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On its first public outing since the failed 600p a share takeover attempt by Delta Two, J Sainsbury took the market by surprise with first-half results that were ahead of analysts' expectations. Although like-for-like sales decreased on tough comparatives, and further blunted by poor summer weather, total sales still rose by 4.7 per cent in the period, thanks to additional selling space and a strong performance in online shopping.
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Crucially, the group was ahead of its sales growth target of reaching an additional £2.5bn of sales by March 2008, since revenue increased by £2.3bn in the period to September 2007 alone. Combined with cost savings, this sales momentum gave a decent boost to profitability.
Sainsbury is now entering the third year of its recovery plan, but chief executive Justin King is raising the bar higher - the new objective is to add another £3.5bn of sales by 2010. To do so, he intends to increase selling space by 10 per cent over the next three years through store extensions and new openings, as well as a partial move towards larger supermarkets. The group will also expand in non-food, notably clothing.
Broker Citigroup has maintained its full-year EPS forecasts at 18.4p (14.5p: 2007).
J Sainsbury (SBRY) |
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|---|---|---|---|---|
| ORD PRICE: | 414p | MARKET VALUE: | £ 7,213m | |
| TOUCH: | 413-414p | 12-MONTH HIGH: | 594p | LOW: 394p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 270p | NET DEBT: | 33% | |
| Half-year to 6 Oct | Turnover (£bn) | Pretax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2006 | 9.02 | 194 | 7.5 | 2.4 |
| 2007 | 9.25 | 232 | 9.4 | 3.0 |
| % change | +3 | +20 | +25 | +25 |
Ex-div:21 Nov Payment:04 Jan |
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These figures hold much that is worthy but, with a bid off the agenda, the toppy looking forward PE of 23 suggests that the good news is pretty thoroughly factored-in for now. Fairly priced.
Last IC view: Fairly priced, 446p, 5 November 2007
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
