SA908 Cover Report edit 6/7/98 4:44 pm Page 1 J Sainsbury plc Annual report and accounts 1998 SA908 Annual Report and accounts 98 Book 2 Proof 4 7 May 1998 Page 1 SA908 Cover Report 98 a/w 7/7/98 9:43 am Page 1 Our objectives are • To provide shareholders with good financial returns by focusing on customers’ needs, adding value through our expertise and innovation, and investing for future growth. • To provide unrivalled value to our customers in the quality of the goods we sell, in the competitiveness of our prices and in the range of choice we offer. • To achieve efficiency of operation, convenience and customer service in our stores, thereby creating as attractive and friendly a shopping environment as possible. • To provide a working environment where there is a concern for the welfare of each member of staff, where all have opportunities to develop their abilities and where each is well rewarded for their contribution to the success of the business. • To fulfil our responsibilities by acting with integrity, maintaining high environmental standards, and contributing to the quality of life of the community. Group profile 1 J Sainsbury plc 1998 at a glance 2 Financial highlights 3 Chairman’s statement 4 Group Chief Executive’s review 6 Our core values 14 Operating review 20 Financial review 24 Community and the environment 26 Board of Directors 28 Report of the Directors 32 Report of the Remuneration Committee 37 Statement of Directors’ responsibilities Auditors’ report on corporate governance 38 Auditors’ report to the shareholders 39 Accounting policies 40 Group profit and loss account 41 Balance sheets 42 Group cash flow statement 43 Group statement of total recognised gains and losses Reconciliation of movements in equity shareholders’ funds 44 Notes to the accounts 58 Ten year financial record 60 Investor information, registered office and advisers SA908 Annual Report and accounts 98 Book 2 Proof 4 7 May 1998 Page 1 SA908 A/R IFC inner edit 6/7/98 6:24 pm Page i J Sainsbury plc is one of the world’s leading retailers, operating three separate store chains in the UK, a supermarket chain in the USA and a bank in the UK. Through these operations, it serves over 14.2 million customers a week. Sainsbury’s Supermarkets is the 30 per cent full-time. Women make Savacentre was founded in 1975 largest part of the Sainsbury Group. up 65 per cent of Sainsbury’s and we opened our first store in 1977. Established in 1869 by John James and Supermarkets’ employees. Savacentre offers superb value for Mary Ann Sainsbury, we are Britain’s In March 1997, Sainsbury’s money, attractive prices and a pleasant oldest major food retailing chain and Supermarkets Ltd was created as a shopping experience for the whole retain the founders’ values of high separate Group subsidiary in order family. Our 13 stores serve over one quality, value for money, excellent to improve management focus. million customers a week and sell service and attention to detail. We strive over 60,000 products including food, always to be the customer’s first choice New store openings 1997/8 clothing, household goods, toys, for food shopping. Kenilworth; Reedswood, Walsall; gardening and electrical products. Blackheath; Burton upon Trent; Sainsbury’s Supermarkets serves over Savacentres are set to become Halifax; Leigh; Oswestry; Penge; 9 million customers a week at 391 Sainsbury’s large store format with all Wantage; Leicester; Coleraine, NI; supermarkets throughout the UK. Some the Sainsbury’s attributes of quality, Walton, Liverpool; Ashbourne; Calne; 370 of our stores are in England, spread choice and passion for food. Brentwood; Telford; Craigavon, NI; across the country from Truro to Partick; and Deal. Savacentre employs 10,125 people. Whitley Bay. There are also nine stores New stores’ sales area: 512,000 sq ft. in Scotland, eight in Wales and four in New store opening 1997/8 Northern Ireland. Extensions 1997/8 Leeds. Worle; Godalming; Rhyl; Frome; Sales area: 85,000 sq ft. Around 60 per cent of Sainsbury’s Peterborough; Crayford; Balham; supermarkets are in shopping-centre or Marshall Lake, Solihull; Cannock; edge-of-shopping-centre locations and Swansea; Kingston; Winterstoke Road, we are committed to urban regeneration. Bristol; and Winchester. Many of our supermarkets have been Extensions’ sales area: 84,000 sq ft. built on formerly derelict sites. Planned store openings 1998/9 A large Sainsbury’s supermarket sells include: over 23,000 products. Sainsbury’s Leven; Fulham Palace Rd, London; own brand products account for about Hitchin; Swiss Cottage, London; Exeter; 40 per cent of lines. In addition to a Hartley Wintney; Liphook; Newry, NI; wide range of quality food and grocery Nottingham; Attleborough; Brighouse; products, many stores also offer Clitheroe; Leeds; Armagh, NI; Chipping bread freshly baked on the premises; Ongar; Sherborne; Chesham; and delicatessen, fresh meat and fish Tottenham Court Rd, London. counters; pharmacies; coffee shops Planned stores’ sales area: 450,000 sq ft. and restaurants; and petrol stations. Planned extensions 1998/9 Sainsbury’s Supermarkets employs Major extensions planned at 21 stores. around 127,000 people. Of these, Planned extensions’ sales area: 70 per cent are part-time and 217,000 sq ft. SA908 A/R IFC inner 1/7/98 5:16 pm Page ii Homebase was founded in 1979 Shaw’s Supermarkets Inc. is our Sainsbury’s Bank opened for business and the first store opened in 1981. wholly-owned subsidiary in the USA. in February 1997. It is a joint venture In March 1995, Homebase trebled in Sainsbury’s interests in the States go owned 55 per cent by J Sainsbury plc size when we acquired Texas Homecare. back to 1983 when we purchased and 45 per cent by Bank of Scotland. All former Texas stores now trade 21 per cent of Shaw’s. We acquired It offers a direct, 24-hour, telephone- as Homebase and most have been full ownership in 1987. banking service. converted to the Homebase format. Shaw’s ethos, rooted in a family owned Sainsbury’s was the first British Homebase serves more than one million background, is to provide high quality supermarket company to open a bank. customers a week at 298 stores at value-for-money prices. The business We are able to offer highly competitive throughout the UK. serves over two million customers rates and value for money products, a week at 121 stores in six New in part, because we do not have A typical store stocks over 20,000 home England states – Massachusetts, to rely on a heavy branch structure. improvement and gardening products New Hampshire, Maine, Rhode Island, We also seek to provide exceptional with a growing emphasis on lifestyle Connecticut and Vermont. customer service. and decorative goods. The Homebase own brand enjoys a high reputation Shaw’s sells some 50,000 products Since its launch, Sainsbury’s Bank has for quality and value for money and of which about 5,500 are the company’s attracted 700,000 customers and accounts for about 29 per cent of sales. own brand. Shaw’s brand products are £1.5 billion in deposits. Our product popular with customers, accounting range has widened and now comprises Homebase employs 17,000 people. for 40 per cent of total sales. They an instant access savings account, New store openings 1997/8 compare favourably with branded lines, a Christmas saver account, two Visa Eastbourne; Truro; Dagenham; offering excellent value for money. credit cards, personal loans, mortgages Kirkcaldy; Newbury; Ewell, Surrey; and home and contents insurance. Shaw’s has 20,100 employees. Gloucester; Inverness; Huddersfield; We plan to introduce further new and Swansea. New store openings 1997/8 products including fixed rate mortgages New stores’ sales area: 399,000 sq ft. Waterford, CT; Colchester, VT; Johnston, and pet insurance, which will be RI; Berlin Corners, VT; Biddeford, ME; Planned store openings 1998/9 launched shortly. Cohasset, MA; East Boston, MA; and Moor Allerton, Leeds; Culverhouse Wakefield, RI. Information on all Sainsbury’s Bank Cross, Cardiff; Irvine; Swiss Cottage, New stores’ sales area: 329,000 sq ft. products is available from Bank London; North Finchley, London; Information Points being installed in East Grinstead; Southend; Sunderland; Planned store openings 1998/9 all Sainsbury Group stores or by calling Hamilton; and Sittingbourne. Bridgeport, CT; Orange, CT; Tilton, NH; the general enquiry line on Freephone Planned stores’ sales area: 409,000 sq ft. Hamden, CT; New Haven, CT; 0500 405060. Wallingford, CT; Shrewsbury, MA; Waterbury, CT; and Webster, MA. Planned stores’ sales area: 368,000 sq ft. SA908 A l t d t 98B k2 SA908 A/R IFC-13 A/W 1/7/98 7:02 pm Page 1 J Sainsbury plc 1998 at a glance Sales (incl. taxes) Operating Number Sales area Employees £m profit £m* of stores** 000 sq ft** 000** J Sainsbury plc 15,496 853.7 823 27,299 174 Sainsbury’s Supermarkets 11,564 734.6 391 10,860 127 Savacentre 864 30.5 13 1,119 10 Homebase 1,235 55.5 298 11,201 17 Shaw’s $2,808m $61.8m 121 4,119 20 * Before Year 2000 costs, profit sharing and exceptional costs. ** As at 7 March 1998. J Sainsbury plc Annual report and accounts 1998 1 SA908 Annual report and accounts 98 Book 2 Proof 5 8 May 1998 Page 1 SA908 A/R IFC-13 A/W 1/7/98 7:02 pm Page 2 Financial highlights Group sales £ billion Group profit £ million Dividend per share pence 98 15.5 98 728 98 13.9 97 14.3 97 651 97 12.3 96 13.5 96 764 96 12.1 95 12.1 95 808 95 11.7 94 11.2 94 731 94 10.6 1998 1997 £m £m % change Group sales (incl.