213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 jsainsburyplc:BeforeNonunderlyingItemsMember iso4217:GBP 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 jsainsburyplc:NonUnderlyingItemsMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 jsainsburyplc:BeforeNonunderlyingItemsMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 jsainsburyplc:NonUnderlyingItemsMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 iso4217:GBP xbrli:shares 213800VGZAAJIKJ9Y484 2022-03-05 213800VGZAAJIKJ9Y484 2021-03-06 213800VGZAAJIKJ9Y484 2020-03-07 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:PreviouslyStatedMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2021-03-06 ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2021-03-06 jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-06 jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-06 jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2021-03-07 2022-03-05 jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2022-03-05 ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2022-03-05 ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2022-03-05 ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2022-03-05 ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2022-03-05 ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2022-03-05 jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2022-03-05 jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2022-03-05 jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:PreviouslyStatedMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IncreaseDecreaseDueToChangesInAccountingPolicyAndCorrectionsOfPriorPeriodErrorsMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2020-03-07 ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2020-03-07 jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-07 jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-07 jsainsburyplc:PerpetualConvertibleBondsMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 ifrs-full:IssuedCapitalMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 ifrs-full:SharePremiumMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 ifrs-full:MergerReserveMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 ifrs-full:CapitalRedemptionReserveMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 ifrs-full:RetainedEarningsMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 jsainsburyplc:TotalEquityBeforePerpetualSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 jsainsburyplc:PerpetualCapitalSecuritiesMember 213800VGZAAJIKJ9Y484 2020-03-08 2021-03-06 jsainsburyplc:PerpetualConvertibleBondsMember
Annual Report and
Financial Statements 2022
Helping everyone
eat better
Offering delicious, great quality food
at competitive prices has been at the
heart of what we do since John James
and Mary Ann Sainsbury opened our
first store in 1869. Today, inspiring and
delighting our customers with tasty
food remains our priority.
Our purpose is that driven by our
passion for food, together we serve
and help every customer.
Our focus on great value food and convenient shopping,
whether in-store or online is supported by our brands –
Argos, Habitat, Tu, Nectar and Sainsbury’s Bank.
Sainsbury’s has over 600 supermarkets and over 800
convenience stores. Argos is a leading digital retailer
and is the third most visited retail website in the UK,
with over 80 per cent of its sales starting online. Argos
is conveniently available for customers to collect from
hundreds of Sainsbury’s stores. Digital and technology
enables us to adapt as customers shop differently and our
profitable, fast-growing online channels offer customers
quick and convenient delivery and collection capability.
Our 171,000 colleagues are at the heart of serving and
helping our customers every day and are vital to our
success, now and in the future.
Performance highlights
3.4%
Retail sales growth (inc. fuel)
versus the 2020/21 financial year.
Excluding fuel sales declined 2.6%
£730m
1,2
Underlying profit before tax,
up 104 per cent versus the 2020/21
financial year and up 25% versus
the 2019/20 financial year
£854m
2
Statutory profit before tax versus
a loss of £164 million in the 2020/21
financial year and versus £278 million
in the 2019/20 financial year
36.9%
Retail operating profit growth versus
the 2020/21 financial year and 6.7%
versus the 2019/20 financial year
25.4p
1
Underlying basic earnings per share,
up 117% versus 11.7p underlying basic
earnings per share in the 2020/21
financial year
8.4%
1
Return on capital employed,
up 280bps versus the 2020/21
financial year and up 100bps
versus the 2019/20 financial year
£38.4m
Raised for good causes
20%
Reduction in absolute greenhouse gas
emissions within our own operations,
against our 2018/19 baseline
119%
Increase in food redistributed
to people this year
2.5m+
Meals donated
1 Refer to Alternative Performance Measures on pages 203 to 207 for definition and reconciliation to statutory measures.
2 The results for 2021 and 2020 have been restated – refer to note 2 of the financial statements on page 113.
Read more about our KPIs on page 30.
Strategic Report
01 Contents and Performance highlights
02 Chairman’s letter
05 Chief Executive’s Q&A
07 Business model
09 Our strategy
10 Our priorities
13 Plan for Better
24 Engaging with our stakeholders and
our Section 172 statement
30 New KPIs
31 Legacy KPIs
32 Financial Review
38 Principal risks and uncertainties
53 Non-financial information statement
Governance Report
54 Board of Directors
58 Operating Board
61 Board leadership and Company purpose
64 Division of responsibilities
65 Composition, succession and evaluation
68 Nomination Committee Report
71 Corporate Responsibility and Sustainability
Committee Report
73 Audit Committee Report
78 Annual Statement from the Remuneration
Committee Chair
84 Annual Report on Remuneration
96 Additional statutory information
Financial Statements
100 Statement of Directors’ responsibilities
101 Independent auditor’s report to the
members of J Sainsbury plc
108 Consolidated financial statements
113 Notes to the consolidated financial
statements
118 Income statement notes
132 Financial position notes
172 Cash flows notes
178 Employee remuneration notes
189 Additional disclosures
194 Company financial statements
196 Notes to the Company financial statements
200 Additional shareholder information
203 Alternative performance measures
208 Glossary
Find out more at
www.about.sainsburys.co.uk/ar2022
01 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
This has been a year of delivering for all our stakeholders
and I am immensely proud of what our business has
achieved for our customers, colleagues, communities
and our shareholders.
Throughout our history Sainsbury’s has always tried to do the right
thing and our approach to supporting people in times of need has
been particularly evident throughout the pandemic. At the very
beginning we gave elderly and vulnerable customers priority
access to home delivery slots – the first supermarket to do so –
and throughout the crisis we have paid colleagues who needed to
stay at home. Together with our customers and colleagues, we
continue to support charities and worthy causes around the world.
As COVID-19 continues to impact the economy and the cost of fuel,
energy and raw materials continues to rise, we remain committed
to doing everything we can to support our colleagues and customers
through what may be challenging financial times ahead.
Despite the difficulties presented by COVID-19, our colleagues continue
to do a brilliant job for our customers and I would like to thank all of
them for their dedication and commitment. We are committed to
paying our colleagues fairly and have invested over £100 million in
retail colleague pay. All Sainsbury’s and Argos retail store colleagues
can now earn the Living Wage wherever they work in the UK.
Our Chief Executive Simon Roberts, and the Operating Board, have
done an excellent job delivering against the key metrics we set out
in November 2020. As a result of our strong profit performance
and retail free cash flow generation, we are pleased to propose to
shareholders the highest final and full-year dividend for seven years.
We have used our strong cash generation in recent years to reduce
debt and return around 50 per cent of underlying net earnings to
shareholders through ordinary dividends. With debt reduction ahead
of schedule, we are increasing our payout ratio to around 60 per cent.
In January we were deeply saddened by the death of our Life
President, Lord Sainsbury of Preston Candover. He played a vital
role in leading Sainsbury’s through a period of significant change
and making it the business it is today. His significant philanthropic
contributions include the foundation of the Linbury Trust with his
wife, Baroness Sainsbury of Preston Candover CBE, which supports
a wide range of charitable causes. His contribution and retailing
talent remains truly inspiring and we will continue to remember
him and the immeasurable impact he made.
Strategic progress
One year into our three-year plan to transform Sainsbury’s, Simon
and his team are making very good progress. They are adapting our
business at pace, simplifying operations and accelerating our cost
savings programmes so that we can invest in food quality, choice
and consistently lower prices for customers. Our portfolio brands –
Nectar, Argos, Habitat, Sainsbury’s Bank and Tu – support our core
food business, delivering for both customers and shareholders.
The focus on value, innovation and service is driving volume market
share performance ahead of our key competitors and, at a time of
inflationary pressures for customers, we are improving our price
position versus our key competitors
3
.
Argos is delivering stronger profitability and Sainsbury’s Bank achieved
an important milestone by declaring a dividend of £50 million back
to the Sainsbury’s Group.
You can read more about our progress to put food back at the heart
of Sainsbury’s on pages 10-11.
In June we launched our new sustainability strategy, Plan for Better,
a core part of our strategy. Across the Group we are embedding
climate considerations into our reporting and decision making,
implementing bold targets and incentives in order to achieve our goal.
This year we strengthened our commitment to tackle the climate
crisis, announcing the acceleration of our target to become Net Zero
across our operations by five years, from 2040 to 2035. We have also
committed to reducing our Scope 3 emissions by 30 per cent by 2030.
As signatories of the Task Force on Climate-related Financial Disclosures
(TCFD), we are committed to providing consistent information to our
stakeholders and our disclosure can be found on page 17.
1 Refer to Alternative Performance Measures on pages 203 to 207 for definition and reconciliation
to statutory measures.
2 The results for 2021 and 2020 have been restated – refer to note 2 of the financial statements
on page 113.
3 NielsenIQ Panel data (YoY and 2 year 52 weeks volume growth differential to P13 FY21/22)
of the year.
02 Strategic Report J Sainsbury plc Annual Report 2022
Chairman’s letter
Chairman Martin Scicluna reviews the
business activity in the year.
2021/22 highlights
9.9p
Proposed final dividend
13.1p
Proposed full-year dividend
per share
25.4p
1
Underlying basic earnings
per share, up 117% versus
11.7p underlying basic
earnings per share in the
2020/21 financial year
29.8p
2
Basic earnings per share,
versus 9.4p basic loss per
share in the 2020/21
financial year
Collaboration is key to tackling the climate crisis. To this end we were
proud to be the Principal Supermarket Partner of the United Nation’s
international climate change conference, COP26, which took place
in Glasgow in November. I was inspired by the encouraging steps so
many businesses, including Sainsbury’s, are taking to address the
challenges we face. We are now well into the next phase of delivering
against the commitments we have set out. We are aligned to the
UN Sustainable Development Goals and, through Plan for Better,
we can identify areas which matter most to our stakeholders, helping
us to make real and meaningful improvements.
Our commitment to Helping everyone eat better is progressing well
as we encourage customers to make food choices that are both
better for them and better for the planet. As part of our commitment
to measure healthy and sustainable diets, we reported against our
new target to achieve at least 83 per cent of ‘healthy’ and ‘better for
you’ sales by 2025, currently at 80 per cent. We also disclosed our
protein sales, with 72 per cent of protein sales being plant based and
meat-free products.
We report on our Plan for Better progress every six months and you can
read more about what we have delivered this year on pages 13 to 17.
Delivering for our customers
We know how important value is to customers and that the cost of
living crisis is putting pressure on household budgets. We are taking
bold steps to enhance the value we offer to customers and we are
keeping prices lower than our competitors. Through the year our
Price Lock promotion fixed the price of up to 2,000 items for at least
eight weeks and our Sainsbury’s Quality, Aldi Price Match campaign
matches the discounter’s prices on 240 popular items. This year
we have increased the number of entry price level lines, offering
customers lower prices on the products they buy most often,
including fresh produce, as well as offering choice across price points.
Offering customers new and innovative products is a key priority for
us and we hit our target of tripling our levels of product innovation
in the year, launching 1,950 new products. We are also working with
third parties such as Boparan Restaurant Group, Coco di Mama and
Starbucks to offer our customers more choice and great quality food
and drink to eat-in or takeaway.
We are making our customers’ lives easier through improving our
digital offer. We are developing SmartShop and we continue to invest
in our Groceries Online business, including rapid delivery through
Chop Chop, Uber Eats and Deliveroo.
Delivering for our colleagues
We are committed to paying our 151,000 retail colleagues fairly
and our wage bill is our biggest operating cost. Since 2017 we have
increased the pay of Sainsbury’s front line colleagues by 25 per cent
and we have increased Argos colleagues’ pay by 31 per cent over
the last five years and have removed age-related pay.
All Sainsbury’s and Argos store colleagues now receive an hourly
base rate of at least £10 per hour. This represents an increase of at
least 5.3 per cent. This new rate of pay is 50p above the government’s
National Living Wage and 10p above Living Wage Foundation’s Living
Wage. We also increased inner London pay from £10.10 to £11.05
in line with the London Living Wage.
We were pleased to announce in April that from 1st May 2022 the
outer London rate would also be moving to £11.05 from £10.50.
This means that all Sainsbury’s and Argos retail store colleagues
can earn the Living Wage wherever they work in the UK.
As we balance the needs of all our stakeholders we will continue to
discuss colleague pay on a regular basis. We commit to paying above
the National Minimum Wage and, when setting pay each year, will
consider the Living Wage, the National Living Wage, competitor pay
and the financial performance of the business. We are also committed
to maintaining a dialogue with all key stakeholders on the issue.
“ One year into our three-year plan to
transform Sainsbury’s, Simon and his team
are making very good progress. They are
adapting our business at pace, simplifying
operations and accelerating our cost
savings programmes so that we can invest
in food quality, choice and consistently
lower prices for customers.”
It is also important for us to be an inclusive retailer with diverse
representation across all levels, so I am pleased to see progress being
made in this area. Initiatives such as the adoption of the Halo Code
and our admission to the Black British Network are just some of the
achievements made this year and I am pleased our work has been
recognised, with the I AM ME Ethnically Diverse Colleague Network
featured in the Top 10 Network Groups in the UK at the Ethnicity
Awards. We are also featured for the first time in the FTSE 100 Top
Ten Best Performers list for Women in Leadership. We are proud to
have published our Gender and Ethnicity Pay Report for a second
year and have seen the pay differentials reduce during that time.
Delivering for our communities
We are committed to supporting our communities and fostering
our charitable partnerships. I was delighted that this year we raised
over £6 million for Comic Relief, in addition to the £2 million we
donated as a business to support the humanitarian crisis in Ukraine.
Through our Ukrainian Crisis Appeal, customers and colleagues have
also donated over £600,000 so far and we are matching donations
up to an additional £500,000.
Our partnership with Neighbourly helps to manage our back of
store food donation programme, helping to connect Sainsbury’s
stores with local partners who will redistribute food to those in need.
So far we have donated over 2.5 million meals, which is equivalent
to £4.8 million in savings for charities and community groups.
This partnership also supports our sustainability targets as we
have pledged to reduce our food waste by 50 per cent by 2030.
03 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Financial review
We delivered a strong performance this year. Underlying profit before
tax was £730 million, up 25 per cent versus the full-year 2019/20.
Last year’s performance reflected significant costs associated with
adapting our business to the COVID-19 pandemic.
Statutory revenue was up 2.9 per cent to £29,895 million and
statutory profit before tax was £854 million versus £278 million in
2019/20, reflecting lower restructuring and impairment costs and
exceptional income from settling legal disputes. We achieved strong
Retail Free Cash Flow of £503 million and average Free Cash Flow
delivery in the three years to March 2022 of £633 million. We are on
track to deliver at least £500 million retail free cash flow per year.
We also delivered non-lease Net Debt reduction of £1,381 million over
the three years to March 2022, ahead of the target of £950 million+
over the four years to March 2023. Underlying basic earnings per
share was 25.4p and basic earnings per share was 29.8p. We remain
committed to maintaining our strong value position, are on track
to deliver our 200 basis points cost reduction target and will invest
in making improvements to our customer offer.
In 2021 we completed a thorough review of the Financial Services
business and concluded that it was in the best interest of shareholders
to retain Sainsbury’s Bank.
More information on our financial performance can be found in the
Financial Review on pages 32 to 37.
Delivering for our shareholders
The Board proposes a final dividend of 9.9p per share, bringing the
full-year dividend to 13.1p per share. This will be the highest dividend
the business has paid for seven years. The shareholder dividend
is being paid on the full underlying profit number of £730 million,
an increase of 24 per cent on the dividend from last year.
Remuneration
The Committee has considered a number of factors when determining
incentive outcomes for the year, including the impact of COVID-19
on performance.
The Remuneration Committee reviews the underlying performance
of the business and this year determined that the COVID-19 driven
elevated grocery volumes caused an estimated net financial benefit
of £100 million, which is reported within our underlying profit before
tax of £730 million. For incentive purposes the Committee applied
downward discretion to remove this £100 million impact from both
the bonus outturn and the long-term incentive plan vesting level.
Simon’s remuneration for the year reflects the strong performance
of the business and the progress we have made against our strategy.
Under his strong leadership Sainsbury’s grocery market share has
increased and we have made significant strides with our value
proposition against our competitors. We have also exceeded our
cost savings target for the year. It should be noted that Simon waived
his entitlement to a bonus for the 2020/21 financial year.
Simon has demonstrated outstanding drive and energy to do the
right thing for our customers and colleagues throughout the
challenges faced and on behalf of the Board I would like to thank
him for all of his hard work and significant achievements.
For more information on this year’s remuneration awards please see
pages 84 to 95.
Board changes
In April we were pleased to announce that Jo Bertram will join
the Board as a Non-Executive Director and member of the CR&S
Committee following the AGM on 7 July 2022, subject to shareholder
approval. Jo Bertram is currently Managing Director, Business &
Wholesale, at Virgin Media O2. Prior to this, Jo held roles at Uber
and McKinsey. She is a highly talented strategic business leader
whose broad experience in technology-led sectors will bring fresh
perspective to the Board.
We also announced that Dame Susan Rice will step down at
Sainsbury’s AGM on 7 July after nine years’ service with us.
Throughout her time she has been steadfast in doing the right thing
for our customers and colleagues. As Chair of the Remuneration
Committee Susan has played a vital role in ensuring our approach
to pay reflects our culture and values at all levels of the organisation.
On behalf of all our colleagues I would like to thank Susan for her
commitment and dedication to Sainsbury’s.
Finally, I would like to thank all of my colleagues for their extraordinary
efforts, support and flexibility over the past year. Once again you
have all risen to the challenges faced and you have been unwavering
in your commitment to do the right thing for our customers.
Martin Scicluna
Chairman
04 Strategic Report J Sainsbury plc Annual Report 2022
1. How has your first full year as CEO of Sainsbury’s been?
It has been an unprecedented year in so many ways, for our customers,
our colleagues, our suppliers and the communities where we trade.
Throughout, we have been relentlessly focused on putting customers
and colleagues first and doing the right thing, while at the same time
working across our company to deliver our plan as we put food back
at the heart of Sainsbury’s. We said we would invest in value,
innovation and service and that is exactly what we are doing –
and our results are showing that as we become more competitive,
more and more customers are choosing to shop with us.
COVID-19 continued to impact our business as more people ate at
home and government restrictions affected our customers’ and
colleagues’ daily lives. With safety as our number one priority
throughout the pandemic, we constantly tried to stay as close as
possible to what mattered most to our customers and colleagues.
We encouraged face mask wearing even when it was not mandatory
and kept screens in the stores where customers wanted them.
We also supported all our colleagues by paying those who were
self-isolating or absent with COVID-19 related sickness, irrespective
of their vaccination status.
The effects of COVID-19 and the UK’s decision to leave the European
Union also caused disruption to the industry’s supply chains.
Shortages of key workers such as HGV drivers put pressure on our
ability to source and move products through the food supply chain
and the pandemic caused higher absence levels, both in stores and
for our suppliers. This meant that availability in our stores and online
was challenged. While the backdrop was difficult, particularly as we
approached Christmas, our teams worked exceptionally hard end
to end across our business to make sure we had food for everyone.
Our suppliers also did a great job under these challenging conditions,
and I thank them for all their support for our business.
As the cost of living puts pressure on household budgets, we have
made massive strides to improve our value offer. This is at the very
core of our strategy to be Food First and I am encouraged by the
progress we have made to become more competitive. We are
delivering the best value for money in at least six years and are
consistently inflating behind the market on the highest volume
products by investing ahead of competitors with a clear focus on
fresh food. The Sainsbury’s Quality, Aldi Price Match campaign is
really popular and we will continue to focus on being great value
for our customers on the fresh and high-volume lines that are most
important to them. Through the year our Price Lock promotion fixed
the price of up to 2,000 items for at least eight weeks. Customers can
be assured that prices will not rise on these products, helping them
to plan and budget and through Price Lock we are holding down the
prices of more products than our competitors.
This year we have seen such fantastic support and hard work from all
of our colleagues right across the business and above all else, I want
to thank every one of my colleagues for such an outstanding team
effort in what have been challenging circumstances. Over the last 18
months we have strengthened our Operating Board to help us drive
our company and our performance forward and I would like to thank
all my colleagues on the Board for their leadership, commitment
and support. I was delighted to promote Graham Biggart and appoint
him to the newly created role of Chief Transformation Officer.
Paula Nickolds joined the business last summer and, less than
a year in, she is already making a significant impact on our General
Merchandise & Clothing business.
2. What are you most proud of?
I am so proud of our colleagues and the entire Sainsbury’s team.
Every day across our company I see and hear about our colleagues
consistently going above and beyond in showing genuine care
and concern for our customers and doing their very best to help.
Our colleagues have done a brilliant job, to navigate the pandemic,
manage labour shortages, and more recently the impact of the
devastating war in Ukraine as well as the cost of living crisis, which
I know is a big concern for us all. Every one of our team has shown
extraordinary resilience, determination and commitment to working
as a team over the last year and I would like to say a heartfelt thank
you to each and every one of them.
In recognition of the role our retail colleagues play in delivering for
our customers and in all of our success, we were the first major
supermarket to pay colleagues the Living Wage wherever they are
in the UK.
1 Refer to Alternative Performance Measures on pages 203 to 207 for definition and reconciliation
to statutory measures.
2 The results for 2021 and 2020 have been restated – refer to note 2 of the financial statements
on page 113.
05 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Chief Executive’s Q&A
One year into Sainsbury’s three-year plan, Chief Executive of Sainsbury’s,
Simon Roberts explains how the business has been relentlessly focused
on putting customers and colleagues first and doing the right thing.
2021/22 highlights
£730m
1,2
Underlying profit before tax,
up 104% versus the 2020/21
financial year and up
25% versus the 2019/20
financial year
£854m
2
Statutory profit before tax
versus a loss of £164 million
in the 2020/21 financial year
and versus £278 million in
the 2019/20 financial year
3.4%
Retail sales growth
(inc. fuel)
£141m
1
Non-lease net debt
20%
Reduction in absolute greenhouse gas emissions within
our own operations, against our 2018/19 baseline
“ By putting our customers and colleagues
first and doing the right thing, I’m confident
we can build on the momentum we have
and continue to make good progress against
our plan.”
I am pleased with the momentum we have been building against our
plan. By putting our customers first and doing the right thing for our
colleagues, I’m confident we can build on this strong first year we have
had in food, supported by our Brands that Deliver and Save to Invest.
We have learnt a lot over the last year as a business about where
we can improve, move faster and work more effectively. We have
become more agile in anticipating the rapidly changing environment
around us and changes in how our customers are shopping. It will be
so important we continue to push forward and while, of course, it is
challenging to make the changes we are making, it has been really
positive to see what we have been capable of across our entire
business as we all learn to adapt and work smarter.
3. What have been the biggest shifts in the market?
The rapid shift to customers shopping groceries online has been
particularly stark. Whilst shopping patterns are beginning to return
to what we saw before the pandemic began, 17 per cent of the food
and groceries we sell is bought online, up from less than 9 per cent
two years’ ago. More than ever, customers want to be able to choose
how and when to shop, fuelling the rise of On Demand services,
particularly across grocery. We have responded by investing in
our online and digital channels and growing our On Demand offer.
Customers are now able to receive Sainsbury’s orders in as little
as 30 minutes through Chop Chop, our rapid delivery service, and
through our partnerships with Uber Eats and Deliveroo. This rapid
move online accelerated by the pandemic has continued in General
Merchandise as we have accelerated the transformation of Argos.
Last year 39 per cent of all our sales across the business were
completed online.
During the pandemic, cooking at home was central to the way
households came together and as finances are increasingly under
pressure, shoppers are looking for cost-effective ways to enjoy eating
and drinking together. We are really well positioned to help customers
with this, offering value across a great choice of food, at different
price points. We are also innovating in response to the shift towards
eating at home and cooking from scratch, developing over 200
products as part of our ‘Inspired to Cook’ range, which makes home
cooking simple and tasty for customers. We also see customers
trading up more and sales of Taste the Difference are up 15 per cent
on two years ago.
The pandemic has put supplier relationships under the spotlight and
those retailers like us with scale and strong networks have been able
to work with suppliers to minimise the impact of rising inflation as
much as possible. We have witnessed significant labour shortages
and like other retailers, we increased the recruitment of online
van and HGV drivers to ensure we were able to maximise delivery
availability and ensure the best possible availability for our customers.
4. What is the biggest challenge ahead?
We know everyone is feeling the impact of inflation which is why we
are so determined to deliver the best value for money we can for our
customers. As a result of being bold in our cost saving plans, we are
able to drive investment back into lower food prices and as a result,
we are consistently inflating behind competitors on the products
customers buy most often. We have real momentum in the business,
having outperformed key competitors on both a one and two-year
basis while also delivering strong underlying profit growth, improved
returns and consistent retail cash flow. This gives us a strong
foundation to keep building momentum in the year ahead and that
is what we are focused on ensuring we do. We have a clear strategy
and a clear plan and whilst the year ahead will be more challenging,
I believe we are well set to navigate these conditions as we drive our
strategy forward and continue to deliver the best value, innovation
and service we can for our customers.
5. What did you learn at COP26?
We know that the issues of climate change and protecting
biodiversity are very important to all our customers and to all our
colleagues. Tackling the climate crisis requires collaboration at all
levels and at COP26 it was inspiring to see what can be achieved
when we all pull together at the world level. COP26 was also
an opportunity to drive meaningful progress and represent and
campaign for real change on behalf of our industry.
Alongside four other major UK retailers, we were really pleased to
sign WWF’s Retailers’ Commitment for Nature, pledging to come
together in force to halve the environmental impact of the UK food
sector by 2030. And, we are also building on our commitments
to reduce carbon emissions, deforestation, food waste and the
packaging we produce.
Progress on the critical issue of climate change can only work if
countries, industries and organisations work systematically to
implement change across all their operations. At COP26 we announced
the acceleration of our target to become Net Zero across our own
operations by five years, from 2040 to 2035, in line with the UN’s goal
to limit global warming to 1.5 degrees. Last year we also set an
absolute target to reduce our Scope 3 emissions by 30 per cent by 2030,
and in delivering these targets we will also endeavour to help our
customers make more sustainable choices when they shop with us.
The key will be for everyone to act on the promises they made at
COP26 and to really focus on making the step change needed to
confront global warming. We all need to be bold and constantly
challenge ourselves to do better – I am really clear that we can only
make the scale of change needed by working together with all our
stakeholders to find new and innovative ways to adapt consumer
habits and implement practices that are better for the planet, better
for customers and better for everyone.
6. How do you feel about the next 12 months?
I feel really positive and energised by the momentum we have and
the brilliant teams we have working across our business. We are fully
committed to do everything we can to help our customers navigate
the increasing costs of living and keep prices as low as we can.
We start this year in a good position financially, with continued
operating momentum supporting our strong competitive position.
Our strong focus on delivering value, innovation and service for our
customers and driving through our cost savings programme puts
us in a good position relative to our competitors and we expect to
continue our strong grocery volume market share performance.
We have a clear focus on keeping prices low and we will remain
committed in our determination to help everyone eat better as
we deliver for our customers, our colleagues, and our shareholders
whatever the external environment may bring.
Simon Roberts
Chief Executive Officer
06 Strategic Report J Sainsbury plc Annual Report 2022
We are putting food back at the heart of Sainsbury’s.
We create value for stakeholders by building on the heritage
and scale of our food business and our strong assets.
Everything we do is underpinned by data and technology
innovation. And the single infrastructure that supports
our brands enables us to drive value and efficiency.
Building on our brand and strong assets
Sainsbury’s brand
and own brand heritage
Online scale
and capability
Our stores
Good catchments,
strength in convenience
Scale
Second largest food retailer
Strong
operating cash flow
Attractive
customer base
Reputation for
service
Nectar, investment
in digital and innovation
Underpinned by data, technology innovation and capability
Name Badge
Creating value for our stakeholders
Customers Colleagues Communities Suppliers Shareholders
07 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Business model
Driven by our passion for food, together we serve and
help every customer.
Our Plan for Better is integrated into everything we
do and is a key differentiator for us.
This year we accelerated our commitment to be Net Zero by 2035,
five years ahead of our original target.
The Sainsbury’s Difference
How we create value
Sainsbury’s brand
Sainsbury’s is a trusted, well-loved brand that has been bringing
high quality, great value food to customers for over 150 years.
Argos, Habitat, Tu, Nectar and Sainsbury’s Bank are complementary
and give customers more reasons to shop with us.
Scale
We offer customers a choice of quality products. We have scale
positions in both food and non-food purchasing and can profitably
deliver a wide range of products and services to customers.
Strong operating cash flows
Our scale, customer proposition and operational efficiency generate
strong operating cash flows to reinvest in our customer offer and adapt
to rapidly changing shopping habits, while also paying dividends and
strengthening the balance sheet.
Attractive customer base
Sainsbury’s is a trusted brand, loved by millions of customers
across the UK. We serve an attractive customer base and two thirds
of the UK population have shopped with Sainsbury’s over the
last year
1
with a bias to a more affluent sociodemographic than
key competitors.
For customers
We listen carefully to our customers and we invest in what matters
to them. Our focus is on offering a broad range of great value,
high quality products – we then focus on strong availability and
excellent customer service, all delivered through our attractive
stores and a range of convenient digital channels. And we reward
our customers for their loyalty. We want to help everyone eat better
and are helping our customers to improve diets while reducing their
impact on the environment, one plate at a time.
For more information about how we engage with our stakeholders,
see pages 24 to 29.
For colleagues
We invest in our colleagues and are committed to paying them
fairly for their efforts. By creating an engaged workforce that is
invested in the progress of the business and the role they play
in our success, we will achieve high retention rates and deliver
superior customer service. See page 25 for more detail.
For suppliers
We are proud of our strong supplier relationships and we work
collaboratively with them to grow our business and theirs.
By improving technology and simplifying processes we are making
it easier for our suppliers to do business with us. See page 27 for
more detail.
For shareholders
Our Chief Executive Simon Roberts, and the Operating Board, have
done a very good job delivering against the key metrics we set
out in November 2020. As a result of our strong profit performance
and free cash flow generation, we are pleased to propose to
shareholders the highest final and full-year dividend for seven
years. We have used our strong cash generation in recent years
to reduce debt and return around 50 per cent of underlying net
earnings to shareholders through ordinary dividends. With debt
reduction ahead of schedule, we are increasing our payout ratio
to around 60 per cent.
For communities
We play an active role in local communities. Our customer feedback
programme and customer surveys help shape our community
programmes and this year we raised £38.4 million for good causes.
See page 28 for more detail.
Stores
Our stores are well-placed, with a strong presence in the South and
in high footfall convenience locations. This helps us offer customers
complementary products, such as Tu, Argos and Habitat, as well as
complementary services such as financial services. Through our stores
we can also present the offers of carefully selected concession partners.
Service
Customers come to Sainsbury’s for our outstanding customer
service. Our 171,000 colleagues are integral to our long-term success.
Online scale
Our Groceries Online business is increasingly profitable and in
the 2020/21 financial year we became the second largest online
grocery retailer.
Argos is the UK’s third most visited online retailer and we are making
good progress to reduce the number of Argos standalone stores
we have and to offer more Argos stores inside Sainsbury’s stores.
We are improving the Argos distribution model, focusing on
high volume Local Fulfilment Centres (LFCs) to improve choice
and availability.
Nectar
Nectar provides a vital competitive advantage to our food business,
our brands and a wide range of partners. It has strong profit growth
prospects through data monetisation and growing coalitions.
It enables us to offer our customers personalised rewards for
their loyalty.
08 Strategic Report J Sainsbury plc Annual Report 2022
1 Nielsen IQ panel, Total FMCG (excl. Kiosk & Tobacco), 52 weeks ending P3 21/22.
We are simplifying operations at pace and accelerating
our cost saving programmes in order to invest in improving
food quality, increasing choice and innovation and
consistently delivering value to customers. Our portfolio
brands – Argos, Habitat, Tu, Nectar and Sainsbury’s Bank –
support our core food business, delivering for customers
and shareholders in their own right. We will continue to
pursue partnerships and to outsource where appropriate,
benefitting from third parties that can make a positive
impact for our customers.
Priorities
— Better value and innovation
— Underpinned by buying benefits
and lower cost to serve
— Customer and profit focus
— Supporting the core food business
— Structurally lower operating costs
to fuel investment in the core
— Cutting complexity and increasing
pace of execution
Our clear priority is to build on our
strong brand heritage and reputation
for quality, range and innovation while
lowering prices and offering more
consistent value. We will offer high
quality, great value food wherever
and however customers want to shop
with us. This is what putting food back
at the heart of Sainsbury’s means.
Collaborating and simplifying how we
work with suppliers will create buying
benefits and lower our cost to serve.
We are refocusing the role of our
portfolio brands to ensure that they
contribute positively in their own right.
Argos, Habitat, Tu, Nectar and
Sainsbury’s Bank are all delivering
for their customers and are on track
to drive sustainable, profitable growth
to support our core food business.
We will deliver a step change in
efficiency by transforming our
approach to costs, simplifying
our organisation and delivering a
structural reduction in our operating
cost base. We are on track with our
plan to reduce our retail operating
costs to sales ratio by at least 200
basis points, so we can reinvest in our
customer offer and deliver improved
financial returns.
Knowing and understanding our customers better than anyone
else is fundamental to our success. Nectar unlocks our ability
to connect with customers and drive that insight into our
business decision making and we now have over nine million
digital Nectar users. We listen to our customers and over
2.7 million respond to our customer satisfaction feedback
programmes a year.
As a responsible retailer, we want to help everyone eat better,
offering our products in a way that helps customers reduce
their impact on the environment one plate at a time. Our
commitment is to invest £1 billion over 20 years to become
Net Zero across our own operations by no later than 2035.
09 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Our strategy
We are one year into our three-year plan to transform
Sainsbury’s and put food back at the heart of our business.
We have gained grocery volume market share from our key
supermarket competitors on both a one and two-year basis
1
and sales are up 7.6 per cent on a two-year basis.
Value
We are making good progress to improve the value of our food.
Weknow that the current cost of living situation is challenging for
everyone and we are relentlessly focused on delivering consistent
long-term value by offering customers great quality, tasty food at
low prices. As a result of being bold in our cost savings plan, we are
able to drive investment back into lower food prices and we are
consistently inflating behind competitors on the products customers
buy most often – including milk, eggs, potatoes, bread, vegetables,
fish and meat. As a result, our relative price position has remained
strong throughout the year – improving 310 basis points against
Aldi,year-on-year
2
, leading to more customers shopping with
us.Byfocusing on fresh and high-volume lines we are offering
customers better value, improving price perception and delivering
strong volume market performance.
Through the year our Price Lock promotion fixed the price of up to
2,000 items for a minimum of at least eight weeks. Customers can
beassured that prices will not rise on those products, helping them
to plan and budget. Through Price Lock we are holding down the
prices of more products than our competitors.
We have also increased the number of entry price point products
onoffer for customers, including Greengrocer fruit & vegetables,
J.James meat and poultry and Stamford Street ready meals offer
customers a wide choice of products.
Innovation
We have delivered our plan to triple the number of new lines we sell,
launching over 1,900 products across all our food brands. We developed
our ‘Inspired to Cook’ range in response to the shift towards eating at
home and cooking from scratch, launching a range of over 200 products
across Grocery and Fresh Foods which make home cooking simple and
tasty for customers. In March we launched 350 new branded World
Food products, our biggest investment into this category to date and
in the first six weeks sales are up significantly.
Our premium Taste the Difference range continues to perform well,
particularly at key seasonal and celebratory moments when people
want to trade up, such as Christmas and Easter. We have grown sales
by 15 per cent versus two years ago.
In March we began our food hall transformation programme. We have
rolled out our successful Beauty Hall format in more stores, improved
the layout of our fresh ranges to make it easier for customers to shop,
increased our popular World Foods ranges and improved our in-store
bakeries. We have also simplified some of our ranges and provided
agreater breadth of products across others, delivering more choice
forcustomers on the products they really want.
Service
We are committed to rewarding our colleagues and all Sainsbury’s
and Argos retail colleagues now receive a base rate of pay of £10 per
hour, above both the National Living Wage and the Living Wage.
In March we increased inner London pay from £10.10 to £11.05 in line
with the London Living Wage. We have announced that from 1 May
2022 the outer London rate will also be moving to £11.05, from £10.50.
This means that all Sainsbury’s and Argos retail colleagues earn the
Living Wage wherever they are in the UK. We were the first supermarket
among the big four to make this happen.
Alongside competitive pay we also offer a comprehensive benefits
package, including year-round colleague discount of 10 per cent,
increased to 15 per cent for five days around every pay day, pension
contributions and an improved family leave policy.
We improved customer service scores in supermarkets
3
and are
adapting our Sainsbury’s store estate to offer more new and
innovative products. This year we opened four new supermarkets
and as part of our drive to offer a broader range of distinctive food
tocustomers in-store, on the move and at home, we announced
boldnew plans to transform our eat-in, takeaway and home delivery
offer. Through a partnership with Boparan Restaurant Group we
havedeveloped “The Restaurant Hub” format, a food hall style
offerwith different brands which we will roll out across 30 stores
inthe next year, with more to come in the future. We will also
open30 Starbucks cafés in Sainsbury’s stores in the next year,
bringing the total number to 60. We took the decision to close
200underperforming cafés in the Spring.
Our Convenience business grew 9 per cent driven by more people
returning to the workplace, with sales now broadly back at pre-
pandemic levels. We opened 19 convenience stores and closed 23.
Weare making progress with our plan to open more Neighbourhood
Hub stores which give customers a larger, more convenient local store
with a wider produce range, more choice and better services.
39 per cent of our overall business now comes through digital channels,
versus 23 per cent in FY 2019/20. We are seeing a normalisation
of pre-COVID-19 shopping patterns as customers are returning to
shopping in stores and demand for Groceries Online, non-food home
delivery and Click & Collect has stabilised, although itremains more
than double pre-pandemic levels.
Our priorities
10 Strategic Report J Sainsbury plc Annual Report 2022
We are putting food back at the heart of Sainsbury’s. This means
we are focused on lowering prices, launching new products and
improving service.
Groceries Online accounted for 17 per cent of grocery sales with
an average of 690,000 orders per week. In FY 2021/22 we grew our
Groceries Online market share to become the second largest online
grocery retailer, up from fourth before the pandemic
4
. This scale gives
us advantage. We have improved profitability by enhancing picking
rates and van utilisation. We are exploring new ways to make
our delivery services better for customers and more efficient and
initiatives include one-hour saver slots and changes to our delivery
pass model. Customer satisfaction in Online is improving relative
tocompetitors
3
.
1 NielsenIQ Panel volume growth YoY and Yo2Y. Total FMCG (excluding Kiosk & Tobacco), 52 weeks
to March 2022. Market Universe: Total Outlets.
2 Edge by Ascential data, internal modelling.
3 Competitor Benchmarking survey, supermarket and online customer satisfaction.
4 NielsenIQ Panel online value share. Total FMCG (excluding Kiosk & Tobacco), 52 weeks to March 2022.
Market Universe: Total Outlets.
Argos sales were down 12.5 per cent year on year against last year’s
high sales during the pandemic. Sales were down three per cent over
two years and were impacted by availability issues caused by supply
chain disruptions and the strategic decisions we made to reduce
promotions and exit less profitable categories. Reflecting this focus,
household and home and furniture sales grew while sales of toys,
consumer electronics and technology categories declined. We have
grown our furniture market share over the past two years, driven by
Habitat, Sainsbury’s and Argos’s main home and furniture brand.
Following a relaunch in September, Habitat products are now available
in 600 Sainsbury’s stores and online via the Argos and Habitat websites.
We are growing our digital presence to ensure that we are well placed
to serve customers who increasingly want to buy online. 80 per cent
of Argos sales are now online, up from 63 per cent two years ago.
Nectar supports our ambitions in food by giving customers
personalised rewards for their loyalty. 9.3 million digital Nectar users
can benefit from personalised offers with us and with our Nectar
partners. This year we launched My Nectar Prices – an innovative
data-led tool which gives customers discounted prices that are
personal to them, delivering even more value for loyal customers.
Over one million customers are benefitting from lower prices and
wewill develop the proposition further. Nectar360, our marketing
services business, is making good progress and we are on track to
hitour 2026 plan on profit.
11 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Sales growth – Food
Definition: Year-on-year growth of total sales, including VAT.
Sales growth – Food
Definition: Year-on-year growth of total online sales, including
VAT and delivery income.
Grocery (%)
2021/22
2020/21
2019/20
(0.2)
7. 8
0.4
Online (%)
2021/22
119.6
(4.7)
7.6
2020/21
2019/20
Sales growth
Definition: Year-on-year growth of total sales, including VAT,
excluding fuel.
LFL transactions growth
Definition: Year-on-year growth in transactions, excluding
fuel, excluding Financial Services, for stores that have been
open for more than one year.
Supermarket (%)
2021/22
(1.8)
(0.1)
2.5
2020/21
2019/20
LFL transactions growth (%)
2021/22
2020/21
2019/20
20.4
(29.5)
(0.6)
Sales growth
Definition: Year-on-year growth of total sales, including VAT,
excluding fuel.
Convenience (%)
2021/22
2020/21
2019/20
1.3
(9.4)
8.8
Our brands that deliver – Nectar, Argos, Habitat, Tu and Sainsbury’s Bank
– are delivering for our customers and our shareholders and supporting
investments in our wider customer offer.
Our retail operating costs to sales ratio has reduced by 83 basis
points versus FY 2019/20 and we continue to target reducing the ratio
by at least 200 basis points by the end of FY 2023/24, despite cost
inflation being significantly higher than was anticipated when this
target was set.
We are working at pace to integrate the Sainsbury’s, Argos and
Habitat supply chain and logistics networks, which will save at least
£250 million over the programme, improve overall efficiency and
deliver a better service to our customers. Our property rationalisation
programme is on track and this year we closed four underperforming
supermarkets and 23 convenience stores. We are also working to
improve the efficiency of Groceries Online, moving stores to a new,
more efficient routing system and improving pick rates, which will
save the business around £50 million overall. In addition, we are
investing to improve the checkout experience for customers and
colleagues which will drive around £50 million of cost efficiencies.
This includes trialling improvements to the layout of self-service
areas, making it easier for colleagues to help customers, reducing
queuing times and creating additional space for shoppers with
trolleys, increasing participation.
We are making good progress in Argos’s end-to-end transformation
programme, which will save £105 million over three years. We have
opened five Local Fulfilment Centres (LFCs) and as a result, our
customers are benefitting from improved availability, faster delivery
and more collection options; we plan to open nine more LFCs this
year. In line with improving availability and convenience for customers
whilst reducing costs, this year we opened 64 Argos stores inside
Sainsbury’s supermarkets plus 62 in-store collection points. We have
closed 73 standalone Argos stores this year. As of 5 March 2022, Argos
has 728 stores, of which 400 are inside Sainsbury’s supermarkets.
We partner with third parties and outsource where necessary to
deliver for our customers, whilst supporting our own cost saving
programme and our focus on food. The changes we are making to
our cafes, hot food counters and bakeries will create £125-150 million
of savings over three years and we will continue to explore ways to work
with partners to drive value and improve service for our customers.
We are proud of our strong relationships with suppliers and are
continuing to work closely with them to drive value and simplify
processes, enabling us to lower our cost to serve and buy better,
as well as minimising the impact of rising inflation as much as
possible for customers.
Tu clothing delivered sales growth of 12.7 per cent over one year and
3.1 per cent over two years and delivers over £1 billion in sales. We are
selling more clothing at full price – with full priced sales participation
now at 89 per cent compared with 65 per cent two years ago – and
running fewer promotions, which improves profitability and supports
increased investment in our core food business.
We continue to make good progress reshaping, strengthening and
simplifying our Financial Services business, with profits of £38 million
versus a loss of £21 million in FY 2020/21. This compares with £48
million in FY 2019/20. FY 2020/21 was impacted by COVID-19 where we
saw significantly reduced demand across consumer credit, combined
with increased bad debt provisions and less activity in our fee-based
products, particularly Travel Money. Reflecting the Bank’s progress,
following the year end, it has paid dividend to the Group for the first
time, of £50 million.
We have continued to improve our digital capability with the launch
of the Argos Monthly Payment Plan, which allows customers to
spread the cost of a purchase across fixed monthly repayments for
aperiod of their choice. We have transformed the Sainsbury’s Bank
loan application journey for single and joint applicants with a fully
digital onboarding experience that can transfer funds to accounts
injust minutes. We have also improved the application journey for
savings customers.
12 Strategic Report J Sainsbury plc Annual Report 2022
We are making good progress with our cost saving programme,
making bold decisions and prioritising what really matters to customers.
By reducing our retail operating costs, we are able to invest more into
our core food business, delivering better value, increasing our innovation
and improving customer service.
Sales growth
Definition: Year-on-year growth of total sales, including VAT.
General merchandise (including Argos) (%)
2021/22
(11.9)
(2.9)
8.3
2020/21
2019/20
Sales growth
Definition: Year-on-year growth of total sales, including VAT,
excluding fuel.
Clothing (including Argos) (%)
2021/22
2020/21
2019/20
12.7
1.2
(8.5)
Bank sales growth
Definition: Year-on-year growth of total sales, including VAT.
Bank (including Argos Financial Services) (%)
2021/22
(24.3)
5.0
2020/21
2019/20
0.2
Our Plan for Better
The environmental and social challenges that are facing the world
have never been greater. As a UK retailer with a food, general
merchandise and clothing business, we source from countries
all over the world, therefore the production, sourcing, packaging
and disposal of these products can have major consequences.
Our commitment to Helping everyone eat better means we are
playing a leading role in offering delicious, affordable food that
supports healthy and sustainable diets, helping customers reduce
their impact on the planet, one plate at a time.
In June 2021 we launched our Plan for Better, a key pillar of our
business strategy. Our Plan for Better covers our environmental
and social commitments and sets out our sustainability goals
across our whole business, outlining our priority areas of focus,
our key commitments and our progress. The plan consists of three
interlocking pillars; Better for you, Better for the planet and Better
for everyone, and we have committed to reporting twice a year to
transparently share our progress. Our standalone Plan for Better
reports can be found at www.about.sainsburys.co.uk.
2.5 million
meals donated via our partnership with Neighbourly
The development of our Plan for Better was informed by identifying
the areas that are most material to our stakeholders and ensuring
alignment to the UN Sustainable Development Goals. This year we
have undertaken another materiality exercise across our stakeholders
to understand the priority areas of focus across the different groups.
Using this insight we continue to evolve our strategy to ensure
it’s fit for purpose and addressing the areas where we can have
a significant impact.
The past year has seen us host our first ESG investor event and our
sponsorship of COP26. We have worked on improving transparency
and increasing disclosures in our reporting with our first SASB
disclosure and implementation of TCFD recommendations
(see page 17 for our TCFD disclosure). We have also rolled out
our food redistribution partnership with Neighbourly to all our
supermarkets. In the year ahead we are looking forward to
launching refreshed commitments and plans across our social
agenda, including human rights and community and partnerships.
We have over 171,000 colleagues who are critical to the long-term
success of our business. We are committed to being an inclusive
employer where everybody is treated fairly and with respect and
is encouraged to develop their skills and fulfil their potential. We are
passionate about playing an active role in our communities, and are
committed to championing human rights.
An inclusive place to work and shop
We want our colleagues to feel connected and engaged, and
measure this through our annual colleague engagement survey
and our regular ‘temperature check’ surveys. An essential part of
the survey process is sharing the results and making real and
tangible actions that make a difference to our colleagues’ experience.
This year we introduced new metrics into the survey; overall as a
company a score of 68 was achieved for colleagues stating how
happy they are at work, whilst 78 per cent of colleagues told us they
are able to be themselves at work. After each colleague engagement
survey, line managers explore their local survey results with their
teams and work together to plan and implement actions that will
help make Sainsbury’s a truly great place to work.
78%
of colleagues told us they are able to be
themselves at work
We continue to work on representation and transparency across
the business and have published our second integrated Gender and
Ethnicity Pay Report this year. We have reduced our mean gender
pay gap by 1.2 per cent to 8.5 per cent, while our median gender pay
gap has decreased by 0.3 per cent to 4.7 per cent. Our mean ethnicity
pay gap is negative at minus 0.9 per cent; this is a result of our hourly
paid store colleagues receiving the same hourly rate and just under
40 per cent of our ethnically diverse colleagues work in stores that
attract a location premium (i.e. inner and outer London), compared
to just under 6 per cent of our white colleagues.
To ensure sustained improvement, we continue to look at focused
initiatives, culture and accountability through targets. We have set
stretching targets to take us to 2024 which covers more of our
colleague population and also forms part of our long-term incentives
for management. Progress on diverse representation at senior
leadership and senior management positions can be seen in the
table on page 14. Across the entire business, female representation
is 52.7 per cent.
13 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Environmental and social sustainability at our core.
We are active in our drive for inclusivity and the progression of our
diverse talent, for example:
— We’ve adopted The Halo Code, the UK’s first Black hair code
which protects colleagues who come to work with natural hair
and hairstyles associated with their racial, ethnic and cultural
identities. We want to ensure Black colleagues can be themselves
without fear of judgement or discrimination which is why we have
updated our dress code policies to embrace afro-textured hair
— We joined the Black British Network to help improve inclusivity
and representation across the business
— We refreshed our LGBT+ colleague policies and guidance, to ensure
we keep our colleagues educated with how language continues to
evolve and continue to be an inclusive workplace
— Our Ethnically Diverse colleague network ‘I AM ME’ was recognised
in the Top 10 Network Group in the UK at the Ethnicity Awards.
— We were recognised as one of the Top 10 in the UK as an
‘Inclusive Company’ at the British LGBT+ Awards
— We were recognised in the Financial Times Diversity leaders
in Europe List
— We were featured in The Times Top 50 Employers for Women
2022: Taking Action on Gender Equality, produced in partnership
with Business in the Community
— We continue to be a Disability Confident Leader – the highest
tier of accreditation in the government’s Disability Confident
Programme
— Over 8,800 colleagues shared with us that they had a disability or
long-term condition in 2021 through our confidential all colleague
survey, this was a significant increase from 2020
— We have committed £1 million in donations working with Black
charities and communities to support racism, education, social
mobility, Black businesses and food insecurity, areas which our
colleagues and customers identified as important
— We have evolved our Family Leave policy by increasing our paid
leave to 26 weeks for maternity, adoption, and surrogacy and
paternity from two to four weeks
— We launched our colleague and line manager menopause guide
and signed the Wellbeing of Women ‘Menopause Workplace Pledge’
— This year we proudly recognised Carers Week, the theme being
‘Make Caring Visible and Valued’, using the day to signpost
colleagues to our newly launched Little Book of Carers, which
shares colleague stories and gives guidance and advice
— After a successful trial we launched the colleague wellbeing app
Unmind, giving every colleague free access to various personalised
tools and learning series across a range of topics, enabling them
to measure and manage their mental health and wellbeing
— 63 per cent of our colleagues tell us that our Mental Health and
Wellbeing tools help them to live happier and healthier lives
— We invested more than £100 million to increase the base rate to
£10 per hour for Sainsbury’s and Argos colleagues and increased
our colleague discount from 10 per cent to 15 per cent for five days
around each pay day, supporting the financial wellbeing of our
colleagues
Being an inclusive organisation with diverse representation at all
levels of our business is important to us. We acknowledge we still
have a way to go, and we are committed to driving positive,
sustainable change to improve the lived experience and opportunities
for under-represented groups, be they colleagues or customers.
For more information please visit the Better for everyone section of
our corporate website or read our Gender and Ethnicity Pay Report at
www.about.sainsburys.co.uk.
14 Strategic Report J Sainsbury plc Annual Report 2022
Diversity and Inclusion targets Senior leadership positions (the top 230 leaders)
Senior management positions (the top 1,200 leaders
beneath the top 230 senior leadership positions)
Female Target 2024: 50% 2021/22: 40.1% 2020/21: 37.7% Target 2024: 43% 2021/22: 35.7% 2020/21: 35.5%
Ethnically diverse Target 2024: 12% 2021/22: 8.2% 2020/21: 8.1% Target 2024: 12% 2021/22: 8.7% 2020/21: 7.2%
Black Target 2024: 3% 2021/22: 2.4% 2020/21: 1.4% Target 2024: 3% 2021/22: 1% 2020/21: 0.7%
Female Male Undisclosed
Total colleagues
90,350
(52.7%)
171,598
81,219
(47.3%)
29 (0.02%)
Voluntary turnover Involuntary turnover Retention
Colleague turnover
72,333
(40.2%)
25,567 (14.2%)
171,598
73,698
(45.6%)
Health and safety
The health and safety of our colleagues and customers is a key part
of our strategy. We have seen a long-term decline in both colleague
and customer reportable injuries over the past five years; our colleague
reportable accidents have decreased by 2.8 per cent, whilst our
customer reportable accidents have decreased by 39.7 per cent. An
independent safety team supports our retail and logistics operations.
They provide a combination of coaching, expertise and challenge to
our line managers using our innovative risk mapping tool, utilising
data from a wide range of sources to identify the key areas requiring
support in any of our stores across the business. This helps us to
ensure that we have the right level of compliance in place around
key areas such as training, fire safety and adherence to procedures,
as well as reviewing culture in individual stores through the lens of
colleagues, regional management and safety teams.
Our governance processes ensures colleagues can feedback on
issues, regular engagement with our unions and Board oversight.
This includes our Great Place to Work groups, divisional level safety
steering groups, our Group Safety Committee which reports into
the Operating Board, as well as quarterly updates to the plc Board.
We have strong and well-established Primary Authority relationships
in place that cover all our risk areas across health and safety, food
safety, fire safety and petroleum safety. These relationships are built
on a foundation of trust and we openly share information with our
Primary Authority .
Community and partnerships
We play an active role in the communities we serve and this year
we have raised a total of £38.4 million for good causes. This year
we have developed our new community and partnerships strategy,
with a focus on food poverty. Our strategy is underpinned by two
key pillars – access to food and prevention, which will be delivered
through three key programmes to support Helping everyone eat
better: food donation, local activation and prevention.
£38.4 million
raised for good causes this year
A key priority for the last year has been around access to food and
to increase the redistribution of surplus food for human consumption.
In August 2021 we began our partnership with Neighbourly, which
has since been rolled out to all supermarkets. From August to
March we donated a total of 2,567,803 meals, which is equivalent
to a £4,878,826 million saving to charities and community groups
(based on £1.90 per meal).
To support our local communities impacted by food poverty, we ran
our Help Brighten a Million Christmases campaign again this year
from 1-24 December, generating £2.6 million for our partners. This
year we also launched our Helping everyone eat better Community
Grants for stores to nominate partner organisations tackling food
insecurity to apply for grants of £500. Through our partnership with
FareShare, with our customers, £1.7 million was donated allowing them
to support charities across the UK at the heart of our communities,
supporting those individuals impacted by food poverty.
We have continued our longstanding partnership with Comic Relief
and this year raised £6.2 million for the Red Nose Day campaign.
In March, we also worked with Comic Relief to support the humanitarian
crisis in Ukraine by launching a Ukrainian Crisis Appeal, donating
£2 million and an additional £600,000 donated by our customers
via Nectar Donate and donations at checkout.
Alongside our community investment, we make positive economic
contributions through our responsible approach to tax. We
contributed £2.3 billion in taxes borne and collected this year.
For more information on how we serve our communities visit
www.about.sainsburys.co.uk for our Plan for Better report.
Championing human rights
We want to treat people fairly throughout our business and supply
chains and we remain committed to respecting human rights. We
understand how intertwined environmental and social sustainability
are, and how the challenges in both areas are interconnected,
therefore as part of a just transition to Net Zero, we want to place the
people in our supply chains at the heart of our move to a low-carbon
world. This year we have undertaken an extensive review of the most
salient human rights risks facing the people in our supply chain and
are using this to inform the development of our new social sustainability
strategy, which we will be reporting progress on later this year.
We recognise the importance of supply chain transparency.
Having previously published our Tier 1 clothing sites, this year
we also published our Tier 1 food sites with information such as
addresses, number of workers, gender split and union membership.
We also acknowledge the need for further transparency, therefore
we will be publishing lists of our General Merchandise and Goods
Not for Resale sites in the year ahead, as well as working to achieve
greater visibility of the challenges faced further down the supply chain.
In 2017, we launched our Modern Slavery Risk Tool, giving us unique
insights into slavery risks across a complex global supply chain,
and we continue to embed the tool into the business by using its
results for internal risk assessments. In 2020 we increased the
scope of this risk to cover all human rights risks and this year have
continued the tools development by updating risk data to ensure
we have the most up-to-date data on the risks in our supply chain.
We identify vulnerable workers and do not tolerate any form of
slavery or servitude in our own operations. For more information
on our approach to social sustainability and to read our Human
Rights Policy and Modern Slavery Statement, please visit
www.about.sainsburys.co.uk.
Healthy and sustainable diets for all
We know that food that is better for us is also better for the planet.
This is why we have committed to develop and deliver healthy,
sustainable diets for all. This year we built on our mass colleague and
customer campaign, Helping everyone eat better, to raise awareness
and drive behaviour change. We want to encourage people to eat
more in line with the principles of the government’s Eatwell Guide
and to help make healthy eating choices more affordable, easy and
tasty. To support customers to incrementally improve their diets, we
have developed recipes which change up well-loved recipes such as
curries, lasagnes and casseroles, and offer hints such as encouraging
customers to mix half pulses with half meat.
This year we reported against our target to measure healthy and
sustainable diets. We aim to achieve at least 83.1 per cent of ‘healthy’
and ‘better for you’ sales by 2025, currently sitting at 80 per cent,
remaining flat year-on-year.
15 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
We undertook an extensive piece of work to review the nutrition
criteria used to define ‘healthy’ and ‘better for you sales’. This
approach will help us identify better choices within categories for
both branded and own-brand products, along a spectrum from less
healthy to most healthy. We also disclosed our protein sales, with
72 per cent of protein sales tonnage being plant based and meat-free
products, of which 12 per cent is entirely plant based
1
.
We continue to utilise ‘test and learns’ to help nudge customer
behaviour by incentivising customers with value pricing or additional
Nectar points with initiatives such as our discounted 60p fruit and
vegetable campaign and The Great Big Fruit & Veg Challenge.
We also continued to support customers by topping up the Healthy
Start vouchers, provided by the government to low-income pregnant
women and families with children under the age of four. The
vouchers consisted of a £2 fruit and vegetable coupon, more than
any other retailer, to help families in need have access to nutritious
produce through the half-term and summer holidays. In the six
months the programme ran, we supported over 17,000 customers to
take home an additional 1.2 million portions of fruit and vegetables.
Principal Supermarket Partner of COP26
This year we were Principal Supermarket Partner of COP26, the
UN Climate Change Conference, which took place in Glasgow in
November 2021. Our aim was to demonstrate strong industry
leadership and inspire our colleagues, customers and other
businesses to rally together to protect and restore our planet for
the future. During the event we hosted multiple events, bringing
in experts from across our business to discuss industry challenges
as well as hosting an exhibition space to engage the public on how
we can all eat better by making small changes to our plates.
We also announced our commitment, alongside other retailers, to
work with the WWF to halve the environmental impact of UK baskets
by 2030. We recognise that solutions to the grand challenges that we
are facing cannot be solved in isolation, therefore we are committed
to working as an industry to identify the key issues that we face and
collaborate so that we can accelerate progress together.
Reducing carbon emissions
This year we announced the acceleration of our carbon emissions
target to become Net Zero in our own operations by 2035, five years
earlier than our original ambition. Overall, we have reduced our
absolute greenhouse gas (GHG) emissions within our operations to
762,119 tCO
2
e, a reduction of 7 per cent year-on-year and 20 per cent
from our 2018/19 baseline, keeping us on course for our new 2035
target. In 2021 we hit some key milestones with the rollout of LED
lighting to 100 per cent of our supermarket estate, reducing lighting
energy consumption by an average of 70 per cent, with a plan to
install 100 per cent LED across our entire estate by the end of 2022/23.
We also transitioned to 100 per cent renewable electricity across
the entire estate and have committed to the long-term purchasing
of renewable energy from new wind farms and solar projects,
significantly reducing reliance on fossil fuels.
We are proud to be recognised by CDP, an environmental impact
disclosure system, for our environmental transparency. We were
awarded an A rating for climate change for the eighth consecutive
year, the only UK retailer to have achieved this. We were also
recognised by CDP as a Supplier Engagement Leader for our work
engaging with our suppliers to tackle climate change.
As part of our commitment to reduce our value chain emissions,
this year we’ve written to 400 of our key suppliers, who constitute
a high proportion of our value chain emissions, requesting that they
disclose their carbon emissions through the CDP or Higg platform.
We currently have 87 per cent of our key food suppliers disclosing via
CDP. We have also set an expectation that our suppliers should
commit to their own Net Zero science-based targets, aligned to the
highest ambition of the Paris Climate Change Agreement. This builds
on our existing science-based target, defined with the Carbon Trust,
to reduce our Scope 3 emissions by 30 per cent by 2030, whereby
our baseline is 26,663,081 tCO
2
e (2018/19). This includes reducing
emissions from purchased goods, upstream transport and
distribution, services sold and our customers’ use and consumption
of the products we sell.
20%
reduction in absolute greenhouse gas emissions within
our own operations, against our 2018/19 baseline
Reducing food waste
We are committed to reducing food waste by 50 per cent across the
whole value chain by 2030; driven by the multi-faceted environmental
and social challenges created by food loss and waste.
This year we have reduced our operational food waste tonnage by
2.4 per cent year-on-year, a reduction of 13 per cent from our 2019/20
baseline. Where we can’t donate surplus food to charity, we send
surplus food to UK farms, via our partners, to be used in animal feed.
We’ve been sending surplus bread for use in animal feed since 2013
and this year we trialled diverting unsold fruit, vegetables and salad
as well. We’ve also been working with suppliers on specifications this
year in order to utilise more of the crop.
We increased our food redistribution to people by 119 per cent
year-on-year, to 4,072 tonnes, an increase of 161 per cent from
our 2019/20 baseline. A key driver of this increase has been our
partnership with Neighbourly which we rolled out to all supermarkets
this year with convenience store rollout planned for the year ahead.
Neighbourly helps us manage our back of store food donation
programme, connecting our stores to a network of over 17,000
charities, schools and community groups. This partnership ensures
both the social and environmental investments already made in food
production are not wasted and that any surplus food gets redirected
to people who need it most. Please see the Community and
partnerships section on page 15 for more information.
We continue to collaborate with industry on reducing food waste and
support the delivery of Courtauld 2025/Champions 12.3. We’ve been
members of UK Food Waste Reduction Roadmap since 2018 and are
pleased many of our Fresh suppliers are also signed up, covering
43 per cent of our total sales. We also continue to work with WRAP to
implement their guidance on upstream and downstream food waste,
including increasing behavioural tips on product labelling. This year
we also engaged suppliers on aligning with WRAP’s best practice on
redistributing own-label products within the supply chain, evolving
our guidelines so that suppliers can redistribute any Sainsbury’s
own-label products to our chosen food donation partners.
1 2020/21 data.
16 Strategic Report J Sainsbury plc Annual Report 2022
Reducing use of plastic packaging
We have seen an absolute reduction in plastic packaging of
2.2 per cent from our 2018 baseline and relative reduction (tonnes per
million units sold) of 4.7 per cent from our 2018 baseline. Year-on-
year the tonnage has decreased by 626 tonnes to 117,333 tonnes,
which puts us behind our target trajectory. We recognise that we
have a lot more to do to reduce our plastic packaging tonnage and
meet our target to reduce this by 50 per cent by 2025. We continue to
implement a number of strategies aiming to remove, reduce, replace
and recycle the amount of plastic packaging, including:
— Removing plastic and replacing with paper straws in our own-
brand range of lunchbox juice cartons, this equates to the removal
of 18.5 million plastic straws from circulation each year to reduce
plastic by 6.6 tonnes
— Removing film overwrap from own-brand tea boxes to reduce
plastic by over 15 tonnes
— Reducing by light-weighting our own-brand water bottles and
caps to reduce by over 300 tonnes
— Reducing by light-weighting our own-brand bleach bottle caps
to reduce plastic by 24 tonnes
— Replacing plastic with card trays for own-brand sausage rolls
and snacks to reduce plastic by over 65 tonnes
— Replacing plastic with pulp fibre trays for own-brand eggs,
to reduce plastic by over 230 tonnes
— Recycling opportunities for customers by rolling out front of store
collection points at all our large supermarket stores for customers
to bring back any flexible plastic packaging such as salad bags,
crisp packets and food pouches for recycling
Task Force on Climate-related
Financial Disclosures (TCFD)
Introduction
With the impacts of climate change being felt around the world,
we understand the important leadership role we can play to help
reduce the impact of the food system on the climate. We are proud
to have been chosen as the Principal Supermarket Partner of COP26.
We have committed to reduce GHG emissions within our own
operations to Net Zero by 2035. This is five years earlier than our
original ambition and aligns with the UN’s goal to limit global
warming to 1.5 degrees, the highest ambition of the Paris Climate
Change Agreement. We have a strong heritage in reducing our own
emissions and are collaborating closely with our suppliers to ensure
we are driving positive change across our supply chain too.
Tackling the climate emergency requires collaborative and
transformational thinking across industry and government, and
a willingness to work together and share learnings globally, so that
we can all take meaningful, immediate action. In November we
signed the World Wide Fund for Nature (WWF) retailers’ commitment
to halve the impact of UK baskets by 2030.
Whilst we are delivering on our commitments to reduce the impact
of our business on the climate, we are aware that climate change
is going to have an impact on our business, presenting risks and
opportunities over the short, medium and long term. We have been
a signatory of the TCFD since January 2020 and have complied with
the requirements of LR 9.8.6R by including climate-related financial
disclosures consistent with the TCFD recommendations to strengthen
our climate resilience, which we discuss below.
Governance
Governance a) Board’s oversight of climate-related risks
andopportunities
The Board
The Board is accountable for risk management, strategy and target
setting, including climate-related matters. The Board monitors
how we are responding to climate-related risks and opportunities,
identified through the risk management process and scenario
analysis. The Board also oversees our Plan for Better strategy, which
includes climate-related matters, and is one of our core strategic
business priorities. Finally, the Board sets and monitors progress
against our climate-related metrics, and this year approved
accelerating our Scope 1 and 2 Net Zero target by five years to 2035.
The Board continues to ensure that there is appropriate climate-
related expertise within the business and has undertaken training
by the Cambridge Institute for Sustainability Leadership. See page 54
for biographies of our Board members.
Board Committees
The Corporate Responsibility and Sustainability (CR&S) Committee
reviews the sustainability strategy and monitors the business
engagement with our key stakeholders, including climate-related
matters. For example, we have asked our suppliers to set their own
targets to reduce GHG emissions and understand our customers
are looking for more sustainable products as they seek to minimise
their personal carbon footprints.
The Remuneration Committee reviews remuneration for Executive
Directors against our Plan for Better strategy, including long-term
targets for Scope 1, 2 and 3 GHG emissions (see page 78 for more details).
The Audit Committee reviews risks and confidence on the climate-
related metrics that we disclose.
Governance b) Management’s role in assessing and managing
climate-related risks and opportunities
Operating Board
The Operating Board defines and monitors the business-wide strategy,
including climate-related matters, adapting to new regulatory
requirements and trends, and approving major investments such
as our commitment to spend £1 billion to become Net Zero. The
Operating Board is chaired by our CEO, who also sits on the Board
and CR&S Committee.
Plan for Better Steering Committee
The Plan for Better Steering Committee supports the Operating
Board and leads the operational execution of our Plan for Better,
by overseeing working group activity, and monitoring performance
against our climate-related metrics. The Plan for Better Steering
Committee is chaired by our Chief Marketing Officer (CMO) and has
cross-divisional representation at Director level.
Plan for Better working groups
The Plan for Better Steering Committee oversees three working groups:
Plan for Better; Environment; and Social. Our key climate-related
targets (Scope 1, 2 and 3, water and biodiversity) are managed by the
Environment working group.
See page 71 for our CR&S Committee Report, providing information
on our governance structure, Committee responsibilities, meeting
frequency and principal activities in the year.
17 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Strategy
Strategy a) Climate-related risks and opportunities identified over
the short, medium, and long term
Climate change is anticipated to impact our business over the short,
medium and long term. Physical risks may impact our operations
and supply chain through extreme weather events, such as flooding
or droughts. Transitional risks as a result of moving to a low-carbon
future may impact us through changing consumer preferences
or climate-related regulation. Climate change also presents
opportunities, such as higher sales of lower GHG emission products.
The table below captures the key climate risks and opportunities
impacting our business, identified through our risk management
and qualitative scenario analysis, as well as potential mitigations.
Financial impact ranges
We have used the below financial impact ranges, which are the
same as we use for our corporate risk management process
(described further in the risk management section on page 38).
Impact Financial range (revenue)
High Greater than £125 million
Medium £25 million to £125 million
Low Less than £25 million
Time horizons
We have used the below time horizons:
Time period Years Reason
Short 0 to 5 years Aligned to our financial planning cycle
Medium 5 to 15 years Nearer term to capture transition risks
and opportunities
Long 15 to 50 years Longer term to capture physical risks
and opportunities
Time horizon Risk type Classification Risk/opportunity description
1
Financial impact
(assuming actions are
taken to mitigate risks)
Potential mitigations that are
being considered as part of our
strategic planning
Short/Medium Transitional Reputation Climate conscious
consumers favouring lower
GHG emission products
Revenue opportunity Development & promotion
of lower GHG emission
products (see Meat, Fish &
Poultry example below on
page 20)
Short/Medium Transitional Policy & Legal Introduction of a carbon
price leading to an increase
in the cost of higher GHG
emission products
Low revenue loss Majority of cost assumed
to be passed on to
customers to encourage
purchase of lower GHG
emission products. We are
also working with our
suppliers to reduce the
GHG emissions of our
products (see Meat, Fish
& Poultry example below
on page 20)
Medium Transition Policy & Legal Ban on the sale of new
petrol and diesel cars from
2030 leading to a reduction
in fuel sales
High revenue loss Providing electric vehicle
charging for customers as
they shop at our stores
Short/Medium/
Long
Physical Acute Increased likelihood of
flooding and drought
leading to a reduction in
crop yields and increased
sourcing costs
Medium/high revenue loss Working with our suppliers
to create climate adaption
plans to secure supply of
crops (see Produce
example below on page 21)
Short/Medium/
Long
Physical Acute Increased likelihood of
flooding leading to water
damage and closure of
stores and depots
Low revenue loss/cost Flood warning system,
flood emergency plans
for at-risk stores and
investments in flood
defences (see Operations
example below on page 19)
1 There are independencies between the climate risks and opportunities identified, such as the introduction of a carbon price providing further incentive for climate conscious consumers to favour lower GHG
emission products.
18 Strategic Report J Sainsbury plc Annual Report 2022
Strategy b) Impact of climate-related risks and opportunities on
business, strategy and financial planning
Climate-related risks and opportunities are considered as part of our
Plan for Better, which is one of our core strategic business priorities.
The below table shows how our Plan for Better strategy supports
climate-related matters.
Plan for Better commitment How our Plan for Better strategy supports climate-related matters
Reduction in
carbon emissions
We have a strong track record over the last 15 years of reducing GHG emissions within our own operations, and have already
achieved a 20 per cent reduction against our 2018/19 baseline. This year we completed rollout of our LED lighting to 100 per cent
of our supermarket estate, reducing lighting energy consumption by an average of 70 per cent. We also transitioned to 100 per cent
renewable electricity across the entire estate (sourced directly from UK wind farms as well as certificate-backed renewable
electricity from the UK) and have committed to long-term purchasing of renewable energy from new wind farms and solar
projects, significantly reducing reliance on fossil fuels. We are working to remove hydrofluorocarbon in our refrigeration, replacing
these with natural alternatives. Our Scope 3 emissions make up 97 per cent of our overall GHG emissions, and we have committed
to a reduction of 30 per cent by 2030. We are working in collaboration with our suppliers, industry and the non-governmental
organisation (NGO) community to achieve this. See page 16 for more details on how we are reducing carbon emissions within our
own operations and supply chain.
Reduction in
wateruse
Climate change is expected to increase water stress in the UK. We have already reduced water usage in our own operations by
13 per cent against our 2018/19 baseline and are making significant progress in both reduction and recycling of water, having
achieved ‘A’ rating in the CDP water security disclosure for the last two years. We are signatories of the WRAP Water Roadmap
2030, working to improve water stewardship in our key sourcing locations. We are currently mapping our total water footprint
across the entirety of our operations and will be setting out our total organisation water stewardship approach in the coming year.
Healthy &
sustainablediets
The type of food in our diet has a big impact on GHG emissions. We are encouraging customers to eat more in line with the
principles of the government’s Eatwell Guide, through marketing campaigns, pricing and Nectar points, such as our Great Big Fruit
& Veg challenge. The Eatwell Guide is a healthy and balanced diet, and when compared against a standard UK diet, is lower in GHG
emissions, water usage and land use. See page 15 for more details on how we are encouraging healthy and sustainable diets.
Reduction in
foodwaste
Food waste contributes over eight per cent of total man-made GHG emissions, so actions we are taking to reduce food waste are also
reducing GHG emissions. This year we rolled out our back of store food donation partnership with Neighbourly to all supermarkets,
helping to connect to a network of over 17,000 charities, schools and community groups. We are following best practice disclosure
on our food waste and encouraging our suppliers to sign up to the WRAP Waste Reduction Roadmap to help drive industry action
on food waste prevention as well as redistribution. See page 16 for more details on how we are reducing food waste.
Biodiversity The environmental changes driven by climate change are putting pressure on species and have the potential to alter ecosystems
over time. We recognise our high dependency on nature and ecosystem services, and have committed to ensuring the impact of
our operations are net positive for biodiversity. We are currently assessing our nature-related risks and opportunities across our
business and supply chain. We have been working to build supply chain resilience for over 20 years, including working directly
with farmers and growers on areas such as soil health and integrated pest management, whilst increasing certification of high
climate risk materials such as palm oil, soy, timber and cotton. For more details on how we are protecting and enhancing
biodiversity, visit www.about.sainsburys.co.uk.
Climate-related matters are also considered within financial planning.
We have committed to spend £1 billion to become Net Zero by 2035
and this is built into our financial plan, approved by the Board.
We have also considered what impact the revenue losses identified
in our scenario analysis (on page 20) could have on the carrying value
of the Group’s store assets, by modelling the impact on cash flows
(the results do not have a material impact on the Group’s impairment
considerations, see page 139 for more details). Finally, Sainsbury’s
Bank considers climate-related risks as part of its Internal Capital
Adequacy Assessment process (ICAAP).
Strategy c) Resilience of strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower scenario
To help shape our understanding of the potential implications of both
the physical and transition risks associated with climate change, we
have conducted both qualitative and quantitative scenario analysis,
with the support of an external specialist. Scenario analysis can act
as a ‘stress test’ for our current business operations and supply chain
and help to explore a range of different outcomes. This has allowed
us to evaluate the potential effects on our strategic and financial
position under each of the defined scenarios. We have then been able
to use the results to inform strategic thinking on how to manage the
identified risks and opportunities.
Our own operations – Qualitative scenario analysis
We have been actively managing flood risk across our property
estate for many years through our flood warning system, flood
emergency plans for at-risk stores and investments in flood defences.
Climate change is expected to increase the frequency and intensity
of flood events in the future, impacting directly through water damage
to our property estate and indirectly by hindering access for our
customers and suppliers. In 2020, we carried out some qualitative
scenario analysis using the World Resources Institute Aqueduct tool
to understand the impact of flood risk and water stress on our locations
in a 4.3°C scenario (high emission). Improving our understanding
of future water-related risks helps us assess the need for future
building adaptations, for example flood defences. It is also informing
our commitment to be water neutral by 2040, by identifying where
water conservation will have the biggest impact.
Our products and supply chain – Qualitative scenario analysis
During 2021, we undertook qualitative scenario analysis that
evaluated the impacts of a wide range of different climate change
risks on the product categories we sell, to identify the product
categories most exposed to climate-related risks and the most
material risks for each product category.
This analysis was conducted by considering the potential impact of
both physical and transitional risks. For physical risks, we considered
the geographical sourcing for each of our product categories and
assessed different physical risks under a high emissions scenario.
To evaluate transitional risks, we considered the GHG emissions of
our different product categories, as well as how changing market
dynamics and increased regulations could impact both production
costs and revenue.
Of the 27 climate-related risks considered through this process, the
four most material climate-related risks were drought, flooding,
carbon taxes and changes in consumer preferences. We identified
Produce, Clothing, Meat, Fish and Poultry (MFP), Dairy and Fuel as
the product categories most exposed to the climate-related risks.
19 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Type of risk Most material risks Most exposed categories
Acute physical risks — Drought
— Flooding
— Produce
— Clothing
Transition risks — Carbon taxes
— Changes in
consumer
preferences
— Meat, Fish & Poultry
— Dairy
— Fuel
The findings of the qualitative scenario analysis were reviewed and
considered, alongside the financial materiality of each product
category, by senior leadership and key stakeholders during a series
of workshops. We then selected MFP and Produce to undergo further
analysis through a quantitative scenario analysis approach, which
we will expand to additional categories next year. This approach was
approved by the Plan for Better Steering Committee with oversight
from the CR&S Committee.
Our products and supply chains – Quantitative
scenario analysis
To further build on these qualitative results, we adopted a quantitative
approach to determine the potential financial impacts associated
with the identified material climate risks for each exposed product
category. The scenarios are built using data from the Intergovernmental
Panel on Climate Change (IPCC) over two time horizons (2030 and
2050) and include a 2°C or lower scenario per the recommendations
of the TCFD. These time horizons align with our definition of medium
and long term. Greater detail is provided below:
— 1.5°C – A pathway that limits global warming to below 1.5°C
(low physical risk, high transition risk)
— 2.4°C – Described by the IPCC as an intermediate scenario
(medium physical and transition risk)
— 4.3°C – A high emissions worst case scenario pathway
(high physical risk, low transition risk)
Through our analysis we identified transition risks to be more
material leading up to 2030 as the global community strives to limit
global warming to below 1.5°C, whereas physical risks are expected
to manifest by 2050 if transition goals are not met. Furthermore,
extending transition risk analysis beyond 2030 also introduces a
significant amount of uncertainty to our analysis. Our analysis of
MFP extends to 2030 as the product category is most vulnerable to
transition risks, namely carbon taxes and changes in consumer
preferences. Our quantitative analysis for Produce extends to 2050
to capture the potential financial impacts associated with drought,
flooding and heat events.
Quantitative scenario analysis – Potential financial impact
of climate-related transition risks on MFP products in a low
emissions scenario in 2030
To assess the costs associated with carbon taxes and changes in
consumer preferences, we evaluated the production of MFP products
in the UK and the production of animal feed globally. Our analysis
considered the impacts of a carbon price on the cost of MFP products
by factoring in the emissions associated with production and in our
supply chain. The carbon prices applied in our scenario analysis align
with IPCC data. We considered how prices of MFP products could
subsequently increase and assumed that additional costs would
be passed on directly to the consumer, further reducing demand.
The analysis assumed that products associated with the highest
emissions would be most avoided by consumers.
The results illustrate a potential revenue loss when looking at the
MFP category in isolation in a 1.5°C (low emissions) world in which
physical risks associated with climate change are limited but high
transition risks are experienced as the world attempts to meet the
Paris Agreement. However, this looks at the MFP product category
in isolation and assumes no actions are taken to mitigate risks, so
does not capture the overall opportunity at Group level of developing
and promoting lower GHG animal protein and nutritionally positive
meat alternatives to capture switching calories from existing and
new customers.
Most material climate risks
impacting MFP
1
Annual revenue loss to MFP category in
isolation in 2030 in 1.5°C scenario, assuming
no actions are taken to mitigate risks
Annual revenue loss/opportunity at Group
level in 2030 in 1.5°C scenario, assuming
actions are taken to mitigate risks
Potential mitigations that are being considered as part
of our strategic planning
Changes in consumer
preferences away from
higher GHG emission
animal protein
£300m to £350m revenue loss to
MFP category in isolation
Overall opportunity for business — Differentiate: develop lower GHG emission
animal protein within existing product
(see integrated beef case study below)
— Shift customer behaviour: towards lower
GHG emission meat proteins and products
— Alternatives: promotion of nutritionally
positive meat alternatives to capture
switching calories from existing and new
customers
Implementation of
carbon taxes
£50m to £100m revenue loss to MFP
category in isolation
Overall opportunity for business — Reduce: work with suppliers to reduce GHG
emissions in our supply chains e.g. supplier
targets, animal health & welfare and feed
efficiency
— Offset: work with suppliers to sequester
carbon in our supply chains e.g. planting trees,
creating hedgerows, and protecting peat land
and mangroves
— Innovate: investment in innovation to further
reduce GHG emissions e.g. methane reducing
food additives
1 Risks should be considered in isolation as the complex interrelationship between multiple risks has not been considered.
20 Strategic Report J Sainsbury plc Annual Report 2022
Case study – Integrated beef scheme
Our market-leading integrated beef scheme uses selected
Aberdeen Angus genetics, resulting in a more sustainable,
highly consistent, and traceable beef product for our customers.
The scheme has been running since August 2019 and we are
working to fulfil our entire Taste the Difference tier. The
genetics used to improve the sustainability of our beef, is
estimated to deliver a 20 per cent reduction in overall GHG
emissions and a 40 per cent reduction in methane.
Quantitative scenario analysis – Potential financial impact
of climate-related physical risks on selected produce crops
in high and low emissions scenarios in 2050
To assess the costs associated with the increased likelihood of flooding,
drought and heat events, we evaluated the production of citrus fruits,
lettuce, berries and potatoes in Spain and the UK. These food items
are particularly vulnerable to climate change and likely to result in
crop failure. We considered two scenarios, one where global warming
reaches 4.3°C (high emission) as a result of no global action taken to
reduce emissions, leading to extreme physical risks manifesting in
the long term, and a 1.5°C (low emission) scenario where the Paris
Agreement is met but physical risks are still experienced, albeit more
mildly. Our physical risk modelling focused on Spain and the UK
where a significant proportion of our produce is grown. Our scenario
analysis considered the impacts of these acute physical risks and the
resulting diminished or lost crop yields that would result in increased
costs in our supply chain. We also assumed that these additional
costs are passed on directly to the consumer, reducing demand and
impacting our revenue. Revenue loss is based on 2021 produce sale
figures and assumes no actions are taken to mitigate risks.
Most material climate
risks impacting citrus
fruit, lettuce, berries &
potatoes in UK & Spain
1
Annual revenue loss to
crops in isolation in 2050
in 4.3°C scenario, assuming
no actions are taken to
mitigate risks
Annual revenue loss to
crops in isolation in 2050
in 1.5°C scenario, assuming
no actions are taken to
mitigate risks
Annual revenue loss/opportunity at
Group level in 2050 in 4.3°C & 1.5°C,
assuming actions are taken to
mitigate risks
Potential mitigations that are being considered
as part of our strategic planning
Flooding £0m to £5m revenue
loss to crops
£0m to £5m revenue
loss to crops
Further work required to
understand revenue impact
at Group level after actions
are taken to mitigate risks
— Engage: continue to work closely
with our suppliers to understand
their adaption plans
— Explore supply chain adaption
options: higher altitude locations,
lower flood risk areas, vertical
farming, glass growing structures,
reservoirs, drainage channels,
drought & temperature resistant
crop strains
Drought £25m to £30m revenue
loss to crops
£10m to £15m revenue
loss to crops
Heat events £35m to £40m revenue
loss to crops
£10m to £15m revenue
loss to crops
1 Risks should be considered in isolation as the complex interrelationship between multiple risks has not been considered.
Case study – UK grown Brassicas
One of the ways we mitigate flood risk is to have multiple
growing locations for a crop. For example, for UK grown
Brassicas we use three distinct areas – Cornwall, East Anglia
and Scotland. These areas have similar growing conditions but
are far enough apart to reduce the risk of all areas suffering
from a severe weather event.
Plans to expand scenario analysis in 2022/23
We understand that we must continue to expand our knowledge of
our climate-related risk and opportunities. Next financial year we are
going to expand our quantitative scenario analysis to look at our
Clothing category. Clothing is particularly exposed to physical risks
due to our sourcing and manufacturing locations in India, China,
Bangladesh and Turkey.
Risk management
Risk management a) Processes for identifying and assessing
climate-related risks
Climate-related risks (short, medium and long term) are identified
through quarterly bottom-up divisional and governance forum risk
assessments and then reviewed annually top-down in a dedicated
climate risk workshop to assess completeness. This considers our
ability to deliver our Plan for Better strategy, including our Scope 1,
2 and 3 targets, as well as physical and transition climate risks
impacting our operations and supply chain, including existing and
emerging regulatory requirements.
Climate risks are mapped against financial and reputational impact
(from insignificant <£10 million to severe >£125 million) and likelihood
of occurring (from remote to almost certain). To assess the effectiveness
of existing climate controls, each risk has three positions: gross risk
(before existing controls); net risk (after existing controls); and target
risk (management’s target position). Climate risks where the impact
is not yet well understood are captured separately on an emerging
risk map (plotted against likelihood of occurring and timeframe).
Risk management b) Processes for managing climate-related risks
Each climate risk is assigned a Director-level business owner who is
responsible for monitoring and mitigating the risk. Climate risks are
agreed once per year at the Plan for Better Steering Committee with
Board level oversight from the CR&S Committee. Climate risks and
mitigations are monitored throughout the year by the Plan for Better
working groups and Steering Committee. To increase ownership of
climate risks across the business, the Steering Committee has
cross-divisional representation at Director level.
Risk management c) Processes for identifying, assessing
andmanaging climate-related risks are integrated into
theorganisation’s overall risk management
The output from this climate risk process, in aggregate, is elevated
to the corporate risk map owned by the plc Board with support
from the Audit Committee, and informs the Environment and Social
Sustainability principal risk, shown on page 50. For more details on
our overall risk management framework and supporting processes,
see page 38.
21 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Metrics and targets
Metrics and targets a) Metrics used to assess climate-related
risksandopportunities in line with its strategy and risk
management process
The below table shows the key metrics and methodology used to
measure climate strategy and risk management.
Plan for Better
Commitment Metric Methodology
Reduction in carbon
emissions
Absolute GHG emissions within our own
operations (tCO
2
e)
Absolute, market based, Scope 1 and 2 GHG emissions in the financial year
for Sainsbury’s Group and supported by third party CBRE and verified by
the Carbon Trust. Follows the GHG protocol.
Electricity which comes from renewable
sources (%)
The amount of renewable energy used by Sainsbury’s Group as a proportion
of the total electricity consumption in the financial year, supported by third
party CBRE. Combination of energy sourced directly from UK wind farms as
well as certificate-backed renewable electricity from the UK.
Absolute Scope 3 GHG emissions (tCO
2
e) Includes emissions from purchased goods, upstream transport and
distribution, services sold and our customers’ use and consumption of the
products we sell as calculated by the Carbon Trust. Follows the GHG protocol.
Key Sainsbury’s food suppliers disclosing
through CDP
Key food suppliers disclosing through CDP, which is an environmental impact
disclosure system. Key suppliers are our 211 most material carbon footprint
suppliers that we asked to disclose through CDP.
GM&C own-brand suppliers disclosing
through HIGG
GM&C own-brand suppliers disclosing through HIGG, which is an
environmental impact disclosure system.
Reduction in water use Absolute water usage within our own
operations (m
3
)
Absolute water usage in the financial year for both Sainsbury’s and Argos
as verified by third party WaterScan.
Healthy & sustainable
diets
Healthy and better for you sales tonnage
as a proportion of total sales tonnage (%)
Food sales tonnage of healthy, healthier choice and better for you products
as a percentage of total food sales tonnage in the financial year (exclusive
of beers, wines, spirits and baby food). Healthy, healthier choice and better
for you defined using a nutrition criteria tool, including criteria from the
Eatwell Guide which is lower in GHG emissions.
Reduction in food
waste
Food waste to anaerobic digestion (tonnes) Total food waste tonnage sent to anaerobic digestion in the financial year
calculated as total operational food surplus i.e. food that is not sold to
customers, less any food surplus redistributed to both humans and animals.
Biodiversity Soy sourced to an independent sustainability
standard (%)
Sustainably sourced soy tonnage as a percentage of total soy tonnage
footprint, as calculated by the third party 3Keel.
Palm sourced to an independent sustainability
standard (%)
Sustainably sourced palm oil tonnage as a percentage of total palm oil
tonnage footprint, as calculated by the third party 3Keel.
Timber sourced to an independent
sustainability standard (%)
Cubic metre volume of assessed sustainably sourced timber products sold
as a percentage of total cubic metre volume of all assessed timber products
sold during 2021 calendar year. Sustainability assessments were carried
out by third party Track Record Global Ltd.
Cotton sourced to an independent sustainability
standard (%)
Cotton tonnage sustainably sourced and certified by third party Better
Cotton Initiative (BCI) as a percentage of total cotton tonnage sourced
during 2021 calendar year.
Number of woodland trees planted (number) Total number of trees planted in the financial year through partnership
with the Woodland Trust.
22 Strategic Report J Sainsbury plc Annual Report 2022
Metrics and targets b) Scope 1, Scope 2, and Scope 3 GHG emissions,
and the related risks
Baseline Results
2018/19 2020/21 2021/22
Scope 1 and 2 GHG
emissions
949,744 tCO
2
e 817,420 tCO
2
e 762,119 tCO
2
e
Scope 3 GHG
emissions
26,663,081
tCO
2
e
N/A N/A
For a more detailed breakdown of our Scope 1 and 2 GHG emissions,
please see our streamlined energy and carbon reporting (SECR)
disclosure on page 97. We have a strong track record of delivering
GHG emissions reductions and a robust plan to Net Zero, however
there is some risk as our transition plan requires industry innovation,
such as a commercially viable alternative fuel solution for heavy
goods vehicles.
We have worked with the Carbon Trust to define our Scope 3 baseline,
which uses industry average carbon factors to calculate total GHG
emissions as there is currently no agreed methodology for companies
to calculate their own Scope 3 emissions. There is also no consistent
industry approach for requesting GHG emission data from suppliers,
although we do measure the number of our suppliers disclosing
through CDP and HIGG (environmental impact disclosure systems).
Whilst we cannot solve these challenges ourselves, we are committed
to work at industry level to find a solution, such as our commitment,
alongside other retailers, to work with the WWF to halve the
environmental impact of UK baskets by 2030.
Metrics and targets c) Targets used to manage climate-related risks
and opportunities and performance against targets
We understand the importance of setting GHG emission reduction
targets, and last year, the Science Based Targets initiative (SBTi)
approved our science-based targets for Scopes 1, 2 and 3. For Scope 1
and 2, these include the reduction of GHG emissions from our own
operations to Net Zero by 2035 in a bid to limit temperature increase
to 1.5°C. Our Scope 3 target, defined in collaboration with the Carbon
Trust, requires the reduction of GHG emissions by 30 per cent by 2030,
to align to a well below 2°C scenario. We have long-term remuneration
targets for Executive Directors on Scopes 1, 2 and 3 (see page 87 for
more details).
We also have targets and measure performance against other
climate-related metrics. See page 19 for more details on how these
metrics are supporting climate-related matters.
Plan for Better
commitment Metric Baseline
Results
Target 2020/21 2021/22
Reduction in carbon
emissions
Absolute GHG emissions within
our own operations (tCO
2
e)
949,744 tCO
2
e
2018/19 FY
817,420 tCO
2
e 762,119 tCO
2
e Net Zero 2035/36 FY
Electricity which comes from
renewable sources (%)
17%
2019/20 FY
20% 41%
(100% from
January 2022)
N/A
Absolute Scope 3 GHG
emissions (tCO
2
e)
26,663,081 tCO
2
e
2018/19 FY
N/A N/A 18,664,157 tCO
2
e
2030/31 FY
Key Sainsbury’s food suppliers
disclosing through CDP
(number)
N/A N/A 183
(87% of key
food suppliers)
N/A
GM&C own-brand suppliers
disclosing through HIGG
(number)
N/A N/A 195
(49% of own-brand
GM&C suppliers)
N/A
Reduction in water use Absolute water usage within
our own operations (m
3
)
3,224,000 (m
3
)
2018/19 FY
2,776,288 (m
3
) 2,797,699 (m
3
) Water neutral
2040/41 FY
Healthy & sustainable
diets
Healthy and better for you
sales tonnage as a proportion
of total sales tonnage (%)
80.3%
2019/20 FY
79.7% 79.6% 83.1%
2025/26 FY
Reduction in food waste Food waste to anaerobic
digestion (tonnes)
31,615 tonnes
2019/20 FY
26,545 tonnes 25,483 tonnes 15,808 tonnes
2030/31 FY
Biodiversity Soy sourced to an independent
sustainability standard (%)
6%
2019 CY
42% N/A
1
100%
Palm sourced to an
independent sustainability
standard (%)
99.1%
2019 CY
99.3% 99.7% 100%
Timber sourced to an
independent sustainability
standard (%)
60%
2019 CY
65% 77% 100%
Cotton sourced to an
independent sustainability
standard (%)
76%
2019 CY
89% 94% 100%
Number of woodland trees
planted (number)
493,750 trees
2019/20 FY
325,000 398,333 N/A
1 Result unavailable at date of publication. Please read our Plan for Better Report on about.sainsburys.co.uk for progress against this metric and all of our other Plan for Better metrics.
23 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Stakeholder considerations and our culture play an
important part in the Board’s discussions and decision
making in promoting the long-term success of the
Company, as outlined in this statement.
During the year ended 5 March 2022, the Board has acted in accordance
with Section 172(1) of the Companies Act 2006. Each Director has
acted in the way they consider, in good faith, would be most likely to
promote the success of the Company for the benefit of its members
as a whole and, in doing so, have regard to the interests of other
stakeholders, whilst maintaining high standards of business conduct.
The Board considers the potential consequences of its decisions on
stakeholders, recognising that decisions made will not necessarily
result in a positive outcome for every stakeholder group. Processes
are in place to ensure effective decision making, which balances
the needs of our stakeholders with the business’s strategic priorities,
purpose, culture and values.
An overview of our key stakeholders and stakeholder considerations
that influenced discussions and the outcomes of these discussions
is outlined below. Further examples of how the stakeholder voice has
been brought into the boardroom can be found in our Governance
section on page 62.
“ Engagement with our stakeholders remains a key priority
and we are committed to building positive relationships with
all of our stakeholders.”
Simon Roberts
Customers
Two-thirds of the UK population have shopped with
Sainsbury’s over the last year
1
and over one million digital
Nectar users regularly benefit from personalised offers
with us and with our Nectar partners. Within Argos, we
have 18.8 million active customers and the website is the
third most visited online retailer in the UK. In Financial
Services, we have 1.8 million active Sainsbury’s Bank
customers and 2.1 million Argos Financial Services
customers. Understanding the needs of our customers
allows us to provide relevant products and services.
Satisfied customers are key to our long-term success.
Key customer priorities
— Competitiveness and value
— Availability and range of products
— Convenience and location
— Speed of Groceries Online delivery
— Quality of products
— Sustainability
Engaging with our customers
We heard what mattered to our customers through:
— 2.7 million responses per year across our Sainsbury’s and Argos
customer feedback programmes (CSAT)
— Social media listening
— Market research
— Qualitative customer focus groups and quantitative surveys
— Nectar data, which helps us understand how customers are
shopping
— Brand tracking, which assesses the performance and perception
of our different brands
1 Nielsen IQ panel, Total FMCG (excl. Kiosk & Tobacco), 52 weeks ending P3 21/22.
Customer feedback and overall metrics on consumer sentiment
and trends were shared regularly with the Board and Operating
Board, steering our responses to the key issues impacting
customers, such as COVID-19, inflation and availability of products.
The Board receives regular updates from the Chief Marketing Officer,
which include feedback from our customer listening sessions.
The Board’s understanding of our customers continued to shape
our strategy and the Board has focused on delivering for customers
in line with our strategic priorities:
— Food First: putting food back at the heart of Sainsbury’s by
offering high quality, great value food to our customers
— Brands that Deliver: Argos, Habitat, Tu, Nectar and Sainsbury’s
Bank contributing positively to the customer experience
— Save to Invest: internal transformation enabling us to reinvest
in our customer offer
— Connected to Customers: knowing and understanding our
customers to enhance our thinking and decision making
— Plan for Better: supporting our customers to eat healthily and
sustainably, whilst delivering on our commitment to become
Net Zero by 2035
The Board also considered and supported the investment in our
contactless sales channels to improve access for customers.
We know that price remains an important consideration for our
customers; our Sainsbury’s Quality, Aldi Price Match and Price Lock
campaigns are two ways in which we have supported our customers
to shop more affordably.
The evolution of our Net Zero by 2040 plan to our Plan for Better
and our partnership with COP26 reflected our customers’ interest
in reducing their environmental impact through their everyday
activities. Decision makers, including our Corporate Responsibility
and Sustainability (CR&S) Committee, referred to customer insight
analysis to understand how customers view our progress around
sustainability and inform how related projects develop.
24 Strategic Report J Sainsbury plc Annual Report 2022
Engaging with our stakeholders
and our Section 172 statement
Colleagues
Our colleagues include everyone who is employed by the
business. Colleagues are at the heart of everything we
do and their commitment to our purpose and values is
critical to the business’s long-term success. Connected,
engaged colleagues, working in safe stores and depots
with better technology, lead to greater efficiency,
increased availability of products and improved
customer service.
Key colleague priorities
— Reward
— Career progression
— Colleague engagement
— Training and development
— Wellbeing
— Health and safety
— Inclusion
Engaging with our colleagues
The Board engaged directly with colleagues through the
National Great Place to Work Group, our Workforce Advisory Panel.
It received presentations on culture, colleague engagement,
talent retention and progression from our Group HR Director,
and regular summaries from the Chief Executive Officer on key
initiatives. Colleagues were updated on decisions made following
their feedback through regular internal communications from
the Chief Executive Officer and Operating Board members.
Our colleague engagement activities included:
— Non-Executive Director meetings with National Great Place
to Work Group members to directly understand the views of
colleagues from across the business via their elected peers
— Continual feedback through internal channels, including live
presentations, question and answer sessions and internal
social media discussions with the Operating Board
— Honest, confidential colleague feedback on what it is like to work
for the business through our annual colleague engagement
survey, ‘We’re Listening’, to inform improvements over the year
— Colleague feedback through topic-specific ‘temperature check’
surveys throughout the year, helping us to understand
colleagues’ views and sentiments, enabling the Board and
Operating Board to act swiftly
— Regular updates provided to the Board, Remuneration
and CR&S Committees on culture, engagement, diversity
and inclusion, and colleague pay
Colleague feedback has provided the Board with insight and
challenge. Through our colleague engagement activities, decision
makers received timely feedback, allowing colleague interests to
remain a priority when considering key concerns. Our response
to COVID-19 exemplifies this. Colleague feedback on internal
social networks and via ‘temperature check’ surveys enabled
senior management to better understand the colleague
experience of new safety guidance and returning to our offices.
The business has made a significant investment in colleague pay
and benefits. All our Sainsbury’s and Argos store colleagues now
receive a base rate of least £10 per hour, above the government’s
National Living Wage and the Living Wage Foundation’s Living
Wage. We have also increased London pay to £11.05, in line with
the London Living Wage. In response to feedback from colleagues,
we have implemented policy and guidance changes in relation to
family leave, menopause, wellbeing and carers.
It is vital that we have a diverse workforce, thriving in an inclusive
culture and reflecting the communities we serve. The Board
supported the additional commitments made by the Operating
Board in support of our Black colleagues, including joining the
Black British Network, to improve representation across the business
and agreeing stretching diversity targets. It also supported the
introduction of Inclusion Training for all line managers and
improving transparency by publishing our Gender and Ethnicity
Pay Report for a second year.
More information on our colleague engagement activities can
be found on pages 13 to 14 and our colleague engagement KPI
can be found on page 30.
25 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Shareholders
We have over 103,000 shareholders, including
large institutional investors and smaller individual
shareholders.
Access to capital is vital to the long-term performance of
our business. We ensure that we provide fair, balanced and
understandable information to shareholders and equity
analysts and work to ensure they have a strong understanding
of our purpose, strategy, performance and culture.
Key shareholder priorities
During the course of the year, we heard from shareholders that
their main areas of focus included:
— Macro factors, such as inflation, cost pressures and availability
challenges
— Progress towards our cost base improvement targets
— Grocery market share performance in a competitive environment
— The impact of normalisation of demand post-pandemic,
including expectations for Groceries Online penetration
— Improving our price position versus competitors
— Improving our product innovation
— General Merchandise sales trends and the impact from
disposable income pressures and supply chain challenges
— Progress of the Argos transformation programme and
associated profit improvements
— Driving returns in the Financial Services business
— Providing confidence in profit, cash flow and dividend prospects
— How we will address capital allocation once our leverage targets
are achieved
— Progress against our Environmental, Social and Governance
(ESG) targets
Engaging with our shareholders
The Board regularly received reports and updates on shareholder
relations, summarising key feedback from our principal
shareholders derived from a programme that consisted of:
— One-on-one investor meetings with the Chairman,
Chief Executive Officer, Chief Financial Officer and Director
of Investor Relations
— Investor events, including our ESG event and Nectar Deep Dive
— Real-time feedback from investors after meetings and
presentations
— The Annual General Meeting
— Attendance at key investor conferences and tours
— Regular email and telephone contact with investors and analysts
— A shareholder event for retail investors, resulting in positive
feedback in relation to investing in the Company from attendee
retail investors
— Dialogue with shareholder groups
— Regular engagement with investors on ESG
The Board continually takes shareholders’ feedback into account
when reviewing levels of disclosure. To help shareholders
understand the on-going impacts of COVID-19 on the business
and the normalisation trends post-pandemic, the Board has
consistently disclosed key customer behaviour trends and
provided greater visibility of trading patterns.
The Board hosted our first ESG event in June 2021, launching our
Plan for Better strategy and enabling shareholders to gain a stronger
understanding of our ESG priorities. It also participated in a
University of Cambridge Institute for Sustainability Leadership
event on ESG, providing it with additional investor insights to
help shape our on-going engagement with investors in this area.
The Board supported our compliance with the Task Force on
Climate-related Financial Disclosures for this financial year,
enabling greater clarity for shareholders on this key topic.
Shareholders were keen to understand our remuneration decisions
and, through voting at the Annual General Meeting, were given
an opportunity to indicate their opinion on the 2021 Remuneration
Report. The Board and Remuneration Committee continued to
consult with shareholders, to understand their views on key
decisions, and we will continue this dialogue in future years.
For more information, please see the Remuneration Report on
page 78.
26 Strategic Report J Sainsbury plc Annual Report 2022
Suppliers
We have over 4,900 Goods For Resale (GFR) suppliers
that supply products for food, general merchandise and
clothing, and over 1,800 Goods Not For Resale (GNFR)
suppliers across the Group that support all functions,
including Logistics, Marketing, Technology and Retail.
Our suppliers range from large multi-national companies
to small independently-run businesses.
Our GFR suppliers are fundamental to the quality and variety of
products we sell and enable us to meet the high standards that
we set ourselves.
Our GNFR suppliers provide operational excellence and access
to the new technology and innovation that ensures we keep pace
with the evolving and changing needs of our customers.
Key supplier priorities
— Long-term relationships
— Cost-efficiency
— Responsible procurement, trust and ethics
— Technological advances
— Payment practices
Engaging with our suppliers
The Board is cognisant of the impact its decisions have on
suppliers and receives regular updates on supplier relationships.
Working collaboratively with our suppliers helps us deliver
innovation in food and we continue to build stronger relationships
with exclusive brands.
In order to maintain consistent communication with our suppliers,
they have access to online supplier portals, enabling the sharing
of news and development of new ways to work together.
Management actively engage with both the GFR and GNFR supply
chains to manage key risks, including the impacts of COVID-19,
global supply chain issues and inflation on stock levels and
logistics. This enabled us to manage our supply chain and
continuity of supply to customers. Additionally, key supplier
meetings with the Board are held to further enhance communication
with these stakeholders.
We take part in annual, independent surveys which benchmark us
against other retailers and highlight areas for improvement; these
include the Supplier Advantage survey and Groceries Supply Code
of Practice supplier survey. The CR&S Committee received updates
during the year on the outcomes of these surveys, which helped
shape supplier-related initiatives.
Our suppliers have been, and continue to be, a key element of
achieving our sustainability targets under Plan for Better. Through
our engagement with our suppliers, we have encouraged them to
disclose their Net Zero ambitions to us and to set their own targets.
We have also encouraged our GFR suppliers to report carbon
emissions through the CDP or Higg platform. Working with
these stakeholders has contributed to our accelerated Net Zero
by 2035 target.
Suppliers are key to protecting human rights throughout our
business activities and the CR&S Committee regularly discussed
relevant matters. We have clear modern slavery policies for both
GFR and GNFR suppliers, actively engaged with our suppliers to
prevent modern slavery and human trafficking in our business
operations and supply chains, and have reported this through
our Modern Slavery Statement. For more information, see page 15.
27 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Communities
We play an active role in our communities, supporting
them through charitable endeavours and generating
a positive impact on our communities worldwide.
Our business relies on resilient communities; we have a long
history of building strong partnerships and making a difference
in the communities we serve, both locally and internationally.
The Board supported the on-going pandemic priorities of keeping
our customers and colleagues safe, helping to feed the nation, and
supporting our communities and the most vulnerable in society,
but expanded the application of these beyond COVID-19. This
embedded focus enabled us to make decisions at pace and
allocate resources and investment for maximum impact on
our communities.
Key community priorities
— Local operational impact
— Tackling food poverty
— Supporting the most vulnerable
Engaging with our communities
Customer and colleague feedback provided the Board with
valuable information on how we can best support our customers
and local communities, particularly in relation to the pandemic
and household financial challenges. Partnering with Neighbourly,
an award-winning giving platform that helps businesses make
a positive impact in their communities by redistributing supermarket
store-level surplus food to people in need, is an example of one of
many initiatives we have put in place to support our communities.
Other examples of community activities undertaken during the
year include:
— Approval of our new community and partnerships strategy
to focus on food poverty
— Partnering with Neighbourly, resulting in the donation of
2.6 million meals
— The launch of the Helping everyone eat better local grants
— Our on-going partnership with FareShare in-store and online
— Continuation of our Help Brighten a Million Christmases
campaign
— Topping up the government’s Healthy Start vouchers
— Community and charity partnerships, which generated over
£38 million for good causes
Regular updates on our community strategy are provided to the
CR&S Committee and the Board.
For more information on our communities, please see page 15.
28 Strategic Report J Sainsbury plc Annual Report 2022
Government and regulators
The UK Government and devolved administrations in
Scotland, Wales and Northern Ireland set the regulatory
environment in which our business operates.
As a UK-based business and a major employer of over 171,000
colleagues, it is appropriate and responsible for a business of our scale
to engage in a transparent way with government and regulators.
Key government/regulator priorities
— Openness and transparency
— Compliance with regulation, including Groceries Supply Code
of Practice (GSCOP)
— Impact on environment
— Diversity and inclusion
Engaging with government and regulators
The Board and CR&S Committee received updates in relation
to our work with government and regulators through summaries
onactivities including:
— Engagement with government through Parliamentary and
party events
— Public responses to government consultations
— Direct meetings
— Trade association meetings
— Government organised roundtables
— Participation in government organised forums, such as the
Food and Drink Sector Council
— Liaison with regulators, including the Grocery Code Adjudicator
and HMRC
The business has continued to work closely with government this
year to support vulnerable customers and communities across
the UK. The Board and senior management have been in regular
dialogue with Ministers and officials, primarily to ensure the on-going
supply of and access to essential groceries, and to manage the safety
of customers and colleagues throughout the on-going pandemic.
29 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Operational Financial
Grocery market share
performance (%)
Definition: Sainsbury’s grocery
market share of total market
and of Big 4 Grocers measured
by Nielson Volume Market share
as at 5 March 2022
Colleague engagement
(score)
1
Definition: Percentage of our
colleagues who feel that we are
a great place to work. Colleague
engagement score out of 100 from
the internal, annual ‘We’re Listening’
survey. Target to maintain strong
engagement score
Retail free cash
flow (£m)
Definition: Net cash generated
from retail operations, after cash
capital expenditure and after
investments in joint ventures
and associates. Target at least
£500 million per annum on average
to 2024
Retail operating cost
to sales (bps)
Definition: Retail operating costs
as a percentage of retail sales
including VAT. Target to reduce by
at least 200bps by 2024 year-end
11.3%
in 2021/22
+2% £503m
in 2021/22
83bps
improvement since 2019/20
2
021/22
2
020/21
2
019/20
2
021/22
2
020/21
2
019/20
T
otal market share
Share of Big 4 Grocers
2
11.3
11.4
11.3
20.
8
20.5
20.4
2
021/22
Colleague engagement
+2%
2
021/22
2
020/21
2
019/20
2
021/22
2
020/21
2
019/20
R
etail free cash flow
3-year total
503
784
611
1,898
1,851
1,499
2
021/22
2
020/21
2
019/20
bps improvement v 19/20
(83)
(57)
Baseline
Diversity and inclusion
Definition: We have three internal
measures for diversity and inclusion,
which come together to form a colleague
representation target for 2024.
Slightly behind target
Customer satisfaction
(score)
Definition: The % of ‘highly
satisfied’ answers out of the total
sample in response to the following
question: Based on your most
recent visit or online order to this
Sainsbury’s, how satisfied were you
with your overall experience?
Plan for Better
commitment
Definition: Our Plan for Better sets
out our sustainability goals across
our whole business, outlining our
priority areas of focus, our key
commitments and our progress.
See below for status against targets
in the priority areas
Pre-tax return on capital
employed (%)
3
Definition: Underlying profit before
interest and tax, divided by average
net assets excluding pension deficit/
surplus, less net debt, calculated on
a 14 point basis. Target to increase
Underlying profit
before tax (£m)
Definition: Profit before tax
adjusted for certain items in note 5
which, by virtue of their size and/or
nature, do not reflect the Group’s
underlying performance. Target to
maintain growth
+230bps
since 2019/20
Carbon Scope 1 & 2
Ahead of target
Food waste
Ahead of target
Carbon Scope 3
Industry reporting challenge
Healthy & sustainable diets
Slightly behind target
Plastic
Behind target
+1.0%
since 2019/20
£730m
in 2021/22
2
021/22
2
020/21
2
019/20
Customer satisfaction bps
230
220
Baseline
2
021/22
2
020/21
2
019/20
Pr
e-tax ROCE (%)
8.4
5.6
7.4
2
021/22
2
020/21
2
019/20
Underlying PBT (£m)
730
357
586
30 Strategic Report J Sainsbury plc Annual Report 2022
New KPIs
In FY21 we announced eight key metrics to ensure we deliver for
customers and drive stronger financial results. These are the Group’s
key performance indicators (KPIs) as we deliver the new plan.
Group measures Retail Maintaining
balance sheet
strength
Underlying basic earnings
per share (pence)
3
Definition: Earnings per share using
underlying profit
Retail underlying
EBITDAR margin (%)
3
Definition: Underlying profit before
tax before underlying net finance
costs, underlying share of post-tax
results from joint ventures,
depreciation, amortisation and
rent, divided by sales excluding
VAT, including fuel, excluding
Financial Services
Like-for-like sales (%)
3
Definition: Year-on-year growth in
sales including VAT, excluding fuel,
excluding Financial Services, for
stores that have been open for more
than one year
Net debt/underlying
EBITDAR (%)
3
Definition: Net debt divided by
Group underlying EBITDAR
2021/22
2020/21
2019/20
2018/19
4
2017/18
25.4
11.7
20.7
20.4
19.8
2021/22
2020/21
2019/20
2018/19
4
2017/18
7.5 6
7.4 4
7.4 7
6.65
7. 2 1
2021/22
2020/21
2019/20
2018/19
2017/18
(2.3)
8.1
(0.6)
(0.2)
1.3
2021/22
2020/21
2019/20
2018/19
4
2017/18
3.1
3.2
3.3
3.6
3.4
Retail underlying
operating margin (%)
3
Definition: Underlying profit before
tax before underlying net finance
costs and underlying share of post-tax
results from joint ventures, divided by
retail sales excluding VAT, including
fuel, excluding Financial Services
Dividend per share (pence)
Definition: Total proposed
dividendper share in relation
tothefinancial year
Retail sales growth (%)
Definition: Year-on-year growth in
sales including VAT, excluding fuel,
excluding Financial Services
1 In the course of this financial year we have
moved to a new metric in our colleague
survey. The above improvement is based
on interim surveys through the course
of the year.
2 Big 4 Grocers consists of Sainsbury’s, Tesco,
Asda and Morrisons.
3 Refer to APMs on page 203.
4 2018/19 restated for IFRS 16.
5 Special dividend paid in lieu of final
dividend for 2019/20 following the deferral
of dividend decision.
IFRS 16 cut-off.
2021/22
2020/21
2019/20
2018/19
4
2017/18
2.24
3.4 0
2.55
3.30
3.4 5
2021/22
2020/21
5
2019/20
5
2018/19
2017/18
13.1
1 0.6
1 0.6
1 0.2
1 1.0
2021/22
2020/21
2019/20
2018/19
2017/18
(0.4)
(2.6)
7.3
9.8
0.4
Core retail capital
expenditure (£m)
Definition: Capital expenditure
excluding Financial Services, before
proceeds from disposal of property,
plant and equipment and before
strategic capital expenditure
Net debt excluding
lease liabilities
Definition: Group net debt excluding
Financial Services net debt balances.
Financial Services balances excluded
because they are part of the daily
operating cycle of the Bank rather
than for financing purposes. Excludes
lease liabilities under IFRS 16
Like-for-like transactions
growth (%)
Definition: Year-on-year growth
intransactions, excluding fuel,
excluding Financial Services,
forstores that have been open
formorethan one year
2021/22
2020/21
2019/20
2018/19
2017/18
645
568
599
508
542
2021/22
2020/21
2019/20
2018/19
2017/18
(141)
(640)
(1,179)
(1,522)
(1,678)
2021/22
2020/21
2019/20
2018/19
2017/18
(0.3)
(1.2)
(0.6)
20.4
(29.5)
31 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Legacy KPIs
Last year we announced that we were moving to new metrics to track
ourselves against. Those have been outlined on the previous page with
the legacy measures listed for transparency here.
2021/22 was the first full year of delivering our Food First strategy, as we put
Food back at the heart of Sainsbury’s, increasing product innovation and
using the benefits of our Save to Invest programme to become more price
competitive for customers and drive a strong volume share performance.
Itwas a year in which our brands delivered, with the Argos transformation
continuing at pace, Nectar 360 launching a new Sainsbury’s Insight Platform
and the Bank returning to profit and declaring its first dividend. Given the
significant COVID-19 impacts in 2020/21, comparisons and commentary
compared to 2019/20 have been used where this helps highlighttrends.
COVID-19 costs were much lower than the previous year. However, sales
remained strong with a sustained shift of food consumption in home,
helping to support strong profit and cash flow delivery. We’ve declared our
highest dividend since 2015, up 24 per cent on last year, and have committed
to increasing the proportion of profits distributed to shareholders through
the ordinary dividend.
Strong sales performance
Group sales (including VAT) were up 3.3 per cent year on year. Grocery sales
were down slightly but strong compared to pre-pandemic levels, supported
by continued elevated in-home consumption and our investments in value
such as Sainsbury’s Quality, Aldi Price Match. General Merchandise sales fell
by 11.9 per cent, reflecting availability constraints and tough comparators.
However, Clothing recovered well from suppressed demand over the pandemic
with growth led by full price sales. Fuel sales grew strongly but remained
below 2019/20. As expected, Groceries Online sales decreased 4.7 per cent
as demand moderated after 119.6 per cent growth in the previous year. This
was partially offset by a recovery in convenience sales of 8.8 per cent as the
nation returned more to workplaces and other urban locations.
Delivering profit growth
This year we returned to profit, generating a statutory profit before tax of
£854 million (2020/21: loss before tax of £164 million) with non-underlying
profits of £124 million supported by significant legal settlements. Our
underlying profit before tax of £730 million was a strong improvement
from the £586 million in 2019/20.
Both the Retail and Financial Services businesses contributed to the
improvement, with Retail underlying operating profit up 37 per cent and
Financial Services returning to profit, with a £38 million underlying operating
profit. The Retail performance was driven by our Save to Invest programme
which generated an 83 basis points reduction in operating costs as a
percentage of sales compared to 2019/20, led by the continuing Argos
transformation programme as we closed 73 standalone Argos stores
and opened 64 Argos stores within Sainsbury’s, reducing operational and
occupancy costs. Savings from our Logistics Transformation programme
helped us to mitigate the impact of significant cost pressures through
theyear. Changes to our food service, counters and bakeries will save
£125-150 million annually and enable us to improve our eat-in and takeaway
customer offer.
Financial Services benefitted from a reduced bad debt charge after posting
COVID-19 provisions in the prior year, and an improved unemployment
outlook. Net interest margin improved as a result of management action
to reduce interest payable through savings rates. In line with our Brands
that Deliver strategy and enabled by a strong capital position, the Bank has
paid a £50 million dividend.
Non-underlying items benefitted from £167 million of income in relation
to two legal settlements made regarding overcharging of payment card
processing fees. We continued with our restructuring programme announced
in November 2020, incurring £92 million (2020/21: £548 million) of costs.
We expect to incur £900 million to £1 billion of one off costs, with most in
the period to March 2024. Of this, £640 million has been charged to date.
Group statutory profit after tax was £677 million (2020/21: loss after tax
of £201 million).
Basic earnings per share was 29.8 pence compared to a loss per share of
9.4 pence in 2020/21. Underlying basic earnings per share increased to
25.4 pence (2020/21: 11.7 pence) due to the strong profit delivery and a lower
tax rate.
Strong free cash flow; capital allocation framework
2021/22 was another year of strong cash generation and net debt reduction.
We reduced non-lease net debt by £499 million, taking our cumulative
reduction to £1,381 million since 2018/19. This includes £240 million of net
debt reduction resulting from the conversion of our perpetual convertible
bond in July 2021. This exceeds our four-year target to reduce non-lease net
debt by £950 million one year early, and contributes to our falling interest
cost expense. Lease net debt increased by £789 million, primarily reflecting
the impact of serving notice to purchase 21 stores from two investment
vehicles in which we hold a 49 per cent interest.
As guided, working capital grew this year following a significant working
capital reduction in the prior year due to COVID-19. This resulted in strong
retail free cash flow of £503 million (2020/21: £784 million). This is significantly
ahead of expectations, supported by the strong profit result, legal settlements
income and lower than expected capital expenditure at £645 million (2020/21:
£568 million). Dividends of £238 million were paid in the year, which were
covered 2.1 times by free cash flow (2020/21: 3.3 times). We have laid out an
updated capital allocation framework, signalling that we will prioritise the
right level of investment to support our strategy and an investment grade
balance sheet but that we expect to pay a higher proportion of underlying
net earnings to shareholders, in the first instance through an increase in the
dividend pay-out ratio to around 60 per cent from around 53 per cent.
Our balance sheet remains strong, and we delivered a pre-tax return on
capital employed of 8.4 per cent, up from 5.6 per cent in 2020/21. The
business had non lease net debt of £141 million and £1.4 billion of undrawn
facilities at the end of the year.
As at 5 March 2022 the net defined benefit pension surplus under IAS 19
for the Group was £2,283 million (excluding deferred tax). The £1,539 million
increase from 6 March 2021 was driven by both changes in financial and
demographic assumptions which lowered liabilities, as well as gains on
planassets.
Delivering through times of change
This was a year of strong delivery, making considerable progress on our
strategy, and we enter the year with good operating momentum and a
strong financial position. The year ahead presents considerable external
pressures and uncertainties with higher operating cost inflation and cost
ofliving pressures on customers. However, we will continue to focus on
delivering consistent improvements in grocery value, innovation and
customer service, funded by our Save to Invest programme. With the
ongoing drive of our colleagues to deliver for our customers and our track
record of successfully responding to the changes of recent years, we are
well placed to maintain a strong competitive position.
Kevin O’Byrne
Chief Financial Officer
32 Strategic Report J Sainsbury plc Annual Report 2022
Financial Review
Financial Review of the year results for the 52 weeks to 5 March 2022
In the 52 weeks to 5 March 2022, the Group generated profit before tax of £854 million (2020/21: loss before tax of £164 million; 2019/20: profit before tax of £278
million) and an underlying profit before tax of £730 million (2020/21: £357 million; 2019/20: £586 million). COVID-19 caused significant distortions to trading, operating
costs and timing of business rates costs in 2020/21. Therefore in some cases commentary has been provided versus the pre-COVID-19 2019/20 financial year.
A number of Alternative Performance Measures (‘APMs’) have been adopted by the Directors to provide additional information on the underlying performance of
the Group. These measures are intended to supplement, rather than replace the measures provided under IFRS. Please see pages 203 to 207 for further information.
Summary income statement
52 weeks to
5 March 2022
£m
52 weeks to
6 March 2021
1
£m
Change
%
Group sales (including VAT) 33,355 32,285 3.3
Retail sales (including VAT) 32,924 31,854 3.4
Retail sales (excluding fuel, including VAT)
28,095 28,837
(2.6)
Group sales (excluding VAT)
29,895 29,048
2.9
Retail sales (excluding VAT)
29,463 28,617
3.0
Underlying operating profit/(loss)

Retail
1,001 731
37
Financial Services
38 (21)
N/A
Total underlying operating profit
1,039 710
46
Underlying net finance costs
(309) (353)
12
Underlying profit before tax
730 357
104
Items excluded from underlying results
124 (521)
N/A
Profit/(Loss) before tax
854 (164)
N/A
Income tax expense
(177) (37)
378
Profit/(Loss) for the financial period
677 (201)
N/A
Underlying basic earnings per share
25.4p 11.7p
117
Basic earnings/(loss) per share
29.8p (9.4)p
N/A
Interim Dividend per share
3.2p 3.2p
–
Final Dividend per share
9.9p 7.4 p
34
Total Dividend per share 13.1p 10.6p 24
1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information.
Underlying profit before tax is up £373 million, and up £144 million compared to 2019/20, driven by continued elevated sales despite much lower COVID-19 costs,
falling finance costs, and the delivery of the Argos Transformation programme, offset by increased variable pay. We have made strong progress on our Save to
Invest plans, with an 83 basis points reduction in operating costs allowing for considerable investments to improve value for customers.
Group sales
Group sales (including VAT, including fuel) increased by 3.3 per cent year-on-year. Retail sales (including VAT, excluding fuel) decreased by 2.6 per cent,
as General Merchandise sales moderated, but remained ahead of 2019/20. Fuel sales increased by 60.0 per cent and Financial Services sales increased by
0.2 per cent.
Total sales performance by category
52 weeks to
5 March 2022
£bn
52 weeks to
6 March 2021
£bn
52 weeks to
7 March 2020
£bn
YoY
Change
%
Yo2Y
Change
%
Grocery 21.0 21.1 19.5 (0.2)% 7.6%
General Merchandise 6.1 6.9 6.4 (11.9)% (4.6)%
Clothing 1.0 0.9 1.0 12.7% 3.1%
Retail (exc. fuel) 28.1 28.8 26.9 (2.6)% 4.6%
Fuel sales 4.8 3.0 4.9 60.0% (2.6)%
Retail (inc. fuel) 32.9 31.9 31.8 3.4% 3.5%
Grocery sales remained significantly above pre-pandemic levels reflecting a sustained shift of consumption in-home. In line with the reduction of government
restrictions during the period, sales were stronger in the first half, and moderated in the second half, albeit at a level still higher than 2019/20. We delivered
a strong volume market share performance, supported by our value investments for customers. We inflated prices behind the market and key competitors
on high volume lines supported by our Sainsbury’s Quality, Aldi Price Match programme and other value initiatives.
General Merchandise sales declined, reflecting tough comparators and availability challenges driven by both product supply and freight availability.
Clothing recovered strongly from a year of suppressed demand with growth driven by full price sales and increased in-store sales.
33 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Fuel sales increased by 60.0 per cent, driven by both increased demand as traffic volumes recovered and inflation in the market driven by higher oil prices,
but remained below pre COVID-19 levels.
Total sales performance by channel
52 weeks to
5 March 2022
52 weeks to
6 March 2021
Total Sales fulfilled by Supermarket stores (2.0)% 11.4%
Supermarkets (inc Argos stores in Sainsbury’s) (1.8)% 2.5%
Groceries Online (4.7)% 119.6%
Convenience 8.8% (9.4)%
Overall sales served from our Supermarkets fell by 2.0 per cent after rising 11.4 per cent in the prior year. Within this, Supermarket sales including Argos stores
in Sainsbury’s fell by 1.8 per cent. Groceries Online sales decreased by 4.7 per cent, as COVID-19 restrictions ended and demand moderated through the year
after rapid growth of almost 120 per cent in the previous year. Convenience sales grew by 8.8 per cent, driven by the recovery of sales in urban sites most
impacted by reduced footfall in the previous year.
Retail like-for-like sales performance
52 weeks to
5 March 2022
52 weeks to
6 March 2021
Like-for-like sales (exc. fuel) (2.3)% 8.1%
Like-for-like sales (inc. fuel) 3.6% 0.7%
Retail like-for-like (‘LFL’) sales, excluding fuel, decreased by 2.3 per cent (2020/21: 8.1 per cent increase), reflecting lower General Merchandise sales, but
showed strong growth versus 2019/20 led by Grocery sales. The impact of stores temporarily closed due to COVID-19 have been included within LFL sales,
with only permanently closed sites treated as not LFL.
Space
In 2021/22, Sainsbury’s opened four new supermarkets and closed four (2020/21: opened one new supermarket and closed 11). There were 19 new Convenience
stores opened in the year and 23 were closed (2020/21: 15 opened and nine stores closed).
During the period 64 new Argos stores in Sainsbury’s were opened and 73 standalone Argos stores were closed, in line with our Argos Transformation plan.
The number of Argos collection points in Sainsbury’s stores increased from 306 to 335. As at 5 March 2022, Argos had 728 stores including 400 stores in Sainsbury’s.
Store numbers and retailing space
As at
6 March
2021 New stores
Disposals/
closures
Extensions/
refurbishments/
downsizes
As at
5 March
2022
Supermarkets 598 4 (4) 65 598
Supermarkets area ’000 sq ft 20,822 134 (78) (75) 20,803
Convenience 813 19 (23) 1 809
Convenience area ’000 sq ft 1,929 42 (54) 1 1,918
Sainsbury's total store numbers 1,411 23 (27) 66 1,407
Argos stores 401 – (73) – 328
Argos stores in Sainsbury’s 336 64 – – 400
Argos in Homebase – – – – –
Argos total store numbers 737 64 (73) – 728
Argos collection points 306 62 (33) – 335
Habitat 3 – – – 3
In 2022/23, we expect to open one supermarket and around 20 new convenience stores, and to close around two supermarkets and five convenience stores.
In addition, we expect to open around 25 Argos stores inside Sainsbury’s, and close around 60 Argos standalone stores.
In the UK, the standalone Argos store estate will reduce to around 100 stores by March 2024, while we expect to have 430-460 Argos stores inside Sainsbury’s
supermarkets as well as 450-500 collection points.
Retail underlying operating profit
Retail underlying operating profit
52 weeks to
5 March
2022
52 weeks to
6 March
2021
1
52 weeks to
7 March
2020
1
YoY
Change
Yo2Y
Change
Retail underlying operating profit (£m)
2
1,001 731 938 36.9% 6.7%
Retail underlying operating margin (%)
3
3.40 2.55 3.30 85bps 10bps
Retail underlying EBITDA (£m)
4
2,145 1,910 2,135 12.3% 0.5%
Retail underlying EBITDA margin (%)
5
7.2 8 6.67 7.51 61bps (23)bps
1 The prior year results have been restated to reflect the removal of business rates from onerous property contract provisions. Refer to note 2 of the accounts for further information
2 Retail underlying earnings before interest, tax and Sainsbury’s underlying share of post-tax profit from joint ventures
3 Retail underlying operating profit divided by retail sales excluding VAT.
4 Retail underlying operating profit before underlying depreciation and amortisation of £1,144 million.
5 Retail underlying EBITDA divided by retail sales excluding VAT.
Retail underlying operating profit increased by 36.9 per cent to £1,001 million (2020/21: £731 million) and retail underlying operating margin increased by
85 basis points year-on-year to 3.40 per cent (2020/21: 2.55 per cent). COVID-19 costs reduced materially year on year to £82 million (2020/21: £485 million).
Retail underlying operating profit was up 6.7 per cent versus two years ago (2019/20: £938 million), reflecting sales growth and a retail underlying operating
margin improvement of 10 basis points. Our Save to Invest programme delivered an 83 basis points reduction in operating costs as a percentage of sales
versus 2019/20. We have invested much of this benefit, as well as benefits from fuel and more profitable clothing and general merchandise sales into lower
grocery prices, targeted at key products for customers, driving strong volume growth.
34 Strategic Report J Sainsbury plc Annual Report 2022
Savings were delivered across the business, with significant contributions from our retail operating model work, both for in Store and Online where annualisation
of rapid growth in the prior year allowed material efficiencies. Argos transformation continued to deliver savings as we integrate the two businesses and reduce
occupancy and store operational costs. Savings from our Logistics Transformation programme helped to mitigate the significant cost pressures felt.
In 2022/23, Sainsbury’s expects a retail underlying depreciation and amortisation charge of around £1.2 billion, including around £500 million right of use
asset depreciation.
Financial Services
Financial Services results
12 months to 28 February 2022 2022 2021 Change
Underlying revenue (£m) 432 431 0%
Interest and fees payable (£m) (57) (90) (37)%
Total income (£m) 375 341 10%
Underlying operating profit/(loss) (£m) 38 (21) N/A
Net interest margin (%)
1
4.5 3.5 100bps
Cost:income ratio (%) 74 74 –
Bad debt as a percentage of lending (%)
2
1.2 1.8 60bps
Active customers (m) – Bank 1.8 1.8 –
Active customers (m) – AFS 2.1 2.2 (4)%
Tier 1 capital ratio (%)
3
15.6 17.6 (200)bps
Total capital ratio (%)
4
18.1 20.2 (210)bps
Unsecured lending (£bn) 4.3 4.1 5%
Secured lending (£bn) 0.8 1.3 (38)%
Customer deposits (£bn) (4.2) (5.1) (18)%
1 Net interest receivable divided by average interest-bearing assets.
2 Bad debt expense divided by average net lending.
3 Common equity Tier 1 capital divided by risk-weighted assets. Reflects impact of dividend declared.
4 Total capital divided by risk-weighted assets.
Financial Services returned to profit with underlying operating profit of
£38 million (2020/21: loss of £21 million). This reflects both a reduction in
credit provisioning as the unemployment outlook improved, a release of
some COVID-19 related bad debt provisions made in 2020/21 and improvements
in net interest margin. Unsecured lending balances were lower on average
through the year, but recovered well in the second half and ended the year
up 5 per cent.
Financial Services total income of £375 million increased by 10 per cent
year-on-year (FY 2020/21: £341 million). Net interest margin recovery is
reflective of management action to reduce interest payable through savings
rates alongside improvements in unsecured asset margins and a lower mix
of secured lending (following our decision to cease new mortgage lending in
2019). Fee income has risen as activity post lockdown increased, with ATMs
and Card fees both recovering, whilst Travel Money remains subdued but is
higher than last year.
The Financial Services cost:income ratio is flat at 74.0 per cent (FY 2020/21:
74.0 per cent). Of the £27 million increase in costs, £17 million reflects
higher royalty payments to Argos, therefore the ratio is down on a group
contribution basis.
Bad debt expense as a percentage of lending decreased 60 basis points
year-on-year to 1.2 per cent (FY 2020/21: 1.8 per cent), driven by stable arrears
and the improving economic outlook. We released £12 million of our COVID
provision, reflecting the more positive economic outlook, particularly in
relation to forecast unemployment.
In line with the group strategic priority Brands that Deliver, and reflecting
theBank’s strong capital position, a £50 million dividend has been paid.
Thisis a key milestone as we start to deliver on our commitment that
Financial Services will be cash generative for the Group. The Bank remains
well capitalised with a CET1 ratio of 15.6 per cent, a decrease from 17.6 per cent
last year driven by this dividend payment.
We expect a further improvement in Financial Services underlying operating
profit in the year ahead.
Underlying net finance costs
Underlying net finance costs reduced by 12 per cent to £309 million (2020/21:
£353 million). These costs include £40 million of net non-lease interest
(2020/21: £60 million). The reduction of net non-lease interest is driven by
the repayment of the £200 million Green loan in August 2021 and redemption
of the perpetual convertible bonds in July 2021. The net interest costs on
lease liabilities have reduced to £269 million (202/21: £293 million), mainly
due to lower interest rates on new leases.
Sainsbury’s expects underlying net finance costs in 2022/23 of between
£315-325 million, including around £270-280 million lease interest.
Items excluded from underlying results
In order to provide shareholders with insight into the underlying performance
of the business, items recognised in reported profit or loss before tax which,
by virtue of their size and or nature, do not reflect the Group’s underlying
performance are excluded from the Group’s underlying results and shown
in the table below.
Items excluded from underlying results
52 weeks to
5 March 2022
£m
52 weeks to
6 March 2021
1
£m
Restructuring and integration programmes (103) (345)
Impairment charges – (220)
Restructuring, impairment and
integration
(103) (565)
Income recognised in relation to legal disputes 182 42
Software as a service accounting adjustment (21) –
IAS 19 pension income 11 6
Property, finance and acquisition adjustments 55 (4)
Items excluded from underlying results 124 (521)
1 The prior year results have been restated to reflect the removal of business rates from onerous property
contract provisions. Refer to note 2 of the accounts for further information.
— Restructuring, impairment and integration costs of £103 million (2020/21:
£565 million) include £92 million (2020/21: £548 million) relating to the
programme announced in November 2020 for the structural integration
of Sainsbury’s and Argos. We expect that we will incur one off costs
fromthese infrastructure, operating model and structure changes of
£900 million to £1 billion, with cash costs of around £300 million, with
themajority in the period to March 2024. In line with IFRIC 21 “Levies”,
business rates are now recognised as a periodic cost as incurred and as
such we expect approximately £40 million of business rates associated
with leased properties in the restructuring programme to be recognised
after the year ended March 2024. Refer to note 2 for further details.
Cash costs in the year were £114 million (2020/21: £39 million). To date
we have incurred costs of £640 million and cash costs of £153 million.
In 2022/23 we expect to incur cash costs of around £100 million in relation
to this programme.
35 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
— Income recognised in relation to legal disputes of £182 million (2020/21:
£42 million) primarily relates to two settlements for overcharges from
payment card processing fees. £75 million of cash was received in prior
financial years and held as deferred income, with £93 million of cash
received in the year net of legal fees. The prior year relates to ATM
business rates reimbursement, and £14 million of cash was received
in the year in relation to these.
— Software as a service accounting policy change resulted in a non-cash
cost of £21 million (2020/21: Nil) following the IFRS interpretations
committee clarification of how these costs should be treated. These costs
represent the prior year impacts of this change.
— IAS 19 Pension income of £11 million (2020/21: £6 million) comprises
pension finance income of £15 million and scheme expenses of £4 million.
— Other movements of £55 million income (2020/21: cost of £4 million)
relate to property profits, acquisition adjustments and non-underlying
financing costs. The positive movement year on year is driven by a gain
on energy derivatives of £76 million driven by higher energy prices.
The energy derivatives relate to long-term, fixed price power purchase
arrangements (PPAs) with independent producers. These are accounted
for as derivative financial instruments, however are not designated in
hedging relationships, therefore gains and losses are recognised in the
income statement. Increases in electricity forward prices in the year have
led to gains on the related derivative financial instruments. During the
year, the Group entered into an additional PPA, however have designated
this in a formal hedging relationship, with gains and losses being
recognised within other comprehensive income.
Taxation
The tax charge was £177 million (2020/21: £37 million). The underlying tax
rate (UTR) was 21.1 per cent (2020/21: 29.4 per cent) and the effective tax rate
(ETR) was 20.7 per cent (2020/21: (22.6) per cent).
The UTR is lower than the prior year, with the higher underlying profit
resulting in a smaller percentage impact from non-qualifying deprecation
and the impact of accounting for the rate change on the recognition of
deferred tax. Unlike previous periods, there is a positive impact on the UTR
of prior year adjustments for corporation tax, reflecting the release of
historic provisions held in respect of now agreed tax returns.
The ETR is significantly higher than the prior year, primarily due to the
accounting loss in FY21. The major impact on the ETR in the current year
relates to the non-deductibility of non-underlying costs and the impact
of prior year adjustments to non-underlying items.
Sainsbury’s expects an underlying tax rate in 2022/23 of around 25 per cent.
Earnings per share
Underlying basic earnings per share increased to 25.4 pence (2020/21:
11.7 pence) driven by the increase in underlying earnings, partially offset
by a higher share count. Basic earnings per share was 29.8 pence (2020/21:
(9.4) pence loss per share).
Dividends
The Board has recommended a final dividend of 9.9 pence per share
(2020/21: 7.4 pence). This will be paid on 15th July 2022 to shareholders on
the Register of Members at the close of business on 10th June 2022. In line
with the Group’s policy to keep the dividend covered 1.9 times by underlying
earnings, this will result in an increased full-year dividend of 13.1 pence
(2020/21: 10.6 pence), an increase of 24 per cent.
Sainsbury’s has a Dividend Reinvestment Plan (DRIP), which allows shareholders
to reinvest their cash dividends in our shares. The last date that shareholders
can elect for the DRIP is 24th June 2022.
We have laid out a capital allocation framework, signalling that we will
prioritise the right level of investment to support our strategy and an
investment grade balance sheet but that we expect to pay a higher
proportion of underlying net earnings to shareholders, in the first instance
through an increase in the dividend pay-out ratio to around 60 per cent
from around 53 per cent.
Net debt and retail cash flows
As at 5 March 2022, net debt was £6,759 million (6 March 2021: £6,469 million),
an increase of £290 million (2020/21: £478 million reduction). Excluding the
impact of lease liabilities on net debt, Sainsbury’s reduced net debt by £499
million in the year of which £240 million results from the conversion of the
perpetual convertible bond in July 2021. Non lease net debt is now £1,381
million lower than at 2018/19 year end, exceeding the four-year £950 million
non lease net debt reduction target we had communicated with a year
to spare, even excluding the impact of the perpetual convertible bond.
Sainsbury’s expects to generate retail free cashflow of at least £500 million
per annum on average for the next three years.
Group net debt includes the impact of capital injections into Sainsbury’s
Bank, less dividends received, but excludes Financial Services’ own net debt
balances. Financial Services balances are excluded because they are part of
the daily operating cycle of the Bank rather than for financing purposes.
Net debt includes lease liabilities under IFRS 16 of £6,618 million (2020/21:
£5,829 million). Lease liabilities increased by £789 million, primarily
reflecting the impact of exercising purchase options on 21 leased
supermarkets held by property investment pools in which the Group holds
an interest. Following the exercise of the options, the lease liabilities have
been remeasured based on the estimated purchase price of the stores.
Retail Retail
Summary cash flow statement
1
52 weeks to
5 March 2022
£m
52 weeks to
6 March 2021
£m
Retail underlying operating profit 1,001 731
Adjustments for:
Retail underlying depreciation and amortisation 1,144 1,179
Share based payments and other 54 26
Retail non underlying operating cash flows
(excluding pensions)
(3) (12)
Adjusted retail operating cash flow before
changes in working capital
2
2,196 1,924
(Increase)/decrease in working capital
3
(185) 452
Net interest paid
3
(323) (372)
Pension cash contributions (71) (101)
Corporation tax paid (23) (94)
Net cash generated from operating
activities
3
1,594 1,809
Cash capital expenditure
3
(645) (568)
Repayments of obligations under leases
3
(491) (499)
Initial direct costs on right-of-use assets (3) (7)
Proceeds from disposal of property, plant and
equipment
46 27
Dividends and distributions received
3
2 22
Retail free cash flow
3
503 784
Dividends paid on ordinary shares (238) (232)
Repayment of borrowings
3
(256) (539)
Other
3
(27) (13)
Net (decrease)/increase in cash and cash
equivalents
(18) 0
Decrease in Debt 747 1,038
Conversion of perpetual convertible bond
4
240 –
Other non-cash and net interest movements
5
(1,259) (560)
Movement in net debt (290) 478
Opening net debt (6,469) (6,947)
Closing net debt (6,759) (6,469)
of which:
Lease Liabilities (6,618) (5,829)
Net Debt Excluding Lease Liabilities (141) (640)
1 See note 7 for a reconciliation between Retail and Group cash flow.] The prior year results have been
restated to reflect the removal of business rates from onerous property contract provisions. Refer to
note 2 of the accounts for further information.
2 Excludes working capital and pension contributions.
3 Refer to the Alternative Performance Measures on pages 203 to 207 for reconciliation.
4 £242 million of the £250 million perpetual convertible bond converted. Given a carrying value
of £248 million this resulted in a £240 million reduction in net debt.
5 Other non-cash includes new leases and lease modifications and fair value movements on derivatives
used for hedging long term borrowings.
36 Strategic Report J Sainsbury plc Annual Report 2022
Adjusted retail operating cash flow before changes in working capital
increased by £272 million year-on-year to £2,196 million (2020/21: £1,924
million). Retail non-underlying operating cashflows of £3 million cost
(2020/21: £12 million cost) reflected legal disputes income offsetting
restructuring costs. Working capital increased by £185 million (2020/21:
£452 million decrease), in line with expectations as our working capital
position normalised compared to a prior year where both our stock and
payables positions were heavily impacted by COVID-19 trading patterns.
Corporation tax paid decreased to £23 million (2020/21: £94 million) reflecting
payments made in the prior year before the decision to forego business rates
relief which subsequently impacted taxable profits. Proceeds from disposals of
£46 million (2020/21: £27 million) resulted from disposals of non-trading sites.
Retail free cash flow decreased by £281 million year-on-year to £503 million
(2020/21: £784 million), driven by the working capital reduction in the prior
year with some of this reversing in the current year. Retail free cash flow was
used to fund dividends and reduce borrowings.
Dividends of £238 million were paid in the year, which were covered 2.1 times
by free cash flow (2020/21: 3.3 times).
The Group held undrawn committed credit facilities of £1,394 million and
undrawn uncommitted facilities of £245 million as at 5 March 2022.
Capital expenditure
Core retail cash capital expenditure was £645 million (2020/21: £568 million).
This was lower than expected due to a number of projects being delayed due
to COVID-19.
Sainsbury’s expects core retail cash capital expenditure (excluding Financial
Services) to be around £700-£750 million per annum over the next three
years, reflecting investment in high-returning supply chain, logistics and
infrastructure projects including the Argos transformation.
Financial Ratios
Key financial ratios
52 weeks to
5 March 2022
52 weeks to
6 March 2021
1
Return on capital employed (%)
2
8.4 5.6
Net debt to EBITDA
3
3.1 times 3.4 times
Fixed charge cover
4
2.8 times 2.2 times
1 The prior year results have been restated to reflect the removal of business rates from onerous property
contract provisions. Refer to note 2 of the accounts for further information.
2 ROCE: Return is defined as a 52 week rolling underlying profit before interest and tax. Capital employed
is defined as group net assets excluding the pension deficit/surplus less net debt (excluding perpetual
securities). This is calculated using the average of 14 datapoints – the prior year closing capital
employed, the current year closing capital employed and 12 intra-year periods as this more closely
aligns to the recognition of profit / loss.
3 Net debt of £6,759 million includes lease obligations under IFRS 16 and perpetual securities treated as
debt, divided by Group underlying EBITDA of £2,206 million.
4 Group underlying EBITDA divided by rent (both capital and interest) and net underlying finance costs,
where interest on perpetual securities is treated as an underlying finance cost.
All three metrics saw significant improvements due to the recovery of profit
and EBITDA following a prior year heavily impacted by COVID-19. Our net
debt to EBITDA metric showed a smaller improvement as net debt increased,
with the increase in lease liabilities more than offsetting significant non
lease net debt reduction.
Property value
As at 5 March 2022, Sainsbury’s estimated market value of properties, with
values based on a 25 year lease with RPI increases, including our share of
properties held within property joint ventures or investment vehicles, was
£10.9 billion (6 March 2021: £10.1 billion), with the increase primarily driven
by a reduction in property yields.
Defined benefit pensions
The Pension Scheme is valued on different bases for different purposes.
For the corporate annual accounts, the value of the retirement benefit is
calculated under IAS19 while the funding of the Scheme is determined
by the Trustee’s triennial valuation. The last triennial valuation, as at
30 September 2018, showed a deficit of £538 million. The Trustee is currently
carrying out the latest triennial valuation as at 30 September 2021.
At 5 March 2022, the net defined benefit surplus under IAS19 for the Group
was £2,283 million (excluding deferred tax). The £1,539 million increase from
6 March 2021 was driven by both changes in financial assumptions which
resulted in a net gain, an adjustment to mortality assumptions and updated
experience which lowered liabilities, in addition to gains on plan assets.
During the year, the Sainsbury’s section of the Scheme reached full funding
on the stronger, secondary funding target agreed as part of the 2018 triennial
valuation. This has resulted in one of the three streams of contributions
payable to the Scheme under the Asset Backed Contributions funding
framework switching off and another stream switching to the Argos section,
until that section is also fully funded. Total contributions to the Scheme will
therefore reduce by £15 million a year.
For 2022/23, total pension scheme cash contributions are expected to be
£62 million.
Retirement benefit
obligations
Sainsbury’s
as at
5 March
2022
£m
Argos
as at
5 March
2022
£m
Group
as at
5 March
2022
£m
Group
as at
6 March
2021
£m
Present value of funded
obligations
(8,060) (1,313) (9,373) (10,218)
Fair value of plan assets 10,158 1,535 11,693 11,000
Pension surplus 2,098 222 2,320 782
Present value of unfunded
obligations
(20) (17) (37) (38)
Retirement benefit surplus 2,078 205 2,283 744
Deferred income tax liability (562) (78) (640) (192)
Net retirement benefit
surplus
1,516 127 1,643 552
Kevin O’Byrne
Chief Financial Officer
37 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Risk management is an inherent part of doing business; it balances
risk and reward, determined through a careful assessment of both
the potential outcomes and impact, as well as risk appetite.
Below and on the following pages, we set out an overview of our risk
management framework, the principal risks at year end, ongoing
mitigations and how these align to our strategy. The Operating
Board monitors these principal risks on an ongoing basis and flexes
mitigations where appropriate.
Our approach to risk management
Our risk management framework is designed to:
— identify key risks that are aligned to our strategy but that could
prevent us from achieving our strategic objectives
— assess the likelihood of these risks occurring, in combination with
both the reputational and financial impact they may introduce
— manage the risks through implementing appropriate mitigation
plans and controls, in line with our risk appetite
— monitor and report on our risks, associated mitigation plans
and changes to the internal/external environment to the relevant
governance fora
The following diagram provides an overview of the key risk
management activities undertaken by leadership that support this
risk framework and allow the Board to fulfil its obligations under
the UK Corporate Governance Code 2018. Please refer to page 61 for
the role and remit of these governance bodies.
Divisional leadership teams
Bottom-up risk identification
— Divisional risk maps reviewed
and challenged
— Divisional emerging risk map
reviewed
— Monitor risk mitigation plans
Governance fora
Risk identification and
monitoring
— Divisional risks relevant to fora
area of scope reviewed
— Governance forum risk maps
reviewed
Operating Board
Bi-annual Corporate risk updates
and deep dives
— Corporate risk map updated and
actions monitored
— Risk deep dives received
— Emerging risk map reviewed
Audit Committee
Corporate risk updates, deep dives
and approve risk framework
— Corporate and emerging risk maps
reviewed
— Risk deep dives received
— Risk policy and framework approved
— Internal audit reporting
plc Board
Review of risk process, corporate
risks and approval of risk disclosures
— Annual internal controls certification
by management
— Principal Risk and Uncertainty
disclosures
The plc Board has overall responsibility for risk management, the
system of internal control, and for reviewing the effectiveness of
these at least annually. As such, they have approved our principal
risks disclosure, as set out on pages 40 to 50. Certain responsibilities
have been delegated to the Audit Committee, as outlined on page 73.
COVID-19
The COVID-19 pandemic demonstrated that active risk and issue
management is an inherent part of doing business. Disruptions
to our business as a result of COVID-19 were actively managed
either through day-to-day ways of working or if needed, through
the Incident Response Team. Reflecting this, we do not have
a specific principal risk related to COVID-19, although its impact
on our principal risks continues to be assessed by the Board and
is set out where relevant, in individual risk disclosures.
Our risk management process
The Risk and Internal Audit team facilitate “bottom up” risk
workshops with divisional leadership teams to identify the key risks
which may prevent the achievement of their objectives. A risk map
is maintained for each division, setting out key risks and their gross,
net and target positions. A consolidated view of relevant risks –
and the effectiveness of mitigating activities – are also discussed
at relevant governance fora, covering safety, data governance and
operational resilience.
The Operating Board maintains the overall corporate risk map,
which captures the key risks to achieving our strategic objectives.
The Operating Board formally reviews the corporate risk map from
a “top down” perspective twice a year, to discuss and agree the
level of risk that the business is prepared to accept for each key risk.
They also review and challenge the output of the bottom up risk
process, considering new risks, movements in the position of risks
and key themes.
The target risk position for the corporate risks is also captured to
reflect management’s risk appetite, where this differs to the current
net position. This enables the Operating Board to agree and monitor
appropriate actions as required. A risk dashboard is maintained for
each corporate risk, setting out the risk, causes of the risk, key
mitigations and any actions to reach the target risk position.
Operating Board members also confirm annually that the corporate
risk map accurately reflects their view of key risk across the
organisation, that they are responsible for managing risks relevant
to their division and that internal controls exist to provide reasonable,
but not absolute, assurance that the risks in their areas of responsibility
are appropriately identified, evaluated and managed; this is also
reported to the Board.
The Risk and Internal Audit team provide the Audit Committee with
a risk management update at each meeting, which includes an
overview of changes to the corporate risk map and risk disclosures
agreed by the Operating Board for their review and comment.
38 Strategic Report J Sainsbury plc Annual Report 2022
Principal Risks
and Uncertainties
Risk and Internal Audit also provide independent assurance to
management and the Audit Committee over specific risk areas as
part of their annual audit plan; risk deep dives were also undertaken
with the Operating Board and/or Audit Committee for a selection
of principal risks, as set out over the following pages.
The Audit Committee Chair provides updates to the plc Board.
Emerging risks and opportunities
Emerging risks and opportunities are also formally reviewed
in the year as part of the bottom up divisional risk management
process. This allows emerging risks to be considered and
discussed by each division and then collated to perform
a business-wide assessment of how emerging risks and
opportunities may impact our business, considering their
potential timeframe and degree of certainty. The outcomes
are reported to the Operating Board and Audit Committee
and relevant actions are agreed.
Independent review of our risk management
framework
During the year, an independent review of our risk management
framework was carried out by a Big 4 firm; this review confirmed
that we are compliant with the Risk Management requirements of
the UK Corporate Governance Code. Actions to further enhance risk
management activities were agreed in line with management’s
appetite. In particular, work continues to define the risk appetite
for each corporate risk.
Changes to principal risk disclosures
As described above, the principal and emerging risks are discussed
and monitored throughout the year to identify and respond to
changes in the risk landscape.
The key change to the risks during the year relates to our previous
“Environment and sustainability” principal risk. The risk has been
expanded and broadened in line with the launch of our Plan for
Better strategic priority (see page 13), which includes our previous
Net Zero commitments, but has been broadened to include our
responsibilities towards putting our planet and people at the core
of our business. There are two key changes.
Firstly, the principal risk now also considers our social objectives, for
example, to leave a measurable positive impact on the communities
we serve and source from and to make Sainsbury’s an inclusive place
to work and shop.
Secondly, we consolidated all climate resilience risks – the impact
of changes to the environment on our business model – under this
principal risk, where previously climate resilience risks were assessed
within each of the relevant principal risks. This change also reflects
the related governance and oversight processes.
As a result, we are reporting this as a new risk, have renamed it
“Environment and social sustainability” and given its increased
scope, have reset the associated gross, net and target risk positions.
Further information on our ongoing implementation of the TCFD
recommendations can also be found on page 17.
The net position of all other corporate risks remain unchanged from
last year.
Our Principal Risks
The most significant principal risks identified by the Board and the
associated mitigations are set out below. This year, we have ordered
them to first show those that have been included in the risk modelling
undertaken as part of the preparation of the viability statement
(see page 51). This reflects that these have the potential to have
the largest impact on the business and is indicated with the
following symbol:
The other principal risks are then set out in no priority order.
We have also more clearly drawn out the link between each principal
risk and the group’s key performance indicators (see page 30)
and continue to highlight the link with the strategy of the business,
as follows:
Food First
Brands that Deliver
Save to Invest
Connected to Customers
Plan for Better
The net risk movement from the prior year for each principal risk and
uncertainty has been assessed and is presented as follows:
No
change
Increased net
risk exposure
Reduced net
risk exposure
NEW
New
risk
Mitigations in place, supporting the management of the risk to a net
risk position, are also described for each principal risk.
Ukraine
We continue to monitor the situation in Ukraine and the
associated impacts this may cause across our principal risks,
with regard to our customers, our colleagues and our
supply chain.
39 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Business continuity, operational resilience and major incident response
Risk Mitigations
A major incident or catastrophic event could affect the business
or its individual brands’ ability to trade. Sainsbury’s exposure to
operational resilience and major incident risks may be greater
because of operational complexities and some ageing systems.
COVID-19 continued to impact the business throughout the year.
For example, increased costs of global supply chains, the availability
of colleagues both within Sainsbury’s and our suppliers and differing
responses across the devolved nations. These disruptions are actively
managed either through day-to-day ways of working or if needed,
through the Incident Response Team.
— The Group Operational Resilience Committee (GORC) meets
quarterly, chaired by the CFO, with support from the Company
Secretary and Chief Information Officer. The GORC sets the
operational resilience strategy for the business and monitors
progress against this
— The Operational Resilience Committee, which includes
representatives from functions across Sainsbury’s, including
the Bank, meets regularly to implement the operational
resilience policy and strategy
— Business-wide resilience exercises are undertaken to imitate real
life business continuity scenarios and test our ability to respond
effectively. This includes testing our emergency call cascade.
Actions in response to lessons learnt are agreed
— Key business processes are assessed for operational resilience
against a set of minimum standards and contingency measures
regularly tested. Remote working solutions have reduced the risk
of loss of a key site
Crisis management
— In the event of any unplanned or unforeseen events, the Incident
Response Team (IRT) is convened to manage the response and
any associated risk to the business
— The IRT Chair reports to the Operating Board, which provides
strategic direction and decision making across financial,
operational and regulatory matters, considering all stakeholders
— The IRT was convened at various times through the year including
to respond to the high demand for fuel, the impact of the Omicron
variant on business operations, Storm Eunice and to co-ordinate
contingency measures with supplier challenges
Direct oversight: Group Operational Resilience Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
40 Strategic Report J Sainsbury plc Annual Report 2022
Business strategy and change RISK DEEP DIVE
Risk Mitigations
The strategy requires significant, concurrent change activities to be
delivered in the right sequence and at pace to drive business value.
Key risks associated with this include an inability to prioritise
resources to deliver competing change activities and/or not having
the right skills, capabilities and culture in place to deliver and embed
the required changes/within required timescales.
— Our business strategy, as set out in this Strategic Report,
is focussed on the following priorities:
— Food First
— Brands that Deliver
— Save to Invest
— Connected to Customers
— Plan for Better
— We have created the new role of Chief Transformation Officer to
drive end to end transformation. This will mean we can bring
together all of the key elements of transformation across the
business and ensure that we deliver on our Save to Invest priority,
making the business simpler and more efficient, while reducing
costs to support our plans to Win in Food and create Brands
that Deliver
— The Operating Board has regular sessions to discuss strategy,
supported by a dedicated Strategy team. The Operating Board
engages with a wide range of stakeholders – including shareholders,
colleagues, customers and suppliers – to ensure our strategy
remains relevant. Reflecting this, one of our strategic priorities,
Net Zero 2040, was broadened this year to set out our sustainability
goals across three critical areas. See page 13 for more detail on
Plan for Better.
— To ensure focus is maintained on delivering the strategic priorities
of the business, new transformational change projects are
approved by the Business Performance Review (BPR) forum,
once they have been through robust challenge on expected costs
and benefits, proposed timeframes for achieving the benefits
and risks associated with their delivery. The BPR also monitors
and reviews the “in year” implementation of the plans to meet
budget targets
— This year, to further develop the culture required to deliver
our strategy, we launched our Valued Behaviours – Own It,
Make It Better and Be Human. These Valued Behaviours were
communicated widely across our business and they have been
embedded in all our development materials, performance
management and recruitment processes
Direct oversight: Business Performance Review, Operating Board
Link to strategy:
Link to key performance indicators: All metrics, associated with
our objective of delivering for customers and driving stronger
financial results
Movement:
41 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Customer
Risk Mitigations
Our business includes Sainsbury’s, Argos, Habitat, Tu clothing, Nectar
and Sainsbury’s Bank. The business, across all brands, must continue
to evolve to meet customer needs and maintain customer loyalty.
A failure to align with, and respond to changes in customer sentiment,
behaviours, expectations and circumstances, exacerbated by changes
in customer behaviours as the COVID-19 pandemic continues to evolve,
will impact our ability to retain existing and attract new customers.
— The Customer, Commercial and Channels Forum, chaired by the
Chief Marketing Officer, is responsible for ensuring the customer
is at the heart of our decision making
— Customer trends, attitudes and behaviours are continually
monitored over time through their response to our propositions
and feedback, as well as reviewing future customer and macro
trends on a quarterly basis, to help set our future direction
— We continue to invest in digitising the Nectar Loyalty scheme
which provides us with a rich source of customer data and insight
that is reviewed and embedded right across our business
— We continued to focus on value, quality, and convenience,
reflecting both what our existing customers want and what will
attract new customers
— In terms of value and quality, we delivered the Sainsbury’s Quality,
Aldi Price Match campaign throughout the year, refreshing it
regularly to respond to customer feedback, launched 1,950 new
products and introduced Nectar Prices, providing personalised
pricing for customers
— In terms of convenience, we continue to monitor and flex our
ways of working to meet customer demand for how they want to
shop, particularly as the COVID-19 pandemic continues to evolve.
As well as our traditional channels, we have invested in our
contactless channels such as SmartShop, Click & Collect and
Groceries Online. In particular, SmartShop Mobile Pay has now
also been rolled out to nearly all convenience stores
— We continue to innovate and trialled our first SmartShop Pick
& Go store during the year to gain customer feedback
Direct oversight: Operating Board and Sainsbury’s Bank Management
Board; Customer, Commercial and Channels Forum
Link to strategy:
Link to key performance indicators: Customer satisfaction
Movement:
Data security RISK DEEP DIVE
Risk Mitigations
It is essential that the security of customer, colleague and company
confidential data be maintained. A major breach of information
security could have a significant negative financial and reputational
impact on the business. The risk landscape is increasingly challenging
with deliberate acts of cybercrime on the rise, targeting all markets
and heightening the risk exposure to broader business disruption as
well as to data breaches.
— A Data Governance Committee (DGC) is in place to oversee the
management of colleague, customer and commercial data,
information security and associated awareness and training.
Metrics to measure alignment to risk appetite are discussed in
each meeting of the DGC
— The Data Governance and Information Security function, with
the support of colleagues in the Technology division, continue to
develop information security strategies and to build the necessary
capability to respond to the increasing number and sophistication
of attacks, alongside focusing on improving how we handle data
and protect systems across the organisation
— A suite of information security policies are in place, which focus
on encryption, network security, access controls, system security,
data protection and information handling
— All colleagues are required to complete mandatory training on
how to keep our information safe. This is supplemented by regular
colleague awareness campaigns, focusing on specific aspects of
data and information security, for example e-mail phishing exercises,
with results reported to the DGC
— Reviews of key third parties who hold sensitive customer or
colleague data continue to take place and progress is monitored
by the DGC
— A risk based security testing approach across IT infrastructure
and systems is in place to identify and address vulnerabilities and
allow us to adapt and improve our defences
Direct oversight: Data Governance Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
42 Strategic Report J Sainsbury plc Annual Report 2022
Financial and treasury RISK DEEP DIVE
Risk Mitigations
The main financial risk relates to availability of short and long-term
funding to meet business needs and fluctuations in interest, commodity
and foreign currency rates.
— Treasury policies, approved by the plc Board, are in place to
address liquidity, refinancing, financial markets and counterparty
credit risks. In addition, the business funding strategy is approved
annually by the plc Board
— The Treasury function is responsible for managing liquid
resources, funding requirements, commodity, interest rate and
currency exposures as set out in line with the Treasury policy
and overseen by the Treasury Committee
— The Audit Committee reviews and approves the viability and
going concern statements on an annual and half-yearly basis
respectively
— The Treasury function has clear operating procedures and
adherence to these is regularly reviewed and audited
— A long-term funding plan is developed as part of the annual
corporate plan process, which includes an assessment of short
and long-term core funding requirements and contingent funding
requirements
— A short-term funding plan is formalised as part of the annual
budget process, which includes an assessment of the core and
contingent funding requirements for the following year and
the market conditions for each of the debt markets accessible
to the business
— There is a long-term funding framework in place for the pension
deficit and there is ongoing communication and engagement
with the Pension Trustees
— Detailed cashflow forecasts are produced by the Finance and
Treasury functions. Finance commercial reviews are also held
each period, chaired by the CFO, with relevant actions and
mitigations agreed
— Financial and Treasury risks in respect of Sainsbury’s Bank are
detailed separately
Direct oversight: The Board of J Sainsbury plc
Link to strategy:
Link to key performance indicators: Retail free cashflow: £500m+
pa average
Movement:
43 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Health and safety RISK DEEP DIVE
Risk Mitigations
Prevention of injury or loss of life for both colleagues and customers
is of utmost importance and is paramount to maintaining the
confidence our customers have in our business.
In the last year, the impact of COVID-19 has continued to affect the
health and safety of our customers and colleagues. This was and
continues to be actively managed, although many of our mitigations
are now part of day-to-day ways of working.
— The Group Safety Committee (GSC) met four times during the
year, receiving detailed reports on a wide range of topics including
COVID management and control, growth of online operations,
building fabric review and safety training. The GSC were also
supported by additional working groups to manage the ever-
changing risks associated with COVID-19
— In particular, the Customer Journey Team ensured COVID-19
mitigations throughout Sainsbury’s were proportionate and
aligned with legislation
— The Operating Board receives quarterly reports on safety, including
an annual deep dive facilitated by the Head of Group Safety, who
also provided an annual safety update to the plc Board
— Clear policies and procedures are in place detailing the controls
required to manage health and safety across the business, aligned
to Assured Primary Authority advice, to comply with all applicable
regulations. These cover the end-to-end operations, including the
auditing and vetting of construction contractors and the health
and safety processes in place in our depots, stores, offices and for
home working colleagues
— Process compliance is supported through oversight from our
Primary Authority, internal training programmes and management
monitoring, all which align to both health and safety laws and
our internal policies. We invested in technology solutions to direct
and monitor process completion, with oversight provided by field
teams in both Safety and Internal Audit
— The new Group Head of Health, Safety and Insurance was
appointed in June 2021 and completed a full review of the Safety
team and processes. As a result, new measures of success were
defined. Key areas include a renewed focus on reducing harm
and its associated costs by removing unnecessary complexity
and enhancing the use of data to prioritise the team’s work
Direct oversight: Group Safety Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
44 Strategic Report J Sainsbury plc Annual Report 2022
Political and regulatory environment
Risk Mitigations
There is a trend of increasing regulation, together with enforcement
action, across all areas of our business. This increases the risk of
non-compliance, adds additional cost as we respond to the
regulations and drives complexity into our business processes.
— We complete a bi-annual risk assessment to review key
regulatory risks, which functions are impacted and at a high level,
how they are managed
— Accountability and responsibilities for key regulatory risks are
confirmed as part of this. Our key regulatory risks include
Competition Law, GDPR, GSCOP and Anti-Bribery and Corruption.
A high-level of assessment of the key elements of a compliance
framework for each of these key risks is completed and the
results are shared with the Operating Board
— Mandatory training is in place for the key regulatory areas,
including data governance, anti-bribery and corruption,
competition law and GSCOP
— In terms of emerging regulatory risk, we liaise with external
parties and our internal stakeholders to monitor changes to
existing regulations that would impact the business, so that we
can respond appropriately. Areas of focus remain the same as
the previous year and include:
— the impact of complying with the post-Brexit regulatory
and enforcement regime, including what it means to be
trading under both UK and EU regulations in Ireland and the
implications of any changes to the NI Protocol
— responding to proposed new rules associated with high fat,
sugar and salt products, plastic, packaging and food waste
— anticipating and responding to emerging areas of regulatory
focus on environment and climate change, and associated
reporting requirements
— As a responsible business, we proactively engage with Government,
devolved administrations, regulators and industry bodies in the
areas in which we operate, on public policy issues impacting
our customers and colleagues. Our engagement is transparent,
and we allow our responses to government consultations to be
made public
Direct oversight: Operating Board
Link to strategy:
Link to key performance indicators: N/A
Movement:
45 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Product safety and sourcing
Risk Mitigations
Failure to manage safety and sourcing risks for both food and
non-food products leads to injury or loss of life, breach of regulation
and/or reputational damage.
— Clear policies and procedures are in place detailing the controls
required to manage product safety, product fraud and ethical
risks across the business and to comply with all applicable
regulations
— These cover the end-to-end operations, including safety processes
in place in our depots and stores and the quality management
controls in place to ensure product safety and integrity
— During the year, Food Safety policies were refreshed and
simplified to ensure they were clear to colleagues and suppliers
— In addition, established supplier audit and product testing
programmes are in place to support rigorous monitoring of
supplier sites, product safety, traceability, integrity and ethical
issues, including modern slavery. Where on-site visits are not
allowed due to COVID-19 restrictions, remote audit and assurance
programmes are in place
— Product recall escalation procedures are in place to quickly resolve
issues for food and non-food product incidents
— Supplier terms, conditions and product specifications set clear
standards for product/raw material safety and quality with which
suppliers are expected to comply
— The Group Safety Committee receive regular reports on product
safety from the Director of Technical, Food, Head of Technical
& Ethical, GM&C and from the Group Head of Health, Safety
and Insurance on operational food safety risks. In addition, the
Corporate Responsibility & Sustainability Committee discussed
matters related to product sourcing risk, including supply chain
transparency, modern slavery and human trafficking
Direct oversight: Group Safety Committee
Link to strategy:
Link to key performance indicators: N/A
Movement:
46 Strategic Report J Sainsbury plc Annual Report 2022
Sainsbury’s Bank
Risk Mitigations
Sainsbury’s Bank is exposed to a number of risks, including those
related to operational, regulatory, credit, capital, funding, liquidity
and market risks.
The COVID-19 pandemic means uncertainty around the economic
outlook will continue, particularly with regard to how the path of
inflation, interest rates and levels of unemployment will evolve.
This is actively managed through our normal economic scenario
modelling analyses and corresponding playbooks.
— The Bank is managed through defined governance structures that
include the Board of Sainsbury’s Bank plc, its Risk Committee and
Audit Committee. The Board of Sainsbury’s Bank plc is comprised
of Executive Directors, independent Non-Executive Directors and
a J Sainsbury plc Executive Director
— The Bank has a defined risk appetite aligned to delivery of
strategic objectives and has implemented a risk management
framework that is overseen by its Risk Committee. This
Committee monitors the effectiveness of risk management
activities against strategic, operational, compliance and financial
risks, and is updated on, and discusses, emerging risk areas.
In particular, the Risk Committee reviews the results of stress
testing including the internal Liquidity and Capital Adequacy
Assessments
— The actual management of risks is through an executive
governance structure, which manages the day-to-day operations
of the business. This includes the Sainsbury’s Bank Management
Board, an Executive Risk Committee and an Asset and Liability
Committee
— Oversight by J Sainsbury plc is provided through:
— Membership of the Board of Sainsbury’s Bank plc –
one J Sainsbury plc Operating Board member is on the
Board of Sainsbury’s Bank plc and provides updates to
the Board of J Sainsbury plc on Bank matters
— Updates on key matters arising from meetings of the
Risk Committee and Audit Committee are reported to
the J Sainsbury plc Audit Committee
— There are a number of reserved matters that require
Sainsbury’s Bank plc to obtain permission from J Sainsbury plc
Direct oversight: The Boards of J Sainsbury plc and Sainsbury’s
Bank plc
Link to strategy:
Link to key performance indicators: N/A
Movement:
47 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Trading environment and competitive landscape
Risk Mitigations
We operate in a highly competitive market during a time of
economic uncertainty, primarily driven by the COVID-19 pandemic.
Whilst the UK has now left the European Union, uncertainties
around the final trading relationship with Northern Ireland and
UK border checks create additional complexities for our business
and our suppliers.
With the outlook set to remain broadly the same for the immediate
future, we need to respond appropriately to external market
conditions while maintaining clear focus on delivering our strategic
objectives.
We also need to be mindful of the ongoing risk of supplier failure,
either through insolvency or through an inability to deliver products
due to global supply chain challenges.
— We have a wide, differentiated portfolio of brands, including
Sainsbury’s, Argos, Habitat, Tu clothing, Nectar and Sainsbury’s Bank,
which provides some inherent resilience to unforeseen changes
— We continually monitor current market trends and price points
across competitors, and respond through actively managing price
positions, developing sales propositions and adjusting promotional
and marketing activity
— We put the customer at the heart of our decision making to
ensure we retain existing and attract new customers – see the
“Customer” principal risk for further details
— We are in regular contact with the government and other external
bodies to understand decision making in relation to Northern
Ireland so we, and our suppliers, can adapt our ways of working
as needed
— In terms of supplier continuity specifically, we maintain regular,
open dialogue with key suppliers concerning their ability to trade
and collaborate with them on solutions where appropriate. This
year, we subsumed the operations of one key supplier into our
business, to ensure continuity of supply
— Reflecting the impact of COVID-19 on global supply chains, we
have continued to work collaboratively with all our suppliers this
year to maintain availability of products for the customer. Actions
taken include onboarding alternate suppliers, rationalising
products and providing logistics support
Direct oversight: Customer, Commercial and Channels Forum;
Operating Board
Link to strategy:
Link to key performance indicators: Grocery market share
performance
Movement:
48 Strategic Report J Sainsbury plc Annual Report 2022
Colleague engagement, retention and capability
Risk Mitigations
The business employs over 171,000 colleagues who are critical to the
success of our business. Attracting talented colleagues, investing
in training and development and rewarding colleagues fairly are
all essential to the sustainability of our operations. An inability to
attract, motivate and retain talent, specific skillsets and capability
impacts our ability to deliver our strategic objectives. The availability
of skills in specific areas is a key area of focus.
COVID-19 continues to affect our store, depot and office-based
colleagues. Many of our mitigations are now part of day-to-day ways
of working.
The challenging trading environment requires a focus on efficient
operations, which may include change initiatives that affect colleagues,
impacting trust or engagement.
— Employment policies and remuneration and benefits packages
are regularly reviewed and are designed to be fair, consistent
andcompetitive. Our base rate of pay for Sainsbury’s and Argos
store colleagues is £10 an hour nationally, ahead of the Living
Wage, and £11.05 an hour in London, in line with the London
Living Wage. Over the course of the year, we also made
exceptional payments for areas with specific skills shortages,
for example drivers
— We have processes in place to nurture talent and provide fulfilling
career opportunities. Formal processes are in place to discuss
performance and development, identify talent, actively manage
succession planning and enable colleagues to progress into
management roles
— We have invested in leadership immersion sessions focused on
our new valued behaviours, as well as ongoing behavioural and
leadership development, to build capability and support a positive
working culture
— We continue to take action to be an inclusive place to work.
We’ve set stretching gender, ethnically diverse and Black
representation targets for 2024, which form part of our leaders’
long-term incentives
— We continue to listen closely to colleagues to inform and adapt
our future plans and actions. Our annual colleague survey was
updated this year to ensure we are measuring the things that
matter most to our people and that support the culture we
seek to have
— In September 2021, we went live with our new hybrid ways of
working, giving colleagues greater flexibility to come together
in our offices, stores and depots for collaboration, coaching or
community purposes and work remotely the rest of the time
— We design and run specific programmes to target hard to recruit
areas, presenting a wide range of opportunities for colleagues
from across our business, as well as attracting new talent.
We have introduced a new HGV driver apprenticeship as well
as an HGV driver academy
— We have upweighted our recruitment teams, to support hiring
in difficult and competitive markets, and embraced new ways
of attracting talent
Direct oversight: Operating Board
Link to strategy:
Link to key performance indicators: Colleague engagement
Movement:
49 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Environment and social sustainability RISK DEEP DIVE
Risk Mitigations
Understanding and mitigating the impact of the climate on our
business operations, reducing our environmental impact as well
as using our size and scale as a business to have a positive impact
on society and our communities is a core part of our strategy.
During the year, the Plan for Better strategic priority was launched,
putting our responsibilities towards our planet and people at the core
of our business.
Reflecting this, this risk was broadened from focussing on our
Net Zero commitments, to include consideration of environmental
and social sustainability risks and the impact of climate change on
our business operations; the latter was previously considered within
each relevant Principal Risk. As a result, the gross, net and target
positions of this risk were reset.
— The Corporate Responsibility & Sustainability (CR&S) Committee
provides oversight of the Plan for Better strategy. The CR&S
Committee, Plan for Better Steering Committee and Audit
Committee review and approve our external reporting and
provide oversight of programme risks
— Our Plan for Better strategy, explained on page 13 of this report,
was launched this year and sets out our environmental and social
sustainability goals across our whole business, outlining our
priority areas of focus, our key commitments and our progress
against these. We have identified areas which matter most to our
stakeholders, have the greatest impact on our business and which
are aligned to the UN Sustainable Development Goals, so that we
can make the biggest difference
— Our Plan for Better strategy has three interlocking pillars:
Better for you, Better for the planet and Better for everyone
— The Plan for Better Steering Committee (Steering Committee)
met six times during the year and provided regular updates
to the CR&S Committee and to the Operating Board as required.
This Steering Committee oversees delivery of the Plan for Better
programme, supported by three working groups responsible
for driving and executing the strategy
— One of our key metrics to measure and report on Plan for Better
performance is our progress towards becoming Net Zero across
our own operations by 2035 and supply chain by 2050. We will
continue to monitor our progress in achieving our targets, flexing
our approach as needed. We also publicly report on progress
towards achieving our Net Zero targets, as well as our other targets
within Plan for Better twice a year, to ensure transparency
— See page 17 for more information on our ongoing implementation
of the TCFD recommendations
Direct oversight: CR&S Committee, Plan for Better Steering
Committee
Link to strategy:
Link to key performance indicators: Plan for Better commitment
Movement:
NEW
50 Strategic Report J Sainsbury plc Annual Report 2022
Statement of Viability
1 How Sainsbury’s assesses its prospects
The Group’s business activities and strategy are central to assessing
its future prospects. These, together with factors likely to affect its
future development, performance and position are set out in the
Strategic Report on pages 1 to 53. The financial position of the Group,
its cash flows and liquidity are highlighted in the Financial Review
on pages 32 to 37.
The Group manages its financing by diversifying funding sources,
structuring core borrowings with long-term maturities and maintaining
sufficient levels of committed funding via the Revolving Credit
Facility. Maintaining a suitable level of undrawn additional funding
capacity minimises liquidity risk.
The Group’s prospects are assessed primarily through its corporate
planning process. This includes an annual review which considers
profitability, the Group’s cash flows, committed funding and
forecasted future funding requirements over three years, with a
further two years of indicative movements. As part of the strategic
planning process, the Directors make a number of assumptions
about business performance and the availability and effectiveness
of mitigating actions available to the Group. In particular, cashflow
forecasting gives visibility of the Group’s headroom, comparing net
debt to the level of committed facilities over the planning period.
The most recent corporate plan was signed off in October 2021, and
refreshed in March 2022, as part of the normal budgeting process.
This is reviewed by the Operating Board and ultimately by the PLC
Board with involvement throughout from both the CFO and CEO.
Part of the Board’s role is to consider the appropriateness of any
key assumptions, taking into account the external environment,
business strategy and model.
In its assessment of the Group’s prospects, the Board has taken
into account:
— The Group’s Food First strategy. This strategy is putting
food back at the heart of Sainsbury’s and offering customers
great value andhigh quality products. The strategy aims to
deliver profitable volume growth while reshaping our business.
— Inflationary pressures. As we emerge out of the COVID-19
pandemic, the Group is now seeing high levels of inflation with
external forecasts indicating this could continue and limit
discretionary spend.
— Climate change considerations. The Group’s most recent
corporate planning and budgeting processes includes assumed
cashflows toaddress climate change risks, including costs
associated with initiatives in place as part of the Plan for Better
commitment which include reducing environmental impacts
and meeting customer expectations in this area, notably through
reducing packaging and reducing energy usage across the estate.
— The Group’s financial position. The Group has materially
reduced net debt and improved its net asset position over the past
year. Furthermore, the Revolving Credit Facility, which enables the
Group to maintain sufficient levels of contingent funding, has two
Facilities; a £300 million Facility (A) and a £1,094 million Facility
(B). Facility A has a final maturity of April 2025 and Facility B has
a final maturity of October 2024. As at 5 March 2022, the Revolving
Credit Facility was undrawn.
2 The assessment period
The Directors have determined that the three years to March 2025
is an appropriate period over which to provide its viability statement.
This was considered the appropriate timeframe by the Directors
because:
— This period is consistent to that used for the Group’s corporate
planning process as detailed above, and reflects the Directors’
best estimate of the future prospects of the business.
— The Group does not earn revenue through long-term contracts.
Therefore, changes to the Group’s Corporate Plan are predominantly
impacted by sales and cost assumptions. These are more difficult
to predict beyond a three-year time-horizon. Both have been
stress-tested as part of the viability assessment.
3 Assessment of viability
To make the assessment of viability the following has been performed:
— Scenarios have been modelled over and above those in the
corporate plan, based upon a number of the Group’s principal risks
and uncertainties (as documented on pages 38 – 50). The scenarios
were overlaid into the corporate plan to assess the potential
impact on net debt of one or more of these crystallising over
the assessment period, and have been tested in isolation and
in combination with one another. The impact of the movements
in net debt on the Group’s funding headroom were then assessed.
Where required, available mitigating actions to maintain funding
headroom were considered as part of the assessment. These
include reducing any non-essential capital expenditure and
operating expenditure on projects, bonuses and dividend payments.
— Reverse stress-testing was performed to determine the extent to
which cash flows would need to deteriorate before fully-utilising
the Group’s funding headroom, and after taking into account any
mitigating actions as detailed above.
Whilst each of the risks on pages 38 – 50 has a potential impact and
have been considered as part of the assessment, only those that
represent severe but plausible scenarios were selected for modelling
through the corporate plan.
51 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
All scenarios modelled and their link to the Group’s Principal Risks and Uncertainties are detailed below:
Scenario modelled Link to Principal Risk
Scenario 1 – Cost of Living scenario
Despite the Group’s positive performance in the past 2 years in light of the COVID-19 pandemic, the Group is now
seeing high levels of inflation with external forecasts indicating this could continue and limit discretionary spend,
particularly impacting General Merchandise & Clothing (GM&C).
Assumptions:
— Sales – volume losses in Argos, Sainsbury’s GM&C and Fuel sales in line with the 2008 recession phasing have
been applied to forecast sales
Failure to align with and respond
to changes in customer sentiment,
expectations and circumstances
exacerbated by uncertainties around
post COVID-19 customer behaviour
Inability to recover from catastrophic
incidents and respond effectively to
major incidents
Scenario 2 – Food inflation impacts on margin
Whilst Food inflation is unlikely to lead to lower sales given large elements are an essential purchase, it may cause
increased competitive pressure and so lower margins generated on those sales.
Assumptions:
— Margin – this scenario models the competing away of margins in grocery sales to attract customers during
this inflationary period
Trading environment and
competitive landscape
Scenario 3 – Data and legal breaches
The impact of any regulatory fines has been considered. The largest considered are the General Data Protection
Regulation (“GDPR”) fine for data breaches, and fines levied by the Groceries Supply Code of Practice (“GSCOP”).
Assumptions:
— Costs – amount paid for regulatory fines
Data security
Health and safety, people and
product
Political and regulatory environment
Scenario 4 – Sainsbury’s Bank capital and liquidity requirements
We have considered the strength of the Bank’s capital and liquidity positions to withstand extreme-but
plausible stress scenarios such as a pandemic, or political instability leading to high unemployment and
very low interest rates.
Assumptions:
— Sales – reflecting another severe COVID-19 stress as per the Annual Concurrent Stress testing release by
the Bank of England
Sainsbury’s Bank
Scenario 5 –Failure to deliver sustainable cost savings
Delays in delivering the Save to Invest programme, which would have an impact of circa. £150 million in each year
of the assessment period, were considered.
Assumptions:
— Costs – additional costs of c. £150m per annum as result of failure to deliver cost savings
Business strategy & change
Reverse stress test
In addition to modelling regulatory fines and price investments as above, the level of forecast sales decline
required before the Group fully utilises its available funding and mitigations was considered. The required
reduction was considered extreme and implausible.
In performing the above analysis, the Directors have made certain
assumptions around the availability and effectiveness of the
mitigating actions available to the Group.
The scenarios above are hypothetical and severe for the purpose
of creating outcomes that have the ability to threaten the viability of
the Group; however, multiple control measures are in place to prevent
and mitigate any such occurrences from taking place.
In year one, the modelling has shown that the business is able to
withstand a combination of all of the scenarios and still maintain
funding headroom. For years two and three, none of the scenarios
modelled individually fully utilised the funding headroom. However,
all of the scenarios modelled together would fully utilise the funding
headroom at three individual and isolated periods. Management does,
however, have controllable mitigating actions available as detailed
above with which to respond that ensure the Group remains viable.
Taking into account the Group’s current prospects and principal risks
and uncertainties, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation and
meet its liabilities as they fall due over the three years to March 2025.
Consideration was also given to the conflict in Ukraine which has
continued to develop subsequent to the Group’s balance sheet date.
Inflationary pressures which may be caused by the conflict have
already been embedded in Scenarios 1 and 2 documented above.
Thus it was concluded that the impact of the conflict in Ukraine does
not impact the conclusions reached over going concern and viability.
4 Going concern
As a consequence of the work performed to support the viability
statement above, the Directors also considered it appropriate to
adopt the going concern basis in preparing the financial statements
which are shown on pages 99 to 199.
52 Strategic Report J Sainsbury plc Annual Report 2022
The following aligns to the non-financial reporting requirements
contained in sections 414CA and 414CB of the Companies Act 2006
and reflects our commitment to and management of the environment,
colleagues, social matters, human rights and anti-bribery and
anti-corruption.
Environment
The food we eat and how that food is produced, sourced, packaged,
and disposed of has major consequences on the environment.
We want to help everyone eat better and, through our sustainability
agenda, we are helping to drive lasting, positive change in the UK
and internationally. We are committed to playing a leading role in
offering affordable food that supports healthy and sustainable diets
and helps customers reduce their impact on the planet, one plate at
a time. This year we launched Plan for Better, our new sustainability
plan covering our environmental and social commitments, which is
integrated into our business strategy. Our Plan for Better sets out our
sustainability goals across the whole business, priority areas of focus,
key commitments and our progress. We have identified areas which
matter most to our stakeholders and are aligned to the UN Sustainable
Development Goals, so that we can make the biggest difference.
We announced the acceleration of our carbon emissions target to
become Net Zero in our own operations by 2035, five years earlier
than our original ambition. You can read more on our Net Zero plan
on page 16. We also announced our commitment, alongside other
retailers, to work with the WWF to halve the environmental impact
of UK supermarket baskets by 2030.
This year we were the Principal Supermarket Partner of COP26,
the UN Climate Change Conference, which took place in Glasgow
in November 2021. You can read more about our Plan for Better,
which includes our participation at COP26, on pages 13 to 17, in our
Non-financial KPIs on page 30, in our Principal risks and uncertainties
on page 50 and in our CR&S Committee Report on pages 71 to 72.
Our policies support our approach to the environment and help our
suppliers meet our sustainability goals. They include our Sustainable
Sourcing Policy Goods for Resale, which helps support suppliers to
effectively carry out their ethical trading responsibilities and meet
Sainsbury’s ethical commitments. It also outlines how suppliers
should implement our Code of Conduct for Ethical Trade, including
protection of the environment. The policy can be found on our
website https://www.about.sainsburys.co.uk/sustainability.
Colleagues
We want to be a place where people love to work and shop. This
means being an inclusive employer where colleagues are treated
fairly and with respect, where they are encouraged to develop their
skills and fulfil their potential. Rewarding our colleagues has been
a real focus for the business over the last two years. Read more
on our colleagues in our Plan for Better section on pages 13 to 14,
Engaging with our stakeholders and our Section 172 statement on
page 25, our Non-financial KPIs on page 30, and in the Board diversity
policy in our Nomination Committee Report on page 69.
Social matters
We have a long history of building partnerships and delivering great
impact in our communities, locally and internationally. We are
committed to supporting social cohesion, economic prosperity and
inclusive growth and we aim to positively impact those in need through
fundraising, volunteering, donations and by raising awareness.
Read more about our communities in our Plan for Better section on
pages 13 to 17, and the CR&S Committee Report on pages 71 to 72.
Human rights
Our customers want to be confident that the people who make,
grow or sell our products are not being exploited or exposed to
infringements on their human rights. Although the primary duty
to protect human rights sits with national governments, we fully
recognise our responsibility as a company to respect human rights
throughout all our operations. Our commitment covers all aspects
of our business, our colleagues, customers and suppliers and is
supported by our Human Rights Policy. We do not tolerate any
form of human rights abuse within our business or supply chains.
Through our due diligence processes, we seek to identify, prevent and
mitigate adverse human rights risks that are linked to our operations,
products or services and deal with any adverse impacts caused.
You can read more about human rights in our Plan for Better section
on pages 13 to 17. Our Modern Slavery Statement can be found at
www.about.sainsburys.co.uk.
Anti-corruption and anti-bribery
Our values form the framework which guides the behaviours of all
colleagues across the business. We expect all our colleagues and
contractors to act with honesty and integrity and never to engage in
any activity which could be considered as accepting a bribe or giving
a bribe. Our Anti-Bribery and Corruption Policy provides guidance
and expectations on our colleagues’ responsibilities and behaviour,
and our expectations to prevent bribery and fraud. We have a
Disciplinary and Appeals Policy to help encourage everyone to
achieve and maintain our rules and standard of conduct, attendance,
capability and performance. Our Whistleblowing Policy covers how
to report wrongdoing when honesty and integrity are compromised.
More information on whistleblowing can be found on page 75.
Other information
Other information to support this statement can be found as follows:
— Description of our business model on page 7
— Task Force on Climate-related Financial Disclosures (TCFD)
on pages 17 to 23
— Non-financial KPIs on page 30
— Principal risks and uncertainties on pages 38 to 50
— Statement of Viability on page 51
— Audit Committee Report on pages 73 to 77
— All of our public policies, reports, codes and standards are
available at www.about.sainsburys.co.uk
The Strategic Report was approved by the Board of Directors and
signed on its behalf by:
Kevin O’Byrne
27 April 2022
53 Strategic Report J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Non-financial
information statement
Martin Scicluna
Chairman
C
N
Appointment to the Board: 1 November 2018.
Martin joined the Board as Chairman Designate
and Non-Executive Director on 1 November 2018.
He was appointed Chairman of the Board on
10 March 2019.
Skills and experience: Martin brings a wealth
of experience from over 25 years’ service as an
executive and non-executive board director at
a wide range of companies.
Career experience: Previous roles include
Chairman of RSA Insurance Group plc, Chairman
of Great Portland Estates plc, Senior Independent
Director and Chair of the Audit Committee of
Worldpay Inc., and Non-Executive Director and
Chair of the Audit Committee of Lloyds Banking
Group plc. He was a partner at Deloitte LLP for
26 years, serving as Chairman from 1995 to 2007,
where his clients included Dixons, WH Smith,
Alliance Unichem and Cadbury.
External appointments: None.
Specific contributions to the Company:
Martin has extensive experience as a Chair.
He brings valuable knowledge and skills in
developing strategy and evaluating business
opportunities, along with understanding of the
financial services sector and how it operates.
Martin also led a robust selection process,
culminating in the appointment of Simon Roberts
as Sainsbury’s Chief Executive Officer.
Independent: Upon appointment.
Simon Roberts
Chief Executive Officer
C
Appointment to the Board: 1 June 2020.
Simon was appointed as Chief Executive Officer
on 1 June 2020, having joined Sainsbury’s and
the Operating Board in July 2017 as Retail &
Operations Director, with responsibility for Stores,
Central Operations and Logistics.
Skills and experience: Simon brings a wide
range of experience and leadership skills to the
Board from previous executive and non-executive
roles. He has over 30 years’ experience leading
major UK retail brands, having spent 15 years at
Marks and Spencer and 13 years at Boots.
Career experience: Prior to joining Sainsbury’s,
Simon was Executive Vice President of Walgreens
Boots Alliance and President of Boots UK and
Ireland. During his tenure, Simon led Boots to
achieve growth in sales and transactions, increased
retail gross margin and doubled sales online.
Before Boots, Simon was at Marks and Spencer
Group plc, where he started his career in stores.
External appointments: Non-Executive
Chairman of the Institute of Customer Service.
Specific contributions to the Company:
Simon is leading Sainsbury’s new plan to put food
back at the heart of the business and making
good progress. One year into the plan we offer
improved value, have achieved our target to
triple the number of new products on our shelves
and our colleagues are delivering great service
in our stores and online. In recognition of their
extraordinary efforts, in January this year we
announced an investment of over £100 million
in colleague pay and all Sainsbury’s and Argos
store colleagues are paid at least £10 per hour.
Our plan is underpinned by our portfolio of
Brands that Deliver – Argos, Habitat, Tu, Nectar
and Sainsbury’s Bank and our Save to Invest
priority. Under Simon’s stewardship, Sainsbury’s
has also launched our sustainability Plan for
Better, which is integrated into our strategy and
includes a bold commitment to become Net Zero
across our own operations by 2035. Simon is a
dedicated, determined and enthusiastic champion
of customers and colleagues. He is the Operating
Board Sponsor of diversity and inclusion within
Sainsbury’s.
Independent: No.
Kevin O’Byrne
Chief Financial Officer
Appointment to the Board: 9 January 2017.
Skills and experience: Kevin brings a wealth
of international retail and finance experience
to the Board from his previous Chief Executive
and Chief Financial Officer roles. His skills and
experience in leading finance and driving
performance improvement provide the business
with valuable expertise in pursuing its strategy.
Career experience: Kevin was previously
Chief Executive Officer of Poundland Group PLC
until December 2016 and held executive roles
at Kingfisher plc from 2008 to 2015, including
Divisional Director UK, China and Turkey,
Chief Executive Officer of B&Q UK & Ireland
and Group Finance Director. Prior to this, he was
Group Finance Director of Dixons Retail plc and
European Finance Director of Quaker Oats. He was
a Non-Executive Director of Land Securities Group
PLC from 2008 to September 2017, where he was
Chairman of the Audit Committee and Senior
Independent Director.
External appointments: Non-Executive
Director and Chairman of the Audit Committee
of Centrica plc. Kevin will be appointed as Senior
Independent Director of Centrica plc with effect
from 1 June 2022.
Specific contributions to the Company:
Kevin is a skilled Chief Financial Officer, with
extensive international retail and finance
experience gained during previous and current
executive and non-executive positions. He has
applied this knowledge to the Finance, Internal
Audit, Investor Relations, Property, Procurement
and Strategy functions at Sainsbury’s, driving
the performance of the business. Kevin is the
Operating Board Sponsor for the LGBT+ inclusion
stream within Sainsbury’s.
Independent: No.
Brian Cassin
Non-Executive Director
A N
Appointment to the Board: 1 April 2016.
Skills and experience: Brian brings relevant
experience of running a FTSE 100 group with
knowledge of big data and analytics, both areas
of key importance to Sainsbury’s. As Chief
Executive Officer of Experian plc, Brian brings
strong leadership experience and a substantial
background in operating within a regulated
environment.
Career experience: Brian joined Experian plc as
Chief Financial Officer in April 2012, a post he held
until his appointment as Chief Executive Officer
in July 2014. Prior to this, Brian spent his career
in investment banking at Greenhill & Co, where
he was Managing Director and Partner. Brian
has also held various roles at Baring Brothers
International and at the London Stock Exchange.
External appointments: Chief Executive
Officer of Experian plc.
Specific contributions to the Company:
Brian’s experience as a current chief executive
and his work in the financial and technology
sectors provide valuable industry insight.
Independent: Yes.
Jo Harlow
Non-Executive Director
C
N R
Appointment to the Board: 11 September 2017.
Skills and experience: Jo brings a wealth of
experience in consumer-facing businesses and
the telecoms and technology industries, both in
the UK and internationally.
Career experience: Jo was Corporate Vice
President of the Phones Business Unit at
Microsoft Corporation and before that was
Executive Vice President of Smart Devices at
Nokia Corporation, following a number of senior
management roles at Nokia from 2003. Prior to
that, she held marketing, sales and management
roles at Reebok International Limited from 1992
to 2003 and at Procter & Gamble Company from
1984 to 1992.
External appointments: Non-Executive
Director and Chair of the Remuneration
Committee of InterContinental Hotels Group plc,
Non-Executive Director andChair of the
Remuneration Committee ofHalma plc and
Director of Chapter Zero.
Specific contributions to the Company:
Jo has broad experience from executive and
non-executive roles and as Chair of the Corporate
Responsibility and Sustainability Committee, she
has helped the business deliver and evolve its
sustainability strategy. She also brings current
external Remuneration Committee experience.
Independent: Yes.
Adrian Hennah
Non-Executive Director
A
N
Appointment to the Board: 1 April 2021.
Skills and experience: Adrian has significant
financial and strategic expertise leading the
performance and strategy of many large
companies.
Career experience: Adrian started his career
working in audit and consultancy with PwC and
Stadtsparkasse Köln, the German regional bank.
Adrian spent 18 years in Chief Financial Officer
roles at three FTSE 100 companies. He was Chief
Financial Officer at Reckitt Benckiser (RB) for
seven years and held the same position at Smith
& Nephew and Invensys. Prior to this he spent
18 years at GlaxoSmithKline working in both
finance and operations. He was also previously
Non-Executive Director and Chair of the Audit
Committee at RELX.
External appointments: Non-Executive
Director of Oxford Nanopore Technologies plc,
a Non-Executive Director of Unilever plc,
an external member (NED) of the Finance
Committee (Board) of Oxford University Press
and a Trustee of Our Future Health.
Specific contributions to the Company:
Adrian brings extensive financial and leadership
experience to Sainsbury’s gained from Chief
Financial Officer positions held in some of the
UK’s largest companies, notably at RB, which
produces leading hygiene, health and nutritional
brands.
Independent: Yes.
54 Governance J Sainsbury plc Annual Report 2022
J Sainsbury plc
Board of Directors
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
Retirements in 2021/22
David Keens retired from the Board on 9 July 2021.
Martin Scicluna
Chairman
C
N
Appointment to the Board: 1 November 2018.
Martin joined the Board as Chairman Designate
and Non-Executive Director on 1 November 2018.
He was appointed Chairman of the Board on
10 March 2019.
Skills and experience: Martin brings a wealth
of experience from over 25 years’ service as an
executive and non-executive board director at
a wide range of companies.
Career experience: Previous roles include
Chairman of RSA Insurance Group plc, Chairman
of Great Portland Estates plc, Senior Independent
Director and Chair of the Audit Committee of
Worldpay Inc., and Non-Executive Director and
Chair of the Audit Committee of Lloyds Banking
Group plc. He was a partner at Deloitte LLP for
26 years, serving as Chairman from 1995 to 2007,
where his clients included Dixons, WH Smith,
Alliance Unichem and Cadbury.
External appointments: None.
Specific contributions to the Company:
Martin has extensive experience as a Chair.
He brings valuable knowledge and skills in
developing strategy and evaluating business
opportunities, along with understanding of the
financial services sector and how it operates.
Martin also led a robust selection process,
culminating in the appointment of Simon Roberts
as Sainsbury’s Chief Executive Officer.
Independent: Upon appointment.
Simon Roberts
Chief Executive Officer
C
Appointment to the Board: 1 June 2020.
Simon was appointed as Chief Executive Officer
on 1 June 2020, having joined Sainsbury’s and
the Operating Board in July 2017 as Retail &
Operations Director, with responsibility for Stores,
Central Operations and Logistics.
Skills and experience: Simon brings a wide
range of experience and leadership skills to the
Board from previous executive and non-executive
roles. He has over 30 years’ experience leading
major UK retail brands, having spent 15 years at
Marks and Spencer and 13 years at Boots.
Career experience: Prior to joining Sainsbury’s,
Simon was Executive Vice President of Walgreens
Boots Alliance and President of Boots UK and
Ireland. During his tenure, Simon led Boots to
achieve growth in sales and transactions, increased
retail gross margin and doubled sales online.
Before Boots, Simon was at Marks and Spencer
Group plc, where he started his career in stores.
External appointments: Non-Executive
Chairman of the Institute of Customer Service.
Specific contributions to the Company:
Simon is leading Sainsbury’s new plan to put food
back at the heart of the business and making
good progress. One year into the plan we offer
improved value, have achieved our target to
triple the number of new products on our shelves
and our colleagues are delivering great service
in our stores and online. In recognition of their
extraordinary efforts, in January this year we
announced an investment of over £100 million
in colleague pay and all Sainsbury’s and Argos
store colleagues are paid at least £10 per hour.
Our plan is underpinned by our portfolio of
Brands that Deliver – Argos, Habitat, Tu, Nectar
and Sainsbury’s Bank and our Save to Invest
priority. Under Simon’s stewardship, Sainsbury’s
has also launched our sustainability Plan for
Better, which is integrated into our strategy and
includes a bold commitment to become Net Zero
across our own operations by 2035. Simon is a
dedicated, determined and enthusiastic champion
of customers and colleagues. He is the Operating
Board Sponsor of diversity and inclusion within
Sainsbury’s.
Independent: No.
Kevin O’Byrne
Chief Financial Officer
Appointment to the Board: 9 January 2017.
Skills and experience: Kevin brings a wealth
of international retail and finance experience
to the Board from his previous Chief Executive
and Chief Financial Officer roles. His skills and
experience in leading finance and driving
performance improvement provide the business
with valuable expertise in pursuing its strategy.
Career experience: Kevin was previously
Chief Executive Officer of Poundland Group PLC
until December 2016 and held executive roles
at Kingfisher plc from 2008 to 2015, including
Divisional Director UK, China and Turkey,
Chief Executive Officer of B&Q UK & Ireland
and Group Finance Director. Prior to this, he was
Group Finance Director of Dixons Retail plc and
European Finance Director of Quaker Oats. He was
a Non-Executive Director of Land Securities Group
PLC from 2008 to September 2017, where he was
Chairman of the Audit Committee and Senior
Independent Director.
External appointments: Non-Executive
Director and Chairman of the Audit Committee
of Centrica plc. Kevin will be appointed as Senior
Independent Director of Centrica plc with effect
from 1 June 2022.
Specific contributions to the Company:
Kevin is a skilled Chief Financial Officer, with
extensive international retail and finance
experience gained during previous and current
executive and non-executive positions. He has
applied this knowledge to the Finance, Internal
Audit, Investor Relations, Property, Procurement
and Strategy functions at Sainsbury’s, driving
the performance of the business. Kevin is the
Operating Board Sponsor for the LGBT+ inclusion
stream within Sainsbury’s.
Independent: No.
Brian Cassin
Non-Executive Director
A N
Appointment to the Board: 1 April 2016.
Skills and experience: Brian brings relevant
experience of running a FTSE 100 group with
knowledge of big data and analytics, both areas
of key importance to Sainsbury’s. As Chief
Executive Officer of Experian plc, Brian brings
strong leadership experience and a substantial
background in operating within a regulated
environment.
Career experience: Brian joined Experian plc as
Chief Financial Officer in April 2012, a post he held
until his appointment as Chief Executive Officer
in July 2014. Prior to this, Brian spent his career
in investment banking at Greenhill & Co, where
he was Managing Director and Partner. Brian
has also held various roles at Baring Brothers
International and at the London Stock Exchange.
External appointments: Chief Executive
Officer of Experian plc.
Specific contributions to the Company:
Brian’s experience as a current chief executive
and his work in the financial and technology
sectors provide valuable industry insight.
Independent: Yes.
Jo Harlow
Non-Executive Director
C
N R
Appointment to the Board: 11 September 2017.
Skills and experience: Jo brings a wealth of
experience in consumer-facing businesses and
the telecoms and technology industries, both in
the UK and internationally.
Career experience: Jo was Corporate Vice
President of the Phones Business Unit at
Microsoft Corporation and before that was
Executive Vice President of Smart Devices at
Nokia Corporation, following a number of senior
management roles at Nokia from 2003. Prior to
that, she held marketing, sales and management
roles at Reebok International Limited from 1992
to 2003 and at Procter & Gamble Company from
1984 to 1992.
External appointments: Non-Executive
Director and Chair of the Remuneration
Committee of InterContinental Hotels Group plc,
Non-Executive Director andChair of the
Remuneration Committee ofHalma plc and
Director of Chapter Zero.
Specific contributions to the Company:
Jo has broad experience from executive and
non-executive roles and as Chair of the Corporate
Responsibility and Sustainability Committee, she
has helped the business deliver and evolve its
sustainability strategy. She also brings current
external Remuneration Committee experience.
Independent: Yes.
Adrian Hennah
Non-Executive Director
A
N
Appointment to the Board: 1 April 2021.
Skills and experience: Adrian has significant
financial and strategic expertise leading the
performance and strategy of many large
companies.
Career experience: Adrian started his career
working in audit and consultancy with PwC and
Stadtsparkasse Köln, the German regional bank.
Adrian spent 18 years in Chief Financial Officer
roles at three FTSE 100 companies. He was Chief
Financial Officer at Reckitt Benckiser (RB) for
seven years and held the same position at Smith
& Nephew and Invensys. Prior to this he spent
18 years at GlaxoSmithKline working in both
finance and operations. He was also previously
Non-Executive Director and Chair of the Audit
Committee at RELX.
External appointments: Non-Executive
Director of Oxford Nanopore Technologies plc,
a Non-Executive Director of Unilever plc,
an external member (NED) of the Finance
Committee (Board) of Oxford University Press
and a Trustee of Our Future Health.
Specific contributions to the Company:
Adrian brings extensive financial and leadership
experience to Sainsbury’s gained from Chief
Financial Officer positions held in some of the
UK’s largest companies, notably at RB, which
produces leading hygiene, health and nutritional
brands.
Independent: Yes.
55 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
Tanuj Kapilashrami
Non-Executive Director
N R
Appointment to the Board: 1 July 2020.
Skills and experience: Tanuj is a highly
experienced HR professional with significant
experience in talent and change management
both in the UK and internationally.
Career experience: Tanuj joined Standard
Chartered Bank in 2017 and is currently the Group
Head of HR. Prior to this, she spent 17 years in
key global and regional HR leadership roles
within HSBC.
External appointments: Group Head of HR
at Standard Chartered Bank, Trustee of Asia
House and a Director of Financial Services Skills
Commission Limited.
Specific contributions to the Company:
Tanuj is a valuable member of the Board as the
business continues to adapt and support its
colleagues in a rapidly changing marketplace.
Independent: Yes.
Dame Susan Rice
Non-Executive Director
N
R
Appointment to the Board: 1 June 2013.
Susan has been the Senior Independent Director
since 6 July 2016. Susan will step down from the
Board after the AGM on 7 July 2022.
Skills and experience: Susan has extensive
experience as a non-executive director, as well
as in retail banking, financial services, leadership
and sustainability.
Career experience: Susan has been a member
of the Scottish First Minister’s Council of Economic
Advisors, a Managing Director of Lloyds Banking
Group Scotland and Chief Executive, then
Chairman, of Lloyds TSB Scotland plc. She has
also held a range of non-executive directorships,
including at the Bank of England and SSE plc.
External appointments: Chair of Scottish
Water and Scottish Water Business Stream
Limited, Chair of the Financial Services Culture
Board, Chair of the Scottish Fiscal Commission
and Senior Independent Director of The North
American Income Trust plc.
Specific contributions to the Company:
Susan provides insight to the Board from her
extensive experience gained as chair, senior
independent director and non-executive
director of various businesses. As Chair of the
Remuneration Committee, she has played a key
role in revising the current Remuneration Policy
and strategy. Her expertise in financial services is
invaluable to the Board as part of its oversight of
Sainsbury’s Bank and Argos Financial Services.
Independent: Yes.
Keith Weed CBE
Non-Executive Director
A C N
Appointment to the Board: 1 July 2020.
Skills and experience: Keith is an exceptionally
capable marketing and digital leader. He has
championed new ways of integrating sustainability
into business and building brands with purpose.
Career experience: Keith has a strong business
background, having spent 36 years at Unilever,
most recently as Chief Marketing and
Communications Officer, which included leading
the company’s ground-breaking sustainability
programme globally. Whilst at Unilever, Keith led
different parts of the business, during which time
he worked closely with Sainsbury’s and other
retailers. He has strong international experience
and knowledge, having run international
businesses both in the UK and overseas.
External appointments: Non-Executive
Director of WPP PLC, Trustee Director of Business
in the Community, Trustee Director of Leverhulme
Trust and President of the Royal Horticultural
Society. He is also a trustee of Grange Park Opera.
Keith was awarded a CBE for services to the
advertising and marketing industry in the 2021
New Year Honours List.
Specific contributions to the Company:
Keith plays an important role in Sainsbury’s
strategic focus on putting food back at the heart
of the business and delivering the Plan for Better.
He has an excellent understanding of both
sustainability and digital, and the ways that
technology is transforming businesses.
Independent: Yes.
Jo Bertram
Non-Executive Director
N C
Appointment to the Board: To be appointed
on 7 July 2022.
Skills and experience: Jo is a highly talented
strategic business leader with significant
experience leading transformation and change.
Career experience: Prior to becoming
Managing Director, Business & Wholesale,
Virgin Media O2, Jo held senior Director and
Strategy roles at O2. Between 2013 and 2017
she held the position of Regional General
Manager, Northern Europe at Uber. Jo has
previously worked at McKinsey and Accenture
and holds an MBA from INSEAD.
External appointments: Managing Director,
Business & Wholesale, at Virgin Media O2.
Specific contributions to the Company:
Jo has worked in growing hi-tech sectors which
will benefit our customers as we explore new
ways to use digital solutions to make shopping
easy and convenient.
Independent: Yes.
Board changes
Subject to shareholder approval, Jo Bertram
will be appointed as a Non-Executive
Director with effect from 7 July 2022.
After nine years’ service as a Non-
Executive Director, Dame Susan Rice
will step down from the Board at the
conclusion of the AGM on 7 July 2022.
Following Susan’s retirement from the
Board, Brian Cassin will be appointed as
Senior Independent Director, Jo Harlow
will become Chair of the Remuneration
Committee and Keith Weed will be
appointed as Chair of the CR&S Committee.
56 Governance J Sainsbury plc Annual Report 2022
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
J Sainsbury plc
Board of Directors continued
Tanuj Kapilashrami
Non-Executive Director
N R
Appointment to the Board: 1 July 2020.
Skills and experience: Tanuj is a highly
experienced HR professional with significant
experience in talent and change management
both in the UK and internationally.
Career experience: Tanuj joined Standard
Chartered Bank in 2017 and is currently the Group
Head of HR. Prior to this, she spent 17 years in
key global and regional HR leadership roles
within HSBC.
External appointments: Group Head of HR
at Standard Chartered Bank, Trustee of Asia
House and a Director of Financial Services Skills
Commission Limited.
Specific contributions to the Company:
Tanuj is a valuable member of the Board as the
business continues to adapt and support its
colleagues in a rapidly changing marketplace.
Independent: Yes.
Dame Susan Rice
Non-Executive Director
N
R
Appointment to the Board: 1 June 2013.
Susan has been the Senior Independent Director
since 6 July 2016. Susan will step down from the
Board after the AGM on 7 July 2022.
Skills and experience: Susan has extensive
experience as a non-executive director, as well
as in retail banking, financial services, leadership
and sustainability.
Career experience: Susan has been a member
of the Scottish First Minister’s Council of Economic
Advisors, a Managing Director of Lloyds Banking
Group Scotland and Chief Executive, then
Chairman, of Lloyds TSB Scotland plc. She has
also held a range of non-executive directorships,
including at the Bank of England and SSE plc.
External appointments: Chair of Scottish
Water and Scottish Water Business Stream
Limited, Chair of the Financial Services Culture
Board, Chair of the Scottish Fiscal Commission
and Senior Independent Director of The North
American Income Trust plc.
Specific contributions to the Company:
Susan provides insight to the Board from her
extensive experience gained as chair, senior
independent director and non-executive
director of various businesses. As Chair of the
Remuneration Committee, she has played a key
role in revising the current Remuneration Policy
and strategy. Her expertise in financial services is
invaluable to the Board as part of its oversight of
Sainsbury’s Bank and Argos Financial Services.
Independent: Yes.
Keith Weed CBE
Non-Executive Director
A C N
Appointment to the Board: 1 July 2020.
Skills and experience: Keith is an exceptionally
capable marketing and digital leader. He has
championed new ways of integrating sustainability
into business and building brands with purpose.
Career experience: Keith has a strong business
background, having spent 36 years at Unilever,
most recently as Chief Marketing and
Communications Officer, which included leading
the company’s ground-breaking sustainability
programme globally. Whilst at Unilever, Keith led
different parts of the business, during which time
he worked closely with Sainsbury’s and other
retailers. He has strong international experience
and knowledge, having run international
businesses both in the UK and overseas.
External appointments: Non-Executive
Director of WPP PLC, Trustee Director of Business
in the Community, Trustee Director of Leverhulme
Trust and President of the Royal Horticultural
Society. He is also a trustee of Grange Park Opera.
Keith was awarded a CBE for services to the
advertising and marketing industry in the 2021
New Year Honours List.
Specific contributions to the Company:
Keith plays an important role in Sainsbury’s
strategic focus on putting food back at the heart
of the business and delivering the Plan for Better.
He has an excellent understanding of both
sustainability and digital, and the ways that
technology is transforming businesses.
Independent: Yes.
Jo Bertram
Non-Executive Director
N C
Appointment to the Board: To be appointed
on 7 July 2022.
Skills and experience: Jo is a highly talented
strategic business leader with significant
experience leading transformation and change.
Career experience: Prior to becoming
Managing Director, Business & Wholesale,
Virgin Media O2, Jo held senior Director and
Strategy roles at O2. Between 2013 and 2017
she held the position of Regional General
Manager, Northern Europe at Uber. Jo has
previously worked at McKinsey and Accenture
and holds an MBA from INSEAD.
External appointments: Managing Director,
Business & Wholesale, at Virgin Media O2.
Specific contributions to the Company:
Jo has worked in growing hi-tech sectors which
will benefit our customers as we explore new
ways to use digital solutions to make shopping
easy and convenient.
Independent: Yes.
Board changes
Subject to shareholder approval, Jo Bertram
will be appointed as a Non-Executive
Director with effect from 7 July 2022.
After nine years’ service as a Non-
Executive Director, Dame Susan Rice
will step down from the Board at the
conclusion of the AGM on 7 July 2022.
Following Susan’s retirement from the
Board, Brian Cassin will be appointed as
Senior Independent Director, Jo Harlow
will become Chair of the Remuneration
Committee and Keith Weed will be
appointed as Chair of the CR&S Committee.
57 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Key to Committee members
A Audit Committee
C Corporate Responsibility and
Sustainability Committee
N Nomination Committee
R Remuneration Committee
A
C
N
R
Denotes Chair of Committee
Simon Roberts
Chief Executive Officer
See page 54.
Kevin O’Byrne
Chief Financial Officer
See page 54.
Rhian Bartlett
Food Commercial Director
Date of appointment: November 2020.
Skills and experience: Rhian joined the
Operating Board in November 2020, having
returned to Sainsbury’s in 2019 as Director of
Fresh Food. Rhian is responsible for delivering the
commercial performance of Sainsbury’s food
business and brands. She has over 20 years’
experience in the retail industry and has held
a variety of senior commercial roles, including
Customer and Digital Director at Screwfix and
Director of UK Trading at eBay. Rhian’s previous
roles at Sainsbury’s include Business Unit
Director Non-Food Grocery and Head of Online
Merchandising. Rhian is a Non-Executive Director
at Speedy Hire Plc and is a Trustee of GroceryAid.
Graham Biggart
Chief Transformation Officer
Date of appointment: March 2022.
Skills and experience: As Chief Transformation
Officer, Graham is responsible for our end-to-end
change programmes across Sainsbury’s, Argos,
Habitat and Tu, to deliver our strategy and future
operating model; he is also accountable for our
Supply Chain, Logistics & Transport Operations,
and Central Business Services. Graham joined
Sainsbury’s in 2015 and has led a number of
different areas of the business in that time, across
commercial, operations and channels, including
Fresh Food & Foodservices, Sainsbury’s Local, and
Argos Republic of Ireland. Prior to Sainsbury’s,
Graham worked at McKinsey & Company,
primarily on strategy and transformation topics,
and before that at Brunswick Group, focused on
media, investor and government communications.
Graham is a Non-Executive Director and member
of the Risk & Audit Committee of GS1 UK.
Jim Brown
Chief Executive Officer, Sainsbury’s Bank
Date of appointment: June 2019.
Skills and experience: Jim joined Sainsbury’s
Bank in June 2019. He has held several senior
international financial services roles, most recently
at RBS in the UK as Chief Executive Officer of
Williams & Glyn. Prior to that, Jim was Chief
Executive Officer of Ulster Bank in Northern Ireland
and the Republic of Ireland. Before moving to
Ireland, Jim was based in Hong Kong and was
Chief Executive Officer of Retail and Commercial
Banking, Asia and the Middle East for RBS and
ABN AMRO. He has also been a member of the RBS
Group Management Committee, ABN AMRO Top
Executive Group, ABN AMRO Global Consumer
Leadership Team and the RBS/Bank of China Joint
Steering Committee. Earlier in his career, he held
senior executive roles for Citibank in Asia, Australia
and New Zealand. Jim has also held board positions
at Ulster Bank, Saudi Hollandi Bank, The Royal Bank
of Scotland (China) Co. Ltd and RBS (Pakistan) Ltd.
He is also a past President of the Institute of
Banking in Ireland. He is currently an advisor to
Circit Limited and a Certified Bank Director.
Tim Fallowfield OBE
Company Secretary and Corporate
Services Director
Date of appointment: September 2004.
Skills and experience: Tim joined Sainsbury’s
in 2001 as Company Secretary, having previously
held the position of Company Secretary and
General Counsel at Exel plc, the global logistics
company, now part of DHL. Tim is a qualified
solicitor and began his career at the international
law firm, Clifford Chance. He joined Sainsbury’s
Operating Board in September 2004 and in addition
to his role as Company Secretary and Corporate
Services Director, he is responsible for the
Corporate Services Division, comprising Legal
Services, Data Governance and Information
Security, Safety and Insurance, and Shareholder
Services. He also chairs the Group Safety
Committee and the Data Governance Committee.
Tim is Chairman of the Disability Confident
Business Leaders Group, which works with
government in shaping the disability employment
agenda and in raising awareness of the benefits
of employing disabled people. He was awarded
an OBE for services to disability awareness in the
2020 New Year Honours List.
58 Governance J Sainsbury plc Annual Report 2022
J Sainsbury plc
Operating Board
Mark Given
Chief Marketing Officer
Date of appointment: June 2020.
Skills and experience: Mark joined the
Operating Board in June 2020. He has significant
experience in customer insight, brand
communication and digital marketing. Mark
joined Sainsbury’s in 2012, becoming Marketing
Director in 2017. He was appointed Chief
Marketing Officer in August 2019 and has
responsibility for marketing across the Sainsbury’s,
Argos, Tu clothing and Habitat brands. Mark has
also been responsible for the Nectar Loyalty
coalition and Nectar360 since the business was
acquired by Sainsbury’s in 2018. Prior to joining
Sainsbury’s, Mark built his digital skills leading
the Priority programme at O2 where he was Head
of Sponsorship. Before this, Mark worked with
key brands at Heineken UK where he was Brand
Director. He began his career at Procter & Gamble
UK and worked across Europe on a variety of
brands. Mark is currently a Council Member of the
Incorporated Society of British Advertisers (ISBA)
and a Fellow of the Marketing Society.
Phil Jordan
Chief Information Officer
Date of appointment: January 2018.
Skills and experience: Phil joined the Board
in January 2018 and has brought a fresh, global
perspective on technology to the Operating
Board, in addition to a wealth of experience in
digital, data and business transformation. Prior to
joining Sainsbury’s, Phil had a long and successful
track record in telecommunications. Most
recently, he was Global Chief Information Officer
at Telefónica, overseeing Digital Transformation
and Information Technology and prior to that,
was Chief Information Officer for Vodafone UK/
Ireland. Phil has worked as a Non-Executive
Director and Advisor on Technology in the
Telecommunications, Investment & Retail
Banking sector. He is Chair-Elect at Digital 9
Infrastructure PLC.
Clodagh Moriarty
Retail and Digital Director
Date of appointment: June 2018.
Skills and experience: Clodagh was appointed
Retail and Digital Director in June 2020, having
served as Chief Digital Officer since June 2018,
when she joined the Operating Board. Clodagh
is responsible for all stores and their operations,
as well as Sainsbury’s digital offer and strategy,
ensuring customers experience an integrated and
seamless shopping experience across Sainsbury’s,
Argos, Tu, Sainsbury’s Bank and Nectar. She is also
a member of the Sainsbury’s Bank Board and sits
on its Nomination and Remuneration Committees.
Clodagh has previously been Director of Online,
Head of Online Trading, Merchandising & Content
and Category Manager for Meal Solutions at
Sainsbury’s. She joined Sainsbury’s as Head of
Strategy, following nine years at Bain & Company.
Paula Nickolds
General Merchandise & Clothing
Commercial Director
Date of appointment: June 2021.
Skills and experience: Paula joined Sainsbury’s
and the Operating Board in June 2021. She is
responsible for delivering performance across
general merchandise and clothing brands at
Sainsbury’s. Paula has 25 years’ experience in
retail, gained at the John Lewis Partnership, which
she joined as a graduate trainee before holding
a variety of senior roles in product, buying and
marketing. Most recently, she was Buying and
Brand Director and then Commercial Director,
before becoming Managing Director in 2017. Paula
is an Ambassador for the UK charity Smart Works
and Chair of the Advisory Board of Near Street.
Angie Risley
Group HR Director
Date of appointment: January 2013.
Skills and experience: Angie was appointed
Group HR Director and became a member of the
Operating Board with responsibility for human
resources in January 2013. Before joining
Sainsbury’s, Angie was the Group HR Director for
Lloyds Banking Group and an Executive Director
of Whitbread PLC with responsibility for HR and
Corporate Social Responsibility. She was previously
a Non-Executive Director and Chair of the
Remuneration Committee of Serco plc. Angie is
currently a Non-Executive Director, member of the
Compliance & Culture Committee and Chair of the
Remuneration Committee at Smith & Nephew plc.
59 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Dear Shareholder
In what has been another exceptional year for retail, the
Board has maintained its focus on the implementation
of the strategy we outlined in November 2020 and we
are pleased with the progress made in the first year
ofour three-year plan. Our strong performance has
enabled us to balance returns to all stakeholders with
an improved value proposition for customers, enhanced
reward for our outstanding colleagues and increased
dividends for shareholders.
The Board has ensured that our strategy remains aligned with our purpose,
culture and values. We receive regular reports on key performance measures
across each of our five strategic pillars at Board meetings. The engagement
between the Board and Operating Board is strong.
Colleague wellbeing and engagement remains a key item on the Board’s
agenda, with particular focus on colleague pay and benefits. We have
invested over £100 million investment in retail colleague pay, which increased
the base rate of pay to at least £10 per hour, and the other aspects of our
improved colleague offer, is a recognition of the extraordinary work they
do for our customers.
Our sustainability strategy is a key priority for the Board and the CR&S
Committee, whose report is set out on pages 71 to 72. The evolution of our
Net Zero by 2040 plan, to our Plan for Better, underpins our progress in this
area, including the acceleration of our Net Zero target to no later than 2035.
Plan for Better is a central part of our strategy and Board agenda and we
recognise that, whilst we have made good progress over the last year, we
have more ambitious targets in the year ahead as we embed the key
initiatives into business as usual. We increased our focus on Environmental,
Social and Governance (ESG) and the Board participated in a University of
Cambridge Institute for Sustainability Leadership event and we hosted our
first ESG event in June 2021, launching our Plan for Better strategy and
enabling shareholders to gain a stronger understanding of our ESG priorities.
Our sponsorship of COP26, an event attended by several members of the
Board, underlines our commitment in this area and we look forward to
working with the WWF to develop industry-wide practice in relation to
Scope 3 emissions.
The business has continued to make progress against its diversity and
inclusion strategy and I am pleased to report that Sainsbury’s has featured
for the first time in the FTSE 100 Top Ten Best Performers list for Women in
Leadership, demonstrating our commitment to be the most inclusive retailer.
Actions to support the progression and representation of our ethnically
diverse colleagues are an important part of our strategy and we supported
the additional commitments made, including joining the Black British
Network. We have published our integrated Gender and Ethnicity Pay Report
for a second year and are pleased to have seen the pay differentials reduce
during that time.
The Board was deeply saddened by the news that Lord Sainsbury of Preston
Candover passed away earlier this year and fully supports the tribute made
on page 2. We will continue to build on his unique legacy and challenge
ourselves to demonstrate the pioneering leadership that he showed in
building the business. Our clear vision and strategy for the business builds
on this ambition.
We are proud of the leadership shown by Simon during the year and the
outstanding contribution of the management team. Our most recent
evaluation of the Board’s effectiveness showed significant progress against
previous actions as well as areas of future focus.
I would like to thank all of my Board colleagues for their commitment,
support and flexibility over the past year. Whilst we welcome a return to
face-to-face meetings, a number of our Board meetings were conducted
in a virtual environment by necessity. This new hybrid way of working has
enabled us to maintain strong governance and robust decision-making,
delivering against our strategy. I will again express my thanks to Susan Rice
for her many years of service and her significant contribution to the Board,
particularly as Senior Independent Director and Chair of our Remuneration
Committee. Following a robust recruitment process, we welcome Jo Bertram
to the Board and look forward to the part that she will play in Sainsbury’s
future. Following Susan’s retirement from the Board, I am delighted to
announce that Brian Cassin will be appointed as Senior Independent
Director, Jo Harlow will become Chair of the Remuneration Committee
and Keith Weed will be appointed as Chair of the CR&S Committee.
Martin Scicluna
Chairman
60 Governance J Sainsbury plc Annual Report 2022
Governance Report
UK Corporate Governance Code
The Board considers that the Company has complied in full with the
Principles and Provisions of the UK Corporate Governance Code 2018
(Code) with the exception of the provision below. Further details on
how we comply with the Code are available in the Strategic and
Governance Reports, as outlined below.
Provision 38 of the Code requires that pension contribution rates,
or payments in lieu, for executive directors are aligned with those
available to the workforce. As disclosed in our 2020 Annual Report
and Accounts, Kevin O’Byrne’s contractual cash pension supplement
is not yet aligned with the pension contribution rates available to the
workforce, but a clear incremental reduction plan to address this has
been in place since 2019/20. The original plan, resulting in alignment
in 2024, was approved by 98.87 per cent when put to shareholders as
part of the Directors’ Remuneration Report within the 2020 Annual
Report. Subsequently, the alignment has been accelerated and full
compliance will be achieved by the end of the 2022 calendar year.
Further detail can be found in the 2021 Annual Report/2022 Directors’
Remuneration Report on page 71.
Compliance with the Code
Board leadership and Company purpose
More information can be found on pages 61 to 63.
Division of responsibilities
More information can be found on page 64.
Composition, succession and evaluation
More information can be found on pages 65 to 67.
Audit, risk and internal control
More information can be found on pages 73 to 77.
Remuneration
More information can be found on pages 78 to 95.
Role of the Board
The Board is the principal decision-making body in the Company. It is
collectively responsible for promoting the long-term success of the business
for the benefit of its members, achieving this through the creation and
delivery of sustainable shareholder value. The Board also carefully considers
its wider stakeholders, including customers, colleagues and suppliers, when
making decisions and more information can be found on pages 24 to 29.
The Board is responsible for setting the strategy of the business and
overseeing its implementation by management. The Board is committed
to delivering on each of our strategic priorities across Food First, Brands
that Deliver, Save to Invest, Connected to Customers and Plan for Better.
It ensures effective corporate governance, succession planning and
stakeholder engagement. The Board is also responsible for ensuring that
effective internal controls and risk management systems are in place;
further information can be found on pages 73 and 77. The Matters Reserved
for the Board can be found on our website at
www.about.sainsburys.co.uk.
The Board has formally delegated certain governance responsibilities to its
Board Committees and the Operating Board, as outlined below.
Operating Board
Matters not specifically reserved for the Board have been delegated to
the Operating Board, chaired by Simon Roberts. The Operating Board is
responsible for the day-to-day operation of the business and the execution
of our strategy, ensuring this is done in an ethical and sustainable manner.
During the year, the Operating Board delivered progress against our strategic,
cultural and sustainability objectives, including the implementation of our
diversity and inclusion agenda. Each Operating Board Director has a range
of responsibilities, as detailed in their biographies on pages 58 and 59.
Sainsbury’s Bank Board
Sainsbury’s Bank plc Board membership comprises an independent Chair,
five Non-Executive Directors, four of whom are independent, together with
the Bank’s Chief Executive Officer and Chief Financial Officer. The Bank’s
Chief Executive Officer is supported by the Sainsbury’s Bank Executive
Committee and is responsible for the day-to-day management of the
business and executing its strategy. The Bank’s Chief Executive Officer
is a member of the Operating Board, bringing the Bank’s priorities and
perspective to the wider business.
61 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Board leadership and Company purpose
Board Committees
The Board Committees support the Board in specific areas of its responsibilities,
as outlined below. The Committee Chairs provide regular updates to the Board on
Committee meetings and activities.
Audit Committee
— Reviews and monitors integrity of financial information prior to publication,
ensuring that the Annual Report as a whole is fair, balanced and understandable
— Oversees systems of internal control and risk management
— Approves internal and external audit processes
— Maintains relationship with auditors
— Carries out in-depth reviews of specific risks, ensuring that risks are appropriately
identified, managed and mitigated
More information on page 73.
Corporate Responsibility and Sustainability Committee
— Reviews the sustainability strategy, ensuring it is aligned with the Company’s
purpose, strategy, culture, vision and values
— Monitors business engagement on sustainability and corporate responsibility
matters with colleagues, customers, suppliers, the community and shareholders
More information on page 71.
Nomination Committee
— Reviews the Board’s size, structure and composition, including the
recommendation of new appointments to the Board
— Monitors balance of skills, knowledge, experience, independence and diversity
of the Board and its Committees to ensure that they remain appropriate
— Oversight of succession planning and development plans of the Board and
senior management
More information on page 68.
Remuneration Committee
— Recommends and reviews the Remuneration Policy, ensuring that it promotes
the delivery of our strategy and the long-term sustainable success of the business
— Approves remuneration and benefits for the Chairman, Executive Directors and
Operating Board Directors
— Approves remuneration principles throughout the business
More information on page 79.
Operating Board Committees
The Operating Board Committees support the work of the Operating Board through
delegated powers, as outlined below. Members of senior management provide
regular updates from these Committee meetings to the Operating Board.
Business Performance Review
— Monitors and reviews implementation of the Group’s plans to meet budget
targets, as set out by the Operating Board
— Approves ‘in-year’ capital expenditure
— Monitors business performance with regards to customers, the market,
product proposition and perceptions of our brand
— Monitors and reviews colleague engagement
Group Data Governance Committee
— Oversees programmes that deliver compliance with Data Protection, Data
Security and Payment Card Industry data security standards
— Oversees effective information security throughout the business
Group Safety Committee
— Reviews the safety culture and the robustness of safety management systems
through audit and safety teams, and the action plan in light of any issues
— Oversees standards for management and monitoring of colleague and
customer safety
— Provides assurance, with the Head of Safety and Insurance, to the Operating
Board, Audit Committee and Board
Group Operational Resilience Committee
— Sets operational resilience strategy
— Monitors implementation of business continuity and disaster recovery
arrangements
Plan for Better Steering Committee
— Leads operational execution of our Plan for Better strategy
— Oversees Plan for Better working groups’ activities in relation to this strategy
to ensure delivery
Customer, Commercial and Channels Forum
— Governs the development and execution of our customer, commercial and
channel plans against our strategy
— Manages the in-year operating performance of the retail business
The Terms of Reference for these Committees can be found on our website at
www.about.sainsburys.co.uk.
Each of these Committees has approved Terms of Reference setting out its areas
of responsibility.
Key areas of focus for the Board
Our Board and Committee meetings were held both in person and remotely during the year, in line with on-going COVID-19 safety guidance. Members of the
Operating Board, management teams and other colleagues attended meetings to enable improved Board dialogue, review performance, discuss progress
and agree key priorities for the short and medium term.
The key areas of focus for the Board during the year are shown below.
Strategy
— Increased focus on strategic priorities at each Board meeting through
a revised meeting agenda structure
— Ensured that the Food First and Plan for Better strategies were key to
discussions and decision-making via regular updates from management
— Completed deep-dives into specific areas of our strategy and upcoming
strategic challenges to review proposals made by management,
providing constructive feedback and direction
— Monitored the impact of COVID-19 on our customers and colleagues
— Reviewed the Operating Board’s plans to simplify the operating model
and progress sustainable cost saving programmes
— Discussed and created relevant actions plan for long-term strategic
challenges, responding to key trends in grocery to 2030
— Considered feedback from customers, colleagues, investors, suppliers
and other stakeholders on our strategy
— Involved in decision-making in relation to the expressions of interest
received for Sainsbury’s Bank, ultimately deciding that retaining the Bank
and continuing the focus on strengthening and simplifying the Financial
Services business would be in the best interests of stakeholders
— Reviewed plans to enhance our brand through our Helping everyone eat
better campaign
More information on pages 9 to 23.
Purpose
— Ensured that our renewed focus on strategy remained aligned with our
purpose throughout discussions and decision-making
— Ensured that business decisions were aligned with our purpose,
establishing a clear and cohesive approach for colleagues in all areas
More information on page 7.
Colleagues, values and culture
— Committed to over £100 million investment in pay for our retail
colleagues and other enhancements to colleague benefits
— Maintained focus on culture as a critical enabler of our success
— Encouraged an improved performance management culture across
the business, emphasising communication and regular feedback
for colleagues
— Supported the Operating Board in the development of our new Valued
Behaviours to further embed a positive, forward-thinking culture aligned
to our purpose and priorities
— Discussed COVID-19 measures for in-store colleagues, with a safety-first
approach taken and reflected on feedback received from both customers
and colleagues on our approach
— Received regular updates on colleague engagement, reviewing colleague
feedback from listening groups and the We’re Listening survey
More information on pages 13 to 14, and 25.
Plan for Better
— Launched our Plan for Better strategy including revised targets
— Approved the plan to accelerate our commitment to be Net Zero no later
than 2035, five years earlier than previously stated
— Hosted Sainsbury’s first Environmental, Social and Governance (ESG)
event, launching our Plan for Better strategy and allowing stakeholders
to gain a deeper understanding of our ESG priorities
— Supported our partnership with and attendance at COP26, furthering our
commitment to protecting the planet
— Attended an event hosted by the University of Cambridge Institute for
Sustainability Leadership, which enhanced understanding of ESG matters
and highlighted the role that our leadership will play in tackling the
social, environmental and climate challenges facing the business
More information on pages 13 to 23.
Governance and risk
— Maintained responsibility for the identification and management of risks
to ensure the successful operation of the business
— Identified and monitored principal and emerging risks, including COVID-19,
supply chain security, talent availability and inflationary pressures
— Reviewed Audit Committee discussions and decisions to monitor internal
controls, stress testing and risk mitigation across the business
— Considered the key aspects of safety, including those in relation to
COVID-19, in order to keep colleagues and customers safe in rapidly-
changing circumstances
— Ensured continued compliance with the UK Corporate Governance Code
2018, as outlined on page 60
— Approved governance improvements including the move to a hybrid-
format Annual General Meeting and climate-related governance initiatives
— Undertook an internal Board evaluation to review the effectiveness of the
Board and its Committees, which included discussing the progress made
from the previous year’s evaluation and agreeing actions for the next
financial year
— Established a forward agenda and deep dives programme to ensure
regular reviews of key areas of focus
More information on pages 38 to 50, and 60 to 77.
62 Governance J Sainsbury plc Annual Report 2022
Succession and leadership
— Focused on succession planning across pivotal roles within the business
— Managed the retirement of David Keens and appointment of Non-
Executive Director Adrian Hennah and his transition as Chair of the
Audit Committee
— Led the appointment of Jo Bertram as Non-Executive Director with effect
from 7 July 2022
More information on pages 65 to 70.
Finance
— Reviewed business performance, including underlying profit forecasts,
cash and net debt positions, trading updates and market response to
announcements
— Discussed the impact of COVID-19 on the financial position of the
Company and discontinuation of LIBOR on financial facilities
— Scrutinised and approved the Company’s Preliminary results, Interim
results and Annual Report and Accounts
More information on pages 32 to 37.
Stakeholders
— Ensured stakeholder considerations were embedded in discussions
and decision-making, as outlined in our Section 172 statement on
pages 24 to 29
— Met key suppliers to enhance communication and understand their
views of our supplier relationships
— Shared responsibility for workforce engagement amongst Non-Executive
Directors, attending our Great Place to Work National Group, our
Workforce Advisory Panel, on a rolling schedule
— Benefited from open and honest colleague feedback on topics including
communication around product availability, colleague morale, job
security, colleague reward and Executive pay, which helped decision-
making in these areas
More information on pages 24 to 29.
Effective decision-making
Having an effective and diverse Board with a culture of engagement
and openness has enabled high quality discussions ahead of
executing several critical decisions during the year.
Net Zero by 2035
In a critical year for tackling the climate crisis, the business took the
decision to accelerate its commitment to Net Zero by no later than
2035, five years earlier than previously stated. The Board was fully
supportive of this decision having carefully reviewed the plans and
actions required to effectively deliver this level of commitment.
Sainsbury’s Bank
During the year, Sainsbury’s had received expressions of interest in
Sainsbury’s Bank. The Board was provided with regular updates from
management and advisers during the process. Whilst the Board
believed that it was in the best interests of shareholders to explore
these expressions of interest, it ultimately concluded that these did
not offer better value for shareholders than would be realised through
retaining Sainsbury’s Bank. The Board took the decision to remain
focused on strengthening and simplifying our Financial Services
business in line with our strategy.
Colleagues
The rapidly-changing nature of COVID-19 also highlighted an
opportunity for the business to implement frameworks and
encourage a culture of demonstrating pace and agility when making
decisions at all levels. The Board played a key role in this and led by
example during the year with several important decisions in relation
to our colleagues.
The Board reviewed the proposal to close our stores on Boxing Day
in2021, taking into consideration the impact on our customers and
the response from colleagues. The Board supported this action,
recognising the contribution of our colleagues throughout the year.
Following the announcement, Martin Scicluna and Tanuj Kapilashrami
discussed this matter with colleagues, enabling them to receive
first-hand feedback that will inform future decisions.
The Board also reviewed the proposal to increase store colleague base
pay above the Living Wage. The impact on various stakeholders was
taken into consideration, including colleagues and investors.
63 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
How the Board operates
The Board and its Committees have a forward programme of meetings to
ensure that sufficient time is allocated to each key area and the Board’s
time is used effectively. There is sufficient flexibility for items to be added
to the agenda, which enables the Board to focus on key matters relating to
the business at the right time.
Our Board comprises the Chairman, two Executive Directors and six
independent Non-Executive Directors. Adrian Hennah joined the Board as
Non-Executive Director on 1 April 2021 and became Audit Committee Chair in
July 2021, succeeding David Keens who retired from the Board on 9 July 2021.
Susan Rice has confirmed her intention to step down from the Board at
the conclusion of the AGM in July 2022 and Jo Bertram will join the Board
as a Non-Executive Director on 7 July 2022. Each of their responsibilities
is listed below and more information on their specific contributions can
be found in their biographies on pages 54 to 57.
Chairman
Martin Scicluna
— Leading the Board and ensuring its effectiveness in
all aspects of its role
— Promoting high standards of corporate governance
— Ensuring that the Board is aware of the views of
shareholders and other stakeholders
— Promoting a culture of openness and debate in the
boardroom and constructive relations between
Executive and Non-Executive Directors
Chief Executive
Officer
Simon Roberts
— Leading the day-to-day management of the
business and executing the strategy agreed
by the Board
— Proposing strategies, business plans and policies to
the Board
— Ensuring effective implementation of the Board’s
decisions
— Leading, motivating and monitoring performance
of the Company’s senior management
— Creating a framework of strategy, values, culture,
performance management and objectives to ensure
the successful delivery of results for the business
— Maintaining an effective framework of internal
controls and risk management
Chief Financial
Officer
Kevin O’Byrne
— Supporting the Chief Executive Officer in developing
and implementing strategy
— Overseeing the day-to-day financial activities and
the financial performance of the business
— Together with the Chief Executive Officer, ensuring
that financial policies and practices set by the Board
are adopted at all levels of the business
Senior Independent
Director
Susan Rice (stepping
down from the Board
on 7 July 2022)
Brian Cassin (with
effect from 7 July 2022)
— Acting as a sounding board for the Chairman and
as a trusted intermediary for the other Directors
when necessary
— Meeting with shareholders and representative
bodies when requested, discussing matters with
them where it would be inappropriate for those
discussions to take place with either the Chairman
or the Chief Executive Officer
— Leading the annual appraisal and review of the
performance of the Chairman
Independent
Non-Executive
Directors
Brian Cassin
Jo Harlow
Adrian Hennah
Tanuj Kapilashrami
Keith Weed
Jo Bertram (with effect
from 7 July 2022)
— Bringing an external perspective, independent
judgement and objectivity to the Board’s
deliberations and decision-making
— Supporting and constructively challenging the
Executive Directors and senior management,
holding them to account and offering specialist
advice using their wide and varied experience
— Monitoring delivery of the agreed strategy within
the risk management framework set by the Board
Company Secretary
and Corporate
Services Director
Tim Fallowfield
— Advising and assisting the Board and the Chairman,
particularly in relation to governance, Board
evaluations, induction, training and formulating the
agenda for Board meetings
— Ensuring that Board procedures and the governance
framework are effective
— Ensuring the Board receives accurate, timely and
clear information and is consulted on all matters
important to it
During the year, the Chairman and Non-Executive Directors met without the
Executive Directors being present. The Chairman holds regular and informal calls
between Board meetings with the Non-Executive Directors, to consider their
views and to enable thorough preparation for Board discussions. In addition, the
Senior Independent Director held discussions with the Non-Executive Directors
without the Executive Directors or the Chairman being present.
Directors were kept informed of the key discussions and decisions made at
each of the four principal Committees – Audit, Nomination, Remuneration,
and Corporate Responsibility and Sustainability. The Chair of each Committee
provided a detailed summary at the Board meeting following the relevant
Committee meeting.
In the rare event that a Director is unable to attend a Board meeting, the
Chairman will meet with the relevant Director in advance, so that their
comments and inputs can be considered. Following the meeting, the Chairman
will provide an update to them on the outcomes of the discussions.
The following table shows the attendance of Directors at scheduled Board
meetings. The Board held eight scheduled meetings during the year, together
with several unscheduled meetings which were well attended by all Directors.
Martin Scicluna 8(8) David Keens
2
3(3)
Brian Cassin 8(8) Kevin O’Byrne 8(8)
Jo Harlow 8(8) Susan Rice 8(8)
Adrian Hennah
1
8(8) Simon Roberts 8(8)
Tanuj Kapilashrami 8(8) Keith Weed 8(8)
The maximum number of scheduled meetings held during the year that each Director could attend is
shown in brackets.
1. Adrian Hennah joined the Board on 1 April 2021.
2. David Keens stepped down from the Board on 9 July 2021.
Time commitment and conflicts of interest
Prior to appointment, each prospective Non-Executive Director confirms
that they will have sufficient time available to be able to discharge their
responsibilities effectively and that they have no conflicts of interest. This is
discussed by the Board before any appointment is made. In addition, the
Board reviews and approves in advance requests by Directors wishing to
undertake new external responsibilities or directorships and considers both
the time commitments involved and any potential conflicts. The conflicts of
interest register is reviewed annually to ensure it is up to date and that there
are no new conflicts to consider. No changes were recorded during the year
that would impact the independence of any of the Directors.
The Board supports Executive Directors having a non-executive directorship role
as part of their continuing development, provided that they have sufficient time
to balance their commitments to the business with any external role. Subject to
Board approval, each Executive Director may hold one non-executive director
position. Whilst recognising the benefits of Non-Executive Directors having
varied and broad experiences, the Board keeps in mind investor guidance and
reviews the commitments of each Director annually.
Throughout the year, all Directors have demonstrated high levels of
availability and responsiveness for additional meetings and discussions
where these have been required. The Board remains confident that individual
members continue to devote sufficient time to undertake their
responsibilities effectively.
64 Governance J Sainsbury plc Annual Report 2022
Division of responsibilities
Director development
Induction
We have a comprehensive and tailored induction programme in place for
Directors when they join the Board to ensure their smooth transition and
enable them to gain an understanding of all major aspects of the business,
including our purpose, vision, strategy, culture, values, governance
framework, sustainability strategy and the opportunities and challenges
facing the sector.
When joining the Board, a new Non-Executive Director typically meets
individually with each Board and Operating Board member, and also with
senior management from key areas of the business to gain an insight into
their respective areas of responsibility. The Company Secretary and
Corporate Services Director briefs them on policies, Board and Committee
procedures, and core governance practice, which includes Directors’ duties
and Market Abuse Regulations. They also receive induction materials including
recent Board and Committee papers and minutes, strategy papers, investor
presentations, Matters Reserved for the Board and the Board Committees’
Terms of Reference. They visit stores, depots and other business locations
and meet key advisers. Director inductions are ongoing processes over a
number of years during which they will cover the areas in the table below.
Adrian Hennah joined the Board as a Non-Executive Director on 1 April 2021
and succeeded David Keens as Audit Committee Chair following David’s
retirement from the Board at the Annual General Meeting on 9 July 2021.
Adrian received a tailored induction on joining the Audit Committee. This
followed the usual programme for Directors’ induction as outlined below but
was specifically designed to support his transition to Audit Committee Chair.
This included attending the April Audit Committee meeting as an observer
and working closely with David Keens to ensure an orderly transfer of
responsibilities.
Adrian also met a number of colleagues and stakeholders pertinent to his
role on the Audit Committee. This included introductory meetings with EY,
the external auditors and Mark White, the Groceries Supplier Code Adjudicator.
He also met individually with each of the Chief Financial Officer’s direct
reports and their respective teams which included Internal Audit, Treasury,
Property, Pensions, IT and various finance teams. In addition to this, Adrian
visited Sainsbury’s Bank’s offices in Edinburgh and met with the Sainsbury’s
Bank’s Chair, the Chief Financial Officer and the Chairs of the Bank’s Risk and
Audit Committees.
Adrian also visited the Sainsbury’s Newbury store with Simon Roberts and
the Waltham Point depot with the Director of Logistics and Supply Chain.
This gave Adrian the opportunity to see first-hand the operations of a store
and depot, and to meet colleagues working within these locations. He has
also participated in Board sessions with employee representatives to hear
their views and experiences.
The Directors’ induction process
Understanding the
business
Understanding the sector
and environment
Meet the Sainsbury’s internal
team and advisers
Visit Group
operations
— Business strategy, purpose
and vision
— Overview of each business area
and its opportunities
— Operating plans, current KPIs
and targets
— Key business relationships
— Board and governance
procedures
— Board effectiveness reviews
and actions
— Matters relevant to the Board
Committees they join
— Recent Board and Committee
papers and minutes
— Key people and succession
plans
— Remuneration and reward
across the business
— Finance, treasury and tax
overviews
— Risk profile and approach
— Internal audit, risk and internal
controls
— The market and competitors
— Customer trends
— Consumer and regulatory
environment
— Brand perception and
reputation
— Analyst and investor
perspectives
— Key stakeholders’ views
— Directors
— Committee Chairs
— Company Secretary and
Corporate Services Director
— Members of the Operating
Board
— Senior management across
the business
— Members of the external
audit team
— Remuneration consultants
— Brokers
— Store visits
— Distribution centres
— Store support centres
65 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Composition, succession and evaluation
Continuing development
Non-Executive Directors continue to learn about the business by meeting
with management, colleagues, suppliers and other stakeholders as described
on the previous page. All of the Non-Executive Directors continue to engage
with different aspects of the business to support their ongoing development.
Further information on the continuing development of two of our Non-
Executive Directors, Jo Harlow and Tanuj Kapilashrami, is described below.
During the year, Jo Harlow, in her capacity as Chair of the Corporate
Responsibility and Sustainability Committee, hosted regular Climate
Dialogues for Sustainability Chairs with support from Chapter Zero. These
covered areas such as external resources, employment engagement,
biodiversity issues, COP26, and linking sustainability goals and remuneration.
She also became a Board member of Chapter Zero, a network of company
Chairs, Committee Chairs and Non-Executive Directors who are committed
to developing their knowledge of the implications of climate change for
UK businesses. Jo met with several Sainsbury’s store managers and had
discussions with the Chairman, Audit Committee Chair and Company
Secretary and Corporate Services Director on sustainability governance.
Jo participated in COP26 and attended a number of Sainsbury’s events
including the inaugural Environmental, Social and Governance (ESG) day,
the Farming Conference and a leadership event. In addition to this, Jo has
regularly attended and spoken at professional webinars, such as those
hosted by Legal & General Investment Management, Willis Towers Watson,
Deloitte, Fidelio and the Local Authority Pension Fund Forum. Jo’s
engagement with colleagues and regular development activities have
enabled her to make an effective contribution as a Non-Executive Director,
particularly in relation to sustainability and climate change issues.
In addition to regular discussions with members of the Operating Board,
Tanuj Kapilashrami regularly attends Sainsbury’s Great Place to Work
colleague listening sessions with the Group HR Director, the Chairman and
other Non-Executive Directors. Tanuj’s participation in these sessions
provided her with the opportunity to engage directly with colleagues and
hear their views on various topics during the year including our strategy,
values and culture, product availability, colleague pay and the decision
to close our stores on Boxing Day. These sessions enabled Tanuj to develop
a greater understanding of the business and bring employee insights into
Board discussions. As part of her external executive role, Tanuj is engaged
with professional bodies, industry forums and global peers and her external
perspective is valuable particularly in discussions involving colleagues and
culture at Sainsbury’s.
Professional development and training
To ensure the Board updates and refreshes its skills and knowledge, we have
a programme to support Directors’ training and development requirements
in relation to governance, investor expectations and regulatory impacts.
This includes regular presentations from management on relevant
governance matters.
The Board was upskilled on social, environment and climate change issues
and developments in a sustainability event led by the Cambridge Institute
for Sustainability Leadership in June 2021. The Board also received external
strategic updates from leading industry analysts in the food retail sector
at a Board dinner in September and at the Strategy Conference in October.
Suppliers also attended a Board dinner in March to enable the Board to hear
feedback directly from suppliers.
Both the Audit and Remuneration Committees received updates on relevant
accounting and remuneration developments, trends and changing disclosure
requirements from external advisers and management. The CR&S Committee
received stakeholder and regulatory updates on ESG matters from
management. More information can be found on pages 71, 73 and 78.
The Board and Committees were updated on compliance with the Modern
Slavery Act, Task Force on Climate-related Financial Disclosures, the 2018 UK
Corporate Governance Code and Directors’ responsibilities under Section 172
of the Companies Act. The Board was also provided with MAR training
from the Company Secretariat this year. The Directors have access to
advice from the Company Secretary and independent professional advice
is available at the Company’s expense, if necessary, in fulfilling their duties
and responsibilities.
Board evaluation
In line with best practice, we review the Board’s effectiveness on an annual
basis through a formal performance evaluation, including an assessment of
the Board and its Committees. An external evaluator conducts the review
every third year, and in the two intervening years this is carried out by the
Company Secretary and Corporate Services Director, to ensure continuity
over the three-year cycle. The last external evaluation was carried out by
Clare Chalmers, an experienced independent provider of board effectiveness
reviews, from November 2019 to February 2020.
This year’s internal evaluation was conducted from December 2021 to March
2022 and led by the Company Secretary and Corporate Services Director. The
review explored the key areas of focus set out below and themes that arose
for action in the 2020/21 internal evaluation. Board members completed an
online questionnaire, based on previous years to maintain continuity, which
also incorporated last year’s key feedback topics and recent developments
in the business, its strategy and governance.
The key areas of focus included: the effectiveness, role and priorities of the
Board and its Committees; the Board’s composition, skills, succession and
culture; the alignment of purpose, strategy and values; leadership of the
Board and the business; ways of working and broader risk management; and
engagement with stakeholders. Each Director was given the opportunity to
raise their own additional points. The results of the internal questionnaire
were discussed with each of the Directors in individual discussions with the
Company Secretary and Corporate Services Director.
Following the individual discussions, the Company Secretary and Corporate
Services Director discussed the conclusions (including any feedback with
individual Directors) with the Chairman and then presented a written report to
the Board. A separate meeting with the Board was held to discuss the findings
and the Board agreed the key actions. The Company Secretary and Corporate
Services Director also met with the Senior Independent Director to discuss
feedback for the Chairman, which was subsequently shared with him as part of
his review meeting. Each of the Committee Chairs received specific feedback on
the effectiveness of the relevant Committee for their consideration.
Findings of the 2021/22 review
The report identified a number of strengths of the Board including:
— The Board continues to operate effectively, with enhanced focus on
performance and the key strategic issues facing the business this year
— The Board has open discussions before major decisions are taken, and
the pace and progress of decision-making has been appropriate with
robust iteration between meetings to maintain momentum
— The Board has responded well to issues in an uncertain trading environment
— The external strategic input received at the sustainability event, Board
dinners and the Strategy Conference during the year were well received
by the Board
— The Chairman is a highly effective leader and has developed strong
relationships and trust with the NEDs
— The Executive Directors keep the Board well informed of key issues
arising, provide strong leadership and management’s handling of the
pandemic was outstanding
— The recent NED appointees are making strong contributions to the Board
— The NEDs are highly engaged and provide a good level of challenge and
support to management
The report also identified development areas for the Board in the year ahead
which are detailed on page 67.
Board Committees
As described above, the evaluation process also assessed the effectiveness
of the Board Committees. A theme identified from the process was a desire
for further cross functionality between the Committees where there was an
overlap of discussions, which is being implemented. The findings ultimately
concluded that each of the Committees continued to operate effectively,
was well led and was efficient in dealing with current issues.
Any specific findings and action points are overseen by each Committee
Chair, with consideration of the overall Board findings which are deemed
relevant to the Committee’s work.
66 Governance J Sainsbury plc Annual Report 2022
Key areas of focus from 2020/21 review Progress and actions implemented during 2021/22
Board development
Ensuring the Board continues to evolve in key strategic areas such as digital
and technology change, sustainability and climate change issues
A sustainability event held by the Cambridge Institute for Sustainability
Leadership was arranged for the Board in June. Leading retail industry
analysts attended a Board dinner in September and the Strategy Conference
in October to provide external strategic perspectives
Customer insights
Continued focus on meaningful customer insight and behaviour data to
further drive our strategy
During the year, the Chief Marketing Officer provided updates on customer
insight data at several Board meetings. This will continue to be an area of
focus for the Board and a plan is being developed to further strengthen the
Board’s understanding of customers
Supplier engagement
Supporting further engagement with Sainsbury’s key suppliers
The Board received supplier-facing, strategic-related updates from the Food
Commercial Director at Board meetings during the year. This focused on our
relationship with suppliers and the activities that the business has undertaken
to support them, particularly in challenging trading environments. In addition
to this, suppliers attended a Board dinner in March, enabling the Board to
hear directly from suppliers
Wider stakeholder engagement
Additional consideration to wider societal issues, including community,
government, non-governmental organisations and key society topics
Regular feedback and updates were provided at Board meetings following
discussions with our stakeholders on key regulatory, societal and
operational issues
Ways of working
Effective and appropriate transitioning plan, including face-to-face
meetings of the Board, management and key stakeholders, once the
COVID-19 restrictions have eased
A clear plan was developed which enabled the Board to transition safely and
effectively to face-to-face meetings of the Board and to meet with Operating
Board members and other key stakeholders within the business
Agreed actions and areas for development for 2022/23
— Allocate additional time at Board meetings for certain strategic topics to enable fuller discussions and reflection by the Board
— Incorporate a broader perspective into the planned customer insight sessions for the Board to strengthen its understanding of customers and support
strategic decision-making across the business
— Review colleague engagement activities planned for the Board and identify additional opportunities for the Board to build on the level of engagement
with colleagues
— Continue to build appropriate relationships with the Bank Board and monitor the Board’s progress in delivering its strategy
— Invite non-Audit Committee members to attend all or part of future Audit Committee meetings when key risks are being discussed to enhance their
understanding of the Company’s significant risks and progress on their mitigation
A combination of
Board evaluation
and Director
appraisal
Progress and
actions
implemented
during 2021/22
Agreed actions
for 2022/23
Board evaluation cycle
Year 2
Review focused
on Year 1 findings
raised and any new
findings arising
Year 1
Independent
and externally
facilitated review
Year 3
Year 2 progress
reviewed and
areas of focus
identified
67 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Nomination Committee
Report
Dear Shareholder
We continue to strengthen our Board and ensure it
is well balanced with the right skills and experience
to effectively deliver our strategy.
The Nomination Committee plays a key role in supporting the Board within
the governance framework in reviewing the composition of the Board and its
Committees. This includes an assessment of whether the balance of skills,
experience, knowledge and independence is appropriate to enable it to
operate in a highly effective manner and to promote the long-term success
of the Company. The Committee also assists the Board in its consideration of
conflicts of interest and independence issues throughout the year. No conflicts
of interest or independence issues were identified as a result of this activity.
The Committee also reviewed the Board’s short, medium and long-term
succession planning at the executive and non-executive level and is satisfied
that the Company is well positioned to move forward with continuity and is
led by a strong leadership team.
The Board supports the recommendations of the Hampton-Alexander
Review on gender diversity and the Parker Review on ethnic diversity. The
Board has made good progress against its diversity and inclusion strategy,
and the Company will feature for the first time in the FTSE 100 Top Ten Best
Performers list for women in leadership. Three of the Board of Directors are
women (33 per cent) and 47.8 per cent of our Operating Board members
and their direct reports are women. One member of the Board of Directors
identifies as ethnically diverse.
Inclusivity throughout the business is highly important to us and we
continue to focus on this and the development of our diverse talent pipeline.
We are highly supportive of the diversity and inclusion initiatives in place
which are detailed on pages 69 to 70.
Following a robust recruitment process, Jo Bertram will join the Board on
7 July 2022 and I look forward to the part that she will play in Sainsbury’s
future. After nine years of outstanding contribution and commitment,
Susan Rice will step down from the Board after the AGM in July 2022.
Following Susan’s retirement from the Board, I am delighted to announce
that Brian Cassin will be appointed as Senior Independent Director, Jo Harlow
will become Chair of the Remuneration Committee and Keith Weed will be
appointed as Chair of the CR&S Committee. During the year, David Keens
stepped down from the Board in July 2021, and Adrian Hennah joined the
Board in April 2021, succeeding David as Audit Committee Chair in July 2021.
The Committee recommended the appointment of Adrian Hennah and
Jo Bertram to the Board following rigorous search processes. The search
processes incorporated the extensive work completed last year to identify
the skills and experience required to deliver our strategy.
Martin Scicluna
Chairman
Principal role and responsibilities
The Nomination Committee is responsible for reviewing the structure,
size and composition of the Board and its Committees; taking into
account skills, knowledge, experience and diversity, and making
recommendations to the Board for any changes. It is responsible for
formulating plans for succession at Board and senior management
levels, taking into account the challenges and opportunities facing the
business, and the skills and expertise needed to ensure the long-term
success of the Company.
The Committee’s Terms of Reference are available on the Company’s
website www.about.sainsburys.co.uk.
The Committee held three scheduled meetings in the year, together with
several unscheduled meetings relating to recruitment and succession planning.
Attendance at the scheduled Nomination Committee meetings:
Martin Scicluna 3(3) Tanuj Kapilashrami 3(3)
Brian Cassin 3(3) David Keens
1
1(1)
Jo Harlow 3(3) Susan Rice 3(3)
Adrian Hennah 2(2) Keith Weed 3(3)
The number of meetings held during the year is shown in brackets.
1 David Keens stepped down from the Board on 9 July 2021.
Committee membership
The Committee consists of the Chairman of the Board and six Non-Executive
Directors, all of whom are independent. The Chairman of the Board is also
the Chair of the Committee, and the Company Secretary and Corporate
Services Director or his nominee acts as the Secretary of the Committee.
The Chief Executive Officer and Chief Financial Officer attend meetings
by invitation.
Succession planning
Talent development
We recognise the importance of developing our people and, as such, the
talent pipeline within our business remains a key focus for the Committee.
Our senior leadership population is a source of future Operating Board talent,
with five members of our Operating Board, Rhian Bartlett, Graham Biggart,
Tim Fallowfield, Mark Given and Clodagh Moriarty, progressing through this
route. Our Leading Together and Leading Steps Up programmes are key
investments we are making into developing senior leadership over the next
two to three years.
Appointments to the Board
The Nomination Committee has a formal, rigorous and transparent procedure
for the appointment of new Directors to the Board. When the need to appoint
a Director is identified, for instance when a Director is approaching the end of
their ninth year on the Board, the Committee reviews the experience, skills
and knowledge required, taking into account the Board’s skills matrix,
existing composition and the relevant experience and understanding of
our stakeholder groups. We engage executive search consultants and
consider the gender, nationality, educational and professional background
of candidates, as well as individual characteristics to see if they will be a
good fit against the desired specification. Suitable candidates are then
interviewed by Committee members. The process is led by the Chairman
who receives support from the Company Secretary and Corporate Services
Director as appropriate.
Careful consideration is given to ensure that proposed appointees have
enough time available to devote to the role and that the balance of skills,
knowledge and experience on the Board with regard to experience and
understanding of our stakeholder groups is maintained.
When the Nomination Committee has identified a suitable candidate, it then
makes a recommendation to the Board with the Board making the final
decision. During the year, the Committee followed the above procedure
during the search for the new Non-Executive Directors, Adrian Hennah and
Jo Bertram. MWM Consulting were engaged by the Committee as external
executive search consultants. MWM Consulting are one of the small number
of firms accredited by the Hampton-Alexander Committee for their leading
68 Governance J Sainsbury plc Annual Report 2022
work in promoting gender diversity. They had no connection with the
Company prior to appointment as recruitment consultants and had no
relevant connections with individual Directors. The Committee briefed the
search consultant on our specification, and we considered and interviewed
a wide and diverse range of candidates for each role. The Board was
unanimous in its decision to appoint Adrian Hennah and Jo Bertram as
Non-Executive Directors.
Identify
The Committee discussed the overall skill sets of
the Board and agreed a detailed job specification,
skill sets and preferred attributes for the appointees.
A thorough review of potential candidates was
undertaken. MWM Consulting presented a diverse
long list of external candidates from a broad range
of backgrounds. The Committee shortlisted a
number of candidates.
Interview
The Chairman and several of the Directors met
with the shortlisted candidates who confirmed
their interest in the role. Following the interviews,
the Nomination Committee members met to
discuss feedback.
Select
The Committee was unanimous in its final
selection of candidates. It recommended to the
Board that Adrian Hennah and Jo Bertram be
appointed as Non-Executive Directors. Their
specific contribution to the Company can be found
in their biographies on pages 55 and 57.
Appoint
Adrian Hennah’s appointment as Non-Executive
Director was announced on 12 March 2021 and
took effect on 1 April 2021. Jo Bertram’s appointment
as Non-Executive Director was announced on 14 April
2022 and she will join the Board on 7 July 2022.
Diversity and inclusion
The Board and Committee continue to drive the agenda of diversity and
inclusion across the business and are proud of the progress we have made
so far. We are committed to being a truly inclusive retailer where every single
one of our colleagues can fulfil their potential and where all our customers
feel welcome when they shop with us. We embrace and actively promote
diversity, inclusion and equity and aim to reflect the diverse communities we
serve. Simon Roberts and the Operating Board provide clear and committed
leadership and accountability of our inclusion agenda, with members of the
Operating Board acting as sponsors across wellbeing, diversity and inclusion,
and our Colleague Networks. To ensure continued progress in this space,
the governance of diversity and inclusion is a regular part of the Operating
Board agenda.
To ensure sustained improvement, we continue to look at focused initiatives,
culture and accountability through aspirational targets. In 2021, we set new,
stretching targets to take us to 2024 which covers more of our talent pipeline
and covers Black representation specifically. We have set a target of 50 per
cent female, 12 per cent ethnically diverse and 3 per cent Black representation
at senior management level
1
. Importantly, these targets will form part of
our long-term incentives for management. We are publicly reporting on
our progress against these targets twice a year with further information
available on our website https://www.about.sainsburys.co.uk/
sustainability/better-for-everyone/diversity-and-inclusion.
Actions to support the progression and representation of our ethnically
diverse colleagues are an important part of our strategy. We continue to
build on our commitments in support of our Black colleagues, all of whom
are part of our focus on changing the conversation around race. Further
information on the strategies we have in place to support our drive for
inclusivity and the progression of our diverse talent can be found on page 14.
The Board receives regular updates on our inclusion initiatives and the Board,
CR&S Committee and Nomination Committee receive detailed presentations
throughout the year on our inclusion priorities and the progress we are
making. The Remuneration Committee also reviewed and approved the
Ethnicity and Gender Pay Report which can be found on our website
https://www.about.sainsburys.co.uk/making-a-difference/
gender-pay-gap.
Board diversity policy
We promote diversity on our Board and we believe there is good balance
amongst our Non-Executive Directors, with extensive and wide-ranging
experience of retail and other consumer-facing businesses and varying
length of service. Our Non-Executive Directors have other highly relevant
skills derived from serving in a range of major executive and non-executive
positions throughout their careers and a blend of cognitive, personal
strengths and backgrounds.
We are keen to ensure that Board membership reflects diversity in its
broadest sense, our colleague base and the communities in which we serve.
The Board’s approach to its own diversity is as follows:
Aim to maintain a level of at least 33 per cent female Directors
and at least one Director who identifies as ethnically diverse on
the Board.
Three of our nine Board Directors are women (33 per cent) and one identifies
as ethnically diverse. In making its recommendations to the Board, the
Committee has due regard to the UK Corporate Governance Code 2018 and
other best practice and will consider the balance of skills, experience,
independence and knowledge of the Board, its diversity in the broadest
sense, including gender and ethnicity, how the Board works together as
a team and other factors relevant to its effectiveness.
The Board continues to review the development of the pipeline of both
ethnically diverse and female senior management within the business.
Of the ten members of our Operating Board during the year, four were
women (40 per cent). More information on diversity and inclusion can be
found on pages 13 to 14.
Consider candidates for appointment as Non-Executive Directors
from a wide pool.
During the year, the Nomination Committee discussed Non-Executive Director
appointments and succession. It worked closely with MWM Consulting in
compiling long and short lists of diverse candidates from various backgrounds
and sectors. Candidates were identified, interviewed and measured against
a detailed job specification, skill sets and preferred attributes.
Assist the development of a pipeline of high-potential
colleagues by encouraging key members of senior management
within the business to take on additional roles to gain valuable
Board experience.
The Board supports and encourages initiatives that strengthen the pipeline
of talent in the Company including:
— A comprehensive talent management review is presented and discussed
by the Board
— Highly personalised plans and initiatives for high-potential colleagues to
broaden their skill sets and experience to prepare them for future senior
roles; for example, through boardroom exposure, and non-executive and
trustee roles outside the business
— Senior management mentoring schemes sponsored by Board and
Operating Board members
1 The definition of ‘senior management’ in the UK Corporate Governance Code should be the Executive
Committee or the first layer of management below Board level, including the Company Secretary.
However, with such a large workforce, we believe including our top 230 senior management in the scope
of our targets ensures that we are focused on improving diversity in all of our most significant leadership
positions and developing our pipeline of talent. Our top 230 lead large teams and are critical role models
in the organisation, playing a vital role in shaping the inclusive culture that we are working hard to
create. We want all of our colleagues to see visible and diverse leaders in every part of the business.
69 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
70 Governance J Sainsbury plc Annual Report 2022
0-3 years
4-6 years
7-9 years
Board tenure
(Non-Executive Directors and Chairman)
3
3
1
Men
Women
Board gender diversity
6
3
White
Ethnically diverse
Board ethnic diversity
8
1
Non-Executive Directors
Executive Directors
Board balance
2
7
Corporate transactions
Risk Management/Audit
Finance/Accounting/Audit
F
inancial Services
Sustainability
Operations/General
Retailing experience
Consumer/Customer Service
E-commerce/Technology
Brand/Marketing
Digital/Online
HR/People
Remuneration
Current or recent
CEO experience
Strategy development/
Implementation
Board skills matrix
6
6
6
6
5
5
9
9
10
10
10
7
8
7
Jo Bertram will join the Board on 7 July 2022, after year end, and therefore
is not included in the above charts.
Corporate Responsibility
and Sustainability
Committee Report
Dear Shareholder
This year we launched our Plan for Better,
putting environmental and social sustainability
at the core of the business.
The Committee oversees the governance of Sainsbury’s being a sustainable
business. We continue to focus on stakeholder engagement including our
customers, colleagues, suppliers and the community. We continue to listen
and to engage with our stakeholders and more information about this can
be found on page 24.
In my fourth year as Chair of the Committee, we continue to see great
developments in our sustainability agenda, particularly with the evolution
of our Net Zero by 2040 plan to our Plan for Better, a key pillar in our broader
business strategy. Launching in June 2021, our Plan for Better encompasses
a range of sustainability commitments across our environmental and social
agenda. We were also hugely proud to be chosen as the Principal Supermarket
Partner of COP26, the United Nations Climate Change Conference, giving us
the opportunity to demonstrate strong industry leadership and inspire our
colleagues, customers and other businesses to rally together to protect and
restore our planet for the future.
COP26 took place in Glasgow for two weeks in November 2021, and as part of
our involvement we hosted multiple events. These included chairing panels
on a consistent approach to data and labelling and how we are helping
everyone eat better in order to protect our planet and our health. We also
engaged the public with our exhibition stand which focused on how we can
all make small changes to our plates to reduce the impact on the planet.
During COP26, we announced a number of new commitments, including
accelerating our target to become Net Zero in our own operations by 2035
and becoming signatories to WWF’s Retailers’ Commitment for Nature,
working with other retailers to halve the impact of UK shopping baskets
by 2030. As part of our commitment to reduce our value chain emissions,
we wrote to 400 of our key suppliers, who constitute a high proportion of our
value chain emissions, requesting that they disclose their carbon emissions
through the CDP or Higg platform, as well as setting their own Net Zero
science-based targets. We’re pleased that 87 per cent of our key food
suppliers arereporting via CDP.
This year we were pleased to arrange an upskilling session for the whole
Board, delivered by the Cambridge Institute for Sustainability Leadership
and in June 2021 we held an Environmental, Social and Corporate
Governance (ESG) event with investors. We talked with investors about our
new sustainability strategy, how we’re progressing against our commitments
and how our plan aligns with our brand commitment: Helping everyone
eat better. We have been a signatory of the Task Force on Climate-related
Financial Disclosures (TCFD) since 2020 and this year have implemented
its recommendations in full to strengthen our climate resilience; more
information on this can be found on page 17.
The Committee is very pleased with many of the Plan for Better outcomes
achieved this year – rolling out LED lighting to 100 per cent of our
supermarket estate and transitioning to 100 per cent renewable electricity
across the entire estate. We also implemented our partnership with
Neighbourly on our food donation programme across all supermarkets,
which has supported a 119 per cent increase in food redistribution for
human consumption year-on-year. For more information on progress on
our Plan for Better, see page 13 and visit www.about.sainsburys.co.uk
for our standalone bi-annual Plan for Better Reports.
COVID-19 has continued to impact the business over the past year, with
ongoing periods of change for our colleagues. We continue to focus on
engagement with colleagues and clear communication and this year have
introduced a new metric on colleague happiness, currently at 68 this year.
The Committee was also highly supportive of the initiatives put in place to
support the communities we serve, including our campaign to Help Brighten
a Million Christmases and the launch of our Helping everyone eat better
Community Grants to help tackle food insecurity. In total £38.4 million was
raised for good causes this year; more information can be found on page 15.
The launch and progress of Plan for Better during the last year has occurred
during a time of unprecedented challenges for the industry. Sainsbury’s
ambitions as reflected in its Plan for Better commitments are strategic and
stretching and the Committee and I look forward to reporting on further
progress in the future!
Jo Harlow
Chair, Corporate Responsibility and Sustainability Committee
Principal role and responsibilities
The Committee’s principal role is to review the sustainability strategy,
ensuring it is aligned with the Company’s purpose, strategy, culture,
vision and values. The Committee also plays a part in monitoring the
business’s engagement with stakeholders including customers,
suppliers, the community, colleagues, shareholders and government
on sustainability and corporate responsibility matters.
Attendance at scheduled Committee meetings:
Jo Harlow 3(3) Martin Scicluna 3(3)
Simon Roberts 3(3) Keith Weed 3(3)
The maximum number of meetings held during the year that each Director could attend is shown in brackets.
71 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Principal activities in the year
The Committee met three times during the year for scheduled meetings
with additional meetings arranged to discuss our ESG event for investors
and a session to upskill the Board, carried out by the Cambridge Institute for
Sustainability Leadership. The meetings focused on our Plan for Better and
stakeholder engagement – customers, colleagues, the community, suppliers
and shareholders. Updates and progress against our Plan for Better were
a key focus of the Committee this year as well as our Committee members’
involvement in our ESG event and our role in COP26.
The Committee discussed the evolution of our sustainability strategy,
building on our Net Zero by 2040 plan to provide feedback and approve our
Plan for Better. As part of the new strategy, the Committee reviewed the
development of the social part of our sustainability strategy, including
our evolved approach to community and partnerships to focus on food
insecurity and our refreshed commitments and targets on human rights.
More information can be found on page 15.
At each Committee meeting, members discussed our engagement across
our stakeholder groups, with deep dives of particular groups at each
meeting. The Committee reviewed our engagement with suppliers and the
feedback we received from suppliers via the Advantage Suppliers Survey
and Groceries Code Adjudicator report. The Committee was also updated
on the progress of the Supplier Relationship Management programme and
how we supported suppliers during exceptional times as a result of Brexit
and COVID-19. More information on suppliers can be found on page 27. The
Committee also considered culture and colleague engagement, reviewing
insights from colleague engagement surveys. More information can be
found on page 13.
Reporting and assurance were discussed at both the CR&S Committee and
the Audit Committee this year, reviewing our approach to ESG reporting
and disclosures, and the level of assurance we have across our metrics.
The Committee discussed our approach to the TCFD recommendations and
the implementation of responsibility for climate risk and opportunities atthe
Board level, as well as building Board competency. The integration of climate
risk analysis findings within strategic and financial decision-making were
also reviewed. More information on TCFD can be found on page 17.
The Committee reviewed the steps being taken to prevent modern slavery
and human trafficking in our business operations and supply chains and
recommended that the Board approve our Modern Slavery Statement.
Further details can be found on page 15.
For further information on our Corporate Responsibility and Sustainability
agenda, please see:
— Page 13 for progress on our Plan for Better commitments
— Page 17 for our TCFD disclosure
— Page 78 for information on sustainability-linked remuneration targets
— Visit www.about.sainsburys.co.uk to read our Plan for Better Report
Governance
J Sainsbury plc Board
Oversight of the sustainability strategy.
Chairman: Martin Scicluna, Chairman
Remuneration Committee
Reviews remuneration targets
aligned to the sustainability
strategy¹.
Chair: Susan Rice,
Non-Executive Director
Corporate Responsibility and
Sustainability Committee
Reviews the sustainability strategy. It also monitors the business’s engagement with
colleagues, customers, suppliers, the community, shareholders and government on
sustainability and corporate responsibility matters.
Chair: Jo Harlow, Non-Executive Director
Audit Committee
Reviews risks and confidence
in disclosures aligned to our
sustainability strategy¹.
Chair: Adrian Hennah,
Non-Executive Director
Operating Board
Defines the business-wide strategy, adapting to new regulatory requirements and
trends. Reviews cross-value progress and signs off major investments.
Chair: Simon Roberts, CEO
Plan for Better Steering Committee
2
Leads operational execution of our sustainability strategy, Plan for Better,
byoverseeing working group activity, ensuring delivery of performance.
Chair: Mark Given, Chief Marketing Officer
Working Groups
3
:
Plan for Better working group, Environment working group and Social working group.
1 Remit of Committee in relation to the sustainability strategy. For full details on the Committees please read the Remuneration Committee Report on page 78 and the Audit Committee Report on page 73.
2 Replaced the Net Zero Steering Committee as of June 2021. Steering Committee meets five times per year. Membership consists of Directors from across the business, with additional Director representation from
Audit, Finance and Strategy attending the Committee twice a year to review Corporate Risk Updates including TCFD recommendations.
3 Current working group structure replaced individual pillar working group structure in September 2021. Working groups meet five times per year. Our Diversity & inclusion and Skills & opportunities pillars are managed
via the Human Resources Leadership Team and the Community & Partnerships pillar is managed via the Marketing and Loyalty Division.
72 Governance J Sainsbury plc Annual Report 2022
Audit Committee Report
Dear Shareholder
I am pleased to present the Committee’s report for
the year ended 5 March 2022, in my first year as
Chair of the Audit Committee.
I was pleased to be appointed as Chair of the Committee during the year,
succeeding David Keens who retired at our 2021 Annual General Meeting.
I would like to thank David for his significant contribution and leadership of
the Committee over the last six years, and for the helpful support and advice
he gave to me in our handover period. Brian Cassin and Keith Weed have
both provided important contributions over the year. The different and
complementary skills we each bring to the Committee have helped ensure
robust and productive discussions with management and the external
auditor. We are also well supported by our Director of Internal Audit, Risk
and Resilience and the Internal Audit team; they play an important role and
their work is respected throughout the business.
Key areas of focus for the Committee during the year included:
— Reviewing financial reporting, including the processes in place to ensure
the Annual Report and Financial Statements are fair, balanced and
understandable
— Considering the impact of COVID-19 on key accounting judgements
— Reviewing the effectiveness of external and internal audit processes and
the effectiveness and appropriateness of our systems of internal controls
— Reviewing of Environmental, Social and Governance (ESG) metrics
and assurance
— Reviewing the Group’s data governance and information security strategy
— Reviewing audit and non-audit fees
The UK’s regulatory landscape continues to evolve and, during the year, the
government consulted on proposals for the extensive reform of audit and
corporate reporting. While, at the time of writing, it is not yet clear what
changes in regulation will materialise, the Committee and management
are challenging ourselves and our external auditor on areas for potential
development, as well as how we might respond to changes in regulation.
Through the annual Board evaluation process (pages 66 to 67), the Board has
again conﬁrmed the effectiveness of this Committee in its role of supporting
the J Sainsbury plc Board in compliance with its duties.
Adrian Hennah
Chair, Audit Committee
Principal role and responsibilities
The primary role of the Committee is to ensure the integrity of
the financial reporting and auditing processes and monitor the
effectiveness of the Group’s internal control and risk management
systems. This includes:
— Monitoring the effectiveness of the financial statements of the
Company, discussing formal announcements relating to the
Company’s financial performance and any significant issues
and any significant judgements contained in them
— Reviewing the Group’s financial statements and the material
financial reporting judgements contained in them
— Advising the Board on whether the Committee believes that this
Annual Report and the financial statements contained within it,
when taken as a whole, are fair, balanced and understandable, and
provide the information necessary for shareholders to assess the
Group’s position and performance, business model and strategy
— Reviewing and monitoring the external auditor’s independence
and objectivity and the effectiveness of the audit process, taking
into consideration relevant UK professional regulatory requirements
— Developing and implementing a policy on the level, amount and
pre-approval of non-audit services provided by the external auditor
— Advising the Board on the appointment, reappointment and
removal of the external auditor and the remuneration and terms
of engagement of the external auditor
— Monitoring the effectiveness of the Group’s internal control
and risk management systems, including whistleblowing and
fraud controls
— Reviewing the scope, activities and results of the Internal
Audit function
— Reviewing the Committee’s Terms of Reference, carrying out
an annual performance evaluation exercise and noting the
satisfactory operation of the Committee
— Reporting to the Board on how it has discharged its operations
The Committee’s Terms of Reference are available on the Company’s
website www.about.sainsburys.co.uk
The Committee held four scheduled meetings in the year.
Attendance at scheduled Audit Committee meetings:
Adrian Hennah
1
3(3) Keith Weed 4(4)
Brian Cassin 4(4) David Keens
2
1(1)
The maximum number of meetings held during the year that each Director could attend is shown in brackets.
1 Adrian joined the Board on 1 April 2021.
2 David Keens retired from the Board on 9 July 2021.
Committee membership
The members of the Committee are all independent Non-Executive Directors
who, together, have experience and skills relevant to the retail sector.
They also have extensive general business and management experience.
Their biographies are on pages 54 to 57. The Board has determined that
Adrian Hennah has recent and relevant financial experience.
Regular attendees at Committee meetings include the Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, Director of Internal
Audit, Risk and Resilience, Director of Group Finance, Company Secretary
and Corporate Services Director, Deputy Company Secretary, the Chief
Information Officer, the Chief Information Security Officer, representatives
of Sainsbury’s Bank and the external auditor.
73 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Committee activities
Financial reporting
The integrity of the financial statements and formal announcements
relating to financial performance
The Committee reviewed the Annual Report, the Preliminary and Interim
results, and supporting information to assist in these reviews.
Significant financial and reporting matters
The Committee reviewed items relating to pensions, going concern and
viability and COVID-19-related disclosures. More information can be found
in Significant financial and reporting matters on pages 76 to 77.
Treasury funding and liquidity
The Committee assessed the business’s secured and unsecured borrowing
facilities and their appropriateness in tenor and amount to Group requirements.
Assumptions and qualifications in support of the viability and going
concern statements
The Committee assessed the financial projections over three years, which
continues to be an appropriate timeframe for the Statement of Viability as
approved by the Board. The key factors underpinning the projections beyond
three years were reviewed. More information can be found in the Statement
of Viability on page 51 and the Significant financial and reporting matters on
page 76.
Assessment of whether the Annual Report is fair, balanced
and understandable
One of the Committee’s key roles is to advise the Board that it is satisfied
that the Annual Report and Financial Statements are fair, balanced and
understandable (see page 100) and provide the information necessary for
shareholders to assess the Company’s position, performance, business
model and strategy. In doing so, the Committee ensures that management
disclosures reflect the supporting detail, and/or challenges management
to explain and justify their interpretation and, if necessary, re-present their
position. The external auditor supports this process, in the course of its
statutory audit, by auditing the accounting records of the Company against
agreed accounting practices, relevant laws and regulations. In addition,
the Committee:
— Reviewed the processes and controls that underpin the Annual Report
preparation including confirmation that the reporting team and
senior management were fully aware of the requirements and their
responsibilities
— Received a draft of the Report and provided feedback on it, highlighting
any areas that required further clarity. The draft Report was amended
to incorporate any feedback ahead of final approval
— Was provided with a list of the key matters included in the Annual
Report, highlighting both positive and negative influences
— Reviewed and discussed the key factors considered in determining
whether the Report is fair, balanced and understandable
The Committee advised the Board that the Annual Report and Financial
Statements are fair, balanced and understandable, and that the Directors
have provided the necessary information for our shareholders to assess
the Company’s prospects, business model and strategy.
Risk management and internal controls, and principal
risks and uncertainties
Risk management reviews of principal risks and uncertainties,
and emerging risks and opportunities, compared to corporate plans
See pages 38 to 50.
Reports from the Audit and Risk Committees of Sainsbury’s Bank,
including risk and compliance reporting processes
Sainsbury’s Bank plc is a subsidiary of the Company, with an independent
Board responsible for setting the Bank’s strategy, risk appetite and annual
business plan. It has an independent Chairman and five Non-Executive
Directors, four of which are independent. The Bank’s Chief Executive Officer
and Chief Financial Officer also sit on the Bank’s Board. The Bank’s Chief
Executive Officer, supported by the Executive Committee, is responsible
for day-to-day management of the business.
The Chairs of the Bank’s Audit and Risk Committees, the Chief Executive
Officer and the Chief Financial Officer attended meetings of the Committee
and provided updates on critical accounting judgements and estimates,
important operating and regulatory matters, the impact of COVID-19, the
control framework and environment, and key risks. There is communication
between Sainsbury’s Internal Audit function and its equivalent within the
Bank. See Significant financial and reporting matters on page 76.
External audit
Scope of the external audit plan and fee proposal
The Committee reviewed EY’s overall work plan and, through regular
communication, advised EY of any specific matters which the Committee
was considering from previous audits and current operations. The
Committee approved EY’s remuneration and terms of engagement.
Independence and objectivity
The independence and objectivity of the external audit function is a
fundamental safeguard to the interests of the Company’s shareholders.
In line with regulation, the previous EY audit partner rotated off the audit
at the end of the 2020/21 audit. The Committee approved the appointment
of Colin Brown as the new EY partner for 2021/22 in April 2021.
Non-audit services and fees
The Committee has overseen the Company’s policy which restricts the
engagement of EY in relation to non-audit services. The intention is to ensure
that the provision of such services does not impact on the external auditor’s
independence and objectivity. It identifies certain types of engagement
that the external auditor shall not undertake, including internal audit and
actuarial services relating to the preparation of accounting estimates for
the financial statements. It requires that individual engagements above
a certain fee level may only be undertaken with pre-approval from the
Committee or, if urgent, from the Chair of the Committee and ratified at
the subsequent meeting of the Committee. It recognises that there are
some types of work where a detailed knowledge of the Company’s business
is advantageous. The policy is designed to ensure that the auditor is only
appointed to provide a non-audit service where it is considered to be the
most suitable supplier of that service.
The Committee received a report on the non-audit services provided. The
annual aggregate of non-audit fees is capped at 70 per cent of the annual
average of the audit fees for the business for the preceding three-year period.
The majority of the non-audit work undertaken by EY during 2021/22 related
to services provided by EY in the capacity of reporting accountant. The total
non-audit fees were £1.0 million. The audit fees for the year in respect of
the Group and subsidiaries were £3.5 million. A breakdown of the fees is
provided in note 9 of the consolidated financial statements on page 127.
Effectiveness of external audit
The Committee considers the effectiveness of the external auditor on an
ongoing basis during the year, including its independence, objectivity,
appropriate mindset and professional scepticism. The Committee has
regards to the:
— Experience and expertise of the external auditor
— Quality of their direct communication with, and support to, the Committee
— Content, insights and value of their reports
— Fulfilment of the agreed external audit plan
— Robustness and perceptiveness of the external auditor in their handling
of key accounting and audit judgements
— Interaction between management and the external auditor, including
ensuring that management dedicates sufficient time to the audit process
— Provision of non-audit services
— Evaluation of the effectiveness of the external auditor
— Other relevant UK professional and regulatory requirements
The Committee conducted an audit effectiveness review. The review
included the distribution of questionnaires to those Directors and managers
in the business directly involved in the audit. The questionnaires sought
feedback on their experience with the external auditor, considering areas
such as the knowledge and experience of the audit team, audit strategy
and planning, and the quality of communication. Management collated the
responses and reported back to the Board.
74 Governance J Sainsbury plc Annual Report 2022
As a result of the review, it was determined that EY maintained good
working relationships and had demonstrated strong technical understanding,
including within the Tax and Bank component teams. Opportunities for
improvements in the planning process were positively discussed between
EY and Sainsbury’s management during the audit debrief, with steps being
taken on both sides to drive further improvements to the process going
forward. EY were robust in their questioning and provided good support
whilst challenging management effectively. The Committee concluded
that EY remained effective, objective and independent in their role as
external auditor.
The Committee has confirmed compliance with the provisions of the
Statutory Audit Services Order 2014.
Recommendation of the reappointment of EY as auditor
The Committee has recommended to the Board the reappointment of EY as
auditor for the 2022/23 financial year. A resolution to this effect will be tabled
at the 2022 AGM.
Tender of external auditor
EY was appointed as the Company’s external auditor in July 2015, following
a tender process. We are next required to undertake a tender in 2024 or we
may do so at an earlier time as determined or required by the Company.
Internal Audit
Director of Internal Audit, Risk and Resilience
The Director of Internal Audit, Risk and Resilience reports to the Committee
Chair and has direct access to all members of the Committee. The purpose,
authority and responsibility of Internal Audit are defined in the Internal
Audit Charter, which the Committee reviews annually.
Internal controls framework
Information on our internal controls framework is on page 77.
Management’s responsiveness to Internal Audit’s findings
and recommendations
The Committee was provided with updates on Internal Audit’s findings,
key agreed actions and the status of all actions at each meeting.
Internal Audit Plan
The scope of the Internal Audit Plan and subsequent amendments were
reviewed by the Committee.
Effectiveness of the Internal Audit function
The Committee reviewed Internal Audit resources, work programme and
results. The Director of Internal Audit provides an annual overview of Internal
Audit’s performance to the Audit Committee, including key performance
indicators and stakeholder feedback. Improvement and actions required are
highlighted and used to assist in reviewing the effectiveness of Internal Audit.
The Committee concluded that Internal Audit continued to be effective.
Other
Audit Committee’s effectiveness
The review of the Committee’s effectiveness formed part of the Board
evaluation. See pages 66 and 67.
Significant issues raised through the whistleblowing process
The Committee received updates at each meeting on any significant
whistleblowing matters. The Committee Chair receives earlier notification
of matters that may develop into a significant incident. No issues arose
that required the Committee to be updated ahead of a scheduled meeting.
All issues were escalated to the relevant manager for investigation. The
availability of the Rightline whistleblowing facility was communicated across
the business during the year.
Data governance and information security
Updates on the data governance and information security programme
were provided during the year, including updates on strategic risks,
third-party assurance, cyber security, the plan for legacy assets, access
controls and security.
Ongoing material litigation
The Committee is appraised on all material litigation and potential impacts
on financial reporting disclosures. These are also provided to the Board.
Compliance with the Groceries Supply Code of Practice (GSCOP)
GSCOP sets out how large retailers should manage certain aspects of their
relationship with grocery suppliers. Each retailer to which it applies has to
appoint a Code Compliance Officer (CCO) whose duties include hearing
disputes between suppliers and the retailer. Sainsbury’s has appointed the
Director of Internal Audit, Risk and Resilience as its CCO.
GSCOP requires that the business delivers an annual compliance report to
the Groceries Code Adjudicator (GCA), as approved by the Chairman of the
Audit Committee, and a summary must be included in the Annual Report
and Financial Statements. This is set out below.
Summary Annual Compliance Report
Sainsbury’s GSCOP compliance framework is based on a collaborative
relationship with the GCA, clear policies and procedures, mandatory training
and regular monitoring and reporting of compliance. Sainsbury’s also has
specific internal resource who provide all relevant colleagues with day-to-
day advice and guidance.
We continue to engage positively with the GCA on GSCOP matters and work
collaboratively to address any concerns and improve our processes through
our regular catch ups. We also proactively contact the GCA for clarification
and guidance. We were pleased to be recognised by suppliers, through the
GCA’s 2021 annual survey, as the retailer with the highest overall compliance
with GSCOP.
This year, as part of our Food First strategy, we conducted structured
planning with some of our branded suppliers. To support these discussions,
additional training and guidance was developed in conjunction with the
Legal team to help ensure compliance with GSCOP throughout the process.
Feedback from suppliers on the programme was provided by the GCA and
changes were implemented to strengthen processes, communication and
oversight mechanisms.
In March 2021, Sainsbury’s agreed to adhere to the GCA’s voluntary code
on forensic auditing from 6 March 2021, alongside all other in-scope retailers.
This limits the auditing of suppliers’ trading accounts for monies owed to
no more than the current and previous two financial years. Suppliers were
notified of this change during the financial year; the commitment is reciprocal,
and suppliers must agree to limit their own audit activity in return.
The challenges on global supply chains, including those for Groceries, have
been widely reported during the year. Sainsbury’s Buying and Supply Chain
teams worked closely with suppliers to maintain supply and to minimise
the impact on customers. Senior legal representatives continue to be
involved in providing support and advice to the business, as well as regular
communications to suppliers reminding them of their obligations and our
ways of working.
Relevant policies are reviewed and updated on at least an annual basis and
are made available to colleagues. This is supported by Sainsbury’s GSCOP
training, which is compulsory for colleagues who are part of the Buying team
and for colleagues who are directly or indirectly involved in decisions that
impact GSCOP. As a result, over 1,800 colleagues completed appropriate
training during the year. GSCOP training is reviewed and refreshed annually.
We also established clear consequences for training non-compliance.
Regular meetings are held between the CCO, Legal, Internal Audit and the
Commercial Planning team to identify and assess emerging risk areas and
an established compliance monitoring programme is embedded within the
business. The Operating Board and Audit Committee are updated four times
a year on GSCOP matters.
31 potential breaches were reported in 2021/22 (eight in 2020/21). Of the
31 potential breaches of GSCOP, three were deemed to be outside the Code
and three were still in progress at the end of the financial year, although
two were subsequently resolved. The increase in potential breaches was
primarily driven by the supplier planning process, referenced earlier.
Of the 27 complaints that were in scope of the Code the majority were
resolved within our Trading Division using standard escalation procedures
with the remainder being resolved through discussions between the CCO and
the supplier. None were pursued as formal disputes with the CCO or referred
to the GCA for arbitration. Causes of potential breaches are reviewed to
identify areas for improvement.
75 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Significant financial reporting matters and judgements
The areas of focus and actions taken by the Committee in relation to the 2022 Annual Report are outlined below. The Committee was satisfied in each case
with the accounting and disclosure in the financial statements.
Area of focus Actions taken
Presentation of financial statements
The Group uses Alternative Performance Measures (APMs) and includes
additional disclosures, including reconciliations to statutory measures,
see pages 203 to 207.
See note 5, Profit before non-underlying items, on page 118.
The Committee considers it important to take account of both the statutory
measures and the APMs when reviewing these financial statements.
In particular, items excluded from underlying results were reviewed by the
Committee and it is satisfied that the presentation of these items is clear,
applied consistently across years and that the level of disclosure is
appropriate. The net non-underlying profit this year was £124 million
(2021 restated: net charge of £521 million). Excluded items are detailed
on pages 118 to 121. The most significant items relate to income recognised
in relation to legal disputes, and charges recognised in relation to the
continuation of restructuring programmes announced during the prior year.
The Committee gave particular attention to the FRC Thematic Review of
APMs published during the year to ensure the Group’s APMs are not
presented in ways that give them greater prominence than amounts
stemming from the financial statements; that specific, tailored explanations
for the inclusion of individual APMs are provided; and that APMs are
reconciled to the most directly reconcilable line items.
Pensions accounting
The Group’s balance sheet shows a pension surplus of £2,283 million,
which comprises £11,693 million of assets, and £(9,410) million of liabilities.
This compares to a net surplus in the prior year of £744 million.
See note 37, Retirement benefit obligations, on page 178.
The Committee reviewed a summary of the actuarial assumptions used
in arriving at the valuation for the defined benefit pension scheme and was
satisfied that they are reasonable.
Going concern and viability
Going concern and viability projections are produced bi-annually and
monitored regularly, especially given the ongoing uncertainties surrounding
COVID-19.
See Statement of Viability on page 51.
The Committee undertook a detailed review of the financial liquidity of the
business over the viability assessment period of three years, taking into
account cash flows, current levels of debt and the availability of future
finance. The viability assessment was discussed by the Committee in March
2022 and scenarios to be stress-tested through the business’s corporate plan
were agreed. The outcomes were discussed in April 2022 which included
specific scenarios in relation to COVID-19.
Sainsbury’s Bank reporting
The Bank’s impairment provisioning for customer loans is a significant risk
and is subject to complex IFRS 9 accounting requirements.
The Committee receives updates on the key agenda items discussed at the
Bank’s Audit Committees. These include accounting judgements and
estimates and important operating and regulatory matters such as liquidity,
cash flows, capital adequacy and risk management processes.
The accounting judgements and estimates reviewed by the Committee
included impairment of loans to Bank customers. Sensitivities for
impairment provisions, including potential impacts from COVID-19, are in
note 30 of the accounts on page 152.
COVID-19-related disclosures
The pandemic continued to affect the Group’s operations throughout the
year and remained an area of uncertainty at the start of the new year.
The Group’s core businesses include essential retailing and financial services,
sectors which have remained operational throughout the year. However,
it is important to consider the impact of COVID-19 on the annual financial
statements, in particular, the measurement of assets and liabilities and the
ability of the business to continue as a going concern.
The Committee has continued its work, debate and challenge as usual.
The impact of COVID-19 on the Group, so far as it can be disaggregated,
is detailed throughout the Annual Report.
Prior year restatements
The prior year financial statements have been restated this year in relation
to two areas:
1 Removal of business rates from onerous property contracts in line with
IFRIC 21 “Levies”;
2 Notional cash pooling arrangements, for which it was concluded that
presenting the cash and overdrafts on a net basis was inappropriate.
The Committee reviewed the accounting for, and disclosure of, prior year
restatements in relation to business rates and notional cash pooling
arrangements. See note 2 of the accounts on page 113 for further information
on prior year restatements.
Impairment of non-financial assets
Impairment of assets is a source of estimation uncertainty. A review for
impairment triggers is performed at each reporting date by questioning
if changes in the circumstances suggest the recoverable value of certain
assets may be less than their carrying value. See note 17, Impairment of
non-financial assets, on page 139.
The Committee review summary reports produced by management
detailing the outcomes of the impairment assessment. No Group
impairment triggers were identified in the year.
Equally, goodwill was separately tested for impairment at the year-end as
required under IAS 36, which includes goodwill recognised in relation to the
acquisitions of Sainsbury’s Bank, Home Retail Group and Nectar. The Committee
challenged the key assumptions used in the impairment review, and whether
the outputs were in line with management’s overall understanding of the
relevant business areas. No impairments were identified.
76 Governance J Sainsbury plc Annual Report 2022
Internal controls framework
The internal controls framework encompasses controls relating to financial
reporting, preparation of consolidated Group accounts, operations and
compliance, risk management and Sainsbury’s interests in joint ventures.
The Audit Committee reviews the effectiveness of internal controls on an
ongoing basis and monitors any remedial action required. An overview of
key elements of the control framework is set out below.
Our control environment
— The Board discusses and approves the Company’s strategy, plans,
objectives, budget and the risks to achieving them
— Group-wide policies covering delegations of authority, anti-bribery
and corruption and key compliance requirements such as keeping
information safe and HR policies set clear parameters for colleagues
— Management regularly reviews risks to achieving objectives, with
mitigating controls identified and actions taken
Controls embedded in the business
— Policies, procedures and controls are embedded within business
processes
— Specific teams, such as Central Retail and Technical Operations, support
the design and implementation of specific controls across the business
— Training programmes are provided to support implementation and
compliance with key policies, processes and controls
Monitoring and oversight
— Compliance with policies, standards and controls is monitored and
evaluated in finance, accounting, treasury, information security and
safety management
— The Business Performance Review forum provides oversight and approval
of capital spend
— The Capital Returns forum monitors the outcome of capital spend
— Quarterly commercial reviews by Executive Directors of financial and
operational performance cover all business areas
— Oversight and governance committees have delegated responsibility
for monitoring key risk areas such as the Data Governance, Group Safety,
Operational Resilience and Treasury Committees
Our assurance framework
— Operating Board members certify annually that the corporate risk map
accurately reflects their view of key risks across the business, that they
are responsible for managing risks relevant to their division and that
internal controls exist to provide reasonable, but not absolute, assurance
that the risks in their areas of responsibility are appropriately identified,
evaluated and managed
— The Board and the Committee review any significant fraudulent activity
and whistleblowing by colleagues, suppliers or other parties, including
alleged incidents of bribery, and actions being taken to remedy any
control weaknesses
— Reports from management are presented to the Operating Board and
Audit Committee on how we manage material risks
— Management and the Audit Committee review the scope and results of
the work of Internal Audit across the Company and of the implementation
of their recommendations
— The Committee reviews the scope and results of the work of the external
auditor and any significant issues arising
77 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Dear Shareholder
This has been a year of unprecedented change.
Throughout, we remained focused on delivering
enhanced value for all our stakeholders: our customers,
our colleagues, the communities in which we operate,
and our shareholders.
You will read in this Annual Report about the issues we faced due to the
ongoing COVID-19 pandemic and the fresh challenges that arose during
the year as a result of the changing marketplace. I would like to thank our
colleagues for their hard work and commitment that enabled us to deliver
for our customers day in, day out, which has significantly contributed to
our strong performance over the year.
We are one year into our three-year plan to put food back at the heart of
Sainsbury’s and as the economic climate changes and the cost of living
keeps on rising, we are committed to supporting our customers and
colleagues every way we can. It’s against this backdrop that we made reward
decisions during the year. As always, the Remuneration Committee seeks
to take a measured and responsible approach to executive pay, considering
decisions from the perspective of all our stakeholders as well as the external
environment. And as a business, we are particularly focused on ensuring
that colleagues throughout the organisation are recognised and fairly
rewarded for the important roles that they play in our success.
Remuneration highlights
Executive pay
— Executive pay is directly linked to the Company strategy and 2021/22
outcomes are aligned to the performance delivered
— The proposed full-year dividend of 13.1 pence is the highest dividend
the business has paid for five years
— The Remuneration Committee has applied downward discretion to
remove £100 million of net COVID-19 benefit from both the annual
bonus and the LTIP outturn
— Executive pay changes – 2022 salary increase of 3.5 per cent for
both Executive Directors is below that of the broader workforce.
On appointment, Simon Roberts’ salary was over 10 per cent lower
than the previous Chief Executive’s salary, and total fixed pay 25 per
cent lower. Simon waived his 2020/21 annual bonus. Kevin O’Byrne’s
pension will be aligned to the wider workforce by the end of this year
Colleague pay
— We are the first major supermarket to pay colleagues the Living
Wage, wherever they work in the UK
— Our base rate is now £10 per hour nationally – ahead of the Living
Wage of £9.90 – and our London base rate is £11.05, in line with the
London Living Wage
— Sainsbury’s hourly-paid retail colleague pay has increased by 25 per
cent and Argos by 31 per cent over the past five years – with over
£200 million invested over the last two years
— Continued enhancement of benefits including changes to colleague
discount and pay while on Family Leave
Strong year of delivery for our stakeholders
Customers and community
As COVID-19 continued to impact our daily lives, we remained focused on
keeping our customers and colleagues safe. We have continued to invest in
price, supporting customers as the cost of living has accelerated. Last year
we launched Sainsbury’s Quality, Aldi Price Match which matches Aldi on
popular products and we continue to run regular Price Lock campaigns to
give customers certainty on the price of a broad range of everyday and
essential items for at least eight weeks.
It is also important to us that we continue to support our charitable partnerships
and the communities in which we operate. Over the 2021/22 financial year, we
raised over £38 million for good causes across all our programmes. This year we
have also worked with Comic Relief to support the humanitarian crisis in Ukraine,
donating £2 million.
Colleagues
I’m really proud to be able to say that all Sainsbury’s and Argos retail store
colleagues can earn at least the Living Wage, regardless of where they work
in the UK. As a retail business with over 171,000 colleagues, our wage bill of
£3.6 billion is our largest operating cost and is 11.9 per cent of our sales, so
any change to the base rate is a material investment decision, but we know
that paying our colleagues fairly is not only the right thing to do but also
drives business performance.
In recent years, we have invested significantly in retail colleague pay –
Sainsbury’s base rates have increased by 25 per cent over the last five years
and Argos by 31 per cent and we have removed age-related pay. Last year
we invested over £100 million improving the base rate and making three
Thank You payments to recognise the efforts of our colleagues during the
pandemic. And this year we will make another over £100 million investment
in hourly-paid retail colleagues. Our base rate is now £10 per hour nationally
– ahead of the Living Wage of £9.90 – and our London base rate is £11.05,
in line with the London Living Wage.
Over the year we made some other changes to further support our
colleagues, including improving pay under our Family Leave policy and
enhancing our colleague discount benefit – the year-round discount of
10 per cent now increases to 15 per cent for five days around every pay day.
This certainty regarding periods of higher discount enables colleagues to
plan and budget and has been warmly welcomed by colleagues. These are
just part of the comprehensive benefits package offered to all colleagues.
Shareholders
The Remuneration Committee, as always, has made its remuneration
decisions with reference to the experience of shareholders.
We delivered a strong set of results for the year, with underlying profit before
tax rising by 24.6 per cent to £730 million against 2019/20 and retail free cash
flow rising to £503 million. The proposed full-year dividend of 13.1 pence
adds to the robust total dividends delivered to shareholders over the course
of the pandemic and is the highest dividend the business has paid for five
years. However, for the reasons outlined below, the Committee decided to
make a downward adjustment to financial metrics for remuneration purposes.
Continued focus on sustainability
2021/22 was another important year in our long-term objective to be Net Zero
by 2035. Our Plan for Better sets out our sustainability goals across our whole
business, outlining our priority areas of focus, our key commitments and
our progress.
In recognition of the importance of these objectives, last year we included
a number of Plan for Better measures in the senior executive long-term
incentive plan, and similar measures are included this year. As a Committee,
we recognise that this is an area of evolving practice and we will continue to
monitor how these metrics influence behaviours and outcomes to ensure that
they are operating as intended and delivering results in line with our strategy.
Executive remuneration in 2021/22
As in prior years the Remuneration Committee has sought to take a measured
and rounded approach to performance assessment when determining
incentive outcomes to ensure that they are fair and proportionate.
For the bonus in respect of 2020/21, the Committee exercised discretion to
adjust the outcome under the profit element of the bonus to partially exclude
certain exceptional, non revenue-generating COVID-19 costs. This adjustment
was made to better reflect the underlying performance of the business and
the shareholder experience.
For the 2021/22 bonus the Committee once again reviewed both actual
performance and the context for delivery. The underlying profit reflects an
extremely strong result, especially when considered alongside the strategic
progress made in the year. However, there was also a recognition that,
in contrast to last year, the pandemic had resulted in an unbudgeted
Annual Statement fromthe
Remuneration Committee Chair
78 Governance J Sainsbury plc Annual Report 2022
net-positive impact on performance, primarily due to sustained higher food
consumption in the home. This net benefit was estimated to be £100 million
after adjusting for COVID-19 costs.
After a detailed review, the Committee determined that it would use its
discretion to adjust both the short and long-term incentive outcomes
to reflect this £100 million benefit. This approach has been adopted
notwithstanding the fact that the proposed shareholder dividend is based
on the full, non-adjusted profit outcome of £730 million.
The Committee is satisfied that the total remuneration received by Executive
Directors in respect of 2021/22 is a reasonable reflection of performance over
the period, taking into account both the current unusual market conditions and
the positive progress that has already been made against our strategic plan.
Annual bonus
Profit accounts for 50 per cent of the overall bonus, with 20 per cent based
onretail free cash flow and 30 per cent based on a strategic scorecard.
On a formulaic basis, the profit element and the retail free cash flow element
would both have paid out at 100 per cent. As a result of the £100 million
adjustment noted above, the outcome under the profit element is reduced to
80 per cent whilst the retail free cash flow element remains at 100 per cent,
reflecting the strong cash generation over the period.
The 30 per cent of the bonus based on a strategic scorecard is made up of
customer metrics, colleague metrics and individual strategic objectives. The
Committee considered a number of data points when reviewing performance,
including the growth in customer satisfaction scores in Sainsbury’s and
Argos, our colleague engagement score and improvements in gender and
ethnicity representation. The Committee has determined that both the
customer element and the colleague element should pay out at 9 per cent
each (out of a possible 10 per cent).
Under Simon Roberts’ leadership, the Company has made sound progress
against the Win in Food strategy and, one year into our three-year plan,
we are on track to meet all eight of our financial and operational targets. The
Committee reviewed Simon’s and Kevin’s performance against their individual
strategic objectives and determined they had both delivered their objectives
and exceeded expectations. Therefore, the Committee agreed a pay out of
9 per cent (out of a possible 10 per cent) for both Executive Directors.
This results in an overall bonus of 87 per cent of the maximum for both
Simon and Kevin. As Simon waived his entitlement to a bonus for 2020/21,
it is difficult to make year-on-year comparisons.
2019 Future Builder
As with the 2018 Future Builder scheme, the impact of COVID-19 could not
be anticipated at the point that the 2019 Future Builder targets were set.
On a formulaic basis, the vesting multiplier would have been 3.3 (out of
a maximum of 4.0) or 82.5 per cent of maximum, reflecting strong EPS,
retail free cash flow and ROCE and outperformance of cost savings targets.
Consistent with the approach taken for the bonus, the results under the EPS,
ROCE and retail free cash flow elements were adjusted downwards by
£100 million, to reflect the pandemic-related benefit described above.
This resulted in a significant reduction in the EPS element as well as a reduced
ROCE outturn. Maximum vesting was achieved on retail free cash flow and cost
savings. Overall the result is a reduced performance multiplier of 2.8 (out of a
maximum of 4.0), meaning this award vests at 70 per cent of the maximum.
2022/23 Remuneration
Both Executive Directors will receive a 3.5 per cent salary increase in 2022.
This is below the increase of at least 5.3 per cent that hourly-paid retail
colleagues received and in line with the increase for other senior management
roles. Kevin O’Byrne’s pension will reduce again this year and it will be fully
aligned to the colleague rate of 7.5 per cent of salary by the end of the 2022
calendar year. Simon Roberts’ pension was set at 7.5 per cent on his
appointment. As previously disclosed, on appointment Simon Roberts’
salary was over 10 per cent lower than previous Chief Executive’s salary, and
total fixed pay 25 per cent lower. He also waived his 2020/21 annual bonus.
Last year, we introduced the 2021 Win in Food incentive plan which linked long-
term remuneration to the eight metrics used to track the successful execution
of the strategy communicated in November 2020. For Executive Directors,
80 per cent is based on the four key financial measures (retail free cash flow,
ROCE, EPS and cost savings) and the remaining 20 per cent is subject to key
strategic indicators (market share, customer, colleague and Plan for Better).
These metrics will once again be utilised for long-term share awards in 2022.
The Committee reviewed the performance targets and made some changes
to ensure the targets remain appropriately stretching.
For 2022/23, the Chief Executive Officer will be granted a long-term share
award of 250 per cent of salary and the Chief Financial Officer 225 per cent,
in line with the current shareholder-approved Remuneration Policy.
Pay across Sainsbury’s
The Remuneration Committee considers wider colleague reward when
determining pay arrangements for the Executive Directors and this remains
a fundamental part of our approach to pay.
During the year, the Committee reviewed the Group’s Ethnicity and
Gender Pay Gap Report and were pleased to see an improvement in the gaps.
Toensure sustained improvement, the Company has set stretching
representation targets and these form part of our long-term incentives
for senior executives. Further details can be found on page 83 of this
report and also on our website.
AGM and Remuneration Policy
While the resolution on the Directors’ Remuneration Report received the
support of the significant majority of our shareholders at the 2021 AGM,
the Remuneration Committee noted that a minority were unsupportive.
Investor concerns primarily related to the bonus outcomes for 2020/21.
The Committee did consult with major investors last year prior to determining
the 2020/21 incentive outcomes, and the decisions were only taken once
there was sufficient comfort that the majority of those consulted were
supportive of the approach.
Shareholder views were again carefully considered when the Committee
determined the incentive outcomes for the 2021/22 financial year, in
particular the adjustment made for the net COVID-19 benefit. Over many
years, the Committee has been keen to understand and take on board
the views of our shareholders before making significant decisions on pay.
The Committee intends to continue its dialogue with shareholders now
and in the future years.
Our Remuneration Policy was approved at the 2020 AGM and will be due for
renewal at the 2023 AGM. We will be reviewing our policy during the coming
year and appropriately consulting with shareholders on any changes.
Dame Susan Rice
Chair, Remuneration Committee
The Committee held four scheduled meetings within the year, together with
a number of unscheduled meetings. Attendance of Directors at scheduled
Remuneration Committee meetings:
Susan Rice 4(4) Jo Harlow 4(4)
Tanuj Kapilashrami 4(4)
The maximum number of meetings held during the year that each Director could attend is shown in brackets.
Principal role and responsibilities
— Determining and agreeing with the Board the Remuneration Policy for
the Chairman, Executive Directors and the Operating Board Directors
— Setting individual remuneration arrangements for the Chairman,
Executive Directors and Operating Board Directors
— Reviewing and noting the pay and benefits applying to colleagues
across the Company and taking these into account when determining
executive pay
— Approving the service agreements of each Executive Director, including
termination arrangements
— Considering the achievement of the performance conditions under
annual and long-term incentive arrangements
The Committee’s Terms of Reference are available on the Company’s
website www.about.sainsburys.co.uk.
79 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Summary of 2021/22 remuneration decisions
Pay element 2021/22 decisions
Salary
No salary increases for
Executive Directors
— Simon Roberts – £875,000 and Kevin O’Byrne – £657,403
— No salary increase was awarded to Executive Directors in March 2021 in line with other management and central colleagues
Annual bonus
Award of 87 per cent
of maximum
— The 2021/22 bonus outturn was 87 per cent of the maximum for Simon Roberts and Kevin O’Byrne
— The Committee exercised negative discretion to adjust the financial results to exclude the unbudgeted net-positive impact of
COVID-19, which was estimated to be £100 million. The profit element paid out at 40 per cent (out of 50 per cent). Without this
adjustment, the profit element would have paid out at 50 per cent (out of 50 per cent)
— As a result of excellent cash management during the year, the retail free cash flow element paid out at the maximum,
20 per cent (out of 20 per cent), despite the downward adjustment
— The Committee determined an outturn of 9 percent for each of the customer metrics and colleague metrics (each out of
10 per cent). Simon Roberts’ and Kevin O’Byrne’s individual annual objectives paid out at 9 per cent (out of 10 per cent),
resulting in an overall strategic scorecard outturn of 27 per cent (out of 30 per cent)
— Further details of the bonus measures and outturn can be found on pages 84 and 85
20% 27%40%
Maximum opportunity
Actual % of maximum
50% 20% 30%
Profit
•
Retail free cash flow
•
Strategic scorecard
•
Group profit
•
Annual operational objectives
LTIP/Future Builder
Vesting at 70 per cent
ofmaximum
— Consistent with the approach for the annual bonus, the Committee exercised negative discretion which reduced the EPS,
ROCE and retail free cash flow elements by £100 million to reflect the pandemic related benefit described above
— The overall impact of the adjustment was to reduce the formulaic vesting from 82.5% to 70% of maximum
— Further detail on the outcomes is set out on page 85
Maximum opportunity
Actual % of maximum
ROCE EPS Retail free cash flow
•
Cost savings
•
Group profit
•
Annual operational objectives
Financial Returns to shareholders
•
Relative performance
•
Strategic priorities
25%
25%
25% 25%
25%
25%
12.5% 7.5%
25%
25% 25%
Total remuneration for 2021/22
When considering year-on-year comparisons for Simon Roberts, it should be noted that the 2020/21 figures do not represent full-year remuneration
(as he was appointed during the year) and he waived his bonus. On a full-time equivalent basis, had he not waived his bonus, his single figure for 2020/21 would
have been £2,898k – see page 84 for further details
Simon Roberts
1
£000
Kevin O’Byrne
2
£000
2021/22 2020/21 2021/22 2020/21
Fixed pay Salary 875 673 657 657
Benefits 24 13 23 17
Pension 66 50 131 148
Performance-related pay Annual bonus 1,675 0 1,029 828
LTIP/Future Builder 1,147 589 1,327 682
Total pay 3,787 1,325 3,167 2,332
1 Simon Roberts was appointed to the Board on 1 June 2020.
2 Kevin O’Byrne volunteered to take the whole of his 2020/21 annual bonus in deferred shares which vest after two years to further align his interests with those of shareholders.
80 Governance J Sainsbury plc Annual Report 2022
Summary of remuneration for 2022/23
Pay element Approach for 2022/23
Salary
3.5 per cent increase
for Executive Directors
(below that of
colleagues)
— Executive Directors received a 3.5 per cent salary increase for 2022/23, below the at least 5.3 per cent for hourly-paid retail
colleagues but in line with the pay review for senior management
— As a result of a change to the pay review and bonus payment dates for all management colleagues, the salary effective date
for Executive Directors has moved from the start of the financial year to 29 May 2022. Executive Director salaries effective
from this date:
— Simon Roberts – £905,625
— Kevin O’Byrne – £680,412
Benefits
No changes
— No changes to current arrangements
Retirement benefits
Chief Executive Officer
aligned with wider
workforce. Chief
Financial Officer aligned
by end of 2022
— Salary supplement in lieu of pension for new hires, including Simon Roberts, is aligned with the rate available to the majority
of colleagues. This is currently 7.5 per cent of salary
— As disclosed previously, the rate for Kevin O’Byrne will be reduced from 25 per cent to 7.5 per cent of salary over time.
For 2022/23 it has reduced from 20 per cent to 17.5 per cent of salary until the end of the 2022 calendar year, when it will
reduce to 7.5 per cent
Annual bonus
No changes
— Performance is based on profit (50 per cent), retail free cash flow (20 per cent) and strategic scorecard (30 per cent)
— Bonus paid 50 per cent in cash after the year-end and 50 per cent deferred into shares for two years
— Maximum opportunity of up to 250 per cent of salary per annum
— The maximum award for 2022/23 is:
— Simon Roberts – 220 per cent of salary
— Kevin O’Byrne – 180 per cent of salary
LTIP: 2022
Leaders Share Award
No changes
— Awards are subject to a three-year performance period followed by a two-year retention period
— Maximum award of up to 250 per cent of salary per annum
— Awards are structured as core awards, with a performance multiplier of up to four times. The 2022 maximum awards are:
— Simon Roberts – core award of 62.5 per cent of salary (max 250 per cent)
— Kevin O’Byrne – core award of 56.25 per cent of salary (max 225 per cent)
— The performance metrics and weightings remain unchanged from 2021 and are fully aligned to our Win in Food strategy
— The Committee has increased the cumulative retail free cash flow targets for 2022 compared to 2021
Measure Weighting
Threshold
target 1.0
x award
Maximum
target 4.0
x award
Cumulative retail free cash flow
1
20% £1,250m £1,650m
ROCE
1
20% 6.75% 9.75%
Underlying basic EPS
1
20% 19.8p 26.5p
Cost reduction
2
20% 80bps improvement 280bps improvement
Strategic indicators 20% Based on market share, customer, colleague andPlan
for Better. Further details set out on pages 87 and 88
1 These measures are defined in the Alternative Performance Measures section of the Annual Report on pages 203 to 207.
2 Improvement on 2019/20 results, due to COVID-19 impact on 2020/21 and 2021/22.
Shareholding
guidelines
No changes
— The Executive Directors are required to build a significant shareholding in the Company. For the Chief Executive Officer this is
three times salary, and for the Chief Financial Officer this is two times salary
— Post-employment shareholding guidelines were introduced following the 2020 AGM. Executives are required to hold shares
equivalent to their in-employment shareholding guideline for two years post departure. This requirement applies only to
shares acquired from Company incentive plans
Recovery provisions
No changes
— The Executive Directors’ incentive arrangements are subject to malus and clawback
81 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Remuneration in context
Our reward objectives
Our objective is to have a fair, equitable and competitive total reward package that encourages colleagues to serve and help every customer, drives profitable
sales and provides opportunities for colleagues to share in Sainsbury’s success.
Executive remuneration principles
The above reward objective applies to our senior executive population as well. In addition, the Committee believes it is important that a significant portion
ofthe Executive Directors’ package is performance-related, delivered in shares and that the performance conditions applying to incentive arrangements
support the delivery of the Company’s strategy and long-term shareholder value.
The Remuneration Policy for our senior executives is therefore based on the following principles:
Linked to our
business strategy
Encourages the
right behaviours
to deliver
long-term growth
Aligned to
our values and
culture
Secures high
calibre leaders
Enables share
ownership
Linking executive pay to our business strategy
The Committee carefully considers the performance metrics incorporated into the annual bonus and long-term incentive plan to ensure they support our
strategic priorities. The annual bonus is linked to key financial and individual strategic objectives, while the long-term incentive plan rewards for delivery
against our key strategic objectives and therefore includes all eight of the key performance metrics that we use to track our success. The achievement of
these metrics supports long-term sustainable performance and value creation for our shareholders.
Key considerations
When reviewing the Remuneration Policy for Executive Directors and determining the approach to pay, in line with the Code, the Committee gives
consideration to the following:
— Simplicity and transparency: The Remuneration Policy has been designed to incentivise senior executives to achieve clearly defined financial,
operational and strategic objectives. The Committee reviews performance metrics and targets each year to ensure that they continue to be
clear and aligned to the delivery of the strategy. The changes we introduced for the 2021 Win in Food incentive plan demonstrate this
— Alignment to our purpose, values and culture: Sainsbury’s has a clear purpose and strong value set resulting in a unique culture which plays
an essential role in achieving our strategy. Our culture is underpinned by our Purpose (our core reason for being); our Valued Behaviours
(what we want from our people); and being a Great Place to Work (encouraging colleagues to want to be their best). The Committee ensures
our pay practices drive the right behaviours in line with our values and culture
— Risk mitigation: The Committee reviews and sets performance targets each year to ensure that they drive the right behaviours and are
appropriately stretching without encouraging unnecessary risks. Under the annual bonus and LTIP the Committee has the ability to adjust
incentive outcomes to ensure that they are reflective of the underlying financial and non-financial performance of the participants and the
Company. The Committee believes that this discretion is an important feature and mitigates the risk of unwarranted vesting outcomes.
In addition, in the event that certain risk events come to light the Committee may operate recovery provisions on all incentive awards. This has
been demonstrated by the Committee over the last two years
— Potential outcomes: When setting, and subsequently implementing, the policy for senior executives, the Committee considers our business
goals, the retail market and competitors, the potential and actual outcome and cost to the Company, stakeholder views and best practice.
The Committee believes it is important to exercise sound judgement at all stages during the process to ensure that executive pay levels
appropriately reflect performance and are aligned with the interests of shareholders
Fair pay for colleagues
When considering remuneration arrangements for Executive Directors, the Committee reviews the pay and conditions of colleagues at all levels throughout the
Company and takes these into account. The Committee receives regular updates regarding any major changes to the pay and benefits of colleagues and has
been kept informed of all pay decisions relating to treatment of colleagues during the COVID-19 pandemic, along with the incentives that were introduced for
drivers in both supermarkets and distribution centres. The Committee also reviews information on internal measures, including details of our ethnicity and
gender pay gap and the ratio of Chief Executive Officer remuneration to the remuneration of our colleagues, and considers how these compare externally.
Sainsbury’s employs over 171,000 colleagues who work hard to deliver for our customers. The Committee recognises that our colleagues are the cornerstone
of our business and essential to the overall success of our plans. The remuneration objectives for our colleagues follow the same principles as the policy for
the Executive Directors. Pay and benefits reflect the nature and contribution of the role and take into account levels of pay in comparable roles in the market.
82 Governance J Sainsbury plc Annual Report 2022
Reward and benefits
— All colleagues are entitled to base salary, pension and a range of benefits
— Managers participate in annual bonus plans which are aligned under a common set of principles
— Senior executives also participate in our Long-Term Incentive Plan
— We offer colleague discount in Sainsbury’s, Argos and Habitat and during 2021/22 colleagues saved over £55 million – around £300 on average.
In 2021/22, we improved colleague discount, increasing the year-round discount of 10 per cent to 15 per cent for five days around pay day
— During the year, we improved our Family Leave policies to provide enhanced support to our colleagues
Recognition, development and wellbeing
— Throughout the pandemic, we have protected, supported and recognised our colleagues
— Being a place where colleagues love to work is really important to us and we recognise colleagues who go the extra mile and bring our values to
life through LOVE, our colleague recognition scheme. During 2021/22 we issued over 342,000 instant rewards and 11,000 exceptional performance
awards to colleagues, along with appreciation gifts. This equates to a cash value of over £6 million
— The Company provides support for mental and physical wellbeing through a variety of mechanisms and we have an Employee Assistance
Programme. During the year we also launched guidance on dealing with the menopause for both line managers and colleagues
— We want to support colleagues in their career goals and operate a number of development programmes including one designed to support retail
colleagues looking to move into front line management and leadership roles
Pensions and life assurance
— Participation in a pension plan is offered to all colleagues on a contributory basis, with the Company contribution varying by grade
— Hourly-paid store colleagues are offered a matching scheme up to 7.5 per cent of salary
— We have c. 115,000 colleagues in our pension plans
— Colleagues in our pension plan also receive six times life assurance (one times if not in a pension or in an auto-enrolled scheme)
Share ownership
— All colleagues have the opportunity to become shareholders in the Company through our all-employee share plans
— Around 26,000 colleagues participate in our Sharesave plans, representing an uptake rate of 17 per cent
— Colleagues can also participate in Sainsbury’s Share Purchase Plan (SSPP), which is our name for the partnership element of the Share Incentive Plan
Ethnicity and gender pay
— Our colleagues are paid according to their role not their gender or ethnicity
— The ethnicity pay gap shows the difference in the average hourly rate of pay of ethnically diverse colleagues compared to that of white colleagues. Our
2021 mean ethnicity pay gap is -0.9 per cent (down from 0.4 per cent) and our median ethnicity pay gap is -2.8 per cent (up from -3.1 per cent). Location
plays a key part in explaining the gap, as nearly 40 per cent of our ethnically diverse colleagues work in our London stores earning a location premium
— Our 2021 mean gender pay gap continued to improve year-on-year to 8.5 per cent (down from 9.7 per cent), as female representation at higher
grades has improved. Our median gender pay gap has also reduced to 4.7 per cent (down from 5 per cent). Like a lot of companies our gap is
caused by the fact that we have more men than women in our most senior roles, more women than men in our hourly-paid roles, and more men
in hourly-paid specialist roles that attract premiums, such as online delivery drivers
— The Board is committed to improving gender and ethnically diverse representation. Our aim is to have 50 per cent of our Operating Board and
50 per cent of our Directors and Senior Managers to be women. At the year-end, these figures were both 40 per cent. Ethnically diverse colleagues
make up only 8.2 per cent of our senior leadership population and we have much more work to do to reach our target of 12 per cent by 2024
CEO pay ratios
— Our CEO pay ratio of 183:1 reflects the size and make up of our colleague base. The ratio has increased compared to the 2020/21 ratio, primarily due
to the fact that our CEO, Simon Roberts, waived his entitlement to an annual bonus for 2020/21 and the 2019 Future Builder has vested at a higher
level than the previous year
— The 25th, 50th and 75th percentiles ranked by total remuneration are all store-based hourly-paid colleagues
Colleague engagement
— The Board recognises the important role our colleagues play in the success of Sainsbury’s. It takes colleague engagement and the views of
colleagues seriously. We communicate regularly with colleagues to provide information about our strategy, our performance and on operational
matters as well as asking for feedback on how colleagues are feeling. Further details are set out on pages 13 and 25 of the Annual Report
— Our Great Place to Work groups operate at store level rolling up to a national group (which is our Workforce Advisory Panel), which meets with
Board members on a regular basis to discuss current issues. Whilst we do not formally consult with colleagues on the setting of the Executive
Director Remuneration Policy, we have used these discussion groups for Non-Executive Directors to engage with colleagues directly on executive
remuneration to give them the opportunity to share their views and opinions. The last listening session covering executive pay was held in
May 2021 and the next one is in July 2022
— Colleagues are able to become shareholders in the Company and can comment on the policy in the same way as other shareholders
83 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Annual Report on Remuneration
Single total figure of remuneration for Executive Directors (audited information)
When considering year-on-year comparisons for Simon Roberts, it should be noted that the 2020/21 figures do not represent full-year remuneration
(as he was appointed during the year) and he waived his bonus. On a more consistent like-for-like basis his 2020/21 remuneration would have been £2,898k
(assuming full-year salary, benefits, pension and full-year 2020/21 bonus; we have still included his actual LTIP vesting even though the grant value relates
to being an Operating Board Director and not Chief Executive Officer).
The 2021/22 total pay figure includes share price appreciation within the LTIP value. Over the relevant period the share price has increased by 27 per cent,
aligning remuneration with the shareholder experience.
The table below shows a single remuneration figure for all qualifying services for the 52 weeks to 5 March 2022, together with comparative figures for the
52weeks to 6 March 2021.
Simon Roberts
4
£000
Kevin O’Byrne
£000
Notes 2021/22 2020/21 2021/22 2020/21
Base salary 875 673 657 657
Benefits 1 24 13 23 17
Pension 66 50 131 148
Total fixed pay 965 736 811 822
Annual bonus 2 1,675 0 1,029 828
LTIP/Future Builder 3 1,147 589 1,327 682
Total variable pay 2,822 589 2,356 1,510
Total 3,787 1,325 3,167 2,332
1 Benefits include a combination of cash and non-cash benefits, valued at the taxable value. For all Executive Directors, this includes a cash car allowance (£15,250) and private medical cover. In 2021/22, on a one-off
basis in line with the approach taken for all colleagues in that year, both Simon Roberts and Kevin O’Byrne received a payment for two days of holiday which could not be taken in the previous year due to the
demands of COVID-19.
2 Annual bonus relates to performance during the financial year, paid in June following the relevant year-end. Normally 50% is paid in cash and 50% in bonus shares which vest after two years. Kevin O’Byrne
volunteered to take the whole of his 2020/21 annual bonus in bonus shares which vest after two years to further align his interests with those of shareholders.
3 The Long-Term Incentive Plan value relates to the Future Builder award vesting in April/May following the end of the relevant financial year, which is the third year of the performance period. The awards are then
subject to an additional two-year retention period for Executive Directors. This two-year retention period will not apply to Simon Roberts’ 2018 or 2019 award as he was an Operating Board Director at the time of grant.
The figures include accrued dividend equivalent shares over the performance period. The 2020/21 LTIP figure has also been updated from the fourth quarter average share price to the actual share price on the vesting
date of 29 April 2021 (£2.354). The 2021/22 values are based on the average share price over the fourth quarter for 2021/22 of £2.790. The values shown above reflect the share price growth since grant of: +£214k for
Simon Roberts and +£247k for Kevin O’Byrne.
4 Simon Roberts’ total remuneration for 2020/21 was based on the period since his appointment as Chief Executive Officer on 1 June 2020. Simon waived his full-year bonus for 2020/21. The 2020/21 Future Builder
value shown relates to an award granted in May 2018 in respect of Simon’s previous role when he was an Operating Board Director. For transparency the full value of the award is shown. The 2021/22 Future Builder
value shown relates to an award granted in May 2019 in respect of his previous role when he was an Operating Board Director.
Base salary (audited information)
Salary
effective from
7 March 2021
Simon Roberts £875,000
Kevin O’Byrne £657,403
Pension
Since his appointment as Chief Executive Officer, in lieu of pension plan
participation, Simon Roberts has received 7.5 per cent of salary, which is in
line with the majority of the wider workforce. For 2021/22, Kevin O’Byrne
received 20 per cent of salary in lieu of pension plan participation. As detailed
elsewhere in this report, his pension will reduce during 2022/23 to align with
the workforce.
Benefits
For 2021/22, benefits for Executive Directors included the provision of
company car benefits, private medical cover, long-term disability insurance,
life assurance and colleague discount.
Annual bonus for 2021/22 (audited information)
For 2021/22 the maximum annual bonus award opportunity for the Chief
Executive Officer was 220 per cent of base salary and for the Chief Financial
Officer the maximum opportunity was 180 per cent of base salary. Normally
50 per cent of any bonus is paid in cash and 50 per cent is paid in shares
which are deferred for two years.
The performance measures for 2021/22 were profit (50 per cent), retail free
cash flow (20 per cent) strategic scorecard (30 per cent comprising colleague,
customer and individual each being 10 per cent).
After the end of the financial year the Remuneration Committee undertook
a review of performance to determine annual bonus outcomes for Simon
Roberts and Kevin O’Byrne. As detailed below, the Committee identified
that a bonus was payable to the Executive Directors. As in prior years the
Remuneration Committee has sought to take a measured and rounded
approach to performance assessment when determining incentive
outcomes to ensure that they are fair and proportionate.
For 2021/22 the Committee identified that the COVID-19 pandemic had
resulted in an unbudgeted net-positive impact on performance, primarily
due to sustained higher food consumption in the home. The net benefit
was estimated to be £100 million. After a detailed review the Committee
determined to reduce the financial results to remove the positive impact.
The following table summarises the final outcomes for the Executive
Directors after this application of discretion.
Outcome
(% of overall max)
Simon Roberts
£000
Kevin O’Byrne
£000
Profit 40% 770 473
Retail free cash flow 20% 385 237
Strategic scorecard 27% 520 319
Total 87% 1,675 1,029
Profit performance
The table below sets out the threshold and stretch profit targets and the
actual profit outcome after the adjustment explained in the Remuneration
Committee Chair’s letter.
Threshold
£m
Stretch
£m
Adjusted
Outcome
£m
Profit
1
550 650 630
1 Underlying profit before tax reduced from £730m to £630m for bonus purposes. This measure is
defined in the Alternative Performance Measures section of the Annual Report on pages 203 to 207.
84 Governance J Sainsbury plc Annual Report 2022
Retail free cash flow
The table below sets out the threshold and stretch retail free cash flow
targets and the actual outcome, after the adjustment explained in the
Remuneration Committee Chair’s letter.
Threshold
£m
Stretch
£m
Adjusted
Outcome
£m
Retail free cash flow
1
130 190 403
1 Reduced from £503m to £403m for bonus purposes. These measures are defined in the Alternative
Performance Measures section of the Annual Report on pages 203 to 207.
Strategic scorecard
The strategic scorecard (30 per cent of the overall bonus) consists of
customer, colleague and individual objectives, equally weighted.
The table below sets out a summary of the achievements of the Executive
Directors in relation to these objectives as assessed by the Remuneration
Committee. The Committee has determined an award of 27 per cent out of
a possible 30 per cent for both Executive Directors.
Shared objectives Outturn
Customer
Championed customer service in Sainsbury’s and Argos. The customer satisfaction score for Sainsbury’s
improved by more than the target of 200bps vs 2019/20 baseline and the score for Argos improved by
more than the target of 100 bps vs 2020/21 baseline
9% (out of 10%)
Colleague Increased overall colleague engagement score by 200bps and made positive progress in inclusion scores
in the three We’re Listening surveys that colleagues participated in during the year
Improved gender and ethnically diverse representation at senior levels. See page 14 for further details
9% (out of 10%)
Simon Roberts Kevin O’Byrne
Director-specific Sainsbury’s grew market share ahead of the other
Big 4 grocers
Year-on-year improvement in value compared
to competitors
Exceeded cost savings target
Delivered strong results through the Finance
Transformation programme
Achieved significant cost savings, exceeding
target, despite delays due to COVID-19 related
supply chain and retail challenges
Good control of capital expenditure in line
with plan
Simon Roberts:
9% (out of 10%)
Kevin O’Byrne:
9% (out of 10%)
Completed a thorough review of the Financial Services business and concluded that it was in the best
interests of shareholders to retain Sainsbury’s Bank
2019 Future Builder (2019/20 to 2021/22 performance period)
(audited information)
The 2019 Long-Term Incentive Plan is known as Future Builder. Around 230
senior managers across the business participated in this arrangement.
Awards are granted under the Long-Term Incentive Plan approved by
shareholders in 2016. A core award of shares is granted, calculated as a
percentage of salary and scaled according to level of seniority. Vesting of
the core award is dependent on performance against specific targets tested
at the end of a three-year performance period. The core awards can grow
up to four times at stretch levels of performance. For Executive Directors,
any vested award is subject to a two-year retention period.
The 2019 Future Builder award was subject to ROCE, EPS, retail free cash
flow and cost savings targets. In addition, a performance gateway had to
be achieved before any element could vest. Consistent with the approach
adopted for the 2018 Future Builder and as disclosed in last year’s Directors’
Remuneration Report, the ROCE and EPS targets have been re-stated on a
like-for-like basis to reflect the adoption of the new accounting standard,
IFRS 16. The Committee is comfortable that the re-stated target ranges are
comparable to the original target ranges set on the basis of the previous
accounting rules.
As outlined in the Remuneration Committee Chair’s letter, a number of
factors were considered when determining the vesting outturn. The
Committee determined that it was appropriate to adjust the outturns
downwards to reflect the estimated £100 million net-positive impact of
COVID-19, in line with the approach taken for bonus. Without this downward
adjustment, the vesting outturn would have been a multiplier of 3.3 out of
4.0 (82.5 per cent of maximum). As a result of this negative adjustment the
ROCE and EPS outturns decrease, while the retail free cash flow and cost
savings targets are met in full resulting in a performance multiplier of 2.8 out
of 4.0 (70 per cent of the maximum). The Committee reviewed the outcome
of the awards in the context of the Company’s performance this year and
determined that this was an appropriate outcome.
The table below sets out the extent to which each performance measure was achieved.
Weighting
Threshold
target
(1.0x core
award)
Maximum
target
(4.0x core
award)
Formulaic
outcome
Adjusted
outcome
Multiplier
achieved
(out of a
maximum
4.0x)
ROCE
1
25% 6.75% 9.75% 8.4% 7.6% 0.5x
Underlying basic EPS
1
25% 21.5p 28.5p 25.4p 21.9p 0.3x
Cumulative retail free cash flow
1
25% £900m £1,400m £1,759m £1,659m 1.0x
Cumulative strategic cost savings 25% £600m £750m £1,188m £1,188m 1.0x
Performance gateway The Remuneration Committee must be satisfied
that the Company’s underlying performance over
the period justifies the level of vesting
Achieved
Total 2.8x out of a
maximum of 4.0x
1 These measures are defined in the Alternative Performance Measures section of the Annual Report on pages 203 to 207.
85 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Shareholding guidelines
(audited information)
The Executive Directors are required to build up a specified level of
shareholding in the Company. This is to create greater alignment of the
Directors’ interests with those of shareholders, in line with the objectives
of the Remuneration Policy.
The guidelines in the 2020 Directors’ Remuneration Policy require the
Chief Executive Officer to have a holding of three times salary and other
Executive Directors to hold shares with a value of two times salary.
Executive Directors are required to hold all vested share awards (net of
tax) until the guideline has been met. In addition to shares held, Bonus
Share Awards (and previously granted Deferred Share Award) and LTIP
awards where the performance period has ended count towards the
guideline (on a net of tax basis).
Simon Roberts currently holds 1.4x salary following his appointment as
Chief Executive Officer in 2020. Kevin O’Byrne was appointed to the Board
in January 2017 and has now met the shareholding requirement.
Post-departure, Executive Directors will be expected to maintain a
shareholding equal to their guideline (or actual shareholding if lower) for
two years post-employment irrespective of the reason for leaving. This
requirement will apply to shares acquired from Company incentive plans.
Shareholding Share awards Guidelines
Number of shares (000)
Simon Roberts Kevin O’Byrne
1,250
1,000
750
250
500
0
Shareholding guidelines
1.4 x salary
4.4 x salary
Remuneration in 2022/23
Base salary
When considering salaries the Committee takes account of a number of
factors, with particular focus on the general level of salary increases
awarded throughout the Company. Where relevant, the Committee also
considers external market data on salary and total remuneration but the
Committee applies judgement when considering such data.
For 2022/23 Simon Roberts and Kevin O’Byrne will receive a 3.5 per cent
salary increase. This is below the at least 5.3 per cent award to retail
hourly-paid colleagues and in line with senior management. The pay
review date for all management colleagues, including Executive Directors,
has changed from the start of the financial year to 29 May 2022 to align
pay review and bonus timings.
Salary
effective from
29 May 2022
Simon Roberts £905,625
Kevin O’Byrne £680,412
Pension
Under the 2020 Remuneration Policy, the pension supplement for any future
appointments is capped at 7.5 per cent of salary, in line with the opportunity
offered to the majority of the workforce. This is the rate that Simon Roberts
receives as Chief Executive Officer.
As disclosed previously, on appointment Kevin O’Byrne received a
contractual cash supplement of 25 per cent of salary, in line with the policy
in place at the time. In recognition of the new policy, Kevin has agreed to a
reduction in his pension supplement over a period of time to the rate offered
to the majority of the workforce (7.5 per cent of salary). From March 2022
Kevin’s supplement reduced to 17.5 per cent until the end of the calendar
year, when it will reduce further to 7.5 per cent.
Benefits
Benefits for Executive Directors in 2022/23 are unchanged and will include
the provision of company car benefits, private medical cover, long-term
disability insurance, life assurance and colleague discount.
Annual bonus
The annual bonus for 2022/23 will operate on the same basis as 2021/22.
It will be based 50 per cent on profit, 20 per cent on retail free cash flow and
30 per cent on strategic objectives (equally weighted between customer,
colleague and individual objectives).
The maximum annual bonus award opportunity for the Chief Executive
Officer is 220 per cent of base salary and for the Chief Financial Officer
is 180 per cent of base salary. 50 per cent will be paid in cash and 50 per cent
in shares deferred for two years.
The profit and retail free cash flow targets are set against the Company’s
expected performance and are subject to a rigorous process of challenge
before the proposals are considered by the Board. The targets are set such
that considerably stretching performance in excess of internal and external
forecasts is required for maximum payout. The strategic objectives ensure
that management continues to focus on operational priorities which
contribute to the achievement of Group performance over the short and
long term.
The Board is of the opinion that any performance targets for the current year
annual bonus are commercially sensitive as the Company operates in a highly
competitive, consumer-facing sector. The disclosure of targets would provide
competitors with insights into the Company’s strategic aims, budgeting and
growth projections. However, in line with previous years, the Company will
retrospectively disclose the targets in next year’s Annual Report.
86 Governance J Sainsbury plc Annual Report 2022
2022 Leaders’ Share Award
Last year’s Long-Term Incentive Plan (LTIP) was known as the 2021 Win in
Food incentive plan which was aligned to our new strategy and it included
all eight key metrics that we use as a measure of our success in delivering
against our updated strategy. As a one-off, we enhanced core award levels
and increased participation in the plan, extending eligibility to a further 1,200
senior leaders.
For 2022, we will retain the same plan structure and metrics and going
forward it will be known as the Leaders’ Share Award. In 2022, circa 230
colleagues will participate in the plan. For Executive Directors 80 per cent of
the plan will be based on the four key financial measures (retail free cash
flow, ROCE, EPS and cost savings). The remaining 20 per cent of the plan will
be subject to key strategic indicators (market share, customer, colleague and
Plan for Better).
The award level for the Chief Executive Officer will be unchanged for 2022.
Simon Roberts will receive a core award of 62.5 per cent of salary (maximum
250 per cent of salary). As disclosed last year, Kevin O’Byrne’s core award
level was increased in 2021 to 62.5 per cent of salary and for 2022 will change
to 56.25 per cent of salary (maximum 225 per cent of salary).
The Leaders’ Share Award is subject to a two-year retention period following
the end of the three-year performance period. This will result in awards to
Executive Directors being released after a five-year period.
The Committee has set stretching targets against these measures for the
2022 awards as shown below. The cumulative retail free cash flow target for
2022 has been increased compared to 2021.
Weighting
Threshold
25% of element vests
Maximum
100% of element vests
Cumulative retail free cash flow
1
20% £1,250m £1,650m
ROCE
1
20% 6.75% 9.75%
Underlying basic EPS
1
20% 19.8p 26.5p
Cost reduction
2
20% 80bps improvement 280bps improvement
Strategic indicators 20%
(equally
weighted)
— Market share – targets are commercially sensitive but we intend to provide full disclosure
of targets at the end of the performance period
— Customer satisfaction – improvement of 0 to 200 bps in Sainsbury’s score and 300 to 500
bps in Argos score
— Colleague – progress against our existing 2024 representation targets (see below)
and assessment of further representation improvements in 2025. Maintain colleague
engagement scores
— Plan for Better – progress against our Scope 1 and Scope 3 and plastic reduction targets
(see below)
1 These measures are defined in the Alternative Performance Measures section of the Annual Report on pages 203 to 207.
2 Improvement on 2019/20 results, due to COVID-19 impact on 2020/21 and 2021/22.
In line with previous grants, the Remuneration Committee must be satisfied
that the Company’s underlying performance over the period justifies the
level of vesting; vesting will be reduced if this is not the case. When making
this judgement the Committee has scope to consider such factors as it
deems relevant. The Committee believes that this discretion is an important
feature of the Long-Term Incentive Plan arrangement and mitigates the risk
of unwarranted vesting outcomes. This performance gateway assessment
applies to all outstanding LTIP awards.
Colleague representation targets
Target – senior leadership positions
(top 230 leaders)
Target – senior management positions
(1,200 leaders beneath senior leadership)
Female 50% 43%
Ethnically diverse 12% 12%
Black 3% 3%
Plan for Better Baseline Threshold Stretch
Scope 1 – GHG emissions 554,936 (tC0
2
e) 18/19 FY 382,403 345,258
Scope 3 – GHG emissions 26,663,081 (tC0
2
e) 18/19 FY 23,783,081 23,108,004
Plastic – Own Brand Food & General Merchandise & Clothing
– tonnes of plastic packaging
69,839 Own Brand Food 2018 CY/
GM&C 2020 CY
55,871 41,903
87 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
2022 Leaders’ Share Award performance measures
(definitions for other awards can be found in the relevant Annual Report)
Cumulative retail free cash flow
— Retail free cash flow measures the total flow of cash in and out of the business as well as providing an assessment of underlying profitability
— Retail free cash flow for these purposes is net cash generated from retail operations, after perpetual security coupons and cash capital expenditure
but before strategic capital expenditure. It includes payments of lease obligations, cash flows from joint ventures and associates and Sainsbury’s
Bank capital injections. It is measured on a cumulative basis over the three-year performance period
Return on capital employed (ROCE)
— ROCE reflects the returns generated for shareholders and measures the efficiency of capital use
— It is defined as return divided by average capital employed where:
— Return is defined as 52-week underlying profit before interest and tax
— Capital employed is defined as Group net assets excluding the pension deficit/surplus, less net debt (excluding the perpetual securities).
The average is calculated on a 14-point basis
— More information can be found in the Alternative Performance Measures section of the Annual Report on pages 203 to 207
EPS
— EPS directly reflects returns generated for shareholders
— Underlying basic EPS is underlying profit after tax attributable to the equity holders of the parent, divided by the weighted average number
of ordinary shares in issue during the year
Cost reduction
— Cost reduction will be measured as an improvement in Retail selling, general and administrative (SG&A) costs as a percentage of retail sales
(including VAT, excluding fuel). Costs also exclude fuel, bonus and share-based payments expenses, non-underlying items and Group
support functions. Given the abnormal nature of 2020/21 and 2021/22, improvement will be assessed against 2019/20 results
Market share
— Sainsbury’s market share (volume) based on Nielsen panel data
Customer
— Based on an annual weighted average of Sainsbury’s CSAT and Argos CSAT (excluding Bank and Tu)
Colleague
— Internally we measure representation at senior and middle management grades for gender, ethnically diverse and Black colleagues.
Colleague engagement is measured using our annual We’re Listening survey
Plan for Better
— Further details on the measures can be found in the Plan for Better section of the Annual Report
88 Governance J Sainsbury plc Annual Report 2022
Non-Executive Director remuneration
Single total figure of remuneration for Non-Executive Directors (audited information)
The table below shows a single remuneration figure for all qualifying services for the 52 weeks to 5 March 2022 for each Non-Executive Director, together with
comparative figures for the 52 weeks to 6 March 2021.
2021/22 2020/21
Fees
1
£000
Benefits
2
£000
Total
£000
Fees
1
£000
Benefits
2
£000
Total
£000
Martin Scicluna 480 0 480 480 0 480
Brian Cassin 68 0 68 68 0 68
Jo Harlow 83 0 83 83 0 83
Adrian Hennah
3
76 1 77 – – –
Tanuj Kapilashrami
4
68 0 68 47 0 47
David Keens
5
30 2 32 88 2 90
Susan Rice 107 4 111 107 3 110
Keith Weed
4
68 0 68 47 0 47
1 Paid in relation to the year.
2 The benefits for the other Non-Executive Directors relate to the reimbursement of travelling expenses to Board meetings held at the Company’s registered office.
3 Adrian Hennah was appointed to the Board on 1 April 2021.
4 Tanuj Kapilashrami and Keith Weed were appointed to the Board on 1 July 2020 and the figures quoted for 2020/21 relate to the period from their appointment to 6 March 2021.
5 David Keens stepped down from his role on 9 July 2021 and the figures quoted for 2021/22 relate to the period up to his departure.
In March 2021, the Chairman’s and Non-Executive Directors’ fees were
reviewed but no increase was applied, in line with management.
Non-Executive Directors receive a base annual cash fee; additional fees
are paid to the Senior Independent Director and to the Chairs of the Audit,
Remuneration and Corporate Responsibility and Sustainability Committees.
The Chairman and Non-Executive Directors receive no benefits other than
a colleague discount card and reasonable business travel expenses.
Chairman and Non-Executive Director fees for 2022/23
In early 2022 the Chairman’s and Non-Executive Directors’ fees were reviewed.
An increase of 3.5 per cent was approved for the Chairman and the base fee
for the Non-Executive Directors in line with senior management colleagues.
Reflecting the growing importance of the role to our business, the additional
fee for the Chair of the Corporate Responsibility and Sustainability
Committee increased from £15,000 to £19,500, bringing it in line with the
Audit and Remuneration Committee Chair fees. The new fee levels are
effective from 29 May 2022 (changed from the start of the financial year).
The following table sets out the fee levels which are effective from
29 May 2022.
Fees effective
from 29 May
2022
Chairman £497,033
Base fee £70,640
Senior Independent Director fee (additional) £19,500
Chair of Remuneration Committee fee (additional) £19,500
Chair of Audit Committee fee (additional) £19,500
Chair of Corporate Responsibility and Sustainability
Committee fee (additional)
£19,500
Non-Executive Directors’ shareholdings and share interests
The beneficial interest of the Non-Executive Directors, in the shares of the
Company are shown below.
Ordinary shares
1
6 March 2021 5 March 2022 27 April 2022
Martin Scicluna 15,000 15,000 15,000
Brian Cassin 25,000 25,000 25,000
Jo Harlow 8,000 8,000 8,000
Adrian Hennah
2
– 15,000 15,000
Tanuj Kapilashrami 5,000 10,500 10,500
David Keens
3
100,000 100,000 N/A
Susan Rice 4,000 4,000 4,000
Keith Weed 2,446 2,446 2,446
1 Ordinary shares are beneficial holdings which include the Directors’ personal holdings and those of their
spouses and minor children.
2 Adrian Hennah was appointed to the Board on 1 April 2021.
3 David Keens stepped down from his role on 9 July 2021 and the figures in the March 2022 column show
his share interests on his leave date.
89 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Pay in the wider organisation
Chief Executive pay ratio
The following table provides pay ratio data in respect of the Chief Executive
Officer’s total remuneration (as shown in the single figure table on page 84
compared to the remuneration of the 25th, 50th and 75th percentile of
UK colleagues. All three of these colleagues are store-based hourly-paid
colleagues, with the 50th percentile and the 75th percentile colleague earning
additional premiums such as unsociable hours premium and driver premium.
The year-on-year increase in the ratio for 2021/22 reflects that the Chief
Executive Officer’s single figure for 2020/21 was suppressed following his
decision to waive his annual bonus. In addition, the figures include exceptional
payments made during the year, including in 2020/21 hourly-paid colleagues
received three Thank You payments relating to COVID-19.
Financial year Method
25th percentile pay ratio
(lower quartile)
50th percentile pay ratio
(median)
75th percentile pay ratio
(upper quartile)
2019/20 Option B
1
173:1 173:1 153:1
2020/21
2
Option B
1
122:1 122:1 107:1
2021/22 Option B
1
202:1 183:1 178:1
1 Option B as defined in the regulations.
2 The Chief Executive Officer’s single figure for 2020/21 used for the purposes of the pay ratio calculations was determined as Mike Coupe’s salary, pension and benefits in respect of the period he served as
Chief Executive Officer (to 31 May 2020) plus Simon Roberts’ salary, pension and benefits in respect of the period he served as Chief Executive Officer (1 June 2020 to 6 March 2021). In order to provide a suitably
representative figure the LTIP portion was based on Mike Coupe’s LTIP award vesting in 2021 removing the effect of pro-rating in order to provide a full-year value. If the full-time equivalent 2020/21 single figure
quoted for Simon Roberts on page 84 had been used, the median pay ratio would have been 152:1.
The colleagues used to calculate the pay ratios were identified using our 2021
gender pay gap data. In line with the regulations, our 2021 gender pay gap
data identifies employees using a snapshot date of 5 April 2021. This method
has been chosen as it makes use of our gender pay data which provided a
readily available and robust dataset.
A full-time equivalent total pay figure was calculated for each of these
colleagues using the single figure methodology. The approach includes base
salaries, pension contributions and any relevant pay premiums. To ensure
these three colleagues were a suitable representative of their quartile, the
total pay figures calculated were compared against a sample of colleagues
either side of the three identified colleagues.
The following table provides base salary and total remuneration information
in respect of the 25th, 50th and 75th percentile colleagues, on a full-time
equivalent basis.
Financial year Remuneration Chief Executive
1
25th percentile pay ratio
(lower quartile)
50th percentile pay ratio
(median)
75th percentile pay ratio
(upper quartile)
2021/22 Base salary £875,000 £18,155 £19,588 £20,703
Total remuneration £3,787,000 £18,780 £20,680 £21,306
The Remuneration Committee considers pay ratios as one of many reference
points when reviewing executive remuneration and considers that the
median pay ratio for 2021/22 is consistent with the pay, reward and
progression policies for the Company. Due to the nature of the role of the
Chief Executive Officer, the Committee believes that it is important for a
significant portion of the Chief Executive Officer’s remuneration package
to be performance-related and aligned to the long-term, sustainable success
of the Company. As a result, the Chief Executive Officer’s single figure
fluctuates each year depending on the Company’s performance and the
outturns of the incentive plans and this will impact the pay ratio reported
in any single year.
Percentage change in Executive and Non-Executive Director remuneration
The table below shows the percentage change in the salary, benefits and bonus of Executive and Non-Executive Directors between (i) 2019/20 and 2020/21
and (ii) 2020/21 and 2021/22 compared with the percentage change in the average of each of those components of pay for all our colleagues.
Percentage change in remuneration
from 2019/20 – 2020/21
Percentage change in remuneration
from 2020/21 – 2021/22
Salary
% change
Benefits
% change
4
Bonus
% change
Salary
% change
Benefits
% change
4
Bonus
% change
Simon Roberts
1
N/A N/A N/A 0.0% 42.7% N/A
Kevin O’Byrne 1.1% 0.0% 222.2% 0.0% 29.3% 24.3%
Martin Scicluna 1.1% 0.0% N/A 0.0% 0.0% N/A
Brian Cassin 1.1% 0.0% N/A 0.0% 0.0% N/A
Jo Harlow 2.8% -100% N/A 0.0% 0.0% N/A
Adrian Hennah
2
– – – N/A N/A N/A
Tanuj Kapilashrami
1
N/A N/A N/A 0.0% 0.0% N/A
David Keens 0.9% -88.2% N/A 0.0% -15.2% N/A
Susan Rice 0.7% -72.7% N/A 0.0% 61.7% N/A
Keith Weed
1
N/A N/A N/A 0.0% 0.0% N/A
All colleagues
3
4.0% -15.3% 308.1% -1.2% -21.9% 5.2%
1 Simon Roberts, Tanuj Kapilashrami and Keith Weed were all appointed during 2020/21 and therefore no annual change is shown for 2020/21. For the purpose of meaningful comparison between 2021/22 and 2020/21,
the 2020/21 figures have been pro-rated up to reflect the full year.
2 Adrian Hennah was appointed to the Board on 1 April 2021 and therefore no annual change is shown for 2021/22.
3 All colleague figures relate to averages based on number of full-time equivalent colleagues. These comparisons will be materially impacted by the grade mix of colleagues. While the 2020/21 to 2021/22 salary change
shows a decrease, hourly paid colleagues received an increase of 2.2 per cent in March 2021 and there was no annual pay review for management. In both comparison years, the benefits change figure shows a decrease
but there was no change to the benefits offered. Note, any one-off payments made have been excluded from these figures.
4 Non-Executive Directors receive no benefits other than a colleague discount card and reasonable business travel expenses. The percentage change figures are in respect of the Non-Executive Directors’ taxable
business travel expenses only. The significant reductions reported for 2020/21 reflect the reduction in business travel during the year.
90 Governance J Sainsbury plc Annual Report 2022
Relative importance of spend on pay
The table below illustrates the year-on-year change in total colleague pay (being the aggregate staff costs as set out in note 36 to the financial statements)
and distributions to shareholders (being declared dividends).
Colleague pay Distribution to shareholders
2020/21
£m
2021/22
£m % change
2020/21
£m
2021/22
£m % change
3,752 3,600 -4.1% 232 238 2.6%
Performance and ChiefExecutive remuneration
The graph shows the TSR performance of an investment of £100 in J Sainsbury plc shares over the last ten years compared with an equivalent investment
in the FTSE 100 Index. The FTSE 100 Index has been selected to provide an established and broad-based index. The graph also includes data for the FTSE
All-Share Food & Drug Retailers Index. The Company is a constituent of both indices. The table details the total remuneration for the Chief Executive over
this period.
Sainsbury’s FTSE 100 FTSE All-Share Food & Drug Retailers
Mar 12 Mar 14Mar 13 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 21 Mar 22Mar 20
250
200
150
100
50
0
TSR performance since March 2012
CEO 2012/13 2013/14 2014/15
1
2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
2
2021/22
Single figure remuneration
(£000)
S Roberts
M Coupe
J King
–
–
4,366
–
–
3,906
–
1,507
405
–
2,802
–
–
2,354
–
–
3,630
–
–
3,569
–
–
2,999
–
1,325
1,447
–
3,787
–
–
Bonus/Bonus Shares/DSA
award as a percentage
ofmaximum
S Roberts
M Coupe
J King
–
–
84%
–
–
73%
–
26%
0%
–
78%
–
–
35%
–
–
57%
–
–
56%
–
–
22%
–
0%
0%
–
87%
–
–
LTIP vesting percentage
of maximum
S Roberts
M Coupe
J King
–
–
44%
–
–
40%
–
0%
0%
–
0%
–
–
22.5%
–
–
42.5%
–
–
55%
–
–
65%
–
60%
60%
–
70%
–
–
1 For 2014/15, Justin King’s ﬁgures relate to the time he was Chief Executive Ofﬁcer and, consistent with the single ﬁgure table, the ﬁgures for Mike Coupe relate to the whole of 2014/15; he was Chief Executive Ofﬁcer
from 9 July 2014.
2 For 2020/21, Simon Robert’s figures relate to the time he was Chief Executive Officer during 2020/21 and, consistent with the single figure table, the figures for Mike Coupe relate to the time up until his departure
on 2 July 2020.
91 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Governance –the Remuneration Committee
Committee membership
The Remuneration Committee during the year comprised Susan Rice (Chair),
Jo Harlow and Tanuj Kapilashrami. All members of the Committee are
independent Non-Executive Directors.
Tim Fallowfield, Company Secretary, acts as secretary to the Committee.
Martin Scicluna, Simon Roberts, Angie Risley (Group HR Director), the
Director of Reward and the Director of Group Finance are invited to attend
Committee meetings either fully or partially. The Committee considers their
views when reviewing the remuneration of the Executive Directors and
Operating Board Directors. Individuals who attend Remuneration Committee
meetings are not present when their own remuneration is being determined.
The Committee typically meets four times each year, or more often as
required. The Committee has a calendar of standard items within its remit
and in addition it held in-depth discussions on specific topics during the
year. In 2021/22 there were a number of unscheduled meetings regarding
changes to the Operating Board as well as discussions on performance
outturns for annual bonus and the Long-Term Incentive Plan. The Committee
complies with relevant regulations and considers the Code and best practice
when determining pay and policy.
Advisers to the Remuneration Committee
The Committee is authorised by the Board to appoint external advisers
if it considers this beneficial. Over the course of the year, the Committee
was supported by its appointed advisers, Deloitte LLP (Deloitte). Deloitte
were reappointed by the Committee as advisers in 2013 following a
competitive tender.
Deloitte are members of the Remuneration Consulting Group and, as such,
operate under the Code of Conduct in relation to executive remuneration
consulting in the UK. During the year, the Committee reviewed the advice
provided by Deloitte and has confirmed that it has been objective and
independent. The Committee has also determined that the Deloitte partner
who provides remuneration advice to the Committee does not have any
connections with the Company that may impact their independence. The
Committee has reviewed the potential for conflicts of interest and judged
that there were appropriate safeguards against such conflicts.
During the year they provided advice to the Committee on a range of topics
including remuneration trends, corporate governance, incentive plan design
and incentive plan rules. Their consultants attended all of the Committee
meetings. In relation to their advice, Deloitte received fees of circa £65,000
(fees are based on hours spent). During the year, Deloitte provided the
Company with unrelated advice and consultancy in respect of information
technology, operating models, data analytics and taxation.
Statement of voting at general meeting
The table below sets out the votes on the Annual Report on Remuneration at the 2021 AGM and on the Directors’ Remuneration Policy at the 2020 AGM.
The Committee is keen to hear the views of all shareholders and continually reviews the Remuneration Policy and its implementation.
Votes for Votes against Votes abstained
Remuneration Report (2021 vote) 80.61%
1,452 million
19.39%
349 million
–
0.7 million
Remuneration Policy (2020 vote) 97.00%
1,636 million
3.00%
51 million
–
6.0 million
Directors’ contracts
Executive Directors have rolling contracts which are terminable on 12 months’ notice by either party. Non-Executive Directors are appointed for an initial
three-year period, which may be extended for a further term by mutual consent. The initial appointments and any subsequent reappointments are subject
to annual election or re-election by shareholders. Non-Executive Directors’ appointments may be terminated at any time by giving three months’ written
notice by either party; six months’ in the case of the Non-Executive Chairman.
92 Governance J Sainsbury plc Annual Report 2022
Executive Directors’ shareholdings and share interests (audited information)
The table below sets out details of the Executive Directors’ shareholdings and a summary of their outstanding share awards at the end of the 2021/22 financial
year. Further details of the movements of the Executive Directors’ share awards during the year are set out on page 95.
Ordinary shares
1
Scheme interests
2
6 March 2021 5 March 2022 27 April 2022
Bonus Share
Awards
3
Deferred Share
Awards
4
LTIP awards
with
performance
period
completed
5
LTIP awards
with
performance
period
outstanding
6
SAYE
Simon Roberts 153,858 373,520 373,520 – 110,362 109,932 2,356,636 4,873
Kevin O’Byrne 489,256 573,312 573,312 343,334 129,331 621,887 1,868,720 3,461
1 Ordinary shares are beneficial holdings which include the Directors’ personal holdings and those of their spouses and minor children. They also include the beneficial interests in shares which are held in trust under
the Sainsbury’s Share Purchase Plan.
2 Deferred Share Awards and Long Term Incentive awards are structured as nil-cost options.
3 Relates to 2020/21 Bonus Share Awards.
4 Relates to 2019/20 Deferred Share Awards.
5 Relates to 2018 Future Builder awards (and 2017 in the case of Kevin O’Byrne).
6 Relates to 2019 and 2020 Future Builder awards (maximum) and 2021 Win in Food award where the performance period has not ended. As noted above, following the year-end, the 2019 award will vest at 70 per cent
of maximum.
Note: The Executive Directors are potential beneficiaries of the Company’s Employee Benefit Trust, which is used to satisfy awards under the Company’s employee share plans, and they are therefore treated as
interested in the 26.6 million shares (2021: 17.2 million) held by the Trustees.
Share awards made during the financial year (audited information)
The following share awards were made to Executive Directors during the year.
Scheme
Basis of award
(maximum) Face value
Percentage vesting at threshold
performance Number of shares
Performance period
end date
Simon Roberts 2021 Win in Food
1
250% of salary £2,187,500 25% of each element 819,288 2 March 2024
Kevin O’Byrne 2021 Win in Food
1
250% of salary £1,643,508 25% of each element 615,544 2 March 2024
Bonus Share Award
2
126% of salary £828,328 N/A 343,334 N/A
1 The performance conditions applying to 2021 Win in Food awards are set out later in this section. The basis of award shows the maximum value being four times the core award. The award was made on 4 June 2021
and the number of shares has been calculated using the average share price between 27 May and 3 June 2021 of £2.670. Subject to performance, the award will vest in May/June 2024 and will be released after a further
two-year retention period. The award is structured as a nil-cost option with an exercise period of up to six years from grant.
2 The Bonus Share Award was made on 7 May 2021 based on performance over the 2020/21 financial year. Simon Roberts waived his entitlement to a bonus for 2020/21. Kevin O’Byrne’s bonus was paid out 100 per cent
in shares rather than 50 per cent cash and 50 per cent shares. The award was made at 70 per cent of the maximum level (maximum of 180 per cent of salary for Kevin O’Byrne). The number of shares has been calculated
using the average share price between 30 April and 6 May 2021, £2.413. No further performance conditions apply. The Bonus Share Award will be released in April 2023.
93 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Unvested Long-Term Incentive Plan awards
The targets for Long-Term Incentive Plan awards granted in 2020 and 2021 are set out in the tables below.
2020 Future Builder
(2020/21 to 2022/23 performance period) Weighting
Threshold target core
(1.0x award)
Maximum target
(4.0x core award)
Cumulative retail free cash flow
1
50% £900m £1,400m
ROCE
1
25% 6.75% 9.75%
Underlying basic EPS
1
25% 19.8p 26.5p
2021 Win in Food incentive plan
(2021/22 to 2023/24 performance period) Weighting
Threshold target core
(1.0x award)
Maximum target
(4.0x core award)
Cumulative retail free cash ﬂow
1
20% £1,000m £1,500m
ROCE
1
20% 6.75% 9.75%
Underlying basic EPS
1
20% 19.8p 26.5p
Cost reduction
2
20% 80bps improvement 280bps improvement
Strategic indicators 20% — Market share – targets are commercially sensitive but we intend to provide
full disclosure of targets at the end of the performance period
— Customer satisfaction – improvement in Sainsbury’s score between
300bps to 900bps and Argos score between 210bps to 510bps
— Colleague – progress against our representation targets (see below) and
maintain colleague engagement scores
— Plan for Better – progress against our Plan for Better Scope 1 & 2, Scope 3
and plastic reduction targets (see below)
1 These measures are defined in the Alternative Performance Measures section of the Annual Report on pages 203 to 207.
2 Improvement assessed against 2019/20 results due to the COVID-19 impact on 2020/21.
Colleague representation targets
Target – senior leadership positions
(top 230 leaders)
Target – senior management positions
(1,200 leaders beneath senior leadership)
Female 50% 43%
Ethnically diverse 12% 12%
Black 3% 3%
Plan for Better targets Baseline Threshold Stretch
Scope 1 & 2 – GHG emissions 949,744 (tC0
2
e) 18/19 FY 761,991 705,870
Scope 3 – GHG emissions 26,663,081 (tC0
2
e) 18/19 FY 24,503,081 23,996,773
Plastic – Food – tonnes of plastic packaging 120,000 tonnes 2018 CY 91,200 80,400
Plastic – GM&C – tonnes of plastic packaging 9,836 tonnes 2018 CY 7,180 6,590
94 Governance J Sainsbury plc Annual Report 2022
Details of the Executive Directors’ share awards and movements during the year (audited information)
The table below shows the conditional awards granted and exercised under each of the Company’s share plans.
Name Award
Date of
award
Share
price at
date of
award
(pence)
Option
price
(pence)
Number of
options held at
6 March 2021
Number of
options
granted/
dividend
shares
allocated
during the
year
Number of
options
exercised
during the
year
Number of
options
lapsed
during the
year
Share price
on exercise
(pence)
Date of
exercise
Notional
gain on
exercise
(£000)
5
Number of
options held
at 5 March
2022
Simon Roberts
Long-Term
Incentive Plan
1
11/05/2017 265 Nil 131,422 23,128 154,550 – 247 06/05/2021 382 0
11/05/2018 307 Nil 366,440 15,141 125,073 146,576 247 06/05/2021 309 109,932
09/05/2019 211 Nil 512,184 – – – – – – 512,184
07/05/2020 193 Nil 1,025,164 – – – – – – 1,025,164
04/06/2021 265 Nil 0 819,288 – – – – – 819,288
Deferred
Share Award
2
09/05/2019 211 Nil 122,745 12,829 135,574 – 247 06/05/2021 335 0
07/05/2020 193 Nil 110,362 – – – – – – 110,362
Sharesave
4
10/12/2019 220 161 3,040 – – – – – – 3,040
14/12/2020 226 161 1,833 – – – – – – 1,833
Total 2,273,190 870,386 415,197 146,576 – – 1,026 2,581,803
Kevin O’Byrne
Long-Term
Incentive Plan
1
11/05/2017 265 Nil 323,123 26,768 – – – – – 349,891
11/05/2018 307 Nil 424,120 17,524 – 169,648 – – – 271,996
09/05/2019 211 Nil 592,804 – – – – – – 592,804
07/05/2020 193 Nil 660,372 – – – – – – 660,372
04/06/2021 265 Nil 0 615,544 – – – – – 615,544
Deferred
Share Award
2
09/05/2019 211 Nil 143,843 15,037 158,880 – 247 06/05/2021 392 0
07/05/2020 193 Nil 129,331 – – – – – – 129,331
Bonus Share
Award
3
07/05/2021 251 – 0 343,334 – – – – – 343,334
Sharesave
4
07/12/2018 300 260 3,461 – – – – – – 3,461
Total 2,277,054 1,018,207 158,880 169,648 – – 392 2,966,733
1 The LTIP share figures relate to the maximum that could be achieved.
2 The Deferred Share Award figures are after the application of performance conditions.
3 Simon Roberts waived his 2020/21 bonus and therefore no Bonus Shares were awarded. Kevin O’Byrne took 100 per cent of his 2020/21 bonus in Bonus Shares.
4 Sharesave is an all-employee share option plan and has no performance conditions as per HMRC Regulations.
5 This is the notional gain on the date of exercise had all shares been sold.
95 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Additional statutory information required by the Accounts Regulations can be found below:
Directors’ interests The beneficial interests of the Directors and their connected persons in the shares of the Company are shown on pages 89 and 93.
During the year, no Director had any material interest in any contract of significance to the Group’s business.
Directors’ indemnities The Company maintains a Directors’ and Officers’ liability insurance policy which provides appropriate cover for legal action
brought against its Directors. The Company has also executed deeds of indemnity for each of its Directors, to the extent permitted
by law and the Company’s Articles of Association. These indemnities were in force throughout the financial year and as at the date
of this report.
Qualifying third-party indemnity provisions (as defined by section 234 of the Companies Act 2006) are in force, to the extent
permitted by law, for the benefit of the Directors in relation to certain losses and liabilities incurred in connection with the
execution of their powers, duties and responsibilities.
Research and
development
In the ordinary course of business the Company regularly develops new products and services. See page 10 for more information.
Employment policies The Company values the different perspectives, experiences and abilities of all our colleagues. We ensure that those living with a
disability or long-term health condition are fully and fairly considered for employment with the Company through well-developed
policies for the equal treatment of all. We have a workplace adjustments process in place for our colleagues who find themselves
with a disability or long-term health condition; workplace adjustments can be made at any point during a colleague’s employment
with us. We are committed to providing equal opportunities for all colleagues and applicants through recruitment, training,
development and promotion. Further information can be found on pages 13 to 14.
Health and safety The health and safety of our colleagues and customers is a key part of our strategy. See page 15 for more information.
Colleague engagement Details on how we engage with our colleagues can be found on page 25.
Political donations The Company made no political donations in 2021/22 (2020/21: £nil).
Post balance sheet
events
In light of the events in Russia and Ukraine, which continued to evolve subsequent to the Group’s balance sheet date, it has been
concluded that the conflict has no material impacts on the Group’s financial statements.
Financial risk
management and
financial instruments
Notes 30 and 31 on pages 149 to 166 disclose details relating to financial risk management and financial instruments.
Disclosure of information
to the auditor
Each Director has confirmed that, so far as each Director is aware, there is no relevant audit information of which the auditor is
unaware. Each Director has taken all steps that they ought to have taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the auditor is aware of that information. For further information, please see the
Statement of Directors’ responsibilities on page 100.
Dividends Details of the payment of the final dividend can be found on page 132.
Ordinary shares Details of the changes to the ordinary issued share capital during the year are shown on page 147. As at 25 April 2022,
2,336,774,734 ordinary shares of 28
4
/
7
pence have been issued, are fully paid up and are listed on the London Stock Exchange.
Share capital Except as described below in relation to the Company’s employee share plans, there are no restrictions on the voting rights
attaching to the Company’s ordinary shares or the transfer of securities in the Company; no person holds securities in the
Company carrying special rights with regard to control of the Company; and the Company is not aware of any agreements
between holders of securities that may result in restrictions in the transfer of securities or voting rights. Further details of the
rights, restrictions and obligations attaching to the share capital of the Company, including voting rights, are contained in the
Company’s Articles of Association. The Articles of Association may only be changed with the agreement of shareholders.
Shares acquired for the Company’s employee share plans by the Trustee rank pari passu with shares in issue and have no special
rights. Where, under the Company’s All Employee Share Ownership Plan, participants are beneficial owners of the shares but the
Trustee is the registered owner, the voting rights are normally exercised by the registered owner at the direction of the participants.
All shares held by the J Sainsbury Employee Benefit Trust are held on an unallocated basis. As such, the Trustees waive their rights
to vote and to receive dividends on these shares. Total dividends waived by the Trustees during the financial year amounted to
£1,600,009.31. A number of shares were purchased into the J Sainsbury Employee Benefit Trust for the purposes of satisfying share
awards under the Company’s share plans. These would ordinarily have been subject to a dividend waiver mandate but were not
settled before the Company’s dividend record date on 12 November 2021. As such, a sum of £57,405.52 (equal to the dividends
received) was returned to the Company by the Trustee. Some of the Company’s employee share plans include restrictions on the
transfer of shares while the shares are held within the plan.
At the Annual General Meeting held in July 2021, the Company was authorised by shareholders to purchase its own shares, within
certain limits and as permitted by the Articles of Association. The Company made no purchases of its own shares during the
financial year.
The Company undertook a share forfeiture programme during the year to trace and notify shareholders who had not had contact
with the Company over the past 12 years, in accordance with the provisions set out within the Articles of Association. Under the
programme, the shares and dividends of untraced shareholders were forfeited with the resulting proceeds transferred to the
Company to use for charitable causes. Late claims will be honoured, and shareholders should contact our Registrars for further
information. Contact details can be found on page 200.
Change of control All of the Company’s employee share plans contain provisions relating to a change of control. On a change of control, options
and awards granted to employees under the Company’s share plans may vest and become exercisable, subject to the satisfaction
of any applicable performance conditions at that time.
A number of the Company’s financing arrangements contain change of control clauses under which lenders may cancel their
commitments and declare all outstanding amounts immediately due and payable. There are no other significant agreements
that would take effect, alter or terminate upon a change of control following a takeover bid.
Additional statutory information
96 Governance J Sainsbury plc Annual Report 2022
Major interests in shares
As at 5 March 2022, the Company had been notified by the following
investors of their interests in 3 per cent or more of the Company’s shares.
These interests were notified to the Company pursuant to DTR5 of the
Disclosure Guidance and Transparency Rules:
Date
notified
Number of
ordinary shares
% of voting
rights
1
Qatar Holdings LLC 4 May 2021 335,446,132 14.99
VESA Equity Investment S.à r.l. 4 March 2022 234,887,363
10.07
BlackRock, Inc. 27 August 2021 149,416,535
6.4 0
Schroders plc 31 March 2021 116,161,658
5.22
Pzena Investment
Management, Inc
29 January 2021 104,292,488 4.69
1 Percentages shown are as a percentage of the Company’s issued share capital when the Company
wasnotified of the change in holding.
As at 25 April 2022, no further changes had been notified.
Directors’ Report
The Directors’ Report comprises pages 1 to 97 of this Annual Report and
Financial Statements. The following information required by Rule 9.8.4R of
the UK Listing Rules (LR) is also incorporated into the Directors’ Report:
Information requirement Location within Annual Report
Interest capitalised See note 14 of the
consolidated financial
statements
Publication of unaudited financial information See note 30
Details of any long-term incentive plans See Remuneration
Report, Remuneration
Policy and note 38
Shareholder waiver of dividends See note 29
Shareholder waiver of future dividends See note 29
Other information requirements set out in LR 9.8.4R are not applicable to
the Company.
Streamlined energy and carbon (SECR) reporting
J Sainsbury plc has calculated and publicly reported its carbon dioxide
emissions and other greenhouse gases (GHG) for several years. We have
measured our emissions since 2005 and set challenging targets throughout
the years. In 2021, we announced our new ‘Plan for Better’ strategy. As part
of this, we accelerated our target to become Net Zero across our own
operations by 2035, aligning the business with the goal to limit global
warming to 1.5°C, the highest ambition of the Paris Agreement. For Scope 3,
our target is the reduction of absolute GHG emissions by 30 per cent by 2030,
to align to a well below 2°C scenario. We’re also working with suppliers to set
their own ambitious Net Zero commitments.
Methodology
In line with the GHG Protocol Corporate Accounting and Reporting Standard
(revised edition), we will be reflecting the performance of Sainsbury’s, and
Argos and Habitat emissions separately, as well as the combined Group
performance. We have reported on all of the emission sources required under
the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations
2013. We have calculated and reported our emissions in line with the GHG
Protocol Corporate Accounting and Reporting Standard (revised edition)
and emission factors from UK Government’s GHG Conversion Factors for
Company Reporting 2021, and IEA 2020 for those overseas. The reporting
period is the financial year 2021/22, the same as that covered by the Annual
Report and Financial Statements. The boundaries of the GHG inventory are
defined using the operational control approach. In general, the emissions
reported are the same as those which would be reported based on a
financial control boundary. Emissions for previous years are retrospectively
adjusted as and when more accurate data is provided.
The following report compares Scope 1 and 2 greenhouse gas emissions for
2021/22 and 2020/21.
UK and global annual energy and carbon
Sainsbury’s Group total carbon figures and intensities
GHG emissions (tCO
2
e) – location-based
Emission source 2020/21 2021/22
Scope 1 527,311.76 516,239.46
Scope 2 327,876.81 274,637.32
Total (tCO
2
e) 855,188.57 790,876.78
Intensity measurement (tCO
2
e/’000 sq ft) 35.06 32.45
GHG emissions (tCO
2
e) – market-based
Emission source 2020/21 2021/22
Scope 1 527,311.76 516,239.46
Scope 2 290,108.15 245,879.55
Total (tCO
2
e) 817,419.91 762,119.02
Intensity measurement (tCO
2
e/’000 sq ft) 33.51 31.27
97 Governance J Sainsbury plc Annual Report 2022
Governance Report Strategic Report Financial Statements
Sainsbury’s breakdown
UK locations
Energy consumption (kWh) Location-based (tCO
2
e) Market-based (tCO
2
e)
Emission source 2020/21 2021/22 2020/21 2021/22 2021/22 2021/22
Combustion of fuel and operation of facilities (Scope 1) 1,571,955,881.57 1,529,627,384.74 448,374.01 447,947.23 448,374.01 447,947.23
Electricity, heat, steam and cooling purchased for own
use (Scope 2)
1,309,493,449.32 1,176,622,051.97 302,984.12 253,601.16 265,843.65 226,601.12
Total 2,881,449,330.90 2,706,249,436.71 751,358.13 701,548.39 714,217.66 674,548.35
Global locations (excludes UK)
Energy consumption (kWh) Location-based (tCO
2
e) Market-based (tCO
2
e)
Emission source 2020/21 2021/22 2020/21 2021/22 2021/22 2021/22
Combustion of fuel and operation of facilities (Scope 1) – – – – – –
Electricity, heat, steam and cooling purchased for own
use (Scope 2)
314,061.66 266,481.33 2 1 3.46 187.37 21 3.4 6 1 87.37
Total 314,061.66 266,481.33 213.46 1 8 7. 3 7 21 3.46 1 8 7. 3 7
Argos and Habitat breakdown
UK locations
Energy consumption (kWh) Location-based (tCO
2
e) Market-based (tCO
2
e)
Emission source 2020/21 2021/22 2020/21 2021/22 2021/22 2021/22
Combustion of fuel and operation of facilities (Scope 1) 345,643,670.03 298,504,465.07 78,639.04 68,040.08 78,639.04 68,040.08
Electricity, heat, steam and cooling purchased for own
use (Scope 2)
96,700,255.42 83,130,666.49 22,526.49 17,627.98 24,002.07 19,030.55
Total 442,343,925.45 381,635,131.56 101,165.53 85,668.06 102,641.11 87,070.63
Global locations (excludes UK)
Energy consumption (kWh) Location-based (tCO
2
e) Market-based (tCO
2
e)
Emission source 2020/21 2021/22 2020/21 2021/22 2021/22 2021/22
Combustion of fuel and operation of facilities (Scope 1) 1,624,552.04 1,242,329.16 298.71 252.16 298.71 252.16
Electricity, heat, steam and cooling purchased for own
use (Scope 2)
5,614,349.16 6,491,519.05 2,152.75 3,220.80 2,152.75 3,220.80
Total 7,238,901.20 7,733,848.21 2,451.45 3,472.96 2,451.45 3,472.96
Dual emissions reporting
Overall emissions have been presented to reflect both location and market-based methodologies, affecting both Scope 1 and Scope 2 emissions.
Scope 1: All Scope 1 market-based emissions have been calculated using UK Government’s GHG Conversion Factors for Company Reporting 2021 for all sources.
Scope 2: 41 per cent of electricity usage is covered by either a Power Purchase Agreement (PPA), a certified green tariff, or falls within onsite renewable
generation from solar energy. The remaining electricity has been reported at supplier-specific emissions rate, and non-UK electricity has been reported at
local grid average, unless supplied by a certified green tariff. From 1 January 2022, Sainsbury’s will source 100 per cent renewable electricity.
Energy efficiency actions
To grow our business sustainably, we are continuously working to cut greenhouse gas emissions, ensuring that we maximise energy efficiency. A few of the
projects we have implemented this year include:
— LED lighting upgrades at 226 stores equating to approximately 23,626,922 kWh annual savings. This has fulfilled the commitment to be fully LED across
100% of our supermarkets by the end of 2021, with the remainder of the estate complete by the end of 2022
— Ensuring the existing solar estate is monitored in detail and the operation of this is optimised through timely replacement of components
— The replacement of refrigeration systems with more efficient technology, whilst also removing HFC refrigerant gases
— The use of an innovative single system to provide store refrigeration, cooling, and heating requirements. This reduces energy consumption in a store
by up to 30 per cent whilst maintaining a high-quality environment, which is warm in winter and cool in summer, by reusing any ‘heating’ or ‘cooling’
throughout the year. We call it ‘RIHC’, Refrigeration Integrated Heating and Cooling
— Delivering Net Zero new stores through the installation of highly efficient Zero Carbon technology
— Exploring how uncontrolled air infiltration in stores can be reduced to improve thermal comfort and reduce heating and refrigeration energy consumption
— Testing out the latest water saving technology in toilets and ensuring water saving taps are fully rolled out to all stores
— Optimising the existing biomass boiler fleet, introducing thermal stores, reducing boiler down-time, and increasing fuel consumption efficiency
By order of the Board
Tim Fallowfield OBE
Company Secretary and Corporate Services Director
27 April 2022
98 Governance J Sainsbury plc Annual Report 2022
Additional Disclosures
189 Note 39 Capital commitments
189 Note 40 Contingent liabilities and contingent assets
190 Note 41 Related party transactions
190 Note 42 Post balance sheet events
191 Note 43 Details of related undertakings
Company Financial Statements
194 Company balance sheet
195 Company statement of changes in equity
Notes to the Company Financial Statements
196 Note 1 Basis of preparation
197 Note 2 Investments in subsidiaries, joint ventures and associates
197 Note 3 Other receivables
197 Note 4 Trade and other payables
198 Note 5 Borrowings
198 Note 6 Taxation
199 Note 7 Share capital and reserves
199 Note 8 Retained earnings
199 Note 9 Contingent liabilities
100 Statement of Directors’ Responsibilities
101 Independent Auditor’s Report to the Members
of J Sainsbury plc
Consolidated Financial Statements
108 Consolidated income statement
109 Consolidated statement of comprehensive income/(loss)
110 Consolidated balance sheet
111 Consolidated cash flow statement
112 Consolidated statement of changes in equity
Notes to the Consolidated Financial Statements
113 Note 1 General information
113 Note 2 Significant accounting policies
117 Note 3 Alternative performance measures
117 Note 4 Significant accounting judgements,
estimates and assumptions
Income Statement
118 Note 5 Profit before non-underlying items
121 Note 6 Revenue
122 Note 7 Segment reporting
126 Note 8 Supplier arrangements
127 Note 9 Operating profit
127 Note 10 Finance income and finance costs
128 Note 11 Taxation
131 Note 12 Earnings per share
132 Note 13 Dividends
Financial Position
132 Note 14 Property, plant and equipment
134 Note 15 Leases
137 Note 16 Intangible assets
139 Note 17 Impairment of non-financial assets
141 Note 18 Financial assets at fair value through
other comprehensive income
141 Note 19 Inventories
142 Note 20 Receivables
143 Note 21 Amount due from Financial Services customers
and other banks
143 Note 22 Assets held for sale
144 Note 23 Trade and other payables
145 Note 24 Amounts due to Financial Services customers and banks
145 Note 25 Provisions
147 Note 26 Called up share capital, share premium and merger reserve
147 Note 27 Capital redemption and other reserves
148 Note 28 Perpetual securities
149 Note 29 Retained earnings
149 Note 30 Financial risk management
162 Note 31 Financial instruments
167 Note 32 Derivative financial instruments and hedge accounting
Cash Flows
172 Note 33 Cash and cash equivalents
174 Note 34 Analysis of net debt
177 Note 35 Borrowings
Employee Remuneration
178 Note 36 Employee costs
178 Note 37 Retirement benefit obligations
186 Note 38 Share-based payments
Financial Statements
99 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year that give a true and fair view of the state of affairs of the Group
and the Company as at the end of the financial year, and of the profit or loss
of the Group for the financial year. Under that law, the Directors have
prepared the Group financial statements in accordance with UK-adopted
international accounting standards. The Directors have elected to prepare
the Parent Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice, including FRS 101
‘Reduced Disclosure Framework’ (UK Accounting Standards and applicable
law). Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and the Company and of the profit or loss of the
Group for that period. In preparing these financial statements, the Directors
are required to:
— select suitable accounting policies and then apply them consistently;
— make judgements and accounting estimates that are reasonable and
prudent;
— state whether UK-adopted international accounting standards have been
followed, subject to any material departures disclosed and explained in
the Group and Company financial statements respectively; and
— prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the Company will continue
in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and the Company’s
transactions and disclose with reasonable accuracy at any time the financial
position of the Company and the Group and enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply with
the Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also responsible for safeguarding
the assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Having taken all the matters considered by the Board and brought to the
attention of the Board during the year into account, we are satisfied that the
Annual Report and Financial Statements, taken as a whole, is fair, balanced
and understandable.
The Board believes that the disclosures set out in this Annual Report provide
the information necessary for shareholders to assess the Group’s performance,
business model and strategy.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on pages 54
to57, confirms that, to the best of their knowledge:
— the financial statements, which have been prepared in accordance with
the relevant financial reporting framework give a true and fair view of the
assets, liabilities, financial position and profit of the Group and Company;
and
— the Strategic Report and Directors’ Report contained in the Annual Report
and Financial Statements include a fair review of the development and
performance of the business and the position of the Group, together with
a description of the emerging and principal risks and uncertainties that it
faces; and
— the Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Group’s position and performance, business
model and strategy.
By order of the Board
Tim Fallowfield OBE
Company Secretary and Corporate Services Director
27 April 2022
Statement of Directors’ responsibilities
100 Financial Statements J Sainsbury plc Annual Report 2022
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’
use of the going concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the directors’ assessment of the
Group and parent company’s ability to continue to adopt the going concern
basis of accounting included:
— Confirming our understanding of the directors’ going concern
assessment process.
— Assessing the adequacy of the going concern assessment to 27 April 2023
and considering the existence of any significant events or conditions
beyond this period.
— Verifying inputs against board-approved forecasts and debt facility
terms.
— Reviewing borrowing facility documentation to confirm availability to the
Group through the going concern period, noting no associated financial
covenants.
— Assessing management’s forecasting process and the consistency of the
assessment with information obtained from other areas of the audit,
such as accounting estimates.
— Testing the assessment, including forecast liquidity under base and
downside scenarios, for clerical accuracy.
— Assessing whether assumptions made (such as future costs including
the impact of inflation and forecast margin) were reasonable with
reference to information obtained elsewhere in the audit and, in the
case of downside scenarios, appropriately severe in light of the Group’s
relevant principal risks and uncertainties.
— Challenging the amount and timing of identified mitigating actions
available to respond to a ‘severe but plausible’ downside scenario, and
whether those actions are feasible and within the Group’s control.
— Performing independent sensitivity analyses on assumptions to assess
the impact on headroom.
— Performing reverse stress testing in order to identify and understand
which factors and how severe the downside scenarios would have
to be to result in the Group utilising all liquidity during the going
concern period.
— Assessing the appropriateness of going concern disclosures.
Our key observations
In management’s base case and downside scenarios, there is significant
headroom without taking the benefit of any identified mitigations.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group and parent company’s ability to
continue as a going concern for the period to 27 April 2023.
In relation to the Group and parent company’s reporting on how they have
applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report. However,
because not all future events or conditions can be predicted, this statement
is not a guarantee as to the Group’s ability to continue as a going concern.
Opinion
In our opinion:
— J Sainsbury plc’s Group financial statements and parent company
financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the parent company’s affairs
as at 5 March 2022 and of the Group’s profit for the period then ended;
— the Group financial statements have been properly prepared in
accordance with UK adopted International accounting standards;
— the parent company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice; and
— the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of J Sainsbury plc (the ‘parent
company’) and its subsidiaries (the ‘Group’) for the period ended 5 March
2022 which comprise:
Group Parent company
Consolidated balance sheet
as at 5 March 2022
Company balance sheet as at
5 March 2022
Consolidated income statement
for the period then ended
Company statement of changes in
equity for the period then ended
Consolidated statement of
comprehensive income for the
period then ended
Related notes 1 to 9 to the financial
statements including a summary of
significant accounting policies
Consolidated statement of changes
in equity for the period then ended
Consolidated statement of cash
flows for the period then ended
Related notes 1 to 43 to the financial
statements, (except for the sections
marked as “unaudited” in Note 30)
including a summary of significant
accounting policies
The financial reporting framework that has been applied in the preparation
of the Group financial statements is applicable law and UK adopted
International accounting standards. The financial reporting framework
that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework” (United Kingdom
Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Group and parent in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the parent company and we remain independent
of the Group and the parent company in conducting the audit.
Independent auditor’s report
to the members of J Sainsbury plc
101 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the
type of work that needed to be undertaken at each of the components by us,
as the primary audit engagement team, or by component auditors from
other EY global network firms operating under our instruction. Of the 14 full
scope components, audit procedures were performed on 12 of these directly
by the primary audit team and on 2 by EY component audit teams in
Edinburgh and Luton. For the 55 specific scope components, work was
performed by the primary audit team on 43 components and on 12 by EY
component audit teams in Edinburgh, Luton and Isle of Man. For the full and
specific scope components, where the work was performed by component
auditors, we determined the appropriate level of involvement to enable us
to determine that sufficient audit evidence had been obtained as a basis for
our opinion on the Group as a whole.
During the current year’s audit cycle, the Senior Statutory Auditor performed
virtual visits to Edinburgh and Luton to hold discussions with the component
teams. The virtual visits used video technology and our global audit software
to meet with component teams to discuss and direct their audit approach,
meeting with members of local management, attending planning and closing
meetings, reviewing relevant working papers including in response to the risk
areas for which component teams perform procedures, including supplier
arrangements, aspects of revenue recognition and the measurement of the
provision for impairment of loans and advances to customers. The primary
team interacted regularly with the component teams where appropriate
during various stages of the audit, reviewed relevant working papers, retaining
those that were considered key, and were responsible for the scope and
direction of the audit process. This, together with the additional procedures
performed at Group level, gave us appropriate evidence for our opinion on
the Group financial statements.
Climate change
There has been increasing interest from stakeholders as to how climate
change will impact J Sainsbury plc. The Group has determined that the most
significant future impacts from climate change on its operations will be from
extreme weather events, such as flooding or droughts and from the move
towards a low-carbon future which may impact the business, as a result of
changing consumer preferences and climate-related regulations. These are
explained on pages 17 to 23 in the required Task Force for Climate-Related
Financial Disclosures and on page 50 in the principal risks and uncertainties,
which form part of the ‘Other information,’ rather than the audited financial
statements. Our procedures on these disclosures therefore consisted solely
of considering whether they are materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or
otherwise appear to be materially misstated.
As explained in the consolidated financial statements, policy, technology
and market changes in response to climate change are still developing,
and these are interdependent upon each other, and consequently financial
statements cannot capture all possible future outcomes as these are not yet
known. The degree of certainty of these changes may also mean that they
cannot be taken into account when determining asset and liability valuations
and the timing of future cash flows under the requirements of UK adopted
International accounting standards. In Notes 14, 17, 25 and 37 to the financial
statements, narrative explanations of the impact of reasonably possible
changes in key assumptions have been provided and significant judgements
and estimates relating to climate change have been described in Note 4.
Our audit effort in considering the impact of climate-related risks on the
financial statements was focused on assessing the Company’s conclusion
that the current known impacts of the Group’s climate related plans and
pledges have been reflected in the valuation of assets and liabilities, the
useful economic lives of Property, Plant & Equipment and the cashflow
forecast used in the assessment of impairment of non-financial assets,
assessment of the going concern basis and viability statement.
The Group has stated its commitment to the aspirations of the Paris Agreement
to achieve net zero emissions by 2035. Within the “Other information”, the
Group discloses its “Plan for Better”; the strategy which sets out how they
are working to transition to a lower carbon future and become a net-zero
business by 2035. The Group has disclosed that this is an evolving area and
the work undertaken by the Group will inform their response to the risks and
opportunities identified. This currently reflects the known impacts of climate
change and will continue to be reflected in their financial models and plans
to reflect the future economic impact on their business model, operational
Overview of our audit approach
Audit scope
— We performed an audit of the complete financial information of 14
components. We performed audit procedures on specific balances
for 55 components.
— The components where we performed full or specific audit
procedures accounted for 100% of Profit before tax, 100% of
Revenue and 100% of Total assets.
Key audit matters
— Supplier arrangements
— Aspects of revenue recognition
— Measurement of provision for impairment of loans and advances
to financial services customers
— Valuation of defined benefit pension scheme
— Aspects of property provisions
— IT environment
Materiality
— Group materiality of £38 million which represents 4.6% of Profit
before tax, adjusted for non-recurring items.
An overview of the scope of the parent company
and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation
of performance materiality determine our audit scope for each component
within the Group. Taken together, this enables us to form an opinion on the
consolidated financial statements. We take into account size, risk profile, the
organisation of the Group and effectiveness of Group-wide controls, changes
in the business environment and other factors such as recent Internal audit
results when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Group financial
statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, of the 116 reporting
components of the Group, we selected 69 components covering entities
within the UK and the Isle of Man, which represent the principal business
units within the Group.
Of the 69 components selected, we performed an audit of the complete
financial information of 14 components (“full scope components”) which
were selected based on their size or risk characteristics. For the remaining 55
components (“specific scope components”), we performed audit procedures
on specific accounts within that component that we considered had the
potential for the greatest impact on the significant accounts in the financial
statements either because of the size of these accounts or their risk profile.
The table below shows the coverage obtained from the work performed by
our audit teams. Scoping changes from the prior year are not significant.
Number
% Group Profit
before tax
% Group
Revenue
% Total
assets
2021/22 2020/21 2021/22 2020/21 2021/22 2020/21
Full scope 14 62% 52% 99% 99% 77% 84%
Specific scope 55 38% 48% 1% 1% 23% 16%
Full and specific
scope coverage
69 100% 100% 100% 100% 100% 100%
Remaining
components
47 0% 0% 0% 0% 0% 0%
Total reporting
components
116 100% 100% 100% 100% 100% 100%
For components not in scope for full or specified audit procedures, we
performed other procedures, including analytical review, testing of
consolidation journals and intercompany eliminations to respond to any
potential risks of material misstatement to the Group financial statements.
102 Financial Statements J Sainsbury plc Annual Report 2022
Key observations communicated to the Audit Committee
Supplier arrangement amounts are appropriately recognised in the income
statement and balance sheet and the disclosures in the financial statements
are appropriate.
Risk
Aspects of revenue recognition
Refer to the Accounting policy and Note 6 of the Consolidated Financial
Statements (page 121)
There are a number of areas within revenue which require management to
exercise accounting judgement in recording manual adjustments where the
recognition of revenue does not directly correspond to cash receipts. Such
adjustments primarily include commission-based arrangements, deferral of
revenue relating to Nectar points and accounting for coupons and vouchers.
There is a risk that these adjustments are not complete and accurate for
the period ended 5 March 2022 and that accounting judgements taken are
inappropriate, particularly in respect of deferral of revenue. The opportunity
exists through management override of controls, such as the posting of
manual journals, to misstate revenue in the period.
Revenue recognised, including the effects of manual adjustments, for the
period ended 5 March 2022 totalled £29,895 million (2020/2021: £29,048 million).
The risk has remained the same in the current year as there continues to be
a focus on business performance.
Our response to the risk
We performed procedures over adjustments to revenue at the Sainsbury’s
Supermarkets Limited, Nectar 360 Limited and Argos Limited components.
— We gained an understanding of and documented the key processes
used to record revenue transactions by performing walkthroughs and
assessing the design effectiveness of key controls.
— We tested the appropriateness of the Group’s revenue recognition policy
by comparing to the criteria set out in IFRS 15 Revenue from Contracts
with Customers.
— We performed journal analysis to identify manual sales journals that did
not result in cash receipts (including coupons and vouchers), obtaining
supporting evidence of collection and settlement to verify revenue was
recognised correctly.
— In relation to the calculation of deferred revenue for Nectar points, we
examined and critically assessed input data which included:
— Obtaining details of points balances earned and redeemed for the
period ended 5 March 2022 and agreeing a sample of points in issue
to Nectar partner confirmations;
— Challenging and analysing management’s accounting judgements
in respect of breakage (the proportion of points which are unlikely
to ever be redeemed); and
— Recalculating the fair value per point, applied to the number of points
in circulation to determine the amount of deferred revenue to
recognise at 5 March 2022.
— Using data extracted from the accounting system, we tested the
appropriateness of manual journal entries, meeting pre-defined criteria
and impacting revenue, as well as other adjustments (consolidation
journals) made in the preparation of the financial statements. We considered
the validity of unusual journals such as those posted outside of expected
hours, or by unexpected individuals and for large or unusual amounts.
— We completed detailed analytical reviews to understand if there had been
significant or unusual activity in the period, including assessing changes
in the number of and nature of manual adjustments to verify completeness.
Key observations communicated to the Audit Committee
Revenue has been correctly recognised in accordance with IFRS 15. The
manual adjustments to revenue in the current year primarily related to
commission and deferred revenue for Nectar. We did not identify any
exceptions in our testing of these manual entries.
plans and customers. Therefore, as set out above, the potential impacts of
future plans are not fully incorporated in these financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of
our audit of the financial statements as a whole, and in our opinion thereon,
and we do not provide a separate opinion on these matters.
Risk
Supplier arrangements
Refer to the Accounting policy and Note 8 of the Consolidated Financial
Statements (page 126)
The Group, through its Retail divisions, receives material discounts and
incentives, fixed amounts (including promotions and utilisation of specific
space), volume-based rebates and marketing and advertising income from
suppliers, collectively referred to as supplier arrangements. The terms of
agreements with suppliers can be complex and varied. In addition, there can
be performance conditions or promotional periods that span the Group’s
reporting date.
Amounts recognised as deductions to Cost of sales for the period ended
5 March 2022 were £381 million (2020/2021: £360 million), with related
balance sheet entries recognised in inventory, current trade receivables
and current trade payables.
Accounting for rebate arrangements with suppliers requires judgement and
estimation in determining the extent to which deal terms have been met,
especially those spanning the Group’s reporting date, impacting cut-off.
High deal volumes are recorded just prior to the Group’s reporting date which
raises the risk that fixed amounts may be misstated. High levels of manual
intervention within the marketing and advertising and discounts and
incentives categories raise the risk of an error occurring in the calculation of
income, either accidentally or purposefully through management override
of controls.
The risk has remained the same in the current year as the complexity around
the arrangements is similar year on year.
Our response to the risk
We performed procedures over supplier arrangements at both the
Sainsbury’s Supermarkets Limited and Argos Limited components.
— We walked through and assessed the design effectiveness of the controls
in place within the supplier arrangements process.
— We selected a sample of suppliers across the categories of supplier
arrangements, to whom we sent confirmations across certain “deal”
types to confirm key deal input terms. Where we did not receive a
response from the supplier, we performed alternative procedures,
including obtaining evidence of initiation (such as supplier invoices)
and if settled, settlement of the arrangement.
— We tested the existence and valuation of balance sheet amounts
recognised in accounts receivable or as a contra-asset in accounts
payable by reviewing post-period end settlement. We also performed
a ‘look-back’ analysis of prior period balance sheet amounts to check
that these amounts were appropriately recovered.
— We tested the settlement of a sample of supplier arrangements
recognised in the income statement, which included settlement in cash
or by off-set to accounts payable.
— Using data extracted from the accounting system, we tested the
appropriateness of journal entries and other adjustments, meeting a
pre-defined criteria, to corroborating evidence such as third party invoices.
— We tested cut-off for deals recorded pre and post period end by obtaining
the supplier agreement to validate that the deal was recorded in the
correct period.
— We assessed the adequacy of the financial statements disclosures in
respect of supplier arrangements and their compliance with accounting
standards including the completeness and accuracy of amounts disclosed.
103 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Key observations communicated to the Audit Committee
We are satisfied that provisions for the impairment of loans and advances
tocustomers were reasonable and recognised in accordance with the
applicable reporting framework based on our procedures performed.
Risk
Valuation of the defined benefit pension scheme
Refer to the Audit Committee Report (page 76); Accounting policies
(page178); and Note 37 of the Consolidated Financial Statements (page 178)
Retirement benefit surplus (2021/2022: £2,283 million; 2020/2021: £744 million
Present value of funded obligations (2021/2022: £9,410 million; 2020/2021:
£10,256 million)
Fair value of plan assets (2021/2022: £11,693 million; 2020/2021: £11,000 million)
The valuation of the liabilities of the pension scheme is subject to the
following significant assumptions which are determined by an external firm
of pension actuaries:
a) Discount rate;
b) Inflation;
c) Future pension increases; and
d) Mortality.
Given the quantum of the defined benefit pension obligation, a movement in
the actuarial assumptions could result in a material difference in its value.
In addition, the unquoted asset pools (2021/2022: £3,900 million; 2020/2021:
£3,126 million) of the defined benefit pension scheme contain an element of
Level 3 illiquid investments. Certain of these assets are harder to value, which
increases the risk of incorrect valuation.
The risks associated with the pension scheme remain elevated as a result of
the economic environment, which has led to greater volatility in the liability
assumptions and additional uncertainty over the valuation of pension assets,
which drives the surplus calculation.
Our response to the risk
Our audit procedures covered the Sainsbury’s Pension Scheme which has
two sections: the Sainsbury’s Section and the Argos Section.
— We gained an understanding of and documented the process used to
record pension balances by performing a walkthrough and assessing the
design effectiveness of key controls.
— With the support of EY pension actuaries we considered the
appropriateness of the key assumptions supporting the valuation of the
scheme liabilities, being the discount rate, inflation, future pension
increases and mortality. We developed an independent range of
reasonable assumptions upon which to assess those used by the Group
and its external actuarial experts.
— We assessed the impact on pension liabilities of changes in financial,
demographic and mortality assumptions and whether these were in line
with our expectations. We also tested the completeness and accuracy of
member data on which these assumptions are based.
— With respect to certain unquoted pension assets we obtained
independent confirmations of all assets held. In conjunction with EY
valuation specialists we independently valued a sample of assets and
compared these to management’s valuations, critically assessing
management’s valuation methodology.
— Where valuation adjustments had been made by management for
changes in relevant market indices and to reflect cash received or paid
between the dates of the net asset value statements fund managers’
original valuations and the end of the Group’s accounting period, we,
in conjunction with EY valuation specialists, tested that the relevant
assumptions used were appropriate.
— We evaluated the competence, capabilities and objectivity of
management’s external actuaries involved in the determination of the
actuarial assumptions.
— We assessed the adequacy of the financial statements disclosures in
respect of the defined benefit pension schemes and their compliance
with accounting standards including the appropriateness of the key
assumptions and sensitivities disclosed.
Risk
Measurement of provision for impairment of loans and advances
to financial services customers
Refer to the Audit Committee Report (page 76); Accounting policies
(page152); and Notes 21 and 30 of the Consolidated Financial Statements
(page 143 and page 149)
Non-current loans and advances to customers (2021/2022: £2,069 million;
2020/2021: £2,332 million)
Impairment of non-current loans and advances (2021/2022: £43 million;
2020/2021: £52 million)
Current loans and advances to customers (2021/2022: £3,202 million;
2020/2021: £3,301 million)
Impairment of current loans and advances (2021/2022: £160 million;
2020/2021: £211 million)
Customer receivables comprise unsecured personal loans, credit cards,
mortgages (Sainsbury’s Bank) and store cards (Argos Financial Services).
Credit provisions represent management’s best estimate of impairment and
significant judgements and estimates are made in determining the timing
and measurement of expected credit loss (‘ECL’). The key judgements and
estimates in respect of the timing and measurement of ECL include:
a) Completeness and accuracy of data;
b) The accounting interpretations and modelling assumptions used to build
the models that calculate ECL;
c) Inputs and assumptions used to estimate the impact of multiple
economic scenarios;
d) Allocation of assets to stage 1, 2 or 3 using criteria in accordance with the
accounting standard;
e) Completeness and valuation of post model adjustments; and
f) Accuracy and adequacy of the financial statement disclosures.
We consider the risk related to the ECL provisions continues to be heightened
as a result of ongoing economic uncertainty from COVID-19 and the
uncertain effects of the invasion of Ukraine.
Our response to the risk
We performed procedures over ECL for Sainsbury’s Bank plc and Argos
Financial Services entities.
— We assessed the design effectiveness of key controls and tested these
across the processes relevant to the impairment provision calculation,
involving EY specialists to assist us in performing our procedures where
appropriate.
— We reviewed the minutes of the Model and Risk Committees where inputs,
assumptions and adjustments to the ECL were discussed and approved.
— We verified the data used in the ECL calculation on a sample basis and
considered the assumptions, inputs and formulas used across the entire
population of ECL models. We assessed the model design and considered
alternative modelling techniques, recalculating the Probability of Default,
Loss Given Default and Exposure at Default for a sample of the models.
— We tested the assumptions and inputs as stated above with the
assistance of EY modelling and economic specialists. We assessed
management’s base and alternative economic scenarios, including
challenging probability weights and comparing to other scenarios from
a variety of external sources, as well as EY internally developed forecasts.
— Benchmarking analysis was performed against the Bank’s peers for
forecasted macroeconomic variables used within the models, such as
GDP and unemployment.
— We assessed the criteria used to allocate an asset to stage 1, 2 and 3
in accordance with IFRS 9 Financial instruments to verify they were
allocated to the appropriate stage and reperformed this allocation in full.
— We challenged post model adjustments for appropriateness using our
knowledge and experience across the industry, performing testing over
material adjustments together with EY credit modelling specialists. We
assessed the appropriateness of the scenarios and calculations used in
determining the adjustment to be applied in response to the economic
uncertainty due to COVID-19 and the invasion of Ukraine.
— We assessed the adequacy and appropriateness of disclosures for
compliance with accounting standards.
104 Financial Statements J Sainsbury plc Annual Report 2022
Our response to the risk
— We held discussions with management to understand the IT
environment and walked through the key financial processes to
understand where IT systems were integral to the Group’s controls over
financial reporting. From this we identified which IT systems to include
in the scope for our detailed IT testing.
— We assessed the IT general controls environment for the key systems
impacting the accurate recording of transactions and the presentation
of the financial statements.
— We designed our IT audit procedures to assess the IT environment,
including an assessment of controls over changes made to the system
and controls over appropriate access to the systems.
— Where we found that adequate IT general controls were not in place,
we performed incremental substantive audit procedures in response to
the deficiencies identified for the systems within the scope of our audit.
Key observations communicated to the Audit Committee
We completed additional substantive testing in order to mitigate the risk of
material misstatement and we reported a number of control observations
and opportunities for improvement.
In the prior year, our auditor’s report included key audit matters in relation
to restructuring programmes and the assessment of the carrying value of
non-current assets. Restructuring activity has been much reduced in the
current year due to closure provisions being recognised in the prior year.
Impairment charges in relation to changes in customer behaviour have not
recurred during the current year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit,
in evaluating the effect of identified misstatements on the audit and in
forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in
the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a
basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £38 million (2020/2021:
£27 million), which is 4.6% (2020/2021: 5%) of Profit before tax, adjusted
for non-recurring items. We believe that Profit before tax, adjusted for
non-recurring items, provides us with the most relevant performance
measure as it adjusts for the effect of items which do not relate to the
ongoing trading of the Group. The materiality basis in the prior year used
a normalised measure of adjusted profit before tax, which reflected the
volatility in the Group’s trading results arising from the impact of COVID-19.
Starting basis Profit before tax £894 million
Adjustments Adjust for non-recurring
items
£77 million
These items are not
one-off in nature)
Materiality Total materiality basis
Materiality of £38 million
(4.7% of materiality
basis)
£817 million
During the course of our audit, we reassessed materiality as the actual
adjusted Profit before tax was higher than the Group’s initial estimate we
used at planning. However, due to the status of our procedures we did not
change our materiality from £38 million to reflect this.
We determined materiality for the Parent Company to be £128 million
(2020/2021: £136 million), which is 2% (2020/2021: 2%) of net assets. The
materiality of the parent company is greater than the Group because the
parent company is a holding company with significant net assets. For any
parent company balances that are consolidated into the Group financial
statements, an allocation of Group performance materiality was used.
Key observations communicated to the Audit Committee
The assumptions used to value the defined benefit obligation are within an
acceptable range. Our testing of the valuation of the pension assets, including
certain harder to value assets, has not identified any misstatements.
Risk
Aspects of property provisions – treatment of business rates
within an onerous contract
Refer to the Audit Committee Report (page 76); Accounting policy and Note 2
of the Consolidated Financial Statements (page 113)
Property provisions of £140 million (2021/2022: £164 million restated) include
provisions for onerous contracts which are recognised where expected cash
outflows exceed the anticipated future benefits. The amounts provided are
based on the Group’s best estimates of the likely committed outflows and
site closure dates. These provisions do not include rent in accordance with
IFRS 16, however do include unavoidable costs related to the lease such as
service charges and also include provisions for dilapidations which are
recognised where the Group has the obligation to make-good its leased
properties. These provisions historically included business rates. There is
apparent mixed practice across companies concerning the treatment of
business rates in onerous contract provisions. However, following additional
guidance published this year by accounting firms including EY, the Group
has reassessed its policy in this area, and concluded that business rates
relating to vacant property are a statutory obligation rather than a
contractual one, and should be recognised as a periodic cost in line with
IFRIC 21 “Levies”. Prior period comparatives have therefore been restated
to remove business rates from previously recognised property provisions
(property provisions at 6 March 2021 reduced by £121 million).
Our response to the risk
We performed procedures over the treatment of business rates within
onerous contracts at both the Argos Limited and Sainsbury’s Supermarkets
Limited components.
— We obtained a copy of and critically analysed management’s technical
accounting paper and legal advice which initially proposed no change to
the historic accounting treatment.
— We compared the Group’s historic accounting policy to sector peers,
and identified apparent mixed accounting practice.
— Given apparent mixed accounting practice, and following recent additional
guidance published this year by accounting firms, the audit engagement
team discussed the issue with EY’s global IFRS subject matter experts in
IFRIC 21 Levies and IAS 37 Provisions, Contingent liabilities and Contingent
assets. The discussion primarily focused on the Group’s property lease
arrangements which stipulate that Argos and Sainsbury’s are required to
pay business rates when they are due and whether this changes the nature
of business rates as a statutory obligation for the Group.
— Following the change in accounting policy, we assessed the
appropriateness of classification of business rates relating to vacant
properties as a non-underlying item.
— We assessed the adequacy of the financial statement disclosures in
respect of the restatement of prior period comparatives for compliance
with accounting standards.
Key observations communicated to the Audit Committee
We concluded that business rates for the period when the premises are
vacant fall outside the scope of the onerous contract provisions under IAS 37
and it is appropriate that no provision is recognised for the business rates.
The change in accounting treatment and disclosure of the impact of the
restatement of prior year comparatives is appropriate, along with the
classification as a non-underlying item.
Risk
The IT environment
The IT systems across the Group are complex and there are varying levels of
integration between them. The systems are vital to the ongoing operations
of the business and to the integrity of the financial reporting process.
During the current year we continued to report deficiencies in certain IT
controls. These deficiencies related to IT systems that are part of the Group’s
control framework over financial reporting and required us to perform
incremental procedures.
This risk remains unchanged from the prior year.
105 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Performance materiality
The application of materiality at the individual account or balance level.
It is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the
Group’s overall control environment, our judgement was that performance
materiality was 50% (2020/2021: 50%) of our planning materiality, namely
£19 million (2020/2021: £13.5 million). We have set performance materiality
at this percentage to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
Audit work at component locations for the purpose of obtaining audit
coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance
materiality set for each component is based on the relative scale and risk
of the component to the Group as a whole and our assessment of the risk
of misstatement at that component. In the current year, the range of
performance materiality allocated to components was £3.8 million to
£15.0 million (2020/2021: £2.7 million to £12.7 million).
Reporting threshold
An amount below which identified misstatements are considered as being
clearly trivial.
We agreed with the Audit Committee that we would report to them all
uncorrected audit differences in excess of £1.9 million (2020/2021: £1.3 million),
which is set at 5% of planning materiality, as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual
report set out on pages 1 to 98, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in this report, we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether
this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of the other information, we are required
to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
— the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
— the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent
company and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or the directors’
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
— adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches
not visited by us; or
— the parent company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
— certain disclosures of directors’ remuneration specified by law are not
made; or
— we have not received all the information and explanations we require for
our audit.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement
relating to the Group and company’s compliance with the provisions of the
UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that
each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements or our knowledge
obtained during the audit:
— Directors’ statement with regards to the appropriateness of adopting the
going concern basis of accounting and any material uncertainties
identified set out on page 116;
— Directors’ explanation as to its assessment of the company’s prospects,
the period this assessment covers and why the period is appropriate set
out on page 51;
— Director’s statement on whether it has a reasonable expectation that the
Group will be able to continue in operation and meets its liabilities set out
on page 52;
— Directors’ statement on fair, balanced and understandable set out on
page 100;
— Board’s confirmation that it has carried out a robust assessment of the
emerging and principal risks set out on page 38;
— The section of the annual report that describes the review of
effectiveness of risk management and internal control systems set out
on page 38; and;
— The section describing the work of the audit committee set out on page 73.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out
on page 100, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group and parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either
intend to liquidate the group or the parent company or to cease operations,
or have no realistic alternative but to do so.
106 Financial Statements J Sainsbury plc Annual Report 2022
Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not
detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations,
or through collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of
fraud rests with both those charged with governance of the company and
management.
— We obtained an understanding of the legal and regulatory frameworks that
are applicable to the Group and determined that the most significant are:
— Those that relate to the form and content of the financial statements,
such as UK adopted International Accounting Standards, the UK
Companies Act 2006, the UK Corporate Governance Code;
— Those that relate to the Bank, such as the regulations, license
conditions and supervisory requirements of the Prudential Regulation
Authority (“PRA”) and the Financial Conduct Authority (“FCA”); and
— Industry-related such as compliance with the requirements of the
Grocery Supply Code of Practice.
— We understood how J Sainsbury plc is complying with those frameworks
by making enquiries of management, internal audit and those responsible
for legal and compliance procedures. We corroborated our enquiries
through our review of board minutes and papers provided to the Audit
Committee and attendance at all meetings of the Audit Committee,
as well as consideration of the results of our audit procedures across
the Group.
— We assessed the susceptibility of the Group’s financial statements to
material misstatement, including how fraud might occur by making an
assessment of the key fraud risks to the Group and the manner in which
such risks may manifest themselves in practice, based on our previous
knowledge of the Group as well as an assessment of the current business
environment.
— Based on the results of our risk assessment we designed our audit
procedures to identify non-compliance with such laws and regulations.
Where the risk was considered to be higher, we performed audit
procedures to address each identified risk of material misstatement.
These procedures included those referred to in the “Supplier arrangements”
and “Aspects of revenue recognition” key audit matters section above.
These procedures included testing manual journals and were designed
to provide reasonable assurance that the financial statements were free
of material fraud or error. We evaluated the design and operational
effectiveness of controls put in place to address the risks identified,
or that otherwise prevent, deter and detect fraud. We also considered
performance targets and their influence on efforts made by
management to manage earnings.
— If any instances of non-compliance with laws and regulations were
identified, these were communicated to the relevant local EY teams who
performed sufficient and appropriate audit procedures, supplemented
by audit procedures at the Group level.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters we are required to address
— Following the recommendation from the audit committee we were
appointed by the company on 8 July 2015 to audit the financial statements
for the period ended 12 March 2016 and subsequent financial periods.
— The period of total uninterrupted engagement including previous
renewals and reappointments is 7 years, covering the periods ending
12 March 2016 to 5 March 2022.
— The audit opinion is consistent with the additional report to the audit
committee.
Use of our report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company
and the company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Colin Brown
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
27 April 2022
107 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
  52 weeks to 5 March 2022 52 weeks to 6 March 2021 (restated)
 Note
Before
non-
underlying
items
£m
Non-
underlying
items
(Note 5)
£m
Total
£m
Before
non-
underlying
items
£m
Non-
underlying
items
(Note 5)
£m
Total
£m
Revenue 6 2 9, 8 95 – 2 9, 89 5 29, 048 – 29, 048
Cost of sales (2 7, 5 3 8) 9 (2 7, 5 2 9) (2 6, 870) (333) ( 2 7, 2 0 3)
Gross profit/(loss) 2,35 7 9 2,366 2,17 8 (333) 1,8 45
Administrative expenses (1 , 3 52) (7 8) (1 ,4 3 0) (1, 480) (222) (1 ,702)
Other income 34 186 220 12 1 13
Operating profit/(loss) 1 ,0 3 9 117 1,156 710 (55 4) 1 56
Finance income 10 3 17 20 3 29 32
Finance costs 10 (31 2) (10) (32 2) (356) 4 (352)
Profit/(loss) before tax 730 1 24 854 357 (52 1) (1 6 4)
Income tax (expense)/credit 11 (1 54) (2 3) (17 7) (105) 68 (37)
Profit/(loss) for the financial period 576 101 677 252 (4 5 3) (2 01)
Note   pence   pence
Earnings/(loss) per share 12
Basic earnings/(loss)   2 9. 8   (9 .4)
Diluted earnings/(loss)   28.8   (9 .4)
The notes on pages 113 to 193 form an integral part of these financial statements.
Refer to note 2 for details of prior year restatements.
Consolidated income statement
for the 52 weeks to 5 March 2022
108 Financial Statements J Sainsbury plc Annual Report 2022



Note
52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
(restated)
£m
Profit/(loss) for the financial year 67 7 (2 01)
Items that will not be reclassified subsequently to the income statement
Remeasurement on defined benefit pension schemes 37 1 ,4 5 7 (4 8 2)
Movements on financial assets at fair value through other comprehensive income 76 55
Cash flow hedges fair value movements – inventory hedges 32 73 (6 0)
Current tax relating to items not reclassified – 44
Deferred tax relating to items not reclassified 11 (4 61) 9
1 ,14 5 (4 3 4)
Items that may be reclassified subsequently to the income statement
Currency translation differences (1) (5)
Movements on financial assets at fair value through other comprehensive income (5) 2
Items reclassified from financial assets at fair value through other comprehensive income reserve 4 –
Cash flow hedges fair value movements – non-inventory hedges 32 131 (1)
Items reclassified from cash flow hedge reserve 32 7 13
Deferred tax on items that may be reclassified 11 (57) 10
79 19
Total other comprehensive income/(loss) for the year (net of tax) 1 , 224 (41 5)
Total comprehensive income/(loss) for the year 1 ,901 (6 16)
The notes on pages 113 to 193 form an integral part of these financial statements.
Refer to note 2 for details of prior year restatements.
Consolidated statement of comprehensive income/(loss)
for the 52 weeks to 5 March 2022
109 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements

 Note
5 March
2022
£m
6 March
2021
(restated)
£m
7 March
2020
(restated)
£m
Non-current assets
Property, plant and equipment 14 8 ,4 0 2 8 ,587 8,9 49
Right-of-use assets 15 5, 560 4 , 74 7 4,826
Intangible assets 16 1 ,00 6 9 14 9 74
Investments in joint ventures and associates 3 5 9
Financial assets at fair value through other comprehensive income 18 604 754 972
Trade and other receivables 20 65 50 43
Amounts due from Financial Services customers and other banks 21 2 ,0 26 2,280 3 ,4 5 3
Derivative financial assets 32 213 8 6
Net retirement benefit surplus 37 2,283 74 4 1,119
20, 16 2 18,089 2 0,351
Current assets
Inventories 19 1 ,79 7 1,6 25 1 ,7 3 2
Trade and other receivables 20 683 725 811
Amounts due from Financial Services customers and other banks 21 3,163 3,1 27 3,951
Financial assets at fair value through other comprehensive income 18 196 90 82
Derivative financial assets 32 78 5 12
Cash and cash equivalents 33 825 1 ,575 994
6 , 74 2 7, 1 4 7 7, 5 8 2
Assets held for sale 22 8 24 4
6,7 50 7, 1 7 1 7, 5 8 6
Total assets 26,912 25,260 27,937
Current liabilities
Trade and other payables 23 (4 , 5 4 6) (4 ,4 8 8) (4,275)
Amounts due to Financial Services customers and other deposits 24 (4 ,4 4 4) (6, 086) (6,890)
Borrowings 35 (5 4) (356) (4 8)
Lease liabilities 15 (5 26) (5 24) (510)
Derivative financial liabilities 32 (2 9) (9 3) (53)
Taxes payable (16 9) (83) (16 8)
Provisions 25 (10 0) (19 9) (106)
(9, 8 6 8) (11,829) (12,050)
Net current liabilities (3, 11 8) (4 ,6 5 8) (4 ,4 6 4)
Non-current liabilities
Other payables 23 (24) (20) (11)
Amounts due to Financial Services customers and other deposits 24 (8 15) (2 0 3) (1 , 20 4)
Borrowings 35 (707) (74 8) (1 , 24 8)
Lease liabilities 15 (6 ,0 95) (5, 310) (5, 2 6 4)
Derivative financial liabilities 32 (3) (4 4) (36)
Deferred income tax liability 11 (8 0 6) (2 55) (265)
Provisions 25 (17 1) (1 5 0) (68)
(8 ,62 1) (6 ,7 30) (8 ,0 9 6)
Total liabilities (1 8 ,4 8 9) (18,5 59) (2 0, 14 6)
Net assets 8 ,4 2 3 6 ,701 7, 7 9 1
Equity
Called up share capital 26 668 637 634
Share premium 26 1 ,4 0 6 1 ,17 3 1 ,1 59
Merger reserve 26 568 568 568
Capital redemption reserve 27 680 680 680
Other reserves 27 409 167 16 8
Retained earnings 29 4 ,6 92 3, 228 4,086
Total equity before perpetual securities 8 ,4 2 3 6 ,4 5 3 7, 2 9 5
Perpetual securities 28 – 24 8 49 6
Total equity 8 ,4 2 3 6,70 1 7, 7 9 1
The notes on pages 113 to 193 form an integral part of these financial statements. Refer to note 2 for details of prior year restatements.
The financial statements on pages 108 to 193 were approved by the Board of Directors on 27 April 2022, and are signed on its behalf by:
Simon Roberts Kevin O’Byrne
Chief Executive Chief Financial Officer
Consolidated balance sheet
At 5 March 2022, 6 March 2021 and 7 March 2020
110 Financial Statements J Sainsbury plc Annual Report 2022
Note
52 weeks to
5 March 2022
£m
52 weeks to
6 March 2021
(restated)
£m
Cash flows from operating activities
Profit/(loss) before tax 854 (1 6 4)
Net finance costs 302 320
Operating profit 1 ,156 156
Adjustments for:
Depreciation expense 14, 15 1 ,069 1,113
Amortisation expense 16 1 51 1 36
Net impairment loss on property, plant and equipment, right-of-use assets, intangible assets 14, 15, 16 9 321
Non-cash adjustments arising from acquisitions – (1)
Financial Services movement in loss allowance for loans and advances to customers 19 85
Loss/(profit) on sale of non-current assets and early termination of leases 33 (6) (17)
Non-underlying fair value movements 5 (76) –
Share-based payments expense 38 58 2 9
Defined benefit scheme expenses 37 4 1 3
Cash contributions to benefit schemes 37 (7 1) (101)
Operating cash flows before changes in working capital 2 , 313 1,7 3 4
Changes in working capital 33
(Increase)/decrease in inventories (17 9) 117
Decrease in financial assets at fair value through other comprehensive income 115 267
Decrease in trade and other receivables 33 62
Decrease in amounts due from Financial Services customers and other deposits 161 1 ,91 2
Increase in trade and other payables 28 321
(Decrease) in amounts due to Financial Services customers and other deposits (1 ,0 3 0) (1,805)
(Decrease)/increase in provisions and other liabilities (80) 17 7
Cash generated from operations 1 ,3 61 2,7 85
Interest paid (3 29) (3 4 9)
Corporation tax paid (2 3) (93)
Net cash generated from operating activities 1 ,00 9 2,3 43
Cash flows from investing activities
Purchase of property, plant and equipment 33 (41 6) (4 2 3)
Initial direct costs on new leases (3) (7)
Purchase of intangible assets 33 (2 78) (17 2)
Proceeds from disposal of property, plant and equipment 4 6 27
Dividends and distributions received 2 2 2
Net cash used in investing activities (6 4 9)
(553)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 26, 29 2 1 17
Proceeds from borrowings – 66 0
Repayment of borrowings
(24 8) (2 8 9)
Repayment of short-term borrowings
– (66 0)
Repayment of perpetual capital securities
(8) (2 50)
Purchase of own shares 29
(4 8) (3 0)
Repayment of capital element of lease obligations
(4 9 3) (501)
Dividends paid on ordinary shares 13
(238) (2 32)
Dividends paid on perpetual securities
(4) (2 3)
Net cash used in financing activities (1,0 1 8) (1 ,3 0 8)
Net (decrease)/increase in cash and cash equivalents (6 5 8) 48 2
Opening cash and cash equivalents 1 ,4 7 6 994
Closing cash and cash equivalents 33 81 8 1 ,4 7 6
The notes on pages 113 to 193 form an integral part of these financial statements.
Refer to note 2 for details of prior year restatement.
Consolidated cash flow statement
for the 52 weeks to 5 March 2022
111 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements

 Note
Called up
share capital
£m
Share
premium
account
£m
Merger
reserve
£m
Capital
redemption
and other
reserves
£m
Retained
earnings
£m
Total equity
before
perpetual
securities
£m
Perpetual
capital
securities
£m
Perpetual
convertible
bonds
£m
Total
equity
£m
At 7 March 2021 (as previously reported) 637 1 ,173 568 847 3,131 6,356 – 248 6,6 04
Opening balance adjustment – – – – 97 97 – – 97
At 7 March 2021 (restated) 637 1,17 3 568 8 47 3, 22 8 6 ,4 5 3 – 24 8 6,701
Profit for the period 29 – – – – 677 67 7 – – 67 7
Other comprehensive income 27, 2 9 – – – 285 1 ,4 57 1 ,74 2 – – 1 , 74 2
Tax relating to other comprehensive income 29 – – – (87) (4 3 1) (51 8) – – (51 8)
Total comprehensive income for the
period ended 5 March 2022
– – – 19 8 1 ,703 1 ,901 – – 1,9 01
Cash flow hedges gains and losses
transferred to inventory
27, 3 2 – – – 28 – 28 – – 28

Transactions with owners:
Dividends 13, 29 – – – – (2 3 8) (2 3 8) – – (2 3 8)
Share-based payment 38 – – – – 60 60 – – 60
Purchase of own shares 29 – – – – (4 8) (4 8) – – (4 8)
Allotted in respect of share
option schemes
26, 29 5 17 – – (1) 21 – – 21
Conversion of perpetual
convertible bonds
28 26 216 – – (2) 240 – (24 0) –
Repayment of perpetual
convertible bonds
– – – – – – – (8) (8)
Other adjustments – – – 16 (1 3) 3 – – 3
Tax on items charged to equity – – – – 3 3 – – 3
At 5 March 2022 668 1 ,4 0 6 568 1 ,0 89 4 ,69 2 8 ,4 2 3 – – 8,4 2 3

        
At 8 March 2020 (as previously reported)
634 1,1 59 568 848 4,06 8 7, 2 7 7 24 8 24 8 7, 7 7 3
Opening balance adjustment – – – – 18 18 – – 18
At 8 March 2020 (restated) 634 1 ,1 59 56 8 848 4,086 7, 2 9 5 24 8 24 8 7, 7 9 1
(Loss)/profit for the period – – – – (2 08) (20 8) – 7 (201)
Other comprehensive income/(loss) – – – 4 (4 8 2) (4 7 8) – – (47 8)
Tax relating to other comprehensive
income/(loss)
– – – (4) 67 63 – – 63
Total comprehensive (loss)/profit for
the period ended 6 March 2021
– – – – (62 3) (6 2 3) – 7 (6 16)
Cash flow hedges gains and losses
transferred to inventory
– – – (1) – (1) – – (1)

Transactions with owners:
Dividends – – – – (2 3 2) (2 3 2) – – (2 32)
Distribution to holders of perpetual
securities
– – – – – – – (7) (7)
Share-based payment – – – – 29 29 – – 29
Purchase of own shares – – – – (30) (3 0) – – (3 0)
Allotted in respect of share
option schemes
3 14 – – – 17 – – 17
Redemption of perpetual
capital securities
– – – – (2) (2) (24 8) – (2 5 0)
At 6 March 2021 637 1,1 7 3 56 8 8 47 3,2 28 6 ,4 5 3 – 24 8 6 ,701
The notes on pages 113 to 193 form an integral part of these financial statements.
Refer to note 2 for details of prior year restatements.
Consolidated statement of changes in equity
for the 52 weeks to 5 March 2022
112 Financial Statements J Sainsbury plc Annual Report 2022
1 General information
J Sainsbury plc is a public limited company (the ‘Company’) incorporated in the United Kingdom, whose shares are publicly traded on the London Stock
Exchange. The Company is domiciled in the United Kingdom and its registered address is 33 Holborn, London EC1N 2HT, United Kingdom.
The financial year represents the 52 weeks to 5 March 2022 (prior financial year: 52 weeks to 6 March 2021). The consolidated financial statements for the
52 weeks to 5 March 2022 comprise the financial statements of the Company and its subsidiaries (the ‘Group’) and the Group’s share of the post-tax results
of its joint ventures and associates.
The Group’s principal activities are Food, General Merchandise and Clothing retailing and Financial Services.
2 Significant accounting policies
2.1 Basis of preparation
The Group’s financial statements have been prepared in accordance with UK-adopted international accounting standards.
The financial statements are presented in sterling, rounded to the nearest million (‘£m’) unless otherwise stated. They have been prepared under the
historical cost convention, except for derivative financial instruments, defined benefit pension scheme assets and financial assets at fair value through
other comprehensive income that have been measured at fair value.
Sainsbury’s Bank plc and its subsidiaries have been consolidated for the twelve months to 28 February 2022 being the Bank’s year-end date (prior financial
year: 28 February 2021). There have been no significant transactions or events that occurred between this date and the Group’s balance sheet date, and
therefore no adjustments have been made to reflect the difference in year-end dates.
Significant accounting policies have been included in the relevant notes to which the policies relate, and those relating to the financial statements as a whole
can be read further below. Unless otherwise stated, significant accounting policies have been applied consistently to all periods presented in the financial
statements.
Prior period restatements
Business rates within property provisions
The consolidated financial statements include a prior year restatement in relation to the treatment of business rates within property provisions. Where the
Group no longer operates from a leased property, onerous property contract provisions are recognised for the least net cost of exiting from the contract.
Unless a separate exit agreement with a landlord has already been agreed, the Group’s policy is that this onerous contract provision includes all unavoidable
costs of meeting the obligations of the contract – these include service charges and insurance, and have also historically included business rates.
There is apparent mixed practice across companies concerning the treatment of business rates in onerous contract provisions. However following additional
guidance published this year by accounting advisory firms, the Group has reassessed its policy in this area, and concluded that business rates are a statutory
obligation rather than a contractual one, and should be recognised as a periodic cost in line with IFRIC 21 “Levies”. Prior period comparatives have therefore
been restated to remove business rates from previously recognised property provisions.
Notional cash pooling
The consolidated financial statements include a prior year restatement in relation to notional cash pooling arrangements where the intention to net settle
cannot be clearly demonstrated, and therefore do not meet the requirements for offsetting in accordance with IAS 32: ‘Financial Instruments: Presentation’.
Prior period comparatives have been restated by grossing up cash and overdrafts (reported within current borrowings). There is no impact on the income
statement, cash flow statement nor earnings and diluted earnings per share.
Prior period comparatives
The prior period comparatives have been restated in accordance with IAS 8: ‘Accounting Policies, Changes in Accounting Policies and Errors’ and have
impacted the primary financial statements as follows:
Income statement
For the 52 weeks to 6 March 2021
Before non-underlying items Non-underlying items Total
As previously
reported
£m
Business rates
adjustment
£m
As
restated
£m
As previously
reported
£m
Business rates
adjustment
£m
As
restated
£m
As previously
reported
£m
Business rates
adjustment
£m
As
restated
£m
Revenue 29,048 – 29,048 – – – 29,048 – 29,048
Cost of sales (26,871) 1 (26,870) (412) 79 (333) (27,283) 80 ( 2 7, 20 3)
Gross profit/(loss) 2,177 1 2,178 (412) 79 (333) 1,765 80 1,845
Administrative expenses (1,480) – (1,480) (238) 16 (222) (1,718) 16 (1,702)
Other income 12 – 12 1 – 1 13 – 13
Operating profit/(loss) 709 1 710 (649) 95 (554) 60 96 156
Finance income 3 – 3 29 – 29 32 – 32
Finance costs (356) – (356) 3 1 4 (353) 1 (352)
Profit/(loss) before tax 356 1 357 (617) 96 (521) (261) 97 (164)
Income tax (expense)/credit (105) – (105) 86 (18) 68 (19) (18) (37)
Profit/(loss) for the
financialperiod
251 1 252 (531) 78 (453) (280) 79 (201)
Earnings per share 11.7 – 11.7    (13.0) 3.6 (9.4)
Diluted EPS 11.4 – 11.4    (13.0) 3.6 (9.4)
Notes to the consolidated financial statements
113 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Balance sheets
As at 6 March 2021
As previously
reported
£m
Notional cash
pooling
adjustment
£m
Business rates
adjustment
£m
As
restated
£m
Cash and cash equivalents 1,477 98 – 1,575
Total assets 25,162 98 – 25,260
    
Current liabilities    
Borrowings (258) (98) – (356)
Taxes payable (59) – (24) (83)
Provisions (209) – 10 (199)
Total current liabilities (11,717) (98) (14) (11,829)
Net current liabilities (4,644) – (14) (4,658)
    
Non-current liabilities    
Provisions (261) – 111 (150)
Total liabilities (18,558) (98) 97 (18,559)
Net assets 6,604 – 97 6,701
    
Equity    
Retained earnings 3,131 – 97 3,228
Total equity before perpetual securities 6,356 – 97 6,453
Total equity 6,604 – 97 6,701
As at 7 March 2020
As previously
reported
£m
Business rates
adjustment
£m
As
restated
£m
Current liabilities   
Taxes payable (163) (5) (168)
Provisions (108) 2 (106)
Total current liabilities (12,047) (3) (12,050)
Net current liabilities (4,461) (3) (4,464)

Non-current liabilities
Provisions (89) 21 (68)
Total liabilities (20,164) 18 (20,146)
Net assets 7,7 7 3 18 7,791

Equity
Retained earnings 4,068 18 4,086
Total equity before perpetual securities 7,27 7 18 7, 295
Total equity 7,7 7 3 18 7,791
2 Significant accounting policies continued
114 Financial Statements J Sainsbury plc Annual Report 2022
Cash flow statement
For the 52 weeks to 6 March 2021
As previously
reported
£m
Business rates
adjustment
£m
As
restated
£m
Cash flows from operating activities
Profit/(loss) before tax (261) 97 (164)
Net finance costs 321 (1) 320
Operating profit 60 96 156
Operating cash flows before changes in working capital 1,638 96 1,734
Changes in working capital
(Decrease)/increase in provisions and other liabilities 273 (96) 177
Cash generated from operations 2,785 – 2,785
Net cash generated from operating activities 2,343 – 2,343
Net cash used in investing activities (553) – (553)
Net cash used in financing activities (1,308) – (1,308)
Net (decrease)/increase in cash and cash equivalents 482 – 482
Change in accounting policy – Software as a Service (SaaS) arrangements
During the year, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred in implementing software as
a service (SaaS) arrangements. This is in response to the IFRS Interpretations Committee (IFRIC) agenda decision clarifying its interpretation of how current
accounting standards apply to these types of arrangements during the current financial year. The new accounting policy is presented within note 16.
Adjustments in relation to costs capitalised in prior years have therefore been recognised as follows:
 £m
Intangible assets (30)
Prepayments 9
Total assets/net assets (21)
Administrative expenses (21)
Profit before tax (21)
The impact is not considered to have a material impact on the prior year balance sheet nor income statement, therefore the prior year results have not been
restated. Given this is an out of period cost and could distort comparability between reporting periods, this has been included within non-underlying profit
before tax. Intangible asset write-offs have been included within disposals.
In addition to the above, £14 million of current year spend that would have been capitalised to intangible assets under the Group’s previous accounting policy
has now been recognised within prepayments (£6 million) and underlying profit (£8 million).
There is no impact on cash flows.
Climate change considerations
In preparing the Group’s financial statements, consideration has been given to the impact of both physical and transition climate change risks, as described
within the Task Force on Climate-Related Financial Disclosures (TCFD) section on page 17, and how these impact the financial statements. While it is not
believed that these climate change risks have a material impact on the Group’s financial statements, further narrative disclosure has been provided in the
following disclosure notes:
— Going Concern – note 2.2
— Significant accounting judgements, estimates and assumptions – note 4
— Property, plant and equipment – note 14
— Impairment of non-financial assets – note 17
— Provisions – note 25
— Retirement benefit obligations – note 37
The policy, technology and market changes in response to climate change are still developing, and these are interdependent upon each other, and
consequently the financial statements cannot capture all possible future outcomes as these are not yet known. The degree of certainty of these changes
may also mean that they cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under the
requirements of UK adopted international accounting standards.
2 Significant accounting policies continued
115 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
2.2 Going concern
The Directors are satisfied that the Group has sufficient resources to continue
in operation for a period of at least 12 months from the date of approval.
Accordingly, they continue to adopt the going concern basis in preparing the
financial statements. The assessment period for the purposes of considering
going concern is the 12 months to 27 April 2023.
In assessing the Group’s ability to continue as a going concern, the Directors
have considered the Group’s most recent corporate planning and budgeting
processes. This includes an annual review which considers profitability,
the Group’s cash flows, committed funding and liquidity positions and
forecasted future funding requirements over three years, with a further
two years of indicative movements.
The Group manages its financing by diversifying funding sources,
structuring core borrowings with long-term maturities and maintaining
sufficient levels of standby liquidity via the Revolving Credit Facility. This
seeks to minimise liquidity risk by maintaining a suitable level of undrawn
additional funding capacity.
The Revolving Credit Facility is split into two Facilities, a £300 million Facility
(A) and a £1,094 million Facility (B). Facility A has a final maturity of April
2025 and Facility B has a final maturity of October 2024. As at 5 March 2022,
both Facility (A) and Facility (B) were undrawn.
In assessing going concern, scenarios in relation to the Group’s principal risks
have been considered in line with those disclosed in the viability statement
on page 51 by overlaying them into the corporate plan and assessing the
impact on cash flows, net debt and funding headroom. These severe but
plausible scenarios included modelling inflationary pressures on both food
margins and general recession-related risks, the impact of any regulatory
fines, and the failure to deliver planned cost savings.
In performing the above analysis, the Directors have made certain
assumptions around the availability and effectiveness of the mitigating
actions available to the Group. These include reducing any non-essential
capital expenditure and operating expenditure on projects, bonuses and
dividend payments.
The Group’s most recent corporate planning and budgeting processes
incorporates assumed cashflows to address climate change risks, including
those associated with the Group’s Plan for Better commitment which include
reducing environmental impacts and meeting customer expectations in this
area, notably through reducing packaging and energy usage across the
estate. Climate-related risks do not result in any material uncertainties
affecting the Group’s ability to continue as a going concern.
Consideration was also given to the conflict in Ukraine which has continued
to develop subsequent to the Group’s balance sheet date. Inflationary
pressures which may be caused by the conflict are already incorporated into
the overall going concern assessment, as such the impact of the conflict in
Ukraine does not impact the conclusions reached over going concern.
As a consequence of the work performed, the Directors considered it
appropriate to adopt the going concern basis in preparing the Financial
Statements with no material uncertainties to disclose.
2.3 Basis of consolidation
a) Subsidiaries
Subsidiaries are all entities, including structured entities (see below) over
which the Group has control. This is when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The results
of subsidiaries are included in the income statement from the date of
acquisition or, in the case of disposals, up to the effective date of disposal.
Intercompany transactions and balances between Group companies are
eliminated upon consolidation.
Sainsbury’s Property Scottish Partnership, Sainsbury’s Property Scottish
Limited Partnership, Sainsbury’s Thistle Scottish Limited Partnership and
Nectar 360 Services LLP, are partnerships which are fully consolidated into
these Group accounts. The Group has taken advantage of the exemption
conferred by Regulation 7 of the Partnerships (‘Accounts’) Regulations 2008
and has therefore not appended the accounts of these qualifying
partnerships to these accounts.
Significant judgement – Consolidation of structured entities
Sainsbury’s Thistle Scottish Limited Partnership (‘the Partnership’) is a
structured entity which the Group fully consolidates.
A structured entity is one in which the Group does not hold the majority
interest but for which management has concluded that voting rights are
not the dominant factor in deciding who controls the entity. The Partnership,
in which both the Group and Pension Scheme Trustee hold an interest, was
established following the 2018 triennial valuation of the Group’s defined
benefit scheme.
The Group has determined that the relevant activities of the Partnership are
the funding of the Scheme and whether the funding targets have been met.
Furthermore, a general partner wholly owned by the Group has exclusive
responsibility for the management and control of the Partnership and sole
authority to exercise the Partnership’s rights. This includes the ability to
make additional contributions to the Scheme such that the funding targets
are met. As the Group can direct the Partnership’s relevant activities and
affect its returns (through reaching the Scheme’s funding targets), it has
been concluded that the Group controls the Partnership, despite not having
a majority interest. It is therefore consolidated in the Group accounts. Further
information is included in note 37.
b) Joint ventures and associates
The Group applies IFRS 11 to all joint arrangements. Under IFRS 11, investments
in joint arrangements are classified as either joint operations or joint ventures
depending on the contractual rights and obligations of each investor. The
Group has assessed the nature of its joint arrangements and determined
them to be joint ventures. Associates are entities over which the Group has
significant influence but not control.
Investments in joint ventures and associates are carried in the Group balance
sheet at historical cost plus post-acquisition changes in the Group’s share of
net assets of the entity, less any provision for impairment. Where the Group
transacts with a joint venture or associate, profits and losses are eliminated
to the extent of the Group’s interest in the joint venture or associate.
A full list of the Group’s joint ventures is included in note 43. Joint ventures
with a different year-end date to the Group are reported to include the
results up to 28 February 2022, the nearest month-end to the Group’s
year-end. Adjustments are made for the effects of significant transactions
or events that occurred between 28 February and the Group’s balance sheet
date. No joint venture arrangements are considered significant to the Group.
c) Foreign currencies
The consolidated financial statements are presented in sterling, which is the
ultimate parent company’s functional currency.
Foreign operations
The Group has operations in Asia that source and purchase certain general
merchandise and clothing inventory. In addition the Group has a trading
entity in Ireland. On consolidation, assets and liabilities of foreign operations
are translated into sterling at year-end exchange rates. The results of foreign
operations are translated into sterling at average rates of exchange for
the year. Exchange differences arising are recognised in the Group
statement ofcomprehensive income/(loss) and are included in the Group’s
translation reserve.
Foreign currency transactions
Transactions denominated in foreign currencies are translated at the
exchange rate at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated
at the exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement.
2 Significant accounting policies continued
116 Financial Statements J Sainsbury plc Annual Report 2022
2.4 Amendments to published standards
Effective for the Group and Company in these financial statements:
The Group has considered the following amendments to published standards
that are effective for the Group for the financial year beginning 7 March 2021
and concluded that they are either not relevant to the Group or that they
do not have a significant impact on the Group’s financial statements other
than disclosures.
— Amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial
Instruments: Recognition and Measurement’ and IFRS 7 ‘Financial
Instruments: Disclosures’ on the Interest Rate Benchmark Reform –
Phase 2
— Amendment to IFRS 16 ‘Leases’ with regards to the exemption granted
in the ‘COVID-19-related rent concessions’
The Group early adopted the Interest Rate Benchmark Reform Phase 2
amendments in the financial year ended 6 March 2021. The Group has
elected not to apply the exemption granted in the ‘COVID-19-related rent
concessions’ as the Group has not received material COVID-19-related rent
concessions as a lessee.
Standards and revisions effective for future periods:
The following standards and revisions will be effective for future periods:
— Amendments to IFRS 3 ‘Business Combinations’ with reference to the
Conceptual Framework
— Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent
Assets’ on Onerous Contracts – Cost of Fulfilling a Contract
— Amendments to IAS 16 ‘Property, Plant and Equipment’ on Proceeds
before Intended Use
— Amendments to IAS 1 ‘Presentation of Financial Statements’ on the
classification of liabilities as current or non-current
— Amendments to IAS 1 ‘Presentation of Financial Statements’ and IFRS
Practice Statement 2 ‘Making Materiality Judgements’ on the disclosure
of accounting policies
— Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’ on the definition of accounting estimates
— Amendments to IAS 12 ‘Income Taxes’ on Deferred Tax Related to Assets
and Liabilities Arising from a Single Transaction
— IFRS 17 ‘Insurance Contracts’
The Group has considered the impact of the remaining above standards and
revisions and has concluded that they will not have a significant impact on
the Group’s financial statements.
3 Alternative performance measures
(APMs)
In the reporting of financial information, the Directors use various APMs.
These APMs should be considered in addition to, and are not intended
to be a substitute for, IFRS measurements. As they are not defined by
International Financial Reporting Standards, they may not be directly
comparable with other companies’ APMs.
The Directors believe that these APMs provide additional useful information
for understanding the financial performance and health of the Group.
Theyare also used to enhance the comparability of information between
reporting periods (such as like-for-like sales and underlying profit) by
adjusting for non-recurring or uncontrollable factors which affect IFRS
measures, to aid users in understanding the Group’s performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive setting purposes.
The APMs that the Group has focused on in the period are defined and
reconciled on page 203. All of the APMs relate to the current period’s results
and comparative periods.
4 Significant accounting judgements,
estimates and assumptions
The preparation of financial statements requires the use of judgements,
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Those which are
significant to the Group are discussed separately below:
Judgements
In the process of applying the Group’s accounting policies, management
has made the following judgements, which have the most significant effect
on the amounts recognised in the consolidated financial statements:
— Consolidation of structured entities – refer to note 2.3
— Non-underlying items – refer to note 5
— Aggregation of operating segments – refer to note 7
— Lease term – refer to note 15
Sources of estimation uncertainty
The areas where estimates and assumptions are significant to the financial
statements are as listed below. The estimates and associated assumptions
are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
— Nectar accounting (breakage estimates) – refer to note 6
— Lease liabilities (derivation of discount rates) – refer to note 15
— Impairment of non-financial assets – refer to note 17
— Provisions – refer to note 25
— Impairment of Financial Services loans and advances – refer to note 30
— Post-employment benefits (assets and liabilities) – refer to note 37
In assessing the Group’s judgements and sources of estimation uncertainty,
consideration has been given to the impact of climate change risk on these.
Aside from impairment of non-financial assets (refer to note 17) and
post-employment benefits (refer to note 37), climate change risks do not
have any impacts on the Group’s judgements or sources of estimation
uncertainty.
Effective interest rates on Financial Services loans and receivables, which
was disclosed as a key estimate in the prior year financial statements,
is no longer deemed to be a key estimate. In calculating the effective
interest rate of a financial instrument the Group takes into account all
amounts that are integral to the yield of a financial instrument as well as
incremental transaction costs. In the case of loans and advances to customers,
any significant changes in the assumptions used to estimate the effect on
future cash flows would not have a material impact on the value of loans
and receivables held on the balance sheet, and therefore the Group no longer
deems this to be a source of significant estimation uncertainty.
2 Significant accounting policies continued
117 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
5 Profit before non-underlying items
In order to provide shareholders with additional insight into the year-on-year performance of the business, an adjusted measure of profit (underlying profit
before tax) is provided to supplement the reported IFRS numbers, and reflects how the business measures performance internally. This adjusted measure
excludes items recognised in reported profit or loss before tax which, if included, could distort comparability between periods.
Determining which items are to be adjusted requires judgement, in which the Group considers items which are significant either by virtue of their size and/or
nature, or that are non-recurring. The same assessment is applied consistently to any reversals of prior non-underlying items.
Underlying profit is not an IFRS measure and therefore not directly comparable to other companies.
The most significant non-underlying items in the current year relate to income received in relation to the settlement of legal disputes over interchange fees,
and costs associated with restructuring programmes. More details on each are included further below.
The Group has not included any additional costs incurred or credits received directly in relation to the impacts of COVID-19 within non-underlying items.
Whilst some items (such as additional expenses incurred protecting colleagues and customers) are discrete and can be separately quantified, others, such as
incremental food sales, cannot be reliably disaggregated from the Group’s underlying performance. The Group has therefore concluded that presenting some
movements as underlying and others as non-underlying would give an imbalanced view that is not easily comparable to past and subsequent periods.

Cost of
sales
£m
Administrative
expenses
£m
Other
income
£m
Net finance
income/
(costs)
£m
Total
adjustments
before tax
£m
Tax
£m
Total
adjustments
£m
Income recognised in relation to legal disputes – 13 167 – 180 (35) 145
Restructuring and integration
Restructuring programmes (69) (35) 12 – (92) 17 (75)
Financial Services transition and other – (11) – – (11) 2 (9)
Total restructuring and integration (69) (46) 12 – (103) 19 (84)

Software as a service accounting adjustment – (21) – – (21) 4 (17)
Property, finance, pension and
acquisition adjustments
ATM business rates reimbursement 2 – – – 2 – 2
Profit on disposal of properties – – 7 – 7 – 7
Non-underlying finance and fair value movements 76 – – (8) 68 (13) 55
IAS 19 pension expenses – (4) – 15 11 (2) 9
Acquisition adjustments – (20) – – (20) 4 (16)
Total property, finance, pension and
acquisition adjustments
78 (24) 7 7 68 (11)
57

Tax adjustments
Over provision in prior years – – – – – (2) (2)
Revaluation of deferred tax balances – – – – – 9 9
Other tax adjustments – – – – – (7) (7)
Total adjustments 9 (78) 186 7 124 (23)
101
Income recognised in relation to legal disputes
During the current period, agreements were reached and two legal cases settled in relation to overcharges from payment card processing fees, which
largely reflect inter-bank “interchange fees”. This has led to net income of £167 million being recognised. The Group has one ongoing legal case remaining
– refer to note 40.
Of the £167 million, cash of £75 million was received in a prior year and held as deferred income. Net cash of £93 million was received during the current
financial year and £1 million of legal fees remains outstanding.
In addition, a provision for a legal claim totalling £13 million has been released as it was assessed during the financial period that a pay-out is no longer
considered probable.
118 Financial Statements J Sainsbury plc Annual Report 2022
Restructuring programmes
In the prior year, the Group announced a restructuring programme to accelerate the structural integration of Sainsbury’s and Argos and further simplify the
Argos business; create a new supply chain and logistics operating model, moving to a single integrated supply chain and logistics network across Sainsbury’s
and Argos; and further rationalise/repurpose the Group’s supermarkets and convenience estate. The programme also considered the Group’s Store Support
Centre ways of working.
The programme is a multi-year activity which began in the prior year and has continued into the current year. Total cumulative costs to 5 March 2022 are
£(640) million split between £(548) million in the prior year and £(92) million in the current period as detailed in the table below. Total expected costs are still
in the range of £900 million to £1 billion to March 2024, with the majority in the period to March 2024. In line with IFRIC 21 “Levies”, business rates are now
recognised as a periodic cost and as such approximately £40 million of business rates associated with leased properties in the restructuring programme will
be recognised after the year ended March 2024. Refer to note 2 for further details.
(Costs)/gains recognised in the current year are as follows:
52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
(restated)
£m
Write downs of property, plant and equipment
(a)
(6) (26)
Write downs of leased assets
(a)
(3) (72)
Write downs of intangible assets – (3)
Closure provisions
(b)
(24) (145)
Accelerated depreciation of assets
(c)
(33) (27)
Redundancy provisions
(d)
(40) (61)
Consultancy costs (18) (10)
Gain on lease terminations
(e)
9 16
Property profits
(f)
12 –
Recognition of sub-lease debtor
(g)
11 –
Restructuring programmes (92) (328)
Impairment of non-financial assets – (220)
Total restructuring and impairment costs (92) (548)
a) During the financial year, the Group announced the closure of 200 of its in-store cafes. Related assets have been written down as a result.
b) Closure provisions relate to onerous contract costs, dilapidations and strip out costs on leased sites that have been identified for closure. Upon initial recognition of closure provisions, management uses its best
estimates of the relevant costs to be incurred as well as expected closure dates. Business rates on leased property where the Group no longer operates from are recognised in the period they are incurred.
c) The remaining useful economic lives of corresponding sites have been reassessed to align with closure dates, resulting in an acceleration in depreciation of these assets. The existing depreciation of these assets
(depreciation that would have been recognised absent of a closure decision) is recognised within underlying expenses, whereas accelerated depreciation above this is recognised within non-underlying expenses.
d) Redundancy costs are recognised as the plan is announced and a valid expectation raised with the affected colleagues. The current year charge relates to redundancies announced as part of Argos store closures,
depot closures, and café and food counter closures.
e) Gains on lease terminations relate to sites impaired in the prior year for which it has been negotiated to exit the leases before the contractual end date. This includes the release of any lease liabilities and right-of-use
assets, as well as any closure provisions previously recognised.
f) Profit on disposal of properties relates to profits recognised in the period as sites previously impaired as part of the restructuring programmes have been disposed of.
g) During the year, the Group was able to negotiate a sub-lease on a previously impaired site for the duration of the remaining headlease. This resulted in the creation of a sub-lease debtor (refer to accounting policies
for Group as lessor on page 137), with any difference between the lease receivable and right-of-use asset being recognised in the income statement.
As the costs incurred facilitate future underlying cost savings, it was considered whether it was appropriate to report these costs within underlying profit.
Whilst they arise from changes in the Group’s underlying operations, they can be separately identified, are material in size and do not relate to ordinary
in-year trading activity. In addition, the areas being closed or restructured no longer relate to the Group’s remaining underlying operations and their exclusion
provides meaningful comparison between financial years.
Software as a service accounting adjustment
During the year, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred in implementing software
as a service (SaaS) arrangements; refer to note 2.1 for further details. Costs capitalised in prior years totalling £21 million have been written off this year.
Given this is an out of period cost and could distort comparability between reporting periods, this has been included within non-underlying profit before tax.
Financial Services transition and other
These comprise Financial Services transition costs of £(11) million and were incurred in transitioning to new banking platforms as part of the previously
announced New Bank Programme. These principally comprise contractor and service provider costs relating to the migration of data and other services
to the Bank’s new infrastructure and operating model. These costs of integration do not reflect the business’s trading performance and so are adjusted
to ensure consistency between periods. The programme ended this financial year.
5 Profit before non-underlying items continued
119 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Property, finance, pension and acquisition adjustments
— A further £2 million of ATM rates reimbursement income is due to be received from the Valuation Office following the Supreme Court’s ruling that ATMs
outside stores should not be assessed for additional business rates on top of normal store rates.
— Profit on disposal of non-trading properties for the financial period comprised £(7) million for the Group. These are excluded from underlying profit as
such profit is not related to the ongoing operating activities of the Group.
— Non-underlying finance and fair value movements for the financial period comprised £68 million for the Group. These include fair value remeasurements
on derivatives not in a hedging relationship and lease interest on impaired non-trading sites, including site closures. The fair value movements are driven
by external market factors and can significantly fluctuate year-on-year. They are therefore excluded to ensure consistency between periods. Lease
interest on impaired, non-trading sites is excluded as they do not contribute to the operating activities of the Group. Included within cost of sales is
£76million of income in relation to favourable movements on long-term, fixed price power purchase arrangements (PPAs) with independent producers.
These are accounted for as derivative financial instruments, however are not designated in hedging relationships, therefore gains and losses are
recognised in the income statement. Increases in electricity forward prices in the year have led to gains on the related derivative financial instruments.
During the year, the Group entered into an additional PPA, however have designated this in a formal hedging relationship, with gains and losses being
recognised within other comprehensive income. Further information is included within note 31. The remaining movements of £(8) million within finance
income and costs are analysed further in note 10.
— Defined benefit pension interest and expenses comprises pension finance income of £15 million and scheme expenses of £(4) million (see note 37).
Although a recurring item, the Group has chosen to exclude net retirement benefit income and costs from underlying profit as, following closure of
the defined benefit scheme to future accrual, it is not part of the ongoing operating activities of the Group and its exclusion is consistent with how the
Directors assess the performance of the business.
— Acquisition adjustments of £(20) million reflect the unwind of non-cash fair value adjustments arising from Home Retail Group and Nectar UK
acquisitions. The Group would not normally recognise these as assets outside of a business combination. Therefore the unwinds are classified as
non-underlying and are recognised as follows:
 52 weeks to 5 March 2022 52 weeks to 6 March 2021

Argos
£m
Nectar
£m
Total Group
£m
Argos
£m
Nectar
£m
Total Group
£m
Depreciation 3 – 3 5 – 5
Amortisation (18) (5) (23) (18) (6) (24)
 (15) (5) (20) (13) (6) (19)
Comparative information (restated)


Cost of sales
£m
Administrative
expenses
£m
Other income
£m
Net finance
income/
(costs)
£m
Total
adjustments
before tax
£m
Tax
£m
Total
adjustments
£m
Restructuring programmes (263) (65) – – (328) 58 (270)
Impairment of non-financial assets (112) (108) – – (220) 33 (187)
Financial Services transition and other – (17) – – (17) 3 (14)
Total restructuring, impairment
and integration
(375) (190) – – (565) 94 (471)

Property, finance, pension and acquisition
adjustments
ATM business rates reimbursement 42 – – – 42 (8) 34
Profit on disposal of properties – – 1 – 1 7 8
Perpetual securities coupons – – – 14 14 – 14
Non-underlying finance movements – – – – – – –
IAS 19 pension (expenses)/income – (13) – 19 6 (1) 5
Acquisition adjustments – (19) – – (19) 4 (15)
Total property, finance, pension and acquisition
adjustments
42 (32) 1 33 44 2 46

Tax adjustments
Derecognition of capital losses – – – – – (28) (28)

Total adjustments (333) (222) 1 33 (521) 68 (453)
Refer to note 2 for details of prior year restatements.
5 Profit before non-underlying items continued
120 Financial Statements J Sainsbury plc Annual Report 2022
Cash flow statement
The table below shows the impact of non-underlying items on the Group cash flow statement:

52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Cash flows from operating activities 
IAS 19 pension expenses (7) (7)
Financial Services transition and other (13) (15)
Restructuring programmes (114) (39)
Income recognised in relation to legal disputes 93 –
ATM rates reimbursement 14 27
Cash used in operating activities (27) (34)

Cash flows from investing activities
Proceeds from property disposals
1
46 27
Cash generated from investing activities 46 27
Net cash flows 19 (7)
1 £19 million of the current period proceeds from property disposals are a result of restructuring programmes.
6 Revenue
Accounting policies
Revenue consists of sales through retail outlets and online and, in the case of Financial Services, interest receivable, fees and commissions and excludes Value
Added Tax (VAT). Revenue is recognised when the Group has a contract with a customer and a performance obligation has been satisfied, at the transaction
price allocated to that performance obligation.
Retail sales
a) Retail – sale of goods
For sales through retail outlets and online, the transaction price is the value of the goods, net of returns, colleague discounts, and vouchers. Revenue is
recognised when the customer obtains control of the goods, which is when the transaction is completed in-store or, for online orders, when goods have
been delivered or collected by customers (for click and collect).
b) Other revenue items
Other revenue items include wholesale sales made directly to third-party customers, and income from concessions and commissions, net of returns and
discounts. Wholesale revenue is recognised when the goods are delivered to the customer. Revenue collected on behalf of others is not recognised as
revenue, other than the related commission which is based on the terms of the contract. Sales are recorded net of VAT.
An element of judgement is required for commission-based arrangements to determine whether the Group should recognise revenue as principal
(recognising gross revenue and associated costs) or as agent (recognising net income as revenue only). The assessment considers whether the Group
controls the relevant goods prior to sale to the end customer. The Group’s relevant contracts are not complex and therefore the level of judgement
involved is not considered significant to the Group.
c) Nectar points
The issuance of Nectar points within the Group creates a separate performance obligation and therefore a portion of the transaction price is allocated to the
loyalty programme using the standalone selling price of points issued, and the corresponding revenue deferred. The deferral is treated as a deduction from
revenue and recognised as a contract liability within deferred income (see note 23). The fair value of the points awarded is determined with reference to the
value per point to a customer and considers expected redemption rates (breakage) and the money off that each point entitles a customer to. The revenue
deferred is subsequently recognised when the Nectar points are redeemed by the customer.
Significant estimate – Fair value of Nectar points
The Group estimates the fair value of points awarded under the Nectar programme by reference to the value per point to a customer, multiplied by expected
breakage assumptions. Breakage represents management’s estimate of points issued that will never be redeemed and is therefore subject to uncertainty.
Breakage is estimated by management based on the terms and conditions of membership and historical accumulation and redemption patterns.
As at the year-end, if the breakage estimate used in determining the deferred revenue for the Group had been 1.0 per cent lower, the deferred points liability
would have been £48 million higher. If the breakage estimate had been 1.0 per cent higher, the deferred points liability would have been £48 million lower.
5 Profit before non-underlying items continued
121 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Financial Services
a) Interest income
Interest income is recognised in the income statement for all instruments measured at amortised cost using the effective interest method.
The effective interest rate of a financial asset is calculated on initial recognition and is applied to the gross carrying amount of the asset. For financial assets
that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised
cost of the financial asset net of impairment. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
In calculating the effective interest rate of a financial instrument the Group takes into account all amounts that are integral to the yield of a financial instrument
as well as incremental transaction costs.
b) Fees and commission income
Fees and commissions that are not integral to the effective interest rate calculation relate primarily to certain credit card and storecard fees, ATM interchange
fees, insurance introduction commission and warranty commission receivable. These are recognised in the income statement on an accruals basis as
performance obligations are satisfied. Where in the case of insurance commissions the income comprises an initial commission and profit share, both
are recognised on completion of the service to the extent reliably measurable. Where there is a risk of potential clawback, an appropriate element of the
commission receivable is deferred and amortised over the clawback period.
Margin from the sale of travel money, representing the difference between the cost price and the selling price, is recognised when the sale to the customer
takes place.
Other income
Other income generally consists of profits and losses on disposal of assets.
Revenue recognised
5 March
2022
£m
6 March
2021
£m
Grocery and General Merchandise & Clothing (GM&C) 25,440 26,103
Fuel 4,023 2,514
Total retail sales 29,463 28,617
Financial Services interest receivable 322 344
Financial Services fees and commission 110 87
Total Financial Services income 432 431
Total revenue 29,895 29,048
7 Segment reporting
Background
Management has determined the operating segments based on the information provided to the Operating Board (the Chief Operating Decision Maker for the
Group) to make operational decisions on the management of the Group. Three operating segments were identified as follows:
— Retail – Food
— Retail – General Merchandise and Clothing
— Financial Services
Significant judgement – aggregation of operating segments
Management has considered the economic characteristics, in particular average gross margin, similarity of products, production processes, customers, sales
methods and regulatory environment of its two Retail segments. In doing so it has been concluded that they should be aggregated into one ‘Retail’ segment
in the financial statements. This aggregated information provides users with the financial information needed to evaluate the business and the environment
in which it operates.
The Operating Board assesses the performance of all segments on the basis of underlying profit before tax. Underlying profit before tax is an APM as described
in note 3. All material operations and assets are in the UK.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment
capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.
Segment revenue presents a disaggregation of revenue from customers consistent with the Group’s primary revenue streams.
6 Revenue continued
122 Financial Statements J Sainsbury plc Annual Report 2022
Income statement and balance sheet
52 weeks to 5 March 2022
Retail
£m
Financial
Services
£m
Group
£m
Segment revenue
Retail sales to external customers 29,463 –
29,463
Financial Services to external customers – 432 432
Revenue 29,463 432
29,895
Underlying operating profit 1,001 38
1,039
Underlying finance income 3 –
3
Underlying finance costs (312) –
(312)
Underlying profit before tax 692 38 730
Non-underlying income (note 5) 124
Profit before tax 854
Income tax expense (note 11) (177)
Profit for the financial year 677
Assets 20,368 6,541
26,909
Investment in joint ventures and associates 3 – 3
Segment assets 20,371 6,541 26,912
Segment liabilities (12,870) (5,619)
(18,489)
Other segment items
Additions to non-current assets
Property, plant and equipment 417 – 417
Intangible assets 229 49 278
Right-of-use assets 1,294 – 1,294
Depreciation expense
1
Property, plant and equipment 590 1 591
Right-of-use assets 477 1 478
Amortisation expense
2
Intangible assets 130 21 151
Impairment charges 8 1 9
Share-based payments 53 5 58
1 Depreciation within the Retail segment includes a £(3) million credit in relation to the unwind of fair value adjustments recognised on acquisition of HRG.
2 Amortisation within the Retail segment includes a £23 million charge in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK.
7 Segment reporting continued
123 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
52 weeks to 6 March 2021 (restated)
Retail
£m
Financial
Services
£m
Group
£m
Segment revenue
Retail sales to external customers 28,617 –
28,617
Financial Services to external customers – 431 431
Revenue 28,617 431
29,048
Underlying operating profit/(loss) 731 (21)
710
Underlying finance income 3 –
3
Underlying finance costs (356) –
(356)
Underlying profit/(loss) before tax 378 (21) 357
Non-underlying expense (521)
Loss before tax (164)
Income tax expense (37)
Loss for the financial year (201)
Assets 17,7 35 7,520
25,255
Investment in joint ventures and associates 5 –
5
Segment assets 17,74 0 7,520 25,260
Segment liabilities (11,941) (6,618)
(18,559)
Other segment items
Additions to non-current assets
Property, plant and equipment 419 – 419
Intangible assets 145 27 172
Right-of-use assets 542 – 542
Depreciation expense
1
Property, plant and equipment 627 2 629
Right-of-use assets 483 1 484
Amortisation expense
2
Intangible assets 116 20 136
Impairment charges 216 105 321
Restructuring charges 227 – 227
Share-based payments 26 3 29
1 Depreciation within the Retail segment includes a £(5) million credit in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK.
2 Amortisation expense within the Retail segment includes a £24 million charge in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK.
Refer to note 2 for details of prior year restatements.
Geographical segments
The Group trades predominantly in the UK and the Republic of Ireland and consequently the majority of revenues, capital expenditure and segment net
assets arise there. The profits, turnover and assets of the businesses in the Republic of Ireland are not material to the Group.
7 Segment reporting continued
124 Financial Statements J Sainsbury plc Annual Report 2022
Cash flow
52 weeks to 5 March 2022 52 weeks to 6 March 2021 (restated)
APM
reference
Retail
£m
Financial
Services
£m
Group
£m
Retail
£m
Financial
Services
£m
Group
£m
Profit/(loss) before tax 833 21 854 (17) (147) (164)
Net finance costs 304 (2) 302 320 – 320
Operating profit 1,137 19 1,156 303 (147) 156
Adjustments for:
Depreciation and amortisation expense 1,197 23 1,220 1,226 23 1,249
Net impairment charge on property, plant and equipment,
right-of-use assets and intangible assets
8 1 9 216 105 321
Non-cash adjustments arising from acquisitions – – – (1) – (1)
Financial Services movement in loss allowance for loans and advances to customers – 19 19 – 85 85
(Profit)/loss on sale of non-current assets and early termination of leases (6) – (6) (19) 2 (17)
Non-underlying fair value movements (76) – (76) – – –
Share-based payments expense 53 5 58 26 3 29
Non-cash defined benefit scheme expenses 4 – 4 13 – 13
Cash contributions to defined benefit scheme (71) – (71) (101) – (101)
Operating cash flows before changes in working capital 2,246 67 2,313 1,663 71 1,734
Changes in working capital
Movements in working capital (306) (646) (952) 612 439 1,051
Cash generated from operations 1,940 (579) 1,361 2,275 510 2,785
Interest paid a (319) (10) (329) (349) – (349)
Corporation tax (paid)/received (23) – (23) (94) 1 (93)
Net cash generated/(used) from operating activities 1,598 (589) 1,009 1,832 511 2,343
Cash flows from investing activities
Purchase of property, plant and equipment (416) – (416) (423) – (423)
Initial direct costs on new leases (3) – (3) (7) – (7)
Purchase of intangible assets (229) (49) (278) (145) (27) (172)
Proceeds from disposal of property, plant and equipment 46 – 46 27 – 27
Dividends and distributions received e 2 – 2 22 – 22
Net cash used in investing activities (600) (49) (649) (526) (27) (553)
Cash flows from financing activities
Proceeds from issuance of ordinary shares d 21 – 21 17 – 17
Proceeds from short-term borrowings c – – – 660 – 660
Repayment of borrowings c (248) – (248) (289) – (289)
Repayment of short-term borrowings c – – – (660) – (660)
Repayment of perpetual capital securities c (8) – (8) (250) – (250)
Purchase of own shares d (48) – (48) (30) – (30)
Repayment of capital element of obligations under lease liabilities b (491) (2) (493) (499) (2) (501)
Dividends paid on ordinary shares (238) – (238) (232) – (232)
Dividends paid on perpetual securities a (4) – (4) (23) – (23)
Net cash used in financing activities (1,016) (2) (1,018) (1,306) (2) (1,308)
Net (decrease)/increase in cash and cash equivalents (18) (640) (658) – 482 482
Refer to note 2 for details of prior year restatements.
7 Segment reporting continued
125 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
8 Supplier arrangements
Supplier incentives, rebates and discounts, collectively known as ‘supplier arrangements’, represent a material deduction to cost of sales and directly affect
the Group’s reported margin.
Income is recognised when earned by the Group when all obligations per the terms of the contract have been performed. Any supplier arrangements which
are linked to inventory purchases are included within the cost of the related inventory, and therefore recognised within cost of sales once the inventory is
sold. Unpaid amounts relating to supplier arrangements are recognised within trade and other receivables, unless there is a legal right of offset, in which
case it is recognised within trade and other payables.
The types of supplier arrangements applicable to the Group are as follows:
— Discounts and supplier incentives – these represent the majority of all supplier arrangements and are linked to individual unit sales. The incentive
is typically based on an agreed sum per item sold on promotion for a period and therefore is considered part of the purchase price of that product.
— Fixed amounts – these are agreed with suppliers primarily to support in-store activity including promotions, such as utilising specific space.
— Supplier rebates – these are typically agreed on an annual basis, aligned with the Group’s financial year. The rebate amount is linked to pre-agreed
targets such as sales volumes.
— Marketing and advertising income – advertising income from suppliers through the Group’s subsidiary Nectar 360 Services LLP and online marketing
and advertising campaigns within Argos.
Amounts recognised in the income statement during the year for fixed amounts, volume-based rebates and marketing and advertising income are shown
below. Discounts and supplier incentives are not shown as they are deemed to be part of the cost price of inventory.
52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Fixed amounts 208 236
Supplier rebates 94 55
Marketing and advertising income
1
79 69
Total supplier arrangements 381 360
1 The prior year has been restated. There is no impact to any of the primary statements.
Of the above amounts, the following was outstanding and held on the balance sheet at the period-end:


52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Within inventory (4) (5)

Within current trade receivables
Supplier arrangements due 39 49
Accrued supplier arrangements 37 37

Within current trade payables
Supplier arrangements due 47 32
Accrued supplier arrangements 2 5
Deferred income due – (2)
Total supplier arrangements 121 116
126 Financial Statements J Sainsbury plc Annual Report 2022
9 Operating profit
Accounting policies
Cost of sales
Cost of sales consists of all costs that are directly attributable to the point of sale including warehouse, transportation costs and all the costs of operating
retail outlets. In the case of Financial Services, cost of sales includes interest expense on operating activities, calculated using the effective interest method.
Operating profit is stated after charging/(crediting) the following items:


52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Employee costs (note 36) 3,600 3,752
Depreciation expense
1
(note 14 and 15) 1,069 1,113
Amortisation expense
2
(note 16) 151 136
Profit on disposal of non-current assets
3
(note 33) (6) (17)
Foreign exchange (gains)/losses (19) 6
Movement in loss allowance for loans and advances to customers 19 85
Impairment charges (note 17) 9 321
1 Depreciation expense includes a £(3) million credit (2021: £(5) million credit) in relation to the unwind of acquisition adjustments.
2 Amortisation expense includes a £23 million charge (2021: £24 million) in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK.
3. Includes £(19) million in relation to disposals of property, plant and equipment (2021: £(1) million), loss on disposals of intangible assets of £4 million (2021: £nil), gains on lease terminations of £(12) million
(2021: £(16) million) and adjustments in relation to software as a service accounting of £21 million (2021: £nil).


2022
£m
2021
£m
Auditor's remuneration  
Fees payable to the Company's auditor for the audit of the parent company and consolidated financial statements 1.1 1.0
Fees payable to the Company's auditor for other services:
The audit of the Company’s subsidiaries 2.4 2.3
Audit-related assurance services 0.1 0.1
Non-audit services 0.9 –
Total fees 4.5 3.4
Non-audit services relate to services provided by the Group’s auditor in the capacity of reporting accountant.
10 Finance income and finance costs
Accounting policies
Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured
at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales.
The coupons on the perpetual capital securities and perpetual convertible bonds are accounted for as dividends in accordance with IAS 32 ‘Financial Instruments:
Presentation’ and hence are not a finance cost. These are included as a finance cost in the presentation of underlying results, but do not qualify as a finance
cost for IFRS statutory purposes.
Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship.
2022 2021 (restated)
Underlying
£m
Non-
underlying
£m
Total
£m
Underlying
£m
Non-underlying
£m
Total
£m
Interest on bank deposits and other financial assets 1 – 1 1 – 1
Fair value measurements – 2 2 – 10 10
IAS 19 pension financing income – 15 15 – 19 19
Finance income on net investment in leases 2 – 2 2 – 2
Finance income 3 17 20 3 29 32
Secured borrowings (40) – (40) (49) – (49)
Unsecured borrowings (2) – (2) (1) – (1)
Lease liabilities (271) (10) (281) (295) (10) (305)
Provisions – amortisation of discount (1) – (1) (1) – (1)
Interest capitalised – qualifying assets 2 – 2 4 – 4
Perpetual securities coupon – – – (14) 14 –
Finance costs (312) (10) (322) (356) 4 (352)
Refer to note 2 for details of prior year restatements.
127 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
11 Taxation
Accounting policies
Current tax
Current tax is accounted for on the basis of tax laws enacted or substantively enacted at the balance sheet date. Current tax is charged or credited to the
income statement, except when it relates to items charged to equity or other comprehensive income.
Deferred tax
Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets
and liabilities.
Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a
transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using
tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences
can be utilised.
Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive
income.
Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Group is able
to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.


52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
(restated)
£m
Current year UK tax 131 34
Current year overseas tax 6 6
Under/(over) – provision in prior years 5 (12)
Total current tax expense 142 28
Origination and reversal of temporary differences 52 (46)
(Over)/under-provision in prior years (35) 27
Adjustment from changes in tax rates 23 –
(Recognition)/derecognition of capital losses (5) 28
Total deferred tax expense 35 9
Total income tax expense in income statement 177 37
Analysed as:
Underlying tax 154 105
Non-underlying tax 23 (68)
Total income tax expense in income statement 177 37
Underlying tax rate 21.1% 29.4%
Effective tax rate 20.7% (22.6)%
128 Financial Statements J Sainsbury plc Annual Report 2022
The effective tax rate of 20.7 per cent (2021 restated: (22.6) per cent) is higher than (2021: lower than) the standard rate of corporation tax in the UK of 19 per cent.
The differences are explained below:


52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
(restated)
£m
Profit before tax 854 (164)
Income tax at UK corporation tax rate of 19.00% 162 (31)
Effects of underlying items:
Disallowed depreciation on UK properties 25 23
(Over)/under – provision in prior years (28) 15
Revaluation of deferred tax balances 14 –
Disallowed depreciation on right of use assets 5 –
Effects of non-underlying items:
Loss on disposal of properties (1) (7)
Over-provision in prior years (2) –
Revaluation of deferred tax balances 9 –
Impairment of non-financial assets – 9
Restructuring programmes – 3
Derecognition of capital losses (5) 28
Perpetual capital securities – (3)
Other (2) –
Total income tax expense in income statement 177 37
Refer to note 2 for details of prior year restatements.
It was announced in the UK Government’s Budget on 3 March 2021 that the main UK corporation tax rate will increase to 25 per cent from 1 April 2023.
Thischange was enacted during the accounting period.
As a result, existing temporary differences on which deferred tax has been provided have been revalued, where appropriate, to reflect the fact that they
willnow unwind at 25 per cent rather than 19 per cent. The impact of this is £23 million (£14 million underlying, £9 million non-underlying and a further
£183million reflected in other comprehensive income).
Income tax charged or (credited) to equity and/or other comprehensive income during the year is as follows:
Share-based
payment
reserve
£m
Actuarial
reserve
£m
Fair value
movements
£m
Total
£m
52 weeks to 5 March 2022
Current tax in equity or other comprehensive income (1) – – (1)
Deferred tax in equity or other comprehensive income (2) 431 87 516
(3) 431 87 515
52 weeks to 6 March 2021
Current tax in equity or other comprehensive income – (44) – (44)
Deferred tax in equity or other comprehensive income – (23) 4 (19)
– (67) 4 (63)
11 Taxation continued
129 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The current and deferred tax in relation to the Group’s defined benefit pension scheme’s remeasurements and available-for-sale fair value movements have
been charged or credited through other comprehensive income where appropriate.
The movements in deferred income tax assets and liabilities during the financial year, prior to the offsetting of the balances within the same tax jurisdiction,
are shown below:
Accelerated
capital
allowances
£m
Capital
losses
£m
Fair value
movements
£m
Rolled over
capital gains
£m
Retirement
benefit
obligations
£m
Share-based
payments
£m
Leases
£m
Other
£m
Total
£m
At 7 March 2021 (141) 64 (48) (81) (192) 9 126 8 (255)
Prior year adjustment to income statement (7) (3) 2 6 – – (1) 38 35
Credit/(charge) to income statement 16 5 4 4 (11) 4 (21) (48) (47)
(Charge)/credit to equity or other comprehensive
income
– – (59) – (276) 2 – – (333)
Revaluation adjustment to income statement (41) 21 (4) (22) (6) 3 28 (2) (23)
Revaluation adjustment to equity or other
comprehensive income
– – (28) – (155) – – – (183)
At 5 March 2022 (173) 87 (133) (93) (640) 18 132 (4) (806)
At 8 March 2020 (143) 93 (46) (83) (214) 12 124 (8) (265)
Prior year adjustment to income statement (20) (10) – 10 – (5) (1) (1) (27)
Credit/(charge) to income statement 39 (28) 4 – (1) 1 (15) 18 18
(Charge)/credit to equity or other comprehensive
income
– – (1) – 48 – – – 47
Revaluation adjustment to income statement (17) 9 (2) (8) – 1 18 (1) –
Revaluation adjustment to equity or other
comprehensive income
– – (3) – (25) – – – (28)
At 6 March 2021 (141) 64 (48) (81) (192) 9 126 8 (255)


2022
£m
2021
£m
Total deferred income tax liabilities (1,043) (462)
Total deferred income tax assets 237 207
Net deferred income tax liability recognised in non-current liabilities (806) (255)
Deferred income tax assets have been recognised in respect of all income tax losses and other temporary differences giving rise to deferred income tax
assets because it is probable that these assets will be recovered, with the exception of unrecognised capital losses of £194 million (2021: £172 million)
following Finance Act 2020 which restricts the amount of chargeable (capital) gains that a company can relieve with its carried-forward capital losses.
Deferred income tax assets and liabilities are only offset where there is a legally enforceable right of offset and the deferred income tax assets and the
deferred income tax liabilities relate to income taxes levied by the same taxation authority.
11 Taxation continued
130 Financial Statements J Sainsbury plc Annual Report 2022
12 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in
issue during the year, excluding those held by the Employee Share Ownership Trusts (note 29), which are treated as cancelled.
In calculating the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially
dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company’s
ordinary shares during the year and the number of shares that would be issued if all perpetual subordinated convertible bonds are assumed to be converted.
Underlying earnings per share is provided by excluding the effect of any non-underlying items as defined in note 5. This alternative measure of earnings per
share is presented to reflect the Group’s underlying trading performance. All operations are continuing for the periods presented.


2022
million
2021
(restated)
million
Weighted average number of shares in issue 2,271.8 2,210.0
Weighted average number of dilutive share options 39.6 21.7
Weighted average number of dilutive subordinated perpetual convertible bonds 39.6 88.4
Total number of shares for calculating diluted earnings per share 2,351.0 2,320.1
 £m £m
Profit/(loss) for the financial period (net of tax) 677 (201)
Less profit attributable to:
Holders of perpetual convertible bonds – (7)
Profit/(loss) for the financial period attributable to ordinary shareholders 677 (208)
Diluted earnings/(loss) for calculating diluted earnings/(loss) per share 677 (208)
Profit/(loss) for the financial period attributable to ordinary shareholders of the parent 677 (208)
Adjusted for non-underlying items (note 5) (124) 521
Tax on non-underlying items 23 (68)
Add back coupons on perpetual securities (net of tax) – 14
Underlying profit after tax attributable to ordinary shareholders of the parent 576 259
Add coupon on subordinated perpetual convertible bonds (net of tax) – 6
Diluted underlying profit after tax attributable to ordinary shareholders of the parent 576 265

Pence
per share
Pence
per share
Basic earnings/(loss) 29.8 (9.4)
Diluted earnings/(loss)
1
28.8 (9.4)
Underlying basic earnings 25.4 11.7
Underlying diluted earnings 24.5 11.4
1 Basic and diluted loss per share are the same in the prior year as the dilutive share options and their respective earnings adjustments are anti-dilutive.
Refer to note 2 for details of prior year restatements.
131 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
13 Dividends


2022
pence
per share
2021
pence
per share
2022
£m
2021
£m
Amounts recognised as distributions to ordinary shareholders in the year:    
Final dividend of prior financial year 7.4 – 164 –
Interim dividend of current financial year 3.2 3.2 74 71
Special dividend of prior financial year – 7.3 – 161
 10.6 10.5 238 232
After the balance sheet date on 27 April 2022 a final dividend of 9.9 pence per share (2021: 7.4 pence per share) was proposed by the Directors in respect of the
52 weeks to 5 March 2022. This results in a total final proposed dividend of £230 million (2021: £164 million).
Subject to shareholders’ approval at the Annual General Meeting, the dividend will be paid on 15 July 2022 to the shareholders on the register at 10 June 2022.
The proposed final dividend has not been included as a liability at 5 March 2022.
14 Property, plant and equipment
Accounting policies
a) Land and buildings
Land and buildings are held at historical cost less accumulated depreciation and any recognised provision for impairment. Capital work in progress is held at
cost less any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its
working condition for intended use. This includes capitalised borrowing costs.
b) Fixtures and equipment
Fixtures, equipment and vehicles are held at cost less accumulated depreciation and any recognised provision for impairment. Cost includes the original
purchase price of the asset and the costs attributable to bringing the asset to its working condition and its intended use.
c) Depreciation
Depreciation is calculated to write down the cost of the assets to their residual values, on a straight-line basis, using the following rates:
— Freehold buildings and leasehold improvements – 50 years, or the lease term if shorter
— Fixtures, equipment and vehicles – three to 15 years
— Freehold land is not depreciated
Capital work in progress is not depreciated prior to being brought to its working condition and its intended use. Capital work in progress does not include land.
Gains and losses on disposal are determined by comparing proceeds less any associated costs of disposal with the asset’s carrying amount and are recognised
within operating profit.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. This includes consideration over
climate change related risks which may impact the useful lives of the Group’s assets, such as the impact of flood risks on store and non-store assets, and any
anticipated replacement of existing assets with new technologies. During the year, no changes were made to the remaining useful lives of the Group’s assets
asa result of climate change risks.
Capitalisation of interest
Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised to the cost of the asset, gross of tax relief.
132 Financial Statements J Sainsbury plc Annual Report 2022
Impairment of non-financial assets
Refer to note 17 for details of impairment policies.


Land and
buildings
£m
Fixtures and
equipment
£m
Total
£m
Cost   
At 7 March 2021 9,655 5,288 14,943
Additions 87 330 417
Disposals (40) (330) (370)
Transfer to asset held for sale (9) – (9)
At 5 March 2022 9,693 5,288 14,981
  
Accumulated depreciation and impairment   
At 7 March 2021 2,793 3,563 6,356
Depreciation expense for the year 170 421 591
Impairment loss for the year – 6 6
Disposals (37) (328) (365)
Transfer to asset held for sale (9) – (9)
At 5 March 2022 2,917 3,662 6,579
Net book value at 5 March 2022 6,776 1,626 8,402
Capital work-in-progress included above 103 314 417
   
Cost   
At 8 March 2020 9,716 5,362 15,078
Additions 89 330 419
Disposals (59) (404) (463)
Transfer to asset held for sale (91) – (91)
At 6 March 2021 9,655 5,288 14,943
   
Accumulated depreciation and impairment   
At 8 March 2020 2,693 3,436 6,129
Depreciation expense for the year 173 456 629
Impairment loss for the year 26 62 88
Disposals (32) (391) (423)
Transfer to asset held for sale (67) – (67)
At 6 March 2021 2,793 3,563 6,356
Net book value at 6 March 2021 6,862 1,725 8,587
  
Capital work-in-progress included above 122 320 442
14 Property, plant and equipment continued
133 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Interest capitalised
Interest capitalised included in additions amounted to £2 million (2021: £4 million) for the Group. Accumulated interest capitalised included in the cost of
property, plant and equipment net of disposals amounted to £335 million (2021: £334 million) for the Group. Accumulated interest capitalised held at net book
value in property, plant and equipment amounted to £284 million (2021: £285 million) for the Group. The capitalisation rate used to determine the amount of
borrowing costs eligible for capitalisation is 6.2 per cent (2021: 4.0 per cent).
Security
Property, plant and equipment pledged as security is as follows:



2022 2021
Number
of
properties
Net book
value
£bn
Number
of
properties
Net book
value
£bn
Loan due 2031 48 0.9 48 0.9
Revolving Credit Facility 60 1.3 60 1.3
Asset backed pension contribution scheme 48 1.2 48 1.2
Bank loans due 2021 – – 10 0.2
Other 6 0.1 6 0.1
 162 3.5 172 3.7
15 Leases
Group as lessee
The Group’s lease portfolio is principally comprised of property leases of land and buildings in relation to stores, distribution centres and support offices,
but also includes other assets such as motor vehicles. The leases have varying terms and often include break clauses or options to renew beyond the
non-cancellable periods.
Accounting policies
Right-of-use assets
Right-of-use assets are recognised at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any subsequent remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement
date less any lease incentives received.
The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life and the lease term. Right-of-use assets
are subject to impairment.
Lease liabilities
Lease liabilities are recognised at the commencement date of the lease and are measured at the present value of lease payments to be made over the lease
term, discounted using the incremental borrowing rate (IBR) at the lease commencement date if the interest rate implicit in the lease is not readily
determinable. The majority of the Group’s leases are discounted using the IBR.
The IBRs depend on the start date and term of the lease, and are determined based on a reference (risk free) rate and adjustments to reflect the Group’s
credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the
group and quoted credit default swaps (“CDS”). IBRs are determined quarterly.
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is
reasonably certain to be exercised, or any periods covered by an option to terminate the lease (a break clause), if it is reasonably certain not to be exercised.
The lease payments include fixed payments and variable lease payments that depend on an index or a rate (using the relevant rate at the commencement
date of the lease), less any lease incentives receivable. The variable lease payments that do not depend on an index or a rate are recognised as an expense
in the period in which the event or condition that triggers the payment occurs. For agreements which contain both lease and non-lease components, such
as cleaning and maintenance services, the non-lease component is excluded from the lease payments used to measure the lease liabilities.
After the commencement date of the lease, the lease liability is subsequently measured at amortised cost using the effective interest rate method. The carrying
amount of lease liabilities is remeasured when there is a change in the future lease payments due to a change in the lease term such as a recognition of an
extension or break option, a change in the fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the commencement date and
do not contain a purchase option. It also applies the low-value asset recognition exemption to groups of underlying leases that are considered uniformly low
value (i.e. below £5,000). Lease payments on short-term leases and leases of low-value assets are expensed to the income statement.
14 Property, plant and equipment continued
134 Financial Statements J Sainsbury plc Annual Report 2022
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Net book value
Land and
buildings
£m
Equipment
£m
Total
£m
At 7 March 2021 4,414 333 4,747
New leases and modifications
1
1,244 50 1,294
Depreciation charge (389) (89) (478)
Impairment charge (3) – (3)
At 5 March 2022 5,266 294 5,560
At 8 March 2020 4,536 290 4,826
New leases and modifications
1
413 129 542
Depreciation charge (398) (86) (484)
Impairment charge (137) – (137)
At 6 March 2021 4,414 333 4,747
1. Includes new leases, terminations, modifications and reassessments.
Set out below are the carrying amounts of lease liabilities and the movements during the period:


2022
£m
2021
£m
At 7 March 2021 and 8 March 2020 5,834 5,774
New leases and modifications 1,280 561
Interest expense 281 305
Payments (774) (806)
At 5 March 2022 and 6 March 2021 6,621 5,834
Current 526 524
Non-current 6,095 5,310
The Group presents additions to lease liabilities and right-of-use assets in line with the disclosure requirements of IFRS 16 ‘Leases’. In doing so, additions to
right-of-use assets and lease liabilities above include the net impact of new leases, terminations, modifications, and reassessments. This year includes the
impact of exercising purchase options on 21 leased supermarkets held by a property investment pool in which the Group holds an interest. The purchase
options were not included within the lease liabilities at inception of the lease as the Group was not reasonably certain to exercise them. Following the exercise
of the options, the respective lease liabilities have been remeasured to include the assumed purchase price, leading to an increase in lease liabilities with
a corresponding increase to the right-of-use asset. The purchases will be completed in the financial year ended 2 March 2024 when the existing leases end.
The purchase price is subject to negotiation and at the year-end had not yet been agreed. Therefore to remeasure the lease liability, the purchase price
has been estimated based on up-to-date property valuations carried out by independent valuers not connected with the Group. The lease liabilities
(and right-of-use assets) may be subsequently adjusted as the property valuations change, and when purchase prices are agreed. This is not considered
a significant estimate in line with IAS 1 ‘Presentation of financial statements’.
Guarantee in relation to property pool
When the properties are sold by the property investment pool in the financial year ended 2 March 2024, the proceeds will be used to settle bonds issued by
the structure. The Group has previously issued a financial guarantee in relation to this, which is triggered if there is a shortfall in the property proceeds and
the bonds cannot be fully repaid. The guarantee is up to £300 million.
The current property valuations indicate that there is significant headroom and therefore no shortfall.
In the event of a delay in the property negotiations, meaning the bond repayment is due before the properties have been sold, the guarantee will be called
upon in full. In such an event, once the properties are sold, Sainsbury’s will recover the guarantee payment in full from the property proceeds.
Significant judgement – lease terms
The inclusion of a lease extension period or lease break period in the lease term is a key judgement for the Group and considers all relevant factors that create
an economic incentive for it to exercise them. For leased properties, this includes the current and expected profitability of the respective site, as well as the length
of time until the option can be exercised. Any changes to the Group’s judgement over lease terms will impact both the right of use asset and lease liability.
Set out below are the undiscounted future rental payments not currently included within the reported lease liability where lease extensions have not been
included, or where lease breaks have been assumed:
2022
£m
2021
£m
Extension options expected to not be exercised 4,681 4,590
Lease breaks expected to be exercised 458 463
15 Leases continued
135 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Significant estimate – discount rates
As noted above, lease liabilities are measured at the present value of lease payments to be made over the lease term, discounted using the IBR at the lease
commencement date (for additions) or at the lease modification date (for modifications).
The IBRs depend on the start date and term of the lease, and are determined based on a number of inputs including a reference (risk free) rate and
adjustments to reflect the Group’s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the
prices of instruments issued by the Group and quoted credit default swaps (“CDS”).
The following table summarises the impact that a reasonable possible change in the IBR would have had on the lease liability additions and modifications
recognised during the year:
(Decrease)/
increase in
lease liability
recognised
£m
Increase in IBR of 1% (40)
Decrease in IBR of 1% 42
Amounts recognised in profit or loss
The following are the amounts recognised in profit or loss:


2022
£m
2021
£m
Depreciation of right-of-use assets (478) (484)
Impairment of right-of-use assets (3) (137)
Interest on lease liabilities (281) (305)
Variable lease payments not included in the measurement of lease liabilities – (1)
Finance income from sub-leasing of right-of-use assets 2 2
Operating sublet income 56 42
Expenses relating to short-term leases (32) (33)
Expenses relating to leases of low-value assets (2) (2)
Total amount recognised in profit or loss (738) (918)
Total cash outflow for leases (excludes sublet income) (808) (841)
There were no leases with residual value guarantees. There have been no sale or leaseback transactions during the period. The Group does not hold any
leases as investment properties under IAS 40. Approximately £2,807 million (2021: £2,856 million) of the Group’s lease liabilities are subject to inflation-linked
rentals and a further £255 million (2021: £268 million) are subject to rent reviews. Rental changes linked to inflation or rent reviews typically occur on an annual
or five-yearly basis. The Group is committed to payments totalling £nil (2021: £32 million) in relation to leases that have been signed but not yet commenced.
Maturity analysis


2022
£m
2021
£m
Contractual undiscounted cash flows  
Less than one year 773 748
One to two years 1,683 716
Two to three years 627 643
Three to four years 575 594
Four to five years 542 547
Total less than five years 4,200 3,248
Five to ten years 2,416 2,420
Ten to fifteen years 2,005 2,078
More than fifteen years 3,338 3,706
Total undiscounted lease liability 11,959 11,452
Lease liabilities included in the statement of financial position 6,621 5,834
Current 526 524
Non-current 6,095 5,310
15 Leases continued
136 Financial Statements J Sainsbury plc Annual Report 2022
Group as lessor
Lessor accounting
The Group leases out owned properties and sublets leased properties under operating and finance leases. Such properties include mall units, stores and units
within stores. Where the Group subleases assets, the sublease classification is assessed with reference to the head lease right-of-use asset. This assessment
considers, among other factors, whether the sublease represents the majority of the remaining life of the head lease. The ratio of rental income to head lease
rental payments is used to determine how much of the right-of-use asset should be derecognised, or analysis of square foot leased in the headlease and
sublease where appropriate. This assessment takes into consideration whether the sublease/headlease are above or below market rate.
Amounts due from lessees under finance leases are recorded as a receivable at an amount equal to the net investment in the lease. This is initially calculated
and recognised using the IBR prevalent in the underlying headlease at the recognition date. Any difference between the derecognised right-of-use asset
and the newly recognised amounts due for leases under finance leases is recognised in the income statement. The Group recognises finance income over
the lease term, reflecting a constant periodic rate of return on the Group’s net investment in the lease. Operating lease income is recognised as earned on
a straight-line basis over the lease term.
The below table sets out the maturity analysis of lease receivables classified as operating leases:


2022
£m
2021
£m
Less than one year 18 17
One to two years 16 15
Two to three years 13 13
Three to four years 11 11
Four to five years 10 9
Five to ten years 30 28
Ten to fifteen years 9 8
More than fifteen years 10 13
Total undiscounted lease payments receivable 117 114
The net book value of property, plant and equipment subject to operating leases at year-end is not material to the accounts.
The below table sets out the maturity analysis of lease receivables classified as finance leases:
2022
£m
2021
£m
Contractual undiscounted cash flows 
Less than one year 7 7
One to five years 36 26
More than five years 5 15
Total undiscounted net investment in lease receivable 48 48
Lease receivables included in the statement of financial position 41 34
Current 5 5
Non-current 36 29
16 Intangible assets
Accounting policies
a) Goodwill
Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group’s share of the net identifiable assets of
the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and
again whenever indicators of impairment are detected and is carried at cost less any provision for impairment.
b) Computer software
Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software
licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software
for internal use are capitalised once the recognition criteria of IAS 38, ‘Intangible Assets’ are met. Other development expenditures that do not meet these
criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful
economic lives of five to fifteen years within administrative expenses.
15 Leases continued
137 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
16 Intangible assets continued
c) Cloud computing arrangements
Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider’s application software over the
contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider’s application software, as well as upfront
costs incurred to configure or customise the SaaS solution.
Configuration and customisation costs are capitalised in the following instances as intangible assets:
— The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software
independently of the host vendor.
— The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that
enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury’s.
Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider’s application
software, are recognised as operating expenses when the services are received.
Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from
the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury’s can benefit from any of the services in
isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution.
d) Acquired intangible assets
Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives
are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful
economic lives, ranging from five to ten years, within administrative expenses.
Refer to note 17 for details of impairment policies.
Goodwill
£m
Computer
software
£m
Acquired
brands
£m
Customer
relationships
£m
Total
£m
Cost
At 7 March 2021 394 899 229 32 1,554
Additions – 278 – – 278
Disposals
1
(2) (100) – – (102)
At 5 March 2022 392 1,077 229 32 1,730
Accumulated amortisation and impairment
At 7 March 2021 28 457 127 28 640
Amortisation expense for the year – 129 20 2 151
Disposals (2) (65) – – (67)
At 5 March 2022 26 521 147 30 724
Net book value at 5 March 2022 366 556 82 2 1,006
Cost
At 8 March 2020 400 749 231 32 1,412
Additions – 172 – – 172
Disposals (6) (22) (2) – (30)
At 6 March 2021 394 899 229 32 1,554
Accumulated amortisation and impairment
At 8 March 2020 22 281 109 26 438
Amortisation expense for the year – 114 20 2 136
Impairment loss for the year 12 84 – – 96
Disposals (6) (22) (2) – (30)
At 6 March 2021 28 457 127 28 640
Net book value at 6 March 2021 366 442 102 4 914
1 Disposals include write offs of software-as-a-service balances as disclosed in note 2.
Goodwill balances are detailed in note 17.
138 Financial Statements J Sainsbury plc Annual Report 2022
17 Impairment of non-financial assets
Accounting policies
Goodwill
Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is an indication that the asset may be impaired.
For the purposes of impairment testing, goodwill is allocated to the Cash Generating Unit (CGU) or group of CGUs within the Retail or Financial Services
segments. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value
less costs to dispose. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. Impairment losses recognised for goodwill are not subsequently reversed.
Property, plant and equipment, right-of-use assets, and finite-lived intangible assets
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment (PPE), right-of-use assets, and finite-lived intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset, being the higher of its fair value less costs to dispose and its value in use, is estimated in order to determine the extent of the impairment loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-
generating unit is reduced to its recoverable amount and an impairment loss is recognised immediately in the income statement.
Where there has been a change in the estimates used to determine the recoverable amount and an impairment loss subsequently reverses, the carrying
amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would
have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. An impairment loss reversal is recognised
immediately in the income statement.
Identification of cash-generating units
Retail
Cash generating units are deemed to be each trading store, store pipeline development site or in certain cases for Argos, a cluster of stores.
PPE, intangible assets and right-of-use assets are allocated to the store CGU they are associated with. For leased assets, the CGU also includes corresponding
lease liabilities as management has concluded that lease liabilities need to be considered when determining the recoverable amount of the CGU. For non-store
assets, including depots and IT assets, these are allocated to a group of CGUs (i.e. the Sainsbury’s or Argos store CGUs that they support).
Goodwill recognised on acquisition of retail chains of stores (Bells and Jacksons) is allocated to its respective store CGUs. Goodwill arising on the purchase
ofHome Retail Group is allocated to the Argos group of store and non-store CGUs. Nectar is a separate CGU.
Financial Services
Cash generating units are deemed to be each respective product or product group that is capable of generating cash flows independent of other products.
Non-product assets are reviewed separately as collective CGUs with the products that they support.
Goodwill arising on the purchase of Sainsbury’s Bank plc is allocated to the Financial Services collective CGUs.
Review for indicators of impairment
At the year-end reporting date, the Group assessed whether indicators of impairment existed within its Retail and Financial Services CGUs. It was concluded
that no indicators of impairment existed within either segment.
Equally, consideration was given as to whether there had been any changes in the estimates used to determine the recoverable amount of assets (excluding
goodwill) which had previously been impaired. No changes were identified and therefore no impairment loss reversals have been recognised.
Impairments recognised as part of restructuring programme
Whilst no indicators of impairment have been identified, impairments of £9 million have been recognised in relation to restructuring activities as disclosed
innote 5.
Climate change considerations
The Group’s scenario analysis performed as part of the Task Force on Climate-Related Financial Disclosures (TCFD) report (refer to page 17) identified that the
four most material climate-related risks were drought, flooding, carbon taxes and changes in consumer preferences. Produce, Clothing, Meat, Fish and Poultry
(MFP), Dairy and Fuel were the product categories most exposed to the climate-related risks.
Changes in consumer preferences in MFP was identified as the risk most vulnerable to transitional risks and modelling this risk in isolation to 2030 in a
1.5°C scenario, assuming no actions are taken to mitigate risks, calculated a £300 million to £350 million loss in revenue. The potential financial impact of
climate-related physical risks on selected Produce in isolation to 2050 in a 4.3°C scenario calculated a £60 million to £75 million loss in revenue. The Group
assessed the effect such losses would have on the recoverable amount of the Retail segment’s store CGUs, and no material impairments were noted.
As such, climate-related risks did not have a material impact on the Group’s impairment considerations at the reporting date.
139 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Goodwill
Goodwill was separately tested at the year-end as required under IAS 36. Goodwill comprises the following:


2022
£m
2021
£m
Jacksons Stores Limited 28 28
Home Retail Group 119 119
Sainsbury’s Bank plc 45 45
Nectar 147 147
Bells Stores Limited 9 9
Other 18 18
366 366
Value in use calculations used to derive the recoverable amount of the CGU to which the respective goodwill has been allocated are based on the following
key assumptions:
Cash flow years/assumptions Cash flows relating to Home Retail Group, Sainsbury’s Bank plc and Nectar are derived from Board approved cash flow
projections for five years and then extrapolated into perpetuity with no assumed growth rate.
Cash flows relating to goodwill attributable to stores are derived from Board approved cash flow projections for five years
and then extrapolated for a further 10 years with no assumed growth rate, representing the typical time between refits.
Where lease terms are shorter than this, the remaining lease term has been used.
Discount rate A post-tax discount rate representing the Retail segment’s weighted average cost of capital (WACC), subsequently
grossed up to a pre-tax rate of 7 per cent (2021: pre-tax rate of 8 per cent), has been used for all goodwill balances,
except Sainsbury’s Bank plc.
A post-tax discount rate representing the Financial Services segment’s weighted average cost of capital (WACC),
subsequently grossed up to a pre-tax rate of 13 per cent (2021: pre-tax rate of 13 per cent), has been used for the
goodwill balance relating to Sainsbury’s Bank plc
No impairments were identified in any of the Group’s goodwill amounts. Sensitivity analysis on the impairment tests for each group of cash-generating
units to which goodwill has been allocated has been performed. The valuations indicate sufficient headroom such that a reasonably possible change to key
assumptions would not result in any impairment of goodwill.
Overall, management are satisfied that there are no reasonable possible changes to assumptions that would lead to the recognition of impairments in
anygoodwill.


Sensitivities (revised headroom)
Carrying
amount
£m
Headroom
£m
Discount rate Cash flows
Decrease of 1%
£m
Increase of 1%
£m
Decrease of 5%
£m
Increase of 5%
£m
Jacksons Stores Limited 28 41 45 38 38 45
Home Retail Group 119 2,026 2,502 1,669 1,882 2,171
Sainsbury’s Bank plc 45 278 316 244 229 326
Nectar UK 147 980 1,170 838 923 1,038
Bells Stores Limited 9 14 15 13 13 15
Other 18 28 33 23 25 31
17 Impairment of non-financial assets continued
140 Financial Statements J Sainsbury plc Annual Report 2022
18 Financial assets at fair value through other comprehensive income
Accounting policies
Financial assets that are held for both the purpose of collecting contractual cash flows and to sell are classified as fair value through other comprehensive
income (FVOCI). They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet
date. Equity investments have been irrevocably designated as fair value through other comprehensive income. Subsequent to initial recognition at fair value
plus transaction costs, these assets are recorded at fair value at each period end with the movements recognised in other comprehensive income until
derecognition or impaired. On derecognition, the cumulative gain or loss previously recognised in other comprehensive income reserves is recognised in
the income statement for debt instruments. Gains and losses on equity instruments are never recycled to the income statement. Dividends on financial
assets at fair value through other comprehensive income are recognised in the income statement when the entity’s right to receive payment is established.
Interest on financial assets at fair value through other comprehensive income debt instruments is recognised using the effective interest method.


52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Non-current
Equity
Other financial assets 382 306
Debt
Interest bearing financial assets – 1
Financial Services related investment securities 222 447
604 754

Current 
Debt 
Financial Services related investment securities 196 90
800 844
The other financial asset predominantly represents the Group’s beneficial interest in a commercial property investment pool. The fair value of the other
financial asset is based on discounted cash flows assuming a property rental growth rate of 0 per cent (2021: 0 per cent) and a discount rate of seven per cent
(2021: seven per cent). There were no disposals in the current year (2021: nil) and no impairment provisions in either the current or the previous financial year.
Sensitivities are included in note 30.
19 Inventories
Accounting policies
Inventories comprise goods held for resale and are valued on a weighted average cost basis and carried at the lower of cost or net realisable value. Net
realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Cost includes all direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition.


52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Gross finished goods 1,930 1,751
Inventory provision (133) (126)
Inventory recognised on Group balance sheet 1,797 1,625
The amount of inventories recognised as an expense and charged to cost of sales for the 52 weeks to 5 March 2022 was £22,499 million (2021: £21,459 million).
Inventory losses and provisions recognised as an expense for the year were £511 million (2021: £500 million).
141 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
20 Receivables
(a) Trade and other receivables
Accounting policies
Trade and other receivables are non-interest bearing and are on commercial terms. They are initially recognised at fair value and subsequently measured at
amortised cost less allowances for expected credit losses, using the simplified approach under IFRS 9, with adjustments for factors specific to each receivable.
2022
£m
2021
£m
Non-current  
Other receivables 41 43
Prepayments 24 7
 65 50
 
Current 
Trade receivables 148 161
Other receivables 363 409
Prepayments 172 155
 683 725
Trade and other receivables include £76 million (2021: £86 million) relating to supplier arrangements where there is no right of offset. Refer to note 8. In addition,
current other receivables of £373 million (2021: £409 million) include £171 million (2021: £152 million) of bank funds in the course of settlement. The carrying
amounts of trade and other receivables are denominated in sterling.
(b) Allowance for expected credit losses
The Group’s exposure to credit risk arising from its retail operations is minimal given that the customer base is large and unrelated and that the overwhelming
majority of customer transactions are settled through cash or secure electronic means. New parties wishing to obtain credit terms with the Group are credit
checked prior to invoices being raised and credit limits are determined on an individual basis.
2022
Not
past due
£m
0 to 6 months
past due
£m
6 to 12 months
past due
£m
Over 1 year
past due
£m
Total
£m
Trade receivables 136 15 6 5 162
Other receivables 403 5 2 10 420
Gross carrying amount – Trade and other receivables 539 20 8 15 582
Allowance for expected credit losses (6) (5) (7) (12) (30)
Net carrying amount on balance sheet 533 15 1 3 552
2021
Not
past due
£m
0 to 6 months
past due
£m
6 to 12 months
past due
£m
Over 1 year
past due
£m
Total
£m
Trade receivables 140 24 3 5 172
Other receivables 461 8 9 4 482
Gross carrying amount – Trade and other receivables 601 32 12 9 654
Allowance for expected credit losses (17) (7) (9) (8) (41)
Net carrying amount on balance sheet 584 25 3 1 613
(c) Major counterparties
The Group has five (2021: seven) major counterparties totalling £124 million (2021: £218 million). No major counterparty balances are considered overdue
orimpaired.
142 Financial Statements J Sainsbury plc Annual Report 2022
21 Amounts due from Financial Services customers and other banks
Accounting policies
Loans and advances are initially recognised at fair value and subsequently held at amortised cost, using the effective interest method, less provision for
impairment and recognised on the balance sheet when cash is advanced.
Refer to note 31 for a detailed description of the accounting policies applicable to financial assets and note 30 for the accounting policies applicable to
impairment of financial assets.


2022
£m
2021
£m
Non-current  
Loans and advances to customers 2,069 2,332
Impairment of loans and advances to customers (43) (52)
 2,026 2,280
 
Current 
Loans and advances to customers 3,202 3,301
Loans and advances to banks 121 37
Impairment of loans and advances to customers (160) (211)
 3,163 3,127
Eligible personal and mortgage loans with applicable haircuts are used as collateral for the bilateral personal loans securitisation facility and the Bank of
England’s Term Funding Scheme Small and Medium-sized enterprises (TFSME) and Indexed Long-term Repo (ILTR) facilities.
As at 5 March 2022, £638 million (2021: £623 million) of Personal Loans assets, including £80 million (2021: £nil) of loans indirectly encumbered via the Bank’s
securitisation facilities, and £626 million (2021: £955 million) of Mortgage assets were pledged to the Bank of England facilitating funding of £nil million
(2021: £950 million) from the TFS, £661 million (2021: £nil) from the TFSME and £225 million (2021: £150 million) from the ILTR.
A further £69 million (2021: £14 million) of Personal Loans assets were pledged indirectly via the Bank’s securitisation facilities generating £50 million
(2021: £10 million) of funding via sale and repurchase agreements and collateral swaps.
Refer to note 30 for further details on Financial Services impairments of loans and advances.
22 Assets held for sale
Accounting policies
Assets are classified as held for sale if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly probable within one year from the date of classification and the assets are available for sale
in their present condition. Assets held for sale are stated at the lower of the carrying amount and fair value less costs to dispose.


5 March
2022
£m
6 March
2021
£m
Opening balance 24 4
Classified as held for sale in the year – 24
No longer classified as held for sale – –
Sold in the year (16) (4)
Closing balance 8 24
For the remaining assets, the sale is still considered probable in the next financial year and so they remain classified as held for sale. The fair value of assets
held for sale is based on independent market valuations of the assets.
143 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
23 Trade and other payables
Accounting policies
The Group’s policy on payment of creditors is to agree terms of payment prior to commencing trade with a supplier and to abide by those terms on the
timely submission of satisfactory invoices.
Trade payables are initially recognised at fair value, which is typically the invoiced amount and then held at amortised cost. They are shown net of supplier
arrangements due where there is a contractual right of offset.


2022
£m
2021
£m
Current  
Trade payables 2,965 2,873
Other payables 675 711
Accruals 565 499
Deferred income 341 405
 4,546 4,488
 
Non-current 
Trade payables – 1
Other payables 11 5
Accruals 2 13
Deferred income 11 1
 24 20
Deferred income
The following table presents a reconciliation of deferred income during the year:


2022
£m
2021
£m
Opening balance 406 340
Revenue deferred in the year 282 393
Revenue recognised in the year which has previously been deferred (336) (327)
Closing balance 352 406
The deferred revenue balance includes £327 million (2021: £323 million) in relation to deferred Nectar points.
Foreign currency risk
The Group has net euro denominated trade payables of £53 million (2021: £50 million) and US dollar denominated trade payables of £119 million (2021: £124 million).
Supplier financing arrangements
The Group has supply chain finance programmes in place. The programmes act as an alternative source of financing for suppliers who have the option to
trade their invoices with funding providers in order to receive cash earlier than the invoice due dates. The payment terms offered to suppliers who are party
tothe supply chain finance programmes are within standard supplier payment terms and agreed directly between the Group and the supplier.
Balances outstanding under the supplier financing arrangements are classified as trade payables, and cash flows are included in operating cash flows,
since the financing arrangements are agreed between the supplier, the funding providers and the third-party platform providers. The Group does not provide
additional credit enhancement nor obtain any working capital benefit from the arrangements.
Included in trade payables at 5 March 2022 are amounts of £355 million (6 March 2021: £349 million) drawn by suppliers who are party to the supply chain
finance programmes.
144 Financial Statements J Sainsbury plc Annual Report 2022
24 Amounts due to Financial Services customers and banks
Accounting policies
With the exception of fixed rate bonds, amounts due to Financial Services customers are generally repayable on demand and accrue interest at retail
deposit rates.
2022
£m
2021
£m
Current  
Customer accounts 4,083 4,924
Other deposits 361 1,162
 4,444 6,086

Non-current
Customer accounts 152 203
Other deposits 663 –
 815 203
Other deposits of £1,024 million (2021: £1,162 million) relate to deposits from wholesale counterparties, including the Bank of England.
25 Provisions
Accounting policies and key information
Provisions are recognised when there is a present legal or constructive obligation as a result of a past event, for which it is probable that an outflow of
economic benefits will be required to settle the obligation and where the amount can be reliably estimated. Provisions are measured at the present value
of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
Property provisions
Where the Group no longer operates from a leased property, onerous property contract provisions are recognised for the least net cost of exiting from the
contract. Unless a separate exit agreement with a landlord has already been agreed, the Group’s policy is that this onerous contract provision includes all
unavoidable costs of meeting the obligations of the contract. The amounts provided are based on the Group’s best estimates of the likely committed outflows
and site closure dates. These provisions do not include rent in accordance with IFRS 16, however do include unavoidable costs related to the lease such as
service charges and insurance. These provisions historically included business rates, however business rates are considered a statutory obligation rather than
a contractual one, and are therefore now recognised as a periodic cost in line with IFRIC 21 “Levies”. Prior period comparatives have been restated to remove
business rates from previously recognised property provisions. Refer to note 2 for further details.
Property provisions also include provisions for dilapidations which are recognised where the Group has the obligation to make-good its leased properties.
These provisions are recognised based on historically settled dilapidations which form the basis of the estimated future cash outflows. Any difference
between amounts expected to be settled and the actual cash outflow will be accounted for in the period when such determination is made.
Where the Group is able to exit lease contracts before the expiry date or agree sublets, this results in the release of any associated property provisions.
Such events are subject to the agreement of landlords, therefore the Group makes no assumptions on the ability to either exit or sublet a property until
a position is agreed.
Insurance provisions
The provision relates to the Group’s outstanding insurance claims liabilities in relation to public and employer’s liability claims, and third-party motor claims.
Claims provisions are based on assumptions regarding past claims experience and on assessments by an independent actuary and are intended to provide
a best estimate of the most likely or expected outcome.
Restructuring provisions
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those
affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement
of a restructuring provision includes only the direct expenditures arising from the restructuring.
The charge for the year mostly comprises redundancy payments as part of Argos store closures, depot closures, and café and food counter closures
announced during the year as detailed in note 5.
145 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Financial Services related provisions
Financial services loan commitment provisions reflect expected credit losses modelled in relation to loan commitments not yet recognised on the balance
sheet, including on credit cards and Argos store cards.
Other Financial Services related provisions are primarily in relation to Argos Financial Services customers in respect of potential redress payable arising from
the historic sales of Payment Protection Insurance (PPI).
The eventual cost is dependent on response rates, uphold rates, complaint rates, redress costs and claim handling costs. The provision represents management’s
best estimate of future costs. These assumptions are inherently uncertain and the ultimate financial impact may differ from the amount provided.


Property
provisions
£m
Insurance
provisions
£m
Restructuring
£m
Financial
Services
related
provisions
£m
Other
provisions
£m
Total
£m
At 7 March 2021 (restated) 164 67 54 26 38 349
Additional provisions 9 34 44 6 1 94
Unused amounts reversed (7) (5) (16) (3) (24) (55)
Utilisation of provision (27) (34) (53) (3) (1) (118)
Amortisation of discount 1 – – – – 1
At 5 March 2022 140 62 29 26 14 271
Current 16 22 28 26 8 100
Non-current 124 40 1 – 6 171
At 8 March 2020 (restated) 38 63 20 37 16 174
Additional provisions 146 33 61 7 32 279
Unused amounts reversed (5) (2) – (2) – (9)
Utilisation of provision (16) (27) (27) (16) (10) (96)
Amortisation of discount 1 – – – – 1
At 6 March 2021 (restated) 164 67 54 26 38 349
Current 72 24 53 21 29 199
Non-current 92 43 1 5 9 150
Climate change considerations
The Group has reviewed its provisions and concluded that no adjustments need to be made for climate change risks, nor that any new provisions need to
berecognised for climate-related matters.
Significant estimate – provisions
The Group’s provisions are estimates of the actual costs and timing of future cash flows, which are dependent on future events and market conditions.
Thusthere is inherently an element of estimation uncertainty within the provisions recognised by the Group. Any difference between expectations and
theactual future liability will be accounted for in the period when such determination is made.
The provisions are most sensitive to estimates of the future cash outflows. The following table summarises the impact that a reasonable possible change
inthe cash outflow assumptions when estimating provisions would have had on the amounts recognised during the year.
Increase/(decrease) in provisions recognised
Property
provisions
Insurance
provisions Restructuring
Other
provisions Total
Increase in cash outflows of 5% 7 3 1 1 12
Decrease in cash outflows of 5% (7) (3) (1) (1) (12)
Sensitivities on Financial Services ECL provisions are included in note 30, therefore not included in the above.
25 Provisions continued
146 Financial Statements J Sainsbury plc Annual Report 2022
26 Called up share capital, share premium and merger reserve
Accounting policies
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds.


2022
million
2021
million
2022
£m
2021
£m
Called up share capital    
Allotted and fully paid ordinary shares 28
4
/7p 2,336 2,231 668 637
 
Share premium account   
Share premium   1,406 1,173
The movements in the called up share capital, share premium and merger reserve are set out below:


Number of
ordinary shares
million
Ordinary
shares
£m
Share premium
account
£m
Merger
reserve
£m
At 6 March 2021 2,231 637 1,173 568
Allotted in respect of share option schemes 14 5 17 –
Allotted in respect of Hybrid Convertible Bond payment 91 26 216 –
At 5 March 2022 2,336 668 1,406 568

At 7 March 2020 2,217 634 1,159 568
Allotted in respect of share option schemes 14 3 14 –
At 6 March 2021 2,231 637 1,173 568
27 Capital redemption and other reserves


Currency
translation
reserve
£m
Financial
assets at
fair value
through other
comprehensive
income
£m
Cash flow
hedge
£m
Total other
reserves
£m
Capital
redemption
reserve
£m
At 7 March 2021 – 251 (84) 167 680
Currency translation differences (1) – – (1) –
Financial assets at fair value through other comprehensive income movements – 71 – 71 –
Cash flow hedges gains and losses transferred to inventory – – 28 28 –
Items reclassified from financial assets at fair value through other comprehensive
income reserve
– 4 – 4 –
Cash flow hedges effective portion of fair value movements – – 204 204 –
Items reclassified from cash flow hedge reserve – – 7 7 –
Other adjustments – – 16 16 –
Deferred tax – (33) (54) (87) –
At 5 March 2022 (1) 293 117 409 680
At 8 March 2020 5 209 (46) 168 680
Currency translation differences (5) – – (5) –
Financial assets at fair value through other comprehensive income movements – 57 – 57 –
Cash flow hedges gains and losses transferred to inventory – – (1) (1) –
Cash flow hedges effective portion of fair value movements – – (61) (61) –
Items reclassified from cash flow hedge reserve – – 13 13 –
Deferred tax – (15) 11 (4) –
At 6 March 2021 – 251 (84) 167 680
The currency translation reserve represents the cumulative foreign exchange differences on the translation of the net assets of the Group’s foreign operations
from their functional currency to the presentation currency of the parent.
The financial assets at fair value through other comprehensive income reserve represents the fair value gains and losses on the financial assets at fair value
through other comprehensive income held by the Group. The cash flow hedge reserve represents the cumulative effective fair value gains and losses on cash
flow hedges in the Group.
The capital redemption reserve arose on the redemption of B shares. Shareholders approved a £680 million return of share capital, by way of a B share scheme,
at the Company’s Extraordinary General Meeting on 12 July 2004. The final redemption date for B shares was 18 July 2007 and all transactions relating to the
B shares have now been completed.
147 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
28 Perpetual securities
Accounting policies and key information
Perpetual securities (perpetual subordinated capital securities and perpetual subordinated convertible bonds) are issued securities that qualify for
recognition as equity. Accordingly any periodic returns are accounted for as dividends and recognised directly in equity at the time it becomes obligated
to pay the periodic return. Any associated tax impacts are recognised in the income statement as this is where the distributable profits were generated
in line with IAS 12 ‘Income Taxes’.
On 30 July 2015 the Group issued £250 million of perpetual subordinated capital securities and £250 million of perpetual subordinated convertible bonds,
collectively known as perpetual securities. Costs directly associated with the issue of £6 million were offset against the value of the proceeds. The perpetual
securities have no fixed redemption date. Holders of the perpetual securities do not benefit from any put option rights.
In the prior year, the Group redeemed the £250 million perpetual subordinated capital securities, at the first call date on 30 July 2020.
In the current year, the Group redeemed the £250 million perpetual convertible bonds. Of these, £240 million were converted to shares on 23 July 2021,
resulting in the creation of 91 million new shares. The remaining were redeemed.


Perpetual
capital
securities
£m
Perpetual
convertible
bonds
£m
At 7 March 2021 – 248
Redemption of perpetual convertible bonds – (240)
Repayment of perpetual convertible bonds – (8)
At 5 March 2022 – –
  
At 8 March 2020 248 248
Distributions to holders of perpetual securities – (7)
Redemption of perpetual capital securities (248) –
Profit for the year attributable to holders of perpetual securities – 7
At 6 March 2021 – 248
148 Financial Statements J Sainsbury plc Annual Report 2022
29 Retained earnings
Own shares held by Employee Share Ownership Trust (ESOT)
The Group owns 26,607,166 (2021: 17,204,213) of its ordinary shares of 28
4
/7 pence nominal value each. At 5 March 2022, the total nominal value of the own
shares was £7.6 million (2021: £4.9 million).
All shares (2021: all shares) are held by a Group trust for satisfying awards under the Group’s Share Plans. The Group trust waives the rights to the dividends
receivable in respect of the shares under the above schemes.
The cost of the own shares is deducted from equity in the Group financial statements. The market value of the own shares at 5 March 2022 was £66 million
(2021: £40 million).


Own
shares
£m
Profit and loss
account
£m
Total retained
earnings
£m
At 7 March 2021 (as previously reported) (33) 3,164 3,131
Opening balance adjustment – 97 97
At 7 March 2021 (restated) (33) 3,261 3,228
Profit for the year – 677 677
Remeasurements on defined benefit pension schemes (net of tax) – 1,457 1,457
Deferred tax on retirement benefit obligations – (431) (431)
Dividends paid – (238) (238)
Conversion of perpetual convertible bonds – (2) (2)
Share-based payment – 60 60
Purchase of own shares (48) – (48)
Current tax on share based payment equity movement – 1 1
Deferred tax on share based payment equity movement – 2 2
Allotted in respect of share option schemes 14 (15) (1)
Other Adjustments (1) (12) (13)
At 5 March 2022 (68) 4,760 4,692
 
At 8 March 2020 (as previously reported) (16) 4,084 4,068
Opening balance adjustment – 18 18
At 8 March 2020 (restated) (16) 4,102 4,086
Profit for the year (restated) – (208) (208)
Remeasurements on defined benefit pension schemes (net of tax) – (482) (482)
Current tax on retirement benefit obligations – 44 44
Deferred tax on retirement benefit obligations – 23 23
Dividends paid – (232) (232)
Share-based payment – 29 29
Purchase of own shares (30) – (30)
Allotted in respect of share option schemes 13 (13) –
Redemption of perpetual capital securities – (2) (2)
At 6 March 2021 (33) 3,261 3,228
Refer to note 2 for details of restatement.
30 Financial risk management
The principal financial risks faced by the Group relate to liquidity risk, credit risk, market risk (foreign currency risk, interest rate risk and commodity risk)
and capital risk.
Financial risk management is managed by a central treasury department in accordance with policies and guidelines which are reviewed and approved by
the Board of Directors. The risk management policies are designed to minimise potential adverse effects on the Group’s financial performance by identifying
financial exposures and setting appropriate risk limits and controls. The risk management policies also ensure sufficient liquidity is available to the Group
to meet foreseeable financial obligations and that cash assets are invested safely.
Financial risk management with respect to Financial Services is separately managed within the Financial Services’ governance structure.
Liquidity risk
Liquidity risk is the risk that the Group may be unable to meet its financial obligations as they fall due.
The principal operational cash flow of the Group is largely stable and predictable reflecting the low business risk profile of the food retail sector and the
cyclical profile of the non-food retail sector. Cash flow forecasts are produced to assist management in identifying future liquidity requirements. The Group’s
liquidity policy sets a minimum funding headroom of £400 million in excess of forecast funding requirements over a rolling 12 month time horizon. The Group
manages its liquidity risk by maintaining a core of long-dated borrowings, pre-funding future cash flow commitments and holding contingent committed
credit facilities.
The Group’s committed £1,394 million Revolving Credit Facility was undrawn at 5 March 2022. The facility is provided by a syndicate of 16 banking partners.
The Group has no financial covenants. The facility is split into two Facilities, a £300 million Facility (A) and a £1,094 million Facility (B). Facility A has a final
maturity of April 2025 and Facility B has a final maturity of October 2024.
149 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
As detailed in note 23, some suppliers have access to supply chain finance facilities, which allows these suppliers to benefit from the Group’s credit profile.
The total size of the facility at 5 March 2022 was £1,101 million (2021: £957 million) across a number of banks and platforms. The level of utilisation is dependent
on the individual supplier requirements and varies significantly over time.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date.
The amounts disclosed in the tables are the contractual undiscounted cash flows or an estimate of cash flows in respect of floating interest rate liabilities.
At 5 March 2022
Less than
one year
£m
One to
two years
£m
Two to
five years
£m
More than
five years
£m
Non-derivative financial liabilities
Secured loans:
Loan due 2031
1
(76) (80) (265) (378)
Unsecured loans:
Bank overdraft (7) – – –
Trade and other payables (4,205) (13) – –
Amounts due to Financial Services customers and banks
2
(4,444) (109) (708) –
Derivative contracts – net settled
Commodity contracts 22 2 – –
Interest rate swaps in hedging relationships
1, 3
(4) 7 4 1
Derivative contracts – gross settled
Foreign exchange forwards – outflow
4
(1,680) (233) – –
Foreign exchange forwards – inflow
4
1,707 234 – –
Commodity contracts – outflow (13) (25) (61) (56)
Commodity contracts – inflow 82 55 102 109
At 6 March 2021
Less than
one year
£m
One to
two years
£m
Two to
five years
£m
More than
five years
£m
Non-derivative financial liabilities
Secured loans:
Loan due 2031
1
(73) (74) (229) (373)
Unsecured loans:
Bank loans due 2021
5
(201) – – –
Bank overdrafts (99) – – –
Trade and other payables (4,083) (19) – –
Amounts due to Financial Services customers and banks
2
(6,088) (126) (82) –
Derivative contracts – net settled
Commodity contracts 2 1 – –
Interest rate swaps in hedging relationships
1, 3
(27) (23) (3) –
Derivative contracts – gross settled
Foreign exchange forwards – outflow
4
(1,570) (198) – –
Foreign exchange forwards – inflow
4
1,483 196 – –
Commodity contracts – outflow (10) (9) (21) (13)
Commodity contracts – inflow 11 9 23 15
Assumptions:
1 Cash flows relating to debt and swaps linked to inflation rates have been calculated using a RPI of 1.4 per cent for the year ended 5 March 2022, 5.0 per cent for the year ending 4 March 2023 and 5.0 per cent for future
years (2021: RPI of 2.7 per cent for the year ended 6 March 2021, 1.4 per cent for the year ending 5 March 2022 and 1.4 per cent for future years).
2 Cash flows relating to amounts due to Sainsbury’s Bank customers and banks are calculated using contractual terms and interest rates for fixed rate instruments. Where balances are contractually repayable on
demand, behavioural assumptions are applied to estimate the interest payable on those balances. These are shown as due within one year.
3 The swap rate that matches the remaining term of the interest rate swaps as at 5 March 2022 has been used to calculate the floating rate cash flows over the life of the interest rate swaps shown above (2021: 6 March 2021).
4 Cash flows in foreign currencies have been translated using spot rates as at 5 March 2022 and 6 March 2021.
5 Cash flows relating to debt bearing a floating interest rate have been calculated using prevailing interest rates as at 6 March 2021.
Financial Services
Liquidity risk is the risk that Sainsbury’s Bank and its subsidiaries (the Bank) cannot meet its payment obligations as they fall due, or can only do so at
excessive cost. The Bank seeks to ensure that financial obligations can be met at all times, even under liquidity stress conditions.
The annual Internal Liquidity Adequacy Assessment Process (ILAAP) enables the Bank to:
(1) Identify and assess its most relevant liquidity risk drivers;
(2) Quantify its liquidity needs under various stress scenarios; and
(3) Put in place appropriate limits and controls to mitigate liquidity risks.
30 Financial risk management continued
150 Financial Statements J Sainsbury plc Annual Report 2022
In meeting its internal limits as well as PRA requirements, the Bank maintains a stock of high quality liquid assets that can be readily monetised by outright
sale or repurchase agreement to meet the Bank’s obligations to depositors and other creditors.
The Bank’s Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) are regularly monitored and forecast alongside cash flow and funding ratios.
Long-term and short-term forecasts are prepared to assess liquidity requirements, taking into account factors such as ATM cash management, contractual
maturities and customer deposit patterns (stable or less stable deposits) as well as outflows regarding undrawn commitments. These reports support daily
liquidity management, with early warning indicators reviewed on a daily basis and appropriate triggers for escalation and action in line with risk appetite,
Liquidity and Funding Policy and Liquidity Contingency Plan. Asset encumbrance ratios and risk indicators for wholesale funding concentrations by type
(total/secured/unsecured), maturity, sector, geography and counterparty are also regularly monitored and reported to the Asset-Liability Committee (ALCO).
Asset encumbrance
2022 2021
Carrying
value of
encumbered
assets
£m
Matching
liabilities,
contingent
liabilities or
securities lent
£m
Carrying
value of
encumbered
assets
£m
Matching
liabilities,
contingent
liabilities or
securities lent
£m
Loans and advances to customers 1,365 885 1,596 1,110
Debt securities 157 75 27 –
Other assets 40 27 76 27
Cash and balances with central banks 15 – 17 –
The primary sources of encumbrance in the Bank relate to margin requirements for derivative transactions and collateral relating to secured funding transactions.
Cash collateral is advanced and received as variation margin on derivative transactions, whilst eligible treasury assets (primarily Gilts and Treasury bills)
are pledged as collateral for initial margin requirements on derivatives which are centrally cleared. Eligible personal loans and mortgages, with applicable
haircuts, are used as collateral for Bank of England funding facilities, including the Term Funding Scheme (TFS), the Term Funding Scheme with additional
incentives for SMEs (TFSME) and Indexed Long-Term Repo (ILTR) facilities.
Credit risk
a. Retail credit risk management
Counterparty credit risk is the risk of a financial loss arising from counterparty default or non-performance in respect of the Group’s holdings of cash and
cash equivalents, derivative financial assets, deposits with banks, investments in marketable securities, trade and other receivables and loans and advances
to customers.
Specifically within Financial Services, retail credit risk is the possibility of losses arising from a retail customer failing to meet their agreed repayment terms
as they fall due under mortgage, unsecured personal loan, credit card or store card arrangements. The Financial Services division utilises automated
scorecards to assess the credit worthiness and affordability criteria of new applicants and ongoing behavioural characteristics of existing customers. The
outcome from all scorecard models are monitored utilising a set of credit quality metrics to ensure actual performance is in line with agreed expectations.
Additional expert underwriting of credit applications is undertaken by a specialist operational team where further consideration is appropriate.
The Retail Credit Risk Committee of Sainsbury’s Bank provides portfolio oversight control over credit strategy to maintain lending in line with the Board
approved risk appetite, with additional oversight and control provided by the Executive Risk Committee and Board Risk Committee. Internal Audit provide
additional assurance by undertaking regular reviews on the adequacy of credit risk policies and procedures.
b. Wholesale and derivative credit risk management
The Group (excluding Financial Services) sets counterparty limits for each of its banking and investment counterparties based on their credit ratings. The
minimum long-term credit rating accepted by the Group is BBB- (Standard & Poor’s and Fitch) or Baa3 (Moody’s) or, in the case of sterling liquidity funds,
AAA or Aaa/MR1+ from Moody’s. In the event of a split credit rating, the lower rating applies.
The table below analyses the Group’s cash and cash equivalents by credit exposure excluding bank balances, store cash, cash in transit and cash at ATMs.
Counterparty Long-term rating
Group
2022
£m
Group
2021
£m
Financial institutions – Money market deposits AAAm/Aaa – 198
Financial institutions – Money market deposits AA+/Aa1 to A/A2 25 200
Deposits at central banks AA+/Aa1 234 852
The table below analyses the fair value of the Group’s derivative financial assets by credit exposure, excluding any collateral held.
Counterparty Long-term rating
Group
2022
£m
Group
2021
£m
Interest rate swaps AA+/Aa1 to A/A2 35 1
Inflation rate swaps AA+/Aa1 to A/A2 5 –
FX forward contracts AA+/Aa1 to A/A2 46 2
Commodity forward contracts AA+/Aa1 to A/A2 25 4
30 Financial risk management continued
151 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The Bank’s treasury portfolio is held primarily for liquidity management purposes and in the case of derivatives, for the purpose of managing market risk.
The liquidity portfolio is invested in eligible investment securities that qualify for the regulatory Liquidity Coverage Ratio (LCR) and internal Operational
Liquidity Pool (OLP). These investments include the Bank of England’s (BoE) reserve account, UK Government securities (gilts or Treasury bills), multilateral
development bank securities, government guaranteed agency securities, UK regulated covered bond programmes and asset backed securities.
Limits are established for all counterparty and asset class exposures based on their respective credit quality and market liquidity. Consideration is also given
to geographical region and the strength of relevant sovereign credit ratings. Derivatives are subject to the same credit risk control procedures as are applied
to other wholesale market instruments and the credit risk arising from mark to market derivative valuations is mitigated by daily margin calls, posting cash
collateral to cover exposures. Daily monitoring is undertaken by the Bank’s Treasury department, including early warning indicators with appropriate triggers
for escalation.
c. Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for the components of the balance sheet, including derivatives. The maximum exposure is
shown gross, before the effect of mitigation through the use of collateral agreements.
2022
£m
2021
£m
Credit risk exposures relating to on balance sheet items
Loans and advances to customers and other banks 5,189 5,407
Cash and balances with central banks 825 1,477
Derivative financial instruments (excludes level 3 instruments) 111 13
Investment securities 418 538
Other assets 552 609
Credit risk exposures relating to off balance sheet items
Loans commitments 26 64
Total credit risk exposures 7,121 8,108
The commitments to lend disclosed in the above table do not include undrawn limits on credit cards and store cards of £8,777 million (2021: £9,165 million).
These are not considered contractual commitments but, because in practice Financial Services does not expect to withdraw these credit limits from
customers, they are within the scope of impairment provisioning.
d. Impairment of financial assets
Accounting policies
Impairments on financial assets are accounted for using a 3-stage forward-looking expected credit loss (ECL) approach in line with IFRS 9. The Group is
required to record an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial
guarantee contracts.
ECLs are based on the difference between the cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other
credit enhancements that are integral to the contractual terms.
For Financial Services portfolios of loans, such as credit card lending, scorecard lending and personal loans, impairment provisions are calculated for groups
of assets, otherwise impairment is identified at a counterparty specific level. The allowance is calculated by reference to the estimated probability of default
(PD), exposure at default (EAD) and loss given default (LGD).
— The probability of default represents the likelihood of a borrower defaulting within 12 months from the balance sheet date or within the expected lifetime
of the borrower.
— Exposure at default represents the expected amount due from the borrower at the point of default by reference to exposure at the balance sheet date
adjusted for expected future changes including repayments and utilisation of undrawn facilities.
— Loss given default represents the expected percentage loss at the point of default relative to the EAD. The estimate takes into account utilisation of any
expected collections and recoveries strategies, debt sale arrangements and collateral.
ECL 3-stage model
— Stage 1 – Impairment allowance on financial assets that have not significantly increased in credit risk since origination, nor are credit impaired, is
calculated using the probability that a borrower will default within 12 months from the balance sheet date. Interest income is recognised on the gross
carrying value of the financial asset.
— Stage 2 – Where a financial asset exhibits a significant increase in credit risk (SICR) but is not yet considered to be credit impaired, the probability of
default considered in the impairment allowance is based upon the lifetime probability of the borrower defaulting. Interest income continues to be
recognised on the gross carrying value of the financial asset.
— Stage 3 – Assets considered to be credit impaired resulting from one or more events that have occurred that has resulted in a detrimental impact on the
estimated future cash flows of the asset. Stage 3 assets will continue to recognise lifetime expected impairment losses (with a 100 per cent probability
ofdefault) and interest income will be recognised on the net carrying amount (i.e. gross amount less impairment allowance).
30 Financial risk management continued
152 Financial Statements J Sainsbury plc Annual Report 2022
Significant increases in credit risk
The Group determines whether there has been a significant increase in credit risk by reference to quantitative thresholds, qualitative indicators and the
backstop presumption that credit risk has significantly increased if contractual payments are more than 30 days past due.
Quantitative thresholds have been determined that when the lifetime PD of an instrument as at the reporting date has increased to greater than a specified
multiple of the origination lifetime PD, a significant increase in credit risk is deemed to have occurred.
Qualitative tests are based around the Group’s credit origination policy rules for Financial Services customers. These rules are in place at account origination
in order to decline accounts that may demonstrate risk factors outside of risk appetite that are not yet reflected in PD measures. At the reporting date,
if an account satisfies any policy decline rules that it had not at the point of origination, it will be considered to have significantly increased in credit risk.
There is no probationary period applied in respect of accounts that cure from stage 2 to stage 1. Transfer criteria have been subject to extensive analysis
to ensure that they appropriately reflect the flow of accounts from origination to default so as to maximise the number of accounts that flow through the
stages and minimise accounts that jump from stage 1 to stage 3, or that fail to enter stage 3 from stage 2.
The Group has applied the low credit risk exemption in respect of its high quality treasury portfolio held for liquidity purposes. This exemption permits low
credit risk debt securities (i.e. those considered investment grade) to remain in stage 1 without an assessment of significant increase in credit risk.
Definition of default
The Group’s definition of default is used in determining those accounts classified as stage 3 (i.e. credit impaired). The Group has chosen not to rebut the
backstop presumption prescribed by IFRS 9 that where an account is 90 days or more past its due date then default has occurred.
The Group has also defined a number of unlikeliness-to-pay criteria that result in an account being deemed to have defaulted. These include:
— Where operational collections activities have been exhausted on accounts that are less than 90 days past due and the account is subject to
recoveries processes
— If any forbearance has been granted on the account (see forbearance definition in section h below)
— Where the customer is subject to insolvency proceedings
— Where the customer is deceased
Where an account no longer meets any of the default criteria, such as by bringing payments back up to date, the Group will continue to consider the account
as being in default for a period of 24 months from the date when it last met the definition of default.
Write-off
Loans and advances to customers are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when
the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject
to write-off.
Subsequent recoveries of amounts previously written off result in impairment gains recorded in the statement of comprehensive income.
Expected lifetime
For the purposes of considering the lifetime probability of default, the expected lifetime of a financial asset is the contractual term where this is fixed within
the contract, or in the case of revolving products such as credit cards a behavioural life is determined by reference to historic trends.
Modified financial assets
When the contractual cash flows of a financial asset have been renegotiated or modified and the financial asset was not derecognised, its gross carrying
amount is recalculated as the present value of the modified contractual cash flows, discounted at the original effective interest rate with a gain or loss
recognised in the income statement.
30 Financial risk management continued
153 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Loans and advances to customers per stage
The tables below summarise the breakdown of the gross carrying amount of loans and advances to customers per stage. Unsecured lending represents
Sainsbury’s Bank credit cards and personal loan lending in addition to Argos storecards. Secured lending represents Sainsbury’s Bank mortgage lending.
At 5 March 2022
Unsecured lending
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Impaired
Less than 3 months, but impaired – – 31 31
Over 3 months – – 75 75
Recoveries – – 59 59
Total gross impaired loans – – 165 165
Past due 30 days to 3 months – 20 – 20
Past due less than 30 days 11 29 – 40
Not past due 3,815 465 – 4,280
Total gross amount due 3,826 514 165 4,505
Impairment
Impairment on gross balance (34) (47) (120) (201)
Undrawn commitments impairment (10) (8) (1) (19)
Total impairment (44) (55) (121) (220)
Coverage 1.2% 10.7% 73.3% 4.9%
At 5 March 2022
Secured lending
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Impaired
Less than 3 months, but impaired – – 8 8
Over 3 months – – 1 1
Recoveries – – – –
Total gross impaired loans – – 9 9
Past due 30 days to 3 months – – – –
Past due less than 30 days – 1 – 1
Not past due 713 59 – 772
Total gross amount due 713 60 9 782
Impairment
Impairment on gross balance – – (2) (2)
Undrawn commitments impairment – – – –
Total impairment – – (2) (2)
Coverage 0.1% 0.7% 23.6% 0.4%
30 Financial risk management continued
154 Financial Statements J Sainsbury plc Annual Report 2022
At 6 March 2021
Unsecured lending
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Impaired
Less than 3 months, but impaired – – 38 38
Over 3 months – – 76 76
Recoveries – – 93 93
Total gross impaired loans – – 207 207
Past due 30 days to 3 months – 21 – 21
Past due less than 30 days 8 26 – 34
Not past due 3,640 499 – 4,139
Total gross amount due 3,648 546 207 4,401
Impairment
Impairment on gross balance (40) (63) (157) (260)
Undrawn commitments impairment (9) (5) (1) (15)
Total impairment (49) (68) (158) (275)
Coverage 1.3% 12.4% 76.3% 6.3%
At 6 March 2021
Secured lending
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Impaired
Less than 3 months, but impaired – – 10 10
Over 3 months – – 1 1
Recoveries – – – –
Total gross impaired loans – – 11 11
Past due 30 days to 3 months – – – –
Past due less than 30 days – 1 – 1
Not past due 1,189 46 – 1,235
Total gross amount due 1,189 47 11 1,247
Impairment
Impairment on gross balance – – (3) (3)
Undrawn commitments impairment – – – –
Total impairment – – (3) (3)
Coverage – 0.4% 27.2% 0.2%
30 Financial risk management continued
155 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The tables below present the reconciliations of ECL allowances on loans and advances to customers, and to overall amounts held on the balance sheet:
At 5 March 2022
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Gross exposure
Impaired – – 174 174
Past due but not impaired 11 50 – 61
Neither past due nor impaired 4,528 524 – 5,052
4,539 574 174 5,287
Allowance for expected credit loss
Opening loss allowance (40) (63) (160) (263)
Transfers between stages 8 (3) (5) –
Additional provisions less amounts recovered (6) 2 13 9
Write-offs – 1 78 79
Changes in credit risk during the year 4 16 (48) (28)
Closing loss allowance (34) (47) (122) (203)
Net exposure 4,505 527 52 5,084
Hedging fair value adjustment (16)
Loans and advances to other banks 121
Net book value on balance sheet 5,189
At 6 March 2021
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Gross exposure
Impaired – – 218 218
Past due but not impaired 8 48 – 56
Neither past due nor impaired 4,829 545 – 5,374
4,837 593 218 5,648
Allowance for expected credit loss
Opening loss allowance (37) (52) (178) (267)
Transfers between stages 59 3 (62) –
Additional provisions less amounts recovered – 2 12 14
Write-offs – 1 88 89
Changes in credit risk during the year (62) (17) (20) (99)
Closing loss allowance (40) (63) (160) (263)
Net exposure 4,797 530 58 5,385
Hedging fair value adjustment 22
Net book value on balance sheet 5,407
Financial commitments
Sainsbury’s Bank has off-balance sheet commitments to extend credit to customers of £26 million (2021: £64 million). These commitments do not include
undrawn limits on credit cards and store cards of £8,777 million (2021: £9,165 million). These are not considered contractual commitments but, because in
practice Financial Services does not expect to withdraw these credit limits from customers, they are within the scope of impairment provisioning.
At the year-end, £19 million of expected credit loss provisions are recognised in respect of off-balance sheet loan commitments and undrawn limits in line
with IFRS 9 (2021: £15 million).
Credit quality per class of loans and advances
The Group defines the following classifications for all loans and advances to customers: High, Satisfactory, Low and Credit impaired. These are segmented
by 12 month probability of default (PD) under IFRS 9.
30 Financial risk management continued
156 Financial Statements J Sainsbury plc Annual Report 2022
IFRS 9 12 month PD
High quality <=3.02%
Satisfactory quality >=3.03% – 11.10%
Low quality >=11.11%
Credit impaired 100%
Unsecured lending
At 5 March 2022
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
High quality 3,401 233 – 3,634
Satisfactory quality 381 181 – 562
Low quality 44 100 – 144
Credit impaired – – 165 165
Total 3,826 514 165 4,505
At 6 March 2021
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
High quality 3,176 161 – 3,337
Satisfactory quality 420 252 – 672
Low quality 52 133 – 185
Credit impaired – – 207 207
Total 3,648 546 207 4,401
Secured lending
At 5 March 2022
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
High quality 713 59 – 772
Satisfactory quality – 1 – 1
Low quality – – – –
Credit impaired – – 9 9
Total 713 60 9 782
At 6 March 2021
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
High quality 1,189 45 – 1,234
Satisfactory quality – 2 – 2
Low quality – – – –
Credit impaired – – 11 11
Total 1,189 47 11 1,247
e. Significant estimate – macro-economic scenarios
IFRS 9 requires that the measurement of ECL should reflect an unbiased and probability weighted amount that is determined by evaluating a range of
forward-looking economic assumptions. The Group has engaged an external supplier to provide economic forecasts which are subject to review, challenge
and approval through the Bank’s governance processes.
For the year ended 5 March 2022 the economic scenarios have been updated to include a reduction in unemployment rates as a result of improved economic
conditions albeit this is offset by increased inflation/CPI rates which is having a notable impact on the cost of living.
The ECL models utilise 4 scenarios (2021: 4 scenarios) including a ‘base case’ scenario considered to be the most likely outcome together with an upside,
downside scenario and severe downside. The base case has been assigned a probability weighting of 45% with the upside, downside and severe downside
scenarios weighted 35%, 15%, 5% respectively (2021: base scenario 40%; upside, downside and severe downside scenarios weighted 30%, 25%, 5% respectively).
30 Financial risk management continued
157 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The key macro-economic assumptions included in the ECL calculation (shown as 5 year averages from the reporting date) were:
As at 5 March 2022
Base
%
Upside
%
Downside
%
Severe
downside
%
Unemployment rate 4.0 3.9 4.7 6.2
Consumer price growth 2.7 2.8 2.6 2.5
GDP 1.8 2.2 1.5 1.0
Mortgage debt as a percentage of household income 102.8 101.7 104.3 105.9
Real household disposable income 1.0 1.3 0.7 0.4
Probability weighting (%) 45 35 15 5
Sensitivity analysis impact on impairment of 100 per cent weighting £(3.8)m £(7.4)m £9.7m £30.4m
f. Management overlays
In the context of IFRS 9, management overlays are short-term increases or decreases to the ECL at either a customer or portfolio level to account for items
that have not been fully reflected in the existing models.
Internal governance is in place to regularly monitor management overlays and to reduce the reliance on management overlays through model recalibration
or redevelopment, as appropriate.
Management overlays applied in estimating the reported ECL at 5 March 2022 are set out in the following table. The table includes adjustments in relation
to data and model limitations resulting from economic uncertainty related to the ongoing recovery from the COVID-19 pandemic. It shows the adjustments
applicable to the scenario weighted ECL numbers.
Movement in ECL
At 5 March
2022
£m
At 6 March
2021
£m
Economic adjustment 10 21
PD adjustment – 10
LGD adjustment – 9
Operational overlays 5 2
Total 15 42
The proportion of management overlay is 9 per cent of the total ECL provision as at 5 March 2022 (2021: 16 per cent).
The Economic adjustment is included where management judge the underlying models do not respond adequately to the economic scenarios. As a result
of COVID-19 there remains uncertainty over the levels of defaults that may arise following the cessation of government assistance schemes, and inflation is
an emerging concern as markets re-open.
The majority of the Operational overlays relate to model or data limitations that are manually corrected, whilst a permanent fix is being developed.
g. Collateral relating to loans and advances to customers
Mortgages held over residential properties represent the only collateral held by the Group for retail exposures. The market value of collateral held for impaired
loans and loans past due but not impaired was £23 million (2021: £26 million). The fair value of collateral held against possession cases was £nil (2021: £nil).
An analysis by loan-to-value (LTV) ratio of the Group’s residential mortgage lending is presented below. The value of collateral used in determining the LTV
ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent movements in house prices.
At 5 March 2022
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Less than 70% 607 57 8 672
70% to 80% 102 2 1 105
80% to 90% 4 1 – 5
90% to 100% – – – –
Greater than 100% – – – –
Total mortgages 713 60 9 782
At 6 March 2021
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Less than 70% 795 37 8 840
70% to 80% 265 7 2 274
80% to 90% 128 3 1 132
90% to 100% 1 – – 1
Greater than 100% – – – –
Total mortgages 1,189 47 11 1,247
30 Financial risk management continued
158 Financial Statements J Sainsbury plc Annual Report 2022
h. Forbearance
The Group provides support to customers who are experiencing financial difficulties. Forbearance is defined as relief granted by a lender to assist customers
in financial difficulty, through arrangements which temporarily allow the customer to pay an amount other than the contractual amounts due. These
temporary arrangements may be initiated by the customer or the Group where financial difficulty would prevent repayment within the original terms and
conditions of the contract.
The main aim of forbearance is to support customers in returning to a position where they are able to meet their contractual obligations.
The Group has well defined forbearance policies and processes. A number of forbearance options are made available to customers. These include arrangements
to repay arrears over a period of time by making payments above the contractual amount, that ensure the loan is repaid within the original repayment term
and short-term concessions, where the borrower is allowed to make reduced repayments (or in exceptional circumstances, no repayments) on a temporary
basis to assist with short-term financial hardship.
The table below details the values of secured and unsecured advances that are subject to the Group’s forbearance programmes:
2022 2021
Gross loans
and advances
subject to
forbearance
£m
Forbearance
as a total of
loans and
advances
%
Forbearance
covered by
impairment
provision
%
Gross loans and
advances
subject to
forbearance
£m
Forbearance
as a total of
loans and
advances
%
Forbearance
covered by
impairment
provision
%
Unsecured 52 1.2 72.0 130 3.0 43.8
Secured 2 0.3 25.7 4 0.3 24.6
Total 54 1.0 70.1 134 2.4 43.3
Market risk
The Group uses forward contracts to hedge foreign exchange and commodity exposures, and interest rate swap contracts to hedge interest rate exposures.
The use of financial derivatives is governed by Board approved policies which prohibit the use of derivative financial instruments for speculative purposes.
a. Foreign currency risk
Currency risk is the risk of increased costs arising from unexpected movements in exchange rates impacting the Group’s foreign currency denominated
supply contracts.
The Group’s currency risk policy seeks to limit the impact of fluctuating exchange rates on the Group’s income statement by requiring highly probable foreign
currency cash flows to be hedged. Highly probable foreign currency cash flows, which may be either contracted or un-contracted, are hedged on a layered
basis using foreign currency forward contracts.
The Group has exposure to currency risk on balances held in foreign currency denominated bank accounts, which may arise due to short-term timing
differences on maturing hedges and underlying supplier payments.
The Group considers that a 10 per cent movement in exchange rates against sterling is a reasonable measure of volatility. The impact of a 10 per cent movement
in the exchange rate of US dollar and euro versus sterling as at the balance sheet date, with all other variables held constant, is summarised in the table below:
Group
2022
Change in
exchange rate
impact on
post-tax
profit
+/-10%
£m
2022
Change in
exchange rate
impact on cash
flow hedge
reserve
+/-10%
£m
2021
Change in
exchange rate
impact on
post-tax
profit
+/-10%
£m
2021
Change in
exchange rate
impact on cash
flow hedge
reserve
+/-10%
£m
USD/GBP 3/(3) (115)/141 3/(4) (112)/137
EUR/GBP 3/(3) (29)/36 3/(3) (27)/33
Financial Services
The Bank is exposed to FX risk through its holding of cash denominated in foreign currencies, primarily Euro and US Dollar, within its travel money bureaux
in J Sainsbury’s stores. The FX positions are hedged on a regular basis. Furthermore a US dollar deposit is held with MasterCard. This exposure is also hedged.
b. Interest rate risk
Interest rate risk is the risk of increased costs or lower income arising from unexpected movements in interest rates and inflation rates impacting the
Group’s borrowing and investment portfolios. The Group’s interest rate policy seeks to limit the impact of fluctuating interest and inflation rates by
maintaining a diversified mix of fixed rate, floating rate and variable capped rate liabilities.
Interest on financial instruments is classified as fixed rate if interest re-sets on the borrowings are less frequent than once every 12 months. Interest on
financial instruments is classified as floating rate if interest re-sets on the borrowings occur every 12 months or more frequently. Floating rate instruments
are considered variable capped rate if the nominal interest rate is subject to a cap.
30 Financial risk management continued
159 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The mix of the Group’s financial assets and liabilities at the balance sheet date was as follows:
Fixed
£m
Floating
£m
Variable
capped
£m
Total
£m
Interest bearing financial assets at fair value through other comprehensive income 121 297 – 418
Amounts due from Financial Services customers and other banks 2,799 2,390 – 5,189
Cash and cash equivalents 547 278 – 825
Bank overdrafts – (7) – (7)
Borrowings (179) – (575) (754)
Amounts due to Financial Services customers and banks (603) (4,656) – (5,259)
Derivative effect:
Interest rate swaps (1,952) 1,952 – –
Inflation linked swaps (490) – 490 –
At 5 March 2022 243 254 (85) 412
Fixed
£m
Floating
£m
Variable
capped
£m
Total
£m
Interest bearing financial assets at fair value through other comprehensive income 74 464 – 538
Amounts due from Financial Services customers 3,102 2,305 – 5,407
Cash and cash equivalents 166 1,409 – 1,575
Bank overdrafts (restated) – (99) – (99)
Borrowings (179) (200) (627) (1,006)
Amounts due to Financial Services customers and banks (675) (5,614) – (6,289)
Derivative effect:
Interest rate swaps (2,951) 2,951 – –
Inflation linked swaps (490) – 490 –
At 6 March 2021 (953) 1,216 (137) 126
(i) Cash flow sensitivity for floating rate instruments
The Group considers that a 100 basis point movement in interest rates is a reasonable measure of volatility. The sensitivity of floating rate balances to a
change of 100 basis points in the interest rate (or such lesser amount as would result in a zero rate of interest) at the balance sheet date is shown below:
2022
Impact on
post-tax
profit
£m
2022
Impact on
cash flow
hedge
reserve
£m
2021
Impact on
post-tax profit
£m
2021
Impact on
cash flow
hedge
reserve
£m
Change in floating rate +/-100bps (5)/9 (0)/0 (9)/5 1/(1)
(ii) Cash flow sensitivity for variable capped rate liabilities
The Group holds £575 million of capped inflation-linked borrowings (2021: £627 million) of which £490 million (2021: £490 million) have been swapped into
fixed rate borrowings using inflation rate swaps maturing in April 2023.
The Group considers that a 100 basis point movement in the RPI rate is a reasonable measure of volatility. The sensitivity of variable capped balances to a change
of 100 basis points in the RPI rate at the balance sheet date is shown below:
2022
Impact on
post-tax
profit
£m
2022
Impact on
cash flow
hedge
reserve
£m
2021
Impact on
post-tax
profit
£m
2021
Impact on
cash flow
hedge
reserve
£m
Change in floating rate +/-100bps (0)/0 5/(6) (2)/2 9/(9)
Financial Services
Interest Rate Risk in the Banking Book (IRRBB) arises from interest rate movements which impact the present value and timing of future cash flows resulting
in changes in the underlying value of a bank’s assets and liabilities and hence its economic value. Interest rates movements also affect a bank’s earnings by
altering interest-sensitive income and expenses, affecting its net interest income.
30 Financial risk management continued
160 Financial Statements J Sainsbury plc Annual Report 2022
The main types of interest rate risk faced by the Bank are:
— Re-pricing gap risk: the risk arising from timing differences in the interest rate changes of bank assets and liabilities (e.g. fixed rate personal loans and
instant access savings accounts).
— Yield curve risk: the risk arising from changes in the slope and shape of the yield curve.
— Basis risk: risk arising from imperfect correlation between different interest rate indices (e.g. administered rate on savings products and treasury assets
linked to SONIA).
— Prepayment risk: the risk arising from the timing of customer prepayments which differ from planning and hedging assumptions.
— Pipeline risk: the risk of a customer drawing down, or not, a product at a rate which is unfavourable for the Bank.
— Credit Spread Risk: the risk of adverse effects resulting from a change in credit spreads, arising via the Bank’s Treasury portfolio.
Interest risk exposure is actively managed within limits that are aligned with the Bank’s risk appetite by using financial instruments such as interest rate
swaps and by taking into account natural hedges between assets and liabilities with similar repricing characteristics. Hedging strategies are implemented
and reviewed to ensure the Bank remains within its limits.
In order to measure the exposure to interest rate risk the Bank adopts a Capital at Risk (‘CaR’) approach to assess the value sensitivity of the Bank’s capital
to movements in interest rates under various interest rates shock scenarios, as well as via an annual earnings at risk metric which measures the sensitivity
of the Bank’s earnings to movements in interest rates over a 12 month period. The CaR measure is an aggregate measure of five separate risk components,
each being a distinct form of interest rate risk including repricing risk, basis risk, prepayment risk, MTM risk and credit spread risk.
c. Commodity risk
Commodity risk is the risk of increased costs arising from unexpected movements in commodity prices impacting the Group’s own use consumption of
electricity, gas and diesel. The Group hedges own use consumption of electricity and gas with forward purchases under flexible purchasing arrangements
with its suppliers as well as power purchase agreements for electricity. The Group uses a combination of purchasing agreements and financial derivatives
to hedge fuel exposures on a layered basis using contracts for difference. See note 32 for derivative disclosures.
Capital risk management
The Group defines capital as net assets (excluding the pension deficit/surplus) less net debt.
The Board’s capital objective is to maintain a strong and efficient capital base to support the Group’s strategic objectives, provide optimal returns for
shareholders and safeguard the Group’s status as a going concern. There has been no change to capital risk management policies during the year.
The Board monitors a broad range of financial metrics including return on capital employed, balance sheet gearing and fixed charge cover.
The Board can manage the Group’s capital structure by diversifying the debt portfolio, adjusting the size and timing of dividends paid to shareholders,
recycling capital through sale and leaseback transactions, issuing new shares or repurchasing shares in the open market and flexing capital expenditure.
From time-to-time the Company purchases its own shares in the market for the purpose of issuing shares under the Group’s share option programmes
however the Group does not operate a defined share buy-back plan.
Whilst there are no repeating financial covenants, part of the Group’s capital risk management is to ensure compliance with the general covenants included
in the Group’s borrowing facilities. Examples of general covenants include restrictions on the permitted value of asset disposals and incremental secured
indebtedness. In addition to there being no breaches of general covenants in the financial year ended 5 March 2022, there is healthy headroom within all
general covenants as at 5 March 2022.
Information relating to Financial Services capital risk management is detailed below.
Financial Services capital resources (unaudited)
The following table analyses the regulatory capital resources under CRD IV. From a prudential perspective, Sainsbury’s Bank is monitored and supervised on
a consolidated basis with its subsidiary, Home Retail Group Card Services Limited, from the point of acquisition of Argos Financial Services in September 2016.
The Bank has obtained an individual consolidation waiver from the PRA, which allows the Bank to monitor its capital position on a consolidated basis only.
Therefore, the capital position shown below is on a regulatory consolidated basis.
The Bank implemented IFRS 9, effective 1 March 2018. The following table analyses the regulatory capital resources under CRD IV and aligns to the phase-in
approach of IFRS 9 impacts on capital, over a 5-year period. The current year transitional data also includes adjustments introduced to mitigate against the
impact of COVID-19, reflecting an additional benefit received for ECL increases.
Transitional
2022
IFRS 9
£m
Full impact
2022
IFRS 9
£m
Transitional
2021
IFRS 9
£m
Full impact
2021
IFRS 9
£m
Common Equity Tier 1 (CET 1) capital:
Ordinary share capital 701 701 901 901
Allowable reserves 126 126 (44) (44)
Regulatory adjustments (142) (180) (66) (131)
Tier 1 capital 685 647 791 726
Tier 2 capital (loan notes – listed) 109 109 120 119
Total capital 794 756 911 845
Regulatory capital is calculated under the Capital Requirements Regulations and Capital Requirements Directive (collectively known as CRD IV) incorporating
CRR2 changes that are effective from 1 January 2022 and aligns to the phase-in approach of IFRS 9 impacts on capital, over a 5-year period from 1 March 2018,
as enacted in the UK. Common Equity Tier 1 (CET 1) capital includes ordinary share capital, other reserves, losses and regulatory deductions.
30 Financial risk management continued
161 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The movement of CET 1 capital during the financial year is analysed as follows:
Transitional
2022
IFRS 9
£m
Full impact
2022
IFRS 9
£m
Transitional
2021
IFRS 9
£m
Full impact
2021
IFRS 9
£m
At 1 March 2021 and 1 March 2020 791 726 822 756
Verified profits/(losses) attributable to shareholders 22 22 (142) (142)
Foreseeable dividend (50) (50) – –
Transitional adjustments (27) – (1) –
Other reserve movements (2) (2) 5 5
Movement in additional value adjustments 1 1 – –
Movement in intangible assets (50) (50) 107 107
At 28 February 2022 and 28 February 2021 685 647 791 726
Leverage ratio (unaudited)
The leverage ratio is defined as the ratio of Tier 1 capital to adjusted assets, which is measured below on a regulatory consolidated basis. The denominator
represents the total non-risk weighted assets of the regulatory group (Bank and Home Retail Group Card Services Limited) adjusted for certain off balance
sheet exposures, assets and regulatory deductions and provides a non-risk-weighted ‘backstop’ capital measure. The leverage ratio is calculated below as
at28 February 2022 on the UK basis which allows central bank assets to be excluded from the leverage exposures. The Bank’s leverage ratio of 9.7 per cent
exceeds the minimum Basel leverage ratio of 3 per cent.
Transitional
2022
IFRS 9
£m
Full impact
2022
IFRS 9
£m
Transitional
2021
IFRS 9
£m
Full impact
2021
IFRS 9
£m
Components of the leverage ratio
Total assets as per published financial statements (Sainsbury’s Bank plc) 6,436 6,436 7,4 3 8 7,4 3 8
Uplift on consolidation of subsidiary undertakings 80 80 58 58
Exposure value for derivatives and securities financing transactions 37 37 22 22
Off balance sheet exposures: unconditionally cancellable (10%) 878 878 917 917
Off balance sheet: other (100%) 5 5 13 13
Other adjustments (169) (207) (79) (143)
Central Bank Claims (219) (219) – –
7,048 7,010 8,369 8,305
Tier 1 capital 685 647 791 726
Leverage ratio 9.7% 9.2% 9.5% 8.7%
Capital management
The Bank manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities.
Capital adequacy is monitored on an ongoing basis by senior management, the ALCO, the Executive Risk Committee and the Board Risk Committee. Our
submissions to the PRA in the year have shown that the Bank has complied with all externally imposed capital requirements.
The Bank will disclose Pillar 3 information as required by the Capital Requirements Regulations and PRA prudential sourcebook on the J Sainsbury plc
external website.
31 Financial instruments
Accounting policies
a) Financial assets
The Group classifies all of its financial assets as either amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit
or loss (FVTPL).
To determine their classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed
based on a combination of the entity’s business model for managing the assets and the instruments’ contractual cash flow characteristics.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely
payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrument level.
The business model assessment reflects how the Group manages the risks relating to the underlying financial assets, including whether the Group’s principal
objective is to collect the contractual cash flows arising from the instruments (amortised cost), to sell the financial instruments (FVTPL) or a combination
thereof (FVOCI).
30 Financial risk management continued
162 Financial Statements J Sainsbury plc Annual Report 2022
Financial instruments at amortised cost
Financial assets that are principally held for the collection of contractual cash flows and which pass the SPPI test are classified as amortised cost. For the
Group this includes cash, receivables and amounts due from financial services customers and other banks. The Group has no intention of trading these
assets. With the exception of trade receivables that do not contain a significant financing component, the Group initially measures these financial assets
at fair value plus transaction costs. Subsequently these assets are carried at amortised cost less impairment using the effective interest rate method. Income
from these financial assets is calculated on an effective interest rate basis and is recognised in the income statement.
Financial assets at fair value through other comprehensive income
Accounting policies are detailed in note 18.
Financial assets at fair value through profit and loss
The Group’s derivatives are classified as fair value through profit or loss. They are carried in the statement of financial position at fair value with net changes
in fair value recognised in the income statement.
Financial assets are derecognised when the contractual cash flows from the asset have expired or have been transferred, usually by sale, and with them
either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset.
b) Financial liabilities
The Group recognises all of its financial liabilities at amortised cost and all derivative financial liabilities are classified as FVTPL. Financial liabilities costs,
including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using
the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which
they arise.
Interest-bearing bank loans, overdrafts, other deposits and amounts due to Sainsbury’s Bank customers are recorded initially at fair value, which is generally
the proceeds received, net of direct issue costs. Subsequently, these liabilities are held at amortised cost using the effective interest rate method.
Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled, or expires.
Financial assets and liabilities by category
Set out below are the accounting classification of each class of financial assets and liabilities as at 5 March 2022 and 6 March 2021.
Amortised
cost
£m
Fair value
through OCI
£m
Fair value
through profit
or loss
£m
Total
£m
Cash and cash equivalents 825 – – 825
Trade and other receivables 552 – – 552
Amounts due from Financial Services customers and other banks 5,189 – – 5,189
Financial assets at FVOCI – 800 – 800
Trade and other payables (4,218) – – (4,218)
Borrowings (761) – – (761)
Amounts due to Financial Services customers and banks (5,259) – – (5,259)
Derivative financial instruments – – 259 259
Lease liabilities (6,621) – – (6,621)
At 5 March 2022 (10,293) 800 259 (9,234)
Restated
Amortised
cost
£m
Fair value
through OCI
£m
Fair value
through profit
or loss
£m
Total
£m
Cash and cash equivalents 1,575 – – 1,575
Trade and other receivables 609 – – 609
Amounts due from Financial Services customers 5,407 – – 5,407
Financial assets at FVOCI – 844 – 844
Trade and other payables (4,102) – – (4,102)
Borrowings (1,104) – – (1,104)
Amounts due to Financial Services customers and banks (6,289) – – (6,289)
Derivative financial instruments – – (124) (124)
Lease liabilities (5,834) – – (5,834)
At 6 March 2021 (9,738) 844 (124) (9,018)
31 Financial instruments continued
163 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
c) Fair value estimation
Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the financial statements at a value other
than fair value. The fair values of financial assets and liabilities are based on prices available from the market on which the instruments are traded. Where
market values are not available, the fair values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing
interest rates. The fair values of short-term deposits, trade receivables, other receivables, overdrafts and payables and lease liabilities are assumed to
approximate to their book values.
At 5 March 2022
Carrying
amount
£m
Group fair
value
£m
Financial assets
Amounts due from Financial Services customers
1
5,189 5,216
Financial liabilities
Loans due 2031 (575) (717)
Tier 2 capital due 2023 (179) (180)
Amounts due to Financial Services customers and other banks (5,259) (5,260)
At 6 March 2021
Carrying
amount
£m
Group fair
value
£m
Financial assets
Amounts due from Financial Services customers
1
5,407 5,418
Financial liabilities
Loans due 2031 (627) (761)
Bank loans due 2021 (199) (199)
Tier 2 capital due 2023 (179) (183)
Amounts due to Financial Services customers and other banks (6,289) (6,298)
1 Included within a portfolio fair value hedging relationship with £3,235 million (2021: £3,984 million) of interest rate swaps.
The fair value of the financial assets has been calculated by discounting cash flows at prevailing interest rates and is within Level 2 of the fair value hierarchy
(see below for fair value hierarchy description). The fair value of financial liabilities have been calculated by discounting cash flows at prevailing interest rates
and are within Level 2 of the fair value hierarchy.
Fair value measurements recognised in the balance sheet
The following table provides an analysis of financial instruments that are recognised at fair value, grouped into Levels 1 to 3 based on the degree to which the
fair value is observable:
— Level 1 fair value measurements are derived from quoted market prices (unadjusted) in active markets for identical assets or liabilities at the balance
sheet date. This level includes listed equity securities and debt instrument on public exchanges;
— Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments is determined by discounting expected cash
flows at prevailing interest rates; and
— Level 3 fair value measurements are derived from valuation techniques that include inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
31 Financial instruments continued
164 Financial Statements J Sainsbury plc Annual Report 2022
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 5 March 2022
Financial instruments at fair value through other comprehensive income
Other financial assets – 15 367 382
Investment securities 418 – – 418
Derivative financial assets – 111 180 291
Derivative financial liabilities – (32) – (32)
At 6 March 2021
Financial instruments at fair value through other comprehensive income
Interest bearing financial assets – 1 – 1
Other financial assets – 15 291 306
Investment securities 537 – – 537
Derivative financial assets – 7 6 13
Derivative financial liabilities – (137) – (137)
Reconciliation of Level 3 fair value measurements of financial assets and liabilities:
Financial
instruments
at FVTOCI
£m
Commodity
derivatives
£m
Total
£m
At 7 March 2021 291 6 297
In cost of sales in the Group income statement – 76 76
In other comprehensive income 76 98 174
At 5 March 2022 367 180 547
Financial
instruments at
FVTOCI
£m
Commodity
derivatives
£m
Total
£m
At 8 March 2020 237 (3) 234
In finance cost in the Group income statement – 9 9
In other comprehensive income 54 – 54
At 6 March 2021 291 6 297
The financial instruments at fair value through OCI relate to the Group’s beneficial interest in a property investment pool. The net present value of the Group’s
interest in the various freehold reversions owned by the property investment pool has been derived by assuming a property growth rate of zero per cent per
annum (2021: zero per cent) and a discount rate of seven per cent (2021: seven per cent) – see note 18. The sensitivity of this balance to changes of one per
cent in the assumed rate of property rental growth and one per cent in the discount rate holding other assumptions constant is shown below:
2022
Change in
growth rate
+/-1.0%
£m
2022
Change in
discount rate
+/-1.0%
£m
2021
Change in
growth rate
+/-1.0%
£m
2021
Change in
discount rate
+/-1.0%
£m
Financial instruments at fair value through OCI 6/(6) (5)/5 9/(9) (6)/6
The Group has entered into several long-term fixed price Power Purchase agreements with independent producers. Included within derivative financial assets
is £180 million (2021: £6 million) relating to these agreements. The Group has entered into a new Power Purchase Agreement during the year, and this has
been designated as a cash flow hedge.
The Group values its Power Purchase agreements as the net present value of the estimated future usage at the contracted fixed price less the market implied
forward energy price discounted at the prevailing swap rate. The Group also makes an assumption regarding expected energy output based on the historical
performance and the producer’s estimate of expected electricity output. The sensitivity of this balance to changes of 20 per cent in the assumed rate of
energy output and 20 per cent in the implied forward energy prices holding other assumptions constant is shown below:
31 Financial instruments continued
165 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Not in a hedge relationship
2022
Change
in volume
+/-20.0%
£m
2022
Change in
electricity
forward price
+/-20.0%
£m
2021
Change
in volume
+/-20.0%
£m
2021
Change in
electricity
forward price
+/-20.0%
£m
Derivative financial instruments 23/(23) 16/(16) 1/(1) 7/(7)
Designated in a cash flow hedge relationship
2022
Change
in volume
+/-20.0%
£m
2022
Change in
electricity
forward price
+/-20.0%
£m
2021
Change
in volume
+/-20.0%
£m
2021
Change in
electricity
forward price
+/-20.0%
£m
Derivative financial instruments 32/(32) 20/(20) N/A N/A
d) Offsetting financial instruments
Financial assets and liabilities are offset, and the net amount reported in the balance sheet, when there is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be
contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company
or the counterparty.
The following table sets out the Group’s financial assets and financial liabilities that are subject to counterparty offsetting or a master netting agreement.
The master netting agreements regulate settlement amounts in the event a party defaults on their obligations.
Amounts not offset
in balance sheet
Gross amounts
of recognised
financial assets
and liabilities
£m
Amounts
offset
in the
balance
sheet
£m
Net amounts
recognised
in the
balance
sheet
£m
Balances
subject to a
contractual
right of
offset
£m
Cash collateral
pledged
£m
Net amounts
£m
Assets
Derivative financial assets 291 – 291 – (20) 271
Trade and other receivables 643 (91) 552 – – 552
Cash and cash equivalents 825 – 825 – – 825
Total assets at 5 March 2022 1,759 (91) 1,668 – (20) 1,648
Liabilities
Derivative financial liabilities (32) – (32) – 20 (12)
Trade and other payables (4,309) 91 (4,218) – – (4,218)
Total liabilities at 5 March 2022 (4,341) 91 (4,250) – 20 (4,230)
Assets
Derivative financial assets 19 (6) 13 (2) (2) 9
Trade and other receivables 756 (147) 609 – – 609
Cash and cash equivalents 1,477 – 1,477 – – 1,477
Total assets at 6 March 2021 2,252 (153) 2,099 (2) (2) 2,095
Liabilities
Derivative financial liabilities (143) 6 (137) 2 30 (105)
Trade and other payables (4,249) 147 (4,102) – – (4,102)
Total liabilities at 6 March 2021 (4,392) 153 (4,239) 2 30 (4,207)
The Group holds certain financial derivatives which are subject to credit support agreements. Under these agreements cash collateral is posted by one party
to the other party should the fair value of the financial derivative exceed a pre-agreed level. As at 5 March 2022, the Group held no collateral against these
financial derivative assets (2021: £nil).
Financial Services has derivatives that are governed by the International Swaps and Derivatives Association and their associated credit support annex
bilateral agreements where if the fair value exceeds a pre-agreed level, cash collateral is posted. As at 5 March 2022, Financial Services and its subsidiary
had pledged/posted collateral of £20 million (2021: provided collateral of £30 million) against the derivatives and received collateral of £20 million
(2021: £2 million).
The Group also operates a cash pooling arrangement and collective net overdraft facility with its main clearing bank. As at 5 March 2022 the Group had a net
overdraft of £7 million (2021: £99 million) under this facility.
31 Financial instruments continued
166 Financial Statements J Sainsbury plc Annual Report 2022
32 Derivative financial instruments and hedge accounting
Accounting policies
The Group uses derivative financial instruments to hedge its exposure to foreign exchange, interest rate and commodity risks. All derivative financial
instruments are initially measured at fair value on the contract date and are also measured at fair value at subsequent reporting dates. Where derivatives do
not qualify for hedge accounting, any changes in the fair value of the derivative financial instrument are recognised in the income statement as they arise.
To qualify for hedge accounting, the Group documents, at the inception of the hedge, the hedging risk management strategy, the relationship between the
hedging instrument and the hedged item or transaction, the nature of the risks being hedged and an assessment of the effectiveness of the hedging
relationship to ensure it is highly effective on an ongoing basis.
Where a derivative does qualify for hedge accounting, any changes in fair value are recognised depending on the nature of the hedge relationship and the
item being hedged as follows:
i) Cash flow hedges
Hedge relationships are classified as cash flow hedges where the derivative financial instruments hedge the Group’s exposure to variability in cash flows
resulting from a highly probable forecasted transaction. These include the exchange rate risk of inventory purchases denominated in foreign currency,
interest rate risk and commodity risk on purchases of power and fuel. Changes in the fair value of derivative financial instruments that are designated and
effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the
income statement.
If a cash flow hedge is hedging a firm commitment or forecast transaction that results in the recognition of a non-financial asset or liability, then, at the time
the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in other comprehensive income are
included in the initial measurement of the asset or liability. This applies to the Group’s foreign currency hedges in relation to inventory purchases.
ii) Fair value hedges
The Group designates certain derivatives as fair value hedges where the derivative financial instrument hedges the change in fair value of the particular risks
inherent in recognised assets or liabilities (fair value hedges).
The Group has adopted IFRS 9 hedge accounting requirements for its fair value hedges of investment securities and its one-for-one hedge on Tier 2 Debt
issuance within Sainsbury’s Bank. The Group continues to adopt IAS 39 for its macro portfolio fair value hedges of fixed rate personal loans and residential
mortgages, as it is permitted to do so under IFRS 9 and until the point that the new macro hedge accounting standard is finalised and adopted.
Fair value hedging matches the change in fair value of designated hedged items against the corresponding change in value of the hedging derivative. The
designated hedged item can be a recognised asset or liability, a firm commitment, or an identified portion of an asset.
The effective part of any gain or loss on the hedged item adjusts the balance of the hedged item and is recognised in the income statement, offsetting the
gain or loss on the hedging derivative. Should circumstances arise where the hedge relationship subsequently proves ineffective, is early settled, or is
terminated the adjustment to the balance of the hedged item is amortised over the remaining life of the hedged item and to the income statement.
Micro fair value hedging – IFRS 9
The Group has purchased a number of fixed rate debt investment securities and has issued fixed rate subordinated debt within Sainsbury’s Bank. These
instruments are hedged via plain vanilla interest rate swaps, with the critical economic terms of both the hedging instrument and hedged item matching.
The notional amount, fixed interest legs and maturity dates are economically matched.
Portfolio fair value hedging – IAS 39
The Group uses portfolio fair value hedging as a risk management tool for hedging interest rate risk on the Personal Loans and Mortgage portfolios. Portfolio
fair value hedging allows the designation of the whole or part of a portfolio of assets or liabilities with similar risk exposures. The hedged item can be
designated based on expected maturities to match the hedging derivative maturity. Hedge effectiveness is considered to have been met where the change
in fair value of the hedged item offsets the change in fair value of hedging instruments, within the 80 to 125 per cent ratio corridor.
The effects of hedge accounting on the Group’s financial position and performance
The fair value of derivative financial instruments has been disclosed in the balance sheet as follows:
2022
Asset
£m
2022
Liability
£m
2021
Asset
£m
2021
Liability
£m
Non-current 213 (3) 8 (44)
Current 78 (29) 5 (93)
Total 291 (32) 13 (137)
167 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The table below provides a breakdown of the type of derivatives in fair value and cash flow hedges as well as derivatives not in a formal hedge accounting
relationship.
2022 2021
Asset Liability Asset Liability
Fair value
£m
Notional
£m
Fair value
£m
Notional
£m
Fair value
£m
Notional
£m
Fair value
£m
Notional
£m
Fair value hedges
Interest rate swaps 35 2,249 (19) 986 1 724 (29) 3,260
Cash flow hedges
Interest rate swaps – – – – – – (1) 200
Inflation rate swaps 5 490 – – – – (13) 490
Foreign exchange forward contracts 46 1,153 (13) 323 1 28 (94) 1,586
Commodity contracts 25 33 – – 4 26 – 10
Power Purchase contracts 98 6 – – – – – –
Derivatives not in a formal hedging relationship
Interest rate swaps – 9 – – – 444 – 453
Cross currency swaps – 44 – 69 1 57 – 5
Power Purchase contracts 82 11 – – 6 11 – –
Total 291 3,995 (32) 1,378 13 1,290 (137) 6,004
Cash flow hedges
There is an economic relationship between the hedged items and the hedging instruments as the terms of the interest rate swaps, foreign exchange and
commodity forward contracts match the terms of the expected highly probable forecast transactions (i.e., notional amount and expected payment date).
The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange and commodity forward contracts
are identical to the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the changes
in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks.
Hedge ineffectiveness can arise from:
— Differences in the timing of the cash flows of the hedged items and the hedging instruments
— Different indexes (and accordingly different curves) linked to the hedged risk of the hedged items and hedging instruments
— The counterparties’ credit risk differently impacting the fair value movements of the hedging instrument compared to the hedged items
— Changes to the forecasted cash flows of hedged items
At 5 March 2022 the maturity profile and average price/rate of the hedging instruments used in the Group’s non-dynamic hedging strategies were as follows:
Maturity
At 5 March 2022
Less than
1 month 1 to 3 months
3 months to
1 year
One to five
years
More than five
years
Cash flow hedges
Interest rate risk
Notional amount – – – 490 –
Average net interest (pay)/receive – – – 1.37% –
Maturity
At 6 March 2021
Less than
1 month 1 to 3 months
3 months to
1 year
One to five
years
More than five
years
Cash flow hedges
Interest rate risk
Notional amount – – 200 490 –
Average net interest (pay)/receive – – (0.51)% (0.94)% –
32 Derivative financial instruments and hedge accounting continued
168 Financial Statements J Sainsbury plc Annual Report 2022
The impact of the hedged items on Group’s financial statements is as follows:
At 5 March 2022
Change in value of
hedged item for
calculating hedge
ineffectiveness
£m
Change in value
of hedging instrument
for calculating hedge
ineffectiveness
£m
Cumulative impact
on cash flow
hedge reserve
£m
Cash flow hedges
Inflation rate swaps (8) 8 5
Foreign exchange forward contracts
1
(73) 73 25
Commodity contracts (25) 25 25
Power Purchase Agreements (98) 98 98
1 Includes £16m reclassified to retained earnings during the year.
At 6 March 2021
Change in value of
hedged item for
calculating hedge
ineffectiveness
£m
Change in value
of hedging instrument
for calculating hedge
ineffectiveness
£m
Cumulative
impact
on cash flow
hedge reserve
£m
Cash flow hedges
Interest rate swaps – – (1)
Inflation rate swaps 5 (5) (13)
Foreign exchange forward contracts 60 (60) (92)
Commodity contracts (4) 4 4
There are no amounts remaining in the hedging reserves for which hedge accounting is no longer applied.
The following table presents a reconciliation by risk category of the cash flow hedge reserve and analysis of other comprehensive income in relation to
hedge accounting:
At 5 March 2022
Opening
£m
Fair value movements
recognised in other
comprehensive income
£m
Amounts
reclassified
£m
Closing
£m Reclassification recognised in
Interest rate swaps (1) – 1 – Finance costs
Inflation rate swaps (13) 8 10 5 Finance costs
Foreign exchange forward contracts
1
(92) 73 44 25 Inventory/retained earnings
Commodity contracts 4 25 (4) 25 Cost of sales
Power purchase agreements – 98 – 98 Cost of Sales
Tax 18 (54) – (36)
 (84) 150 51 117
1. Includes £16 million reclassified to retained earnings during the year.
At 6 March 2021
Opening
£m
Fair value movements
recognised in other
comprehensive income
£m
Amounts
reclassified
£m
Closing
£m Reclassification recognised in
Interest rate swaps (1) – – (1) Finance costs
Inflation rate swaps (13) (5) 5 (13) Finance costs
Foreign exchange forward contracts (31) (60) (1) (92) Inventory
Commodity contracts (8) 4 8 4 Cost of sales
Tax 7 11 – 18
 (46) (50) 12 (84)
Fair value hedges
Within the Financial Services business, interest rate swaps are executed to hedge interest rate risk arising from fixed rate exposures in its retail personal loan
and retail mortgage books, and certain fixed rate treasury investment securities, which are predominantly funded by variable rate linked liabilities.
The cash flows under the hedging instruments (interest rate swap derivatives) substantially match the cash flow profile of the hedged items (personal loans,
mortgages, treasury investment securities and borrowings). The changes in fair value of the derivatives offset changes in the fair value of the hedged items
through the income statement, with any ineffective portion also being recognised in the income statement.
The main source of ineffectiveness within the micro hedge relationships relates to the floating leg valuation changes inherent within the hedging instrument
that do not exist within the hedged item.
Ineffectiveness on portfolio hedges can arise as a result of several factors, including floating leg valuation changes inherent within the hedging instrument
that do not exist within the hedged item, mismatch in cash flow maturities between the hedged item and hedging instrument and basis risk between cash
flows discounted using different benchmark rates.
32 Derivative financial instruments and hedge accounting continued
169 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
At 5 March 2022 the maturity profile and average price/rate of the hedging instruments used in the Group’s non-dynamic hedging strategies were as follows:
Maturity
Less than
1 month 1 to 3 months
3 months to
1 year
One to five
years
More than five
years
At 5 March 2022
Fair value hedges
Interest rate risk
Interest rate swaps
Notional amount – 138 584 1,246 1,267
Average net interest (pay)/receive – (0.08)% (0.20)% (0.28)% 0.06%
At 6 March 2021
Fair value hedges
Interest rate risk
Interest rate swaps
Notional amount – 328 973 1,441 1,242
Average net interest (pay)/receive – (0.82)% (0.66)% (0.60)% –
The impact of the hedged items on Group’s financial statements is as follows:
Carrying amount
of the hedged item
Change in fair value
used for measuring
ineffectiveness
for the period
Accumulated amount of fair
value hedge adjustments
included in the carrying
amount of the hedged item
Line item in financial statementsAt 5 March 2022
Assets
£m
Liabilities
£m £m
Assets
£m
Liabilities
£m
Fair value hedges
Interest rate swaps 2,725 – (38) (16) – Amounts due from Financial Services customers
Interest rate swaps 197 – (4) (3) – Financial assets at FVOCI
Interest rate swaps – (179) 1 – (2) Borrowings
2,922 (179) (41) (19) (2)
At 6 March 2021
Carrying amount
of the hedged item
Change in fair value
used for measuring
ineffectiveness
for the period
Accumulated amount of fair
value hedge adjustments
included in the carrying
amount of the hedged item
Line item in financial statements
Assets
£m
Liabilities
£m £m
Assets
£m
Liabilities
£m
Fair value hedges
Interest rate swaps 3,164 – (5) 22 – Amounts due from Financial Services customers
Interest rate swaps 73 – – (1) – Financial assets at FVOCI
Interest rate swaps – (179) 1 – (3) Borrowings
3,237 (179) (4) 21 (3)
32 Derivative financial instruments and hedge accounting continued
170 Financial Statements J Sainsbury plc Annual Report 2022
The impact of the hedging instruments on the financial statements is as follows:
At 5 March 2022
Notional
amount
£m
Carrying amount
Change in fair value for measuring
ineffectiveness for the period
£m Line item in financial statements
Asset
£m
Liability
£m
Fair value hedges
Interest rate swaps (loans and mortgages) 3,164 30 (18) 40 Derivative financial assets/
liabilities
Interest rate swaps (Tier 2 capital) – – (1) (1) Derivative financial liabilities
Interest rate swaps (investment securities) 71 5 – 5 Derivative financial assets
3,235 35 (19) 44
At 6 March 2021
Notional
amount
£m
Carrying amount
Change in fair value for measuring
ineffectiveness for the period
£m Line item in financial statements
Asset
£m
Liability
£m
Fair value hedges
Interest rate swaps (loans and mortgages) 3,912 1 (29) 5 Derivative financial liabilities
Interest rate swaps (Tier 2 capital) – – – (5) Derivative financial assets
Interest rate swaps (investment securities) 72 – – 2 Derivative financial liabilities
3,984 1 (29) 2
Fair value hedge relationships impacted profit or loss as follows:
Hedge ineffectiveness recognised in cost of sales
2022
£m
2021
£m
Change in value of hedged items for calculating hedge ineffectiveness (41) (4)
Change in value of hedging instruments for calculating hedge ineffectiveness 44 2
Hedge ineffectiveness recognised in cost of sales 3 (2)
Derivatives not in a hedge relationship
Some of the Group’s derivative contracts do not qualify for hedge accounting and are therefore not designated in a hedging relationship. In addition, where
gains or losses on a derivative contract economically offset the losses or gains on an underlying transaction, the derivative is not designated as being in a
hedging relationship.
The Group has several long-term fixed price Power Purchase agreements with independent producers as detailed in note 31. Included within derivative
financial assets is £180 million (2021: £6 million) relating to these agreements, of which £82 million is not within a hedging relationship. Fair value gains of
£76 million have been recognised in the income statement during the year for these arrangements.
Sainsbury’s Bank and its subsidiaries had a £9 million portfolio of interest rate swaps hedging mortgage pipeline offers that cannot be entered into a hedge
accounting relationship (2021: £9 million) with fair value fluctuations fully accounted for in the P&L, with no effective offset.
Additionally, the Group had £nil of compressed and offsetting LIBOR swaps forming part of Sainsbury’s Bank’s novation project from LIBOR to SONIA
derivatives (2021: £888 million).
The fair value fluctuations crediting the income statement for interest rate derivatives not in a hedge accounting relationship was a credit of £nil (2021: £nil).
32 Derivative financial instruments and hedge accounting continued
171 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
33 Cash and cash equivalents
Accounting policies
Cash and cash equivalents
Cash and bank balances comprise cash in hand and at bank, deposits at central banks, investments in money market funds and deposits and other
short-term highly liquid investments.
To be classified as cash and cash equivalents, an asset must:
— Be readily convertible into cash;
— Have an insignificant risk of changes in value; and
— Have a maturity period of typically three months or less at acquisition.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purposes of the cash flow statement.
Cash flow statement
The Group presents its cash flow statement using the indirect method, whereby profit is reconciled to net cash from operating activities by adjusting profit
and loss for non-cash items.
Interest, dividends and taxes
The Group has chosen to present interest received on bank deposits and other financial assets as well as dividends received as cash flows from investing
activities because they are returns on the Group’s investments.
Dividends paid are presented as financing cash flows as they are considered a cost of obtaining financial resources.
Interest paid on borrowings is presented within cash flows from operating activities as they are held for cash management purposes.
Lease payments and receipts
Lease payments are presented as follows in the Group cash flow statement:
— Cash payments for the principal element of the lease liabilities are presented as cash flows from financing activities
— Cash payments for the interest element of lease liabilities are presented as interest paid within cash flows from operating activities consistent with
presentation of interest payments
— Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease
liabilities as cash flows from operating activities
— Cash receipts in relation to sub-leases (both operating and finance leases) are included within operating cash flows
For the purposes of the cash flow statement, cash and cash equivalents comprise the following:


2022
£m
2021
(restated)
£m
Cash in hand and bank balances 566 325
Money market funds and deposits 25 398
Deposits at central banks 234 852
Cash and bank balances as reported in the Group balance sheet 825 1,575
 
Bank overdrafts (7) (99)
Net cash and cash equivalents as reported in the Group cash flow statement 818 1,476
Of the above balance, £18 million (2021: £20 million) was restricted as at year-end. Of the £18 million (2021: £20 million) restricted cash, £15 million
(2021: £17 million) is held as a reserve deposit with the Bank of England in accordance with statutory requirements. This deposit is not available for use
in day-to-day operations. A further £3 million (2021: £3 million) is restricted for Insurance purposes.
Refer to note 2 for details of restatement.
172 Financial Statements J Sainsbury plc Annual Report 2022
Reconciliation of cash flow items
Working capital
Inventories
£m
Financial
assets at fair
value through
OCI
£m
Trade and other
receivables
£m
Amounts due
from Financial
Services
customers
£m
Trade and other
payables
£m
Amounts due
to Financial
Services
customers and
other deposits
£m
Provisions
£m
At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271)
At 6 March 2021 (restated) 1,625 844 775 5,407 (4,508) (6,289) (349)
Balance sheet movement (172) 44 27 218 62 (1,030) (78)
Fair value movements – 71 – (38) – – –
Hedge adjustments (7) – – – – – –
Interest in working capital – – – – (6) – –
Transfer of SaaS spend to prepayments – – 9 – – – –
Reclassification to other lines in the cash flow statement – – – – (28) – –
Financial Services ECL impairments – – – (19) – – –
Movement in capital accruals – – – – 1 – –
Amortisation of discount – – – – – – (1)
Other – – (3) – (1) – (1)
Movement shown in cash flow statement (179) 115 33 161 28 (1,030) (80)
Inventories
£m
Financial
assets at fair
value through
OCI
£m
Trade and other
receivables
£m
Amounts due
from Financial
Services
customers
£m
Trade and other
payables
£m
Amounts due
to Financial
Services
customers and
other deposits
£m
Provisions
£m
At 6 March 2021 (restated) 1,625 844 775 5,407 (4,508) (6,289) (349)
At 7 March 2020 (restated) 1,732 1,054 854 7,4 0 4 (4,286) (8,094) (174)
Balance sheet movement 107 210 79 1,997 222 (1,805) 175
Fair value movements – 57 – – – – –
Hedge adjustment to inventory 10 – – – – – –
Reclassification to other lines in the cash flow statement – – – – 80 – –
Dividends received from JVs – – (18) – – – –
Financial Services ECL impairments – – – (85) – – –
Movement in capital accruals – – – – 8 – –
Other – – 1 – 11 – 2
Movement shown in cash flow statement 117 267 62 1,912 321 (1,805) 177
33 Cash and cash equivalents continued
173 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Other

2022 Note
Gross
additions
£m
Capitalised
interest
£m
Movement in
capital accruals
£m
Movement
shown in cash
flow statement
£m
Purchase of property, plant and equipment 14 (417) 2 (1) (416)
Purchase of intangible assets 16 (278) – – (278)
2021 Note
Gross
additions
£m
Capitalised
interest
£m
Movement in
capital accruals
£m
Movement shown
in cash flow
statement
£m
Purchase of property, plant and equipment 14 (419) 4 (8) (423)
Purchase of intangible assets 16 (172) – – (172)
Profit on the sale of properties and early termination of leases in the cash flow statement is reconciled as follows:
52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Profit on disposal of properties (note 5) (7) (1)
Non-underlying gain on early termination of leases (note 5) (9) (16)
Profit on disposal of properties within restructuring programmes (note 5) (12) –
Non-underlying SaaS adjustment (note 5) 21 –
Underlying gain on early termination of leases (3) –
Loss on disposal of intangible assets 4 –
Profit on sale of non-current assets and early termination of leases (6) (17)
34 Analysis of net debt
The Group’s definition of net debt includes the following:
— Cash
— Borrowings and overdrafts
— Lease liabilities
— Perpetual securities
— Debt-related financial assets at fair value through other comprehensive income
— Derivatives used in hedging borrowings
Net debt includes the capital injections to Sainsbury’s Bank, but excludes the net debt of Sainsbury’s Bank and its subsidiaries (Financial Services). Financial
Services’ net debt balances are excluded because they are required as part of the business as usual operations of a bank, as opposed to specific forms of
financing for the Group.
Derivatives exclude those not used to hedge borrowings, and borrowings exclude bank overdrafts as they are disclosed separately.
33 Cash and cash equivalents continued
174 Financial Statements J Sainsbury plc Annual Report 2022
A reconciliation of opening to closing net debt is included below. Balances and movements for the total Group and Financial Services are shown in addition
to Retail to enable reconciliation between the Group balance sheet and Group cash flow statement.
Cash movements Non-cash movements



7 March
2021
£m
Cash flows
excluding
interest
£m
Net interest
(received)/paid
£m
Accrued
interest
£m
Other non-cash
movements
£m
Changes in
fair value
£m

5 March
2022
£m
Retail       
Net derivative financial instruments (14) – 10 (10) 11 8 5
Borrowings (excluding overdrafts) (826) 248 28 (25) – – (575)
Lease liabilities (5,829) 491 281 (281) (1,280) – (6,618)
Arising from financing activities (6,669) 739 319 (316) (1,269) 8 (7,188)

Financial assets at fair value through other
comprehensive income
1 – – – – (1) –
Cash and cash equivalents (restated) 546 (110) – – – – 436
Bank overdrafts (restated) (99) 92 – – – – (7)
Retail net debt (excluding perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Financial Services
Net derivative financial instruments – – – – – 4 4
Borrowings (excluding overdrafts) (179) – 10 (11) – 1 (179)
Lease liabilities (5) 2 – – – – (3)
Arising from financing activities (184) 2 10 (11) – 5 (178)

Financial assets at fair value through other
comprehensive income
537 (115) – – – (4) 418
Cash and cash equivalents 1,029 (640) – – – – 389
Financial Services net debt 1,382 (753) 10 (11) – 1 629

Group
Net derivative financial instruments (14) – 10 (10) 11 12 9
Borrowings (excluding overdrafts) (1,005) 248 38 (36) – 1 (754)
Lease liabilities (5,834) 493 281 (281) (1,280) – (6,621)
Arising from financing activities (6,853) 741 329 (327) (1,269) 13 (7,366)

Financial assets at fair value through other
comprehensive income
538 (115) – – – (5) 418
Cash and cash equivalents (restated) 1,575 (750) – – – – 825
Bank overdrafts (restated) (99) 92 – – – – (7)
Group net debt (excluding perpetual securities) (4,839) (32) 329 (327) (1,269) 8 (6,130)

Retail net debt (excluding perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759)
Perpetual convertible bonds (248) 8 – – 240 – –
Retail net debt (including perpetual securities) (6,469) 729 319 (316) (1,029) 7 (6,759)
Of which:
Leases (5,829) (6,618)
Net debt excluding lease liabilities (640) (141)
Other non-cash movements relate to interest accruals and new leases.
Refer to note 2 for details of restatement.
34 Analysis of net debt continued
175 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Cash movements Non-cash movements 
8 March
2020
£m
Cash flows
excluding
interest
£m
Net interest
(received)/paid
£m
Accrued
interest
£m
Other non-cash
movements
£m
Changes in
fair value
£m
6 March
2021
£m
Retail       
Net derivative financial instruments (15) – 6 (5) 5 (5) (14)
Borrowings (excluding overdrafts) (1,116) 289 38 (37) – – (826)
Lease liabilities (5,768) 499 305 (305) (560) – (5,829)
Arising from financing activities (restated) (6,899) 788 349 (347) (555) (5) (6,669)
      
Financial assets at fair value through other
comprehensive income
1 – – – – – 1
Cash and cash equivalents (restated) 506 40 – – – – 546
Bank overdrafts (restated) (59) (40) – – – – (99)
Retail net debt (excluding perpetual securities) (restated) (6,451) 788 349 (347) (555) (5) (6,221)
      
Financial Services       
Net derivative financial instruments 4 – – – – (4) –
Bank overdrafts – – – – – – –
Borrowings (excluding overdrafts) (180) – – – – 1 (179)
Lease liabilities (6) 2 – – (1) – (5)
Arising from financing activities (restated) (182) 2 – – (1) (3) (184)
      
Financial assets at fair value through other
comprehensive income
802 (267) – – – 2 537
Cash and cash equivalents 547 482 – – – – 1,029
Financial Services net debt 1,167 217 – – (1) (1) 1,382
      
Group       
Net derivative financial instruments (11) – 6 (5) 5 (9) (14)
Borrowings (excluding overdrafts) (1,296) 289 38 (37) – 1 (1,005)
Lease liabilities (5,774) 501 305 (305) (561) – (5,834)
Arising from financing activities (restated) ( 7,0 81) 790 349 (347) (556) (8) (6,853)
      
Financial assets at fair value through other
comprehensive income
803 (267) – – – 2 538
Cash and cash equivalents (restated) 1,053 522 – – – – 1,575
Bank overdrafts (restated) (59) (40) – – – – (99)
Group net debt (excluding perpetual securities) (restated) (5,284) 1,005 349 (347) (556) (6) (4,839)
      
Retail net debt (excluding perpetual securities) (6,451) 788 349 (347) (555) (5) (6,221)
Perpetual capital securities (248) 250 – – (2) – –
Perpetual convertible bonds (248) – – – – – (248)
Retail net debt (including perpetual securities) (6,947) 1,038 349 (347) (557) (5) (6,469)
Of which:      
Leases (5,768) (5,829)
Net debt excluding lease liabilities (1,179) (640)
Refer to note 2 for details of restatement.
34 Analysis of net debt continued
176 Financial Statements J Sainsbury plc Annual Report 2022
Reconciliation of net cash flow to movement in net debt
52 weeks to
5 March
2022
£m
52 weeks to
6 March
2021
£m
Opening net debt (6,469) (6,947)
 
Cash flow movements
Net (decrease)/increase in cash and cash equivalents (including overdrafts) (658) 482
Elimination of Financial Services movement in cash and cash equivalents 640 (482)
Repayment of perpetual capital securities 8 250
Decrease in Retail borrowings 248 289
Decrease in Retail lease obligations 491 499
Net interest paid on components of Retail net debt 319 349
Changes in net debt resulting from cash flow 1,048 1,387
 
Non-cash movements 
Accrued interest (316) (347)
Retail fair value and other non-cash movements (1,022) (562)
Changes in net debt resulting from non-cash movements (1,338) (909)
 
Movement in net debt (290) 478

Closing net debt (6,759) (6,469)
35 Borrowings
2022 2021
Current
£m
Non-current
£m
Total
£m
Current
£m
Non-current
£m
Total
£m
Loan due 2031 44 531 575 55 572 627
Bank overdrafts (restated) 7 – 7 99 – 99
Bank loans due 2021 – – – 199 – 199
Sainsbury's Bank Tier 2 Capital due 2027 3 176 179 3 176 179
 54 707 761 356 748 1,104
Refer to note 2 for details of restatement.
a) Loan due 2031
The loan is secured against 48 (2021: 48) supermarket properties (note 14). This is an inflation linked amortising loan from the finance company Longstone
Finance plc with an outstanding principal value of £566 million (2021: £614 million) fixed at a real rate of 2.36 per cent where principal and interest rate are
uplifted annually by RPI subject to a cap at five per cent and a floor at nil per cent. The carrying value of the loan is £575 million (2021: £627 million) with a
final repayment date of April 2031.
The Group has entered into inflation swaps to convert £490 million (2021: £490 million) of the £566 million (2021: £614 million) loan from RPI linked interest
to fixed rate interest until April 2023. These transactions have been designated as cash flow hedges (note 32).
The principal activity of Longstone Finance plc is the issuing of commercial mortgage-backed securities and applying the proceeds towards the secured
loans due 2031 with the Group as summarised above.
Intertrust Corporate Services Limited holds all the issued share capital of Longstone Finance Holdings Limited on trust for charitable purposes. Longstone
Finance Holdings Limited beneficially owns all the issued share capital of Longstone Finance plc. As the Group has no interest, power or bears any risk over
these entities they are not included in the Group consolidation.
b) Bank overdrafts
Bank overdrafts are repayable on demand and bear interest at a spread above Bank of England base rate.
c) Bank loan due 2021
On 6 August 2021 the Group repaid the secured £200 million Green Loan and subsequently ensured the release of all security interests.
d) Sainsbury’s Bank Tier 2 Capital due 2027
The Bank issued £175 million of fixed rate reset callable subordinated Tier 2 notes on 23 November 2017. The notes pay interest on the principal amount at
a rate of six per cent per annum, payable in equal instalments semi-annually in arrears, until 23 November 2022 at which time the interest rate will reset.
The Bank has the option to redeem these notes on 23 November 2022.
.
34 Analysis of net debt continued
177 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
e) Short-term borrowings
The Revolving Credit Facility is split into two Facilities, a £300 million Facility (A) and a £1,094 million Facility (B). Facility A has a final maturity of April 2025
and Facility B has a final maturity of October 2024. At 5 March 2022, the Revolving Credit Facility was undrawn (2021: undrawn).
The Revolving Credit Facility incurs commitment fees at market rates and drawdowns bear interest at a margin above SONIA.
The Group maintains uncommitted facilities to provide additional capacity to fund short-term working capital requirements. Drawdowns on these
uncommitted facilities bear interest at a margin. The uncommitted facilities were undrawn at 5 March 2022 (2021: undrawn).
36 Employee costs


2022
£m
2021
£m
Employee costs for the Group during the year amounted to:  
Wages and salaries, including bonus and termination benefits 3,119 3,302
Social security costs 240 230
Pension costs – defined contribution schemes 183 191
Share-based payments expense 58 29
 3,600 3,752

2022
’000
2021
’000
The average number of employees, including Directors, during the year was:  
Full-time 65 65
Part-time 116 115
181 180
Full-time equivalent 117 117
Details of key management compensation can be found in note 41 and within the Directors’ Remuneration Report on pages 84 to 95.
37 Retirement benefit obligations
Accounting policies – defined contribution pension schemes
The Group contributions to defined contribution pension schemes are charged to the income statement as incurred. Any contributions unpaid at the balance
sheet date are included as an accrual as at that date. The Group has no further payment obligations once the contributions have been paid.
Accounting policies – defined benefit pension scheme (Sainsbury’s Pension Scheme)
The surplus or deficit recognised in the balance sheet for defined benefit schemes represents the difference between the fair value of the plan assets and the
present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is actuarially calculated on an annual basis using the
projected unit credit method.
Actuarial gains and losses are reported in the statement of other comprehensive income as incurred, and comprise both the effects of changes in actuarial
assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred.
The income statement charge consists of a financing charge, which is the net of interest cost on pension scheme liabilities and interest income on plan assets
and defined benefit pension scheme expenses.
The financing charge is determined by applying the discount rate used to measure the defined benefit obligation to the pension scheme liabilities and plan
assets at the beginning of the financial year.
Background
The retirement benefit obligations relate to the Sainsbury’s Pension Scheme plus three unfunded pension liabilities for former senior employees of
Sainsbury’s and Home Retail Group.
The Sainsbury’s Pension Scheme has two sections, the Sainsbury’s Section which holds the assets and liabilities of the original Sainsbury’s Pension Scheme,
and the Argos Section which holds the assets and liabilities of the Home Retail Group Pension Scheme. Each section’s assets are segregated by deed and ring
fenced for the benefit of the members of that section. The Scheme is run by a corporate trustee with nine directors.
The Scheme is also used to pay life assurance benefits to current (including new) colleagues.
The retirement benefit obligations at the year-end have been calculated by Isio, the actuarial advisers to the Group, using the projected unit credit method
and based on adjusting the position at the date of the previous triennial valuation for known events and changes in market conditions as allowed under
IAS 19 ‘Employee Benefits’.
35 Borrowings continued
178 Financial Statements J Sainsbury plc Annual Report 2022
Sainsbury’s section
The section was closed to new employees on 31 January 2002 and closed to future accrual on 28 September 2013. There are three benefit categories: final
salary, career average and cash balance. Final salary and career average benefits are determined by service and salary. Cash balance benefits are determined
by the accrued retirement account credits.
Argos section
The section was closed to new employees in 2009 and to future accrual in January 2013. Pension benefits are based on service and final salary when leaving
the Scheme.
Triennial valuation
The Trustee’s triennial valuation is used to determine the contributions required for the Scheme to pay all the benefits due, now and in the future. The Trustee
must allow for a level of prudence and so these assumptions therefore place a relatively high value on the Scheme’s liabilities. By contrast, IAS 19 ‘Employee
Benefits’ requires all companies to value the liabilities on a ‘best estimate’ basis which places a lower value on the liabilities and therefore a more favourable
financial position. As such, the accounting value is different to the result obtained using the Trustee’s triennial valuation basis.
The Trustee completed a triennial valuation, carried out by Willis Towers Watson, as at 30 September 2018 on the projected unit basis and a recovery plan
was agreed. The deficit on the basis of the assumptions agreed was £538 million.
Under the funding plan, Sainsbury’s established a new Scottish Limited partnership – Sainsbury’s Thistle Scottish Limited Partnership (‘the Partnership’)
withthe Scheme on 17 July 2019.
Properties with a valuation of £1,350 million were transferred into a newly formed property holding company – Sainsbury’s Property Holdings Limited (‘Propco’)
from the Sainsbury’s Property Scottish Partnership and other Sainsbury’s Group Companies. The Propco is a wholly owned subsidiary of the Group and leases
the transferred properties to other Group companies. Rental receipts facilitate payments of interest and capital on loan notes issued to the Partnership, in which
the Scheme holds an interest.
The Partnership is controlled by Sainsbury’s and its results are consolidated by the Group. The Group’s balance sheet, IAS 19 deficit and income statement
are unchanged by the establishment of the Partnership. The Scheme’s investment in the Partnership does not qualify as a plan asset for the purposes of the
Group’s consolidated financial statements and is therefore not included within the fair value of plan assets.
The value of the properties transferred to the Propco remains in the Group’s property, plant and equipment on the balance sheet, and the Group retains full
operational flexibility to extend, develop and substitute them.
The Scheme’s interest in the Partnership entitles it to annual distributions over up to 20 years through three payment streams:
1) Payments to the Sainsbury’s section (£15 million per year)
2) Payments to the Argos section (£20 million per year)
3) Switching payment stream, paid to either the Sainsbury’s section or Argos section (initially approximately £23 million per year, increasing to £33 million
by 2038)
In addition to the above, cash contributions of £10 million were paid during the year (2021: cash contributions of £40 million).
The payments to the Sainsbury’s and Argos sections (streams 1 and 2) stop in 2030, or when the relevant section reaches its funding target, if earlier.
The switching stream is initially paid to the Sainsbury’s section until it reaches the funding target, when it will then switch to the Argos section. Payments
continue until 2038 or until both sections have reached their funding targets, if earlier.
The level of property in the Propco reduces as the Scheme reaches the funding targets.
The Sainsbury’s section reached its funding target on 31 December 2021, and so the first payment stream was switched off. The switching stream will move
to the Argos section from March 2022.
The next triennial funding valuation as at 30 September 2021 is currently being completed by the Trustee. The results of this valuation are not yet available.
IFRIC 14
Under IFRIC 14, a company is required to measure any economic benefits available to it in the form of refunds or reductions to future contributions at the
maximum amount that is consistent with the terms and conditions of the pension scheme. These are regarded as available to a company if it has an
unconditional right to realise them at some point during the life of the pension scheme or when all benefits are finally settled. Such an unconditional right
would not exist when the availability of the refund or the reduction in future contribution would be contingent upon factors beyond the company’s control.
Management is of the view that it has an unconditional right to a refund of surplus under IFRIC 14. As such no adjustment has been made for potential
additional liabilities.
In forming this conclusion management has considered whether the Group can control the run-off of the Scheme until there are no liabilities left, consistent
with IFRIC 14. For example, if the Trustee has a unilateral power to wind up the Scheme while there are liabilities remaining, then it is viewed that the Group
cannot access surplus through this route. For both sections, management have assessed that the Group can control run-off until no liabilities remain by
complying with its obligations under the Scheme rules and pensions legislation, and there will therefore be a gradual settlement of the planned liabilities over
the life of each section.
The Scheme rules list certain situations under which the Trustee can wind up the Scheme; however whilst there is gradual settlement of the Scheme’s
liabilities, these are concluded to be within the control of the Group. As a result, it is concluded that the Trustee does not have a unilateral power to wind up
the Scheme nor augment benefits while the Scheme is ongoing.
37 Retirement benefit obligations continued
179 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Unfunded pension liabilities
The unfunded pension liabilities are unwound when each employee reaches retirement and takes their pension from the Group payroll or is crystallised in the
event of an employee leaving or retiring and choosing to take the provision as a one-off cash payment.
a) Income statement
The amounts recognised in the income statement are as follows:


2022
£m
2021
£m
Excluded from underlying profit before tax:  
Interest cost on pension liabilities
1
(197) (163)
Interest income on plan assets 212 182
Total included in finance income 15 19
Defined benefit pension scheme expenses (7) (7)
Past service credit/(cost) 3 (6)
Total excluded from underlying profit before tax 11 6
Total income statement expense 11 6
1 Includes interest of £1 million for the unfunded pension scheme (2021: £1 million).
Past service credit
The past service credit of £3 million is in relation to a Pension Increase Exchange (PIE) option introduced in the Argos section following a deed of amendment
signed during the current financial year. The prior year past service cost relates to Guaranteed Minimum Pension (GMP) equalisation following a High Court
ruling in November 2020 regarding individual transfer payments.
b) Other comprehensive income
Re-measurements of the retirement benefit obligations have been recognised as follows:
2022
£m
2021
£m
Return on plan assets, excluding amounts included in interest 739 (458)

Actuarial gains/(losses) arising from changes in: 
Finance assumptions
1
334 (115)
Demographic assumptions
2
133 24
Experience
3
251 67
Total actuarial gains/(losses) 718 (24)

Total remeasurements 1,457 (482)
1 Includes £1 million for the unfunded pension scheme (2021: £nil).
2 Includes £1 million for the unfunded pension scheme (2021: £nil).
3 Includes £nil for the unfunded pension scheme (2021: £2 million loss).
37 Retirement benefit obligations continued
180 Financial Statements J Sainsbury plc Annual Report 2022
c) Balance sheet
The amounts recognised in the balance sheet are as follows:
2022 2021
Sainsbury’s
£m
Argos
£m
Group
£m
Sainsbury’s
£m
Argos
£m
Group
£m
Present value of funded obligations (8,060) (1,313) (9,373) (8,808) (1,410) (10,218)
Fair value of plan assets 10,158 1,535 11,693 9,596 1,404 11,000
Retirement benefit surplus/(deficit) 2,098 222 2,320 788 (6) 782
Present value of unfunded obligations (20) (17) (37) (21) (17) (38)
Retirement benefit surplus/(deficit) 2,078 205 2,283 767 (23) 744
The retirement benefit surplus and the associated deferred income tax balance are shown within different line items on the face of the balance sheet.
The movements in the Group’s net defined benefit surplus are as follows:


2022
£m
2021
£m
As at the beginning of the year 744 1,119
Net interest income 15 19
Remeasurement gains/(losses) 1,457 (482)
Pension Scheme expenses (7) (7)
Contributions by employer 71 101
Past service credit/(charge) 3 (6)
As at the end of the year 2,283 744
The movements in the retirement benefit obligations (including unfunded obligations) are as follows:


2022
£m
2021
£m
As at the beginning of the year (10,256) (10,372)
Interest cost (197) (163)
Remeasurement gains/(losses) 718 (24)
Benefits paid 322 309
Past service credit/(charge) 3 (6)
As at the end of the year (9,410) (10,256)
Analysed as:
Retirement benefit obligations (9,373) (10,218)
Unfunded obligations (37) (38)
The movements in the fair value of plan assets are as follows:
2022
£m
2021
£m
As at the beginning of the year 11,000 11,491
Interest income on plan assets 212 182
Pension Scheme expenses (7) (7)
Remeasurement gains/(losses) 739 (458)
Contributions by employer 71 101
Benefits paid (322) (309)
As at the end of the year 11,693 11,000
37 Retirement benefit obligations continued
181 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Significant estimate – pension scheme assets
The Scheme holds some private market assets as they are expected to deliver a more favourable risk/return profile than public market equivalents. These
assets are relatively illiquid (likely to be realised over c.5 years) but the Scheme holds sufficient liquid assets (cash, gilts and other liquid securities) to be
confident that it can meet its pension and collateral obligations over time.
The valuation of these assets is based on the audited accounts of the funds, where available, and net asset value statements from the investment managers
where recent accounts are not available. For many of the investments, the valuations provided are at 30 September. The Group therefore performs a roll-forward
for these valuations, adjusting for cash received or paid and applying the changes seen in relevant liquid indices as follows:
Asset class Returns from 30-Sep-21 to 5-Mar-22
Global equity USD return (3.22)%
Global High Yield Debt USD return (3.02)%
US loans USD return 0.51%
UK REITS GBP return (1.10)%
The roll-forward has increased the valuation of illiquid assets by £40 million. A 1 per cent increase/decrease in the indices used would have caused a £18 million
increase/decrease in the adjustment.
As at 5 March, the scheme has an immaterial exposure to Russian and Ukrainian assets, with market value totalling £6.0m, which represents only 0.05%
of total scheme assets.
Investment strategy and risks associated with the Group’s defined benefit pension scheme
The Trustee considers that its primary responsibility in respect of investments is to ensure, for the duration of the Scheme, that funds will be available
to meet the benefit payment obligations as they fall due. Based on this responsibility and its obligation to manage the investments, its investment objectives
are as follows:
In respect of the Sainsbury’s section:
1. Target a 50 per cent or better chance of being fully funded on a gilts + 0.5 per cent p.a. funding level basis by March 2022; and
2. To limit the downside risk associated with the investment policy, wherever possible.
In respect of the Argos section:
1. Target a 50 per cent or better chance of being fully funded on a gilts + 0.5 per cent funding level basis by September 2022; and
2. To limit the downside risk associated with the investment policy, wherever possible.
37 Retirement benefit obligations continued
182 Financial Statements J Sainsbury plc Annual Report 2022
37 Retirement benefit obligations continued
The risks associated with achieving the above strategy are as follows:
Risk Description Mitigation
Investment
strategy risk
Underperformance of Defined Benefit investment strategy
relative to the Pension Scheme’s liabilities reduces the future
resources available to meet pension obligations.
The Scheme adopts a liability driven investment framework to
generate excess asset returns with reference to its liabilities by
largely removing its interest and inflation uncertainties.
Investment
implementation
risk
Poor execution including investment manager
underperformance relative to their targets leads to lower
funding levels.
Over two thirds of investment mandates are managed to closely
follow a portfolio benchmark with limited investment decisions
made by managers.
Custody risk Inadequate controls lead to inaccurate record keeping and
loss of assets through investment fraud.
The top tier global custodian Northern Trust is used to oversee
the Scheme’s assets. The Trustee also uses an independent third
party to periodically review Northern Trust.
Sustainability,
including ESG
and climate risks
Investment managers have poor ESG, Stewardship and climate
risks oversight policies.
The Scheme incorporates ESG, stewardship and other related
risks into its Statement of Investment Principles (SIP) and
publishes an annual Implementation Statement. Investment
managers are requested to confirm whether they operate in line
with the Scheme’s official policies.
The approach that the Trustee has adopted as part of its
ongoing process to deliver a Net Zero goal by 2050 includes
investment decisions based on new climate governance and
reporting standards, engagement with corporates and
government, maintaining outcomes focused climate objectives
in investments and the role of the Scheme’s investment
managers in signing up to the UN Principles of Responsible
Investment and having Net Zero targets.
Investment
regulatory risk
Insufficient training and awareness of regulatory
requirements results in non-compliance with regulations .
The Scheme is advised by Eversheds Sutherland on legal and
regulatory matters, and closely follows changes in regulatory
and other legal requirements for pensions and investments.
Periodic training is provided to the Investment Committee,
advisers, and if necessary, the full Board by relevant experts.
Investment
liquidity risk
Insufficient liquidity to meet ongoing cashflow requirements
in respect of member benefit payments.
The Scheme adopts a collateral sufficiency framework which
ensures sufficient high quality liquid assets are maintained in
order to meet liquidity requirements, even in times of market
stress. The Investment Adviser liaises with the Scheme Actuary
to understand future cash flow requirements.
Investment
counterparty risk
Financial losses may be incurred due to failure of
counterparties or inability to roll-over derivative positions
Asset Managers manage credit limits for all their derivative
counterparty exposures and monitor positions over derivative
roll dates.
Longevity risk The Scheme pays benefits longer than expected due to
Scheme members’ increasing life expectancy.
Longevity risk is managed as part of the Scheme’s integrated
risk management framework. The Scheme monitors longevity
risk closely and aims to achieve sufficient funding level by
meeting milestone targets to prepare for members’ increasing
life expectancy.
Currency risk The Scheme’s unhedged foreign currency exposure leads to
additional volatility for non-sterling denominated assets’ returns.
Foreign currency exposure is closely monitored and hedging
programmes are implemented to efficiently control foreign
currency risk at reasonable hedging costs.
183 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
The major categories of plan assets are as follows:
Quoted
2022
£m
Unquoted
1
2022
£m
Quoted
2021
£m
Unquoted
2021
£m
Equity
Private – 393 – 304

Bonds
2
Government Bonds 3,241 19 1,356 76
Corporate Bonds 4,038 1,478 5,378 507
Emerging Market Bonds 139 4 380 8

Derivatives
3
115 379 164 581

Alternatives
Real Estate – 593 – 670
Private Debts – 733 – 690
Diversified Growth – 301 – 286
Cash and Cash equivalents 260 – 596 4
 7,793 3,900 7,874 3,126
1 Certain unquoted fixed interest securities, private equity and debt investments and property investments are stated at fair value. These fair values may differ from their realisable values due to the absence of liquid
markets in these investments.
2 Bonds – circa 84 per cent of the Scheme’s corporate bonds are invested in investment grade credit. The remainder are either unrated or below investment grade.
3 Swap contract derivatives outstanding at the year-end are stated at the net present value of future discounted cash flows of each leg of the swap.
Of the above assets, £5,575 million are denominated in sterling and £6,118 million are denominated in overseas currencies.
d) Assumptions
The principal actuarial assumptions used at the balance sheet date are as follows:


2022
%
2021
%
Discount rate 2.40 1.95
Inflation rate – RPI 3.60 3.15
Inflation rate – CPI 2.90 2.45
Future pension increases 2.30 – 3.45 2.15 – 3.10
Discount rate
The discount rate for the Scheme is derived from the expected yields on high quality corporate bonds over the duration of the Group’s pension scheme and
extrapolated in line with gilts with no theoretical growth assumptions. High quality corporate bonds are those for which at least one of the main ratings
agencies considers to be at least AA (or equivalent).
Inflation
On 25 November, the Government and UK Statistics Authority’s joint consultation response on RPI reform was published. This confirmed their intention to
amend the RPI calculation methodology to be aligned to that already in use for the calculation of the CPI (including housing) with effect from 2030. As a
result, the Group reduced the post 2030 gap between RPI and CPI to nil in the prior year, effectively assuming RPI will be aligned with CPI post 2030, resulting
in a single weighted average RPI-CPI gap of 0.70% p.a. for the 5th March 2022 year-end. This approach has been applied consistently in the current year.
Mortality
The base mortality assumptions are based on the SAPS S2 tables, with adjustments to reflect the Scheme’s population. Future mortality improvements for
the 2022 year-end are CMI 2021 projections with a long term rate of improvement of 1.25 per cent p.a. Future mortality improvements for the 2021 year-end
were CMI 2020 projections with a long term rate of improvement of 1.25 per cent p.a.
While Covid-19 had an impact on mortality in 2020, the impact on future mortality trends is currently unknown. All IAS 19 calculations use the CMI model,
which measures potential changes to future mortality trends. The Group’s policy is to use the available version as at the year-end (the 2021 results used the
CMI 2020 model). The latest CMI model, CMI 2021, was released on 9 March 2022.
The CMI 2020 model showed a significant reduction of 11.8 per cent in the 2020 rates of longevity for the general population. This is well outside the range
of annual mortality changes in the last 40 years.
As a result of this significant change in mortality, the CMI modified the calibration process for CMI 2020 to allow choice on the weighting placed on an
individual year’s data. For the Core version of CMI 2020, a weight of zero per cent was applied to 2020 data and weightings of 100 per cent for other years,
so the potentially exceptional 2020 experience was ignored when modelling future improvements. This approach has been maintained for CMI 2021,
with zero per cent weighting applied to 2020 and 2021 data. In the prior year, the Group determined that putting a high weighting on the impact of 2020
could undervalue the liability so a zero per cent weighting was therefore applied to the 2020 mortality data.
37 Retirement benefit obligations continued
184 Financial Statements J Sainsbury plc Annual Report 2022
The level and quality of knowledge on the long-term impact of COVID-19 is still uncertain, however there have now been two years of adverse experience
and management is of the opinion that this justifies some allowance in long-term mortality trends. The choice of weighting to apply to 2020 and 2021 data
is judgemental. The UK has continued to see the impact of the pandemic into 2021 with significant excess deaths compared to pre-pandemic levels.
Deaths for 2021 are therefore expected to be higher than 2019 but not as high as 2020 given the success, thus far, of the vaccination programme at reducing
hospitalisations and deaths. With 2020 and 2021 experiencing negative mortality improvements relative to 2019, it is felt that it would be overly conservative
to adopt the Core CMI 2021 model which shows improvements in mortality in 2020, 2021 and beyond.
A 10 per cent weighting has therefore been applied to the 2020 and 2021 mortality data, broadly reflecting that the effects of the pandemic are significantly
reduced going forwards with mortality rates for 2022 immediately returning to those in 2019. Thereafter, mortality improvements are in line with the CMI 2021
Core model. The impact of different weightings on the Scheme liabilities is included in the sensitivities section within this note.
The life expectancy for members aged 65 years at the balance sheet date is as follows:
Sainsbury’s
section
Main Scheme
2022
Years
Sainsbury’s
section
Executive
Scheme
2022
Years
Argos
section
2022
Years
Sainsbury’s
section
Main Scheme
2021
Years
Sainsbury’s
section
Executive
Scheme
2021
Years
Argos
section
2021
Years
Male pensioner 19.6 23.8 21.3 20.0 24.1 21.7
Female pensioner 23.5 25.0 23.9 23.8 25.3 24.0
The life expectancy at age 65 for members aged 45 years at the balance sheet date is as follows:
Sainsbury’s
section
Main Scheme
2022
Years
Sainsbury’s
section
Executive
Scheme
2022
Years
Argos
section
2022
Years
Sainsbury’s
section
Main Scheme
2021
Years
Sainsbury’s
section
Executive
Scheme
2021
Years
Argos
section
2021
Years
Male pensioner 20.8 25.0 22.5 21.3 25.3 23.0
Female pensioner 25.0 26.5 25.4 25.3 26.7 25.5
e) Sensitivities
The present value of the Scheme’s liabilities recognised at the balance sheet date and the net financing charge recognised in the income statement are
dependent on the discount rate. Other key assumptions within this calculation are based on market conditions or estimates of future events, including
mortality rates. The carrying value of the retirement benefit obligations is impacted by changes to any of the assumptions used, however is most sensitive to
changes in the discount rate.
The following sensitivities are based on management’s best estimate of a reasonably anticipated change. The sensitivities are calculated using the same
methodology used to calculate the retirement benefit obligation, by considering the impact for a given change in assumption. The net retirement benefit
obligation is the difference between the retirement benefit obligation and the fair value of plan assets. Changes in the assumptions may occur at the same
time as changes in the fair value of plan assets. There has been no change in the calculation methodology since the prior period.
Sainsbury’s
£m
Argos
£m
Total
£m
Financial sensitivities
An increase of 0.5% in the discount rate would decrease the present value of funded obligations by 673 120 793
A decrease of 0.5% in the discount rate would increase the present value of funded obligations by 763 138 901
An increase of 0.5% in the inflation rate would increase the present value of funded obligations by 399 109 508
A decrease of 0.5% in the inflation rate would decrease the present value of funded obligations by 409 99 508
An increase of 0.5% in the inflation rate for future pension increases would increase the present value of funded obligations by 202 64 266
A decrease of 0.5% in the inflation rate for future pension increases would reduce the present value of funded obligations by 233 60 293
Demographic sensitivities
An increase of one year to the life expectancy would increase the present value of funded obligations by 347 55 402
Changing the 2020 and 2021 weighting parameters in CMI 2021 to 0% would increase the present value of funded obligations by 108 17 125
Changing the 2020 and 2021 weighting parameters in CMI 2021 to 25% would decrease the present value of funded
obligations by
104 17 121
37 Retirement benefit obligations continued
185 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
f) Future benefit payments
Details of future committed payments are included in the Background section at the beginning of this note. Expected cash contributions in FY22/23 are
approximately £62 million.
The duration of the plan liabilities is around 19 years for the Sainsbury’s section and 21 years for the Argos section. The following table provides information
on the timing of benefit payments (amounts undiscounted):


2022
£m
2021
£m
Within the next 12 months (next annual reporting period) 240 199
Between 2 and 5 years 1,003 936
Between 6 and 15 years 3,644 3,662
Between 16 and 25 years 4,176 4,317
Beyond 25 years 6,362 6,591
Total expected payments 15,425 15,705
38 Share-based payments
Accounting policies
The Group provides benefits to employees (including Directors) of the Group in the form of equity-settled and cash-settled share-based payment
transactions, whereby employees render services in exchange for shares, rights over shares or the value of those shares in cash terms.
For equity-settled share-based payments, the fair value of the employee services rendered is determined by reference to the fair value of the shares awarded
or options granted, excluding the impact of any non-market vesting conditions. All share options are valued using an option-pricing model (Black-Scholes).
This fair value is charged to the income statement over the vesting period of the share-based payment scheme with a corresponding increase in equity.
For cash-settled share-based payments, the fair value of the employee services rendered is determined at each balance sheet date and the charge
recognised through the income statement over the vesting period of the share-based payment scheme, with a corresponding increase in accruals.
The value of the charge is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting,
with the corresponding adjustments made in equity and accruals.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital
contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an
increase to investment in subsidiary undertakings, with a corresponding credit to equity.
The Group recognised £58 million (2021: £29 million) of employee costs (note 36) related to share-based payment transactions made during the financial year.
Of these, a credit of £1.5 million (2021: £0.5 million credit) was cash-settled.
The Group operates several share-based payment schemes as set out below:
a) Savings-Related Share Option Scheme (Sharesave)
The Group operates a Savings-Related Share Option Scheme, which is open to all UK employees with more than three months’ continuous service. This is an
approved HMRC scheme and was established in 1980. Under Sharesave, participants remaining in the Group’s employment at the end of the three-year (and
historically also five-year) savings period are entitled to use their savings to purchase shares in the Company at a stated exercise price.
Employees leaving for certain reasons can use their savings to purchase shares within six months of their leaving.
A reconciliation of Sharesave option movements is shown below:
2022
Number of
options
million
2022
Weighted
average
exercise price
pence
2021
Number of
options
million
2021
Weighted
average
exercise price
pence
Outstanding at beginning of year 64.1 179 60.8 190
Granted 13.8 228 23.7 161
Lapsed/forfeited (10.0) 179 (11.4) 196
Exercised (9.6) 204 (9.0) 186
Outstanding at end of year 58.3 186 64.1 179
Exercisable at end of year 4.7 238 6.2 186
Exercisable range 161 to 260 161 to 260
37 Retirement benefit obligations continued
186 Financial Statements J Sainsbury plc Annual Report 2022
The weighted average share price for options exercised over the year was 259 pence (2021: 216 pence). The weighted average remaining contractual life of
options outstanding at 5 March 2022 was 1.8 years (2021: 2.2 years).
Options granted during the year were valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair value
calculations. The fair value per option granted during the year and the assumptions used in the calculation are as follows:
 2022 2021
Share price at grant date (pence) 277 226
Exercise price (pence) 228 161
Expected volatility – 3 year period (%) 30.8 29.9
Option life – 3 year period (years) 3.2 3.2
Expected dividends (expressed as dividend yield %) 4.0 5.2
Risk-free interest rate – 3 year period (%) 0.1 0.1
Fair value per option – 3 year period (pence) 59 55
The expected volatility is based on the standard deviation of the Group’s share price for the period immediately prior to the date of grant of award, over the
period identical to the vesting period of the award, adjusted for management’s view of future volatility of the share price.
b) Long-Term Incentive Plan
Under the Long-Term Incentive Plan, shares are conditionally awarded to the senior managers in the Company. The core awards are calculated as a
percentage of the participants’ salaries and scaled according to grades.
Performance is measured at the end of the three-year performance period. If the required performance conditions have been met, the awards vest and the
participants are able to exercise 100% of the awards received. For 2020 awards and prior, recipients were only able to receive 50% of their awards after 3 years
and 50% of their awards after 4 years. Options granted will expire five years from the grant date.
For Executive Directors, awards will normally be subject to a two-year holding period following the end of the three-year performing period. Options granted
to acquire the award of shares will expire six years from the date of grant.
Dividends will accrue on the shares that vest in the form of additional shares.
The core award can grow by up to four times, dependent on the level of performance. Straight-line vesting will apply if performance falls between two points.
Awards are structured as nil cost options.
A reconciliation of the number of shares conditionally allocated is shown below:
2022
Million
2021
Million
Outstanding at beginning of year 12.2 10.2
Conditionally allocated 12.9 7.8
Released to participants (5.0) (4.4)
Lapsed (1.6) (1.4)
Outstanding at end of year 18.5 12.2
The weighted average remaining contractual life of share options outstanding at 5 March 2022 was 1.5 years (2021: 1.4 years).
Details of shares conditionally allocated at 5 March 2022 are set out below:

Date of conditional award
2022
Million
2021
Million
12 May 2016 (2016 Future Builder) – 0.1
11 May 2017 (2017 Future Builder) 1.1 3.3
11 May 2018 (2018 Future Builder) 2.8 2.1
09 May 2019 (2019 Future Builder) 2.9 3.1
07 May 2020 (2020 Future Builder) 3.3 3.6
06 Jun 2021 (2021 Win in Food Plan) 8.4 –
 18.5 12.2
The 2021 Win in Food Plan was opened up to a larger population of managers, which has driven through the higher amount of options granted for the year.
This was a one-off increase specifically for the 2021 Win in Food Plan.
38 Share-based payments continued
187 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
No performance conditions were included in the fair value calculations. The fair value per option granted during the year and the assumptions used in the
calculation are as follows:
2022 2021
Share price at grant date (pence) 267 199
Option life (years) 3 3 or 4
Fair value per option (pence) 267 199
During the year, a total number of 5.0 million shares were exercised (2021: 4.4 million shares). The weighted average share price during the year for options
exercised was 248 pence (2021: 194 pence).
c) Deferred Share Award
This plan is closed to new participants; the last awards made under this plan were in 2020/21. The Deferred Share Award targets a diverse range of financial
and strategic scorecard measures. These are intended to reward the Directors in the Company, including Executive Directors, for driving the short-term
objectives that will directly lead to building the sustainable, long-term growth of the Company. Awards are structured as nil cost options.
Share-based awards are made to participants subject to performance against a basket of measures. At least 50 per cent of the awards are based on the
delivery of financial performance and returns to shareholders. The balance is based on measures which will assess the Company’s performance relative to its
competitors as well as key strategic goals.
Performance against the target is measured over one financial year. Any shares awarded are deferred for a further two years to ensure that management’s
interests continue to be aligned with those of shareholders. The shares are subject to forfeiture if the participant resigns or is dismissed. Dividends accrue on
the shares that vest in the form of additional shares.
A reconciliation of the number of shares granted over the year is shown below:


2022
Million
2021
Million
Outstanding at beginning of year 3.6 3.8
Granted 0.2
1
2.1
Lapsed (0.1) (0.6)
Exercised (2.0) (1.7)
Outstanding at end of year 1.7 3.6
1. The awards Granted in 2022 relate to dividend shares awarded.
The number of shares allocated at the end of the year is set out below:


2022
Million
2021
Million
09 May 2019 0.1 1.9
07 May 2020 1.6 1.7
 1.7 3.6
The weighted average remaining contractual life of share options outstanding at 5 March 2022 was nil years (2021: 0.5 years). The weighted average share
price during the year for options exercised was 241 pence (2021: 195 pence).
d) Bonus Share Award
Senior managers and supermarket managers receive 60 per cent of their bonus in cash and 40 per cent of the award in shares. Director level managers receive
50 per cent of their bonus in cash and 50 per cent of the award in shares. Before 2021 awards had a three year deferral period, however awards granted from
2021 now have a deferral period of two years (except for colleagues who are subject to a deferral period due to certain financial service regulations).
Dividends accrue on these shares and are released at the end of the deferral period.
38 Share-based payments continued
188 Financial Statements J Sainsbury plc Annual Report 2022
A reconciliation of the number of shares granted over the year is shown below:


2022
Million
2021
Million
Outstanding at beginning of year 10.6 12.7
Granted 12.6 1.7
Exercised in the period (4.3) (2.9)
Lapsed (1.7) (0.9)
Outstanding at end of year 17.2 10.6
The number of shares allocated at the end of the year is set out below:


2022
Million
2021
Million
11 May 2018 – 3.2
09 May 2019 5.1 6.1
07 May 2020 1.1 1.3
07 May 2021 11.0 –
 17.2 10.6
The weighted average remaining contractual life of share options outstanding at 5 March 2022 was 0.7 years (2021: 0.8 years). The weighted average share
price during the year for options exercised was 242 pence (2021: 184 pence).
39 Capital commitments
At 5 March 2022, capital commitments contracted, but not provided for by the Group, amounted to £108 million (6 March 2021: £113 million) and £nil for the
property joint ventures (6 March 2021: £nil).
In addition, the Group is committed to payments totalling £nil (2021: £32 million) in relation to leases that have been signed but not yet commenced.
40 Contingent liabilities and contingent assets
The Group has a number of contingent liabilities in respect of historic lease guarantees, particularly in relation to the disposal of assets, which if the current
tenant and their ultimate parents become insolvent, may expose the Group to a material liability. This liability decreases over time as the leases expire.
The Group has considered a number of factors, including past history of default as well as the profitability and cash generation of the current leaseholders,
and has concluded that the likelihood of pay out is remote.
Along with other retailers, the Group is currently subject to claims from current and ex-employees in the Employment Tribunal for equal pay under the
Equality Act 2010 and/or the Equal Pay Act 1970. There are currently circa 8,600 equal pay claims from circa 4,400 claimants, in which the claimants are
alleging that their work within Sainsbury’s stores is or was, of equal value to that of colleagues working in Sainsbury’s distribution centres, and that
differences in terms and conditions relating to pay are not objectively justifiable. The claimants are seeking the differential back pay based on the higher
wages in distribution centres, and the equalisation of wages and terms and conditions on an ongoing basis. The Group believes further claims will be served.
There are three stages in the tribunal procedure for equal value claims of this nature and the claimants will need to succeed in all three. The first stage is
whether store claimants have the legal right to make the comparison with depot workers. Following European and Supreme Court decisions in other similar
litigation, Sainsbury’s has conceded this point. The second stage is the lengthy process to determine whether any of the claimants’ roles are of equal value to
their chosen comparators. This process is likely to continue for several more years. In the event that any of the claimants succeed at the second stage there
will be further hearings, in the years following, to consider whether any pay differential is justified.
Given that the outcome of the second and third stages in the litigation remains highly uncertain at this stage, the Group cannot make any assessment of the
likelihood nor quantum of any outcome. No provision has therefore been recognised on the Group’s balance sheet. There are substantial factual and legal
defences to these claims and the Group intends to defend them vigorously.
As disclosed in note 5 to the financial statements, the Group had a number of ongoing legal cases in relation to overcharges arising from payment card
interchange fees. During the year settlements have been reached in two of these cases, resulting in non-underlying income of £167 million being recognised.
The last of these cases goes to trial for a final determination of quantum in early 2023. A range of possible outcomes is possible, including £nil. As the
outcome and quantum of any award is not virtually certain no income has been recognised in accordance with IAS 37: ‘Provisions, Contingent Liabilities
and Contingent Assets’.
38 Share-based payments continued
189 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
41 Related party transactions
a) Key management personnel
The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board. The key management
personnel compensation is as follows:


2022
£m
2021
£m
Short-term employee benefits 12 9
Post-employment employee benefits 1 1
Share-based payments 6 5
 19 15
Three key management personnel had credit card balances with Financial Services (2021: five). These arose in the normal course of business and were
immaterial to the Group and the individuals. One key management personnel held saving deposit accounts with Financial Services (2021: three). These
balances arose in the normal course of business and were immaterial to the Group and the individuals.
b) Joint ventures and associates
Transactions with joint ventures and associates
For the 52 weeks to 5 March 2022, the Group entered into various transactions with joint ventures and associates as set out below. All transactions with joint
ventures and associates are at arm’s-length.


2022
£m
2021
£m
Dividends and distributions received 2 4
Rental expenses paid (8) (6)
Year-end balances arising from transactions with joint ventures and associates


2022
£m
2021
£m
Other payables (1) (2)
c) Retirement benefit obligations
As discussed in note 37, the Group has entered into an arrangement with the Pension Scheme Trustee as part of the funding plan for the actuarial deficit in
the Scheme. Full details of this arrangement are set out in note 37 to these financial statements.
42 Post balance sheet events
In light of the events in Russia and Ukraine, which continued to evolve subsequent to the Group’s balance sheet date, it has been concluded that the conflict
has no material impacts on the Group’s financial statements.
190 Financial Statements J Sainsbury plc Annual Report 2022
43 Details of related undertakings
All companies listed below are owned by the Group and all interests are in the ordinary share capital, except where otherwise indicated. All subsidiaries have
been consolidated.
a) Subsidiary undertakings
The Group holds a majority of the voting rights of the following undertakings:
Entity Country of incorporation Interest Holding Address*
ARG Personal Loans Limited UK 100% Indirect Avebury
ARG Services Limited
†
UK 100% Indirect 33 Holborn
Argos Best Sellers Limited
†
UK 100% Indirect 33 Holborn
Argos Business Solutions Limited UK 100% Indirect Avebury
Argos Card Transactions Limited UK 100% Indirect 33 Holborn
Argos Direct Limited UK 100% Indirect 33 Holborn
Argos Distributors (Ireland) Limited Ireland 100% Indirect Unit 7, Ashbourne Retail Park
Argos Holdings Limited UK 100% Indirect Avebury
Argos Limited UK 100% Indirect Avebury
Argos (N.I.) Ltd UK 100% Indirect Forestside Shopping Centre
Argos Retail Group Limited
†
UK 100% Indirect 33 Holborn
Argos Superstores Limited
†
UK 100% Indirect 33 Holborn
Argos Surbs Investments Limited UK 100% Indirect Avebury
Barleygold Limited UK 100% Indirect 50 Bedford Street
Bed Store & More Limited
†
UK 100% Indirect 33 Holborn
Bells Stores Limited UK 100% Direct 33 Holborn
BLSSP (PHC 7) Limited UK 100% Indirect 33 Holborn
Braemar Castle Limited UK 100% Direct 33 Holborn
Brand-Leader's Limited UK 100% Indirect 33 Holborn
Chad Valley Limited UK 100% Indirect 33 Holborn
Clearance Bargains Limited UK 100% Indirect 33 Holborn
Cliffrange Limited UK 100% Indirect 33 Holborn
Coolidge Investments Limited UK 100% Indirect 33 Holborn
Financial Recovery Services Limited UK 100% Indirect Avebury
First Stop Stores Limited UK 100% Indirect 33 Holborn
Flint Castle Limited UK 100% Direct 33 Holborn
Global (Guernsey) Limited Guernsey 100% Indirect PO Box 33 Dorey Court
Habitat Retail Limited UK 100% Indirect Avebury
Holborn UK Investments Limited UK 100% Direct 33 Holborn
Home Retail Group Limited UK 100% Indirect Avebury
Home Retail Group (Cyprus) Limited Cyprus 100% Indirect 5 Anastasios Leventis Street
Home Retail Group (Finance) LLP UK 100% Indirect Avebury
Home Retail Group (Guernsey) LP Guernsey 100% Indirect PO Box 33 Dorey Court
Home Retail Group (Jersey) Limited Jersey 100% Indirect 44 Esplanade
Home Retail Group (UK) Limited UK 100% Indirect Avebury
Home Retail Group Card Services Limited UK 100% Indirect Avebury
Home Retail Group Holdings (Overseas) Limited UK 100% Indirect 33 Holborn
Home Retail Group Insurance Services Limited UK 100% Indirect Avebury
Home Retail Group Nominees Limited UK 100% Indirect 33 Holborn
Home Retail Group Pension Scheme Nominees Limited
†
UK 100% Indirect Avebury
Home Retail Group UK Service Company Limited UK 100% Indirect 33 Holborn
Home Store & More Limited
†
UK 100% Indirect 33 Holborn
J Sainsbury Limited
†
Ireland 100% Direct 6th Floor, South Bank House
J Sainsbury Common Investment Fund Limited UK 100% Indirect 33 Holborn
J Sainsbury Distribution Limited UK 100% Direct 33 Holborn
J Sainsbury Pension Scheme Trustees Limited UK 100% Direct 33 Holborn
J Sainsbury Trustees Limited UK 100% Indirect 33 Holborn
Jacksons Stores Limited UK 100% Direct 33 Holborn
Jacksons Stores 2002 Limited UK 100% Indirect 33 Holborn
JS Information Systems Limited UK 100% Direct 33 Holborn
JS Insurance Limited Isle of Man 100% Direct Third Floor, St George's Court
JSD (London) Limited UK 100% Indirect 33 Holborn
* See full addresses on page 193.
† Dissolved subsequent to 5 March 2022.
191 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Entity Country of incorporation Interest Holding Address*
Jungle Online UK 100% Indirect 33 Holborn
Jungle.com Limited UK 100% Indirect 33 Holborn
Jungle.com Holdings Limited UK 100% Indirect 33 Holborn
Nash Court (Kenton) Limited UK 100% Indirect 33 Holborn
Nectar 360 Limited UK 100% Indirect 33 Holborn
Nectar 360 Services LLP UK 100% Indirect 33 Holborn
Nectar EMEA Limited UK 100% Indirect 33 Holborn
Nectar Loyalty Holding Limited UK 100% Direct 33 Holborn
Premier Incentives Limited
†
UK 100% Indirect 33 Holborn
Ramheath Properties Limited UK 100% Direct 33 Holborn
Sainsbury Bridgeco Holdco Limited UK 100% Direct 33 Holborn
Sainsbury Holdco A Limited UK 100% Direct 33 Holborn
Sainsbury Holdco B Limited UK 100% Direct 33 Holborn
Sainsbury Propco A Limited UK 100% Indirect 33 Holborn
Sainsbury Propco B Limited UK 100% Indirect 33 Holborn
Sainsbury Propco C Limited UK 100% Direct 33 Holborn
Sainsbury Propco D Limited UK 100% Direct 33 Holborn
Sainsbury Property Investments Limited UK 100% Direct 33 Holborn
Sainsbury's Argos Asia Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury’s Argos Asia Commercial Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury’s Argos Asia Sourcing Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury's Argos Asia Technical Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury’s Argos Commercial Consulting (Shanghai) Limited China 100% Indirect 26/F, Tower 1
Sainsbury's Bank plc UK 100% Direct 33 Holborn
Sainsbury's Convenience Stores Limited
†
UK 100% Direct 33 Holborn
Sainsburys Corporate Director Limited UK 100% Direct 33 Holborn
Sainsbury’s Corporate Healthcare Trustee Limited
(formerly Argos Extra Limited)
UK 100% Direct 33 Holborn
Sainsbury’s Corporate Secretary Limited UK 100% Direct 33 Holborn
Sainsbury’s Group Holdings Limited UK 100% Direct 33 Holborn
Sainsbury's Heather GP Limited UK 100% Indirect 3 Lochside Avenue
Sainsbury's Intermediate Holdings Limited UK 100% Direct 33 Holborn
Sainsbury's Limited
†
Ireland 100% Direct 6th Floor, South Bank House
Sainsbury's Limited** UK 100% Direct 3 Lochside Avenue
Sainsbury's Manor GP Limited UK 100% Direct 3 Lochside Avenue
Sainsbury's Manor II Property Limited UK 100% Direct 3 Lochside Avenue
Sainsbury's Manor Property Limited UK 100% Direct 3 Lochside Avenue
Sainsburys (NI) Ltd UK 100% Indirect Forestside Shopping Centre
Sainsbury's Planet Limited
†
UK 100% Direct 33 Holborn
Sainsbury’s Property Scottish Limited Partnership UK 100% Indirect 3 Lochside Avenue
Sainsbury’s Property Scottish Partnership UK 100% Indirect 3 Lochside Avenue
Sainsbury's Rose LP Limited UK 100% Indirect 33 Holborn
Sainsbury’s SL Limited UK 100% Direct 33 Holborn
Sainsbury's Supermarkets Ltd UK 100% Direct 33 Holborn
Sainsbury’s Thistle Scottish Limited Partnership UK 100% Indirect 3 Lochside Avenue
Sainsbury’s Tyne Property Holdings Limited UK 100% Indirect 33 Holborn
Software Warehouse Holdings Limited UK 100% Indirect 33 Holborn
Stamford House Investments Limited UK 100% Direct 33 Holborn
Stamford Properties One Limited UK 100% Direct 33 Holborn
Stamford Properties Three Limited UK 100% Direct 33 Holborn
Stamford Properties Two Limited UK 100% Direct 33 Holborn
Stanhope Finance Limited UK 100% Indirect 33 Holborn
Tintagel Castle Limited UK 100% Direct 33 Holborn
Town Centre Retail (Bicester) Limited UK 100% Indirect 33 Holborn
43 Details of related undertakings continued
* See full addresses on page 193.
** An application has been made to strike off this company from the Companies Register.
† Dissolved subsequent to 5 March 2022.
192 Financial Statements J Sainsbury plc Annual Report 2022
b) Associated undertakings
The Group has a participating interest in the following undertakings:
Entity Country of incorporation Interest Holding Address*
3BW Limited UK 50% Indirect 5 St John’s Lane
Harvest 2 GP Limited UK 50% Indirect 100 Victoria Street
Harvest 2 Limited Partnership UK 50% Indirect 100 Victoria Street
Harvest Development Management Limited UK 50% Indirect 100 Victoria Street
Harvest GP Limited UK 50% Indirect 100 Victoria Street
Hedge End Park Limited UK 50% Direct 33 Holborn
c) Undertakings other than subsidiaries and associated undertakings
The direct or indirect holder of 100 per cent of the voting interests in the following undertakings is an associate of the Group:
Entity Country of incorporation Interest Holding Address*
BLSSP (Cash Management) Limited** UK 50% Indirect York House
BLSSP Property Holdings Limited** UK 50% Indirect York House
Harvest 2 Selly Oak Limited UK 50% Indirect 100 Victoria Street
BL Sainsbury Superstores Limited UK 50% Indirect York House
British Land Superstores (Non-Securitised) UK 50% Indirect York House
Pencilscreen Limited UK 50% Indirect York House
d) Overseas branches
The Group has the following branches overseas:
Entity Country Holding Address*
Sainsbury’s Argos Asia Limited – Bangladesh Liaison Office Bangladesh Indirect Level 10, Simpletree Anarkali
Sainsbury’s Argos Asia Limited – India Branch Office India Indirect Unit No. 1, 1st Floor, Ambience Corporate Tower II
* See full addresses below.
** An application has been made to strike off this company from the Companies Register.
Address Full address
3 Lochside Avenue 3 Lochside Avenue, Edinburgh, EH12 9DJ, United Kingdom
5 Anastasios Leventis Street 5 Anastasios Leventis Street, Leventis Gallery Tower, 8th Floor, 1097 Nicosia, Cyprus
5 St John’s Lane 5 St John’s Lane, London, EC1M 4BH, United Kingdom
6th Floor, South Bank House 6th Floor, South Bank House, Barrow Street, Dublin 4, D04 TR29, Ireland
Unit 904, 9/F, Tower 2 Unit 904, 9/F, Tower 2, The Quayside, 77 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong
26/F, Tower 1 26/F, Tower 1, Kerry Everbright City Phase III-Enterprise Centre, No.128, West Tian Mu Road,
Shanghai 200070, People’s Republic of China
33 Holborn 33 Holborn, London, EC1N 2HT, United Kingdom
44 Esplanade 44 Esplanade, St Helier, Jersey, JE4 9WG, Channel Islands
50 Bedford Street 50 Bedford Street, Belfast, BT2 7FN, United Kingdom
100 Victoria Street 100 Victoria Street, London, SW1E 5JL, United Kingdom
Avebury Avebury, 489-499 Avebury Boulevard, Milton Keynes, MK9 2NW, United Kingdom
Forestside Shopping Centre Forestside Shopping Centre, Upper Galwally, Belfast, BT8 6FX, United Kingdom
Level 10, Simpletree Anarkali Level 10, Simpletree Anarkali, 89 Gulshan Avenue Plet 03, Block – CWS(A),
Dhaka – 1212 Bangladesh
PO Box 33 Dorey Court PO Box 33, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 4AT
Third Floor, St George’s Court Third Floor, St George’s Court, Upper Church Street, Douglas, IM1 1EE, Isle of Man
Unit 7, Ashbourne Retail Park Unit 7, Ashbourne Retail Park, Ballybin Road, Ashbourne, Co. Meath, Ireland
Unit No. 1, 1st Floor, Ambience Corporate Tower II Unit No. 1, 1st Floor, Ambience Corporate Tower II, Ambience Island, NH-8, Gurgaon – 122011,
Haryana, India
York House York House, 45 Seymour Street, London, W1H 7LX, United Kingdom
43 Details of related undertakings continued
193 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Note
2022
£m
2021
£m
Non-current assets
Investments in subsidiaries, joint ventures and associates 2 7,668 7,610
Financial assets at fair value through other comprehensive income – 1
Trade and other receivables 3 149 161
7,817 7,7 72
Current assets
Trade and other receivables 3 2,080 1,489
Taxes receivable – 16
Derivative financial assets 7 14
Cash and cash equivalents 14 353
2,101 1,872
Total assets 9,918 9,644
Current liabilities
Trade and other payables 4 (3,499) (2,789)
Borrowings 5 – (199)
Derivative financial liabilities (7) (1)
Provisions – (1)
(3,506) (2,990)
Net Current liabilities (1,405) (1,118)
Non-current liabilities
Derivative financial liabilities – (13)
Deferred income tax liability 6 (16) (12)
Provisions (1) –
(17) (25)
Total liabilities (3,523) (3,015)
Net assets 6,395 6,629
Equity
Called up share capital 7 668 637
Share premium 7 1,406 1,173
Merger reserve 7 568 568
Capital redemption reserve 7 680 680
Other reserves 7 2 3
Retained earnings 8 3,071 3,320
Total equity before perpetual securities 6,395 6,381
Perpetual convertible bonds – 248
Total equity 6,395 6,629
The loss after tax for the Company for the year was £(68) million (2021: loss of £(202) million). The notes on pages 196 to 199 form an integral part of these
financial statements.
The financial statements on pages 194 to 199 were approved by the Board of Directors on 27 April 2022, and are signed on its behalf by:
Simon Roberts Kevin O’Byrne
Chief Executive Chief Financial Officer
The Company’s registered number is 00185647.
Company balance sheet
At 5 March 2022 and 6 March 2021
194 Financial Statements J Sainsbury plc Annual Report 2022

Note
Called up
share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Capital
redemption
and other
reserves
£m
Retained
earnings
£m
Total equity
before
perpetual
securities
£m
Perpetual
capital
securities
£m
Perpetual
convertible
bonds
£m
Total
equity
£m
At 7 March 2021 637 1,173 568 683 3,320 6,381 – 248 6,629
Loss for the year 8 – – – – (68) (68) – – (68)
Other comprehensive loss – – – (1) – (1) – – (1)
Total comprehensive expense for the
year ended 5 March 2022
– – – (1) (68) (69) – – (69)
Transactions with owners:
Dividends 8 – – – – (238) (238) – – (238)
Purchase of own shares – – – – – – – – –
Allotted in respect of share option schemes 7, 8 5 17 – – 59 81 – – 81
Conversion of perpetual convertible bonds 26 216 – – (2) 240 – (240) –
Repayment of perpetual convertible bonds – – – – – – – (8) (8)
At 5 March 2022 668 1,406 568 682 3,071 6,395 – – 6,395

At 8 March 2020 634 1,159 568 683 3,734 6,778 248 248 7,2 74
Loss for the year 8 – – – – (209) (209) – 7 (202)
Total comprehensive (expense)/income for
the year ended 6 March 2021
– – – – (209) (209) – 7 (202)
Transactions with owners:
Dividends 8 – – – – (232) (232) – – (232)
Distribution to holders of perpetual
securities
– – – – – – – (7) (7)
Allotted in respect of share option schemes 7, 8 3 14 – – 29 46 – – 46
Redemption of perpetual capital securities – – – – (2) (2) (248) – (250)
At 6 March 2021 637 1,173 568 683 3,320 6,381 – 248 6,629
The notes on pages 196 to 199 form an integral part of these financial statements.
Company statement of changes in equity
for the 52 weeks to 5 March 2022
195 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
1 Basis of preparation
The parent company’s financial statements are prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law), including Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and the Companies Act 2006.
FRS 101 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in the Standard, which addresses the financial reporting requirements and
disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition measurement and disclosure
requirements of UK-adopted international accounting standards.
The financial year represents the 52 weeks to 5 March 2022 (prior financial year 52 weeks to 6 March 2021).
The disclosure exemptions adopted by the Company in accordance with FRS 101 are as follows:
— The requirements of IAS 7 to present a cash flow statement
— The requirements of paragraph 17 of IAS 24 ‘Related Party Transactions’, to disclose information related to key management personnel, and the
requirements of IAS 24 to disclose related party transactions between two or more members of a group for wholly owned subsidiaries
— The requirements of paragraphs 30 and 31 of IAS 8 to disclose information assessing the possible impact of new standards issued but which are
not yet effective
— The requirements of IFRS 7 and IFRS 13 for disclosure of financial instruments and fair values
The financial statements are presented in sterling, rounded to the nearest £million unless otherwise stated. They have been prepared on the going concern
basis under the historical cost convention, except for derivative financial instruments and financial assets at fair value through other comprehensive income
that have been measured at fair value.
Amendments to published standards
Effective for the Company in these financial statements:
The Company has considered the following amendments to published standards that are effective for the Company for the financial year beginning 7 March
2021 and concluded that they are either not relevant to the Company or that they do not have a significant impact on the Company’s financial statements
other than disclosures.
— Amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments: Recognition and Measurement’ and IFRS 7 ‘Financial Instruments:
Disclosures’ on the Interest Rate Benchmark Reform – Phase 2
— Amendment to IFRS 16 ‘Leases’ with regards to the exemption granted in the ‘COVID-19-related rent concessions’
The Company early adopted the Interest Rate Benchmark Reform Phase 2 amendments in the financial year ended 6 March 2021. The Company has elected
not to apply the exemption granted in the ‘COVID-19-related rent concessions’ as the Company has not received material COVID-19-related rent concessions
as a lessee.
Standards and revisions effective for future periods:
The following standards and revisions will be effective for future periods:
— Amendments to IFRS 3 ‘Business Combinations’ with reference to the Conceptual Framework
— Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ on Onerous Contracts – Cost of Fulfilling a Contract
— Amendments to IAS 16 ‘Property, Plant and Equipment’ on Proceeds before Intended Use
— Amendments to IAS 1 ‘Presentation of Financial Statements’ on the classification of liabilities as current or non-current
— Amendments to IAS 1 ‘Presentation of Financial Statements’ and IFRS Practice Statement 2 ‘Making Materiality Judgements’ on the disclosure of
accounting policies
— Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ on the definition of accounting estimates
— Amendments to IAS 12 ‘Income Taxes’ on Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
— IFRS 17 ‘Insurance Contracts’
The Company has considered the impact of the remaining above standards and revisions and has concluded that they will not have a significant impact
on the Company’s financial statements.
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and not presented an income statement
nor a statement of comprehensive income for the Company alone.
Notes to the Company financial statements
196 Financial Statements J Sainsbury plc Annual Report 2022
2 Investments in subsidiaries, joint ventures and associates
Accounting policies
Investments in subsidiaries, joint ventures and associates are carried at cost less any impairment loss in the financial statements of the Company.
At each reporting period, the Company assesses the carrying amounts of its investments to determine whether there is any indication of impairment.
Where such an indication exists, the Company makes an estimate of the recoverable amount. If the recoverable amount of the investment is less than its
carrying amount, the investment is written down to its recoverable amount. Any impairment loss is immediately recognised in the income statement.
Significant estimate – impairment of investments in subsidiaries
The Company considers impairment of its investment in subsidiaries by estimating the recoverable amounts of the investments, which are based on either
the net assets of the subsidiary, or value-in-use calculations. Where a value-in-use calculation is used, discounted cash flows have been derived from the
latest five-year Board-approved cash flows to perpetuity with no growth rate applied, discounted at a pre-tax rate of 7 per cent to 13 per cent.
2022
£m
2021
£m
Subsidiaries  
At the beginning of the year 7,609 7,749
Additions 58 29
Impairments – (169)
At the end of the year 7,667 7,609
Joint ventures and associates 1 1
Subsidiaries, joint ventures and associates 7,668 7,61 0
The directors acknowledged that as at 5 March 2022 the market capitalisation of J Sainsbury plc was less than the net assets of the company, which primarily
consists of investments in subsidiaries. This was considered an indicator of impairment and an impairment test over the investment in subsidiaries was
performed. No impairments were identified. Where value-in-use calculations have been used to estimate the recoverable amounts of the investments,
sensitivity analysis has been performed. The analysis indicates that there is sufficient headroom such that a reasonably possible change to key assumptions
would not result in any impairment in any of the Company’s investments in subsidiaries.
An impairment charge of £169 million was recognised in the prior year in relation to the Company’s investment in its subsidiary Sainsbury’s Bank plc,
reducing the Company’s investment to £856 million based on remaining net assets. No impairment charge was recognised over the Company’s other
investments in subsidiaries.
3 Other receivables
Accounting policies
Receivables are recognised initially at fair value, and subsequently at amortised cost using the effective interest rate method, less provision for impairment.


2022
£m
2021
£m
Non-current  
Amounts owed by Group companies 149 161

Current
Amounts owed by Group companies 2,080 1,478
Prepayments and accrued income – 11
 2,080 1,489
Receivable balances with other Group entities are reviewed for potential impairment based on the ability of the counterparty to meet its obligations.
This is assessed by considering the net asset position of the entity and whether the amounts owed to the Company are covered. Where this is not the case,
the estimated future cashflows of the counterparty are considered in line with the methodology detailed in note 2. No impairment losses were recognised
in the year.
4 Trade and other payables
Accounting policies
Payables are recognised initially at fair value, and subsequently at amortised cost using the effective interest rate method.
2022
£m
2021
£m
Current  
Amounts owed to Group entities 3,496 2,782
Other payables 3 7
3,499 2,789
197 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
5 Borrowings
 2022 2021
Current
£m
Non-current
£m
Total
£m
Current
£m
Non-current
£m
Total
£m
Bank loans due 2021 – – – 199 – 199
Total borrowings – – – 199 – 199
6 Taxation
Accounting policies
Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities.
Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a transaction
that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates
(and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can
be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other
comprehensive income.
Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Company is able
to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Capital losses
£m
Rolled
over capital
gains
£m
Total
£m
At 7 March 2021 12 (24) (12)
Rate change adjustment to income statement 4 (8) (4)
At 5 March 2022 16 (32) (16)
At 6 March 2021 and 8 March 2020 12 (24) (12)
198 Financial Statements J Sainsbury plc Annual Report 2022
7 Share capital and reserves
Accounting policies
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Share capital, share premium and merger reserve


2022
million
2021
million
2022
£m
2021
£m
Called up share capital    
Allotted and fully paid ordinary shares 28
4
/
7
p 2,336 2,231 668 637

Share premium account
Share premium 1,406 1,173
The movements in the called up share capital, share premium and merger reserve accounts are set out below:
Number of
ordinary
shares
million
Ordinary
shares
£m
Share
premium
account
£m
Merger
reserve
£m
At 6 March 2021 2,231 637 1,173 568
Allotted in respect of share option schemes 14 5 17 –
Allotted in respect of Hybrid Convertible Bond payment 91 26 216 –
At 5 March 2022 2,336 668 1,406 568
At 8 March 2020 2,217 634 1,159 568
Allotted in respect of share option schemes 14 3 14 –
At 6 March 2021 2,231 637 1,173 568
Capital redemption and other reserves
Financial assets
at fair value
through other
comprehensive
income
£m
Total other
reserves
£m
Capital
redemption
reserve
£m
At 6 March 2021 3 3 680
Financial assets at fair value through other comprehensive income movements (1) (1) –
At 5 March 2022 2 2 680
The financial assets at fair value through other comprehensive income reserve represents the fair value gains and losses on the financial assets at fair value
through other comprehensive income held by the Company.
The capital redemption reserve arose on the redemption of B shares. Shareholders approved a £680 million return of share capital, by way of a B share scheme,
at the Company’s Extraordinary General Meeting on 12 July 2004. The final redemption date for B shares was 18 July 2007 and all transactions relating to the
B shares have now been completed.
8 Retained earnings
2022
£m
2021
£m
Beginning of the year 3,320 3,734
Loss for the year (68) (209)
Dividends paid (238) (232)
Allotted in respect of share option schemes 59 29
Conversion of perpetual convertible bonds (2) –
Redemption of perpetual capital securities – (2)
End of the year 3,071 3,320
9 Contingent liabilities
Through the normal course of business, the Company has issued guarantees covering various commitments of its subsidiaries. No liabilities have been
recognised in the Company’s accounts as it is considered remote that the guarantees will be called on.
199 Financial Statements J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Additional shareholder information
Financial calendar
Ex-dividend date of final dividend 9 June 2022
Record date of final dividend 10 June 2022
Q1 trading statement 5 July 2022
Annual General Meeting 7 July 2022
Payment date of final dividend 15 July 2022
Interim (half-year) results announcement 3 November 2022
Q3 trading statement January 2023*
Preliminary (full year) results announcement April 2023*
* provisional dates
Shareholders
End of year shareholder information as at 5 March 2022.
2022 2021
Number of shareholders 103,337 112,571
Number of shares in issue 2,336,350,627 2,230,782,394
Annual General Meeting (AGM)
The AGM will be held at 33 Holborn, London EC1N 2HT at 11.00am on Thursday, 7 July 2022 with facilities to attend electronically. The Notice of the Meeting
and the proxy card for the meeting are enclosed with this report and further details will be available on our website www.about.sainsburys.co.uk.
Registrars
For information about the AGM, shareholdings, dividends and to report changes to personal details, shareholders should contact:
Equiniti Registrars
Aspect House
Spencer Road
Lancing BN99 6DA
Telephone: 0333 207 6557*
*Lines are open 9am to 5pm (UK time), Monday to Friday (excluding public holidays in England and Wales).
Please remember to tell Equiniti if you change your residential address or bank details, or if there is any other change to your account information.
You can view and manage your shareholding online at www.shareview.co.uk. You will require your 11-digit Shareholder Reference Number to log in which
can be found on your share certificate and dividend confirmation.
Dividends
We have simplified the way we pay dividends. Since December 2021, payments to shareholders are no longer made by cheque. To continue to receive
dividends and any other money payable to you in connection with your J Sainsbury plc ordinary shares, you will need to provide your bank or building
society account details, so that payments can be made directly to your nominated account by direct credit. Please visit www.shareview.co.uk for
further details.
Dividend Reinvestment Plan (DRIP)
The Company has a DRIP, which allows shareholders to reinvest their cash dividends in the Company’s shares bought in the market through a specially
arranged share dealing service. No new shares are allotted under this DRIP and approximately 24,569 shareholders participate in it. Full details of the DRIP and
its charges, together with mandate forms, are available from Equiniti. Alternatively, you can elect to join the DRIP by registering at www.shareview.co.uk.
Shareholder communications website
J Sainsbury plc Interim and Annual Reports, and results announcements, are available via our website at www.about.sainsburys.co.uk. As well as
providing share price data and financial history, the site also provides background information about the Company, regulatory and news releases and
current issues.
Electronic shareholder communications
The Company encourages all shareholders to receive their shareholder communications electronically to reduce our impact on the environment and has
set up a facility for shareholders to do so. The service allows you to:
— View the Annual Report and Financial Statements on the day it is published
— Receive electronic notification of the availability of future shareholder information (you must register your email address for this service)
— Check the balance and current value of your shareholding and view your dividend history
— Submit your vote online prior to a general meeting
To register, visit www.shareview.co.uk. You will need your 11-digit Shareholder Reference Number which can be found on your share certificate and
dividend confirmation.
Financial Statements 200 J Sainsbury plc Annual Report 2022
Share dealing services
To buy or sell your J Sainsbury plc ordinary shares, please visit your stockbroker or your bank who will usually be able to assist you. Alternatively, you may
consider using Equiniti. Equiniti offers a telephone and online facility, which gives shareholders the opportunity to trade at a known price. The telephone
service is available from 8.00am to 4.30pm, Monday to Friday, excluding bank holidays, on telephone number 0371 384 2030. The online share dealing service
gives shareholders the option to submit instructions to trade online and more information can be found by visiting www.shareview.co.uk.
ShareGift
If you have a small number of shares which would cost more for you to sell than they are worth, you may wish to consider donating them to the charity
ShareGift (Registered Charity 1052686) which specialises in accepting such shares as donations. The relevant stock transfer form may be obtained from
Equiniti. There are no implications for Capital Gains Tax purposes (no gain or loss) on gifts of shares to charity. If you are a UK taxpayer, it is also possible
to obtain income tax relief. Further information about ShareGift may be obtained by calling 0207 930 3737, emailing help@sharegift.org or by visiting
www.sharegift.org.
Shareholder security
Some of our shareholders have received unsolicited telephone calls or correspondence from organisations or persons claiming or implying that they have
some connection with the Company. These are typically from purported ‘brokers’ who offer to buy shares at a price often far in excess of their market value.
Shareholders are advised to be very wary of any offers of unsolicited advice, discounted shares, premium prices for shares they own or free Company reports.
If you receive any such unsolicited calls, correspondence or investment advice:
— make sure you get the name of the person and organisation;
— check that they are properly authorised by the Financial Conduct Authority (FCA) before getting involved by visiting https://register.fca.org.uk; and
— report the matter to the FCA either by calling 0800 111 6768 or by completing an online form at
www.fca.org.uk/consumers/report-scam-unauthorised-firm.
More detailed information on this or similar activity can be found on the FCA website https://www.fca.org.uk/scamsmart.
To understand how Sainsbury’s processes shareholder data, please visit www.about.sainsburys.co.uk/site-services/privacy-policy.
ProSearch
Sainsbury’s has instructed ProSearch, a specialist tracing company, to identify and communicate with shareholders who may be owed dividends or shares in
Sainsbury’s. If you have received a communication from ProSearch and think you may be due some dividends or shares in Sainsbury’s and would like further
information, please contact ProSearch directly. You can call them on 0800 389 6479* or for more information, visit www.prosearchassets.com.
* Lines are open 9am to 5pm Monday to Friday (excluding UK public holidays).
American Depository Receipts (ADRs)
The Company has a sponsored Level I ADR programme for which the Bank of New York Mellon acts as depository. The ADRs are traded on the over-the-counter
(OTC) market in the US under the symbol JSAIY, where one ADR is equal to four ordinary shares. All enquiries relating to ADRs should be addressed to:
Bank of New York Mellon
Shareholder Correspondence
PO Box 505000
Louisville
KY 40233-5000
Toll Free Telephone number for US domestic callers: 1-888-269-2377
International callers can call: +1-201-680-6825
Website: www.mybnymdr.com
Email: shrrelations@bnymellon.com
Financial Statements 201 J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Key contacts and advisers
Registered office
J Sainsbury plc
33 Holborn
London EC1N 2HT
Registered number 185647
Investor relations
James Collins
Director of Investor Relations and Financial Planning
J Sainsbury plc
33 Holborn
London EC1N 2HT
InvestorRelations2@sainsburys.co.uk
Registrars
Equiniti Registrars
Aspect House
Spencer Road
Lancing BN99 6DA
www.shareview.co.uk
Auditors
Ernst & Young LLP
1 More London Place
London SE1 2AF
Solicitors
Linklaters LLP
One Silk Street
London EC2Y 8HQ
Stockbrokers
UBS
5 Broadgate
London EC2M 2QS
Shore Capital Stockbrokers
Cassini House
57 St James’s Street
London SW1A 1LD
General contact details
For any customer enquiries, please visit our websites:
— Sainsbury’s https://help.sainsburys.co.uk/help
— Argos www.argos.co.uk/help/contact-us
— Habitat www.habitat.co.uk/contact-us
— Nectar www.nectar.com/help
— Sainsbury’s Bank www.sainsburysbank.co.uk/insuring/support/customer_support_zone
Cautionary statement
Certain statements included in this Annual Report are forward-looking. Such statements are based on current expectations and are subject to a number
of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these
forward-looking statements. They appear in a number of places throughout this Annual Report and include statements regarding our intentions, beliefs
or current expectations and those of our officers, Directors and employees concerning, amongst other things, our results of operations, financial condition,
liquidity, prospects, growth, strategies and the business we operate. Unless otherwise required by applicable law, regulation or accounting standard, we do
not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
Financial Statements 202 J Sainsbury plc Annual Report 2022
In the reporting of financial information, the Directors use various APMs which they believe provide additional useful information for understanding the
financial performance and financial health of the Group. These APMs should be considered in addition to, and are not intended to be a substitute for IFRS
measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies who
use similar measures.
All of the following APMs relate to the current period’s results and comparative periods where provided.
APM
Closest equivalent
IFRS measure Definition Purpose Reconciliation
Income statement – Revenue  
Retail sales Revenue Group sales less Financial
Services revenue.
Shows the annual rate
of growth in the Group’s
Retail business sales.
A reconciliation of the measure is provided in note 6 of the
financial statements.
Like-for-
like sales
No direct
equivalent
Year-on-year growth in sales
including VAT, excluding fuel,
excluding Financial Services,
for stores that have been open
for more than one year.
The relocation of Argos stores
into Sainsbury’s supermarkets
are classified as new space,
while the host supermarket
is classified like-for-like.
The impact on sales of stores
which were temporarily closed
due to COVID-19 have been
included within LFL sales. Only
permanently closed sites and
those temporarily closed for
non COVID-19 related reasons
are treated as non LFL.
The measure is used
widely in the retail
industry as an indicator
of current trading
performance and is
useful when comparing
growth between
retailers that have
different profiles of
expansion, disposals
and closures.
The reported retail like-for-like sales decline of (2.3) per cent is
based on a combination of Sainsbury’s like-for-like sales and
Argos like-for-like sales for 2022. See movements below:
2022 2021
Retail like-for-like
(exc. Fuel, inc. VAT)
(2.3)% 8.1%
Underlying net new space impact (0.3)% (0.8)%
Retail sales growth
(exc. Fuel, inc. VAT)
(2.6)% 7.3%
Fuel impact 6.0% (7.2)%
Total retail sales growth
(inc. Fuel, inc. VAT)
3.4% 0.1%
VAT impact (0.4)% 0.6%
Total retail sales growth per note 6 3.0% 0.7%
Income statement – Profit
Retail
underlying
operating
profit
Profit
before tax
Underlying earnings before
interest, tax, Financial
Services operating profit and
Sainsbury’s underlying share
of post-tax profit from joint
ventures and associates.
This is the lowest
level at which the
retail segment can
be viewed from
a management
perspective, with
finance costs
managed for the
Group as a whole.
2022
£m
2021
(Restated)
£m
Group PBT (note 7) 854 (164)
(Less)/Add back Group non-underlying
items (note 5)
(124) 521
Group UPBT 730 357
Financial Services underlying operating
(profit)/loss
(38) 21
Retail underlying profit before tax 692 378
Net underlying finance costs 309 353
Retail underlying operating profit 1,001 731
Retail sales (note 7) 29,463 28,617
Retail underlying operating margin 3.40% 2.55%
Underlying
profit
before tax
Profit
before tax
Underlying results exclude
items recognised in reported
profit or loss before tax which,
if included, could distort
comparability between
periods. In determining which
items to exclude from
underlying profit, the Group
considers items which are
significant either by virtue
of their size and/or nature,
or that are non-recurring.
In order to provide
shareholders with
additional insight into
the year-on-year
performance of the
business, this adjusted
measure of profit is
provided to supplement
the reported IFRS
numbers and reflects
how the business
measures performance
internally.
— Underlying profit before tax is bridged to statutory profit
before tax in the income statement and note 5 of the
financial statements.
— The adjusted items are as described in note 5 of the
financial statements
Alternative performance measures (APMs)
Financial Statements 203 J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
APM
Closest equivalent
IFRS measure Definition Purpose Reconciliation
Income statement – Profit
Underlying
basic
earnings
per share
Basic
earnings
per share
Earnings per share using
underlying profit
as described above.
This is a key measure
to evaluate the
performance of the
business and returns
generated for investors.
A reconciliation of the measure is provided in note 12 of the
financial statements.
Retail
underlying
EBITDA
No direct
equivalent
Retail underlying operating
profit as above, before
underlying depreciation,
and amortisation.
EBITDA is used to
review the retail
segment’s profit
generation and the
sustainability
of ongoing capital
reinvestment and
finance costs.
2022
£m
2021
(Restated)
£m
Retail underlying operating profit 1,001 731
Add: Retail depreciation and amortisation
expense
1,197 1,226
Less: Non-underlying depreciation and
amortisation
(53) (47)
Retail underlying EBITDA 2,145 1,910
Retail sales (note 7) 29,463 28,617
Retail underlying EBITDA margin 7.28% 6.67%
Underlying
net finance
costs
Finance
income less
finance
costs
Net finance costs before any
non-underlying items as
defined above that are
recognised within finance
income/expenses.
This provides
shareholders with
additional insight into
the underlying net
finance costs of the
Group by excluding
non-recurring
one-off items.
A reconciliation of this measure is included in note 10 of the
financial statements.
The adjusted items are as follows:
— Perpetual securities coupons – these are accounted for as
equity in line with IAS 32 ‘Financial Instruments: Presentation’,
however are accrued on a straight-line basis and included as
an expense within underlying profit as they are included by
management when assessing Group borrowings. These are
now £nil following the redemption of the perpetual convertible
bond during the year
— Non-underlying finance movements – these include fair value
remeasurements on derivatives not in a hedging relationship
and lease interest on impaired non-trading sites, including site
closures. The fair value movements are driven by external
market factors and can significantly fluctuate year-on-year.
They are therefore excluded to ensure consistency between
periods. Lease interest on impaired, non-trading sites is
excluded as they do not contribute to the operating activities
of the Group
— IAS 19 pension interest. Although a recurring item, the Group
has chosen to exclude net retirement benefit income and costs
from underlying profit as, following closure of the defined
benefit scheme to future accrual, it is not part of the ongoing
operating activities of the Group and its exclusion is consistent
with how the Directors assess the performance of the business.
Underlying
tax rate
Effective
tax rate
Tax on underlying items,
divided by underlying profit
before tax.
Provides an indication
of the tax rate across
the Group before
the impact of
non-underlying items.
The tax on non-underlying items is included in note 5 of the
financial statements.
Financial Statements 204 J Sainsbury plc Annual Report 2022
Alternative performance measures (APMs) continued
APM
Closest equivalent
IFRS measure Definition Purpose Reconciliation
Cash flows and net debt
Retail cash
flow items
in Financial
Review
No direct
equivalent
To help the reader understand
cash flows of the business
a summarised cash flow
statement is included within
the Financial Review.
As part of this a
number of line items
have been combined.
The cash flow in note 7
of the financial
statements includes a
reference to show what
has been combined in
these line items.
Ref
5 March
2022
£m
6 March
2021
£m
Net interest paid a (323) (372)
Repayment of lease liabilities b (491) (499)
Repayment of borrowings c (256) (539)
Other d (27) (13)
Dividends and distributions
received
e 2 22
Retail free
cash flow
Net cash
generated
from
operating
activities
Net cash generated from retail
operations, after perpetual
security coupons and cash
capital expenditure, and
including payments of lease
obligations, cash flows from
joint ventures and associates
and Sainsbury’s Bank capital
injections.
This measures cash
generation, working
capital efficiency and
capital expenditure
of the retail business.
5 March
2022
£m
6 March
2021
£m
Cash generated from retail operations 1,940 2,275
Net interest paid (ref (a) above) (323) (372)
Corporation tax (23) (94)
Retail purchase of property, plant and
equipment
(416) (423)
Retail purchase of intangible assets (229) (145)
Retail proceeds from disposal of property,
plant and equipment
46 27
Initial direct costs on right-of-use assets (3) (7)
Repayments of obligations under leases (491) (499)
Dividends and distributions received 2 22
Retail free cash flow 503 784
Adjusted
net cash
generated
from retail
operations
(per Financial
Review)
Cash
generated
from
operations
This presents retail operating
cash flows adjusted for
movements in working
capital, less net interest paid
(including distributions on
perpetual securities) and
pension cash contributions.
This enables
management to assess
the cash generated
from its core retail
operations.
5 March
2022
£m
6 March
2021
£m
Retail cash generated from operating
activities (note 7)
1,598 1,832
Perpetual security coupons (4) (23)
Adjusted net cash generated from
operating activities
1,594 1,809
Core retail
capital
expenditure
No direct
equivalent
Capital expenditure excluding
Sainsbury’s Bank.
This allows
management to assess
core retail capital
expenditure in the
period in order to
review the strategic
business performance.
2022
£m
2021
£m
Purchase of property, plant and equipment (416) (423)
Purchase of intangibles (229) (145)
Cash capital expenditure (645) (568)
Financial Statements 205 J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Alternative performance measures (APMs) continued
APM
Closest equivalent
IFRS measure Definition Purpose Reconciliation
Underlying
working
capital
movements
No direct
equivalent
Removes working capital
and cash movements relating
to non-underlying items.
To provide a
reconciliation of the
working capital
movement in the
financial statements to
the underlying working
capital movement in
the Financial Review.
5 March
2022
£m
6 March
2021
(Restated)
£m
Retail working capital movements
per cash flow (note 7)
(306) 612
Adjustments for:
Retail non-underlying impairment charges
(note 7)
8 216
Non-underlying restructuring and
impairment charges (note 5)
(92) (548)
Bank non-underlying restructuring and
impairment charges
7 105
Accelerated depreciation (note 5) 33 27
Gains on early termination of leases (note 5) (9) (16)
Profit on disposal of properties within
restructuring programme (note 5)
(12) –
ATM income (note 5) 2 42
Income recognised in relation to legal
disputes (note 5)
180 –
Other 1 2
Non-underlying working capital
movements before cash movements
118 (172)
Non-underlying cash movements:
Restructuring (note 5) 114 39
Bank restructuring (4) –
ATM income (note 5) (14) (27)
Income recognised in relation to legal
disputes (note 5)
(93) –
Retail non-underlying operating cash
flows (excluding pensions)
3 12
Total adjustments for non-
underlying working capital
121 (160)
Underlying working capital
movements
(185) 452
Financial Statements 206 J Sainsbury plc Annual Report 2022
Alternative performance measures (APMs) continued
APM
Closest equivalent
IFRS measure Definition Purpose Reconciliation
Net debt Borrowings,
cash,
derivatives,
financial
assets at
FVTOCI,
lease
liabilities
Net debt includes the capital
injections into Sainsbury’s
Bank, but excludes the net
debt of Sainsbury’s Bank and
its subsidiaries.
It is calculated as: financial
assets at fair value through
other comprehensive income
(excluding equity investments)
+ net derivatives to hedge
borrowings + net cash and
cash equivalents + loans +
lease obligations + perpetual
securities.
This shows the overall
strength of the balance
sheet alongside the
liquidity and its
indebtedness and
whether the Group
can cover its debt
commitments.
A reconciliation of the measure is provided in note 34 of the
financial statements. In addition, to aid comparison to the
balance sheet, reconciliations between financial assets at FVTOCI
and derivatives per the balance sheet and Group net debt
(i.e. including Financial Services) is included below:
5 March
2022
£m
6 March
2021
£m
Financial instruments at FVTOCI per
balance sheet
800 844
Less: equity-related securities (382) (306)
Financial instruments at FVTOCI included
in net debt
418 538
Net derivatives per balance sheet 259 (124)
Less: derivatives not used to hedge
borrowings
(250) 110
Derivatives included in net debt 9 (14)
Other
Net debt/
underlying
EBITDA
No direct
equivalent
Net debt divided by Group
underlying EBITDA.
This helps management
measure the ratio of the
business’s debt to
operational cash flow.
Net debt as provided in note 34. Group underlying EBITDA is
reconciled within the fixed charge cover analysis below.
Return on
capital
employed
No direct
equivalent
Return on capital employed is
calculated as return divided by
average capital employed.
Return is defined as 52 week
rolling underlying profit before
interest and tax.
Capital employed is defined
as Group net assets excluding
pension deficit/surplus,
less net debt (excluding
perpetual securities). The
average is calculated on
a 14-point basis.
The 14-point basis uses the
average of 14 datapoints –
the prior year closing capital
employed, the current year
closing capital employed and
12 intra-year periods as this
more closely aligns to the
recognition of amounts in the
income statement.
This represents the
total capital that the
Group has utilised in
order to generate
profits. Management
use this to assess
the performance of
the business.
52 weeks
to 5 March
2022
£m
52 weeks to
6 March
(Restated)
2021
£m
Underlying profit before tax 730 357
Add: Underlying net interest 309 353
Return 1,039 710
Capital employed is reconciled as follows:
52 weeks
to 5 March
2022
£m
52 weeks to
6 March
(Restated)
2021
£m
Group net assets 8,423 6,701
Less: Pension surplus (note 37) (2,283) (744)
Deferred tax on pension surplus 640 192
Less: net debt (ex-perpetual securities)
(note 34)
6,759 6,221
Effect of in-year averaging (1,127) 240
Capital employed 12,412 12,610
Return on capital employed 8.4% 5.6%
Fixed
charge cover
No direct
equivalent
Group underlying EBITDA
divided by rent (representing
capital and interest
repayments on leases) and
underlying net finance costs,
where interest on perpetual
securities is treated as an
underlying finance cost.
All items are calculated on
a 52 week rolling basis.
This helps assess
the Group’s ability
to satisfy fixed
financing expenses
from performance
of the business.
52 weeks
to 5 March
2022
£m
52 weeks to
6 March
(Restated)
2021
£m
Group underlying operating profit 1,039 710
Add: Group depreciation and amortisation
expense
1,220 1,249
Less: Non-underlying depreciation and
amortisation expense
(53) (47)
Group underlying EBITDA 2,206 1,912
Repayment of capital element of lease
obligations
(493) (501)
Underlying finance income 3 3
Underlying finance costs (312) (356)
Fixed charges (802) (854)
Fixed charge cover 2.8 2.2
Financial Statements 207 J Sainsbury plc Annual Report 2022
Governance ReportStrategic Report Financial Statements
Alternative performance measures (APMs) continued
Annual General Meeting (AGM) – This year the AGM will be held on
Thursday 7 July 2022 at our registered office 33 Holborn, London EC1N 2HT
at 11.00am.
Argos Financial Services (AFS) – ARG Personal Loans Limited;
Home Retail Group Card Services Limited; and Home Retail Group Insurance
Services Limited.
bps – Basis points.
by Sainsbury’s – Core own-label brand.
Click & Collect – Service which allows customers to place general
merchandise and grocery orders online for collection in-store.
Corporate Responsibility and Sustainability (CR&S) – The need
to act responsibly in managing our impact on a range of stakeholders:
customers, colleagues, investors, suppliers, the community and the
environment.
CPI – Consumer Price Index.
Dividend cover – Underlying profit after tax from continuing operations
attributable to ordinary shareholders divided by total value of dividends
declared during the year.
Earnings Per Share (EPS) – Earnings attributable to ordinary shareholders
of the parent divided by the weighted average number of ordinary shares in
issue during the year, excluding those held by ESOP Trusts, which are treated
as cancelled.
Fair value – The amount for which an asset could be exchanged, or a
liability settled, between knowledgeable, willing parties in an arm’s length
transaction.
FVTPL – Fair value through profit or loss. Method of valuing a financial
instrument where changes in fair value are recognised directly in the
income statement.
Group – The Company and its subsidiaries.
IFRIC – International Financial Reporting Interpretations Committee.
IFRSs – International Financial Reporting Standard(s).
Joint venture (JV) – A business jointly owned by two or more parties.
Kantar Worldpanel (Kantar) – An independent third party providing
data on the UK Grocery Market.
LTIP – Long-Term Incentive Plan.
MSC – Marine Stewardship Council.
Nectar – One of the most popular loyalty schemes in the UK.
PRA – Prudential Regulation Authority.
RPI – Retail Price Index.
Taste the Difference – Sainsbury’s premium own-brand range
ofproducts.
Total Shareholder Return (TSR) – The growth in value of a shareholding
over a specified period, assuming that dividends are reinvested to purchase
additional units of the stock.
Tu – Sainsbury’s own-label clothing range.
Glossary
Financial Statements 208 J Sainsbury plc Annual Report 2022
[This report is printed on UPM Fine.
The printer is certified to the
environmental management system
ISO14001 and is also CarbonNeutral™]
[This product is made of material from
well-managed, FSC
®
-certified forests and
other controlled sources.]
Designed by mslgroup.co.uk
Find out more at
www.about.sainsburys.co.uk/ar2022