UK supermarket group Sainsbury’s today (16 May) ruled out the possibility of a property sale, posting a 42% increase in profits for the year to 24 March.
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Unveiling its expectation-beating performance, Sainsbury’s also revealed plans to boost sales by as much as GBP3.5bn (US$6.95bn) over the next three years.
Speaking on a conference call this morning (16 March), chairman Philip Hampton said: “now is not the time for material change” to the group’s property ownership structure.
According to Hampton, the group’s strong trading performance reinforces the need for property ownership, with land assets increasing in value to GBP8.6bn. Property, he said, remains a core part of the business, offering significant development potential.
“As we move from recovery to growth we believe it is right to retain ownership of our properties,” Hampton concluded.
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By GlobalDataIn recent months, Sainsbury’s has seen off an GBP11bn private equity takeover bid, which looked to capitalise on the retailer’s considerable property portfolio. Pressure has also come from investors to unlock the value of the group’s land holdings, with one of Sainsbury’s largest shareholders, Robert Tchenguiz, calling for the value of the company’s freehold property to be released.
While Sainsbury’s has refused to bow to investor pressure to sell off its land holdings, it has boosted returns, increasing EPS by almost 22% to 9.75 pence a share.
Full year pre-tax profits showed strong growth, rocketing from GBP104m to GBP477m. On an underlying basis, profits increased to GBP380m. Sales rose 6.9% to GBP18.52bn, with an underlying increase of 5.9% excluding fuel.
“This strong sales performance is ahead of our own expectations. It’s also our best for many years,” chief executive Justin King said. “These achievements give us a strong foundation on which to build. We believe now is the right time to look to the next stage of our recovery and to expand the business to drive growth for the longer-term.”
King hailed the success of the ‘Making Sainsbury’s Great Again’ recovery programme, which has boosted sales by GBP1.8bn over the past two years. During a conference call, King unveiled a new three-year plan that aims to see turnover grow by GBP3.5bn by 2010.
He said: “Our vision is simple; we are here to serve customers with a choice of great products at fair prices and by so doing, to provide shareholders with strong, sustainable returns.”
As the group focuses on moving “from recovery to growth” King said it will open 30 supermarkets and 100 convenience stores over the next three years, at a cost of around GBP2.5bn.
One-third of the group’s targeted revenue increase is expected to come from non-food items.
Sainsbury’s also said it will pay staff its a GBP56m bonus, which will be shared out between its 118,000 employees in June.
