Interim dividend of 3.3 pence per share, up 6 per cent, in line with their policy of paying 30 per cent of prior full year dividend. Full year dividend policy will change to 1.9x cover by underlying earnings (versus 2.0x previously) to offset the dilutive non cash impact of IFRS 16 on underlying earnings.
Other financial highlights include:
Group sales of £16,856 million, down 0.2 per cent
Retail sales (excluding fuel) down 0.6 per cent
Like-for-like sales (excluding fuel) down 1.0 per cent
In line with guidance, underlying profit reduced by £41 million to £238 million due to the combined impact of the phasing of cost savings, higher marketing costs and tough weather comparatives
As set out at the Capital Markets Day, they have reviewed their store estate, leading to £203 million of largely non cash one-off costs recognised in this half. Total one-off costs in the first half are £229 million, resulting in statutory profit before tax of £9 million. They continue to expect the total cost of the property strategy programme to be in the range of £230 million to £270 million
Underlying earnings per share down 16 per cent to 7.9 pence
Retail free cash flow of £698 million, up £81 million year-on-year, reflecting continued strong cash generation plus distributions from the British Land joint venture
Net debt reduced by £568 million to £6,778 million, reflecting the above cash generation. As in previous years, net debt at half year benefited from working capital phasing which will reverse in the second half. They have committed to reduce non-lease net debt by at least £750 million in the next three years from £1,522 million and expect a reduction of at least £300 million in 2019/20
New longer-term asset-backed pension plan agreed, providing greater security to the Scheme. 2018 triennial valuation deficit is down to £538 million, from £1,055 million in 2015 resulting in cash contributions reducing immediately by approximately £50 million per annum on average
Unique opportunity to structurally reduce costs by c.£500 million over five years as they integrate Sainsbury's and Argos, in addition to ongoing cost savings to cover the impact of cost inflation
