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Sainsbury brings back dividend and staff bonus as cash surges in first half

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J Sainsbury PLC (LON:SBRY) has hiked its dividend and promised its staff another bonus as it expects full-year profit to be at least 5% higher than last year after a strong half-year performance.

New chief executive Simon Roberts, who started in June, also unveiled a range of long-term strategic tweaks that are expected to “drive an inflection in underlying profit momentum” that will cut debt over the next two years and generate average annual free cash flow of £500mln in the three years to 2025.  

Total sales in the half-year to September 19, 2020, were up 6.9% on a like-for-like basis, with grocery sales up 8.2% and general merchandise sales up 7.4%, including Argos up almost 11%.

This compared to 8.2% LFL sales in the first quarter, with grocery up 10.5% and GM up 7.2%, when the first coronavirus (COVID-19) lockdowns in the UK boosted sales, as they are expected to do again in November and perhaps December too.

Total group revenues of £16.6bn were down 1.8% as financial services revenue fell 24%. Digital sales more than doubled to £5.8bn, of which groceries online sales up 102%.

A loss before tax of £137mln reflected £438mln of costs associated with closing standalone Argos stores and “other strategic and market changes”, with underlying profits reported at £301mln.

But with free cash flow of £943mln, Sainsbury’s was able to declare an interim dividend of 3.2p plus a special dividend of 7.3p which it said was in lieu of the missing final dividend for the previous financial year, while staff will also get a second 10% “thank you payment”.

With COVID-19 accelerating a number of shifts in the industry, investments by Roberts’ predecessor over recent years in digital and technology have, he said, “laid the foundations for us to flex and adapt quickly as customers needed to shop differently”, with 40% of sales made digitally in the half compared to 19% a year ago.

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