Preliminary Results 2012/13

Preliminary Results 2012/13

David Tyler Chairman

John Rogers Chief Financial Officer

Group performance Highlights Underlying results 2012/13 m 2011/12 m Change % Sales (inc VAT) 25,632 24,511 4.6 Sales (inc VAT, ex fuel) 4.3 Operating profit 829 789 5.1 Net finance costs (111) (109) (1.8) Share of JV profits 38 32 18.8 Profit before tax 756 712 6.2 Tax rate 23.7 % 26.1 % 245 bps Basic EPS (1) 30.7 p 28.1 p 9.3 Full year dividend per share 16.7 p 16.1 p 3.7 Statutory results Items excluded from underlying results 32 87 (63.2) Profit before tax 788 799 (1.4) (1) Underlying basic earnings per share

Retailing Good sales growth over the year LFL sales growth Sales from net new space Total sales growth (1) (1) Up 1.8% 2.5% 4.3% Continued LFL outperformance to the market Contribution from extensions 0.7% (2) 2013/14 FY Guidance Full year LFL 1.0-1.5%, reflecting similar challenging market conditions with reduced contribution from extensions of 0.2% (2) Contribution from net new space (excluding extensions and replacements) similar to 2012/13 (1) Sales, excluding fuel, including VAT (2) Net of disruptions

Retailing Good improvement in underlying profit 2012/13 m 2011/12 m Change % Sales (inc VAT, inc fuel) (ex VAT, inc fuel) 25,632 23,303 24,511 22,294 4.6 4.5 Underlying EBITDAR 1,824 1,740 4.8 Underlying EBITDAR margin % at constant fuel prices 7.83 7.80 3 bps 4 bps Underlying operating profit 829 789 5.1 Underlying operating margin % at constant fuel prices 3.56 3.54 2 bps 2 bps 2013/14 FY Guidance Expect operating profit to grow in line with sales

Retailing Cost inflation of around 2.5% offset by over 100m of savings Annual operating cost savings ( m) 2008/09 100 2009/10 145 2010/11 2011/12 2012/13 100 105 104 2013/14 FY Guidance Cost inflation towards the middle of 2-3% range Efficiency savings of around 100m

Sainsbury s Bank Continues to attract new customers Sainsbury s brand and in-store marketing reduce costs of acquiring new customers Ability to leverage Nectar data to reward and incentivise customers Strong track record of profit growth 8% increase in active accounts over the year to 1.5m Strengthened management team Bank profit before tax (1) ( m) 2008/09 13 2009/10 19 2010/11 30 2011/12 42 2012/13 59 (1) 100% Sainsbury s Bank PBT adjusted to J Sainsbury plc year end

Sainsbury s Bank Clear benefits for customers and shareholders Opportunity to increase the number of Sainsbury s customers with a banking product from 1 in 20 Offering accessible, high quality and tailored products which reward customers who bank and shop with us Bank customers are more loyal and spend more in-store Future investment in the Bank aligned to Sainsbury s strategy Cash payback within 8 years, returns above IRR hurdle rate Highly cash generative in later years Expected to complete January 2014

Sainsbury s Bank Transaction terms Acquire 50% for 248m 1.03x Tangible Net Asset Value Net capital injection of 40m over 3 years Bank headline profit CAGR expected to be in the high teens over the next 5 years Underlying profit expected to be broadly flat in the first 2 years due to double running costs, increasing thereafter as costs reduce Bank will incur non-underlying transition costs of 170m and capex of 90m over 4 years to build and move onto a new, flexible banking platform

Joint Ventures Continued strong delivery Sainsbury s Bank (1) Property joint ventures 2012/13 m 22 16 2011/12 m 16 16 Sainsbury s Bank Strong growth in key product areas Property joint ventures Profits in line with guidance 2013/14 FY Guidance Sainsbury s Bank UPBT broadly flat year-on-year, full consolidation from January 2014 Property JVs Expect a similar level of profit (1) Sainsbury s underlying share of Sainsbury s Bank post-tax profit

Underlying finance costs In line with guidance 2012/13 m 2011/12 m Change % Net interest cost (111) (109) (1.8) Net interest cover 7.8x 7.5x 4.0 Fixed charge cover 3.1x 3.1x - Capitalised interest 32m (2011/12: 35m) 2013/14 FY Guidance Expect underlying net finance costs to remain broadly flat year-on-year

Items excluded from underlying results 2012/13 m 2011/12 m Profit on disposal of properties 66 83 Investment property fair value movements (10) 0 c.5.1% yield (March 2012: c.5.0%) Financing fair value movements (10) (16) Pensions accounting (5) 17 One-off items (9) 3 Total 32 87

Pensions accounting Triennial Valuation March 2012 valuation expected to be finalised June 2013 Consultation Proposed closure of the defined benefit pension scheme to future accrual If proposal proceeds, it is expected to: - Decrease the defined benefit pension cost; - Increase the contribution to defined contribution plans; and - Reduce the defined benefit pension liability 2013/14 FY Guidance Expect underlying service cost to be around 64m under IAS 19 (Revised)

Retailing Margins and returns Overall returns in line with guidance Underlying EBITDAR margin % (1) 2008/09 7.62 Underlying operating margin % (1) 2008/09 3.26 2009/10 7.79 2009/10 3.36 2010/11 7.81 2010/11 3.50 2011/12 7.80 2011/12 3.54 2012/13 7.83 2012/13 3.56 Return on capital employed % (2) 2008/09 10.12 Pension adjusted return on capital employed % (2) 2008/09 10.24 2009/10 10.97 2009/10 10.53 2010/11 11.08 2010/11 10.66 2011/12 11.06 2011/12 10.56 2012/13 11.18 2012/13 10.41 (1) (2) Not fuel adjusted 12 month rolling earnings before interest and tax divided by average shareholder funds and net debt

Growing space Delivering space growth plans Store development Stores 000 sq ft As at March 2012 Openings: New/replacement supermarkets Supermarket extensions Refurbishments New convenience stores Gross new space 1,012 14 8 35 87 20,347 634 165 18 190 1,007 c.45k sq ft average size c.21k sq ft average size 4.9% Closures: Replacement stores/closures Net new space As at March 2013 (7) 1,106 (89) 918 21,265 3 supermarkets/4 convenience 4.5% 2013/14 FY Guidance Expect to deliver around 1m sq ft gross new space Expect to open around 2 convenience stores per week

Growing space and creating property value Unlocking property profits Significant property portfolio, valued at 11.5bn - 0.5bn added due to investment and development of assets - 0.2bn of cash proceeds from sale and leasebacks Property profits of 66m have been realised (nearly 350m over the last 5 years) Market value of properties ( bn) 2008/09 7.5 2009/10 2010/11 2011/12 2012/13 9.8 10.5 11.2 11.5 Over the last 5 years Valuation Gains Property Proceeds Land & Buildings Capex Increase 4.0bn 1.3bn 5.3bn ( 2.5bn) 2.8bn

Capital expenditure Core capital expenditure reduced in line with guidance Core capital expenditure Acquisition of freehold properties Net disposal proceeds (1) Net capital expenditure 2012/13 m 1,040 37 (202) 875 2011/12 m 1,240 25 (303) 962 2013/14 FY Guidance Full year core capital expenditure of around 1.1bn, excluding the investment in Sainsbury s Bank (1) 192m from sale and leasebacks and 10m from other disposal proceeds

Capital expenditure Rebalancing capital spend and targeted reduction in the medium term Increased focus on convenience, digital and cost saving initiatives with quick pay-back 2011/12-1.2bn 2012/13-1.0bn 2013/14-1.1bn New Stores Convenience Extensions Refurbishments Logistics and Commercial Initiatives IT 2013/14 FY Guidance Capex/sales ratio similar to 2012/13 Targeted reduction from 4.1% to <3.5% capex/sales ratio over the medium term

Cash flow Small decline in cash from operations due to increase in working capital requirement Operating cash flow Change in working capital Cash from operations Net interest Tax Net dividend Net cash used in investing activities Proceeds from shares Other non cash movements Movement in net debt Net debt 2012/13 m 1,294 (26) 1,268 (131) (144) (290) (899) 17 (3) (182) (2,162) 2011/12 m 1,238 53 1,291 (129) (82) (285) (940) 14 (35) (166) (1,980)

Balance sheet Maintained strong position Market value of property increased to 11.5bn (March 2012: 11.2bn) Net debt 2,162m (March 2012: 1,980m) - secured, low-cost, long-dated debt - facilities of 3.4bn IAS 19 net pension deficit (1) (688)m (March 2012: (455)m) - 0.6% decrease in the real discount rate - increase in asset value of 649m 2013/14 FY Guidance Year-end net debt position expected to be around 2.4bn, 2.6bn including the consideration to be paid for Sainsbury s Bank When Sainsbury s Bank transaction completes in January 2014, Bank assets and liabilities will be fully consolidated at 2013/14 year end (1) Net of deferred tax

Balance sheet Lease adjusted net debt/underlying EBITDAR (Rolling 12 month) 2008/09 4.1 Fixed charge cover (EBITDAR / interest + rent) 2008/09 3.1 2009/10 3.9 2009/10 3.2 2010/11 4.1 2010/11 3.1 2011/12 4.1 2011/12 3.1 2012/13 times Balance sheet gearing (net debt / total equity) 2008/09 4.1 38 2012/13 times Core capex/sales (Core capex / sales inc fuel inc VAT) 2008/09 4.2 3.1 2009/10 31 2009/10 4.1 2010/11 33 2010/11 5.0 2011/12 35 2011/12 5.1 2012/13 per cent 38 2012/13 per cent 4.1

Dividend Growing dividend in line with guidance Dividend cover increased to 1.83 times Dividend per share history (p) Dividend cover history (1) 2008/09 13.2 2008/09 1.61 2009/10 14.2 2009/10 1.68 2010/11 15.1 2010/11 1.75 2011/12 16.1 2011/12 1.75 2012/13 16.7 2012/13 1.83 times (1) Underlying profit after tax from continuing operations attributable to equity shareholders divided by the total value of dividends declared during the year

Summary Trading and operations Continued outperformance of the market, with 33 quarters of LFL growth Delivered operating margin accretion against tough industry backdrop Key financial measures Continued focus on ROCE Underlying profit before tax up 6.2% to 756m Property profits of 66m (nearly 350m over 5 years) Balance sheet Key balance sheet metrics remain stable Property value increases by 0.3bn to 11.5bn

Justin King Chief Executive

2012/13 Operating review Delivered good sales and profit growth, outperforming the market Quality own-brand offer remains a key point of difference Nectar, coupon-at-till and Brand Match key to success Online and convenience businesses continue to grow strongly Acquisition of Sainsbury s Bank allows continued development of complementary channels

2012/13 Strong trading performance Significant market beating sales performance in a challenging market - total sales up 4.3%, like-for-like sales up 1.8% (1) Underlying operating profit up 5.1%, slightly ahead of sales growth Sainsbury s sales growth is strong in a tough market Total sales growth (2) 7 6 5 4 3 2 1 0-1 -2-3 Q1 Q2 Q3 Q4 Q1 2012/13 Sainsbury s Morrisons Tesco Asda Total Grocery (1) (2) Sales including VAT and excluding fuel Kantar Total Till roll 12 w/e

Market backdrop Consumers remain under pressure -10 Customer confidence remains depressed but outlook has improved over the year % Inflation has outstripped wage growth Forecast growth -20-30 2010 2011 2012 2013 Source: CEBR 2001 2003 2005 2007 2009 2011 2013 2015 (1) Wage Growth: Average gross earnings (inc bonus) GfK Consumer Confidence Index Wage growth (1) Consumer price inflation Household disposable income

Market backdrop Changes in shopping behaviours annualising Contribution to growth % 5 4 3 2 1 0-1 -2-3 -4-5 2008/09 2009/10 2010/11 2011/12 2012/13 Volume decline is starting to abate Transaction frequency has stabilised at a new, higher level Frequency contribution Items per basket contribution Overall volume contribution Source: Kantar Worldpanel 12we Total Grocery data to 17 March 13

Market backdrop A year like no other Queen's Diamond Jubilee, Olympics and Paralympics High levels of customer awareness and colleague engagement Legacy programmes launched - Active Kids for All - Sainsbury s Anniversary Games

Live Well For Less Increasing the number of own-brand customers Own-brand sales have grown faster than branded sales - Total own-brand sales up nearly 5% year-on-year - Growth in all three tiers Our values are a long term, strategic point of difference - Invested in our supply chain and sourcing credentials - DNA testing for over 10 years

Live Well For Less Unique combination of Nectar, CAT and Brand Match Brand Match is helping to close the price perception gap - Around 350m coupons issued to date - Cheaper than coupons issued over 50% of the time Unique combination of Nectar and coupon-at-till (CAT) - Issue relevant and personalised promotions - Incentivises customers to shop different channels - Reward loyal customers over 110m redeemed in-store last Christmas

Our values make us different Continue to work towards our 20x20 commitments Health: Trained pharmacists in over 270 stores as Healthy Eating Advisors Sourcing: RSPCA Retailer of the Year and continue to be the largest retailer of Fairtrade, MSC fish and Freedom Foods products Environment: 82,000 solar panels on 189 stores largest multi-site solar array in Europe Community: Presented a record cheque for 10.5m to Comic Relief Great place to work: Created 400 apprenticeship places

Performance Brand performance Winner of Supermarket of the Year for 5 of the last 7 years Winner of Convenience Chain of the Year for the last 3 years Winner of Online Retailer of the Year Winner of Employer of the Year Business In The Community Platinum Big Tick 2013

A long-term vision for growth

Great Food Continued leadership in quality food Quality of products (scale of 1-10) 8.50 8.25 8.4 8.2 8.00 7.75 7.50 2009/10 2010/11 2011/12 2012/13 7.8 7.7 Sainsbury s Morrisons Tesco Asda Sources: Ipsos-MORI (from Jan 2009 to P1 2012/13) and Brand Face (from P1 2012/13 to date) unweighted rolling 8 week data. Base sizes per rolling period : Sainsbury s (c.800), Tesco (c.400), Asda (c.250), Morrisons (c.200).

Great Food Continual investment in own-brand Completed our re-launch of by Sainsbury s - Over 6,500 lines, many new or improved - Winner of Own-Label Range of the Year Fresh counters in over 500 stores - Over 20,000 colleagues trained at 7 food colleges Continue to invest in British food - Biggest volume retailer of British apples and pears

Compelling General Merchandise and Clothing Strong contribution to overall performance GM and Clothing has grown at over twice the rate of food over the year Strong clothing sales growth has continued - 7 th largest UK clothing retailer by volume - Launched a further 4 Gok for Tu ranges Achieved the milestone of 1bn annual GM sales - 7 th largest UK retailer for homeware by value

Complementary Channels and Services Convenience business continues to grow strongly Convenience sales of over 1.5bn and growing at 17% year-on-year Opened 87 stores during the year and a second dedicated convenience depot, located at Thameside Number of convenience stores set to overtake number of supermarkets next year

Complementary Channels and Services Groceries online growing at around 20% year-on-year Groceries online business of nearly 1bn Nectar helps understand and drive cross-shopping Customer service and availability improvements over the year Improvement in operational efficiency over the year - 10% increase in items picked per hour - 15% increase in deliveries per van

Complementary Channels and Services Multi-channel participation increases total spend Nectar data key to understanding the developing customer behaviour New channels incrementalise spend When customers shop all three channels, total spend more than doubles Bank ownership will further enhance loyalty Supermarkets Multiples of supermarket spend Less than 1.0 1.0-1.1 1.1-2.0 Greater than 2.0 Convenience Groceries Online

Developing new business Expanding our brand into new areas Sainsbury s Pharmacies: Over 270 in-store pharmacies and 3 hospital pharmacies Sainsbury s Energy: 83% increase in customers over the year Insight 2 Communication: JV with Aimia that allows suppliers to deliver targeted offers to our customers Launched a number of digital businesses: - Rovi - Sainsbury s Entertainment - ebooks by Sainsbury s

Growing Space and Creating Property Value A unique space growth opportunity Supermarkets Opening stores in select locations where Sainsbury s does not currently have a presence there are 35% of postcodes where Sainsbury s market share <5% Extensions Increasing the proportion of customers with access to a full non-food offer from 11% to 33% over the last 5 years Convenience Increasing the proportion of convenience space, reflecting the change in consumer shopping habits Highly accretive investments, generating strong returns

A long-term vision for growth

Summary Good sales and profit performance Continued strength in own-brand Competitive advantage through Nectar, coupon-at-till and Brand Match Strong growth in our multi-channel businesses Opportunities to further develop Sainsbury s Bank Consistent delivery of our long-term vision for growth

Q&A

Preliminary Results 2012/13