REG - B&M European - FY22 Preliminary Results
31/05/2022 07:15
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RNS Number : 3023N B&M European Value Retail S.A. 31 May 2022
31 May 2022
B&M European Value Retail S.A.
FY22 Preliminary Results Announcement
Strong execution consolidates sales and profit gains made during FY21
B&M European Value Retail S.A. ("the Group"), the UK's leading variety
goods value retailer, today announces its Preliminary Results for the 52 weeks
to 26 March 2022 ("FY22"). Due to the exceptional nature of the previous
financial year, comparisons are also shown with regards to pre-pandemic levels
of FY20 where relevant, to provide a more meaningful measure of performance.
HIGHLIGHTS
· Group revenues decreased by (2.7)% on prior year to £4,673m (or
(2.4)% at constant currency(1)), but increased 22.5% on a two-year basis
versus FY20
· B&M UK fascia(2) revenue decreased (4.1)% year-on-year, driven
by one-year like-for-like(3) ("LFL") revenue decline of (9.0)%
o On a two-year basis versus FY20, LFL revenues were up 13.0% with sales
densities significantly higher than pre-pandemic levels due to retention of
new customers
· Gross margin increased slightly year-on-year in the core B&M UK
business, driven by strong performance across General Merchandise and a high
sell-through rate on Seasonal ranges leading to limited markdown activity
· Group adjusted EBITDA(4) (pre-IFRS16) of £619m (FY21: £626m) with
an adjusted EBITDA(4) margin of 13.2% (FY21: 13.0%), both slightly above
consensus expectations
o On a two-year basis versus FY20, Group adjusted EBITDA(4) has increased
80.8%
· On a post-IFRS16 basis, Group adjusted EBITDA(4) was £828m,
representing an adjusted EBITDA(4) margin of 17.7%
· Group statutory profit before tax remained flat at £525m with
statutory diluted earnings per share 42.1p (FY21: 42.7p)
· 34 gross new B&M UK(2) store openings offset by 14 closures and
relocations, with new store returns remaining very strong
· Excellent progress in France with all stores now under the B&M
banner and an adjusted EBITDA(4) of £32m (FY21: £11m), representing a margin
of 9.2% (FY21: 3.6%)
· Group cash generated from operations of £598m (FY21: £944m),
reflecting the strong EBITDA outturn and investment in working capital to
ensure availability of Spring/Summer 2022 seasonal stock
· Year-end net debt(5 )of £790m, with a net debt(5) to adjusted
EBITDA(4) leverage ratio (pre-IFRS16) of 1.3x (FY21: 0.8x), comfortably within
our stated leverage ceiling of 2.25x
· Recommended final dividend(6) of 11.5p per share (FY21: 13.0p),
bringing the full year ordinary dividend to 16.5p per share (FY21: 17.3p) in
addition to the £250m special dividend(6) paid in January 2022.
· Alex Russo, currently CFO, announced as successor to Simon Arora as
CEO
Simon Arora, Chief Executive, said,
"I am very pleased with the results we have delivered. The strength and
resilience of our business model has enabled us to execute our plans well and
continue offering compelling value for money to customers. As a result, we
have sustained the step up in sales and profit compared to pre-pandemic
levels. To all colleagues across the Group who helped make that happen, I
extend my sincere thanks.
The retail industry is facing inflationary pressures whilst our customers are
having to cope with a significant increase in the cost of living, making
spending behaviour in the year ahead difficult to predict. However, we have
seen before that during such times customers will increasingly seek out value
for money, and B&M is ideally placed to serve those needs. As such, we
are well positioned to support the communities in which we trade and continue
our long-term growth strategy."
Financial Results
FY22 FY21 Change
Number of Stores
Group 1,119 1,091 +2.6%
B&M UK 701 681 +2.9%
Heron Foods 311 306 +1.6%
France 107 104 +2.9%
Total Group revenues £4,673m £4,801m (2.7)%
B&M UK £3,909m £4,078m (4.1)%
Heron Foods £411m £415m (0.9)%
France £353m £309m +14.2%
Total Group revenues at constant currency(1) - - (2.4)%
Group adjusted EBITDA(4) £619m £626m (1.2)%
B&M UK(2) £564m £591m (4.5)%
Heron Foods £23m £25m (8.1)%
France £32m £11m +191.6%
Group adjusted EBITDA(4) margin % 13.2% 13.0% +20 bps
Group statutory profit before tax £525m £525m (0.1)%
Group adjusted profit before tax(4) £524m £540m (3.0)%
Statutory diluted EPS 42.1p 42.7p (1.4)%
Adjusted diluted EPS(4) 41.6p 43.4p (4.2)%
Ordinary dividends(6) 16.5p 17.3p (4.6)%
1. Constant currency comparison involves restating the prior year Euro
revenues using the same exchange rate as that used to translate the current
year Euro revenues.
2. References in this announcement to the B&M UK business includes the
B&M fascia stores in the UK except for the 'B&M Express' fascia
stores. References in this announcement to the Heron Foods business includes
both the Heron Foods fascia and B&M Express fascia convenience stores in
the UK. When reporting adjusted EBITDA, B&M UK also includes the corporate
segment as referred to in note 2 of the financial statements, and includes an
adjusted profit of £1m (FY21: loss of £(2)m).
3. One-year like-for-like revenues relate to the B&M UK estate only
(excluding wholesale revenues) and include each store's revenue for that part
of the current period that falls at least 14 months after it opened compared
with its revenue for the corresponding part of FY21. This 14 month approach
has been adopted as it excludes the two month halo period which new stores
experience following opening. Two-year like-for-like revenues also relate to
the B&M UK estate only, and includes each store's revenue for that part of
the current period that falls at least 26 months after it opened compared with
its revenue for the corresponding part of FY20.
4. The Directors consider adjusted figures to be more reflective of the
underlying business performance of the Group and believe that this measure
provides additional useful information for investors on the Group's
performance. Further details can be found in note 3 of the financial
statements. Adjusted figures exclude the impact of IFRS16.
5. Net debt comprises interest bearing loans and borrowings, overdrafts and
cash and cash equivalents. Net debt was £790m at the year end, reflecting
£963m as the carrying value of gross debt netted against £173m of cash.
See notes 17, 20 and 27 of the financial statements for more details.
6. Dividends are stated as gross amounts before deduction of Luxembourg
withholding tax, which is currently 15%.
7. Net capital expenditure includes the purchase of property, plant and
equipment, intangible assets and proceeds from the sale of any of those items.
These exclude IFRS16 lease liabilities.
Results Presentation
An in-person presentation for analysts in relation to these FY22 Preliminary
Results will be held today at 08:30 am (UK) at Bank of America Merrill Lynch,
2 King Edward St, London EC1A 1HQ. Attendance is by invitation only.
A simultaneous live audio webcast and presentation will be available via the
B&M corporate website at
www.bandmretail.com/investors/presentations/year/2022
Enquiries:
B&M European Value Retail S.A.
For further information please contact +44 (0) 151 728 5400 Ext 5763
Simon Arora, Chief Executive
Alex Russo, Chief Financial Officer
Jonny Armstrong, Head of Investor Relations
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)
This announcement contains statements which are or may be deemed to be
'forward-looking statements'. Forward-looking statements involve risks and
uncertainties because they relate to events and depend on events or
circumstances that may or may not occur in the future. All forward-looking
statements in this announcement reflect the Company's present view with
respect to future events as at the date of this announcement. Forward-looking
statements are not guarantees of future performance and actual results in
future periods may and often do differ materially from those expressed in
forward-looking statements. Except where required by law or the Listing Rules
of the UK Listing Authority, the Company undertakes no obligation to release
publicly the results of any revisions to any forward-looking statements in
this announcement that may occur due to any change in its expectations or to
reflect any events or circumstances arising after the date of this
announcement.
Notes to editors
B&M European Value Retail S.A. is a variety retailer with 701 stores in
the UK operating under the "B&M" brand, 311 stores under the "Heron Foods"
and "B&M Express" brands, and 107 stores in France also operating under
the "B&M" brand as at 26 March 2022. It was admitted to the FTSE 100 index
on 21 September 2020.
The B&M Group was founded in 1978 and listed on the London Stock Exchange
in June 2014. For more information please visit www.bmstores.co.uk
(http://www.bmstores.co.uk)
Chief Executive's Review
Becoming an even better retailer
Over the past two years B&M has, like all businesses, had to adapt to a
rapidly changing world. I am very proud of the way in which we have
responded to those ongoing challenges and continued delivering against our
purpose; to provide customers with great value for money so that they keep
returning to our stores. At the same time, we have maintained a very strong
financial performance with both sales and profit being significantly ahead of
pre-pandemic levels.
Reflecting on a remarkable period of growth for the Group, I am convinced that
our experiences have made us an even better retailer than we were prior to the
pandemic. In that time the core B&M UK business has acquired, and most
importantly retained, a number of new customers, and this provides an exciting
platform from which to continue taking market share across a number of product
categories.
In France, the B&M brand has been well received, the financial performance
is much improved and the business is unrecognisable to the one we acquired in
2018 in terms of customer proposition. For Heron Foods, what began as a more
challenging period in FY22 ended with strong momentum and we continue to
regard that business as being a good strategic fit, albeit of relatively
modest size in the context of the overall Group.
The strength and resilience of our business model continues to be a key
differentiator and has enabled us to continue offering compelling value for
money to customers. In particular, our robust supply chains, simple
operations and speed of decision making have all helped the Group respond
decisively and effectively in FY22. This is perhaps best illustrated by the
two-year like-for-like(3) sales growth of 13.0% in the core B&M UK
business, which was relatively consistent throughout large parts of the year
despite changing external conditions and global supply chain disruption.
The 701 B&M UK stores are mostly located in Out of Town retail parks,
making them somewhat insulated from the structural footfall decline in town
centres and secondary malls. Moreover, given recent successes in key
seasonal categories such as Gardening and Christmas, it would appear that our
larger B&M Homestores are increasingly regarded as a 'destination' visit
for many customers. This is important, since it helps to reinforce customer
loyalty and affection towards the B&M brand.
Looking ahead, it remains difficult to accurately predict the net impact a
number of different factors could have on the business. These include, but
are not limited to, the impact of rising inflation on product cost prices and
consumer spending, plus the extent of further normalisation in customer
behaviour as we emerge from the pandemic.
Our discounted food and FMCG products should appeal to lower-income households
who are likely to be disproportionally affected by the rising cost of living,
and may also benefit from increased demand as a result of new customers
switching to B&M as they look for greater value for money.
In General Merchandise, which has seen consecutive years of very strong growth
both in terms of sales and margin, we accept that the outlook is more
uncertain. That said, the range of categories we offer are at affordable
price points and the semi-essential nature of many of these products all
provide reasons to believe we will continue to perform well within the overall
market.
Given the positioning of the B&M UK business together with the attractive
growth prospects in France, we can look to the future with a sense of cautious
optimism and a clear focus on providing customers with great value for money
and, as a consequence, gain further market share.
Financial performance
Due to the highly elevated sales comparatives due to prolonged periods of
lockdown in FY21, the most meaningful measure of performance for the core
B&M UK business this year has been the two-year like-for-like(3) ("LFL")
growth versus the pre-pandemic levels of FY20. On that basis, growth of
13.0% means that store sales densities remain significantly higher than before
the pandemic and suggests we have retained the loyalty of many new customers
acquired last year.
Most product categories delivered double-digit LFL growth over that two-year
period, with notable strength seen in General Merchandise ranges where the
business ensured good stock availability and was able to meet strong customer
demand.
Due to this relative out-performance in General Merchandise, B&M UK gross
margin benefited from another small step up this year. Strong execution from
the buying teams and a limited requirement for markdown activity given the
good level of sell-through on Seasonal categories contributed to gross margin
expanding 52 bps year-on-year.
Diligent cost control enabled much of the operating leverage delivered last
year to be retained, resulting in a strong adjusted EBITDA(4) margin of 14.4%
on a pre-IFRS16 basis. Whilst this represented a marginal decrease of (6)
bps from the 14.5% delivered last year, it remains significantly above the
EBITDA margin from FY20.
In Heron Foods, LFL sales performance steadily improved throughout the year as
the comparatives from FY21 eased. As such, the EBITDA result was similar to
last year and profit margin was broadly maintained, representing a robust
outcome for FY22 as a whole.
In France, the business exceeded expectations in FY22. The local management
team have made considerable progress over the past two years, implementing
important strategic changes whilst at the same time navigating various impacts
from the pandemic. An outturn of £32m adjusted EBITDA(4) at a margin of
9.2% was a very pleasing result and is affirmation that the B&M
proposition can be successful in France.
Overall, although Group adjusted EBITDA(4) declined very slightly
year-on-year, results for FY22 demonstrate a sustained step up in
profitability compared to pre-pandemic levels. Alongside this, the Group
remained highly cash generative and has continued to use this cash effectively
in line with its capital allocation framework.
Current trading and outlook
Given the impact of the pandemic at the start of both FY21 and FY22, assessing
current trading is challenging with both the one-year and two-year
like-for-like(3) comparisons significantly complicated by restrictions in
place during both comparative periods. The B&M UK LFL sales performance
over the first 8 weeks of FY23 has been (13.2)% and (11.5)% versus FY22 and
FY21 respectively.
During this current period we consider a three-year measure to be helpful in
gauging the underlying sales performance of the business. Compared to
pre-pandemic levels of 2019, the three-year LFL performance since the start of
the new financial year was +7.7% in April 2022, with an improvement to +10.9%
in the first 3 weeks of May 2022. Trading patterns are expected to remain
unpredictable in the year ahead. In particular, the elasticity between volume
and price on General Merchandise is difficult to predict, as is the demand at
individual category level.
With respect to gross margin, the past two years have seen very limited end of
season markdown activity on Seasonal categories, due to the high rate of
sell-through. Looking into FY23, some level of markdowns are expected to
return and there may be an adverse impact from category mix as customers shift
spending away from more discretionary higher margin General Merchandise
categories in favour of Food and FMCG products. As a result of this gross
margin dilution, B&M UK adjusted EBITDA(4) margin is expected to step back
between 70 to 130 bps but to remain structurally higher than pre-pandemic
levels.
Elsewhere in the Group there is a positive outlook for Heron Foods, where
inflation in food prices and a return to normal footfall levels should be
supportive of revenues. In France, further development of the customer
proposition as the brand becomes better known should also help deliver
continued strong LFL sales growth and further growth in EBITDA following last
year's pleasing performance.
Operating costs remain tightly controlled across the Group with freight costs
competitively positioned for the year ahead and a flexible and low-cost store
labour model. Fuel and energy costs collectively represented less than 1.0%
of FY22 revenues.
In terms of store growth, the Group will remain disciplined when choosing new
sites to ensure returns are maximised, with the quality of new locations just
as important as quantity. The Group currently expects gross new store
openings across each business in FY23 to be approximately 40 for B&M UK,
15 for Heron Foods and 6 in France.
Given the uncertain macroeconomic outlook, it is difficult to predict the net
impact of a number of factors such as customer down-trading, category mix
shift and the impact of inflation on sales volumes. However, the Group
remains well positioned to continue offering great value-for-money across a
wide range of categories. In the core B&M UK business, price
competitiveness remains very strong. On a basket of c.550 Food and FMCG
items, the Group's latest internal price comparison suggests B&M is about
15% cheaper on average than mainstream supermarket competitors. Furthermore,
93% of all products sold at B&M are less than £20, making it less exposed
to any sharp reductions in spending on higher ticket items.
Notwithstanding the many and varied uncertainties and headwinds which are
likely to impact on our trading performance during FY23, at this early stage
in the year Group adjusted EBITDA(4) is expected to be in the range of £550m
to £600m, significantly ahead of the FY20 pre-pandemic level of £342m.
Longer-term, the growth prospects both in the UK and in France are highly
attractive. The Group is committed to a rollout target of at least 950
B&M UK stores and continued geographic expansion of the Heron Foods
convenience store chain. In France, with strong foundations now in place and
the ongoing development of operational competencies, the pace of organic
growth is expected to step up from FY24 onwards.
Strategic development
The Group executed its plans well throughout FY22. Despite a challenging and
unpredictable macroeconomic backdrop, the B&M business model proved very
capable of responding to changing conditions and enabled strong progress to be
made against its long term strategy.
1. Delivering great value to our customers
B&M's purpose is to deliver great value to customers so that they keep
returning to our stores time and time again. This purpose is as compelling
now as it has ever been, given the inflationary pressures currently being felt
by consumers.
The B&M price competitiveness is driven by a relentless focus on buying
large volumes of a limited assortment of best-selling items, sourcing these
products direct from manufacturers and keeping costs low. Not only does this
approach allow the business to pass cost savings on to customers, but it also
keeps operations simple, agile and responsive.
Retaining the loyalty of customers who discovered B&M during FY21 was a
key objective over the past year. The best way to achieve this was to ensure
the business had good availability of the right products at the best possible
prices, be that the leading household brand names or our private label ranges
across General Merchandise categories.
Given the two-year like-for-like(3) sales growth of 13.0% in FY22, it would
appear that many new customers from last year have found the B&M
proposition compelling and continued to visit stores. This is also validated
when looking at the cohorts of new customers previously identified in FY21.
Based on Barclaycard transaction analysis from the month of acquisition in
FY21 to the end of FY22, 78% of those new shoppers have visited B&M again
since their initial visit. Moreover, the demographic profile of customers
who have demonstrated the greatest propensity to return is that of a low to
middle income family, underpinning the attractiveness of the B&M value for
money proposition to a customer type that represents a significant part of the
total UK population.
The 'treasure hunt' remains an essential part of the customer appeal, and this
is true whether shoppers need a bargain or just enjoy one. It's also likely
to be a reason why the B&M brand is increasingly well loved. According
to a national survey of over 96,000 consumers published by BrandVue in March
2022, B&M was ranked the UK's 9(th) most loved retail brand overall, and
placed 3(rd) within the Home category.
It also revealed that affinity was particularly strong amongst younger
generations such as 'Gen Z' and 'Millennials', providing reason to be
optimistic regarding long term prospects given the potential for these
customers to be loyal B&M shoppers for their families for many years to
come. Success in categories such as Toys, where B&M was awarded
"Multiple Toy Retailer of the Year" at the Toy Industry Awards this year,
further illustrates the appeal of a bricks and mortar discounter such as
B&M.
At category level, sales performance was relatively broad based throughout
FY22. Certain General Merchandise ranges proved particularly popular, with
key seasonal ranges such as Gardening and Christmas delivering record
performances. Strong sell-through also delivered a gross margin benefit due
to end of season markdown activity being limited. These seasonal categories
are important for long term customer retention since they reinforce B&Ms
position as a destination visit for such items year after year and in a
category where our model is at its most disruptive.
Success in these Seasonal categories was made possible due to the decisive
action taken in response to global supply chain disruption, where the business
ensured strong on-shelf availability by taking receipt of stock earlier than
normal. This approach has also been adopted in relation to Spring/Summer
2022 Seasonal stock, and is likely to continue until disruption subsides.
Given the rising cost of living and the extent to which it will likely impact
certain demographics more than others, the B&M proposition of making
everyday items affordable should continue to resonate strongly with customers.
2. Investing in new stores
In the core B&M UK fascia 34 gross new stores were opened during FY22, of
which 2 were relocated stores and a further 12 stores were closed. The
closures generally represent early generation stores coming to the end of
leases and where a larger, modern store had already been opened in the same
catchment in a previous financial year. In total there was a net increase of
20 stores, growing the B&M UK portfolio to 701.
New store openings continue to be accretive to Group profitability with recent
cohorts typically outperforming the company average, and that includes when
re-locating an existing store. Importantly, although relocations and
closures do not contribute to the net increase in store numbers year-on-year,
they do provide an uplift to overall estate profitability both in terms of
absolute profit and profit margin.
The B&M UK business expects to open approximately 40 gross new stores in
FY23 and the recently lifted moratorium on tenant evictions should support the
current pipeline of opportunities. It is possible that incremental
opportunities to add space could arise should the retail industry see capacity
withdrawal as a consequence of the current cost of living pressures.
However, the business remains very selective when appraising a potential new
site so as not to risk diluting profit margins, as evidenced by the
above-average contribution margin of recent years' cohorts as noted above.
Longer term, there remains a long runway of growth in the UK, with the
potential for at least 950 B&M fascia stores in total. Based on the
current estate of 701 stores, an estimated 38% of the UK population still live
over 3 miles from a B&M store. As such, given the increased sales
densities and broadening demographic appeal of B&M over the past two
years, this long term target increasingly looks like a conservative estimate.
The discount convenience store business, Heron Foods, opened a total of 16
gross new stores and closed 11 stores during the year, growing the estate to
311 stores. The closures included 5 relocations where there was an
opportunity to move to a more attractive site within the same local catchment
area. The remaining 6 closures represented stores that previously traded
under the 'Cooltrader' brand that were inherited when acquiring the Heron
Foods business but were in sub-optimal or unprofitable locations.
Heron Foods stores are only c.3,000 sq ft on average, serve a very localised
customer base and extend over a smaller geographic footprint compared to the
B&M fascia. As such, due to the nature of locations required and the
practicalities of distributing chilled and frozen food, the rate of growth
will always be slower. There should be around 15 gross new store openings
again in FY23, with a similarly paced rollout in future years.
In France the focus in FY22 has been on re-branding the existing estate rather
than opening new stores, and all stores are now branded B&M. That said,
the business was able to open 3 opportunistic new stores, taking the estate to
107 stores as of the year-end.
3. Developing our international business
FY22 has been a year of excellent progress in France, both financially and
operationally.
The two-year LFL sales growth was +21% for the full year, demonstrating the
success of store layout and product changes made during that time. The
adjusted EBITDA(4) outturn of £32m and profit margin of 9.2% represents a
very strong result, particularly in the context of France being loss-making as
recently as FY20. Such performance provides a firm foundation from which to
grow organically in FY23 and beyond.
With the fascia re-branding programme complete and Clothing & Footwear
representing only c.12% of the sales mix in FY22, these two strategic
priorities have been executed well by the French management team. There will
be ongoing refinements in FY23 to the product mix, for example, growing the
range of FMCG to help drive footfall, but the priority for the year ahead is
very much on further improving overall store standards, consistency and
operational competencies.
As part of that focus, there will be further trials of a company operated
model in France, with any new store openings in FY23 falling under this
structure rather than the mandated manager model inherited when acquiring the
French business. This will look to replicate the store operating model of
B&M in the UK, where all colleagues are employed directly and B&M has
complete control over the store's operations. To assist with these changes,
experienced members of the UK store operations team are currently on
secondment in France.
Such has been the progress this year, there is a strong conviction that the
B&M proposition can be successful in France. In particular, the Board
now has the confidence to begin a steady rollout of new stores. This will be
undertaken slowly initially, with approximately 6 new stores in FY23, but is
expected to increase in outer years.
Given both the plans for FY23 outlined above and the long term growth
potential in France, no other international geographies are currently being
evaluated so as to not risk management distraction.
4. Investing in our people and infrastructure
Developing colleagues remains crucial to the Group's ongoing success and forms
an important part of the new ESG strategy approved by the Board this year.
The well-established "Step-Up" training programme saw 91 colleagues promoted
into store management roles this year, whilst a new "Warehouse to Wheels"
initiative aimed at offering training opportunities for warehouse colleagues
to become HGV drivers was also developed.
Through the new store opening programme, over 650 new retail jobs were created
in the UK. B&M also supported almost 3,000 colleagues under the
Government's "Kickstart" programme which aims to help long-term unemployed
people get back into work in their local communities, and a further 144
colleagues were enrolled onto various apprenticeships.
The B&M website has not historically been transactional, instead acting as
a footfall driver into stores and a channel through which to engage with an
online community of customers. All that remains true. However, at the time
of writing an online home delivery service will shortly be launched on a
limited range of items. This trial will ultimately extend across c.1,000
SKUs representing in part bulkier or higher ticket General Merchandise items
which customers cannot always easily transport home from stores themselves or
products that do not require disproportionate mail order packaging. Given
the disruptive B&M price position, the business believes this could prove
an attractive proposition for customers. However, it remains open minded as
to the long term potential of the trial, and a 'test and learn' approach will
be adopted over the coming months as customer response is closely monitored.
The existing network of five main B&M UK Distribution Centres remains
adequate to service current sales volumes and as such no large-scale capital
investment in additional capacity is anticipated in the near term. Over the
medium term, the Group's infrastructure requirements will depend on the rate
and geographical spread of new store openings alongside ongoing development of
the supply chain. The Group does not have plans for capital intensive
development projects and prefers to lease any such additional capacity in line
with its capital light model.
The transport operation is also operated in-house, remains well invested and
scalable. The main area of investment in FY22 was with regards to IT
infrastructure and applications, where various projects were carefully
selected to underpin the continued growth of the Group.
Environmental, Social & Governance
The Group recognises the growing importance of Environmental, Social &
Governance ("ESG") actions and reporting to all stakeholders and has made
significant progress in developing its approach over the past 12 months.
Following extensive consideration, the Board formally approved its first ESG
strategy this year.
In developing this strategy, the Group has sought to strike a balance between
being sufficiently ambitious, reflecting the step change in performance over
the past two years, but also ensuring these ambitions are appropriate for a
business such as B&M, being a variety goods value retailer focused on long
term sustainable growth.
The strategy has been built around four pillars designed to help make the
business stronger and more resilient whilst underpinning the Group's purpose
of delivering great value to customers. These pillars, and relevant
highlights from FY22, are as follows:
Environment
· Reduced the Groups carbon intensity for Scope 1 and 2 emissions,
with the FY22 ratio over 50% lower than 5 years ago;
· Committed to a science-based target of reducing Scope 1 & 2
carbon emissions by 25% by 2030, and a supplier engagement target for Scope 3
carbon emissions.
Colleagues
· Acknowledged the dedication and hard work of over 24,000 colleagues by
awarding an extra week's wages in January 2022;
· Continued development of own talent through the "Step-Up" programme,
promoting 91 colleagues to B&M Deputy and Store Manager positions.
Communities
· Extended the reach of the B&M value for money proposition to
new communities by opening 54 gross new stores across the Group;
· Created over 650 new retail jobs in the UK, in addition to almost
3,000 placements under the governments "Kickstart" scheme and 144 colleagues
enrolled on various apprenticeship programmes;
Supply Chain
· Ongoing investment in ethical trading audit procedures, with no
instances of non-compliance identified;
· Continued to treat all suppliers fairly, with average payment terms of
only 16 days, and worked collaboratively in supporting various sustainability
initiatives.
To complement the launch of the ESG strategy, a standalone ESG report will be
published for the first time this year and will provide further detail,
including relevant metrics, targets and initiatives. In addition, a new
Sustainability Manager role was created in FY22, with the role being filled by
an internal candidate, clearly aligning with the "Colleague" pillar of the
strategy.
The Board is pleased with the progress made with regards to the ESG strategy
in FY22, but also acknowledges that it will need to evolve over time. In
that regard, progress will be overseen collectively as a full Board rather
than by delegating to any sub-committee.
On a personal note
The Group has today announced Alex Russo as my successor as CEO. While the
change will not take place just yet, this is my valedictory Chief Executive
annual review, so I apologise for the indulgence of penning a few personal
words.
My decision to step down as CEO during the next year evoked similar feelings
to when my wife and I became 'empty nesters' when our two daughters recently
left home for college or to pursue a career. There is a touch of sadness but
the overwhelming emotion is one of pride.
The numbers so easily trip off the tongue. From a purchase price of £525,000
in December 2004 to becoming a constituent of the FTSE100 index in September
2020. From 21 shops in the North of England to now over 1,100 stores across
the UK and France. From having 500 colleagues to now a family of 38,000
wonderful people.
However, none of these numbers capture the real essence of it.
What has made this journey so incredibly rewarding is the hard work, ambition
and loyalty of my colleagues who all share a willingness to work hard. This
work ethic operates at all levels and we celebrate it.
We also have ambition. We desperately want to win and our culture of trust
allows us to do so. We trust each other to be honest and open. If something
goes wrong, we don't hide from it or 'play the blame game'. Instead we learn
from that mistake and make sure it isn't repeated.
Finally, we reward loyalty and commitment. We promote from within, it's our
home-grown entrepreneurial culture, coupled with an ability to operate 'at
B&M speed', that gives us an edge over the competition.
These values didn't come about by me dreaming them up, seated at my desk. They
evolved organically, through the actions every day, seven days a week, of the
many thousands of loyal colleagues who have built B&M into what it is
today. My role has been simply to create the environment in which these
wonderfully talented and hard-working retailers could thrive.
I wish Alex every success in preserving and building upon these values when he
takes over the role. If we stay true to them, B&M has a prosperous future
for many decades to come. Like for my daughters, I view that future with a
quiet optimism. I will be working hard in my remaining period as CEO to ensure
the transition is smooth and that Alex is successful.
Finally, I would like to thank all our stakeholders for your support and
engagement over the wonderful last 17 years. I am very grateful and look
forward to thanking as many of you as possible in person over the coming
months.
Simon Arora
Chief Executive Officer
30 May 2022
Financial Review
Accounting period
The current accounting period represents the 52 weeks trading to 26 March 2022
("FY22") and the comparative period represents the 52 weeks to 27 March 2021
("FY21").
The Group financial statements have been prepared in accordance with IFRS and
are reported as such. Underlying figures presented before the impact of
IFRS16 continue to be reported where they are relevant to understanding the
performance of the Group and to aid comparability with previous years.
Financial performance
Group
Total Group revenue in FY22 was £4,673m (FY21: £4,801m), representing a
year-on-year decrease of (2.7)%. On a constant currency basis(1), revenues
decreased by (2.4)%.
Group adjusted gross margin(4) was 37.5% (FY21: 36.7%), an increase of 77 bps
driven by performance in the core B&M UK business. Group adjusted
operating costs(4), excluding depreciation and amortisation, remained broadly
flat year-on-year at £1,133m (FY21: £1,137m). Depreciation and
amortisation (excluding the impact of IFRS16 and adjusting items) increased
5.4% to £66m (FY21: £62m), largely due to ongoing investment in new stores
across all fascias.
Group adjusted EBITDA(4), stated on a pre-IFRS16 basis, decreased slightly by
(1.2)% to £619m (FY21: £626m) reflecting the exceptional nature of the prior
year but nonetheless representing a strong outcome for FY22, being 80.8%
higher than FY20. Group adjusted EBITDA(4) margin increased slightly
year-on-year due to the accretive contribution from France, and when compared
to pre-pandemic levels of FY20 has expanded 427 bps over that two-year
period.
On a post-IFRS16 basis, Group adjusted EBITDA(4) was £828m (FY21: £834m)
which represented an adjusted EBITDA(4) margin of 17.7% (FY21: 17.4%).
An adjusted EBITDA(4) is reported to allow investors to better understand the
underlying performance of the business. The adjusting items are detailed in
note 3 of the financial statements, and totalled £12m this year (FY21:
£(3)m).
B&M UK
In the UK, total B&M revenues decreased by (4.1)% to £3,909m (FY21:
£4,078m), with the annualisation of revenues from the 43 gross new store
openings in FY21 and contribution from the 34 gross new store openings this
year offsetting some but not all of the one-year like-for-like(3) ("LFL")
revenue decline of (9.0)%.
On a two-year basis versus pre-pandemic levels of FY20, which is considered to
be a more meaningful measure of performance this year, LFL revenues were 13.0%
higher this year. This represents a significant increase in store sales
densities, with the business having been successful in retaining the loyalty
of many customers who discovered B&M during the prior year. Although the
two-year LFL in the final quarter of the financial year was lower than the run
rate during the first three quarters, this was expected due to the impact of
the panic buying of essential products in March 2020 at the start of the
pandemic.
At category level, the two-year LFL performance has been broad based. Demand
for essential food and FMCG items has remained steady, whilst certain General
Merchandise ranges have performed particularly well and provided a small
year-on-year gross margin benefit. The average transaction value remains
relatively modest at c.£18 due to the nature of the product ranges sold by
B&M.
There were 34 gross new store openings and 14 closures in FY22, with 2 of
those closures being relocations. New store openings continue to deliver
strong returns on investment, with no maturity period required and recent
cohorts typically delivering a higher store contribution margin than the
company average, meaning the rollout programme remains supportive of profit
margins.
In addition to revenue generated in-store, wholesale revenue remained
relatively consistent at £45m (FY21: £47m). Most of this represents sales
made to the associate Centz Retail Holdings Limited, a chain of 45 variety
goods stores in the Republic of Ireland.
B&M UK gross margin expanded slightly by 52 bps to 37.4% (FY21: 36.9%) and
was relatively consistent across both H1 and H2, such was the performance of
the Spring/Summer and Christmas seasonal ranges respectively. In particular,
the gross margin outturn for FY22 reflects the impact of inflation in freight
rates from the start of 2022, which has been manageable. The business
continues to enjoy a long-standing relationship with its shipping partner used
for transporting General Merchandise goods out of Asia, and believes itself to
be relatively well positioned versus competitors in this regard.
Adjusted operating costs(4), excluding depreciation and amortisation,
decreased by (1.6)% to £899m (FY21: £914m). These costs represented 23.0%
of revenues (FY21: 22.4%), a small increase of 58 bps due to the LFL revenue
decline on a one-year basis. However, when comparing this to FY20 when
operating costs were 23.4% of revenues, there has been an improvement of 40
bps over that two-year period driven by the operating leverage achieved on
significantly higher sales densities.
In terms of store related costs, colleague wages and salaries as a proportion
of sales have remained flat year-on-year at c.9%, while rental costs have also
been stable and very competitively positioned. Variable transport and
distribution costs increased marginally as a percentage of revenues due to
targeted investment in HGV driver wages early in the year. Energy costs
related to utilities represent less than 1% of store revenues and continue to
be tightly managed, supported by the ongoing rollout of energy reduction
initiatives such as LED lighting and a Building Energy Management System.
Adjusted EBITDA(4) for the B&M UK business decreased by (4.5)% to £564m
(FY21: £591m) and the adjusted EBITDA(4) margin decreased slightly by (6) bps
to 14.4% (FY21: 14.5%). However, both remain significantly above historical
levels.
Heron Foods
In the discount convenience chain, Heron Foods, revenues fell slightly to
£411m (FY21: £415m). This reflects the impact of annualising against the
highly elevated comparatives from last year when the business benefitted from
lockdown induced shopping behaviour, particularly with regards to Frozen food.
The revenue contributed by the annualisation of new stores broadly offset a
year-on-year LFL decline, although this steadily improved throughout FY22 and
was positive in the final quarter.
Gross margin in Heron Foods remained broadly flat versus FY21 despite the
supply environment for Frozen and Chilled food proving somewhat challenging
over the past 12 months.
Operating costs remained well controlled, increasing marginally as a
percentage of revenues to 26.1% (FY21: 25.5%) due to investment in store
wages.
Heron Foods adjusted EBITDA(4) decreased to £23m (FY21: £25m) and the
adjusted EBITDA(4) margin declined by (43) bps to 5.5% (FY21: 5.9%),
representing a satisfactory result for the year.
France
In the French business, revenues increased by 14.2% to £353m (FY21: £309m),
reflecting the strong progress made in FY22. Performance in categories such
as Homewares, Indoor Furniture and Giftwares was particularly strong, having
been given greater prominence in store due to the re-merchandising which has
taken place alongside the fascia re-branding programme.
Gross margin improved again year-on-year, driven by further planned
rationalisation of Clothing and an increase in the sales participation from
higher margin General Merchandise categories.
Given the focus on improving operational consistency across the French estate
this year, there was an improvement of 190 bps in operating costs as a
percentage of sales to 36.1% (FY21: 38.0%).
Adjusted EBITDA(4) increased significantly to £32m (FY21: £11m), with an
adjusted EBITDA(4) margin of 9.2% (FY21: 3.6%). This represents a considerable
turnaround for the business and should provide a strong platform for future
growth in France.
Depreciation and amortisation
Depreciation and amortisation expenses, excluding the impact of IFRS16, grew
by 5.4% to £66m (FY21: £62m), representing only 1.4% of sales (FY21: 1.3%).
The increase was largely due to continued investment in new stores across all
fascias, with the Group growing the store estate by 2.6% in the year.
The additional depreciation and amortisation charge relating to lease
liabilities under IFRS16 was £161m (FY21: £153m).
Finance expense
Adjusted net finance charges(4) for the year, excluding IFRS16, were £29m
(FY21: £24m). This included bank and high yield bond interest of £27m (FY21:
£22m) and amortised fees of £2m (FY21: £2m). The higher interest charge
relates to the issue of a new £250m High Yield Bond in November 2021.
The interest charge relating to lease liabilities under IFRS16 was £59m
(FY21: £61m).
Profit before tax
Statutory profit before tax was £525m (FY21: £525m). An adjusted profit
before tax(4) is also reported to allow investors to better understand the
operating performance of the business (see note 3 of the financial
statements). Adjusted profit before tax(4) for the year decreased slightly to
£524m (FY21: £540m).
The impact of IFRS16 on the Group financial statements was to decrease
statutory profit before tax by £11m.
Taxation
The tax charge in FY22 was £103m (FY21: £97m), representing an effective tax
rate of 19.6%. We expect the tax rate going forward to reflect the blended
rate of taxes in the countries in which we operate. This is currently 19% in
the UK and 27.5% in France, although the UK Corporation Tax rate is scheduled
to increase to 25% from FY24 onwards.
As a Group, we are committed to paying the right tax in the territories in
which we operate. The B&M UK business paid taxes totalling £517m in FY22,
including £245m relating to those taxes borne directly by the company such as
corporation tax, customs duties, business rates, employer's national insurance
contributions and stamp duty and land taxes. The balance of £272m are taxes
we collect from customers and employees on behalf of the UK Exchequer, which
includes Value Added Tax, Pay As You Earn and employee national insurance
contributions.
Profit after tax and earnings per share
Statutory profit after tax was £422m (FY21: £428m) and the statutory diluted
earnings per share was 42.1p (FY21: 42.7p).
Adjusted profit after tax(4), which we consider to be a better measure of
performance for the reasons outlined above, was £417m (FY21: £435m), and the
adjusted fully diluted earnings per share(4) was 41.6p (FY21: 43.4p).
Investing activities
Group net capital expenditure(7) totalled £85m this year (FY21: £81m).
Investment included £34m spent on 54 gross new stores across the Groups
fascia's (FY21: £43m on 65 stores) and £8m on infrastructure projects to
support the continued growth of the business (FY21: £8m). There was also
investment of £42m on maintenance works to ensure that our existing store
estate and warehouses are appropriately invested (FY21: £22m), with the
year-on-year increase largely driven by the fascia re-branding programme in
France. There was also a net expenditure of £1m relating to a small number of
freehold acquisitions and disposals (FY21: net expenditure of £8m).
Net debt and cash flow
The Group continues to be highly cash generative, with cash generated from
operations of £598m (FY21: £944m). This is lower than the prior year,
largely due to investment in working capital with regards to Spring/Summer
seasonal stock. Such stock has been deliberately receipted earlier than
normal to ensure strong availability. It is also being sold through more
evenly across the season compared to the highly elevated demand seen in March
and April 2021, which impacted the normal working capital cycle and created an
inflow at the FY21 year-end.
The strong performance and cash generation have enabled the Group to pay
dividends totalling £430m(6) in FY22. This includes a £250m(6) special
dividend paid in January 2022.
Net debt(5) (on a pre-IFRS16 basis), increased to £790m (FY21: £519m). The
net debt(5) to adjusted EBITDA(4) leverage ratio was 1.3x (FY21: 0.8x),
comfortably within our 2.25x leverage ceiling.
B&M periodically explores opportunities to repay, prepay, repurchase,
refinance or extend its existing indebtedness prior to the scheduled maturity
of such indebtedness, and/or amend its terms with the requisite consent of
lenders as part of B&M's continuing efforts to manage its capital
structure. B&M and/or its Group may also incur additional indebtedness to
the extent permitted by the covenants of existing indebtedness or with the
requisite consent of lenders, including in connection with the Group's
evaluation of strategic expansion and acquisition opportunities.
In accordance with this framework, the Group issued an additional £250m High
Yield Bond in November 2021 which matures in November 2028. The French
business also repaid the remaining balance of €25m relating to the French
Government-backed loan facility scheme that was initially made available in
FY21 due to the disruption caused by Covid-19. See note 20 of the financial
statements for further details.
The Board adopted a long-term capital allocation policy in 2016 to provide a
framework to help investors understand how the Group will continue to balance
the funding requirements of a growth business like B&M with the desire to
return surplus capital to shareholders. The Board will continue to evaluate
opportunities to invest and support the growth of the business along with the
scope for any incremental return of capital to shareholders in the context of
that framework.
Dividends
During the year, the Company declared and paid an interim ordinary dividend of
5.0p(6) per share in addition to a special dividend of 25.0p(6) per share.
Subject to approval by shareholders at the AGM on 28 July 2022, a final
ordinary dividend of 11.5p(6) per share is to be paid on 5 August 2022 to
shareholders on the register of the Company at the close of business on 1 July
2022. The ex-dividend date will be 30 June 2022.
The Group has a dividend policy which targets an ordinary dividend pay-out
ratio of between 30 to 40% of net income on a normalised tax basis. The Group
generally aims to pay the interim and final dividends for each financial year
in proportions of approximately one-third and two-thirds of the total annual
ordinary dividend respectively.
The Group is strongly cash generative and its policy is to allocate cash
surpluses in the following order of priority:
1. the roll-out of new stores with a strong payback profile;
2. ordinary dividend to shareholders;
3. mergers & acquisition opportunities; and
4. returns of surplus cash to shareholders.
The above list is a summary of the main items, but is not exhaustive as other
factors may arise from time to time which require investment to support the
long-term growth objectives of the Group.
The parent company of the Group is an investment holding company which does
not carry on retail commercial trading operations. Its distributable reserves
are derived from intra-group dividends originating from its subsidiaries. The
parent company is a Luxembourg registered company, and as such, the Board is
permitted to have recourse to the company's share premium account as a
distributable reserve. It remains the Group's policy for dividend purposes to
have recourse to distributable profits from within the Group, and accordingly,
ahead of interim dividends, and also ahead of the year-end in relation to
final dividends, the Board reviews the levels of dividend cover in the parent
company to maintain sufficient levels of distributable profits in the parent
company for each of those dividends. There are over £500m of distributable
reserves in the principal trading subsidiary of the Group, B&M Retail
Limited, and there are no dividend blocks between it and the Company.
Notwithstanding the current macroeconomic uncertainties, the Group has
continued to be highly cash generative and is in a strong position to maintain
its ordinary dividend policy. The principal risks of the Group are set out in
its Annual Report, in particular those relating to Covid-19, supply chain,
competition, economic environment, commodity prices, infrastructure and
international expansion. These are relevant to the ability of the Group to
maintain its ordinary dividend policy in the future. The Group however
maintains strategies to mitigate those risks and the Board believes the Group
has a robust and resilient business model through the combination of having a
value-led product assortment which to a large extent comprises essential goods
and also competes across a very broad section of the retail markets in our
chosen locations.
Alex Russo
Chief Financial Officer
30 May 2022
Consolidated Statement of Comprehensive Income
Period ended 52 weeks ended Restated*
26 March 2022 52 weeks ended
27 March 2021
Note £'m £'m
Revenue 2 4,673 4,801
Cost of sales (2,921) (3,031)
Gross profit 1,752 1,770
Administrative expenses (1,142) (1,157)
Operating profit 4 610 613
Share of profits in associates 11 3 2
Profit on ordinary activities before net finance costs and tax 613 615
Finance costs on lease liabilities 5 (59) (61)
Other finance costs 5 (29) (29)
Finance income 5 0 0
Profit on ordinary activities before tax 525 525
Income tax expense 9 (103) (97)
Profit for the period 2 422 428
Other comprehensive income for the period
Items which may be reclassified to profit and loss:
Exchange differences on retranslation of subsidiary and associate investments (2) (1)
Fair value movement as recorded in the hedging reserve 20 (26)
Tax effect of other comprehensive income 9 (4) 5
Total other comprehensive income 14 (22)
Total comprehensive income for the period 436 406
Earnings per share
Basic earnings per share attributable to ordinary equity holders (pence) 10 42.2 42.8
Diluted earnings per share attributable to ordinary equity holders (pence) 10 42.1 42.7
* Other comprehensive income has been restated in 2021 to remove the effect of
the hedging gains and losses transferred to inventories. These are recorded
directly in the consolidated statement of changes in equity. See note 1.
All profit and other comprehensive income is attributable to the owners of the
parent.
The accompanying accounting policies and notes form an integral part of these
consolidated financial statements.
Consolidated Statement of Financial Position
Note 26 March 27 March
2022 2021
As at
Assets £'m £'m
Non-current
Goodwill 12 920 921
Intangible assets 12 120 118
Property, plant and equipment 13 363 336
Right of use assets 14 1,066 1,071
Investments in associates 11 8 4
Other receivables 16 7 7
Deferred tax asset 9 31 32
2,515 2,489
Current assets
Cash at bank and in hand 17 173 218
Inventories 15 863 605
Trade and other receivables 16 53 42
Income tax receivable 9 -
Other financial assets 19 25 4
1,123 869
Total assets 3,638 3,358
Equity
Share capital 22 (100) (100)
Share premium (2,476) (2,475)
Retained earnings (121) (128)
Hedging reserve (13) 8
Legal reserve (10) (10)
Merger reserve 1,979 1,979
Foreign exchange reserve (5) (7)
(746) (733)
Non-current liabilities
Interest bearing loans and borrowings 20 (950) (723)
Lease liabilities 14 (1,140) (1,139)
Deferred tax liabilities 9 (43) (27)
Provisions 21 (4) (5)
(2,137) (1,894)
Current liabilities
Interest bearing loans and borrowings 20 (6) (7)
Trade and other payables 18 (564) (524)
Lease liabilities 14 (170) (163)
Other financial liabilities 19 (0) (16)
Income tax payable (4) (13)
Provisions 21 (11) (8)
(755) (731)
Total liabilities (2,892) (2,625)
Total equity and liabilities (3,638) (3,358)
The accompanying accounting policies and notes form an integral part of these
consolidated financial statements. This consolidated statement of financial
position was approved by the Board of Directors and authorised for issue on 30
May 2022 and signed on their behalf by:
Simon Arora, Chief Executive Officer.
Consolidated Statement of Changes in Shareholders' Equity
Share capital Share Retained Hedging Legal Merger Foreign Total
premium earnings reserve reserve reserve exchange equity
reserve
£'m £'m £'m £'m £'m £'m £'m £'m
Balance at 28 March 2020 100 2,474 245 9 10 (1,979) 8 867
- - (97) - - - - (97)
Ordinary dividends declared
- - (450) - - - - (450)
Special dividends declared
0 1 1 - - - - 2
Effect of share options
0 (546) - - - - (545)
Total transactions with owners 1
Profit for the period - - 428 - - - - 428
Other comprehensive income (restated*) - - 1 (22) - - (1) (22)
- - 429 (22) - - (1) 406
Total comprehensive income for the period
Hedging gains & losses reclassified as inventory (restated*) - - - 5 - - - 5
100 2,475 128 (8) 10 (1,979) 7 733
Balance at 27 March 2021
- - (180) - - - - (180)
Ordinary dividends declared
- - (250) - - - - (250)
Special dividends declared
0 1 1 - - - - 2
Effect of share options
0 1 (429) - - - - (428)
Total transactions with owners
Profit for the period - - 422 - - - - 422
- - - 16 - - (2) 14
Other comprehensive income
Total comprehensive income for the period - - 422 16 - - (2) 436
Hedging gains & losses reclassified as inventory - - - 5 - - - 5
100 2,476 121 13 10 (1,979) 5 746
Balance at 26 March 2022
* Other comprehensive income, total comprehensive income and hedging gains
& losses reclassified as inventory have been restated in 2021 to remove
the effect of the hedging gains and losses transferred to inventories. These
are recorded directly in the consolidated statement of changes in equity. See
note 1.
The accompanying accounting policies and notes form an integral part of these
consolidated financial statements.
Consolidated Statement of Cash Flows
Period ended 52 weeks ended 26 March 52 weeks ended 27 March
2022 2021
Note £'m £'m
Cash flows from operating activities
Cash generated from operations 23 598 944
Income tax paid (107) (117)
Net cash flows from operating activities 491 827
Cash flows from investing activities
Purchase of property, plant and equipment 13 (96) (87)
Purchase of intangible assets 12 (4) (1)
Business disposal net of cash disposed - 9
Disposal of interest in associated company 11 - 0
Proceeds from sale of property, plant and equipment 15 7
Finance income received 0 0
Dividends received from associates 11 - 2
Net cash flows from investing activities (85) (70)
Cash flows from financing activities
Receipt of newly issued corporate bonds 20 250 400
Repayment of previously issued corporate bonds 20 - (250)
Receipt of term loan facilities 20 - 300
Repayment of term loan facilities 20 - (300)
Repayment of acquisition loan facility 20 - (82)
Net repayment of Group revolving bank loans 20 - (120)
Net repayment of Heron facilities 20 (4) (5)
Net (repayment)/receipt of government backed loan in France 20 (22) 23
Net receipt/(repayment) of other French facilities 20 1 (1)
Repayment of the principal in relation to lease liabilities 14 (159) (141)
Payment of interest in relation to lease liabilities 14 (59) (61)
Fees on refinancing 20 (3) (11)
Other finance costs paid (24) (24)
Receipt from exercise of employee share options 8 - 0
Dividends paid to owners of the parent 29 (430) (697)
Net cash flows from financing activities (450) (969)
Effects of exchange rate changes on cash and cash equivalents (1) 3
Net decrease in cash and cash equivalents (45) (209)
Cash and cash equivalents at the beginning of the period 218 427
Cash and cash equivalents at the end of the period 173 218
Cash and cash equivalents comprise:
Cash at bank and in hand 17 173 218
Overdrafts - -
173 218
The accompanying accounting policies and notes form an integral part of these
consolidated financial statements.
Notes to the Consolidated Financial Statements
1 General information and basis of preparation
The consolidated financial statements have been prepared in accordance with EU
IFRS.
The Group's trade is general retail, with continuing trading taking place in
the UK and France. The Group has been listed on the London Stock Exchange
since June 2014.
The consolidated financial statements have been prepared under the historical
cost convention as modified by the revaluation of financial assets and
financial liabilities at fair value through profit or loss. The measurement
basis and principal accounting policies of the Group are set out below and
have been applied consistently throughout the consolidated financial
statements.
The consolidated financial statements are presented in pounds sterling and all
values are rounded to the nearest million (£'m), except when otherwise
indicated. This is the first period where the Group has rounded to the nearest
million (previously rounding to the nearest thousand). In transitioning the
prior year accounts, usual rounding practices have been adhered to.
The consolidated financial statements cover the 52 week period from 27 March
2021 to 26 March 2022 which is a different period to the parent company
standalone accounts (from 1 April 2021 to 31 March 2022). This exception is
permitted under article 1712-12 of the Luxembourg company law of 10 August
1915, as amended, because the Directors believe that;
· the consolidated financial statements are more informative when they
cover the same period as used by the main operating entity, B&M Retail
Ltd; and
· it would be unduly onerous to rephase the year end in that subsidiary
to match that of the parent company.
The year end for B&M Retail Ltd, in any year, will not be more than six
days prior to the parent company year end.
B&M European Value Retail S.A. (the "Company") is at the head of the Group
and there is no consolidation that takes place above the level of this
company.
The principal accounting policies of the Group are set out below.
Restatement of other comprehensive income
The Group has restated the other comprehensive income caption of 'fair value
movement as recorded in the hedging reserve' to exclude the amount moved to
inventories on the maturation of effective hedges as required by IFRS 9
'Financial Instruments'.
This has resulted in a decrease of £5m in other and total comprehensive
income for the prior year. The corresponding credit to the hedging reserve is
presented in the consolidated statement of changes in equity.
There was no effect on the profit for the period, earnings per share,
consolidated statement of financial position or consolidated statement of cash
flows.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and its subsidiary undertakings, together with the Group's share of
the net assets and results of associated undertakings, for the period from 28
March 2021 to 26 March 2022. Acquisitions of subsidiaries are dealt with by
the acquisition method of accounting. The results of companies acquired are
included in the consolidated statement of comprehensive income from the
acquisition date.
Control is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
· power over the investee (i.e. existing rights that give it the current
ability to direct the relevant activities of the investee),
· exposure, or rights, to variable returns from its involvement with the
investee, and,
· the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an
investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
· the contractual arrangements with the other vote holders of the
investee,
· rights arising from other contractual arrangements, and,
· the Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the statement of
comprehensive income from the date the Group gains control until the date the
Group ceases to control the subsidiary, excluding the situations as outlined
in the basis of preparation.
Going concern
As a value retailer, the Group is well placed to withstand volatility within
the economic environment. The Group's forecasts and projections, taking into
account reasonably possible changes in trading performance, show that the
Group will trade within its current banking facilities.
After making enquiries, including preparing cash flow forecasts for at least
12 months from the date of approval of these financial statements, the
Directors are confident that the Group has adequate resources to continue its
successful growth.
This assessment considered various scenarios including an extreme reduction in
like for like sales, gross margin deterioration, disruption to our
distribution network and cyber threats. The Group also has recourse to several
mitigations to improve liquidity, including our £155m revolving credit
facility, which had £142m available at the year end date.
There have been no post balance sheet changes to liquidity and the current
inflationary pressures do not have a material impact on this assessment as the
Group is well placed to absorb or pass on these costs given our position as a
low cost retailer.
Consequently, the Directors are confident that the Group and Company will have
sufficient funds to continue to meet its liabilities as they fall due for at
least 12 months from the date of approval of the financial statements and
therefore have prepared the financial statements on a going concern basis.
Note also that viability and going concern statements have been made in the
'Principal risks and uncertainties' section of this annual report.
Revenue
Under IFRS 15 Revenue is recognised when all the following criteria are met;
· the parties to the contract have approved the contract;
· the Group can identify each parties rights regarding the goods to be
transferred;
· the Group can identify the payment terms;
· the contract has commercial substance;
· it is probable that the Group will collect the consideration we are
entitled to in respect to the goods to be transferred.
In the vast majority of cases the Group's sales are made through stores and
the control of goods is immediately transferred at the same time as the
consideration is received via our tills. Therefore, revenue is recognised at
this point.
The Group sells a small quantity of gift vouchers for use in the future and,
as such, a small amount of deferred revenue is recognised. At the period end
the value held on the balance sheet was £0.5m (2021: £0.3m).
The Group operates a small wholesale function which recognises revenue when
goods are delivered and an invoice is raised. The revenue is considered
collectable as the Group's wholesale customers are usually related parties to
the Group (such as our associates) or are subject to credit checks before
trade takes place. See note 2 for the split of wholesale sales to store sales.
Revenue is the total amount receivable by the Group for goods supplied, in the
ordinary course of business, excluding VAT and trade discounts, and after
deducting returns and relevant vouchers and offers.
Administrative expenses
Administrative expenses include all running costs of the business, except
those relating to inventory (which are expensed through cost of sales), tax,
interest and other comprehensive income. Transport and warehouse costs are
included in this caption.
Elements which are unusual and significant, such as material restructuring
costs, may be separated as a line item.
Goodwill
Goodwill is initially measured at cost, being the excess of the fair value of
consideration transferred over the fair value of the net identifiable assets
acquired and liabilities assumed at the date of acquisition.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated to the
relevant cash-generating units (CGUs) that are expected to benefit from the
combination. The cash-generating units are individual stores and the groups of
cash-generating units are the store portfolios in each operational segment.
Goodwill is tested for impairment at least once per year and specifically at
any time where there is any indication that it may be impaired. Internally
generated goodwill is not recognised as an asset.
Segment reporting
Operating segments are reported in a manner consistent with internal reporting
provided to the chief operating decision maker. The chief operating decision
maker has been identified as the executive directors of the Group. The
executive directors are responsible for assessing the performance of the
business for the purpose of making decisions about resources to be allocated.
Alternative performance measures
The Group reports a selection of alternative performance measures (APM's) as
detailed below and in note 3, as the Directors believe that these measures
provide additional information that is useful to the users of our accounts.
The alternative performance measures we report in these accounts are:
· Earnings before interest, tax, depreciation and amortisation (EBITDA)
· Adjusted EBITDA
· Adjusted Profit
· Adjusted Earnings per share
Both IFRS 16 and non-IFRS 16 versions of these alternative performance
measures have been calculated and presented in order to aide comparability
with the figures presented in previous years.
Interest, tax, depreciation and amortisation are as defined statutorily whilst
the items we adjust for are those we consider not to be reflective of the
underlying performance of the business as detailed in note 3. These
adjustments include the effect of ineffective derivatives and foreign exchange
on intercompany balances, which do not relate to underlying trading, and costs
incurred in relation to acquisitions, which are non-recurring and do not
relate to underlying trading.
Underlying performance has been determined so as to align with how the Group
financial performance is monitored on an ongoing basis by management. In
particular, this reflects certain adjustments being made to consider an
adjusted EBITDA measure of performance
Adjusted finance costs reflect the ongoing charges associated with our debt
structure and exclude one off effects of refinancing,
The directors believe that our adjusted APMs, and specifically, EBITDA
provides users of the account with a measure of performance which is
appropriate to the retail industry and presented by peers and competitors.
Adjusted values are considered to be appropriate to exclude unusual,
non-trading and/or non-recurring impacts on performance which therefore
provides the user of the accounts with an additional metric to compare periods
of account.
The alternative performance measures used are not measures of performance or
liquidity under IFRS and should not be considered in isolation or as a
substitute for measures of profit, or as an indicator of the Group's operating
performance or cash flows from operating activities as determined in
accordance with IFRS.
Business combinations
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the consideration
transferred, measured at the acquisition date fair value, which may include
contingent consideration at net present value. Acquisition-related costs are
expensed depending on their nature with costs of raising finance amortised
over the term of the relevant element of finance provided and the remainder
expensed when incurred.
Assets and liabilities are recognised at their acquisition date fair value,
with the difference between the consideration and the net assets recognised as
goodwill on the statement of financial position or as a gain in administrative
expenses.
Brands
Brands acquired by the business are amortised if the corresponding agreement
is specifically time limited, or if the fair valuation exercise (carried out
for brands acquired via business combinations) identifies a fair lifespan for
the brand. This amortisation is charged to administrative expenses.
Otherwise, brands are considered to have an indefinite life on the basis that
they form part of the cash generating units within the Group which will
continue in operation indefinitely, with no foreseeable limit to the period
over which they are expected to generate net cash inflows.
Where brands are considered to have an indefinite life they are reviewed at
least annually for impairment or whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable.
Where the carrying value of an asset exceeds its recoverable amount (i.e. the
higher of value in use and fair value less costs to sell), the asset is
impaired accordingly with the impairment charged to administration expenses.
Intangible assets
Intangible assets acquired separately, including computer software, are
measured on initial recognition at cost comprising the purchase price and any
directly attributable costs of preparing the asset for use.
Following initial recognition, assets are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation begins when an
asset is available for use and is calculated on a straight line basis to
allocate the cost of the asset over its estimated useful life as follows:
Computer software acquired -
3 or 4 years
Amortisation method, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation
and accumulated impairment losses.
Cost comprises purchase price and directly attributable costs. Unless
significant or incurred as part of a refit programme, subsequent expenditure
will usually be treated as repairs or maintenance and expensed to the
statement of comprehensive income.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of the replaced part
is derecognised.
Depreciation
Freehold land is not depreciated. For all other property, plant and equipment,
depreciation is calculated on a straight line basis to allocate cost, less
residual value of the assets, over their estimated useful lives as follows:
Leasehold buildings - Life of lease
(max 50 years)
Freehold buildings - 2% - 4%
straight line
Plant, fixtures and equipment - 10% - 33% straight line
Motor vehicles - 12.5% -
33% straight line
Residual values and useful lives are reviewed annually and adjusted
prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is
included in the statement of comprehensive income when the asset is
derecognised.
Leases
The Group applies the leasing standard, IFRS 16, to all contracts identified
as leases at their inception, unless they are considered a short-term lease
(with a term less than a year) or where the asset is of a low underlying value
(under £5k). Assets which may fall into this categorisations include
printers, vending machines and security cameras, and the lease expense is
within administrative expenses.
The Group has lease contracts in relation to property, equipment, fixtures
& fittings and vehicles. A contract is classified as a lease if it conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
When a lease contract is recognised, the business assesses the term for which
we are reasonably certain to hold that lease, and the minimum lease payments
over that term are discounted to give the initial lease liability. The initial
right-of-use asset is then recognised at the same value, adjusted for
incentives or payments made on the day that the lease was acquired. Any
variable lease costs are expensed to administrative costs when incurred.
The date that the lease is brought into the accounts is the date from which
the lease has been effectively agreed by both parties as evidenced by the
Group's ability to use that property.
The right-of-use asset is subsequently depreciated on a straight-line basis
over the term of that lease, or useful life (whichever is shorter) with the
charge being made to administrative costs. The lease liability attracts
interest which is charged to finance costs, and is measured at amortised cost
using the effective interest method.
Right-of-use assets may be impaired if, for instance, a lease becomes onerous.
Impairment costs are charged to administrative costs.
Lease modifications are recorded where there is a change in the expected
cashflows associated with a lease, such as through a rent review. When a lease
modification occurs the lease liability is recalculated and an equivalent
adjustment is made to the right of use asset, unless that asset would be
reduced below zero, in which case the excess is expensed in administrative
costs. The recalculation is carried out with an unchanged discount unless the
change has affected management's assessment of the term of the lease.
If there is a significant event, such as the lease reaching its expiry date,
the likely exercise of a previously unrecognised break clause, or the signing
of an extension lease, the lease term is re-assessed by management as to how
long we can reasonably certain to stay in that property, and a new lease
agreement or modification (if the change is made before the expiry date) is
recognised for the re-assessed term, with a recalculated discount rate.
Lease modifications are also recorded where there is a change in the expected
cashflows associated with the lease, such as through a rent review. Unless the
change affects the term, the discount rate is not recalculated. A lease
modification results in a recalculation of the lease liability with a
corresponding adjustment made to the right of use asset.
The discount rate used is individual to each lease. Where a lease contract
includes an implicit interest rate, that rate is used. In the majority of
leases this is not the case and the discount rate is taken to be the
incremental borrowing rate as related to that specific asset. This is a
calculation based upon the external market rate of borrowing for the Group, as
well as several factors specific to the asset to be discounted.
The Group separates lease payments between lease and non-lease components
(such as service charges on property) at the point at which the lease is
recognised. Non-lease components are charged through administrative expenses.
Sale and leaseback transactions
The Group recognises a sale and leaseback transaction when the Group sells an
asset that has been previously recognised in property, plant and equipment,
and subsequently leases it back as part of the same or a linked transaction.
Management use the provisions of IFRS 15 to assess if a sale has taken place,
and the provisions of IFRS 16 to recognise the resulting lease, with the
liability and discount rate calculated in line with our lease policy and the
asset subject to an adjustment based upon the net book value of the disposed
asset, the opening lease liability, the consideration received and the fair
value of the asset on the date it was sold.
Resulting gains or losses are recognised in administrative expenses.
Onerous leases
A lease is considered onerous when the economic benefits of occupying the
leased properties are less than the obligations payable under the lease.
When a lease is classified as onerous, the right-of-use asset associated with
the lease is impaired to £nil value and non-rental costs that are likely to
accrue before the end of the contract are provided against.
Investments in associates
Associates are those entities over which the Group has significant influence
but which are neither subsidiaries nor interests in joint ventures.
Investments in associates are recognised initially at cost and subsequently
accounted for using the equity method. However, any goodwill or fair value
adjustment attributable to the Group's share of associates is included in the
amount recognised as investment in associates.
All subsequent changes to the share of interest in the equity of the associate
are recognised in the Group's carrying amount of the investment, including a
reduction in the carrying amount equal to any dividend received. Changes
resulting from the profit or loss generated by the associate are reported in
"share of profits of associates" in the consolidated statement of
comprehensive income and therefore affect net results of the Group. These
changes include subsequent depreciation, amortisation and impairment of the
fair value adjustments of assets and liabilities.
Items that have been recognised directly in the associate's other
comprehensive income are recognised in the consolidated other comprehensive
income of the Group. However, when the Group's share of losses in an associate
equals or exceeds its interest in the associate the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf
of the associate. If the associate subsequently reports profits, the investor
resumes recognising its share of those profits only after its share of the
profits equals the share of losses not recognised.
Unrealised gains on transactions between the Group and its associates are
eliminated to the extent of the Group's interest in the associates. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in the consolidated
financial statements of associates have been adjusted where necessary to
ensure consistency with the accounting policies adopted by the Group.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that
an asset may be impaired. If any indication exists, or when annual impairment
testing for an asset is required (for goodwill or indefinite life assets), the
Group estimates the asset's recoverable amount.
The Group bases its impairment calculation on detailed budgets and forecasts
which are prepared separately for each of the Group's cash generating units
(CGU's) to which the individual assets are allocated. These budgets and
forecast calculations are prepared in December and usually cover a period of
five years. For longer periods, a long-term growth rate is calculated and
applied to the projected future cash flows after the fifth year. The Group's
three year plan is usually approved in March. If due to the passage of time
there are significant differences in the key assumptions between the forecast
and plan, or if management consider that the forecast has a more sensitive
level of headroom, then the impairment test will be additionally sensitised to
the plan assumptions.
Indications of impairment might include (for goodwill and the brand assets,
for instance) a significant decrease in the like for like sales of established
stores, sustained negative publicity or a drop off in visits to our website
and social media accounts.
An asset's recoverable amount is the higher of an asset's or CGU's fair value
less costs to sell and its value in use. It is determined for an individual
asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or
CGU.
Impairment losses of continuing operations, are recognised in the statement of
comprehensive income in those expense categories consistent with the function
of the impaired asset.
For assets excluding goodwill and acquired brands with indefinite lives, an
assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Group estimates the asset's
or CGU's recoverable amount.
A previously recognised impairment loss is reversed only if there has been a
change in the assumptions used to determine the asset's recoverable amount
since the last impairment loss was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior
years. Such reversal is recognised in the statement of comprehensive income,
except for impairment of goodwill which is not reversed.
Inventories
Inventories are stated at the lower of cost and net realisable value, after
making due allowance for obsolete and slow moving items, using the weighted
average method.
Stock purchased in foreign currency is booked in at the hedge rate applicable
to that stock (if effectively hedged) or the underlying foreign currency rate
on the date that the item is brought into stock.
Net realisable value is the estimated selling price in the ordinary course of
business, less estimated costs to sell. Transport, warehouse and distribution
costs are not included in inventory.
The Group receives supplier rebates which are included in the cost of
inventory balance (and which therefore ultimately flow through to cost of
sales). These rebates are recognised on an accruals basis according to actual
sales levels achieved at the end of each period.
Share options
The Group operates several equity settled share option schemes.
The schemes have been accounted for under the provisions of IFRS 2 and,
accordingly, have been fair valued on their inception date using appropriate
methodology (the Black Scholes and Monte Carlo models).
A cost is recorded through the statement of comprehensive income in respect of
the number of options outstanding and the fair value of those options. A
corresponding credit is made to the retained earnings reserve and the effect
of this can be seen in the statement of changes in equity. See note 8 for more
details.
Taxation
Current income tax
Current income tax assets and liabilities for the current period are measured
at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting date, in the
countries where the Group operates and generates taxable income. Tax is
recognised in the statement of comprehensive income, except to the extent that
it relates to items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other comprehensive income
or directly in equity.
Deferred tax
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date. Deferred tax liabilities
are recognised for all taxable temporary differences, except:
• When the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.
• In respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures, when
the timing of the reversal of the temporary differences can be controlled and
it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
carry forward of unused tax credits and unused tax losses, to the extent that
it is highly probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised, except:
• When the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit
or loss.
• In respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures,
deferred tax assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Financial instruments
The Group uses derivative financial instruments such as forward currency
contracts, fuel swaps and interest rate swaps to reduce its foreign currency
risk, commodity price risk and interest rate risk. Derivative financial
instruments are recognised at fair value. The fair value is derived using an
internal model and supported by valuations by third party financial
institutions.
Where a derivative financial instrument is designated as a hedge of the
variability in cash flows of a recognised asset or liability, or a highly
probable forecast transaction, the effective part of any gain or loss on the
derivative financial instrument is recognised directly in other comprehensive
income and accumulated in the hedging reserve. Any ineffective portion of the
hedge is recognised immediately in the statement of comprehensive income.
Effectiveness of the derivatives subject to hedge accounting is assessed
prospectively at inception of the derivative, and at each reporting period end
date prior to maturity.
Where a hedge of a forecast transaction subsequently results in the
recognition of a non-financial asset, such as an item of inventory, the
associated gains and losses are recognised in the initial cost of that asset.
When a hedging instrument expires or is sold, terminated or exercised, or the
entity revokes designation of the hedge relationship but the hedged forecast
transaction is still expected to occur, the cumulative gain or loss at that
point remains in equity and is recognised in accordance with the above policy
when the transaction occurs. If the hedged transaction is no longer expected
to take place, the cumulative unrealised gain or loss recognised in equity is
reclassified in the statement of other comprehensive income immediately.
Financial assets
Under IFRS 9, on initial recognition, a financial asset is classified as
measured at amortised cost, fair value through profit or loss or fair value
though other comprehensive income.
A financial asset is measured at amortised cost using the effective interest
rate if it meets both of the following conditions: it is held within a
business model whose objective is to hold assets to collect contractual cash
flows; and its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding. Under IFRS 9 trade receivables, without a significant financing
component, are classified and held at amortised cost, being initially measured
at the transaction price and subsequently measured at amortised cost less any
impairment loss.
IFRS 9 includes an 'expected loss' model ('ECL') for recognising impairment of
financial assets held at amortised cost. The Group has elected to measure loss
allowances for trade receivables at an amount equal to lifetime ECLs. Credit
losses are measured as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the entity in accordance with the
contract and the cash flows that the Group expects to receive).
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating expected credit
losses, the Group considers reasonable and supportable information that is
relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis based on the Group's
historical experience and informed credit assessment and including
forward-looking information. The Group performs the calculation of expected
credit losses separately for each customer group. The balances involved are
immaterial for further disclosure.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income comprise
derivative financial instruments entered into by the Group that are designated
as hedging instruments in hedge relationships as defined by IFRS 9. Financial
assets at fair value through other comprehensive income are carried in the
statement of financial position at fair value with changes in fair value
recognised in other comprehensive income.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include derivative
financial instruments entered into by the Group that are not designated as
hedging instruments in hedge relationships as defined by IFRS 9. Financial
assets at fair value through profit or loss are carried in the statement of
financial position at fair value with changes in fair value recognised in
profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised when the rights to
receive cash flows from the asset have expired and the entity has transferred
its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full and either (a) the entity has
transferred substantially all the risks and rewards of the asset, or (b) the
entity has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
Impairment of financial assets
The Group assesses at each reporting date, on a forward looking basis the ECLs
associated with our financial assets carried at amortised cost.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IFRS 9 are classified as financial
liabilities at fair value through profit or loss or other financial
liabilities. The entity determines the classification of its financial
liabilities at initial recognition. All financial liabilities are recognised
initially at fair value.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial
derivatives held for trading. Financial liabilities are classified as
held-for-trading if they are acquired for the purpose of selling in the near
term. This category includes derivative financial instruments entered into by
the Group. Gains or losses on liabilities held-for-trading are recognised in
profit and loss.
Other financial liabilities
After initial recognition, interest bearing loans and borrowings, trade and
other payables and other liabilities are subsequently measured at amortised
cost using the effective interest rate method. Gains and losses are recognised
in the statement of comprehensive income when the liabilities are derecognised
as well as through the effective interest rate method (EIR) amortisation
process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included in finance costs.
Derecognition
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires.
Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at
each reporting date is determined by reference to mark-to-market valuations
obtained from the relevant bank (bid price for long positions and ask price
for short positions), without any deduction for transaction costs.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, less bank
overdrafts to the extent the group has the right to offset and settle these
balances net.
Equity
Equity comprises the following:
§ "Share capital" represents the nominal value of equity shares;
§ "Share premium" represents the excess of the consideration made for the
shares, over and above the nominal valuation of those shares;
§ "Legal reserve" representing the statutory reserve required by Luxembourg
law as an apportionment of profit within each Luxembourg company (up to 10% of
the standalone share capital);
§ "Hedging reserve" representing the fair value of the derivatives held by
the Group at the period end that are accounted for under hedge accounting and
that represent effective hedges;
§ "Merger reserve" representing the reserve created during the
reorganisation of the Group in 2014;
§ "Retained earnings reserve" represents retained profits;
§ "Foreign exchange reserve" represents the cumulative differences arising
in retranslation of the subsidiaries and associates results.
Foreign currency translation
These consolidated financial statements are presented in pounds sterling.
The following Group companies have a functional currency of pounds sterling:
· B&M European Value Retail S.A.
· B&M European Value Retail 1 S.à r.l. (Lux Holdco)
· B&M European Value Retail Holdco 1 Ltd (UK Holdco 1)
· B&M European Value Retail Holdco 2 Ltd (UK Holdco 2)
· B&M European Value Retail Holdco 3 Ltd (UK Holdco 3)
· B&M European Value Retail Holdco 4 Ltd (UK Holdco 4)
· EV Retail Ltd
· B&M Retail Ltd
· Opus Homewares Ltd
· Retail Industry Apprenticeships Ltd
· Heron Food Group Ltd
· Heron Foods Ltd
· Cooltrader Ltd
· Heron Properties (Hull) Ltd
· Centz N.I. Limited
The following Group companies have a functional currency of the Euro:
· B&M European Value Retail 2 S.à r.l. (SBR Europe)
· B&M France SAS
· B&M European Value Retail Germany GmbH (Germany Holdco)
The Group companies whose functional currency is the Euro have been
consolidated into the Group via retranslation of their results in line with
IAS 21 Effects of Changes in Foreign Exchange Rates. The assets and
liabilities are translated into pounds sterling at the period end exchange
rate. The revenues and expenses are translated into pounds sterling at the
average monthly exchange rate during the period. Any resulting foreign
exchange difference is cumulatively recorded in the foreign exchange reserve
with the annual effect being charged/credited to other comprehensive income.
Transactions entered into by the company in a currency other than the currency
of the primary economic environment in which it operates (the "functional
currency") are recorded at the rates ruling when the transactions occur.
Foreign currency monetary assets and liabilities are translated at the rates
ruling at the balance sheet date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
Pension costs
The Group operates a defined contribution scheme and contributions are charged
to profit or loss in the period in which they are incurred.
Provisions
Provisions are recognised when a present obligation (legal or constructive)
exists as a result of a past event and where it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and the amount can be reliably estimated. Provisions are discounted
where the time value of money is considered to be material.
The property provision also contains expected dilapidation costs, which covers
expected dilapidation costs for any lease considered onerous, any related to
stores recently closed, any stores which are planned or at risk of closure and
those stores occupied but not under contract. At the period end 99 stores were
provided against (2021: 87).
We do not provide against stores which are under contract and not considered
at risk of closure (comprising the majority of the estate) as management
consider that such a provision would be minimal as a result of regular store
maintenance and limited fixed fit out costs.
We also provide against the terminal dilapidation expense on our major
warehouses, which is built up over the term of the leases held over those
warehouses.
Critical judgements and key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the financial information was
prepared. However, existing circumstances and assumptions about future
developments may change due to market changes or circumstances arising beyond
the control of the Group. Such changes are reflected in the assumptions when
they occur.
Critical judgments
Investments in associates
Multi-lines International Company Ltd (Multi-lines), which is 50% owned by the
Group, has been judged by management to be an associate rather than a
subsidiary or a joint venture.
Under IFRS 10 control is determined by:
· Power over the investee.
· Exposure, or rights, to variable returns from its involvement with the
investee.
· The ability to use its power over the investee to affect the amount of
the investor's returns.
Although 50% owned, B&M Group does not have voting rights or substantive
rights. Therefore, the level of power over the business is considered to be
more in keeping with that of an associate than a joint-venture and, therefore,
it has been treated as such within these consolidated financial statements.
Hedge accounting
The Group hedge accounts for stock purchases made in US Dollars.
There is significant management judgment involved in forecasting the level of
dollar purchases to be made within the period that the forward hedge has been
bought for.
Management takes a prudent view that no more than 80% of the operational
hedging in place can be subject to hedge accounting, due to forecast
uncertainties, and assesses every forward hedge taken out, on inception, if
that figure should be reduced further by considering general purchasing
trends, and discussion of specific purchasing decisions.
Estimation uncertainty
There are no areas of estimation uncertainty where management consider that
there is a significant risk of a material adjustment to the carrying amounts
of assets and liabilities within the next financial year.
Standards and Interpretations not yet applied by the Group
The following amendments to accounting standards and interpretations, issued
by the International Accounting Standards Board (IASB), have not yet been
applied by the Group in the period. None of these are expected to have a
significant impact on the Group's consolidated results or financial position:
IASB effective for annual periods beginning on or after 1 January 2022
Standard Summary of changes UK Endorsement status EU Endorsement status
Amendments to IFRS 3 Business combinations The amendments updated a reference in IFRS 3 to the Conceptual Framework for Not yet endorsed Not yet endorsed
Financial Reporting without changing the requirements for business combination
accounting.
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets The amendments specify which costs an entity includes in determining the cost Not yet endorsed Not yet endorsed
of fulfilling a contract for the purpose of assessing whether the contract is
onerous.
Annual improvements - cycle 2018-2020 This cycle of improvements contains amendments to the following standards: Not yet endorsed Not yet endorsed
· IFRS 9 Financial Instruments: clarifies the fees to be included in the
'10 per cent' test for derecognition of financial liabilities.
· Illustrative Examples accompanying IFRS 16 Leases: to remove the
illustration of payments from the lessor relating to leasehold improvements.
IASB effective for annual periods beginning on or after 1 January 2023
Standard Summary of changes UK Endorsement status EU Endorsement status
Amendments to IAS 8 Accounting Estimates Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Not yet endorsed Not yet endorsed
Errors, make a distinction between how an entity should present and disclose
different types of accounting changes in its financial statements. Changes in
accounting policies must be applied retrospectively while changes in
accounting estimates are accounted for prospectively.
Amendments to IAS 1 and IFRS 2 The amendment requires an entity to disclose its material accounting policy Not yet endorsed Not yet endorsed
information instead of its significant accounting policies. A policy can be
material by nature even if the related amounts are immaterial.
2 Segmental information
IFRS 8 ("Operating segments") requires the Group's segments to be identified
on the basis of internal reports about the components of the Group that are
regularly reviewed by the chief operating decision maker to assess performance
and allocate resources across each reporting segment.
The chief operating decision maker has been identified as the executive
directors who monitor the operating results of the retail segments for the
purpose of making decisions about resource allocation and performance
assessment.
For management purposes, the Group is organised into three operating segments,
comprising the three separately operated businesses within the Group; UK
B&M, UK Heron and France B&M.
Items that fall into the corporate category, which is not a separate segment
but is presented to reconcile the balances to those presented in the main
statements, include those related to the Luxembourg or associate entities,
Group financing, corporate transactions, any tax adjustments and items we
consider to be adjusting (see note 3).
The average Euro rate for translation purposes was €1.1756 /£ during the
year, with the period end rate being €1.2009 /£ (2021: €1.1203/£ and
€1.1691/£ respectively).
52 week period to 26 March 2022 UK UK France Corporate Total
B&M Heron B&M
£'m £'m £'m £'m £'m
Revenue 3,909 411 353 - 4,673
EBITDA (note 3) 563 23 32 13 631
EBITDA (IFRS 16) (note 3) 729 34 64 13 840
Depreciation and amortisation (170) (23) (34) - (227)
Net finance expense (48) (2) (11) (27) (88)
Income tax (expense) (96) (1) (5) (1) (103)
Segment profit/(loss) 415 8 14 (15) 422
Total assets 2,952 281 331 74 3,638
Total liabilities (1,513) (117) (251) (1,011) (2,892)
Capital expenditure* (80) (9) (11) - (100)
52 week period to 27 March 2021 UK UK France Corporate
B&M Heron B&M Total
£'m £'m £'m £'m £'m
Revenue 4,077 415 309 - 4,801
EBITDA (note 3) 592 25 11 (5) 623
EBITDA (IFRS 16) (note 3) 759 35 42 (5) 831
Depreciation and amortisation (162) (20) (34) - (216)
Net finance expense (48) (3) (13) (26) (90)
Income tax (expense)/credit (106) (2) 1 10 (97)
Segment profit/(loss) 443 10 (4) (21) 428
Total assets 2,687 282 348 41 3,358
Total liabilities (1,477) (117) (240) (791) (2,625)
Capital expenditure* (65) (13) (10) - (88)
*Capital expenditure includes both tangible and intangible capital.
Revenue is disaggregated geographically as follows:
Period to 52 weeks ended 26 March 52 weeks ended
2022 27 March
2021
£'m £'m
Revenue due from UK operations 4,320 4,492
Revenue due from French operations 353 309
Overall revenue 4,673 4,801
Non-current assets (excluding deferred tax and financial instruments) are
disaggregated geographically as follows:
As at 26 March 27 March
2022 2021
£'m £'m
UK operations 2,252 2,227
French operations 224 225
Luxembourg operations 8 5
Overall 2,484 2,457
The Group operates a small wholesale operation, with the relevant
disaggregation of revenue as follows:
Period to 52 weeks ended 26 March 52 weeks ended
2022 27 March
2021
£'m £'m
Revenue due to sales made in stores 4,628 4,754
Revenue due to wholesale activities 45 47
Overall revenue 4,673 4,801
3 Reconciliation of non-IFRS measures from the statement of
comprehensive income
The Group reports a selection of alternative performance measures as detailed
below. The Directors believe that these measures provide additional
information that is useful to the users of the accounts.
EBITDA, Adjusted EBITDA and Adjusted Profit are non-IFRS measures and
therefore reconciliations from the statement of comprehensive income are set
out below.
Period to 52 weeks ended 26 March 52 weeks ended
2022 27 March
2021
£'m £'m
Profit on ordinary activities before interest and tax 613 615
Add back depreciation and amortisation 227 216
EBITDA (IFRS 16) 840 831
Exclude effects of IFRS 16 on administrative costs (209) (208)
EBITDA 631 623
Reverse the fair value effect of ineffective derivatives (13) 7
Foreign exchange on intercompany balances 1 3
Release of exceptional French stock provision - (7)
Adjusted EBITDA 619 626
Pre-IFRS 16 depreciation and amortisation (66) (62)
Net adjusted finance costs (see note 5) (29) (24)
Adjusted profit before tax 524 540
Adjusted tax (107) (105)
Adjusted profit for the period 417 435
Attributable to owners of the parent 417 435
The effects of IFRS 16 on administrative costs caption reflects the difference
between IAS 17 and IFRS 16 accounting and largely consists of the additional
rent expense the Group would have incurred under the IAS 17 standard.
Adjusted EBITDA (IFRS 16) and Adjusted Profit (IFRS 16) are calculated as
follows. These are the statements of adjusted profit that includes the effects
of IFRS 16.
Period to 52 weeks ended 26 March 52 weeks ended
2022 27 March
2021
£'m £'m
Adjusted EBITDA (above) 619 626
Include other effects of IFRS 16 on EBITDA 209 208
Adjusted EBITDA (IFRS 16) 828 834
Depreciation and amortisation (227) (216)
Interest costs related to lease liabilities (note 5) (59) (61)
Net adjusted other finance costs (29) (24)
Adjusted profit before tax (IFRS 16) 513 533
Adjusted tax (101) (106)
Adjusted profit for the period (IFRS 16) 412 427
Adjusting items are the effects of derivatives, one off refinancing fees,
foreign exchange on the translation of intercompany balances and the effects
of revaluing or unwinding balances related to the acquisition of subsidiaries.
Significant project costs or gains or losses arising from unusual
circumstances or transactions may also be included if incurred.
The exceptional French stock provision was recognised in 2019/20 when the
first French lockdown was put into place resulting in the closure of the
French store estate with significant uncertainty regarding when stores would
be able to reopen. Ultimately the stock provision was largely released during
2020/21, as the stock was sold through once the stores were reopened and this
release was treated as adjusting to match the treatment when recognising the
provision. No new adjusting items have been recognised in respect of the
pandemic in either of the presented years.
The following table reconciles the statutory figures to the adjusted (IFRS 16)
and adjusted figures in the statutory P&L format on a line by line basis.
52 week period to 26 March 2022 Statutory figures Adjusting items Adjusted (IFRS 16) Impact of IFRS 16 Adjusted figures
£'m £'m £'m £'m £'m
Revenue 4,673 - 4,673 - 4,673
Cost of sales (2,921) - (2,921) - (2,921)
Gross profit 1,752 - 1,752 - 1,752
Depreciation and amortisation (227) - (227) 161 (66)
Other administrative expenses (915) (12) (927) (209) (1,136)
Operating profit 610 (12) 598 (48) 550
Share of profits in associates 3 - 3 - 3
Profit before interest and tax 613 (12) 601 (48) 553
Finance costs relating to right of use assets (59) - (59) 59 -
Other finance costs (29) - (29) - (29)
Finance income 0 - 0 - 0
Profit before tax 525 (12) 513 11 524
Income tax expense (103) 2 (101) (6) (107)
Profit for the period 422 (10) 412 5 417
52 week period to 27 March 2021 Statutory figures Adjusting items Adjusted (IFRS 16) Impact of IFRS 16 Adjusted figures
£'m £'m £'m £'m £'m
Revenue 4,801 - 4,801 - 4,801
Cost of sales (3,031) (7) (3,038) - (3,038)
Gross profit 1,770 (7) 1,763 - 1,763
Depreciation and amortisation (216) - (216) 154 (62)
Other administrative expenses (941) 10 (931) (208) (1,139)
Operating profit 613 3 616 (54) 562
Share of profits in associates 2 - 2 - 2
Profit before interest and tax 615 3 618 (54) 564
Finance costs relating to right of use assets (61) - (61) 61 -
Other finance costs (29) 5 (24) - (24)
Finance income - - - - -
Profit before tax 525 8 533 7 540
Income tax expense (97) (9) (106) 1 (105)
Profit for the period 428 (1) 427 8 435
Adjusted tax represents the tax charge per the statement of comprehensive
income as adjusted only for the effects of the adjusting items detailed above
and the one off deferred tax gain on recognition of the deferred tax asset in
France in the prior year.
The segmental split in EBITDA (IFRS 16) and Adjusted EBITDA (IFRS 16)
reconciles as follows:
52 week period to 26 March 2022 UK UK France Corporate Total
B&M Heron B&M
£'m £'m £'m £'m £'m
Profit before interest and tax 559 11 30 13 613
Add back depreciation and amortisation 170 23 34 - 227
EBITDA (IFRS 16) 729 34 64 13 840
Adjusting items detailed above - - - (12) (12)
Adjusted EBITDA (IFRS 16) 729 34 64 1 828
52 week period to 27 March 2021 UK UK France Corporate Total
B&M Heron B&M
£'m £'m £'m £'m £'m
Profit/(loss) before interest and tax 597 15 8 (5) 615
Add back depreciation and amortisation 162 20 34 - 216
EBITDA 759 35 42 (5) 831
Adjusting items detailed above - - - 3 3
Adjusted EBITDA (IFRS 16) 759 35 42 (2) 834
Adjusted EBITDA and related measures are not measures of performance or
liquidity under IFRS and should not be considered in isolation or as a
substitute for measures of profit, or as an indicator of the Group's operating
performance or cash flows from operating activities as determined in
accordance with IFRS.
4 Operating profit
The following items have been charged in arriving at operating profit:
Period ended 52 weeks ended 26 March 52 weeks ended
2022 27 March
2021
£'m £'m
Auditor's remuneration 1 1
Payments to auditors in respect of non-audit services:
Taxation advisory services - -
Other assurance services 0 0
Other professional services - -
Cost of inventories recognised as an expense (included in cost of sales) 2,921 3,031
Depreciation of owned property, plant and equipment 62 57
Amortisation (included within administration costs) 2 3
Depreciation of right of use assets 163 156
Impairment of right of use assets 2 5
Operating lease rentals 2 (1)
Loss on sale of property, plant and equipment 1 1
(Gain)/loss on sale and leaseback (1) 0
(Gain)/loss on foreign exchange (9) 9
5 Finance costs and finance income
Finance costs include all interest related income and expenses. The
following amounts have been included in the continuing profit line for each
reporting period presented:
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Interest on debt and borrowings (27) (22)
Ongoing amortisation of finance fees (2) (2)
Total adjusted finance expense (29) (24)
Non capitalised fees incurred on refinancing - (3)
Release of remaining unamortised fees on previous facilities - (2)
Total other finance expense (29) (29)
Finance costs on lease liabilities (59) (61)
Total finance expense (88) (90)
The finance expense reconciles to the statement of cash flows as follows:
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Cash
Finance costs paid in relation to debt and borrowings 24 23
Finance costs paid in relation to lease liabilities 59 61
Fees paid in relation to refinancing 3 11
Finance costs paid 86 95
Non cash
Movement of accruals in relation to debt and borrowings 3 (1)
Capitalisation of amortised fees in relation to new facilities (3) (8)
Release of capitalised fees held in relation to previous facilities - 2
Ongoing amortisation of finance fees 2 2
Total finance expense 88 90
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Interest income on loans and bank accounts 0 0
Total finance income 0 0
There are no adjusting items related to financial income.
Total net adjusted finance costs are therefore:
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Total adjusted finance expense (29) (24)
Total adjusted finance income 0 0
Total net adjusted finance costs (29) (24)
6 Employee remuneration
Expense recognised for employee benefits is analysed below:
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Wages and salaries 530 515
Social security costs 32 30
Share based payment expense 2 2
Pensions - defined contribution plans 8 7
572 554
There are £1m of defined contribution pension liabilities owed by the Group
at the period end (2021: £1m).
B&M France operates a scheme where they must provide a certain amount per
employee to pay upon their retirement date. The accrual on this scheme at the
period end was £2m (2021: £2m).
The average monthly number of persons employed by the Group during the period
was:
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
Sales staff 39,804 37,981
Administration 1,070 854
40,874 38,835
7 Key management remuneration
Key management personnel and Directors' remuneration includes the following:
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Directors' remuneration:
Short term employee benefits 4 3
Benefits accrued under the share option scheme 1 1
Pension 0 0
5 4
Key management expense (includes Directors' remuneration):
Short term employee benefits 9 8
Benefits accrued under the share option scheme 1 1
Pension 0 0
10 9
Amounts in respect of the highest paid director emoluments:
Short term employee benefits 2 2
Benefits accrued under the share option scheme 1 1
Pension 0 0
3 3
The emoluments disclosed above are of the directors and key management
personnel who have served as a director within any of the continuing Group
companies.
8 Share Options
The Group operates three equity settled share option schemes which split down
to various tranches. Details of these schemes follow.
1) The Company Share Option Plan (CSOP) scheme
The CSOP scheme was adopted by the Group as a Schedule 4 CSOP Scheme on 29
March 2014. No grant under this scheme can be made more than 10 years after
this date.
No awards have been issued under this scheme since August 2016 with the final
11,049 options exercised in the prior year. No options were held at either
period end date.
2) Long-Term Incentive Plan (LTIP) Awards
The LTIP was adopted by the board on 29 May 2014. No grant under this scheme
can be made more than 10 years after this date.
Eligibility
Employees and executive directors of the Group are eligible for the LTIP and
the awards are made at the discretion of the remuneration committee.
Limits & Pricing
A fixed number of options are offered to each participant, with the pricing
set at £nil. The options offered to each individual cannot exceed a total
value of 100% (200% under exceptional circumstances) of the participants base
salary where the value is measured as the market value of the shares on grant
multiplied by the number of options awarded, with the whole scheme limited to
10% of the share capital in issue.
Dividend Credits
All participants in any LTIP awards granted after 1 April 2018 are entitled to
a dividend credit where the notional dividend they would have received on the
maximum number of shares available under their award is converted into new
share options and added to the award based upon the share price on the date of
the dividend. These additional awards have been reflected in the tables below.
Vesting & Exercise
The share options are subject to a set of conditions measured over a three
year performance period as follows:
LTIP Executive ("A") awards
· 50% of the awards are subject to a TSR performance condition, where
the Group's TSR over the performance period is compared with a comparator
group. The awards vest on a sliding scale where the full 50% is awarded if the
Group falls in the upper quartile, 12.5% vests if the Group falls exactly at
the median, and 0% below that.
· 50% of the awards are subject to a Diluted EPS performance target. The
awards vest on a sliding scale based upon the Earnings per share as follows:
Award EPS as at 50% paid at 12.5% paid at
LTIP 2016A March-19 22.5p 17.5p
LTIP 2017A March-20 24.0p 19.0p
LTIP 2018A March-21 28.0p 23.0p
LTIP 2019A March-22 33.0p 27.0p
LTIP 2020A March-23 30.0p 25.0p
LTIP 2021A March-24 45.0p 37.0p
Below the 12.5% boundary, no options vest. Diluted EPS is considered to be on
frozen GAAP and so does not include the effects of IFRS 16.
· The performance period is the three years ending the period end
specified in the EPS table above.
· Once the performance period concludes, the calculated number of share
options remaining are then subject to a two year holding period.
· The share options vest at the conclusion of the holding period.
LTIP Restricted ("B") awards
· Group EBITDA must be positive in each year of the LTIP.
· The awards also have an employee performance condition attached.
Vested awards can be exercised up to the tenth anniversary of grant.
Tranches
There have been several awards of the LTIP, with the details as follows.
Note that the LTIP Executive awards have been split into the element subject
to the TSR (50%) and the element subject to the EPS (50%) since these were
valued separately.
The TSR awards market condition has been included in the fair value
calculation for those awards, all non-market conditions have not been
included. Expected volatility has been calculated based upon the historic
share price volatility of the Group and those of comparable companies.
The key information used in the valuation of these tranches is as follows:
Scheme Date of grant Original options granted Fair value of each option Risk free rate Expected life (years) Volatility
2016A-TSR 18 Aug 16 122,385.5 164p 0.09% 5 26%
2016A-EPS 18 Aug 16 122,385.5 254p 0.09% 5 26%
2017A-TSR 7 Aug 17 40,610 272p 0.52% 5 32%
2017A-EPS 7 Aug 17 40,610 351p 0.52% 5 32%
2018A-TSR 22 Aug 18 226,672.5 240p 0.97% 5 29%
2018A-EPS 22 Aug 18 226,672.5 409p 0.97% 5 29%
2019A-TSR 22 Aug 19 275,640.5 251p 0.37% 5 31%
2019A-EPS 22 Aug 19 275,640.5 361p 0.37% 5 31%
2020A-TSR 30 Jul 20 141,718 409p -0.11% 5 48%
2020A-EPS 30 Jul 20 141,718 464p -0.11% 5 48%
2021A-TSR 3 Aug 21 218,861 354p 0.23% 5 37%
2021A-EPS 3 Aug 21 218,861 560p 0.23% 5 37%
2017/B1 7 Aug 17 287,963 361p 0.25% 3 32%
2017/B2 14 Aug 17 101,654 360p 0.25% 3 32%
2018/B1 23 Jan 18 19,264 400p 0.25% 3 32%
2018/B2 20 Aug 18 236,697 406p 0.25% 3 30%
2019/B1 20 Aug 19 369,061 348p 0.47% 3 30%
2019/B2 18 Sep 19 2,678 373p 0.47% 3 30%
2020/B1 30 Jul 20 303,092 463p -0.12% 3 39%
2021/B1 3 Aug 21 281,950 560p 0.12% 3 42%
Scheme Options at 27 Mar 21 Granted Dividend credit Forfeited Exercised Options at 26 Mar 22
2016A-TSR 122,385.5* - - - (122,385.5) -
2016A-EPS 70,982.5* - - - (70,982.5) -
2017A-TSR 27,557* - - - - 27,557*
2017A-EPS 18,071* - - - - 18,071*
2018A-TSR 262,012 - 14,692 (74,239) - 202,465*
2018A-EPS 262,012 - 18,356 - - 280,368*
2019A-TSR 259,633 - 19,760.5 - - 279,393.5
2019A-EPS 259,633 - 19,760.5 - - 279,393.5
2020A-TSR 157,438.5 - 11,922.5 - - 169,361
2020A-EPS 157,438.5 - 11,922.5 - - 169,361
2021A-TSR - 218,861 10,799.5 - - 229,660.5
2021A-EPS - 218,861 10,799.5 - - 229,660.5
2017/B1 73,667 - - - (20,091) 53,576
2017/B2 13,379 - - - - 13,379
2018/B2 234,759 - 4,876 (7,657) (193,689) 38,289
2019/B1 395,455 - 27,849 (31,782) - 391,522
2019/B2 3,163 - 240 - - 3,403
2020/B1 300,724 - 22,073 (25,694) - 297,103
2021/B1 - 281,950 13,600 (24,530) - 271,020
Scheme Options at 28 Mar 20 Granted Dividend credit Forfeited Exercised Options at 27 Mar 21
2015A-TSR 40,616* - - - (40,616) -
2015A-EPS 31,477* - - - (31,477) -
2016A-TSR 122,385.5* - - - - 122,385.5*
2016A-EPS 70,982.5* - - - - 70,982.5*
2017A-TSR 40,610 - - (13,053) - 27,557*
2017A-EPS 40,610 - - (22,539) - 18,071*
2018A-TSR 244,718.5 - 27,333.5 (10,040) - 262,012
2018A-EPS 244,718.5 - 27,333.5 (10,040) - 262,012
2019A-TSR 271,922.5 - 28,588.5 (40,878) - 259,633
2019A-EPS 271,922.5 - 28,588.5 (40,878) - 259,633
2020A-TSR - 141,718 15,720.5 - - 157,438.5
2020A-EPS - 141,718 15,720.5 - - 157,438.5
2017/B1 263,855 - - (115,188) (75,000) 73,667
2017/B2 93,629 - - (16,050) (64,200) 13,379
2018/B1 16,856 - - (2,408) (14,448) -
2018/B2 245,397 - 25,167 (35,805) - 234,759
2019/B1 392,521 - 40,805 (37,871) - 395,455
2019/B2 2,847 - 316 - - 3,163
2020/B1 - 303,092 32,366 (34,734) - 300,724
* These share options have vested and are in a two year holding period.
3) Deferred Bonus Share Plan (DBSP) Awards
The Deferred Bonus Share Plan differs from the other awards in that there are
no vesting conditions.
The scheme has been set up in order to allocate a specified proportion of the
executive director's annual bonus into £nil price share options which are
then placed in holding for three years.
As there are no vesting conditions, these awards have been valued at the
amount of the bonus to be converted into share options under the scheme.
There are annual awards of the scheme. The 2022 award will be made after this
set of statutory accounts has been published, and will therefore be reported
in the next annual report.
Scheme Options at 27 Mar 21 Granted Dividend credit Forfeited Exercised Options at 26 Mar 22
2019 Bonus allocation 67,920 - 4,989 - - 72,909
2020 Bonus allocation 50,748 - 3,843 - - 54,591
2021 Bonus allocation - 85,340 4,210 - - 89,550
Scheme Options at 28 Mar 20 Granted Dividend credit Forfeited Exercised Options at 27 Mar 21
2019 Bonus allocation 61,008 - 6,912 - - 67,920
2020 Bonus allocation - 45,682 5,066 - - 50,748
The fair values of the presented schemes are £479k (2021), £175k (2020) and
£217k (2019).
The summary period end position is as follows:
Period ended 26 March 27 March
2022 2021
Share options outstanding at the start of the year 2,736,978 2,467,125
Share options granted during the year (including via dividend credit) 1,004,705 886,127
Share options forfeited or lapsed during the year (163,902) (379,484)
Share options exercised in the year (407,148) (236,790)
Share options outstanding at the end of the year 3,170,633 2,736,978
Of which;
Share options that are not vested 2,319,878 2,292,268
Share options that are in holding 745,511 357,664
Share options that are vested and eligible for exercise 105,244 87,046
All exercised options are satisfied by the issue of new share capital. The
weighted average share price on exercise was £5.64 (2021: £5.09). All
outstanding options have a £nil (2021: £nil) exercise price and the weighted
average remaining contractual life is 2.0 years (2021: 2.2 years).
In the year, £2m has been charged to the consolidated statement of
comprehensive income in respect to the share option schemes (2021: £2m). At
the end of the year the outstanding share options had a carrying value of £5m
(2021: £4m).
9 Taxation
The relationship between the expected tax expense based on the standard rate
of corporation tax in the UK of 19% (2021: 19%) and the tax expense actually
recognised in the statement of comprehensive income can be reconciled as
follows:
Period ended 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Current tax expense 90 104
Deferred tax charge/(credit) 13 (7)
Total tax expense recorded in profit and loss 103 97
Deferred tax charge/(credit) in other comprehensive income 4 (5)
Total tax charge/(credit) recorded in other comprehensive income 4 (5)
Result for the year before tax 525 525
Expected tax charge at the standard tax rate 100 100
Effect of :
Expenses not deductible for tax purposes 4 4
Income not taxable (4) (2)
Lease accounting (0) 0
Foreign operations taxed at local rates 2 0
Changes in the rate of corporation tax 2 1
Adjustment in respect of prior years (2) (7)
Hold over gains on fixed assets 1 1
Other (0) (0)
Actual tax expense 103 97
The caption 'Changes in the rate of corporation tax' includes the differences
arising due to the change in the future corporation tax rate to 25% from April
2023.
Deferred taxation
Statement of financial position 26 March 27 March
2022 2021
£'m £'m
Accelerated tax depreciation (6) (2)
Relating to intangible brand assets (28) (22)
Fair valuing of assets and liabilities (asset) 0 3
Fair valuing of assets and liabilities (liability) (6) (2)
Temporary differences relating to the tax accounting for leases 24 19
Movement in provision 1 2
Relating to share options 3 2
Held over gains on fixed assets (3) (1)
Losses carried forward 3 6
Other temporary differences 0 0
Net deferred tax (liability)/asset (12) 5
Analysed as;
Deferred tax asset 31 32
Deferred tax liability (43) (27)
Statement of comprehensive income 52 weeks to 52 weeks to
26 March 27 March
2022 2021
£'m £'m
Accelerated tax depreciation (4) 1
Relating to intangible brand assets (6) (1)
Fair valuing of assets and liabilities (7) 5
Temporary differences relating to the tax accounting for leases 5 (1)
Movement in provision (1) 1
Relating to share options 1 1
Held over gains on fixed assets (2) (1)
Brought forward losses (3) 7
Other temporary differences 0 0
Net deferred tax (charge)/credit (17) 12
Analysed as;
Total deferred tax (charge)/credit in profit or loss (13) 7
Total deferred tax (charge)/credit in other comprehensive income (4) 5
During the prior period, the Group recognised €7m of brought forward losses
as a deferred tax asset due to making the assessment that these losses are
realisable against future profits of the French business. In the above tax
reconciliation the recognition of these losses is included in the caption
'Adjustment in respect of prior years'.
There were no unrecognised deferred tax assets in relation to losses carried
forward within the Group at the period end (2021: same).
The Group offsets tax assets and liabilities if and only if it has a legally
enforceable right to set off current tax assets and current tax liabilities
and the deferred tax assets and deferred tax liabilities relate to income
taxes levied by the same tax authority.
10 Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit or
loss for the financial period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding at each
period end.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during each year plus the weighted
average number of ordinary shares that would be issued on conversion of any
dilutive potential ordinary shares into ordinary shares.
Adjusted (and adjusted (IFRS 16)) basic and diluted earnings per share are
calculated in the same way as above, except using adjusted profit attributable
to ordinary equity holders of the parent, as defined in note 3.
There are share option schemes in place (see note 8) which have a dilutive
effect on both periods presented. The following reflects the income and share
data used in the earnings per share computations:
Period ended 26 March 27 March
2022 2021
£'m £'m
Profit for the period attributable to owners of the parent 422 428
Adjusted profit for the period attributable to owners of the parent 417 435
Adjusted (IFRS 16) profit for the period attributable to owners of the parent 412 427
Thousands Thousands
Weighted average number of ordinary shares for basic earnings per share 1,001,061 1,000,695
Dilutive effect of employee share options 1,893 1,382
Weighted average number of ordinary shares adjusted for the effect of dilution 1,002,954 1,002,077
Pence Pence
Basic earnings per share 42.2 42.8
Diluted earnings per share 42.1 42.7
Adjusted basic earnings per share 41.6 43.4
Adjusted diluted earnings per share 41.6 43.4
Adjusted IFRS 16 basic earnings per share 41.2 42.7
Adjusted IFRS 16 diluted earnings per share 41.1 42.6
11 Investments in associates
Period ended 26 March 27 March
2022 2021
£'m £'m
Net book value
Carrying value at the start of the period 4 5
Disposal of holding in Home Focus Group Ltd - 0
Dividends received - (2)
Share of profits in associates since the prior year valuation exercise 3 2
Effect of foreign exchange on translation 1 (1)
Carrying value at the end of the period 8 4
The Group has a 22.5% holding in Centz Retail Holdings Limited, "Centz", a
company incorporated in Ireland. The principal activity of the company is
retail sales and their registered address is 5 Old Dublin Road, Stillorgan,
Co. Dublin
The Group has a 50% interest in Multi-lines International Company Ltd,
"Multi-Lines", a company incorporated in Hong Kong. The principal activity of
the company is the purchase and sale of goods and their registered address is
8/F, Hope Sea Industrial Centre, No. 26 Lam Hing Street, Kowloon Bay, Hong
Kong.
The Group previously held 20% of the ordinary share capital of Home Focus
Group Ltd, a company incorporated in Republic of Ireland and whose principal
activity was retail sales with a registered address of Boole House, Beech Hill
Office Campus, Beech Hill Road, Clonskeagh, Dublin 4. This holding was sold in
December 2020 for €350k. Home Focus Group is immaterial for further
disclosure.
None of the entities have discontinued operations or other comprehensive
income, except that on consolidation both entities have a foreign exchange
translation difference.
Period ended 26 March 27 March
2022 2021
£'m £'m
Multi-lines
Non-current assets 15 5
Current assets 94 74
Non-current liabilities - -
Current liabilities (99) (72)
Net assets 10 7
Revenue 324 240
Profit 3 2
Period ended 26 March 27 March
2022 2021
£'m £'m
Centz
Non-current assets 16 11
Current assets 20 25
Non-current liabilities (8) (10)
Current liabilities (15) (19)
Net assets 13 7
Revenue 78 61
Profit 5 3
The figures for both associates show 12 months to December 2021 (prior year:
12 months to December 2020), being the period used in the valuation of the
associate.
12 Intangible assets
Goodwill Software Brands Other Total
£'m £'m £'m £'m £'m
Cost or valuation
At 28 March 2020 922 10 115 1 1,048
Additions - 1 - - 1
Disposals - - - - -
Effect of retranslation (1) (0) (0) (0) (1)
At 27 March 2021 921 11 115 1 1,048
Additions - 3 1 - 4
Disposals - - - - -
Effect of retranslation (1) (0) (0) (0) (1)
At 26 March 2022 920 14 116 1 1,051
Accumulated amortisation / impairment
At 28 March 2020 - 6 1 - 7
Charge for the year - 2 1 - 3
Disposals - - - - -
Effect of retranslation - (0) (1) - (1)
At 27 March 2021 - 8 1 - 9
Charge for the year - 2 0 - 2
Disposals - - - - -
Effect of retranslation - (0) (0) - (0)
At 26 March 2022 - 10 1 - 11
Net book value at 26 March 2022 920 4 115 1 1,040
Net book value at 27 March 2021 921 3 114 1 1,039
At the period end, no software was being developed that is not yet in use
(2021: £1m), and the Group was committed to the purchase of trademarks worth
£2m (2021: £nil).
Impairment review of intangible assets held with indefinite life
The Group holds the following assets with indefinite life:
Segment 26 March 26 March 27 March 27 March
2022 2022 2021 2021
Goodwill Brand Goodwill Brand
£'m £'m £'m £'m
UK B&M 807 98 807 96
UK Heron 88 14 88 14
France B&M 25 - 26 -
Not all items in the brand classification have an indefinite life as some are
time limited. The brand intangible assets that have been identified as having
an indefinite life are designated as such as management believe that these
assets will hold their value for an indefinite period of time. Specifically
the B&M and Heron brands represent leading brands in their sectors with
significant histories and growth prospects.
The B&M France goodwill is held in Euros, with an underlying balance of
€30m (2021: €30m).
In each case the goodwill and brand assets have been allocated to one group of
CGUs, being the store estate within the specific segment to which those assets
relate.
The Group performs impairment tests at each period end. The impairment test
involves assessing the net present value (NPV) of the expected cash flows in
relation to the stores within each CGU according to a number of assumptions to
calculate the value in use (VIU) for the group of CGUs.
The impairment test methodology has been refined in the year. The prior year
sensitivities and headroom have been restated to reflect the refined
methodology. The impact on the prior year headroom was B&M -£181m, Heron
+£12m, France +€32m, with all three entities headroom remaining
significant. The adjustment has therefore had no material impact. The refined
methodology had a small impact on the disclosed discount rates.
The key assumptions in assessing the value in use as at 26th March 2022 were;
The Group's discount rate
This was calculated using an internal CAPM model which includes external
estimates of the risk-free-rate, cost of debt, equity beta and market risk
premium. It is adjusted for which country the segment is in, how large the
segment is and includes an alpha rate estimate made by management.
The inflation rate for expenses
This is based upon the consumer price index for the relevant country, as well
as official reports from the appropriate central bank.
The like for like sales growth
This is an estimate made by management which encompasses the historical sales
trends of the entity and management's assessment of how each segment will
perform in the context of the current economic environment.
A terminal growth rate
An estimate made by management based upon the expected position of the
business at the end of the five year forecast period, in the context of the
macro growth level of the economic environment in which that segment operates.
The assumptions were as follows:
As at 26 March 27 March
2022 2021
Discount rate (B&M) 10.8% 12.1%
Discount rate (Heron) 13.7% 12.6%
Discount rate (B&M France) 12.9% 13.6%
Inflation rate for costs (B&M & Heron) 3.5% 1.2%
Inflation rate for costs (B&M France) 1.5% 0.0%
Like for like sales growth (B&M) 3.5% 2.0%
Like for like sales growth (Heron) 4.0% 2.0%
Like for like sales growth (B&M France) 4.5% 2.0%
Terminal growth rate (B&M) 0.5% 0.5%
Terminal growth rate (Heron) 1.2% 1.2%
Terminal growth rate (B&M France) 1.2% 0.0%
These assumptions are reflected for five years in the CGU forecasts and beyond
this a perpetuity calculation is performed using the assumptions made
regarding terminal growth rates.
The B&M Retail impairment model assumptions were moderated in year one of
the forecast due to the significant Covid impact on trade from January to
April 2021 within the base year, reducing both the like for like sales growth
and the costs that feed through to the final contribution figures.
In each case, the results of the impairment tests on the continuing operations
identified that the VIU was in excess of the carrying value of assets within
each group of CGUs at the period end dates. The headroom with the base case
assumptions in B&M was £4,833m, Heron £43m and B&M France €349m
(2021: £3,261m, £154m and €201m respectively).
Heron's result demonstrated a lower level of headroom when compared to the
other two segments, but the directors consider that the assumptions made are
reasonably prudent and that it is unlikely that a situation will arise where
an impairment would be required in that segment.
Such a situation would include like for like sales falling 50bps below
inflation for each year in the projection, or nil LFL's in year 1, both of
which would lead to an impairment of significantly under £10m. It should be
noted that the impairment test does not include the projected new store
openings in the segment which are accretive to the forecast results, nor the
impact of management actions to be taken. We further sensitised the
assumptions to the most recent board approved plan, making appropriate
adjustments to exclude new stores, which resulted in a projected headroom of
£33m.
No other indicators of impairment were noted in the segments and the
impairment tests were sensitised with reference to the key assumptions for
reasonable possible scenarios.
These scenarios specifically included;
· A drop off in sales or gross margin, modelling flat long term like for
like sales and terminal growth rates.
· Sales prices failing to keep pace with inflation such that the local
inflation rates increase 50bps without a corresponding increase in like for
like sales.
· A deterioration of the credit environment, leading to a significantly
increased cost of capital of 15%.
Further scenarios were also considered as part of our viability testing,
including the potential for further lockdowns, the loss of a warehouse due to
a fire and any impact on our supply chain with respect to international
relations.
None of the sensitised or viability scenarios indicated that an impairment
would result in any of our segments, except as noted above for Heron.
To further quantify the sensitivity, the below tables demonstrate the point at
which each impairment test would first fail for changes in each of the key
assumptions, when applied to all years, whilst assuming each other key
assumption is held level (e.g. for inflation sensitivity, the LFL was not
adjusted):
26 March 27 March
2022 2021
B&M
Discount rate 61.7% 60.0%
Inflation rate for expenses 14.1% 13.5%
Like for like sales (7.3)% (8.8)%
Terminal growth rate Not sensitive Not sensitive
B&M France
Discount rate 55.1% 49.5%
Inflation rate for expenses 6.9% 4.2%
Like for like sales (0.5)% (1.8)%
Terminal growth rate Not sensitive Not sensitive
Heron
Discount rate 17.1% 23.9%
Inflation rate for expenses 4.7% 4.9%
Like for like sales 3.0% (2.4)%
Terminal growth rate (5.0)% (30.2)%
13 Property, plant and equipment
Land and buildings Motor vehicles Plant, Total
fixtures and equipment
£'m £'m £'m £'m
Cost or valuation
At 28 March 2020 86 16 380 482
Additions 18 5 64 87
Disposals (4) (1) (6) (11)
Effect of retranslation - - (2) (2)
At 27 March 2021 100 20 436 556
Additions 18 2 76 96
Disposals (8) 3 (5) (10)
Effect of retranslation - (0) (1) (1)
At 26 March 2022 110 25 506 641
Accumulated depreciation and impairment charges
At 28 March 2020 19 6 146 171
Charge for the period 4 4 49 57
Disposals (0) (1) (6) (7)
Effect of retranslation - - (1) (1)
At 27 March 2021 23 9 188 220
Charge for the period 5 3 54 62
Disposals (0) 1 (4) (3)
Effect of retranslation - - (1) (1)
At 26 March 2022 28 13 237 278
Net book value at 26 March 2022 82 12 269 363
Net book value at 27 March 2021 77 11 248 336
Under the terms of the loan and notes facilities in place at 26 March 2022,
fixed and floating charges were held over £82m of the net book value of land
and buildings, £12m of the net book value of motor vehicles and £242m of the
net book value of the plant, fixtures and equipment. (2021: £77m, £11m,
£223m respectively).
At the period end <£1m of assets were under construction (2021: <£1m).
Included within land and buildings is land with a cost of £6m (2021: £6m)
which is not depreciated.
Capital commitments
There were £5m of contractual capital commitments not provided within the
Group financial statements as at 26 March 2022 (2021: £12m).
14 Right of use assets
Land and buildings Motor vehicles Plant, Total
fixtures and equipment
£'m £'m £'m £'m
Net book value
As at 28 March 2020 1,061 18 7 1,086
Additions 153 3 3 159
Modifications 7 0 - 7
Disposals (13) (0) (0) (13)
Impairment (5) - - (5)
Depreciation (146) (6) (4) (156)
Foreign exchange (7) (0) (0) (7)
As at 27 March 2021 1,050 15 6 1,071
Additions 160 0 2 162
Modifications 23 - - 23
Disposals (18) (1) (0) (19)
Impairment (2) - - (2)
Depreciation (154) (6) (3) (163)
Foreign exchange (6) - - (6)
As at 26 March 2022 1,053 8 5 1,066
The vast majority of the Group's leases are in relation to the property
comprising the store and warehouse network for the business. The other leases
recognised are trucks, trailers, company cars, manual handling equipment and
various fixtures and fittings. The leases are separately negotiated and no
subgroup is considered to be individually significant nor to contain
individually significant terms.
The Group recognises a lease term appropriate to the business expectation of
the term of use for the asset which usually assumes that all extension clauses
are taken, and break clauses are not, unless the business considers there is a
good reason to recognise otherwise.
At the period end there was one property with a significant unrecognised
extension clause for which the Group has full autonomy over exercising in
2040. On the date of recognition of the relevant right of use asset, in March
2020, the extension period liability had a net present value of £30m.
There are no material covenants imposed by our right-of-use leases.
In the year the Group expensed £2m (2021: £2m) in relation to low value
leases and <£1m (2021: <£1m) in relation to short term leases for
which the Group applied the practical expedient under IFRS 16.
The Group has expensed <£1m (2021: <£1m) in relation to variable lease
payments. The agreements are on-going and future payments are expected to be
in-line with those expensed recently.
The Group received £2m (2021: £3m) in relation to subletting right-of-use
assets.
The impairments noted in the table above are recorded when the carrying value
of a right of use asset exceeds the value in use of that asset. These arise
when we exit a store before the related lease has come to an end, or as the
outcome of our annual store impairment review. All impairments are in relation
to store leases. No impairments have been reversed in the presented periods.
The segmental splits of the impairments were B&M <£1m, Heron £1m,
B&M France <£1m (2021: B&M £4m, Heron £1m, B&M France
<£1m).
The current and future cashflows for the right-of-use assets are:
26 March 27 March
2022 2021
£'m £'m
This year 218 202
Within 1 year 219 213
Between 1 and 2 years 210 205
Between 2 and 3 years 194 190
Between 3 and 4 years 177 174
Between 4 and 5 years 160 156
Between 5 and 10 years 478 514
More than 10 years 167 159
Total 1,605 1,611
The change in lease liability reconciles to the figures presented in the
consolidated statement of cashflows as follows:
26 March 27 March
2022 2021
£'m £'m
Lease liabilities brought forward 1,302 1,295
Cash
Repayment of the principal in relation to right of use assets (159) (141)
Payment of interest in relation to right of use assets (59) (61)
Non-cash
Interest charge 59 61
Effects on lease liability relating to lease additions, modifications and 172 156
disposals
Effects of foreign exchange (5) (8)
Total cash movement in the year (218) (202)
Total non-cash movement in the year 226 209
Movement in the year 8 7
Lease liabilities carried forward 1,310 1,302
Of which current 170 163
Of which non-current 1,140 1,139
Discount rates
Where, as in most cases, a discount rate implicit to the lease is not
available, discount rates are calculated for each lease with reference to the
underlying cost of borrowing available to the business and several other
factors specific to the asset.
The selection of discount rates is therefore a management judgement, see note
1. As this is a significant management judgement we have calculated the
weighted average discount rates and sensitivity to a 50bps change in the
discount rate to the interest charge as follows:
26 March 27 March
2022 2021
Weighted average discount rate
Property 4.5% 4.7%
Equipment 3.2% 3.3%
All right of use assets 4.5% 4.7%
Effect on finance costs with a change of 50bps to the discount rate £'m £'m
Property 7 6
Equipment 0 0
All right of use assets 7 7
Sale and Leaseback
During the year the business has undertaken two sale and leasebacks (2021:
one).
The details of the transactions were as follows:
26 March 27 March
2022 2021
£'m £'m
Consideration received 14 6
Net book value of the assets disposed (7) (3)
Costs of sale when specifically recognised - -
Profit per pre-IFRS 16 accounting standards 7 3
Opening adjustment to the right of use asset (6) (3)
Profit/(loss) recognised in the statement of comprehensive income 1 (0)
Initial right of use asset recognised 6 3
Initial lease liability recognised (11) (6)
The pre-IFRS 16 profit is higher because the provisions of IFRS 16 require
that a portion of the profit relating to the sale and leaseback is instead
recognised as a reduction in the opening right of use asset, and therefore the
benefit is released over the term of the contract.
15 Inventories
As at 26 March 27 March
2022 2021
£'m £'m
Goods for resale 863 605
Included in the amount above was a net release of £14m related to inventory
provisions (2021: £4m net charge). In the period to 26 March 2022 £2,921m
(2021: £3,031m) was recognised as an expense for inventories. In the year
£21m of supplier rebates were received (2021: £22m).
16 Trade and other receivables
26 March 27 March
2022 2021
£'m £'m
Non-current
Other receivables 7 7
7 7
Current
Trade receivables 6 4
Deposits on account 13 2
Provision for impairment (2) (0)
Net trade receivables to non-related parties 17 6
Prepayments 20 14
Related party receivables 3 8
Other tax 3 8
Other receivables 10 6
53 42
Trade receivables are stated initially at their fair value and then at
amortised cost as reduced by appropriate allowances for estimated
irrecoverable amounts. The carrying amount is determined by the directors to
be a reasonable approximation of fair value.
There are no individually non-related significant balances held at the current
period end. See note 26 in respect of balances held with related parties.
The following table sets out an analysis of provisions for impairment of trade
and other receivables:
Period ended 26 March 27 March
2022 2021
£'m £'m
Provision for impairment at the start of the period (0.4) (0.2)
Impairment during the period (1.6) (0.2)
Utilised/released during the period 0.3 0.0
Effect of foreign exchange 0.0 0.0
Balance at the period end (1.7) (0.4)
Trade receivables are non-interest bearing and are generally on terms of 30
days or less.
The following table sets out a maturity analysis of trade receivables,
including those which are past due but not impaired:
As at 26 March 27 March
2022 2021
£'m £'m
Neither past due nor impaired 2 2
Past due less than one month 1 0
Past due between one and three months 2 1
Past due for longer than three months 1 1
Balance at the period end 6 4
17 Cash and cash equivalents
As at 26 March 27 March
2022 2021
£'m £'m
Cash at bank and in hand 173 218
Overdrafts - -
Cash and cash equivalents 173 218
As at the period end the Group had available £142m of undrawn committed
borrowing facilities (2021: £142m).
18 Trade and other payables
As at 26 March 27 March
2022 2021
£'m £'m
Current
Trade payables 388 343
Other tax and social security payments 62 66
Accruals and deferred income 75 100
Related party trade payables 27 9
Other payables 12 6
564 524
Trade payables are generally on 30 day terms and are not interest bearing. The
carrying value of trade payables approximates to their fair value. For further
details on the related party trade payables, see note 26.
During the period the Group implemented a supply chain financing facility. The
facility is operated by a major banking partner with high credit ratings and
is limited to $50m total exposure at any one time.
The exposure at the period end was $21m relating to one supplier, the average
balance since inception has been $19m.
The purpose of the arrangement is to enable our participating suppliers, at
their discretion, to draw down against their receivables from the Group prior
to their usual due date.
From the Group's perspective, the invoices subject to the scheme are treated
in the same way as those not subject to the scheme. That is that they are
approved under our usual processes (and cannot be drawn down against until
they have been approved) and paid on the usual due date, which is in line with
the payment terms of our other international suppliers. We do not benefit from
the margin charged by the bank for any early draw down, and the bank does not
benefit from additional security when compared to the security originally
enjoyed by the supplier. There is no impact on potential liquidity risk as the
cash flow timings and amounts are unchanged for those invoices in the scheme
against those not in the scheme.
There would be no impact on the Group if the facility became unavailable and
there are no fees or charges payable by the Group in regards to this
arrangement.
As these invoices continue to be part of the normal operating cycle of the
Group, the scheme does not change the recognition of the invoices subject to
the scheme, so they continue to be recognised as trade payables, with the
associated cash flows presented within operating cash flows and without
affecting the calculation of Group net debt.
19 Other financial assets and liabilities
Other financial assets
As at 26 March 27 March
2022 2021
£'m £'m
Current financial assets at fair value through profit and loss:
Foreign exchange forward contracts 9 3
Current financial assets at fair value through other comprehensive income:
Foreign exchange forward contracts 16 1
Total current other financial assets 25 4
Total other financial assets 25 4
Financial assets through profit or loss reflect the fair value of those
derivatives that are not designated as hedge relationships but are
nevertheless intended to reduce the level of risk for expected sales and
purchases.
Other financial liabilities
As at 26 March 27 March
2022 2021
£'m £'m
Current financial liabilities at fair value through profit and loss:
Foreign exchange forward contracts 0 6
Current financial liabilities at fair value through other comprehensive
income:
Foreign exchange forward contracts - 10
Total current other financial liabilities 0 16
Total other financial liabilities 0 16
The other financial liabilities through profit or loss reflect the fair value
of those foreign exchange forward contracts that are not designated as hedge
relationships but are nevertheless intended to reduce the level of risk for
expected sales and purchases.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
· Level 1: quoted (unadjusted) prices in active markets for identical
assets or liabilities.
· Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly
or indirectly.
· Level 3: techniques which use inputs that have a significant effect on
the recorded fair value that are not based on observable market data.
As at the reporting dates, the Group held the following financial instruments
carried at fair value on the balance sheet:
Total Level 1 Level 2 Level 3
£'m £'m £'m £'m
26 March 2022
Foreign exchange contracts 25 - 25 -
27 March 2021
Foreign exchange contracts (12) - (12) -
The financial instruments have been valued by the issuing bank, using a mark
to market method. The bank has used various inputs to compute the valuations
and these include inter alia the relevant maturity date and strike rates, the
current exchange rate, fuel prices and relevant interbank floating interest
rate levels.
20 Financial liabilities - borrowings
As at 26 March 27 March
2022 2021
£'m £'m
Current
B&M France loan facilities 3 3
Heron loan facilities 3 4
6 7
Non-current
High yield bond notes 646 397
Term facility bank loan 297 296
B&M France government backed facilities - 22
Other B&M France loan facilities 7 5
Heron loan facilities - 3
950 723
The carrying values given above include fees incurred on the refinancing which
are to be amortised over the terms of those facilities. More details of these
are given below.
Bond issue
On 24 November 2021 the Group issued £250m of high yield bond notes. The
maturity date of these notes is November 2028 and they have an interest rate
of 4.00%. £56m of the bonds were purchased by a related party, see note 26
for further details.
Fees incurred totalled £3m and these were capitalised. The carrying value of
these bonds includes these fees which are amortised over the term of the
bonds.
Prior year refinancing
In the prior year, on 13 July 2020, the Group refinanced their main facilities
by repaying the previously existing £250m high yield bond notes, the £300m
term loan and the €92m acquisition facility, and drawing down a new main
facility of £300m and issuing £400m of high yield bonds. The maturity dates
on the facilities are April 2025 and July 2025 respectively.
The previously held £150m revolving loan facility was also replaced by a
£155m revolving loan facility which was not drawn on the date of the
refinancing.
£100m of the high yield bonds issued were purchased by a related party. See
note 26 for further details.
The following fees were expensed through other finance costs in relation to
the loans and bonds which were repaid.
£'m
Remaining unamortised fees associated with the repaid term loan 1
Remaining unamortised fees associated with the repaid acquisition loan 0
Remaining unamortised fees associated with the repaid high yield bonds 1
Early repayment charge associated with the corporate bonds 3
Breakage fees 0
Total fees expensed through other finance costs 5
The following fees were incurred on refinancing and have been capitalised
within the debt balance, to be amortised over the term of the debt to which it
relates.
£'m
Capitalised fees relating to the term loan facility 4
Capitalised fees relating to the high yield bonds 4
Total fees capitalised within the debt balances 8
The figure on the cashflow of £10.8m includes the above £8.1m capitalised
fees, £2.6m early repayment/breakage charges and £0.1m of fees associated
with an earlier extension of the acquisition facility.
French government backed loan
In the prior year, in April 2020, the French government mandated that our
B&M France stores were required to close as part of their response to the
Covid-19 pandemic. As a mitigation they introduced government backed loans to
assist the company's affected by this measure. As a precaution and due to the
uncertainty over the progression of the virus and the impact on trade, the
Group's French entity took a €51m loan under this scheme.
The loan had an initial maturity of 1 year, which was interest free but
attracted a guarantor's fee of 0.5%.
The loan was refinanced in February 2021 such that €25.5m was repaid with
the remainder retained in order to cover continuing uncertainty over further
measures in relation to the pandemic. The extension period was until April
2022, attracted a guarantor's fee of 1.0% and an additional average interest
rate margin of 0.2%. The loan was fully repaid in November 2021.
The loan was only for use in the French business, in respect to their working
capital cash flows, and as such the cash balance remains in that entity and
did not impact the Group refinancing or bond decisions taken in the presented
periods.
Other loans
The B&M France and Heron loan facilities are carried at their gross cash
amount. The B&M France loan facilities are held with various
counterparties and at various margins and maturities, further details are
included in the maturity table below.
The maturities of the loan facilities are as follows:
Interest rate Maturity 26 March 27 March
2022 2021
% £'m £'m
Revolving facility loan 1.75% + SONIA N/A - -
Term facility bank loan A 2.00% + SONIA Apr-25 300 300
High yield bond notes (2020) 3.625% Jul-25 400 400
High yield bond notes (2021) 4.00% Nov-28 250 -
Heron loan facilities - Melton 3.58% Jul-22 3 3
Heron loan facilities - Term 2.50% N/A - 3
B&M France - Government Guaranteed 1.10-1.34% N/A - 22
B&M France - BNP Paribas 0.75-0.76% Jul 23-Sep 24 1 1
B&M France - Caisse d'Épargne 0.75-1.51% Aug 22-Oct 24 1 2
B&M France - CIC 0.71-1.20% Nov 22-Jan 27 3 2
B&M France - Crédit Agricole 0.39-0.81% Aug 23-Jan 28 1 2
B&M France - Crédit Lyonnais 0.68-0.74% Nov 24-Mar 27 4 1
B&M France - Société Générale 0.63% Jun-23 0 1
963 737
The acquisition facility, term loans A and the high yield bond notes have
carrying values which include transaction fees allocated on inception.
The acquisition facility and all B&M France facilities have gross values
in euros, and the values above have been translated at the period end rates of
€1.2009/£ (2021: €1.1691/£).
The movement in the loan liabilities during the year breaks down as follows:
As at 26 March 27 March
2022 2021
£'m £'m
Borrowings brought forward 730 772
Cash
Repayment of revolving loan facilities - (120)
Repayment of term facility - (300)
Repayment of corporate bonds - (250)
Draw down of new term facility - 300
Issue of new corporate bonds 250 400
Repayment of acquisition facility - (82)
Repayment of Heron loan facilities (4) (5)
(Repayment)/receipt of B&M France loan guaranteed by the French government (22) 23
Receipt/(repayment) of other B&M France loan facilities 1 (1)
Capitalised fees on refinancing (3) (11)
Non-cash
Foreign exchange on loan balances 2 (3)
Refinancing fees directly expensed - 3
Ongoing amortisation of fees capitalised on refinancing 2 2
One-off fee amortisation on refinancing - 2
Total cash movement in the year 222 (46)
Total non-cash movement in the year 4 4
Movement in the year 226 (42)
Borrowings carried forward 956 730
Of which current 6 7
Of which non-current 950 723
21 Provisions
Property provisions Other Total
£'m
£'m
£'m
At 28 March 2020 2 5 7
Provided in the period 8 4 12
Utilised during the period (1) (3) (4)
Released during the period (0) (2) (2)
At 27 March 2021 9 4 13
Provided in the period 5 2 7
Utilised during the period (1) (2) (3)
Released during the period (2) (0) (2)
At 26 March 2022 11 4 15
Current liabilities 2022 7 4 11
Non-current liabilities 2022 4 - 4
Current liabilities 2021 4 4 8
Non-current liabilities 2021 5 - 5
The property provision relates to the expected future costs on specific
leasehold properties. This is inclusive of onerous leases and dilapidations on
these properties. The timing in relation to utilisation is dependent upon the
individual lease terms.
The other provisions principally relate to disputes concerning insured
liability claims. A prudent amount has been set aside for each claim as per
legal advice received by the Group. These claims are individually
non-significant and average £9k per claim (£11k in 2021).
22 Share capital
Allotted, called up and fully paid Shares £'m
B&M European Value Retail S.A. ordinary shares of 10p each
As at 28 March 2020 1,000,582,898 100
Release of shares related to employee share options 236,790 0
As at 27 March 2021 1,000,819,688 100
Release of shares related to employee share options 407,148 0
As at 26 March 2022 1,001,226,836 100
Ordinary shares
Each ordinary share ranks pari passu with each other ordinary share and each
share carries one vote. The Group parent is authorised to issue up to an
additional 2,970,995,386 ordinary shares.
23 Cash generated from operations
Period ended 52 weeks ended 52 weeks ended
26 March 27 March
2022 2021
£'m £'m
Profit before tax 525 525
Adjustments for:
Net interest expense 88 90
Depreciation on property, plant and equipment 62 57
Depreciation on right of use assets 163 156
Impairment of right of use assets 2 5
Amortisation of intangible assets 2 3
(Gain)/loss on sale and leaseback (1) 0
Loss on disposal of property, plant and equipment 1 1
Loss on share options 2 2
Change in inventories (260) (20)
Change in trade and other receivables (12) 9
Change in trade and other payables 40 105
Change in provisions 2 6
Share of profit from associates (3) (2)
(Profit)/loss resulting from fair value of financial derivatives (13) 7
Cash generated from operations 598 944
24 Group information and ultimate parent undertaking
The financial results of the Group include the following entities.
Company name Country Date of incorporation Percent held within the Group Principal activity
B&M European Value Retail S.A. Luxembourg May 2014 Parent Holding company
B&M European Value Retail 1 S.à r.l. Luxembourg November 2012 100% Holding company
B&M European Value Retail Holdco 1 Ltd UK December 2012 100% Holding company
B&M European Value Retail Holdco 2 Ltd UK December 2012 100% Holding company
B&M European Value Retail Holdco 3 Ltd UK November 2012 100% Holding company
B&M European Value Retail Holdco 4 Ltd UK November 2012 100% Holding company
B&M European Value Retail 2 S.à r.l. Luxembourg September 2012 100% Holding company
EV Retail Limited UK September 1996 100% Holding company
B&M Retail Limited UK March 1978 100% General retail
Opus Homewares Limited UK April 2003 100% Dormant
Retail Industry Apprenticeships Ltd UK June 2017 100% Employment services
Heron Food Group Ltd UK August 2002 100% Holding company
Heron Foods Ltd UK October 1978 100% Convenience retail
Cooltrader Ltd UK September 2012 100% Dormant
Heron Properties (Hull) Ltd UK February 2003 100% Dormant
B&M European Value Retail Germany GmbH Germany November 2013 100% Ex-holding company
B&M France SAS France November 1977 100% General retail
Centz N.I. Limited UK January 2021 100% Property management
Registered Offices
· The Luxembourg entities are all registered at 68-70 boulevard de la
Pétrusse, L-2320 Luxembourg.
· The UK entities are all registered at The Vault, Dakota Drive, Estuary
Commerce Park, Speke, Liverpool, L24 8RJ.
· B&M European Value Retail Germany GmbH is registered at Am
Hornberg 6, 29614, Soltau.
· B&M France are registered at 8 rue du Bois Joli, 63800 Cournon
d'Auvergne.
SAS Babou were renamed as B&M France SAS during the year, BRP SAS were
also merged into this entity.
Associates
The Group has a 50% interest in Multi-lines International Company Limited, a
company incorporated in Hong Kong, and a 22.5% interest in Centz Retail
Holdings Limited, a company incorporated in the Republic of Ireland. The share
of profit/loss from the associates is included in the statement of
comprehensive income, see note 11.
The Group previously held a 20% interest in Home Focus Group Limited, a
company incorporated in the Republic of Ireland. This interest was disposed of
in full in December 2020 for €350k.
Ultimate parent undertaking
The directors of the Group consider the parent and the ultimate controlling
related party of this Group to be B&M European Value Retail SA, registered
in Luxembourg.
25 Financial risk management
The Group uses various financial instruments, including bank loans, related
party loans, finance company loans, cash, equity investment, derivatives and
various items, such as trade receivables and trade payables that arise
directly from its operations.
The main risks arising from the Group's financial instruments are market risk,
currency risk, cash flow interest rate risk, credit risk and liquidity risk.
The directors review and agree policies for managing each of these risks and
they are summarised below.
The existence of these financial instruments exposes the Group to a number of
financial risks, which are described in more detail below. In order to
manage the Group's exposure to those risks, in particular the Group's exposure
to currency risk, the Group enters into forward foreign currency contracts. No
transactions in derivatives are undertaken of a speculative nature.
Market risk
Market risk encompasses three types of risk, being currency risk, fair value
interest rate risk and commodity price risk. Commodity price risk is not
considered material to the business as the Group is able to pass on pricing
changes to its customers.
Despite the impact of price risk not being considered material, the Group has
previously engaged in swap contracts over the cost of fuel in order to
minimise the impact of any volatility. None of these contracts were
outstanding at either period end date.
The Group's policies for managing fair value interest rate risk are considered
along with those for managing cash flow interest rate risk and are set out in
the subsection entitled 'interest rate risk' below.
Currency risk
The Group is exposed to translation and transaction foreign exchange risk
arising from exchange rate fluctuation on its purchases from overseas
suppliers.
In relation to translation risk, this is not considered material to the
business as amounts owed in foreign currency are short term of up to 30 days
and are of a relatively modest nature. Transaction exposures, including those
associated with forecast transactions, are hedged when known, principally
using forward currency contracts.
All of the Group's sales are to customers in the UK and France and there is no
currency exposure in this respect. A proportion of the Group's purchases are
priced in US Dollars and the Group generally uses forward currency contracts
to minimise the risk associated with that exposure.
Approach to hedge accounting
As part of the Group's response to currency risk the currency forwards taken
out are intended to prudently cover the majority of our stock purchases
forecast for that period. However, the Group only hedge accounts for that part
of the forward contract that we are reasonably certain will be spent in the
forecast period, allowing for potential volatility. Therefore, management
always consider the likely volatility for a period and assign a percentage to
each tranche of forwards purchased, usually in the range 50-80%, and never
more than 80%.
Effectiveness of the hedged forward is then assessed against the Group hedge
ratio, which has been set by management at 80% as a reasonable guide to the
certainty level we expect the hedged portions of our forwards to at least
achieve. If they fail, or are expected to fail, to meet this ratio of
effectiveness then they are treated as non-hedged items, and immediately
expensed through Profit and Loss.
Ineffectiveness can be caused by exceptional volatility in the market, by the
timing of product availability, or the desire to manage short term company
cash flows, for instance, when a large amount of cash is required at
relatively short notice.
If the Group did not hedge account then the difference is that the gain or
loss in other comprehensive income would be presented in profit or loss and
the assets and liabilities presented under the classification fair value
through other comprehensive income would be at fair value through profit or
loss.
The difference to profit before tax if none of our forwards had been hedge
accounted during the year would have been a gain of £30m (2021: £22m loss)
and a pre-tax loss in other comprehensive income of £27m (2021: £20m gain).
The net effective hedging loss transferred to the cost of inventories in the
year was £5m (2021: net loss of £5m). At the period end the amount of
outstanding US Dollar contracts covered by hedge accounting was $487m (2021:
$474m). The change in fair value of the hedging instruments used as the basis
for recognising hedge ineffectiveness was £nil (2021: £nil).
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible
change in US Dollar period end exchange rates with all other variables held
constant. The impact on the Group's profit before tax and other comprehensive
income (net of tax) is largely due to changes in the fair value of our foreign
exchange derivatives and revaluation of creditors and deposits held on account
with our US Dollar suppliers.
As at Change in USD rate 26 March 27 March
2022 2021
£'m £'m
Effect on profit before tax +2.5% (4) (5)
-2.5% 5 6
Effect on other comprehensive income +2.5% (9) (8)
-2.5% 10 9
Profit before tax and other comprehensive income are not sensitive to the
effects of a reasonably possible change in the Euro period end exchange rates.
These calculations have been performed by taking the period end translation
rate used on the accounts and applying the change noted above. The balance
sheet valuations are then directly calculated. The valuation of the foreign
exchange derivatives are projected based upon the spot rate changing and all
other variables being held equal.
Interest rate risk
Interest rate risk is the risk of variability of the Group cash flows due to
changes in the interest rate. The Group is exposed to changes in interest
rates as the Group's bank borrowings are subject to a floating rate based on
LIBOR until December 2021 and SONIA since that date.
The Group's interest rate risk arises mainly from long-term borrowings.
Borrowings issued at variable rates expose the Group to cash flow interest
rate risk. The Group's exposure to interest rate fluctuations is not
considered to be material, however the Group has in the past used interest
rate swaps to minimise the impact.
If floating interest rates had been 50 basis points higher/lower throughout
the year with all other variables held constant, the effect upon calculated
pre-tax profit for the year would have been:
As at Basis point increase / decrease 26 March 27 March
2022 2021
£'m £'m
Effect on profit before tax +50 (1) (1)
-50 1 1
This sensitivity has been calculated by changing the interest rate for each
interest payment and accrual made by the Group over the period, by the amount
specified in the table above, and then calculating the difference that would
have been required.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a financial
loss. The Group's principal financial assets are cash, derivatives and trade
receivables. The credit risks associated with cash and derivatives are
limited as the main counterparties are banks with high credit ratings (A long
term and A-1 short term (Standard & Poor) or better, (2021: A, A-1 (or
better) respectively). The principal credit risk arises therefore from the
Group's trade receivables.
Credit risk is further limited by the fact that the vast majority of sales
transactions are made through the store registers, direct from the customer at
the point of purchase, leading to a low trade receivables balance.
In order to manage credit risk, the directors set limits for customers based
on a combination of payment history and third party credit references. Credit
limits are reviewed by the credit controller on a regular basis in conjunction
with debt ageing and collection history. Provisions against bad debts are
made where appropriate.
Liquidity risk
Any impact on available cash and therefore the liquidity of the Group could
have a material effect on the business as a result.
The Group's borrowings are subject to quarterly banking covenants against
which the Group has had significant headroom to date with no anticipated
issues based upon forecasts made. Short term flexibility is achieved via the
Group's rolling credit facility. The following table shows the liquidity risk
maturity of financial liabilities grouping based on their remaining period at
the balance sheet date. The amounts disclosed are the contractual undiscounted
cash flows:
Within 1 year Between 1 and 2 years Between 2 and 5 years More than 5 years Total
£'m £'m £'m £'m £'m
26 March 2022
Interest bearing loans 48 44 794 290 1,176
Lease liabilities 219 210 531 645 1,605
Trade payables 415 - - - 415
27 March 2021
Interest bearing loans 28 48 754 0 830
Lease liabilities 213 205 520 673 1,611
Trade payables 352 - - - 352
Fair value
The fair value of the financial assets and liabilities of the group are not
materially different from their carrying value. Refer to the table below.
These all represent financial assets and liabilities measured at amortised
cost except where stated as measured at fair value through the profit and loss
or fair value through other comprehensive income.
As at 26 March 27 March
2022 2021
Financial assets £'m £'m
Fair value through profit and loss
Forward foreign exchange contracts 9 3
Fair value through other comprehensive income
Forward foreign exchange contracts 16 1
Loans and receivables
Cash and cash equivalents 173 218
Trade receivables 20 14
Other receivables 10 6
As at 26 March 27 March
2022 2021
Financial liabilities £'m £'m
Fair value through profit and loss
Forward foreign exchange contracts 0 6
Fair value through other comprehensive income
Forward foreign exchange contracts - 10
Amortised cost
Overdraft - -
Lease liabilities 1,310 1,302
Interest-bearing loans and borrowings 956 730
Trade payables 415 352
Other payables 12 6
26 Related party transactions
The Group has transacted with the following related parties over the periods:
Multi-lines International Company Limited, a supplier, and Home Focus Group
and Centz Retail Holdings, both customers, are or were associates of the
Group.
Ropley Properties Ltd, Triple Jersey Ltd, TJL UK Ltd, Rani Investments,
Fulland Investments Limited, Golden Honest International Investments Limited,
Hammond Investments Limited, Joint Sino Investments Limited, Ocean Sense
Investments Limited and Multi Lines International (Properties) Ltd, all
landlords of properties occupied by the Group, and Rani 1 Holdings Limited,
Rani 2 Holdings Limited and SSA Investments, bondholders and beneficial owners
of equipment hired to the Group, are directly or indirectly owned by director
Simon Arora, his family, or his family trusts (together, the Arora related
parties).
There was a significant related party transaction in the period as SSA
Investments participated in the Corporate Bonds issued by the Group in
November 2021 by purchasing £56m of the 4.00% bonds with an eight year
maturity. In the prior year they also participated in the Corporate Bonds
issued by the Group in July 2020 by purchasing £100m of these 3.625% bonds
with a five year maturity. In December 2020 and February 2021, the 3.625%
bonds were transferred to Rani 2 Holdings Limited (£50m) and Rani 1 Holdings
Limited (£50m), also related parties, respectively.
£4m of interest expense was incurred on these bonds during the year with £2m
accrued at the period end (2021: £3m, £1m respectively). Further details on
these bonds are given in note 20.
The following table sets out the total amount of trading transactions with
related parties included in the statement of comprehensive income, including
the P&L impact of any leases:
Period ended 26 March 27 March
2022 2021
£'m
£'m
Sales to associates of the Group
Centz Retail Holdings Limited 44 45
Home Focus Group Limited - 1
Total sales to related parties 44 46
Period ended 26 March 27 March
2022 2021
£'m
£'m
Purchases from associates of the Group
Multi-lines International Company Ltd 279.4 230.4
Purchases from parties related to key management personnel
Fulland Investments Limited 0.2 0.1
Golden Honest International Investments Limited 0.2 0.0
Hammond Investments Limited 0.2 0.1
Joint Sino Investments Limited 0.2 0.1
Ocean Sense Investments Limited 0.2 0.1
SSA Investments 0.0 0.2
Total purchases from related parties 280.4 231.0
The IFRS 16 Lease figures in relation to these related parties, which are all
related to key management personnel, are as follows:
Depreciation Interest Total charge Right of use Lease liability Net
charge charge asset Liability
£'m £'m £'m £'m £'m £'m
Period ended 26 March 2022
Rani Investments 0 0 0 1 (1) (0)
Ropley Properties 1 1 2 8 (11) (3)
TJL UK Limited 1 1 2 11 (13) (2)
Triple Jersey Limited 9 3 12 54 (67) (13)
11 5 16 74 (92) (18)
Depreciation Interest Total charge Right of use Lease liability Net
charge charge asset liability
£'m £'m £'m £'m £'m £'m
Period ended 27 March 2021
Rani Investments 0 0 0 1 (1) (0)
Ropley Properties 2 1 3 9 (13) (4)
TJL UK Limited 1 0 1 12 (14) (2)
Triple Jersey Limited 9 4 13 64 (78) (14)
12 5 17 86 (106) (20)
Included in the current year figures above is one new lease entered into by
Group companies during the current period with the Arora related parties
(2021: two new). The total expense on this lease in the period was <£1m
(2021: <£1m). There were no conditionally exchanged leases with Arora
related parties in the current period with a long stop completion date (2021:
none).
The following table sets out the total amount of trading balances with related
parties outstanding at the period end.
As at 26 March 27 March
2022 2021
£'m £'m
Trade receivables from associates of the Group
Centz Retail Holdings Ltd 3 8
Total related party trade receivables 3 8
As at 26 March 27 March
2022 2021
£'m £'m
Trade payables to associates of the Group
Multi-lines International Company Ltd 25 8
Trade payables to companies owned by key management personnel
Ropley Properties Ltd 0 0
Triple Jersey Ltd 2 1
Total related party trade payables 27 9
Outstanding trade balances at the balance sheet dates are unsecured and
interest free and settlement occurs in cash. There have been no guarantees
provided or received for any related party trade receivables or payables.
The balance with Multi-lines International Company Ltd includes $21m (2021:
$nil) held within a supply chain facility. See note 18 for more details.
The business has not recorded any impairment of trade receivables relating to
amounts owed by related parties at 26 March 2022 (2021: no impairment). This
assessment is undertaken each year through examining the financial position of
the related party and the market in which the related party operates.
The future lease commitments on the Arora related party properties are:
As at 26 March 27 March
2022 2021
£'m £'m
Not later than one year 15 16
Later than one year and not later than two years 14 16
Later than two years and not later than five years 36 40
Later than five years 47 59
112 131
See note 11 for further information on the Group's associates.
For further details on the transactions with key management personnel, see
note 7 and the remuneration report.
27 Capital management
For the purpose of the Group's capital management, capital includes issued
capital and all other equity reserves attributable to the equity holders of
the parent. The primary objective of the Group's capital management is to
maximise the shareholder value.
In order to achieve this overall objective, the Group's capital management,
amongst other things, aims to ensure that it meets financial covenants
attached to the interest-bearing loans and borrowings that define capital
structure requirements. Breaches in meeting the financial covenants would
permit the bank to immediately call loans and borrowings. There have been no
breaches in the financial covenants of any interest-bearing loans and
borrowing in the current or prior period.
The Group manages its capital structure and makes adjustments in light of
changes in economic conditions and the requirements of the financial
covenants.
To maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares.
The Group uses the following definition of net debt:
External interest bearing loans and borrowings less cash and short-term
deposits.
The interest bearing loans figure used is the gross amount of cash borrowed at
that time, as opposed to the carrying value under the amortised cost method.
As at 26 March 27 March
2022 2021
£'m £'m
Interest bearing loans and borrowings (note 20) 963 737
Less: Cash and short term deposits - overdrafts (note 17) (173) (218)
Net debt 790 519
28 Post balance sheet events
There have been no material events between the balance sheet date and the date
of issue of these accounts.
29 Dividends
A Special dividend of 25.0 pence per share (£250.3m), was declared in
December 2021 and has been paid.
An interim dividend of 5.0 pence per share (£50.1m) was declared in November
2021 and has been paid.
A final dividend of 11.5 pence per share (£115.1m), giving a full year
dividend of 16.5 pence per share (£165.2m), is proposed.
Relating to the prior year;
Special dividends of 20.0 pence per share (£200.1m), 25.0 pence per share
(£250.2m) and 15.0 pence per share (£150.1m) were declared in January 2021,
November 2020 and March 2020 respectively. All were paid in the prior year.
An interim dividend of 4.3 pence per share (£43.0m) was declared in November
2020 and has been paid in the prior year.
A final dividend of 13.0 pence per share (£130.1m), giving a full year
dividend of 17.3 pence per share (£173.1m) was declared in July 2021 and has
been paid in the current year.
30 Contingent liabilities and guarantees
As at 27 March 2021 and 26 March 2022, B&M European Value Retail S.A.,
B&M European Value Retail 1 S.à r.l., B&M European Value Retail 2
S.à r.l., B&M European Value Retail Holdco 1 Ltd, B&M European Value
Retail Holdco 2 Ltd, B&M European Value Retail Holdco 3 Ltd, B&M
European Value Retail Holdco 4 Ltd, EV Retail Ltd and B&M Retail Ltd are
all guarantors to both the loan and notes agreements which are formally held
within B&M European Value Retail SA. The amounts outstanding as at the
period end were £300m for the loans (2021: £300m), with the balance held in
B&M European Value Retail Holdco 4 Ltd, and £650m (2021: £400m) for the
notes, with the balance held in B&M European Value Retail S.A.
As at 27 March 2021 and 26 March 2022, Heron Food Group Limited and Heron
Foods Ltd are guarantors to the loans which are formally held within Heron
Foods Ltd. The amount outstanding at the year-end was £3m (2021: £6m) with
the balance held in Heron Foods Ltd.
31 Directors
The directors that served during the period were:
Peter Bamford (Chairman)
Simon Arora (CEO)
Alex Russo (CFO)
Ron McMillan
Tiffany Hall
Carolyn Bradley
Paula MacKenzie (Appointed 9 November 2021)
Gilles Petit (Resigned 29 July 2021)
On 22 April 2022, Simon Arora announced his intention to retire from his
position as CEO in twelve months' time.
All directors served for the whole period except where indicated above.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Group
and Company financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group and Company financial
statements for each financial year. Under that law they are required to
prepare the Group financial statements in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the EU and applicable
law and have prepared the Company financial statements in accordance with
Luxembourg legal and regulatory requirements regarding the preparation of
annual accounts ("Lux GAAP"). In addition the Group financial statements are
required under the UK Disclosure Guidance and Transparency Rules to be
prepared in accordance with International Financial Reporting Standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union ("IFRSs as adopted by the EU").
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of their profit or loss for that period.
In preparing each of the Group and Company financial statements, the Directors
are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and estimates that are reasonable and prudent;
· present the financial statements and policies in a manner that
provides relevant, reliable, comparable and understandable information;
· state whether they have been prepared in accordance with IFRSs as
adopted by the EU;
· assess the Group and parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either intend to
liquidate the Group or the parent Company or to cease operation, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with
company law. They are responsible for such internal control as they determine
is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website. The
financial statements are published on the Company's website.
Legislation in Luxembourg governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
· the consolidated financial statements of B&M European Value Retail
S.A. ("Company") presented in this Annual Report and established in conformity
with International Financial Reporting Standards as adopted in the European
Union give a true and fair view of the assets, liabilities, financial
position, cash flows and profits of the Company and the undertakings included
within the consolidation taken as a whole;
· the annual accounts of the Company presented in this Annual Report and
established in conformity with the Luxembourg legal and regulatory
requirements relating to the preparation of annual accounts give a true and
fair view of the assets, liabilities, financial position and profits of the
Company;
· the Strategic Report includes a fair review of the development and
performance of the business and position of the Company and the undertakings
included within the consolidation taken as a whole, together with a
description of the principal risks and uncertainties it faces.
We consider this Annual Report (including the financial statements), taken as
a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position, performance,
business model and strategy.
Approved by order of the Board.
Simon Arora
Chief Executive Officer
Alex Russo
Chief Financial Officer
30 May 2022
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