J Sainsbury PLC (LON:SBRY) slumped to a full-year statutory loss due to costs related to the Coronavirus (COVID-19) pandemic and the strategic changes announced in November.
The grocer enjoyed good underlying trading momentum which continued into the new financial year, however in the months ahead will find it tough to beat the strong comparable periods last year as customer behaviour normalises. As a result, management remains “prudent” on outlook.
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Underlying profit before tax in the financial year to March 2022 is expected to be in line with consensus forecasts of £620mln, which is higher than in the year to March 2020, when it was £586mln.
The financial services segment is estimated to return to a full-year profit, the FTSE 100 group added.
Net debt is now forecast to be cut by at least £950mln over the four years to March 2023 thanks to strong cash generation, against previous guidance of £750mln.
Average retail cash flow is expected to be at least £500mln annually over the three years to March 2025.
The board has proposed a final dividend of 7.4p per share, bringing the full-year distribution to 10.6p per share, in line with last year.
It diverges from the policy of a dividend covered 1.9x by underlying earnings but that’s because of strong underlying cash generation and the company’s promise to protect shareholder income from the full impact of COVID-19 on profits.
In the year to 6 March, grocery sales and general merchandise sales jumped 8%, with digital sales up 102%. However, these were offset by reduced fuel sales. As a result, group revenue excluding VAT was flat at £29bn.
Sainsbury’s slumped to a statutory loss before tax of £261mln from a £255mln profit last year, with underlying profit before tax down 40% to £356mln.
COVID-19 costs came in at £485mln, while the restructuring programmes and impairments appeared as charges of £423mln and £220mln respectively. The firm decided to forego business rates relief like many other competitors did.
"The company maintains an optimistic outlook, and investors should take confidence that the group anticipates increased underlying profit before tax in the upcoming financial year to align with forecasts," said Neil Shah, Director of Research at Edison Group.
"Although the economic outlook remains uncertain, the easing of lockdown is set to benefit supermarkets as footfall will return to stores, whilst permitted travel should the drive fuel sales that have been sorely lacking."
Shares dipped 2% to 236.3p on Wednesday morning.
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