REG - B&M European - Annual Financial Report and Notice of AGM
21/06/2022 07:00
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RNS Number : 5404P B&M European Value Retail S.A. 21 June 2022
21 June 2022
B&M European Value Retail S.A.
Annual Report & Accounts 2022 and Notice of Annual General Meeting
B&M European Value Retail S.A. (the "Company"), the UK's leading variety
goods value retailer, announces that it has released today the Company's
Annual Report and Accounts for the financial year ended March 2022 and posted
to shareholders the convening Notice to its Annual General Meeting.
The Annual General Meeting of the Company will be held at the Sofitel
Grand-Ducal, 35, Rue du Laboratoire, L-1911 Luxembourg, Grand-Duchy of
Luxembourg on Thursday 28 July 2022 at 12:00 noon (CET).
In accordance with Listing Rule 9.6.1R, copies of the following documents have
been submitted to the National Storage Mechanism and will be available shortly
for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) ; copies of them are
also available on the Company's website in the investors section on the
following page: www.bandmretail.com/investors/agm.aspx
(http://www.bandmretail.com/investors/agm.aspx) .
• Annual Report and & Accounts 2022;
• Notice of 2022 Annual General Meeting; and
• Form of Proxy for the Annual General Meeting.
In accordance with Disclosure and Transparency Rule 6.3.5R (DTR 6.3.5R) and
the requirements which it imposes on how to make public annual financial
reports, the information in the Appendix to this announcement below is
extracted from the Annual Report & Accounts 2022 and should be read in
conjunction with the Company's Preliminary results announcement for the year
ended 26 March 2022 which was issued on 31 May 2022 and contained the
Company's preliminary consolidated financial statements; information on
important events that have occurred during the financial year and their impact
on the financial statements; details of related party transactions and the
statement of directors' responsibilities. That information (a copy of which is
available on the Company's website at www.bandmretail.com
(http://www.bandmretail.com) ) together with the information set out in the
Appendix below constitutes the material required by DTR 6.3.5R to be
communicated to the media in unedited full text through a Regulatory
Information Service.
This announcement is not a substitute for reading the Annual Report &
Accounts 2022 in its entirety. Page references in the Appendix below are page
numbers of the Company's Annual Report & Accounts 2022.
Enquiries
B&M European Value Retail S.A.
For further information please contact +44 (0) 151 728 5400
Simon Arora, Chief Executive
Alex Russo, Chief Financial Officer
investor.relations@bandmretail.com (mailto:investor.relations@bandmretail.com)
Media
For media please contact +44 (0) 207 379 5151
Sam Cartwright, Maitland
bmstores-maitland@maitland.co.uk (mailto:bmstores-maitland@maitland.co.uk)
APPENDIX
The principal risks and uncertainties relating to the Company are as set out
in pages 26 to 34 inclusive of the Annual Report & Accounts 2022.
The following is extracted in full and unedited text from the "Principal risks
and uncertainties" section of the Annual Report & Accounts 2022 and is
repeated here solely for the purpose of complying with DTR 6.3.5R.
PRINCIPAL RISKS AND UNCERTAINTIES
The following principal risks and uncertainties could have an impact on our
business model and strategy. Mitigating steps aimed at managing and reducing
those impacts are being employed by the Group as summarised below.
The Group's risks and mitigations are reviewed as part of the oversight of the
system of internal controls by the Audit & Risk Committee. They are
reported on to the Board, which takes overall responsibility for the risk
management of the Group.
The Group's Internal Audit function assesses the ongoing business risks of the
Group. It reports on the effectiveness of internal control procedures to the
Audit & Risk Committee. In assessing risk, it considers the Group's risk
mitigating actions and provides recommendations to management to improve
business processes and limit their exposure to risk.
The Group's approach to reviewing risk appetite is part of an annual risk
management cycle, which is used to drive and inform actions in relation to the
principal risks identified by the Board. As part of that process, the Group's
appetite for risk is defined with reference to the expectations of the Board
for both commercial opportunity and internal control. It is then used for
setting the Group's internal audit plan each year.
Risk management evaluation
The Group's executive management are responsible for identifying and
evaluating new and emerging risks and mitigating actions.
The Audit & Risk Committee, together with the support of the Group's
Internal Audit department and the Group's General Counsel, is responsible for
monitoring risks and mitigating actions and reporting any matters of concern
to the Board.
The Board is responsible for overseeing risk management of the Group. It
considers the recommendations made by the Audit & Risk Committee and
determines the framework of the type of controls and mitigating steps which
are to be implemented. That evaluation of risk and controls is carried out in
the context of how those risks could impact the overall objectives of the
Group.
The implementation of processes and controls in relation to the management of
risk is delegated by the Board to the executive and operational senior
management of the UK and French businesses.
Group Internal Audit reports to the Audit & Risk Committee at each of its
meetings during the year on the progress of management's implementation of
recommended actions to mitigate risks.
Principal risks
Covid-19 continues to remain a principal risk but its overall impact to
B&M has reduced with the lifting of government restrictions and widespread
vaccination programmes in the UK and France. Economic environment risks have
been impacted by a cost of living crisis; supply chain risk affected by supply
disruption in Asia; and commodity price increases due to inflationary
pressure. This means that some of these risks have increased in likelihood
and/or impact. The global increase in malware and ransomware means that the
likelihood of cyber security risks has increased. Other principal risks have
either reduced or remained stable.
None of the principal risks included in the 2020/21 financial year have been
removed and no new ones have been added.
Assessment of risks
An assessment is made by the Board of the likelihood or probability of a risk
occurring and the impact of the risk after taking account of mitigating
factors and controls. The assessment of that is set out in the heat map
opposite.
The heat map indicates the Board's view of the likely degree of impact of each
risk after taking into account the risk mitigations referred to in the
principal risks table below.
Principal risks table
The table below describes (i) the main risk exposures identified by the Board
in relation to our Group businesses, (ii) the mitigating factors which relate
to how the Group manages each of the risk exposures, and (iii) the linkage
between the business strategy and the relevant risk exposures. The group also
summarises (where relevant) key actions arising in the year in relation to how
the Group has addressed certain aspects of these risks. The Group has also
indicated where there were any changes in the profile of any of the risks,
which reflects the Board's view of the current trend in relation to those
risks.
The risks set out in the table are not exhaustive but represent the main risks
to the Group in relation to the period under review.
Climate change
Climate change was considered at the Group's annual strategy day in March
2022. It was determined, at that time, that climate change does not represent
a principal risk given the detailed risk assessment performed by management
this year and how the outcome of that assessment compares to the principal
risks already identified. However, this assessment will be reviewed at least
annually by management and the Board.
We have embedded a climate change perspective into the ongoing assessment of
our internal corporate risk register and will continue to review our risk
management process. Our climate risk impact framework will be continuously
updated and monitored, with full reviews occurring on an ongoing basis,
facilitated by the Group Internal Audit function.
Link to strategy key
A Delivering great value to our customers
B Investing in new stores
C Developing our international business
D Investing in people and infrastructure
Risk change key
Increased risk
- No change
Decreased risk
1 Covid-19
Description & potential impact Strategic Priority Change
Prolonged social restrictions due to the coronavirus or any reoccurrence of
government restrictions in the UK, France or China could impact consumer
demand, supply chains, the ability of colleagues to work and our stores A B C D
continuing to operate at expected levels of profitability. It could also
affect the timing of new store openings in relation to completion of works by
contractors.
Risk Mitigations Key Actions in 2021/22
· The categories of goods which the B&M UK and Heron Foods · The plans put in place by the B&M UK business in order to protect
businesses sell are essential goods within the UK Government guidelines. our supply chain (as referred to below under the key actions in relation to
Supply Chain risk) have continued to protect the business from any material
· Maintaining sufficient liquidity for our ongoing operations. disruption to supplies, costs or prices, with those risks having been managed
and offset by stock cover held in the UK of c.12 weeks cover for general
· Maintaining (i) flexibility in our distribution network and with merchandise goods.
suppliers to cope with additional demand in relation to FMCG items, and (ii)
controls of orders of lines where demand has slowed to protect against · Government policy in France in relation to Covid restrictions
over-stocking in certain categories. differed to the UK approach, and our French business remained responsive to
the changing requirements during the early part of the financial year.
· The Group's approach to flexible working arrangements supported
colleagues in relation to working hours and homeworking arrangements
throughout the year.
2 Supply chain
Description & potential impact Strategic Priority Change
Imported goods from China represent a significant proportion of the Group's
general merchandise products. Lead time delays in the supply chain could
result in lower sales and potential loss of margin through higher markdowns. A
Disruption to the supply chain arising from civil unrest, natural disasters,
diseases and pandemics, ethical trading issues or quality standards failures
could impact our trading performance and brand reputation.
Risk Mitigations Key Actions in 2021/22
· The Group has an experienced buying team which is responsible for · Stock cover in the B&M UK business of over 12 weeks on general
maintaining an efficient and effective supply chain. merchandise imported goods ensures levels of inventory are adequate to meet
periods of supplier delay.
· A range of alternative supply sources are maintained across the
product categories and we are not over-reliant on any one single supplier. · Internal review of supplier social compliance process and appointment
of Sustainability Manager to monitor transparency in the supply chain.
· The Group has anti-bribery & corruption and modern slavery &
human trafficking policies in place in relation to its supply chain. · Working with suppliers and freight forwarders to forecast and remain
vigilant in relation to challenges regarding the transportation of goods.
· A combination of individual buyers and sourcing agent employees
conduct supplier factory visits where this is possible given local Covid
restrictions.
3 Competition
Description & potential impact Strategic Priority Change
The Group operates in highly competitive retail markets in the UK and France
which could materially impact the Group's profitability, share price and limit
growth opportunities. A C D
Risk Mitigations Key Actions in 2021/22
· Continuous monitoring of competitor pricing and product offering. · The Group has continued to maintain its strict SKU count discipline
within product ranges, which enables it to react quickly to ever changing
· Development of new product ranges within the product categories to consumer tastes, trends and buying habits.
identify new market opportunities and target new customers.
· The Group commissioned a customer insight survey to measure our
strengths and weaknesses against our competitors, to provide management with
indicators of where the Group can improve our competitive edge relative to our
peer group and other discount retailers. This allows the Group to track
progress against each of the indicators and outputs from those surveys.
· Around half of the Group's revenues in the period continues to come
from food and FMCG goods. This has allowed the Group to remain insulated from
any down turn in consumer spending and resilient against our competitors
whilst continuing to meet our customers' needs.
4 Economic environment
Description & potential impact Strategic Priority Change
A reduction in consumer confidence could impact upon customer spending, and
subsequently revenue and profitability, as a result of the prevailing
macroeconomic conditions in the markets in which we operate. A B C D
Risk Mitigations Key Actions in 2021/22
· We offer a range of products and price points for consumers which · The Group has continued to ensure that we remain focused on only
allows them to trade up and down. stocking the top best-selling lines across our ranges. We have continued to
work hard to ensure our stores remained well stocked with the best-selling
· We maintain a low cost business model that allows us to maintain our products on a daily basis.
selling prices as low as possible.
· Management has continued to proactively respond to changing sales
· We have an effective forecasting process that enables actions to be patterns throughout the year noting that customers still make discretionary
undertaken reflecting economic conditions. purchases albeit relatively low in value. The business was able to respond to
this demand as very few products offered are high value items, with the
majority being priced below £50.
5 Regulation and compliance
Description & potential impact Strategic Priority Change
The Group is subject to a range of regulatory and legislative requirements, -
including those relating to the importation of goods, anti-bribery and
C D
corruption, anti-modern slavery, anti-tax avoidance & evasion, health
& safety, employment law, general data protection regulation ("GDPR"),
control of pollution and contamination to the environment, the Listing Rules,
Transparency laws and regulations and the Groceries Supply Code of Practice
(the "Groceries Code"). The impact of failure to comply with laws and
regulations could lead to financial penalties and significant reputational
damage.
Risk Mitigations Key Actions in 2021/22
· The Group has a number of policies and codes, including a code of · Mandatory training for all management and support centre colleagues
conduct which incorporates an anti-bribery & corruption policy, which using an e-learning portal has continued throughout the year.
outlines the mandatory requirements we apply to our business. Our codes and
policies are communicated to staff along with our employee handbook which is · Our Groceries Code Compliance Officer and Group Internal Audit team
made available to everyone joining the business. have actively engaged during the year with the Groceries Code Adjudicator
("GCA") in relation to our action plans and follow-up work during the year.
· Management are responsible for liaising with the Group's General
Counsel (and external advisors where required) to ensure that we identify and · The Group has implemented reporting in line with the Task Force on
manage compliance with all applicable new legislation and regulations which Climate-related Financial Disclosures.
apply to us in Luxembourg, the UK and France. Changes in legal and regulatory
matters are monitored closely on a regular basis by the Group's General
Counsel, who provides reports on new regulatory developments directly to the
Board as well as its Committees and Executive Management. The Internal Audit
function of the Group includes assurance testing and auditing of the Group's
implementation of new areas of regulatory compliance.
· We have a whistle-blowing procedure and policy which allows
colleagues to confidentially report any concerns or inappropriate behaviour
within our business.
· In relation to anti-modern slavery and other standards relating to
human rights within our supply chain, the Buying teams are charged with
ensuring that every supplier is required to adhere to our Workplace Policy
standards.
· The Company has a Group-wide GDPR policy. Our privacy policies,
processes in relation to data subject rights requests, privacy notices given
to all our colleagues, and privacy notices for users of our websites and
subscribers to our online mailing lists are reviewed to ensure they are GDPR
compliant.
· Our Groceries Code compliance programme includes guidance and
training for colleagues, monitoring of compliance, reporting of potential
non-compliance issues, dispute resolution procedures and a Code Compliance
Officer who oversees compliance and the resolution of code related issues with
suppliers in the event of escalation being necessary or required by a
supplier. Oversight of our compliance with the Grocery Code is carried out by
management and reviewed by the Audit & Risk Committee as a standing agenda
item at each of the meetings of that committee throughout each year.
6 International expansion
Description & potential impact Strategic Priority Change
Developing our businesses in new market territories is important to the
Group's strategic plans. Expanding into new markets creates additional
challenges and risks which could impact the overall performance of the Group, C
its growth and profitability.
Risk Mitigations Key Actions in 2021/22
· The Group has international retail experience on the Board. · We continued to strengthen the senior leadership team in France with
the new appointment of a Supply Chain Director (France) and secondment of
· The Group will continue to support the development of the experienced management from the UK to transfer operational knowledge to colleagues in
senior leadership teams in France in key operational areas. France.
· The Group assesses markets in which the business operates or might · We completed the fascia rebrand of all stores in France which has
expand into, to ensure they are appropriate for value retailing and that delivered a strong improvement in financial performance.
product ranges are developed and selected by local buying teams along with
access to leverage from the Group's supply chain.
· The Group continues to invest in both the infrastructure and
technology of our French business.
7 Warehouse infrastructure
Description & potential impact Strategic Priority Change
The loss of one of our distribution centres or failure to maintain and invest -
in our warehousing and transport infrastructure as the business continues to
B D
grow its store portfolio, could materially impact short/medium term trading
and the profitability of the business.
Risk Mitigations Key Actions in 2021/22
· Forward plans have been implemented for additional warehousing · We have commenced the roll out of the upgraded JDA Warehouse
capacity to support our new store opening programme. The Group in the UK has Management System. We plan to complete the remaining sites in FY23.
seven separate distribution centres, plus a further two in France.
· The vast majority of product SKU's now have dual locations within our
· The Group maintains adequate business interruption and UK Distribution Centre estate, so in the short term if a Distribution Centre
increased cost of working insurance in the event of a loss of was out of operation our stores could continue to be serviced with the full
a distribution centre. range of product SKU's by the rest of the Distribution Centres without
significant replenishment delays.
· B&M's UK business has access to container storage yards in the
north and the south of England, allowing greater flexibility for re-routing
stock to other Distribution Centres at short notice if a Distribution Centre
was carrying a surplus or was out of operation.
· The Board annually reviews its short and medium term distribution
infrastructure requirements.
8 IT systems, cyber security and business continuity
Description & potential impact Strategic Priority Change
The Group is reliant upon key IT systems, and disruption to such systems would
adversely affect business operations including those at the distribution
centres and stores. The potential impact of a failure to protect and maintain D
our data and systems could lead to significant business disruption,
reputational damage and in the case of a loss of personal data, potential
prosecution. This also applies to any failure to protect the Group's
IT systems and data from viruses, cyber invasive threats, corruption or
sabotage.
Risk Mitigations Key Actions in 2021/22
· All critical business systems have third party maintenance contracts · IT cyber security and PCI controls in relation to processing card
in place and those systems are industry standard retail business systems. transactions are continually reviewed to ensure updates in line with payment
card industry standards.
· IT investments and budgets are reviewed and approved at Board level.
· The B&M fascia business has implemented an Endpoint Security
· The Group has a disaster recovery strategy and plan in place for all Platform and Advanced Malware Protection to improve cyber security. We
of our key systems. continue to investigate ways to improve our cyber protection especially from
ransomware using the Protect, Recover and Ensure Business Continuity model.
· The Group has an ongoing Payment Card Industry compliance strategy.
· A 3 year phased programme of improvements and upgrades to IT systems
· IT security is monitored at Board level and includes penetration and infrastructure commenced in FY22 with approval of the Board. This
testing and up-to-date security software. programme includes improvements to the Group Finance system, networks and
segregation, data centre improvements and migration of email to the cloud.
· Significant decisions for the business are made by the Group or
operational boards with segregation of duties enforced on key business
processes, such as the payables process, and a robust IT control environment
is in place.
9 Commodity prices/cost inflation
Description & potential impact Strategic Priority Change
Escalation of costs within the supply chain arising from factors such as A
increases in raw material and wage costs could adversely affect the
profitability of the business. Additionally, increased fuel and energy costs
could impact upon distribution, logistics and store overheads.
Risk Mitigations Key Actions in 2021/22
· Freight rates, energy and currency are forward purchased to mitigate · The Group has freight rate agreements in place with freight
against volatility and to allow the business to plan and maintain margins. forwarders with set prices at least 12 months ahead.
· Wage increases are offset where possible by productivity · A Building Energy Management System controls energy consumption at
improvements. stores more effectively and roll out of LED lighting across all stores is
helping to mitigate rising energy costs.
· Forecasts and projections produced by the business include the
expected impact of the national living wage and therefore the Board's
strategic planning takes account of that.
10 Key management reliance
Description & potential impact Strategic Priority Change
The Group is reliant on the high quality and ethos of the executive team as D -
well as strong management and operational teams. There is a risk that a lack
of succession planning for senior colleagues could impact the performance
overall of the business.
Risk Mitigations Key Actions in 2021/22
· Key senior and operational management are appropriately incentivised · Succession planning has been regularly reviewed by the Nomination
through bonus and share option arrangements to retain talent. Committee throughout the year ensuring succession plans for key senior
management through to executive positions.
· The composition of the executive team is kept under constant review
to ensure that it has the necessary resources and skills to deliver the · The Group has continued to strengthen the senior management teams of
Group's plans. its businesses. This has included (i) the appointment of a new General Counsel
following the retirement of the previous General Counsel early this year, and
· The Nomination Committee has developed succession plans for the Board (ii) the appointment of a new Supply Chain Director (France) to enhance the
of Directors and key senior operational management resourcing positions. It French Leadership team.
also reviewed the wider senior management resourcing needs of the Group.
11 Store expansion
Description & potential impact Strategic Priority Change
The ability to identify suitably profitable new store locations is key to B -
delivering our growth plans. Failure to identify suitable locations in areas
targeted for new stores could impact upon store expansion plans and reduce the
rate of growth in the business.
Risk Mitigations Key Actions in 2021/22
· Our CEO actively monitors the availability of retail space with the · The B&M UK business continues to take steps where new store
support of internal and external property acquisition consultants. opening opportunities exist in current store locations, to replace older
generation stores with better quality sites and premises and via acquisition
· The flexibility of the trading format allows us to take advantage of of adjacent space to expand stores and optimise performance.
a range of store sizes and locations.
· Each new store opening is approved by the CEO ensuring that property
risks are minimised and that lease lengths are appropriate.
· Where new locations may impact on existing locations, the
cannibalisation effects are estimated and then monitored and measured to
ensure that there is an overall benefit to the Group.
12 Stock management
Description & potential impact Strategic Priority Change
Ineffective controls over the management of stock could impact the achievement A -
of our gross margin objectives. Lack of product availability or over-stocking
could impact working capital and cash flows.
Risk Mitigations Key Actions in 2021/22
· The Group has a highly disciplined limited SKU count throughout our · Despite the disruption to supply chains in the Far East and Asia the
product ranges and effective regular markdowns on slow moving product lines. Group has aimed to maintain at least three months of stock cover throughout
the year.
· Our non-seasonal initial stock orders do not exceed circa 12 weeks of
forecast sales and action is undertaken after circa 4 weeks of trading to
either repeat the order, refresh the product design or discontinue the product
line.
· Consistent levels of stock cover by product category are maintained
through regular reviews of the open-to-buy process, supported by the
disciplined SKU count.
Risk Mitigations
Key Actions in 2021/22
· The Group has an experienced buying team which is responsible for
maintaining an efficient and effective supply chain.
· A range of alternative supply sources are maintained across the
product categories and we are not over-reliant on any one single supplier.
· The Group has anti-bribery & corruption and modern slavery &
human trafficking policies in place in relation to its supply chain.
· A combination of individual buyers and sourcing agent employees
conduct supplier factory visits where this is possible given local Covid
restrictions.
· Stock cover in the B&M UK business of over 12 weeks on general
merchandise imported goods ensures levels of inventory are adequate to meet
periods of supplier delay.
· Internal review of supplier social compliance process and appointment
of Sustainability Manager to monitor transparency in the supply chain.
· Working with suppliers and freight forwarders to forecast and remain
vigilant in relation to challenges regarding the transportation of goods.
3
Competition
Description & potential impact
Strategic Priority
Change
The Group operates in highly competitive retail markets in the UK and France
which could materially impact the Group's profitability, share price and limit
growth opportunities.
A C D
Risk Mitigations
Key Actions in 2021/22
· Continuous monitoring of competitor pricing and product offering.
· Development of new product ranges within the product categories to
identify new market opportunities and target new customers.
· The Group has continued to maintain its strict SKU count discipline
within product ranges, which enables it to react quickly to ever changing
consumer tastes, trends and buying habits.
· The Group commissioned a customer insight survey to measure our
strengths and weaknesses against our competitors, to provide management with
indicators of where the Group can improve our competitive edge relative to our
peer group and other discount retailers. This allows the Group to track
progress against each of the indicators and outputs from those surveys.
· Around half of the Group's revenues in the period continues to come
from food and FMCG goods. This has allowed the Group to remain insulated from
any down turn in consumer spending and resilient against our competitors
whilst continuing to meet our customers' needs.
4
Economic environment
Description & potential impact
Strategic Priority
Change
A reduction in consumer confidence could impact upon customer spending, and
subsequently revenue and profitability, as a result of the prevailing
macroeconomic conditions in the markets in which we operate.
A B C D
Risk Mitigations
Key Actions in 2021/22
· We offer a range of products and price points for consumers which
allows them to trade up and down.
· We maintain a low cost business model that allows us to maintain our
selling prices as low as possible.
· We have an effective forecasting process that enables actions to be
undertaken reflecting economic conditions.
· The Group has continued to ensure that we remain focused on only
stocking the top best-selling lines across our ranges. We have continued to
work hard to ensure our stores remained well stocked with the best-selling
products on a daily basis.
· Management has continued to proactively respond to changing sales
patterns throughout the year noting that customers still make discretionary
purchases albeit relatively low in value. The business was able to respond to
this demand as very few products offered are high value items, with the
majority being priced below £50.
5
Regulation and compliance
Description & potential impact
Strategic Priority
Change
The Group is subject to a range of regulatory and legislative requirements,
including those relating to the importation of goods, anti-bribery and
corruption, anti-modern slavery, anti-tax avoidance & evasion, health
& safety, employment law, general data protection regulation ("GDPR"),
control of pollution and contamination to the environment, the Listing Rules,
Transparency laws and regulations and the Groceries Supply Code of Practice
(the "Groceries Code"). The impact of failure to comply with laws and
regulations could lead to financial penalties and significant reputational
damage.
C D
-
Risk Mitigations
Key Actions in 2021/22
· The Group has a number of policies and codes, including a code of
conduct which incorporates an anti-bribery & corruption policy, which
outlines the mandatory requirements we apply to our business. Our codes and
policies are communicated to staff along with our employee handbook which is
made available to everyone joining the business.
· Management are responsible for liaising with the Group's General
Counsel (and external advisors where required) to ensure that we identify and
manage compliance with all applicable new legislation and regulations which
apply to us in Luxembourg, the UK and France. Changes in legal and regulatory
matters are monitored closely on a regular basis by the Group's General
Counsel, who provides reports on new regulatory developments directly to the
Board as well as its Committees and Executive Management. The Internal Audit
function of the Group includes assurance testing and auditing of the Group's
implementation of new areas of regulatory compliance.
· We have a whistle-blowing procedure and policy which allows
colleagues to confidentially report any concerns or inappropriate behaviour
within our business.
· In relation to anti-modern slavery and other standards relating to
human rights within our supply chain, the Buying teams are charged with
ensuring that every supplier is required to adhere to our Workplace Policy
standards.
· The Company has a Group-wide GDPR policy. Our privacy policies,
processes in relation to data subject rights requests, privacy notices given
to all our colleagues, and privacy notices for users of our websites and
subscribers to our online mailing lists are reviewed to ensure they are GDPR
compliant.
· Our Groceries Code compliance programme includes guidance and
training for colleagues, monitoring of compliance, reporting of potential
non-compliance issues, dispute resolution procedures and a Code Compliance
Officer who oversees compliance and the resolution of code related issues with
suppliers in the event of escalation being necessary or required by a
supplier. Oversight of our compliance with the Grocery Code is carried out by
management and reviewed by the Audit & Risk Committee as a standing agenda
item at each of the meetings of that committee throughout each year.
· Mandatory training for all management and support centre colleagues
using an e-learning portal has continued throughout the year.
· Our Groceries Code Compliance Officer and Group Internal Audit team
have actively engaged during the year with the Groceries Code Adjudicator
("GCA") in relation to our action plans and follow-up work during the year.
· The Group has implemented reporting in line with the Task Force on
Climate-related Financial Disclosures.
6
International expansion
Description & potential impact
Strategic Priority
Change
Developing our businesses in new market territories is important to the
Group's strategic plans. Expanding into new markets creates additional
challenges and risks which could impact the overall performance of the Group,
its growth and profitability.
C
Risk Mitigations
Key Actions in 2021/22
· The Group has international retail experience on the Board.
· The Group will continue to support the development of the experienced
senior leadership teams in France in key operational areas.
· The Group assesses markets in which the business operates or might
expand into, to ensure they are appropriate for value retailing and that
product ranges are developed and selected by local buying teams along with
access to leverage from the Group's supply chain.
· The Group continues to invest in both the infrastructure and
technology of our French business.
· We continued to strengthen the senior leadership team in France with
the new appointment of a Supply Chain Director (France) and secondment of
management from the UK to transfer operational knowledge to colleagues in
France.
· We completed the fascia rebrand of all stores in France which has
delivered a strong improvement in financial performance.
7
Warehouse infrastructure
Description & potential impact
Strategic Priority
Change
The loss of one of our distribution centres or failure to maintain and invest
in our warehousing and transport infrastructure as the business continues to
grow its store portfolio, could materially impact short/medium term trading
and the profitability of the business.
B D
-
Risk Mitigations
Key Actions in 2021/22
· Forward plans have been implemented for additional warehousing
capacity to support our new store opening programme. The Group in the UK has
seven separate distribution centres, plus a further two in France.
· The Group maintains adequate business interruption and
increased cost of working insurance in the event of a loss of
a distribution centre.
· We have commenced the roll out of the upgraded JDA Warehouse
Management System. We plan to complete the remaining sites in FY23.
· The vast majority of product SKU's now have dual locations within our
UK Distribution Centre estate, so in the short term if a Distribution Centre
was out of operation our stores could continue to be serviced with the full
range of product SKU's by the rest of the Distribution Centres without
significant replenishment delays.
· B&M's UK business has access to container storage yards in the
north and the south of England, allowing greater flexibility for re-routing
stock to other Distribution Centres at short notice if a Distribution Centre
was carrying a surplus or was out of operation.
· The Board annually reviews its short and medium term distribution
infrastructure requirements.
8
IT systems, cyber security and business continuity
Description & potential impact
Strategic Priority
Change
The Group is reliant upon key IT systems, and disruption to such systems would
adversely affect business operations including those at the distribution
centres and stores. The potential impact of a failure to protect and maintain
our data and systems could lead to significant business disruption,
reputational damage and in the case of a loss of personal data, potential
prosecution. This also applies to any failure to protect the Group's
IT systems and data from viruses, cyber invasive threats, corruption or
sabotage.
D
Risk Mitigations
Key Actions in 2021/22
· All critical business systems have third party maintenance contracts
in place and those systems are industry standard retail business systems.
· IT investments and budgets are reviewed and approved at Board level.
· The Group has a disaster recovery strategy and plan in place for all
of our key systems.
· The Group has an ongoing Payment Card Industry compliance strategy.
· IT security is monitored at Board level and includes penetration
testing and up-to-date security software.
· Significant decisions for the business are made by the Group or
operational boards with segregation of duties enforced on key business
processes, such as the payables process, and a robust IT control environment
is in place.
· IT cyber security and PCI controls in relation to processing card
transactions are continually reviewed to ensure updates in line with payment
card industry standards.
· The B&M fascia business has implemented an Endpoint Security
Platform and Advanced Malware Protection to improve cyber security. We
continue to investigate ways to improve our cyber protection especially from
ransomware using the Protect, Recover and Ensure Business Continuity model.
· A 3 year phased programme of improvements and upgrades to IT systems
and infrastructure commenced in FY22 with approval of the Board. This
programme includes improvements to the Group Finance system, networks and
segregation, data centre improvements and migration of email to the cloud.
9
Commodity prices/cost inflation
Description & potential impact
Strategic Priority
Change
Escalation of costs within the supply chain arising from factors such as
increases in raw material and wage costs could adversely affect the
profitability of the business. Additionally, increased fuel and energy costs
could impact upon distribution, logistics and store overheads.
A
Risk Mitigations
Key Actions in 2021/22
· Freight rates, energy and currency are forward purchased to mitigate
against volatility and to allow the business to plan and maintain margins.
· Wage increases are offset where possible by productivity
improvements.
· Forecasts and projections produced by the business include the
expected impact of the national living wage and therefore the Board's
strategic planning takes account of that.
· The Group has freight rate agreements in place with freight
forwarders with set prices at least 12 months ahead.
· A Building Energy Management System controls energy consumption at
stores more effectively and roll out of LED lighting across all stores is
helping to mitigate rising energy costs.
10
Key management reliance
Description & potential impact
Strategic Priority
Change
The Group is reliant on the high quality and ethos of the executive team as
well as strong management and operational teams. There is a risk that a lack
of succession planning for senior colleagues could impact the performance
overall of the business.
D
-
Risk Mitigations
Key Actions in 2021/22
· Key senior and operational management are appropriately incentivised
through bonus and share option arrangements to retain talent.
· The composition of the executive team is kept under constant review
to ensure that it has the necessary resources and skills to deliver the
Group's plans.
· The Nomination Committee has developed succession plans for the Board
of Directors and key senior operational management resourcing positions. It
also reviewed the wider senior management resourcing needs of the Group.
· Succession planning has been regularly reviewed by the Nomination
Committee throughout the year ensuring succession plans for key senior
management through to executive positions.
· The Group has continued to strengthen the senior management teams of
its businesses. This has included (i) the appointment of a new General Counsel
following the retirement of the previous General Counsel early this year, and
(ii) the appointment of a new Supply Chain Director (France) to enhance the
French Leadership team.
11
Store expansion
Description & potential impact
Strategic Priority
Change
The ability to identify suitably profitable new store locations is key to
delivering our growth plans. Failure to identify suitable locations in areas
targeted for new stores could impact upon store expansion plans and reduce the
rate of growth in the business.
B
-
Risk Mitigations
Key Actions in 2021/22
· Our CEO actively monitors the availability of retail space with the
support of internal and external property acquisition consultants.
· The flexibility of the trading format allows us to take advantage of
a range of store sizes and locations.
· Each new store opening is approved by the CEO ensuring that property
risks are minimised and that lease lengths are appropriate.
· Where new locations may impact on existing locations, the
cannibalisation effects are estimated and then monitored and measured to
ensure that there is an overall benefit to the Group.
· The B&M UK business continues to take steps where new store
opening opportunities exist in current store locations, to replace older
generation stores with better quality sites and premises and via acquisition
of adjacent space to expand stores and optimise performance.
12
Stock management
Description & potential impact
Strategic Priority
Change
Ineffective controls over the management of stock could impact the achievement
of our gross margin objectives. Lack of product availability or over-stocking
could impact working capital and cash flows.
A
-
Risk Mitigations
Key Actions in 2021/22
· The Group has a highly disciplined limited SKU count throughout our
product ranges and effective regular markdowns on slow moving product lines.
· Our non-seasonal initial stock orders do not exceed circa 12 weeks of
forecast sales and action is undertaken after circa 4 weeks of trading to
either repeat the order, refresh the product design or discontinue the product
line.
· Consistent levels of stock cover by product category are maintained
through regular reviews of the open-to-buy process, supported by the
disciplined SKU count.
· Despite the disruption to supply chains in the Far East and Asia the
Group has aimed to maintain at least three months of stock cover throughout
the year.
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