Sainsbury's confident after profits jump

13th May 2010 07:04

Supermarket Sainsbury's posted full-year profits ahead of expectations, sending the company's shares higher in spite of chief executive Justin King's expectations of a rise in VAT. King said he thinks a rise in VAT on non-food items is 'more likely than not' when the Con-Lib government implements an emergency budget, which it plans to do within the next 50 days. VAT is predicted to rise to 20% from 17.5%. The rise in VAT may be a particular concern for Sainsbury's, which has been seeking to increase its non-food offering.In the year to March 20, underlying pre-tax profits climbed to £610m, which was slightly ahead of expectations, from £519m the previous year, on total sales that were up to £21.4bn from £20.4bn. On a like-for-like basis excluding fuel sales were up by 4.3%.Sainsbury's, which like all supermarkets has faced the problem of slowing food inflation, said like-for-like sales growth was ahead of its target of 3% to 4%.Growth in sales has been helped by Sainsbury's seeking to widen its appeal by moving into non-food areas such as clothing and video games and opening convenience stores.It is proposing a full year dividend of 14.2p, up from 13.2p last year.' Whilst we expect that the environment will remain challenging and consumer spending will be under pressure, we believe our strong space growth plans, supporting our expanding food, complementary non-food and convenience store businesses, alongside our continued focus on productivity, will enable the business to make further good progress,' said King.