PRELIMINARY ANNOUNCEMENT 52 weeks ended 26th April 2003

PRELIMINARY ANNOUNCEMENT

52 weeks ended 26th April 2003

Agenda - Good Morning and Welcome

1. Overview - John von Spreckelsen

2. Strategy - Renewal and New Business - John von Spreckelsen

3. Strategy - Commercial - Steve Back

4. Financial Review - Steve Back

5. Summary and Close - John von Spreckelsen

Financial Summary

Sales improvement by 0.7% to £5.0bn

Operating profit increase from £28.1m to £30.1m

EBITDA growth from £113.9m to £121.5m

Strong ungeared balance sheet with NAV of £765.9m

Capital expenditure increased by 62% to £189.6m

Recommended final dividend 1.25p per share

Underlying EPS up 15% from 5.5p to 6.3p

Like-for-LikeFood Retail Sales

* Electronic top up of mobile phones has largely replaced phone card sales.If the full sales value of the top up was recorded within sales rather than the commission element, like-for-like sales would have shown an uplift to 1.7%.

2001/02H2

2002/03H1

2002/03H2

2002/03Full Year

9 weeksto

28 June 2003

SF Fascia 0.1 0.4 1.5 0.9 1.1*

KS Fascia 1.4 1.3 1.0 1.2 1.1

Group 0.6 0.8 1.3 1.0 1.1

Agenda






Vision

plc: “Be the leading small-format food retailer in the UK”

Somerfield: “Be the leading local fresh and convenience food retailer”

Kwik Save: “Be the dominant low price neighbourhood food retailer”

StrategyCapitalise on Key Assets

• Large estate - the Group has more stores in the UK than any other quoted grocery food retailer

• Fresh - the Group has the capability and expertise for daily delivery

• UK national supply chain - covers all of England, Scotland and Wales

• Strong balance sheet and no debt

• Experienced retail management team

Strategy Background

• Market

– Convenience is a fast growing market and remains fragmented

– Main shop segment of the market - no growth

– Convenience and top up shopping - some consolidation taking place - attractive growth opportunities

• Company

– Shareholder returns and profits are not yet adequate

– Historically weak and confused business model for Kwik Save

– Valuable estate but under-performing and under-invested retail portfolio

StrategyOffer - Exploit Complementary Market Positioning

Somerfield Kwik Save

Target customers Broad appeal for top upconvenience shoppers

Mid-market for staggered mainand top up shopping missions

Market positions Staggered main/top up andconvenience stores with anextensive fresh range

Quick to reach, easy to shop, lowpriced shopping

Primary demographic B/C1s C2D

Strategy Portfolio - Focus on Core Offer

Retail Square Footage Average Square Footage

Somerfield- Larger stores

2,000 –15,000 8.7k– reduces to 6.0k

Downsize and co-site with other retailers e.g. Kingswood Refits in larger stores less successful

Kwik Save 6,000 – 12,000 Average 8.0k- Larger stores Downsize and let surplus space Dispose or transfer to Somerfield- Smaller stores Extend or convert to Somerfield

Transfers both ways between fascias where demographics support such change

Franchising and Forecourts 1,500 – 4,500 Ideal average 3.0k (Sunday hours)

Strategy - New BusinessOpportunity to Expand into the Convenience Market

Forecourts - Key differentiator is that these are food sites selling fuel

TFE 18 stores achieving growth of 9% in Q4

Food only agreements

Margram 8* stores of the 12 now trading as Somerfield

Food and fuel sites

Weekly sales range from £112k to £242k

Franchise - Quality fresh food based “franchise” offer

TM Retail 3* stores - co-branded trial

* As at the year end only 2 Margram stores and one TM store were open and included in turnover

StrategyGrowth Through Investment - Somerfield

100th store launched this week - Worlds End, Chelsea

2001/02 2002/03 2003/04

Total store refits 33 59 100

Refits to Concept 1st Year 2nd Year

2,000 – 15,000 sq ft15,000+ sq ft

20%6%

6%9%

StrategyKwik Save - Formats Investment

Second Trial - 8 Stores

Productivity and Growth

First Trial - 6 storesAverage Capex £848k Sales Area 11.7k Cost per foot £73Sales pre £89k Growth 29.6% New Sales £115k

Average Capex £704k Sales Area 9.9k Cost per foot £71Sales pre £71k Growth 25.4% New Sales £90k

Average Capex £776k Sales Area 10.8k Cost per foot £72Sales pre £80k Growth 27.8% New Sales £102k

StrategyRange - For Everyday Needs

Somerfield Kwik Save

Value range Makes Sense Simply(cheapest on display)

Own label Somerfield Kwik Save

Premium So Good -

Healthy Good Intentions -

Alternative OrganicsSeasonal e.g. barbecue

-

Agenda






StrategyGrowth is paramount - what about cost?

• Created centralised procurementPACE - a process to reduce cost of goods for resaleSTEPS - centralised savings on support goods, services and all contractsand co-operations for supply e.g. NISA

• Cost of supply chain operation

• Head Office and Support functions

• Cost of finance - interest at lowest rates

• Tax and Dunbar

• Property and under-utilised assets - release of profits and cash for next 2 years

• Closed stores - quick and effective turnaround

StrategySupply Chain/IT

• Largely unchanged - target 15 Depots by 2005/06 Financial YearProduction of a single, integrated, fully composite supply chain(current capacity £6 billion)Development of new composite RDCsSingle RDC for all slow moving goodsClosure of outdated/surplus depots

• Operational EffectivenessComposite deliveries - covering Chill, Frozen and AmbientShorter lead times for fresh deliveriesOne system - “Exceed” to manage all depots on lineInteractive voice picking - improves accuracy and picking efficiency

• IT - continuation of improvement strategy

StrategyAvailability and Stock

Stock reduced after improved depot availability

373330

290325

0

100

200

300

400

2000 2001 2002 2003

£m

9192939495969798

%

Stock Average Availability

Agenda






Net Profit

2002/0352 weeks

£m

2001/0252 weeks

£mSales per accounts 5,000.1 4,965.8

Operating profit 30.1 28.1

Exceptional items 9.0 7.4

Interest - on-going (4.3) (7.3)

- exceptional - (6.0)

Profit before taxation 34.8 22.2

Taxation credit 5.0 6.0

Profit after taxation 39.8 28.2

Dividends (8.0) (4.9)

Retained profit 31.8 23.3

Exceptional Items

Last year within interest there were refinancing costs of £6.0m

2002/03£m

2001/02£m

Profit on disposal of all fixed assets 17.0 8.1

Supply Chain integration (including redundancies) (8.0) (2.0)

Business closures (24-7) - (2.0)

Asset impairment write back - 7.5

Other - Independent Insurance Company exposure - (4.2)

Exceptional items (8.0) (0.7)

Total 9.0 7.4

Taxation

• £5.0m tax credit for the year (buffer carried forward) £8.5m

• Taxable losses carried forward £49.6m

• Capital losses carried forward £219 m

• Tax plan completed

Operating Cash Flow

2002/0352 weeks

£m

2001/0252 weeks

£m

Operating profit 30.1 28.1

Depreciation & amortisation 91.4 85.8

EBITDA 121.5 113.9

Working capital 22.1 11.7

Provisions and exceptionals (11.8) (9.3)

Operating cash flow 131.8 116.3

Reconciliation of Net Debt

£m

Net funds – 27 April 2002 29.2

Operating cash flow 131.8

Interest paid including refinancing (4.3)

Taxation refunded 3.0

Capital expenditure (178.9)

Dividends (6.9)

Asset sales 45.5

New finance leases (17.0)

Issue of shares (option arrangements) 1.0

Other (0.9)

Net funds – 26 April 2003 2.5

Reinvestment

2002/03£m

2001/02£m

New stores, conversions/refits and upgrades 108.4 71.4

Systems enhancements 23.0 19.1

Distribution network 38.3 5.6

Store infrastructure 19.9 20.6

Total expenditure 189.6 116.7

Asset sales (45.5) (30.4)

Net expenditure 144.1 86.3

Strategy - FRS17 Pension Risk

• FRS17 pension deficit from £55.1m to £99.5m

• £6.8m higher P & L charge under FRS17 than under SSAP24

• The defined benefit scheme is closed to new members and the Group has increased company pension contributions from 13.9% to 20%

Agenda






Summary

• Clear focused business strategy

• Experienced Board to deliver and add pace to the strategy

• Sound financial base on which to grow

• Somerfield on track and remains focused

• Kwik Save format of the future to be rolled out

• Operating in growing market segments

StrategyFinancial Targets - EBIT Margins

Somerfield 4%

Kwik Save 2%

Forecourts and Franchising 3%

Capital - all investments must meet a demanding cash payback model

- exceptions: health and safety and infrastructure works

Question and Answer Session

Thank you

APPENDICES

HR Strategyfor our Stakeholders

People

• Energise 54,000 colleagues

• Simplify and create an effective, focused and lean organisational structure

• Train and develop our own people and promote from within

• Motivate and reward our people

• Establish a strong culture and values set - a way of working for our organisation

• Create a totally focused retail team

Interest

2002/03£m

2001/02£m

Interest payable on borrowings (4.7) (10.9)

Interest receivable on deposits 1.4 4.1

Other (1.0) (0.5)

(4.3) (7.3)

Exceptional (refinancing) interest - (6.0)

(4.3) 13.3

Trading Portfolio MovementsNo. of Stores

Somerfield Kwik Save Total

At 27 April 2002 589 717 1,306

New stores 3 1 4

KS to SF conversions 6 (6) -

SF to KS conversions (1) 1 -

Closures (8) (33) (41)

At 26 April 2003 589 680 1,269

Trading Portfolio MovementsSq. Ft. (‘000s)

Somerfield Kwik Save Total

At 27 April 2002 5,210 5,753 10,963

New stores 7 10 17

KS to SF conversions 36 (36) -

SF to KS conversions (9) 9 -

Closures (99) (332) (431)

At 26 April 2003 5,145 5,404 10,549

PRELIMINARY ANNOUNCEMENT 52 weeks ended 26th April 2003

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