• Chairman's statement
• Business review
  • Our business and its markets
  • Corporate objectives
  • Operating review
  • Financial review
  • Principal risks and uncertainties
• Board of Directors
• Operating Board
• Governance
  • Statement of corporate governance
  • Remuneration report
  • Statement of Directors' responsiblities
• Financial statements
  • Group income statement
  • Statements of recognised income and expense
  • Balance sheets
  • Cash flow statements
  • Notes to the financial statements
  • Five year financial record
• Additional shareholder information
• Financial calendar

Corporate objectives

When I joined Sainsbury’s we undertook a complete review of the business and outlined a plan for Making Sainsbury’s Great Again (“MSGA”) in October 2004. The plan was based on delivering great quality food at fair prices. To achieve this on an ongoing basis we needed to fix many fundamental parts of our operation.

Only by satisfying customers and improving sales could we return to sustainable growth in both sales and profitability and this has driven everything we have done over the past three and a half years.

Over the past 12 months we have continued to make good progress, growing like-for-like sales (excluding fuel) by 3.9 per cent and I’m delighted that the year culminated in fulfilling the commitments made in October 2004.

We have now reported 13 consecutive quarters of like-for-like sales growth and achieved £2.7 billion additional sales by March 2008 against the original stretching target of £2.5 billion. This is a great achievement in a challenging market.

Our sales growth is also reflected in substantially improved profits and operational gearing is coming through. We have good momentum as we now focus on taking Sainsbury’s from recovery to growth. This is an outstanding achievement and I would like to thank all 150,000 Sainsbury’s colleagues for the part they played.

Our passion for healthy, safe, fresh and tasty food, our value, innovation and strong ethical approach to business provides differentiation between us and our major competitors and are what customers want and expect from Sainsbury’s.

We remain focused on building and stretching our lead in food and are committed to providing great quality food at fair prices whatever our customers’ budgets. We’re accelerating the development of our complementary non-food offer to provide customers with a broader shopping experience and our ability to do this is being driven by the addition of sales space through both extensions and new store developments.

We also continue to extend our relationship with customers beyond the traditional supermarket environment through the growth of our convenience store operation, our online offer and Sainsbury’s Bank. We have also announced plans to launch a non-food online business in the first half of 2009/10.

Our active property management is enabling us to retain operational flexibility while exploiting the development potential of our property assets and maximise value. Since March 2007 we have undertaken £2 billion of asset management activity, including two joint ventures.

In May 2007 we outlined a number of new targets which build on our recovery to date to expand and drive further growth. These are ambitious plans that bring together the ongoing improvements we are making in efficient operational performance with the work we have already completed on developing a universal customer offer.

Achieving the MSGA targets has provided a firm base for ongoing sales and profit growth and new space development. However, as we said throughout the second half of 2007/08, consumer budgets are clearly under pressure and we expect the market to remain intensely competitive.

Sainsbury’s is now a much better business, able to compete and grow in this challenging environment. We will continue to focus on developing our offer in line with changing customer requirements and on driving further operational savings. This will ensure we continue to make progress in the year ahead.

Over the past three years significant improvements have been made to the company’s operation providing a firm base for future growth. The task, encompassing fixing many basics, from product range and pricing to supply chain and IT, was a huge undertaking for a business the size of Sainsbury’s and, as acknowledged at the time, was a job for the medium to long-term.

A good example of the progress that has been made is in product availability, cited in 2004 as our number one performance issue. The depot network has been successfully reorganised improving service to stores and today availability is the highest it has been since our records began.

A significant amount of work has been undertaken in improving customer service and the product offer and customer transactions have now risen from around 14 million in 2004 to over 16.5 million a week. Over £450 million has been invested in price and quality and our price competitiveness is the best it has been for many years.

We have achieved over £440 million of cost savings since March 2005 despite the fact that some of the original intended areas of saving, such as marketing, were re-assessed due to the changing competitive conditions.

Overall, the first three years of MSGA have been successful and all the initial retailing targets set in October 2004 have been achieved.

Recovery to growth

In May 2007 we set new three-year targets that build on the strong progress made to date and drive further growth in the business. Five areas of focus have been identified to take Sainsbury’s from recovery to growth.

• Great food at fair prices: To build on and stretch the lead in food. By sharing customers’ passion for healthy, safe, fresh and tasty food Sainsbury’s will continue to innovate and provide leadership in delivering quality products at fair prices, sourced with integrity.
• Accelerating the growth of complementary non-food ranges: To continue to develop and accelerate the development of non-food ranges following the same principles of quality, value and innovation and to provide a broader shopping experience for customers.
• Reaching more customers through additional channels: To extend the reach of Sainsbury’s brand by opening new convenience stores, developing the online home delivery operation and growing Sainsbury’s Bank.
• Growing supermarket space: To expand the company’s store estate, actively seeking and developing a pipeline of new stores and extending the largely under-developed store portfolio to provide an even better food offer while also growing space for non-food ranges.
• Active property management: The ownership of property assets provides operational flexibility and the exploitation of potential development opportunities will maximise value.

To help lead the company through this next stage of its development we have strengthened our operating board with the addition of four new directors to oversee IT and change, commercial services, property and strategy. The changes are effective from mid June 2008 and give greater representation on the board for key areas of increasing significance as our business moves from recovery to growth.

In addition the company has strengthened its property team as the natural next step in its active property management. A new division has been created to dedicate resource to the ongoing management of Sainsbury’s property joint ventures and potential development opportunities to maximise value of the assets.

Operational efficiency

The 2007-2010 targets are underpinned by ongoing operational efficiencies. The cost savings achieved over the last three years have delivered significant progress and there are further plans to reduce the cost base over the coming years, with the target to offset at least half of operating cost inflation.

Creating operational efficiencies is now embedded within the various functions of the business including the store estate, the distribution network, property development and central functions.

In stores, night shift operations have been improved and bi-optic scanners and self checkouts are being introduced to help drive efficiency. Shelf-ready packaging continues to be rolled out to improve replenishment further and additional enhancements to in-store labour management are planned for the year ahead.

Within the distribution network there has been significant improvement to depot productivity and store deliveries. These have been driven by new processes, network re-organisation, a new transport management system and the introduction of new facilities such as a new 530,000 sq ft depot at Northampton, built under carbon-negative conditions, which opened in November 2007.

In April 2008 we announced the appointment of Roger Burnley, previously supply chain director, into the new role of retail and logistics director on our operating board. This reflected in part that the task had changed from fixing the basics to ongoing operational improvements by consolidating the responsibility for both store and depot operations.

A 355,000 sq ft ambient facility was acquired in Staffordshire in March 2008 and a 550,000 sq ft centre in North Yorkshire, to be operated by logistics specialist Wincanton, will be used to consolidate the convenience store supply chain operation currently based in two centres at Maltby and Skelton. These will close later this year. The new depot will also provide relief for the supermarket estate this Christmas and when fully operational will employ around 500 colleagues. At Waltham Point, some of the automated equipment has been removed and similar refurbishment is planned at Hams Hall later this year.

Cost savings within the central functions are being delivered through more cost effective solutions, such as the recent creation of a shared services support centre in Manchester, the ongoing improvements to data analytics from the Nectar card loyalty scheme for targeting marketing spend and the future planned relocation of the central store support centre in Holborn, London to Kings Cross in 2011.

With the renewed focus on growing supermarket space, an enhanced store opening plan is now in place. We have developed our capability in this area to deliver more efficient capital spend from the recently strengthened store development and property team. This team is focused on building and renovating for less by bringing in-house many of the procurement and planning functions previously contracted outside the business.

Justin King

Chief Executive