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As supermarket group profits fall...

Sainsbury’s Bank unveils plan to launch mortgages

Sainsbury's Bank hqSainsbury’s Bank is to introduce mortgages on the back of strong growth in the business, it emerged today.

The group said the the decision had been taken after the Edinburgh-based bank achieved a 5% rise in underlying profit to £65 million and total income by a similar figure to £274m.

It marks a change in focus after the bank, based at Edinburgh Park, said it was more likely to remain focused on savings accounts.

“Given the bank’s strong trading performance and the trust people have in the Sainsbury’s brand, we have decided to launch new mortgage products in 2017,” it said in today’s annual result statement.

“We believe these products will complement our existing financial services portfolio and we expect customers to respond well.”

Total accounts held by customers now stand at nearly 1.7 million. 

“We performed strongly in the competitive personal loans market, with 15% year-on-year growth in the number of advances to new customers,” said the company.

Insurance products grew 10% and sales of home insurance by 25%.  

The bank now has 207 Travel Money bureaux and enjoyed a 30% increase in transactions year-on-year. 

The ATM estate grew by over 4% to 1,646 and ATM transactions by nearly 2% year-on-year to nearly 240 million. The bank said £1 of every £11 dispensed from a LINK ATM transaction is from Sainsbury’s Bank. 

Sainsbury's bagGroup profits fall

The group reported a 13.8% fall in underlying profits to £587m, largely because of falling food prices. A proposed final dividend of 8.1p is trimmed by 1.2%.

Convenience stores now generate sales of more than £2.3 billion and delivered over 9% sales growth during the year despite the business being impacted by a higher proportion of categories that are experiencing food price deflation. 

“We have taken a disciplined approach to new space this year, opening 69 convenience stores, and by the end of the year we traded out of 773 convenience stores,” it said.

“We are trialling new convenience formats, both smaller and larger than our standard convenience stores. Our new ‘micro’ 753 sq ft store in Richmond is the smallest Sainsbury’s Local to date, and it is designed to meet the needs of people working in the area who want to buy ‘food for now’.”

Groceries online grew by nearly 9% with orders increasing by nearly 15%. The company had a record week in the run up to Christmas, delivering over 289,000 orders, both to customers’ homes and to the 101 grocery Click & Collect sites. It aims to double the number of Click & Collect sites by the end of the financial year.

CEO’s statement

Mike Coupe, chief executive, said: “We are making good progress against the strategy we outlined to shareholders in November 2014. We continue to outperform our main supermarket peers and maintain market share in a competitive, deflationary environment.

“We deliver great quality products and services at fair prices, whenever and wherever customers want to shop – and with volumes and transactions up, it is clear customers are responding positively to our offer.

“Our core food business performed well, underpinned by our quality investment programme, our simpler pricing strategy and lower regular prices. We also saw strong growth in clothing and general merchandise, as well as in our convenience and online channels. These results reflect the multi-product, multi-channel shopping experience customers are looking for today and our proposed acquisition of Home Retail Group will accelerate our strategy in this direction.

“We continue to manage our costs and capital expenditure carefully and, after making operating cost savings of £225 million this year, we are on track to deliver our three-year £500 million cost saving programme by the end of 2017/18. Ongoing pricing pressures and food price deflation have impacted our sales and operating margins. As a result, underlying profit and earnings per share are down this year versus last year.

“The market is competitive, and it will remain so for the foreseeable future. We believe we have the right strategy in place and are taking the right decisions to achieve our vision to be the most trusted retailer where people love to work and shop.”

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