Notes to the financial statements
11 Property, plant and equipment
| Group | Company | |||
|---|---|---|---|---|
| Land and buildings £m |
Fixtures and equipment £m |
Total £m |
Land and buildings £m |
|
| Cost | ||||
| At 26 March 2006 | 6,418 | 4,323 | 10,741 | 268 |
| Additions | 383 | 344 | 727 | — |
| Disposals | (73) | (138) | (211) | (5) |
| Part disposal of Sainsbury’s Bank | — | (49) | (49) | — |
| Transfer to assets held for sale | (9) | — | (9) | — |
| At 24 March 2007 | 6,719 | 4,480 | 11,199 | 263 |
| Accumulated depreciation and impairment | ||||
| At 26 March 2006 | 970 | 2,711 | 3,681 | 17 |
| Depreciation expense for the year | 92 | 387 | 479 | 2 |
| Disposals | (2) | (106) | (108) | — |
| Part disposal of Sainsbury’s Bank | — | (29) | (29) | — |
| At 24 March 2007 | 1,060 | 2,963 | 4,023 | 19 |
| Net book value at 24 March 2007 | 5,659 | 1,517 | 7,176 | 244 |
| Capital work-in-progress included above | 343 | 89 | 432 | — |
| Cost | ||||
| At 27 March 2005 | 6,234 | 4,235 | 10,469 | 349 |
| Additions | 284 | 228 | 512 | 14 |
| Acquisition of subsidiaries | 4 | — | 4 | — |
| Disposals | (79) | (140) | (219) | (95 ) |
| Transfer to assets held for sale | (25) | — | (25) | — |
| At 25 March 2006 | 6,418 | 4,323 | 10,741 | 268 |
| Accumulated depreciation and impairment | ||||
| At 27 March 2005 | 922 | 2,471 | 3,393 | 19 |
| Depreciation expense for the year | 77 | 372 | 449 | 3 |
| Disposals | (29) | (132) | (161) | (5) |
| At 25 March 2006 | 970 | 2,711 | 3,681 | 17 |
| Net book value at 25 March 2006 | 5,448 | 1,612 | 7,060 | 251 |
| Capital work-in-progress included above | 309 | 44 | 353 | — |
| Group | Company | |||
|---|---|---|---|---|
| 2007 £m |
2006 £m |
2007 £m |
2006 £m |
|
| The net book value of land and buildings comprised: | ||||
| Freehold land and building | 4,339 | 4,166 | 65 | 70 |
| Long leasehold | 889 | 818 | 179 | 181 |
| Short leasehold | 431 | 464 | — | — |
| 5,659 | 5,448 | 244 | 251 | |
Interest capitalised
Interest capitalised included in additions amounted to £10 million (2006: £10 million) for the Group and £nil (2006: £nil) for the Company. Accumulated interest capitalised included in the cost total above amounted to £253 million (2006: £244 million) for the Group and £nil (2006: £nil) for the Company. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 5.3 per cent (2006: 5.3 per cent).
Security
Property, plant and equipment of 127 supermarket properties, with a net book value of £2,456 million (2006: £2,515 million) are pledged as security for the long-term financing (note 20).
In addition, property, plant and equipment of a further six supermarket properties, with a net book value of £74 million (2006: £75 million) has been pledged as security to underpin the residual value guarantee given by the Group with regards to 16 supermarket properties sold in March 2000 and ten supermarket properties sold in July 2000 (note 37).
Analysis of assets held under finance leases – Group
| 2007 £m |
2006 £m |
|
|---|---|---|
| Land and buildings | ||
| Cost | 53 | 55 |
| Accumulated depreciation and impairment | (21) | (21) |
| Net book value | 32 | 34 |
12 Intangible assets
| Goodwill £m |
Pharmacy licences £m |
Software £m |
Total £m |
|
|---|---|---|---|---|
| Cost | ||||
| At 26 March 2006 | 109 | 36 | 120 | 265 |
| Additions | — | — | 7 | 7 |
| Acquisition of subsidiaries (note 33) | 3 | — | — | 3 |
| Part disposal of Sainsbury’s Bank | — | — | (12) | (12) |
| At 24 March 2007 | 112 | 36 | 115 | 263 |
| Accumulated amortisation and impairment | ||||
| At 26 March 2006 | — | 14 | 60 | 74 |
| Amortisation expense for the year | — | 3 | 18 | 21 |
| Part disposal of Sainsbury’s Bank | — | — | (7) | (7) |
| At 24 March 2007 | — | 17 | 71 | 88 |
| Net book value at 24 March 2007 | 112 | 19 | 44 | 175 |
| Cost | ||||
| At 27 March 2005 | 106 | 35 | 115 | 256 |
| Additions | — | 1 | 5 | 6 |
| Acquisition of subsidiaries | 3 | — | — | 3 |
| At 25 March 2006 | 109 | 36 | 120 | 265 |
| Accumulated amortisation and impairment | ||||
| At 27 March 2005 | — | 12 | 41 | 53 |
| Amortisation expense for the year | — | 2 | 19 | 21 |
| At 25 March 2006 | — | 14 | 60 | 74 |
| Net book value at 25 March 2006 | 109 | 22 | 60 | 191 |
The goodwill balance above relates to the Group’s acquired subsidiaries – Bells Stores Ltd, Jacksons Stores Ltd, JB Beaumont Ltd, SL Shaw Ltd and Culcheth Provision Stores Ltd – and is allocated to the respective cash-generating units (“CGUs”) within the retail segment. The CGUs for this purpose are deemed to be the respective acquired retail chains of stores. The value of the goodwill was tested for impairment during the current financial year by means of comparing the recoverable amount of each CGU to the carrying value of its goodwill.
To calculate the CGU’s value in use, Board approved cash flows for the following financial year are assumed to inflate at the long-term average growth rate for the UK food retail sector and are discounted at ten per cent (2006: ten per cent). Based on the operating performance of the respective CGUs, no impairment loss was deemed necessary in the current financial year (2006: £nil).
13 Investments in subsidiaries
| 2007 £m |
2006 £m |
|
|---|---|---|
| Shares in subsidiaries – Company | ||
| Beginning of year | 7,225 | 5,764 |
| Investment in subsidiaries | 21 | 1,463 |
| Acquisition of subsidiaries | 3 | 6 |
| Part disposal of Sainsbury’s Bank | (77) | — |
| Provision for diminution in value of investment | (6) | (8) |
| End of year | 7,166 | 7,225 |
The Company’s principal operating subsidiaries are:
| Share of ordinary
allotted capital and voting rights |
Country of
registration or incorporation |
|
|---|---|---|
| Bells Stores Ltd |
100% | England |
| Jacksons Stores Ltd |
100% | England |
| JS Insurance Ltd |
100% | Isle of Man |
| JS Information Systems Ltd |
100% | England |
| Sainsbury’s Supermarkets Ltd |
100% | England |
| Swan Infrastructure Holdings Ltd | 100% | England |
All principal operating subsidiaries operate in the countries of their registration or incorporation, and have been consolidated up to and as at 24 March 2007.
14 Investments in joint ventures
| Group | Company | |||
|---|---|---|---|---|
| Shares
at cost £m |
Group share
of post-acquisition reserves £m |
Total £m |
Shares
at cost £m |
|
| At 26 March 2006 |
6 | 4 | 10 | 6 |
| Addition of Sainsbury’s Bank (note 7) | 70 | 18 | 88 | 70 |
| Share of retained profit |
— | — | — | — |
| At 24 March 2007 |
76 | 22 | 98 | 76 |
| At 27 March 2005 |
6 | 4 | 10 | 6 |
| Share of retained profit |
— | — | — | — |
| At 25 March 2006 | 6 | 4 | 10 | 6 |
The Group share of post-acquisition reserves includes £18 million relating to 50 per cent of Sainsbury’s Bank retained earnings as a subsidiary prior to it becoming a joint venture (note 7).
The holdings directly owned by the Company of the Group’s principal joint ventures were:
| Year-end | Share of ordinary allotted capital |
Country of registration or incorporation |
|
|---|---|---|---|
| Hedge End Park Ltd (property investment – UK) |
24 March | 50% | England |
| Boutique Sainsbury SARL (food retailing – France) |
31 December | 50% | France |
| Sainsbury’s Bank plc (financial services – UK) | 31 March | 50% | England |
Management accounts for the joint ventures have been used to include the results up to 24 March 2007.
The Group’s share of the assets, liabilities, income and expenses of its principal joint ventures are detailed below:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Non-current assets | 577 | 2 |
| Current assets | 1,140 | 9 |
| Current liabilities | (1,376) | (1) |
| Non-current liabilities | (243) | — |
| Net assets | 98 | 10 |
| Income | 33 | 4 |
| Expenses | (33) | (4) |
| Profit after tax | — | — |