Sainsbury's impresses

By Malcolm Craig

- Published: 25 May, 2007

Sainsbury's has taken the City by surprise with the strength of its recovery. Latest year pre-tax pro-fits (to 24 March 2007) have soared 42% to £477m. Sales climbed 6.9% to £17.2bn. Numis Securities has made a provisional forecast for pre-tax profits of £544m for the current year and £680m in 2009.

Sainsbury's board is not planning to release cash from its £8.6bn property assets - despite 5% shareholder Robert Tchenguiz's proposals for releasing cash from the Sainsbury estate and returning £4bn to shareholders. Property ownership remains at the heart of Sainsbury's business plan.

Boss Justin King is planning to increase sales by a further £3.5bn over the next three years. Sainsbury's has already grown sales by £1.8bn since March 2005, so it is well ahead of its plan to increase sales by £2.5bn by next March. By March 2010, there should be a total of £5.3bn in sales growth since March 2005.

King wants to open 30 new supermarkets and 100 convenience stores over the period, spending £2.5bn in the process, and to double the size of Sainsbury's

internet business.

Selling space is to be boosted overall by 10% and much of it is earmarked for non-food sales. Shareholders are being rewarded with a near 22% rise in the dividend to 9.75p.

IS MORRISONS A PRIVATE EQUITY TARGET?

Wm Morrison continues to be the subject of fevered speculation that it could become the next private equity target, following the failure of the bid for Sainsbury's by the CVC-led private equity consortium. The market price tag for Morrisons is thought to be £10.7bn. The prime attraction to private equity bidders lies in Morrisons's property portfolio, worth at least £7.7bn.

Asda advances

Asda's fortunes are also improving as sales in the last three months increased by 5% to 6%. Owner Wal-Mart does not reveal the exact figure. Customers have been attracted by cut-throat prices and new premium food ranges.

Greggs boost

Greggs saw sales of sausage rolls and sandwiches rise by nearly 5% in the 18 weeks to 5 May. This contrasts with a 3.9% sales rise for the first nine weeks of the year. Trading was boosted by unusually warm summer weather during the period, allied to a big national advertising campaign.

Numis Securities is looking for pre-tax profits of £46m to £47m for the current year.