Notes to the financial statements
33 Acquisition of subsidiary
On 30 June 2006, the Group acquired 100 per cent of the shares in Culcheth Provision Stores Ltd for a total cash consideration of £3 million, net of cash acquired (note 12).
34 Related party transactions
Group
(a) Key management personnel
The key management personnel of the Group comprise members of the J Sainsbury’s plc Board of Directors and the Operating Board.
The key management personnel compensations is as follows:
| 2007 £m |
2006 £m |
|
|---|---|---|
| Short-term employee benefits | 7 | 8 |
| Post-employment employee benefits | 1 | 1 |
| Share-based payments | 7 | 6 |
| 15 | 15 |
Details of transactions, in the normal course of business, with the key management personnel are provided below. For this purpose, key management personnel include Group key management personnel and members of their close family.
| Credit card balances | Saving deposit accounts | |||
|---|---|---|---|---|
| Number of key management personnel |
£000 | Number of key management personnel |
£000 | |
| At 26 March 2006 | 4 | 9 | 2 | (1) |
| Amounts advanced/(received)1 | 4 | 115 | 1 | (769) |
| Interest earned/(paid) | 1 | — | 2 | (3) |
| Amounts (repaid)/withdrawn2 | 4 | (116) | 1 | 486 |
| At 24 March 2007 |
4 | 8 | 2 | (287) |
| At 27 March 2005 | 5 | 11 | 4 | (487) |
| Amounts advanced/(received)1 | 6 | 249 | 3 | (97) |
| Interest earned/(paid) | 3 | 1 | 4 | (18) |
| Amounts (repaid)/withdrawn2 | 6 | (252) | 3 | 601 |
| At 25 March 2006 | 4 | 9 | 2 | (1) |
(b) Joint ventures
In the current financial year, the Company sold a five per cent shareholding in Sainsbury’s Bank plc (the ‘Bank’) to the Bank of Scotland (a wholly owned subsidiary of HBOS plc) and consequently, the Bank became a 50:50 joint venture between the Company and HBOS plc (note 7).
Transactions with joint ventures
For the 52 weeks to 24 March 2007, the Group entered into various transactions with joint ventures as set out below.
| 2007 £m |
2006 £m |
|
|---|---|---|
| Services and loans provided to joint ventures |
||
| Sales of inventories | 4 | 3 |
| Management services provided | 3 | — |
| Services and loans provided by joint ventures | ||
| Management services received | — | (1) |
Year-end balances arising from transactions with joint ventures
| 2007 £m |
2006 £m |
|
|---|---|---|
| Receivables |
||
| Other receivables |
4 | 1 |
| Loans due from joint ventures: |
||
| Floating rate subordinated undated loan capital1 | 20 | — |
| Floating rate subordinated dated loan capital2 | 30 | — |
| Payables | ||
| Loans due to joint ventures | (5) | (5) |
- The undated subordinated loan capital shall be repaid on such date as the Financial Services Authority shall agree in writing for such repayment and in any event not less than five years and one day from the dates of draw down. In the event of a winding up of Sainsbury’s Bank plc, the loan is subordinated to ordinary unsecured liabilities. Interest is payable three months in arrears at LIBOR plus a margin of 1.0 per cent per annum for the duration of the loan.
- No repayment of dated subordinated debt prior to its stated maturity may be made without the consent of the Financial Services Authority. In the event of a winding up of Sainsbury’s Bank plc, the loan is subordinated to ordinary unsecured liabilities. Interest is payable three months in arrears at LIBOR plus a margin of 0.6 per cent per annum for the duration of the loan.
(c) HBOS plc group
In the prior financial year and up to 8 February 2007 of the current financial year, Sainsbury’s Bank plc was a subsidiary of the Company and had as shareholders the Company and Bank of Scotland (part of the HBOS plc group), which held 55 per cent and 45 per cent respectively of the issued share capital.
Transaction with the HBOS plc group
Companies within the HBOS plc group provided both management and banking services to Sainsbury’s Bank. Sainsbury’s Bank also entered into financial transactions with, and earned commission from, companies within the HBOS plc group, all under normal commercial terms.
| 2007 £m |
2006 £m |
|
|---|---|---|
| Loans given to, and commission received from HBOS plc group | ||
| Total loans and advances made during the year | 5,589 | 8,961 |
| Net interest received in respect of interest rate swaps, loans and advances | 40 | 16 |
| Commission income earned | 18 | 7 |
| Services and loans provided by HBOS plc group | ||
| Management and banking services | (40) | (52) |
| Interest expense paid in respect of subordinated loan capital | (2) | (3) |
| Deposits by banks: | ||
| Short-term borrowing | — | (66) |
| Fixed-term borrowing | (79) | (1,007) |
| Subordinated undated loan capital1 | — | (9) |
| Net interest paid in respect of interest rate swaps, loans and advances | (36) | (21) |
Year-end balances arising from transaction with the HBOS plc group
| 2007 £m |
2006 £m |
|
|---|---|---|
| Receivables | ||
| Current account | — | 7 |
| Loans and advances | — | 996 |
| Interest receivable | — | 4 |
| Commission receivable | — | 1 |
| Payables | ||
| Management and banking services | — | (18) |
| Interest payable | — | (5) |
| Deposits by banks: | ||
| Fixed-term borrowing | — | (1,009) |
| Subordinated liabilities due: | ||
| Floating rate subordinated undated loan capital1 | — | (18) |
| Floating rate subordinated dated loan capital2 | — | (27) |
- The undated subordinated loan capital shall be repaid on such date as the Financial Services Authority shall agree in writing for such repayment and in any event not less than five years and one day from the dates of draw down. In the event of a winding up of Sainsbury’s Bank plc, the loan is subordinated to ordinary unsecured liabilities. Interest is payable three months in arrears at LIBOR plus a margin of 1.9 per cent per annum for the duration of the loan.
- No repayment of dated subordinated debt prior to its stated maturity may be made without the consent of the Financial Services Authority. In the event of a winding up of Sainsbury’s Bank plc, the loan is subordinated to ordinary unsecured liabilities. Interest is payable three months in arrears at LIBOR plus a margin of 0.75 per cent per annum for the duration of the loan.
Company
(a) Key management personnel
The key management personnel of the Company comprise members of the J Sainsbury’s plc Board of Directors. The Directors do not receive any remuneration from the Company (2006: £nil) as their emoluments are borne by subsidiaries. The Company did not have any transactions with the Directors during the financial year (2006: nil).
(b) Subsidiaries
The Company enters into loans with its subsidiaries at both fixed and floating rates of interest on a commercial basis. Hence, the Company incurs interest expense and earns interest income on these loans and advances. The Company also received dividend income from its subsidiaries during the financial year.
Transactions with subsidiaries
| 2007 £m |
2006 £m |
|
|---|---|---|
| Loans and advances given to, and dividend income received from subsidiaries | ||
| Loans and advances given | 69 | 1,399 |
| Loans and advances repaid by subsidiaries | (802) | (3,104) |
| Loans and advances disposed of with part disposal of Sainsbury’s Bank | (50) | — |
| Interest income received in respect of interest bearing loans and advances | 127 | 110 |
| Dividend income received | 270 | 270 |
| Loans and advances received from subsidiaries | ||
| Loans and advances received | (1,559) | (3,448) |
| Loans and advances repaid | 2,167 | 1,650 |
| Interest expense paid in respect of interest bearing loans and advances | (224) | (154) |
Year-end balances arising from transactions with subsidiaries
| 2007 £m |
2006 £m |
|
|---|---|---|
| Receivables | ||
| Loans and advances due from subsidiaries | 1,243 | 1,899 |
| Payables | ||
| Loans and advances due to subsidiaries | (5,203) | (5,856) |
(c) Joint ventures
In the current financial year, the Company sold a five per cent shareholding in Sainsbury’s Bank plc (the ‘Bank’) to the Bank of Scotland (a wholly owned subsidiary of HBOS plc) and consequently, the Bank became a 50:50 joint venture between the Company and HBOS plc (note 7).
Year-end balances arising from transactions with joint ventures
| 2007 £m |
2006 £m |
|
|---|---|---|
| Receivables | ||
| Other receivables | 1 | — |
| Loans due from joint ventures: | ||
| Floating rate subordinated undated loan capital1 | 20 | — |
| Floating rate subordinated dated loan capital2 | 30 | — |
| Payables | ||
| Loans due to joint ventures | (5) | (5) |
- The undated subordinated loan capital shall be repaid on such date as the Financial Services Authority shall agree in writing for such repayment and in any event not less than five years and one day from the dates of draw down. In the event of a winding up of Sainsbury’s Bank plc, the loan is subordinated to ordinary unsecured liabilities. Interest is payable three months in arrears at LIBOR plus a margin of 1.0 per cent per annum for the duration of the loan.
- No repayment of dated subordinated debt prior to its stated maturity may be made without the consent of the Financial Services Authority. In the event of a winding up of Sainsbury’s Bank plc, the loan is subordinated to ordinary unsecured liabilities. Interest is payable three months in arrears at LIBOR plus a margin of 0.6 per cent per annum for the duration of the loan.