000
£000

546
307
314
68
140
272
1,187
550
–
812
–
602

4,798

Total
1999
£000

579
321
333
–
–
286
424
234
469
294
182
276

3,398

J Sainsbury plc Annual report and accounts 2000

Directors’ emoluments continued
The emoluments of each of the Non-Executive Directors are set out below:

Sir George Bull
Keith Butler-Wheelhouse
June de Moller
Sir Terence Heiser GCB
Sir Clive Thompson
Rt Hon Sir Timothy Sainsbury
Sir David Scholey CBE

Note

Fees

2000
£000

225
13
13
31
35
7
25

349

1999
£000

177
–
–
30
24
24
30

285

Notes to the tables:
1

Highest paid Director. Retired as a Director 26 May 2000. Compensation for loss of office, payable in the financial year commenced 2 April 2000, has been
agreed at £1,237,000 and includes a pension contribution of £237,000.
Appointed as a Director 1 March 2000.
Appointed as a Director 15 November 1999.
Retired as a Director 9 March 2000. Compensation for loss of office has been provided for at year end.
Retired as a Director 14 May 1999. Compensation for loss of office includes a pension contribution of £171,000.
Retired as a Director 20 November 1998. Continued to be employed until 5 March 1999 during which time he received a salary of £87,000.
Retired as a Director 30 July 1998. Chairman until date of retirement.
Retired as a Director 30 November 1999. Compensation for loss of office includes a pension contribution of £102,000.
In addition, benefits in kind of £15,000 (1999: £8,000). Annual fees unchanged since becoming Chairman in August 1998.

2
3
4
5
6
7
8
9
10 Appointed as a Director 23 September 1999.
11 Fees are paid to Rentokil Initial plc. Invoices are remitted quarterly, which distorts year-on-year comparisons.
12 Retired as a Director 21 July 1999.
13 Resigned as a Director 1 February 2000.

Directors’ pension entitlements
The pension entitlements of the Directors who served during the 52 week period ended 1 April 2000 were as follows:

Dino Adriano
John Adshead CBE
Ian Coull
Sir Peter Davis(cid:3)
Roger Matthews(cid:3)
Robin Whitbread
David Bremner*
David Clapham*
Kevin McCarten*
Rosemary Thorne*

Less than one year’s service
At date of retirement as a Director

Additional
pension earned
in the year
£000

Length of
service

Transfer
value of
increase
£000

Accrued
entitlements at
year end
£000

36
11
13
–
–
31
4
35
5
7

6
13
8
–
5
4
15
–
6
–

78
198
104
–
55
42
135
–
55
83

306
128
104
–
5
123
39
82
33
55

Age

57
55
49
58
45
49
42
54
42
48

The transfer value represents the capital sum that would be necessary to acquire the incremental annual pension earned in the year
which would be payable each year from normal retirement age and therefore cannot be meaningfully added to annual remuneration.
The accrued pension entitlement shown is the amount that would be paid each year following retirement based on retirement at age
60 (or at the date of retirement for Directors who have retired during the year). The increase in the additional pension earned during
the year excludes any increase for inflation. Members of the scheme have the option of paying Additional Voluntary Contributions.
Neither these contributions nor the resulting benefits are shown in the above table.

J Sainsbury plc Annual report and accounts 2000

(cid:3)
Report of the Remuneration Committee

Directors’ interests
Directors’ interests in the ordinary shares of the Company and shares held in trust on behalf of Directors are as follows:

Dino Adriano
John Adshead CBE
Ian Coull
Sir Peter Davis
Roger Matthews
Robin Whitbread
Sir George Bull
Keith Butler-Wheelhouse
June de Moller
Sir Terence Heiser GCB
Sir Clive Thompson

Ordinary shares1

1 April 2000

4 April 1999

Long Term
Incentive
Plan2

Performance
Share
Plan3

59,474
50,679
30,963
100,000
25,000
57,102
12,500
–
1,500
1,000
881

44,966
45,914
25,218
85,000*
–*
43,163
10,000
–*
–*
1,000
881

30,406
18,613
20,144
–
–
16,723
–
–
–
–
–

66,844
36,096
38,101
–
–
32,754
–
–
–
–
–

*
1

At date of appointment
The ordinary shares above are beneficial holdings which include the Directors’ personal holdings and those of their spouses and minor children, as well as
holdings in family trusts of which a Director or minor children are beneficiaries or potential beneficiaries. They also include the beneficial interest in shares
which are held in trust under the J Sainsbury Profit Sharing Scheme.
Shares held in trust represent shares awarded to Directors under the Long Term Incentive Plan. Under the Plan, half of the bonus award in respect of the year
ended 7 March 1998 was used to purchase shares at a price of 518.0 pence in May 1998. Subject to the rules of the Plan, these shares will vest with the Director
on the third anniversary of the award.
The Plan allows shares to be allocated to individuals, to be released to them in the form of options if the future criterion is met. Subject to performance the
first release will occur in 2002.

There were no changes to the Directors’ interests in ordinary shares shown above between 1 April 2000 and 30 May 2000.

Options over ordinary shares
Directors’ options under the Company’s Executive Share Option Scheme (a) and Savings-Related Share Option Scheme (b) are set out
below:

Total
4 April
1999

Number
granted

Number
exercised

Date
exercised

2,126(b)
494(b)
291(b)
3,710(b)

15/03/00
02/02/00
02/03/00
02/03/00

Option
price
p

331.0
292.0
331.0
331.0

Market price
on exercise
p

Gains on options
exercised
£

254.0
312.5
269.75
269.75

(1,637)
101
(178)
(2,272)

Dino Adriano
John Adshead CBE

395,375
291,866

133,439
71,997

Ian Coull
Sir Peter Davis
Roger Matthews
Robin Whitbread
David Bremner
David Clapham

293,833
–
–
272,798
220,711
172,794

78,003
3,009,596
106,333
65,711
230,911
–

12,366(a)

27/07/99

272.69

371.75

12,249

1,710(b)
364(b)
196(b)
51(b)
1,280*

12/11/99
12/11/99
12/11/99
12/11/99

331.0
313.0
292.0
398.0

349.75
349.75
349.75
349.75

Total
1 April
2000

526,688

363,078
368,126
3,009,596
106,333
326,143
451,622

169,193
247,073
2,554

320
133
113
(24)

8,805

Kevin McCarten
Rosemary Thorne

181,987
225,946

65,086
60,927

284,319*

Options lapsed not exercised

Gains on options exercised have been calculated using the differences between the share option price and the market price on the
date of the exercise. Where shares have been retained by the individual, rather than sold, the gain shown is the notional gain at the
date of exercise.

The Company’s Register of Directors’ Interests contains full details of Directors’ shareholdings and options to subscribe.

J Sainsbury plc Annual report and accounts 2000

Options over ordinary shares continued
Options outstanding above and below the market price of 283.0 pence on 1 April 2000 are set out in the table below:

Dino Adriano
John Adshead CBE
Ian Coull
Sir Peter Davis
Roger Matthews
Robin Whitbread

Options outstanding
below market price

Options outstanding
above market price

Total number of
options outstanding

Number

989
474
2,507
3,009,596
–
811

Weighted
average price
p

253.0
253.0
253.0
260.5
–
253.0

Number

525,699
362,604
365,619
–
106,333
325,332

Weighted
average price
p

420.8
428.7
439.4
–
319.75
406.1

526,688
363,078
368,126
3,009,596
106,333
326,143

The options outstanding under the Company’s Executive Share Option Scheme and Savings-Related Share Option Scheme have been
made at various dates between 28 February 1991 and 1 March 2000 as listed in note 26 on pages 58 and 59 and are exercisable
at prices between 253.0 pence and 545.0 pence. In the period from 4 April 1999 to 1 April 2000 the highest middle market price was
453.0 pence and the lowest middle market price was 239.0 pence.

Approved by the Board on 30 May 2000

Sir Clive Thompson
Chairman of the Remuneration Committee

J Sainsbury plc Annual report and accounts 2000

Statement of Directors’ responsibilities
in respect of the financial statements

Company law requires the Directors to prepare financial
statements 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 financial statements, the Directors are required to:

•

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 financial statements; and

•

prepare the financial statements 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 financial statements comply with the Companies Act
1985. They are also responsible for the safeguarding of the
assets of the Company and for taking reasonable steps for the
prevention of fraud and other irregularities.

Auditors’ report to the members of J Sainsbury plc

We have audited the financial statements on pages 39 to 62.

Group’s corporate governance procedures or its risk and control
procedures.

Respective responsibilities of Directors and Auditors
The Directors are responsible for preparing the Annual Report.
As described above, this includes responsibility for preparing the
financial statements, in accordance with applicable United Kingdom
accounting standards. Our responsibilities, as independent
auditors, are established in the United Kingdom by statute,
the Auditing Practices Board, the Listing Rules of the Financial
Services Authority and our profession’s ethical guidance.

We report to you our opinion as to whether the financial
statements give a true and fair view and are properly prepared
in accordance with the United Kingdom Companies Act.
We also report to you if, in our opinion, the Directors’ Report
is not consistent with the financial statements, if the Company
has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit,
or if information specified by law or the Listing Rules regarding
Directors’ remuneration and transactions is not disclosed.

We read the other information contained in the Annual Report
and consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with
the financial statements.

We review whether the statement on pages 31 and 32 reflects the
Company’s compliance with the seven provisions of the Combined
Code specified for our review by the Financial Services Authority
and we report if it does not. We are not required to consider
whether the Board’s statements on internal control cover all risks
and controls, or to form an opinion on the effectiveness of the

Basis of audit 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 financial statements. It also includes an
assessment of the significant estimates and judgements made by
the Directors in the preparation of the financial statements, 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 financial statements 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 financial
statements.

Opinion
In our opinion the financial statements give a true and fair view of
the state of affairs of the Company and the Group at 1 April 2000
and of the profit and cash flows of the Group for the 52 weeks
then ended and have been properly prepared in accordance with
the Companies Act 1985.

PricewaterhouseCoopers
Chartered Accountants and Registered Auditors

London
30 May 2000

J Sainsbury plc Annual report and accounts 2000

Group profit and loss account
for the 52 weeks to 1 April 2000

Turnover including VAT and sales taxes
VAT and sales taxes

Note

Before
exceptional
items
£m

17,414
(1,143)

Turnover excluding VAT and sales taxes

16,271

Continuing operations

Acquisitions

Group turnover excluding VAT and sales taxes

15,784
487
16,271

2000
52 weeks

Exceptional
items
£m

Before
exceptional
items
£m

Total
£m

1999
56 weeks

Exceptional
items
£m

–
–

–

–
–
–

17,414
(1,143)

17,587
(1,154)

16,271

16,433

15,784
487
16,271

16,433
–
16,433

–
–

–

–
–
–

Total
£m

17,587
(1,154)

16,433

16,433
–
16,433

Cost of sales

Gross profit

Administrative expenses
Amortisation of goodwill
Year 2000 costs
Profit sharing
Total administrative expenses

Operating profit

Continuing operations

Acquisitions

Group operating profit

Associated undertakings – share of profit
Profit on sale of properties
Profit on disposal of an associate

Profit on ordinary activities before interest
Net interest payable

Profit on ordinary activities before tax

Underlying profit on ordinary activities before tax
Amortisation of goodwill
Group profit on ordinary activities before tax

(15,118)

(83) (15,201)

(15,095)

(21)

(15,116)

1,153

(83)

1,070

1,338

(21)

1,317

1, 6

(486)
(11)
(6)
(10)
(513)

(29)
–
–
–
(29)

(515)
(11)
(6)
(10)
(542)

640

(112)

528

659
(19)
640

(96)
(16)
(112)

1
–
–

641
(72)

569

580
(11)
569

–
52
–

(60)
–

(60)

(60)
–
(60)

563
(35)
528

1
52
–

581
(72)

509

520
(11)
509

(406)
–
(30)
(45)
(481)

857

857
–
857

12
–
–

869
(55)

814

814
–
814

–
–
–
–
–

(21)

(21)
–
(21)

–
11
84

74
–

74
–
74

(406)
–
(30)
(45)
(481)

836

836
–
836

12
11
84

943
(55)

888

888
–
888

Tax on profit on ordinary activities

(189)

(162)

(258)

(34)

(292)

Profit on ordinary activities after tax
Equity minority interest

Profit for the financial year
Dividends

Retained profit

Earnings per share
Underlying earnings per share*
Diluted earnings per share
Underlying diluted earnings per share*

380
2

382

(33)
–

(33)

347
2

349
(274)

18.3p
20.5p
18.2p
20.5p

556
2

558

40
–

596
2

598
(294)

304

31.4p
29.2p
31.1p
29.0p

Before amortisation of goodwill, exceptional costs and non-operating items.

J Sainsbury plc Annual report and accounts 2000

Group statement of total recognised gains and losses
for the 52 weeks to 1 April 2000

Profit for the financial year
Currency translation differences on foreign currency net investments

Total recognised gains and losses relating to the financial year

There is no material difference between the above profit for the period and the historical cost equivalent.

2000
52 weeks
£m

349
3

352

1999
56 weeks
£m

598
5

603

Reconciliation of movements in equity shareholders’ funds

Profit for the financial year
Dividends

Currency translation differences
Goodwill on disposals charged to profit for the financial year
New share capital subscribed for less expenses of capital issues
Amounts deducted in respect of shares issued to the QUEST
Other

Net movement in equity shareholders’ funds
Opening equity shareholders’ funds

Closing equity shareholders’ funds

Group

Company

2000
52 weeks
£m

349
(274)

75
3
–
21
(1)
–

98
4,644

4,742

1999
56 weeks
£m

598
(294)

304
5
148
68
(6)
(2)

517
4,127

4,644

2000
52 weeks
£m

262
(274)

(12)
4
–
21
(1)
–

12
4,423

4,435

1999
56 weeks
£m

779
(294)

485
2
–
68
(6)
–

549
3,874

4,423

J Sainsbury plc Annual report and accounts 2000

Balance sheets
1 April 2000 and 3 April 1999

Fixed assets
Intangible assets
Tangible assets
Investments

Current assets
Stocks
Debtors
Investments
Sainsbury’s Bank
Cash at bank and in hand

Creditors: due within one year
Sainsbury’s Bank
Other

Net current liabilities

Total assets less current liabilities

Creditors: due after one year
Provisions for liabilities and charges

Total net assets

Capital and reserves
Called up share capital
Share premium account
Revaluation reserve
Profit and loss account

Equity shareholders’ funds
Equity minority interest

Total capital employed

Group

Company

Note

2000
£m

1999
£m

2000
£m

1999
£m

316
6,563
98

6,977

986
320
18
1,718
533

3,575

–
6,409
41

6,450

843
249
17
1,766
725

3,600

–
394
6,131

6,525

–
120
–
–
237

357

(1,607)
(3,113)

(1,669)
(2,880)

–
(1,035)

(4,720)

(4,549)

(1,035)

(1,145)

(949)

(678)

–
226
5,726

5,952

–
72
–
–
1

–
(835)

(835)

(762)

5,832

5,501

5,847

5,190

(993)
(48)

(804)
(8)

(1,412)
–

(767)
–

4,791

4,689

4,435

4,423

481
1,379
39
2,843

4,742
49

4,791

480
1,359
38
2,767

4,644
45

4,689

481
1,379
–
2,575

4,435
–

4,435

480
1,359
–
2,584

4,423
–

4,423

Notes to the financial statements are included on pages 44 to 62.

The financial statements on pages 39 to 62 were approved by the Board of Directors on 30 May 2000, and are signed on its behalf by

Sir George Bull Chairman

Roger Matthews Group Finance Director

J Sainsbury plc Annual report and accounts 2000

Group cash flow statement
for the 52 weeks to 1 April 2000

Net cash inflow from operating activities

Dividends received from associated undertakings

Returns on investments and servicing of finance
Interest received
Interest paid
Interest element of finance lease rental payments

Net cash outflow from returns on investments and servicing of finance

Taxation

Capital expenditure and financial investment
Payments to acquire tangible fixed assets
Receipts from sale of tangible fixed assets
Purchase of own shares
Payments to acquire intangible fixed assets

Net cash outflow from capital expenditure and financial investment

Acquisitions and disposals
Acquisition of and investment in subsidiary and associated undertakings
Investment in Sainsbury’s Bank by minority shareholder
Proceeds from disposal of associate
(Investment in)/proceeds from disposal of other fixed asset investments

Net cash (outflow)/inflow from acquisitions and disposals

Equity dividends paid

Net cash (outflow)/inflow before management of liquid resources and financing

Management of liquid resources

Financing
Issue of ordinary share capital
Increase in short-term borrowings
Increase/(decrease) in long-term borrowings
Capital element of finance lease rental payments

Net cash inflow from financing

(Decrease)/increase in cash in the period

Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the period
Cash inflow from increase in debt and lease financing
Debt in subsidiaries acquired
New finance leases
Currency translation difference

Movement in net debt in the period

Net debt at the beginning of the period

Net debt at the end of the period

J Sainsbury plc Annual report and accounts 2000

Note

2000
52 weeks
£m

838

–

1999
56 weeks
£m

1,322

46
(109)
(17)

(80)

(218)

(755)
385
(68)
(6)

(444)

(293)
4
–
(1)

(290)

(294)

(488)

–

16
79
173
(4)

264

(224)

(224)
(248)
(76)
(7)
(5)

(560)

(704)

(1,264)

46
(113)
(16)

(83)

(287)

(803)
107
(2)
–

(698)

(11)
9
345
3

346

(249)

354

38
188
(9)
(6)

211

568

568
(173)
–
(17)
(5)

373

(1,077)

(704)

Accounting policies

Basis of the financial statements
These financial statements 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. Accounting policies have been consistently applied, with
exception of the change noted below. No profit and loss account is
presented for the Company as provided by Section 230(3) of the
Companies Act 1985.

Change in accounting policy
The Company has changed its accounting policy in respect
of computer software as from 4 April 1999. Costs incurred in
acquiring and developing computer software are now capitalised
as fixed assets where the software supports a significant business
system and the expenditure leads to the creation of an identifiable
durable asset. Computer software assets are depreciated over
their expected useful lives.

In the 52 weeks to 1 April 2000, additions to computer software
assets which would previously have been charged to the profit
and loss account amounted to £18 million and depreciation where
the software assets were already in use amounted to £3 million so
giving a net impact of £15 million. It is not practicable to restate
prior years as the required detail covering previous years is not
available across all Group companies.

Consolidation
The Group financial statements combine the results of the parent
undertaking and all its subsidiaries, associated undertakings and
joint ventures, to the extent of Group ownership and after
eliminating intra-group transactions.

The results of subsidiaries and associated undertakings are
included in the Group profit and loss account from the date of
acquisition, or in the case of disposals, up to the effective date
at which the investment is sold.

Goodwill arising in connection with the acquisition of shares in
subsidiaries and associated undertakings is calculated as the
excess of the purchase price over the fair value of the net assets
acquired. Under the transitional arrangements of FRS10, goodwill
arising on acquisitions prior to 8 March 1998 has been set off
against reserves. For subsequent acquisitions, goodwill is
recognised as an asset on the Group’s balance sheet in the
year in which it arises and amortised on a straight line basis
over a finite life of a maximum of 20 years and, only under
specific circumstances, will it be assumed that goodwill has
an indefinite life.

The Group’s interests in its joint ventures are accounted for using
the gross equity method. The Group’s interests in its associated
undertakings are accounted for using the equity method. In a
joint arrangement that is not an entity, the Group accounts for
its share of assets, liabilities and cash flows measured according
to the terms of the agreement governing the arrangement.

Turnover
Turnover consists of sales through retail outlets, sales of completed
development properties and, in the case of Sainsbury's Bank plc,
interest receivable, fees and commissions.

Cost of sales
Cost of sales consists of all costs to the point of sale including
warehouse and transportation costs, all the costs of operating retail
outlets and, in the case of Sainsbury’s Bank plc, interest payable.

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. No provision has been made for additional tax which would
arise if profits of overseas subsidiaries or associated undertakings
were distributed.

Fixed assets
Freehold land is not depreciated. Freehold buildings, and leasehold
buildings with more than 50 years unexpired, are depreciated in
equal annual instalments at the rate of 2 per cent 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.

Fixtures, equipment (including computer software) 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.

Acquired pharmacy licences are included in intangible assets
and are stated at cost less amortisation. These are amortised
on a straight line basis over a useful economic life of 15 years.

Fixed assets are subject to review of impairment in accordance
with FRS11, Impairment of Fixed Assets and Goodwill. Any
impairment in the value of such fixed assets is charged to the
profit and loss account as it arises.

Research and development
Research and development expenditure is written off as incurred,
except where it fulfils the criteria as laid out in SSAP13.

Capitalisation of interest
Interest incurred on borrowings for the financing of specific
property developments is capitalised.

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 are charged direct to the profit and loss account.
Rentals under operating leases are charged on a straight line
basis up to the date of the next rental review.

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.

Stocks
Stocks are valued at the lower of cost and net realisable value.
Stocks at warehouses are valued at cost, and those at retail
outlets are valued at calculated average cost prices.

Foreign currencies
On consolidation, assets and liabilities of foreign undertakings are
translated into sterling at year end exchange rates. The results of
foreign undertakings are translated into sterling at average rates
of exchange for the year.

Exchange differences arising from the retranslation at year end
exchange rates of the investment in foreign undertakings, less
exchange differences on foreign currency borrowings or forward
contracts which finance or hedge those undertakings, are taken
to reserves and are reported in the statement of total recognised
gains and losses.

Financial instruments
The derivative financial instruments used by the Group to manage
its interest rate and currency risks are interest rate swaps and
swap options, cross currency swaps, forward rate contracts and
currency options.

Interest payments or receipts arising from derivative instruments
are recognised within net interest payable. Any premia or
discounts arising are amortised over the life of the instrument.

Termination payments made or received in respect of derivatives
are spread over the life of the underlying exposure in cases where
the underlying exposure continues to exist and taken to the profit
and loss account where the underlying exposure ceases to exist.

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements
for the 52 weeks to 1 April 2000

Segmental analysis of turnover, profit and net assets

1
The statutory comparatives are for the 56 weeks to 3 April 1999. The Financial Review on pages 24 to 27 compares underlying operating
profit (before amortisation of goodwill, Year 2000 costs and exceptional items) to the equivalent 52 weeks to 3 April 1999. The Review
also analyses the impact of e-commerce development costs and the timing of Easter.

52 weeks to 1 April 2000

Food retailing – UK
DIY retailing – UK
Banking – UK
Property development – UK
Other – UK

Total – UK
Food retailing – US
Food retailing – Egypt

Total overseas

Group total

Goodwill amortisation

Associated undertakings
Net interest payable

Group profit before tax

Profit on ordinary activities before tax

Turnover
(excluding VAT)
£m

Before
exceptional
items
£m

Exceptional
items
£m

12,353
1,217
136
165
–

13,871
2,376
24

2,400

16,271

509
55
3
16
–

583
79
(11)

651

(11)

640
1
(72)

569

24
(51)
–
–
6

(21)
(39)
–

(39)

(60)

–

(60)
–
–

(60)

Non-operating assets and liabilities (not allocated)
Net borrowings (not allocated)**

Group net assets

Excluding net borrowings and intercompany assets and liabilities.

*
** Net borrowings include cash and current asset investments, excluding those of Banking.

56 weeks to 3 April 1999

Food retailing – UK
DIY retailing – UK
Banking – UK
Property development – UK
Other – UK

Total – UK
Food retailing – US

Group total

Goodwill amortisation

Associated undertakings
Net interest payable

Group profit before tax

Profit on ordinary activities before tax

Turnover
(excluding VAT)
£m

Before
exceptional
items
£m

Exceptional
items
£m

13,074
1,187
158
32
12

14,463
1,970

16,433

731
65
(6)
9
3

802
55

857

–

857
12
(55)

814

6
(23)
–
–
7

(10)
84

–

74
–
–

Non-operating assets and liabilities (not allocated)
Net borrowings (not allocated)**

Group net assets

Excluding net borrowings and intercompany assets and liabilities.

*
** Net borrowings include cash and current asset investments, excluding those of Banking.

Group
total
£m

533
4
3
16
6

562
40
(11)

591

(11)

580
1
(72)

509

Group
total
£m

737
42
(6)
9
10

792
139

931

–

931
12
(55)

888

Net
assets*
£m

4,750
522
113
123
(35)

5,473
796
18

814

6,287

(258)
(1,264)

4,791

Net
assets*
£m

4,554
442
101
130
10

5,237
505

5,742

(387)
(704)

4,689

Sales between the Group’s business segments are not material. Turnover is disclosed by origin. There is no material difference in
turnover by destination.

J Sainsbury plc Annual report and accounts 2000

Cost of sales and operating expenses

Continuing

Group

Turnover excluding VAT and sales taxes
Cost of sales
Exceptional cost of sales

Gross profit
Administrative expenses
Exceptional administrative expenses
Amortisation of goodwill
Year 2000 costs
Profit sharing

Operating profit

The exceptional costs comprise the following:

Sainsbury’s Supermarkets
Homebase
Shaw’s Supermarkets

Exceptional cost of sales

Sainsbury’s Supermarkets
Homebase
Shaw’s Supermarkets

Exceptional administrative expenses

Total exceptional costs

Before acquisitions
£m

Acquisitions
£m

15,784
(14,651)
(78)

1,055
(458)
(18)
–
(6)
(10)

563

487
(467)
(5)

15
(28)
(11)
(11)
–
–

(35)

Severance and
reorganisation costs
£m

Store
closures
£m

19
18
4

12
–
13

8
27
7

–
4
–

2000
52 weeks
Total
£m

16,271
(15,118)
(83)

1,070
(486)
(29)
(11)
(6)
(10)

528

1999
56 weeks
Total
£m

16,433
(15,095)
(21)

1,317
(406)
–
–
(30)
(45)

836

2000
Total
£m

27
45
11

12
4
13

112

1999
Total
£m

–
21
–

–
–
–

–

The reorganisation costs incurred in Sainsbury’s Supermarkets were the result of simplifying central and store operations and
streamlining the store management structure. The integration of Savacentre into Sainsbury’s Supermarkets is now complete.

Homebase has closed 99 kitchen studios which were loss making and is utilising the space released for extending its own range of
products. The severance and reorganisation costs of closure and simplification of operations amounted to £15 million. Restructuring
costs at Hampden, which was acquired during the year, amounted to £2 million.

The exceptional severance costs in US operations all relate to the integration of Star Markets (see note 33).

The costs of store closures include a programme of 14 Homebase closures.

Profit sharing

3
The amount provided for profit sharing for the UK retail companies is calculated based on the operating profits and net interest
reflected in the accounts of the participating companies.

The figure on which the profit fund is based is £470 million (1999: £806 million). £9 million (1999: £42 million) has been provided for
the profit fund and £1 million (1999: £3 million) for Employers’ National Insurance payable thereon.

Employees participate in the Profit Sharing Scheme after completing one financial year’s service and obtain full benefits after the third
year. In respect of the 52 week period ended 1 April 2000, 117,320 employees are eligible. A distribution rate is calculated according
to the size of the profit fund and the total qualifying pay of eligible employees and is finalised following the Annual General Meeting.
The distribution rate in 2000 is expected to be approximately 1.1 per cent of qualifying pay (1999: 4.5 per cent).

Profit sharing may be taken in cash under the Cash Trust or, subject to the statutory maximum, in shares under the Share Trust.
The number of shares allotted to Profit Sharing Scheme participants in July 1999 is set out in note 26.

At 1 April 2000, the Trustees of the J Sainsbury Profit Sharing Scheme Share Trust held 9.8 million shares (1999: 9.9 million) on behalf
of 55,284 participants (1999: 52,105) in the Scheme.

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Profit on sale of properties

Sale and leaseback of UK supermarket freeholds
Disposal of Shaw’s Supermarkets shopping centres
Other

Group

2000
52 weeks
£m

1999
56 weeks
£m

82
(15)
(15)

–
–
11

An amount of £82 million is included in property profits resulting from the sale of 16 supermarket freehold properties for proceeds of
£325 million to a property company not related to the Group. The supermarkets have been leased back by Sainsbury’s Supermarkets
for a period of 23 years at a market rental which will increase by 1 per cent per annum over the lease period. The leases have been
treated as operating leases. The Company has provided a guarantee to the purchasers of the freeholds that the properties will realise at
least £170 million at the end of the lease period. In view of the relatively low amount of this guarantee when compared to the present
market value of the freehold interests, it is believed that the likelihood of this guarantee being invoked is remote.

Provision was made for a loss of £15 million on the sale of 19 shopping centres owned by Shaw’s Supermarkets. The transaction
generated net proceeds of £72 million. In 15 of these shopping centres, Shaw’s Supermarkets will enter into a lease, but only for the
area from which it trades.

The proceeds from these exceptional items are included in the cash flow statement on page 42 in Receipts from sale of tangible fixed assets.

Net interest payable

Interest receivable

Interest payable and similar charges:

Bank loans and overdrafts
Other loans
Finance leases

Interest capitalised

Net interest payable

Group

2000
52 weeks
£m

1999
56 weeks
£m

28
77
17

122
(14)

108

17
82
16

115
(15)

100

Including interest receivable attributable to Sainsbury’s Bank of £111 million (1999: £139 million), included in sales, and interest payable
attributable to Sainsbury’s Bank of £74 million (1999: £108 million), included in cost of sales, total interest receivable for the 52 weeks
ended 1 April 2000 amounted to £147 million (1999: £184 million) and total interest payable amounted to £196 million (1999: £223 million).
Interest is capitalised at the weighted average cost of related borrowings, and of the interest capitalised, £10 million (1999: £12 million)
has been capitalised into fixed assets (see note 13) and £4 million (1999: £3 million) has been capitalised into stocks during the
financial year.

Profit on ordinary activities before tax

Profit on ordinary activities before tax is stated after charging/(crediting):
– owned assets
Depreciation
– assets under finance leases

Amortisation of intangible assets
Pension costs
Auditors’ remuneration

Operating lease rentals

– audit fee (Company £0.1 million, (1999: £0.1 million))
– other services (see below)
– properties
– fixtures, equipment and vehicles
– receivable

Group

2000
52 weeks
£m

1999
56 weeks
£m

394
16
12
64
0.7
5.2
257
11
(15)

380
8
–
70
0.6
2.9
249
12
(19)

Non-audit fees paid to PricewaterhouseCoopers include consultancy fees for business process reviews, systems implementation and
taxation advice.

J Sainsbury plc Annual report and accounts 2000

Employees

Employees’ remuneration and related costs during the period amounted to:

Wages and salaries
Social security costs
Other pension costs

Profit sharing

The average number of employees during the period was:

Full-time
Part-time

Full-time equivalent

Group

2000
52 weeks
£m

1,634
103
63

1,800
10

1,810

1999
56 weeks
£m

1,696
108
70

1,874
45

1,919

Group

2000
Number

1999
Number

60,207
129,020

55,956
123,002

189,227

178,958

116,946

109,245

Advances to Directors and connected persons

8
As at 1 April 2000, authorisations, arrangements and agreements entered into by Directors and connected persons in the normal course
of business with Sainsbury’s Bank amounted to £37,000 (1999: £52,132) (number of persons: 5 (1999: 10)).

The details of Directors’ emoluments and interests are set out in the Report of the Remuneration Committee on pages 33 to 37.

Tax on profit on ordinary activities

The tax charge based on the profit for the period is:
UK Corporation tax at 30% (1999: 31%)
Over provision in prior periods – UK
Deferred tax
Overseas tax – current
Overseas tax – deferred
Taxation on exceptional items
Share of associated undertakings’ tax

Dividends

Interim
Final proposed

Group

2000
52 weeks
£m

1999
56 weeks
£m

180
–
3
10
(4)
(27)
–

162

2000
52 weeks
£m

77
197

274

238
(8)
9
19
(4)
34
4

292

1999
56 weeks
£m

77
217

294

2000
pence
per share

4.02
10.30

14.32

1999
pence
per share

4.02
11.30

15.32

The 1999 final dividend included a one-off payment of 1.0 pence per share (amounting to £19 million in total) to cover the extra four
weeks in that financial year.

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Earnings per share

11
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number
of ordinary shares in issue during the year, excluding those held by the Employee Share Ownership Trusts (see note 14) which are
treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market
price of the Company’s ordinary shares during the year.

Weighted average numbers of shares in issue
Weighted average number of dilutive share options

Total number of shares for calculating diluted earnings per share

2000
52 weeks
million

1,913.5
4.1

1999
56 weeks
million

1,909.4
17.0

1,917.6

1,926.4

The alternative measure of earnings per share is provided because it reflects the Group’s underlying trading performance by excluding
the effect of amortisation of goodwill, exceptional costs, the profit or loss on the sale of properties, and any profits or losses on disposal
of associated undertakings or subsidiaries.

2000
52 weeks

1999
56 weeks

Earnings
£m

Per share
amount
pence

Earnings
£m

Basic earnings per share

Amortisation of goodwill
Exceptional costs
Profit on sale of properties and disposal of an associate

Basic earnings per share before amortisation of goodwill, exceptional costs
and profit on sale of properties and disposal of an associate

Diluted earnings per share

349

11
84
(52)

392

349

18.3

0.6
4.4
(2.8)

20.5

18.2

Diluted earnings per share before amortisation of goodwill, exceptional costs
and profit on sale of properties and disposal of an associate

392

20.5

Intangible fixed assets

Cost
At 4 April 1999
Reclassification of pharmacy licences as intangible assets
Acquisitions at fair value
Additions

At 1 April 2000

Amortisation
At 4 April 1999
Reclassification of pharmacy licences as intangible assets
Charge for the year

At 1 April 2000

Net book value
At 1 April 2000

At 3 April 1999

Goodwill
£m

–
–
6
307

313

–
–
11

302

–

599

–
14
(55)

558

599

558

Other
£m

–
10
–
6

–
1
1

–

Per share
amount
pence

31.4

–
0.7
(2.9)

29.2

31.1

29.0

Total
£m

–
10
6
313

329

–
1
12

316

–

Goodwill arising on the acquisitions of Star Markets, Hampden and EDGE is being amortised on a straight line basis over their economic
life, which in each case, having regard to the nature of the business, is estimated to be 20 years.

Other intangible assets comprise acquired pharmacy licences, which are amortised over 15 years.

J Sainsbury plc Annual report and accounts 2000

Tangible fixed assets

Cost or valuation
At 4 April 1999
Reclassification of pharmacy licences as intangible
Additions (see below)
Acquisitions at fair value
Disposals
Exchange adjustments

Group

Fixtures,
equipment
and vehicles
£m

3,306
–
372
85
(99)
–

Properties
£m

5,831
(10)
431
67
(354)
3

9,137
(10)
803
152
(453)
3

At 1 April 2000

5,968

3,664

9,632

Depreciation
At 4 April 1999
Reclassification of pharmacy licences as intangible
Charge for the year
Acquisitions at fair value
Disposals

At 1 April 2000

Net book value
At 1 April 2000
At 3 April 1999

Capital work-in-progress included above
At 1 April 2000
At 3 April 1999

830
(1)
96
12
(33)

1,898
–
314
48
(95)

2,728
(1)
410
60
(128)

904

2,165

3,069

5,064
5,001

1,499
1,408

6,563
6,409

124
76

125
61

249
137

Company

Total
£m

Properties
£m

Total
£m

229
–
495
–
(325)
–

399

3
–
2
–
–

394
226

–
–

229
–
495
–
(325)
–

399

3
–
2
–
–

394
226

–
–

The amount included in the additions of £803 million in respect of interest capitalised during the period ended 1 April 2000 amounted
to £10 million (1999: £12 million). Accumulated interest capitalised included in the cost or valuation total above amounts to £247 million
(1999: £242 million) for the Group and £nil (1999: £nil) for the Company.

Analysis of finance leases – Group

Cost
Depreciation

Net book value

2000

Fixtures,
equipment
and vehicles
£m

1
1

–

Properties
£m

145
45

100

Total
£m

146
46

100

Properties
£m

116
31

1999

Fixtures,
equipment
and vehicles
£m

25
23

Total
£m

141
54

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Tangible fixed assets continued

13
Analysis of properties

At 1 April 2000

Freehold
Cost
1973 valuation
1992 valuation
Long leasehold
Cost
1973 valuation
1992 valuation
Short leasehold
Cost

Group

Company

Cost
£m

Valuation
£m

Cost
£m

Valuation
£m

4,269

922

685

5,876

3
64

3
22

170

229

–

399

–
–

–

The Group has followed the transitional provisions in FRS15, Tangible Fixed Assets, to retain the book value of land and buildings,
certain of which were revalued in 1973 and 1992, without updating the valuations. The 1973 valuation, covering substantially the whole
of the Group’s properties at that time, was made on the basis of open market values by Healey & Baker and G. L. Hearn and Partners.
The 1992 valuation, covering a number of non-retail properties, was made on the basis of open market values by J. Trevor & Sons.

If the properties included at valuation had been included at cost, the cost and accumulated depreciation figures at 1 April 2000 would
have been:

Freehold
Long leasehold
Short leasehold

Fixed asset investments

Subsidiaries (note 15)

Joint ventures and associated undertakings (note 16)
Listed on a UK stock exchange
Other

Purchase of own shares at cost*
Other unlisted investments at cost

Group

Company

Cost
£m

Depreciation
£m

4,294
938
687

5,919

536
149
210

895

Cost
£m

170
229
–

399

Depreciation
£m

–
5
–

Group

Company

2000
£m

1999
£m

2000
£m

6,115

1999
£m

5,698

–
26

26
70
2

3
35

38
2
1

–
16

16
–
–

–
28

28
–
–

6,131

5,726

The Group owned 19,469,350 (1999: 398,783) shares at 1 April 2000 with a nominal value of £4.9 million (1999: £0.1 million).

J Sainsbury plc Annual report and accounts 2000

Fixed asset investments continued

14
415,186 shares (1999: 398,783 shares) are held in an Employee Share Ownership Trust (ESOT) on behalf of certain Directors and senior
executives under the Group’s Long Term Incentive Plan in respect of an award dated 29 May 1998. Under this scheme, awards under
which have now ceased, an amount equal to 50 per cent of the annual bonus of participating Directors and senior executives was
retained and used by the Company to purchase shares in the Company. It is a condition of the scheme that the shares are held by the
ESOT for a period of three years from the date of the award. On the third anniversary of the award, beneficial ownership of the shares
will transfer to those Directors and senior executives who remain in the Company’s employment or who have left for certain permitted
reasons. The cost for the long-term incentive scheme is reflected in the relevant year’s profit and loss account and shares are purchased
at fair value from the market.

704,164 shares (1999: nil) are held by an ESOT on behalf of certain Directors and senior executives under the Group’s Long Term
Performance Share Plan in respect of an award dated 26 July 1999. All participants remaining in the Company’s employment, or leaving
for certain permitted reasons, are entitled to receive a grant of option after a period of three years to purchase the shares awarded to
them for the sum of £1, at any time during the 10 years following the date of grant. The participants’ entitlement to receive the grant
depends on the Company’s total shareholder return (TSR), compared to a peer group of companies, over the three year period from the
original award. If the appropriate level of TSR is not achieved, the entitlement to receive a grant of option will lapse. A charge is taken to
the profit and loss account only when it becomes clear that a grant will be made.

18,350,000 shares (1999: nil) are held by an ESOT for the Colleague Share Option Plan (see note 26). There is no charge to the profit
and loss account because substantially all UK employees are entitled to participate in the Plan.

The market value of the shares held by the ESOTs at 1 April 2000 was £55.1 million (1999: £1.5 million). The Directors do not consider
the shortfall between cost and market value to be a permanent impairment in value.

The ESOTs waive the rights to the dividends receivable in respect of the shares held under all the above schemes except for the Long
Term Incentive Plan.

Investment in subsidiaries

15
The Company’s principal operating subsidiaries are:

Sainsbury’s Supermarkets Ltd (food retailing)
Homebase Limited* (DIY retailing)
J Sainsbury Developments Ltd (property development)
Shaw’s Supermarkets Inc.* (food retailing)
Sainsbury’s Bank plc (banking)
Egyptian Distribution Group SAE (food retailing)

Shares are held by other subsidiaries.

Share of ordinary
allotted capital
and voting rights

Country of
registration or
incorporation

100%
100%
100%
100%
55%
80.1%

England
England
England
USA
England
Egypt

All principal operating subsidiaries operate in the countries of their registration or incorporation. Sainsbury’s Bank plc’s audited accounts
are drawn up to 29 February 2000 to conform with Bank of Scotland (the 45 per cent shareholder). Management accounts have been
used to include Sainsbury’s Bank plc’s results up to 1 April 2000. All other principal operating subsidiaries have been included up to
1 April 2000.

Summary of movements – Company

At 4 April 1999
Investment in subsidiaries
Net repayment of long-term capital advances

At 1 April 2000

Shares
(at cost)
£m

Long-term capital
advances
£m

Total net
investment
£m

4,313
534
–

1,385
–
(117)

5,698
534
(117)

4,847

1,268

6,115

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Investment in joint ventures and associated undertakings

16
The Company’s joint venture is:

Hedge End Park Limited (property investment – UK)
Ordinary shares (other shareholder Marks & Spencer p.l.c.)

Share of
ordinary
allotted capital

Country of
registration or
incorporation

Year-end

1 April

50%

England

The Company’s share of turnover amounted to £2 million for the 52 weeks to 1 April 2000 (56 weeks to 3 April 1999: £2 million) and its
share of operating profit amounted to £1 million for the 52 weeks to 1 April 2000 (56 weeks to 3 April 1999: £1 million). The Company’s
share of the gross assets of its joint venture amounted to £26 million at 1 April 2000 (1999: £25 million) and its share of the gross
liabilities of its joint venture amounted to £11 million at 1 April 2000 (1999: £11 million). The investment in Hedge End Park Limited is
held directly by the Company.

Summary of movements

Group
At 4 April 1999
Share of retained profit
Movement relating to acquisitions

At 1 April 2000

Company
At 4 April 1999
Transfer to investment in subsidiaries

At 1 April 2000

Shares
(at cost)
£m

Group share of
post acquisition
reserves
£m

Long term
capital advances
£m

19
–
(13)

17
(11)

8
1
1

–
–

–

11
–
(1)

11
(1)

The investments in Hampden and EDGE were consolidated as subsidiaries from 16 October 1999 and 20 October 1999 respectively.

Total
£m

38
1
(13)

28
(12)

1999
£m

702
141

843

1999
£m

–
62
10
–
–

1999
£m

2
15

Group

2000
£m

868
118

986

Group

Company

2000
£m

142
24
100

320

1999
£m

96
17
82

249

2000
£m

–
–
117
–
3

120

2000
£m

4
14

Group

Stocks

Goods for resale
Land held for and in the course of development

Debtors

Trade debtors
Amounts owed by subsidiaries
Other debtors due in less than one year
Other debtors due in more than one year
Prepayments

Current asset investments

Investments listed on a recognised stock exchange at cost (equivalent to market value)
Unlisted investments at cost

J Sainsbury plc Annual report and accounts 2000

Current assets and creditors of Sainsbury’s Bank

Current assets
Treasury bills and other eligible bills
Loans and advances to banks
Loans and advances to customers*
Debt securities
Prepayments and accrued income

Creditors: due within one year
Customer accounts
Accruals and deferred income

Group

2000
£m

64
542
684
399
29

1,718

1,590
17

1,607

1999
£m

83
1,212
398
48
25

1,766

1,653
16

1,669

Loans and advances to customers include £329 million (1999: £100 million) of loans and advances repayable in more than one year (see note 23).

In addition to the above assets and liabilities, Sainsbury’s Bank had other assets of £5 million at 1 April 2000 (3 April 1999: £4 million)
and other liabilities of £4 million (3 April 1999: £nil).

Creditors

Group

Company

2000
£m

1999
£m

2000
£m

1999
£m

Due within one year:
Borrowings:
Bank loans and overdrafts
8.25% Bond – Dec 2000
Short-term notes
Current portion of long-term indebtedness including obligations under finance leases

Total short-term borrowings
Trade creditors
Amounts due to subsidiaries
Corporation tax
Social security and other taxes
Other creditors
Accruals
Proposed dividend

Due after one year:
Bank and other loans
Medium-term notes
US$ 200 million 6.25% Notes – March 2002
7.25% Bond – June 2002
8.25% Bond – Dec 2000
8% Irredeemable Unsecured Loan Stock
Obligations under finance leases
Amounts due to subsidiaries
Other creditors

178
150
523
4

855
1,147

128
132
428
226
197

293
–
368
4

665
1,084

185
89
469
171
217

13
150
523
–

686
–
34
26
57
16
19
197

3,113

2,880

1,035

385
115
125
200
–
3
133

993

43
132
125
200
150
3
128

804

350
115
125
200
–
3
–
597
22

1,412

174
–
368
–

542
–
33
8
–
13
22
217

835

–
132
125
200
150
3
–
127
30

767

Bank and other loans includes a debt of £350 million (1999: £nil) which is repayable in December 2003 and on which interest is payable
at a fixed rate of 6.54 per cent per annum.

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Summary of borrowings

Group

Company

Due within one year:
Bank and other loans
Obligations under finance leases
Due after one and within two years:
Bank and other loans
Obligations under finance leases
Due after two and within five years:
Bank and other loans
Obligations under finance leases
Due after five years:
Bank and other loans
Obligations under finance leases

2000
£m

852
3

192
4

566
18

70
111

1999
£m

661
4

199
3

384
13

70
112

2000
£m

686
–

167
–

556
–

70
–

1999
£m

542
–

187
–

353
–

70
–

1,816

1,446

1,479

1,152

Obligations under finance leases due after five years at 1 April 2000 are repayable by instalment. Bank and other loans due after five
years are not repayable by instalment.

Financial instruments

23
The financial assets and financial liabilities analysed below include fixed rate financial assets of £7 million (1999: £7 million), financial
assets on which no interest is paid (i.e. debtors receivable in more than one year) of £15 million (1999: £10 million) and financial
liabilities on which no interest is paid of £32 million (1999: £35 million) which are not included in Group net debt as analysed in note 24.
Debtors receivable and creditors payable in less than one year, and the current assets and current liabilities of Sainsbury’s Bank are
excluded from the analysis. The Group’s policies and procedures in relation to its treasury management, including management of
interest rate and currency risk, are set out on pages 26 and 27 of the Financial Review.

2000

1999

Fair values of financial assets and financial liabilities

Book value
£m

Fair value
£m

Book value
£m

Fair value
£m

Primary financial instruments held or issued to finance Group operations
Borrowings due within one year
Borrowings due after one year
Other creditors
Deposits maturing within one year
Deposits maturing after one year
Derivative financial instruments held to manage
the interest rate and currency profile
Interest rate swaps
Swaptions
Forward contracts

(855)
(961)
(32)
551
7

–
–
–

(857)
(953)
(32)
551
7

2.6
(2.4)
(0.4)

(665)
(781)
(35)
742
7

–
–
–

(666)
(800)
(35)
742
8

5.8
0.1
(2.1)

Fair values of financial assets and financial liabilities have been calculated by discounting future cash flows at the relevant Group
borrowing spread over LIBOR equivalent rates at 1 April 2000 and 3 April 1999.

The above analysis includes finance leases with a capitalised value of £136 million (1999: £132 million). These leases primarily finance
stores in the Group’s US operations and it is not practicable to estimate the fair value of these loans as no appropriate external
benchmark is available. They are therefore included at book value.

Analysis of interest rate profile and currency of financial assets and financial liabilities
There are no material monetary assets or liabilities that are not denominated in the functional currency of the entity concerned, other
than certain non-sterling borrowings which are hedges for investments in overseas operations.

J Sainsbury plc Annual report and accounts 2000

Financial instruments continued

23
Financial assets
After taking into account various interest rate swaps and forward currency contracts for £340 million (1999: £140 million) the interest
rate profile of the Group’s financial assets was:

Currency

Sterling
US dollar
Other

At 1 April 2000

Sterling
US dollar
Other

At 3 April 1999

Floating rate
financial assets
£m

Fixed rate
financial assets
£m

Financial assets
on which no
interest is paid
£m

747
138
6

891

437
443
2

882

7
–
–

13
2
–

9
1
–

Total
£m

767
140
6

913

453
444
2

899

Floating rate financial assets comprise bank balances linked to bank base rate, and money market fund balances and commercial paper
investments bearing interest rates linked to LIBOR. The fixed rate financial asset has an interest rate of 7.75 per cent fixed for an
average of 5.2 years. The financial assets on which no interest is paid have a weighted average period until maturity of two years.

Financial liabilities
After taking into account various interest rate swaps and forward foreign currency contracts for £340 million (1999: £140 million), the
interest rate profile of the Group’s financial liabilities was:

Fixed rate debt

Sterling
US dollar
Other

At 1 April 2000

Sterling
US dollar

At 3 April 1999

Financial liabilities
on which no
interest is paid
£m

Floating rate
financial
liabilities
£m

Fixed rate
financial
liabilities
£m

Weighted
average
interest rate
%

Average time
for which rate
is fixed
years

13
19
–

25
10

1,079
486
31

1,596

591
440

1,031

204
356
–

560

205
349

554

7.26
8.82
–

8.25

7.3
8.7

8.2

2.9
7.0
–

5.5

3.8
7.8

6.3

Total
£m

1,296
861
31

2,188

821
799

1,620

Floating rate financial liabilities comprise bank borrowings, linked to bank base rate and LIBOR, and commercial paper, floating rate notes
and fixed rate long term debt issues swapped into floating rates, all bearing interest rates linked to LIBOR. Financial liabilities on which no
interest is paid do not have pre-determined dates of payment and, therefore, a weighted average period of maturity cannot be calculated.

The above analysis includes three interest rate swaps which convert nominal fixed rate financial liabilities of £350 million at 6.54 per
cent, £150 million at 8.25 per cent and £32 million at 7.36 per cent into floating rates based on sterling LIBOR, and one interest rate
swap which converts nominal floating rate LIBOR linked debt of $150 million into fixed rate financial liabilities at 6.95 per cent.

The above analysis excludes two swap options in an aggregate amount of $200 million which, if exercised by the counterparty, would
require the Group to enter into a swap under which it would receive fixed rate interest at 6.40 per cent and pay floating rate LIBOR on
a nominal amount of $200 million for a period to November 2002. The options may be exercised by the counterparty on quarterly dates
through to August 2002.

The above analysis does not include a put option on two million shares in the Company which was sold to a counterparty in relation
to the hedging of share options granted to employees (see note 26). The option was exercised on 19 April 2000 at the exercise price
of 377.5 pence per share.

In addition to the above, the Group’s provision of £40 million (1999: £nil) for onerous leases meets the definition of a financial liability.
This financial liability is considered to be a floating rate financial liability as, in establishing the provision, the cash flows have been
discounted. The discount rate will be reappraised at each half yearly reporting date to ensure that it reflects current market
assessments of the time value of money and the risks specific to the liability.

Including Sainsbury’s Bank (see below), there were no material recognised or unrecognised gains or losses on interest rate hedging
instruments or forward foreign currency contracts at the beginning, end or during the 52 week period ended 1 April 2000 other than
the interest rate swap and forward foreign currency contracts disclosed above.

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Financial instruments continued

23
Financial instruments – Sainsbury’s Bank
The financial assets and financial liabilities of Sainsbury’s Bank are shown separately as current assets and current liabilities in the
Group Balance Sheet (see note 20). The management of Sainsbury’s Bank’s treasury operations is separate from that of the Group, as
described on pages 26 and 27 of the Financial Review.

Sainsbury’s Bank’s exposure to movements in interest rates is shown in the following table which discloses the interest rate repricing
profile of assets and liabilities as at 1 April 2000. Any asset (or positive) gap position reflects the fact that Sainsbury’s Bank’s financial
assets reprice more quickly, or in greater proportion than liabilities in a given time period, and will tend to benefit net interest rate
income in a rising interest rate environment. A liability (or negative) gap exists when liabilities reprice more quickly or in greater
proportion than assets during a given period and tends to benefit net interest income in a declining rate environment. Items are
allocated to time bands by reference to the earlier of the next contractual interest rate repricing date and the maturity date.

Interest rate sensitivity table of Sainsbury’s Bank as at 1 April 2000

Not more Over 3 mths Over 6 mths

than but not over but not over but not over
3 years
£m

6 mths
£m

1 year
£m

3 mths
£m

Over 1 year Over 3 years
but not over
5 years
£m

Assets:
Eligible bank bills
Loans and advances to banks
Loans and advances to customers
Debt securities
Other assets

Total assets

Liabilities:
Customer accounts
Other liabilities
Shareholders’ funds

Total liabilities
On balance sheet gap

Interest rate swaps

Net interest rate sensitivity gap

64
499
350
399
–

1,312

1,533
–
–

1,533
(221)

(133)

–
10
1
–
–

–
–
–

–
11

–

–
33
4
–
–

8
–
–

8
29

Over Non-interest
bearing
£m

5 years
£m

–
–
13
–
–

–
–
–

–
13

–

–
–
–
–
34

–
21
112

133
(99)

–

(99)

–

–
–
119
–
–

119

40
–
–

40
79

–
–
197
–
–

197

9
–
–

9
188

(76)

(17)

171

Cumulative gap

(133)

(122)

(88)

(85)

Interest rate sensitivity table of Sainsbury’s Bank as at 3 April 1999

Assets:
Treasury bills and other eligible bills
Loans and advances to banks
Loans and advances to customers
Debt securities
Other assets

Total assets

Liabilities:
Customer accounts
Other liabilities
Shareholders’ funds

Total liabilities

Interest rate sensitivity gap

Cumulative gap

Not more
than
3 mths
£m

Over 3 mths
but not over
6 mths
£m

Over 6 mths
but not over
1 year
£m

Over 1 year
but not over
3 years
£m

Over 3 years
but not over
5 years
£m

Non-interest
bearing
£m

83
1,033
294
48
6

1,464

1,653
–
–

1,653

(189)

–
179
1
–
1

181

–
–
–

–

181

(8)

–
–
3
–
–

–
–
–

–

(5)

–
–
47
–
–

–
–
–

–

–
–
53
–
–

–
–
–

–

–
–
–
–
22

–
16
101

117

(95)

–

As set out above, Sainsbury’s Bank has entered into interest rate swaps on a notional principal amount of £186 million. The underlying
risks involved are significantly lower than the contract or notional principal amounts, as shown by the risk weighted amounts calculated
using the Financial Services Authority’s capital adequacy rules (total of £0.1 million) and their fair value represented by replacement
cost (total of £0.4 million).

J Sainsbury plc Annual report and accounts 2000

Total
£m

64
542
684
399
34

1,723

1,590
21
112

1,723
–

–

Total
£m

83
1,212
398
48
29

1,770

1,653
16
101

1,770

–

Analysis of net debt

Cash and liquid funds
Overdrafts

Debt due within 1 year
Debt due after 1 year
Finance leases

Total

Provisions for liabilities and charges

At 4 April 1999
Profit and loss account
Deferred tax – UK
Deferred tax – US
New provisions
Utilised
Transfer to corporation tax

At 1 April 2000

The provided and unprovided liabilities for deferred tax are as follows:

Timing differences between depreciation
and capital allowances
Other timing differences

At 3 April
1999
£m

742
(128)

(532)
(653)
(133)

(704)

Cash
flow
£m

(190)
(34)

(224)
(79)
(173)
4

(248)

(472)

Debt in
subsidiaries
acquired
(excluding cash
and overdrafts)
£m

Other
non–cash
movements
£m

Exchange
movements
£m

At 1 April
2000
£m

(1)
–

(2)
(2)
–

551
(162)

(689)
(828)
(136)

(5)

(1,264)

(76)
–
–

(76)

–
–
(7)

(7)

Deferred tax
£m

(4)

3
(4)

(3)

Group

Other
£m

46
(7)

Total
£m

3
(4)
46
(7)
2

Group

2000
Provided
£m

2000
Unprovided
£m

1999
Provided
£m

1999
Unprovided
£m

9
(12)

(3)

178
(27)

151

12
(16)

(4)

172
4

176

The potential liability for tax which might arise on disposal of the Group’s properties has not been quantified. In the opinion of the
Directors the likelihood of any such liability arising is remote.

The total of other provisions of £51 million includes a new provision of £46 million relating to store closures, of which £40 million
is for onerous leases and £6 million for other store closure costs. The provision for onerous leases covers residual lease commitments,
of up to 80 years, after allowance for existing or anticipated sublet rental income. It has been calculated by applying a pre-tax discount
rate to the anticipated cash flows over the remainder of the leases. The other store closure costs will crystallise in the financial year
commenced 2 April 2000.

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Called up share capital and share premium account

Ordinary shares of 25 pence each authorised – 2,000 million shares

At 4 April 1999
Shares allotted:
Profit Sharing Scheme
Savings-Related Share Option Scheme
Executive Share Option Scheme

At 1 April 2000

Allotted fully
paid shares
million

1,918.2

1.3
4.6
0.4

Aggregate
nominal
value
£m

500

480

–
1
–

Share
premium
£m

Consideration
£m

1,359

5
14
1

5
15
1

1,924.5

481

1,379

Further details of these Schemes at 1 April 2000 are set out below:

Savings-Related Share Option Scheme

(a)
The Company operates a Savings-Related Share Option Scheme for all UK employees with more than one year’s service. This is an
approved Inland Revenue Scheme and was established in 1980. The Scheme is renewable every 10 years and was last renewed in 1996.
At 1 April 2000, UK employees held 63,604 five-year savings contracts in respect of options over 31.4 million shares and 41,125 three-year
savings contracts in respect of options over 10.6 million shares.

Details of these options at 1 April 2000 are set out below:

Date of grant

6 December 1993 (5 year period)
16 December 1994 (5 year period)
20 December 1995 (5 year period)
11 December 1996 (3 year period)
11 December 1996 (5 year period)
10 December 1997 (3 year period)
10 December 1997 (5 year period)
10 December 1998 (3 year period)
10 December 1998 (5 year period)
7 January 2000 (3 year period)
7 January 2000 (5 year period)

Price
pence

301.0
331.0
313.0
292.0
292.0
398.0
398.0
416.0
416.0
253.0
253.0

Options outstanding
at the end of the period

2000
million

1999
million

–
3.5
6.4
0.9
5.1
2.3
5.3
3.0
5.5
4.4
5.6

1.0
6.3
7.3
2.4
5.8
2.8
6.1
3.8
6.2
–
–

42.0

41.7

The J Sainsbury plc Qualifying Employee Share Ownership Trust (the QUEST) was established under a deed of trust dated 11 December
1998. The purpose of the QUEST is to acquire shares for UK employees, including Directors, in satisfaction of their options under the
Savings-Related Share Option Scheme.

Of the 4.6 million ordinary shares allotted in relation to the Savings-Related Share Option Scheme, 2.1 million ordinary shares were
subscribed for by the QUEST at a market value of £6.2 million. These shares were allocated to employees, including Directors, in
satisfaction of options exercised under the Scheme. The Company provided £1 million to the QUEST for this purpose. The cost
of this contribution has been transferred by the Company directly to the Profit and Loss Account reserve (see note 28).

J Sainsbury plc Annual report and accounts 2000

26
(b)

Called up share capital and share premium account continued
Executive Share Option Scheme

Date of grant

31 July 1989
28 February 1991
28 August 1992
12 March 1994
8 September 1995
1 December 1995
20 May 1997
11 November 1997
10 November 1998
2 August 1999
24 November 1999
17 January 2000
1 March 2000

Options outstanding
at the end of the period

Price
pence

272.7
322.1
447.0
359.0
475.0
386.0
367.0
489.0
545.0
377.5
319.75
319.5
260.5

2000
million

–
0.8
3.5
3.1
5.4
0.1
7.9
0.4
8.0
10.9
0.1
0.2
3.0

1999
million

0.2
0.9
3.6
3.3
5.6
0.1
8.1
0.5
8.3
–
–
–
–

43.4*

30.6

These options were held by a total number of 1,873 executives.

Figures for all prices and options outstanding are adjusted as necessary for the rights issue in July 1991.

Colleague Share Option Plan

(c)
In July 1999 the Company established a Colleague Share Option Plan to operate under the rules of the Inland Revenue Approved
Discretionary Share Option Scheme. A total of 111,000 UK employees participated in the Plan and on 2 August 1999 were awarded
options over 36 million shares, at the option price of 377.5 pence per share. The options will normally be exercisable between three and
ten years from the date of the grant of option. It is intended that there will be a further option granted under this plan in June 2000 for
those UK employees who did not qualify for the first grant.

Revaluation reserve

At 4 April 1999
Transfer from Group profit and loss account

At 1 April 2000

Profit and loss account

At 4 April 1999
Profit retained for the period
Currency translation differences
Amounts deducted in respect of shares issued to the QUEST
Transfer to Revaluation reserve

Group
£m

38
1

Group
£m

2,767
75
3
(1)
(1)

Company
£m

–
–

–

Company
£m

2,584
(12)
4
(1)
–

At 1 April 2000

2,843

2,575

The cumulative goodwill deducted from the reserves of the Group at 1 April 2000 amounted to £289 million (1999: £289 million).
This goodwill will be charged to the profit and loss account on disposal of the businesses to which it relates.

The profit for the financial year of the Company was £262 million (1999: £779 million).

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Reconciliation of operating profit to net cash inflow from operating activities

Operating profit
Depreciation
Amortisation of intangible assets
(Profit)/loss on sale of equipment, fixtures and vehicles
Increase in stocks
Increase in debtors
Increase in creditors and provisions
Decrease/(increase) in Sainsbury’s Bank current assets
(Decrease)/increase in Sainsbury’s Bank creditors

Future capital expenditure

Contracted for but not provided for in the accounts

Group

2000
52 weeks
£m

1999
56 weeks
£m

528
410
12
(4)
(86)
(47)
39
48
(62)

838

836
388
–
6
(75)
(73)
256
(182)
166

1,322

Group

Company

2000
£m

260

1999
£m

184

2000
£m

–

1999
£m

–

Contingent liabilities and financial commitments

31
The Company has no guarantees for the borrowings of subsidiaries at 1 April 2000 (1999: £nil). The Company has guaranteed Group
annual commitments under lease obligations on land and buildings of £25 million, which increase by one per cent per annum.

Group commitments to make operating lease payments during the next financial year are as follows:

Leases which expire within 1 year
Leases which expire between 1 and 5 years
Leases which expire after 5 years

The Company has no annual commitments.

Land and buildings

Other leases

2000
£m

3
6
310

1999
£m

2
5
259

2000
£m

1
10
–

1999
£m

1
12
13

Pension costs

32
The pension costs for the UK mainly relate to two funded defined benefit pension schemes, the J Sainsbury Pension and Death Benefit
Scheme (JSPDBS) and the J Sainsbury Executive Pension Scheme (JSEPS). The assets of these schemes are held separately from the
Group’s assets by trustee companies.

In June 1998, the Group introduced a defined contribution Group Personal Pension Plan to meet the requirements of a modern work
force and in order to manage pension costs for the Group in the future. New employees are eligible to join only the Group Personal
Pension Plan but may join the JSPDBS after five years’ service. New Directors and senior executives will continue to join the JSEPS.

The pension cost for the period ending 1 April 2000 is based on the results of a triennial valuation carried out by Watson Wyatt, the
Group’s independent actuaries, as of 8 March 1997, on the projected unit basis.

J Sainsbury plc Annual report and accounts 2000

Pension costs continued

32
The principal actuarial assumptions used in the actuarial valuations are:

Long term rate of return on investments
Annual increase in dividends
Average annual increase in total pensionable salary (excluding promotional increments)
Average annual increase in present and future payments
Average rate of inflation

8.5
4.75
5.5
4.0
4.0

As at March 1997, the market value of the UK schemes was £1,999 million (1994: £1,435 million). The actuarial value was sufficient to
cover 109 per cent (1994: 122 per cent) of the liabilities of the JSPDBS, a surplus of £111 million (1994: £181 million) and 115 per cent
(1994: 120 per cent) of the JSEPS, a surplus of £44 million (1994: £44 million).

Total pension contribution costs for the Group were £64 million for the 52 week period ended 1 April 2000 (1999: £70 million for
56 weeks) of which the pension contribution costs of the UK schemes amounted to £53 million (1999: £61 million for 56 weeks). There
is a variation from the regular cost because of scheme surpluses. These surpluses are being amortised over a period using a method
which reduces the amount of variation from the regular cost until 2005 for the JSPDBS and 2011 for the JSEPS. Total costs for 2000
are after taking account of an amortisation of scheme surpluses of £22 million (1999: £26 million for 56 weeks). The Group’s UK
pension cost is not expected to increase until the results of the triennial valuation which is currently being undertaken are known.

The Group also operates a final salary pension scheme in the US. The pension cost relating to the US benefit scheme has been
determined with the advice of independent actuaries. The charge to the profit and loss account of £11 million (1999: £9 million for
56 weeks) has been calculated in accordance with US accounting principles but would not have been materially different had UK
accounting principles been applied.

Acquisition of and investment in subsidiary and associated undertakings

33
During the financial year, the Group purchased Star Markets Holdings Inc. and increased its investment in Egyptian Distribution Group
SAE (EDGE) from 25.1 per cent to 80.1 per cent, and its investment in Hampden Group PLC from 29.2 per cent to 100 per cent.

Star Markets Holdings Inc.
Hampden Group PLC
Egyptian Distribution Group SAE

Group

2000

Cash consideration
plus costs
£m

Cash balances
acquired
£m

Overdrafts
acquired
£m

1999

Total
£m

Cash consideration
plus costs
£m

(235)
(14)
(40)

(289)

1
3
–

–
–
(8)

(8)

(234)
(11)
(48)

(293)

–
–
(11)

(11)

All of the purchases have been accounted for using acquisition accounting.

The total adjustments required to the book values of the assets and liabilities of the companies acquired in order to present the net
assets of those companies at fair values in accordance with Group accounting principles were £26 million.

From the dates of acquisition to 1 April 2000, the acquisitions contributed £487 million to turnover and an operating loss of £35 million
(after exceptional costs of £16 million and a charge of £11 million for amortisation of goodwill).

a) Acquisition of Star Markets Holdings Inc.
On 28 June 1999, Shaw’s Supermarkets acquired Star Markets for a total consideration of £311 million, including debt acquired.
Star Markets now operates 44 supermarkets, mainly in the Greater Boston area.

From the date of acquisition to 1 April 2000, Star Markets contributed £446 million to turnover, an operating loss of £19 million (after
exceptional costs of £14 million and amortisation of goodwill of £10 million). Star Markets contributed £11 million to the Group’s net
operating cash flow, paid £5 million in respect of interest and utilised £3 million for capital expenditure.

The pre-acquisition figures quoted below are stated before any adjustment for Group accounting policies and were prepared under
local accounting principles.

In the financial year to 30 January 1999, Star Markets reported turnover of $1.06 billion, earnings before interest, tax and depreciation
of $55 million and a loss before tax and after financing costs of $5 million and a loss after tax of $6 million. From the period since that
date to the date of acquisition, Star Markets made a loss after tax of $10 million.

J Sainsbury plc Annual report and accounts 2000

Notes to the financial statements

Acquisition of and investment in subsidiary and associated undertakings continued
Acquisition of Star Markets Holdings Inc. continued

33
a)
Details of the transaction, showing the fair value adjustments, are set out in the table below:

Tangible fixed assets
Stocks
Other current assets
Creditors

Net assets acquired
Consideration

Goodwill

Consideration satisfied by:
Cash (including £2 million acquisition costs)
Debt acquired

Total consideration

Fair value adjustments

Book value
£m

Revaluations
£m

Accounting
policy
alignments
£m

100
40
43
(100)

(22)
–
–
–

(22)

–
–
–
–

–

Fair value
to the
Group
£m

78
40
43
(100)

61
311

250

235
76

311

The book values of the assets and liabilities have been taken from the management accounts of Star Markets at 26 June 1999. The fair
value adjustments contain some provisional adjustments which will be finalised in the financial statements at 31 March 2001 when the
detailed acquisition investigation has been completed.

Other acquisitions

Book value of net assets acquired (includes net overdrafts of £5 million)
Fair value adjustments

Net assets acquired
Consideration

Goodwill

£m

11
(4)

7
64

Hampden and EDGE were consolidated as subsidiaries from 16 October 1999 and 20 October 1999 respectively. Provisional fair value
adjustments of £2 million have been made to align accounting policies in respect of fixed assets (£1 million) and stock (£1 million).
Provisional adjustments of £2 million to reflect the revaluation of fixed assets have been made.

The provisional fair value adjustments will be finalised in the financial statements at 31 March 2001 when the detailed acquisition
investigations have been completed.

Consideration comprised cash and a further potential payment of up to £11 million contingent on the future profit performance of EDGE.

Related party transactions

34
The following transactions fall to be disclosed under the terms of FRS8.

Sainsbury’s Bank is a subsidiary of the Company, and has as joint shareholders the Company and Bank of Scotland, which hold 55 per cent
and 45 per cent respectively of the issued share capital. In the year ended 1 April 2000, Bank of Scotland provided both management
and banking services to Sainsbury’s Bank. In the same period the Group provided management services and reward points (relating to
customer loyalty cards) to Sainsbury’s Bank.

The amounts in respect of management, banking services and reward points payable during the year were:

Payable to Bank of Scotland
Payable to the Group

2000
£m

19
10

1999
£m

19
12

In addition, Sainsbury’s Bank made loans and advances to and entered into interest rate swaps with Bank of Scotland Treasury
Services plc and operated a current account at Bank of Scotland during the year, all under normal commercial terms. Included in
loans and advances to banks at 1 April 2000 of £542 million (1999: £1,211 million) are loans and advances to Bank of Scotland
Group of £376 million (1999: £395 million).

J Sainsbury plc Annual report and accounts 2000

Five year financial record

Financial results (£ million)
Group turnover (including VAT and sales taxes)
Increase on previous year
Group operating profit (before Year 2000 costs and profit sharing)
Sainsbury’s Supermarkets
Homebase
Shaw’s
Sainsbury’s Bank
Sainsbury’s Egypt
Other operating activities

Year 2000 costs
Profit sharing
Associated undertakings
Interest receivable/(payable)

Group profit before tax, amortisation of goodwill, exceptional costs
and non-operating items

(Decrease)/increase on previous year

Earnings per share
Basic
(Decrease)/increase on previous year
Diluted (before amortisation of goodwill, exceptional costs and non-operating items)
(Decrease)/increase on previous year

1996(b)

1997(c)

1998(d)

1999(e)

2000(f)

13,499
11.9%

14,312
6.0%

15,496
8.3%

16,378
5.7%

17,414
6.3%

778
26
–
–
–
(1)

803

–
(50)
19
(59)

692
16
41
(6)
–
2

745

–
(37)
19
(76)

766
55
38
(15)
–
10

854

(20)
(44)
16
(78)

732
75
53
(5)
–
12

867

(28)
(45)
11
(50)

522
57
80
3
(11)
16

667

(6)
(10)
1
(72)

764

651

728

755

580

(5.4)% (14.8)%

11.8%

3.7% (23.2)%

26.8p

22.0p
(10.1)% (17.9)%
23.1p
(4.1)% (16.9)%

27.8p

25.1p
14.1%
26.6p
15.2%

18.3p
29.2p
16.3% (37.3)%
20.5p
26.8p
0.8% (23.5)%

Dividend per share

12.1p

12.3p

13.9p

14.32p(a) 14.32p

Retail statistics
Number of outlets at financial year-end
Sainsbury’s Supermarkets – over 40,000 sq ft sales area
Sainsbury’s Supermarkets – 25,000–40,000 sq ft sales area
Sainsbury’s Supermarkets – 15,000–25,000 sq ft sales area
Sainsbury’s Supermarkets – under 15,000 sq ft sales area

Sainsbury’s Supermarkets
Homebase
Shaw’s
Sainsbury’s Egypt

Total number of stores

Sales area (000 sq ft)
Sainsbury’s Supermarkets
Homebase (approx. 80% covered sales area)
Shaw’s
Sainsbury’s Egypt

Group total
Net increase on previous year:
Sainsbury’s Supermarkets
Group

New Sainsbury’s Supermarkets openings

Sainsbury’s Supermarkets’ sales intensity (including VAT)(g)
Per square foot (£ per week)
Share of national trade in predominantly food stores and
pharmaceutical, medical, cosmetic and toilet goods outlets(h)

28
211
87
49

375
310
96
–

33
223
87
47

390
297
115
–

39
229
93
43

404
298
121
–

42
233
98
45

418
288
127
–

781

802

823

833

61
225
99
47

432
297
168
100

997

10,801
11,632
3,137
–

11,421
11,246
3,822
–

11,979
11,201
4,119
–

12,571
10,851
4,410
–

13,055
11,339
5,617
378

25,570

26,489

27,299

27,832

30,389

4.6%
59.1%

6.3%
3.6%

4.6%
3.1%

1 9

4.9%
2.0%

3.9%
9.2%

17.86

18.09

18.26

18.04

16.98

12.2% 12.3% 12.5% 12.3% 11.9%

(a) Excludes a 1.0 pence per share payment to cover the extra four weeks in 1999.
(b) 1996 figures for profits and diluted earnings per share are stated before
exceptional costs of £48 million (£5 million as restated under FRS12).
(c) 1997 figures for profits and diluted earnings per share are stated before
exceptional costs of £50 million (£44 million as restated under FRS12).
(d) 1998 figures for profits, basic earnings per share and diluted earnings per

share are restated to comply with FRS12 and FRS14 and are before
exceptional costs of £28 million and a loss of £12 million on the disposal
of a subsidiary.

(e) 1999 figures for profits and diluted earnings per share are for the 52 week

period to 3 April 1999 and are stated before exceptional costs of £21 million
and a profit of £84 million on the sale of an interest in an associate.
(f) 2000 figures for profits and diluted earnings per share are before

amortisation of goodwill of £11 million, exceptional costs of £112 million
and a profit on disposal of properties of £52 million.

(g) Including Savacentre, excluding petrol.
(h) Based on Office for National Statistics data and Sainsbury’s Supermarkets

sales, excluding petrol.

J Sainsbury plc Annual report and accounts 2000

Investor information

Shareholders’ interests at 1 April 2000

2000 Shareholder %

Number of shareholders: 121,512 (1999: 113,403)

Number of shares in issue: 1,924,493,253 (1999: 1,918,215,654)

Range of shareholdings

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

Shareholders %

Shares %

2000

1999

2000

1999

52.42
17.73
27.56
1.68
0.44
0.17

0.55
49.45
0.84
18.67
4.38
29.23
2.75
1.93
9.25
0.52
0.20 82.23

0.50
0.83
4.39
3.09
10.07
81.12

100.00 100.00 100.00 100.00

2000 Shares %

Individual and other shareholders
Insurance companies
Banks and nominees
Investment trusts
Pension funds
Other corporate bodies

92.68
0.16
5.51
0.20
0.02
1.43

100.00

43.15
1.14
51.01
0.16
0.82
3.72

100.00

At the year-end, the Trustees of the J Sainsbury Proﬁt Sharing Scheme Trust held
9.8 million shares (1999: 9.9 million) on behalf of 55,284 participants (1999: 52,105).
The Trustees’ holding is included in ‘individual and other shareholders’.

Annual General Meeting
The Annual General Meeting will be held at 11.30 am on
Wednesday 26 July 2000 at The Queen Elizabeth II Conference
Centre, Broad Sanctuary, Westminster, London SW1P 3EE.
The Notice of the Meeting and the proxy card accompany this
Annual Report.

Individual Savings Account (ISA)
On the Company’s behalf, a corporate ISA is being operated by
Sainsbury’s Bank plc in association with the Bank of Scotland. The
plans being offered are a Maxi ISA to include shares and cash and
a Mini shares ISA. The contact address and telephone number
are included in the ‘Useful Contacts’ section on the back cover.

Tax information – Capital Gains Tax
For Capital Gains Tax purposes, the market value of ordinary
shares on 31 March 1982 is 69.375 pence.

Dividend Reinvestment Plan
The Company has a dividend reinvestment plan for the forthcoming
and future dividends which allows shareholders to reinvest their
cash dividend in shares bought on the London Stock Exchange
through a specially arranged sharedealing service. Details of how
the plan works and the charges, together with a mandate for
shareholders to complete if they wish to join the plan are available
from our Registrar, Computershare Services PLC. See the
‘Useful Contacts’ section on the back cover for their address.

Last date for return or
revocation of plan mandates

7 July 2000

Plan shares purchased for shareholders

28 July 2000

Plan share certificates issued

11 August 2000

American Depository Receipts (ADRs)
In the US, the Company’s ordinary shares are traded in the form
of American Depository Shares, evidenced by ADRs, and trade
under the symbol JSNSY. Each American Depository Share
represents four ordinary shares. Citibank is the authorised
Depository Bank for the Sainsbury ADR programme.

All enquiries regarding ADR holder accounts and payment of
dividends should be addressed to:
Citibank, N.A., ADR Shareholder Services
111 Wall Street, New York, NY 10043

Low cost dealing service
The Company offers a share dealing service for J Sainsbury plc
ordinary shares through The Share Centre Ltd. in conjunction with
UBS Warburg. Dealing commission on both purchases and sales of
J Sainsbury plc ordinary shares is one per cent. Purchases are
subject to a minimum charge of £5.

For further information contact The Share Centre. Details are
shown in the ‘Useful Contacts’ section on the back cover.

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.

J Sainsbury plc Annual report and accounts 2000

Financial summary

Financial calendar, registered office and advisers

Sales (including VAT and sales tax) £ million
Underlying profit before tax2 £ million
Underlying earnings per share2 pence
Dividend per share pence3

2000
52 weeks

19991
52 weeks

17,414

16,378

580

20.5p

755

27.0p

14.32p

%
change

6.3

(23.2)

(24.1)

–

2
3

Business summary

New management team accelerating pace of change.

Clear leadership and focus on Sainsbury’s Supermarkets.

Strong performance at Shaw’s Supermarkets – including Star Markets.

Strong like-for-like sales growth at Homebase.

Acceleration of e-commerce strategy across the Group.

Financial calendar 2000/2001

Dividend and interest payments

Ordinary dividend:
Final payable
Interim payable

28 July 2000
January 2001

8% Irredeemable Unsecured Loan Stock

1 March/1 September

£150m 8.25% Notes 2000

22 December

$200m 6.25% Notes 2002

£200m 7.25% Notes 2002

Other dates

Interim results announced

Interim report circulated

Results for the year announced

Report and accounts circulated

Annual General Meeting

27 March

7 June

November 2000

May 2001

June 2001

July 2001

Registered office
J Sainsbury plc
Stamford House
Stamford Street
London SE1 9LL
Registered number 185647

Registrars
Computershare Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH

Auditors
PricewaterhouseCoopers
1 Embankment Place
London WC2N 6NN

Solicitors
Denton Wilde Sapte
One Fleet Place
London EC4M 7WS

Stockbrokers
UBS Warburg
1 Finsbury Avenue
London EC2M 2PP