REG - B&M European - FY23 Preliminary Results
31/05/2023 07:00
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RNS Number : 0902B B&M European Value Retail S.A. 31 May 2023
31 May 2023
B&M European Value Retail S.A.
FY23 Preliminary Results Announcement
Strong growth and disciplined delivery in FY23, excellent profitable momentum
into FY24
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 25 March 2023 ("FY23").
HIGHLIGHTS
· Group revenues of £4,983m were 30.7% ahead of pre-pandemic FY20 levels on a
constant currency(1) basis
· Group adjusted EBITDA(4) (pre-IFRS 16) of £573m normalising from COVID
boosted FY22 of £619m; in line with guidance and significantly ahead of
pre-pandemic FY20 levels of £342m
· Group adjusted EBITDA(4) (pre-IFRS 16) margin of 11.5% has stepped up compared
to the 9.0% achieved in FY20. Group adjusted EBITDA(4) (post-IFRS 16) was
£796m (FY22: £828m)
· Group cash generated from operations was £866m (FY22: £598m), year-on-year
("YoY") growth of 44.8% reflecting planned stock reductions of £99m YoY and
inventory discipline
· Group statutory profit before tax of £436m (FY22: £525m) with statutory
diluted earnings per share 34.7p (FY22: 42.1p)
· B&M UK LFL customer transaction numbers increased every month since June -
demonstrating underlying growth and widening of appeal
· B&M UK fascia(2) revenue increased by 4.0% YoY, driven by one-year
like-for-like(3) ("LFL") revenue increase of 0.7% and the increase in space
through new store openings. Q4 LFL run rate of 3.2%, exiting the year with
momentum
· B&M UK fascia adjusted EBITDA(4) % (pre-IFRS 16) normalised to 12.4%
(FY22: 14.4%), with a full year trading trading gross margin(8) % reduction of
148 bps. Trading gross margins significantly improved into the second half
versus the first, with a 92 bps reduction versus last year
· 707 B&M stores in the UK with 21 gross new store openings offset by 15
closures and relocations. Total average selling area increased by 3.6% with
relocated stores providing typically 3x greater sales square footage helping
drive total sales growth from relocations
· Sales in France increased by 22.1% YoY with adjusted EBITDA(4) (pre-IFRS 16)
of £41m (FY22: £32m), representing a margin of 9.6% (FY22: 9.2%) further
evidences the continued strategic and operational progress as product ranging
is evolved
· Sales in Heron Foods increased by 18.1% YoY with adjusted EBITDA(4) (pre-IFRS
16) of £30m (FY22: £23m), representing a margin of 6.1% (FY22: 5.5%) which
underlines the attraction of our convenience discount offering to customers
· In the first 9 weeks of FY24, B&M UK LFL sales have run at 8.3%, France
and Heron continue their trading momentum and we expect full year Group
adjusted EBITDA(4) (pre-IFRS 16) to be higher than FY23
· Year-end net debt(5) of £724m, with net debt(5) to adjusted EBITDA(4)
leverage ratio (pre-IFRS 16) of 1.3x (FY22: 1.3x)
· Recommended final dividend(6) of 9.6p per share (FY22: 11.5p), bringing the
full year ordinary dividend to 14.6p per share (FY22: 16.5p) in addition to
the 20.0p special dividend(6) paid in January 2023 (FY22: 25.0p)
Alejandro Russo, Chief Executive, said,
"FY23 has been another year of strong underlying progress for B&M and the
long-term future looks very positive. It has also been a year of planned
management transition. Simon Arora has stepped down after 19 years of leading
this business and we thank him and wish him well for the future.
B&M has many years of profitable growth ahead, to be delivered through our
four channels of growth (existing B&M UK stores, new B&M UK stores,
France and Heron) and in delivering this growth, B&M will generate cash
and compound earnings growth for our shareholders. We are actively responding
to the short-term pressure on consumers from the cost-of-living crisis, with a
relentless focus on price and value. A strengthened management team and the
hard work of our 39,000 employees executing our unchanged strategy will help
us deliver in the current financial year. We expect to grow sales and profits
in FY24, despite economic uncertainty."
Financial Results
FY23 FY22 Change
Total Group revenues £4,983m £4,673m 6.6%
Group adjusted EBITDA(4) (pre-IFRS 16) £573m £619m (7.4)%
Group adjusted EBITDA(4) (pre-IFRS 16) margin % 11.5% 13.2% (174) bps
Group cash generated from operations £866m £598m 44.8%
Group adjusted profit before tax(4) £459m £524m (12.6)%
Group statutory profit before tax £436m £525m (17.0)%
Adjusted diluted EPS(4) 36.5p 41.6p (12.3)%
Statutory diluted EPS 34.7p 42.1p (17.6)%
Ordinary dividends(6) 14.6p 16.5p (11.5)%
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, an adjusted loss
of £1m (FY22: profit of £1m).
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 FY22. This 14-month approach
has been adopted as it excludes the two-month halo period which new stores
experience following opening. Three-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 38 months after it opened compared with
its revenue for the corresponding part of FY20.
4. The Directors believe that our adjusted figures - as described in Note
1 of the financial statements - provide users of the accounts with measures of
performance which are 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. See Note 3 of the financial statements for further
details. Adjusted figures exclude the impact of IFRS 16.
5. Net debt comprises interest bearing loans and borrowings, and cash and
cash equivalents. Net debt was £724m at the year end, reflecting £961m as
the value of gross debt netted against £237m 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 IFRS 16 lease liabilities.
8. Trading gross margin is considered to be a meaningful measure of
profitability as it refers to the measure of gross margin used by management
to commercially run the business. It differs to the statutory definition for
B&M, which declined 177 bps from 37.4% to 35.7%, due to technical
accounting adjustments in relation to the allocation of gains and losses from
derivative accounting, storage costs and commercial income, with the
derivative adjustments the main factor.
9. UK market share is calculated based on the reported revenues of B&M
UK and Heron Foods, compared to NIQ Scantrack, Total Store, Total Coverage
inc. Discounters, 52 weeks ending 31.12.22.
10. NIQ Homescan, year to March 2023.
Results Presentation
An in-person presentation for analysts in relation to these FY23 Preliminary
Results will be held today at 09:30 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/2023
Enquiries:
B&M European Value Retail S.A.
For further information please contact +44 (0) 151 728 5400 Ext 6363
Alejandro Russo, Chief Executive
Mike Schmidt, Chief Financial Officer
Dave McCarthy, Head of Investor Relations
Investor.relations@bandmretail.com
Media
For media please contact
Sam Cartwright, H-advisors, sam.cartwright@h-advisors.global +44 (0) 7827 254
561
Jonathan Cook, H-advisors, jonathan.cook@h-advisors.global +44 (0) 7730 777
865
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.
B&M European Value Retail S.A. is a variety retailer with 707 stores in
the UK operating under the "B&M" brand, 319 stores under the "Heron Foods"
and "B&M Express" brands, and 114 stores in France also operating under
the "B&M" brand as at 25 March 2023. 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
The last 12 months have been a year of major transition for B&M.
FY23 has been a good and significant year in the evolution of B&M. There
have been planned management changes, there have been major economic headwinds
and there has been material cost pressures to deal with. But B&M UK has
weathered the difficult environment well and has delivered another excellent
year of financial performance with an adjusted EBITDA margin(4) of 12.4%. We
have delivered strong sales growth and market share gains, an EBITDA margin
substantially ahead of pre-pandemic levels, and strong cash generation helped
by a clean inventory position. This reduction in inventories helped facilitate
an extra £200m (20.0p per share) being returned to shareholders through a
special dividend in January this year, on top of an interim dividend of 5.0p
and a final ordinary dividend of 9.6p. This is a very pleasing reward for our
shareholders and reflects growth of the business, good cost control and strong
cash management.
A relentless focus on helping our customers navigate the cost-of-living crisis
has been key to our success. Delivering strong results has been made possible
through the hard work of our employees, and through a laser like focus on
price and value for money. In contrast to some other businesses, we look to
keep prices as low as we can, while delivering profitable growth and cash for
our shareholders. At the same time, we continue to expand our store estate,
upgrade the existing estate and to make improvements in our offer, whether
through price investment or through improving store standards. Profitable
growth is at the core of our strategic objectives, and to do that we need to
put consumer needs at the centre of what we do.
The underlying strategy remains unchanged with the focus on simplicity and low
costs across our four channels of growth, which are improved sales in existing
stores, the expansion of our store estate in the UK, expansion in France and
continued growth in Heron, our UK convenience store operation. I will return
to these four channels later.
The long-term outlook for B&M remains very positive, with many years of
profitable growth ahead. In the UK, B&M has a small market share(9) and
even less in France. Market share in both countries can be substantially
higher and as we execute our strategy, we will deliver compounding earnings
growth and cash returns for shareholders.
Competitive Position
To deliver on our long-term aims, we must remain highly competitive in a
rapidly developing retail market. We must remain relevant through price,
edited range and location, and these requirements drive our strategy. We
continue to be relentlessly focused on price and compared to last year, our
price advantage over the mainstream supermarkets is as strong as it was
through consistency of everyday low prices ("EDLP").
Many consumer trends favour B&M, including trading down, as does the
changing structure of grocery retailing. Currently, many consumers are
switching to the two German Limited Assortment Discounters ("LADs") which
remain heavily focused on own label. Our branded offer is highly complementary
to them. Independent research shows that most LADs shoppers also shop
elsewhere(10), and where we are co-located, our stores tend to trade
exceptionally well. This is as true in France as it is in the UK.
In non-grocery our aggressive focus on price is also working, with General
Merchandise performing very well. Price comparisons are inevitably harder in
this area due to a lack of brands, differences in products and our constantly
evolving product mix but our price positioning remains market leading. While
improving our price position, over the last several years we have also
improved our product quality. Hence our value for money credentials are
substantially improved, as evidenced by the increased number of monthly
transactions and by our retaining many of the customers who tried us for the
first time during lockdowns.
Strategic progress review
The macroeconomic outlook remains uncertain, with the consumer challenged by
high inflation, rising interest rates and by declining real incomes. Despite a
tough backdrop, we remain focused on delivering through our existing four
channels of growth in FY24.
1: Existing B&M UK stores: A core driver of growth
In FY23 there was a sharp focus on delivering growth through our existing
stores. This led to major improvements in store standards and increased
product availability, which in turn led to improvements in like-for-like(3)
("LFL") sales. In the second half, driven by improvements in store standards,
B&M UK delivered 5.1% LFL sales growth. This shows the power of improving
the offer in existing stores, while the benefits of operational gearing are
evidenced in cash and profits.
Our stores have the capacity to keep growing their sales for many years ahead.
Due to operational gearing and no extra capital, such growth should be highly
profitable, should deliver incremental returns on investment and should allow
further reinvestment back into lower prices to drive further profitable
growth.
2: New B&M UK stores: Square footage growth outpaces our growth in net new
stores
Total average net sales area (including garden centres) increased by 3.6% in
the last financial year. This is greater than the increase in net new stores
(6 stores or a 0.9% increase) and is driven by three factors: 1) new stores
tend to be bigger than existing store average, 2) new stores are more likely
to have a small garden centre than existing stores and 3) replacement stores
are usually much larger than the stores they replace.
Previously we have made it clear that the 950 target for store numbers is
conservative but even so, it represents c.35% more stores than today, and with
newer stores being on average bigger than existing stores and having higher
total sales, the sales growth should be even greater than this 35%.
The sales contribution from our gross new store openings continues to be very
healthy in 2023 and reinforces the strategy of replacing older, smaller stores
at the end of their leases with new stores where there is a catchment
opportunity to do so.
We will accelerate our new store openings back towards 40 stores per annum,
with c.30 expected in FY24, but focus will always remain on new stores
generating a leading return on investment. We will not compromise on our
investment targets, and we will not open unprofitable stores just to meet a
store opening target. Sustainable profitable growth is at the core of our
business.
3: France will provide growth for many years to come
France has undergone a major transformation, with recent results highlighting
the long-term potential. All stores have been branded B&M, clothing (which
was a major part of the offer when the business was acquired) has been removed
and the FMCG range is building. The business was loss making just two years
ago but in FY23, France delivered 22.1% sales growth and an adjusted EBITDA(4)
(pre-IFRS 16) margin of 9.6%. As the business continues to evolve and benefit
from the B&M supply chain and infrastructure, there remains the prospect
of further growth in EBITDA margin.
New store growth will also deliver economies of scale and operational gearing
benefits. In FY23 we opened 7 new stores in France. In FY24 we plan to open
another 10 new stores, with a potential for an acceleration in openings in
future years. With just 114 stores currently, in a country with a similar
population to the UK, France can sustain a strong opening programme for the
long term.
4: Heron Foods offers growth and offers other benefits to the core business
Heron Foods has had an outstanding year, delivering substantial sales growth
and a leading EBITDA margin in its area. It currently operates 319 stores, but
as a low-priced convenience store operator there remains the scope to open
many more. The scale of the opportunity may be judged by the fact that the
market leader in the UK operates over 2,000 convenience stores.
Heron Foods has undergone a strategic repositioning over the last 18 months.
The number of freezer units in each store has been reduced - but not the
Frozen range. Instead, products have been merchandised more intensively
freeing up extra space in store. This extra space has allowed the chilled and
ambient ranges to be extended and this has driven a step change in sales
densities.
As well as being a strong business in its own right, Heron brings other
benefits to the Group. It enhances our buying economies, provides other
economies of scale and is an invaluable source of learning and knowledge, as
is our French operation.
Management Changes
As stated earlier, this year has seen some major planned changes in the
management team. After 19 highly successful years, Simon Arora stepped down as
CEO and has now exited the business. We thank Simon for his outstanding
contributions to B&M and to the UK economy.
After two years as Chief Financial Officer, I am delighted to have taken the
role of Chief Executive Officer. I have strengthened the management team with
a number of key appointments, including:
• Mike Schmidt as CFO, with 22 years experience, following 9 years at
DFS
• Jon Parry as Supply Chain Director with 26 years experience,
following 12 years at Asda
• Philippe Brasleret as Retail Stores Director in France with 18 years
experience, following 9 years at Aldi France
• James Kew as Head of Retail Operations for B&M UK with 16 years
experience, following 5 years as Head of Productivity and Change at B&M UK
These represent a planned strengthening of our management team and we will
strengthen our team further with new appointments in the coming months.
Current trading and outlook
Our business has now normalised to a new, sustainable and higher level of
underlying sales and margin compared to the pre-pandemic year of FY20. We
remain highly cash generative and in the absence of acquisition opportunities
for batches of stores, we will look to return excess cash to shareholders at
the appropriate time in line with our capital allocation framework.
Against the ongoing cost-of-living crisis, we will help our customers by
remaining highly price competitive and growing our business, through existing
and new stores in the UK and France. As well as expecting further LFL growth
in existing stores, during FY24 we plan to open c.30 new B&M stores in the
UK, c.10 in France and c.20 Heron Foods stores.
The business will maintain a high degree of discipline on EDLP pricing,
limited range assortment and a low-cost operating model.
In the first 9 weeks of FY24, B&M UK LFL sales have run at 8.3%, France
and Heron continue their trading momentum and we expect full year Group
adjusted EBITDA(4) (pre-IFRS 16) to be higher than FY23.
Alejandro Russo
Chief Executive Officer
30 May 2023
Financial Review
Accounting period
The current accounting period represents the 52 weeks trading to 25 March 2023
("FY23") and the comparative period represents the 52 weeks to 26 March 2022
("FY22"). The upcoming accounting period represents 53 weeks trading to 30
March 2024 ("FY24").
The Group financial statements have been prepared in accordance with IFRS and
are reported as such. Underlying figures presented before the impact of IFRS
16 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
This is the first year since the outbreak of COVID-19 where trading patterns
have normalised. We believe FY23 can be viewed as the Group's new underlying
revenue and profit base level from which we grow from - with Group adjusted
EBITDA(4) (pre-IFRS 16) of £573m. We now have the proven evidence there has
been a step change in performance of the Group since the pandemic, where Group
adjusted EBITDA(4) (pre-IFRS 16) in FY20 was £342m. Trading was exceptional
during each of FY21 and FY22, particularly during the periods where
non-essential retail was closed, including some of the first quarter of FY22.
Our performance relative to pre-pandemic levels evidences that we are
retaining the new customers won during the pandemic years. Importantly though,
the robust profit margins and cash conversion characteristics of the business
remain unchanged.
Total Group revenue in FY23 was £4,983m (FY22: £4,673m), representing a
year-on-year increase of 6.6%. On a constant currency basis(1), revenues
increased by 6.5%. This has been driven by positive like-for-like(3) ("LFL")
in all businesses, which includes inflation and mix effects, and by strong
trading from new stores.
Group adjusted EBITDA(4) (pre-IFRS 16) decreased to £573m (FY22: £619m) as
we completed a full year of undisturbed post-pandemic trading. The continued
Group revenue growth in the year was moderated by the reduction in the trading
gross margin in B&M UK as described below, that led to a £49m or 2.7%
growth in gross margin. Operating costs also increased by £94m or 8.3%,
reflecting the cost of serving our increased revenues, opening new stores and
also cost inflation, including the effects of the 6.6% increase to the UK
national living wage. On a statutory basis, profit before tax declined to
£436m from £525m, again reflecting the normalisation of trading to a
post-pandemic period.
Group adjusted EBITDA(4) (pre-IFRS 16) margin is now 11.5%, which is 253 bps
higher than pre-pandemic levels (FY20: 9.0%). This reflects the structural
change in our margin which the business has undergone in the last three years,
with an evolution of our product range, greater economies of scale, the
benefits of operational gearing from higher sales densities and other
operational learnings.
On a post-IFRS 16 basis, Group adjusted EBITDA(4) was £796m (FY22: £828m)
which represented an adjusted EBITDA(4) margin of 16.0% (FY22: 17.7%).
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 £19m this year (FY22:
£(12)m).
We closed the year with an unchanged leverage with a pre-IFRS 16 net debt(5)
to adjusted EBITDA(4) leverage ratio of 1.3x (FY22: 1.3x), following the
payment of £347m of ordinary and special dividends in the year. This
reflects the Group continuing its strong track record for operating cash
generation and capital expenditure efficiency. Significantly, operational
efficiency in our stores and logistics and our discipline in implementing
markdowns in garden categories contributed to a £99m stock reduction, that
underpinned the total cash generated from operations across the year of £866m
(FY22: £598m).
B&M UK
In the UK, total B&M fascia(2) revenue increased by 4.0% to £4,067m
(FY22: £3,909m), with one-year LFL revenue increasing by 0.7%. There was a
strong run rate in the second half of the year with LFL sales growth of 5.1%,
compared to a first half LFL of (3.9)% and the business has likewise entered
the current year with strong momentum. Our LFL customer transaction numbers
increased every month since June.
On a three-year basis, total revenue is 29.5% higher than in FY20, with LFL
revenue(3) 13.3% higher. This reflects the underlying growth of the business
during the pandemic and during lockdowns and is indicative that many customers
won during lockdown have become regular customers.
At category level, we believe the one-year LFL performance has now broadly
normalised against the peak of the pandemic. Demand for essential food and
FMCG items has remained high, with many customers seeking out leading branded
goods at the lowest possible price during this cost-of-living crisis. General
Merchandise demand has also been resilient and performing in line with our
plans, with seasonal categories such as Halloween, Christmas, Easter and most
recently the Coronation all having a strong sell-through.
B&M's trading gross margin(8) reduced by 148 bps across the full financial
year, driven by the reintroduction of usual markdown activity including the
previously disclosed markdowns in the gardening category in H1. Consistent
with this, a marked improvement in the year-on-year trend was seen in H2
relative to H1 (H2 trading gross margin down 92 bps versus FY22), due to
strong sell through with only planned markdown activity in general merchandise
categories, coupled with a significant reduction in freight rates.
There were 21 gross new openings of which 5 were replacements for smaller
legacy stores and a further two relocations of FY23 closures will occur early
in FY24. The replacement stores typically have 3x the total sales space of
the stores they replaced and deliver a higher store contribution than the
stores they replaced.
New stores, including replacements, are cash generative in year one and
typically deliver a higher store contribution than the Group's average.
In addition to revenue generated in-store, wholesale revenue decreased to
£37m (FY22: £45m). Most of this represents sales made to the associate
Centz Retail Holdings Limited, a chain of 54 variety goods stores in the
Republic of Ireland.
Operating costs, excluding depreciation and amortisation, increased by 5.7% to
£950m (FY22: £899m) which represented 23.4% of revenues (FY22: 23.0%). This
was primarily because of an increase in store costs driven by a strategic
decision to focus on store standards to drive LFL sales, partially offset
against foreign exchange gains made due to our strong hedging position against
the underlying spot rate.
Adjusted EBITDA(4) (pre-IFRS 16) for the B&M UK business decreased by
(10.9)% to £502m (FY22: £564m) and the adjusted EBITDA(4) margin decreased
by (207) bps to 12.4% (FY22: 14.4%). However, both remain significantly
above historical levels. Statutory operating profit for the year was £479m
(FY22: £569m).
France
In France, revenues increased by 22.1% to £431m (FY22: £353m), reflecting
strong LFL performance and new store openings delivering well. There were 7
new stores opened in FY23 increasing the average sales area of the total store
estate by 4.7% to 3.1m sq. ft. (FY22: 3.0m sq. ft.).
Adjusted EBITDA(4) (pre-IFRS 16) increased by £9m to £41m (FY22: £32m),
with an adjusted EBITDA(4) margin of 9.6% (FY22: 9.2%). The French business
continues to build a sustainable underlying profit base and is primed to carry
on delivering against the strategic and financial objectives set. Statutory
operating profit for the year was £19m (FY22: £11m).
Gross margin remained broadly stable with far less emphasis placed on textiles
and further steps taken towards aligning its product mix to that seen in
B&M UK.
Operational consistency remained throughout the year. Operating costs as a
percentage of sales improved by 1.2% to 34.9% (FY22: 36.1%).
Heron Foods
In the discount convenience chain, Heron Foods, revenues increased by 18.1% to
£485m (FY22: £411m), reflecting a successful year and continued growth.
There were 14 gross new stores openings and 6 closures in FY23, with 3 of
those closures being relocations. As with the B&M business, the store
estate is carefully monitored and if an opportunity arises to open a new
higher quality store in a new or existing area, the business will look to
capitalise. Total average sales area of the store estate increased by 5.0% to
970k sq. ft. (FY22: 920k sq. ft.).
Heron Foods adjusted EBITDA(4) (pre-IFRS 16) increased to £30m (FY22: £23m),
with an adjusted EBITDA(4) margin of 6.1% of sales (FY22: 5.5%), representing
a successful result for the year. Statutory operating profit for the year was
£38m (FY22: £30m).
Gross margin in Heron Foods remained resilient against FY22 with a strong
performance across all categories - Chilled, Ambient and Frozen - with the
latter being a growth driver later in the financial year as our customers look
to avoid food wastage during the cost-of-living crisis.
Operating costs remained well-controlled, remaining broadly flat as a
percentage of revenues.
Depreciation and amortisation
Depreciation and amortisation expenses, excluding the impact of IFRS 16, grew
by 16.3% to £76m (FY22: £66m), representing only 1.5% of sales (FY22: 1.4%).
The increase was largely due to continued investment in new stores across all
fascias, with the Group growing the store numbers by 1.9% in the year.
The additional depreciation and amortisation charge relating to lease
liabilities under IFRS 16 was £166m (FY22: £161m).
Finance expense
Net finance charges for the year, excluding IFRS 16, were £38m (FY22: £29m).
This included bank and high yield bond interest of £38m (FY22: £27m) and
amortised fees of £2m (FY22: £2m).
The interest charge relating to lease liabilities under IFRS 16 was £61m
(FY22: £59m).
Profit before tax
Statutory profit before tax was £436m (FY22: £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) (pre-IFRS 16) for the year
decreased to £459m (FY22: £524m).
The impact of IFRS 16 on the Group financial statements was to decrease
statutory profit before tax by £4m.
Taxation
The tax charge in FY23 was £88m (FY22: £103m), representing an effective tax
rate of 20.1%. 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 25% in France, although the UK Corporation Tax rate has now
increased 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 £527m in FY23,
including £210m 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 £317m 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 £348m (FY22: £422m) and the statutory diluted
earnings per share was 34.7p (FY22: 42.1p).
Adjusted profit after tax(4), which we consider to be a better measure of
performance for the reasons outlined above, was £366m (FY22: £417m), and the
adjusted fully diluted earnings per share(4) was 36.5p (FY22: 41.6p).
Investing activities
Group net capital expenditure(7) totalled £89m this year (FY22: £85m).
Investment included £33m spent on 42 gross new stores across the Group's
fascias (FY22: £34m on 54 stores) and £16m on infrastructure projects to
support the continued growth of the business (FY22: £9m). There was also
investment of £40m on maintenance works to ensure that our existing store
estate and warehouses are appropriately maintained (FY22: £42m). There was
also a net expenditure of £(1)m relating to a small number of freehold
acquisitions and disposals (FY22: net expenditure of £1m).
Net debt and cash flow
The Group continues to be highly cash generative, with cash generated from
operations of £866m (FY22: £598m), helped by the planned stock reduction of
£99m.
The strong performance and cash generation have enabled the Group to pay
dividends totalling £347m(6) in FY23. This includes a £200m(6) special
dividend paid in February 2023.
Net debt(5) (on a pre-IFRS 16 basis), decreased to £724m (FY22: £790m).
The net debt(5) to adjusted EBITDA(4) leverage ratio was 1.3x (FY22: 1.3x),
the fourth year that we maintained it below 1.5x and comfortably within our
published 2.25x leverage ceiling.
In March 2023, we entered into a new five-year senior facilities agreement,
with two one-year extension options for a £225m senior term loan facility and
a £225m senior revolving credit facility with a banking syndicate made up of
seven banks. This facility gives us significant additional maturity, can be
upscaled by up to £350m if required to support future growth, and provides a
streamlined bank group that we look forward to working with in the future.
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 20.0p(6) per share.
Subject to approval by shareholders at the AGM on 25 July 2023, a final
ordinary dividend of 9.6p(6) per share is to be paid on 4 August 2023 to
shareholders on the register of the Company at the close of business on 30
June 2023. The ex-dividend date will be 29 June 2023.
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 rollout 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 supply chain, competition,
economic environment, warehouse 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.
Mike Schmidt
Chief Financial Officer
30 May 2023
Consolidated Statement of Comprehensive Income
Period ended 52 weeks ended
25 March 2023 52 weeks ended
26 March 2022
Note £'m £'m
Revenue 2 4,983 4,673
Cost of sales (3,182) (2,921)
Gross profit 1,801 1,752
Administrative expenses (1,265) (1,142)
Operating profit 4 536 610
Share of (losses)/profits in associates 11 (1) 3
Profit on ordinary activities before net finance costs and tax 535 613
Finance costs on lease liabilities 5 (61) (59)
Other finance costs 5 (40) (29)
Finance income 5 2 0
Profit on ordinary activities before tax 436 525
Income tax expense 9 (88) (103)
Profit for the period 2 348 422
Other comprehensive income for the period
Items which may be reclassified to profit and loss:
Exchange differences on retranslation of subsidiary and associate investments 5 (2)
Fair value movement as recorded in the hedging reserve 28 20
Tax effect of other comprehensive income 9 5 (4)
Total other comprehensive income 38 14
Total comprehensive income for the period 386 436
Earnings per share
Basic earnings per share attributable to ordinary equity holders (pence) 10 34.8 42.2
Diluted earnings per share attributable to ordinary equity holders (pence) 10 34.7 42.1
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 25 March 26 March
2023 2022
As at
Assets £'m £'m
Non-current
Goodwill 12 921 920
Intangible assets 12 120 120
Property, plant and equipment 13 380 363
Right of use assets 14 1,056 1,066
Investments in associates 11 8 8
Other receivables 16 6 7
Deferred tax asset 9 30 31
2,521 2,515
Current assets
Cash at bank and in hand 17 237 173
Inventories 15 764 863
Trade and other receivables 16 52 53
Income tax receivable 12 9
Other financial assets 19 1 25
1,066 1,123
Total assets 3,587 3,638
Equity
Share capital 22 (100) (100)
Share premium (2,478) (2,476)
Retained earnings (104) (121)
Hedging reserve 3 (13)
Legal reserve (10) (10)
Merger reserve 1,979 1,979
Foreign exchange reserve (10) (5)
(720) (746)
Non-current liabilities
Interest bearing loans and borrowings 20 (873) (950)
Lease liabilities 14 (1,124) (1,140)
Deferred tax liabilities 9 (43) (43)
Provisions 21 (3) (4)
(2,043) (2,137)
Current liabilities
Interest bearing loans and borrowings 20 (81) (6)
Trade and other payables 18 (541) (564)
Lease liabilities 14 (177) (170)
Other financial liabilities 19 (13) (0)
Income tax payable (6) (4)
Provisions 21 (6) (11)
(824) (755)
Total liabilities (2,867) (2,892)
Total equity and liabilities (3,587) (3,638)
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 2023 and signed on their behalf by:
Alejandro Russo, 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 27 March 2021 100 2,475 128 (8) 10 (1,979) 7 733
- - (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
Other comprehensive income - - - 16 - - (2) 14
- - 422 16 - - (2) 436
Total comprehensive income for the period
Hedging gains & losses reclassified as inventory - - - 5 - - - 5
100 2,476 121 13 10 (1,979) 5 746
Balance at 26 March 2022
Allocation to legal reserve - - (0) - 0 - - -
- - (165) - - - - (165)
Ordinary dividends declared
- - (201) - - - - (201)
Special dividends declared
0 2 1 - - - - 3
Effect of share options
0 2 (365) - - - - (363)
Total transactions with owners
Profit for the period - - 348 - - - - 348
- - - 33 - - 5 38
Other comprehensive income
Total comprehensive income for the period - - 348 33 - - 5 386
Hedging gains & losses reclassified as inventory - - - (49) - - - (49)
100 2,478 104 (3) 10 (1,979) 10 720
Balance at 25 March 2023
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 25 March 52 weeks ended 26 March
2023 2022
Note £'m £'m
Cash flows from operating activities
Cash generated from operations 23 866 598
Income tax paid (84) (107)
Net cash flows from operating activities 782 491
Cash flows from investing activities
Purchase of property, plant and equipment 13 (93) (96)
Purchase of intangible assets 12 (5) (4)
Proceeds from sale of property, plant and equipment 9 15
Finance income received 2 0
Net cash flows from investing activities (87) (85)
Cash flows from financing activities
Receipt of newly issued corporate bonds 20 - 250
Repayment of Heron facilities 20 (3) (4)
Repayment of government backed loan in France 20 - (22)
Net receipt of other French facilities 20 0 1
Repayment of the principal in relation to lease liabilities 14 (168) (159)
Payment of interest in relation to lease liabilities 14 (61) (59)
Fees on refinancing 20 - (3)
Other finance costs paid 5 (36) (24)
Dividends paid to owners of the parent 29 (366) (430)
Net cash flows from financing activities (634) (450)
Effects of exchange rate changes on cash and cash equivalents 3 (1)
Net increase/(decrease) in cash and cash equivalents 64 (45)
Cash and cash equivalents at the beginning of the period 173 218
Cash and cash equivalents at the end of the period 237 173
Cash and cash equivalents comprise:
Cash at bank and in hand 17 237 173
237 173
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.
The consolidated financial statements cover the 52 week period from 27 March
2022 to 25 March 2023 which is a different period to the parent company
standalone accounts (from 1 April 2022 to 31 March 2023). 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. The next accounting period for the
Group will be a 53 week period, from 26 March 2023 to 30 March 2024.
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.
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 27
March 2022 to 25 March 2023. 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 levels of trading including a severe but
plausible downside like for like scenario and the Group also has recourse to
several mitigations to improve liquidity. In March 2023, the Group committed
to fully re-financing its existing term loan and RCF facilities, totalling
£455m, for a new £225m term loan and a £225m RCF maturing in March 2028,
with two one-year extension options. On 3 April 2023, the Group completed the
funds flow in relation to this extension of its term facility bank loan. The
Group has also maintained its £400m bond maturing in July 2025 and its £250m
bond maturing in November 2028.
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 <£1m (2022: <£1m).
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 (CGU's) 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 (EPS)
Both IFRS 16 and pre-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 fair value impact of derivatives yet to mature, that
have not been designated as part of a hedge accounting relationship, and
foreign exchange on intercompany balances, which do not relate to underlying
trading, and costs incurred in relation to significant projects, 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 (pre-IFRS 16) 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.
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
(<£5k). Assets which may fall into these 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 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.
Refinancing
Where bank borrowings are refinanced, the Group assesses whether the
transaction results in new facilities or a modification of the previous
facilities.
Where the transaction results in a modification of the facilities, the Group
assesses whether that modification is substantial by reference both to whether
the present value of the cash flows of the new facilities is more than 10%
different to the present value of the cash flows of the previous facilities
and by reference to any qualitative differences between the old and new
agreements.
Where a modification is substantial, the Group derecognises the original
liability and recognises a new liability for the modified facilities with any
transaction costs expensed to the income statement. Where the modification is
non-substantial, the Group amends the carrying amount of the liability to
reflect the updated cash flows and amends the effective interest rate from the
modification date.
Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and in hand, less bank
overdrafts to the extent the Group have 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;
§ "Retained earnings reserve" represents retained profits;
§ "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;
§ "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);
§ "Merger reserve" representing the reserve created during the
reorganisation of the Group in 2014; and
§ "Foreign exchange reserve" represents the cumulative differences arising
in retranslation of the subsidiaries and associate's 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 - (Dissolved on 17 January 2023)
· 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, 105 stores
were provided against (2022: 99).
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
distribution centres (DC's), which is built up over the term of the leases
held over those DC's.
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 cautious 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 2023
Standard Summary of changes EU Endorsement status
Amendments to IAS 8 Accounting Estimates Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Endorsed on 2 March 2022.
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. Effective from 1 January 2023.
Amendments to IAS 1 and IFRS Practice Statement 2 The amendment requires an entity to disclose its material accounting policy Endorsed on 2 March 2022.
information instead of its significant accounting policies. A policy can be
material by nature even if the related amounts are immaterial.
Effective from 1 January 2023.
IASB effective for annual periods beginning on or after 1 January 2024
Standard Summary of changes EU Endorsement status
Amendments to IAS 1 The amendment requires an entity to have the right to defer settlement of the Not yet endorsed
liability for at least 12 months after the reporting date in order to classify
Presentation of Financial Statements a liability as non-current. This right may be subject to a company complying
with conditions (covenants) specified in a loan arrangement.
Amendments to IFRS 16 The amendment requires a seller-lessee to subsequently measure such leaseback Not yet endorsed
liabilities in a way that does not recognise any amount of gain or loss that
Lease Liability in a Sale and Leaseback relates to the right of use it retains. The new requirements do not prevent a
seller-lessee from recognising in profit or loss any gain or loss relating to
the partial or full termination of a lease. The amendments do not depend on an
index or rate.
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 €1.1581 /£ during the
year, with the period end rate being €1.1360 /£ (2022: €1.1756/£ and
€1.2009/£ respectively).
52 week period to 25 March 2023 UK UK France Corporate Total
B&M Heron B&M
£'m £'m £'m £'m £'m
Revenue 4,067 485 431 - 4,983
EBITDA (note 3) 680 41 76 (20) 777
EBITDA (pre-IFRS 16) (note 3) 503 30 41 (20) 554
Depreciation and amortisation (182) (22) (38) - (242)
Net finance expense (45) (3) (11) (40) (99)
Income tax (charge)/credit (87) (3) (6) 8 (88)
Segment profit/(loss) 366 13 20 (51) 348
Total assets 2,856 295 385 51 3,587
Total liabilities (1,443) (119) (277) (1,028) (2,867)
Capital expenditure* (77) (11) (10) - (98)
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) 729 34 64 13 840
EBITDA (pre-IFRS 16) (note 3) 563 23 32 13 631
Depreciation and amortisation (170) (23) (34) - (227)
Net finance expense (48) (2) (11) (27) (88)
Income tax charge (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)
*Capital expenditure includes both tangible and intangible capital.
Revenue is disaggregated geographically as follows:
Period to 52 weeks ended 25 March 52 weeks ended
2023 26 March
2022
£'m £'m
Revenue due from UK operations 4,552 4,320
Revenue due from French operations 431 353
Overall revenue 4,983 4,673
Non-current assets (excluding deferred tax and financial instruments) are
disaggregated geographically as follows:
As at 25 March 26 March
2023 2022
£'m £'m
UK operations 2,240 2,252
French operations 243 224
Luxembourg operations 8 8
Overall 2,491 2,484
The Group operates a small wholesale operation, with the relevant
disaggregation of revenue as follows:
Period to 52 weeks ended 25 March 52 weeks ended
2023 26 March
2022
£'m £'m
Revenue due to sales made in stores 4,940 4,628
Revenue due to wholesale activities 37 45
Revenue due to online activities 6 -
Overall revenue 4,983 4,673
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 all non-IFRS measures and
therefore a reconciliation from the statement of comprehensive income is set
out below.
Period to 52 weeks ended 25 March 52 weeks ended
2023 26 March
2022
£'m £'m
Profit on ordinary activities before interest and tax 535 613
Add back depreciation and amortisation 242 227
EBITDA 777 840
Reverse the fair value impact of derivatives yet to mature 17 (13)
Online project costs 2 -
Foreign exchange on intercompany balances 0 1
Adjusted EBITDA 796 828
Depreciation and amortisation (242) (227)
Interest costs related to lease liabilities (see note 5) (61) (59)
Net other finance costs (see note 5) (38) (29)
Adjusted profit before tax 455 513
Adjusted tax (91) (101)
Adjusted profit for the period 364 412
Adjusted EBITDA (pre-IFRS 16) and adjusted profit (pre-IFRS 16) are also
non-IFRS measures and are reconciled as follows:
Period to 52 weeks ended 25 March 52 weeks ended
2023 26 March
2022
£'m £'m
EBITDA (above) 777 840
Remove effects of IFRS 16 on EBITDA (223) (209)
EBITDA (pre-IFRS 16) 554 631
Adjusting items (above) 19 (12)
Adjusted EBITDA (pre-IFRS 16) 573 619
Pre-IFRS 16 depreciation and amortisation (76) (66)
Net other finance costs (38) (29)
Adjusted profit before tax (pre-IFRS 16) 459 524
Adjusted tax (93) (107)
Adjusted profit (pre-IFRS 16) for the period 366 417
The effects of IFRS 16 on EBITDA 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.
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, as they have
been in the current year, recognising the loss incurred from the online
trading trial, which had ceased by the year end date.
The following table reconciles the statutory figures to the adjusted and
adjusted (pre-IFRS 16) figures in the statutory P&L format on a
line-by-line basis.
52 week period to 25 March 2023 Statutory figures Adjusting Adjusted Impact of Adjusted
items figures IFRS 16 (pre-IFRS 16)
£'m £'m £'m £'m £'m
Revenue 4,983 - 4,983 - 4,983
Cost of sales (3,182) - (3,182) - (3,182)
Gross profit 1,801 - 1,801 - 1,801
Depreciation and amortisation (242) - (242) 166 (76)
Other administrative expenses (1,023) 19 (1,004) (223) (1,227)
Operating profit 536 19 555 (57) 498
Share of losses in associates (1) - (1) - (1)
Profit before interest and tax 535 19 554 (57) 497
Finance costs relating to right-of-use assets (61) - (61) 61 -
Other finance costs (40) - (40) - (40)
Finance income 2 - 2 - 2
Profit before tax 436 19 455 4 459
Income tax expense (88) (3) (91) (2) (93)
Profit for the period 348 16 364 2 366
52 week period to 26 March 2022 Statutory figures Adjusting items Adjusted figures Impact of Adjusted
IFRS 16 (pre-IFRS 16)
£'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
Adjusted tax represents the tax charge per the statement of comprehensive
income as adjusted only for the effects of the adjusting items detailed above.
The segmental split in EBITDA and Adjusted EBITDA reconciles as follows:
52 week period to 25 March 2023 UK UK France Corporate Total
B&M Heron B&M
£'m £'m £'m £'m £'m
Profit before interest and tax 498 19 38 (20) 535
Add back depreciation and amortisation 182 22 38 - 242
EBITDA 680 41 76 (20) 777
Adjusting items detailed above - - - 19 19
Adjusted EBITDA 680 41 76 (1) 796
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 729 34 64 13 840
Adjusting items detailed above - - - (12) (12)
Adjusted EBITDA 729 34 64 1 828
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 52 weeks ended 26 March
25 March 2022
2023
£'m £'m
Auditor's remuneration 1 1
Payments to auditors in respect of non-audit services:
Other assurance services 0 0
Cost of inventories recognised as an expense (included in cost of sales) 3,182 2,921
Depreciation of owned property, plant and equipment 71 62
Amortisation (included within administration costs) 4 2
Depreciation of right-of-use assets 167 163
Impairment of right-of-use assets 2 2
Operating lease rentals 5 2
(Profit)/loss on sale of property, plant and equipment (1) 1
Gain on sale and leasebacks (1) (1)
Gain on foreign exchange (10) (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
25 March 26 March
2023 2022
£'m £'m
Interest on debt and borrowings (38) (27)
Ongoing amortisation of finance fees (2) (2)
Total other finance expense (40) (29)
Finance costs on lease liabilities (61) (59)
Total finance expense (101) (88)
The finance expense reconciles to the statement of cash flows as follows:
Period ended 52 weeks to 52 weeks to
25 March 26 March
2023 2022
£'m £'m
Cash
Finance costs paid in relation to debt and borrowings 36 24
Finance costs paid in relation to lease liabilities 61 59
Fees paid in relation to refinancing - 3
Finance costs paid 97 86
Non-cash
Movement of accruals in relation to debt and borrowings 2 3
Capitalisation of paid fees in relation to new facilities - (3)
Ongoing amortisation of finance fees 2 2
Total finance expense 101 88
There are no adjusting items relating to finance expenses.
Period ended 52 weeks to 52 weeks to
25 March 26 March
2023 2022
£'m £'m
Interest income on loans and bank accounts 2 0
Total finance income 2 0
There are no adjusting items relating to
finance income.
Total net other finance costs are therefore:
Period ended 52 weeks to 52 weeks to
25 March 26 March
2023 2022
£'m £'m
Total other finance expense (40) (29)
Total other finance income 2 0
Total net other finance costs (38) (29)
6 Employee remuneration
Expense recognised for employee benefits is analysed below:
Period ended 52 weeks to 52 weeks to
25 March 26 March
2023 2022
£'m £'m
Wages and salaries 583 530
Social security costs 39 32
Share based payment expense 3 2
Pensions - defined contribution plans 9 8
Total remuneration 634 572
There are £1m of defined contribution pension liabilities owed by the Group
at the period end (2022: £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 £1m (2022: £2m).
The average monthly number of persons employed by the Group during the period
was:
Period ended 52 weeks to 52 weeks to
25 March 26 March
2023 2022
Sales staff 42,299 39,804
Administration 1,206 1,070
Total staff 43,505 40,874
7 Key management remuneration
Key management personnel and Directors' remuneration includes the following:
Period ended 52 weeks to 52 weeks to
25 March 26 March
2023 2022
£'m £'m
Directors' remuneration:
Short term employee benefits 4 4
Benefits accrued under the share option scheme 1 1
Pension 0 0
Total 5 5
Key management expense (includes Directors' remuneration):
Short term employee benefits 9 9
Benefits accrued under the share option scheme 2 1
Pension 0 0
Total 11 10
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
Total 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) 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
LTIP 2022A March-25 50.0p 42.0p
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%
2022A-TSR 17 Nov 22 309,342 124p 3.16% 5 31%
2022A-EPS 17 Nov 22 309,342 386p 3.16% 5 31%
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%
2022/B1 3 Aug 22 396,877 437p 1.75% 3 32%
2022/B2 15 Dec 22 3,641 412p 1.75% 3 32%
Scheme Options at 26 Mar 22 Granted Dividend credit Forfeited Exercised Options at 25 Mar 23
2017A-TSR 27,557* - - - (27,557) -
2017A-EPS 18,071* - - - (18,071) -
2018A-TSR 202,465* - 19,613 8,243† - 230,321*
2018A-EPS 280,368* - 25,327 (8,243)† - 297,452*
2019A-TSR 279,393.5 - 24,963 (11,168.5) - 293,188*
2019A-EPS 279,393.5 - 24,963 (11,168.5) - 293,188*
2020A-TSR 169,361 - 15,763 - - 185,124
2020A-EPS 169,361 - 15,763 - - 185,124
2021A-TSR 229,660.5 - 21,376.5 - - 251,037
2021A-EPS 229,660.5 - 21,376.5 - - 251,037
2022A-TSR - 309,342 18,509 - - 327,851
2022A-EPS - 309,342 18,509 - - 327,851
2017/B1 53,576 - - - (53,576) -
2017/B2 13,379 - - - (13,379) -
2018/B2 38,289 - - - (38,289) -
2019/B1 391,522 - 10,023 (1,937) (399,608) -
2019/B2 3,403 - 107 - (3,510) -
2020/B1 297,103 - 24,247 (19,011) - 302,339
2021/B1 271,020 - 22,204 (36,086) - 257,138
2022/B1 - 396,877 23,532 (12,145) - 408,264
2022/B2 - 3,641 168 - - 3,809
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
*These share options have vested and are in a two-year holding period.
† There was a rebalancing between the EPS and TSR awards after the final
analysis of the performance conditions of this scheme. The overall shares
options vesting on the scheme does not change, only the split between TSR and
EPS.
2) Deferred Bonus Share Plan (DBSP) Awards
The Deferred Bonus Share Plan differs from the LTIP 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 2023 award will be made after this
set of statutory accounts have been published and will therefore be reported
in the next annual report.
Scheme Options at 26 Mar 22 Granted Dividend credit Forfeited Exercised Options at 25 Mar 23
2019 Bonus allocation 72,909 - - - (72,909) -
2020 Bonus allocation 54,591 - 5,082 - - 59,673
2021 Bonus allocation 89,550 - 8,335 - - 97,885
2022 Bonus allocation - 278,466 25,916 - - 304,382
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
The fair values of the presented schemes are £1.1m (2022), £0.5m (2021),
£0.2m (2020) and £0.2m (2019).
3) Specific LTIP Awards
The remuneration committee are able to award specific share schemes under the
LTIP framework, where considered appropriate.
There are two such schemes at the year end, both relating to the buy-out of
executive share option schemes held prior to appointment with the business.
Both schemes have no vesting conditions but are time limited with details
given below.
Scheme Options at 26 Mar 22 Granted Dividend credit Forfeited Exercised Options at 25 Mar 23
Buy-out Nov-23 - 32,392 1,938 - - 34,330
Buy-out Nov-24 - 32,392 1,938 - - 34,330
The fair values of the presented schemes are both £0.1m.
The summary period end position is as follows:
Period ended 25 March 26 March
2023 2022
Share options outstanding at the start of the year 3,170,633 2,736,978
Share options granted during the year (including via dividend credit) 1,692,106 1,004,705
Share options forfeited or lapsed during the year (91,517) (163,902)
Share options exercised in the year (626,899) (407,148)
Share options outstanding at the end of the year 4,144,323 3,170,633
Of which;
Share options that are not vested 2,499,574 2,319,878
Share options that are in holding 1,644,749 745,511
Share options that are vested and eligible for exercise - 105,244
All exercised options are satisfied by the issue of new share capital. The
weighted average share price on exercise was £3.59 (2022: £5.64). All
outstanding options have a £nil (2022: £nil) exercise price and the weighted
average remaining contractual life is 2.1 years (2022: 2.0 years).
In the year, £3m has been charged to the consolidated statement of
comprehensive income in respect to the share option schemes (2022: £2m). At
the end of the year the outstanding share options had a carrying value of £6m
(2022: £5m).
9 Taxation
The relationship between the expected tax expense based on the standard rate
of corporation tax in the UK of 19% (2022: 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
25 March 26 March
2023 2022
£'m £'m
Current tax expense 84 90
Deferred tax charge 4 13
Total tax expense recorded in profit and loss 88 103
Deferred tax (credit)/charge in other comprehensive income (5) 4
Total tax charge recorded in other comprehensive income (5) 4
Result for the year before tax 436 525
Expected tax charge at the standard tax rate 83 100
Effect of:
Expenses not deductible for tax purposes 3 4
Income not taxable (2) (4)
Lease accounting (1) (0)
Foreign operations taxed at local rates 2 2
Changes in the rate of corporation tax 1 2
Adjustment in respect of prior years 2 (2)
Hold over gains on fixed assets 0 1
Other 0 (0)
Actual tax expense 88 103
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 25 March 26 March
2023 2022
£'m £'m
Accelerated tax depreciation (11) (6)
Relating to intangible brand assets (27) (28)
Fair valuing of assets and liabilities (asset) 3 0
Fair valuing of assets and liabilities (liability) (1) (6)
Temporary differences relating to the tax accounting for leases 24 24
Movement in provision 0 1
Relating to share options 3 3
Held over gains on fixed assets (4) (3)
Losses carried forward - 3
Other temporary differences 0 0
Net deferred tax liability (13) (12)
Analysed as;
Deferred tax asset 30 31
Deferred tax liability (43) (43)
Statement of comprehensive income 52 weeks to 52 weeks to
25 March 26 March
2023 2022
£'m £'m
Accelerated tax depreciation (5) (4)
Relating to intangible brand assets 1 (6)
Fair valuing of assets and liabilities 8 (7)
Temporary differences relating to the tax accounting for leases (0) 5
Movement in provision (0) (1)
Relating to share options (0) 1
Held over gains on fixed assets (0) (2)
Brought forward losses (3) (3)
Other temporary differences (0) 0
Net deferred tax charge 1 (17)
Analysed as;
Total deferred tax charge in profit or loss (4) (13)
Total deferred tax credit/(charge) in other comprehensive income 5 (4)
There were no unrecognised deferred tax assets within the Group at the period
end (2022: 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 (pre-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 25 March 26 March
2023 2022
£'m £'m
Profit for the period attributable to owners of the parent 348 422
Adjusted profit for the period attributable to owners of the parent 364 412
Adjusted (pre-IFRS 16) profit for the period attributable to owners of the 366 417
parent
Thousands Thousands
Weighted average number of ordinary shares for basic earnings per share 1,001,593 1,001,061
Dilutive effect of employee share options 1,730 1,893
Weighted average number of ordinary shares adjusted for the effect of dilution 1,003,323 1,002,954
Pence Pence
Basic earnings per share 34.8 42.2
Diluted earnings per share 34.7 42.1
Adjusted basic earnings per share 36.3 41.2
Adjusted diluted earnings per share 36.2 41.1
Adjusted (pre-IFRS 16) basic earnings per share 36.5 41.6
Adjusted (pre-IFRS 16) diluted earnings per share 36.5 41.6
11 Investments in associates
Period ended 25 March 26 March
2023 2022
£'m £'m
Net book value
Carrying value at the start of the period 8 4
Share of (losses)/profits in associates since the prior year valuation (1) 3
exercise
Effect of foreign exchange on translation 1 1
Carrying value at the end of the period 8 8
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.
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 25 March 26 March
2023 2022
£'m £'m
Multi-lines
Non-current assets 14 15
Current assets 69 94
Non-current liabilities - -
Current liabilities (75) (99)
Net assets 8 10
Revenue 252 324
(Loss)/profit (3) 3
Period ended 25 March 26 March
2023 2022
£'m £'m
Centz
Non-current assets 16 16
Current assets 24 20
Non-current liabilities (10) (8)
Current liabilities (13) (15)
Net assets 17 13
Revenue 71 78
Profit 3 5
The figures for both associates show 12 months to December 2022 (prior year:
12 months to December 2021), 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 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
Additions - 3 2 - 5
Disposals - (7) (4) - (11)
Effect of retranslation 1 0 0 0 1
At 25 March 2023 921 10 114 1 1,046
Accumulated amortisation / impairment
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
Charge for the year - 1 3 - 4
Disposals - (6) (4) - (10)
Effect of retranslation - 0 0 - 0
At 25 March 2023 - 5 0 - 5
Net book value at 25 March 2023 921 5 114 1 1,041
Net book value at 26 March 2022 920 4 115 1 1,040
At the period end, no software was being developed that is not yet in use
(2022: same), and the Group was not committed to the purchase of any
intangible assets (2022: committed to £2m of trademarks).
Impairment review of intangible assets held with indefinite life
The Group holds the following assets with indefinite life:
Segment 25 March 25 March 26 March 26 March
2023 2023 2022 2022
Goodwill Brand Goodwill Brand
£'m £'m £'m £'m
UK B&M 807 99 807 98
UK Heron 88 14 88 14
France B&M 26 - 25 -
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 (2022: €30m).
In each case the goodwill and brand assets have been allocated to one group of
CGU's, 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 CGU's.
The key assumptions in assessing the value in use as at 25 March 2023 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. Discount
rates have increased during the year, largely due to an increase in the
risk-free rate.
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.
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.
Gross margin
The standing assumption made by management is that forecast gross margin will
be similar to that experienced in the prior year, and the result is
subsequently sensitised to the gross margin input to demonstrate the
robustness of the projection against this assumption.
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 25 March 26 March
2023 2022
Discount rate (B&M) 12.7% 10.8%
Discount rate (Heron) 14.7% 13.7%
Discount rate (B&M France) 14.7% 12.9%
Inflation rate for costs (B&M & Heron) 8.0%/1.0%* 3.5%
Inflation rate for costs (B&M France) 6.0%/4.0%/2.0%* 1.5%
Like for like sales growth (B&M) 2.0% 3.5%
Like for like sales growth (Heron) 5.0%/2.0%* 4.0%
Like for like sales growth (B&M France) 7.0%/2.0%* 4.5%
Gross margin (all) ±0bps N/A
Terminal growth rate (B&M) 0.5% 0.5%
Terminal growth rate (Heron) 1.0% 1.2%
Terminal growth rate (B&M France) 1.2% 1.2%
* The first figure reflects the assumptions in year one (and year two for
French inflation) which are higher due to the current economic environment.
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.
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 CGU's at the period end dates. The headroom with the base case
assumptions in B&M was £3,380m, Heron £83m and B&M France €248m
(2022: £4,833m, £43m and €349m respectively).
No 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 20%.
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, except any specific year one or two
assumptions noted above, whilst assuming each other key assumption is held
level (e.g. for inflation sensitivity, the LFL was not adjusted):
25 March 26 March
2023 2022
B&M
Discount rate 53.9% 61.7%
Inflation rate for expenses 12.8% 14.1%
Like for like sales (5.4)% (7.3)%
Gross margin (234)bps N/A
Terminal growth rate Not sensitive Not sensitive
B&M France
Discount rate 72.0% 55.1%
Inflation rate for expenses 8.0% 6.9%
Like for like sales (3.0)% (0.5)%
Gross margin (152)bps N/A
Terminal growth rate Not sensitive Not sensitive
Heron
Discount rate 22.4% 17.1%
Inflation rate for expenses 3.9% 4.7%
Like for like sales (0.5)% 3.0%
Gross margin (56)bps N/A
Terminal growth rate (17.6)% (5.0)%
In the prior year, Heron's result demonstrated a lower level of headroom when
compared to the other two segments, but the Directors considered that the
assumptions made were reasonably prudent and that it was unlikely that a
situation will arise where an impairment would be required in that segment.
This has been borne out by the actual results outstripping the projection
which has resulted in a higher level of headroom for this year's test.
13 Property, plant and equipment
Land and buildings Motor vehicles Plant, Total
fixtures and equipment
£'m £'m £'m £'m
Cost or valuation
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
Additions 7 6 80 93
Disposals (18) (5) (47) (70)
Effect of retranslation - 0 3 3
At 25 March 2023 99 26 542 667
Accumulated depreciation and impairment charges
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
Charge for the period 4 5 62 71
Disposals (15) (2) (46) (63)
Effect of retranslation - 0 1 1
At 25 March 2023 17 16 254 287
Net book value at 25 March 2023 82 10 288 380
Net book value at 26 March 2022 82 12 269 363
Under the terms of the loan and notes facilities in place at 25 March 2023,
fixed and floating charges were held over £82m of the net book value of land
and buildings, £10m of the net book value of motor vehicles and £257m of the
net book value of the plant, fixtures and equipment. (2022: £82m, £12m and
£242m respectively).
At the period end £3m of assets were under construction (2022: <£1m).
Included within land and buildings is land with a cost of £6m (2022: £6m)
which is not depreciated.
Capital commitments
There were £7m of contractual capital commitments not provided within the
Group financial statements as at 25 March 2023 (2022: £5m).
14 Right-of-use assets
Land and buildings Motor vehicles Plant, Total
fixtures and equipment
£'m £'m £'m £'m
Net book value
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
Additions 130 2 3 135
Modifications 32 - - 32
Disposals (18) (0) (0) (18)
Impairment (2) - - (2)
Depreciation (160) (4) (3) (167)
Foreign exchange 9 0 1 10
As at 25 March 2023 1,044 6 6 1,056
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
sub-group 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 £3m (2022: £2m) in relation to low value
leases and <£1m (2022: <£1m) in relation to short term leases for
which the Group applied the practical expedient under IFRS 16.
The Group expensed <£1m (2022: <£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 (2022: £2m) 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 (2022: B&M <£1m, Heron £1m, B&M France
<£1m).
The current and future cashflows for the right-of-use assets are:
25 March 26 March
2023 2022
£'m £'m
This year 229 218
Within 1 year 229 219
Between 1 and 2 years 217 210
Between 2 and 3 years 200 194
Between 3 and 4 years 184 177
Between 4 and 5 years 166 160
Between 5 and 10 years 486 478
More than 10 years 141 167
Total 1,623 1,605
The change in lease liability reconciles to the figures presented in the
consolidated statement of cashflows as follows:
25 March 26 March
2023 2022
£'m £'m
Lease liabilities brought forward 1,310 1,302
Cash
Repayment of the principal in relation to right-of-use assets (168) (159)
Payment of interest in relation to right-of-use assets (61) (59)
Non-cash
Interest charge 61 59
Effects on lease liability relating to lease additions, modifications and 150 172
disposals
Effects of foreign exchange 9 (5)
Total cash movement in the year (229) (218)
Total non-cash movement in the year 220 226
Movement in the year (9) 8
Lease liabilities carried forward 1,301 1,310
Of which current 177 170
Of which non-current 1,124 1,140
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.
We have calculated the weighted average discount rates and sensitivity to a
50bps change in the discount rate to the interest charge as follows:
25 March 26 March
2023 2022
Weighted average discount rate
Property 4.7% 4.5%
Equipment 4.2% 3.2%
All right-of-use assets 4.7% 4.5%
Effect on finance costs with a change of 50bps to the discount rate £'m £'m
Property 6 7
Equipment 0 0
All right-of-use assets 6 7
Sale and Leaseback
During the year the business has undertaken two sale and leasebacks (2022:
two).
The details of the transactions were as follows:
25 March 26 March
2023 2022
£'m £'m
Consideration received 4 14
Net book value of the assets disposed (3) (7)
Costs of sale when specifically recognised (0) -
Profit per pre-IFRS 16 accounting standards 1 7
Opening adjustment to the right-of-use asset (0) (6)
Profit recognised in the statement of comprehensive income 1 1
Initial right-of-use asset recognised 1 6
Initial lease liability recognised (2) (11)
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 25 March 26 March
2023 2022
£'m £'m
Goods for resale 764 863
Included in the amount above was a net release of £3m related to inventory
provisions (2022: £14m net release). In the period to 25 March 2023, £3,182m
(2022: £2,921m) was recognised as an expense for inventories and £26m of
supplier rebates were received (2022: £21m).
16 Trade and other receivables
25 March 26 March
2023 2022
£'m £'m
Non-current
Other receivables 6 7
Total non-current receivables 6 7
Current
Trade receivables 9 6
Deposits on account 2 13
Provision for impairment (2) (2)
Net trade receivables to non-related parties 9 17
Prepayments 26 20
Related party receivables 2 3
Other tax 5 3
Other receivables 10 10
Total current receivables 52 53
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 25 March 26 March
2023 2022
£'m £'m
Provision for impairment at the start of the period (2) (0)
Impairment during the period (0) (2)
Utilised/released during the period 0 0
Effect of foreign exchange (0) 0
Balance at the period end (2) (2)
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 current:
As at 26 March 26 March
2023 2022
£'m £'m
Current 6 2
1-30 days past due 1 1
31-90 days past due 0 2
Over 90 days past due 2 1
Balance at the period end 9 6
17 Cash and cash equivalents
As at 25 March 26 March
2023 2022
£'m £'m
Cash at bank and in hand 237 173
Cash and cash equivalents 237 173
As at the period end the Group had available £142m of undrawn committed
borrowing facilities (2022: £142m).
18 Trade and other payables
As at 25 March 26 March
2023 2022
£'m £'m
Current
Trade payables 371 388
Other tax and social security payments 80 62
Accruals and deferred income 63 75
Related party trade payables 11 27
Other payables 16 12
Total current payables 541 564
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.
The Group had supply chain financing facilities in place during the year. The
facilities are operated by major banking partners with high credit ratings and
are limited to $50m total exposure at any one time.
The exposure at the period end was $nil (2022: $21m), the average balance over
the year was $13m (2022: $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 these schemes are
treated in the same way as those not subject to these schemes. 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 banks for any early draw down, and the
banks do 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 schemes against those not in these schemes.
There would be no impact on the Group if the facilities became unavailable and
there are no fees or charges payable by the Group in regard to these
arrangements.
As these invoices continue to be part of the normal operating cycle of the
Group, the schemes do not change the recognition of the invoices subject to
them, 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 25 March 26 March
2023 2022
£'m £'m
Current financial assets at fair value through profit and loss:
Foreign exchange forward contracts 1 9
Current financial assets at fair value through other comprehensive income:
Foreign exchange forward contracts 0 16
Total current other financial assets 1 25
Total other financial assets 1 25
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 25 March 26 March
2023 2022
£'m £'m
Current financial liabilities at fair value through profit and loss:
Foreign exchange forward contracts 8 0
Current financial liabilities at fair value through other comprehensive
income:
Foreign exchange forward contracts 5 -
Total current other financial liabilities 13 0
Total other financial liabilities 13 0
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
25 March 2023
Foreign exchange contracts (12) - (12) -
26 March 2022
Foreign exchange contracts 25 - 25 -
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,
which 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 25 March 26 March
2023 2022
£'m £'m
Current
Term facility bank loan 78 -
B&M France loan facilities 3 3
Heron loan facilities - 3
Total 81 6
Non-current
High yield bond notes 646 646
Term facility bank loan 219 297
B&M France loan facilities 8 7
Total 873 950
Extension of senior loan facilities
On 3 April 2023, the Group completed an extension of its term facility bank
loan. The transaction was committed on 21 March 2023 and therefore took place
from an accounting perspective before the year end date.
The previous £300m term facility was drawn down in July 2020 with £4m of
fees capitalised into the balance at that time. The agreement included a
revolving facility of £155m and was due to mature in April 2025.
This has been extended with new facilities totalling £450m due to mature in
April 2028. These comprise a term loan of £225m and a revolving facility of
£225m and the agreement also includes the availability of two 1-year
extension terms, subject to mutual consent with the banking syndicate.
An assessment has been made by management with the conclusion that the
transaction represents an extension and not a significant modification.
This is as the terms are substantially the same under the new agreement with
the only differences that Heron is now included as a Guarantor and that the
information requirements, covenant calculations and leverage boundaries have
been updated to reflect the implementation of IFRS 16 such that the new levels
are materially equivalent to the pre-IFRS 16 levels previously used. The
discounted committed cash payments due under the new agreement are also not
materially different to those prior to the extension.
As such, the remaining £2m of unamortised capitalised fees have remained on
the balance sheet and will be amortised over the extended term. There are £4m
of fees associated with the extension which have also been capitalised into
the loan balance. None of these fees were paid prior to the year-end date,
whilst a portion of these fees are payable to the banking partners on the
funds flow date.
As the extension was committed pre-year end the pre-existing £300m term loan
has been split into a £225m non-current liability and a £75m current
liability for disclosure. This is since the £225m is to be rolled into the
newly extended term facility directly whilst the £75m is repayable. The funds
flow completed successfully on April 3, shortly after the year end date.
Other borrowings
The carrying values given above include fees incurred on refinancing which are
to be amortised over the terms of those facilities. More details of these are
given below.
The Group holds two tranches of high yield bonds which are each held at
amortised cost.
The two tranches of bonds were issued in July 2020 and November 2021,
respectively, with £4m and £3m of fees capitalised at inception. A number of
these bonds have been purchased by related parties, see note 26.
All other loans are carried at their gross cash amount. The maturities, which
only relate to the position as at 25 March 2023, and gross cash amounts of
these facilities are included in the table below.
Interest rate Maturity 25 March 26 March
2023 2022
% £'m £'m
Revolving facility loan 1.75% + SONIA N/A - -
Term facility bank loan A 2.00% + SONIA Apr-23 75 -
Term facility bank loan A 2.00% + SONIA Apr-28 225 300
High yield bond notes (2020) 3.625% Jul-25 400 400
High yield bond notes (2021) 4.00% Nov-28 250 250
Heron loan facilities - Melton N/A N/A - 3
B&M France - BNP Paribas 0.75-3.50% Jul-23 to Feb-28 3 1
B&M France - Caisse d'Épargne 0.75-2.60% Aug-23 to Nov-29 2 1
B&M France - CIC 0.71-0.75% Sept-24 to Jan-27 2 3
B&M France - Crédit Agricole 0.39-0.81% Aug-23 to Jan-28 1 1
B&M France - Crédit Lyonnais 0.68-0.74% Nov-24 to Mar-27 3 4
B&M France - Société Générale 0.63% Jun-23 0 0
Total 961 963
The term facility bank loans and the high yield bond notes have carrying
values which include transaction fees allocated on inception.
All B&M France facilities have gross values in euros, and the values above
have been translated at the period end rates of €1.1360/£ (2022:
€1.2009/£).
The movement in the loan liabilities during the year breaks down as follows:
As at 25 March 26 March
2023 2022
£'m £'m
Borrowings brought forward 956 730
Cash
Issue of new corporate bonds - 250
Repayment of B&M France loan guaranteed by the French government - (22)
Repayment of Heron loan facilities (3) (4)
Receipt of other B&M France loan facilities 0 1
Capitalised fees on refinancing - (3)
Non-cash
Foreign exchange on loan balances 0 2
Refinancing fees accrued (1) -
Ongoing amortisation of fees capitalised on refinancing 2 2
Total cash movement in the year (3) 222
Total non-cash movement in the year 1 4
Movement in the year (2) 226
Borrowings carried forward 954 956
Of which current 81 6
Of which non-current 873 950
21 Provisions
Property provisions Other Total
£'m
£'m
£'m
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
Provided in the period 1 2 3
Utilised during the period (1) (2) (3)
Released during the period (6) (0) (6)
At 25 March 2023 5 4 9
Current liabilities 2023 2 4 6
Non-current liabilities 2023 3 0 3
Current liabilities 2022 7 4 11
Non-current liabilities 2022 4 - 4
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 (£9k in 2022).
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 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
Release of shares related to employee share options 626,899 0
As at 25 March 2023 1,001,853,735 100
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 2,970,368,487 ordinary shares.
23 Cash generated from operations
Period ended 52 weeks ended 52 weeks ended
25 March 26 March
2023 2022
£'m £'m
Profit before tax 436 525
Adjustments for:
Net interest expense 99 88
Depreciation on property, plant and equipment 71 62
Depreciation on right of use assets 167 163
Impairment of right of use assets 2 2
Amortisation of intangible assets 4 2
Gain on sale and leaseback (1) (1)
(Gain)/loss on disposal of property, plant and equipment (1) 1
Share option expense 3 2
Change in inventories 103 (260)
Change in trade and other receivables 1 (12)
Change in trade and other payables (30) 40
Change in provisions (6) 2
Share of loss/(profit) from associates 1 (3)
Loss/(profit) resulting from fair value of financial derivatives 17 (13)
Cash generated from operations 866 598
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% Property management
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
During the year, on 17 January 2023, Retail Industry Apprenticeships Ltd was
dissolved and ceased to be a member of the group.
Registered Offices
· The Luxembourg entities are all registered at 68-70 boulevard de la
Pétrusse, L-2320 Luxembourg.
· Centz N.I Limited are registered at Murray House, 4 Murray Street,
Belfast, United Kingdom, BT1 6DN.
· The other UK entities are all registered at The Vault, Dakota Drive,
Estuary Commerce Park, Speke, Liverpool, L24 8RJ.
· B&M European Value Retail Germany GmbH are registered at Am
Hornberg 6, 29614, Soltau.
· B&M France are registered at 8 rue du Bois Joli, 63800 Cournon
d'Auvergne.
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.
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 S.A.,
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.
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 fluctuations 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 administrative expenses in 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.
Where a hedged derivative matures efficiently, the fair value is transferred
to inventory and subsequently to cost of sales when that item is sold. 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.
In the period, the Group has had $634m of hedged derivatives mature (2022:
$516m). The difference to profit before tax if none of our forwards had been
hedge accounted during the year would have been a loss of £7m (2022: £30m
gain) and a pre-tax loss in other comprehensive income of £28m (2022: £20m
loss).
The net effective hedging gain transferred to the cost of inventories in the
year was £49m (2022: net loss of £5m). At the period end, the amount of
outstanding US Dollar contracts covered by hedge accounting was $641m (2022:
$487m), which mature over the next 15 months (2022: 9 months). The change in
fair value of the hedging instruments used as the basis for recognising hedge
ineffectiveness was £2m (2022: £nil), achieved effectiveness was 97% (2022:
100%).
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 25 March 26 March
2023 2022
£'m £'m
Effect on profit before tax +2.5% (11) (4)
-2.5% 12 5
Effect on other comprehensive income +2.5% (13) (9)
-2.5% 13 10
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 in the accounts and applying the changes noted above. The balance
sheet valuations are then directly calculated. The valuation of the foreign
exchange derivatives were 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 a portion of the Group's bank borrowings are subject to a floating
rate based on SONIA (previously LIBOR until December 2021).
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 25 March 26 March
2023 2022
£'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, (2022: 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 semi-annual 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
25 March 2023
Interest bearing loans 117 40 480 489 1,126
Lease liabilities 229 217 550 627 1,623
Trade payables 382 - - - 382
26 March 2022
Interest bearing loans 48 44 794 290 1,176
Lease liabilities 219 210 531 645 1,605
Trade payables 415 - - - 415
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 25 March 26 March
2023 2022
Financial assets £'m £'m
Fair value through profit and loss
Forward foreign exchange contracts 1 9
Fair value through other comprehensive income
Forward foreign exchange contracts 0 16
Loans and receivables
Cash and cash equivalents 237 173
Trade receivables 11 20
Other receivables 10 10
As at 25 March 26 March
2023 2022
Financial liabilities £'m £'m
Fair value through profit and loss
Forward foreign exchange contracts 8 0
Fair value through other comprehensive income
Forward foreign exchange contracts 5 -
Amortised cost
Lease liabilities 1,301 1,310
Interest-bearing loans and borrowings 954 956
Trade payables 382 415
Other payables 16 12
26 Related party transactions
The Group has transacted with the following related parties over the periods:
Multi-lines International Company Limited, a supplier, and Centz Retail
Holdings, a customer, are 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 and Ocean Sense
Investments Limited, 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). Simon Arora is also
directly a bondholder of the business.
There were significant related party transactions in the period, with SSA
Investments purchasing a total of £43m of our 4.00% corporate bonds and £13m
of our 3.625% corporate bonds in June 2022, and Simon Arora purchasing £35m
of our 3.625% corporate bonds over December 2022 and January 2023. The overall
related bond position is summarised in the table below with all related party
bondholders being Arora related parties.
52 weeks ended 52 weeks ended
25 March 26 March
2023 2022
£'m £'m
Simon Arora (3.625%, 2025 bonds) 35 -
SSA Investments (3.625%, 2025 bonds) 13 -
SSA Investments (4.000%, 2028 bonds) 99 56
Rani 1 Investments (3.625%, 2025 bonds) 50 50
Rani 2 Investments (3.625%, 2025 bonds) 50 50
Total 247 156
The expense incurred during the year, and the accrual at the end of the year
are shown in the table below:
Expense Accrual Expense Accrual
to 25 March on 25 March to 26 March 2022 on 26 March 2022
2023 2023 £'m £'m
£'m £'m
Simon Arora 0.3 0.3 - -
SSA Investments 4.0 1.6 1.5 0.8
Rani 1 Investments 1.8 0.4 1.8 0.4
Rani 2 Investments 1.8 0.4 1.8 0.4
Total 7.9 2.7 5.1 1.6
The following table sets out the total amount of trading transactions with
related parties included in the statement of comprehensive income:
Period ended 25 March 26 March
2023 2022
£'m £'m
Sales to associates of the Group
Centz Retail Holdings Limited 34 44
Total sales to related parties 34 44
Period ended 25 March 26 March
2023 2022
£'m £'m
Purchases from associates of the Group
Multi-lines International Company Ltd 193.7 279.4
Purchases from parties related to key management personnel
Fulland Investments Limited 0.2 0.2
Golden Honest International Investments Limited 0.2 0.2
Hammond Investments Limited 0.2 0.2
Joint Sino Investments Limited 0.2 0.2
Ocean Sense Investments Limited 0.2 0.2
SSA Investments 0.1 0.0
Total purchases from related parties 194.8 280.4
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 25 March 2023
Rani Investments 0 0 0 1 (1) (0)
Ropley Properties 2 1 3 8 (11) (3)
TJL UK Limited 1 0 1 10 (12) (2)
Triple Jersey Limited 8 3 11 46 (57) (11)
Total 11 4 15 65 (81) (16)
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)
Total 11 5 16 74 (92) (18)
There were no new leases entered into by the Group during the current period
with the Arora related parties (2022: one new). The total expense on this
lease in the prior period was <£1m. There were 3 conditionally exchanged
leases with Arora related parties in the current period with a long stop
completion date (2022: none).
The following tables set out the total amount of trading balances with related
parties outstanding at the period end.
As at 25 March 26 March
2023 2022
£'m £'m
Trade receivables from associates of the Group
Centz Retail Holdings Ltd 2 3
Total related party trade receivables 2 3
As at 25 March 26 March
2023 2022
£'m £'m
Trade payables to associates of the Group
Multi-lines International Company Ltd 7 25
Trade payables to companies owned by key management personnel
Rani Investments 0 -
Ropley Properties Ltd 1 0
TJL UK Limited 1 -
Triple Jersey Ltd 2 2
Total related party trade payables 11 27
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 $nil (2022:
$21m) 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 as at 25 March 2023 (2022: 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 25 March 26 March
2023 2022
£'m £'m
Not later than one year 14 15
Later than one year and not later than two years 13 14
Later than two years and not later than five years 35 36
Later than five years 35 47
Total 97 112
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 25 March 26 March
2023 2022
£'m £'m
Interest bearing loans and borrowings (note 20) 961 963
Less: Cash and short-term deposits (note 17) (237) (173)
Net debt 724 790
28 Post balance sheet events
On 3 April 2023, the Group completed the funds flow with respect to the
extension of their bank facilities for a further five years. See note 20 for
further details.
29 Dividends
A Special dividend of 20.0 pence per share (£200.4m), was declared in January
2023 and has been paid.
An interim dividend of 5.0 pence per share (£50.1m) was declared in November
2022 and has been paid.
A final dividend of 9.6 pence per share (£96.2m), giving a full year dividend
of 14.6 pence per share (£146.3m), is proposed.
Relating to the prior year;
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), was declared in July 2022 and has
been paid in the current year.
30 Contingent liabilities and guarantees
As at 25 March 2023, 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, B&M Retail Ltd, Heron Food Group Ltd and
Heron Foods 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, with the balance
held in B&M European Value Retail Holdco 4 Ltd, and £650m for the notes,
with the balance held in B&M European Value Retail S.A.
As at 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 were 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, with the balance held in B&M European Value Retail Holdco 4
Ltd, and £650m for the notes, with the balance held in B&M European Value
Retail S.A.
As at 26 March 2022, Heron Food Group Limited and Heron Foods Ltd were
guarantors to the loans which were formally held within Heron Foods Ltd. These
loans were repaid during the year, with no amounts outstanding as at 25 March
2023 (2022: £3m), with the balance held in Heron Foods Ltd.
31 Directors
The directors that served during the period were:
Peter Bamford (Chairman)
A Russo (CEO, from 26 September 2022, previously CFO)
S Arora (CEO to 26 September 2022)
M Schmidt (CFO, appointed 1 November 2022)
R McMillan
T Hall
C Bradley
P MacKenzie
O Tant (Appointed 1 November 2022)
Simon Arora has retired from the Group on 21 April 2023.
All directors served for the whole period except were indicated above.
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