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Notes to the financial statements

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35 Operating lease commitments

The Group leases various retail stores, offices, depots and equipment under non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights.

The Group sublets certain leased properties and the total future minimum sublease payments to be received under non-cancellable subleases at 24 March 2007 are £262 million (2006: £267 million).

The Company does not have any operating lease commitments (2006: nil).

36 Capital commitments

During the current financial year, the Group entered into contracts of £305 million (2006: £477 million) for future capital expenditure not provided for in the financial statements.

The Company does not have any capital commitments (2006: nil).

37 Contingent liabilities and financial commitments

Contingent liabilities

Operating lease commitments (note 35) include payments in respect of 26 supermarket properties sold (16 supermarket properties sold in March 2000 for £325 million and ten supermarket properties sold in July 2000 for £226 million) and leased back to Sainsbury’s Supermarkets for a period of 23 years. Under the arrangement, the Company has provided a residual value guarantee of £170 million for the 16 supermarket properties and £39 million for the ten supermarket properties at the end of the lease period.

In view of the relatively low amount of the guarantees when compared to the present market value of the freehold interests, the Directors believe that the likelihood of the guarantees being invoked is remote, therefore no provision has been recognised in these financial statements.

Financial commitments

The financial commitments of Sainsbury’s Bank plc, a 50 per cent joint venture of the Group, are set out below.

Sainsbury’s Bank

The amounts noted below indicate the volume of business outstanding at the balance sheet date in respect of undrawn commitments to lend on credit cards, mortgages and personal loans. They do not reflect the underlying credit or other risks which amounted to £7 million (2006: £9 million) as indicated by the risk-weighted amount using the Financial Services Authority’s capital adequacy requirement. The risk-weighted amount is much lower than the contractual amount since the majority of commitments are cancellable, either at any time or up to and including one year.