Annual Report and Accounts 2002 building Our goal is to be the first choice for those customers who have the opportunity to shop locally in a Safeway store. To deliver this goal we will focus on: – product and price, and be – best at fresh – best at availability and – best at customer service store formats p14 best at fresh p8 best customer service p30 £1.79 89 p best deals p22 best availability p26 Safeway plc Annual Report Solicitors Chairman’s statement 2 Best availability 26 and Accounts 2002 Clifford Chance LLP David Webster summarises Safeway’s Keeping our shelves full throughout the Stockbrokers Contributing editors WestLB Panmure Limited performance during the year and trading day remains a key priority and Kevin Hawkins CSFB de Zoete highlights some of the key our performance goes from strength Simon Laffin & Bevan Limited Miles Collins developments in our industry. to strength. Steve Webb Design and production Janey Berry Addison Safeway Photography Chief executive’s review 4 Best customer service 30 Registered Office Food photography: Our new formats, product ranges, The key to being best at customer service 6 Millington Road Ian O’Leary Hayes, Middlesex Location photography: value offer and the commitment of is to train and motivate our colleagues UB3 4AY Andrew Wilson Safeway people are the themes of better than our competitors – which is 020 8848 8744 Board photography: John Wildgoose Carlos Criado-Perez’s review of the year. exactly what we’re doing. Internet Product photography: www.safeway.co.uk Ben Jennings Group Company Secretary Andrew Wilson Best at fresh 8 Our corporate responsibilities 32 & Legal Director Front cover: Leadership in product standards and We take our responsibilities to all our David Wilson Ian O’Leary innovation is a core brand value of stakeholders very seriously. Here we Registrars Inside back cover: Computershare Investor Andrew Wilson New Safeway and we are rapidly outline what we have been doing and Services PLC Typesetting making this a reality. what our priorities are for the current year. PO Box 435, Owen House Front section: Addison 8 Bankhead Crossway North Accounts section: Park Edinburgh Communications Limited Our New Safeway stores 14 The Safeway Board 34 EH11 4BR Printing The roll-out of New Safeway is Auditors The White Dove Press KPMG Audit Plc accelerating – here each of our new store Building for a profitable future 36 This document has been Principal bankers printed on Hello Gloss. It is formats is described and illustrated, Simon Laffin reports on our financial HSBC Bank plc produced in a mill with including a tour of our first megastore. performance. The Royal Bank of ISO 9002 and ISO 14001 Scotland plc accreditation. The bleaching Credit Suisse First Boston materials are Totally Chlorine Best deals 22 Free (TCF). We continue to develop our weekly flyers to drive sales locally. Annual Report and Accounts 2002 Safeway plc 1 Chairman’s statement building the New Safeway The overriding theme of our year and of this Report is our progress in building New Safeway. I said last year that we had completed the turnaround phase of our recovery and were well into the second phase of our growth strategy. Our goals in this phase are to transform our store portfolio, radically improve our product range and increase the value of the Safeway shopping basket. I am delighted to report that we have made a great deal of progress in each case. Our results reformatting our stores during the year and which we plan to continue Our like-for-like sales increased by 4.8%, making this the third consecutive making at a similar level in the current year is, along with our focus on year of strong sales growth and driving an improvement of 14% in our product development, fundamental to the current phase of our strategy. sales per square foot since 1999. Profit before property and tax is up by Now that our financial performance is much stronger, our priorities for 11% to £355 million, earnings per share is also up by 11% to 24.5 pence this year and beyond are to continue our like-for-like sales growth and and our recommended dividend for the full year has increased by 5% to to complete the evolving transformation of our store portfolio. 9.52 pence per share. This performance has been achieved despite transitional costs of £34 million arising from our store reformatting programme. During the last two years, we have increased our pre-tax Our stakeholders profit by 45% and our net margin to sales by 0.8%, reflecting a better I am pleased to report that, in March, Safeway gained entry to the sales mix and improved efficiency. FTSE4Good index of socially responsible companies after a rigorous analysis of our policies and practices by the certifying authority. The criteria for membership of the index cover every aspect of our relationship Our strategy with our stakeholders. In the course of preparing our submission we Our four business goals of being best at fresh, having the best deals, discovered several areas for potential improvement, particularly in the being best at availability and being best at customer service remain the provision of independent auditing of our environmental standards, and cornerstone of our strategy. Since the Autumn of 1999, our deep-cut have taken the appropriate corrective action. The process of applying for deals, communicated weekly by nine million flyers delivered direct to membership has emphasised the importance of our wider responsibilities our customers, have increased our total transactions by 1.5 million to to society and Lawrence Christensen, our Supply Director, will ensure well over 11 million per week. The investment which we have made in that these issues continue to be given full weight at Board level. 2 Safeway plc Annual Report and Accounts 2002 Chairman’s statement Awards won by Safeway – April 2001-2002 Queen’s Award for Enterprise Pizza and Pasta Industry Awards 2001 in the Sustainable Development category – Special Award for Innovation in the (April 2001). Pizza Retailer category. Motor Transport Environmental Dried Fruit Awards 2001 Award in conjunction with Scania – Best New Convenience Product of the for CNG lorries. Year for “The Best” Pork Loin Joint with Apricot Stuffing. Retail Personality of the Year 2001 – Carlos Criado-Perez (Retail Week). Off-Licence News: Drinks Retailing Awards 2002 – Training Initiative of the Retail Week Awards 2002 Year for our Wine Advisor programme. Best Store Design – Woking and St Katharine Docks. International Wine Challenge 2001 – Great Value Champagne (Albert Etienne). PR Week Award 2001 – In house department of the year. MLC Supermeat Awards – Best Pork Product for our Pork & National Seafish Championships Bramley Apple Sausage and two regional – Seafish Champion of the Year awarded winners for best meat counters – Safeway to Christine Fisher, Fishmonger, at Weymouth and Up Hatherley. Safeway Devizes (September 2001). Meat Industry Training Award Retail Industry Awards 2001 for our meat training programme – Multiple Retailer of the Year, Off-licence for in-store butchers (endorsed by The Retailer of the year and Store Manager of Worshipful Company of Butchers, the Year (September 2001). the only supermarket to be endorsed). The Board actively support the work of the Centre and thereby encourage greater Lisa Gernon is retiring from the Board as a non-executive director at the trust and cooperation between all stakeholders in the food industry. end of May. I would like, on behalf of the Board, to thank her warmly The DTI Code of Practice for suppliers came into effect in mid-March for her contribution to our business. We are in the process of recruiting and we are, of course, doing our best to make it effective. With this end two additional non-executive directors and an announcement will be in mind, in January we launched our Safeway Farmers’ Charter to build made shortly. on and extend the limited protection given to farmers, as distinct from On 15 May, the Board announced the appointment of Jack Sinclair as other suppliers, by the Code. Group Marketing and Trading Director, with effect from 31 May 2002. He joined Safeway in December 1989. Current trading In the first six weeks of the new financial year like-for-like sales growth was 2.0%, against last year's tougher comparatives. We remain, however, Our industry committed to driving strong sales growth and expect performance in In the aftermath of the Foot and Mouth crisis, the Government the remainder of our first quarter progressively to strengthen as the established a Policy Commission on the Future of Food and Farming pace of new format store relaunches picks up. in England, chaired by Sir Donald Curry, which reported its findings in January. A central theme in its Report is the need for more cooperation Finally, I should like to thank everyone in our business for their commitment throughout the food supply chain. To deliver this goal a Food Chain to building the New Safeway and for their hard work in making it happen. Centre has been created, facilitated by the Institute of Grocery Distribution, which will sponsor and coordinate both the analysis of specific problems and the agreed actions to resolve them. Safeway will David Webster Chairman 23 May 2002 Annual Report and Accounts 2002 Safeway plc 3 Chief executive’s review building Our new formats The key concept is the blending of catering, fresh foods, ambient groceries The Plymstock megastore is a landmark in our format development. and a growing range of non-food products and services in a multi-format It demonstrates how we can transform a 28,000 square foot superstore store portfolio. We have now proved that we can deliver in each of our into a 58,000 square foot hypermarket and do so in a way which breaks four formats a distinctive shopping experience which is proving successful.