Sainsbury's annual profits up 28%

Sainsbury's chief executive Justin King

Supermarket chain Sainsbury's has reported strong growth in profits and plans to boost its non-food business.

Underlying profits reached £488m in the year to 22 March, marking a 28% rise on the year before. Like-for-like sales, excluding fuel, went up 3.9%.

The firm said the results marked the end of a recovery plan set out in 2004.

The retailer also said it would invest £15m in 2008 and 2009 to start selling non-food products online and expand its banking operations.

Sainsbury's said it would be adding new sales space to expand its non-food range, both by developing new stores and expanding existing ones.

The firm said it expected two-thirds of future sales growth to come from food and one-third from non-food, with half the new space given to its growing non-food offer.

The board is recommending a final dividend of 9 pence per share, bringing the full-year dividend to 12p - an increase of 23%.

Achieving targets in the firm's turnaround plan "has provided a firm base for ongoing sales profit growth and new space development", the retailer said.

"However, as we said throughout the second half of 2007/2008, consumer budgets are clearly under pressure and we expect the market to remain intensely competitive," said Justin King, chief executive of the firm.