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Cost savings, Argos synergies boost profit at Sainsbury's

Supermarket giant Sainsbury's reported a 20% increase in its underlying pre-tax profit, boosted by substantial cost savings and synergies from its in-house Argos stores.

Underlying pre-tax profit rose to £302m from £251m in the 28 weeks to 22 September 2018 while it made cost savings of £121m.

However, transactions from its core food business grew just 0.6% over the period and the company cautioned that "continued pressure" remained on general merchandise margins.

Argos EBITDA synergies amounted to £63m, bringing the cumulative total to £150m EBITDA, Sainsbury's said. Since the half-year close, the company said it had reached its £160m Argos EBITDA synergy target, nine months ahead of the original schedule.

However, the firm warned that the consumer outlook was uncertain.

"The grocery, general merchandise and clothing markets continue to be highly competitive and very promotional. However, we remain on track to deliver current market consensus for 2018/19 underlying pre-tax profit of £634m," Sainsbury's said.

Regarding its proposed combination with Asda, Sainsbury's said that the Competition and Markets Authority was currently conducting its in-depth Phase Two review.

The company would pay an interim dividend of 3.1p per share, in line with its policy of paying 30% of the prior full-year dividend

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