Sainsbury's profits up 42% as it rules out property spin-off

Iranian property mogul Robert Tchenguiz, who holds a 5 per cent stake, had been the driving force behind a campaign for Sainsbury to divide its trading and property businesses into two separate companies.

His move followed the failed private equity takeover approach for the company earlier this year.

But Philip Hampton, Sainsbury's chairman, unveiling a rise in pre-tax profits to 380 million (267m), said it was "right to retain ownership of our properties", which are valued in the company's annual accounts at 8.6 billion.

Hampton, also revealing like-for-like sales up a shade under 6 per cent in the year to 24 March, said: "Property has always been at the heart of our business and is closely aligned to our successful operation.

"We see trading and property as being mutually reinforcing. Our estate still has considerable development potential, which we believe will maximise both operational and freehold property value."

City analysts said the strong trading performance at Sainsbury showed its three-year recovery programme, which ends early next year, was bang on track.

The recovery plan was launched by incoming chief executive Justin King after Sainsbury made the first loss in its 135-year history in 2004.

Total sales last year climbed nearly 7 per cent to 18.5bn, while Sainsbury Bank, the group's joint venture with HBOS, made a 2m profit following a 10m loss in the previous year.

King hailed the latest performance as "our best for many years", and said it showed the company was now moving "from recovery to growth".

He also said he had no regrets about the CVC-led consortium's takeover approach failing even though it was widely believed he would make millions of pounds more via private equity incentivisation schemes and crystallised share options than currently.

"We have been able to achieve all these results in the public domain," King said. "There are many advantages of being in the public domain, not least being able to speak publicly about those achievements."

Hampton also suggested the group was "narrowing the gap" somewhat between its own incentivisation schemes and rewards available from private equity.

Sainsbury's full-year dividend is lifted nearly 22 per cent to 9.75p.

On the lack of a separate one-off capital return to shareholders, Hampton said: "It may well be in the future we may make capital returns to shareholders.

"But at this stage in our development we don't believe it is the right time to reduce our flexibility."