Can you take me through the numbers?
The sales overall were up 11% and that was strong growth in the UK across
both sides of the business across the general merchandise, clothing and home,
and also across food.
But internationally as well we had another half of further strong growth.
Profit before tax was up about 30% at £405m. Again, we’re very pleased with that
performance and the dividend has increased by 31% to 6.3p at the interim stage.
And at the gross margin level, where have the gains come from?
Presumably from suppliers.
When we gave guidance for the full year of 6-7% increase, we always expected
that the first half increase would be greater than the second half. So the
increase that you’ve seen is no surprise to us. Second, our costs this year will
be 8-9% ahead of last year.
Now your new property strategy is obviously a major programme. How
are you going to finance this?
The property strategy that we’ve talked about is very exciting for the business,
both in the short term and also from a longer-term growth prospective.
As a company, we have very strong cashflow characteristics. We have a strong
balance sheet and we think we can comfortably finance it out of the cash flow
over the next few years.
But can you give some idea of the scale of the investment?
That’s not something we’re ready to go into at this point in time. I think the
key point I would make is that this is not transforming in terms of the balance
sheet. We absolutely think that we can fund this out of the cashflow of the
business over the coming years.
Now you’ve revised your capital expenditure numbers up by
considerable amounts. Can you just take me through them in the light of your
accelerated modernisation plan?
Our guidance on capex is now between £750m and £800m. What we’re choosing to
do for the 2007 programme is start work in January.
This year, we started, by and large, in April. That means that we’re still
on-site in a number of our stores now, which is not great given that we’re
coming up to the Christmas period and we want our stores to look clean for our
customers going into Christmas.
It means there will be about £120m more capital into this financial year
2006/07. We announced that we bought 12 Simply Food stores in a package that
equates to about a £60m increase in capital expenditure than we originally
thought. We are also choosing to undertake some significant developments in some
of our big city centres.
What guidance can you give on the pension deficit?
I think there are two points to make on the pension deficit. The first is we
have an accounting valuation, which is necessarily a volatile measure. And that
valuation shows a deficit of about £1bn at 30 September 2006. I think the key
measure, though, is the actuarial valuation. That is something that we’re not
able to share at this point. We feel that, in terms of the size of the Group,
that it’s a liability which we are very comfortable with and that we can manage
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