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The overriding theme of our year and of this Report is our progress in building New Safeway. I said last year that we had completed the turnaround phase of our recovery and were well into the second phase of our growth strategy. Our goals in this phase are to transform our store portfolio, radically improve our product range and increase the value of the Safeway shopping basket. I am delighted to report that we have made a great deal of progress in each case.
Our results
Our like-for-like sales increased by 4.8%, making this the third consecutive year of strong sales growth and driving an improvement of 14% in our sales per square foot since 1999. Profit before property and tax is up by 11% to £355 million, earnings per share is also up by 11% to 24.5 pence and our recommended dividend for the full year has increased by 5% to 9.52 pence per share. This performance has been achieved despite transitional costs of £34 million arising from our store reformatting programme. During the last two years, we have increased our pre-tax profit by 45% and our net margin to sales by 0.8%, reflecting a better sales mix and improved efficiency.
Our strategy
Our four business goals of being best at fresh, having the best deals, being best at availability and being best at customer service remain the cornerstone of our strategy. Since the Autumn of 1999, our deep-cut deals, communicated weekly by nine million flyers delivered direct to our customers, have increased our total transactions by 1.5 million to well over 11 million per week. The investment which we have made in reformatting our stores during the year and which we plan to continue making at a similar level in the current year is, along with our focus on product development, fundamental to the current phase of our strategy. Now that our financial performance is much stronger, our priorities for this year and beyond are to continue our like-for-like sales growth and to complete the evolving transformation of our store portfolio.
Our stakeholders
I am pleased to report that, in March, Safeway gained entry to the FTSE4Good index of socially responsible companies after a rigorous analysis of our policies and practices by the certifying authority. The criteria for membership of the index cover every aspect of our relationship with our stakeholders. In the course of preparing our submission we discovered several areas for potential improvement, particularly in the provision of independent auditing of our environmental standards, and have taken the appropriate corrective action. The process of applying for membership has emphasised the importance of our wider responsibilities to society and Lawrence Christensen, our Supply Director, will ensure that these issues continue to be given full weight at Board level.
The Board
Lisa Gernon is retiring from the Board as a non-executive director at the end of May. I would like, on behalf of the Board, to thank her warmly for her contribution to our business. We are in the process of recruiting two additional non-executive directors and an announcement will be made shortly.
On 15 May, the Board announced the appointment of Jack Sinclair as Group Marketing and Trading Director, with effect from 31 May 2002. He joined Safeway in December 1989.
Our industry
In the aftermath of the Foot and Mouth crisis, the Government established a Policy Commission on the Future of Food and Farming in England, chaired by Sir Donald Curry, which reported its findings in January. A central theme in its Report is the need for more cooperation throughout the food supply chain. To deliver this goal a Food Chain Centre has been created, facilitated by the Institute of Grocery Distribution, which will sponsor and coordinate both the analysis of specific problems and the agreed actions to resolve them. Safeway will actively support the work of the Centre and thereby encourage greater trust and cooperation between all stakeholders in the food industry.
The DTI Code of Practice for suppliers came into effect in mid-March and we are, of course, doing our best to make it effective. With this end in mind, in January we launched our Safeway Farmers’ Charter to build on and extend the limited protection given to farmers, as distinct from other suppliers, by the Code.
Current trading
In the first six weeks of the new financial year like-for-like sales growth was 2.0%, against last year's tougher comparatives. We remain, however, committed to driving strong sales growth and expect performance in the remainder of our first quarter progressively to strengthen as the pace of new format store relaunches picks up.
Finally, I should like to thank everyone in our business for their commitment to building the New Safeway and for their hard work in making it happen.
David Webster Chairman
23 May 2002
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