Preliminary results2011/12

David TylerChairman

John RogersChief Financial Officer

bps

Group Performance Highlights

Underlying results

Sales

(inc VAT)

Sales (inc VAT, ex fuel)

Operating profit

Net finance costs

Share of JV profits

Profit before tax

Tax rate

Basic EPS

Full year dividend per share

Statutory results

Items excluded from underlying results

Profit before tax

2011/12

£m2010/11

£m

6.8

4.5

6.9

(12.4)

33.3

7.1

(12)

6.0

6.6

n/a

(3.4)

Change

%

%

p

p

%

p

p

24,511

789

(109)

32

712

26.1

28.1

16.1

87

799

(1)

Underlying basic earnings per share(1)

22,943

738

(97)

24

665

26.0

26.5

15.1

162

827

Retailing Continued sales outperformance

2012/13 GuidanceFull year LFLs similar to FY 2011/12Contribution from net new store space (excluding extensions and replacements) around 2%

Sales excluding fuel and including VAT(1)

LFL outperformance to market

Contribution from extensions 1.1%

LFL sales

growthSales from net

new spaceTotal

sales growth

Up 2.1% 2.4% 4.5%

(1)(1)

Retailing Trading intensity

Structural impact from strategic growth initiatives

Sales including VAT and excluding fuel, divided by average space(1)

Movement in Trading Intensity(1)

£ per sq ft per week

10

12

14

16

18

20

22

2010/11 New Supermarkets

NewExtensions

Core Estate 2011/12

Retailing Good improvement in underlying profit

bp

bps

bps

bps

Sales (inc VAT, inc fuel)

(ex VAT, inc fuel)

Underlying EBITDAR

Underlying EBITDAR margin %

at constant fuel prices

Underlying operating profit

Underlying operating margin %

at constant fuel prices

2011/12

£m2010/11

£m

6.8 5.6

5.5

(1)

12

6.9

4

10

Change

%

24,511

22,294

1,740

7.80

789

3.54

22,943

21,102

1,649

7.81

738

3.50

Retailing Cost inflation of 2.5% offset by over £100m of savings

Annual operating cost savings (£m)

07/08 08/09 09/10 10/11 11/12

50

100

150

200

2012/13 Guidance

Cost inflation towards the upper end of 2-3% range

Efficiency savings of around £100m

Other

Retailing £600m of cost savings delivered in last 5 years

Self checkout

Labour matching

Simpler processes

Stock-loss

Counters’ procedures

Network efficiencies

Routing improvements

Fuel efficiency

LED light bulbs

Chiller cabinets

Store wiring

ProcurementIT contracts

Commercial services

Store GNFR

Central costs

Range reviews

Energy

Logistics

Store costs

Retailing Operating margin improvement

Supermarkets open less than one year(1)

bps

17

(3)

(2)

(2)

10

(6)

4

Underlying business

Sale and leasebacks

New space(1)

Investments in growth

Operating profit margin improvement (fuel adjusted)

Fuel price inflation

Operating profit margin improvement

Delivering margin progression against challenging market backdrop

Underlying business continues to improve profitability

Joint Ventures Continued strong delivery

Sainsbury’s Bank

2012/13 Guidance

Sainsbury’s Bank – Expect a step up in profit

Property JVs – Expect a similar level of profit

Property joint ventures

Sainsbury’s Bank

Property joint ventures

16

16

11

13

2011/12

£m2010/11

£mChange

%

45

23

Steady growth in loans and insurance

Tight control on bad debt

Extended 5 stores, adding a total of 80,000 sq ft

Underlying Finance Costs In line with guidance

2012/13 GuidanceUnderlying net finance costs expected to increase by around £5-10m

Finance income

Interest costs

Capitalised interest

Net finance costs

Net interest cover

Fixed charge cover1

18

(162)

35

(109)

7.5

3.1

19

(143)

27

(97)

7.9

3.1

2011/12

£m2010/11

£m

x

x

x

x

Underlying EBITDAR/(Underlying net finance costs + rent)(1)

Items Excluded From Underlying Results

c. 5.0% yield (March 2011: c. 4.9%)

Profit on disposal of properties

Investment property

fair value movements

Financing fair value movements

Pensions accounting

One-off items

Total

2011/12

£m2010/11

£m

108

39

7

3

162

108

39

7

3

5

162

83

0

(16)

17

3

87

Retailing Margins and returns

Not fuel adjusted

12 month rolling earnings before interest and tax divided by average shareholder funds and net debt

(2)

(1)

Underlying operating margin

(1)

2.0

11/1207/08 08/09

2.5

3.0

3.5

4.0

%

09/10 10/11

Return on capital employed

(2)

4

6

8

10

12

%

11/1207/08 08/09 09/10 10/11

EBITDAR margin

(1)

6.007/08 08/09

6.5

7.0

7.5

8.0

%

09/10 10/11 11/12

Growing Space Delivering space growth plans

As at March 2011

Openings:

New/replacement supermarkets

Extensions/refurbishments

New convenience stores

Gross new space

Closures:

Replacement stores/closures

Net new space

As at March 2012

Stores ‘000 sq ft

7.3%

6.5%

c.18k sq ft average size

Store development

934

19

OULT

73

(4)/(10)

1,012

19,108

750

491

160

1,401

(162)

1,239

20,347

4 supermarkets/10 convenience

2012/13 GuidanceExpect to deliver around 5% gross space growthExpect to open 1-2 convenience stores per week

c.39k sq ft average size

Growing Space Amount of immature space has peaked

Returning to a steady-state of space growth

Drag of new space on margins to reduce across next 5 years

0

5

10

15

20

25%

of total space

15/16e14/15e13/14e12/13e11/1210/1109/1008/09

Accretive space

Immature space

Forecast

2012/13 Guidance

Operating profit to grow in line with sales

Capital Expenditure Core capital expenditure to reduce by 20% next year

2012/13 GuidanceFull year core capital expenditure of around £1bn

Core capital expenditure

Acquisition of freehold properties

Net disposal proceeds

Net capital expenditure

2011/12

£m2010/11

£m

1,138

17

(275)

880

1,240

25

(303)

962

Capital Expenditure Rebalancing capital spend to existing space

Increased spend on refurbishing existing stores and IT platform to support online growth

Continued focus on new stores and convenience

Space growth returning to normalised levels

New Stores

Convenience

Extensions

Refurbishments

IT

Maintenance

2011/12 -

£1.2bn 2012/13 -

£1.0bn

Cash Flow Improving cash flow from operations

2010/11

£m

Operating cash flow

Change in working capital

Cash from operations

Interest

Tax

Dividend

Net cash used in investing activities

Other funding movements

Movement in net debt

Net Debt

1,238

53

1,291

(142)

(82)

(285)

(883)

(65)

(166)

(1,980)

1,216

(78)

1,138

(126)

(158)

(269)

(902)

52

(265)

(1,814)

2011/12

£m

2

168

13

(13)

48

(6)

2

(225)

37

(9)

Change

%

Market value of property up £0.7bn to £11.2bn (March 2011: £10.5bn)-

£2.2bn added through investment and development of assets over 3 years-

£3.7bn total increase in property value since March 2009

IAS 19 net pension deficit £(455)m (March 2011: £(241)m)-

0.5% decrease in real discount rate-

increase in asset value of £578m

Net debt £1,980m (March 2011: £1,814m)-

secured, low-cost, long-dated debt-

facilities of £3.4bn

Retail operating cash flow up 13.4% to £1,291m (March 2011: £1,138m)-

£53m improvement in working capital

Balance Sheet Maintained strong position

2012/13 GuidanceYear-end net debt position expected to be around £2.2bn

Balance Sheet

Balance sheet gearing

0

20

40

50

10

30

(net debt/total equity)

EBITDAR/(interest + rent)

(Core capex / sales inc fuel inc VAT)

Core capex/sales

0

4.0

2.0

6.0

Fixed charge cover

0

3.5

07/08 08/09 09/10 10/11 11/12

07/08 08/09 09/10 10/11 11/12 07/08 08/09 09/10 10/11 11/12

Lease adjusted net debt/EBITDAR

07/08 08/09 09/10 10/11 11/12

% %

timestimes

1

2

3

0

1

2

3

4

4.5

Dividend Policy Continuing to grow dividend

Dividend payout at top of current policy range

Policy to increase dividend each year, building to 2x cover over the medium term

DPS and dividend cover1

history

5

10

15

20

05/06 06/07 07/08 08/09 09/10 10/11 11/12

Underlying basic earnings per share divided by dividend per share(1)

1.19x

1.33x

1.45x1.61x

1.68x1.75x

1.75xDPS(p)

Summary

Trading and operations

7 years of like-for-like sales growth, outperforming the market

Delivered operating margin accretion while investing for the future

Property profits of £83m

Key financial measures

Continued focus on ROCE

Space growth of 5% and reduction in capex in 2012/13

Continue to drive operational cash flows and improved working capital

Balance sheet

Key balance sheet metrics remain stable

Property value increases to £11.2bn

Justin KingChief Executive

Good sales and profit growth against challenging market backdrop

Helping our customers iáîÉ=tÉää=Ñçê=iÉëë

Continuing to deliver our long term vision for growth

2011/12 Operating review

Market Backdrop Consumers to remain under pressure in 2012

Inflation has outstripped wage growthCustomer confidence remains depressed

0

20

40

60

80

100

120

140

JM A M J A S O N D J F M JA M J A S O N D J F M JA M J A S O N D J F M

2009 2010 2011 2012

Source: Nationwide Consumer confidence

Expectations Index

Present situation Index

Nationwide Consumer Confidence Index

0

1

2

3

4

5

6

CPI

Wage

increaseForecast growth

2000 2002 2004 2006 2008 2010 2012 2014 2016

Source: CEBR

% %

Market Backdrop Customers shopping more frequently

Source: Kantar Worldpanel 12we Total Grocery data to 22 Jan 12

• Customers shopping more frequently, locally, to manage total spend and waste

• Trend reflected in convenience and online growth

• Negative volumes expected to continue through 2012/13

(6)

(4)

(2)

0

2

4

6

Con

trib

uti

on

to g

row

th %

Frequency contribution Items per basket contribution Overall volume contribution

2008/09 2011/122010/112009/10

Market Backdrop Savvy shopper managing budget over time

Kantar total till roll, 4 w/e

2

4

6

8

10

12

Christmas

Royal

wedding&

Easter

Christmas

Easter

ChristmasEaster

% 2009/10 2010/11 2011/12

Grocery market growth

Spend

Save

Market Backdrop Sainsbury’s well placed for key events in 2012

Live Well For LessReflecting the customer mood

Live Well For LessReflecting the customer mood

Launched our OM=Äó=OM commitments – better for our customers, colleagues, suppliers and communities

Customers continue to endorse our commitment to our values

Live Well For Less Our values make us different

Live Well For Less Brand Match reinforces competitiveness of our pricing

‘Cheaper here today’ coupons >50% of time

Over half of coupons issued are <£1

More customers now agree that Sainsbury’s sells brands at the same price as other Supermarkets

60

70

80

90

100

Launch Today

%

Source: Weekly Sainsbury’s Brand Match Nectar Customer Tracking

Live Well For Less Nectar is a key driver of customer loyalty and insight

Almost £200m in points redeemed in the year

375m coupons at till issued to customers

125 suppliers used coupon at till to promote their products across 650 campaigns

A Long-Term Vision for Growth

Great Food Maintaining our advantage in quality food

Source: Ipsos-MORI unweighted rolling 8 wk data, questionnaire completed online since Jan 2009Base sizes per rolling period: Sainsbury’s (c800), Tesco (c400), Asda (c250), Morrisons (c200)

Mean

score

7.5

7.75

8

8.25

8.5

08/09 09/10 10/11 11/12

Quality of products (scale of 1–10)

JS

Tesco

Asda

Morrisons

8.2

8.1

8.4

7.8

Great Food Own label a point of difference

Continuous development to retain our quality lead

Converted 60% of Äó=p~áåëÄìêóÛë=range this year – 70% of which is new or improved

In last 2 years launched or improved 9,000 products across own label

10

20

30

2 4 6 8 10

Contribution to food sales growth

Year on year sales growth (%)

Co

ntr

ibu

tio

n t

o t

ota

l fo

od

sal

es g

row

th (

%)

Great FoodGreat service and inspiration from our counters

18,000 colleagues trained at our Food & Bakery colleges

Great Food counters rolled out to 333 stores so far

Fastest growing counter sales of any major retailer

Compelling General Merchandise and Clothing Complementary to a great weekly food shop

Best food store in town, complemented by great non-food

Focus on ‘hero’ categories: home, TU clothing, papershop

Growing faster than food and gaining market share

50

100

150

200

Store #

Distribution of Supermarket stores

Under10,000

10,000-25,000

25,000-40,000

40,000-60,000

60,000 –80,000

80,000+

Store Space (‘000 sq ft)

25

35

40

50

Food

0

5

20

30

NonFood

Average store space allocation

25

40

60

80

Total

Proportion of food space

Proportion of non-food space

Complementary Channels and Services Fast growing businesses of scale

Convenience business of £1.3bn and online business of £0.8bn

Adding 1-2 stores per week to reach 500th convenience store in 2012/13

Over 50 stores delivering 1,000+ online orders per week

Sainsbury’s vs Market Growth

Convenience Online

0

5

10

15

20

25

30

08/09 09/10 10/11 11/12

Sainsbury’s

IGD Convenience and forecourt

08/09 09/10 10/11 11/12

Sainsbury’s

IGD Groceries online

% %

Developing New Business Investing to build our multi-channel capability

Most Click & Collect sites of any UK supermarket retailer

Launched online music download service

Investing in IT systems to support growing digital and multi-channel platforms

200

400

600

800

1000

March 2011 March 2012

Increase in Click & Collect Stores

Store #

Sainsbury’s Entertainment

Supermarkets

Convenience

Developing New Business Sainsbury’s Bank

(20)

(10)

0

10

20

30

40

50

06/07 07/08 08/09 09/10 10/11 11/12

£m

Sainsbury’s Bank operating profit

Sainsbury’s Bank operating profit

Sainsbury’s share of post tax profits

Driving growth by rewarding the Sainsbury’s shopper

Preferential pricing on Home and Car insurance for Nectar Card holders

Growing Space and Creating Property Value A unique space growth opportunity

Supermarket space added 2011/12

New Stores Extensions

Market share weighted to the South

Kantar 52 w/e 18 March 2012

25% of the UK population not within 15 minute drive of a Sainsbury’s

Market share below 10% in 60% of UK postcodes

Space Growthby region (%)Market Share (%)

Summary

Good sales and profit performance

Challenging economic environment to continue

iáîÉ=tÉää=Ñçê=iÉëë reflects the customer mood

Consistent delivery of our long term vision for growth

Q&A

Preliminary Results2011/12