In this section
Our Sustainability Plan
Annual Report 2016
David Tyler, Sainsbury's Chairman's summary of the financial year 2015/16.
Our strategy is built on the fundamental strengths of our business: our great heritage, quality food at fair prices and strong values. It recognises that customers will increasingly shop through multiple channels and according to their varying needs. Our business will continue to adapt to changing shopping needs, ensuring that we exceed customer expectations in a fast-paced, digital world.
The UK retail sector is evolving rapidly in line with changing consumer behaviour. People are shopping more often and are buying fewer items on a typical trip. Furthermore, customers are seeking greater choice, speed and convenience, as well as high levels of service, however they choose to shop. The grocery market continues to experience price competition and food price deflation, and the growth of discount retailers and new online entrants to the market have changed the competitive landscape. In these conditions it is clear that grocery retailers must adapt to stay ahead.
Like-for-like sales have declined this year as a result of pricing pressures and food price deflation. Underlying profit before tax was down nearly 14 per cent to £587 million, underlying basic earnings per share was down just over eight per cent to 24.2 pence and return on capital employed declined 88 basis points year-on-year to 8.8 per cent. However, the strategy we outlined 18 months ago is working and we are currently the best-performing of our main supermarket peers, growing volumes and maintaining market share.
Accelerating our strategy
The most significant event this year has been your Board’s proposal to acquire Home Retail Group plc, owners of the Argos retail chain. The combination of Argos with Sainsbury’s will create a leading food and non-food retailer. It provides us with an opportunity to accelerate our strategy, delivering compelling revenue and cost synergies. We will create a multi-product, multi-channel proposition with fast delivery networks which will be very attractive to customers. We are pleased that the Board of Home Retail Group plc has recommended our offer to its shareholders, and our focus is now to obtain the necessary regulatory clearances and prepare for the future integration of our two businesses.
Your Board remains focused on building shareholder value and we are confident that by following our strategy, driving efficiencies and managing costs carefully, we will achieve this. We are committed to paying an affordable dividend to our shareholders and have fixed dividend cover at 2.0 times. We are therefore recommending a final dividend of 8.1 pence per share this year, making the proposed full-year dividend 12.1 pence per share.
Management and colleagues
Mike Coupe leads a highly talented and experienced management team and we have over 162,000 colleagues. The commitment, skills and customer service standards our colleagues deliver make the difference. In August, we announced a four per cent pay increase for 137,000 colleagues who work in our stores across the country. Our new standard hourly rate is well above the government’s National Living Wage and will also apply to around 40,000 colleagues under the age of 25.
In addition, nearly 126,000 colleagues and management will share a bonus of around £100 million in recognition of their hard work during the year.
At our AGM on 6 July 2016, John McAdam, Senior Independent Director, will step down after ten years as a Non-Executive Director. I would like to thank John for his very valuable contribution to Sainsbury’s, in particular for his counsel in his role as Senior Independent Director. Susan Rice, who has been a member of the Board since 2013, will succeed John as Senior Independent Director.
Brian Cassin, CEO of global information services company Experian plc, joined the Board as a Non-Executive Director on 1 April 2016 and will be a member of the Audit Committee and the Nomination Committee. Brian brings to us his experience of running a FTSE40 company and of big data and analytics - topics of key importance to Sainsbury’s.
The UK grocery market will remain competitive. The growth of the discount retailers, food price deflation, ongoing price competition and the continuing pressure on consumer expenditure look set to continue throughout 2016. However, we have a business that is well-placed to navigate this tough trading climate and we have significant opportunities to grow our business and accelerate our strategy.
Here is an overview of our financial performance. More detailed information is available in the 5 year summary and the Investor section.
Biographies of our plc and operating board directors and the committees they are a member of.
© J Sainsbury plc 2016