2nd July 2003
SOMERFIELD plc
PRELIMINARY STATEMENT OF RESULTS
STRATEGY FOR GROWTH
Somerfield plc today announced its results for the 52 weeks ended 26 April
2003. The key points are:
* Operating profit of �30.1 million, compared with �28.1 million last year
* Attributable profit of �39.8 million, compared with �28.2 million last year
* Underlying earnings per share of 6.3p compared with 5.5p last year
* Recommended final dividend of 1.25p per share; total for the year of 1.65p
per share
* Capital expenditure of �189.6 million; �116.7 million last year
* Strong ungeared balance sheet with net cash of �2.5 million
* Like-for-like sales growth for the year for Somerfield +0.9%, Kwik Save
+1.2% and Group +1.0%
* The first 9 weeks of the new year like-for-like sales growth for Somerfield
+1.1%, Kwik Save +1.1% and Group +1.1%
John von Spreckelsen, Executive Chairman, comments:
"While we are pleased to report further progress in rebuilding profitability,
we recognise that the pace of recovery was not fast enough. However, following
organisational changes, we have a strong executive management team focused on
delivering the renewal of the Company with urgency and pace.
The Board is confident that the delivery of the refocused Group strategy will
create substantial shareholder value and we are already seeing good returns
from past years' investment in store refits and product development. We expect
sales growth to gather momentum as this investment continues."
Introduction
Underlying operating profits grew over the year from �28.1 million to �30.1
million. Group like-for-like sales for the year were +1.0%. Pre-tax profits
before exceptional items were �25.8 million, an underlying growth rate of 24%.
A net exceptional profit totalling �9.0 million consisted of proceeds from
property disposals partially offset by closure costs relating to depot
rationalisation. Taking these into account, the profit before tax rose 57% to �
34.8 million. In view of the Group's continuing progress, the Board is pleased
to recommend a final dividend of 1.25p per share. This takes the total for the
year to 1.65p per share, an increase of 65% on the previous year.
The business remains financially very strong. Good cash flow and continuing
proceeds from the sale of surplus properties have helped to maintain a healthy
balance sheet. Shareholder funds total �765.9 million, which equates to a net
asset value per share of �1.55. The Group had net funds at the year end of �2.5
million, despite significantly increased year on year capital investment - up
62% to �189.6 million.
Strategy
The current strategy concentrated on stabilising and de-risking the Group and
then moving into profitability. The next phase of the strategy is to
concentrate on accelerating our recovery through growth. Consequently, during
the year, the Board undertook a detailed review of the Group's growth strategy
in the following key areas:
* Somerfield fascia stores
* Kwik Save fascia stores
* Financing
* Customer offer
* Supply Chain and IT
* Estate portfolio
* New business
* Cost control
The plans for the Somerfield fascia were reaffirmed following some refinement.
Kwik Save was refocused to reflect our experience with the new-format stores
and the customer research on range requirements. In addition to driving organic
growth through our two existing store estates, we have also been developing two
new business streams under the Somerfield brand - petrol station forecourts and
franchise operations.
Somerfield
The Somerfield portfolio currently trades from over 5 million square feet. The
Board has concluded that the best option for the Group and our shareholders is
to accelerate the store refit programme. Our strategy work has identified that
an individual Somerfield store's optimum retail trading area is from 2,000 to
15,000 square feet, with particular emphasis on fresh food and convenience
shopping for our customers. Therefore, over time, the store estate will be
reconfigured. Our expectation is that the current average retail store size for
Somerfield of 8,700 square feet will reduce to around 6,000 square feet. This
move will be achieved through downsizing some stores as part of their
refurbishment and sub-letting surplus space to complementary retailers. In
addition, any new stores will match these store size parameters. This process
will address the productivity issues, particularly relevant to our larger
stores, relating to sales per square foot and improve profitability from the
estate.
The momentum of the estate refurbishment programme will continue in 2003/04 and
up to 100 stores will benefit from refit investment at a cost of approximately
�70 million. Together with the refits completed in the year, this investment
will provide growth in both sales and profitability.
Kwik Save
The Kwik Save portfolio currently trades from nearly 5.5 million square feet.
The strategy review concluded that the format is ideally suited to 6,000 to
12,000 square feet stores. Our portfolio of smaller stores will therefore be
reconfigured over time:
* existing smaller stores will be extended (half of the estate is freehold)
* a few stores will be transferred to Somerfield where the demographics
support the change.
The adjustment of the larger stores will be managed in the same way as for
Somerfield, by downsizing and adding complementary retailers. The average store
size for Kwik Save is expected to remain at around 8,000 retail square feet.
The target customer base is different from Somerfield, so the two fascias will
provide distinct retail offers.
Work to develop a new format for Kwik Save stores has been continuing since we
opened our first new concept store in Manchester. The concept was substantially
refined and tested in stores of various sizes across the country. The first six
"regeneration" store trials were launched during the first half of the year and
a further eight stores were opened during the second half. Sales for all 14
stores are strong, with uplifts ranging from 13% to 55%.
The new store format is brighter, fresher and more colourful than the
traditional "no frills" Kwik Save. Layouts are more logical and easier to shop,
with new shelving and refrigeration units. The space devoted to fresh food
concessions is greatly increased. We are confident that the sales uplifts can
be sustained over time so we have begun a rollout across our estate. We aim to
refit approximately 50 stores for around �35 million by December 2003, with the
option to accelerate the programme in 2004.
During the year we closed 33 stores where we saw no prospect of achieving
satisfactory returns. All proceeds from disposals will be reinvested into the
store regeneration programme.
Financing
Investment return criteria have been revised and the Group has adopted a
demanding cash payback model for all investments. The Group's investment
programmes will be funded by the net cash inflow from operating activities
supported by reinvesting non core asset disposal proceeds. However, where
appropriate, we will also use tax efficient finance facilities and other
borrowings.
Customer offer
The Somerfield business will continue to offer its customers excellent fresh
food and convenient shopping from a mid-size supermarket. The stores will have
a range tailored to meet everyday needs and will offer good quality and value.
Convenience is a key driver for our customers.
Kwik Save will be targeting customers who are price sensitive and more cost
conscious. Competitive prices are important for day-to-day food needs and the
ranges will be complemented by narrow, sometimes seasonal, non food ranges. We
have listened to our customers and are correcting the range. The improvements
in range, store standards, price competitiveness and the store fabric from
investment are key to delivery of sales growth.
Supply Chain and IT
A key element in our recovery programme is the rationalisation of our supply
chain and IT systems to reduce overheads and increase efficiency.
The logistics strategy remains unchanged and the Group has reduced the
distribution network from 34 warehouses in 1998, with the aim to operate from
15 warehouses by 2005/06. Our new North West regional distribution centre at
Lea Green, St Helens, Merseyside opened on time and to budget in May 2003. This
644,417 square foot multi-temperature facility serves the entire North West of
England, replacing five depots in the North West and the Midlands. As the
efficiency of our distribution system increases, we have been able to reduce
stock levels across the group. During the year, we took a further �35 million
out of inventory, bringing the total below �300 million.
The sale and leaseback of the North West distribution centre in 2003/04 has
generated a profit of �11.8 million. Against this, redundancies, dual running
costs and closure costs associated with the five depots that will close will be
around �11 million. The project therefore remains profit neutral.
Our IT systems are now in the third year of a five year transformation
programme of consolidation and simplification. During the year, we piloted a
new HR system that will be fully implemented next year. The installation of new
generation tills completes the rollout of a single EPoS system for both
Somerfield and Kwik Save fascia stores.
Estate portfolio
The Group has more stores in the UK than any other quoted grocery food
retailer. Its store portfolio comprises 479 freeholds, 121 long leaseholds and
669 short leasehold properties. As part of our current portfolio review, the
Group undertook a revaluation exercise on a sample of 121 stores representing
26% of the Group's tangible fixed asset net book value. The valuations were
conducted by third party advisers on a `red book' basis. The results indicated
that there was a potential revaluation gain of �147 million, representing an
uplift of 55%. A desk top exercise was also performed on the remainder of the
estate and, in the opinion of the directors, this would yield an increase of
around 19% giving rise to a further potential valuation uplift of �110 million.
The Group has in excess of �200 million of capital losses that can be utilised
against potential capital gains from property disposals.
New business
We took a fresh look at our 18 existing forecourt sites and enhanced
operational standards. In the last quarter of the year they have been the
fastest growing part of our business, with sales increases of around 9%.
Forecourts represent a significant opportunity to develop new stores
economically, with petrol sales providing an additional driver of footfall and
cash flow. During the year, 12 sites were acquired from an independent
operator, Margram Holdings, and merged with our existing forecourt operation
under a single management team. Eight of the new sites have existing
convenience stores, which we have converted to the Somerfield fascia. The
remaining four are currently under development. Over the next three years we
intend to open more forecourt sites.
We are also working with TM Retail to develop a new Somerfield store
partnership model. Under a pilot programme, we are converting six stores into
convenience outlets trading under a joint Somerfield/Martin's fascia. We
provide retail expertise and a full range of fresh, ambient and frozen food,
both branded and own label. All six will be open by October and initial results
are encouraging.
Cost control
As part of the overall Group strategy, cost control has been recognised as an
essential element in delivering growth and shareholder returns. The Board has
set a target to realise cost savings of around �100 million over the next 3
years, the majority of which will be reinvested into our customer offer to
drive growth.
Operating Review
Somerfield
Somerfield's like-for-like sales growth for the year was +0.9%. In the first
half year like-for-like sales were +0.4% with the second half year being +1.5%.
While the sales performance was mixed over the year, substantial sales uplifts
were achieved at those stores that benefited from a refurbishment. Margins
improved, helped by a more effective pricing strategy, reductions in cost of
goods and the continuing success of own brand lines.
The megadeal promotions continue to be popular with customers, and the
programme will be refreshed next year. To enhance value for our regular
customers, we have been trialling a savercard that gives cardholders access to
additional cost saving opportunities. Results in the first 33 trial stores have
been encouraging, with an increase in average basket size and/or visit
frequency among card users compared to non-card users.
The retail offer to our customers has continued to improve. Somerfield's own
label now accounts for around �1.2 billion of sales. The `Makes Sense' range
focuses on value for money. After a successful launch in August 2002, the range
continues to perform well. During the year, we achieved strong growth from our
new `So Good' premium range and `Good Intentions' healthy eating range,
stimulated by an innovative product development programme and effective
promotions.
The `Good Intentions' range provides a healthier option without compromising on
taste or quality. This range is being constantly reviewed and developed in
response to very positive customer feedback. The `So Good' range, offering food
and drink of exceptional quality, achieved sales of approximately �33 million
last year and has grown to over 280 lines.
Investment in refurbishing stores to the new Somerfield format increased
significantly, with 59 refits completed in the year, bringing the total to 95.
A further 30 stores benefited from lower cost makeovers to improve the
environment for customers and staff. A total of 145 stores have now been
improved in this way and these will eventually be upgraded to the new format as
the refurbishment programme progresses. We continue to review the performance
of every store in the Somerfield estate and during the year, we closed 8 stores
that were not achieving a satisfactory return and converted 1 store to the Kwik
Save fascia.
Kwik Save
Kwik Save's like-for-like sales growth for the year was +1.2%, with the first
half producing growth of +1.3% and the second half growth of +1.0%. Since the
start of 2003 we have focused on a sales driven recovery whilst improving
margins. This has come from improvements across the board in our customer
offer, operational performance and investment, and we are confident that
improvement will continue next year. In addition, there is now a clearly
defined and thoroughly tested new retail format which will generate substantial
and sustained sales improvements and returns on capital for the new Kwik Save
as it is rolled out nationally.
During the year, a strengthened Kwik Save management team has been working to
address a range of operational issues which had been preventing Kwik Save from
achieving further growth. These included store standards, product availability
and ranging. It has been important to deal with these fundamental issues before
committing to heavy investment in the store regeneration programme.
The choice of products at Kwik Save stores has not kept pace with customer
expectations. A clear three tier hierarchy, offering leading brands, a good
quality own label range and a `cheapest on display' alternative for everyday
essentials has been lacking. In January 2003, a new cheapest on display
`Simply' range was launched. Currently there are approximately 140 lines and
this will grow to some 200 lines by the end of next year. `Simply' replaced an
assortment of tertiary brands with a coherent and attractively packaged range,
and within three months of launch was selling at an annualised rate of
approximately �60 million. By the end of next year we expect the brand to be
achieving annualised turnover of around �100 million.
In early March 2003, a competitively priced range of Kwik Save own label
products was introduced. This is achieving sales uplifts of up to 30%, of which
half is incremental, with a relatively small impact on sales of other brands.
By the year end, we had introduced new products in eight categories and expect
to have up to 1,000 lines across most categories by the end of next year.
Financial Review
Group Results
The Group recorded a profit of �30.1 million at the operating level before
exceptional items, compared with the prior year profit of �28.1 million, an
increase of 7.1%. Underlying earnings per share have increased to 6.3 pence
from 5.5 pence.
Sales Performance
Sales
Sales for the period increased to �5,000.1 million.
Like-for-like sales
By fascia, like-for-like sales performance was as follows:
Full year Full year H1 H2
to 27.4.02 to 26.4.03 2002/03
Store fascia
analysis
Somerfield (%) +1.4 +0.9 +0.4 +1.5
Kwik Save (%) +2.5 +1.2 +1.3 +1.0
Group (%) +1.8 +1.0 +0.8 +1.3
Exceptional Items
A net exceptional item of �9.0 million has been credited in the period as set
out in note 7 to the financial statements. This item comprises operating and
non-operating exceptional items. At the operating level, an �8.0 million charge
relating to the cost of redundancies and other closure costs associated with
the Group's depot rationalisation has been taken.
At the non-operating level, a profit of �17.0 million was generated. This
comprised a profit of �8.1 million from a sale and leaseback arrangement on the
distribution centre at Wellingborough. The consideration from the sale was �
21.4 million. The profit on disposal will be sheltered for tax purposes by
capital losses brought forward from prior years. Four smaller depots were also
sold and leased back and, in line with our normal on going portfolio review,
some 37 other store properties and sundry assets were also disposed of during
the period at a profit of �8.9 million.
Interest
Following successful renegotiations of the banking agreements at the end of the
last financial year, interest costs have fallen. The total interest charge for
the year was �4.3 million, a reduction of �3.0 million compared to last year's
interest charge of �7.3 million. Last year, due to the Group's re-financing,
there was an exceptional interest charge of �6.0 million. There has been no
similar charge this year.
Taxation
Prior year tax provisions of �5.0 million have been released.
Dividends
The Board is proposing a final dividend of 1.25p per share.
Strong Balance Sheet and Cash Flows
In the year, the Group generated a total operating cash flow of �131.8 million,
compared with �116.3 million last year. The increase was mainly due to working
capital benefits.
Underlying cash generation has been strong as we were able to fund a �62.4
million increase in capital expenditure payments whilst the Group remained
ungeared at the year end.
Total capital additions were �189.6 million and comprise �108.4 million on new
stores, store conversions, refits and upgrades; �23.0 million on improving
computer systems, of which �10.3 million was specific to stores; �38.3 million
on distribution, of which �30.0 million related to the construction of our
distribution centre at St Helens; and �19.9 million on store infrastructure.
Shareholders' funds increased to �765.9 million compared with �733.1 million.
Pension Schemes
Pension schemes and the impact of Financial Reporting Standard 17 "Retirement
Benefits" ("FRS 17") are discussed in detail within note 15 to the financial
statements.
Post Balance Sheet Event - Property Disposal
On 28 May 2003, the Group completed the sale and leaseback, following the
successful construction, of its distribution centre in the North West at Lea
Green, St Helens, Merseyside. At a sale price of �38.1 million, this
transaction has generated a profit on disposal of �11.8 million. This profit
will be sheltered for tax purposes by capital losses brought forward from prior
years.
Current Trading
Within Somerfield the first 9 weeks like-for-like sales were +1.1% and within
Kwik Save +1.1%. At Group level like-for-like sales were +1.1%.
For further information contact:
Somerfield plc:
John von Spreckelsen - Executive Chairman c/o Cubitt Consulting
Steve Back - Group Finance Director 020 7367 5100
Cubitt Consulting:
Fergus Wylie 020 7367 5100
Somerfield plc
Consolidated Profit and Loss Account
for the 52 weeks ended 26 April 2003
2002/03 2001/02
(52 weeks) (52 weeks)
Notes �m �m
Sales 5,000.1 4,965.8
Valued added tax (331.8) (325.3)
Turnover 2 4,668.3 4,640.5
Cost of sales (4,536.3) (4,515.8)
Exceptional cost of sales items 7 (8.0) 1.3
Total cost of sales (4,544.3) (4,514.5)
Gross profit 124.0 126.0
Administrative expenses (101.9) (96.6)
Operating profit
Operating profit before exceptional items 30.1 28.1
Exceptional items 7 (8.0) 1.3
Total operating profit 22.1 29.4
Profit on disposal of fixed assets 7 17.0 8.1
Closure costs of 24-7 home shopping business 7 - (2.0)
Profit on ordinary activities before interest 39.1 35.5
Interest payable and similar charges (4.3) (7.3)
Exceptional interest charges 7 - (6.0)
Total interest payable and similar charges 3 (4.3) (13.3)
Profit on ordinary activities before taxation 34.8 22.2
Taxation on profit on ordinary activities 4 5.0 6.0
Profit on ordinary activities after taxation 39.8 28.2
Dividends 5 (8.0) (4.9)
Retained profit 31.8 23.3
Earnings per share 6
Underlying 6.3p 5.5p
Basic 8.2p 5.8p
Diluted 8.1p 5.7p
Somerfield plc
Consolidated Balance Sheet
as at 26 April 2003
2002/03 2001/02
Notes �m �m
Fixed assets
Properties, plant and equipment 8 1,013.9 941.7
Investment in own shares 7.6 7.0
1,021.5 948.7
Current assets
Stock 290.4 324.8
Debtors 9 117.8 115.2
Short term investments 0.5 2.6
Cash at bank and in hand 127.7 86.2
536.4 528.8
Creditors: amounts falling due 10 (766.8) (669.7)
within one year
Net current liabilities (230.4) (140.9)
Total assets less current 791.1 807.8
liabilities
Creditors: amounts falling due 11 (13.6) (59.3)
after more
than one year
Provisions for liabilities and 12 (11.6) (15.4)
charges
765.9 733.1
Capital and reserves
Called up share capital 49.6 49.4
Share premium account 34.2 33.4
Revaluation reserve 69.6 76.2
Other reserves 335.3 335.3
Profit and loss account 277.2 238.8
Equity shareholders' funds 765.9 733.1
Somerfield plc
Consolidated Cash Flow Statement
for the 52 weeks ended 26 April 2003
2002/03 2001/02
(52 weeks) (52 weeks)
Note �m �m
Net cash inflow from operating 13 131.8 116.3
activities
Returns on investment and servicing of
finance
Interest received 1.3 3.8
Interest paid (5.3) (17.9)
Interest element of hire purchase and (0.3) (0.1)
finance lease rental payments
Net cash outflow from returns on (4.3) (14.2)
investment
and servicing of finance
Taxation
Corporation tax refund 3.0 12.1
Net cash inflow from taxation 3.0 12.1
Capital expenditure and financial
investment
Payments to acquire fixed assets (178.9) (116.5)
Receipts on sale of fixed assets 45.5 30.4
Payments to acquire own shares (0.6) -
Net cash outflow from capital (134.0) (86.1)
expenditure
and financial investment
Equity dividends paid (6.9) -
Cash (outflow)/inflow before use of (10.4) 28.1
liquid resources
and financing
Management of liquid resources
Movement on short term investments 2.1 0.8
Financing
Issue of share capital 1.0 0.5
Movement in bank loans 50.0 (72.1)
Capital element of hire purchase and (1.2) (1.2)
finance lease rental payments
Cash inflow/(outflow) from financing 49.8 (72.8)
Increase/(decrease) in cash in the 41.5 (43.9)
period
Somerfield plc
Reconciliation of Movements in Shareholders' Funds
for the 52 weeks ended 26 April 2003
2002/03 2001/02
(52 weeks) (52 weeks)
�m �m
Profit on ordinary activities after taxation 39.8 28.2
Dividends (8.0) (4.9)
New share capital subscribed 0.2 -
Premium on new share capital subscribed 0.8 0.5
Net increase in shareholders' funds 32.8 23.8
Opening shareholders' funds 733.1 709.3
Closing shareholders' funds 765.9 733.1
Somerfield plc
Notes to the Preliminary Statement of Results
1. Basis of preparation
The financial statements do not constitute statutory accounts. The results for
the 52 weeks ended 26 April 2003 are extracts from the group accounts for that
period, which will be delivered to the Registrar of Companies in due course and
on which the auditors have given an unqualified report which does not contain a
statement under Section 237(2) or (3) of the Companies Act 1985 and have been
prepared on a consistent basis with the prior year.
The financial information of Somerfield plc for the 52 weeks ended 27 April
2002, has been extracted from the statutory accounts for that period, which
have been delivered to the Registrar of Companies and on which the auditors
gave an unqualified report which did not contain a statement under Section 237
(2) or (3) of the Companies Act 1985.
2. Turnover and segmental analysis
The Group operates only in the business of food retailing and associated
activities, with business wholly transacted in the United Kingdom.
An analysis of turnover at the respective period ends, is as follows:
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Somerfield fascia 2,650.1 2,603.0
Kwik Save fascia 1,980.4 1,942.1
Closed stores 37.8 95.4
4,668.3 4,640.5
Somerfield plc
Notes to the Preliminary Statement of Results
3. Interest
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Bank loans and overdrafts 4.7 5.6
Interest on private placement debt - 5.3
Costs associated with re-financing - 6.0
Other interest payable 1.0 0.5
5.7 17.4
Other interest receivable (1.4) (4.1)
4.3 13.3
4. Taxation
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Corporation tax - -
Corporation tax release - prior year (5.0) (6.0)
Deferred tax - -
(5.0) (6.0)
5. Dividends
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Interim dividend of 0.4p (2001/02: nil) 1.9 -
Final dividend of 1.25p (2001/02: 1.0p) 6.1 4.9
8.0 4.9
The final dividend will be paid on 22 September 2003 to holders of ordinary
shares on the register at close of business on 22 August 2003. The shares will
become ex-dividend on 20 August 2003.
Somerfield plc
Notes to the Preliminary Statement of Results
6. Earnings per share
The calculation of basic earnings per share is based upon the profit on
ordinary activities after taxation of �39.8 million (52 weeks to 27 April 2002:
profit of �28.2 million) divided by the weighted average number of ordinary
shares in issue during the period of 485.6 million (52 weeks to 27 April 2002:
485.2 million). Underlying earnings per share, excluding exceptional items,
have been calculated in order to allow shareholders to assess the underlying
results of the business. This underlying earnings per share measure is based on
the same number of shares in issue as the basic calculation and the profit on
ordinary activities after taxation, but excluding exceptional items and amounts
written back to investments, and amounts to a profit of �30.8 million (52 weeks
to 27 April 2002: profit of �26.8 million).
In accordance with FRS 14 "Earnings Per Share", diluted earnings per share have
been disclosed. The diluted earnings per share are based upon the profit on
ordinary activities after taxation of �39.8 million (52 weeks to 27 April 2002:
profit of �28.2 million). The dilution effect is calculated on the full
exercise of all ordinary share options granted by the group, including
performance based options where the performance condition has been met. The
calculation compares the difference between the exercise price of exercisable
share options, weighted for the period over which they were outstanding, with
the average daily mid-market closing price over the period. The resulting total
number of shares on which diluted earnings per share have been calculated is as
follows:
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
million million
Basic weighted average number of shares 485.6 485.2
in issue in the period
Weighted average number of dilutive
potential ordinary shares:
- Employee share options 4.6 8.2
Total number of shares for calculating 490.2 493.4
diluted earnings per share
Somerfield plc
Notes to the Preliminary Statement of Results
7. Exceptional items
Exceptional items credited/(charged) to the profit and loss account are as
follows:
52 weeks 52 weeks
to to
26 Apr 27 Apr
2003 2002
Notes �m �m
Operating exceptional items:
Exceptional cost of sales items
Asset impairment write back (1) - 7.5
Other operating exceptional items (2) (8.0) (6.2)
(8.0) 1.3
Non operating exceptional items:
Profit on disposal of fixed assets (3) 17.0 8.1
Closure costs of 24-7 home shopping business - (2.0)
9.0 7.4
Exceptional interest charges:
Group re-financing costs (4) - (6.0)
Exceptional items credited to profit before 9.0 1.4
taxation
Taxation on exceptional items - -
Exceptional items credited to profit after 9.0 1.4
taxation
1. Asset impairment write back
A full Group impairment exercise was carried out for the year ended 29 April
2000. Due to improving economic conditions a revised full impairment exercise
was carried out at the prior year end. The impact of this review resulted in
further asset impairments for a small number of stores together with the
reversal of impairment losses previously recognised on a number of the group's
other store assets.
2. Other operating exceptional items
The current period charge relates to the costs of redundancies and other
closure costs associated with the Group's depot rationalisation. The prior
period charge represented the Group's exposure to the Independent Insurance
Company and costs associated with a depot closure.
3. Profit on disposal of fixed assets
This comprises the profit on the sale of the Wellingborough distribution centre
and four smaller depots as well as profits and losses from store and other
sundry property disposals. The profit on fixed asset disposal in the prior
period comprises profits and losses from a depot sale, the sale of stores and
other sundry property disposals.
4. Group re-financing costs
The prior year represented costs associated with the Group's re-financing that
was concluded by the prior year end.
Somerfield plc
Notes to the Preliminary Statement of Results
8. Movement in tangible fixed assets
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Beginning of the period 941.7 925.8
Capital additions 189.6 116.7
Capital disposals (26.0) (22.5)
Depreciation (91.4) (85.8)
Impairment write back - 7.5
End of the period 1,013.9 941.7
9. Debtors
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Other debtors 91.9 81.0
Prepayments and accrued income 25.9 34.2
117.8 115.2
10. Creditors: amounts falling due within one year
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Trade creditors 457.8 486.6
Loan facilities 109.6 -
Finance lease obligations 2.5 0.3
Corporation tax 8.3 10.2
Other creditors 98.0 83.2
Other accruals 84.5 84.5
Proposed dividend 6.1 4.9
766.8 669.7
Somerfield plc
Notes to the Preliminary Statement of Results
11. Creditors: amounts falling due after more than one year
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Loan facilities - 59.3
Finance lease obligations 13.6 -
13.6 59.3
12. Provisions for liabilities and charges
The utilisation of provisions for liabilities and charges in the period to 26
April 2003 is set out below:
As at Provided in Used in As at
27 Apr 2002 the period the period 26 Apr 2003
�m �m �m �m
Restructuring 2.2 - - 2.2
Closed properties 13.2 - (3.8) 9.4
15.4 - (3.8) 11.6
13. Net cash inflow from operating activities
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Operating profit before exceptional items 30.1 28.1
Exceptional items (charged)/credited to (8.0) 1.3
operating profits
22.1 29.4
Depreciation 91.4 85.8
Decrease in stocks 34.4 5.1
Increase in debtors (2.5) (2.1)
(Decrease)/increase in creditors (9.8) 8.7
Impairment write back of fixed assets - (7.5)
Closure costs of 24-7 home shopping - (2.0)
business
Movement in respect of provisions (3.8) (1.1)
131.8 116.3
Somerfield plc
Notes to the Preliminary Statement of Results
14. Free cash flow and net debt
a. Free cash flow
The operating cash flow before the payment of dividends and financing items is
as follows:
52 weeks to 52 weeks to
26 Apr 2003 27 Apr 2002
�m �m
Cash inflow from operating activities 131.8 116.3
Net interest paid (4.3) (14.2)
Taxation received 3.0 12.1
Capital expenditure (178.9) (116.5)
Asset sales 45.5 30.4
Purchase of own shares (0.6) -
Free cash flow (3.5) 28.1
b. Movement in net debt
�m
Opening net funds 29.2
Free cash flow (3.5)
Dividends (6.9)
Issue of shares 1.0
New finance leases (17.0)
Other non cash movements (0.3)
Closing net funds 2.5
Closing net debt is analysed within the balance sheet at 26 April 2003 as
follows:
�m
Loan facilities (109.6)
Finance leases - due within one year (2.5)
- due after one year (13.6)
Cash at bank and in hand 127.7
Short term investments 0.5
Net funds 2.5
15. Retirement benefits under FRS 17
In accordance with FRS 17, the Group has decided not to adopt this standard
early but rather to follow the transitional rules set out in the accounting
standard. FRS 17 impacts defined benefit pension schemes and the full annual
report will provide the disclosure required.
If FRS 17 had been in force for the financial year ended 26 April 2003, the
Group would have recognised a pension liability in the balance sheet of
approximately �99.5 million. The profit and loss charge would have been
approximately �6.8 million higher than the pension charge recognised in
accordance with SSAP 24.
Somerfield plc
Notes to the Preliminary Statement of Results
15. Retirement benefits under FRS 17 (continued)
The FRS 17 calculations are particularly sensitive to factors such as asset
value volatility and corporate bond yields used in the calculation of pension
liabilities and are not necessarily representative of the long term funding
requirements of the Group pension schemes. It is generally accepted that the
ultimate adoption of FRS 17 or a similar international accounting standard will
result in increased volatility in companies' earnings due to the requirement to
value pension scheme assets and liabilities to market values annually. The
impact on the Group will however be limited by the fact that the defined
benefit schemes are closed to new members. In addition, in order to help reduce
any actuarial shortfall, the Group increased company pension contributions from
13.9% to 20% in May 2003.
16. Post balance sheet event
On 28 May 2003, the Group completed the sale and leaseback, following the
successful construction, of its distribution centre in the North West at Lea
Green, St Helens, Merseyside. At a sale price of �38.1 million this transaction
has generated a profit on disposal of �11.8 million. This profit will be
sheltered for tax purposes by capital losses brought forward from prior years.
The initial rent, agreed in the new 25 year lease, is �2.8 million per annum
and is subject to 5 yearly rent reviews.
17. Distribution of the report and accounts
Copies of the 2002/03 report and accounts will be sent to shareholders and will
be available after 1 August 2003 from the Company Secretary, Somerfield plc,
Somerfield House, Whitchurch Lane, Bristol BS14 0TJ. The preliminary statement
of results will be available on Somerfield's web site at www.somerfield.plc.uk.
Information on Somerfield can also usually be obtained from financial web sites
through the use of the ticker symbol "SOF".
18. Shareholder enquiries
Computershare Investor Services PLC maintain the company's share register and
the separate Somerfield Employee Share Scheme Registers. Enquiries about
shareholdings should be addressed to the Registrars at Computershare Investor
Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol, BS99 7NH
(telephone 0870 702 0000).
19. Annual General Meeting
The Annual General Meeting will be held at Somerfield House, Whitchurch Lane,
Bristol, BS14 0TJ on 3 September 2003.
5
20
END